Grab HP’s Stock Before it Takes Off

September 24th, 2010

Grab HP's Stock Before it Takes Off

A common pitfall companies encounter has to do with challenging marketplace conditions, be it changing customer habits or competition from rivals that attempt to steal away its business. Others have a habit of self inflicting their wounds.

Changing market conditions, foreign competition, fickle consumers — these are conditions most investors can live with as an excuse for poor performance — to an extent. But when a dominant company continually stumbles over itself because of something as simple and within the realm of control as, say, hiring and firing decisions, its enough to make investors head for the exit.

But in the case of Hewlett-Packard (NYSE: HPQ), the crowd has it all wrong. Sure, the soap-opera events surrounding the dismissal of Mark Hurd, HP's former Chief Operating Officer, were embarrassing for the company, but new investors now have a chance to pick up a world-class name for a cheap price.

The most recent snafu from HP relates to the manner in which it ousted Hurd. Apparently, he wasn't as popular inside the company as he was outside. Investors cheered his every move, be it cost cutting or orchestrating sizeable acquisitions, both of which helped sales and profits move forward in impressive fashion.

Past issues have stemmed from the hiring of Carly Fiorina, a high-profile executive from outside the company that oversaw the ambitious purchase of Compaq Computers. Unfortunately, this move and others did nothing to boost the share price and resulted in her sacking within a few years. Shortly after this chain of events, Patricia Dunn, the company's chairwoman, was fired after it was discovered she hired private-eye firms to spy on other board members.

Talk about internal company drama.

The reasons for the sacking of Mark Hurd are not clear and may never be, because the board of directors did not provide a straightforward explanation of why he was let go. Doctored expense reports and a murky relationship with a woman who worked on corporate events for the company were alluded to, but never fully explained. Whatever the real reason may be, it leaves the company without a CEO that appeared to be wildly successful to those outside of the company.

This uncertainty has sent shares of HP to bargain-basement levels. Communication from the board has stated that HP is not dependent on any one individual for its success and refers to an “HP Way” that is meant to define its culture and no-nonsense, team approach to creating and selling technology products and services. Despite the board's dismal track record on communicating with the investment community, it is spot on in this case.

Regardless of the litany of leadership drama at HP, the company's corporate culture appears to be working. HP has been experiencing improving demand in most of its businesses. Revenue during its most recent quarter increased a very healthy +11.4% and reached $30.7 billion on the back of strong trends for its enterprise storage and servers, computers and printers. Service growth was more modest but remained highly profitable. HP also provided a favorable outlook. It expects full-year sales to reach more than $125 billion and earnings from continuing operations of around $4.50 per share. This would represent year-over-year sales growth of almost +10% and earnings growth in the mid-teens.

In addition to the strong organic growth trends, HP has snapped up a number of smaller tech rivals. Bolt-on acquisitions include data-storage firm 3PAR (NYSE: PAR), and software security providers ArcSight (Nasdaq: ARST) and Fortify Software. Healthy cash flow generation is being used on acquisitions, share buybacks and to support a modest dividend.

Favorable market tailwinds and healthy acquisition activity mean HP is unlikely to see any serious disruption to its operations while it searches for a successor. I've had past concerns that the hardware (computer, printers, etc.) divisions are too cyclical and carry low profit margins, but the company has a few years of easy sailing as global economies recover from the credit crisis and companies refresh aging devices to remain competitive.

Action to Take —> At a forward P/E of just over 9, investors are far too pessimistic on HP's future. Near-term negative sentiment from the Hurd firing isn't helping, but does offer an opportunity to pick up the shares on the cheap. Last year, free cash flow ran close to $4.60 per diluted share and illustrates just how much excess capital the company generates.

This also equates to a trailing free cash flow multiple around 9. Applying a more historical multiple in the low teens off of earnings and cash flow suggests upside of at least +40% and doesn't even factor in annual profit growth, which should be at least +10% for the foreseeable future. In my mind, it doesn't really matter who the next CEO will be, or how long he or she remains at the helm — the stock is still a buy.

– Ryan Fuhrmann

A graduate of the University of Wisconsin and the University of Texas, Ryan Fuhrmann, CFA, adheres to a value-based investing viewpoint that successful companies…

Uncategorized

Leveraging Junk Debt Off the Charts

September 24th, 2010

The massive door of the Mogambo Bug-Out Bunker (MBOB) was locked, and I was taking a little break, leisurely looking through the periscope/range finder/fire-control module, calmly reconnoitering the perimeter and keeping an eye on the neighbors, watching them acting like they are innocently mowing their lawns and washing their stupid cars, but who are actually spying on me, like I am too stupid to notice their treachery and perfidy.

I see all this an say to myself, “These are the same dolts who are not buying gold, silver and oil with every dollar they have, even after all the time I spent telling them do that very thing! Dolts!”

And, indeed, everywhere I look I see dolts, and so, apparently, does Doug Noland, who, in his Credit Bubble Bulletin at PrudentBear.com, takes a look at what is happening in high-yield bonds. He found that “According to Bloomberg, this week’s $41.7bn of corporate bond issuance combined with about an equal amount from last week pushed two-week debt sales to the strongest level this year. With more than three months to go, year-to-date junk issuance is already well into new record territory.”

“Wow! I whistled to myself. “Record territory! Wow! Paying the highest price to get the lowest yield in history!”

Almost involuntarily, I began a pointless tirade of further scathing commentary on such abject stupidity as to pay a historically high price for very low quality debt to get a historically-low yield when the government is deficit-spending more than 10% of GDP and the Federal Reserve is creating staggering amounts of money, which guarantees inflation! Insane!

Mr. Noland, apparently seeing me spiraling off into Screaming Mogambo Outrage Land (SMOL), thankfully headed me off by noting that The Wall Street Journal reported, to my utter astonishment, that all of this buying of junk debt is all being leveraged, but even worse is that the amount of leverage is Off The Freaking Charts (OTFC)! We’re freaking doomed!

