The Stocking Stuffer Issue

Dave Gonigam – December 23, 2011

  • A pre-holiday edition of The 5, sprinkled with a few “gifts”
  • Jim Nelson on the one sure thing coming out of the payroll tax tug of war in Washington
  • Can you handle volatility? Rick Rule’s 2012-13 outlook for precious metals
  • Handicapping who’s leaving the euro… the Christmas present no one will receive… Canadians sound off about the Keystone pipeline fracas… and more!

   With 11 days before the Iowa caucuses, seven out of 10 of Americans say they “can’t wait” for the presidential campaign to be over already.

It’s the day before a holiday weekend, and while Addison continues some well-deserved time away, your editor du jour still feels a bit guilty about the mega-downer of an issue we delivered the day before Thanksgiving.

So today, look for a few little holiday “gifts” sprinkled through the issue. They’re not big gifts, especially coming from a publication you already get free; consider them tokens of our goodwill.

First gift: polling figures that perhaps will make you feel less alone.

   The figures from Gallup speak for themselves:

Those percentages are identical, by the way, among both registered voters and the adult population at large.

Among voters in 12 “swing states” where the campaign is likely to be most intense, the “can’t wait” contingent jumps to 75%.

Among people 65 and older — who’ve already seen more than their share of elections, thank you very much — the “can’t wait” number jumps to 80%.

   The number of voters registered with one of the major political parties has dropped 3.5% since the 2008 elections, according to research by USA Today.

The number of independent voters is up 1.7%.

“The pattern,” says the colorful rag, “continues a decades-long trend that has seen a diminution in the power of political parties, giving rise to independents as Ross Perot and Ralph Nader and the popularity this year of libertarian Republican Ron Paul.”

   Congress proceeded to validate voter disgust this morning by passing an extension of the payroll tax cut. For two more months. Thus guaranteeing a rerun of this drama in February.

As half-measures go, this is about as half-fast as they get: What would be so hard about either letting it expire or passing it for 12 more months?

While the cable news pundits chatter about who won or who lost politically, “Truly, it’s the future retirees who might take the largest hit,” says our income specialist Jim Nelson.

“The bill is supposed to be funded through higher collectable fees for Fannie Mae and Freddie Mac. The two mortgage giants have been ordered to collect higher fees from lenders for repayment of loans.” This will come out of the hide of nearly every homebuyer going forward.

“Total expense of the bill: $32.5 billion. Total expected revenue from these fees: $36 billion.” And that’s over a 10-year span!

“We’ll see if that happens. But someday, this down-to-the-wire game Congress keeps playing with Social Security revenue will end badly.”

That’s why Jim continues to harp on the need to line up alternative sources of retirement income… and we continue to give him a platform to do so. One of his favorite strategies — a happy accident resulting from a little-known provision in a law Congress passed 25 years ago — is described in detail here. (Readers with more substantial assets might want to give this a look.)

   Durable goods orders came in way above expectations this morning, according to the Census Bureau. Orders for goods expected to last three years or longer jumped 3.8% in November — twice the guess of the “expert consensus.”

However, nearly all the increase was driven by transportation goods — especially civilian aircraft.

Take away aircraft and defense goods… and shipments are down the last three months, while orders are down two of the last three months.

   Personal income and consumer spending both rose 0.1% last month, in the estimation of the Commerce Department.

The meager income gains were driven by rental income and dividends. Wages and salaries actually fell as payrolls in both the manufacturing and service sectors shrank.

The Federal Reserve’s favorite measure of inflation is contained within this monthly report: “Core personal consumption expenditures” are up 1.7% year over year. That’s right within the Fed’s sweet spot.

   New home sales ticked up 1.6% in November, continuing a weak growth curve in place since midsummer.

Prices of new homes, meanwhile, are down 2.5% year over year.

   The stew of data has simmered into a mild rally as the trading week winds down. Major U.S. stock indexes are up about half a percent.

At 12,240, the Dow is back toward the high end of the trading range where it’s been stuck since early August.

   Gold is drifting toward week’s end, the spot price currently $1,607. Silver is rallying modestly, but nowhere near enough to reclaim $30; at last check, the bid is $29.29.

   “I think the gold price goes higher and the silver price goes higher over the next two years,” says perennial Vancouver favorite Rick Rule, delivering another small gift, “but I think it goes higher in extremely choppy fashion.”

“I think,” Mr. Rule tells radio interviewer Eric King, “you are going to see some temporary solution to the problems facing the eurozone, in terms of public debts. When I say temporary, I really do mean temporary because those economies are overindebted. But you’re going to see a bit of confidence returning to the system, which I think will be bad for the gold and silver prices.”

“That is good for people who have a long- or intermediate-term interest in gold and silver because it gives you the opportunity to add to your positions at advantageous prices.”

“For people who aren’t good at dealing with volatility, it’s going to be a rough couple of years. For people who are good at dealing with volatility, it’s going to be a very good couple of years.”

   “A year, two years or three years from now,” reflects our Dan Amoss, “the eurozone will consist of just a northern European ‘core.’”

