Friday, March 29, 2013

The Chess Game of Capital Controls

From Jeff Clark, Senior Precious Metals Analyst

The best indicator of a chess player's form is his ability to sense the climax of the game.
–Boris Spassky, World Chess Champion, 1969-1972

You've likely heard that the German central bank announced it will begin withdrawing part of its massive gold holdings from the United States as well as all its holdings from France. By 2020, Bundesbank says it wants half its gold reserves stored in its own vault in Germany.

Why would it want to physically move the metal from New York? It's not as if US vaults are not secure, and since Germany already owns the gold, does it really matter where it sits?

You may recall that Hugo Chávez did the same thing in late 2011, repatriating much of his country's gold reserves from London. However, this isn't a third-world dictatorship; Germany is a major ally of the US. So what's going on?

Pawn to A3

On the surface, it may seem innocuous for Germany to move some pallets of gold closer to home. Some observers note that since Russia isn't likely to be invading Germany anytime soon – one of the original reasons Germany had for storing its gold outside the country – the move is only natural and no big deal. But Germany's gold stash represents roughly 10% of the world's gold reserves, and the cost of moving it is not trivial, so we see greater import in the move.

The Bundesbank said the purpose of the move was to "build trust and confidence domestically, and the ability to exchange gold for foreign currencies at gold-trading centers abroad within a short space of time." It's just satisfying the worries of the commoners, in the mainstream view, as well as giving themselves the ability to complete transactions faster. As evidence that it's nothing more than this, Bundesbank points out that half of Germany's gold will remain in New York and London (the US portion of reserves will only be reduced from 45% to 37%).

Sounds reasonable. But these economists remind me of the analysts who every year claim the price of gold will fall – they can't see the bigger implications and frequently miss the forest for the trees.


What your friendly government economist doesn't reveal and the mainstream journalist doesn't report (or doesn't understand) is that in the event of a US bankruptcy, euro implosion, or similar financial catastrophe, access to gold would almost certainly be limited. If Germany were to actually need its gold, regardless of the reason, any request for transfer or sale would be… difficult. There would be, at the very least, delays. At worst such requests could be denied, depending on the circumstances at the time. That's not just bad – it defeats the purpose of owning gold.

But this still doesn't capture the greater significance of this action. First, it reinforces the growing recognition that gold is money. Physical bullion isn't just a commodity, a day-trading vehicle, or even an investment. It's a store of value, a physical hedge against monetary dislocations. In the ultimate extreme, it's something you can use to pay for goods or services when all other means fail. It is precisely those who don't recognize this historical fact who stand to lose the most in an adverse monetary event. (Hello, government economist.)
Second, here's the quote that reveals the ultimate, backstop reason for the move: Bundesbank stated it is a "pre-emptive" measure "in case of a currency crisis."

Germany's central bank thinks a currency crisis is really possible. That's a very sobering fact.
We agree, of course: history is very clear on this. No fiat currency has lasted forever. Eventually they all fail. Whether the dollar goes to zero or merely becomes a second-class currency in the global arena, the root cause for failure is universal and inevitable: continual and perpetual dilution of the currency.

Some level of currency crisis is inescapable at this point because absolutely nothing has changed with worldwide debt levels, deficit spending, and currency printing, except that they all continue to increase. While many economists and politicians claim these actions are necessary and are leading us to recovery, it's clear we have yet to experience the fallout from spending more than we have and printing the difference. There will be serious and painful consequences, sooner or later of an inflationary nature, and the average person's standard of living will be greatly reduced.

And now there are rumblings that the Netherlands and Azerbaijan may move their gold back home. If this trend gathers steam, we could easily see a "gold run" in the same manner history has seen bank runs. Add in high inflation or a major currency event and a very ugly vicious cycle could ignite.


If other countries follow Germany's path or the mistrust between central bankers grows, the next logical step would be to clamp down on gold exports. It would be the beginning of the kind of stringent capital controls Doug Casey and a few others have warned about for years. Think about it: is it really so far-fetched to think politicians wouldn't somehow restrict the movement of gold if their currencies and/or economies were failing?
Remember, India keeps tinkering with ideas like this already.

What this means for you and me is that moving gold outside your country – especially if you're a US citizen – could be banned.

Fuel would be added to the fire by blaming gold for the dollar's ongoing weakness. Don't think you need to store gold outside your country? The metal you attempt to buy, sell, or trade within your borders could be severely regulated, taxed, tracked, or even frozen in such a crisis environment. You'd have easier access to foreign-held bullion, depending on the country and the specific events.

None of this would take place in a vacuum. Transferring dollars internationally would certainly be tightly restricted as well. Moving almost any asset across borders could be declared illegal. Even your movement outside your country could come under increased scrutiny and restriction.

The hint that all this is about to take place would be when politicians publicly declare they would do no such a thing. You could quite literally have 24 hours to make a move. If your resources were not already in place, even the most nimble of us would have a very hard time making arrangements.

Once the door is closed, attempting to move restricted assets across international borders would come with serious penalties, almost certainly including jail time. In such a tense atmosphere, you could easily be labeled an enemy of the state just for trying to remove yourself from harm's way.

The message is clear: storing some gold outside your country of residence is critical at this point, and the window of time for doing so is getting smaller.

Don't just hope for the best; do something about it while you still can. The minor effort made now could pay major dividends in the future. Besides, you won't be any worse off for having some precious metals stored elsewhere.

If you're moved to take action, know that you're not alone. It's critical that you take these first steps now, while you still can. The best chess players in the world aren't that way because they can see the next move. They're champions because they can see the next 14 moves. You only have to see the next two moves to "win" this game. I suggest making those moves now before your government declares checkmate.

There's another "great game" when it comes to the precious metals market: the junior mining sector. The truth is, these stocks aren't for every investor – junior miners are more volatile than any other stock on Earth. However, for those who can stomach sudden price swings and are willing to bet against the crowd, right now junior explorers are offering the profit opportunity of a lifetime.

If you've ever wanted a realistic shot at making a fortune, you owe it to yourself to sign up for the upcoming Downturn Millionaires free online video event. It will feature famous speculators, including Doug Casey, Rick Rule, and Bill Bonner, who will detail how everyday investors can leverage junior miners to fantastic profits… just as they have done time and again over the years. Get the details and sign up now.

The 2 Energy Sectors You Should Invest in This Year


Thursday, March 28, 2013

Gold vs. S&P 500 – Where is the Value?

This past week we received the final 4th Quarter GDP number which came in at 0.39%. The total 4th Quarter growth was terrible, plain and simple. Based on the performance in the equity markets that we have seen thus far in the 1st Quarter of 2013 investors would expect strong GDP growth. However, the only thing spurring stock market growth is the constant humming of Ben Bernanke’s printing press.

The real economy and the stock market are no longer strongly correlated. Essentially, they are meaningless. How do you evaluate risk when Treasury linked interest rates are artificially being held down by the Federal Reserve? How do you evaluate earnings growth estimates when most government based statistics are manipulated or “smoothed” to perfection?

My final argument to anyone who is a true believer that the stock market is representative of the economy is a very simple premise. If the stock market is the economy, how does the stock market evaluate small business earnings growth when most small businesses are not publicly traded? It is a simple question, but I have yet to find a sell side analyst that can work around it with facts......Read More.

Here's 2 Energy Sectors You Should Invest in This Year

Wednesday, March 27, 2013

Ignore Banks' Bearish Statements on Gold

By Jeff Clark, Senior Precious Metals Analyst

Goldman Sachs has lowered its gold price projections and says the metal is headed to $1,200. Credit Suisse and UBS are bearish. Citigroup says the gold bull market is over.

