InvestMacro Forex News

By George Leong, B. Comm.

 I’m not a shopper by any means but I just got back from my annual trip to south Florida where I was able to take a look at the retailers that appear to be attracting tons of traffic in the retail sector.

 First of all, the big-time shopping mall in the Orlando area is the “Premium Outlets” mall chain. The operator of these discount outlet malls across America (which recently expanded into Canada), Simon Property Group, Inc. (NYSE/SPG), is a very interesting play on the retail sector. In each mall, there are often many more than 100 retailers from the top brand-name retail stocks in America.

 As I walked around the mall, I noted what retailers were popular based on each store’s traffic and the buying frenzy inside. Remember, consumer spending drives the economy and overall gross domestic product (GDP) growth, so business in the retail sector can be quite telling.

 One of the top retailers was NIKE, Inc. (NYSE/NKE), which is a major attraction in the mall and one of the top stocks in the retail sector. While Under Armour, Inc. (NYSE/UA) has been increasing its market share, I continue to feel that NIKE is the “Best of Breed” in the sports apparel business in the retail sector.

 In the youth apparel area, The Gap, Inc. (NYSE/GPS) was a major focal point in the mall, along with Banana Republic, which The Gap also operates. In the youth and early adult clothing market, The Gap has been successful in turning around its business over the past decade and is now a good pick to consider in the retail sector.

 Also in the apparel market, Ralph Lauren Corporation (NYSE/RL), which continues to be a top player in the retail sector, was seeing decent business at its storefront in the mall. Ralph Lauren’s signature horse and polo logo has become a trendy status symbol in the retail sector, which could be the reason why it seems to be drumming up business here.

 In the luxury retail sector, stores in the mall that appeared to be attracting the most interest from consumers were Michael Kors Holdings Limited (NYSE/KORS) and Coach, Inc. (NYSE/COH). According to my wife, the lineups were out the door at these stores, as shoppers searched for significant sales. My top pick in luxury is Michael Kors (see “My Favorite Pick Among the Luxury Brand Stocks.”), which has been successful in expanding its product line to include apparel, unlike Coach, which only offers handbags and accessories.

 So in sum, the retail stocks I mentioned above are some of the best in the retail sector and are likely to provide some of the top buying opportunities for the retail investor.

This article What I Learned About Retail Stocks While Shopping in South Florida was originally published at Profit Confidential

Source: Peter Byrne of The Mining Report (1/7/14)

http://www.theaureport.com/pub/na/zinc-or-swim-do-base-metals-have-a-future

Joseph Gallucci of Dundee Capital Markets sees a rosy future for zinc investors. As the large zinc mines shut down, the juniors are stepping forward to meet growing demand for the industrial staple. In this interview with The Mining Report, Gallucci delivers smart tips for base metals investors on where to find opportunity when zinc prices start to climb.

The Mining Report: How are the fundamental challenges facing the global base metals markets likely to play out in 2014?

Joseph Gallucci: There are several long-term issues that impacted copper and the other base metal spaces in 2013, and those long-term issues will persist for the foreseeable future. Allow me to explain the basics via a few examples:

Indonesia recently stopped the export of intermediary products, such as pig iron nickel. The country’s leadership is increasingly practicing resource nationalism by restricting mining firms to in-house processing and to shipping only finished products. It is also unsettling that Intrepid Mines Ltd. (IAU:TSX; IAU:ASX) lost control of its project this year to an Indonesian partner!

In terms of supply chain disruptions in 2013, Grasberg and Bingham Canyon were two of the biggest issues, but we are still well below the annual average of a 5% supply disruption. This year has been an anomaly and quite low in that regard. Supply chain disruptions will definitely pick up going forward and they are impossible to predict.

For problems with mining infrastructure, Chile was the hot button. It has port access and infrastructure issues, and there are still no power agreements in place for many of Chile’s mining development projects. These types of long-term issues will continue to impact the base metals sector into the future.

TMR: Were declining ore grades an issue in 2013?

JG: The decline of ore grade is a long-term problem. We are now seeing projects with only 0.3% and 0.4% copper being developed. Those are very low-grade ore bodies in massive open pits. The issue going forward is the grades will continue to fall unless there are stellar discoveries—which is certainly possible. Reservoir Minerals Inc. (RMC:TSX.V) (BUY rated at Dundee) has put out some very impressive drill holes in Serbia. And Ivanhoe Mines Ltd. (IVN:TSX) (BUY rated at Dundee) is developing the high-grade Kamoa project in the Democratic Republic of the Congo. But those projects are outliers—the trend is for grades to fall lower as the geography of mineable base metal deposits becomes increasingly remote and difficult to find.

TMR: Given declining grades, is there an exploitable synergy between mining for base metals alongside precious metals in terms of lowering overall costs of production?

JG: It depends upon the nature of the ore body. Unfortunately, the declining grades are not strictly limited to copper. There is a decline across all of the base metals and precious metals. The grades just keep sinking lower and lower. But if a firm is mining a polymetallic ore body and it can make a concentrate, the mining and the processing activities are very similar for polymetallic ore bodies. On the other hand, if a firm is purely focused on producing gold doré bars, there are no synergies with the base metals on the processing side.

Look at the experience of Nevsun Resources Ltd. (NSU:TSX; NSU:NYSE.MKT) (BUY rated at Dundee). I just returned from visiting its Bisha operation in Eritrea. Nevsun was mining a gold oxide cap there—putting it through a gold plant and making doré bars. It has changed gears: shutting down the pure gold plant to make a copper and gold concentrate. On the mining side, that process is fairly similar, but on the processing side, producing concentrate is quite different from making gold bars. That is an example of precious metal-base metals synergy. Nevsun has successfully transitioned from being a gold producer to being a base metals producer. The company has a solid balance sheet. It has $300 million ($300M) in cash and pays a 4.5% dividend. It is very rare in the base metals space to see a dividend of any kind, let alone one of that magnitude.

TMR: Let’s look at zinc, which is a metal market that you have studied extensively. What are the commercial applications of zinc?

