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March 2012 - Page 5 of 12 - Money Morning - Only the News You Can Profit From

How to Trade Gold with ETFs and Options

With few exceptions, most leading financial gurus agree that every portfolio should include some physical gold.

But while the yellow metal itself is great as a long-term hedge against turmoil and inflation, it's a lousy trading vehicle.

Here's why.

For shorter-term trading purposes, most gold investors look first to the futures markets, generally focusing on either the CME Group's full-size COMEX contract, which represents 100 ounces of the metal, currently valued around $165,000, or its little brother, the 50-ounce miNY gold future.

However, that can be a fairly costly proposition, with initial margin requirements on a single 100-ounce contract running in excess of $10,000.

And, as anyone who has held those contracts in recent weeks can attest, it can also be an extremely risky one.

For example, the single-day loss on a 50-ounce miNY future on Feb. 29 was $3,845, with the intraday trading range topping $5,200.

Similarly, last Wednesday's one-day decline of $51.30 an ounce in the price of the full-size April future would have cost traders on the wrong side of the move a whopping $5,130.

Even recent intraday moves have been scary.

On March 9, April gold futures plunged $27.70 an ounce shortly after the open, only to rebound and trade as much as $39.50 an ounce higher later in the day.

That swing had a total value of $6,720 – in a single 5-hour and 10-minute trading period!

So, if those numbers give you pause, but you'd still like to mine for profits in the gold market, what can you do?

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Time to Buy Inc (PCLN)?

Money Morning's Shah Gilani joined Fox Business Tuesday morning to discuss the benefits of Inc. (Nasdaq: PCLN). The travel deals site has seen money pouring into it as the PCLN share price nears $700. Host Stuart Varney asks Gilani to explain why investors are pulled to Priceline – and if it's living up to […]

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Stocks on the Rise Today: Tiffany & Co. (NYSE: TIF), Inc. (Nasdaq: AMZN), Solar3D

Stocks on the rise today (Tuesday) that are poised to end with huge gains include: Tiffany & Co. (NYSE: TIF), which soared on its annual profit outlook; Inc. (Nasdaq: AMZN), which made a move to increase efficiency, and small-cap Solar3D, which may have just uncovered a groundbreaking solar energy development.

Tiffany & Co. (NYSE: TIF) stock surges after high earnings forecast: Tiffany, the world's second largest upscale jewelry retailer, announced Tuesday it expects this year's sales growth to beat estimates.

Tiffany forecast profit will rise to as high as $4.05 a share for the year ending Jan. 31, 2013. That's about 3.3% higher than the average analyst estimate of $3.92, according to Bloomberg News.


TIF stock soared in the morning after news that Tiffany could overcome this season's lighter-than-expected holiday sales.

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Higher Bank Dividends Would Relieve Shareholder Stress

The real winner in last week's bank stress tests should have been the shareholders.

But after the stress test results on 19 top financial institutions were announced last week and all but four of them passed, shareholders with bank dividends were left wanting more.

Of course, the more successful banks – like JPMorgan Chase & Co. (NYSE: JPM) – did announce modest dividend increases, and large share repurchases immediately afterwards.

The problem is they didn't go far enough.

Even now, after these increases, bank dividends still remain far below the level of 2007 in many cases, and represent only around a quarter of net income.

For bank shareholders, that makes no sense.

I'll tell you why.

The Case for Higher Bank Dividends

The great majority of bank shares in the United States are commercial banks, which take deposits from customers and lend money to businesses.

That is an intrinsically low-risk business, unless the bank is lending recklessly.

In addition banks provide credit card and other services to consumers and businesses, all of which are relatively low in risk.

They are also slow-growth, since the U.S. economy grows only 2-3% per annum on average. Being slow-growth, low-risk businesses, banks do not need to grow their capital rapidly.

Of course, bank services did grow faster than the economy from 1980-2007, but that is every reason to think that was something of bubble, and that much of the excess returns available to banks in those years is now gradually washing out of the system.

As a result, banks can afford to pay a high percentage of their earnings in dividends – perhaps as high as 70-80%.

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Here is What's Wrong With Bank of America (NYSE: BAC)

If you have a mortgage with Bank of America (NYSE: BAC) and want to refinance, don't bother.

You are not worth the bank's time. Or at least I wasn't.

That's what I learned first-hand last week when I called Bank of America to refinance a home mortgage I've had with them for years.

My jaw practically hit the floor when Alejandro from BofA's mortgage department told me this over the phone.

"Because of excessively high demand," Alejandro said, "we can't accept your refinancing application. But we can take a reservation and have an agent call you in 90 to 120 days."

Huh?…You can't be serious.

I really have to wait three or four months to even apply for a lower interest rate when I've been an existing customer for years?

Yeah, I bet, I thought to myself…

They'll call me when interest rates are much higher or when BofA works its way through its part of the $25 billion robo-signing settlement reached over its abuses in the foreclosure process.

Of course, all of this is after BofA received $45 billion in taxpayer bailout funding.

And after they reportedly shifted the risks associated with $75 trillion in derivatives from its investment banking and trading units to BofA's depository arm, a unit flush with FDIC-insured deposits.

But that is another story for another day.

How Bank of America Treats its Customers

Suspecting something wasn't quite right, I made a second call to BofA to inquire about a new loan.

