GBPUSD’s downwards movement from 1.6339 extends to as low as 1.5475. Resistance is located a the trend line on 4-hour chart, as long as the trend line resistance holds, the downtrend could be expected to continue, and next target would be at 1.5400 area. On the upside, a clear break above the trend line resistance will indicate that a cycle bottom has been formed, and consolidation of the downtrend is underway, then further rise to 1.5700 area could be seen.
Yesterday we showed you a chart for the Market Vectors Gold Miners ETF [NYSE: GDX].
It was an ugly looking chart for anyone who had bought the ETF.
Today we’ll show you another chart…an even uglier chart.
But like yesterday’s chart it’s giving you a clue.
It’s showing that despite the tremendous returns from Australian stocks over the past six months, there is still plenty of value among some of the market’s most beaten-down stocks…
Yesterday afternoon we asked Doc Cowie if there are any other charts he follows. He showed us this one:
It’s the Market Vectors Junior Gold Miners ETF [NYSE: GDXJ]. This ETF only goes back to late 2009. Things started off pretty well for the ETF as markets and the gold price rallied hard in 2010.
But since then things haven’t been so great. The ETF has more than halved since the 2010 peak.
Of course like all falling investments it hasn’t gone down in a straight line. As you can see on the chart there have been many false dawns (or ‘false breaks’ as Slipstream Trader Murray Dawes calls them).
Each time these falls have sucked in investors, believing that the market is about to turn and gains are on the way. But now the ETF is at its lowest point since its creation.
As we mentioned last week in Scoops Lane (the premium weekly eletter available to Port Phillip Publishing’s paid subscribers), we haven’t tipped a gold stock since November 2010. We ended up taking a 14.7% loss on that stock, which in hindsight was a good exit point as it fell much further after that. It turns out that was near the top of the market for gold stocks.
But now, based on what the Doc tells us, and what we can see in the price action on the charts, gold stocks look super attractive again.
So what is it about gold stocks that attract the Doc…and what does he look for when he chooses a stock?
Well, the first part is easy. Worldwide, central bank meddling and the devaluation of currencies have driven investors to seek security.
Part of that involves buying gold and silver.
And it’s not just mom-and-pop investors or gold bugs. The biggest buyers are the developing nations’ central banks, such as China’s, India’s, and Russia’s.
Each has actively bolstered their gold holdings. That said, China hasn’t released official gold holding number since 2009, so no one know for sure just how much gold the Peoples’ Bank of China owns.
As for what to look for in gold stocks, the Doc has a few key criteria. Chief among them are:
He also adds in cash. But he says this is less important for companies that already produce gold and generate cash flows. That’s because those companies are less likely to need to raise cash from investors or lenders.
What you need to be careful of are the perennial capital raisers. That is, the companies that frequently need cash injections from shareholders and which always claim to be one step away from making it to the big time…yet never get there.
Boy, have we learned that the hard way over the years…
But it’s the first criteria – low cost of production – that has the Doc perplexed at the moment. On Tuesday he showed you the following chart:
Despite the near-record high gold price, gold miners’ cash costs have haven’t kept pace. For instance, in 2002 when the gold price was about USD$350 an ounce, cash costs were about USD$150 an ounce (a $200 margin).
Roll forward to the third quarter of 2012 and even though gold was USD$1,650, cash costs were only about USD$650 an ounce…for a USD$1,000 margin.
Now, measuring the cash costs of a project isn’t perfect. It doesn’t take into account all the exploration costs and construction capital for a mine or the company. But it’s still a valid measure for comparing costs against other companies and against prior years.
So with widening cash margins, it makes no sense that gold explorers and gold producers have fared so poorly over the past year. Or does it?
In our view, the big handbrake for gold mining stocks has been an unstable and unpredictable global market. Because gold miners need so much capital it means they have to raise cash from shareholders or from lenders.
And as you saw during 2008, capital can quickly dry up. So it’s reasonable to expect that with so much negativity around the market investors haven’t forgotten recent history.
But maybe that’s about to change. Yes, the global economy isn’t any better than it was five years ago. Arguably it’s worse, given the trillions of dollars printed by central banks. But with the blue-chip S&P/ASX 200 index bashing through 5,000 points we see some of the gloom lifting from investors – even if it’s only temporary.
