This last week has truly been a rollercoaster for investors worldwide …
From the onset of earnings season and fresh economic data, to the aftermath of Cyprus and the massive implosion of Bitcoin — this week has been hectic and unprecedented all across the board.
So instead of focusing on a single issue — drilling down on an individual story — like we usually do in the Afternoon Edition, this Friday we’re going to give you a quick “reader’s digest” version of the week’s biggest events, and how they might affect your portfolio …
Gold dipped nearly 4% today and briefly dropped below $1,500 per ounce as the metal fell into bear-market territory. Gold is down 20% from its August 2011 high of $1,891.90.
Investors got spooked on news that Cyprus is set to sell 400 million euros’ worth of gold to fund its bailout. Cyprus’ planned sale amounts to approximately 10.36 tons. This would be the largest gold sale by a euro-zone country since France sold 17.4 tons in 2009.
We believe that, instead of looking bearish for gold, this move is instead confirming George Soros’ view as we outlined in an issue earlier this week.
Soros believed the metal still had some shine to it, and that its lackluster performance came from the fact that it was an easy asset to sell in hard times. After all, with gold pushing $1,600 an ounce, it’s one of the best investments on anyone’s books right now.
So when investors need to raise cash, selling off a little gold can often be a quick way for them to do it (just as Cyprus planned to sell its gold and raise cash). But as we have seen before, one little panic can trigger a large change of direction on a dime …
Nasdaq has admitted — unequivocally — that it botched the Facebook IPO. Chief executive Robert Greifeld is going to be paying for it personally, in the form of a substantially smaller bonus this year.
You may remember Facebook’s IPO as a pretty convoluted affair; using mechanisms like “Greenshoes” to keep share prices in the desired range.
But going beyond that, its IPO was further hampered by delays and technical problems. These left the actual traders in a state of confusion about what orders had actually closed, and at what price.
Honestly, this is just adding insult to injury for Facebook’s notoriously ham-fisted IPO. It’s still a bit baffling that anyone thought this was ever a good idea.
After all, it hadn’t been seven years since Rupert Murdoch made his legendary purchase of Facebook’s predecessor — MySpace — for a whopping $580 million. Even worse, it hadn’t even been a year since Rupert sold MySpace for just $35 million … a loss of over 90%.
The market, in general, should’ve known better. Because as any parent could easily tell you, teenagers aren’t always a great investment …
Oil dropped to its lowest level in eight months following a slew of news that led investors to worry over future demand. On the domestic front, worries arose after retail sales fell in March for the second month out of three and consumer confidence weakened to a nine-month low.
In-house resource expert Sean Brodrick points to other factors keeping oil’s price down. Thanks to an oil pipeline belonging to Exxon in Arkansas springing a big leak last week …
“That pipeline is shut down until the problem is fixed, cutting off 90,000 barrels a day from being pumped to refineries on the coast, and adding to oil inventories.
“The market in general seems toppy and may be ready for a deeper pullback. But some stocks will go up anyway, and I think nat-gas is one of those areas that looks set to outperform.”
Sean just gave his Junior Resource Millionaire subscribers a play on oil and natural gas, and he’s planning on releasing even-more new trades this coming Tuesday with “knock-it-out-of-the-ballpark” potential. Click here now to find out how you can get on the list to receive them!
Meanwhile, commodities kept stealing the show as coffee continued its tumble. Coffee and the “softs” (agricultural commodities) have been a great trade for years now. Because even in the wake of a massive financial crisis, people still need coffee, sugar and bacon (sweet, sweet bacon).
But as with so many other commodities, 2013 has shown us a bit of a reversal in coffee, the effects which are finally starting to seep through …
We say that because coffee kingpin Starbucks (SBUX) is doing something nearly unprecedented … it’s actually lowering its prices on coffee! By a dollar a bag. Which might not sound like much, until you realize that — even with their outrageous prices on coffee drinks — Starbucks is only clearing about $2.55 of real profit per bag of coffee.
So why give up a major share of their profits? For the chance to muscle in on Dunkin’ Brands (DNKN) …
By lowering prices, Starbucks figures it’ll be able to pull some of the more value-minded customers away from chains like Dunkin’ Donuts and McDonald’s (MCD).
The folks at Starbucks seem to think this devious plan will force their competitors into a corner; either they’ll need to cut prices to keep up, or be forced to watch their market share slip away.
This is all great news, by the way. Starbucks’ business model has been in trouble ever since the first breath of crisis back in 2008, and it’s great to see them finally addressing it.
But at the same time, Starbucks coffee is something we like to call a “prestige product,” like a Gucci bag or a Louis Vuitton jacket. It’s not just a cup of coffee, but a status symbol for many of its patrons.
I mean, if the product didn’t carry some kind of prestige, then how else were they going to get five bucks out of you for a 12-ounce coffee?
So while this move may be a good thing for competitiveness in the short term, it has the potential to seriously disturb Starbucks’ positioning in the market … something that’s worth a lot more than a dollar a bag.
Wells Fargo (WFC) and JPMorgan Chase (JPM) both slipped following mixed earnings reports.
JPM beat on earnings, but revenue fell 6% from the same period a year ago. Investors also worried over slowing loan growth. The company also raised its dividend to 38 cents per share from 30 cents.
WFC also beat earnings expectations, as net income grew 23% from the same period a year ago. However, revenue fell short of expectations.
With more than 100% gains off the lows from 2009, many investors are leery of bank stocks and how they might fare in the year ahead.
“After you’ve been running up for a couple years,” market expert Mark Minervini explains, “I think it becomes more of a trading market.”
He thinks that 2013 will feature just two major themes for financials:
1) Don’t fight the Fed
2) The “Reverse Beauty Contest” (which one’s the least-ugly)
So keep a close eye on your financial holdings over the weeks and months to come, and stay tuned for more up-to-the-minute market insights …
Good Luck and Happy Investing,
Uncommon Wisdom Daily