So I guess it's time to pack it in, right?

Not so fast. As we've written before, these types of analysts have been consistently wrong about gold throughout this bull cycle. Another reason to disagree, however, is history; we've seen this movie before. In the middle of one of the greatest gold bull markets in modern history, the one that culminated in the 1980 peak, gold experienced a 20 month, one way decline. Every time it seemed to stabilize, the bottom would fall out again. From December 30, 1974 to August 25, 1976, gold fell a whopping 47%.

1976 had to be a tough year for gold investors. The price had already been declining for a year – and it just kept on sinking. Since that's similar to what we're experiencing today, I wondered, What were the pundits were saying then? I wanted to find out.

I enlisted the help of two local librarians, along with my wife and son, to dig up some quotes from that year. It wasn't easy, because publications weren't in digital form yet, and electronic searches had limited success. But we did uncover some nuggets I thought you might find interesting.

The context for that year is that the IMF had three major gold auctions from June to September, dumping a lot of gold onto the market. Both the US and the Soviet Union were also selling gold at the time. It was no secret that the US was trying to remove gold from the monetary system; direct convertibility of the dollar to gold had ended on August 15, 1971.

The public statements below were all made in 1976. You'll see that they aren't all necessarily bearish, but I included a range to give a sense of what was happening at the time, especially regarding the mood of the gold market. I think you'll agree that much of this sounds awfully darn familiar. I couldn't resist making a few comments of my own, too.

To highlight the timing, I put the comments into a price chart, pinpointing when they were said relative to the market. Keep in mind as you read them that the gold price bottomed on August 25, and then began a three-and-a-half year, 721% climb…

[1] "For the moment at least, the party seems to be over." New York Times, March 26.

[2] "Though happily out of the precious metal, Mr. Heim is no more bullish on the present state of the stock market than any of the unreconstructed gold bugs he's had so much fun twitting of late. He's urging his clients to put their money into Treasury bills." New York Times, March 26.

Me: These comments remind me of those today who poke fun at gold investors. I wonder if Mr. Heim was still "twitting" a couple years later?

[3] "'It's a seller's market. No one is buying gold,' a dealer in Zurich said." New York Times, July 20.
Turns out this would've been an incredible buyer's market – but only for those with the courage to buy more when gold dropped still lower before taking off again.

[4] "Though the price recovered to $111 by week's end, that is still a dismal figure for gold bugs, who not long ago were forecasting prices of $300 or more." Time magazine, August 2.
The "gold bugs" were eventually right; gold hit $300 almost exactly three years later, a 170% rise.

[5] "Meanwhile, the economic conditions that triggered the gold boom of 1973 through 1974, have largely disappeared. The dollar is steady, world inflation rates have come down, and the general panic set off by the oil crisis has abated. All those trends reduce the distrust of paper money that moves many speculators to put their funds in gold." Time magazine, August 2.

This view ended up being shortsighted, as these conditions all reversed before the decade was over. Does this sound similar to pundits today claiming the reasons for buying gold have disappeared?

[6] "Our own predictions are that gold will go below $100, with some hesitation possible at the $100 level." As stated by Mr. Heim in the August 19 New York Times.

Yes, this is the same gentleman as #2 above. I wonder how many of his clients were still with him a few years later?

[7] "Currently, Mr. LaLoggia has this to say: 'There is simply nothing in the economic picture today to cause a rush into gold. The technical damage caused by the decline is enormous and it cannot be erased quickly. Avoid gold and gold stocks.'" New York Times, August 19.

You can see that these comments were made literally within days of the bottom! Take note, technical analysts.

[8] "'Gold was an inflation hedge in the early 1970s,' the Citibank letter says. 'But money is now a gold-price hedge.'" New York Times, August 29.

Wow, were they kidding?! This reminds me of those dimwits journalists who said in 2011 to not invest in gold because it isn't "backed by anything."

[9] "Private American purchases of gold, once this was legalized at the end of 1974, never materialized on a large scale. If the gold bugs have indeed been routed, special responsibilities fall on the victorious dollar." New York Times, August 29.

The USD's purchasing power has declined by 80% since this article declared the dollar "victorious."

[10] "Some experts, with good records in gold trading, declare it is still too early to buy bullion." New York Times, September 12.

Too bad; they could've cleaned up.

[11] "Wall Street's biggest brokerage houses, after having scorned gold investments during the bargain days of the late 1960s and early 1970s, made a great display of arriving late at the party." New York Times, September 12.

No comment necessary.

[12] "He believes the price of bullion is headed below $100 an ounce. 'Who wants to put money over there now?'" As stated by Lawrence Helm in the New York Times, September 12.

The price of gold had bottomed two weeks before, making the timing of this advice about the worst it could possibly be.

[13] Author Elliot Janeway, whose book jacket states, "Presidents listen to him," was asked by a book reviewer about his preferred investments. He writes: "Then, gold and silver? He likes neither. In fact he writes: 'Any argument against putting your trust in gold, and backing it up with money, goes double for silver: silver is fool's gold.'" New York Times, November 21.

Mr. Janeway ate his words big-time: from the date of his comments to silver's peak of $50 on January 21, 1980, silver rose 1,055%!

[14] "Mr. Holt admits that 'in 1974, intense speculation caused the gold price to get too far ahead of itself.'" New York Times, December 19.

So, anything sound familiar here? Yes, it was a brutal time for gold investors, but what's obvious is that those who looked only at the price and ignored the fundamentals ended up eating their words and dispensing horrible advice. Investors who followed the "wisdom of the day" missed out on one of the greatest opportunities for profit in their lifetimes.

I was pleased to learn, though, that not all comments were negative in 1976. In fact, in the middle of the "great selloff," there were those who remained stanchly bullish. These investors must've been viewed as outliers – they, much like some of us now, were the contrarians of the day.

Also from 1976…
  • "Many gold issues, in fact, are down 40 percent or more from their highs. Investors who overstayed the market are apparently making their disenchantment known. The current issue of the Lowe Investment and Financial Letter says, 'We are showing losses on our gold mining share recommended list… but keep in mind that these shares are for the long-term as investments.'" New York Times, March 26.

    Sounds like what you might read in an issue of a Casey Research metals newsletter..
  • "The time to buy gold shares," [James Dines] declares, "is when there is blood in the streets." New York Times, September 12.

    If you glance at the chart above, Jim's comments were made within two weeks of the absolute low.
  • "We're recommending to clients that they hold gold and gold shares," [C. Austin Barker, consulting economist] says. "The low-production-cost mines in South Africa might be interesting to buy for the longer term because I see further inflation ahead." New York Times, September 12.

    Investors who listened to Mr. Barker ended up seeing massive gains in their gold and gold equity holdings.
  • "The probability of runaway inflation by 1980 is 50%... In light of this, the only safe investments are gold, silver, and Swiss francs,'" said the late Harry Browne on November 21 in the New York Times.
  • "In the longer run, [Jeffrey Nichols of Argus Research] believes gold's price trend 'is much more likely to be upward than downward.'" New York Times, December 19.

    The "longer run" won.
  • "'I think the intermediate outlook for gold is a period of consolidation and a bit of dullness,' says Mr. Werden. 'However, six or nine months from now, we could see renewed interest in gold.'" New York Times, December 19.

    He was right; within nine months gold had risen 13.5%.
  • "Mr. Holt offers some advice to investors who are taking tax losses on their South African gold shares – some of which are selling at just 30 to 35 percent of their peak prices in 1974. 'If leverage has worked against you on the way down,' he reasons, 'why not take advantage of it on the way up?'" New York Times, December 19.

