The Plight of the Baby Boomers

January 3rd, 2011

Okay, so what will 2011 bring?

Most likely, it will bring more of 2010. That is, the confusing and contradictory trends of the past year are likely to keep going.

On the one hand, the deflationary contraction that began in 2007 will continue shrinking prices and economic growth. The savings rate has climbed to over 5%. Unemployment is still near 10%. And the CPI – if you believe the official numbers – is nearly flat. We may be living through the biggest rush in monetary inflation in US history, but the core inflation numbers haven’t moved so little in more than 50 years.

On the other hand, the inflationary expansion of the money supply that began in 2009 will go on too. It will bring more bubbles and more speculative pressure on oil and gold. It might also bring a collapse of the US Treasury bond market – if not in 2011, then soon after!

Which hand will have the upper hand?

Neither.

Instead, they will continue jerking the economy this way and that…rewarding some speculators, punishing others…smacking economists…and giving central bankers the middle finger.

That’s our prediction.

Gold will rise. Oil will rise. Emerging markets will rise.

The US economy will NOT rise.

What? Weren’t there encouraging signs of life at the very end of the year?

Yes. But there are always signs of life in an economy. The US economy isn’t dead. It’s just going through a bad patch…like a man whose wife has left him…or a woman who has gained 20 lbs…or a 60-year-old couple that has to downsize. These things take time.

“Baby boomers unprepared for retirement,” says a headline in the local paper.

According to the article, 10,000 boomers will reach age 65 every day for the next 19 years. And few of them have saved enough money. Some were counting on 401(k) plans. But stocks haven’t made any progress in the last 10 years. Others were looking to their houses as a source of retirement financing. They were doing fine until 2007. Since then, the value of their houses has been cut by a third.

The poor boomers! What are they going to do?

We talked to one of these boomers on the way from the airport.

“I’m going to work until I drop,” he said. (Good plan. If you have a job…)

“I bought a little apartment over in Boca Raton,” our driver explained after picking us up on Miami. “You know, like everyone else, I’ve been hurt by this recession. They say it’s over. But it doesn’t seem over to me.

“A couple years ago, people would rent my limo service for a big night out…maybe, twice a week. I’d take them down to Miami. They’d go to a big party…or to a Heat game…and then to a nightclub. They’d pay me for a whole night. It was good money.

“But now, I’m lucky if I get one a month. Either people don’t have money or they’re not spending it.

“My wife and I had a big house with a swimming pool…everything. But we also had a big mortgage, $4,500 a month. She didn’t want to do it. But we had no choice. I needed to make sure that at least I’d have a roof over my head. So, I bought an apartment in Boca for $27,000. It was $90,000 three years ago.

“And I told my wife that we had to cut back. This way, I’ll be able to save some money. Then, if we want to, we can always buy a big house again. But right now, I just don’t want that burden on my back. I can’t afford it.”

Bill Bonner
for The Daily Reckoning

The Plight of the Baby Boomers originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
The Plight of the Baby Boomers




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

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2-Year High for Oil Pushes the Loonie Higher

January 3rd, 2011

Well… As I expected, the euro (EUR) really ran up on Friday’s trading, as shorts were covered and trading books were squared for year-end. I truly believe that this euro-buying could be reversed as we go through the first month of 2011… The reason I say that is I truly believe that the euro will come under pressure, as the Eurozone gets probed to come up with better solutions to their periphery countries’ problems. I expect Germany to balk at many things, and when they balk, the runners get to move up…the runners being the dollar, and gold…

Eventually Germany will come up with a solution that’s agreeable by all parties (except Italy; they always whine), and that’s when we’ll see the euro come back… At least that’s my thought for the first part of 2011…

Now… All that could change in a NY minute, if…the markets don’t want to probe the Eurozone for better solutions, and instead take their fight to the US dollar… Which, in my opinion is the way it should be, with the Eurozone’s debt problems taking third, behind Japan and the US.

The euro ran up to 1.34 and change on Friday, but has given back about 1-cent of the ground gained in the last two days of trading in 2010. The Aussie dollar (AUD) is off by about 1/4 of a cent this morning, and gold is flat… Not everyone around the world is back to work today, but I am…so, let’s get going!

Let’s see… Oil is trading at $92… I don’t want to see this happen, but it sure looks like oil is going back to $100 again, doesn’t it? The only thing good about $100 oil is the benefit the Canadian dollar/loonie (CAD) receives by the high priced oil. And that’s exactly what we’re seeing now, and most of the latter part of 2010 – oil’s price moving higher, and dragging the loonie along for the ride… Oil is trading near a 2 1/2-year high, and so is the loonie! I saw some pundits’ forecasts for the loonie, and they have the currency trading between $1.01 and parity in 2011… Hmmm, that seems awfully tight! Tupperware like! I’m just not buying that tight range, not with the way currencies as a whole have traded in the past two years, with wild swings, and lots of volatility. So… I’ll go out on a limb and say that if oil goes to $100, the loonie will break higher than the $1.01 cap others have put on it for 2011.

Well… The euro may be off by about 1-cent this morning, but it’s not because of fundamentals. Eurozone manufacturing rose more than forecast in December, with their manufacturing index (just like ours), rising to 57.1 from 55.3! WOW! That’s a huge move for one month, and that’s in the face of a strong euro throughout December. Now, of course, Germany is the star performer for manufacturing in the Eurozone, but most of the other countries of the Eurozone showed some improvement, except Greece…

On Friday, Germany’s Chancellor, Angela Merkel, must have been making her New Year’s Resolutions, because she was talking up the euro like I’ve never heard her talk it up before… She was actually sounding emotional about the single unit/euro… She even mentioned that “we have to strengthen it”… Hmm… I guess she finally realized that the common currency for the Eurozone is what’s needed. Now… If only she would agree that a common bond issuance is also needed, we wouldn’t have to worry about “strengthening the euro” as it would take of that in a heartbeat!

