Everything Stays the Same

Nothing's been happening in stock market world other than creation of wealth for those who stay invested. Unless you are a day trader, in which case you are probably losing more money than you make under the guise of "all it takes is one big winner". Statistics are against day traders and stock pickers, which is why I am not one.

A New Way to Think about Risk

There are too many investment options out there, so I thought I'd take a step back to look at some excellent places you can park money. I also want to introduce a new way to think about risk tolerance.

What to do About Real Estate In Canada

Here's the macro picture of Real Estate in Canada.

In many parts of Canada housing has been white hot. The data is rather shocking from an investment standpoint. Let's take a look at some numbers.

Canadian house sale prices on average, rose by 8.2% year over year.
Two Story single family home prices alone rose by 21%
Townhouse/row unit prices rose  by 17.9%
One-story single family homes rose by 16.6%
Apartment/condo units rose by (16.3%)

http://creastats.crea.ca/natl/index.html

Toronto and Vancouver remain Canada's lava-like hot spots for housing. If you bought a single family home five years ago in Toronto, chances are you are now sitting on a 70%+ gain. That's INSANE! Real estate doesn't produce those kinds of gains so quickly in a normal market. Usually, you could expect your property to gain 2-3% per year. Not 15-20%.

What we are seeing in Toronto and Vancouver is a red-hot, white streak, run away housing market, which is creating a housing bubble. And it started with Canada's exemplary financial system. After the crash of 08, Canadians realized that our banking system had protections in place which prevented us from being shocked like the US by housing. One of those protections was our limited exposure to sub prime mortgage securities, and strict mortgage lending rules.

Well, those strict mortgage lending rules are no big deal for the wealthy folks migrating over from Asia, who have been snapping up real estate in Vancouver and Toronto for years, driving up prices in the process. So as far as people who were born and raised in Canada, the rules generally work, but that's also the problem. The same rules that work for Canadians to keep a lid on our housing market make no difference or impact on the ability of wealthy foreigners to drive up prices with foreign funds while us working stiffs are stuck renting (which is also becoming ridiculously over-priced), or living an hour (or more!) commute from work through mile after mile of snarling traffic.

On top of this, mortgage rates have stayed at near all time lows. Today, a $500k mortgage will set you back $2,000 per month if you opt for the monthly payment plan. If you make over $100k a year, it's doable. But if you are like the rest of us and make less than that, it's not feasible unless you rent out the basement and most rooms in the house.

If you own a home in Vancouver or Greater Toronto (or a second rental property), the advice I'm getting is that it's a fine time to sell and move someplace that isn't jam packed with people, smog, and a cost of living so high that you can be house poor even if you make 100k a year and live in a modest townhouse. In fact, the time may be quickly passing to jump ship out of the GTA and Greater Vancouver housing bubbles since both Ontario and BC have passed/are about to pass new laws which restrict the ability of foreign buyers to purchase property. This is going to put a hard lid on housing prices going forward.

Still, could prices climb higher? Yes, they most certainly could. At the height of Japan's housing bubble, it was said "the value of the Imperial Palace in Tokyo exceeded the value of all the real-estate in California". So yeah, prices could still go higher. The question is, do you have the guts to get out when things hit the roof? If you don't, you'll likely go bankrupt if you can't wait out the carnage.

So what am I doing? I have decided to sell. I have two properties. I will be selling one, and using the proceeds to pay off a second mortgage, effectively taking my exposure to a housing market shock to zero. Since I'll be living in the second property, it doesn't matter if the price crashes by 80% ... because I need to live somewhere and I'm young enough to be able to wait out a recovery.

Although I would strongly like to get into the market in Southwestern Ontario, I'm staying far away until I can actually afford the housing there (which might be never, and that's OK).

Consolidation Game

Since the new primary bull market trend was confirmed, I have been watching several investment firms and newsletters.

Many of the newsletters seem to be saying one thing: that the current trend must end soon. While the firms seem to be saying that gravy train will never end, but then are crying doom every time the market drops. It's insanity.

So Close! Or is it? Here are The Possibilities

It's funny how the relationship between the Dow Jones Industrials and the Dow Jones Transportation indexes can mirror what I'm already seeing.

You see, I do quite a bit of research even though my posts are short. After I've completed my research, I look at the Dow relationship and I am often surprised that this one index relationship mirrors what I've been concluding based on my research. It could be confirmation bias, but then again, I've made some 'surprisingly' accurate calls. This isn't an accident, nor am I some sort of magician. It all comes back to Dow Theory.