JG: About 50% of the zinc market is used for galvanizing steel as anti-rust protection for car manufacturing and construction. The biggest buyers are China at 45% and Europe at 20%.

TMR: What’s the global supply situation?

JG: The market in the Western world has been in a supply deficit for quite some time, and now, for the first time, it is in a global deficit. And the deficit will only get bigger. The zinc market is quite different from the copper market because about 40% of its production comes from junior miners, whereas in the copper space, juniors only account for about 7% of production. As the big zinc ore bodies are tapped out and the large mines close, they will continue to be replaced by smaller zinc operations. Brunswick was the first to close, and Century, Skorpion and a whole host of other mines are following suit.

TMR: Are companies hoarding zinc in anticipation of higher prices?

JG: Hoarding is definitely an issue. For example, the zinc inventories on the London Metal Exchange (LME) are controlled by four big players. The bulk of their inventory is stored in several warehouse facilities in New Orleans. The metal stores are not readily available for distribution and it is in fact due to the multiple locations that warehousing companies can move product among themselves in an effort to keep queues long. Therefore, queuing issues can cause price increases—although it is hard to calculate the extent of the problem at present.

TMR: You have talked about the large zinc mines shutting down, which should drive up prices. Can you expand on that scenario?

JG: The big zinc ore bodies are near an end and there is no replacement on the horizon for two reasons: 1) There are no more big ore bodies available. 2) There is no serious exploration for zinc. The copper business faces the same dynamic of gradual diminishment of raw material. Interestingly, as Brunswick and Century and Skorpion shut down their zinc operations, the sector has been freed up to bring on smaller-capacity mines, which helps the supply situation. And there is undeveloped supply capacity in China. But none of these potential developments can replace the magnitude of what we are losing by way of the big ore bodies going extinct.

TMR: Does the downward trend in terms of supply mean that the zinc market is not cyclical?

JG: All commodity markets have long-term cycles. But right now we are dealing with a special zone of the long-term zinc cycle as the big ore bodies close one after the other and are not replaced. This is a first for the zinc market, even though it was not unforeseen.

TMR: So what features can make the changing zinc market attractive to investors?

JG: Zinc equities are leveraged to the commodity, and there are not many equities left to buy on the TSX. But it is important to look at the zinc cost curve, which is very flat compared to the copper cost curve. As the zinc mine shutdowns cause supply limitations, and warehouse inventories start to peter out, market prices will have to rise. And due to the cost curve, even a small increase in the price of zinc will generate a big increase in revenue for producers.

TMR: Which zinc mining firms do you view as the most promising?

JG: My favorite is Trevali Mining Corp. (TV:TSX; TREVF:OTCQX; TV:BVL) (TOP PICK, BUY rated at Dundee). It is in production and it has access to a great partner in Glencore International Plc (GLEN:LSE) (not covered at Dundee). It is quite rare for a junior mining firm to have a strategic partnership with such a giant as Glencore. And because up to 40% of zinc production comes from the juniors, Glencore is interested in obtaining the zinc feed even though it does not have the time to directly manage small operations. In the Trevali-Glencore symbiosis, Trevali mines the ore and sells the zinc concentrate to Glencore at market terms. Trevali is well positioned on the Toronto Stock Exchange (TSX) to benefit from increases in zinc prices, or even by stability in the price.

TMR: Where are the Trevali mines located?

JG: Trevali has a zinc mine in Peru called Santander, which is operating at capacity of 2,000 tons per day (2 Ktpd). Its New Brunswick complex is composed of one mill and two mines, which are scheduled to go on-line by the end of 2014 at about 3 Ktpd. Trevali can rely on Glencore’s expertise to get these mines and mills into production. And the New Brunswick jurisdiction is very safe.

TMR: Trevali’s stock is down from last year. Why?

JG: Trevali was six months late in delivering on its Peruvian operation and the stock went into the penalty box. To secure financing for the New Brunswick operation, the firm announced a potential $60M debt facility arrangement with RMB Resources, but the deal did not close. Since then, Trevali has raised equity ~$45M at $0.83/share, and its stock has gone up. With the equity deal complete and the debt facility potentially resized to $35M, the financing overhang is gone. It is a good buy now that it has one asset in operation and the other asset is financed and can be put into production by the end of next year.

TMR: Who else do you like in the zinc space?

JG: There are not many players left in the zinc space! I like Canadian Zinc Corp. (CZN:TSX; CZICF:OTCQB)(BUY rated at Dundee). It has just finished a very long and rigorous permitting process that took six years to complete. Now, it is tasked with raising the funds to get the permitted asset into production. Its property is located in the Northwest Territories—a bit remote, but in a safe jurisdiction. The financing in 2014 will probably include a debt off-take deal and an equity portion. The project is undergoing some metallurgical work, but I expect news on the financing to start unfolding in H1/14.

There are also smaller zinc companies, such as Zazu Metals Corporation (ZAZ:TSX) (NEUTRAL rated at Dundee), Rathdowney Resources Ltd. (RTH:TSX.V) (NEUTRAL rated at Dundee) and TriAusMin Ltd. (TRO:ASX) (NEUTRAL rated at Dundee), which I follow. These three firms all have good potential, when and if we see higher zinc prices. Another company is Ivernia Inc. (IVW:TSX) (BUY rated at Dundee), which is a lead producer. Ivernia is the only pure-play lead zinc producer on the TSX and is now in production after some environmental issues. The company operates the Paroo Station mine in Australia, which is the largest pure lead mine in the world, and has a strong partnership with Enirgi Group (a private company). Zinc and lead tend to move in the same direction. Lead is currently outperforming zinc, however.

TMR: Will we see higher zinc prices in the near term?

JG: The price of zinc should respond positively as more shutdowns are announced. The fundamentals are clearly in place for both the zinc price and the equity prices that are leveraged to zinc to increase. The stock price of companies that are already in production, such as Trevali, will increase the fastest, but the others should quickly follow suit.

TMR: Is there some kind of technology that can replace the industrial use of zinc?

