Gold has hit an all-time high of $1,250. The flight-to-safety trade is starting to take on a different flight pattern away from U.S. treasury bonds to Gold. We are starting to establish a real base of support for Gold prices at the $1,200 level. The sovereign debt concerns in Europe (1.00 Dollar = 1.19 Euro) are beginning to shed light on to a much larger global sovereign debt problem that stretches around the globe from the U.K. to the U.S. Bill Gross of Pimco was recently quoted as saying that the 30 year bull market for bonds is over.
As Gold continues to soar to new heights the sister precious metal Silver has not moved in tandem. The New York Post has recently reported that J.P. Morgan is under investigation for manipulation of the Silver futures market. The allegation is that Morgan pushed down Silver prices when bullish news broke during 2009 to keep the price surpressed.
The historical relationship between Gold and Silver has been 20:1 which means that Silver is historically priced at 5% of Gold. Within the Roman Empire, Silver was acknowledge to always be priced at 10% of Gold, however, the supply of Silver during that time period was much more limited. Therefore, even at a 20:1 ratio Silver would now be priced at $62.50!!!
Current Price: $18.00 per troy oz.
http://www.bloomberg.com/markets/commodities/cfutures.html
The best way to buy Silver (other than physical), is SLV for unleverage or AGQ for 2x leverage.
Thursday, May 13, 2010
Monday, March 29, 2010
Canary in the Coal Mine
Alan Greenspan was recently quoted as saying that the recent spike in U.S. Treasury Yields is equivalent to a, "canary in the mine". If the 10 year treasury yield goes over 4.00% and holds it may be a very bad sign for higher interest rates going forward. The Fed controls short term interest rates only. The market controls long term interest rates and if the bidders do not show up at the treasury auctions the government must increase the rates to intice buyers.
The rate on the 10 year treasury bill dictates interest rates for mortgages, business loans, etc. If that rate increases to say 5.50% (which is being projected for 2010 year end by Morgan Stanley) that would spell very bad news for the fragile recovery in the real estate market and may also push up the already sky high national unemployment rate well over 10%.
The rate on the 10 year treasury bill dictates interest rates for mortgages, business loans, etc. If that rate increases to say 5.50% (which is being projected for 2010 year end by Morgan Stanley) that would spell very bad news for the fragile recovery in the real estate market and may also push up the already sky high national unemployment rate well over 10%.
Tuesday, September 1, 2009
Gold $1,000
Now for the good news... today we have some of the greatest investment opportunities of a lifetime. The major sell-off of 2008-2009 has thrown the baby out with the bath water. Don't be fooled, however, we are not out of the woods and certain areas such as financials, retail, real estate, and anything related to the U.S. consumer are still particularly vulnerable.
The "cash for clunkers" program which is being hailed as a great success is about the worst idea that the U.S. government has ever hatched. We are currently destroying perfectly good cars to push the U.S. consumer further into debt to buy new cars in a feeble attempt to save the automobile industry. The real kicker is that most of the money went to foreign car companies like Toyota!
IMHO, the greatest investment opportunity today is GOLD below $1,000 per oz. The inflationary pressures will almost certainly push up this store of value as the value of the dollar falls. The easiest way to invest is a gold exchange traded fund under the ticker symbol "GLD". This ETF is priced at approx. 1/10 the value of an ounce of gold (same goes for silver under the ticker symbol "SLV").
The "cash for clunkers" program which is being hailed as a great success is about the worst idea that the U.S. government has ever hatched. We are currently destroying perfectly good cars to push the U.S. consumer further into debt to buy new cars in a feeble attempt to save the automobile industry. The real kicker is that most of the money went to foreign car companies like Toyota!
IMHO, the greatest investment opportunity today is GOLD below $1,000 per oz. The inflationary pressures will almost certainly push up this store of value as the value of the dollar falls. The easiest way to invest is a gold exchange traded fund under the ticker symbol "GLD". This ETF is priced at approx. 1/10 the value of an ounce of gold (same goes for silver under the ticker symbol "SLV").
Wednesday, July 8, 2009
Unemployment 9.5%
The national unemployment rate is now 9.5%. Some states have entered double-digit unemployment (California, Nevada, Michigan, Indiana) and this trend may continue. I strongly believe that the unemployment rate provided by the Bureau of Labor Statistics is grossly understated. This rate does not include new college grads, people who have stopped looking for work, self-employed (real estate agents / independent contractors), and the under-employed (part-timers). Unless the employment rate improves the economy will continue to trend downward along with home prices, consumer spending, GDP, and corporate earnings.
