Gold Price Plummets as China Applies the Economic Brakes

November 15th, 2010

Gold received some roughshod treatment on Friday from traders and investors who once horded the shiny metal… And all because of rumors going that China MAY raise their interest rates to cool their economy… That’s called applying the brakes… But will it apply the brakes on global growth, or even growth in China to the degree that called for a $43 dollar slide in gold on Friday? I don’t think so! But, that’s what happened, so you go to the ropes, do the rope-a-dope, and try to get through the round, right?

So… I guess the thought that China is trying to slow down (HEY! This would not be their first rate hike, or other method to slow down their economy!), is just too much for the commodity guys. Just look at the Reuters/Jefferies CRB Index of 19 raw materials… It lost more ground on Friday that it had in any trading day in 18 months! So, is this the end of the commodity bull market? I hardly think so, folks… Haven’t we seen sell-offs in gold in the past 10 years, during its bull market run? Yes, siree Bob, we have! And didn’t they eventually become tiny items in our rear view mirror? Yes, siree Bob!

In addition, news that China’s four biggest banks have stopped extending new credit to developers for the rest of the year and the total credit available to the property sector will be cut by 20% next year also weighed on the risk assets… So, Friday was definitely a risk off day, and this morning is looking like Friday will carry over… UGH!

So… With all the commodities taking a shot to the mid-section, causing the commodities to lose their air, the commodity currencies got tarred with the same brush… So, the likes of Australia, New Zealand, South Africa, Canada, Brazil, and Norway, all were sold.

This morning, gold is off another $3.50, so the selling hasn’t stopped…

The euro (EUR) this morning is feeling the effects of a stronger dollar, and…more problems for Ireland… It now seems that Ireland is mulling around the thought of using the Euro-Fund, which was created last winter/spring to keep the Eurozone members from having to go to the IMF, and keep it all “in the family” OK.

The dollar buying ran so deep on Friday that even the Chinese renminbi (CNY) got sold. And, you should have seen the bets being taken off the currency… I’ve explained this before, but for those of you new to class… The Chinese renminbi is not a fully convertible currency, with limited liquidity, and is traded on what’s called a “Non-Deliverable Forward”, which means all trades in renminbi must be settled in dollars, and it can’t by title be delivered anywhere. The Chinese government sets the daily trading range on the renminbi based on its relationship with a basket of currencies. (No one really knows what currencies are in the basket.) So… the markets can’t dictate the “spot price “ of the renminbi like it can other currencies. The only thing the markets can play with is the “future level” of the renminbi… And this is where it becomes so costly to do business in this currency, because the markets get completely out of hand, driving the price of the renminbi higher, based on their prognostications for the renminbi.

Well… Those bets for outrageous currency appreciation were reduced last night… I really did think the markets were getting ahead of themselves here, but… They are the markets; they are never wrong!

While I’m on China… And I realize the China talk is getting long in the tooth this morning, but this is important to talk about, even The Economist thought it was important to talk about! Here’s a snippet from The Economist…. Chinese rebalancing alone wouldn’t fix US economy…

US President Barack Obama didn’t say anything untrue when he criticized China at the Group of 20 summit, but his comments open the US to a charge that it is behaving irresponsibly, according to The Economist. The US has played a major role in bringing about the economic imbalance that Obama blames on China. “The ultimate American goal should be a sturdy economy,” the magazine notes. “Chinese rebalancing, absent reforms in America to increase savings and facilitate growth in export industries, will leave the American economy short of this goal.”

OK… The data cupboard has October retail sales for us this morning. The retail sales numbers/reports lately have been good, which makes me so curious as to how…right? But, I guess, we’ll just go with it… My beautiful bride was out shopping yesterday for almost 10 hours! Christmas shopping… YIKES! The Butler Household Index will be flying off the scale next month! But for this month, I have to say that once again, I think retail sales will be good… The spending is picking up by consumers… I told you it would, 22% unemployment or not, US consumers cannot sit on money. They would rather spend it than to watch it earn 0.10% and then have to pay taxes on that measly amount! I bet when we get the Personal Income and Spending it’s going to be like old times with the spending far outpacing the income.

In New Zealand overnight, their retail spending for September was stronger than expected, moving up 1.6%… That’s a strong move, folks… and I hope the Reserve Bank of New Zealand (RBNZ) noticed! I doubt it, though. The RBNZ gave their latest assessment on the economy last night, and delivered a sober medium-term assessment for the economy, in their The RBNZ Financial Stability Report.

New Zealand has had a tough row to hoe lately, having to deal with an Earthquake, diseased kiwi-fruit vines, and they always have a central bank Governor (Bollard) who is Mr. Downbeat on the currency… But, I do expect the sun to shine on New Zealand again, as winter is now over, and spring will bring about a rate hike or two in 2011 from the RBNZ.

I’m sitting here, typing and reading stuff, and I get the feeling that somehow G-20 is going to make this sell off in commodities – and that includes food prices – into something that they take credit for… After having not done diddly-squat at their meeting! Oh well… Who cares, I guess I should say, eh?

Treasury yields continued to rise on Friday, with the 10-year at 2.83% this morning… Hmmm… Once again, this could be the beginning of the popping of the Treasury bubble, but… I doubt it, as the Fed will be buying $600 billion of Treasuries in the coming months… And these higher yields are needed to attract foreign investors… And for now, the higher yields are supporting the dollar rally.

Then there was this… I’ve been doing a lot of reading about the latest round of Quantitative Easing (QE2) by our esteemed (NOT!) central bank… I came across this and thought it played so well with my dislike for QE… Nearly a century ago, the great economist Ludwig von Mises observed that massive central bank easing is invariably a form of cowardice that attempts to avoid the need to restructure debt or correct fiscal deficits, avoiding wiser but more difficult choices by instead destroying the value of the currency.

To recap… The dollar is in favor this past week, and that continued on Friday, especially against gold, as the shiny metal sold off $43. China is rumored to be ready to hike interest rates to cool their economy, and the thought of China cooling their economy was too much for commodity traders, and the commodity currencies. Treasury yields continue to climb higher… Is this the bubble popping before our eyes? Now with the Fed ready to buy $600 billion in Treasuries in the next few months…

Chuck Butler
for The Daily Reckoning

Gold Price Plummets as China Applies the Economic Brakes 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:
Gold Price Plummets as China Applies the Economic Brakes




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

Gold Price Plummets as China Applies the Economic Brakes

November 15th, 2010

Gold received some roughshod treatment on Friday from traders and investors who once horded the shiny metal… And all because of rumors going that China MAY raise their interest rates to cool their economy… That’s called applying the brakes… But will it apply the brakes on global growth, or even growth in China to the degree that called for a $43 dollar slide in gold on Friday? I don’t think so! But, that’s what happened, so you go to the ropes, do the rope-a-dope, and try to get through the round, right?

