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Renewed concerns regarding the debt situation in Spain sent the euro plunging to fresh lows against several of its main currency rivals, including the US and Australian dollars and the Japanese yen on Friday. Investors are now worried that Spain will have to seek a full scale international bailout to rescue its ailing banking sector. This week, the common-currency is likely to see additional volatility, as a batch of euro-zone news is set to be released. Tuesday in particular may be a busy day in the markets, as both France and Germany are scheduled to release manufacturing data. Should any of the indicators come in below their expected levels, the euro could extend its downtrend.
Investors sought out safe-haven assets on Friday following renewed Spanish debt fears. The news sent the US dollar significantly higher against several of its main currency rivals, including the Swiss franc and euro. The USD/CHF gained close to 100 pips during European trading, eventually peaking at 0.9885 before staging a minor correction to close out the week at 0.9875. Against the euro, the USD was able to reach a fresh two-year high after investors became concerned that Spain would soon need to request an international bailout. The EUR/USD sank as low as 1.2143 before finishing the week at 1.2158.
This week, dollar traders will want to pay attention to several potentially significant news events. On Tuesday, a speech from Fed Chairman Bernanke could lead to volatility if he hints at a new round of quantitative easing to boost the US economy. In addition, home sale data on Wednesday, followed by Thursday’s Core Durable Goods Orders and Friday’s Advance GDP figure mean that the greenback is likely to see plenty of movement in the coming days.
The euro dropped to a record low against both the Australian and Canadian dollars on Friday, while the EUR/JPY hit an 11-year low. Fears that Spain, the EU’s fourth largest economy, will soon require a bailout were blamed for the euro’s downtrend. The EUR/AUD fell close to 70 pips during European trading, while the EUR/CAD dropped close to 60 pips. The pairs respectively finished out the week at 1.1707 and 1.2309. Against the yen, the euro tumbled over 100 pips before closing the week at 95.43.
This week, analysts are warning that given the current fears that the euro-zone debt crisis is spreading to other countries in the region, combined with the ongoing concerns regarding Spain, the euro could potentially fall further against its main rivals. In addition to any announcements out of the EU regarding the Spanish debt situation, traders will also want to pay attention to manufacturing and services data out of Germany and France, scheduled to be released on Tuesday. Should any of the news fail to come in as expected, the euro may extend its recent losses.
Risk aversion due to euro-zone news sent the price of gold tumbling close to $13 an ounce during the first half of the day on Friday. The precious metal eventually reached $1573.26 before correcting itself after Russia announced that it had boosted its gold reserves. Gold eventually closed out the week at $1584.25 an ounce.
This week, gold traders will want to pay attention to news out of the EU and US. While the euro-zone debt crisis has resulted in prices falling in recent days, gold has the potential to see gains following a speech from Fed Chairman Bernanke on Tuesday. Should the Fed Chairman hint at a new round of quantitative easing in the US, the precious metal may turn bullish as a result.
After hitting an eight-week high earlier in the week, crude oil resumed its bearish trend on Friday as euro-zone news caused investors to shift their funds to safe-haven assets. The price of oil fell by well over $1 a barrel over the course of the day, eventually reaching as low as $90.90 before recovering to close out the week at $91.51.
This week, oil traders will want to monitor any developments in the Middle East. The military-conflict in Syria combined with the ongoing dispute over Iran’s nuclear program were the main reasons behind oil’s bullish movement last week. Any escalation in either conflict may lead to supply side fears among investors which could result in oil resuming its upward trend.
The weekly chart’s Slow Stochastic appears to be forming a bullish cross, indicating that this pair could see an upward correction in the coming days. Furthermore, the same chart’s Williams Percent Range has crossed over into oversold territory. Traders may want to open long positions for this pair.
Long-term technical indicators indicate that this pair is range trading, meaning that no defined trend can be determined at this time. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the near future.
