View of the stock, gold and commodities markets..

 

THEY STILL DON’T GET IT: “Fewer workers are needed today IN MOST BUSINESSES.” Too many people just cannot understand this fact or refuse to accept it! I have written for six years that less people are required for the production of goods and services. Fewer people are needed in most industries today. More is done by less! The 1960’s term “replaced by a computer” is so true today. High technology and robotics have replaced people. No matter what industry we examine, less people are required for it to function-from underground mining operations to the floors of the stock exchanges. This will continue to have an enormous impact on employment levels. The point is that most people are not indispensable.

TECHNICAL ANALYSIS HAS BEEN TRUMPED BY NEAR ZERO RATES In the stock markets, technical analysis and cyclical analysis still suggest that we still could face an overall decline in the stock market of between 20% to 26% over the next year. It has been calling for those declines to be followed by moves up to occur for three years and they did not occur.  It did not occur in our view because of near zero interest rates which have provided tremendous support for the stock market. Keep in mind that is what our analysis suggests and has suggested, things could or should happen, they do not have to happen.

HAROLD AGJ DAVIS OF  PRAIRIECROPCHARTS.COM  IN WINNIPEG  does excellent technical analysis on commodities and his recent work suggests that gold and oil may need a bit more time to complete important price bottoms. Harold is awaiting technical signals; he also feels that many commodities are close to turning positive. He has to see the technical patterns confirm that bottoms have been completed. He does think that a major bottom in commodities is close.

LONG TERM CHARTS SUGGESTED: Using historical charts and cycles, the stock market should have suffered a harsh decline but it did not occur since we still have the backdrop that can prevent or at least delay a bear market which is: 1-No real rise in interest rates (still near zero rates at present!) 2-money supply growth is still adequate-not contracting. 3-The economy, though not strong, is still not becoming weaker. Those ingredients can support a respectable stock market performance and limit a bear market; but those ingredients may change.

GOLD AND GOLD STOCKS ARE STILL FINISHING THEIR MAJOR BOTTOMS Our analysis suggests that gold and many gold stocks have been finishing making major bottoms since the summer of 2013. We have seen obvious manipulation to keep gold prices down such as “midnight sales” of huge amounts of gold contracts in the futures markets-which is really paper sales-fiat money, not true bullion!

WHY CENTRAL BANKS LOVE THE WEAKNESS IN GOLD BULLION  Because they have been able to accumulate the gold bullion available for sale at lower prices, they take advantage of  the low prices to buy the gold.

DESPITE POTENTIAL BEAR MARKETS AND HARSH PRICE DECLINES: Our research and experience has always shown that the greatest buying opportunities are created when stocks are in their bear market cycles. No, it is not necessarily for trading stocks but for undervalued accumulation with the potential for exceptional capital gains. Stocks must be studied with in-depth fundamental analysis and concurrent insider buying or large insider ownership must be there! The amounts of common stocks that are incredibly cheap are as high as ever. The problem is that the major brokerage houses still follow and recommend their same limited universe of stocks and often drive them up well above proper valuation; that story will never change.

THE FEDERAL RESERVE DOES NOT WANT NOR CAN IT AFFORD A HARSH BEAR MARKET: The Federal Reserve Bank considers the stock market performance as a key factor of the economy. It knows that the economy cannot tolerate a bear market. Many US and Canadian pensions are underfunded and could be challenged to deliver the required payments to their pensioners. High interest rates and or a severe bear market in stocks could cause chaos.

THE FED MODEL: If we use the “Fed Model” for the 10 year T-note vis a vis the S&P 500, it still allows a move up of another 15%. But can the T-Note rate remain at such low levels?  We also do not believe the reported inflation numbers-we never did.

LARGE CAP STOCKS, INSIDER SELLING IS VERY HEAVY: Insiders, the officers and directors of the publicly traded corporations, two weeks ago saw over $500,000,000 of insider selling with only about $40,000,000 insider buying. Not a short term timing tool but a longer term warning of later declines.

CANADIAN JUNIOR MINING SHARES, AU CONTRAIRE, THEY HAVE A HEAVY AMOUNT OF INSIDER (OFFICERS AND DIRECTORS) BUYING: Their managements obviously believe that they are very undervalued. By any gauge that we use and have used in the past, they are exceptionally undervalued based upon their cash positions and the amount and the value of their in-ground assets. They are now carrying their lowest valuation levels in over twenty years. Large cap mining shares and mid-cap mining shares are carrying very low valuation levels also.

COMMODITIES CYCLE: Our analysis based upon population trends and economies suggests that the   weakness in many commodities’ prices is a “pit stop” that will change again. Historically speaking, a bullish cycle should have has more years to run on the upside. If it occurs, it would limit the upside for the major industrial stocks. Watch copper for clues.

GOLD’S PRICE DECLINE: Gold in the $1200 range? Note that the cost of production for many gold companies is approximately $1200 per ounce-and more. At today’s prices, production at many mines ceases and if you examine supply growth over the last ten years you can see that the supply available for purchase is rather limited. moreover, few large discoveries of gold have been made in the last ten years. The “cost of production” is the key element here so watch it. It can provide a valid bottom-we are there.

CANADIAN AND U.S. ECONOMIES: The economies still are grinding along and our business owners and workers still tell us that they do not see much economic strength or much improvement ahead. They need it, but do not see it happening. And yes, there are strong segments in the economy but unfortunately still too many weak segments. Fewer workers are required today to operate most businesses and governments; however, many economists and governments have not recognized that yet. The “Debt Monster “of governments, provinces, states and individuals is the frightening overhang.