Montreal Analyst

EUROPEAN MONETARY UNION GDP Story: A Fairy tale turned to horror story Once upon a time a considerable time ago there was a far off land called Europe that decided to form a more perfect union, but a still a less-than-perfect union, and blend its data together using an average weighted by GDP and population to express conditions within its borders. To this day many people still feel it is the right way to summarize conditions in this land of milk and honey. And if the milk in Germany is fresh but it is beyond its sell date in the rest of Europe on balance the large German weight might make it all seem fresh. But I don’t think buying soured milk from France would taste good in your coffee because German milk is so very up-to-date. Yet, that is the nature of data from Europe and impact of the rules prevailing in euroland…not to be confused with Euro-Disney but in fact quite confusable with euro-Disney because of the fun ride it has been giving investors recently…weeee! I want to go to Greek-land next, daddy!

THE STOCK MARKET IS IN A PERIOD OF EXCESSES SO INVEST IN WHAT IS UNDERVALUED NOT WHAT IS POPULAR.  Before I start, I want to emphasize that we are always invested in the market as we always find stocks that are undervalued……..many!  We may be bearish for many large caps that have performed well. But our view is that now is the time to take profits in some of them. But we always find numerous stocks that are undervalued and offer the potential for exceptional capital gains; Gold stocks are at the top of the list.

Robert A Brusca, PhD, Chief Economist FAO Economics, New York; Bob has been excellent in his views and forecasts for the world’s economies and the economy as well.  We pay close attention to his outlook which advises institutional investors. The following contains Bob’s very cautious economic outlook for this year.   

How Palos Passes Judgment on, Makes Assessments of, and Forecasts Stock Market Returns Over the short term, stock prices can from to time run far-away above or below fair value. However, over the fullness of time, price stability, economic growth and monetary policy are the three main fuels that propel stock market returns. In this connection, it is crucial, with the use of metrics, to numerically define what fair value is, and what constitutes price stability, causes economic growth and determines monetary policy.

A Long Way Off From Normalization The roles of interest rates are manifold. The crucial ones are:

  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.

Reprinted from Bull & Bear Financial Report VOL. 26 NO. 06 • Sept.-October 2014 By KC Grainger & Bob Pellerin* “True market makers are a thing of the past and this has a huge impact on the small cap mining stocks’ price movements…old support levels are not support anymore.” That is what I wrote eight years ago for the “Bull and Bear” and it still holds true.

I want to emphasize that we are not short sellers and we believe that investors should always be invested in the stock market. Our difference with the view of many others is that we believe that profits should be taken and at all times there are numerous stocks that have been hammered down in price and are quite undervalued that merit investment consideration. By the way, we are positive on gold mining stocks and hard asset stocks. We feel that we are in a bottoming formation in gold stocks; we like many of them as we feel the true bottom for gold is between $1200 to $1350. The downside risk in gold is far less than the downside risk in the industrial stock market.

We like  to study the charts of “value” indicators that show under valuation and over valuation. As you know,  the “value of US stocks to US Gross Domestic Product” is currently between 140% to 150%. In the past this level has led to market declines of 30% to 50% twice in the last 100 years.