The daily chart’s Relative Strength Index has crossed into oversold territory, signaling possible upward movement for this pair in the near future. In addition, the Slow Stochastic on the same chart appears to be forming a bullish cross. Going long may be the wise choice for this pair.
The weekly chart’s Williams Percent Range is currently well into overbought territory, signaling that downward movement could occur in the coming days. Furthermore, the Relative Strength Index on the same chart is currently at the 70 level. Opening short positions may be the wise choice for this pair.
The Slow Stochastic on the daily chart is forming a bullish cross, signaling that this pair could see upward movement in the near future. This theory is supported by the Relative Strength Index on the same chart, which has crossed into oversold territory. Opening long positions may be the wise choice for forex traders today.
Forex Market Analysis provided by ForexYard.
© 2006 by FxYard Ltd
Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.
A report into attitudes towards owning gold bullion posed the following question: ‘What are the reasons for the continued sceptical attitude towards gold?’
There were three key answers:
The report pointed towards a positive future for gold as an investment tool. Yet, it also noted that the metal still needs to overcome its status as an investment tool for cranks, weirdos and old fashioned investors.
So how did gold get its reputation in the mainstream as a ‘barbarous relic’?
John Maynard Keynes is often credited with the term. But in actual fact, he wasn’t referring to gold directly, but rather the gold standard.
The reference to gold dates back further, to 1894 when a Tennessee merchant told the US Senate that, ‘Gold is a relic of barbarism and should be discarded by all civilized nations as a medium of exchange.’
No doubt that was just what the Senate and future US central bankers wanted to hear.
In 1946, the Bretton Woods agreement enabled a fixed exchange rate. It meant that you could exchange your US dollars for gold. The going rate was $35 per ounce for several decades. President Richard Nixon ended this system in 1971. From that point on, only faith in the American government was behind the greenback.
And what happened to gold? Soaring inflation (around 11% by 1979) enabled gold to rally over the next decade from $35 an ounce to more than $850 an ounce.
As the decadent eighties rolled in, all sorts of fancy financial tools were developed. These were the investing tools for the modern man. You could leverage yourself to the eyeballs.
After all, why buy something as simple as gold when there are complicated financial tools like swaps, futures, options, Forex, warrants, bonds and stocks to invest in?
This has led the modern man, with all his fancy financial products, to sneer at gold investors. He sees them as people who refuse to move with the times. The sort of people who were most likely your Great Depression surviving grandparents.
So it’s not easy to change gold’s image from a ‘barbarous relic’ to an investing tool. And it’s made harder when today’s investing ‘gurus’ slam it.
Take this, from a speech given by billionaire investor Warren Buffett in 1998:
‘[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.’
11 years later, when the gold price had risen from $350 per ounce to $850 an ounce (a nice 142% gains), did Buffett change his tune?
No. He didn’t. In fact, when a CNBC reporter asked where the price of gold was going and if it had a place in value investing, he said gold does nothing but ‘…look at you’:
‘I have no views as to where it will be, but the one thing I can tell you is it won’t do anything between now and then except look at you. Whereas…Coca-Cola will be making money, and I think Wells Fargo will be making a lot of money…it’s a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that.’
Since Buffett said that gold would do nothing between ‘now and then except to look at you’, the spot price has risen 84%.
But what about Coca-Cola [NYSE: KO] and Wells Fargo [NYSE: WFC]? Seeing as they were Buffett’s choice of investment at the time. Coke’s up 73% and Wells Fargo is 24% higher since then…
It’s not a bad return for either Wells Fargo or Coca-Cola. But it’s not as good as an 84% return.
Shares in Coca-Cola are trading at USD$77.55. Does that sound like a good price to you? Well here’s the thing, for one ounce of gold at roughly USD$1,570, you’d get less than 21 Coca-Cola shares.
What do you actually get with the Coke stocks? A bit of paper that says you own a tiny smidgin of the company. You and about 9.2 million of your closest mates.
And here is one of the crucial differences owning shares versus gold. You’re at the mercy of company management.
