Innovators and Creators of Capital: Giving Thanks

0
  • percent; Taiwan gained 1.05 percent and the KOSPI rose 0.81 percent.
  • The 10-year Treasury bond yield fell fourteen two basis points to 2.17 percent.

Gold-Game-Film - U.S. Global Investors

Domestic Equity Market

The S&P 500 Index was positive again this week, rising 0.20 percent and closing at an all-time high. The market has maintained a steady growth and recovery pace, spurred by global central bank actions and relatively positive sentiment.

S&P 500 Economic Sectors
click to enlarge

Q2 Hedge Funds Resource Page Now LIVE!!! Lives, Conferences, Slides And More [UPDATED 7/6 22:21 EST]

Q2 Hedge Funds Resource PageSimply click the menu below to perform sorting functions. This page was just created on 7/1/2020 we will be updating it on a very frequent basis over the next three months (usually at LEAST daily), please come back or bookmark the page. As always we REALLY really appreciate legal letters and tips on hedge funds Read More


Strengths

  • The consumer discretion sector was on top, up 2.39 percent. Time Warner led the group, up 6.33 percent, followed by Carnival, up 6.23 percent. Another top performer was TJX Companies, up over 4 percent. This sector was driven by the fall in energy prices, which will leave the average consumer with more disposable income.
  • The information technology sector was the second-best performing sector, up 2.05 percent. This group was led by Analog Devices, up 5.79 percent, which released positive earnings that helped other blue chip stocks outperform.
  • The best performing company this week was Southwest Airlines, up 9.99 percent. Airlines benefit massively with the decline in fuel costs and increase in discretionary spending.

Weaknesses

  • The energy sector was the worst performer this week, hindered by names such as Diamond Offshore Drilling, down 20.94 percent, and QEP Resources, down 19.31 percent. Both of these names—and, in fact, the whole sector—were affected by the Organization of the Petroleum Exporting Countries’ (OPEC’s) refusal to cut production, which sent oil prices below $70 a barrel for the first time since 2010.
  • Another area of weakness was materials, which closed down 3.13 percent. It was dragged down by LyondellBasell, which fell 13.53 percent on the drop in oil prices. LyondellBasell uses cheap U.S. natural gas liquids to produce ethylene, which is at risk as wells become economically unviable.
  • The worst performing company this week was Newfield Exploration, which fell 22.47 percent as the company missed expectations on both top and bottom lines.

Opportunities

  • Global airlines have greatly benefited both from falling fuel costs and an increase in travel demands. There is a growing amount of disposable income to the consumer. This could stay strong for the next few months as oil historically hits a bottom in February.
  • Next week a few important economic data points are released, such as construction spending, manufacturing, factory orders and unemployment.
  • In light of OPEC’s decision to maintain current production levels, we can see opportunity in the consumer discretionary sector, which was already expected to have one of the best holiday seasons of recent times.

Threats

  • Following OPEC’s meeting, U.S. energy producers with weak balance sheets or companies which are regionally exposed to higher production costs will be in danger of insolvency.
  • Many industries have benefited from the increased economic activity from U.S. energy growth, such as railroads, sand, pipelines and construction. Also, new home and car sales in many regions have grown with the increase in wealth. This could be negatively impacted by a fall in oil, and therefore temporary loss of jobs as uneconomic wells close down.
  • With conflict in Ukraine on the rise again, and Russia overstating its available cash reserves, the instability of their economy has the potential for a domino effect.

Short-Term, Tax Free, NEARX, Near-Term Tax Free Fund

The Economy and Bond Market

U.S. Treasury bond yields were lower this week, primarily driven by lower oil prices, fears of slowing global growth and the threat of deflation. Economic data in the U.S. was mixed but inflation in Europe continues to slow. The lack of action from OPEC to reduce oil supply focused investors’ concerns on the threat of deflation in Europe. Speculation began to build that further European Central Bank (ECB) easing steps could come as early as next week.

Two-Year Treasury
click to enlarge

Strengths

  • Bonds rallied this week as global growth concerns mount and the 10-year Treasury yield hit the lowest level since the mini-crisis scare that occurred in mid-October.
  • New home sales rose 0.7 percent in October and reached the highest level since June 2013.
  • The German Ifo Institute Index increased for the first time in seven months. We are getting tentative signs of economic stabilization in Germany, which is a key barometer for the rest of Europe.

