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I'll Be Buying Gold and Gold Miners SoonBy
Thursday, August 6, 2015
Now is a great time...
Nobody is expecting a crisis (similar to the one Greece just had) in the U.S., so the prices of classic "hard assets" – like gold and gold miners – are attractively priced today.
The price of gold – astonishingly – is at a five-year low. Compare that with stocks, which have run up for six consecutive years.
And gold is HATED today. According to my friend Jason Goepfert (who runs SentimenTrader.com), gold sentiment today is lower than it was in February 2001 – when gold was around $260 an ounce.
Longtime DailyWealth readers know we like to buy what is CHEAP and HATED. Right now, gold ticks both of those boxes.
However, I'm not heavily buying gold just yet. Let me explain...
For me to get really interested in an investment, I also want to see an UPTREND in place. (Cheap, hated, and in the start of an uptrend – that's my investing mantra.) With gold at a five-year low right now, we don't have an uptrend.
So even though gold is cheap and hated – and even though gold is THE great crisis hedge throughout history – I'm not heavily buying the metal yet.
And if you think the situation in gold is bad, then you ought to take a look at mining companies...
"Prices of many mining companies have fallen by over 90%," my friend and successful natural resources financier Jeff Phillips reminded me over lunch this month in San Diego.
Jeff is using the massive bust in small-cap mining companies as a buying opportunity...
"I don't know if the new bull market in resources starts six months or 12 months from now," he said. "But the prices right now for quality assets are incredible. You don't have to buy lower-quality assets that are cheap... Why do that when you can buy high-quality companies at great prices today? I'm buying."
Junior gold-mining companies are down 85% as a group in less than five years – as measured by the performance of the Market Vectors Junior Gold Miners Fund (GDXJ) – which holds a basket of small-cap gold miners.
Smaller mining stocks are definitely CHEAP and HATED today. But like gold, we don't have an uptrend yet – so we don't have our green light to buy.
Prices are cheap, but they could continue to get cheaper. We don't want to try to "catch a falling knife."
Don't worry, you won't miss it. There will be plenty of upside potential when the trend starts moving upward.
The great part about holding gold and gold miners is that your downside risk will be limited. With gold at a five-year low and the shares of mining companies down by 85%, you will hardly be buying at the top when the time comes!
The general consensus is that there is no crisis on the horizon in the U.S. I don't expect a crisis soon, but it is possible eventually. And because no one sees it coming, the cost of protecting yourself today is cheap.
Once the uptrend kicks in, I suggest you buy these "crisis hedges" heavily.
Good investing,
Steve
Further Reading:
Dr. David "Doc" Eifrig has shown readers how powerful it can be to hold "chaos hedges" – like gold – in your portfolio... "When investors get nervous about bad economic news... debt crises in Europe... and the specter of runaway inflation in the United States," he writes, "stocks fall, and gold and silver rise." Learn how Doc protects his wealth with precious metals here and here.
In this must-read essay, Dan Ferris explains how owning physical gold and silver preserves the purchasing power of your wealth. The Fed is "an imbecile with a hammer. The hammer is money-printing, and every economic problem is a nail. So you should always own gold..."
Market NotesTHE TREND IS STILL UP FOR THIS ELITE MEDICAL STOCK The health care industry is booming... and today, we turn to the World Dominator of needles and syringes for the latest proof.
Regular readers are familiar with Dr. David Eifrig's long-term bullish stance on health care stocks. Aging Baby Boomers will keep demand high for all types of medical products and services. Last month, we showed readers how this trend is playing out with pharmacies CVS and Walgreens. Another company that has benefited from this trend is medical-device maker Becton Dickinson (BDX).
Becton Dickinson is the No. 1 player in its industry. It makes everything from syringes and diabetes-care products to catheters and medical disposal systems. Odds are you've come into contact with the company's products dozens of times in your life and never realized it. And BDX's medical supplies will continue to have constant, strong demand (it's unlikely people will stop getting sick and going to the hospital).
The company is also a fantastic dividend-payer, having raised its dividend for more than 40 years in a row. And as you can see from the chart below, shares are in a long-term uptrend and have soared as of late. The stock is up 100%-plus over the last three years... and yesterday, shares struck a new all-time high. We don't see this trend slowing down any time soon...
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