Energy & Commodities

Gold Guns & Gas

Posted by Porter Stansberry - S&A Digest

on Tuesday, 04 December 2012 17:37

Porter calls it "the best business in the world."

It's the only business in the world that routinely enjoys a positive cost of capital. In every other business, companies must pay for capital. They borrow through loans. They raise equity (and most pay dividends). They pay depositors. Everywhere else you look, in every other sector, in every other type of business, the cost of capital is one of the primary business considerations.

But a well-run business in Porter's favorite sector will routinely not only get all the capital it needs for free, it will actually be paid to accept it.

* We're talking about insurance… And the best insurance companies make sure the premiums they charge are greater than the risks they accept by extending insurance. These companies make a profit on underwriting. That's why Warren Buffett loves insurance so much and used it as the building block for his $217 billion holding company, Berkshire Hathaway.

In his 2011 letter to investors, Buffett wrote:

Insurers receive premiums upfront and pay claims later. In extreme cases, such as those arising from certain workers' compensation accidents, payments can stretch over decades. This collect-now, pay-later model leaves us holding large sums – money we call "float" – that will eventually go to others.

Meanwhile, we get to invest this float for Berkshire's benefit… If our premiums exceed the total of our expenses and eventual losses, we register an underwriting profit that adds to the investment income our float produces. When such a profit occurs, we enjoy the use of free money – and, better yet, get paid for holding it.




Hedge-fund manager John Paulson now holds more gold than Brazil, Bolivia, or Bulgaria…

Paulson, who became a billionaire with his bet against sub-prime housing in 2007, now holds 21.8 million shares (around $3.67 billion) in the SPDR Gold Trust (GLD) – the biggest gold-backed exchange-traded fund. According to the most recent regulatory filing available, that makes him the biggest shareholder, with 4.9% of the fund. His holding represents about 66 tons of gold… meaning he controls more gold bullion than countries like Brazil, Bulgaria, and Bolivia hold in their reserves. Paulson also owns $1 billion of AngloGold Ashanti stock, in addition to smaller stakes in many other gold-mining stocks.

Paulson has been bullish on gold for years… He even has a fund that's denominated in the precious metal. And he understands the correct way to view gold…

"We view gold as a currency, not a commodity," Paulson told Bloomberg in June. "Its importance as a currency will continue to increase as the major central banks around the world continue to print money."

* Legendary investor George Soros' Soros Fund Management also upped its gold holdings by 49%. The fund now holds 1.3 million shares of GLD.

Paulson and Soros aren't the only ones who think gold is a good idea right now.

Michael Mullaney, a chief investment officer at Boston's Fiduciary Trust – which manages $9.5 billion in assets – said, "We see gold as a hedge against the follies of politicians. It's a good time to garner some protection in portfolios by having some real assets like gold."

And Alan Gayle, a senior strategist at Ridgeworth Capital Management in Virginia – which has $47 billion in assets under management – said, "It looks as though global monetary stimulus is likely to continue, particularly in the wake of growing fiscal austerity. That puts pressure on the monetary authorities to stimulate the economy and that will debase the currencies and put a bid under gold."

Screen Shot 2012-12-04 at 4.11.17 PM


Other than the U.S. becoming the dominant player in the global energy market, one of the major benefits of the U.S. shale boom is a resurgence in domestic manufacturing.

Natural gas is a major cost for manufacturers (from steel to chemicals). And as a result of oversupply, low natural gas prices will attract manufacturers to the U.S. My colleague Dan Ferris calls this phenomenon the "American Industrial Renaissance." He wrote about it in today's DailyWealth.

The American Industrial Renaissance is a simple-but-powerful wealth-building trend…

Thanks to new drilling technologies, we are unlocking vast new supplies of natural gas in underground shale formations across the country. The increased supply has pushed prices lower. And lower natural gas prices improve the profitability and competitive edge of many American industries – including chemicals, plastics, cement making, steel, power generation, and transportation.

