When Gold Goes Up

September 24th, 2010

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

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

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

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

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

Watch out, dear reader, watch out.

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

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

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

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

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

And again in 2002. And 2003. And 2004.

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

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

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

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

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

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

Is there anything that can stop gold from going up?

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

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

So gold is a “can’t lose” investment.

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

Bill Bonner
for The Daily Reckoning

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

Read more here:
When Gold Goes Up




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

Commodities, Uncategorized

The Legend of Alan GreedScam

September 24th, 2010

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

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

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

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

The full infographic follows…

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

Read more here:
The Legend of Alan GreedScam




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

Uncategorized

The Legend of Alan GreedScam

September 24th, 2010

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

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

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

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

The full infographic follows…

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

Read more here:
The Legend of Alan GreedScam




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

Uncategorized

The Hartford Enters Active ETF Arena

September 24th, 2010

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

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

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

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

ETF, Mutual Fund, OPTIONS

The Hartford Enters Active ETF Arena

September 24th, 2010

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

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

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

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

ETF, Mutual Fund, OPTIONS

Silver Nears 30-Year High

September 24th, 2010

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Then there was this… From The Washington Post

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

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

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

Chuck Butler
for The Daily Reckoning

Silver Nears 30-Year High originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Silver Nears 30-Year High




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

Uncategorized

Silver Nears 30-Year High

September 24th, 2010

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Then there was this… From The Washington Post

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

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

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

Chuck Butler
for The Daily Reckoning

Silver Nears 30-Year High originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Silver Nears 30-Year High




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

Uncategorized

On Abnormal Returns TV with Tadas Viskanta

September 24th, 2010


Just a quick note to let readers know that yesterday I spent a half hour talking with Tadas Viskanta of Abnormal Returns on Abnormal Returns TV.

We discuss a wide variety of topics, with an emphasis on the VIX, VIX futures, VXX, contango, futures-based ETFs, and related subjects. We also talk a little bit about the ideas behind my last three posts on the blog:

  1. Diversification, Momentum and Sidestepping the 2008 Panic
  2. VIX and Historical Volatility Settling Back in to Normal Range
  3. The Education of a Trader

Thanks to Tadas for the opportunity to experiment with a new media platform. Going forward, I expect to be showing up in other corners of the internet not just in print, but also in an audio and/or video format as well.

Related posts:

Disclosure(s): neutral position in VIX via options



Read more here:
On Abnormal Returns TV with Tadas Viskanta

ETF, OPTIONS, Uncategorized

The All Important Level to Watch on the US Dollar Index

September 24th, 2010

It seems as though the Federal Reserve once again is taking aim squarely at the US Dollar Index with talk of ‘likely’ (or possible) injections of liquidity into the economy in the form of a second major Quantitative Easing plan should the economy falter.

While QE may indeed help stocks and the general economy – should it come to that – the major casualty of a new round of easy monetary policy will likely be the US Dollar – weakened by the injection of liquidity.

That being said, let’s take a quick look at the critically important weekly technical (chart) level to watch in the US Dollar Index, as it reflects confluence support.  Any further breakdown under this support would trigger a major chart sell signal.

Let’s see it on the Weekly Frame:

From a chart perspective, the level to watch is abundantly clear.  It’s roughly the $80.00 index level as seen above.

First, “Round Numbers” often provide their own support or resistance, and serve as a pure price level to watch.

Second, the 200 week Simple Moving Average rests currently at $80.04 – it’s a level that has been important in the past, halting the earlier decline in August.

Finally, the 61.8% Fibonacci Retracement as drawn (from the November 2009 low to the 2010 high) rests at $79.75.

These three chart levels align at the $80 level to form an important confluence support… and thus turning point in the market.

Should the Dollar continue its decline through this confluence support, then that would set-up a potential longer-term target for a move back down to the $74 level seen in late 2009.

Should the Federal Reserve actually go through with its plan to “help the economy in any way possible,” then we can anticipate a move that could take us down to that level.

What seems to be happening now is market expectations of action, rather than actions themselves, but whatever the case, participants in the Dollar will need to watch the $80 level extremely closely.

A break under that level could be quite significant.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

Read more here:
The All Important Level to Watch on the US Dollar Index

Uncategorized

The All Important Level to Watch on the US Dollar Index

September 24th, 2010

It seems as though the Federal Reserve once again is taking aim squarely at the US Dollar Index with talk of ‘likely’ (or possible) injections of liquidity into the economy in the form of a second major Quantitative Easing plan should the economy falter.

