What would Thomas Jefferson Say to the Architects?

The latest Street$marts is out, “What would Thomas Jefferson Say to the Architects?” http://www.investfortomorrow.com/newsletter/CurrentStreet$marts20120625.pdf

Topics in this issue include a little known, but important economic indicator, the latest pullback in stocks and where gold is headed.

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Gold to $2000 and Beyond

Here is the second video I did with the folks from Yahoo! at their beautiful new studio in the city.  Anytime there are bold statements on gold, people come out of the woodwork to comment.  And I would be surprised if they aren’t at least 100 comments by the time you read this. 

One of the great myths is that gold goes up when there is inflation. I think the 1990s is the perfect example of why that isn’t true.  A better statement would have been that gold goes up anticipating inflation…

http://finance.yahoo.com/blogs/breakout/easy-money-low-rates-gold-2000-end-134943224.html

If you bought gold nine months ago at a record high and have since seen the price decline by 15% or $300 an ounce, you’re not the unluckiest investor alive, you’re just a little early.

“This is not a pullback, this is a full fledged correction,” says Paul Schatz, President of Heritage Capital in the attached video. “We’re shaking out every weak-handed holder possible.”

His case for owning gold is three-fold but also comes with the self-disclaimer that he’s “not a gold bug” that reflexively sees the precious metal as the answer to all investment questions.

First off, there’s the fundamental backdrop that the world is full of accommodating central banks right now, least of which is our own Fed. As Schatz says, “the ECB (European Central Bank) is just getting started.”

Add in super low interest rates and just enough inflation and we find ourselves facing so-called ”negative real rates of returns” and you’ve got an environment where something like gold, that protects purchasing power, should do well.

There’s also a timing and technical component to Schatz’s bullish call on bullion. As much as he thinks it would be ”nice” to see gold bottom out around $1500, he’s counting on a sharp snap-back to the previous high of $1900, that will ultimately break through psychological resistance of $2000 by the end of this year or early 2013.

“Once we exceed the old highs in the $1900s, we certainly go to $2000 and that sets the stage for the next run” he says, pondering the next high-water mark, “Is it $2200? $2300?”

“I don’t think the secular bull market in gold is over,” Schatz concludes. “I think you have years left in it.”

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The Fed, QE and Earnings Season

I had a great time with the folks at Yahoo! yesterday in New York in their brand spanking new studio.  We tape three fairly controversial segments and Matt Nesto knew exactly how to bait me just right!  Here is the first piece.

Enjoy!

http://finance.yahoo.com/blogs/breakout/move-bernanke-qe3-115057583.html#more-13067

In case you missed it, The House of Mirrors has officially taken the place of The Earnings & Fundamental Palace on Wall Street. I say this at a time when the aspirations and way forward for the U.S. stock market appear to be in direct conflict with what is normally perceived as being in the best interest of the country.

Worst unemployment print of the year, stocks rally.

Job creation craters, stocks rally.

Of course, even casual students of the market can see right through this bad-is-good charade and know the answer to this riddle lies right at the feet of Ben Bernanke, the Chairman of the Federal Reserve and key holder to the vault where so-called “QE3” is being stored.

“It is amazing but it seems that people are just going to invest when the Fed is going to stand behind and backstops them,” says Paul Schatz, President of Heritage Capital in the attached video.

But before you get too far ahead of yourself on the QE3 bus, you must realize that it’s going to take a whole lot more drama than a 4% dip to get Bernanke to deliver the goods. By my math, which is based on the prior three rounds of easing, the S&P 500 would have to erase all of the year’s gains, or drop 10 to 12% before the Fed can be expected to act.

Like most investors, Schatz is of the mind that it’s not a matter of ”if” but “when” it’s going to act, and has been calling for multiple QE’s since the first one was floated in 2008.

“We’re well on our way to a $5 trillion Fed balance sheet,” he says.

And it’s not just the Fed, Schatz says, Central banks from around the world are engaging in unprecedented easing programs, so much so that Schatz facetiously calls “ink” his best idea given the amount of it that will be used to print.

“The ECB is just starting. They’re going to go into the trillions and trillions in the next couple of years,” he says, describing the ensuing environment as a ”rent to own” market that will be full of volatility and opportunity.

“Four to eight percent pullbacks can and do occur at any time,” he says, calling them healthy, regular and something that should be bought, as long as the market has the QE-backing it so badly craves.

