3 Mining Stocks for Investors Seeking Gold Exposure

Wesdome gold mines up significantly in the last 12 months
click to enlarge

K92 Mining Inc.

Perhaps a less well-known name, K92 Mining is based in Vancouver and operates solely in Papua New Guinea. Ralph sums up why he likes the company: “I think K92 is another one that has a great deposit, high grade. The CEO spends time at the mine site. It’s off on the other side of the world, but he goes and spends a week there every month working, so it’s very much a hands-on management style.”

Strong management is an important factor for us when looking at companies. It’s one of our “5 Ms” for picking gold mining stocks: market capitalization, management, money, minerals and mine life cycle.

K92 has broken out so far in 2019 and could have further to go after reporting strong first quarter results. The company reported 19,125 gold ounces produced from its Kainantu mine in Papua New Guinea.

K92 Mining has broken out so far in 2019
click to enlarge

Wheaton Precious Metals Corp.

Although not technically mining stocks, royalty and streaming companies are a way to gain exposure to miners. These companies own streams on the production of precious metals, in exchange for helping finance the projects and providing upfront capital. One of our favorites is Wheaton Precious Metals Corp.

Wheaton Precious Metals CEO Randy Smallwood with USGI porfolio manager Ralph ALdis

In 2018 Wheaton faced a tax dispute with the Canada Revenue Agency (CRA) over income generated by foreign owned subsidiaries. The CRA claimed that the company owed back taxes and fines that could have been as high as $1 billion. Fortunately, an agreement was reached, and although Wheaton will face higher taxes, the company can now focus attention on operations and put the issue behind it.

Ralph is in close contact with much of senior management: “In fact, Chief Financial Officer Gary Brown was at our office in San Antonio a few weeks ago and explained to our team that the tax issue has been resolved, but that investors still haven’t woken up to the good news. That’s why we believe right now could be a good time to pick up this name before word spreads.”

Wheaton trades in both New York and Toronto, making it easier for investors to buy. The company focuses on silver – in addition to gold, copper and other metals – and currently has streaming agreements for 19 operating mines and nine development stage projects. We like to look at the price-to-book ratio, and based on that, Wheaton looks undervalued relative to some of its royalty and streaming peers, including Franco-Nevada Corp. and Royal Gold Inc.

Wheaton Precious Metals looks undervalued compared to peers
click to enlarge

A consolidation bug hit senior miners late last year and early this year. When Barrick Gold bought Randgold Resources, then Newmont merged with Goldcorp, many analysts suspected there would be a selloff of assets and a flood of acquisitions and deals in the small- and mid-cap producer space.

As Ralph puts it: “I do think a wave of consolidation is going to come because we know a lot of the seniors are going to try to spin assets off. That could create a lot of interesting opportunities for smaller mining companies.”

Interested in adding to your gold exposure through an actively-managed mutual fund? Learn more about the World Precious Minerals Fund (UNWPX)

As the U.S.-China trade spat drags on, so too could the stock market volatility that has accompanied it so far this month. The S&P 500 and Dow Jones Industrial Average both fell 2.4 percent on May 13 – their worst days since January. The longer trade negotiations remain ongoing, the longer the geopolitical and economic risks remain.

One potential hedge against volatility and market risk is having an allocation to gold, which has historically moved in the opposite direction of equities. I often recommend having a 10 percent portfolio weighting in the yellow metal – with 5 percent in physical gold and the other 5 percent in gold mining equities, mutual funds and ETFs.

Gold mining stocks have been down so far this year, but I believe this represents a buying opportunity. The NYSE Arca Gold Miners Index, which tracks a diversified blend of small-, mid- and large-cap miners, is down 9.22 percent for the 12 months ended May 13.

To get additional insight on miners, I spoke with our portfolio manager and gold expert Ralph Aldis. Ralph has over 30 years’ experience in the gold space, and together we manage two mutual funds focused on the yellow metal. Some of Ralph’s top gold mining stocks as of late are Wheaton Precious Metals, Wesdome Gold Mines and K92 Mining – all three of which we own in our junior and intermediate miner mutual fund, the World Precious Minerals Fund (UNWPX).

Wesdome Gold Mines Ltd.

One miner that we really like is Canadian-based Wesdome Gold Mines. Ralph describes the company as having “delivered both operating and drilling results very consistently” and being disciplined when it comes to raising money.

The company just reported strong first quarter results, including revenue of CA$32.5 million – a 24 percent increase from a year earlier. Plus, its gold production increased 6 percent from a year earlier to 19,010 ounces. Wesdome operates two gold mining operations in Ontario and Quebec and trades on the Toronto Stock Exchange under the ticker symbol WDO.

As you can see in the chart below, the company has seen massive growth in the last 12 months with a total return nearly exceeding 100 percent. We believe it’s a good candidate for a takeover by a larger miner due to its strong drilling results, competent management team and safe jurisdiction in Canada.

In fact, Wesdome was the top holding in UNWPX as of the most recent quarter end. View all fund holdings here.

click to enlarge

K92 Mining Inc.

