3 Reasons To Still Own Gold (or Finally Buy Some)

April 20th, 2011

3 Reasons To Still Own Gold (or Finally Buy Some)

I recently watched the classic man-eating fish movie “Jaws” and the latest action in the precious metals space reminded me of the tagline for the film, “Just when you thought it was safe to go back into the water…”

Is it safe to swim in the water? Or is Jaws still lurking out there, the physical embodiment of a financial world gone lethal? Can gold still protect us?

Gold has had a magnificent run during the past 10 years, doubling in value since 2008 alone. Gold has set and broke several new price records, most recently reaching $1,500.00 per ounce on the Comex division of the New York Mercantile Exchange in Tuesday's (April 19) trading.

The most commonly-traded gold exchange-traded fund (ETF), the SPDR Gold Trust (NYSE: GLD) ETF, followed suit, closing just shy of $146.00 a share, an all-time high. Mirroring these moves was gold's less valuable (and possibly more appealing sibling) silver, which has been hitting 31-year highs almost daily.

Gold “mania” is seemingly at full strength. But questions remain. Is profit taking the next move? What if you are among the majority of investors who have yet to dip a toe into the water? Is it safe to dive in?

Let's look at three fundamentals regarding gold, along with the rational outlook that should correspond with these facts:

1. Inflation Naturally, I'm not referring to core inflation, also known as the government's consumer price index (CPI). The CPI is like the calm surface water that hides the beast beneath.

Headline inflation, which is the measure of the total inflation in the economy, is running very hot. There is increased demand for resources thanks to growing economies worldwide and corresponding shortages developing in food, energy and elsewhere. Gold is benefiting from inflation and there seems to be little reason to expect it to slow down.

Money creation in the United States has excess dollars chasing these aforementioned goods. Some think this is a good thing. Some will argue that the Federal Reserve will eventually sop up the extra liquidity. But the reality is they never really will. The dollar has lost 95% of its purchasing power since 1913, the birth-year of the Fed. I see no circumstances under which the dollar will not continue to fall long-term. It will bounce up now and then, but if nothing else, the past 40 years have cemented the dollar's future — and the trajectory is to the ocean floor.

2. Demand − From people, institutions and governments — gold is wildly in demand like the cheesy “Jaws” merchandise sold during the record run of the movie in the 1970s. Faith in virtually all currencies has been shaken, if not destroyed, and will probably never be restored.

The dollar's reserve currency status is threatened. More than threatened, it is visibly on the way out. What was once mere speculation has evolved into blatant measures to see it replaced. It will happen, but it will also take years. When we see countries like Venezuela and China trading with each other without using dollars (or any other currency) the evidence is irrefutable.

We also see many countries increasing their gold holdings (China's has increased from 600 metric tons to 1,054.1 metric tons since 2003), the logical defensive strategy when saddled with hundreds of billions in depreciating dollar reserves: stockpile commodities and natural resources. I give you dollars and you give me gold, oil, or steel — that's a fine exchange for me.

3. Government spending − The U.S. government is losing its credibility. Speculation that the United States will have its credit rating lowered was fueled this week after ratings agency Standard & Poor's lowered its outlook on U.S. debt from “stable” to “negative”.

The United States is the largest debtor nation in the world, nee, in all of human history. Once upon a time, it was the largest creditor nation in the world. In the 1980s, it loaned other countries money, money it really had. Now it borrows massive amounts to service its debt. The nation's well documented entitlement obligations are helping to catapult its annual budget to fantastical extremes.

Action to Take –> Keep your gold or buy some. The facts argue that gold should continue to rise; and not just in dollar terms. Many of these observations can be applied to other countries and currencies as well. I'd love to be optimistic regarding the United States' financial future, but right now things look grim. Jaws is still out there.

– Steven P. Orlowski

P.S. — We found an obscure mining company that tossed back 19% in dividends last year (plus another 34% in capital gains). If you think that's impressive, wait until you see this video…

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

This article originally appeared on StreetAuthority
Author: Steven Orlowski
3 Reasons To Still Own Gold (or Finally Buy Some)

Read more here:
3 Reasons To Still Own Gold (or Finally Buy Some)

Commodities, ETF, Uncategorized

3 Reasons To Still Own Gold (or Finally Buy Some)

April 20th, 2011

3 Reasons To Still Own Gold (or Finally Buy Some)

I recently watched the classic man-eating fish movie “Jaws” and the latest action in the precious metals space reminded me of the tagline for the film, “Just when you thought it was safe to go back into the water…”

Is it safe to swim in the water? Or is Jaws still lurking out there, the physical embodiment of a financial world gone lethal? Can gold still protect us?

Gold has had a magnificent run during the past 10 years, doubling in value since 2008 alone. Gold has set and broke several new price records, most recently reaching $1,500.00 per ounce on the Comex division of the New York Mercantile Exchange in Tuesday's (April 19) trading.

The most commonly-traded gold exchange-traded fund (ETF), the SPDR Gold Trust (NYSE: GLD) ETF, followed suit, closing just shy of $146.00 a share, an all-time high. Mirroring these moves was gold's less valuable (and possibly more appealing sibling) silver, which has been hitting 31-year highs almost daily.

Gold “mania” is seemingly at full strength. But questions remain. Is profit taking the next move? What if you are among the majority of investors who have yet to dip a toe into the water? Is it safe to dive in?

Let's look at three fundamentals regarding gold, along with the rational outlook that should correspond with these facts:

1. Inflation Naturally, I'm not referring to core inflation, also known as the government's consumer price index (CPI). The CPI is like the calm surface water that hides the beast beneath.

Headline inflation, which is the measure of the total inflation in the economy, is running very hot. There is increased demand for resources thanks to growing economies worldwide and corresponding shortages developing in food, energy and elsewhere. Gold is benefiting from inflation and there seems to be little reason to expect it to slow down.

Money creation in the United States has excess dollars chasing these aforementioned goods. Some think this is a good thing. Some will argue that the Federal Reserve will eventually sop up the extra liquidity. But the reality is they never really will. The dollar has lost 95% of its purchasing power since 1913, the birth-year of the Fed. I see no circumstances under which the dollar will not continue to fall long-term. It will bounce up now and then, but if nothing else, the past 40 years have cemented the dollar's future — and the trajectory is to the ocean floor.

2. Demand − From people, institutions and governments — gold is wildly in demand like the cheesy “Jaws” merchandise sold during the record run of the movie in the 1970s. Faith in virtually all currencies has been shaken, if not destroyed, and will probably never be restored.

The dollar's reserve currency status is threatened. More than threatened, it is visibly on the way out. What was once mere speculation has evolved into blatant measures to see it replaced. It will happen, but it will also take years. When we see countries like Venezuela and China trading with each other without using dollars (or any other currency) the evidence is irrefutable.

We also see many countries increasing their gold holdings (China's has increased from 600 metric tons to 1,054.1 metric tons since 2003), the logical defensive strategy when saddled with hundreds of billions in depreciating dollar reserves: stockpile commodities and natural resources. I give you dollars and you give me gold, oil, or steel — that's a fine exchange for me.

