With a rising dollar, do gold bugs need to seek cover?

Posted June 15, 2011 at 3:55 am

by Alexander Schachtel

The US dollar continues to sway in trading this week, down big against the Euro today after posting substantial comparative gains through most of last week.

Gold (NYSE:GLD) and Silver (NYSE:SLV) prices, which are generally thought to move inversely with the dollar, have shed some value in trading in that span of time.

Combine indicators signaling a possible slow-down in the Chinese Economy and an increasingly likely Greek -default scenario in Europe and you may see the dollar continue to rise against two of the world’s leading currencies.

So if the dollar finally starts to gain significant momentum, do the gold-bugs have reason to seek cover and latch on to other commodities? George Soros, the investment tycoon and philanthropist, recently sold the large majority of his funds’ holdings in Gold, having opined that the gold market is officially in a bubble.

As QE2 nears its end expect more inflationary pressure on the dollar to be lifted leading to further appreciation in the value of the greenback. It is starting to look like Soros is on the money once again.

All told, the future market prices for Gold (NYSE:GLD) and Silver (NYSE:SLV) may hinge more on the success of the current economic recovery than anything else.

Dollar prices will be more swayed by…

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Gartman Feels Party is Over For Gold

Posted June 12, 2011 at 7:45 pm

by Nicholas Larkin
via June 3rd Bloomberg Article

Dennis Gartman, the economist and editor of the Gartman Letter who correctly forecast 2008’s commodities slump, cut his gold position by half today and said yesterday’s drop makes him “nervous” that it may keep falling.

The metal fell as much 1.3 percent yesterday after earlier this week trading within 1.8 percent of the all-time high a month ago. Gartman cut his gold holdings in all currencies. Gold in euros and British pounds rose to records since last week.

“For the first time in a very, very long while, we are a good deal more nervous than we have been about the trend,” Gartman said in his Suffolk, Virginia-based Gartman Letter. “We fear that yesterday’s sharp break that took gold down to $1,520 in the veritable twinkling of an eye was the harbinger of even more severe weakness that might soon develop.”

Gold may fall “swiftly” to about $1,480 an ounce as early as the next few days, he wrote. Gold for immediate delivery dropped $6.27, or 0.4 percent, to $1,527.30 an ounce by 1:07 p.m. in London.

Gold has gained 7.4 percent this year and touched a record $1,577.57 an ounce on May 2 as faster inflation, Europe’s debt crisis, a weakening dollar and unrest in the Middle East and north Africa boosted demand for a protection of wealth. European Union and International Monetary Fund officials today complete a review of Greece’s plan for 78 billion euros ($113 billion) in asset sales and austerity measures as they prepare the nation’s second bailout in little more than a year.

Full article…

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A Formidable Doomsayer Who Sees Another Market Crash Ahead

Posted June 7, 2011 at 2:37 am

He’s the mutual fund manager with the best record in the past quarter-century, and he correctly predicted the last two stock market crashes. So why aren’t people listening when Bob Rodriguez says another calamity is looming?

by Mina Kimes

You have to see it from Bob Rodriguez’s perspective. Twice he has spotted an approaching storm. Twice he has warned the world. Twice he has been pooh-poohed and seen investors abandon the two mutual funds he managed. Twice he has taken steps to shield his clients from the coming crisis.
And twice — first with Internet stocks in the 1990s, and then with the financial crisis of 2008 — Rodriguez has been right.

As the latter cataclysm unfolded, the man once mocked for missing out on the hottest markets of his lifetime was anointed as a seer. The Wall Street Journal pronounced Rodriguez one of the “doomsayers who got it right.” Barron’s labeled him a “prophet.” MarketWatch described him as one of the “four horsemen of the market.”

Rodriguez, the CEO of $16 billion money management firm First Pacific Advisors, isn’t the type to be satisfied with being right (though he’s certainly not above that particular pleasure). He’s seemingly compelled to share the hard truth. It’s as if he has this terrible gift, and with that comes the obligation to tell the world when calamity is on the horizon.

So when he was invited to address more than 1,000 mutual fund managers at a conference held by Morningstar in May 2009 — just when it looked as if the crisis had finally abated — Rodriguez gave himself only a brief pat on the back. Then he launched into a tirade, ripping into all of the parties involved in the meltdown.

