Italy’s unemployment rate reaches all-time high

By HY Markets Forex Blog

The unemployment rate in Italy reached an unexpected all-time high in the first quarter, according to the National institute of statistics reports released on Friday. Increased from the previous quarter of 11.4%, unemployment rate stood to an unexpected 11.9% as it picked up to 12.0% in April month-on-month.

Joblessness (ITMUURS) increased by 12 percent after March reading was revised up from 11.5 percent to 11.9 percent  ,according to reports from the  national statistics office lstat.

Italy’s recession will continue through the year and the economy will contract 1.8 percent in 2013 as the effects of the economic tightening and credit conditions will hold down the economic activity, the Organistation for Economic Co-operation and Development (OECD) .

Employment rate are expected to fall, as cutting household budgets and spending. According to OECD, part of the cause of the quick rise of the unemployment rate back in 2012, was due to the increase in the labor force.

Last year, Italy’s gross domestic product (GDP) went down by 2.4 percent and the European Commission (EC) expects the economy should contract 1.3 this year.  Public debt-to-GDP ratio is expected to reach 132.2% of GDP by 2014, EC data also showed.

Italy’s Prime Minister Enrico Letta said that employment will be the top priority of his government. The unemployment rate between the age range of 15 to 24 rose to 40.5 percent in April.





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Friday Charts: Crooked Politicians, “Redneck Intelligence” and Stock Market Seasonality


It’s Friday in the Wall Street Daily Nation!

That means the long-winded analysis is out. (Hallelujah!)

And some carefully selected charts are in. (Amen!)

So without further ado, check out these snapshots of the big thorn stuck in small business’ side… a
sell in May” update… and, as I promised yesterday, one of my favorite stocks to own during this economic recovery.

Move Government, Get Out the Way!

I’ve featured the
NFIB Small Business Optimism Index here before.

So what does the latest reading tell us? In short, Washington is still a major problem.

The number of businesses citing poor sales as their biggest concern keeps falling. But the number of those that blame taxes and government red tape keeps climbing.

In fact, 44% of small business owners rank these two factors as their biggest problems. Mind you, that’s almost double the low hit in September 2008.

Maybe President Reagan was on to something when he warned: “The nine most terrifying words in the English language are: ‘I’m from the government and I’m here to help.’”

Let’s all do our part to help Washington get the message.

Copy and paste this chart into an email to your elected representatives with a simple message (from the wise words of Ludacris): “Get out the way!”

Sell in May? Nope! How About June?

I hate to say “I told you so.” But… I told you so!

On May 1, I warned: “Selling in May and going away is not all it’s cracked up to be.”

And sure enough, the market kept on rallying. As I write, the S&P 500 Index and Dow are both up about 3%, while the Nasdaq is up about 4%.

So what’s in store for June? A little
gloom – that is, if history is a reliable guide.

Although the Dow averaged a gain of 0.37% in June over the last 100 years, it’s only delivered positive returns 48% of the time, according to Bespoke Investment Group.

If we focus on the last 50 and 20 years, the average performance is even weaker. The Dow actually averaged declines of 0.37% and 0.76%, respectively. And it only posted positive returns 46% and 40% of the time.

Now, if that has you thinking about ditching stocks to sidestep the potential selloff, might I suggest an alternative?

For instance, a stock that’s uniquely positioned to buck the trend…

You Might Be a Redneck If…

If you live anywhere in the South, you might be accused of being a redneck if you own a pickup truck. (I know, because it’s happened to me.) Chances are, though, that you’re a small business owner, too.

As I’ve noted before, small business owners account for a large portion of pickup sales, particularly
Ford (F) F-Series trucks. That means, by gauging sales of F-Series trucks, we can track the health of the economy.

And there’s no mistaking the underlying trend…

Year-to-date through April, Ford has sold just as many F-150 trucks as it did right before the recession hit. And there’s more road ahead.

So much so, that Ford is planning to boost North American production to meet the demand.

