I used this insight and logic to warn investors about an imminent downturn in gold prices earlier this month. I got a lot of “feedback” from disappointed gold bugs. But it didn’t take long for them to eat their words as the price of an ounce of gold fell by nearly 10% in the last month.

But as I said earlier in the week, the slide is over. Of course, unlike the nation’s leaders, I’m willing to follow my words with action.

Here is what I sent to TFN Strategic Trader members first thing this morning:

“It is time to make the move. With the dollar increasing in value, America’s fiscal future looking stronger than its European brethren and record inflows proving safety has taken a backseat to asset appreciation, the price of gold has fallen by nearly 10% over the past month.

“Just yesterday, I read my first article in nearly a year that discusses the downside of the shiny, precious metal. Now that gold is trading for $1,100 an ounce, the sentiment has turned.

“Where were these articles a month ago when I warned of a turnaround? Now that the crowd has caught on, it’s time to change our outlook.

“As option investors, that means it is time to by. All you contrarian investors are going to love this week’s play. It gives you a chance to maximize the gains from gold’s upcoming turnaround.

“With gold shedding a significant portion of its value over the last four weeks, the speculation surrounding the metal has diminished greatly. That means once we get back down to base levels – the charts show its somewhere between the $1,050 and $1,100 per ounce range – we are set for even more upside.

“Rising inflation, interest rates and economic activity will boost demand well into the new year.

“Here is how I want you to take advantage of the situation. It is simple. Buy…”

You didn’t think I would give it away did you? To get in on the action and learn what I recommended, click here.

***We have come to the end of the year. In some ways I will be glad to see it go and in others, 2009 will be missed.

As a financial pundit, there will never be another year like 2009. Between pyramid-scheme scandals, unfathomable amounts of government intervention, a market nosedive and a roaring comeback, we never had a shortage of topics to cover.

As an investor, the action was bittersweet. Nobody likes extreme volatility like we saw in the first half of the year. Sure, there was profit opportunity, but not if it means losing your hair and risking your house.

For buy-and-hold investors, the year will end with gains of about 20% from the major indices. A nice victory, but still well short of where we were two years ago.

For in-and-out traders, the sky was the limit in 2009. Over at TFN Strategic Trader, we wrapped up a significant number of triple-digit winners.

But instead of looking backwards, it’s important to look towards the future and see what is just across the horizon. For 2010, it will be all about currencies, commodities and small caps. With so many of the nation’s smallest companies restrained by lending restrictions and top lines that refuse to grow, the next twelve months will be pivotal for the smallest of publicly traded companies.

For investors with the determination and skill to uncover the companies likely to be successful during that time, expect strong rewards. You can bet we will cover this sector in great detail as the year kicks off.

Until then, enjoy the last few hours of 2009 and have fun celebrating the arrival of the New Year.

Also happening today: President Obama is set to speak on the economy this morning, and Helicopter Ben is delivering a speech on “Four Questions about the Financial Crisis” this afternoon.

Hmmm…he should have called our emergency hotline we have set up for Treasury Secretaries and Fedheads. We could have helped him out with some of the answers to those questions…

CNNMoney.com reports that in the prepared remarks for his speech, Bernanke said, “Recently we have seen tentative signs that the sharp decline in economic activity may be slowing.”

The ‘signs’ he is referring to include recent upticks in home sales and new home constructions, as well as improvements in consumer spending, especially new vehicles.

“A leveling out of economic activity is the first step toward recovery,” said Big Ben. “To be sure, we will not have a sustainable recovery without a stabilization of our financial system and credit markets.”

Bernanke may have wanted to wait until the retail numbers were released before preparing those remarks. Nearly every expert that has been surveyed on this topic believed that U.S. retail sales, which count for half of consumer spending, rose in March, mainly due to the auto industry incentives that began last month.

However, it turns out that retail numbers pulled a fast one – and showed a drop in sales for last month.

Two months of gains has boosted hopes that March’s numbers would follow suit, building a rebound in consumer spending.

