The Ultimate Layer of Financial Protection

Guest Post By Dennis Miller – The Ultimate Layer of Financial Protection

From international real estate to international government regulation to international business, Nick Giambruno, the senior editor of International Man is the go-to guy. While my passport is good for another eight years, I’m sure he has to replace his annually. Nick has recently been traveling with legendary investor, Doug Casey, and I had the opportunity to ask him a few questions about this trip as well as tips for folks looking to protect themselves and their wealth by diversifying internationally. So, without further ado…

Dennis Miller: Nick, please tell us about your last trip. Cyprus, I believe?

Nick Giambruno: Thanks, Dennis. It’s great to be here. Yes, it was Cyprus, with the original “International Man” himself—Doug Casey. Cyprus is the best recent example of how a desperate government acts and how internationalization can protect us.

As you are no doubt aware, on a seemingly ordinary Saturday in March when people least suspected it, the government of Cyprus quickly closed the banks, imposed capital controls, and announced the confiscation of customer deposits. Doug and I went to see the fallout firsthand. The in-person perspective was helpful for learning when and how the next Cyprus will occur.

Political Diversification Is a Universal Need

Dennis: Today I want to focus on the financial issues of seniors and savers. For the most part, seniors are staying put geographically. So why should they invest in international companies? Why use a broker outside of their home country? These ideas make folks in my generation squirm a bit. So tell us why seniors—even seniors with modest portfolios—should internationalize some of their assets.

Nick: Seniors, savers, and others depending on fixed, nominal incomes should definitely consider internationalizing a portion of their assets. They often suffer the most from the predictable actions any desperate government may take as its fiscal health deteriorates. That includes capital controls, wealth confiscation through currency devaluations, one-off emergency “taxes” on financial accounts—which occurred in Cyprus—nationalizing retirement accounts, and various other means.

It is incorrect to assume this couldn’t happen in your home country. If history shows us anything, it’s that it could happen in any country. That’s why taking practical measures to protect yourself and your family is prudent.

These risks are particularly high under most Western governments, including the US. They have current debt loads and future spending commitments that all but guarantee that eventually they will try to unscrupulously grab as much wealth as they can.

This is why Doug Casey has said over and over that diversifying your political risk through internationalization is his single most important recommendation today.

Through internationalization, you place your money outside the immediate grasp of your home government. This diversifies your political risk. When wealth is outside of its immediate reach, it is much more difficult, if not practically impossible, for a desperate government to confiscate it on a whim.

For example, some Cypriots did their homework and concluded that their home country was not a safe place to store a lot of cash. These people moved their savings to different countries, and avoided the so-called one-off emergency levy.

The need for political diversification is universal. It does not just apply to Americans or Europeans, but to everyone in the world. Of course, there are varying degrees of protection. People with modest means can internationalize, often without leaving their own home. Whether it’s purchasing a foreign public company with your US brokerage account, purchasing real estate in a foreign country, or anything else in between, everyone can internationalize their assets to some degree.

Also—and this is critical—as long as you follow the reporting and other legal requirements, internationalizing your assets is completely legal. There are a lot of popular misconceptions about that, so it’s important to emphasize.

Retirement Accounts Are a Common Target

Dennis: So, when a desperate government can’t pay its bills, it just takes money from people who have it?

Nick: Yes, that is exactly correct. The methods and the rhetoric may vary, but the end result is always the same. Any government that gets sufficiently desperate will siphon off as much of people’s real purchasing power as it can.

Take IRAs and other retirement accounts, for example. They are often the next targets after a desperate government imposes capital controls and implements other broad wealth-confiscation measures, such as official currency devaluation.

Here’s how it usually happens. A government will forcibly convert assets held in retirement accounts into “safer” assets, such as government bonds. Naturally, politicians will slickly sell the idea to the public as “for their own good.” In reality, it’s a way for a government to finance itself—by forcefully dumping its unwanted debt onto seniors and savers.

Dennis: How can internationalizing your retirement account protect you?

Nick: It’s much more difficult for the government to convert your retirement assets if they are outside of its immediate reach. If you have a standard IRA from a large US financial institution, it would only take a phone call from the US government and poof, your dividend-paying stocks and corporate bonds could instantly be transformed into government paper.

It’s happened in Argentina and numerous other countries, and it is certainly an option on the table in the US. Heck, there are already whispers about the US government assuming some risk for US retirement accounts. That’s code for forced conversion of assets into government bonds.

Obviously, this is much harder for the government to do if your retirement assets are sufficiently internationalized. It is pragmatic and prudent to structure your IRA and retirement savings in an internationally diversified way. As a practical matter, international assets are not as easy confiscate.

For example, you can structure your IRA to invest in foreign real estate or certain types of physical gold stored abroad. If and when there is some sort of decree to convert or otherwise confiscate the assets in your retirement account, your internationalized assets ensure that your savings won’t vanish at the stroke of a pen.

