Creeping Inflation Reveals Recession’s Trapdoor

October 21st, 2010

As the Fed’s stated intention to execute QE2 lurks ever closer — plans to resume asset purchases, including Treasuries, are slated for the November 2nd FMOC meeting — even a few more than average regional Fed bank presidents are breaking rank.

According to Bloomberg, Philadelphia president Charles Plosser said unemployment is a “terrible problem,” but he flat out prefers it “to monetary-policy solutions at this point,” that increase inflation. Even more plainly, he said, “I am less inclined to want to follow a policy that is highly concentrated on raising inflation and raising inflation expectations.”

Nonetheless, QE2 will likely proceed as planned, and many already hard hit by recession will find their remaining dollars even less valuable.

Creeping Inflation Reveals Recession’s Trapdoor 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:
Creeping Inflation Reveals Recession’s Trapdoor




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

Unemployment and Consumer Debt: The 800 lb Gorilla in the Room

October 21st, 2010

When I left you Tuesday morning, the currencies were hanging on, but as Chuck explained yesterday, we saw a considerable sell-off in response to the rate increase from China as the day wore on. The euro (EUR) had briefly dipped into the 1.36 handle and the dollar index rallied the most in two months. It looks as though this was just a knee-jerk reaction as we opened yesterday morning with the euro in the mid 1.38 handle and rose all the way up to 1.3991. It was as if Tuesday was gone with the wind, like it never happened.

I can hear you asking yourself, “What’s the deal?”… Why did the currencies snap right back into place like a rubber band? Well that tug of war I was talking about between the two quantitative easing camps pulled back the other way and traders became focused on the Fed’s Beige Book. There was another economic firm that came out and said the magnitude of QE will be more than what is currently expected so that sent the dollar bulls back into time out, at least for now.

We also had the Chicago Fed President say that the central bank will need to buy securities on a large scale several times in order to give the economy a needed kick-start and fuel inflation. The only problem here is that slow growth and rising inflation isn’t exactly a good combo, so traders sold the dollar on that concern. As Chuck has mentioned several times, it’s a classic case of buy the rumor and sell the fact, so look for this type of volatility until the Fed finally includes the rest of us in on their master plan.

While their wasn’t much in the data closet today, the results of last week’s mortgage apps and the Fed’s Beige Book weren’t what you would call “dollar positive” either. We saw mortgage applications, which is a very volatile figure to begin with, fall 10.5% last week and represented the largest drop in more than four months. This figure is obviously sensitive to the interest rate environment, so as the 10-year has ticked up a bit from where its been, mortgage rates have followed suit.

The 800 lb gorilla remains on the back of real estate as high unemployment and consumer debt levels in addition to tight credit standards make it difficult just to refinance and, not to mention, that many homeowners remain underwater. If you throw in the whole foreclosure mess, it’s just not a pretty sight.

The Beige Book really didn’t tell us anything that we didn’t already know and there weren’t any surprises, be it good or bad. The report just said the economy expanded at a moderate pace in September and into the first week of October with not much in the way of improvement on the horizon. It’s definitely not something that would deter additional QE or create an environment that would cause us to think the Fed would minimize their scope of implementation.

The report said on balance, national economic activity continued to rise, albeit, at a modest pace and consumer spending was flat. We just have to go back and look at past retail sales reports to see this. Again, it’s a bit higher but nothing to write home about. Retailers said consumers are slowly regaining confidence, but remain price conscious and were largely limiting purchases to necessities and nondiscretionary items.

I agree with the Fed there. If you don’t have a job or if you’re worried about losing your job, it’s not very likely or wise to go out and spend money on stuff you don’t need or something that you would just like to have. They also said the housing market was still sluggish or even declining in many regions but there were scattered reports of some improvement. The report went on the say the outlook suggested sales and construction would remain subdued through year-end. So as I said before, not surprised here, but it was slightly more upbeat than the last report.

It’s Thursday, so we have the weekly jobless and continuing claims due out first thing this morning followed by the leading indicators gauge and Philly Fed index. Initial claims are expected to improve a bit but still remain above 450K while continuing claims are forecast to tick up somewhat. While employers have already cut staff to near bare bones levels and remaining content with current staffing levels, we just haven’t seen much deviation from that 450K level on initial claims.

With companies still turning profits and functioning efficiently on short staff, it’s going to take sustained economic growth before we see much in the way of improvement. The September leading indicators are expected to match the last printing in August of 0.3%. This index is a gauge of the economic prospects over the next 3 to 6 months and with employment remaining a problem and manufacturing subdued, I really don’t see much in the way of improvement.

The last piece of data to come out will be the Philly Fed Index, which measures manufacturing in the Philadelphia area. We saw it fall 0.7% in September on less rebuilding of inventory but it’s expected to increase 2% in October. These local manufacturing reports can be fairly volatile, so we’ll see if there really was an improvement.

Moving to currencies, it was a good day for all of the majors. The two currencies heard yelling “winner, winner, chicken dinner” yesterday were the Norwegian krone (NOK) and the Swedish krona (SEK), with the Brazilian real (BRL) bringing up the rear. The euro – which we call the Big Dog, and accounts for a majority of the dollar index – came in 4th place by rising over 1.5% and was the catapult for those Nordic currencies.

Since both currencies have a much smaller trading volume, the euro pretty much determines if they rise or fall on a given day but deviate depending on market conditions. The wind behind Sweden’s sails are thoughts of a possible rate hike next week from the Riksbank, while Norway was pushed up by higher oil prices. Another driving factor was higher risk appetite, since they are thinly traded, so the subsiding fears of slowing global growth from the Chinese rate hike gave them the added push to outperform the euro.

Looking at the opposite end of the currency returns on the day, the Brazilian real was able to muster a modest 0.25% gain. It looks as though the new tax assessment – and thoughts of additional such measures, possibly affecting the stock market next – has the hot money investors thinking twice. These types of traders typically have a short-term memory and future rate hikes could help alleviate a lot of that concern.

We had a mid-month inflation report yesterday that showed October inflation doubled from September and rose 5.03% year-over-year. Brazil has attracted a net $34.6 billion into their bond and stock markets through August, which is more than double the total for 2009, so many economists have upped their year-end inflation outlook to an average 5.20%. While a stronger currency helps offset some inflation, the central bank doesn’t exactly want all of this money flowing in unchecked, hence the intervention measures and taxes.

As Chuck mentioned yesterday, the Australian dollar (AUD) shot right back to nearly the 0.99 handle as it gained back just about everything it lost on Tuesday by rising just under 2% on the day. Since the Australian economy is so closely tied to China these days, the Chinese rate hike really had a profound impact, as would any other economic reports or policy changes. We also had Aussie leading indicators released yesterday, which showed a slight decline month on month, but still remains high as it’s up over 5% compared to last August.