Tack on the fact that sales in Europe are bottoming out, and Ford is certainly in store for an earnings boost.

My conservative estimate calls for the company to earn $2 per share in 2014, which would represent a 41% increase over the consensus estimate for this year.

Given that stocks ultimately follow earnings – and that Ford is trading on the cheap at less than 11 times earnings, compared to 16.8 times for the S&P 500 Index – shares could easily rally another 50% from current levels.

Throw in a modest 2.7% dividend yield, and what’s not to like?

You might be a redneck if you drive a pickup. But you’d be a pretty darn
smart redneck if you also owned a few hundred shares of Ford.

That’s it for this week. Before you go, though, let us know what you think of this weekly column – or any of our recent work at
Wall Street Daily – by sending an email to [email protected], or leaving a comment on our website.

Ahead of the tape,

Louis Basenese

Article By

Original Article: Friday Charts: Crooked Politicians, “Redneck Intelligence” and Stock Market Seasonality

Keep One Eye on Resource Stocks and the Other on the NASDAQ


The Dow Jones Industrial Average hits a record high and people go wild.

The S&P 500 hits a record high and the same happens.

The German DAX and the UK FTSE 100 approach their 2007 peak and we wonder whether the euro crisis happened at all.

When the Aussie S&P/ASX 200 reached a five-year high, thoughts were that it would keep going higher.

And yet, there’s one index that hasn’t gotten much attention, but has beaten them all. It hasn’t hit a new high, but it has climbed 50% higher than the Dow Jones, and it could have further to go…

Yesterday, Diggers & Drillers editor Dr Alex Cowie showed us a report from Goldman Sachs that said ‘buy resources – sell banks‘.

When you’ve got Goldman Sachs behind a trade, well, we won’t say it guarantees gains, but if the big investment bank can do for the Aussie resource sector what it did for the US bond market, it could be a good year for resource investors.

And boy, do resource investors need something to go right after the rotten start to the year. But the Doc isn’t one to stay on the back foot. After (rightly) keeping his powder dry through the start of this year, the Doc teed up a triple-whammy of stock picks in his latest research report, released last night.

As usual, the Doc has meticulously picked these three stocks based on eight criteria. The most important of which in a market like this is ensuring the company has plenty of cash on the books.

The work the Doc does researching the small resource stocks is nothing short of outstanding…which is more than you can say for the Goldman folks…

‘Tell Me Something I Don’t Know’ about Resource Stocks

Let’s be honest, a recommendation to ‘buy resources – sell banks‘ is a little [ahem] two-dimensional.

If your editor was a Goldman client we’d have to say, ‘Try harder.’

When the Doc showed us the Goldman note it took us back to a meeting we had with a prospective client about eight years ago during our days as a stockbroker.

The client told us clearly, ‘I don’t want you to give me buy and sell advice on Rio or BHP, I can work that out for myself, I want you to tell me something I don’t know.

It was one of those things that has always stuck in our mind. It’s a rule we try to stick to every day. Tell you or show you something you don’t know. So if we relate that back to the Goldman Sachs note, does Goldman really need to tell clients to ‘buy resources – sell banks‘?

Maybe they do, who are we to say? But it strikes us most clients could have figured that out for themselves. Saying that, yesterday the Metals & Mining index fell 1.2% while the Financials index only fell 0.8%.

So perhaps clients aren’t listening to Goldman Sachs’ advice anyway. But that’s by the by. Back to the point we made at the top of this letter.

Amongst all the hubbub over the major indices hitting new highs; the fuss about the Aussie dollar hitting the skids; and gold and resource stocks falling, investors have missed one thing.

And that’s the fact that the NASDAQ index (comprised of mostly technology stocks) has outperformed the two other major US indices since the market bottomed in 2009.

Since then the NASDAQ has gained 140%. Compare that to the woeful 45% gain by the S&P/ASX 200 index.