Gold is flat so far this morning, and begins 2011 trading at $1, 420.10… That’s pretty incredible, folks… But, like I told the audience that tuned into my interview on WAAM radio 1600 AM, yesterday… “Gold is a rarity… It’s not like miners can just make gold appear for them.” I used to give this fact at my presentations (I’ll have to have someone research it to see if it needs to be updated), but you could put all the gold that’s ever been mined in two Olympic-sized swimming pools…

Silver is outperforming gold today, just as it did throughout 2010. Silver is trading above $31… WOW! I’ve already told you about what I think here with silver, so I won’t go into that again, but… I do want to point out that NewsMax is going to be running an article this month where I discuss how I believe silver is the new gold…

And the Brazilian real (BRL) continues to be one of the better performing currencies, overall. When you include interest paid, the real is up 39% in the past two years versus the dollar…and then add in the interest…pretty impressive! And that’s with the Brazilian government doing everything they can to stem the real’s strength. I’ve said this before, but you have to make certain that you only use your “speculative” money that you allocate in your investment portfolio, when it comes to reals…

Then there was this… Well, you know how I’ve tried to point out the debt problems of the US… Well, there’s a great story on the Bloomie this morning about Illinois, and how their budget deficit is at least $13 billion, and they have $4 billion in missed payments or underfunded state pensions… Illinois lawmakers meet this week and will attempt to come up with a solution to this mess… Good luck with that! You see, this deficit didn’t happen to show up one day… It’s been building to this crescendo for some time. Illinois shares the same credit rating (the lowest) as California, and Moody’s has assigned Illinois a negative outlook… Look, if these lawmakers don’t do something about their deficit spending, the total State’s deficit will be $15 billion by this time next year! And the markets think Greece or Ireland is a larger problem? They had better think again…and soon!

To recap… The currencies and precious metals rallied strongly on Friday, as expected, with position squaring and the closing of books for 2010. The currencies are weaker though this morning, with gold flat and silver up slightly. Angela Merkel was talking up the euro on Friday (must be a New Year’s Resolution for her!)… And oil is at a 2-year high, dragging the loonie along for the ride higher…

Chuck Butler
for The Daily Reckoning

2-Year High for Oil Pushes the Loonie Higher originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
2-Year High for Oil Pushes the Loonie Higher




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

The Amphora Report’s 2010 Topics in Review (4 of 4)

January 3rd, 2011

[Introduction below, and then continuing from Part 3.]

In 14 editions of the Amphora Report this year we have covered nearly 30 topics, many of which overlap in some way. What binds them all into a coherent set is our view that the economic policies being implemented in nearly all major countries are not just unsustainable but in some cases outright reckless. These countries include the US, the issuer of the world’s reserve currency. By implication, the dollar is likely to lose its pre-eminent reserve currency status in the coming years. The result is bound to be a period of global economic and financial market turmoil and, for most if not all traditional financial assets, underperformance in real, purchasing-power adjusted terms. What follows below is a list of all topics, including both a brief summary and an update of our thinking for 2011.

THE FED’S TEENAGE TEMPER TANTRUM | VOL 1/11

When a young child is caught in a lie, they deny it. As they grow, they find ever more elaborate ways of deceiving their parents, only to be caught out time and again. Finally, as a teenager, they give up trying to deceive and begin simply to blame their parents for their transgressions, rather than take responsibility. Recent statements by Federal Reserve officials suggest that, following a long childhood, the Fed has now entered its teenage years.

It is highly unusual for the Fed to offer opinions about US government economic policy, much less criticize it, but Chairman Bernanke did just that earlier this year, when he said that the Congress should focus on getting the deficit under control and leave the economy to the Fed. Yet the Congress has now extended tax cuts and unemployment benefits, actions which will increase the deficit. The Fed may not be pleased with this development. It might result in a scaling back of planned Treasury bond purchases. But regardless, relations between the government and the Fed are more strained today than at any time since the early 1980s, when Paul Volcker came under fire for raising interest rates in the middle of a major recession. With Ron Paul, a noted Fed critic, assuming the Chairmanship of the House Monetary Affairs Subcommittee next year, the acrimony is all but certain to continue in 2011.

GUESS WHAT’S COMING TO DINNER: INFLATION! | VOL 1/12

The surge in global food prices will soon arrive on the dinner table. However, to focus on the direct inflationary impact of higher food prices alone is to miss the bigger, far more inflationary picture implied by rising wage demands in developing countries. Beginning next year, consumers in most developed economies will discover to their surprise that “food” price inflation is creeping into an astonishingly wide variety of consumer goods.

Food price inflation is a dangerous animal. As a product which must be purchased and consumed on a daily basis, consumers are acutely aware of it and, for those on low incomes, it can threaten their basic health and that of their family. This is why the recent surge in global food prices is so significant. And so far, food prices are holding these gains, with corn, wheat and soya bean prices all near recent highs. In 2011, as food price inflation feeds into wage pressures in emerging markets, it will gradually transform into a more general manufactured goods price inflation the world over.

FROM STAGNATION TO STAGFLATION | VOL 1/12

US CPI has been trending lower amidst a stagnating US economy. However, a look behind the headline economic data and across some financial market developments reveals a disturbing picture, that in fact the US economy may already have entered a “stagflationary” situation not unlike the late 1970s. This spells danger for financial asset prices.

Many economic commentators have speculated that the US might find itself in a stagflationary situation as a result of a weaker dollar, higher oil and import prices generally, yet with a weak jobs market and high unemployment. We argue that, if you look behind the headline economic data, we may already be there. While the Fed claims that inflation is undesirably low, they are referring to the current rate of core price inflation, which excludes food and energy. Also, the CPI calculation methodology has changed dramatically through the years. Indeed, if CPI is measured in the same way in which it was in the 1970s, for example, the last time the US economy was mired in stagflation, then you find that the current rate of overall CPI is over 8% y/y and rising, notwithstanding broad unemployment in the double-digits. As pipeline price inflation is still on the way, this situation is likely to worsen in 2011.

PLUS ÇA CHANGE (PLUS C’EST LA MÊME CHOSE) | VOL 1/13

This past week provided an excellent example of this old French saying, which translates somewhat inelegantly into English as: “The more things change, the more they stay the same”. The US mid-term elections may have resulted, as expected, in a large victory for the Republicans, who now control the House of Representatives. But notwithstanding some grand headlines in the press, this is highly unlikely to change current US or global economic and financial market trends.

