Archives for September 2011

September 2011 - Page 4 of 10 - Money Morning - Only the News You Can Profit From

Buying Physical Silver

Do you have a drawer full of old silver coins? Buying physical silver?

Right now, Silver investment prices are on a major tear. They are poised to break even higher by the end of the year.

And this report shows why that's not about to end any time soon – and exactly how far silver is expected to run.

In fact, silver could be the most lucrative precious metal of 2011.

Here's why...

How High Oil Prices Will Fuel Europe's Next Economic Crunch

As I met with the Polish officials last Friday in Krakow to begin government sessions on shale gas policy, and European Union (EU) ministers met in the southwestern city of Wrocław, Poland, thoughts turned once again to oil pricing.

In case you haven’t been watching, Brent prices in London are approaching $113 per barrel, while the West Texas Intermediate (WTI) benchmark traded in New York is about to break the $90 per barrel level again.

The spread between the two remains at all-time highs, indicating that Brent will continue to appreciate quicker than U.S. pricing, although both are rising.

That spread is “in favor” of Brent.

This creates a continuing problem for the EU, which is faced with mounting Eurozone currency and liquidity problems, weakness in its banking sector, and a European Central Bank (ECB) that’s experiencing dissent – within its own ranks – over the proper course of action regarding Greece’s debt issues.

Friday’s meeting in Wrocław concerned whether Greece will receive the next tranche of a bailout package. That package is already widely perceived as being insufficient to prevent some sort of Greek default. Plus, the Germans are taking a hard line on what is necessary for that largess to keep coming.

Meanwhile, the internal dispute is getting intense.

A good example is the decision made last Friday morning by the ministers. Or perhaps more accurately, the non-decision. The ministers decided, well, not to decide until next month.

The prospect of higher prices for Brent further complicates matters with the common currency.

The euro has been losing ground against the dollar throughout the latest period of the debt crisis. Of course, that says less about the dollar’s strength than it does about the euro’s enduring weakness.

That, combined with a rise in the cost of energy, means Europe is facing the prospect of a new economic crunch.

This one has the potential of completely derailing this continent-wide recovery already distinguished by its anemic performance.

In Krakow, Too, Our Problem Is Oil

There are essentially three reasons Poland has decided to expedite decisions on developing its domestic shale gas.

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IMF Growth Forecast: U.S. and Europe Will Ignore Warnings, Despite Slashed Estimates

In lowering its growth forecast for the United States and Europe, the International Monetary Fund (IMF) warned of "severe repercussions" unless drastic measures are taken soon.

But don't expect the warning to spawn any real action.

"The global economy has entered a dangerous new phase," Olivier Blanchard, the IMF's chief economist said in the report released yesterday (Tuesday). "The recovery has weakened considerably. Strong policies are needed to improve the outlook and reduce the risks."

The IMF slashed its 2011 growth forecast for the U.S. economy from the 2.5% estimate it offered in June all the way down to 1.5%. Next year won't be any better: The 2.7% 2012 projection the IMF offered in June was cut all the way to 1.8%.

"Bold political commitment to put in place a medium-term debt reduction plan is imperative to avoid a sudden collapse in market confidence that could seriously disrupt global stability," the IMF said.

But with governments in Europe moving slowly to contain the sovereign debt crisis afflicting the PIIGS (Portugal, Ireland, Italy, Greece and Spain) and the United States suffering from political gridlock, the IMF's call to action will likely go unheeded.

In recent weeks, U.S. President Barack Obama has proposed a jobs plan, as well as a deficit reduction plan. But with congressional Republicans opposed to elements of those plans – primarily increases in spending and taxes – the swift policy action the IMF sees as critical will likely be stillborn .

In Europe, the IMF is calling for bold action to contain the debt crisis. It is particularly worried that a Greek default could cause many large banks – which own much of the Greek debt – to take large losses.

That U.S. banks are intertwined with European banks heightens the risk.

According to Money Morning C apital W ave S trategist Shah Gilani, "U.S. banks are widely believed to have $41 billion of direct exposure to Greece" and have loaned heavily to their European counterparts.

More sobering, Gilani says, is that "U.S. money-market funds have a hefty European exposure, too." He noted that 12% of the loans made by our biggest money-market funds were made to three big European banks – two of which, Societe Generale SA (PINK ADR: SCGLY) and Credit Agricole SA, were downgraded by Moody's Corp. (NYSE: MCO) just last week.

The third, BNP Paribas SA, remains under review.

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Fed Preview: Today's FOMC Meeting Will Prove That Team Bernanke is Out of Ideas

If you're handicapping the U.S. Federal Reserve's two-day Federal Open Market Committee (FOMC) meeting that concludes today (Wednesday), you can make the following two predictions – and you'll almost certainly be right:

  • U.S. Federal Reserve Chairman Ben S. Bernanke will announce some form of economic stimulus.
  • But the short-term benefits will be small, and any long-term benefits won't be enough to help out-of-work Americans or jump-start the wheezing U.S. economy.

"I do think the Fed will intervene," Money Morning Chief Investment Strategist Keith Fitz-Gerald said in an interview. "But I don't believe for a second that the central bank's intervention will help the U.S. economy."

Troubling Trends

If anything, the nation's economy looks worse today than it did on Aug. 9, which is when central-bank policymakers last met. The "official" unemployment rate remains at an alarming 9.1% – with no jobs added in August – and true joblessness may range from 17% to 23%. Housing starts declined last month by the greatest amount since April. And the International Monetary Fund (IMF) just downgraded its U.S. growth forecast to 1.5% from 2.5% [To see related story in today's issue, please click here].

The spreading European sovereign debt crisis continues to whipsaw stocks, oil prices and gold. And several dramatic single-day plunges – in stocks and in gold – spooked investors for days after the event.

