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Where Is U.S. Global Investors Investing Now?

U.S. Global Investors, which has historically focused on resource and precious metals investing…

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This article was originally published by Streetwise Reports

Source: Streetwise Reports   11/18/2021

U.S. Global Investors, which has historically focused on resource and precious metals investing prior to launching its global airlines ETF in 2015, is now branching out to a new sector. Streetwise Reports speaks to Frank Holmes, CEO and Chief Investment Officer, who discusses the path ahead for gold as well as the new investment area for the firm that he believes global economic imbalances have primed for profits.

Streetwise Reports: Frank, thanks for joining us today. Gold has been trading more or less sideways all year. Do you think it’s going to rally into year-end?

Frank Holmes: I think gold is one of the great trades, particularly the gold stocks, and for several reasons. But let’s talk about gold itself. For the past 21 years, 80% of the time gold has been bullish and has outperformed the S&P 500 by 250%. Take a look at the Consumer Price Index (CPI) numbers this year, that I believe are greatly understated at 4%–4.5%. If you use the algorithm used in 1980 when interest rates were at 20%, it would suggest that inflation should be 14% today. So you mean to say inflation is running between 4% and 14% and I can borrow a 10-year government bond at 1.5%? That’s negative real interest rates at an all-time high, suggesting gold should be $4,000, never mind when we take a look at previous money printing. I think that gold is greatly lagging and is one of those catch-up trades that is going to happen.  

Now let’s look at what some call “digital gold,” or Bitcoin. With Bitcoin and Ethereum, it’s been active Millennials who have been really important in the overall capital markets of speculation. A lot of Bitcoin diehards are like goldbug fanatics; they both read from the same old testament of history, government money printing. The thought leaders behind Bitcoin are very much caught up with the destruction by money printing of our country’s currency. So the difference I’ve seen is that the Bitcoin Millennials are like strike lawyers looking for the big killing to make a big score, whereas the gold investor is much more like a defense lawyer, about asset allocation and protection from the ravages of currency devaluations.   

When I look at the two of them, Bitcoin and gold, I ask why investors ought to have one or the other. Well, Millennials have led this bull market. We saw this in the U.S. Global Jets ETF (JETS), and we’re seeing this also in Bitcoin enthusiasm. But I think that, as a conservative money manager, the volatility of gold is substantially less than Bitcoin or Ethereum. GATA [Gold Anti-Trust Action Committee] believes gold is being suppressed by the G7 finance ministers as a functioning cartel, and I used to laugh about that, but now, the fact that they’ve been able to push through a flat tax of 15% for all companies means they are functioning like a cartel and, therefore, suppressing while they’re continuing the money printing. That just means gold is going to have a bigger pop. If real estate is up 19–20% then gold is definitely undervalued.

Then when we look at the gold stocks, we look at a universe of 100 producers around the world, and it’s a record number that have free cash flow. Even though gold has been fluctuating roughly between $1,700 and $1,850 per ounce, the gold producers are actually in a much stronger position. I know our quant-based Go Gold and Precious Metal Miners ETF (GOAU) has far outperformed the overall universe of the VanEck Junior Gold Miners ETF (GDXJ:NYSE.ARCA) by a wide margin because it focuses on those companies that have that high gross margin and high free cash flow.

SWR: How has GOAU been able to outperform the GDXJ?

FH: The GDXJ follows a basic index of market caps. With GOAU, we have focused on cherry picking — or high grading, to use the expression in gold — those companies that have several key factors. They have to be very inexpensive on a relative enterprise value basis. They have to have revenue last quarter growing faster than the previous four-quarter average and cash flow last quarter growing faster than the previous four-quarter average, so they’re showing relative growth or cost control. And they have free cash flow to give them more interest. When we look at these factors, out of 100 names, it’s always challenging to get 25 names. When it comes to these stocks, it’s really about revenue per share and growth per share.

Then you have the royalty and streaming companies on top of that. We believe they have a superior business model because they have high gross margins, for one. The easiest way to see that is Franco-Nevada Corp. (FNV:TSX; FNV:NYSE), which has $24 million ($24M) of revenue per employee on royalties; the average of Barrick Gold Corp. (ABX:TSX; GOLD:NYSE) and Newmont Corp. (NEM:NYSE) is probably $600,000 per employee. So royalty companies are historically much more efficient and have the ability, with any rise in the price of gold, to pay out rising dividends.

