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Welcome to Money Morning - Only the News You Can Profit From.


How to Rent a Fortune

With a 37% gain in The Blackstone Group LP (NYSE: BX) since late July, we’ve done really well with our targeted investment in real estate.

And with very quick gains of 9% in Brazilian-food processor BRF SA (NYSE ADR: BRFS), 5.2% in South American agricultural play Adecoagro SA (NYSE: AGRO) and 1.6% in high-tech agribusiness player  Neogen Corp. (NasdaqGS: NEOG), we’re doing well with our plays on (pockets of) accelerating U.S. inflation.

Today we’re going to combine the two concepts and employ a very simple formula we believe will add to your profits…

  • Featured Story

    Don't Fear China and Japan Owning More U.S. Debt


    The U.S. Treasury Department said today (Thursday) that total foreign holdings of U.S. debt rose 1.1% in November to $5.72 trillion, putting foreign holdings 0.1% below the all-time high of $5.76 trillion it reached in March 2013.

    In particular, China's holdings reached record levels, increasing 0.9% to $1.32 billion, and so did Japan, which boosted its holdings by 1% to $1.19 trillion. The two countries are the largest and second-largest foreign buyers of Treasury debt, respectively.

    To watch the video, click here...
  • U.S. Debt

  • Will United States Debt Holders Bail on Treasuries? afraid looking businessman

    Since the mid-1990s, China and a host of other foreign governments have quietly acquired one-third of all United States public debt. Foreign holders of United States debt held more than $5.6 trillion in Treasury securities as of August 2013.

    But continued debt-ceiling drama in the United States is starting to change that.

  • Four Things the Debt Ceiling Deal Doesn't Fix Time Bomb Everyone in the Capitol is patting themselves on the back and glad-handing for the news media, rattling on about “fighting the good fight.” Sure, we’ve avoided default… for just 112 more days. Most of us won’t even pay four phone bills by the time the “crisis” gets brewing again. As ridiculous as that fact is, it gets worse. You see, the “Great Band-Aid Treaty” doesn’t actually do anything to address the fundamental challenges facing our economy right now. Here are the four biggest issues that Congress ducked out on...
  • Should We Be Worried About a U.S. Debt Default? Why You Have to Be Investing in the Stock Market Now

    While the stock markets so far have reacted mildly to the government shutdown, the looming Washington fight over the need to raise the federal debt ceiling could lead to a U.S. debt default.

    And that, everyone agrees, would trigger a much more pronounced reaction from Wall Street.

    To continue reading, please click here...
  • Dire Consequences Await as U.S. Debt Nears a Tipping Point Fiscal cliff stack of quarters left

    As U.S. debt as a percentage of GDP hovers at levels not seen since World War II, concerns are growing that the American economy is susceptible to a debt crisis in the near future.

    Here's why people are worried: If interest rates return to normal levels of around 5% as the U.S debt approaches $20 trillion, then servicing that debt each year will cost taxpayers $1 trillion.

    Does anyone think that the Federal Reserve, as the enabler of all this debt, will be in any rush to raise interest rates?

    Following Europe's example, the U.S. debt-to-GDP ratio hit 105.6% in 2013, a perilous level that has long-term repercussions for the world's largest economy, according to Standard & Poor's. By 2016, right around the time that Hillary Clinton will be running in earnest to be president, the ratio will likely hit a staggering 111%.

    But how much debt is too much debt? And what are the pitfalls facing the United States in the future? Both questions remain hotly contested among economists, despite a wide acceptance of a "tipping point" theory both by politicians and ordinary Americans.

    To continue reading, please click here...

  • U.S. Economy to Get Jolt from 1.2 Million Homebuilding Jobs Hardhat tools copy

    An accelerating rebound in new home construction over the next two years should finally give the U.S. economy the jump-start it needs to progress toward a truly robust recovery.

    New home construction continues to bounce back from the lows of 2009, after the housing bubble burst, but still has a long way to go.

    With housing one of the prime drivers of the U.S. economy - historically construction accounts for 5% of the U.S. gross domestic product (GDP) and related economic activity another 13% - a spike of activity in this area could drive the growth that's long been lacking from the recovery.

    "A revival in new home construction will have a huge stimulative effect on the larger economy," Brad Hunter, chief economist for housing research firm Metrostudy, told Bloomberg News. "When home construction goes up, so does demand for furniture, tile, lumber, concrete, draperies, paint and appliances of all sorts."

    To continue reading, please click here…

  • The Trillion Dollar Trick Trillion dollar coin Minting a trillion-dollar platinum coin to pay our debts may seem ridiculous. But in fact, our government has done the same thing for the past five years, creating more than $1 trillion out of thin air each year. Read More...
  • Will Gold be Paulson's Next "Greatest Trade Ever"?
    When famed hedge-fund manager John Paulson speaks, people listen.

    And it's no wonder.

    Paulson made his way into the financial history books thanks to what many now call the "greatest trade ever".

    Paulson & Co. shorted the subprime mortgage market before the collapse banking a $15 billion gain.

    So when Paulson went big again by buying gold in 2009 and 2010, investors took notice.