A Multistep Strategy

Dennis: Does this really apply here in the US? What about Europe and Japan?

Nick: Absolutely. Political diversification makes sense for everyone on the planet. For people in debt-ridden countries, it’s doubly important.

At the very least, you can diversify into a foreign currency or foreign company—steps you can take using most US brokerage accounts. However, these steps only internationalize your savings to a small degree. If your foreign investments are in a US brokerage account, they are still within the immediate reach of the US government.

Holding assets in a foreign brokerage account—say, in Singapore or Hong Kong—creates a much higher level of protection. Plus, if some of your cash and savings are in a foreign brokerage account, they won’t be trapped if your home country institutes capital controls.

Again, think about Cyprus. Doug Casey and I met with several Cypriot business people who said they were unaffected by the capital controls and confiscation because they kept cash in banks outside of Cyprus. Had they kept their money in Cyprus, it would have been subject to strict limitations on withdrawals and sending money abroad.

By holding their cash in Switzerland, for example, Cypriot companies diversified some of the political risk associated with their home country. Internationalizing part of your assets is like an insurance policy—one you are no worse off holding.

Dennis: OK, you’ve sold me. Keeping all of your money in your home currency and in your home country is risky. You could lose a lot, either through high inflation, heavy taxation, or outright confiscation.

At the same time, many folks with more modest portfolios want their money close by. What can they do to protect themselves?

Nick: Storing some physical gold in a foreign country is one of the best ways people with modest means can internationalize their savings. A number of service providers can help you do this from your own home. In some cases, you can also open foreign bank and brokerage accounts remotely without meeting high minimum-balance requirements.

A private, non-bank vaulting company is perhaps the best way to hold gold abroad. They allow you to rent a small safety deposit box in places like Singapore, Switzerland, Dubai, or Hong Kong.

Dennis: Our regular readers know that part of my Roth IRA is offshore. Many readers were surprised to learn that was legal. Are there easy ways to internationalize part of your IRA?

Nick: Yes, there are turnkey ways to do it. I touched on some of the details above. With a couple of important exceptions and limitations, it is possible and practical to structure your IRA so that it can open offshore bank and brokerage accounts denominated in foreign currencies, and invest in assets like foreign real estate and certain types of physical gold held abroad.

Success Demands Immediate Action

Dennis: Nick, I know you are a boots-on-the-ground type of guy. You’ve traveled to countries like Cyprus to learn how people have protected their money. Is there any common thread among those who successfully protect themselves?

Nick: Savvy people who live in countries like Cyprus and Argentina took action before it was too late. They saw the writing on the wall and didn’t wait. When you’re trying to protect yourself from the destructive actions of a desperate government, internationalizing a year early is always better than one day too late. When the window of opportunity closes, it shuts tight.

In order for these destructive measures to be effective, they have to be sudden, surprise attacks. That was the case in Cyprus. On a seemingly ordinary Saturday morning, Cypriots awoke to find that the banks had been indefinitely closed and capital controls had been put into place. Their savings were no longer safe, and it was a surprise to most.

The critical lesson here is: act before it is too late. To me, the financial direction of the US government and its implications are crystal clear. The window of opportunity to internationalize and insulate yourself is still open, but it gets verifiably smaller with each passing week. Now is the time to start developing and implementing your strategies.

Dennis: Nick, beyond protection from a desperate government, I think of internationalizing your assets as the ultimate investment diversification. Even if a Cyprus-type event never happens to us, it’s still the best way to hedge against inflation or deflation. Am I overstating my case here?

Nick: No, not at all. If one country is suffering an economic downturn, others are growing. If one currency is going down in value, others are rising. We used to credit air travel with making the world a much smaller place. The Internet has facilitated that ten times over. While Americans are used to investing in American companies, many people, even those with smaller portfolios, are now looking for the best investments in the world. If protecting your portfolio through diversification is important to you, then looking at worldwide opportunities is the way to go.

Dennis: Any final ideas you want to share?

Nick: I urge everyone to look at the worst-case scenario. No one knows for sure how far our government will go to confiscate wealth. At the same time, even if our government does not go to extremes, we are still ahead. If an investor diversifies internationally and takes advantage of worldwide opportunities, he will still be better off financially, and his portfolio will be much better protected.

Dennis: Nick, it’s been a pleasure. Thank you for taking the time to share your thoughts.

Nick: My pleasure, Dennis; thank you for asking me.

In my book Retirement Reboot, I discussed how easy the decision to go international was for my wife Jo and me. On the one hand, the thought of sending part of our hard-earned money to a country we had never visited to be looked after by a highly recommended person we had never met sounded absurd.

But on the other hand, we looked at the direction our country was headed. The annual deficit had doubled, and it was about to double again. We could see that sooner or later, this could destroy our wealth through high inflation. For us, going international was portfolio insurance, plain and simple.

