Seven Questions Gold Bears Must Answer

By Jeff Clark, Senior Precious Metals Analyst

A glance at any gold price chart reveals the severity of the bear mauling it has endured over the last three years. More alarming, even for die hard gold investors, is that some of the fundamental drivers that would normally push gold higher, like a weak U.S. dollar, have reversed.

Throw in a correction defying Wall Street stock market and the never ending rain of disdain for gold from the mainstream and it may seem that there’s no reason to buy gold; the bear is here to stay.
If so, then I have a question. Actually, a whole bunch of questions.

If we’re in a bear market, then…..

Why Is China Accumulating Record Amounts of Gold?

Mainstream reports will tell you Chinese imports through Hong Kong are down. They are.
But total gold imports are up. Most journalists continue to overlook the fact that China imports gold directly into Beijing and Shanghai now. And there are at least 12 importing banks—that we know of.
Counting these “unreported” sources, imports have risen sharply. How do we know? From other countries’ export data. Take Switzerland, for example:

So far in 2014, Switzerland has shipped 153 tonnes (4.9 million ounces) to China directly. This represents over 50% of what they sent through Hong Kong (299 tonnes).

The UK has also exported £15 billion in gold so far in 2014, according to customs data. In fact, London has shipped so much gold to China (and other parts of Asia) that their domestic market has “tightened significantly” according to bullion analysts there.

Why Is China Working to Accelerate Its Accumulation?

This is a growing trend. The People’s Bank of China released a plan just last Wednesday to open up gold imports to qualified miners, as well as all banks that are members of the Shanghai Gold Exchange. Even commemorative gold maker China Gold Coin could qualify to import bullion. Not only will this further increase imports, but it will serve to lower premiums for Chinese buyers, making purchases more affordable.

As evidence of burgeoning demand, gold trading on China’s largest physical exchange has already exceeded last year’s record volume. YTD volume on the Shanghai Gold Exchange, including the city’s free trade zone, was 12,077 tonnes through October vs. 11,614 tonnes in all of 2013.

The Chinese wave has reached tidal proportions—and it’s still growing.

Why Are Other Countries Hoarding Gold?

The World Gold Council (WGC) reports that for the 12 months ending September 2014, gold demand outside of China and India was 1,566 tonnes (50.3 million ounces). The problem is that demand from China and India already equals global production!

India and China currently account for approximately 3,100 tonnes of gold demand, and the WGC says new mine production was 3,115 tonnes during the same period.

And in spite of all the government attempts to limit gold imports, India just recorded the highest level of imports in 41 months; the country imported over 39 tonnes in November alone, the most since May 2011.

Let’s not forget Russia. Not only does the Russian central bank continue to buy aggressively on the international market, Moscow now buys directly from Russian miners. This is largely because banks and brokers are blocked from using international markets by US sanctions. Despite this, and the fact that Russia doesn’t have to buy gold but keeps doing so anyway.

Global gold demand now eats up more than miners around the world can produce. Do all these countries see something we don’t?

Why Are Retail Investors NOT Selling SLV?

SPDR gold ETF (GLD) holdings continue to largely track the price of gold—but not the iShares silver ETF (SLV). The latter has more retail investors than GLD, and they’re not selling. In fact, while GLD holdings continue to decline, SLV holdings have shot higher.

While the silver price has fallen 16.5% so far this year, SLV holdings have risen 9.5%.

Why are so many silver investors not only holding on to their ETF shares but buying more?

Why Are Bullion Sales Setting New Records?

2013 was a record-setting year for gold and silver purchases from the US Mint. Pretty bullish when you consider the price crashed and headlines were universally negative.
And yet 2014 is on track to exceed last year’s record-setting pace, particularly with silver…

• November silver Eagle sales from the US Mint totaled 3,426,000 ounces, 49% more than the previous year. If December sales surpass 1.1 million coins—a near certainty at this point—2014 will be another record-breaking year.

• Silver sales at the Perth Mint last month also hit their highest level since January. Silver coin sales jumped to 851,836 ounces in November. That was also substantially higher than the 655,881 ounces in October.

• And India’s silver imports rose 14% for the first 10 months of the year and set a record for that period. Silver imports totaled a massive 169 million ounces, draining many vaults in the UK, similar to the drain for gold I mentioned above.

To be fair, the Royal Canadian Mint reported lower gold and silver bullion sales for Q3. But volumes are still historically high.

Why Are Some Mainstream Investors Buying Gold?

The negative headlines we all see about gold come from the mainstream. Yet, some in that group are buyers…..

Ray Dalio runs the world’s largest hedge fund, with approximately $150 billion in assets under management. As my colleague Marin Katusa puts it, “When Ray talks, you listen.”

And Ray currently allocates 7.5% of his portfolio to gold.

He’s not alone. Joe Wickwire, portfolio manager of Fidelity Investments, said last week, “I believe now is a good time to take advantage of negative short-term trading sentiment in gold.”

Then there are Japanese pension funds, which as recently as 2011 did not invest in gold at all. Today, several hundred Japanese pension funds actively invest in the metal. Consider that Japan is the second-largest pension market in the world. Demand is also reportedly growing from defined benefit and defined contribution plans.

And just last Friday, Credit Suisse sold $24 million of US notes tied to an index of gold stocks, the largest offering in 14 months, a bet that producers will rebound from near six-year lows.

These (and other) mainstream investors are clearly not expecting gold and gold stocks to keep declining.

Why Are Countries Repatriating Gold?

I mean, it’s not as if the New York depository is unsafe. It and Ft. Knox rank as among the most secure storage facilities in the world. That makes the following developments very curious:

• Netherlands repatriated 122 tonnes (3.9 million ounces) last month.

• France’s National Front leader urged the Bank of France last month to repatriate all its gold from overseas vaults, and to increase its bullion assets by 20%.

