New Answers on AAPL, SBUX, CMG, Gold, Silver, More…

There’s no shortage of good material from you folks. The comment boards are lighting up, and no surprise given the explosive reports I’ve filed for you in the past week on the European banking crisis, the Deutsche Bank bomb, and an official Super Crash warning. Feel free to join in and leave your comments and questions at SureMoneyInvestor.com or follow me on Facebook or Twitter.

In particular, I’m getting a lot of questions right now about big-name equities like Apple, Chipotle, Starbucks, Alcoa, and more – as well as the all-important precious metals and currencies.

I hope these answers help you make good decisions as you get your portfolio ready for the Super Crash.

Here’s what you need to know.

Q: How do you see the value of [Apple Inc.] AAPL in 2016 especially with ApplePay being launched? ~ Carl M.

A: AAPL is not an expensive stock but it has run into the problem that all huge companies ultimately face – how to keep growing from an enormous revenue and profit base.  AAPL will almost certainly remain among the most profitable companies in the world, but at its current size it is going to be extremely difficult for it to grow at a high enough rate to gain a high earnings multiple.  New initiatives like ApplePay just won’t move the needle on the stock.  In a bear market, it is going to be difficult for AAPL to do better than the market.

Q: [Alcoa Inc.] AA is more tied to economic growth than any other company in this world. How can this be a long given your outlook? ~ Max K.

A: To be honest, I had a hard time finding ANY stocks to recommend to buy this year. I believe we are already in a bear market and it is going to get worse.  But AA is a very cheap stock with limited downside and the potential for decent gains as a break-up candidate.  It has attracted the attention of one of the most astute value and activist investors in the world, Elliot Management, which tells me that has good potential for gains.

Q: Your analysis of [Chipotle Mexican Grill Inc.] CMG is suspect, have you actually visited any location? They are still packed, maybe not the across the block long lines as before, but I think they will post a much smaller SSS loss than the Street expects… ~ Dan J.

A: I am a big fan of Chipotle’s food. But no restaurant company should trade at a price earnings ratio 60x, which was where CMG was trading before its food poisoning scare.  That scare seriously damaged its brand but even before that it was a severely overvalued stock. Like AAPL there are limits to growth in every business, and CMG was priced as though there would be a restaurant on every corner, which was unrealistic.  In a bear market, this stock will suffer more than stocks trading at lower multiples; with the food scare, it could crash.

Q: Michael, why are you short [Starbucks Inc.] (SBUX)? ~ Pat J.

A:  SBUX was one of a select group of stocks that kept the market indices aloft in 2015 while the average stock fell into bear market territory.  Even after dropping $10 from its 52-week high of $64 per share, the stock is trading at a price/earnings ratio of 33x, more than twice the market multiple.  It is overvalued and will decline further in a bull market.

Q: What is your outlook on all the cloud software companies with no real earnings? Workday Inc. (WDAY), ServiceNow Inc. (NOW), etc. ~ Jim Z.

A: All the iCloud stocks are in a bubble and will crash along with the FANGs.

Now let’s move on to precious metals and currencies.

Q: What would you suggest as far as a good ratio of how much gold to silver to hold in one’s portfolio? If you wanted to have a 10% position in PM in your over-all portfolio, how much of that 10% should be gold vs. silver? Also, how much would you suggest in terms of having an actual physical holding of each of these metals? ~ Samuel P.

A: Gold should be 15-20% of your portfolio; your precious metals position should always be heavily weighted towards gold.  There is no set ratio but I favor gold over silver because gold is more of a currency than silver and the premise for buying precious metals is that they are hedges against the destruction of paper currencies by incompetent and arrogant central bankers.

The main reason for that is that silver really is “poor man’s gold.” The major difference is that gold is a currency while silver remains a metal. Silver has a lot more industrial uses than gold, and is also more volatile, more dependent on the state of the industrial economy (which isn’t very good right now), and very beaten down right now. The strong dollar, China’s implosion, and a variety of other factors have all hurt the price of silver.

smi silver investor

Overall, gold is a much better long-term investment than silver because it’s a currency rather than a metal.

My preferred way to own gold or silver is in physical form: coins or bars. Whenever possible, I opt for actual gold instead of ETFs or miners (though those can certainly be a valid choice, and I’ve discussed several of my favorites in the Gold Briefing). As a general rule, if you want to invest in gold, invest in gold.

