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Posts Tagged ‘history’

Necessary Actions To Take BEFORE The Ebola Panic Starts

August 10th, 2014

biohazardMac Slavo: The Ebola virus is spreading and no one in any position of authority is releasing information to the public about how serious of a contagion this is. Read more…

Defense, Government, Healthcare, World News

Health Care Workers Fighting The Virus Are Getting Infected

August 6th, 2014

Ebola-YouTube-300x180Michael Snyder: Something is different this time.  This is the worst Ebola outbreak in recorded history, and this particular strain appears to be spreading much more easily than others have.  So far, 1,323 people have been infected in the nations of Guinea, Liberia, Nigeria, and Sierra Leone Read more…

Defense, Government, Healthcare, World News

25 Facts About The Ebola Virus You Need To Know

August 6th, 2014

Ebola-Nightmare-Public-Domain-300x300Michael Snyder: What would a global pandemic look like for a disease that has no cure and that kills more than half of the people that it infects?  Let’s hope that we don’t get to find out, Read more…

Defense, Government, Healthcare, World News

10 Examples Of How Clueless Our Leaders Are About The Economy

March 13th, 2013

obamaThey didn’t see it coming last time either.  Back in 2007, President Bush, Federal Reserve Chairman Ben Bernanke and just about every prominent voice in the financial world were all predicting that we would experience tremendous economic prosperity well into the future.  In fact, as late as January Read more…

Consumer, Economy, World News

Monster Sinkholes An Indication That Major Earth Changes Are Coming Along The New Madrid Fault?

December 2nd, 2012

Michael Snyder: The most powerful earthquakes in the history of the United States happened along the New Madrid Fault in 1811 and 1812.  Those earthquakes were reportedly Read more…

Economy, World News

Steroids Wearing Off! Key Sectors Slumping! Urgent Action Required!

June 10th, 2011

Mike LarsonI’ve been a huge football fan for years. I started watching Dallas Cowboys games when I was five because I loved the star on the team’s helmets. I cheered for the Miami Dolphins because I live in South Florida. And then after I went to college in Boston, I adopted the New England Patriots as my team — an affiliation that carries to this day.

One thing I’ve always hated to see was when the game would be corrupted by steroids. I remember when Lyle Alzado of the Los Angeles Raiders struck fear into the hearts of opposing teams in the early 1980s. But it turned out his aggressive style of play and incredible strength turned out to stem largely from drug use. He died a broken man of brain cancer at 43.

It’s not just football, either. How many baseball greats are now turning out to be nothing more than juiced-up pretenders? Heck, even cycling great Lance Armstrong is under a cloud today due to doping allegations made by former teammates.

It’s truly sad, and in the end, what’s the point? Why try to get an unfair edge if it just ends up killing you in the end? Or if your medals and rings and trophies just get stripped away?

Why am I bringing this up?

Because we’re seeing the same, sorry thing happen here to the U.S. economy! Washington has been trying to pump the economy full of easy money for the better part of two years now. Yet it hasn’t worked! And despite all that, the addicts on Wall Street are once again jonesing for another hit!

What’s going to happen in the markets as a result? What does this mean for you? And most importantly, what can you DO about it? Here’s my take …

Why You Can’t Keep Propping
up an Ailing “Player” Forever

Beginning in March 2009 and continuing all the way through present day, Washington has been trying to juice the economy. It began with the bogus “stress tests.” They helped spike the value of bank and real estate stocks, allowing companies to sell equity and buy themselves some time.

We were told the trillions in stimulus programs would cure our economic woes.
We were told the trillions in stimulus programs would cure our economic woes.

It continued with the $1.25 trillion QE1 program … the $600 billion QE2 boondoggle … payroll tax cuts … the HAMP mortgage modification effort … an almost-$900 billion economic stimulus bill … and more.

We were told these would drive unemployment down substantially.

We were told these would prevent a double-dip in housing.

We were told these efforts would — for once and for all — plug the massive balance sheet holes in the banking system.

We were told there would be virtually no negative side effects.

And we were told months ago that the economy had entered a self-sustaining, healthy recovery.

But Treasury Secretary Timothy Geithner … Federal Reserve Chairman Ben Bernanke … President Obama’s economic advisors … and virtually all the major Wall Street economists got it wrong. All we did was pump the economy up with monetary steroids — buying us some short-term performance at the cost of long-term health.

We’re now $14.3 trillion in debt, and Geithner is raiding every government account he can to keep us under the debt ceiling. Plus, we’re running up a trillion-dollar deficit for the third straight year, something no country in the history of the world has ever done.

And what do we have to show for it?

  • A confirmed double-dip in housing,
  • A rising cost of living,
  • A renewed jobs market threat, with unemployed Americans taking a record-long amount of time to find work,
  • And a fresh roll over in bank stocks, with companies like Bank of America giving up every penny of gains they’ve made in the last two years.
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Wall Street’s Plea: “Brother, Can
You Spare Some More QE?”

Bottom line: The print, borrow, spend program is NOT working! Yet in the wake of the dismal May jobs report, Wall Street is back to begging Helicopter Ben Bernanke for more free money! And when they don’t get it, like some spoiled kid, they take their toys and go home.

On Tuesday, the Fed chairman offered no hint that QE3 would be forthcoming.
On Tuesday, the Fed chairman offered no hint that QE3 would be forthcoming.

Just witness what happened late Tuesday …

Bernanke gave a speech on the economic outlook at the International Monetary Conference in Atlanta. He said the economy appeared to be weakening again, but failed to promise QE3. Result? Stocks rolled over into the close.

