August 26th, 2009 by Money Manager

Stocks are supposed to go down, but they don’t want to just yet.

World stock markets declined sharply Monday. The trouble started in Shanghai, where the benchmark index fell 5.8 percent, its biggest loss since November. The Dow Jones industrial average’s 2 percent decline that day actually understated the weakness here in the U.S.

The widely stated reason for the tumble was renewed worries about the strength of the global economic recovery. But there doesn’t have to be an official reason. In my view, it was simply a matter of overdue profit taking.

After all, news on the economy has actually been improving. And the profit taking lasted just one day. U.S. stocks have since made up for Monday’s lost ground. At today’s market close, the S&P 500 was actually slightly higher than its closing level last Friday.

My long-term view for both U.S. Treasury securities and the dollar is unfavorable. In both cases, it reflects concerns about the massive amount of debt in the U.S., exacerbated by the necessary but costly government programs to bail out the troubled economy and financial system. This makes our government debt securities and our currency relatively unattractive.

For Treasury issues, there are also worries about the large quantity of them held by foreign investors. It’s generally in the interest of these investors to support their large Treasury stakes. But there are also signs that they want to diversify away from Treasury issues, and that they won’t be as willing to buy as much as before even as new issuance will jump in order to fund our mounting debt.

But sometimes short-term trends run counter to the long-term ones.

China and Japan, the world’s largest creditors to the U.S., bought longer-term Treasury notes and bonds at a record rate in June. It’s also worth noting that demand for Treasury securities has risen from U.S. households, which have finally started to save more after years of spendthrift behavior.

China and Japan were heavy sellers of short-term T-bills in June. But total foreign net buying of Treasurys excluding Treasury bills hit $100.5 billion in June.

So while we continue to worry that the U.S. government’s aggressive stimulus program will eventually fuel inflation, this is not yet a major concern for foreign buyers.

In June, yields on Treasury notes and bonds hit their highest levels for the year, with the 10-year yield briefly climbing above 4 percent. That yield has now fallen to below 3.5 percent amid strong buying. Yet investors supposedly are turning more bearish on Treasuries based on the belief that yields will rise (will lower prices) as the economy gradually improves

Meanwhile, the dollar benefited in 2008 as a safe haven amid a risk-averse, global flight to quality during the economic crisis. But as the world’s investors regain a taste of risk, they tend to move out of dollars and into other vehicles that offer better profit potential, particularly in a recovering economic environment.

For the dollar, the direction is more clear: down. While demand for Treasury issues has remained relatively strong despite perceived economic improvement, that same factor is putting pressure on the greenback

The Dollar Index, which the Intercontinental Exchange (a publicly traded global electronic marketplace) uses to track the dollar against six major currencies, is now at its lowest level in almost a year. Stronger economic data tend to weaken the dollar as investors became more comfortable buying riskier, higher-yielding assets elsewhere.

A potential catalyst for a higher dollar would be if the Federal Reserve were to start raising short-term interest rates again. But that’s not in the cards yet.

The big picture for the world’s economy is this. First, many emerging-markets economies are doing well. Second, the economies of many more mature nations stabilized in the second quarter. The U.S., however, continues to lag, although growth is expected to return in the current quarter.

The Organization for Economic Cooperation and Development said this week that its 30 members, developed-market nations, collectively should start to grow sooner than previously expected. But the group’s economic recovery will probably still be weak.

The OECD said its member countries stabilized in the second quarter, led by export growth in Germany and Japan. The OECD’s report said that gross domestic product (GDP) of the OECD’s major seven countries (Canada, France, Germany, Italy, the U.S., the U.K. and Japan) slipped 0.1 percent from the previous quarter between April and June after dropping 2.1 percent in the first quarter. The U.K. and Italy lagged the most behind, followed by the U.S. at a 0.3 percent drop.

The outlook from Europe, where the OECD is based, is much the same as it is here. For example, the International Chamber of Commerce there said that high unemployment rates and rising public debt in many countries bring concerns about a sustained recovery in the global economy.

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August 25th, 2009 by Money Manager

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August 23rd, 2009 by Money Manager

Black Hills Gold

Black Hills gold is the favorite jewelry of Laurie Holt, Amanda Lewis and Lorraine Matthews of Dallas, TX. This especially attractive gold is usually crafted into traditional designs that features yellow, rose and green gold molded into leaves and grape clusters.

The Black Hills Goldrush

The Black Hills were part of the Sioux reservation. But, when gold was discovered there, people like Fred Manuel, Henri LeBeau, Steve Utter, Tom Miller, Seth Bullock and Samuel Fields rushed there, regardless of any treaty with the native Sioux. The Black Hills Goldrush began in earnest in 1874. At first, the miners found loose gold in the soil and in the riverbeds that is known as placer gold, or gold that has eroded from somewhere else. Places like Custer and Whitewood Creek rapidly became small cities. Those that believed there must be a mother lode went on a search for the location of the gold ore running through the rock, and when they found it, they named that mine the “Homestake.” The Homestake mine produced massive amounts of gold… maybe even ten percent of the world’s gold supply. It finally was shut down in 2001.

