Jay Taylor: Turning Hard Times Into Good times

Whether Inflation or Deflation, Gold Retains its Value

David Skarika and Florian Siegfried pose differing economic views, but both are unequivocal believers that you must own gold to preserve wealth in a crumbling economy. Skarika sees inflation as cyclically inevitable. Siegfried sees the potential for a credit implosion to lead to massive overall price declines. Skarica will share his inflationary cycle views from his new book, “The Great Super Cycle” during the first half of our three-hour show. Then later, the highly successful Swiss-based gold fund manager Siegfried will talk about his deflationary views and how best to prepare for the damage collapsing prices may have on those not ready for that scenario. Both Skarika and Siegfried will be asked for some investment ideas. Also on next week’s show, on our quest to turn hard times into good times, I will talk about some of the exciting companies I just filmed in Vancouver this past weekend. One is a gold company. Another a copper company and a third one is a specialty metals company.
(download the episode here)

Dow Sits Atop 12,000; Time for Caution?

Stocks had a very strong day, with the S&P busting through 1,300 and the Dow closing above 12,000, as the market recouped all its losses from Friday's sell-off. Some strong earnings reports, a good ISM number, and a calmer Egypt all contributed to today's rally. While we continue to believe things are looking up for the economy, we remain cautious on stocks in the near term given the strong run-up they've had over the past few months and the overall bullish sentiment that is out there.

The Uranium Stocks Index was the top performing tickerspy Index on the day, led by Uranium Energy (AMEX: UEC - News) with a 10% gain. The Contract Research Outsourcing Stocks Index was the day's worst performing tickerspy Index, with Parexel Internation (Nasdaq: PRXL - News) down -10%.

Stocks climbed on the day, with the Dow rising 148 points to 12,040. The S&P jumped 21 points to 1,308, while the Nasdaq soared 51 points to 1,308. Oil fell -$1.42 to $90.77 a barrel, while gold rose $5.80 to $1,340.30 an ounce.

In economic news, the Institute for Supply Management said its January manufacturing index rose to 60.8% from 58.5% in December, the best reading in over six years. ISM said the employment index jumped to 61.7% in January from 58.9% in December while new orders increased to 67.8% from 62% in December.

In earnings news, United Parcel Service (NYSE: UPS - News) shares rose 4.2% after the world's largest package delivery firm said its fourth-quarter profit rose 48% to $1.12 billion, or $1.11 per share, from $757 million, or 75 cents a share, a year earlier. Revenue jumped 8% to $13.42 billion. Analysts were expecting a profit of $1.05 a share on revenue of $13.32 billion. For 2011, UPS expects its profits to rise 16%-22% to $4.12-$4.35 a share. Analysts were forecasting a profit of $4.19. Nearly 80 pros held UPS in their portfolios at the end of the third quarter, and almost 500 tickerspy members own the stock in their portfolios. (more)

Housing Armageddon: 12 Facts Which Show That We Are In The Midst Of The Worst Housing Collapse In U.S. History

We are officially in the middle of the worst housing collapse in U.S. history - and unfortunately it is going to get even worse. Already, U.S. housing prices have fallen further during this economic downturn (26 percent), then they did during the Great Depression (25.9 percent). Approximately 11 percent of all homes in the United States are currently standing empty. In fact, there are many new housing developments across the U.S. that resemble little more than ghost towns because foreclosures have wiped them out. Mortgage delinquencies and foreclosures reached new highs in 2010, and it is being projected that banks and financial institutions will repossess at least a million more U.S. homes during 2011. Meanwhile, unemployment is absolutely rampant and wage levels are going down at a time when mortgage lending standards have been significantly tightened. That means that there are very few qualified buyers running around out there and that is going to continue to be the case for quite some time to come. When you add all of those factors up, it leads to one inescapable conclusion. The "housing Armageddon" that we have been experiencing since 2007 is going to get even worse in 2011.

Right now there is a gigantic mountain of unsold homes in the United States. It is estimated that banks and financial institutions will repossess at least a million more homes this year and this will make the supply of unsold properties even worse. At the same time, millions of American families have been scared out of the market by this recent crisis and millions of others cannot qualify for a home loan any longer. That means that the demand for unsold homes is at extremely low levels.

So what happens when supply is really high and demand is really low?

