Month: December 2011

Dec. 20 (Bloomberg) — Ellen Braitman summarizes the top stories this morning on the Bloomberg Business Report. (Source: Bloomberg)

London Gold Market Report
from Ben Traynor
BullionVault
Tuesday 20 December, 08:45 EST

SPOT MARKET gold prices climbed to $1608 an ounce Tuesday lunchtime in London – a 2.8% gain from last week’s low – while stocks and commodities traded higher, with the exception of the FTSE in London which fell lower.

Silver prices rose to $29.51 per ounce – still 0.9% down on last week’s close – while major government bond prices fell and the Euro gained amid signs of progress on the Eurozone crisis.

“Liquidity in the precious metals space remains light,” warns Walter de Wet, commodities Strategist at Standard Bank.

“Short-term the [precious metals] complex is likely to remain vulnerable to bouts of long liquidation amid concerns over funding levels,” agree analysts at Swiss refiner MKS.

Despite this morning’s rally, gold remains around 8% down since the start of December.

“Profit-taking and year-end book squaring by large investors, including mutual funds and macro hedge funds…help explain the recent drop in prices,” says a note from HSBC.

“Gold prices may stay weak but volatile for the rest of this year, we believe, as trading volume is likely to dry up in the run-up to the year-end holidays.”

Eurozone finance ministers agreed Monday to lend an additional €150 billion to the International Monetary Fund. Four other European countries outside the Eurozone – Czech Republic, Denmark, Poland and Sweden – also said they will contribute extra funds.

Britain meantime did not offer additional funding, but added it will “define its contribution” early next year.

“The UK has always been willing to consider further resources for the IMF, but for its global role and as part of a global agreement,” said a statement from HM Treasury.

Germany’s Bundesbank pledged €41.5 billion – but on condition that these funds go to the IMF’s general resources and are not earmarked for Europe, news agency Bloomberg reports.

Boosting the IMF by €150 billion is “obviously a small-scale solution” says former UBS chairman Peter Kurer.

“What really would be needed in the ideal world would be Eurobonds or a substitute which can bring large-scale liquidity and confidence into the markets.”

Tuesday saw the beginning of the European Central Bank’s 3-Year Longer Term Refinancing Operation (LTRO), whereby banks will be able to borrow from the ECB for three years while posting distressed Eurozone government debt as collateral.

“These measures address the risk that persistent financial markets tensions could affect the capacity of Euro area banks to obtain refinancing over longer horizons,” ECB president Mario Draghi told the European parliament yesterday.

Draghi also confirmed that the ECB has lowered the reserve ratio – the proportion of a bank’s balance sheet it is required to hold with a central bank – from 2% to 1%, as well as expanding the list of collateral eligible for refinancing.

Spain’s government saw its borrowing costs fall Tuesday morning when it auctioned €5.64 billion of short-term Treasury bills. The average yields on 3-month T-bills fell to 1.735% – down from 5.11% last month – while 6-month yields were down from 5.227% to 2.435%.

“The expectation is that a lot of banks have been buying [peripheral Eurozone government debt] into the LTRO,” one trader told Reuters.

“It’s going to be an interesting battle in January when we start getting big chunks of supply, but at the moment people were probably underweight their benchmarks and short Italy and Spain, and this is an opportunity for them to square positions.”

Banks in the United States meantime are still vulnerable to the Eurozone crisis, despite selling most of their European government bonds, research published by the Federal Reserve Bank of San Francisco warns.

“US banks have mostly shed their direct exposure to European sovereign debt,” noted San Francisco Fed research advisor Sylvain Leduc earlier this month.

“But they remain subject to the risk that European trading counterparties might not be able to meet their obligations.”

Over in India, gold demand remained subdued yesterday despite last week’s fall in gold prices, newswire Reuters reports.

“Consumers are not buying due to an inauspicious period,” says Ashok Jain of Mumbai jeweler Chenaji Narsinghji.