Meanwhile, the same economic “experts” like Paul Krugman who told us that if we just borrowed, printed and spent enough money, everything would be fine, are still at it. They’re asking for even more of the same medicine that didn’t work in the past … twice!

Look folks, the plain, unvarnished truth is that our economy needs a long period of convalescence to heal. We need to work off the massive excesses built up during the tech stock and real estate bubbles. All the steroids in the world won’t do the trick!

Fortunately, you CAN take steps to protect yourself. You can avoid losing money if stocks and the economy sink. In fact, you can turn lemons into lemonade and rack up profits from fading sectors like real estate, banking, consumer durables, and more.

That’s what I’m already helping my subscribers do — and if you’d like to join them for just $2.73 per day, click here to learn more.

Your other option?

Sit by and do nothing while Washington and Wall Street sink further into the debt, deficit, and downturn abyss. I trust that sounds as unattractive an option to you as it does to me.

Until next time,

Mike

Read more here:
Steroids Wearing Off! Key Sectors Slumping! Urgent Action Required!

Commodities, ETF, Mutual Fund, Real Estate, Uncategorized

Expiring Monthly May 2011 Issue Recap

May 27th, 2011

A quick reminder that the May edition of Expiring Monthly: The Option Traders Journal was published earlier this week and is available for subscribers to download.

This month’s feature article, Understanding Order Flow, Part One: Reading It, is authored by Mark Sebastian and delves into subjects such as the impact of large trades on implied volatility and skew. Mark will be back with part two of this illuminating feature in the June edition.

Another article that breaks new ground and offers more than a few surprises is Jared Woodard’s Why Black-Scholes Is Better Than We Think, which evaluates how robust the Black-Scholes model is in the context of delta hedging.

One of my favorite parts of the magazine is the interview segment. This month Mark Sebastian interviews TradeKing Chairman and CEO Donald Montanaro. Their conversation traces the history of the discount brokerage industry, the role of options in the discount brokerage world, and the evolution from bricks and mortar to online options trading.

In this month’s issue I am responsible for three articles. The one I enjoyed the most I call Cheating with Partial Hedges, which explores the subject of creating custom portfolio hedges which minimizing cost and risk, while maximizing coverage where it matters most. I also was responsible for the monthly Follow That Trade column. This month I follow a silver and gold pairs trade that combines some bottom-fishing characteristics with a short implied volatility flavor. Last but not least, in the Wolf Against the World column I square off with Mark Wolfinger (whose New Options Trader column is a great resource for those who are new to trading options) to debate the merits of using technical analysis in trading options. My argument relies heavily on the use of TA for position management and exits.

In keeping with tradition, I have reproduced a copy of the Table of Contents for the May 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/.
Related posts:


[source: Expiring Monthly]

Disclosure(s):
I am one of the founders and owners of Expiring Monthly



Read more here:
Expiring Monthly May 2011 Issue Recap

OPTIONS, Uncategorized

An Unstoppable Trend – Three Ways to Play it

May 26th, 2011

A few months ago, I hopped on a train to NYC to check out Gabelli’s 16th Annual Aircraft Supplier Conference. I find these conferences are a great way to learn a lot about the leading companies in an industry in a short amount of time. Among the 14 companies presenting were some industry heavyweights like Honeywell and Boeing.

I have a favorable view of aircraft suppliers in general. And I think this may be a good spot to drop some lines and fish for winners. There are many reasons for my optimism. For starters, the long-term growth trends of air traffic show no signs of slowing down. Since 1977, revenue passenger miles (RPMs) have grown about 5% per year. RPM is an industry measure of air traffic. It is simply the number of paying passengers, times miles flown.

After dipping during the 2008-09 crisis, RPM is on the march again. In fact, it seems to be making up for lost time. More passengers and more miles mean more planes. That’s the simplest reason to like aircraft parts suppliers. Secondarily, the industry retires hundreds of planes every year. And there is renewed demand for more fuel-efficient aircraft.

International Revenue Passenger Miles for US Carries, Dec. 1996 to Feb. 2011

Put it all in a pot and you understand why the backlogs of Boeing and Airbus for new aircraft are very healthy. Over the next several years, these two companies are on pace to deliver more than 1,000 new planes per year. Looking out over the next 20 years, the airline industry as a whole will need more than 30,000 new planes. That’s about $3.6 trillion in new business for the aircraft industry.

The main drivers of all this growth, though, are the billions of new consumers from emerging markets, in particular the Asia-Pacific region. Boeing expects air traffic in the Asia-Pacific region to grow more than 7% per year over the next two decades.

Estimated Annual Growth of Airline Traffic from 2010-2029

So that’s a big-picture view of why I like the industry. As to particular ideas, I’m looking over a bunch: Parker Hannifin, Curtiss-Wright and Hexcel. To be clear, I have not recommended any of these stocks to my subscribers. But I am keeping a close eye on them.

Let’s start with Parker Hannifin (NYSE:PH). It is more of a conglomerate than a pure play on aerospace. Only 18% of sales come from aerospace, but it does so many important things it’s worth talking about. As the senior vice president put it at the Gabelli Conference, “Parker Hannifin is uniquely positioned to address the challenges of mankind.” He then ticked off a list of things including food, water, energy and more. PH essentially makes components to control fluids, hence its broad applicability to everything from water to the fluids of an aircraft.

PH gets more than half of its business from overseas markets. It also gets half of its revenues from aftermarket sales – for things like parts and service. These are stable sources of high-margin business. I like businesses like this.

PH is an old American workhorse whose track record I admire. The company began in 1918 when 33-year-old engineer Arthur Parker rented a loft in Cleveland to develop his unique braking system for trucks and buses. From that humble beginning, PH is a $10 billion business today.

