Tuesday, August 31, 2010

The Poor Have No Chance of Joining the Rich, the Game is Rigged


"Financiers - like bank robbers - do not create wealth. They merely distribute it. While the mob may idolize holdup men in good times, in the bad times it lynches them. What they will do to the new money men when their blood is up, we wait eagerly to find out." - Mobs, Messiahs and Markets.

As our economy hurtles towards its meeting with destiny, the political class seeks to assign blame on their enemies for this Greater Depression. The Republicans would like you to believe that Bill Clinton, Robert Rubin, Chris Dodd, and Barney Frank and their Community Reinvest Act caused the collapse of our financial system. Democrats want you to believe that George Bush and his band of unregulated free market capitalists created a financial disaster of epic proportions. The truth is that America has been captured by a financial class that makes no distinction between parties. These barbarians have sucked the life out of a once productive nation by raping and pillaging with impunity while enriching only them. They live in 20,000 square foot $10 million mansions in Greenwich, CT and in $3 million dollar penthouses on Central Park West.

These are the robber barons that represent the Age of Mammon. The greed, avarice, gluttony and acute materialism of these American traitors has not been seen in this country since the 1920's. The hedge fund managers and Wall Street bank executives that occupy the mansions and penthouses evidently don't find much time to read the bible in their downtime from raping and pillaging the wealth of the middle class. There are cocktail parties and $5,000 a plate political "fundraisers" to attend. You can't be cheap when buying off your protection in Washington DC. (more)

Using this one method I turned a $14,000 trade into a $75,000 profit in just 8 months.


Bear Bet: China Crash Now Simply Unavoidable

Three numbers should suffice to give Chinese economic policymakers a sleepless night: 65.4 million, $28.7 billion and $2.45 trillion.

In order, they are the estimate by a government researcher of how many apartments stand vacant in China, many of them bought as speculative investments; the country's trade surplus in July; and the international reserves the central bank has accumulated by buying dollars to hold down the yuan.

Together, they encapsulate the distortions of an economy that favors investment by suppressing the cost of capital and other inputs at the expense of consumers, whose spending power is held down by low wages and low deposit rates.

Unable to sell at home all that it produces, China exports the rest.

This template has powered 30 years of headlong growth that is catapulting China past Japan to become the world's largest economy after the United States. (more)

Using this one method I turned a $14,000 trade into a $75,000 profit in just 8 months.

Here Are The Biggest Fund Losers From The Retail Stock Market Boycott


It is no surprise that Charles Schwab is trading at 52 week lows: as long highlighted, for retail brokers to make money, someone has to trade. And since Schwab can't charge the computers, the banks, and the Fed for transactions (especially the latter which seems to enjoy dark venues more than anything), the future is sure not bright for the E-Trade's (potentially the only investment in Citadel's portfolio, which is for the second year in a row below its high water mark, making money this year) and the Schwabs. Yet due to their relatively lean cost structure, retail brokers at least do not have to worry much about redemptions and capital under management. Which is most certainly not true for the mutual funds out there, many of which are also public, and will soon be whacked doubly more so as a result of plunging asset holdings, and tumbling transactions. So instead of shorting Schwab, here are the mutual funds, classified courtesy of Moody's, which have the most to lose from the ongoing $50 billion+ YTD withdrawal by investors from domestic stock funds (hint: Waddell & Reed, and Janus). (more)

Stock Assault 2.0 - Artificial Intelligence Stock Market Software

BNN: Top Picks

Rick Stuchberry, portfolio manager, Macquarie Private Wealth, shares his top picks.

click here for video

Safe investments with reasonable returns

Severe stock market corrections like the Dow’s 23 per cent plunge in 1987 and the mysterious derivative trade that led to a 600-point drop in the Dow on May 6 this year have helped drive small investors out of the market.

Canadians, growing increasingly weary over market volatility, entered 2010 sitting on a mountain of cash – about $1 trillion to be exact, mostly in bank accounts and GICs. And over the course of the year they’ve pumped another $100 billion into bank accounts.

On the surface it might look like a sensible thing to do. After all, you can’t lose money if it’s squirreled away under a mattress or in a bank account.

Or can you?

Because all this money is largely stowed away in savings accounts and GICs, all you can earn on a short-term savings account is about 0.25 per cent and on five-year deposits about 4 per cent. (more)

Using this one method I turned a $14,000 trade into a $75,000 profit in just 8 months.

Dividend Watch List

Watch List Summary
The best performing stock from the previous list was Harleysville (HGIC) which rose 4% The worst performing stock was Medtronic (MDT) which fell 14%.

Topping the list this week is Johnson & Johnson (JNJ). Based on IQTrends (http://www.iqtrends.com/), JNJ is undervalued at or near 3.5% yield. The current yield is 3.7%. Trailing P/E of 12 is 25% below its average 5 years P/E of 16. We suggest readers adding JNJ to your investment watch list.

Second on the list is Intel (INTC). After cutting their sales and margin forecast down on Friday, stock rose 1%. Could the negative news be priced in? Only time will tell. Intel is trading at 11x trailing earnings. Compared that to its 5 years average of 21x, it could be a bargain. Analyst will have a weekend full of downward revision so we expect little more pressure next week. But given the stock is yielding 3.4% compared to the 5 years average yield of 2.3%, the risk/reward is more attractive now. Both JNJ and INTC have payout ratio below 50%. (more)

Obama could kill fossil fuels overnight with a nuclear dash for thorium

by Ambrose Evans Pritchard,

We could then stop arguing about wind mills, deepwater drilling, IPCC hockey sticks, or strategic reliance on the Kremlin. History will move on fast.

