Tag: Federal Reserve

Silver Near a 31-Year High

Silver Near a 31-Year High

Filed under: Major Movement , Competitive Strategy , Barrick Gold (ABX) , Commodities , Federal Reserve Back in the late 1970s, the Hunt brothers from Texas tried to corner the silver market . That drove prices to $48 an ounce. Now, 31 years later, silver is shooting higher again. The March silver futures contract closed at $32.296 per ounce , up 72 cents. Since gold is expensive, investors are turning to silver to hedge against inflation. Many fear that the Federal Reserve will not be able to control the spike in commodity prices. The Fed is buying $600 billion of treasuries and keeping interest rates near zero. Continue reading Silver Near a 31-Year High Silver Near a 31-Year High originally appeared on BloggingStocks on Sat, 19 Feb 2011 12:50:00 EST. Please see our terms for use of feeds . Permalink | Email this | Comments

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Inflation in (Mostly) the Wrong Places

It is often claimed that inflation is a benign, even positive, force. People assume that prices, wages, and assets will all rise together… In the real world, inflationary episodes don’t play out that way. Wages don’t keep up, and bubbles form in unexpected (and unwanted) places. In America, compensation is clearly stagnant. And the outlook for future pay raises is not good, as this chart from David Rosenberg shows: Contrast that with this next chart, which shows the percentage of companies planning to raise prices: Combine stagnant wages and slow growth with high unemployment and rising prices, and you get a recipe for stagflation. This scenario is being played out around the world. In the UK, consumer prices rose 4% in 2010. As noted by the Financial Times , wages aren’t keeping up: The prices of everyday goods and services are rising about twice as rapidly as average wages, Tuesday’s inflation figures confirmed — which means that the standard of living of many Britons is already falling. According to the Bank of England, average pay at the end of this year will be able to buy no more than it could in 2005. It is the first time that the purchasing power of earnings has fallen so far since the 1920s. I expect this trend to continue as long as the Fed’s mad experiment is ongoing. The thing about Central Bank “easing” is you never know where inflation will pop up… Easy money will always fuel speculators, who have little skin in the game, to find another bubble to “invest” in. Silver, gold, oil With printing presses switched “on” for the foreseeable future, we remain bullish on precious metals. Silver is holding above $30 today and could hit $37.50 on the next leg up. Coal, oil, and natural gas investments should continue to do well. And as my colleague Nick Hodge of Energy and Capital says, “Buy it if it burns.” If you’re not yet convinced that Fed printing is directly related to rising commodity prices, examine the following chart. (The solid blue line represents the Austrian Money Supply (AMS), and the solid teal line represents commodity prices ( IMF Commodity Index )): Note: The version of money supply shown

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Three Garbage Stocks

Three Garbage Stocks

The market goes up everyday… This two-year chart represents the thirty varsity players on the U.S. economic court. You might look at this 100% gain in two years and think that this bull market is overdue for a correction. But don’t worry. Uncle Ben, our fair Chairman over at the United States Federal Reserve, has it all in hand. This is not the time to fret over debt, inflation, taxes, or unemployment… Don’t fight the Fed This market is simple. The Fed is pumping liquidity into the market at an unprecedented rate. There is an old Wall Street platitude that says “Don’t Fight the Fed.” It means you buy stocks when interest rates are dropping and sell when they are going up. The current Fed fund rate is at 0.25%. It can’t get much lower, and no one expects them to hike rates in the near future. What are you waiting for… zero percent? People heed the Bernanke It looks like folks just like you and me are putting the hard times behind them… The adjusted retail numbers for December showed $380.9 billion in sales, an increase of 0.6 percent from the previous month, and 7.9 percent above December 2009. Total sales for 2010 were up 6.6 percent. For the fourth quarter, they were up 7.8 percent. Car sales jumped 14.7 percent over last year. For non-store retailers like Amazon, sales jumped 15 percent. The unofficial numbers for January show a 4.1 percent gain from a year ago. This is great stuff. Amazon investors liked it so much that the company now trades at twice the price it did during the dot-com bubble in 1999. Amazing. ~~SIGNUP_WD~~ The screen It’s a good idea to screen for stocks at least once a week. I generally screen for low P/E, small market capitalization, and good dividend. From there, I go through the list and look for red flags and growth potential. I like the companies that are under $250 million in market value, with high future growth and fat margins. I also look at debt ratios. I call these “garbage stocks” because they ain’t for widows and orphans, but they tend to run under the right circumstances. Today, three companies in the retail sector popped up on my screen. All three shared my garbage stock credentials. And they have something else in common: They cater to the petite bourgeois. They are Books-A-Million (NASDAQ: BAMM), Collectors Universe (NASDAQ: CLCT), and CPI Corp. (NYSE: CPY). The merchant of Wal-Mart All of these companies sell products to the middle class, but none of their products are necessities… Books-A-Million runs 223 discount bookstores in the Southeastern United States. Collectors Universe provides third-party authentication, grading, and related services for rare collectibles like coins, trading cards, and sports memorabilia. CPI runs Wal-Mart Portrait Studios and PictureMe Portrait Studios. BAMM has a market cap of $92 million and a trailing P/E of 6.62. The company had a negative revenue growth of 5.5% year over year, but it does pay a fat 5.2% dividend. (They could also be a beneficiary of Barnes and Noble going bankrupt.) CLCT has a market cap of $109.34 million, a P/E of 6.6, gross margins of 60%, quarterly revenue growth of 8%, and a dividend yield of 9%. CPY has a market cap of $152 million, a P/E of 8.06, 8% margins, a flat quarterly revenue growth, and a 5.10% dividend yield. …