You’ve seen Wheaton Precious Metals Corp. (WPM:TSX; WPM:NYSE) and Franco-Nevada, for example, have a very positive tilt as gold rallies in that they’re going to share a bigger dividend distribution. So we have a greater concentration in Franco-Nevada, Wheaton Precious and Royal Gold Inc. (RGLD:NASDAQ; RGL:TSX) within the GOAU ETF. I think that that’s been a factor that’s helped this particular fund outperform. We rebalance every quarter. With the three big royalty companies, if one outperforms the other, then at the quarter-end we’ll sell some to buy the other.

Each quarter we don’t know which companies are going to outperform, but we know overall the royalty companies have a superior business model. That’s been the thought process there, and it’s called mean reversion.

A lot of the holdings in GDXJ have mergers and takeovers and share distributions: financings to develop assets that never really develop and mergers that are never really accretive on a per-share basis. So I think we have a smart suite of factors that are really rewarding those companies that have the best value metrics on a per-share basis, quarter over quarter and year over year.

SWR: Everybody thinks of you as a gold person, but, in addition, over the last couple of years, U.S. Global Investors has launched the U.S. Global Jets ETF, which focuses on the global airlines industry. And now you’re going to be adding another ETF, the U.S. Global Sea to Sky Cargo ETF (SEA), which will launch in mid- to late-November, providing access to global marine shipping and air freight industries. Why shipping and cargo? What made you take notice of this area and decide to jump in?

FH: There’s a big supply and demand imbalance right now. I see that a lot of the supply imbalance has to do with European Union and United Nations’ climate change policies. They’ve created massive imbalances of replacing energy. After shutting down all the nuclear reactors in Germany, all of a sudden the economy turns around and the price of coal explodes on the upside. There’s a shortage of electricity. It has not brought onstream enough wind farms and solar farms or natural gas to replace the demand for 7.5 billion people. France hasn’t had this problem because it hasn’t shut down its nuclear reactors.

We’ve also seen part of the green policies not allowing higher sulfur content, low grade oil, which is used for moving big ships around the world, which kept them from going into various ports. So you’ve all of a sudden shrunk by 25–30% the ships able to move product around. Many of these policies are faster at cutting anything with a carbon footprint than they are at being moderate. These policies are creating an imbalance of demand and supply. What they’ve told everybody short term was it was due to COVID. So along comes COVID, the world’s closed down and now, when we get people going back to work and traveling again, you witness this normal pent-up demand, and then you hit all this money printing that starts getting deployed. During that period, the ships cannot move product.

You have all these other imbalances for energy. So I think that climate change is a recipe for higher inflation. They might be able to improve it short term by movement of certain products, but I know in my experience in the cryptocurrency mining business, via Hive Blockchain Technologies, we’ve had challenges I wrote about a year ago getting things from China. We talked about it long before it became mainstream, like with chip shortages for the car manufacturers. Now we see steel prices taking off, copper prices taking off, shortages of car manufacturing, shortages of chips to be able to complete the cars. Therefore, price inflation is up 25% for secondhand cars.

So coming back, when you take a look at this imbalance, it says that this industry is going to have pricing power, and it reminded me of the JETS ETF. When I created JETS, I had noticed, after 2008 and 2009 many airlines had just come out of bankruptcy—everyone but Southwest Airlines had some type of bankruptcy or financial problem but they were also functioning—a third of the flight options you had to travel around the world had dropped. You just didn’t have the options you had before, and the price of your tickets doubled. I said, well, if I’m going to get into the ETF business, this industry has pricing power. Then I did the analysis and found out that the airlines have this thing called ancillary fees and they were going to grow rapidly, which they did. Ancillary fees include charging for your bags and changing your flight ticket. Every time you made a change, a $200 trade, all of a sudden this business and the airlines credit card business exploded and were big profit centers.. So I said this is a good time because they have the wind in their sails; it’s not in their face now. They’ve come out of bankruptcy.

So now we come to cargo shipping. Similar to JETS, the wind is in their sails now. There are imbalances around the world. The world has massive money printing. Global demand is surging. The Purchasing Managers’ Index (PMI) is surging, but even so, they can’t move basic commodities or finished products around like they used to. You have to wait six months to get a Samsung refrigerator. So when you dig into it, you say, wow, there’s no one really doing this using the quant metrics we look at in our product lineup. In our analysis during the COVID crisis, the best performing airlines were cargo airlines.