So… I guess the thought that China is trying to slow down (HEY! This would not be their first rate hike, or other method to slow down their economy!), is just too much for the commodity guys. Just look at the Reuters/Jefferies CRB Index of 19 raw materials… It lost more ground on Friday that it had in any trading day in 18 months! So, is this the end of the commodity bull market? I hardly think so, folks… Haven’t we seen sell-offs in gold in the past 10 years, during its bull market run? Yes, siree Bob, we have! And didn’t they eventually become tiny items in our rear view mirror? Yes, siree Bob!

In addition, news that China’s four biggest banks have stopped extending new credit to developers for the rest of the year and the total credit available to the property sector will be cut by 20% next year also weighed on the risk assets… So, Friday was definitely a risk off day, and this morning is looking like Friday will carry over… UGH!

So… With all the commodities taking a shot to the mid-section, causing the commodities to lose their air, the commodity currencies got tarred with the same brush… So, the likes of Australia, New Zealand, South Africa, Canada, Brazil, and Norway, all were sold.

This morning, gold is off another $3.50, so the selling hasn’t stopped…

The euro (EUR) this morning is feeling the effects of a stronger dollar, and…more problems for Ireland… It now seems that Ireland is mulling around the thought of using the Euro-Fund, which was created last winter/spring to keep the Eurozone members from having to go to the IMF, and keep it all “in the family” OK.

The dollar buying ran so deep on Friday that even the Chinese renminbi (CNY) got sold. And, you should have seen the bets being taken off the currency… I’ve explained this before, but for those of you new to class… The Chinese renminbi is not a fully convertible currency, with limited liquidity, and is traded on what’s called a “Non-Deliverable Forward”, which means all trades in renminbi must be settled in dollars, and it can’t by title be delivered anywhere. The Chinese government sets the daily trading range on the renminbi based on its relationship with a basket of currencies. (No one really knows what currencies are in the basket.) So… the markets can’t dictate the “spot price “ of the renminbi like it can other currencies. The only thing the markets can play with is the “future level” of the renminbi… And this is where it becomes so costly to do business in this currency, because the markets get completely out of hand, driving the price of the renminbi higher, based on their prognostications for the renminbi.

Well… Those bets for outrageous currency appreciation were reduced last night… I really did think the markets were getting ahead of themselves here, but… They are the markets; they are never wrong!

While I’m on China… And I realize the China talk is getting long in the tooth this morning, but this is important to talk about, even The Economist thought it was important to talk about! Here’s a snippet from The Economist…. Chinese rebalancing alone wouldn’t fix US economy…

US President Barack Obama didn’t say anything untrue when he criticized China at the Group of 20 summit, but his comments open the US to a charge that it is behaving irresponsibly, according to The Economist. The US has played a major role in bringing about the economic imbalance that Obama blames on China. “The ultimate American goal should be a sturdy economy,” the magazine notes. “Chinese rebalancing, absent reforms in America to increase savings and facilitate growth in export industries, will leave the American economy short of this goal.”

OK… The data cupboard has October retail sales for us this morning. The retail sales numbers/reports lately have been good, which makes me so curious as to how…right? But, I guess, we’ll just go with it… My beautiful bride was out shopping yesterday for almost 10 hours! Christmas shopping… YIKES! The Butler Household Index will be flying off the scale next month! But for this month, I have to say that once again, I think retail sales will be good… The spending is picking up by consumers… I told you it would, 22% unemployment or not, US consumers cannot sit on money. They would rather spend it than to watch it earn 0.10% and then have to pay taxes on that measly amount! I bet when we get the Personal Income and Spending it’s going to be like old times with the spending far outpacing the income.

In New Zealand overnight, their retail spending for September was stronger than expected, moving up 1.6%… That’s a strong move, folks… and I hope the Reserve Bank of New Zealand (RBNZ) noticed! I doubt it, though. The RBNZ gave their latest assessment on the economy last night, and delivered a sober medium-term assessment for the economy, in their The RBNZ Financial Stability Report.

New Zealand has had a tough row to hoe lately, having to deal with an Earthquake, diseased kiwi-fruit vines, and they always have a central bank Governor (Bollard) who is Mr. Downbeat on the currency… But, I do expect the sun to shine on New Zealand again, as winter is now over, and spring will bring about a rate hike or two in 2011 from the RBNZ.

I’m sitting here, typing and reading stuff, and I get the feeling that somehow G-20 is going to make this sell off in commodities – and that includes food prices – into something that they take credit for… After having not done diddly-squat at their meeting! Oh well… Who cares, I guess I should say, eh?

Treasury yields continued to rise on Friday, with the 10-year at 2.83% this morning… Hmmm… Once again, this could be the beginning of the popping of the Treasury bubble, but… I doubt it, as the Fed will be buying $600 billion of Treasuries in the coming months… And these higher yields are needed to attract foreign investors… And for now, the higher yields are supporting the dollar rally.

Then there was this… I’ve been doing a lot of reading about the latest round of Quantitative Easing (QE2) by our esteemed (NOT!) central bank… I came across this and thought it played so well with my dislike for QE… Nearly a century ago, the great economist Ludwig von Mises observed that massive central bank easing is invariably a form of cowardice that attempts to avoid the need to restructure debt or correct fiscal deficits, avoiding wiser but more difficult choices by instead destroying the value of the currency.

To recap… The dollar is in favor this past week, and that continued on Friday, especially against gold, as the shiny metal sold off $43. China is rumored to be ready to hike interest rates to cool their economy, and the thought of China cooling their economy was too much for commodity traders, and the commodity currencies. Treasury yields continue to climb higher… Is this the bubble popping before our eyes? Now with the Fed ready to buy $600 billion in Treasuries in the next few months…

Chuck Butler
for The Daily Reckoning

Gold Price Plummets as China Applies the Economic Brakes 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:
Gold Price Plummets as China Applies the Economic Brakes




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

Fed money printing getting even wilder!

November 15th, 2010
chart Fed money printing getting even wilder!

Dear Subscriber,

Martin D. Weiss, Ph.D.

I’ve seen a lot of crazy monetary shenanigans in my lifetime — in Brazil, Japan and elsewhere.

But I’ve never seen anything quite like the explosion of out-and-out money printing we’re witnessing in the United States today.

Look. Back in 1999, Fed Chairman Alan Greenspan poured money into the economy to help soften the impact of the feared Y2K bug. Monetary experts thought he had gone wild.

Two years later — this time in response to the 9-11 terrorist attacks — Greenspan did it again. He ran the money printing presses and tried to flood the banking system with liquidity. They said he had gone wilder.

But the piles of money Greenspan printed during those two episodes are anthills in comparison to the mountains Ben Bernanke is printing today.

Below are the numbers. They’re mindboggling.

