Month: January 2012

By Amy Calistri, DividendOpportunities.com

Investors have been asking me about this stock for weeks. And I don’t blame them…

The stock is yielding more than 18% right now. That high yield comes on top of a 7 million share buyback announcement that this company made just weeks ago.

But underneath that seemingly good news are some serious questions. And those questions suggest that Invesco Mortgage Capital (NYSE: IVR) might be in trouble.

IVR is a mortgage REIT. The company borrows money or raises capital at cheap rates, and then uses that money to buy mortgage-backed securities — pooled groups of mortgages — that pay higher yields.

For instance, a mortgage REIT might take out a loan at 2%, invest in a pool of mortgages earning 5%, and then pocket the difference. That difference between borrowing costs and what it earns on the basket of mortgages is called the “spread.” The larger the spread, the more money the REIT earns, and the more money available to distribute to investors.

But aren’t mortgage REITs risky? Aren’t the mortgage-backed securities they invest in the same ones that led to the housing crisis?

Well, when it comes to mortgage-backed securities, there are two kinds. Some mortgage REITs primarily own mortgage-backed securities backed by agencies such as Freddie Mac and Fannie Mae. Fannie and Freddie are in turn backed by the government. That means these mortgage-backed securities are essentially guaranteed by Uncle Sam. That makes the securities pretty safe.

On the other side of the coin, REITs can make more income on mortgage-backed securities that aren’t guaranteed by these agencies. This means they can make more money, but then they are on the hook if the mortgage goes into default.

The value of non-agency guaranteed securities has been dropping. And IVR holds a slug of non-agency mortgage-backed securities — making up roughly one-third of its portfolio.

IVR also saw a decrease in net income in the quarter ended September 30, dropping to $0.79 per share from $1.01 a year earlier. And this could be an ongoing concern. In a recent article from Bloomberg, the company’s Chief Investment Officer said that over the last two months IVR was having to pay higher short-term borrowing rates due to the riskiness of its portfolio holdings.

Meanwhile, the REIT has continued to cut its dividend. In March it made a payment of $1.00 per share. The dividend then fell to $0.97 per share, then to $0.80, and then to $0.65 per share in the most recent quarter. That makes the current yield of more than 18% questionable at best.

Most mortgage REITs are adding to their portfolios in an effort to generate enough income to support their dividends. And IVR has done that in the past year. But in a surprising move, on December 13 the REIT announced a share buyback plan that would allow it to repurchase up to seven million shares. The resulting fewer shares on the open market could marginally support net income on a per-share basis. However, it doesn’t begin to offset the 60 million new shares it issued in 2011 alone.

I’m not sure I understand IVR’s plan to maintain its dividend. Of the mortgage REITs I have studied over the last two months, IVR is the one I would be most concerned about holding. It could very well bounce from here in the short term, but I’m not comfortable with its position for the long term, even with a high yield.

Always searching for your next paycheck…

Amy Calistri
Chief Investment Strategist — The Daily Paycheck

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Disclosure: Neither Amy Calistri nor StreetAuthority owns shares of IVR.

First, the bad news.

Although Africa has vast fossil and renewable energy sources, only twenty percent of its population has direct access to electricity and in some rural areas, four out of five people are completely without power. According to the UN, over 600 million Africans currently do not have access to electric power. A depressing 70 percent of Sub-Saharan Africa’s population is living without access to clean and safe energy for their basic needs such as cooking, lighting and heating, making energy poverty among the most urgent issues facing Africa. Worldwide, more than 1.4 billion people worldwide have no access to electricity, and 1 billion more only have intermittent access.

Over 2.5 billion people, almost half of humanity, rely on traditional biomass – wood, coal, charcoal, or animal waste to cook their meals and heat their homes, exposing themselves and their families to smoke and fumes that damage their health and kill nearly two million people a year. More than 95 percent of these people are either in sub-Saharan Africa or developing Asia.

The good news?

According to the Managing Director of Nigeria’s Bank of Industry (BOI), Evelyn Oputu, total investments in renewable energy in Africa rose from $750 million in 2004 to $3.6 billion in 2011. To put this in a global context, worldwide investment in renewable energy has risen from $33 billion in 2004 to $211 billion in 2011.