Our assessment of the US political outlook following the recent mid-term elections was not entirely correct. We expected complete gridlock, yet there has already been agreement to extend both tax cuts and unemployment benefits. We doubt we are the only ones surprised by this. However, while these actions may not qualify as gridlock, they do nevertheless reinforce our ultimate conclusion in this topic, which is that the US government is not going to be able to address its deficit during the coming two years. Indeed, the deficit is now going to be commensurately larger in 2011 and 2012, and perhaps beyond.

THE TALE OF ANDRÉ PRENNER, A PARABLE FOR OUR TIMES | VOL 1/13

In this edition, we take a brief pause from our normal economic and financial market commentary with this tale of common sense economic calculation and action. And no, we do not believe that the world is any more complex than we present it here. If you want to understand economics, you need first understand two things: That the human condition of one of scarcity and uncertainty; and that absent rational economic calculation and a certain degree of passionate risk-taking, nothing good can ever come of it.

As this topic was a parable, rather than an economic or investment analysis, there is really nothing to update other than to say that we still don’t believe that the US is as attractive a place to do business as it used to be, with obvious consequences for future economic growth. We would like to draw readers’ attention to the protagonist’s name, however. Did anyone make the connection between his name and the themes in the story? Hint: Adopt a gentle French accent and speak the name softly as one long word.

A CENTURY OF MONEY MISCHIEF | VOL 1/14

The US Fed recently celebrated the centennial of its founding at a historic hotel on Jekyll Island, off the cost of Georgia, where a secret meeting took place to lay the political foundations for what would become the Federal Reserve System. But what, exactly, does the Fed have to celebrate, as it was created, ostensibly, to promote financial stability?

What can we say? More and more observers are coming to the inevitable conclusion that the Fed has not done a particularly good job at promoting financial stability, nor at protecting the purchasing power of the dollar through the years. But why? Is the Fed incompetent? Is it poorly designed? Does it have the wrong mandate? We are pleased to learn that Ron Paul will be Chairing the US House Monetary Affairs Subcommittee next year as he is likely to ask these questions. 2011 may be the year that we begin to get some answers.

THE RISING SEA OF DEBT | VOL 1/14

As yet another wave of crisis rolls across the global financial markets, it is instructive to step back and look at the entire sea of debt. As is postulated by global warming theory, rising temperatures result in rising sea levels. Well, as the global debt crisis heats up and the sea of debt rises, it eventually yet suddenly swamps those living close to the shore. Whether a home is lost to foreclosure, a factory to corporate bankruptcy, or both are lost to the sea, makes little difference to the holders of the debt that is defaulted on. From an investor’s point of view, there is simply too much credit risk in the sea and they want it reduced. At first, politicians presumed this could be summarily accomplished with sovereign bailouts. But now the sovereigns themselves, one by one like dominoes, are toppling over. The credit risk, sovereign and all, must be reduced. This can occur either through default or currency devaluation. With few exceptions, policymakers appear to prefer the latter.

We attempted to pull many previous threads into this topic, which looks at the debt crisis from the investor’s perspective. They want less credit risk and they are going to find a way to reduce it, one way or the other. 2011 will be yet another year in which policymakers struggle to prevent such an implied deleveraging. What forms of fiscal and monetary stimulus are we yet to see? How will investors react?  We don’t presume to know the specifics but what we do know is that increasingly arbitrary attempts to prevent financial markets doing what they know they must do are going to fail. That credit risk will be reduced in the end, through some combination of default and currency devaluation. The only question is how much additional economic damage will be unnecessarily caused along the way. Judging by the experience of 2008-10, there could be much additional damage indeed.

We wish all of our readers a pleasant and festive holiday season, free from the relentless doom and gloom of the Amphora Report. Best Wishes to all for a happy and prosperous 2011.

Regards,

John Butler,
for The Daily Reckoning

[Editor's Note: The above essay is excerpted from The Amphora Report, which is dedicated to providing the defensive investor with practical ideas for protecting wealth and maintaining liquidity in a world in which currencies are no longer reliable stores of value.]

The Amphora Report’s 2010 Topics in Review (4 of 4) originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
The Amphora Report’s 2010 Topics in Review (4 of 4)




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Chart of the Week: The Year in Economic Data (2010)

January 3rd, 2011

One of the blog’s surprise hits in 2010 was a series of charts I began which started out with the unwieldy title of Trends in Economic Data Relative to Expectations.

I have utilized this chart format to track the performance of key economic data releases relative to consensus expectations.

The data are sorted into five groups and include economic reports such as the ones highlighted below:

  • Manufacturing/General – GDP, ISM, Industrial Production, Capacity Utilization, Durable Goods, Factory Orders, Regional Fed Indices, Productivity, etc.
  • Housing/Construction – Building Permits, Housing Starts, Existing Home Sales, New Home Sales, Pending Home Sales, S&P/Case-Shiller Home Prices, Construction Spending, etc.
  • Employment – Employment Report, Jobless Claims, etc.
  • Consumer – Retail Sales, Consumer Confidence, Consumer Sentiment, Personal Income, Personal Spending, etc.
  • Prices/Inflation – Producer Price Index, Consumer Price Index, etc.

For each report, I evaluate whether the data exceeds or falls short of consensus expectations. I then aggregate the data over time to see the extent to which certain segments of the economy are trending higher or lower relative to expectations.

The chart tells a couple of interesting stories for 2010. First, it was the manufacturing sector which provided the bulk of the positive surprises during the first half of the year and the propelled stocks to their April highs.

Manufacturing began to turn down in May, following stocks down. This was just about the time that housing and construction started to provide some evidence of positive surprises, but that sector did nothing to stem the tide of falling stock prices.

When stocks started to turn around at the end of August and make their big bullish move for the year, this coincided with an improving employment picture, a rebound in manufacturing and an upturn in the consumer.
Over the course of the year, economic data came very close to meeting expectations for all sectors except housing and construction, which was the surprise winner in the data vs. expectations sweepstakes.