“Demand will improve only after January 14,” he added, explaining that the Hindu calendar month of Khar Mass – considered an inauspicious time to buy gold – runs until then, having begun on December 16.

Rupee gold prices have fallen from all-time highs hit in recent weeks, as the Rupee fell on currency markets to record lows against the Dollar.

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

Source: ForexYard

EUR bears are out in full force. According to the most recent CFTC Commitment of Traders Report, speculators in the futures market have built their largest EUR short position since May 2010. The one sided positioning highlights the market’s pessimism against the EUR but also brings the possibility of a short squeeze. The risk is for a bout of short covering to shake out weak EUR shorts before another move lower.

Economic News

USD – Housing Continues to Weigh on GDP

The USD caught a bid following the death of North Korean dictator Kim Jong II and news of increased tensions on the Korean Peninsula. Today’s building permits and housing starts are forecasted to be flat which underscores the slow recovery in the US housing market. Wednesday’s existing home sales will also shed some light on a sector that has been a drag on US GDP. The USD may lose its recent appeal should we have better than expected hosing data which would contribute to an improved risk sentiment.

Liquidity is beginning to tighten as the Christmas holiday approaches with short term moves running a bit further. While the major FX pairs remain trading within their recent ranges, reduced liquidity has the possibility of triggering stops for those traders who look use tight protective stops.

EUR – EUR Pessimism Reaches a High

EUR bears are out in full force. According to the most recent CFTC Commitment of Traders report, speculators in the futures market have built their largest EUR short position since May 2010. As of last Tuesday speculators were holding -116k contracts short, up from -95k. The one sided positioning highlights the market’s pessimism against the EUR but also brings the possibility of a short squeeze. The risk is for a bout of short covering to shake out weak EUR shorts before another move lower.

European sovereign credit downgrade rumors have kept the pressure on the EUR and open discussion for a nation to leave the EU by ECB President Draghi did not support the 17-nation currency. Draghi told the Financial Times the exit of an EU member would face greater economic pain outside the EMU than if a nation stayed within the friendly confines. These comments were likely directed towards Greece.

The ECB continues to operate in the bond markets to support fiscally pressured nations with its SMP bond buying program which purchased EUR 3.361 bn last week, up from EUR 0.635 bn two weeks ago. The central bank has also provided almost unlimited liquidity to banks via the new Long Term Refinancing Operations (LTRO), though the ECB has stopped short of unlimited bond purchases.

It is notable that the US-German 2-year spread has now turned negative, setting a new record low. This means Germany can now borrow at a lower rate than the US for 2-years. The 2-year US Treasury Note/bund yield spread has done a good job of tracking the EUR/USD as the spread reached a peak of 134 bp on May 4th. Interestingly enough this was the same day the EUR peaked versus the USD at 1.4938. The 2-year spread currently stands at a record low of -2 bp while the EUR/USD is just above the 1.30 level. EUR/USD support is found at the 2011 low of 1.2870 while resistance is located at the October 4th low of 1.3140.

CAD – Economic Calendar Stacked with Canadian Data

In contrast to the US, this week’s economic calendar is stacked with Canadian data releases. Today will bring CPI data and the core data is expected to fall to 0.2% while the headline number should remain steady at 0.2%. On Wednesday we will get retail sales data while the highlight will come on Friday with monthly GDP. Canadian data for November was generally stronger, in-line with better US data. However, during the month of December the two nations’ data releases have diverged with the US continuing to post better numbers while Canada has disappointed on a number of points, most notably being employment and manufacturing data.

The USD/CAD continues to move higher and has resistance at 1.0460 from the trend line off of the October and November highs. Support is found at 1.0110 from the August uptrend. Versus the EUR the CAD has fared better as the EUR/CAD continues to test the September lows of 1.3400. A break here would expose this year’s low of 1.2985.