And the future?

According to a report issued in August 2011 by Frost & Sullivan entitled “Mega Trends in Africa: A bright vision for the growing continent,” investment in renewable power in Africa is set to grow from the 2011 total of $3.6-billion in 2010 to $57-billion by 2020, a staggering 1,583 percent increase in nine short years. According to the document, “The key growth sectors will be wind power, solar power, geothermal power and foreign direct investment (FDI) into energy and power infrastructure.”

The reason for the spectacular projections? Africa’s combination of a massive unmet demand, including remote communities, allied to an abundance of renewable power potential in the form of solar, wind and geothermal potential. To give but one example, Only seven percent of Africa’s hydropower capacity has been developed up to now.

Africa is not yet locked into the inefficient, oft-polluting infrastructure of many Western countries. Accordingly, Africa with modern efficient technologies could build a renewable energy infrastructure that could bypass the inefficient, fossil fuel-centered energy infrastructure systems of the developed world.

Modest starts in renewable energy have already begun across the continent. Wind power projects in Africa are planned or under way in Egypt, Ethiopia, Kenya, Morocco, Nigeria, Tunisia, and Tanzania – including Kenya’s 0.3 gigawatt Lake Turkana project and 0.7 gigawatt of capacity under construction in Morocco, while Cameroon, Kenya, Tanzania, and Uganda all have existing biomass power capacity or plans for future development.

Solar? South Africa has its planned solar park in Upington, intended to contribute 5,000 megawatts to the national electrical grid, while North Africa’s Desertec is the largest solar power project ever conceived, designed at a potential cost of $500 billion to provide a significant portion of the electricity needs of participating countries in the Middle East and North Africa (MENA) region and up to 15 per cent of Europe’s electricity needs by 2050.

Africa’s ambitions have the support of the United Nations, where in 2010 the General Assembly unanimously endorsed a resolution designating 2012 as “The International Year of Sustainable Energy for All.” UN Secretary-General Ban Ki-moon has set three inter-linked objectives to support the goal of achieving “Sustainable Energy for All” by 2030, which are ensuring universal access to modern energy services, doubling the rate of improvement in energy efficiency and doubling the share of renewable energy in the global energy mix.

The UN Sustainable Energy for All incorporates a number of initiatives focusing on Africa, including World Bank Group’s Lighting Africa, the Paris-Nairobi Climate Initiative, the Africa-European Union Energy Partnership, and the Global Alliance for Clean Cookstoves, as well as the EU’s decision to make access to sustainable energy a development priority through its “Agenda for Change.” A number of countries, including South Africa, are also leading the way with national initiatives.

But these initiatives are relatively recent and need financial support to prosper. It was only in September 2010 that African and European leaders launched the Africa-EU Renewable Energy Cooperation Program (RECP) at the First High-Level Meeting of the Africa-EU Energy Partnership (AEEP) in Vienna.

AEEP’s agenda is nothing if not ambitious, as its targets on renewable energy to be reached by 2020 include 10,000 megawatts of hydropower facilities, 5,000 megawatts of wind power capacity, 500 megawatts of solar energy capacity and tripling the capacity of other renewables, such as geothermal, and modern biomass.

The downside to this picture? Three things – the need for massive amounts of investment capital, a problem attendant to massive amounts of cash – corruption, and the continent’s changing political landscape, which is already impacting the Desertec North African solar initiative as the Arab Spring roils the south coast of the Mediterranean.

But both the need and potential are there – all that are currently lacking to make the future predictions a reality are cash and political will.

Source: http://oilprice.com/Alternative-Energy/Renewable-Energy/Investment-in-African-Renewable-Energy-Reaches-$3.6-Billion-in-2011.html

By. John C.K. Daly of Oilprice.com

Jan. 4 (Bloomberg) — Bill Gross’s Pimco Total Return Fund had $5 billion in client redemptions last year as the world’s largest mutual fund trailed rivals, its first year of withdrawals in records going back to 1993, according to Morningstar Inc. Mark Barton reports on Bloomberg Television’s “On the Move.”

