DOWN BABY DOWN!
— Is The Great Wall Street Meltdown Still On Its Way?
Yikes! In a few weeks of panic selling this winter (we’re talking about you,
Of course, equanimity (or should we say wishful thinking) has returned to Wall Street, and the stock market is surging again.
But according to one brokerage analyst, the S&P 500 -- adjusted for inflation -- is now about the same as it was in 2000 (15 years of, uhm, nothing – except irrational exuberance”!)
ANY IDENTIFIABLE PROBLEMS SETTING OFF THE RECENT MARKET IMPLOSION?
In fact, there have two likely causes of the winter market meltdown:
1) CHINA: Chinese government regulators initiated steps to allow more “short-selling”, where investors can essentially “bet” that the price of selected shares will fall — with the unintended consequence of ultimately driving Chinese share prices down, and simultaneously driving down the value of American retirement & pension-fund investments in Asia.
Additionally, the fear has continued that, as China’s international exports shrink in response to the current global recession, China’s economy will concurrently slow down — also driving down stock-market valuations.
2) GREECE: It’s been an ongoing question for more than a year now -- will Greece pay its debts, or will the country be (a) forced into the equivalent of national bankruptcy by its European Union (EU) creditors; (b) withdraw from the EU; and (c) then attempt to reflate its treasury’s empty coffers -- by returning to its old currency, the Greek drachma.
Also note that the current sentiment of those in the know, reflected in recent bond market prices, appears to be that it is only a matter of time till Greece defaults on its debt..
3) A GLOBAL STOCK-MARKET MELTDOWN: In response to prospect of Greece exiting the E.U. (European Union) -- as well as an expected decline in the growth of the Chinese economy (because of slowing exports to the rest of the world) -- global stock-market indices outside of North America initially experienced a deep dive only muted by the recent rise of the U.S. dollar, which in turn has meant lower-price exports to America from these nations, as well as rising profits for export-oriented businesses at home (for example, German & Japanese car makers).
Finally, in response to many current global insecurities – particularly Middle East instability (thanks to the rise of ISSIS, and expansion of the Iranian presence in Syria & Iraq), as well as an ongoing world-wide implosion of bond markets – the price of gold continues to rise (along with silver).
So, as I’ve noted previously on this blog, establishing a minimum 10% portfolio of gold-related mining stocks and mutual funds would (in my opinion) be a good idea –- since these, and new negative financial & international disasters, could continue to occur.
WHAT TO DO TODAY, TO PREPARE FOR TOMORROW’S NEW CONTINGENCIES?
So what to do tomorrow? Well, believe it or not, my advice would be to be courageous and follow the clarion cry of John Templeton: “The time of maximum pessimism is the best time to buy (stocks)!”
And particularly consider purchasing shares in cash-rich, debt-free companies which have been able to maintain growing businesses despite all the recent global economic headwinds.
HOW ABOUT SOME SPECIFIC EQUITY RECOMMENDATIONS ALREADY?
Some specific equity recommendations from yours truly?
Well, why not … paraphrasing the words of Bill Clinton when introduced to a gaggle of White House interns (past & future)?
So here we go:
Buy GIBSON ENERGY INC ($GEI:CA), yielding 4.34%
a) EXPERIENCED, SAVVY MANAGEMENT
They have already, or are starting to implement, a business strategy to expand services to the U.S. oil hub in Mississippi.
And GEI has also received committed shipper support to proceed with the construction of 2 additional crude oil storage tanks at the busy Hardisty storage hub in Alberta (Canada).
The two storage tanks are expected to be in service by the middle of 2017, responding to continued production in the Western Canadian oil sands (despite declining oil prices on the futures market).
Western Canada oil sands production continues, because revenues are paid in U.S. dollars (at the “well head”), meaning welcome profits in Canadian dollars.
According to Rick Wise, Gibson’s Chief Operating Officer, “a robust growth profile remains in place for oil sands related production volumes.”
b) I previously held shares in this Canadian oil-services company for at least 15 years; and I always collected its ample (and always sustainable) annual dividend, while making a number of capital gains -- trading in & then out and then back into this equity on fluctuations in the price of WTI oil.
Buy HOUSTON LAKE MINING INC. ($HLM. CA –TSX Venture Exchange), paying no dividend
Rationale: (a) The company owns one the best rare-mineral deposits in North America; (b) Rare-metals demand is rising because of the Chinese choke hold on the market – buying as much as they can on market setbacks, as well as restricting the export of their own production of rare metals; and (3) savvy “Houston Lake Mining” management is hedging their bet on rare metals through the company's continuing accumulation of land holdings rich in gold and platinum deposits.
As a source of further background information on HLM, here’s management’s own description of their company:
“Houston Lake Mining Inc., a mining exploration company, is engaged in the acquisition, exploration, and development of mining properties Canada. The company explores for rare metal deposits, such as lithium, tantalum, rubidium, and cesium, as well as gold and platinum group metal deposits. It focuses on its 100% owned Pakeagama Rare Metals Project that is located in Red Lake, northwestern Ontario, Canada.”