Crude Oil – Crude Oil Prices Flat On Korean News

Surprisingly, spot crude oil did not find a bid following the death of North Korean dictator Kim Jong II and news of increased tensions on the Korean Peninsula. The price of spot crude oil failed to reach above the $95. Perhaps the risk-off environment, the threat of additional European sovereign credit rating downgrades, and a stronger USD are weighing on the commodity. Spot crude oil prices have resistance at $95 from the November 25th low and may have made a tweezer bottom at $92.50.

Technical News

EUR/USD

On a weekly basis the EUR/USD broke some important technical barriers, closing below the rising trend line from the January and October lows. The weekly close 1.3045 was also in-line with the 61% Fibonacci retracement from the 2010-2011 bullish trend. While weekly stochastics are currently oversold the monthly stochastics may have room to run lower. The January low of 1.2870 is the near-term support with additional support coming in at 1.2665 from the monthly chart off of the 2008 and 2010 lows. Resistance is back at 1.3140 and the 20-day moving average of 1.3275, followed by the December high of 1.3550.

GBP/USD

Sterling has consistently been sold at previous resistance levels and with falling weekly and monthly stochastics this strategy could remain intact. Initial support is found at Friday’s high of 1.5560 and the pair may have scope back to the range between the 55-day moving average at 1.5740 and the late November high of 1.5775. Any rally could be capped at 1.5890 from the falling trend line off of the August and October highs. The test for sterling shorts will come at the October low of 1.5270. A break here may find support at the trend line stemming from the January 2009 low which is found at 1.5100.

USD/JPY

The USD/JPY is encroaching on its trend line from the 2007 high which comes in at 78.30. Weekly and monthly stocahstics are both moving higher and a break above the trend would expose the post-intervention high of 79.50 and the August high of 80.20. A failure to make a significant close above the trend line could have the USD/JPY testing the December low of 77.50 and the November low of 76.55.

USD/CHF

Last week’s break above the 0.9330 resistance opens the door to this year’s high of 0.9782 as well as the December high of 1.0065. The falling trend line from the 2003 trend line comes in at 1.1165 and makes for a long term resistance level. To the downside 0.9330 will now act as a support followed by the late November low of 0.9065 and the 200-day moving average at 0.8925.

The Wild Card

USD/SEK

Today the Riksbank is expected to lower interest rates by 25 bp. Surprisingly, the USD/SEK has been unable to sustain a bid above the September high near 7.0000. Forex traders should note the 50% Fibonacci retracement of the 2010 high to the 2011 low rests at 7.0500. Support is found back at the December low of 6.6890.

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.

Sweden’s Riksbank cut its benchmark repo rate by 25 basis points to 1.75% from 2.00%.  The Bank said: “There is still considerable uncertainty regarding the public-finance problems in, above all, the euro area and several euro countries are expected to implement more stringent fiscal tightening than was previously assumed. Growth in the euro area is therefore expected to be low in the period ahead. However, the global economy as a whole is growing at a relatively good rate.”

The Riksbank previously increased the benchmark repo rate by 25 basis points to 2.00% at its July meeting, after also increasing by 25 basis points at its April meeting this year.  Sweden reported annual inflation of 2.8% in November, down from 3.2% in September, 3.4% in August, 3.3% in July, 3.1% in June, and 3.3% in May, the same as April, and up slightly from 2.9% in March; while also above the Riksbank’s inflation target of 2.0%. 

Written by Sara Nunnally, Editor, Insiders Strategy Group, insideinvestingdaily.com

The war in Iraq has been “over” for less than a week and already its citizens are protesting in the streets. It won’t be long until chaos prevails.

Last week, a decade of war officially ended. There was no pomp, no drums and bugles, no aircraft carriers sporting a “Mission Accomplished” sign.

Just a quiet dignified lowering of the colors, rolling up of the Marine Corp flag.