A big reason why shares have done so well – and could continue to do so – is that it’s no longer embarrassing to admit you buy shares!
If you told anyone two years ago that you buy shares they would have shook their head and sucked in. They would have warned you that share investing is a mugs game – ‘Don’t you know the world is in turmoil?’
It was hard to argue that when shares were mostly going down or sideways. But now share investors have a comeback line. They can point to the profits in their trading account.
And once investors build up some confidence our bet is this will filter down through the market – from blue-chip to mid-cap to small-cap. The latter two are where most of the gold explorers and small producers sit.
This may sound like a crazy reason to buy shares, but you should never underestimate the power of positive attitudes when it comes to investing.
Cheers,
Kris
From the Port Phillip Publishing Library
Special Report: How to Hunt Down 2013′s Biggest Stock Market Winners
Daily Reckoning: Here’s One Way to Eke More Gains from this Rising Stock Market
Money Morning: Why You Shouldn’t Fall in Love With Beautiful Bank Yields
Pursuit of Happiness: Put the Future on Hold, Plan for Today First
Chances are you’ve heard about the so-called ‘race to the bottom’ in which various industrialized nations are gradually allowing their currencies to depreciate in an attempt to maintain competitive parity.
Forget about it…the real risk right now is an all-out 1930s-style currency war. I know it’s not front-page news yet, but I have a sneaking suspicion it will be shortly.
It’s going to blindside Washington and most of Europe, where central bankers, politicians, and more than a few economists fail to recognize that events from nearly 100 years ago are now primed to repeat themselves…
Worse, it will devastate an entire class of investors who have put their faith in the current economic dogma of endless bailouts and money printing.
Ironically, this currency war won’t start because of international problems. Instead, it will be touched off in earnest because of domestic concerns.
My guess is Japan fires the first shots.
Here’s why:
This is very similar to the situation in 1931 when the United Kingdom removed itself from the gold standard on September 19th of that year.
Not surprisingly, by December the pound sterling took a 30% nose dive against the U.S. dollar. It also set off a chain of “me-too” actions and reactions from the United States, France, Germany, Sweden, and Norway, among others.
Notes Roderick Floud in his book, The Economic History of Britain Since 1700: Volume 2: 1860-1939, there were ‘some 25 countries with close economic or imperial links to Britain’ that had tied their currencies to the sterling.
If you remember your history, the lessons here are pretty clear: The nations that abandoned the then-prevailing international currency trading standard first benefited the most.
Conversely, those that hung on got slammed because their money suddenly commanded a premium versus the newly ‘inexpensive’ sterling, U.S. dollar, French franc and German mark, which were the powerhouses of the day.
By 1932, the sterling’s depreciation had created a ‘rapid and forceful cyclical upswing’ notes Floud, because the cheap money that stimulated investment following the UK’s exit from the gold standard really was not so much a result of policy as a it was the by-product of ‘depressed world financial markets.’
I agree. Right now, in a replay of events from that era, a stronger yen has crippled Japan’s recovery by limiting its ability to engineer a brighter future by making its goods prohibitively expensive in global markets at a time when world markets are sluggish themselves.
Compounding the problem is the fact that Japan’s overall market share of world export markets has declined much the way England’s had.
Many leading Japanese companies are now struggling to remain even marginally competitive in markets that they once dominated like televisions, electronics and machinery. The most graphic examples include Sony, Sharp, and Panasonic, all of which once dominated the television markets and all of which are in deep trouble today.
There’s obviously no gold standard to come off of at the moment, which is why the ‘things will be different this time crowd’ can’t wrap their heads around the concept of a full-blown 1930s-style currency war.
Goosing the printing presses and moving aggressively to weaken the yen before other nations weaken their currencies further would allow Japan to capture additional market share from other exporters before they have a chance to react.
Obviously, such actions would not sit well with major regional trading partners, most notably South Korea and Taiwan. Nor would it be particularly well received in South America, where emerging markets are tied to a blend of U.S. dollars and, increasingly, the Chinese yuan.
So retaliation would likely be swift and significant in the form of capital controls and transaction-specific taxes, both of which are blunt force instruments capable of doing a lot of damage. That’s another lesson from the 1930s that seems to go unheeded by today’s leaders.
