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Investing Ideas A New Bull Market Begins Now
Investing Ideas A New Bull Market Begins Now 
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The dollar index The Bear Stearns rescue and the Treasury department’s call for a new “blueprint” have helped ignite a rally in financial stocks… but it seems nothing can kickstart the dollar. |
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| A New Bull Market Begins Now |
| Tuesday, 22 January 2008 | |||||||||
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It’s tough to believe, but there is still one bull market raging on. With the U.S. markets closed, I was looking forward to taking a day to review some current positions—figuring out what’s going to recover, what’s not… and act accordingly. Even though the markets are down, this is still a time to sell the losers. But after I woke up today at about 4:30am Pacific Time (I’m still getting my sleep schedule back to normal after coming back from Asia), the first thing I did was turn on my computer to see what was happening and found the markets in the red up and down the board. Hong Kong was down 5.5%. Shanghai’s main index was struck with a 5.1% loss. India fell 7.7%. The DAX in Germany fell 4.2%. And the TSX Venture Exchange (where the most speculative, yet most highly profitable trades are made) was off 6.5% after the first hour of trading. It was a bloodbath around the world and the U.S. missed it all…in a way. Today’s U.S. market closure was actually one of the key catalysts for today’s worldwide market turn down. Despite what the news reports say about London, Frankfurt, Tokyo, and Hong Kong, the deepest pockets and most powerful money managers are mostly in the United States. And with a day off like today, the extra liquidity and buying demand from bottom fishing value traders just didn’t come through. So, despite what has happened, it’s all just part of the (much needed) correction cycle we’re in now. But a correction, regardless of how bad it ends up being, is just that—a correction. Over the past few weeks when it seemed like absolutely everything was getting crushed, there were some good sectors that kept on climbing without a hitch. Practically everything in the agriculture sector has been on a tear. Gold has been dominating the headlines with its meteoric rise to more than $900 an ounce and then its subsequent pullback. But one of the investments that has survived the raging bear, is slowly gaining steam, and has quite a bit of upside is silver. That’s right, good old silver. Sure, it’s not as exciting as gold has been recently, but silver is a lot different. What makes silver different is that it’s a useful metal. It’s consumed. Demand comes from industrial sources and new supply is absolutely essential. That’s why silver is really starting to get my interest. You see, silver is used for a lot of things. You can find silver in automobile engines, electrical appliances, security systems, telecommunication networks, mobile telephones, television receivers and computers. Jet engines depend on silver-coated bearings for their performance and safety. All major jet engine manufacturers are required to use silver due to its unique metallic properties . Bottom line, I want you to understand that silver is used in a lot of stuff… and we need more silver to make more of that stuff. It’s not like gold, which has extremely limited amount of uses.
Over the next two years, gold and silver will likely continue to run. Gold might more than double and make it to $2,000 (after many corrections along the way), but I think silver has a much better shot at tripling in value long before gold ever doubles from here. It all comes down to utility value. Gold has value because the world arbitrarily affords it that value (just like we arbitrarily assign value to the dollar, euro, yen, etc.), but silver has utility value. It’s used in things. And that makes it a lot less susceptible to being the flavor of the month and “hot money” buying and selling like gold is. So if you’re looking for a good commodity to buy for the next three months or more, silver is the place to be. Regrettably, all signs are pointing to continued weakness for base metals, oil, and energy over the next couple of months. Good investing, Andrew
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