Well, anyway, this “OFTC” thing is how I, a typical paranoid lunatic who sees the horror of inflation in prices every time he sees the inflation in the amount of money being deficit-spent by the government and created out-of-thin-air by the Federal Reserve, interpret the Journal reporting that “Poster children of the mid-2000s credit bubble, leveraged loans are set to have their busiest year since 2008,” which were “at the heart of the credit bubble,” and have now “surged back with surprising speed as investors chasing yield are increasingly willing to finance riskier companies.”

My hands, wrapped around the handles of the periscope, instinctively clenched in terror at the thought of seeking riskier debt – and leveraging the bet! – in the riskiest economic environment that I can imagine, when I accidentally hit the “Fire” button! Oops!

Expecting a massive eruption of firepower, I instinctively cringed and immediately started trying to come up with some plausible denial (“Those weren’t my machine guns!”) or a scapegoat (“Islamic terrorists!”), when the ensuing silence made me realize that I had fortunately forgotten to set the Fire Control Arming Switch (FCAS) to “on,” which I didn’t do because it is all the way over on the other side of the room, making this an instance of pathological laziness and poor work habits paying off!

Of course, you never hear about the upside of incompetence and sloth from your stupid family or your stupid boss, but who are instead always “on your case” about something like getting up off the couch and doing some work, working, and doing things right, and not goofing off, and the ever-popular “paying attention, which is not to mention the blah blah blah.”

My tightened grip was just a hint – a mere hint! – of my paralyzing fear and paranoia cranked up, as in the movie Spinal Tap, to 11, an unbelievable overload of impending doom and hyperinflationary torture brought on by the sheer, staggering dumbosity of Yet More Massive (YMM) amounts of money being created to buy Yet More Massive (YMM) amounts of junk debt, selling at the highest prices of the last zillion years, by taking advantage of the lowest interest rates in that selfsame “last zillion years,” a bizarre interest-rate environment caused by the panicked response of the Federal Reserve at its own egregious mismanagement, all of this even though I know that “dumbosity” is not even a word, but I don’t change it, no matter how stupid it sounds, which shows you how Completely Freaked Out (CFO) I am about the whole thing! We’re freaking doomed!

So, as bad as it is that somebody is buying riskier and riskier debt, in a deteriorating economic environment of pandemic burdensome debt, with consumer prices rising, with massive government deficit-spending and unbelievable amounts of money being created by the monstrous Federal Reserve to make price rises even worse, and even worse, it’s all leveraged!

Alert Junior Mogambo Rangers (JMR) are instantly on alert at the use of the unusual phrase “even worse, and even worse,” which is an obvious Mogambo Secret Code (MSC).

You can pinpoint a rookie JMR by the way they earnestly dial-in their Junior Mogambo Ranger Decoder Rings (JMRDRs) and go through a lot of pointless rigmarole, only to find the message to, “Buy gold, silver and gold!” which is always the same secret message.

The experienced JMR, on the other hand, doesn’t bother, and looks, instead, for the reason for the sudden appearance of a Mogambo Secret Code (MSC), in this case being that these high-risk junk bonds are speculators using their client’s money not to merely buy high-yield debt, but as mere collateral on a loan to borrow many times that amount!

Then Mr. Noland says that, “In the face of enormous supply, corporate bond yields have remained extraordinarily low,” which certainly seems like a paradox to me, which was alarming until I remembered that I am stupid, and everything always seems strange and paradoxical to me.

Then I, despite my tragic handicap, remember the enormous amounts of money being created by the central banks of the world, including our own foul Federal Reserve, just for things like this! Money is everywhere!

Startling myself, my fear of inflation suddenly comes roaring up from the hideous depths of my nightmares, making me jump, a condition not made any easier by Casey’s Daily Dispatch newsletter, where he writes, “debt is the single biggest economic challenge facing the US – and much of the developed world. In time this debt will get resolved, it always does, but it’s not going to be pretty.”

Not going to be pretty, indeed! Pausing only long enough to congratulate Mr. Casey on using “it’s not going to be pretty” as a humorous understatement to the horror of eventual massive defaults, massive unemployment, massive loss of wealth, a collapsed economy, a trashed dollar and hyperinflation, I go helpfully on to note that this seems like the perfect time to bring up the fact that you should be buying gold, silver and oil with a nervous, paranoid mania usually seen in crack addicts and crazy people, because while it certainly won’t “be pretty” for people who do not own gold, silver and oil, it will be for those who do! Whee! This investing stuff is easy!

The Mogambo Guru
for The Daily Reckoning

Leveraging Junk Debt Off the Charts 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:
Leveraging Junk Debt Off the Charts




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

Leveraging Junk Debt Off the Charts

September 24th, 2010

The massive door of the Mogambo Bug-Out Bunker (MBOB) was locked, and I was taking a little break, leisurely looking through the periscope/range finder/fire-control module, calmly reconnoitering the perimeter and keeping an eye on the neighbors, watching them acting like they are innocently mowing their lawns and washing their stupid cars, but who are actually spying on me, like I am too stupid to notice their treachery and perfidy.

I see all this an say to myself, “These are the same dolts who are not buying gold, silver and oil with every dollar they have, even after all the time I spent telling them do that very thing! Dolts!”

And, indeed, everywhere I look I see dolts, and so, apparently, does Doug Noland, who, in his Credit Bubble Bulletin at PrudentBear.com, takes a look at what is happening in high-yield bonds. He found that “According to Bloomberg, this week’s $41.7bn of corporate bond issuance combined with about an equal amount from last week pushed two-week debt sales to the strongest level this year. With more than three months to go, year-to-date junk issuance is already well into new record territory.”

“Wow! I whistled to myself. “Record territory! Wow! Paying the highest price to get the lowest yield in history!”

Almost involuntarily, I began a pointless tirade of further scathing commentary on such abject stupidity as to pay a historically high price for very low quality debt to get a historically-low yield when the government is deficit-spending more than 10% of GDP and the Federal Reserve is creating staggering amounts of money, which guarantees inflation! Insane!

Mr. Noland, apparently seeing me spiraling off into Screaming Mogambo Outrage Land (SMOL), thankfully headed me off by noting that The Wall Street Journal reported, to my utter astonishment, that all of this buying of junk debt is all being leveraged, but even worse is that the amount of leverage is Off The Freaking Charts (OTFC)! We’re freaking doomed!