I’d like everyone to take a moment to thank our servicemen and women for all the hard work and sacrifice they’ve made for their country. And I’d like to thank their families for their own dedication and sacrifice.

So many have been lost… But now, tens of thousands are coming home.

We did it. We removed a brutal dictator and ushered in democratic elections. Iraq is now in charge of its own destiny.

We all hope it’s a good one.

We all hope that the old political and ethnic tensions won’t rumble to the top and boil over into yet another war in the Middle East.

But that’s what the newly democratic country is facing.

From The Wall Street Journal:

Tensions are growing in Iraq over plans by some predominantly Sunni provinces to declare greater autonomy from the central government in Baghdad.

The provincial council of Diyala, a volatile area northeast of Baghdad and bordering Iran with a patchwork of ethnic and sectarian groups, said Tuesday that it was moving to hold a referendum to declare itself semiautonomous.

The timing couldn’t be more planned… On Dec. 31, 2011, U.S. troops will leave Iraq. It’s no surprise that the internal divisions between Sunni and Shiites are starting to widen.

Within Iraq, these tensions are one thing, but they won’t remain localized… Especially when Iran has so much to gain by backing its Shiite ideals.

And this has even bigger ramifications outside of stability within Iraq.

You see, Iran and Saudi Arabia are vying for control of the Middle East, and the two powers are very different. Iran is predominantly Shiite, while the powers that rule in Saudi Arabia are Sunni. Iran has been encouraging Saudi Arabia’s Shiite population to turn against the State.

Most of these Shiites live in the northeastern part of the country — right where the biggest oil fields in the world are.

And we’re set to leave the region in 12 days.

The announcement in Iraq set off a wave of protests and demonstrations in Diyala and Baquba. Diyala has been the center of a lot of tensions, and was even controlled in part by militants with al-Qaida connections.

Here’s the interesting part. The demonstrations were composed of both Shiites and Sunnis who were against the idea of semiautonomy. How this will play out across the country remains to be seen, but those sect-tensions aren’t going anywhere.

And the stage is being set for an even bigger confrontation.

Both Iran and Saudi Arabia have a lot of heft. Six months ago, Iran, and a couple other OPEC producers blocked production decisions at its meeting in Vienna. The internal struggles were so bad that some insiders didn’t think OPEC would survive.

They have, for now. And Saudi Arabia has appeared to take charge in OPEC’s latest meeting, where production quotas were decided: 30 million barrels of oil a day.

But Iran is not impotent.

Indeed, just last week Iran threatened to block the strategic Strait of Hormuz. About 15.5 million barrels of oil a day flow through the Strait. That’s about one-sixth of global demand, making the Strait of Hormuz the most important oil shipping route in the world.

To be clear… Iranian officials said its military will conduct a training drill to practice closing the Strait.

This mere threat sent oil prices soaring $3 back above $100 a barrel.

The real thing could be much worse. And the action will set off a number of counter measures that will end up in a devastating war.

Iran has already said it will strike Israel and other U.S. interests in the Gulf if it is attacked. Those other “interests” include oil and Saudi Arabia.

Think $100 is too expensive? OPEC doesn’t. They think it’s “reasonable.” That means they won’t lift a finger if oil prices climb because of geopolitical tensions between Iran and Saudi Arabia. Once the U.S. leaves, this age-old conflict will flare up again.

And oil prices will be caught in the middle.

Oil at $150 is not out of the question for 2012.

And if you’re like us, through the chaos, you’ll see an opportunity here. It’s time to batten down the hatches, folks. Use the recent pullback in oil prices to get positioned in some strategic oil plays. I’ve got my Macro Trader subscribers in some United States Oil (USO:NYSE) calls, but this is just the beginning of a longer-term strategy.

This conflict is going to create another hell for the Middle East, and a lot of money for savvy investors.

Insideinvestingdaily.com Publisher’s Note: Sara is right. We are one headline away from a massive spike in oil prices. We are ignorant to believe an age-old war between the Sunnis and the Shiites will fade away simply because we lowered our flag and went home.

