Economic Cycles« Previous Entries
Published Every Thursday The Case For Deflation There is a strong body of thought that we are headed for a period of deflation. According to Harry Dent, author of “The Great Crash Ahead”, “we are in the initial stages of a Primary Bear Market“. He points out this is evidenced by the long-term chart on [...]
Whats-Hot-or-Not Periodically we publish our stock picks. Stocks that we like are “Hot” and listed below. Stocks not considered hot are removed. Apple Computer (AAPL) Has Had its day. When Apple was at $676.00, we suggested buying Put Options. It seemed that several factors were in play and market exuberance was pushing Apple higher, without a [...]
e Losses Raise Investor Anxiety
Junior resource stocks have had their worst beating in many years. Most are down 50% or more. It is a very difficult time for investors in these stocks. There are many explanations, but whatever the reasons, there are few buyers and many sellers. When good news is released by a company, it becomes a liquidity event and everyone lines up to sell the stock because there are buyers available. Bucking this trend is proving very difficult.
Investors are frightened, resulting in stock lows and fears last seen in the aftermath of the credit crunch of 2008 when many juniors crumbled and collapsed. Many companies are most apprehensive about their future as junior exploration companies rely on repeated visits to the market to raise funding for the next round of explorations, and there is little appetite in the markets these days to invest in any junior company. Company that are short of cash are worried about their future capability to stay in business. Those companies with little cash on hand, are being forced to turn over their properties to larger companies with the alternative being to lose the property entirely.
Out of this Doom and Gloom, There are Opportunities
First consider the illogical behavior of the stock market. Stocks rise or fall with little relationship to value. We have discussed this lack of relationship of stock price to vale many times, and the conclusion is always the same. Those that buy when stocks are low, do well in the market. Those that buy after the market has risen to dizzying heights, and buy because everyone else is buying, lose their shirts.
It is funny how quickly the psyche of investors can change. The same stock, with the same assets, with the same potential, can be worth $10.00 one month and the next month, no-one wants it at $0.10.
Emotions Drive Stock Market Values
Consider in 2008 when stocks fell so violently and so dramatically, that there were almost no buyers for them. Those few who had the intestinal fortitude to buy these beaten down stocks did very well indeed in the years 2009 through 2011.
It was similar to going into your local department store, and seeing all of the merchandise on the shelves marked down to 10% of what it was selling the day before. A major shopping spree took place for those that understood that these cycles always occur. These cycles of emotional desire to buy what is hot, and to sell what is not, are related to the business cycles that we refer to so often.
If you want a bargain, and if you want to buy low, and later sell high, the bargains are now waiting to be plucked. How jealous everyone will be that you had the good luck to buy when prices were so cheap.
Consider Some Facts
Commodity prices remain high and within a normal range of the high that they reached in the last cycle, yet the shares of the junior companies that own the un-mined deposits of these metals in the ground, are severely depressed. There is not a correlation.
There has been no dramatic slowdown anywhere in the world. The US continues to drag itself out of the mire with ever reducing unemployment and ever increasing car sales. Japan teeters near the fiscal cliff in the same manner that it has done for many years now, but the country has survived earthquakes and tsunami’s and still is the 2d or 3rd largest (depends how you calculate) economy in the world. China, in spite of predictions of a great bust, has proven itself to be resilient and if there is a slowdown, demand from the millions of new middle class consumers remains strong.
The US fiscal cliff is a gamesmanship political fight, with the ideologies of the two parties at odds with each other. This is not a fiscal cliff and it will produce no depression. What most people fail to understand is that this type of political infighting has gone on since the birth of the Republic, and this is nothing new. In her biography, “Team Of Rivals: The Political Genius of Abraham Lincoln,” Doris Kearns Goodwin recounts similar bitter politic fighting going to Abraham Lincoln.
The Fiscal Cliff will be remembered with laughter in the same vein that Y2000 is remembered as a humorous anecdote.
Producing Minerals From the Ground
The miners and producers of metals are making near record margins. Costs have moderated a bit, profit margins are high. Miners should be enjoying this success, but instead are mired in this emotion of pessimism.
The very fact that every mine can see at current world prices, all of their output, shows how robust the demand is, and how valuable these junior minors are.
But fear has taken over the TSX Venture and the last time that happened, it was the greatest buying opportunity of our lifetime. So it is now. In 2003, gold traded at $230 per ounze. Today it trades at $1,650 /oz, roughly an 8x increase in price. Yet the stock price of companies that own gold in the ground is dropping.
In 2003, oil traded at $30/bl. Today it trades close to $100/bvl – a 3x increase. Copper traded at less than $1.00 whereas today it trades around $3.00.
The value is there for the picking. This is an opportunity to buy these stocks.
CymorFund Stock Picks – What’s-Hot-or-Not In February 2013, we started suggesting stocks that were undervalued and had a strong upside potential. Most of our early picks were in the junior resource sector, and in spite of a horrific downturn in this sector, we are proud that our picks in this very short time, have preformed [...]
Whats-Hot-or-Not Periodically we publish our stock picks. Stocks that we like are “Hot” and listed below. Stocks not considered hot are removed. Whats-Hot-or-Not Buy EMED Mining $0.175 (EMED on AIM; EMD on TSX) EMED Mining is a European Mining story. It has various projects in Europe, but the flagship is a copper deposit in Spain. [...]