At the conference, PH handed out a pamphlet that showed about a dozen different stats – things likes sales, profits, employees, book value, debt to equity – going all the way back to 1945. Those stats had me floored. You could read a chunk of the history of the nation in these fluctuating numbers, like the width of tree rings serve as a record of the fat years and the lean.

PH has boosted its dividend for 54 years. It has a long track record of steady cash flows. At $87 per share, it trades for about 15 times its 2011 earnings estimate. Analysts are looking for a plump 17% jump in earnings in 2012. International sales account for nearly half the company’s revenue, thereby providing a nice built-in hedge against future dollar weakness. It’s a good company and we may get involved at some point.

Another old American hand I like is Curtiss-Wright (NYSE:CW). The company goes back 80 years when companies created by Glenn Curtiss and the Wright Brothers merged. Lots of people know the Wright Brothers’ story, but Glen Curtiss’ story is less well known. He was a brilliant inventor who brought many innovations to flying.

Curtiss-Wright makes many mission-critical systems for aircraft. It also makes pumps, valves and motors for submarines, aircraft carriers and more. Finally, the company has a good nuclear business in which it makes parts for reactors. In this, Curtiss-Wright is a kind of picks-and-shovels play on the nuclear power.

The company has been growing rapidly of late. Sales have grown 20%-plus over the last five years. Like PH, Curtiss-Wright is another reasonably priced industrial. At the current quote of $33.35, the stock sells for less than 14 times trailing earnings and about 11 times next year’s guess.

Finally, there is Hexcel, which trades on the NYSE under the ticker HXL. Hexcel makes advanced composites made of carbon fibers and glass that make an aircraft lighter, stronger and faster. The company also uses this know-how to make components for the wind power industry.

Hexcel has been growing about 10-15% per year for the last few years. But earnings should grow 20%-plus this year. Hexcel’s composites are popular, given the demands for more fuel-efficient aircraft. The new planes have 10 times the composites of older aircraft. And the wind power business is a growth area, too.

The story doesn’t seem to be much of a secret, though. Hexcel’s shares trade for 16 times next year’s earnings per share guess. But it’s one to watch. I’ll be keeping a close eye on this sector.

Regards,

Chris Mayer,
for The Daily Reckoning

An Unstoppable Trend – Three Ways to Play it originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
An Unstoppable Trend – Three Ways to Play it




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

Storm Warning! Part II

May 20th, 2011

“Your predictions have become soundly validated, yet that means the dire outcome you feared is arriving,” Chris Martenson remarked in a recent Q&A with Addison Wiggin. “What’s it like for you to be at this time in history?”

Addison answered that question – along with many others – in yesterday’s edition of The Daily Reckoning. Today’s edition features additional insights from Addison in the second and final installment of his Q&A with Chris Martenson.

Addison Wiggin: When you look at monetary history – or even the history of empires as we did in Empire of Debt – every 50, 60, 70 years there’s a major shift in the reserve currency of the world, in the dominant financial structure of the world, and we’re coming up on that now…

So I’ve been suggesting for a long time, and I still think it’s true, that whatever’s going to happen next, it’s not going to happen without even a higher degree of uncertainty than what we’ve seen over the last couple years. And the little skirmishes that we have going on in the Middle East and the two “hot wars” that we’re involved with in Iraq and Afghanistan, I think they’re just precursors to something bigger, which will accompany a shift from the US as the dominant financial player in the world to something else, which will likely be some kind of sharing of financial structures with China, and possibly India.

And it’s probably going to get a lot uglier before we get to anything that resembles peacetime and normalcy.

Chris Martenson: So we have a period of adjustment, somewhere between here and there, we’re going to see some sort of a falloff in living standards, I would guess, if we hold the view that the United States and other advanced economies have essentially been living beyond their means. That means that they have to live below their means for a period of time, and that’s where you see disruption, volatility. Is that fair?

Addison Wiggin: Yeah, I think that’s fair, and I do think a reduction in our expectations of our standard of living is inevitable…People have grown to expect things that even a generation ago just wouldn’t even be considered possible. But those credit cards are starting to run out. So I think we can expect a downward revision of expectations…

Chris Martenson: Many people choose to look at that message and say, “Oh, that’s unpleasant.” But it just happens to be reality to me. With change, there’s always crisis, but there’s always opportunity, lots of opportunities out there… When I look at the future I say, “Oh, here’s what we’re going to stop doing; here’s what we’re going to have to start doing; here’s what we’ll continue doing.” Getting the big sweeps of [these trends] correct, I think, is the best thing to do…

Addison Wiggin: Right, and one of the central tenants of the Agora Financial strategy is that while we identify a lot of the problems that are arising – mass approach to government, mass approach to the auto industry, and other artifacts of the 20th Century – we also identify the resulting opportunities… In a way it’s a positive thing that some of these massive, archaic government structures are crumbling and meeting their demise, because that allows for people to become more nimble, and take advantage of opportunities that would otherwise be swallowed up.

Chris Martenson: Oh, I completely agree. I’ve heard you’re working on another documentary set for release later this year. Does any of this tie in, and can you tell us a little about it?

Addison Wiggin: It does. It ties in, absolutely ties in, because as we were making our documentary, I.O.U.S.A., I kept hearing this mantra, “We’re going to grow our way out of this,” as if there was a one-size-fits-all solution to the fiscal problem… I kept hearing that phrase and it just made me think, “Well who are going to be the people that help us grow our way out of this?” Predominantly, that’s entrepreneurs. Most job creation, most new ideas, most innovation comes from entrepreneurs who are willing to take a risk with their own time, with their own money…

So I wanted to look and see what entrepreneurs were thinking and doing in the post-crisis time, 2008 to 2009. And for a case study, I’m using this company called Odyssey Marine that looks for gold at the bottom of the ocean. I like the metaphor of Greg Stam and his crew going out into the ocean, and using very sophisticated technology that they had to develop themselves, looking for gold at the bottom of the ocean in these shipwrecks. They have to have historians and oceanographers and people that understand how tides work and it’s a very sophisticated enterprise.