• The Swiss Gold Initiative, which did not pass a popular vote, would’ve required all overseas gold be repatriated, as well as gold to comprise 20% of Swiss assets.

• Germany announced a repatriation program last year, though the plan has since fizzled.

• And this just in: there are reports that the Belgian central bank is investigating repatriation of its gold reserves.

What’s so important about gold right now that’s spurned a new trend to store it closer to home and increase reserves?

These strong signs of demand don’t normally correlate with an asset in a bear market. Do you know of any bear market, in any asset, that’s seen this kind of demand?

Neither do I.

My friends, there’s only one explanation: all these parties see the bear soon yielding to the bull. You and I obviously aren’t the only ones that see it on the horizon.

Christmas Wishes Come True…..

One more thing: our founder and chairman, Doug Casey himself, is now willing to go on the record saying that he thinks the bottom is in for gold.

I say we back up the truck for the bargain of the century. Just like all the others above are doing.

With gold on sale for the holidays, I arranged for premium discounts on SEVEN different bullion products in the new issue of BIG GOLD. With gold and silver prices at four-year lows and fundamental forces that will someday propel them a lot higher, we have a truly unique buying opportunity. I want to capitalize on today’s “most mispriced asset” before sentiment reverses and the next uptrend in precious metals kicks into gear. It’s our first ever Bullion Buyers Blowout—and I hope you’ll take advantage of the can’t-beat offers.

Someday soon you will pay a lot more for your insurance. Save now with these discounts.

The article 7 Questions Gold Bears Must Answer was originally published at casey research.

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Crude Oil Market Summary for Week Ending Friday December 5th

Crude oil futures in the January contract had a wild trading week continuing a bearish trend after settling last Friday around 66.15 basically going out at the same price today and if you are still short this market I would continue to place my stop loss above the 10 day high which currently stands at 77.02 risking around 1100 points or $11,000 per contract plus slippage and commission as this is a high risk trade at the current time.

However if you are not currently short this market I would sit on the sidelines and look for a better trade. The chart structure will start to improve dramatically starting on Monday as the risk will come down dramatically as the trend continues with gold and crude oil to the downside as the commodity markets as a whole remain bearish as the U.S dollar hit another 5 year high today so continue to play this to the downside as I think the oversupply issue worldwide will put a lid on prices here in the short term.

Eastern Europe and Russia are both heading into recession while the United States economy is looking very solid as consumers will definitely benefit from lower prices at the pump which should continue to put upward pressure on the equity markets in my opinion, however with OPEC deciding last week not to cut production this market should continue to move to the downside as the chart structure has started to improve, however there is extreme volatility in this market at the current time with high risk so move on and do not try to pick a bottom as I’m not bullish crude oil prices at all.
Trend: Lower
Chart Structure: Improving

This weeks crude oil market summary was provided by our trading partner Mike Seery. Get more of his calls on commodities....Just Click Here

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Russia and China’s Natural Gas Deals are a Death Knell for Canada’s LNG Ambitions

By Marin Katusa, Chief Energy Investment Strategist

In recent years, a number of Asian companies have been betting that Canada will be able to export cheap liquefied natural gas (LNG) from its west coast. These big international players include PetroChina, Mitsubishi, CNOOC, and, until December 3, Malaysian state owned Petronas.

However, that initial interest is decidedly on the wane. In fact, while the British Columbia LNG Alliance is still hopeful that some of the 18 LNG projects that have been proposed will be realized, it’s now looking less and less likely that any of these Canadian LNG consortia will ever make a final investment decision to forge ahead.

That’s thanks to the Colder War—as I explain in detail in my new book of the same name—and the impetus it’s given Vladimir Putin to open up new markets in Asia.

The huge gas export deals that Russia struck with China in May and October—with an agreed-upon price ranging from $8-10 per million British thermal units (mmBtu)—has likely capped investors’ expectations of Chinese natural gas prices at around $10-11 per mmBtu, a level which would make shipping natural gas from Canada to Asia uneconomic.

At these prices, not even British Columbia’s new Liquefied Natural Gas Income Tax Act—which has halved the post payout tax rate to 3.5% and proposes reducing corporate income tax to 8% from 11%—can make Canadian natural gas globally competitive.

These tax credits are too little, too late, because Canada is years behind Australia, Russia, and Qatar’s gas projects. This means there’s just too much uncertainty about future profit margins to commit the vast amount of capital that will be needed to make Canadian LNG a reality.

Sure, there are huge proven reserves of natural gas in Canada. It’s just been determined that Canada’s Northwest Territories hold 16.4 trillion cubic feet of natural gas reserves, 40% more than previous estimates.

But the fact is that Canada will remain a high-cost producer of LNG, and its shipping costs to Asia will be much higher than Russia’s, Australia’s, and Qatar’s. So unless potential buyers in Asia are confident that Henry Hub gas prices will stay below $5, they’re unlikely to commit to long-term contracts for Canadian LNG—or US gas for that matter—because compression and shipping add at least another $6 to the price.

Shell has estimated that its proposed terminal, owned by LNG Canada, will cost $40 billion, not including a $4 billion pipeline. As LNG Canada—whose shareholders include PetroChina, Korea Gas Corp., and Mitsubishi Corp.—admits, it’s not yet sure that the project will be economically viable. Even if it turns out to be, LNG Canada says it won’t make a final investment decision until 2016, after which the facility would take five years to build.

But investors shouldn’t hold their breath. It seems like Korea Gas Corp. has already made up its mind. It’s planning to sell a third of its 15% stake in LNG Canada by the end of this year.

And who can blame it? The industry still doesn’t have clarity on environmental issues, federal taxes, municipal taxes, transfer pricing agreements, or what the First Nations’ cut will be. And these are all major hurdles.