Cheap natural gas produced from the U.S. shale revolution has transformed America into "the low-cost industrialized country for energy," according to the Wall Street Journal. Savings on input costs can increase profits… which gives U.S.-based manufacturers a huge competitive advantage.

Natural Gas vs Oil infographic


Record Guns Sales


Shopping malls weren’t the only places receiving an influx of shoppers on Black Friday: According to the FBI, the day after Thanksgiving saw record gun sales, with 154,873 checks conducted, a 20 percent increase from last year. 

Over the three days from Nov. 23 to Nov. 25, there were a total of 283,423 NICS checks, compared with 215,192 last year.

Store owner Nesby said that sales at his store had been busy all week, noting that, following the presidential election, gun owners are concerned about new regulations. Nesby also cited a 15 percent increase in sales among women seeking guns for personal protection..”

“People are worried about gun control restrictions,” Nesby said.





Personal Finance

CDN Real Estate: Bang Crash

Posted by Canadian Housing Price Charts

on Tuesday, 04 December 2012 14:07

When prices go exponential, Chartists who track price series love to use the elegance of the Eiffel Tower as a metaphor. In short Vancouver Eiffelizes while Calgary Zooms.

The left side of the tower is exciting and for those who can time the ultimate exhaustion and exit point. They are rewarded... well exponentially. Vancouver average single family detached prices in October 2012 dropped again for a six month plunge of 12.9% and a loss of of $137,300 which is greater by 12% than the 2007-09 crash amount and the current plunge is a 77% retracement of the $177,329 gain since the beginning of the year (Vancouver Chart).

7496040 orig

But the right side of the tower is where exponential decay occurs and the trip down often has the right leg breaking well below the trend that was in place prior to the exponential move up. 

When it comes to real estate (a slow asset), the right leg can stretch out much further over time as evidenced by the Japanese experience.

As the downside trip gathers momentum, the market participants lower their expectations. We already hear real estate agents advising their client sellers to list their properties for sale below the last recorded comparable sale price to insure action and increase the probability of a successful transaction. 

The fear of missing out in Vancouver is being replaced with the fear of getting stuck.

3167201 orig

....read all the rest of Canadian City Pricing HERE 



Personal Finance

John Templeton: Secrets of world's best stock picker

Posted by Equity Master

on Tuesday, 04 December 2012 11:18

SJT 100 YearsThe 16 rules that the investing legend has been so kind to share with the investing community.

Last week, we brought to you our first article in a series of articles we plan to write about Sir John Templeton's rules for investment success.

Rule # 2: Invest - Don't trade or speculate 

First up, Sir Templeton outlined how over the long term, stocks are one's best bet to preserve or even enhance purchasing power. And now, he focuses on helping an investor acquire the correct mindset for successful investing. And that mindset is of being an investor and not a trader or a speculator. 

Thus, if a person has to achieve great long term track record, he will have to think from the point of view of an investor. Acting like a trader that buys today and sells tomorrow or a speculator that buys solely on the hopes that he will sell the stock to a greater fool is nothing but highly risky in the long term. 

But how exactly does one think like an investor? Well, to think like an investor means thinking long term and thinking like a business owner. In other words, for an investor, the main focus should not be the stock markets. It should not even be the stocks under consideration. Instead, the main focus of an investor's analysis should be the underlying business. 

Thus, an investor is only concerned with whether the underlying business has a strong financial position and whether it makes sufficient profits that continue to grow year after year. Besides, an investor should also be concerned about the price at which the shares of the business are available at in the markets. 

Aside of these factors, there are hardly any other factors that matter for an investor we believe. Things like stock price volatility or the volumes in the financial markets should be of no concern for the investor. 

In the final analysis, what matters is the cultivation of right habits. And once a person does so by focusing solely on the investment aspects and not getting influenced by wide price swings, he would have taken a huge step towards a rewarding career as an investor according to John Templeton and also according to us. 