Muddling on with the status quo is not a grown-up policy. The International Energy Agency says the world must invest $26 trillion (£16.7 trillion) over the next 20 years to avert an energy shock. The scramble for scarce fuel is already leading to friction between China, India, and the West.

There is no certain bet in nuclear physics but work by Nobel laureate Carlo Rubbia at CERN (European Organization for Nuclear Research) on the use of thorium as a cheap, clean and safe alternative to uranium in reactors may be the magic bullet we have all been hoping for, though we have barely begun to crack the potential of solar power.

Dr Rubbia says a tonne of the silvery metal – named after the Norse god of thunder, who also gave us Thor’s day or Thursday - produces as much energy as 200 tonnes of uranium, or 3,500,000 tonnes of coal. A mere fistful would light London for a week. (more)

Money Today - September 2010

Money Today is a comprehensive, easy-to-read personal finance magazine that steers clear of the jargon thats common to money-related issues. The content is both topical and timeless. Most important, it is utilitarian, offering readers clear tips on managing their money--be it investing in mutual funds, buying stocks or a house or car. It even offers help when negotiating a new salary or setting up your own business. In short, Money Today takes the guesswork out of investing and helps you maximize your returns.

read more here

A Way for Traders to Profit from Failing Banks

As the economy continues to slide, regional banks are failing at an alarming rate. So far, in 2010, 109 banks have failed. This brings the total number of bank failures since 2007 to 277.

As a result, many regional banks provide excellent shorting opportunities. California-based East West Bancorp (NYSE: EWBC) is one such candidate.

The holding company for East West Bank, EWBC offers a full range of personal and business banking deposit and loan services. Although the company has thus far managed to maintain profitability, this picture may be about to change.

EWBC appears technically vulnerable. The stock is in an intermediate-term downtrend and falling. It is currently testing an important resistance zone between $14.10 and $15.00. (more)

When Will Silver Prices Explode?

Jason Hommel,

Many analysts and investors try to guess when silver prices will explode. They make these guesses based on the charts, or even by the fundamentals like I do. I pointed out the fundamental supply and demand numbers in my last article, "1% of 1%".

The Tiny Silver Market attracts 1% of 1%, or $1 out of every $10,000 in the US Banking system, each year.

By the time 1% of paper money tries to buy silver in one year, there will be 100 times as much investor buying of silver as today, which will be about $180 billion trying to buy only 750 million ounces of annual world production, which implies a silver price of about $240/oz., or perhaps higher.

1% of 1% August 23rd, 2010 (The Silver Market is tiny, tiny, tiny!)

That article led Al Korelin and Steve Carr to call me up for a 13-minute radio interview on the Korelin Economics Report. See here:


Please listen to that radio segment; it's very powerful information.

The silver fundamentals are so great, and the silver market is so small, that at any time, the silver price can double, up from about $18-19/oz. now, to about $40/oz. (more)

Using this one method I turned a $14,000 trade into a $75,000 profit in just 8 months.

Monday, August 30, 2010

Is This The Great Bond Market Crash Of 2010?


OK, maybe it hasn't really crashed yet. But the two day, 3 ½ point sell off in the futures for the 30 year Treasury bond (TBT), at the end of last week was the sharpest drop in 18 months. Winston Churchill's great 1942 quote, which marked the turning of the tide for Britain in WWII, comes to mind. "This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning."

In my recent piece on the extreme overvaluation of government debt, I pointed out that the last time rates were this low, Treasury bonds brought in a miserly 1.9% yield for a decade (click here for the piece). Professor Jeremy Siegel at the Wharton School at the University of Pennsylvania has one upped me. After yields bottomed in 1956, bonds suffered negative returns for 30 years!

This should have occurred to me, as the first mortgage I took out on a Manhattan coop in 1982 carried an 18% interest rate. That was then Federal Reserve governor Paul Volcker was waging a holy war on inflation and eventually won. I took out one of the first ever floating rate mortgages, and by the time I sold it three years later, the rate had melted down to only 11%. I tell this story to kids buying their first starter homes now and they look at me like I'm some kind of dinosaur. (more)

Stocks, Commodities, Forex Review / Preview: Nowhere to Go but Up?

Have expectations already sunk so low that even the coming week’s dour results could still beat expectations and spark a rally? That’s the big question for the coming week.

The main theme continues to be risk aversion in all markets, most obviously in global stocks and bonds.

Equities are continuing to show technical breakdown. US and European government bonds are showing no signs of breaking the strong long-term bull trend despite decade low rates. Most growth dependent commodities show a similar story, though copper gets a bit of a boost from slowdowns in Chilean mines.

The underlying cause is uncertainty about the continuity of the global economic recovery as most of its engines slow down. Europe faces a slowdown from the combined effects of austerity and future aid to nations struggling under debt burdens, and to their large bank creditors. Japan remains stuck in deflation. China is intentionally cooling its growth to avoid inflation. Every major indicator of US economic health points to a substantial slowdown in the second half of the year.

The only clear beneficiaries are safe-haven and currency-hedge assets: AAA bonds, gold, the JPY, CHF and to a lesser extent, the USD. (more)

Technically Precious with Merv.