Pipeline permits are also still incomplete. The federal government still hasn’t decided if LNG is a manufacturing or distribution business, which matters because if it rules that it’s a distribution business, permitting is going to be delayed.

And to muddy the picture even further, opposition to gas pipelines and fracking is on the rise in British Columbia and elsewhere in Canada. While fossil fuel projects are under fire from climate alarmists the world over, Canadian environmentalists are also angry that increased tanker traffic through its pristine coastal waters could lead to oil spills.

Canada is now under the sway of radical environmental groups and think tanks like the Pierre Elliot Trudeau Foundation, which take as a given that Canada should shut down its tar sands industry altogether. For these people, there’s no responsible way to build new fossil fuel infrastructure.

Elsewhere, investors might expect money and jobs to do the talking, but Justin Trudeau’s Liberal Party, which has called for greenhouse gas limits on oil sands, is now leading the conservatives in the polls. (Just out of curiosity, does Trudeau plan on putting a cap on the carbon monoxide concentration from his marijuana agenda? But I digress.) If a liberal government is elected next year, it might adopt a national climate policy that would cripple gas companies and oil companies alike.

Some energy majors are already shying away from Canadian LNG. BG Group announced in October that it’s delaying a decision on its Prince Rupert LNG project until after 2016. And Apache Corp., partnered with Chevron on a Canadian LNG project, is seeking a buyer for its stake.

Not everyone is throwing in the towel. Yet. ExxonMobil—which is in the early planning phase for the West Coast Canada LNG project at Tuck Inlet, located near Prince Rupert in northwestern British Columbia—has just become a member of the British Columbia LNG alliance.

But Petronas was a key player. It was thought that the company would be moving ahead after British Columbia’s Ministry of Environment approved its LNG terminal, along with two pipelines that would feed it.

Instead, Petronas pulled the plug. We can’t know how many things factored into that decision nor whether it’s absolutely final. All the company would say is that projected costs of C$36 billion would need to be reduced before a restart could be considered. (That $36B figure includes Petronas’s 2012 acquisition of Calgary based gas producer Progress Energy Resources Corp., as well as the C$10 billion proposed terminal, a pipeline, and the cost of drilling wells in BC’s northeast.)

This latest blow leaves Canadian LNG development very much in doubt. In fact, most observers believe that Petronas’s move to the sidelines probably sounds the death knell for the industry, at least for the foreseeable future.
For more on how the Colder War is forever changing the energy sector and global finance itself, click here to get your copy of Marin’s New York Times bestselling book. Inside, you’ll discover more on LNG and how this geopolitical chess game between Russia and the West for control of the world’s energy trade will shape this decade and the century to come.

The article Russia and China’s Natural Gas Deals Are a Death Knell for Canada’s LNG Ambitions was originally published at casey research

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The Healthy Bull Market: Bah, Humbug!

By Tony Sagami

Are you a long term investor? Convinced that all you have to do is wait long enough to be guaranteed huge stock market profits? Take a look at the chart below of rolling 30 year returns of the S&P 500 and tell me if it affects your enthusiasm.

The reality is that stock market results vary widely depending on what your starting point is. For example, any investor who put $100,000 into the stock market 1954 was rewarded with roughly the same $100,000 30 years later in 1984.

Yup… 30 years in, and not a penny of profits.



With the stock market at all-time highs, you may find it hard to be pessimistic, but the stock market is doing as well as it’s ever done, with a rolling 30-year return of better than 400%.

How would you feel about earning 0% on your money for 30 years?

Could the stock market go even higher? Yes, it could—but the odds aren’t favorable after the QE fueled rally has pushed stocks to historically high valuations. High valuations? Despite what the mass media and the Wall Street crowd try to tell you, valuations are quite high.

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The most popular myth spouted on financial TV these days is the notion that the S&P 500 is trading at 19 times earnings. Baloney!

First, that 19 P/E is based on “forward” earnings, not trailing earnings. As unreliable as economists and self-serving analysts are, I’m surprised that anyone—especially you—believes anything they say.

Second, that forward looking earnings forecast is based on those 500 companies increasing their earnings by an average of 23% over the next 12 months. Yup… a 23% increase!

That’s extremely optimistic, but I think especially misplaced now that the steroid of quantitative easing is behind us. Consider this: everybody agrees that stocks responded extremely positively to quantitative easing, so doesn’t it make sense to be concerned now that the monetary punch bowl has been yanked away?

The first place to look for signs of waning enthusiasm are small-cap stocks. While the Dow Jones Industrial Average and the S&P 500 were setting all-time highs, the Russell 2000 wasn’t able to punch through its March, July, and September peaks.



This quadruple top looks like a formidable resistance level for small stocks and clear evidence that investors are reducing risk by rotating out of small-cap stocks and into big cap stocks.



Additionally, financial stocks are showing signs of exhaustion too. Healthy bull markets are often led by financial stocks, but the financials are lagging the major indexes now. That’s why I think last week’s 3.9% GDP print smelled fishy; some weak economic numbers are spelling trouble.

Durable Goods Orders Not So Good: The headline number for October durable goods orders was strong with a +0.4% increase, but if you back out the volatile transportation sales, the picture is a lot uglier. If you exclude transportation—because just a few $100 million jet orders can skew the numbers—the 0.4% gain turns into a 0.9% decrease.

By the way, orders for defense aircraft were up 45.3%, but orders for non defense aircraft orders were down 0.1% in October. If not for some big government orders, the results would be absolutely horrible!

Unemployment Claims Rise Despite Holiday Hiring: The job picture, which had been improving, showed some deterioration last week despite going into the busy holiday hiring season. Initial jobless claims jumped to 313,000, a 7.2% increase from last week as well as much higher than the 286,000 forecast. It also broke a 10-week streak of claims below 300,000.