3. Government spending − The U.S. government is losing its credibility. Speculation that the United States will have its credit rating lowered was fueled this week after ratings agency Standard & Poor's lowered its outlook on U.S. debt from “stable” to “negative”.

The United States is the largest debtor nation in the world, nee, in all of human history. Once upon a time, it was the largest creditor nation in the world. In the 1980s, it loaned other countries money, money it really had. Now it borrows massive amounts to service its debt. The nation's well documented entitlement obligations are helping to catapult its annual budget to fantastical extremes.

Action to Take –> Keep your gold or buy some. The facts argue that gold should continue to rise; and not just in dollar terms. Many of these observations can be applied to other countries and currencies as well. I'd love to be optimistic regarding the United States' financial future, but right now things look grim. Jaws is still out there.

– Steven P. Orlowski

P.S. — We found an obscure mining company that tossed back 19% in dividends last year (plus another 34% in capital gains). If you think that's impressive, wait until you see this video…

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

This article originally appeared on StreetAuthority
Author: Steven Orlowski
3 Reasons To Still Own Gold (or Finally Buy Some)

Read more here:
3 Reasons To Still Own Gold (or Finally Buy Some)

Commodities, ETF, Uncategorized

Weiss Ratings: 74% of U.S. Banks Vulnerable to Rising Short-Term Interest Rates

April 20th, 2011

JUPITER, Florida (April 20, 2011) — Nearly three quarters of the nation’s banks are vulnerable to rising short-term interest rates, according to a new study by Weiss Ratings, the nation’s leading independent provider of bank, credit union and insurance company financial strength ratings.

In a study of 6,949 banks, Weiss found that a total of 5,165, or 74%, are vulnerable to rising interest rates, due largely to liabilities with rates scheduled to reprice within one year that were far greater than assets with rates scheduled to reprice within one year. This measure, called the negative gap ratio, indicates that the banks will be at a disadvantage in a rising interest rate environment, as their cost for deposits and other borrowings rise more quickly than their income on loans and investments of a similar maturity.

“With short-term interest rates at historic lows and ongoing speculation about when they will rise, it’s important for consumers to understand that any future rate rise will put the profitability of many financial institutions at risk,” said Gene Kirsch, senior banking analyst at Weiss Ratings. “In this environment, consumers may be drawn to the highest rates paid on deposits, but they mustn’t forget the importance of financial strength when selecting a bank or thrift.”

Large banks ($10 billion or more in assets) most vulnerable to rising interest rates based on their extremely negative one-year gap ratios include:

In contrast, large banks ($10 billion or more in assets) with positive one-year gap ratios that are well positioned for rising short-term interest rates include:

Regionally, Weiss’ study found that the Northeast and Mid-Atlantic have the highest concentration of banks most vulnerable to a rise in short-term interest rates with 82.7% and 80.0% respectively. In contrast, states in the West region have the lowest percentage (58.5%) of institutions most vulnerable to rising short-term rates.

Institutions’ Vulnerability to Rising Short-Term Interest Rates by Region

To view the 1-year gap ratio of all U.S. banks with $10 billion or more in assets as well as a detailed explanation of the gap ratio and its effect on profitability, individuals can visit http://www.weissratings.com/ratings/banks-vulnerability-to-rising-interest-rates.aspx.

In addition, to view Weiss Ratings’ free list of the weakest and strongest banks and thrifts, consumers should visit www.weissratings.com/banklists.

About Weiss Ratings

Weiss Ratings, the nation’s leading independent provider of bank, credit union and insurance company financial strength ratings, accepts no payments for its ratings from rated institutions. It also distributes independent investment ratings on the shares of thousands of publicly traded companies, mutual funds, closed-end funds and ETFs.

1 One-year gap ratio is defined as assets with maturities one year or less minus liabilities with maturities of one year or less as a percentage of total assets (which are exposed to changing interest rates).
2Connecticut, Delaware, Massachusetts, Maine, New Jersey, New Hampshire, New York, Pennsylvania, Rhode Island, and Vermont.
3District of Columbia, Kentucky, Maryland, North Carolina, South Carolina, Tennessee, Virginia, West Virginia.
4California, Colorado, Hawaii, Nevada, and Utah.

Read more here:
Weiss Ratings: 74% of U.S. Banks Vulnerable to Rising Short-Term Interest Rates

Commodities, ETF, Mutual Fund, Uncategorized

A Currency and Commodity Rally for the Ages

April 20th, 2011

Front and center this morning we have a currency and commodity rally going on for the ages! But first… Today is also my long time, good friend, and the Big Boss’ birthday! Yes… Happy Birthday, Frank Trotter! YAHOO!

OK… The currency and commodity rally for the ages… It’s as if the overnight markets guys and gals had the light bulb go on over their collective heads, and inside the light bulb was this thought… “Interest rates around the world are going up, but staying down in the US and S&P just downgraded the US’s outlook to negative, so why are we holding dollars?”… The rest is history as they say, with the euro (EUR) rallying to 1.45, the Aussie dollar (AUD) to $1.0650, and gold at $1,505…

It’s pretty amazing once the markets figure out something, it’s like they’re playing poker, and decide to “go all in”… For all the time before they finally figure something out, they hem and haw around giving this reason or that reason for supporting a sinking asset… In this case it’s the dollar… Look, I don’t want this to happen, but, the writing has been on the wall for some time now, and I said it would happen, so there you go!

We also had Sweden’s Riksbank adding fuel to the fire that’s burning under the pole that the dollar is strapped to this morning, by hiking their internal interest rate 25 basis points (1/4%) bringing their internal rate to 1.75%… I expect the Riksbank to hike rates quite frequently this year, pushing their rate to 2.5% in the next year… The Swedish krona (SEK) received a ton of love after the rate hike, and has finally moved back to its level of 2008… You know, the levels we saw before the financial meltdown, the first of many things that have come along to rescue the dollar, but eventually allow it to be tied to the pole again…

As I said above, gold is trading above $1,500 this morning…and that move is responsible for helping the Aussie dollar reach a 29-year high at $1.0650! And don’t forget silver! Yes, silver is trading above $44 this morning! And once again, it’s important to remember that those who think that because gold and silver don’t pay interest, higher rates around the world would squash their bull market rallies, are wrong… Or at least to me they are… Instead, higher rates around the world squash the dollar, and gold and silver are being used as “dollar alternatives”…

Another thing throwing gas (literally) on the fire burning beneath the pole that the dollar is tied to, is the jump in the price of oil yesterday and overnight… Yesterday, the price of oil had slipped to $106.10, but this morning, it’s back to $109.80! And don’t think for a minute that investors aren’t using oil investments as dollar alternatives too!

With the rise in the price of oil, the “petrol currencies” of: Canada, Norway, UK, and even Mexico (with their depleting oil reserves) get an extra boost against the dollar. So… it’s an all-out rout on the dollar this morning… It’s like the overnight markets ambushed the dollar, captured it, and are now holding it captive!