The airlines that stopped flying passengers and instead were using their whole belly to move cargo benefitted the most. So we created this model of 20% airlines cargo only and 80% dry ships. We think that this trend is going to continue. As more climate change policies come in place, it’s going to create more bottlenecks and give shipping of products and services more pricing power.

It’s also a way for our audience to play global resources. If you don’t want to play one commodity against the other, or this, one easy simple way is to play global shipping.

SWR: In other words, this is one of these bad news is good news situations for investors in this space.

FH: Absolutely.

SWR: Would you talk a little bit more about the air cargo companies and which ones you expect to benefit from this increased consumer demand?

FH: We really saw air cargo companies benefit during COVID because products, like face masks and gloves, had to be moved, and they had to get them from Asia to North America and Europe. The two biggest, as everyone knows, are FedEx Corp. (FDX:NYSE) and United Parcel Service Inc. (UPS:NYSE), but then there are private companies that are huge in cargo as well. There’s Qatar Airlines and Emirates. They’re huge in cargo. So when we look at that universe of cargo airlines, there are other public companies and they’ve just been great performers, like Turkish Cargo. Particularly out of Asia, you have EVA Air Cargo. These businesses, I believe, will continue to boom.

Take a look at Zara, one of the biggest companies in the retail clothing businesses of the world. Its business model is to knock off the latest fashion designers before their products get to the market and get them out at a cheaper price. Well, one of the ways Zara does that is by shipping everything by airplanes. They have to use cargo planes for supply management. If you take a look at that business, the pricing power for these cargo airlines is just going to continue to grow.

SWR: Tell us about the dry shipping component to the ETF.

FH: Goods like Samsung TVs and refrigerators are moved by dry ship. One of the big issues has been that the ships that they had in Europe were able to ship over from China coming to here, but they’re going back empty because we’re not exporting like we were. When we turn around and start going back with more full ships, then they’re going to make more money on these ships.

SWR: I understand one of the top holdings will be A.P. Moller-Maersk A/S (AMKBY:OTCMKTS), the Danish shipping company, and Reuters recently reported that its final Q3/21 earnings tripled to $6.9 billion. So is that one of the companies that you will be including in the ETF?

FH: Absolutely. Bloomberg analysts in September forecast the company’s net income will not only be a record for Maersk, but for ANY Denmark-listed company. This is all thanks, of course, to unheard-of shipping rates.

Not only that, the imbalance is going to continue. It’s not short term. I know the Federal Reserve keeps saying it’s just a short-term imbalance, but it’s just not true. It’s an imbalance that’s not going away, especially when you add the green movement. I’m a big believer of clean air and clean water, but investors must also be aware of the accountability standards held for the scientists or engineers who are making these policy decisions; there’s no accountability if they’re wrong. If you’re an engineer building a bridge, then you better have insurance in case you’re wrong because you’ll get sued. But you don’t see these scientists being sued if they are wrong about their climate stances. In my opinion, many of their policies are esoteric, idealistic policies, and these people are not held accountable. There seems to be a full court press with more and more layering on of these policies. Because of that, I think we’re going to have continuous inflation. I think it’s very inflationary, and I think this is a way to protect yourself as an investor.

If you believe the 27 countries are working like a cartel and they’re going with modern monetary theory, that’s to print as much money as possible, it just means that we’re going to have a lot of people with cash looking for products and services, and there are going to be bottlenecks in getting them to you. Air Canada, for example, has done exceptionally well with Cargojet. That’s all it does, nothing but cargo. So we think these are simple names that people can think of that are going to do well.

SWR: Is there anything else you’d like to tell our readers that we haven’t talked about?

FH: I think that some of your readers have bought HIVE Blockchain Technologies Ltd. (NASDAQ: HIVE), and HIVE has done exceptionally well, so I think it is worth mentioning briefly too. For your readers who are unfamiliar with HIVE, it is a cryptocurrency miner, and was the first to go public back in 2017 on the TSX.V, but is now available on the NASDAQ Exchange as well. So far, touch wood, we’ve been the most profitable of the public crypto miners because we’re the only one that mine both Ethereum and Bitcoin. The digital asset space continues to grow, and that includes the companies mining these coins, like HIVE. Hopefully, HIVE continues in that growth cycle.

SWR: We appreciate your time today, Frank. Thank you.

