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Today’s the day. If you have ever hunted for undersea gold, you likely know Mel Fisher’s famous mantra. The great shipwreck hunter used the line thousands of times before it became the undeniable truth on the day he uncovered the “Atocha mother lode.”

While this week’s record-breaking surge in gold prices is not likely to create $450 million in newfound wealth for any singular investor, it is the day gold bugs have been waiting for.

Thanks to surprising news that India’s central bank shelled out some $6.7 billion to get its hands on 200 metric tons worth of the International Monetary Fund’s (IMF) gold stash, the bullion market is on fire today.

Why is this good news?

Several reasons. First, since India’s name is on the receipt, China will have to wait in line to get its gold from the IMF. It’s either that or tread ever so carefully into the volatile spot market.

You see, the IMF’s sale is nothing new. It announced months ago its plans to unload 403.3 metric tons of the golden precious metal into the market.

However, most investors thought China, with its desperate need to diversify its holding of American greenbacks, would be the chief buyer.

But this week’s news proves otherwise. It turns out India is on a diversification spree of its own, desperate to hedge against any unfavorable moves in the American dollar.

With just $200 tons left, there is not much gold left for other nation’s to get their hands on. $7 billion worth of cash is nothing for a country like China that right now holds nearly a trillion dollars worth of reserves.

The market’s logic for sending prices higher today is simple supply and demand. With less surplus available from the IMF, countries looking to diversify will have to hit the spot market.

Higher demand equals higher prices.

I have been writing about China’s growing commodities carry trade for months now.

It is the process where Beijing (and now India, evidently) uses its pile of increasingly depreciating dollars to buycommodities. It then sits on the commodities for a bit and sells them at a premium in the domestic currency.

This phenomenon alone creates fantastic commodities market bullishness.

But for gold longs, the timing of today’s announcement from the IMF could not have been better. It meshes perfectly with the increasing volatile equities market.

Not only can gold bugs raise prices due to increased diversification demand, but they can also raise their asking price due to increased flight to safety.

With the American market looking weaker by the minute and unemployment just about ready to climb into double-digit territory, gold just may be the one asset worth more in six months than it is today.

While an intraday surge of nearly $25 may appear as a major move after the incremental adjustments we have seen over the past few weeks, it represents a mere 2% change in the assets value.

Let me tell you, there is a lot more where that came from.

Today’s Daily Angle comes from Wikinvest Wire member StockTradingToGo. You can read the full article on the Stock Trading to Go blog.

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Done, finished! Any investor who is buying into this market dip thinking that the next 4 – 6 weeks are going to be up up and away needs to drop back down to earth. The S&P 500’s close under the 50 day moving average is the last brick in the bulls wall of support.

Some fun facts for you to consider:

• Out of the last nine trading sessions on the S&P 500, six have been distribution or heavy distribution days.
• Bye bye 20 day moving average support.
• Bye bye 50 day moving average support.
• There were 9 stocks down for every 1 up in last Monday’s heavy volume session.

A great chart by Dave Singer also shows the massive rising wedge that has been forming (Note chart is of the Dow Jones and is from this past Tuesday, October 27th):

Dave Singer’s Technical Chart (click to enlarge)

These rising wedges are traditionally very bearish and this time around is no exception. It is hard to tell if the Dow closed out of this wedge formation as of last week’s close so keep a close eye on this potential formation breakdown.

Also, check out the Volatility Index at the top of this article which has spiked nearly 30% in the last four sessions.

I want to clarify that I am simply calling the rally since March as over and that we can see downside pressure for the short term, 4 – 6 weeks max. If we see the rising wedge collapse to the downside, MACD confirmation, etc. then that may turn this retracement into a different scenario with darker possibilities.

Overall though cash is back to being king. In fact I am back in 100% cash as of last week. Last time I went 100% cash was back in August of last year and we all know what happened after that.

Stay smart out there!

Today’s Daily Angle comes from Wikinvest Wire member Michael Panzner of Financial Armageddon. You can read thefull article on Michael’s blog.

Just as there is more than one way to skin a cat (apologies to the animal lovers out there), there are myriad ways to illustrate the extent of the economic and financial mess we are in.

As a fan of simple graphs that tell a powerful story, I couldn’t resist the urge to highlight two charts featured in a recent post by the Sudden Debt blog, entitled “A More ‘Personal’ Look At Debt“:

It is common enough to look at debt as a percentage of GDP, DPI, etc. but that’s so… impersonal. So here are a couple of (very scary) charts that look at things from a dollars per person perspective (click on charts to enlarge).

