Daily Gains Letter

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Tesla Soon to Be the Biggest U.S. Automaker?

By for Daily Gains Letter | Feb 24, 2014

Tesla Soon to Be the BiggestEvery time I drive my SUV, especially when I have to fill up the tank with premium gas, I quiver and think about downsizing to a smaller gas-efficient vehicle or some sort of hybrid.

I remember back more than a decade ago when Canadian upstart Ballard Power Systems Inc. (NASDAQ/BLDP) was all the rage on Wall Street, with traders driving up the stock price to above $100.00 in early 2000 on anticipation the company could develop the first hydrogen-powered cell for vehicles. Of course, as my stock analysis indicates, that failed, as Ballard was unable to develop a battery small enough to power the everyday car. The rest is history. Ballard is still hanging around, but it’s a non-factor in the alternative power sector for vehicles, based on my stock analysis.

As many of you already know, my stock analysis favors Tesla Motors, Inc. (NASDAQ/TSLA) as the big winner in the alternative power sector for vehicles. In a few short years, Tesla has become the next big technological innovation with its fully electric-powered vehicles. The Tesla vehicles look sharp and sporty and are gaining a wide acceptance based on the sales we are seeing.

I drove by a Tesla charging station the other day, and it looks impressive and innovative. Tesla is aiming to build a “Supercharger” network to cover about 98% of the United States by 2015. The Supercharger network can charge up a Tesla car via the changing of the battery pack and is free if you buy the more powerful battery. The whole process to automatically change the battery takes less than 90 seconds, according to the … Read More


As Investors Grow More Skeptical Toward Stocks, Time to Move to Safe Haven ETFs?

By for Daily Gains Letter | Feb 19, 2014

Safe Haven ETFsWe see there’s a significant amount of economic news mounting against the argument that key stock indices will go higher this year. We see major companies on the key stock indices reporting corporate earnings that are dismal to say the very least. We see indicators of prosperity suggesting the opposite is likely going to be true for the U.S. economy. Lastly, we also see troubles developing very quickly in the global economy.

First on the line are the corporate earnings of companies on the key stock indices—which is hands down one of the main factors that drive these indices higher. We see companies showing signs of stress. Consider General Motors Company (NYSE/GM), for example; the company’s corporate earnings declined 22% in 2013 from the previous year. (Source: “GM reports lower-than-expected 4Q earnings,” Yahoo! Finance, February 6, 2014.)

Some might call this a story of the past; we need to look at what the future looks like instead. Sadly, going forward, companies on the key stock indices and analysts look worried as well. Consider this: so far, 57 S&P 500 companies have issued negative corporate earnings guidance, while only 14 have issued positive guidance. At the same time, analysts’ expectations are coming down as well. On December 31, the consensus estimate expected S&P 500 earnings to grow by 4.3%; now, these expectations have come down to 1.5%. (Source: “S&P 500 Earnings Insight,” FactSet, February 7, 2014.)

Looking at the broader U.S. economy, it’s not moving in favor of the key stock indices, either—the economic data isn’t looking very promising.

Industrial production in the U.S. economy declined in January from the previous … Read More


Now the Perfect Time to Get Back into Oil Stocks?

By for Daily Gains Letter | Feb 14, 2014

Oil StocksThe price of light crude oil recently broke through the $100.00-per-barrel mark for the first time this year. Oil prices had been on the decline since early September 2013 when they touched a high of $110.00 per barrel. By early January, oil prices had dropped more than 17%, hovering around $92.00 per barrel.

Thanks to the frigid weather blanketing much of the U.S. and improvements in the country’s oil infrastructure, oil prices have since climbed more than nine percent.

In late January, a new oil pipeline opened that connects Alberta, Canada to the Gulf Coast refineries and export terminals. The pipeline is made up of a combination of the original Keystone pipeline running from Alberta to Cushing, Oklahoma, where it then connects with the new Keystone XL South pipeline, which carries on to Texas. (Source: Philbin, B., “Oil Pipeline Opens, Prices Surge,” Wall Street Journal, January 26, 2014.)

Cushing is the pricing point for the New York Mercantile Exchange’s West Texas Intermediate (WTI) contract, North America’s benchmark oil price. It is also America’s biggest oil storage hub. The southern extension of the contentious Keystone XL pipeline is expected to help eliminate the glut of oil in Cushing that has artificially skewed U.S. oil prices for three years, keeping it trading well below crude oil prices based on the European Brent benchmark.

Interestingly, the abundance of oil and increased flow of crude oil from Cushing to the Gulf Coast does not translate into a drop in oil prices. That’s because some of the so-called “extra” oil making its way to the Gulf Coast is being processed into fuels and shipped to … Read More


Where to Find the Best Opportunities in Emerging Markets

By for Daily Gains Letter | Feb 13, 2014

Emerging MarketsThere are a significant number of concerns regarding the emerging markets at this time. Investors are asking if emerging market stocks are a good buy right now; are the troubles over or are there still more to come?

As it stands, it seems further troubles are brewing in the emerging markets, as the Federal Reserve tapers its quantitative easing program. We have seen currencies in countries like Turkey, South Africa, Russia, and Argentina decline significantly.

You see, when the Federal Reserve first started to lower its interest rates and initiated quantitative easing; it gave birth to a trade. The idea behind this trade was simple: you borrowed money from a low-interest-rate country—the U.S.—then invested that money in a high-interest-rate-paying country—the emerging markets, like Turkey—and banked the difference. The Federal Reserve tapering its quantitative easing is drying up the liquidity—the money that went to high-interest-paying countries has to come back now. This is what’s creating troubles.

Before I go into further detail, I want to restate my opinion on the emerging markets and their stocks: in the long run, they can be very profitable. My main reason for this belief is that emerging markets need infrastructure, meaning construction companies and utilities companies will be profitable. These markets also have massive populations and the middle-class is on the rise, meaning consumer discretionary stocks and companies in the service sector will see growth as a result.

Where are the opportunities in the emerging markets now?

One rule of thumb is that when there’s a broad market sell-off, even companies with great fundamentals and solid track records get punished. Investors sell these stocks in … Read More


Two Reasons to Consider Gold Investments Right Now

By for Daily Gains Letter | Feb 12, 2014

Gold Investments“Why would someone be bullish on gold right now? Stocks have the momentum. Let me warn: you will be better off buying stocks than buying gold bullion.” These were the “wise” words of my good old friend Mr. Speculator, when I met him over the weekend.

Not too long ago, he was afraid about what would happen to his stock position. Now, his opinion has changed. Mr. Speculator thinks key stock indices will hit new highs and gold bullion—which provides safety against the backdrop of a weak economy—will go down further. He said, “It will be a bad year for gold investors.”

Mr. Speculator may be right about the key stock indices. The momentum on the stock market is significantly noticeable. We see buyers come in and buy after every decline. This can continue, but you have to keep in mind that the fundamentals are becoming weak. This can be troublesome and could create a massive sell-off very quickly.

On gold, however, I completely disagree.

I have been bullish on gold bullion for some time, and my main argument has to do with the demand and supply of the precious metal. I see demand for gold bullion increasing, while the supply side is being threatened due to low prices.

We are seeing China become the biggest consumer of gold bullion. It was India before, but the government and the central bank of the country are working very hard to curb the demand for the yellow shiny metal. According to the China Gold Association, in 2013, the total precious metal consumption in the country increased by 41% to 1,176.4 tonnes. This … Read More


How the Trend Is Changing for Silver

By Sasha Cekerevac for Daily Gains Letter | Feb 12, 2014

Trend Is Changing for SilverOne of the interesting things about investors is how so many become complacent over time. When precious metals like silver were rising steadily, more and more people jumped on the bandwagon. But times have changed.

With few people in the media talking about precious metals, I think it’s a good time to take a look at silver, as 2014 could potentially be a very strong year for the metal.

Obviously, we know that 2013 was a tough year for most of the precious metals, as investors began to believe that economic growth was going to accelerate globally. Over the last couple of months, it is clear that global economic growth is far from certain.

Uncertainty is an important component for the precious metals market, and we have seen silver react much more sharply than the other commodities, both to the upside and the downside.

As people become more uncertain, they look to assets that they believe can help protect their wealth. The emerging markets are getting hit badly, including Turkey hiking rates massively in one day, Argentina and Venezuela having serious issues, the Ukraine experiencing riots, and China now exhibiting signs of a slowdown in economic growth. Considering all of this, it’s no surprise that many people in nations around the world continue to accumulate precious metals, including silver.

An interesting note from last week made by the European Central Bank (ECB) president, Mario Draghi, in his comments following the central bank meeting is the possibility that there could be additional monetary stimulus (money printing) coming shortly.

With economic growth nowhere in sight in Europe, to have yet another central … Read More


Stock Market Sell-Off Making This Sector an Attractive Buy?

By for Daily Gains Letter | Feb 10, 2014

Stock MarketWith the markets selling off, many may not think now is the best time to consider discretionary stocks. But it’s because the markets are selling off that beaten-down stocks selling non-essential products and services (what people want, not need) might be worth a second look—not just because many discretionary stocks are beaten down, but rather because consumer spending fuels the majority of economic growth in this country.

Normally, when consumers have the money to spend, they do so on discretionary items like travel, electronics, cars, and luxury brands. But, as virtually all of us can contest, this isn’t always the case. Credit card purchases may not be the same as having discretionary income, but they accomplish the same short-term goals.