At any time company management can dilute the value of your shares by issuing more. When that happens, if you want your shares to have the same value as previously, you have to buy more.
But with gold, no one can touch it. As in, the metal is ‘outside’ the financial system. No matter what central bankers do, they can’t fiddle with it. A corporation can’t water down the value of your gold by issuing more. It’s a finite resource. It’s a store of value. It’s a tangible asset. No one has yet found a way to create gold from thin air.
And yes, it’s pretty to look at.
Times have changed. The thing is, owning gold is becoming normal.
Just recently, on a construction site in Melbourne, a few electricians were talking about how to best store their cash (they’re tradies after all). As they ate their meat pies and drank their cans of Coke, one of the sparkies’ said to Mr Smith, ‘Hey, can you get your wife to call me? I want to buy some gold but I don’t know where to start.’
No longer is the yellow metal only for the ‘gold bugs’, old timers and the rich…
But the changing attitudes over gold go deeper than a couple of tradie’s chatting over a smoko. Things are slowly changing at the big end of town too.
China is developing its own internal gold market.
According to the Financial Times: ‘China is set to launch interbank gold trading at the end of next month amid a broader set of banking reforms… A spokesman for the Shanghai Gold Exchange confirmed that the exchange “has this plan” to create an interbank gold market and was working with other government agencies to do so…’
Why would China want to enable gold trading between banks? Could it be because China wants to use more gold in their banking system?
Greg Canavan, editor of Sound Money. Sound Investments, has followed the China-Gold story for quite some time. In a recent report he wrote:
‘In 2007, China became the world’s largest gold producer. And by 2011, it produced 355 tonnes of gold… not one single ounce of China’s new supply made it to the global gold market.’
Greg sees this latest move by the Chinese government as a clear sign that ‘…the Chinese government is determined to make gold a much bigger part of their financial strategy in the coming years.’
China creating their own interbank gold market is just the first step of asserting their new found dominance of the gold market (China accounted for a quarter of global gold demand during the first three months of this year).
This move by China could be a big deal for the gold market, and it’s bound to have an impact. If you want to find out more about how Beijing is re-writing their own rules and the role gold will play in the kingdom’s survival, click here.
Shae Smith
Editor, Money Weekend
The Most Important Story This Week…
Commodities have had a tough year in 2012. Most of them have traded down pricewise on fears of falling demand as the world economy slows. The Australian Resources Minister was quoted as saying the era of high commodities is over. Does this signal a bottom? Money Morning editor Dr. Alex Cowie is still bullish on mining stocks – especially in strategic minerals and gold. See what he says in Is This Man the Ultimate Contrarian Indicator for Mining Shares?
Other Recent Highlights…
Kris Sayce on How an Interest Rate Rise Could Trigger a ‘Punch Bowl’ Rally: “He’s impossible to ignore. That’s right, we’re talking about US Federal Reserve Chairman, Dr. Ben S. Bernanke. He’s just finished giving testimony to the US Congress. Asked about the impact of low interest rates, the Fed Chairman said the Fed was ready to take ‘away the punch bowl’. In other words, raise interest rates. That’s bad news for stock markets, right? Maybe not.”
Greg Canavan on Why Gold is Flowing into China: “I want you to think differently about China and the way the Western media presents its economic development. There is no doubt China’s economy has some real challenges. One question the reader asked was if it’s possible China is cornering the gold market to solve their problems.”
Phil Oakley on What Are the Bond Markets Telling Us?: “Most small investors spend the majority of their time looking at stock markets. However, I’ve always believed that to get a deeper understanding of what’s really going on, the best thing you can do is to try to figure out what the bond market is telling you.”
John Stepek asks Annoyed by the LIBOR Rigging? You Should be Raging About The Fed: “What’s really happening now is that the general public is getting a look under the bonnet of the financial system. And they’ve discovered that the engine of the sleek-bodied sports car that delivered them the illusion of wealth in the good times, is in fact a mass of loose screws and unsheathed wiring held together with sticky tape and false promises.”
