Over the last 40 years, the way individuals invest has evolved in five stages or eras, with each stage of the evolution marked by its own set of tools and preferences. Each era has also been marked by progressively greater benefits, but also many drawbacks and disadvantages.

However, I believe the era of investing we are in today offers the greatest opportunities and advantages that individual investors have ever had access to. That means your ability to profit, while taking on less risk, is greater today than ever before. Let me show you what I mean. Read the full story

In June, the World Health Organization (WHO) alerted the public that a worldwide pandemic of swine flu (H1N1) was sweeping the globe.  Health officials at the Centers for Disease Control and Prevention (CDC) have stated that the swine flu virus could infect up to 40% of Americans over the next couple of years.  Read the full story

I have had the good fortune to travel to more than 40 countries in the last ten years.  I love to experience other cultures, to meet people and to learn about the history of different parts of the world.  I believe that if you are living in the United States today, you are quite fortunate indeed. Read the full story

I’m no math wizard but I know enough to not buy state sponsored lottery tickets. Your odds are much better when you buy your tickets via the natural resource sector where you can stack the deck in your favor and make life changing money.

Small cap resource stocks have been absolutely trashed over the last 12 months. Many companies are running out of cash as well as credit and some are closing their doors. It’s Darwinism at its’ finest. The strongest companies, those with world-class management, strong balance sheets, and access to capital will survive and prosper. Those with little cash on hand, shaky prospects, and inexperienced management will disappear.  And now is the time to take positions in the most promising leaders who are positioned to directly benefit from the ongoing financial chaos.

A merger and acquisition mania is now underway. Take a quick look at some recent announcements:

• Canadian Gold Hunter (CGH:Toronto) is taking over Sanu Gold (SNU:Toronto).
• ATW Gold (ATW:Toronto) is merging with Kinbauri Gold (KNB:Toronto).
• New Gold (NGD:US) is combining their business with Western Goldfields (WGW:AMEX).
• IMA Exploration (IMR:AMEX), Kobex Resources (KBX:Toronto) and International Barytex (IBX:Toronto) are working on a merger.
• Linear Gold (LRR:Toronto) recently acquired GLR Resources (GLR:Toronto) Goldfields Project.
• Geoinformatics Exploration (GXL:toronto) is acquiring Rimfire Minerals (RFM:Toronto).

This is just for starters. The primary point I’m making is that M & A activity is on a massive upswing. This is rapidly changing the complexion of the sector and creating fabulous opportunities for investors.

This environment is ideal for selecting and riding the best run companies as the precious metal bull market continues to unfold. The companies leading the charge in this consolidation will emerge from this process stronger than ever. There are numerous advantages for shareholders:

• A superior management team typically results.
• Synergies are created.
• Overhead costs are lowered.
• The portfolio of properties and projects are increased which improves company diversification.
• More dollars are allocated for the most promising exploration targets.
• Larger companies attract the buying power of heavyweight financial institutions.

“Super Juniors” are being created. Companies with cash are marrying companies with exceptional projects in need of funding for advancement. Producers are gaining access to more reserves. Key technologies are being shared. These are clearly win-win situations.

We have long been acquiring the companies acting as resource consolidators in my Resource Windfall Speculator advisory. They are snapping up distressed bargains across the globe. Cash and connections are tough to beat these days.

Yes, size does matter. So does staying power. Personal fortunes will be made by savvy investors who now hitch their wagons to the talented and aggressive management teams constructing companies that will grow and dominate in the coming years and decades.

There is nothing quite like owning an un-expiring lottery ticket!

Invest Resourcefully,
Rusty

It’s a scene that plays out in Las Vegas on a daily basis. Desperate after a series of losing bets and down to their last few hundred dollars, the gambler decides that the only way to get back in the black is to leverage up and put it all on the line. And you know how that story ends.

Now imagine if that gambler had $180 billion. And mixed into the pot is your pension (and the pension of every other public employee in California).

Nervous yet? The members of the California Public Employees’ Retirement System (CalPERS) should be. The organization provides retirement and health benefits to over 1.6 million public employees, retirees, and their families in California. The new head of investments at the fund, Joseph Dear, has big plans on how to get back the $60 billion the fund lost last year: add more risk!