Finally, as the year came to a close, it was employment which was most highly correlated with changes in stock prices, followed closely by a virtual dead heat between housing/construction and the consumer.

Related posts:

Disclosure(s): none



Read more here:
Chart of the Week: The Year in Economic Data (2010)

Uncategorized

Brazil’s Auto Industry is Booming!

January 3rd, 2011

Rudy Martin

Martin is on his way back from Brazil this morning. So he has asked me to open the New Year with this special report, which, by the way is ALSO about Brazil!

Brazil is the world’s fifth largest car producer, and according to its national automakers’ association:

• Auto sales are soaring and should total 3.5 million units for 2010, a 9.8 percent increase over the prior year.

• New cars are coming off assembly lines at an even faster pace. Automobile production in Brazil is forecast to grow 13.1 percent this year, more than the 6.5 percent expansion previously predicted.

• But the supply is not keeping up. Brazil still needs to import 20 percent of its demand for autos.

Next, take a closer look at this auto production picture from a regional viewpoint …

Brazil is Argentina’s biggest trade partner. And Brazil’s auto demand is leading to a parts shortage in Argentina.

Brazil's factories can't keep up with demand.
Brazil’s factories can’t keep up with demand.

Integration has become a focus for the regional auto makers who have plants in both countries. Any moves toward this should help the producers. In this case, the two large American companies, General Motors Corp (NYSE:GM) and Ford Motor Co (NYSE:F), have significant operations in Brazil and Argentina.

Fortunately, through the MERCOSUR agreements, Brazil and Argentina have virtually eliminated tariff and non-tariff barriers on most trade between them, creating a strong economic bond and spirit of cooperation.

The key solution now has to do with direct investment. In response, the Brazilian Development Bank and Argentina’s Banco de La Nacion, are creating a debt-backed $200 million fund that will be available for the auto sector of both nations.

However, accommodating all the new vehicles creates another problem …

It Will Take Billions to Get the
Roads Back In Shape

According to President Rousseff,

“Brazil has gone for more than 30 years without investing in infrastructure in a sufficient amount. President Lula’s administration started to change that. I have to solve the road issues in Brazil, the railroads, the highways, the ports, and the airports.”

Brazil's highways need massive updating to accommodate all the new cars.
Brazil’s highways need massive updating to accommodate all the new cars.

Consequently, the Brazilian government announced plans to spend more than $500 billion on infrastructure over the next four years, which should benefit the whole economy.

Sectors, such as utilities, telecommunications and industrial materials should see strong growth. An exchange traded fund (ETF), like EGShares Brazil Infrastructure (BRXX), is one way to get in on the action.

Let me leave you with this …

Brazil is in great shape. It has amassed a robust currency reserve of $287 billion, the eighth largest in the world, and is experiencing an economic boom never seen before. What’s more, Brazil has one of the lowest debt-to-GDP ratios in the world. Its budget deficit is only three percent of GDP, compared to over 10 percent in the U.S.

And the next wave of growth is creating winners in Brazil right now!

Best wishes,

Rudy

Read more here:
Brazil’s Auto Industry is Booming!

Commodities, ETF, Mutual Fund, Uncategorized

Brazil’s Auto Industry is Booming!

January 3rd, 2011

Rudy Martin

Martin is on his way back from Brazil this morning. So he has asked me to open the New Year with this special report, which, by the way is ALSO about Brazil!

Brazil is the world’s fifth largest car producer, and according to its national automakers’ association:

• Auto sales are soaring and should total 3.5 million units for 2010, a 9.8 percent increase over the prior year.

• New cars are coming off assembly lines at an even faster pace. Automobile production in Brazil is forecast to grow 13.1 percent this year, more than the 6.5 percent expansion previously predicted.

• But the supply is not keeping up. Brazil still needs to import 20 percent of its demand for autos.

Next, take a closer look at this auto production picture from a regional viewpoint …

Brazil is Argentina’s biggest trade partner. And Brazil’s auto demand is leading to a parts shortage in Argentina.

Brazil's factories can't keep up with demand.
Brazil’s factories can’t keep up with demand.

Integration has become a focus for the regional auto makers who have plants in both countries. Any moves toward this should help the producers. In this case, the two large American companies, General Motors Corp (NYSE:GM) and Ford Motor Co (NYSE:F), have significant operations in Brazil and Argentina.

Fortunately, through the MERCOSUR agreements, Brazil and Argentina have virtually eliminated tariff and non-tariff barriers on most trade between them, creating a strong economic bond and spirit of cooperation.

The key solution now has to do with direct investment. In response, the Brazilian Development Bank and Argentina’s Banco de La Nacion, are creating a debt-backed $200 million fund that will be available for the auto sector of both nations.

However, accommodating all the new vehicles creates another problem …

It Will Take Billions to Get the
Roads Back In Shape

According to President Rousseff,

“Brazil has gone for more than 30 years without investing in infrastructure in a sufficient amount. President Lula’s administration started to change that. I have to solve the road issues in Brazil, the railroads, the highways, the ports, and the airports.”

Brazil's highways need massive updating to accommodate all the new cars.
Brazil’s highways need massive updating to accommodate all the new cars.

Consequently, the Brazilian government announced plans to spend more than $500 billion on infrastructure over the next four years, which should benefit the whole economy.

Sectors, such as utilities, telecommunications and industrial materials should see strong growth. An exchange traded fund (ETF), like EGShares Brazil Infrastructure (BRXX), is one way to get in on the action.

Let me leave you with this …

Brazil is in great shape. It has amassed a robust currency reserve of $287 billion, the eighth largest in the world, and is experiencing an economic boom never seen before. What’s more, Brazil has one of the lowest debt-to-GDP ratios in the world. Its budget deficit is only three percent of GDP, compared to over 10 percent in the U.S.

And the next wave of growth is creating winners in Brazil right now!

Best wishes,

Rudy

Read more here:
Brazil’s Auto Industry is Booming!

