With family having left, I wanted to update the topic of recent posts.
AAPL: I penned a bullish note pre-earnings. Sales and earnings disappointed, but leaks of upcoming product intros have spurred a massive rally. This has occurred on significant declines in current quarter and next fiscal year estimates from the analysts. AAPL fans are not deterred. 40% yoy increase in earnings estimates are expected from a number of members of an AAPL-oriented forum in which I participate, whereas analysts are looking for perhaps half that yoy gain. For the first time since I started blogging enthusiastically about AAPL in spring 2010 around $250/share, except for the period of uncertainty regarding SJ's illness/impending demise, I think that AAPL is a good but not great stock going forward-- though it is a great company. I'd like to see more fear and improving fundamentals to think it's a great stock prospectively, which are situations I see with several other companies that unlike AAPL are well off prior highs though along with Apple they have record sales and earnings.
I have handled the commodities situation well so far, as well. I stood back from PPLT and PALL a couple of months ago when they just didn't act right. However, platinum was already at the marginal cost of production for a number of mines. Probably, similar for palladium, which is a thinner market.
As soon as I read about the tragedy at the Lonmin mine in South Africa, with dozens of people shot dead by police for protesting, I bought the early surge up in PPLT from lower levels than where it had been when last I blogged on it. I also bought PALL, which trades with PPLT. These stocks (commodities) are "acting well". I speculate that even in a "sluggish" global economy, these industrial (and ornamental) metals are going to rise over time. In the short run, Johnson Matthey put out a report around March of this year suggesting that platinum would like sell around $1600 this fall, and palladium would be around $715 (per ounce prices). They know the market super-well and have had a good track record on price projections so far as I have seen. These are thus both "value" metals and I think they can be bought here despite the recent price surge.
Of my current favorite stocks, one is old, two are new. Old is Con Ed (ED), which after hitting an all-time high took a tumble correlated with the sell-off in T-bonds and the NAZ surge. Relative strength collapsed to 14 from a period of time at above 80. Yet the fundos are fine operationally, earnings are rising. Unbelievably for this boring company, Value Line's computer gives it above average price potential (rank 2) and a technical ranking also of 2. I have been getting Value Line for decades. If Con Ed has ever been a #2 for timeliness of stock price movement, I can't remember it.
Remember, ED is a bond substitute in my book. I continue to foresee it trading to a 3% dividend yield, even in a scenario in which the 10-year T-bond rate rises to 2.5%. I have no idea when this might occur. (I thus see little need for most investors to hold bonds.)
New entrants, and my current momentum favorites, are AGU and CF. These fertilizer companies have P/E's below 10, strong financial strength, and rising earnings estimates. CF has the best stock chart around. AGU looks strong, as well. AGU has the advantage here of having a catalyst. Jana, a hedge fund, is an activist shareholder with a 5% stake. They want AGU broken up, as it has a large global farm retail division. I like ag over consumer electronics here. One has shortages, the other is moving to saturation in parts of the world that don't require low prices to buy the product.
Getting back to electronics, the other strategic (not necessarily tactical) fave I have are the telecoms that are "doing well". These include T, VZ and BCE. These can be yield stocks when the market again starts to worry about growth, but they participate in the growth of data usage, etc. etc. from the spreading use of mobile devices. All are rising out of bases on the stock charts, offer over 4% dividends which are expected to rise, and (importantly) have gently accelerating earnings growth already reported. These stocks could all trade much higher simply as bond substitutes, as well.
The stock market, in fits and starts, overvalued by numerous metrics as it is, has thus begun to make the (usually slow) turn to being less overvalued than bonds. This turn is just beginning, but it is clearly established for the stronger blue chips.
Showing posts with label platinum. Show all posts
Showing posts with label platinum. Show all posts
Monday, August 20, 2012
Monday, August 13, 2012
Dangerous Markets
In my last post, a while ago pre-vacation, I talked up AAPL's virtues. Events proved this correct, in a funy way. AAPL disappointed on sales and earnings, yet the stock is close to its all-time high. IMO, AAPL is at best a weak hold now on a trading basis. The fanbois are loving it that a new iPhone will be out soon. LOL, that's a surprise?
