• Bank of America Corp. (NYSE: BAC) intends to pay back $45 billion in loans it borrowed from the U.S. government through the Trouble Assets Relief Program (TARP) by the end of the year, The Financial Times reported. And it intends to do so by accelerating its program to raise capital. Sources told the FT that BofA is on track to raise more than $35 billion by the end of September.

• Brazil’s unemployment rate fell to 8.9% in April from 9.3% in March, Bloomberg reported. “The labor market stopped getting worse, that’s definitively good news,” Julio Gomes de Almeida, a consultant at the Brazilian Research Institute for Industry Development, told Bloomberg.

• Taiwan’s economy shrank a record 10.24% in the first quarter, as a result of slowing exports and a lack of private investment. Taiwan’s statistics agency cut its full-year growth forecast but also believes the worst is over.  “I think we have more or less seen the bottom for Taiwan’s GDP, in terms of dollar value, in the first quarter. We will start seeing improvement in the second, third and fourth quarters this year,” chief statistician Shih Su-mei told a news conference, Reuters reported.

• Emirates airline posted an 80% drop in full-year profit, and gave a grim short-term assessment. “As we move into the new financial year, the outlook is not improving,” Chairman Ahmed bin Saeed al-Maktoum said in the statement, Bloomberg reported. “Although fuel prices are dropping, demand for business and first-class traffic is still weak in many markets.”

• The dollar fell to its lowest levels against the euro since January and dropped versus the yen yesterday (Thursday) as Treasuries fell and gold prices increased. The spread between yields on 10-year notes and Treasury Inflation Protected Securities (TIPS), reflecting the outlook among traders for consumer prices, reached 1.73%, the highest level since September, raising inflation fears as the U.S. budget deficit widens, Bloomberg reported.

• Workers will hold a ratification vote on an agreement reached by General Motors Corp (NYSE: GM) and the United Auto Workers (UAW) union leadership on contract changes and restructuring $20 billion in debt owed to a trust fund for retiree healthcare, Reuters reported.  Details of the tentative agreement are being withheld until GM workers are briefed on the proposed new contract, which was reached after a round of talks involving representatives of the U.S. Treasury, the union said in a statement.

• The Conference Board’s index of U.S. leading economic indicators rose 1% in April, more than forecast. A separate report showed manufacturing in the Philadelphia area shrank in May at the slowest pace in eight months, signaling the deepest recession in 50 years could end later this year, Bloomberg reported. The leading indicators gauge registered its biggest gain since November 2005, the Conference Board said today. The index points to the direction of the economy over the next three to six months.

• Copper lost as much as 4% yesterday (Thursday) before narrowing losses near the close, Reuters reported.  The metal, often seen as an economic barometer, was dragged down by a drop in broad market sentiment amid fresh signs of economic weakness. Copper for July delivery on the New York Mercantile Exchange’s COMEX division slipped 5.55 cents to settle at $2.0510 a pound.

Source: Investment News Briefs Friday, May 22, 2009

Why $21.22 Is Your Inflation Protection Level

Question is… has the bear market rally over the past two weeks been solid enough to generate new buy signals? Well, yes and no…

History Repeating?

While some indexes did establish buy signals, a number of them weren’t able to reach their optimum downside targets. While this is can sometimes create false signals, the bigger picture indicates that the signals are probably valid.

What is much more certain, however, is that the indexes are tracing out a larger consolidation pattern. That movement could mean that the Nasdaq indexes will test their January (and possibly even November) highs before any serious selling resumes.

Long-term consolidation patterns are nothing new for stock indexes. In fact, the current pattern on the S&P bears some striking similarities to the larger one that ended in 2002 – as you can see on the monthly chart below…

The main two similarities that jump out between these two bear market consolidation patterns is that…

• The selloffs began from almost the same levels
• Until March, the number of points lost was practically identical

The key difference between the two time periods, though, is that the 2000-2002 bear market lasted over 2½ years, while the current bear market is only in its 18^th month.

This means that even amid a strong rally at the moment, investors should be very wary about calling this the bottom and jumping back in with a vengeance. Bear market rallies often lure investors back to the party with quick, sharp upward moves… only to run out of steam and head back down.

Practice Patience During March Madness

So don’t expect a new bull market to start here. Before the five-year bull market that followed the last bear market, the indexes went through an eight-month consolidation pattern. And even if we use the November low as the start of the consolidation pattern, this one has only lasted four months.

In addition, when we see steep declines – as we have done recently – it usually requires a longer consolidation period while time plays catch up with price.

In 2003, we didn’t know that the market’s consolidation pattern was complete until weekly buy signals were triggered. And right now, it’s just too early to even consider calculating where the S&P 500 would trigger a weekly buy signal.

What we can say, though, is that since the Nasdaq 100 didn’t violate its November low, it would have to get up to at least 1,387 points just to set up a weekly buy signal.

Fortunately, we can be more definitive with this week’s sector…

Your Inflation Buzz-Phrase: “Trillion-Dollar Bailout”

Last week, the Federal Reserve announced that will buy $1.2 trillion worth of government bonds, which will then be pumped into the U.S. economy,

It wasn’t just stocks that loved the news. Commodities did, too. A lot! For example, gold prices shot $70 higher from Wednesday’s low. And most other dollar-denominated commodities were higher by the end of the week, alongside foreign currencies.

Hot on the heels of that strategy, the government revealed its own trillion-dollar move today. The “Public-Private Investment Program” will buy $1 trillion worth of so-called “toxic assets” in order to shore up U.S. banks’ sagging balance sheets.

