Dave Gonigam – July 10, 2012
- Envy, 2012 style: When the media hate on a wealthy person few people ever heard of or remember…
- The “biggest fire sale in history” gets a truckload of new inventory: In a world of worry, Chris Mayer finds four pockets of opportunity
- Byron King with some shocking facts about the electrical grid… and a sector you shouldn’t overlook
- A forecast for $1,800 gold… Readers recall sweet childhood memories soured by the dollar’s decline… $250k becomes the new $100k… and more!
Is it the summertime heat?
What in the world would drive Matt Lauer — a guy who pulls down $25-30 million a year — to wax indignant this morning about Denise Rich giving up her U.S. citizenship?
We don’t actually know the income or net worth of Ms. Rich — shoe heiress, socialite, songwriter — but “she is a frequent habitue of Cannes, Monte Carlo and St. Tropez with celebrities and singers aboard her 157-foot yacht, Lady Joy,” according to Reuters.
“Whoever even heard of Denise Rich before this morning?” inquires Addison by IM.
Certainly no one since 2001.
That’s when President Clinton, on his way out of office, pardoned her ex-husband Marc — the legendary commodities trader convicted of illegal trading with Iran.
The pardon was widely reported as a favor to Denise Rich, a big-time Democratic Party donor. That, or it was an excuse for the cable channels to trot out archive footage of Clinton leering at the busty Ms. Rich during a fundraiser.
Ms. Rich’s name — actually her maiden name, Eisenberg — shows up on the Federal Register’s latest quarterly list of people who’ve given up U.S. citizenship.
As Addison has discussed in Apogee Advisory for more than a year now, growing numbers of Americans are surrendering their citizenship, even at the cost of a steep “exit tax” enacted in 2008.
The list for the first quarter of this year includes 460 names. Assuming that pace keeps up the rest of the year, the total for 2012 will set another record.
Like the last semifamous person to make the move — Facebook co-founder Eduardo Saverin — Rich does not cite high U.S. tax rates as the motive. Her lawyer says she’s making the move at age 68 “so that she can be closer to her family and to Peter Cervinka, her longtime partner.” She will retain her Austrian citizenship through her late father and settle down in London.
No matter, she’s now the target of widespread opprobrium. “I think this is despicable,” said one of the Today show panelists joining Lauer. “I have nothing but contempt for Denise Rich trying to escape taxes. Anyone who turns down American citizenship – it’s crap, it’s crap. It’s absolute crap.”
And so it goes.
Major U.S. stock indexes opened up today, but now are flat. The S&P poked through 1360.5 at the open, but has now retreated.
We’re watching 1,360.5 this week because if it closes above that level, it’s a 42% payoff for Abe Cofnas’ “mock trade.” Ditto if there’s a sell-off and the S&P closes below 1,336.5.
“The S&P 500 will be very sensitive to new expectations,” Abe reminded us in yesterday’s 5. Look for those expectations to play out when minutes of the Fed’s most recent meeting are released tomorrow afternoon… and again on Friday morning when the Commerce Department issues its latest read on wholesale prices.
To learn more about how Abe watches day-to-day market movements… and how you can profit from them week to week… you’ll want to read this. We’re extending a special offer on Abe’s one-of-a-kind service, Fear & Greed Trader. It expires this Friday at midnight.
“There are still plenty of interesting choices in the stock market to invest in,” says Chris Mayer, “even as things look sour.”
For instance, the “biggest fire sale in history” that he clued us into six months ago has gotten even bigger.
Then, eurozone banks were set to unload $1.8 trillion in assets to shore up their books. Now, according to the International Monetary Fund, the figure has more than doubled… to $3.8 trillion.
“Europe is one of the world’s greatest investment opportunities right now,” says David Rubenstein, the co-founder of the private equity firm Carlyle. “There’s no part of the world that will see so much assets sold at a discount as in Europe.”
