Bull Markets in Wine & Steak, Penny Stock Advice, Chinese Housing Bubble and More!

by Addison Wiggin & Ian Mathias

  • The 5 finds two bull markets we can really get behind: wine and beef
  • Alan Knuckman on a technical indicator bullish for all commodities
  • How to trade a penny stock that’s getting pumped by Internet spammers
  • Chinese home prices up 11% since last year… Frank Holmes says it’s still not a bubble

  Deep down, we knew it all along. Over countless lunches at Mick O’Shea’s, we knew we were on the right track… but we just couldn’t put our finger on it.

Finally, a study released today confirms our suspicion. The ultimate investment class of the last generation… and perhaps the next… is…

Wine!

That’s even better than gold. Of course, we’d be remiss not to add — you can’t drink a Krugerrand when the going gets tough.

(Check the study out: Raise Your Glass: Wine Investment and The Financial Crisis. Heh. We may have missed our calling.)

  While you’re out stockpiling wine today, pick up some steaks, too… beef prices are soaring.

Just as we, with the help of our buddy Doug Casey, have forecast in these pages, the credit crisis put a stranglehold on the already wheezing cattle industry. The USDA claims worldwide beef production has declined three years in a row. The ethanol hoax and rising corn prices haven’t helped matters much.

Add in the abnormally cold winter we just lingered through and cattle are starting to seem scarce. Cattle futures are up 20% already this year, says the Financial Times this morning. Traders are now flirting with the $1 a pound mark, a pre-credit crunch high.

  If the falling dollar doesn’t find some support soon, all commodities will rise, says our resource trader Alan Knuckman. “The dollar may be marking a reversal from the uptrend to recent 10-month highs. This break is what we have been looking for to accelerate the commodities rally.

“As you can see from the chart above, the dollar has broken well below its 50-day moving average — marking a bullish turn for commodities. Assuredly, I’ll be keeping a close eye on this potential dollar reversal in the next week.”

If Alan is right, now would be a good time to begin trading commodities again. Those who’ve been following Resource Trader Alert have enjoyed an average gain of 56% on trades Alan has recommended. In fact, “readers could have made SIXTEEN TIMES THEIR MONEY following my buy and sell recommendations in 2009,” he says. For proof and a discount, click here now. Don’t worry, we’ll wait for you. We’ve got our wine and steak standing by for lunch.

 

[Pause]

 

  Before we get to the numbers today, a reminder. Our Greg Guenther has issued a quick alert for Bulletin Board Elite readers: Sell STTN before a pump and dump scheme gets out of hand.

“When you own shares of a penny stock that’s getting pumped, it’s like being on a sinking ship full of treasure,” Gunner says. “You want to pocket as much loot as you possibly can — but you have to bail out before the boat takes on too much water. And you definitely don’t want to be one of the last investors off. Spots on the lifeboats are limited. Get greedy, and you could get pulled under.

“We bought STTN Monday morning, based on its solid trend and new 52-week high. Since then, I’ve seen two separate spam e-mails regarding the stock, and it’s gone from 70 cents to nearly $1. Even though it’s moving fast, we have to be exceedingly careful right now. That’s why I want you to sell shares today… don’t get caught up in the hype. We have an opportunity to take the gains and run — 30% in 24 hours — so I recommend you do just that.”

Gunner’s been on a hot streak this year, closing eight of his last 10 plays for profit, with an average gain of 19%. And that’s including the two losers. If you’re interested in learning more about over-the-counter and Bulletin Board stocks, Mr. Guenthner has been fielding questions and will present his findings in a Web event we have scheduled for April 20th at 1 p.m. EDT. Click here if you’d like to participate in this free event.

Or take advantage of this special discount on Bulletin Board Elite, our most exclusive publication. Details here.

  Stocks looked like they might end their two-month rally yesterday. Alcoa kicked off earnings season with its fifth loss in the last six quarters, and indexes were down early. But this bear market rally just won’t quit… the Dow and S&P managed a tiny little gain yesterday, and both opened higher this morning, partly on retailer strength in March.

  Retail sales, in fact, grew more than the Street expected in March, the Commerce Department reported this morning. Their gauge rose 1.6% from February, the largest gain in four months.

  But don’t get too excited about the retail sales number. The consumer price index (CPI) rose 0.1% in March, the Labor Department announced today. That adds up to a 2.3% rise in consumer prices over the last year, goosing the retail number… and contributing another layer to the recovery buzz.

  On the other side of the world, Chinese property prices jumped a record 11.7% over the last year, its National Bureau of Statistics said early this morning. The Chinese government has tried and tried again this year to throw some cold water on the steaming housing market… raising mortgage rates above market prices and imposing higher sales taxes on homes. But it’s all in vain… home prices crept up another 1.1% in March alone.