Changes to the Funds Page

Check them out, and enjoy!
https://goldavalanche.blogspot.ca/p/blog-page.html

Close to "All In" - Nov 27/16

The Dow Jones Transportation Average is closing in on the all important 9199.65 level I want to see before deploying the balance of my cash into the broad markets.

Something's not Right with the Dow Jones Industrials

I was shocked to see the Dow Industrials rally all the way back up after selling off. I was fairly certain that a new sell off was imminent. I guess that's why trying to time the market exactly is a fool's errand.

However, I'm almost completely convinced that if the Dow doesn't make another new high this week, it's game over for buying stocks --- for a little while. The Transportation average hit another new all time high today, and the Dow industrial failed to confirm. This simply means we need to continue to watch the Dow LIKE A HAWK. But I'm growing more and more confident that the time to make big one way bets either way on stocks is a bad idea.

For now, I'm placing all broad market bets on hold.

We won't know if the new trend is 100% confirmed for a little while, but we can start researching now about how we will approach a market sell-off. That way, when the new trend is confirmed, we won't be caught off guard and we can pull the trigger with confidence.

I bought the Vix a while back, as I thought "for sure" there would be a market sell-off 'soon'. What I wasn't considering is that there was no technical or logical basis for a sell-off, given a number of factors including increasingly positive job reports, and an expanding monetary base. I should have waited for confirmation instead of buying with my emotions. Now I'm stuck in a trade and am down 50%. Yuck.

Lesson learned.

NEVER short the market unless you know with a high level of confidence that is based on real evidence that you'll win.

Survive The Coming Slow-Burn Crash

By Money Morning Editorial
www.moneymorning.com

The money pundits in the press and on TV are gleefully reporting that the blue chips are up over 13,000. They seem to be saying, "Happy days are here again!"

But they're completely wrong.

The seemingly miraculous climb in the Dow - from 6,443.27 after the market crash in 2008... to over 13,000 today- didn't happen all on its own. It has taken trillions of dollars of money from the U.S. Federal Reserve to boost these share prices back near their 2007 highs. 

That means this run of market growth isn't related to real growth. The Dow you're invested in is dangerously inflated. The value of the REAL Dow is much lower than what you see every day. 

In fact...the REAL Dow is at 8,800 right now - and when this market bubble pops, that's where the Dow will go. The real explosion will happen after January 1,2013. That's when the unavoidable "fiscal cliff" of tax hikes and spending cuts will begin to inflict massive damage on the economy.

If you don't protect your investments now, you could see more than half of your money wiped out by the coming financial crisis and resulting market collapse. In a minute I'm going to give you specific and immediate steps you can take to guard your money. But first, let me show you exactly what is happening. 

The Real Value of the Dow

The reason the Dow's real value is a staggering 50% lower than where stocks are now trading stems from intervention by the U.S. government. You see, the U.S. government has intentionally decoupled the stock market from the economy. That is, the connection between the stock market and the U.S. economy has been erased. Obliterated. And that's a problem. A big problem. 

EDITOR'S NOTE: How big a problem is it? A group of prominent economists believes a devastating economic collapse is not only coming... it's a mathematical certainty. The evidence is startling... and undeniable. See it here.

We can pinpoint the precise moment this "decoupling" began - February 23rd, 1995, at the Federal Reserve's bi-annual Monetary Policy Report to Congress. That's when Fed Chairman Alan Greenspan first suggested the loose monetary policy that has stolen the American dream from so many investors. This abrupt reversal of policy spurred an immediate rally in stocks. And overnight, an unthinkable precedent was put into effect.

The Fed's policies could now be used to pump up the market - not strictly as an emergency measure in response to a national crisis, but just because. This opened the floodgates to Quantitative Easing, money printing, interest rate manipulation, and other "stimulus" shenanigans that have become The Fed's MO over the last 17 years. The result: An artificially engineered "Franken-bubble" unlike any in U.S. history.



Remember what happened after 9/11? Greenspan cut interest rates to stimulate the economy, creating the housing bubble. That caused the "crash" of 2008 - which as you can see, was really just the market reverting to its fundamental economic value. However, before the Fed started manipulating the market in February of 1995, the Dow and S&P 500 accurately reflected America's economic growth. 

The following facts plainly show this. 

Why the Dow Should Be at 8,800

Since 1947, U.S. GDP has grown by an average of 3.3% annually, with an average inflation rate of 3.4%. That's a combined 6.7%. At the end of '47, the Dow sat at 177.58. Multiply this by 6.7% - compounded annually through 1994 (47 years) - and you'll get 3,742.

