Archives for June 2013

June 2013 - Page 2 of 16 - Money Morning - Only the News You Can Profit From

How Europe Will Help Gold Shine Again

The Good News: The euro crisis has failed to explode in the last three years, in spite of repeated predictions that it would. Many commentators now rejoice that the problem is solved.

The Bad News: Don't believe it. While a few of the countries have made steps toward recovery, there are still several that haven't, and, by and large, those that haven't are larger than those that have.

As always with European crises, the summer should be a quiet period as everyone puts aside these dire economic issues and goes on holiday. But there will be more fireworks after September's German election, when tough decisions will be made.

And that's why gold (and select emerging markets) remain strategic holdings in smart investors' portfolios.

Europe's Rogues Gallery

Greece is the worst basket case, and will almost certainly need bailing out again.

In spite of a drop in GDP of a full 25% since the start of the crisis, it is STILL expected to run a balance of payments deficit this year. That's worrying.

If you push an economy into a giant recession, you expect it to have trouble balancing its budget because government revenue declines and welfare spending increases. The Economist magazine's panel of forecasters expects Greece to run a budget deficit of 5.3% of GDP this year.

However, the balance of payments works the opposite way – a giant recession means domestic consumers can no longer afford foreign goods, while exporters can cut wages and the cost of supplies and make themselves more competitive.

Why Gold is Down Today

Can a continued reaction from the Fed be why gold is down today – a week after the FOMC meeting?

Both gold and silver tumbled to near three-year lows in overnight trading.

"Actually, I think we've got multiple factors at work here," Money Morning resources expert Peter Krauth told us when we asked him to explain the 4.13% ($52.80) fall in gold prices today.

"First, it's an ongoing reaction to the Fed," said Krauth. Last week Team Bernanke sent stocks and gold tumbling on the idea that the Fed's quantitative easing measures could taper by year end.

"Second, rising interest rates create a bit more opportunity cost for owning gold," continued Krauth. "Third, we're in summer now, a seasonally weak period for gold, and finally, there's ongoing apathy for gold as official inflation remains tame."

Official government-reported inflation is 1.7%…. Although you probably would argue otherwise if you've been grocery shopping recently. That's still below the Fed's 2% target.

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Beware: The IRS Is Putting More and More Armed Agents in the Field

"A Career In Action! As an IRS Criminal Investigation (CI) Special Agent, you will pull together your accounting and law enforcement skills. CI special agents are duly sworn law enforcement officers who investigate complex financial crimes associated with tax evasion, money laundering, narcotics, public corruption, and much more. Are You Ready For The Challenge?" – from

Now that sounds exciting. Part accountant… Part cop… All IRS. Opening soon at a theater near you.

But what would the Internal Revenue Service do with armed agents? We've already seen what the IRS can do when it's not packin' heat. They wield considerable power to collect taxes, or at least make lives miserable, so why would they require the extra coercive power of firearms?

The IRS doesn't exactly advertise the fact that they field armed, sworn officers, but they have been making more appearances lately.

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The Fed Or the Fundamentals? What's Behind Stock Market Moves?

What's driving the stock market – the Fed or company fundamentals?

The answer, of course, depends whom you ask.

Has most or all of the growth in the market over the past few years been due to the Fed's massive QE easy money stimulus?

Or is it fundamentals like earnings per share and the price/earnings ratio?

We asked three experts to weigh in: Money Morning Chief Investment Strategist Keith Fitz-Gerald, Money Morning Capital Wave Strategist Shah Gilani and Brian Wesbury, the chief economist at First Trust Advisors.

Here's their take.

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Is the Stock Market Sell-Off Over? That Depends on Bernanke

U.S. Federal Reserve Chairman Ben Bernanke's announcement last week that the Fed would like to start curbing its QE3 bond-buying program triggered a stock market sell-off that erased two months' worth of gains in two days.

The markets have stabilized in the days since, but the episode has left Wall Street jittery.

And for that you can blame Bernanke, Money Morning Chief Investment Strategist Keith Fitz-Gerald told host Stuart Varney on FOX Business today (Wednesday).

