Wall Street vs. Resources in 2019
It’s often said that commodities and equities are contracyclical. On a multi-decade scale, it’s true that investors tend to shift from one to the other. But few investors think or invest on a multi-decade scale. Within a decade—and certainly within a news cycle—general equities and industrial commodities often do move together.
That makes sense. In theory, if the economy is booming, companies should be more profitable, and their share prices should rise. At the same time, that same economy will require more resources, boosting commodities prices. And in our global economy, the boom helps the poorest most of all, increasing their basic consumption as well as lifting some to the level of buying their first car or home.
So far so good, but that’s a theoretical economic view. The real world is more complicated. Messier. For instance, there are times when productivity increases are deflationary. We can see rising profits for business and falling commodity prices at the same time. There are times of high inflation that put the squeeze on profits and result in higher commodity prices simultaneously. And sometimes technological change creates greater demand for certain resources while extinguishing demand for others, regardless of economic growth or decline.
This is worth remembering, because it’s looking increasingly probable that 2019 is going to be a rough year for Wall Street.
Investors who assume that the Dow and S&P 500 going into a protracted bear will be bad for all resource commodities could be in for a shock.
Resources as a group retreated before Wall Street did in 2018. This was due to the trade war, which didn’t seem to rattle broader markets until much later. The end of the trade war—which all sides clearly want and seems reasonable to expect this year—should provide an instant boost for resource commodities.
Get our daily investorintel update
Meanwhile, higher volatility and fear are boosting precious metals. They’re a special class of commodity that often move with industrial metals, but march to the beat of the safe-haven drummer during times of systemic stress.
But even when the trade war does end, it may or may not do much for US equities. Stocks are facing the headwind of quarterly comparisons to 2018, a year when one-time tax cuts boosted bottom lines.
There’s also the fact that the record bull on Wall Street can’t go on forever—and everyone knows it. The panicky volatility we’ve seen of late is ample evidence of this.
And then there’s the elephant in the room everyone on Wall Street seems desperate to ignore: the entire global economic context today is one fraught with unknown and unforeseeable consequences to the massive, unprecedented interventions of governments around the world since the crash of 2008. From multiplying money supplies to gargantuan central bank balance-sheet expansions to negative interest rates, no one really knows how to unwind all this safely—if it can be done at all.
For these reasons and more, I’m bearish on mainstream equities in 2019, and likely for years ahead. I’m bullish on resources, especially precious metals, uranium, and the minerals that power the new energy paradigm.
But even if I’m wrong about Wall Street, and stocks have another gangbuster year in 2019—perhaps with a little help from the Fed—that doesn’t mean that all the ideas that worked in 2017 and 2018 will work in 2019. Some of these leftover ideas have seen their potential realized, and there’s not as much upside left. Others never saw their potential realized—and they never will.
This is key: 2018 was a year that saw many once-exciting investment ideas expire… some in glory, and many in the dumpster.
This means that some of the assets many investors are holding are past their prime. They will not deliver in the future.
Which ones? I’ve just published a free, detailed report explaining exactly what you should watch out for. But to give you a quick overview, there are the seven areas I think all investors should be very wary of:
- Tomahawk Tweets: Investing based on tweets from the White House.
- The Great 2018 Marijuana Mania: Weed is becoming a legitimate business—but that doesn’t mean pot stocks will be winners this year.
- The Short Volatility Crisis: There was a way to profit on Wall Street’s record bull keeping volatility down. That trade is done.
- The Continuing Yield Hunt: Seeking yield in a low-yield environment has pushed many investors into becoming speculators without realizing it. That’s very dangerous.
- The Crypto Crypt: I’m not anti-blockchain. But as with the dot-com bubble, while the technology is real, most of the offerings will be duds.
- (Lazy) Passive Investing: It’s dangerous to put all your eggs in an ETF basket and think that doing so mitigates risk through diversification.
- Leveraged ETFs: This puts the ETF risk on steroids.
The report explains each of these expired investment ideas: what it was, why it worked, why may not work going forward, and what to do if you’re exposed. Even folks who don’t agree with me on some of these investments could benefit from rethinking the risks attached to the others.
I strongly encourage all investors to download my free report and inform themselves about these potentially toxic assets.
That goes double if you’re as optimistic about certain resources in 2019 as I am. Like me, you may be wondering what to sell in other areas to reallocate to the resources already in rising trends.
Note from the Publisher: Lobo Tiggre has recently launched his own subscription-based program called The Independent Speculator, which advertises “Actionable Investment Ideas for Exceptional Results. Start benefitting from powerful, thoroughly researched, unbiased investment insights today.” that I personally love — to subscribe, click here
Lobo Tiggre is the founder and CEO of Louis James LLC, and the principal analyst and editor of IndependentSpeculator.com. He researched and recommended speculative opportunities ... <Read more about Lobo Tiggre>