Perhaps a less well-known name, K92 Mining is based in Vancouver and operates solely in Papua New Guinea. Ralph sums up why he likes the company: “I think K92 is another one that has a great deposit, high grade. The CEO spends time at the mine site. It’s off on the other side of the world, but he goes and spends a week there every month working, so it’s very much a hands-on management style.”

Strong management is an important factor for us …read more

How to Limit Your Exposure to the U.S.-China Trade War

world trade volume shrank in January 2019
click to enlarge

Time to Rotate Into Small-Cap and Mid-Cap Stocks?

A possible option could be small to mid-cap stocks, which are generally tied more closely to the domestic market than their blue-chip peers.

Not only are small and mid-caps more insulated from protectionist policies such as tariffs and stricter trade barriers, but they’re also supported by a stronger U.S. dollar. This week, the dollar tested its 52-week high, set in late April, and is currently trading above its 50-day and 200-day moving averages.

a strengthening U.S. dollar favors smaller, more domestic-focused companies
click to enlarge

A strong greenback acts as a headwind to multinationals that do a lot of exporting, the reason being that American goods and services become more expensive to international markets.

Conversely, a stronger dollar supports smaller but high-quality, dividend-paying firms whose revenues are more likely to come from inside the U.S. than overseas. Think companies like Pool Corporation, the Clorox Company, PetMed Express, Hawaiian Holdings and more—all of which were held in our

The U.S. economy is growing at one of the fastest rates in the developed world right now, and unemployment hit a nearly 50-year low of 3.6 percent in April. Under normal circumstances, this should boost demand for domestic equities. Some investors, however, are hesitant to participate due to escalating trade tensions between the U.S. and China, among other factors. The latest fund flows report from Morningstar shows that investor appetite for equities has declined so far this year in favor of asset classes that are perceived to have less risk, including government and municipal bonds.

What’s more, economic data points to a slowdown in parts of Europe and Asia. The Eurozone Manufacturing PMI registered a six-year low of 47.5 in March, while China’s manufacturing sector is expanding only marginally.

This is expected to impact large U.S.-based multinationals that do a significant percentage of their business overseas. (In 2017, Intel topped the list with foreign sales accounting for 80 percent of total sales, followed by food and beverage maker Mondelez (76 percent) and Coca-Cola (70 percent).)

Many investors may wonder, then, how they can get access to the robust U.S. economy and strengthening dollar while limiting their exposure to shrinking global trade and a potentially slowing economy outside of the U.S.

click to enlarge

Time to Rotate Into Small-Cap and Mid-Cap Stocks?

A possible option could be small to mid-cap stocks, which are generally tied more closely to the domestic market than their blue-chip peers.

Not only are small and mid-caps more insulated from protectionist policies such as tariffs and stricter trade barriers, but they’re also supported by a stronger U.S. dollar. This week, the dollar tested its 52-week high, set in late April, and is currently trading above its 50-day and 200-day moving averages.

click to enlarge

A strong greenback acts as a headwind to multinationals that do a lot of exporting, the reason being that American goods and services become more expensive to international markets.

Conversely, a stronger dollar supports smaller but high-quality, dividend-paying firms whose revenues are more likely to come from inside the U.S. than overseas. Think companies like Pool Corporation, the Clorox Company, PetMed Express, Hawaiian Holdings and more—all of which were held in our Holmes Macro Trends Fund (MEGAX) as of March 31.

A recent Wall Street Journal article supports this strategy.

“A resurgence in the dollar potentially bodes well for one group that has struggled to reclaim record territory after last year’s rout: small-cap stocks,” the article reads. It also adds that smaller companies likely stand to benefit from the Federal Reserve’s freeze on additional interest rate hikes.

We Believe Smaller Domestic Companies Look Undervalued

Indeed, small-cap stocks have not fully recovered from the market selloff in the fourth quarter, unlike S&P 500 companies. As of May 8, the Russell 2000 Index was still around 9 percent lower than its all-time high in late August. The S&P, meanwhile, rocketed back up to record levels before hitting resistance …read more

Copper Well Positioned to Lead the Next Resource Cycle

Ivanhoe Mines' high-grade Kamoa-Kakula copper project in the Democratic Republic of Congo

Summary

Ivanhoe’s high-grade Kamoa-Kakula copper mine to come online soon.
Once again, bitcoin won’t replace gold.
Peak gold is closer than you think.

The world is on a path to vast shortages in copper, nickel, lithium and other important minerals that are necessary to build the batteries in electric vehicles. So says Tesla’s global supply manager, according to Reuters.

The comment comes as the electric car maker broke ground in Shanghai for its first overseas “Gigafactory.” Tesla’s first battery factory, in Reno, Nevada—the largest in the world—is still in expansion mode and aims to produce as many as 105 gigawatt hours (GWh) of battery cells and 150 GWh of battery packs by next year.

All combined, that’s a lot of copper that will need to come down the pipeline very soon.

But some analysts now say that capacity isn’t quite there yet to feed global demand, and the industry could be running in deficit by 2021. Commodities analyst firm CRU Group expects copper supply to be short some 41,000 tons that year and 270,000 tons a couple of years later.

