Fourth Quarter Outlook (Part 2)

Posted On Oct 2, 2018 By Emily Clancy

  • Jim Rickards: “The setup in gold is attractive”
  • Ray Blanco: On the trail of mitochondrial DNA
  • Investing in upscale fast food
  • Take a look at the federal debt… we dare you
  • Is Tesla akin to a cult of personality?
  • Expensive micro-apartment (even by Manhattan’s standards)

“Gold Is Doing Something It Hasn’t Done in Nearly 30 Years,” says a headline at CNBC. “Gold’s on track for its longest losing streak since 1989,” the article says.

Thursday, gold dropped below $1,190 to a six-week low and the yellow metal’s on its way to six straight months in the red.

In short, gold’s down 7% so far this year.

With all that downward momentum, you’d think the bears would be selling off — more than they have been. But they’re not… which might be a signal to buy.

[Hold the phones: This morning, gold’s popped. It’s up $16.30, to $1,204.90…]

Gold is as good a place as any to continue our fourth-quarter outlook, begun here yesterday. We turn to four of our experts…

Like CNBC, Jim Rickards notices a similar trend: “Speculators in the gold futures market are more bearish than they’ve been in over 15 years.

“Many of these speculators now hold short positions in gold futures,” he says. “But they could find themselves in trouble if gold’s low prices draw in new buyers.”

Short squeeze, anyone?

You’ll recall this scenario — “when rising prices force short sellers to buy gold to close their positions.”

The movement up and to the right draws in momentum traders; once they pile into the market, prices drive even higher.

Jim says, “From a fundamental perspective, the setup in gold is attractive.”

Other factors, Jim says, “have created a phenomenal buying opportunity in both gold and high-quality gold mining stocks.

“After nearly a decade of zero interest rates and quantitative easing, central banks have encouraged the formation of a new global debt bubble,” he says.

Certain emerging markets — think Turkey and Argentina — have borrowed too much in the last 10 years, plunging their economies into chaos.

In the U.S., the debt bubble’s mostly concentrated in the corporate sector as it was in 2007.

Gulp.

“The U.S. corporate debt bubble is at risk of being popped by the Fed steadily hiking interest rates and performing quantitative tightening,” Jim says, “at a time when most investors seem to have forgotten how stock and corporate bond markets got so high on central bank stimulus in the first place.”

Jim predicts: “The gold market will start to anticipate the Fed’s predictable response to debt distress.

“Gold will spike on the first hint of debt distress,” he concludes.

“Age-related diseases are becoming an ever-larger drain on our health care system,” Ray Blanco says on the science-and-wealth beat.

He says:

  • 92% of older Americans have been diagnosed with at least one chronic health condition
  • 80% of the Medicare budget is spent on these age-related conditions.

Not to mention the trillions spent worldwide…

“But scientists are rapidly zeroing in on a potential culprit of age-related diseases — mitochondrial DNA.”

Mitochondria function like organs within our cells — they’re responsible for breaking down nutrients into the energy needed to fuel them.

“Mitochondria are made up of DNA, similar to the DNA found in the nucleus of a cell,” says Ray. “And like nuclear DNA, mitochondrial DNA can be susceptible to harmful mutations, causing genetic diseases.”

Mitochondria seem to age much as we do, and since they serve as “cellular power plants,” as they shut down, our bodies shut down. (Not to put too fine a point on it… heh.)

“So understanding mitochondria and mitochondrial DNA are the beginning of a whole new field of medicine,” Ray says.

In terms of investing, he’s keeping tabs on companies “poised to turn that research into real-world therapies.”

Greg Guenthner and Jonas Elmerraji say: “Consumers are eating out in record numbers — but you probably won’t see longer lines at your local fast-food chain’s drive-thru.

“That’s because traditional fast-food restaurants like McDonald’s have struggled to keep up with newer concepts that have burst onto the scene in recent years,” they continue.

The whole foodie trend has customers shelling out more money for better-quality food. And investors are taking notice…

“They’ve noticed hip, new ‘better food’ chains are running rings around the traditional fast-food joints.”