Commodities, ETF, Mutual Fund, Uncategorized

5 Copper ETFs Poised For Growth In 2011

January 3rd, 2011

In 2010, copper locked in a second consecutive annual gain of nearly 33 percent as demand remained elevated due to growth in emerging markets and a weak dollar.  As for the future of the industrial metal, copper’s outlook remains rosy as a supply and demand imbalance is expected to take place providing positive price support to the Global X Copper Miners ETF (COPX), the iPath Dow Jones Copper Index ETN (JJC), the First Trust ISE Global Copper Index Fund (CU), the PowerShares DB Base Metals (DBB) and the iShares MSCI Chile Index (ECH).

According to the International Copper Study Group, a copper deficit of 435,000 metric tons in 2011 is expected to emerge in the markets, marking the first deficit in three years, during which global production has averaged 18 million tons.  On the demand side, one of the primary driver’s of increased demand is economic expansion in emerging markets.  The developing world is expected to at the forefront of global economic growth and with this the need for improved infrastructure and increased construction and manufacturing is expected to keep demand for copper, which is used in electrical wiring, plumbing and in heating and cooling systems, elevated.   

To put it into perspective, demand for copper in China, India, Brazil and the Middle East is expected to increase at an average annual rate of 7 percent per capita through the next four years. 

Broader supply worries are expected to be the true driver behind copper’s expected shine this year.  Global exchange inventories of copper declined by nearly 22% in 2010 and stockpiles are expected to drop to an all time low this year with mines in Chile, long the world’s top copper producer, seeing their deposits exhausted.  Furthermore, new mining and production projects are too small and insufficient to make up for the shrinking volumes and the grade of copper that is being extracted continues to deteriorate. 

As mentioned above, some ways to play copper include:

  • Global X’s Copper Miners ETF (COPX), which is an equity play on copper and focuses on copper miners like Inmet Mining Corp., First Quantum Minerals and Jiangxi Copper Company Ltd. as its holdings.
  • iPath Dow Jones Copper Index ETN (JJC), a pure play on copper which seeks to track the performance of copper futures contracts
  • First Trust ISE Global Copper Index Fund (CU), which is an equity play on copper and includes copper producers and miners such as Southern Copper Corporation (SCCO), Freeport McMoRan Copper & Gold (FCX) and Antofagasta PLC as its top holdings.
  • PowerShares DB Base Metals (DBB), which allocates 33% of its assets to copper futures contracst
  • iShares MSCI Chile Index (ECH), which is a play on Chile, the world’s largest copper producer in the world accounting for nearly 33% of total global copper production. 

Disclosure: No Positions

Read more here:
5 Copper ETFs Poised For Growth In 2011




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ETF, Uncategorized

5 Copper ETFs Poised For Growth In 2011

January 3rd, 2011

In 2010, copper locked in a second consecutive annual gain of nearly 33 percent as demand remained elevated due to growth in emerging markets and a weak dollar.  As for the future of the industrial metal, copper’s outlook remains rosy as a supply and demand imbalance is expected to take place providing positive price support to the Global X Copper Miners ETF (COPX), the iPath Dow Jones Copper Index ETN (JJC), the First Trust ISE Global Copper Index Fund (CU), the PowerShares DB Base Metals (DBB) and the iShares MSCI Chile Index (ECH).

According to the International Copper Study Group, a copper deficit of 435,000 metric tons in 2011 is expected to emerge in the markets, marking the first deficit in three years, during which global production has averaged 18 million tons.  On the demand side, one of the primary driver’s of increased demand is economic expansion in emerging markets.  The developing world is expected to at the forefront of global economic growth and with this the need for improved infrastructure and increased construction and manufacturing is expected to keep demand for copper, which is used in electrical wiring, plumbing and in heating and cooling systems, elevated.   

To put it into perspective, demand for copper in China, India, Brazil and the Middle East is expected to increase at an average annual rate of 7 percent per capita through the next four years. 

Broader supply worries are expected to be the true driver behind copper’s expected shine this year.  Global exchange inventories of copper declined by nearly 22% in 2010 and stockpiles are expected to drop to an all time low this year with mines in Chile, long the world’s top copper producer, seeing their deposits exhausted.  Furthermore, new mining and production projects are too small and insufficient to make up for the shrinking volumes and the grade of copper that is being extracted continues to deteriorate. 

As mentioned above, some ways to play copper include:

  • Global X’s Copper Miners ETF (COPX), which is an equity play on copper and focuses on copper miners like Inmet Mining Corp., First Quantum Minerals and Jiangxi Copper Company Ltd. as its holdings.
  • iPath Dow Jones Copper Index ETN (JJC), a pure play on copper which seeks to track the performance of copper futures contracts
  • First Trust ISE Global Copper Index Fund (CU), which is an equity play on copper and includes copper producers and miners such as Southern Copper Corporation (SCCO), Freeport McMoRan Copper & Gold (FCX) and Antofagasta PLC as its top holdings.
  • PowerShares DB Base Metals (DBB), which allocates 33% of its assets to copper futures contracst
  • iShares MSCI Chile Index (ECH), which is a play on Chile, the world’s largest copper producer in the world accounting for nearly 33% of total global copper production. 

Disclosure: No Positions

Read more here:
5 Copper ETFs Poised For Growth In 2011




HERE IS YOUR FOOTER

ETF, Uncategorized

How You Trade the Big Trends in 2011

January 3rd, 2011

I hope everyone had a great holiday and new years!

It’s time to reset our profit counter to zero and start looking for new profitable trades along with managing our current open positions on our small cap stocks which we continue to hold with gains of 66%, 35% and 10%.

Last year was a tough one as the stock market chopped around in a very large range giving off buy and sell signals every week and some times every other day… If you understand how to trade options then these conditions can make you a boat load of money.

Those who follow me or trade with me through my trading newsletter know how conservative I am when looking for low risk setups in both ETFs and stocks. And no doubt agree there were some extended periods of time when we did not have any trades because the volatility on a daily basis was making it the risk higher than what I wanted us to take, thus we waited for setups instead of chasing prices. We still locking in some solid gains with 8 winning trades, but feel we can better this year especially if we get less chop and more of a trending market.