Q: What about using inverse ETFs USD/Yuan or USD/Emerging Market Currencies? ~ Mike S.

A: Inverse ETFs are dangerous. They do not work as advertised. They have to be reset on a daily basis. They are for speculators and day traders.  I would avoid them.

Q: Since we are in a commodity “bubble” and this bubble will burst – it would lead one to assume that gold and particularly silver (which are commodities – traded on the commodity exchanges) will also burst and go down and not up! In deflation, is Au and Ag really a “good investment” or just a hedge against catastrophe? ~ Cynthia F.

A: In the first place, we’re not in a gold “bubble” – gold has had a very rough few years.

smi gold investor

In the second place, gold is not a “commodity” – even though it’s traded on commodity exchanges – and the same rules don’t apply.

Gold should actually be considered a currency, not a metal or commodity, in today’s world. Unlike other currencies (with the exception of digital currencies such as bitcoin), it is the anti‐fiat currency. It is a hedge against dollar and other paper currency depreciation. It should not be treated like a commodity, since it will not respond like one.

In a world where the Federal Reserve has made no secret of its desire to increase inflation as its official policy, the dollar will unquestionably decline against the value of gold and other tangible assets over the long run. The explosion in financial asset prices since the financial crisis is a manifestation of the destruction of the value of all fiat currencies including the dollar.

It is no accident that the wealthiest people in the world are shifting money out of paper currencies into high end real estate, collectibles, art, and other tangible assets. Eventually gold and other precious metals will appreciate sharply along with these beneficiaries of dollar depreciation.

Do you have a question I didn’t cover? Please feel free to ask me in the comments – as we get closer to the Super Crash, I’ll be actively reading and answering. Keep in mind that I can’t provide personalized investment guidance, but I’m eager to help however I can.

Stay safe out there.

Sincerely,

Michael Lewitt

45 Responses to “New Answers on AAPL, SBUX, CMG, Gold, Silver, More…”

  1. Hi Michael,
    I don’t have a question, I just wanted to say I think you are providing a great service for individual investors. I’ve seen your interviews on RealVisionTV and found them very refreshing. Thank you for sharing your views.
    Regards,
    Brian

  2. For someone with 15-20 years left to retirement taking an aggressive approach to their 401-k currently, would you recommend restructuring my 401-k. Up till now I’ve always listened to the advice of others who normally say….just leave it alone and don’t touch your 401-k till you get within a few years of retirement. I have rode the market down and back up a couple of times in my 401-k. Would be nice for once to not have to ride it all the way down every time.

  3. In your previous posting, you covered problems with central banks in Europe, in Japan and in China, as well as the Fed. You mentioned dollars and the Yuan as well as the Euro.

    No mention was made of Great Britain, Sterling, London or the Bank of England. Does that mean that there will be less impact here when the meltdown comes or are you already considering the United Kingdom as dead, buried and finished ?

  4. Michael your insight is truly remarkable. I’ve only been following you for a few months and have learned so much. Question: you predict a super crash in June of this year, what if the Fed does another round of quantitative easing this time using the so called helicopter money that Ben Bernanke talked about in the past in which the government will spend the money on infrastructure projects to spur economic activity? Can this be a sufficient countermeasure to blunt the effects of a supercrash in the market? Thank you.

  5. First, I would like to thank you for making ” Sure Money” available to the regular, small investor, like myself, and I sure like the price!! Believe me, your generosity of your time and recommendations are greatly appreciated. I’m sure most of the subscribers out there would agree with me.
    Now I only have one question and its this : I have shorted SPY, and a few other equities, as you recommended but I shorted via OTM puts? Should I be short using ITM puts, like say, at a delta of 70-75??

    Again, thank you, Michael.

    Gord P
    Atl.

  6. Several months past, I purchased Put options on most major banks in the States and in Europe. I fully expect at least one of these highly leveraged banks to go under over the next year. Once that happens and assuming the Fed will not be able to save the banking system this time round, my puts will be deep in the money. My only concern however is this party risk. Although the CBOE does insure individual broker members, they do not insure every option contract. I know that the banks hold sizeable derivative positions (both written and purchased Call and Put Options). What happens when a major player goes down for the count. Will they still be in a position to honour Put they have written?

  7. Hi Michael,

    I am a relatively new Passport Club subscriber, but I’ve already found your guidance to be spot on and immensely helpful. How bad is the Super Crash going to be? Do you have a target for the S&P 500 or other indexes?