#1 — Y2K. Between October 6, 1999 and January 12, 2000, the Fed pumped in $73 billion in three months (based on the Fed’s measure of the U.S. monetary base).

#2 — 9-11. In the days immediately following the attacks through September 19, 2001, Greenspan rushed to pump $40 billion into the U.S. economy — one of the largest amounts ever recorded for such a short period.

#3 — QE1. In response to the debt crisis of 2008-2009, the Fed embarked on its first round of “quantitative easing” — buying bonds to pump more money into the economy.

As a direct result, the monetary base exploded by $1.3 trillion from September of 2008 to February of 2009.

That was nearly 18 times larger than the Y2K episode and 32 times larger than the 9-11 money pumping.

#4 — QE2. Bernanke’s Fed just announced a second round of quantitative easing (QE2) slated to be smaller than the first — $600 billion.

So based on the idea that it’s smaller, apologists for the Fed want you to believe that all is OK — that it’s nothing more than a “relatively moderate” maneuver.

Internal Sponsorship

Today is the last day for $1 million …

After today, you will have missed your chance to view The $3 Trillion Lie to use the investment intelligence we present to protect yourself … and to go for substantial profits as Fed pursues its money-printing policy.

We’d hate to see you miss out on the profit potential we’re grabbing right now as precious metals soar … as Fed money printing dooms the dollar … and as foreign stock markets continue to leave the S&P 500 in the dust.

Turn up your computer speakers and click this link to view The $3 Trillion Lie and then join me in my Million-Dollar Rapid Growth Portfolio while you still can!

That’s baloney! Pure hogwash!

Why? Because the QE1 and QE2 money printing is cumulative.

In other words …

The $600 billion of new money printing, which Bernanke just announced on November 3, is being piled on TOP of his first round of money printing.

Is this standard operating procedure for the Fed?

Heck no!

In fact, soon after the Y2K and 9-11 money printing binges, Greenspan’s Fed immediately sucked all the extra funds out of the economy: He promptly REVERSED those two money printing binges!

Bernanke has been promising something similar — the so-called “exit strategy.” But where did the exit strategy go?

My view: It probably never existed to begin with. Instead, it’s bound to go down in history as one of the greatest broken promises of all time.

Worse, it’s very possible Bernanke’s real plan was not to exit. It was to dive in even deeper, and that’s exactly what he’s doing right now — all based on the lame excuse that “inflation is too low.”

My recommendation is three-fold.

First, if you’re overloaded with contra-dollar assets like commodities and foreign currencies, consider taking some hefty profits. Reduce your exposure, and save it for the next major buying opportunity.

Second, don’t get caught in traditional, buy-and-hold strategies. The giant see-saw in the stock market since 2000 should teach you that lesson. Keep plenty of liquid cash. Stay flexible.

Third, see our latest video for additional guidance. It goes permanently offline tonight.

Good luck and God bless!

Martin

Related posts:

  1. Fed money-printing scheme triggering bond price meltdown!
  2. Silver EXPLODES 5.8%! Gold surging! Global firestorm about Fed money printing
  3. News flash: $600 billion Fed funny money! Big LIE!

Read more here:
Fed money printing getting even wilder!

Commodities, ETF, Mutual Fund, Uncategorized

Fed money printing getting even wilder!

November 15th, 2010
chart Fed money printing getting even wilder!

Dear Subscriber,

Martin D. Weiss, Ph.D.

I’ve seen a lot of crazy monetary shenanigans in my lifetime — in Brazil, Japan and elsewhere.

But I’ve never seen anything quite like the explosion of out-and-out money printing we’re witnessing in the United States today.

Look. Back in 1999, Fed Chairman Alan Greenspan poured money into the economy to help soften the impact of the feared Y2K bug. Monetary experts thought he had gone wild.

Two years later — this time in response to the 9-11 terrorist attacks — Greenspan did it again. He ran the money printing presses and tried to flood the banking system with liquidity. They said he had gone wilder.

But the piles of money Greenspan printed during those two episodes are anthills in comparison to the mountains Ben Bernanke is printing today.

Below are the numbers. They’re mindboggling.

#1 — Y2K. Between October 6, 1999 and January 12, 2000, the Fed pumped in $73 billion in three months (based on the Fed’s measure of the U.S. monetary base).

#2 — 9-11. In the days immediately following the attacks through September 19, 2001, Greenspan rushed to pump $40 billion into the U.S. economy — one of the largest amounts ever recorded for such a short period.

#3 — QE1. In response to the debt crisis of 2008-2009, the Fed embarked on its first round of “quantitative easing” — buying bonds to pump more money into the economy.

As a direct result, the monetary base exploded by $1.3 trillion from September of 2008 to February of 2009.

That was nearly 18 times larger than the Y2K episode and 32 times larger than the 9-11 money pumping.

#4 — QE2. Bernanke’s Fed just announced a second round of quantitative easing (QE2) slated to be smaller than the first — $600 billion.

So based on the idea that it’s smaller, apologists for the Fed want you to believe that all is OK — that it’s nothing more than a “relatively moderate” maneuver.

Internal Sponsorship

Today is the last day for $1 million …

After today, you will have missed your chance to view The $3 Trillion Lie to use the investment intelligence we present to protect yourself … and to go for substantial profits as Fed pursues its money-printing policy.

We’d hate to see you miss out on the profit potential we’re grabbing right now as precious metals soar … as Fed money printing dooms the dollar … and as foreign stock markets continue to leave the S&P 500 in the dust.

Turn up your computer speakers and click this link to view The $3 Trillion Lie and then join me in my Million-Dollar Rapid Growth Portfolio while you still can!

That’s baloney! Pure hogwash!

Why? Because the QE1 and QE2 money printing is cumulative.

In other words …

The $600 billion of new money printing, which Bernanke just announced on November 3, is being piled on TOP of his first round of money printing.

Is this standard operating procedure for the Fed?

Heck no!

In fact, soon after the Y2K and 9-11 money printing binges, Greenspan’s Fed immediately sucked all the extra funds out of the economy: He promptly REVERSED those two money printing binges!

Bernanke has been promising something similar — the so-called “exit strategy.” But where did the exit strategy go?

My view: It probably never existed to begin with. Instead, it’s bound to go down in history as one of the greatest broken promises of all time.

Worse, it’s very possible Bernanke’s real plan was not to exit. It was to dive in even deeper, and that’s exactly what he’s doing right now — all based on the lame excuse that “inflation is too low.”

My recommendation is three-fold.

First, if you’re overloaded with contra-dollar assets like commodities and foreign currencies, consider taking some hefty profits. Reduce your exposure, and save it for the next major buying opportunity.

Second, don’t get caught in traditional, buy-and-hold strategies. The giant see-saw in the stock market since 2000 should teach you that lesson. Keep plenty of liquid cash. Stay flexible.

Third, see our latest video for additional guidance. It goes permanently offline tonight.

