Rick Rule, president and CEO, Rule Investment Media LLC
FOCUS: Natural resource stocks
Top Picks: Dundee, Franco-Nevada, Exxon-Mobil
MARKET OUTLOOK:
In the near term, North American, but particularly U.S. debt and equity markets, remain very buoyant, driven by a stubbornly strong U.S. economy, moderating interest rates and very strong investor liquidity. The high cap tech sector continues to lead the charge, with high growth, and high margins.
This strength at the top conceals some otherwise obvious warning signs: market breadth is very narrow, most of the economy is not benefitting from a statistically strong economy, and in particular, government spending and deficits are out of control, while American politics are at best chaotic.
The on-balance-sheet obligations of the U.S. federal government handily exceed US$35,000,000,000,000, while the net present value of off-balance-sheet liabilities at the federal level (entitlements) exceed $100,000,000,000,000. These obligations are expected to be met by a budget that is itself in deficit by at least $2,500,000,000,000.
In an election year, both parties in the U.S. are rolling out expensive proposed spending programs to in effect bribe voting blocks. With a deficit at six per cent of gross domestic product (GDP), on-balance-sheets exceeding 110 per cent of GDP, and on-balance-sheet liabilities exceeding 300 per cent of GDP, this is unsustainable.
The result, this viewer believes, will be a 1970s style response, where the economy inflates away the net present value obligations. This will be quite challenging for long duration fixed income investors.
The consequence of this is that the precious metals sector is already showing signs of life, as a historic inflation hedge. I would personally be surprised if this did not continue.
The gold equities are beginning to catch a bid too, as increasing gold prices finally begin to outpace rising costs, increasing producer margins.
Over on the oil side, equities are still very cheap, as the governing narrative appears to be that the end of oil demand is nigh. In truth oil demand will likely stay strong through midcentury and beyond. North American, but particularly Canadian natural gas, is in near-term over-supply, and is laughably cheap. Over five years this will change.
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TOP PICKS:
Dundee Corp (DC.A TSX)
Franco-Nevada (FNV TSX)
Exxon-Mobil (XOM NYSE)
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| DC.A TSX | Y | Y | Y |
| FNV TSX | Y | Y | Y |
| XOM NYSE | Y | Y | Y |
PAST PICKS: OCTOBER 12, 2023
Centaurus Metals (CTM ASX)
- Then: AU$0.53
- Now: AU$0.49
- Return:-8%
- Total Return: :-8%
G Mining (GMIN CVE)
- Then: $4.44
- Now: $10.92
- Return:146%
- Total Return: 146%
Equinox Gold (EQX TSX)
- Then: $4.16
- Now: $5.67
- Return:36%
- Total Return: 36%
Total Return Average: 58%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| CTM ASX | Y | Y | Y |
| GMIN CVE | Y | Y | Y |
| EQX TSX | Y | Y | N |