Meaning: We could be looking at another commodities super-cycle, with the red metal leading the way.

click to enlarge

“You’re going to need a telescope to see copper prices in 2021,” my friend Robert Friedland, billionaire founder and executive chairman of Ivanhoe Mines, told us last year during a visit to our office.

I had the opportunity to hear Robert speak last week at the Royal Bank of Canada (RBC), where he explained that investment in metals and mining must increase to meet the unique demands of the future. I also caught up with Ivanhoe executive vice chair Egizio Bianchini, who previously served as vice chair and co-head of metals and mining at BMO Capital Markets.

Robert and I are in agreement: The trend toward mass electrification—of everything from vehicles to renewable energy—favors copper, and investors might want to consider getting in now.

Ivanhoe remains my favorite way to get copper access. I own the stock personally. The Vancouver-based miner is nearing the start of production at its long-awaited, high-grade Kamoa-Kakula project in the Democratic Republic of Congo, which has recently gone through leadership change. Ore grades are off the charts. The Kamoa-Kakula deposit—“unquestionably the best copper development project in the world,” as Robert describes it—was fast-tracked after China’s CITIC Metal invested more than $450 million, or nearly $3 a share, late last month.

If fears of a bear market or economic recession are keeping you up at night, I think high-quality resource stocks like Ivanhoe are where you want to be because they’ve historically held up very well.

click to enlarge

I’m also heartened to hear that infrastructure might soon be moved to the top of the U.S. government’s priorities, which would be a boon to copper and other base metals. President Donald Trump recently met with Democratic congressional leaders and tentatively agreed to a $2 trillion infrastructure package to overhaul U.S. roads, highways, bridges, railroads and waterways. Where …read more

Hard Truths in Resource Investing, According to Bob Moriarty

Silver is dirt cheap relative to gold
click to enlarge

“All commodities deviate from the mean at times, and always regress to the mean,” Bob writes. “Prices naturally go up and naturally go down, but they always go back to the mean eventually.”

Chapter 14 of Basic Investing includes a helpful list of other tools and websites Bob uses on a regular basis to track commodity prices and trends, and to time his trades.

Hard truths, practical guidance, invaluable insight. It’s all there in Bob’s book, which, I should add, is also a delightful, often humorous read.

“The day you start thinking you are smarter than the market, you have made a giant mistake that will cost you dearly.”

“All debts get paid… They are paid either by the borrower or by the lender.”

“The mob is always wrong. All you have to do is figure out what they think and then do the opposite.”

“Listening to liars gets very expensive.”

I could keep going, but these are just some of the kernels of wisdom and hard truths I came across while reading Robert Moriarty’s latest book, Basic Investing in Resource Stocks: The Idiot’s Guide. I’ve known Bob for many years, and if there’s one thing he’s proven about himself time and again is that he doesn’t mince words.

Nor should he. Bob’s accomplished far too much in his life to worry about tiptoeing around the truth. Many people reading this right now probably know Bob best from his highly popular resource websites 321Gold and 321Energy. 321Gold, I should point out, has done a lot over the years to bring U.S. Global Investors to people’s attention, and I’m grateful to Bob for that.

Besides extreme contrarian resource investing, Bob also has a place in the history books as an aviator. Not only was he the youngest naval combat pilot, at 20 years old, during the Vietnam War, but he still holds the time record for flying from Paris to New York and back again, in 1981. Three years after that, he famously flew his Beechcraft Bonanza V35 under the Eiffel Tower.

But back to the book.

Beware of False Prophets

Perhaps what I admire most about Basic Investing is how refreshingly open it is. Again, Bob doesn’t mince words, and he’s more than willing to share what he describes as his own past errors so that readers might learn from them. (To be perfectly honest, though, the longer anyone spends in the capital markets, the more likely it is that he or she will make a bad bet or 10. No one gets it right all of the time.)

Just as he does in his 2016 bestseller Nobody Knows Anything, he makes the case that you should be skeptical of anything the “experts” and “gurus” tell you. Otherwise, you could get seriously burned. In Bob’s experience, that’s amounted to placing too much trust in a junior resource company’s management team, some of whom go on to squander the money they raised.

“If you find a company with a story so compelling, so bulletproof that it simply cannot fail, rest assured that the village idiot is right around the corner looking for a job,” he colorfully writes. “When you believe [the company] would work even if someone spent 24 hours a day, seven days a week trying to screw it up, you will find that the village idiot ends up running the company and puts in a lot of overtime.”

No Alternative to Gold and Precious Metals

Despite the risk of having to deal with the occasional ineffective or destructive CEO, Bob says, “investing in …read more

3 Things Driving Oil Prices Right Now

HIVE Blockchain Technologies trades closely with Ethereum
click to enlarge

And two, I take my role as interim CEO seriously. I believe that my fiduciary duties extend to all shareholders of HIVE, not just to Genesis. I seek and fight for good corporate governance. I manage conflicts of interest. And I demand transparency. These are qualities I admire in companies as chief investment officer of U.S. Global Investors.

Despite all this, I’m hopeful that a satisfactory resolution can be reached between the two parties, especially now as prices of digital currencies are stirring to life. In an exciting bit of news, bitcoin not only traded above $5,500 last week but also signaled a bullish “golden cross” for the first time since 2015. To read more, jump to the Blockchain and Cryptocurrency section by

We’ll get to talking about oil and energy in just a moment, but first I have something important to share with you all.