Well, anyway, this “OFTC” thing is how I, a typical paranoid lunatic who sees the horror of inflation in prices every time he sees the inflation in the amount of money being deficit-spent by the government and created out-of-thin-air by the Federal Reserve, interpret the Journal reporting that “Poster children of the mid-2000s credit bubble, leveraged loans are set to have their busiest year since 2008,” which were “at the heart of the credit bubble,” and have now “surged back with surprising speed as investors chasing yield are increasingly willing to finance riskier companies.”

My hands, wrapped around the handles of the periscope, instinctively clenched in terror at the thought of seeking riskier debt – and leveraging the bet! – in the riskiest economic environment that I can imagine, when I accidentally hit the “Fire” button! Oops!

Expecting a massive eruption of firepower, I instinctively cringed and immediately started trying to come up with some plausible denial (“Those weren’t my machine guns!”) or a scapegoat (“Islamic terrorists!”), when the ensuing silence made me realize that I had fortunately forgotten to set the Fire Control Arming Switch (FCAS) to “on,” which I didn’t do because it is all the way over on the other side of the room, making this an instance of pathological laziness and poor work habits paying off!

Of course, you never hear about the upside of incompetence and sloth from your stupid family or your stupid boss, but who are instead always “on your case” about something like getting up off the couch and doing some work, working, and doing things right, and not goofing off, and the ever-popular “paying attention, which is not to mention the blah blah blah.”

My tightened grip was just a hint – a mere hint! – of my paralyzing fear and paranoia cranked up, as in the movie Spinal Tap, to 11, an unbelievable overload of impending doom and hyperinflationary torture brought on by the sheer, staggering dumbosity of Yet More Massive (YMM) amounts of money being created to buy Yet More Massive (YMM) amounts of junk debt, selling at the highest prices of the last zillion years, by taking advantage of the lowest interest rates in that selfsame “last zillion years,” a bizarre interest-rate environment caused by the panicked response of the Federal Reserve at its own egregious mismanagement, all of this even though I know that “dumbosity” is not even a word, but I don’t change it, no matter how stupid it sounds, which shows you how Completely Freaked Out (CFO) I am about the whole thing! We’re freaking doomed!

So, as bad as it is that somebody is buying riskier and riskier debt, in a deteriorating economic environment of pandemic burdensome debt, with consumer prices rising, with massive government deficit-spending and unbelievable amounts of money being created by the monstrous Federal Reserve to make price rises even worse, and even worse, it’s all leveraged!

Alert Junior Mogambo Rangers (JMR) are instantly on alert at the use of the unusual phrase “even worse, and even worse,” which is an obvious Mogambo Secret Code (MSC).

You can pinpoint a rookie JMR by the way they earnestly dial-in their Junior Mogambo Ranger Decoder Rings (JMRDRs) and go through a lot of pointless rigmarole, only to find the message to, “Buy gold, silver and gold!” which is always the same secret message.

The experienced JMR, on the other hand, doesn’t bother, and looks, instead, for the reason for the sudden appearance of a Mogambo Secret Code (MSC), in this case being that these high-risk junk bonds are speculators using their client’s money not to merely buy high-yield debt, but as mere collateral on a loan to borrow many times that amount!

Then Mr. Noland says that, “In the face of enormous supply, corporate bond yields have remained extraordinarily low,” which certainly seems like a paradox to me, which was alarming until I remembered that I am stupid, and everything always seems strange and paradoxical to me.

Then I, despite my tragic handicap, remember the enormous amounts of money being created by the central banks of the world, including our own foul Federal Reserve, just for things like this! Money is everywhere!

Startling myself, my fear of inflation suddenly comes roaring up from the hideous depths of my nightmares, making me jump, a condition not made any easier by Casey’s Daily Dispatch newsletter, where he writes, “debt is the single biggest economic challenge facing the US – and much of the developed world. In time this debt will get resolved, it always does, but it’s not going to be pretty.”

Not going to be pretty, indeed! Pausing only long enough to congratulate Mr. Casey on using “it’s not going to be pretty” as a humorous understatement to the horror of eventual massive defaults, massive unemployment, massive loss of wealth, a collapsed economy, a trashed dollar and hyperinflation, I go helpfully on to note that this seems like the perfect time to bring up the fact that you should be buying gold, silver and oil with a nervous, paranoid mania usually seen in crack addicts and crazy people, because while it certainly won’t “be pretty” for people who do not own gold, silver and oil, it will be for those who do! Whee! This investing stuff is easy!

The Mogambo Guru
for The Daily Reckoning

Leveraging Junk Debt Off the Charts 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:
Leveraging Junk Debt Off the Charts




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

Is the Bull Market in Gold Over?

September 24th, 2010

Gold hit three new record highs last week. This week, following the announcement by the US Fed on Tuesday, it is hitting still more highs…closing in on $1,300 as we write.

Gold should go up with consumer prices. But, for nearly two decades – from 1980 to 1999 – gold went down while consumer and asset prices rose. Now, consumer prices are stable. Yet gold hits new records.

All views on gold are baroque. There’s no line of thought on the subject that doesn’t have a curve in it. Some buyers are loading up on gold because they see a recovery coming. Others are buying it because they don’t. Recovery, say some, will boost consumer appetites, resulting in higher inflation levels and a higher price for gold. The absence of recovery, say others, will cause the Fed to undertake more money printing.

Those who have no opinion on the matter are among gold’s most aggressive buyers. To them, gold looks like a “can’t lose” proposition. If the economy improves, gold rises naturally. If it doesn’t improve, the Bernanke team will force it up.

And if not Bernanke, the Chinese. Gold makes up only 1.7% of China’s foreign exchange reserves. Many analysts believe China is targeting a 10% figure. If so, it would have to buy every ounce the world produces for two and a half years. Or, if it relies on only its own production – China is the world’s largest producer – it would take nearly 20 years of steady accumulation to reach the 10% level.

The metal holding down the 79th place in the periodic table has many uses. People make spoons, forks and bathroom faucets out of it. It’s occasionally used as roofing, or even as a murder weapon; Crassus had molten gold poured down his throat after being captured by the Parthians. And Lenin said he would line the public latrines with it. But the best use ever found for it was as money – as a reliable measure of wealth.