"The bet is all about Ben. This market is all about what he's going to do every day he wakes up and traders are trying to figure out if he's coming or going," he said.

So is the stock market sell-off over, or just taking a breather?

Take a look at the video to find out how Keith sees the situation, and to get his advice on how to deal with all the Bernanke-induced volatility.

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And despite what the Fed said last week, here's Why We Won't See the End of QE for a Very Long Time.

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How to Digest China's Credit Crunch Cereal

So, you've been consuming large servings of China's "credit crunch" in your morning news lately…but do you know the ingredients hiding inside your breakfast?

Here is a simple breakdown on what China's credit crunch is, and why it's important to your wallet:

Let's begin with some shocking numbers.

China is the world's 2nd largest economy.

The Chinese stock market fell as much as 1.7% on Wednesday, and it had already reached lows unseen since the 2009 global financial crisis.

Short-term inter-bank interest rates last week reached as high as 25%.

It is an understatement to say that investors around the globe are extremely nervous as to what this all means for China's growth.

These dismal numbers all stem from the Chinese credit crunch.

China's government-controlled central bank, the People's Bank of China (PBOC), has been pulling back on feeding the banks yuan to meet the demand for money in order to combat excessive lending that was causing concerns it might overheat the economy and lead to bad investments.

Issues like creating a real estate bubble.

Sound intimately familiar? It definitely should.

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Watch for Record Rain-Driven Corn Prices

Last year's crippling drought has led to a spike in global corn prices and tightened available supply stocks, as U.S. farmers experienced staggering crop destruction from the sweltering heat.

But this year, Mother Nature seems to be making up for lost time.

Farmers have been inundated with so much rain in the planting season months that just 54% of the Iowa corn crop is rated good or excellent as of last week. The 10-year average of the state crop is 74%, which is raising concerns given that the planting season recently ended.

Nationally conditions are improving following a recent rush by farmers to complete corn planting to beat crop insurance deadlines. As of last week, 65% of the U.S. corn crop is currently rated in good or excellent condition, down 3% from the 10-year average.

Ongoing storms across the Northern Corn Belt have made it increasingly difficult for farmers to get seeds into the ground. The slower-than-normal pace of plantings has fueled concerns that U.S farmers would plant less corn than earlier USDA estimates, reducing the size of this year's crop.

Now, with more unpredictable weather on the horizon, all eyes look to Friday with big announcements by the USDA on planted acreage and the quarterly figures for corn stocks.

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"Secret" Double-Digit Income Stocks

Dividend stocks have been bid up in 2013, and many investors believe the yawn-inducing dividends of 3-4% generally available now aren't worth the risks involved in an overheated income sector.

Many stocks paying higher dividends, in the tantalizing 8-10% range, are paying them out of capital, which is hardly a good thing. A number of companies are paying a fixed dividend where it's mathematically impossible for investors to get their money back just because so many unwary investors are craving big, easy income.

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Stocks to Buy Now: Profit from this Looming Flood of Money

As we've pointed out to Money Morning members, knowing the best stocks to buy now can give you a huge advantage when markets sell off and stocks are basically on sale.

That's why we've been watching out for the sectors of the market that will have a bright future regardless of the recent market gyrations.

Although it seems somewhat counter intuitive one such space would be the asset management sector. Asset managers and brokers may see some short-term weakness in a falling market but the long-term outlook is strong.

You see, over the past few decades there has been a transfer of retirement risks from corporations to individuals. This has left individual investors responsible for investing assets to fund their needs.

It has also created a huge market for asset managers.

Social and demographic trends are very positive for asset management firms. Assets have flown into investment products in the past several years, and the amount of assets under management at the end of May surpassed the previous high levels of 2007.

One huge reason for the flow of money: Baby boomers are hitting retirement.

Over the next decade, boomers will be retirement and looking for help to manage their new financial environments. Also, many boomers will be eligible for catch up contributions to their retirement plans, which should add to the pool of available assets.