June 13, 2013
- “He was consistently wrong”: Rickards versus Roubini on gold. Grab the popcorn!
- “Additive manufacturing”: Mainstream catches on to the new industrial revolution
- Don’t panic: Neil George looks at what — if anything — has changed about your income plays
- More signs of mergers and acquisitions in a beaten-down sector… and a PRO way to play it
- The commodity favored by choosy thieves… more common ground for the tea party and Occupy… why Obama’s $3 million retirement cap matters even if your account is much smaller… and more!
“Why don’t you tell me what you think of me?” asked Ellsworth Toohey, the archvillain of Ayn Rand’s The Fountainhead.
Replied the hero, Howard Roark: “But I don’t think of you.”
The exchange came to mind this morning upon examining playboy economist Nouriel Roubini’s latest declaration about gold: “The gold rush is over,” he concludes in the Guardian. “The run-up in gold prices in recent years — from $800 per ounce in early 2009 to above $1,900 in the autumn of 2011 — had all the features of a bubble. Now, like all asset price surges that are divorced from the fundamentals of supply and demand, the gold bubble is deflating.”
Enter Jim Rickards, author of Currency Wars.
Rickards and Roubini had a famous 16-hour Twitter war over the gold standard in 2011. So when Kitco caught up with Rickards recently, the interviewer couldn’t resist asking about Roubini’s sweeping pronouncement.
“Roubini said it was a bubble at $1,000,” replied Rickards, “it was a bubble at $1,200, a bubble at $1,500… He was consistently wrong. So I didn’t read or hear about his latest prognostication, but I [see] no more reason to give it any credence than all his prior comments.”
He didn’t read the article. Heh.
“But I don’t think of you, Mr. Roubini.”
Mr. Rickards, gentleman that he is, did not see fit to cut short his interview, however. So it’s worth paying heed to how he deconstructed one of Roubini’s main points.
“Gold prices,” Roubini writes, “tend to spike when there are serious economic, financial and geopolitical risks in the global economy.”
“If he thinks the crisis is over,” says Rickards, “if he thinks the depression is over, if he thinks there are not serious financial, political, geopolitical risks in the global economy, then he’s not living on the planet Earth.
“This is, I would say, the riskiest period of my lifetime since perhaps the Cuban missile crisis. Nothing has been resolved since 2009.
“All that’s happened is the Fed has printed an enormous amount of money to paper over the problems. But the structural adjustments that need to be made have not been made… Everything that was present about the risks in 2008 is worse today.”
“Welcome to the New Industrial Revolution,” writes The Wall Street Journal in a special pullout section… veering us in a whole different direction.
Once again, we find ourselves trying to untangle the conundrum of epic technological and energy breakthroughs unfolding every day… despite the fact that nothing from 2008’s been fixed.
Yes, the Fed’s printing scads of money. But to chalk up everything to QE is too facile. Something real is going on here — “a wave of technologies and ideas that are creating a computer-driven manufacturing environment that bears little resemblance to the gritty and grimy shop floors of the past,” as the Journal puts it.
We’ve been onto the revival of U.S. manufacturing for 18 months… and, more recently, onto small, quick, cheap, personalized and decentralized production.
Credit falling prices and big data… but “by far the most significant of these steps forward is additive manufacturing — a process of making a three-dimensional object of virtually any shape from a digital model.”
That is, 3-D printing, one of the key technologies entrepreneur and former Wired editor Chris Anderson describes in his book Makers.
“These exotic machines can use a range of materials” the Journal goes on ” — everything from wood pulp to cobalt — and create things as varied as sneakers, fuel nozzles for airplanes and, ultimately, even human organs. And a single piece of manufacturing equipment, rather than being custom-designed to perform a single function, can be programed to fabricate a virtually limitless array of objects.”
“What the new manufacturing model enables,” Anderson writes in Makers, “is a mass market for niche products… Products no longer have to reach global markets and find their audience. That’s because they don’t do it from the shelves of Wal-Mart. Instead, they use e-commerce, driven by an increasingly discriminating consumer who follows social media and word of mouth to buy specialty products online.”
[Ed. Note: We’re still wrapping our minds around all this too — not only “small batch” manufacturing, but the fact it’s occurring amid the backdrop of an unresolved financial crisis.
