The Biggest, Most Inevitable Bull Market

Does
your
portfolio have exposure to the most inevitable bull market in the world? I’m talking about a long-term trend that has
nowhere to go but up. It’s literally a
life and death situation.

The
alternative to a bull market in these commodities is something the
world’s
population has to strive to avoid at all costs. It’s more
important than oil, more vital than coal, and way more serious
than gold, copper, iron – or any other industrial metal or energy
commodity.

Because
if
there’s not more production of this particular group of commodities
every day,
in perpetuity, most people on this planet will starve.

Yes, I’m talking about food. And I realize it’s not an “exciting”
investment, not like some new oil discovery or a massive gold bonanza. But the world’s population is growing.

Designed to Fail

I’m sure by now you’ve heard that Goldman Sachs (NYSE:GS) has been indicted for fraud. Goldman is accused of creating securities that were designed to fail, so it and its hedge fund cronies could make billions in profits.   

 

Case in point: Abacus 2007-AC1. “Abacus” was a 23-part series of “synthetic collateralized debt obligations” that Goldman Sachs constructed and sold to supposedly sophisticated investors.   

 

According to Bloomberg, a “synthetic collateralized debt obligations” was a mixture of “…credit- default swaps (CDO), used to transfer the risk of losses on debt, and securitization, used to slice the risk in a pool of assets into various new securities.”

Gold

You
might
have heard the news on Friday about Goldman Sachs’ recent trouble with
the
SEC. The SEC is suing Goldman for
defrauding investors of collateralized debt obligations (CDOs). The fraud comes in because Goldman
(allegedly) did not disclose to CDO investors that Paulson & Co.
helped put
together these investments while at the same time betting against them.

That’s
kind
of like a car dealership selling you a car that was assembled by a
mechanic who
also happens to be betting the drive train will fail.

It
seems
that Paulson’s foresight in betting against mortgage backed securities
issued
by Goldman Sachs has his fund under scrutiny from the SEC as well.

This
scrutiny
is making some people nervous about owning the same gold securities as
Paulson
& Co – which is having a downward effect on all gold securities, not
least
of which is gold itself.

Invest in What You Love

I always assumed
that I
drink way too much coffee, but I read a story in the Wall
Street
Journal
at the end of last year that made me change my mind.

The crux of
the article:

“…an
analysis in the Archives of Internal Medicine
found that people who drink three to four cups of java a day are 25%
less
likely to develop Type 2 diabetes than those who drink fewer than two
cups. And
a study presented at an American Association for Cancer Research meeting
found
that men who drink at least six cups a day have a 60% lower risk of
developing
advanced prostate cancer than those who didn’t drink any.”

Six cups
of coffee a
day seems like a lot, I realize, but I drink about that much. I go through a prodigious amount of coffee in
any given week – maybe about one pound. That’s 52
pounds a year!

Apparently,
I’m not
alone. Coffee is the second most popular
beverage in the world after plain old water. In
total, the world drinks 400 billion cups of coffee every year. It’s one of the world’s most traded
commodities – which made me think: why not find a way to invest in the
brown
bean?

Get While the Gettin’s Good

I said I would be using the banks as my “canaries in the coalmine” for earnings season. Financials tend to lead the stock market, both on the upside and the downside. 

 

Of the big banks to report so far, we’ve heard from JP Morgan (NYSE:JPM) and Bank of America (NYSE:BAC). And their results have been remarkably similar.   

 

Both banks posted better-than-expected profits based on strong trading results. And both banks continue to be hampered by impaired assets and non-performing loans. 

Simon vs. General Growth

Today, I start by offering my condolences. It’s tax day, never a pleasant time of the year.  

 

Yesterday, I noted that the recent rally lacked enthusiasm. Low volume and small daily gains were the hallmarks. Did all that change yesterday after Intel (Nasdaq:INTC) posted blowout numbers?  

 

Maybe. Volume posted its best totals since February. And the S&P 500 made its biggest gain since March 5. 

A Tax Free Commodity Investment

Whether you paid your taxes early, or you’re still tearing
your hair out looking for that one last receipt, there’s something aggravating
about April 15th.

To take your mind off things, I’ve dug up some information
on a special kind of tax-free investment: real estate investment trusts, or
REITs.

REITs are special companies that pay ZERO corporate taxes as
long as they pay out over 90% of their profits to shareholders in the form of
dividends. Obviously, you have to pay
tax on the dividends – but as a shareholder, that’s the only tax you’ll
pay. Non-REIT shareholders get dinged
twice: once as an owner (corporate tax) and again as a shareholder (capital
gains and dividend taxes).

Okay, I know what you’re thinking: what does a REIT have to
do with commodities?

No Doubt About Intel

Yesterday I gave a somewhat tongue in cheek treatment to the question of whether Alcoa (NYSE:AA) had beaten analysts’ earnings expectations or not.   

 

Intel (Nasdaq:INTC) left no room for doubt. The chip-maker crushed estimates by $0.05 a share, beat on revenues and profit margins and guided higher for the second quarter.   

 

What’s next for Intel? Fixing the housing problem? 

Why I’m Down on GLD

If you’ve been a reader for very long, you might have
noticed that I’m not a huge fan of the exchange traded fund Spidershares Gold
Trust (NYSE: GLD). Each share of this
ETF corresponds to 1/10 of an ounce of gold, kept in the fund’s vault in London.

I should point out up front: I’m both long-term and
short-term bullish on gold prices. I
think as long as governments around the world treat their currencies like their
own private piggy banks to inflate at will, gold will remain a good place to
put your money.

So why don’t I like GLD? I’ve glossed over these reasons before, but I think you deserve the benefit
of some research and facts before you put my theories into practice in your own
portfolio.

But first, all of my reasoning assumes that you are
bullish on gold. If you’re not bullish
on gold, please PLEASE drop me an email at editorial@resourceprospector.com
and tell me why.

Alcoa: Meet, Miss or Beat?

There are some investors who think the significance of aluminum company Alcoa’s earnings is overblown. There are stocks that provide a better measure of consumer spending habits, or otherwise give more insight into the economy’s health.  

 

But because Alcoa is always the first major company to report, it’s numbers are still treated like an omen for the 499 companies on the S&P 500.  

 

So, if you ignore one-time charges, Alcoa (NYSE:AA) reported $0.10 a share 1st Quarter profit yesterday afternoon. I would swear I read on Yahoo! Finance that analysts were expecting $0.11 a share. That would mean Alcoa missed estimates.