Market and Meaning is our weekly update on market movements and their meaning for you as an investor. Market and Meaning is reserved for premium subscribers but is currently being offered for free to all our readers. As always, everything here represents our personal views and not official recommendations, please do your own due diligence and come to your own conclusions. To follow us more closely at Investor in the Family, be sure to subscribe by entering your info in the field to the right side of our web page and follow us on Twitter, Facebook, Scutify, and even Pinterest.
The U.S. economy actually shrank in the first three months of 2014. This is the first time the economy has contracted since the first quarter of 2011. Original expectations where for growth of 0.1% but instead the economy shrank 1%. The abnormally harsh winter weather is still being blamed.
The European Central Bank will meet this week and they are expected to increase their current levels of financial stimulus. One possible move would be negative interest rates. This means that banks that store money at the ECB will actually have to pay to keep it there. The hope is that this will force more money out into the struggling economy. Quantitative easing as the U.S. Federal Reserve has been doing is also a possibility.
Former Microsoft (NASDAQ:MSFT) CEO Steve Ballmer purchased the Los Angeles Clippers for $2 billion. The highest price paid for any other NBA team was $550 million for the Milwaukee Bucks. Perhaps even more amazing is that Ballmer was able to buy the team entirely with money he made on Microsoft stock over the last 10 months. That's right, he made $2 billion on Microsoft stock in 10 months.
One of our favorite stocks, Glu Mobile (NASDAQ:GLUU) announced that they will hold a secondary offering. This means they will create more stock to sell for the purpose of raising more money for the company. Depending on the reasoning this can be a good or bad thing. If the company is struggling and needs cash, this is a bad thing. If the company is on fire and has great management, a secondary offering can be a very bullish thing. As you might suspect, GLUU falls into the latter category. Prices have dropped even further on the news, we see this is a great opportunity to buy the stock.
In Ukraine, a new President was elected, candy baron billionaire Petro Proroshenko. He is pro-European, which is a notable shift from the former president who fought to align with Russia against the will of the people. Following the elections, Russian troops withdrew most of their troops from the Ukrainian border.
What does all of this mean for the investor? The U.S. economy is still sputtering along as most economist still call for growth of well over 2% this year, time will tell. Europe is still teetering economically and we do not see any real reason for optimism there. People are struggling to figure out where to invest since it seems all assets are already at high prices. We continue to believe that physical gold and silver are great opportunities and that the stock market will still climb a lot higher before this party ends. Our optimism for many of our favorite names is still high: Glu Mobile (GLUU), Amtech Systems (NASDAQ:ASYS), Attunity (NASDAQ:ATTU), QAD Software (NASDAQ:QADA), Facebook (NASDAQ:FB), and Apple (OTC:APPL).
Current Market Outlook: YELLOW ALERT
The Current Market Outlook is like our traffic light for investing. Green means all systems go, yellow means to be cautious, and red means we believe there are major reasons to be concerned.
In site related news, we have begun collecting key articles written throughout the week and highlighting key quotes from each. This allows our readers to stay up to date on key thoughts and dialogues that are taking place in the investing world. Check them out in our new Current Top Articles section. There is a new section on buying a home, see Buying New Home for more. Also, don't let any more time pass before you read our resource recommendation for Scutify and our updated recommendation for PTT Research.
Gold (NYSEARCA:GLD) closed at $1251.30/oz and Silver (NYSEARCA:SLV) at $18.81/oz. with both taking quite a tumble for the week. As has been the case for the last three years, there was no real clear reason why the prices dropped so much. Many believe large banks are big enough to influence the relatively small gold and silver markets and are intentionally keeping prices down. We're not big conspiracy theorists, but the idea is fairly tenable and in our opinion the best explanation at present.
Our opinion on gold and silver holds firm. As we have said for some time now, we are still looking for one more big drop. We made some small purchases as prices fell this week, but are remaining disciplined for the expected lower prices. Gold below $1200 is a good range for us, but we are hopeful for even lower toward the $1000 range. As always, we prefer to spread out our buying to get a better average cost.
That said, if we did not own any physical gold or silver, we would consider the current prices to be a very good entry point for long-term investment. One of our favorite gold sources recently said that he expects the metals to at least double from current levels in coming years calling this a "generational buying opportunity." It is important to reiterate that we are talking about owning physical gold and silver coins and bars, not stocks or ETFs. Our favorite coins are U.S minted Silver and Gold Eagles, they are universally recognized and offer tax protection. For information on how to buy gold and silver, please see "How To Buy Gold And Silver."
Bitcoin is sitting at around $628.23, up nearly $100 for the week and $175 over the last two weeks. Bitcoin had been languishing of late, but something has happened to jolt the digital currency out of its stupor. We are aware of no particular catalyst for the big spike from the low-$400 range where it had been for weeks. We continue to urge caution as we still think Bitcoin is a lottery ticket that could grow 10-100x or more and could even more easily go to $0. Caution and small amounts of money are strongly advised. For information on how to buy Bitcoin as well as our views on investing in it, please see our article, "How To Buy Bitcoin."
Disclosure: I am long GLUU, ASYS, ATTU, QADA, FB, AAPL.
Additional disclosure: We own gold and silver coins and bars as well as some Bitcoin.