To some degree, a currency ‘skirmish of sorts’ is already underway in that there’s already been a lot of verbal intervention by various nations. However, I look at this as a largely wasted exercise by self-interested politicians and central bankers. They’re all staring at each other across a sea of political niceties while all the while hoping nobody will be the first to blink.
Eventually, somebody will decide to do just that; it all depends on who has the right incentives and how much they have to lose.
The situation reminds me of something called the prisoner’s dilemma, a theoretical exercise in game theory in which the optimal outcome for all participants results directly from mutual cooperation. The problem (and the reason why it’s a dilemma) is that eventually the optimal outcome for one or more individuals is not to participate as a group.
That’s significant because the psychology of our leaders has changed since this crisis began much the way it changed in the 1920s leading up the United Kingdom’s departure from the gold standard in the 1930s.
Specifically, when this crisis began, world leaders quickly realized that they had to work together in some capacity, so they gathered the G20 for discussion as opposed to the much smaller – some would say elite – G5.
Today, though, as conditions continue to deteriorate and each new round of fresh stimulative action brings less in the way of results, the attitude is becoming ‘every man for himself’.
Naturally, the breakdown in cooperation heightens the severity of any potential disruption or departure because the benefits of going it alone begin to be worth more than continued participation in the group.
It’s no wonder that nations like Sweden, Hungary, and Germany are agitating for lower rates under the circumstances. Others are sure to follow.
That’s an entirely different question. I think the winners will change as the battle progresses. Using the 1930s as an example, it’s clear that the country that moves first gains the most, so that constitutes winning at least early on in the battle. That’s probably Japan.
However, once a good old-fashioned currency war gets underway in earnest, I think the winners – if you can call them that – are those who have the wherewithal to withstand the deepest drop.
In a world of interlocked finance and an estimated $1.5 quadrillion worth of unregulated derivatives tied to numerous asset classes including sovereign debt, that’s not a pleasant thought, because some nations have a lot farther to “fall” than others.
I believe the U.S. will be the victor in the medium-term. While this country no longer has the deep manufacturing base it once did, the majority of commodities are still traded in dollars, which builds in a de facto advantage.
The looming downgrade everybody fears will actually strengthen things as long as Team Bernanke maintains an ‘accommodative’ stance – boy, have I come to loathe that word.
Longer term, however, it’s a very different story.
China, with its 1.3 billion consumers and growing global influence, will be the clear winner. Right now the yuan is a partially blocked currency, but that’s changing very rapidly as the economic balance of power shifts east. And it will continue to shift for at least the next decade.
China’s acutely aware of the yuan’s potential, which is why that nation has very carefully and methodically engineered its emergence into global markets over the past decade.
Beginning with partial trading ranges, proceeding through bilateral yuan-based swaps that bypass traditional global currency trading pairs and the development of its own futures markets, China is taking action to ensure the yuan has the foundation it needs.
As part of that, China’s also buying gold in record amounts – over 834.5 metric tonnes in 2012, which is 93.53% more than the 431.2 metric tonnes it purchased a year ago.
Why?
Because China wants to ensure that the yuan has stable, long-term value in global markets when it becomes fully convertible in 2015 and begins trading freely from an offshore hub in London.
My, how the world turns.
Keith Fitz-Gerald
Contributing Editor, Money Morning
Publisher’s Note: This article first appeared in Money Morning (USA)
From the Archives…
Two Questions to Ask Before You Buy Another Stock
8-02-2013 – Kris Sayce
Are These 5 Blue-Chip Stocks Still a Good Buy?
7-02-2013 – Kris Sayce
Don’t be Long and Wrong on this Stock Market Rally
6-02-2013 – Kris Sayce
Perceptions of Beauty and Stock Valuations
5-02-2013 – Satyajit Das
This Share Market Rally Has Angered Some Investors
4-02-2013 – Kris Sayce
By www.CentralBankNews.info Chile’s central bank held its monetary policy interest rate steady at 5.0 percent, as expected, and said inflationary expectations remain in line with its target and recent indicators for domestic output and demand have exceeded forecasts.