JG: Not unless you figure out a way to eliminate rust! Galvanizing is always going to be needed, and there is no cost-effective replacement for it as far as I know. If cars and buildings were suddenly made out of plastic, the need for zinc would fall. But short of total plastification, zinc is here to stay.

TMR: Are there other base metals firms that investors should investigate?

JG: I am impressed with the performance of Capstone Mining Corp. (CS:TSX) (BUY rated at Dundee). It is on the cusp of becoming a midcap copper producer. It acquired Pinto Valley earlier this year. Analysts will get a chance to visit the asset in Q1/14. On a multiple basis, Capstone is one of the larger pure copper producers and it is less expensive than its competitors, Lundin Mining Corp. (LUN:TSX) (BUY rated at Dundee) and HudBay Minerals Inc. (HBM:TSX; HBM:NYSE) (NEUTRAL rated at Dundee). Capstone can really shine in 2014!

TMR: Any other companies in North America that have your eye?

JG: Nevada Copper Corp. (NCU:TSX) (BUY rated at Dundee) is one of my top picks. Its two-phase project is unique. Phase 1 is completely permitted and under construction. Phase 2 is undergoing permitting, which will likely be resolved in H1/14. Pending the passage of legislation to transfer federally owned lands to local authorities, it will be permitted quickly. It is rare to find an asset in the U.S. that does not have permitting issues. Nevada Copper is often compared to Augusta Resource Corp. (AZC:TSX; AZC:NYSE.MKT) (SELL rated at Dundee). Augusta is a great ore body, a great deposit, but is undergoing a lot of permitting problems. The next four months will be key for Augusta, whether or not it can complete its permitting process as promised. Nevada Copper offers investors an option in U.S. copper development with very little permitting risk attached.

TMR: One of the companies you cover— Quaterra Resources Inc. (QTA:TSX.V; QMM:NYSE.MKT)(NEUTRAL rated at Dundee)—is developing its Yerington project in Nevada on a former Anaconda Mining Inc. (ANX:TSX), open-pit copper mine. How is that dynamic playing out?

JG: Historically, Quaterra has been spread a bit thin as a mining company, analyzed by many as lacking a clear-cut focus. After Steve Dischler took over as CEO recently, he made it quite clear that the focus is to be on Yerington—and that is the correct focus for this company. Quaterra has a variety of developmental resources. It owns the MacArthur solvent extraction and electrowinning SX-EW project adjacent to the Anaconda mine. That is a low-capex, heap-leach, run-of-mine operation, so there is no crushing required. It will take a relatively low capex to go into production. Quaterra also has the Bear deposit, which has a non-NI-43-101-compliant resource at the moment, and holds about 5 billion pounds (5 Blb) at 0.4% copper. That will be drilled off this year and, hopefully, we can get some positive information then. The short story is that Quaterra will thrive under the new management regime with its primary focus on Yerington, and it will bring other projects along as tailwind.

TMR: Are there any other junior firms you’d like to call our attention to today?

JG: Taseko Mines Ltd. (TKO:TSX; TGB:NYSE.MKT) (BUY rated at Dundee) is a copper producer that is highly leveraged to the copper price but is high cost. However, it has a good cost protection program using low-cost copper hedging. If an investor believes that copper prices will rise, Taseko is the highest-moving stock related to that scenario. Its Gibraltar project is in production and moving along rather well. The project’s third expansion has gone off great, but its growth project, Prosperity, is in the midst of a permitting battle. I do not have a current value for Prosperity. But in Q1/14, we expect an update on Prosperity, which could adversely impact the Taseko stock, or not.

Another stock for people’s radar to track is Reservoir Minerals Inc. (RMC:TSX.V) (BUY rated at Dundee). It has generated fantastic drill results of late in its Serbia project. Similar to how Trevali has Glencore as a partner, Reservoir has Freeport-McMoRan Copper & Gold Inc. (FCX:NYSE) (not covered at Dundee).

TMR: Thank you, Joseph, for being with us today.

JG: Thank you, a pleasure.

Joseph Gallucci has approximately 10 years experience in equity research. He joined Dundee Capital Markets in June 2012 as a senior mining research analyst. Gallucci spent the previous five years at Canada’s largest independent broker, in the mining research team where he was originally a research associate and then promoted to Mining Analyst. Gallucci’s main focus is on base metals and bulk commodities on a global scale. Prior to this, he was a research associate in the forestry sector at a Canadian bank-owned broker. Gallucci holds a Bachelor of Commerce degree from Concordia University and an Master of Business Administration in investment management from the Goodman Institute of Investment Management.

DISCLOSURE:

1) Peter Byrne conducted this interview for The Mining Report and provides services to The Mining Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: none.

2) The following companies mentioned in the interview are sponsors of The Mining Report: Trevali Mining Corp. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Joseph Gallucci: I or my family own shares of the following companies mentioned in this interview: None. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: Trevali Mining Corp. Dundee Capital Markets has provided investment banking services to companies mentioned in this interview in the past 12 months: Trevali Mining Corp. All disclosures and disclaimers are available on the Internet at www.dundeecapitalmarkets.com. Please refer to formal published research reports for all disclosures and disclaimers pertaining to companies under coverage and Dundee Capital Markets. The policy of Dundee Capital Markets with respect to Research reports is available on the Internet atwww.dundeecapitalmarkets.com. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

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By John Whitefoot for Daily Gains Letter

Did gold make a New Year’s resolution? If it happened to set its sights on 2014 being better than 2013, then that might not be too hard to accomplish. For gold bugs, 2013 was abysmal. Gold bullion prices ended the year down about 28%—the biggest annual drop in more than 30 years.

Gold bullion prices experienced an unprecedented run-up after the tragic events of September 11, 2001 and soared higher in 2008 as the global economy teetered on the brink of a recession. Investors’ justifiable fears of economic turmoil and inflation sent them running to gold bullion and gold mining stocks to hedge against this economic uncertainty. Between September 2001 and September 2011, gold prices soared more than 560%.

