Blog Posts by Matt Nesto

It didn't take much to bring beleaguered gold traders back from the brink. Jitters in Japan and fear over the Fed have stoked a reversal in gold that follows a seven month, 25% slump.

While the most widely traded metal is still only about $25 away from the two and a half year low it hit in April, Paul Schatz, president of Heritage Capital, thinks there's currently a lot more upside than downside in gold.

"This is probably only half or three-quarters of the way done," Schatz says in the attached video of the long-term rally in gold. In fact, in a recent note to clients he wrote, "I do not believe there is enough evidence at this time to conclude that the secular bull market in gold has ended."

What that means, Schatz predicts, is that "if you give gold 3-5% on the downside, I think your upside is probably 15%," which would push gold north of $1500 again. Not only does he think it is "way too early" to give up on gold given what's happening in Japan and Europe, Schatz thinks most investors have it wrong.

"I'm a very big believer in the masses being embarrassingly wrong at major turning points," Schatz writes to clients, adding that the skepticism about the metal's future has gotten ahead of itself.

After rising 80% in the past seven months, Japan's benchmark Nikkei 225 (^N225) stock index finally blinked. A staggering 7% single-day decline rocked Tokyo's market in ways not seen since the Earthquake-Tsunami disaster of 2011.

While the cause of the sell-off is being laid at the feet of weaker than expected Chinese manufacturing data and worries about the Fed curtailing its five year bond buying spree, Paul Schatz, president of Heritage Capital sees it a little differently.

"It's an elevator shaft decline," Schatz says in the attached video. "You can attribute any kind of news you want to it, but the fact of the matter is, this was a balloon so blown up with air, the slightest little prick was going to take an awful lot of air out really quickly."

So now the question is, will it continue in Japan? And will it spread to the U.S. and rest of the world?

From Schatz's stand point, what happens today and tomorrow is not as important as what happens in the next few weeks. While he predicts weakness here and "reverberations around the world" he thinks this will make for a great buying opportunity, albeit one that many people will miss out on.

"All the people sitting on the sidelines have been salivating for any chance to get in," Schatz says, adding, now that it's here, they won't. "I'll argue those people are not going to buy, that markets are going to stabilize" and then resume their uptrend.

It's the hottest stock that almost nobody loves. Hewlett-Packard's (HPQ) nearly 50% gain so far this year has left it in a league of its own atop the 30 companies that make up the Dow Jones Industrial Average (^DJI), and yet, its support on Wall Street is razor thin.

Despite this stock's rebound, its forward PE ratio of 6, the fact that 25% of its market value is from cash, and it easily covers a 2.5% dividend yield, the pride of Palo Alto is still in need of some love.

As my co-host Jeff Macke and I discuss in the attached video, with the stock surging and expectations weak, the company's 2nd quarter earnings results due out after the close of trading today, are taking on special interest.

Analysts are expecting earnings per share to tumble to $0.81 from $0.98 a year ago. While the costs involved in restructuring a business with 335,000 employees are immense, interested investors would be wise to know that FactSet data shows H-P has not missed its bottom line consensus estimate in three years.

Unfortunately, the same cannot be said about its shrinking sales results, which have left Wall Street wanting more in 3 of the past 5 quarters. This quarter, analysts have revenues pegged to slump about 9% to $28.0 billion, but don't hold your breath.

While some would take weak results earlier this month from rival computer-maker Dell (DELL) as a warning, it's not necessarily clear that the Texas-based takeover target didn't poison its results in order to improve the odds that its founder will be able to take the company private.

Expectations are for courteous questions and familiar answers when Federal Reserve chairman Ben Bernanke sits before the Joint Economic Committee in Congress today. After all, it's not as if the two-term Fed chief doesn't have his story down by now. What that means is that he should be able to reiterate his outlook of cautious confidence and reassure the world that things are improving and that the Fed will be able to extract itself from its easy money stance when the time is right to do so.

Related: QE Tapering Won't Start Until Q4 Says Chandler

But for Fed watcher Chris Whalen, a managing director at Carrington Investment Services, the world would be well served if Bernanke came clean on the short-comings of his global inflation strategy.

"The big lie among all the central bankers is that they can do something to help grow jobs and get the economy back to where it was," Whalen says in the attached video. "Despite everything they've done for the past five years, the pool of credit is shrinking," he says, and in many markets, is actually deflating.

