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I have two urgent questions for you.
If so, great. If not, the lesson learned could still save you a fortune in the months ahead:
Avoid all investments that are vulnerable That includes long-term bonds, bank stocks, mortgage companies and businesses that borrow a lot of money … or encourage their customers to do so. Meanwhile, did you ride the mega-wave of profits churned out by the gold and energy investments we highlighted — like Royal Gold, Agnico Eagle, Enerplus or the Oil Service HOLDRs? If so, stick with them. If not, you have another, potentially even greater chance to ride the wave this year, provided you follow this basic principal:
Seek investments that are insulated That includes …
Already, in the first few days of the new year …
The Great Opportunities (and Dangers)
This is the leading exchange-traded fund representing the nation’s largest companies that service the oil and gas industry. If you look back over the last couple of years and track the fund from low to low, you can see three critical phases in its rise: In the first phase, from the middle of 2004 to the middle of 2005, it appreciated steadily, from the mid-60s to the mid-80s … In the second phase, it rose more quickly, from the mid-80s to 108, and now … In the third phase, its rise has accelerated even further, catapulting the stock to over $138 this week. This is the explosive stage when most of the profits are made — and in a much shorter period of time. It is also the time when volatility can be the greatest, bringing sharp and quick corrections. Our recommendation: If you’re on board with this ETF or something similar, stick with it. If not, use any temporary corrections, such as yesterday’s modest decline, to jump on board. But you don’t have to buy the OIH itself to profit from this move. You can buy some of the individual stocks in the index. Or for maximum leverage, you can buy …
Some advantages:
They’re not for your keep-safe funds. But with the kind of accelerated rise we’re witnessing in this sector right now, they could be the tail that wags the dog in your portfolio.
On December 27, I showed you how big money was on the move into companies like Royal Gold (RGLD). Sure enough, the stock has continued to rise virtually nonstop ever since, surging by ANOTHER 15% just since we last talked about it, reaching as high as $37 this week. Yesterday, it retreated. And if it continues to do so in the days ahead, it may open up one last window for late-comers to buy before the next major surge. Ditto for Agnico-Eagle Mines, which we’ve also been highlighting here.
Last year, we told you the stock would blast through all its barriers on the chart, and now it has done precisely that. Its current surge, from the $13 level to the $22 area is almost a double in less than 9 weeks. But the surge still seems to have legs, and if gold bullion continues to rise, we wouldn’t be surprised to see AEM shoot straight for the $30 – $40 range. Stocks in other natural resources that we’ve been following for you in Money and Markets have also gone ballistic in recent days. Take Peabody Energy (BTU), for example, a major coal producer with operations in the U.S. and overseas. After a 2-month pause late last year, the company’s shares have now embarked on another, accelerated surge, reaching new all-time highs just this week. If you’re already on board, don’t do a thing. If not, we think it’s a buy on any pullback, say, to the mid-$80s. Or consider Alcoa Aluminum (AA). Unlike the others, this is not one of those core natural resource stocks that’s had a well-established uptrend for the past few years. Quite to the contrary, it was pounded steadily downward from nearly $39 in early 2004 to $22.54 as recently as last October 13. But when it broke out to the upside last year, we alerted readers to the event. And now, it’s been climbing nicely ever since, paving the way for more gains this year. Aluminum prices, meanwhile, are likely to continue rising. You can buy these stocks and do well this year. Or, as I mentioned a moment ago, you can buy the more highly leveraged investments — options or small caps — and do several times better. Whatever you do, however, don’t walk away with the impression that this is just a matter of a rising market tide lifting all ships. Don’t be mislead to believe that you can just sit in an S&P 500 Index fund or throw darts at stock listings and still make money. Quite to the contrary. This remains, as before, a schizophrenic market, divided into two opposite camps — big winners and big losers. A prime example of the latter: General Motors.
Ford, which just got downgraded (again!) by S&P, is in a similar situation. Just yesterday, S&P sank Ford’s credit rating deeper into junk bond territory, saying it was skeptical about the company’s ability to turn around its operations in North America. Ford Motor Credit, the company’s financing arm, got the same treatment from S&P. The rating on both was slashed by two notches to BB-, still overrated, in our view. Why am I so bearish? Because Detroit is getting smacked from two sides: First, even though gasoline prices have come down from their post-hurricane peaks, Americans are still leery of buying their gas-guzzling SUVs. And despite the inevitability of higher fuel costs, these companies have done little or nothing to adapt so far. Second, without the low-interest financing deals that were so popular in recent years, most consumers simply don’t have access to the cash they’d need anyhow. Result: GM’s and Ford’s auto sales are the victim of both rising inflation and higher interest rates. Home construction companies like Lennar (LEN) … mortgage lenders like Fannie Mae (FNMA) … non-prime lenders … major banks and brokerage firms … all are — or soon will be — getting pinched in this environment. What To Do Go back to the two questions I asked you at the outset, and double-check to make sure you’re on the right track. Ask yourself the two key questions again: 1. Are you avoiding investments that are vulnerable to rising inflation and higher interest rates? If not, don’t delay one moment longer. Get out of long-term bonds. Get out of stocks that move in tandem with bonds, such as major financial stocks. Get out of companies that are the most vulnerable to costlier fuel or the surging cost of key commodities. 2. Are you putting some of your money into investments that are best positioned to profit in this environment? If not, what are you waiting for? You can do it on your own. You can follow the specific portfolio instructions we provide in our Real Wealth Report (dedicated to natural resources) and Safe Money Report (primarily for risk-adverse investors). Or you can go for the high-octane profits in select small-cap natural resource stocks. (Read Larry’s latest report for more details). Plus, one last question: Do you have a solid chunk of your money set aside in a safe haven? We think it’s a must! Best wishes, Martin About MONEY AND MARKETS MONEY AND MARKETS (MAM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Larry Edelson, Tony Sagami and other contributors. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MAM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MAM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Contributors include Marie Albin, John Burke, Beth Cain, Christine Johnston, Amber Dakar, Michael Larson, Monica Lewman-Garcia, Julie Trudeau and others.
© 2006 by Weiss Research, Inc. All rights reserved. |
Did you follow our recommendation last year to get the heck out of stocks that sank — like Delphi, Delta Airlines, Fannie Mae, Ford and General Motors?
Consider the Oil Service HOLDRs (OIH), for example — which we highlighted frequently last year.
Gold Mining Shares
Despite the strong rally in the Dow to kick off the new year … and despite some gains in the last couple of days … the big picture is that GM’s shares are still sinking into a bottomless pit.