    Solid advice for investors today, too.
  • "What's his [Thomas J. Holt] prediction for the future price of gold? 'A new high, reaching above $200 an ounce, within the next couple years.'" New York Times, December 19.

    His prediction was conservative; gold reached $200 nineteen months later, by July 1978.
It's clear that there were positive "voices in the wilderness" during that big correction, and as we all know, those who listened profited mightily.

There were other interesting tidbits, too. For example, gold stocks had been performing so poorly for so long that some advisors suggested a strategy we also hear today…
  • "It is probably too late to sell gold shares, the stock market's worst-acting group these days, except for one possible strategy: selling to take a tax loss and switching into a comparable gold security to retain a position in the group." New York Times, September 12.
Even back then, it was widely known that gold often bucks the trend of the broader markets…
  • "You might put a small portion of your money into gold shares and pray like the dickens that you lose half of it. In that way, chances are that if gold shares go down, the rest of your stock portfolio will go up." New York Times, September 12.
Gold miners provided critical revenue and jobs, just like today. From the August 2 issue of Time magazine…
  • "South Africa, the world's largest gold producer, is being hurt the most. The price drop will cost it at least $200 million in potential export earnings this year."
  • "Layoffs at the gold mines would make it even worse – the joblessness could intensify South Africa's explosive racial unrest."
  • The Soviet Union, the world's second-largest gold producer, is feeling the price drop, too. The Soviets depend on gold sales to get hard currency needed to buy US grain and other imports."
Gold was also used as collateral…
  • "The international gold market was also roiled yesterday by a report by the Commodity News Service that Iran was negotiating to lend South Africa roughly $600 million, predicated on a collateral of 6.25 million ounces of gold."
And just like today, there were plenty of stupid misguided US politicians: From the New York Times on August 27:
  • "The drop in gold bullion prices from $126, which was the average at the first IMF auction June 2, provoked the Swiss National Bank to attack Washington's attitude toward the metal as 'childish.' Aside from the estimated $4.8 billion of gold reserves held by Switzerland, bankers there advocate some role for the metal as a form of discipline against unrestricted printing of paper money."
That last statement from the Swiss bankers is hauntingly just as true today.
Last, you know how the government in India has been tinkering with the precious-metals market in its country? And how it's led to smuggling? From the New York Times on August 27:
  • "India announced it was resuming its ban on the export of silver. India is believed to have the largest silver hoard and the government there freed exports earlier this year as a means of earning taxes levied on overseas sales. However, most silver dealers minimized the significance of India's move yesterday. As one dealer explained, 'Smuggling silver out of India is so ingrained there that the ban will have no effect on the flow. It never has. Indian silver will continue to ebb and flow into the world market according to price.'"
So what's the difference in mood today vs. the mid-1970s? Nothing! This shows that the same concerns, fears, and confusion we have now existed at a similar point in the gold market then. There were also those who saw the big picture and stayed vigilant. Virtually every comment made in 1976 could apply to today. Keep in mind that most of the statements above are from two publications only; there are undoubtedly many more similar comments from that year.

The obvious lesson here is that patience won out in the end. It took the gold price three years and seven months to return to its December 1974 high. It only took another 18 months to soar to $850. Today, that would be the equivalent of gold falling until June this year, and not returning to its $1,921 high until April, 2015. It would also mean we climb to $6,227 and get there in November, 2016. Could you wait that long for a fourfold return?

This review of history gives us the confidence to know that our gold investments are on the right track. I hope you'll join me and everyone else at Casey Research in accepting this message from history and staying the course.

So, what will your kids or grandkids read in a few decades?
  • "Buy gold. It's going a lot higher." Jeff Clark, Casey Research, March 24, 2013.
Gold is going higher, but gold producers are going to go higher still. Now, junior gold explorers… if you select the right ones, you'll experience life-changing gains. Identifying junior gold miners with the right stuff is how contrarian investing legends Doug Casey, Rick Rule, and Bill Bonner have made millions – and right now you have the opportunity to hear them reveal exactly how they did it, and how you can, too. It's all happening during the upcoming Downturn Millionaires web video event, which is free.

To learn more, click here.

The 2 Energy Sectors You Should Invest in This Year

The Collapse in the Junior Mining Stock Sector

To say the precious metals market is in turmoil would be an understatement. Gold has dropped 3% in the last year, while gold stocks have been completely decimated, even strong firms with outstanding projects are down 50% or more.

It's not surprising many investors are wondering if the bull market in precious metals is over… yet conditions like we're seeing now in the mining sector are exactly what contrarian investors look for.

To help clarify today's investing environment in precious metals stocks for you, Casey Research called together a panel of experts in mining and natural resources for an urgent summit: Downturn Millionaires.

We videotaped this event on location (at La Estancia de Cafayate in Argentina, with video feeds to panelists in the junior resource capital of Vancouver) and will air it on the Internet at 2 p.m. Eastern time on April 8.

This event is free to the public. All you have to do is register....Just click here.

Among the topics covered in depth:

* Does the bull market in gold and silver still have legs?

* What investors with positions in junior resource stocks can do today to reduce losses and reposition their portfolios.

* Is the gold stock sector doomed, or has the disconnect between the price action of the juniors in the face of rampant central bank money printing created a once in a generation contrarian opportunity to profit?

* A critical, extremely timely overview of the state of the global economy.

Here's the "Downturn Millionaires" all star guest line up and registration form to sign up now for the Downturn Millionaires webcast.

The 2 Energy Sectors You Should Invest in This Year

Say Goodbye to Yellow Gold and Hello to Black Gold

The gold market continues to frustrate the bulls and confound conventional wisdom. The market action yesterday and early today can only be seen as negative. With both our weekly and monthly Trade Triangles red, we see no reason to get excited about gold moving higher at the moment, so for now say goodbye to yellow gold.

On the other side of the ledger, say hello to black gold. Yesterday our weekly green Trade Triangle kicked in and gave a buy signal in the crude oil market. Yesterday's buy signal was in line with the longer term monthly Trade Triangle, which has been bullish and in place for quite some time. We see the renewed bull market in crude oil continuing from here based on our Trade Triangle technology. With gasoline and crude oil prices moving higher, it does raise concerns about gas prices. If gas prices become so expensive, is that going to derail the economy?

The 2 Energy Sectors You Should Invest in This Year

Tuesday, March 26, 2013

The 2 Energy Sectors You Should Invest in This Year

Top energy analyst Marin Katusa, frequently featured in the financial media such as Forbes, Business News, Financial Sense News Hour, and the Al Korelin Show, says two highly undervalued energy sectors will provide windfalls for smart investors this year.

Read his assessment, including which two energy sectors you should be bullish on for 2013....and which two you'd only lose money on. Click here for Marin's free report, The 2013 Energy Forecast.

Read "Fortune Favors the Bold Energy Investor"

What Does 8% Inflation Really Mean?

From Dennis Miller at Casey Research......


Eight percent is not good news. In my latest article I shared some reader feedback from our inflation survey, and in case you missed it, the Money Forever Reader Poll Inflation Rate is 8%. But what does that number really mean for us – seniors and savers trying to protect our buying power? It's time to read the tea leaves and find out.


Up to Your Ass in Alligators

You may remember the old poster that read, "When you are up to your ass in alligators, it's tough to remember the goal was to drain the swamp." You may have felt overwhelmed during the last few years, as the investment options for your retirement portfolio changed. You might read about the benefits of gold and silver one day, then CDs, dividend-paying stocks, and annuities the next. It's pretty easy to feel overwhelmed, particularly when you cannot afford to put too much of your life savings at risk.