Typically, deals like this are available only to the Carlyles of the world. But Chris has uncovered two plays where you, the retail investor, can take advantage. One is up 22% this year, the other 25%.
“There are always pockets in emerging markets that I like,” Chris goes on. “They have the right combination of growth and pricing that make them good bets.”
“Mongolia is my favorite emerging market. I like the frontier markets of Asia — and Africa as well. Africa is a fantastic market, full of super-low prices and double-digit yields. And there are safe ways to play it.” Chris is promising details in his next issue.
“There are also pockets in the U.S. and Canada worth investing in. When I think of the U.S., in particular, I think of three great trends in its favor”:
- The cheap housing market.
- The energy boom.
- The rise of American manufacturing (notwithstanding the recent data).
“Not too many countries can claim all three. U.S. housing is cheap and recovering. The energy boom — both in shale gas and domestic oil — means that U.S. energy bills are getting slashed. And finally, U.S. manufacturing is starting to make a comeback, as I’ve related before.”
“There is always plenty to worry about,” Chris concludes. “But there are also plenty of opportunities.:
- Look to take advantage of the EU crisis. There are winners from the asset sales
- Look to take advantage of the slowdown in China. There are winners from falling commodity prices — gold miners, for example, which use tremendous amounts of energy
- Look to invest in those pockets of strength in emerging markets that have the right combination of attractive prices and big growth, such as in Mongolia and parts of Africa
- Finally, look to invest in ways that benefit from three great American themes: a U.S. housing recovery, a fall in energy prices and a revival of American manufacturing.”
Chris has uncovered quality names in all these spaces for his entry-level newsletter, Capital & Crisis. From 2010 to the present, he’s delivered average 42% gains per year. Compare that with the S&P — up only 26% across the entire 2½-year span.
You can examine the track record for yourself — warts and all — at this link. No drawn-out presentation to watch. No long wind-up. Just a consistent — and safe — record of gains you can put to work in your own portfolio.
Gold tried to make a small move up this morning, but like stocks, it’s been beaten back… thanks to the dollar index reaching a new two-year high of 83.4.
At last check, gold had settled back to $1,585. Silver was down to $27.08.
GFMS, the giant precious metals consultancy now under the aegis of Thomson Reuters, is looking for gold to reclaim $1,800 before the calendar turns to 2013.
Short-term ups and downs notwithstanding, “we believe the gold bull market remains intact,” says GFMS chief analyst Philip Klapwijk, who sees central banks worldwide resorting to easy-money policies in the months ahead.
“Indeed, as we move into the fourth quarter,” he says, “a clearer uptrend should establish itself, with gold easily breaching the $1,800 mark before year-end.” A new high eclipsing the September 2011 record of $1,925 could come in the first half of next year.
[Ed. Note: We’re almost ready to take the wraps off something we’ve been hinting at for weeks now — the easiest way to buy, sell and store gold that we’ve ever run across. Seriously, if you’re a first-time buyer, you’ll never find an easier way. And even if precious metals are already part of your portfolio, we think you’ll find a lot to like.
We’re going to reveal all this coming Monday morning at 9:00 a.m. EDT. Keep an eye out for an email from us at that time.]
“Without the Internet, it’s 1982,” says Byron King. “Without electricity, it’s 1882.”
“What a spectacle,” he goes on, reflecting on a storm a few days ago that knocked out power to Washington, D.C. “The nation’s capital city — filled with bureaucrats who fancy themselves capable of micromanaging the nation’s economy — cannot even keep the lights on after a bad storm.”
Meanwhile, among all U.S. industries, the heavily regulated power-generation sector has the second-lowest pace of research and development spending. “According to the Electric Power Research Institute,” Byron says, “the pet food industry, hotel industry and the insurance industry all invest in R&D at higher rates than does the electric power sector.”