To be fair, Whalen says it's not just Bernanke who is blowing new asset bubbles, he thinks it's a global condition. And nowhere is it more conspicuous than in Japan where he likens the country's new inflation-creation policy by way of a weaker Yen to a ''deliberate act of economic war."

He's been called the golden boy, the best banker in America, the person singly responsible for JP Morgan's (JPM) success, and someone too important to be messed with. But if you ask Chris Whalen if Jamie Dimon, or any bank CEO, should hold both the chairman and CEO titles he'll tell you straight up that it's a terrible mistake.

"The division of jobs is not about efficiency or stock performance. It's about accountability," says Whalen, the managing director at Carrington Investment Services. "There's really no protection for the small shareholder, so you need accountability. You need to have the operator running the business and the board essentially oversees their activities."

While many have argued that the 60% surge in shares of JP Morgan over the past year outweighs the black eye the bank and its leader suffered as a result of $6 billion so-called London Whale trading losses, Whalen is unmoved by that argument.

"Everybody keeps going, 'oh the stock is up, Chris.' It's at book value, guys, and it's probably fairly valued," he says, characterizing Dimon's performance as a having done "a good job but not tremendous."

And even if this vote had passed and the investors decided they wanted to split the two roles, Whalen points out, "the board has no duty to follow the wishes of shareholders" since it is a non-binding referendum. Even so, he predicts there will be change at JP Morgan.

An ounce of gold, often represented by a single American Eagle coin, is a fairly easy thing to visualize. Even a 400 ounce gold bar, like the ones held at Fort Knox, is a fairly fathomable concept. But when you try to get your head around just how much of the metal an ETF like the SPRD Gold Shares (GLD) owns, it can get a little daunting. And the same is true when you try to track how much they've had to sell as the price of gold slips to a 2-1/2 year low.

"300 tons," says Tom Lydon, the editor of ETF Trends, in the attached video, calling the disposal of over 600,000 pounds of gold so far this year "amazing" and "incredible."

This, of course, as the largest metal-tracking fund has gone from briefly being the biggest ETF, to being a top-5 player after being cut in half to approximately $46 billion in value today, holding just over 1,000 tons of gold in its vaults.

While gold is clearly out of favor forcing the hand of holders to sell into weakness, Lydon says it won't always be that way.

"Central banks maybe aren't as concerned," he lists as one reason why gold is down. "I think the average investor, with stocks and bonds doing so well, I think they say, 'hey, I don't need to hedge, so that gold position I had, I'm going to put that into stocks for now.'"

There's a flippant retort used in investment circles in which mistaken fund managers proclaim: "I wasn't wrong, I was just early." It's used to vindicate a miscalculation as being the result of bad timing rather than bad judgment. Despite its rather corny and cliched premise, it is used more often than you would think.

In fact, Don Hays, the founder of Hays Advisory Group, points out that the excuse is being widely used right now by red-faced investors who are reacting too early to fears about the Federal Reserve tapering its bond buying program.

"After being in this business 42 years, how many times have I heard that?" Hays asks in the attached video of current concerns about teh Fed unwinding its $85 billion monthly quantitative easing program. "We have a long way to go before you have to worry about that."

In a recent not to client, Hays argues it will take years for the current monetary policy environment to deteriorate from near perfect conditions today to a point where it could threaten the bull market. And even when the Fed inevitably does begin to taper, Hays says it won't be as if the accommodative spigot just gets turned off completely.

There are simply no safe havens anymore and investors know it. In three short weeks, the 10-year Treasury yield has gone from 1.6% to 2.0% and in doing so, has gouged four percent off of the price of these ''super safe'' assets in the blink of an eye. Gold (GLD) has had an even worse month than bonds, shedding over seven percent just this month alone.

At the same time, stocks continue to be the only wining hand in town. Even though the ride has been delightful, owning equities is still nerve wracking.

"Everyone is looking for non-correlated ways to offset risk in portfolios, to offset all the ups and downs," says Tom Lydon, editor of ETF Trends in the attached video. "As long as everyone is long, you have that risk," he adds, crystallizing the What-do-I-do? dilemma investors are grappling with lately.

Not long ago, the answer to this problem fell almost exclusively into the laps hedge funds, but Lydon says things have changed in the past few years, and now, more than ever, individuals have the ability to do themselves what they used to have to outsource to the professionals.

"What's happened is, the average investor just isn't up for the risk anymore," Lydon says, highlighting one of the key reasons why so-called alternative ETFs are experiencing massive growth, including MLPs, REITs, Commodities, Alternative Energy and leveraged funds.