One of our readers really drove home the challenges we all face:

"Anyone who has been living on SS [Social Security] checks since 2000 will tell you the same thing. They cannot live on those checks alone, and [have] depended on the interest they receive from their savings accounts or CDs. They cannot do this any longer. They now need to withdraw principal or redeem some CDs just to make ends meet. … [We are] on fixed incomes with no hope of getting a raise. These people understand the effects of inflation more than any other group. These people live with fear every day, understanding they have little control over their financial future, while watching their life savings slowly vanish every year."

Of the readers who responded to our poll, 1.6% think the inflation rate is 2% or less. On the flip side, the remaining 98.4% must think the government is lying (or in need of a new statistician).
My dear friend Toots, whom I often quote, wrote, "Did we prove once again the world is not flat?" Perhaps, but there's more to it. Certainly, I've made that point before, but that doesn't negate the need to highlight these phony government numbers. We shouldn't accept falsehoods with a nod and a wink; that's how they become immutable "facts" of life in many people's minds.

Some folks want to debate the methodology used by Shadow Government Statistics, but that misses the point. The bottom line is: 98.4% of us agree that the real inflation rate is higher than the rate reported by the BLS. That is the reality of our readers – at the grocery store, the gas pump, and today at the flower shop (gentlemen, don't forget roses for your sweetheart). Anyone living on a fixed income already knows this.
The real issue is that we are getting squeezed! At least, 98.4% of us think so. There's no need to dwell on whether it's 6%, 7% or 8%, etc. What really matters is how this affects your life. If the price of my favorite snack doubled, and the price of broccoli dropped 50%, my costs are rising. The price of broccoli could drop 99%, and I still wouldn't buy it.

While planning for retirement, most of us planned for a 2% inflation rate and anticipated earning 6% on our portfolio. That was a nice retirement plan while it lasted, but it won't do much good for anyone now.
Another old-line "rule" was: a retiree could safely use 4% of his portfolio every year to supplement Social Security, and still be fine for the rest of his life. Where did the math come from? If your portfolio grew 6% every year and you took out 4%, the remaining 2% covered any loss to inflation. It was really that simple, and it worked just fine for me in my early retirement years.

We have all heard the old rule, "Live off the interest and never touch the principal." That is exactly what we were doing, while also protecting that principal from inflation.

Now comes the scary part. If the real rate of inflation is anywhere near the Money Forever Reader Poll Inflation Rate of 8%, how much can we take out of our portfolio every year without losing buying power? The math is still simple, but with a frightening answer: nothing, unless you earn more than 8%.

The problem is easy to understand, but the solution is tough to implement. If we want that same 4% to supplement our Social Security checks, we need to earn 12% on our portfolio every year – 8% for inflation and 4% for income. And this does not even factor in taxes. Those of us with a traditional IRA who are over 70 1/2 years old are required to take a minimum distribution, which can come with a nice tax bill.

Imagine that you have a $1 million portfolio, and your goal is to keep up with the Money Forever Reader Poll Inflation Rate and earn 4% income to supplement your Social Security checks. That's $120,000. To maintain a somewhat conservative posture, we recommend 30-33% of your portfolio be in cash, which pays little if any interest; let's assume cash pays 0% for the moment. That means you must earn 17.1% on the remaining $700,000 to reach your goal of $120,000.

That return can come in the form of an income check, dividends, and stock appreciation. Whatever the source, that's a pretty tall order. And it's particularly daunting when you consider that anyone close to retirement age should make minimal high-risk investments. We can't bet it all on a speculative stock, hoping to catch the next Internet startup success story.

Finding the Strength to Strangle the Nemean Lion

The Money Forever team is on the lookout for solid companies that not only pay dividends, but also have a history of regular dividend increases. In the last quarter, three of the stocks in the Money Forever portfolio increased their dividends. It is highly unlikely that most of us will live long enough to see our dividends equal 50% of our investment (which is what Warren Buffett receives from Coca-Cola, according to what I've read). However, if a company is currently paying 4%, it won't take too long to see an 8% yield. Once our dividend yield is at or above the inflation rate, we can factor in appreciation and start gaining ground on the inflation monster once again.

While dividend-paying stocks will get us on the right track, there's still more work ahead. Dividends alone are not enough; we also need stock appreciation. If you subscribe to our premium publications, it may be a good time to review our special report, Money Every Month, where we discuss this in great detail. As of today, over half of the stocks in our portfolio have double-digit gains. While we are proud of what we have accomplished to date, we also understand that the current market could change any minute. We have to remain vigilant. Stocks with a long history of increasing their dividends plus a good history of appreciation are hot tickets. Perhaps this is part of the reason why the stock market is doing so well in a tough economy.

Alternative sources of income can also help. Two of our recent Money Forever premium issues focused on annuities and reverse mortgages. Under the right circumstances, as we outline in our reports, these can be valuable alternatives for filling your cash-flow gap. Nevertheless, please consider all of the risks and cautionary tales included in our reports before purchasing an annuity or signing a reverse mortgage. One seemingly simple mistake – like neglecting to put your spouse on a reverse mortgage – can be devastating.

So can it be done? Can we really build a portfolio that will stand up against the current rate of inflation? Sure; but we have to stay on top of our investments and continue to educate ourselves. "Set it and forget it" won't work.

From the Stadium to the Golf Course

For many of us, cutting back on expenses is very difficult. It can feel like part of our retirement dream is going up in smoke. We have friends who planned to take summer and winter cruises every year after they retired. They thought they had the money to do it, but now they have to cut back. They do not enjoy their driving trip to the local state park nearly as much as they do a cruise.

One of the respondents to our survey mentioned that he cut back on golf from three days to two days a week. Our good friend Phil addressed his golf situation in a unique manner. For several years he had volunteered during spring training for a major league baseball team. Then the local golf course advertised for part-time help. He inquired; the job sounded like fun, and he negotiated complimentary greens fees as part of his package. For him it is the best of both worlds. Now he has a little extra income, his golf expenses are radically reduced, and he still is able to golf regularly, something he really enjoys. And yes, the baseball team is going to have to recruit another free laborer. Somehow, I think they'll manage!

I'm realizing we all have to come to grips with the reality described by our reader at the beginning of today's article. While it may be difficult for all of us, we are old enough to know that putting things off only makes problems get worse faster. It's like our own personal fiscal cliff, but we can't keep running the printing press and ignoring the real problem.

My oldest daughter, also a baby boomer, went to a class on personal financial management about ten years ago. I asked her what she thought the biggest lesson was. Her response surprised me:

"The first thing to deal with is your expectations. If you want a lot of stuff, and currently do not have the income to pay for it, you must find ways to increase your income. If that is not possible, then you must learn to adjust your lifestyle and be happy with what you have, living within your means. Dad, they stressed that part of being truly happy is the realization that your neighbor may have more or less than you do and it makes no difference. Personal financial management is as much an adjustment of your attitude as it is an adjustment of your spending habits."

In retrospect, that class had a major effect on her life. She is a grandmother now, and she and her husband have a truly happy family. I believe it was philosopher William James who said, "Human beings can alter their lives by altering their attitudes." That sentiment certainly rings true.

OK, you get the point, but you may not like it. Neither do I, and neither do the millions of our peers in the same predicament. So what should we do? To start with, everything I just mentioned, which is quite a task. Become an active investor, learn, and adjust to the new market. We must protect our nest eggs and look for solid income opportunities. We must look at our spending habits and see where we can cut back. Every dollar we save takes a little pressure off our portfolio and the need for it to produce income.