FREE weekly precious metal investment newsletter, click here

Truck Tonnage Index Increases for 8th Month

The American Trucking Associations’ advance seasonally adjusted (SA) For-Hire Truck Tonnage Index increased 1.5% in July, although June’s reduction was revised from 1.4% to 1.6%. The latest improvement raised the SA index from 108.3 (2000=100) in June to 110 in July. Compared with July 2009, SA tonnage climbed 7.4%, which matched June’s increase and was the eighth consecutive year-over-year gain (see chart above). Year-to-date, tonnage is up 6.7% compared with the same period in 2009.

ATA Chief Economist Bob Costello said that July’s data didn’t change his outlook for subdued tonnage growth in the months ahead, stating, “The economy is slowing and truck freight tonnage has essentially gone sideways since April 2010.” Nevertheless, Costello believes that tonnage will post moderate gains, on average, for the second half of the year. “After accounting for the reduction in supply over the last few years, even small gains in tonnage will have a larger impact on the industry than in past. (more)

"Monetary Shock and Awe": The Fed Prepared to Launch Most Radical Intervention in History

By Mike Whitney / globalresearch,

The equities markets are in disarray while the bond markets continue to surge. The avalanche of bad news has started to take its toll on investor sentiment. Barry Ritholtz's "The Big Picture" reports that the bears have taken the high-ground and bullishness has dropped to its lowest level since March ‘09 when the market did a quick about-face and began a year-long rally. Could it happen again? No one knows, but the mood has definitely darkened along with the data. There's no talk of green shoots any more, and even the deficit hawks have gone into hibernation. It feels like the calm before the storm, which is why all eyes were on Jackson Hole this morning where Fed chairman Ben Bernanke delivered his verdict on the state of the economy on Friday.

Wall Street was hoping the Fed would "go big" and promise another hefty dose of quantitative easing to push down long-term interest rates and jolt consumers out of their lethargy. But Bernanke provided few details choosing instead this vague commitment:

“The Committee is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly." (more)

Miners On Verge of Breakout: Mergers and Acquisitions Heating Up The Sector

By Jeb Handwerger / goldstocktrades.com,

The global debt crisis and the war on deflation by the Federal Reserve is causing more producers to find ways to invest their cash. This low interest rate environment which may continue for some time will force producers whom are sitting on large cash positions to acquire more reserves. Mergers and acquisitions in the mining sector have increased over this past year due to a lack of major discoveries as well as supply and demand changes in emerging economies.

We have seen a trend of investments from Asia to purchase stakes in mining companies. In 2009 the Chinese Investment Corporation, a state owned company, took large ownership positions in Teck Cominco and Penn West Energy Trust. Recently in June, China National Nuclear signed a contract with Cameco to supply 23 million pounds of uranium. Hanlong Investments took a large stake in General Moly, one of the leading North American molybdenum developers. Korea Electric Power signed a deal with Denison Mines another uranium developer. Sojitz bought a 25% interest in the Taseko’s Gibraltar Copper Mine. Then recently we saw BHP Billiton trying to make a deal with Potash Corp. and Kinross, a large producer buying Redback, an exploration company. This trend should continue through 2011.

Investors should be studying the companies that are receiving premiums and position themselves accordingly to make potentially large profits. Junior mining companies that are sitting on large assets that are still relatively cheap or overlooked should be considered. There are still many companies with strong assets that are trading way below value. This is an exciting and highly profitable time for the companies with assets close to production in the mining sector. (more)

Its Official: China is Unloading its Treasury Bonds

It looks like the smart money these days is found in China. While American investors have been scrambling over each other to buy more Treasury bonds at historically low yields, China has begun quietly unloading some of its own enormous holdings. In June, the Middle Kingdom sold $21.2 billion of paper, reducing its net long to $839.7 billion. This is little more than 10% of the total $8.18 trillion in federal debt that Uncle Sam has outstanding.

Total foreign ownership of US Treasury bonds amounts to $4 trillion, up from $2.4 trillion in three years. Instead, the Chinese have been buying Japanese government bonds, which today carry a paltry 0.9% yield, but have the merit that they are denominated in a rapidly appreciating currency. The Mandarins in Beijing have also been picking up a variety of bonds in Europe which have seen yields pushed to near records, thanks to the debt crisis there.

Officials at the People's Bank of China say that it is all part of a broader diversification effort away from the greenback. PIMCO's Bill Gross has apparently been taking Mandarin lessons on the sly because he has also been paring back his own massive holdings in longer dated Treasuries. To understand why, take a look at the chart below of the spread between the Dow dividend yield and the ten year Treasury yield which has turned positive for the first time since 1955. (more)

Canadian dollar ‘big winner’ with more quantitative easing

Jonathan Ratner, National Post,

If the Fed pursues another round of quantitative easing, the Canadian dollar may be the big winner. The loonie has tended to perform fairly well following previous QE episodes, according to Barclays strategist Paul Robinson.

“In our view, this is likely to be the case once again, but the larger the monetary stimulus the more that it may benefit,” he said in a report.

If this is done relatively soon and in relatively large size, Mr. Robinson believes QE could produce a more positive response this time around, particularly given the success authorities had in limiting the severity of the recession in 2008-2009.

“The more successful QE is deemed to be, the lower U.S. interest rates will be, the higher the inflationary pressures around the world and the more growth will be supported,” the strategist said. “Canada seems to be perfectly placed to benefit from all of these factors.” (more)

Kiplinger's Personal Finance - October 2010

Kiplinger's Personal Finance was written to help you do a better job of managing your personal and family financial affairs and to help you get more for your money. You get ideas on saving, investing, cutting taxes, making major purchases, advancing your career, buying a home, paying for education, health care and travel, plus much, much more.

read more here

Analyst: Citigroup Is Cooking the Books


An all-out war has broken out between Citigroup CEO Vikram Pandit and a prominent securities analyst who is saying that the big bank may be cooking the books by inflating its earnings through an accounting gimmick, FOX Business Network has learned.