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Weekend: The Fool Proof Retirement Plan

Welcome to the Wealth Daily Weekend Edition— our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles. As I wrote earlier in the week, dividend reinvestment plans — or DRIPs — are a great way to secure your financial future. All you need is the time and patience to stick to the blueprint… The best part is these plans are offered by more than 1,100 companies and are available to investors of all stripes, making it possible to purchase shares of stock without using a broker. This allows investors to buy stock directly from the company in very small amounts— something that can be more difficult and costly when compared to buying shares through your broker. In fact most companies don’t charge a fee, and the minimum investment can be as low as $10. Advertisement 60 Minutes Reports on Growing Body Parts Call it what you want: biotechnology, tissue engineering, cell therapy, regenerative medicine. The famous newsmagazine has reported on one doctor about to make multiple medical problems disappear forever. Lucky for you, that same doctor sits on the board of a $3.00 company that will bring these solutions to market— making shareholders rich in the process. Check out the 60 Minutes clip to learn the name. The plans also reinvest all or partial dividends paid into more stock, thus the name “Dividend Reinvestment Plan.” And in this case — since the investment is based on dollar amounts — you can purchase fractional shares. In addition, investors can choose to add a monthly contribution to the plan, boosting the amount of wealth the DRIP can create. That means you can start out with as little…

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NEWSFLASH: The Meltdown Didn’t Have to Happen

Filed in Alan Greenspan, BP, democrats, Federal Reserve, Gold, Gold Market, lead, Lear, o, Yahoo by on January 28, 2011 0 Comments
NEWSFLASH: The Meltdown Didn’t Have to Happen

Watching the government do practically anything is often akin to watching molasses run down the hill in January. But like that slow running ooze, even the government eventually manages to accomplish its feat. The problem in this case is that they are telling us what we already know. So here’s the newsflash sportfans: the financial meltdown could have been stopped. Gee thanks… From the New York Times by Sewell Chan entitled: Financial Meltdow was ‘Avoidable’, Inquiry Concludes “ The 2008 financial crisis was an “avoidable” disaster caused by widespread failures in government regulation, corporate mismanagement and heedless risk-taking by Wall Street, according to the conclusions of a Congressional inquiry. The government commission that investigated the financial crisis casts a wide net of blame, faulting two administrations, the Federal Reserve and other regulators for permitting a calamitous concoction: shoddy mortgage lending, the excessive packaging and sale of loans to investors, and risky bets on securities backed by the loans. “ The greatest tragedy would be to accept the refrain that no one could have seen this coming and thus nothing could have been done,” the panel wrote in the report’s conclusions. “If we accept this notion, it will happen again.” The commission’s report finds fault with two Fed chairmen: Alan Greenspan, a skeptic of regulation who led the central bank as the housing bubble expanded, and his successor, Ben S. Bernanke, who did not foresee the crisis but then played a crucial role in the response to it. It criticizes Mr. Greenspan for advocating financial deregulation and cites a “pivotal failure to stem the flow of toxic mortgages” under his leadership as “the prime example” of government negligence. It also criticizes the Bush administration’s “inconsistent response” to the crisis — allowing Lehman Brothers to go bankrupt in September 2008 after earlier bailing out another bank, Bear Stearns, with help from the…

