Individual Stocks or Index Funds - 2019 may be a pivotal year!

Picking Stocks VS Index Funds in 2019

2019 does not bode well for Stock Indexes and therefore, Index funds.  Buying Index funds has been the go-to investment of individual investors (and some institutional investors) for years now.  Since 2009, many have done very well with this simple strategy which has outdone many money managers over that time.

2019 may be different for a number of reasons! This bull market we have enjoyed since 2009, is getting very long in the tooth and 2019 is beginning to look like the end is in sight.

The macro picture is a mishmash of poor decisions and poor leadership from Central Banks and world leaders alike. The news is dominated by trade war talks, Walls, Brexit, German (read Euro) downturn, and Debt, beyond anything we have witnessed in the past. Real war cannot be dismissed either as the USA and North Korea are at a stalemate, and (nuclear armed) India and Pakistan are shooting down each others fighter jets, to the cheers of their domestic audiences.

With Britain on the verge of a "no deal" Brexit, Italy may be becoming a financial basket case, German output is inching into negative territory, and in France, the Macron government has done nothing to right that ship.

Some believe that, Deutsche Bank may well be the "Lehman Brothers" of the Euro zone this year as creditors close in and a bailout partner is not in sight. The two largest economies on the planet, USA and China are at serious odds over trade AND both are in serious DEBT!

As the USA begins to withdraw from the world under this administration, it owes $22 Trillion dollars and that debt is now growing at 1.5 Trillion per year under Trump.

There are two ways to handle such a debt burden, 1: Default
2: reduce the dollar to a nickel.  There is no other way to pay down such a massive debt! (my bet is that, if it were entirely up to Mr. Trump, he would pick door number 1)

There are now more refugees on the move across the world than WW2 and most countries are putting up barriers to entry. Euro zone countries from Spain to Greece are doing whatever they can to keep out refugees, instead of welcoming them. Climate change, inept governments and wars are the reasons for such a migration.

Witness the debacle in the USA on the southern border as this president continues to threaten to shut down government if he does not get his wall. This argument is a hideous sidelight to what is truly going on in the world. This same administration seems to admire despots while scorning democracy, whether it is in it's own constitution or that of valuable allies.

The USA has now walked away from trade agreements, peace treaties and most recently, a nuclear arms agreement with Russia. None of these things bode well for markets, or indeed, humanity, going forward, but the pied Pipers of Wall Street keep on playing!

On a lesser, and personal financial note, while most index funds have very low fees, they are paid annually, and therefore, add up over time, eating into profits.  As the value of your investments go up, so do your fees. This is a built in strategy that will eventually eat away at your gains. If these investments go down, the fund still gets paid, every year!

Conversely, Buying individual stocks is now usually done online for less than $10 per trade! (One time). When an index tumbles, not all stocks are included. Some stocks actually go up at such times.

 The drawback:

Now you have to do homework!  Stocks are not index funds! They require you to do some investigating of your own, unless, of course, you want to keep all your money in cash, gold and silver, and buried in your back yard!

Gold Miners are in the drivers seat, during these economic head winds.

Image via WikipediaI like gold miners this summer!!!

I especially like gold miners that do not have any of their production hedged.

I like gold miners that are producing lots of gold right now!

I like gold miners whose production is increasing at this writing.

I like gold miners who have more than one producing mine!

  I like gold miners whose infrastructure and operations are sound, with no forseeable production problems!

I like gold miners that operate in safe mining jurisdictions, with no political overtones!

I like gold miners that are well lead by smart management who show their smarts in an ongoing basis, with great execution of clear business plans!

I lke gold miners that make money, and that will continue to make money, no matter what the market does.

  I LIKE GOLD MINERS!!!!!

For those of you who have read past articles, you know I am invested in physical gold and silver. Make no mistake, I view these as great investments in this environment. However, this year, it is the gold miners, especially those miners meeting the above criteria, that will out perform the markets this fall, and beyond.

The U.S. dollar is shrinking, and will continue to shrink in the long run. Over the past six months, the U.S. dollar has lost 10% against the Euro!  THE EURO!, where countries are lining up from the smallest (Greece) to  some of the largest (Spain, and now Italy) at the European credit window.

The European union could, on paper, save Greece and maybe even Ireland and Portugal. But Spain and Italy are both way too big to save. There is now no doubt that the Euro is in crisis and may not even survive, at least in its current form.

