Fiscal Cliff Averted: And Here Are the Next 6 Crises to Worry About

Here’s the bright side: After over a year of fretting, the fiscal cliff has finally been averted — at least for the time being. In a thirteenth-hour agreement, Congress and President Obama decided to raise taxes a little bit, delay the scheduled budget cuts that promised to tank the economy, and craft a plan that will delay a total economic meltdown.

While we’ve managed to escape a devastating, intentionally-created budget crisis, the war isn’t over. Over the next several months, Congress and the president will need to navigate several potential fiscal disasters that, if neglected, could be utterly horrifying. If you still have the stomach to look closely into the ragged visage of utter political incompetence, consider this list of six ways Washington could mess things up for millions of us all over again.

1. Sequestration, the Sequel
Remember sequestration, the stunningly stupid $1 trillion in cuts that Congress imposed on themselves (and us)? Remember when they realized that they couldn’t reach an agreement on what actually needed to be cut? Well, they still haven’t reached an agreement, and they still haven’t taken the sequester off the table. If they can’t come to a conclusion within two months, the sequester will kick in, slashing funding to pretty much every federal program and sending the economy in a screaming nose dive.

Happy New Year.

2. The Debt Ceiling
In theory, setting a debt ceiling for the nation was a good idea: Rather than wasting time arguing over every silly little federal expense, the debt ceiling — introduced during World War I — enabled Congress to simply set a limit on the amount of money that the government could spend. Since then, the debt ceiling has been raised dozens of times, generally without much trouble or fuss. In 2011, however, Republicans in Congress battled with the president over the debt limit in an attempt to force the government to cut spending. In the process, they provoked a credit rating downgrade for the U.S., threatened to tank our economy, and set the stage for the fiscal cliff.

In a couple of months, we’re set to go through the same mess all over again.

3. Austerity Is on Its Way
It’s easy to view the federal budget as a sort of household purse writ large. Based on that philosophy, when money gets tight, the government should do what families do — tighten the purse strings, cut the fat, and generally pull back on expenses. And, now that Obama has locked in many of the Bush tax cuts, things are going to get VERY tight.

The trouble is, while it’s easy to deploy cliches, real-life government budget cuts are a bit more complicated. The biggest targets — defense, Social Security and Medicare — have rabid defenders, while cutting from easier targets — like education, Medicaid, and other programs that help the poor and middle class — tends to compound a nation’s economic problems rather than improving them, due to their beneficiaries suddenly having so much less discretionary money to spend.

In other words, austerity is the definition of a rock and a hard place, and we’re going there in late February.

4. The (Temporary) Rise and (Inevitable) Fall of the American Paycheck
Everybody knew the payroll tax holiday wasn’t going to last forever. While it’s fine to cut the cash flow to Social Security for a little while, any long-term cuts to its income will have bigger repercussions — like the ultimate dissolution of the program.

Even so, the holiday was a nicely-designed bit of stimulus. By giving a 2 percentage point break on payroll tax withholding, the government poured money directly into the pockets of every American worker. Now that it’s gone, the median American family will now have $1,000 less to spend in 2013 than they would have had, and the economy will lose hundreds of millions of dollars in discretionary income that was helping to fuel the economic recovery.

5. The Ongoing Battle With Unemployment
While the unemployment rate has dropped from its Great Recession peak, it remains high — and even those who have managed to find a job often find themselves settling for low-paying, low-benefit part-time work that isn’t sufficient to keep a middle class family afloat.

Part of the problem is that companies are (allegedly) worried about making long-term plans while an economic disaster looms on the horizon. While the fiscal cliff deal has kept the economy from flying off a cliff, it doesn’t resolve the fundamental problems in the economy. And, with austerity measures threatening a deep cut to the economy and a debt ceiling debate threatening America’s solvency, it still doesn’t look like a great time to hire new workers.

6. There’s Still No Deal on Superstorm Sandy Relief
On one level, the incredible devastation of Hurricane Sandy is an isolated problem — its effect, after all, was largely limited specific parts of the East Coast. Then again, the mid-Atlantic and Northeast are among the country’s most densely populated areas, and the continued delay in federal funding to begin rebuilding the area is affecting many millions of citizens. What’s more — as a couple of prominent Republican’s, New Jersey Gov. Chris Christie and New York Rep. Peter King, both noted, the Congress has taken longer to respond to this problem than to any comparable disaster in recent memory.

While it’s easy to chalk up the Sandy debacle to Congress’ current bureaucratic gridlock, it’s also worth noting that the Republican party has a long history of blocking disaster relief. Little surprise: To a true budget hawk, disaster relief is yet another overly-generous government program.