The Central Bank of Chile, which last trimmed rates by 25 basis points in January 2012, repeated that any changes in its policy stance would depend on the implications of domestic and external conditions on the inflationary outlook and it’s policy was aimed at keeping inflation at 3.0 percent.
Chile’s inflation rate inched up to 1.6 percent in January from 1.5 percent in December, the lowest rate since mid-2010. The central bank targets inflation of 2-4 percent, with a 3.0 percent midpoint.
The central bank said international financial conditions were stable but the fiscal and financial situation in the euro zone remains fragile. Weak growth continues in developed economies while “more favorable signs are observed coming from China” and world prices of copper have risen.
The central bank’s latest poll of analysts earlier this week showed that interest rates were expected to remain on hold today but then rise by 25 basis points within 11 months.
Chile’s Gross Domestic Product expanded by 1.4 percent in the third quarter from the second for annual growth of 5.7 percent, up from 5.5 percent in the second quarter.
I could never live in Scandinavia. The long winters would drive me stark-raving mad. And for a guy who has driven all the way to Mexico because he needed a good street taco, the blandness of the food would prevent me from ever being happy in Europe’s great white north.
Yet it seems that the people that live there seem content enough. In the 2012 Legatum rankings of the world’s happiest and most prosperous countries, Norway, Denmark and Sweden took the first three spots, and Finland took 7th.
As a point of reference, the United States took 12th place, below even Canada, which came in 6th. It appears that excessive use of mayonnaise and a love of hockey are the secrets to prosperity and happiness.
In any event, Scandinavian stockholders have a lot to be happy about. The Nordic countries have by and large avoided the worst aspects of the Eurozone crisis. It helps, of course, that Norway is not an EU member state and that Denmark and Sweden currently do not use the euro currency. But their low debt levels and responsible governance go a long way too. And along with the UK, the Nordics have been the loudest supporters of free trade and open markets in the European Union.
Exchange-Traded Fund | Ticker | Div Yield | Price/Earnings | Avg Volume |
| iShares MSCI Sweden | EWD | 2.84% | 15 | 200,458 |
| Global X Norway | NORW | 2.67 | 11 | 60,026 |
| iShares MSCI Denmark | EDEN | 1.04% | 16 | 3,414 |
| iShares MSCI Finland | EFNL | 3.92% | 13 | 5,952 |
| Global X FTSE Nordic Region | GXF | 2.34% | 13 | 12,923 |
Let’s take a peek at the ETFs that focus on Scandinavia starting with the iShares MSCI Sweden (NYSE:$EWD). EWD has a lot of the names you would expect—Ericsson (OTC:ERIXF) and Volvo (OTC:VOLVF) are major holdings, as is retailer Hennes & Mauritz (better known as H&M). The three collectively make up a quarter of the ETF’s holdings.
Banks take another quarter of the ETF with most of the rest in industrials and technology. All in all, EWD is not a bad way to get exposure to a collection of high-quality European names located safely outside the Eurozone.
Next on the list in the Global X Norway ETF (NYSE:$NORW). There is also an iShares MSCI Norway ETF (NYSE:$ENOR), but the Global X ETF has better trading volume.
As with the Swedish market, the Norwegian market has a decent-sized allocation to banks. But with its vast North Sea oil assets, Norway is first and foremost an energy play. Energy makes up nearly half the fund’s portfolio, and Statoil ASA (NYSE:$STO) is the largest holding, taking up nearly 20% of the portfolio. Telecom provider Telenor ASA (OTC: TELNY) accounts for another 10%.
I hesitate to say too much about the iShares MSCI Denmark (NYSE:$EDEN) and the iShares MSCI Finland (NYSE:$EFNL) ETFs because they are too thinly traded for me to recommend in good faith. Both also have so little under management (less than $5 million) that I would consider both at risk of closing before year end.
If you want to invest in Danish or Finnish companies, you might do better going the individual stock route. Danish Carlsberg AS (OTC:CABGY), the fourth largest beer brewer in the world, is a backdoor way to play growth in Russia and Asia. Among global brewers, my preference remains Heineken (OTC:HEINY) due to its greater exposure to the frontier markets of Africa.