That’s why we’re flying in both Mr. Anderson and Mr. Rickards to speak at the Agora Financial Investment Symposium, starting July 23 in Vancouver. They’re the headliners among a long list of distinguished speakers who will help us make sense of the best of times and the worst of times… all at the same time.
Our theme this year is “A Tale of Two Americas.” We’ll scope out the investment opportunities arising from both a crushing debt crisis… and the confluence of new energy sources and radical technologies.
At last check, we still have 193 seats available. But they’re going fast. Learn how to secure your place right now.]
U.S. stocks are shaking off the latest scare from Japan.
Overnight, the Nikkei entered official bear market territory — off 20% from its peak. This morning, the major U.S. indexes are all slightly in the green… but that’s after yet another big sell-off yesterday that pulled the Dow below 15,000. Meanwhile the S&P 500 is once again dancing near its 50-day moving average of 1,611.
“Nervous observers of markets are monitoring selling in emerging markets and Japan,” Options Hotline’s Steve Sarnoff wrote his readers last night. “Toss in: currency swings, central bank tapering talk, Turkish protests, U.S. administration scandals, and markets are ripe for roiling.
“An extremely high level of speculation (even higher than back in the delirious dot-com days), based on penny stocks as a percentage of Nasdaq volume, strongly advocates for caution.”
“Under the surface, things are starting to look dicey,” concurs Greg Guenthner in today’s Rude Awakening.
“Instead of buying every pullback that even slightly resembles a dip, traders and investors are now having second thoughts. Gains are not automatic. The summer chop is upon us.”
The S&P is down a little over 4% from its all-time high last month. “You have to understand that 5% corrections are normal occurrences,” Greg writes with a reality check for perma-bulls.
“If you’re a trader, get ready to sell if the market begins to crumble. If you’re a longer-term investor, you should have no trouble holding through the chop.”
“Income stocks aren’t doomed,” reads the reassuring email from our income specialist Neil George.
The interminable chatter about the Fed “tapering” back its bond purchases is goosing interest rates up… and knocking the stuffing out of Treasuries, corporate bonds, municipal bonds… and dividend-paying stocks.
But Neil has a problem with this mindset: “It’s not following any sort of well-thought-out scenarios when it comes to the economy and the financial markets. If money is going to get tight — driving up funding costs for everything from consumer to business credit — it’s extremely hard to see how the economy will support more growth and expansion as well as job creation to justify higher prices for so-called growth stocks.
“And it’s the low- to no-dividend stocks that are being bought up now — even as income payers are being sold.”
Neil stands firmly in the camp that QE won’t wind down anytime soon — not with the unemployment numbers stuck above the Fed’s target, and inflation numbers stuck below. Result: Some of his favorite income plays can be had for bargain prices right now.
One of Neil’s favorite income strategies is tax-free… and keeps you safely away from the ups and downs of the stock market. It amounts to legally “cheating” the IRS. Move on it now and you could collect three tax-free income checks every month… as you’ll see right here.
Meanwhile, rising interest rates are also likely to accelerate the merger trend in banking — a trend Chris Mayer’s been eyeing for months.
Refinances made up 82% of the mortgage market in January. Now, with 30-year fixed rates back above 4%, the proportion has fallen to 68%. And there aren’t enough new buyers to pick up the slack, in the estimation of Rick Aneshansel, incoming president of the mortgage unit at U.S. Bank.
“If industry volumes are down, the industry has to resize itself,” he tells American Banker. “When we go through those cycles, we see consolidation. I think it’s going to be a period that has some challenges, and there will be winners and losers.”
As Chris Mayer noted in our virtual pages two weeks ago, 2012 was already the busiest for banking mergers and acquisitions in five years. And he expects more: “According to PL Capital, which specializes in banks, an acquirer can cut 25-50% of the target’s operating costs. Add in the pressure small banks face with high regulatory costs and this creates a huge incentive to sell.”
PRO-level readers can scroll down for a juicy name and ticker in the sector. (You haven’t gone PRO yet? Here’s where you can do so.)
It’s a mostly quiet day for the precious metals — gold at $1,383, silver at $21.80.
Platinum is down more than 1.5% this morning. But it remains comfortably above the gold price, at $1,452.