The Canadian dollar/loonie (CAD) got an extra boost after their March inflation rate jumped to 3.3%! Looks like the Bank of Canada (BOC) is going to have to come back to the rate hike table sooner than they had previously thought! I really think that the BOC needs to get their heads on straight here, since they had backed away from the rate hike table, not wanting to attract attention to the loonie, as they didn’t want the currency to get too strong… But I would think that rather than not wanting to see the currency appreciate, that the BOC needs to accept a stronger loonie, and let it do some of the work of holding down inflation pressures… Look, if oil is going to remain above $100, and food prices continue to be more than “transitory” (as our Big Ben likes to say), inflation is going to remain a problem for the BOC and the Canadian people… So, go ahead, and accept a stronger loonie, BOC, you’ll be happy you did!

I guess that old kiss of death that I put on things from time to time, didn’t last too long for the New Zealand dollar/kiwi (NZD)… Yesterday, I was disappointed to see kiwi slip after talking about its steady rise in the past month… But today, kiwi has touched 80-cents… The last time kiwi was above 80-cents was three years ago! Kiwi’s high was reached in February of 2008, topping out at 0.8214… So… If kiwi is to return to its previous high, it still has a ways to go, eh?

The fact that the earnings season has been pretty good so far is weighing on the dollar, this morning, which should be good for the US… But markets are taking it as reason to rally versus the dollar, on the “boost to risk sentiment”… So… In that vein, today, after the market closes, Apple will announce first quarter earnings… If the “risk sentiment” is to remain, and continue to put pressure on the dollar, Apple’s earnings will need to be strong.

Portugal and Spain were able to auction bonds this morning without major problems, which is a good sign for them, and for the euro. So, watch for this, folks… Today or tomorrow we’ll see the media refocus on restructuring Greek debt, to take the heat off the dollar…

Yes, I don’t like being so cynical, but what can I do? I see it every time, and it’s so blatant! Of course, my beautiful bride would probably tell you otherwise… HA! But think about all this for a minute… I just call them the way I see them, and if that’s being a Smart-A** or cynical, so be it!

Not that too many people noticed it… But I left three zeros off my reporting of the National Debt yesterday… But we all know it’s $14+ TRIILLION at this point, and going up every second. But I do agree that when someone sees $14 trillion, they get the picture better if they see it as $14,000,000,000,000 … It makes one think about it a little more, rather than just saying $14 trillion, and letting it roll easily off the tongue…

As I look at the currency screens, all the currencies that should be in green are green, and all the currencies that should be in red are in red, except for one… The Japanese yen (JPY), which had been in rally mode for the past couple of weeks, just doesn’t mix well when the “risk on” is in full bloom like it is today…

Then there was this… From channelnewsasia.com…

China is set to designate one bank in Singapore to take on the role of clearing yuan trades as it gradually moves to internationalize its currency.

It is believed that either the Bank of China or the Industrial and Commercial Bank of China will be the clearing bank, according to analysts.

Some analysts see this as a move by China to reduce its reliance on the greenback as a reserve currency.

Thio Chin Loo, Senior FX and Interest Rate Strategist with BNP Paribas, said: “So with the volatility of the US asset market over the last two years, it has probably caused some pain to the external balance sheets and therefore the need to want to diversify FX reserve holdings with the US dollar.”

China’s central bank may also grant the Monetary Authority of Singapore a qualifying foreign institutional investor status which allows the MAS to invest in Chinese financial products on the mainland.

The stories on China and their move toward a freely exchangeable currency are becoming more frequent, aren’t they? I think China is moving more quickly than they had previously planned, because of the things going on in the US.

To recap… Besides it being Frank Trotter’s birthday, the other big news for today is that we’ve had a currency and commodity rally versus the dollar for the ages! The euro is over $1.45, and gold is over $1,500! Rate differentials, S&P negative outlooks, and pretty strong earnings from US companies are all ganging up on the dollar this morning… Oil has rallied $3 overnight, and the Riksbank hiked rates 25 basis points.

Chuck Butler
for The Daily Reckoning

A Currency and Commodity Rally for the Ages originally appeared in the Daily Reckoning. The Daily Reckoning recently featured articles on stagflation, best libertarian books, and QE2

.

Read more here:
A Currency and Commodity Rally for the Ages




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

A Currency and Commodity Rally for the Ages

April 20th, 2011

Front and center this morning we have a currency and commodity rally going on for the ages! But first… Today is also my long time, good friend, and the Big Boss’ birthday! Yes… Happy Birthday, Frank Trotter! YAHOO!

OK… The currency and commodity rally for the ages… It’s as if the overnight markets guys and gals had the light bulb go on over their collective heads, and inside the light bulb was this thought… “Interest rates around the world are going up, but staying down in the US and S&P just downgraded the US’s outlook to negative, so why are we holding dollars?”… The rest is history as they say, with the euro (EUR) rallying to 1.45, the Aussie dollar (AUD) to $1.0650, and gold at $1,505…

It’s pretty amazing once the markets figure out something, it’s like they’re playing poker, and decide to “go all in”… For all the time before they finally figure something out, they hem and haw around giving this reason or that reason for supporting a sinking asset… In this case it’s the dollar… Look, I don’t want this to happen, but, the writing has been on the wall for some time now, and I said it would happen, so there you go!

We also had Sweden’s Riksbank adding fuel to the fire that’s burning under the pole that the dollar is strapped to this morning, by hiking their internal interest rate 25 basis points (1/4%) bringing their internal rate to 1.75%… I expect the Riksbank to hike rates quite frequently this year, pushing their rate to 2.5% in the next year… The Swedish krona (SEK) received a ton of love after the rate hike, and has finally moved back to its level of 2008… You know, the levels we saw before the financial meltdown, the first of many things that have come along to rescue the dollar, but eventually allow it to be tied to the pole again…

As I said above, gold is trading above $1,500 this morning…and that move is responsible for helping the Aussie dollar reach a 29-year high at $1.0650! And don’t forget silver! Yes, silver is trading above $44 this morning! And once again, it’s important to remember that those who think that because gold and silver don’t pay interest, higher rates around the world would squash their bull market rallies, are wrong… Or at least to me they are… Instead, higher rates around the world squash the dollar, and gold and silver are being used as “dollar alternatives”…

Another thing throwing gas (literally) on the fire burning beneath the pole that the dollar is tied to, is the jump in the price of oil yesterday and overnight… Yesterday, the price of oil had slipped to $106.10, but this morning, it’s back to $109.80! And don’t think for a minute that investors aren’t using oil investments as dollar alternatives too!

With the rise in the price of oil, the “petrol currencies” of: Canada, Norway, UK, and even Mexico (with their depleting oil reserves) get an extra boost against the dollar. So… it’s an all-out rout on the dollar this morning… It’s like the overnight markets ambushed the dollar, captured it, and are now holding it captive!

The Canadian dollar/loonie (CAD) got an extra boost after their March inflation rate jumped to 3.3%! Looks like the Bank of Canada (BOC) is going to have to come back to the rate hike table sooner than they had previously thought! I really think that the BOC needs to get their heads on straight here, since they had backed away from the rate hike table, not wanting to attract attention to the loonie, as they didn’t want the currency to get too strong… But I would think that rather than not wanting to see the currency appreciate, that the BOC needs to accept a stronger loonie, and let it do some of the work of holding down inflation pressures… Look, if oil is going to remain above $100, and food prices continue to be more than “transitory” (as our Big Ben likes to say), inflation is going to remain a problem for the BOC and the Canadian people… So, go ahead, and accept a stronger loonie, BOC, you’ll be happy you did!