Even gold is not perfect as money. During the years following the Spanish conquest of their New World territories, for example, gold flooded back into the Iberian Peninsula. Soon there was much more gold than the other forms of wealth it was meant to represent. Each incremental ounce of gold was disappointing. It bought only a fraction as much as it had before this monetary inflation began. And had you bought it in 1980 you would have seen 90% of your purchasing power disappear before the bottom finally came. Even today, you still would not be back at breakeven. The price of gold will have to almost double from today’s level to reach its inflation-adjusted high of 1980.

But this is what makes gold very different from other money. If you happen to have a billion-Mark note from the Weimar Republic or a trillion dollar note from Zimbabwe, you can hold onto that paper until hell freezes; its value will never return. Gold, on the other hand, will never go away. And when the post-1971 monetary system cracks up, gold is likely to return to its 1980 high…and keep going.

Over the centuries, mankind has often experimented with alternatives to gold. Driven by larceny or desperation, base metal and paper were tried on many occasions. Paper was particularly promising. You could put as many zeros on a piece of paper as you wanted, creating an infinite supply of “money,” as Ben Bernanke once noticed, at negligible cost. But the experiments all ended badly. People realized that money gotten at no expense was only gotten rid of at great cost. Given the ability to create “money” at will, a central banker will sooner or later create too much.

But one generation learns. The next forgets.

By 1971, Americans had forgotten everything they ever knew about money. Richard Nixon cut the final link between the US dollar and gold.

At first, it looked as though investors hadn’t noticed. But then began a great bull market in gold that took the price from $43 to $850. And just then, when investors were most sure that paper dollars would soon be worthless, a remarkable thing happened. Paul Volcker intervened. He made it clear that if the dollar were to go the way of all paper, it wouldn’t be on his watch. Inflation rates fell, along with gold.

Whatever shards of monetary wisdom were still lying on the ground intact in 1971 have since been ground to dust. Now, Ben Bernanke strives as diligently to destroy the dollar as Paul Volcker did to protect it. And another generation awaits a whack on the knuckles.

Regards,

Bill Bonner
for The Daily Reckoning

Is the Bull Market in Gold Over? 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:
Is the Bull Market in Gold Over?




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.

Commodities, Uncategorized

Is the Bull Market in Gold Over?

September 24th, 2010

Gold hit three new record highs last week. This week, following the announcement by the US Fed on Tuesday, it is hitting still more highs…closing in on $1,300 as we write.

Gold should go up with consumer prices. But, for nearly two decades – from 1980 to 1999 – gold went down while consumer and asset prices rose. Now, consumer prices are stable. Yet gold hits new records.

All views on gold are baroque. There’s no line of thought on the subject that doesn’t have a curve in it. Some buyers are loading up on gold because they see a recovery coming. Others are buying it because they don’t. Recovery, say some, will boost consumer appetites, resulting in higher inflation levels and a higher price for gold. The absence of recovery, say others, will cause the Fed to undertake more money printing.

Those who have no opinion on the matter are among gold’s most aggressive buyers. To them, gold looks like a “can’t lose” proposition. If the economy improves, gold rises naturally. If it doesn’t improve, the Bernanke team will force it up.

And if not Bernanke, the Chinese. Gold makes up only 1.7% of China’s foreign exchange reserves. Many analysts believe China is targeting a 10% figure. If so, it would have to buy every ounce the world produces for two and a half years. Or, if it relies on only its own production – China is the world’s largest producer – it would take nearly 20 years of steady accumulation to reach the 10% level.

The metal holding down the 79th place in the periodic table has many uses. People make spoons, forks and bathroom faucets out of it. It’s occasionally used as roofing, or even as a murder weapon; Crassus had molten gold poured down his throat after being captured by the Parthians. And Lenin said he would line the public latrines with it. But the best use ever found for it was as money – as a reliable measure of wealth.

Even gold is not perfect as money. During the years following the Spanish conquest of their New World territories, for example, gold flooded back into the Iberian Peninsula. Soon there was much more gold than the other forms of wealth it was meant to represent. Each incremental ounce of gold was disappointing. It bought only a fraction as much as it had before this monetary inflation began. And had you bought it in 1980 you would have seen 90% of your purchasing power disappear before the bottom finally came. Even today, you still would not be back at breakeven. The price of gold will have to almost double from today’s level to reach its inflation-adjusted high of 1980.

But this is what makes gold very different from other money. If you happen to have a billion-Mark note from the Weimar Republic or a trillion dollar note from Zimbabwe, you can hold onto that paper until hell freezes; its value will never return. Gold, on the other hand, will never go away. And when the post-1971 monetary system cracks up, gold is likely to return to its 1980 high…and keep going.

Over the centuries, mankind has often experimented with alternatives to gold. Driven by larceny or desperation, base metal and paper were tried on many occasions. Paper was particularly promising. You could put as many zeros on a piece of paper as you wanted, creating an infinite supply of “money,” as Ben Bernanke once noticed, at negligible cost. But the experiments all ended badly. People realized that money gotten at no expense was only gotten rid of at great cost. Given the ability to create “money” at will, a central banker will sooner or later create too much.

But one generation learns. The next forgets.

By 1971, Americans had forgotten everything they ever knew about money. Richard Nixon cut the final link between the US dollar and gold.

At first, it looked as though investors hadn’t noticed. But then began a great bull market in gold that took the price from $43 to $850. And just then, when investors were most sure that paper dollars would soon be worthless, a remarkable thing happened. Paul Volcker intervened. He made it clear that if the dollar were to go the way of all paper, it wouldn’t be on his watch. Inflation rates fell, along with gold.

Whatever shards of monetary wisdom were still lying on the ground intact in 1971 have since been ground to dust. Now, Ben Bernanke strives as diligently to destroy the dollar as Paul Volcker did to protect it. And another generation awaits a whack on the knuckles.

Regards,

Bill Bonner
for The Daily Reckoning

Is the Bull Market in Gold Over? 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:
Is the Bull Market in Gold Over?




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.

Commodities, Uncategorized

SP500 Levels to Watch and Market Realities You Should Know

September 24th, 2010

Days like this remind us of Mark Douglas’ “market realities” as explained in Trading in the Zone – specifically, “The market can do anything!”