It’s Not All Resource Stocks in the Small-Cap Market

It can’t be a coincidence that part of the reason for the relatively poor performance of the Aussie index is because the Aussie market is so two-dimensional – bank stocks or resource stocks…resource stocks or bank stocks.

When investors want to shift from one sector to a number, they’ve got a fairly limited choice.

Of course, we’re being a bit unkind. Search a bit further into the small-cap end of the market and it may surprise you what you find. It’s far from just resource stocks.

In fact, resource stocks make up less than half the stocks on the Australian Small-Cap Investigator recommended buy list.

But the performance of the NASDAQ isn’t a coincidence. And unlike the gains for the Dow Jones and the S&P 500, we’re not convinced all the NASDAQ gains are the result of the US Federal Reserve’s money printing.

Our guess is there’s more to it than that. While some NASDAQ stocks will have benefited (the NASDAQ actually contains a number of financial stocks) from money printing, the reasons behind the rising index are more likely due to what we see as the start of a new phase in technological progress.

While the internet boom may have kicked off about 17 years ago (Wow, that long ago!), only now is the cream really rising to the top.

And we’re not just talking about the big consumer names like Google, Facebook and Amazon. We’re talking about the stocks led by entrepreneurs who are innovating and shaking up the world’s economy.

The Molecular Economy

The internet boom was all about loud and brash arrivals on the market. The internet crash was all about promises never delivered.

This time it’s different. That doesn’t mean stock prices will keep going up in a straight line. We’re old enough to know that doesn’t happen. But we do believe that the performance of the NASDAQ index is worth noting.

A 140% gain in four years is nothing to sniff at. To our way of thinking, after a few false starts, the Dinosaur Economy is on its last legs. It’s only surviving due to the money printing of central banks. By contrast, the New Economy (or Molecular Economy as we call it) thrives on ideas and entrepreneurialism.

In short, we agree that it’s a good idea to buy beaten-down resource stocks. But in our view you’re cheating yourself if that’s the only place you invest. To borrow Goldman Sachs’ advice, we’ll put it this way ‘buy molecular – sell dinosaur’.

Over the last six months we’ve been working on an exciting new project with this idea in mind. And we’ll be ready to go public with it soon. We can honestly say it’s the most interesting and exciting research we’ve ever done. And we can’t wait for it to launch in the next couple of weeks, so we’ll keep you posted.

It’s a great opportunity, so look out for it. As Jim Mellon states in his great book, Cracking the Code, ‘we are at the stage that Apple or Microsoft were 20 or more years ago…and that alone makes it important for serious investors to sit up and take note‘.

He’s absolutely right.

You’ll see what we mean very shortly. Watch this space.


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From the Port Phillip Publishing Library

Special Report: How to Buy Better Stocks

Daily Reckoning: China’s City in the Sky

Money Morning: Getting in on the ’99 Cent Craze’ with Crowdfunding

Pursuit of Happiness: How One Reader Saved $300 with a Simple Phone Call

Australian Small-Cap Investigator:
Why Now is a Good Time to Invest in Small-Cap Stocks

‘Benny and the Jets’ Pay Tribute to Doris Day


The quintet of ‘Benny and the Jets’ – Bernanke (US Federal Reserve), Carney (Bank of England), Draghi (European Central Bank), Xiaochuan (Peoples Bank of China) and Kuroda (Bank of Japan) – are secretly a cover band for Doris Day.

Their one and only (repetitive) rendition is this chorus:

I’m forever blowing bubbles,
Pretty bubbles in the air,
They fly so high,
Nearly reach the sky,
Then like my dreams,
They fade and die.
Fortune’s always hiding,
I’ve looked everywhere,
I’m forever blowing bubbles,
Pretty bubbles in the air.

Benny and the Jets have belted out this song for four years. The market keeps cheering, so they keep singing.

The smart money is questioning when will these one hit wonders topple from the charts?

Which bubble (and there are many) is going to ‘fly the highest’ and ‘fade and die’ the fastest?

