The News is Generally Negative
One reads much in the financial news currently about the global slowdown, about the European Debt Crisis, about inflation in China, about Japan’s difficulties, and so much more bad news.
One has to wonder why the stock market has shown such strength since March 2009. Is this the first time ever that the market has completely failed to foretell what is happening in the economy? The reader knows that I am skeptical about whether the market is efficient, or whether it properly foretells the future. But, the market has never, on a global sense completely misled the investor as to the state of the economy. And there has never been a cycle that has shown so much strength in such a short time, only to fall.
Consider the Signs Around You
A report this week said that we should watch the banks because the sheer volume of derivatives is far greater than just before the meltdown. The piece to watch in that report, is that the financial level of transactions has again risen. The other piece to watch is that the banks are now larger than they were just before the meltdown.
Look at car sale. The US big three have either completely repaid their loans or almost done so.
Look at unemployment – stubbornly high. Yet this has been a result of every single downturn since the graet depression. It is what happen as sectors of the work force are always left behind in every recovery. Sad, but factual.
Look at sales in value goods – reaching new highs.
And so on.
How to Interpret Commodity Prices
In the last month, the prices of commodities have generally stabilized or fallen a bit. Share prices have also stabilized or fallen a bit.
On the other hand, if you are not in commodities, your portfolio has suffered a more significant amount. Banks in general have become suspect again, especially in the USA.
The Market Works in Cycles
The question is whether the recent rise in commodity prices has peaked and it is time to move on.
If you are a trader, perhaps.
If you are a value investor, as we are, it is time to reflect on what is going on.
This is generally the time of year that investors fail to realize the annual cycle in the markets. Have you heard the phrase “Sell in May and go away?”. Almost without fail, stocks moderate or fall this time of year, every year. What we are currently experiencing is this annual event.
It is time to look at the prices of commodities. The market never goes in one direction forever. If the rise is too sustained over too long a period, it is time to flee. Those that jump on a bandwagon too late in the game, get hurt. This pause is quite healthy and quite normal. Do not be confused.
Investors with market acumen look at current pricing and either they see a further weakening before they start buying, or they are buying now.
We don’t fancy ourselves as being able to accurately predict the short term moves in the market. We think that anyone who does, is deluding themselves.
It is possible that prices will weaken further, or start strengthening. The point is, that it is a good time to buy cautiously.
Demand for Copper
If you look between the headlines, you will see numerous articles about the demand for copper rising, production falling, and a looming shortage. It is time to look for bargains in copper stocks.
Demand for Dysprosium
One of the areas receiving much attention currently is dysprosium. It turns out that rare earth metals sometimes are not so rare after all.
However, they are a few that have enormous shortages looming. One of these is dysprosium, a rare earth considered by the US Military as essential. In the western world, there are only two companies with a real prospective near term supply.
Buy one of these companies.