The Unique Production of Black Hills Gold

The fabrication of Black Hills gold is as unusual as its history. Using bars of pure 24 karat gold, silver and copper, the only necessary factor for the resulting work to be called “Black Hills Gold” is that the bracelet or necklace be fabricated in the Black Hills of South Dakota. The gold and copper can be mined anywhere – even Afghanistan, Costa Rica, Andorra, New Caledonia or Wake Island.

The gold is compounded with copper to create the 12 karat rose gold, and silver is united with the gold to produce the 12 karat green gold. The resulting colors of gold are then rolled to varying thicknesses to be made into unique orders of jewelry. Each special piece is stamped from the thin sheet using dies and patterns. The unique pieces are then all set to made into necklace using pre-cast bases.

The bases are first burnished, either by hand or tumbling. When the bases are polished to a nice sheen, the individual pieces are either hand-soldered onto the base or they are attached in a soldering oven with several other pieces at the same time. After soldering, the pieces are dipped into a mild acid bath before going through an inspection to see if they meet the exacting standards for Black Hills gold. When a piece passes inspection, it is electroplated with 24 karat gold. A process called wriggling is used to remove the electroplated gold from the rose or green colored parts. This creates a frosty or textured appearance to the jewelry. Every leaf vein is then engraved by hand so it shimmers.

After another round of buffing, the finished piece is ready for wearing. If it needs a amethyst it is sent to the stone setting department for mounting.

Traditional Styles

The traditional pattern of Black Hills gold jewelry was made by French prospector and goldsmith, Henri LeBeau in the late 1800s. He stated he had dreamed of the style when he went unconscious from thirst and starvation. His style is made up of green and rose colored grape leaves, combined with grapes and gold vines. Since he first designed this, the grape leaf design has adorned pendants, rings, bracelets and watch bands in varying patterns. It is such a distinctive pattern that one only has to glance at it to verify that it is a Black Hills gold design.

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August 23rd, 2009 by Money Manager

The consumer continues to be under duress. Job losses continue to mount; while weekly readings are down from their highs, initial unemployment claims are still running above expectations. For those already out of work, they face only a finite amount of unemployment benefits. Housing prices continue to fall, again, at a slower pace, but the effect is still the same as Americans can no longer draw on their home values for spending or count on the ever-rising house price for future wealth increases. Credit lines are being drawn in by card issuers and consumers face high fees for their outstanding debt balances. Without question, these factors have had their effect on consumer spending (and saving). Retail sales continue to contract more than economists have expected. The savings rate, at 4.6 percent, remains close to the 13-year high it reached in May.

The tough consumer environment clearly is having an effect on retailers, who have largely struggled through this deep recession. At the expense of profits, most have cut prices to keep up sales volumes; job cuts and inventory reductions have helped support profit margins, but there is no getting around the dismal environment. On the other hand, some retailers have held their own. One in particular has been Wal-Mart (WMT). The world’s largest retailer reported second-quarter earnings last week that not only beat analysts’ expectations, but also showed growth versus the year earlier period.

For the first time in five weeks, the market posted a weekly decline last week, changing the underlying mood from overwhelmingly bullish to more cautious. Market participants concentrated on retail sales numbers and on the decline in consumer confidence as measured by Reuters and the University of Michigan index of consumer sentiment.

While the auto sector has received a boost from cash-for-clunkers-related sales, the overall picture continues to reflect a consumer who’s stretched beyond his means. Foreclosure filings rose to a record, and retail sales declined the most since March. Americans are increasingly seeking bankruptcy protection: 35 percent more individuals or households file for bankruptcy today than a year ago, and the numbers are moving higher. The trend is also very disturbing for businesses, with a 64 percent increase in filings over a six-month period versus a year ago.

These are just some of the reasons why I am concerned that the market’s advance is overdone. The government spending, which has been replacing both consumer and business demand, has been helping the economy, but this just cannot replace all the demand that’s been lost – and cannot go on forever.

The other day, Warren Buffett reiterated his views on the government spending by writing an op-ed piece for The New York Times. Buffett called it a “butterfly effect” as the consequences of the government spending could exceed the size of it. With the U.S. economy “out of the emergency room,” now could be the time to address the size of that spending. “With government expenditures now running 185 percent of receipts, truly major changes in both taxes and outlays will be required. A revived economy can’t come close to bridging that sort of gap.”

Buffett finished his op-ed article with the following: “Unchecked carbon emissions will likely cause icebergs to melt. Unchecked greenback emissions will certainly cause the purchasing power of currency to melt. The dollar’s destiny lies with Congress.” I cannot agree more. This is why I like the markets of those countries that are commodities-rich, expecting commodities to benefit from the weaker dollar. And, of course, I like gold – the ultimate dollar hedge.

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August 15th, 2009 by admin