Frank Holmes is CEO and chief investment officer at U.S. Global Investors, which manages a diversified family of funds specializing in natural resources, emerging markets and gold and precious metals. In 2016, Holmes and portfolio manager Ralph Aldis received the award for Best Americas Based Fund Manager from the Mining Journal. In 2011 Holmes was named a U.S. Metals and Mining “TopGun” by Brendan Wood International, and in 2006, he was selected mining fund manager of the year by the Mining Journal. He is also the co-author of The Goldwatcher: Demystifying Gold Investing. More than 30,000 subscribers follow his weekly commentary in the award-winning Investor Alert newsletter, which is read in over 180 countries. Holmes is a much sought-after keynote speaker at national and international investment conferences. He is also a regular commentator on the financial television networks CNBC, Bloomberg, BNN and Fox Business, and has been profiled by Fortune, Barron’s, The Financial Times and other publications.

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Disclosure:
1) Patrice Fusillo conducted this interview for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She owns, or members of her immediate household or family own, shares of the following companies mentioned in this article: None. She is, or members of her immediate household or family are, paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this interview are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
3) Frank Holmes: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: HIVE. I, or members of my immediate household or family, are paid by the following companies mentioned in this article: N/A. My company has a financial relationship with the following companies mentioned in this interview: HIVE Blockchain Technologies. Funds controlled by U.S. Global Investors hold securities of the following companies mentioned in this article: Royal Gold Inc., Wheaton Precious Metals, Franco-Nevada, Barrick Gold, Maersk. I determined which companies would be included in this article based on my research and understanding of the sector. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
4) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this interview, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Franco-Nevada, Wheaton Precious Metals, Royal Gold, Barrick Gold and HIVE Blockchain Technologies, companies mentioned in this article.

( Companies Mentioned: AMKBY:OTCMKTS, FNV:TSX; FNV:NYSE, RGLD:NASDAQ; RGL:TSX, WPM:TSX; WPM:NYSE, )

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Precious Metals

Gold Springs Discovers New Gold System – Shares Jump 20%

Gold Springs [GRC-TSX; GRCAF-OTCQB] reported assay results from hole J-21-015 with an average…

Gold Springs Resource Corp. [GRC-TSX; GRCAF-OTCQB] reported assay results from hole J-21-015 with an average of 1.0 g/t gold equivalent over more than 163 metres located 180 metres south of the discovery hole J-21-006 at the 100%-owned Gold Springs property located on the border of Nevada and Utah.

The results confirm the existence of a new gold-mineralizing system called intrusive-related gold system (IRGS) on a new target that the company has named Tremor. This new gold system is situated along the northern extension of the Jumbo trend of the large Gold Springs project of 8,000 hectares.

J-21-015 highlights include 1.0 g/t gold equivalent over 163.1 metres: 1.42 g/t gold equivalent over 33.5 metres within the vein, which includes 3.26 g/t gold equivalent over 10.7 metres within the vein; and 0.94 g/t gold equivalent over 123.5 metres within the intrusive and contact zone.

Randall Moore, executive vice-president of exploration, stated: “We have been anxiously awaiting these results, which now confirm what we believe to be a major new discovery. The existence of an IRGS at Gold Springs opens a potentially large area to develop a new gold resource. Hole J-21-015 extended both the high-grade vein system and the gold mineralization associated with the intrusive first seen in hole J-21-006. We would also like to highlight that both holes ended in gold mineralization. We are now awaiting assays from another 15 holes at Tremor that are currently in the laboratory for testing. Drilling has extended this northern vein for over 200 metres and the Tremor intrusive zone for 600 metres along strike as seen in the drill cuttings. The thickest intercept within the intrusive thus far has been 280 metres.”

The company is waiting to receive assays from 24 holes on two targets; 15 from Tremor and nine from White Point, in the coming weeks.

Gold Springs Resource is confident of the presence of an intrusive-related gold system within the Tremor target situated along the north extension of the Jumbo trend in Utah where a strong CSAMT (controlled source audio magnetotelluric) high resistivity anomaly extends for 1,200 metres.

The company completed 18 holes at Tremor designed to test the extent of the intrusive-hosted gold system. These holes demonstrate the intrusive extends for 600 metres and is open to the north, south and at depth. In addition, the vein system in hole J-21-006 has been traced for 200 metres. For details on hole J-21-006, which returned 6.87 g/t gold equivalent over 24.4 metres, included grades of 30.9 g/t gold equivalent over 4.6 metres.

The drill has moved to Charlie Ross where eight additional holes are planned to follow up that new discovery.