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The Fed Blows a Cupcake Bubble

The number one cupcake play in America is going public. Crumbs Bake Shop operates 34 cupcake stores from New York to California, humorously billing itself as “creator of the gourmet cupcake.” Owners stand to make up to $100m from the IPO, and the deal could price higher, with cupcake-mania hitting a fever pitch. At $100m, investors would be paying about $3 million per cupcake store. Management is betting on aggressive expansion to fuel growth, and plan to open hundreds of new stores. Naturally, growing a chain of stores from 34 to 300 is no easy task. Recall the great donut bubble of 2003… Krispy Kreme (NYSE: KKD) was the darling of Wall Street. Its shares peaked at near $50 from a split-adjusted IPO price of $3.50, giving the donut maker a sky-high valuation of $3b (pdf). Shares trade around $7 today, up from a low of around $1. KKD expanded too fast, took on too much debt, and nearly went bankrupt. They also had some accounting issues, but those likely were probably just a side effect of a business-plan gone bad. Today Krispy Kreme is still muddling along, closing stores opened just a few years back. Expansion is always risky — especially when financed with debt and equity offerings. Hopefully Crumbs can avoid a similar fate, and follow the glorious path of Chipotle instead, which is up 436% since its IPO in 2006. In any case, I wish them well; I’ve heard their cupcakes are delicious. The larger point here is about what this cupcake IPO says about the state of markets. After all, it almost certainly wouldn’t be happening without all that Fed-injected liquidity sloshing around. Back in July 2008, The Onion published a prescient piece titled, “Recession-Plagued Nation Demands New Bubble to Invest In”: What America needs right now is not more talk and long-term strategy, but a concrete way to create more imaginary wealth in the very immediate future. Congress is currently considering an emergency economic-stimulus measure, tentatively called the Bubble Act, which would order the Federal Reserve to begin encouraging massive private investment in some fantastical financial scheme in order to get the nation’s false economy back on track . Even Jonathan Swift would have to appreciate satire so pointed. Unfortunately, the bit reads a lot like a Fed policy statement. Change the title to “Encouraging Risk Investment During Recession,” and any good Fed economist would nod along in agreement. The sentiment is identical. Bernanke has often stated that he wants to create a “wealth effect.” Push stocks higher, the theory goes, and people will spend more because they feel richer. Long-term thinking, truly… It’s been two and a half years since the Onion piece was written. Not only did we get one bubble; we got a handful of them. Notably in commodities, metals, food prices, and treasury bonds. Malinvestment and moral hazard ride on in 2011 One of the nastier side effects of “easy money” policies is known as malinvestment . It almost sounds harmless… mal- investment ( mal = bad). After all, everybody has a loser every now and then, right? The problem with easy money is that it inevitably spurs not just bad, but dangerous investments. During the tech bubble, it was countless doomed tech IPOs. In…

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The $600 Billion Gamble

The $600 Billion Gamble

I’ve spilled so much ink on QE2 at this point that I must be beginning to sound like a broken record. So I’ll let this story speak for itself…. From Reuters by Jonathan Spicer entitled: Fed’s bond-buying could soon backfire: Plosser “ The U.S. Federal Reserve’s aggressive bond-buying plan could soon backfire unless the central bank gradually changes course to head off inflation, a top Fed official known for his hawkish stance said on Tuesday. Philadelphia Federal Reserve Bank President Charles Plosser said the $600-billion quantitative easing plan, known as QE2, would need to be reconsidered if the U.S. economy’s current “moderate recovery” picks up steam. The prospect of sustained price deflation — a worry for Fed Chairman Ben Bernanke and other backers of the controversial QE2 plan — is highly unlikely in part because the Fed’s massive reserves will eventually flow out into the economy, Plosser added. “If the economy begins to grow more quickly and the sustainability of this recovery continues to gain traction, then the purchase program will need to be reconsidered along with other aspects of our very accommodative policy stance,” Plosser said in a speech to the Risk Management Association. “The aggressiveness of our accommodative policy may soon backfire on us if we don’t begin to gradually reverse course,” he said. It comes as recent data show the U.S. economy is slowly recovering, but also as Fed officials increasingly rally behind QE2, which in early November set the Fed to purchasing Treasury securities in an effort to rejuvenate that recovery. While some have credited QE2 for having already played a role in the rebound, Plosser said that argument likely “stretches things.” Nothing more than a $600 billion gamble…Don’t you just love the Fed? Related Articles: Hoenig: QE2 May Lead to “future instability” Hoenig: QE2 Won’t Work Hoenig: Let Troubled Banks Fail Jim Grant on the Fed’s “Mission Creep” Jim Grant: “The Fed is out of its lane” To learn more about Wealth Daily click here Advertisement Military’s Latest Energy Report Will Give You the Willies Inside, they confess a shocking truth… without any new developments, we only have 16 months of oil left! Before the media catches wind and panic drives the price of oil through the roof, I’ll show you how one group of companies solving the problem could make you filthy rich by Christmas. Click here to find out more. The $600 Billion Gamble originally appeared in Wealth Daily . Wealth Daily is a free daily newsletter featuring contrarian investment insights and commentary.