But at least the first step of resolving that issue may be taken Friday, assuming the House passes the bill that Speaker John Boehner has scheduled, and approves $9 billion in flood insurance for the victims. Other bills will follow later this month, to send a full package of $60 billion to address the issues created by the hurricane. All $60 billion in aid has already been approved in a package passed by the Senate.

Read more : Best blue chip stocks

Piggy-Back Trades: How They Work for Junior Gold Miners

Existing gold producers might be having a tough time on the stock market right now, but there’s always an exploration and development company that can explode in value with a big discovery of gold or an expansion in its resource base.

The key to making money from junior mining companies is the participation of institutional investors. Most junior mining companies have a considerable amount of common shares outstanding—they have to do this in order to raise money for exploration and feasibility studies. But as we all know, institutional investors are the big drivers of share prices; you want to own a story that other big investors own, because they are the ones that can turn junior mining companies into burgeoning gold producers. There’s nothing wrong with a little piggy-back trade. Besides, as an individual investor, are you really going to go visit a junior gold miner’s property in Peru?

There are many gold junior mining companies out there. Some don’t even have ongoing business operations. They are public companies that have the exploration rights to a property, and speculating in this kind of story is virtually impossible for an armchair investor. From my perspective, I think a speculator in junior mining companies wants the story to be a little more developed—with institutional investor participation already present.

One such story in this market is Belo Sun Mining Corp. (TSX/BSX), which is a Canadian company developing its 100%-owned Volta Grande gold property in Brazil. The company has a strong following among institutional investors and Wall Street analysts. It’s one of those junior mining companies that seem to be doing everything right. The company’s stock chart is below:

Chart courtesy of www.StockCharts.com

Still at the development stage, this gold miner is working methodically to develop an accurate resource estimate for its property. The company plans to issue a feasibility study this year, which will lay out the business plan for a gold mine to be built. It’s highly likely that the company will come back to the stock market in order to raise more funds to develop its property.

Speculating among junior mining companies is a 100% risk-capital endeavor. Anything can happen to this kind of stock. History has shown that there is great disappointment within the group. Stories come and go; there have even been some fantastic frauds. But when all the right pieces and the right people come together, you can actually make a lot of money from junior mining companies that hit it big.

I don’t see the spot price of gold accelerating over the very near term, but the fundamentals do exist for rising gold prices in the future. If you are interested in speculating in gold junior mining companies, take your time and be highly selective. The odds are you won’t get a winner.

Gold Seen Outperforming as Commodity Bull Run Stalls Near-Term

Gold may outperform other commodities as the bull run in raw materials pauses amid slowing economies, while grains and oilseeds may jump on weather disruptions, according to participants at the World Commodities Week conference.

Commodities will likely lack direction for the next 12 months, meaning investors will focus more on relative-value trades, according to Tiberius Asset Management AG. Deutsche Bank AG favors precious metals and is neutral on oil and industrial metals, Michael Lewis, head of commodities research at the bank, said today at the conference in London. Bullion isn’t in a “bubble” at current prices, he said.
“The markets will go sideways in a volatile environment” in the short term, said Christoph Eibl, a founding partner of Zug, Switzerland-based Tiberius.
Commodities erased their gains for the year on Oct. 23 on concern demand for energy, industrial metals and some agricultural products will slump as economic growth decelerates. Raw materials, as measured by the Standard & Poor’s GSCI Index of 24 commodities, made annual advances in 11 of the last 13 years. The gauge’s last annual drop was in 2008.
The International Monetary Fund cut its 2012 global growth forecast to 3.3 percent on Oct. 9, compared with a July prediction of 3.5 percent, and expects the euro area to contract 0.4 percent. Growth in China, the biggest user of everything from copper to cotton, has slowed for seven consecutive quarters.
The S&P GSCI gauge is down 1.2 percent this year and the MSCI All-Country World Index (MXWD) of equities gained 10 percent. The U.S. Dollar Index, a measure against six major trading partners, fell 0.3 percent.

Fiscal Cliff

Gold won’t become a bubble unless prices rise to a record above $2,200 an ounce, while oil and industrial metals are vulnerable to risks associated with the so-called fiscal cliff in the U.S., said Lewis of Frankfurt-based Deutsche Bank. He was referring to $607 billion in federal spending cuts and tax increases scheduled to take effect in January unless the U.S. Congress intervenes.
Gold is up 9.7 percent this year and traded at $1,715.53 an ounce by 4:10 p.m. in London. Central banks have been expanding gold reserves after the metal climbed the past 11 years and investors boosted holdings in bullion-backed exchange-traded products to a record. Nations bought 254.2 tons in the first half of 2012 and may add close to 500 tons for the year as a whole, the London-based World Gold Council said in August.