Jan. 4 (Bloomberg) — Peter Dixon, global equities economist at Commerzbank AG, talks about euro-zone inflation data, which fell to 2.8 percent in December. He speaks from London with Maryam Nemazee on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)

Written by Sara Nunnally, Editor, Inside Investing Daily, insideinvestingdaily.com

The next year will be painful. But if this controversial research is right, it will be the year investors have the opportunity to build true, long-lasting wealth.

Happy new year, everyone! I hope you had a safe and fun holiday, with many more to come…

Let’s get down to work, because 2012 is going to be a busy year. In Macro Trader, I’ve been researching a theory called K-Cycles. This theory was developed by Nikolai Kondratiev, a Russian economist in the Stalin era, and he was killed for his research.

In a nutshell, Kondratiev said that the economies move in long waves, with extended booms and busts that range between 45 and 60 years.

His research was so accurate that he was able to predict the Great Depression.

Stalin loved this idea… that capitalism was flawed and destructive. It fit perfectly into the communist agenda.

But what Stalin didn’t like was the idea that economies would be reborn after a collapse, and the cycle would start over. This part of his theory got Kondratiev thrown in prison for eight years, and ultimately executed.

Here’s what’s so powerful about K-Cycles… No matter what governments do, they can’t stop the bottom of the cycle from coming.

Now, for some investors, this might seem really scary. That’s why we’ve been bombarding you with protective strategies over the past couple of years.

We see it as a huge opportunity that investors haven’t seen in decades… perhaps even since the Great Depression.

According to Kondratiev’s research, 2012-2015 is the end of the fifth cycle.

In other words, the bottom is here.

For investors, there is no better news. Not because it’ll be the end of the pain — far from it. In fact, the next three years could be the most painful we’ve had in a long, long time. But this is when true wealth is created.

More millionaires were created during the Great Depression than at any other time in our history.

Like I said, 2012 is going to be a busy year…

And we have an idea of where the next cycle is going to take us. The first five K-Cycles were the steam engine and cotton; railways and steel; electrical engineering and chemicals; petrochemicals and automobiles; and information technology and housing.

We think the sixth cycle is going to focus on global infrastructure and the health industry.

Think of it as the bridges and biotech era. The globalization of our markets, the growth of emerging market economies and populations and the urbanization of communities require these two things almost more than anything else.

And don’t think that food and agriculture are outside of this realm.

There are so many food storage facilities being constructed in the U.S. that storage capacity is at the highest it’s been in 20 years.

And biotechnology is being used to create genetically modified crops that are resistant to pests, drought and diseases.

Global infrastructure is going to be a dynamic sector for the next three to five years. Kondratiev’s theory says that demand for commodities starts the cycle over, and this sector uses a lot of commodities! From steel to copper to cement to energy, there are so many ways to play…

I like builders of things — bridges, power plants, pipelines, water treatment facilities, airplanes and ports.

The companies that build things are going to be in high demand, particularly from growing emerging markets, such as China and India, even Latin America and certain parts of the Middle East.

I’ve got my Macro Trader subscribers in Boeing (BA:NYSE), but this is the first of many companies we’re looking into to take advantage of this long-term trend.

The health industry is going to be equally dynamic. The discoveries and strides we’re making in drug therapies are changing the face of life-threatening conditions like cancer and AIDS. Add to that the huge wave of baby boomers starting to exit the workforce, and the health industry is going to experience unprecedented demand for everything…

Long-term care facilities, hospitals, medications for heart conditions and diabetes… It’s a huge arena for investors.

These two sectors are my best picks for 2012. They could be entering a multidecade boom, as Kondratiev’s next cycle comes into focus. It’s important to note that the next few years are going to be volatile. The bottom is never smooth, so investments in both of these industries are going to be just as volatile until the next cycle gains some traction.

Keep all of your protection in place… but be ready to move into global infrastructure and the health industry.

Publisher’s Note: If you want to learn more about Kondratiev and how his research affects today’s investor, follow this link.