The macro picture grows dimmer with each passing month.  The debt ceiling crisis in the USA, and the muddying of those waters by both political parties, is becoming the 800 lb gorilla.  The Tea Party will have none of it.  Their patrons in the Republican party, at the insistance of the TP, are playing brinkmanship with the U.S. economy at this writing. They do not want to extend the ceiling and will not approve ANY kind of tax increase, even though every expert in the field feels tax increases absolutely have to be part of the overall solution to U.S. debt. Democrats are once again, sitting on their hands. The unemployment rate is printed at just over 9%, but if you believe that, I have a bridge to sell you. Fully 14.5% of America is now on food stamps!  (That's right, 1/7th of the pupulation)

In comparison, the debt problems of  Greece is barely a 40 lb monkey in the mechanics of global markets. Even if the U.S. debt ceiling gets raised in the medium term, where does that leave the USD, especially as QE2 ends, and there are not enough buyers of U.S. treasuries to keep up the charade.

The new Gorilla stumbling into the zoo of international finance  is the debt problems of Italy, whose economy, over 1 $Trillion and about 25% of the Eurozone, might be considered a 700 lb Gorilla.  Greece, Ireland, and Portugal , are one thing, but Spain and Italy are in a different financial league, and if they go, so goes the Euro. Spain has 20% unemployment right now and Italy is more in debt that any of the others.

The golden elephant in the room is, India, which now buys more gold than any other country.  China, viewing gold as an alternate currency, however, is catching up. They now allow their citizens, for the first time, to hold physical gold. The Chinese government has actually been quietly encouraging its citizens to do exactly that. Other countries increasing their purchasing of gold include Brazil, Germany, Russia, Indonesia etc.  European banks, and by proxy, U.S. banks are no place to invest right now. Get out while you still can.

These problems are not new.  The tipping point was circa 2008, and the storm was sidetracked by the biggest financial experiment in history. Yes, there will always be "some" good stocks to buy, but for now:

I want to own gold, and gold miners, of the best quality. I am buying them now!


My current picks:


1. SanGold
2. Barrick
3. Kinross
4. Brigus Gold

In that order.

Happy investing

HP

PS: If you want to speculate with the big boys....

Nautilus Minerals (Seabed mining)

If you want to speculate on the cheap....
Visit: TNR Gold projects, Alaska




News: Undersea Gold Company Nautilus mining for a lot more!

Related articles

• Commodity Watch: Gold Getting Attractive Again, But Not Silver (GLD, GDX, GDXJ, SLV, SIL, NAK, MIDSX) (247wallst.com)
• $5000 Gold? (lewrockwell.com)
• Here's That Big GOLD $5,000 Call That Everyone Is Talking About Today (GLD) (businessinsider.com)
• 7 Secrets to Profitable Gold Investing, Part 1 (fool.com)
• SanGold increases MIll throughput/production (Retirefund)
• Fears about debt send gold price to record (seattletimes.nwsource.com)
• Newest Gold Boom Could Aid Big Miners (GLD, GDX, GDXJ, NEM, ABX, AUY, GG) (247wallst.com)

Updates: Asian investors stricken by gold fever - BNN

Taking profit: Sell in May and go away may be good advice this year!

As I have said before, it is never wrong to take profit. While no one can time the market (and I certainly am not attempting to do that here) however, taking profit when you are doing well is simply good common sense, especially at a time when macro events may tip the scales against your investment strategy,

As you already know, I like commodities! I like hard assets and hold gold, silver, lithium, copper etc.  I believe that, in the long run, these are great investments. I am concerned at this time, about the strong head winds which seem to be rising at this time in equity markets, and so, today, I took some good profits off the table and sold off shares.

I have done this for the past two weeks in fact, taking profit in the following companies:

Capitalism, greed, and the faustian bargain of more liquidity

"Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone" John Maynard Keynes

"The best way to destroy the Capitalist system is to debauch the currency" Vladimir Lenin

As more Billionaires are made, and the current ones increase their wealth in leaps and bounds, in the same year that workers are tremendously punished, and stand to lose their futures, one wonders if Capitalism itself isn't the third system to meet it's fate after National Socialism (Nazism) and Communism. Today, the pure Capitalist system is shown wanting, as never before. Let's call it "Kudlow Capitalism" after CNBC's very outspoken, cheer leader, of the billionaire club, Larry Kudlow. You know, the TV host who never allows anyone with a different slant on Capitalism to talk more than 20 seconds without either cutting them off or talking over their voices. The same guy that is now blaming President Obama for all the troubles, along with Fox news, who now resemble the Nazi propaganda machine of the 1930's

When "investment banks" hoard tankers full of oil offshore, awaiting a rise in oil prices, so as to pounce on the unsuspecting consumer like a cougar, is that good for the rest of the economy? Remember, this is not an oil company that needs storage space for a glut on the market, but an "investment bank"! Should they be allowed to speculate on such a large scale, in such a necessary commodity? Oil speculation is only one example of the "fingers in the cookie jar" mentality of big investment banks like JP Morgan and Goldman Sachs. As I've said before, if the price of oil is $70, you can probably chock up $25 of that price to these types of giant, market moving, speculators. (That's about 36% of the cost of filling up your cars gas tank). No wonder GS has come to be labeled a "Giant vampire squid" smothering the face of society with their tentacles following the smell of money into every orifice.

