Our 2011 Forecasts

by Addison Wiggin – January 3, 2011

  • The 5’s 2011 forecast issue… Facebook at $50 billion? Ha!

  • Why Chris Mayer sees gold stocks as the top-performing sector

  • Alan Knuckman’s audacious silver outlook… After $30, where next?

  • Amoss on “margin squeeze,” Cofnas on the return of dollar bulls and more

  • Devil in the details… The 5 dives inside upbeat manufacturing numbers

  • If consumers are roaring back, why are fewer buying movie and concert tickets?

Welcome to 2011… early this morning, we learned Goldman Sachs and a Russian firm called Digital Sky Technologies have pumped $500 million into Facebook. The deal values the “popular social networking site” at $50 billion… more than eBay, Yahoo! or Time Warner.

Ha. Ha. Ha!

This first nugget of fresh news makes our first official forecast of 2011 a slam-dunk: Facebook and Goldman will fleece millions of Americans of their retirement funds… maybe not this year, maybe not next, but before they are done with the whole charade.

Sure, we know the story. Social media exploded in 2010. Facebook passed Google as the most visited site on the planet, with one out of every four webpages viewed in the U.S. belonging to Facebook. Yeah, yeah, it’s a good story.

But we’ve also seen this movie before.

You have 500 million people playing Farmville and Mafia Wars and telling the world how wasted they got last night… but what makes them worth an average $100 in market value?

Our own social media maven suggests “the real value” of the company is in “leveraging all the user data they’ve collected on their members. The ability to develop tools, apps and targeted advertising will allow you to monetize. As they open up their API, it will allow developers to access this info and use this community to create more and more interaction.”

That’s possible.

But we think the real value is in the story itself, reflected in the company’s shares… which you can’t buy right now.

Barely a month ago, TechCrunch.com reported Accel Partners, an early-round investor in Facebook, sold off a big portion of their stock in the company at a $35 billion valuation — a return of “something like 247 times” on that sale.

Now Goldman intends to set up a special purpose vehicle (SPV) so its high-net-worth clients can skirt IPO laws and get their money in before Facebook goes public.

“While the SEC requires companies with more than 499 investors to disclose their financial results to the public,” says Andrew Ross Sorkin on his site DealB%k, “Goldman’s proposed special purpose vehicle may be able get around such a rule because it would be managed by Goldman and considered just one investor, even though it could conceivably be pooling investments from thousands of clients.”

Whether Facebook is profitable now — we don’t know because the books are still private — or whether they can figure out how to be profitable in the future is largely irrelevant. The big money is going to be made early in the “secondary market” for private shares.

If and when the IPO happens — like any good Ponzi scheme — retail investors, those last in the door, will get stuck holding very expensive paper.

Our advice: Steer clear.

With this morning’s announcement, Facebook founder Mark Zuckerberg will start off the new year worth twice as much as he ended the last (on Friday), which was then reported by Forbes as a measly sum of $6.9 billion.

“Gold stocks will be the top-performing sector in 2011,” says Chris Mayer kicking off a litany of forecasts we have for you today… all of which we expect will prove far more useful to you than what we plan to eat for lunch. (Steak and frites, probably, chased with a glass of Brouilly).

In fact, Chris’ forecast is a bold one, considering the HUI index of gold stocks is just 2.5% off its all-time high reached… um, less than a month ago.

“Gold stocks are cheap on a fundamental basis,” Mr. Mayer argues. That means double-digit increases in earnings and cash flow for many gold stocks.

Chris has open positions in gold stocks up 69%…97%… and 138%. Last year, he closed out gold plays for gains of 78% and 135%. His best picks for 2011 go out to Reserve members tomorrow.

“Silver could possibly double in price again in 2011,” according to Resource Trader Alert editor Alan Knuckman, riffing on a theme.

That’s big, considering the metal ended 2010 at a 30-year high above $30 an ounce. Alan sees a potentially weak dollar propelling gold to new heights… but silver could go even higher.

Alan’s silver recommendations during 2010 delivered gains of 84%… 100%… and 206%. And his readers racked up gold gains of 64%… 106%… 114%… and 221%. No doubt more is in store this year.

