BIG STOCK SELL-OFF IN YEAR END FINALE?

December 10, 2012

The approaching fiscal cliff and the probability of higher taxes could prompt an end of year sell-off in the stock market. Investors should prepare by diversifying into assets which are not positively correlated with stocks. Gold investments in particular are well-suited for this purpose…

Wall St Week Ahead: “Cliff” worries may drive tax selling

Investors typically sell stocks to cut their losses at year end. But worries about the “fiscal cliff” – and the possibility of higher taxes in 2013 – may act as the greatest incentive to sell both winners and losers by December 31.

The $600 billion of automatic tax increases and spending cuts scheduled for the beginning of next year includes higher rates for capital gains, making tax-related selling even more appealing than usual.

 

http://ca.news.yahoo.com/wall-st-week-ahead-cliff-worries-may-drive-171035415–sector.html

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American Consumers Turn Sour on Economic Outlook

December 7, 2012

Just in time for Christmas, consumer sentiment in America is taking a nosedive.

Americans are increasingly worried about the outlook for the economy, largely due to the fiscal cliff which is only about a month away.

This decline in morale has implications for the financial markets. It is difficult to see positive action in the stock market with Americans so worried about their futures.

In contrast, historically, hard assets, particularly gold investments, have appreciated during periods when Americans are worried, providing a degree of protection against bad times.

http://www.marketwatch.com/story/consumer-sentiment-nose-dives-in-december-2012-12-07

 

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What Goes Up, Must Come Down

November 16, 2012

Despite very questionable economic news, the stock market has appreciated in much of 2012. It was led principally by Apple Computer, the darling of the tech industry.

In case you haven’t noticed, Apple is in trouble now. It’s stock is down, way down from its highs. In fact, Apple shares have fallen 25% since late September. Yesterday the stock fell 2.4%.

Investors must consider whether or not Apple is the “canary in the mineshaft.”

How can a company whose shares investors chased up 74% in a year suddenly fall out of favor like it has?

Something is spooking investors. And we suggest that that something should not be viewed as exclusive to Apple. The stock market is vulnerable and investors should diversify into assets that are not closely correlated with stocks.

Rare gold coins are particularly useful in this regard.


Wealthy Investors Dumping Stocks, Real Estate and Businesses Ahead of Fiscal Cliff as Market Guru Warns of Market Collapse

November 13, 2012

 

As many readers already know, due to long-term irresponsible fiscal policies, the US government finds itself headed to the edge of a so-called “fiscal cliff.”

Policymakers in Washington are trying to strike a deal to head off the carnage, but their track record is awful on such deals. What we are soon to be faced with is a combination of large budget cuts and sizable tax increases, which will kick in if nothing is done.

Faced with the possibility of tax hikes, America’s wealthy investors are taking action ahead of time and it isn’t good news for the markets; wealthy investors are liquidating stocks, real estate and even whole businesses to avoid higher tax rates in the future. This is obviously terrible news for the stock market, the real estate market and the economy as a whole, creating the type of environment in which hard assets, such as gold coins, thrive.

http://www.cnbc.com/id/49792979

Meanwhile, long-time market analyst, Marc Faber of The Gloom Boom and Doom Report actually says that there will be no fiscal “cliff.” Nevertheless, he predicts that corporate profits are certain to disappoint, resulting in a stock market decline of 20% or more. Faber points to Apple Computer as a leading indicator; Apple’s stock has fallen 20% in recent months already.

http://www.cnbc.com/id/49802535

 

 


Stocks Tank Post-Election

November 7, 2012

The US stock market appeared to have an allergic reaction to the results of yesterday’s presidential election, with the Dow falling some 313 points, or 2.36%, today. The S&P 500 slid 34 points, or 2.37% and the Nasdaq Composite fell 75 points, or 2.48%.

Actually, it wasn’t just the outcome of the election that stocks were reacting to, there were other factors in play.

Traders were very concerned about the approaching fiscal “cliff” and fear that the sharply divided government and country will be unable to come to terms to deal with it as 2012 winds down.