I guess that old kiss of death that I put on things from time to time, didn’t last too long for the New Zealand dollar/kiwi (NZD)… Yesterday, I was disappointed to see kiwi slip after talking about its steady rise in the past month… But today, kiwi has touched 80-cents… The last time kiwi was above 80-cents was three years ago! Kiwi’s high was reached in February of 2008, topping out at 0.8214… So… If kiwi is to return to its previous high, it still has a ways to go, eh?

The fact that the earnings season has been pretty good so far is weighing on the dollar, this morning, which should be good for the US… But markets are taking it as reason to rally versus the dollar, on the “boost to risk sentiment”… So… In that vein, today, after the market closes, Apple will announce first quarter earnings… If the “risk sentiment” is to remain, and continue to put pressure on the dollar, Apple’s earnings will need to be strong.

Portugal and Spain were able to auction bonds this morning without major problems, which is a good sign for them, and for the euro. So, watch for this, folks… Today or tomorrow we’ll see the media refocus on restructuring Greek debt, to take the heat off the dollar…

Yes, I don’t like being so cynical, but what can I do? I see it every time, and it’s so blatant! Of course, my beautiful bride would probably tell you otherwise… HA! But think about all this for a minute… I just call them the way I see them, and if that’s being a Smart-A** or cynical, so be it!

Not that too many people noticed it… But I left three zeros off my reporting of the National Debt yesterday… But we all know it’s $14+ TRIILLION at this point, and going up every second. But I do agree that when someone sees $14 trillion, they get the picture better if they see it as $14,000,000,000,000 … It makes one think about it a little more, rather than just saying $14 trillion, and letting it roll easily off the tongue…

As I look at the currency screens, all the currencies that should be in green are green, and all the currencies that should be in red are in red, except for one… The Japanese yen (JPY), which had been in rally mode for the past couple of weeks, just doesn’t mix well when the “risk on” is in full bloom like it is today…

Then there was this… From channelnewsasia.com…

China is set to designate one bank in Singapore to take on the role of clearing yuan trades as it gradually moves to internationalize its currency.

It is believed that either the Bank of China or the Industrial and Commercial Bank of China will be the clearing bank, according to analysts.

Some analysts see this as a move by China to reduce its reliance on the greenback as a reserve currency.

Thio Chin Loo, Senior FX and Interest Rate Strategist with BNP Paribas, said: “So with the volatility of the US asset market over the last two years, it has probably caused some pain to the external balance sheets and therefore the need to want to diversify FX reserve holdings with the US dollar.”

China’s central bank may also grant the Monetary Authority of Singapore a qualifying foreign institutional investor status which allows the MAS to invest in Chinese financial products on the mainland.

The stories on China and their move toward a freely exchangeable currency are becoming more frequent, aren’t they? I think China is moving more quickly than they had previously planned, because of the things going on in the US.

To recap… Besides it being Frank Trotter’s birthday, the other big news for today is that we’ve had a currency and commodity rally versus the dollar for the ages! The euro is over $1.45, and gold is over $1,500! Rate differentials, S&P negative outlooks, and pretty strong earnings from US companies are all ganging up on the dollar this morning… Oil has rallied $3 overnight, and the Riksbank hiked rates 25 basis points.

Chuck Butler
for The Daily Reckoning

A Currency and Commodity Rally for the Ages originally appeared in the Daily Reckoning. The Daily Reckoning recently featured articles on stagflation, best libertarian books, and QE2

.

Read more here:
A Currency and Commodity Rally for the Ages




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

Dollar collapsing, gold flying as Washington dithers! What to do …

April 20th, 2011
Mike Larson

The fallout from Standard & Poor’s landmark warning on America’s creditworthiness is bad — and getting worse. Just today …

* Gold exploded higher, powering through $1,500 an ounce for the first time in world history!

* Silver shot up another 80 cents, closing in on $45 an ounce for the first time in more than three decades!

* Crude oil rallied more than a dollar a barrel, putting even more upward pressure on gas prices. It now costs an average of $3.84 a gallon for gas, the highest in 31 months!

* The Dollar Index is collapsing to a fresh 17-month low of 74.30. As you can see in this chart, we’re just a few ticks from the lowest level for the dollar EVER!

Just take a look …

U.S. Dollar Index

In other words — just as we’ve been predicting — global investors are fleeing our currency. And they’re flocking to something, ANYTHING that will hold its value.

Yet Washington continues to dither … to fiddle while the dollar burns! Democrats and Republicans keep talking past each other, and the deficit commission’s landmark report on how to tame the explosion in red ink has been all but left to the dustbin of history.

Nobody in a position of power wants to step forward and take the necessary steps to rein in our national debt, at $14,309,159,097,877.65 and counting!

Look, the dollar is already collapsing … precious metals are already soaring … and your cost of living is already exploding … just as we’ve been warning.

Next up? Far MORE DIRE consequences for your wealth and well-being!

That’s why I urge you to view Dr. Weiss’ landmark “American Apocalypse” video immediately.

In it, you’ll learn precisely how to protect yourself — and also how to turn the great power of these dangers into tremendous profit opportunities.

Until next time,

Mike

Read more here:
Dollar collapsing, gold flying as Washington dithers! What to do …

Commodities, ETF, Mutual Fund, Uncategorized

If You Don’t Know About This Income Investing Oddity, Pay Attention

April 20th, 2011

If You Don't Know About This Income Investing Oddity, Pay Attention

I know what income investors like.

If I put a double-digit yield in the headline of an article, it will see thousands more reads than an article without a big headline yield.

I can put “safety” in the headline. I can put in enormous capital gains. But yield is what really excites income investors.

That's one of the reasons I have a “10%-Plus” Portfolio in my High-Yield Investing advisory. To be included in the portfolio, a security has to pay double-digits at the time it's added. No exceptions.

But there's a secret to those high yields I'd guess most income investors don't know.

Take a look below. I've shown the performance of my current holdings in the “10%-Plus” Portfolio (to be fair to High-Yield Investing subscribers I've redacted the ticker symbols).

Why are the yields you see here below 10%? Nearly all the holdings in the portfolio have risen since I added them. That lowers the current yield, but those who bought when I highlighted the play are still earning 10% or more on the initial investment.

Sure, I have a losing position. No one can pick 100% winners. But I have one more list I want you to see.

It's the performance of my lower-yielding “Dividend Optimizer” Portfolio. These are investments you can count on to deliver above-average income year-in and year-out, but they don't pay out the juicy double-digit yields.

That performance is very good. But with the average returns between the two portfolios, there's something odd happening.

The “10%-Plus” Portfolio is showing an average gain of about four times the average yield. But the lower-yielding “Dividend Optimizer” Portfolio shows an average gain of more than five times the yield. Just a few weeks ago, the average return was actually six times the yield.

