Europe is smoldering like a fine cigar. It will take a while to burn to the end, but make no mistake, the whole Eurozone is burning.

This is a story about a man who jumped from a 100 floor skyscraper.

The price of gold inched closer to $1,600 an ounce today. What might happen if the yellow metal falls below $1,600?

You wouldn't know it from watching the news or reading the paper - but there's only one data point that deserves your attention.

I look at the entire global market for everything, and in doing so it becomes perfectly clear that no other market looks as promising or potentially profitable as the commodity market.

In case you weren't paying attention, the Swiss just closed up shop on the Franc.

Until last week, the Swiss Franc traded freely - tied only to the Swiss government and financial system.

And since the Swiss government is generally much more robust, less debt-ridden and generally more prosperous than most other developed world governments, investors fled the Euro in record numbers, pushing up its conversion rate against other world currencies.

I've asked my friend, colleague and fellow gold investor Tom Cullis to explain a somewhat complicated concept known as "Free-Gold." At the surface, this concept may appear to be nothing but a simple call to return the dollar or other world currencies to the gold standard. But that's not quite the whole story. It's not even what Free-Gold is really about.

I'm really excited to have Tom delve into this concept, because I believe it's just starting to gain momentum, and it's rapidly approaching a "tipping-point" moment. I think you'll be hearing a lot about Free-Gold - at first from people like me, but then increasingly from mainstream investment sources and eventually you won't be able to turn on the TV or open a newspaper without hearing about it.

And before I ask Tom to step into the mysterious waters of Free-Gold, I want to assure you that this series of essays is not a part of a Free-Gold sales pitch. We're not selling Free-Gold. Free-Gold is basically just a very high-level way of thinking about what's going on with the world's money system right now. The only thing we're likely to tell you as a result of understanding Free-Gold, is something that you probably already believe: you need to own physical gold, and not just a little bit!

When it comes to conspiracy theories, and the theorists who theorize them, I definitely fall into the armchair variety. Sure, conspiracy theories can be fun (like The Da Vinci Code), and sometimes there may even be a little meat in the conspiracy bone. For instance, there's no evidence to say that former Treasury Secretary Henry Paulson let Lehman Brothers fail because he didn't like CEO Richard Fuld. But after engineering a buyout for Bear Stearns, I feel strongly that Paulson got personal.

And we can't be sure that the Chicago Merc raised margin requirements on silver to protect big banks short positions. But it makes some sense...

So, I couldn't help but get a little conspiratorial after Friday's dismal jobs numbers. Not one economist got even close to the real number (18K). And after the ADP Payroll number came out, estimates for the government's NonFarm payrolls went up.

Now, we know pretty much any government statistic is suspect. They are usually calculated to give a rosy picture. And the NonFarm Payroll number is especially variable because, as a Bloomberg article notes:

The Labor Department, which houses the Bureau of Labor Statistics, adjusts the employment figures each month to account for things like teachers falling off school payrolls in June and workers finding temporary employment with retailers during the December holiday season.

"There was a big adjustment this month," Labor Department Chief Economist Betsey Stevenson said on a conference call with reporters. "It's an art and a science doing seasonal adjustments and it's really hard to predict."

At a time when we've already seen weak economic data for a couple months, wouldn't it be a good time to be less aggressive with seasonal adjustments? Or does the weak employment number support the Obama administrations budget battles in Congress? It seems to me that austerity is a tougher sell when it could easily push the economy into recession.

Well that didn't take long. Just a day after it was reported that Greece will benefit from a debt restructuring that will require current bond-holders to take a financial hit, Ireland's finance ministry is demanding a similar restructuring for its bonds.

Of course, this is what happens when you open the door to restructuring. In a union, all rules must apply equally. You just can't give preferential treatment to one country and not expect others to demand the same treatment. The European Central Bank should have known this. And its failure to see this one coming is making the situation even more unstable.

Bank stocks are getting beaten down again this morning. Bank of America (NYSE:BAC), for instance, is off another 3%, and is trading below $11 a share and well below tangible book value of $11.40.

 

Valuations might look attractive. As a group, the big banks trade with a forward P/E around 10, while the S&P 500 as a whole sits at 13. But investors should always ask “what’s the upside?” And for the banks, that’s a darn good question.

The U.S. dollar and Treasury bonds are weaker today after the Group of 8 said the global economy was growing and the perception of Greek debt problems improved.