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Bank of America (NYSE:BAC) on U.S. Dollar, Euro

Bank of America Corp.’s (NYSE:BAC) head of Americas G- 10 currency strategy at Bank of America Corp. in New York, Paresh Upadhyaya, commented on the relationship of the U.S. dollar and the euro after the U.S. payrolls report, which was considered disappointing. Upadhyaya said, “Overall, the tone for the dollar should be stronger as most of the data has been coming in on the stronger side and

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Jobs Report Disappoints Despite Lower Unemployment Rate

Filed in Federal Reserve, New Gold, o, recession by on January 7, 2011 0 Comments
Jobs Report Disappoints Despite Lower Unemployment Rate

Filed under: Forecasts , Employees , Market Matters , Economic Data , Federal Reserve , Recession The Labor Department reported that employers added 103,000 jobs last month. This fell short of the expected 150,000 predicted by economists surveyed by Dow Jones. However, the unemployment rate fell to 9.4%. The November report was revised upward to 71,000 from 39,000, as reported by the Wall Street Journal . Earlier in the week ADP reported that private sector jobs rose by 297,000 last month, the strongest gain since ADP began collecting data. Continue reading Jobs Report Disappoints Despite Lower Unemployment Rate Jobs Report Disappoints Despite Lower Unemployment Rate originally appeared on BloggingStocks on Fri, 07 Jan 2011 11:40:00 EST. Please see our terms for use of feeds . Read | Permalink | Email this | Comments

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It’s Funny How We Get The Perfect Job Number

It’s Funny How We Get The Perfect Job Number

Earlier this week on January 5th, 2011 the payroll processing company ADP reported that the U.S. economy had added 297,000 jobs. The economists went wild raising the expectations of today’s government non-farm payroll report to over 200,000 jobs. However, today the job report was released at 8:30 am EST and the U.S. Labor Department only reported a headline number of 103,000. This is quite a disappointment for all those who thought the economy was adding much more jobs as the ADP report suggested. It is important to note that all of these reports cannot be trusted. Even in modern times with all the wonderful technology in the world it seems that the readings when it comes to economic data should be taken with a grain of salt. All that really matters is if the Federal Reserve Bank will continue with it’s U.S. Treasury purchases called QE-2. As long the central bank continues to create capital reserves by buying bonds and keeps the fed funds rate at zero percent the economy will inflate overall. That has been seen throughout history. Investors should just look at when the former Federal Reserve Bank Chairman, Alan Greenspan, lowered the fed funds rates(overnight lending rate to large major banks) to 1.00 percent in 2002. The economy inflated higher for five straight years. However, once interest rates began to increase the economy had already created one of the biggest bubbles in recent times. That was obviously the housing and credit bubble of 2007-2008. We can only wonder how bad this bubble will be that is being created now? The Federal Reserve Bank tells us that there is no inflation. However, the economies in Asia are trying to fight inflation. If this is a global economy how could one part of the world have inflation and the other part have no inflation? It is simply because of the labor market and the fuzzy math that is used by the economists. When a country has high unemployment there is never signs of inflation. However, if one looks at the price of copper, gold, silver, gasoline, oil, or food they will easily see that there is inflation. Leading commodity stocks such as Freeport McMoRan Copper & Gold Inc.(NYSE:FCX), Southern Copper Corp.(NYSE:SCCO), Silver Wheaton Corp.(NYSE:SLW), and many others are trading at or near all time highs. You see today’s weaker than expected job number gives the Federal Reserve an excuse to say that we need to continue their quantitative easing program. Remember quantitative easing is the catalyst for the rally as traders and investors continue to buy the dip. If today’s government job report would have been near 300,000 new jobs the U.S. Dollar would have spiked along with higher U.S. Treasury yields. This would have caused a major sell off. Therefore, you can see how a not so good or even a disappointing job number can be good for the stock market. It’s simply amazing how this all works. Nicholas Santiago InTheMoneyStocks