That's almost dead-on the 3,793 reading the Dow posted at the close of 1994. However, since February of 1995, America's average yearly inflation rate has been 2.48%. And the average annual GDP growth has been only 2.38%. That's a combined 4.86%. This means that if the historic relationship between GDP growth, inflation and the stock market had held true after 1994, the Dow would've closed the second quarter of 2012 at 8,808. 

A recent report from the Federal Reserve Bank of New York proves that these calculations are accurate. According to that July 11 report, as much as 50% of the S&P 500's gains since 1994 are due to market reactions to Fed monetary policy announcements. 

What this Means for You

There are two critically important things you need to know if you want to actually make any money in the comatose, Franken-bubble market we're facing.

ONE: The Fed's "market cocaine" is losing its pop - The effectiveness of Quantitative Easing and other stimulus at pumping up equities is diminishing fast.

For instance, QE2 expended 50% more stimulus cash for every point it raised the Dow, compared to QE1. And The Fed's "Operation Twist" is costing even more per market point than did QE2. This latest stimulus attempt from the Fed could do even less. And those who get caught in it could have a big price to pay.

TWO: The economy won't "re-couple" with stocks until 2021 - Eventually, today's hyper-inflated stock market will reconcile with the rock-hard realities of the U.S. economy. It's simple economic physics.

So, let's say that for the foreseeable future, the U.S. economy posts a modest 2% annual growth, and 3% annual inflation. Using the same formula that held true from 1947 until the market's 1995 "decoupling" from the economy, it'll be nine years before the real economic fundamentals catch up to where the market is today! Here's what these two things mean.

For at least nine more years, we can expect a "comatose" stock market - flat overall, with occasional spikes and drops of volatility. And that's only if the U.S. economy grows at 2% annually. Right now, there's very little evidence to suggest that the U.S. economy is capable of growing at a 2% annual rate for the foreseeable future.

Morgan Stanley just revised downward its forecast for America's GDP growth in 2013 - to 1.75%, from this year's 2% growth estimate. MS also issued a warning that because of the unavoidable "fiscal cliff" of tax hikes and spending cuts, the U.S. GDP could get a lot lower after 2013.

But even this gloomy forecast could be extremely optimistic. So the best case scenario: The Dow takes nine years to catch up to its real value, meaning little to no growth in the market. The worst: The Dow collapses to its real value - and takes 50% of your money with it. 

Four Ways to Protect Your Money from the Dangerously Inflated Dow

Now that you know the real value of the Dow, would you trust your savings, your retirement, to this over-inflated market bubble? Here are assets that will let you not only hold on to your money but also turn a profit while the Dow corrects to its real value. 

1: Precious Metals

While QE1 and QE2 clearly did little to strengthen the U.S. economy, their effects on the markets were undeniable.

Commodities soared.

Since March 2009, gold is up 97%, silver is up 162%, and the Continuous Commodity Index (CCI) is up 55%. Thanks to the Fed, this trend has just been rebooted. That means you should maintain exposure to inflation-sensitive assets, like precious metal favorites silver and gold. They will continue to do as well or better than they did during QE1 and QE2. The only difference with this round of QE is that it's going to be much bigger and go on much, much longer. So as a result of the Fed doubling its balance sheet over two years, Bank of America says they expect massive inflation, enough to see gold double as well. They foresee gold to $3,350 an ounce. The outcome is so obvious now even a major bank can see it coming. 

2: Oil

Just like precious metals, oil prices have been on a tear since 2009, up 122%.  While oil's price rise cooled this year, new forecasts show that will not be the case for 2013. Bank of America expects inflation to double oil prices, sending them to $190 a barrel. But there's a lot more to oil's price rise than inflation.

Money Morning oil expert Dr. Kent Moors outlined three key reasons other than inflation that point to higher oil prices in 2013 and beyond: 

• Demand continues to rise in those parts of the world most directly affecting price. Those areas are not North America or Western Europe, but are markets in which unconventional oil will not have an effect for some time.
• Oil production costs are rising. The cost of extracting a barrel of unconventional oil extracted will increase the price of the crude. Energy research experts Bernstein Research said that the average marginalcost of oilaround the world today is $92 a barrel, and is set to rise because it is more expensive to lift, process, refine, and distribute these new sources of crude oil.
• Oil prices are affected by the regionalization of supply for both crude and refined oil products. As we move toward 2015 and beyond, the demand curve will dictate pricing premiums for regions where imbalances of supply are present.