Good luck and God bless!

Martin

Related posts:

  1. Fed money-printing scheme triggering bond price meltdown!
  2. Silver EXPLODES 5.8%! Gold surging! Global firestorm about Fed money printing
  3. News flash: $600 billion Fed funny money! Big LIE!

Read more here:
Fed money printing getting even wilder!

Commodities, ETF, Mutual Fund, Uncategorized

AdvisorShares’ Active ETF Assets Cross $100 Million

November 15th, 2010

On Nov 11th, AdvisorShares announced in a press release that the assets managed within its 4 actively-managed ETFs now exceed $100 million. AdvisorShares pioneered the launch of many unique strategies including long/short funds and global tactical funds that were previously accessible mainly through hedge funds with high barriers to entry for investors.

AdvisorShares’ current position marks a big leap from where it was earlier this year when the company only had one fund on the market whose asset growth had reached a plateau. The very first product that the firm launched was the Dent Tactical ETF (DENT: 20.4205 0.00%) which hit the market in September 2009 to much anticipation as the fund was managed by Harry Dent, known for “The Dent Method” which is used to forecast long-term economic trends. The fund had gathered $25 million by March 2010 but has since stopped growing with assets continuing to hover between $20-25 million. There was little of note coming from AdvisorShares after the launch of DENT for quite a while, until the Mars Hill Global Relative Value ETF (GRV: 24.7801 0.00%) and the WCM/BNY Mellon Focused Growth ADR ETF (AADR: 28.69 0.00%) were launched in July this year. Both were industry firsts with GRV being the first long/short relative value ETF while AADR was the first internationally focused actively-managed ETF. GRV in particular gained strong favour with investors as it gathered in excess of $40 million in assets in little over a month. The latest fund to be launched from AdvisorShares was the Cambria Global Tactical ETF (GTAA: 24.99 0.00%) in October, which is managed by another popular portfolio manager – Mebane Faber, the author of the book “The Ivy Portfolio”. GTAA has even left GRV in the dust, having already gathered $40 million in assets in about 2 weeks, in the process helping AdvisorShares’ total AUM exceed $100 million.

AdvisorShares has built up a reputation for bringing unconventional active strategies to investors which bear resemblance to hedge-fund style management instead of just plain-vanilla mandates. At the same time, it has also built up a reputation for bringing some very expensive products to market, with its “cheapest” Active ETF charging investors 1.25% in expenses with the most expensive at 1.56%. That is almost comparable to many active mutual funds, but from AdvisorShares’ point of view, it is charging for the unique strategies that it is providing investors access to. While it is still early years as a whole for the Active ETF space, the response that AdvisorShares’ is seeing for its more exotic long/short and tactical offerings may provide indications that investors do have an appetite for expensive products provided the strategy is unique enough.

Of course, at the end of the day, the long-term track record that the portfolio managers develop would likely end up being the biggest determinant of success for these active funds. In that regard, only one of AdvisorShares’ offerings, AADR, has been able to outperform its benchmark since inception. DENT and GRV have both underperformed their benchmarks by large margins. While not entirely fair to judge active manager on such a short time span, the managers will have to pull up their socks if the funds are to continue attracting assets.

AdvisorShares also has some more interesting products in the pipeline. The Peritus High Yield ETF (HLYD) is scheduled for launch in December and will be the first Active ETF to focus on the high yield bond market. Another is a short-only equity fund called the Active Bear ETF (HDGE). AdvisorShares is also collaborating with Strategic Investment Management (SiM) to plan two more actively-managed ETFs. That pipeline should ensure continuing activity from AdvisorShares in the next few months.

ETF, Mutual Fund

AdvisorShares’ Active ETF Assets Cross $100 Million

November 15th, 2010

On Nov 11th, AdvisorShares announced in a press release that the assets managed within its 4 actively-managed ETFs now exceed $100 million. AdvisorShares pioneered the launch of many unique strategies including long/short funds and global tactical funds that were previously accessible mainly through hedge funds with high barriers to entry for investors.

AdvisorShares’ current position marks a big leap from where it was earlier this year when the company only had one fund on the market whose asset growth had reached a plateau. The very first product that the firm launched was the Dent Tactical ETF (DENT: 20.4205 0.00%) which hit the market in September 2009 to much anticipation as the fund was managed by Harry Dent, known for “The Dent Method” which is used to forecast long-term economic trends. The fund had gathered $25 million by March 2010 but has since stopped growing with assets continuing to hover between $20-25 million. There was little of note coming from AdvisorShares after the launch of DENT for quite a while, until the Mars Hill Global Relative Value ETF (GRV: 24.7801 0.00%) and the WCM/BNY Mellon Focused Growth ADR ETF (AADR: 28.69 0.00%) were launched in July this year. Both were industry firsts with GRV being the first long/short relative value ETF while AADR was the first internationally focused actively-managed ETF. GRV in particular gained strong favour with investors as it gathered in excess of $40 million in assets in little over a month. The latest fund to be launched from AdvisorShares was the Cambria Global Tactical ETF (GTAA: 24.99 0.00%) in October, which is managed by another popular portfolio manager – Mebane Faber, the author of the book “The Ivy Portfolio”. GTAA has even left GRV in the dust, having already gathered $40 million in assets in about 2 weeks, in the process helping AdvisorShares’ total AUM exceed $100 million.

AdvisorShares has built up a reputation for bringing unconventional active strategies to investors which bear resemblance to hedge-fund style management instead of just plain-vanilla mandates. At the same time, it has also built up a reputation for bringing some very expensive products to market, with its “cheapest” Active ETF charging investors 1.25% in expenses with the most expensive at 1.56%. That is almost comparable to many active mutual funds, but from AdvisorShares’ point of view, it is charging for the unique strategies that it is providing investors access to. While it is still early years as a whole for the Active ETF space, the response that AdvisorShares’ is seeing for its more exotic long/short and tactical offerings may provide indications that investors do have an appetite for expensive products provided the strategy is unique enough.

Of course, at the end of the day, the long-term track record that the portfolio managers develop would likely end up being the biggest determinant of success for these active funds. In that regard, only one of AdvisorShares’ offerings, AADR, has been able to outperform its benchmark since inception. DENT and GRV have both underperformed their benchmarks by large margins. While not entirely fair to judge active manager on such a short time span, the managers will have to pull up their socks if the funds are to continue attracting assets.

AdvisorShares also has some more interesting products in the pipeline. The Peritus High Yield ETF (HLYD) is scheduled for launch in December and will be the first Active ETF to focus on the high yield bond market. Another is a short-only equity fund called the Active Bear ETF (HDGE). AdvisorShares is also collaborating with Strategic Investment Management (SiM) to plan two more actively-managed ETFs. That pipeline should ensure continuing activity from AdvisorShares in the next few months.

