Please, DON’T Make a Difference…

  • What is there to gain?
  • A new record low
  • Tiny stocks

Here’s some news that can only crush any hopes you have for the future. From the Financial Times:

Goldman Sachs attracted more than a quarter of a million applications from students and graduates for jobs this summer, suggesting fears of a “brain drain” in the sector may be exaggerated as banks introduce more employee-friendly policies.

The number of applications from students and graduates globally have risen more than 40 per cent since 2012, according to figures provided to the Financial Times.

By the way, when we talk about crushing any hope you have for the future, we’re not just talking about the wasted young lives that end up swilling around in corporate finance.

Our greatest fear is that these students and graduates have had it drummed into their brain that they should try to ‘make a difference’ in the world.

No. Please don’t ‘make a difference’. Mind your own business instead.

Not to mention that their brains have become addled by the textbook notions of economics…and that they may try to take what they’ve learned and apply it to the real world.

Last week we issued a plea for three graduates at the stockbrokers’ conference to save themselves. This week, we issue another plea: May the Lord have mercy on our souls, and save us from a tidal wave of graduates who are determined to ‘make a difference’.


Over the weekend, the Dow Jones Industrial Average fell 31.5 points, or 0.18%.

The S&P 500 index dropped 6.13 points, for a 0.29% fall.

In Europe, the Euro Stoxx 50 index fell 36.31 points, or 1.2%. Meanwhile, the FTSE 100 index gained 0.39%, and Germany’s DAX index lost 1.03%.

In Asian markets, the Nikkei 225 index is down 125.75 points, or 0.76%. China’s CSI 300 index is down 0.14%.

In Australia, the S&P/ASX 200 index is up 42.71 points, or 0.8%.

On the commodities markets, West Texas Intermediate crude oil is trading at US$49.10 per barrel. Brent crude is at US$50.06 per barrel.

Gold is trading for US$1,241 per ounce. Silver is trading at US$16.44 per ounce.

The Aussie dollar is worth 73.34 US cents.

What is there to gain?

There is nothing to be gained by telling investors to not do something.

Your editor had that epiphany today. It may not be strictly true, but it’s how I feel right now.

Today, the VanEck Vectors Gold Miners ETF [ASX:GDX] is up a whopping 9.17%.

Gold stock Newcrest Mining Ltd [ASX:NCM] is up 11%.

Northern Star Resources Ltd [ASX:NST] is up 15.21%.

St Barbara Ltd [ASX:SBM] is up 14.89%. And Evolution Mining Ltd [ASX:EVN] is up 13.68%.

Great news. It certainly is for those investors with the foresight to tuck into gold stocks while they were dirt cheap.

We can only hope then that subscribers to our Tactical Wealth investment advisory ignored our advice last September when we profiled the Gold Miners ETF…but told them not to buy…not yet!

Since then, the ETF has just about doubled in price.

And, since then, the share price of Northern Star Resources is up around 150%. Your editor’s only tiny saving grace is that we profiled a gold stock in the special research report that we compile for Alliance subscribers each year.

In that report, we suggested investors buy one particular gold stock, due to its high cash and low debt.

How many acted on that advice? At least one, we hope.

But enough of the self-flagellation. What explains the rapid rise of gold, and in particular, gold stocks?

As you may have guessed or know by now, it’s all down to the news on Wall Street from Friday night. Or rather, the news from the US Bureau of Labor Statistics.

As Bloomberg reports:

The argument for a June interest-rate hike from the Federal Reserve has evaporated.

Economists and investors largely agreed that Friday’s disappointing employment report for May — the U.S. economy added just 38,000 new jobs — all but eliminated the chance that Fed officials would tighten policy when they meet June 14–15 in Washington, and may make it difficult for them to raise in July.

Bloomberg went on to quote US Federal Reserve governor Lael Brainard, who said that ‘Today’s labor market report is sobering and suggests that the labor market has slowed.


The numbers may not have been so bad. After all, a 38,000 gain in jobs is still a 38,000 gain in jobs. The trouble is that economists had predicted a 160,000 gain in jobs.

Now that the jobs number has missed by such a large margin, investors are less certain about the Fed raising rates. And if the Fed doesn’t raise rates, in all likelihood it will mean a weaker US dollar, and a stronger gold price.

That has already begun to play out. After falling to US$1,200 late last week, the gold price rebounded on Friday night. The following chart gives you a clue about the timing of the release of the BLS jobs numbers:

chart image

Source: Bloomberg
Click to enlarge

That is a Harrier jump-jet style vertical lift-off.