And in 2007 they found $500 million worth of silver and gold coins at the bottom of the ocean off the coast of Gibraltar. They were immediately arrested by the Spanish government, hauled into Gibraltar, and now even to this day in court trying to [keep what they found]… They’ve been tied up all this time and in all these kinds of political shenanigans. So to me, the story of Odyssey Marine is a good metaphor for the types of challenges that entrepreneurs across the economy have faced since the housing bubble collapsed and everybody has realized that house prices and stocks don’t go up forever. There has to be something else moving in the economy in order for prosperity to take place.

Chris Martenson: I’ve been thinking on this theme in a slightly different direction which is that if you really want to dig out from a bunch of debt and you want to grow your way out, you need something transformative typically. Railroads at one point, steam engines at one point, maybe the Internet at another, but something. And I’ve just been wondering, where is this technology? I don’t see it right now. We’re doing incremental improvements. iPhone 4 is awesome, but not that much greater than iPhone 3, etc.

So where everybody is poised and ready and waiting for that transformation to come, I don’t know what it is at this stage. It could be in technologies around alternative energy. It could be in transforming our society away from liquid fuels based on petroleum to something else, possibly like you said, a basket of things. But we’re not doing it yet. And so the longer we wait, the more concerned I become that what I think you’re chronicling in this documentary is really just governments sort of leaning on entrepreneurs saying, “Can we squeeze this rock a little harder?”

Addison Wiggin:
Right. One area that is a potential transformative area, we look at the work that Juan Enrique has been doing in turning algae into methane. Juan Enrique is a venture capitalist based out of Boston who helped to put together the financing for decoding of the genome.

And his big idea is that the thing that sort of saved the US economy in the 1990s was the movement from analog into digital. We transformed almost every industry into a digital industry in a very short period of time and it created a lot of jobs. It created a lot of new ways of thinking. It created new areas of innovation and it spurred on an era of enhanced computational abilities, which is now giving us the ability to solve even greater problems at a faster speed. Juan Enrique believes that the next phase that we’re going to see is a transformation from digital to life sciences.

They can now program genetic code and come up with new ways of producing things that are synthetic strands of code. And there are amazing things that they can do. Right now, they’re experimenting with programming the genetic code of algae to produce methane, harvesting the methane and using that as an alternate energy. It’s been advertised widely on Exxon commercials on TV because they dumped a bunch of money in there.

But that’s just one example of the kind of transformative things going on. We have a newsletter called Breakthrough Technology Alert, edited by a gentleman named Patrick Cox, who has been around in these transformative fields for many, many years – looking at companies that are coming up with new and interesting ways of solving basic problems of society. From our perspective, that whole area of transformative technology is potentially the greatest source of new companies and entirely new economies if we’re going to reinvent ourselves once again, it’s likely to come from that area.

And that’s where we’re looking most deeply for investment ideas. But also the knock-on effect would be that the economy might be able to grow and produce the kind of income that we need to address the other issues. Although I have to say that Patrick takes a much more dire look at what we would call the Welfare State. He thinks it can’t sustain itself the way it is and it’s likely just to get destroyed in the next wave of transformative evolution, and that’s a good thing in his opinion. Let’s get rid of that old, archaic way of looking at things and get onto the business of producing new products, new ideas, and innovations that can actually help people.

Chris Martenson: Great! Thanks, Addison.

An Addison Wiggin interview,
for The Daily Reckoning

Storm Warning! Part II originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
Storm Warning! Part II




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 1980 copy of Playboy Predicts the Future for Silver

May 12th, 2011

Last night I lay back on my couch and had a couple of glasses of red, while reading an article from 1980 about the Hunt brothers and the events that surrounded the last spike in Silver to $50.

I found the article while surfing the web for financial news so I take no responsibility for the fact the original article was found in Playboy. Everyone reads Playboy for the articles, right?

It was a fascinating article and well worth the read for anyone interested in the markets. You can find the article here.

A short synopsis of the story is that the Hunt brothers, and in particular, Nelson Bunker Hunt, bought so much silver in the mid to late ’70s that they nearly cornered the market.

They bought 55 million ounces in late 1973 and early 1974 at around $3-$4 an ounce and sent 40 million ounces of it by chartered plane to Switzerland because they feared the US government would confiscate silver in the same way it had stolen gold from US citizens in the 1930s.

The rationale for their buying made perfect sense. Nixon had taken the dollar off the gold standard, so it was now a purely fiat currency. The Hunts feared that their wealth was going to be stolen by the printing presses and they wanted to protect their immense inheritance (their father made billions in oil).

They continued buying over the ensuing years and even went into partnership with some Saudi Sheiks. They set up a Bermuda-based trading company called International Metals Investment Company Ltd. The firm listed four principals: Nelson Bunker Hunt, William Herbert Hunt, Sheik Mohammed Aboud Al-Amoudi and Sheik Ali Bin Mussalem. Rumours were that they were also backed by some very wealthy Sheiks who didn’t want to be named.

This firm was incorporated in the summer of 1979 just prior to the immense spike in silver. They bought 90 million ounces of silver through the partnership and also wanted to take delivery of the silver. Over the next few months, the silver price spiked sharply (from $8 to $16 during August and September 1979) and there were fears of a squeeze on silver supplies. The commodity exchanges were worried that they would not be able to make delivery of contracts in silver bullion when they came due.