And just to expand briefly on what Chuck said about Canada, the BOC did keep rates on hold and they said the withdrawal of monetary stimulus would be gradual. They did cut growth expectations this year down to 3% from 3.5% and reduced the 2011 forecast to 2.3% from the previous figure of 2.9%. With inflation not presenting any imminent problems, growth expectations cut, and a general uncertainty of how the US economy progresses, they certainly have time to sit on the sidelines and take it all in.

Moving over to Switzerland, the SNB was in the news again as they lowered inflation expectations through 2013. While the franc (CHF) has appreciated against the dollar, it has actually depreciated against the euro over the past month. The SNB gets all flustered when the franc rises disproportionately to the euro and is typically what policy makers refer to when they say it’s too expensive. It seems as though Swiss policymakers have taken a page out of Brazil’s playbook by thinking of alternate ways to curb the appeal of the currency instead of just flat out intervening in the market.

The SNB last month cut its 3-year inflation outlook by the most in history as they lowered the 2011 projection to 0.3% from 1% and the 2012 estimate to 1.2% from 2.2%. These downward revisions have many economists and institutions pushing thoughts of a rate hike out even further as, according to the SNB, inflation will remain below the 2% target well into 2013. I guess we’ll see if this type of creative intervention, if you will, actually works and catches on.

Staying with Europe, we had German Chancellor Angela Merkel say at a gathering that the German economy is doing better than expected and may expand more than 3% this year. She also said governments need to work on an exit strategy from the stimulus and that Europe and the US are giving differing answers as to the timing of such an exit. In fact, she said there are good reasons to take up the exit strategy now in Europe.

I certainly like that type of charisma, but it will probably be a while until we actually see something like that happen. Going off on a tangent, I saw someone calling for the euro trading at 1.50 within the next 3 to 6 months. That seems rather aggressive, but if traders don’t like what they see with the Fed’s QE, who knows.

As I turned the screens on this morning, the currencies are pretty much in the same range as where I left them last night. The euro has managed to trade back up into 1.40 and the pound sterling (GBP) has lost about half a cent so far this morning. Other than that, not much movement overnight.

To recap… The currencies rallied on talk of a more aggressive QE campaign than anticipated so look for this type of back and forth trading until the plan is laid out in front of us. The Fed Beige Book told us everything we already know. The Nordic currencies gained on higher risk appetite, higher rates, and a higher euro. Switzerland tries another approach in an attempt to lure investors away from the franc…

Mike Meyer
for The Daily Recknoning

Unemployment and Consumer Debt: The 800 lb Gorilla in the Room 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:
Unemployment and Consumer Debt: The 800 lb Gorilla in the Room




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.

Real Estate, Uncategorized

Unemployment and Consumer Debt: The 800 lb Gorilla in the Room

October 21st, 2010

When I left you Tuesday morning, the currencies were hanging on, but as Chuck explained yesterday, we saw a considerable sell-off in response to the rate increase from China as the day wore on. The euro (EUR) had briefly dipped into the 1.36 handle and the dollar index rallied the most in two months. It looks as though this was just a knee-jerk reaction as we opened yesterday morning with the euro in the mid 1.38 handle and rose all the way up to 1.3991. It was as if Tuesday was gone with the wind, like it never happened.

I can hear you asking yourself, “What’s the deal?”… Why did the currencies snap right back into place like a rubber band? Well that tug of war I was talking about between the two quantitative easing camps pulled back the other way and traders became focused on the Fed’s Beige Book. There was another economic firm that came out and said the magnitude of QE will be more than what is currently expected so that sent the dollar bulls back into time out, at least for now.

We also had the Chicago Fed President say that the central bank will need to buy securities on a large scale several times in order to give the economy a needed kick-start and fuel inflation. The only problem here is that slow growth and rising inflation isn’t exactly a good combo, so traders sold the dollar on that concern. As Chuck has mentioned several times, it’s a classic case of buy the rumor and sell the fact, so look for this type of volatility until the Fed finally includes the rest of us in on their master plan.

While their wasn’t much in the data closet today, the results of last week’s mortgage apps and the Fed’s Beige Book weren’t what you would call “dollar positive” either. We saw mortgage applications, which is a very volatile figure to begin with, fall 10.5% last week and represented the largest drop in more than four months. This figure is obviously sensitive to the interest rate environment, so as the 10-year has ticked up a bit from where its been, mortgage rates have followed suit.

The 800 lb gorilla remains on the back of real estate as high unemployment and consumer debt levels in addition to tight credit standards make it difficult just to refinance and, not to mention, that many homeowners remain underwater. If you throw in the whole foreclosure mess, it’s just not a pretty sight.

The Beige Book really didn’t tell us anything that we didn’t already know and there weren’t any surprises, be it good or bad. The report just said the economy expanded at a moderate pace in September and into the first week of October with not much in the way of improvement on the horizon. It’s definitely not something that would deter additional QE or create an environment that would cause us to think the Fed would minimize their scope of implementation.

The report said on balance, national economic activity continued to rise, albeit, at a modest pace and consumer spending was flat. We just have to go back and look at past retail sales reports to see this. Again, it’s a bit higher but nothing to write home about. Retailers said consumers are slowly regaining confidence, but remain price conscious and were largely limiting purchases to necessities and nondiscretionary items.

I agree with the Fed there. If you don’t have a job or if you’re worried about losing your job, it’s not very likely or wise to go out and spend money on stuff you don’t need or something that you would just like to have. They also said the housing market was still sluggish or even declining in many regions but there were scattered reports of some improvement. The report went on the say the outlook suggested sales and construction would remain subdued through year-end. So as I said before, not surprised here, but it was slightly more upbeat than the last report.

It’s Thursday, so we have the weekly jobless and continuing claims due out first thing this morning followed by the leading indicators gauge and Philly Fed index. Initial claims are expected to improve a bit but still remain above 450K while continuing claims are forecast to tick up somewhat. While employers have already cut staff to near bare bones levels and remaining content with current staffing levels, we just haven’t seen much deviation from that 450K level on initial claims.

With companies still turning profits and functioning efficiently on short staff, it’s going to take sustained economic growth before we see much in the way of improvement. The September leading indicators are expected to match the last printing in August of 0.3%. This index is a gauge of the economic prospects over the next 3 to 6 months and with employment remaining a problem and manufacturing subdued, I really don’t see much in the way of improvement.

The last piece of data to come out will be the Philly Fed Index, which measures manufacturing in the Philadelphia area. We saw it fall 0.7% in September on less rebuilding of inventory but it’s expected to increase 2% in October. These local manufacturing reports can be fairly volatile, so we’ll see if there really was an improvement.

Moving to currencies, it was a good day for all of the majors. The two currencies heard yelling “winner, winner, chicken dinner” yesterday were the Norwegian krone (NOK) and the Swedish krona (SEK), with the Brazilian real (BRL) bringing up the rear. The euro – which we call the Big Dog, and accounts for a majority of the dollar index – came in 4th place by rising over 1.5% and was the catapult for those Nordic currencies.