But demand on the decrepit grid keeps growing. “Twitter — just Twitter — accounts for over 1 billion messages every week. Each message consumes 0.025 watt-hours per tweet. This power consumption is equivalent to about 2,500 MWh per week of demand on the grid — about the output of one nuclear power plant. Consider that this new Twitter-based electric demand simply did not exist before about three years ago — and try to build a new nuclear plant in three years!”
“I’ve seen estimates,” Byron concludes, “that the world’s overall electricity supply will need to triple by 2050 to keep up with demand. Yet people still ask me why I’m bullish on copper.”
“My personal measure of the loss of value in the dollar is ice cream,” a reader writes, carrying on our 18-cent dollar theme.
“In my youth, an ice cream cone cost 5 cents. A double dip was 10 cents. I don’t believe an ice cream cone today can be bought for less than $2, and in most places it is considerably more.”
“I use that because most people can remember what an ice cream cone cost in their youth. And it is easy to understand that no meaningful changes have occurred to ice cream, unlike an automobile, a television set, etc.”
“When I was a 7-year-old, in Hawaii,” writes another reader with a childhood sweet-tooth memory, “my favorite thing in the whole world was a Fudgsicle on hot summer days. It was heaven.”
“I would walk the six blocks to the neighborhood store, in the blazing sun, just to have one… and then walk back in the blazing sun. But those few minutes of heaven was well worth it to that kid. Then, it cost 10 cents. They are still readily available… but now cost 90 cents. They’re still heaven to me, and I still buy them.”
“That was 50 years ago, by the way. And that comes out to an 800% increase!”
“Aloha… love ya at The 5.”
“My awakening came 32 years ago when my youngest son turned 10.”
“For his brother, who is 8 years older, I had a birthday party with 10 of his friends. I bought each boy five candy bars, took them to the movie and then had cake and ice cream at home. The entire party cost me just over $20: five candy bars for 25 cents and 50 cents for the movie tickets for 11 boys plus a boxed cake mix and a gallon of ice cream.”
“By the time my youngest was 10, the candy was 69 cents each and the movie ticket was $2.50, for a total of $65.45 plus cake and ice cream. However, my husband’s income had not gone up but $10 per week. Needless to say we didn’t have the same party.”
“I wouldn’t want to figure out what it would be now.”
“With all due respect, ‘What a maroon’” says a reader who takes issue with the fellow who said, “Comparing the price of today’s car versus one 40-plus years ago is as useful as comparing the price of a computer versus one 10 years ago.”
“Today’s car,” this individual writes, “may have all those ‘wonderful’ federal-required features, but it’s also considerably more expensive for all these fed requirements. Today’s computers are less expensive in today’s dollars, and a helluva lot cheaper in yesterday’s.”
“Imagine how inexpensive transportation could be were we to have true automotive freedom and be able to purchase the car WE want, rather than the car designed by the safety and enviro-nazis. (All for our ‘own good,’ of course).”
“Love The 5, and keep tweaking the moronic collective nose.”
The 5: The “moronic collective nose”… We’ll have to remember that line. It’s sure to come in useful sometime…
Cheers,
Dave Gonigam
The 5 Min. Forecast
P.S. Remember when a six-figure salary meant you’d arrived? Really arrived?
“Many now consider $250,000 the new $100,000 income,” says a story at Bankrate.com that went viral yesterday. “Less than 20% of American households even break the six figures. But many who earn incomes near the mark find that their prized incomes don’t take them as far as the hype.”
So there’s another way of looking at the damage that’s been done to the dollar’s value since Nixon closed the proverbial “gold window” in 1971. A dollar then is worth only 18 cents today… and that’s using the government’s own skewed figures!
It’s easy to fume… but it’s also easy to take a few protective measures. Seriously, you’d be surprised how easy it is to implement some of the 47 suggestions sprinkled through Addison’s Little Book of the Shrinking Dollar.
Do you have your copy yet? If not, here’s a bargain offer you won’t find anywhere else.