3: Dividends

Dividends represent the biggest source of returns you can get from stock investing. Now, to a lot of people, dividends may not sound very sexy. That's because they don't realize that 90% of the U.S. stock market's returns over the last century have come not from share appreciation, but from the cash that companies pay their shareholders. 



When you think about this, it's like having the thousands of people employed by these dividend-paying companies all working to make you rich. But you can't just go for high yield. As we enter a period of slow economic growth, you have to find companies that not only have a long history of dividend increases, but can survive a U.S. recession. 

That's why Emerson Electric (NYSE:EMR) and Procter and Gamble Co. (NYSE: PG)rank among our favorite dividend stocks. They have more than half of their business overseas. Both have raised their dividends every year since 1957 and 1954, respectively. Emerson yields 3.2% and P&G 3.6%. 

Another top dividend stock is OmegaHealthcareInvestors(NYSE: OHI). OHI is a real estate investment trust (REIT) andthe company's leases have an inflation-protection clause built in, so your nominal yield - in this case 7% - is even better than it looks since the dividends tend to rise with inflation. 

4: Farmland

Legendary Wall Street trader Jim Rogers recently offered this unconventional advice: If you want to get rich, you should be investing in farmland. "It's the farmers, the producers, who are going to be in the captain's seat when the prices go through the roof," he toldThe Australian Financial Review.

Over the last 100 years farmland, based on income and capital appreciation, has consistently delivered positive returns -- with only three brief periods of negative returns (1930s, 1980s, and 2008). And as the saying goes, they just aren't making any more of it. So a severe imbalance is developing in the supply and demand of farmland. Farmland is also an opportunity to invest in an asset class not directly correlated to stocks and bonds, and one with significantly less volatility. Rogers believes investing in farmland is "in its third inning." In other words, there's still plenty of time to get in.

One way is to invest in agricultural futures through ETFs like the PowerShares DB Commodity Index (NYSEArca:DBC). The fund tracks an entire basket of agricultural commodities including corn, soybeans, wheat, cotton, sugar, coffee, cattle and pigs.

There's also Adecoagro S.A. (NYSE:AGRO), a Luxembourg-based company that owns significant farmland holdings in South America. It owns nearly 500,000 acres of farmland, consisting of 23 farms in Argentina, 13 farms in Brazil, and one in Uruguay.

Canadian citizens can invest in Agcapita Farmland Investment Partnership, a farmland private equity fund, with significant holdings in Saskatchewan, Alberta and Manitoba. Jim Rogers is actually an advisor to the fund, currently open to retail investors for a minimum investment of $10,000.

One More Thing You Should Know About...

As you now know, governments and central banks of the world have spent and borrowed us into oblivion by wasting our tax dollars, hard work, and loyal citizenship. And all the money printing by the Fed has occurred while our debt has surged to astronomical levels... Eventually foreign countries are not going to trust that investing in America is a safe bet.

Even worse, our debt is creating an incomprehensible threat that is quickly bearing down on all 313 million Americans. 

To understand the truth about America's economic future, take a look at this gripping investigative documentary. 

You owe it to yourself to learn what else the government is hiding from you.

Source: http://moneymorning.com/2012/11/15/dont-lose-half-your-savings-four-ways-to-survive-the-coming-crash/

Retail investors are speculating on a new bull market. Should you?

By R. McGuire
www.goldavalanche.blogspot.com

Answer: If you want to risk your money, go for it. As for me, it's too risky of a play at the moment, because we are stupendously close to potentially receiving a tried and tested reliable buy signal.

Here's an overview of what US retail investors have been up to.

• Since 2006, $600 billion piled out of equity funds.
• At the same time, $800 billion flooded bond funds. 
• In the past TWO WEEKS, $35 billion has flowed back into stock funds. $19 billion of these funds are in long-only.

Source: http://www.cnbc.com/id/100416162

Ok, so here's the deal. You and I both know that in order for a new primary bull market trend to be confirmed, the Dow unequivocally must break it's old high. The $35 billion of retail money which has flowed back into stock equity funds is thus nothing short of speculative. This kind of herd move is potentially dangerous. Sure, the herd could be right that a new bull market is upon us, but if the Dow can't break its all time highs while the trans continues to make new highs, all that speculative money that flowed back into stock funds is at serious risk.

This is, incidentally why I am still holding corporate and government bonds, as well as gold and gold equities.
So, I will repeat my words of caution to my fellow retail investors: If you have cash on the sidelines and want to use it, I would be weary of going long on stock funds just yet. At the same time, I also would not short this market. It's essentially a no man's land at the moment. If you are itchy to put your cash to work someplace, please do it cautiously. Better to miss 5% of a bull market that will surge 50%, than to get in at near the top of a bear market that will slide 20%. At this point, the Dow only needs to go roughly 150 points higher to beat it's all time high. Waiting for that moment now is not only wise, but prudent. As long-term investors, our timing doesn't have to be perfect, but we do not want to get stuck on the wrong side of the primary trend.

