The trading day is short… and so is today’s 5… but there’s still time for Congress to muck things up…

by Addison Wiggin & Ian Mathias

  • The trading day is short… and so is today’s 5… but there’s still time for Congress to muck things up…
  • How your rep helped killed the retail season… oh, the delicious irony…
  • Three reasons the dollar is rising at year-end despite a historic decade for gold…
  • The simplest way to cut your chances of an IRS audit… the riff raff… and a season’s greeting…

Since time is short for many of you today, and because the New York Stock Exchange is knocking off at 1 p.m. EST , we’ll deliver you a first: The 2 ½ Min. Forecast.

By the time you read this, we assume the Senate will have passed a health care bill and an increase in the national debt ceiling.  But ’ tis the day before Christmas, and we’re noticing an earlier act of Congress is having some unintended consequences on holiday shopping.

The consumer polling firm American Research Group estimates that retail sales in November and December will fall another 1.2% from last year’s horrid figures… in part because credit card issuers are slashing limits and rejecting applicants before a new law cracks down on the industry next February.  Absent the changes, ARG believes sales would grow 0.8%,  

The White House, Congress and the Fed want to move heaven and earth to get consumers spending again, yet one of their proudest legislative accomplishments of the year is achieving exactly the opposite. Revel, if you will, in the irony.

Gold is approaching year’s end up 24% from where it was at the beginning.  That’s nine up years in a row.  And one factor likely to make it 10 is this: Gold is “a very, very limited metal,” in the words of our coin expert Nick Bruyer. “In fact, production of gold is actually declining right now. And total supplies of gold, including scrap, are actually declining at the same time that demand is increasing.”

If you had a chance to catch Nick’s Q&A on Nine Things You Should Know Before Buying Gold and Silver Coins, you know that supply of gold is limited… but upward price pressure is potentially not. If you haven’t had a chance to view the interview, you can do so here… and claim your own set of MS-70 Gold Eagles, on hold exclusively for Agora Financial readers until Jan. 8 .

Meanwhile, as we review the year-end letter just sent to readers of Alan Knuckman’s Resource Trader Alert, we’re struck by how they had a chance to take profits on gold plays four times — for 100%, 214%, 89% and 107%.  

Average performance across all plays for the year : up 57%, losers included. RTA is just one of the high -intensity trading services bundled into the Agora Financial Reserve. Get details on your limited- time membership offer, here…

The dollar index is heading into the holidays just off a three-month high.  “Three factors came into play to push the dollar higher” in recent weeks, says our forex man Bill Jenkins. “First was the huge and unexpected improvement in the non farm payrolls report (NFP). While forecasts were calling for a loss of 125,000 jobs, the data came in showing a loss of only 11,000 jobs!

“Second, there was a big jump in U.S. retail sales. Again, the forecast was for a modest gain of 0.6% or so. The actual reading came in at 1.3% — more than double the ‘rosy’ estimate. This helped to reinforce the idea that Americans must be going back to work, since unemployed people don’t have money to spend.

“Then the Federal Open Market Committee’s minutes reported that ‘economic activity has continued to pick up and that the deterioration in the labor market is abating.’ Such a hopeful statement put dollar bulls back on the warpath, almost ignoring the downside statement that interest levels were likely to stay ‘exceptionally low’ for an ‘extended period. ’ But the Fed has been using the word ‘extended ’ a lot, and people are beginning to wonder if we are coming to the end of that ‘period. ’

“Thus, some barometers are now calling for a possible interest rate hike as soon as June. But on Tuesday morning, the revised U.S. GDP figure came in at 2.2% growth, rather than the 2.8% analysts were expecting. This was a real surprise. And immediately, the market responded by selling off the dollar. But just as quickly, the sentiment reversed, and the dollar was being bought.

“So we have no clear-cut direction here. Are we trading on risk appetite/aversion, or are we trading on fundamentals? The market has yet to make up its mind.”

The good thing about forex trading is the market doesn’t have to make up its mind for you to pull in a tidy profit. Again, the Master FX trading service comes complete with your holiday membership offer of the AF Reserve. Join here.

We conclude with some year-end tax advice.  Want to avoid an audit?  Make sure you earn less than $200,000 a year.  Figures just out from the IRS show you have a 1% chance of being audited under that threshold.  Over $200,000, it becomes 3%.  And over $1 million, it becomes 6%.

The number of audits over $200,000 grew 11% this year, but below that cutoff line the number held steady. This is a trend not likely to go away any time soon.

Before we go, a sampling of pithy comments from our virtual mailbag:

“Asian equity funds are reportedly preparing their war chests for the bottoming of the U.S. commercial real estate market ,” writes one, “so they can step in and scoop up bargain -basement deals. Think we can sell them Pebble Beach and Rockefeller Center again?”

“These rating agencies,” inquires a reader reacting to Moody’s downgrade of Greek government debt… “they’re the same ones that said sub prime was AAA? They’re still in business? And their credibility on these Greek bonds is what? The world has truly gone mad!”

Reacting to the Commerce Department’s revision of third-quarter GDP from 3.5% to 2.2%, “Hey, they missed it by only 59% (if my calculator is still working.)  Close enough for gov’t forecasting. Good thing public accounting firms have the same leeway.  Not!”

We thank you for all your continued input.  A lively and engaged readership is one of the things that keeps The 5 a lively read.  We wish you happy holidays.  The next edition of The 5 arrives on Monday.

Merry Christmas,

Addison Wiggin
The 5 Min. Forecast

P.S.  Time is running short if you’ve been thinking about joining the Agora Financial Reserve. We’re keeping it open past Christmas, but not past New Year’s.  The cutoff is midnight next Tuesday.  If you haven’t had a chance lately to review the privileges that come with membership, here’s where to go.


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