    At the time he said, "As an investor, I became very concerned about having my assets denominated in U.S. dollars," Paulson told his audience. "So I looked for another currency in which to denominate my assets in. I feel that gold is the best currency."

    In fact, Paulson's holdings in the SPDR Gold Trust (NYSE: GLD) make his firm the biggest stakeholder in this ETF, with a position currently valued at $2.9 billion.

    So that begs the question....

    Is Paulson still a gold bull?

    In a recent letter to investors he wrote, "By the time inflation becomes evident, gold will probably have moved, which implies that now is the time to build a position in gold."

    And he's not alone.

    Recent filings showed that another legendary hedge-fund investor, George Soros, has nearly doubled his stake in GLD to 85,450 shares.

    But "Bond King" Bill Gross's latest words and actions may well be the most significant of all.

    To continue reading, please click here....
  • Paul Krugman is Dead Wrong: Debt Matters Paul Krugman, the Princeton University economics professor, Nobel Prize winner, and regular New York Times op-ed contributor says, "Debt matters, but not that much."

    Not only is he off the reservation on this one, but he's completely fallen off his high horse.

    In the real world, debt actually matters a lot.

    In a Houston Chronicle opinion piece last week, Krugman, riding his horse - whose name might as well be Liberal Conscience - trampled conservatives under the guise of an economics lesson that derided "deficit-worriers" for wrongly seeing "America as being like a family that took out too large a mortgage, and will have a hard time making the monthly payments."

    According to Krugman, that's a bad analogy and "the way our politicians think about debt is all wrong, and exaggerates the problem's size."

    Decide for yourself. Either debt matters a lot, or not that much...

    The World According to Paul Krugman

    Professor Krugman calls all the conversation in Washington about debt and deficits a "misplaced focus" and says all of the economic experts "on whom much of Congress relies have been repeatedly wrong about the short-run effects of budget deficits."

    He derides the fears that deficits will cause interest rates to soar by pointing out that they haven't moved.

    What he doesn't say is that they haven't moved because they're not free to move.

    The fact is that the U.S. Federal Reserve has corralled the free market in interest rates by knocking short-term rates to almost zero through successive open market operations and extraordinary quantitative easing measures.

    Mr. Krugman mocks those waiting for rates to rise and notes that while they wait "rates have dropped to historical lows."

    Maybe what he doesn't realize is that the Fed's actions themselves have been nothing short of historical.

    The crux of Mr. Krugman's supposition that debt doesn't matter much is based on his bashing of the popular analogy comparing America's debt problems to those of a mortgaged homeowner.

    All of which Krugman claims is "a really bad analogy in at least two ways."

    He says, "First, families have to pay back their debt. Governments don't - all they need to do is ensure that debt grows more slowly than their tax base."

    "Second," he says, "an over-borrowed family owes the money to someone else; U.S. debt is, to a large extent, money we owe ourselves."

    He goes on to say that the debt from World War II was never repaid and didn't make postwar America poorer.

    In fact, the Professor points out, "the debt didn't prevent the postwar generation from experiencing the biggest rise in incomes and living standards in our nation's history."

    Krugman is Flat Out Wrong

    First off, the homeowner analogy is excellent--not irrelevant.

    Mr. Krugman is wrong when he says that homeowners have to pay back their debt. The truth is they don't have to.

    To continue reading, please click here...

  • Why America Hates Congress Everybody knows that screwing up a critical assignment at work will almost surely get you fired.

    That is, unless you work as a member of the U.S. Congress.

    After more than two months of bickering, the six Republicans and six Democrats on the "super committee" tasked with finding at least $1.2 trillion debt reduction savings over the next decade have thrown in the towel.

    They have no debt reduction plan.

    Analysts agree that despite the urgency of addressing America's fiscal issues, both sides are more interested in scoring political points than solving problems.

    Meanwhile, the federal debt continues to grow. It eclipsed $15 trillion last week.

    With representatives pocketing salaries of $174,000 a year despite their failures, it's no wonder U.S. citizens are down on Congress. A recent New York Times/CBS poll showed Congressional approval sinking to just 9%.

    Even some members of Congress admit it.

    "The politicians care more about their parties and getting reelected than they do the very real problem," Sen. Tom Coburn, R-OK, said Sunday on C-SPAN's "Newsmakers" program. "[The super committee] was Washington's answer to kicking the can down the road."

    According to the law passed as part of the debt ceiling deal over the summer, failure of the super committee to come up with a debt reduction plan is supposed to result in $1.2 trillion in automatic cuts, known as "sequestration."

    Half of those cuts, $600 billion, are to come from defense spending, with the other half coming from such areas as education, the environment, transportation, housing assistance and veterans' healthcare.

    But just because that's what the law says doesn't mean it will happen. Congress, don't forget, can undo any laws it creates. Ideological opposites Sen. John McCain, R-AZ, and Rep. Maxine Waters, D-CA, among others, are already working on this.

    It's just more evidence of a disingenuous Congress.

    Pointing Fingers

    Instead of developing a deficit reduction solution, lawmakers have tried to convince the American people that the super committee's failure is the other party's fault.

