Investor CAFÉ

The Impossible Year: Cubs Win… Is Trump Next?

It has been an improbable year: the curse of the Billy goat was lifted on the Chicago Cubs and they won a world championship in baseball after a 108-year drought.

Among my friends, I predicted they would win it all this year and celebrated the victory with my daughter, who lives in Chicago, and reveled all night long. It was an exhausting night — a five-hour game where both teams had a real shot at winning.

Incredibly, the seventh game of the World Series was not decided until the very last out in the bottom of the 10th inning with the potential tying run on base in the person of speedy Rajai Davis.

I have a running bet with political pundit and Vegas oddsmaker Wayne Allyn Root on the outcome of the presidential election. I wrote him, “My prediction came true about the Cubs. Will yours about Trump?”

Root and other Donald Trump supporters believe that next Tuesday’s election is our own Brexit moment, which they call Trumpxit. Certainly, the race has tightened in the last two weeks, as the oddsmakers have raised the prospect of a Trump victory, but it still is Hillary Clinton’s lead to lose.

Why has the stock market fallen for seven straight trading days? Because investors fear a Trump presidency will create a similar situation to what happened in Britain after they voted to leave the European Union: the end of the bull market in the dollar and stocks, and a sharp rise in the price of gold.

If Trump wins, I fear that like the World Series, it will be an all-night affair, waiting until the wee hours of the morning before the election is decided. Anything is possible. If Utah votes for a third candidate, the next president of the United States may be elected in the U.S. House!

The Political Fed Postpones Rate Increase: Good News for Democrats?

As expected, the Fed has decided to postpone a decision on raising rates until at least December, after the election. The Fed has been super liberal in expanding the money supply (nearly 10%) in response to a sluggish recovery. Gross Output (GO), the broad-based measure of economic activity, and my Skousen B2B index both were released today for the second quarter, showing mild 1.1% growth for both. Business spending had been down three quarters in a row prior to this announcement, so the economy is starting to move back up, but only tepidly. See my full press release at http://mskousen.com/2016/11/second-quarter-gross-output-and-b2b-index-increase-still-no-signifficant-growth-of-the-u-s-economy/.

Is It Time to Buy Gold? A Report from New Orleans

“You have to sift through a lot of dirt before you find gold.” — “Maxims of Wall Street”

Last week, I attended and spoke at the New Orleans Investment Conference, the granddaddy of gold bug conventions. I reported last year about attendees who claimed they had lost up to 70% of their portfolio by investing in penny stocks.

Mining Stocks: For Speculators Only

I moderated a panel on global investing that included Doug Casey, Adrian Day and Dennis Gartman — all commodity experts. I asked them to name one mining company that has a good long term track record like Apple, Procter & Gamble, or Exxon, and they couldn’t. Major miners such as Freeport, Barrick, or BHP are all volatile stocks, but have no long-term upward trend. And they pay very little in dividends. Day suggested Franco-Nevada Corp. (FNV), but Franco-Nevada is not a traditional exploration and development mining company. Rather it is a finance company that is paid royalties from mining operations.

Even Doug Casey admitted that penny mining stocks are like burning matches. If you hold a burning match for long enough, you will get burned.

My talk in New Orleans was on “The Three Greatest Threats to Your Wealth Today.” They were government policy (taxes, inflation and strangulation), bad investment choices and bad timing. What about gold? I showed this chart demonstrating that mining companies are not able to make consistent profits like most companies on the S&P 500.

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In summary, mining stocks should be viewed short-term speculations, never long-term investments. When you buy a gold stock, you need an exit strategy. Many of the investors at New Orleans had made good money in mining stocks this year, and I told them to take some profits and not get greedy. Of course, as soon as I said that, gold stocks have started to move back up, due to fear that Trump might get elected, so there may be more life in the gold bull market.

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