Quantitative Easing

The U.S. Federal Reserve said Sept. 13 it will buy $40 billion of mortgage debt a month in the third round of so-called quantitative easing and probably hold the federal funds rate near zero until at least the middle of 2015. Gold prices almost doubled from December 2008 to June 2011 as the central bank bought $2.3 trillion of debt in two rounds of QE.
“Precarious” inventory levels in some agricultural products, such as soybeans and corn, mean there is little room in the market to absorb any supply shocks, Lewis said. Rising inflation related to food prices may prevent emerging markets countries from introducing more easing measures that could have boosted demand for other raw materials, he said.
“The hardest area to play in commodities is agriculture,” said Chris Armitage, the U.K. managing director at FourWinds Capital Management, which oversees about $1 billion in natural- resource funds.
The U.S. Department of Agriculture estimated in June that the U.S. would harvest a record 14.79 billion bushels of corn, before slashing its forecast to 10.7 billion bushels, following the worst drought in half a century. Wheat has rallied 36 percent in Chicago this year, while soybeans are up 30 percent and corn has gained 17 percent.

Assets Under Management

Commodity assets under management reached $423 billion at the end of August, from $395 billion at the start of the year, based on Barclays Plc’s estimates of money tied to exchange- traded products, medium-term notes and indexes, according to an Oct. 1 report. Assets reached a record $451 billion in April 2011.
About $50 billion of investments is tracking commodity indexes other than the two biggest, the S&P GSCI and the Dow Jones-UBS Commodity Index, according to Dan Raab, head of commodity investor marketing and structuring at UBS Securities LLC.
“Commodities as an asset class absolutely can’t be ignored,” Raab said. “Consumption of raw materials and use of commodities is likely to increase in the next 20 to 30 years.”

Article Source: http://www.businessweek.com/

The Basics of Gold Bullion Investments

Gold bullion is defined as that gold whose purity ranges from 22 to 24 karat.
Gold markets sell it in the form of 1 ounce, 10 ounce, 100 ounce, and 1,000
ounce bars. Gold bullion is a tangible asset that is undeterred by the downs
in the economy. In contrast, the profits of gold mining stocks are based upon
the spread between the costs required for the gold-mining and the value of the
gold that is excavated from the ground. The costs for such mining depend upon
geo-political factors including tightness in the credit market, investor sentiments
etc. Thus a gold bullion stock is more preferred on an investment portfolio as
compared with a gold mining stock even if one considers it on a long-term basis;
taking due consideration of the risk factors involved. Even in an extremely rickety
economic scenario, it is gold bullion in the form of a coin, bar, jewelry, etc. that
will stand strong and benefit its investors.

The gold bullion market is a medium through which trading of pure gold is done
by traders; mostly over the counter with concentration base in the London area.
This market is open throughout the day and its rate of turnover is very high as
gold is considered as a useful hedge during times of inflation. Transactions
in the gold bullion market are mostly done through electronic media or via the
telephone. As compared with various other gold-investing methods like mutual
funds, exchange traded funds, futures and options, gold bullion investing involves
lower flexibility as far as trading is concerned on account of the limitations
in buying or selling of precise amounts of the gold coins and bars that have
established sizes. In addition, storing and insuring of gold bullion is a costly
affair. Despite the same, gold bullion investing is preferred first as one can build
a strong base in one’s investment portfolio through it. After this, putting money
in the speculative gold mining stocks can be considered. Another way in which
gold bullion investing can be done is through purchase of gold bullion securities.
These are potential long term winners.

In order to help investors identify different gold securities, a unique symbol
referred to as the gold bullion ticker is used. Its first portion represents the stock
exchange at which it is traded while the second portion is the representation of
the gold bullion fund. Such funds are directly related to the price of gold bullion.
As with any investments, in this case as well, careful research into all the gold
bullion securities is very necessary before the decision of investing in the shares
is taken. Details like the company’s headquarters and location areas for storage
of gold in the physical form need to be understood. The reason is that if the
said area is unsafe on account of it being politically insecure or affected owing
to non-compliance of eco-friendly norms, then investments here would not be
worthwhile.

Gold bullion investments are advantageous as one actually owns the amount
of gold one invests in. Gold bullions have universal monetary value and high
liquidity. No wonder then that they are referred to as universal currency.