Stocks may love all this trillion-dollar bailout news – in the short-term. But over the longer-term, most analysts agree that we’ll see something else rise soon: Inflation. Hardly surprising, with the U.S. mint continuing to run the presses at a rapid clip.

If we do indeed see that result, it means one thing: The value of the U.S. dollar has nowhere to go but down. And that will consequently force commodity prices higher.

Take a look at the daily chart of the PowerShares DB Commodity Index Tracking Fund (NYSE: DBC)…

As you can see, DBC closed above its 50-day moving average (marked in red) – the day before the Fed’s $1.2 trillion announcement. It then closed higher for the rest of last week.

The important number is $21.22 – the level it needs to close above in order to trigger a daily buy signal. If it can do that, it’s a very good area from which investors can buy into the broad commodities sector on pullbacks – something that would provide a good hedge against inflation, as well as price appreciation.

I suggest using a couple of closes below the trendline (blue) as a stop loss.

Source: How to Protect Your Portfolio from Inflation

Gold demand has in fact exploded, and not just here and there. Everywhere. Around the world, customers have been queuing up to strip coin shops’ shelves bare. Mints have been running 24/7 and still have been forced to ration coin shipments to their dealers. ETF vaults are bulging.

Now, the World Gold Council has confirmed the trend with hard numbers for the third quarter of this year. In a page-and-a-half press release summarizing 3Q2008 activity, the WGC had to use the word “record” ten times. Some highlights:

• Dollar demand for gold in Q3 was a record US$32 billion, 45% higher than the previous record, set in 2Q2008.
• Identifiable investment demand, which incorporates demand for gold through exchange-traded funds (ETFs), bars and coins, rose to $10.7 billion (12.3 million ounces), double year-earlier levels.
• Retail investment demand rose 121% to 7.5 million ounces, with strong bar and coin buying in the Swiss, German, and U.S. markets. Europe as a whole saw an all-time record 1.64 million ounces of bar and coin buying. France became a net investor in gold for the first time since the early 1980s.
• Gold ETFs posted a record quarterly inflow of 4.8 million ounces in Q3. After the collapse of Lehman Brothers in late September, ETF inflows shot higher by an unprecedented 3.6 million ounces in only five days.
• Demand for gold jewelry hit a record $18 billion. Leading the way was India, which witnessed a rise of 65% in dollar value (1.3 million ounces) compared with 3Q2007. The Middle East, Indonesia, and China all experienced increases of more than 40% in value or 10% in weight, year over year.

At the same time that demand is setting records, supply has been unable to keep pace, falling 9.7% from year-earlier levels, the WGC reported. The drop was largely due to inaction on the part of central banks, which have increasingly shut their vault doors.

Heavy demand, declining supply… small wonder that gold prices have remained near record highs in most of the world’s currencies; that dealers have been marking up coins by 10% or even 15% (when they can get them); and that one-ounce coins still fetch bids close to $1,000 on eBay.

When will the spot price in U.S. dollars, which is set by the futures market, catch up? No one knows. But it will.

The world’s hunger for gold will only grow into a future awash in fiat currency. Gold is the ultimate and, at day’s end, the only safe haven from the kind of currency destruction that is being visited upon the dollar, the euro, even the renminbi, as governments everywhere desperately try to stave off a deflationary depression the only way they know how: by turning on the printing press.

We are in a period of intense monetary inflation. It will be followed, inevitably, by a long period of price inflation. People will be desperate to preserve the buying power of their dollars, euros, etc., and they will turn to the one thing capable of doing just that. Gold.

As gold rises, it will lift the shares of selected mining companies with it. The ones that prosper the most will be those that have positioned themselves to survive the credit crisis — by stockpiling cash, keeping production costs down, and locking up borrowed money on favorable terms.

Companies that have failed to do this will go under, unable to get credit in a frozen market. That will both diminish competition and further curb supply, and those that properly planned ahead will rake in enormous profits as gold goes through the roof. Or more likely, as Casey Research founder Doug Casey puts it, gold “heads to the moon.”

But which are the companies poised to profit the most? The ones we cover in our monthly newsletter for conservative investors, BIG GOLD.

We are dedicated to bringing you the information that will allow you profitably to pick your way through the present economic minefield. We search the world of producing gold miners, to find the best of the best. We pinpoint the investments that will not only hold on through a market downturn, but will rebound spectacularly as the commodities market recovers, which it must.

In addition, we bring subscribers the best ways to invest in physical gold, including where to find coins and bars at affordable prices in times of extreme scarcity — like right now, when mints are not minting, most dealers are out of stock, and those still taking orders are charging exorbitant premiums.

While we specialize in producing companies, we also cover such alternative gold investments as ETFs, mutual funds, royalty companies, and closed-end funds. We strive to find what’s best for you. And we answer your specific questions, each month in our BIG GOLD Responds section.

The elaborate world financial structure that has been erected over the past two decades created a humongous bubble that has now popped. What will come in the aftermath of this cataclysm cannot be foreseen, but it will be different. One thing is for certain, though, gold has been money, in all times and places, for thousands of years. The people of the world are already returning to it as the sole store of value, and that’s a trend that will accelerate in the coming years. You can count on it.

Learn how to make the trend your friend with a 3-month, no-risk subscription to BIG GOLD… and as an added bonus, receive our hot-off-the-press special report “The Crisis in Pictures” absolutely FREE of charge. Click here to continue…

Source: Gold Buyers Smash Records