Debt per person and GDP per person (click to enlarge)

Debt per person and Disposable Personal Income per person (click to enlarge)

Note: the Total Debt used to construct these chart does NOT include debt of the financial sector so as to avoid any double counting (e.g. a mortgage inside a CDO), even at the cost of somewhat understating the crush of debt. It’s bad enough, anyway. ]]> http://blogs.wikinvest.com/dailyangle/2009/11/the-growing-debt-divide/feed/ http://blogs.wikinvest.com/dailyangle/2009/11/us-personal-income-data-for-september-shows-pullback/ http://blogs.wikinvest.com/dailyangle/2009/11/us-personal-income-data-for-september-shows-pullback/#comments Mon, 02 Nov 2009 07:01:21 +0000 admin http://blogs.wikinvest.com/dailyangle/?p=418

Today’s Daily Angle comes from Wikinvest Wire member Edward Harrison of CreditWritedowns.com. You can read thefull article on Edward’s blog.

The data released this morning by the U.S. Department of Commerce’s Bureau of Economic Analysis on personal income somehow managed to show weakness in income and consumption as well as savings. I see this as proof that Americans are not saving and hence not deleveraging, but they are also so income constrained that their consumption should not be expected to increase markedly either. This points to a mild recovery.

The numbers from September show a significant decline in consumption from the cash-for-clunkers juiced August numbers.

Personal outlays — PCE, personal interest payments, and personal current transfer payments — decreased $48.8 billion in September, in contrast to an increase of $138.2 billion in August. PCE decreased $47.2 billion, in contrast to an increase of $139.8 billion.

If you take out August and cash-for-clunkers and look back at June and July, September’s consumption numbers are up a tick (annualized $10.53 trillion in personal outlays versus $10.44 trillion for July and $10.42 trillion for June).

So consumers are spending money. You can see this in the savings data as well.

Personal saving — DPI less personal outlays — was $355.6 billion in September, compared with $307.0 billion in August. Personal saving as a percentage of disposable personal income was 3.3 percent in September, compared with 2.8 percent in August.

3.3 percent is higher than 2.8 percent but it is a lot lower than 5.9 percent, which is where things were in May. I took this issue up at length in my post, “Americans are not increasing savings” earlier this month saying:

Savings rates averaged 9% through 1982. They were consistently above 7% through 1992. Since then, savings rates have collapsed. From Jan 1969 to November 1997 (comprising all monthly data since record-keeping began), the 10-year average savings rate was higher in every single month than the 5.9% savings rate achieved in May 2009.

So 2.8% is ridiculously low and inadequate to meet Americans’ needs in terms of reducing debt and Baby Boomers’ preparing for retirement. Absent asset-price appreciation as a source of savings, we are going to be in for some tough sledding in a few years. Clearly, record low interest rates are reducing the propensity to save.

On the other hand, incomes are still constrained. The BEA reports:

Personal income decreased $0.1 billion, or less than 0.1 percent, and disposable personal income (DPI) decreased $0.2 billion, or less than 0.1 percent, in September, according to the Bureau of Economic Analysis…

Real disposable income decreased 0.1 percent in September, compared with a decrease of 0.2 percent in August. Real PCE decreased 0.6 percent, in contrast to an increase of 1.0 percent.

This puts personal income on par with Aug 2007 levels, as income is being reduced by high unemployment.

My analysis says the data are pointing to a mild recovery on the back of consumer spending which is being spurred by low interest rates. As a result, savings are now going back down to dangerously low levels. This mix is a direct result of policy decisions made in Washington, which are designed to recreate the pre-crisis status quo ante. Thus far, they have been successful. ]]> http://blogs.wikinvest.com/dailyangle/2009/11/us-personal-income-data-for-september-shows-pullback/feed/ http://blogs.wikinvest.com/dailyangle/2009/10/will-rise-in-september-retail-sales-carry-into-holidays/ http://blogs.wikinvest.com/dailyangle/2009/10/will-rise-in-september-retail-sales-carry-into-holidays/#comments Fri, 30 Oct 2009 07:01:50 +0000 admin http://blogs.wikinvest.com/dailyangle/?p=416

Today’s Daily Angle comes from Bob Blandeburgo of Wikinvest Wire members MoneyMorning.com. You can read thefull article on the Money Morning blog. The article was originally published at the beginning of October, but as we head into November the questions raised in the article become more pressing.