Gold and Silver Flat in Asian Trading

Most metals and energy commodities closed with strong gains in international market. Gold closed slightly higher, recovering a part from the previous session’s slide, as better performance in equity markets and underlying uncertainties surrounding the US fiscal crisis increased bullion’s investment appeal. Gold rose 0.04% for the first time in four days on speculation that the Federal Reserve will buy more debt to boost the U.S. economy. However, silver fell 0.16%.
Public bickering between Democrats and Republicans made the headlines of global news services. After President Obama told investors earlier in the week, that a deal was imminent and that he was ready to sign the new legislation as soon as it reached his desk.
Gold holdings  of SPDR gold trust, the largest ETF backed by the precious metal, declined to 1,347.02 tons, as on Nov 28. Silver holdings of ishares silver trust, the largest ETF backed by the metal, declined to 9,780.44 tons, as on Nov. 29.
The dollar index, which measures the greenback against a basket of six rival currencies, stood at 80.215, above the day’s low of 80.021, but still down from 80.262 in late US trading session on Wednesday.
This morning gold prices have come of the highest level of the session as euro has come under pressure after concern on German economy arrived in the market. Other than this, US economic releases could scale back expectations for further easing from the Federal Reserve, boosting the dollar and weighing on the precious metal. Asian markets are trading in a higher side with optimism of increasing economic sentiment in China and Japan.
Looking towards later today traders can expect gold prices to continue its upside move whereas prices may come under pressure during European session. German retail sales are likely to decline further which will weigh on the euro to pressurize on these metal prices. Likewise, US personal data are expected to an improved picture as GDP number for third quarter climbed up. Thus, higher dollar index during US session may weigh on prices.
This morning, Japan released their monthly data dump; Japanese industrial production has improved and supported gains in Asian equities, which may continue to support gains in Silver. Also growing Chinese business sentiments and growing manufacturing may continue to support demand for the metal. Even record mining and higher costs failed to dent and with improving sentiments buying at dips should be initiated. Silver outpaced gold in yesterday’s session and is trading at 34.278 flat this morning

Article Source: http://www.fxempire.com/

Smaller Technology Stocks Turning Things Around—a Great Sign for the Future

All it takes is a little positive momentum in this kind of stock market for share prices to accelerate strongly. Investor sentiment is pretty fragile, and we know that there are a lot of headwinds for the stock market going into 2013.

Oddly, positive momentum in the stock market these days is the result of action by policymakers, which is somehow not right. This is the pickle we’re in: too much debt, and not enough action.

One thing we are getting is renewed momentum in smaller technology stocks. All kinds of U.S. technology companies reported a big turnaround in their third-quarter earnings results, and many of these technology stocks have seen their share prices turn around as well.

One technology stock that recently moved strongly higher on the stock market is Semtech Corporation (NASDAQ/SMTC), a Camarillo, CA-based semiconductor manufacturer. The company beat the street with its latest earnings and revenues, and its positive momentum is a good sign for the U.S. economy. The company’s stock chart is below:

 Chart courtesy of www.StockCharts.com

Another much smaller technology stock that’s turning things around is SeaChange International, Inc. (NASDAQ/SEAC). The company’s stock market price has been ticking higher all year, and there is a lot of anticipation regarding its upcoming earnings report on December 4. The company’s stock chart is featured below:

 Chart courtesy of www.StockCharts.com

As we know, large-cap technology stocks have been struggling with economic weakness in the eurozone and China. It’s great to see financial (and stock market) strength among smaller technology stocks, which generate more revenues from the domestic U.S. economy.

Whenever the broader stock market gets any momentum behind it, usually some kind of external worry brings prices down again. I think that equity speculators should keep their holdings as domestic as possible. The less international exposure, the better, considering that growth prospects are better at home. Recent momentum in smaller technology stocks is a positive sign going into 2013. Let’s hope it lasts.

Article Source: http://www.pennystockdetectives.com/

Gold to Retest Highs?

If there is anything I’ve learned over the years of trading/investing, it is to fade the crowd. When gold was rallying to all-time highs, I was warning of a monster correction. This wasn’t a “rational” call since the debt crisis in Europe was intensifying, but then again, markets are not rational. You must feel out markets and go with your instinct

You must constantly adjust your forecasts to account for price action as a function of time. While I expected a correction to the $1400′s, the price action since then just hasn’t justified such a call, which is why I have been buying. Don’t get stuck with one view of where a market is headed if the price action is telling you something totally different. This is the trap people fall into all the time.

People are way too bearish on gold in the short-term, which suggests to me we will see a strong move in the opposite direction. For now, I think we are setting up for a retest of highs, but first I want to see gold push past $1730. A convincing bounce off of $1600 was the first sign we were in store for a sustainable rally. A move past $1730 and then $1750 will be the next sign. I’m not sure people will catch on to the rally until it’s too late.

I have been steadily adding to my gold positions throughout this correction. If there is one thing I’ve been consistent about the past couple of months, it’s that gold stocks are a steal. You must be patient in waiting for a rally to materialize; the biggest moves always happen a very short period of time. A big move may be coming, and you can be sure I want to be positioned for it.

Article Source: http://expectedreturnsblog.com