Investors asleep at the wheel as equities market loses its compass

This crazy world we live in got just a little bit crazier as the USA’s equity markets rallied to new highs on a NEGATIVE Jobs report released by the Department Of Labor today. My previous blogs have expressed that I expected a soft and weaker report than most economists. I indicated that a poor jobs report, and the recent government shutdown/debt ceiling dispute would be enough to postpone the Federal Reserve “tapering” asset purchases. And I predicted that once again QE would be injected into the system and ultimately all asset classes. Here is an article written about economist’s forecasts on the jobs report yesterday.
http://www.usatoday.com/story/money/markets/2013/10/21/delayed-sept-jobs-report-set-for-release/3147237/

From the same newspaper the results were reported in the following article;
http://www.usatoday.com/story/money/business/2013/10/22/september-jobs-report/3146693/

The US equities markets (Dow & S&P 500) rallied to near record highs on the NEGATIVE jobs data which reported the slowest jobs growth since June 2012. I want to reiterate my point that apparently NEGATIVE news is actually GOOD for the equities markets. The stock market goes UP as Job creation goes DOWN. The market rallies because poor job creation will be the catalyst for the Federal Reserve to continue injecting cash into the system which will eventually find a place across all asset classes including equities/stock-market. This QE money injection is fueling the markets and distorting the value of certain asset classes relative to their GENUINE ability to give you an adequate return on investment. It is causing malinvestment and a misdirected allocation of financial resources to asset classes that, put simply, cannot and will not give the return on investment to justify their price.

A Reuters article released confirms what I had said to expect and was reported today as the Federal Reserve’s likely game plan going forward.
http://www.reuters.com/article/2013/10/22/us-usa-economy-idUSBRE99L04G20131022

The investment strategy going forward, in my opinion is a simple one. It is obvious that the equities market has lost touch with reality and is a bubble which will ultimately burst. Until that happens the QE injections
fueled by NEGATIVE news may stabilize or continue to inflate the market. The strategy is not to pick the asset class that will go up, perhaps all asset classes will go up with the QE cash injections. The game is to pick the asset class that will increase at a faster rate. I would like to reinforce my case for the precious metals sector in particular gold mining stocks - which were an absolute gift a week or so ago when I first mentioned them. Since that blog a week ago gold has risen approximately 5% from $1,280 to $1,340 today. My gold stock picks have outperformed the respective rise in the price of gold as predicted in the blog also. Barrick Gold (ABX) on the USA stock market has seen an approximate 17% increase in price which is a multiple of 3 times the rise in the physical price of gold. Newcrest Mining (NCM) listed on the Australian Stock Exchange has gone from approximately $10.20 to an intraday high of $11.35 today or up 11%. Silverlake Resources (SLR) on the ASX has seen its price extend from 65c to an intraday high of 76.5c or
approximately 18%. I expect this trend to continue over the medium term, but definitely the long term. The correction in the equities markets that will come when earnings season rolls through its process will see a shift in momentum out of equities into the precious metals. There will be a mad scramble by those that have shorted the precious metals as they try and recover their positions. This may already be gaining momentum as I write this blog.

I hope that those that have read my blog have made some money, I hope that I have entertained whilst I have informed. If you like my blog I would appreciate the feedback and also the exposure so pass it on to whoever you feel may be interested. Remember, the equities market may have lost it’s compass, but if you keep following my blog, I will try and make sure you don’t lose yours!