Retail sales rose in September for the first time in 13 months, fueling hopes that the worst is behind retailers that head into the holiday season better prepared for a tough economic environment.

Three reports were unanimous that sales gained, but to different degrees: Market research firm Retail Metrics Inc. said sales rose 1.1% last month, Thomson Reuters tallied a rise of 0.6% and a tally by International Council of Shopping Centers (ICSC) and Goldman Sachs Group Inc. (NYSE: GS) showed a 0.1% increase.

“Let the retail recovery begin,” said Michael Niemira, chief economist at ICSC. “This is the start of a better performance and better fundamentals.”

Retailers such as Target Corp. (NYSE: TGT), Aeropostale (NYSE: ARO) and Kohl’s Corp. (NYSE: KSS) raised their guidance for the current quarter ending October 31. But the encouragement was reserved as it pertains to the fiscal holiday quarter that starts next month for most retailers. Fundamentals key to consumer confidence – particularlyunemployment, which rose to 9.8% last month – are still serious concerns.

“While our outlook for the third quarter has improved, we remain cautious in our expectations for fourth quarter results in both of our business segments,” said Gregg Steinhafel, Target’s chairman, president and chief executive officer.

Of course, retailers didn’t have to do much to beat last year’s September, which was relatively poor.

“You want to be careful how much you’re reading into the improved numbers,” Michael McNamara, vice president for research and analysis at SpendingPulse, an information service by MasterCard Advisors that estimates sales for all forms of payment, including cash, checks and credit cards in an interview with The New York Times.

For instance, jewelry sales increased 1.2% last month, McNamara said, “but that is still about 5% lower than we were in September 2007 and about 10% lower than the sector was in September 2006.”

“In some respects the sector has turned the clock back to 2005 sales,” he said.

While the bleeding at retailers may not have stopped, it has likely slowed as leading indicators such as the financial markets and consumer sentiment show improvement. The Standard & Poor’s 500 Index has risen more than 55% since its March lows, while the Reuters/University of Michigan Index of Consumer Sentiment was up to 73.5, its highest level since the start of 2008. ]]> http://blogs.wikinvest.com/dailyangle/2009/10/will-rise-in-september-retail-sales-carry-into-holidays/feed/ http://blogs.wikinvest.com/dailyangle/2009/10/fed-authorized-100-payout-by-aig-on-cds/ http://blogs.wikinvest.com/dailyangle/2009/10/fed-authorized-100-payout-by-aig-on-cds/#comments Thu, 29 Oct 2009 07:01:15 +0000 admin http://blogs.wikinvest.com/dailyangle/?p=413

Today’s Daily Angle comes from Wikinvest Wire member Yves Smith of Naked Capitalism. You can read the full article on NakedCapitalism.com

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Wow, I should not be surprised, but this is a stunner nevertheless.

It had generally been assumed that the AIG payouts of 100% on credit swaps (when the insurer was under water and bankrupt companies do not satisfy their obligations in full) was the result of some gap in oversight plus traders at AIG exercising discretion (they were unhappy about bonus rows and had reason to curry favor with dealers, who were potential employers).

The article makes clear that AIG had been negotiating to settle on the swaps prior to getting aid from the government, and was seeking a 40% discount. The Fed might not have gotten that much of a discount, but there was clearly no need to pay out at par.

This massive backdoor subsidy to the likes of Goldman, DeutscheBank was authorized by Geithner while he was at the New York Fed.

From Bloomberg:

[Elias] Habayeb, 37, was chief financial officer for the AIG division that oversaw AIG Financial Products, the unit that had sold the swaps to the banks. One of his goals was to persuade the banks to accept discounts of as much as 40 cents on the dollar….

Beginning late in the week of Nov. 3, the New York Fed, led by President Timothy Geithner, took over negotiations with the banks from AIG, together with the Treasury Department and Chairman Ben S. Bernanke’s Federal Reserve. Geithner’s team circulated a draft term sheet outlining how the New York Fed wanted to deal with the swaps — insurance-like contracts that backed soured collateralized-debt obligations….

Part of a sentence in the document was crossed out. It contained a blank space that was intended to show the amount of the haircut the banks would take, according to people who saw the term sheet. After less than a week of private negotiations with the banks, the New York Fed instructed AIG to pay them par, or 100 cents on the dollar. The content of its deliberations has never been made public.