And further, here’s how they describe what exactly are rare earth metals:
“Over the past quarter century, an emerging class of metals has grown exponentially in demand as a byproduct of the Technological Revolution. That group, known as the Rare Earths Elements (and variously referred to as Specialty or Technology Metals), has become the backbone of innovation in the fields of clean energy, consumer electronics, computer applications, health care technologies and much more. Today, a great deal of what we refer to as the modern technology would be all but impossible without the Rare Earths Elements and their associated oxides and concentrates.
“Rare Earths include the unique elemental suite known as the Rare Earths Elements (REE’s) and a select group of specialty metals produced primarily for technology applications. At Ucore, our focus is on Heavy REE’s (a class of REE’s known for their high value relative to other REE’s) and collateral metals often found in concert with REE deposits. Collectively, this group represents a resource sub-sector experiencing unprecedented growth in global demand, combined with diminishing near term supply and a correspondingly high future potential for return on investment.”
In my humble opinion, this rare (earths) investment could lead to unprecedented rare capital gains in the future!
So it might be worth your consideration, as a "buy", during market declines.
Buy UCORP RARE METALS INC. ($UCU.CA –TSX Venture Exchange), also paying no dividend
Please not that this is an “Over The Counter (OTC)” stock for American investors, requiring a qualified broker to purchase shares in this Canadian-based miner.
Here’s how this company’s prospectus describes its mining “mission”:
“Ucore Rare Metals Inc. is a well-funded development-phase mining company focused on establishing rare metal resources with near term production potential. With multiple projects across North America, Ucore’s primary focus is the 100% owned Bokan-Dotson Ridge REE property in Alaska...
“The Bokan – Dotson ridge REE project is located 60 km southwest of Ketchikan (Alaska) and 140 km northwest of Prince Rupert (British Columbia); and it has direct ocean access to the western seaboard and the Pacific Rim, a significant advantage in developing near term production facilities and limiting the capital costs associated with mine construction...
“The Bokan property is particularly enriched with heavy rare earth elements, including the critical elements Dysprosium, Terbium and Yttrium."
My own perspective on the company's merits?
a) Highest Grade Heavy Rare Earth Deposit in U.S. (NI-43-101 Compliant)
b) Short projected timeline to production, estimated at 3 years
c) Excellent Logistics: The only REE deposit worldwide on immediate deep water access, with future accessible labor and electrical power
d) Located in Alaska, one of the world’s leading mining-friendly jurisdictions
e) Excellent geopolitical support (local; state; and federal)
Certainly worth a look, I would think.
Buy ACADIAN TIMBER ($ADN:T), paying annual dividend of at least 5%
Here’s how Acadian’s management describe their company:
“Acadian Timber Corporation harvests and markets forest products. The Company markets saw logs to lumber mills, pulp wood to paper mills, and biomass to electricity generating plants. Acadian Timber operates in New Brunswick and Maine.”
MY RATIONALE FOR BUYING THIS COMPANY:
(a) All its costs are in CANADIAN dollars; BUT its main revenues come from the United States in AMERICAN DOLLARS
(b) Good track of record regularly raising dividends
(c) Excellent current annual dividend of 5% looks sustainable (ie., Acadian will rake in sufficient revenues to pay its dividend, despite most setbacks in the world-wide market for lumber).
(d) When and if the housing market in the United States starts rising again, this company’s share price should also rise substantially.
Just one cautionary note: this is a THINLY TRADED stock; so it may be necessary to ACCUMULATE shares, buying in small quantities (over time) on market dips.
(4) Buy KINDER MORGAN ($KMI), paying a dividend of 5.5%
a) Recently, Kinder Morgan projected 2015-16 cash revenues of $1.24 billion ($0.58 a share), after adjusting for expenses.
c) This number matched the company’s previous guidance, after factoring in possible future energy price fluctuations.
d) Additionally, the company confirmed its target of a 10% annual dividend (compound) growth rate right through to 2020.
Most important observation on my part: even in the worst of times, this energy monolith seems capable of countering the worst obstacle the markets can throw at it.
Buy L-3 COMMUNICATIONS HOLDINGS INC ($LLL), yielding 2.21% %
In my opinion, this U.S. defense company is the wave of the future, in terms of the “weapon” they manufacture.
L-3 Communications insists that their small manned airborne intelligence-gathering “attachment” to airborne spy planes and drones --named SPYDR -- is the most versatile and inescapable in the world: “It casts a ‘web’ that captures mission-critical intelligence about its targets and delivers the information in real time”.
A few facts, about L-3, also worth noting:
a) The company's C3ISR (Command, Control, Communications, Intelligence, Surveillance and Reconnaissance) solutions are used by all branches of the U.S. military.
b) In Jan 2015, the company acquired MITEQ, Inc., a manufacturer of specialized RF microwave products and SATCOM components for space and military applications.
According to the CEO of L-3, his company intends to capitalize on growing demand for those products -- thanks to the acquisition -- which is expected to boost L-3’s top line by roughly $60 million for the year ending Dec 31, 2015.
And that’s it for today’s investment musings. Please enjoy your day, perhaps watching the latest FIFA (women's soccer) round of elimination games, or even "The Gerry Springer Show" if need be.
And tomorrow morning, remember that clarion call of investment guru, John Templeton:
“The time of maximum pessimism is the best time to buy!”
Nuff said, for today, I would think.