You can learn more about how we did this in Retirement Reboot, which you get free with a risk-free subscription to Miller’s Money Forever. In addition to the book, you get interviews with other experts like Nick to help guide you through very important niche topics. Recent interviews include:

  • Maximizing Your IRA with Terry Coxon, senior economist and editor at Casey Research;
  • Energy Profits with Marin Katusa, senior editor of Casey Research’s energy publications and frequent commentator on BNN and other major media outlets;
  • Juniors for Seniors with Louis James, globe-trotting senior editor of Casey Research’s metals and mining publications; and
  • Other esteemed colleagues.

Gain access to everything our portfolio has to offer, as well as access to these top minds through occasional interviews and input, with your risk-free 90-day trial subscription to Miller’s Money Forever.



Historic Optimism in the Stock Market – What Does it Mean?

By Elliott Wave International

How do you know when the market is getting ready for a change? This quote from Bob Prechter’s best-selling book, Conquer the Crash, looks at investor psychology at extremes in the markets:

The engine of high stock market valuation is widely shared optimism. The greater the degree of the advance that is ending, the greater the optimism at its peak. Optimism also tends to remain strong in the early stages of a bear market …

Today, how optimistic are market participants? Bob dedicated an entire issue of his Elliott Wave Theorist market letter to looking at the level of optimism in the markets today. These two charts, excerpted from that letter, show just a piece of the story. Learn how you can get the entire issue, with 15 eye-opening charts, for free.

* * * * *

“Charts tell the truth. Let’s look at some charts …

“Figure 9 shows that in the second-to-last week of October, the public poured more money into various U.S. stock funds than at any time in at least seven years, which includes the 2007 stock market top.

“All this stock buying has created a lopsided investment ratio among fund sectors. As shown in Figure 10, the percentage of money in Rydex’s conservative money-market funds as opposed to speculative stock market funds is the lowest since 2001, which is just after the all-time high in the real value for stocks.”


These are just two of the 15 charts that you can see for free. For a limited time, Elliott Wave International is giving away a full issue of Robert Prechter’s Elliott Wave Theorist. In this 10-page issue, you can see all 15 charts and decide for yourself whether the market is at an optimistic extreme. See below for more details.


See All 15 Charts from Bob Prechter’s 10-Page Market Letter — FREE

Is the U.S. stock market at an optimistic extreme? See for yourself with this limited-time special offer.

Download your free copy of Bob Prechter’s November Elliott Wave Theorist now >>

Sri Lanka rejigs policy framework, sees higher growth

    Sri Lanka’s central bank rejigged its policy framework, replacing its current policy rate corridor with a Standing Rate Corridor (SCR) and renamed the standing repurchase facility as the Standing Deposit Facility (SDF) with the rate for this facility, the Standing Deposit Facility Rate (SDFR), becoming the rate for the placement of overnight excess funds for banks and setting a floor for the corridor.
    The SDFR replaces the bank’s repurchase rate with open market operation auctions continuing as usual, depending on liquidity conditions in money markets. The Central Bank of Sri Lanka cut the repurchase rate by 100 basis points this year to 6.50 percent and held SDRF steady at this level.
    The central bank’s current Standing Reverse Repurchase Facility will be renamed as the Standing Lending Facility (SLF) and the Standing Lending Facility Rate (SLFR) will be the rate for the lending of overnight funds to the banking system, setting the upper limit in the corridor.
    The central bank also said volatility in the call money market had eased substantially so a compression of the new rate corridor was warranted with the lending rate, or SLFR, cut by 50 basis points to 8.0 percent, compressing the corridor to 150 basis points from 200 basis points.
     “It is expected that this compression will facilitate the reduction of the interest spread of banks over time, without affecting the deposit rates offered by banks to their customers,” the bank said.
   The central bank also said it expected “economic growth to accelerate further during the new year, while inflation is projected to remain in mid-single digits.”
    Sri Lanka’s Gross Domestic Product set is to expand by around 7.2 percent in 2013, the bank said, with both current and capital accounts of the balance of payments improving, increasing the exchange rate and the international reserves.
    At the same time, Sri Lanka’s headline and core inflation rate eased further, hitting 4.7 percent and 2.1 percent, respectively in December. For 2013 the average headline rate was 6.9 percent, down from 7.6 percent in 2012, while the core rate fell to 4.4 percent from 5.8 percent.
    “The continued easing of monetary policy through 2013 amidst low and stable inflation has brought about the desired macroeconomic outcomes,” the bank said.
    Higher inflows from the export of services and workers’ remittances improve the current account while “substantial foreign capital inflows” resulted in a balance of payment surplus over over US$ 700 in 2013 compared with $151 in 2012.
    Gross official reserves rose to a provisional $7.1 billion by end-2013, the bank said.
    The central bank’s governor, Ajith Nivard Cabraal, later told a forum in Colombo that he expects 2014 economic growth of 7.8 percent and then gradually accelerate to a growth rate of 8.5 percent in 2016, according to press reports.

