Trend Watch

Ending the War on Pot Would Add $20 Billion to the U.S. Economy

So much for the war on drugs. For the first time ever, a majority of Americans now support legalizing marijuana.

According a new report from the Cato Institute, pot legalization could inject $20 billion a year into the U.S. economy due to the tax revenue generated and savings in law enforcement costs.

So how big is the market for market for marijuana?

Trend Watch

Welcome to the Next Subprime Bubble

Who could forget the subprime mortgage crisis of just a few years ago?

If there's one good thing that came out of that nightmare, it's that we – borrowers, lenders, financial institutions all – learned that securitizing bad loans and letting them spread like poison throughout the financial system was a bad thing.

We can look back at the subprime crisis with the wisdom of afterthought, and see all the mistakes laid bare.

We'd never let that happen again, right?


Welcome to the start of the next subprime crisis: Subprime auto loans.

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Wall Street

Why the Twitter Flash Crash Should Make You Angry

The Twitter flash crash on Tuesday that very briefly shaved 140 points off the Dow Jones Industrial Average should be of great concern to retail investors.

That short and sudden dip in the markets, caused by a false Tweet on a hacked Associated Press account that suggested President Obama had been injured in a bombing at the White House, was yet another reminder of the risks that high-frequency trading (HFT) poses to the markets, and to retail investors in particular.

Simply put, HFT is the practice of using supercomputers to execute trades in milliseconds.

Because high-frequency trading accounts for at least half of the market, any hiccup in the system can have an instant and dramatic impact, as we saw with the now-infamous flash crash in May 2010 that sliced 1,000 points off the Dow in 10 minutes.

As if that weren't already treacherous enough, HFT firms increasingly have added social media inputs, like Facebook (Nasdaq: FB) and Twitter, to the mix, to scour their feeds for news that could affect stocks.

So now even something as absurd as a fake Tweet can move markets.

"Algorithms used to trade off news headlines, now they trade off tweets. That's very dodgy, very shaky ground," Oli Freeling-Wilkinson, chief executive officer of the London-based analytics firm Knowsis, told Reuters.

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Top News

Internet Sales Tax is a "Money Grab" and a "Job Killer"

Supporters of the Internet sales tax continue to pitch it as a "fairness" issue – but experts say the tax would do costly damage to our economic recovery.

The Internet sales tax would allow states to make online retailers collect taxes on purchases. It would replace a 1992 Supreme Court decision that said a state can't force a retailer to collect sales tax unless the retailer has a physical presence in the state.

State and local governments support the bill, claiming they are losing tax revenue under the current system. Several big-box merchants, brick-and-mortar stores, and mom-and-pop shops back the bill, arguing online retailers have an unfair price advantage.

But Illinois Policy Institute's Ted Dabrowski told FOX Business Network's "Varney & Co." this tax wouldn't achieve any of its promises.

"Anybody who tries to pitch this new tax as a fairness tax is not telling the truth," said Dabrowski. "What this really is is a money grab. It's a money grab by states like Illinois, New York, California who don't manage their own budgets and are not fiscally responsible. And it's another Obama tax on the middle class, it's another tax on entrepreneurs, and it's just the wrong thing for our country. It's a job killer."

Dabrowski told host Stuart Varney that Illinois tried taxing the Internet retailers two years ago, but it was a "failure." Dabrowski said the state government expected the tax to raise $150 million, but after three months had only collected $3 million.

That's because online retailers left the state to avoid the tax and set up shop in more business-friendly states. The smaller online retailers had to shut down because of the added expense.

The bill probably sounds familiar. A similar one made the rounds in 2012, but expired.

Now it's on the fast track to get passed, thanks to persistence by Sen. Harry Reid (D-NV).

According to a letter sent to Reid from seven U.S. senators, Reid used a procedural maneuver to avoid the typical committee process and rush the Senate's vote on the bill, known as the Marketplace Fairness Act.

It passed a test vote Wednesday 74-23, and could come up for a final vote as early as today (Thursday).

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Precious metals

Jim Rogers on Gold Prices 2013

With the yellow metal down about 14% this year, wouldn't it be great to get the scoop from famed investor Jim Rogers on gold prices in 2013- specifically, why they're down, and if investors should still bet on a long-term gold bull market?

We had a chance to ask Rogers those very questions last weekend.

Sunday evening, Money Morning Executive Editor William Patalon III spoke on the phone with Rogers – who was at his home in Singapore – in a wide-ranging discussion about gold, U.S. stocks, commodities and global central banks' "race to the bottom" – or, as Rogers calls it, "race to insanity."

