Friday, December 31, 2010

What Oil and Gas are Telling Us Now

Right now, oil and natural gas prices are stretched to their limits.

Rarely before in history has oil been so expensive while at the same time, natural gas prices so cheap.

You can see this price differential in effect by looking at this chart, which divides the price of one barrel of oil by the price of one million british thermal units (mmbtu) of natural gas:

It’s helpful to use these types of ratios – that is, the price of one commodity divided by the price of another – to scrub out dollar and currency market fluctuations. It gives you a purer look at the actual relative value of one commodity vs. another.

The only other time natural gas was as relatively cheap to oil as it is right now happened in last half of 2009.

And in just four months, natural gas prices doubled: (more)

Home Prices Are Still Too High : Peter Schiff

By PETER D. SCHIFF

Most economists concede that a lasting general recovery is unlikely without a recovery in the housing market. A marked increase in defaults and foreclosures from today's already elevated levels could produce losses that overwhelm banks and trigger another, deeper financial crisis. Study after study has shown that defaults go up when falling prices put mortgage holders "underwater." As a result, the trajectory of home prices has tremendous economic significance.

Earlier this year market observers breathed easier when national prices stabilized. But the "robo-signing"-induced slowdown in the foreclosure market, the recent upward spike in home mortgage rates, and third quarter 2010 declines in the Standard & Poor's Case–Shiller home-price index—including very bad October numbers reported this week—have sparked concerns that a "double dip" in home prices is probable. A longer-term view of home price trends should sharply magnify this fear.

Even those economists worried about renewed price dips would be unlikely to believe that the vicious contractions of 2007 and 2008 (where prices fell about 30% nationally in just two years) could return. But they underestimate how distorted the market had become and how little it has since normalized. (more)

Top 11 Value Stocks for 2011

Broadly speaking, stocks were a fine investment in 2010. True, the market lagged the jaw-dropping returns to be found in, say, gold, which jumped about 25%, or silver, up 75%. But the S&P 500 ($INDU) is set to close 2010 with a 13% gain -- something that was almost unthinkable as recently as September -- and we'd gladly take returns like those again in 2011.

Wall Street's average price target on the S&P 500 has it tacking on another 11% over the next 12 months, according to Bloomberg data -- with plenty of ups and downs along the way, naturally. That has us inclined to play defense in our 2011 stocks picks, with an eye toward bargain stocks paying generous, sustainable dividends.

We screened the S&P 500 for stocks trading at deep discounts to the index by forward earnings, currently at 14.6, according to market research firm Birinyi Associates. We also looked for price/earnings-to-growth (PEG) ratios well below the S&P 500's figure of 1.6, according to data from Thomson Reuters. (PEG reveals how how a stock is valued relative to its growth prospects. (more)

Marc Faber: Treasurys Are A "Suicidal Investment"



Marc Faber, who just like Nassim Taleb has never hidden his disdain for investments in US-backed paper, is back to bashing Treasurys, although with logic diametrically opposite to that espoused by those such as Morgan Stanley who see rising rates as a sign of economic growth. "This is a suicidal investment,” Faber told Bloomberg in a telephone interview from St. Moritz, Switzerland. “Over time, interest rates on U.S. Treasuries will go up. Investors will gradually understand that the Federal Reserve wants to have negative real interest rates. The worst investment is in U.S. long-term bonds.” As for equities, Faber increasingly sees a Zimbabwe outcome: “If you print money, the currency goes down and the S&P 500 goes up. By the end of 2011, people will look at 2012 and think 2012 could be a very bad year because the policies applied are not sustainable and create a lot of instability. Investors may look at 2012 and 2013 with horror.” Not Wall Street thought. By the end of 2011, bankers will most likely be looking at the second consecutive record bonuses year, and by then will have enough gold safely stashed away in non-extradition countries to where the host organism may finally be allowed to die in peace.

Treasury 10-year note yields will rise to 5 percent from yesterday’s level of 3.349 percent, Faber said, without specifying a time frame. As bonds fall over the next decade, he said investors should buy precious metals, real estate or equities. U.S. debt has returned 5.7 percent in 2010, more than erasing last year’s 3.7 percent loss, according to a Bank of America Merrill Lynch index.

Treasuries fell today as reports showed initial jobless claims dropped more than forecast, U.S. businesses expanded at the fastest pace in two decades and pending home resales beat expectations. The yield on the benchmark 10-year note advanced 0.04 percentage point to 3.39 percent at 1:54 p.m. in New York, according to BGCantor Market Data.

Faber correctly predicted in May 2005 that stocks would make little headway that year. The S&P 500 gained 3 percent. He was less prescient in March 2007, when he said the S&P 500 was more likely to fall than rise because the threats of faster inflation and slower growth persisted. The S&P 500 then climbed 10 percent to its record of 1,565.15 seven months later, and ended the year up 3.5 percent.

Rising Oil Prices Make E&P Profitable

The Energy Report: Your area of coverage is exploration and production. Do small caps and large caps trade similarly? Do they follow similar patterns?

Phil McPherson: Yes. In the exploration and production (E&P) space as a whole, it's a pretty simple business model. The size of the company is basically a reflection of the ability to accelerate that business model. And your ability to execute and meet timelines usually has just as much of an impact on your market cap as the success or the failure of the actual oil and gas (O&G) play. I'm covering many California companies, including Berry Petroleum (NYSE:BRY), Plains Exploration & Production (NYSE:PXP) and this small oil producer that I stumbled across, NiMin Energy Corp. (TSX:NNN). I think they all have the same type of idea. But in terms of how they trade, every company is in some ways going to trade as does the commodity. So you're going to go up and down on certain days because oil's up and oil's down. I used to joke with people that you could announce the best well in the world, but if oil prices are down, your stock is going to go down. A small cap of $100 million to $500 million trades more on the net asset value (NAV) or the value of the perceived potential of your properties. When you get to that $500 million– $2 billion area, you start looking at a multiple of EBITDA (earnings before interest, taxes, depreciation and amortization) or cash flow multiples. When you get to be large cap, you're really more of an earnings story; then you start thinking about P/E ratios and cash flow ratios.

TER: Do inflationary pressures point towards higher oil prices?

PM: With the economy recovering, and as more people feel that the double-dip recession is not going to happen, oil prices are tending to stay stronger. However, it seems to me the tail is wagging the dog right now, with the U.S. dollar going down and the price of bonds being up, and the yield being extremely low. To me, it has more to do with the price of oil than necessarily the pure supply and demand fundamentals, because we still have excess supply of oil via OPEC. If you're bullish on oil or bullish on the economy, then you use those dips as opportunities to gain more exposure. (more)

Dow Dog Dividend Champions

Several articles, both here on Seeking Alpha and elsewhere, have recently discussed the “Dogs of the Dow” strategy, which calls for buying the 10 highest yielding companies in the Dow Jones Industrial Average at the end of the year. I decided to compare the Dogs (along with the rest of the components in that index) to my listing of Dividend Champions/Contenders/Challengers, which can be found here. (Note that the November 30 listing will be replaced after Friday's market close.) My thinking was that investors might want to consider not just the current yield, but also the history of each company increasing its dividend on an annual basis, as well as the payout ratio for each company.