Among Finnish stocks, the only one with any volume at all in the United States is beleaguered mobile phone maker Nokia (NYSE:$NOK). I like Nokia as a turnaround play, but I acknowledge that it’s risky and highly dependent on the success of its Microsoft (Nasdaq:$MSFT) Windows Phones.
Finally, if you’re looking for a diversified mix of the Nordic countries, the Global X FTSE Nordic Region 30 (NYSE:$GXF) is an option, though its trading volume is a little on the low side.
Disclosures: Sizemore Capital is long MSFT and HEINY.
The post Investing in Nordic ETFs appeared first on Sizemore Insights.
By John, TradingSpotSilver.com
See Part 1 Here: The Importance of Stop Loss in Forex Trading
Being punished by the markets is an oft heard phrase in forex. In the context of stop loss, some traders might think that the stop loss and take profit are two end points in a trade. However, you are able to better manage your losses, if you trail your stops. While most trading platforms allow you to set up trailing stops automatically, I for one am not a big fan of it. Automated set ups, while take out the emotional factor still fail to consider some important aspects such as price action (unless you have a custom built trailing stop EA that considers all aspects to do the job for you).
Stop losses is an effective tool to lock in whatever pips the market gives you. While this can be a double edged sword, at the very least as long as you can break even on your trade, it is a winner.
Trailing stops, in our context is nothing but trailing the pips in order to lock in the profits. Using trailing stops is an art in itself and you simply cannot expect to continue locking in your profits as the trade moves closer to your take profit levels. On the contrary, given the unpredictability of the markets, trailing stops when used without prior research can in fact kill your potential of making more pips per trade (for some traders, making 20 pips or so per day or per trade is more than sufficient).
In my previous article, I concluded with some tools that can be used by traders to plot important support and resistance levels. These, as we know are areas where we expect price to act (reverse, range, retrace).
The concept of trailing stops cannot be better explained than with charts. Let’s take a look at the EURUSD chart with Fibonacci levels plotted and see how stop losses can be used effectively.
The above chart is a recent one hour EURUSD chart plotted with Fibonacci levels. Let’s assume that given the recent fundamentals and the strong bullish run of the Euro; we go long at 50% Fibonacci level (@ 1.35319) with a stop loss set just above the 61.8% level (@1.34984). By moving our stops as price climbs up from one level to another, our initial risk exposure of -335 Pips can be reduced by moving the stop loss level closer to our entry at 1.35229 (+9 Pips). Since the market moved in the intended direction, we shift our stops to that gives us a profit of +9 pips, thus leaving us better off than breaking even on the trade.
So long as price hasn’t moved significantly beyond 38.2%, we don’t move our break even stop until we see a strong price rally at this level. When price moves from the 38.2% level, we then shift our stop loss to the 38.2% level, which is 1.35741 (+425 Pips).
If you believed there was still some steam left in the EURUSD rally, then just by shifting our stops, we would have moved the stop level right to the 23.6% level or 1.36263, effectively pocketing 944 pips.
Notice that as price touched the 0% level, (1.37108) the EURUSD reversed. While the price dropped back, we effectively managed to make a total of 944 pips on this trade, by simply shifting our stops.
Now if you compare this with using a pre-defined take profit level, we would have limited our profit taking level and even worse, by not shifting the stops, had the trade reversed much earlier it would have resulted in a loss, rather than make any positive pips.
Trailing or shifting stops is a common strategy and one that can be found with indicators such as the Ichimoku or the Parabolic SAR. It is best used during market volatility or when you are trading economic news releases. Using stops is the best way to make confident trades where even if you go wrong, your stops are there to protect your profits.
To conclude this two part article, I’d like to summarize that stops, when used correctly can be a great tool to not just limit your risks but to lock in profits as well. While you cannot become adept in trailing your stops right from the word go, practice makes one perfect and no better way to do this than to discipline yourself to shift your stops to break even once price moves away from your entry and continue trailing the price so as to pocket as many pips as possible.
John is a full time forex trader and contributes regularly to tradingspotsilver.com, a blog focused on trading systems, trade analysis and MT4 tutorials.
A string of woeful economic data today from Japan to the European bloc is deemed to benefit the exchanges of the US dollar opposite the Swiss franc. In the skirmish between the two secure investments, the Greenback is more likely to take the bullish charge as economists anticipate improvements in the world’s largest economy, in contrast with the ill mood across the other major markets.
