Dear Reader,
1) Today’s Daily Reckoning Australia begins with a hat tip to my fellow editor Brian ‘Goldfinger’ Chu.
He’s our resident gold hound here at Fat Tail Investment Research.
Last week, I got him on the phone to press him for his latest read on the gold market. Gold had rallied to more than US$1,900, and the stocks were beginning to rumble.
You might be surprised to know he urged some caution.
While Ukraine is rattling the gilded cage a bit, we still have a bit of a bogey in the room: the Fed meeting in March.
This is going to be a doozy either way. If they raise too little, the inflation hawks will squark of their cowardice and bubble blowing.
If they tighten too much, they could crunch the outlook for the stock market.
I don’t envy Fed Chairman Jerome Powell right now. He’s spent the last six months or so telling us that inflation is ‘temporary’.
Now, the world’s gone cold on Russia via sanctions and diplomatic isolation.
Russia is a big producer of oil and gas, coal, nickel, iron ore, wheat — in other words, commodities! These are the very markets that push inflation higher because they’re input costs. More inflation could be on the way.
Those appalled at Russia’s aggression naturally call for sanctions to cut off their global markets and foreign income.
There are two problems with this, as far as I can see.
One is that the world’s biggest buyer of raw materials is China.
They are clearly going to keep dealing with Russia in the same way they kept dealing with Iran in earlier years.
No doubt there’s a measure of sticking it to the Westin this as well as their basic need for commodity imports.
The second is that big sanctions on Russian supply will drive up speculation into commodity futures, spiking inflation in the West without the benefit of hurting Russia. They’ll still be selling into China and getting those high prices.
Likely, oil and gas prices already carry a war premium now anyway. It’s possible not putting sanctions on caused them to cool off a bit.
Don’t forget, most Western nations carry substantial oil reserves for this kind of disruption — as long as they’re prepared to use it.
Only time can tell as this situation develops. That brings me back to Brian.
While he urged some temporary caution on gold stocks in general, it is merely a question of timing.
Brian knows the best projects across Australia and the world. All you need is for them to hit the right price.
That’s why I urge you to sign up to Strategic Intelligence Australia here.
Once Brian’s convinced gold is ready to have a crack at a moonshot higher, likely after the Fed meeting, he’ll be there to pull the trigger for you.
Fortune favours the prepared mind. Go here to get started.
2) It’s no easy market on the ASX right now. But there’s always opportunity as long as you keep watching.
One idea, for the moment, is to hunt for dividends rather than obsessing about immediate capital gains.
Another idea might be to explore the use of options to exploit the high volatility and uncertainty we’re currently seeing.
A third is to take the long view. By that, I mean the next five years. That’s how we go about it over at Cycles, Trends & Forecasts. This is where we track the 18-year property cycle.
Our latest issue will go out tomorrow, with a new recommendation from me.
The stock in question is down about 8% since the start of the year — roughly on par with the market (ASX 200).
But its latest market update shows it’s trundling along just fine.
As long as we don’t go into a Third World War, I see it as a perfect time to pick up on the cheap for long-term income and capital gain. It pays out quarterly dividends too.
We also received the most amazing letter last week. One of our subscribers has poor health and therefore income.
She could barely believe us when we said real estate would boom out of the COVID collapse. Then she saw it happening before her and became convinced of our analysis.
She rode the 2020 stock market boom and put the profits into a wonderful home with a low mortgage.
I also had a gent tell me we had changed his life after he converted a decent capital gain into a Fat Tail Alliance membership that’s gone on to lots of great investments.
I urge you: get involved here and see what you can achieve.
All the best,
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Callum Newman,
Editor, The Daily Reckoning Australia
PS: Don’t be shy! Come check out my podcast on Spotify here. We have some great content…all free. Let me know what you think!