8 Predictions for 2014 – Gold, Bitcoin, 3D Printing

By Jason Hamlin,

Economic predictions are a crap shoot at anytime, but especially during times when central bank intervention is running at all-time highs. The markets are more managed and manipulated now than at any point in history. The Federal Reserve is literally propping up the entire system via nearly $1 Trillion in bond purchases per year, artificially low interest rates, an active plunge-protection team, gold market intervention, economic data manipulation and clandestine operations we have yet to understand.

So anyone trying to make economic or political predictions with any accuracy is naive, delusional or possibly both. Yet, everyone seems to enjoy these predictions, so I have decided to partake. The following are my predictions for 2014:

1) Stock valuations will continue pushing higher in 2014

The stock market bubble with continue inflating before it finally pops and a major correction ensues around the summer of 2014. Investors should continue riding the trend higher and profiting from the FED-induced bubble, while maintaining sensible trailing stop orders.

2) Higher taxes and health care expenses will hurt consumer spending in 2014
This will continue to squeeze the middle class and harm the economic recovery, as consumer spending dries up. We have already seen signs of this with low initial retail sales during the holiday season.

3) The FED will not end QE in 2014
The Federal Reserve cannot cut QE by any significant amount without crashing the markets. Therefore, I predict they will not make any major cuts to their quantitative easing program without replacing it with equally or more potent stimulus in another form. We will see a new program from Yellen designed to increase the velocity of money and get the banks lending. This will lead to higher inflation in 2014 and into 2015.
Yet, the era of super low interest rates is likely over. We will see interest rates climb slowly higher in 2014, capping the recent advance in the housing market.

4) Gold and silver will push towards previous highs by the end of 2014
Precious metals will find a bottom during the first quarter of 2014 and rebound strongly into the second half of the year. Gold will advance back towards $2,000 and silver towards $50 before year end, with increased volatility as price discovery moves away the COMEX. Many miners will go under due to the depressed prices of the past year and lack of financing, while best-in-breed mining and royalty stocks will easily double from the current oversold levels.

5) Russia and China will continue growing economically, politically and militarily These two nations, together with their BRICS counterparts, will continue encroaching on the role of the U.S. as global superpower. This trend will accelerate with the backlash from the NSA spying scandal, as leaders around the world have a growing distrust of the United States government. This will make it harder for the U.S. to find military allies or get cooperation for UN resolutions. This will also generate significant economic consequences for the United States, as foreign nations seek to limit their business dealing with the Unites States or U.S.-based companies.

6) 3D printing technology will make major ripples in worldwide manufacturing
The manufacturing landscape will be forever changed with the evolution of 3D printing technology. Consumer acceptance will increase as prices drop and we will start to see more people purchasing consumer-grade 3D printers for the home. This consumer adoption will help leading companies in this sector meet their lofty growth forecasts. Nanotechnology, robotics, graphene technology, genomics and intelligent sensor technology will continue to accelerate and drive innovation in 2014.

7) The importance of independent media will continue to grow
As this happens, traditional media outlets will become even more marginalized. With the spread of information and decentralization of media power, people will become more aware of the real happenings in the world and less susceptible to mainstream media spin. Social media and other online platforms will continue to ferment revolution, challenge the status quo and question the lies of the governments and large corporations that have been colluding to exploit their people.

8) Bitcoin will continue increasing in popularity and value,
Amazon or another major retailer will announce acceptance of the virtual currency. Bitcoin will continue to have wild price swings, increasing in value to $5,000 or higher during 2014.

Parting Shot

Those are my best guesses for 2014. While there appears to be plenty of dark clouds on the horizon, I am also hopeful and inspired by many of the changes that we are seeing. Technology is enabling increased information dissemination, education, political networking, medical advances and significant wins in the decentralization of power. We now have a free-market currency to compete with central bank notes and the ability to print weapons for self defense.

There have also been a number of localized political wins, including the legalization of marijuana in a few states, labeling of GMO foods in Connecticut, public education and outcry against an invasion of Syria, several municipalities nullifying provisions of the NDAA and other signs of an awakening of the citizenry.

No matter what happens, I wish you happiness and prosperity in the new year! If you would like to receive my monthly contrarian newsletter, which covers precious metals, agriculture, energy, emerging technologies, bitcoin and so much more, please click here to subscribe.



Gold Plunges Amid Stock Surge

By HY Markets Forex Blog

Those who trade gold provided the precious metal with its sharpest annual loss since 1981 this year.

On Dec. 31, the last trading day of 2013, February futures for the precious metal settled at $1,202.30 an ounce on the Comex division of the New York Mercantile Exchange, according to Bloomberg. As a result, prices for the commodity have plunged 28 percent for the year. 

Gold plunges amid stock surge
At the same time, U.S stocks surged, The Wall Street Journal reported. Many global investors sought out equities, which are perceived as having more risk than gold, during a year when sentiment was supported by various reports indicating strength in the economy.