Granted, there is a mountain of evidence to suggest investors should shun discretionary stocks. Unemployment is high, wages are stagnant, and, for the first time ever, working-age Americans are the primary recipients of food stamps. On top of that, median household income (adjusted for inflation) has declined for five straight years. (Source: DeNavas-Walt, C., et al., “Income, Poverty, and Health Insurance Coverage in the United States: 2012,” United States Census Bureau web site, September 2013.)

That hasn’t stopped us from spending. At $3.04 trillion, consumer credit is up 22% over the last three years. Total household debt is more than $13.0 trillion, close to its 2007 pre-recession level and just below the $17.0-trillion government debt load. (Source: Cox, J., “It’s back with a vengeance: Private debt,” CNBC, October 12, 2013.)

During the last quarter of 2013, the U.S. economy expanded at an annual rate of 3.2%. During the third quarter, … Read More


How to Prepare for the Stock Market Sell-Off I’ve Been Warning About

By Sasha Cekerevac for Daily Gains Letter | Feb 7, 2014

Stock MarketWell, that didn’t take long! Just a few weeks ago, I wrote an article stating that investors should begin to worry about the lofty level of the stock market. Since that time, the S&P 500 has dropped by more than five percent in less than two weeks.

This market correction won’t be a surprise to my readers, as I have been suggesting investment strategies that can help prepare your portfolio for a large downswing in the market for some time now.

When I wrote the article in late January, the S&P 500 was surging, even though the preliminary Thomson Reuters/University of Michigan index of consumer sentiment dropped month-over-month. Since then, we have seen additional data coming from China showing that its economy is beginning to slow.

The Markit/HSBC China Manufacturing Purchasing Managers’ Index (PMI) for January was 49.6, much weaker than expected. (A PMI data point below 50 denotes a contraction in activity.) While many analysts have been expecting China to begin accelerating, this recent data is a dose of reality, as manufacturing jobs in China dropped for the third consecutive month. (Source: “HSBC China Manufacturing PMI,” Markit Economics, January 30, 2014.)

I know what you’re thinking; “Why should investors in the S&P 500 care about what happens in China?” A market correction doesn’t occur based on a single event. When you’re trying to develop investment strategies, especially if you are considering the potential for a market correction in a large index, such as the S&P 500, you have to take many factors into account, as if you’re working on a jigsaw puzzle.

First ask yourself, what are the positive … Read More


Could Gold Surprise Investors in 2014?

By for Daily Gains Letter | Jan 31, 2014

Could Gold Surprise Investors in 2014?The demand for gold bullion is increasing. Each day there’s more evidence that suggests this phenomenon will continue. We see consumers buying gold bullion across the global economy. As a result, mints are working in overdrive mode to meet this demand and gold storage facilities are looking to add more vaults.

The Brinks Company (NYSE/BCO), UBS AG (NYSE/UBS), and Deutsche Bank Aktiengesellschaft (NYSE/DB) are opening new vaults in Asia. What’s their reasoning for taking this step? The demand for gold, especially from China, has increased.

Regarding vaults, the general manager of Brink’s in Singapore, Baskaran Narayanan, said, “We need additional capacity, so we have to take further space.” He added, “There’s a surge in demand for precious metals in Asia, and one can see the focus and movement from the west to the east.” (Source: Larkin, N., et al., “Gold Flows East as Bars Recast for Chinese Defying Slump,” Bloomberg, January 28, 2014.)

Mints cannot meet the demand. The Austrian Mint, for example, was forced to hire more employees and add more time to the daily shifts worked. This wasn’t enough. Even while operating 24 hours a day to meet the gold bullion demand, the mint is failing. (Source: Roy, D., “Gold Mint Runs Overtime in Race to Meet World Coin Demand,” Bloomberg, January 27, 2014.)

But there’s something else happening that could cause a further increase in the demand for gold bullion, and that’s a currency crisis in the emerging markets. Currencies in countries like Turkey, Russia, South Africa, and Argentina have seen massive declines. The central banks look worried. The central banks of Turkey and South Africa have … Read More


How to Profit from the Collapse in Emerging Markets

By for Daily Gains Letter | Jan 30, 2014

Emerging MarketsAfter years of easy money and a failure to secure a well-executed exit plan, it looks as though the emerging markets are getting a taste of the Federal Reserve’s economic tapering. Over the last five years, the emerging markets have benefited from low interest rates and listless growth in developed countries.

But, with the U.S., Japan, and Europe—the three biggest economies globally—all expanding for the first time in four years, the tables are turning and the sheen is beginning to wear on the emerging markets.

In an effort to help kick start the U.S. economy after the financial crisis in 2008, the Federal Reserve enacted it’s overly generous bond buying program (quantitative easing). All told, the Federal Reserve dumped more than $3.0 trillion (and counting) into the markets and has kept interest rates artificially low.

The ultra-low interest rates might have been great for home buyers, but income-starved investors had to look elsewhere to pad their retirement portfolio. Many retail and institutional investors went to the emerging markets, where the interest rates were higher and there was a real opportunity for growth.

In December, the Federal Reserve said it was going to begin tapering its $85.0-billion-per-month quantitative easing strategy to $75.0 billion a month in January. Just yesterday, the Fed announced it will be reducing that number to $65.0 billion a month in February. While the amount is negligible, it signals the eventual end of artificially low interest rates. The cheap money that propped up asset prices in emerging markets, like India, China, and Indonesia, is beginning to crumble.

The Argentinean peso, Indian rupee, South African rand, and Turkish lira … Read More


Top Investor Safe Havens for Protection Against Collapsing Economic Growth

By for Daily Gains Letter | Jan 29, 2014

Economic GrowthTroubles in the global economy look to be strengthening, suggesting an economic slowdown may be following. Not only are the major economic hubs of the global economy showing signs of stress—something I have mentioned in these pages many times before—but we see demand slowing down as well.

The Baltic Dry Index (BDI) gives us a general idea about how the demand in the global economy looks. At the very core, this index tracks the shipping price of raw materials. If the shipping prices increase, it suggests there’s increased demand in the global economy. If they decline, it’s not really a good sign. Please look at the chart of the BDI below.

Baltic Dry Index Chart

Chart courtesy of www.StockCharts.com

The BDI is outright collapsing. Since the beginning of the year, the BDI has declined more than 42%. This shouldn’t be taken lightly because it suggests demand in the global economy is slowing down very quickly. Looking at the average change in the BDI in January since 2003, this decline in 2014 is the second-biggest on record—in 2012, the BDI collapsed 58% in January.

Another indicator of demand in the global economy I look at is the Chinese economy. It has been known as the manufacturing hub of the world, and the country exports a significant amount of its goods to the world. If we see manufacturing activity in that country slow down, it gives us a hint that a global economic slowdown may be following.

Consider this: In January, the HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI)—an indicator of manufacturing activity in China—plunged to a six-month low. It was registered at 49.6 in … Read More


Why Gold Looks Good to Me in 2014

By Sasha Cekerevac for Daily Gains Letter | Jan 29, 2014

Gold Looks Good to Me in 2014Just the other day, I was talking to a friend of mine who seemed extremely cheerful. I asked why, and he said that his investments have performed well over the past few months and he saw no reasons to worry.

This is a common problem with investor sentiment; people tend to become complacent and only look to the recent past as an indication of what tomorrow will bring.

This is quite dangerous. Investor sentiment is often wrong and can be used as a contrary indicator, buying when others are dumping their stocks and taking profits when others are blissfully unaware of the changing landscape around them.

Americans need to be careful of becoming too complacent in their bullish investor sentiment, because the U.S. is not isolated from the rest of the world.

When the real estate bust and financial crash occurred here in America several years ago, the effects spread to many nations around the world, including the emerging markets.

With the Federal Reserve pushing the gas pedal on money printing here in the U.S., it has created a shock absorber to some extent, temporarily keeping global pressures at bay, especially in relation to the emerging markets.

However, investors do need to be aware that there is much uncertainty around the world. Investor sentiment for global institutions has been aware of these potential issues and is now running for the exits.

Last week this began in Asia, as economic growth appears to be slowing and reports of a financial crisis in China are beginning to grow. With the Chinese shadow-banking sector showing signs of cracking, this is creating negative investor … Read More


Gold: Slam-Dunk Sell or Trade of the Year?

By for Daily Gains Letter | Jan 23, 2014

Gold: Slam-Dunk SellDemand for gold bullion remains high. Each day there’s a new piece of information that continues to attest to this phenomenon. With this, I remain bullish on the yellow shiny metal. But one thing should be noted: I am not saying the bottom has been placed in, but that all the indicators are suggesting a bottom may be in the making.

From a fundamental point of view, the basic factors of price—supply and demand—suggest gold prices may be going higher (which I have said before). Demand is increasing.

We are seeing massive demand for gold bullion from countries like Turkey. According to the Istanbul Gold Exchange, Turkey imported 302.3 tons of gold bullion in 2013. This was more than double what it imported in 2012 and the highest amount since 1995. (Source: Larkin, N., “Turkey’s Silver Imports Surge to Most Since 1999 as Prices Slide,” Bloomberg, January 2, 2014.)