Dear plans to divert more of the fund’s money toward private equity and hedge funds. Other likely targets for investment are junk bonds, commodities, and real estate. The very same real estate market that caused the funds’ real estate portfolio to fall 35 percent last year. And private equity? Last year the private equity holdings of CALPERS fell 31 percent.

Even Gov. Schwarzenegger, who has overseen the near bankruptcy of his state, called the fund “unsustainable”.

One area that the fund will be reducing exposure to is domestic stocks. It appears that they simply don’t offer a high enough risk/reward profile to interest Mr. Dear.

The sad aspect is that this is just the highest-profile case. The same scenario is playing out across the country, as individual investors, asset managers, and others realize that they are facing huge losses and a limited time to make up ground. Instead of taking a prudent path with less risky stocks and bonds and preserving what is left, the gambler’s mentality is taking over. Disaster is the likely result.

You can read more about Mr. Dear and Calpers here, and if you are interested in extremely safe investments that are offering annual gains that are doubling the stock market, consider Steve McDonald’s service, The Bond Trader.

You can’t go back. So don’t assume that as the U.S. and the West recovers, they’ll attract foreign capital just like they did before the recession. It’s a far different landscape now. The easy-credit bubbles are gone. And they’ve left us with a hellacious debt burden.

The U.S. debt is expected to zoom to $16.2 trillion by 2012, almost equal to its projected GDP. Italy’s debt is expected to reach 120% next year. France’s debt will approach 90% next year (if President Nicolas Sarkozy goes ahead with his fiscal blitz). All told, by next year, Europe’s debt should rise to about 80 percent of GDP. And then there’s Japan. Its public debt is headed toward unfathomable depths. It should reach 240% of GDP by 2014.

After buying $600 billion in U.S. assets last year, China, for example, is having second thoughts. It won’t come close to matching that number this year. And China has made it very clear that not even relatively cheap assets available in the U.S. will lure Chinese investment money.

In an interview published in China’s state-controlled media, the chairman of China Development Bank said Chinese foreign investment won’t target Western economies. “Everyone is saying we should go to the western markets to scoop up [underpriced assets]. I think we should not go to America’s Wall Street.

So where will China go? The bank chairman says China “should look more to places with natural and energy resources.” That would be Africa, Russia, Australia, plus other places.

The resource war is gaining steam. When the global economy recovers, it’s a sure bet that commodity prices will start getting expensive again. China has concluded that it’s a better deal to buy the mines now rather than the commodities later.

Resource countries are going to be the main beneficiaries. South Africa is known for its metals and mining and gold industry. The ETF covering it, iShares MSCI South Africa Index (EZA), is up 27.6% year-to-date.

If you want to see the future of banks, take a look at how Morgan Stanley did this past quarter. Last week some of America’s biggest banks trotted out short-term profits that hid deeper and longer-term problems. For the most part, they did better than expected. A few even made money. Some people will take solace in that. Since the banks got us into this mess, they want them to get us out. I think that’s asking far too much of banks. Banks have their hands full just trying to save themselves. Saving the economy would be asking too much.

The rule of thumb is, as the economy goes, so goes the banks. Can the banks even save themselves while households absorb the $15 trillion hit they’ve taken to their net worth?

Morgan Stanley gives us some clues. And we’d be foolish to ignore them. It did the worst of the six big banks which reported last week. So what was its main fix?  It’s replacing the head of its trading desk with a top hedge fund performer. This desk trades bonds, currencies and equities (sort of like what hedge funds do). Morgan Stanley’s trade desk didn’t do very well, especially in comparison to the smart guys at Goldman Sachs…

Goldman Sachs lost more than $100 million on six trading days over the quarter and earned more than $100 million on 23 days. Morgan Stanley lost more than $125 million on four days (including losing $390 million in one day in August) and made more than $125 million on eight days.

Goldman Sach’s ratio of big winning days over big losing days was 3.8. Morgan Stanley’s was two. Morgan Stanley says they’re going to start to take on more risk. Hey, guys, great idea. But you need to get better doing your trades first.