As many of you know, aside from being the chief executive of U.S. Global Investors, I also serve as the interim chairman and interim CEO of HIVE Blockchain Technologies, the first publicly listed company engaged in the mining of cryptocurrencies.

I’m incredibly honored to play a role in this emerging and very promising digital industry, and it’s a responsibility I take very seriously. The search for a new HIVE CEO is underway, but in the meantime, I’m committed to the company’s success, and I see no greater duty than fulfilling my fiduciary obligation to all shareholders equally. On top of all this, I haven’t taken a salary as interim CEO.

If you’ve studied corporate law, you might be familiar with duty of care and duty of loyalty, the twin pillars of fiduciary duty. Whereas the former charges officers and directors to act prudently, the latter says that they should refrain from benefiting themselves at the expense of the company they serve.

To me, that means insisting on good corporate governance and transparency. I expect that from not only HIVE’s own leaders but also those at Genesis, HIVE’s strategic partner and largest shareholder.
Sadly, Genesis seems not to be of the same mind.

I won’t rehash all of the grievances here. Those curious can read the press release.

Suffice to say, though, that ideologies clashed the weekend before last, of all weekends, when many families were celebrating Easter or Passover. After months of what I believed were good faith efforts to get Genesis to disclose all costs for mining operations—leading to a breach of contract we value at around $50 million, as per the master service agreement (MSA)—Genesis tried to “resolve” the dispute by removing all HIVE directors who were independent of Genesis’ self-interests, including myself, and replacing them with their own officers and employees.

Ultimately, this boardroom dispute failed.

So why am I sharing this with you? One, I wanted to give you some insight into why HIVE stock fell some 40 percent over two days this week. Before the selloff, HIVE had been tracking Ethereum and was up nearly 200 percent for 2019. As Warren Buffett might say, Mr. Market was none too pleased with Genesis’ actions.

click to enlarge

And two, I take my role as interim CEO seriously. I believe that my fiduciary duties extend to all shareholders of HIVE, not just to Genesis. I seek and fight for good corporate governance. I manage conflicts of interest. And I demand transparency. These are qualities I admire in companies as chief investment officer of U.S. Global Investors.

Despite all this, I’m hopeful that a satisfactory resolution can be reached between the two parties, especially now as prices of digital currencies are stirring to life. In an exciting bit of news, bitcoin not only traded above $5,500 last week but also signaled a bullish “golden cross” for the first …read more

Invest in Optimism: A Conversation With Keith Fitz-Gerald

becton, dickinson & co. (BD) vs. the market
click to enlarge

Lyft and Uber, on the other hand, may never be profitable according to their own documents and information. Last time I checked, hope was not a viable investment strategy.

I’m a simple guy. That’s one of the things that I learned from Mimi. If you can’t explain a product, a service or even a company to your grandmother, then maybe it’s too complicated or too risky.

I think it was Einstein who said that if you can’t explain something simply, you don’t understand it well enough.

That’s my understanding. Take Fitbit and GoPro. Those are great examples of nice-to-have companies. I use their products myself. They’re interesting devices, but they’re not must-haves.

Apple, on the other hand, is transitioning from a nice-to-have to a must-have because it’s getting into medical devices. It’s making a medical pivot, really. Imagine the profit potential when doctors begin prescribing Apple devices—something I think is a very real possibility within the next few years. That’s a real game changer.

Some analysts sounded the warning bell in March when the

If you’re as much a consumer of financial news as I am, chances are very good you’ve seen Keith Fitz-Gerald as a regular contributor on Fox Business, CNBC and elsewhere. That, or read his invaluable market commentary online.

Nothing beats catching him in person, though, and I highly advise you do so if you get the opportunity.

Part investment guru, part motivational speaker, Keith manages to make you feel as if you can conquer the world… and have a great time doing it. I’ve had the privilege of seeing him present a number of times before—most recently at Money Map Press’ Black Diamond Conference in Delray Beach, Florida—and I’m always in awe not just of his depth of market knowledge but also the amount of energy he brings to the table.

The longtime writer of the popular Money Map Report and High Velocity Profits newsletters, Keith was gracious enough to chat one-on-one with me recently. Below are highlights from our conversation, during which we touched on a number of topics ranging from portfolio construction to the similarities between investing and the martial arts.

You have a unique story about how you first got interested in investing. If I remember, it began with your grandmother.

Thanks for remembering! We all called her Mimi. She was widowed at a very young age and turned a small life insurance settlement into everything she needed to live out the rest of her life and then some. She became a global investor long before that term even existed. When I turned 15, Mimi didn’t give me the usual books or sweaters other teenagers might have received. Instead, she got me subscriptions to Value Line and Forbes, and every Sunday afternoon we would meet over martinis and ham sandwiches to talk about the markets.

Mimi wanted me to understand that the world was much bigger than my garage. Our discussions weren’t necessarily about investing, but about the companies, products and services that were changing the world I would inherit. We talked about how and why that mattered and, of course, how to invest in markets that would change dramatically during my investing lifetime.