One person who noted how the precious metal dropped while stocks surged was George Gero, who works for RBC Capital Markets Global Futures as a senior vice president, according to the media outlet. He observed that U.S. equities rose by an amount that was close to the decline that gold suffered during 2013.

“The biggest theme for gold this year has been the move out of gold and into equities,” the market expert stated, according to the news source. “Last year, clients were asking fund managers, ‘Do I own gold?’ This year, the clients are asking if they own well-performing equities.”

As these stocks spiked in value, many global investors saw their perception of the precious metal as a store of value begin to deteriorate, Bloomberg reported. Another factor that contributed to the sentiment of market participants changing was the Federal Reserve’s decision to announce a definitive timeline for paring quantitative easing.

Fed announces tapering timeline
Earlier in December, Fed policymakers indicated at the conclusion of their most recent meeting that starting in January, the financial institution would purchase $75 billion worth of these financial instruments every month. This figure represented a gradual decrease from the $85 billion that the central bank had been purchasing on a monthly basis.

“Expectations of monetary policy and the influence of that on gold was the dominant factor for 2013,” Howard Wen, who works for HSBC Securities (USA) Inc. as a a precious-metals analyst, told The Wall Street Journal. “The withdrawal of stimulus removes the need for gold as an inflation hedge.”

Another person who noted the changing sentiment around possible increases in the price level was Ric Spooner, chief analyst at CMC Markets in Sydney, according to Bloomberg. While those who trade gold persistently worried that monetary stimulus could be a major factor that could help push the price level higher, many stopped becoming concerned about this potential situation, Spooner told the media outlet.

“Investors gave up, at least temporarily, on the notion that central bank stimulation was going to cause an inflationary problem in western economies in the foreseeable future,” he told the news source. Spooner noted that in addition, while those who invest in exchange-traded products ”had previously been a source of demand for gold, they became net sellers.”

Data provided by Bloomberg revealed that in 2013, the gold holdings of ETPs lost $73.7 billion in value. In addition, the assets of these investment vehicles plunged 33 percent  for the year to 1,767.1 tons on Dec. 27.

Traders short gold
In this year, when the price of the precious metal has been plunging and the holdings of ETPs have been declining sharply, traders have been making bearish wagers on the value of the commodity with rising frequency, Sterling Smith, a futures specialist with Citi Institutional Clients Group, told The Wall Street Journal.

“Gold shorts made a surprising amount of money, and on the last day of the year gold falls off a cliff for them,” he told the news source.

Bearish predictions for 2014
In addition to dropping sharply in 2013, some market experts have predicted that next year, the precious metal will experience further deterioration. Earlier this year, Jeffrey Currie, head of commodities research for Goldman Sachs Group Inc., said that for 2014, gold is a “slam dunk” sell, according to Bloomberg. He said that the metal will become less appealing as a safe haven asset as the U.S. economy continues to grow in strength.

Another person who made a bearish forecast for the future of the precious metal was Bart Melek, head of commodity strategy at TD Securities in Toronto, the media outlet reported.

“The haven premium has dwindled considerably with the economy showing signs of improvement,” he told the news source. “Prices could drop to $1,125 before March as there are no reasons to buy gold.”

Not everyone has such dire feelings toward the metal, as data provided by the U.S. Mint reveals that in 2013, purchases made from this government agency have surged 14 percent, according The Wall Street Journal. Gold suffered its sharpest two-day decline since 1974 in April, and in that month, dealers purchased more than 200,000 ounces worth of coins made from the precious metal.

The post Gold Plunges Amid Stock Surge appeared first on | HY Markets Official blog.

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Ring in the New Year With These Six Stocks

By Ring in the New Year With These Six Stocks

During my latest appearance on CNBC’s Stock Brawl on Monday, I railed against the practice of buying overvalued stocks and hoping they’ll one day grow into their valuations.

That’s a fool’s game. Especially five years into a rip-roaring bull market.

Instead of overpaying, we should (always) be on the hunt for undervalued names with solid growth prospects.

After all, as Warren Buffett famously said, “Price is what you pay; value is what you get.”

Granted, that’s easier said than done presently, given that roughly 90% of stocks in the S&P 500 Index rallied last year.

But it’s not impossible. Because, believe it or not, the most compelling bargains right now can be found by digging through other investors’ trash piles.

I shared earlier this week that the end of a historic year for stocks prompted a spat of indiscriminate selling in an effort to harvest tax losses, setting the stage for a strong bounce back in the weeks ahead.

And as I promised then, here are six tax-loss treasures worth adding to your portfolio right away…

Tax-Loss Buying Opportunity #1: JDS Uniphase Corp. (JDSU)

JDS Uniphase, a $3-billion market cap company, is one of only 48 stocks in the S&P 500 to fall in price in 2013. Most of the bleeding came during the fourth quarter, too, thanks to a weak quarterly report.