This is where it gets really interesting. And we can see some parallels to the current price action in silver…

As stated in the article, “The boards of both the Chicago and the New York exchanges were composed not only of ‘outside’ directors but also of representatives of the major, usually Eastern-based brokerage houses. Later testimony would reveal that nine of the 23 Comex board members held short contracts on 38,000,000 ounces of silver. With their 1.88 billion dollar collective interest in having the price go down, it is easy to see why Bunker did not view them as objective regulators.”

As the price of silver continued to climb the regulators began changing the rules. First the Chicago Board of Trade (CBOT) raised the margin requirement and declared that silver traders would be limited to 3 million ounces of futures contracts. Traders with more than that would have to divest themselves of their excess futures holdings by mid-February 1980.

The price of silver really started to shoot to the sky now because there was a perceived silver shortage. By the end of 1979 the price stood at $34.45.

On January 7, 1980 the Comex changed the rules. The exchange announced new position limits for futures contracts of 10 million ounces. The effective date for the limits was February 18, 1980. After this announcement, the price climbed higher and the Hunts kept buying. On January 17 silver hit $50 an ounce.

On January 21, the Comex announced its coup de grace, saying that trading would be limited to liquidation orders only. No, I’m not kidding. The exchange changed the rules so that no one was allowed to open any new positions from that point on. You could only liquidate open positions. The next day silver fell off a cliff and plunged from $44 to $34.

To cut a long story short the price kept falling and the Hunts couldn’t cover their margins on the futures they had bought. The Fed stepped in for fear that a huge financial panic was about to ensue and lent $1.1 billion to the Hunts to cover their margins but demanded huge collateral for the loans.

Nelson Bunker Hunt eventually went bankrupt in 1988.

Fast-forward 30 years and the silver price has once again scaled the heights to $50 an ounce. The exchanges changed the rules to increase the margin requirements and the price of silver has plunged 27% in a week. There are rumours that JP Morgan holds an immense short position in silver that was feeling the pinch.

What better way for them to relieve the pressure than to turn the screws on the long positions by raising the margin requirements substantially and then pick up the pieces at their leisure?

After reading the history of the Hunt brothers and seeing that the futures exchanges change the rules of the game after the fact, you have to view the current price action in silver with a little more skepticism.

In 1980, the fall was due to the exchange’s desire to hurt a big player who was long. Today’s move I believe is more about protecting the position of an insider who is short and hurting.

Therefore, I think you would have to say that chances are high that the price of silver will once again scale the heights if the players who are short use this sell off to cover their short positions. There is still a lot of pent up demand for precious metals and central banks continue to print.

I would not be surprised to see silver flat line for a few months during this seasonally weak period for metals and after taking such a hammering, but there will be a time in the next few months when silver will be a bargain.

Regards,

Murray Dawes,
for The Daily Reckoning

A 1980 copy of Playboy Predicts the Future for Silver originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas. Bill Bonner, the founder of the the Daily Reckoning released his latest book Dice Have No Memory: Big Bets & Bad Economics From Paris to the Pampas in April 2011.

Read more here:
A 1980 copy of Playboy Predicts the Future for Silver




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

This Momentum Stock Could Gain at Least 35%

May 12th, 2011

This Momentum Stock Could Gain at Least 35%

Airlines are one of those industries that just don't get any respect from investors. These long-suffering companies have a history of losses and usually carry a lot of debt. Billionaire investor Warren Buffett took notice of these qualities and summed it all up when he wrote, “The worst sort of business is one that grows rapidly, requires significant capital to engender growth and then earns little or no money. Think airlines.” But in an overheated stock market, airlines are just the kinds of stock that actually offer some safety, since they haven't participated in the rapid run-up, and all it takes is a few positive events to send share prices higher.

History shows that after a market tops, the high-momentum winners that led the advance tend to be the ones that decline the fastest. We saw this in 2000 as tech stocks led on the way up and on the way down. Stocks that lag the general stock market advance tend to lose less or even gain during bear markets. So while the market may not be at a top, I think one airline stock in particular — Fort Worth, Texas-based AMR (NYSE: AMR), the parent company of American Airlines — is likely to make money no matter what the stock market does.

The downtrend in AMR's stock price looks like it is about to change. Technical analysis supports a much higher price and momentum indicates the time is right for establishing a position.

Fundamentals indicate that the company is well-positioned to prosper even in a declining economy. While other airline stocks have similar fundamentals, the technical position of AMR is what makes it worth buying now. The chart below shows that momentum is moving higher, and that minimizes the chances of falling for the fundamental “value trap.” Strong technicals show that other investors are already buying, so the stock price may continue to go up. (Many value stocks can languish at low prices for extended periods of time, until other investors spot the opportunity. Buying value stocks with high momentum lowers the risk of holding a stagnant position, which is the equivalent of dead money.)

Management has access to more than $17 a share in cash sitting on its books, almost three times the price of the stock. It's rare to have a chance to buy cash so cheaply. In addition, earnings for the past three quarters have exceeded analyst estimates, indicating the company has become focused on making money. (Big companies like American often seem to lose sight of this priority and pursue growth at any price rather than profits for shareholders.)

The low-earnings estimates reflect a pessimistic view of the company by analysts, and consistently beating those estimates could be showing that the analysts have developed a mistaken impression of management. Several academic studies have demonstrated that positive earnings surprises tend to be followed by stock market gains while analysts catch up to the positive changes being made by the company.

