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Welco me to Pro fit Co nfidential • Wednesday, February 29 , 20 12 SIGNUP FOR PROFIT
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"A Golden Opportunity for Stock Market Investors"
Back in 20 0 2 the edito rs o f Profit Confidential started telling their readers it was time to Our t o p analyst s pick t he ir num be r o ne
jump into go ld related investments, specifically go ld sto cks. This go ld sto cks guidance and st o ck f o r 20 12. Se e why we t hink it co uld
analysis pro ved to be extremely timely. Yes, back in 20 0 2 we started o ffering go ld sto cks be t he be st st o ck t o o wn right no w f o r t he
analysis to o ur readers and we still do it to day. We have been reco gnized as o ne o f the first bigge st pro f it s. And it 's yo urs FREE whe n
yo u sign-up t o ge t Profit Confidential daily
investment letters to tell its audience to jump into go ld sto cks, very early in the go ld bull
market. The go ld analysis we pro vided resulted in many sto cks we fo llo w rising in price wit h o ur co m plim e nt s!
10 0 % o r mo re in sho rt perio ds o f time. To day, yo u can regularly find o ur go ld analysis in
Profit Confidential . Each time go ld prices mo ved higher, we to ld o ur readers to buy mo re Enter e-mail... SIGN UP
go ld related investments. See what we have to say abo ut go ld’s future dally in Profit
Confidential . We respect yo ur privacy and will never share yo ur e-mail address.
New Higher Margin Requirement
for Gold an Investor Opportunity PROFIT CONFIDENTIAL Forecast s Fe b. 29 , 20 12
Immediate term outlook:
No Co mments
The bear market rally in sto cks that started March 9 , 20 0 9
remains intact. Since March o f 20 0 9 we have been and co ntinue
Po sted by Michael Lo mbardi, MBA in go ld sto cks, ho w to invest in go ld , investo r
to be immediate term bullish o n sto cks. Go ld bullio n is up
co nfidence, price o f go ld bullio n , sto ck market , Sto ck Market Advice , sto ck prices o n August $1,30 0 an o unce since we first reco mmended it in 20 0 2 and we
11th, 20 11 are still bullish o n the metal.
After mo nths o f patient waiting, the go ld sto cks came to Short-to-medium term outlook:
life yesterday. Right acro ss the bo ard, whether it was Natio nal debt increasing at the rate o f $125 billio n per mo nth will
junio r o r senio r go ld pro ducers, the sto ck prices o f eventually debase the U.S. do llar. Our co ncern is future
go ld co mpanies were up sharply Wednesday. deterio ratio n o f the greenback, an expansive mo ney supply and
rising U.S. natio nal debt will eventually push do mestic inflatio n
and interest rates higher, negatively impacting the American
Ho pefully, my readers have been fo llo wing my and interest rates higher, negatively impacting the American
guidance and seeking refuge in the go ld-mining eco no my and equities.
co mpanies. Since the spring o f this year, go ld bullio n
prices have been rising sharply, while go ld sto cks
sto o d pat. I have been writing that the leaders o f the PROFIT CONFIDENTIAL Est imat es Fe b. 29 , 20 12
go ld bull market wo uld shift fro m the actual bullio n to To tal 20 11 per share earnings fo r 30 sto cks in the Do w
the go ld sto cks, and that’s what started happening Jo nes Industrial Average: $900
Do w Jo nes Industrial Average Price/earnings multiple: 13.4
Since the middle o f June, the Do w Jo nes U.S. Go ld
Mining Index (an index co mprised o f the largest U.S. go ld-mining co mpanies) is up 12%, Do w Jo nes Industrial Average Dividend Yield: 2.6%
while the general sto ck market has go ne do wn 11% in the same time perio d!
3-mo nth day U.S. T-bill Yield: 0.01%
But, like all go o d things, as the price o f go ld bullio n hits $1,8 0 0 , there are fo rces that want
to put a wrench in the 10 -year go ld bull market, as many believe go ld has beco me to o 10 -year U.S. Treasury Yield: 2.0%
speculative. Hence, this mo rning, we learn that CME Gro up Inc. (CME), the wo rld’s largest
futures market, changed the rules witho ut advance warning and increased the minimum
amo unt o f cash speculato rs and investo rs must depo sit to trade a futures co ntract o f go ld. Search
In summary, margin requirements, with a flick-o f-a-switch, have increased by 22% this
mo rning. Yo u may remember, the CME did the same thing to silver (increased the margin Search
requirements fo r trading silver a few mo nths ago ) and silver fell sharply in price.
Well, I have news fo r the market, and better news fo r my readers. The bull market in go ld is
to o stro ng to have the metal fall in value by 30 % as silver did after the CME increased the
margin requirement fo r trading silver futures.
If you missed Apple, shame
Fo r my readers, any pullback o n the price o f go ld bullio n caused by the CME’s newly
impo sed margin requirements wo uld present a perfect buying o ppo rtunity fo r the junio r and on us. If you miss this...
senio r go ld-pro ducing sto cks, o nce again. This is ho w to invest in go ld no w.
A rare sit uat ion could t rigger t riple- digit gains f or
Michae l’s Pe rso nal No t e s: t his $7 st ock...in t he next 90 days. An opport unit y
so rare, we’ve only seen it happen a f ew t imes
On Tuesday o f this week, the Federal Reserve made the unprecedented actio n o f bef ore.
specifically saying ho w lo ng it wo uld keep sho rt-term interest rates lo w. I’m sure yo u have In f act , t his company is st rikingly similar t o Apple
heard. The Fed will keep rates lo w thro ugh mid-20 13. bef ore it s st ock price t ook of f .
On the news o f a pro lo nged perio d o f interest rates that are lo w, U.S. Treasuries rallied. It
do esn’t matter if Standard & Po o r’s has cut the credit rating o f the U.S. It do esn’t matter if Learn all about the next Apple here!
Co ngress has just given the Obama Administratio n ano ther $2.1 trillio n to spend. Investo rs
want U.S. Treasuries.
Yesterday’s auctio n o f $24.0 billio n in 10 -year U.S. Treasuries was the first o ffering o f U.S.
debt since Standard & Po o r’s cut the U.S.’s credit rating. There was a line up to buy these
bo nds—and the buyers walked away with the lo west yields o n reco rd—2.14%.
The Next Step for the Stock Market
At 2.14%, the dividend yield o f the Do w Jo nes Industrial Average sto cks o f 2.8 % sure do es
lo o k co mpetitive. By Michael Lombardi, MBA
Whe re t he Marke t St ands; Whe re it ’s He ade d: For the benefit of my new readers, and as an update for my
long- time readers, today I want to talk about exactly where I
It’s up and do wn, do wn and up fo r the markets. My readers need to understand that, when believe we are in the stock market. After a 25- year bull
we have huge multi-10 0 po int up and do wn days o n the market, mo st o f that trading is market in stocks, which was fueled by a 25- year decline in
co mputer-driven. Very little o f it has to do with individual investo rs buying o r selling. Since interest rates and a period of great financial leveraging that
the advent o f index-traded funds, co mputer/auto matic trading has beco me a big part o f Wall accompanied collapsing interest rates, a Phase I bear market
Street. (often referred to as the first down- leg) brought stock prices
down sharply. From its high of 14,164 ...
What am I do ing? I’m sitting back and waiting. The current situatio n co uld go o ne o f two
ways. The market co uld mo ve fro m here to test its March 20 0 9 lo ws o r the first real
co rrectio n o f 20 11 co uld be clo se to ending, at which po int the bear market rally wo uld
resume its upward trend.
One of the Best Things Going in
I’m in the camp that believes it is to o early to test the March 20 0 9 lo ws fo r a variety o f
reaso ns I have written abo ut o ver the past two weeks. So me o f tho se reaso ns: sto cks are
the Main Street Economy Today
a better investment alternative to day to 10 -year U.S. Treasuries; mo netary po licy remains
acco mmo dative; the great majo rity o f investo rs are pessimistic; co rpo rate pro fits are still By Mitchell Clark, B.Comm.
stro ng; and co rpo rate insiders are buying sto ck at a pace no t seen since the spring o f
Precious metals and oil have proven that commodities are in
20 0 9 .
an upward price cycle. If you believe in the commodity price
cycle like I do, you’ve got to have some exposure to the
What He Said:
group as part of a balanced investment portfolio. Within the
“Co nsumer co nfidence do es no t change o vernight. In the U.S., 70 % o f GDP is based o n group, there are three main sectors for consideration: precious
co nsumer spending. And, in my life, all the recessio ns I have seen o r studied have o nly
metals, energy, and agriculture. Precious metals and oil have
already been big winners. Like all commodities, they’ve
co me to an end when co nsumers started spending. With co nsumer sentiment getting
experienced substantial price corrections, but their price cycle
wo rse, and with the U.S.perso nal savings rate near reco rd lo ws, it may take years fo r
over the last ...
co nsumers to start spending again.” Michael Lo mbardi in PROFIT CONFIDENTIAL ,
February 25, 20 0 8 . By the end o f 20 0 8 , the rest o f the wo rld was realizing that the Read More
recessio n wo uld be much lo nger and deeper than mo st had imagined.
High Oil Prices Mean Profiting From this Kind
Trading Action Repeating Itself—What of Play
the Stock Market’s Setting Itself up for By George Leong, B.Comm.
No Co mments With the outlook for the U.S. and global economies looking
more encouraging, we have seen a corresponding upward
Po sted by Mitchell Clark, B.Co mm. in co rpo rate earnings, go ld sto cks, price o f go ld , price o f push by oil prices on the chart. The April WTI Oil is advancing
silver, S&P 50 0 , silver sto cks , sto ck market o n July 29 th, 20 11 higher at above $108.00 and north of its 50- day moving
average (MA) of $100.35 and 200- day MA of $95.86. A
While the price o f go ld and price o f silver co ntinue to be bullish golden cross is holding, with the 50- day MA above the
200- day MA. An issue for us is that a large part of oil prices
very stro ng, a lo t o f go ld sto cks and silver sto cks have 200- day MA. An issue for us is that a large part of oil prices
been pulling back in price. It’s a reflectio n o f the current continues to be largely dictated by ...
state o f things, with investo r sentiment seemingly stuck
in a rut. We’re in a market with so much uncertainty that
any call is valid and all o utco mes are plausible. The
sto ck market co uld co mpletely fall apart, stay the same,
o r advance. A market malaise has set in and it’s almo st Why McDonald’s Is Brilliant
entirely due to the so vereign debt situatio n.
