Money Morning Mail Bag

Article Index

Money Morning Mailbag: With Many Ways To Hold It, Investors Need To Get Their Hands on Silver

A couple weeks ago, Money Morning Guest Writer Jack Barnes examined the last major commodity to enjoy a true price breakout: silver.

Barnes detailed why silver is poised for a breakout, based on its current price surge underway in India, the price run up of gold - a leading indicator of silver prices - and the fact that the white metal has yet to set a new nominal record price in U.S. dollars.

Barnes outlined the actions investors should take to involve silver in their investment plans, offering three strategies: physical acquisition and accumulation, exchange-traded funds (ETFs) and stocks, and options on futures.

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We Want to Hear From You: How Do You Feel About the U.S. Government's Proposals to Boost Employment?

The U.S. unemployment rate has hovered around 10% for months - with no real signs of improvement. As American workers grow increasingly impatient, the U.S. government is running out of options to help the job market.

But with midterm elections approaching, U.S. President Barack Obama is trying to show voters there's hope in resolving the stubbornly high unemployment rate. On Monday, he unveiled a six-year infrastructure plan that would invest billions in transportation projects and create a "substantial" number of jobs.

The government would supply $50 billion off the bat to rebuild 150,000 miles of roads, 4,000 miles of rail and 150 miles of runway, plus modernize the air traffic control system. The plan also sets up a government-run infrastructure bank to finance the projects, combining tax dollars with private investment for funding.

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Money Morning Mailbag: Ending Bush Tax Cuts Not a Cure-All for U.S. Financial Woes

The question of whether or not to extend the Bush tax cuts will be a pivotal issue as Washington prepares for this year's midterm election.

The Congressional Budget Office yesterday (Thursday) reported that extending the tax cuts would result in only short-lived economic benefits.

"[It would provide] a considerable boost to economic activity in 2011 and beyond for a few years," CBO Director Douglas Elmendorf told CNN. "Over time, [however,] the negative consequences of very high federal borrowing build up."

The CBO reported that if the cuts for most U.S. taxpayers were made permanent - as proposed by U.S. President Barack Obama - the nation's accrued debt (not including money owed to Social Security and other government trust funds) could climb to 100% of gross domestic product by 2020, up from 62% this year.

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Money Morning Mailbag: U.S. Credit-Rating Agency Fights Back to China's Attacks

Last week, the credit rating feud between Standard & Poor's Financial Services LLC and the Chinese firm Dagong Global Credit Rating Co. Ltd - which Money Morning Contributing Editor Martin Hutchinson examined late last month - heated up.

Harold "Terry" McGraw III, chairman and chief executive of S&P said that companies like Dagong joined up with politicians and other countries to unfairly attack U.S. ratings firms.

"If you're in a populist mood, you've got to find the villain," McGraw told the Financial Times in an interview in Beijing.

McGraw referred to comments made to the Financial Times in July by Guan Jianzhong, the chairman of Dagong.

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Money Morning Mailbag: Big Banks Under Fire for Metals-Market Manipulation

A New York Post article in May reported that the Department of Justice had launched an investigation into the supposed metals-market manipulation by JPMorgan Chase & Co. (NYSE: JPM).

The article alleged that JPMorgan, which holds a number of derivatives in precious metals, attempted to lower the price of silver for its own profit. JPMorgan was quick to issue a response, stating there was no criminal or civil investigation into the company's silver trading practices.

But as word spread around the Web, readers' comments poured in with concerns over the news:

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Money Morning Mailbag: Emergent Natural Gas Market Improves U.S. Fleet Vehicles

The global energy sector is shifting which means huge changes lay ahead for the U.S. natural gas market. Dr. Kent Moors, a career energy-sector consultant who works with governments and corporations throughout the world, says the United States' fragmented natural gas market is "about to become one global market, operating at the speed of light."

U.S. natural gas will play a major part in reducing greenhouse gas emissions by replacing older, inefficient coal plants. Its use is likely to double to 40% of the energy market over the next several decades, according to a study by the Massachusetts Institute of Technology.

The abundance of natural gas - especially shale gas, an unconventional source packed tightly in rock formations - in the United States has driven down natural gas prices, making the fuel more desirable. Shale gas has grown to 15%-20% of the U.S. natural gas output, and as companies design better drilling technology, shale gas reserves will be more easily attainable.

"Natural gas is becoming sexy again, with all this new technology to get the gas out of the shale," Kim Hill, director of the Sustainable Transportation and Communities group for the nonprofit Center for Automotive Research told The New York Times.

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Money Morning Mailbag: Will Elections and a Resignation Open the Door for U.S. Budget Changes?

Administration officials announced this week that the White House Budget Director Peter Orszag plans to leave U.S. President Barack Obama's Cabinet before work on the next U.S. budget begins, which could be some time in the next few weeks. Orszag would be the first member of President Obama's Cabinet to exit.

The U.S. budget is under scrutiny as the budget deficit is forecast to hit $1.6 trillion by 2011. A President-appointed panel is currently working on budget reduction plans to be presented in a report due in December.

Orszag's strategies as former head of the Congressional Budget Office (CBO) supported a stop to deficit spending, but once he was placed in the budget driver's seat, making significant cuts was nearly impossible with recovery progress slow and unemployment high. Orszag instead ended up helping outline the $787 billion stimulus package in 2009.

