Mike Swanson: The Gold Stocks are Like a Fueled up Rocket… – 8/10/2014
This week we have author and investor Mike Swanson as our guest. Mike is the founder and chief editor of WallStreetWindow and author of the book Strategic Stock Trading. Mike ran a hedge fund from 2003 to 2006 that generated a return of over 78% for its investors. He has published a financial investment newsletter since 1999 now titled WallStreetWindow Monthly. We brought mike on because of his contrarian approach to investing, and his interest in the beaten down precious metals sector.
Asked about what kind of contrarian investments he is looking for right now, Mike says that from a contrarian standpoint, he likes to look for asset classes that are undervalued and also look for sectors that has been in long bear markets. He emphasizes that one doesn’t invest just because something has been falling, but rather look for markets that are in a transition period between a bear and a bull market, a period which often shows signs of sideways trading for some time, after a long decline.
Mark saw an opportunity in Greece, when the stock market fell to very low levels, and the sentiment for that particular market was very negative. Speaking about the investment he made at the time, Mike explains that: “Everything was super cheap, and all the news on television was bad, but it didn’t matter, the stocks went up after that.” “A similar meltdown took place in Cyprus not long ago, after bank deposits were confiscated, the stock market have gone up substantially after that incident.”
In Mike’s book, Strategic Stock Trading, he breaks the market into four stages: a bull market, a topping market, a bear market, and a sideways and bottoming type market. In a sideways bottoming type of market, the market tend to go sideways until it starts to go up and begins a new bull market. That is the exact position the mining stocks are in. This is essentially a rocket that has been fueled up, and very soon someone’s going to press the ignition switch.
Next, on the topic on the general stock market. Mike says that when the next bear market comes, the fed will have less options when trying to stimulate the market, since interest rates already are close to zero. Bonds won’t act as a safe haven either, because of the low interest rates. Mike thinks more people will look for gold as a safe haven, as they did in the 1970’s.
In every bear markets there are certain stocks that enter into a bull market as a segregated part of the market. In year 2000 the tobacco stocks broke out and rallied for many years, as the rest of the market was popping, since those stocks had been beaten down prior to that. It could be that gold and the mining stocks begin a new bull market, just as weakness begins in the general equity markets. Mike does not think a bear market in the general stock market will be bad for gold, rather quite the opposite.
Mike Swanson is the founder and chief editor of WallStreetWindow and author of the book Strategic Stock Trading. He ran a hedge fund from 2003 to 2006 that generated a return of over 78% for its investors during that time frame. In 2005 out out over 5,000 hedge funds tracked by hedgefund.net it was ranked in the top 35 in regards to performance. He has published a financial investment newsletter since 1999 now titled WallStreetWindow Monthly and publishes a premium trading service called WallStreetWindow Power Investor geared towards accredited investors. He graduated from the University of Virginia in 1999 with a Masters Degree in History and published a book on the history of the American South focusing on the city of Danville, Virginia in 2010. In 2013 he published the book The War State: Cold War Origins of the Military-Industrial Complex and the Power Elite, 1945-1963.