Gold Today gold is trading slightly above $1,600 per ounce US$. In late 2011 it reached above $1,900 per ounce US$. It had a marvelous run, from $350 per ounce to $1,900 per ounce. Those that jumped on this train did very well indeed. It is now 1 1/2 years later. Pundits everywhere were projecting [...]
The Current Dilemma Greece continues its attempts at restructuring and civil unrest threatens, Spain’s unemployment continues to rise to unprecedented levels, and France is straining under labor unrest. An example of the struggle to squeeze every source for more revenue is a proposal in Hungary late last year Hungary Solicits the Chinese? European Union member [...]
An Interesting Commentary on How Investment Decisions Are Made The following is a reprint of an article that goes into some detail on how investment decisions are made. It seems appropriate today. It is a bit long and a bit wordy, but investors should always be better investors if they understand what prompts their own [...]
An Examination of China’s Reality as Compared to Media Reports The information coming out of China continues to confuse and obstruct what is truly important, which is the gradual improvement in economic numbers coming out of the US. The US is the economic engine of the world, and as the US recovers, so does the [...]
The Dow Jones Transportation Average (DJTA) Also called the “Dow Jones Transports”, the DJTA is a U.S. stock market index from Dow Jones Indexes of the transportation sector, and is the most widely recognized gauge of the American transportation sector. It is the oldest stock index still in use. This index hit its height of importance when railways across America hit their [...]
We have often remarked on how the USA will lead the recovery and that the next economic cycle will make its way through the doom and gloom in today’s market. We now have visible evidence that this is starting to happen. European Debt Crisis Pundits continue to insist that the EU (European Economic Union) must [...]
A Sense of Drama Stuck between a hard place and a rock, the Republicans finally relented and an agreement concerning the Fiscal Cliff was reached. The issue seems to have been a holdover from the sudden rise of the Tea Party, which during the last administration promoted a nonsensical pledge among Republicans to never agree [...]
Stop Losses In its simplest form, a stop loss is a standing instruction to your broker that if a stock falls in value to a certain point, an order will be automatically executed to immediately sell that stock at the market price. The Purpose Of Stop Losses As part of the traditional psychology of investing [...]
An Over-Reaction to Current Debt Issues Those that are sophisticated enough and experienced enough, know that after every exuberance in an economic cycle, financial matters become so difficult that many come to the conclusion that “This Time It Is Different”. Analysts come to the conclusion that there is no escape from the inevitable and doom [...]
Employment Numbers are Still Difficult U.S. Bureau of Labor Statistics: U.S. Unemployment rises slightly to 7.9 Percent in October, U.S. total non-farm payroll employment increased by 171,000 in October, and the unemployment rate was essentially unchanged at 7.9 percent and the number of unemployed persons (12.3 million) were essentially unchanged in October, following declines in [...]
Advisers to Investing Readers will know that we often comment on the motivations of those that advise on where to invest, and what to invest in. They have their motivations and it is essential for investors to understand why your investment adviser recommends an investment and why a media pundit touts some stock or other. [...]
The Panic Investment Cycle We have often repeated some basic principles of investing, including advising readers to recognize that every stock varies in price more as a result of emotion and other factors, than as a result of the company’s real business activities. The most important factor in buying or selling a security, is the [...]
The Fiscal Cliff Approaches With the US election now over, the Tea Party smacked down, and the Republicans licking their wounds, attention has shifted to the Fiscal Cliff. Should the politicians not reach agreement, a prearranged penalty system kicks in with large income tax rate increases and large expenditure cuts. Sort of a massive bluff [...]
Will Gold Reach $2,500 an Ounce Common wisdom is a belief that gold is poised to rise in value, and that you had better buy gold for your security. Advertisements heard regularly on US and Canadian radio advertise how to buy gold for your portfolio. Gold Funds and Silver Funds, Gold and Silver ETF’s and [...]
Black Monday (October 19, 1987) Black Monday refers to Monday October 19, 1987, when stock markets around the world crashed, shedding a huge value in a very short time. The crash began in Hong Kong and spread west to Europe, hitting the United States after other markets had already declined by a significant margin. The [...]
Cheap energy is the key to productivity. Where the cost of energy is lower, productivity is greater. This is true worldwide. We begin by looking at energy costs and production in the USA. The Presidential Debate – Candidates Agree on Gas & Oil Last night the third and final debate between Romney and Obama took [...]
News Media have to Fill Space & Get Attention – Gloom & Doom Gets Attention In the midst of an overload of information, it is important to step back, silence the rhetoric and gain a wider perspective of the economy. CymorFund has frequently discussed how the economy has cycles of activity. Each cycle starts anew [...]
The Golden Dawn There is a right wing nationalistic party in Greece called the Golden Dawn. In the last election, it garnered about 6% of the votes. This compares to 2% in previous support. In spite of significant outrageous conduct by The Golden Dawn, support continues to increase rapidly for this party. Some say it [...]
The US Debate over Quantitative Easing We have an interesting debate going on in the US Presidential campaign. On one side are people claiming that government handouts are ruining America and the government must immediately stop incurring debt, and go to a balanced budget. On the other other side are people claiming that the economy [...]
The Negative Daily News Daily we are bombarded with news of European Debt Crises, of China Slowdowns, of USA housing and job numbers. Everything seems so negative. Yet when one takes a larger view of what is happening around us, it is obvious that the next cycle is starting, and we are pulling out of [...]« Previous Entries