ETF, Mutual Fund

Chart of the Week: Uptick in the Jobs Picture

November 15th, 2010

Lost in all of the attention paid to Ireland, China, Cisco (CSCO) and the week’s other headline grabbers was some signs of progress on the jobs front, specifically in the area of the weekly jobless claims data.

This week’s chart of the week shows initial and continuing jobless claims since 2000 as a percentage of total covered employment in order to adjust for the changing size of the workforce. Note that while initial claims (solid red line) peaked first in March 2009, they have been in a holding period for the last year or so. Continuing claims (dotted blue line) peaked three months later and initially showed a sharper decline. While continuing claims began to form a plateau earlier in the year, the last month or so has seen noticeable improvement, with the trend line now dropping below the gray rectangle which marks the recent consolidation area.

This improvement could be a precursor to some downward movement in the unemployment rate, which may show up as early as in this month’s data.

Related posts:

[source: Bureau of Labor Statistics]
Disclosure(s): none



Read more here:
Chart of the Week: Uptick in the Jobs Picture

Uncategorized

Chart of the Week: Uptick in the Jobs Picture

November 15th, 2010

Lost in all of the attention paid to Ireland, China, Cisco (CSCO) and the week’s other headline grabbers was some signs of progress on the jobs front, specifically in the area of the weekly jobless claims data.

This week’s chart of the week shows initial and continuing jobless claims since 2000 as a percentage of total covered employment in order to adjust for the changing size of the workforce. Note that while initial claims (solid red line) peaked first in March 2009, they have been in a holding period for the last year or so. Continuing claims (dotted blue line) peaked three months later and initially showed a sharper decline. While continuing claims began to form a plateau earlier in the year, the last month or so has seen noticeable improvement, with the trend line now dropping below the gray rectangle which marks the recent consolidation area.

This improvement could be a precursor to some downward movement in the unemployment rate, which may show up as early as in this month’s data.

Related posts:

[source: Bureau of Labor Statistics]
Disclosure(s): none



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Chart of the Week: Uptick in the Jobs Picture

Uncategorized

Dollar Continues to Control Gold, Oil & Equities

November 15th, 2010

Over the past few months it seems as though everything has been tied to the dollar. Simple inter-market analysis makes it obvious that almost everything in the financial market eventually has an affect on stocks and commodities in some way. But recently trading has really been all about the dollar. If you watch the SP500 and gold prices you will notice at times virtually every tick the dollar makes directly affects the price and direction of gold and the SP500 index.

Let’s take a look at some charts to see the underlying trends and what they are telling us…

Dollar Index – Daily Chart

As you can see the trend is clearly down. Currently the dollar is trying to find a bottom as it bounces and pierces the previous high. The question everyone wants to know is if the dollar is about to rally and reverse trends or was Friday’s pierce of the October high just a shake out before the next leg down?

Back in late August the dollar pierced the July high on an intraday basis (shake out) just before prices dropped sharply. I think this could very easily happen again but when you see what gold volume is doing, it’s a different story.

Those who follow me closely know I focus on trading with the underlying trend, but manage my risk by trading smaller position sizes when the market has more uncertainty than normal with is what we are currently experiencing.

GLD – Gold Fund – Daily Chart

Gold and the dollar are almost inverse charts when comparing the two. Gold happens to be testing a key support level and its going to be interesting to see how the price holds up going forward. The one thing that has me concerned is the amount of selling taking place. The chart shows heavy volume selling and could be warning us of a possible trend change in the dollar, gold, oil and equities in the coming weeks.

Again the trend for gold is still up, so I would not be trying to short it at this time, rather look to buy into dips until the market trend proves us wrong. That being said, with the selling volume giving off a negative vibe and the fact that gold has rallied for such a long time, any new positions should be very small…

Crude Oil – Daily Chart

Oil looks to be forming a possible cup and handle pattern. If the Dollar continues to consolidate for another 1-3 weeks and breaks down, then we should see the price of oil trade in the range shown on the chart and eventually breakout to the upside. I have a $95-100 price target on oil if the dollar continues to trend down. Until we see some type of handle form here I am not trading oil.

SPY – SP500 Fund – Daily Chart

The equities market looks to have had one of those days which spooked the herd. Friday the price dropped triggering protective stops with rising volume. I was watching the intraday chart as the SP500 broke below the weeks low, and this triggered protective stops which can be seen on the 1 minute charts. In an uptrend I prefer watching stops get triggered because it means traders are getting taking out of long positions and most likely looking to play the short side. When the masses become bearish on the market, that’s when I start looking to play the upside in a bull market (buy the dip).

The chart below clearly shows the days when the shake outs/running of the stops took place. Most traders were exiting their positions and/or going short because the chart looked bearish. One thing I find that helps my trading is that if the chart looks rally scary (bearish) then I start looking at a shorter term time frame for a possible entry point to go long using price and volume analysis.

Weekend Market Trend Trading Conclusion:

In short, I feel the market is at a critical point which will trigger a very strong movement in the coming days or weeks. Because the dollar, gold, oil and the equities market have had such big moves I think trading VERY DEFENSIVE is the only way to play right now. That means trading small position sizes. Right now I am trading 1/8 – 1/4 the amount of capital I generally use on a trade. Meaning if I typically put $40,000 to work, right now I am only taking positions valued at $10,000.

Remember not to anticipate trend reversals by taking a position early. Continue to trade with the underlying trend with small positions or skip a couple setups if you feel strongly of a possible reversal. Once the trend reverses and the volume confirms, only then should you be playing the new trend. Picking tops can be expensive and stressful.

Get My Daily Pre-Market Trading Analysis Videos, Intraday Updates & Trade Alerts Here: www.GoldAndOilGuy.com

Chris Vermeulen

Read more here:
Dollar Continues to Control Gold, Oil & Equities




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

Dollar Continues to Control Gold, Oil & Equities

November 15th, 2010

Over the past few months it seems as though everything has been tied to the dollar. Simple inter-market analysis makes it obvious that almost everything in the financial market eventually has an affect on stocks and commodities in some way. But recently trading has really been all about the dollar. If you watch the SP500 and gold prices you will notice at times virtually every tick the dollar makes directly affects the price and direction of gold and the SP500 index.

Let’s take a look at some charts to see the underlying trends and what they are telling us…

Dollar Index – Daily Chart

As you can see the trend is clearly down. Currently the dollar is trying to find a bottom as it bounces and pierces the previous high. The question everyone wants to know is if the dollar is about to rally and reverse trends or was Friday’s pierce of the October high just a shake out before the next leg down?

Back in late August the dollar pierced the July high on an intraday basis (shake out) just before prices dropped sharply. I think this could very easily happen again but when you see what gold volume is doing, it’s a different story.

Those who follow me closely know I focus on trading with the underlying trend, but manage my risk by trading smaller position sizes when the market has more uncertainty than normal with is what we are currently experiencing.