Austria-Hungary was a sprawling central European power. It comprised parts of the modern-day Czech Republic, Slovakia, Poland, Ukraine, Romania, Hungary, Serbia, Montenegro, Bosnia and Herzegovina, Croatia, Slovenia, Italy and Austria. Its currency, the krone, was formed in 1892 and managed by the central bank in Vienna and Budapest.
After World War I, the empire was broken into four parts by the Allies, who blamed Austria-Hungary for starting the war. By 1919, it had split into Czechoslovakia, Austria, Hungary and Yugoslavia. The empire had financed its war effort almost entirely by financing from the central bank (ie, money printing). It continued to fund itself in this way after the war.
As you might expect, the policy was highly inflationary. Between 1914 and 1918, the cost of living rose by 1,226%. Economists Peter Garber and Michael Spencer wrote: “The new states shared a greatly devalued, hyper-inflating currency, a collapsed trade and payment system, and large external debts.”
By 1919, Yugoslavia decided it had had enough. It decided to leave the krone. And that’s when events started to spin out of control.
Yugoslavia’s ad hoc plan to escape the krone was simple: all krone in the country would be stamped with a two-headed eagle, the national symbol. So all krone in Yugoslavia would be turned into the new currency.
There was just one problem. The Yugoslavs were leaving the krone because they were sick of high inflation. That suggested to other krone users that the Yugoslavs would do a better job of defending the value of their currency than the existing guardians of the krone.
As a result, money flooded into Yugoslavia from all across the old empire. The economy of 1919 was mainly cash-based, so people literally pushed wheelbarrows of cash across the open fields in order to have them stamped. The Yugoslavs were left with no choice but to physically seal their borders to stop the flood and prevent massive inflation.
This cross-border flood of money forced the other countries’ hands too. One by one, the new countries of the old Austro-Hungarian Empire began to stamp their own currencies too. And as each country decided to break off and form their own currency, the flood got bigger, with savers desperately moving from country to country, seeking the best place to have their krone stamped.
By the time the flood washed over the last country to leave the krone, Hungary, there were railway wagons full of cash left in the country.
The breakup of the krone was chaotic. The new countries made up the rules as they went along.
When ink-stamped currency resulted in widespread fraud, they used sticker stamps. When authorities started to confiscate some of the cash as they converted it into the new currency (in the form of forced loans paying low interest rates), there were bizarre reverse bank runs as savers stuffed money into banks to evade expected levies on cash.
Austria even created separate currencies for natives and foreigners. All the while, the flood of capital across borders created havoc wherever it washed up. The equivalent to the entire money supply of Hungary was transferred out of Czechoslovakia and Austria alone. Most of it ended up in Hungary.
As a result, in the six years after the war, Hungary and Austria both suffered from dreadful hyperinflations. The League of Nations was ultimately called in to manage Austria’s money supply, and Hungary was forced to introduce yet another new currency.
However, Yugoslavia, the country that instigated the panic, was able to keep a fairly even keel throughout. It was better able to maintain its currency’s stability because it was less indebted than the others, and it suffered less from destabilising capital flows.
After the old Austro-Hungarian Empire dissolved into smaller states, it was thought that the old patterns of trade and co-reliance would continue. But under pressure, fraternity gave way to factionalism.
Trust between nations disappeared and they stopped trading with one another. Austrian farmers even stopped supplying their own capital city of Vienna, fearing food shortages. The stock of trains and coal was unevenly distributed among the new countries, so they resorted to confiscating whatever crossed their borders.
National self-interest ultimately undid the krone too, writes economist Eduard Marz. The Austrians and Hungarians held most of the war debt, while the Czechoslovaks and the Yugoslavians held relatively more cash. The trouble is, the Austrians and Hungarians also controlled the printing press, and so they were happy to erode the value of their own debt at the others’ expense.
The krone warns of what happens when politics is out of sync with money. There is no neutral monetary policy – there are always, necessarily, winners and losers. So fraternity between the two groups is essential.