The data below is from Yahoo, with the exception of the number of years of dividend increases. The projected Dogs are in bold, although it's worth noting that slight changes in the last few trading days of 2010 could easily cause Intel (INTC) or Procter & Gamble (PG) to take the place of General Electric (GE) among the Dogs.

In terms of reliable dividend increases, the Dogs appear to have a mediocre record at best, with three Champions (25 years or more), one Contender (10-24 years), and one Challenger (5-9 years). Note that both Pfizer (PFE) and GE declared increases in 2010, but their total 2010 dividend payments were less than was paid in 2009, so any new streak will have to begin in 2011. Kraft Foods (KFT) froze its dividend rate in 2008, prior to its acquisition of Cadbury, and Merck (MRK) and DuPont (DD) simply have not raised their payouts for many years. The payout ratios for Pfizer and Verizon (VZ) appear to be distorted by depressed earnings figures, so this should also be a concern to potential investors. (more)

BNN: Top Picks


Sri Iyer, Senior Portfolio Manager and Head of Global Investments, Guardian Capital, shares his top picks.


click here for video

Get Ready For A Year Of Volatility: More Flash Crashes, Fed Hating, Civil Unrest And Bad Weather

Oh boy is 2011 going to be an exciting year! Some things that I think might happen:

-Volatility is going up across the board. If you have the stomach for the swings that are coming across all markets there is a ton of money to be made; balls and timing are all that are necessary. The markets will create dozens of opportunities to make and lose.

-There will be 50 days with a swing in the S&P greater than 1%. There will be 10 days where gold swings $50. There will be two days with a drop greater than 100 bucks. Most of the big moves will be down moves. Bonds will not be spared the volatility.

-Gold will be higher a year from now but off its peak. At some time in the fall, gold will be near 1,800 and the New York Times will do a front-page story that gold is on its way to 2,000. That will be the high point of the year.

-Copper will continue to rise. This metal will benefit as the poor man’s gold. Why buy an ounce of something for $1,600 when you can have a whole pound of something else for only $5? The logic is compelling only because there is no logic. Increasingly, it will become understood that money does not hold value. Copper will do a better job of storing value then a Treasury Bond.

-The US bond market is in for a heck of a year. The 30-year will trade at BOTH 3% and 5%. Higher rates will come early in the year, then the deflation trade will come back into vogue. (more)

Stocks down slightly as investors lock in 2010

NEW YORK -- Stocks dipped Thursday as investors locked in their positions at the end of the year.

While U.S. markets fell slightly, stocks are set to end 2010 on an upbeat note: The S&P 500 index and the Dow Jones industrial average are both up 14 percent for the year, after dividends, thanks to record corporate profits. The Dow is back to levels last seen in August 2008, prior to the heat of the financial crisis, while the S&P might just eke out the best December in 20 years.

Some investors are taking the last week of the month to sell and notch their profits. Others are selling stocks or funds that have lost money in order to reap the tax benefits.

The Dow Jones industrial average was off 15.67 points, or 0.1 percent, to 11,569.7. The S&P 500 edged down 1.9, or 0.2 percent, to 1,257.88. The technology-focused Nasdaq composite index fell 3.95, or 0.2 percent, to 2,662.98. (more)

New Unemployment Claims Fall

The New Unemployment Claims number is usually one of the last indicators to start improving after a recession. But once unemployment claims start to fall, job growth and strong economic expansion are never far behind.

And today, New Unemployment Claims finally broke through the critical 400,000 level for the first time in 2 ½ years.

That's an incredibly bullish sign for investors. It means 2011 is likely to be a very good year for stocks as Americans start going back to work and consumer growth picks up.

Thursday, December 30, 2010

Two Utilities for a Short-term Holiday Profit

We have one more week to go in 2010. It has been a great year. The S&P 500 is up nearly 13% and my systems are telling me that 2011 could be much better. A lot depends on the economy, of course. The financial issues in Europe are significant and could become a global contagion. Too much, I am afraid, is dependent upon what the Federal Reserve does with regard to QE2 and beyond (I have much more to say about this in my Mastering the Markets letter this week).

There is a bit of a Santa Claus rally going on at the moment, and if you are not one of the unlucky unemployed, it is likely you are feeling pretty good about the economy and your lot in life.

I have a couple of picks for the upcoming week that have a strong market forecast to support the trades. Let me show you what I mean...

Below is my MarketProphet chart of the Utility Index: (more)

5 “red hot” dividend stocks to buy now


According to Standard & Poor’s, 2009 was the worst year on record for dividend stocks. The rating’s agency calculates that dividend cuts in U.S. traded common stock cost investors over $58 million in income last year, and the year saw the fewest number of companies increasing dividends and the most decreasing dividends since S&P began keeping track of the measure in 1955. Well, what a difference a year makes.

This year, 247 of the S&P 500 companies increased dividends in 2010. That equates to $207 billion, or an increase of 5.6% over the S&P 500 dividends paid out in 2009. The good news here is that number is expected to continue climbing in 2011.

So, with the renewed dividend fervor on Wall Street, it’s no wonder that dividend-paying equities are red hot among investors. But just which dividend-paying stocks should you buy now?

Here are five of our favorite dividend stocks to buy now. (more)

McAlvany Weekly Commentary

The Best of 2010

Margin Debt Soars to Highest Levels Since September 2008

Margin debt is one measure of the amount of optimism or pessimism in the stock market. Rising margin debt generally correlates to a rising stock market. Margin use has soared to the highest level since September 2008.

Margin Debt Data is from NYSE Factbook Securities Credit

ZeroHedge discussed margin debt in NYSE October Margin Debt Jumps To Highest Since Lehman Failure As Investor Net Worth Is At Lowest Since April Highs
It is not just the stock market that is at the highest levels since Lehman. Probably just as importantly, NYSE margin debt has surged to $269 billion, an increase of $13 billion from the prior month, and the highest since September 2008 when it was at $299 billion.

We are confident that NYSE cash in November will be at the lowest level of the year, not to mention December, as hedge funds leveraged everything they could, in some cases hitting as much as 3-4x gross leverage, in pursuit of beta, now that unleveraged alpha strategies have ceased to work. Which means that with retail stubbornly missing from the picture, the only beneficiaries of the HFT and Fed facilitated melt up are the 1000 or so hedge funds, where average net worth is in the 6 digits, that will be profitable this year. (more)

DBB: Buy-and-Hold Investment More Useful Than Gold


PowerShares DB Base Metals Fund (NYSE: DBB) — Commodities should generally outperform the market in 2011, with industrial-use metals leading the group. Since DBB is the largest fund composed of futures contracts on some of the most widely used metals, such as aluminum, zinc and copper, it is a candidate for a powerful move higher in the new year.

