The Odds Are In Your Favor To Trade Gold This Quarter

Using MarketClub's weekly and daily Trade Triangles, I have found that over the last 6 1/2 years, the second quarter of the year has shown the most consistent profits in gold. These past results showed a quarterly gain on average of $7,104.83 on one futures contract.

Gold (XAUUSDO) enjoyed a nice move up earlier in the year, reaching a high of $1393.35 and has pulled back to an important Fibonacci support area. I want to watch this market very carefully and wait for the weekly Trade Triangle to turn green to get bullish on gold. That's not to say I am not longer term bullish, it only means that my timing will kick in when the weekly Trade Triangle turns into a green Trade Triangle.

Besides the Fibonacci support area, the RSI indicator is also at a very low level, similar to that of December 2013.

Trading Results

Q2 of 2008            $965.00
Q2 of 2009            $870.00
Q2 of 2010         $7,057.00
Q2 of 2011         $6,700.00
Q2 of 2012         $4,223.00
Q2 of 2013       $31,260.00
TOTAL             $42,629.00
AVE GAIN         $7,104.83

The results are based on signals using MarketClub's real time spot gold prices and margin of $8,333. This particular trading strategy and results are based on trading one futures contract, both from the long and short side. An ETF could be substituted, but I suspect the results would be quite different.

Trading Rules

How to use MarketClub's Trade Triangles to trade gold:

Use the weekly Trade Triangle to determine the major trend and initial positions. Use the daily Trade Triangles for timing purposes.

Gold entry and exit signals are generated from the spot Gold (XAUUSDO) chart.

Let me give you an example: if the last weekly Trade Triangle is GREEN, this indicates that the major trend is up for that market. You would use the initial GREEN weekly Trade Triangle as an entry point. You would then use the next RED daily Trade Triangle as an exit point. You would only reenter a long position if and when a GREEN daily Trade Triangle kicked in.

You would then use the next RED daily Trade Triangle as an exit point, provided that the GREEN weekly Trade Triangle is still in place and the trend is positive for that market. The reverse is true when you have a RED weekly Trade Triangle. You would use the initial RED weekly Trade Triangle as an entry point for a short position. You would then use the next GREEN daily Trade Triangle as an exit point.

Only Trade With Risk Capital

Even if the odds are in your favor, don't forget that there are no guarantees in trading and only funds that you can afford to lose should be used to trade with.

See you in the markets!
Adam Hewison

Make sure to catch Adam on INO TV



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What Is Worse Than Being at Risk?

By Dennis Miller

You may have heard the old adage: “What is worse than being lost? Not knowing you are lost.” In that same vein: What is worse than being at risk? You guessed it! Not knowing you’re at risk. For many investors, portfolio diversification is just that. They think they are protected, only to find out later just how at risk they were.

Diversification is the holy grail of portfolio safety.

Many investors think they are diversified in every which way. They believe they are as protected as is reasonably possible. You may even count yourself among that group. If, however, you answer “yes” to any of the following questions, or if you are just getting started, I urge you to read on.

• Did your portfolio take a huge hit in the 2008 downturn?
• Was your portfolio streaking to new highs until the metals prices came down a couple years ago?
• Do oil price fluctuations have a major impact on your portfolio?
• When interest rates tanked in the fall of 2008, did a major portion of your bonds and CDs get called in?
• Are you nervous before each meeting of the Federal Reserve, wondering how much your portfolio will fluctuate depending on what they say?
• Has your portfolio grown but your buying power been reduced by inflation?
• Do you still have a tax loss carry forward from a stock you sold more than three years ago?

There are certain lessons most of us learn the hard way—through trial and error. But that can be very expensive. Ask anyone who has a loss carry forward and they will tell you that the government is your business partner when you are winning. When you are losing, you are on your own.

The old saying rings true here: “When the student is ready to learn, the teacher shall appear.” Sad to say, for many investors that happens after they have taken a huge hit and are trying to figure out how to prevent another one.

Alas, there is an easier way. Anyone who has tried to build and manage a nest egg will agree it is a long and tedious learning experience. The key is to get educated without losing too much money in the meantime.

Avoid Catastrophic Losses

The goal of diversification is to avoid catastrophic losses. In the past, we’ve mentioned correlation and shared an index related to our portfolio addition. The scale ranges from +1 to -1. If two things move in lockstep, their correlation rates a +1. If the price of oil goes up, as a general rule the price of oil stocks will also rise.