However, the leading provider of communications test and measurement solutions appears to be on the brink of reporting a strong quarter.

Recent channel checks by Stifel Nicolaus’ Patrick Newton suggest that the company is experiencing strong sales momentum “across a meaningful portion of its product portfolio.” So much so that Newton felt the need to reiterate his “Buy” rating on the stock.

The company has also been on an acquisition spree. Most recently, it scooped up privately held Network Instruments, which enhances its overall market opportunity by a healthy $1 billion.

Ironically enough, JDS Uniphase might go from being the hunter to the hunted.

On the heels of Apple’s (AAPL) recent purchase of 3-D sensor company, PrimeSense, JDS Uniphase is now the last publicly traded leader in gesture recognition technology.

And the impetus for a deal is only strengthened given that the stock is trading within spitting distance of its 52-week low. I suggest you act before deep-pocketed institutions and/or corporations do.

Tax-Loss Buying Opportunity #2: Jabil Circuit, Inc. (JBL)

Jabil ranks as another rare loser in the S&P 500. It, too, fell from grace in the closing month of the year.

But it would be inaccurate to suggest that its precipitous mid-December decline was caused entirely by tax-loss selling.

In a call with analysts, CEO Mark Mondello did reveal an unexpected shift in demand from one of its key customers. However, tax-loss selling undoubtedly contributed to the decline.

Here’s the thing – the sales downturn isn’t permanent. As Mondello indicated, “[It’s] significant but assumed to be temporary.”

If we take a slightly longer-term view, we realize that the company is still on track to deliver earnings growth of 50% in the current fiscal year.

Such strong profit growth is all the more compelling when we realize how cheaply shares are trading. At current prices, Jabil carries a price-to-earnings (P/E) ratio of only 9.6.

That’s equal to roughly a 50% discount to the industry average and the S&P 500.

I assure you, steep bargains like that won’t last long into the New Year.

Tax-Loss Buying Opportunity #3: Walter Energy, Inc. (WLT)

Forget about being universally shunned. Coal spent much of 2013 being downright hated.

It’s no surprise, then, that shares of Walter Energy – a leading supplier of metallurgical coal for the global steel industry – got clobbered, dropping more than 50%.

As I shared before, the stage has been set for conditions in the coal industry to go from bad to less bad. It’s happening. Just read the latest management comments from Peabody Energy Corp. (BTU).

I’m no longer the lone contrarian on coal anymore, either. The analysts at Citibank believe a rebound is imminent, with Walter being the prime beneficiary in the “met” coal market. I agree!

Even more telling, insiders purchased 116,120 shares of Walter over the last six months at an average price of about $18 (the stock currently trades for about $16.80). I recommend you follow their lead, stat!

Tax-Loss Buying Opportunity #4: Fusion-io, Inc. (FIO)

I’ve previously singled out Fusion-io as an attractive way to play the “Big Data” boom. Its software and hardware solutions allow customers to quickly and efficiently process and analyze data.

Shares were already down more than 50% heading into December. But that’s when the tax-loss selling kicked into overdrive, sending them down another 15% by mid-month.

In the wake of Western Digital’s (WDC) $340-million purchase of sTec in the middle of 2013, Fusion-io is naturally in the buyout crosshairs, too.

That’s all the more true with shares trading below $9.

Tax-Loss Buying Opportunity #5: Cincinnati Bell Inc. (CBB)

If Cincinnati Bell didn’t get off to such a horrendous start to 2013, plummeting 46% in the first quarter, it wouldn’t have become such an attractive tax-loss selling candidate.

Beginning in October, shares embarked on a legitimate turnaround, rising more than 30%.

Thanks to a high average trading volume of 1.3 million shares per day, the tax-loss selling didn’t put a dent in the recovery. It only served to hold back prices.

With the selling pressure removed, it’s time for the rebound to resume.

You see, even though Cincinnati Bell is a boring old telecom, it’s on track for an impressive earnings increase – from a loss of $0.16 per share this year to a profit of $0.13 per share in 2014.

The good news? The stock is still trading at a 60% discount to the industry on a price-to-sales basis, which means there’s still plenty more room for share prices to run.

Tax-Loss Buying Opportunity #6: Eurasian Minerals Inc. (EMXX)

Remember the “Golden Disaster” I talked about a few weeks ago? Well, forget about gold bullion prices slumping 30% on the year. Junior mining stocks got whacked even more, dropping upwards of 60%, on average.

The end result? Junior mining stocks became the poster children for tax-loss selling heading into the final months of the year.

One company in particular, Eurasian Minerals, is now trading almost right where it did when the bull market began way back in March 2009. That’s absurd!

The company is well capitalized, which is a rarity in the sector. Not to mention, it owns a diversified portfolio of mineral exploration and development properties.

Bottom line: If you’re looking to get good value for your money, look no further than this list of six stocks.