Before You Cheer Cheap Oil: After OPEC agreed to keep production levels unchanged, the price of oil plunged by 7% on Friday to less than $68 a barrel. That’s good news for drivers, but oil’s falling prices (as well as those of other commodities) are a very bad sign for economic growth. Moreover, the energy industry has been one of the few industries producing good, high-paying jobs. Thus, low oil prices could turn that smile into a frown in no time.



The Bond Conundrum: The yield on 10 year Treasury bonds was as high as 3% earlier this year but dropped to 2.31 last Friday. If our economy were rocking as well as the 3.9% GDP rate suggests, interest rates should be rising… not falling like a rock.

The stock market may not fall out of bed tomorrow morning, but the holiday season for stock market investors looks like it may be more Scrooge than Santa Claus.

30 year market expert Tony Sagami leads the Yield Shark and Rational Bear advisories at Mauldin Economics. To learn more about Yield Shark and how it helps you maximize dividend income, click here.

To learn more about Rational Bear and how you can use it to benefit from falling stocks and sectors, click here.

The article Connecting the Dots: The Healthy Bull Market: Bah, Humbug! was originally published at mauldin economics

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Investors That Do Not Understand The Power Of Seven Will Lose Money in 2015

Investors and traders around the world continually search to find or increase their edge in the financial markets to boost profits. The next few months are going to be critical for investors because the number seven is now in play for the stock market.

What does this mean?

In magical lore seven is a magical number., While all numbers are ascribed certain properties and energies, seven is a number of power, a lucky number, a number of psychic and mystical powers, of secrecy and the search for truth. Seven is used 735 times in the bible and if you total up all words including “sevenfold” and “seventh” there is a total of 860 references.

The origin of seven’s power lies in the lunar cycle. The moon has four phases lasts about seven days. The Sumerians gave the week seven days. Life cycles on earth also have phases demarcated by seven, and there are seven years to each stage of human growth, seven colors to the rainbow, seven notes in the musical scale, seven petitions in the Lord’s Prayer, and seven deadly sins.

More importantly for investors the number seven and multiples of seven have a powerful influence on money. The U.S. stock market is now trading in the seventh year window and it should not be taken lightly. While I could go into a lot more detail about how I use seven in my algorithmic trading strategy to swing trade the S&P 500 index. This article focuses on the investing outlook.

I am fortunate enough that I have been trading since 1997 and have seen the how the stock market cycles affect human behavior and businesses specifically the financial newsletter industry which I have been involved in since the first day my trading career. The stock market appears to be nearing a critical turning point that will change the lives and behaviors of investors for years to come.

The good news is that I have experienced four of these turning points and human behavior shifts in my career before and we currently entering the fifth turning point. I feel obligated to share this valuable insight with those of you who read my work. The next major market move could have a dramatic impact on your wealth and retirement years.

Insight on Investor Behavior and Business

Being heavily involved in the financial newsletter industry I have not only seen but survived several of these major cycles which forced many newsletters to go out of business. The cycles at play here are the market trend and the behavior of traders and investors.

The combined forces of these two cycles are what cleanse the newsletter industry of poor quality services. It becomes almost impossible to obtain new clients without word of mouth/referrals from happy users and if the quality of the newsletter is poor, eventually they lack enough users to make it feasible to operate. Unfortunately it’s the brutal truth, and over the last couple years I am seeing newsletters and even to top trading magazines that have been around for decades closing their doors.

The business cycle can easily be explained by observing the chart below of the SP500 index. In short, when the stock market has been rising for six or more months investors start to become confident in that they can make money on their own. And in fact they can if they buy and hold during a bull market.

But what happens as the market continues to rise for many years is that more and more investors and traders realize they can make money on their own.  The longer the uptrend remains intact the less will need the help of a trading and investing newsletter making it difficult to get new customers in this highly competitive industry.

Currently investors are behaving almost identical to what I saw during 1999 – 2001, from 2006 – 2007, and now 2014 – 2015 market tops.

Did you notice anything with those market tops? They are 7 years apart…

Let’s now take a look at the best times in the business cycle where traders and investors are in desperate need of help and start subscribing to multiple paid financial newsletter services. The strongest times for business took place during 2002 – 2003, and again in 2008 – 2010. This is when investor not only lost most of their wealth, but their faith in how they invest, who they invest with, and the stock market as a whole.

Did you notice any these also? They are 7 years apart also…

 Investors 7 Year Financial Outlook

Those of you who follow me know that I do not pick market tops or bottoms. Rather I focus on identifying trends and cycles in the market and only trade and invest with the active confirmed trend.

You also know that trying to pick market tops and bottoms is a suckers game and a sure fire way to lose a lot of money and build a serious complex that the market is manipulated, not tradable, and that it may be time for you to give up on trading all together.

Well, I am here to say that the market is tradeable, and can generate traders and investors a boat load of money once you understand how and why it moves. Most importantly you need to understand money/position management and be patient for consistent long term gains.

Take a look at the chart below for a clear visual of 7 year cycle highs and lows at play.

 

While I do not invest based on this major seven year cycle I do actively trade a smaller market cycle which provides roughly 35 – 65 trades per year. This strategy allows me to profit during these major bull markets and also during the multi-year bear markets when the majority of investors are losing boat loads of their hard earned money.

The reason I do not invest in the seven year cycle is because the market can still have 30+% price swings within bull and bear markets and that type of volatility is beyond what I am comfortable with. Also because I can actively invest with my automated trading system so I don’t need to lift a finger or watch the stock market each day, week or month.

I hope you found this report useful in some way, and I ask that you share it with others.