Also, don't discount finding other sources of income. Write the book you've been dreaming about – turn your hobbies into a profit. I have a buddy who worked in the auto industry. Dealers often sell a car they do not have in inventory if there is one at a nearby dealer they can trade for. He set up a business helping dealers move vehicles around. He loves it because he stays active, and he says he had to learn zero new skills. His comment was, "Where else can I get a part-time job where I get paid to drive around listening to a ball game?"

You, dear readers, drove home the point for me with your feedback to our survey. If we need 12% or so to protect our nest eggs, then we all have to accept that challenge. If we have a really good year, we can grow our nest eggs and increase our buying power. If we fall short, we must keep erosion to a minimum.

The last time I ran a retirement planning computer program, it said I would be fine as long as I passed away before age 125. In a bad year that may slip to 115. We are all in this together, and I'm committed to making sure Miller's Money Forever lives up to its name.

One final thought…

My overriding point is that we have to take control of our retirement finances. Like I said earlier, the days of "set it and forget it" are gone. The upside here is that we can actually secure our retirement. Together with thousands of subscribers we're doing just that. One way to start is with our free Money Every Month plan outlining how to invest so you’re getting income every month.  Click here to find out more about this plan.

The 2 Energy Sectors You Should Invest in This Year

Where is all the new Natural Gas Pipeline Construction?

U.S. natural gas pipeline capacity investment slowed in 2012 after several years of robust growth. Limited capacity additions were concentrated in the northeast United States, mainly focused on removing bottlenecks for fast growing Marcellus shale gas production. More than half of new pipeline projects that entered commercial service in 2012 were in the Northeast (see map below). Excluding gathering, storage, and distribution lines, project sponsors in the United States added 4.5 billion cubic feet per day of new pipeline capacity and 367 miles of pipe totaling $1.8 billion in capital expenditures in 2012.

Read the entire EIA article

Today's Top Performing ETF's

Monday, March 25, 2013

Tax Treatment of PFGBest Losses

Our friends at DeCarley Trading are reminding Ex-PFG clients to be sure to properly claim the fraudulent losses on your tax return......

Many of you have been asking about the tax treatment of losses sustained at the hands of PFGBEST. Please see below statement from the CCC:

The IRS has confirmed that victims of the PFGBest fraud can access the optional safe harbor mechanism set forth in Revenue Procedure 2009-20 so that victims can claim their losses as theft losses. Responding to the CCC’s request for guidance, the IRS stated in a letter:

…the PFGBest scheme qualifies as a “specified fraudulent arrangement” within the meaning of Revenue Procedure 2009-20. Thus, investors who otherwise meet the requirements of Revenue Procedure 2009-20 may use the safe harbor, following the procedures as set forth in that revenue procedure.

The full response is posted below, along with the documents necessary to utilize this mechanism. Please note: it is not required that PFGBest victims use this procedure. It may not provide the best solution for your particular tax situation. Claimants in the PFGBest case are urged to consult their tax professionals as soon as practicable to determine if it is appropriate and wise to seek relief under the safe harbor deduction for theft losses. You may need to provide the following documents to your tax advisor:

IRS Response to CCC
Revenue Ruling 2009-09: PDF Version
Revenue Procedure 2009-20:PDF Version
CCC Request to IRS CCC Request to IRS
Wasendorf Plea Agreement Wassendorf Plea Agreement
Wassendorf Judgement Wassendorf Judgement

DeCarley Trading


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Sunday, March 24, 2013

Hugo Chavez Is Gone, But His Oil Legacy Lives On

On March 5, 2013, Hugo Chávez, one of the most iconic presidents in the world, died at the age of 58. While he was alive, Chávez was a highly controversial figure, calling George W. Bush a drunkard and a "psychologically sick man" and Tony Blair an "imperialist pawn who attempts to curry favor with Danger Bush-Hitler."

Like him or hate him, Chávez definitely had a huge following in Venezuela, as well as the entirety of Latin America. His anti-American and socialistic rhetoric made him an ally of Fidel Castro in Cuba and Ahmadinejad in Iran. Combined with Correa in Ecuador, Fernández in Argentina, and Morales in Bolivia, Chávez was able to make a front in South America against the "evil imperialist gringos."

But with him no longer in the picture, things will change, and cheap Venezuelan oil will be able to flow into the markets, right?


Whoever succeeds Hugo Chávez will be trapped between a rock and a hard place. Venezuela currently has some of the cheapest gasoline in the world; it's costing an average of $1 to fill up one's tank. These low prices are made possible by the enormous amount of fuel subsidies – estimated to be 4.5% of the GDP (for reference, the US Department of Defense spends 4.5% of the US GDP). Any attempts to remove these subsidies will be met with enormous resistance from the population, which has long viewed cheap gas as a birthright.

To make things worse, the production of oil from Venezuela has been steadily decreasing due to the lack of reinvesting back into the oil patch and lack of upgrading the energy infrastructure. Instead of investing in the oil sector, Chávez has been spending most of the money on social programs. This decrease in supply combined with increased demand for oil from a growing population means there is much less oil available for exports.

In fact, since Chávez took power in 1999, Venezuela's oil exports have been cut by half. Oil provides 45% of Venezuela's revenue, so in order to keep running the country, the government must find a way to get more money out of every barrel that it exports. And what better way is there than to pass it on to the evil imperialist consumers of the West?

This situation is not happening just in Venezuela, but in many other oil producing countries: Iran, Kuwait, and Indonesia are just a few examples. It is only a matter of time before these countries conspire in order to raise the worldwide price of crude oil. What will they raise it to?

U.S. $100 per barrel of oil? U.S. $150? U.S. $200? Whatever it takes to keep the country running and the ruling classes in power. Will America be spared? According to the latest International Energy Agency (IEA) report, the United States will become self sufficient in energy by 2035, which means that it will be free from the geopolitical manipulations of oil producing countries.

Unfortunately for America, this report is flawed and filled with inconsistencies, relying on it to guide your energy investment decisions would likely prove disastrous to your portfolio. A better bet for your portfolio would be to follow the advice in The 2013 Energy Forecast. It provides an insider's view of two segments of the energy sector likely to provide sizable near term returns to investors who position themselves now.

Just click here to get your free report today!

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Friday, March 22, 2013

When it comes to coffee, at this point all that matters is Brazil

Well, the JO crowd finished the week on a positive note. But the bears are still in charge when it comes to coffee. As I have said before, we can pick apart what is going along across the globe but it looks like as Brazil coffee farmers go, so goes coffee futures pricing. Here's today's post on coffee from one of our trading partners Mike Seery......

Coffee futures finished this Friday afternoon on a positive note closing at 136 a pound up 200 points for the trading session finishing higher for the 3rd straight day but still right near 2 ½ year lows as the bear market continues finishing down around 100 points for the trading week.

Coffee futures on the daily chart has excellent chart structure so if you are willing to stick your neck out you will be able to place tight stops limiting your monetary loss in case you are wrong and at this point there is still talk of a tremendous crop coming out of Brazil which is keeping a lid on prices despite the fact of rust problems in Central America a bad drought in Vietnam which is reducing their crop forecast but Brazil’s crop could be so huge as traders are unwilling to stick their neck out on the upside at this point.

As I’ve stated in many previous blogs I was bullish coffee and I was wrong, however the longer we start to grind lower like we are at this point with no volatility going into the volatile frost season I still believe if you have deep enough pockets and you are willing to take a longer term view coffee prices I believe will reward you in the long run because I do believe prices will be higher 12 months from now than they are at these depressed levels.

Even producers in Brazil are starting to complain that prices are getting to low and are starting hold back some of their crop eventually that’s what happens with prices get to low and if prices get too high producers often produce too much sending prices lower but at this point prices are so low that production in my opinion will start to decrease.

Coffee trend? Lower. Chart structure? excellent.