But, not so much. The Commerce Department showed that March’s retail sales were down for almost every type of store except necessities, such as food and drugs.

MarketWatch reports: “Retail sales in the first quarter were down 1.2%, compared with the fourth quarter of last year, raising the possibility that real consumer spending may have fallen again for the first three months of 2009 after plunging at a 4% annual rate in the final six months of 2008.

“Economist David Rosenberg of (NYSE:BAC) Bank of America’s Merrill Lynch said he expected consumer spending to decline at a 3.7% annual pace in the April through June quarter.”

“The retail sales figures indicated incentives and promotions by car dealers and clothing stores such as Gap Inc. failed to draw customers hurt by a lack of credit and the highest jobless rate in 25 years.”

In other words…outlook not so good for the economy. Americans have clearly been spooked by the high jobless rate. It seems that everyone knows someone who has been laid off, or had hours cut back…and the possibility of it happening to you becomes very real. So you cut back. You make dinner instead of going out…make do with last year’s summer clothes instead of going on a shopping spree. You want to make sure you have cash in the coffer…just in case.

This behavior begins to add up, as these numbers show. It makes you wonder: is it possible we are witnessing the taming of the American consumer? We’ll have to wait and see.

Now, we turn to Addison, with a report on what news has investors in a tizzy:

“The U.S. stock market dodged another bullet yesterday,” writes Addison in today’s issue of The 5 Min. Forecast. “Goldman Sachs (NYSE:GS) announced late in the day that it had pulled off a $1.8 billion profit in the first quarter.

“That’s $3.39 a share, more than twice as much as the market had anticipated.

“Investors are now wildly confident that Goldman Sachs will be one of the best performing financials of 2009.

“The Dow managed to end the day with less than a percent loss. The S&P 500 and NASDAQ both pulled off small gains.

“Curious how the markets work, though, isn’t it?

“In reality, Goldman benefited from a quirk in its new reporting schedule. ‘Its fourth quarter ended in November 2008,’ reports the Financial Times, ‘but after converting to a bank holding company last year, Goldman adopted a calendar-year earnings period starting in 2009. As a result, the company did not have to include December in its first quarter earnings, a month in which it sustained $1.3bn in pre-tax losses.’

“So Goldman actually made $0.5 billion in the first quarter. But who really cares? The investment bank is up 54% year to date!

“And since their stock is so ‘strong,’ Goldman bigwigs confirmed that they would move forward with a $5 billion secondary stock offering… the proceeds of which will be used to pay back TARP loans. Work it.

“Oh boy, ‘buyer beware,’ warns our short side specialist Dan Amoss. ‘The most responsibly managed banks should survive this downturn because cash flow from good loans should roughly offset the losses from souring loans.’

“‘Regulators will probably grant forbearance, meaning that they’ll look the other way while they allow bank capital levels to get dangerously low in 2009 and 2010. But just because many banks will avoid FDIC receivership doesn’t mean the stocks will be good investments.’”

And back to Kate, reporting from a blustery Baltimore:

“I hear that the government’s turn around on tax returns are up this year, which gets money back in the hands of consumers at a faster pace than previous years,” writes our good buddy Chuck Butler in today’s issue of The Daily Pfennig. “And we all know what happens when consumers get money in their hands: they spend it!”

Very true…but will the American consumer have anywhere left to spend their tax return?

A new report shows that strip malls, neighborhood centers and regional malls are losing stores at the fastest clip in over ten years. In addition, consumers are keeping a tighter grip on their wallets, causing retailers to trim down on the amount of merchandise available in the store, in order to stay afloat.

The report, done by New York-based real estate research firm Reis, shows that “In just the first quarter of 2009, retail tenants at these neighborhood centers have vacated 8.7 million square feet of commercial space. This number exceeds the 8.6 million square feet of retail space that was vacated in all of 2008.”

The report goes on to show that “vacancy rates at malls rose 9.5% in the first quarter, outpacing the 8.9% vacancy rate registered in all of 2008, marking the largest single-quarter jump in vacancies since Reis began publishing quarterly figures in 1999.