Let’s take a look at the current structure of the S&P 500, note the most important levels to watch, and go back to a reminder about market realities as they exist currently – fighting these realities could be very costly.

First, the S&P 500 Daily Structure:

Let’s start first with the key technical levels to watch.

As I mentioned in last night’s subscriber report, we had at least a decent chance of supporting off the confluence level at 1,120 – though I certainly did not envision such a powerful rally forming off that support.  Wow.

As it is, confluence support held – so far.

For reference, the support is the 1,130 level from the price breakout, and the coming convergence of the 200d SMA (very important) at 1,117 and the 20 day SMA (less important – green) at 1,115.

It’s a buy as long as we’re above there.

Confluence resistance, as I see it, exists at the 1,145 level or more generally, 1,150.

Any move back above 1,150 sets the short-term goal to 1,170 which could occur quickly.

I mentioned this earlier in my “Game-Changer at 1,130” post where I defined the upside targets.

So here we are back at 1,150 playing the “Will 1,150 hold or not?” game.

Which brings me to my next point – dealing with current market realities.

From what I’m picking up on in the trading community, a lot of traders are having great difficulty right now because they were positioned short under 1,130 and thought there was no way possible the market could break above 1,130.

The first thing to say is to hark back to Mark Douglas’ teachings that “Anything Can Happen.”  It can – and often does.

Traders who approached this major technical resistance line from a perspective of:

“Hmm.  I know that it’s resistance, but I have to be open to the possibility that it might break, which means I’ll take stops and then perhaps get long to play for the upside break”

fared far superior than traders who viewed this test of 1,130 as an absolute brick wall that HAD to turn the market lower.

Having an open mind and planning objective “IF/THEN” statements often trumps bias and ‘absolutes’ about what the market must or must not do.

The reality now is that as long as the market is above 1,130, further bullish potential remains.  Remaining short above 1,130 might be a dreadfully painful experience, particularly if resistance at 1,150 ALSO breaks.

If it comes down to holding a stubborn opinion versus following what the the market is actually doing (as opposed to what it should be doing)… my bet’s on the market every time.

If you’ve not read Trading in the Zone, I – along with many traders – strongly suggest reading that timeless classic.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

Read more here:
SP500 Levels to Watch and Market Realities You Should Know

Uncategorized

SP500 Levels to Watch and Market Realities You Should Know

September 24th, 2010

Days like this remind us of Mark Douglas’ “market realities” as explained in Trading in the Zone – specifically, “The market can do anything!”

Let’s take a look at the current structure of the S&P 500, note the most important levels to watch, and go back to a reminder about market realities as they exist currently – fighting these realities could be very costly.

First, the S&P 500 Daily Structure:

Let’s start first with the key technical levels to watch.

As I mentioned in last night’s subscriber report, we had at least a decent chance of supporting off the confluence level at 1,120 – though I certainly did not envision such a powerful rally forming off that support.  Wow.

As it is, confluence support held – so far.

For reference, the support is the 1,130 level from the price breakout, and the coming convergence of the 200d SMA (very important) at 1,117 and the 20 day SMA (less important – green) at 1,115.

It’s a buy as long as we’re above there.

Confluence resistance, as I see it, exists at the 1,145 level or more generally, 1,150.

Any move back above 1,150 sets the short-term goal to 1,170 which could occur quickly.

I mentioned this earlier in my “Game-Changer at 1,130” post where I defined the upside targets.

So here we are back at 1,150 playing the “Will 1,150 hold or not?” game.

Which brings me to my next point – dealing with current market realities.

From what I’m picking up on in the trading community, a lot of traders are having great difficulty right now because they were positioned short under 1,130 and thought there was no way possible the market could break above 1,130.

The first thing to say is to hark back to Mark Douglas’ teachings that “Anything Can Happen.”  It can – and often does.

Traders who approached this major technical resistance line from a perspective of:

“Hmm.  I know that it’s resistance, but I have to be open to the possibility that it might break, which means I’ll take stops and then perhaps get long to play for the upside break”

fared far superior than traders who viewed this test of 1,130 as an absolute brick wall that HAD to turn the market lower.

Having an open mind and planning objective “IF/THEN” statements often trumps bias and ‘absolutes’ about what the market must or must not do.

The reality now is that as long as the market is above 1,130, further bullish potential remains.  Remaining short above 1,130 might be a dreadfully painful experience, particularly if resistance at 1,150 ALSO breaks.

If it comes down to holding a stubborn opinion versus following what the the market is actually doing (as opposed to what it should be doing)… my bet’s on the market every time.

If you’ve not read Trading in the Zone, I – along with many traders – strongly suggest reading that timeless classic.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

Read more here:
SP500 Levels to Watch and Market Realities You Should Know

Uncategorized

More on the Multi-Asset Class ETF Portfolio

September 24th, 2010

Yesterday’s post, Diversification, Momentum and Sidestepping the 2008 Panic, brought such a positive response that I thought a brief follow-up is in order.

In the chart below, courtesy of ETFreplay.com, I show how the Multi-Asset Class ETF Portfolio I referred to yesterday performed on a month to month basis, this time using the ETFreplay’s Portfolio Moving Average timeline tool. The chart is really a table which shows all of the ETFs and the results of the moving average rule which determined whether to be long or in cash for each month of the period covered. The far right portion of that graphic also shows where the each of the individual ETFs currently stands relative to their selected (in this case it was six months) moving average.

Commodities, ETF, Uncategorized

When Gold Goes Up

September 24th, 2010

“Gold is saying something,” writes Bloomberg columnist Mark Gilbert.

What’s it saying? Nobody knows. Well, at least nobody who works at The Daily Reckoning. We listen. We hear. But we still don’t know what the hell gold is talking about. The yellow metal is speaking in riddles.

Yesterday, gold spoke again. It rose $4 to a new record high of $1,296. Tomorrow, it will probably hit yet another record – possibly over $1,300.

In the conventional wisdom, gold is telling us to watch out. Inflation is coming. Either the regular kind…the kind that comes with “growth”…or the kind that comes with the “hyper” modifier. Almost everyone likes the regular kind. Almost no one likes the hyper kind.