But since then, gold prices have lost their lustre. And in June of this year, the precious metal hit a three-year low of $1,179 an ounce after the Federal Reserve hinted it would begin to taper its generous $85.0-billion-per-month quantitative easing policy. Investors took this as a sign that the U.S. economy was on solid footing.

Gold bullion prices remained weak near the end of the year after the Federal Reserve announced on December 18 that it would begin to reduce its monthly bond buying program to $75.0 billion a month starting in January. Gold bullion ended the year at $1,202.

2013 will be remembered as the year when (misguided) economic optimism helped lift the Dow Jones Industrial Average by 26%, the S&P 500 by almost 30%, and the NASDAQ by 34%. In 2013, that same optimism also shaved off half of the value of gold mining stocks.

But it could get worse for gold bullion and gold mining stocks in 2014. After all, gold has lost significant value and doesn’t provide a dividend. On top of that, some equities have been providing investors with really solid double-digit gains and dividend growth.

This, coupled with a so-called improving economy, has many gold bugs predicting a weak year for gold bullion prices. Some expect gold prices to trip below $1,000 in 2014, while others predict it will hover near $1,250. Not everyone is so pessimistic about gold bullion prices; gold enthusiast Eric Sprott predicts gold bullion prices will hit $2,400 by this summer. (Source: Keith, D., “Q&A: Eric Sprott on gold and why it’s heading to $2,400 in a year,” The Globe and Mail, August 15, 2013.)

Whether gold bullion prices will explode, go sideways, or give up more ground in 2014, there are a number of different strategies investors can take when it comes to gold mining stocks.

For example, a drop in the price of gold to below $1,100 per ounce could hurt more highly leveraged gold mining companies, such as Barrick Gold Corporation (NYSE/ABX), Detour Gold Corporation (TSX/DGC), and Newmont Mining Corporation (NYSE/NEM).

When it comes to gold mining stocks, look for those companies with a strong balance sheet (cash), large deposits, and production costs near or below $1,000 per ounce. Gold mining stocks that fit that bill include B2Gold Corp. (NYSE/BTG), Eldorado Gold Corporation (NYSE/EGO), and Goldcorp Inc. (NYSE/GG).

In a year when few expect gold prices to soar and many mining stocks are struggling to survive, you may also want to consider looking for junior gold mining stocks with proven resources to be valuable at current prices, such as Midas Gold Inc. (TSX/MAX) and Gold Reserve Inc. (TSXV/GRZ).

While 2014 may not be the year gold bullion regains all of its shine, it might be remembered as the year when astute investors got in ahead of the rush.

By Dennis Miller

Doctors cannot cure a patient in severe pain by pumping him full of painkillers; they need to accurately diagnose the root cause of the pain before treatment. Without an accurate diagnosis, it is nearly impossible to fix a problem, medical or otherwise.

And the stakes are high: a misdiagnosis can trigger treatment that may compound a problem instead of making it better. That’s exactly what happened with the bank bailout five years back: the “cure” set in motion new challenges for seniors and savers.

Forget all the technical mumbo-jumbo. Here are the need-to-know facts: for generations seniors and savers could invest the bulk of their retirement nest egg in safe, interest-bearing CDs, government bonds, and utility bonds. That, coupled with Social Security, allowed for a comfortable retirement. Those 6-7% yields are gone, as we all know.

Was the 2008 financial crisis properly diagnosed and treated? That depends on whom you ask. Most Americans, however, don’t think so. According to Pew Research, “Five out of eight Americans surveyed (63%) earlier this month believe the US financial system is no more secure in 2013 than it was before the economic crisis of 2008.”

In September, Sheraz Mian broke down the 2Q earnings reports of the S&P 500 companies in Zacks Earning Trends:

“Yes, the total earnings tally reached a new quarterly record in Q2 and the rest of the aggregate metrics like growth rates and beat ratios look respectable enough. But all of that was solely due to one sector only: Finance. … Finance results have been very strong, with total earnings for the companies that have reported results up an impressive +30% on +8.5% higher revenues. Excluding Finance, total earnings for the remainder of S&P 500 companies that have reported would be down -2.9% from the year-earlier period.”

Too-big-to-fail banks are certainly succeeding. The report continued:

“Earnings growth was particularly strong at the large national and regional banks, with total earnings at the Major Banks industry, which includes 15 banks like J.P. Morgan and Bank of America.”

Pew Research also reported that 33% of people it surveyed thought things were more secure in 2013 than they were in 2008. Those people must work in the financial sector.

The problem continues to grow. And it’s a problem that affects us all. While the Federal Reserve holds down interest rates and floods the banking system with money, the retirement dreams of several generations are being destroyed.

As interest rates tumbled, investors ran to bonds, utilities, dividend-paying stocks, and master limited partnerships (MLPs), which offer better yields. As one subscriber mentioned to our team, “at least they have a better chance of keeping up with inflation.”

Sure enough, the stock market came back to new, all-time highs. So now both the banks and Wall Street are happy. But where does that leave us?

In the middle of 2013, Mr. Bernanke uttered the word “taper,” sending the stock market into a tizzy and gold prices soaring. This was a preview of things to come. Many of the investments I mentioned above took a dive, as they have become interest-rate sensitive. Take utility stocks, for example. In September, I highlighted how these stocks took an immediate 11.2% tumble. Since then, although the Fed has tried to calm the markets, there is still real cause for concern.

I’m worried, but I refuse to throw down my cards. Doug Casey recently reminded us of one of his basic principles: “My preferred investment style is to look for opportunities where no one else is looking.” If we invest along with the crowd, we can expect to get caught in the rushing tide, regardless of its direction.

While the Federal Reserve has been trying to keep things under control, don’t be lulled to sleep. Interest rates may have turned the corner, and it is time to review your portfolio with that in mind. Here are five questions to ask about your current investments.

• Is this investment likely to get caught in the outgoing tide if the Fed gets serious about tapering?
• How has this company performed in other down markets?
• Can the company’s fundamental business thrive in both good and bad economic times?
• Is the dividend safe?
• Should the market turn down rapidly, what should you expect from this company?

