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Currency

New Inflation ETFs


Posted by ETF Daily News

on Friday, 10 February 2012 13:04

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Inflation can be deadly to your investments. It’s a silent killer, too — one that reduces your “real” asset value even when the “nominal” worth looks higher.You can now defend Yourself From The Fed With new Inflation ETFs offering direct exposure to U.S. inflation and deflation expectations.

 

....read Defend Yourself From The Fed With These New Inflation ETFs (INFL, DEFL, RINF, FINF)



Stocks & Equities

7 Top Penny Stocks


Posted by Beacon Equity

on Friday, 10 February 2012 12:43

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Penny stocks are well known to traders for lightning fast percentage gains, but is there any evidence for a penny stock to potentially become a high dollar stock? There have been quite a few penny stocks to become big company stocks over the past 10-20 years, but considering the amount of penny stocks trading on the market; it is uncommon. Penny stocks are high risk and high reward so prudent investors do not usually allocate a large portfolio percentage to penny stocks, if any at all. There are questions that investors should ask when deciding to invest in penny stocks with potential: is the company poised for a reverse merger with a larger company, does the company offer a valuable product, is the company actually legitimate, and can this company actually make a profit?

 

....read Beacon Equities 7 Top Penny Stocks HERE



Bonds & Interest Rates

3 Reasons To Short U.S. Treasuries


Posted by Simon Moore via Seeking Alpha

on Friday, 10 February 2012 09:04

(The first powerful chart shows Interest Rates collapsing while Inflation continues to rise)

 

Below I show 3 charts that make the case for shorting US government bonds, specifically I'm using the 10 year Treasury. I believe that shorting US debt or 5 year+ duration is a sensible trade based on the current rate of inflation and an improving economic outlook compared to historically low Treasury yields.

1. Yields out of step with current inflation
Inflation excluding food and energy (red line - right axis) is now lower than the yield on the 10 year (blue line - left axis). Note the scales on the axis are different, but the 2 generally move together, and inflation is currently 30 bps higher than the 10 year yield. This suggests either falling inflation or an increase in yields, because it is unlikely investors will accept negative real returns on bonds for long.

434482-1328854866090312-Simon-Moore origin

 

2. Disconnect between the S&P and bonds
Since late 2011, the S&P 500 (red line) has risen significantly, whereas bond yields (blue line) have remained flat. It is likely that either the stock market or bonds will decline to correct this.

434482-13288550392209163-Simon-Moore origin

3. Declining dollar may drive domestic inflation
The dollar shown below on a trade-weighted basis, is flat to declining, this matters because the exchange rate determines the relative price of domestic goods vs. imports. As the dollar falls, domestic goods become relatively cheaper, raising demand for domestic goods. More money causing the same amount of goods is generally considered inflationary. Of course, one way for the dollar to strength is for yields on US debt to rise.

434482-13288554600998-Simon-Moore origin

 

A lot of this thinking is predicated on continued economic recovery through 2012 into 2013. If that were to change, perhaps if Europe's decline deepens, many of the relationships above would unravel. I am highlighting imbalances which can be brought back into balance from either side i.e. bonds could fall OR alternatively the S&P could fall back and inflation could fall too (which is pretty much what one would expect if the economy loses steam).

In addition, the value of bonds are their diversification from equities, in shorting treasuries you are giving up that hedge and if the stock market falls, a short treasury bet would likely decline with it providing no diversification benefit. Of course, we should also not ignore the Fed and Operation Twist, which is looking to aggressively lower yields on longer term debt, however there comes a point where the Fed's desire to lower longer term rates is overtaken by economic trends, just as the Fed cannot directly set the exchange rate.

Let me leave you with one final point, the average inflation rate in the US from 1914-2010 has been 3.4% with the current 10 year yield at 2%, we are, broadly speaking, forecasting inflation to be below average for the next 10 years. That's not to say it can't happen - deflation has happened before, but it's against the run of the long-term trend.

Operationalizing the trade
This is not the easiest trade to implement and certainly not for the risk averse. Though there are plenty of inverse bond ETFs and ETNs, I am personally a little sceptical of them given short track records and relatively high fees. Personally, I prefer to short the larger more liquid bond ETFs directly, such as TLT.

Disclosure: I am short TLT.



Timing & trends

Where is Marc Faber Investing his Money ?


Posted by Mark Faber

on Friday, 10 February 2012 08:31

(Marc Faber suggests preserving your wealth with 25% of your portfolio in this basket of high yielding (5%), high-quality stocks) -

 

There is a huge amount of underground lending throughout Asia. Mr. Bernanke can drop his dollar bills on the U.S., but the growth in dollars here can lead to strong economic growth and inflation in other countries. That has happened in the past few years. I am the most bearish person you can imagine on earth, which is why I recommend putting, say, 25% of your money in equities, 25% in precious metals, 25% in cash and bonds and 25% in real estate. These assets won't go up substantially this year, but they could preserve your wealth. People say large-capitalization stocks are inexpensive, and I agree. I would buy a basket of high-quality big-caps in Europe and the U.S. You can by Total [TOT], in France, which yields more than 5%,

TOT

and Nestlé [NESN.Switzerland]

Nestle

and Novartis [NVS]

N

and Pfizer [PFE].

pfe

These stocks don't have huge downside risk.

Because emerging markets saw big declines last year, you could also buy SATS [SATS.Singapore], in Singapore, which provides catering services to the airline industry and ports. It yields 5% and trades for 13 times earnings. I also like K-REIT Asia Management [KREIT.Singapore], a real-estate investment trust that yields 7%. The stock has fallen by about 50% and the dividend might be cut. But even if it is cut to 4%, this is an OK investment. These stocks won't go up right away, but reinvesting dividends will yield an adequate return over time. StarHub [STH.Singapore], the mobile-phone company, yields 6.9% and the P/E is 14.

