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Things have changed, nothing about today’s financial world is conventional. This requires more than a broker calling you and selling the house product or advice of when to buy and sell or buying and holding. Gone are the days of buying a good company, the best of the best, and holding on for a multi year profit. The primary reasons for this is, the world is so interconnected now and too many people have been burned over the last 20 years.
History looks back at Ghandi’s no war revolution against England and notes the victory as amazing. Now think about the Facebook revolutions of Egypt and Uganda, small countries you may say but countries with new regimes nonetheless. Companies are like countries, it does not take much good press or bad press for social media to catch something and create voids in the market of either buyers or sellers and send prices dramatically up or down. We also look back over the last 20 years, at the market bubbles, the technology bubbles, the oil bubble, the real estate bubble and the commodity bubbles and while these circumstances made some people lots of money, the majority held on too long and saw electronic profits turn into real cash losses.
These events, especially those of losses, that ‘were not supposed to happen’, have left the average person confused and unsure of what to do. These unconventional times require that we employ active market analysis and strategy rather than the conventional buy, hold and hope. It requires you work with a group of people who work differently and that truly respect your capital and your future. Global Market Assets works with a different incentive than you might find in any other group of asset managers, we do not make money if you do not make money. If there is a loss, we share it with you, by using our time and energy working to recoup the loss for free. Our unconventional respect of your capital requires that we look at the markets in strategic ways that move profits forward.
Silver is an odd investment vehicle, odd due to the fact it is trapped between being a currency commodity and an industrial commodity. Some people do consider Silver to be a currency commodity, however, that space and ideology is really owned by Gold. You never hear mainstream thinking that Silver is a currency reserve, sorry Silver ideologists but it is true. That would really put Silver appropriately in the industrial commodity category like Copper. If you understand this concept, please take a few moments to review the prices of industrial metal commodities like copper. Do not make the mistake of considering Silver as a precious metal like Platinum, Silver is not a rare element on planet Earth and so should not be considered "precious". Again, apologies to Silver ideologists and jewelers alike.
We first became interested in Silver in 2001. We started buying silver bars. Yes, we bought the physical because we thought it was cool to have around, not a mistake we will ever make again. Our average cost was in $7-$8 per ounce range. Then one day Silver shot up to the $12 range and we thought that was awesome but not good enough to sell as we owed it physically and not electronically. Once Silver was staying over $10 per ounce it was all the buzz in the news, making it a good investment to be in- IF you were in below $10 an ounce. We did not watch it tick for tick but when it went above $20 an ounce the news was crazy with wild reports of Silver being the "next Gold" and it going "for sure $100 to $500" ounce. We recognized we were in a trading frenzy. Could Silver go to $100, $200 or $500 per ounce? Remember this: IN A FRENZY PRICE CAN GO ANYWHERE. So we decided to wait and see where the Silver feeding frenzy would go, with the strategy of slowing moving up our protective stop along the ride (our protective stop being the day we ran to the Silver buyers and sold at their store). When Silver was near $50 an ounce our protective stop was moved up to $41. We ended up getting a little over $39 per ounce buy the time we got all the physical together, arrived at the Silver dealer and took the large hit on selling the actual physical bouillon instead of the basic brokerage fee for trading Silver in electronic form. From our selling point it was a slow ride down in the $30, then $20 and now $16 per ounce now. Not bad.
So is NOW the best time to buy Silver? No. Silver could very well head back towards $10 an ounce. So WHEN is the best time to start looking into investing in Silver? It will become interesting again after Gold starts another big move upwards and once again Silver is marketed as a currency reserve instead of a commodity.
As Oil begins to trade on the first day of the year, it is one of the most attractive places to put money to work this year- when the time is right.
On the chart posted below, there are three of the most important price levels for Oil for 2015. As price approaches these levels, we expect there to be excellent opportunities. The Most Important Price Level for Oil in the year 2015 is $75.36. The price levels of $43.80 and $80.47 are also extremely important. Can Oil really fall to $43.80, sure, anything can happen. We will be looking for opportunities to trade Oil to the $75.36 area.
What market conditions will be created if Oil drops to the $43.80 or lower price levels? We will discuss that in a future article.
For now, keep your eye on the declining trendline noted on the Oil chart.