By Sasha Cekerevac
Just last week, sto cks were lo o king set fo r a decent run,
as co rpo rate earnings mo stly impressed the Street. That rally fizzled pretty quickly and no w Every year it seems we get some new investment strategy
the S&P 50 0 Index is back do wn at the 1,30 0 level, which I view as pro blematic in terms o f that assures us it is the “secret” to getting rich. Over a decade
the market’s o verall health. What’s happening is that investo rs are beginning to igno re go o d ago, it was the Internet and dot- com hype. Recently, it’s social
news and event-driven trades do n’t seem to have any legs. It’s a stro ng signal that the media, with Facebook and LinkedIn Corporation
market is tired and very unsure o f itself. (NYSE/LNKD). For a long- term investment, the key is what
management can do to constantly innovate and grow. Many
With this backdro p, there certainly is no rush to take actio n o n the lo ng side. Even if the people wouldn’t associate blue- chips with being highly
so vereign debt issue were to be settled right no w and the market were to make a big innovative, but they’d be wrong. They might say that high- tech
advance, there’s just as much pro bability that it wo uld pull back a mo nth fro m no w o n blue- chips like Apple Inc. (NASDAQ/AAPL) can ...
lackluster eco no mic news. The equity market sure isn’t making it easy fo r traders.
The S&P 50 0 Index has basically been trading range-bo und since the beginning o f the year
with declining vo lume. Oddly, it’s fo llo wing a very similar trading pattern to the beginning o f
last year where sto cks advanced and then didn’t do anything fo r abo ut 10 mo nths befo re
breaking o ut. We co uld be in fo r a similar scenario this year where sto cks might no t
experience any material rally until so metime in the fo urth quarter. That is my current figuring. Extra
While co rpo rate earnings are stro ng, eco no mic data are no t. Last year—and so far this
year—the sto ck market was held to gether by go o d co rpo rate earnings, as investo rs were
A Study You Should Know About
willing to wait fo r the eco no my to reco ver. The pace o f that reco very is mo st certainly
unclear and the marketplace is gro wing impatient. Co uple this with all the pro blems
By Michael Lombardi, MBA
asso ciated with co untry debt and deficits, and yo u co uld easily make the case fo r an S&P
belo w 1,30 0 . While most other economists tell us otherwise, I’ve been
writing this year about how the numbers so far do not point to
I think we’re go ing to get co ntinued range-bo und trading fo r the next several mo nths with
a U.S. economic recovery, but rather to a continued economic
the po tential fo r an end-o f-year rally based o n the expectatio n fo r go o d fo urth-quarter slowdown, with the threat of recession. I’ve been focused on
numbers. Co rpo ratio ns are do ing their part; no w it’s time fo r the eco no my and the average damaged consumer, who has lost value in
po licymakers to do theirs. his/her home and has been restrained by no income growth
…if he/she is lucky enough to have a job. With over 47 million
Americans on food stamps, I’m at a loss ...
Flush with Cash—Gold Shares Are the New Read More
What We Can’t Forget About in the Stock
No Co mments
Po sted by Mitchell Clark, B.Co mm. in Sto ck Market Advice o n July 14th, 20 11
By Mitchell Clark, B.Comm.
So , the price o f go ld is go ing up, and so are go ld sto cks. There
really isn’t much mo ney to be made in this market except fo r Street analysts are saying that, because of higher oil prices,
speculating in go ld shares. It’s the industry with the best near- the Dow Jones Transportation Average is showing a real
and medium-term fundamentals as far as I’m co ncerned. divergence from the rest of the stock market. According to
Dow Theory, confirmation from this index is required in order
The big mo ve in go ld has already taken place and equity to uphold the primary trend in the stock market. It’s kind of an
investo rs sho uld already have so me expo sure to this old- fashioned way of predicting the stock market, but I do
impo rtant co mmo dity. The thing abo ut the glo bal eco no my is believe in it. Oil prices have been stronger lately because of
that we’re in a lo ng perio d o f slo w gro wth with inflatio nary geopolitical concerns, but a lot of the stocks ...
pressures. It’s the best o f bo th wo rlds fo r go ld. Add in so vereign debt wo rries (po liticians
wo uld rather print mo ney and create inflatio n than cut pro grams) and the emerging strength
o f BRIC eco no mies, and it’s quite arguable that the spo t price o f go ld co uld hit $2,0 0 0 an
The Thorn in the PC Market Leader’s Side
There are actually very few investment-grade, large-cap go ld co mpanies. Only a few pay a
dividend and, o f tho se, yields aren’t really mo re than o ne percent. Mo st o f the go ld miners By George Leong, B.Comm.
o ut there wo uld co mpare to medium- o r small-cap co mpanies and, because o f the
vo latility inherent in co mmo dities, sho uld be co nsidered speculative equity securities. My kid hardly ever works on his desktop personal computer
Regardless, I wo uldn’t have an equity po rtfo lio that didn’t have so me expo sure to go ld, (PC) anymore, instead favoring a laptop. In fact, I often see
especially giving current eco no mic fundamentals. him surfing the Internet and doing research using my “iPad” or
his “iTouch.” This market shift is not only with my kid, but with
Like mo st things no w, investo rs can co nsider a go ld mutual fund o r exchange-traded fund millions who are also abandoning their computers in favor of
(ETF). There’s even publicly traded co mpanies the so le purchase o f which is to o wn and tablets. The result of this is proving quite difficult for PC
secure large numbers o f go ld bars. Fo r the mo st part, all sto cks related to go ld trade makers, who are fighting to come up with a defense. The
co mmensurately with the spo t price o f the co mmo dity—and there lies the greatest market leader in PCs, ...
investment risk fo r a go ld investo r.
There was a bandwago n effect taking place in precio us metals earlier in the year.
Institutio nal investo rs piled into go ld, silver and co pper and then jumped into agricultural
co mmo dities. Right no w, large mo ney managers are desperately ho ping that seco nd- Platinum Surges 15% in Seven
quarter earnings and visibility will be stro ng eno ugh to pro vide a catalyst to buy sto cks.
Investing in go ld isn’t o n their minds to any great degree. But, the price o f go ld is creeping
Weeks; Now Where Does it Go?
higher. If it ticks past $1,6 50 , then I think we’ll have a new rush o n o ur hands. Percentage-
wise, this price isn’t far away at all. It certainly is a great time to be in the go ld mining By Sasha Cekerevac
business. It’s an industry that’s flush with cash.
Some of the toughest decisions an investor has to make
occur when you are up on a trade. I’ve highlighted some of
the merits in investing in precious metals like platinum before,
A Growth Industry with a the last being on January 11, 2012, in the article Investors
—Should You Consider Platinum? At the time I wrote the
—Should You Consider Platinum? At the time I wrote the
Great Fundamental Backdrop article, platinum was trading approximately $1,497; as of
today, the market for platinum is trading around $1,723, a
move of approximately 15% in less than seven weeks. In fact,
No Co mments ...
Po sted by Mitchell Clark, B.Co mm. in go ld sto cks, investing in go ld, precio us metal Read More
co mmo dities, precio us metal sto cks, price o f go ld , so vereign debt, spo t price o f silver o n
July 8 th, 20 11
Precio us metal co mmo dities co rrected with so me fervo r Popular Tags
—especially silver. The price o f go ld mo ved so mewhat
lo wer in the recent co rrectio n, but it is still so lidly abo ve
the $1,50 0 -per-o unce level. I think that $2,0 0 0 fo r an austerity measures best stocks blue chips China's GDP China's
o unce o f go ld is a real po ssibility o ver the next 12 to 18 Growth co nsumer co nfidence consumer spending
mo nths and it will likely co rrespo nd to so me so rt o f corporate earnings corporate profits credit crisis debt
currency instability related to so vereign debt. Witho ut
crisis dividend paying stocks dividends DOW Dow Jones
questio n, the so vereign debt issue is the gravest
investment risk to yo ur po rtfo lio and is even mo re Indust rial Average Dow Jones Industrials
earnings seaso n economic slowdown euro Euro pean Central
perilo us than a do uble-dip recessio n.
Go ld sto cks actually co rrected mo re than the spo t price and I wo uld be a new buyer o f go ld Bank European debt crisis european economy european
shares at this time. This presumes o f co urse that equity investo rs do n’t already have so me union eurozone f inancial crisis GDP growth
expo sure to this impo rtant market secto r. The resilience o f the spo t price o f go ld in recent
mo nths is, in my mind, a stro ng signal fo r the future. The U.S. do llar do esn’t really have to gold bull market go ld investments gold prices gross
go do wn relative to o ther currencies fo r go ld to keep ticking higher. The rate o f inflatio n domestic product ho me prices inflation rate institutio nal
do esn’t have to be pro no unced either. All that’s required is just a little bit o f everything investo rs investing in gold investing in real estate investing
—so vereign debt wo rries, a slightly weaker do llar, and two -percent to three-percent in stocks investment risk investor sentiment IPOs jo b creatio n
inflatio n—and the spo t price o f go ld can easily break into new reco rd territo ry.
jobs market large-cap co mpanies large-cap stocks Market
Investing in go ld is a must these days and it’s been a fantastic trade fo r a number o f years Veiw micro- cap stocks mining stocks NASDAQ national debt
already. The spo t price o f silver did get ahead o f itself, as speculato rs bid that co mmo dity NYSE oil stocks penny stocks price of gold quantitative
mo re than any o ther in the ho pe o f glo bal eco no mic reco very. I wo uldn’t be surprised at all
to see silver mo ve o ver the $40 .0 0 -per-o unce level in the near future, especially if seco nd-
easing retail sales retail sector retail stocks rising interest
quarter earnings co me in so lid. rates silver silver stocks small-cap stocks So vereign
As I say, the go ld trade has made fo r go o d investing fo r several years no w and my best
Debt stock-picking stock advisors Stock Market
predictio n is fo r this upward price trend to co ntinue. Right no w, there are large, medium and Condition Stock Market Picks stock market rally stock market
small pro ducers o f go ld that are trading fo r reaso nable prices o n the sto ck market. A lo t o f risk stock market success Stock Market Updates stocks Stocks
these co mpanies have little to no debt and are sitting o n large cash ho ards, waiting to put Trading Tips technical analysis The Leong Side of the
that mo ney into new explo ratio n. I hate to say it, but this decade is go ing to be a go lden age Market U.S. banks U.S. debt U.S. Deficit U.S. ho me prices U.S.
fo r precio us metal miners. It’s a great time to be in this industry, with spo t prices high and
real estate market U.S. recession U.S. Treasuries
bank acco unts full.
unemployment rat e Wal Mart
Speculating in go ld mining sto cks is a difficult business. What I think makes fo r an attractive
investment within this industry is finding a handful o f co mpanies that each o ffer a “package”
o f go o d business o ppo rtunities. This means that a go ld mining co mpany sho uld already
be pro ducing and selling o unces o f go ld with detailed expectatio ns fo r increased Categories
pro ductio n o ver the co ming quarters. The co mpany sho uld have o ther pro perties that it’s
explo ring, even in co njunctio n with o ther, perhaps larger mining co mpanies. There needs to Gold Stocks Real Estate Market
be a track reco rd o f financial gro wth, alo ng with lo ts o f cash in the bank fo r further Stock Market Gold Investments
explo ratio n activities. Finally, a decent track reco rd o n the sto ck market always helps—this Bear Market Debt Crisis
means that institutio nal investo rs kno w abo ut the business and are willing to invest in/trade Bull Market Chinese Economy
the sto ck. U.S. Dollar Economic Analysis
Euro Benchmark Stocks
I believe in the co mmo dity price cycle and a fundamental backdro p to suppo rt higher go ld
Interest Rates Dow Jones Industrial
prices. Acco rdingly, go ld sto cks sho uld co ntinue to be so me o f the best equity ho ldings
U.S. Def icit Average
o ver the next few years.