Since both currencies have a much smaller trading volume, the euro pretty much determines if they rise or fall on a given day but deviate depending on market conditions. The wind behind Sweden’s sails are thoughts of a possible rate hike next week from the Riksbank, while Norway was pushed up by higher oil prices. Another driving factor was higher risk appetite, since they are thinly traded, so the subsiding fears of slowing global growth from the Chinese rate hike gave them the added push to outperform the euro.

Looking at the opposite end of the currency returns on the day, the Brazilian real was able to muster a modest 0.25% gain. It looks as though the new tax assessment – and thoughts of additional such measures, possibly affecting the stock market next – has the hot money investors thinking twice. These types of traders typically have a short-term memory and future rate hikes could help alleviate a lot of that concern.

We had a mid-month inflation report yesterday that showed October inflation doubled from September and rose 5.03% year-over-year. Brazil has attracted a net $34.6 billion into their bond and stock markets through August, which is more than double the total for 2009, so many economists have upped their year-end inflation outlook to an average 5.20%. While a stronger currency helps offset some inflation, the central bank doesn’t exactly want all of this money flowing in unchecked, hence the intervention measures and taxes.

As Chuck mentioned yesterday, the Australian dollar (AUD) shot right back to nearly the 0.99 handle as it gained back just about everything it lost on Tuesday by rising just under 2% on the day. Since the Australian economy is so closely tied to China these days, the Chinese rate hike really had a profound impact, as would any other economic reports or policy changes. We also had Aussie leading indicators released yesterday, which showed a slight decline month on month, but still remains high as it’s up over 5% compared to last August.

And just to expand briefly on what Chuck said about Canada, the BOC did keep rates on hold and they said the withdrawal of monetary stimulus would be gradual. They did cut growth expectations this year down to 3% from 3.5% and reduced the 2011 forecast to 2.3% from the previous figure of 2.9%. With inflation not presenting any imminent problems, growth expectations cut, and a general uncertainty of how the US economy progresses, they certainly have time to sit on the sidelines and take it all in.

Moving over to Switzerland, the SNB was in the news again as they lowered inflation expectations through 2013. While the franc (CHF) has appreciated against the dollar, it has actually depreciated against the euro over the past month. The SNB gets all flustered when the franc rises disproportionately to the euro and is typically what policy makers refer to when they say it’s too expensive. It seems as though Swiss policymakers have taken a page out of Brazil’s playbook by thinking of alternate ways to curb the appeal of the currency instead of just flat out intervening in the market.

The SNB last month cut its 3-year inflation outlook by the most in history as they lowered the 2011 projection to 0.3% from 1% and the 2012 estimate to 1.2% from 2.2%. These downward revisions have many economists and institutions pushing thoughts of a rate hike out even further as, according to the SNB, inflation will remain below the 2% target well into 2013. I guess we’ll see if this type of creative intervention, if you will, actually works and catches on.

Staying with Europe, we had German Chancellor Angela Merkel say at a gathering that the German economy is doing better than expected and may expand more than 3% this year. She also said governments need to work on an exit strategy from the stimulus and that Europe and the US are giving differing answers as to the timing of such an exit. In fact, she said there are good reasons to take up the exit strategy now in Europe.

I certainly like that type of charisma, but it will probably be a while until we actually see something like that happen. Going off on a tangent, I saw someone calling for the euro trading at 1.50 within the next 3 to 6 months. That seems rather aggressive, but if traders don’t like what they see with the Fed’s QE, who knows.

As I turned the screens on this morning, the currencies are pretty much in the same range as where I left them last night. The euro has managed to trade back up into 1.40 and the pound sterling (GBP) has lost about half a cent so far this morning. Other than that, not much movement overnight.

To recap… The currencies rallied on talk of a more aggressive QE campaign than anticipated so look for this type of back and forth trading until the plan is laid out in front of us. The Fed Beige Book told us everything we already know. The Nordic currencies gained on higher risk appetite, higher rates, and a higher euro. Switzerland tries another approach in an attempt to lure investors away from the franc…

Mike Meyer
for The Daily Recknoning

Unemployment and Consumer Debt: The 800 lb Gorilla in the Room 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:
Unemployment and Consumer Debt: The 800 lb Gorilla in the Room




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.

Real Estate, Uncategorized

A New ETF To Play Precious Metals

October 21st, 2010

As the appeal for precious metals continues to prevail, ETF provider, ETF Securities, announced that its newest product, the ETFS Precious Metals Basket (GLTR), will begin trading on the NYSE Arca tomorrow.

This new ETF will be the first of its kind enabling investors to gain access to physically backed gold, silver, platinum and palladium all in one security. The actual gold, silver, platinum and palladium bullion that the ETF is backed by is expected to be held by the trust, vaulted in London and Switzerland and inspected biannually by the independent metal assayer, Inspectorate International. 

Furthermore, GLTR will carry an expense ratio of 0.60% and seeks to replicate the performance of the price of Gold, Silver, Platinum and Palladium, less the Trust’s expenses. 

ETF Securities has already made its footprint in precious metal ETFs through its ETFS Physical Swiss Gold Shares (SGOL), ETFS Physical Silver Shares (SIVR), ETFS Physical Platinum Shares (PPLT) and ETFS Physical Palladium Shares (PALL), which have combined assets under management of US$2bn as of September 28th, 2010.

As for the future of GLTR, both micro and macroeconomic forces remain favorable for precious metals, giving GLTR all the right tools to attract assets and answer the prayers of investors who are in search of a one-stop-shop way to play a diversified basket of precious metals.

Disclosure: No Positions

Read more here:
A New ETF To Play Precious Metals




HERE IS YOUR FOOTER

ETF, Uncategorized

A New ETF To Play Precious Metals

October 21st, 2010

As the appeal for precious metals continues to prevail, ETF provider, ETF Securities, announced that its newest product, the ETFS Precious Metals Basket (GLTR), will begin trading on the NYSE Arca tomorrow.

This new ETF will be the first of its kind enabling investors to gain access to physically backed gold, silver, platinum and palladium all in one security. The actual gold, silver, platinum and palladium bullion that the ETF is backed by is expected to be held by the trust, vaulted in London and Switzerland and inspected biannually by the independent metal assayer, Inspectorate International. 

Furthermore, GLTR will carry an expense ratio of 0.60% and seeks to replicate the performance of the price of Gold, Silver, Platinum and Palladium, less the Trust’s expenses. 

ETF Securities has already made its footprint in precious metal ETFs through its ETFS Physical Swiss Gold Shares (SGOL), ETFS Physical Silver Shares (SIVR), ETFS Physical Platinum Shares (PPLT) and ETFS Physical Palladium Shares (PALL), which have combined assets under management of US$2bn as of September 28th, 2010.