Bernanke feels pressure to act, but the odds that Federal Reserve policy can make a meaningful splash are low indeed, Money Morning's Fitz-Gerald says.

What to Expect From Today's FOMC Meeting

Since the Fed's actions have so far done little to ignite economic growth, investor expectations were muted ahead of today's FOMC meeting conclusion.

"It looks like the market is baking in an announcement of some kind of quantitative-easing strategy," Deirdre Dennehy, portfolio manager at Rockland Trust, said in an interview. "[But] for them to announce a QE3, I'm not sure how impactful that's going to be. The more times they do that, the less the effect in the market."

Analysts expect the Fed will attack longer-term rates by adjusting its $1.7 trillion portfolio of U.S. Treasury securities.

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Why We Know Gold Prices Are Headed Higher

Over the long haul, gold prices are headed higher. If I got your attention with that statement, I'm glad – that was precisely my intent. You see, our global-investing experts here at Money Morning believe the worries about a major decline in gold prices are overblown. In fact, we see two strong profit plays in […]

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How Greece's Debt Issues Are Becoming a Global "Black Hole"

The extremely volatile markets of late stem in part from news suggesting Greece's debt issues have made a default imminent – creating a global black hole that's sucking in a growing number of other economies with it.

Default fears intensified last Friday when European finance ministers announced they would delay a decision on whether or not Greece was eligible for its sixth tranche of bailout funds. Greece was scheduled to get the next $11 billion (8 billion euros) installment of its $152.6 billion (110 billion euros) aid package by the end of September, but now must wait at least until October.

European Union (EU) and International Monetary Fund (IMF) inspectors met with Greek Finance Minister Evangelos Venizelos last night to evaluate the country's progress with austerity measures. Greece agreed to reduce its deficit to 7.5% of gross domestic product (GDP) this year, and below 3% by 2014 in order to receive bailouts from the IMF and other euro nations.

But investors are afraid the country will run out of cash before a bailout decision is reached.

Greece may not be going down to a Trojan-level defeat in the next few days, or even weeks, but there is little doubt that the country cannot afford to remain harnessed to the euro. It faces almost certain default at this point, sad to say, which means that some big banks, shareholders and bondholders are going to suffer.

Perhaps those Eurozone critics who said that a currency union not backed by taxation or bond-issuing authority was a bad idea should have been heeded. Then countries like Greece would not have been encouraged into a currency union that's an ill-suited match for its unique economy, history and ambition.

Now the critics are being proven largely right, unfortunately.

The most dangerous thing is new evidence that the debt crisis continues to spread.

Looks like France is headed down the same path as Italy and Spain. According to a Bloomberg News story last week, France may need new austerity measures to avoid a bond sell-off and credit rating downgrade.

It seems that Nicolas Sarkozy is the new Silvio Berlusconi.

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Four Stocks to Avoid At All Costs

If you're like most investors, you probably spend most of your time searching for the "next" Apple Inc. (Nasdaq: AAPL) or next Google Inc. (Nasdaq: GOOG) – in other words, the next big winner.

But finding winners is only part of the equation.

If you're looking to build real wealth, you need to avoid the really big losers – like the "next" Enron, or next Lehman Brothers Holdings Inc. (PINK: LEHMQ).

Portfolio killers like those are the stocks to avoid at all costs.

Let me explain …

How to Win By Not Losing

During my years as a global merchant banker, advisor to governments, financial-news editor and trading-service specialist, I've time and again seen the big losses that can result from arrogant executives (Enron), greed-driven strategies (Lehman) and other investments gone wrong.

But what most investors don't understand is that the fallout from these losses reaches far beyond the losses themselves. You see, that's money that can't be deployed into winners.

As one longtime investing adage tells us, if you suffer a 50% loss on a stock, you need that stock to double in price (a gain of 100%) just to get back to even.

And let's be honest: How many times has one of your stocks doubled – after it took that kind of a beating?

There are many strategies you can use to protect yourself from big losses. Just last week, for instance, I showed you how to bolster your portfolio by investing in companies with strong growth prospects and a record of consistent dividend payouts.

I call those companies "Alpha Bulldogs" – and recommend the shares of the strongest performers to subscribers of my Permanent Wealth Investor advisory service.

In last week's report – "Investment Protection: These Dividend Stocks Yield Twice as Much as Treasuries" – I discussed two specific "Alpha Bulldog" stocks: B&G Foods Inc. (NYSE: BGS), and a second whose identity was withheld specifically for the charter subscribersof our newest premium advisory service – Money Morning Private Briefing.

But as I noted above, finding great investments is only half the battle. In the work that I do for my subscribers, I must also avoid big losers.

What to Expect from this Week's FOMC Meeting

The next Federal Open Market Committee (FOMC) meeting starts tomorrow (Tuesday), and investors expect Fed Chairman Ben Bernanke to announce some form of stimulus measures for the U.S. economy. Investors anticipate the Fed to announce at Wednesday's conclusion new efforts to reduce long-term interest rates to allow for cheaper borrowing as well as to increase […]

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Cash in on the "Takeover Mania" in the Gold-Mining Sector With These Two Stocks

A "takeover mania" is about to hit gold-mining stocks.

And we're going to show you how to profit.

As many of you are already aware, The Wall Street Journal has just reported that stocks of gold-mining companies are dirt cheap.

Of course, Money Morning readers already knew that.

Since our experts told readers to buy gold back in late 2007 (when the "yellow metal" was trading at $770 an ounce), we've continued to ferret out the best gold-related investments.

If you heeded our advice, you were well-positioned to profit from this year's run-up in gold prices – and probably have a fatter portfolio to show for it.

If you didn't, however, don't fret. The stock market is offering investors a rare second chance.

And we're going to show you how to best benefit.

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