In fact, I might even wait for the Dow to double confirm a breaking of its old high before buying into more equity funds.

Happy (and patient!) Investing,
R

Merry Christmas! Dec 26, 2012 - Hold, Not Sell

By Ryan McGuire
for Gold Avalanche

The next several days are important ... for your families! Take it easy with family and friends, and don't check the ticker too often. It looks like both indexes will simply bounce off of support and continue to move higher.

Why? Because both indexes failed to break out of previous highs. That means they are finally starting to work together, which is a nice change. Hopefully this lasts for a while.

Since the previous intermediate trend was up - signaled at the last intermediate bottom, and since the primary trend continues to be up, and since no signal has yet been given to alert us to an imminent bear market threat, I shall hold and wait.

Peace,
R

Sept 3, 2012 - Chart to keep an eye on (S&P 500)

By Scott Pluschau
www.scottpluschau.blogspot.com

First let me say that it is great to be back at the helm going into next week. 

The last time the S&P 500 had any pattern worth mentioning it was the "Ascending Triangle" pattern that developed over a week in early August; see one hour chart left hand side below.  There was a sign of potential capitulation from the shorts when a spike high came through the daily chart's bullish parallel rising channel, see right hand side below.  The "Measured Rule" profit taking target captures nicely the shorts being flushed out and the longs ringing the register.

I am going to show multiple charts to keep them as clean as possible.  I am using a one hour chart at first to fit in the previous price action and drawing.

The ascending triangle shows increasing demand with each selloff. This can be seen by the rising trendline on the one hour chart below.  If you are a bear or short, and the market will not go lower and take out a previous "swing low", your side is weak, and in futures the weak get hunted down by the strong. 

(Click on charts to expand)

What development is there now?  I am keeping my eye on a "Descending Triangle" going into next week, see left hand side 30 min chart below.  There has been demand at the 1,395 level and a sign of increasing supply with each rally failing to take out the previous high.  A breakdown here and a secondary target becomes the lower trendline of the channel on the daily chart, right hand side below.

The bulls should still be shown respect with the larger degree timeframe in a bullish rising channel.  The rising channel in the daily timeframe shows increasing demand from longer term traders.  What that means to me, is I would be conservative with any quality short trade setups, and do not marry them.  

Going into next week I am looking for a short below 1,395 the way it looks right now.  Otherwise I am comfortable on the sideline.  Trading inside this range in the meatime would be flat out guessing with my methodology, and I have no "edge" guessing.   Other potential trade setups will be to the long side above 1,410 in the smaller degree timeframe.  I know what I am looking for, and I will be ready to strike when presented with a favorable trading opportunity.  Position sizing continues to be "conservative".

When might I begin to get "moderate" or "aggressive"?  When the probabilities for success increase.  That time will come.

An email update on the new service was sent to potential subscribers yesterday and another will be sent later today.  Next Sunday August 9th, a new journey begins. Will you be joining...

twitter/ScottPluschau
Consulting? ScottPluschau@gmail.com
Members to Scott's blog are appreciated
Comments are welcome

Source: Chart to keep an eye on (S&P 500)

 

Is Gold Still "The Next Greatest Trade Ever"?

By Peter Krauth
www.moneymorning.com

Believe it or not, the housing crash wasn't all heartache and tears. When the mortgage bubble burst a few select investors made a boatload. One of them was hedge fund titan John A. Paulson. In what has been called "the greatest trade ever," Paulson earned $15 billion for himself and his clients as the rest of the markets fell hard.

But thanks to artificially low interest rates, incessant money printing, and ongoing stimulus plans, the same opportunity is beginning to build. I'm talking about gold, where the "the next greatest trade ever" is only a matter of time.

You see, there's no mania like gold mania.

And despite the fact that we've been in a powerful gold bull market for more than a decade already, I believe the best is yet to come for gold prices. As it happens, so does John A. Paulson, who is already lining up for round two.

Here's why...

Billionaires Love Gold

As the dust settled on his housing mega gains, Paulson's research led him to conclude the demand for gold would be strong in the years ahead.

Thanks to profligate central banks and ongoing fear about the sustainability of our fiat financial system, Paulson decided real money was the place to be setting up his next great trade.