Chris Vermeulen
www.The Gold & Oil Guy.com

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Weekly Crude Oil, Dollar and Gold Market Summary for Week Ending Friday November 28th

Crude oil futures in the January contract are down $6 a barrel as OPEC announced on Thanksgiving that they will not cut production as the trade was expecting 1 million barrels to be cut sending prices to a 5 year low with the next major level of support all the way back to May 24th of the year 2010 at 67.15 and I still do believe with OPEC and Saudi Arabia definitely wanting lower prices that they will get their wish as prices remain bearish in my opinion. Crude oil futures are trading far below their 20 and 100 day moving average telling you that trend is lower and if you’re still short this market I would place my stop loss above the 10 day high which currently stands at 77.83 which is around 1000 points or $10,000 risk per contract plus slippage and commission as the chart structure now has turned terrible. The chart structure before today’s activity was very solid as the 10 day high was very close to where prices were trading, however when you move $5 lower in one day that’s what’s going to happen. If you’re not short this market I would sit on the sidelines because I think the risk is too high but definitely do not try and pick a bottom because who knows how low prices can actually go. The U.S dollar continues its bullish momentum up another 60 points today also contributing to a weaker energy market as the world is awash with energy supplies at the current time and you have to remember in 2008 prices traded around $35 a barrel and that was with a weak U.S dollar so prices still can head lower.
Trend: Lower
Chart Structure: Terrible

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The U.S dollar is rallying sharply this Friday afternoon currently trading at 88.42 in the December contract as I’ve been recommending a bullish position in the U.S dollar while placing your stop loss below the 10 day low which currently stands at 87.23 risking around $1,200 dollars plus commission and slippage per contract as the chart structure is outstanding at the current time. The U.S dollar is trading above its 20 & 100 day moving average telling you that the trend is to the upside as crude oil prices are down nearly $5 which is really putting pressure on several of the foreign currencies such as the Canadian dollar which is down 150 points and I still do believe we’re in a longer-term secular bull market in the U.S dollar. The European countries look to head into recession as the trend is your friend in the commodity markets so continue to play this to the upside while placing the proper stop loss while using the proper amount of contracts risking only 2% of your account balance on any given trade in case you are wrong. The strong U.S dollar is pressuring many commodity prices to the downside as the next major resistance is at 88.51 which was the most recent high hit last week and I do think prices will continue to move higher as investors feel much safer buying the U.S dollar than buying any other currency which are all seemingly in turmoil at the current time.
Trend: Higher
Chart Structure: Excellent

Investors 7 Year Financial Outlook....Take a Look at a Clear Visual of 7 Year cycle Highs and Lows

Gold futures this Friday afternoon after the Thanksgiving holiday are sharply lower due to the fact that crude oil prices are down nearly $5 also pressuring the precious metals to the downside as gold in the February contract is currently trading down $29 at 1,167 after settling last Friday at 1,198 as I still remain neutral in this market as prices are trading above their 20 day but still below their 100 day moving average so avoid this market at the current time. In my opinion choppy markets are difficult to trade as the longer term downtrend line in gold is still intact in my opinion as a strong U.S dollar and S&P 500 continue to take money out of gold as the money flow continues to go into those 2 sectors as I still think there’s a possible retest of 1,130 in the month of December and if you remember in 2013 December was also a negative month to the downside as the stock market in my opinion will continue to climb higher throughout the rest of the year. The chart structure in gold is poor at the current time as prices have been choppy in recent weeks so look for a better market to trade and keep an eye on this and hopefully better chart structure will develop over the course of the next several weeks but I’m feeling that we will not be involved in the gold market until at least early 2015.
Trend: Mixed
Chart Structure: Poor

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How Does Your Game Plan for Crude Oil and Commodities Stack Up Against This

Our trading partner John Carter sent us this reminder this week. It addresses what's really on the table in the coming months and what you are going to miss out on if you don't take a few minutes and take advantage of what he has to say........Here's what John is saying.

With the markets closed I wanted to take the time to write you this important message. As you may know I've been a full time trader for the last 15 years.

A few years ago I founded Simpler Options to post my options trading ideas. In a short time it has become one of the largest and most recognized options research companies in the world. We serve over 100,000 subscribers in over 100 countries.

You may know about a few of my big trades. 

I caught the big move in oil last year:

I traded Tesla earlier this year to the tune of $1 million in one day:

But that's not why I'm emailing you. 

I reference the success and experience with trading only because there is an even bigger trading opportunity lurking. A once a decade shift in the market that will result in the next great wealth creation - for those that know about it.

What I am going to say you will not read anywhere else.  It flies in the face of every newsletter out there I know about.  In fact, I've already received dozens of hate mail. But just remember.....

Only a few people believed me last year when I said oil would go from $90 to $110 in just a few months. One person that believed me was billionaire Richard Branson.  I help him with Virgin Airlines hedge their oil:

Only a few people believed me about Tesla.

But, when the big trade happened the traders who had prepared themselves followed me into the trade. One of our clients made $250,000 on that one trade. And that brings us to today......

Big opportunities always disguise themselves in different clothes.  Not everyone can recognize the opportunity.  That is why other services are still speaking about doom and gloom.  This is not 2008 anymore. 

The fact is markets go through cycles.  There are major cycles and minor cycles. The market is at a crossroad between the end of a major bear market cycle since 2000.  And, the end of a minor bull market cycle since 2009.  

I'll explain the driver of this crossroad.  As for me, I am more certain about this once in a decade shift than I've been about anything else in my life. 

The Great American Revival

In short, I believe that Americans are about to see a major shift in the value of the dollar. We have gotten a glimpse of this since the summer.  The US dollar index went from 79.74 to as high as 88.44.  That is a huge move.  In the previous 2 years - 2012 & 2013 - the dollar moved only half as much. 

The dollar index impacts everything.

The commodity markets like gold, silver, and oil.  

The treasury markets.  

The stock markets around the world. 

They all rely on the U.S. Dollar. 

