Saturday, December 11, 2010
Watch the video here
Adrian Day: Absolutely. As you may recall, we also talked about how China has been driving the resource market and will continue to drive it for the next decade. Even if China's economic growth slows from 9.5%–5%, the demand for resources will still be very dramatic—much higher than now. As China becomes more industrialized, increasingly more people in its massive population will move up into the middle classes.
Middle class people want houses with electricity, running water and indoor plumbing. They want to have cars, as well as bicycles, which takes copper, aluminum, platinum, rubber, oil, etc. And as more Chinese go from eating the chickens and goats they raise in rural China to an urban environment, they lose their taste for goat meat and want beef instead. Cows consume more wheat than do goats. That's just an example. The point is, the basic factors driving all the resources are also driving agriculture. (more)
Buy Physical Gold and Physical Silver Through a Commercial Bank and You May End Up with a Vault Full of Air
Wall Street is a loser. Stocks are Wall Street’s ultimate sucker bet. And it’ll sucker you again. You’ll lose, worse than in the last decade. Wake up before Wall Street banks trigger the next meltdown, igniting mass bankruptcy.
Here are 10 more reasons not to bet at Wall Street’s casino … wait till after they implode:
1. American stocks are a high-risk sucker bet
That’s the view of Peter Morici, the former chief economist at the International Trade Commission: that U.S. stocks are a sucker bet. Is Main Street waking up to Wall Street’s con? Maybe. “With corporate profits breaking records, Wall Street anxiously anticipates the return of the individual investors to the stock market. It may be a long wait, because the little guy may have concluded investing in stocks is a sucker bet.”
America’s divided into two stock markets: one for Wall Street’s rich insiders, another for Main Street’s suckers: “Investors, as opposed to traders, buy stocks in companies whose profits they expect to rise. The conventional wisdom says stock prices will follow profits up, but over the last two business cycles, that simply has not happened.”
From 1998 to 2010, profits rose 203%. But the S&P 500 was up just 7%. And still, naive investors buy into Wall Street’s sucker bet. (more)
Regular Markets at a Glance readers may have wondered why we remained so silent on the subject of silver over the last several months. Considering the significant exposure we have to silver as a firm, we can assure you that it wasn’t for lack of desire to share our views, but rather due to strict solicitation restrictions imposed on us by the cross-border listing of Sprott Physical Silver Trust (PSLV) this past October. It therefore gives us great pleasure to finally share our views on silver with you.
We have included two separate articles in this issue of Markets at a Glance: the first was written back in June 2010, and contains the information we used in the prospectus for the PSLV. The second is an update article written this past month that discusses new developments in the silver market and confirms our views on the metal. We urge you to read them both in order to understand our investment thesis for silver, and we hope they compel you to take a much closer look at silver as a long-term investment. Silver’s dramatic rise over the last two months is no fluke - it’s the result of a compelling supply/demand dynamic within a unique market structure. We hope the following articles convey our enthusiasm for "the other shiny metal" as an exceptional investment opportunity. (more)
From Investors Intelligence:
In last month's report we were cautious and anticipating a correction. Subsequent trading in November saw the markets perform the much needed correction, a move that retraced a Fibonacci 23.6% retracement of the September and October rally on both the S&P 500 and the NASDAQ 100. Not that deep but it was sufficient enough to take the boil off our indicators. We piled back into equities over the last two weeks of November, just ahead of the market reasserting. The Coe Report portfolio for instance moved rapidly from net short mid month to a 110% net long last week.
click here for audio
The first chart shows Q Ratio from 1900 through the first quarter of 2010. I've also extrapolated the ratio since the end of Q3 based on the price of VTI, the Vanguard Total Market ETF, to give a more up-to-date estimate.
Interpreting the Ratio
The data since 1945 is a simple calculation using data from the Federal Reserve Z.1 Statistical Release, section B.102., Balance Sheet and Reconciliation Tables for Nonfinancial Corporate Business. Specifically it is the ratio of Line 35 (Market Value) divided by Line 32 (Replacement Cost). It might seem logical that fair value would be a 1:1 ratio. But that has not historically been the case. The explanation, according to Smithers & Co. (more about them later) is that "the replacement cost of company assets is overstated. This is because the long-term real return on corporate equity, according to the published data, is only 4.8%, while the long-term real return to investors is around 6.0%. Over the long-term and in equilibrium, the two must be the same." (more)