The real story with American Airlines is in that $17 per share in cash, which should help the company survive any type of downturn. The long-term debt is high, totaling about $27 per share, but the short-term debt is relatively low and AMR should be able to refinance at low rates unless rates jump higher. And with the Federal Reserve doing all it can to keep rates down, AMR seems very likely to have access to the money it needs this year.

It's also important to time your buys so you don't sit through large losses. Buying American in January, for example, would have been painful. The stock fell by almost 40% during the first four months of the year. Oil gained 20% in this timeframe, and many investors worried about the impact higher fuel costs would have on airline profits. At this point, the concerns seem to be overdone, and the airlines have shown that fewer flights, luggage fees and other changes have helped them maintain profits.

The chart below helps us see that risk is currently low. Prices have fallen since the start of the year, while the market has gone up. Right now, momentum shows the price has probably fallen too fast, and it is due to bounce higher.

Uncategorized

Memo to Fed: Ignoring a problem doesn’t make it go away!

April 15th, 2011

Mike LarsonFederal Reserve Chairman Ben Bernanke. Fed Vice Chair Janet Yellen. New York Fed President Bill Dudley. Rather than use their official titles, I think I’ll just call them the founding members of the “Ostrich Club!”

Why? Because they’re shoving their heads in the sand and hoping obvious problems will go away, rather than doing anything about them! Specifically, they’re ignoring both anecdotal and empirical evidence that inflation is raging.

It’s nuts!

Here was Yellen in New York on Tuesday:

“Recent developments in commodity prices can be explained largely by rising global demand and disruptions to global supply rather than by Federal Reserve policy … I expect that consumer inflation will subsequently revert to an underlying trend that remains subdued, so long as increases in commodity prices moderate and longer run inflation expectations remain reasonably well-anchored.”

Here was Dudley in Tokyo on Monday:

“We shouldn’t be enthusiastic about tightening monetary policy too soon … If inflation expectations become unanchored, the Fed would have to respond. I don’t see any signs that expectations are becoming unanchored.”

And Bernanke? He said before Congress just over a month ago that:

“The rate of pass-through from commodity price increases to broad indexes of U.S. consumer prices has been quite low in recent decades … Currently, the cost pressures from higher commodity prices are also being offset by the stability in unit labor costs. Thus, the most likely outcome is that the recent rise in commodity prices will lead to, at most, a temporary and relatively modest increase in U.S. consumer price inflation.”

Are These Guys Looking at the
Same Numbers as Me? Really?

So do those Fed claims hold up to reality? Not by a country mile!

Just look at import prices — what it costs for us to bring goods into this country for eventual processing or sale. They surged 2.7 percent in March after a 1.4 percent rise a month earlier. That was the biggest gain in any month since June 2009!

Government inflation figures do not include surging fuel prices.

Government inflation figures do not include surging fuel prices.

Even if you strip out all fuels (since, you know, the Ostrich Club’s bylaws state that none of us drive or heat our homes), you get a 0.6 percent rise. That’s good for a gain of 4.2 percent from a year ago, the fastest rate of non-energy inflation since October 2008!

Then there’s the 10-year “TIPS spread,” the difference between the yield on the nominal 10-year Treasury and the yield on 10-year Treasury Inflation Protected Securities. The wider the spread, the more future inflation the bond market is pricing in.

Lo and behold, that spread just hit 265 basis points (2.65 percentage points). That’s the highest going all the way back to August 2006! It’s also just 13 basis points shy of a post-millennium high, and far above the average 205 basis points seen since long-term TIPS were first sold in the 1990s!

Americans polled by the University of Michigan in March said they expect inflation to run at a 4.6 percent rate over the next year. That’s the highest in 31 months! Five-year inflation expectations have climbed to 3.2 percent, also the highest since mid-2008.

And get this …

According to Shadow Government Statistics, if the Bureau of Labor Statistics still calculated official inflation the way it did a couple decades ago, it’d be surging at a 9.6 percent annual rate. That’s the kind of nearly double-digit inflation we got in the 1970s. And I’m sure it jibes with the kinds of price increases you’re seeing in your daily life.

Bottom line: You have professional investors, companies, average Americans, and virtually everyone else reporting and expecting more and more inflation. Yet Bernanke and his merry pranksters in the Ostrich Club have the unmitigated gall to claim there’s no inflation or inflation fear out there!

They’re using a new buzzword to describe the rise in prices … “transitory.” I don’t know about you, but that sure conjures up memories of the subprime mortgage crisis. A parade of policymakers told us the problems were “contained” back then — when in reality, they weren’t, and we experienced the country’s biggest financial crisis and worst recession in decades!

Epic Cluelessness Just Underscores the
Need for Financial Self Defense!

I’ve been following the financial markets for a long time. I’ve read a lot of lousy research, and listened to a ton of claptrap over the years. But I can honestly say I’ve never seen so much cluelessness and ostrich-like behavior as I’m seeing in Washington right now.

It’s not just Bernanke, Yellen and Dudley who are card-carrying members of the club either. You could throw President Obama’s economic team and many in Congress — on both sides of the aisle — in there too.

Much has been made about the $38.5 billion in budget cuts they finally agreed on a few days ago. We’re supposed to believe this is some great governmental triumph. But the International Monetary Fund (IMF) says that’s balderdash.

The group just warned that the U.S. lacks a “credible strategy” to deal with the exploding federal debt and deficit, and that it has “serious concerns” about what that means for future borrowing costs (read: interest rates) here.

The IMF goes on to note that ours was the only advanced economy in the world that boosted its underlying budget deficit in 2011. In order to slash our deficit in half by 2013 — as the Group of 20 nations pledged to do last year — we’d have to push through the toughest austerity measures in the history of record-keeping (which dates back to 1960).