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Money Morning Mailbag: How Will New Accounting Standards Affect U.S. Banks and Investors?

The Financial Accounting Standards Board (FASB) last month proposed an overhaul of accounting standards that would require U.S. banks to record their loans at current market value, giving investors a clearer picture of the banks' financial standing.

The proposal is an effort to tighten banking regulation and improve financial transparency, and coincides with Congress finalizing financial reform.

News of the possible policy change prompted this reader to weigh in on what its enforcement, which has been pushed back to as late as 2013, could do for the banking industry:

"Convergence" between U.S. accounting practices and international accounting practices (from the International Accounting Standards Board) is to be implemented in one year. As part of this convergence, U.S. banks must soon begin to revalue (lower) assets on their books at current market value (mark-to-market).

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Money Morning Mailbag: BP's Post-Oil-Spill Reputation Leads Readers to Consider Socially Responsible Investing

BP PLC (NYSE ADR: BP) stock plunged 16% to hit a 14-year low in New York trading Wednesday as some investors panicked over growing liabilities and others worried about socially responsible investing.  

In London trading Thursday BP fell 6.7% to 365.50 pence, its lowest closing price since January 2003 and 44% lower than the day the Deepwater Horizon rig exploded.

"The share price is political and in no way fundamental," said Jason Kenney, an analyst at ING Wholesale Banking in Edinburgh. "The U.S. needs to realize it needs BP to survive to clean up the mess. Scapegoating has gone too far."

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Money Morning Mailbag: Investors Show Growing Concerns Over Deflation

The threat of deflation has been making its rounds as inflationary measures like the consumer price index (CPI) fell for the first time in 13 months in April, dropping 0.1%. Core CPI - which excludes food and energy prices - rose only 0.9%, its smallest gain since 1966. The producer price index (PPI) also dipped 0.1%.

"The recent trend in inflation has been swiftly to the downside," Eric Green, chief U.S. rates strategist at TD Securities, told Reuters. "All measures of inflation are decelerating."

Investment behavior has shown an anxious but mixed sentiment of hedging against both inflation and deflation: Demand for gold metal is outstripping supply by more than 1% per year and has pushed gold prices to record highs, while others have sought out both corporate bonds and U.S. Treasuries for safety.

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Money Morning Mailbag: The Euro and Other Hot Topics Spark Reader Debate

The Money Morning Facebook page is gaining more members daily and the Money Morning Mailbag feature is fueling a record number of reader comments and e-mails, giving us a better picture of how readers feel about recurring content like the euro, company profits, and emerging economies. Some articles like the evaluation of Australia's mining super tax have sparked lengthy reader conversation and argument we enjoy observing - and hope readers enjoy being a part of.  

Here is another look at some recent articles generating the most attention and some additional links for further reading. 

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Money Morning Mailbag: Investors Should Steer Clear of Australia's Mining "Super Tax"

Money Morning Contributing Editor Martin Hutchinson last week introduced readers to the Australian mining "super tax" that will disrupt the industry's cyclical nature and threaten mining companies' profitability.

Reader questions and comments poured in immediately, especially from our friends in the land down under. Some criticized the government's greed, others saluted the tax, and many wondered what action to take as investors. The result was a passionate, well-informed, and at times combative, reader dialogue. 

Australian Prime Minister Kevin Rudd has proposed an additional 40% tax on mining company earnings and hopes to use the revenue to snag some hefty cash piles from the profitable natural resources industry. But instead he is putting the economy in danger of future funding shortfalls: If the mining industry's revenue stream starts to run thin, the projects the money is supporting will be strapped and funds will have to be squeezed from elsewhere.

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Money Morning Mailbag: State Budgets Far From Healed After Recession 

Question: Which of the states are doing best and worst?

- Kathryn

Answer: The first 9 months of 2009 handed states the biggest revenue decline in history and the bleeding hasn't stopped. The Center on Budget and Policy Priorities (CBPP) estimates state budget gaps will grow to $350 billion over the next two years, with every state in "fiscal trouble" except Montana and North Dakota. California is projected to hit $20 billion and New York $9 billion.

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Money Morning Mailbag: Readers Eager For Effective Financial Regulation

The Money Morning mailbag continues to overflow with reader thoughts and concerns regarding financial reform – which is finally making slow progress in Washington. After three failed attempts to bring a financial regulation bill to the floor this week, the Senate on Wednesday finally agreed to start debate.

Following is a collection of this week’s Money Morning reader comments on our articles regarding reform, inspired also by more news from the Securities and Exchange Commission case against Goldman Sachs Group, Inc. (NYSE: GS) as executives faced a Senate committee hearing.

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Money Morning Mailbag: What's More Broken - Washington or Wall Street?

While policymakers will have taken up the debate over financial reform in the halls of Congress, Money Morning readers have been posting comments to our Money Morning Facebook page and writing in to our e-mail mailbag at with their thoughts on the Goldman Sachs Group Inc. (NYSE: GS) case and the relationship between Washington and Wall Street.

A week after the Securities and Exchange Commission brought fraud charges against Goldman Sachs, President Barack Obama yesterday (Thursday) blamed the financial meltdown on both Washington and Wall Street in a speech in New York and urged Wall Street giants to stop fighting reform.

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