By George Leong for Daily Gains Letter | Sep 12, 2014
A look at precious metals shows gold and silver are devoid of any momentum at this time, while copper has been steadily retrenching from its recent highs.
Copper is playing off of the global economic growth, but a metal that is surging on the charts and catching the imagination of metal traders on the London Metal Exchange is zinc.
Zinc is used in numerous industrial and consumer applications. Steel companies use zinc as a rust inhibitor, so it’s quite important to manufacturing. The United States Mint also uses zinc to make pennies.
The problem is that the world supply of zinc is contracting.
However, zinc is currently around a three-year high and looks good as an investment opportunity at this time.
An intriguing small-cap zinc play that has been sizzling on the chart and is an investment opportunity in the global economic renewal and supply issues is Horsehead Holding Corp. (NASDAQ/ZINC). The company’s share price is up 62% from its 52-week low and has easily outperformed the S&P 500 over the past year with a 45% advance. But despite the company’s advance, Horsehead seems to still have upside potential, which suggests the company could offer a good investment opportunity.
Operating via its Horsehead Corp. subsidiary, the company produces specialty zinc and zinc-based products that are made from recycled materials.
The company closed an old plant and replaced it with a newer, more advanced facility that will produce better fabricated steel products along with raw materials found in the manufacturing of rubber tires, alkaline batteries, paint, chemicals, pharmaceuticals, and stainless steel.
Products include zinc metal used as a protective coating to … Read More
By Moe Zulfiqar for Daily Gains Letter | Mar 26, 2014
By now, you have probably noticed one phenomenon: the speculations regarding China’s growth are increasing each day. Turning on the TV or flipping through the pages of the newspaper, you’ll likely hear and read all about how the second-biggest economic hub in the global economy will tumble.
No doubt, the arguments backing this argument are very credible. The Chinese economy is seeing an economic slowdown and troubles in that country continue to gain strength. For example, the Chinese manufacturing sector is stalling. In March, the HSBC Flash China Manufacturing Purchasing Mangers’ Index (PMI) declined to its lowest level in eight months. The output index declined to an 18-month low. (Source: “HSBC Purchasing Managers’ Index Press Release; Output contract at quickest pace in 18 months during March,” Markit, March 24, 2014.)
We have seen a few companies in the Chinese economy default on their bonds, and there are fears that more will soon fall. The widespread speculation is that the government might not come to the aid of those companies that are in trouble.
With this, investors are panicking. One of the hardest-hit asset classes due to this panic is copper. Please take a look at the chart of copper prices below.
Chart courtesy of www.StockCharts.com
Since the beginning of the year, copper prices are down more than 13% and investors believe demand for the red metal will continue to decrease due to the decline in manufacturing. During the past decade, China was building massive infrastructure and a significant amount of copper was needed as a result. This is not the case anymore.
Copper prices have broken below a key level—$3.00—and … Read More
By Moe Zulfiqar for Daily Gains Letter | Mar 25, 2014
Problems in the Canadian economy are growing and whispers of an economic slowdown are looming in the air. If an economic slowdown does occur, the Canadian dollar will be the primary victim—and investors can profit heavily from this scenario.
The central bank of the country isn’t very optimistic about the growth. Commenting on the country’s first-quarter growth, the governor of the Bank of Canada, Stephen Poloz, said, “What we have seen is that the numbers in the first quarter have been a little shy of what we were expecting.” He added, “It’s easy to point to the weather as a qualitative explainer, but it is hard for us to believe that all of that is just that.” (Source: Woodbury, R., “UPDATE 3-Canada’s Poloz sees a future of slower growth, low rates,” Reuters, March 18, 2014.)
The Bank of Canada lowered its growth estimates from what it originally anticipated. It now expects the Canadian economy to grow at an annualized pace of 2.5% in the first quarter compared to the 2.9% it predicted in December.
The Bank of Canada isn’t the only place that is suggesting the Canadian economy is headed towards an economic slowdown.
The companies traded on Canadian stock exchanges are warning about an economic slowdown, too. We can tell this by looking at their corporate earnings. If their profits start to show troubles, then it means the overall economy may be slowing. Consider this: in the fourth quarter of 2013, 60% of all the companies on the Toronto Stock Exchange (TSX) missed their earnings expectations. (Source: Shmuel, J., “Why is the TSX rallying even as Canadian companies suffer?” … Read More
By Sasha Cekerevac for Daily Gains Letter | Mar 14, 2014
There is something going on right now in the copper market that should alarm you. Over the past week, the price of copper has plunged, recently hitting a four-year low.
Why should this matter?
Most investors and analysts are placing bets that economic growth is about to re-accelerate globally. Never before has the world been so interlinked, so we must pay attention to what is occurring internationally.
Copper is an important part of the potential for economic growth, not just because it is used in building and construction, but because it is also a major factor in the Chinese lending market, which is now showing severe strain leading to a potential debt crisis.
Remember, the last financial emergency was led by a debt crisis brought on by a housing bubble that eventually popped. High levels of debt creating a bubble are always dangerous, as the hangover is quite severe.
How does this impact economic growth for us here in America?
To begin with, we all know that the U.S. is doing relatively better than other parts of the world, but we are not exactly running at full speed. Any slowdown in economic growth—especially with a country as large as China—that is brought on by a debt crisis in that nation could severely impact our economy.
In China, the lending market is quite different than in North America, and firms have to rely on what’s called shadow banking.
Many firms in China have trouble borrowing, so they buy copper and use it as collateral. We are not talking about a small amount of money, as a shadow banking system in China … Read More
By Moe Zulfiqar for Daily Gains Letter | Aug 8, 2013
While investors with balanced portfolios have enjoyed great returns provided by the key stock indices thus far, those who were heavily focused on commodities and the basic material sector most likely beg to differ. Commodities prices have come down across the board: precious metals like gold and silver have been trending downward, copper prices are edging lower, and agricultural products like corn and soybeans are outright facing selling pressures.
With these happenings comes a question: what should an investor do in situations like these, when the commodities prices are sliding lower?
One action investors might want to take before falling commodities prices take a further toll on their portfolio is to cut their losses and change their allocation, selling what has gone down significantly. Simple math would suggest this: if a stock has fallen 50% in value, it has to increase 100% for an investor to just break even.
If investors continue to be persistent with a belief that commodities prices have a great future ahead, but are witnessing a minor sell-off now, they may want to look at companies that are involved in making, exploring, or doing business with those commodities and have some sort of income attributes to them.
The idea behind this investment strategy is simple: until the commodities prices settle down, companies can provide investors with income in the form of dividends. For example, if a stock price goes down 10%, but over the year it provides a six-percent dividend, then, in essence, their loss is only four percent for the year.
The following are a few ways investors can be exposed to certain commodities and … Read More