At Money Forever, we put trailing stop losses on our portfolio picks for a darn good reason: We cannot afford large losses with our retirement money.

Invest where no one else is looking. All too often these are called “out of favor” investments. That implies there is something wrong with them, and people avoid them accordingly. Seventy-three years on the planet, however, tells me something different. There are many attractive people at every high school prom, but very few are crowned king or queen. The same principle applies to investments.

The real challenge is finding those attractive opportunities that have been overlooked by the majority of investors. Where should we look? Can we do the research ourselves? If we want to take on that challenge, do we even have the time and skill set?

Or could we turn to our stockbrokers? It’s not likely. Years ago, my broker and I wrote to her company’s research department in New York, asking for advice in a particular market sector. The “research department” sent a summary similar to what I now get from my online broker. Our request was probably handled in less than two minutes. Their analysis: buy their recommendation because 8 of 10 companies rate it as a “strong buy.”

No kidding! That was where everyone else was looking. It was the last investment I wanted to make.

The good news is: we have other options. Folks like Doug Casey saw a great void in the retail market, and investment newsletters began to flourish.

Fast forward to 2013… I asked our team of analysts for tips on looking where no one else was. We started our search with a basic premise: maximizing income and appreciation while avoiding catastrophic losses.

With modern tools, an analyst can put in a few variables and get a list of candidates without breaking a sweat. That works well until everyone picks the same investments. Real research takes a lot more time and effort. With that said, here are four tips for finding hidden gems.

1. Being #1 is not always an advantage. In our special report Money Every Month, we ranked the top dividend-paying stocks by dividend yield and payment date. It is common to stop at the stock with the highest yield. But there are a lot of good companies further down the list. They may pay a smaller dividend, but they are just as solid and much less volatile. If there is less money pouring into these stocks, there is less risk of losing dividend income if the stock tumbles and everyone exits.
2. Big does not always mean bad. There are some large companies that have a strong worldwide presence with a good dividend yield. While they may not be the #1 name in the industry, they do very well. These stocks don’t necessarily have tiny dividends—just not enough to catch the eye of yield-starved investors. It just takes time to find the right ones. It can be done; I know because we have some in the Money Forever portfolio.
3. Find investments where potential growth outweighs interest-rate sensitivity. If the primary driver in market price is not solely the dividend, the investment won’t be as affected during a period of rising or dropping interest rates as it might be otherwise.In the Money Forever portfolio, we have a convertible bond fund with a good yield, but its performance is affected by the performance of the underlying stocks. The one we selected has a large share of defensive stocks in sectors we are comfortable with, thereby reducing risk and raising the potential for appreciation.
4. Understand how various sectors react in a down market with rising rates. Concentrating on defensive sectors reduces risk. A company can have good dividends with growth and appreciation, but it might be a terrible investment in a downturn. The financial sector is a prime example: The dividends are good, and a strengthening economy can make the sector grow, but those dividends won’t pay off if another 2008 is just around the corner.The term “bond bubble” is being tossed around a lot lately. Should this bubble burst (much like the real estate bubble before it), the financial sector will be dramatically affected.

It has been five years since interest rates tumbled. We don’t need any more proof to know the political class is either unwilling or unable to fix the problem. We can’t sit around and wait for the good old days to come back, nor can we afford to just follow the crowd. We have to deal with our problem to have enough for retirement and make it last.

Sometimes laughing at yourself can be humbling; it can also be a great learning experience. I recently had an exchange with one of our regular readers; he wanted to know if our premium subscription was worth the money. With my marketing background, I have always believed that you should put the value before the cost. We discussed how our team is educating readers on subjects they are unlikely to read about elsewhere. And the Money Forever portfolio is doing quite well, to boot. Some subscribers have mentioned that their gains have paid for our services for many years to come. I told this particular reader that the current promotional price is $8.25/month, and if we can’t bring more value than that to our subscribers, we wouldn’t be in business. His response was humbling: “Gee, I didn’t know that was the price. Had I known that, I would have signed on weeks ago.”

So much for my marketing expertise!

On a trip to Vermont, we cut a short video outlining what we’re all about and how we fit in to the big picture—your big picture. I urge readers to take a few moments to watch. The best part is this: You can sign up for the subscription, download my book, and all our special reports and back issues. If, after you read through them, you decide this is not for you, you can cancel within 90 days and receive 100% of your money back. And you can keep the material as our thank-you for looking us over.

By John Mauldin – Thoughts from the Frontline: Forecast 2014 The Human Transformation Revolution

It is that time of the year when we peer into our darkened crystal balls in hopes of seeing portents of the future in the shadowy mists. This year I see three distinct wisps of vapor coalescing in the coming years. Each deserves its own treatment, so this year the annual forecast issue will in fact be three separate weekly pieces.

The final letter of the series will discuss what I see as potentially developing in the markets this year, but such prognostication has to be framed within the context of two larger and far more important streams. Next week we will examine the larger economic problems facing much of the developed world, and specifically we’ll consider the Era of Unfulfilled Expectations. What happens when governments and central banks find it impossible to live up to the promises that they have made to their constituencies? Throw in a mix of frustrating demographics and disastrous economic policy choices, and you have a witch’s brew of uncertainties.

Thankfully, an even greater force of progress will ultimately overwhelm the unintended consequences of meddling governments to ultimately deliver a very positive future, even if the the benefits are somewhat unevenly distributed in the shorter term. In this week’s letter we’ll look at the economic effects of the Age of Transformation, countering the arguments that call for a bleak, low-growth future wherein all the marvelous innovations that have occurred in the course of the human experience are behind us. Are we not to see yet again a development with the impact of the steam engine, electrical grid, telecommunications, or combustion engine? I think we will – in fact, fundamental, life-changing innovations are happening all around us today. We are just looking in the wrong places, expecting the future to resemble the past. If the depressing models of zero future growth are right, then our investment choices should be far different than if we have an optimistic view of the human experiment. Yes, we must balance our optimism with an appreciation of the uncertainties that will inevitably result from the antics of overreaching governments and their hubristic economic and monetary policies; but we must first and foremost have our eyes wide open to possibilities for growth.