Even with platinum and palladium prices down from their peaks, the metals are still in demand among the criminal class.
Police in Linden, N.J., report two daylight thefts of catalytic converters from vehicles — one at a train station. That’s on top of 16 recent thefts from trucks parked at a U-Haul.
“The thieves are targeting larger vehicles,” New York’s Fox 5 reports, “especially SUVs like the
Jeep Cherokee. Police say that’s because the converters are larger and contain more platinum.
“They are also easier to crawl under to get to the converters.” Small battery-powered saws get the job done in minutes. Scrap yards with no scruples will pay about $100 for a converter. Car owners will pay about $1,000 for a replacement.”
Eyes on the prize…
“Regarding the NSA and monitoring of American citizens’ phones,” a reader writes, “all the talk is about the use of these information to stop terrorist plots and attacks.
“Call me crazy, but you can’t tell me that the administration and/or Congress did not use this information to see what the opposition is up to and any person or group that was or are opposed to anything the government is promoting. This has not been brought up in any conversations I know of and the question has not been raised by the news media, why?”
The 5: “I can tell you,” private investigator Steven Rambam says in a lengthy YouTube lecture on privacy, “that everybody that attended an Occupy Wall Street protest, and didn’t turn their cellphone off, or put it — and sometimes even if they did — the identity of that cellphone has been logged, and everybody who was at that demonstration, whether they were arrested, not arrested, whether their photos were ID’d, whether an informant pointed them out, it’s known they were there anyway. This is routine.”
Tea partiers can draw their own conclusions about whether these practices have been applied to them. (And they’re welcome to send us another round of hate mail insisting they have nothing in common with those dirty freaking hippies. Heh…)
Meanwhile, Tennessee bullion dealer Franklin Sanders posted the following on his site yesterday: “My dear wife Susan reminded me of an event during our 1991 federal trial for willful failure to file income tax returns and conspiracy to delay and defeat the IRS (we were all acquitted). A major thrust of the government’s case was to show they could retrieve every piece of financial data about everyone.
“Susan was on the witness stand, and the prosecutor asked her if she had spent X dollars on T-shirts at J.Crew the weekend before. Matter of fact, she had, and she had charged them. Never losing her aplomb (she never does), with withering sweetness Susan said, ‘Yes, I did. I bought them for my children. They’re good kids, and they deserve a new T-shirt now and then.’
“Government could not have known about that charge without having access to credit card company records. And since that charge occurred AFTER the date of the dirty deeds we were accused of, government was abusing process by continuing to spy on us.
“But we’re not special — now they’re spying on all y’all, too!”
“I have been receiving a new pitch,” a reader writes about one of our more talked-about presentations of late, “something about Obama shaking in his pants over what is about to be revealed.
“He is going to cap retirement accounts at $3 million. I think that sucks, but for whom? The last set of numbers Fidelity released recently said the average balance in retirement accounts is like 80 grand. I constantly read about boomers with less than 50 or 25 grand in savings. How are they going to get to $3 million at this point?
“With wages going down and unemployment at who knows where, how do younger generations expect to get there? I’ve been working for 28 years and have put 10% or more a year in my 401(k), no company match, and trust me, it doesn’t look like the $3 million cap will be a problem.
“I just wonder how many people outside the 1% would have much of a chance to accumulate $3 million.”
The 5: You still have reason to be concerned. From The Wall Street Journal in April: “The danger for rank-and-file workers, whose account balances typically fall under the proposed cap, is that the people who would be among the most affected by it — business owners and other successful investors — could disband 401(k) plans for all employees and move money into other tax-sheltered tools.”
That is, if small-business owners no longer have all the tax benefits that come with current 401(k) rules, there’s less incentive to offer 401(k) plans to their employees. “If this legislation were enacted tomorrow, we would probably deactivate our plan,” said the partner of a lumber-trading company in Washington state.
In any event, you need only a small grubstake to activate what we cheekily call “the secret $200 retirement blueprint.” Learn how to get started at this link.
Cheers,
Dave Gonigam
The 5 Min. Forecast
P.S. “Graphene: Fast, Stronger, Bendier” says a headline in the Financial Times.
The mainstream is quickly catching on to our favorite “miracle material.” In fact, one of the major profit catalysts is only weeks away from kicking in… as our Byron King proves for you here.