As for the future of GLTR, both micro and macroeconomic forces remain favorable for precious metals, giving GLTR all the right tools to attract assets and answer the prayers of investors who are in search of a one-stop-shop way to play a diversified basket of precious metals.

Disclosure: No Positions

Read more here:
A New ETF To Play Precious Metals




HERE IS YOUR FOOTER

ETF, Uncategorized

Profit from Rising Food Prices with ETFs

October 21st, 2010

Ron Rowland

Here’s a question for you … and I’m pretty sure your answer is “Yes.” The question is: Do you eat?

Food is a basic necessity of life. We all need to eat. Some of us eat more than others do, of course. Sadly, some people live in places where there simply isn’t enough food to go around.

The good news is that this is starting to change. The world is going through an agricultural revolution. For ETF investors, it is a potentially huge opening. Today I will tell you how to munch your way to profits.

Three Trends in Food

Three big trends are converging to bring about a dramatic shift in what and how people eat around the world.

Water projects open up new land for farmers.
Water projects open up new land for farmers.

First, modern technology is opening up new frontiers in food production. Genetically-engineered seed, sophisticated fertilizers, and massive water projects allow farmers to harvest more from every acre … and let them produce from land that was once unusable.

Second, people in the “Emerging Market” nations of China, Brazil, India and many others are changing their diets along with their economies. Millions are finding they can afford things that used to be occasional luxuries: Meat, milk, and even sugar.

Third, Americans are changing their diets, too. Obesity is a national problem — and is hitting the pocketbook in the form of higher health care costs. We aren’t all going on the South Beach Diet. Nevertheless, our eating habits are changing, slowly but surely.

All these developments are causing massive change in the global food production industry. Smart investors know that change brings opportunity as well as risk. And now you can exploit the new trends with ETFs.

If you’ve seen my ETF Field Guide, you know that commodity-related ETFs are a growing niche. I don’t have space to tell you about all these funds, so I’m going to highlight just two of them.

MOO: An ETF You Can Taste

Modern-day agriculture is about big corporations as well as small family farms. Most of the dominant companies are publicly traded … which means you can buy into their success.

Farmers need their tractors.
Farmers need their tractors.

Agriculture crosses many sectors. Because it is food related, it usually ends up as part of the “Consumer Staples” sector. However, agriculture is so broad that some of the stocks can be found in “Materials,” “Industrials,” and even “Natural Resource” funds. Unfortunately, since these funds are usually capitalization-weighted, the agriculture allocation can be dwarfed by the big multinational energy, mining, chemical, and manufacturing companies.

If your goal is to gain exposure to the food business, you are much better off with an ETF such as Market Vectors Agribusiness (MOO). Some of the top holdings in MOO are familiar names:

  • Tractor manufacturer John Deere (DE)
  • Fertilizer maker Mosaic (MOS)
  • Agribusiness conglomerate Archer Daniels Midland (ADM)

Because MOO includes more than just U.S. stocks, it is also a great way to get a piece of some key foreign companies from this sector. You may not know much about Wilmar International or Yara, but they are big players in this sector.

Right now MOO is tearing higher. From July 1, 2010 through October 20, the shares have climbed more than 37 percent. Some of the gain is related to a falling U.S. Dollar, but the underlying trend in agriculture is also giving MOO a big boost.

One thing you need to understand about MOO: It is a stock ETF. Even though it holds only companies involved in agribusiness, it doesn’t necessarily go up and down along with food commodity prices. If that kind of investment is what you want, you should consider …

DBA: Going Straight to the Source

PowerShares DB Agriculture Fund (DBA) is based on a commodity price index that covers all the major crops: Wheat, corn, sugar, and soybeans as well as some smaller markets like live cattle, lean hogs, coffee and cocoa.

DBA lets you invest in crops.
DBA lets you invest in crops.

I like DBA because it gives you one-stop shopping. Individually, all these markets are subject to wild swings based on weather, export policies and all kinds of other factors. Bundling them together in this way gives you better exposure to the long-term trends.

DBA is also far more convenient (not to mention less risky) than assembling your own portfolio using the futures markets. You don’t have to worry about margin calls, delivery dates, and other minutiae. All that happens behind the scenes in DBA.

What if you put MOO and DBA together? Then you have the agricultural sector covered from both directions. You will participate in the movement of commodity prices as well as changes in the stock price of companies producing those commodities.

DBA has jumped almost 26 percent since its last low in early June, and still has plenty of room for growth on the upside.

MOO and DBA are both good-sized funds with plenty of liquidity on most days. Even so, you will want to use a limit order. Be prepared for plenty of volatility if you choose to buy either of these ETFs. The ride can be rough — but the rewards can be super-sized.

Best wishes,

Ron

Related posts:

  1. Profit from Booming Southeast Asia with ETFs
  2. Three ETFs for Rising Interest Rates
  3. Three ETFs for Rising Interest Rates

Read more here:
Profit from Rising Food Prices with ETFs

Commodities, ETF, Mutual Fund, Uncategorized

WisdomTree Files For Actively Managed Emerging Market Bond ETFs

October 21st, 2010

In an attempt to broaden its horizons, ETF provider WisdomTree Investments, recently filed paperwork with the Securities and Exchange Commission to provide actively managed emerging market bond ETFs.

According to the filing, the first ETF of the proposed three, would be the WisdomTree Asia Bond Fund,  which seeks to offer broad exposure to Asian government and corporate bonds.  Furthermore, the fund intends to invest in fixed income securities denominated in the local currency of countries in Asia.  Particularly, the fund is expected to focus its investments in China, Hong Kong, India, Indonesia, South Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand. 

The second ETF is expected to be the WisdomTree Latin American Bond Fund, which is designed to provide broad exposure to Latin American government and corporate bonds through numerous investments in a range of instruments with varying credit risk and duration.   Additionally, the fund intends to invest in fixed income securities denominated in the local currencies of countries in Latin America as well as provide broad-based exposure to the region’s bond markets through investing in both investment and non-investment grade securities.

The last proposed active fixed income ETF is the WisdomTree EMEA Bond Fund, which seeks to give investors exposure to fixed income in securities in Europe, the Middle East and Africa.  To be more specific, the fund expects to focus on the Czech Republic, Egypt, Hungary, Israel, Poland, Qatar, Romania, Russia, Slovakia, South Africa, Turkey, and United Arab Emirates.  The fund is expected to invest in both investment and non-investment grade securities issued by the governments in the EMEA regions as debt instruments issued by corporation in the region. 

As developed economies continue to struggle to show signs of economic growth, bolstering the appeal of emerging markets, these ETFs are likely to attract assets once they start trading. 

