One of the reasons I'm bullish on emerging market stocks is because they underperformed the U.S. in 2013. But most importantly, the P/E ratio of these emerging market stocks is at all time lows (P/E=11), while the P/E ratio in the U.S. is at 22. This is a valuation of more than double the emerging market stocks.
I think this underperformance in EM stocks is due to the underperformance of the CRB index as compared to U.S. stocks, which can also be seen here. Stocks went up (yellow line), but the CRB index (orange line) went down.
I have become very bullish lately on silver and was already bullish on gold. But the following chart makes me ultimately bullish. We see the biggest increase in gold lease rates as of yesterday and we have seen this before. In 2008, the gold lease rates started to spike upwards, which meant gold was in short supply. It also meant that the "interest" to hold gold was going up, just like the "interest" on your cash is going up. This ultimately means that the world is valuing gold at a higher interest rate and the central banks are demanding their gold back from the bullion banks. We are in for a huge upside move if you ask me.
I have been monitoring the copper warehouse stock levels in previous articles and today I came across an interesting article on Seekingalpha talking about copper futures contango. In that article the author gave a historical chart of the premium or discount for contracts extending about a year to 18 months in the future. We will see that backwardation will have a positive effect on copper prices and much more. The Chinese have been doing very odd things with their copper warehouse stocks. To read about this go to: Copper turns to backwardation . Chart 1 and 2: Copper futures contango and copper price
Comments
Post a Comment