fiscal cliff- Money Morning - Only the News You Can Profit From.
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Precious Metals48
Why Germany Wants its Gold Back
After spending more than 50 years in foreign hands, Germany's gold is finally going home.
In a recent watershed decision the Bundesbank, Germany's central bank, has decided at least half of its gold should be held in its own vaults.
Since the Bundesbank is the second-largest gold holder in the world, that's going to mean moving 54,000 bars of the shiny metal.
So why does Germany want its gold back, and why now?
Part of it has to do with pressure from a grassroots group led by a group of economists, business executives, and lawyers, along with the German Precious Metals Association, who have put together a "Repatriate our Gold!" campaign.
But that's only part of the story...
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U.S. Economy4Recession 2013: Can We Avoid It?
The U.S. economy is currently two-for-two in its attempts to skirt recession 2013.
The first came after we narrowly avoided a tumble over the fiscal cliff with a down-to-the-wire deal on New Year's Day. The second came Wednesday with the passage of a three-month extension on raising the debt ceiling.
Had we not averted one or the other, the Congressional Budget Office warned on numerous occasions that a recession in 2013.
But we are not out of the woods just yet, even though the odds may have changed.
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Precious MetalsGold Prices: Have We Reached "Peak Gold"?
Expectations for gold prices just grew brighter due to a recent outlook on production numbers.
Gold producer Iamgold Corp. (NYSE: IMG), which has mines in Canada and Mali, forecasts gold prices will soar to a record $2,500 an ounce as global output peaks and ore grades decline.
Grade is the relationship between quality, tons, geometry and depth that indicates if a gold find can be extracted at a cost that makes doing so profitable. High grade is key in a gold deposit.
Iamgold CEO Steve Letwin told Bloomberg News in a Jan. 10 interview that the industry has exploited its best-quality gold reserves and as a result is tapping lower-grade and higher-cost deposits.
In fact, he sees this as a sign of "peak gold" - when the maximum rate of global gold extraction is reached.
"I really think we are at Peak Gold. Nobody has seen the kind of production profiles they thought they were going to see," Letwin explained.
What is Peak Gold?
After peak gold is reached, there's a terminal decline in the rate of production.
The "peak gold" theory mirrors the "peak oil" theory, which maintains the earth holds a finite amount of crude, and production will eventually outstrip supply.
The peak gold phenomenon was actually spotted several years back.
Barrick Gold (NYSE: ABX) CEO Aaron Regent told The Daily Telegraph in 2009 at the Royal Bank of Canada's annual gold conference "there is a strong case to be made that we are already at peak gold."
"Production peaked around 2000 and it has been a decline ever since, and we forecast that decline to continue. It is increasingly difficult to find ore," Regent said.
In 2001, the world saw what was believed to be record global gold production of 2,649 tons.
And what has happened since then in gold production supports the peak gold theory...
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Your Money 3The Greatest Investing Mistake You'll Ever Make
I wrote an article for Money Morning on Tuesday entitled: "The Great Rotation Makes Stocks a Generational Buy."
The story drew several comments from readers - some in agreement, others... not so much.
For instance, reader Mike W. wrote in quoting the article:
"Last week $22 billion flowed into mutual funds and ETFs. That's the second-largest weekly flow on record. Of that... $8.9 billion flowed into equity mutual funds... the most since March 2000 and the fourth-largest weekly inflow on record."
He continued:
"What happened after the [largest] inflow of $23 billion in late 2007? The stock market fell off a cliff. What happened after March of 2000? The stock market fell off a cliff."
As you might have guessed, there's much more to this story...
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Your Money2The Fiscal Cliff Deal Just Made Bonds Even More Risky in 2013
Going over the fiscal cliff would have been bullish for long term U.S. Treasuries. But that didn’t happen. Instead we got a deal with modest tax increases, tiny spending cuts and $64 billion worth of tax-exemption pork.
Now bonds have become toxic enough to make you wonder whether or not the bond bubble has sprung a leak.
But there’s quite a bit more to this story than just U.S. Treasuries.
Here's why the entire bond universe is now at greater risk...
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Your Money1Fiscal Cliff Deal Tax Changes for 2013
On Dec. 31, 2012 Washington hammered out a last-minute agreement for tax deals to avert the looming fiscal cliff.
A collective sigh of relief could be heard by taxpayers even though Congress did not fix spending cuts.
Now as we begin gathering documents for the April 15 tax filing date, there are new tax laws from the fiscal cliff deal that will affect everyone.
One immediate thing that will be noticed is the Internal Revenue Service (IRS), thanks to the last-minute changes, is processing tax returns at a slower rate.
But it doesn't mean you have to delay things.
U.S. President Barack Obama has said that 98% of Americans will not see their income taxes go up - but take a look to be sure, because there is something for everyone in here.
Your Fiscal Cliff Deal Tax Changes for 2013
First, here's some good news from the tax changes:
- Being married isn't a bad thing! Couplesstill have the standard deduction that's twice that of individuals. For the 2012 tax year, this standard deduction increased to $6,100($12,200 for married couples filing jointly), a rise from $5,950 ($11,900 for married couples filing jointly).
- Many middle-class taxpayers will be protected from the alternative minimum tax (AMT)as the income exemption level will now be permanently adjusted for inflation. This means taxes will be less for the 60 million Americans that would have impacted.
- For homeowners who were either granted principal forgiveness or underwent a short sale or foreclosure, they will not have to pay tax on the forgiven debt amount with the deal's one-year extension.