Author: Staff Writer

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Precious Metals

Sprott Physical Gold and Silver Trust (CEF): A Brand-New Prospect for Investors

Sprott Physical Gold and Silver Trust (CEF) is currently valued at $17.10. When the trading was stopped…

For the readers interested in the stock health of Sprott Physical Gold and Silver Trust (CEF). It is currently valued at $17.10. When the trading was stopped its value was $17.21.Recently in News on April 13, 2021, Sprott Physical Gold and Silver Trust Updates Its “At-The-Market” Equity Program. Sprott Asset Management LP (“Sprott Asset Management”), a subsidiary of Sprott Inc., on behalf of the Sprott Physical Gold and Silver Trust (NYSE: CEF) (TSX: CEF) (TSX: CEF.U) (the “Trust”), a closed-ended mutual fund trust created to invest and hold substantially all of its assets in physical gold and silver bullion, today announced that it has updated its at-the-market equity program to issue up to US$1 billion of units of the Trust (“Units”) in the United States and Canada. You can read further details here

Sprott Physical Gold and Silver Trust had a pretty Dodgy run when it comes to the market performance. The 1-year high price for the company’s stock is recorded $20.38 on 06/01/21, with the lowest value was $16.75 for the same time period, recorded on 09/29/21.

Sprott Physical Gold and Silver Trust (CEF) full year performance was -5.37%

Price records that include history of low and high prices in the period of 52 weeks can tell a lot about the stock’s existing status and the future performance. Presently, Sprott Physical Gold and Silver Trust shares are logging -16.09% during the 52-week period from high price, and 2.09% higher than the lowest price point for the same timeframe. The stock’s price range for the 52-week period managed to maintain the performance between $16.75 and $20.38.

The company’s shares, operating in the sector of Financial managed to top a trading volume set approximately around 2939308 for the day, which was evidently higher, when compared to the average daily volumes of the shares.

When it comes to the year-to-date metrics, the Sprott Physical Gold and Silver Trust (CEF) recorded performance in the market was -11.63%, having the revenues showcasing -4.09% on a quarterly basis in comparison with the same period year before.

Specialists analysis on Sprott Physical Gold and Silver Trust (CEF)

According to the data provided on Barchart.com, the moving average of the company in the 100-day period was set at 17.91, with a change in the price was noted -1.84. In a similar fashion, Sprott Physical Gold and Silver Trust posted a movement of -9.71% for the period of last 100 days, recording 489,960 in trading volumes.

>> 7 Top Picks for the Post-Pandemic Economy << 

Trends and Technical analysis: Sprott Physical Gold and Silver Trust (CEF)

Raw Stochastic average of Sprott Physical Gold and Silver Trust in the period of last 50 days is set at 16.43%. The result represents improvement in oppose to Raw Stochastic average for the period of the last 20 days, recording 6.72%. In the last 20 days, the company’s Stochastic %K was 2.89% and its Stochastic %D was recorded 4.11%.

Now, considering the stocks previous presentation, multiple moving trends are noted. Year-to-date Price performance of the company’s stock appears to be encouraging, given the fact the metric is recording -11.63%. Additionally, trading for the stock in the period of the last six months notably deteriorated by -14.50%, alongside a downfall of -5.37% for the period of the last 12 months. The shares -3.66% in the 7-day charts and went up by -4.26% in the period of the last 30 days. Common stock shares were lifted by -4.09% during last recorded quarter.

Author: Sarah Baker

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Precious Metals

It’s The Taper, Stupid!

It’s The Taper, Stupid!

Submitted by QTR’s Fringe Finance

It is astounding to me how much market commentary I have seen over the last 48…

It’s The Taper, Stupid!

Submitted by QTR’s Fringe Finance

It is astounding to me how much market commentary I have seen over the last 48 hours placing blame for the market “volatility” (read: 2% off all time highs) on the Omicron variant.

The extent of our recent “volatility”.

While there are definitely still some uncertainties about the new variant, early indications make it look as though it is not going to be meaningfully deadlier than other variants and that, one way or the other, we will be able to deal with Omicron and see our way through it – just as we did with the Delta variant. That is, unless the government implements more of what one trader calls a “criminal” response to Covid and issues more lockdowns and mandates.

While Omicron uncertainty has likely contributed slightly to market volatility, I don’t think it is the driving force behind it. Rather, I believe that current volatility is a result of Jerome Powell’s surprising, and so far unrelenting, hawkish stance that a taper and rate hikes look to be necessary.

In fact, several Fed governors have commented over the last 48 hours about potentially accelerating both rate hikes and tapering. This language, as I noted days ago, is an admission that the Fed has lost control of inflation.