So despite one portfolio boasting double-digit yields (which should make the securities more attractive to investors), the performance of the two portfolios is roughly the same.

My colleague Daniel Moser attributes this phenomenon to the “sweet spot” for yields — those in the 5-8% range.

It's the area where yields are not so low that they're trivial and not so high that they make it tough for management to pay steadily increasing dividends.

Action to Take–> Most importantly, this little quirk shows you don't want to always pass up lower-yielding securities simply because you've found something paying more. You can be rewarded just as handsomely by those sitting in the “sweet spot.”


– Carla Pasternak

P.S. — If you're looking for quality stocks with high yields, you should take a look at this one. It pays a 19.2% dividend yield. It borrows cheap, gets paid handsomely and then pockets the spread. You'll get the full story on this cash machine and others like it in this video.

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

This article originally appeared on StreetAuthority
Author: Carla Pasternak
If You Don't Know About This Income Investing Oddity, Pay Attention

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If You Don’t Know About This Income Investing Oddity, Pay Attention

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If You Don’t Know About This Income Investing Oddity, Pay Attention

April 20th, 2011

If You Don't Know About This Income Investing Oddity, Pay Attention

I know what income investors like.

If I put a double-digit yield in the headline of an article, it will see thousands more reads than an article without a big headline yield.

I can put “safety” in the headline. I can put in enormous capital gains. But yield is what really excites income investors.

That's one of the reasons I have a “10%-Plus” Portfolio in my High-Yield Investing advisory. To be included in the portfolio, a security has to pay double-digits at the time it's added. No exceptions.

But there's a secret to those high yields I'd guess most income investors don't know.

Take a look below. I've shown the performance of my current holdings in the “10%-Plus” Portfolio (to be fair to High-Yield Investing subscribers I've redacted the ticker symbols).

Why are the yields you see here below 10%? Nearly all the holdings in the portfolio have risen since I added them. That lowers the current yield, but those who bought when I highlighted the play are still earning 10% or more on the initial investment.

Sure, I have a losing position. No one can pick 100% winners. But I have one more list I want you to see.

It's the performance of my lower-yielding “Dividend Optimizer” Portfolio. These are investments you can count on to deliver above-average income year-in and year-out, but they don't pay out the juicy double-digit yields.

That performance is very good. But with the average returns between the two portfolios, there's something odd happening.

The “10%-Plus” Portfolio is showing an average gain of about four times the average yield. But the lower-yielding “Dividend Optimizer” Portfolio shows an average gain of more than five times the yield. Just a few weeks ago, the average return was actually six times the yield.

So despite one portfolio boasting double-digit yields (which should make the securities more attractive to investors), the performance of the two portfolios is roughly the same.

My colleague Daniel Moser attributes this phenomenon to the “sweet spot” for yields — those in the 5-8% range.

It's the area where yields are not so low that they're trivial and not so high that they make it tough for management to pay steadily increasing dividends.

Action to Take–> Most importantly, this little quirk shows you don't want to always pass up lower-yielding securities simply because you've found something paying more. You can be rewarded just as handsomely by those sitting in the “sweet spot.”


– Carla Pasternak

P.S. — If you're looking for quality stocks with high yields, you should take a look at this one. It pays a 19.2% dividend yield. It borrows cheap, gets paid handsomely and then pockets the spread. You'll get the full story on this cash machine and others like it in this video.

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

This article originally appeared on StreetAuthority
Author: Carla Pasternak
If You Don't Know About This Income Investing Oddity, Pay Attention

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If You Don’t Know About This Income Investing Oddity, Pay Attention

Uncategorized

3 Small Caps That Could Double This Year

April 20th, 2011

3 Small Caps That Could Double This Year

In the past few years, we've discussed the importance of catalyst investing. This involves clearly identifiable events that, if they come to pass, the they'll propel a stock sharply higher.

Here are a handful of stocks that could strongly benefit from possible catalysts in 2011. Each stock could double if they receive just a few good breaks.

1. Broadwind Energy (Nasdaq: BWEN)
This stock caught my eye after a recent upward move. Shares had fallen from the 52-week high of $4 to just $1.21 in early March. Now that they're back up above $1.50 — gaining more than 20% in just three recent trading sessions, I've been giving the company a fresh look. And I like what I see…

Broadwind, which makes components for the wind-turbine industry, had been rumored to be on the cusp of a buyout last fall. Shares moved up on word that GE (NYSE: GE) or a foreign suitor would soon make a bid. No such bid ever materialized, prompting shares to hit new lows. I'm not ruling out that such a bid may still emerge, but I like this stock for other potential catalysts.

For starters, business appears to be rebounding. Sales had fallen from $207 million in 2008 to just $137 million in 2010 as U.S. spending on wind farms slumped. Fourth-quarter sales of $47 million marked a turn, posting the first year-over-year quarterly increase in nearly three years. Bookings for new orders surged to $60 million, the highest rate in more than a year. Backlog rebounded sequentially by $16 million, to $226 million.

Yet it's the macro picture that I see as the big catalyst. As the cost of wind power keeps dropping, major players are making big investments. For example, Google (Nasdaq: GOOG) and a pair of Japanese firms are investing about $500 million in a wind farm GE is developing in Oregon. Notably, the consortium has predicted that the wind power generated will be competitive with other fuels and won't require utility-level subsidies. The fact that the wind farm will have zero emissions is just an added kicker.

Management has noted a positive change in industry tone from the first half of 2010 to the second half. And they expect 2011 results to show continued strengthening. The key is to at least move back to break-even, as the company only has $25 million left between its cash balance and an undrawn credit line. If that happens, investors will re-embrace this fallen stock that trades for just 0.7 times projected 2011 revenue. I would expect that multiple to double if the sales rebound is sustained, implying similar upside for the stock.

2. Winnebago (NYSE: WGO)
Talk about an ugly stock chart. Every time oil prices rise to new highs, this maker of gas-guzzling recreational vehicles (RVs) falls further. The stock has fallen in seven of the last eight sessions (going into trading on April 19) as investors assume that demand for RVs will dry up while gasoline is at $4 a gallon.

Well, the catalyst for this stock should be pretty clear. If oil prices finally pull back, then shares are likely to see a decent rebound. The more serious rebound is likely to come if the employment picture continues to strengthen. In the middle of the past decade, when employment trends were last on the upswing, Winnebago typically generated roughly $1 billion in annual sales. The recent economic weakness has altered that trend. Sales plunged to just $211 million in fiscal (August) 2009 and only rebounded to $450 million in 2010, less than half the level of the previous peak.

Analysts think sales will rebound 20% in fiscal 2011 and 2012. The key is the economic variables — falling oil prices and rising employment. If those two catalysts come into play, then long-term investors are likely to note just how cheap this stock now is, trading at roughly six times peak earnings from the last cycle. The stock has come down from $30 in 2007 to a recent $12, but if the economy appears increasingly healthier later this year, then look for shares to move back up smartly into the $20s.

