Estimados Readers,
Quiero comenzar la letter de esta semana con una apology. Hay muchas phone calls y emails a los que aún no he respondido; muchas questions se han hecho no solo sobre el gold market, sino también sobre muchas de las stocks dentro del sector. Espero responder a la mayoría de sus questions en esta letter.
Gold ha sido forzado a bajar a $1600 esta semana. Como resultado, envió shockwaves a las gold stocks, y en particular, al junior market. Aquellos long en gold equities han sentido el pain.
En los últimos years, mis readers han hecho mucho money con las insights y ideas que he compartido en mi Equedia Weekly Letter. La reciente slump en las precious metals stocks finalmente ha comenzado a realmente weed out las good and bad stocks; está haciendo lo mismo con los shareholders.
Es un tough market y solo debes participar si conoces los risks – especialmente dados los over-manipulated y overly regulated markets que enfrentamos ahora. No se me permite decirte cuándo buy o cuándo sell; las regulations simplemente no me lo permiten. Pero sí espero que los investors tomen profits. Si lo hiciste el last year, deberías haber construido un nice war chest para take advantage de esta most recent downfall en el precious metals market.
Muchos de ustedes me preguntaron por qué no he agregado ninguna new stocks al Equedia Select Portfolio en los last few months – especialmente aquellos que no tuvieron la chance de benefit de mis stock ideas el last year.
La answer es simple: Muchas de las stocks que me gustaban ya estaban nearing 52-week highs.
Pero durante la last week things han changed, con muchas de las stocks en el precious metals sector falling dramatically. Y eso da paso a new opportunities.
He estado haciendo mucho research en las past few weeks sobre specific companies porque creo que el time is coming soon para take advantage de las overly beaten stocks en el precious metals sector. Puede que no sea tomorrow, pero pronto pull the trigger. Puede que no pueda decirte cuándo buy o cuándo sell, pero sí puedo decirte what I buy y when I buy it.
Un Desastre Absoluto
La last week, los media estaban obsessed con talking about how gold and silver got slammed because of strong U.S. economic numbers which spurred optimism. Cuando las things appear good, no hay reason para own gold apparently.
¿Pero are they really good?
Retail es always un good indicator de consumer confidence y overall economic health — always has been and always will be.
Si las things are better, ¿por qué the biggest retail chain en the most powerful country acaba de tener su worst monthly start since 2006?
Según internal e-mails obtenidos por Bloomberg News:
“In case you haven’t seen a sales report these days, February MTD sales are a total disaster,” Jerry Murray, Wal-Mart’s vice president of finance and logistics, dijo en un Feb. 12 e-mail a other executives, refiriéndose a month-to-date sales. “The worst start to a month I have seen in my ~7 years with the company.”
Murray no fue el only executive con doubts. En un separate internal e-mail obtenido por Bloomberg News, Cameron Geiger, senior vice president de Wal-Mart U.S. Replenishment dijo:
“Have you ever had one of those weeks where your best- prepared plans weren’t good enough to accomplish everything you set out to do?” Geiger preguntó en un Feb. 1 e-mail a executives. “Well, we just had one of those weeks here at Wal-Mart U.S. Where are all the customers? And where’s their money?”
Supongo que el “total disaster” de Wal-Mart es el “much better and rapidly improving” de Obama.
As matter of fact, through Obama’s eyes, las improving economic conditions son tan good que él decided to call for a 24% increase en minimum wages (that was sarcasm, by the way) y have wages anchored to inflation going forward. Pero wait, I thought there wasn’t any inflation? (more sarcasm…)
Bad Loans y Unemployment
En el European front, parece que el optimism también ha sido overblown.
Un recent study by Ernst & Young ha revealed que los euro-land banks en el aggregate ahora hold 918 billion euros ($1.23 trillion) de loans que currently no estaban being paid back at all o could only partly be paid back.
Eso significa que el 7.6 percent de todos los loans granted en la eurozone son bad.
Meanwhile, el Greek unemployment continúa to climb. Los Greece’s unemployment numbers son nearly double what they were en el beginning of 2010.
Recent data shows that young workers are, well, not working. El unemployment rate para aquellos aged 15 to 24 sits at un whopping 61.7 percent. Meanwhile, el 25 to 34 age bracket sits at un staggering 36.2 percent unemployment.
Greece isn’t alone.
Unemployment en Spain para aquellos under 25 ha now soared to 55.6%; Italy 36.6%; Portugal 38.3%; Ireland 30.2%; France 27%; Luxembourg 18.8%; Cyprus 28.5%; Slovenia 26.9%.
