Jeff Clark: 'The gold stock rally is here'… Euro slaughter continues… The $4.4 million shirt… Reader feedback: 100% in less than a day…
The gold stock rally we've been waiting for is officially here… That's what Jeff Clark, who's closely followed gold stocks this year, told Growth Stock Wire readers this morning. The Market Vectors Gold Miners Fund (GDX) is up 8% in the past week. It rallied more than 4% yesterday as the broader market fell. Gold itself was down more than 2%.
Take a look at the chart (below) that Jeff published in today's Growth Stock Wire. It compares GDX to SPDR Gold Trust (a fund designed to track gold's price action):
As Jeff described it…
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A falling line on the chart shows gold stocks are lagging the metal. A rising chart would indicate gold stocks were outperforming the action in the metal. As you can see, gold stocks have lagged the metal all year. The underperformance became even more extreme over the past three months. |
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But notice the pattern has finally broken above its recent series of lower highs. Yes, it is just a tiny breakout for now... But it is the first ray of sunshine we've seen in the sector in over a year. |
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The best time to own gold-mining stocks is when the stocks are outperforming the metal. |
If you've been looking to take some positions in gold stocks, it's time to start nibbling. The trend has finally broken to the upside. Jeff's S&A Short Report subscribers are already profiting… (His readers have pocketed two triple-digit gains in gold stocks in the last two days alone.)
The euro slaughter continues… Declines in German business confidence and manufacturing pushed the euro to less than $1.26 – its lowest level since July 2010. The ever-increasing possibility of Greece leaving the European monetary union also weighed on the currency. (Greece has yet to elect a new government… And support is growing for parties opposed to austerity.)
We're still long-term bearish on the euro… The market is dealing with Greece now. Either the European Central Bank will print money to save Greece (which we expect), or it will let Greece fail and disband the euro. Both are horrible outcomes for the currency (though the former path will drag things out until the next European Union (EU) nation, likely Spain, crashes). Whether the euro fails or the continent's governments agree to keep papering over the currency crises, the euro is heading lower over the long term.
But consider the short term… Everybody expects the euro to fall. Every day, we're bombarded with headlines about Greece's possible exit from the EU. Net short positions against the euro are at a record high. A euro rally in the short term would not surprise us.
Van Simmons knows the collectibles market… As the chairman of Collector's Universe, President of David Hall Rare Coins, and co-founder of the Professional Coin Grading Service (the standard by which collectible coins are graded), he's seen everything in collectibles… He's also as shrewd an investor as we've ever met.
Our colleague Steve Sjuggerud loves to tell a story about Van… Years ago, Van bought a stuffed Bengal tiger for $2,000 from the trophy room of a southern California museum owner. His wife thought he was crazy when he walked in the house with a tiger.
But Van knew Bengal tigers are rare. (It's illegal to hunt them.) And he got a great deal. Still… Van's wife wouldn't let him keep the tiger, so he sold it for $10,000. A year later, the same stuffed tiger sold at auction for $50,000. You can read the essay Steve wrote about Van here.
Van e-mailed me (Sean Goldsmith) earlier this week to tell me about a sector of the collectibles market that's on fire… He's not buying. But he was astounded by the prices for sports memorabilia…
In addition to grading rare coins, Van's company also grades baseball cards and sports memorabilia. In the early 1980s, he started PSA (Professional Sports Authenticators) to grade high-quality baseball cards. He noticed an opportunity in rare cards, as the price spread between poor-quality and mint condition cards was too low. Since then, PSA established itself as the authority on sports memorabilia pricing…
And recently, Van was shocked by the prices some items of sports memorabilia have brought at auction…
A 1920 Babe Ruth jersey sold for $4.4 million. The highest previous price for a Ruth jersey was $940,000. And the latest jersey was a grey road jersey, not the famous Yankee pinstripes. It also didn't have Ruth's number "3" on the back. The current price "is almost beyond comprehension," according to Van's partner.
A 1955 Roberto Clemente baseball card sold for $432,690… The previous record for the same card was $110,000. Van was buying this card for $110 in the '80s. Even cards that aren't considered that rare fetched more than $150,000 at this auction.
Also, a Babe Ruth hat sold for $537,278… More than three times the record price for any hat.
The man who ran the auction said most of the big money came from relative newcomers… wealthy folks looking for trophy pieces and a place to put their money. As Van told me on the phone… "These guys are happy to pay $5 million for a jersey, which may fall to $2 million because they know it will still have some value. They don't think the dollar has any value. They're scared of keeping their wealth in cash."
Still, as hot as baseball memorabilia is right now… Van says collectible gold coins are "truly one of the most underpriced assets in the market today." For example, high-quality $20 Saint Gauden gold coins – one of the world's most popular collectible coins – used to sell for double the spot price of gold eight years ago. Today, they go for about $1,850, less that 20% above the price of gold. If you'd like to speak with Van about the opportunity, you can call him at David Hall Rare Coins at (800) 759-7575. (We do not receive any monetary compensation for recommending him. We simply know he's always treated our readers right in the past.)
New 52-week highs (as of 5/23/12): ProShares UltraShort Euro Fund (EUO) and Wal-Mart (WMT).
"When a company says it pays a dividend, let's say 3%, does that mean it pays 3% per month, or 3% per quarter, or 3% yearly? What is the standard time frame for a dividend payment?" – Paid-up subscriber WG
Ferris comment: When we say a stock "yields 3%," it usually means the annual dividend is 3% of the current share price. Let's take a real-life example: Extreme Value recommendation Automatic Data Processing (NYSE: ADP). Right now, ADP's annual dividend is $1.58 per share. Its share price this morning was $53.24. So $1.58 divided by $53.24 equals 2.97%... or approximately 3%. Most companies pay their dividends quarterly. (But some are more frequent.)
"Jeff had a great call on GDX today, as well as the market." – Paid-up subscriber DLA
"Did awesome trade with GDX. One hundred per cent in less than one day." – Paid-up subscriber Art Werner
"Jeff: I happened to be at my computer at 10:38 when you suggested that buying GDX at $41.60, using a very close stop. So I bought the Jun 43 calls; paid $1.05. Thanks for the suggestion, as I am up almost 100%." – Paid-up subscriber Peter Gaillard
Regards,
Dan Ferris and Sean Goldsmith
Medford, Oregon and New York, New York
May 24, 2012