3. A123 Systems (Nasdaq: AONE)
This lithium-ion battery maker is now a “show-me” stock. After missing sales forecasts for a number of quarters, shares have slipped from more than $25 in late 2009 to less than $6. Those weak sales results led to higher-than-expected losses, which led to fast-sinking cash levels. As a result, investors began to realize A123 would need to keep selling more stock to stay afloat.

That vicious cycle now looks to be at end. The company just raised another $250 million and analysts increasingly think the era of big cash losses will wind down. By the time the cash from this latest capital infusion has been spent, A123 may actually be a profitable company.

Here's why…

A123 possesses strong engineering capabilities in its lithium-based batteries that are aimed at the transportation and electrical grid markets. This enabled the company to sign up an impressive roster of major clients. Trouble is, those clients have been slow to get going with their own cutting-edge programs. For example, Fisker Automotive, a rival of Tesla Motors (Nasdaq: TSLA), has been dogged by delays in launching a new electric luxury sedan, but the sedan should finally reach customers this summer.

A123 has also announced that a major unnamed automaker has signed up as a customer. Investors await more details about this mystery customer and to what type of deal both parties have agreed. But this news could help clarify why analysts think that after several years of disappointment, A123 is likely to see sales more than double in 2011 to around $200 million and double again in 2012. If that comes to pass, then A123 will be close to break-even and won't need to raise any more cash.

With the stock now more than 75% from its late 2009 peak, these catalysts highlight that shares now hold more reward than risk.

Action to Take –>
When you swing for the fences, you can also miss. Each of these stocks may prove to be dead money if these catalysts fail to develop. Yet they do appear to have found a floor at these levels, so investors aren't absorbing the usual amount of risk when looking at swing-for-the-fences-type stocks.


– David Sterman

P.S. — We've just identified six surprising events that could break your portfolio wide open in 2011. Knowing these pivot points in advance lets you focus your investing strategy like a beam of light in the dark… and make a lot of money in a hurry. Get them free by simply watching this video presentation.

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
3 Small Caps That Could Double This Year

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3 Small Caps That Could Double This Year

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Two Collapse Scenarios

April 20th, 2011

Claus VogtNever before has the government’s manipulation of financial markets created greater dangers — and opportunities — for investors!

How do we know? Because lesser manipulations in recent years have already proven to be disastrous.

They led to a stock market bubble and bust in 2000 … to an even larger housing bubble and bust in 2007 … and then the greatest banking crisis of our lifetime in 2008.

Nothing Learned

What’s most ironic is that, despite those obvious failures, now those very same policies — even larger in scope than ever before — have led to still another massive bubble, this time in the one asset that, until now, had been considered above the fray: U.S. government debt.

We know how disastrous the sovereign debt crisis has been in Europe. We know that the United States government’s finances are definitely not in better shape. And we also can anticipate that a bust in U.S. debt could make the housing and banking crisis of 2008 look mild by comparison.

The only remaining question is not if, but HOW a debt crisis will hit the U.S. as well. I see two possible scenarios …

Bond collapse scenario. Mass psychology in global bond and currency markets drive the action.

One night, you go to bed thinking that the majority of market participants retain confidence in government debt, more than enough to prop up bond markets forever.

Then, the next morning you wake up to discover that the global confidence in the U.S. has been shattered by a singular event, and all hell is breaking loose.

Borrowing becomes next to impossible or prohibitively expensive. Banks fail. The financial system as we know it unravels. The economy plunges into another recession.

A video replay of 2008? No. Because this time governments do not have the will or the means to fight it.

Recession scenario. We wind up essentially falling off the same cliff as in the bond collapse scenario, but we get there via a different pathway.

This scenario begins where the first scenario ends — with a double-dip recession.

The recession guts government tax revenues, bloating the federal deficit even further.

And this is what leads to a government funding crisis, much as it has for many cities and states around the U.S.

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Which Scenario Will it Be?

Still too soon to say. But we already have some evidence that BOTH are in process.

S&P’s warning on Monday, putting the U.S. government’s debt outlook on “negative” status, was just one more reminder of the unfolding debt crisis scenario.

Meanwhile, we also see abundant new signs of the double-dip recession scenario:

  • Inflation: Historically rapid rises in inflation have consistently triggered a recession, or at a minimum, severe bear markets or crashes. Since inflationary pressures are clearly on the rise, this indicator is a clear warning sign.
  • Severely rising crude oil prices have also been associated with recessions in the past. Increases of more than 150% in two years rarely happen. But when they do, a recession isn’t far off. So this indicator is currently also in “recession warning” mode.
  • The U.S. housing market has started to fall again. And the mortgage credit reset schedule seems to assure much more downward pressure during the next 12 to 15 months. This doesn’t bode well for the housing market itself, the banking sector, or the economy. Indeed, a sustainable economic recovery with an ongoing price slump in housing is highly improbable.
  • Then we have rising interest rates. In both the U.S. and in Europe the bond market is driving longer term rates up. And in emerging markets, central banks have long started with restrictive monetary measures, hiking interest rates and reserve requirements. Needless to say, rising interest rates can trigger bear markets and recessions.

These are four strong reasons for another economic downturn in the not-too-distant future.

With governments already massively over-indebted …

With inflation expectations on the rise, and …

With central banks starting to jack up interest rates …

I doubt the governments of Europe or the U.S. can pull another rabbit out of the hat. Soon the stock market will feel the pressure, and the economy would likely follow.

My recommendation: If you’re overloaded with stocks, use inverse ETFs like the ProShares UltraShort Financials ETF (symbol: SKF). They’re easy to buy. You can never lose more than you invest. And they’re a very good hedge.

Best wishes,

Claus

Read more here:
Two Collapse Scenarios

Commodities, ETF, Mutual Fund, Uncategorized

A New Economic Paradigm

April 20th, 2011

Since the 1980s, a culture of debt has arisen in the United States. That change was the consequence of a misguided trade policy that gave rise to a current account deficit of unprecedented size. Between 1982 and 2008, the United States imported $7.4 trillion more than it exported. It financed the shortfall on credit. That credit transformed the structure of the US economy.

Every country’s balance of payments must balance. Thus, between 1982 and 2008, $7.4 trillion in foreign capital entered the United States to finance that deficit. That amount was considerably more than the entire amount of US government debt held by the public at the end of 2008, $5.8 trillion. As the money flowed in, it created a credit-fueled economic bubble—just as foreign capital inflows blew Latin America into an economic bubble in the 1970s and the Asian crisis countries into economic bubbles in the 1990s.

In the process, the structure of the US economy changed. The manufacturing sector was decimated when exposed to ultra-low-wage foreign competition, while the service sector came to dominate the economy and employment as credit-driven asset price inflation created the wealth that made many of those services profitable.

Consequently, over less than three decades, as the US trade deficit grew to previously unimaginable levels, the country’s economic growth model became one of credit-financed consumption that depended on ever-increasing amounts of credit each year to sustain it. In 2008, when the private sector could no longer bear the burden of so much debt, that economic paradigm collapsed.

That paradigm of debt-fueled consumption can never be resuscitated. The US economy is now on government-funded life support that cannot be paid for over the long run. The limited nature of government resources makes it inevitable that a new economic paradigm will emerge over the next five to ten years. The future of the United States—and the rest of the world—will be determined by the form that new paradigm takes.