While QE may indeed help stocks and the general economy – should it come to that – the major casualty of a new round of easy monetary policy will likely be the US Dollar – weakened by the injection of liquidity.

That being said, let’s take a quick look at the critically important weekly technical (chart) level to watch in the US Dollar Index, as it reflects confluence support.  Any further breakdown under this support would trigger a major chart sell signal.

Let’s see it on the Weekly Frame:

From a chart perspective, the level to watch is abundantly clear.  It’s roughly the $80.00 index level as seen above.

First, “Round Numbers” often provide their own support or resistance, and serve as a pure price level to watch.

Second, the 200 week Simple Moving Average rests currently at $80.04 – it’s a level that has been important in the past, halting the earlier decline in August.

Finally, the 61.8% Fibonacci Retracement as drawn (from the November 2009 low to the 2010 high) rests at $79.75.

These three chart levels align at the $80 level to form an important confluence support… and thus turning point in the market.

Should the Dollar continue its decline through this confluence support, then that would set-up a potential longer-term target for a move back down to the $74 level seen in late 2009.

Should the Federal Reserve actually go through with its plan to “help the economy in any way possible,” then we can anticipate a move that could take us down to that level.

What seems to be happening now is market expectations of action, rather than actions themselves, but whatever the case, participants in the Dollar will need to watch the $80 level extremely closely.

A break under that level could be quite significant.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

Read more here:
The All Important Level to Watch on the US Dollar Index

Uncategorized

Join Corey Today for a Lunchtime Chat on Enhancing Retracement Trades

September 24th, 2010

I wanted to invite you to today’s (Friday, September 24) online chat session during lunch – 1:00 EST / 12:00 CST – with the MoneyShow’s eTrading Expo entitled:

Five Ways to Enhance Your Retracement Trades.

The link above is the direct link to my topic page and registration info.

It will be a brief 20-minute online chat session where I will discuss tips and tricks on how to increase your accuracy when trading retracement set-ups and then take a few questions from attendees.

From the official description:

“What are 5 quick ways you can improve your retracement trades? Come chat live with Corey Rosenbloom, CMT as he shares five important technical signals and indicators you can use right now to put on lower risk, higher probably retracement trades”

The eTrading Expo features similar chats all day Friday and Saturday from leading industry experts including Tom Busby, John Carter, Toni Hansen, John Bollinger, and many more.

Full speaker list, details, and registration are located at the MoneyShow’s eTrading Expo introduction page.

There, you will also be able to view/attend free full hour-long session from experts at the Futures and FOREX Expo going on right now in Las Vegas.

I hope to see you there this afternoon!

Corey

Read more here:
Join Corey Today for a Lunchtime Chat on Enhancing Retracement Trades

Uncategorized

Join Corey Today for a Lunchtime Chat on Enhancing Retracement Trades

September 24th, 2010

I wanted to invite you to today’s (Friday, September 24) online chat session during lunch – 1:00 EST / 12:00 CST – with the MoneyShow’s eTrading Expo entitled:

Five Ways to Enhance Your Retracement Trades.

The link above is the direct link to my topic page and registration info.

It will be a brief 20-minute online chat session where I will discuss tips and tricks on how to increase your accuracy when trading retracement set-ups and then take a few questions from attendees.

From the official description:

“What are 5 quick ways you can improve your retracement trades? Come chat live with Corey Rosenbloom, CMT as he shares five important technical signals and indicators you can use right now to put on lower risk, higher probably retracement trades”

The eTrading Expo features similar chats all day Friday and Saturday from leading industry experts including Tom Busby, John Carter, Toni Hansen, John Bollinger, and many more.

Full speaker list, details, and registration are located at the MoneyShow’s eTrading Expo introduction page.

There, you will also be able to view/attend free full hour-long session from experts at the Futures and FOREX Expo going on right now in Las Vegas.

I hope to see you there this afternoon!

Corey

Read more here:
Join Corey Today for a Lunchtime Chat on Enhancing Retracement Trades

Uncategorized

If You Own One of These Popular High-Yielders, Pay Attention

September 24th, 2010

If You Own One of These Popular High-Yielders, Pay Attention

My guess is you haven't brought the Restoring American Financial Stability Act (the official name of the just-passed financial reform act) to the lake with you this summer.

At 2,300 pages and filled with 100-word sentences written in complex legalese, the bill — signed into law with much fanfare by President Obama on July 21st — is not exactly light reading.

However, buried in this legislation is Section 171, the Collins Amendment. And this single amendment dramatically impacts income investors. It completely alters the status of one of the more popular high-yield investments.

