What a Bloody Week!

IDW-2016-01-15

Now, this is starting to get really serious! It is of course what I have always expected. But the ability on the part of Federal Reserve operatives to live a lie and encourage our entire society to do the same has lasted far longer than most of us would believe it possible. But just as sure as there are limits as to how high the world’s greatest pole vault jumper, aided by performance enhancing steroids, can rise before returning to earth, there are limits as to how high stocks can rise even when they are boosted by the performance enhancing steroid of QE.

Now we are about to see what the Fed is made of. With the selloff in stocks this week, I am hearing more and more calls on the mainstream media for a reversal of rate rises. In my view, this only serves to prove I was right when I said on camera last June that “The Fed simply can’t raise rates.” Of course it has proven me wrong. It did raise rates ¼% even as it boosted the payment to banks for not lending by ¼% to ½%. But with $1.1 trillion of value going to money heaven, the Fed may be facing one of those so called “day of reckoning” moments. If the Fed would face up reality, then we might have some hope for the future. More than likely, it will continue it will continue to worship “the father of lies” by making excuses for why things are not going well and then continue to carry out the same policies that have gotten us so deeply into the trench latrine to begin with.

My IDW continues to head toward a trajectory that is looking ever more like that of the 2008-09 event. Talk about catching a falling knife! The problem in a market like this, which I think is the early stage of a bear market is that value makes no difference. As the “margin clerk” calls, you have to sell what you are able to sell, not necessarily what you would prefer to sell. I have personally made some painful sales this week, booking some early losses this year, not because I do not believe in the longer term prospects of the stocks I sold, but only because I think they will almost certainly get cheaper. And so sell now, build cash and wait for the falling knife to fall and bounce on the floor a few times until the downward energy dissipates. Then go back and buy some or all of those same stocks at much, much cheaper prices.

SELL the following on Tuesday when the markets open or if you can sell does so on Monday. Altius Minerals, Callinex Mines Inc., Nano One Materials Corp., Synodon Inc. and Uranium Energy. As the global economy heads over into recession/depression, It is very difficult for me to see how all of these names won’t trade lower. I just believe the emerging deflationary vortex will take these stocks lower over the coming weeks and months and so you will most likely be able to pick them up cheaper in the not too distant future. Regarding Nano One, it is my view that as this market really plunges lower, the Tesla craze is likely to cool down very considerably. A technology that can and will in my view start to make a difference in the area of carbon emissions is dynaCERT, which I am opting to keep. We should start to see their sales rise dramatically, first in the trucking industry and then potentially in the auto industry as the emissions scandal in the auto industry continues to go global.

The stocks that I have chosen to keep in this group should be able to perform relatively well, each for its own reason: Alon USA Partners for example, will continue to make good margins, in fact perhaps better margins as the price of oil continues to decline. Its share price may be in decline, but its business prospects and dividends paid should remain strong, at least for the foreseeable future. It is my understanding that U.S. refiners are running close to capacity, so it should be able to keep its margins high.

Arianne Phosphate is the only major new phosphate deposit nearing production in a safe part of the world. Its economics look very robust and unless the world stops eating, a major fertilizer company is going to have to have this company’s project.

Canacol Energy Ltd. is continuing to make money selling natural gas in Colombia so its cash flow and balance sheet should remain strong.

dynaCERT has an immediate answer for the automobile makers to get them in compliance with environmental regulators around the world PLUS it saves 10% to 20% in fuel costs. Its shares have performed well even in this dismal market since we recommended it.

Goldmoney Inc. – This company has deep pockets behind it and it has a revolutionary low cost payment system using gold as its currency. Saving money in payment transfers is what it offers in addition to doing so using gold as money which over the longer term will gain value and has been doing so even over the past few years vis-à-vis most currencies.

Neptune Technologies & Bio Resources – This company seems to be turning the corner in terms of its profitability and its krill product is very helpful in reducing joint problems and lowering cholesterol. However, it is considerably more expensive than say inferior products such as Omega 3 fish oil. So in my mind, keeping this stock now was kind of a close call. It has a 50% interest in Ascati Pharma Inc. which is applying for FDA approval for its krill-based CaPre drug that lowers bad cholesterol and increases good cholesterol. So I like the longer term prospects of this company. During a time when more and more people are required to watch their budgets to be sure they can afford absolute necessities, the question is how well will a superior, though expensive product perform. Time will tell, so act according to your answer to that question.

Pan Orient – If there were one energy stock to hold in this market melt down, this is the one. It will likely pay a C$0.40 dividend compared to its C$1.15 closing price this week. Moreover, it continues to generate solid cash flows from oil and gas production in Thailand and prospects for a major oil and gas discovery look very good sometime early this year. Chen figures the company will still have about $1.00/share cash in the bank at the end of this year after paying out C$0.40 dividend and it is likely to pay out more cash in the not too distant future. This is a keeper in my view.

About Jay Taylor

Jay Taylor is editor of J Taylor's Gold, Energy & Tech Stocks newsletter. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. Currently he also hosts his own one-hour weekly radio show Turning Hard Times Into Good Times,” which features high profile guests who discuss leading economic issues of our day. The show also discusses investment opportunities primarily in the precious metals mining sector. He has been a guest on CNBC, Fox, Bloomberg and BNN and many mining conferences.