Gold Could Fall To $900/Ounce By Year End 2014

Canada...

It gets worse for gold: The yellow metal fell 28% in 2013—its worst one-year drop in 32 years—for a number of reasons, including the threat of tapering and a growing appetite for stocks. Credit Suisse also thinks it was in a bubble, suggesting it could fall to $900 an ounce by the end of this year.

...Our market should see gains of between 7% and 9%, says Fehr. Add in an average 3% dividend, plus more global growth, and it may even break double digits. “It’s going to get better,” he says. “There’s more upside to come.”

Much has been said about how well global stock markets have fared over the past three years, but there’s one developed country that has lagged the rest: our own. While Canada recovered nicely in the wake of the recession, the S&P/TSX composite index is down 1% since 2011. Over the same period the S&P 500 rose 43%. Even some European countries have outperformed our market. Given their home-market bias, many Canadians have likely been surprised by just how little their portfolios have moved over the past couple of years.

There’s good news for these long-suffering investors. Many analysts and investment experts think 2014 will finally be Canada’s time to shine. Much of what’s ailed our country is now priced into stock valuations, and with the global economy finally moving in the right direction, every market, including ours, should see some sizable gains going forward.

Our struggles to date relate to the fact almost 80% of our market is concentrated in three sectors: financials, energy and materials. The last industry in particular has been badly beaten down. Materials, which accounts for 23% of the S&P/TSX composite, plummeted by 33% in 2013. Energy, which makes up 27% of our market, rose just 7% last year; over the past three, it’s down nearly 5%. Other than that our market has done well. Craig Fehr, Edward Jones’s Canadian investment strategist, points out that every other sector besides utilities and telecoms posted double-digit gains last year.

Expect better performance in the resource sectors in 2014, he adds. Materials have been hurt by China’s slowdown—there’s been less demand for commodities—but that growth pullback appears to have run its course. In fact, some economists think China’s GDP growth could speed up next year. Our energy sector has been hurt partly by low natural gas prices and the discount placed on Canadian oil compared to world benchmarks, but gas and oil prices have generally been flat or on the rise.

Materials and energy should also perform better in 2014 simply because many of the stocks in these sectors are now incredibly cheap. “Canada will do better because of valuations,” says Luc de la Durantaye, CIBC Asset Management’s head of asset allocation. “From that perspective we don’t see that drag continuing.”

There are other positive signs too, says Ian Hardacre, Invesco’s head of Canadian equities. People aren’t as worried about a Canadian housing crash as they used to be, and the Canadian financial sector—our other big industry—continues to be a well-run oligopoly. Banks may see modest gains next year, but the insurance sector, which is a big beneficiary of rising interest rates, could see solid growth for a second year in a row, he says. Industrials, meanwhile, should continue to benefit from the U.S. rebound.

Our market should see gains of between 7% and 9%, says Fehr. Add in an average 3% dividend, plus more global growth, and it may even break double digits. “It’s going to get better,” he says. “There’s more upside to come.”

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Markets Plunge Canada, USA And The World

The Toronto stock market plunged more than 200 points Friday as emerging market worries persuaded investors to avoid riskier assets like equities and commodities.

The S&P/TSX composite index dropped 215.18 points to 13,717.79 in a broad-based sell-off.

The Canadian dollar was ahead 0.21 of a cent to 90.31 cents (U.S.) as Statistics Canada said the annual inflation rate rose to 1.2 per cent in December, compared with 0.9 per cent in November, largely because of higher gasoline prices.

Losses were even steeper in New York where the Dow Jones industrials racked up a sizable triple-digit loss for a second day, falling 318.24 points to 15,879.11 after plunging 176 points on Thursday. The Nasdaq was 90.7 points lower to 4,128.17 while the S&P 500 index was down 38.17 points to 1,790.29.

The rout in emerging market assets began a day earlier following signs that manufacturing was contracting in China, a major driver of global economic growth.

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Is A January Stock Correction A Tell Tale Sign for 2014?

Investors commonly believe that January’s performance can be somewhat of a telltale sign about how the rest of the year will go.

The idea that as goes January, so goes the rest of year. It has been a surprisingly accurate measure, correct 89 per cent of the time since 1950, according to Stock Trader’s Almanac.

