Water: The Ultimate Commodity

The Palisades Water Index is an unmanaged benchmark that many water indexes and ETFs track. Why the interest in water? Like gold and oil, water is a commodity - and it happens to be rather scarce.

Global Water Resources
About 70% of the earth's surface is covered in water, but 97% of it is saltwater, which is unfit for human use. Saltwater cannot be used for drinking, crop irrigation or most industrial uses. Of the remaining 3% of the world's water resources, only about 1% is readily available for human consumption.

Global Shortage
Rapid industrialization and increasing agricultural use have contributed to worldwide water shortages. Areas that have experienced water shortages include China, Egypt, India, Israel, Pakistan, Mexico, parts of Africa and the United States (Colorado, California, Las Vegas and the East Coast), to name but a few.

Pollution also highlights the need for clean water. In the U.S., the dead zone off the Gulf Coast highlights the impact of fertilizer runoff, and methyl tertiary butyl ether (MTBE), an additive in unleaded gasoline, can be found in well water from California to Maryland. Overseas, highly publicized incidents in Russia, China and elsewhere demonstrate that pollution isn't limited to the West. Of course, fouled water supplies further limit the amount of fresh water available for human use.

Indexes
Like any other scarcity, the water shortage creates investment opportunities. Here are some of the more popular indexes designed to track various water-related investment opportunities:

• Palisades Water Index - This index was designed to track the performance of companies involved in the global water industry, including pump and filter manufacturers, water utilities and irrigation equipment manufacturers. The index was set at 1000 as of December 31, 2003. It closed at 1351.08 on December 30, 2005.

• Dow Jones U.S. Water Index - Composed of approximately 23 stocks, this barometer climbed from 500 to 800 over the 12 months ending December 31, 2005.
  
  
• ISE-B&S Water Index - Launched in January 2006, this index represents water distribution, water filtration, flow technology and other companies that specialize in water-related solutions. It contains 20 stocks.
  
  
• S&P 1500 Water Utilities Index - A sub-sector of the Standard & Poor's 1500 Utilities Index, this index is composed of just two companies, American States Water (NYSE:AWR) and Aqua America (NYSE: WTR). In 2005, the S&P 1500 Water Utilities Index rose in excess of 45% .

The Bloomberg World Water Index and the

HUMOR

John Williams Exclusive – US Dollar Selling & Hyperinflation

With so many questions surrounding the U.S. dollar and rising inflation, today King World News interviewed internationally followed John Williams of Shadowstats to get his take on the U.S. dollar, Fed and hyperinflation. When asked about the current fiscal crisis the United States faces Williams stated, “Well, very simply I have very little respect for a political system that goes to the brink each time the debt has to be raised. They have to raise the debt ceiling because the government already is obligated to spend the money beyond what it can raise in taxes. I would be very surprised if the US actually defaults.

What they are doing now is the type of thing that has happened a number of times before, although there seems to be more of a serious challenge this time around and risk of an outright default on the US debt. This would be disastrous for the financial system. Indeed it likely would trigger very heavy selling of the US dollar, which would accelerate the inflation process and move us towards the hyperinflation scenario….

More…

Real Unemployment Rises to 16.2% in June -- 25.3 Million People

(CNSNews.com) – The real unemployment rate rose to 16.2 percent in June, the Bureau of Labor Statistics (BLS) reported on Friday, marking a return to levels not seen since January 2011.

The “real” unemployment rate is technically a combination of three measures of unemployment: the unemployment rate, the number of people working part-time who want full-time work, and the number of people “marginally attached” to the workforce.

Those who have left the workforce but would still like to be employed are considered marginally attached.

This figure is considered a more complete measure of unemployment because it captures a broader spectrum of those affected by the weak economy. Merely counting those who apply for unemployment benefits as “unemployed” does not fully account for everyone who is out of work or underemployed.

This real unemployment rate – known as the U6 rate – has been climbing since February 2011 when it was at 15.9 percent. Real unemployment peaked in October of 2009 at 17.4 percent, before falling into the 16 percent range for much of 2010.

It now appears that the real unemployment rate is returning to its 2010 levels, trending upward after staying slightly below 16 percent from February to May.

The total number of people who were truly unemployed in June was 25.3 million -- the 14.1 million who were unemployed, the 2.7 million who were marginally attached to the workforce and the 8.6 million who were underemployed.

Three Safe Sectors For The Summer: BAX, CL, FEZ, GII, IDU, MO, MRK, VDC, VOO, XLP, XLV

With ballooning federal budget deficits here at home, bailout after bailout in the Eurozone and roaring inflation continuing to persist in many of the emerging markets, it's no wonder investors are on edge. These problems, compounded with slowing global economic growth, have caused the markets to steadily trend downward since June. As the immediate-term economic outlook is poor, many investors are in a quandary about what to do. As we enter the "dog days" of summer and more bad news is on the horizon, investors may want to tilt their portfolios toward a defensive posture.

Trouble Brewing
Overall, the news keeps getting worse for the global economy. Greece's inability to pay back its debt has once again made front-page news. As the credit upheaval spreads from Greece, analysts estimate a significant risk of Spain and Italy being "engulfed by the crisis". The PIIGS nations will require constant handholding and will be a major drag on European growth. Funds like theSPDR EURO STOXX 50 (NYSE:FEZ) continue to fall. In the emerging world, food continues to be a major issue. As food prices maintain their upward trend, the potential to unhinge the developing world's strong prospects continues to grow. This doesn't even take into account the potential housing bubbles brewing in places like Hong Kong and China.

In the U.S., the economy is appearing to slow down. June's unemployment rate rose to 9.2% from 9.1%, as hiring crawled to a near standstill last month. This lack of jobs is having a dramatic effect on consumer confidence. For the month of May, the index dropped by 5.2 points, reaching a six-month low. The housing market remains strained, and the threat of a Debt Ceiling default continues to rise every day. Overall, earnings for a variety of companies have fallen in the last quarter due to the slowing economy.

Defense is the Best Offense
With all the headwinds facing the global economy, it's no wonder the major stock indexes have trended downward over the last few weeks. The Vanguard S&P 500 ETF(NYSE:VOO) seems to shudder every time there's more bad news. While a new recessionmay or may not be in the cards, it could be time for investors to break out the recession handbook. By seeking shelter in those sectors that tend to do well in constrained environments, investors could avoid some of the worst effects of the summer downturn. Here are a few ways to do just that. (To help you recession-proof your portfolio, read 4 Characteristics Of Recession-Proof Companies.)

Consumer Staples
With the return of volatility, investors may want to look toward their pantries and medicine cabinets for stocks. After all, the companies that produce food, toilet paper and soap may not be exciting, but they tend to be very predictable and normally generate positive free cash flows. Their non-cyclical nature makes them perfect additions for a portfolio looking for shelter. The Consumer Staples Select Sector SPDR (NYSE:XLP) is still the most liquid way to gain access to this sector. However, the Vanguard Consumer Staples ETF(NYSE:VDC) may be a better choice, offering more exposure to product producers than retailers. The fund follows 111 different companies including Altria Group (NYSE:MO) andColgate-Palmolive (NYSE:CL). The ETF yields 2.39%.

Utilities
Like consumer staples, the utility sector offers the right combination of safety and dividends that investors are looking for to get them through the current turmoil. Even in times of duress, people need to heat and cool their homes. They need the water and electricity flowing. Both the iShares Dow Jones U.S. Utilities (NYSE:IDU) and utility-heavy SPDR FTSE/Macquarie Global Infrastructure 100 (NYSE:GII) offer yields in excess of 3.5%.

Healthcare
As one of the few sectors of the U.S. economy that has seen constant growth, the sector may be one of the better choices to play the turmoil. Healthcare is one of the only sectors to see continued jobs growth over the last 10 years. The Health Care Select Sector SPDR (NYSE:XLV) follows some of the largest healthcare names such as Merck(NYSE:MRK) and Baxter (NYSE:BAX).

Bottom Line
With uncertainty beginning to creep back into the markets, investors may want to take a defensive posture. The three sectors of healthcare, consumer staples and utilities make ideal places to hide from the storm.

The Disappearing Black Middle Class

Princeton Professor Cornel West (center) eagerly shakes the hand of President Barack Obama in June 2010. Today, West calls Obama “a black mascot of Wall Street oligarchs.” | Pablo Martinez Monsivais~AP

Millions of Americans endured financial calamities in the recession. But for many in the black community, job loss has knocked them out of the middle class and back into poverty. And some experts warn of a historic reversal of hard-won economic gains that took black people decades to achieve.

