Precious Metals are a Waste of Your Capital, Invest in These Banks Instead
There was a running theme this week in the stocks you sent me: metals.
Gold, silver… precious metals that everyone expected to climb higher and higher with the war in Ukraine raging on – but that’s not what’s happening. Frankly, GLD, GDX, and SLV are a waste of your capital right now. There may be a little bit more upside to each, so put your trailing stops in place, take your profits, and get out.
There are better places to put your money, including an ETF trade and a few of my favorite banks.
04/22/2022 Buy, Sell, or Hold Transcript
Everybody Shah Gilani coming to you with your Friday BS.H, as in Buy, Sell, or hold.
Thanks for all the stocks you sent in! A few recurring themes, so I’m gonna hit a bunch of them, but I’m gonna lump a couple of them together in terms of the themes. And you’ll see what I’m talking about in a minute.
First off, I’m gonna get to GLD. Gold. Yeah, the SPDR Gold Shares ETF, which is proxy for holding gold. People, the answer with GLD, which is the same answer I’d give you if you ask me what to do with physical gold, is hold it. I certainly wouldn’t buy it here. I’m not a gold digger. I’m not sure where gold is gonna go. I’m not sure where GLD is going to go. It’s had a bit of a run, but where’s it gonna go? Is it gonna break out? And where’s it gonna go?
There is no return to a gold standard, people. That’s not gonna happen. The only reason I call it a hold right in here, as opposed to sell, you’ve made a little bit of money on it is yes. With the war in Ukraine, continuing, it can go higher. Guess what else has happened? Russia fired an Intercontinental ballistic missile. That might move it a little higher in days and weeks ahead. And more importantly, coming up next: potential Russian default. That could push gold a little bit higher on unknowns, shall we say?
So it’s a hold, it’s not a buy. I would not be buying it here. No way. No how. But at some point, when you’re happy with another 5% or 10% gain, get out and go apply your money somewhere else. Gold is not what it used to be. It’s not going to move. You’re better off placing your capital in all kinds of other investments. That’s it for GLD.
Next up on the thematic side, GDX, which is the VanEck Gold Miners ETF. This is the same story as GLD. Just because they’re miners doesn’t mean they are a business with potential profit margins and mines that they can explore and maybe find huge stores of gold. Guess what? If all the miners have found more gold and they mine it, the price will probably come down. It’s not gonna go up.
Okay. So you look at that in terms of a business, but really your mining gold. It’s about the price of gold. And it’s going to move consistently with the price of gold, whether it’s a cash price of gold, the future’s price of gold… So GDX same story. Where’s it gonna go? It’s a hold for the same reasons I said for GLD. But at some point, take your profits, get out and go look for something else to put your money in. There’s plenty of other things. Next up, silver. SLV. A lot of you ask about iShares Silver Trust ETF. It’s very much the same story. Silver has more industrial uses than gold by far, but still silver has really not done very much. It hasn’t really popped. A lot of people thought it would kind of follow gold higher. Maybe it would exceed gold because it’s got industrial uses. It’s a waste of your capital not unlike gold.
It doesn’t pay dividend. There’s plenty of other places you want to be besides silver. So as far as SLV, it’s a hold, because baby, you get a little more pop, but use trailing stops. It goes a little higher. If it comes down, have a stop in place for GLD, for GDX, and for SLV, and get out and go find another place to park your capital. So that’s it for the precious metals.
Next up, BOIL. This is the ProShares Ultra Bloomberg Natural Gas ETF. It’s ultra because it’s leveraged 2X. So it’s a leveraged ETF. The problem with leveraged ETFs is they’re really better for trading than they are for any kind of long term hold. If you hold them for a longer period of time and you get a steady, consistent move up (or, in the case of inverse ETFs, a steady move down in any kind of leverage) you’ll do well. But getting to that point… It’s choppy all the way. And you’re gonna get killed because they are repriced. Most of them on a daily basis.
That’s a long explanation. Suffice it to say, when these leverage ETFs are priced on a daily basis, that throws everything off. You’re not getting what you expected. It’s great for trading. Not for a long term. Hold right now. Yeah, it’s a hold. If it’s gone up and you own it a little bit here, but make sure you raise your trailing stops because you’ve already had a nice pop, but it’s gonna come right back down for the reasons I’ve said in terms of the daily pricing. That’s number one. Number two, now gas is very volatile right now.
Anyway, trade it. Do not hold leverage ETFs for long. If you have a nice run of profits for a couple of days, take your profits. People. They’re not gonna continue to go up. If the instrument that they follow kind of goes sideways, you’re gonna get hammered. All right. So that’s what you want to do with these. As far as BOIL goes, trade it. If you own it lot lower, hold it. See if it can’t go a little higher trail stops higher. So if it turns around, comes down, it’ll go sideways and you start losing value because of the daily pricing. You’ll get out.