Are we still surprised at the disappointing March retail figures?

Now back to Goldman Sachs, which managed a major bounce back from its worst quarter since it became a public company in 1999.

Reporting their results a day early, Goldman said yesterday that it earned $1.8 billion, or $3.39 a share, for the quarter ending March 31.

But as Addison pointed out, above, Goldman did benefit from a ‘quirk’ in their new reporting schedule.

“Leave it to the clever boys at Goldman Sachs to turn dross into gold,” says our friend Barry Ritholtz in a post on his blog, The Big Picture today.

“The bulk of their profits had come from AIG transfer payments – the AIG 100% payouts funded via bailout monies that saw Goldie as one of the largest recipients. Floyd Norris notes that most of the AIG effect was in December. ‘For the first quarter, the total A.I.G. effect on earnings was, in round numbers, zero.’”

Wondering how this is possible? Well…that’s where the beneficial ‘quirk’ comes into play…

From the NYT:

“Goldman’s 2008 fiscal year ended Nov. 30. This year the company is switching to a calendar year. The leaves December as an orphan month, one that will be largely ignored. In Goldman’s news release, and in most of the news reports, the quarter ended March 31 is compared to the quarter last year that ending in February.

“The orphan month featured – surprise – lots of write-offs. The pre-tax loss was $1.3 billion, and the after-tax loss was $780 million.

“Would the firm have had a profit if it stuck to its old calendar, and had to include December and exclude March?”

“Truly astounding,” writes Barry, “the word Chutzpah simply does not do it justice.”

Source: U.S. Retail Figures Pull a Fast One

This from Ted at Investor’s Daily Edge:

The stock market is still in panic mode; investors have lost too much and are dumping their stocks in an attempt to salvage what little money they have left.

The more they sell, the worse the market gets. The worse the market gets the more they sell. It’s like a nightmarish game of dominoes.

Granted the new giant stimulus package, a bigger round of rescues, and the largest deficit financing of all time are going to have an effect on this economic crisis. Some of these policies will help, but they may also backfire and aggravate the crisis. Just don’t count on the government to bail you out.

Unfortunately, it looks like the stock market will actually get worse before it gets better. Please don’t try to pick a bottom, bottom picking in this bear market is extremely risky so be careful. Wait to see a sustained recovery before stepping back into stocks.

Here are a few reasons to be bearish:

• GDP declined 6.2% in the fourth quarter and GDP will probably have a similar decline in the first quarter of this year. This is a much bigger drop than most experts were forecasting. And there is evidence that the decline is accelerating.
• U.S. consumer spending is dropping like a rock and this is killing the economy. Consumer spending accounts for about 70% of total economic activity in America.
• The media is extremely negative. Every time you turn the nightly news on, you see financial disaster everywhere. The news loves to report that more people are being laid off, more businesses are going bankrupt, real estate is going lower, etc. All this negativity scares people into selling their stocks and spending less.
• Government borrowing is exploding and this will have dire consequences including higher inflation.
• We are witnessing the collapse of a mountain of debt in the private sector and the public sector may be next. Many governments around the world could end up defaulting on their debt, which would have severe economic repercussions.
• The number of troubled banks is increasing and the amount of toxic assets on their books is continuing to expand rapidly.

The bad news is there is no growth engine, at the present time, to pull us out of this economic slump.

So what are we supposed to do now?

You need to protect your nest egg and protect yourself against further losses. Get your money growing again and protect your capital by cutting your losses. Lower your exposure to the stock market by selling off the poor performers and diversifying into contrarian investments like natural resources including gold and silver. Just use common sense and stay flexible with a well-balanced portfolio.

You should have at least 10% of your assets in gold and silver as an insurance policy. All of my indicators suggest these hard assets will soon move to new record highs. In fact, I think gold and silver are in for an extended bull market even as most stocks face an extended bear market.