Where gold has risen as a safe haven priced only on investor demand, base metals are priced on a combination of investor demand and industrial use.

For example, the market for copper is very tight with a flat supply and increasing demand from China, Europe and the United States. The price of copper has risen about 50% in the past six months, and according to industry analysts, there is no top in sight.

Buy DBB now and hold. The long-term price objective for this ETF is $30-plus.

Underneath the Happy Talk, Is This As Bad as the Great Depression?

The following experts have - at some point during the last 2 years - said that the economic crisis could be worse than the Great Depression:
How could that possibly be, when the stock market has largely recovered? (Let's forget for a moment that the stock market rallied after 1929, but then crashed in a double dip).

To find out, we'll look at a couple comparisons to get an idea of what is going on in the rest of the economy. And then we'll compare the government's efforts in the 1930s to today. (more)

Bob Chapman: Adding Fuel to the Financial Fire. Deepening Crisis. Bogus Economic Statistics Used as a Coverup

Mr. Bernanke, Chairman of the Federal Reserve, a private corporation, would have us believe that, quantitative easing is the only way to save the US economy and to reverse the unemployment problem. He conveniently forgets to tell you that he authored a paper in 1988 with Mr. Michael Baskin that concluded that what Mr. Bernanke is doing with QE does not work. He told watchers of “60 Minutes” that the jobless rate would have been far higher; something like it was in the “Great Depression” at 25%. If Mr. Bernanke had taken time to have his minions do the research, he would have found that U3 at the peak of the “Great Depression” was 25.2% and U6 was 37.6%. As we write U3 is 9.8% and U6 is 17%. If you strip out the bogus birth/death ratio, real unemployment on a U6 basis is probably close to 22-3/8%, as yet, considerably less than in the 1930s, but impressively unacceptable. As those interested now know over the past three years the Fed has bailed out financial firms and many other corporations with funds provided indirectly by the US taxpayer. Little of this largess has fallen into employment and as a result unemployment has risen. It lies in the face of reality for Mr. Bernanke to tell was that QE2 will create employment when QE1 certainly did not.


What Mr. Bernanke has done is add fuel to the fire, which has given us one of the greatest financial scams of all time.


Part of the Fed’s cover is the fiscal irresponsibility of government, which in 2010 created $2 trillion in net liabilities, as federal benefits rose. That was the result of the Financial Report of the US, which rightly applies corporate-style accrual accounting. That includes interest on debt and federal benefits payable when they are incurred. This method illustrates the mounting liabilities of government entitlement programs, such as Medicare, Medicaid and Social Security. 2010’s cash budget may have narrowed to $1.294 trillion from $1,417 trillion in 2009, but the real number was $2,080 trillion. (more)


Stocks down slightly as investors lock in 2010

NEW YORK -- Stocks dipped Thursday as investors locked in their positions at the end of the year.

While U.S. markets fell slightly, stocks are set to end 2010 on an upbeat note: The S&P 500 index and the Dow Jones industrial average are both up 14 percent for the year, after dividends, thanks to record corporate profits. The Dow is back to levels last seen in August 2008, prior to the heat of the financial crisis, while the S&P might just eke out the best December in 20 years.

Some investors are taking the last week of the month to sell and notch their profits. Others are selling stocks or funds that have lost money in order to reap the tax benefits.

The Dow Jones industrial average was off 15.67 points, or 0.1 percent, to 11,569.7. The S&P 500 edged down 1.9, or 0.2 percent, to 1,257.88. The technology-focused Nasdaq composite index fell 3.95, or 0.2 percent, to 2,662.98. (more)

30 Downtrend Stocks Being Snapped Up by Institutional Investors

The following is a list of stocks in a downtrend, i.e. trading below the 20-day, 50-day and 200-day moving averages. All of these stocks have seen significant institutional buying over the last three months.

The smart money seems to think the recent weakness in these shares present a buying opportunity. What do you think? Full details below.

Moving average and short float data sourced from Finviz, institutional data sourced from Reuters.

The list has been sorted by the change in institutional ownership over the last three months.

1. Cninsure Inc. (CISG): Insurance Brokers Industry. Market cap of $746.8M. The stock is currently -8.66% below its 20-day MA, -24.15% below its 50-day MA, and -31.97% below its 200-day MA. Institutional investors currently own 30,658,752 shares vs. 22,585,147 shares held three months ago (+35.75% change). Short float at 10.67%, which implies a short ratio of 4.39 days. The stock has lost -20.96% over the last year.

2. Harry Winston Diamond Corporation (HWD): Nonmetallic Mineral Mining Industry. Market cap of $950.22M. The stock is currently -10.55% below its 20-day MA, -10.92% below its 50-day MA, and -5.59% below its 200-day MA. Institutional investors currently own 52,751,266 shares vs. 40,603,769 shares held three months ago (+29.92% change). Short float at 0.34%, which implies a short ratio of 1.33 days. The stock has gained 16.62% over the last year. (more)

Dow posts 2-year high in quiet trading

(CNNMoney.com) -- Stocks crept to yet another two-year record in quiet trading Wednesday, as traders look to end the year on a high note.

At the closing bell, the Dow Jones industrial average (INDU) was up 10 points, or 0.1%, at 11,585 -- it's highest point in two years. The S&P 500 (SPX) rose 1 point, or 0.1%; and the Nasdaq (COMP) ticked up 4 points, or 0.2%.

With no economic reports on the calendar, stocks eked out the slight gains as investors are eager to end the year on the upside.

"The market's going to drift higher for the remainder of the year, as we come into the beginning of January," said Rich Ilczyszyn, market strategist with futures broker Lind-Waldock. (more)

Wednesday, December 29, 2010

Ex-Shell president sees $5 gas in 2012

(CNNMoney.com) -- The former president of Shell Oil, John Hofmeister, says Americans could be paying $5 for a gallon of gasoline by 2012.

In an interview with Platt's Energy Week television, Hofmeister predicted gasoline prices will spike as the global demand for oil increases.

"I'm predicting actually the worst outcome over the next two years which takes us to 2012 with higher gasoline prices," he said.

Tom Kloza, chief oil analyst with Oil Price Information Service says Americans will see gasoline prices hit the $5 a gallon mark in the next decade, but not by 2012.

"That wolf is out there and it's going to be at the door...I agree with him that we'll see those numbers at some point this decade but not yet." Kloza said.