But being the contrary coots that we are, we’re inclined to think that there will be many a slip between the cup of $1,300 gold and the puckered lips of gently rising inflation levels.

Watch out, dear reader, watch out.

Not that we’re dissing gold or sassing the goldbugs. Not at all. We think it’s going to $1,500…and then to $3,000. But next week?

Don’t know. We have to keep listening…trying to interpret the whispers.

There’s something all together too obvious and too easy about the gold market now. It just goes up. Year after year. Maybe it’s a trap.

In 2000, there was a crash in dot.coms. The whole magic of the tech bubble suddenly disappeared. And guess what? Gold went up.

In 2001, the War on Terror began. And guess what? Gold went up again.

And again in 2002. And 2003. And 2004.

By 2005, the world economy was in the throes of a massive financial bubble. Everything was going up. Gold went up too.

In 2006, the US had a major housing bubble on its hands. Gold went up.

In 2007, the housing bubble started to lose air. Gold went up.

In 2008, Wall Street stared into the abyss. Lehman Bros. went broke. The feds took over housing finance, auto-making, insurance, commercial lending…and gold went up.

In 2009, the feds went all out to try to engineer a recovery. The Fed ballooned its balance sheet by $1.2 trillion. The federal budget went into deficit by nearly one and a half trillion. Still, gold went up.

And what’s this? The recession officially ended more than a year ago. Housing and unemployment are still limping. De-leveraging is still underway (David Rosenberg calls it a “depression”)…and go figure. Gold is still going up.

Is there anything that can stop gold from going up?

We don’t know. But many smart people are coming to the conclusion that they can’t lose with gold. If the economy recovers…gold is a cinch to go up along with inflation. If the economy falters…gold will go up when the Fed comes to the rescue with more printing press money.

And then, there are the Chinese. God knows they like gold. And they don’t have much of it. If they’re behind this gold market it could last for another 20 years.

So gold is a “can’t lose” investment.

We like gold. But we don’t like “can’t lose” investments. What to do?

Bill Bonner
for The Daily Reckoning

When Gold Goes Up 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:
When Gold Goes Up




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.

Commodities, Uncategorized

When Gold Goes Up

September 24th, 2010

“Gold is saying something,” writes Bloomberg columnist Mark Gilbert.

What’s it saying? Nobody knows. Well, at least nobody who works at The Daily Reckoning. We listen. We hear. But we still don’t know what the hell gold is talking about. The yellow metal is speaking in riddles.

Yesterday, gold spoke again. It rose $4 to a new record high of $1,296. Tomorrow, it will probably hit yet another record – possibly over $1,300.

In the conventional wisdom, gold is telling us to watch out. Inflation is coming. Either the regular kind…the kind that comes with “growth”…or the kind that comes with the “hyper” modifier. Almost everyone likes the regular kind. Almost no one likes the hyper kind.

But being the contrary coots that we are, we’re inclined to think that there will be many a slip between the cup of $1,300 gold and the puckered lips of gently rising inflation levels.

Watch out, dear reader, watch out.

Not that we’re dissing gold or sassing the goldbugs. Not at all. We think it’s going to $1,500…and then to $3,000. But next week?

Don’t know. We have to keep listening…trying to interpret the whispers.

There’s something all together too obvious and too easy about the gold market now. It just goes up. Year after year. Maybe it’s a trap.

In 2000, there was a crash in dot.coms. The whole magic of the tech bubble suddenly disappeared. And guess what? Gold went up.

In 2001, the War on Terror began. And guess what? Gold went up again.

And again in 2002. And 2003. And 2004.

By 2005, the world economy was in the throes of a massive financial bubble. Everything was going up. Gold went up too.

In 2006, the US had a major housing bubble on its hands. Gold went up.

In 2007, the housing bubble started to lose air. Gold went up.

In 2008, Wall Street stared into the abyss. Lehman Bros. went broke. The feds took over housing finance, auto-making, insurance, commercial lending…and gold went up.

In 2009, the feds went all out to try to engineer a recovery. The Fed ballooned its balance sheet by $1.2 trillion. The federal budget went into deficit by nearly one and a half trillion. Still, gold went up.

And what’s this? The recession officially ended more than a year ago. Housing and unemployment are still limping. De-leveraging is still underway (David Rosenberg calls it a “depression”)…and go figure. Gold is still going up.

Is there anything that can stop gold from going up?

We don’t know. But many smart people are coming to the conclusion that they can’t lose with gold. If the economy recovers…gold is a cinch to go up along with inflation. If the economy falters…gold will go up when the Fed comes to the rescue with more printing press money.

And then, there are the Chinese. God knows they like gold. And they don’t have much of it. If they’re behind this gold market it could last for another 20 years.

So gold is a “can’t lose” investment.

We like gold. But we don’t like “can’t lose” investments. What to do?

Bill Bonner
for The Daily Reckoning

When Gold Goes Up 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:
When Gold Goes Up




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.

Commodities, Uncategorized

The Legend of Alan GreedScam

September 24th, 2010

Mortgage Rates has an infographic featuring the tale of Alan Greenspan’s twin-like in appearance alter ego, Alan GreedScam, including how he helped orchestrate decades of malinvestment in the US.

Of course, it’s actually one in the same person, but when you look at Alan Greenspan’s early writing — strongly in support of gold-backed currency — you must wonder where he went wrong. In his 1966 piece, entitled Gold and Economic Freedom, he wrote:

“This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”

The graphic below shows just how far he strayed from those beliefs. It can be seen in its full high-resolution glory exactly where it came to our attention, in a recent post about Alan GreedScam on The Big Picture blog.

The full infographic follows…

The Legend of Alan GreedScam 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 Legend of Alan GreedScam




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 Legend of Alan GreedScam

September 24th, 2010

Mortgage Rates has an infographic featuring the tale of Alan Greenspan’s twin-like in appearance alter ego, Alan GreedScam, including how he helped orchestrate decades of malinvestment in the US.