Not ten minutes later I was put through immediately to an underwriter who was all too happy to help a new, unknown prospect – a.k.a. me – take on more debt. Imagine that.

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Monday's Stock Market News: UPS Inc. (NYSE: UPS), US Steel Corp (NYSE: X), Glencore

Monday's stock market news from United Parcel Service Inc. (NYSE: UPS), U.S. Steel Corp. (NYSE: X), and Glencore International Plchelped drive gains in U.S. markets. The Dow moved up a slim 0.05% to close at 13,239.13; the S&P 500 climbed 0.4% to close at 1,409.75; and the Nasdaq rose 0.75% to 3,078.32.

United Parcel Service Inc. (NYSE: UPS) biggest deal in company history: UPS announced Monday a $6.77 billion deal to buy Netherlands-based delivery service TNT Express NV to bolster global sales growth.

TNT is Europe's second-biggest express mail company. Its acquisition will double the UPS presence in Europe and give it about the same market share as the region's industry leader DHL. The deal also will boost UPS's international sales to 36% of its total from 26% currently – a significant leap towards the company's goal of 50%.

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New Apple Dividend Will Help Push Shares Higher (Nasdaq: AAPL)

A new Apple Inc. (Nasdaq: AAPL) dividend will make the stock even more attractive while expanding the pool of potential investors.

Apple announced Monday that starting in September, it will pay a $2.65 quarterly dividend.

Apple also announced a $10 billion stock buyback program to be conducted over three years, beginning in September.

The stock buyback was a bigger surprise to analysts. While too small to move the stock significantly, Apple CEO Tim Cook said the intent is to avoid earnings-per-share dilution from future shares issued to reward employees.

The Cupertino, CA company's enormous pile of cash and investments – over $97 billion as of the end of 2011 – had led to increasingly strident calls for an Apple dividend in recent years.

Yet despite today's investor-friendly moves, some think Apple could have done more.

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FDI in retail has failed

There is a raging debate on FDI in retail but, guess what, it's already here – and it has failed big time.

FDI in financial services retail has been here since 1993 and it has been a disaster for the consumer.

Consider this: in 1992 the only mutual funds available to local Indians were run by the Unit Trust of India and a handful of other PSUs like SBI Mutual Fund and Canbank Mutual Fund. At that time UTI alone owned 10% of the value of all listed Indian shares. This means that local Indian investors, via their ownership of the units of UTI, owned 10% of the Indian stock market.

Then, in 1993, we allowed FDI in the retail mutual funds business.

Under the FDI rules, if a foreign fund house wanted to own 100% of the mutual fund business in India, it needed to bring in USD 50 millionas equity in the company. If the foreign fund house wanted to own 76% (but less than 100%), it had to bring in USD 25 million as equity. And, if the foreign fund house wanted to own 51% (but less than 76%), it needed to bring in USD 5 million as equity in the mutual fund business.

Foreign mutual funds dominate, retail presence wilts

The policy was a success.

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Obama: U.S. Energy Future Depends on Rare Earth Metals

Will a near-monopoly in rare earth metals do for China what oil did for Saudi Arabia?

Not if the U.S. government has anything to say about it.

President Barack Obama made that clear last week when he joined the European Union and the Japanese government in filing a complaint with the World Trade Organization (WTO) about China's manipulation of the global market in rare earth metals.

"We've got to take control of our energy future and we cannot let that energy industry take root in some other country because they were allowed to break the rules," Obama said in a press conference.

It's a clear signal that Obama will do anything to keep China from maintaining a stranglehold on rare earth metals-a set of 17 minerals that are responsible for powering everything from hybrid cars to self-cleaning ovens.

More importantly, the filing is an acknowledgement that the minerals represent a crucial source of renewable energy that are now essential to the way we live.

Rare Earth Metals: Easy to Find, Hard to Mine

Rare earths have been in the headlines a lot recently.

That's because demand for rare earth metals has skyrocketed in the past few years and is likely to grow exponentially in the years ahead.

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Growth in Google's Android Pays Off for InvenSense Inc. (NYSE: INVN)

The exploding number of Google Android devices has become a cash machine for microchip maker InvenSense Inc. (NYSE: INVN).

InvenSense makes the tiny motion sensors used in 70% of Android phones and 90% of motion-sensing Android tablets.

Mobile device makers have enthusiastically adopted Android, an operating system developed by Google Inc. (Nasdaq: GOOG), because Google licenses it for free.

Growth in Android devices is exploding.

At the Mobile World Congress in Barcelona last month, Google Senior Vice President for Mobile Andy Rubin announced that 850,000 Android devices are activated every single day, for year-over-year growth of 250%.

That kind of growth offers tremendous potential for a company like InvenSense, which only went public last November.

With 512 million mobile devices expected to be sold by 2014, the market for InvenSense promises to be huge.

InvenSense: The Best Performing IPO of 2011

These motion-sensor chips, called Micro Electro Mechanical Systems (MEMS), are what enable mobile devices to react to tilting or shaking.

Although MEMS technology has existed for decades, it was when InvenSense's motion sensing chips were used in the Nintendo Co. Ltd. (PINK ADR: NTDOY) Wii controller in 2006 that the technology started to go mainstream.

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