"The demand is still sluggish enough in some of the mature economies." (more)

Roar Earths

Rare earth metal miners were roaring this morning with many of the Market Vectors Rare Earth ETF component holdings up double-digit percentage points. On my daily volume breakout screen, 5 of the top 16 volume breakouts were in rare earth/strategic metals miners, including: China GengSheng Minerals Inc (CHGS), Avalon Rare Metals Inc (AVL), General Moly Inc (GMO), Rare Element Resources Ltd (REE), and REMX (the Market Vectors Rare Earth ETF itself). Those are just a few of the top volume breakouts across the U.S. markets. Here’s a list of holdings within the REMX ETF as per Bloomberg and their performance today:

Shares of many rare earth and strategic metals flew on Monday and Tuesday this week based on an announced rare earth mineral export quota cut from China, the largest producer of rare earth metals in the world. So what are the implications should the largest producer in the world restrict supply? Prices go up. It’s the same idea behind the oil cartels. Control the supply of a resource with inelastic demand and you have the setup to make substantial profits.“China’s Commerce Ministry allotted 14,446 tonnes of quotas to 31 companies, which was 11.4 percent less than the 16,304 tonnes it allocated to 22 companies in the first batch of 2010 quotas a year ago.” (more)

Petrobras Calls Could Heat Up the New Year

I have to admit that I was a bit taken aback when the Kuwaiti oil minister announced that the world could withstand oil at $100 barrel. It wasn’t that an oil minister said it; it was that the oil minister was from Kuwait and not Iran. Along with that eye-opening statement, we are seeing some very interesting things in the oil markets right now.

For instance, anticipation of growth has rallied oil despite an economy that hasn’t really done much in three years; China seems to realize it may have overdone the increase of its currency rates in an attempt to slow down the rally in commodity prices; a computer virus may have set the Iran nuclear program back two years; and an American car company can’t make a competitively priced electric car without the government’s $8,000 tax credit.

But all those factors probably weigh less on the oil markets than currency issues. Yes, oil is up $10, but how much is the U.S. dollar down against the euro and against every other world currency? One thing we know is that the QE2 effort has weakened the dollar against other currencies. (more)

Energy, agriculture, gold and silver bullion - protectors from the coming crisis

The Gold Report: Much has happened since our last discussion in September. The election, with the Republicans taking the House and the super majority in the Senate. QE2 (quantitative easing) not only discussed but actually released. The U.S. assisting in the financing in Europe. The benefactors of the 2008 bailout money finally published. And then the hottest topic in Washington for a while, extending the Bush tax credits along with an Obama unemployment tax credit. Have any of these developments changed or firmed your opinion of the U.S. economy or the international monetary crisis?

Porter Stansberry: I'm fascinated by the way the crisis is unfolding. The U.S. government is still willing to add enormous amounts of new debt. And it is willing to underwrite not only quantitative easing in the U.S. but also fund it in Europe as well. These are symptoms of a much bigger ongoing problem-the enormous sovereign debt crisis in the Western democracies.

I think we're going to see a lot more quantitative easing. We're going to have to see a lot more fiscal deficit growth going forward, especially with a union between the Republican House that wants to cut taxes and the Obama administration that wants to extend benefits. "You let us cut taxes and we'll agree to extend benefits." Of course, that's the worst of both worlds in terms of our fiscal position because it will result in vastly bigger spending and less tax revenue. There's no other government that will even attempt adding vast new debts at this stage in the game. Americans still have no idea of the risks our government is taking with our currency. (more)

Jay Taylor: Turning Hard Times Into Good times




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Treasuries Drop as Five-Year Note Sale Attracts Lowest Demand Since June

Treasuries tumbled, pushing benchmark 10-year note yields up the most in two weeks, after the $35 billion sale of five-year securities attracted the lowest demand since June.

U.S. debt due in more than a year was headed for the biggest monthly loss in the global government bond market as primary dealers ended up with their biggest share of an auction of the five-year maturity since July 2009. The two-year note yield increased to the highest level in six months.

“Foreigners weren’t as aggressive at the sale as usual, leaving a lot for primary dealers,” said Jason Rogan, director of U.S. government trading in New York at Guggenheim Partners LLC, a brokerage for institutional investors. “It’s not looking good for the seven-year auction tomorrow.”

The yield on the current five-year note increased 12 basis points, or 0.12 percentage point, to 2.15 percent at 5 p.m. in New York, according to BGCantor Market Data. The price of the 1.375 percent security maturing in November 2015 fell 18/32, or $5.63 per $1,000 face amount, to 96 13/32. (more)

The Baby Boomers Turn 65

The first of 78 million baby boomers born in the wake of the Second World War will turn 65 in 2011. Some have long since retired, while others plan to hold onto their jobs for the foreseeable future. Many unemployed baby boomers are also looking for work to supplement poorly funded retirement accounts or to continue to contribute to society in a meaningful way.

Robert Baxter will turn 65 in August 2011, but is reluctant to leave a job he loves. "I've been lucky enough to work my way up in business to the point where I am running the show and that is quite rewarding, so I am in no hurry to retire," says Baxter, CEO of Dryden Mutual Insurance Company in Dryden, N.Y. He might consider retiring at some point between the ages of 68 and 70. "My generation is having second thoughts about taking any sort of early retirement," he says. "When my parents retired, they had a defined benefit pension and Social Security and they actually had over 100 percent replacement of their income. That's not going to happen to my generation."

But holding on to a job in your 60s or finding a new one can be difficult. "Workforce participation among older workers is higher than it has ever been and so is unemployment," says Ted Fishman, author of Shock of Gray, a book about the world's aging population. Once unemployed, older workers generally remain out of work longer than their younger counterparts. The average duration of unemployment for those age 55 and older in November 2010 was 45 weeks, 12 weeks longer than it takes the typical younger person to find a job. When Marty Colletti of Austin, Texas, a former account manager for Dell, was laid off in March 2009, it took her nearly two years to find a new job at a comparable level. Colletti, who will turn 65 in May, began a new job at a smaller company as a search engine optimization consultant in December 2010. "I tend to attribute my age to it taking so long to get a job," she says. (more)

Case-Shiller: Home Prices Dive Another 0.8% In October

Headline Number: Down 0.8% for 20 city index, worse than expectations.

Expectations: A fall in prices of 0.2% for October.

Background: In September, prices fell by 1.5% indicating housing was in a double-dip scenario.

From the report:

“The double-dip is almost here, as six cities set new lows for the period since the 2006 peaks. There is no good news in October’s report. Home prices across the country continue to fall.” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor's. “The trends we have seen over the past few months have not changed. The tax incentives are over and the national economy remained lackluster in October, the month covered by these data. Existing homes sales and housing starts have been reported for both October and November, and neither is giving any sense of optimism. On a year-over-year basis, sales are down more than 25% and the months’ supply of unsold homes is about 50% above where it was during the same months of last year. Housing starts are still hovering near 30-year lows. While delinquency rates might have seen some recent improvement, it is only on a relative basis. They are still well above their historic averages, in both the prime and sub-prime markets."

Grow Your Returns With Agriculture ETF DBA

PowerShares DB Agriculture Fund (NYSE: DBA) — This exchange-traded fund (ETF) seeks to track the price and performance of the Deutsche Bank Liquid Commodity Index. Food shortages and higher prices for commodities like wheat, corn, soybeans and sugar are being forecast by economists worldwide.