The New York Fed’s decision to pay the banks in full cost AIG — and thus American taxpayers — at least $13 billion. That’s 40 percent of the $32.5 billion AIG paid to retire the swaps. Under the agreement, the government and its taxpayers became owners of the dubious CDOs, whose face value was $62 billion and for which AIG paid the market price of $29.6 billion. The CDOs were shunted into a Fed-run entity called Maiden Lane III…

The deal contributed to the more than $14 billion that over 18 months was handed to Goldman Sachs, whose former chairman, Stephen Friedman, was chairman of the board of directors of the New York Fed when the decision was made…..

“In cases like this, the outcome is always along the lines of 50, 60 or 70 cents on the dollar,” [Donn] Vickrey [of financial research firm Gradient Analytics Inc.] says…..

One reason par was paid was because some counterparties insisted on being paid in full and the New York Fed did not want to negotiate separate deals, says a person close to the transaction. “Some of those banks needed 100 cents on the dollar or they risked failure,” Vickrey says.

As Vickrey indicates, the fact that this was a backdoor rescue means the Fed is acting as an extra budgetary vehicle of the Treasury. This is a violation of the Constitution and shows how patently false the Fed’s claims of independence are.

Continue reading this article on the Naked Capitalism Blog…

Today’s Daily Angle comes from Wikinvest Wire member Dividend Growth Investor. You can read the full article on DividendGrowthInvestor.com

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In Six Dividend Stocks for current income I provided a list of higher yielding dividend stocks, which investors could use for current income. With a high current yield, the stock list could provide a decent stream of dividend income for retired individuals. There lies another problem however.

Most younger investors tend to ignore dividend stocks, which typically are mature, slower growing companies with dependable cashflows a portion of which are distributed back to investors. Younger investors view these dependable income stocks as boring and too slow moving, which don’t have anything better to do with their cashflows but send them back to owners in the form of dividends. Instead these investors prefer investing in growth stocks with high price earnings ratios and high expectations for growth. While most companies that distribute a portion of their profits in the form of dividends realize that double-digit growth cannot last forever, most growth stocks sell at rich valuations, supported by analysts who have perfected the art of predicting high growth rates for decades to come. As soon as the music stops, these growths stocks stumble, dragging investors fortunes with them.

On the other hand the dividend stocks would have kept growing, albeit at a slower pace, and would have kept sending a higher stream of dividend income to shareholders, to be used at their own discretion. Many investors do not realize that unlike capital gains, dividends are real cash that bolsters your return. Dividends have also accounted for 40% of the annual average total returns of the S&P 500 over the past century. A company, which grows its dividend year after year, could end up paying a double-digit yield on cost to long-term investors over time.

Companies that regularly pay dividends impose a discipline on managers to treat cash very carefully and thus make better decisions by adopting projects, which would generally improve the bottom line, without sacrificing return on equity. Thus dividend stocks, which consistently grow their payments, should be in every investor’s portfolio, irrespective of their age. A stock that regularly grows its distributions provides an inflation proof source of income, which is much more reliable than the [[Consumer Price Index], on which TIPs (TIP) rely on.

A stock could afford to consistently raise distributions by selling products, which have a strong brand image, and thus are not easily substituted by others. Examples of such companies include Procter & Gamble (PG), Clorox (CLX), Pepsi Co (PEP), Wal-Mart (WMT) and Emerson Electric (EMR).

The Clorox Company (CLX) manufactures and markets a range of consumer products such as bleaches; cleaning products; water-filtration systems and filters; auto-care products; plastic bags, wraps, and containers; Over the past decade the company has managed to boost earnings per share at a rate of 13.60% annually. Clorox has paid uninterrupted dividends and increased payments to common shareholders every year for 31 years. Dividends have increased at an average rate of 8.60% annually since 1999. Check my analysis of the The Clorox Company (CLX).

Emerson Electric Co. (EMR), a diversified global technology company, engages in designing and supplying product technology and delivering engineering services to various industrial and commercial, and consumer markets worldwide. The company operates through five segments: Process Management, Industrial Automation, Network Power, Climate Technologies, and Appliance and Tools. The company has been able to increase earnings at an average rate of 8.40% annually over the past decade. Emerson Electric Co. has increased payments to stockholders for 52 consecutive years. The ten-year dividend growth rate is 7% per annum over the past decade. Check my analysisof Emerson Electric Co. (EMR).