She often used to say “Get out there and see it.” Mimi traveled all over the world as a means of vetting her investments and that’s a habit I’ve kept up to this day. Eventually, Mimi got so good at translating what she saw into investment ideas that the Merrill Lynch brokers she worked with used to call her and ask for her thoughts.

Mimi was an exceptionally bright and astute observer of the world around her. Yet, at the same time, she was a very humble person. I miss her today but have no doubt she’s out there watching the markets carefully and looking, as she always did, ahead for cues as to what’s next.

Hopefully, those are traits that I’ve picked up. I am a big believer in “boots on the ground” when it comes to exploring potential investments. I’ve traveled widely all over the planet over the …read more

The Hunger for Muni Bonds (And Gold!) Is Real

muni bond funds had their best quarter of ivnestor inflows since 2009
click to enlarge

According to Morningstar data, tax-free muni bonds saw more than $8.8 billion in net flows in the three months ended March 31, beating U.S. equity funds ($6.2 billion) and international equity funds ($1.3 billion). This tells me that investors were seeking stability as well as a strategy to counteract the changes to the tax code.

Investors Prefer Actively Managed Muni Bond Funds

Actively managed muni funds were more popular than passively managed funds, including ETFs. Active funds attracted $7.5 billion, more than five and a half times more than passive muni funds, which saw only $1.3 billion in net flows, according to Morningstar.

As I told you in a

Another Tax Day has come and gone. Although it might be some time before we get the full picture of what Americans earned and paid in taxes last year, it’s probably safe to assume that the top 1 percent of earners shouldered most of the U.S. tax burden.

In 2016, the most recent year of available data, the top 1 percent was responsible for over 37 percent of all income taxes. Compare that to the bottom 50 percent, which was responsible for about 3 percent of all taxes.

Of course, the highest earners also paid the highest average income tax rate of 26.9 percent, which is seven times more than the rate faced by the bottom 50 percent.

This was the first year that Americans paid taxes under President Donald Trump’s tax cuts. And yet many filers—especially those living in high income tax states such as New York, California and New Jersey—saw their payments rise significantly due to state and local tax (SALT) deductions being capped at $10,000.

This change has been a boon for municipal bonds, which are exempt from taxes not only at the federal level but also, in most cases, state and local levels.

Muni bond funds, in fact, just had their best quarter of inflows since 2009, as you can see below.

click to enlarge

According to Morningstar data, tax-free muni bonds saw more than $8.8 billion in net flows in the three months ended March 31, beating U.S. equity funds ($6.2 billion) and international equity funds ($1.3 billion). This tells me that investors were seeking stability as well as a strategy to counteract the changes to the tax code.

Investors Prefer Actively Managed Muni Bond Funds

Actively managed muni funds were more popular than passively managed funds, including ETFs. Active funds attracted $7.5 billion, more than five and a half times more than passive muni funds, which saw only $1.3 billion in net flows, according to Morningstar.

As I told you in a previous post, I think the reason investors prefer active muni funds is that they want a manager who knows how to conduct deep credit research, adjust for duration and monitor for risks and opportunities. You don’t get that with a passive fund.

Muni Supply Has Tightened

Trump’s tax law supports the outlook for muni demand in more ways than one. The supply of municipal debt has been restricted thanks to the elimination of a category known as “advanced refunding issues,” which in years past accounted for about a fifth of muni bond issuances annually.

Any casual student of economics knows that tighter supply, combined with increased demand, creates investment opportunities. And since the tax law went into effect in January 2018, muni bonds have outperformed both 10-year Treasuries and investment-grade corporate debt.

click to enlarge

On a final note, I should point out that munis have a history of doing well in late-cycle environments, which we seem to be in right now. This, along with flat issuance and stronger demand …read more

The Second Best Performing Asset Since 1999

Gold Had the Second Highest Annualized Returns for the 20-year period
click to enlarge

The S&P 500, by comparison, returned only 5.6 percent on an annualized basis, but that’s after it underwent

Last week the world got its first look ever at a black hole, one of those cosmic bodies so supermassive and powerful that not even light can escape its pull. These things literally destroy all matter that comes within their reach, making them the trash compactors of the universe.

Some of you reading this right now can probably point to a few investments you made over the years that had more in common with black holes than you would care to admit.

Gold, I’m happy to say, is not among those investments, despite all the negative press it sometimes gets. The evidence keeps rolling in that the yellow metal has historically been a wise investment. Because it has a negative correlation with the market, gold has helped investors diversify their portfolios and improve their risk-adjusted returns. Back in January, I shared several charts showing how the price of gold has beaten the market over several time periods, including the 21st century (so far).

Take a look at the chart below, using data released last week by JPMorgan. For the 20-year period ended December 31, 2018, gold as an asset class had the second best annualized returns at 7.7 percent. Only REITs (real estate investment trusts) did better at nearly 10 percent.

click to enlarge

The S&P 500, by comparison, returned only 5.6 percent on an annualized basis, but that’s after it underwent two huge pullbacks that greatly impacted performance. Bonds—which include Treasuries, government agency bonds, corporate bonds and more—came in next at 4.5 percent. Not bad, considering the asset class has lower overall volatility and risk than equities.