Disclosure: No Positions

Read more here:
WisdomTree Files For Actively Managed Emerging Market Bond ETFs




HERE IS YOUR FOOTER

ETF, Uncategorized

What is next for the Dollar, SP500 and Gold

October 21st, 2010

The equities market reversed to the upside Wednesday posting a light volume broad based rally. Remember light volume tends to have a neutral to upward bias on stocks, But it was mainly the sharp drop in the dollar which spurred stocks and commodities higher.

Today’s bounce was not much of a surprise for several reasons…
• Overall trend is up, one day sell offs are generally profit taking
• Panic selling on the NYSE tipped us off that the market was oversold
• I don’t think they will let the market fall before the November election
• Intermediate cycle is turning up this week, 3 weeks of upward momentum…

US Dollar Index – 4 Hour Chart

The dollar put in a big bounce this week filling its gap window… Remember most gaps get filled with virtually every investment vehicle so when you see them remember this chart….

SPY ETF – Daily Chart

SP500 has been riding the key moving average up and Tuesday’s sell off tagged the 14MA along with extreme market internal readings telling intraday traders that a bounce is about to take place.

Gold Futures – Daily Chart

You can see gold has done much the same… A sharp profit/stop running sell off, which took the price back down to support. We took a long position to catch this bounce and hopefully a larger move going forward.

Market Sentiment Readings

Tuesday’s pullback was a great reminder of just how over extended the equities market was. These heavy volume sell offs are typical in a bull market. Without regular pauses in price, traders tend to place trailing stops moving them up each day. With traders chasing stocks higher bidding them up instead of waiting for a pullback we get a very large number to stop orders following the price up each day. Then, it’s only a matter of time before a key short term support level is broken at which point the flood gates open and everyone’s stops turn to market orders flooding the stock exchanges with sell orders causing a rapid decline and panic selling. This is exactly what happened on Tuesday which I show in the chart below.

Understanding how to read market internals provides great insight for short term traders looking to make quick high probability trades every week… Market internals are just part of the equation but very powerful on their own with proper money/position management. Both of these intraday extremes were bought on Tuesday in the advanced chatroom (FuturesTradingSignals.com).. We quickly booked profits and moved our stops up in order to protect our capital as the market surged higher.

Mid-Week Market Trend Analysis:

In short, the US Dollar is still in a down trend overall. The Fed’s I would think will continue to hold the market up into the election. It works well for them… they print money which devalues the dollar, and in return boosts stocks and commodities, plus they get trillions of dollars to spend… I’m sure its like kids in a candy store over there.

While everyone is trying to pick a top in this over extended market I think it is crucial to stick with the overall trend and to not fight the Fed. Using the key moving averages on the daily chart as shown in the charts above, continue to buy on dips until the market closes below the 20 day moving average at which point you should abandon ship.

Get My Reports and Trade Ideas Here for Free: http://www.thegoldandoilguy.com/specialoffer/signup.html

Also Follow Me on Twitter in Real-Time: http://twitter.com/GoldAndOilGuy

Chris Vermeulen

Read more here:
What is next for the Dollar, SP500 and Gold




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

What is next for the Dollar, SP500 and Gold

October 21st, 2010

The equities market reversed to the upside Wednesday posting a light volume broad based rally. Remember light volume tends to have a neutral to upward bias on stocks, But it was mainly the sharp drop in the dollar which spurred stocks and commodities higher.

Today’s bounce was not much of a surprise for several reasons…
• Overall trend is up, one day sell offs are generally profit taking
• Panic selling on the NYSE tipped us off that the market was oversold
• I don’t think they will let the market fall before the November election
• Intermediate cycle is turning up this week, 3 weeks of upward momentum…

US Dollar Index – 4 Hour Chart

The dollar put in a big bounce this week filling its gap window… Remember most gaps get filled with virtually every investment vehicle so when you see them remember this chart….

SPY ETF – Daily Chart

SP500 has been riding the key moving average up and Tuesday’s sell off tagged the 14MA along with extreme market internal readings telling intraday traders that a bounce is about to take place.

Gold Futures – Daily Chart

You can see gold has done much the same… A sharp profit/stop running sell off, which took the price back down to support. We took a long position to catch this bounce and hopefully a larger move going forward.

Market Sentiment Readings

Tuesday’s pullback was a great reminder of just how over extended the equities market was. These heavy volume sell offs are typical in a bull market. Without regular pauses in price, traders tend to place trailing stops moving them up each day. With traders chasing stocks higher bidding them up instead of waiting for a pullback we get a very large number to stop orders following the price up each day. Then, it’s only a matter of time before a key short term support level is broken at which point the flood gates open and everyone’s stops turn to market orders flooding the stock exchanges with sell orders causing a rapid decline and panic selling. This is exactly what happened on Tuesday which I show in the chart below.

Understanding how to read market internals provides great insight for short term traders looking to make quick high probability trades every week… Market internals are just part of the equation but very powerful on their own with proper money/position management. Both of these intraday extremes were bought on Tuesday in the advanced chatroom (FuturesTradingSignals.com).. We quickly booked profits and moved our stops up in order to protect our capital as the market surged higher.

Mid-Week Market Trend Analysis:

In short, the US Dollar is still in a down trend overall. The Fed’s I would think will continue to hold the market up into the election. It works well for them… they print money which devalues the dollar, and in return boosts stocks and commodities, plus they get trillions of dollars to spend… I’m sure its like kids in a candy store over there.

While everyone is trying to pick a top in this over extended market I think it is crucial to stick with the overall trend and to not fight the Fed. Using the key moving averages on the daily chart as shown in the charts above, continue to buy on dips until the market closes below the 20 day moving average at which point you should abandon ship.

Get My Reports and Trade Ideas Here for Free: http://www.thegoldandoilguy.com/specialoffer/signup.html

Also Follow Me on Twitter in Real-Time: http://twitter.com/GoldAndOilGuy

Chris Vermeulen

Read more here:
What is next for the Dollar, SP500 and Gold




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

Why Inflation is Always a Bad Thing

October 20th, 2010

Bloomberg had the news that the Labor Department released its new report to show that “Including volatile food and energy costs, wholesale prices rose 0.4 percent” from the prior month, which is pretty bad. Included was the snippet that “The cost of food increased 1.2 percent in September from a month earlier, the most since March.” Yikes!

Energy prices increased 0.5%, which made the Mogambo Food And Fuel Index (MFAFI) jump by 1.7% in One Freaking Month (OFM)! As a guy who fears inflation with an all-consuming dread that used to border on insanity but is now waaaAAAAaaay past that arbitrary boundary because of the fiscal insanity of the despicable deficit-spending Obama administration and the treachery of the foul Federal Reserve to create enough new money to accommodate the calamitous overspending, I can actually feel myself becoming hysterical with fear!

Stunned, I slowly rise to my feet in preparation to scream my guts out in fear, as is usual for me, when I was rendered speechless by Agora Financial’s 5-Minute Forecast plopping into my email in-box, where I read that “the producer-price index was up 0.4% in September” over the month before, and, “Compared to a year earlier, wholesale prices are up 4%. In fact,” they say, “we see an unbroken string of year-over-year increases throughout 2010 ranging from 2.8-5.9%.” Gaaahhh!