Again, Hainan Island is the epicenter of the insanity. Property prices in Haikou, its capital city, are up 65% in the last year. What’s the Chinese word for ‘bubble’ again?

  “China’s housing market is hot, but it’s not a bubble on the verge of bursting,” reads the latest research from U.S. Global, a group of funds controlled by our friend and perennial Investment Symposium favorite Frank Holmes.

“The price of housing in China has risen as the economy has expanded, but the chart from BCA Research shows that housing price growth has been significantly slower than GDP growth since the late 1980s.

“The price of housing has roughly doubled since the late 1990s, but it’s important to remember that China’s prices have risen from a much lower base than in the developed countries (among them, Britain, Ireland and Spain) in which bubbles were created. It’s also relevant to point out that household disposable income in China more than doubled during the period. The rise of the Chinese middle class is a major global economic phenomenon — tens of millions of people are added each year…

“Demand is still strong. A recent survey by the Hong Kong-based brokerage CLSA found that 56% of China’s middle-class families are considering buying a new home — despite the higher prices, many families can pay a 30% down payment because of their higher savings.

“Our own research shows that property developers, coming off a good 2009, are expanding into second- and third-tier cities, where housing markets are also growing and prices are more affordable.

“This widening of opportunity, combined with the government’s early recognition that decisive measures were needed, together will raise the probability that it will achieve its goal of slowing down home price increases without causing the market to collapse.”

  “The last couple of days, there’s been two Canadian readers forecasting a Canadian housing meltdown similar to what happened in the U.S.,” another Canadian reader writes. “I wouldn’t bet on it.

 

“The big difference in Canada is that you have to prove your income is stable (and real), you have to put your own money in as a down payment (borrowed money is not acceptable), you have to have a good FICO score on your credit record (this can’t be fudged) and you can’t just walk away from your mortgage — it’s a registered personal debt that you have to pay off somehow.

 

“And the Canadian bank that gives you a mortgage actually holds it and collects the payments from you. It doesn’t repackage and sell its mortgages to third parties.

 

“It’s been darn hard to qualify for a mortgage in Canada, and it just got harder. Now to get that 2% variable-rate mortgage you have to meet all the financial and credit qualifications needed to get a 4% fixed-rate mortgage. Then you can go get your 2% variable-rate mortgage.

 

“Bottom line is that homeowners and bank CEOs in Canada have a LOT of their own skin in the game.”

The 5: Uh… as we said, you’re just not doing your part in this crisis.

  A flat tax “would be the greatest change for our economy,” a reader writes of our brief mention of Steve Forbes yesterday. “The CPAs can make their money off of the small-business men and corporations, but let us ‘average working people’ off of the hook.”

  “The flat tax is another way to make the rich richer and the poor poorer,” another argues. “Think about the lower end of the economic scale. The guy makes minimum wage and is below the poverty level. He pays his Social Security and his Medicare and now you want him to pay some flat percentage (10%) of his total gross income in income taxes. Steve Forbes would love a flat tax, I’m sure. It would probably save him millions, if he pays taxes now.

“Yes, something needs to be done to make the system more equitable and to put the IRS out of business, but a straight flat tax is not the answer.”

The 5: What then? Let’s eat the rich.

  “Come now. You can’t be serious!” our last reader exclaims. “A flat tax would put half of this country’s lawyers out of business. Then what would they do? They’d run for Congress. Scary thought.”

The 5: At least there’s a cap on the number of people in Congress. Although it’s true, there’s no end to the damage they can do.

Cheers,

Addison Wiggin

The 5 Min. Forecast

P.S. “One of my favorite stem cell companies — and a key holding in our portfolio — is on still track to make their skin care product available this year,” Patrick Cox told his Breakthrough Technology Alert readers yesterday. “The serum contains extracts from human parthenogenic stem cells (hpSC) modified using nanotechnology. These are combined with a vitamin complex and other active ingredients. Recently, the company announced positive results from important safety tests.

“As you may know, my wife has been using an early version of the product for some time now. She doesn’t like me to tell people who’ve complimented her on her improved appearance about the serum, though. Being a “geek” myself, my inclination is to tell everybody about the science behind the product. She, despite her graduate degree in biology, apparently prefers that people not know that she is getting cosmeceutical assistance. Go figure. How’s a simple economist, handicapped by a Y chromosome, supposed to know these things?

“Speaking of science and economics, I realize that one person is not a statistically significant sample size. The exception might be, however, when the sample is your spouse. I can, in fact, report that she does look significantly younger.”

 

What’s the company producing this stuff? Is it too late to invest? Can you (or your spouse) get your hands on some? All questions answered in Patrick’s latest Breakthrough Technology Alert. Get access to it here.

rspertzel

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