 

As we know, a weaker dollar sets the stage for higher stock and commodity prices. Oil is perhaps the best indicator of economic growth expectations. And its inverse correlation to the U.S. dollar is also airtight. So much so, that if you see oil rally, bullish economic commentary is usually not far behind.

"Restructuring" is just a nice way of saying "default." Basically, Greece would tell its creditors that it can't make full interest payments on outstanding debt (bonds), and that those creditors must accept new bonds with different interest rates.

I am nearly speechless about the LinkedIn (Nasdaq:LNKD) IPO yesterday. Nearly. The social media company opened its first day of public trading at $83 a share after it was offered at $45. It finished the day at $94, after trading as high as $122.

 

This for a company with $15 million in earnings on $243 million in revenues. LinkedIn is now worth around $9 billion.

Nearly a month ago, after the last Fed meeting, we started to discuss the likelihood that the U.S. economic recovery was slowing down. After all, the Fed had just lowered its GDP forecast for 2011 and acknowledged that inflation was picking up as a result of QE2.

 

The S&P 500 was above 1,360 at the time.

When Fed Chief Ben Bernanke told us that he believed inflation was “transitory”, he was saying that commodity prices were higher due to Fed monetary policy.

 

When Bernanke went on to say that he would let QE2 end and not immediately fire up the QE3 engine, because the risks of further inflation were not being offset by gains in employment.

 

Put simply, Bernanke said inflation was all (or at least mostly) his fault.

More and more, strategists, commentators and investors are coming to the same conclusion: it's all about the U.S. dollar. When the dollar rallies, stocks and commodities sell off. When the dollar falls, then our favorite assets can rally.

 

It almost doesn't matter what the time-frame is. Evidence is mounting that even hourly moves for stock prices get their direction from the dollar's latest move.

It's the first day of the second quarter, and also April Fool's day, so be on your guard. The first day of the month has been an overwhelmingly bullish day ever since the stock market bottomed in March 2009. And the first day of a new quarter has also been bullish, as new money gets put to work by mutual funds.

Today we also have a strong non-farm payroll number to propel stocks higher.

The economy added 216,000 new jobs in March. This is a net number that includes job losses at the government level. Private hiring has now topped 200,000 jobs for two months running, for the first time since 2006.

The government published unemployment rate fell to 8.8%. And while that's still unacceptably high, it's an improvement.

Whether or not we can give the Fed any credit for helping the jobs market with QE2, today's jobs number increases the odds that the Fed will stand down in June, and not move directly into another round of stimulus QE3.

And while we've discussed the end of QE2 as a potentially bearish catalyst for stocks, it could also be considered a sign of confidence in the U.S. economy. I know that might seem like a stretch, and I still expect there to be some kind of correction ahead of June (sell in May?).

The Wall Street Journal reported today that troubles in Japan aren't staying on the island nation. Instead, they're spreading throughout the world.

From the Journal's article, "Global markets plunged as deepening worries over the specter of a nuclear power crisis in Japan in the wake of last week's earthquake and its economic implications sent investors scurrying again for safety."

This piece begs the question: what's safe these days? Is the U.S. Dollar safe? Are U.S. Treasuries safe?

Once again, China has raised reserve requirements for banks to slow down lending and, hopefully, slow inflation, too. China reports that inflation accelerated to 4.9% in January. Part of the reason is that drought has damaged China's grain production and food prices are up.

Chinese banks lent $158 billion in January. That was more than double the rate of lending in December. Apparently, lending typically surges in the early months of the year in China.

For an economy that has been highly dependent on government and corporate spending, Chambers' outlook wasn't very encouraging. But on a day when Cisco was pounded for around 15%, and Google (Nasdaq:GOOG), Microsoft (Nasdaq:MSFT) and Apple (Nasdaq:MSFT) all finished in the red, the Nasdaq as a whole actually posted a gain.

Now, Apple alone accounts for 20% of the Nasdaq 100 (the 100 largest stocks on the Nasdaq). Throw in Google (4.2%), Microsoft (3.6%) and Cisco 1.6%, and you're looking at 30% of the Nasdaq 100. Nearly one-third of the Nasdaq 100 was lower on Thursday, easily the most influential tech companies, and the Nasdaq managed a gain for the day.

I've been warning that a correction was coming for stock prices for a few weeks now. And no, I'm not trying to point out that I have any unique insight on this. It's just that when the stock market advances in a virtually straight line for 4 months, you start to think investors and traders will take some profits at some point.