And the recent move by China to raise interest rates is evidence that the country’s central planners are concerned about possible inflation in food prices that could cripple their economy.

As for agriculture ETF DBA, note the impressive pickup in volume on the chart, as well as the golden cross and the recent breakout from a double-top following a bounce from its 50-day moving average.

Traders should target DBA for a quick trade to $36 since the ETF broke down from that level in August 2008, but long-term investors may want to hold this ETF as a cornerstone investment with a price objective north of $50.

If You Haven't Bought Silver Yet, Read This


Chris Weber writes: The last time I was able to identify a period when a precious metals correction was about over happened two years ago...

At that time, gold hit a low of $693 and silver $9.63. Since then, gold has risen about 100%, but silver has soared 206%. This is an extraordinary occurrence in just two years.

Back in October, I thought both metals, and especially silver, were due for a rest, and perhaps a correction.

Silver reached $24.75 on October 14. I expected a back-off to begin. Silver briefly touched as low as $23. That is a 7% fall. In the universe of silver, this is nothing. And then the rise resumed. In December, silver reached a new high of $30.50.

This all feels unprecedented to me. Gold has not been giving people an advantageous entry point for a long time now. But silver is supposed to crash at certain times... It can almost be relied upon to do this.

Not this time. At least, not so far. Given an opportunity to correct or even consolidate its prior gains, silver barely takes a breath and then reaches new highs.

Why? Some say silver shorts are covering. But why now? Why this time? Silver prices refused to fall, and then rose... Of course under these circumstances shorts will cover. (more)

Tuesday, December 28, 2010

Chart of the Day: Stock Dividend Yields

"What about the S&P 500 dividend yield, and this comes courtesy of an old pal from Merrill Lynch who is currently an investment advisor. Over the course of 2010, numerous analysts were saying that people must own stocks because the dividend yields will be more than that of the 10-year Treasury. But alas, here we are today with the S&P 500 dividend yield at 2% and the 10-year T-note yield at 3.3%.

From a historical standpoint, the yield on the S&P 500 is very low ― too low, in fact. This smacks of a market top and underscores the point that the market is too optimistic in the sense that investors are willing to forgo yield because they assume that they will get the return via the capital gain. In essence, dividend yields are supposed to be higher than the risk free yield in a fairly valued market because the higher yield is “supposed to” compensate the investor for taking on extra risk. The last time S&P yields were around this level was in the summer of 2000, and we know what happened shortly after that. When the S&P yield gets to its long-term average of 4.35%, maybe even a little higher, then stocks will likely be a long-term buy. "

Jim Cramer Picks His Top DOW Stocks For 2011


(TheStreet) -- People do a lot of top down analysis at this time of the year, trying to figure out how much the Dow and the S&P could go up--or down--in the coming year. That's not my style. As someone who is a stock picker, I like a bottoms up approach, analyzing each Dow component to come up with what I think the most visible index will deliver in 2011.

Here's my annual analysis, case by case, that adds up to a target of 13,365 for the Dow Jones next year -- a 16% gain from current levels and a bountiful return -- based on a prognostication of the performance of the individual members of the venerable index.

Although I am a bottoms up guy, as a backdrop I am presuming a resumption of decent U.S. growth courtesy of the Fed -- call it 3% to 4% -- continued worldwide growth, a stable to slight decline in the dollar and a decent rise in rates (30-year Treasury bond going to 4.8%) as befitting a return to economic health.

Still, I don't want to overplay the macro hand. I am seeing these terrific gains on the Dow from the players within, not the trends outside. Here's how I get to my 13,365 target. (more)

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BYD: Buffett's Favorite Auto Stock


When I went to the Berkshire Hathaway (NYSE: BRK.B) annual meeting in 2009, there was something I really wanted to do.

No, it wasn't a chat with Warren Buffett.

That's almost impossible at the yearly "Woodstock for Capitalists," and only first-timers make the trek to Omaha, Nebraska, to see Buffett anyway. Longtime shareholders make the trip to listen to Berkshire's vice chairman, Charlie Munger.

But even speaking with the inimitable Munger, who's probably the smartest guy in U.S. business, wasn't at the top of my list.

I really wanted to see a floor model of one of Berkshire's newest acquisitions -- the BYD (BYDDF.PK) car.

You see, all of Berkshire's companies display their wares in the exhibition hall at the Qwest Center in Omaha, from the GEICO gecko to Fruit of the Loom, and tucked off to one side was a BYD vehicle, complete with a leather interior, an atypical option for BYD cars, which are barebones and compete on price. (more)

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John Embry: "Gold, Silver Could Go Ballistic By Year End"

Sprott's John Embry is in fine form today: in a just released oped in the Investor's Digest of Canada, the Chief Investment Strategist of Sprott Asset Management LP, and one of the biggest fans of shiny metals in history, makes the following bold prediction, which also explains how he views the concerted attempts by the LBMA to keep gold below the $1,420 all time high: "I am not in the least bit concerned about these shenanigans because I believe considerable additional quantitative easing is inevitable, irrespective of what the Fed says or does in the short term. Goldman Sachs's chief U.S. economist Jan Hatzius clearly shares my view as he has suggested that ultimately as much as $4 trillion maybe required although he anticipates that it will be staged. In my opinion this will act as catnip for gold and silver prices, which could go ballistic by year-end." Presumably, he means 2011. So forget all you have heard about interest rate (real or otherwise) correlations: they don't exist. All that does exist is the willingness of the Fed to 'print.' And with China increasingly starting to tighten, the Fed will need to do double duty if it wishes to keep global liquidity well-offered with near-free fiat paper. While we don't quite share Embry's enthusiasm for gold's imminent escape velocity, we are confident that as long as loose monetary policy is the only means to extend and pretend the ponzi, gold will, in turn, be well-bid.

"Gold, Silver Could Go Ballistic By Year End" published in Investor's Digest of Canada

The gold price experienced a virtually uninterrupted rise of more than $200 in a 2 1/2 month period from the end of July through mid-October. This came on the heels of an orchestrated $100 price takedown following an all-time price high in mid-June as the authorities took great pains at that time to ensure that the gold price wasn't flying as the necessity for further quantitative easing (QE) became obvious.

Not surprisingly, we saw a replay of this mindset in late October as the gold price came under renewed attack in the aftermath of a large buildup in Comex open interest during the aforementioned price rise. With the U.S. elections and an important Federal Open Market Committee meeting (where another massive QE operation was expected to be announced) in the offing, the U.S. powers-that-be wanted to make sure that the gold price wasn't surging to new highs. (more)

CBC Doc Zone 2010.12.09 - Blowout: Is Canada Next?



On April 20, 2010, BP's Deepwater Horizon rig exploded unleashing 5 million barrels of oil into the Gulf of Mexico. It has been nothing short of catastrophic, causing extensive damage to marine and wildlife habitat, as well as to the Gulf's fishing and tourism industries. In May 2010, Chevron began drilling Canada's deepest well off the coast of Newfoundland, begging the question: Could an oil spill of the same magnitude happen in Canada?