If one compares the platinum ETF, PPLT, with the SPY for as long as PPLT has been in existence, and goes back to the platinum futures markets for prior history, one will see a close correlation between the two. This has diverged over the past year or so. Platinum, and even more so palladium, are priced on the margin largely because they are used in the real economy. The ETFs are secondary in importance; they are not "money" a la gold and perhaps silver. If the central banks were inflating everything so much, or about to, said inflation would include these very rare and essential metals. I thus take them as proverbial canaries. I "think" that stocks have been carried aloft on a similar mode as bonds. If I saw real strength in copper, platinum, palladium prices etc., I would suppose that bonds were all wet and go with the growth stuff. But I don't see that. In fact, the last few months that the Billion Prices Project covers (up to June 30) shows no inflation. (Note they do not cover services.)
The VIX was down today on a down day for stock prices. This joins the metals in non-confirming the action. Meanwhile, fundos matter. The European recession, misnamed a debt crisis, continues on. The sedative of the Olympics is over. For some time I have been analogizing what's been going in in Europe the past few years to what was going on in the US beginning in about 2006. Europe 2012 continues to have similarities to the US 2008 that trouble me.
There have been a few times in my investing career in which I had an atypical sense that I was smarter than the markets or the pundits and actually was right (i.e. lucky). In the 1990s, this sense was that the insanity would continue on until it didn't. I was lucky to stay with the trend until 2000 and get very much out of stocks that year, to get back in in the spring of 2003. In the summer of 2007, I got out of stocks and into cash and bonds around Dow 13000, and when it went to 14300+, I was untroubled. A year later, it had been halved.
I have a similar feeling now about things. As was the case in the US through August 2008, the markets were trading as if things were normal. But they manifestly were not. While the authorities were on the case, they were not gods, and they did the best they could. But troubles are troubles, and Europe has troubles; and the US economy has continued to trail expectations. The president's plans for the country to double exports in a five year span is not on track, as the ROW is not cooperating.
The VIX is 14. It is 1/3 below its 200 day sma. 14 on the VIX is support (resistance for stocks) for the past 5 years. Either the economic news is about to turn sunny, or the VIX is overbought. Right now, I continue to like ED and WGL over AAPL and the growth stuff.
If one compares the platinum ETF, PPLT, with the SPY for as long as PPLT has been in existence, and goes back to the platinum futures markets for prior history, one will see a close correlation between the two. This has diverged over the past year or so. Platinum, and even more so palladium, are priced on the margin largely because they are used in the real economy. The ETFs are secondary in importance; they are not "money" a la gold and perhaps silver. If the central banks were inflating everything so much, or about to, said inflation would include these very rare and essential metals. I thus take them as proverbial canaries. I "think" that stocks have been carried aloft on a similar mode as bonds. If I saw real strength in copper, platinum, palladium prices etc., I would suppose that bonds were all wet and go with the growth stuff. But I don't see that. In fact, the last few months that the Billion Prices Project covers (up to June 30) shows no inflation. (Note they do not cover services.)
The VIX was down today on a down day for stock prices. This joins the metals in non-confirming the action. Meanwhile, fundos matter. The European recession, misnamed a debt crisis, continues on. The sedative of the Olympics is over. For some time I have been analogizing what's been going in in Europe the past few years to what was going on in the US beginning in about 2006. Europe 2012 continues to have similarities to the US 2008 that trouble me.
There have been a few times in my investing career in which I had an atypical sense that I was smarter than the markets or the pundits and actually was right (i.e. lucky). In the 1990s, this sense was that the insanity would continue on until it didn't. I was lucky to stay with the trend until 2000 and get very much out of stocks that year, to get back in in the spring of 2003. In the summer of 2007, I got out of stocks and into cash and bonds around Dow 13000, and when it went to 14300+, I was untroubled. A year later, it had been halved.
I have a similar feeling now about things. As was the case in the US through August 2008, the markets were trading as if things were normal. But they manifestly were not. While the authorities were on the case, they were not gods, and they did the best they could. But troubles are troubles, and Europe has troubles; and the US economy has continued to trail expectations. The president's plans for the country to double exports in a five year span is not on track, as the ROW is not cooperating.
The VIX is 14. It is 1/3 below its 200 day sma. 14 on the VIX is support (resistance for stocks) for the past 5 years. Either the economic news is about to turn sunny, or the VIX is overbought. Right now, I continue to like ED and WGL over AAPL and the growth stuff.