Corrections are inevitable and healthy for stock prices, like a forest fire that clears out underbrush and old growth and let's new growth occur. OK, that may be a little dramatic, but you get the point.

Yesterday, both the U.S. dollar and stock prices moved lower. That’s pretty unusual. Also yesterday, Intel (Nasdaq:INTC) posted an absolutely blowout quarter. This morning, in pre-market, the stock is up just a nickel.

Now, Intel has sold off on positive earnings reports over the last few quarters. But this time, Intel beat all expectations. Earnings were up 48% over last year. And yet the stock appears unable to move higher. I will call that unusual, as well.

As we discussed yesterday, recent weakness was a dip to be bought. But we should also understand that anticipating more upside is really about anticipating the news flow, and investor reaction to that news.

Of course, I didn't know that Portugal would get a great response to a bond auction, thereby lessening worries that debt problems were spreading. I also didn't know that Wells Fargo would upgrade the financial sector on renewed dividends and "superior" earnings growth.

So how do we view a stock market that can’t hold its early highs, sells off to slightly negative territory mid-day, and then recovers roughly 50% of the decline by the close? Is that bullish behavior? Is it bearish? Or is it just plain weird?

 

While there’s certainly no shortage of weird out there – like the 7% rally for Lennar (NYSE: LEN) today when housing data appears to be getting worse – we have no choice but to see yesterday’s action as bullish. After all, the major indices finished in the green.

As the ratings agency Moody's reviewed the credit ratings of Greece, Spain and Ireland over the past month, investors have moved out of risky European debt, and into gold. This was followed by today's membership admission of the euro zone's newest member, Estonia, as the 17th member of the club and a country which as traditionally had it's own bouts of debt crises and deficit reduction challenges.

According to metals trader Matthew Zeman of LaSalle Futures Group out of Chicago, "All commodities are going to benefit from the fear of future inflation, and investors will continue to pile into hard assets." Gold appreciated in price by 29.7% in 2010.

Currencies don’t trade in a vacuum. They trade based on relative value compared to other currencies. In other words, if you want to buy Japanese yen, you usually have to sell whatever currency you have to make the conversion.

 

So if the U.S. dollar is weak, it’s usually a good idea to see what else is going on in the world, rather than assume the dollar is trading on U.S. data alone.

Bloomberg is reports that holiday retail sales jumped 5.5%, the biggest gain in 5 years. Macy's (NYSE:M) and Abercrombie & Fitch (NYSE:ANF) were among the big winners, but it seems as though all the upside has already been had in the retail stocks. My favorite, Kohl's (NYSE:KSS), has done anything since its mid-November jump.

It should be clear from the retail sales numbers that Americans have gotten more comfortable with the U.S. economic recovery. While we certainly can't say the economy is hitting on all cylinders, it has stabilized and growth forecasts are on the rise.

Well, well, the euro rallied today. Is that because China came out and endorsed the European Union's efforts to contain its debt problems? Or should we assume that traders are simply lightening up on their positions as 2010 winds down.

I'll take option #2. I'll also take the upside we're seeing in the stock market today.

The S&P 500 is moving above resistance at 1,250 today. That opens the door for more upside to end the year.

We are in the final stretch before Christmas. Yes, the blatant commercialization of a great holiday gets old. But it never manages to dampen my Christmas spirit.

Online sales are up 12% over last year. And brick and mortar sales are coming in strong too. SpendingPulse reports that clothing sales are up 9.8%, jewelry's up 2.6% and furniture sales are up 3.4% over last year.

There are plenty of analysts and economists that think QE2 is a bad idea. I've been one of them.

And even now, as economic data improves to the point that GDP forecasts are moving higher, the Fed appears steadfast that the economy needs more stimulus. The language in yesterday's FOMC statement was unchanged.

The inflationary risks of QE2 have been well articulated by the anti-Fed crowd. And even though today's CPI number shows that inflation is not happening, it's easy to interpret the rise in bond yields as sign that inflation is right around the corner.

Once again, stocks are advancing today. Commodity prices have been driving the action lately, and that's the case again today. And much of the reason is China.

 

Inflation has picked up China as demand for goods chugs on unabated. China's government has been taking steps to cool inflation, including raising down payment requirements for real estate purchases and raising reserve requirements for banks.

 

In fact, there was speculation that China would raise rates over the weekend. China did not act on interest rates, and that's one reason commodities, and stocks, are rallying today.

Welcome back! I hope everyone had a most excellent and relaxing Thanksgiving holiday.

