There are numerous hot items on my radar today – below I’ll share with you my five favourites for right now.
In the spirit of the holiday season, let’s give thanks for the following investment opportunities…
#1. Broad Stock Markets – Be thankful. Clearly, ‘big’ market indexes are strong. The Dow Jones is up this year. The Nasdaq is up. The Standard & Poor’s is up. Big mutual funds that ride these waves are doing well. Things look good. Of course, stock markets climb the proverbial ‘wall of worry.’ In other words, people bellyache about this or that — pick your economic poison – and then they still buy shares. In 2013, you can’t argue with ‘up’.
Consider a couple of other points. The Federal Reserve is still doing that ‘quantitative easing’ (QE) thing. That’s $85 billion per month of Fed support to Wall Street and big banks. I doubt that Fed Chairman Ben Bernanke wants to exit his current job on a downbeat note. Thus, I suspect that we’ll enjoy more QE for a while, until he rides off into the sunset. So party like it’s 2013! Oh wait…it’s still 2013. Maybe start worrying about your exit strategy for 2014.
#2. Fracking – More for which to be thankful! Indeed, we are just sooo lucky to be alive right now! The fracking revolution is unlocking all but incalculable new amounts of hydrocarbon resources. Without this unexpected revolution, you’d be paying US$150 per barrel for oil while freezing in the dark.
For now, all this ‘new’ energy can wallpaper over many macro mistakes by politicians. That, and fracking is investable – the ‘trifecta’ of service companies come to mind, Schlumberger (SLB), Halliburton (HAL) and Baker Hughes (BHI). All that and more.
Speaking of fracking, allow me to get parochial about my home state of Pennsylvania (yes, that old Rust Belt jurisdiction west of New Jersey). If Pennsylvania were an independent country, it would be – right now, today – the eighth-largest gas-producing nation in the world. Why? Fracking. More than 6,200 new oil and gas wells in just the past five years. Astonishing!
Indeed, just the Marcellus Shale play of Pennsylvania already appears to be the second-largest natural gas deposit on the planet. When you throw in related plays like Utica and the Upper Devonian? This part of the world where I live is nearly off the charts with energy potential. Pennsylvania! Go figure!
#3. Gold and Silver – With stock markets up and the US in the midst of an energy boom (see above), the dollar is strong and precious metals are weak. Bummer for gold and silver, right?
Then again, be thankful. With nominal prices down, you can add to your stock of physical metal for the long haul. Yes, I mean buy physical metals. Just to be clear, don’t ‘back up the truck’ and use all of your cash. But it’s OK to nibble away and add to your position at regular intervals. Metal prices could go down some more – because the dollar is looking good as the US increases its internal energy production. But long term?
Well, speaking of long term, remember, back in President John Kennedy’s day, a quarter-dollar coin was made out of 90% silver and 10% copper and worth all of ’25 cents’. Today, that same metal coin is worth over $3.60 just for the melt value. That is, over the long term, US currency is subject to inflation and loss of purchasing power. That’s why SOME of your portfolio – 5%, 10%, 15% – ought to be in precious metals. Buy low. Hang on. Sleep well as the future unfolds.
#4. Uranium – Be thankful for uranium. Uranium? Who cares, right? Well, not very many people care just now. Which is why uranium is ‘on sale,’ so to speak, if you’re a long-term buyer. Prices are low, which means what? No new supply coming to market.
Meanwhile, our friends the Russians just shipped out the last pounds of their Cold War nuclear weapons stockpile subject to the ‘Megatons to Megawatts’ program. That is, the pipeline from Russia is now empty!
Without Russian uranium keeping a lid on pricing, I expect yellowcake prices to creep up. This price trend will benefit the likes of big miners in that space – keep an eye out.
#5. The Astonishing Future – And lastly, be thankful for really smart people who are changing the world. Heck, they’re making big parts of the world obsolete as we know it. In 10 years, you might not recognize the place. And it’s investable.
Last month I was in New York at a conference. On a Sunday, and yes, I work Sundays! — I witnessed an absolutely astonishing experiment! Astounding! Mind-bending! It was one of those ‘OMG!’ moments. Seriously. Oh! My! God! What? Was? That? How? Can? That? Happen?
What happened? I’m sorry, but I’m under a nondisclosure agreement. I can’t tell you. Except…I can say this. The experiment involves carbon. The results certainly must be based on some laws of physics. Which laws? Ummm…right now it beats the hell out of me. I’m almost ready to call up a couple of acquaintances at Harvard and ask if I could borrow lab space and investigate something that involves quantum effects on ultra-thin crystal layers.
For now, I’d say that shares in carbon technology plays are…undervalued. Companies that understand carbon technology are going to change the world. I suspect that 2014 will be a good year for carbon.
I’ll leave it at that and wish you all the best this holiday season.
Byron W. King
Contributing Editor, Money Morning
Publisher’s Note: Five Big-Picture Investing Opportunities- Fracking, Gold, Carbon And More! originally appeared in The Daily Reckoning USA