The sad truth is, we are in worse shape now than we were eight years ago. And if what we think is about to happen becomes reality, it is great news for gold investors. If you want the in-your-face details, you need to read Sara’s urgent report on the situation.

By Carla Pasternak, GlobalDividends.com

Yields on 10-year Treasuries are now below 2%. And 30-year U.S. Treasury yields average less than 3%.

But I’ve found a group of government bonds yielding upwards of 5%.

Most of them carry high quality “AA” credit ratings. And since I first brought them to the attention of High-Yield Investing readers in June 2010, they’ve returned better than 20%.

They’re called “Build America Bonds.”

You may have heard of them. The program has proven to be one of the more successful outcomes of Obama’s $800 billion stimulus package, the American Recovery and Reinvestment Act of 2009. The bonds were designed to stimulate the economy by creating employment at the local level.

Like other municipal bonds, the debt is used to finance local construction projects, such as bridges and roadways. The new bridge across the San Francisco Bay and the mass transit system in New Jersey were financed with Build America Bonds.

As with other municipal bonds, interest payments are exempt from local taxes in the state of issue. Unlike most municipal bonds, however, interest on Build America Bonds may be subject to federal taxes, depending on which of the two types of bonds are issued.

Municipalities can offer a tax credit to the buyer and receive a 25% subsidy on interest payments from the U.S. Treasury. But the most popular issue is taxable and gives the municipalities a direct payment from the Treasury for 35% of the interest payments. Either way, the subsidy reduces borrowing costs while allowing municipalities to offer higher, more enticing yields than they could otherwise afford.

With up to 35% of the interest backed by the U.S. government, most Build America Bonds carry a “AA” credit rating. Many are general obligation bonds, which require municipalities to raise taxes if they can’t make interest payments. Others are backed by revenues from essential services, including water and sewer projects.

These bonds weren’t expected to deliver the kind of returns investors have seen since the program expired in December 2010.

Instead, a cloud of uncertainty was expected to hang over the bonds and the funds that own them as the limited number of bonds available in the market could negatively affect their value.

In fact, the reverse has happened.

Precisely because no new Build America Bonds have been issued, investors have bid up prices.

It’s not so easy to buy individual Build America Bonds since institutional investors have scooped them up. But there are a handful of Build America Bond funds, including three exchange-traded funds (ETFs) with the tickers BAB, BABS, or BABZ, yielding around 5%, and a couple of leveraged closed-end funds (CEFs) with the tickers BBN and GBAB, which throw off yields of around 7%.

Keep in mind that if interest rates rise, these long-term bonds could come under pressure. Also, as the global economy strengthens, investors will likely rotate into higher-risk growth plays.

For now, however, Build America Bonds offer some of the best yields around for safety-conscious investors.

Good Investing!

Carla Pasternak’s Dividend Opportunities

P.S. — For more high-yield opportunities, be sure to watch this presentation. We’ve collected information on some of the most interesting income investments available — including something called “perpetual cash machines” that have returned up to 162% per year. Visit this link to watch now.

By MoneyMorning.com.au

What’s the latest news on the Chinese economy…?

“Chinese authorities have barred the world’s largest rare earths producer from exporting due to ‘environmental concerns’, in a move likely to significantly affect global supply.” – Sydney Morning Herald

We’re sure it will affect supply. As the SMH notes, the barred company – Baotou Steel – “accounts for nearly half of the world’s rare earths production.”

But is it really due to “environmental concerns”?

Of course not.

The Western media often forgets dictators are masters in the art of spin. Think about it. If the Chinese economy cut exports because it wanted to prop up the price… or to disguise the fact that economic growth is hitting the skids… it would play havoc with the markets.

Hence the need for a convenient yarn… which is exactly what China has come up with.