When the losers and winners line up along national lines, there’s a danger the currency will fragment. In other words – it’s not good when nine different languages appear on your bank notes, as was the case with the krone.
In 1919, the dominant powers in Austria and Hungary used the money to benefit themselves at the expense of Yugoslavia and Czechoslovakia, and the Yugoslavs were cohesive enough to fight back.
Similarly today, the winners and losers from eurozone monetary policy in 2012 are clearly lined up along national lines.
Money in Europe is tight. That suits Germany, but it is strangling the periphery. What’s different now – and not in a good way – is that in 1919, Yugoslavia, the first nation to leave the currency union, did so because it wanted a stronger rather than a weaker currency. As a result, money flooded in.
That’s a better problem to have than the inverse, which is what afflicts Greece and peripheral Europe. Greece needs a weaker currency than the euro, but if it talks about leaving then euros will flood out of the country in anticipation of being ‘stamped’ as drachmas. Greek banks would collapse and there would be a terrible crash.
1919 also tells us something about how ordinary people, not elites, drive the breakup of a currency. If savers believe the value of their wealth is in danger of being destroyed, they won’t wait for their politicians to catch up – they’ll take matters into their own hands.
If Greece fell out of the euro, its savers would be wiped out. Savers across the periphery would be right to take fright and move their euros to safety in Germany. That would be enough to drive those countries out of the currency.
There’s another end-of-euro scenario that looks more like the 1919 story. If Germany refuses to pay the price for keeping the euro together (via either higher inflation or explicit transfers to the peripheral countries), it might decide to walk away like Yugoslavia.
It could do so without collapsing its financial system. The main cost would be the devastation it would leave behind in its neighbours and trading partners. It’s a terrible price – but it may be the only one Germany is willing to pay.
Seán Keyes
Contributing Writer, Money Morning
Publisher’s Note: This article first appeared in MoneyWeek (UK)
From the Archives…
The Credit Market Debt Bubble and the Role of Gold
13-07-2012 – Greg Canavan
How to Survive and Thrive from China’s Bust
12-07-2012 – Kris Sayce
Payday Loans: Why This Lender of Last Resort Isn’t the Bad Guy
11-07-2012 – Kris Sayce
What A Slowing Chinese Economy Means For Pork Chops
10-07-2012 – Dr. Alex Cowie
Late News: Bankers Rig Interest Rates, No-One Fired
09-07-2012 – Dr. Alex Cowie
The Currency Collapse in 1919 – and What it Could Mean for the Euro
Article by Investment U
When the Supreme Court was weighing arguments regarding the constitutionality of the Affordable Care Act, many phrases were being tossed around:
And when it came down to the end, Chief Justice John Roberts said that there will be a mandate that everyone must get health insurance by 2014 or get taxed. The tax would allow for subsidies or Medicaid to take over for those who can’t afford it.
Everyone was all up in arms over the mandate being a tax. But that’s not the tax we should all be worried about. The healthcare ruling means that a 3.8% surtax on investment income is almost certain. If it doesn’t come to pass, it means something uglier may be thrown upon us.
This new investment tax was originally passed by Congress in 2010. I’m about to get all “IRS” on you, so bear with me. It affects the net investment income of the majority of joint filers with adjusted gross income of more than $250,000 ($200,000 for single filers). January 1 of next year, the tax rates on long-term capital gains and dividends for these same earners bumps up from the lows of the Bush era ushered in at 15% to 18.8%. This will happen if Congress extends the current tax law.
But if they don’t…
If Congress – in their present state of dysfunction – allows the Bush era tax rates set in 2001 and 2003 to expire at the end of this year, the top rate on capital gains will jump to 23.8% and the top rate on dividends goes up nearly triple to 43.4%.
A lot of pundits and analysts got this wrong believing that Obamacare would be overturned. Now no matter what the case at the end of the year, people need to make moves to soften the blow of a new round of taxation.