The Patenting of Human Genes Goes to U.S. Supreme Court

by Mike Kapsch, Investment U Research
Wednesday, January 4, 2011

By the year 2000, it took the U.S. government 10 years and $3 billion in taxpayer money to fully map out the first human genome…

Today, companies are racing to manufacture gene sequencer machines that can decipher your entire DNA in just two hours, and for roughly $1,000 per test. While it’s great news that decoding your genes can give doctors the ability to detect and treat diseases, such as breast or prostate cancer, before they even become problematic, “60 Minutes reports,” “There is a catch…”

“Strange as it seems, [your genes could be] the property of a biotech company that has taken a patent out on it.”

Are Our Genes for Sale?

As of today, nearly 40,000 patents are held on roughly 20% of all human genes. One company, Myriad Genetics (Nasdaq: MYGN), holds patents on two breast cancer genes – BRCA1 and BRCA2. And now the legality over these patents has become a centerpiece of debate across the country…

In 1994, Myriad was the first company able to isolate the breast cancer gene found in human DNA. Today, by holding the patents to these genes, it alone controls all testing that may take place regarding them.

This “gene monopoly” helps Myriad rake in over $400 million a year in revenue. Not to mention, the company also has zero debt on its balance sheet. And earnings are growing comfortably at 11%. But it also recently landed them in hot water as part of a pivotal case with the U.S. Supreme Court over the legality of patenting human genes.

Investors will want to pay close attention to the final decision from this case, which is expected sometime next June. Because this ruling will likely not only have adverse effects on Myriad’s bottom line… it’s set to have a big impact on the entire biotech industry across the United States.

The Case for Patenting Human Genes

Advocates for patenting human genes say most people have it all wrong…

Kevin Noonan, a patent attorney, states that biotech companies like Myriad Genetics aren’t actually patenting the gene itself at all… Instead, they’re patenting its isolated clone. And since these clones don’t exist in nature, they should be patent-eligible.

He also argues, “The U.S. leads the world in biotechnology and… one important reason [for this] is because companies that have developed those tests could get the economic support needed… because of patent protection.”

By making these patents illegal, you make it much riskier for investors to put money in biotech firms trying to discover what these isolated genes are. So without these patents, Noonan says, this progress would drop off significantly.

Yet, while gene patents may play a key part in promoting biotechnological innovation, it’s also unknown whether the patent system is the best way to achieve such advancements…

The Case Against Patenting Human Genes

That’s why the American Civil Liberties Union and the Public Patent Foundation petitioned the U.S. Supreme Court to look at Myriad Genetics case very closely.

The ACLU and the PPF argue that human genes are products of nature. Biotech companies are simply discovering a link between a gene and some various diseases and therefore shouldn’t be allowed to hold a patent on the isolated gene.

From a research standpoint, they also claim that human gene patents hinder scientific progress because everyone must get permission from the patent holder to do anything at all with the gene. This can only raise costs over the long term.

The Road Ahead

After a federal ruling in March that human gene patents were indeed unconstitutional, and then a reversal in July, the U.S. Supreme Court will now have the final say over the future of patenting human genes.

The next six months will be critical for Myriad Genetics and the biotech industry. And depending on whatever the U.S. Supreme Court decides, Myriad’s shares may either sink or skyrocket.

Good Investing,

Mike Kapsch

Article by Investment U

Jan. 4 (Bloomberg) — Mark O’Byrne, executive director of brokerage GoldCore Ltd., discusses the outlook for gold. He talks from Dublin with Mark Barton and Linzie Janis on Bloomberg Television’s “Countdown.”

Healthcare: The Sector You Must Be Invested in for the Next 10 Years

by Marc Lichtenfeld, Investment U Senior Analyst
Wednesday, January 4, 2011: Issue #1679

Wes Harris of Charlotte is going to have a heart attack in February. His blocked artery isn’t going to wait to see if Greece or Italy will default on its debt.

John Davidson of Oklahoma City is going into the hospital for a knee replacement next week. The surgery will happen no matter if the S&P is up, down, or sideways.

And Carly Nelson who lives in a suburb of St. Louis needs a mastectomy after breast cancer was discovered. She will likely start chemo several weeks later. Whether unemployment climbs back over nine percent will have no bearing on her decision about treatment.