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in Europe Will Be…
No Co mments
Po sted by Michael Lo mbardi, MBA in euro pean eco no my, glo bal eco no my, go ld bullio n
price, go ld sto cks, go vernment bo nds , Greece, gro ss do mestic pro duct , Italy, so vereign
debt, Spain, Sto ck Market Advice o n June 24th, 20 11
I have to tell yo u, I tho ught it wo uld be Spain. My
thinking o f the o rder in which the so vereign debt crisis
wo uld engulf Euro pe was first Greece, then Spain, then
But it lo o ks like I was wro ng. Italy, ho me o f my favo rite
Italian wine, is next.
It all started o n June 18 when Mo o dy’s Investo r
Services said that it was weighing whether to cut Italy’s
credit rating. Since then, go vernment bo nd yields have
been rising in Italy.
Italy has regained o nly a small fractio n o f the gro ss
do mestic pro duct (GDP) gro wth it lo st during the glo bal
recessio n (Italian GDP in the first quarter o f 20 11 ro se
o nly o ne-tenth o f o ne percent o ver first-quarter 20 10 GDP). Unemplo yment is high.
Interest rates are rising and a sex-scandal-plagued Silvio Berlusco ni is o ccupied with trying
to maintain his po sitio n as Prime Minister as uncertainty o ver his capacity to go vern rises.
Here’s why I believe the so vereign debt infectio n is spreading to Italy.
Yesterday, the shares o f Italy’s fo rth largest bank, Unio ne di Banche Italiane, fell five percent
to 3.6 3 euro s—belo w what it had priced its shares in a o ne-billio n euro rights o ffering it
was trying to clo se yesterday.
The sto ck price o f Italy’s largest bank, UniCredit, was do wn abo ut nine percent yesterday.
Intesa Sanpao lo , the co untry’s seco nd largest bank, saw its sto ck price tumble seven
When the sto ck prices o f majo r banks fall so quickly, investo r panic usually sets in. And that
may be the situatio n in Italy right no w. Mo o dy’s Investo r Services said Thursday that it may
do wngrade the credit rating o f 13 large Italian banks.
It lo o ks like the bo nd vigilantes are clo sing in o n their next target. Po o r euro ; ho w will it
ever get a break?
Michae l’s Pe rso nal No t e s:
What a day fo r the sto ck market Thursday…
First we had the Internatio nal Energy Agency (IEA) anno unce that it wo uld release 6 0
millio n barrels o f o il into the marketplace. That pushed sto ck and co mmo dity prices
severely lo wer. Then Greece anno unced that it has struck an austerity deal, which bro ught
sto ck prices back the o ther way.
Why the IEA is releasing so much o il is a mystery to me. I’ve read all the news repo rts last
night and this mo rning, but I just do n’t get it. This o il is being released fro m “emergency o il
So me repo rts said the o il was being released to reduce the sho rtage o f o il caused by lo ss
o f pro ductio n in Libya. But the market reacted as if this was an o versupply situatio n. After
all, Saudi Arabia is increasing its o il pro ductio n to near reco rd daily levels.
There are o bvio usly so me po litical mo tives behind the scenes here…so I’ll just leave it at
But fo r investo rs, I see o ppo rtunity. Go ld bullio n was do wn o ver $30 .0 0 per o unce
yesterday. I haven’t seen that kind o f do wnside mo vement o n go ld fo r mo nths.
But when I lo o ked at my go ld sto cks, I no ticed that they clo sed Thursday at the same level
they clo sed Tuesday. Go ld sto cks ho lding steady while the yello w metal falls in price?
As I have been writing fo r a few weeks no w, the share prices o f go ld explo ratio n and
develo pment co mpanies are fo rming a base here. Yesterday’s sharp pullback in go ld
bullio n’s price was a go o d indicatio n that the go ld sto ck prices are near their bo tto m. If this
was two mo nths ago , and go ld was do wn $30 .0 0 an o unce, go ld sto ck prices wo uld have
pivo ted do wnward quickly.
Whe re t he Marke t St ands; Whe re it ’s He ade d:
Let them release 6 0 millio n barrels o f o il, let Greece and Italy fall. It do esn’t matter to this
bear market rally. No matter ho w bad the news gets, the market co ntinues to trade abo ve its
20 0 -day mo ving average—a big technical po sitive fo r sto cks.
Sto cks lo ve to climb a “wall o f wo rry.” And we seem to have plenty o f that aro und lately. I’m
sticking with my guns: The bear market rally that started in March 20 0 9 , altho ugh tired and
lo ng-in-the-to o th, still has life left in it.
What He Said:
“What gro up o f sto cks is next to fall in light o f the so ftening U.S. ho using market? The
sto cks o f co mpanies that sell retail pro ducts to the American co nsumer, I believe, are next
o n the hit list. Many retail sto cks are already repo rting so ft sales. In my o pinio n, they haven’t
seen anything yet in respect to weaker sales.” Michael Lo mbardi in PROFIT
CONFIDENTIAL, August 30 , 20 0 6 . Acco rding to the Do w Jo nes Retail Index, retail sto cks
fell 42% fro m the fall o f 20 0 6 thro ugh March 20 0 9 .
Gold: The Fundamentals Keep
Shaping up for this Investment
No Co mments
Po sted by Mitchell Clark, B.Co mm. in go ld prices, go ld sto cks, go o d trades, investing in
go ld, sto ck prices o n June 20 th, 20 11
“Uncertainty” and “wo rry” are the wo rds describe the
current state o f the equity market witho ut co rpo rate
earnings and new visibility. Seco nd-quarter earnings
seaso n can’t co me so o n eno ugh—it’s what the
market is desperately waiting fo r.
We have a situatio n where sto ck prices are bo uncing
aro und o n the news o f the day and an investing
marketplace that is ho ping that the so vereign debt
issue can be co ntained. This has given a sho rt-term
bo o st to the do llar, but the lo nger-term trend is fo r a declining currency. This means that the
o utlo o k fo r the price o f go ld remains stro ng.
Investing in go ld has pro ven to be a highly pro fitable endeavo r o ver the last few years, but
everything needs to take a break o nce in a while. Bo th silver and go ld go t a little ahead o f
themselves, but they definitely were go o d trades. If I were to pick o ne precio us metal to
fo cus o n go ing fo rward, it wo uld be go ld.
Here we have an industry that’s awash in cash, is highly pro fitable, and that has limited
pro spects fo r large new disco veries (like o il). Go ld sto cks trade co mmensurate with the
spo t price o f the co mmo dity (with the exceptio n o f majo r new disco veries) and, in the next
upward spike in go ld prices, I think we’ll see a wave o f co nso lidatio n within the industry.
Medium-tier pro ducers will want to use their co mmo n shares as currency to bulk up o n
pro ductio n befo re the next majo r leg up in the spo t price. A lo t o f go ld mining co mpanies
believe that the spo t price o f go ld can hit o ver $1,750 per o unce this year.
I’d be a buyer o f new go ld shares in this market. Uncertainty is everywhere, but when a go ld
mining co mpany says that it expects to pro duce a certain amo unt o f go ld and o ther
bypro ducts, as well as what the co sts are go ing to be, it’s pretty easy to figure o ut the kind
o f cash this business is go ing to generate. Because the estimating pro cess fo r mineral
reso urces and extractio n is regulated and the industry has high standards o f repo rting,
investo rs can have a go o d level o f co nfidence in drill results and business plans fo r
pro ductio n.
As always, yo u want to co nsider an existing pro ducer that’s also drilling fo r mo re go ld
aro und existing pro perties. Yo u want a business with lo ts o f cash in the bank, a highly
educated and respected management team and, finally, a rising co mmo dity price
enviro nment fo r spo t prices.
In the go ld mining universe, there are a lo t o f co mpanies fro m which to cho o se, but there
aren’t a lo t o f co mpanies that are pro ducing o ver 10 0 ,0 0 0 o unces a year. This makes
sto ck picking within the industry that much easier.
Investing in go ld isn’t fo r everyo ne; but, in this eco no my, there’s no t a lo t o f business
gro wth aro und. In terms o f financial success, o utperfo rmance is still with precio us metal
pro ducers and, while everything o ccurs in waves, the fundamentals, in my view, keep
shaping up fo r go ld.
The Best Buys in the Stock
Market Right Now
No Co mments
Po sted by Mitchell Clark, B.Co mm. in fo urth-quarter earnings , go ld sto cks, investment risk ,
large-cap sto cks, majo r co rrectio n , o il prices, sto ck market , sto ck prices o n June 9 th, 20 11
It lo o ks like the o ld investo r adage “go away in May” is
go ing to play itself o ut o nce again. It may no t be until the
fo urth quarter that sto cks can find a new uptrend, as the
eco no my needs mo re time to find its fo o ting. What’s
happening no w in the equity market is a recko ning
amo ng investo rs’ expectatio ns. It’s no t really abo ut
share prices. The time ho rizo n fo r decent investment
returns fro m sto cks is expanding and the actual amo unt
o f tho se expected returns in shrinking. The market right
no w is abo ut declining pro spects fo r sto cks and it’s reflected in the S&P 50 0 Index being
belo w the 1,30 0 mark.
The next majo r suppo rt level fo r this bro ad market index is 1,250 . It seems likely to me that
sto ck prices will drift do wnward to create that level o ver the next three weeks. Sto ck market
malaise co uld be with us fo r the entire third quarter, as expectatio ns co ntinue to be revised.