The Japanese love karaoke, so perhaps Kuroda is singing the loudest from the central bankers’ song sheet.

From the quintet, Kuroda is the one blowing the most air into his bubble.

The Land of the Rising (Rising, Rising) Debt

Kyle Bass from Hayman Capital made a fortune from shorting the US sub-prime mortgage market and Greek bonds. I’m a big fan of Bass. He has a real grasp of numbers and forensic analysis.

In his opinion Japan is living on borrowed time (and lots of printed money). Based on his analysis, he’s betting Kuroda will be singing a much sadder song in the not too distant future.

Bass shared his views on Japan in a recent address he gave to The University of Chicago Booth School of Business. Here are some of the key notes from his speech:

  1. On all historical measurements Japan is well into the ‘zone of insolvency‘.
  1. Emerging market economies historically implode when public debt levels exceed 5 times central tax revenue.
  1. Japan’s debt level of over one quadrillion (a billion billion) yen represents around 25 times central tax revenue.
  1. Tax revenues are approximately 43 Trillion Yen, of which 10 Trillion Yen (23%) Japan uses to pay the interest only on the debt – this is with interest rates around a measly 0.6%.
  1. Japan collects 43 trillion Yen in taxes but spends 102 billion Yen. Japan spends double the amount they collect in taxes, which just adds to the debt pile. The pile of dry tinder just keeps getting bigger.
  1. In the past 5 years there have been 10 Japanese Finance Ministers – this cabinet post is a real hot potato. Of the ten, one minister committed suicide and one checked into hospital after ratifying a budget.
  1. Large Japanese corporations are actively engaged in acquiring/merging businesses outside of Japan. Bass believes they are moving money out of Japan as a hedge against massive currency devaluation.
  1. Demographics – Due to its closed border policy, Japan’s population is shrinking in number. The population is also ageing. Approximately 30% of the population is aged over 60, compared to 8% in the rest of the developed world. More retirees mean less taxes and more welfare – not a combination that will correct a massive budget deficit.
  1. Until 2012 Japan had been able to finance its government debt from the savings of its citizens. Those savers are now retirees and are selling their government bonds to fund their retirements. The base of the Ponzi scheme is shrinking.

    This is why the newly elected Prime Minister Shinzo Abe and the recently appointed head of the Bank of Japan, Haruhiko Kuroda, have signaled a ‘print and be damned’ approach to their problems.

  1. When the bond market loses confidence in Japan, Bass thinks Japanese interest rates will go into the teens. To appreciate the enormity of this implication currently 23% of tax revenues go to pay interest on government debt at an interest rate of 0.6% – if Bass is right, interest rates will rise nearly 20 times current levels.

    To put some numbers on this – interest payments would skyrocket from 10 trillion yen to 200 trillion yen, which they would need to pay from tax revenues of 43 trillion yen. That’s simply not possible. If something cannot continue then it won’t.

Highly respected US economic and investment author, John Mauldin, described Japan as ‘a bug in search of a windshield.’

In his recent weekly newsletter, Thoughts from the Frontline, Mauldin stated, ‘Let me repeat what I wrote months ago, that the largest single position in my personal portfolio, since January 1, is short Japan.

Kyle Bass thinks there are numerous pins waiting to burst the Japanese bubble – you only need one:

We believe that Japan is teetering on the precipice of financial collapse, and any number of data points or events in the coming weeks and months could be the proverbial tipping point.

‘It could be as significant as a negative structural current account, a revocation of BoJ policy independence, or even political and economic conflict with regional neighbors or perhaps something as innocuous as ratings actions or Basel III regulations that force financial institutions to reduce their hugely concentrated exposure to JGBs.

What we do know is that when it does break loose, 20 years of suppressed, spring-loaded interest rate volatility on the back of the largest peacetime accumulation of sovereign debt will afford no time to readjust portfolios to get out of the way.

When the Japanese bubble bursts, the cacophony of all the other bubbles popping will drown out even the loudest shrills from Benny and the Jets.

