January 2012 Archives - 5/11 - Money Morning - Only the News You Can Profit From
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…
QE3, $2,200 Gold, and the Trillion Dollar Bazooka
It's the beginning of a new year, and there's no shortage of big headlines…
Europe is on the financial brink, Iran is a powder keg, and precious metals like gold have retreated.
It's also a time when there is no shortage of financial forecasts.
Even though these kinds of predictions about the future can be tough to make, I'll admit it's kind of fun to look forward and see what the future may hold.
Like in December 2010, when I said I expected gold to reach $1,900/oz in 2011. Some people thought that I was crazy. At the time, gold was trading for just $1,390/oz.
But just nine months later, that turned out to be a pretty good call as gold hit a new high of $1,923/oz. before eventually pulling back.
Better yet, in January 2010, I even said gold would eventually top $5,000. Of course, most people thought that call was preposterous.
Now, even Standard Chartered bank's analysts expect gold to climb to $5,000.
- Obama's Rejection of the Keystone XL Oil Pipeline is Pure Politics
The Next Eastman Kodak Co. (NYSE: EK): Companies Headed for Bankruptcy in 2012
Eastman Kodak Co. (NYSE: EK) filed Chapter 11 early this morning (Thursday), becoming one of the first to file among the staggering number of U.S. companies headed for bankruptcy this year.
The Rochester, NY-based company, started in 1880, has been bleeding money since consumers ditched film for digital photography. Eastman Kodak listed assets of $5.1 billion and debt reaching $6.8 billion in its U.S. Bankruptcy Court filing.
"They were a company stuck in time," Robert Burley, an associate professor at Toronto's Ryerson University, told Bloomberg News. "Their history was so important to them, this rich century-old history when they made a lot of amazing things and a lot of money along the way. Now their history has become a liability."
Kodak stock had fallen more than 35% by 2:00 p.m. today, bringing its total slip for the past year to more than 93%.
Downward Mobility is Crushing the American Dream
Forget about getting ahead. For many in the middle class these days it's more about not sliding backwards.
It's called downward mobility and it's crushing the American Dream.
According to a study conducted by the Pew Charitable Trusts, nearly one out of three U.S. citizens born into middle class households in the 1960s have lost their economic status.
And because the study used data from 2004 to 2006 – before the Great Recession – the numbers today could be even worse.
"Being raised in the middle class is not a guarantee that you'll have that same status as an adult," Erin Currier, project manager at Pew's Economic Mobility Project, told CNNMoney. "With all the economic turmoil in the past four years, there's good reason to think that downward mobility is more severe."
Pew used three different criteria to assess the economic status of the study subjects. According to two criteria, 28% dropped out of the middle class; a third measure showed downward mobility for 19%.
Pew defines the middle class as those falling between the 30th and 70th percentiles of income.
It compared the households of the target group in 1979, when middle class meant incomes between $32,900 and $64,000, to their income in 2004-2006, when middle class meant making between $53,900 and $110,000.
Any middle class workers hit by the current recession will have a long road back.
In another Pew study, half of people who lost 25% or more of their income during better times in 1994 were still making less money four years later. One third of the group had not recovered even after 10 years.
With the unemployment rate still at 8.5% and so many people working at jobs making less than they once did, it will take years for the middle class to recover – if it ever does.
No Longer the Land of Opportunity
Once envied as the land of opportunity, the United States is no longer the best place to climb the economic ladder – far from it.
Three Reasons Yahoo Inc. (Nasdaq: YHOO) Could Rally Without Co-Founder Jerry Yang
Seventeen years after starting one of the first Internet content companies, Yahoo Inc. (Nasdaq: YHOO) co-founder Jerry Yang resigned yesterday (Tuesday) – giving Yahoo a fighting chance of rising from its dismal decline in the tech world.
The departure of co-founder Yang, who also served as CEO from June 2007 to January 2009, marks the latest casualty as Yahoo strives to compete against more modern tech companies. Yahoo two weeks ago announced it had chosen a new chief executive officer – Scott Thompson, most recently president of eBay Inc. (Nasdaq: EBAY).
Still, Yang's decision was a surprise because of his deep personal attachment to the company.
"Jerry's thrown in the towel," Colin Gillis, a BGC Partners analyst, told Bloomberg News. "He founded the company – this is his baby."
How to Put a Touch of Glory in Your Life
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."
How to Win Bernanke's War on Savers with a 19% Yield
There is no other way to put this… With his zero interest rate policy (ZIRP), U.S. Federal Reserve Chairman Ben Bernanke has declared a virtual war on the nation's savers.
That's why savings-conscious investors have been forced out into the markets these days in search of higher yields.
Between 10-year notes offering yields under 2% and CD rates hovering near 1%, savers have been left little choice.
It is one of the reasons why high-paying dividend stocks have been in demand ever since the ZIRP crisis began.
For savvy investors looking to boost their yield, there's only one place to look…
They're called mortgage REITs, and they offer investors the chance to collect some of the highest dividend yields available today.
In fact, one of these investments is actually paying a 19% yield, right now!
That's not a typo. Double-digit yields like those really can be found if you know where to look for them.
I'll tell you more about this company in a moment. But first I'd like to explain to you what mortgage REITs are all about.
Mortgage REITs Explained
Real Estate Investment Trusts, or REITs, came into existence because of U.S. President Dwight Eisenhower's "Cigar Tax Excise Tax Extension" of 1960. Under this initially obscure tax provision, REITs can avoid corporate income tax, provided they invest in real estate-related assets and pay out at least 90% of their income in dividends to investors.
Mortgage REITs, as their name suggests, invest in residential and commercial mortgages.
Within the residential mortgage REIT category, some invest in agency-guaranteed REITs while others specialize in REITs that are not guaranteed.
Given the recent default rate on home mortgages, investors would be wise to concentrate on guaranteed agency mortgage REITs. This is due in part to Ben Bernanke's monetary policy since 2008.
Let me explain…