In fact, it looks as though inflation has gotten so bad that the Fed is going to have to try and attempt to “stick the landing” of presenting hurried tapering and rate hike plans to the market. Of course, the Fed won’t really be able to stick the landing on either because politicians on the left and castrated on-air finance personalities will cry foul as soon as the market has a 10% pullback as a result of higher rates (just as they did on the Covid crash).

But for now, the company line is that we are going ahead with rate hikes and looking to accelerate the taper. This – not the Omicron variant – is what is moving markets.

I said just days ago that Powell doesn’t even need to say anything for the market to continue to stay volatile at this point because his standing position on the matter is very hawkish. Yet, instead of saying nothing, he went as far as to reaffirm his hawkish stance on Wednesday of this week. From my piece earlier this week:

If the Fed does look to accelerate the taper and toss around the idea of rate hikes in order to try and rope inflation in, as indicated, I think we can expect further downside in equity markets in December, as I predicted about a week ago. In fact, Powell doesn’t even have to re-acknowledge what he said yesterday, he simply has to say nothing until the Fed’s next official nod to the markets.

As I said during my interview yesterday with Jack Boroudjian, tapers cause markets to crash: it is that simple. Just take a look at what happened in December 2018. This time is not going to be different. If the Fed goes ahead and decides to taper, you can expect risk assets to get smacked.

Small caps and technology have gotten the “worst of it” during this volatility and I continue to believe that that will be the trend.

The Russell 2000 and NASDAQ are just so chock-full of overvalued, cash burning companies that the world would actually be better without – malinvestment that should’ve been corrected years ago – that I believe those indexes will move disproportionately lower.

I also continue to be profoundly negative on ARKK, an actively managed fund whose flagship component and largest weighting is up 90.6% in the last twelve months, yet has still somehow managed to plunge -11.9% over the same time period.

That takes some very special “active management”.

Source: Ycharts

In fact, just yesterday after hours, another Cathie Wood holding, Docusign, took a 25% haircut.

Wood contends that the growth from her companies will eventually make up for this volatility in the very long term, but I think her portfolio of egregiously overvalued names represents the first head on the chopping block if market volatility continues. And, as I noted days ago, if Tesla ever starts to sell off, ARKK holders should look out below.

As I’ve said before, I also think there will be somewhat of a rotation trade back into cash generating blue chip names, consumer staples and the few companies that still pay a dividend and have modest price to earnings ratios – one of which I profiled as my favorite just weeks ago.

Some of my other favorite names that I am looking to buy if they continue to sell off are well-known blue chip staples that have seen their stocks trade sideways or disproportionately lower over the last couple of months, despite growth-style P/E’s for some. I’d argue names like Disney (DIS) and Walmart (WMT) offer GARP (“growth at a reasonable price”) should they keep selling off. I also love Johnson & Johnson (JNJ)(my largest holding in my all-dividend portfolio which I add to almost daily) and Intel (INTC), which I believe will undergo a renaissance and eventually retake its throne as king of chips – if it isn’t bought out first at these levels.

Gold has continued to selloff on the expectation that a taper is actually coming.

Source: Ycharts

The selloff could easily continue for the short- to mid-term, at least until we get to the point that gold needs to be bought as a volatility hedge due to a taper, or the point where the Fed finally caves and stops its plans for tapering or raising rates. It will be interesting to see how inflation may drive the Fed’s decision making going forward.

Heading into the weekend and into the back end of this month, traders would do well to focus their energies more on Fed commentary than on developments with the Omicron variant, barring any massive change with what we know regarding the new strain. Obviously, if Omicron turns out to be a flesh eating variant of the virus that kills people instantly, that is going to have a profound effect on equity markets (Neel Kashkari heard shouting it the background: “Not if I can help it!”).

But for the time being, thank God that doesn’t seem to be the case. Heading into 2022, I still think the markets could be in for a collapse, as I wrote here, as it appears that this is the only man that can move markets in this day and age:

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DISCLAIMER: 

I own JNJ, WMT, DIS and INTC. I own ARKK, IWM, SPY puts. I own puts and calls in GLD and own a host of gold-related and precious metals related names. None of this is a solicitation to buy or sell securities. Positions can always change immediately as soon as I publish this, with or without notice. You are on your own. Do not make decisions based on my blog. I exist on the fringe. The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I get shit wrong a lot. 

Tyler Durden
Fri, 12/03/2021 – 10:25






Author: Tyler Durden

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