A Thought Bubble

The first three lines of the first verse of the central bankers’ theme song sums up their thinking:

I’m dreaming dreams,
I’m scheming schemes,
I’m building castles high.

Be careful. These dreamers and schemers will blow your castle sky-high if you believe their spin.

When the bubbles burst perhaps they can learn the lines to:
‘Pop go the weasel(s).’

Vern Gowdie
Contributing Editor, Money Morning

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From the Archives…

The Day Japan and China Shook the Aussie Market

24-05-2013 – Kris Sayce

Why the Only Thing That Matters in the Markets is Japan
23-05-2013 – Murray Dawes

When Soros Buys Gold Stocks, You Better Take Note…
22-05-2013 – Dr Alex Cowie

Look for Small-Cap Resource Stocks with Plenty of Cash
21-05-2013 – Dr Alex Cowie

Why Bank Stocks have Outperformed Resource Stocks…
20-05-2013 – Kris Sayce

Multinationals vs. the Nation State


We might be in the early stage of a World Government Revolution.

I’ve had enough of the carry-on that comes from world ‘leaders’. It’s frustrating that the money we pay in taxes finds its way into giant government pits of emptiness. I ain’t getting value for money.

Maybe there’s a better way to run the world? Imagine a world where leadership is egalitarian. A world with decentralised boundaries and borders. Probably the best way to describe it would be The Great Global Liberation. Essentially a world where there’s no ‘government’ per se.

I may be the ultimate optimist, but imagine…a world free from central control and economic mismanagement? Throw the concept of a nation state away; it won’t be the way the world works in the future. Multinationals are poised to wrestle control away from government.

It’s a New World Order

I’m going to step you through how the world will decentralise and nation states will fall to multinationals. There will be no power in armed forces, but power and real freedom through technology.

Government will lose monetary power and the flow on effect is they will lose governing power. The current course of huge debt and ‘worry about it later when the economy is flying’ won’t last. It hasn’t worked, and is unlikely to in the future.

I’ll show you in today’s essay that a number of technology companies are larger than most countries. And over the next 5 weeks I’ll also show you;

  • Why a multinational would run a country better,
  • How government will and already has lost their grip on power because of technology,
  • What the future will look like, and
  • What you can do about it to seize the opportunities

Who’d Win? Gillard, Abbott…or Ballmer, Brin, Bezos, Page, Ellison, Cook?

I did something I thought I’d never do. Numerous hours of research and armed with my trusty iPad, I went to JB-HiFi. And got them to price-match me an Apple MacBook Pro. They did, and it was mine.
At that point I thought I’d converted to the Dark Side…well at least the fruity side of the PC vs. Mac debate.

Little did I realise that the world of Apple had already flooded into my life long ago. It started with a Macintosh Classic in late 1990’s, then an iPod in 2004, an iPhone in late 2007, an iPad and Apple TV in 2012 and now a MacBook Pro in 2013.

I was an ‘Applophile’ and didn’t even know it. Opening the box to my MacBook I realised these products were a part of my existence. They didn’t make me who I am, but they did have a strong impact on how I operate in the world.

But it wasn’t just my Apple stuff. It was the laptop I’d had since about 2006. The Windows OS I’d run since I was 5. The Google Android Phone I’d had for the last 2 years. The kitchenware I’d bought from Amazon and the endless number of devices I’ve run Oracle’s Java platform on.

And it got me thinking. These technologies and companies have contributed more to my happiness, productivity and view of the world than any government has.

I know that’s a fair jump to make, but at the time of unboxing the MacBook there was some pointless tit-for-tat between Gillard and Abbott on the TV. It was simply unbearable to watch.

I did a quick mental run through of the dollars I’d contributed to these technology companies. Over the course of many years, it had totalled a lot. I also ran through the taxes I’ve paid to the government over my working life. Funnily enough it totalled significantly more.