Look, you don’t need to be Joseph Goebbels to figure out the environment is a hot topic in the West. So what better way to disguise a slowing economy than to claim it needs to cut rare earths exports to stop pollution?

It’s perfect.

China isn’t worried about polluting the water supply or digging up things it shouldn’t. It couldn’t care less.

Its bigger concern is stopping the Chinese economy from going into free-fall. The fact is people aren’t buying as much as they used to… the 40-year credit boom has run its course.

So the Chinese economy needs a way to suck more money into its manufacturing sector. The simple way is to make it harder for non-Chinese manufacturers to get hold of rare earths.

Remember, rare earths are one of the world’s most important elements. You can’t make flat panel TV screens, missile guidance systems, wind turbines or electric cars without them.

The kind of things China makes. The kind of things the Chinese economy would like to make more of.

Chinese Economy Slipping Toward Recession

Just three weeks ago, Bloomberg News reported:

“China’s manufacturing contracted for the first time since February 2009 as the property market cooled and Europe’s crisis cut export demand…”

Remember how bad things looked in 2009? And if you think the European debt crisis is a problem, just wait until China’s debt bubble pops.

As reported by Bloomberg News this week:

“A copy of Manhattan, complete with Rockefeller and Lincoln centers and what passes for the Hudson River, is under construction an hour’s train ride from Beijing…

“The planned 15.2 million square meters (164 million square feet) of office space by 2020 in Yujiapu and across the Hai River in Xiangluo Wan, or Conch Bay, is more than one-third of the 450 million square feet in Manhattan.”

These are the type of projects the China needs Aussie iron ore and copper to build. These are the type of projects that have supported Australia’s economic boom for nearly 10 years.

If the building program was sustainable it would be fine. If it was supply meeting demand it would be fine. But it isn’t. It’s supply hoping (praying) that the demand occurs.

Ah, but China is a net saver, it has cash invested in all those U.S. government bonds – is the classic argument.

There’s one problem. Speculating Chinese local governments have most likely spent any savings China has in U.S. government bonds. How do we know? Read on…

China Has Blown its Savings

According to the U.S. Treasury, at the end of October, China held USD$1.134 trillion-worth of U.S. government bonds.

Bloomberg reports, the debts of 231 local government financing companies (there are 6,576 in total) amount to USD$622 billion.

Who knows what the total debt is for all 6,576 financing firms… USD$1 trillion? USD$2 trillion? $4 trillion? More?

Of course, the mainstream China bulls still believe China uses capital and resources effectively. China is a miracle – they say. China is a centrally planned economy and can therefore control its economy… It can engineer a soft economic landing.

Funnily enough, we heard a similar argument when the U.S. tried to slow its economy in the 2000s. In that case, they argued the central planners at the U.S. Federal Reserve could lift interest rates to cool the economy… and then drop them to stop a crash.

It didn’t work for them.

And it won’t work for the Chinese economy either. Any economy built on a credit bubble will eventually have to pay the consequences.

The U.S. and Europe are facing the consequences of their credit bubbles right now. Next is China and Australia… two of the last big economic bubbles to pop.

More on what to do about it later this week.

Cheers.
Kris

P.S. Many investors mistake credit for innovation. The truth is: real innovation doesn’t need credit. In fact, the best innovators are funded with equity rather than debt. Simply because investors who really believe in the company would rather take a slice of future profits rather than earn a few dollars from a loan repayment. That’s why I look for genuine innovation and entrepreneurship in the stocks I tip for Australian Small-Cap Investigator. If you’d like to take out an obligation-free 30-day trial to my small-cap stock tips, click here for details…