Fund managers, he said, had “stunk.” The federal stimulus programs were foolish and shortsighted, and regulators had lost all credibility. Worst of all, he said, was the ballooning U.S. debt, which had prompted him to stop buying long-term bonds from the “irresponsible and fiscally inept government.”

He continued in that fiery vein for almost an hour. When he was done, he stared out into an awkward and complete silence. Then it came: a thunderous standing ovation from the very fund managers he had just excoriated.

Rodriguez is an anomaly in the sunny world of mutual funds, where the typical manager is…

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When to Sell Gold or Gold Shares

Posted June 7, 2011 at 1:17 am

by Emily Knapp

This year, market-guru George Soros dumped around $800 million of Gold (NYSE:GLD). Now people are wondering if it might be time to jump ship. If Soros is getting out now, what does that say for the future of the gold market?

While it’s true gold (NYSE:GLD) has been bullish for a 12-year run now, and that one should expect the floor to fall out at some point, that’s unlikely to happen before it hits its blow-out phase, when share prices will go through the roof. Until that happens, there is still more money to be made.

In July 1999, gold (NYSE:GLD) hit a 20-year low at $252.80 an ounce, but since then it has steadily recovered, reaching a record high of $1,575.79 an ounce — that’s a 623.23% increase in value over 12 years.

If you bought in in 1999, maybe you’re ready to sell as you kick back on your yacht in the south of France and fan yourself with crisp hundreds. Selling too soon at least avoids the risk of selling too late.

For gold (NYSE:GLD) to move into bubble territory, we’ll have to see a…

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The New Banks of America

Posted June 2, 2011 at 2:19 am

As the Feds put the squeeze on traditional banks, payday loan lenders stand to benefit.

by Danny Miller

For some time now we have been big fans of the pawn broker/payday loan lending industry. Often times they get a bad rap (sometimes deservedly) for “preying” on the lower income class who aren’t always able to get a short term loan or open a checking account with a traditional bank.

In recent years the industry has grown by leaps and bounds as the financial crisis spread its tentacles up and down Main St. and unemployment grew. The price increases in precious metals such as gold and silver has been a boon as well.
 
Companies like $EZPW, $FCFS, $WRLD and $CSH have prospered from the current economic climate (in the U.S. and abroad) by stepping in to fill the void left by the “old” banks who have either gone under or made it harder to get a quick loan…and this has not gone unnoticed.

Politicians have always kept a close eye on the payday loan lending industry, and like clockwork have stepped up their game recently, most notably in Austin, TX.
 
With payday loan lenders in the spotlight again, many have forgotten that D.C. has also created legislation to put the clamps down on traditional banks.

Full story…

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Performance, YTD, For The World’s 7 Largest Economies

Posted May 26, 2011 at 3:50 am

by Gary Gordon

Equity market performance for the world’s 7 largest economies hasn’t exactly been awe-inspiring. Then again, it has been far better than a sharp stick in the eye.

Here’s the tale of the tape through 5/25:

Even reviewing the results leads me back to the oldest financial cliche. Specifically, past performance does not guarantee future performance.

Consider the Eurozone. Initially, investors capitalized on U.S. dollar devaluation against the euro-dollar as well as a modicum of mature stock market resiliency. As the months drag on, however, the region’s string of debt downgrades and back-breaking stagflation are taking a toll; the euro-dollar has lost roughly -5.5% against the greenback in less than 4 weeks.

How confident should an investor be that EZU will bounce higher anytime soon?

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Is the Chinese market nothing more than a gambling den?

Posted May 25, 2011 at 1:50 pm

by Jeff Macke

China’s growth is slowing. At this point even the Chinese are willing to confess to that, albeit to a muted degree.

Alas, first-hand accounts of what’s really going on behind the… ahem… Great Wall are harder to find. That’s why Breakout went to Simon Baker. The original Friend of Breakout is not only a snappy-dressing Brit, he’s also the head of Baker Avenue Asset Management. He is an insightful investor with a track record to prove it.

Baker is fresh back from China, and the message he’s bringing isn’t likely to comfort advocates of the Chinese growth story. Baker “visited 16 companies… Solar companies, chicken companies, cement companies across six provinces. It was consistently the same message:

We were lied to.

For the sake of clarity, the “we” in question consists of Baker and eight other officially “sophisticated” investors; the liars were Chinese companies and their management.