Earning season is now kicking off with Alcoa. These earnings may wind up disappointing the market and we could enter the second stage of the bear market selloff of 2008-2009. The government stimulus will eventually wear off and we will be left only with the $12 trillion federal debt burden (which doesn't include entitlement programs like Social Security and Medicaid). China owns $800 billion of US Treasuries and the US stimulus program was $800 billion?!?!
If the Obama administration decides to push for another stimulus program it may send a sell signal on the US dollar which would be highly inflationary. The fed is also monetizing the US debt by buying Treasury bonds. The Fed announced on March 18 it would buy as much as $300 billion in Treasuries over six months to hold down borrowing costs (mortage rates, etc.). The exit strategy is nowhere in sight and it will be very difficult to raise interest rates when the economy is still extremely unstable.
Earning season is now kicking off with Alcoa. These earnings may wind up disappointing the market and we could enter the second stage of the bear market selloff of 2008-2009. The government stimulus will eventually wear off and we will be left only with the $12 trillion federal debt burden (which doesn't include entitlement programs like Social Security and Medicaid). China owns $800 billion of US Treasuries and the US stimulus program was $800 billion?!?!
If the Obama administration decides to push for another stimulus program it may send a sell signal on the US dollar which would be highly inflationary. The fed is also monetizing the US debt by buying Treasury bonds. The Fed announced on March 18 it would buy as much as $300 billion in Treasuries over six months to hold down borrowing costs (mortage rates, etc.). The exit strategy is nowhere in sight and it will be very difficult to raise interest rates when the economy is still extremely unstable.
Friday, March 20, 2009
Greenbacks = Wallpaper
The U.S. Government is in the process of running the printing press and debasing our currency. The true definition of inflation is the increase in the money supply... price inflation is just the effect of monetary inflation. Many high profile companies continue to slash dividends and make their stocks not worth holding. The only reason to own a stock is for dividends!
The scandals at AIG should be blamed squarely on the U.S. Government. You cannot just give a heroin addict money and expect them to use it for college and to pay off their debts. AIG is a bad company and they should have gone bankrupt. All the U.S. Government did was pay off their gambling debts to Goldman Sachs, etc. That is taxpayer money that will NEVER BE RECOVERED!!!
There has recently been a big shift away from the U.S. Dollar / U.S. Treasuries into commodities / foreign stocks. I expect this trend to continue and U.S. stocks / real estate to lose value. At the same time, however, I expect consumer good prices to increase. Everything from food, energy, and clothing will become very expensive due to limited inventories. People will continue to lose their jobs putting additional pressure on real estate prices and consumer credit across the country.
The scandals at AIG should be blamed squarely on the U.S. Government. You cannot just give a heroin addict money and expect them to use it for college and to pay off their debts. AIG is a bad company and they should have gone bankrupt. All the U.S. Government did was pay off their gambling debts to Goldman Sachs, etc. That is taxpayer money that will NEVER BE RECOVERED!!!
There has recently been a big shift away from the U.S. Dollar / U.S. Treasuries into commodities / foreign stocks. I expect this trend to continue and U.S. stocks / real estate to lose value. At the same time, however, I expect consumer good prices to increase. Everything from food, energy, and clothing will become very expensive due to limited inventories. People will continue to lose their jobs putting additional pressure on real estate prices and consumer credit across the country.
Monday, December 22, 2008
Happy New Year 2009!
What a tough year it has been for the American investor. Hopefully, 2009 will offer a much needed fresh start. Recent retirees have been rocked by a 1-2 punch in 2001-2002 and again now in 2008-2009. These losses will be devastating to the retirement of millions of American households. The evolution of the retirement plan from Defined Benefit to a Defined Contribution arrangement has left retirees with a lump sum rollover and a "good luck" wish from their former employers. The retirement plan sponsors must adopt guaranteed lifetime income payout options in the form of immediate annuities to ensure that their retiree assets are not dissipated by stock market girations, bad investment advice (predatory advisors, real estate speculation), and outright financial scams (Madoff, etc.).
The unemployment rate is moving up quickly from 6% to 7% and foreclosures continue to plague the real estate market. The NBER has finally stated the obvious; the US economy is now in a recession that began in December 2007. The new administration certainly has their work cut out for them. The TARP funds are slowly being distributed and the banks, insurance companies, and auto industry are all looking for a handout. A new fiscal stimulus plan is yet to be announced and many Americans are really struggling. I have one suggestion to the new administration....