Will politicians have the courage to make the cuts our country needs?

Will politicians have the courage to make the cuts our country needs?

Look, it took six temporary funding bills … and more than six months of negotiations … to even come up with the $38.5 billion budget-cutting deal. The start of fiscal 2012 is approaching fast, and there’s a huge gulf between what Republicans and Democrats want in that year’s budget. I see virtually no way Congress will pass, and Obama will sign into law, the kinds of extremely austere cuts we need to make.

In the meantime, our nation is getting very close to hitting the so-called “debt ceiling” of $14.3 trillion. And no matter whose budget plan we adopt, that ceiling is going to have to be raised by a huge amount. It will take a $1.9 trillion hike to get us through 2011 under the relatively austere Republican budget blueprint, and $2.2 trillion following Obama’s February budget outline.

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These figures clearly show that our country’s fiscal outlook is rapidly spiraling out of control!

At a time like this, folks, you NEED to implement a strategy of financial self defense …

My Safe Money subscribers just bagged a nice gain on a foreign oil and gas producer, for instance, which I zeroed in on as a beneficiary of the Fed’s easy money policies and the declining dollar. Plus, they’re positioned to make a pile of gains from the explosion in precious metals.

If you’re looking to join them, and want to learn more about OTHER ways to protect yourself from the Ostrich Club, please don’t hesitate any longer. Watch Martin Weiss’ American Apocalypse video online — for free — right away. It gives you all the hard-hitting, practical information you need in these treacherous times.

Until next time,

Mike

Read more here:
Memo to Fed: Ignoring a problem doesn’t make it go away!

Commodities, ETF, Mutual Fund, Uncategorized

3 Stocks in this Sector Could Easily Double

April 8th, 2011

3 Stocks in this Sector Could Easily Double

Between 1970 and 1975, a quarter of companies in the U.S. railroad industry were forced to file for bankruptcy protection. There were simply too many competitors and they could not handle the high levels of government regulation, volatile fuel costs and the billions of dollars it took to maintain thousands of miles of track, locomotives and freight cars.

Since that time, the remaining competitors have steadily merged and there are only seven leading players today. The leading players now have the size and scale to justify high capital expenditure costs and can effectively compete with the trucking industry. A government report stated that railroads have seen productivity gains that have far exceeded the gains seen in other industries and the economy as a whole.

In perhaps the biggest vote of confidence the industry could ever receive, Warren Buffett announced he would spend $26 billion to acquire Burlington Northern Santa Fe, one of the largest companies in the space, in late 2009. Railroads have become great investments.

But I'm not interested in railroads as an investment. I'm more interested in the next sector to follow in their footsteps: the leading U.S. airlines.

This may seem strange, given the history of bankruptcy in the airline industry. Buffett himself once famously called airlines “lousy investments.” But the same could be said about the railroad companies at one time. I think some of the major airlines have turned over a new leaf, so contrarian investors who get in early before the crowd realizes it stand to make a lot of money.

Uncategorized

3 Stocks in this Sector Could Easily Double

April 8th, 2011

3 Stocks in this Sector Could Easily Double

Between 1970 and 1975, a quarter of companies in the U.S. railroad industry were forced to file for bankruptcy protection. There were simply too many competitors and they could not handle the high levels of government regulation, volatile fuel costs and the billions of dollars it took to maintain thousands of miles of track, locomotives and freight cars.

Since that time, the remaining competitors have steadily merged and there are only seven leading players today. The leading players now have the size and scale to justify high capital expenditure costs and can effectively compete with the trucking industry. A government report stated that railroads have seen productivity gains that have far exceeded the gains seen in other industries and the economy as a whole.

In perhaps the biggest vote of confidence the industry could ever receive, Warren Buffett announced he would spend $26 billion to acquire Burlington Northern Santa Fe, one of the largest companies in the space, in late 2009. Railroads have become great investments.

But I'm not interested in railroads as an investment. I'm more interested in the next sector to follow in their footsteps: the leading U.S. airlines.

This may seem strange, given the history of bankruptcy in the airline industry. Buffett himself once famously called airlines “lousy investments.” But the same could be said about the railroad companies at one time. I think some of the major airlines have turned over a new leaf, so contrarian investors who get in early before the crowd realizes it stand to make a lot of money.

Uncategorized

CUBA: Preparing for Perestroika

March 29th, 2011

Dividing Old Havana from Chinatown is Cuba’s Capitolio Nacional, a monumental edifice with a fateful past. El Capitolio was conceived during the Roaring ’20s, when the island led the world in sugar exports and the future seemed sky blue.

President Gerardo Machado dreamed of turning Cuba into the Switzerland of the Americas. He decided that his 4 million countrymen needed a domed capitol building even taller and more ornate than the one he toured in Washington. So Cuba’s Congress dutifully poured 3% of the country’s GDP into their new home. (This would be akin to the US Congress spending $420 billion for a new office today, but let’s not give them any ideas…)

It took 8,000 skilled Cuban laborers just three years to complete El Capitolio, which featured gilt ceilings, a giant diamond embedded into the pristine marble floor and the world’s third-largest indoor statue. However, the showy project couldn’t have been more poorly timed. Work completed in 1929, just as America’s stock market crashed and the Great Depression unfolded.

The Smoot-Hawley tariffs crushed Cuban sugar prices by 74%. When El Capitolio’s ribbon was cut in 1931, Cuba’s economy lay in tatters. Machado was forced out of office, and his dream building would perform congressional service for only 28 years before Fidel Castro’s revolutionaries swept into Havana and opted for more austere premises. I don’t need to recite the history from here, which you probably well know.