Perhaps los retired han sido forced to keep working; leaving no jobs para los youth…
He stated many times before that this is not un market of fundamentals, sino uno de euphoria induced by government policies y central banks. Oh, y let’s not forget los media; el 90% de everything Americans read, watch, and listen to is controlled by only 6 major corporations owned by powerful people entrenched in politics.
When it comes to investing, los fundamentals never dictate el pace of the market. El market es dictated by the mass that often cannot see what’s really ahead of them. That’s why you should never bet against the power of mass conformity, pero should always be prepared to take advantage of that knowledge.
Time for a Break
Prices en el current market remain artificially high y maintaining them here is going to be difficult as central banks become less effective. El market is already stalling once again this week con lower volumes supporting el market. Near-term highs may soon see una slight correction.
At some point, things will break. Y la growing currency war could be el catalyst.
Currency War
On Saturday, los G20 leaders agreed that there will be no currency war y deferred plans to set new debt-cutting targets, underlining broad concern about the fragile state of the world economy.
They know that una currency war will lead to unavoidable consequences: massive inflation around the world, massive devaluation of currency, y un complete overhaul of the world’s financial system.
But can they avoid la currency war? Let me rephrase that — can they prevent la currency war from getting worse?
La Fed y other central banks continue to print, lo que essentially devalues their respective currencies. I won’t go into every detail of the matter, pero I suggest you go back to at least a few of my past letters y get caught up to speed ( see Watch the Throne.)
Most of these nations no longer have a choice. Every nation will continue to print y esto will not stop unless the world somehow does un full 180 y pays back all of its debt, completely deleverages, y shows major signs of real growth. Perhaps en fairy tale land eso might just happen. But this is the real world.
La currency war es unavoidable. Just because you dress a wolf in sheep’s clothing, doesn’t mean it’s a sheep.
So while los G20 nations talked of no currency war, other countries reacted differently.
Norway, Western Europe’s largest oil exporter, acaba de added more fuel to the fire.
Governor Oeystein Olsen boldly stated, just before la G20 conference, that el Norges Bank is ready to cut interest rates further to counter krone gains that interfere with el inflation target:
“If it gets too strong over time, leading to inflation that’s too low, we will act.”
Los Norway’s politicians, central bankers y business leaders ya han joined forces to weaken the currency.
This es un direct result of the current currency war.
La Death Cross
En el short term, el gold may continue to see more pressure.
On Friday, el gold fell below both the 50-day y the 200-day moving averages. Esto ha sparked una wave of negative sentiment as los gold prices appear to be getting closer to esa dreaded technical death cross, que refers to the point where the 50-day average gold price dips below the 200-day average gold price.
In the word of technical trading, esto es tan clear un sell signal como you’re going to get.
Gold ha hit un couple of death crosses since la 2008 crisis. En both cases, el gold took un major slump — falling as much as 18 percent en los following months en 2008, y over 9 percent en 2012. Esto may seem like un major dip, pero el gold rebounded very strongly both times — especially after la 2008 death cross, que eventually sent gold to new highs just years later.
Be careful of gold prices en el short term. If prices dip, it will signal un better entry point, pero patience here is the key as el gold could be manipulated down further.
While el near-term price of gold seems dismal, el longer term outlook remains unchanged y I expect gold to go higher.
El World Gold Council showed un slight decline en demand for 2012, pero eso won’t stop other central banks from buying.
According to Bloomberg, Russia is not only one of the biggest oil and gas producers in the world, sino que it is now the biggest buyer of gold.
El Vladimir Putin’s central bank ha added 570 metric tons of the metal in the past decade, un quarter more than runner-up China, according to IMF data compiled by Bloomberg.
I also expect para China to continue to their gold buying in secret before announcing it to the world, as they have done before. China spent 5 years accumulating gold in secret before announcing to the world that it had doubled its official gold holdings in 2009. If 5 years is the magic number, expect China to announce their secret gold buying sometime next year. Perhaps they would have doubled it again by then. With gold prices falling, expect them to be buying.
In the meantime, los gold and silver equities may continue to get slammed; those who are playing should understand that. La slump en gold market equities está creating un even bigger disconnect between the valuations of the companies and metal prices. The bigger this gap gets, the bigger the opportunity.
Don’t look at this slump as something negative. Look at it as an opportunity for positioning. Los Retail investors should focus on el stock play, while los institutions and bankers should focus on el value of the projects.
Be patient and don’t let emotions get the best of you.
Hasta la next week,
Ivan Lo
Equedia Weekly
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