This is how banks are now making profits … not from loans but from risking taxpayer-paid TARP money, guaranteed Fed-backed loans and money from depositors and risking it on trades where you can make over $100 million in a single day but also lose $100 million (or in Morgan Stanley’s case $390 million) in a single day.

If you’re good at this sort of thing, like Goldman Sachs and JP Morgan are, then you can ignore your poorly performing portfolio of loans and tell shareholders that banking is still a good business even though it’s not exactly true. If you’re not that good, then like Morgan Stanley you can talk lamely about taking on more risk.

Before banks leveraged up and paid less attention to asset quality, banking used to be a good business. Borrowing low and lending high was a sure-fire way to generate profits. You can’t get more simple than that. But that wasn’t good enough for bankers. They lobbied for and got the repeal of the Glass-Steagall in 1999. Glass-Steagall had separated deposit banks from investment banks. After 1999, banks could take the tens of billions of dollars from depositors and invest it in anything and everything, from low-yield but safe Treasuries to risky but high-yield derivatives.

As you know by now, not enough went into safe Treasuries and too much went into risky derivatives. A few bubbles later banks were forced to write down about $1.6 trillion on their investments.

The one thing banks couldn’t talk about last week is improving loan portfolios. American Express hinted that their consumer loans may start to default at slower rates in the second half of the year. But Capital One and every other bank refrained from making such bold claims.

Consumers are in debt rehab. It’s hard to overestimate how bad it’s getting for consumers right now. But it’s going to take a while. They’re still spending much more than they make. In the first quarter they borrowed 128 percent of their income.

There’s absolutely no way that banks can separate themselves from this consumer squeeze. And I don’t see accelerating foreclosures and credit card default reversing this year or next…

•    Foreclosures will go up as long as the economy keeps shedding jobs. Whether the economy loses jobs at rate of 450,000 a month or 300,000 a month doesn’t matter.

•    Credit card defaults won’t improve either. People without jobs run up more card debt than people with jobs. And they have less money to pay back what they owe. And even though refinancing is up, homeowners have already cashed out most of the equity in their houses.

•    In Fed Chief Bernanke own inimitable words, “The possibility that the recent stabilization in household spending will prove transient is an important downside risk to the outlook.”

The Obamarons want banks to lend more so consumers can spend more so the economy can get better. Somebody should write them a memo and point out that consumers aren’t looking for loans and banks shouldn’t be forced to lend to cash-squeezed consumers (isn’t that how we got into this mess in the first place?).

But the real scary ticking time bomb is in banks’ commercial real estate loans. Most commercial real estate loans are balloon loans. Companies only have to pay the interest until the full amount is due. And the expiration dates for many of these loans are now coming due.

There’s a cynical saying in Russia which made the rounds during the good ol’ years of communist rule. It went like this: You pretend to pay me and I’ll pretend to work. Russians barely worked and they barely got paid. You could say the same thing about banks and their corporate customers. Banks pretend that the real estate loans to customers are still good, and these customers pretend that they will pay them back. It’s playing out right now, in broad daylight…

Florida-based resort developer Bluegreen Corp. just got an extension on $130 million worth of loans.  Toys R Us, Tanger Factory Outlets and Washington Real Estate Investment Trust also all recently got loan extensions.

How far has commercial real estate fallen? Even Morgan Stanley’s highly regarded Crescent portfolio of properties has taken a big hit. I had been following Crescent for about five years. Before Morgan Stanley bought them out a couple of years ago, Crescent was a Texas-based real estate company. It owned some of the most prestigious office buildings and hotels in Houston and Dallas. Two years ago, its rents were high and vacancies low. Now, Morgan Stanley’s $2 billion exposure to Crescent’s portfolio is seen as a big albatross as tenants look for lower rents in the cheaper side of town.

The $6.7 trillion commercial property market is slipping fast. Prices have fallen about 35% since the market peaked. Morgan Stanley’s chief financial officer said he did not see the light “at the end of the commercial real estate tunnel yet. Peak to trough, you have already had a pretty nasty correction in the market but it is still not looking very good at the moment.”