I then tried to determine where I felt I was getting real value for money. It was an easy determination.

Apple, Microsoft, Google, Amazon and Oracle won convincingly.

I decided to run a mock election. I put Tim Cook, Steve Ballmer, Sergey Brin & Larry Page, Jeff Bezos and Larry Ellison against Julia Gillard and Tony Abbott. In a landslide defeat, the two political leaders were comprehensively beaten.

At this point I also realised that perhaps I’m not alone in my reasoning. Might there be millions, or even billions of other people worldwide that share the same view? I don’t know if that’s true yet, but I’m looking to hear people’s thoughts on this.

My initial point here is technology multinationals have a greater impact on the social fabric in today’s modern age than political systems do. This is something I’ll go into more detail on in Part 3.

Appcrozonglecle: (p. Ap-kro–zon–gool–cool) def. A Very Big Company.

But let’s look at the financial position of these multinationals vs. some Nation States. Because I’m certain they’re bigger economically that most countries.

The financial statements of Apple, Microsoft, Amazon, Google and Cisco are amazing. Here’s the revenue these tech giants had for the 2012 financial year.

From highest to lowest, Apple $156.5 billion, Microsoft $73.7 billion, Amazon $61.3 billion, Google $50.1 billion and Oracle $31.1 billion.


Now as a point of comparison let’s have a look at the GDP of a select few countries. New Zealand, Belarus, Sri Lanka, Croatia and Uruguay.


Funnily enough the five tech companies are on par with these countries in terms of the final total value of the goods they make each year.

Let’s take stock of that. Apple sells per year in product what the entire country of New Zealand creates per year in GDP.

Imagine if you combined Apple, Microsoft, Amazon, Google and Oracle together and made one big company. Let’s call it ‘Appcrozonglecle’.

Their combined revenues of $372.6 billion put them as the 31st largest country in the world. Bigger than Columbia, Denmark, Singapore and the United Arab Emirates.

Then what if we look at their cash positions combined — that is, how much cash to these tech giants have in their coffers?  For a start, if they wanted to, Apple could have bought Cyprus. And had change to wipe the total external debt of Singapore for the fun of it.

That’s right. Apple on its own has enough cash to eliminate the total external debt of Cyprus and Singapore; over $130 billion.

These multi-nationals have greater economic power than hundreds of countries in the world. They are financially managed more effectively too. And they all turn a profit regularly (except for Amazon).

Add to this the combined direct workforce of the five tech companies mentioned. The total population is over 400,000. Factor in the indirect jobs they create and the numbers head into the millions.

There’s so much money flowing through the doors and so much cash hoarded. It’s not unrealistic to think one, or a couple, of these tech giants could buy their own country.

It would be the reversal of what happened during the GFC. Instead of countries bailing out companies, we’d have companies bailing out countries.

The up side could be assuming power and control over the governing body. Apple might create their own sovereign nation.

Of course I’ll expand on this over the next few weeks but for now, understand that economically the power has already shifted from the nation state to the multinational. So what comes next?

Sam volkering.
Editor, Money Morning

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Ed Note: Sam Volkering is assistant editor and analyst for a new breakthrough technology investment service to be launched by Australian Small-Cap Investigator editor Kris Sayce. The breakthrough technology service will introduce cutting edge investment ideas from the technologies of the future, including medicine, science, energy, mining, and more.

From the Archives…

The Higher the Market, the Harder the Fall
10-05-13 – Vern Gowdie

India’s Balance of Trade — a World out of Balance
9-05-13 – Greg Canavan

How the Dow is Just Wall Street’s Marketing Tool
8-05-13 ­– Dan Denning

Watch Out For When Australia’s Terms of Trade Goes Back to ‘Normal’
7-05-13 – Greg Canavan

The Greatest Wealth Transfer in History
6-05-13 – Bill Bonner

USDCAD is facing 1.0286 key support

USDCAD is facing 1.0286 key support, a breakdown below this level will indicate that the uptrend from 1.0013 had completed at 1.0420 already, then the following downward movement could bring price back to 1.0100 zone. On the upside, as long as 1.0286 support holds, the price action from 1.0420 could be treated as consolidation of the uptrend from 1.0013, one more rise to 1.0500 area to compete the upward movement is still possible.