Greg and Jonas recommend looking for “ground-floor” opportunities to jump into these restaurant stocks before they become “growth machines.”

Furthermore, they say don’t be put off by surging share prices or wait for pullbacks. They suggest striking while these stocks are hot.

“There’s a lot of potential,” say Greg and Jonas, “in the months to come.”

To the markets, where oil’s making a move above $75 for a barrel of West Texas crude.

The Dow’s added about 100 points, to 26,790, and the S&P 500’s up just about four points, to 26,790.

The Nasdaq sits at 8,051, up 15 points.

Bitcoin’s lost $32.66, at $6,524.54. Out of curiosity, ethereum is down by 1.4%, to $227.70.

“The federal debt increased by $1.3 trillion in fiscal 2018,” says an article at CNSNews.com.

That stat’s courtesy of the Treasury Department and means the U.S. government managed to rack up that amount of debt from Oct. 1, 2017 through Sept. 30, 2018.

Put another way:

  • That’s the sixth largest fiscal-year debt increase in U.S. history
  • It’s the eighth fiscal year of the last 11 in which the debt increased by at least $1 trillion
  • That’s approximately $8,172 in additional debt for every working American.

To get an even bigger picture, take a look at this chart (if you dare):

Federal Debt Chart

“There were 155,542,000 people with jobs in the United States in August,” CNSNews.com reports.

“That means that the $21.52 trillion in federal debt at the end of fiscal 2018 equaled approximately $138,330 for every person in this country who works.”

We need a drink…

You might have guessed: Our income expert Zach Scheidt’s not a Tesla fanboy…

But he believes there’s a valuable lesson to be learned from Elon Musk.

“The man wants so much to do good for the world,” says Zach, “but sometimes he can’t seem to stay out of his own way.”

Of course, Zach’s referring to Musk’s erratic behavior and off-the-wall tweets — one of which landed him in the SEC’s crosshairs.

After reaching a settlement with the SEC over the weekend, we take a look beyond Musk’s antics to Tesla’s fundamentals.

According to Fox Business: “Tesla produced 80,142 vehicles in the third quarter, including 53,239 Model 3 Sedans — meeting its production target…

“In August, Tesla said it would produce 50,000–55,000 Model 3s in 3Q, after repeatedly hitting weekly production targets in July.”

Good news, right?

But — according to the company’s most recent update — production fell off in the last week of September, missing its target of 6,000 vehicles by 700.

Hmm… I wonder what was happening the last week of September. (*Scratching head*… heh.)

Zach says: “Don’t buy into a company that solely relies on a specific person or leadership team to function.”

Elon Musk

Cult of personality?

He goes on to quote fund legend Peter Lynch who said, “Go for a business that any idiot can run, because sooner or later any idiot probably is going to be running it.”

“This goes for all publicly traded companies,” Zach continues. “Don’t risk your hard-earned money on an investment that relies on one factor to succeed.

“Successful investments are made in companies consistently growing earnings, innovating for the future and paying back investors through dividends.”

“A tiny penthouse apartment in New York City is on the market for $750,000,” says Business Insider.

Nothing unusual about that…

But: “At just 350 square feet, that puts the cost at $2,143 per square foot, which is $370 more per square foot than the Manhattan average.”

(That gives the 875-square-foot Silicon Valley cottage we told you about Friday, asking $2,886 per square foot, a run for its money.)

“For comparison, the typical American home is 2,687 square feet and costs $216,700,” says Business Insider. The average price per square foot then registers at just $81.

So what do you get for the apartment’s $750,000 price tag?

“The compact New York apartment, which could fit inside the average U.S. home about 7½ times, was created by Graham Hill, founder of lifestyle and design company LifeEdited and advocate for minimalism and living with less…

Folding Bed

Courtesy: Corcoran
The walls literally close in on you…

“The listing describes the apartment’s living space as ‘a room that transforms from bedroom to living room to dining room to boardroom.’”

The apartment’s layout can even be configured to accommodate a dinner party for 10… if you don’t mind nine other people invading your personal space.

Best regards,

Emily Clancy
The 5 Min. Forecast


Other Articles In 5 Min. Forecast