So he put a huge portion of his wealth into one asset class: gold.

In January 2010, Paulson launched a dedicated gold fund, which invests in gold stocks and gold derivatives, committing $250 million of his own capital. Now to be fair, the results have been less than stellar so far. Thanks mainly to mining stocks, Paulson's Gold Fund was down 23% in the first half of this year. But here's the thing. His original bets against housing fell at first, too. And we all know how that one turned out. Over time, Paulson's thesis proved to be spot on.

So what has Paulson been buying lately?...

Thanks to a recent "Form 13F" filing we know Paulson is still on board since he's been aggressively adding to his gold exposure of late. According to the most recent filings for Q2, Paulson boosted his holdings of SPDR Gold Trust ETF (NYSEArca: GLD) by 26% to 21.8 million shares, and bought more shares of NovaGold Resources Inc. (NYSEAMEX: NG). With these moves, Paulson's $21 billion hedge fund is currently at 44% exposure to gold and related equities, up a third from 33% in Q1.

What's more, in February Paulson advised his clients that he saw gold as his favored long-term holding, since it offers simultaneous protection against debasing currencies (money printing), increasing inflation, and rising euro risks. And in April, he told investors that gold miners were trading at historically cheap levels.

Yet Paulson's not alone in his love of the shiny metal. George Soros' Form 13F filings reveal the prolific hedge fund manager is something of a gold bug as well.

In Q2 Soros not only added some 884,000 shares of GLD, worth $130 million, but he also unloaded almost $50 million (1 million shares) in financials and banks, including names like Citigroup, JPMorgan, and Goldman Sachs.

Given his connections to the highest levels of global politics, finance, and banking, Soros has to be one of the most well-informed money managers around.

For investors, that kind of action is hard to ignore.

Gold and Gold Stocks are Headed Higher

But that's not the only reason to think that gold is the next greatest trade ever. Fact is, there are several more reasons, both fundamental and technical, why gold is primed for big gains from here. They include:

• Seasonal Patterns. Since January 2002, gold has averaged 20.8% gains from the months of August through the end of February.
• Gold Demand Sustained. According to the World Gold Council (WGC), gold demand volume was down 7% in Q2 (year over year), but stable in value terms at $51.2 billion, since the gold price was up about 7%.
• Central Banks Buying. Gold reserves increased by 157.5 tonnes in Q2, the largest quarterly net purchases since the official sector shifted into net buying mode in Q2 2009, according to WGC. Developing nations were again the biggest buyers.
• Gold is Technically Cheap.Frank Holmes of U.S. Global Investors says that, using the 12-month rolling return for gold with data from the last 10 years, gold reached an extreme low earlier this month, triggering a Buy signal.
• Narrowing Price Range and Volatility.Since mid-May, gold's been trading in a narrow price range, and daily volatility has all but dried up. This behavior is typical before large moves.
• Bullish Price Action.The gold price has been acting well, establishing higher highs and higher lows for the past three months.
• Gold Stocks Historically Cheap. By several fundamental measures, including price-to-book and price-to-earnings, gold producers are about as cheap as they've been since this entire secular bull launched back in 2001.

What investors need to keep in mind is that gold's price hasn't progressed in a straight line. Instead, it tends to follow a "two steps forward, one step back" pattern.

But even after retreating from last year's high at $1,900, gold has gained an astonishing 78% between March 2009 (when gold was $920) and current gold prices around $1,660.

Paulson knows this set-up as well, which is why he's gearing up again.

As Bloomberg recently reported, "The last time his (Paulson's) stock portfolio had a bigger concentration in gold-related equities than last quarter was March 2009, when U.S. equities hit bottom."

Meanwhile, governments and central banks the world over keep perpetuating the expansion of debt at an accelerating rate. Their solution to the problem invariably is well...debt, debt and more debt.

In this kind of environment, the only logical conclusion is higher gold prices and gold stocks.

That's why I think Paulson is about to cash in on yet another gigantic pay day. There's a reason billionaires love gold.

About the Author
Peter Krauth is a former portfolio adviser and a 20-year veteran of the resource market - with special expertise in energy, metals, and mining stocks. Peter uses the connections he amassed over the years to exploit the moneymaking potential of every kind of commodity. As editor of Real Asset Returns, he travels around the world to dig up the latest and greatest profit opportunity. Peter has also contributed some of the most widely read and highly regarded investing articles on Money Morning. Learn more about Peter on our contributors page.