If you are wondering why I screamed in terror like a sissy little girl and why I seem to have peed in my pants, it’s because of the horror of 5.9% inflation in prices!! This is horrific, as indicated by the use of two exclamation points, and which is so horrific (audience shouts out, “How horrific, Wonderful And Masterful Mogambo (WAMM)?”) that even writing about it requires at least one exclamation point, as I prove thusly!

The Eternal Ugly Truth (EUT) is that 4,500 years of history has conclusively shown that any inflation in prices is Bad News (BN), especially a sustained, years-long inflation, and anything over 3% annual inflation is always Bad, Bad News (BBN). So, 5.9% inflation in prices would be considered, continuing in this vein, Really Bad, Bad News (RBBN).

If you are NOT likewise screaming in horror and surreptitiously checking to see if you have, likewise, peed in your pants as you suspect, then I assume you are either drunk, stoned, distracted, stupid, or have remarkable bladder control, or else you know very little about the Austrian school of economics – the only true theory of economics, and which can be found, free, at mises.org – and thusly I know that you have no interest in using Mogambo’s Iron Laws Of Economics (MILOE) to intelligently invest your money in gold, silver and oil when the foul Federal Reserve is creating trillions and trillions of new dollars – Every Freaking Year (EFY)! – so that the corrupt, bankrupted federal government can borrow it and spend it, also EFY! EFY!!!!

Junior Mogambo Rangers (JMRs) are instantly on alert by the appearance of the rare “quadruple exclamation point” particularly as punctuation for an acronym, especially following the same acronym followed by a single exclamation point in the previous sentence, and they conclude that this must be some kind of Secret Mogambo Code (SMC).

And indeed it is SMC! It is a Powerful Mogambo Signal (PMS) to immediately buy as much gold, silver and oil stocks as you can, and to keep buying them for as long as you can, using every dollar you can, no matter what your family says about what a cheap, stinking, stingy, paranoid gold-bug lunatic you are, or how much they whine and complain that you need to give them more money because prices are rising and rising but you won’t give them any money because (and this is the important part) you are too busy using all the money to buy gold, silver and oil.

Putting up with the ceaseless crap of spendthrift family members is not the easy part of being a cheap stinking, stingy, paranoid gold-bug lunatic. Buying gold, silver and oil is, and that is why Junior Mogambo Rangers (JMRs) are known to exclaim in glee, “Whee! This investing stuff is easy!”

The Mogambo Guru
for The Daily Reckoning

Why Inflation is Always a Bad Thing 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:
Why Inflation is Always a Bad Thing




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

Why Inflation is Always a Bad Thing

October 20th, 2010

Bloomberg had the news that the Labor Department released its new report to show that “Including volatile food and energy costs, wholesale prices rose 0.4 percent” from the prior month, which is pretty bad. Included was the snippet that “The cost of food increased 1.2 percent in September from a month earlier, the most since March.” Yikes!

Energy prices increased 0.5%, which made the Mogambo Food And Fuel Index (MFAFI) jump by 1.7% in One Freaking Month (OFM)! As a guy who fears inflation with an all-consuming dread that used to border on insanity but is now waaaAAAAaaay past that arbitrary boundary because of the fiscal insanity of the despicable deficit-spending Obama administration and the treachery of the foul Federal Reserve to create enough new money to accommodate the calamitous overspending, I can actually feel myself becoming hysterical with fear!

Stunned, I slowly rise to my feet in preparation to scream my guts out in fear, as is usual for me, when I was rendered speechless by Agora Financial’s 5-Minute Forecast plopping into my email in-box, where I read that “the producer-price index was up 0.4% in September” over the month before, and, “Compared to a year earlier, wholesale prices are up 4%. In fact,” they say, “we see an unbroken string of year-over-year increases throughout 2010 ranging from 2.8-5.9%.” Gaaahhh!

If you are wondering why I screamed in terror like a sissy little girl and why I seem to have peed in my pants, it’s because of the horror of 5.9% inflation in prices!! This is horrific, as indicated by the use of two exclamation points, and which is so horrific (audience shouts out, “How horrific, Wonderful And Masterful Mogambo (WAMM)?”) that even writing about it requires at least one exclamation point, as I prove thusly!

The Eternal Ugly Truth (EUT) is that 4,500 years of history has conclusively shown that any inflation in prices is Bad News (BN), especially a sustained, years-long inflation, and anything over 3% annual inflation is always Bad, Bad News (BBN). So, 5.9% inflation in prices would be considered, continuing in this vein, Really Bad, Bad News (RBBN).

If you are NOT likewise screaming in horror and surreptitiously checking to see if you have, likewise, peed in your pants as you suspect, then I assume you are either drunk, stoned, distracted, stupid, or have remarkable bladder control, or else you know very little about the Austrian school of economics – the only true theory of economics, and which can be found, free, at mises.org – and thusly I know that you have no interest in using Mogambo’s Iron Laws Of Economics (MILOE) to intelligently invest your money in gold, silver and oil when the foul Federal Reserve is creating trillions and trillions of new dollars – Every Freaking Year (EFY)! – so that the corrupt, bankrupted federal government can borrow it and spend it, also EFY! EFY!!!!

Junior Mogambo Rangers (JMRs) are instantly on alert by the appearance of the rare “quadruple exclamation point” particularly as punctuation for an acronym, especially following the same acronym followed by a single exclamation point in the previous sentence, and they conclude that this must be some kind of Secret Mogambo Code (SMC).

And indeed it is SMC! It is a Powerful Mogambo Signal (PMS) to immediately buy as much gold, silver and oil stocks as you can, and to keep buying them for as long as you can, using every dollar you can, no matter what your family says about what a cheap, stinking, stingy, paranoid gold-bug lunatic you are, or how much they whine and complain that you need to give them more money because prices are rising and rising but you won’t give them any money because (and this is the important part) you are too busy using all the money to buy gold, silver and oil.

Putting up with the ceaseless crap of spendthrift family members is not the easy part of being a cheap stinking, stingy, paranoid gold-bug lunatic. Buying gold, silver and oil is, and that is why Junior Mogambo Rangers (JMRs) are known to exclaim in glee, “Whee! This investing stuff is easy!”

The Mogambo Guru
for The Daily Reckoning

Why Inflation is Always a Bad Thing 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:
Why Inflation is Always a Bad Thing




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

UK Hacks Away at Budget, Feels “Like an Amputation”

October 20th, 2010

Today, the UK took a chainsaw to its budget to the tune of roughly $120 billion. Unlike the US, the nation feels obliged to implement a few austerity measures that may lend some credibility to its AAA credit rating despite its record budget deficit. The cuts include raising the retirement age, reducing welfare benefits, and making plans to let go of nearly 500,000 government workers.