OFFER A TAX CREDIT OF $10K - $15K TO HOME BUYERS!!!!!!!!!!!
We must clear out the real estate inventory before this economy can get back on a stable footing. If the real estate market continues to fall and credit markets remain frozen, the US economy will head into a prolonged recession or possibly a full blown depression. The US stock market has already decreased -50% this year and the Fed has cut interest rates down to 0% and has committed to keeping rates low (even if that means buying long term bonds). Inflation has moderated with declines in commodity prices and the consumer has finally caught a break with declines in gas prices ($1.50 a gallon due to demand destruction). The flight to safety continues and the 10 year treasury yield is now down to 2.00%. That's lower than it has been since 1953!
See the link below for historical 10-year treasury yields direct from the Federal Reserve:
http://www.federalreserve.gov/releases/h15/data/Monthly/H15_TCMNOM_Y10.txt
The Madoff Securities scandal has only added to the crisis in confidence among investors. My advice is to handle your own investments. You will pay a lot less fees and you will be in control of your own destiny. Investors must get back to fundamentals and take more responsibility for their own future.
I hope that people across America will spend this holiday season focusing on what is really important in life... health, family, and freedom ; )
Merry Christmas & Happy New Year to you and yours!
The unemployment rate is moving up quickly from 6% to 7% and foreclosures continue to plague the real estate market. The NBER has finally stated the obvious; the US economy is now in a recession that began in December 2007. The new administration certainly has their work cut out for them. The TARP funds are slowly being distributed and the banks, insurance companies, and auto industry are all looking for a handout. A new fiscal stimulus plan is yet to be announced and many Americans are really struggling. I have one suggestion to the new administration....
OFFER A TAX CREDIT OF $10K - $15K TO HOME BUYERS!!!!!!!!!!!
We must clear out the real estate inventory before this economy can get back on a stable footing. If the real estate market continues to fall and credit markets remain frozen, the US economy will head into a prolonged recession or possibly a full blown depression. The US stock market has already decreased -50% this year and the Fed has cut interest rates down to 0% and has committed to keeping rates low (even if that means buying long term bonds). Inflation has moderated with declines in commodity prices and the consumer has finally caught a break with declines in gas prices ($1.50 a gallon due to demand destruction). The flight to safety continues and the 10 year treasury yield is now down to 2.00%. That's lower than it has been since 1953!
See the link below for historical 10-year treasury yields direct from the Federal Reserve:
http://www.federalreserve.gov/releases/h15/data/Monthly/H15_TCMNOM_Y10.txt
The Madoff Securities scandal has only added to the crisis in confidence among investors. My advice is to handle your own investments. You will pay a lot less fees and you will be in control of your own destiny. Investors must get back to fundamentals and take more responsibility for their own future.
I hope that people across America will spend this holiday season focusing on what is really important in life... health, family, and freedom ; )
Merry Christmas & Happy New Year to you and yours!
Thursday, September 18, 2008
DOW 10,000
Well here we are... let's recap. Bear Stearns, Indymac, Lehman Brothers, AIG, Merrill Lynch, and now Morgan Stanley all rocked by toxic mortgage debt. Will Goldman Sachs be left as the only independent investment bank without the cushion of deposit accounts to fall back on???
I smell opportunity here... GS at 100 and GE at 20 (with 5% dividend). They are both extremely well run firms that may have the strength to weather this storm. When the dust finally settles there will emerge from the wreckage a few bright stars that had enough foresight to plan for a rainy day.
Interest rates are going down. A flight to safety has accelerated and yields on U.S. Treasury bonds have dropped fast. It is very difficult to find a safe place to stash money today other than government debt. Even money market accounts have lost value and have "broken the buck". Some money market investors are only getting back .96 cents on the $1.00. That is almost considered sacrilege in the investing world!!!!
I smell opportunity here... GS at 100 and GE at 20 (with 5% dividend). They are both extremely well run firms that may have the strength to weather this storm. When the dust finally settles there will emerge from the wreckage a few bright stars that had enough foresight to plan for a rainy day.
Interest rates are going down. A flight to safety has accelerated and yields on U.S. Treasury bonds have dropped fast. It is very difficult to find a safe place to stash money today other than government debt. Even money market accounts have lost value and have "broken the buck". Some money market investors are only getting back .96 cents on the $1.00. That is almost considered sacrilege in the investing world!!!!
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