It’s safe to say some people just do not like being in cash, hence the reason so many want stock picks and trades all the time. But to be flat out honest, I love being in cash or at least holding a good chunk in cash waiting for a high probability opportunity to pop up on my charts before committing my hard earned cash. It’s better to be wishing you were in a trade than to have all your money tied up in losing positions just because you wanted to be active… Because I give you only the trades I am making with my own money, I think that is the reason things are slower paced, unlike some other newsletters in this industry which fire off new trades each day or week just to keep those addicted (wanting stocks picks all the time) happy.

Anyways, 2011 should be a great year for trading, investing and education. Last years fast paced market I know either took your money and got you really frustrated, or you made money and was able to use the difficult conditions to fine tune your trading and money management stills like I did. 2011 feels like it’s going to start out similar to 2010 where we get a move up into mid January, but once earning season starts the market sells off on the good news for an 8-10% correction.

The good news is that after last years fast paced market and my constant refining of my strategy and money management rules, we should be able to catch the majority of the trends this year both up and down using stocks, regular ETFs and Inverse ETFs.

As much as I would like to forecast what I think will happen this year, I have decided to take the market one quarter at a time to keep everyone more in tune with what’s happening now and a glance forward up to 2-3 months.

Take a look my SP500 charts for the next 3-8 weeks below.

SP500 Index – Daily Chart
On this chart you can see that the overall trend right now is still clearly up. But with this current situation I feel one should be on the sidelines waiting for the market tip its hand telling us its headed higher or lower. If it prices start to fall we will look to short the market in order to profit from the correction as long as the market provides an optimal opportunity.

Currently the market sentiment levels are at extreme highs, which is the same as last January and April’s highs. With extreme sentiment, light volume (lack of buyers) and earning season just about to start I cant help but think a nice correction is about to take place which will cleanse the market before the next big leg higher.

If all goes according to plan we should see an 8-10% correction. A pierce of the November low is what I am looking for as that would trigger a lot of protective stop orders and create panic selling in the market. It is panic selling which creates a market bottom. That being said we may not get that large of a correction which is why we must continue to monitor the market closely as my analysis will change with the market.

Jan 2010 SP500 Correction
This time last year the market was in a very similar situation with market sentiment, light volume, and earning season just around the corner…

Its difficult to pick tops because they can stay overbought for an extended period of time, bottoms are a little different simply because fear is more powerful than greed and shows it’s self on the charts once you know what to look for and how to trade it. My point here that you should not jump the gun and start shorting just because you think one is around the corner. I prefer to wait for more of a clear signal that sellers are in control then ride the short term down trend and hope it blows up into the correction I think we are about to see.

During bottoms there are new low washouts, and the same goes for tops, we get several small new highs just before the price rolls over, and that has yet to happen.

Weekend Market Trend Conclusion:
In short, 2011 should have several great plays as I am looking at the SP500, Precious Metals, Oil, US Dollar, Bonds and Emerging Markets for some big moves. You can get my pre-market daily videos, intraday updates along with my stock and ETF trades by visiting my website and joining my newsletter: www.TheGoldAndOilGuy.com

Chris Vermeulen

Read more here:
How You Trade the Big Trends in 2011




Chris Vermeulen is a full time daytrader and swing trader specializing in trading (NYSE:GLD), (NYSE:GDX), XGD.TO, (NYSE:SLV) and (NYSE:USO). I provide my trading charts, market insight and trading signals to members of my newsletter service. If you have any questions feel free to send me an email: Chris@TheGoldAndOilGuy.com This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Commodities, ETF, OPTIONS

How You Trade the Big Trends in 2011

January 3rd, 2011

I hope everyone had a great holiday and new years!

It’s time to reset our profit counter to zero and start looking for new profitable trades along with managing our current open positions on our small cap stocks which we continue to hold with gains of 66%, 35% and 10%.

Last year was a tough one as the stock market chopped around in a very large range giving off buy and sell signals every week and some times every other day… If you understand how to trade options then these conditions can make you a boat load of money.

Those who follow me or trade with me through my trading newsletter know how conservative I am when looking for low risk setups in both ETFs and stocks. And no doubt agree there were some extended periods of time when we did not have any trades because the volatility on a daily basis was making it the risk higher than what I wanted us to take, thus we waited for setups instead of chasing prices. We still locking in some solid gains with 8 winning trades, but feel we can better this year especially if we get less chop and more of a trending market.

It’s safe to say some people just do not like being in cash, hence the reason so many want stock picks and trades all the time. But to be flat out honest, I love being in cash or at least holding a good chunk in cash waiting for a high probability opportunity to pop up on my charts before committing my hard earned cash. It’s better to be wishing you were in a trade than to have all your money tied up in losing positions just because you wanted to be active… Because I give you only the trades I am making with my own money, I think that is the reason things are slower paced, unlike some other newsletters in this industry which fire off new trades each day or week just to keep those addicted (wanting stocks picks all the time) happy.

Anyways, 2011 should be a great year for trading, investing and education. Last years fast paced market I know either took your money and got you really frustrated, or you made money and was able to use the difficult conditions to fine tune your trading and money management stills like I did. 2011 feels like it’s going to start out similar to 2010 where we get a move up into mid January, but once earning season starts the market sells off on the good news for an 8-10% correction.

The good news is that after last years fast paced market and my constant refining of my strategy and money management rules, we should be able to catch the majority of the trends this year both up and down using stocks, regular ETFs and Inverse ETFs.

As much as I would like to forecast what I think will happen this year, I have decided to take the market one quarter at a time to keep everyone more in tune with what’s happening now and a glance forward up to 2-3 months.

Take a look my SP500 charts for the next 3-8 weeks below.

SP500 Index – Daily Chart
On this chart you can see that the overall trend right now is still clearly up. But with this current situation I feel one should be on the sidelines waiting for the market tip its hand telling us its headed higher or lower. If it prices start to fall we will look to short the market in order to profit from the correction as long as the market provides an optimal opportunity.

Currently the market sentiment levels are at extreme highs, which is the same as last January and April’s highs. With extreme sentiment, light volume (lack of buyers) and earning season just about to start I cant help but think a nice correction is about to take place which will cleanse the market before the next big leg higher.