Weaknesses

  • Durable goods orders excluding transportation unexpectedly fell 0.9 percent in October.
  • The Consumer Confidence Index experienced a surprising drop in November, raising questions about the holiday selling season.
  • WTI oil prices fell by more than 12 percent this week as OPEC declined to take action to reduce supply. This fall in oil prices is signaling a growth scare for the global economy as falling demand is the culprit behind the declines.

Opportunities

  • Euro-area inflation has slowed to just 0.3 percent year-over-year and the ECB could act as soon as next week. An ECB official mentioned that full-blown sovereign debt quantitative easing (QE) could begin in the first quarter of 2015.
  • With both the ISM Manufacturing Index and nonfarm payrolls out next week, any disappointment could be the next positive catalyst for the market.
  • Municipal bonds continue to look like an attractive alternative in the broad, fixed-income universe.

Threats

  • The post-Thanksgiving shopping season appears to be off to a strong start. With falling oil prices and more money in people’s pockets this could be a robust holiday season.
  • Stronger-than-expected economic data next week could slow down the recent bond rally.
  • The geopolitical situation remains unusually fluid and could take a negative turn.

Managing Expectations: Anticipate Before You Participate in the Market. Download Our Free Whitepaper!

Gold Market

For the week, spot gold closed at $1,168.74 down $32.81 per ounce, or 2.73 percent. Gold stocks, as measured by the NYSE Arca Gold Miners Index, fell 6.70 percent. The U.S. Trade-Weighted Dollar Index slipped 0.05 percent for the week.

Date Event Survey Actual Prior
Nov 25 US GDP Annualized QoQ 3.3% 3.9% 3.5%
Nov 26 US Durable Goods Orders -0.7% -0.4% -1.3%
Nov 26 US New Home Sales 471K 458K 467K
Nov 27 Germany CPI YoY 0.6% 0.6% 0.8%
Nov 28 Eurozone CPI Core YoY 0.7% 0.7% 0.7%
Nov 30 HSBC China Manufacturing PMI 50.0 50.0
Dec 01 US ISM Manufacturing 57.9 59.0
Dec 03 US ADP Employment Change 221K 230K
Dec 04 ECB Main Refinancing Rate 0.050% 0.050%
Dec 04 US Initial Jobless Claims 225K 214K

Strengths

  • India imported 102 tonnes of gold between November 1 and November 15, just 48 tonnes shy of its total imports for the entire month of October. This data reveals a robust physical demand for gold in the country. Furthermore, India is looking to remove its 80/20 rule this week in order to free up gold flows into the country while eliminating distortions in the flows.
  • Central banks have been under pressure in Europe to account for gold held abroad. The latest news comes from France, where Governor of the Bank of France M. Christian Noyer has been asked to comprehensively audit the nation’s gold reserves. Likewise, the Netherlands repatriated some of its gold in order to restore confidence in the central bank. The increase in proprietary holding of gold by central banks is positive for global gold demand.
  • The Swiss will vote on the “Save Our Swiss Gold” referendum on November 30. While the central bank has opposed the measure, which would require the bank to hold at least 20 percent of its reserves in gold domestically, considerable support exists. The central bank argues against the referendum on the grounds that gold is a volatile asset. However, equities and bonds are as well, especially in recent years. When the country’s currency was backed by a minimum of 40 percent gold, the central bank was still able to function properly, not like the hedge fund model that so many central banks employ today. If passed, the referendum should boost gold demand.

Weaknesses

  • Four companies, including Goldman Sachs Group Inc. and HSBC Holdings PLC, are being sued over claims that they conspired for eight years to manipulate precious metals prices. The lawsuits join the club of numerous other attacks on financial companies.
  • Around 500 protesters blocking a main highway in South Africa were fired upon with rubber bullets by the police this week. The protesters claimed to be demonstrating about the granting of mining rights to billionaire Robert Friedland’s Ivanhoe Mines.
  • Chow Tai Fook Jewellery Group, a major jewelry retailer in Hong Kong, reported a decline in profit of 23 percent for the six months ending September. Sales of gold products accounted for a significant part of the decline, falling 41 percent.

Opportunities

Are-We-Close-to-the-End-of-the-Correction
click to enlarge

  • The chart above shows the profit margin of Klondex Mines versus a peer group of other gold miners. On the vertical scale plotted against the valuation, enterprise value, is assigned by the market for a given revenue base.  In the case of Klondex Mines, its revenue of $33 million for the third quarter was slightly less than Argonaut Gold and Alamos Gold with $37 million and $39 million, respectively, however Klondex’s value is $175 million while Argonaut and Alamos sport enterprise