We still have to remember, ho wever, that sto cks have had a great run since 20 0 9 and they
haven’t really experienced any majo r co rrectio n since then. While investo r expectatio ns are
being adjusted, it do es make it easier fo r the bro ader market to accelerate when the
eco no my and co rpo rate earnings turn upward. My guess is that this wo n’t happen until the
fo urth quarter this year.
The best buys in this market right no w co ntinue to be with large-cap, dividend paying
co mpanies. At the very least, a decent handful o f these kinds o f sto cks sho uld be o n
investo rs’ radar screens. The market isn’t finished go ing do wn as yet, but barring any
majo r sho cks to the system (like a Greek debt default), I expect sto ck prices to tread water
fo r a while. With all the current info rmatio n, getting so me large-cap, dividend equity
investments befo re the fo urth quarter seems to me like a decent strategy.
The price o f o il remains a go o d pro xy fo r the sho rt-term trading actio n in sto cks. Lo nger-
term, a weaker o il price will have a direct stimulative effect o n the eco no my. As fo r go ld, this
is an investment theme with staying po wer; ho wever, the near-term trading actio n seems
bent o n go ing lo wer. This is natural, as investo rs want to unwind the trade after go ld (and
silver) has hit reco rd price highs. There’s still lo ts o f ro o m fo r go ld expo sure in an equity
po rtfo lio to day. There’s to o much investment risk and inflatio nary risk in the glo bal
eco no my to do witho ut it.
The next quarter o r so sho uld be a go o d time to co nsider a high-dividend-paying o il and
gas investment. These sto cks have co rrected with the spo t price o f o il and are quickly
beco ming attractively priced. If OPEC increases its pro ductio n like it says it wants to do
o ver the near term, o il price so ftness will present a go o d entry po int befo re the eco no my
Stock Market Action Déjà Vu:
What’s Going on with Trading
No Co mments
Po sted by Mitchell Clark, B.Co mm. in bear market , co nso lidatio n, eco no my, equity market,
go ld sto cks, sto ck market actio n , Sto ck Market Advice , sto ck picking , trading actio n, U.S.
eco no my o n June 8 th, 20 11
It lo o ks like the current trading actio n in sto cks is the
co rrectio n/co nso lidatio n that we sho uld have had earlier
in the year. Investo r sentiment was perhaps to o
o ptimistic and eco no mic reality has no w caught up to
The o nly things that investo rs really care abo ut are the
numbers, and in tho se numbers they want to see
gro wth. Investo rs sell when businesses aren’t gro wing
and they even sell when business remains the same.
The reality o f a slo w gro wth eco no my is no w settling in
and, no matter what the go vernment o r Fed do es no w,
the eco no my is o n its o wn.
We’re likely to get co ntinued weakness in sto cks until we get into seco nd-quarter earnings
seaso n. If tho se numbers are bad, then sto cks wo uld be in serio us tro uble. The go o d news
is that expectatio ns fo r the seco nd quarter remain quite so lid. No t all industries are
experiencing the same level o f eco no mic activity, and that’s to be expected. With this
backdro p, ho wever, it’s pretty reaso nable to co nclude that the equity market wo n’t be taking
o ff anytime so o n, which is a simple reflectio n o f the current state o f things.
As mentio ned in this co lumn many times o ver the last several mo nths, there’s no rush fo r
investo rs to be taking o n new po sitio ns, especially at the speculative end o f the market.
Sto ck picking is much mo re difficult in a slo w gro wth enviro nment and the returns fro m
speculating o n co rpo rate events are less ro bust in a bear market. Fro m my perspective,
we’re still in a bear market fo r sto cks and the S&P 50 0 Index still hasn’t achieved the same
level that it was trading at o ver 10 years ago .
Faster-gro wing eco no mies like China and Brazil are what are keeping the earnings gro wing
at large co rpo ratio ns. Witho ut these emerging o peratio ns, the earnings results fro m S&P
50 0 co mpanies wo uld be a lo t different. Because the wo rld’s mature eco no mies are
gro wing slo wly and the U.S. eco no my still has to wo rk thro ugh the ho using crisis, I think the
sto ck market is experiencing the same kind o f pattern it did fro m the mid-19 6 0 s to 19 8 0 .
We’ve already been into the current sto ck market co nso lidatio n fo r a go o d 10 years no w
and there’s mo re to go . It’s o ne big trading range that, witho ut dividends, wo uld have meant
negative investment returns fro m sto cks.
Since last September, mo st investable assets have go ne up significantly in price. Sto cks, o il
and go ld have all been due fo r a co rrectio n because o f that run-up. What the market is
go ing thro ugh no w is a reality check and a reminder that eco no mic gro wth can’t be
manufactured o r engineered. The eco no my is still in the pro cess o f balancing itself o ut
after a bubble perio d in ho using. Once this situatio n is fixed, the eco no my will start gro wing
again in a meaningful way.
Time to Go Big or Go Home—Large-cap
Earnings All That Matters
No Co mments
Po sted by Mitchell Clark, B.Co mm. in co rpo rate earnings, dividend-paying sto cks, equity
securities, go ld sto cks, investment risk , large-cap sto cks, so vereign debt, sto ck market o n
June 3rd, 20 11
The o nly thing that really matters to the sto ck market is
co rpo rate earnings. The numbers are everything, and
that’s what equity investo rs need to be fo cused o n.
I’d be a new buyer o f large-cap, dividend paying sto cks
right no w. The market hasn’t pulled back much o ver the
last two years and, every time it has, it’s been a great
buying o ppo rtunity. The sto ck market is reaso nably
valued at its current level and the expectatio n is fo r a
so lid year o f co rpo rate pro fit gro wth. Jo b numbers,
ho using prices, and ISM surveys are all impo rtant, but,
as the o wner o f a business, it’s always the bo tto m line
that co unts.
Even tho ugh I’m advo cating that investo rs with mo ney to
spend co nsider buying sto cks right no w, I’m no t saying that investo rs sho uld lo ad up o n
speculative issues. Far fro m it. Investment risk in the wo rld remains very high. This is
mo stly due to the so vereign debt issue in Euro pe, which keeps flaring up every mo nth o r
so . A lo t o f big investo rs o ver the years have co ntemplated the end o f the euro currency; if
it were to happen, the result wo uld be disastro us fo r capital markets o ver the sho rt term. It
wo uldn’t be the end o f the wo rld, o f co urse, but financial markets wo uld likely take a huge
hit. So , because this risk is present and real, equity investo rs need to be fairly co nservative
with their ho ldings. And, if we are go ing to experience a perio d o f slo w eco no mic gro wth in
the U.S. eco no my, then investo rs need to be awfully cho o sy abo ut which co mpanies they
invest in. Ever wo nder why a co mpany like Caterpillar Inc. (NYSE/CAT) has been such a
po werho use wealth creato r fo r shareho lders just o ver the last year? It’s because the
co mpany is well-diversified in the wo rld’s fastest gro wing eco no mies.
I think so me individual investo rs have a tendency to fo rget just ho w risky sto cks are. Putting
mo ney into the sto ck market is taking a gamble—yo u’re betting o n a co mpany’s ability to
generate pro fits, while reco gnizing that the business cycle exists. Witho ut questio n, equity
securities (which are shares in a co mpany that trade in a seco ndary market) are 10 0 % risk-
capital instruments. Therefo re, it pays to have a healthy regard fo r risk, no matter what the
bro ader market is do ing.
Everybo dy likes a bandwago n. Take go ld, fo r example. The spo t price o f the co mmo dity
has been go ing up fo r years no w, but it isn’t until the media headlines take ho ld that a lo t o f
new investo rs jump in and buy go ld o r go ld sto cks. As the o ld saying go es, o nce it’s in the
newspaper, the sto ry is mo stly o ver. This still rings true to day.
Right no w, it’s difficult to be a buyer o f sto cks. The eco no mic data is lackluster and we’re in
between earnings seaso ns. But, it’s o ften this kind o f uncertainty that creates go o d entry
po ints fo r new po sitio ns. No w is a go o d time to be co nsidering well-managed, large-cap,
dividend-paying sto cks. The right large-cap co mpany can beat the best high flyer the
market has to o ffer.
Fighting Market Risk: Use Put Options
No Co mments
Po sted by Geo rge Leo ng, B.Co mm. in best sto ck advice , defensive hedge, go ld sto cks,
pro tecting yo ur investments , pro tective hedge, put o ptio ns , risk management , silver sto cks ,
Sto ck Market Advice o n May 20 th, 20 11
In Friday’s issue, I discussed the idea o f generating
so me cash thro ugh writing co vered call o ptio ns sho uld
the market trade flat.
At this juncture, sto ck markets are pausing and sho wing
so me uncertainty. And, while I do no t pretend to have a
crystal ball, I do firmly believe in ado pting stro ng risk-
management to pro tect yo ur investments and hard-
earned capital. This is my best sto ck market advice.
The last thing yo u want is to watch yo ur gains
One o f my favo rite strategies I like perso nally to pro tect investment gains is the use o f put
o ptio ns as a defensive hedge against market weakness. This strategy is called a Protective
Hedge. Do n’t be scared by the name o r the fact it emplo ys derivatives, as the strategy is
Under this scenario , investo rs may be so mewhat bearish o r uncertain and want to pro tect
the current gains against a do wnside mo ve in the sto ck o r the market with the use o f index
put o ptio ns.
Fo r tho se o f yo u no t familiar with o ptio ns, a buyer o f a put-o ptio n co ntract buys the right,
but no t the o bligatio n, to sell a specific number o f the underlying instrument at the strike o r
exercise price fo r a specified length o f time until the expiry date o f the co ntract. After the
expiry date, the particular o ptio n expires wo rthless and any respo nsibility is eliminated.
The buyer o f the put o ptio n pays a premium to the writer o f the o ptio n, who gets
co mpensated fo r assuming the risk o f exercise. The writer o f the put o ptio n is o bligated to
buy the sto ck fro m the ho lder o f the put sho uld it be exercised by the expiry date.
Fo r the writer o f the put o ptio n, the amo unt o f premium received fo r assuming the risk is
generally directly co rrelated to the vo latility o f the sto ck and market. The mo re vo latile the
sto ck, the higher the premium paid fo r the o ptio n. And lo w vo latility translates into lo wer
Yo u can buy puts fo r sto cks and secto rs. If yo ur po rtfo lio is heavy in techno lo gy, yo u can
buy puts o n the NASDAQ. Or let’s say yo u have benefited fro m the run-up in go ld and silver
to reco rd histo rical highs; in this case, a go o d strategy may be to buy put o ptio ns o n The
Philadelphia Go ld & Silver Index, which tracks 10 majo r go ld sto cks and silver sto cks.