Pakistan is seeing massive imports of gold bullion into the country. As a result, the Economic Coordination Committee (ECC) of the Cabinet has imposed a ban of 30 days on gold bullion imports to Pakistan. This is the second time the country has taken such a step. The first time it imposed a ban on gold bullion imports was in July of 2013. (Source: “ECC imposes 30-day ban on gold import,” The Nation, January 21, 2014.)

The demand for gold bullion from India and China has shown great resilience in the past year, and I wouldn’t be surprised to see it continue. With the Chinese New Year fast approaching—a time when gold bullion is purchased by consumers as gift and good … Read More


Weak Q1 Earnings to Finally Trip Up the Illogical S&P 500

By for Daily Gains Letter | Jan 22, 2014

Illogical S&P 500Stock markets are only as healthy as their stocks—well, at least they technically should be. But despite its stellar year in 2013, the S&P 500’s component stocks weren’t supporting the growth with strong revenue and earnings growth.

I might sound like a broken record, but the fact of the matter is that the S&P 500 was fuelled by the Federal Reserve and its $85.0-billion-a-month quantitative easing efforts and artificially low interest rates, and the fact that businesses were streamlining operations and implementing aggressive share repurchase programs.

When it comes to financially engineering quarterly results, companies on the key stock indices logged a record-high for share buyback activity. In fact, in 2013, share buybacks amounted to $460 billion—the highest amount since 2007.

Companies on the S&P 500 embraced cutbacks and share repurchase programs because their earnings were nothing to talk about. Despite a year full of all-time highs, each quarter, a larger percentage of companies on the S&P 500 revised their earnings guidance lower—a seemingly obvious disconnect.

During the first quarter, 78% of S&P 500 companies revised their earnings lower; 81% did so in the second quarter; and a record 83% of firms offered lower earnings guidance in the third quarter. Not to be outdone, the fourth quarter saw 94% revise their guidance lower. (Source: “Record high number and percentage of S&P 500 companies issuing negative EPS guidance for Q4,” FactSet, January 2, 2014.)

In spite of the earnings disappointment, the S&P 500 continues to march illogically higher. The index might have gained 30% in 2013—but did it come at a cost? To keep growing, stocks actually have to start posting … Read More


High Car Loan Delinquencies Suggest Solid 2014 Sales for Automakers?

By for Daily Gains Letter | Jan 17, 2014

High Car Loan Delinquencies Don’t Mean Trouble for AutomakersWe expect American consumers to do a lot in this country; not least of which is to be the nation’s economic engine, after all, 70% of our gross domestic product (GDP) comes from consumer spending.

After years of strong stock market gains, America is still being bogged down with stagnant wages, high unemployment, and near-record-high food stamp usage—not the best formula for a nation that relies on consumers to spend, spend, spend. However, it is also contingent upon us being able to continually pay our bills. It’s the ebb and flow of consumerism.

But that flow is becoming more and more constricted. While banks are more than willing to increase high-interest credit card and loan limits to maxed-out consumers, they’re beginning to fear that this money might never be paid back.

According to the latest quarterly survey, American and Canadian bank managers’ expectations for delinquencies on auto sales loans have hit their highest level since the end of 2012; expectations for delinquencies on credit cards reached a two-year high; and 34% of respondents expect auto sales loan delinquencies to climb in the next six months, while 28% expect delinquencies on credit cards to rise.

Despite these findings, the report also found that consumer borrowing (and spending) shows no signs of slowing down! In fact, 58% of bankers said they expect the average credit card balance to increase over the next six months—only six percent expect balances to go down. On top of that, 44% of polled bankers say they expect the amount of credit extended to consumers to increase—only 14% think it will decrease.

These findings run in step with … Read More


As Apple Moves into China, Market Underestimates the Icon’s Next Potential Growth

By Sasha Cekerevac for Daily Gains Letter | Jan 17, 2014

Is the Market Underestimating Apple’s Potential Growth

When it comes to big-cap stocks, very few are larger than Apple Inc. (NASDAQ/AAPL).

But there’s one question many investors may be asking: is there an investment opportunity in Apple’s stock at current levels? I believe there may be, even after a strong move up since hitting a 52-week low in April at $385.10.

You have to be careful when looking at big-cap stocks and whether or not there is a strong investment opportunity going forward. Just because a stock has moved up over the past year, that doesn’t mean it’s necessarily overvalued.

There is one key question that you must ask yourself as an investor: can the big-cap stocks you’re considering continue growing their corporate earnings?

At the end of the day, an investment opportunity will only pay off if corporate earnings are generated in the future. I believe that Apple is still a great value at current valuations because the company will continue to drive corporate earnings higher.

Naturally, as with all big-cap stocks, the law of large numbers comes into play. Obviously, a company that is small can grow at a much faster rate than big-cap stocks such as Apple, which has a market cap of just over $500 billion.

However, don’t discount the ability of Apple to utilize its skills at innovation and marketing in generating corporate earnings. Apple, too, sees an investment opportunity in diversifying its customer base and introducing new products.

The big news recently has been the move by Apple into China.

Apple has signed a deal with China Mobile Limited (NYSE/CHL), which has approximately 760 million subscribers. Following the announcement of the … Read More


Hidden Value in the Emerging Markets?

By for Daily Gains Letter | Jan 14, 2014

Emerging MarketsAre emerging markets worth looking at in 2014? Not too long ago, emerging market equities witnessed a pullback—when the taper talk came on the horizon. As a result, investors are asking if this has now created some value in these markets.

Before going into any details, investors have to keep one very important aspect of investing in mind: cheap doesn’t mean good value. Investors shouldn’t be interpreting falling prices as “value coming back to the market.” In some cases, this may be true, but in other cases, if the prices are falling, there’s a reason.

You see, emerging markets are going through some troubles, and as a consequence, their equity prices are a little vulnerable.

For example, India, the third-largest economy in Asia, reported a decline of 9.6% in 2013 auto sales. This was the first decline in auto sales since 2002. This well-known emerging market is struggling with high inflation and low economic growth—or a period commonly referred to as “stagflation.” In the fiscal year 2013, India’s economic growth was the lowest in almost 10 years, and inflation is running at 10%. (Source: Choudhury, S., “Indian Car Sales Slump for First Time in a Decade,” Wall Street Journal, January 9, 2014.)

China, another major emerging market, has been seeing its fair share of trouble as well. This year the country is expected to post growth that’s nothing like its historical average. In December, the HSBC China Manufacturing Purchasing Managers’ Index (PMI)—a gauge of manufacturing activity in the country—declined to a three-month low. (Source: “HSBC Purchasing Managers’ Index Press Release,” Markit Economics web site, January 2, 2014.)

Brazil, a common … Read More


How to Profit on Gaming Without Becoming a Gambler

By for Daily Gains Letter | Jan 10, 2014

Profit on GamingEveryone has an opinion. Unfortunately, opinions are just that…opinion; they aren’t truth. So you have to take opinions with a grain of salt. That said, some opinions hold more weight than others. More specifically, I tend to sit up and take note when someone close to the source has something interesting to say.

On the back of an improving U.S. economy, more and more Americans will be looking for places to spend their newly found disposable income. And when it comes to parting with your money, there’s no better place to go than Las Vegas; at least not if you’re in North America.

If, however, you’re not all that much into plunking your money down on a system designed to benefit the host, but like the idea of making money off those that lose, then gaming stocks might be up your alley. It also might be a good idea to look beyond Las Vegas for some big growth gaming stock opportunities.

The Las Vegas Review-Journal recently reported that the gaming industry in Macau, China dwarfs the Las Vegas strip…and is ripe for North American investors. In 2013, Macau’s gaming revenues soared 18.6% year-over-year, reaching a record $45.2 billion, blowing away expectations. (Source: Stutz, H., “Macau gaming revenues reach record $45.2 billion in 2013,” Las Vegas Review-Journal, January 2, 2014.)

Most analysts expected the Macau, China gaming market would grow by 12% to 15%. Those kinds of numbers are more striking when you consider that this small region in China now collects seven times the annual gaming revenue generated by the Las Vegas strip.

Macau, better known as the “Monte Carlo … Read More


How Sony Could Surprise Investors in 2014

By Sasha Cekerevac for Daily Gains Letter | Jan 10, 2014

Investors in 2014As the stock market continues moving higher, it becomes that much more difficult to find value stocks. They’re still there, but one needs to dig a bit deeper to find attractive valuations as part of one’s investment strategy.

One company that I’ve been researching lately is Sony Corporation (NYSE/SNE). Everyone is aware, I’m sure, of Sony, as it’s been around for decades. While the stock had a relatively strong performance in 2013, I believe there is potential for a very good year in 2014, in terms of corporate earnings growth.

When people think of Sony, I’m sure it might surprise them that the company is only worth approximately $18.0 billion. These days, when social media companies that don’t generate any income or, in cases such as SnapChat, don’t have any revenue are worth billions of dollars, the valuation of Sony certainly appears interesting.

But when you’re looking at an investment strategy for a company, there needs to be a catalyst for the stock to move higher. I believe that 2014 will present several important drivers that will propel the stock upwards.

My first point is the weakening of the Japanese yen. I believe that we will continue to see the Japanese yen weaken, which will have a positive impact on Sony’s corporate earnings. By incorporating this macro viewpoint into one’s investment strategy, it will help provide a diversified approach to generating returns.

