Financial Sense Newshour
In his first Big Picture topic this week, “A Correction, Rotation, and then a Melt-Up” Jim looks at the market for the second half of 2013. Jim believes we will see a short and shallow correction, followed by a rotation into cyclical stocks as the Reflation Trade plays catch-up in the second half. The “Melt-Up” might occur late in the year if bonds start to sell off and cash floods into stocks from the bond market. Jim also answers your Q-Calls in this segment of the program.
Jim’s next Big Picture topic centers on Ben Bernanke’s testimony on Capitol Hill this week. His remarks seemed to cause some confusion in the financial markets. Bernanke said premature tightening would carry a substantial risk of ending the economic recovery, but didn’t really provide much detail on when or if the Fed would begin to withdraw stimulus. Jim reads the tea leaves and gives his analysis of the Fed’s exit strategy. In the next topic, “The Risk of Double Taxation” Jim discusses the latest Congressional hunt for more tax revenue, this time focusing on Apple and its hoard of overseas cash. Jim looks at the very high corporate tax rates in the US, and the valid reasons corporations are reluctant to repatriate overseas cash.
Let's take a closer look at Trina Solar Energy (TSL) and Claymore Global Solar Energy (TAN).
Jim is pleased to welcome back Marc Faber PhD, of Marc Faber Limited in Hong Kong. Marc and Jim discuss the current state of the gold market and that Marc is buying gold every month, which he is storing in Asia, not Switzerland or the US. Marc also emphasizes the importance of diversification, and how his assets are evenly divided among real estate, stocks, bonds and gold. He also notes that sadly most investors are always chasing performance, forcing them to usually buy high and sell low. While Marc mentions that currently there are more sellers than buyers in gold, he acknowledges that “something isn’t right in the gold market”. Marc and Jim also discuss the current strength of the US dollar.
Jim is pleased to welcome back Barry Bannister CFA, Managing Director at Stifel Nicolaus. Barry characterizes the first half of 2013 as recovery from a deflationary shock, with defensive stocks outperforming. He sees the second half of the year as a return of the “reflation trade”, with an emphasis on the energy, materials, industrials and technology sectors. Barry also discusses the many parallels between the depression-era policies of 1932-1937 and the current economic policies from 2009 -2013. He sees politicians repeating many of the same policy mistakes, and believes if the economy falters, it will be policy-driven, not from the economic fundamentals.
Jim welcomes back Ned Schmidt CFA, Publisher of The Value View Gold & The Agri-Food Value View Reports. Ned is very optimistic on gold. He also advises investors to ignore Wall Street, as he believes gold is currently funding the “carry trade”. He notes that Chinese imports of gold have doubled from a year ago. Ned also cites three key factors for his optimism. The first is the ratio between gold valuation and the stock market is the best since 2008. Secondly, he believes the bottom in the price of physical gold is in place. Lastly, Ned believes the next Federal Reserve chairperson, widely believed to be Janet Yellen, will make Ben Bernanke look conservative when it comes to money-printing.
Jim welcomes back Russell Napier, Consultant with CLSA Asia-Pacific Markets. Russell makes the case that faltering economic growth in the emerging markets, weaker commodity prices, a falling yen and strengthening dollar are warning signs of a deflationary shock ahead. Russell believes that the rally in developed-world equities will not last much longer as emerging market growth slows. He is bearish on gold shorter term, but bullish longer-term as both structural and cyclical forces turn in gold’s favor. Russell sees the current falling gold price as a sign that the global reflation is failing and we are nearing a deflationary shock.
This week Jim and Cathlyn discuss the situation of investors who would like to diversify an over-allocation in metals, but are waiting for the market to “recover” before they make any changes. Jim uses the case study of Thomas Leaderman to illustrate the costs of waiting for “the right time”.
Ryan Puplava does double duty this week, giving his technical analysis on the markets as well as his weekly Market Wrap-up. Technically, Ryan sees a cyclical rotation of stocks into what he refers to as The Taper Trade, and out of more defensive stocks such as health care and utilities.
The first Big Picture topic this week is “Game of Thrones - the Dollar vs. Gold”. Jim looks at the massive global currency debasement among central banks, and in that current game the dollar is king. Gold is in the background and not a major player.