“This crisis is not the result of the PIIGS countries being unable to ‘inflate their way out of debt’; it’s the result of excessive government spending and bureaucratic red tape leading to sclerotic, uncompetitive economies that favor consumption over production.”

Result: “The supply of both euro and noneuro paper money will keep growing in Europe through this restructuring process. The peripheral countries (Portugal, Italy, Ireland, Greece and Spain) will likely withdraw from the euro and reintroduce their own currencies.”

We’ll explore more of Dan’s euro-scenario next week. He cautions, by the way, this outcome is not a lead-pipe cinch. Matters could change on a dime depending on, for instance, the outcome of February elections in Greece.

That’s why he’s developed a strategy to profit from euro-turmoil that’s set to move big no matter the short-term noise. During the market meltdown of late 2008, he laid on a similar strategy good for 334% gains in a little over three months. The best time to move on it is now.

Or since the euro crisis isn’t going way — sorry to say — you might wish to consider an array of strategies to protect and grow your wealth. That’s why we’re reopening membership to the Agora Financial Reserve.

It’s lifetime access to darn near everything we publish… for a one-time price lower than you’d pay for one year’s access if you signed up for our services individually. A full listing of the privileges and benefits of membership is available here.

   And now for a musical interlude. Consider this another little “gift.” Alas, the song happens to be about a present none of us will receive.

   “As a Canadian who works in the Alberta oil patch,” a reader writes, “I believe the best outcome for us was your government’s poor decision to shelve the Keystone XL pipeline. Although pumping our unrefined oil through Nebraska and into Oklahoma City’s ‘refinery row’ is a very simple and profitable business.”

“The real profit, however, is in building our own refineries and pumping our own refined, value- added product through the Rockies and off to Asia.”

“You see, with most of OPEC’s oil being exported to the American ports, all of Asia is anxious to secure a refined product they can depend on. Who is more dependable than a Canadian, eh?”

“We as a country are beginning to realize that we do not need Oklahoma City to refine our oil. We can do it ourselves.”

“For a while there, I was worried about the fruits of my people’s labor being shipped away stateside for pennies on the dollar. Thanks to Obama and pals, our industry is being forced into adding value to our already valuable resources. This is a terrible outcome for Americans, but the best thing that could of happened to us Albertan oil workers.”

   “It’s too bad,” writes another Canadian reader, “that the USA, Canada and similar countries are being controlled more and more by single-minded radical environmentalists and leftistas. Those people don’t really care about the environment — they just hate free enterprise and the thought of anyone making (gasp!) a profit — unless they are the ones making a profit.”

“Now that the enviro-left has blocked new oil pipelines from Canada to the USA, Canada will sell oil to Asia — and get $10-30 per barrel more than what we got from the USA. We have been happy to help our good old friend (the USA) by providing reliable ethical oil at a discount price, but it looks like those days are over.”

“Oh, well, at least the enviro-left will be happy that the USA will be buying more higher-cost oil from degenerates like Nigeria, Saudi Arabia and Venezuela, where women are treated like livestock, nobody cares about the environment the 99% have real reasons to protest and they absolutely HATE Americans.”

The 5: Hold on. Part of the two-month extension of the payroll tax cut includes a requirement that the White House decide on the Keystone expansion within 60 days, rather than put it off for a year.

“It is a stinging defeat,” says a Reuters analysis, “for environment groups that have lobbied fiercely against the Keystone extension, and comes little more than a month after the president had sought to take the heat out of the issue by postponing approval beyond the next election pending a review of alternative routes through Nebraska.”

   “As always, another interesting issue,” a complimentary reader writes after yesterday. “The chart of the Chicago Fed National Activity Index shows a very interesting, if not disturbing, long-term trend line.”

The reader even drew it for us. We put it in red to make it stand out…

“Does this have any significance or interpretation worthy of comment?”

The 5: Eek… Seems to speak pretty well for itself. Good catch!

   “For what it is worth, I used to be an avid reader and subscriber to your publications, and while I consider The 5 Min. Forecast to be required daily reading, I doubt that I will ever repurchase or spend any more money with your good selves, because the vast majority of your output is now on video.”

“I regret this move of yours to primarily video as I have never, and will never, watch one of these. It might be an unfair comment, but these appear to be ‘geared up’ to those who cannot gather enough brain cells in one place in order to read something. I am sure that those with poor eyesight, etc., will appreciate this, but still… I cannot shake off the thought that this is just more ‘dumbing’ down.”

“When you can offer the CHOICE of watching and/or reading, I will reconsider. Until then, I am content to sit with my cash in my wallet and look elsewhere.”

The 5: Tell you what: We have one more little “gift.” For your holiday reading pleasure, here are text-only versions of some of our most popular research reports…

If you’re already familiar with many of our services, you might wish to peruse our “full buffet” offering of the Agora Financial Reserve.

This too is in text form, so you’ll have plenty of time to chew on it next week along with your leftover turkey sandwiches. Save this email and follow this link. Membership will be open throughout the holidays.


Merry Christmas,

Dave Gonigam
The 5 Min. Forecast

P.S. U.S. and Canadian markets will be closed on Monday for the “official” observation of Christmas Day. The 5 returns on Tuesday.


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