Longer term, it’s been pretty accurate, too. If the Standard & Poor’s 500 rises in January, markets rose that year 88 per cent of the time since 1936, says Ken Winans of Winans International. Meanwhile, if the market as down in January, stocks fell 80 per cent of the time. January is of keen interest this year as investors wonder if stocks can repeat their strong performance from last year.

So far, during the month of January, the S&P 500 is down 1.4 per cent. The S&P TSX index is up 1 per cent.

But Winans warns investors from reading too much into January. The indicator does fail. For instance, the market fell 3.7 per cent and 8.6 per cent in January 2010 and 2009, says Stock Trader’s Almanac. And both years, the market ended quite a lot higher.

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Market Corrections: The brightest shining stars can turn dim in an instant.

Optimism rules. Almost two thirds of investment professionals expect the global economy to expand in 2014, according to a CFA Institute survey. And 71 per cent picked stocks as the asset class most likely to perform best, a big jump from 50 per cent last year.
 

If you invested in the stock market in 2013, you had excellent returns in both Canadian and U.S. equities.

It was a surprising outcome for a year in which all the news seemed gloomy. The TSX composite index was up 9.6 per cent (not including dividends) and the S&P 500 index was up nearly 30 per cent.

Optimism rules. Almost two thirds of investment professionals expect the global economy to expand in 2014, according to a CFA Institute survey. And 71 per cent picked stocks as the asset class most likely to perform best, a big jump from 50 per cent last year.

All is not rosy, however. Canadian respondents see a lack of ethical culture in financial firms eroding investor trust – in particular, pressure by advisers to sell products that may not suit investor needs.

I’ve been investing for long enough that I know caution is always warranted. There’s never a slam-dunk solution. The brightest shining stars can turn dim in an instant.

I like to buy and hold blue-chip stocks for years at a time (and reinvest the dividends). I’m skeptical of market forecasts, since so many go wrong.

Here are six things I’ve learned as an investor:

Buy profitable companies. Don’t buy dreams. You’re better off owning lucrative money spinner Google (even if you buy a single share at $1,150 U.S.) than yet-to-make-money Twitter. No matter how great a story sounds or how promising a proprietary technology may be, says Irvine, buying a company without profits is speculation.

Look for rising dividends. Money-making companies can hold on to their profits or give part of their profits to shareholders in the form of dividends or share buybacks. A rising dividend shows that a company is confident about its future, says David Baskin of Baskin Financial, an investment management firm. Rising dividends are paid from rising profits. And rising profits lead to higher stock prices.

Look for share buybacks. When companies buy back their shares, they reduce the number of shares held by the public. This means higher earnings per share for shareholders, even if the firm’s profits stay the same. Since 1998, says Baskin, companies that buy back at least five per cent of their shares have delivered an annualized return of 13.8 per cent vs. 6.7 per cent for the overall S&P 500 index.

Cut your losses quickly. Don’t fall in love with stocks. Don’t refuse to recognize the reason you bought a stock has changed for the worse. Just leave, says Jim Cramer, who bought Sears as a real estate play for his charitable trust. Later, he decided it was an earnings play. “What a fool I was,” the flamboyant TV host says in his new book, Get Rich Carefully. “The reason I had bought Sears, the monetization of real estate, was gone. I was simply trying to come up with some alibi, perhaps an improvement in same-store sales, to justify the story.”

Don’t worry about a market correction. Stock marketsdon’t go up indefinitely. Optimism can push prices ahead of corporate profits, forcing a return to fundamentals. “We can’t predict when the current bull market will end, when the ‘correction’ will begin, how long it will last or how severe it will be,” says U.S. adviser and author Dan Solin in the Huffington Post. “You can’t base a sound investment plan on the unsupported musings of ‘experts’ who claim to have an ability to predict the future.”

Don’t hold only stocks. You can lessen the impact of declines by holding bonds and cash, even if they barely keep up with inflation. Bonds tend to rise when stocks fall, as central banks cut interest rates to boost the economy. (Falling rates make bonds with higher yields more valuable.) In its 2014 outlook, giant fund manager Vanguard urges investors to hold bonds, despite low yields: “High-grade bonds act as ballast in a portfolio, buffering losses in riskier assets.”

You can try to predict the future, but you’re only guessing. It’s better to find an investment strategy that works in good or bad markets and stick to it.

Ellen Roseman writes about personal finance and consumer issues.

http://www.thestar.com/business/personal_finance/2014/01/19/6_things_ive_learned_about_investing_roseman.html