“Gold, silver and energy issues are all still going to be on the table for 2011,” says our resident geologist and resource industry insider Byron King, adding another sector to the fire…

China still needs scads of resources to grow its economy; an index of manufacturing activity out this morning shows 22 straight months of growth.

During 2010, Byron delivered gains across the precious metals, energy and rare earths space. Existing picks are up 137%… 227%… 273%… even 393% on his favorite little offshore oil play. Byron’s favorite picks for 2011 go out tomorrow to Reserve members.

“Dividends will play a major role in investor’s portfolios in 2011,” says our income investing specialist Jim Nelson, keeping his focus.

This too is a pretty bold forecast; after all. “We almost don’t talk about yields in equities anymore,” says Jack Bogle, the 81-year-old who built the Vanguard mutual fund empire. (He also says, “This is the most difficult time to invest in my career.”)

But Jim says stocks won’t deliver much in the way of capital gains for the next 12-18 months. Suddenly, people will pay attention to dividends again.

Jim’s average open pick, including capital gains and dividends, is up 25%. His average closed position in 2010 gained 23%. His top two picks for 2011 yield 4-5%. As with Chris Mayer, he’ll name them for Reserve members tomorrow.

“For 2011, my No. 1 prediction is a rise in the Producer Price Index,” says our stock market vigilante Dan Amoss.

Companies will be paying more for the raw goods they acquire… and they’ll likely have trouble passing along those costs to penny-pinching consumers. This is the dreaded “margin squeeze” we wrote about a couple of times late in 2010.

“This will have a major impact on the real economy: crowding out household budgets, and cutting discretionary spending in many sectors,” Dan continues.

Dan has several companies in his sights that could take a hard fall… delivering big profits to his readers. He took aim at the trucking industry last year; as two sickly firms fell hard, he delivered gains of 90% and 92%.

Which sectors are most vulnerable in 2011? Dan reveals all tomorrow.

“This $1.40 stock could become a market leader in 2011,” predict our penny stock team of Greg Guenthner and Jonas Elmerraji.

They’re going against the grain, too. During the previous decade, this stock was bashed relentlessly, and for good reason. Just the mention of its name raised a few eyebrows during our editorial meeting last month.

But they make a compelling case. And they reveal it to Reserve members tomorrow.

“Get ready… the bulls are coming back to the U.S. dollar,” warns our currency trading specialist Abe Cofnas. Abe sees two factors at work:

  • A better-than-expected recovery in the United States

  • An indication the Fed is being increasingly vigilant about inflation.

If that makes no sense to you, remember this: It doesn’t matter whether it’s true, it matters whether traders believe it’s true.

And you can’t argue with Abe’s approach. During 2010, he delivered gains of 107%… 369%… 545%… even a ridiculous 1,329%… all in less than a week’s time, trading a market that literally no other U.S.-based advisory service follows.

Abe’s Strategic Currency Trader is currently available exclusively to members of the Agora Financial Reserve.

[Ed. Note: Only a few hours remain in which you can secure a membership — giving you lifetime access to all of our services for a one-time fee. After tonight’s deadline, you won’t see today’s price for the Reserve ever again. If you’d like to get complete, exclusive access to all our forecasts and picks for 2011 tomorrow at 5 p.m. EST, please accept our invitation to join the Reserve today.]

Stocks are starting 2011 on a positively giddy note. The Dow is up nearly 130 points, past the 11,700 mark, for no obvious reason.

Gold is holding its own from Friday’s close, currently at $1,420. Silver clings to the $31 level, at $31.03.

The pace of U.S. manufacturing is picking up, according to the latest ISM manufacturing survey. The December number came in at 57, up from 56.6 in November. Fifty is the dividing line between expansion and contraction.

The Street was expecting a higher number, but clearly, traders don’t much care today.

Dig into the report, and there’s genuine cause for concern: The prices manufacturers paid for their raw goods rose 3% from November to December. And looking over previous months’ reports, this trend is accelerating.