These procedures and others save lives and improve quality of life. Millions of operations, tests and other healthcare services will happen regardless of world events, economic, political, or otherwise.

When people are sick, they’ll do anything in their power to get better. And it doesn’t matter one iota what else is happening on the planet.

It’s one of the reasons I love the healthcare sector.

Starting this year until 2030, 10,000 Baby Boomers will turn 65 every single day. And you don’t need a doctorate in demographics to know that older people consume more healthcare as they age.

That’s why $4 trillion is expected to flood into healthcare over the next eight years.

Super Bowl of Healthcare

While football players are gearing up for the playoffs, hoping to make it to the big game, I know that I’m already going. But the Super Bowl I’m talking about is in San Francisco, not Indianapolis, and it takes place a month earlier.

On Saturday I fly to California for the J.P. Morgan Healthcare Conference. It’s the most important and exclusive healthcare conference of the year. Typically, you need to manage millions of dollars to get a ticket to sit in on presentations and meet the CEOs of some of the largest and most innovative healthcare companies.

This is my sixth consecutive year attending the conference and it always generates a ton of new ideas.

Presentations are expected from the likes of Pfizer (NYSE: PFE), Celgene (Nasdaq: CELG) and AstraZeneca (NYSE: AZN), as well as some smaller companies like Incyte (Nasdaq: INCY), Illumina (Nasdaq: ILMN) and NuVasive (Nasdaq: NUVA).

I’m looking forward to hearing about the macro picture and how all of these companies plan on capitalizing on the millions of new patients and trillions of new dollars that are on the cusp of entering the system.

As a result, I’m particularly interested in diagnostics and genetic sequencing. We’re already at the point where doctors know that specific cancers will or won’t react to certain treatments based on genetic mutations. But we’re in the very early stages of this type of science. Within the next 10 years, by reading our genetic code, doctors will be able to understand so much more about what keeps us healthy and what makes us sick.

And in order to gather that information, medical professionals will need tools – machines, consumables, tests – in order to gather and interpret all of that data.

I expect diagnostics and medical technology to be huge winners not only in 2012, but over the next decade or so. The Oxford Club’s Investment Director Alexander Green has been bullish on medical technology for a while now, discussing it at length in The Oxford Club Communique’s 2012 Forecast Issue.

Interestingly, on New Year’s Eve, I had dinner with a health insurance executive, a surgeon and a computer programmer. For half of the evening, we talked about the changes technology is bringing to healthcare. It further confirmed what Alex and I have been saying for a while now. This sector is going to be huge.

Packed Calendar

The pace of the week is hectic. I’ll at the conference every morning by 7:15 AM. Right now, the only holes in my schedule are Monday at 2:00 PM and Wednesday at 10:00 AM. Lunch and dinner are booked every day with fund managers and analysts.

Along with sitting in on presentations and breakout sessions, I have one-on-one meetings set up with several management teams, including the one from a tiny company with mind-blowing technology that’s on the verge of changing how new drugs are discovered.

I’ll report back to you next week in this column with some of my observations.

Meanwhile, if you’re as jazzed as I am about the prospects for the healthcare sector, let me know. When you provide your email address, you’ll be the first to hear about my new healthcare investing service, FirstLine Investor Alert, which is launching in the next week or two. And you’ll receive a special discount that’s only available to those who sign up on this hot list. You’ll be under absolutely no obligation. You’ll simply be notified first and save a significant amount if you do decide to try the service.

The healthcare sector is on the launch pad. The conference I’m attending always gives me some great ideas and new contacts to help my readers navigate the field to find the best profit opportunities.

With all of that money cascading into the healthcare sector over the next decade, medical stocks are going to take off with or without you. I hope it will be with you. And it’s taking place no matter what happens in Europe or the election.

I’ll talk to you next week.