Blowout: Is Canada Next? , is a documentary that tracks the aftermath of the worst oil spill in U.S. history, and transposes the oil spill to Canada's Grand Banks. By documenting the latest scientific findings in the Gulf, Blowout: Is Canada Next? builds a picture of what an offshore drilling disaster would look like on Canada's East coast.

Just weeks after the Deepwater Horizon blowout in the Gulf, Chevron began drilling Canada's deepest oil exploration well off the coast of Newfoundland. Located 430 kms from shore, the Chevron well is twice as deep as BP's Deepwater Horizon well, six times further out to sea, and in much rougher seas. In the event of a blowout, it would take 11 days for emergency response ships to even reach the spill. An oil blowout off the coast of Newfoundland would decimate the world's last remaining Atlantic cod fishery, along with several species of whales, seals, turtles, coral habitats and seabirds that feed in the basin. These rich and fertile seas are the backbone to Newfoundland's tourism industry. An oil spill would create dead zones within the ocean and potentially devastate this economic mainstay that brings in over 1 billion tourist dollars annually.

Canada has entered the race to drill oil in deeper and deeper waters, but safety procedures and cleanup techniques have not kept pace with the petrochemical industry's pursuit of oil. Is it only a matter of time before an oil catastrophe happens in Canada?

John Embry: "Gold, Silver Could Go Ballistic By Year End"

Sprott's John Embry is in fine form today: in a just released oped in the Investor's Digest of Canada, the Chief Investment Strategist of Sprott Asset Management LP, and one of the biggest fans of shiny metals in history, makes the following bold prediction, which also explains how he views the concerted attempts by the LBMA to keep gold below the $1,420 all time high: "I am not in the least bit concerned about these shenanigans because I believe considerable additional quantitative easing is inevitable, irrespective of what the Fed says or does in the short term. Goldman Sachs's chief U.S. economist Jan Hatzius clearly shares my view as he has suggested that ultimately as much as $4 trillion maybe required although he anticipates that it will be staged. In my opinion this will act as catnip for gold and silver prices, which could go ballistic by year-end." Presumably, he means 2011. So forget all you have heard about interest rate (real or otherwise) correlations: they don't exist. All that does exist is the willingness of the Fed to 'print.' And with China increasingly starting to tighten, the Fed will need to do double duty if it wishes to keep global liquidity well-offered with near-free fiat paper. While we don't quite share Embry's enthusiasm for gold's imminent escape velocity, we are confident that as long as loose monetary policy is the only means to extend and pretend the ponzi, gold will, in turn, be well-bid.

"Gold, Silver Could Go Ballistic By Year End" published in Investor's Digest of Canada

The gold price experienced a virtually uninterrupted rise of more than $200 in a 2 1/2 month period from the end of July through mid-October. This came on the heels of an orchestrated $100 price takedown following an all-time price high in mid-June as the authorities took great pains at that time to ensure that the gold price wasn't flying as the necessity for further quantitative easing (QE) became obvious. (more)

Copper May be in 550,000 Ton Deficit in 2011 on Low Stocks, Macquarie Says

The global copper market is estimated to have a 550,000-metric ton deficit next year as falling stockpiles push prices to $5 a pound, Macquarie Bank Ltd. said in a research report today.

The forecast was based on an assumption of 4 percent mine supply disruption, or 720,000 tons, with global stocks falling to below three weeks of world consumption, according to the report. It also excluded material that may be held by exchange- traded products launched by BlackRock Inc. and JPMorgan Chase & Co., it said.

The final 2011 copper deficit could be bigger as the bank believes the Securities and Exchange Commission will approve the introduction of the ETF products, said Macquarie.

Euro Pain Turns to 23 Percent Gain for Europeans in S&P 500 Read more: Euro Pain Turns to 23 Percent Gain for Europeans in S&P 500

For all the losses facing Europeans this year, investors from the region who bought U.S. stocks as the euro weakened are getting the best returns in a decade.

The Standard & Poor’s 500 Index rose 23 percent this year when translated to euros, the most since the currency was formed in 1999 and almost double the 13 percent gain for Americans, according to data compiled by Bloomberg. Buying the Nikkei 225 Stock Average in Tokyo produced a 20 percent increase for Europeans, compared with a 2.5 percent loss when priced in yen, the data show.

Record budget deficits and bailouts of Greece and Ireland sent the European currency down 8.4 percent in 2010, boosting winnings for anyone converting dollar-denominated investments back into euros. Concern about further declines may spur more overseas investment in 2011, according to Dirk Pattyn at Degroof Fund Management Co. in Brussels, whose U.S. fund gave European investors a 24 percent return this year.

“The focus is still the debt problem in Europe, and many clients might be looking at the U.S. as a first alternative,” said Pattyn, who held Chevron Corp. and Microsoft Corp. among $33 billion in investments at his company this year. “It’s been an excellent year for U.S. investors in Europe. You have the currency that added a lot, and also you had the performance of the underlying index.” (more)

How the Mortgage Market Will Look in 2011

This was kind of a bizarre year for the mortgage market. In the first half of the year, you had a decent number of home sales keeping mortgages for purchases stable, thanks to the home buyer credit. In the second half of the year, that changed as demand crumbled when the credit was withdrawn. At the same time, you had very low mortgage interest rates throughout much of the year cause a mini-refinancing boom. 2011 will look very different, as the housing demand continues to struggle and mortgage interest rates have begun rising.

Michele Lerner has a pretty good list of seven mortgage trends we can expect to see in 2011, over at Investopedia. A few are relatively trivial if you assume her first trend, rising mortgage interest rates, will hold. That will predictably continue to lower the demand for mortgages and refinancing, while increasing the portion of purchase applications. Lerner's last three predictions are a little more interesting, however.

First, she says that jumbo mortgages, those which exceed the conforming limit (between $417,000 and $729,750, depending on location) will become cheaper. Lerner notes that these mortgage interest rates were higher than conforming rates in 2009 and early 2010, but began to fall in the latter part of this year. This mostly has to do with the funding available for mortgages. Since the mortgage-backed securities (MBS) market died with the financial crisis, banks had to rely on government sources of financing. As investors become more comfortable again with private MBS, jumbo loans will become cheaper. For this to happen in 2011, the MBS market will have to improve accordingly. (more)

Crude Oil Declines From 26-Month High on Concerns China's Growth May Ease

Crude oil fell from a two-year high in New York as China’s second interest-rate increase since October bolstered concern that economic growth will slow in the biggest energy-consuming country.

Futures snapped five days of gains after the People’s Bank of China boosted benchmark one-year lending and deposit rates by 25 basis points Dec. 25 to curb inflation. Oil advanced earlier as temperatures fell and storms blanketed the eastern U.S. with snow, raising demand for heating fuels.