GLD – Gold Fund – Daily Chart

Gold and the dollar are almost inverse charts when comparing the two. Gold happens to be testing a key support level and its going to be interesting to see how the price holds up going forward. The one thing that has me concerned is the amount of selling taking place. The chart shows heavy volume selling and could be warning us of a possible trend change in the dollar, gold, oil and equities in the coming weeks.

Again the trend for gold is still up, so I would not be trying to short it at this time, rather look to buy into dips until the market trend proves us wrong. That being said, with the selling volume giving off a negative vibe and the fact that gold has rallied for such a long time, any new positions should be very small…

Crude Oil – Daily Chart

Oil looks to be forming a possible cup and handle pattern. If the Dollar continues to consolidate for another 1-3 weeks and breaks down, then we should see the price of oil trade in the range shown on the chart and eventually breakout to the upside. I have a $95-100 price target on oil if the dollar continues to trend down. Until we see some type of handle form here I am not trading oil.

SPY – SP500 Fund – Daily Chart

The equities market looks to have had one of those days which spooked the herd. Friday the price dropped triggering protective stops with rising volume. I was watching the intraday chart as the SP500 broke below the weeks low, and this triggered protective stops which can be seen on the 1 minute charts. In an uptrend I prefer watching stops get triggered because it means traders are getting taking out of long positions and most likely looking to play the short side. When the masses become bearish on the market, that’s when I start looking to play the upside in a bull market (buy the dip).

The chart below clearly shows the days when the shake outs/running of the stops took place. Most traders were exiting their positions and/or going short because the chart looked bearish. One thing I find that helps my trading is that if the chart looks rally scary (bearish) then I start looking at a shorter term time frame for a possible entry point to go long using price and volume analysis.

Weekend Market Trend Trading Conclusion:

In short, I feel the market is at a critical point which will trigger a very strong movement in the coming days or weeks. Because the dollar, gold, oil and the equities market have had such big moves I think trading VERY DEFENSIVE is the only way to play right now. That means trading small position sizes. Right now I am trading 1/8 – 1/4 the amount of capital I generally use on a trade. Meaning if I typically put $40,000 to work, right now I am only taking positions valued at $10,000.

Remember not to anticipate trend reversals by taking a position early. Continue to trade with the underlying trend with small positions or skip a couple setups if you feel strongly of a possible reversal. Once the trend reverses and the volume confirms, only then should you be playing the new trend. Picking tops can be expensive and stressful.

Get My Daily Pre-Market Trading Analysis Videos, Intraday Updates & Trade Alerts Here: www.GoldAndOilGuy.com

Chris Vermeulen

Read more here:
Dollar Continues to Control Gold, Oil & Equities




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

Top ETF Gainers of the Week to Watch

November 15th, 2010

In a down week for indices world-wide, the top ETF gainers for the period were primarily short ETFs, with some strength in the energy sector evident.  Oddly enough, following the widely anticipated QE2 announcement, Treasuries have been selling off, presumably because markets had widely anticipated the announcement and were perhaps hoping for something more substantial on the order of another full Trillion dollars in purchases.

Those who foresaw the government debt reversal and shorted Treasury ETFs had a good week.  Meantime, gold and silver had wild swings, with silver’s move initially precipitated by margin requirement surprise announcements, but further bolstered by US Dollar strength in what appears to be the next Euro crisis – Ireland.

Elsewhere, Obama’s trip abroad failed to yield a free trade agreement with South Korea, there was much criticism from abroad on the US QE2 initiative, there were some really shocking cuts recommended from the US deficit panel, and the tech bellwether Cisco (CSCO) saw its shares hammered in an earnings call in which its outlook was less than hopeful.  With these events, we saw the following top performing ETFs in both the non-leveraged and leveraged segments:

Non-Leveraged ETFs

GAZ – Barclays iPath Natural Gas ETN – Up 11% – Energy has been a hot story of late, even with other commodities taking a breather this week.  This natural gas ETN (exchange traded note) has been moving quickly, but note that ETNs can trade at a premium to the net asset value of their underlying assets, and GAZ is showing a premium of over 20%.  A reversion to the mean alone would surprise investors.  GAZ is actually down 38% YTD.

VXX – iPath S&P 500 VIX Short Term Futures ETN -Up 7% – This ETN trades on the VIX, otherwise known as the fear index.  In any down week, one could anticipate VXX will show a positive return.  This often makes for a good long trade when markets are collapsing and volatility is spiking, but as a long-term investment, VXX isn’t really suitable for most portfolios.  Volatility is not an asset class and can’t reasonably be assumed to appreciate indefinitely.  YTD, VXX is down over 65%.

XOP – S&P Oil and Gas Exploration – Up 3% - This ETF was up on both stronger oil prices (aside from Friday) and M&A activity in the sector, including Chevron (CVX) and Atlas (ATLS). With multinationals flush with cash, investors are certainly speculating on more such activity.  XOP is up 16% on the year.

Leveraged ETFs:

DRV - Direxion Real Estate Bear 3X – Up 15% – Real estate outfits took it on the chin last week in the face of more downward home price data in many metro markets and no signs of life in the economy at large.  With more on leveraged ETF performance below, note that DRV has lost 2/3 its value just YTD.

EDZ - Direxion Emerging Markets Bear 3X – Up 13% – With emerging markets tending to be more volatile than western markets, many countries in the emerging markets sectors showed huge losses on the week on the heels of China trying to cool things down with further rate increases and global jitters over the latest Greece in the EU – Ireland.  Given the strength we’ve seen overall for emerging markets on the year, the 3X inverse EDZ is down over 50% YTD.

ERX – Direxion Energy Daily 3X – Up 4% – One of the sole long ETF sectors on the week, ERX gained on the heels of oil and natural gas continuing to rise, driving exploration and refiners higher.  As mentioned above, with some M&A activity in the sector, speculation on other deals drove shares of many firms higher as well, in spite of a drop in oil prices on Friday.

* I always highlight that leveraged ETFs are undesirable as  long-term investment due to the decay in value that occurs over time from daily resets.  This is a mathematical certainty that investors often don’t research or understand up front, check out real-life example leverage ETF decay examples showing why they continuously reverse split for more.

Disclosure: No positions in any ETFs for equities referenced in article.

Commodities, ETF, Real Estate

Top ETF Gainers of the Week to Watch

November 15th, 2010

In a down week for indices world-wide, the top ETF gainers for the period were primarily short ETFs, with some strength in the energy sector evident.  Oddly enough, following the widely anticipated QE2 announcement, Treasuries have been selling off, presumably because markets had widely anticipated the announcement and were perhaps hoping for something more substantial on the order of another full Trillion dollars in purchases.

Those who foresaw the government debt reversal and shorted Treasury ETFs had a good week.  Meantime, gold and silver had wild swings, with silver’s move initially precipitated by margin requirement surprise announcements, but further bolstered by US Dollar strength in what appears to be the next Euro crisis – Ireland.