The analyst, Mike Mayo, of the securities firm CLSA, has been telling investors that Citigroup (C: 3.75 ,0.00 ,0.00%) should take a writedown, or a loss on some $50 billion of “deferred-tax assets,” or DTAs. That is a tax credit the firm has on its financial statement that Mayo says is inflating profits at the big bank by as much as $10 billion.

For that critique, Mayo has been denied one-on-one meetings with top players of the firm, including CEO Vikram Pandit, Chief Financial Officer John Gerspach, and any other member of management, while other analysts enjoy full access to the bank’s top executives, FBN has learned.

In fact, Mayo hasn’t had a meeting with Pandit or anyone in Citigroup management since around the time of the financial crisis, in the fall of 2008, when Citigroup was on the verge of extinction and needed an unprecedented series of government bailouts to survive. (more)

US Economic Calendar For the Week

DateTime (ET)StatisticForActualBriefing ForecastMarket ExpectsPriorRevised From
Aug 308:30 AMPersonal IncomeJul-0.2%0.2%0.0%-
Aug 308:30 AMPersonal SpendingJul-0.2%0.3%0.1%-
Aug 308:30 AMPCE Prices - CoreJul-0.1%0.1%0.0%-
Aug 319:00 AMCase-Shiller 20-city IndexJun-3.0%3.5%4.61%-
Aug 319:45 AMChicago PMIAug-58.057.562.3-
Aug 3110:00 AMConsumer ConfidenceAug-49.550.050.40-
Aug 312:00 PMMinutes of FOMC Meeting08/10-----
Sep 18:15 AMADP Employment ChangeAug-0K13K42K-
Sep 110:00 AMConstruction SpendingJul--0.5%-0.7%0.1%-
Sep 110:00 AMISM IndexAug-
Sep 110:30 AMCrude Inventories08/28-NANA4.11M-
Sep 12:00 PMAuto SalesAug-NA3.9M3.8M-
Sep 12:00 PMTruck SalesAug-NA5.1M5.14M-
Sep 28:30 AMInitial Claims08/28-475K475K473K-
Sep 28:30 AMContinuing Claims08/21-4460K4435K4456K-
Sep 28:30 AMProductivity-Rev.Q2--1.4%-1.6%-0.9%-
Sep 28:30 AMUnit Labor CostsQ2-1.1%1.1%0.2%-
Sep 210:00 AMFactory OrdersJul-0.1%0.3%-1.2%-
Sep 210:00 AMPending Home SalesJul--1.0%0.0%-2.6%-
Sep 38:30 AMNonfarm PayrollsAug--106K-118K-131K-
Sep 38:30 AMNonfarm Payrolls - PrivateAug-10K42K71K-
Sep 38:30 AMUnemployment RateAug-9.6%9.6%9.5%-
Sep 38:30 AMHourly EarningsAug-0.1%0.1%0.2%-
Sep 38:30 AMAverage WorkweekAug-
Sep 310:00 AMISM ServicesAug-

Saturday, August 28, 2010

The Economist – 28 August 2010

The Economist is a global weekly magazine written for those who share an uncommon interest in being well and broadly informed. Each issue explores the close links between domestic and international issues, business, politics, finance, current affairs, science, technology and the arts.

read more here

audio here

The Top 5 Reasons Gold Prices Move

By Alix Steel / TheStreet.com,

Gold prices have risen more than 10% in 2010, closing Wednesday at $1,241 an ounce. Rising unemployment in the U.S., import slowdown in China, weak global economic data, and a struggling eurozone have triggered gold's recent surge, but those issues don't tell the whole story.

Gold prices have regained speed in the past weeks as Cisco's CEO John Chambers hinted at a double-dip recession, and a slew of economic data including rising weekly initial jobless claims have brought into question the health of the U.S. economy, which has trumped any merger news and positive earnings. Gold prices have rallied 5% in August during a typically slow buying season while the Dow Jones Industrial Average fell 4%.

Gold prices are volatile, however. When equities plummet, investors are often forced to sell gold for cash, but any significant dip triggers a wave of buying as investors purchase gold at "discount" prices resulting in a strong tug-of-war for prices. Aside from recent market jitters, there are five other fundamental factors that contribute to gold's strong price moves. (more)

World Financial Report, Aug 27, 2010

click here for audio

Decoupling Now, Currency Crisis Soon

NIA believes that the decoupling we have been predicting of precious metals from the Dow Jones has now officially taken place. A year ago we would consistently see precious metals and stock market prices rise and fall in parallel. We have now seen the Dow Jones decline by 6.1% from its high on August 9th, along with both gold and silver rising by about 3.3% during this same time period.

The Dow Jones to gold ratio is now down to 8.1, near its low for 2010 of 7.9. The gold to silver ratio still remains at a historically high level of 66. However, silver was up today by $0.65 to $19.03 per ounce, its biggest one day gain since early June. We expect silver to significantly outperform gold in the months to come.