“There’s a feeling that the Chinese interest-rate move will slow economic growth,” said Peter Beutel, president of Cameron Hanover Inc., a trading-advisory company in New Canaan, Connecticut. “This could diminish demand for energy or at least slow projected growth, which has powered the recent rally.”

Crude oil for February delivery fell 51 cents, or 0.6 percent, to settle at $91 a barrel on the New York Mercantile Exchange. Futures earlier climbed to $91.88 a barrel, the highest intraday level since Oct. 7, 2008. Prices are up 15 percent this year. (more)

Monday, December 27, 2010

"JP Morgue" Silver Manipulation Explained, Part 2

China's Christmas Present To The World: Another Interest Rate Hike

Following Friday's failed 3 Month Bill auction, things in China are once again getting interesting, just as the rest of the world has decided to sleep right into 2011. The PBoC, in a surprise move, hiked its lending and deposits rates by 0.25%, the second time the bank has done so since October 19, when its then-raise was the first in 3 years. And by all accounts the PBoC is not done: consensus is for three 25 bps moves by the end of 2011: that the PBoC is starting early may be an indication that the country is starting to seriously worry about its soft landing prospects. Yet one thing that is certain is this move cements the CNYUSD peg: despite all the rhetoric, China will keep the currency peg come hell or high water, as it eliminates any monetary trump card Bernanke may have (just as Germany loves being part of the EUR which has such insolvent countries as all PIIGS members backing up the rear). What is unclear is whether the PBoC has now decided to avoid the RRR hike path as the preferred approach to combating inflation. It is assumed that his action will have a soothing impact on the Chinese 7 and 30 Day Repo rates come Monday, as else more failed bond auctions are certain to be in store for Shanghai in 2011.

From the just released PBoC statement:

The People's Bank of China, starting December 26, 2010 has raised the financial institutions' benchmark deposit and lending rates. The one-year deposit and lending rates by 0.25 percentage points, respectively, other deposit and lending interest rate adjusted accordingly (see table). - Full release link.

And the biggest irony is that as China turns off the liquidity spigot, and the hot money follows the path of least resistance in a world of connected liquidity vessels, we expect that commodity prices in the US will jump that much higher, as the speculators slowly abandon the SHCOMP and related exchanges and bring their full sound and fury on fertile for manipulation US soil.

Chart of the Day: Market Bullishness


"Investors Intelligence now shows the bull share heading up to 58.8% from 55.8% a week ago, and the bear share is up to 20.6% from 20.5%. So bullish sentiment has now reached a new high for the year and is now the highest since 2007 ― just ahead of the market slide."



King World News Weekly Metals Wrap

The KWN Weekly Metals Wrap - We have added new segments to the KWN Weekly Metals Wrap covering gold, silver, trading and a plethora of other factors affecting the precious metals markets. I am giving King World News listeners globally access to what has long been my secret weapons in researching where gold and silver are headed directionally along with the COT Report. We Cover the Commitment of Traders Report in detail as well as a number of other factors which can influence the gold and silver market price action. (click here for audio)

Nine 2011 Predictions By David Chu

1. The U.S. will implement QE3/4 when the $600 billion of QE2 is not enough (already it is not enough as admitted by the Fed's chairman Benjamin Shalom Bernanke recently on CBS' 60 Minutes). Except it won't be called as such in the lamestream media. QE3/4 will be in the trillions of U.S. dollars (USD) of quantitative easing, i.e., fake digital money printing from the Fed to sop up unwanted U.S. Treasuries. The unstated and ONLY purpose of QE2 and QE3/4 is to buy up all of the U.S. Treasury debts that the foreign nations are beginning to refuse to buy while they are quietly dumping what they possess on the U.S. and world markets in exchange for real and tangible assets and resources.
2. The major export nations like China, Russia, Brazil, India, Argentina, and others will engage in and increase their non USD-denominated trading among themselves, as exemplified by the recent China-Russia trade agreements whereby they would start trading in Rubles and Yuans, and not use USD as is typically transacted in international trades for commodities and oil. This will put increasing devaluation pressures on the USD. So, look forward to the US Dollar Index to drop further from the low 80s now to the low 70s or even lower in 2011.
3. Retail food prices in the U.S. will increase in the low to medium DOUBLE digit ranges (10% to 40%) for everything from the junk/GMO "foods" served by corporations like McDonald's to healthy/organic foods supplied by companies like Whole Foods Market. This will take place noticeably in the first half of 2011. (more)

Trader Holds $3 Billion of Copper in London


As commodity prices soar to new records, the ability of a few traders to hold huge swaths of the world's stockpiles is coming under scrutiny.

The latest example is in the copper market, where a single trader has reported it owns 80%-90% of the copper sitting in London Metal Exchange warehouses, equal to about half of the world's exchange-registered copper stockpile and worth about $3 billion.

The report coincided with copper prices reaching record highs Tuesday. Commodities prices rallied along with stocks. The Dow Jones Industrial Average gained 55.03 points, or 0.5%, to 11533.16, its highest level since August 2008. Crude oil jumped to its highest level in more than two years and topped $90 a barrel in late electronic trading in New York. Corn and soybeans rose amid worries about hot weather in Argentina. (more)

Royal Nickel (RNX): Little Inco prepares to take flight

Royal Nickel, a company led by a group of former Inco executives, is working to cash in on rising commodity prices by developing a large nickel project near Amos, Quebec.

The Inco boys are back!

Three years after the venerable Canadian nickel mining giant was swallowed by Vale SA (NYSE: VALE, Stock Forum) of Brazil, a group of former Inco executives are working to cash in on rising commodity prices by developing the Dumont nickel deposit in Quebec, at a projected cost of around $2 billion.

This effort is being led by Scott Hand, the 68-year-old ex Inco chief executive officer, who two years ago agreed to become executive chairman of Royal Nickel Corp.(TSX: T.RNX, Stock Forum), the Toronto company that owns 100% of the project.

He is working with a management team that includes former Inco marketing vice-president Peter Goudie, and Tyler Michelson, who was a vice-president and business strategist at Inco.

Mitchelson is now President and chief executive officer at Royal Nickel, which recently raised $45 million from an initial public offering that will be used to finance metallurgical test work and mine feasibility studies.

On December 24, 2010, the stock was trading at $2.09, giving Royal Nickel a market cap of 175.5 million based on 84 million shares outstanding.

"We do have a couple of former Falconbridge people there too," said Hand, referring to the fact that Alger St-Jean, a former senior geologist at Falconbridge, is now vice-president of exploration at Royal Nickel. Falconbridge was Canada's second largest nickel miner, behind Inco, before it was acquired by Xstrata PLC in 2006. (more)

US Economic Calendar for the Week

DateTime (ET)StatisticForActualBriefing ForecastMarket ExpectsPriorRevised From
Dec 289:00 AMCase-Shiller 20-city IndexOct--0.2%NA0.59%-
Dec 2810:00 AMConsumer ConfidenceDec-56.056.154.1-
Dec 297:00 AMMBA Mortgage Applications12/24-NANA-18.6%-
Dec 2910:30 AMCrude Inventories12/25-NANA-5.33M-
Dec 308:30 AMInitial Claims12/25-415K416K420K-
Dec 308:30 AMContinuing Claims12/18-4000K4030K4064K-
Dec 309:45 AMChicago PMIDec-61.562.562.5-
Dec 3010:00 AMPending Home SalesNov--3.0%-1.8%10.4%-

Saturday, December 25, 2010

Construction In China Fuels Commodities Investing

2010 has been quite the year for commodities. No doubt you’ve seen the various headlines about soaring gold prices. You may have even seen how higher wheat and corn prices are impacting the price of groceries.