The good news is that this change will give savvy investors who know where to look the ability to lock in attractive 6-7% yields, investment-grade safety and the potential for capital gains within three to five years.

But this opportunity will not be around for long. The rule changes are already in place. The window is open now, but begins to close in 2013 and shuts completely at the end of 2015.

The high-yield opportunity I'm talking about lies with trust preferred stock, also called trust unit preferred shares or “TruPS.” Banks are usually associated with these shares… but that may be changing. (If you own the preferreds of a bank, they stand a good chance of being trust preferreds.)

You see, TruPS aren't issued directly by the bank. Instead, the bank sets up a new company or off-balance sheet trust. When TruPS are issued, the trust receives the offering proceeds, not the bank. However, the trust then turns around and loans the proceeds to the bank. This convoluted financing was worth it because banks were allowed to count TruPS toward Tier 1 capital — a basic measure of a bank's financial strength. During the height of the financial crisis, banks issued $149 billion of trust preferred stock, according to the Federal Reserve Bank of Philadelphia.

But the financial reform act changes all that. In the future, banks won't be able to include TruPS in Tier 1 capital. The phase out period begins January 1, 2013 and will be complete by December 31, 2015.

This change has major implications for income investors. The biggest is that some banks may choose to redeem their TruPS during the next three to five years. Today, however, these TruPS carry high coupons associated with 30-year investments.

Since TruPS will no longer serve their original purpose of counting as Tier 1 capital, banks will have no reason to hold them. The additional costs of setting up and maintaining the issuing TruPS are unattractive, as well.

That leaves three possible outcomes. First, some banks will choose to do nothing and simply allow their TruPS to mature and not issue any more. Most mature by 2030. Other banks may choose to issue traditional preferred or common stock to shore up Tier 1 capital and then offer TruPS holders the option of converting to these issues.

A third outcome is redemption… and that's where the opportunity lies.

Banks could begin calling TruPS as early as October of this year. If you buy TruPS below their par value (typically $25), this will lead to potential capital gains if the security is called. Of course, that is in addition to the high yields they pay while you wait. Remember that these securities were issued with a long-term outlook, so the yields they pay are associated with 30-50 year bonds instead of the 3-5 year outlook before the law changes.

Action to Take –> If you want to do some hunting for trust preferred securities on your own, I'd recommend QuantumOnline.com. The website has a list of current TruPS on the market that you may want to investigate. (It's free, with registration. Look under than “Income Tables” tab.) Remember, not all TruPS will be called, so you have to be selective. Be on the lookout for those trading below par value and backed by investment-grade credit ratings.


– Carla Pasternak

P.S. –

Uncategorized

A Possible +100% Return From a Company That’s Right Under Your Nose

September 24th, 2010

A Possible +100% Return From a Company That's Right Under Your Nose

I always keep my eyes open for investment opportunities. The best method is to literally keep them open when you are out and about doing your daily business. This is one of the ways I've found multi-bagger stocks over the years.

Everyday items can certainly provide investors with good returns, but these companies tend to be what Peter Lynch called “stalwarts” — slow growing companies paying a nice dividend that should form the cornerstone of your portfolio.

However, it is the companies behind the scenes or right under your nose that provide the big growth opportunities. Many years ago, I invested in a company called Flextronics (Nasdaq: FLEX). At the time, the company was providing a lot of the parts and electronics that went inside things like cellular phones.

While I was in a Subway sandwich store a few weeks ago, I saw the employees rapidly heat up the sandwiches in a TurboChef oven. I thought a super-fast oven was a neat idea, but also dismayed to learn the company had been purchased in 2008 by Middleby Corporation (Nasdaq: MIDD), a company that designs, manufactures and sells commercial foodservice and food processing equipment.

That's when it hit me that ovens must be big business. Every single restaurant at home and abroad uses ovens, not to mention any number of institutions like hospitals and businesses. I wasn't the first to discover the company. The stock has returned about +500% since 2003, and you could've had it during the market bottom of 2009 for about -67% off the current price.

I still like what I see in Middleby, though, and think it has room to grow. This means more than ovens. It means toasters, griddles, charbroilers — lots of hot appliances. And as it turns out, hot is better than cold. Cold appliances like refrigerators are commodities at this point — cooling something doesn't take much imagination or effort, from a design perspective. Hot appliances are far more complicated in design and require more study before purchasing. Heating something also entails several different methods — baking, frying, broiling, etc. That means lots of different products to create and sell.