In last place is the “average investor” with a lackluster 1.9 percent.

Everyday Investors Have Lagged the Market by a Wide Margin

Surprised? You shouldn’t be. Quantitative analysis of investor behavior, conducted by research firm DALBUR, has shown time and again that everyday retail investors regularly lag the market, in good times and in bad, by an alarmingly wide margin. Last year they lost approximately 9.42 percent, or more than twice as much as the S&P did.

This is due mainly to bad timing. Instead of taking a buy-and-hold approach and riding out short-term volatility, many investors tend to sell at the absolute worst time. And that’s often after missing the rally and buying at the peak.

I shouldn’t have to tell you that this strategy, if it can be called that, is like a “black hole” for your money.

Don’t get me wrong. Trading can be fun and sometimes very profitable. But it’s not investing. If you insist on trading, I believe it’s still crucial to maintain a sizeable allocation in high-quality stocks and bonds, exercise discipline and allow your investment to compound over time.

And as always, I recommend the 10 Percent Golden Rule, which you can learn about by clicking here.

Ray Dalio Remains a True Believer in Gold

Ray Dalio, the world’s most profitable hedge fund manager, is a strong believer in the power of gold
Photo by:

What You Need to Know About Indonesia Ahead of Next Week's Election

Indonesian markets stuck in a holding pattern awaiting April 17 election
click to enlarge

I’ll share something else investors will really want to know about Indonesia—but first, a brief American history lesson. Don’t worry, it will all make sense.

The Economic Windfall of the U.S. Homestead Act

The Homestead Act is one of the most consequential pieces of legislation in U.S. history. Passed in 1862, the statute gave scores of families the once-in-a-lifetime opportunity to become proud owners of as many as 160 acres of federal land in Western territories.

Certain conditions had to be met first to receive a land title, but the beauty of the statute is that nearly anyone was eligible so long as they were willing to put in the work. U.S. citizens, immigrants and freed slaves all stood to benefit. Families who before had little or no assets suddenly found themselves with the financial independence so many had never known. For the first time, homesteaders gained access to banking and loans, as they could now put up their land as collateral.

Not only did the Homestead Act hasten the development of the American West, but it also ushered in the most productive agricultural economy the world had ever seen. The U.S. became a more attractive place for investors.

Today, an estimated 93 million Americans can trace their ancestries back to those original homesteaders.

So why am I telling you this?

Can Lightning Strike Twice in Indonesia?

I’m sharing this with you to draw a direct link to what’s currently happening in Indonesia. Under the leadership of President Widodo, the Southeast Asian country’s government is similarly in the process of distributing wealth to its people by certifying as many as 9 million hectares (ha) of public land. Indonesia is the fifth largest country by area in Asia, with massive natural resources—it has the

On Wednesday of next week, the world’s largest presidential election will be held. Voters in Indonesia will go to the polls to decide whether to give incumbent president Joko Widodo another five years, or elect former general Prabowo Subianto.

I think of Indonesia’s presidential election as the “world’s largest” for a couple of different reasons. One, voters are given the day off, which encourages higher turnout. In 2016, some 138 million Americans voted in the general election, compared to 193 million Indonesians who are expected to vote next week. That’s despite the Southeast Asian country having a smaller overall population than the U.S. to decide whether to give incumbent president Joko Widodo another five years, or elect former general Prabowo Subianto.

And two, Indonesians get a direct vote. Whereas the U.S. elects its presidents indirectly through the Electoral College, voters in Indonesia get to choose their presidents directly—one voter, one vote. to decide whether to give incumbent president Joko Widodo another five years, or elect former general Prabowo Subianto.

This effectively makes Indonesia one of the largest democratic countries in the world. to decide whether to give incumbent president Joko Widodo another five years, or elect former general Prabowo Subianto.

In the meantime, the Indonesian market has been in a holding pattern so far this year as investors await the election outcome.

click to enlarge

I’ll share something else investors will really want to know about Indonesia—but first, a brief American history lesson. Don’t worry, it will all make sense.

The Economic Windfall of the U.S. Homestead Act

The Homestead Act is one of the most consequential pieces of legislation in U.S. history. Passed in 1862, the statute gave scores of families the once-in-a-lifetime opportunity to become proud owners of as many as 160 acres of federal land in Western territories.

Certain conditions had to be met first to receive a land title, but the beauty of the statute is that nearly anyone was eligible so long as they were willing to put in the work. U.S. citizens, immigrants and freed slaves all stood to benefit. Families who before had little or no assets suddenly found themselves with the financial independence so many had never known. For the first time, homesteaders gained access to banking and loans, as they could now put up their land as collateral.

Not only did the Homestead Act hasten the development of the American West, but it also ushered in the most productive agricultural economy the world had ever seen. The U.S. became a more attractive place for investors.

Today, an estimated 93 million Americans can trace their ancestries back to those original homesteaders.

So why am I telling you this?

Can Lightning Strike Twice in Indonesia?