Several years ago, GS collected a $300,000,000 fee to help the country of Greece essentially fudge the numbers of their national debt. (to allow the lying Greek government to get into the Euro zone by skirting the necessity to disclose it's total debt ratio) Now their bets against that same debt stand to make them even more money. Essentially they gave Greece a reason to burn the house down, then bought insurance against the fire. Is this fraud or just good money management. You decide if they deserve the title of Vultures of Wall Street! (See Bank Bets - New York Times )

Investors in the Euro have already decided, by dumping their Euro's. Greece may yet get bailed out by it's Euro partners, but don't count on it. Why should hard working, prudent Germans, who have recently been told they cannot collect old age security pensions until after age 67, suddenly feel the urge to bail out free spending and freeloading Greeks, who can retire at 60. With Spain Portugal and Italy waiting in the wings for their own rescue, why would Germany and France (who have troubles of their own) even consider it. Greece should be ejected from the Euro zone unless or until they get their sick fiscal house in order, and their bulging debt under some sort of control. Civil unrest will result.

Speaking about sick fiscal policies and massive debt, The United States budget forecasts a $1.7 Trillion dollar debt for this year, bringing total debt to around $14T (depending on which number are crunched) by year end. If America continues to pump liquidity into the system, the storm clouds of 2008 will begin to pail in comparison with those forming over 2010 and beyond. The U.S. Government is now the sole backer of mortgages in the Country through it's control of Fannie Mae and Freddie Mac. If they nationalized those two entities right now, that would add over $5 Trillion to the U.S. Debt book. Add to that the fact that China is owed a big chunk of the United States debt at a time when a trade war with the Country looms large and those storm clouds get darker still. China holds $2 Trillion in their FE account, (including $800 Billion in U.S. debt) has been storing up massive amounts of commodities, is ahead in the production of green energy initiatives and has more than three times the population, so who is best suited to withstand a protracted trade war? Couple all of this with the continuing "gaming of the U.S. system" by the vultures of Wall Street, and the picture for prosperity in the Good Ole U.S. of A is dimming daily.

Weighing in on the "Faustian bargain" of Keynesian economic theory this week was none other than Conrad Black, in a letter to his old Alma Mater, the National Post (Almost surely written from his jail cell). The audacity of an old Bay Street fraudster, writing about the futility of propping up markets with so much liquidity, while other, bigger frauds are being precipitated upon an unsuspecting public purse, by much bigger "Wall Street" fish, exactly because of the liquidity infusion, was a little comical.

Whether the infusion of money comes from taxpayers (TARP and it's ilk) or from common shareholders, (as in Conrad Blacks case) there is always a vampire squid swimming nearby to latch on and leach every bit of money it can settle it's tentacles upon. Why does the general public always seem surprised when Wall Street Vultures pay out to their executives, over $100 Billion in bonuses for one year of speculation, while the American taxpayer is given a bill that neither they, their children or their grandchildren will be able to pay.

It is said that, "power corrupts and absolute power corrupts absolutely". Since the early 1970's we've been fed the mantra" greed is good" and "free markets can regulate themselves" (greed good - regulation bad - ie: Larry Kudlow and company) and that Government should just get out of the way and let markets regulate themselves. We are now reaping the painful rewards of that mindset. The vultures of Wall Street have proven that "Greed is corrupt, and absolute greed is corruption absolute"! The opposite of greed is not thrift. It is generosity. Generosity is a word completely lost on Wall Street. Vultures aren't generous, indeed they don't really care who they feed upon, but only that they feed.

The crooks settled in and took over the store so long ago that they have convinced the police that they are actually the owners. Only when the real owners return and demand change, will real change occur, but don't hold your breath. Every time that notion takes shape, the crooks rally the troops in Washington and the uninitiated across America, then threaten to close the great Casino, and everyone goes away until it re stocks and re-opens for business again.

Maybe it's time to tear down the Casino and start again!

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• The Second Phase of the Global Economic Crisis Is at Our Doorstep (seekingalpha.com)
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• Goldman admits helping Greece 'fiddle books' to conceal public debt (telegraph.co.uk)

Cruising in the Greek Islands this fall...

Image via Wikipedia

My wife and I are planning a trip to Europe this fall which includes a day in Vienna, several days in Rome and a cruise to the Greek Islands (Santorini and Mykonos), Athens Greece, Istanbul and Ephesus Turkey and Naples Italy before returning to Rome.

It is our fourth Cruise in Europe and though we usually choose Royal Caribbean Cruise Lines (rccl) on this occasion we will cruise aboard her sister line Celebrity Cruise Lines Celebrity Solstice.

This is a beautiful new ship and we are excitedly looking forward to seeing her.

If you have visited the Greek Islands recently or have been aboard the Solstice, please drop a comment regarding "things to know"!