Secrets of world's best global stock picker Article Series - Previous article


Gold & Precious Metals

2011 #1 Gold Timer's Prospective Course For Gold

Posted by Stephen Todd - The Todd Market Forecast

on Tuesday, 04 December 2012 09:25

2 Time #1 Gold Timer says:

The weekly chart of gold futures has been consolidating since the third quarter of 2011. If May-June of 2011 was truly the bottom, then the correction was comparable to that experienced in 2008. 

Since the election there has been a mad rush by the public into gold coins. Conventional wisdom says that when the public gets excited about an investment, it's a top or at least a danger signal. But, like so many old market tales, the truth is somewhat different. The investing public isn't as stupid as some one make them out. 

For instance, I remember that the public was wild about real estate starting in the 1960s, but that didn't stop property values from increasing for decades. 

The last time we had such enthusiasm for gold coins was in 2008 and as the chart below shows, the price of gold more than doubled after that. 

Screen Shot 2012-12-03 at 10.23.32 PM

Will it happen this time? I doubt we'll get a double in four years, but I do know that Mr. Bernanke is dedicated to printing money as is European Central Bank. 

Just recently, the Bank of Japan promised to do the same thing. I suppose that they figured since Bernanke has been so successful in turning the U.S. economy around, they would try the same thing. I hope you note a bit of sarcasm in that last statement. 

Irresponsible central bankers such as Bernanke and Mario Draghi who flood the World with paper currency will cause gold to go up over time as the public gradually loses faith in dollars, yen, euros etc. 

This, plus the fact that they ain't making it no more is a longer term positive for the yellow metal, but also note that gold can go into a funk for an extended period so hopefully, we can time our way to profits although it's been very tricky lately with massive moves back and forth.

We're bullish on gold, but the recent break below a previous low (arrows) makes us a bit nervous.

Screen Shot 2012-12-03 at 10.41.50 PM

By 2 Time #1 Gold Timer Stephen Todd - (The above an Excerpt from his Dec. 2012 Issue which covers all markets)


Since 1993, we have given instructions to mutual fund investors to be either 100% invested or 100% on the sidelines. According to Timer Digest, of Greenwich, CT, which monitors over 100 advisory services world wide, we are only one of four
services to have beaten the buy and hold over the past ten years.

We were rated # 1 for the past ten years at year end, 2003, 2004 and 2005. In 2006, we slipped to # 3. At the end of 2007 we were ranked # 4.

Since then, we have dropped out of the top ten for stocks, but we were bond timer of the year at the end of 2007 and 2008 which means we were ranked number 1 both years. We were rated # 1 in gold timing for 1997 and again in 2011.


TODD MARKET FORECAST (Excerpt from the Dec. 2012 Issue)

Stephen Todd P.O. Box 4131 

Registered Investment Advisor Phone 909 338 8354 Crestline, CA 92325-4131 

www.toddmarketforecast.com Issue 12 Year 27 e-mail -toddmarketforecast@yahoo.com 

Due the first Tuesday of each month.



Stocks & Equities

Perspectives: Weekly Strategy & Commentary

Posted by Tyler Bollhorn - StockScores

on Tuesday, 04 December 2012 08:42

Screen Shot 2012-12-03 at 10.05.10 PMFocus on the Trade, Not on the Money

perspectives commentary

Order the Mindless Investor book now
Tyler Bollhorn's new book, "The Mindless Investor" is not yet in stores but you can now order advanced copies of it. To do so, first log in toStockscores.com and then cut and paste this link in to the address bar of your browser. Doing so will add the charge ($29.95 + $6.50 shipping) to your shopping cart so you can complete the transaction.