Let’s get started with a discussion on retail sales. As we know, GDP growth came in a bit stronger than expected for the third quarter, largely because of stronger consumer spending growth

Ireland agreed to terms for a bailout over the weekend. And while the U.S. dollar rallied today against the euro, investors should expect that trend to reverse in the near future with the dollar continuing its long term slide against major world currencies.

The European Union's willingness to support indebted member nations is bullish for the euro. Also, the Fed's QE2 will continue to weigh on the U.S. dollar.

It’s one of those situations in investing that often defies logic - and leads to big opportunities. When the majority of investors become convinced that a trade can only go one way, well, it often doesn’t.

 

And as I’ll show you, there can be easy gains to be had when you understand this.

 

For this example, I’m talking about the U.S. dollar.

 

You’ll probably recall the vicious downtrend the dollar entered in the two months leading up to Ben Bernanke’s second round of quantitative easing.

It's Veteran's Day, I'm taking a moment to recognize the sacrifice and dedication of our military.

The bond markets are closed today, so we're losing an important catalyst for the stock market. Without the running gauge for the U.S. dollar, traders will have to depend on recent news to drive the action today. And that may not be a good thing...

Cisco (Nasdaq:CSCO) is down huge after its earnings report last night. The company beat earnings by a couple pennies, but offered guidance that was well below expectations.

Well, new unemployment claims rose by 13,000 to 462,000 last week. I probably don't have to tell you that unemployment is moving in the wrong direction.

Of course, we've discussed the fact that unemployment is a lagging indicator and will be among the last data points to improve until we're blue in the face. And really, investors seem to be looking beyond the weekly swings.

What are they looking forward to? Why, quantitative easing, of course. These days, any weak data makes it seem more certain that the Fed will dump as much as $500 billion into the system in some form of asset buying.

Stocks pushed higher again on Friday. The Dow Industrials broke above 11,000 and the S&P 500 moved closer to TradeMaster Jason Cimpl's target set five weeks ago of 1,172.

Still, these indices are below their 52-week highs of 11,309 and 1,219, respectively. That was back in April, after the European debt problems prompted a massive lending program form the EU and 1Q earnings came in very strong.

This is a big week for the stock market. Not only do we get some critical economic data this week, 3Q earnings season starts and the major indices are likely to pick a direction.

There has been a lot of bullish activity for stocks over the last 4-5 weeks. But the S&P 500 has been unable to take out resistance at 1,150 after repeated attempts over the last two weeks. At the same time, 1,140 acted as a solid floor over the last 6 trading days.

Something's gotta give.

The weak economic recovery has created a very volatile stock market. Wide swings in investor sentiment give us "it's getting better" rallies and "double-dip recession" sell-offs.

We've enjoyed one of those "it's getting better" rallies that's boosted the S&P 500 85 points, or 8%, from 1,040 on August 31 to a 1,125 close yesterday. The move was supported by improving employment data, better than expected retail sales and spending numbers and as surprise jump in manufacturing activity.

But these days, investors don't maintain their convictions, or stock positions, for long. And economic data is having a hard time building on its momentum.

Before May, there were plenty of investors wondering if the stock market had gotten too far ahead of the economy. Sure, stock valuations themselves have stayed within historic norms, supported by strong earnings growth.

 

But with unemployment stuck at persistently high levels, ongoing imbalances in the economy, and record high budget deficits, it’s reasonable to wonder how long earnings growth can continue. Now, after the debt issues with Greece have revealed some serious dissension in the European Union and questions about the future of the euro as a currency, we’ve seen an abrupt reversal. 

At last week’s lows, the S&P 500 was down 9.6% from its highs. Oil prices are down 20%. 

On Monday, when it was apparent that we were in for a big day as futures went limit up in pre-market, I said I wanted to see a candlestick pattern called “three white soldiers.”  

 

Three white soldiers basically means three pretty good sized up days in a row. This pattern is considered very bullish, especially after a period of consolidation. And the reason it’s bullish is fairly easy to deduce. 

 

A period of consolidation for a stock means that not much is changing. The buyers and sellers are pretty much in agreement as to what it’s worth. And so the price doesn’t change much. 

Investing in gold is often called a “fear trade.” In times of crisis, it’s believed that gold will hold its value, and even rise, while the value of paper currencies and other assets fall.  

 

If you bought SPDR Gold ETF (NYSE:GLD), which seeks to track the price of physical gold, 2 years ago, you’d be up around 36%.   

 

The S&P 500 is down around 15% during that time.   