 

Read more articles at Marc Faber's Financial Doom Blog HERE



Gold & Precious Metals

The Gold Chart That Will Knock Your Socks Off!


Posted by Sean Brodrick - Uncommon Wisdom

on Friday, 10 February 2012 08:16

It's a chart of gold fabrication demand — including jewelry, coin, dental, electronic and other industrial uses — that I made using data from Morgan Stanley.

In a moment, I'll tell you why this is so important for you to know. But first, let me say that I'm not disputing its data or projection of gold fabrication demand. There's something else to this chart. Take a look ...

chart-1

 

The red line is supply from gold mines, and the blue line is gold fabrication demand. Morgan Stanley's numbers show that fabrication demand for gold is rising, and estimates indicate that it should soar in the years ahead. The company resolves this by saying that investment demand is going to go down. With all due respect to Morgan Stanley, I believe it has that part of the equation wrong, and the only way this demand squeeze will be resolved is through much, MUCH higher prices that force fabricators to look for substitutes.

After all, when the price of an investment — whether it's gold or stocks or anything else — goes higher, do investors want less of it? Heck no! They usually want more — much more!
And this is exactly what I think we're going to see in gold — a rip-roaring rally that sends gold prices much, much higher.

I have more forces that I'll be covering in my presentation in Orlando. But even now, there are other bullish factors falling into place for gold, like pieces to a gleaming metal puzzle. Let me tell you about three important developments that will drive gold prices higher, starting with the fact that......

 

China's Gold Imports Are Soaring!

China's gold imports from Hong Kong more than tripled in 2011 from the year before, hitting a record 428 metric tons.

China does not release official data on gold imports or demand. So the Hong Kong import numbers, published by the Hong Kong Census and Statistics Department, are considered to offer a partial view of overall demand.

According to sources quoted in the Financial Times, one trader at a Chinese bank said China's total imports last year were at least 30% higher than the Hong Kong numbers. And for 2012, analysts believe China's gold imports are going to continue to ramp up.

Bottom line: China is going to overtake India as the world's largest gold consumer, probably sooner rather than later. And China's hunger for the yellow metal is going to be a major force driving gold prices going forward.

And not only are prices going up, but so is the cost to produce it. Which begs the question ...

 

Have We Hit Peak Gold?

Steve Letwin, the CEO of IAMGold, thinks so. In an interview with Mineweb, Mr. Letwin said: "I think you hit peak gold three or four years ago. You cannot find the large deposits anymore. Most of it (is) lower-grade and in more-remote locations, so it's going to be difficult for anybody to produce gold at less than $1,200 per ounce in terms of new discoveries."

Ore grades are falling — from around an average grade of 12 grams per ton in 1950 to about 3 grams per ton in the U.S., Canada and Australia. Miners are now going after ore they used to drive over to get to the big deposits.

They aren't chasing low-grade ore because it's fun. They're going after low-grade ore because it's all they can find. Now, there are mines going into production with less than a gram per ton of gold, and they're quite profitable!

Sure, there probably are some high-grade deposits waiting to be discovered. But those higher-grade deposits will be smaller — that's why they were overlooked the first time around.

 

People are Losing Faith in Fiat Currency

Fiat currency is paper money — in other words, it gets its value from government say-so. And with the government creating more and more money all the time — the Federal Reserve's latest weekly money supply report from last Thursday shows that money supply has surged yet again, by more than 35% on an annualized basis — this shakes people's faith in the value of paper money.

So more and more people are turning to REAL money — gold and silver.

That's why U.S. Mint sales of American Eagle silver coins were the second highest EVER in January. Meanwhile, gold-coin sales totaled 127,000 ounces last month, the most since January 2011.

But I'm not just talking about individuals. Some state-level legislators are getting so worried about the U.S. dollar, they want out.  Lawmakers from 13 states — including Minnesota, Tennessee, Iowa, South Carolina and Georgia — are seeking approval from their state governments to either issue their own alternative currency or explore it as an option. Just three years ago, only three states had similar proposals in place.

Of all the state proposals circulating right now, South Carolina, Georgia, Idaho and Indiana have the best chance of passing their proposed bills this year. If those bills become law, it could have a domino effect, cutting away one of the underpinnings of the U.S. dollar's value.

And that would be just the latest problem for the U.S. dollar. The greenback has only held its value so well in the last year because the euro looks so bad that the dollar looks downright good in comparison.

When the rug finally gets pulled out from under the dollar's wobbly feet, the fall could shake the world as we know it.

Bottom line: Gold is Ramping up for its Next Big Move

I could give you many more reasons why gold looks so good here. In fact, I'll be giving a bunch of them in my presentation at the World Money Show in Orlando. But whether you see that presentation or not, know this — the fuse is lit on gold.

The forces of supply and demand are lighting the fuse on gold's next big move. You'll want to be onboard this metal rocket when it takes off.

 

Yours for trading profits,

Sean

 

P.S. Gold is going up, but not straight up. You've got to pick the right companies to invest in, AND grab them at the right time so you can get the biggest-possible return.

Frankly, that's why I think the best investment you can make right now is to join my Red-Hot Global Resources service. We just got locked-and-loaded in three potentially rocket-fueled precious-metals trades. There's still time to get in before these names blast off. Don't miss out – join today and get access to these new trades!



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