In this exclusive interview, the legendary investment guru took us on a tour of the gold market, taking a close look at what's driven the past 12 years of gold price gains – and what will move the yellow metal going forward.

He also pointed out the one fundamental reason why gold prices fell recently…

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Precious Metals

Gold Price Drop Drives Global Buying Frenzy

The recent gold price drop caused some major losses in the paper gold market, but it's triggered a gold rush for physical buyers.

Ever since the precious metal got clobbered in a two-day period by heavy short selling in the futures market, there has been an unprecedented frenzy around the globe for the actual physical metal, in the form of bullion, jewelry, bars and coins.

In fact, the U.S. Mint announced Tuesday it had suspended sales of its one-tenth ounce American Eagle gold bullion coins for the first time since November 2009, as demand depleted the government's inventory.

The gold bears must be scratching their heads…

Investing Tips

Why Hedge Funds Are a Lousy Investment

The one thing you can guarantee when investing in hedge funds is, the managers are going to get rich…even if the investors don't.

Don't get suckered into believing you will be taking your investing strategy to the next level. The difference between reality and perception is stark and the only people sure to win are the managers themselves.

The annual report on the 25 highest paid hedge fund managers came out last week and the results were no less outrageous than they have been for years: $14.1 billion in pay and paper profits on their own investments in 2012, slightly down from 2011's $14.4 billion, according to Institutional Investor Alpha's Rich List.

You can do the math – the average top 25 hedge fund manager took home $564 million in 2012, down from $576 million in 2011.

The big question is, what did these managers do for their investors to earn these kinds of sums?

After all Lloyd Blankfein, CEO of Goldman Sachs, took home a measly $21 million.

In 2011, the average hedge fund lost money, even before the $14+ billion creamed off by the top 25 managers. In 2012 the average hedge fund made a weak 6.4% for its investors, according to Hedge Fund Research.

That means it trailed a passive portfolio of 40% bonds and 60% stocks by almost 5 percentage points. This is one of the big reasons I have disliked hedge funds for so long. They seem built more for managers amassing wealth than doing so for their investors.


5 Factors That Will Push Silver to $250 an Ounce

All bull markets go through periods of consolidations and corrections. And precious metals are no exception.

There has been plenty about gold's swan dive, but less talk about silver. And at this point there's more potential for silver than gold…significantly more.

Because the global silver market is relatively small, silver prices tend to be more volatile; the pounding selloff we witnessed in silver this past month is a testament to that fact. But volatility works both ways, so when silver rises, its price can explode higher.

That's exactly what happened in April 2011, when silver prices rose by 170% in the space of just 7 months. That's why silver investors say investing in silver is like buying "gold on steroids."

And right now, it looks like the silver market is on the cusp of doing the same thing all over again. According to our research, the next stop could be $40 by year's end, and $60 by the end of 2014. And much higher after that.

Here are five key factors that will drive silver higher – significantly higher – in coming years.

Top News

Apple Stock May Not Climb, But Will Still Reward Investors

There was really only one good thing for Apple stock investors in yesterday's (Tuesday's) earnings report.

Apple Inc. (Nasdaq: AAPL) announced an unprecedented share buyback program and boosted its dividend in attempts to pacify edgy investors who have watched the company's stock tumble about 34% over the past six months.

The iPhone maker will return $100 billion of cash to shareholders by 2015, through an increased dividend and $60 billion share buyback program. Apple's quarterly dividend was sweetened 15% to $3.05 a share. The stock now carries a juicy 3% yield. The new dividend is payable on May 16 to shareholders of record May 13.

With an annual payment of some $11 billion, Apple becomes the biggest dividend payer in corporate America, taking the crown from Exxon Mobil Corp (NYSE: XOM).

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Energy Investments

The Market for Clean Energy Investments Continues to Move East

While renewables and other "clean" energy solutions continue to lose steam with investors in North America, it's quite another story elsewhere.

Investment capital is moving east at an incredible pace.

Last week, the Pew Charitable Trusts issued the fourth annual "Who's Winning the Clean Energy Race?"

Worldwide, nations increased clean energy generation capacity by 88 gigawatts (GW) in 2012. However, that also complemented an 11% decline in overall investment compared to 2011.

Some of that is explained by the impending end of heavy government subsidies in both the U.S. and the European Union. But despite the drop, 2012 still marked the third straight year in which clean energy investments topped $200 billion worldwide.

The year still ended with more than five times the investment recorded in 2004, the year generally used as the base for calculations.

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