Why Bonds are Rallying

Another day, and still no agreement on a 2011 budget
in Congress. Surprisingly though, the stock market is not really being
affected by the impasse. Sure, the major indices are down slightly again
today, but I think we can all imagine that it could be much worse.

Treasury bond prices have been choppy, with big $3 price swings on the
chart of the iShares Barclays 20+ Year Treasury Bond ETF (TLT) in July. But
overall, bonds are holding up well, and this tells us clearly that no one
expects the U.S. government to default on its bond payments.

$50 Silver?

A story by Robert Lenzner in Forbes Magazine today outlined the potential
for silver to go as high as $50 an ounce in the near future.

With silver on the march from year to date lows of just over $15 an ounce
all the way up to recent highs of over $30 an ounce, it’s been one of the
best performing asset classes of the past year – and even the past
decade.

How to Invest in this Market

In difficult economic environments, when the stock market
seems to move with little rhyme or reason, investors will sometimes say “it’s
a stock pickers market.”

The idea of a “stock picker’s market” is that of a trendless
market, but one where you can still buy quality, undervalued stocks and make
money.

But according to the
Wall Street Journal
, that’s not what we have right now. And
investors who are relying simply on a company’s fundamentals to invest are
not being rewarded with profits.

Who’s Profiting Now?

Stocks have been unable to make any headway over the past
few sessions. And late-day sell-offs have been a common theme.

I often refer to oil prices as a proxy for growth
expectations. And with oil prices set to drop below $72 a barrel today, it’s
clear that investors are not bullish on growth. Of course, recent economic
data has indicated that economic activity in the
U.S. has slowed down.

Perhaps the biggest drag on the economy is housing. That’s
nothing new. But New and existing home sales have been weaker than expected
after the expiration of the homebuyer tax credit in April.