Uncommon Wisdom Daily Blog

January-April Performance: Awesome!

by Sean Brodrick on May 17, 2013

The April numbers are in and my Junior Resource Millionaire not only outperformed its benchmark by a wide margin, it also left the S&P 500 in the dust.

I was able to beat my benchmark by so much because many commodities and commodity stocks are having a lousy year (so far). So far, I’m having a great year. But you never know what is around the corner. Stay cool, my friends.

Ed Yardeni Tells Those Worried About Market Valuation to Chill Out

by Sean Brodrick on May 16, 2013

Via Marketwatch …

If your stomach is bleeding over whether this market is getting overripe, chill out already, according to this chart from Ed Yardeni.

Mr Yardeni writes: “The recent valuation-led rally in stocks isn’t irrational exuberance. Rather, it is a bullish rejection of the bearish and dreaded prediction of the Endgame prognosticators pontificating that the end is near or even imminent.” This illustration of the S&P 500 forward P/E ratio shows there’s room to run. Yardeni says if the metric just reverts to 2009′s peak, the S&P would move all the way up to 1,744.

Chart of Bull Market Duration

by Sean Brodrick on May 16, 2013

Chart of average bull market duration, from Barry Rithholtz …

The rest of the piece the chart is in is worth reading, too.

Gold edges down, investors cautious ahead of Fed statement

Gold premium over spot price

by Sean Brodrick on May 1, 2013

Just thought I would take a historical look.

Updated chart

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Why Do I Invest in Gold?

by Sean Brodrick on April 30, 2013

Why do I invest in gold? Sure, I like having dollars in my pocket — the more the better. I’m a capitalist — I LIKE capital. But I’m also acutely aware that while paper currencies come and go, the value of gold is eternal.

Gold will hold its value in this world long after our bones turn to dust. That’s why Wall Street despises it.

To mom-and-pop investors, gold is a real store of value; to budding entrepreneurs, gold shines with freedom. But to the cowards who rule the corridors of power, gold is a warning that the illusions, manipulations and degradations they force upon the weak cannot last forever.

Stay tuned.

Big-Ass Gold Chart

by Sean Brodrick on April 30, 2013

Here’s a chart to watch … but it’s a weekly chart, so don’t expect big changes in a hurry.

Yeah, it looks pretty bullish. And in Junior Resource Millionaire, we added two positions today AND took double-digit percentage gains on another gold mining position. So, there is room for optimism.

But remember, there are plenty of charts on gold, some bullish, some bearish. Here’s one the gold bears are probably looking at right now …

Looking at the chart, you can see that gold is up against two kinds of overhead resistance. One is from the 20-day moving average, which is often seen as a dividing line between short-term bullish and bearish trends. The other is the gap between where gold opened on 4/12 and where it opened on 4/15. Bears will think (probably correctly) that there could be gold buyers trapped there, and so it will take significant effort to get gold over that level.

This would explain why the Commitments of Traders report for gold at the New York Mercantile Exchange’s Commodity Exchange (COMEX) shows small speculators net long positions are at their lowest levels in ages (see chart). In other words, the small traders/general public is the LEAST BULLISH ON GOLD since 2001 – when gold was coming off a 20-year bear market.

The next week could be a pretty interesting one for gold. Stay tuned. And Junior Resource Millionaire subscribers – enjoy the gains on that position you banked today. We may buy it again, so SHHH!

3 Questions Gold Buyers & Sellers Need to Ask

by Sean Brodrick on April 25, 2013

Gold is up nearly 2% AGAIN today, and is up about halfway from its big rout that began in the second week of April. This is a tough time for investors, who have to ask themselves some questions. Feel free to answer below or email or tweet me your answers.

1. This is options expiration day for gold. This is probably part of what is pushing up gold prices today, and probably means that gold prices will go lower tomorrow. But how much lower? And is this just a blip in gold’s recovery? Start polishing those crystal balls, kiddos. My question: Are you a buyer of gold’s next dip? Or a seller of this rally?

