Saturday, October 9, 2010
Silver, copper and platinum futures have all rallied to fresh highs recently as well.
With all the talk about a gold bubble in the works as investors rush to stake their claim in this asset, it’s worthwhile to take a look at other hard assets that are good investment alternatives to gold. Each of these offers its own strengths and weaknesses, but most importantly are ways to diversify your holdings away from gold if you are worried about a crash.
Here are five hard-asset alternatives for investors to consider:
Appeal: You may not know it, but platinum comes in bars and coins just like gold and silver — and since it’s one of the most valuable metals per ounce, you won’t have to worry about spatial limitations when stowing Armageddon funds in your safe or bunker. For those of you with a less catastrophic outlook looking for a good long-term investment, platinum has the added appeal of industrial applications (including catalytic converters for automobiles) as well as luxury items like jewelry. So if and when consumers start spending again, platinum will see a spike in demand.(more)
The dimensions of the foreclosure crisis keep expanding. Lenders and loan servicers including JPMorgan Chase (JPM) and Ally Financial are facing an explosion in homeowner lawsuits and state attorney general investigations of claims of falsified mortgage documents. Lawmakers in both houses of Congress have called for investigations. And procedural mistakes in the handling of mortgage documents have clouded titles establishing ownership of the homes, a problem that could plague both buyers and sellers for years. "This is going to become a hydra," says Peter J. Henning, a professor at Wayne State University Law School in Detroit. "You've got so many potential avenues of liability. You don't even know the parameters of this yet."
JPMorgan and Ally's GMAC Mortgage unit have delayed foreclosures in 23 states where courts have jurisdiction over home seizures. Bank of America (BAC) suspended foreclosures as well, pending a review of documents. In December 2009, a GMAC employee said in a deposition that his team of 13 people signed about 10,000 documents a month without verifying their accuracy. "My suspicion is that this will wind up being an industrywide issue," says Patrick Madigan, Iowa assistant attorney general. "Many companies were using robo-signers." (more)
A weakening U.S. dollar and improving outlook for global equity markets have combined to send prices of many natural resources higher. And while correlations between commodity prices and equities have undoubtedly increased in recent years, several have demonstrated exactly why many investors see this asset class as a valuable addition to stock-and-bond portfolios. While nearly every commodity product has gained ground over the last month, some have delivered particularly big gains. Below, we profile five commodity ETFs that have surged since the beginning of September, taking a look under the hood of each fund and examining some of the factors responsible for their impressive rallies. (more)
The Gold Report: John, you were recently at a mining conference in Toronto where you told the audience you could see gold spiraling well into the thousands/oz. without worldwide financial Armageddon. Other gold pundits think such prices can be attained only with global financial ruin. Tell us how gold investors can have their cake and eat it too.
John Kaiser: I regard gold as a special asset class, whose specialness is derived from the fact that gold is very rare, hard to bring above ground and generally useless due to its high cost, unlike silver, which is more abundant than cheap and gets fabricated into all sorts of industrial applications. Gold would be a wonderful conductor for electronics, too, but it's just too expensive. We have just over 5 billion oz. (Boz.) scattered around the world in safes, vaults and jewelry boxes not doing much at all.
Because gold has limited utility, its price is irrelevant to ongoing economic activity. As a comparison, if oil shoots to $500/barrel that means that your paycheck would allow you to drive just one-fifth the distance it allows you to drive now. Such a move in oil would have drastic implications for the global economy. But if gold shoots to $5,000, what happens? Well, the gold stays in my teeth. Jewelry demand goes down even more, but nobody makes any decisions to substitute out of gold because it really isn't being used for much. In other words, it really should not affect the economy.
TGR: Then why are people buying gold? (more)
It played a role in a 15-minute, 600-point market meltdown last spring now known as the "Mini Market Crash."
Correspondent Steve Kroft talks to Narang in a rare chance to see such a business up close. He also speaks to SEC Chair Mary Schapiro - who has high frequency trading in her regulatory sights - and others for a "60 Minutes" report to be broadcast Sunday, Oct. 10, at 7 p.m. ET/PT.
High frequency traders rely on mathematicians and computer experts to write electronic trading programs and they use expensive computers to run them. Many of the country's large financial institutions do high frequency trading and it is estimated that from 50 to 70 percent of all U.S. stock trades are made this way. Humans are becoming less involved. "Humans are way too slow to trade on the kinds of opportunities that we're trying to capture," says Narang. "Opportunities that exist for only fractions of a second," he tells Kroft. (more)
S&P Projects 60% Of All Countries Will Be Junk-Rated By 2060, Sees Increasing "Tests To Social Cohesion"
While a loss of 95,000 jobs normally might be expected to hurt stocks, the market's desire for cheap money trumped concerns about the slow economy.
"It was almost as if the market was cheering for a bad report to try to solidify that the Fed would engage in quantitative easing," said Scott Marcouiller, chief technical market strategist at Wells Fargo Advisors in St. Louis.
Agriculture-related shares surged in sync with U.S. corn and soybean futures after the U.S. Department of Agriculture said the corn crop is likely to be far smaller than expected. Caterpillar (NYSE:CAT - News) rose 2.1 percent to $80.37 and gave the biggest boost to the Dow industrials.
A construction and farm machinery sector index (^15GSPMCHD - News) rose 2.6 percent on the belief U.S. grain farmers will use some of their profits from higher crop prices to buy new tractors and harvesting equipment. (more)