The second point is the introduction of new gaming consoles. At the recent Consumer Electronics Show in Las Vegas, Sony announced that it had sold 4.2 million “PlayStation 4” units as of December 31, 2013. With sales beginning … Read More


Will 2013’s Worst-Performing Metal Rebound in 2014?

By for Daily Gains Letter | Jan 9, 2014

Metal Rebound in 2014The year 2013 was not kind to gold; the yellow metal closed the year down about 28%—its biggest annual drop in three decades. But in spite of the awful year for gold, it wasn’t the worst-performing metal in 2013. That dubious distinction goes to silver.

On the heels of quantitative easing, a devaluation of the dollar, and inflation, safe haven investors were expecting silver prices to trade in the $30.00–$50.00-an-ounce range. Sadly for these investors, that did not come to fruition.

After starting 2013 at $30.00 an ounce, the white metal finished the year around $19.50 an ounce—an annual loss of 36%. The dismal year is even more cringe-worthy when you consider silver recorded an average price of $31.15 in 2012—the second-highest on record.

Silver prices tanked in mid-April on the back of gold’s violent descent. Gold prices plummeted (in part) on the rumored sale of gold reserves in Cyprus. This decline occurred despite the demand for physical gold remaining strong in India and China. This point is important because, together, these two countries account for more than half of the annual demand for gold.

Still, silver prices fell in step with gold and then continued to slip lower over the ensuing months after the Federal Reserve hinted it might begin to taper its $85.0-billion-per-month easy money policy.

While analysts are divided as to how silver will perform in 2014 (some of them are calling for a range of $19.00–$26.00 an ounce and others are suggesting $30.00–$34.00 an ounce), the year will present investors with some solid opportunities.

For starters, the recently announced pullback in quantitative easing from $85.0 billion … Read More


Update: My 2014 Gold Outlook

By for Daily Gains Letter | Jan 7, 2014

Gold OutlookIn 2013, gold prices saw the worst tumble in a few decades. This decline in prices caused many to panic, and the negativity towards the yellow metal increased significantly. As we begin 2014, this sentiment seems to be holding on. It’s not uncommon to hear analysts or investors say how gold bullion isn’t worth holding and that there are better opportunities.

However, I’ve been bullish on gold for some time, and I stand by my bullishness. The main reason for my take on the precious metal comes down to the most basic factors that determine price—supply and demand. I continue to see a declining supply and increasing demand. Keeping all else the same, this is the perfect recipe for higher prices ahead.

On the demand side, we are seeing buying from countries across the globe. This was something that was said to have slowed when the gold bullion prices were going down back in April of 2013 and then again in June of 2013.

Australia’s Perth Mint reported sales of gold bullion coins and bars increased by 41% in 2013 compared to a year ago. The Mint sold 754,635 ounces of gold bullion in 2013 compared to 533,333 ounces in 2012. (Source: Sedgman, P., “Perth Mint Gold Sales Surge 41% in 2013 on Worst Rout Since 1981,” Bloomberg, January 2, 2013.)

At the U.S. Mint, the increase in sales of gold bullion coins has been similar to that of Australia’s. The U.S. Mint, for the entire year of 2013, sold 856,500 ounces of gold bullion in American Eagle coins. This was 13% higher compared to the same period a year … Read More


Economic Indicators Pointing to Weaker Growth in 2014

By for Daily Gains Letter | Jan 6, 2014

Economic IndicatorsIf the stock market is an indicator of U.S. economic health, then 2013 was a stellar year. The Dow Jones Industrial Average closed out 2013 with a 26% gain. The S&P 500 was up 29%, while the NASDAQ Composite was up 34%.

Despite a stellar 2013, the crystal ball for the U.S. economy and Wall Street in 2014 remains murky. That’s because investors might have to actually consider the health of the U.S. economy this year. Now granted, the U.S. economy kicked into high gear last January after the federal government avoided the dreaded fiscal cliff. Thanks to some recent economic indicators, the start of 2014 has been more subdued.

Factory activity in China hit a three-month low in December. While Germany and Italy reported healthy manufacturing numbers, British manufacturing growth eased and France hit a seven-month low of 47.0 (scores below 50 indicate contraction). Here at home, the U.S. economy got a boost after it was announced that manufacturing hit an 11-month high in December of 55.0, up from 54.4 in November. (Source: Weisenthal, J., “This Manufacturing Report From France Is Just Plain Ugly,” Business Insider, January 2, 2014.)

To show it believes the U.S. economy is improving, the Federal Reserve recently announced that it will begin to taper its quantitative easing efforts this month. Instead of pumping $85.0 billion per month into the U.S. economy, it is going to purchase just $75.0 billion in bonds.

And to quell investors’ fears, the Federal Reserve said it will continue to keep interest rates artificially low until the unemployment rate hits 6.5% or lower—a target that probably won’t be reached until … Read More


Bitcoin: The Next Hot Trade or a Scam?

By for Daily Gains Letter | Dec 19, 2013

BitcoinA friend of mine recently asked if he should invest in Bitcoin. He was astonished with its growth; he said, “I can’t believe it. You could get one Bitcoin for $100.00 not too long ago, and now that looks cheap!”

He asked if there will be growth in the digital currency in the long run, and if he will be able to make money for his portfolio. My response was simple: “I don’t know.” He didn’t like my answer at first, but when I explained further, his perspective toward Bitcoin changed.

You see, I am a big believer in investing in what I know. For example, I like to look at companies whose business I understand—I understand how they make sales and generate their profits. When it comes to foreign exchange, I look at currencies of countries that I know I can learn more about and the data sources are reliable.

But when it comes to Bitcoin, I am still uncertain about how it is priced. With stocks, you can get a general idea about where the stock prices might be headed. You can look at analysts’ expectations and the like. With Bitcoin, it isn’t mainstream just yet. There are some analysts who are saying the digital currency will skyrocket, while on the other side, there are those who are saying it will die as quickly as it became famous. At the very core, there’s too much noise.

On top of this, there’s too much volatility in Bitcoin’s value. I was watching a live chart of Bitcoin prices compared to the U.S. dollar not too long ago, and in a … Read More


Why These Particular Markets Will Be More Attractive to Investors in 2014

By for Daily Gains Letter | Dec 17, 2013

Investors in 2014The U.S. stock market rally has been on a solid run this year, thanks in large part to the Federal Reserve’s $85.0-billion-per-month quantitative easing policy—well, that and some solid economic indicators. But the question remains: will the momentum continue into 2014?

It all depends on whether or not the U.S. stock market rally follows the laws of physics. For example, when it comes to momentum, an object will continue unless force is applied against it, either a huge amount of force all at once or an applied force over a given period of time. On the other hand, the more momentum something has, the harder it is to stop.

The fuel that has helped propel the U.S. stock market rally over the last number of years could be flickering out. Thanks to better-than-expected employment and retail numbers and strong preliminary gross domestic product (GDP) numbers, many think the Federal Reserve will start to taper its quantitative easing strategy sooner than later.

The end of easy money, some think, could put a cramp in the stock market’s four-year-plus rally—or at least make it run a little more slowly in 2014 than it did in 2013. Whereas the S&P 500 is up roughly 25% year-to-date, analysts think it will grow by as little as six percent and as much as 11% in 2014. This means that the S&P 500 will experience another year of record-highs in 2014, but not quite as bullish as 2013. (Source: “Here’s What 14 Top Wall Street Strategists Are Saying About The Stock Market In 2014,” Business Insider web site, December 13, 2013.)

Those looking to outpace the … Read More


Bitcoin: The New Gold?

By for Daily Gains Letter | Dec 9, 2013

Bitcoin The New GoldBack in March, a Canadian man listed his house for sale in exchange for Bitcoins—5,362 of them. At the time, the digital currency was exchanging hands at US$73.00, which means the house was available for about $395,000. (Source: “Canadian house first on sale for Bitcoin currency,” RT.com, March 25, 2013.)

The listing was considered a risky (and bizarre) idea; after all, the digital currency is experimental, decentralized, and can be transferred to anyone, anywhere in the world. Until recently, it was debatable as to whether or not this currency would even gain traction.

Because it is digital, the currency does not exist in a physical sense. It also isn’t issued by any central bank, and that might be part of the appeal; without a central bank, accounts cannot be seized or frozen. (That’s an attractive point for those in Cyprus who had 10% of all savings and deposits seized by the government.)

The lack of an intervening central bank also means the currency cannot be manipulated. While the digital currency is regularly being “minted,” there is a limit to how much can be created; this is to prevent inflation. There are currently around 12 million Bitcoins in circulation. After the year 2140, no more will be minted, and the total amount available will stand at a maximum 21 million.

Still, the price of a Bitcoin can fluctuate wildly. First introduced in early 2009, the digital currency floundered, coming in at about US$14.00 earlier this year. Now, the digital currency is “worth” around $1,080. Had the above-mentioned house sold for 5,362 Bitcoins, and had the owner held onto those coins, his … Read More


Losing Faith in Gold? Read This Before You Sell

By for Daily Gains Letter | Nov 25, 2013

Faith in Gold“The sky is falling, sell;” “It’s useless, run away;” “There’s going to be deflation, so it won’t serve any purpose to your portfolio”—these are a few of the ways gold bullion is being described these days. The yellow metal is facing scrutiny, and those looking for it are gasping for air.

Looking at all this negativity, should you lose trust in gold and sell, like the mainstream says?

