smart-money-report.com Blog

There are five pillars to our approach to investment success.

Number 1: Identify Major Investment Themes

In early 2003, we identified our favorable and unfavorable major investment themes for the next 10, 15, 20 years or so: Read the rest of this entry »

The Commitments of Traders report (COT) is a weekly government report that is extremely valuable in knowing what the “smart money” is doing in various futures markets. There is a report for each futures market. Although COT reports have been around for years, the average investor not only doesn’t know how to use it, most don’t even know that it exists. Read the rest of this entry »

The new Gold Miners Index ETF (GDX) that started trading last week looks like a winner. I find it very difficult to analyze gold mining stocks from a traditional fundamental analysis perspective, so I think an ETF that tracks a good gold mining index is going to be very popular.

GDX has approximately 43 mining stocks in the index. And it is very well diversified among a wide variety of mining companies. Here are the components as of 4/30/05. It not only has the big guys — Newmont, Barrick, Goldcorp — in the index, it has some small caps as well. It even has a few silver stocks.

And it has the volatility needed for big potential profits:

Over the last five years, the index has gone up 285% while the price of gold has gone up 137%, more than doubling the profit of owning gold over that period of time. I welcome this new addition to the ever-growing list of very useful exchange traded funds.

There has been a lot of hype over the commodity sell off. And, indeed, it has caused us to take profits in most of our mining stocks. But there has also been a big pull back in emerging markets:

The I-Shares emerging market ETF (EEM) is off 16% in less than three weeks. In fact, it’s getting very close to its upward trending 40-week moving average. If it holds the moving average, consolidates, and moves up enough to trigger a Parabolic SAR buy signal, there could be a real opportunity there. In other words, the emerging markets are still primary bull markets and the current sell off should be viewed as a potential buying opportunity rather than the beginning of a new bearish trend.

What is a small cap stock? First of all, “cap” is short for capitalization. Capitalization means the market price of an entire company, calculated by multiplying the number of shares outstanding by the price per share. Some people define a small cap stock as one with a market cap of less than $1 billion. But I like to define them as ones with a market cap of under $500 million. Read the rest of this entry »

Ever since the bull market for precious metals began there have been times when the mining stocks are cheap in relation to the metals and there have been time when the mining stocks have been expensive:

Whenever the gold/XAU ratio has been above 5 it has been a good time to buy mining stocks. Take Newmont Mining (NEM) as an example:

When the ratio has been above 5, NEM has been in a buying range. It’s getting close. We own no gold or silver mining stocks at the moment. We have 40% cash. We will bide our time until we get a signal. But opportunity appears to be near at hand.

Over the years, I’ve helped hundreds (maybe over a thousand) of people with their personal financial planning. And I can tell you that there are five basic things you want to do to never have a serious financial problem the rest of your life. Read the rest of this entry »

You gotta be impressed with copper. Commodity prices get hammered yesterday and copper, the strongest one of all, rallies to close only 3% down for the day. We’ve taken profits on gold and silver stocks. All we have left are copper and oil stocks along with the silver ETF. The oil companies don’t need $70 oil to do well. And copper just has a lot of underlying demand as evidenced by the very bullish commitments of traders reports and yesterday’s price action.

I knew this was coming. Commodity prices finally take a dive and the conventional wisdom is that it was speculation all along that was driving commodity prices higher rather than true demand. Don’t believe it for a moment. Commodity prices have been going up precisely because there is growing global demand and limited supply.

Also, prices are cheap. Look at the big picture. Commodity prices were in a 20+ year bear market. And history is clear. The long bear market is over, and we’re in the early years of a very long bull market. Sure every once in a while speculation will drive prices on a short term basis. And I’m quite sure that speculation had a lot to do with the recent surge. But speculation is not what’s causing the primary bull market in commodities. Keep your eye on the ball, ignore the chatter, and you’ll do well.

“The most important person on earth is a mother. She cannot claim the honor of having built Notre Dame Cathedral. She need not. She has built something more magnificent than any cathedral—a dwelling for an immortal soul….The angels have not been blessed with such a grace.”

– Jozsef Cardinal Mindszenty (1892—1975)