Middleby's business is truly global, serving dozens of countries across the globe. Ovens are like Coca-Cola (NYSE: KO) — there's no reason why every place that can sell the product shouldn't sell the product. It means infinite expansion possibility.

Another secret to Middleby's success is the same reason why businesses like car dealership maintenance centers are so profitable — service contracts. It isn't enough to just buy a Middleby product, a client will want to purchase a service contract. Appliances will need service no matter how well-made they are. It's a bit like purchasing insurance. It costs Middleby less to come out and service a unit annually than what it collects to contract the service. This also means recurring revenue.

There's also a secular trend here in the United States, one that will unquestionably resume when the recession ends, and that is that Americans love to eat out. According to some estimates, we spend almost half of our food money eating outside the home.

Financially, Middleby is on solid ground. The company experienced a +9.3% sales increase in the second quarter, and a +12% rise in earnings. Free cash flow has been increasing over the years — from $56 million in 2007 to $95 million in 2009.

Action to Take –> Buy Middleby. Analyst's foresee +20% compound annual earnings growth during the next five years. If the stock price follows suit, as one would expect, that would suggest a +150% return. Backing off to a more conservative view of +15% earnings growth, you're looking at a solid double for a company with an entire planet to conquer and the resources to make it happen.

– Melvin Halcomb

Disclosure: Neither Melvin Halcomb nor StreetAuthority, LLC hold positions in any securities mentioned in this article.

This article originally appeared on StreetAuthority
Author: Melvin Halcomb
A Possible +100% Return From a Company That's Right Under Your Nose

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A Possible +100% Return From a Company That’s Right Under Your Nose

Commodities, Uncategorized

7 Key Questions About Gold

September 24th, 2010

7 Key Questions About Gold

Gold is on the march. The yellow metal is spiking to a new all time (non inflation-adjusted) highs of nearly $1,300 per ounce on renewed speculation that the Federal Reserve's next moves will only strengthen the case for higher gold prices down the road.

Let's take a closer look at some key questions to see if gold is set to shine even brighter or eventually lose its luster.

Q: What is the Fed concerned about?
A: In its most recent statement after Federal Reserve Open Market Committee (FOMC) meetings, the Fed noted that potential deflation is of increasing concern. (Core annual inflation has been running at 0.9% for five months in a row, its lowest pace since 1966.) Any drop in prices could spell real trouble for the economy and would imperil borrowers that are seeing lower income but constant debt levels.

Q: What might the Fed do?
A: To help support prices, the Fed can inject money into the economy by buying back bonds. (The bondholders that sell their debt back to the government would presumably put that cash to use elsewhere in the economy.)

Q: Why should that impact gold?
A: Many fear that the Fed is simply inviting the prospect of troubles down the road. Early in the last decade, the Fed also sought to boost the economy's prospects by keeping interest rates low. That set the stage for rampant low-cost borrowing and an eventual housing boom, which turned out to be disastrous for the economy when the music stopped.

This time around, the concern instead focuses on what might happen if the economy hums back to life but the Fed has a hard time keeping growth (and inflation) from surging. In the recent economic bubble, inflation never emerged. Yet gold bulls insist that we won't be so lucky next time. That's because budget deficits are now far higher, and if the United States can't meet its obligations, then inflation will rise as the Fed raises interest rates to keep attracting buyers for its debt. That would cause the dollar to weaken and gold would provide shelter in the storm. (But if rising inflation fails to materialize, then many that had bought gold on inflation fears may look to sell their positions.)

In addition, gold isn't as closely tied to economic cycles as are many commodities and equities, and it is frequently bought to diversify portfolios and guard against losses elsewhere. Conversely, as economies improve and stock markets rise, the argument for owning gold weakens. The fact that gold is hitting new highs even as the S&P 500 has had a strong two-week run is fairly unusual.

Q: What's the upside for gold?
A: Ah, the crystal ball question. Bulls think it can move toward the $2,000 per ounce. mark, which is actually the all-time high when adjusted for inflation. [Read: The Truth About Gold]

Why that price? There seems to be no real way to peg an actual projected value on gold. The price is driven by sentiment and not any sort of underlying asset value. We can figure out global demand for gold, and also how much is being produced each year. But we don't have a clear read of how much actual gold is sitting in central banks and especially in safe deposit boxes. Contrary to popular belief, central banks tend to offer contradictory statements on their gold holdings to keep currency speculators from knowing the state of their finances.