If all goes according to plan we should see an 8-10% correction. A pierce of the November low is what I am looking for as that would trigger a lot of protective stop orders and create panic selling in the market. It is panic selling which creates a market bottom. That being said we may not get that large of a correction which is why we must continue to monitor the market closely as my analysis will change with the market.

Jan 2010 SP500 Correction
This time last year the market was in a very similar situation with market sentiment, light volume, and earning season just around the corner…

Its difficult to pick tops because they can stay overbought for an extended period of time, bottoms are a little different simply because fear is more powerful than greed and shows it’s self on the charts once you know what to look for and how to trade it. My point here that you should not jump the gun and start shorting just because you think one is around the corner. I prefer to wait for more of a clear signal that sellers are in control then ride the short term down trend and hope it blows up into the correction I think we are about to see.

During bottoms there are new low washouts, and the same goes for tops, we get several small new highs just before the price rolls over, and that has yet to happen.

Weekend Market Trend Conclusion:
In short, 2011 should have several great plays as I am looking at the SP500, Precious Metals, Oil, US Dollar, Bonds and Emerging Markets for some big moves. You can get my pre-market daily videos, intraday updates along with my stock and ETF trades by visiting my website and joining my newsletter: www.TheGoldAndOilGuy.com

Chris Vermeulen

Read more here:
How You Trade the Big Trends in 2011




Chris Vermeulen is a full time daytrader and swing trader specializing in trading (NYSE:GLD), (NYSE:GDX), XGD.TO, (NYSE:SLV) and (NYSE:USO). I provide my trading charts, market insight and trading signals to members of my newsletter service. If you have any questions feel free to send me an email: Chris@TheGoldAndOilGuy.com This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Commodities, ETF, OPTIONS

2010 Intermarket Relationship Charts with the SP500

January 2nd, 2011

As promised, I wanted to follow-up the prior “Market Performance in 2010” post with a few charts of the major cross-markets and the developing relationship with the S&P 500.

In looking at the reference charts, pay close attention first to the type of relationship – positive or negative – and the periods of time (highlighted) where the traditional relationship broke-down temporarily – and then resumed its normal course.

First, let’s start with the S&P 500 and 10-year Treasury Note Prices:

As a reference, the S&P 500 will be the black line in all charts, and will be scaled on the right.

In recent history, Treasury prices are INVERSE stock prices, which is logical.

The Bond and Stock Markets COMPETE for investor capital, and investors tend to invest in bonds when playing “risk off” or conservative, and invest in stocks when playing “risk on” and offensive.

This strong inverse relationship proved true with the exception of the highlighted period from July to November when both markets rose together.  That was in part due to the Federal Reserve’s QE2 plan and the “advance” positioning ahead of the official announcement.

The relationship returned to normal in November as bonds fell and stocks continued their rise – and the relationship remains ‘normal’ today.

The S&P 500 and Gold Prices:

In general, stocks and gold prices have been positively correlated, but for the most part gold rose all year long with only a medium pullback in July – about the same time stocks pulled back.

However, you can see that stocks fell from May to July and gold rose – so the relationship is weakly positively correlated.  Gold – along with stocks – benefited at the end of the year due to the QE2 rumors and facts from the Federal Reserve.

The relationship remains positively correlated as we start 2011.

The S&P 500 and Crude Oil (red):

Of all the major cross-markets, the MOST positively correlated markets are stocks and crude oil – at least in 2010.

Virtually every single turn stocks made, crude oil made it right along-side the S&P 500.

Both markets share similar fates in terms of global economic prospects, and both benefited at the end of the year due to the QE2 activities.

It would be surprising if this relationship broke down soon – it was the strongest in 2010.

The S&P 500 and the US Dollar Index:

Investors traditionally view the US Dollar Index and the S&P 500 as strongly inversely correlated, and that was very correct in 2010.

The relationship remains strongly inversely correlated (when one moves up, the other moves down), though there were brief periods in 2010 where the relationship was not perfectly inversely correlated.

This logically places the US Dollar Index roughly positively correlated with Treasury Bond/Note prices, and of course also inversely correlated with Gold and Crude Oil.

I discuss these relationships – and current opportunities/price levels to monitor currently and in the weeks ahead – in the member Inter-market Report each weekend.

Keep these charts as a reference and learn how markets relate and what to expect from one market to the next – and be aware when the traditional relationships break-down temporarily so you can manage risk appropriately.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Read more here:
2010 Intermarket Relationship Charts with the SP500

Uncategorized

New Year’s Wishes

January 1st, 2011

Money and Markets Group
From left to right: Mike Larson, Nilus Mattive, Martin D. Weiss, Ph.D., Claus Vogt, Bryan Rich, Ron Rowland

Our entire Money and Markets team wishes you a New Year that brings health, wealth and peace to you and your loved ones.

Read more here:
New Year’s Wishes

Commodities, ETF, Mutual Fund, Uncategorized

2010 MultiMarket Performance Returns

December 31st, 2010

Courtesy FinViz.com, I wanted to share the 2010 multiple market performance – futures contract returns – for 2010.  You might be surprised which markets rose the most in the year.

Here’s the chart with one day left to close out 2010:

Wouldn’t it be neat to have this chart at the beginning of 2010?  Wishful thinking.  We have to make our positioning in real time with the information we have.

It might be no surprise that precious metals (palladium, silver, and gold) comprise the top of 2010, but did you know how much silver outperformed gold?

Silver prices moved from the $17 level almost doubling to the present value of $31, while gold opened 2010 near $1,100 and ended $300 per ounce up to $1,400.  I think most people – myself included – didn’t realize the strong performance of silver relative to gold – at least in pure percentage terms.

The second major fact is that most agricultural commodities across the board did very well, especially Cotton, Coffee, Corn, Wheat and Soybeans.  Even sugar beat the S&P 500 this year.

Speaking of stocks, the Small-Cap Russell 2000 beat the S&P 500, rising 26% to the NASDAQ 100’s 19% and the S&P’s 13%.