One year ago, almost all mainstream economists on CNBC were calling for either a "U" or a "V" shaped economic recovery. NIA said that prices were rising only due to inflation and there would be no economic recovery. NIA went into detail about how destructive government programs like the homebuyers tax credit were helping to artificially boost economic numbers, but as soon as these programs were over, economic activity would collapse to new lows. NIA was right. Now that the government has ended its homebuyers tax credit, we just saw sales of previously owned homes decline in July by 25.5% from one year ago, to their lowest level in a decade. We also saw new home sales in July based on the signing of new contracts decline by 32.4% from one year ago. (more)

Dow Regains 10,000 Despite Weak GDP, Dour Bernanke


The Dow recaptured the 10,000 level and stocks surged Friday as investors accelerated bargin-hunting right into the closing bell.

The market set aside a glum outlook from Dow component Intel(INTC), and instead drew a measure of comfort from a downward revision to second-quarter gross domestic product that wasn't as deep as expected, and suitably somber comments from Federal Reserve Chairman Ben Bernanke about the nation's economic outlook.

The Dow Jones Industrial Average leapt higher by 165 points, or 1.7%, to close at 10,151. The S&P 500 finished up 17 points, also a 1.7% gain, at 1,065 while the Nasdaq rose 35 points, or 1.7% to 2,154. On Thursday, the Dow closed below 10,000 for the first time since July 6, and it sank as low as 9,936 early in Friday's trading before rebounding.

Still each of the major market averages finished to the downside for the week. The tech-heavy Nasdaq led the way, dropping 1.2%. The Dow finished lower by 0.6%, and the S&P 500 lost 0.7% since last Friday's close.

Adding to the market's calculus was a good old-fashioned bidding war in the tech space. 3Par(PAR) had decided to accept Dell's(DELL) offer to acquire the data storage company for $1.8 billion, or $27 a share, a consideration that matched Hewlett-Packard's(HPQ) sweetened bid on Thursday. (more)

Weekly Visual CFTC Commitment Of Traders Summary - August 27

But first our summary on the key COT activity: net spec long positions in wheat futures on the CBOT and the KCBOT hit fresh records, at 36.7k and 67.6k: is more food inflation on the immediate horizon? Net spec shorts in US Treasury Bonds, and LT Us Treasury Bonds, while still just negative at -5.8k, and -2.6k, respectively, are at the highest they have been in 2010: keep an eye on this metric as a positive inflection point may be the contrarian signal to sell. At least those concerned about the price of chocolate may rest easy: Cocoa ICE futures dipped to the lowest net spec total for 2010, at 8,092k. In currencies, the JPY posted the second highest net long exposure for 2010 at +51,069 Net Spec, an increase of 1,000 from a week prior, and a far cry from the -55.7k recorded on April 13. EUR net positions also droppe notably, after hitting a 2010 high of -3,731k, the net spec contracts have declined to -21.6k as of August 24.

Commitment of Traders Report

Commitment of Traders Financials

10 stocks to grow old with

Dividend investing delivers safe stocks that spin off cash and have historically beat the market.

Bill Turnbull is the living definition of the phrase “long-term investor.” The 89-year-old former bank manager has been saving money for more than 40 years — starting in the late 1960s, when his kids were young and his mortgage was new. Turnbull's investment style has evolved over the years, but since the '90s he has focused almost exclusively on blue-chip stocks that pay juicy dividends. He particularly likes Canadian banks, but each of the 20 to 30 stocks in his portfolio has some sort of regular cash payout. So far, that strategy that has served him well.

When he started investing in stocks in the early '90s, his portfolio was worth $100,000 — today, despite the market crash in late 2008, it's worth more than $650,000.

If you're interested in building a retirement portfolio like that, you may want to try Turnbull's approach. Given the extreme volatility in the markets over the past few years, many like the idea of investing in solid, reputable companies that make enough cash every year to pay a good chunk of it out directly to shareholders. Even better, historical data show that over long periods of time, stocks that pay high dividends — especially those which regularly increase their dividends — soundly beat the market. If you invest in such stocks along with the right mix of bonds, you'll get what many investment advisers say is the perfect retirement portfolio. Not only is it easy to set up and maintain, it's crash resistant, dependable, and once you're retired, it will provide a steady stream of income for years. (more)

Goldman's Technical Update: Bearish, With An "Ultimate H&S Target Of 900"

In this week's update on technical chart formations, Goldman's John Noyce has nothing optimistic to tell clients. Noyce observes that while the market may have entered a short-term consolidation period with the 1,038-1,045, "looking further out the setup on the weekly charts of the S&P and the VIX, plus those for broader asset markets - fixed income in particular – make us think that a sustained bounce is unlikely and that broader risks remain on the downside." Yet the most interesting chart formation is the imminent flattening of the 2s30s... not here, but in the UK. Will the Julian Robertson "suicide" trade shift across the Atlantic?

And other key observations on the SPX:

The setup on the weekly chart still looks very heavy - The market moving lower following the bearish weekly reversal which was posted two weeks ago:

  • As discussed previously this was the third bearish weekly reversal pattern posted this year. Each one being posted from a marginally lower high (January 1,150, June 1,131 and August 1,129). This seems to be a signal that the market has lost the momentum associated with the ‘09 uptrend. (more)

Proposing an Overnight Gold Fund

There is much debate within the precious metals industry regarding the alleged suppression, or at least manipulation to an extent, by either central banks or the proprietary trading divisions of large banks, or a combination of the two.

In April the US Commodity Futures Trading Commission CFTC fined Hedge Fund Moore Capital for manipulation of the New York platinum and palladium futures market, as the firm was found to be “banging the close”, which involves entering orders in a manner designed to inflate the closing price, which other various derivatives contracts could be based on. So that is irrefutable evidence that the precious metals futures market is, at least to some extent, being manipulated. However a large concentration of this debate is based not on platinum and palladium, but on gold and silver, and particularly gold.