The dollar index impacts the price of gas at the pump.  Have you been noticing gas prices going down? Doesn't the extra 20 bucks you save at the pump feel good? In spite of the global economic crisis the dollar remains the world's reserve currency.

The bank of Japan is still printing money faster than any other country in the world.  Yet they are on the verge of another recession. The EU has rates at 0% and are speaking about ramping up the printing press.  China announced a surprise rate cut days ago! 

Meanwhile, the US Federal Reserve has been tightening the printing press. They are also talking of rate hikes next year. The exact opposite of what the next 3 largest economies in the world are doing!

The rise of the dollar and the opportunity is at its infancy.  In 2015 you can set you and your family up to be the recipient of the wealth shift.  Millions of people around the world will not see this coming and fall behind. The impact this will have is wide reaching.  It will impact every market around the globe.  I want to share with you the best way to maximize this opportunity.  

Exchange Traded Funds (ETFs).

The world's smartest investor knows about the power of ETFs.  Warren recently advised his heirs, "Put my estate in index funds."

ETFs allow you to buy or short almost any stock market in the world.  You can buy or short any commodity or precious metal. Want to play the downside in your retirement account?  You can buy an ETF that shorts a market in a retirement account.  

So how can you begin creating wealth right away?

This Saturday I'll be teaching a timely class on trading Options on ETFs called the Wealth Creator.

($997 Value)

In this class I'll share:

* Why I believe the dollar will continue to rise.

* What ETFs to watch and buy in the following year.

* The easiest way to profit from the rise in the dollar. 

* How to time this event so whether you're a short or long term trader you can profit. 

Also, there are 3 full mentorship days of live trading and teaching the following week.  The importance of these 3 days are too many to count.

Last month we did a sold out mentorship in Las Vegas where attendees paid $5,000. 

The Wealth Creator class and mentorship will sell out on its own. But, this is such a critical time in the market I don't want anyone to miss this opportunity in 2015.

So I decided to put together a special bonus package for anyone that buys the Wealth Creator class and mentorship. 

I'm going to give you access to:

Bonus #1: My Plan or Get Slaughtered training class. 

($997 Value)

On December 31st join me for an all day trading and planning session. 

The old saying, "If you fail to plan, you plan to fail" is never more true in trading.

During this class:

* Concentrate on creating a viable trading plan for 2015

* Design a plan that can achieve your objectives

* Create crystal clear trading rules for you to follow in 2015

* Set concrete action steps to drive your trading goals

Learn to do the critical thinking and planning to develop the best options strategies for your trading success

I did this on January 1st, 2014 and weeks later I had the $1 million trade in Tesla.  This year we will develop a trading plan for 2015 together. 

Bonus #2: Follow up Q & A webinar. 

($297 Value)

Early 2015 we will have a follow up class to review the markets and your trading plan.  You’ve had a chance to apply the strategies in the live markets so now is your chance to ask follow up questions. This is the time when I can update you on any new market forces that you need to be aware of so you can continue your trading success. 

Register here:

Simpler Options "Wealth Creator".....Webinar Replay

My commitment is to help as many investors as I can for the next great wealth shift.  I hope everyone takes advantage of this opportunity.  The reality is, the fewer the people the better. We have an amazing team of people here who have the same goal as I do.  

Since starting Simpler Options a few years ago, we have helped a lot of people become better traders. 

"I have never had an experience like this before. We have 3 small trading accounts totaling just over $100k (at least that was the case on Monday afternoon). Putting just a portion of that into play (following your rules), I've gained just over $30k in 3 days!"

"I have to say that I have over 7,000 reasons to be thankful for you guys putting on such a great program!"

"When I saw the advertisement for this training I told my wife I was going to spend the $997 to buy it. Well, I closed out the trade on INVN we did on Monday for a $1300 profit today.  Absolutely the best trade I have had since I started trading."

"My first thirty days, starting June 7th with $47,887.87 in my account. By July 3rd my account was $ 73,188.38 produced a nice impressive 52.83% return - Not to shabby. :-)"

Believe me, nothing makes me feel better than receiving notes like these.  It's my crack. But I have to tell you, right now, I am worried about a lot of our subscribers. We have many, many hard- working people who are going to get caught by surprise. You can either let things happen to you..... or you can take a few simple steps and take charge of your family's fate.

To get started, click on the link below:

Simpler Options "Wealth Creator".....Webinar Replay

We'll see you next week in the markets putting some of this to work,

Ray C. Parrish

aka the Crude Oil Trader

Get our latest FREE eBook "Understanding Options"....Just Click Here!

Using Stock Buybacks to Mask Deep Business Problems

By Tony Sagami

Stock buybacks are always a good thing… right? That’s what the mass media has trained investors to believe, but there are times when stock buybacks are a horrible strategy.

Let’s take a look at Herbalife, which has had very visible news items as billionaires like Carl Icahn, George Soros, Daniel Loeb, and Bill Ackman publicly debate the future of the company.



Herbalife shares have lost more than half their value in 2014 because of a Federal Trade Commission investigation and a big drop in profits. 50% is a huge haircut, but I believe Herbalife is poised for even more pain.

Rapidly Disappearing Profits

Herbalife recently reported its third-quarter results and they were just awful. Herbalife earned $0.13 per share in Q3, but that was a whopping 92% decline from the $1.32 it earned last year.

That’s awful, but Herbalife says business will be even worse going forward. The Wall Street crowd expected Herbalife to grow revenues by 7% in 2015, but the company said that its revenues will fall by -1% to -2% instead.

Part of that lower guidance is from the impact of the strong US dollar. Guidance for Q4 includes an unfavorable impact of $0.31 from currency conversions. If you remember, I previously wrote that the strong dollar was going to kill the 2015 profits of companies that do lots of business overseas.

I have to admit, I am skeptical of all the multilevel marketing businesses, but Herbalife is reinforcing that preconceived notion.