Gold producers generally spend around $450 per ounce to produce gold ($900 on a fully-expensed basis), so with gold above $1,000, there is ample incentive to hike output. And rising output of anything tends to have a dampening effect on prices. It hasn't happened yet, but some suspect we may be reaching the point of a gold glut — at least in terms of industrial and jewelry demand. Financial hedging demand is fairly immune to supply, and could continue to power gold higher. Gold contracts that expire in 2016 place a $1,447 price on an ounce of gold.

Rising prices have a way of feeding on themselves. JP Morgan's asset management arm continues to load up on gold on expectations that it will attract even more interest in coming years. (This is also known as the Greater Fool theory or the Keynesian beauty contest.)

Q: What's the downside?
A: The short answer is that gold could fall below $500 if all of these concerns fail to materialize. That's where gold traded back in 2005. And that's likely the area where supply and demand are truly affected, financial hedging considerations notwithstanding. As long as massive budget deficits remain as a concern, however, gold is very unlikely to fall back to that level.

Q: If I think gold has more to climb, should I buy gold or gold stocks?
A: The benefit of buying gold (or a gold ETF like the SPDR Gold Shares (NYSE: GLD)) is that you aren't paying for the operating expenses of gold companies and you are eliminating company-specific risk. And since gold producers may seek to lock in (or hedge) the price at which they can sell gold, they may not be able to fully profit from the sharp upward move in gold prices. (Currently, most gold producers are unhedged and willing to accept market risk, but that may change if prices rise higher.)

Then again, profits at gold-mining firms can grow even faster than the underlying commodity's price if they didn't lock in prices. That's due to the fixed-cost nature of gold mining. As noted earlier, it costs roughly $450 per ounce to mine, store and transport gold. So with gold selling at $1,000 an ounce, that's a $550 gross profit. But if gold prices rose +50% to $1,500, then per ounce gross profits would nearly double to $1,050. (Actual profits are well lower when non-mining costs are included.)

During the past 25 years, gold stocks have historically traded for between 12 and 24 times projected profits. Now they trade for just 11 times next year's profits. But that's because profits have risen so sharply and could well re-trench. If gold stayed above $1,200 per ounce for a number of years to come, then these stocks would look appealing. But if gold fell below $1,000 per ounce, then these companies' P/E ratios would appear astronomically high.

Investors can also look at where the gold miners trade in relation to their net asset value (NAV). They have historically traded between 1.4 times and 2.4 times NAV (except in early 2009 when they traded below NAV) and currently trade at 1.8. That NAV would rise and fall in step with any move in gold prices.

Q: What about “peak gold?”
A: While the question of peak oil dominates energy markets, it's really not important in gold mining. Most publicly-traded gold producers estimate that they have proven reserves that are equivalent to 10 to 20 years of annual production (and a similar amount that they have yet to verify as recoverable). And unlike oil that disappears when it is used, actual industrial demand for gold is so small relative to the amount held in bank vaults and jewelry chests, that any shortage could be met fairly easily.

Yet it is getting more expensive to mine gold as the easiest plays have been mined out and new mines are in increasingly remote or hard-to-mine locations. In 2000, it cost roughly $175 to mine and transport an ounce of gold. That figure moved above $250 in 2006, above $400 in 2008, and appears headed toward the $500 mark in the next year or so. Despite that rise, gross profit margins have surged. Gold miners made roughly $50 for every mined ounce from 1990 through 2005. Per ounce profits are up nine-fold since then.

But as noted above, miners have plenty of overhead costs, and it actually costs more than $900 to produce an ounce of gold when they are accounted for. That's why gold miners would hate to see a sharp pullback below $1,000 an ounce.

Action to Take –> All of this highlights a real conundrum for investors. Gold prices are being supported by economic concerns that have yet to (and may never) materialize. Gold can easily power higher (and technicians note that it just passed an important resistance level). But on a fundamental basis, gold appears quite overvalued. If gold prices fell to a point that truly reflects the fundamentals, then gold miners would see profits evaporate. Gold makes sense as a defensive hedge and as a means of diversification. But it's not a clear value as a pure investment.


– David Sterman

David Sterman started his career in equity research at Smith Barney, culminating in a position as Senior Analyst covering European banks. David has also served as Director of Research at Individual Investor and a Managing Editor at TheStreet.com. Read More…

Disclosure: Neither David Sterman nor StreetAuthority, LLC hold positions in any securities mentioned in this article.

This article originally appeared on StreetAuthority
Author: David Sterman
7 Key Questions About Gold

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7 Key Questions About Gold

Commodities, ETF, Uncategorized

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