If the two things move in the opposite direction (a correlation of -1), we can also predict the results. If interest rates rise, long term bond prices will fall and generally so will the stocks of homebuilders. At the same time, a correlation of zero means there is no determinable relationship. If the price of high grade uranium goes up, more than likely it will not affect the market price of Coca Cola, ticker $KO, stock. So, your goal should be to minimize the net correlation of your portfolio so no single event can negatively impact it catastrophically.

General Market Trends

An investor with mutual funds invested in Large Cap, Mid Cap, and Small Cap stocks may think he is well diversified with investments in over 1,000 different companies. Ask anyone who owned a stable of stock mutual funds when the market tumbled in 2008 and they will tell you they learned a lesson.

Mr. Market is not known to be totally rational and many have lost money due to “guilt by association.” When the overall stock or bond market starts to fall, even the best managed businesses are not immune to some fallout. While the Federal Reserve has pumped trillions of dollars into the system, there is no guarantee the market will rebound as quickly as it has in the last five years. The market tanked during the Great Depression and it took 25 years to return to its previous high.

If you listen to champions of the Austrian business cycle theory, they will tell you the longer the artificial boom, the longer and more painful the eventual bust. Mr. Market can dish out some cruel punishment.
Diversification is indeed the holy grail, but there are some risks which diversification cannot mitigate entirely. No matter how hard you try to fortify your bunker, sooner or later we will learn of a bunker buster. There are times when minimizing the damage and avoiding the catastrophic loss is all anyone can do.

Sectors

Allocating too much of your portfolio to one sector can be dangerous. This is particularly true if a single event can happen that could give you little time to react. While no one predicted the events of September 11, people who held a lot of airline stocks took some tough losses. Guilt by association also applied here. After September 11, the stocks of the best-managed airlines, hotels, and theme parks took a downturn.

When the tech bubble and real estate bubble burst, the stock prices of the best-run companies dropped along with the rest of the sector, leaving investors to hope their prices would rebound quickly.

Geography

One of the major factors to consider when investing in mining and oil stocks is where they are located. It is impossible to move a gold mine or an oil well that has been drilled. Many governments are now imposing draconian taxes on these companies, which negatively impacts shareholders. In some cases, this can be a correlation of -1. If an aggressive government is affecting a particular oil company, other companies in different locations may have to pick up the slack and their stock may rise in anticipation of increased sales.

Many governments around the world have become very aggressive with environmental regulation, costing the industry billions of dollars to comply. If you want to invest in companies that burn or sell anything to do with fossil fuels, you would do well to understand the political climate where their production takes place.
Investors who prefer municipal bonds must make their own geographical rating on top of the ratings provided for the various services. States like Michigan and Illinois are headed for some rough times. I wouldn’t be lending any of them my money in the current environment no matter what the interest rate might be.

Currency Issues

Inflation is public enemy number one for seniors and savers. One of the advantages of currencies is they always trade in pairs. If one currency goes up, another goes down. If the majority of your portfolio is in one currency, you are well served to have investments in metals and other vehicles good for mitigating inflation.

Tim Price sums it up this way in an article posted on Sovereign Man:

“Why do we continue to keep the faith with gold (and silver)? We can encapsulate the argument in one statistic.

“Last year, the US Federal Reserve enjoyed its 100th anniversary. … By 2007, the Fed’s balance sheet had grown to $800 billion. Under its current QE program (which may or may not get tapered according to the Fed’s current intentions), the Fed is printing $1 trillion a year. To put it another way, the Fed is printing roughly 100 years’ worth of money every 12 months. (Now that’s inflation.)”

It is difficult to determine when the rest of the world will lose faith in the U.S. dollar. Once one major country starts aggressively unloading our dollars, the direction and speed of the tide could turn quickly.

Interest-Rate Risk

The Federal Reserve plays a major role in determining interest rates. Basically they have instituted their version of price controls and artificially held interest rates down for over five years. Interest-rate movement affects many markets: housing, capital goods, and some aspects of the bond markets. While it also makes it easier for businesses to borrow money, they are not likely to make major capital expenditures when they are uncertain about the direction of the economy.

While holders of long term, high interest bonds had an unexpected gain when the government dropped rates, their run will eventually come to an end as rates rise. Duration is an excellent tool for evaluating changes in interest rates and their effect on bond resale prices and bond funds. (See our free special report Bond Basics, for more on duration.)

While interest rates have been rising, when you factor in duration there is significant risk, even with the higher interest offered for 10- to 30-year maturities. Again, having a diversified portfolio with much shorter term bonds helps to mitigate some of the risk.

