Time to Buy, Gold Now Beating Stocks for the Year

Written by Nick Hodge
Posted September 13, 2017 at 7:52PM

I think it’s time to take some profits in equities.

I’ve been on record for some time now saying that a “see-saw” effect would be taking place in the market, whereby the easy money that’s been made from unprecedented stimulus and zero interest rate policy (ZIRP) would be taken off the table and rotated into traditional safe haven assets.

That is happening right now.

You won’t want to be caught without a seat when the music stops.

To that end, we’ve started locking in profits in my entry-level Wall Street’s Underground Profits newsletter over the past few months.

What we’re doing is the perfect illustration of how a wider selloff (crash?) will play out.

The Fed is leveraged to the hilt, stocks are way overvalued by typical measures, bank lending is barely growing (which is a sure sign a recession is looming), and the finance cabal has created the same situation in auto loans that took down the market 10 years ago.

But rather than tell you what’s going to happen… let me show you what is happening.

On July 14th, we sold Spirit Airlines for a profit of 40%. We bought it early 2016 just below $38 and sold it at $53.22. Here’s what it’s done since we locked in our profits two months ago:

Spirit Airlines 2017

Other major airlines that had been doing well, like Southwest (NYSE: LUV) and American (NYSE: AAL), have fallen hard as well.

Are they isolated?

Hardly.

Other major companies and sectors that depend on consumer spending are struggling as well.

Advanced Auto Parts (NYSE: AAP) is down 42% for the year. Under Armour (NYSE: UAA) is down 41% for the year. Macy’s is down 36%.

Yes, the S&P 500 is up 10.5% year-to-date, but an outsized portion of its gains are being driven by just a handful of stocks. Over the last 30 months, for example, 40% of the S&P’s gains were driven by six stocks: Facebook, Amazon, Google, Netflix, Apple, and Microsoft.

You could say it’s being artificially propped up.

Because elsewhere things ain’t so good.

Just this week Vitamin World marked the 25th retail chain this year with liabilities over $10 million to file for bankruptcy. That list includes children’s clothier Gymboree, shoe retailer Payless Holdings, electronics retailer H.H. Gregg, and outdoor retailer Gander Mountain.

2017 retail bankruptciesAs I’ve been saying for months with my see-saw analogy, as this capital flows out of mainstream stocks it is going to head to safe havens, specifically precious metals like silver and gold.

And wouldn’t you know it?

Take a look at a year-to-date chart of the S&P, gold prices, gold miners, and junior gold miners.

S&P vs gold stocks 2017(Click to Enlarge)

In the past two months, both gold prices and gold stocks have passed the S&P to outperform it for the year. Junior gold stocks are right on its tail.

The see-saw is beginning to tilt away from mainstream equities and toward precious metals. And there is still a lot more upside to come for the latter.

Why?

There are many reasons. But the simplest is that no one owns gold stocks right now.

According to Bank of America Merrill Lynch, during the last gold bull market their clients had a 7% allocation to the sector. Right now their clients' gold ownership is only at a 1% allocation.

BAC Gold Holdings(Click to Enlarge)

As that other 6% comes into the sector, you’ll want to be ahead of it. That’s what will propel gold and silver stocks much higher.

Now is the time to increase your exposure to precious metals stocks.

I have put together a full report on this see-saw phenomenon, and the 10 best stocks I think you should be buying right now to profit from it.

You can find that research here.

Call it like you see it,

Nick Hodge Signature

Nick Hodge

follow basic@nickchodge on Twitter

Nick is the founder and president of the Outsider Club, and the investment director of the thousands-strong stock advisories, Early Advantage and Wall Street's Underground Profits. He also heads Nick’s Notebook, a private placement and alert service that has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world. For more on Nick, take a look at his editor's page.

*Follow Outsider Club on Facebook and Twitter.

Comments

Investing in Marijuana Without Getting Burned

JMM_copper_superplay_banner_ad