THREE ACTIONABLE IDEAS THAT I'VE WRITTEN ABOUT IN THE NEW YEAR INCLUDE GOLD, CORPORATE BONDS AND TIPS, AND HEALTHCARE STOCKS --
GOLD IS RISING AGAINST ALL CURRENCIES... One of our readers complained to me this week that we haven't provided any actionable ideas since the start of the new year. How about gold? We've written a number of positive articles on that commodity over the past couple of months. I've also explained that gold (and gold stocks) do well in both deflationary and inflationary environments. I've also predicted that bullion could reach $1,000 by the end of this year. Another positive sign for gold is that it's rising against all major currencies. That's the hallmark of a true bull market in gold. Chart 1 shows the streetTracks Gold Trust (GLD) testing its September/October highs and a yearlong resistance line. Gold has been much stronger when measured against other currencies. Charts 2 through 6 show gold hitting new highs against the Euro (Chart 2), the British Pound (Chart 3), the Swiss Franc (Chart 4), the Australian Dollar (Chart 5), and the Canadian Dollar (Chart 6). Gold is slightly weaker in dollar terms (Chart 1) because the U.S. Dollar has been the strongest of those currencies. When foreign currencies plummet (as they've done since mid-year), foreign traders have two choices. They can buy the U.S. Dollar or gold. Between last July and November, they favored the greenback. They've favored gold since then. The only currency that's been stronger than the dollar is the yen. Gold is also rising versus the Japanese currency.
Chart 1
Chart 2
Chart 3
Chart 4
Chart 5
Chart 6
GOLD RALLIES AGAINST THE YEN ... Chart 7 plots gold versus the Japanese yen over the last year. From July to November, the yen was the preferred save haven of the two. Since November, however, gold has been rising faster than the yen. That makes gold the stronger of those two asset choices. Since gold is often viewed as an alternate currency choice, global traders have apparently concluded that bullion is now the safest currency of all. One of the reasons is that foreign central bankers are in a race to see which will be the next to reach zero interest rates (after the U.S.).
Chart 7
HOW ABOUT CORPORATE BONDS AND TIPS... My January 23 Market Message carried the headline: "GOING FOR THE GOLD -- BULLION BREAKS OUT -- BARRICK AND NEWMONT EXCEED 200-DAY AVERAGES -- TIPS GAIN GROUND ON TREASURY BONDS". There are three actionable ideas in that message -- buying gold, buying Barrick or Newmont, and buying Treasury Inflation Protected Securities. Chart 10 is an updated version of the chart shown earlier of the iShares TIPS Bond ETF (TIP). I described the TIP as "triangulating just below its 200-day moving average". That's still the case and favors an eventual upside breakout. I also suggested that "it's possible that TIPS are starting to bounce for the same reason gold is". That was an actionable comment. So were my January 9 and 19 messages on the upturn in investment grade corporate bonds at the expense of Treasuries as shown in Chart 9.
Chart 8
Chart 9
HOW ABOUT HEALTHCARE... I've written several positive articles on healthcare stocks over the last month. A January 27 message was headlined: "HEALTCHARE IS TOP DEFENSIVE SECTOR". I showed six healthcare stocks that were leading the group higher. [I added more in a subsequent message]. Chart 10 is an updated version of the January 27 chart with the headline: "HEALTHCARE SPDR LEADS S&P 500". That paragraph stated: "The XLV appears heading for a test of its January peak. A close above that level could trigger a further rally toward its 200-day average. That could boost the S&P 500 (green line)..." As of today, the XLV is the only sector SPDR to exceed its January high. And it's helping pull the S&P 500 higher. An investor looking to invest some money in stocks could have chosed the defensive SPDR (XLV) or any one of the healthcare stocks that I showed rising above their 200-day lines. Those were all actionable ideas in an environment that offers very few choices.
Chart 10
MY JOB IS TO PRESENT PROMISING IDEAS ... I generally don't issue specific buy and sell signals. [The main reason I don't is that every reader has a different risk threshold and time horizon. What's a good buy for one might not be for another. What's good for a short-term trader might not be for a long-term investor. I've also found in the past that specific buy and sell recommendation meant for one group are often misunderstood by other groups]. Instead, what I do is to show which markets (like gold and TIPS) or which market sectors (like healthcare) are starting to look more attractive on both an absolute and relative basis. I try to avoid those that don't. I leave it up to you to examine those ideas further to see if they fit into your investment philosophy. That necessitates some work on your part and some knowledge of charting principles. I don't, however, tell you what to buy and sell. I spend a lot of time working through all of the market noise to find those markets that show some promise. Recently, three promising ideas have been gold, corporate bonds and TIPS, and healthcare stocks. It's up to you to decide what to do with those ideas.