US unemployment claims for the past week are forecast to have declined, albeit slightly. Data from the labor department today is assumed to show a decrease in the number of individuals who filed for unemployment insurance for the first time. Economists estimate a drop to 361,000 people, after the prior release showed that 366,000 individuals filed for jobless insurance. A steeper dive would provide further bullish momentum for the Greenback.
On related news, Anna-Louise Jackson & Anthony Feld of Bloomberg News report that more American employees may voluntarily quit their jobs this year as an increase in wages and openings boosts confidence in the labor market. This coincides with President Obama’s directive of increasing the Federal minimum wage to $9, as per his State of the Union speech.
Based on seasonally-adjusted data from the Department of Labor, about 2.2 million US workers resigned in December, which is a 7.4 percent increase from a year earlier. These employees represent 53 percent of total separations, the highest since June 2008. This ratio has shown “good improvement and has been trending up” after hitting the lowest ratio of 37 percent in April 2009, according to Nicholas Colas, chief market strategist at ConvergEx Group. Readings above 50 percent imply “a reasonably good and improving economy,” as the quits ratio is “inextricably linked” with consumer confidence.
Meanwhile, a role reversal seems to have occurred in the Euro Zone after preliminary data showed that Germany and France shrank by 0.6 percent and 0.3 percent, respectively in the final quarter of 2012. For Germany, this is its deepest contraction since the height of the global financial crisis in 2009, while France is edging closer to recession.
These economic data support the prospects of the Greenback, and a buy position is recommended for the USDCHF today. It is still wise to look out for probable technical corrections on the currency pair’s movement.
For more news, analysis, technical charts and candlestick analysis, visit AlgosysFx Forex Trading Solutions.
London Gold Market Report
from Adrian Ash
BullionVault
Thurs 14 Feb, 07:50 EST
The PRICE of wholesale gold rallied from fresh 6-week lows at $1641 per ounce on Thursday morning, rising as European stock markets fell after much-worse than forecast economic data.
Silver meantime stalled below $31 per ounce as industrial and energy resources cut earlier gains.
Economic output across the 17-member state Euozone contracted by 0.6% in the fourth quarter of 2012, the worst drop since the depths of the global recession four years ago.
Gold prices for Euro investors today jumped €16 per ounce from yesterday’s near 8-month low at €1218.
UK gold investors saw the price rise to £1060 as UK government debt prices fell again, nudging 10-year gilt yields up to 2.27%, their highest level since last April.
“The outlook for gold demand remains strong in 2013,” reckons Marcus Grubb, managing director investment at the World Gold Council, launching the market-development body’s latest Gold Demand Trends report today.
“We expect jewelry demand to remain buoyant, driven largely by wealth creation in India and China, and the re-synchronization of economic growth in both countries.”
Altogether in 2012, global gold demand was the second-highest on record, down 4% by weight from 2011 but rising 2% by value to $236 billion.
Gold supply slipped 1%, as new record mine output met falling supplies from existing above-ground stocks.
So-called “scrap” supply fell 3% for 2012 as a whole, despite average gold prices rising more than 6% to an annual record of $1669 per ounce.
“The main drag on gold prices [so far this month],” wrote INTL F.C.Stone’s Ed Meir in a note on Wednesday, “is the fact that we are seeing money move into industrial metals, corporate bonds, sovereign paper and equities.
“[That is] leaving much less of the investment pie available for gold and silver.”
But if “examined in a longer term context,” says today’s World Gold Council report, “annual gold demand was 15% higher [in 2012] than the average for the previous five years, with much of that growth coming from the physical bar segment of investment demand and central-bank purchases.”
Central banks as a group bought a 5-decade record of 534 tonnes in 2012, raising their US Dollar spend on buying gold for their currency reserves by 24%.
Despite rising prices, gold jewelry demand also rose by value, up 3% to a new record of $102.4bn.
“That clearly illustrates that gold is capturing an increasing share of wallet,” says the report.
Studying the World Gold Council data, “[Indian] purchases were clearly brought forward in anticipation of import duty hikes,” says Eugen Weinberg’s team at Commerzbank today.