You may be asking yourself, “What is investment income? Does any of this political drama affect me?”
That’s a good question. Most experts will tell you that the following qualifies as investment income:
That’s a lot of categories for you to fall into.
Now here are cases were the tax doesn’t apply:
The game has changed. From 2013 on, many investors will have to vigilantly watch how they manage not only their reported adjusted gross income but also their investment income so that this tax will not eat them up.
A classic Rolling Stone’s song just seemed like the perfect segue… You can see the list above of the types of investment income that are immune to the new tax. We are going to see many investors in the next six months running for shelter in these types of assets and vehicles. Robert Gordon of Twenty-First Securities, a tax-strategy firm in New York stated, “This [3.8%] tax alone makes accelerating investment income into 2012 profitable for many taxpayers.”
Here are three major trends to look for or to take advantage of over the rest of 2012:
Here’s some food for thought. If you’re betting on a new President next year that will repeal all this legislation, good luck. That’s a gamble. If you bet wrong, it’s going to hurt you during filing season. You’ve been warned.
Good Investing,
Jason
Article by Investment U
Article by Investment U
It’s no surprise to me that stock markets in Southeast Asia – what I call the “sweet spot” of Pacific Rim growth – are outperforming. While emerging markets are down so far this year, the Philippines is up 19%, Vietnam has bounced back 17% and Singapore has risen 13%.
Located south of China and east of India, this booming region is sometimes overlooked by even the most sophisticated investors. Yet it represents 10 countries with a population of 600 million and an economic output of $1.7 trillion.
A free trade pact between the Southeast Asian regional grouping (ASEAN) and China (ASEAN-China Free Trade Area), took effect in January 2010. By the end of that year, ASEAN exports to China had leapt 54% and overall trade between these countries jumped 47%. This free trade area has become the third largest in the world and more than 7,000 products trade at zero tariffs.
The next move is a work led by China’s prime competitors. The Trans-Pacific Partnership countries – Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam and the United States – announced the achievement of the broad outlines of an ambitious, twenty-first century Trans-Pacific Partnership agreement that will supercharge trade and investment in the Pacific Rim.
This agreement will also boost America’s stake in this vital region. U.S. goods exports to the broader Asia-Pacific region totaled $775 billion in 2010, a 25% increase over 2009 and equal to 61% of all U.S. goods exported to the world.
Southeast Asia also sits astride the biggest trade routes in the world and the two busiest ports, Hong Kong and Singapore.
The South China Sea links the Indian Ocean with the western Pacific, but to get there ships need to move through one of several narrow straits that serve as chokepoints. To put things in perspective, the oil transported through the Malacca Strait from the Indian Ocean through the South China Sea, is triple the amount that passes through the Suez Canal and 15 times the amount that passes through the Panama Canal.
The stakes are high because roughly 65% of South Korea’s energy supplies, nearly 60% of Japan and Taiwan’s energy supplies, and about 80% of China’s oil imports come through the South China Sea. It also has proven oil reserves of seven billion barrels and an estimated 900 trillion cubic feet of natural gas.
But the importance of these prime trade routes and the natural resources in the area pose a risk to investors, as it makes the region a “cockpit” of rising confrontation.
China is intent on pushing its territorial claims well beyond conventional norms and Law of the Sea guidelines. Countries affected by China’s overreach, such as Malaysia, Philippines Taiwan, Brunei and especially Vietnam, aren’t rolling over, but rather pushing back hard.
Oftentimes the confrontations are sparked by fishing boats and escalate from there. This is how the recent standoff between China and the Philippines over Scarborough Shoal began.
In late May, CNOOC (NYSE: CEO), a Chinese state-owned oil company, announced it was opening nine blocks off Vietnam’s coast to international bids for oil and gas exploration. These reach to within 37 nautical miles of Vietnam’s coast, which extends 2,000 miles. Then on June 21, Vietnam’s parliament passed a maritime law that reinforced its claims to the Spratly and Paracel Islands. China shot back that this a “serious violation” of its sovereignty.