Daily Forex Analysis

Up Close and Personal with Charles Sizemore, Manager of the Dividend Growth Portfolio

By The Sizemore Letter

Covestor produced the following video featuring Charles Sizemore, the manager of the Dividend Growth Portfolio and three other models at Covestor.

For more information, see the Dividend Growth Portfolio’s profile page, which includes performance and recent portfolio moves.

Angola holds rate steady at 10%, inflation drops further

    Angola’s central bank held its main policy rate steady at 10.0 percent as inflation continued to drop and the exchange rate remained stable.
    The National Bank of Angola (BNA), which cut its rate by 25 basis points in January, said the monthly inflation rate in April was 0.6 percent, down from 0.66 percent in March, for an annual rate of 9.0 percent, down from 9.1 percent.
    The BNA has for many years strived for an inflation rate below 10 percent and since August 2012 inflation has remained below that level.
    The central bank also said credit to the economy rose by 0.18 percent in April and the average interest rate on credit of 181 days in local currency rose to 12.53 percent for retailers and declined to 13.7 percent for the corporate sector.
    The average exchange rate for the kwanza against the U.S. dollar was 96.045 at the end of April compared with 95.98 at the end of March. During April the central bank sold US $1,980 million to the market for a total of $6,232 million in the first four months.
    In 2012 Angola’s economy grew by 7.4 percent and the International Monetary Fund projects growth of 6.2 percent this year.

Free Metals Report: Read Bob Prechter’s Big 5 Gold Warnings for Bulls and Bears

By Elliott Wave International

Gold and silver have been THE financial news in recent weeks. The coverage began during mid-April’s three-day price decline, but the real precious metals story goes back further than that. Since 2011, gold and silver have declined more than 30% and 50%, respectively. Continue reading to learn more, or get ahead of the trend by reading Bob Prechter’s Big 5 Gold Warnings for Bulls and Bears.

Read more about Prechter’s urgent report now.

Dear Trader,

Volatile price action is a surprise to most investors most of the time.

That’s definitely true of precious metals in the past 30 days. But, the real story is far bigger than just one month. In fact, gold and silver have seen declines of more than 30% and 50%, respectively, since 2011. Now that’s news!

If you invest in precious metals, you owe it to yourself to read this brand-new report, Bob Prechter’s Big 5 Gold Warnings for Bulls and Bears, from Elliott Wave International.

Inside the new report, you’ll learn the truth about:

1) Central Bank Buying
2) Fed Inflating
3) The “Crisis Hedge” Argument
4) The “Gold is Cheap” Argument
5) The Conviction that Post-Peak Lows were Support

Follow this link to learn more about Bob Prechter’s Big 5 Gold Warnings for Bulls and Bears and get your very own copy now — it’s free >>


P.S. If you follow the link above, you’ll see a stunning chart of some of EWI’s gold and silver forecasts over the past three years. When a market’s wave patterns are clear, as they are now in gold and silver, it is a remarkable sight. See the chart now.


About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world’s largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.



It’s Official: NYSE Margin Debt Hit New Record, Surpasses 2007

Margin Debt Hit New RecordIs it just me, or have investors completely abandoned the concept of risk and reward?

The reality of the situation is that the key stock indices are treading in shark-infested waters and the risks are piling up daily. I see bearish signals all over, but the theme among investors, even conservative investors, continues to be “keep buying.”