Elsewhere, Obama’s trip abroad failed to yield a free trade agreement with South Korea, there was much criticism from abroad on the US QE2 initiative, there were some really shocking cuts recommended from the US deficit panel, and the tech bellwether Cisco (CSCO) saw its shares hammered in an earnings call in which its outlook was less than hopeful.  With these events, we saw the following top performing ETFs in both the non-leveraged and leveraged segments:

Non-Leveraged ETFs

GAZ – Barclays iPath Natural Gas ETN – Up 11% – Energy has been a hot story of late, even with other commodities taking a breather this week.  This natural gas ETN (exchange traded note) has been moving quickly, but note that ETNs can trade at a premium to the net asset value of their underlying assets, and GAZ is showing a premium of over 20%.  A reversion to the mean alone would surprise investors.  GAZ is actually down 38% YTD.

VXX – iPath S&P 500 VIX Short Term Futures ETN -Up 7% – This ETN trades on the VIX, otherwise known as the fear index.  In any down week, one could anticipate VXX will show a positive return.  This often makes for a good long trade when markets are collapsing and volatility is spiking, but as a long-term investment, VXX isn’t really suitable for most portfolios.  Volatility is not an asset class and can’t reasonably be assumed to appreciate indefinitely.  YTD, VXX is down over 65%.

XOP – S&P Oil and Gas Exploration – Up 3% - This ETF was up on both stronger oil prices (aside from Friday) and M&A activity in the sector, including Chevron (CVX) and Atlas (ATLS). With multinationals flush with cash, investors are certainly speculating on more such activity.  XOP is up 16% on the year.

Leveraged ETFs:

DRV - Direxion Real Estate Bear 3X – Up 15% – Real estate outfits took it on the chin last week in the face of more downward home price data in many metro markets and no signs of life in the economy at large.  With more on leveraged ETF performance below, note that DRV has lost 2/3 its value just YTD.

EDZ - Direxion Emerging Markets Bear 3X – Up 13% – With emerging markets tending to be more volatile than western markets, many countries in the emerging markets sectors showed huge losses on the week on the heels of China trying to cool things down with further rate increases and global jitters over the latest Greece in the EU – Ireland.  Given the strength we’ve seen overall for emerging markets on the year, the 3X inverse EDZ is down over 50% YTD.

ERX – Direxion Energy Daily 3X – Up 4% – One of the sole long ETF sectors on the week, ERX gained on the heels of oil and natural gas continuing to rise, driving exploration and refiners higher.  As mentioned above, with some M&A activity in the sector, speculation on other deals drove shares of many firms higher as well, in spite of a drop in oil prices on Friday.

* I always highlight that leveraged ETFs are undesirable as  long-term investment due to the decay in value that occurs over time from daily resets.  This is a mathematical certainty that investors often don’t research or understand up front, check out real-life example leverage ETF decay examples showing why they continuously reverse split for more.

Disclosure: No positions in any ETFs for equities referenced in article.

Commodities, ETF, Real Estate

Quick Sector Rotation Insights from the September Low

November 14th, 2010

The S&P 500 bottomed (recent swing low) at the 1,040 level at the end of August/start of September and has rallied almost non-stop to the 1,230 area.

Two quick questions come to mind – how have the individual sectors performed, and what does this say about the broader market?

Let’s take a look:

When doing any sort of Sector Comparison, it’s best to start with a grouping of sectors into two categories – the OFFENSIVE (or aggressive) sectors and the DEFENSIVE sectors.

I always make that distinction when I do Sector Rotation updates.

Offensive Sectors – as shown through AMEX Sector SPDRs – include Financials, Consumer Discretionary, Technology, Industrials, and Materials.

As you can see from the grid above (via StockCharts), the Offensive Sectors have in some case almost doubled the percentage gains of the Defensive Sectors (Consumer Staples, Health Care, and Utilities).

That’s what you’d expect, and it suggests bullish strength for the broader market – as in, according to the model, this is what you would expect to see from a broad Bullish Expansion phase.

Of course, there is one little outlier and it’s the Energy (XLE) sector, which is up 23% from the late September lows (to present).

According to the Sector Rotation Model, when energy is the best performer, it’s usually a danger or caution sign, as energy prices start to ‘overheat’ in the midst of a broad expansion which serves almost as a tax on consumers and businesses.

It’s something to keep an eye on, but for the moment – or at least looking at the early September to mid-November rally – the Model is showing bullish confirming strength.

It suggests that – as long as the rally continues – investors would look to be positioned in the Offensive Sectors, though what happens at the key resistance at 1,230 is key.

A firm break above 1,230 is a call for repositioning bullishly (according to the model), given that price could stall at the key 1,230 level.  It’s an example of how to combine index expectations and key levels with the Sector Rotation Model (which gives a broader look at the S&P 500 Index).

Keep a watch on Energy and the Offensive Sectors – and leading stocks in those sectors – until proven otherwise.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

Read more here:
Quick Sector Rotation Insights from the September Low

Uncategorized

Quick Sector Rotation Insights from the September Low

November 14th, 2010

The S&P 500 bottomed (recent swing low) at the 1,040 level at the end of August/start of September and has rallied almost non-stop to the 1,230 area.

Two quick questions come to mind – how have the individual sectors performed, and what does this say about the broader market?

Let’s take a look:

When doing any sort of Sector Comparison, it’s best to start with a grouping of sectors into two categories – the OFFENSIVE (or aggressive) sectors and the DEFENSIVE sectors.

I always make that distinction when I do Sector Rotation updates.

Offensive Sectors – as shown through AMEX Sector SPDRs – include Financials, Consumer Discretionary, Technology, Industrials, and Materials.

As you can see from the grid above (via StockCharts), the Offensive Sectors have in some case almost doubled the percentage gains of the Defensive Sectors (Consumer Staples, Health Care, and Utilities).

That’s what you’d expect, and it suggests bullish strength for the broader market – as in, according to the model, this is what you would expect to see from a broad Bullish Expansion phase.

Of course, there is one little outlier and it’s the Energy (XLE) sector, which is up 23% from the late September lows (to present).

According to the Sector Rotation Model, when energy is the best performer, it’s usually a danger or caution sign, as energy prices start to ‘overheat’ in the midst of a broad expansion which serves almost as a tax on consumers and businesses.

It’s something to keep an eye on, but for the moment – or at least looking at the early September to mid-November rally – the Model is showing bullish confirming strength.

It suggests that – as long as the rally continues – investors would look to be positioned in the Offensive Sectors, though what happens at the key resistance at 1,230 is key.

A firm break above 1,230 is a call for repositioning bullishly (according to the model), given that price could stall at the key 1,230 level.  It’s an example of how to combine index expectations and key levels with the Sector Rotation Model (which gives a broader look at the S&P 500 Index).