The 200 small islands and coral reefs – only about 40 of which are permanently above water – that support territorial claims are highly contentious.
The countries that are eye to eye with China often look to America’s diplomatic and military clout to balance the scales. Japan and South Korea also have a significant stake in how the dust settles.
These simmering conflicts rarely make the front page and shouldn’t discourage you from investing in Southeast Asia. But they should prompt you to manage risks using wide diversification and 20% sell stops.
Good Investing,
Carl
Article by Investment U
Article by Investment U
Monday morning, I was interviewed by The South Florida Sun Sentinel about my book, Get Rich with Dividends. (Have I mentioned I have a new book?) The first question the reporter asked me was, “What do you say to investors who are nervous about the market?”
Then, a few hours later in a marketing meeting for Investment U, someone posed the question, “How do we market to investors who are nervous?”
And investors are scared. Their fears are completely valid:
The list goes on…
In the financial publishing business, it’s known that it’s easy to market yourself if you’re bearish. Fear has, and always will be, a powerful motivating factor. And there’s always a logical reason to be bearish. Stocks are overvalued, earnings are weak, the economy is weakening, investors are too complacent, etc. It’s a lot tougher to argue that investors should be in stocks.
But there’s one key reason why they should.
Long-term investors almost always win.
Last week, I told you that over 10-year periods, stocks have made money 91% of the time.
Since 1937, stocks finished positive in 67 out of 74 10-year periods. The average gain has been 129% over 10 years.
The seven negative 10-year periods were all tied to the Great Depression and Recession. And not all 10-year periods that included the Depression and Recession were negative. Only seven of them.
So based on history, it would take a catastrophic economic collapse to not make money in the stock market over the next 10 years.
So how do you make money in the face of the euro, Obomney and Iran?
You invest in great companies that pay and raise the dividend every year and then you go about your life. That’s it.
You check in with those companies from time to time to make sure the dividend is safe and continuing to be raised and then you get back to what you were doing, i.e. your job, your family, Civil War re-enactments…
The beauty of investing in Perpetual Dividend Raisers – stocks that raise the dividend every year – is that they tend to continue to raise the dividend no matter what’s happening in the White House or around the globe.
If a company has been raising its dividend for 25 years, like Mercury General (NYSE: MCY) has, chances are it’s going to raise it for a twenty-sixth year. If they don’t, investors are going to be furious, as they’ve come to expect a dividend hike every year.
A company that doesn’t raise the dividend after 25 years in a row of dividend growth will find its stock in a steep sell-off and its executives getting their resumes together after being thrown out by shareholders.
Those executives are going to do everything in their power to ensure they can continue to raise the dividend year after year.
There are few sure things in life and past performance is no guarantee of future results, but chances are that a company that has lifted its dividend every year for a couple of decades is going to do it again this year, and next year, and the year after that, and that year after that…
Investing in Perpetual Dividend Raisers allows you to outpace inflation, earn more income every year and, if you’re reinvesting your dividends, compound those dividends to the point where you can easily make 12% per year in conservative blue-chip stocks.
At 12% per year, you more than triple your money in 10 years. Considering we’re emerging from the “lost decade,” I bet you would have been very happy tripling your nest egg while most people barely saw any return over 10 years, if they made any money at all.
Investing in dividend-paying companies is easy, it’s conservative and best of all, it almost always works. Certainly more than any other investing strategy. If you can name another strategy with a better than 91% track record that can grow your money at 12% per year in conservative investments, I’d like to know about it.
There are valid reasons to be nervous. No one is saying you shouldn’t be concerned about world and economic events. Just don’t invest like you are. History is not on your side.
Good Investing,
Marc
P.S. Thank you for making Get Rich with Dividends a bestseller. It spent the past week as No. 1 in “Investing” on Amazon and got as high as No. 14 in all books. It did so well Amazon actually ran out of copies. They’ll have more next week. If you don’t want to wait, you can download it for the Kindle on Amazon or you can order the book from Barnes and Noble.
