Is Barack Obama Intentionally Trying to Damage Our Economy and Security?

That may seem like an absurd question, but it’s hard to come to any other conclusion when you consider what is happening to our energy industry on the Gulf Coast. As the Wall Street Journal reports today, the Obama Administration may have lifted its ban on drilling in the deepwater Gulf of Mexico, but there are still long delays in getting other permits approved to drill for oil. Why? No one seems to know. We assume that politicians do what is in their own self-interest, but in this case Obama seems to be damaging himself because he is dragging down the economy. As the Journal puts it, “The Gulf coast economy has been hit hard by the slowdown in drilling activity.” And Obama doesn’t seem particularly eager to change that fact.

There are only a handful of possible explanations of why he is doing this. (1) He doesn’t care, and his radical environmental agenda comes first. (2) He hates oil companies so much that he’s willing to have his political fortunes damaged further by dragging down the economy. (3) He hates capitalism so much that he’s determined to “gut” a leading industry such as energy. (4) There is raging incompetence in Washington. (more)

What Rising Commodity Prices Mean for Investors

On the last trading day in 2010, gold prices traded up $15.50 to more than $1,421 an ounce and oil prices ended above $91 a barrel. Indeed, gasoline prices are back above $3 a gallon, up more than 44 cents from last year!

But these hard assets aren’t the only things climbing… look at the prices of these other commodities. Coffee futures have jumped more than 60% in 2010, and sugar has nearly doubled in the past six months alone.

Wheat prices are up more than 46% in the past six months despite seesawing through much of the third and fourth quarters. Corn’s up nearly 57%, and soybeans are up better than 51%.

I could go on and on…

What’s behind these moves in commodity prices, and what does this mean for your investment portfolio?

In past Smart Investing Daily issues, we’ve made the connection between the U.S. dollar’s performance against other currencies and the rise and fall of commodity prices.

This link is simple: Every commodity priced in dollars is subject to price fluctuations based on the value of that dollar. That’s why some commodities make great hedges against a falling dollar.

What’s Behind Commodity Price Gains?

But is the U.S. dollar behind these major commodity price gains? (more)

Six Financial Blunders and Their Fixes

This year will likely be remembered for its broad, unpredictable market swings.

As one might expect in a time of volatility, making all the right moves with your investment portfolio and retirement plan was a challenge. What didn't help matters were the mistakes and overreactions many investors made, moves that could hurt them both immediately and for years to come.

But there are also some easy steps to take to recover from the mistakes of 2010 for a better 2011:

Problem 1: Analysis Paralysis
When confronted with questions about what direction to go in with their financial plan, many decided to go... nowhere.

Mark Byelich, president of M.J. Byelich & Associates, a Pennsylvania-based financial services firm, says the problem is not just lacking the confidence to stick with an investment strategy, but even having a well-considered plan to start with.

"I talk to so many folks who say they held back from making any contributions to their 401(k) because they were unsure what to do with the market," he says. "There is this stagnation. Everyone is just sort of stuck in the mud, uncertain of what to do."

"You can dissect it down to, 'Maybe I didn't get out of bonds a month ago' or, 'I sold my commodity allocation because I thought we were at the top,' or 'I didn't buy gold,'" he adds. "But I think it comes down to a more fundamental thing: 'I didn't really have a real asset allocation plan, I didn't have a real financial plan and therefore I don't have the confidence to stay in the game.'" (more)

Marc Faber's January 2011 Outlook---Correction Imminent

Investor extraordinaire Marc Faber is out with his latest Gloom, Boom, and Doom report, which discusses his outlook for 2011. Here are a few highlights:

1. Equity Markets--Faber believes a correction is imminent for the stock market as bullish sentiment (AAII sentiment) nears record levels and mutual fund cash positions remain very low. Furthermore, the latest upward move in stocks has occurred on declining volume, which is usually bearish from a technical point of view. The correction should occur in January. That being said, you should be buying into the correction as it represents a good buying opportunity. Faber prefers energy companies and speculative stocks such as home builders and even AIG. He goes on to say that the third year of a Presidential cycle is very good for speculative stocks versus traditional blue chip value plays.

2. Gold and Silver--Reiterates his favorable opinion on gold and silver. Doubts they are currently in a bubble as some analysts postulate. Faber notes that investor exposure is very low when you look you compare it to the world's financial wealth, meaning that gold and silver are still under-owned and have room to run. (more)

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American Decline This time it's for real.

This time it's different. It's certainly true that America has been through cycles of declinism in the past. Campaigning for the presidency in 1960, John F. Kennedy complained, "American strength relative to that of the Soviet Union has been slipping, and communism has been advancing steadily in every area of the world." Ezra Vogel's Japan as Number One was published in 1979, heralding a decade of steadily rising paranoia about Japanese manufacturing techniques and trade policies.

In the end, of course, the Soviet and Japanese threats to American supremacy proved chimerical. So Americans can be forgiven if they greet talk of a new challenge from China as just another case of the boy who cried wolf. But a frequently overlooked fact about that fable is that the boy was eventually proved right. The wolf did arrive -- and China is the wolf.

The Chinese challenge to the United States is more serious for both economic and demographic reasons. The Soviet Union collapsed because its economic system was highly inefficient, a fatal flaw that was disguised for a long time because the USSR never attempted to compete on world markets. China, by contrast, has proved its economic prowess on the global stage. Its economy has been growing at 9 to 10 percent a year, on average, for roughly three decades. It is now the world's leading exporter and its biggest manufacturer, and it is sitting on more than $2.5 trillion of foreign reserves. Chinese goods compete all over the world. This is no Soviet-style economic basket case. (more)

Commodities: The bull that just won't die

(CNNMoney) -- Gold, oil and other commodities enjoyed a stellar run in 2010. The party may not be over just yet ... but investors have to be wary.

Several experts say that the main forces behind the bull run in commodities last year, namely strong economies in emerging markets coupled with worries about the health of the U.S. and Europe, are likely to remain in place this year.

Concerns about the sovereign debt crisis in Europe and the slow grind of a recovery in the U.S. could weaken both the euro and the dollar. A stagnant greenback in particular should bolster commodity prices since many commodities are priced in dollars.

David Beahm, vice president of economic research Blanchard & Company Inc, a New Orleans-based investing firm that specializes in tangible assets like gold and other precious metals, says gold could hit $1,650 an ounce in 2011. That's about 15% higher than current levels, which are already flirting with record highs (not adjusted for inflation.)

Beahm said that the Federal Reserve's quantitative easing program should lead to more weakness for the dollar as the central bank continues to purchase long-term bonds. He added that the Fed may need to do even more to jumpstart the economy, especially if the unemployment rate remains high. (more)

HOT COMMODITIES FOR 2011

Mike Savage of the Savage Financial Group discusses which commodities are likely to continue surging in 2011. Savage likes uranium mining companies, silver due to its industrial utility and says natural gas is beginning to break out of its long bear market: