from TransferOfWealth:
http://www.butlerresearch.com/ Theodore (Ted) Butler must certainly be the foremost silver analyst of our time. Not only is he a pioneering thinker on the subject of silver, he is also way ahead of the curve with what’s happening in the silver market. Many of his ideas are original and new. It’s no exaggeration to say that almost everything you see other people write about silver today comes from Ted Butler.
Goldman sites that the biggest drag on China has been fiscal tightening because of inflation fears. However, that could be about to change. Inflation is slowing, and that means the government will have room to lower interest rates and allow more lending.
So which sector should benefit the most as China rebounds? One of the worst performing sectors this year...
As you can see from the chart above, basic materials have significantly out-performed the S&P 500 during the last five years. However, Basic Materials has been the second worst performing sector this year and could be a good mean reversion trade as demand for the sector picks up.
Why?
China's long-term appetite for commodities, materials and industrial consumption stems from the rapid growth in transportation, housing and infrastructure projects. This has lead to the lower and middle classes increases in wages and demand for food related goods and services. As a larger portion of the lower and middle classes income increases, so will the demand for agricultural related products. This ultimately should drive earnings power for our three favorite basic materials stocks and one industrial that has a high correlation to the sector.
1) Freeport-McMoRan Copper & Gold (NYSE: FCX) engages in the exploration, mining, and production of mineral resources. The company primarily explores for copper, gold, molybdenum, silver, and cobalt.
2) Monsanto Company (NYSE: MON), together with its subsidiaries, provides agricultural products for farmers in the United States and internationally. It operates in two segments, Seeds and Genomics, and Agricultural Productivity. The Seeds and Genomics segment produces corn, soybean, canola, and cotton seeds, as well as vegetable seeds, including tomato, pepper, eggplant, melon, cucumber, pumpkin, squash, beans, broccoli, onions, and lettuce seeds.
The Mosaic Company (NYSE: MOS) engages in the production and marketing of concentrated phosphate and potash-based crop nutrients for the agriculture industry worldwide. The company also offers phosphate-based animal feed ingredients and produces and sells potash for use as fertilizers and animal feed ingredients, as well as for use in industrial applications.
Potash Corporation of Saskatchewan Inc. (NYSE: POT) produces and sells fertilizers and related industrial and feed products primarily in the United States and Canada. The company mines and produces potash, which is used as fertilizer. It also offers solid and liquid phosphate fertilizers; animal feed supplements; and industrial acids that are used in food products and industrial processes.
Action to Take --> Friday's rally has pushed the prices of some of these securities above our recommended "buy" levels stated in the graphs. I recommend traders wait for a pull back before jumping into these trades.
Whether it’s pirated software, poison-infused baby formula, cancer-causing drywall, luxury purses, or fake medicines, if you need a knock-off, China has traditionally been the go-to country, with a counterfeiter always willing to oblige.
Now, with precious metals prices on the cusp of possibly the biggest price explosion in centuries, fake gold and silver products are becoming a booming industry say Global Piracy & Counterfeiting Consultants:
We have read about one Chinese counterfeiter openly bragging about producing 100,000 fake U.S. Silver Dollars per year, and that’s just one counterfeiter. At this point, we are telling all investors of gold, or silver coins, and or any type of precious metal bar to only buy from a reputable U.S. dealer, that has an established track record, and a money back guarantee. We fear this Chinese counterfeit gold, or silver coins, or bars, could be a multi billion dollar a year business, and we greatly fear many innocent investors could be taken to the cleaners.
…
Based on our research some of the Chinese counterfeit coins, are of such high quality, it is not uncommon for even experts to be deceived. We think its smart for every investor to have gold, or silver, our big worry is pretty simple, what if they invest 10%, or 20% of their net worth in what are counterfeit precious metal coins, that are basically worthless? We would call this a disaster for the investor, and out big fear is there are probably tens of thousands of investors in the United States, who have been duped. Even worse, once again for all intents, and purposes the U.S. Federal Government is a no show-once again.”
…
“The world needs to come to grips with the largest counterfeiter in the world, the fact that 10% of China’s GDP is a direct result of counterfeiting. If it’s not knock off pharmaceuticals, that can kill people, it’s high tech smart phones, or electronics. Our new worry is pretty obvious related to Chinese counterfeiters bankrupting innocent precious metal, or coin investors, with what could be their life savings. At what point do consumers in the United States, Europe, Japan, or the rest of the world say no thanks to any more Chinese products, given its uncaring attitude about flooding the global markets with counterfeits, or fakes?
David Rosenberg of Gluskin Sheff joined Consuelo Mack on Wealth Track this weekend to discuss his outlook for the economy. Rosenberg isn’t just bearish. He say the US economy is in a modern day depression similar to what Japan has suffered from for the last 20 years. He bases this view on the idea that de-leveraging tends to coincide during a prolonged period of economic weakness that is not merely consistent with recession.
Rosenberg says we’re just 4 years into a depression that will likely last 7-10 years. He says the economy is likely to begin contracting again in 2012 and that the employment situation is going to deteriorate further. He calls the MF Global bankruptcy the Bear Stearns of 2011.
Contrary to common misconception, Rosenberg is not bearish on everything. After being a long-time US Treasury bull, Rosenberg is sounding a bit less bullish on government bears. He says the love affair is over. He now prefers corporates and income at a reasonable price.