From a big picture perspective, the iPath Dow Jones-UBS Commodity Index ETN (DJP) is up almost 13% year to date. DJP holds a basket of 19 commodities weighted on market prices.

But DJP doesn’t do justice to the year we’re seeing in commodities.

In fact, a handful of individual commodities are having unbelievable years. Cotton is the year’s biggest winner, up a ridiculous 104% year to date. Some other headline grabbers are silver, up an amazing 74%, and corn, up a stellar 46%.

And those are just some of the flashy winners. There are over 15 major commodities with greater than 20% gains this year! That’s crazy.

No matter how you look at it, it’s been an incredible year for commodity investors.

Here’s the thing…

We’re just scratching the surface of where commodities can go. (more)

HES Radio: World Financial Report

The World Financial Report brings you timely information on the worlds most exciting markets like oil, precious metals, currencies, commodities and hard money markets like very rare color diamonds and collectibles. The World Financial Report makes predictions and gives investment advice and has been very successful in identifying trends in the marketplace.

click here for audio

John Taylor Says To Play The Coming End Of The Global Reliquification By Shorting Australia

In his weekly headline letter John Taylor analyzes where he and Jim Chanos have overlapping views, and where both of them erred (hint: everyone underestimated the willingness of Bernanke to sacrifice monetary prudence in order to reflate anything and everything, although with oil now the latest and greatest excess liquidity target, the experiment may soon be ending). Yet the time of the global reliquification may be coming to an end: "If the Republicans play rough and California craters, fiscal tightening will be the rule, US rates will be higher than Bernanke wants, the dollar will be strong, and foreign markets will be hurt. The odds favor an outcome like this, and the Fed is not free to ride to the rescue again. With Ron Paul riding hard over Bernanke, the Feds wild ways will be corralled. With fewer excess dollars, the growth game, and the markets that follow it, are over." So is shorting stocks the best bet? Yes. But an even better one is going short the Aussies: "The Aussie was over USD 1.0000 today and we think it is a great sell here." (more)

Lindsey Williams: Coming Crisis - Dr. Stan Monteith

Why oil services stocks are outperforming oil producer stocks

The share prices of oil service companies have outperformed the share prices of large-cap oil and gas companies’ common shares since the broader stock market indexes started to move higher at the start of September. The unit price of the Oil Service Holders (OIH-NYSE, $138.52) exchange traded fund (ETF) has increased about 39% since September 1, compared to a 34% price increase for units of the Energy Select Sector SPDR Fund (XLE-NYSE, $67.22) ETF. Interestingly, oil prices have only increased about 21% in the same time frame, which is almost identical to the move experienced by the S&P 500 Index.

There are several other ETFs that track the shares of oil and gas producers and services companies, although those other ETFs do not experience the same magnitude of trading volume as the XLE and OIH ETFs.

The XLE ETF tracks the shares of U.S. large-cap oil and gas companies with recent trading volume about 10 to 20 million units per day. This ETF has a heavy weighting of Exxon Mobil Corp. (XOM-NYSE, $72.80), which significantly influences the direction of the ETF. Since XOM has lagged the XLE ETF during the last several months the recent influence has been a drag on the ETF’s performance.

The OIH ETF tracks the Philadelphia Oil Services Index (OSX, 242.22), which is comprised of the shares of U.S. large-cap oil and gas service companies. Recent trading volume is about 4 to 5 million units per day. This ETF includes oil and gas service companies such as Schlumberger Ltd. (SLB-NYSE, $82.81), Halliburton Co. (HAL-NYSE, $40.41) and Baker Hughes, Inc. (BHI-NYSE, $56.76), which have all outperformed the OIH ETF since Sept. 1. (more)

Ted Butler: A CFTC Show Stopper

For all those who watched the historic CFTC meeting December 16th on position limits, no, your eyes didn’t deceive you – the meeting ended strangely and abruptly. No vote was taken on the staff’s proposal and you should be scratching your head at what actually transpired. As strange as the sudden adjournment to the most important meeting in CFTC history might be, there was a wealth of knowledge and confirmation to be drawn from it. This meeting was perhaps the most significant and positive development towards ending the long-term silver manipulation that I have witnessed in my 25 year involvement. Silver investors should come away from this meeting with a strong conviction of how things will turn out.

I know there are deep differences between the five commissioners on the matter of position limits, even though such limits are now mandated by law. I know that the CME Group (COMEX and NYMEX) is pulling out all stops to prevent, delay and water down any position limits that may be enacted. But I also know that there is one glaring truth that accounts for the dissention and turmoil revealed at the meeting. This is all about silver and its manipulation. If it weren’t for silver, this meeting and the issue of position limits would be a non-event. There is no current concentration problem in any other commodity.

Because of the fact that silver has been manipulated in price and position limits would terminate that manipulation, the CME and JPMorgan want to derail any move towards these limits. Keep this fact in mind, as it is the central issue. When it comes to market regulation and silver the CME Group does not do the right thing. They are only interested in their bottom line and the devil with everyone else. However, the CME is designated as a self-regulatory organization by law, which means they have special responsibilities as a front line defense against market wrongdoing. (more)

Friday, December 24, 2010

Charlie Brown Christmas

Down Argentine Way

There are many ominous parallels between Argentina and the U.S. and the question often asked is can America avoid the economic consequences that Argentina suffered from a fascist government combined with government debt and currency collapse? I believe the answer is likely NO!

"There are a lot of ways to ruin an economy. Argentina has experimented with most of them. It has devalued its currency, and revalued it. It has pegged it, and then knocked down the peg. It has regulated, controlled, inspected, taxed and confiscated. Following the 2001 crisis, earnings fell by 30% – with half the nation slipping below the official poverty line. What is remarkable is that the Argentine economy has survived at all." ~ Bill Bonner

Down Argentine Way was the 1940 film that made a star of Betty Grable, who played an attractive young woman on vacation who fell in love with a wealthy racehorse owner. The storyline actually reflected a common occurrence during the 25 years prior to the film debut.

In the early 20th century, "as rich as an Argentine" was a common expression, often used in connection with poor British aristocrats attempting to marry off their daughters to wealthy Argentinians. Argentina was indeed a wealthy nation; for example, we all know about Harrods Department Store in London. Few realize that during this period of Argentine prosperity, Harrods also ran a store in Buenos Aires. (more)