 

You probably already know that gold hit a new all-time high yesterday at $1,200 an ounce. And even though other traditional measures of fear – like the volatility index (VIX), bonds and even stocks – didn’t move much today, the move in gold can’t be ignored.  

Apparently, the going rate for a 404 point rally on the Dow Industrials is $1 trillion. Any takers? Going once… 

After stocks lost $1 trillion during that surreal 2 minute stretch last Wednesday, it’s nice to get that market-cap back. But there is still work to do. 

Yesterday’s rally took the S&P 500 within range to challenge resistance at 1,165. It will be important for the S&P 500 to move above this level today.

As Germany voted to approve bailout money for Greece, German Left Party lawmaker Gesine Loetzsch was quoted as saying "Speculators are Taliban in pinstripes, and people in our country must be protected from these Taliban…”  

 

It’s scary to me that any political leader could voice such an inflammatory and downright naïve opinion.   

 

If a hitter in baseball can’t hit the high fastball, then that’s exactly what he will see until he makes an adjustment. When Yahoo! failed to take advantage of its early-mover status on the Internet to implement a viable paid advertising model, it opened the door to Google.   

Just yesterday, we discussed how stock market plunges can be set off by what amounts to a “global margin call.” And that’s exactly what yesterday’s decline felt like, as the selling was relentless.  

 

There were no bounces, no dead-cat rallies as the selling built pressure built until it reached its crescendo.   

 

That crescendo, a 998-point spike lower on the Dow Industrials, was caused directly by some computer-based trading programs gone haywire. (There’s no other way to explain how Accenture (NYSE:ANC) could drop from $40 a share to a penny.)  

Will this be the Greek bailout plan that sticks? We’ve seen enough stops and starts that I can’t blame anyone for being a little skeptical. Or even a lot skeptical.   

 

But this time, Germany Chancellor Angela Merkel is doing a victory dance as Greece was forced to accept some pretty strict austerity measures to get its budget deficit below the 3% the EU mandates by 2014.   

 

Greece was originally asking for $55-$69 billion in aid. The final package comes in at $146 billion. That’s a big difference, but it makes sense. Greece needs some cushion to assure investors that it will be able to pay its debt.   

The S&P 500 moved back down for retest of 1,165 support/resistance point yesterday. That important level held, but it’s interesting to see what lead to the retest.   

 

Basically, yesterday’s decline was the result of currency values. The U.S. dollar rose against the euro as more signs of dissension in the European Union add uncertainty to the future of the euro.  

 

The root cause of the dissension, the ongoing debt issues in Greece and now in Portugal, is somewhat irrelevant. Greece will get the bailout loans it needs. And whether they come cheaply from the IMF or a bit more expensive from the EU central bank, they will come.   

 

The overriding issue is that Germany is demanding IMF involvement. Other European countries see this as an internal matter for the EU to solve. From that perspective, we can see the Greek debt solution as a chance for the EU to demonstrate its cohesion.  

 

And Germany is throwing a monkey wrench into the whole thing. 

That was quite a show Maguire Properties (NYSE:MPG) put on yesterday after it reported 4^th quarter earnings. It opened down, around $2.50 a share, and then marched steadily higher for the rest of the day to close at $3.54.   

 

Maguire’s cash reserves are rising after it walked away from a few underwater properties and sold a couple others. Investors seem to be saying the stock is on more solid ground now – volume was monstrous.  

 

While I’d love for Daily Profit readers to have participated in yesterday’s gains, I stand by my recommendation to take your profits on the stock before earnings. Earnings are a big uncertainty. Maguire could just as easily have dropped yesterday. There’s always risk when investing, and perhaps more so with a stock like Maguire. It would have been irresponsible of me not to have you take profits before earnings. 

I got this letter in my inbox yesterday:   

 

Good morning Ian,   

 

I followed your instruction and bought MPG at 1.50 per share, today, it goes crazy. Thanks a lot.    

 

I really like to read your articles.   

 

Sue   

 

I first discovered Maguire back in September, 2009. As part of my daily routine, I check in on the stocks that are moving the most every day. You can find this information on Yahoo! Finance by clicking on this link:  http://finance.yahoo.com/gainers?e=us.  

 

This list simply shows the stocks that are putting in the biggest moves of the day. It’s almost always dominated by small cap stocks. You’ll also usually see a few regional banks that are up 15% on 3,000 shares traded. I’m always curious why these big moves happen to small banks on ridiculously light volume, but I digress…