Financial Market Update:
Fallout in the Gold Market No Surprise
Equity Markets having a bad week after hitting
all-time highs last week
April 17, 2013
– Gold drops 9% on Monday long term trend remains bearish
– Stocks roughed up this week following record highs last week
– Intel fears overblow, sales decline 3% but look to new products
– Portfolio action: sold JP Morgan, added to Deere
Gold Drops 9% on Monday
Gold has been in decline for a while, but Monday the slide gained momentum gained speed as various rumors spooked investors out of the gold market. The winds have been against gold for a while. The strength in the US Dollar this year, coupled with the expectation that the Federal Reserve will start pulling back from its expansionary strategies are macro- economic factors not favorable for commodities and specifically, gold. In our 2nd Quarter Client Outlook, the negative outlook was highlighted, thus “we told you so!”
Rough week for stocks
After hitting record highs in the SP500 last week, stocks have hit an air pocket this week. The selloff was sparked by China’s weaker than expected GDP report and the horrible bombing in Boston, added to investor nervousness. So far, the intermediate bullish trend for stocks remains in place. Should the downturn continue, more defensive action will be considered.
Intel fails to live up to negative expectations
Last night, Intel reported their financial results for the 1st quarter which were not as bad as many feared. Recent industry reports of huge PC sales declines have scared many investors from Intel. While Intel’s PC sales fell by 6%, total company sales only fell by 3%. Further, the company indicated they have a number of new products hitting the market the second half of the year including semiconductor chips that will allow many new features. Our intermediate price target for Intel is $25, or a potential 13% gain, plus the 4% dividend yield is also pretty nice.
Portfolio Action: Sold JP Morgan, adding to Deere
All positions in JP Morgan were sold yesterday after a significant rise in the shares from last summer. JP Morgan’s 1st quarter financial results were mixed with revenue growth non-existentand earnings growth resulted from lower bad loan write-offs. Further, JP Morgan seems to be constantly involved in governance problems including the Madoff Ponzi-sceme to the LondonWhale (which created the opportunity to buy the stock cheap).
Share of Deere have dropped from the mid 90’s to the low 80’s on concerns of low corn and other agriculture prices, due largely to good weather. With weather patterns lately, betting on good weather seems to be a bad gamble. The downturn in the stock seems to be a good
opportunity to add to this high quality industry leader.
Information sources used to prepare this report include Argus Research, Value Line Investment Survey, Zacks, Barron’s, Kiplinger’s, Fidelity, and Decision Economics. Founded in 2010, Andrew Hill Investment Advisors, Inc. is registered as an investment advisor with the state of Florida and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. Andrew Hill and clients of AHIA hold positions in the investments mentioned in this report. Please contact Andrew Hill Investment Advisors, Inc. if there are any changes in your financial situation or investment objectives, or if you wish to impose, add or modify any reasonable restrictions to the management of your account. Our current disclosure statement is set forth in Part II of Form ADV and is available for your review upon request. Tax and estate planning advice is general in nature and the firm is not engaged in
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