Stop the Market Insanity

That's what a CNN headline demanded over the weekend.

On the surface, the call certainly seems justified. Just take a look at what's going on in the markets. In August three of the top performing stocks had to be a shock for anyone who can read a balance sheet. Shares of AIG soared 290% outpacing spectacular runs of Fannie Mae and Freddie Mac 250% and 270% respectively.

The last month it seemed the worse the company, the better the shares did. These companies are on the hook for hundreds of billions of dollars in bailout money. They're essentially worthless, but the market didn't seem to care.

But if we take a step back, we can see how one person's "insanity" actually makes a lot of sense. All of the recent market action does make sense if you look at what's going on in the markets. More importantly, the run in these "garbage stocks" signals a very, very big opportunity is just around the corner...

[ Read More ]

As most readers know, we're pretty excited about the near-term and long-term potential for silver.

Over the past few months we've looked into why silver has so much potential. We looked at how it was poised to be a huge winner when inflation really sets in. Also, we looked at how silver, as dual-purpose metal, will do well whether the recovery turns out to be real or it's simply another case of great expectations on Wall Street. 

In the end though, the market for silver is just like every other market: it's driven by buyers and sellers.

And right now, the silver market has just been opened to one of the largest groups of potential buyers in the world - China.

So too, we have with us one of the leading silver analysts in the world, David Morgan, to explain what's going on in China and what it means for silver.

David has been following the silver market closely for more than 30 years. Basically, you'd have a tough time finding someone who knows the silver market better than David.

Please enjoy...

[ Read More ]

When is the market going to fall?

That's the question I'm asked most often. And for good reason too.

Since the March lows, the Dow has rallied more than 45% in just 170 days. Throughout it all, there have been countless comparisons to the 1929-30 rally. A few months after the 1929 crash, the Dow put in a temporary bottom too. The index went on to rally 46% in 148 days. This has some bears saying the rally is living on borrowed time.

True - the rally has been strong and it is showing signs of slowing down, but it's hardly unprecedented. The greatest stock market rally in history makes the current run-up look quite tame. In 1932 the Dow soared 111% in just 98 days.

That's what is keeping the bearish sentiment so high. September is only a few days away. September, on average, is the worst month for stocks over the past 50 years.

Of course, monthly averages are hardly good at predicting the future. If they were, we'd all simply short the market in September and buy in December and January (two of the best-performing months) and retire.

The likely real reason for the average returns being so low is coincidence. Dragging September down has been the 1987 crash, Russian debt default in 1998, September 11 terrorist attacks, and last year's meltdown.

That's just a few bear arguments that I've heard in the past few weeks. I still believe this is a bear market rally and haven't turned truly bearish yet (except in a few places - e.g. "hot" auto parts stocks). There's no doubt a downturn will come. But here's the three indicators you should watch for to see when the next leg of the downturn is coming...

[ Read More ]

Is there an investment better than oil?

It seems to many, oil has it all.

Oil is a popular way to protect against inflation.

It's truly a liquid asset. Someone, somewhere, always needs oil. It can be bought and sold very easily.

Also, oil is tough not to keep track of. The financial media gives us daily updates on gasoline prices.

On top of that, even slight increases in demand can send oil prices soaring. For instance, world oil consumption increased from 76 million barrels per day in 2000 to 87 million barrels per day in 2008. Meanwhile, oil prices climbed from around $30 per barrel in 2000 to average more than $80 a barrel last year. A 14% increase in demand led to more than a 150% rise in prices.

There's the "Peak Oil" argument too. Which makes sense in there isn't too much "easy" oil left, but there's still plenty of oil in the world. It's just more expensive to produce. Also the truly economically viable alternatives will come along, but they're realistically years away from mass implementation. Remember, it took a couple of decades for the world to get rid of its addiction to whale oil after Peak Whale Oil.

So oil doesn't look too bad. At $74 a barrel though, it's not too good to pass up either.

There is, however, one energy sector which is looking much better than oil at the moment. A sector growing much faster than wind and solar power. A sector which doesn't require any government legislation (ref: Cap-and-Trade) to make it economically viable. And one that has China, ExxonMobil, and other deep-pocketed energy heavyweights cutting multi-billion dollar checks every few months.

And best of all the investment opportunities will be limited. So when the big money wakes up to this high-growth energy sector, there will only be a few options for them to plow money into...

[ Read More ]

There aren't too many hard and fast rules to be a successful investor.

After all, investing successfully at times requires you to flexible or rigid, take action in a plodding or swift manner, patient or impatient, and it all depends on ever-changing circumstances.

There are a few rules, however, which can be used in any market. Below are 10 rules developed by Bob Farrell who rose to the chief market analyst spot at Merrill Lynch during his 25 year career. The rules, although developed years ago, seem tailored for the current market conditions...

[ Read More ]