FTC and FBI Investigation

The Federal Trade Commission is investigating Herbalife for what could ultimately result in charges that Herbalife is operating an illegal pyramid scheme.

In March, the FTC sent Herbalife a civil investigative demand (CID), which is a subpoena on steroids because all the evidence produced by a CID can be used by other agencies in other investigations, such as the FBI, which is also investigating Herbalife.

The FTC outcome is unknown. Heck, Herbalife could eventually be declared innocent and pure… but I wouldn’t bet on it.

Board Members Gone Bad!

When your company is in the middle of FTC and FBI investigations, the last thing you want is for your company officers to get in trouble with the law. A current Herbalife board member, Pedro Cardoso, has been charged with illegal money laundering by Brazilian prosecutors. Time will tell if the charges are true… but it looks very bad.



That’s not the only problem with the Herbalife board of directors. Longtime Herbalife Board Member Leroy Barnes announced that he is leaving. Board members leave for legitimate reasons all the time, but Barnes is the fourth Herbalife board member to leave in 2014. Talk about rats jumping the ship!

The Smoke and Mirrors of Stock Buybacks

The above issues are all serious and enough to stay away from Herbalife, but the biggest red flag I see is the abusive financial engineering that Herbalife is using to prop up its stock.

Example: In Q2, Herbalife spent over $500 million to buy back its own stock for the purpose of propping up its earnings-per-share ratio. Fewer shares translates into higher earnings per share.



The root of the problem is that Herbalife is using up all its cash AND borrowing money like mad to finance the stock buyback.



In the last year, Herbalife’s debt has exploded by over $1 billion. Herbalife is using every penny of operating cash flow and taking on new debt just to buy back its stock.



Moreover, since Herbalife’s stock has plunged by 50% this year, Herbalife wasted hundreds of millions of dollar of shareholder money by buying stock at much higher prices.

And now that revenue, profits, and free cash flow generated by operations are shrinking, Herbalife is on a collision course with insolvency.



Carl Icahn, who is certainly a much better investor than I will ever be, is a big Herbalife fan and even went as far as to call the shares undervalued. “I would tell you I do believe Herbalife is quite undervalued and it is still a good business model.”

Ahhhh… Carl… sorry, but I think you couldn’t be more wrong.

George Soros, by the way, appears to agree with me because he reduced his Herbalife holdings by 60% after the company reported those disastrous third quarter results a few weeks ago. I’m not suggesting that you rush out and buy put options on Herbalife tomorrow morning. As always, timing is everything, but I have very little doubt that Herbalife’s stock will be significantly lower a year from now.

Moreover, the real point isn’t whether Herbalife is headed higher or lower, but that good, old fashioned fundamental research can help you make money in any type of market environment.

Even during bear markets.

30-year market expert Tony Sagami leads the Yield Shark and Rational Bear advisories at Mauldin Economics. To learn more about Yield Shark and how it helps you maximize dividend income, click here.

To learn more about Rational Bear and how you can use it to benefit from falling stocks and sectors, click here.

The article Connecting the Dots: Stock Manipulation 101: Using Stock Buybacks to Mask Deep Business Problems was originally published at mauldin economics

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Debunking the Claim That Puerto Rico’s Tax Benefits Are “Hype” or “Too Good to Be True”

By Nick Giambruno

It was only a matter of time before it happened.

After releasing our groundbreaking free documentary America’s Tax-Free Zone, new and old misconceptions about Puerto Rico’s tax benefits have surfaced. Many of them had previously been debunked.

The purpose of today’s article is to drive a stake through the heart of these misconceptions and forever put them to rest. And there is really no better person on the planet to do that than David Nissman, a true authority on this topic.

David Nissman was appointed by former U.S. President George W. Bush to be the United States Attorney for the U.S. Virgin Islands. He regulated the tax incentive programs there—which have many similarities to the Puerto Rico incentives—for the US federal government during his tenure. He also has written a number of the economic development statutes in place today.

David has since left the dark side and now represents U.S. taxpayers in IRS audits concerning tax incentive programs in the U.S. Territories—like the Virgin Islands and Puerto Rico. His current and former experiences gives him unparalleled insight into the U.S. government’s thinking behind Puerto Rico’s tax incentives.

After reading this article, you should have no doubt that Puerto Rico’s tax incentives are not “hype” and not “too good to be true.” The fact is, they are 100% real and legal. And for those who obtain them, they are here to stay.

Puerto Rico’s tax incentives may allow you to totally eliminate all forms of taxation on capital gains, interest, and dividends and reduce your corporate income tax rate to just 4%. Americans can find similar benefits nowhere else in the world short of renouncing their citizenship. Much ink has been spilled on this already, so if you are new to Puerto Rico’s tax incentives see here to get all caught up.

David will also show that:

• Puerto Rico’s tax incentives are not some fly by night thing. They fit into the economic development policy that has been supported by the U.S. federal government and both political parties for many decades.

• It’s nearly impossible for either the U.S. or Puerto Rican governments to end the tax incentives for those who already have obtained them.

Now, we aren’t saying it is impossible that these tax incentives could go away for new participants. That is a possibility, but also not a very likely one. It is also an incentive to obtain your tax benefits from the Puerto Rican government (which come in the form of a legally binding contract) as soon as possible—because once you’ve received your contract giving you your tax benefits, it will be almost impossible for anyone to take them away from you prospectively or retroactively, no matter how hard some politicians will stomp their feet.

Even if the benefits were to somehow magically disappear after a couple of years, you could still reap enormous benefits from participating in them. My colleague Louis James remarked that even if the tax incentives last only for five years, he’d be able to pay for his condo with his tax savings.