It might help to think of the process as one of exploration. I imagine a group of intrepid adventurers (I picture in my mind Daniel Boone) topping one mountain pass after another, each time gazing off into the distance … to the next mountain pass. Between them lie beautiful valleys and rivers – as well as parched deserts and dead-end canyons full of potentially hostile natives. So the path is both uncertain and unending, as we head toward some ultimate destination we can barely even speculate about. Such a journey should not be undertaken without a great deal of thought and preparation, and it helps if you can find an experienced guide to assist in the process.

Before we set off on this week’s leg of the journey, since this New Year’s Thoughts from the Frontline is normally the most widely read issue of the year, let me welcome new readers and note that this weekly letter is free, and you can subscribe at http://www.MauldinEconomics.com. And feel free to send this letter on to your friends and associates – I hope it will spark a few interesting conversations.

The End of Growth?

There is a school of thought that sees the first and second industrial revolutions as having been driven by specific innovations that are so unique and so fundamental that they are unlikely to be repeated. Where will we find any future innovation that is likely to have as much impact as the combustion engine or electricity or (pick your favorite)?

This is a widespread school of thought and is nowhere better illustrated than in the work of Dr. Robert Gordon, who is a professor of economics at Northwestern University and a Nobel laureate. I have previously written about his latest work, a paper called “Is US Economic Growth Over?”

Before I audaciously suggest that he and other matriculants in his school of thought confuse the products of industrial revolutions with their causes, and thus despair over the prospects for future growth, let’s examine a little bit of what he actually says. (You can of course read the original paper, linked above.) To do that we can turn to an article by Benjamin Wallace-Wells that I cited in Outside the Box last June. He explains Robert Gordon’s views better than anyone I am aware of.

“[T]he scope of his [Gordon’s] bleakness has given him, over the past year, a newfound public profile,” Wallace-Wells notes. Gordon offers us two key predictions, both discomfiting. The first pertains to the near future, when, he says, our economy will grow at less than half its average rate over the last century because of a whole raft of structural headwinds.

His second prediction is even more unsettling. He thinks the forces that drove the second industrial revolution (beginning in 1870 and originating largely in the US) were so powerful and so unique that they cannot be equaled in the future.

(A corollary view of Gordon’s, mentioned only indirectly in Wallace-Wells’s article, is that computers and the internet and robotics and nanotech and biotech are no great shakes compared to the electric grid and internal combustion engine, as forces for economic change. Which is where he and I part company.)

Gordon thinks, in short, that we do not understood how lucky we have been, nor do we comprehend how desperately difficult our future is going to be. Quoting from Wallace-Wells:

What if everything we’ve come to think of as American is predicated on a freak coincidence of economic history? And what if that coincidence has run its course?

Picture this, arranged along a time line.

For all of measurable human history up until the year 1750, nothing happened that mattered. This isn’t to say history was stagnant, or that life was only grim and blank, but the well-being of average people did not perceptibly improve. All of the wars, literature, love affairs, and religious schisms, the schemes for empire-making and ocean-crossing and simple profit and freedom, the entire human theater of ambition and deceit and redemption took place on a scale too small to register, too minor to much improve the lot of ordinary human beings. In England before the middle of the eighteenth century, where industrialization first began, the pace of progress was so slow that it took 350 years for a family to double its standard of living. In Sweden, during a similar 200-year period, there was essentially no improvement at all. By the middle of the eighteenth century, the state of technology and the luxury and quality of life afforded the average individual were little better than they had been two millennia earlier, in ancient Rome.

Then two things happened that did matter, and they were so grand that they dwarfed everything that had come before and encompassed most everything that has come since: the first industrial revolution, beginning in 1750 or so in the north of England, and the second industrial revolution, beginning around 1870 and created mostly in this country. That the second industrial revolution happened just as the first had begun to dissipate was an incredible stroke of good luck. It meant that during the whole modern era from 1750 onward – which contains, not coincidentally, the full life span of the United States – human well-being accelerated at a rate that could barely have been contemplated before. Instead of permanent stagnation, growth became so rapid and so seemingly automatic that by the fifties and sixties the average American would roughly double his or her parents’ standard of living. In the space of a single generation, for most everybody, life was getting twice as good.

At some point in the late sixties or early seventies, this great acceleration began to taper off. The shift was modest at first, and it was concealed in the hectic up-and-down of yearly data. But if you examine the growth data since the early seventies, and if you are mathematically astute enough to fit a curve to it, you can see a clear trend: The rate at which life is improving here, on the frontier of human well-being, has slowed.

To continue reading this article from Thoughts from the Frontline – a free weekly publication by John Mauldin, renowned financial expert, best-selling author, and Chairman of Mauldin Economics – please click here.

© 2013 Mauldin Economics. All Rights Reserved.
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By Moe Zulfiqar for Daily Gains Letter

In 2013, gold prices saw the worst tumble in a few decades. This decline in prices caused many to panic, and the negativity towards the yellow metal increased significantly. As we begin 2014, this sentiment seems to be holding on. It’s not uncommon to hear analysts or investors say how gold bullion isn’t worth holding and that there are better opportunities.

However, I’ve been bullish on gold for some time, and I stand by my bullishness. The main reason for my take on the precious metal comes down to the most basic factors that determine price—supply and demand. I continue to see a declining supply and increasing demand. Keeping all else the same, this is the perfect recipe for higher prices ahead.

On the demand side, we are seeing buying from countries across the globe. This was something that was said to have slowed when the gold bullion prices were going down back in April of 2013 and then again in June of 2013.

Australia’s Perth Mint reported sales of gold bullion coins and bars increased by 41% in 2013 compared to a year ago. The Mint sold 754,635 ounces of gold bullion in 2013 compared to 533,333 ounces in 2012. (Source: Sedgman, P., “Perth Mint Gold Sales Surge 41% in 2013 on Worst Rout Since 1981,” Bloomberg, January 2, 2013.)