But, here's where you got hit:
- Say goodbye to the two-year payroll tax holiday. It has expired and now employees' net pay is down two percentage points as 6.2% of Social Security will be taken out of paychecks versus 4.2%. There is $113,700 wage ceiling so any wages over that will be exempt.
- A worker with a $41,000 salary - the national average--will have $32 less in a biweekly paycheck, reported CNN.
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U.S. Economy1$1 Trillion Coin Isn’t the Right Answer to Our Debt Ceiling Crisis
There's increasing support for the idea of minting a $1 trillion coin to help the United States avoid hitting the debt ceiling.
Even those supporting the idea - including The New York Times' Paul Krugman - admit it sounds "silly," but say it deserves consideration in that it could help solve one of our country's biggest economic issues.
"By minting a $1 trillion coin, then depositing it at the Fed, the Treasury could acquire enough cash to sidestep the debt ceiling - while doing no economic harm at all," Krugman wrote.
While the government can't make infinite sums of money however and whenever it likes, there's a legal loophole that gives the Treasury Department the authority to create platinum coins of any denomination.
The law that gives Treasury that authority is meant to allow the issue of commemorative coins, but its intentions have been misinterpreted and distorted by politicians and economists alike.
Here's the real deal with a $1 trillion coin and what it would do to the U.S. economy.
To continue reading, please click here...
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Investment Tips3Here's Why The Fiscal Cliff Deal is Great News For Dividend Stocks
I wish I had a nickel for every scary story I read about dividend stocks and the fiscal cliff over the last four months.
I heard so many, I could probably take the rest of the year off.
Of course, a funny thing happened on the way to this great apocalypse: dividend stocks are not only alive and well, but stronger than ever.
As I wrote a few weeks ago, the Fiscal Cliff fears surrounding income stocks were completely overblown.
And now that a budget agreement has been reached and the tax treatment of dividends is locked in, all of this doom-and-gloom can now be finally put to rest.
With a deal in place, dividends will be taxed as favorably for investors as capital gains. For lower income folks, qualified dividends continue to be taxed at 15%.
It only changes for investors who have met the government's latest definition of "rich."
For those with incomes above $400,000 ($450,000 for a married couple) there is quite a substantial increase in the tax rate on qualified dividends. It rises from 15% to 23.8%, including the 3.8% investment income surcharge in the Obamacare legislation.
However, the capital gains tax in this bracket will rise by the same amount, while interest income will be taxed at 43.4% (39.6% income tax plus the 3.8% Obamacare surcharge.)
That means the relative advantage of qualified dividends over interest income will be preserved, along with the parity between dividend and capital gains tax rates.
So for most dividend investors, very little about their investments has changed.
The difference is that these new rates are permanent - there's no 10-year horizon, as there was with the previous 15% dividend tax rate. So investment planning just got a bit easier.
The bottom line is that with the fiscal cliff deal, there are now three good reasons why dividend stocks are irresistible.
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The Fiscal Cliff60Why The Fiscal Cliff "Deal" is Spelled P-O-R-K
After narrowly missing the fiscal cliff, the President went out of his way to thank the Senate and Congress for getting things done.
Granted, it wasn't an Academy Award speech, but it could have been given the performance he delivered as he congratulated everybody from his "extraordinary" Vice President Joe Biden to Harry Reid, Nancy Pelosi and even Speaker Boehner.
It was quite a spectacle really, but puuuulleeeassssse...now for the back- room details.
Behind the scenes, there was plenty of f-bombing, poison pilling and grandstanding leading up to the deal - and that was before the members of Congress and the Senate actually got serious with their usual ultimatums followed by earnest- looking sound bites and posturing.
And for what?...
According to Washington, they not only prevented the nation from going off the fiscal cliff, but also did lots of good things for America. Whether that's true or not depends on your perspective.
Given the fact taxes have increased for 77% of Americans thanks to payroll tax changes, and another $4 trillion stands to be added to the deficit, that's debatable.
But what gets me really riled up is the amount of pork contained in the bill.
For a bunch of lawmakers who were supposedly so busy and so involved in "negotiations," they were remarkably productive when it came to special interests.
Take a look at what else was packed into this sausage:
To continue reading, please click here...
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Fiscal Cliff Deal Gives Energy Investors the Chance to Make a Bundle
Marina and I are still here in the Bahamas where our Internet and TV reception has been very sporadic over the past two weeks. It started improving on New Year's Day, just in time for us to watch our favorite situation comedy.
You know the one. It's called Congress.
And after much political jockeying and self-serving speeches from a largely empty floor, the House finally voted to pass the Senate's stopgap fiscal cliff Band-Aid.
Of course, the nation had technically fallen over the cliff after midnight January 1, but the holiday spared anybody inside the Beltway the problem of determining what that actually meant.
Welcome to the ongoing way of governing in Washington. It's called brinksmanship. Along the way, America has dodged another political bullet.
According to the deal, income taxes are going up for individuals making $400,000 or couples earning $450,000 or more; unemployment compensation has been saved; the sequestration of automatic expenditure cuts has been delayed.
But let's face it, two months from now, when the debt ceiling comes up for another debate, we will head right back into crisis mode. In the long-term view, nothing has changed.
In the interim, though, we are going to make some serious money in the energy sector.
How long that advance goes on is an open question. But there is one overriding factor in all of this.
And the sooner you know what it is, the sooner you'll be ready to profit. Here's what I mean...
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