Numerous hypothesises have been put forward as to the motive behind alleged suppression of the gold, ranging from a central bank conspiracy to keep gold prices low, to large trading banks simply exploiting their market dominance for easy profits, or even a combination of the two with the central banks and large bullion trading operations working together in some kind for cartel to keep gold prices low. (more)

Robert Shiller Says Double Dip Imminent

Bloomberg Businessweek - August, 30 2010

* The Gold Digger. Thomas Kaplan the mad se arch
for the world's most primitive source of wealth.

* Politics. Chris Christie: The GOP's austerity rock star.

* Companies. GM's new tough guy.

* Etc. Grab a pillow! The rise of the workplace nap

read more here

Chart of the Day

Friday, August 27, 2010

The Potash price play

Una Galani, Reuters ·

Potash prices are crucial to how far BHP Billiton can stretch its US$39-billion hostile bid for Canada's Potash Corp. of Saskatchewan. The miner's offer is essentially a bet on demand for the commodity, which accounts for the bulk of the fertilizer giant's value.

According to calculations by Reuters Breakingviews, every US$50 increase in the long-term price of a tonne of potash adds about US$20 to Potash Corp.'s value. BHP's offer reflects the current market. But if prices rocket, so too will the value of its target.

To value Potash Corp., start by looking at its other businesses. The company's phosphate and nitrogen divisions are worth roughly US$11-billion, according to Morgan Stanley's estimates of what it would cost to rebuild them. Potash Corp. also owns stakes in smaller listed rivals which have a current market value of US$8-billion. (more)

BNN: Top Picks

Paul Harris, partner and portfolio manager, Avenue Investment Management, shares his top picks.

click here for video

9 Stocks to Hold Forever

Timothy Lutts / seekingalpha.com,

As to the market, which is very good about following the rules of supply and demand, these are very interesting times. Demand is down, in part because of lousy economic news (which I’m not going to go into today). Bond yields are at record lows … a clear sign of the market’s “flight to safety.” And it’s extremely difficult to find an optimistic economist these days. (You know in your heart that they’re often wrong, but you listen to them anyway.)

Ben Bernanke commented a month ago that “the economic outlook remains unusually uncertain,” and the President of Cisco (CSCO), John Chambers, repeated that outlook after his company’s earnings report last week, saying, “We think the words “unusual uncertainty” are an accurate description of what’s occurring.”

The market, of course, hates uncertainty, but I’ve learned to embrace it, which is why I’ve been growing increasingly optimistic in recent weeks, particularly because the market hasn’t fallen apart. So today, I want to give you part two of my article on “Stocks to Hold Forever.”

Part one, back on July 28, told you about the amazing Mr. Phelps, whose investment strategy was to buy stocks with exceptional growth potential when they were young … and never sell them. (more)

As Economy Wilts, Investors Await Bernanke Speech

By: Dan Weil

Investors are waiting with baited breath to see what Federal Reserve Chairman Ben Bernanke has to say in his speech about the economy at a Fed symposium Friday.

It will be his first public remarks since the central bank’s decision earlier this month to buy Treasury securities with the proceeds from its maturing mortgage bonds. That will keep the Fed’s balance sheet at $2.05 trillion, avoiding a shrinkage of its quantitative easing program.

After this week’s housing data, some economists are growing more worried about the possibility of a double-dip recession and deflation.

Existing home sales plunged 27 percent in July from June to at least an 11-year low. And new home sales dropped 12 percent in July to at least a 47-year low.

Economists now expect that second quarter GDP growth, originally estimated by the government at 2.4 percent, will be revised down to 1.5 percent Friday. That’s a far cry from the 3.7 percent expansion in the first quarter. (more)

Bullish Sentiment Plummets to Credit Crisis Low

By: John Melloy Executive Producer, Fast Money

The number of individual investors who have a bullish outlook on the stock market for the next six months plunged to 21 percent, from 30 percent last week, according to a widely followed sentiment survey.

What’s more, this is the lowest weekly reading from the American Association of Individual Investors since a March 2009 level of 19 percent, which occurred just before the S&P 500 collapsed to a 12-year low of 676.

1047.22 -8.11 (-0.77%%)

So effectively, individual investors feel as good about stocks as they did at the very depths of the credit crisis, even though the S&P 500 is still more than 50 percent higher than that low.

Looking at the events of the past five days (the survey is completed every Wednesday) not much comes to mind that would trigger such a surge in pessimism. There was the record plunge in July existing home sales on Tuesday, but the stock market actually almost finished higher that day as traders speculated that was just the after-effects of a tax credit that pulled sales forward. (more)

Gold stocks discount lower gold price

David Berman/ globeandmail.com

Michael Curran, an analyst at RBC Dominion Securities Inc., is bullish on gold and gold equities, and you can see why. Whereas gold trades at about $1240 (U.S.) an ounce right now, gold equities are discounting considerably lower prices for the commodity, leaving plenty of upside potential.

According to his figures, the average discounted gold price among North American Tier 1 producers is $915 an ounce. In other words, the stock prices assume that the long-term price of gold will tumble about 26 per cent from the current level. Yamana Gold Inc. (YRI-T10.79-0.03-0.28%) has the lowest discounted gold price, at $780 an ounce. Newmont Mining Corp. (NEM-N59.440.701.19%) has the highest discounted gold price, at $1017 an ounce. Barrick Gold Corp. (ABX-T48.820.861.79%) is near the average, at $904 an ounce.

