Heavy investment in solar sector

The resource sector continues to be under pressure from a strong US dollar, rising long-term interest rates, growing oversupply and excess capacity which is taking its toll on the explorers and producers in the resource sector.

The oilfield services we have selected have a higher yield than bonds with significant potential to grow dividends year-after-year and we believe they are under appreciated by those in search of yield.

For more significant growth potential, however, we intend to invest more heavily into the solar sector with the remainder of our cash balance.

We believe the solar sector has the highest growth potential in the US, benefiting from significant cost reductions, making the technology profitable in its own right without reliance on government subsidies. As a “green” energy, it should continue to be a politically favored industry.

US President Obama would like to double renewable electricity generation by 2020. This could be beneficial for nuclear energy, which does not have carbon emissions, but the prime beneficiary should be solar energy, the cheapest form of renewable energy to install and maintain.

At some point we can see hard assets returning to favor once again thanks to either the potential for the unprecedented monetary stimulus that the US Fed has been feeding into the market or global economic growth rebounding on its own.

Until either of these events occurs we will remain heavily weighted towards those sectors peripheral to the resource sector and in alternative energy. Our fund is approximately 50% in cash and we are excited about continuing to turn the corner and begin to achieve our objective of outsized returns. The resource sector continues to be under pressure from a strong US dollar, rising long-term interest rates, growing oversupply and excess capacity which is taking its toll on the explorers and producers in the resource sector.

Rising interest rates due to either a growing US economy and/or the potential for the US Fed to reduce QE purchases next year has triggered a bear market for bonds, increasing the appeal of US equities.

By Rodney Stevens, Fund Manager

The post Fund invests in oilfield services and solar power appeared first on AdviserVoice.

Inflationary impact on resources market

The resource sector continues to be under pressure despite the raging bull market in the US.

Unfortunately the currently tepid recovery in the US. economy, as a serviced based economy, is not strong enough to lift metals prices, which are being hampered by weaker Chinese economic growth and investment demand as well as high inventory levels.

At some point can see the potential for all the monetary stimulus that the US Federal Reserve has been feeding the market will result in an inflationary spiral, in which case hard assets would return to favor. Otherwise global economic growth could rebound on its own right without the need for stimulus, boosting the demand for metals.

Click here to read the full update by Ascenta Asset management’s Rodney Stevens.

The post Inevitable future inflation will favour resources… appeared first on AdviserVoice.

It seems all it takes is a little volatility to get the bulls running for the hills. Gold has been especially volatile this year.

After rising as much as seven-fold from 2000 to 2012, the yellow metal is down 17% this year to date. It’s been a disheartening year for investors in precious metals, and a recent survey by the American Association of Individual Investors (AAII) recorded bullish sentiment dropping from 49% to 29%, in two weeks.

Click here to view the full commentary.

The post Keep the faith: bullion prices look set for recovery appeared first on AdviserVoice.

Greece has only 2% of Eurozone GDP and 3% of its debt, but its significance is as a member of a group of economic laggards known ironically, and perhaps appropriately, as “PIIGS” (Portugal, Italy, Ireland, Greece and Spain). These omnivores all suffer, in varying degrees, from overconsumption and sovereign debt indigestion! 

Germany and France have both affirmed Greece’s place in the Eurozone, making clear their commitment for a bail out program to calm fears of a contagion. For its part, Greece committed to abide by conditional austerity measures, whilst Italy, the largest of the PIIGS, faces a decisive vote on budget cutting measures of its own. 

A more solvent group of nations with their own acronym – the “BRICs” (Brazil, Russia, India and China) meet next week in Washington to discuss what role they might play. 

The Greek Drama will continue to play out over the next several weeks. Is there enough political will to rescue Greece from default or let it fail? More importantly, can European and world leaders steer the region towards solvency? 

Recent days have been signs of that leadership emerging with quieter markets. Any positive moves should send strong signals to restore lost confidence. What does this mean for our resource-based fund? 

The gold “disconnect” is a result of this uncertain environment. Investors have preferred physical gold, the traditional safe haven and currency hedge, to gold-based equities. Indeed, the price of gold has almost doubled since early 2008 while HUI index, measuring unhedged equities, rose by just 22%. Proven reserves of gold have been available for c. US$500/oz – a quarter of the physical price! 

This pattern now seems to be reversing. For example, on August 10th, the DOW dropped 4% with gold stocks rallying 3% and on September 7th gold lost over 3% while gold stocks actually rose by 0.33%. We expect this pattern to strengthen, with a number of funds and institutions beginning to transfer from bullion into equities, with the best potential gains with the smaller cap “junior” stocks. 

The gold commodity/equity disconnect is nothing new and historically the subsequent reversion tends to be swift and dramatic.

The post A Greek drama and a gold disconnect appeared first on AdviserVoice.

Today we saw continuing defensive repositioning on the heels of the Philadelphia Fed’s dismal manufacturing report fueling a continued climb in the price of gold and, paradoxically, a feeding frenzy for US Treasuries pushing the 10-year yield to under 2% at one point (this is rightly viewed less as a vote of confidence in the US economy and more as a flight to the only other store of massive liquidity).

Clearly the market is preparing itself for the worst, namely a return to recession in the major developed economies and at least a significant weakening of prospects for emerging economies. While we still believe somewhat anemic growth is the more likely outcome, it has to be recognized that the threat of negative GDP growth has increased and for a natural resource equity fund such as ours there’s little escaping a certain amount of pain along the way.

It’s hardly a surprise that commodity prices have fallen in recent weeks given downgraded projections of global growth, but the retreat in natural resource equities has amplified these losses. In a debt/liquidity crisis like this we’re accustomed to advising people to own physical assets or, in the case of equities, companies with physical assets. History tells us that at some point resource prices reflect a new reality and the disparity between market capitalization and real value springs back decisively and dramatically.

Today you can buy an ounce of gold bullion for over US$1800 an ounce or you can buy shares in almost any major producing gold company providing exposure to an ounce of gold for something closer to US$500 per ounce.

The post Falling gold mining equities present buying opportunity appeared first on AdviserVoice.