England holds an interesting position between Europe and the United States and both of these countries have their impact on the English economy. England has many of the European Union benefits without sharing their currency, so they are in a better position to balance internally the impacts of both the EU and American economies on theirs.
The American economy is improving while the EU is struggling but overall there is real growth in the economy in England. The two impacts we see in 2015 are the Great British Pound to gain ground over the Euro and we also expect to see the Great British Pound locked into a valuation range with the US Dollar.
Now is not the time to look to place capital in either of these ideas, as there have already been market moves to support these ideas. However, there will be upcoming opportunities in the months ahead to put capital to work here. We will keep a watch both ways to best track these two elements the GBPUSD and the EURGBP.
The first part of 2014 was quiet for the DOW Jones Industrial Average with its slow grind up in price. Then in the middle of the year we started to experience some extreme volatility. Why so much volatility? For the first time in almost 14 years the major economic countries of the world are preparing and communicating they are looking to raise interest rates, even though they have indicated there will be no large rate hikes.
This poses a problem for the markets as they have had over a decade of free and loose money supply and now they are looking to have that money supply reduced. Traditionally, when the governing banks of the world go into a tightening of the money supply, the equity markets move downwards. Will the equity markets follow that tradition this time? One cannot be sure as we live in a different economic world then existed before the last 14 years of loose money supply. So what should we do?
If we are currently long equities, we should keep a watchful eye on price as it relates to the trendline in the graphic below. If price closes below that line, we should look to liquidate some of our equity assets. Should we go long at this time in the DOW or equities in general? We are not in favor that at this time as there are plenty of other markets, with better opportunities to put money to work in. What if the market races past the recent highs? We will let it run and then wait of a good opportunity to get into that run.
We are close to DOW 20,000 and it is quite likely that the markets will spike to that level, however, DOW 25,000 is expected to be a very difficult target to reach in 2015 with the tightening money supply- remember the old expression, 'don't fight the FED'.
The good thing about the recent volatility, is it gives us some excellent significant price levels to use for market entries and market exits.
2104 has been a rough year for those who have been holding Gold, not that it lost a lot ground in 2014 but it remained range bound. Will Gold go back up to the highs of $1900.00?
At this time, even though Gold has been consolidating, all of the longer term trends are still down. Many people get confused as to direction of trend, they will look at the chart below and see Gold is going up, it was going up but at this time it is not. The chart shows over 20 years of price for Gold and for most of those years Gold was stuck in a price range. Since the peak in price, Gold has had a difficult time crossing both of the descending trendlines noted on the chart. The $1030.00 level is the last area where price tried to pull back in its upward move and we expect price to move down to that level. If price gets to the $1030.00 level, we will watch for it to hold and break up over the decelerating trendline.
The other thing we will be on the watch for is price closing over the decelerating trendline even if price does not drop to the $1030.00 level.
What about there being fundamental news that could push Gold back up in 2015? At this time, there is nothing on the news horizon that could propel Gold higher. You have to keep keep in mind, Gold is not as rare as people think and it is an emotional investment when economic times are bad. Now that many of the G7 countries are looking to raise interest rates in 2015, there is little expectation of major economic issues in the near future and thus little impetus for this to be a reason for Gold to move upwards.
For now we will watch to see if Gold falls further and monitor the points noted above for an indication of a resumption of Gold's upward movement. Even though that may sound a bit bleak for those holding Gold from much higher levels, we expect there to be opportunities to make profits in range bound markets over the next several months.
The news release for the December 2015 USA Federal Reserve was a change in their language as to when interest rates may rise. Again, there is no time indication as to exactly when they intend to raise interest rates in the USA, sometime in 2015. The continued vagueness gives the governing body of bankers plenty of room to play, there are 12 months in 2015 and much can happen that is more likely to push it to the end of the year, if not, until 2016.
Just an idea to keep in mind, that as rates go up equity markets go down. There is probably not a person in government right now that is interested in seeing massive equity market reversals, so if and when interest rates go up, expect them to be very slow going. Slow going will give the market participants plenty of time to adjust their strategies.
The price of Oil is currently still unwinding and we will have to wait until after the first of the year, 2015, to see if we start to develop a base from which it may begin to move upwards. That said, there are some interesting developments that are occurring in the price action of Oil.