At the U.S. Mint, the increase in sales of gold bullion coins has been similar to that of Australia’s. The U.S. Mint, for the entire year of 2013, sold 856,500 ounces of gold bullion in American Eagle coins. This was 13% higher compared to the same period a year ago, when the U.S. Mint sold 753,000 ounces of gold bullion in American Eagle coins. (Source: “Bullion Sales/Mintage Figures,” United States Mint web site, last accessed January 3, 2013.)

When I look at nations like India and China—two of the biggest gold bullion–consuming nations—the demand looks robust, as well. In India, the government and central bank have imposed restrictions on buying; they want to slow the demand for gold bullion, but they are failing. Smuggling has become a new major way of bringing the yellow shiny metal into the country. In China, exact numbers aren’t really available, but just by looking at the imports of gold bullion from Hong Kong, those numbers show that the appetite for the yellow shiny metal in China remains solid.

On the supply side, the conditions are becoming bleak, and the production of gold, according to some indicators, is already declining. Consider the U.S. gold bullion mine production. In the first nine months of 2013, mine production declined by 2.85% compared to the same period a year earlier. Between January and September of 2013, U.S. mines produced 170,000 kilograms (kg) of gold bullion. In the same period of 2012, these mines produced 175,000 kg. (Source: “Mineral Industry Surveys,” December 2013, U.S. Geological Survey web site, last accessed January 6, 2014.)

With all this said, one thing has to be made very clear: the negativity towards gold bullion can continue for some time, and the prices may go down further. Investors looking to buy the metal may want to consider investing in an exchange-traded fund (ETF) like SPDR Gold Shares (NYSEArca/GLD). These investors also have to remember to not over-leverage their portfolio with gold bullion; a limited percentage of the portfolio value placed in gold will do the job. By following this investment strategy, investors will protect their portfolio from massive draw-downs and won’t miss out on their future goals.

By Michael Lombardi, MBA

Will the gains that the U.S. housing market made in 2012 and 2013 continue into 2014? As you’ll read below, the biggest threat to the housing market is moving in the opposite direction—against housing.

Sure, the Case-Shiller S&P Home Price Index, which tracks prices in the U.S. housing market, shows an overall increase of 13.6% in home prices in the first 10 months of 2013 (see the chart below).

            Chart courtesy of http://stockcharts.com/

But for growth in the housing market to continue, you need favorable market conditions for buyers. Unfortunately, the “favorable” conditions of 2011 through to 2013 are now becoming “unfavorable.”

Interest rates on mortgages are rising sharply. In November of 2013, the popular 30-year fixed mortgage rate tracked by Freddie Mac stood at 4.26%. In the same period a year ago, this rate was only 3.35%. (Source; Freddie Mac web site, last accessed January 3, 2013.) The interest rate on the standard 30-year fixed mortgage has gone up 27% in twelve months. And the higher mortgage rates go, the more the affordability for home buyers declines.

But rising interest rates are not the only factor weighing against the housing market in 2014.

Adjustable-rate mortgages (ARMs), which virtually disappeared after 2007, are making a big comeback.

According to DataQuick, in November of 2013, about 11% of all homes in Southern California were bought using ARMs. This has doubled in the area from the same period a year ago. (Source: Los Angeles Times, January 1, 2013.) ARMs have a fixed interest rate for a certain period of time, and then rates on the typical ARM adjust to market rates. What will happen to all those home buyers who purchased houses using ARMs over the past three years as interest rates increase? They will have added monthly costs—that’s what will happen.

Any softness for the U.S. housing market at this point will spell disaster for an already delicate U.S. economy. I’d be weary of the housing market recovery in 2014.

This article Trouble Ahead for Housing in 2014? was originally published at Profit Confidential

By Sasha Cekerevac for Daily Gains Letter

With the new year just beginning, many investors will begin looking at their portfolio and trying to figure out how to shift their investment strategy to include sectors that should outperform in 2014.

One investment strategy I like to use during the beginning of the year is to look for a situation where fundamentals are improving, but market sentiment remains weak.

At year-end, many times you will see tax loss selling occurring. Essentially, investors are selling those holdings that have gone down the most to crystallize the losses for tax purposes. This also presents an opportunity—if the long-term investment strategy is sound.

One sector that has been hit hard is the precious metals sector. This should be no surprise to many readers, as the sell-off in precious metals has gotten a lot of negative media attention. However, I would like to bring to your attention an investment strategy of looking to add industrial precious metals, such as platinum and palladium, to your portfolio.

The vast majority of demand for both platinum and palladium is for industrial purposes, especially for catalytic converters in the automobile industry. These precious metals are crucial for the production of vehicles, and demand in this sector continues to rise.

While total vehicle sales for the full year of 2013 aren’t in yet, it is expected that U.S. auto sales will be the highest in six years, with an approximately 50% jump from the lows experienced in 2009. In 2014, U.S. auto sales will continue to be strong, with an estimated total number of over 16 million units sold.

The investment strategy in these industrial metals is to determine whether or not demand is fundamentally increasing or decreasing. Both here in America and globally, it’s quite clear that industrial use will continue to rise.

The price of palladium has remained near its highs for the year, but platinum followed other precious metals lower in 2013. Part of the selling pressure earlier in the year was due to exchange-traded funds (ETFs) that were selling precious metals across the board. Plus, over the past month, I believe the market was experiencing tax loss selling in both precious metals and mining stocks.

With 2014 upon us, I think these precious metals look quite favorable. Much of the selling by ETFs appears to have ended, yet fundamental demand for these precious metals remains strong. In this situation, it appears that a bullish scenario is emerging as an investment strategy.

Chart courtesy of www.StockCharts.com

One way to incorporate this investment strategy of adding these industrial precious metals to a portfolio is through an ETF, such as the Sprott Physical Platinum and Palladium Trust (NYSEArca/SPPP). This particular ETF holds physical precious metals and is a relatively cost-effective method of incorporating this investment strategy without the additional fees of buying and selling physical coins and bars as an individual.