Stockscores Market Minutes Video
Monday's market weakness takes the market close to a "risk off" phase after a few weeks of "risk on". In this week's Market Minutes video, I discuss what this means and how to tell when the market is ready to give you market beating profits. You can watch it by clicking here. To receive email alerts any time I upload a new video, subscribe to the Stockscores channel at www.youtube.com/stockscoresdotcom.

This week's Trading Lesson
What are your motivations for trading the stock market? If you a relatively normal person then it is likely that you trade to make money. However, I have found that trading to make money is dangerous because of the emotional attachment we have to our cash. The best traders have different motivations.

Consider something as simple as crossing the road. What do you think about when crossing a busy street? Are you solely motivated to achieve the obvious goal of getting to the other side? Not likely. You are probably thinking a lot about getting to the other side without getting run over.

While this seems obviously silly, the correlation that can be made to trading demonstrates an important point. When we focus on money, when we are motivated by greed, we tend to ignore the obvious. If you are trading to make money then a number of psychological problems enter the trading decision.

First, we worry about missing out on an opportunity. We may look at a trade and think that it is not ideal but still "pretty good". We remember the last "pretty good" trade set up that came along and how it did really well. We remember the pain that we associate with missing out on that pretty good trade set up that we ignored and that motivates us to take this trade, even though it is less than ideal.

Would you cross a busy road if you had a "pretty good" chance of making it without being hit? Would you jump out of an airplane if there was a "pretty good chance" that your parachute would open?

Second, when our trading decisions are motivated solely by money, we tend to work very hard to find something to trade. While a good work ethic is important to be successful in life, working hard to identify opportunities in the stock market is not always good. Doing so means we work hard to find things that are not obvious, and therefore, may not be good enough to even be worth trading. I find that my very best trades are the ones that I don't have to think twice about, those that jump off my trading screen when the stock is in front of me. I don't work hard to find them, they find me.

Third, when we trade just to make money we tend to sell our winners too soon. We want to lock in that good feeling of making a profit and don't want to ever feel the frustration of having a winner turn in to a loser. So, we exit the stock when it feels good or at the first sign that the trade might make us feel bad. This causes us to not ride out the inevitable pull backs along a longer term trend.

Finally, focusing on the money causes us to now manage risk ineffectively. When we think about how much we "could" make if the stock goes up then we might buy a position larger than we are willing to lose. By taking too much risk, we are more likely to not sell our losers when they reach a sell signal or exit our winners too soon because of the fear that the winner will turn in to a loser.

Rather than focus on money when you trade, I want you to focus on being right. Do your analysis on a stock and then ask, "am I right to buy this stock?" "Am I right to short sell this stock?"

Make your trading an intellectual exercise, a challenge to your brain to be right more than you are wrong. Take your focus off of the green and on to the black and white. The easiest way to do this is to only look at the charts and not look at your account's profit and loss indicator. I strongly believe that if you focus on making the right decision instead of focusing on making money, you will end up making more of it anyway.

perspectives strategy

I looked through a lot of charts tonight but could not find something that I think is worth considering right now. The market's performance today (Monday) was a short term signal that a pullback is likely. After hitting a new high on a gap higher, stocks sold off through the day and closed below their open. After a couple of weeks of strength, I think we may see some weakness in the near term and I recommend a defensive stance.

Individual stocks trading on their own stories can do well. You can find these with the Stockscores Market Scan tool by searching for stocks trading abnormal volume and make an abnormal gain. There are usually a few every week, just nothing that I liked today.


  • Get the Stockscore on any of over 20,000 North American stocks.
  • Background on the theories used by Stockscores.
  • Strategies that can help you find new opportunities.
  • Scan the market using extensive filter criteria.
  • Build a portfolio of stocks and view a slide show of their charts.
  • See which sectors are leading the market, and their components.


    This is not an investment advisory, and should not be used to make investment decisions. Information in Stockscores Perspectives is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The writers and editors of Perspectives may have positions in the stocks discussed above and may trade in the stocks mentioned. Don't consider buying or selling any stock without conducting your own due diligence.






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