We remain long coffee using ETF "JO"

Click here to get your own free trend analysis for coffee ETF "JO" in your inbox.

EIA: Pennsylvania Natural Gas Production Rose 69% in 2012 Despite Reduced Drilling Activity

Natural gas production in Pennsylvania averaged 6.1 billion cubic feet per day (Bcf/d) in 2012, up from 3.6 Bcf/d in 2011, according to Pennsylvania Department of Environmental Protection (DEP) data released in February 2013. This 69% increase came in spite of a significant drop in the number of new natural gas wells started during the year.

Several factors contributed to the production increase. While accelerated drilling in recent years (primarily in the Marcellus Shale formation) significantly boosted Pennsylvania's natural gas production, increases were restricted by the state's limited pipeline and processing infrastructure. This created a large backlog of wells that were drilled but not brought online. As infrastructure expanded, these wells were gradually connected to pipelines, sustaining natural gas production increases through 2012 despite the decline in new natural gas well starts. Data from DEP show that a significant portion of wells that began producing in 2012 were drilled earlier.

Graph of PA natural gas drilling and production, as explained in the article text 

Improved drilling and well completion techniques can reduce drilling time and lead to higher production per well. The increased use of horizontal drilling (see graph) and hydraulic fracturing, particularly in the more geologically favorable portions of the Marcellus, allows for more production per well. As operators continue to improve well completion techniques, they are achieving higher initial per-well production rates and boosting overall production.

Pennsylvania typically releases major production data twice a year for unconventional (horizontal) oil and natural gas wells and once a year for conventional oil and natural gas wells. With rapidly increasing natural gas production in Pennsylvania, EIA has proposed to add Pennsylvania (and at least 11 other states) to its monthly EIA-914 natural gas production survey, which would provide more timely reporting of Pennsylvania's rising production.

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Tuesday, March 19, 2013

Making money with Apple using any size account AAPL

If you missed John Carter's webinar last week you missed how he explained his favorite trade setups. In the last couple of days he has used these exact setups to make himself some killer profits trading Apple [AAPL] options. And the best part about these trades is that they can be profitable with any size account.

Watch John's latest two part video HERE

In this free two part video he explains his EXACT entry signal, and how he managed this trade. It's actually really simple and you've got to see this.

And John is holding another webinar Wednesday night at 8 p.m. eastern, in which he explains his trade setups for trading options in detail. So while you are there make sure to sign up for the webinar before all the slots are taken.

Click here to watch two part video and sign up for webinar

See you Wednesday night!
Ray C. Parrish
The Crude Oil Trader

Sunday, March 17, 2013

Trading Tips from John D. Rockefeller

John D. Rockefeller was America's first billionaire. After the civil war Rockefeller had a good amount of money with which to invest. He (correctly) believed railroads would become the primary means to transport agricultural products and would open up the vast western lands to eastern markets, trends that didn't bode well for his own produce shipping. He began to look for other business ventures that could be profitable and found a fledgling sector poised to take off.....the oil industry.

However, where he and his partners entered was not in oil production, but its refining. The same railroads that would eclipse his shipping business would help launch his refining venture, as Cleveland enjoyed not the usual one rail line, but two. Transportation costs would be lower and thus his refinery products more competitive.

By the late 1860s, only five years after getting into the oil business, Rockefeller's refining company was the largest in the world. A major reason for his success was a business model that today we call vertical integration. Rockefeller knew that in order to keep costs down, he would have to control both the upstream and the downstream. For example, he even bought his own woodlands for lumber to make his own oil barrels, and built kilns on site to dry the lumber and save shipping weight on its way to (his own) cooperage. His attention to cost cutting was painstaking.

So, can we learn from Rockefeller and put the lessons he learned to work for us in our modern day trading?

Let's try.

Trading like Rockefeller.....

1. Lower your costs. Lower costs mean higher margins and much more resilience during bad times. Rockefeller famously reduced from 40 to 39 the number of drops of solder to close the lids of kerosene cans, saving the company hundreds of thousands of dollars in the long run. He'd also ask for financial statements down to three decimal places, the better to spot inefficiencies in his supply chain and fix them.As investors, follow in Rockefeller's footsteps by investing in companies with low costs, but also reduce the cost basis in the stocks you own.

2. Have you checked lately whether you're getting the best deal from your brokerage? Don't be afraid to take your business somewhere else. Every advantage counts in this fast moving world.

3. Also, are you making the most out of your portfolio? Could you do more with it? It's a good idea to invest a portion (and we do mean just a portion) of your portfolio in equities that can offer higher reward for higher risk. This is especially true if your portfolio is heavy in capital.

4. When the market is turning against you, move on. Had Rockefeller stuck to his grain shipping business, he'd likely not even made a ripple on the pages of financial history. When he spotted opportunity in the up and coming oil industry, he wasn't afraid to abandon what had been a good thing and to take the leap.For us, this advice means sometimes selling companies that are under performing. Knowing when it's time to cut our losses and to turn our capital toward more profitable ventures. The tricky part is knowing when to be patient and hold and when to recognize a true shift in the marketplace....and that comes from reading the signs from Mr. Market.

5. Vertical integration is a hallmark among many strong companies. Part of the reason Rockefeller could edge out his competitors was the fact that he controlled his own supply chain. He noticed very early on that if he did not control many aspects of his production, he would be at a disadvantage when it came to negotiations. And as he expanded his business, he purchased companies that could make the entire refinery process smoother, including pipelines, railroads, and even those woodlands we mentioned.Thus, if we want blue chip companies that will perform well for us over the long term, we should look for firms that are vertically integrated within their own sectors.

6. Patience is key. Rockefeller kept his discipline when he landed in a tough job market after school. As investors, we're looking for companies that can pay good dividends in the long run. However, we must be wary of overpaying for stocks. Being patient, letting the market come to us rather than chase it ourselves, will give us the best bang for our buck.

Check out our Top 50 Stocks List

Friday, March 15, 2013

Is it time to be sweet on Sugar SGG

Our friends at the MarketClub have posted that they are seeing a bullish uptrend arrow for sugar coming from their Trade Triangle technology. MarketClub contributor Jim Robinson says.......

"Sugar looks to be making a Head and Shoulder base and a breakout to the upside would be bullish. A Head and Shoulders pattern isn't a completed pattern until there is a neckline breakout. Waiting for the neckline breakout helps to confirm the pattern is good and will keep us from buying into what looks like a head and shoulders base, but then fails. The weekly MarketClub Trade Triangle is pointing up which is bullish. If sugar trades higher and makes a strong move through the neckline, that puts the odds with higher prices, making this a great chart to watch as big bull move is possibly on the way for sugar"

Here is Jim's chart and technical view of the Trade Triangles for May sugar using SF.K13.E

We are long sugar using ETN ticker SGG

Click here to check out the MarketClub Trade Triangles for yourself!


Wednesday, March 13, 2013

The Stock Market Trend & Hot Sector ETF’s

Trading with the trend should be your main focus for long term success no matter what type of trader you are (Options Trader, Stock Trader, or ETF Trader) although it’s not as easy as it sounds.

The good news is that there is a simple trading model that removes 95% of trading analysis and greatly reduces trading related emotions because the key technical analysis rules based on one of the world’s best chart technicians (John Murphy) technical analysis methods have been applied to the chart automatically. The key is to identify the trend of the market. Once that is known you can focus on trading strategies that take advantage of the current trend.

Over the past few years I have been creating this indicator/chart layout tool which converts my chart reading experience, tips and tricks into a simple system removing analysis paralysis which cause most individuals to second guess what they see and don’t pull the trigger. Using too many indicators or read/listening several other traders commentaries with different views than you causes this paralysis.