Risk Categories of Individual Investments

While investors have been looking for better yield, there has been a major shift toward lower-rated (junk) bonds. Many pundits have pointed out that their default rate is “not that bad.”

At the same time, the lure of highly speculative investments in mining, metals, and start-up companies with good write-ups can be very appealing. There is merit to having small positions in both lower-rated bonds and speculative stocks because they offer terrific potential for nice gains.

So What Can Income Investors Do?

There are a number of solid investments out there that offer good return, with a minimal amount of risk exposure and that won’t move because of an arbitrary statement by the Fed. It’s not always easy to find them, but there is hope for people wondering what to do now that all of the old adages about retirement investing are no longer true.

There are three important facets of a strong portfolio: income, opportunities and safety measures. Miller's Money Forever helps guide you through the better points of finance, and helps replace that income lost in our zero-interest-rate world—with minimal risk.

This is where the value of one of the best analyst teams in the world comes into focus. We focus on our subscribers’ income-investing needs, and I challenge our analysts to find safe, decent-yielding, fixed-income products that will not trade in tandem with the steroid-induced stock market—or alternatively, ones that will come back to life quickly if they do get knocked down with the market. They recently showed me seven different types of investments that met my criteria and still withstood our Five Point Balancing Test.

My peers are of having holes blown in their retirement plans. While nuclear bomb shelter safe may be impossible, we still want a bulletproof plan. This is what we’ve done at Money Forever: built a bulletproof, income generating portfolio that will stand up to almost anything the market can throw at it.

It is time to evolve and learn about the vast market of income investments safe enough for even the most risk-wary retirees. Some investors may want to shoot for the moon, but we spent the bulk of our adult lives building our nest eggs; it’s time to let them work for us and enjoy retirement stress free. Learn how to get in, now.

The article What Is Worse Than Being at Risk? was originally published at Millers Money

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Marc Faber: Don’t Keep Your Gold and Silver in the U.S.

Gloom, Boom and Doom Report publisher Marc Faber discusses the fragile state of the U.S. and global financial systems. How rising inflation will affect the average American. How soon the bubble will burst and why gold and silver will triumph.  

 

Here are a few highlights:

 

“The U.S. is a country that likes to create trouble, but they don’t like to clean up things.”

“We’ve now been five years into the bull market and the U.S. economy bottomed out in June 2009. We already had a crack up boom—not in the economy of the typical household, but in the economy of the "super well to do people", whose asset prices rose dramatically and as a result created a huge wealth inequality.”

“My view would be that we have already printed so much money, and to accelerate it will be bringing about numerous other problems, so my time frame is that the [bubble], maximum, will burst in three years’ time.”

“Once the collapse happens, the power of central banks will be curtailed greatly because people will realize who brought along first the Nasdaq bubble in 1999: The Federal Reserve. Who brought about the housing bubble between 2001 and 2007? The Federal Reserve. And who is bringing now along another great credit bubble and asset bubble? The Federal Reserve.”

“I don’t think that anything is very cheap, but if I have to compare different asset prices, say real estate, stocks, bonds, commodities, gold, art, and so forth—and old cars—then I think that gold and silver [are] relatively inexpensive because they have had big corrections already, and you should not forget that the global bond market now is over $100 trillion.”

The article Don’t Keep Your Gold and Silver in the US, Says Marc Faber was originally published at Casey Research

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International Fight Club

By Grant Williams

Sometimes the sand shifts beneath your feet without your realizing it. Other times you can see it happening.

In November 1975, at a summit meeting in the picturesque Château de Rambouillet near Paris, leaders of the six richest industrial powers gathered to form a rather exclusive, though completely informal, little club.

Takeo Miki, Prime Minister of Japan; President Gerald Ford of the United States; the United Kingdom’s PM, Harold Wilson; West German Chancellor Helmut Schmidt; and Aldo Moro, Prime Minister of Italy, joined Valéry Giscard d’Estang, the French President, in establishing what was tagged the “Group of Six” or, as it would become known in today’s AOW (abbreviation obsessed world), the G-6.

A year later, upset at being left out of the club, Canada applied for and was granted membership after a month long pledge drive in which Prime Minister Pierre Trudeau had to shotgun a six pack of Molson, ride a moose bareback through the streets of Montreal, and ring the doorbell at the White House and run away.

Thus was borne the Group of Seven (G-7 — see how this works? Pretty clever, huh?).

The G-7 would meet informally (at enormous taxpayer expense) in a few dive bars like the Dorado Beach Resort in Puerto Rico, the Schaumburg Palace in Bonn, the Akasaka Palace in Tokyo, and the San Giorgio Maggiore in Venice; and at these gatherings the attendees would eat gourmet meals, quaff the finest wines, and discuss how to make the world a better, fairer place ….