Regards,

Richard Duncan
for The Daily Reckoning

P.S. For additional details, please see The Corruption of Capitalism, Chapter 10: “America Doesn’t Work.”

A New Economic Paradigm originally appeared in the Daily Reckoning. The Daily Reckoning recently featured articles on stagflation, best libertarian books, and QE2

.

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A New Economic Paradigm




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

How I Hedged Summer Gas Prices with ETFs

April 20th, 2011

gas-pump

With oil prices hovering over $100 per barrel again and the summer driving season approaching, Americans are rightfully fretting over what they’re going to be paying at the pump as tensions continue to flare in the Middle East and the nuclear accident continues to unfold in Japan.  Gas prices tend to rise annually during the summer driving season anyway, so it shouldn’t come as a surprise if prices continue to rise from the current levels of close to $4 in many states.

There are various ways to hedge your own energy costs which I penned a while back, but since I just did a transaction last week, I thought I’d share the actual details.  Of the various ways to hedge energy costs, I chose to focus directly on gasoline prices since there isn’t always a direct correlation to oil prices given the refining situation in the US.  Maybe it’s just me, but it always seems like gas prices are quick to rise when oil rises, but slow to fall when oil declines.  Additionally, if refining capacity were to become constrained again, gas prices could remain high while oil prices dropped.

Therefore, I used the best proxy for gas prices out there, the gas price ETF with ticker symbol UGA.  While one approach would be to buy shares of UGA, I chose to sell a put option.

Transaction:

  • I sold 2 UGA Jul 16 2011 50.0 Put Options for 1.90 each
  • UGA was trading at around $53 per share at the time of the trade and 52.45 as of Tuesday’s close
  • Income = $380 net of commissions

Outcomes

I know, this isn’t a big trade, this is more of a personal finance balancing act.  Our family only consumes a few hundred dollars in gas a month, so if gas prices spike, the $380 will help blunt the increase.  Should they decline, then I’m paying less out of pocket even though I may lose money on the trade.  In order to lose money on the trade actually, at expiry in July, UGA would have to be trading at (50-1.9 = 48.1) $48.1 per share or less.  So, if UGA closes at $49, which would mean gas prices declined almost 10% from today’s price, you’d get to keep the full premium.

This method is essentially what businesses and municipalities do on a larger scale though.  If you’re running a business that relies heavily on gas prices, you may want to hedge in this fashion (airlines do).  If your input costs are heavily dependent upon any other raw material, if you can hedge it, you may want to do so to smooth out operational risks.  There are numerous commodity ETFs to choose from to see where else you can hedge costs that impact you – food, coffee, oil, you name it!

Do You Hedge Anything?

ETF, OPTIONS

Expiring Monthly April 2011 Issue Recap

April 19th, 2011

The April edition of Expiring Monthly: The Option Traders Journal was published yesterday (in keeping with our practice of publishing on the Monday following options expiration) and is available for subscribers to download.

In this month’s issue I author the feature article, Exploring Put to Call Ratios. This is somewhat of a departure from the bulk of the content of the magazine, which continues to focus on options as trading vehicles. For many of us, however, options are not only highly flexible trading vehicles, but also the source of quite a few slices of data that can serve as indicators, most notably the VIX and put to call ratios.

Some of my favorite articles in the current issue of Expiring Monthly include a Mark Sebastian interview noted options guru Larry McMillan; a guest article on the CBOE PutWrite Index (PUT) from Jason Ungar; and a thought-provoking piece from Jared Woodard on three volatility plays for the European sovereign debt crisis.

Mark Sebastian also interviews Ping Zhou, a co-author of Trading on Corporate Earnings News and pens the monthly Follow That Trade column, which focuses on position management for an OEX butterfly. Mark Wolfinger continues to be a prolific contributor, speaking out on options brokers are putting limits on customer trading on the last trading day of the expiration cycle, debating the role of options as speculative vehicles and offering some thoughts to the new options trader around risk, timing and money.

All in all I am delighted by the quality of our fourteenth issue, thrilled by the positive feedback I have received from readers, and excited by some of the articles that are currently taking shape for the coming months.

In keeping with tradition, I have reproduced a copy of the Table of Contents for the April issue below for those who may be interested in learning more about the magazine. Thanks to all who have already subscribed. For those who are interested in subscription information and additional details about the magazine, you can find all that and more at (the newly redesigned) http://www.expiringmonthly.com/.

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How to Keep Your Silver Safe

April 19th, 2011

Today I want to give you a street-smart playbook on how to buy and sell physical silver. This is the real stuff, for those of you who like to sleep at night knowing you’ve got the shiny metal in your possession.

Without further ado, I give you the top 4 ways to hold your physical silver…

#No. 1 Safely Keep Your Silver Under Switzerland’s Largest Airport

Gold Switzerland gives you the ability to buy and hold silver while safely storing your personal bullion under Zurich airport in Switzerland. But don’t let the name fool you, these guys are experts in both gold and silver. In fact, their tagline says it best: “The safest way to buy and own gold and silver.”

With an initial purchase of at least 6,000 ounces, you can buy silver and have Gold Switzerland keep an eye on it. Here’s what their 1-2% management fee covers:

  • Vault storage of the silver/gold
  • Insurance of the silver/gold
  • All administrative matters in connection with the buying and storage of the silver/gold
  • Early warning alerts and pre-launch reports on the world economy and precious metals
  • Quarterly statement of the investor’s silver/gold holdings
  • Private investment advice and consultation relating to your investment

Everything is clear-cut with this dealer. You can purchase silver at competitive rates and store it in possibly the safest geographic and political region in the world. Plus, if you’d like to have your personal silver transferred closer to home, Gold Switzerland can organize a secure transport of your bullion.

It’s a one-stop shop for holding silver.

#No. 2 Buy and Sell Coins and Bars with EverBank

EverBank has some of the most innovative accounts the banking world has to offer, and their physical silver options maintain the same high standard.

In an EverBank Metals Select Allocated Account you can buy and sell silver bars and coins. So you can even hold market-friendly, and potentially valuable, coins like American Silver Eagles.

In an allocated account you’ll receive monthly statements describing your personal holdings. Plus, if you’d ever want to take physical delivery of your bars or coins, EverBank offers delivery services.

A key factor to this allocated account is the low opening balance, a mere $7,500. Compared to Gold Switzerland’s 6,000-ounce buy, you’re looking at quite a difference. So this may be the poor man’s way to hold the poor man’s gold.

The last factor that makes EverBank’s offering even more special is that you can hold your silver in an IRA. This is one simple way to help protect and save your retirement nest egg.

Add it all up and EverBank has a very strong offering. You have the option of holding coins instead of plain bullion, you can have your silver delivered AND they offer the IRA option – all for a low initial outlay!

#No. 3 Local Storage in Your Bank’s Safety Deposit Box

The third option I’m sure you’ve heard: simply storing your bullion in a safety deposit box at a bank.

This option has some distinct pros and cons, so let’s take a look….