If you notice the price chart below, we have a decelerating trendline and that is an excellent precursor to a base being formed. The two attempts of price to break and close over the decelerating trendline are also significant.
Fundamentally, we also need to keep an eye on the $40-$50 range for Oil. It has been said that price of Oil needs to be above $40 a barrel to profitably remove oil from both the Canadian and American Oil fields and that was mentioned almost 10 years ago. If we consider inflation, wages and materials we are nearing the price level where it will cost money to pump oil from the Canadian and American pools.
Both from a fundamental and price perspective, Oil is beginning to look very attractive.
Investing in the global markets presents numerous challenges and fears to most investors. The stability of the local governments and the regulatory oversight established in those local countries to monitor the complex workings of various markets are two challenging components to examine and track.
The Foreign Exchange markets, or Forex markets, allow investors to participate in significant changes in the global economy and current shorter term trends without having to determine the validity, solvency and security of foreign companies.
For example, in the last several years there have been discoveries of some of the largest oil fields in the world, the largest supply of clean diamonds in the world and the opening of a cross continent shipping route. Imagine all the companies that have the opportunity to benefit, how do you know which ones will get the contracts, grow successfully and be well managed- you don’t. The greatest beneficiary is going to be the overall Canadian economy, it is secure, stable and has plenty of regulation. The Canadian Dollar has increased as much as 40%* while the world markets went through the largest crash of all time.
There are also trends that occur on a daily, weekly and monthly level. These moves also have th potential to produce excellent returns*. How is this possible? The value of each country’s currency changes continuously all day long just like the price of a stock, those movements also have potential to produce profitable returns*.
What about the stability of smaller countries and their currency?
We believe there are plenty of opportunities in the major countries of the world that do business with and process the currency for the smaller perhaps less stable and less secure countries. For example, if there is a lot of growth in an emerging country they will need more oil. Oil can only be purchased with US Dollars and EURO Dollars. The emerging country will have to go to the currency market and purchase US Dollars or EURO dollars with their money. That increases the demand for US and EURO dollars and thus their value. That increase in value of the US and EURO dollar can be a potentially profitable short term increase or long term increase. So investing in currencies with long time stable governments such as the USA, Great Britain, Japan, Canada, Australia and the EURO Zone presents us plenty of investment opportunities*.
One of the best ways to participate in the global markets is through Foreign Exchange. Why is that?
Investing in global companies can be difficult as international companies are governed by their respective countries regulatory bodies all of which have different guidelines and mandates. Getting to know the intricacies of both the companies and the governments that are oversee them can be a virtual impossibility for the majority of people who would wish to find opportunities abroad from their local markets.
Not only countries have departments of company oversight they also have departments the work to control and maintain the business environment. In the USA, for example, the SEC would be the department of oversight for the equities market and the Federal Reserve works to stabilize the financial environment via interest rates. The departments responsible for maintaining a good business environment, in their respective countries, monitor the economic conditions to keep working conditions where well run companies can be profitable and keep their population working. When these departments use the tools at their disposal, such as interest rates, to create a stable business environment they impact the valuation of their currency. Therefore, when a countries business environment is weak their currency will become weak and when the business environment is strong their currency will become stronger. Why is this important?
While it may be difficult to get credible information on foreign companies and understand the departments that oversee them, it is easy to understand the economic governing bodies as all economies are governed by the same economic principles. While we may not see the impact of these departments decisions immediately in their currency, we will see the impact over time. We have to consider all the public companies a government entity must oversee and this helps us to understand why some companies are able to get away with unethical conduct for such a long time and financially damage investors who place their money in them. If we compare that, with the small number of major countries in the world and how they keep a careful watch on each other to properly meet the reporting standards they all share, we begin to see the advantage of investing in a countries currency instead of the companies operating within them.
So why do the currency markets carry the stigma of being more high risk than any other market? The leverage that can be used in trading the currency markets, the overtrading of many currency market participants and overall lack of knowledge traders have of the currency markets make it appear higher risk than any other market, when in reality the risk involved is the same as any other market that operates in the world.
When one considers that the countries of the world are keeping a close eye on each other, their reporting, their currency valuation and that they get together for regular meetings, we can begin to appreciate that perhaps one of the most visible and controlled global markets to participate in are the world currency markets.