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| Leeb's Market Forecast | |
| April 16, 2008 | |
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| Dear Investor,
Leeb’s Ground-Floor Trader Weekly Update Whither gold?
Gold prices – and those of related precious metals – have been disappointing this month, given the many signs of rising inflation at home and around the world. Certainly recession fears have played a part, as historically a weaker economy took pressure off the gas pedal that fueled inflation. In addition, traders may simply be taking profits on gold and easing back on their positions as the Midas metal's price gains in recent years may have some folks looking to reduce the percentage of their total assets invested in gold.
The core PPI, which excludes food and energy, rose only 0.2 percent because of lower car and truck prices, giving some solace to those who think inflation will remain under control. But it seems clear that the trend of rising prices for energy, food, metals and other commodities is more powerful, and likely more enduring, than falling car and truck prices. And this week's Consumer Price Index report is expected to show that inflation rose at a 4 percent annualized rate in the first quarter – far above the levels we've become accustomed to in recent years.
Meanwhile, interest rates and the dollar continue to fall; by definition, these trends are inflationary. So our internal macroeconomic situation is reinforcing the external reality of worldwide rising commodity prices, driven by demand from the huge emerging markets -- whose purchasing power is rising exponentially. Advertisement Attention TCI Readers: Let me introduce you to the man who could help you make more money, faster than ever before.
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Gold remains the single best hedge against inflation. Precious metals prices remain undervalued historically, and we think it's likely gold will test new highs in the coming months and head not only well into the four digits but do so at a rapid pace over the next decade. That's not to say gold might not fall in the short run, perhaps down to the low $800s. But we're confident it will rebound from there.
Gold stocks make sense for another reason: they're bargains. Don't be fooled the sector's share-price gains in recent years, as they actually did not keep pace with the price of gold. Relative to the net value of their assets, gold companies are available at lower multiples than they normally are. And when you extrapolate net asset values a year or two into the future, assuming gold continues to move higher, the average gold-mining stock seems likely to rise at least 25% over the next 12-18 months. Most of our selections offer even more-compelling upside potential, for company-specific reasons.
As for the overall market, it continues to fall as gloomy investors envision stagflationary numbers coming out over the next week or two. Who can blame them? That's not an unlikely scenario. However, there are many reasons to suspect that the gloom is overdone. The most obvious is that high levels of pessimism have correlated with market bottoms historically, and sentiment indicators are significantly pessimistic today. Another plus: low average valuations for the overall stock market also indicate we're closer to a bottom than a bear market. (In fact, the S&P 500's valuation is lower now than it was at the bottom of the bear market in 2002.) Outside the financial sector, the U.S. economy is holding up OK – with good prospects for the rest of the second quarter. The weak dollar is bolstering the export market, and U.S.taxpayers will receive their economic-stimulus checks this month, a temporary but significant shot in the arm for the consumer-spending sector. So whatever the second-quarter GDP number turns out to be, companies in many industries will continue to post positive earnings and cash flows.
Our investment outlook continues to be to remain in the stock market, with significant exposure to companies benefiting from the current economic realities and those that are extremely undervalued relative to their long-term growth prospects. Our favorite areas include precious metals, energy and other commodities; select foreign companies; and undervalued turnaround plays in beaten-down areas, including financial services. Until next week, Your Ground Floor Trader Team Advertisement 33% in 33 days -- how's that for a winner?
Today's oil prices don't give you much pleasure at the gas pump, but if you're smart enough to put yourself on the right side of this trend, you can really clean up.
For example: A little over a month ago, when oil closed in the three-digit range, three days in a row, for the first time in history, we felt sure that oil service stocks would respond by climbing up from their oversold levels. One of best performing stocks in that group at the time was Weatherford International (WFT). So to maximize our short-term profits, we recommended a leveraged play on the stock.
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You'll be amazed how easy it is. ---------------------------------- If you cannot view this mailing click here. This email was sent to LEMMETRY@GMAIL.COM. You are receiving this email because you have requested a free subscription to Dr. Stephen Leeb's Market Forecast. Click here to be removed from this mailing list. Click here to be removed from all of our promotional offers. TCI Enterprises, LLC 500 5th Ave., 57th Floor New York, NY 10110 Disclaimer TCI Enterprises LLC, The Complete Investor, Emerging Investments, Leeb ETF Trader, Leeb IPO Insight, Leeb's Aggressive Trader and their affiliated companies and publications ("TCI" or "Letters" or "Publications") are not registered as a broker dealer or investment advisers with the U.S. Securities and Exchange Commission or any state securities authority. Letters and their information and content providers make no representations or warranties of any kind in connection with the subject matter, performance or the suitability of the information contained in publications for any purpose and are not liable for the timeliness, accuracy, or completeness of the information contained herein. The information contained in publications is provided for general informational purposes, and is not a substitute for obtaining professional advice from a qualified person, firm or corporation familiar with your personal circumstances. Please seek the advice of professionals, as appropriate, regarding the evaluations of any specific security, report, opinion, advice or other content. TCI is not responsible for any trades placed by the recipients of TCI based on the information included therein. There can be no assurance that your portfolio or positions can achieve the indicated performance and therefore, the sample performance information should not be relied upon. Investment recommendations are not intended to be construed to be personalized advice, or recommendations to buy, hold, or sell mentioned securities and readers should consider their personal situation before making any investment. All opinions expressed and information and data provided therein are subject to change without notice. TCI, its officers, directors, employees, and/or associated entities may have positions in and from time to time make purchases, or sales of the securities discussed or mentioned in TCI. TCI shall have no liability for any e-newsletter that is lost, intercepted or not received by you in a timely manner, or at all, for any reason.  |
