Stocks crashed on Monday before surging back in dramatic fashion on Wednesday following Christmas. But the 1000-point run didn’t last long. The market sank dramatically again on Thursday before staging a late-session comeback in a swing that saw the Dow Jones Industrial Average span over 870 points for the day.
To put it mildly, it’s been a dramatic year for world markets. In all, $17 trillion worth of assets have been lost so far in 2018, a number that represents almost 20% of the world economy.
Despite the roller-coaster ride, some investors still find room for optimism.
“We still think we’re in this secular bull market that’s going to be led by high growth companies in a low growth world. It’s stocks like Apple and Microsoft, you will get those losses back eventually,” said one trader to CNBC.
But natural resource investor Eric Sprott isn’t buying it.
“Are we surprised that stocks are going down? We shouldn’t be.”
“They were pumping it up and now they’re pricking it … The macro theory is totally playing out here. It looks like the Fed put is not there.”
THE GREAT ECONOMIC FRAUD
Like a growing number of experts, Sprott believes the growth of the last 10 years, spurred by low interest rates and central bank bond purchases, will soon come to an abrupt halt.
“[T]he whole 2009 to 2018 was essentially a fraud created by the Fed, by doing things that no one in the history of the financial world had ever heard about before: printing money and having zero or negative interest rates.”
According to Sprott, the signs of trouble are already apparent.
“We’re going to have serious, serious underperformance of pensions funds this year … And they’re already underfunded.”
He also pointed to FedEx’s recent financial results as a warning of trouble ahead.
“[FedEx] basically said they all of a sudden, saw a marked decline in business … [T]hey see a declining trend going forward into 2019.
“So that is an ominous warning that things aren’t going well. Not that we need warnings because we see housing, we see autos, we see retail, we see bank stocks collapsing. We see transports in a bear market. We see bear markets all over the world.”
THE BIG RUN IN GOLD STOCKS HAS STARTED
On, the bright side, Sprott believes the recent outperformance of gold and gold stocks is a good sign.
“[T]his reminds me of early 2016. There was a day … in 2016 when the golds stocks did the same thing. They went down 5% or 6% in the day and then boom, they hit bottom and they went up probably 100% in a very, very short time.”
“[T]he S&P and most of the averages are down in excess of 15% and gold stocks are up 15%. We’ve had a 30% over-performance in about three months.”
“You’re a portfolio manager. You’re being brutalized. Nothing is working except all of a sudden, the computer shows you, oh, gold is working. Gold stocks are working.”
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Natural resource investments are influenced by the price of underlying commodities like oil, gas, metals, coal, etc.; several of which trade on various exchanges and have price fluctuations based on short-term dynamics partly driven by demand/supply and also by investment flows. Natural resource investments tend to react more sensitively to global events and economic data than other sectors, whether it is a natural disaster like an earthquake, political upheaval in the Middle East or release of employment data in the U.S. Low priced securities can be very risky and may result in the loss of part or all of your investment. Because of significant volatility, large dealer spreads and very limited market liquidity, typically you will not be able to sell a low priced security immediately back to the dealer at the same price it sold the stock to you. In some cases, the stock may fall quickly in value. 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