By Jen Bawden
August 16, 2008
An update on my thoughts regarding commodities especially gold and silver. I would also add the DBA to this. As we have discussed numerous times over the last 3 months an uptick in the dollar could continue to erode gold and commodities. Obviously this has been a strong pattern of late.
Living in Florida I have seen first hand that real estate goes down just as fast as it goes up. (You will see that now in New York and the Hamptons.)
I know I am not alone in my conviction that there is strong market manipulation going on by the committee to save the world to try to hide the cancer that lurks within.
I do not for one minute believe that a bottom has been put into this bear market and I also believe that if we sit tight and wait until as I have been preaching the sun, stars and planets all align there will be incredible deals on gold and mining companies.
I am referring to; ONE, a late August/September/October crash in the market. TWO, the typical sell gold in May buy back in September slowdown in the metals market. THREE, a short term bounce in the dollar all of which I believe are about to happen.
This will provide unbelievable buying opportunities on gold companies like Noront (NOT), Goldcorp (G), Seabridge (SA) and Aurizon Mines (ARZ).
The government has a very good reason to get oil back below $100 (now that it has conducted its test on how high they can possibly push energy prices.)
A rekindling of the dollar was really the only way to push oil sharply down. When commodities started crashing I sold anything I had a profit in. I am still holding a few of my gold companies, including Seabridge and of course they have fallen a lot in the last few months but I am in them long term.
When oil falls below $100 it will be a good time to start looking at the below energy companies (especially if September or October gives us a big downturn as I expect it will!) I have also discovered a number of really great oil and gas companies that give excellent dividends.
My favorites are Arc Energy (Canadian), Alta Gas (Canadian), Advantage Energy (Canadian), Pembina Pipeline income fund (Canada). Lastly West Shore Terminals. A few US ones are Constellation Energy Partners (CEP) at 12%, and Enbridge (ENB) which yields 8%.
The idea is to be sitting in cash ready for a 1000 to 2000 down week or two. Be ready to pounce once the market has really crashed on these solid income producing energy companies. This also goes for metal companies like Silver Wheaton (SLW) who buy their silver at a very low price and sell it for whatever the going price is.
I believe there is a fundamental fact missing from the markets calculations. The dollar has not stopped falling because Bernanke has stopped throwing money out of helicopters nor because the credit crunch is over. Rather, the American dollar has stopped dropping because finally Britain, Europe and the rest of the world are catching the cold the US gave them.
When everybody wakes up and figures out that all the worlds currencies are going to be inflated just as the US has tried to do to keep the economy churning commodities will continue their very strong bull run.
I am waiting and watching for the dollar to finish its bounce and then I will be locking and loading with dividend producing oil and gas companies and the ETF DGP which is the Deutsche bank 2x gold long. Obviously the key here is patience until oil heads below 100 and even in a miracle to $85 again. Be patient while Gold and silver fall.
In the next 5 years there are very few places I would feel safe, commodities will be one of them. In turbulent times the only other safe place to be is in cash. (That is if the US Peso does not devalue)
The day will come though when the world will wake up to realize that America has a lot more then just a cold and I fear one day the dollar could tumble as fast as it seems to now be rebounding.
Last but not least every time the market goes anther few hundred points higher I buy more ETFs to short it. (Denise and my favorite is the Double Dow Down (DXD)).