Guest Editorial
Ben Bernanke is Every Gold Bug's Best Friend
After prices fell 10% in December, many investors wondered if the bull market in gold was running out of steam.
That was before Federal Reserve Chairman Ben Bernanke swooped in with a "red cape" and fired the bulls back up.
Since the Fed reassured the world that interest rates will remain at "exceptionally low levels" for another two years, gold has jumped more than 3%.
UBS AG (NYSE: UBS) described the situation simply, "if investors needed a (further) reason why they should be long gold now, they got it yesterday … a more accommodative policy is a very good foundation for gold to build on the next move higher."
To gold bugs, two more years of near-zero, short-term interest rates means negative real interest rates are here to stay, and this has historically been a strong driver for higher gold prices.
Bernanke and the Fed aren't the only central bankers in the fiscal and monetary bullring.
Brazil has cut its benchmark interest rate a few times and China lowered its reserve rate for banks in December. According to ISI Group, 78 "easing moves" have been announced around the world in just the past five months as countries look to stimulate economic activity.
One of the main weapons central bankers have employed is money supply, which has created a ton of liquidity in the global system. Global money supply rose 8% year-over-year in December, or about $4 trillion, according to ISI. I mentioned a few weeks ago how China experienced a record increase in the three-month change in M-2 money supply following China's reserve rate cut.
Together, negative real interest rates and growing global money supply power the Fear Trade for gold. The pressure these two factors put on paper currencies motivates investors from Baby Boomers to central bankers to hold gold as an alternate currency.
To continue reading, please click here…
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This New Spy Technology Could Be Worth Billions
Using GPS to track a risky teenage driver or a cheating spouse is about to become old hat.
You see, we are actually on the verge of a revolution that will allow us to locate and track every physical object made in the world.
Not to mention literally every person on planet Earth.
And best of all, this new technology can be used to solve a wide range of problems.
From checking on patients at home, to finding stolen cars, to locating soldiers lost from their units, the possibilities are endless.
Then again, as privacy advocates are quick to point out, there is also the potential for abuse.
Consider this: In the near future, Big Brother will even be able to track your clothing. It's right out of "1984."
That's why I believe the Supreme Court's recent ruling that curbs police use of GPS trackers is a big win for citizens and high-tech investors.
That's because the high court used a broad brush that will give police units pause before they abuse the new tracking technology.
We need these broad safeguards for one simple reason: In the Era of Radical Change, the pace of breakthroughs is so fast that no court or government agency can hope to keep up.
Welcome to the Surveillance Society
In that regard the Supreme Court's timing is right on the money.
The Federal Aviation Administration (FAA) is set to approve new, small helicopter "spy" drones for local police to use in cities.
In fact, AeroVironment Inc. (Nasdaq: AVAV) has a new device especially tailored for law enforcement. The mini-copter weighs just 5.5 pounds and fits in a car trunk.
It costs about $40,000, roughly the price of a police cruiser. But the drone is often much better than a car at tracking suspects.
Big energy also has shown interest in these new drones. They work well for checking on remote assets like oil rigs and pipelines.
I also recently told you about AeroVironment's new hummingbird-sized spy drone. I predict that in a few short years, the scale of these robots will shrink to the size of a fly.
Believe it or not, there is even "talking" underwear courtesy of the Pentagon.
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The Safe, Sure Road to a Golden Retirement
It has been called the "royal road to riches."
Starting with just $10,000 and a small monthly contribution, any investor can use this method to create their own golden parachute – a million-dollar retirement portfolio.
All you need is time.
Time. That is something nobody seems to have anymore – or really appreciate.
But at 48 years old, I understand how 30 years can slip by in an instant. It may seem like forever, but it's not.
Instead, today it's all about the fast money. In the market, out of the market… this stock, that stock. Nobody has the patience to ride out the rough spots anymore.
However, there is one thing that never changes in the investment world: When you buy solid companies and reinvest the dividends you can build true wealth.
The best part is you'll never have to rely on Social Security to fund your golden years.
Of course, seasoned income investors have known this for years. That's why the truly rich don't spend their days glued to the financial news.
In this style of investing, less truly is more.
Because the biggest factor behind this well-worn strategy is time itself and time never fails.
The Most Powerful Investment Strategy of All-Time
The secret to this approach is in the compounding effect that Albert Einstein once called "the most powerful force on earth."
It's the safe, sure road. And anybody who tries it can become a millionaire if they are smart enough to stick with it.
In fact, this force is so powerful that I think the government is deliberately keeping it from you.
I say that because if the masses actually knew the income this compounding approach could deliver, they would immediately demand an end to Social Security as we know it.
Why is that? you ask. To continue reading, please click here….
Congress' Next Bad Idea Would Destroy the Shale Boom
Last week, six Members of Congress, led by Rep. Dennis Kucinich (D-Ohio), introduced the "Gas Price Spike Act."
With concerns over the likelihood of higher gas prices this summer, the bill and its sponsors propose the creation of a "Reasonable Profits Board" that would control the profits of oil and gas companies.
