In a recent landslide election, Republicans took back control of the Senate
and House. President Obama's approval rating is very low. Although there a
few making money in the stock market, the majority of the American people are
fed up with close to 100 million people not working. Welfare and entitlement
spending is out of control. The debt is still soaring close to $20 trillion
and the dollar is rising making it even harder for politicians and banks to
avoid default.
Somehow irrationally despite billions of dollars being printed under the guise
of QE, the US dollar is rising. The question is how long do you really believe
this dead cat bounce in the US dollar will last?
It may be just a bounce in a long term downtrend and is only relative to the
other fiat currencies in fast decline. Smart investors should be accumulating
gold and silver coins and high quality junior mining stocks trading now at
historic lows. It should be noted that coin sales are picking up especially
mint grade numismatics.
Avoid the large cap equities like the S&P500 (SPY) making a classic megaphone
top, US dollar (UUP) and long term treasuries (TLT) as these are markets overbought
and where the fundamentals do not justify the current valuation. I am very
concerned about the exuberance in banking and real estate as the numbers of
unemployed in America are still at record levels. Avoid "fairy tale" sectors
which try to say that Price Earning Ratios do not matter or that we are in
a new era which justifies obscene valuations.
The Middle East Arab Spring has turned into an Islamic Winter. Black swans
could still be on the horizon. Now the US is looking to team up with Iran to
fight ISIS and possibly ignoring the threat of Iran's nuclear ambitions. Russia
just stated What we are seeing with the rise of the dollar and decline in commodities
may be part of the war no longer fought with bullets and missiles but with
foreign exchange rates. The ruble is collapsing along with the Russian Economy.
China and Russia may begin to look to trade in Yuan to avoid the negative consequences
of currency wars.
Those with US dollars are able to purchase gold and silver at low prices despite
record demand. The US Mint is showing record sales. Many have asked how is
gold and silver going down in price when demand is at record levels? The only
answer is that some games are being played in the paper market. This week the
regulators just fined the major banks for manipulating exchange rates. Investors
may be just beginning to lose faith in the manipulated paper markets and are
just buying physical coins. Some numismatics such as Mint Grade Morgan and
Peace Silver dollars have had a nice rise this past year despite a decline
in gold (GLD) and silver (SLV) prices.
The junior gold miners (GDXJ) are hitting record volumes which indicates massive
capitulation. The bear may be getting exhausted. We know that bear markets
end in panic and many bail at the low. This time of the year the San Francisco
Resource Conference was a main gathering for junior mining investors for many
years. Now it is cancelled. This indicates to me that the public investor has
panicked out chasing the bull market in US large caps, the dollar and long
term treasuries.
When the retail investor is gone, the smart money accumulates. Don't rush,
there may be retests of this bottom and long term resource investors should
look to add to high quality position on weakness during this tax loss season.
Remember that bear market bottoms and tax loss selling season are some of the
best times to buy at a discounted price. In this resource bear market over
the past four years picking the winners has been challenging, but still I continue
to search for the juniors who are the winners. Learn more about these mining
trailblazers for free by clicking
here...