Anyway, the little club remained closed to outsiders until, in 1997, UK PM Tony Blair and US President Bill Clinton invited Russian President Boris Yeltsin to pop along to Naples to observe the G-7 on the understanding that full membership in the club would be forthcoming.

To nobody’s surprise, in 1998 Russia participated in its first informal gathering, and, hey presto, the club was now....? Come on....? Yes, you’ve got it, the G-8!

Among its members, in 2012 the G-8 accounted for 50.1% of nominal global GDP:

Source: United Nations

The G-8 essentially encompasses the top third of the world….

Source: Wikipedia

Anyway, amidst the ongoing turmoil in and around Ukraine and in amongst the threats and counter-threats this past week, was a movement, led by Britain’s David Cameron, to punish Russia’s President, Vladimir Putin, by telling him he was no longer part of this very exclusive club:

(UK Daily Telegraph): The Group of Seven big economies (G7) should cancel a meeting with Russia in June, British Prime Minister David Cameron said on Monday as world leaders kicked off a two-day nuclear security summit in The Hague.

“We should be clear there’s not going to be a G8 summit this year in Russia,” Mr Cameron told reporters ahead of a hastily-convened meeting with other leaders of the G7 — a group of industrialised nations that excludes Russia, which joined in 1998 to form the G8.

The other six members of the G-7 rallied round Cameron and agreed that the upcoming summit in Sochi, scheduled for June, would be moved to the bright lights of Brussels and Russia would be excluded — though they were at pains to point out that the exclusion would be temporary.

Having been slapped across the back of the legs, it was time for Putin to make the promises necessary to reingratiate himself with the giants of the G-7, like François Hollande, who talked tough as Russian troops casually wandered into sensitive military installations in Crimea, meeting precisely zero resistance:

(Reuters): “We have to also think about other sanctions if there is an escalation,” French President Francois Hollande said before the summit. “If there are illegitimate claims, if there are troop operations, if there are threats, then there will be other sanctions.”

However, just when the G-7 had Vlad the Invader right where they wanted him, he outmaneuvered them in a manner that could potentially shift those sands I was talking about in previously unfathomable ways….

Click here to continue reading this article from Things That Make You Go Hmmm…

A free weekly newsletter by Grant Williams, a highly respected financial expert and current portfolio and strategy advisor at Vulpes Investment Management in Singapore.

The article Things That Make You Go Hmmm: Fight Club was originally published at Mauldin Economics

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SP500 ETF Trading Strategies & Plan of Attack for This Week

Index ETF Trading Strategies: Stocks have kick started this week with a 0.85% pop in price but the big question is if the market can hold up. Last week stocks repeatedly gap higher and sold off with strong volume telling us that institutions are slowing phasing out of stocks (distribution selling) unloading shares into strength and passing them onto the a average investor to be left holding bag.

I want to show you a couple charts which show the price action, volume and money flow of the SP500 so you have a visual of what I am talking about.

30 Minute Intraday SP500 Chart – ETF Trading Strategies

In the chart below you can see the price gaps followed by selling. Why is this important? It is important because during a down trend the market makers and big money plays who have the money and tools to manipulate the markets will allow the market drift higher or they will run price up in overnight or premarket trading when volume is light. Once the 9:30am ET opening bell rings volume and liquidity spike which allows the big money player to sell remaining long positions and or add to short positions they have.

If you look at the blue on balance volume line at the bottom of the chart you can clearly see that more contracts are being sold than bought which is typically an early warning sign that the market is about to fall farther.


 

Automated Trading System – 30 Minute ES Futures Chart

Below is a marked up screen shot of my automated trading system which I use for timing both futures and ETF trading strategies. The color coded bars tell you the market trend along with the strength of buyers and sellers.

When you couple market cycles, trends, volume/money flow, along with chart patterns we can forecast and trade markets with a high degree of accuracy in terms of market direction and timing.


 
My Index ETF Trading Strategies Conclusion:
 
Just to be clear on the current market trend and my overall outlook let me explain a little more. Overall, the broad stock market remains in an uptrend. Thursday and Friday of last week we started getting orange bars on the chart telling us that cycles, volume, and momentum are now neutral. It’s 50/50 on which way the market will go from here, so until the market internals (cycles, volume, breadth) push the odds in our favor enough for a short sell trade or a new long entry we will not add new positions to our portfolio.