    Thank you,
    Kurt

  8. Hi Michael,

    I’m a relatively new Passport Club subscriber, but I’ve already found your guidance to be spot on and immensely helpful. How bad is the Super Crash going to be? Do you have a target range for the S&P 500 or other indexes?

  9. Arminius Aurelius

    I have since the early 1970’s been a buyer of Gold and Silver . The only time I ever sold my bullion was in 1980 when within 4 weeks Gold doubled from about $ 450.00 to $ 850.00 ….that was irrational . Started buying slowly again about 1994 . By 1999 it was an obvious steal . but now especially for young people I would say that Silver , percentage wise will increase much more than Gold . Gold is mined and held forever whereas Silver is mined and a high percentage is used in industry , therefore it is gone forever ……..therefore over the years Silver will become a rare commodity compared to Gold . Young people have less money to invest , Silver will be a winner for them. ……..Arminius Aurelius

  10. In additional to physical gold and GLD why are you not telling you subscribers to buy GDX. Since 1/1/16 GLD is up 17.3% but GDX is up 33.9%. Also, FNV is up 26.3% since 1/19/16.

    Also, what about inverse ETF’s (single and double leverage) on the Dow and S & P? Since 1/19/16 DXD is up 3.2% and QID is up 7.7%. I am increasing the profits in my portfolio faster now then when we were at the end of the bull market.

  11. Florida Resident

    For Jim Swabe and any other reader who is within 15 years of retirement, request the full legal document for your 401(k) plan and look in it for when you can take a distribution from the plan while you are still employed there. Many plans permit in-service distributions beginning at age 59.5 and some will permit rollover transfers, beginning at that age, into an IRA. If you find that your 401(k) does permit same, then you can make sales within your 401(k) account to raise the cash you wish to transfer into your IRA, then request a Trustee-to-Trustee transfer from your 401(k) to an IRA Custodian which will allow you to purchase physical gold (there are several of these IRA Custodians in the US). A direct Trustee-to-Trustee (401k trustee to your IRA trustee) transfer is not currently taxable. Then have the IRA-allowable/IRS permitted gold coins purchased within the IRA. A couple of these IRA Trustees will even permit you to have a true “self-directed IRA” wherein you can set up an LLC owned by the IRA and then you can have your own LLC write a check or send a wire to purchase the gold coins and you, as manager of your LLC, can actually take physical delivery of your IRA gold. Just be sure to safekeep your IRA gold in a US Bank or in a US depository only – don’t risk an IRS showdown by storing your IRA gold offshore or in Canada.

  12. Why are you choosing the super crash by summer 2016 as opposed to fall or by the end of 2016? are there any major catalysts to cause this crash? Are there any miners which you would recommend for those willing to take a leveraged bet on higher gold prices?a few major and junior miners would be great. Love your tweets and insights!

  13. I’m just trying to understand .

    To the following question on February 11, 2016

    Q: What about using inverse ETFs USD/Yuan or USD/Emerging Market Currencies? ~ Mike S.

    Your answer was
    A: Inverse ETFs are dangerous. They do not work as advertised. They have to be reset on a daily basis. They are for speculators and day traders.  I would avoid them.

    Previously on February 8, 2016 in an article called « Urgent Market Warning
    The Super Crash Will Start by June 20th » you have recommended, to protect ourselves, to

    . Buy SH, the short ETF that goes up when the S&P 500 goes down.

    In both cases we are talking about inverse ETFs that are reset on a daily basis. What is the difference ?

    P.S. I greatly appreciate your articles and advices . Thank you

  14. About inverse ETFs, Michael is correct that they have ‘slippage’ in price accuracy and are not desirable for long or even medium term investments. On the other hand, if you choose to look at them as a type of insurance, like car or home insurance, they can have ‘just-in-case’ value. In a portfolio with the ability to sell ‘put’ or ‘call’ options, a person can use them with some ETFs and take advantage of the time premium to make the mix work well as a hedge against a market crash. Not all ETFs have options available to trade however. One thing to consider in comparing various ETFs is the trading volume (number of shares traded per day), not just the price per share. Higher volume is more desirable. I personally use inverse ETFs sparingly, and usually hedge them with selling options which allow me to be the insurance provider and salesman to balance the insurance of the inverse ETF itself.

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