Can they pass along these rising costs to their end-users and to consumers? That’s the “margin squeeze” we’ve been talking about. It’s one of the big issues we’re facing in 2011, and it’s showing up in the numbers this morning.

Amid all the jawboning about the comeback of the American consumer, we notice some interesting outliers in the entertainment industry…

The movie industry revenue will fail to exceed its 2009 record, according to Hollywood.com. Total 2010 box-office take will end up $10.5 billion, the website projects — about 1% less than the previous year’s $10.6 billion. It’s only the second time ever that revenue has fallen year over year; the first was 2007-08.

Attendance in theatres, meanwhile, dropped 5.36%.

Gross revenue from concert tours fell sharply in 2010, too, according to numbers from Pollstar. The top 50 acts worldwide pulled in $2.93 billion — down 12% from the year before.

Ticket sales were down 15% — even though prices were cut up to $20 a pop after the first few gigs for many top acts like the Jonas Brothers, Rihanna and Creed failed to meet expectations.

Hmmm… In both cases, revenue is down… and the number of bodies going through the turnstiles is down even more. Either consumers are content to stay home with Xboxes and Netflix movies… or they’re not willing to pay for concerts and the movies as much as they used to.

Or maybe story lines and stars of late just… suck.

“It would seem to me,” a reader writes, “that the U.S. could start reducing the amount of food it exports to China in retaliation for the rare earths restrictions. Unless, of course, you can eat neodymium, etc….

The 5: Your suggestion fits in line with one of our forecasts for 2011: a trade war with China will gain populist support among the dunderheads in Washington. Forget the fact that China isn’t limiting rare earth exports to the United States only… let’s starve them out!

We can’t wait until the Chinese find a viable alternative to U.S. Treasuries and dump them en masse. That’ll be really fun. Thanks for the helpful suggestion.

“I became a Reserve member this year in late September,” a reader writes in response to our membership invitation, which ends this evening. “I pulled all of my investments out of educational funds, mutual funds and any other nonperforming funds I had and pooled them all into the ‘Agora fund.’

“In three months, I’m up $5,000.00 on the recommendations you’ve made, and by next year, if all continues to go as planned, I hope to meet with some of you guys at your next conference.”

The 5: Indeed, we do hope to see you in Vancouver. Admission to the Agora Financial Investment Symposium comes free with your Reserve membership. It’s one of the many privileges and benefits you get, with our compliments.

“When you first offered memberships in the Agora Financial Reserve,” writes another reader, “I jumped at it. What is today’s price — 2½ times, three times what I originally paid?

“The Reserve financial advice has made me so much more in profits than the cost of the membership that I no longer even recall the ratio.”

The 5: You bring up an important point: As we’ve added new services over the years, we’ve continually added value to Reserve membership. In the last quarter of 2010 alone, we added…

  • Technology Profits Confidential, where Ray Blanco follows larger-cap tech and biotech plays with huge potential

  • Penny Momentum Trader, where Jonas Elmerraji’s average annualized gain to date is over 319%.

So after midnight tonight, whenever we decide to reopen Reserve membership again (there’s no set schedule), the fee will be substantially higher than it is today. This is your final chance to get in at the current fee. And here’s where you can act.

“Just closed an option recommended by Dan Amoss,” writes a third. “Looks like this one trade more than covered my Lifetime Membership in the Agora Financial Reserve.

“Joining the AFR was easily one of the best financial decisions I have ever made. Thanks so much, and many blessings to you and your families!”

Cheers,

Addison Wiggin

The 5 Min. Forecast

P.S.: A final reminder: Your existing Agora Financial subscriptions may entitle you to a substantial discount on membership in the Agora Financial Reserve. A subscription to just one of our premium services may entitle you to a discount of up to 31%.

The more services you have right now, the bigger your potential discount. How much can you save on a Reserve membership? Could be several thousands of dollars. You can find out by calling John Wilkinson at (866) 361-7662. He’ll look over your account and tell you your savings, right down to the penny.

Remember, the doors close tonight at midnight. And the fee goes up when and if we reopen membership. In other words, it will serve you well to act today.

rspertzel

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