Of course, it’s actually one in the same person, but when you look at Alan Greenspan’s early writing — strongly in support of gold-backed currency — you must wonder where he went wrong. In his 1966 piece, entitled Gold and Economic Freedom, he wrote:

“This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”

The graphic below shows just how far he strayed from those beliefs. It can be seen in its full high-resolution glory exactly where it came to our attention, in a recent post about Alan GreedScam on The Big Picture blog.

The full infographic follows…

The Legend of Alan GreedScam 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 Legend of Alan GreedScam




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 Hartford Enters Active ETF Arena

September 24th, 2010

The Hartford Financial Services Group, Connecticut based company with over $380 billion in assets, has filed with the SEC for exemptive relief to launch actively-managed ETFs through a newly formed “The Hartford Active Exchange-Traded Fund Trust”. The proposed funds will be sub-advised by Hartford Investment Financial Services, which currently has $45 billion in assets under management.

The Hartford is seeking relief for actively-managed ETFs that may also invest in other ETFs, thereby creating a fund-of-funds structure. While the relief has been sought for funds that may invest in equities or fixed-income securities, both in the US and markets, the initial fund will invest primarily in US dollar and non-US dollar denominated investment grade debt. The securities may be issues from both developed and emerging markets and of any maturity. The filing though clearly points out that the proposed funds will not invest in any derivatives such as swaps, options and futures. This last caveat has been a common feature of many recent filings for Active ETFs that are attempting to avoid additional scrutiny resulting from the SEC’s ongoing investigation into derivative usage in ETFs.

The Hartford currently has an array of mutual fund across various asset classes that it offers to investors and in July announced fee reductions on 36 of its mutual funds, in an attempt to make them more competitive within their Morningstar categories. The move to enter Active ETFs is likely part of a larger push to address advisor demands for lower expenses and fee transparency.

There are now numerous well-known mutual fund shops, such as Legg Mason, Eaton Vance, T. Rowe Price and John C. Hancock that have filings to launch actively-managed ETFs which are backlogged with the SEC. However, very few of those proposed Active ETFs have made it out the other end and launched on the market, giving the impression that the SEC is now the biggest hurdle in getting these products out to market. The SEC launched its investigation back in March 2010 and since then new launches of Active ETFs have slowed down to a trickle, even as the filings continue to pile up.

ETF, Mutual Fund, OPTIONS

The Hartford Enters Active ETF Arena

September 24th, 2010

The Hartford Financial Services Group, Connecticut based company with over $380 billion in assets, has filed with the SEC for exemptive relief to launch actively-managed ETFs through a newly formed “The Hartford Active Exchange-Traded Fund Trust”. The proposed funds will be sub-advised by Hartford Investment Financial Services, which currently has $45 billion in assets under management.

The Hartford is seeking relief for actively-managed ETFs that may also invest in other ETFs, thereby creating a fund-of-funds structure. While the relief has been sought for funds that may invest in equities or fixed-income securities, both in the US and markets, the initial fund will invest primarily in US dollar and non-US dollar denominated investment grade debt. The securities may be issues from both developed and emerging markets and of any maturity. The filing though clearly points out that the proposed funds will not invest in any derivatives such as swaps, options and futures. This last caveat has been a common feature of many recent filings for Active ETFs that are attempting to avoid additional scrutiny resulting from the SEC’s ongoing investigation into derivative usage in ETFs.

The Hartford currently has an array of mutual fund across various asset classes that it offers to investors and in July announced fee reductions on 36 of its mutual funds, in an attempt to make them more competitive within their Morningstar categories. The move to enter Active ETFs is likely part of a larger push to address advisor demands for lower expenses and fee transparency.

There are now numerous well-known mutual fund shops, such as Legg Mason, Eaton Vance, T. Rowe Price and John C. Hancock that have filings to launch actively-managed ETFs which are backlogged with the SEC. However, very few of those proposed Active ETFs have made it out the other end and launched on the market, giving the impression that the SEC is now the biggest hurdle in getting these products out to market. The SEC launched its investigation back in March 2010 and since then new launches of Active ETFs have slowed down to a trickle, even as the filings continue to pile up.

ETF, Mutual Fund, OPTIONS

Silver Nears 30-Year High

September 24th, 2010

Well… The one-day of profit-taking and soft data selling in the currencies is water under the bridge, and the currencies are back to kicking sand in the face of the dollar. And gold? The shiny metal is knocking on the door to $1,300, and silver is near a 30-year high! So… In my book, this is a Fantastico Friday!

Yes… The one-day of reprieve for the dollar is in the books, and it’s time to get back to the task at hand, you know, the one the US government wants, and the one the US Treasury wants, and the Cartel for that matter wants it too… And that is a weaker dollar, so that they can achieve two goals…

1. Give the US Treasuries they need to sell and continue to sell again and again to finance the deficit spending, a “discount price”… Which is what a cheaper dollar will do. And…

2. Allow the US government to repay debts with cheaper dollars…

Let’s not ever forget those two goals… When it gets dark and gloomy for the currencies, like last winter, with the Eurozone GIIPS, and it looks like the dollar will enter a multi-year strong trend, you have to pull those two goals that you’ve written down, out of your back pocket to reassure yourself that diversifying is the right thing to do!

This morning in Germany, the euro (EUR) got a boost back over 1.34, when German Business Confidence, as measured by the think tank IFO, showed a nice increase, moving the index to a three-year high! WOW! This is not some fly-by-night operation either, folks! IFO surveys 7,000 business executives… For those of you keeping score at home, the IFO index is now 113.07…

I see where some Fed Heads are taking exception to the markets’ reaction to the FOMC statement on Tuesday… The Fed Heads claim that the markets have overreacted. Yeah, and we all just fell off the turnip truck! NOT! Oh well… This will put a smile on your face… That is, if you laugh with me in my corner… Get this… Big Ben Bernanke is going to give a speech today titled: “Fixing Economics: Lessons from the Crisis”.

I’m going to leave that one right there, as there are so many smart aleck remarks that are shooting through my brain right now!

Well… Our President met with China and Japan yesterday in attempts to get them to allow their currencies to gain versus the dollar (see, I told you the government wants a cheaper dollar!) We saw the Chinese leader standing next to the President at the end of their meeting and they were taking questions… The Chinese leader just stood there with this smile on his face, that said, “I don’t care what you want, we’re not going to allow the renminbi to gain 20% like you have demanded we do”… Smile… HA!