The scrutiny against gold bullion is significant, but I remain bullish on the metal in the long run. As it stands, I don’t see demand declining, and as the prices remain suppressed, I expect the supply to decrease.

When gold bullion prices slid lower, we started to hear that the buyers would run for the exits, but we still don’t see that happening; as a matter of fact, more consumers are jumping in to buy the precious metal.

The nations that are known as the biggest consumers of gold bullion are still buying. According to the World Gold Council, in the third quarter of 2013, gold bullion jewelry demand in China was 164 tonnes, an increase of 29% from the same period in 2012. In India, the demand for gold bullion remains robust; for the first nine months of this year, the demand for gold bullion was higher than the previous year by 19%, despite the government and central bank working together to curb the demand. (Source: “Gold continues its journey from West to East as buoyant consumer markets balance investment outflows,” World Gold Council web site, November 14, 2013.)

“Consistent with the first two quarters of 2013, the global gold market … Read More


Profit from Emerging Markets with Just One Investment

By for Daily Gains Letter | Nov 12, 2013

Profit from Emerging MarketsEmerging market equities have taken center stage these days because, according to some, the key stock indices in the U.S. economy are reaching the overpriced mark. Investors’ returns aren’t going to be as robust going forward; there’s a significant amount of noise about them taking the shape of a bubble.

With all this happening, investors are asking which emerging market economy they should invest in. Should they buy companies operating in India? Or is China still the best emerging market economy in which to invest?

The answer to this question is not as easy as it may seem to some. Investors have to keep in mind that each emerging market is unique—it presents different opportunities, risks, and rewards.

Take China, for example. As key stock indices in the U.S. economy have increased this year—the S&P 500 is up more than 23% so far—the stock market in the Chinese economy hasn’t performed as well; in fact, the key stock indices there have declined. Please look at the chart below: the Shanghai Stock Exchange Composite Index has declined more than 6.4% between January and October.

Shanghai Stock Exchange Composite Chart

Chart courtesy of www.StockCharts.com

Does this mean there’s room for growth? Don’t be too quick to judge. The Chinese economy is going through a bit of an economic slowdown. This year, the country’s gross domestic product is expected to increase much less than its historical average; the growth of the Chinese economy is projected to be lower next year as well. At the same time, there’s noise stating that there may be a credit crisis in the country.

If all of the trouble growing in the Chinese … Read More


How to Profit When Washington Inevitably Starts Bickering Again

By for Daily Gains Letter | Oct 21, 2013

Washington InevitablyIf you listen to mainstream media, the power struggle in Washington is over. The left and right came together valiantly, raising the debt ceiling and ending the U.S. government shutdown. At least, they temporarily did; they basically just put a glow-in-the-dark “SpongeBob SquarePants” band-aid on a compound fracture.

Washington voted to temporarily fund the government through January 15, 2014, and extend the $16.7-trillion debt ceiling through February 7. Then it starts all over again—and if it’s a repeat of the last three weeks, it isn’t going to be pretty.

The self-inflicted U.S. government shutdown, according to one estimate, took at least $24.0 billion out of the U.S. economy; this is after the Federal Reserve reported modest growth in September. (Source: Johnson, L., “Government Shutdown Cost $24 Billion, Standard & Poor’s Says,” Huffington Post web site, October 16, 2013.)

How the January/February deadlines will impact the U.S. and global economy is anyone’s guess in 2014. Or rather, it depends on who you ask; according to the Canadian Imperial Bank of Commerce (CIBC), the global economy is expected to turn a corner in 2014, thanks to economic improvements in the U.S. and Europe. World growth could accelerate more than four percent in 2014, while U.S. growth will climb to 3.2% in 2014 from 1.5% this year. (Source: Quinn, G., “Global economy set to ‘turn a corner’ in 2014, CIBC’s Shenfeld says,” Financial Post web site, October 17, 2013.)

This, of course, is in sharp contrast to the International Monetary Fund (IMF), which said that, as a result of the U.S. government shutdown and slow international expansion, the global economy will grow at … Read More


Coal: The Next Great Long-Term Play?

By for Daily Gains Letter | Oct 17, 2013

Long Term PlayWhen it comes to global energy production, the United States will be the top dog in a few short years. Back in November, the International Energy Agency (IEA) forecasted that the U.S. would overtake Saudi Arabia as the world’s top oil producer by 2017.

Over the last week, two more reports have positioned the U.S. as an even stronger near-term energy giant. The IEA said the U.S. will surpass Russia as the biggest non-OPEC producer of oil and natural gas in 2014. (Source: Harrison, V., “U.S. to pump more oil than Russia in 2014,” CNN web site, October 11, 2013.)

Over the last two quarters, the U.S. has produced more than 10 million barrels per day—its highest output in decades. Thanks to increased production in the Bakken oil field in North Dakota and the Eagle Ford shale formation in South Texas, U.S. production of oil and natural gas liquids will exceed 11 million barrels per day by the second quarter of 2014.

Perhaps more interestingly, it was announced earlier this week that coal is expected to surpass oil as the world’s primary energy source by 2020. Despite President Obama’s best efforts to reduce U.S. carbon emissions and phase out our dependence on coal, it looks like the fossil fuel is going to continue to be a major energy source. (Source: “World Coal Consumption To Surpass Oil By 2020 Due To Rising Demand In China And India,” Huffington Post web site, October 13, 2013.)

In fact, global coal consumption is expected to rise by 25% by the end of the decade to 4,500 million tonnes of oil equivalent, surpassing oil at … Read More


A Global Issue That Could Damage American Stocks

By for Daily Gains Letter | Oct 11, 2013

Damage American StocksThe global economy looks to be in trouble, with the problems brewing quickly. Major economic hubs in the global economy are struggling for growth, but are failing—a fact that is largely ignored by the mainstream.

Long-term investors need to know that an economic slowdown in the global economy can deeply affect the key stock indices here in the U.S. economy. The reason for this is very simple: American-based companies operate throughout the global economy. As a matter of fact, in 2012, for the S&P 500 companies that provide data about sales in the global economy, 46.6% of all sales came from outside of the U.S. (Source: “S&P 500 2012: Global Sales – Year In Review,” S&P Dow Jones Indices web site, August 2013.)

Clearly, if there is an economic slowdown, the demand will decrease and the U.S.-based companies will sell less and earn less profit. As a result, their stock prices will decline.

So what is really happening?

In the beginning of the year, there was a significant amount of noise about how the global economy will experience growth. This did not happen.

The International Monetary Fund (IMF) expects the global economy to grow by 2.9% this year after seeing growth of 3.9% in 2011 and 3.2% in 2012. In 2014, the IMF expects the global economy to increase by 3.6%. (Source: Duttagupta, R. and Helbling, T., “Global Growth Patterns Shifting, Says IMF WEO,” International Monetary Fund web site, October 8, 2013.) Mind you, these estimates were much higher in July, but they have since been revised lower.

We all know how anemic the rate of growth of the U.S. … Read More


One ETF the Fed’s Actions Won’t Affect

By for Daily Gains Letter | Sep 12, 2013

Fed’s ActionsWhile the S&P 500 continues to perform well, the markets have been skittish since May 22, when the Federal Reserve hinted it might consider tapering its $85.0-billion-per-month bond-buying program. If Ben Bernanke begins to curtail Wall Street’s monthly allowance, there are fears the markets will not be able to stand on their own economic merit.

Granted, many don’t think the Fed will begin tapering in 2013; this may account for the S&P 500’s solid, yet volatile run. The same can’t be said for emerging markets.

Investors have pulled over $22.0 billion from emerging-market bond funds since the end of April. This has lifted emerging-market bond yields by 1.4 percentage points, almost the most in five years.

Borrowing costs have been on the rise from record lows as speculation swirls around when the Federal Reserve will begin to cut back its quantitative easing measures—this also means the end of artificially low interest rates. This matters to emerging markets, because it signals the end of cheap money that’s been propping up asset prices in countries like India, China, and Indonesia.

Those investors who diversified their retirement fund with emerging-market exchange-traded funds (ETFs) have been in for a rough ride. The MSCI Emerging Markets Index (NYSE/EEM) is down eight percent year-to-date.

One of the few places where the Federal Reserve’s sphere of quantitative easing influence is muted is in the world of frontier markets. Frontier markets refer to countries such as Argentina, Kenya, Qatar, and Vietnam—those markets that are in the early stages of development. Frontier markets are an attractive opportunity for investors, because they represent a long-term economic growth possibility. And there … Read More


Supply and Demand Metrics Suggest a Bright Future for Gold Ahead

By for Daily Gains Letter | Sep 6, 2013

Bright Future for GoldThe case for higher gold bullion prices continues to become stronger each day. As I have been harping on about in these pages, there’s significant evidence that the demand for the yellow metal is increasing and supply is facing hardships.

Let’s look at the demand side of gold bullion first. It is robust, to say the very least.

I have reported here before that we see strong demand for gold bullion from the Far East. The consumers in the two biggest gold bullion-consuming nations, India and China, continue to buy more. This is nothing new.

What’s really surprising to note is that as the prices have come down, India and China weren’t the only places that saw demand for gold bullion increase. Other countries in the global economy also saw a spike in demand.

Consider the Royal Canadian Mint (RCM). In the second quarter of this year (ended June 29), the Mint recorded revenues of more than $1.0 billion. This is the first time in history that the RCM has achieved sales of this magnitude.