Friday, June 1, 2012
Gold Up but Oil Down: A Mixed Message
Oil and gold are doing what they did in later periods of 2008 as well as last year. Oil is breaking down while gold is moving up. The gold:oil ratio is either about 20:1 (WTI) or about 17:1 (Brent). Either way, gold is not historically cheap to oil. There is clearly more room for oil prices to drop, both fundamentally and based on my reading of net short positioning of the commercials in the crude oil futures market. Thus as in 2008, a deeper low in the gold market is very possible (no guarantee), as people start really fearing deflation (perhaps). More fundamentally, in recessions, people must pay their bills with currency, not gold, plus jewelry purchases decrease. Finally, let's remember that the gold is now about 4X as expensive relative to U.S. residential real estate as it was when the ratio was at its minimum about seven years ago. You can't eat either gold or a home, but you can live in the latter (or rent it out for a profit, or so you hope). Value buyers are looking to homes this cycle for inflation protection, not only gold. I think the financial markets will reflect this relatively high price of gold compared not only to houses but to metals such as platinum.
Thus I am looking at the action in the precious metals today as technical, under cover of the "they will print" POV. But no U.S. recession is baked in the cake, and the current money flows into the Treasury market out of Europe and out of the global stock markets are probably sufficient to take the place of a new QE.
All recessions are deflationary (or disinflationary). As regular readers know, I give ECRI's views more weight than the Street does. Their WLI was down again today, and the multi-year trend is uninspiring.
If their U.S. recession call is correct while Europe works through its various problems, I think we can look forward to demand for commodities sharply diminishing. For example, there is said to be a 2-year supply of platinum in ETFs, for which the public is paying storage costs. LOL! Platinum can go into deficit, plus what do you think happens to the demand for platinum jewelry in a global recession? Platinum "could" fall a lot further from here. Just look at the 2008 lows if you are skeptical. Maybe it can't go so low, but sub-$1200 is quite possible. I just don't see gold as a good value at its current price in that global recession scenario. Message: sometimes markets should be watched and not traded.
As I've been saying since January 2009, the U.S financial structure. has been developing as Japan did during its ZIRP period. The zero bound has been a gravitational force, as it were, pulling the longer maturities toward it, with inflationary spurts during the expansion phase of the economic cycle.
I still consider stocks as a whole to be overpriced. OTOH, buy-and-hold investors are finally getting the chance to purchase a growing number of equities that are likely to outperform Treasuries on a multi-year basis, ignoring the fluctuations in between. Hint: think secure and growing income stream, a la BDX; or high and safe income stream even if it fails to grow ("we" think safe), as in ED.
Thus I am looking at the action in the precious metals today as technical, under cover of the "they will print" POV. But no U.S. recession is baked in the cake, and the current money flows into the Treasury market out of Europe and out of the global stock markets are probably sufficient to take the place of a new QE.
All recessions are deflationary (or disinflationary). As regular readers know, I give ECRI's views more weight than the Street does. Their WLI was down again today, and the multi-year trend is uninspiring.
If their U.S. recession call is correct while Europe works through its various problems, I think we can look forward to demand for commodities sharply diminishing. For example, there is said to be a 2-year supply of platinum in ETFs, for which the public is paying storage costs. LOL! Platinum can go into deficit, plus what do you think happens to the demand for platinum jewelry in a global recession? Platinum "could" fall a lot further from here. Just look at the 2008 lows if you are skeptical. Maybe it can't go so low, but sub-$1200 is quite possible. I just don't see gold as a good value at its current price in that global recession scenario. Message: sometimes markets should be watched and not traded.
As I've been saying since January 2009, the U.S financial structure. has been developing as Japan did during its ZIRP period. The zero bound has been a gravitational force, as it were, pulling the longer maturities toward it, with inflationary spurts during the expansion phase of the economic cycle.
I still consider stocks as a whole to be overpriced. OTOH, buy-and-hold investors are finally getting the chance to purchase a growing number of equities that are likely to outperform Treasuries on a multi-year basis, ignoring the fluctuations in between. Hint: think secure and growing income stream, a la BDX; or high and safe income stream even if it fails to grow ("we" think safe), as in ED.
Friday, January 29, 2010
Gold: Comments on Price and Relationship to Stocks
The accompanying chart is an about 22-year chart showing long channels of first, gold outperformace v. stocks, then the opposite, then back to gold. Gold was price-controlled for much of the 20th century; we saw long periods of a 5:1 ratio in the pre-FDR days, and at the depths of the Depression after gold was raised to about $35 per ounce, we say 2 or 3 to 1 as the ratio, rising at the maximum pre-WW II to 5 to 1.
From a sentiment standpoint, the only free sentiment data I can follow daily comes from the premium of Gold-Trust's NAV to the value of its gold holdings. That premium has been about 2.5% the past 2 days, and is about 2.1% as I write this.
Having followed GTU for the past year or so, I can say this is about as low a premium as it has carried.
At gold's peak price in early December, that premium surged to about 9%.