If the discounted gold price were to narrow the gap with the actual, current price – say, to $1,200 an ounce – then share prices would rise considerably. In fact, the average pop would be 55 per cent. Even with a discounted price of just $1,000 an ounce, the average share price would rise 17 per cent. (more)

10 Practical Steps That You Can Take To Insulate Yourself (At Least Somewhat) From The Coming Economic Collapse

Most Americans are still operating under the delusion that this "recession" will end and that the "good times" will return soon, but a growing minority of Americans are starting to realize that things are fundamentally changing and that they better start preparing for what is ahead. These "preppers" come from all over the political spectrum and from every age group. More than at any other time in modern history, the American people lack faith in the U.S. economic system. In dozens of previous columns, I have detailed the horrific economic problems that we are now facing in excruciating detail. Many readers have started to complain that all I do is "scare" people and that I don't provide any practical solutions. Well, not everyone can move to Montana and start a llama farm, but hopefully this article will give people some practical steps that they can take to insulate themselves (at least to an extent) from the coming economic collapse.

But before I get into what people need to do, let's take a minute to understand just how bad things are getting out there. The economic numbers in the headlines go up and down and it can all be very confusing to most Americans.

However, there are two long-term trends that are very clear and that anyone can understand.... (more)

Birinyi Cuts 2010 Forecast, Says Bull Market Intact

Weakening economic growth will cut returns for the Standard & Poor’s 500 Index this year while failing to end the bull market that started 17 months ago, according to Birinyi Associates Inc.

The benchmark gauge for American equities will probably rise 17 percent from today’s close to 1,225 by year-end, the Westport, Connecticut-based research and money management firm founded by Laszlo Birinyi wrote in a note to clients. Birinyi forecast a rally to 1,325 on March 29.

Declines in companies from Wal-Mart Stores Inc. to Procter & Gamble Co. are unlikely to be erased this year, spurring the lowered forecast, the firm said. Birinyi, one of the first money managers to advise buying stocks before the S&P 500 bottomed in March 2009, has maintained his bullish stance even as the gauge lost 13 percent since April. (more)

Gerald Celente: Economic Collision Course: The “Crash of 2010”

Following the “Panic of ’08” and the subsequent “Great Recession,” Washington, Wall Street and the media united to promote the belief that extreme crisis management measures enacted by governments had rescued the world, and staved off even worse disaster.

“Recovery” was in the air. “Recovery” was the word on the public’s lips. “Recovery” was fervently preached and endlessly pitched.

A very few argued that the measures could not work; that they would not live up to expectations. But only Gerald Celente predicted, from the onset, that they would fail completely, leading to the “Crash of 2010” and an inevitable descent into the “Greatest Depression.”

Now, with the data catching up to Celente and the economic skies falling, the “Recovery Hawks” have turned “Chicken Little.”

Celente plotted out the collision course and provided strategies for both steering clear of the dead end “Road to Recovery” and following roads less traveled that would lead to safety and success.

As every driver knows, in the moment before a collision there’s a gap – a split second – between recognition of the crash to come and the impact. In economic terms, that gap was the period between August 2007 (when we pinpointed an imminent financial crisis) and now … August 2010. (more)

Chances of Double Dip Now Over 40%: Roubini

By: CNBC.com

The chances of a double-dip recession are now more than 40 percent and policymakers have options to stimulate the economy, Nouriel Roubini of Roubini Global Economics told CNBC Thursday.

Second-quarter gross domestic product growth will be revised down to an a annual rate of 1.2 percent from an initial reading of 2.4 percent, Roubini said, adding that any improvement recently was due to inventory adjustments.

Roubini, who is often referred to as "Dr. Doom," also said that a "series of tailwinds in the first half of the year ... are going to be essentially headwinds" in the second half. (more)

The 15 Best Things Warren Buffett Has Ever Said About Investing

Famously called "the oracle of Omaha", Warren Buffett often delights journalists and his fans with gems of essential business wisdom and humor.

Many of them actually come from his annual letters to his shareholders, where he explains Berkshire Hathaway's current situation. This is not your usual report - Buffett actually talks to his shareholders, explains what's going on, and cracks jokes.

Other extremely quotable nuggets come from speeches or interviews. Broadcast journalists call the investor a "bite machine".

We compiled a few of the best quotes on investing we could find, without claiming to be exhaustive. If we've missed any of your favorites, feel free to let us know in the comments. (more)

Keiser Report: Global economy death spiral

Thursday, August 26, 2010

You'll Buy Gold Now and Like It!

By Jeff Clark, Casey's Gold & Resource Report

I get this question a lot: "Should I buy gold now, or wait for a pullback?"

It’s a valid question. For nearly two years, gold hasn't had a serious decline. There have been pullbacks, of course, but nothing assumption-challenging. In fact, since October 2008, gold’s largest price drop is 10.6% (based on London PM fix prices), and yet the average of all declines since 2001 is 13% (of those greater than 5%). The biggest pullback we've seen this summer is 8.2%. Technically the summer's not over, but I'll admit I'm surprised we haven't had a better buying opportunity.

So, is now the time to buy? It depends on your honest answer to another question: “Do you own enough gold?” By “enough” I mean an amount that lends meaningful protection on your assets. By ”meaningful” I mean that no matter what happens next – another financial blow-up, accelerating inflation, crushing deflation, war, a plummeting dollar, more reckless government spending – you won't worry about your investments.