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Gold and Silver Prices to Spike Next Week

Gold and Silver Prices to Spike Next Week

Gold and silver prices have remained volatile in both directions since October. But indications from the COMEX show suggest we may see a spike in these precious metals prices next week… As prices moved higher over the past two weeks, strong bouts of profit taking have hit the gold and silver markets in each instance, stalling the next attempt to hit another new high. World Gold and Silver Demand World investment demand for gold has increased 250% in the past ten years. Investment demand for silver has skyrocketed 522% since 2007. Sales of official gold coins (like the American Gold Eagle) have increased 618% since 2007. World governments are hoarding silver; official sales have plummeted 83% in the past three years. Gold demand for ETFs has increased 20,470% since 2002. Above-ground silver supplies dropped 86% last year. Industrial demand for silver has increased over the past decade, despite a 236% increase in prices. On the downside action over the past two weeks, strong buying support has come in as precious metals prices looked like they were going to sell off— thus our current holding pattern in gold and silver prices. This will change to the upside within the next two weeks as major buying of physical metal will need to take place in order to meet contractual obligations on the COMEX before December 31, 2010. Contracts for gold and silver December futures that demand physical metal must be met by then. But there appears to be a significant shortfall in the actual physical metal required to meet these demands — especially in silver… If these contractual obligations are not met by the 12/31/10 deadline, then we could see a default scenario, which would drive the metals prices even higher and cause great instability for other markets as well. This potential default is due to the fact that JP Morgan Chase, the largest fractional stock holder of the Federal Reserve, has been wildly shorting silver and is now caught between a rock and a hard place. Word on the street is that JP Morgan Chase has opted to go massively long copper in an attempt to hedge their losses in silver, which could be enormous. This is…

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Ron Paul Puts the Fed In the Crosshairs

Ron Paul Puts the Fed In the Crosshairs

If this isn’t Ben Bernanke’s worst Congressional nightmare, I don’t know what is. His arch-nemesis, Ron Paul, author of “End the Fed,” will take control of the House subcommittee that oversees the Federal Reserve. Yesterday, House Financial Services chairman-elect Spencer Bachus, chose Paul to lead the panel’s domestic monetary policy subcommittee when Republicans take the House majority next month. Meanwhile just last week, Paul said he is planning a whole new a set of hearings on U.S. monetary policy and will restart his push for an audit of all the Fed’s functions. In that regard, here’s a look the direction some of those hearings may take… From Forbes by Alexandra Zendrian entitled: Ron Paul’s Golden Rule Forbes: Why do you think the Federal Reserve needs to be audited? Dr. Ron Paul: For lots of reasons. I don’t believe in secrecy. I don’t think anyone should have so much power that they can create money out of thin air and spend it and interfere in the markets and do central economic planning without any oversight. Congress has a responsibility to know what they’re doing because they created the Fed, they’re very, very important, and people benefit from their actions. And I’d like to know who benefits and who suffers the consequence. I just think that it would be in the interest of the people to know exactly what the Fed is doing. Forbes: Why don’t we know what’s going on with the Fed? People have been pretty complacent, generally complacent, over many, many years because it’s been an insidious problem. I mean, in 1913, they came into existence and a lot of people didn’t know much about it. And they didn’t call for it. But over the years, there’s always been one or two saying, “We should know more about it.” And in the 1970s, when we had a pretty serious economic crisis with inflation and interest rates at 21%, there was a demand for an audit. So they passed an audit bill and what they did exactly was they put prohibitions in. Before that, it was a little vague, but they made it instead of opening up the doors for an audit, they made it absolutely much more difficult for us to find out what they were doing. And my bill essentially repeals what they put in place in 1978, the prohibitions against auditing the Fed. And they work in secrecy. They’re allowed to make arrangements with foreign governments, foreign central banks, international organizations, and they’ve really abused their power, although their power’s been on the books, to deal with corporations. It’s been this recent crisis that has really brought this to a head. They have literally bought over a trillion dollars’ worth of securities. And we don’t know who benefited from that or how much they paid for them. So I think it’s time that the people know what they’ve been up to. The Fed is all-powerful and they scare people and tell people “the world will come to an end.” That’s exactly what they’re doing right now. “This would be so horrible, we would lose our independence.” But all they’re talking about independence is secrecy. They argue, “Oh, no, we …

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