According to Reuters:

“The jury remains out on whether the economy — just recovering from the worst recession since World War Two — can survive the squeeze which will cut growth by around half a percent each year. Analysts expect the Bank of England to keep monetary policy super-loose for the foreseeable future.

“Nor is it clear whether the cuts — aimed at bringing down a record budget deficit of 11 percent of GDP — can actually be achieved. More of the burden has been shifted to the notoriously hard-to-cut welfare bill — an extra 7 billion pounds on top of the 11 billion pounds cuts already announced…

“… [Conservative finance minister George Osborne] said the state pension age for men and women will rise to 66 by 2020 and that 490,000 public sector jobs were likely to disappear over the next four years.”

In addition to the cuts mentioned above, significant budget reductions will be made in Defense, Home Office, Rural Affairs, Justice Ministry, Local Government, Business Innovation, and a slew of other areas. Even the Her Majesty the Queen has accepted a freeze on her palace cash allowance.

As BNP Paribas economist Alan Clarke suggests in the article, “The consensus forecasts imply these will feel like a paper cut — we believe reductions of this magnitude will feel more like an amputation.”

The UK is at least seriously posturing on its budget deficit… it remains to be seen if the US will follow suit. You can read more details in Reuters coverage of how the UK is slashing spending and raising its retirement age.

Best,

Rocky Vega,
The Daily Reckoning

UK Hacks Away at Budget, Feels “Like an Amputation” 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:
UK Hacks Away at Budget, Feels “Like an Amputation”




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

UK Hacks Away at Budget, Feels “Like an Amputation”

October 20th, 2010

Today, the UK took a chainsaw to its budget to the tune of roughly $120 billion. Unlike the US, the nation feels obliged to implement a few austerity measures that may lend some credibility to its AAA credit rating despite its record budget deficit. The cuts include raising the retirement age, reducing welfare benefits, and making plans to let go of nearly 500,000 government workers.

According to Reuters:

“The jury remains out on whether the economy — just recovering from the worst recession since World War Two — can survive the squeeze which will cut growth by around half a percent each year. Analysts expect the Bank of England to keep monetary policy super-loose for the foreseeable future.

“Nor is it clear whether the cuts — aimed at bringing down a record budget deficit of 11 percent of GDP — can actually be achieved. More of the burden has been shifted to the notoriously hard-to-cut welfare bill — an extra 7 billion pounds on top of the 11 billion pounds cuts already announced…

“… [Conservative finance minister George Osborne] said the state pension age for men and women will rise to 66 by 2020 and that 490,000 public sector jobs were likely to disappear over the next four years.”

In addition to the cuts mentioned above, significant budget reductions will be made in Defense, Home Office, Rural Affairs, Justice Ministry, Local Government, Business Innovation, and a slew of other areas. Even the Her Majesty the Queen has accepted a freeze on her palace cash allowance.

As BNP Paribas economist Alan Clarke suggests in the article, “The consensus forecasts imply these will feel like a paper cut — we believe reductions of this magnitude will feel more like an amputation.”

The UK is at least seriously posturing on its budget deficit… it remains to be seen if the US will follow suit. You can read more details in Reuters coverage of how the UK is slashing spending and raising its retirement age.

Best,

Rocky Vega,
The Daily Reckoning

UK Hacks Away at Budget, Feels “Like an Amputation” 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:
UK Hacks Away at Budget, Feels “Like an Amputation”




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

Hot Markets and Commodities, yet the small investor continues to miss the run!

October 20th, 2010

David Banister- www.MarketTrendForecast.com

All investors can recall the horror during the five months from October 2008 through early March of 2009 as day after day the markets continued to make new lows. That type of catastrophic drop leaves many psychological scars and probably spooked millions of investors out of the stock market for good. To wit, since the March 2009 lows and throughout this new Bull Market Cycle, Investors are pulling money out of equity funds in droves and piling into Bonds. This is the fight or flight mentality taking hold of the herd, and as they continue to disbelieve in the new bull cycle in stocks, the market continues to power higher.

I’ve long been a believer in Elliott Wave Theory, which was developed in the 1930’s by R.N. Elliott. He was a man decades ahead of his time, and to this day his work remains revolutionary in tracking and forecasting market and commodity trends and cycles. This theory forms the basis of my work for market forecasting and trading and investing. While the crowd continues to wait for the next crash, the Elliott wave patterns I’ve been outlining have continued to foretell a bullish move possibly of historic proportions. Taking advantage of this type of move means you need to tune out the noise from CNBC, all of the jobs data, and the negative mantra. Everyone knows that stocks climb a wall of worry, but you have to have a method to let you know to stay long and where best to invest during a super cycle Elliott Bull Wave pattern as we are in now.

My theory back in late February 2009 was that the market was about to bottom and nobody knew it. I wrote an article on 321Gold.com at the time to outline my reasoning and had a chart showing 1200 on the SP 500 as a likely target. At the time the SP 500 was trading around 720 and had not yet completed it’s drop to 666, but was within a few weeks. Interestingly to me anyways, at 666 the SP 500 bottomed and not randomly at all! That 666 figure was an exact 61.8% Fibonacci re-tracement of the 1974 lows to the 2000 highs Bull Cycle. Often crowds act in patterned behaviors that are formed around Fibonacci mathematics. Typical re-tracements are 38%, 50%, 61.8%, or even 78.6%. Combining Elliott Wave patterns with Fibonacci sequences allows me to confirm or help firm up a forecast. That drop over five Fibonacci months completed a multi year cycle from the 2000 highs to the 2009 lows, and it did so right at a clear Fibonacci pivot point. This is why I believe the next many years will be very bullish for stocks, and most investors will not be on board.

Those Fibonacci and Elliott Wave patterns gave me the heads up to start turning bullish, coupled with the sentiment readings which were equally as bearish as the October 2002 bottoms. In addition, there was way too much discussion about deflation. The rubber band in essence was stretched so far to one side on the sentiment gauges and deflation talk, that it would only take a slight shift towards inflation to move stocks much higher.

Fast forward to October 2010, and we now see the ravages of inflation becoming very apparent some 18 odd months later. Gold is at $1350 per ounce, Silver is at $24, the SP 500 is heading back to 1200, Corn, Sugar, Coffee, Copper are all at huge highs. What investor’s don’t understand is stocks are one of your best asset classes in the earlier periods of an inflationary shift, what I would call an inflationary period of prosperity worldwide. Elliott Wave patterns most recently that I outlined on my market forecast service alerted my subscribers to prepare for a massive bull run once the 1094 area on the SP 500 was crossed to the upside.