Article by Investment U
Article by Investment U
At first, its name sounds more like a foreign language than a metal.
But you may be surprised to know that manganese – a grayish-white element essential to the production of steel – is actually the fourth most traded metal in the world.
Last year, 15.4 million tons of it was produced to help make better cars, infrastructure and even unleaded fuel.
And although prices have traded relatively flat in recent months, I’m writing you today because manganese is set up to become one of the most sought after minerals in the world. Here’s why…
(Click here to check out a detailed infographic about manganese from Visual Capitalist.)
In short, engineers at the University of Illinois recently created a prototype battery using lithium and manganese that can be recharged by 90% in just two minutes flat. That’s right, two minutes flat.
They’re called “lithiated manganese dioxide,” or LMD, batteries.
Now I don’t know what kind of car you drive, but two minutes is about how long it takes for my Chevy to refuel at the pump.
But the best part about these new LMD batteries in development is that, not only do they have higher power output and provide enhanced safety in comparison to other lithium ion batteries, they’re much cheaper to make, as well.
Because manganese is very abundant around the world. It’s actually the twelfth most common element found in the earth’s crust.
Today, 90% of global manganese output is used in the production of steel. But with new technologies, such as LMD batteries, new markets are opening up for manganese. And it could be a game-changer for the electric vehicle market – and switched-on investors – over the next few years.
So where could one look for opportunities to invest in manganese?
There aren’t many ways to go about it. Despite being such a major player in the world of metals, there aren’t any convenient ETFs tracking the price of manganese. And there really aren’t any legitimate miners that completely focus on the metal.
Until more investors catch on to the investment potential of manganese, you only have two real options.
First, look small and look abroad. For example, after 50 years of shutting down production, the South American nation of Guyana is on the brink of restarting its manganese mining industry.
According to Resource Investing News, in 2010, the government granted Reunion Gold Corp. (TSXV: RGD) four prospecting licenses to explore for and develop manganese at the nation’s old mine location at Matthews Ridge in northern Guyana.
This move alone could make Guyana one of the top five manganese producers in the world within the decade. If all goes according to plan, building the mine will begin in August 2013, with full production starting up in 2014.
Other countries with big opportunities in manganese include Gabon, China, South Africa and Ukraine.
A second way to play manganese is by simply sticking with the major players. It may not sound like a lot of fun, but it’s a safe bet. Among the top three manganese producers currently worldwide are BHP Billiton (NYSE: BHP), Anglo American (LSE: AAL, OTC: AAUKY) and Vale S.A. (NYSE: VALE).
Either way you approach it, manganese presents a great opportunity to invest today. And as I’ve shown, soon it won’t be used just for steel anymore.
In fact, carmakers like Chevrolet Nissan, and Hyundai are already putting LMD batteries in the Volt, Leaf and Sonata. Now if they could just hurry up on that two-minute battery recharge…
Good Investing,
Mike
Article by Investment U
By Central Bank News
COUNTRY | NEW RATE | OLD RATE | ONE YR AGO |
CANADA | 1.00% | 1.00% | 1.00% |
TURKEY | 5.75% | 5.75% | 5.75% |
S.AFRICA | 5.00% | 5.50% | 5.50% |
MEXICO | 4.50% | 4.50% | 4.50% |
COUNTRY | DATE | RATE | 1 YR AGO |
ISRAEL | 23-Jul | 2.25% | 3.25% |
HUNGARY | 24-Jul | 7.00% | 6.00% |
NIGERIA | 24-Jul | 12.00% | 8.75% |
THAILAND | 25-Jul | 3.00% | 3.25% |
NEW ZEALAND | 26-Jul | 2.50% | 2.50% |
PHILIPPINES | 26-Jul | 4.00% | 4.50% |
COLOMBIA | 27-Jul | 5.25% | 4.50% |
By Central Bank News
