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The weather has been miserable all week long.
Every day, I found myself waking up and staring outside the window to see nothing but grey skies and dark rain clouds.
The markets have been turbulent to say the least. We knew the markets were due for a correction at some point. But this week the markets showed us once again who was boss. The Dow dropped 268 points on Thursday, dipping below 10,000 and giving us the worst one-day decline we have had since April 2009. Every major exchange around the world saw red.
Friday was no different. I woke up and looked outside my window only to see those same dark clouds and grey skies casting their shadow. My friend had called me the night before for a round of golf but I turned him down because I knew the weather would suck. I was right.
I got out of bed and went straight to my computer.
Then it hit me. Déjà vu.
All I could see were headlines of European economic problems and sharp red arrows flashing across my screen. It felt like 2009 all over again and it reminded me that the markets are still as volatile as they were in the credit crunch days. The Dow was down below the benchmark 10,000 now. Things were not looking good.
So I threw a bunch of low ball bids for stocks in hopes that the markets would bounce back after such a sharp decline – as they had in 2009. After that, I could no longer stare at the markets anymore. I decided to turn my computer off, run a few errands, and get ready to head downtown for my meeting with Bob and Jim (names are fictitious to conceal next week’s cover story).
But before I could leave, I looked out the window and the weather was beginning to change. A small glimmer of light busted through the clouds and the grey skies were almost gone. In a matter of moments, the grey sky and rain clouds had completely disappeared.
I put my sunglasses on and proceeded to drive downtown. Halfway there, my blackberry beeps:
“You should have come golfing…the weather is great.”
Thanks. It’s always great to have friends who like to rub it in your face. But the truth is, even if the weather was good, I would have been in no mood for golf. The markets were taking a turn for the worst and part of me felt like I was experiencing the credit crunch all over again.
Finally, I arrived at my meeting. The markets were now closed and still I decided I wasn’t going to look at what happened. I held in blind faith that the red arrows I saw would change colour. Then Jim walks
“Hey, did you see? We closed up 10 points…”
A sigh of relief shot up my spine. The markets had once again, gone from horrible to not so bad. A swing of 177 points in the last hour of trading.
Like the weather, the markets had done a complete one-eighty.
It was a return to the unusual relationships seen at major flash points over the past two years when investors fled risky assets and jumped into safe havens, such as gold. This market behaviour, which has reasserted itself repeatedly since the financial crisis began, suggests that investors still have no clue where we are and that the governments have done little to ease our worries.
One of friend over at Trimtabs Investment Research, Charles Biderman, has been publicly stating that there may be a possible role by the government to infuse cash into our markets. Perhaps this past Friday the Government knew we couldn’t fall back below 10,000 or market sentiment would be crushed. Just a thought…
Luckily, things are different.
This time there has been no sign of a financial-market panic. The risk of Greece or other European nations defaulting was probably more of a correctional reminder than an actual financial collapse.
As mentioned in our last newsletter (see a Clear and Present Danger), China has started implementing measures to ease growth to deter inflation. The Federal Reserve is also planning to end its extraordinary liquidity measures soon. The recent market reaction to these developments suggests doubt that the economy will be strong enough on its own to merit the strong rally in risky financial assets that government intervention sparked last year.
Sure the US Government is spending money on what they believe is helping the economy. But that is exactly what is going to rewrite history and our future. The era of big government has returned with a vengeance, in the form of the largest federal work force in modern history.
The Obama administration says the government will grow to 2.15 million employees this year, topping 2 million for the first time since President Clinton declared that “the era of big government is over.” The expansion could provide more ammunition to those arguing that the government is trying to do too much under President Obama.
The deficit is already at an all time high. Take a look at the US debt clock now which sits at well over $12,375,300,000,000 at the time of this writing (see here) and when we mentioned back on December 6th 2009 when it was at $12,080,600,000,000 (see The Impressive News Release).
That’s an increase of $300 billion in 2 months!
But regardless of the volatility of the markets, our stance remains bullish on the overall commodities and precious metals sector long term.
We have discussed the issues of inflation and the possibility of hyper inflation (see We’re Back and It’s Time to Prepare). We have shown you reports that give the outlook for commodities and gold given both a bearish and bullish scenario (see The Report That Shocked the World). This is why we are still confident in our views on the markets, despite the uncertainties.
A few weeks ago (see A Clear and Present Danger), we had asked our readers to send us information on companies they felt were undervalued. In our search, we came across a very unique situation that caught our attention.
This company wasn’t a near term producer nor did it have a significant 43-101 resource calculation. But after meeting with its extremely impressive management team and hearing their Cinderella story, it didn’t matter.
With the data this company has compiled over the last 5-7 years and over $17 million spent, it could be on the verge of a breakthrough that will transform their future forever.
Next week, we’re going to tell you who they are and why we have selected them as our next Featured Company in our Special Report Edition.
You don’t want to miss it.
Until next week,
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