It is important to understand that nearly 75% of stocks/investments move with the broad market. So we don’t want to add more long positions when the odds are not in favor of higher prices. Trading in general is not hard to do, but creating, following, executing properly money and position management is. If you have trouble with following or creating an ETF trading strategy you can have my ETF trading system for rising, falling and sideways markets traded automatically in your trading account.

Learn more here about my Automated Trading Systems

See you in the market! 
Chris Vermeulen



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Inflation Is Coming, What to Do NOW

By Jeff Clark, Senior Precious Metals Analyst

We’ve all heard of the inflationary horrors so many countries have lived through in the past. Third world countries, developing nations, and advanced economies alike—no country in history has escaped the debilitating fallout of unrepentant currency abuse. And we expect the same fallout to impact the U.S., the EU, Japan, China—all of today’s countries that have turned to the printing press as a solution to their economic woes.


Now, it seems obvious to us that the way to protect one’s self against high inflation is to hold one’s wealth in gold… But did citizens in countries that have experienced high or hyperinflation turn to gold in response? Gold enthusiasts may assume so, but what does the data actually show?

Well, Casey Metals Team researcher Alena Mikhan dug up the data. Here’s a country-by-country analysis…...

Brazil

Investment demand for gold grew before Brazil’s debt crisis and economic stagnation of the 1980s. However, it really took off in the late ‘80s, when already-high inflation (100-150% annually) picked up steam and hit unsustainable levels in 1989.

Year	Inflation	Investment demand (tonnes)
1986	167.8%	20.0
1987	218.5%	42.8
1988	554.2%	61.5
1989	1,972%*	86.5
1990	116.2%**	-74

Source: The International Gold Trade by Tony Warwick-Ching, 1993; inflation.eu
*Measured from December to December
**Year-end rate

During this period, investment demand for bullion skyrocketed 333%, from 20 tonnes in 1976 to 86.5 tonnes in 1989.

And notice what happened to demand when inflation began to reverse. Substantial liquidations, showing demand’s direct link to inflation.

Indonesia

Indonesia was hit by a severe economic crisis in 1998. The average inflation rate spiked to 58% that year.

Year	Inflation	Investment demand (t)
1997	6.2%	11.5
1998	58.0%	22.5
1999	24.0%	11.0
2000	3.7%	8.5

Sources: World Gold Council, inflation.eu

Gold demand doubled as inflation surged. It’s worth pointing out that investment demand in 1997 was already at a record high.

Also, total demand in 1999 reached 120.8 tonnes (not just demand directly attributable to investment), 18% more than in pre-crisis 1997. But overall, once inflation cooled, so again did gold demand.

India

While India has a traditional love of gold, its numbers also demonstrate a direct link between demand and rising inflation. The average inflation rate in 1998 climbed to 13%, and you can see how Indians responded with total consumer demand. (Specifically investment demand data, as distinct from broader consumer demand data, is not available for all countries.)

Year	Inflation	Consumer demand* (t)
1996	8.9%	507
1997	7.2%	688
1998	13.1%	774
1999	4.8%	730

Sources: World Gold Council, inflation.eu
*Includes net retail investment and jewelry

Gold demand hit a record of 774.4 tonnes, 13% above the record set just a year earlier. In fairness, we’ll point out that gold consumption was also growing due to a liberalization of gold import rules at the end of 1997.

When inflation cooled, the same pattern of falling gold demand emerged.

Egypt, Vietnam, United Arab Emirates (UAE)

Here are three countries from the same time frame last decade. Like India, we included jewelry demand since that’s how many consumers in these countries buy their gold.

Year	Egypt		Vietnam		UAE
	Inflation	Consumer demand (t)	Inflation	Consumer demand (t)	Inflation	Consumer demand (t)
2006	6.5%	60.5	7.5%	86.1	10%	96.0
2007	9.5%	68.5	8.3%	77.5	14%	107.3
2008	18.3%	76.8	24.4%	115.8	20%	109.5
2009	11.9%	58.4	7.0%	73.3	1.6%	73.9

Sources: World Gold Council, indexmundi.com

Egypt saw inflation triple from 2006 to 2008, and you can see consumer demand for bullion grew as well. Even more impressive is what the table doesn’t show: Investment demand grew 247% in 1998 over the year before. Overall tonnage was relatively modest, though, from 0.7 to 2.5 tonnes.

Vietnam and the United Arab Emirates saw similar patterns. Gold consumption increased when inflation peaked in 2008. Again, it was investment demand that saw the biggest increases. It grew 71% in Vietnam, and 27% in the United Arab Emirates.