Ahead of the tape,

Louis Basenese

The post Ring in the New Year With These Six Stocks appeared first on Wall Street Daily.

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Original Article: Ring in the New Year With These Six Stocks

The Federal Reserve Takes its Foot off The Accelerator


The taper has come and gone and the world still turns. Imagine that. The Federal Reserve’s decision to reduce its monthly bond purchases by $10 billion wasn’t a show stopper on Wall Street. It was a show starter.

The Dow Jones Industrials climbed almost three hundred points and nearly 2%. The S&P 500 went back over 1800. Not to be outdone, the ASX/200 sighed with relief and climbed over 2% to close above 5,200 again. What’s more, the gold price fell 3.4% in US dollar terms to a three-year low.

The reporting about the taper shows you how muddled investor thinking has become. For example, one local newspaper reported that since markets rallied after the taper announcement, it suggested that the US economic recovery would not ‘derail’ financial markets. Let’s leave aside the question of whether there really is a US recovery. Since when would a recovery in the economy ever derail stock markets?

If the economy were getting better, why would stocks ever get worse? This is the mental conundrum Fed followers are in. Stimulus in the form of quantitative easing, which is good for stocks (especially financial stocks) can only last as long as the economy (where the rest of us live) is bad. Thus, bad news for Main Street is better news for Wall Street.

What a relief it must have been for traders to realise that good news for Main Street (even if it’s made up) isn’t bad news for Wall Street. That’s what the reaction seemed to indicate. Or, perhaps investors had already priced in the taper and it was more a case of, ‘buy the rumour, sell the fact’. Another possibility is that traders are hell bent on buying stocks because it’s a cyclical bull market and any reason will do (or none is necessary). But check out the chart below.

New Highs on Narrow Breadth

Click to enlarge

The black line on the chart shows the number of stocks on the S&P 100 in a bullish point-and-figure pattern. The red line is the index itself. The right scale measures the bullish percent figure. The left scale measures the level of the index. What does it tell you?

Well, the S&P itself has climbed 50% in the last two years. But it hasn’t been a smooth ride. During that run, the bullish percent index has dropped to nearly 50 two times. When it reaches that number it means half the stocks are in a bullish point and figure pattern and half are bearish. Why is this important?

You can take this chart as a measure of the market’s real health. It’s both a measure of breadth and momentum. Most of the time, those measures are correlated with the trends in the underlying index. Except for now.

Look closely and you’ll see that this month, the index has made new highs even as breadth deteriorates. Fewer stocks out of the 100 are in bullish patterns. Yet the index keeps climbing. Breadth is deteriorating. This is a classic sign of a market with narrower leadership. More liquidity is piling into a smaller band of blue chip stocks. This creates self-fulfilling rallies. But they are not broad rallies. And that makes them fragile. How fragile? Now look at the chart below.

QE Pumps up American and Japanese stocks

Click to enlarge

The S&P 500 is up 165% from the low on March 9, 2009. And yes, I cherry picked that low. It’s what makes the gain so impressive. The 2009 lows were put in because the Federal Reserve committed to providing Wall Street firms with cheap credit to turn into trading profits. It has worked a treat.

By comparison, Japanese stocks didn’t really get going until the Bank of Japan pledged to double the monetary base in November 2012. It was a late start. But the red line shows it’s been an impressive game of catch up. As I wrote recently, a US dollar rally against the euro could make European shares the next cab off the rank in terms of QE-driven rallies (especially if money comes out of overvalued US stocks and into cheaper European stocks).

Australian stocks, as measured by the All Ordinaries, are up a respectable 63% since the 2009 lows. But without an ambitious plan of money printing from the RBA, local shares can’t compete with their blue-chip brethren overseas. And even if the RBA does print (unlikely), the weaker Aussie dollar and lower interest rates will erode Australia’s recent reputation as high-yield haven for foreign capital.

Fragile things break easily. All it takes is a wayward bump. The trouble with a bump like that is that you never see it coming until it’s too late. Stocks could fall by 15-20% in a matter of weeks, both in America and here in Australia. Be ready for that.

And keep your wits about you. The big takeaway from the Fed’s language recently is that it would keep interest rates low ‘well past the time’ US unemployment hits 6.5%. Interest rates are effectively dead as a tool for conducting monetary policy. That leaves asset purchases.

But when the Federal Reserve purchases government bonds or mortgage backed securities, it doesn’t stimulate the economy in the same way an interest rate cut might. It only stimulates financial markets, which is why they’re making new highs. More importantly, as my mate Greg Canavan pointed out, QE pushes stock prices higher by pushing the equity risk premium lower.

It’s a dangerous game that always results in investors taking too much risk. They take too much risk because price signals no longer communicate the real level of risk you’re taking in buying an asset or security. Investors become speculators and rush headlong into an increasingly narrow class of assets: stocks and financial stocks especially.