“History is going to say the black middle class was decimated” over the past few years, said Maya Wiley, director of the Center for Social Inclusion. “But we’re not done writing history.”

Adds Algernon Austin, director of the Economic Policy Institute’s Program on Race, Ethnicity and the Economy: “The recession is not over for black folks.”

In 2004, the median net worth of white households was $134,280, compared with $13,450 for black households, according to an analysis of Federal Reserve data by the Economic Policy Institute. By 2009, the median net worth for white households had fallen 24 percent to $97,860; the median net worth for black households had fallen 83 percent to $2,170, according to the institute.

Austin described the wealth gap this way: “In 2009, for every dollar of wealth the average white household had, black households only had two cents.”

Austin thinks more black people than ever before could fall out of the middle class because the unemployment rate for college-educated blacks recently peaked and blacks are overrepresented in state and local government jobs. Those are jobs that are being eliminated because of massive budget shortfalls.

Since the end of the recession, which lasted from 2007 to 2009, the overall unemployment rate has fallen from 9.4 to 9.1 percent, while the black unemployment rate has risen from 14.7 to 16.2 percent, according to the Department of Labor. Last April, black male unemployment hit the highest rate since the government began keeping track in 1972. Only 56.9 percent of black men over 20 were working, compared with 68.1 percent of white men.

Even college-educated blacks fared worse than their white counterparts in the recession. In 2007, unemployment for college-educated whites was 1.8 percent; for college-educated blacks it was 2.7 percent. Now, the college-educated unemployment rate is 3.9 percent for whites and 7 percent for blacks.

Nearly 8 percent of African Americans who bought homes from 2005 to 2008 have lost them to foreclosure, compared with 4.5 percent of whites, according to an estimate by the Center for Responsible Lending.

Some see a bitter irony in soaring black unemployment and the decline of the black middle class on the watch of the first black president.

“I thought Barack Obama could have provided some way out. But he lacks backbone,” Princeton Professor Cornel West told truthdig.com recently.

West said Obama sold out the poor to become “a black mascot of Wall Street oligarchs and a black puppet of corporate plutocrats. . . . I don’t think in good conscience I could tell anybody to vote for Obama.”

Wiley said Obama should be applauded for several initiatives that have helped the black middle class, such as programs to modify certain mortgages and prevent foreclosure because of job loss. But she would like Obama to aggressively counter the suggestion that first black president would be showing favoritism if he specifically helped black people.

“It’s the right thing to do for the nation,” she said. “Black people are a huge segment of the population, they’re especially hard-hit, and the country cannot recover if the black community — as well as the white community and others — does not recover.”

Need a Stock Tip? Review the U.S. Financials (BAC, JPM, WFC)

With today's pullback, you can chase the recent 52-week high stocks that have pulled back like NetFlix (NASDAQ:NFLX) or look to U.S. Bank stocks that are trading "very cheap". That includes Bank of America (NYSE:BAC) shares which hit a new 52-week low today and are trading in the $10.30 range.
If you don't like BofA there are plenty more to choose from including JP Morgan Chase (NYSE:JPM) or Wells Fargo (NYSE:WFC).

Can Bank Stocks Fall Any More?
The market is tanking thanks to bad news out of Europe (for the 3,632nd time), and the bank stocks are among the worst performers.
Citigroup shares are down 3.8% this morning. J.P. Morgan stock is off 3.2%. Bank of America is sliding 3.1%. Wells Fargo is down 2.6%. Remember all those wrong (or early?) calls earlier this year that bank stocks were “cheap?” Well, those bank stocks just keep getting cheaper.
It’s almost hard to imagine bank stocks have much more to fall.
The second quarter earnings season is about to start this week, and investors are basically writing off the entire quarter and crossing their fingers for a better back half of the year. Analysts — no doubt with a few careful whispers from the big banks — have been hacking down their earnings estimates for the quarter.
The question is whether the ugly second quarter is going to come in below the lowered bar of expectations. If that happens, will it be a mass investor exodus, or a shrug and more cries to buy “cheap” financial stocks?