You should also think about doing put options or shorts on weak companies. You can make a tremendous amount of money as a company’s stock declines. A good service to look at is Andrew Gordon’s Red Flag Insider. His service has performed extremely well in this bear market.

This economic crisis may not be over for years, but after the selling wave in stocks is over — I expect to see a major rally take place, with the Dow gaining back 50% or more of its losses in just months. So be prepared and I will keep you posted on how to play it.

Source:  Is Dow 5,000 a Possibility?

The farmer grew cotton, some trucking company delivered that cotton to the textile mill, the textile mill converted the raw cotton to denim, the denim was sent to some garment company which then made the jeans – and the jeans found their way to the mall where you bought them. At each step of the way there is an involvement of “economic activity”. And there are many “linkages”. Someone needs to make the trucks to move all the cotton and the denim clothes. Someone needs to build the roads so that the trucks can move on them. And then you need cement to make the roads and machinery for making cement. You also need machines to convert cotton to denim and then the buttons and zips to make the jeans.

GDP is clearly a complex event. Imagine all the people who need to be involved in some economic activity just to get you your one pair of jeans. And that pair of jeans does a few things: it clothes you and covers you; it represents a fashion statement; or it is just another “thing” you bought for the sake of buying something.

But not every bit of GDP is necessarily “good” GDP. Take the case of gambling. It is an industry and is counted in GDP. Someone needs to build the casinos, manufacture the cards, manufacture the tokens, manufacture the liquor that is consumed (another not so “good” GDP), manufacture the cigarettes (yet another not so “good” GDP), and then all the linkages that come from there – the cement to build everything and the trucks to transport everything. So a country that builds many casinos may be adding to GDP but, chances are, its society will not be that “happy”. If parents are busy gambling all day long, then who is with their children? Or if people smoke and drink a lot (which could happen in a casino environment) what happens to the health of the “healthy” people and the cost inflicted to society over time? Looking after sick people in hospitals is not “good” GDP – there is an economic activity that adds up to GDP but no one is really “happy”.

And I see a large contribution to GDP from the fund management industry. There are 33 of us fund managers registered as Asset Management Companies with SEBI. And we have hundreds of mutual funds that we have created to cater to your every imagined financial need (uh, not Quantum). We (except Quantum) have deployed an army of distributors and sub-brokers and sales agents and wealth advisors to look after every conceivable need for any financial product you may have. All these new fund launches, recommendations to move from one fund to another fund every week or every month – all of this generates economic activity and adds to GDP.

Most of it is useless for you, the investor, but tends to make the middle men rich. That is why Quantum Asset Management Company and the Quantum Mutual Funds have no distributors to “sell” you anything. That is why we launch a few products: most mutual funds are useless and will give you little benefit in the long run – though they will add to the GDP of the middle men a lot in the short term.

Another example of “useless” GDP comes from the statistics of foreign buying in India. Over Rs 4,000 crores of buying and selling by foreign “investors” occurs every day in the Indian stock markets. At the end of the day, they have actually bought or sold only Rs 150 crores of stocks. The other trades of Rs. 3,850 crores – which they “squared up” and offset in the course of one trading day – added to the GDP of the brokers, the custodians, the banks, the stock exchanges, and the government’s income from a trading tax. But it did little to anything real about India, about India’s GDP, and neither did it give anyone a more accurate picture of the “true” level of stock prices.

In fact, I can make a strong case that this “casino” activity hurts India’s standing as a serious contender for long term capital that is required to build India’s future GDP.

So GDP is not an indicator that should make you feel proud or sad. When you read that India’s GDP was 9% per annum that is a useless statistic. Particularly if most of it was from selling you mutual funds you don’t really need; or from building casinos; or selling more alcohol; or manufacturing guns. That is all “bad” GDP.

As India’s GDP slows down to a more sustainable rate of 6.5% per annum, I hope that it is the “bad” GDP that gets hit more than the “good” GDP. For example, if you spend less time buying and selling mutual funds, it will have a dramatic impact on your distributor’s GDP but not on your GDP. Invest wisely, invest long term, and your GDP will chug along quite happily.