And when inflation subsided? You guessed it: Demand fell.

Japan

Prime Minister Shinzo Abe’s plan to kill deflation pushed Japan’s consumer price inflation index to 1.2% last year—still low, but it had been flat or falling for almost two decades, including 2012.

Year	Inflation	Consumer demand (t)
2012	-0.1%	6.6
2013	1.2%	21.3

In response, demand for gold coins, bars, and jewelry jumped threefold in the Land of the Rising Sun.

One of the biggest investment sectors that saw increased demand, interestingly, was in pension funds.

Belarus

Unlike many of the nations above, citizens from this country of the former Soviet Union do not have a deep-rooted tradition for gold. However, in 2011, the Belarusian ruble experienced a near threefold depreciation vs. the U.S. dollar. As usual, people bought dollars and euros—but in a new trend, turned to gold as well.

We don’t have access to all the data used in the tables above, but we have firsthand information from people in the country. In the first quarter of 2011, just when it became clear inflation would be severe, gold bar sales increased five times compared to the same period a year earlier. In March alone that year, 471.5 kg of gold (15,158 ounces) were purchased by this small country, which equaled 30% of total gold sales, from just one year earlier. Silver and platinum bullion sales grew noticeably as well.

The “gold rush” didn’t live long, however, as the central bank took measures to curb demand.

Argentina

Argentina’s annual inflation rate topped 26% in March last year, which, according to Bloomberg, made residents “desperate for gold.” Specific data is hard to come by because only one bank in the country trades gold, but everything we read had the same conclusion: Argentines bought more gold last year than ever before.

At one point, one bank, Banco Ciudad, even tried to buy gold directly from mining companies because it couldn’t keep up with demand. Some analysts report that demand has continued this year but that it has shown up in gold stocks.

What to Do—NOW

History clearly shows there is a direct link between inflation and gold demand. When inflation jumps, or even when inflation expectations rise, investors turn to gold in greater numbers. And when gold demand rises, so does its price—you can guess what happens to gold stocks.

With the amount of money the developed countries continue to print, high to hyperinflation is virtually inevitable. We cannot afford to believe in free lunches.

The conclusion is inescapable: One must buy gold (and silver) now, before the masses rush in. The upcoming inflationary storm will encompass most of the globe, so the amount of demand could push prices far higher than many think—and further, make bullion scarce.

Your neighbors will soon be buying. We suggest beating them to the punch.

Remember, gold speaks every language, is highly liquid anywhere in the world, and is a proven store of wealth over thousands of years.

But what to buy? Where? How?

We can help. With a subscription to our monthly newsletter, BIG GOLD, you’ll get the Bullion Buyers Guide, which lists the most trustworthy dealers, thoroughly vetted by the Metals team, as well as the top medium- and large-cap gold and silver producers, royalty companies, and funds.

Normally I’d suggest that you try BIG GOLD risk free for 3 months, but right now, I can offer you something even better: ALL EIGHT of Casey’s monthly newsletters for one low price, at a huge 55% discount.

It’s called the Casey OnePass and lets you profit from the huge variety of investment opportunities we here at Casey Research are seeing in our respective sectors right now—from precious metals to energy, technology, big-picture trend investing, and income investing.

Click here to find out more. But hurry—the "Casey OnePass" offer expires this Friday, April 4.

The article Inflation Is Coming, What to Do NOW was originally published at Casey Research

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Why Gold Is Falling and a Gold Forecast You May Not Like

The bitter truth about what may happen to gold is not all that exciting and likely don’t want to know, but you need to understand what is unfolding as we speak…..

Long story short, the prices of bonds look as though they are about to rally once again. Mounting fears of a stock market correction has money flowing into bonds which in turn will drive interest yields lower yet gain.

But the BIG PICTURE of what he FED said the other week about how they plan to raise rates in 2015 and cut QE down to $55 billion per month hurts the long term outlook for gold.

This news may not sound that important, it actually is and undermines the price of miners, silver and gold in a big way. Find out why gold is falling and the threat that could trigger a much larger meltdown in the long run with my gold forecast video.



Chris Vermeulen
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U.S. Government Is Unaffordable and Unsustainable, Says David Walker

By David Walker

Former Comptroller General of the United States David Walker talks about the trouble with Obamacare and the sky high national debt. 

Just for starters he covers  how much to spend on national defense and outlines his top 3 reforms to fix the U.S. government.

Want more insightful talk on your money and investments? Subscribe now to Sound Money in your email, in iTunes, or via RSS. Email iTunes RSS

Here are a few highlights:

“America can definitely be made great again. It’s not too late, but what we need is a wakeup call, a call to action and a specific course correction to try to be able to make sure that we don’t repeat history.”