2. Here’s a chart Reuters put together showing where various analysts/companies put their year-end forecasts for the price of gold.

Reuters: Most of the 29 banking and brokerage analysts and consultants polled expected prices to find support and stay above the $1,400 mark.

Goldcore adds: The majority of analysts, 20 out of 29, expect gold to end 2013 above $1,450 per ounce and 6 analysts, saw gold above $1,650/oz by the end of 2013.

Interestingly, the majority are bullish at these price levels with average price forecasts for the year of 2013 much higher than today’s prices – at a mean of $1596/oz and a median of $1627/oz.

My question: If most banking and brokerage analysts are looking for higher prices in gold, is that bullish for the metal?

3. Many commodity gurus have turned bearish on gold, and funds are selling their gold ETF holdings. Not so mom-and-pop investors, who are buying the metal hand-over fist, at least when it comes to gold eagles. Here’s a chart I made using US mint data …

The red line is last year’s gold eagle sales month by month, the blue line is this year’s gold eagle sales. The most recent data on the US Mint’s web site shows 196,500 ounces have been sold so far in April, nearly TEN TIMES the 20,000 sold in the same month a year ago. What’s more, the US Mint recently suspended sales of its one-tenth ounce American Eagle gold bullion coins as surging demand overwhelmed supply.

Meanwhile, other countries – China, India, Japan – are seeing tremendous buying interest on the consumer level.

My question: Will consumer demand overwhelm institutional selling? Who wins in this battle, and who is left with regrets?

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How Long Could an S&P 500 Correction Last?

by Sean Brodrick on April 18, 2013

It’s been a crappy week for many reasons (thank you, The Onion, for stating the obvious). And with the major stock indices looking more wobbly all the time, investors are wondering if they should sell and sit it out, or stick around to see if this is just a minor pullback.

Here’s a chart of S&P 500 action since the last major market pullback in 2011 …

The major uptrend is obvious, as is the pullbacks the S&P 500 has experienced. Those pullbacks have been as short as four weeks, and three times were 9 weeks long. The pullbacks aren’t that deep, and they’re great set-ups for the next rallies.

Now, here’s what you have to wonder …

Will the broad market pull back at all? This current leg looks a little long in the tooth, but shorts have gone broke making that bet before.
Would a pullback follow the previous pattern? That would be a best-case scenario for the bulls, because they’d get great set-ups into stocks they’ve wanted to buy more cheaply anyway.
Would this be the beginning of a bigger, deeper correction? If so, all bets are off.

Just something to keep in mind. And if you’re interested in bull markets, take a look at natural gas.

Asian Consumers Catch Gold Fever

by Sean Brodrick on April 17, 2013

The drop in gold prices is bringing out the bargain hunters, at least in the areas of the world where people know that gold has real value. Three examples …

“People are actually buying everything, gold bars, gold coins. People are rushing to get a hand on it. We have a problem meeting the demand because we are unable to get new supply,” said Brian Lan, managing director of GoldSilver Central in Singapore.

“There’s a huge backlog. It’s the same for silver. So far sentiment seems to be improving. Even the price has more or less stabilized,” Lan said.

(link)

Gold sales from Australia’s Perth Mint, which refines nearly all of the nation’s bullion, surged after prices plunged, adding to signs that gold’s slump to a two-year low is spurring increased demand.

“The volume of business that we’re putting through is way in excess of double what we did last week,” Treasurer Nigel Moffatt said by phone, without giving precise figures. “There’s been people running through the gate.”

(link)

“It has been very hectic in the last two days,” said Deepak Tulsiani, owner of Dwarkadas Chandumal Jewellers in Mumbai as he surveyed his 11 employees, who were busy with customers. “There has been a rush to buy gold because now people are getting jewelry 15 percent cheaper than before. It’s value for their money.”

Zaveri Bazaar, the largest bullion market in the country, buzzed with customers, who were browsing through collections of bangles, bracelets, necklaces and rings displayed in trays ahead of the wedding and festival seasons. Most buyers were women in groups of two or more, accompanied by a male who paid the bills.

(Link)

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