“This unprecedented result was due to the soaring demand for the Mint’s world-renowned Gold and Silver Maple Leaf bullion coins and sustained popularity of our expertly handcrafted numismatic products,” said Ian E. Bennett, president and CEO of the RCM. (Source: “Royal Canadian Mint achieves $1 billion in revenue in single quarter for first time in its history,” Royal Canadian Mint web site, August 27, 2013.)

At the RCM, the sales of gold bullion in coins in the second quarter increased 144% compared to the same period a year ago, reaching 403,000 ounces.

Moving towards the … Read More


Is Now the Right Time for Emerging Market Equities?

By for Daily Gains Letter | Sep 3, 2013

TEmerging markets seem to be gaining popularity these days when it comes to the “next big thing” for investors. The reason for this is very simple: emerging market equities have come down in value significantly from their recent highs, leaving investors asking if its time to jump in and buy to profit.

Take a look at the equity market in India, for example—the country is considered one of the biggest emerging markets. The India Bombay Stock Exchange 30 Sensex Index is down more than 10% from its peak in late July.

India isn’t alone; stocks and key stock indices in other emerging market economies are in very similar conditions, if not performing worse. China’s stock market is lagging, Indonesia’s has recently plummeted, and the Brazilian equity market continues to show dismal returns.Please look at the chart below to get a more precise idea:

Stock Exchange 30 Sensex Index Chart

Chart courtesy of www.StockCharts.com

 Before adding companies involved in emerging markets or buying an exchange-traded fund (ETF) that gives them exposure to those economies, every investor should ask themselves: does the stock market declining in value really mean there’s value—or, in other words, an opportunity for profit?

The answer: not necessarily.

Investors should consider that emerging market economies are sometimes relied on by developed nations to buy their products, because they can make them at cheaper rates. So if the developed markets start to see some sort of economic slowdown, the emerging market economies could see ripple effects. This may just be one of the phenomena driving the stock markets in those countries lower.

The developed nations in the global economy aren’t showing robust growth. For example, … Read More


Have Conflicts in Syria Made Oil a Great Short-Term Play?

By for Daily Gains Letter | Aug 30, 2013

Have Conflicts in Syria Made Oil a Great Short-Term Play?If investing is about taking advantage of opportunities, oil might be one of the best plays right now.

According to the International Energy Agency, the three most common reasons for disruptions in the global oil supply are technical problems (check), civil unrest (check), and seasonal storms (check—the 2013 Atlantic hurricane season is in full swing until the end of November). (Source: “How does the IEA respond to major disruptions in the supply of oil?,” International Energy Agency web site, last accessed August 29, 2013.)

Between Thursday, August 22 and Wednesday, August 28, the price of crude oil climbed five percent to a two-year high. Over the last two months, the price of crude oil has surged more than 17% on the heels of tighter supply due to disruptions in the North Sea and Libya, positive economic data out of China and the eurozone, and rising tension in Syria.

Light Crude Oil Chart

Chart courtesy of www.StockCharts.com

Now granted, Syria isn’t an oil powerhouse: its current daily output is less than 50,000 barrels a day (a significant decrease from 350,000 barrels in March), but that’s just a drop in the bucket compared to the global output of 90 million barrels a day.

The real threat to the price of oil is a result of political jockeying. While the U.S. and its allies are considering a launch against Syria in response to its use of banned deadly chemical weapons on its civilians, China and Russia have weighed in, saying that would lead to “catastrophic consequences.”

Iran, of course, said any strike against Syria would lead to retaliation on Israel. Israel, for its part, said it was … Read More


Gold Keeps Rising: Time to Drop Your Bearish View on the Yellow Metal?

By for Daily Gains Letter | Aug 29, 2013

290813_DL_zulfiqarI will be the first one to agree that it’s very difficult, if not impossible, to price gold bullion. Unlike stocks or bonds, it doesn’t provide investors with income or necessarily have an interest rate. Sadly, just for this reason, the yellow metal gets a lot of scrutiny. We saw what happened to gold prices not too long ago: they were slammed on the notion that the precious metal doesn’t have any use in a portfolio anymore, and it seemed as if no one knew where the precious metal would find support.

Now, a couple of months after the sell-off, the price of gold bullion is up about 20% from its lows around the $1,175 area.

Looking at all this, one must wonder: what’s really next for gold bullion? Is the bull market that began in 2001 over, or do gold bullion prices still have some room to grow?

Gold -Spot Price Chart

Chart courtesy of www.StockCharts.com

When I look at gold bullion prices, I tend to focus on the supply and demand side.

Looking at the demand side of gold bullion, it seems robust. As the prices were falling, there was a significant amount of concern that the consumers will eventually diminish in numbers.

We did not see this phenomenon occur. Consumers stayed; as a matter of fact, they rushed to buy more. Keep in mind that earlier in the second quarter of this year, gold bullion prices had a significant downturn. By the logic presented, buyers should have diminished by the end of the quarter.

Consider this: the Word Gold Council (WGC) reported that the demand for gold bullion in China during … Read More


Where the Real Opportunity in the Gold Market Is

By for Daily Gains Letter | Aug 16, 2013

Real Opportunity in the Gold MarketThe direction the price of gold bullion is headed is heavily debated these days. Those who are bearish continue to say the shiny yellow metal has no space in an investor’s portfolio. They argue that the price action we have seen in the gold bullion market since the beginning of the year, especially the sell-offs in April and June, were just a few minor sell-off episodes. We are headed much lower than $1,000.

When it comes to the price of gold bullion going forward, I have to distance myself from the bears. I cannot predict where gold prices will bottom or where will they top, but what I see is certainly worth noting. Both the fundamentals and the technicals of gold bullion are showing the presence of bullish sentiment.

At the very basic level, the demand for gold bullion is increasing, and it is very evident. Take sales of gold bullion coins at the U.S. Mint, for example. For the first seven months of 2013, the demand was higher by 82% compared to the same period a year ago. The U.S. Mint sold 679,500 gold bullion coins in total, compared to only 374,000 in the previous year. (Source: “Bullion Sales/Mintage Figures,” U.S. Mint, last accessed August 14, 2013.)

Demand for the precious metal in China is robust and continues to increase. Consider this: according to the Chinese Gold Association, in 2012, 460 tonnes of gold bullion were consumed in the Chinese economy; this year, the number has increased to 706.36 tonnes. If the demand remains, China may very well become the biggest consumer of gold bullion in the world (it’s … Read More


Why the Stock Market Could Be Set Up for a Sudden Plummet

By for Daily Gains Letter | Aug 5, 2013

Stock Market Could Be Set Up for a Sudden PlummetInvestors need to be careful, as the risks on key stock indices are continuously piling up. They need to keep a close eye on their portfolio, and maybe should consider taking some profits off the table.

Since the beginning of the year, key stock indices, like the S&P 500, have been constantly increasing in value and making new highs. Recently, we witnessed the S&P 500 reach above 1,700, and other key stock indices, like the Dow Jones Industrial Average, entering uncharted territory as well.

With these increases, investors are now asking: how high can the key stock indices really go?

Looking at the broader picture, the U.S. economy isn’t performing as well as the key stock indices are suggesting. In times of high economic activity, the stock market tends to perform well. This is not the case for the U.S. economy as it stands, as the U.S. gross domestic product (GDP) only increased at an annual pace of 1.7% in the second quarter of this year. (Source: “Gross Domestic Product, second quarter 2013 (advance estimate),” Bureau of Economic Analysis, July 31, 2013.)

On top of this, the unemployment situation is still bleak in the U.S. economy, risking deterioration in consumer spending. The average American Joe is still facing many problems: look at food stamp usage and the amount of homes under negative equity, for instance.

Adding to the worries, the global economy is also showing signs of deep stress, with countries across the map showing concerns. For example, China is expected to show a significantly lower growth rate compared to its historical average this year, and the eurozone remains troubled … Read More


What You Need to Know to Protect Yourself from the Global Economic Slowdown

By for Daily Gains Letter | Aug 1, 2013

Global Slowdown to Disrupt Your PortfolioThe global economy is showing traits that shouldn’t go unnoticed by investors. Instead, investors should keep a close eye on their portfolio and make sure they are managing their risk properly by not being overexposed to a certain region, having their assets allocated in different asset classes, and having stop orders in place for their doubtful positions.

Investors need to know that companies trading on the key stock indices have exposure to the global economy; this means their stock prices can suffer.

The global economy looks to be heading towards a period of stagnant growth or an outright economic slowdown. The reason behind this notion is very simple: countries across the board in the global economy are witnessing anemic growth, and the demand is declining.

For example, consider India, one of the well-known emerging markets in the global economy. The central bank of India expects the country to grow by 5.5% in the fiscal year ending March 2014. This was lower than the central bank’s earlier forecast of 5.7%. (Source: Goyal, K., “India Central Bank Holds Rates in Push to Stem Rupee Plunge,” Bloomberg, July 30, 2013.)

In June, industrial output in the third-biggest hub in the global economy, Japan, fell 3.3% from a month earlier. This was the first time in five months that industrial output in the country fell; it had increased 1.9% in May. (Source: “RPT-Japan June industrial output falls 3.3 pct mth/mth,” Reuters, July 29, 2013.)