If yo u are heavily weighted in techno lo gy, yo u can buy put o ptio ns in Po werShares ETFs
(NASDAQ/QQQ), fo r example, a heavily traded put used fo r defensive purpo ses.
It’s that easy. Just take a lo o k at the vario us indices that clo sely reflect yo ur ho ldings o r put
o ptio ns o n individual sto cks that yo u may have a large po sitio n in.
In this market, safety is the key.
U.S. Debt Ceiling and Gold: Market
Closes One Eye, Other Wide Open
No Co mments
Po sted by Michael Lo mbardi, MBA in bo nd market, go ld bullio n price, go ld investment, go ld
sto cks, sto ck market , Sto ck Market Advice , sto ck prices , U.S. debt ceiling o n May 18 th, 20 11
As we all kno w, the U.S. reached the maximum debt
level at which it can bo rro w (its debt ceiling) earlier this
week. The U.S. has bo rro wed $14.3 trillio n and canno t
bo rro w mo re unless Co ngress increases the debt
The go vernment says that it has dipped into its federal
pensio n funds to pay its bills. And what do es the market
do ? It clo ses an eye and yawns. The yield o n the 10 -year U.S. Treasury actually fell
yesterday to 3.1%. The bo nd market is experiencing a “little” rally despite the go vernment
having to dip into its pensio n funds to pay its bills.
Frankly, the bo nd and sto ck market do esn’t care at this po int. It’s keeping that eye clo sed. It
feels, like we all feel, Co ngress will eventually give in and raise the amo unt the U.S.
go vernment can bo rro w like it always has in the past.
But the market has the o ther eye wide o pen o n this o ne…
By the middle o f this May, the U.S. Mint had so ld 8 5,0 0 0 o unces o f American Eagle go ld
co ins—o n track to being their best sales mo nth in abo ut a year.
The last time sales o f go ld co ins reached that level, the price o f go ld bullio n ro se 21% in
the fo llo wing year.
Go ld, having hit a high o f $1,541 per o unce earlier this mo nth, is back do wn to $1,49 1 this
mo rning, a dro p o f 3.2%. But the go ld sto cks were getting so ft back in April and stayed so ft
fo r mo st o f May…until yesterday.
I believe the share prices o f the go ld mining co mpanies are starting to firm up again. In fact,
o ver the last co uple o f days, the go ld mining sto cks have led bullio n higher. The market has
o ne eye wide o pen o n this o ne. A stro ng price base has been established fo r the go ld
mining sto cks…and the patient go ld investo rs are abo ut to get rewarded.
The market clo ses o ne eye o n the debt pro blem, and o pens the o ther to the develo ping
co mmo dities sto ry.
Michae l’s Pe rso nal No t e s:
The same thing will happen here in No rth America…
Yesterday, the United Kingdo m’s Office o f Natio nal Statistics repo rted that inflatio n in the
U.K. jumped to 4.5% in April. Co re inflatio n, which excludes the vo latile fo o d and energy
items, came in at the fastest pace in 14 years—3.7%.
Bets that the Bank o f England will be raising interest rates so o ner rather than later have
We will experience the same sequence o f events here. The inflatio n rate in America will
eventually po p. The Fed will react by raising sho rt-term interest rates. We will hear the
pundits say that the Fed kept rates to o lo w fo r to o lo ng.
As I have been writing fo r weeks no w, inflatio n is beco ming a pro blem thro ugho ut the wo rld
fo r several reaso ns. The United States will no t be immune to inflatio n wo es.
In the U.K., two -year go vernment bo nds yield 1.0 2%. In the U.S., a two -year U.S. Treasury
yields o nly abo ut half o f that—0 .53%. Is the directio n o f U.S. sho rt-term interest rates no t
staring us in the face?
Whe re t he Marke t St ands; Whe re it ’s He ade d:
Very interesting to no te…
The number o f sto ck adviso rs bullish o n the market has fallen sharply, while the number o f
sto ck adviso rs expecting a co rrectio n in the sto ck market has risen sharply (so urce:
Investors Intelligence Advisors Sentiment , 5/18 /11).
Traditio nally, sto ck market adviso rs are wro ng o n their co nsensus o pinio n: if they expect
the market to rise, the o ppo site happens. If they expect the market to fall, it usually rises.
The mo re there are o f them who expect a co rrectio n in sto ck prices, the less likely it is that
it will happen.
I’ve been writing that I expect a little mo re po p fro m this bear market rally; say ano ther 10 %
o n the upside. Given the bearishness starting to prevail amo ngst sto ck adviso rs, the
chances o f the bear market rally co ntinuing are no w stro nger.
The Do w Jo nes Industrial Average starts this mo rning up 7.8 % fo r 20 11.
What He Said:
“Prepare fo r the wo rst eco no mic perio d ahead that we have seen in years, my dear reader,
as that is what I see co ming. I’ve written o ver the past three years ho w, in the late 19 20 s,
real estate prices fell first befo re the sto ck market and ho w I felt the same wo uld happen
this time. Ho me prices in the U.S. peaked in 20 0 5 and started falling in 20 0 6 . The sto ck
market is fo llo wing suit here in 20 0 8 . Is a depressio n co ming? No . Ho w abo ut a severe
deflatio nary recessio n? Yes!” Michael Lo mbardi in PROFIT CONFIDENTIAL , January 21,
20 0 8 . Michael started talking abo ut and predicting the eco no mic catastro phe we started
experiencing in 20 0 8 lo ng befo re anyo ne else.
Gold’s Recent Price Action: Separating
the Men from the Boys
No Co mments
Po sted by Michael Lo mbardi, MBA in bear market rally , gas prices, go ld bull market, go ld
investments, go ld sto cks, inflatio n, Sto ck Market Advice o n May 12th, 20 11
The lateco mers to the go ld bull market have been feeling the
heat the last co uple o f days.
After reaching a reco rd high o f $1,540 an o unce o nly seven
business days ago (o n May 3), the price o f go ld bullio n has
fallen $55.0 0 to $1,48 5.
But it’s no t the price o f go ld bullio n that has investo rs and
speculato rs wo rried. After all, the price o f bullio n is up $252.70
an o unce, o r 20 .5%, o ver the past 12 mo nths. The fear and
co ncern lies with the price actio n o f the go ld sto cks.
As a reader e-mailed us yesterday, “Michael, I enjo y reading PROFIT CONFIDENTIAL each
day and appreciate yo ur wise advice. I have been invested in go ld sto cks fo r the past fo ur
years and have do ne reaso nably well…but am perplexed at the recent perfo rmance o f
sto cks in relatio n to the metal price. (Go ld) sto cks are standing pat when go ld is rising and
selling o ff when go ld declines.”
I’m sure the majo rity o f my readers invested in go ld are no ticing the same thing as the
abo ve reader.
But, in a bull market, this is what separates the men fro m the bo ys. The lateco mers to the
go ld bull market (the “bo ys”) are dumping their go ld sto cks as fear sets in o ver weakness
in the yello w metal. The seaso ned go ld investo rs (the “men”) see go ld sto cks fo rming a
so lid base here. The men are buying the go ld sto cks o n dips, no t selling them.
The go ld bull market is 10 years o ld. It’s no t a market fo r trading. It is a market fo r seizing
the trend and staying with it. During this bull market, there have been times when go ld sto cks
have led the advance higher befo re go ld bullio n and there have been times when go ld
bullio n has led go ld sto cks higher (which is where we are no w).
No thing has changed in the wo rld to change my view o n go ld. The Fed hasn’t sto pped the
printing press. The go vernment hasn’t reined in its reckless spending. Lo ng-term interest
rates haven’t co me do wn; neither has inflatio n.
Everyo ne has an o pinio n, a belief. Perso nally, I see the weakness in the price o f go ld
sto cks as an o ppo rtunity. And that’s why I’m buying mo re o f them to day.
Michae l’s Pe rso nal No t e s:
“Gas prices reach all-time high, co mmuters express need fo r gas cap lo cks,” read the
headline o n the 6 8 0 news.co m web site. But have no fear, o ur go vernment is telling us that
inflatio n is under co ntro l.
I believe that China is telling the truth abo ut its inflatio n rate. And it’s dealing with it.
Yesterday, China anno unced inflatio n fo r April was running at 5.3%. The Chinese
go vernment wo uld like to see the rate at fo ur percent and, in its attempt to reach that go al;
China has been raising interest rates and the reserve requirement ratio fo r its co mmercial
I’ve been writing fo r mo nths that the inflatio n “pro blem” in No rth America is much bigger
than the go vernment o r media ackno wledges. I’m still o f the o pinio n that the Federal
Reserve will co me o ut with ano ther fo rm o f QE1 and QE2 when QE2 ends next mo nth. The
greater the Fed’s effo rts to expand the mo ney supply, the greater the lo ng-term
hyperinflatio n risks.
Whe re t he Marke t St ands; Whe re it ’s He ade d:
End o f the bear market rally? After all, the Do w Jo nes Industrials was do wn 130 po ints
yesterday. No t a chance.
Yo u o bvio usly read my co lumn fo r the reaso n that I have a different angle and view o n what
is happening in the marketplace than mo st eco no mists and analysts. Sure, the bear market
rally is tired and clo se to to pping o ut.
But watching the ticker tape yesterday, I believe that the market do wndraft had mo re to do
with a respo nse to the guilty verdict o f Galleo n Gro up LLC’s Raj Rajaratnam than anything
else. The securities po lice are tightening the strings o n Wall Street players and Wall Street’s
respo nse was, “We do n’t like it.”
The bear market rally in sto cks that started in March o f 20 0 9 , altho ugh very tired and lo ng in
the to o th, co ntinues.
What He Said:
“When I lo o k aro und to day, I see falling sto ck prices…I see falling ho use prices…and prices
fo r retail go o ds sto res declining. The media has it all wro ng blaming (wo rrying abo ut)
inflatio n. In my o pinio n, the single biggest threat to the U.S. eco no my and to the Fed in
20 0 8 is deflatio n. Yo u can bet the Fed will expand the mo ney supply and dro p interest rates
aggressively, as deflatio n starts to rear its ugly head.” Michael Lo mbardi in PROFIT
CONFIDENTIAL, December 17, 20 0 7. Michael was o ne o f the first to warn o f deflatio n. By
late 20 0 8 , wo rld eco no mies were embedded in their wo rst state o f deflatio n since the
Great Depressio n.