PepsiCo, Inc. (PEP) manufactures, markets, and sells various snacks, carbonated and non-carbonated beverages, and foods worldwide. The company manufactures, sells, and distributes Pepsi-cola beverages and is enhancing its distribution channels through its acquisition of key bottlers. The company has been able to increase earnings at an average rate of 9.90% annually over the past decade. PepsiCo has been consistently increasing its dividends for 36 consecutive years. Dividend payments have increased by an average rate of 13.50% annually since 1999. Check myanalysis of PepsiCo, Inc. (PEP).

The Procter & Gamble Company (P&G), together with its subsidiaries, provides branded consumer goods products worldwide. The company operates in three global business units (GBU): Beauty, Health and Well-Being, and Household Care. The company has been able to increase earnings at an average rate of 12.20% annually over the past decade. Procter & Gamble has been increasing its dividends for the past 53 consecutive years. Dividend payments have increased by an average of 10.90% annually over the past 10 years. Check my analysis of Procter & Gamble (PG).

Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats worldwide. It operates through three segments: Wal-Mart Stores, Sam’s Club, and International. The company has managed to deliver an impressive 11.60% average annual increase in its EPS. Wal-Mart Stores has consistently increased dividends every year for 35 years. Dividends have increased at an average rate of 18.90 % annually since 1999. Check my analysis of Wal-Mart Stores, Inc. (WMT).

While these companies are poised to deliver strong long-term dividend growth, don’t throw caution away. These stocks should be a part of a diversified dividend portfolio with at least 30 components in it.

Full Disclosure: At the time of writing, author is long CLX, EMR, PEP, PG and WMT

Today’s Daily Angle comes from Wikinvest Wire member Rob Powell of TelecomRamblings.com. You can read the full article on Rob’s blog.

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Telecommunications giant Verizon (VZ) reported earnings yesterday morning, and like AT&T last week there weren’t many surprises. Total revenues of $27.3B were slightly above expectations, as were adjusted earnings per share of $0.60. There was no iPhone of course, but the net increase of 1.2M wireless subscribers was a bit higher than expected. Verizon is gearing up to challenge the iPhone with phones based on Google’s Android in the fourth quarter, but even with a big launch it will be a while before that could be relevant. I doubt very much if Verizon’s Droid series will do the iPhone that much damage, but really all it has to do to be successful is reduce churn by giving Verizon subscribers an upgrade path to a similar device.

On the other hand, they do have FIOS whose subscribers continue to grow steadily with another 191K FIOS TV and 198K total subscribers added during the quarter. That’s 3.3M total FIOS subscribers now, which is becoming quite substantial, and they still expect to have FIOS pass 15M homes by the end of the year. Growth from FIOS has helped the mass markets portion of Verizon’s wireline business hold relatively steady this year, even as the Global Enterprise and Global Wholesale revenues have declined by over 5%. They didn’t say much about that last bit of course, prefering to emphasize a 1% increase in ‘worldwide sales of strategic business services’ above last year’s levels. But as with AT&T, that’s PR for you.

As I said, overall no real surprises here. Verizon’s results are a fairly linear extrapolation of current trends, with a touch of economic optimism thrown in. In other words, while signs of a failing recovery may yet emerge during this earnings season, they did not do so today.

Today’s Daily Angle comes from Martin Hutchinson of Wikinvest Wire members MoneyMorning.com. You can read thefull article on the Money Morning blog.

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Which global economy grew at an annual rate of 11% in the second quarter, and will report a second-consecutive double-digit advance when it reports today?

Hint: It isn’t China.

But you are looking in the correct part of the world.

The economy in question is South Korea, which has enjoyed an astonishing rebound since it reached a recessionarybottom last winter. One factor in particular should nurture this rebound: The Korean economy wasn’t pulled down by the U.S.-led subprime mortgage crisis, which infected many foreign banks that invested in mortgage-backed securities– the Asian Tiger was pole-axed by a collapse in world trade in the first three months of this year.

At the nadir in March, South Korean exports were down 40% from the same point in 2008. The banking system also had a liquidity crisis that required a government bailout – not because of investments in toxic U.S. derivatives, but because of similarly lackluster credit card loans and dodgy mortgage rubbish of its own.

The South Korean won declined by 40% against the dollar during the 12-month-stretch that ended in February. It has since recovered about half that drop, so it remains undervalued.

But the overall outlook is highly upbeat. From its low point in December 2008, the Korea Composite Stock Price Index (KOSPI) is up 65%. Exports have recovered, particularly on the back of surging demand from China – a trading partner that is growing a bit more slowly than Korea, but that has considerably more muscle with 27 times the population.

Click here to read the full article on the Money Morning Blog.