The winds of change are gathering in Cuba, though. Since Fidel Castro’s health nearly failed in 2006, power has passed to his younger brother, Raul Castro. Raul has quietly reshuffled more than 30 cabinet members to prepare his party and people for a sweeping economic policy overhaul – Perestroika al Cubano. Even the semi-retired Fidel seems to have glumly accepted that change is inevitable, candidly admitting to a visiting US journalist that “the Cuban model doesn’t even work for us anymore.”

The global economic crisis whacked Cuba hard. Venezuela cut back on its largesse as its own economy worsened. Tourism and remittances softened, while nickel export prices tanked. Furthermore, three severe hurricanes left a wake of destruction in 2008. Unable to service Cuba’s estimated $21 billion foreign debt, and running out of generous leftist patrons to hit up, Raul Castro has, apparently, decided he has little choice but to pry open Cuba’s economy.

Castro’s wild card is Cuba’s oil and gas reserves. The island currently produces 60,000 bbl a day. But its US-facing northern waters hold an estimated 5-20 billion barrels of oil and 20 trillion cubic feet of natural gas. (Note: This compares with 29 billion barrels of oil reserves in the entire US.) Accessing this undersea oil requires the sophisticated drilling technology the US excels in. But as long as sanctions remain in place, the US oil majors are excluded from that bonanza. Amidst the applause of oil industry lobbyists, the dance for reengagement has begun, with both partners taking some unprecedented steps.

Raul Castro has issued a far-reaching five-year road map for Cuba’s future economic reform. The proposed changes would put Cuba on a very similar path to that taken by China in the 1980s and Vietnam in the 1990s. Here are some of the ideas: permit real estate transactions amongst Cubans, merge the two-tier currency system, close down inefficient state enterprises, decentralize state ownership, facilitate private ownership of businesses, distribute idle land to farmers, open state-owned wholesale markets and further encourage foreign investment – particularly in tourism.

In recent months, some planned reforms have already been implemented in an effort to delay Cuba’s impending insolvency. Costly subsidies on sugar and personal care products are being scaled back. The government announced plans to shed 500,000 state workers (that’s 10% of the country’s government work force in a country where 85% of workers work for the state) and guide them somehow into the private sector.

Cubans are being encouraged to grow and sell their own fruits and vegetables. The government is inviting foreign investors to develop 10 golf course estates in Cuba, with a new law allowing 99-year land leases to foreign buyers of plots in such projects. In the old days of Fidel’s revolution, such policies were unthinkable.

So what is the potential for a liberalized Cuban economy?

Just look 90 miles across the straits to Florida. A million Cuban-Americans call Miami home. Cuba has 60% of Florida’s population and 80% of its landmass, but greater natural resources and a much longer coastline, so one might conclude that the two are of comparable overall potential.

Perhaps to underscore their similarities, remember the fact that England and Spain cleanly swapped the two in 1763. Today, Florida’s economy is 12 times larger than Cuba’s. One reason is that Florida gets 20 times as many tourists as Cuba, plus an inflow of affluent retirees.

When the US government stops restricting its citizens from traveling to Cuba, the island will become an instant tourist magnet. Offering short flights, sunny beaches, cool music, “old world” architecture and cheap surgery, Cuba should have no problem drawing several million American tourists a year, as further-away destinations like Costa Rica have done.

Should reforms become comprehensive enough, agriculture seems an obvious investment play: Half the land is arable, labor is cheap and rain is plentiful. Cuba’s once-vaunted sugar industry stands in disarray, with 80% of the old mills shut down. However, today’s high sugar prices provide ample incentive to revive the sector, along with other traditional crops such as cigar tobacco.

Despite its long coastline, fisheries and aquaculture remain largely overlooked. Cuba is a world-class producer of nickel, but other mineral deposits remain underexploited. And then there’s the oil. The entire power system needs to be updated, financial services developed, retailing expanded – the opportunities seem endless.

Beyond the subsidized basics, most consumer goods have to be imported, and imports draw heavy duties. Telecom services are costly due to government monopolization and inefficiency. The list goes on. In this environment, it is tough for most Cubans to get by unless they receive remittances, tourist gratuities or tea money.

All in all, we eagerly await the implementation of Cuba’s economic reforms. As this process unfolds, Cuba could transform into one of the world’s most attractive frontier investment destinations. America has a long track record of turning bitter rivals into productive partners (a recent example being Vietnam), and re-engagement with Cuba could be one of Obama’s most notable foreign policy legacies.

Some frontier investors are not waiting for that and are already investing in Cuba. While 100% foreign ownership is permitted, most investors enter joint ventures with Cuban state enterprises, which typically contribute land, labor and sometimes capital. Over 250 such joint ventures exist, mostly for specific sectors or projects. Investments are made in foreign currency, eliminating exchange rate issues, and there are no restrictions on capital repatriation. Corporate income tax is 30% for joint ventures and 35% for wholly owned foreign companies, but tax holidays of five-seven years are available.

A few Cuba-focused investment groups have been established that non-US investors can access. Canada-listed Sherritt Group is a major player in Cuban nickel mining and, formerly, telecoms. A private investment group backed by European investors, Coral Capital has restored Havana’s historic Saratoga Hotel, which was recently ranked by Conde Nast as the 16th best hotel in the world. Coral is now planning a number of golf course, marina, housing and hotel projects, as is Leisure Canada, a Canada-listed investment vehicle.

Regards,

Douglas Clayton
for The Daily Reckoning

CUBA: Preparing for Perestroika originally appeared in the Daily Reckoning. Daily Reckoning founder Bill Bonner recently wrote articles on stagflation and the great correction.

Read more here:
CUBA: Preparing for Perestroika




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.

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