    Democrats had called for a "balanced" approach of some higher taxes, mostly on the wealthy, and spending cuts. Republicans eschewed any increase in taxes, preferring instead to reach debt reduction goals entirely through spending cuts.

    "The wealthiest of Americans, those who earn more than $1 million every year, have to share, too. And that line in the sand, we haven't seen any Republicans willing to cross yet," super committee co-chair Sen. Patty Murray, D-WA, said on CNN's"State of the Union."

    "I don't understand the economics that says that if we raise taxes on my employer, or my boss, somehow they're going to go out and hire my unemployed brother-in-law," Rep. Jeb Hensarling, R-TX, another committee co-chair, countered on "Fox News Sunday."

    Why so much rhetoric and no action?

    The main reason is that the automatic cuts don't kick in until January 2013 - after the key 2012 elections. Both sides hope to pin the blame on the other side to secure election victories next November that will empower them to solve the debt problem their way.

    To continue reading, please click here...

  • Washington's Debt-Ceiling Debate – A Political Sham I have to tell you that - as a former international merchant banker - I want to laugh out loud when I hear the dire predictions of how the United States will have to default if Congress doesn't raise the nation's debt ceiling.

    With a little Wall Street-style creative financing - even when the government's outstanding debt level reaches the official limit of $14.3 trillion sometime around the end of March - there's no reason why the country can't go on borrowing as if nothing has changed.

    The debt-ceiling debate is something you're going to hear a lot about in the days and weeks to come. The Obama administration just yesterday (Monday) introduced its fiscal 2012 budget proposal - a spending plan that's certain to ignite a firestorm of debate between Democrats and Republicans. And those arguments about next year's spending plan will absolutely feed into a heated showdown over the federal debt ceiling.

    But the two sides are arguing about the wrong thing: It's the country's debt load - not the debt ceiling - that has to be addressed. And I can prove it to you.

    Like a consumer who's in over his head, Uncle Sam has several alternatives available before his creditors arrive to repossess his vehicles and cut up his credit card. By highlighting some of the "debt dodges" that are available, I will show you that the dire near-term predictions aren't anything to fear. Long-term, however, this country really does need to slash its debt-load. But that requires a real commitment, not political maneuvering.

    To see through this "political theater," please read on...

  • 2011 U.S. Debt Forecast: Five Simple Ways to End America's Spiraling National Debt By 2020, U.S. debt could reach 90% of the United States' annual economic output.

    That's more than $20 trillion in national debt, which would mean Americans are on the hook for more than $65,000 per person.

    Just by paying the interest on that much debt, the United States could become incapable of repairing its own roads or educating its children. The U.S. is already receiving warnings from Moody's and Standards & Poor's that its credit rating is being threatened by its debts.

    And moving into a lower credit rating bracket would give America such companions as Bangladesh, Serbia and Mozambique. I'm sure all of those are... Read More...
  • Moodys Warns U.S. May Get Credit Downgrade in "Coming Two Years" The United States' AAA credit rating may be at risk sooner than previously thought as the nation fails to deal with its growing debt, Moody's Investors Service warned last week. Moody's said December's extension of the Bush-era tax cuts, combined with results from the November elections, may lead to further gridlock in Congress, increasing its doubts about the federal government's determination to reduce its debt. The credit ratings agency said it might put a "negative" outlook on the AAA rating of U.S. debt sooner than anticipated as the country's budget deficit expands. Read More...
  • U.S. Credit Downgrade Possible, Moody's Warns The United States' AAA credit rating may be at risk sooner than previously thought as the nation fails to deal with its growing debt, Moody's Investors Service warned last week.

    Moody's said December's extension of the Bush-era tax cuts, combined with results from the November elections, may lead to further gridlock in Congress, increasing its doubts about the federal government's determination to reduce its debt.

    The credit ratings agency said it might put a "negative" outlook on the AAA rating of U.S. debt sooner than anticipated as the country's budget deficit expands.

  • U.S. Debt Levels Elicit Warnings From Moody's and S&P Although worries about European sovereign debt continue to top the list of key investor concerns, two major credit-rating firms last week reminded investors that the United States may also have a debt problem.

    In a research report on Thursday, Moody's Investors Service (NYSE: MCO) said the U.S. government will have to arrest its explosive deficit growth if it's to have any hope of keeping its "Aaa" debt rating. In a separate action that same day, Carol Sirou, the head of Standard & Poor's France, told listeners at a Paris conference that her firm could conceivably lower the outlook for the U.S. debt rating sometime in the future.

  • Investing Strategies: How to Protect Yourself if the U.S. Economy Catches the "Japan Disease" Grim unemployment figures, growing worries about crushing debt loads and the apparent absence of any inflation are causing many investors to ask a tough question: Is the U.S. economy catching the "Japan disease," the dreaded and dreadful malaise that has left the onetime Asian powerhouse in a stagnant state since 1990?

    It's a crucial question.

    And the answer will guide your investment decisions for the next 20 years.

    To find out the best investments to be making right now, please read on... Read More...