Stock Picking for New Opportunities—What
It Might Take for Another Major Advance
No Co mments
Po sted by Mitchell Clark, B.Co mm. in earnings seaso n, eco no mic analysis , go ld mining,
go ld sto cks, gro wth o ppo rtunities, share prices, small cap sto cks, sto ck market , sto ck
picking o n May 5th, 20 11
Right no w the bro ader market is taking a well-deserved
break after a pretty successful first-quarter earnings
seaso n. This market needs a new catalyst if share
prices are go ing to advance and there isn’t o ne present
just yet, so sto cks will trade o n the eco no mic news o f
the day. So far this mo nth, the eco no mic data are
generally po sitive, but no t o verly so . I think we’re go ing
to be in a slo w gro wth enviro nment fo r quite so me time.
With this backdro p, it’s fair to say that there wo n’t be any
majo r tailwinds fo r equity investo rs in the near future. It’s
a sto ck pickers’ market that’s due fo r a co rrectio n. It is
well-deserved, ho wever, and we have to ro ll with the
In my eco no mic analysis, there weren’t very much ho me
runs in the earnings department. The eco no my just isn’t ro bust eno ugh to pro duce so me
majo r o utperfo rmance. I wo uld say that, generally, large-cap results were decent in the first
quarter and the o utlo o k fo r the seco nd quarter is abo ut the same. Fo r smaller co mpanies,
which are still repo rting their numbers right no w, there hasn’t been much in the way o f
o utperfo rmance either, altho ugh several mining sto cks came o ut with excellent financial
gro wth due to stro ng spo t prices. This was expected by the marketplace and even the mo st
ro bust miner is selling o ff right no w.
The sto ck market’s been due fo r a break fo r quite a while and it’s natural fo r this to o ccur
between earning seaso ns. As an investo r, I wo uld be in no rush to take o n new po sitio ns in
this market, but I wo uld be keeping a clo se eye o n go ld po sitio ns. This is lo ng-term trend
that’s no t go ing away.
A number o f very so lid small-cap go ld mining sto cks are retreating in this market and this
is a secto r that’s ripe fo r so me stro ng trading actio n later in the year. As I’ve been writing, I
still feel that the precio us metal secto r represents so me o f the mo st attractive gro wth
o ppo rtunities fo r equity investo rs and that any majo r co nso lidatio n o r co rrectio n in the
secto r wo uld be a great entry po int fo r new po sitio ns.
If there isn’t any new catalyst o n the upside, there isn’t o ne o n the do wnside either. This is a
sto ck market that will likely drift o ver the near term. It’s called sto ck market malaise and it
reflects a certain wariness as to whether eco no mic gro wth is sustainable this year.
Institutio nal investo rs remain unsure.
Sto ck picking o ver the very near term is go ing to be difficult as the bro ader market drifts.
There’s no need fo r any majo r actio n just yet. I do n’t see the equity market advancing in any
meaningful way until we get to seco nd-quarter earnings seaso n. The current break has
definitely been earned.
Gold Burning up the Chart: My Gold Advice
No Co mments
Po sted by Geo rge Leo ng, B.Co mm. in go ld advice, go ld investment, go ld prices, go ld
sto cks, o il sto cks, silver sto cks o n April 29 th, 20 11
What a few mo nths it has been fo r go ld. With war
wo rries in Libya to debt co ncerns in Euro pe and the
United States, alo ng with rising demand o ut o f China
and India, it appears to be the perfect sto rm fo r driving
go ld prices higher. In fact, the break at $1,50 0 was much
so o ner than I had expected and, based o n the chart,
prices co uld go even higher, albeit the buying may be
so mewhat ahead o f itself and hence vulnerable to
so me pro fit-taking.
The June go ld bro ke to a reco rd high o f $1,535.10 o n
April 28 and is lo o king to go higher. The chart sho wed a
bullish inverse head and sho ulders fo rmatio n in March.
Prio r to this, there was a bullish V fo rmatio n in January and early February. The June go ld
made a stro ng breako ut at the $1,440 resistance that was in place since No vember 20 10 in
Alo ng with the upward push, the trading vo lume in the June go ld been surging during the
breako ut and this is bullish. The co ntract is abo ve its 50 -day mo ving average (MA) o f
$1,441. The bias remains bullish. The mo ving average co nvergence-divergence (MACD)
has been flashing a buy signal since early April; but be careful, as we co uld be in sto re fo r a
Investing in go ld is a safe haven play when the market risk rises.
Go ld has rallied in each o f the last 10 years and sho ws a beautiful bullish price chart. My
go ld advice wo uld be to accumulate go ld o n weakness.
The situatio n in Libya co uld wo rsen and there are also tensio ns in Iran and o ther Middle
East co untries. This means added glo bal risk. Oil is trading at o ver $112.0 0 per barrel o n
the threat o f mo re disruptio n in o il fro m Libya and o ther o il-pro ducing co untries.
In my view, the key determinant o f ho w go ld will fare will depend o n the directio n o f sto cks
alo ng with the geo po litical tensio ns.
If the Middle East situatio n wo rsens, it wo uld drive up o il prices, which wo uld impact
eco no mic gro wth at a time when the eco no mies co ntinue to be at risk.
Also , do n’t fo rget abo ut the mo unting debt and deficit in the United States. The co untry has
o ver $14.0 trillio n in debt and is paying billio ns in interest daily. Many states are struggling
to make ends meet and are lo o king at severe cuts in the state budgets.
Silver has also fo llo wed go ld higher, with the May silver futures co ntract abo ve $48 .0 0 an
o unce. It appears set to take a run at $50 .0 0 . The near-term picture with silver is also
extremely bullish o n strengthening Relative Strength, but at the same time o verbo ught.
Silver is a play o n the eco no mic reco very, as it’s fo und in electro nics.
I also like co pper as a play o n the reco vering glo bal eco no mies, especially in industrial
applicatio ns and ho using.
My advice o n playing the co mmo dities is to buy go ld sto cks, silver sto cks, and o il sto cks
o n weakness.
Stock Prices and Corporate Profits:
The Divergence Explained
No Co mments
Po sted by Michael Lo mbardi, MBA in bear market rally , co rpo rate earnings, first-quarter
earnings, go ld investment, go ld prices, go ld sto cks, Sto ck Market Advice , sto ck market
o pinio n, sto ck prices o n April 27th, 20 11
The go o d o ld times must be back.
So far this mo nth, 31 majo r co mpanies have filed with
the U.S. Securities and Exchange Co mmissio n to go
public, the highest number since the summer o f 20 0 7.
Co rpo rate earnings? They’re bo o ming again, to o . Just
lo o k at so me o f these first-quarter earnings repo rts:
Fo rd Mo to r Co mpany (NYSE/F), the seco nd largest U.S.
car maker, made $2.55 billio n. Jo hnso n & Jo hnso n
(NYSE/JNJ) made $3.48 billio n. The Go ldman Sachs
Gro up, Inc. (NYSE/GS), fifth largest U.S. bank, po sted a
$2.74-billio n pro fit. Wells Fargo & Co mpany
(NYSE/WFC) po sted a $3.76 -billio n pro fit. JPMo rgan
Chase & Co . (NYSE/JPM) made a $5.56 -billio n pro fit.
Five co mpanies; $18 .0 billio n in first-quarter pro fit.
Why did I cho o se these five? Because all o f them repo rted earnings substantially higher
than in the same perio d o f 20 10 ! Co rpo rate pro fits are back big-time and this is adding fuel
to the bear market rally in sto cks that investo rs have been so enjo ying fo r 26 mo nths no w.
But when we lo o k clo ser at the five co mpanies I list abo ve, all five, except fo r Fo rd Mo to r
Co ., have their sto cks selling substantially belo w their five-year highs.
The sto ck market is a leading indicato r, no t a lagging indicato r. By pricing the sto cks o n my
list abo ve, except fo r Fo rd, well belo w their five-year price high, the sto ck market is telling
us that it do es no t believe that the better-than-expected earnings repo rts will co ntinue.
As fo r Fo rd, the co mpany’s sto ck is trading clo se to its highest level in 10 years. As we all
remember, this is the o nly majo r car co mpany that did no t get a bailo ut fro m Washingto n
during the credit crisis.
Michae l’s Pe rso nal No t e s:
Go ld investo rs are no ticing that, while go ld bullio n is rallying to new reco rd highs ($1,50 9
per o unce as I write this mo rning), the go ld sto cks are lagging the rally in go ld bullio n. Why
In my 10 -year invo lvement in this go ld bull market, I’ve o ften no ticed that either go ld sto cks
o r go ld bullio n lead the bull, but rarely bo th. We are in o ne o f tho se perio ds where go ld
bullio n is breaking to new price highs and the go ld sto cks are failing to fo llo w…it’s almo st
like the go ld sto cks do no t believe that go ld prices are mo ving so high!
I believe that go ld sto cks are fo rming a stro ng base fro m which to make their next advance.
There’s no escaping it…higher go ld bullio n prices lead to higher pro fits fo r go ld mining
co mpanies. Just this mo rning, Barrick Go ld Co rpo ratio n (NYSE/ABX), the wo rld’s largest
go ld-pro ducing co mpany, repo rted that it made a $1.0 -billio n pro fit in the first quarter o f
20 11, up 22% fro m the same perio d o f 20 10 .
There are many go o d buys in the junio r and senio r go ld sto ck secto r right no w.
Whe re t he Marke t St ands; Whe re it ’s He ade d:
The Do w Jo nes Industrial Average has climbed 1,0 38 po ints so far this year, up 8 .9 % fo r
20 11. The S&P 50 0 o pens this mo rning at its highest level since June o f 20 0 8 .
I’ve been calling it a bear market rally since March o f 20 0 9 and all I can say is that this bear
has failed to disappo int. As I have been saying fo r o ver two years…technically, yo u do no t
trade against the trend, which has been upward. And, fundamentally, yo u do no t “fight the
Fed.” We are living in the mo st acco mmo dative mo netary po licy perio d in histo ry. Sho rt-
term interest rates are near zero . The Federal Reserve is taking actio ns we’ve never seen
Add to all this a stro ng co rpo rate earnings quarter and, bang, the rally marches o n. But there
are cracks in the lining, my dear reader. Lo ng-term interest rates are rising, the U.S. do llar is
under immense pressure to devalue, inflatio n is beco ming a pro blem, and memo ries o f the
wo rst recessio n since the Great Depressio n are fading fast.
Enjo y the pro fits fro m this bear market rally while they last, because they will no t last much
lo nger. Upside pro fit po tential in sto cks (five percent to 10 % higher) do es no t o utweigh the
What He Said:
“Overbuilt, o ver-speculated, o ver-financed and o verdo ne. This is the Flo rida real estate
market right no w. Fo r tho se lo o king to buy fo r perso nal use o r investment, ho ld o ff! The
best deals are yet to co me. I co ntinue with my predictio n that the hard landing in the U.S.
ho using market, which is no w affecting lenders, will have significant negative effects o n the
U.S. eco no my.” Michael Lo mbardi in PROFIT CONFIDENTIAL , April 3, 20 0 7. Michael started
talking abo ut and predicting the financial catastro phe we started experiencing in 20 0 8 lo ng
befo re anyo ne else.