My simple red light, green light model clearly shows a viewer the current trend and expected price range (high and low) looking forward a couple days. I uses a series of data points like volatility, volume, cycles, momentum, chart patterns and logic rules. It even shows extreme pivot points helping you find low risk entry prices for both bull and bear market conditions.

Recent trends and signals for the SP500 Index Daily Chart:


Trading With the Trend – The Sweet Spots

Knowing the direction of the market is simple using the chart system above but trading with the trend is not that simple because of natural human behavior. Instead traders fall victim to trying to pick a top or bottom because they think the price is overbought or oversold and they want to catch the next big trend change.

We all know the saying “the market climbs a wall of worry”. Well, the biggest worry most traders have is buying long in a bull market because stocks and price always look overbought and ready to top each week… This leads to people trying to get fancy picking a top only to get their head handed to them a few days or weeks later depending on how stubborn they are to exit a losing position.

The key to long term success is to buy during broad market (SP500) corrections once sentiment, cycles and momentum are starting to flash extreme oversold conditions. These show up as green arrows on the trend chart. At that point most sectors and high beta stocks like IBM, GOOG etc… should be at a key entry points with most of the downside risk removed already. Remember ¾ stocks follow the broad market so it only makes sense to follow it also.

What about a runaway stock market? This is when the stock market does not pullback but just keep grinding its way higher and higher… The only thing you can do is sit in cash, or look for a stock or sector that is having a small pause or pullback and get long with a small position until you get that broad market pullback and major by signal to add more.

Below are a few sectors showing a minor pause/pullback within this bull market:


Mid-Week Trend Conclusion:

Overall, the broad market remains in an uptrend. While I would like to see the SP500 pullback and give us another major buy signal like it did in December and February I do mind that much if prices keep running higher as it just give us more cushion and potential profits for when the trend does eventually roll over and flip signals. I hope you found this report interesting. It’s just scratching the surface of this topic but it’s a start. Know the stock market trends by joining my free newsletter at The Gold & Oil

Chris Vermeulen

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Tuesday, March 12, 2013

Chevron CEO on CNBC.... Keep Cash Reserves If Oil Prices Fall

Chevron CEO John Watson discusses where the biggest production growth is occurring globally and what his company plans to do with its $22 billion in cash.

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How to Find High Probability Trades

The last time we shared a webinar hosted by John Carter he gave out a trade for attendees to take, if they felt like it, that netted John 86k. And he's hosting another webinar this week

No promises on trade recommendations as he only takes what the market gives him, but I really recommend you sign up for this event for Thursday at 8 p.m. est.

Click here for Webinar Sign up

Here is just an idea of what John will be covering......

*    His favorite options trading strategies,
*    How to find high probability trades,
*    How to manage options trades,
*    How to trade options to generate wealth or income from any account size and more.

If you have decided that it's time to start making real money trading, make time for this event.

John Carter's "How to Find High Probability Trades"

Sunday, March 10, 2013

Silver Miners, Gold Miners and the Price Of Gold

Silver and silver mining stocks are front and center for investors and active traders. Because of silvers high volatility (large price swings) it naturally attracts a lot of attention.

First you have seasoned investors who are waiting for the right opportunity to get long or short for the next move. Then you have the active traders playing the day to day price swings. Finally you get the gamblers who are salivating over the potential to double their accounts and are riding the commodity on pure emotions (Fear & Greed). All these things compound the volatility for the investment making it headline news and what everyone wants to be involved in.

The focus of this report is show you where the price of gold, silver and miner stocks are currently trading and what to lookout for in the coming days/weeks. Below is a chart of gold but silver has a similar pattern and will follow or should I say lead the price of gold in percentage terms because of its volatility.

Gold Weekly Chart:

Gold has been testing its long term support level for three weeks. I expect we see price start to move quickly sooner than later but there is potential for it to tread water here until the second half of April. We all know the saying “Sell in May and Go Away” and as we get closer to that date we should start to see money flow into the “Safe Havens” being gold, silver, and miners. While this has not happened many times on the charts I am thinking beyond them and of what the masses are likely to flock to when stocks lose their luster.

Also if you have been following the price of the dollar index you know that its getting a little overbought and when it starts to correct the falling dollar should help send precious metals higher.


Gold & Silver Miners VS Gold Bullion Performance:

The stock market has certain chart patterns that tell chart readers what the holders of that particular investment is feeling emotionally. Knowing how to read these extreme patterns can yield some big gains and works for most investments types (stocks, bonds, commodities and currencies).

Without getting into the boring technical details precious metal stocks are starting show signs of panic selling which typically happens before a major bottom is put in place. A bottom generally takes a week or two for some type of bottoming pattern or base building to form. This is the most volatile time to be trading these investments so trade with caution.


Gold Miners Bullish Percent Index:

Bullish percent indexes are a great way to see how popular an investment is. If you do not know what a bullish percent chart is then you can look it up online and learn more. The way I read it is when it’s up over 75-80 it’s a popular investment and everyone is buying it. It also means it’s in a major uptrend. But you must be aware that when everyone is buying something once price starts to turn down you better be one of the first few out the door before everyone else runs for the door and price crashes.

It’s similar but reversed for investments that are below 20. Everyone is selling, no one wants to own it but once the selling momentum stops price should rebound and rally. Keep in mind this indicator is not great for timing, but confirms that what you are looking at is either oversold, neutral or overbought in the BIG picture.


Weekend Precious Metals Trading Conclusion:

In short, I still like gold, silver, and their related mining stocks. I am watching them very closely for signs of a bottom and will be jumping on that train when the selling momentum looks to have stalled. Keep in mind that all these investments are still in a VERY STRONG DOWN TREND and trying to catch a falling knife is not what I do. Waiting for momentum to shift is my focus as there should be big upside if metals and stocks can find a bottom soon. If gold breaks down below key support as posted on the weekly chart then the uptrend may be over and it will be time to start looking for short positions.

You can get my free weekly reports and ideas here at The Gold & Oil

Chris Vermeulen

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Saturday, March 9, 2013

Are you using the "Squeeze Trade"

We have had a huge response to John Carters options trading video that we posted on Thursday. Because of some of the feedback and input that has come in John has decided to release a follow up video. Here's a little advice though, before watching the video get out a pen and paper. Personally I think you'll want to take some notes this time around.

Today's video will include more details on individual trades John has been doing. Including how he made 43k trading MA options. The video is only 13 minutes long so no excuses. Here is just a sample of what John will be covering.......

- Three (3) strategies to trade "The Squeeze"
- The secret behind 39 minute charts
- The "Porsche Trade Setup"

Whether you trade options as an expert or beginner we would love to hear your feedback so please feel free to leave a comment.

Just click here to watch John's video

See you in the markets!
Ray C. Parrish
President/CEO The Crude Oil Trader

Exact Setup of a 43k Options Trade

Friday, March 8, 2013

Natural Gas....Is it time to trust the bullish Trade Triangles?

Today we are going to take a look at the technical picture of Natural Gas (NG.J13.E) and analyzing it using the MarketClub Trade Triangles. Natural gas found support at a double bottom level, has moved higher, and put in a weekly MarketClub green Trade Triangle, which is bullish.

If natural gas continues higher and breaks through resistance, it would put in a monthly MarketClub green Trade Triangle, which would be even more bullish. The MACD is on a buy signal and right now everything is pointing to higher prices for natural gas. This is a chart to watch, as big things look to possibly be in store on the upside for natural gas.

Click here to sign up for your own trial of the MarketClub Trade Triangle technology!