I’m sharing this with you to draw a direct link to what’s currently happening in Indonesia. Under the leadership of President Widodo, the Southeast Asian country’s government is similarly in the process of distributing wealth to its people by certifying as many as 9 million hectares (ha) of public land. Indonesia is …read more

What Ballooning Corporate Debt Means for Investors

Frank Homles speaking at the Money Map Press Black Diamond Conference in Delray Beach Florida

Last week I was in Delray Beach, Florida, where I presented at Money Map Press’ Black Diamond Conference.

What I love about this event, and others like it, is that it gives investors a chance not only to hear from their favorite newsletter writers but also speak with them face-to-face on a wide range of topics, from metals and mining to bitcoin and cannabis, and so much more. Among the most sought-after presenters this year were early-stage tech investor Michael Robinson, who I interviewed last year; Money Map Chief Investment Strategist Keith Fitz-Gerald; and Sprott CEO Rick Rule.

In case you didn’t get the chance to attend, I’ll be sure to cover the highlights in the coming days.

Right now I want to share with you the latest from Metals Focus. The London-based commodities research group just released the 2019 edition of its widely-read Gold Focus report, and the big news is that global gold demand will climb to its highest level in four years. The uptick is expected to be driven by an increase in jewelry fabrication, with India, China and Italy leading consumption higher.

click to enlarge

Interest in gold jewelry has indeed improved in recent years, a phenomenon we’ve noticed with the success of such companies as Menē. Late last year, Google inquiries for “gold jewelry” hit an 11-year high.

But there’s more to the story than the Love Trade. Metals Focus analysts see gold also benefiting from a more dovish Federal Reserve and fears of a global economic slowdown.

“We expect U.S. real gross domestic product (GDP) to slow in 2019 and 2020,” comments Metals Focus Director Nikos Kavalis. “This reflects a natural tapering, following two very strong years, the fading of windfall gains from the late-2017 tax reforms and, eventually, also the impact of trade wars on U.S. consumer spending.”

Are We Headed for Another Recession?

Few people know the risks in today’s economy and marketplace as much as David Rosenberg, chief economist and strategist at Canadian wealth management firm Gluskin Sheff & Associates. For years he’s educated investors with his popular “Breakfast with Dave” newsletter, which you can subscribe to here. He’s also a regular contributor to the Globe and Mail and the Financial Post.

Considered by many to be a Wall Street permabear, Rosenberg successfully predicted the 2007-2008 financial crisis.

Now he’s predicting another recession to make landfall as soon as the second half of this year. Why? In short, the Fed has been too aggressive tightening liquidity at a time when corporate debt is at an all-time high. What’s more, the Trump administration has already enacted fiscal stimulus in the form of tax reform, which has historically been reserved for times of economic turmoil, not expansion.

“How are we going to stimulate fiscal policy [in the event of a recession]?” he asked recently on CNBC’s Trading Nation. “We already did that at the peak of the cycle. We don’t have the fiscal ammunition.”

Corporate Debt Nearing Half of U.S. GDP

Rosenberg recently …read more

China's Factories Power On for the First Time in Four Months

Manufacturing Conditions Improved in China for First Time in Four Months
click to enlarge

The strong upward move likely reflects the outcome of a record $83 billion China’s central bank injected into the financial system back in January. At the time, policymakers also signaled they may cut rates this year if the stimulus doesn’t bear fruit.

So far, it seems to be helping the world’s second-largest economy come off a weak end to 2018. According to research firm China Beige Book, the country’s economy showed “an unmistakable first-quarter recovery,” with company borrowing at its highest level since mid-2013.

China A-Shares Nearing a 12-Month High on Trade Progress

Chinese stocks, as measured by the Shanghai Composite Index, climbed to a nine-month high last week and are currently up some 27 percent from their low in December 2018. On Friday, A-shares flashed a bullish sign by cracking their 200-week moving average for the first time since September 2014. In a report dated April 1, Evercore ISI analyst Rich Ross wrote that “a breakout above 3,200 will generate a bigger global cross asset buy signal.”

China Stocks Approaching a Key 3,200 Buy Signal
click to enlarge

The rally is being driven by not only the stimulus but also record foreign investment and MSCI’s acceleration of China’s A-shares weighting in its Emerging Markets Index, according to the Financial Times. The country’s non-financial sectors received an all-time high of 885.61 billion yuan ($131 billion) in foreign direct investment last year, with inflows growing 25 percent year-over-year in December alone.

Factory Expansion Continues Elsewhere

China wasn’t alone in expanding factory activity last month. Russia’s PMI rose from a neutral 50.1 in February to 52.8 in March, its highest level since January 2017. Business optimism dramatically improved as rates of output and new orders accelerated.

Russia PMI Picked Up to Highest Since January 2017 in March
click to enlarge

Here in the U.S., we saw an uptick in manufacturing growth in March, although at a slightly slower pace than in the previous month. A key factor behind the lower figure, according to IHS Markit, was a slower rise in output. “The rate of expansion eased to a marginal pace that was the weakest since June 2016 and below the series trend,” according to the monthly PMI report.

U.S. PMI Dropped to Lowest Since June 2017 as Price Pressures Moderated
click to enlarge

Input price inflation fell to its slowest pace since August 2017. Goods producers cited higher raw materials prices as a result of the ongoing impact of tariffs and greater demand for inputs. As expected, companies largely passed this increase on to consumers.