Railroad Stocks & Gold—the Two Best
Sectors of the Equity Market
No Co mments
Po sted by Mitchell Clark, B.Co mm. in earnings seaso n, go ld prices, go ld sto cks, investing
in go ld, railro ad sto cks, silver prices , Sto ck Market Advice o n April 27th, 20 11
There are a lo t o f bellwether co mpanies to repo rt o ver
the next co uple o f weeks and the trading actio n in sto cks
will be fo cused o n that news. I still do n’t think that this
earnings seaso n has been anything to write ho me
abo ut. Fo r a number o f large-cap co mpanies, the
earnings have been so lid, but there haven’t been any
grand slams. The fact is that this eco no my can’t
pro duce much in the way o f o utperfo rmance, with the
po ssible exceptio n o f go ld sto cks.
Railro ad sto cks are still lo o king great in this market and that’s always a go o d sign that
general eco no mic activity is getting better. The railro ad co mpanies o perate like the
acco unting co ncept: first in/first o ut. They see impro ved eco no mic activity first and they see
it go just the same. The majo r railro ad sto cks are trading just o ff their price highs. CSX
Co rpo ratio n (NYSE/CSX) just repo rted a 30 % impro vement in earnings, as freight vo lumes
increased. Street analysts already raised their earnings guidance fo r the co mpany’s
seco nd, third and fo urth quarters, all o f 20 11 and 20 12. If yo u want to kno w where the
bro ader sto ck market is headed, just fo llo w the railro ad sto cks.
Investing in go ld and o ther precio us metals co ntinues to pay o ff regardless o f what’s
happening in o ther secto rs o f the eco no my. The new $7.8 -billio n bid by Barrick Go ld
Co rpo ratio n (NYSE/ABX) fo r co pper pro ducer Equino x Minerals Limited (TSX/EQN) is the
latest big acquisitio n in the mining business. Equino x Minerals has been a po werho use
mo neymaker. The sto ck did very well o ver the last 10 mo nths, and then pulled back with
co pper prices. Then, a Chinese co mpany made an unso licited bid fo r the co mpany, but the
Street figured that ano ther, friendlier bid wo uld surface (and rightly so ). The sto ck traded well
abo ve its o riginal takeo ver price and no w the trade is o ver.
Yo u can bet that, with go ld prices and silver prices trading right at their all-time price highs,
mo re mergers and acquisitio ns will be co ming. This secto r in my view remains perhaps the
mo st attractive fo r equity speculato rs in the current enviro nment. And this is kno wing that
mo st o f the go o d go ld sto cks in that universe have already go ne up. With mining
co mpanies almo st dro wning in cash, they have no where else to put this excess cash flo w
but to purchase o ther miners. I can almo st see the investment bankers dro o ling o ver the
pro spects o f mo re deals co ming do wn the pipeline.
I do feel that the equity market lo o ks tired and that a co rrectio n o r meaningful co nso lidatio n
is increasingly likely after first-quarter earnings seaso n is o ver. As I’ve written recently,
investo rs do n’t need to be in a rush to take much actio n in this market. Things lo o k like
they’re to pping o ut.
The Key to Successful Speculation
in Mining Stocks
No Co mments
Po sted by Mitchell Clark, B.Co mm. in earnings seaso n, go ld sto cks, investment strategy,
mining sto cks, Sto ck Market Advice , sto ck picking , sto ck prices o n April 25th, 20 11
I was beginning to get a little wo rried that this earnings
seaso n was go ing to be a dud. Just like the eco no my,
there is gro wth o ut there, but it isn’t unifo rm. Investo r
sentiment is still so mewhat sideways abo ut the state o f
things. I still see the main sto ck market averages as
getting clo se to to pping o ut. It sho uld happen within the
next two quarters.
The co mmo dity price cycle remains in full fo rce and just abo ut everything related to
precio us metals, o il and agriculture is go ing up in value. It’s a unique time in capital markets,
as we do n’t get a fully fledged upward co mmo dity price cycle all that o ften. In my view, it’s a
lo ng-term trend that sho uld be fully embraced.
Investing in go ld is a prio rity if yo u want to have expo sure to the current cycle. As yo u kno w,
mo st precio us metals have already experienced significant price increases o ver the last
several years. The spo t prices o f go ld and silver co ntinue to hit new highs at this time. Fo r
investo rs in this secto r, established junio r pro ducers with stro ng explo ratio n po tential o ffer
so me o f the mo st co mpelling o ppo rtunities fo r risk-capital equity speculato rs. The entire
precio us metal industry is swimming in cash and there’s go ing to be a lo t o f buying and
selling o f who le co mpanies this year and next.
Interestingly, a lo t o f co mmo dities have seen their prices mo ve co mmensurately with
sto cks o ver the last while. It’s like the glo balized eco no my (and speculato rs) are speaking
with o ne vo ice. I do think bo th sto ck prices and mo st co mmo dities can experience further
price appreciatio n o ver the very near term, with the likeliho o d o f a co rrectio n happening
so o n. If this happens to bo th sto cks and co mmo dity spo t prices, I’d definitely be a new
buyer o f go ld shares.
I prefer the buy-lo w/try-to -sell-high investment strategy as a general rule. There are always
mo mentum trades in the sto ck market. There are always special situatio n o ppo rtunities. But
in the case o f go ld and silver, I’m a lo ng-term bull, so I do n’t have any pro blems with
investo rs speculating in shares that have already experienced big price mo ves. The key to
successful go ld mining speculatio n as an equity investo r is to buy a “package,” which is a
kno wn miner with well-regarded management that’s gro wing pro ductio n and earnings, and
bo asts excellent pro spects fo r further mineral disco veries that can co me into pro ductio n.
The investing universe fo r these kinds o f co mpanies is actually quite small.
So far this year, I’ve seen so me substantial capital gains amo ng sto cks o f precio us metal
pro ducers; no t because o f stro ng spo t prices, but because o f takeo ver bids. Mergers and
acquisitio ns in this industry are ripe fo r acceleratio n and it’s a key co mpo nent o f the
risk/return ratio with mining co mpanies.
Fo r no w, it’s time to enjo y the go o d financial results in large-caps. I’m co nfident that the
go o d news will co ntinue, but no t fo r every industry. I think we’ll get a co rrectio n so o n and
this means a great o ppo rtunity to add to precio us metal po sitio ns.
The Dilemma for Investors with Money to
Spend on Stocks
No Co mments
Po sted by Mitchell Clark, B.Co mm. in first-quarter earnings , go ld sto cks, investment risk ,
Sto ck Market Advice , sto ck picking o n April 20 th, 20 11
It’s a to ugh market fo r equities right no w because
there’s no expectatio n fo r majo r gro wth. So far, big
co mpanies haven’t said eno ugh o n the subject and, with
o ther less-than-enthusiastic news, the sto ck market is
waffling. In fact, the main sto ck market indices co uld
experience a to tal breakdo wn here if the numbers fro m
co rpo ratio ns do n’t start impro ving.
Investo rs bet big o n stro ng first-quarter results and
while, so far, big co mpanies are repo rting gro wth, they’re
no t repo rting numbers that are beating co nsensus and
this means that share prices are very unlikely to advance. In this kind o f enviro nment, new
sto ck picking sho uld go o n the backburner. It’s a wait-and-see market and, like the
eco no my, first-quarter earnings results aren’t go ing to be unifo rm at all.
Texas Instruments Inco rpo rated (NYSE/TXN) just repo rted first-quarter financial results that
missed co nsensus. This impo rtant benchmark co mpany in the semico nducto r industry
repo rted gro wth, but no thing to write ho me abo ut. Like many sto cks in the techno lo gy
secto r, this o ne lo o ks like it’s ro lling o ver.
And the banking industry hasn’t repo rted numbers that have been up to snuff. Yes, there is
gro wth, but, fro m my perspective, the numbers aren’t impro ving eno ugh to warrant new
po sitio ns in the secto r. This is the situatio n the bro ader sto ck market finds itself in right
no w. First-quarter numbers are generally better, but no t by much.
I co me back to the go ld mining industry as o ne o f the few secto rs with any gro wth left in
them. No w that everyo ne is newly wo rried abo ut debt and deficits (because Standard &
Po o r’s says so ), upco ming currency wars are making the case fo r go ld that much better
With the news we have right no w, I have to say that investment risk in equities remains high.
The bro ader market already went up so lidly in anticipatio n o f stro ng first-quarter earnings.
Co mpanies so far aren’t beating co nsensus and they aren’t guiding higher. This presents a
dilemma fo r investo rs with mo ney to spend o n sto cks. Do es the risk justify the po tential
return? Sho uld yo u be a buyer o f new po sitio ns in this kind o f market? I say no to bo th
questio ns, and it isn’t that I do n’t expect the eco no my to impro ve o r that co rpo ratio ns
wo n’t keep gro wing their earnings. With the news we have right no w, the gro wth isn’t stro ng
eno ugh to justify any bo ld new mo ves. We’re at a time no w when a lo t o f previo us
expectatio ns are co ming to gether. What develo ps next is anyo ne’s guess. One thing I kno w
is that I wo uldn’t sell any go ld o r silver. This is the o nly gro wth industry left and it might just
be the o nly sto re o f value go ing if the so vereign debt issue cascades.
Why the Biggest Profits in the Gold
Bull Market Are Still Ahead
No Co mments
Po sted by Michael Lo mbardi, MBA in go ld advice, go ld bull market, go ld investment, go ld
prices, go ld sto cks, investment advice o n April 18 th, 20 11
“It’s to o late, the easy mo ney has been made,” is the
mo st co mmo n respo nse I get fro m investo rs when I
ask them why they do no t have expo sure to the go ld bull
market. No thing co uld be further fro m the truth.
Yes, go ld’s had a pheno menal run-up in price, rising
fro m under $30 0 .0 0 an o unce in 20 0 2 to $1,48 0 to day
—a gain o f 39 3%. I wro te these no w famo us wo rds in
PROFIT CONFIDENTIAL back o n December 13, 20 0 2:
“I’ve been pushing go ld bullio n and go ld shares fo r o ver
a year no w. Bank in January 20 0 2, I perso nally started
buying go ld-related investments.”