“President Obama promised … that he was going to be a uniter rather than a divider, and unfortunately, he hasn’t done that. Our financial condition today is much worse than when President Obama took office.

Frankly, from George Washington, who was our first president, to William Jefferson Clinton, who was our 42^nd president, we only accumulated $5.5 trillion in debt—and now we’re up to $17.5 trillion.”

“The government is going to always do more for the poor, for the disabled, and for the military, but … promises way too much and it subsidizes way too many people, and the result of that is that it creates a system that is unaffordable and unsustainable.”

“What a lot of people don’t realize is built into the Affordable Care Act, is a bailout provision for insurance companies. So that taxpayers are probably going to be on the hook for, you know, some large payments due to meet those guarantees.”

The article US Government Is Unaffordable and Unsustainable, Says David Walker was originally published at Casey Research

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Understanding Covered Calls

By Dennis Miller

The strategy I’m writing about today is one of my favorite, guaranteed moneymakers. These are trades we can all easily make, requiring no capital outlay and guaranteed to make a profit or you don’t make them. What’s the catch? We might occasionally find ourselves lamenting how much more money we might have made.


Experienced investors have likely figured out that I’m talking about a stock option called a “covered call.” Buying options is for speculators, and that’s not what I’m talking about today. I want to show you the one and only option trade that meets my stringent criteria for comfort.
Covered calls:

• Are easily understood;
• Are easy to implement;
• Require no market timing to make your predetermined profit; and
• Require minimal time for investors to manage.

In addition, you can calculate your profit clearly at the time of the trade (if there’s no hefty gain, you pass on it); the risks are financially and emotionally manageable; and the upside potential is excellent with covered calls. Let’s begin with the boilerplate stuff first before we discuss strategy.

There’s an options market that allows people to buy and sell options on stocks. Speculators have made millions of dollars trading options without owning a single share of stock. That’s the wrong place to be with your retirement nest egg. I’m going to show you how an average investor with an online brokerage account can supplement his income in a safe, easy, responsible, and conservative manner.

Let’s start with a basic premise: money is consistently made on the sell side of the transaction. Selling one type of option is the only strategy that will meet our stringent criteria.

Before we proceed, here’s a need-to-know glossary for covered calls:

Stock option. An option is a right that can be bought and sold. There are markets for trading options in an orderly manner. Two transactions may occur between the buyer and seller. The first is the transaction when the right (option) is sold. The second transaction is “optional” and at the discretion of the buyer. If the buyer exercises his right (option), the seller is required to complete an agreed-upon stock transaction. Today we’re focusing on covered call options.

Covered Calls. When you sell a covered call, the buyer purchases the right to buy a certain number of shares of stock which you own, at an agreed upon (strike) price, at any time before the option expires (known as the expiration date). The option buyer is not obligated to buy your stock; he has the right to do so. You’re obligated to sell the stock if the buyer exercises the option. The term for this is your stock gets “called away.” Regardless, you keep the money you were paid when you sold your option.

There are four elements to an option transaction:

1. the price of the option in the market (what you can buy or sell it for);
2. the number of contracts (each contract is 100 shares);
3. the price of the underlying stock (referred to as strike price); and
4. the expiration date.

Option price. This is the price the option is bought or sold for. This changes as the price of the underlying stock moves in the market and the time frame moves closer to the expiration date. Readers will see that there are two prices: “bid” and “asked,” just like stocks. When you sell an option, this completes the first part of the transaction. The money changes hands and is yours to keep, regardless of what happens later. Cha-ching!

Strike price. This part of the transaction is agreed upon when the option is bought/sold. Let’s assume the buyer purchased a call (a right to your stock) at a strike price of $55/share. Should the buyer choose to exercise his option, the buyer pays you $55/share, and you (through your broker) deliver the stock, regardless of the current market price of the stock.

Expiration date. Options generally expire on the third Friday of every month. When looking at the options trading platform on any major stock, you’ll find options available for several months in advance. You’ll notice that the longer the remaining time, the higher the price of the option.

At the time the stock option is bought/sold, all of the elements above are agreed upon. The buyer has until the expiration date to exercise his option. The numbers of shares and selling price have already been determined. If your stock is called away, you’ll see the cash come in to your brokerage account, and the shares will automatically be delivered to the buyer.