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Jobs Report Overreaction

Last week on CNBC I commented on how investors and the media are way too concerned about one less than expected jobs report from Friday, just like they were way too celebratory last month.  While I am glad we raised cash a few weeks, I plan to redeploy that this quarter into weakness.

Give a look…

http://video.cnbc.com/gallery/?video=3000083018&play=1

 

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Apple… Is this Time Really Different???

http://www.investfortomorrow.com/newsletter/CurrentStreet$marts20120325.pdf

 

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The Coming Crash in Apple or the Road to $1000

http://www.investfortomorrow.com/newsletter/CurrentStreet$marts20120309.pdf

 

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Fed’s Balance on the Way to $5 Trillion

Here is the text portion of an interview I did with ET NOW from India last night.

http://economictimes.indiatimes.com/opinion/interviews/you-will-see-a-fed-balance-sheet-in-excess-of-5-trillion-paul-schatz-heritage-capital-llc/articleshow/12467745.cms

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Heritage Capital on CNBC’s Worldwide Exchange

If you are up early, I will be on CNBC’s Worldwide Exchange at 5:50am on Wednesday, March 21.

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How to Live Like a Millionaire

The lives of the “rich and famous” tend to be quite a bit different from the lives of the merely “rich.” In fact, studies show that being rich often results from a rather low-profile lifestyle.

With that said, if you want to live the life of a millionaire, here’s your guide:

Work hard.

According to ”The Millionaire Next Door,” by Thomas Stanley and William Danko, 80% of the millionaires worked and saved to generate their wealth and 80% of them are still working. About half of all millionaires are self-employed or own a business. Nearly half of working millionaires plan to toil part or full-time during the retirement years, according to a survey from Northern Trust Corp.  Millionaires are also less likely to waste time during the day; instead they are reading and doing things that contribute to their success.

Be very conservative with your money.

Individuals who build wealth tend to live well below their means.  Affluent households are heavier coupon users than those with lower incomes, according to a 2009 study by Nielsen and market research firm Inmar. In researching for the book cited above, Thomas Stanley reports that he found 11% of vehicle purchases by US millionaires were Toyotas.  Most millionaires buy and drive used cars and have never spent more than $55,000 (in 2010 dollars) on a new car. Their homes are typically worth less than $300,000 (in 2010 dollars), according to Stanley.

Worry.

More money doesn’t necessary solve money worries. According to surveys, few millionaires feel rich. They worry about having enough money in retirement, increasing health-care costs, funding their kids’ college education and paying the bills.

Take calculated risks.

Millionaires tend to be aware of their personal income and net worth statements, and have taken strategic risks to earn and grow money. They take calculated risks with an exit strategy and plan to protect the downside.

Be a bit rebellious. 

To become wealthy, you have to have the ability to resist the peer pressure to spend and accumulate possessions. You need to be willing to be different, to look for opportunities outside of the mainstream and take those opportunities when they present themselves. Perhaps this is why many male millionaire entrepreneurs had been in trouble with school authorities or the police during their adolescence, according to one study.

Delegate.

Millionaires recognize that they can’t be experts at everything and hire the best resources they can find.

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Maximize Your FDIC Insurance

As of 2008, deposits in FDIC member banks are insured by the Federal Depository Insurance Corporation up to $250,000 per individual. Because an “individual” is defined in a number of different ways, your accounts can be insured well in excess of $250,000 at the same bank, if they are structured under different ownership forms and, if applicable, beneficiary designations.

FDIC coverage is $250,000 for the total of all single accounts owned by the same person at the same insured bank. This includes those opened under the Uniform Transfers to Minors Act, for a sole proprietorship or established for a decedent’s estate.

Joint accounts are insured up to a maximum of $250,000 for each co-owner. To reach that number each co-owners’ share of every account jointly held at the same insured bank is added together. Joint owners must be people, not legal entities such as corporations, have equal rights to withdraw funds, and sign the deposit account signature card.

All self-directed retirement funds owned by the same person in the same FDIC-insured bank are combined and insured up to $250,000.

Each participant in employee plans that are not self-directed is insured up to $250,000 for his or her non-contingent interest.

Revocable Trust Accounts, Payable-On-Death (POD) accounts, living or family trust accounts and irrevocable trusts are insured up to $250,000 for each named beneficiary as long as “qualifying” requirements are met.

FDIC uses the insured bank’s deposit account records (ledgers, signature cards, CDs) to determine deposit insurance coverage. So make sure your banks have the correct information that will result in the highest available insurance coverage. 

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