This isn’t jingoism, conspiracy theorizing or xenophobia talking. Baker’s been there, brought…

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A new laptop that has the potential to change the industry

Posted May 24, 2011 at 1:54 am

by  Anton Wahlman

The formal name for the laptop is the Samsung Series 5 Chromebook from Google (GOOG), and it will be available from Amazon (AMZN) and Best Buy (BBY) starting June 15.

The WiFi-only version will be $429, and the version that includes Verizon EV-DO service will be $499.

There are some people in this world who like to spend a lot of time hacking and tinkering with their computers. They take pride in how many hours or days per week that they can tune their application installs, tweak their antivirus settings and re-architect their various backup methodologies. Often enough, these people also wipe their PCs clean and reinstall all of their stuff — and they love it, the more often, the merrier.

These people are equivalent to those in the car world who love to get under the hood and fix problems. If they can spend their entire weekends getting under their cars with tools, fixing and upgrading, they’re in heaven.

We all know who these people are. Some believe they constitute 1% of the population, others estimate they are closer to 20%.

If you’re one of those 1% or 20% of the population, the Samsung Series 5 Chromebook isn’t for you.

But if you are part of the other 80% or 99% of the population, the Samsung Series 5 Chromebook is your dream laptop. You’re the kind of person who absolutely hates things such as car problems or malfunctioning computers.

You would rather go to the…

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The 6 emerging market currencies that will rule the world

Posted May 19, 2011 at 11:12 pm

by Maxwell Strachan

The world economy, so long defined by the dominance of a few advanced countries, has entered a period of “transformative change,” according to a new report by the World Bank.

Globalization is shifting the balance of power toward a handful of increasingly prominent emerging economies, mostly notably China and India. That, in turn, could soon end the U.S. dollar’s era of dominance, the report, entitled “Global Development Horizons 2011—Multipolarity: The New Global Economy,” says.

Six emerging economies could account for half of all economic growth by 2025, the report says, matching the output of the “euro area,” inlcuding Brazil, China, India, Indonesia, South Korea, and Russia. That’s assuming an annual growth rate in emerging economies of 4.7 percent until 2025. Advanced economies like the U.S. are expected to grow at a 2.3 percent rate.

For emerging economies to continue that tremendous rate of growth, the report says, they’ll need to make “structural changes” that increase productivity and domestic demand. So far, emerging economies have depended on technological innovation and expanding demand in other countries.

“The fast rise of emerging economies has driven a shift whereby the centers of economic growth are distributed across developed and developing economies – it’s a truly multipolar world,” said Justin Yifu Lin, the World Bank’s chief economist, in the release.

The report also predicts the demise of the dollar as the world’s reserve currency. By 2025, say the authors of the report, the world economy could be run according to a “multi-currency” understanding, one in which the dollar is joined by the euro and renminbi, according to a release.

“Over the next decade or so, China’s size and the rapid globalization of its corporations and banks will likely mean a more important role for the renminbi,” said Mansoor Dailami, lead author of the report and manager of emerging trends at the World Bank, in the accompanying release.

Full article…

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Beware the False Breakout in Stocks

Posted May 9, 2011 at 2:37 am

by Nathaniel Crawford 

Swiss investor Marc Faber has just released his latest issue of the Gloom, Boom, and Doom Report where he discussed his outlook for the stock market, gold, emerging markets, and other financial topics. Here are a few highlights from the report:

1. Equity Markets – The markets may be giddy about stocks hitting new highs, but contrarian investor Marc Faber is having nothing of this. He is concerned that stocks will fall sharply in May and that the recent breakout in stocks will prove to be trap for the bulls. The markets are due for a correction and the technicals point to a weak market. In particular, Faber points to the decline in new 52 week highs as evidence of an unhealthy internal market. Right now, Faber would stay away from cyclicals, tech stocks, and banks. If you have to own stocks make sure it is something safe like consumer staples (MO, JNJ, PEP, KO, etc).

2. Gold & Silver — Still likes gold as a long-term investment and recommends dollar cost averaging every month regardless of the price. However, when it comes to silver, Faber is more cautious, noting the recent run-up in the price. He expects a 20%+ correction in the metals complex because the inflation trade has become too crowded.

3. Commodities – Dr Copper is issuing a warning to investors. While the S&P 500 has made a new high, copper failed to do so (non-confirmation). This is a significant development because Dr Copper and the SP 500 have a very high correlation. This signal, along with the large declines in other commodities such as sugar and cotton, leads Faber to believe that stocks could follow commodities lower (in the short-term)

Full article…

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