First, unlike the other two options I’ve mentioned, a local safety deposit box is, well, local. If proximity is a main factor for you in storing your silver then a safety deposit box may be the key.

Heck, I know that I’d like to look at my silver from time to time – maybe even bite a coin or two.

With a safety deposit box you can do that. You can check on your silver with a short trip to your bank – so instead of a monthly statement, you can simply stop in and take a gander. Plus, if you ever have an emergency where you’d need to get a hold of your bullion, it’s as simple as a trip to the grocery store.

Clearly, safety deposit boxes have a few distinct advantages over other remote storage options, but there are also some drawbacks – the main one being that the bank will not insure your physical bullion. You’ll need to have separate insurance on it, which could be pricey.

#No. 4 Making the Markets Work (And Hold Silver) for You

The final option that I’ll share with you comes directly from the commodities market.

You’ve probably heard people say “take delivery” of your silver. This expression comes straight from the commodities markets, which are now run by the Chicago Mercantile Exchange (CME) Group.

The same commodities markets that offer gold and crude oil also offer silver – but this doesn’t have to all be “paper trading.” Instead, you could take delivery of the silver you purchase.

As I mentioned above, one silver bar is 1,000 troy ounces, and the standard CME silver futures contract controls five bars. (If you’d like to see the specs for yourself click here.)

Buying and taking delivery of CME futures contract has several advantages.

First, the contracts are extremely liquid, so you can rest assured that you’re getting a fair price on the silver you’re buying. And second they have storage options if you want to take physical delivery.

For example: you can go directly to the commodities market and buy a silver futures contract for, say, December 2011 (currently trading around $37.70 – a small premium to the current silver price). After purchasing the contract, which by the way would run you $188,500, you can take delivery in December 2011 and have a depository from the CME hold the bullion for you. This option comes with a small storage fee, ranging from $35-$42.50 a month, per contract.

Your personal silver can be held at a few different locations, two of which are HBSC Bank in New York and Delaware Depository Service Company in Delaware. Your bars have serial numbers and can easily be resold – incase you want to hold for a limited period of time.

Another benefit, depending on how you look at it, is that you can initially purchase your silver on margin. So instead of putting up the $200k to purchase your December silver you can put up closer to $10k now, and pay the rest come delivery. Think of it as “lay away” for metals!

Truly, the CME contract and storage may be the lowest percentage cost option for you. But, remember, it requires you to buy 5,000 ounces at a time – a $188,000 investment. I guess it all depends how much of the shiny stuff you want to buy.

So there you have it, four of the best ways to purchase physical silver without the risk of holding it at your house.

Regards,

Matt Insley,
for The Daily Reckoning

How to Keep Your Silver Safe originally appeared in the Daily Reckoning. The Daily Reckoning recently featured articles on stagflation, best libertarian books, and QE2

.

Read more here:
How to Keep Your Silver Safe




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, OPTIONS, Uncategorized

Who Will Win Latin American Communications?

April 19th, 2011

Rudy Martin

The telecom and media sectors in Latin America are in a titanic power struggle — deserving of its own soap opera series.

The end prize here is an estimated 400 million or more Latin Americans using computers, smart phones, tablet devices and similar hardware over the next five years. The key players are a pair of outsized billionaire Mexican personalities and the public companies they steer.

America Movil SAB de CV (NYSE:AMX), the Mexican-based wireless telecom behemoth is controlled by Carlos Slim. It’s the leading provider of communication services in Latin America and one of the five largest in the world in terms of equity subscribers and market capitalization. Slim’s biggest advantage is having a near monopoly with 70% of the Mexican wireless market and substantial access to capital.

In the other corner is Emilio Azcarraga, who owns Grupo Televisa SA (NYSE:TV) which is best known as the premier television broadcaster. He wants to offer a suite of voice, broadband and television services and is already developing plans to do so.

Grupo Televisa recently acquired a 50% stake in the wireless services provider, Grupo Iusacell for $1.6 billion. The acquisition will enable Grupo Televisa to promote its content to the Grupo Iusacell subscribers (4% of the Mexican mobile market). Grupo Televisa also recently bought the 41.7% stake that it does not currently own in cable television company, Cablemas for MXN 4.7 billion (US$397 million). These deals underscore the urgency to build critical mass for competing effectively against a market dominating rival such as America Movil.

But it’s not just a business for two.

Playing the role of antagonists are the Mexican regulators. They denied America Movil’s entry into the television business on its home turf in Mexico, after it outlined aggressive plans to double its pay television customer base to 22 million by 2013. Mexico wants to see more competition to keep costs down.

But don’t count anyone out yet. Given the limited penetration for pay television in lucrative Latin American markets, such as a mere 10% for Brazil, there is enough business to go around for these and more vendors in this market.

So, where are other opportunities in this growing area other than these mega television and telecommunications companies?

One company that has been quietly going about its business is Argentina-based e-commerce portal, MercadoLibre, Inc. (NASDAQ:MELI). I feel that MercadoLibre should be a natural beneficiary of the explosive growth anticipated in the Latin American online advertising market (expected to be $4.2 billion in 2014 from $2 billion in 2010). Plus, the company has been able to leverage its strong brand and gain acceptance in markets outside its domestic shores such as Brazil, Mexico and Venezuela. But there are risks in competing directly with the “Titans” for Latin American entertainment dollars.

The risks in broadband include gigantic capital commitments, unanticipated technological developments and changing consumer preferences that can result in quick obsolescence for major industry initiatives. Hopefully these are more than offset by the rewards of capturing the monthly entertainment, communications and information fees from hundreds of millions of new clients.

An interesting sidebar in this general area comes from recent information from the 2010 U.S. census that Hispanic-Americans accounted primarily for the growth in the nation’s population over the past decade. At the end of last year, the Hispanic population constituted 50 million people (16% of the total population) in the United States.

Now, that proportion is set to balloon to an incredible 29% by 2050, a huge market opportunity in my view.

Other U.S.-based broadcasters agree, such as the NBC Universal division of Comcast Corp. (NASDAQ:CMCSK) and the Fox unit of News Corp. (NASDAQ:NWSA). They have moved quickly to attract eyeballs by launching channels that specifically produce content for the Hispanic population.

Consider what would happen if you could combine an attractive Latin American market with the growing U.S. Hispanic market. That’s exactly the dream behind the 2010 Televisa and Univision deal.

Finally, just imagine what happens when MercadoLibre one day announces it can and will stream videos and movies via the internet. Or that it has a market-dominating online game in Spanish or Portuguese like QuePasa (QPSA). Stay tuned.

Rudy Martin, editor of Emerging Market Winners, is widely recognized as an authority on stock and ETF investing. With more than 25 years of investing experience, Rudy started his investment career by co-managing a $2 billion private equity portfolio for Transamerica. He also served as an analyst for DeanWitter and Fidelity Investments, and research director of a quantitative research firm that is now part of TheStreet.com. Recently he has been providing his investment ideas directly to a select list of global hedge funds as Managing Director of Latin Capital Management, an institutional money management firm with more than $180 million in assets under management. For more information on Emerging Market Winners, click here.

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Who Will Win Latin American Communications?

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