Under the bill, this board – made up of unelected bureaucrats – could apply a "windfall profit tax" on the sale of oil and gas at rates of 50% to 100%. These taxes would take aim at corporate profits that the board feels are "unreasonable" or "unfair."
Congress would then appropriate the money raised to subsidize electric vehicles and mass transit.
Now you may want to take a second and breathe, because this is no satire.
Oh, and the proposed bill offers no specific guidance on how the board would determine what represents a "reasonable profit." How do we even begin to define this term? Are some profits more unreasonable than others? And who decides what is "reasonable?"
Apple Inc. (Nasdaq: AAPL) last week shattered earnings expectations. The electronics company has a profit margin north of 20%; meanwhile, the oil and gas industry has a sector-wide margin a little less than 10%.
And though the price of oil and gas will rise in the future – and despite the name of the bill – a reasonable profits board would do nothing to improve consumers' plights at the pump.
In fact, it would only make things worse for people like you and me.
Ratio Analysis: $DAX/European Financial Index Going Parabolic?
by Albertarocks
Global Economic Intersection Article of the Week
Executive Summary
Recently I've tuned my focus to Europe in order to try to get a better handle on exactly what the hell is going on over there. Well actually, whatever is going on over there will probably forever remain a mystery to all of us… hidden under so much paperwork, lies and spin that we'd never be able to get to the bottom of it. Nonetheless, I want to know if there are any clues we can garner from across the pond if we just focus a little harder and do some meaningful analysis? Yes, I think there are.
We begin by putting together a chart of the DAX as if it were priced in units of the Dow Jones Europe Financials Index. This would be similar to pricing the S&P 500 in terms of the BKX. The only difference is that the study which follows is purely European. The first picture we're going to look at is the monthly chart of the $DAX:$E1FIN (the DAX divided by the Dow Jones European Financial Index). We have to look at the big picture first in order to see if there is in fact any pattern or relationship that suggests reason to investigate further. And immediately, we see that there is. The result is a ratio which in turn can be compared directly to activity within the DAX itself. I've also added the European Financials Index as a separate entity in its own panel in order that we can look at all 3 at the same time and in the same context. I realize it's a rather long lanky chart, but it contains a ton of information and there's not much point in presenting a chart that lacks useful data:
The first thing we want to know is whether or not any major top or bottom in European equities (using the DAX as the most logical proxy for all) coincides with a major change in the ratio. In other words, was there any sort of major shift in the ratio at the time that the DAX made a sudden change in trend? If so, which of the components contributed the lion's share to that shift? We also want to know what happened within the European financial sector at the time of that abrupt change. In the pursuit of studies like this, occasionally it becomes apparent that there doesn't seem to be any such relationship occurring at all. Indeed, there have been times when I have put together a study similar to this with the expectations that some sort of meaningful correlation would pop right off the chart, only to find that there in fact was none. I can occasionally be surprised by such a revelation but hey… if I'm on the wrong track, I recognize that in a hurry, dump it and move on to the next one. But of course, when we're talking about the German stock market and the entire European financial district in the same sentence, surely there has to be a meaningful relationship that can lead to clues? And of course… there is.
What the Next Decade Holds for Commodities
What a decade!… A rapidly urbanizing global population driven by tremendous growth in emerging markets has sent commodities on quite a run over the past 10 years.
In fact, you would find that all 14 commodities are in positive territory if you annualized the returns since 2002.
The best performer was silver with an impressive 20% annualized return.
Surprisingly, that was higher 19% annual return on gold.
Notably, all commodities except natural gas outperformed the S&P 500 Index 10-year annualized return of just 2.92%.
However, last year did not seem reflective of the decade-long clamor for commodities.
In 2011, only four commodities we track increased: gold (10%), oil (8%), coal (nearly 6%), and corn (nearly 3%).
The remaining commodities listed on our popular Periodic Table of Commodity Returns fell, with losses ranging from nearly 10% for silver to 32% for natural gas.
I think this chart is a "must-have" for investors and advisors because you can visually see how commodities have fluctuated from year to year…
How to Put a Touch of Glory in Your Life
[Editor's Note: Alex Green is one of our favorite writers. He has the rare talent to be able to turn a simple story into genius. In this story that ran in Spiritual Wealth on Friday, Alex explains why attitude really is everything. We hope you’ll enjoy it as much as we did.]
Dear Reader,
There's an old story about a man who walks by a construction site and sees workmen pushing wheelbarrows, each filled with an enormous stone.
He asks one what they're doing.
"What does it look like?" he says with a sneer. "Hauling rocks."
Unsatisfied with that answer, the passerby asks another construction worker the same question.
The workman doesn't bother looking up. "We're putting up a wall."
Frustrated, the man tries one last time. "I say there," he asks the next fellow, "can you tell me what you men are doing here?"
The workman puts down his wheelbarrow, wipes his forehead and says with a broad smile, "We're building a cathedral."
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