Source: Is Gold Still "The Next Greatest Trade Ever"?:

A Primer on Dividend-Paying Stocks (NYSE:PG, NYSE:NWN, NYSE:EMR, NASDAQ:CINF)

from Money Morning by Diane Alter
08/30/2012

AOL Inc. (NYSE: AOL) announced Monday it would divvy out $1.1 billion in cash to shareholders, joining the growing group of dividend-paying stocks - although only for brief moment.

AOL will dole out a one-time payment of $5.15 a share to holders of record Dec. 5, for a total of $500 million given out in dividends.

In addition to the whopping and unexpected dividend news, AOL also reported a $600 million fast-tracked share repurchase agreement with Barclays Plc (NYSE ADR: BCS).

The move comes on the heels of a deal inked in April to sell 800 patents to Microsoft Corp. (Nasdaq: MSFT). At the time, AOL assured its plans were "to return a significant portion of the sale proceeds to shareholders."

The move also follows a push from activist shareholder group Starboard Value LP, which had been lobbying for AOL to unload its patent cache and reward shareholders with a dividend and share repurchase program.

Investors applauded the dividend news, sending shares of AOL up more than 3% Monday. The stock has been on a tear, climbing more than 120% year-to-date. While AOL has only planned a one-time dividend, many other companies in 2012 have announced regular payouts.

Dividend-Paying Stocks: Payouts on the Rise

A number of companies are beginning to recognize just how important dividends have become in this era of low-interest savings accounts and certificates of deposits (CDs) that offer paltry yields. In fact, dividends, once a trademark of stodgy blue chip companies, are emerging in full force in the tech sector.

Fisher Communications (Nasdaq: FSCI) made waves Monday after the company's board approved a special dividend of $10 a share payable on Oct. 19. In addition, starting in the fourth quarter of 2012, the company will shell out regular quarterly dividend payments of 15 cents a share.

Cisco Systems Inc. (Nasdaq: CSCO), one of the Internet darlings of the dot.com heyday, started paying a dividend in April 2011 and just two weeks ago nearly doubled its disbursement. The leading provider of IP-based networking announced on Aug. 15 it was raising its dividend from 8 cents a share to 14 cents. Now sporting a 3.2% dividend yield and still sitting on a pile of cash, the payout ratio suggests Cisco can continue to raise its dividend.

Forbes wrote that the move is another sign that tech companies are morphing into the new industrials. In fact, Forbes asked if Cisco, with its rich yield, could now be as reliable as an electricity stock (a group long revered for healthy dividends).

Apple Inc. (Nasdaq: AAPL), enjoying explosive growth with its iPads, iPods, iPhones and iTunes Store, in March initiated a quarterly dividend of $2.65 per share which was paid out in its fourth quarter of fiscal 2012. It also announced a share buyback program to the tune of $10 billion.

Tech isn't the only sector rewarding its shareholders with cash.

Tobacco giant Altria Group Inc. (NYSE: MO), valued for its attractive and often increased dividend, hiked its dividend payout 7.3% to 44 cents a share last week, for a yield of 4.8%. Offshore drilling behemoth SeaDrill Ltd. (Nasdaq: SDRL) also just increased its dividend by 2 cents to a rich 84 cents a share. And Brinker International Inc. (NYSE: EAT), the parent company of Chili's, Maggiano's and Macaroni Grill, also just announced it was boosting its dividend payout 25%, and it too will initiate a stock repurchase plan.

Diversify With Dividend Stocks

Before diving in to dividend-paying stocks, investors need to do their research. Investing for yield takes some planning.

To be properly diversified, income investors need to look across a broad spectrum.

Money Morning Global Investing Strategist Martin Hutchinson said that in addition to the robust payouts from real estate investment trusts (REITs), master limited partnerships (MLPs), financials and shipping, investors should dot their portfolios with tech stocks like the ones listed above.

Hutchinson also comprised a list of dividend stocks that have survived every recession since 1962, are expected to survive the next one (which looks increasingly more likely), and have not only maintained but raised their dividends for over half a century.

"For investors, that's the true sign of a recession-proof stock," said Hutchinson. "These types of stocks represent the ultimate safe haven for your money. Their share price and even earnings may decline, but their dividends should continue to increase."

Hutchinson's dividend stock winners include:

• The Procter and Gamble Co. (NYSE: PG), the household conglomerate that has increased dividends every year since 1954. Its dividend yield is 3.7%.

• Northwest Natural Gas Co. (NYSE: NWN) has raised its dividend every year since 1956. The company, which stores and distributes natural gas in Oregon, Washington and California, boasts a 3.7% dividend yield.