Related Articles

Entrepreneurs and Entrepreneurialism

How to Buy Gold and Silver

The Only Gold and Silver Stocks to Buy

The Secret Aussie ‘Bank Run’ is a Sign to Buy Gold

Why Gold Should Become Your ‘Stay Rich’ Asset

From the Archives…

A More Profitable Investment Than Cheap Gold?
2011-12-16 – Aaron Tyrrell

The Best Property Investment in the World
2011-12-15 – Aaron Tyrrell

Is This the Gold Buying Dip You’ve Waited For?
2011-12-14 – Kris Sayce

Is Now a Good Time to Invest in Stocks?
2011-12-13 – Kris Sayce

Why You Shouldn’t Trust Your Gold to a Banker
2011-12-12 – Kris Sayce

For editorial enquiries and feedback, email [email protected]

The Chinese Economy and Australia: The Last of the Bubbles

By Paul Tracy, GlobalDividends.com

It’s the most popular high-yielding stock owned by Congress.

And they might be on to something. Right now this stock yields 5.9%… and it’s one of the most stable dividend-payers in America. During the recession, dividends stayed steady. And in the past five years investors have enjoyed five annual dividend increases.

At last count, 57 members of Congress — 20 Democrats and 37 Republicans — owned shares of this company.

I’ll tell you more in a moment. But first, I think you should understand why it’s important to know that Congress owns the shares at all…

A few weeks ago, 60 Minutes finally blew the lid off the entire thing.

To make a long story short, insider trading is legal for members of Congress and many of their high-ranking aides. They can trade based on the information they encounter in their day-to-day work, even it if it is non-public information. (For the full story, you can read some of our thoughts on the topic here.)

We have been telling readers about this for months. In fact, we even put out a special report — Congress’ Dirty Secret — that outlined the problem and also showed people how to find out what their Congressman owns with a few clicks of a mouse.

But there’s no illusion here. We could scream about the problem until we’re blue in the face. However, when 60 Minutes — one of the most-respected investigative journalism programs on television — dedicates a segment to the issue, the nation pays attention.

And we’re happy to see it getting the press. There’s no doubt that this is a problem. According to data from the Center for Responsive Politics, 250 of the 535 members of Congress are millionaires. That’s 47%! In other words, being a millionaire makes you “average” in Congress.

Meanwhile, according to a Barron’s story, members of Congress outperform your typical investor by an extra 6.8 percentage points each year.

Let me be clear. We’re not suggesting that Congress has inside information on AT&T (NYSE: T) — the high-yielding stock that’s owned by nearly 60 members of Congress (that makes it the most popular income stock owned by our representatives).

However, when dozens of millionaires with a history of beating average investors year after year own a particular stock, we think it’s smart to pay attention.

Obviously, AT&T won’t make you a millionaire overnight, but it is one of the most stable businesses in America. The shares fell with the broader market during the recession, but the underlying business kept steadily making money.

Today the company takes in about $120 billion in revenues each year and generates $36 billion in cash from operations. Of that, roughly $10 billion annually is returned to investors via dividends. And those payments have increased every year going all the way back to the 1980s.

I’m not necessarily recommending you snap up some shares of AT&T, but there is plenty to like about the stock… and importantly, Congress seems to agree.

[Note: As I said, we have more about Congress’ insider trading here. We’ve even put together a special report — Congress’ Dirty Secret: The 6 Most Popular Stocks Owned by Your Representatives — on the topic. Visit this link to learn more about Congress’ “dirty secret.”]

Good Investing!

Paul Tracy
StreetAuthority Co-Founder, Chief Investment Strategist — Top 10 Stocks

Disclosure: StreetAuthority owns shares of T as part of its various “real money” portfolios.  In accordance with company policies, StreetAuthority always provides readers with at least 48 hours advance notice before buying or selling any securities in any “real money” model portfolio.

AUDUSD stays in a downward price channel on 4-hour chart, and remains in downtrend from 1.0378. As long as the channel resistance holds, downtrend could be expected to resume, and another fall towards 0.9663 is still possible. Key resistance is now at 1.0026, a break above this level will indicate that lengthier consolidation of downtrend is underway, then bounce to 1.0100 area could be seen.

Forex Technical Analysis