Financial Sense Blog

I'd like to return to a theme we were discussing last week concerning our expectations for this year's upcoming 4-year cycle bottom. We touched on this in a recent commentary and we'll discuss it some more here. The theme I'd like to emphasize is that in years when the 4-year cycle bottoms (which always occurs in late September/early October) and the stock market takes a significant hit prior to the 4-year cycle time low, the bottom is in most cases made well before the late September/early October period and the market usually ends up outperforming for the rest of the year.

Gold remains on track (as far as our template). Here is the potential bullish outcome. The longer Gold holds above $1160 and that trendline, the more likely the bullish outcome.

A large part of Canada’s massive oil sands deposits could become one of the most “green” energies on the planet, by using electricity to heat up and break down the heavy oil. EEOR, or Electrically Enhanced Oil RecoverySM is a new technology being field tested in Saskatchewan by a Canadian junior producer, Deloro Resources.

I have to wonder, are we entering the ending phase of this cyclical bull? For some time now I've noticed the similarities between the '02-'07 cyclical bull and what we've experienced since March of last year. The one difference is that this time we've truncated the middle phase of the bull.

U.S. equities are called higher this morning after posting a strong gain on Wednesday and a follow-thorough rally last night. The stable Euro is contributing to the rally along with position squaring ahead of Friday’s U.S. Employment Report.

From the raising of the finance for a mine, to the start of gold production, takes around five years. That’s assuming there is a gold resource available to mine in a gold mining-supportive country of sufficient size to make the mine worthwhile. During the last 15 years of last century, support to such ventures from central banks through bullion banks was so strong that the mines would be loaned the gold they were going to produce.

Last week, we began to discuss this subject, sharing our views on the history and economic back drop for the past twenty years. If you missed it, you can go to www.guildinvestment.com for a copy of the letter. Over two decades ago, Japan fell into an economic malaise due to the deflating of a bubble in real estate and the restructuring of an extremely over-levered banking system. After twenty years, they are still in a malaise.

With the mainstream media focusing on the country's leveling unemployment rate, improving retail sales, and nascent housing recovery, one might think that the US government has successfully navigated the economy through recession and growth has returned. But I will argue that a look under the proverbial hood reveals a very different picture.

The problem isn’t that the US economy fell by $300 billion in real terms between 2007 and 2009. The more relevant issue for long-term investors is that the private economy fell by $1.3 trillion, even while total federal, state and local government spending rose by $1 trillion. “Crowding out” is an obscure term if you're not an economist – but this replacement of the private economy with government spending may end up being one of the largest determinants of your standard of living during retirement.

Some investors in the junior mining world talk about a summer effect – a decline in share prices over the quiet period while people are on summer vacation. In anticipation of that decline, they begin selling in May with the expectation that they will buy back in September. To a certain extent, Sell in May becomes a self-fulfilling prophecy. Last year, the TSX Venture Index dropped 10% by June, but was up 20% from the May level by early September.