February 2011 Archives - 3/8 - Money Morning - Only the News You Can Profit From
Gold Fever in China Sparks "Global Phenomenon" of Demand for Yellow Metal
Inflation risk is driving "explosive" buying of physical gold in China, putting the country on a path to becoming the world's number one gold consumer and driving demand for the yellow metal to a 10-year high.
Chinese demand for gold bars and coins reached 180 tons in 2010, up a whopping 70% from 2009, Albert Cheng, the World Gold Council's managing director for the Far East, said at a news conference last Thursday.
Chinese demand for gold jewelry hit an all-time high of 400 tons in 2010, the WGC said.
China was the "strongest market for investment demand" in gold last year, Cheng said while discussing findings released in the 2010 Gold Demand Trends Report. He added that Chinese gold demand nearly tripled in the last 10 years to around 600 metric tons – and that it may double again in less than a decade.
- Uranium Prices: The Top Three Ways to Play the Nuclear Power Surge
Global Investing Strategies: A "Lightning-Round" Look at U.S. Stocks, the Dollar, Inflation and China
If you're a regular Money Morning reader, then you know that, d uring my appearances on national television or when I'm doing media interviews around the world, I frequently participate in something called a "lightning round " – a rapid-fire interview technique in which the announcer (and sometimes even audience members) run through a list of questions in rapid-fire order.
It's a technique that really puts you on the proverbial "hot seat." But I actually enjoy it: It forces you to think on your feet – which appeals to the former trader in me – and allows you to run through a bunch of topics in a very short stretch. In one way or another, each of these topics deals with global investing strategies.
I thought you might enjoy – and perhaps even find useful – a "highlight reel" of some of the best lightning-round questions that I've received in recent weeks, both in front of the camera and during the informal discussions that follow the presentations and broadcasts.
And we'll start with the topic that seems to be one of the most popular global investing strategies topics right now – gold.
More Mega-Deals to Come as M&A Activity Returns to Pre-Crisis Levels
A flurry of early-year deal making has helped drive global mergers and acquisitions (M&A) activity to its highest level since before the financial crisis. And the M&A market still hasn't hit full stride.
Cash rich companies and greater confidence in the overall economy are two big reasons for the turnaround. But international, cross-border deals have offered another catalyst for the spectacular growth.
Total M&A deal volume was up 62% to $377 billion as of February 14, according to Thomson Reuters data. That's the highest level since 2007, and it's still on the rise.
Indeed, global M&A activity in 2011 is expected to total more than $3 trillion this year, compared to $2.8 trillion in 2010.
Don't Use History To Predict Fate of Municipal Bond Market
Wall Street analyst Meredith Whitney triggered panic in many municipal bond holders when she declared last year that municipal bond defaults – possibly 50 to 100 – were on the horizon, due to the debt-laden condition of state and local government budgets.
Although some financial analysts have criticized Whitney for muni-bond warnings they say are overblown, she's not the only one predicting municipal bond market trouble. JPMorgan Chase & Co (NYSE: JPM) Chief Executive Officer Jamie Dimon said last month he expected more defaults this year, and Money Morning Contributing Editor Shah Gilani said Whitney is not crying wolf, as others have claimed.
iPhone Technology: It's Like Buying "B" Shares In Apple Inc. (Nasdaq: AAPL)
This technology spent 20 years as a humdrum subset of the industrial microchip business – until its consumer-product potential was realized when Apple Inc. (Nasdaq: AAPL) made it a centerpiece of the must-have iPhone.
The sector's overall revenue is already projected to advance by 60% in the next three years.
But you have a chance to do even better.
You see, thanks to visibility it gained from its inclusion in the iPhone and iPad, this microchip technology – known as Micro Electronic Mechanical Systems, or MEMS – represents a ground-floor profit play with a big, and sustained, payoff.
"For the global MEMS market, the iPhone 4 was a breakthrough product," Jérémie Bouchaud, director and principal analyst for MEMS and sensors at market-researcher iSuppli Corp., told Money Morning this week in a telephone interview from Munich.
There's a hefty profit potential from this iPhone technology, especially if you focus on the smaller players whose sales are growing at double- and triple-digit rates.
But one stock in particular packs a promising profit punch. In fact, this company's technology was so crucial to the success of the iPhone and iPad that buying its stock would be like owning "B" shares in Apple.
For the one "MEMS" stock to play now, please read on…
China's Trade Surplus Goal Signals It's Time To Dance With the Dragon
China's economic model has long been dependent on exports. Over the past several decades, the country has been the world's manufacturing floor, turning the "Made in China" stamp into a common fixture of goods sold in the United States and Europe.
But now China has made a new goal: It will double its imports by 2015, reducing the trade surplus to zero and releasing itself from an export-reliant economy. Beijing this year made this goal a key part of China's 12th Five Year Plan.
This bold new target represents a major shift in the balance of global trade and a new paradigm for which the United States is not prepared, according to Money Morning Chief Investment Strategist Keith Fitz-Gerald.
"The West needs to realize that the United States is dangerously close to being completely irrelevant to the Chinese growth model," Fitz-Gerald said in an interview. "China will not live and die by U.S. demand."
Farmland Prices Riding High on Ag Commodity Surge
As prices for corn, soybeans and other U.S. agricultural crops soar, the cost to buy the land they are grown on is rising as well,
Farmland values in the 10th District of the central United States are climbing at their fastest rates since the 2008 boom, the Federal Reserve Bank of Kansas City said Tuesday.
Prices climbed 14.8% for irrigated cropland and rose 12.9% for non-irrigated land in seven states in the fourth quarter of 2010, compared to the same period in 2009, the bank said in a report on its Web site. The gains stand in stark contrast to the prices of homes and commercial real estate in a region where manufacturing job losses have held the economy in check.
Fist-Sized Cellular Antennas Will Help Feed Data-Hungry Smartphones
Several new cellular antenna technologies eventually could remove the steel-tree cell towers' blight on the landscape while improving signal coverage and making more bandwidth available for Web-connected smartphones.
Several wireless network equipment vendors have been demonstrating such products this week in Barcelona, Spain at the Mobile World Congress, the world's largest cell phone trade show.
The new technology can't arrive soon enough for the carriers. A deluge of demand from smartphones and the nascent tablet PC market in the next few years threatens to overwhelm current wireless networks, even with the ongoing deployment of the next-generation network LTE, or Long Term Evolution. Carriers will need to handle 26 times the volume of data traffic in 2015 as they did in 2010, according to Cisco Systems Inc.'s (NASDAQ: CSCO) latest Visual Networking Index Forecast.
Will Egypt End the "Obama Arms Bazaar?"
While many investors are focused on the roles that Google Inc. (Nasdaq: GOOG) and Twitter played during Egypt's recent turmoil, I immediately zeroed in on all the American-made military hardware that exists in that region – and began to analyze the risk that investors face if the U.S. defense industry quite literally bet on the wrong horse.
Between 2006 and 2009, we sold more than $50 billion worth of weapons systems and related hardware to Middle East nations, according to the Congressional Research Service. The value of annual military contracts in the region has quadrupled since 2000, according to CNN.com.
And it doesn't look like things are slowing down – at least, not yet.