That’s how you trade BOIL. Not a long-term hold. Would I buy it up here? No, it’s too high for me, but if I owned it, I would hold it thinking, “Maybe I can get a little bit more out it with my stops up.” Any of the leverage ETS, be careful. Trade them. Don’t own ’em. I mean, don’t own ’em with a forever plan.
Next up… A lot of questions about the airlines. Delta, United, Jet Blue… I’m gonna lump them all together. People, I’m gonna tell you this about that: You wanna look at them on a one-year basis. Go right ahead. You’re gonna get excited. You’re gonna say, “Oh my gosh, they any breaking out! This is the reopening trade finally coming to pass. They’ve broken out of their sideways channels. And some of ’em are looking really good. And the airlines, oh, their profitability’s returning.”
Yes. I’m on a lot of flights. Yes. They’re almost always full. Yes. The airports are busier than I’ve ever seen them. And guess what? They are gonna return to profitability. People are traveling and that’s a good thing, but you have to look at them in terms of a five-year chart. Where are they going to go? You want look at it from a historical perspective to answer the question.
If you own them lower trail your stops up, all right. Make sure cuz if they come back down and they will get out with your nice profit. While airlines are in a sideways range, you sell the top and buy the bottom. It’s a reversion to the mean type trade. You go back and forth. You trade them, sell ’em, buy ’em, sell them, buy them. Now they look good, right? Be careful. Trail your stops higher because they’re gonna come back down. The profitability isn’t gonna go through the roof. Gas prices are going up. Fuel prices are going to continue to go higher. So they’re going yes. Gain some of their profitability. But where those stocks gonna go, they’ve already had a nice move of higher. So they’re a hold. If you own them, trail stops higher and be happy when you take a nice profit. They’re not a buy here.
Next up, thematically banks. Lot of you ask me about all of the banks. So I’m gonna hit a few of them pretty hard and fast. And I’m gonna give you the same story on all of them. I still like the financials. I love them. Made a lot of money on myself. They came back down. I got stopped out. Took my profits, looking for places to reenter. I think this is an opportunity to reenter now. And you have a limited downside risk if you play them smartly. So they’ve come down. Might be an opportunity right here. People.
I like buying them. JP Morgan Chase is trading around $131 and change. Had a very nice update that it had a nice couple updates. Had a very nice morning. This morning market seems to want to turn around right now. And it’s a little scary. Not sure how we’re gonna close, could close higher on the highers of the day could close on the lows of the days here on Thursday. Don’t know. But right now, as I’m recording this JP Morgan Chase is at $131 and change. It’s got a 3.4% dividend yield down here. Guess what? I’d buy it down here. And I put a 5% stop on it. Yes. I only risk 5%. If I’m wrong, I take a 5% loss. Nobody’s gonna cry over 5%. I hope you don’t cry at 5% loss.
Now, Bank Of America has a 2.12% dividend yield. Same thing. Trading around $39 and change. I buy it down here with a 5% stop. If it gets down to $37, you got a 5% loss. Get out, revisit it sometime later.
Wells Fargo has a 2.06% dividend yield down here at about $48 and change. Now I like Wells Fargo. I own Wells Fargo. I have owned Wells Fargo a lot lower I’m up huge on Wells Fargo. And I’m looking for a place to exit. I got my place in mind. I think Wells Fargo can get back to $55 and change. I’d probably look to sell my position somewhere up there. Can I get back up to $60? Possibly yes. But down here, I think it’s a buy with a 5% stop. So Wells Fargo around 48 bucks in change. If you wanna buy it down here, take a shot at it.
Use a 5% stop loss. That’s all you wanna risk on this. If you catch a momentum ride higher, good for you. You can get a maybe nice 20% move outta this trade. Maybe more, maybe ends up being a nice long-term trade for you. But right now, markets in a state of flux, I’m not so sure about how long, long term is. I just think you can get into some of these financials and get a nice little pop out of them.
Last but not least on the banks that you guys asked me about is CitiBank, symbol C. This has got the best dividend yield at 3.84%. That’s pretty nice dividend yield on a pretty good payout ratio of 23%. Citi is trading at about $53 and change. Same story. I’d buy it here. Put a 5%, which is about $50. So you can buy here at $53 and change. If it gets to 50 bucks, take your 5% loss, move on. That’s how I would trade the banks.
Why would I trade the banks down here? Why would I take a shot with them down here on account of the fact that as earning season for the banks is, you know, we’re moving on from that, they’re going to start to go back into the market and gonna start to buy back shares because they don’t buy back shares. You know, when they announce prior to announcing their earnings, there’s a pretty much a cutoff period where they just don’t do that.
So once the earnings are passed, they get back to work so on dips and they’ve all dipped. They’re going to want to buy. They have huge buyback programs and they’re going to buy the socks that they’re now a little bit of court level. That’s probably the principle reason. I like taking a shot on the banks down here with 5% kind of what I call tight, stop loss. That’s it. Bunch of ’em. I hit the banks for you.
I hid some of the precious metals for you and I hit the airlines. Hope that’s enough. I’ll catch you guys next week. And thanks for sending in all those stocks. Cheers.