That's right - prices go down. (more)

Nearly 11 Percent of US Houses Empty

I usually find the quarterly homeowner vacancy and homeownership report from Census pretty lackluster, but the latest one released this morning was anything but.

America's home ownership rate, after holding steady for a while, took a pretty big plunge in Q4, from 66.9 percent to 66.5 percent. That's down from the 2004 peak of 69.2 percent and the lowest level since 1998.

Homeownership is falling at an alarming pace, despite the fact that home prices have fallen, affordability is much improved and inventories of new and existing homes are still running quite high.

Bargains abound, but few are interested or eligible to take advantage.

More concerning than the home ownership rate is the vacancy rate. The Census tables don't tell the entire story, but they tell a lot of it. Of the nearly 131 million housing units in this country, 112.5 million are occupied. 74.8 million are owned, and that's only dropped by about 30 thousand in the past year. 38 million are rented, but that's up by over a million year over year. That means more new households are choosing to rent.

Now to vacancies. There were 18.4 million vacant homes in the U.S. in Q4 '10 (11 percent of all housing units vacant all year round), which is actually an improvement of 427,000 from a year ago, but not for the reasons you'd think. (more)

Worst of euro crisis over?

European leaders have shown they’re capable of taking the steps needed to stabilize the European single currency, allowing the euro-zone to turn the corner in the sovereign-debt crisis, the region’s most powerful finance ministers told the World Economic Forum’s annual meeting on Saturday.

Noting “indications in the market of confidence,” French Finance Minister Christine Lagarde said the “euro-zone has turned the corner.”

German Finance Minister Wolfgang Schaeuble said the euro would be “stable.”

Although the lack of a common budgetary policy had created turmoil, the euro zone is well on the way to creating the tools needed to ensure the stability of the euro after taking lessons from recent bouts of contagion and volatility, he said, in the same wide-ranging panel discussion on the economic outlook, which also included British Chancellor of the Exchequer George Osborne, World Bank President Robert Zoellick, Barclays PLC /quotes/comstock/23s!a:barc (UK:BARC 294.50, -3.70, -1.24%) Chief Executive Robert Diamond.

“We will deliver. You will see,” Schaeuble said.

European officials are debating a range of potential measures for a permanent rescue mechanism and increased coordination and monitoring of fiscal policy.

The remarks came in a week that saw French President Nicolas Sarkozy and German Chancellor Angela Merkel both use Davos to pledge a commitment to defending the euro. (more)

ROBERT SHILLER: “EVERYTHING IS OVERPRICED”

Robert Shiller: ”It seems like everything is overpriced: stocks, bonds, and real estate. And index bonds were given a negative yield recently; maybe they’re coming back. Nothing looked attractive.”

Gold Bottoming?

Gold has risen a fantastic ten years in succession. Gold, of late, has been receiving a lot of interest and publicity and advertising. Gold is probably overdue for a correction in this ongoing bull market. Analysts are talking about “gold correcting down to 1200 or even 1000.” However, I believe that the more important picture is that the gold bull market has much further to go on the upside.

I’ve been reading the McClellan Market report for years. It’s one of the better and more intelligent reports that I read. McClellan does a good deal of research on cycles, and I must say some of their cycle studies work out quite well.

McClellan has discovered that there’s a cycle low that appears for gold roughly every 12.5 months. The cycle lows have run as follows: Jan 6, ’06, Jan 8, ’07, Jan 7, ’08, Jan 5, ’09, Jan. 4, ’10, Jan 8, ’11. McClellan puts the next cycle bottom for gold at February 8, 2011. Which means that the cycle low for gold should arrive at any time between now and February 8, give or take a few weeks before or after that date.

Interestingly, the McClellan cycle bottom for gold is due to arrive amid a good deal of professional bearishness regarding gold (“gold overdue for a major correction”). Thus, many traders have traded out of their gold positions, just as we near the date for the McClellan cycle bottom. Below, the red arrows mark the McClellan cycle lows.

The Russell view — It’s virtually impossible to successfully time in-and-out trades during an ongoing primary bull market. Usually what happens is that the trader has moved out of the market just as the bull trend resumes. Thus, the bull market does what it’s supposed to do — advance while leaving most traders and Johnny-come-latelies behind. (more)