Chart courtesy of www.StockCharts.com

If one were interested in a stock that has exposure to these industrial precious metals, I would consider a firm like Stillwater Mining Company (NYSE/SWC). The company’s investment strategy is to focus on both mining precious metals and extracting platinum and palladium from spent catalytic converters. With operations here in America, there is a lot less risk than other companies with mines in South Africa and Russia.

I’m a value-oriented person, and I like adding stocks in assets when others are selling them as part of my overall investment strategy. I think the entire precious metals sector, including gold and silver along with platinum and palladium, has been oversold. When we look back at 2014, we will see just how cheap this sector was at the beginning of the year.

Guest Post By Alex Eliades

I have recently been exposed to the various business models that Forex brokers use to profit from offering trading services and it is definitely an area that should be more transparent. To define them we are looking at market making, STP (straight through processing) and ECN (electronic communication network) along with various cocktails of the three.

As many of you will know a broker that works as a market maker matches buyers and sellers together on their own network but makes money by charging a difference in the spread. However, a large percentage of Forex brokers are not able to physically match up the buying and selling of trades as there is very rarely enough orders to do so. If they were to try, then a client would place a trade and often have a long wait until it was matched up with another trade and get processed.

Therefore, a Forex company that offers the market making model uses an external price feed, fulfills orders by becoming the buyer or seller of currency itself. Therefore, in a way a broker offering a market maker model is trading directly with its clients. This means that for a market maker broker the total client trade must overall be negative in order for the broker to profit. At first it may appear like a bad idea to trade with a market maker because a trader could believe that if they consistently make money then it is not in the broker’s interest to have them as a client. Well, if a broker is operating as a 100% market maker then that would be true but most brokers identify traders that profit and large trade volumes of risk and they cover those positions with prime brokers or liquidity providers at a spread lower than they are giving to those clients. This way brokers that operate market maker models can still accommodate and profit from traders that profit. The negative side of this is that while small trades are processed instantly anything over a certain threshold would go to a dealer, who would either accept an order for the broker or pass the risk on to a prime broker. If an order is requested at a price that is unobtainable in the market or is seen too risky then the dealer can reject the order and issue an alternative re-quote, which the client can accept or decline. The whole market maker model does work well for brokers but as many have noted does have a conflict of interest between the client and the broker. It is in the interest of the broker for a novice trader to deposit a lot of money, trade badly and lose everything. If a trader is consistently profitable then a broker operating as a market maker is at risk and will take measures to protect themselves, which in some cases can work against the trader.

Looking at the agency business models otherwise known as STP and ECN there are some distinct differences and advantages when compared to the market maker model. The first thing to understand is that with the agency model the broker acts as a middle man passing trades between a prime broker and its client. The broker covers their operating cost by either adding a mark-up in the spread or by charging a commission on each trade. This way it is in the interest of the broker for the clients to make a lot of trades, profit and continue trading. It is not in the interests of the broker for a client to make a huge deposit and lose everything in a single trade as the broker does not profit from losses. Therefore, the agency model aligns the interests of the trader and the broker and gives the broker a great incentive to provide the best trading environment to its clients so that they can become profitable and trade more. This also makes brokers that follow the agency model ideal for traders that use scalping and hedging strategies or EAs. It is also worth noting that the agency models make re-quotes a thing of the past as orders do not go through a dealing desk. However, it is important to understand that as orders are passed through directly to the market there are some cases when orders cannot be executed at the price ordered in the traders platform. Instead, they get executed at the closest possible price instantly with what is known as ‘slippage’, which is a difference in the order and execution price. This can happen due to latency between the traders PC, the server placing the order and the actual market liquidity itself. Slippage can be both positive and negative and good brokers will always pass on positive slippage to their clients as well as negative slippage. A trader of a direct market access broker will usually experience a 50-50 split between positive and negative slippage when it occurs at all. Under a market maker model the equivalent re-quote will never be positive.

Let’s take a look at the STP and ECN agency models in more depth to understand how they work and differ from one another.

First up, the STP model stands for Straight Through Processing and does as its name suggests. Using an STP model a broker takes the pricing offered from an institutional broker and offers it to the trader with either a spread mark-up or a commission fee per trade.

Second, the ECN model stands for electronic communication network and this works by taking pricing from a pool of liquidity providers and relaying all prices as well as market depth to the trader so that the trader can get the best pricing from many sources. Just like the STP model, a broker offering an ECN to their clients will cover their operating costs through a mark-up in the spread or on commission per trade.

By default, the most popular trading platform MT4 is not capable of passing through ECN pricing from multiple sources with the market depth without the aid of a plugin. For this reason only brokers that offer platforms such as MT5, Saxo Trader and Currenex can offer a true ECN environment to their traders. Despite this many MT4 brokers claim to offer ECN accounts. They either do this with an unofficial MT4 plugin or they are actually offering STP/ECN accounts, which is a cocktail of the two models. Under the STP/ECN model a broker would offer MT4 (that doesn’t support multiple price feeds) and using a bridge have it connected to an ECN so that the best pricing is displayed from multiple liquidity providers in one price feed. This results in the lowest spread forex brokers that offer the MT4 platform.

With the fierce competition between brokers and the push towards transparency in the Forex market it seems that the people will be in search of the best ECN Forex broker for the foreseeable future. Market makers will still continue to operate but the fight between the various broker models will continue to be thrashed out for quite some time and I am sure dominance will boil down to which one can offer the most advantageous trading environment.

Guest Post by Alex Eliades

From a technical perspective I expect weaker AUD against the buck, but price is still above that 0.8882 key level that needs to be broken for a bearish case. I would love to see push down to 161.8% Fibonacci extension target to make sure that pair is forming an impulsive fall. In such case we would confirm bearish view and look for possible shorts in rest of the week.

AUDUSD 1h elliott wave analysis

If you are intraday trader on German Dax then current price action may be very interesting for you as we see price correcting up with (A)-(B)-(C) formation that represents just a temporary recovery within larger incomplete downtrend. Keep an e ye on that 9500 and 9540 figures from where sell-off may occur.

Dax30( Mar 2014) 1h elliott wave analysis

Written by www.ew-forecast.com

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