Good Investing,

Marc Lichtenfeld

Article by Investment U

Jan. 4 (Bloomberg) — Claudio Piron, head of emerging Asia foreign-exchange and fixed-income strategy at Bank of America Corp.’s Merrill Lynch unit, talks about Europe’s debt crisis, the outlook for global currencies and his investment strategy. Piron speaks with Rishaad Salamat on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)

London Gold Market Report
from Ben Traynor
BullionVault
Wednesday 4 January, 08:30 EST

THE SPOT MARKET gold price ticked down to below $1600 an ounce Wednesday morning – having earlier touched its highest level since before Christmas at $1612 – while stock and commodity markets also edged lower as the US Dollar looked to have ended its recent spell of weakness.

The previous day saw the gold price gain over 2.5% in thin trade, with the Dollar falling against other major currencies on Tuesday – before easing as Asian markets reopened.

“Gold surrendered some gains overnight as Asian participants engaged in light profit-taking,” says Marc Ground, commodities strategist at Standard Bank.

“Key [gold price] resistance…lies at the $1630 level which represents the 200 day moving average,” says Russell Browne, a technical analyst at bullion bank Scotia Mocatta.

“We believe that while the 200 day moving average holds, the risk remains for another visit to the $1523 area.”

The silver price fell to $29.05 per ounce – a 3.8% gain for the week so far – having hit $29.78 earlier in the morning.

Record trading volumes were reported on the Shanghai Gold Exchange Wednesday – following a New Year holiday yesterday – with less than three weeks to go before Chinese Lunar New Year on 23 January.

“The physical demand side of things will be the big factor helping to take prices back up again, along with Dollar weakness,” says Daniel Smith, commodities analyst at Standard Chartered in London.

This morning however the Dollar rallied against the Euro, with the latter dropping back below $1.30.

The US Dollar Index meantime – which measures the US currency’s strength against six other major currencies – crept back above 80, a level it climbed to last month, having dropped below 73 earlier in 2011.

In India meantime, the federal cabinet has approved legislation that could lead to hallmarking of gold jewelry, which is currently done on a voluntary basis, being made mandatory.

“Hallmarking can boost investment demand in jewelry form,” says Prithviraj Kothari, president of the Bombay Bullion Association – which today predicted a 48% quarter-on-quarter fall in Indian gold imports in the first three months of 2012.
“Currently purity concerns deter many consumers from buying jewelry.”

The latest World Gold Council figures show Indian gold jewelry demand accounted for 14.6% of global demand for gold bullion in the third quarter of 2011.

“Our physical sales to India yesterday were about double average levels,” says a note from UBS precious metals strategist Edel Tully.

India’s gold imports fell by 56% year-on-year in the final quarter of 2011 – a period in which Rupee weakness contributed to record high domestic gold prices– according to BBA data published Monday.

“The key factor in this market right now is not purely the gold price, but stabilization in the Rupee,” adds UBS’s Tully – who was today announced one of the winning analysts in the London Bullion Market Association’s 2011 precious metals Forecast.

Tully was the closest of 24 precious metals analysts who 12 months ago predicted the average gold price for 2011 (she forecast an average gold price of $1550 per ounce – the actual average came in at $1572).

All of the 24 analysts polled underestimated by how much the gold price would move last year. The biggest predicted range – the gap between the high and low for the year – was $555, while the actual range came in at $581.

Over in the US, the Federal Open Market Committee – which decides Federal Reserve monetary policy – will start publishing members’ projections for future interest rate decisions, the latest FOMC minutes show.

“This is a complete 180-degree shift from the old mysterious-institution approach,” reckons Ethan Harris, New York-based co-head of global economic research at Bank of America Merrill Lynch.
“It’s a bit awkward – you’re going to reveal to the public how much uncertainty the Fed itself has about where it’s going.”

The price of WTI crude oil held above $102 a barrel Wednesday morning, as Iran threatened to close the Straits of Hormuz in response to US and European sanctions.

“With 40% of the world’s internationally traded oil moving through the Strait of Hormuz,” says HSBC analyst James Steel, “even a low probability of the strait’s closure…can have a material impact on oil and hence on gold prices.”

“Gold may not be a safe haven in financial turmoil,” adds Nick Trevethan, senior commodity strategist at ANZ Bank, “but it does seem to function as a safe haven against real-world geopolitical risks.”

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.