And, while many investo rs feel that it is to o late to get into the go ld bull market, I co ntinue
buying in. Actually, I’ve been buying go ld-related investments all the way alo ng; mo st
recently when go ld was trading at $1,40 0 an o unce.
Here are two reaso ns why I keep buying and why I believe the biggest gains fo r go ld
investo rs lie ahead:
Firstly, the shares o f quality go ld-pro ducing co mpanies are lagging the rise in the price o f
the metal. Lo o k at the shares o f Barrick Go ld Co rpo ratio n (NYSE/ABX), o ne o f the wo rld’s
largest go ld-mining co mpanies. Back in 20 0 2, Barrick’s sto ck traded at $20 .0 0 . To day, it
trades at $53.0 0 , a gain o f 175%, while go ld bullio n is up 39 3% in the same time perio d.
Same thing with Newmo nt Mining Co rpo ratio n (NYSE/NEM), ano ther majo r go ld pro ducer.
Its sto ck traded at $25.0 0 in early 20 0 2; to day, it trades at $57.75, fo r a gain o f o nly 130 %
—go ld bullio n, o ver the same time perio d, beat the gain three-fo ld.
The sto ck market wo rks o n supply and demand. The mo re demand fo r a certain sto ck o r
type o f sto ck, the higher the price go es. The great majo rity o f mutual funds in existence
to day are no t investing in go ld sto cks. As time passes and go ld prices co ntinue to rise,
investment pro fessio nals will start to view go ld as a “must have” in their po rtfo lio . Demand
fo r quality go ld sto cks will rise. Go ld sto cks will start to fare better than go ld bullio n itself.
The seco nd reaso n why the biggest gains fo r go ld investo rs lie ahead has to do with the
basic pro fitability o f the majo r go ld mining co mpanies. Barrick, Newmo nt, and Go ldco rp
Inc. (NYSE/GG) have fixed co sts at their existing mines, so their pro fits rise sharply as go ld
prices rise. Lo o k at it this way: a go ld mining co mpany has a co st o f pro ductio n o f
$8 0 0 .0 0 an o unce. At $1,48 0 an o unce fo r go ld, the co mpany is enjo ying a gro ss pro fit o f
8 5% o n its co st o f go ld.
No w, if go ld prices went to $2,50 0 an o unce (which I expect go ld bullio n to easily surpass),
the go ld mining co mpany pro ducing go ld at $8 0 0 .0 0 an o unce all o f a sudden sees its
pro fit margin jump to 213% and, bang…the sto ck price takes o ff.
The biggest pro fits in go ld lie ahead, because we are still in that phase o f the go ld bull
market where sto cks are lagging the price advance o f the underlying co mmo dity. Bo tto m
line: investment pro fessio nals still do no t believe go ld is wo rth having in their clients’
po rtfo lio s and the great majo rity o f investo rs do no t have expo sure to go ld. As we enter
phase three o f the go ld bull market, go ld sto cks will start to lead, as o ppo sed to lag, the
advance in go ld prices.
Michae l’s Pe rso nal No t e s:
It was bo und to happen…
The big news this mo rning: New Yo rk-based Standard & Po o r’s credit rating agency
do wngraded the U.S. AAA credit rating fro m “stable” to “negative.”
I’ve been writing abo ut this co ming event fo r mo nths. The quickly rising natio nal debt o f the
U.S., and lack o f any meaningful effo rt to reduce o ur annual deficit wo uld so o ner o r later
cause the security o f debt instruments to co me under questio n.
Ho w it usually wo rks: first a co untry’s debt rating is cut (like the U.S. debt rating was cut
to day), then interest rates in that co untry rise to o ffset the new perceived risk in its debt
securities (in this case, U.S. Treasuries).
First we had lo ng-term interest rates rise, no w sho rt-term interest rates will co me under
pressure to rise. If the sto ck market go es do wn big-time to day, which I expect it will, the
reaso n will be the market’s increasing realizatio n that higher interest rates in the U.S. are
just aro und the co rner.
Whe re t he Marke t St ands; Whe re it ’s He ade d:
The bear market rally that fo llo wed the early 19 30 s sto ck market crash started in Octo ber
19 34 and lasted until August 19 37—35 mo nths—and to o k the Do w Jo nes Industrial
Average fro m a level o f 9 0 to 18 5, a gain o f 10 6 %.
The current bear market rally in sto cks started back in March o f 20 0 9 and is enjo ying its
26 th mo nth o f gains, having bro ught the Do w Jo nes Industrial Average up 9 3% so far. As I
have been writing, the current bear market rally is no t o ver yet. While upside po tential is
limited, there is ano ther five percent to 14% left o n the upside fo r this market.
The Do w Jo nes Industrial Average o pens this week up 6 .6 % fo r 20 11.
What He Said:
“If I had to pick o ne sto ck exchange that wo uld rank as the best perfo rmer o f 20 0 7, it wo uld
be the TSX (Canada’s equivalent o f the NYSE). Interest rates in Canada remain very lo w
and they are no t expected to rise anytime so o n. Americans lo o king to diversify their
po rtfo lio s, bo th as a hedge against the U.S. do llar and a play o n go ld bullio n’s price rise,
sho uld co nsider the TSX. Mo st bro kers in the U.S. can buy sto ck o n this exchange.”
Michael Lo mbardi in PROFIT CONFIDENTIAL , February 8 , 20 0 7. The TSX was o ne o f the
to p perfo rming sto ck markets in 20 0 7, up just under 20 % fo r the year.
Three Major Financial Trends
Investors Can Profit From Today
No Co mments
Po sted by Michael Lo mbardi, MBA in financial trends, go ld prices, go ld sto cks, interest
rates, real estate market, Sto ck Market Advice , sto ck prices , U.S. Treasuries o n April 8 th,
Three majo r trends in the financial markets, all fro m
which investo rs can make mo ney, co ntinue their
develo pment this mo rning…
Trend #1: Rising lo ng-term interest rates. The 10 -year
U.S. Treasury hit a yield o f 3.6 % Friday mo rning. My
fo recast calls fo r the bellwether 10 -year Treasury to
easily sail past 4.0 % this year.
I’ve been predicting that bo nd investo rs wo uld take a hit
since the summer o f 20 10 , and that’s exactly what has
been happening. The yield o n the 10 -year Treasury sits
to day at the same po int it did in January o f 20 0 8 —but sho rt-term interest rates were a lo t
higher back then. Pressure is no w mo unting fo r sho rt-term rates to rise as well.
The writing is o n the wall with this o ne: lo ng-term interest rates are rising despite the Fed’s
QE2 effo rt, which is o mnibus. Investo rs sho rting lo ng-term bo nds are bo o king, and will
co ntinue to reap serio us pro fits this year.
Trend #2: Sto ck prices will co ntinue to rise in the immediate term. We to ld o ur readers to
jump into sto cks in March o f 20 0 9 , and have kept them in sto cks since then. The Do w
Jo nes Industrial Average has risen 9 3% since March 9 , 20 0 9 . Yes, the easy mo ney has
been made in the sto ck market, but there is ano ther five percent to 10 % upside pro fit
Each passing day, mo re and mo re investo rs are beco ming co nvinced that the wo rst is o ver
fo r the eco no my. They will be pro ven wro ng, but, in the meantime, the cash o n the sidelines
will push sto ck prices higher. The bear market rally o f the past two years has been a true
classic, panning o ut just as I expected, with mo re upside left.
Investo rs can co ntinue to reap immediate-term pro fits fro m the sto ck market (almo st
anything, except real estate sto cks, has been go ing up o ver the past 25 mo nths), but, as
lo ng-term yields hit fo ur percent and get clo ser to five percent, the market rally will be
deflated like o ne big ballo o n.
Trend #3: Go ld prices are at abo ut halfway in their bull market cycle . This mo rning, go ld
bullio n is up ano ther $12.50 an o unce, clo sing in o n $1,50 0 per o unce. Since 20 0 2, I have
been yelling, screaming, to anyo ne who wo uld listen: Buy go ld related investments! I
co ntinue to believe that go ld is headed to $2,50 0 to $3,0 0 0 per o unce.
The U.S. do llar index chart ($USD) is abo ut to break majo r suppo rt, the Fed is getting
nervo us abo ut lo ng-term inflatio n, and the Chinese are o n a buying spree trying to get their
hands o n as many decent precio us metal explo ratio n and develo pment co mpanies they
can. There are plenty o f quality go ld sto cks listed o n senio r sto ck exchanges that will
deliver serio us pro fits to investo rs this year.
There yo u have it. My clo sing co mmentary fo r the week…three majo r financial trends
investo r can still pro fit fro m to day.
Michae l’s Pe rso nal No t e s:
The widely expected mo ve by the Euro pean Central Bank to raise interest rates yesterday,
after keeping them artificially lo w fo r three years, marks the first time in 40 years that Euro pe
has mo ved to raise interest rates befo re the U.S.
The Euro pean Central Bank (ECB) raised interest rates by o ne-quarter po int to 1.25%. The
equivalent bank rate in the U.S. is between zero and o ne-quarter percent. Germany’s
eco no my is bo o ming, inflatio n risks are high, and the ECB is acting. Two mo re rate
increases o f o ne-quarter po int each are expected by the ECB this year.
The Euro pean Central Bank has no w jo ined the ranks o f Canada, India, China, New
Zealand, Australia, Po land, and Sweden in raising interest rates po st-recessio n. The U.S.
Fed, usually the glo bal leader in setting interest rates po licies, will so o n be the laggard in
jo ining the glo bal trend o f rising sho rt-term interest rates.
Whe re t he Marke t St ands; Whe re it ’s He ade d:
A bear market in sto cks still presides. Expect co ntinued immediate-term rising sto ck prices.
The sho rt- to lo ng-term picture co ntinues to deterio rate.
What He Said:
“Yo u’ve been reading my articles o ver the past few mo nths and have seen ho w negative
I’ve beco me o n the U.S. eco no my. Particularly, I believe it’s the ramificatio ns o f the faltering
ho using secto r that are being underestimated by eco no mists. A recessio n do esn’t take
much to happen. It’s disappo inting mo re hasn’t been written o n the po pular financial sites
and in the newspapers abo ut the real threat o f a recessio n happening in 20 0 7. I want my
readers to be fully aware o f my eco no mic o pinio n: I wo uldn’t be surprised to see the U.S.
eco no my in a recessio n so metime in 20 0 7. In fact, I expect it.” Michael Lo mbardi in PROFIT
CONFIDENTIAL, No vember 13, 20 0 6 . Michael was o ne o f the first to predict a U.S.
recessio n, lo ng befo re Wall Street analysts and eco no mists even tho ught it a po ssibility.
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