Never sell a call option without owning the underlying stock; it’s much too risky for your retirement nest egg.
Option contract. An option contract is for 100 shares of the underlying stock. Options are sold in contracts, and the prices are quoted per share. For example, if you see an option price of $1.15, the contract will cost $115 ($1.15 x 100 shares). If a buyer/seller wants to have an option on 500 shares, he buys five contracts.

There are two types of options: puts and calls. We’re going to discuss the only option strategy that meets our stringent, conservative criteria: selling a covered call.

Why would an investor buy a call option? Buyers of call options are generally speculators who believe that a stock will appreciate above the strike price before the option expires. If they guess right, they can make a lot of money.

The vast majority of call options expire worthless. The rules are simple. Don’t sell an option unless you own the underlying stock. (This is referred to as a “naked call”.) Don’t buy options—period!

A Savvy Strategy

We’ll use a fictional company – ABC Products – for an example. Say we bought the stock in October 2012 for $40; the market price one year later (in November 2013) was $55/share. Why would we want to sell a covered call?

In November, ABC was $55/share. We’ll say its current dividend is $0.55/share. The March call option at a strike price of $57 is selling for $1.10/share—twice as much as the current dividend.

Assume that on December 20, you either called your broker or went online and brought up ABC in your trading platform. You would have seen the current bid and asked prices. Assume it sold for $1.10/share.
Now, one of four things could have happened:

1. The stock didn’t go over the $57 strike price, so the stock was not called away. In approximately 90 days, you’d have received $0.55/share in dividends, plus $1.10 for the option, for a total of $1.65. You just added more than double the dividend to your yield without spending a penny more of your investment capital. What do we do when the option expires? Look for another juicy opportunity for the June options and do it again!
2. Let’s take the worst case scenario: the market tanked. You had a 20% trailing stop in place. You got stopped out at $44—$11/share lower than the November price. But wait a minute, what about the covered call? The value of the option would also have dropped and sold for mere pennies. If you got stopped out of the stock, you could have bought back the option at the same time. For the sake of illustration, say you bought it back for $0.04. You netted $1.06/share profit. Instead of losing $11/share, your loss became $9.94. If you didn’t buy back your option, you’d have had huge risk exposure should the stock jump back up. It isn’t worth the risk, so you’d spend the few pennies it takes to close out your position.
3. You wanted to exit your position before the expiration date. If the stock rises above the strike price of the option, generally the price of the option will move right along with it. If the stock moved to $59/share, you would “buy to close.” The market price should be close to $2/share; however, that would be offset by the fact that you sold your stock for $59.00 share. If the stock remained stagnant or started to drop and you wanted to exit your position, the market price of the option would decline more rapidly. You’d likely buy back your option at a profit.
4. The most difficult situation emotionally is when the stock rises well above the strike price and gets called. Let’s assume that in March, ABC has appreciated to $59/share. Your option is called at $57 (the strike price). You make a profit of $2/share from the time you sold the option, plus the $1.10/share for the option and the $0.55 dividend, for a total of $3.65/share. For the 90-day time frame, you earned 6.3% on your money ($55/share), or 24.9% on an annualized basis, net of brokerage commission. Yet we’ll lament the fact that you could have made more.

In each case, you haven’t invested any more capital. You make 100% profit on the call in two cases. The worst case is you generally break even on the options should you want to exit early. In the vast majority of cases, selling covered calls is straight profit on top of your dividends.

Here are some guidelines:

• Sell covered calls for stocks you own and would gladly keep.
• Sell covered calls to expire after the dividends are paid.
• Sell covered calls at a strike price above the current market price of the stock, referred to as “out of the money.”
• Don’t lament the times your stock gets called. You took a nice profit, and there are plenty more opportunities out there.
• Use stocks that are heavily traded, as they are more liquid.
• To calculate gains for any stock and option price combination, please use our option calculator, which you can download here.

Selling selected covered calls is a great way to turbocharge yield without any additional investment. At the same time, it will mitigate a bit of risk. If you have a 20% trailing stop in place and the stock gets stopped out, your 20% will be offset by the profit you made on the option sale. While most investors are starved for yield, you can find yield in the safest and easiest manner possible.

Each month, we look at the Miller’s Money Forever portfolio and recommend and track covered calls on some of our positions. If you're not a current subscriber, I highly recommend taking advantage of our 90-day, no-risk offer. Sign up at the current promotional rate of $99/year, and download my book and all of our special reports—really take your time and look us over. If within the first 90 days you feel we're not for you, feel free to cancel and receive a 100% refund, no questions asked. You can still keep the material as our thank-you for taking a look. Click here to subscribe risk-free today.

The article Covered Calls was originally published at Millers Money

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