In addition to this, in the same month, the country’s retail sales also didn’t register as expected. Retail sales in the Japanese economy increased only 1.6%, compared to the 1.9% … Read More


Forget Gold & Silver for Now: This Is the Mineral Investors Should Be Playing

By for Daily Gains Letter | Jul 26, 2013

Forget Gold & Silver for Now: This Is the Mineral Investors Should Be PlayingThere’s a rush happening in the U.S. economy, but no one seems to have heard much about it. No, it’s not for gold, silver, or oil. This time around, it has to do with rare earth elements, or what are sometimes referred to as rare earth metals.

Before going into further details about how investors may be able to profit from this situation in the making, it is necessary to know what these rare earth elements are and what they are used for.

Rare earth elements, at the very core, have many different uses. They are used in technology like cell phones, televisions, and lighting systems. They are also used in aerospace, automotive, and energy industries. Note that these are just a few of the uses of rare earth elements; there are many other uses for them, as well.

How critical are rare earth elements? According to Ian Ridley, director of the U.S. Geological Survey Central Mineral and Environmental Resources Science Center in Colorado, “without rare earths we’d be back to having black-and-white cellphones again.” (Source: “Gold rush trash is Information Age treasure,” USA Today, July 21, 2013.)

One must ask the question: why call it a rush?

As their name suggests, these elements are rare, found only in certain locations. This leaves them vulnerable to demand and supply shocks.

As a matter of fact, we saw something similar back in 2011. A rare earth element called neodymium, used in the automotive industry, could be purchased for $15.00 a kilogram in 2009. Fast-forward to 2011, and the price of this rare earth element reached $500.00 a kilogram; that’s an increase … Read More


Three Current Risks You Need to Be Aware of to Protect Your Portfolio Now

By for Daily Gains Letter | Jul 23, 2013

Aware of to Protect Your PortfolioKey stock indices are roaring higher—and this is making bulls happier, while bears are arguing the rise isn’t sustainable. Noise is at its peak. Regardless of this, investors shouldn’t lose sight of what is happening, and always manage their risk.

Since the beginning of the year, the S&P 500 has increased more than 18%. Other key stock indices, like the Dow Jones Industrial Average, have shown a similar pattern and have provided stock investors with profits.

Take a look at the chart of the S&P 500 below. At the very least it’s in a breakout mode. The S&P 500 broke above its long-term resistance, the price level where sellers dominate, around 1,550–1,575. It was tested twice—once in early 2000, and then in 2007—but failed to break above. Technical analysts would say what happened on the chart of the S&P 500 is simply bullish.

They would argue that when a resistance breaks, it becomes the support level—the price area where buyers dominate—and when the support breaks, it ends up becoming the resistance level.

S&P 500 Large Cap Index Chart

Chart Courtesy of www.StockCharts.com

I’m not saying key stock indices will decline from here and the S&P 500 will come crashing down. The path of least resistance seems to be towards the upside, while I focus on risk management—knowing what kind of risks are present and what kinds of events investors can expect.

The first and most important thing investors need to note is that the key stock indices rising upwards of 18% in the first half of the year—for a 36% yearly move—may be too much to handle.

It wouldn’t be a problem if the U.S. economy … Read More


Changes in This Country’s Economy Have Created Opportunities

By for Daily Gains Letter | Jul 16, 2013

Economic GrowthSwitzerland is at a crossroads. On one hand, the country, long celebrated for its economic growth, saw its exports

hit hard in May. That’s not a good long-term indicator for a country whose exports account for 50% of the gross domestic product (GDP).

On the other hand, Switzerland recently signed a free trade deal with China. For investors looking to diversify their portfolio, all the pieces are in place for an excellent trading opportunity. (Source: “Switzerland Exports,” TradingEconomics.com, last accessed July 12, 2013.)

When most people think of Switzerland, they think of banking.

That tradition came from Switzerland’s political neutrality (it avoided both World Wars), which has translated into long-term political stability, strong monetary policies, and economic growth, making it an attractive safe haven for investors. In fact, it is estimated that almost 30% of all funds held outside their country of origin are kept in Switzerland.

More recently, Switzerland’s political neutrality meant that it has been able to enjoy economic growth while the rest of Europe was embroiled in economic turmoil. Switzerland is not a member of the European Union (EU), and only became a member of the United Nations (UN) in 2002.

As a result, trade is the foundation of Switzerland’s prosperity. Switzerland’s economic growth hinges on its main exports, including watches and clocks (TAG Heuer, Hublot, Zenith), medicinal and pharmaceutical products (Novartis, Roche), food processing (Nestle), and electronics and machinery (ABB Ltd., Sika AG).

For years, Switzerland’s economic growth has been helped, in large part, by Germany and the United States, its two largest trade partners. In 2012, Germany accounted for about 25% of Switzerland’s foreign trade. … Read More


These Are the Sectors to Watch in an Overvalued Market

By for Daily Gains Letter | Jul 12, 2013

Why Looking at the Dow Jones as a Whole Could Be a Big MistakeWhat a difference 81 years can make. On July 8, 1932, the Dow Jones Industrial Average hit a Great Depression-era low, closing at 41.22, representing an 89.19% loss from its March 1929 peak of 381.17. Over the next 18 months, the Dow Jones Industrial Average gained 150%.

Over the last 81 years, the Dow Jones Industrial Average has climbed 3,700%, and closed at a record-high 15, 461 yesterday. Since hitting a Great Recession low of 6,705.63 in March 2009, the Dow Jones Industrial Average has rebounded almost 130%.

What have we learned over the last 80 years of investing? Maybe that patience is an investor’s most important virtue. When the markets have been faced with wars, terrorism, and economic or political upheaval, they always rebound. Even when the markets are down, there’s always a bullish play waiting to be discovered.

After all, making money in the stock market is about taking advantage of opportunities. People run to and away from stocks for the wrong reasons. In the words of Warren Buffet, “A public-opinion poll is no substitute for thought.” (Source: BrainyQuote, last accessed July 11, 2013.) When it comes to investing, it’s more important to think for yourself than to follow the herd.

That is especially true today. With the Dow Jones Industrial Average hitting a new record, that exuberance has more to do with the Federal Reserve’s $85.0 billion-per-month quantitative easing policy and artificially low interest rates.

In essence, today’s growth on Wall Street can be attributed to Federal Reserve chairman Ben Bernanke, the world’s biggest sugar daddy.

This will become evident after the second-quarter earnings season is in … Read More


What You Absolutely Need to Know About Gold’s Future

By for Daily Gains Letter | Jul 11, 2013

Do Have Faith in Higher Gold PricesI have faith that gold prices are just about to go higher. While the current negativity towards gold continues to increase, it goes against the most basic of economic principles—supply and demand.

Since gold prices have begun their recent slump, some in the mainstream media have even said that the bull market in the metal that began in 2002 is over. They are saying gold bullion has no space in their portfolio and that it isn’t really a store of wealth anymore.

But the fundamental reasons for a rise in the value of gold bullion are actually increasing. The demand is going up and supply appears to be slowing—the very recipe for a price increase.

The demand for the metal remains very strong. According to data from the Hong Kong Census and Statistics Department, imports of gold bullion to mainland China from Hong Kong increased to 108.781 tonnes in May, compared to 80.101 tonnes in April—a 36% increase in just one month. (Source: Ananthalakshmi, A., “UPDATE 1–China’s net gold imports from Hong Kong jump in May,” Reuters, July 5, 2013.)

And there are major concerns on the supply side. The cost to take gold out of the ground is getting higher than the metal’s current price, making mining gold a losing proposition. Consider that Barrick Gold Corporation (NYSE/ABX, TSX/ABX), one of the biggest senior gold bullion miners, is halting its production at one of its biggest mines, the Pascua Lama mine in Chile, due to its costs increasing from $5.0 billion to $8.5 billion. And Barrick isn’t the only one facing a problem in rising production costs; there are others … Read More


How Low Can Gold Prices Actually Go?

By for Daily Gains Letter | Jun 25, 2013

Why Gold Bears May Be Wrong on Their PredictionsGold prices fell into turmoil after the Federal Reserve announced it might be slowing the pace of its quantitative easing. Prices tumbled and broke below the support level, which was formed after gold’s previous decline in mid-April to around $1,350.

Since the beginning of the year, gold prices have been in a continuous decline and have plummeted from trading at about $1,650 an ounce to below $1,300—a drop of more than 21%.

With this slump in gold prices came an increased amount of noise. Some are saying gold has lost its “haven” status, while others are saying we actually may see deflation ahead, so buying gold isn’t the brightest move for investors. Their estimates may vary, but it’s clear that they are extremely bearish on the yellow metal.You can see this decline in the stock chart below:

Gold - Spot Price Chart

Chart courtesy of www.StockCharts.com

With all the negativity around the precious metal, everyone is wondering: how low can gold prices actually go?

It actually turns out that the supply and demand side of gold suggests that the bears might be wrong in their projections.

While the gold prices have taken a hit, the demand remains exuberant. The World Gold Council (WGC) reported that in the first quarter of 2013, 963 tonnes of gold bullion was sold. In that period, central banks bought more than 100 tonnes for seven consecutive quarters, and buyers in India and China, the biggest gold-consuming countries, were resilient and bought even more. (Source: “Global demand for gold Jewellery up 12% in Q1 2013 driven by significant increases in India and China,” World Gold Council web site, May 16, 2013, … Read More


These Emerging Markets to Benefit from New Global Economy

By for Daily Gains Letter | Jun 25, 2013

Are Smaller Emerging Markets the Next Big Trade for Investors?While the majority of Americans might not have passports, that doesn’t mean we should avoid investing in foreign countries—especially in this market. Since rebounding in 2009, the S&P 500 has climbed around 145%, peaking on May 22 at 1,687.18. And that’s when it all started to go wrong.