Poor old Janet Yellen has her work cut out of for her. Ben Bernanke will leave on a high. But the Yellen Fed will have only one tool left to address the next crisis: bigger asset purchases. You can view this week’s taper as the Federal Reserve taking its foot off the accelerator for a moment. But Yellen has a lead foot. There’s danger on the road ahead.

Best Regards,

Dan Denning+,
Contributing Editor, Money Morning

Ed Note: This article is an edited extract of an update originally published in The Denning Report.

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A Recession is Coming, and That Makes Stocks a Buy…


After being mostly indifferent on gold in 2013, we’ll look to pick up more exposure to it this year.

Statements such as this one from Michael Shaoul, chief executive officer at Marketfield Asset Management, give us confidence that gold is a good place to put money as an ‘insurance policy’. Mr Shaoul told Bloomberg News:

The developed economies are growing, and equities remain very interesting, so there is really no reason to be in gold.

Mr Shaoul is wrong. There are plenty of reasons to be in gold. One of them is the continued and gradual destruction of paper money. So as a long-term gold buyer we’re happy when the mainstream starts talking down the importance of gold.

The mainstream sells. The price falls. We buy more.

But make no mistake, you shouldn’t buy gold if you’re looking for a way to make money…lots of money…in 2014. If that’s your number one goal this year then you’ll have to look elsewhere…

If we had to only invest in one asset class this year it would be stocks.

Of course, we don’t have to invest in just one asset class. We have a choice. Our choice is to spread things around into a few asset classes. We mainly choose cash, gold and stocks.

Of the three, we’re betting on stocks giving investors the best returns this year.

Not everyone will agree with us. Last year was a pretty good year for stocks. The S&P/ASX 200 Index gained 14.6%. Many folks will argue that after a double-digit year this year the returns will be more subdued.


If you think a 14.6% return is pretty good, if you think things couldn’t get any better, and if you decide to avoid stocks this year, you’ll look back on 2014 as a year of missed opportunities.

What if Investors Have Priced in the Bad News?

Why are we so sure of a great year for stocks?

This report from the Australian sums things up well:

Stockmarket investors may suffer more subdued returns in the next 12 months amid growing concerns that company valuations have overshot earnings growth, after the flood of cash into equities and a storming run by the banks helped deliver the best returns since 2009.

That report could be right. Share price growth may suffer if earnings growth suffers. If so, it could mean that stock prices and stock indices fall over the next 12 months.

That certainly wouldn’t do much for our prediction of the S&P/ASX 200 index hitting 7,000 points in 2015. And it wouldn’t do much for our view that small-cap stocks will lead the way.

But what if the market has already priced in the slower earnings growth? What if that’s why the Australian market performed poorly last year compared to the US and European indices?

As an investor it’s a question you’ve got to ask before you think about abandoning the stock market this year.

Stock Prices Are All About the Future

Time and again investors forget one of the key rules of investing: that stock prices are all about future earnings.

And while you can count this year’s earnings as ‘future earnings’, to a large degree the market looked at that last year. This year the market will have one eye on this year’s earnings and one eye on next year’s earnings.

This is the type of situation that can puzzle novice investors. A company will report a lower profit or even a loss, and yet the share price can take off.

The novice investor will ask, ‘How is that possible?’ That’s because they don’t notice the company’s forward looking statements about the following year.

The novice investor doesn’t understand that the investment pros had already factored in the bad earnings news for the current year – that’s why the share price had already fallen, or risen less compared to other companies’ shares.

The pro investor looks ahead. The pro investor looks past what’s about to happen and instead looks at what will happen after that. That’s why we’re not worried about Australian company earnings being lower this year.

As always, we’re looking to the future.

Does an Aussie Recession Mean Time to Buy Stocks?

To our mind it takes us back to the way most folks have looked at the market over the past six years. But to be honest, it’s not just novice investors who have made this mistake.

Most investors have focused either on the past or on the immediate news-making events – such as what the US Federal Reserve or European Central Bank is up to, or rising Chinese interest rates.

We call that stuff ‘noise’. It’s good for headlines. And it’s good for the folks who tend to focus on macro-economic analysis. But focusing on that stuff isn’t always the best use of an investor’s time.

Chances are if you’d focused on the macro stuff for most of the past six years you’ve sat on your hands in cash while the US stock market gained 170% and even the lagging Australian market gained 70%.

You would have worried too much about money printing, the potential for rising interest rates, and the latest worries about inflation or deflation. None of that would have helped you earn a buck in the stock market – unless you figured, as we did, that low interest rates and money printing are here to stay for the foreseeable future. (Perhaps forever?)

So sure, things may look bad for the Australian economy this year. It could even enter a recession. That could mean Australian companies record lower revenue and profits for the year. But don’t assume that means stock prices are about to hit the skids.

If 2014 turns out to be the bottom of the cycle for the Australian economy as some expect, it could also turn out to be the best time to buy stocks rather than sell them.


From the Port Phillip Publishing Library

Special Report: 574 Years in the Making

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