It’s official…

Margin debt—that’s the amount of money borrowed to purchase stocks—on the New York Stock Exchange (NYSE) reached its all-time high in April. Margin debt on the NYSE registered at $384.3 billion as the key stock indices hit new record-highs. (Source: New York Stock Exchange web site, last accessed May 29, 2013.) The highest margin debt ever reached prior to this was in July of 2007, when it stood just above $381.0 billion. At that time, just like today, the key stock indices were near their peaks and “buy now before it’s too late” was the prominent theme of the day

Looking ahead, corporate earnings, which ultimately drive the direction of the key stock indices, don’t look so good. So far, 106 companies in key stock indices like the S&P 500 have provided their corporate earnings outlooks for the second quarter, and more than 80% of them have issued earnings outlooks that are negative! Corporate earnings growth for the second quarter is now projected to be only 1.4%—and the estimate keeps going down! (Source: FactSet, May 28, 2013.)

And this chart doesn’t look good either:

 XLU Utilities Selected Sector SPDR NYSE Chart May 2013

Chart courtesy of

The above chart shows the performance of the S&P 500 utilities stocks through an exchange-traded fund (ETF) called the Utilities Select Sector SPDR (NYSEArca/XLU). Why is this chart important? Utilities stocks are considered safe because the companies in the sector usually have good long-term growth and consistent corporate earnings. But this chart shows how investors are fleeing the safety of utilities stocks—and I think they are running to high-risk stock sectors.

But in spite of all these factors, it wouldn’t surprise me to see the key stock indices go even a little higher because of all the buying momentum. The bear market rally, which began in 2009, has done a masterful job at convincing investors that the stock market is safe again—but it will all end in a collapse. It’s only a matter of when it will happen.

Key stock indices rising on anemic economic growth, poor corporate earnings, and leveraged investors—this is not going to end pleasantly.

Michael’s Personal Notes:

The International Monetary Fund (IMF) has officially lowered its growth expectation for the Chinese economy, the second-biggest engine in the global economy. The IMF expects China to grow 7.75% this year compared to the eight percent it previously projected.

The First Deputy Managing Director of IMF, David Lipton, said, “while china still has significant policy space and financial capacity to maintain stability even in the face of adverse shocks, the margins of safety are narrowing.” (Source: “IMF Forecasts Lower China Growth, Warns on Debt,” Wall Street Journal, May 29, 2013.) This will be the first year since 2009 that China’s economic growth is in the single digits.

France, a key economy in the eurozone and the fifth-biggest in the global economy, is back in a recession for the third time in five years, as the economic slowdown in the country continues to take its toll. In May, consumer sentiment in the French economy reached lows not seen since July of 2008. (Source: France 24, May 28, 2013.)

As I have written before, there is no way the economic slowdown in the global economy will not end up affecting America. The price action in the stock market doesn’t show this, but in the first quarter of 2013, of the 11 companies on the Dow Jones Industrial Average that reported their revenues in Europe, nine of them posted a decline in sales from that region! (Source: FactSet, May 28, 2013.)

Dear reader, while the U.S. economy still hasn’t recovered from the last economic slowdown, more troubles from outside our domestic control lie ahead.

China and France are just a few of the many examples of what’s actually happening in the global economy. Other nations like Japan are facing severe scrutiny as well.

There are several countries in the eurozone that are in an outright depression. The youth unemployment rate in some eurozone countries is close to 50%. In Cyprus, the government has gone so far as to take money right out of its citizens’ bank accounts if their deposits totaled over 100,000 euros.

While you don’t read or hear as much about it as you did last year, the economic issues in the eurozone are dire—and the ramifications for the global economy are very real. Should Germany’s economy soften further, we could see all of Europe come under economic pressure, the winds of which will surely sail across the Atlantic to the West.

What He Said:

“Even the most novice investor can now read the chart of the Dow Jones U.S. Home Construction Index and see that it is trading at its lowest level in five years. If, like me, you believe that stocks are an indication of what lies ahead, this important index is telling us housing prices are headed to 2002 levels! What would that do to the economy? Such an event would devastate the U.S.” Michael Lombardi in Profit Confidential, December 4, 2007. That devastation started happening in the first quarter of 2008.

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