• Emerson Electric Co. (NYSE: EMR) has increased its dividend yearly since 1957. This global engineering services and solutions company rewards shareholders with a 3.5% dividend yield.

• Cincinnati Financial Corp. (Nasdaq: CINF) has boosted its dividend every year since 1961. The property and casualty insurance stock carries a yield of 4.2%.

Source: Dividend-Paying Stocks: AOL Not the Only One to Raise Payout:

Recession 2013: Prepare Your Portfolio with These Rock-Solid Dividend Payers

JULY 9, 2012BY MARTIN HUTCHINSON, Global Investing Strategist, Money Morning

Successful investing is a bit like connecting the dots. Put enough of them together and they begin to form a picture. Unfortunately, today's dots are pointing towards a recession. With first-quarter GDP growth under 2% and a whole host of indicators moving in the wrong direction, it looks as though the U.S. economy has stalled. That leaves income investors like us faced with a very important question: how do we best protect our portfolios from the stock price declines and dividend cuts that a recession would bring?

One simple answer is to invest in those countries that are not suffering recession. That opens up a world of possibilities.  For instance, you might consider investing in Japan, which grew at over 4% in the first quarter. Orix Corporation (NYSE: IX) is a name I like. 

Or better yet you could invest in emerging markets where growth continues to sizzle. 

That makes stocks like the Aberdeen Chile Fund (NYSE: CH) a good buy-especially considering the fund offers a dividend yield over 10%. The fund is attractive to me for two reasons. First, it's becuse Chile is a well-run country, standing higher than the U.S. on several international business surveys. But more importantly, its dependence on copper and other commodities is not a problem unless the global economy as a whole goes into recession, which I don't expect.

With assets in primarily Chilean securities, the fund also offers investors a nice measure of diversification from the U.S. economy, since they can expect Chile to keep on growing-- even if the U.S. economy takes a step backwards. 

But that doesn't mean you need to avoid the U.S. altogether, either. 

In fact, there is a key indicator I'll discuss in a moment which will allow you to preserve your income and the value of your investments through all but the deepest recessions. First though, you'll need to avoid a few pitfalls. As always, it's never just a matter of picking the stocks with the highest dividend yield. It's just not that simple.

In fact, a number of the highest dividend-paying companies like American Capital Agency (Nasdaq: AGNC) have dividends that depend on financial game-playing--- borrowing in the short-term markets and investing in long-term housing agency debt. 

While the income stream from the agency bonds will remain solid in a recession (because it is effectively government guaranteed) entrusting much of one's wealth to this kind of scheme is foolish. 

Meanwhile, other high-paying dividend companies have overleveraged balance sheets. 

B&G Foods (NYSE: BGS), for example, has an excellent recession-proof business in managing brands of shelf-stable foods such as Cream of Wheat and Grandma's Molasses - products whose sales generally suffer little in a recession. At its current elevated share price of around $26 it still has a dividend yield of around 4%. 

However, its balance sheet has a 4:1 debt/equity ratio, and excluding intangible assets it has a negative net worth. 

BGS also suffered badly in 2008-09, with the share price dropping below $3. This could easily happen again if bank facilities became tight.

The True Sign of Recession-Proof Stocks

However, at the other end of the spectrum, there are some dividend aristocrats which have not only maintained but increased their dividends for over half a century. 

Having survived every recession since 1962, they can be expected to survive the next one, and indeed to continue increasing their dividend. 

For investors, that's the true sign of a recession-proof stock.

As a result, these types of stocks represent the ultimate safe haven for your money. Their share price and even earnings may decline, but their dividends should continue to increase. 

There are 10 such companies, four of which have a current dividend yield of 3.5% or more - giving you a pretty good yield at a time when even 30-year Treasury bonds yield only 2.7%. 

They include: 

• Procter and Gamble Co. (NYSE: PG) has increased dividends every year since 1954. This huge household goods company pays a dividend yield of 3.7%;
• Northwest Natural Gas (NYSE: NWN) has increased dividends every year since 1956. With a dividend yield of 3.7%, the company stores and distributes natural gas in Oregon, Washington and California;
• Emerson Electric (NYSE: EMR) has increased dividends every year since 1957. This worldwide engineering services and solutions company pays a dividend yield of 3.5%;
• Cincinnati Financial Corp. (Nasdaq: CINF) has increased dividends every year since 1961. The property and casualty insurance company pays a dividend yield of 4.2%.

Here's the best part: with those four you even get the diversification of four different sectors along with the ultimate dividend-producing, sleep-at-night investments. 

So you see sometimes, investing can be easy---even in the face of a recession. 

Good Investing,