Wheaton Precious Metals WPM, my top choice in precious metals, had a nice 14% advance on Friday based on resolution of a tax dispute with Canada. I would not chase the stock now, but would wait for a modest pullback. But given the company’s historic and sizable participation in silver, WPM remains the best long-term way both to participate in a likely sizable advance in gold over the next several years and to play the 3- to 4-fold advance in silver demand coming from the electronics and solar industries over the coming decade. In addition, WPM has begun funding of mines for other scarce minerals, such as cobalt, that are facing shortages in the electronics arena.

Last week saw the largest withdrawal from developed-markets equity ETFs in history. It was the 2nd largest for U.S. equity funds. This reflects fairly well the results of the AAII survey which indicated 21% bulls and 49% bears. While I normally would not pay this any heed, this struck me as a very extreme reading in this environment. It adds to my sense that some sort of recovery in prices will soon be underway.

How widespread that recovery is, how far it goes, and on-going macro-economic developments will determine the outcome of my reassessment of my previously stated view that we have not yet left the long bull market. When I wrote my correction warning at the start of October urging the raising of cash, I admitted that my thought that the predicted larger-than-normal correction was not the start of a bear market “could be wrong given all the potential macro risks looming seemingly over the horizon.” I said seemingly because I felt the myriad macro risks were not yet actionable despite their seriousness. Now those problems seem more pressing, but I’m not sure if that is because they really are more pressing or whether it is simply a function that the market suddenly thinks they are relevant – whereas 2 ½ months ago, they had practically no relevance.

Meanwhile, precious metals, IBM, Abbvie, and many other selections from the favored list offer attractive prices. Though the ‘’avoid’’ stocks may well bounce, the risks of trying to benefit from a bounce in challenged companies are too high.

John Stewart
Chief Investment Strategist

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