Whether you should buy now is almost irrelevant if you don't already own a meaningful amount of gold. If you earn $50,000 a year, how is one gold Eagle coin going to protect you if the dollar plummets and sends inflation soaring? If your investable assets total $100,000, is your nest egg sufficiently protected owning two gold Maple Leafs? This is all akin to buying a $50,000 insurance policy for a $500,000 home. (more)

McAlvany Weekly Commentary

When China Rules the World: An Interview with Martin Jacques

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Loonie holds near 7-week lows as U.S. data drags

By Claire Sibonney

TORONTO (Reuters) - Canada's dollar held near seven-week lows against the greenback on Wednesday as weak U.S. economic data added to worries about the recovery, though a late rebound in commodity and equity markets cut most of the currency's early losses.

Morning figures showed new U.S. home sales slumped to their slowest pace on record in July and orders for costly durable goods were soft, heightening fears the economy was at risk of a new downturn.

The Canadian dollar crept as low as C$1.0669 to the U.S. dollar, or 93.73 U.S. cents, after the durable goods data, before building back up.

Later in day, bargain hunters in search of beaten-down assets boosted U.S. stocks to finish in positive territory, while oil settled higher above $72 a barrel, snapping five days of losses.

"Since weakening early this morning (the Canadian dollar) started to strengthen throughout the day at a slow pace," said Camilla Sutton, senior currency strategist at Scotia Capital.

"And it's been a similar story across asset classes, so we've seen oil move higher and equities make up for their losses early on." (more)

The Elusive Canadian Housing Bubble: Summer 2010 Edition - Canary In A Coal Mine

Our friend Alec Pestov has just completed the follow up to his original in-depth analysis of the Canadian housing market: "This second edition of the report is the first of the semi-annual sequels for the original paper to provide timely updates on the state of the housing market in Canada. This document introduces a structure of the semi-annual releases, and your comments and suggestions regarding it are always welcome." For all in the market looking to buy or sell real estate in Canada, this is a must read.

The Elusive Canadian Housing Bubble: Summer 2010 Edition - Canary In A Coal Mine

The Elusive Canadian Housing Bubble - Summer 2010

Silver and Gold Breaking Out As Safe Haven Buying Continues

Silver had very powerful break out today as investors are seeking assets that are safe and will retain value during a debt crisis. Silver is seeing demand at these price levels as it is historically cheap relative to gold. If the ratio came down to the levels it was in 2006 it would be close to $27 an ounce. Silver is soaring because investors are realizing this is a hard asset, it is money and it is historically cheap compared to gold.

Gold has reached overbought conditions from my July 28th buy signal. Right now gold is a bit overbought while silver is at an interesting buy point, having found support for the fourth time at its long term 200 day moving average. Today’s breakout of the symmetrical triangle, a very bullish chart pattern, is a sign that silver has built up a lot of internal strength and could break out into new three year highs. Remember, silver is significantly below all time highs while gold has already broken into new highs.

While I am bullish on gold, I believe investors could see a higher percentage move in silver. I have also alerted my readers to a specific mining company which has recently found a major discovery in Mexico. Pure silver discoveries are very rare. Silver supply is mostly produced as a byproduct which makes supply very inelastic. A new pure silver discovery in a silver bull market could receive a nice premium. (more)

Oil, gasoline end higher as bargain hunters step in

(MarketWatch) -- Crude-oil futures ended Wednesday in positive territory, despite a surprise increase in inventories and weak economic data that offered little hope for a surge in demand.

Crude for October delivery rose 89 cents, or 1.2%, to settle at $72.52 a barrel on the New York Mercantile Exchange, after setting an 11-week low on Tuesday. Earlier in the session, oil had posted an intraday low of $70.69 a barrel.

Gasoline for September delivery also turned as the session progressed, adding a penny, or 0.8%, to end at $1.86 a gallon, after hitting an eight-month low on Tuesday.

"We're seeing some buying interest right now," especially because the inventories report failed to send oil futures much lower than their opening price, said Matt Smith, an analyst with Summit Energy in Louisville, Ky.

"There was no huge negative reaction" to the weekly data, which gave oil some measure of strength, he added.

Natural gas, however, bucked the positive trend and maintained its losses, with the September contract retreating 17 cents, or 4.2%, to $3.87 per million British thermal units. That's the lowest price since late March and the first time it traded below $4 since early May. (more)

Why US Treasury Notes Will Eventually Yield Nothing

Barry M Ferguson / marketoracle.com,

For all investors seeking income, I have some bad news for you. US Treasury notes and bonds will eventually yield nothing. That’s right, I said it. “Zero percent interest coupons”. Many pundits would argue the opposite. And yes, the argument for higher interest coupons in the future is valid and sound. The US is currently following a strategy of debt destruction such that as I write, the nation is closing in on $13.5 trillion in debt. To see the number is quite startling. It is: $13,500,000,000,000.00. Mercy! The number is so large, most calculators can’t account for all the numeric placeholders. The number is so large, we now round up by hundred billions. The number is so large, the late astronomer, Carl Sagan, referred to really large numbers as “billions and billions”.

The good news is that there appears to be a limit. Zimbabwe wrote the book on trying to print their way out of economic dysfunction and eventually stopped printing with a z$100 trillion bill. As we all know, a printing press that never stops promotes inflation that eventually makes the printing press irrelevant. Not long after the introduction of the z$100 trillion, Zimbabwe thought about introducing the z$1 quadrillion bill. But, I suppose they reconsidered due to the idea that it would take too long to make change at the McDonald’s drive thru. Actually, by the time they got through destroying their economy, a z$1 quadrillion bill would not even buy a Big Mac! Have we not learned anything! (more)