September was marked by volatility as European problems dominated the headlines. As we head into earnings season, worries will increase as investors worry about the holiday shopping season and its effect on sales and employment.
My long and short ideas from September are still in effect as nothing has been done to fix the problems in the US and Europe. Until that happens, gold and silver will remain well supported while the banking sector remains on life support.
For October, I am expanding on my tech and gold and silver stocks while looking at adding some shorts in the exchanges and European debt.
Silver Wheaton (NYSE:SLW) – Silver Wheaton has been beaten down along with the price of silver but this should be looked at as a buying opportunity ahead of the seasonally strong fourth and first quarters of the year.
If anything, the selloff in silver makes it more attractive to sign new streaming deals with the balance sheet cash. Once people start looking towards an economic recovery, the two forces which are dragging silver down will begin to work in its favor.
Qualcomm (NASDAQ:QCOM) – Smartphones based on Snapdragon chips are beginning to hit the market and have partnered with Microsoft (NASDAQ:MSFT) to power the first generation of Windows 8-based PCs. Major launches coming shortly include the Windows-Nokia phones, along with the next generation of Motorola (NYSE:MMI) phones.
At the Microsoft BUILD conference, Qualcomm’s Gobi chips helped power wireless connectivity on prototype Windows 8 PCs.
During the recent market selloff Qualcomm’s stock has held its ground as investors realize the true value of the patent portfolio and mobile phone featuring Snapdragon chips make their way to the market. We may be ready to retest the August lows and any selloff should be look at as a buying opportunity.
Yamana Gold (NYSE:AUY) – Yamana’s stock ran up to $19 before selling off back to the $14 level, providing investors with an excellent buying opportunity ahead of the next leg up.
One has to ask themselves if, during this period of volatility, anything has changed in Yamana’s future? The dividend was recently raised as a sign of strong prices, recent drilling has led to strong organic growth, and production is set to increase by 40% over the next few years.
If anything, the recent rise in the dollar and global slowdown should help cool the inflationary fires whipping through Brazil and Argentina.
NYSE Euronext (NYSE:NYX) – This is a play on the continued protests on Wall Street as the NYSE Euronext has broken through support levels and looks to be headed lower.
At the current time, it's unclear how the protests will affect stock prices if they continue, but additional uncertainty is not good at this point in time when the markets are worried about a Greek default, the US slipping back into a recession, and Congressional budget negotiations.
Continued protests may undermine what slim confidence there may be that we will avoid a recession.
Nasdaq OMX Group (NASDAQ:NDAQ) – Same reasons as above except the Nasdaq OMX Group has not broken support levels.
Eurozone debt – A controlled default for Greece is not going to inspire confidence in the bond markets for Eurozone debt going forward. It appears that as Trichet is about to leave and Draghi is set to take over, ECB policy will take a sharp turn for the doves.
Expect rate cuts and bond purchases to help support interest rates, but the reality of the matter is the situation in Greece is not getting any better. Over the weekend, there were reports that Greek courts are letting the long-term unemployed walk away from their debts while the Greek government is putting into place an austerity plan that will fall short of EU goals.
After the controlled default, Greek debt will be priced at default levels and Europeans across the continent will pay higher interest rates on their borrowings while the banking sector remains on life support.