EIA: Saudi Arabia was world's largest petroleum producer and net exporter in 2012

Saudi Arabia was the world's largest producer and exporter of petroleum and other liquids in 2012, producing an average of 11.6 million barrels per day (bbl/d) and exporting an estimated 8.6 million bbl/d (net). Saudi Arabia produces more than three times as much of these liquids as the next largest member of the Organization of the Petroleum Exporting Countries (Iran), and as much as the rest of the Arab Middle East put together.

In addition to leading the world in production and exports, Saudi Arabia has an estimated 268 billion barrels of proved oil reserves, over 16% of the global total, and is the only country in the world with extensive spare oil production capacity, which can help cushion market disruptions. While Saudi Arabia has about a hundred major oil and natural gas fields, more than half of its proved reserves are contained in eight fields. Saudi Arabia's (and the world's) largest oil field (Ghawar) alone contains an estimated 70 billion barrels of proved reserves, more than the proved reserves in all but seven other countries.

Graph of total petroleum liquid production, as explained in the article text 

In 2012, 16% of Saudi liquids exports were sent to the United States, accounting for 13% of total U.S. liquids imports. While Canada is the prime supplier of U.S. liquids imports, Saudi Arabia remains an important supplier.

Although leading the world in exports, Saudi Arabia's own liquids consumption is growing. Unlike the United States, Saudi Arabia uses significant amounts of oil for electricity generation, reaching as much as one million bbl/d during hot summer months. Electric demand has doubled since 2000 and is expected to continue its rapid growth. Without initiatives to facilitate fuel switching and increase efficiency, growing volumes of oil, expensive in relation to other fuels, will be consumed domestically.

Finally, as EIA has previously discussed, the choice of accounting conventions for measuring liquids production can also affect which country is considered the world's leading producer at a given date.

Get John Carter's new "Options Trading Strategies for 2013"

Wednesday, March 6, 2013

Size Doesn't Matter.....Your Account Size that Is

More and more traders are trying their luck in the options trading game. But it has nothing to do with luck. It simply has to do with "time decay", the inevitable passing of time and the hope of reducing your risk and improving your odds of taking a profit before the clock runs out.

This is not an area of the market that anyone should blindly take a spin at. You need to understand the adjustability and broad range of trade structure that allows you to profit whether you are confronting a low volatility market, sideways or consolidating conditions, or a high volatility marketplace.

We get messages here at The Crude Oil Trader on a regular basis asking us to recommend options set ups and make suggestions on our members trades. We pass these messages on to one of two options traders that have become the most highly regarded options traders around. J.W. Jones and John Carter.

This week John has put together a video for us explaining how he is using options as income trades, no matter what the account size. What's interesting is he literally "gives" us the set ups that he uses on his own accounts. You need to see why these trades can be used on any size account and still be profitable. I think this will interest a lot of home gamers and pros alike who are trying to break into options trading. A market that has grown by 500% in the last decade.

One of the things that has made so many people resistant to options trading is just how complicated the talking heads on TV make options trading sound as they rush through their trade of the week. John teaches more about options income trading in a few minutes then you've read in most books.

Here's just a sample of what John will show us in this short video......

* How he made $52,875.00 last week trading Google Options

* His favorite options trading strategy for generating income

* Trading Setups with a probability of 75%

* How to limit your risk when the trade goes against you and much more

Grab a pen and paper so you can take some notes then just click here to watch the video. It's only 12 minutes long and in that short time I think John will change your mindset when it comes to options.

Final Stages of the Advance on SP 500....The Wave Pattern

Our trading partner David Banister has been projecting a potential rally pivot at 1552-1576 for many weeks now. The recent drop to 1485 although harrowing, was a normal fibonacci retracement of the last major rally leg to 1531 pivot highs. Banister believes that this 5 wave advance 1343 pivot lows is nearing an end based on mathematics and relationships to prior waves 1-3.

At 1569 the SP 500 would mark a perfect fibonacci relationships to waves 1-3 for this final 5th wave to the upside. In the big picture, we are still working higher off the 1010 pivot lows on the SP 500, and this rally takes 5 full waves to complete. He thinks we are near wave 3 highs, and wave 4 correction would be up next, followed by another thrust to highs if all goes well this year.

That all said, a multi-week correction and consolidation wave 4 pattern is likely once we pivot at 1552-1576. We should expect this correction to retrace anywhere from 80 -100 points on the SP 500, but one week at a time.

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Sunday, March 3, 2013

Gold, Crude Oil & the SPX Trends and Setups

Over the past year our long term trends and outlooks have not changed for gold, oil or the SP500. Though there has been a lot of sideways price action to keep everyone one their toes and focused on the short term charts.

As we all know if the market does not shake you out, it will wait you out, and sometimes it will do both. So stepping back to review the bigger picture each weeks is crucial in keeping a level trading/investing strategy in motion.

The key to investing success is to always trade with the long term trend and stick with it until price and volume clearly signals a reversal/down trend. Doing this means you truly never catch the market top nor do you catch market bottoms. But the important thing is that you do catch the low risk trending stage of an investment (stage 2 – Bull Market, Stage 4 Bear Market).

Lets take a look at the charts and see where prices stand in the grand scheme of things.

Gold Weekly Futures Trading Chart:

Last week to talk about about how precious metals are nearing a major tipping point and to be aware of those levels because the next move is likely to be huge and you do not want to miss it.

Overall gold and silver remain in a secular bull market and has gone through many similar pauses to what we are watching unfold over the past year. As mentioned above the gold market looks to be trying to not only shake investors out but to wait them out also with this 18 month volatile sideways trend.

A lot of gold bugs, gold and stock investors of mining stocks are starting to give up which can been seen in the price and selling volume for these investments recently. We are contrarians by nature so when we see the masses running for the door we start to become interested in what everyone is unloading at bargain prices.

Gold is now entering an oversold panic selling phase which happens to be at major long term support. This bodes well for a strong bounce or start of a new bull market leg higher for this shiny metal. If gold breaks below $1500 – 1530 levels it could trigger a bear market for precious metals but until then we're bullish at this price. We think we could see another spike lower in gold to test the $1500- $1530 level this week but after that it could be off to the races to new highs.


Crude Oil Weekly Trading Chart:

Crude oil had a huge bull market from 2009 until 2011 but since then has been trading sideways in a narrowing bullish range. We expect some big moves this year for oil and technical analysis puts the odds on higher prices. If we do get a breakout and rally then $130 will likely be reached. But if price breaks down then a sharp drop to $50 per barrel looks likely.


Utility & Energy Stocks – XLU – XLE – Weekly Investing Chart

The utility sector has done well and continues to look very bullish for 2013. This high dividend paying sector is liked by many and the price action speaks for its self. If the overall financial market starts to peak then these sectors should hold up well because they are services, dividend and a commodity play wrapped in one.


SP500 Trend Daily Chart:

The SP500 continues to be in an uptrend which we are trading with until price and volume tells us otherwise. But there are some early warning signs that another correction or a full blown bear market may be just around the corner.

Again, sticking with the uptrend is key, but knowing what to look for and prepare for is important so that when the trend does change your transition from long positions to short positions is a simple measured move in your portfolios.


Weekend Trend Conclusion:

In short, we remain bullish on stocks and commodity related stocks until I see a trend change in the SP500.

Energy sector is doing well and looks bullish for the next month. As for gold and gold miners, we feel they are entering a low risk entry point to start building a new long position. Risk is low compared to potential reward.

When the price of a commodity or index trade near the apex of a narrowing range or major long term support/resistance level volatility typically increases as fear and greed become heightened which creates larger daily price swings. So be prepared for some turbulence in the coming weeks while the market shakes things up.

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