And now without further ado, I’ll turn things over to David Nissman, who will put these misconceptions to bed for good.
Until next time,

	Nick Giambruno Senior Editor, INTERNATIONALMAN.com

---

By David Nissman

When the United States began its relationship with Puerto Rico and the other Territories in the Caribbean in 1898, they were poor and had been economically oppressed. The US government sought to help create financial independence with economic development policies. This was not wholly altruistic. If the Territories were not financially independent, they would be a burden on the federal government.

From the start in the early 20^th century, the Territories’ use of incentives to develop their economies was challenged as unconstitutional in violation of Article 1, Section 8, which required that “all duties, imposts, and excises shall be uniform throughout the United States.” The Supreme Court in a line of cases known as the Insular Cases used a line of deprecating and racially insensitive reasoning to accord all inhabitants of the Territories less than full constitutional rights. The less than satisfying trade-off in the outflow from the Insular Cases was that the Territories’ ability to use special tax laws to develop their economies was not restrained by Article 1, Section 8 of the U.S. Constitution.

This policy began in 1900 with the advent of the Foraker Act, which set up the first municipal government in Puerto Rico and permitted Puerto Rico to utilize special taxing measures. During the 114 years since the Foraker Act, Congress and the local governments in the US Territories have enacted many different programs to help the Territories raise revenues. President Herbert Hoover, visiting the Virgin Islands in 1931, was stunned at the poverty and declared:

“[W]e acquired an effective poorhouse, comprising 90 percent of the population. The people cannot be self-supporting either in living or government without discovery of new methods and resources. The purpose of the transfer of administration from the naval to a civil department is to see if we can develop some form of industry or agriculture which will relieve us of the present costs and liabilities in support of the population or the local government from the Federal Treasury or from private charity.... [H]aving assumed the responsibility, we must do our best to assist the inhabitants.”

—New York Times, March 27, 1931

Congress in 26 USC 933 (Puerto Rico) and in 934 (the Virgin Islands) has passed statutes that enable the local governments to grant benefits on territorial source income to territorial residents. These laws have been firmly in place since 1960.

Critics always opine that Congress and or the Territorial governments can take these laws away, but they neglect an important component of the legal relationship between the United States government and its Territories. The Territories have a very special status: according to US Supreme Court case law, the Territories have the status of federal agencies. If a federal agency grants a contract to a business or individual, the federal government is bound to honor it. It would be a violation of the Contracts Clause of the US Constitution to take it away. So if an individual or business holds a contract from the Puerto Rico government granting these tax benefits (Act 20, Act 22), the contract is enforceable against both the Puerto Rican and US governments. Not even Congress can affect existing contracts.

Puerto Rico’s tax incentives are carefully considered programs. The Puerto Rican government based them on the Virgin Islands Economic Development Commission (VI EDC) programs. The VI EDC program has been fully vetted and litigated in the federal courts. Everyone recognizes the legitimacy of these programs and how they are part of US developmental policy toward US Territories. The bottom line is, Puerto Rico’s tax incentives are very sustainable.

Because of the continuing discussions in Congress about reforming the tax code, there is quite a bit of fearmongering that Congress may somehow repeal these programs.

Two points must be considered when hearing this:

1) Do we actually believe that our gridlocked Congress is currently capable of reaching a bipartisan agreement to overhaul the US tax code? While the tax code is in serious need of overhaul, this is a project that is years away. When there finally is new tax legislation, the Territories will lobby hard—with the U.S. Department of the Interior (DoI) firmly on their side—to continue making these benefits available.

The United States DoI continues to recognize that the Territorial tax incentives are a necessary component of U.S. developmental policy toward its Territories. In July, 2005, the DoI filed a written statement concerning its own concerns with new tax regulations for the Territories. The paper noted that (emphasis mine):

[t]he Secretary of the Interior has stated that her top priority for the Insular Areas is to promote private sector economic development there. Under the Secretary’s leadership, the Department of the Interior has been implementing a comprehensive program to advance this priority …. Because of the special fiscal and economic challenges faced by the Insular Areas, it has been the policy of successive administrations from both parties to support tax and trade provisions to help the Insular Areas generate sufficient tax revenue and economic activity to meet the most basic needs of their people. Notwithstanding these incentives, each of the Insular Areas continues to experience severe economic and fiscal difficulties. 

Special tax provisions for the Insular Areas, in particular, manifest an important underlying principle of US territorial policy: The Federal government does not treat the Insular Areas as sources of revenue. The US has a strong interest in maintaining and enhancing the economic and fiscal well-being of the Insular Areas.

—Statement of the US Department of the Interior, Office of Insular Affairs on Temporary and Proposed Regulations to Implement the American Jobs Creation Act of 2004 (July, 2005)

2) Whether these programs change one day or whether Puerto Rican statehood requires different tax rules, the individuals and businesses that have decrees with the Puerto Rican government will have to be grandfathered in based on the Contracts Clause in the US Constitution. Those individuals and businesses interested in moving to Puerto Rico would be wise to get moving to the extent there is any fear of legislative change.

Finally, it is also not very likely that the Puerto Rican government itself will end these programs. Attracting wealthy people and profitable businesses to relocate to Puerto Rico through these programs is attractive to both of the major political parties in Puerto Rico. Given the financial crisis in Puerto Rico, it is unlikely that the local government—which has committed large resources to marketing these programs—will suddenly embark on a different direction.

In conclusion, those who lawfully fulfill the purpose and requirements of the Territorial tax incentive programs—like Puerto Rico’s Acts 20 and 22—should feel confident that their contracts will be honored by both governments.

Editor’s Note: If you’re considering taking advantage of Puerto Rico’s tax incentives—benefits Americans can find nowhere else—then you should check out our comprehensive video course on the topic. It’s the authoritative guide on Puerto Rico’s tax incentives with information you won’t find anywhere else; and it will save you a lot of time and money. More on that here.

The article was originally published at internationalman.com.

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