In addition, traders are once again worried about Europe. Greece is set to have another parliamentary vote on yet another austerity package designed to prevent a frightening default and there is a great deal of uncertainty surrounding whether that vote will produce a favorable outcome.

What all this indicates is that the US and Europe are both awash in debt and the financial world is skeptical that either will take meaningful steps to solve their problems. This is an environment fraught with risk and, in a risky environment, there is no better safe haven than gold.


More Evidence of Stagflation

August 9, 2012

There have been several significant news stories in the financial world during the first week or so of August which are worth taking note of.

Despite the fact that gold has traded mostly sideways for some time now, there is a great deal of evidence to indicate that conditions are percolating below the surface that could lead to conditions that would be decidedly negative for the US dollar and financial assets and thus positive for gold investments.

For instance, the CEO of PIMCO, which is the parent of America’s largest bond fund, has warned that the world is headed for a severe recession not unlike the one that ended in 2009:

http://www.bloomberg.com/news/print/2012-08-02/pimco-s-el-erian-says-world-in-serious-slowdown.html

Readers will recall that the recession that ended in 2009 came about after a financial crisis which almost saw the meltdown of the US financial system. Readers should also recall that in the beginning of that episode gold languished as investors liquidated gold positions to cover losses elsewhere. Nevertheless, gold rebounded sharply and ended higher in both 2008 and 2009. Meanwhile, the stock market experienced its worst bear market in almost a decade.

Do not assume that gold investments only rise during periods of high inflation. That is one of the most common misconceptions surrounding gold investing. Historically, gold has provided financial insurance and profits during a variety of economic conditions, such as the severe recession of 2008-2009.

Speaking of inflation, it is true that gold tends to react favorably to high inflation. One of the chief components of wholesale and retail inflation is food. We are seeing more and more reports in the news that indicate that drought conditions will lead to higher food prices going forward:

http://www.euronews.com/2012/08/06/drought-threatens-world-food-price-rises/

Couple these two reports–the threat of recession and the threat of inflation–and you get something called stagflation, a condition we have covered on Mind Your Money to a great extent.

The last time the US economy experienced stagflation was in the 1973-75 time frame. During that period the price of gold tripled and the stock market fell 45%.

This creates a potential scenario in which investors should accumulate gold investments to protect their wealth from any of 3 possible threats:

1. Recession

2. Inflation

3. Both Recession and Inflation–Stagflation


Unemployment: America in Denial

August 3, 2012

The US economy is in trouble, though many Americans, and much of the mainstream media are in denial.

The latest unemployment numbers are out and they show another slight increase, to 8.3%. The trend has been headed in the wrong direction for a few weeks now.

The economy is NOT improving and sooner or later this is bound to be reflected in the financial markets. There is just no scenario in which the stock market and real estate market can be healthy while the overall economy is sick.

Government statisticians tried to put a good face on the unemployment news by coupling it with the tid bit that the economy added 163,000 jobs in July, the highest number in some time. But that figure has to be taken with a grain of salt because in each and every month so far in 2012 that jobs report has had to be revised downward in the following month.

In other words, someone, somewhere in the halls of government has their finger on the scale. It is just not reasonable to believe that it is just a coincidence that the employment figures can possibly be wrong in the same direction 8 months in a row.

Yesterday CNBC ran a story that reinforces the contention that the US economy is actually already in a recession and we are just are in denial about it. The unemployment picture is actually much worse than it appears…

http://www.cnbc.com/id/48468748

Investors may be bewildered by this news, but they need to shake off the cobwebs and realize that this all adds up to eventual very bad news for the financial markets, the stock market in particular. Meanwhile, inflation is making a comeback. Fuel prices made a surprise jump in July and drought is putting upward pressure on food prices across America.

This is building a picture that looks very much like STAGFLATION. Wise investors need to protect themselves against stagflation and the way to do so is to look to history.

The last time stagflation was a serious issue in the US economy was back in the 1973-75 time period, when the stock market fell 45% and the price of gold tripled…