And as we noted before, it has had a follow-on impact on the price of gold stocks and the Aussie dollar.

After trading below 72 US cents early last week, the Aussie dollar has jumped strongly, trading above 73 US cents at present. That’s a big move in the currency markets, and highlights just how significant the miss in the jobs numbers was.

The next question is whether that gives the Reserve Bank of Australia (RBA) an incentive to cut rates at tomorrow’s meeting.

The last rate cut caught the market by surprise. This time, based on prices in the futures market, investors have priced in a 92.2% certainty that the RBA won’t cut rates.

The market is less certain about July, pricing in a cut of only 74.4%.

But that may not mean anything. The RBA has shown in the past that it doesn’t mind issuing the odd surprise or two with an unexpected rate cut.

Following on from the US jobs numbers, and the rally in the Aussie dollar, could that be enough to convince the RBA that a cut to a new record low of 1.5% is necessary?

We’ll both find out tomorrow.

A new record low

In related news, Bloomberg reports:

Australia’s 10-year bond yield fell to an all-time low after U.S. payrolls grew at the slowest pace in almost six years, slimming the chances the Federal Reserve will increase interest rates in the coming months.

The 10-year yield was a 2.16 percent as of 10:01 a.m. in Sydney, a record based on data compiled by Bloomberg going back to 1969.

And it’s a record according to the Bloomberg charts too:

chart image

Source: Bloomberg
Click to enlarge

How long until it hits zero? We’ll wait for that too…although it most probably won’t happen tomorrow. Next year? Maybe.

Tiny stocks

On any given day, the market’s biggest movers are the stocks you’ve likely never heard of.

They aren’t stocks like BHP Billiton Ltd [ASX:BHP], Telstra Corporation Ltd [ASX:TLS], or Commonwealth Bank of Australia [ASX:CBA].

They aren’t stocks with multi-billion-dollar market capitalisations. They aren’t stocks priced in big dollar numbers.

The market’s biggest movers, day in and day out, are ‘tiny stocks’. They’re stocks that are mostly priced under a dollar…mostly under 50 cents…actually, mostly under 20 cents, if we’re being honest.

They are stocks with market capitalisations just a fraction the size of the market’s big blue-chip stocks.

In the world of ‘tiny stocks’, a market cap of $50 million is a ‘blue-chip’ stock compared to most of the stocks in this sector.

See for yourself. Below is a list of the biggest percentage movers on the stock market today:

chart image

Source: Bloomberg
Click to enlarge

How many of those stock codes do you recognise? Not many, I’d wager.

How familiar are you with Northern Manganese Ltd [ASX:NTM]? It’s up 410% today…that’s right, just today. When it last traded on Thursday last week, it closed at one cent.

Today, as I write, it’s trading for 5.2 cents — a 410% gain. And, even after the gain, the stock still only has a market cap of $10.5 million.

Of course, even in this market, that type of gain is rare. You can see that in the list above. One stock is up 410% in one day, while the next best gainer is up ‘just’ 125%.

After that, the gains fall off pretty quickly. But here’s the thing, while you can’t expect these ‘tiny stocks’ to put in the same kind of gains as Northern Manganese, big single-day gains do happen.

And when they do, your aim should be to get on board before the gains take place. How do you do that? We’ll explain more over the next couple of weeks.

Now, to be clear, and to the best of my knowledge, none of our investment advisories recommended Northern Manganese. And I’d be surprised if any of them would after such a big gain.

The point I’m making is that there are around 2,000 stocks listed on the Australian Securities Exchange. If you’re like most investors, you probably own no more than about 20 of them.

And at a stretch, you’ve probably heard of no more 50–70 of the stocks currently listed on the ASX. That means there are over 1,900 stocks out there, rising and falling each day…and you’re completely in the dark about them.

Well, thanks to a project we started last year, our aim is to change that. Our aim is to help introduce you to some of the most volatile, exciting, and potentially profitable (and risky) ‘tiny stocks’ that trade on the ASX.

Will every stock we profile go up 410% in one day? No. Will even a half or a third of them do so? Not likely. But, as we’ve seen since launching this project in June last year, you don’t actually need to find that many of them.

In fact, just spotting and buying into one or two of them can be enough to turn a mediocre index-hugging portfolio into a multi-digit outperformer.

It’s a thrilling idea. And it’s one that I’m proud to have been a part of since we introduced it to Port Phillip Publishing subscribers last year.

And soon, you’ll have a chance to be a part of it. Stay tuned. Details will be available in the near future. This is one opportunity any speculator and risk-hungry investor really won’t want to miss.