I just don’t see where the US gets off telling other countries that buy our debt, and keep our economy from collapsing, and the dollar from defaulting, what to do with their currency… I’ll tell you right now, that the US government, doesn’t hold true the idea that each country has an obligation to its people/citizens to provide price stability, and no to debase their currency! Other countries do… And that’s where the rubber meets the road folks…

Having said that… It is thought that the Bank of Japan (BOJ) came back into the markets to sell yen (JPY) again last night, as yen fell from 84.50 to 85.40 in a manner of minutes, although unlike last time, the Ministry of Finance (MOF) did not confirm that they had issued instructions to the BOJ to intervene… But, that’s all it could have been… It looks like intervention, walks like intervention, and smells like intervention… It was intervention!

But guess what? The markets volleyed back the BOJ’s serve, and pushed yen back to a level that was even stronger than the 84.50 it started out at! The markets are taking the fight to the BOJ and MOF… Good Show!

I just saw Marc Faber on the Bloomberg TV channel, talking about Asia… I see where he agrees with me that the Asian currencies (including the Pan Asian currencies) are the best-positioned currencies to rally and gain versus the dollar. Of course, I would have gone further to say the commodity currencies wouldn’t be far behind… But, you know me… I’ve got to get my two-cents in whenever I can!

I have been telling you about the fight going on in the markets over the Brazilian real (BRL)… The Brazilian Central Bank (BCB) has been rumored to be spending $1 billion per day on buying dollars and selling real, in an attempt to keep the real from getting too strong, and the markets are fighting back with their own treasure chest of money… Last week, there were 284,967 more bets on the real rising than falling; that’s the most since June of 2007. Basically, each contract is worth $50,000, so doing the calculation, and using my new math skills, I come to more than $14 billion!

As I’ve always told you, central bank intervention will not work in the long run… You see, in the real’s case the rise is fundamental… Their economy is strong, their exports are strong, inflation is heating up, and in need of higher interest rates, which already are present in Brazil… Those things speak of a stronger real… In the long run, after the government gives up, or runs out of money…

Not that this has anything to do with the Brazil story, but running out of money reminds me of a quote that I’ve used at my presentations before, and always gets a rise out of the audience, and that is what Margaret Thatcher said about socialism… “The problem with Socialism is that eventually you run out of other people’s money.”

I guess that would be a good one for everyone to remember here in the US…

OK… Back to Brazil… The Brazilian government has made claims about “not losing” this battle for the real… I don’t believe the Brazilian government has had a chat with reality lately… It would behoove them to do so, before they go and throw billions more down the drain…

OH! And looky here! I see where Petroleo Brasileiro, Brazil’s state-controlled oil company, will be able to develop mammoth offshore oil reserves after raising $70 billion in the largest share offering worldwide… This just means more demand for reals, folks…

But… Like I always do, when talking about Brazil… It is to remind you that Brazil is an emerging market, and strange things can happen in emerging markets. So be careful to use only the “speculation money” of your portfolio here…

OK… Enough of that! How about what’s going on here in the US besides the President wasting time urging the Chinese to allow a 20% appreciation in their currency? Well… Former Fed Chairman, Paul Volcker, is telling people to “not worry about deflation here in the US.”  Hmmm… Sounds like old Paul must have become a Pfennig Reader! I’ve been saying that for some time now, and even showed you some food price items that had been rising…

Well, my friend, and colleague over at the Sovereign Society, Eric Roseman, pointed out to me the other day that there are some indexes that track agriculture are really beginning to move higher… For instance, the Dow Jones- UBS Agriculture index is up 27.7% this year… Hmmm… Didn’t I tell you once that the Fed/Cartel will take their eye off the inflation ball, concerning themselves with deflation, and before they know it, inflation will be soaring, and they’ll rush to hike rates, but they will be so far behind the inflation 8-ball… Well… It’s beginning to look like that forecast will come to fruition, eh?

Recall a couple of weeks ago, I told you that there were reports that back customers with time deposits (CD) were allowing them to mature, and moving the dollars into checking accounts, so they would have liquidity? Well… Time-deposit balances declined from $2,365 billion on January 1, 2010 to $2,165 billion on June 30, 2010, as $200 billion in maturing CDs were not rolled over. Out of the $200 billion decrease in CD balances, consumers used $29 billion, or 15%, to pay down credit card and other revolving debt, according to the guys over at Market Rates Insight…

I’ll tell you one thing… Those people need to be opening EverBank checking accounts, because the EverBank checking account, besides being called the “Best Checking Account in the country” by Kiplinger’s, also pays interest on the balance, that beats the national average by a country mile!

OK… For those of you who don’t like it when I advertise something in the letter, sorry… For those of you who don’t already have an EverBank Checking Account, what are you waiting for?

Well… Of course, basically, I would be telling those people that they need to shift some of their dollars to currencies and precious metals… But, that’s my message wherever I go, people wanna know, and I tell them… Diversify a portion of your portfolio out of dollars and into currencies and metals…

The US data cupboard today has August Durable Goods, and New Home Sales… Durable Goods data has been quite volatile in recent months, and I expect August to be no different. New Home Sales are expected to rise… I’ll bet a dollar versus a Krispy Kreme that the only way this happens is if the Home prices fall…

Then there was this… From The Washington Post

Senate Democrats said Thursday that they had abandoned plans for a pre-election showdown with Republicans over taxes, postponing any vote on extending Bush administration tax cuts until after the November midterms…

You don’t think the decision to delay this vote on taxes has any thing to do with the mid-term elections, do you? HA!

To recap… The one-day of profit taking is over, and the currencies are back on the rally tracks this morning. The euro is back over 1.34, and gold is knocking at the door to $1,300, with silver near a 30-year high! It looks like Japan intervened last night, temporarily taking the yen weaker, only to see the markets reverse the trade, and push yen stronger! The President met with China and Japan yesterday… I doubt anything will come of it, and it will turn out to have been a waste of time…

Chuck Butler
for The Daily Reckoning

Silver Nears 30-Year High 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:
Silver Nears 30-Year High




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

Copyright 2009-2013 MarketDailyNews.COM

LOG