In the following excerpts from this week's interviews on the Financial Sense Newshour, Jeffrey Saut discusses his 2014 outlook for the stock market, Frank Holmes offers his recommendations on the safest way to play gold stocks, Alex Daley discusses game-changers in the technology space, and Jim Puplava addresses whether we're in a stock market bubble.
I think the economy is picking up steam here. I think we’re going to be nudging 3% GDP growth and maybe a little better than that by the end of next year. And the history of years following 20% up-years for the S&P 500 is pretty consistent. So I’m not looking for a year like we had in 2013 but the Fed is going to expand its balance sheet by another 12% even with the tapering announcement; and there’s a pretty tight correlation, or R-squared, since 2009 with an expansion in the Fed’s balance sheet and the rate of return in the equity markets; overlaying that is about a 12-13% anticipated increase in earnings from roughly $107/share for the S&P in 2013 to $122 in 2014. So, I think it’s reasonable to expect a 10-12% total return in the S&P this year even though we’re probably going to get some kind of pullback along the way... (Click here to listen)
For those investors who say I don’t want to go out and buy a mutual fund, I just want to buy stocks—I think you have to be very careful in that universe because so many factors can change. But if you want a sort of simple model I would go buy a basket of Franco-Nevada, Royal Gold, and Silver Wheaton. These companies have royalties on most of the world’s gold and silver production; they have huge profit margins. You buy a basket of them and you’ll get the same momentum and beta as gold—up or down—but you have less risk in the downdrafts with these stocks purely because of their capital market structure. They have little employees; they get nice-clean royalties off the top, and I think that’s the safest way to go in picking these stocks... (Click here to listen)
There’s a couple of really big ones on the horizon that I think are just sort of peaking their heads above the market. One of them is intelligent systems, which splits into two different categories. One they generally refer to as Big Data; effectively, the ability to mine all the data that’s being collected about individuals, businesses and their behaviors and use that to provide a better experience to maybe tailor advertising to someone’s past behaviors… That same intelligence can be applied to mechanical systems too…nowadays the number of sensors that are out there, the software that’s available, just the community alone that’s hacking these…little analog to digital conversion boards that let you take inputs from the real world, digitize them into a computer and then take actions based on that. Boards are $40 each, $30 each. People are putting together smart systems. Just this morning someone sent me a video of a homebuilt automated snowplow. No longer need to go out with a snow shovel—just open your garage press a button and this thing and plows your entire yard for you. That kind of smarts is now available at a commodity level and is changing everything from shop floors, warehouses, farming, healthcare even with the delivery of medications in hospitals by robots—there are all kinds of really fascinating changes and, frankly, big ethical and societal concerns that are going to come out of it... (Click here to listen)
One of things you need to know is that a stock market and an economy can handle crises that erupt out of nowhere when the economy is growing. It’s much harder to handle a crisis when you’re in a recession. And, right now, eight of the thirteen leading economic indicators we follow are heading up—which tells me the economy is picking up steam—two are flat, and only three are down. Secondly, we have monetary policy that is still stimulative. Even though the Fed may be pulling back on tapering, they’re still saying we’re going to keep interest rates at zero for at least to the middle of 2015, and maybe even longer. Third, we are going to see less fiscal drag from Washington this year and so that should make for a healthier environment. What does this mean for investments? As I’ve mentioned, I don’t think we’re in bubble territory yet when it comes to the stock market, but stocks aren’t necessarily cheap. Thus, when stocks are higher priced as they are today—obviously they’re not as cheap as they were in 2009—what it means is, you have to look for value. Right now, those areas, I believe, are Technology, Financials, Energy, and Industrials... (Click here to listen)
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