Want more timely insight into global markets? Subscribe to our FREE award-winning Investor Alert by

A resolution to the China-U.S. trade dispute is still in the works, but China’s manufacturing sector just returned to growth for the first time in four months, a sign that its government’s economic stimulus appears to be working. Both the private Caixin and official Chinese government purchasing managers’ indices (PMI) beat consensus by rising sharply above 50.0 in March, indicating factory expansion.

click to enlarge

The strong upward move likely reflects the outcome of a record $83 billion China’s central bank injected into the financial system back in January. At the time, policymakers also signaled they may cut rates this year if the stimulus doesn’t bear fruit.

So far, it seems to be helping the world’s second-largest economy come off a weak end to 2018. According to research firm China Beige Book, the country’s economy showed “an unmistakable first-quarter recovery,” with company borrowing at its highest level since mid-2013.

China A-Shares Nearing a 12-Month High on Trade Progress

Chinese stocks, as measured by the Shanghai Composite Index, climbed to a nine-month high last week and are currently up some 27 percent from their low in December 2018. On Friday, A-shares flashed a bullish sign by cracking their 200-week moving average for the first time since September 2014. In a report dated April 1, Evercore ISI analyst Rich Ross wrote that “a breakout above 3,200 will generate a bigger global cross asset buy signal.”

click to enlarge

The rally is being driven by not only the stimulus but also record foreign investment and MSCI’s acceleration of China’s A-shares weighting in its Emerging Markets Index, according to the Financial Times. The country’s non-financial sectors received an all-time high of 885.61 billion yuan ($131 billion) in foreign direct investment last year, with inflows growing 25 percent year-over-year in December alone.

Factory Expansion Continues Elsewhere

China wasn’t alone in expanding factory activity last month. Russia’s PMI rose from a neutral 50.1 in February to 52.8 in March, its highest level since January 2017. Business optimism dramatically improved as rates of output and new orders accelerated.

click to enlarge

Here in the U.S., we saw an uptick in manufacturing growth in March, although at a slightly slower pace than in the previous month. A key factor behind the lower figure, according to IHS Markit, was a slower rise in output. “The rate of expansion eased to a marginal pace that was the weakest since June 2016 and below the series trend,” according to the monthly PMI report.

click to enlarge

Input price inflation fell to its slowest pace since August 2017. Goods producers cited higher raw materials prices as a result of the ongoing impact of tariffs and greater demand for inputs. As expected, companies largely passed this increase on to consumers.

Want more timely insight into global markets? Subscribe to our FREE award-winning Investor Alert by clicking …read more

Retire Happy With Dollar Cost Averaging

The Power of Dollar Cost Averaging
click to enlarge

Remember, the illustration above includes only the period during the

Last week I had the pleasure of attending and presenting at the Oxford Club’s 21st Annual Investment U Conference in St. Petersburg, Florida. As many as 400 accredited investors were in attendance from all over the U.S.

The main topic was the current retirement crisis, which I wrote about earlier last month. Baby boomers are reaching retirement in worse financial shape than the previous generation—a phenomenon we haven’t seen in at least six decades.

So how can we reverse course and assure future generations are financially prepared to leave the workforce?

A common theme running through many of the Oxford presentations was to start investing early and to take advantage of compound interest.

This is so important. Albert Einstein once described compounding as “the eighth wonder of the world.”

If you’re reading this and have kids or grandkids, I urge you to help them on the path to participating in the market now. It doesn’t require as much capital as you might think—especially if you’re investing with dollar cost averaging.

What it does require, though, is discipline. Put a long-term plan in place and let compound interest work its magic.

I’ve shared this chart with you before, but I think it’s worth sharing again. It shows a hypothetical initial investment of $1,000 in an S&P 500 Index fund in March 2009. Ten years later, after regular monthly contributions of only $100, the value of that initial investment grew at an annualized 12.96 percent to more than $26,385. Investors who had the discipline to stick with this plan and reinvest the dividends were rewarded handsomely.

click to enlarge

Remember, the illustration above includes only the period during the 10-year bull market, and there’s no guarantee that the good times will continue.

But with dollar cost averaging, some of the guesswork involved in market timing is eliminated. Our own plan, which we call the ABC Investment Plan, automatically lets you purchase more shares when prices are low and fewer shares when they’re high.

The ABC Plan doesn’t assure a profit, of course, or fully protect against losses. No investment plan can guarantee those things.

Nevertheless, because it requires only a small initial investment, I think it’s a great way to get a young person started in today’s market. The Plan is also helpful for people who might be worried about their retirement goals but unsure how to build their wealth.

It’s never too late to start participating. Download an application today by clicking here.

The 10 Percent Golden Rule

I’d like to address a question I received over email last week from an investor. He asked for clarification on my 10 Percent Golden Rule. As you know, I often recommend a 10 percent weighting in gold, with 5 percent in physical gold and 5 percent in gold mining stocks.

“What does ‘weighting in gold’ actually mean?” he wrote. After explaining that he already owns a number of gold and silver coins, he asked how he knows if he has enough.

First of all, I think these are …read more