A flattening in Chinese demand left India as the world’s #1 consumer yet again, defying many analysts forecasts.
Japanese households became net buyers of gold for the first time since 2005, albeit of just 7.6 tonnes, with the dis-hoarding of private investment holdings slowing sharply as the new Abe administration vowed to weaken the Yen to reflate the economy in the fourth quarter.
Soros Fund Management – which raised its allocation to gold by one-half in the third quarter of 2012 – has made about $1 billion in profits betting on the Yen’s 20% fall since November, according to the Wall Street Journal today.
Fellow gold investors David Einhorn at Greenlight Capital and Kyle Bass at Hayman Capital Management have also made “big trading profits” betting against the Japanese currency, the WSJ adds.
Gold price chart, no delay | Buy gold online
Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold and silver in Zurich, Switzerland for just 0.5% commission.
(c) BullionVault 2013
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
Yesterday the S&P/ASX 200 reached your editor’s year-end target of 5,002 points.
We’re somewhat surprised that the index hit this level before the end of February rather than the end of December.
So when the stock market’s going up, who’s complaining? We’re certainly not.
Before you rush out to invest every single cent in the stock market, remember what we told you last week — you shouldn’t try to get the highest possible returns for every single dollar. You first need to allocate your investments according to your attitude to risk. Only then do you look to maximise each dollar.
Most of that is pretty easy. Find a high interest bank account for cash. Find the best term deposit rate. And locate the best bullion dealer for your gold and silver investments.
But maximising every dollar in the stock market is harder. The easy trade since the middle of last year has been to buy dividend-paying stocks. But as well as getting a dividend, investors have gotten a nice bonus with capital gains — the Australian share market is up 14.9% since 16 November.
So, what do investors do now? How can you maximise your stock market returns after shares have already gone up?
The biggest mistake you could make today is to assume there isn’t any value in the market (we’ve just tipped a deep value stock in the February issue of Australian Small-Cap Investigator).
We showed you last week with our Five Beaten-Down Blue-Chips that these stocks are still a long way below the 2007 and 2008 peaks.
But it’s not just beaten-down blue-chips that you should have your eye on. Our good buddy Dr Alex Cowie keeps a close watch on mining stocks for his Diggers & Drillers investment advisory.
One of the sectors he watches closely is the gold stock sector (as do many of the editors here). He keeps close tabs on the Market Vectors Gold Miners ETF [NYSE: GDX]. The Doc says he’s ‘stunned’ that the index has fallen so low, and that it ‘is ripe for a rebound’.
This ETF contains the bigger US-listed gold stocks. As you can see from the chart below, gold mining stocks (blue line) have fared poorly compared to the top 20 ASX-listed stocks (yellow line):
The blue-chip dividend-payers are up 21.3% while ‘blue-chip’ gold miners have fallen 25.6%.
Now, just because a stock has gone up doesn’t mean it won’t keep going up. And remember, if you bought dividend stocks for the dividend you should probably hang in there and keep hold of them.
If you’re looking for value, it’s hard to find that in most of the big blue-chip dividend players.
And our bet is you’ll start to see a lot of volatility and sideways movement in those stocks as they reach their limits. ‘Pairs traders’ will look to profit by short-selling over-valued stocks and buying under-valued stocks. They’ll then reverse the trades as the stocks switch places.
But if you’re looking for value and you want pure growth rather than dividends, gold stocks are worth looking at. Just bear in mind that a gold stock isn’t a substitute for a dividend-paying stock. They are two different investments.
If you’ve gotten capital growth from your dividend stocks, treat that as a bonus. But if you’re after some real growth assets, we agree with the Doc, it’s a great time to look at gold and other mining stocks…especially if he’s right about the strength of China’s economy.
And best of all, it may help you build your wealth to combat the government’s latest tax grab.
Cheers,
Kris
Join me on Google Plus
From the Port Phillip Publishing Library
Special Report: How to Hunt Down 2013′s Biggest Stock Market Winners
Daily Reckoning: Mind the Gap: What Lies in Store for the Australian Dollar?
Money Morning: When Will the Inflationary Stock Boost End?
Pursuit of Happiness: Put the Future on Hold, Plan for Today First