On May 22, the Federal Reserve hinted that since the U.S. economy seemed to be on the right track, it might begin to ease its $85.0 billion-per-month quantitative easing policy. Just the idea of losing out on free money sent the markets into a frenzy—over the following two weeks, the S&P 500 lost more than four percent of its value.

While the S&P 500 regained some ground, it continued to be volatile leading up to the Federal Reserve’s June 19 meeting. During that meeting, the Federal Reserve announced that while it would continue with its quantitative easing policy, it would still ease the $85.0 billion-per-month program by the end of the year, and could end it altogether in 2014. Over the following two days, the S&P 500 slipped almost four percent.

While many investors are worried the U.S. economy will not be able to sustain itself without the Federal Reserve’s bond-buying program, there are other markets that investors can turn to if they’re looking for protection and wealth creation.

But bigger is not always better in this economic climate. On June 19, the Hong Kong and Shanghai Banking Corporation (HSBC) said its preliminary monthly Purchasing Managers’ Index (PMI) for China fell to a nine-month low in June of 48.3; a reading under 50 indicates a contraction.

Since May 22, the iShares MSCI … Read More


The Surprising New Drags on the Global Economy

By for Daily Gains Letter | Jun 24, 2013

The Surprising New Drags on the Global EconomyThe world’s two biggest economies seem to be competing against one another to see which can be a bigger drag on the global economy.

In the U.S., the problem is the regulators. As the old saying goes, you can’t fight the Fed.

On Wednesday, June 19, the Federal Reserve announced it would continue its quantitative easing program—at least until America’s jobs market improves substantially. At the same time, the Federal Reserve also said it would ease the $85.0 billion-per-month program by the end of the year, and could end it altogether in 2014.

For a bull market rooted more in the Federal Reserve’s monthly alimony payment than sound economic numbers, this is bad news. After five years, the world’s largest economy might have to stand on its own legs in 2014; that’s not something it’s prepared to do.

The U.S. markets reacted to the news the following day in a sea of red. In fact, less than two percent of S&P 500 companies were trading up.

And in China, the problem is disappointing manufacturing news, and it suggests the global economy is in worse shape than anyone thought.

The HSBC Flash China Purchasing Managers’ Index hit a nine-month low of 48.3 (49.2 in May). The Flash China Manufacturing Output Index came in at 48.8 (50.7 in May), a new eight-month low. A measure below 50 indicates contraction. (Source: “HSBC Flash China Manufacturing PMI,” Markit Economics, June 20, 2013.)

Here’s a quick summary of the China Flash Manufacturing Index: output is decreasing at a faster rate, new orders are decreasing at a faster rate, new export orders are decreasing at a … Read More


Has Hope Run Out for the Eurozone?

By for Daily Gains Letter | Jun 20, 2013

Has Hope Run Out for the EurozoneThe economic slowdown in the eurozone continues to take a toll on the global economy. It’s causing major economies like China to suffer severely due to anemic demand. Sadly, looking ahead, there’s really no light at the end of the tunnel. Despite the bailouts and the European Central Bank (ECB) taking a tougher stance, countries at the epicenter of the crisis continue to suffer and show dismal economic data, and others are starting to follow their lead towards economic scrutiny.

The Bank of Spain, the central bank of the fourth-biggest economy in the eurozone, reported that the total amount of bad loans in the country had increased to 167.1 billion euros in April from 162.3 billion euros in March. Month-over-month, the amount of bad loans in the Spanish economy has increased by 2.9%. (Source: “Spain’s mortgage crisis lingers on as bad loans soar,” Deutsche Welle, June 18, 2013.)

The ratio of bad loans to all the credit in the country increased to 10.87% from 10.47%. This means that out of every 100 loans in Spain, almost 11 were considered “bad” or default loans.

The situation in Italy, the third-biggest economic hub in the eurozone, is very similar. The Italian Banking Association reported that bad loans in the country increased by 2.3 billion euros to 133 billion euros from March to April. Year-over-year, the bad loans in this eurozone country have grown 22%, making up 3.5% of the total loans. (Source: “Bad loans at Italian banks still growing in April,” Reuters, June 18, 2013.)

What’s even more troubling is that industrial production in the eurozone is declining. It decreased by 0.6% … Read More


Fed’s “Great Exit” a Sustainable Strategy?

By for Daily Gains Letter | Jun 18, 2013

Fed’s “Great Exit” a Sustainable StrategyFor much of last week, the global markets were taking a beating on growing concerns that the central banks will start easing their economic stimulus. Before the markets opened Friday morning, Reuters boldly announced that the rout was over, and U.S. markets opened trading up. (Source: Jones, M., “GLOBAL MARKETS-Shares pick up, dollar steady after bruising selloff,” Reuters, June 14 2013.)

Two hours later, though, Wall Street was singing a different tune. The U.S. markets slipped after the International Monetary Fund (IMF) announced it cut its 2014 growth outlook for the U.S to 2.7% from three percent. The unemployment rate for 2014 is projected to decrease slightly (on average) to 7.2 %. (Source: “Concluding Statement of the 2013 Article IV Mission to The United States of America,” International Monetary Fund web site, June 14 2013.)

Time will tell if these projections will come true. After initially predicting U.S. 2013 growth of 2.2%, the IMF revised it downward to 1.9%; the IMF continues to maintain that lowered projection. This tepid growth is expected to keep unemployment hovering around 7.5% for the remainder of 2013.

The IMF noted that the Federal Reserve needs to carefully plan its exit strategy to avoid hurting financial markets. The best way to do this, it maintains, is to continue its $85.0 billion a month bond-buying program until at least the end of 2013.

In addition to continued economic stimulus, the IMF also said Washington wasn’t doing enough to cut long-term budget deficits—though it would seem that higher deficits go hand-in-hand with money printing—and that Washington needs to cut entitlement spending and generate higher revenues.

What this … Read More


Global Rout in Markets Gathering Momentum?

By for Daily Gains Letter | Jun 17, 2013

Global Rout in Markets Gathering MomentumSo this is what it looks like when global investors take their eyes off the Federal Reserve’s quantitative easing policy and focus on the real economy instead! As I’ve been predicting, the global sell-off of stocks looks like it’s beginning in earnest.

And you can pinpoint the exact moment investors and economists around the world began to get jittery. It was on May 22, right after the Federal Reserve hinted it might start tapering off its $85.0-billion-per-month quantitative easing policy as early as Labor Day.

The global markets haven’t been the same since.

Japanese stocks have entered bear market territory, tanking more than six percent last Thursday to a nine-month low on the threat of reduced economic stimulus from central banks. South Korean shares slipped 1.4%, hitting their lowest close in seven months.

Concern that China’s economic growth is grinding down has seen the Shanghai Composite Index trading at its lowest levels since mid-December 2012 and has dropped 12% from the year’s high on February 6.

One of China’s biggest trading partners may also be feeling the pinch. Australia’s economy expanded just 2.5% in the first quarter, below projected forecasts of 2.7%. While the country’s economy had been chugging along due to increased demand for natural resources, it is beginning to sputter thanks to the slowdown in China. Couple this with the country’s underperforming non-mining sectors, and you can see why Goldman Sachs and others think Australia could, after 22 years, slip into recession. (Source: “Australia’s economic growth rate misses forecasts,” BBC web site, June 5, 2013.)

On top of that, the World Bank cut its global 2013 growth forecast … Read More


Fear Sneaking Back into the Stock Market

By for Daily Gains Letter | Jun 13, 2013

Fear Sneaking Back into the Stock MarketIn just a matter of a few months, the S&P 500 is up more than 14%. To say the very least, these gains are nothing short of amazing—much better than what investors can get with the long-term U.S. bonds that currently yield less than 3.5%.

Consider this: on average, in the first five months of this year, the S&P 500 went up by about 2.8% per month (14% divided by five months). Assuming the stock market keeps the same pace, the S&P 500 will gain way more than 30% this year (12 times 2.8%).

Now, one must ask the question: is this sustainable? Can the S&P 500 keep going at this pace?

Since at least 1968, the S&P 500 has gone up more than 30% only three times: in 1975, when it increased by 31.55%; in 1995, when it climbed 34.11%; and in 1997, when it climbed 31.01%. (Source: “History of The S&P 500 Index,” The Standard, last accessed June 11, 2013.) Even with a massive turnaround in the stock market in 2009, the S&P 500 only increased return to 28.04%. (Source: “SPDR S&P 500,” Morning Star, last accessed June 11, 2013.)

Just looking at the economic performance of the U.S. economy when the S&P 500 increased more than 30% in the past, it was exuberant. For example, between 1975 and 1976, the gross domestic product of the U.S. economy grew 5.3%. (Source: “Real Gross Domestic Product, 1 Decimal,” Federal Reserve Bank of St. Louis web site, last accessed June 11, 2013.)

Looking at the economic conditions now, they are not as great. The International Monetary Fund (IMF) expects the … Read More