Jon D. Markman
Now is the Season for Investing in Gold-mining Stocks
If you're not investing in gold-mining stocks now, you should be.
Why now?
Analysts at TIS Group reminded me last week that not only are gold-mining stocks very cheap now versus gold bullion, but this also happens to be the best time of the year to buy the stocks.
The gold miners' cycle usually bottoms in August and peaks in March, putting us just a bit after the start of the strong period.
That makes it buying season for gold-mining stocks.
Play Gold's Rise by Investing in Gold-Mining Stocks
The rise in gold miners during last year's buying season was fairly dramatic.
From Aug. 31 last year through the following 14 weeks, the Market Vectors ETF Trust(NYSE: GDX), which is comprised of the larger miners, was up 28%, while Market Vectors Junior Gold Miners(NYSE: GDXJ), comprised of smaller producers, was up 48%.
Members of my service captured a bunch of those gains. That was at a time when gold itself was up only 20%, but looking back that was when gold started its trajectory from $1,300 in November to almost $1,900 now.
Gold-mining stocks then went sideways in anticipation of the end of the U.S. Federal Reserve's second round of quantitative easing (QE2) at the end of June, but have now broken out again, as the accompanying chart shows.
Why would the miners improve?
How Greece's Debt Issues Are Becoming a Global "Black Hole"
The extremely volatile markets of late stem in part from news suggesting Greece's debt issues have made a default imminent – creating a global black hole that's sucking in a growing number of other economies with it.
Default fears intensified last Friday when European finance ministers announced they would delay a decision on whether or not Greece was eligible for its sixth tranche of bailout funds. Greece was scheduled to get the next $11 billion (8 billion euros) installment of its $152.6 billion (110 billion euros) aid package by the end of September, but now must wait at least until October.
European Union (EU) and International Monetary Fund (IMF) inspectors met with Greek Finance Minister Evangelos Venizelos last night to evaluate the country's progress with austerity measures. Greece agreed to reduce its deficit to 7.5% of gross domestic product (GDP) this year, and below 3% by 2014 in order to receive bailouts from the IMF and other euro nations.
But investors are afraid the country will run out of cash before a bailout decision is reached.
Greece may not be going down to a Trojan-level defeat in the next few days, or even weeks, but there is little doubt that the country cannot afford to remain harnessed to the euro. It faces almost certain default at this point, sad to say, which means that some big banks, shareholders and bondholders are going to suffer.
Perhaps those Eurozone critics who said that a currency union not backed by taxation or bond-issuing authority was a bad idea should have been heeded. Then countries like Greece would not have been encouraged into a currency union that's an ill-suited match for its unique economy, history and ambition.
Now the critics are being proven largely right, unfortunately.
The most dangerous thing is new evidence that the debt crisis continues to spread.
Looks like France is headed down the same path as Italy and Spain. According to a Bloomberg News story last week, France may need new austerity measures to avoid a bond sell-off and credit rating downgrade.
It seems that Nicolas Sarkozy is the new Silvio Berlusconi.
Mid-Cap Stocks Could Be Ready to Reverse Course
Mid-cap stocks were one of the hottest investments of the past year until recently.
That is clearly exemplified by the iShares S&P MidCap 400 Index (NYSE: IJH), which jarred investors by sinking 2.3% over the past three trading days. The exchange-traded fund (ETF) had shot up 33% in the 12 months prior.
But the good news is that a reversal could be in the making.
That is, the sharp decline of the past few days may have helped to set the right shoulder of an inverse "head-and-shoulders" pattern. This is a classic reversal pattern that tends to occur at the end of major declines. You can see for yourself on the accompanying chart.
New Products and Cheap Shares Mean It's Time to Buy Google Inc. (Nasdaq: GOOG)
Google Inc. (Nasdaq: GOOG) has fumbled some moneymaking initiatives over the past six months, but now it's time I give them credit.
The company finally appears to be on the path toward shaping up its many facets, giving advertisers more reason to promote on the network – and putting more money in Google's fat pockets.
It helps when a company is challenged by a fierce rival or two, and right now Google's getting a motivating push from Facebook Inc. and Microsoft Corp. (Nasdaq: MSFT). I am particularly impressed with Google Plus (Google+), the search giant's new attack on Facebook. It is a rethink of the social web that looks like it could actually gain traction in coming months and years.
There is a huge opportunity in the social web for people who don't quite get Facebook, which is a large percentage of the population over age 25. For my teenage kids, Facebook practically is the Internet. They do all their messaging, e-mailing and photo-sharing there in one great big group hug; what's made available to one friend is made available to all.
But there are hordes of people who would never want to share their lives with all their friends, and compartmentalize their lives between work, neighborhood, old high school buddies and the like. For them, the social media team at Google+ has created the concept of "circles," which allows you to share some photos and links with one group of friends to the exclusion of others. And all of your Google contacts can easily be interwoven into a larger conversation in a way that escapes the confines of instant messaging or e-mail.