It doesn’t look good for banks when it comes to their consumer or commercial borrowers. Sure, some of these big banks made loads of money from their inhouse hedge funds. But that stuff can turn on a dime. Last quarter is already ancient history. Next quarter may be entirely different. And next year who knows. Banks are crossing their fingers and hoping for the best. But the economy isn’t cooperating. Banks are playing a dangerous game. They’re walking a tightrope in a stiff breeze, hoping they won’t fall off.  And I think that breeze is going to get a lot stronger over the 12 months. The banks aren’t through falling yet.

To your investing success,
Andrew

If I had the capital, I would buy it all right now!  Inflation could blow real estate values through the roof.  It’s time for you to accumulate those short-sale and bank owned properties for pennies on the dollar.  Read the full story

Monday
Economic Report: New Home Sales

The New Home Sales report for June comes out this morning. Expectations are for a slight increase versus May. While I am still skeptical of a sustained housing recovery, I do think this report will meet expectations. This is partially based on it being the summer selling season, as well as the fact that existing home sales for June also increased.

Earnings Announcements: Honeywell (HON), Verizon (VZ), Amgen (AMGN)

Tuesday
Economic Report: Consumer Confidence, S&P/Case-Shiller Home Price Index

The July Consumer Confidence report is anticipated to show a slight improvement since last month. With the economy showing slightly encouraging signs of a recovery, job losses slowing, and no spike in gas prices, I think this report will meet expectations.

The S&P/Case-Shiller Home Price Index comes out Tuesday as well, and this report will still show a significant decline, but a smaller decline than in the past.

Wednesday
Economic Report: Durable Orders, Fed Beige Book

Durable Orders for June are expected to show another decline, and I don’t see anything convincing me that I should expect otherwise.

The Fed Beige Book comes out on Wednesday, and everyone will be looking at the book to see if there are any signs anywhere of a recovery. If I had to guess, manufacturing will show a slight increase, real estate in some pockets will show improvement while others areas, like New York City, will be getting worse.

Earnings Announcement: Time Warner (TWX), Visa (V)

Thursday
Earnings Announcement: ColgatePalmolive (CL), Exxon Mobil (XOM), Mastercard (MA), Sony (SNE), Dow Chemical (DOW), Disney (DIS)

Friday
Economic Reports: GDP - Advanced

The Advanced GDP report is likely to show another decline in the second quarter. Until consumers can feel comfortable spending money, GDP is going to continue to fall.

Earnings Announcement: Chevron (CVX)

Respectfully,

Christian Hill

If you expect to make money in this market or capitalize on the predicted W-shaped recovery you need to start looking at the jobs numbers as a predictor of a recovery, not something that follows one.

70% of this economy isn’t functioning as it should and won’t until there is a significant change in the employment numbers. Shoppers will return to the stores and the cash will come back to the markets when investors and consumers sense there is a future that includes a reliable paycheck.

Employment figures in the past have been a lagging indicator of economic activity. In other words, in past recessions unemployment did not improve until after a recovery had started and the stock market had moved up.

The rules have changed. Jobs have been cut at a rate we haven’t seen since the great depression and the average consumer is scared, for good reason.

The most telling jobs number of 2009 is that 112 of 372 reporting areas have reported unemployment of 10%, up from just six areas last year.

The Bureau of Labor Statistics reported that all 372 reporting areas in the U.S. had year over year increases in unemployment. 15 areas had unemployment over 15%, and two had rates as high as 23% and 26%.

In this recent earnings season virtually every company whether they met or exceeded their earnings estimates did so by cutting costs. That means they employed fewer people.

Cost cutting, cost containment, margin performance, call it what you like, what it really means is unemployment. The single biggest expense for any business is personnel. When a company says cost cutting what it means is job cutting.

If you’ve ever had to worry about where your next paycheck is coming from, you know what scared means. More importantly you know the affect it has on your sense of well being, or lack of it.

This loss of a sense of well being, by both investors and consumers, is at the root of our W-shaped recovery and a double dip recession.

In a system that is almost three quarters dependent on the consumer, we’re going nowhere without consumer confidence and that will come with jobs.

In every recession since 1950 a decrease in initial jobless claims was a leading, not a lagging indicator of a recovery. It will be the first reliable sign that real sustainable growth is on the horizon.

It’s published weekly and is one of the easiest of all the indicators to understand, just look for a downward trend. It also has been a consistently reliable market buy signal that can put you in the front of the pack.