Keep a watch on Energy and the Offensive Sectors – and leading stocks in those sectors – until proven otherwise.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

Read more here:
Quick Sector Rotation Insights from the September Low

Uncategorized

Dazzling Bargains in Commodities

November 14th, 2010

Sean Brodrick

Tomorrow is your last day for Weiss Research’s extremely timely online presentation by Martin Weiss and Monty Agarwal and ALSO the day they’re closing enrollment in the service that tracks Martin’s $1 million portfolio. (Click here to view now.)

Missing it would be unfortunate because one of the three major asset classes where they’re investing Martin’s money is the same area where I see the most dazzling bargains — in commodities.

Let me ask you this: Is gold a bargain at $1,400 an ounce? Is crude oil a screaming deal at $85 a barrel?

Absolutely!

In fact, I think the prices of many commodities such as gold, crude oil, wheat, soybeans, copper and silver will continue to climb over the next year … and will be much higher just 18 months from now.

Today, I’ll tell you why that is. And why, even if you’re only starting to invest in commodities right now, you could make a heck of a lot of money going forward.

After All, A New Commodities Supercycle Is Here!

There are distinct cycles in the commodity markets, and the last big bull market started a decade ago with gold.

But don’t worry, you haven’t missed the boat. Commodity bull markets typically last 18 to 21 years!

Moreover, I don’t think this is an average commodity bull market. I think it’s a “commodity supercycle” — a much longer period in which commodity prices absolutely soar.

This is a rare and powerful event, indeed. In fact, there have been only two supercycles in the last 150 years:

  • Commodities Supercycle #1 saw the Industrial Revolution create powerful and sustainable demand for raw materials for 33 years between 1885 and 1918.
  • Commodities Supercycle #2 started after World War II and ran for 29 years between 1946 and 1975 as the reconstruction of Europe and Japan helped set off a global commodity price explosion.

So what’s fueling Commodities Supercycle #3?

Ravenous demand from emerging markets around the world for copper, aluminum, steel, coal and more is ramping up. China, Russia, the Middle East, India, Brazil and others are devouring raw materials as they build up their economies.

In fact, Merrill Lynch forecasts that more than $6 trillion will be spent on infrastructure improvements over the next three years — with 80 percent being invested in the BRIC countries (Brazil, Russia, India, China).

South Africa will spend $115 billion; Mexico, $140 billion; Brazil, $517 billion. In Russia and the Middle East, expect $500 billion and $586 billion, respectively. China, meanwhile, will spend more than all of the others combined — $3.8 trillion — mostly on water, environment, transportation and energy.

Plus, there are two more forces at work here:

Force #1: A flood of money from central banks desperate to keep their tottering economies afloat is lifting the boats of all hard assets.

Why?

Because while printing presses can manufacture money, they can’t create more hard assets. That’s why we call gold, silver, oil and other commodities “real wealth.”

Force #2: The easy-to-access deposits of many basic commodities have already been discovered and used up.

Yes, we can find more oil, for example. But to get it out of the ground, we have to come up with new, cutting-edge technologies — such as in the Bakken oil shale or such as drilling offshore wells as deep as Mt. Everest is high.

So we can find more resources, but it’s not cheap. And the further and further we have to stretch to get new deposits, the higher and higher the costs — and prices we’ll pay.

You can see why a new commodities supercycle is here.

And while prices have already doubled, there’s no reason they can’t triple or quadruple!

Keep in mind that the last two supercycles pushed commodity prices higher for an average of 31 years.

Increasing Demand from Overseas Consumers
Will Only Stoke the Supercycle Fires Further …

Only a generation ago, most people in China were riding bicycles. Now, China is the biggest auto market in the world. And the Chinese are hopping into their cars to go buy air conditioners, refrigerators and Western food.

They want to eat, drive and live like Americans. In fact, everybody does!

Asia boasts fully HALF of the world’s population. And they are all traveling on a similar path — from austerity and rice bowls to prosperity and all-you-can eat buffets.

The restaurants are air-conditioned, and the consumer electronics are state-of-the-art. To me, that means their road to the future is paved with steel and aluminum, oil and coal, silver and copper.

Not long ago, some scientists figured out that if everyone in the world wanted to live like Americans, we’d need to find three more Earths to supply all the raw materials. That means commodity prices are headed higher, higher and HIGHER!

Just take a look at what’s happening in individual commodities markets right now …

Silver: As of Thursday, November 4, the U.S. Mint had sold more American Silver Eagle bullion coins in 2010 than in any other year of the coin’s history. October sales combined with the 255,000 already sold in November lifted 2010 Silver Eagle bullion coin sales to 28,885,500.

What’s more, every pullback in silver brings in new buying. On Wednesday, when silver dropped $2 an ounce, sales of Eagles soared to 675,000 on a single day.

My new target for silver: $50 an ounce!

Gold: Gold eagle sales are soaring as well, and worries over European sovereign debt are keeping the fires lit under the yellow metal. Demand for gold is rising among investors large and small, as well as central banks.

I now expect gold to go to $2,500 an ounce.

Copper: The red metal just hit a new record high because copper exports from Chile are under pressure, even as demand for copper in China ramps up enormously.

Result: The industrial metal, which is used in plumbing, heating, electrical and telecommunications wiring, has rocketed by around 50 percent since June to a new peak.

Oil: Global demand is rising, U.S. supplies are falling as our economy improves, and Chinese demand is insatiable. Is that bullish for oil prices? Heck, yeah!

In fact, I think crude oil is going to $105 a barrel in the next six months!

And agricultural commodities like soybeans and cotton are exploding higher, too!

Look, the math of the commodity bull market is simple:

You add the massive new demand in Asia with rapidly dwindling supplies, then multiply it by the rapidly growing amount of paper money in the world.

What you’re left with is the potential for this supercycle to drive prices to all-time highs … then, to all-time inflation-adjusted highs … and ultimately, beyond.

What’s important here is that big bull markets like this one usually don’t provide “perfect” entry points. Those who are waiting for the “ideal” place to enter the commodity supercycle may have a long and frustrating wait..

You can sit on your hands and watch the parade of profits pass you by. Or you can join in. The choice is yours.

Reminder: If you want to learn how veteran hedge fund manager Monty Agarwal is investing $1,000,000 of Martin’s money, tomorrow is your last day to view their special presentation. After tomorrow (Monday 11/15), not only will you miss this extremely valuable information, it will be impossible for you to join them. Click on this link.

Yours for trading profits,

Sean

Related posts:

  1. Nine Beaten-Down ETF Bargains
  2. Give Thanks for Dividend Bargains
  3. Gold up $41! Commodities, currencies exploding higher!

Read more here:
Dazzling Bargains in Commodities

Commodities, ETF, Mutual Fund, Uncategorized

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