What the Future Holds for U.S. Stocks in Light of the Fed’s Failings
Major U.S. stocks were under pressure during most of the past week as new worries about Eurozone sovereign debt and a disastrous press conference by U.S. Federal Reserve Chairman Ben Bernanke corroded confidence.
This time, it was not just Greece that was pushing sellers' hot button, but also Italy, as the Mediterranean nation's banks are believed to have excessive exposure to troubled loans in the region. But at the center of the troubles was Bernanke, who looked helpless as an Econ 101 student in a master's class when asked by the media to explain why the economy was not improving as fast as expected.
On the plus side of the ledger this was a stronger-than-forecast increase in U.S. durable goods orders, some very upbeat inflation comments from China, and an improvement in German business confidence.
So where are we now?
Well, my premise at the start of the year was that you would not have to get too fancy to beat the broad market indexes, which are weighed down by troubles at the banks. The idea was you would not even have to get as fancy as picking the right world regions or sectors, like last year. Instead, you could put a large part of your portfolio in something as prosaic as the growth half of the S&P 400 Midcap Index – the iShares Midcap Growth Fund ETF(NYSE: IJK) fund – and let it ride.
That worked for my through mid-May, then it stopped out for a fat gain. Now it looks good to go again, as long as bulls man up and make a stand right here, right now.
Dow Jones Transportation Average Rolls to Record High
The biggest news of the week for me was the fantastic earnings report from railroad Norfolk Southern Corp. (NYSE: NSC), which pushed the Dow Jones Transportation Average to a new record high.
Think about that. New. All-Time. High. For the transports. The transports! When crude oil prices are pressing $112 a barrel. When the economy is limping along at an annualized growth rate of less than 2%. When the bears said we should be diving for cover.
The railroads have been killing it, and not just the likes of NSC, Union Pacific Corporation (NYSE: UNP) and CSX Corporation (NYSE: CSX). It's also the freight expeditors and truckers like C.H. Robinson Worldwide Inc. (Nasdaq: CHRW), Expeditors International of Washington (Nasdaq: EXPD), and Ryder System Inc.(NYSE: R).
For more about what a new high for the transports means, please read on…
Is Apple Inc. (Nasdaq: AAPL) Undervalued?
Apple Inc. (Nasdaq: AAPL) last year passed Microsoft Corp. (Nasdaq: MSFT) to become the largest technology company by market capitalization. Overall, it's now second only to Exxon MobilCorp. (NYSE: XOM) in size.
But shockingly, even at $323 billion, Apple still looks cheap.
After all, the company still sports a tiny 13-times forward earnings multiple.
Cisco Systems Inc. (Nasdaq: CSCO): The Story That Wall Street Missed
It was another good week for U.S. stocks, despite the whipsaw-trading that resulted from alternating good news/bad news/good news developments on the earnings and geopolitical fronts throughout the week. The Dow Jones Industrial Average rose 1.5% for the week, while the Standard & Poor's 500 Index advanced 1.4%. The tech-laden Nasdaq Composite Index only managed to edge up by 0.7%, having been held back by Cisco Systems Inc. (Nasdaq: CSCO).
Although the Nasdaq lagged its U.S. stock-market counterparts, the 0.7% advance it put together last week did follow a 1.5% advance the week before. What's more, the U.S. high-tech sector has actually been the third-best-performing sector so far this year, with a 7.75% year-to-date gain that trails only energy and industrials.
According to MarketWatch.com, of the 76 technology companies that are part of the S&P 500, 64 companies, or 84.2%, have reported their fourth-quarter earnings. The results: A total of 52, or 81.3%, have surprised to the upside. Four firms have reported earnings that were right in line with expectations. And eight, or 12.5%, have disappointed (surprised to the downside).
Cisco was the biggest of those disappointments. But there's a much bigger story here than meets the eye.
And perhaps a much bigger profit opportunity….
For a full analysis of the "story behind the story," please read on…
Netflix Inc. (Nasdaq: NFLX): The Red Envelope Gets the Green Light From Investors
Netflix Inc. (Nasdaq: NFLX) stock is up more than 300% over the past year, making it a surprise leader in the technology sector and a media darling. And while it may be overvalued, it should continue to perform well throughout the year.
I've long respected Netflix's business model. In fact, I've been a customer for several years now. However, the company's stock has suddenly become very controversial, as many analysts and fund managers think it overpriced and overhyped.
That case is certainly there to be made, considering Netflix has a Price/Earnings (P/E) ratio of about 72.5 – compared to 19 for Apple Inc. (Nasdaq: AAPL).
But here's the deal: Netflix reported a blow-out fourth quarter after the market closed last Wednesday.
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