Category — Recommended Newsletters
Amidst this very dark outlook for Europe, markets oscillate daily. Big rallies follow big sell-offs. Hope follows fear as faith in the ‘bailout’, the ‘rescue’ and the ‘stimulus package’ trumps all other logic.
That’s where you are today. Hope and fear are the two dominant market characteristics. They are also the enemy of the rational investor. So try to put the large daily moves into perspective. It’s what happens when risk and uncertainty are on the rise.
A good illustration of this is the VIX indicator – commonly referred to as the fear gauge. The VIX is a measure of volatility. A spike in the VIX correlates to a drop in equity markets. The chart below shows the VIX over the past 5 years.
Back in 2007 and early 2008, the VIX indicator displayed increased volatility and traded at a relatively high level, before blasting higher as the 2008 credit crisis hit. It then spiked to an index level of just over 45 in 2010 and 2011. This was in response to the end of the US Fed’s monetary stimulus measures. [Read more →]
June 23, 2012 Comments Off
This week will go down as another where the market is driven by central bankers rather than company fundamentals.
So as a stock picker, we’re stuck between feelings of frustration and opportunism.
Frustration that policy makers and central bankers can’t just get out of the way and let the free market run its course. Opportunism because we see stocks trading at bargain-basement prices.
In fact, for this month’s Australian Small-Cap Investigator, we’ve foundfour stocks we’d like to tip. But with only limited time to research them before our deadline, we’ll probably have to hold two of those stocks over for next month.
June 20, 2012 Comments Off
Allen Stanford is a bad man.
A US court this week sentenced him to 110 years in prison for running a USD$7 billion Ponzi scheme.
Just how bad is he?
According to the US District Court, Southern District of Texas, Houston Division, it recommended an even heavier sentence:
‘Robert Allen Stanford is a ruthless predator responsible for one of the most egregious frauds in history, and he should be sentenced to the statutory maximum sentence of 230 years’ imprisonment.’
But what did he do that was so bad?
We’ll get to that in a moment. Before we do, in yesterday’s Money Morning we missed out a key part of a quote that renders the quote meaningless. The missing piece was in a quote from Bank of England governor, Mervyn King’s speech in 2007.
June 16, 2012 Comments Off
David Wolman has written a book called The End of Money.
In the book, Wolman asks:
‘Yet how different is Kim Jong Il’s counterfeiting, really, from the decision to spend $700 billion in borrowed money to kick-start economic growth, from creating more than $1 trillion out of thin air to help clean up the housing bubble crisis?’
It’s a fair question, and we’ve asked similar questions during the past four years.
But right now, those who control the printing presses don’t see their actions as counterfeiting. They call it stimulus, support and monetary policy.
They even create fancy names to disguise what they’re really doing. They call it ‘quantitative easing’.
But they can call it what they like. It all means the same thing, devaluation and destruction of wealth… [Read more →]
June 15, 2012 Comments Off
There was a great article recently in the Australian Financial Review on entrepreneurialism.
The article is titled, ‘Accepting failure on path to success’.
It pretty much sums up the attitude that entrepreneurs (and investors) need when making business and investment decisions.
The article notes:
‘[Aussie business] the Loop has embraced the idea of “fast failure” when adding new features to the website. “In the early days, for the features that we’d come up with, we’d spend a couple of months building them and then launch them…Some were hugely successful and some our users didn’t use at all. Now we launch very basic versions and if anyone is bothered to use them, then we build them out. It’s about learning as we go.’
The article goes on, ‘Andy Fallshaw is similarly a fan of the “fail small and often rather than big and infrequently” model.’
The message to takeaway is the idea that failure is OK. It’s much better to fail early in a bad business venture rather than stringing the idea out for years and still ending up as a failure.
Share traders take this approach all the time. They’re usually only in a position for a short period. If they get it wrong, they aim to get out quickly and try their luck with something else. [Read more →]
June 12, 2012 Comments Off
The gold market is an incredibly complex beast, so I’m going to try and simplify things as much as possible.
To get you in the right frame of mind, consider that the history of gold and humanity has a span of 6,000 years. Think about that. It is a long time. The history of the US paper dollar — and the global financial system that it underpins — spans just 41 years.
Right now, I want you to consider this. ‘But, this game of gold, it is not only hard, but will cost anyone dearly if they try it without all the facts!’
That quote was believed to be written by a banking insider who went by the pseudonym of ‘Another’. The background to Another’s ‘thoughts’ is a long one…it’s a fascinating story that I’ll endeavour to write to you about at some other time. [Read more →]
June 10, 2012 Comments Off
Last weekend, on a sunny afternoon in the Victorian suburb of Bayswater, two men on a dirt bike smashed the glass window of a jewellery store. In 90 seconds they stole about $90,000 of gold jewellery. And then rode off.
The shop was open for business and a staff member and the owner were out the back. They weren’t sure what the ‘banging’ sound was.
But these dirt bike bandits aren’t the only ones pinching gold.
On five separate occasions a Perth man walked into a store to try on a gold necklace. Once wearing the necklace, he’d bolt out the door. Police reckon his stealing binge netted him $70,000 of gold jewellery. The cops only caught him this week. [Read more →]
June 9, 2012 Comments Off
Is China’s economy heading for a hard landing? We think so – which is why we think you should steer clear of everything from most industrial commodities to Asia-dependent luxury goods firms.
It is hard to tell much (except the general trend) from the official GDP numbers, so with this in mind, here’s a list of reasons to think that all is not well in the economy the bulls hope will be the financial saviour of the West.
1. The FT reports that Chinese buyers have deserted the Hong Kong art market. Six months ago, they accounted for around 44% of Sotheby’s sales. That is now down to more like 20-25%. Kevin Ching, chief executive of Sotheby’s Asia, noted that “there used to be five to six mainland Chinese individuals who would bid like crazy here, but they did not make any offer in spring sales.” Sotheby’s reported a net loss of $10.7m in the first quarter.
2. ICIS.com reports that demand for polyethylene, which has long been “a very reliable leading indicator for the economy”, is no longer rising but falling (down 6% overall). [Read more →]
June 8, 2012 Comments Off
By all accounts, the U.S. dollar should be the functional equivalent of a Zimbabwean bill.
The Fed has pumped trillions into the worldwide financial system as part of misguided stimulus efforts that should be incredibly inflationary.
Yet, instead of a disastrous repeat of the Weimar Republic, the U.S. dollar has strengthened considerably.
This despite rising unemployment, slowing economic growth and a debt debate that’s about to begin anew.
Since last July, the U.S. dollar has risen against all 16 major currencies while the Intercontinental Exchange Dollar Index is up 12%, according to Bloomberg.
In fact, the greenback is now higher than it was when the Fed engaged in Operation Twist in late 2011 as part of a plan to keep the dollar low by buying bonds. [Read more →]
June 7, 2012 Comments Off
‘Gold remains the currency of last resort’ – Jeff Currie, Head of Commodity Research, Goldman Sachs
As a ‘last resort’ it’s not doing too badly.
Since the SPDR Gold Trust ETF [NYSE: GLD] first listed in the US in September 2004, gold has gained 250%.
During the same time the S&P 500 has gained 13.25%.
June 7, 2012 Comments Off