Given the understanding that inflation would become the new trend, we took multiple positions in Gold stocks and Rare Earth metals stocks ahead of the curve. Some of our recent picks included Hudson Resources at 63 cents in August, now trading at $1.30. Others include BORN at $8, a Chinese Corn based producer of Alcohol that ran to $19 within 7 weeks. We were investing in Rare Earth stocks almost 12 months ago, including REE at $1.80, and it’s now trading over $13.00 a share! Even up to the present time, my ATP service has been positioning our subscribers into Tasman Metals at $1.54, now $2.28 and Quest Rare minerals at $4.10 now $5.50. These moves are happening in stunningly quick periods of time, so being positioned ahead of those moves is crucial.

Gold and Gold stocks have obviously had a very strong move to the upside. Back in August of 2009 I forecasted a massive five year advance in Gold and Gold stocks. This again was entirely based on Elliott Wave patterns I recognized and crowd behavior. Investors will recall the 13 year bull market in tech stocks that started in 1986 when Microsoft went public, and ended in 1999 when AOL was sold to Time Warner for 150 billion. Well, the first five years of the Tech Bull nobody participated except the early investors. Intel and Dell also went public, along with EMC and others. By the time 1991 rolled around, investors kind of woke up and start buying. The problem was they were late, missing the first five years. At that point Tech stocks bucked and kicked up and down with no net gains for three years. Investors gave up again in 1994, and then we began a torrid 5 year rally to 1999. It was not until the last 12 months of that rally that everyone piled in, herd behavior in it’s finest form. Well, we are seeing the same patterns now in the precious metals areas of the market. The final 5 years started in August of 2009, kind of like 1994 in tech stocks. The first 5 years were 2001-2006 where Gold funds returned 30% compounded per year, by the time everyone got on board the funds did nothing for then next three years. Everyone gave up and lost interest, and that was the August 2009 buy signal.

Bringing us full circle, investors continue to shy away from this stock bull market following the five month crash of nearly two years ago. This is exactly the psychology present in an early stage bull market. Going forward from here, I look for the SP 500 to hit 1220 at the top of an Elliott Wave three from the 1040 lows in the summer. That will be followed by a correction pattern and then we will resume the advance to new highs on this bull market stretch from March of 2009. Gold should work it’s way up to $1480-1520 if I’m right on it’s bull move from the $1155 lows this June. Below we have a chart of the SP 500 on a long term basis, and it is currently in the third wave up from the 1010 lows on July 1st. This wave pattern is powerful and should run to at least 1220 intermediately. In time, this multi-year bull market could power to all-time highs and really upset the Bears.

Inflation is taking hold around the world, and stocks are one of your best asset classes to participate. You can follow along by registering for free weekly updates at www.MarketTrendForecast.com

Get Our Free Trading Ideas At Our Twitter feed: http://www.twitter.com/activetrading Some of the recent Tweets have had returns of 30% to 75% within 5-10 days just in the past 30 days or so.

Read more here:
Hot Markets and Commodities, yet the small investor continues to miss the run!




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

The Truth Behind the Chinese Rare Earths Embargo

October 20th, 2010

“It makes logical sense: Whenever you have a shortage of raw materials in the world, it historically has led to war.” So said investment biker and Vancouver veteran Jim Rogers during a recent address to the Mises Institute in Alabama.

A couple of generations ago, Japan attacked Pearl Harbor within months of a US oil embargo. Monday, China embargoed exports of rare earth elements to the United States.

Rare earths, in case you need a refresher, are a class of 17 elements used in everything from mobile phones, to hybrid car batteries, to flat-screen TVs, to guided missile systems, to wind turbines.

If it involves cutting-edge modern technology, chances are it requires rare earths.

So what’s the rub? Right now, China controls 93-97% of the world supply, depending on the source you choose to cite at your next cocktail party.

Still, the Chinese decision to stop exports to the US marks one of the strangest export bans in recent history.

When Russia banned grain exports in August, Prime Minister Vladimir Putin made the announcement himself and outed his fear that Russians would starve. But when China banned the export of rare earths to the United States, a New York Times reporter had to suss it out through “three rare earth industry officials, all of whom insisted on anonymity for fear of business retaliation by Chinese authorities.”

There’s no indication how long the embargo may last, and a fourth industry official says it appears a stray shipment or two is still being allowed to go through.

It puts officials in Washington in an odd position: “We’ve seen the news report,” says a spokeswoman for the Office of the US Trade Representative, “and are seeking more information.”

On this front, they’re bereft of their usual posturing and indignant outrage. As if they just didn’t see this one coming… Hmmmn…

When China cut off rare earth exports to Japan last month, the motive was pretty obvious: Japan captured a Chinese fishing boat in waters claimed by both countries. But what gives with the stealth embargo to the US?

Of course, there’s headline-grabbing tension between policy wonks in Washington and party apparatchiks in Beijing over the value of the renminbi (CNY)… which has, in turn, played host to a series minor trade disputes: The US government has imposed duties on Chinese tires. Chinese officials have imposed duties on US chicken. Yada, yada… Bureaucrats squabbling: what else do they fill their time with?

As we were looking under the hood, we found a motive with a little more oomph behind it.

Last Friday, the Office of the US Trade Representative announced it was launching an investigation into Chinese subsidies of green energy. The United Steelworkers have been raising a ruckus about this so, of course, given the election cycle, there’s more than one beltway resident willing to go to bat for them.

The union claims the Chinese have adopted “policies that protect and unfairly support its domestic producers of wind and solar energy products, advanced batteries and energy-efficient vehicles…as China seeks to become the dominant global supplier of these products.”

What goes into wind turbines? Rare earths. What goes into advanced batteries and energy-efficient vehicles? Rare earths.

Suddenly, it all starts to make sense. Then again, the US investigation may have simply handed Beijing a pretext for doing something it planned all along.

“China does have 97% of rare earths,” Jim Rogers explains, “and China’s booming. So China’s cutting back on the exports of rare earths, which I guess anybody would do if they were booming and they could see there was limited supply.”

“Since 2006,” explains The Economist, “China has behaved in a way that resembles OPEC, the oil-producers’ cartel, cutting exports by 5-10% a year. In July the export quota was cut by 40%. Prices have soared.” And they’ve soared at the very time demand is soaring, too: “Demand is forecast to increase by around two-thirds over the next five years.”

“If you could figure out a viable way to invest in rare earths,” Jim Rogers concludes, “you will probably make a fortune.”

So who are the winners and losers from all this? Reuters is out this morning with a handy list. The losers include the manufacturers who rely on rare earths. In the US, those are primarily makers of catalytic converters, along with the metal-alloying and ceramic-making sectors.

The winners are the miners of rare earths…and they do exist outside China’s closed system. In fact, 65% of world reserves lie outside China. They just haven’t been developed yet. The United States, Canada and Australia all have deposits that tiny mining firms are scrambling to bring into production.

Addison Wiggin
for The Daily Reckoning

The Truth Behind the Chinese Rare Earths Embargo 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.”

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The Truth Behind the Chinese Rare Earths Embargo




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

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