Similarly, the much larger and much better known Central Fund of Canada (CEF) is down to a 3.9% premium over NAV. This fund, which owns both gold and silver, has often traded at a double-digit premium to NAV. CEF and GTU are run by the same organization; www.gold-trust.com; www.centralfund.com.
(In case you are wondering, there are various reasons to value precious metals held in these ETFs over those held by the much larger GLD and SLV ETFs; at least many people believe so, which accounts for their premia.)
I take the above to be encouraging signs that the hot money is leaving or has left the precious metals market.
Structurally, gold but not silver is in a confirmed bull market. Similarly, platinum (PPLT) is in a moderately bullish long-term configuration but has not taken out its high of prior years as gold did late last year. Palladium (PALL) is nowhere long-term; its recent strength vs. gold has been a source of concern as it is the most speculative of the bunch.
Currently, gold is holding at the same price, roughly, as the S&P 500. For them to perform equally, gold would have to go up 2% to account for dividends from stocks. Based on the above, definitely fallible indicator, and considering various measures of investor optimism re stocks, outperformance in the months and year ahead for gold is my guess.
Copyright (C) Long Lake LLC 2010
Monday, November 16, 2009
Economic Reports Taken Bullishly by Metals Traders
Meanwhile, while it may be slightly ancient news, the Commerce Dept. reported today that manufacturing and trade shipments for Sept. were $988 B, down 0.3% from August and down 13.1% from the year earlier. The inventory/sales ratio was stable month on month at 1.32.
Thought you might like to know. End of recession/depression turning point? Could well be. But we must be careful in watching large percentage moves off of a low base.
And for all the excitement about retail sales and the moves in stocks, these moves are matched by gold once again.
More to the point: platinum, palladium and silver are screaming to the upside.
More and more to the point: Longer-dated Treasuries are up in price.
Money is chasing all sorts of financial assets. In times like this, the safest short-term strategy is to go with the flow. And so prices of metals are being bid up. Louise Yamada had spied strength in silver as she stated in a recent interview. Great call! And breaking out silver is, attracting new buying as it does so.
Its back to the reflationary '30s for now
Copyright (C) Long Lake LLC 2009
Thought you might like to know. End of recession/depression turning point? Could well be. But we must be careful in watching large percentage moves off of a low base.
And for all the excitement about retail sales and the moves in stocks, these moves are matched by gold once again.
More to the point: platinum, palladium and silver are screaming to the upside.
More and more to the point: Longer-dated Treasuries are up in price.
Money is chasing all sorts of financial assets. In times like this, the safest short-term strategy is to go with the flow. And so prices of metals are being bid up. Louise Yamada had spied strength in silver as she stated in a recent interview. Great call! And breaking out silver is, attracting new buying as it does so.
Its back to the reflationary '30s for now
Copyright (C) Long Lake LLC 2009
Thursday, October 29, 2009
Market Comment
Once again, gold is performing at least as well as the Standard and Poor's 500 index. It's rather incredible that 9+ years into that outperformance, not only has it been continuing almost daily, but that the ratio of the gold price vs the S&P index is about at a "normal" 1:1.
Given that the administration is simply supporting the FIRE economy with debt-based gimmicks such as "Clunkers" and nothing-down FHA loans, plus considering Carter-era gimmicks such as paying firms to create "jobs", this cycle is looking more as though there has been a 1974 major stock market bottom with a strong rebound, but with the likelihood of new lower stock market values adjusted for the general price level.
Except for the few income stocks that offer international diversification and adequate income and where management is outperforming the economy and its competition, such as McDonald's, it's getting harder to justify stock markets investments when you can invest in your home that you get to use, and alternatives to overvalued financial instruments that might pull an AIG over permanent assets such as gold or its riskier "precious" colleagues, platinum and silver.
Copyright (C) Long Lake LLC 2009
Given that the administration is simply supporting the FIRE economy with debt-based gimmicks such as "Clunkers" and nothing-down FHA loans, plus considering Carter-era gimmicks such as paying firms to create "jobs", this cycle is looking more as though there has been a 1974 major stock market bottom with a strong rebound, but with the likelihood of new lower stock market values adjusted for the general price level.
Except for the few income stocks that offer international diversification and adequate income and where management is outperforming the economy and its competition, such as McDonald's, it's getting harder to justify stock markets investments when you can invest in your home that you get to use, and alternatives to overvalued financial instruments that might pull an AIG over permanent assets such as gold or its riskier "precious" colleagues, platinum and silver.
Copyright (C) Long Lake LLC 2009
Subscribe to:
Posts (Atom)