The summer doldrums are in effect, but that doesnt mean that there isnt much going on in the finance and investing world. There are a number of macro events taking place across the world – from central banks to IMF to other geopolitical issues in the middle east, Europe, Asia etc. All these issues could spell trouble for the world and I remain in a “risk-off” mode, no matter what the S&P thinks.
The stock market seems to be trading as if nothing is wrong with the world, but look under the surface and there is nothing optimistic as it continues to trade at all time highs. Interest raise expectations have all but vanished at the Fed, helicopter money is openly discussed as if it’s a normal course of action and the world will be able to “grow” again. I remain extremely skeptical and have been moving my portfolio to protect against the coming disaster.
What does this all mean for the macro/global economy. Its hard to know…except that it brings more volatility and starts the next innings of currency wars. The US$ continues to rise against the global basket of currencies, but interesting the Japanese Yen has been rallying as well. Keeping an eye on the currency can provide a good pulse on how different markets are perceived in the overall global economy.
Outlook for August 2016
As things stand, there are a lot of headwinds facing the economy. Potential recession/depression troubles still exist. The stock market continues flying high and investors continue ignoring all warnings coming from the bond market, commodities market, transportation market, manufacturing market indices etc. Even an earnings recession and discarding GAAP measure for accounting principles by most blue chip companies cannot seem to bring this market down. I however remain skeptical and wait for the storm. It is for this reason that gold and silver, typical safe havens, continue to be my focus. Generally speaking, things haven’t changed much since my Outlook for 2016 (from January) post. Be sure to check it out for further investment ideas.
I recently decided to liquidated 1/3 of my portfolio and move to cash. I still continue to hold DGI stocks, and am focused on reducing the overall number of holdings. The reasons have been shared in this post. As I already discussed in that article, I want to concentrate on a smaller number of holdings and the only sector that I am bullish on is the precious metals space — gold and silver. Over the course of last couple of months, I have initiated new positions in Silver Wheaton (SLW.TO) and Pan American Silver (PAA.TO) and will be looking for any weakness to add more. I am also looking to upgrade to a better quality of gold mining stock. I own IAMGold (IMG.TO) and the company has had some management issues — a company that I do not mind selling, hence the reason I wrote a covered call on it last month during the ensuing panic after the Brexit vote. Since then, I have picked up shares of B2Gold Corp (BTO.TO) which is a much better run company and trades a good price even after the spectacular run up this year.
It is interesting to note that gold/silver have had an incredible performance so far this year as the US$ continues to rise (which normally has inverse correlation). So, when the tide turns around US$, we can expect gold/silver to really take off. Jim Rickards had an interesting comment about the movement stating: “Gold stopped being a commodity and became money”, which I thought was very telling.
— Jim Rickards (@JamesGRickards) July 10, 2016
I am currently reading and learning a lot about the mining industry. Its a space that I do not understand very well, and I hope to build my knowledge up. The commodities continue to be hated, but the moves in H1 2016 have been promising. Perhaps this is the start of a new bull market? Or is it a dead cat bounce? A false start perhaps? No one really knows…but I think its a good time to start loading up some shares in the sector as its one area I find presents good opportunities.
As it stands, our current portfolio diversification is as shown below:
August is expected to be another slow month when it comes to dividend increase announcements. I am expecting only one company to announce an increase our portfolio.
- Bank of Nova Scotia (BNS.TO) – last increase was 2.86% in Mar 2016
What are your thoughts on the stocks mentioned here? Do you own them or are they on your watchlist? What do you think of the current market levels and buying here? Make sure to leave a comment below as I value reading your questions and comments.