Smaller, high beta stocks tend to outperform in the early to mid stages of a bull market – though 2010 had its share of ups and downs and wasn’t as strong as 2009’s near non-stop rally.

Crude Oil and the S&P 500 roughly turned in the same  percentage – up 12% to 13% on the year.

The US Dollar Index, despite the bearish sentiment, ended 2010 about where it started, gaining 1% – though it too had strong up and down trends during the year.

Currency futures in general were mixed, with the biggest gains above coming from the Japanese Yen and Aussie Dollar – both up around 14%.

I’ll follow-up with inter-market comparison charts, but in the meantime,  have a great New Year’s and I wish you a wonderfully productive 2011!

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Read more here:
2010 MultiMarket Performance Returns

Commodities, Uncategorized

In 2010 I Learned That…

December 31st, 2010

Josh Brown of The Reformed Broker has an excellent post up today, In 2010 I Learned That…, in which he aggregates a wide variety of market perspectives from his broad network. The results have a large dollop of market wisdom, yet are spiced with the type of humor and satire that is a hallmark of Josh’s efforts.

When asked for some input about what I learned in 2010, my immediate reaction what that I hadn’t learned as much in 2010 as I had in 2009 and 2008. After a moment of reflection, five ideas tumbled out of my head, in the following order:

  1. Substantial profits can be made from surfing the bleeding edge of Wall Street’s product development engine (this is the one Josh chose to include in his post)
  2. The more confident you are in the value of your primary strategies, the more difficult it is (should be) to pull the trigger on other strategies/trades with less impressive or uncertain prospects
  3. There is a huge desire for investors to understand the VIX futures term structure and its implications
  4. When you combine ETFs and options, almost any possible trade idea can be implemented
  5. A good portfolio is one that funds a good vacation without the need for frequent monitoring of positions (my wife’s favorite of this group)

[As an aside, while Josh has a penchant for nailing the humorous side of the investment world, his On a Personal Note… from yesterday shows his talent for writing about the poignant as well.]

Readers, what have you learned in 2010? Feel free to hit up the comments…

Related posts:

Disclosure(s): none



Read more here:
In 2010 I Learned That…

ETF, OPTIONS, Uncategorized

Global Rate Hiking Cycle Gathers Steam; What to Do …

December 31st, 2010

Mike Larson

Not a creature was stirring, not even a mouse, here in the U.S. markets late last week. But on Christmas Day, China’s central bank shocked investors …

Specifically, the People’s Bank of China raised short-term interest rates for the second time in the past three months.

The 25 basis point hike to 5.81 percent in the benchmark one-year lending rate effectively puts the world on notice that China is more concerned about pricing pressure than it has been in a long, long time. And for good reason: Chinese inflation surged to a 28-month high of 5.1 percent in November.

China is hardly alone in this shift toward higher rates. Other central banks around the world are trying like crazy to combat inflation and the negative side effects of easy money.

Just consider how …

Rates Are Rising Worldwide!

Malaysia started raising rates in March. Its overnight policy rate now stands at 2.75 percent after three hikes. Elsewhere in Southeast Asia, Taiwan started raising its discount rate in June, while South Korea has boosted its benchmark rate twice since July.

The global money war is intensifying.
The global money war is intensifying.

New Zealand has only hiked rates twice since June. But Australia has jacked rates up seven times to 4.75 percent, while the Reserve Bank of India has raised rates six times since March to 6.25 percent.

In Europe, concern over the heavily indebted “PIIGS” countries has kept the European Central Bank on hold. But Sweden’s Riskbank has raised rates four times to 1.25 percent since July, while Norway has hiked its rates three times in the past 14 months.

And what about South America?

Brazil has boosted its benchmark short-term rate by 200 basis points to 10.75 percent, with another 100 to 200 points worth of hikes likely in 2011. Chile has more than tripled rates to 3.25 percent from 1 percent in only six months, while Peru has increased rates five times since May.

In other words, the global money war I’ve been talking about for some time is intensifying! Smaller nations around the world are raising rates, and now, the 800-pound gorilla — China — is following suit.

Meanwhile, the …

Fed Is Still Sitting on Its Hands
as Money War Heats Up

The only glaring exceptions? The so-called “developed” economies — Japan, the U.S., and “core” Europe. Unlike their “emerging” market neighbors, they’re weighed down with too much debt, too little growth, and too much short-sightedness by policymakers.

The Fed refuses to budge.
The Fed refuses to budge.

Indeed, despite rising inflation pressure … better economic news … and a backfiring QE2 program, the U.S. Federal Reserve has signaled plans to leave rates pegged near 0 percent until the sun exhausts its fuel in, oh, about 5 billion years.

The relative imbalance between U.S. rates and rates in many foreign countries is keeping the pressure on the dollar. It’s also juicing commodity and gold prices.

Most importantly, the Fed’s intransience is forcing longer-term bond investors to take matters into their OWN hands. They’re dumping Treasury bonds hand-over-fist, leading to the worst rout for long bonds in 18 months.

My recommended course of action?

First, hedge against bond price declines by using ETFs that rise in value as Treasuries fall.

Second, keep your fixed-income money in shorter-term ETFs or mutual funds rather than longer-term ones to avoid big potential losses. That means something like the iShares Barclays 1-3 Year Treasury Bond Fund (SHY) rather than the Vanguard Extended Duration Treasury ETF (EDV).

Third, keep your eye on the speed and magnitude of the increase. Should the rate rout accelerate and worsen, it could be a real headwind for stock prices.

And fourth? Have a fantastic New Year! I’m looking forward to helping you make 2011 your most profitable yet.

Until next time,

Mike

P.S. This week on Money and Markets TV, I was joined by other Weiss analysts for a look back at some of the biggest market-moving stories of 2010. And we offered practical advice for protecting your money and turning a profit in any market condition.

If you missed last night’s episode of Money and Markets TV — or would like to see it again at your convenience — it’s now available at www.weissmoneynetwork.com.

Read more here:
Global Rate Hiking Cycle Gathers Steam; What to Do …

Commodities, ETF, Mutual Fund, Uncategorized

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