Why I’m Down on GLD

If you’ve been a reader for very long, you might have
noticed that I’m not a huge fan of the exchange traded fund Spidershares Gold
Trust (NYSE: GLD). Each share of this
ETF corresponds to 1/10 of an ounce of gold, kept in the fund’s vault in London.

I should point out up front: I’m both long-term and
short-term bullish on gold prices. I
think as long as governments around the world treat their currencies like their
own private piggy banks to inflate at will, gold will remain a good place to
put your money.

So why don’t I like GLD? I’ve glossed over these reasons before, but I think you deserve the benefit
of some research and facts before you put my theories into practice in your own
portfolio.

But first, all of my reasoning assumes that you are
bullish on gold. If you’re not bullish
on gold, please PLEASE drop me an email at editorial@resourceprospector.com
and tell me why.

Alcoa: Meet, Miss or Beat?

There are some investors who think the significance of aluminum company Alcoa’s earnings is overblown. There are stocks that provide a better measure of consumer spending habits, or otherwise give more insight into the economy’s health.  

 

But because Alcoa is always the first major company to report, it’s numbers are still treated like an omen for the 499 companies on the S&P 500.  

 

So, if you ignore one-time charges, Alcoa (NYSE:AA) reported $0.10 a share 1st Quarter profit yesterday afternoon. I would swear I read on Yahoo! Finance that analysts were expecting $0.11 a share. That would mean Alcoa missed estimates.

Radioactive Warning

There
are always at least two sides to every commodity story, the biggest being supply
and demand.

In
yesterday’s
issue of the Resource Prospector
, I talked about demand for
uranium. After following and untangling
the threads, it seems like demand is slated to rise. That’s according to two of the biggest
authorities on the subject, the World Nuclear Association, and the Nuclear
Energy Agency.

Today,
I’ll tackle the supply side of the equation – and I’ll show how current annual
production of uranium falls well short of annual consumption.

I
unearthed a WNA chart to better show this contrast, which I believe will be the
real catalyst for higher uranium prices.

Uranium in the Mail

There’s
nothing better than a well articulated question to get the juices flowing on a
Monday morning. To that point, I was
glad to see a question from John B. of the UK in my inbox today.

John’s
main point: uranium production numbers can be confusing. I agree.

There’s
a few main issues that, for the most part, are largely unknown.

John
asked,

“Mining Weekly (RSA) has
just quoted NEA [Nuclear Energy Agency] DG Luis Echavarri, ‘By 2030, there will
not be a very significant change in the number of NPPs [Nuclear Power Plants]
in the world’.

You quote WNA [World Nuclear Association]
reckoning on 5 times more uranium demand than at present in 2030!

Have you researched the schedule of closures and new build openings? It is all
very confusing.”


John
raises a good question that certainly merits further research.  It is
confusing when two authorities on nuclear power seem to be in
disagreement
over how many plants will be built in the next 20+ years and how much
that
might affect demand for uranium. But upon
closer inspection, I don’t think they are really disagreeing.

Earnings Season

Finally. Greece has been offered a lump-sum loan by the European Union. It’s been obvious for weeks that this needed to happen. Now that it has, at least we can look forward to not reading about this saga every day.   

 

A month ago, this Greek bailout might have been a significant catalyst for the stock market. Now, after the seemingly endless back and forth, there’s not much impact beyond a rally for Greek banks and bonds.   

 

From a trading perspective, the Greece news is being overshadowed be earnings season… 

Bank Shenanigans

How many times will we see the headlines say that an aid package for Greece is ready to go into effect? Talk about dysfunction, the way the EU and Greece has handled this situation, it’s no wonder that investors are demanding extremely high premiums to handle Greek debt.   

 

It’s pretty clear that Greece needs a lump sum loan from either the EU or the IMF. I don’t care which. But please, just get it done so we can stop all the drama.   

 

The Wall Street Journal is reporting that banks have been pulling a fast one on investors for the last year…  

Down With Uranium?

In some parts of Vermont, you can walk down the street with a
loaded .357 magnum on your hip, in plain view, and no one will bat an eye.
Vermont is
also the only state in the country where you can hunt fish with a gun. I’ve
heard northern pike can be vicious, but seriously?
We also don’t have any restrictions on
concealed carry. As long as someone
hasn’t been convicted of a felony, they can pack heat in Vermont. Are we politer for it? I can’t tell.

Yes, Vermont is probably the best place to go
skiing on the East coast – but it’s also gorgeous and extremely livable in the
summer. To that point, it does get
pretty darn cold during the winter – usually there’s a week or two where we dip
into the negative 20s. But the hottest days of the summer will
scratch into the low 100s on occasion.

The biggest contradiction
might be that Vermont
gets a good chunk of its electricity from a nuclear plant called “Vermont
Yankee.”

I know…you’re thinking:
“liberal state” and “nuclear power” do not go together very well. And you’re right. It seems that Vermonters have been trying to
close Vermont Yankee ever since it opened. Lately, the calls for its closure have grown much more shrill and
frequent after a small amount of nuclear waste water *may* have leaked into the
Connecticut River – the river that separates Vermont and New Hampshire, passes
through the middle of Massachusetts and eventually outlets into the ocean on
the Connecticut coast.

Has the Bull Market in Commodities Run Its Course?

I hear lots of
people saying that while commodities have had a nice run, the bull market in
“stuff” is nearing its end. That begs
the question: how long can a commodity bull market last?

It’s a valid and important
question.

I’m a commodity investor,
but not for sentimental reasons. As much
as I value gold as a hedge against inflation, or oil’s ability to make
my car go vroom – I invest in commodities for fundamental reasons – largely
because I believe they are still cheap and undervalued from a historical perspective.

So, back to the question at
hand. How long can a commodity run
last?

Bullet-Proof

The stock market rally that started on February 5th, 2010 appears to be absolutely unstoppable. Bullet-proof. However you want to say it, there seems to be very little downside to stock prices, even after a strong rally.   

 

Now, we are not surprised. I’ve been relentlessly bullish here in Daily Profit. Sure, I may point out some discrepancies once in a while, maybe even shoot a few holes in the financial media’s neat and tidy explanations, but I’ve had us focused on upside targets for a year now, and there’s one main reason: earnings.   

 

This time last year, it was brutally obvious that analysts were seriously underestimating the earnings potential for bank stocks, even after the government changed the accounting rules to encourage profitability.   

 

And in subsequent months, analysts continued to lowball earnings estimates. Companies kept beating them, and the market kept rallying.   

I Refuse to Invest In Something Like That!

Coal is awful. When the black rock burns it pollutes,
spewing metric tons of carbon dioxide in the atmosphere every day. Most investors will tell you it’s a dead
resource: “we’re moving towards renewables,” they’ll say. Coal is an anachronism; a blight. It’s an atrociously dirty energy source that
will soon be relegated to the same place we put lead paint, asbestos insulation,
and shoe-store foot x-rays – buried deep down in the ground.

In the news this week alone,
there are two stories about coal miners trapped in mines – one coal mine in China, and one in West Virginia. There’s also a story about a coal tanker that
ran aground on Australia’s Great Barrier Reef. My point is that coal is largely hated.

Not by me, of course. I like having a warm house during cold
winters. I like air conditioning in the
summer. I like cheap goods produced so
cheaply, in part, thanks to inexpensive and plentiful coal. I also like the idea of buying stock in
companies that mine such a cheap, hated commodity.