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A Four-Point Investing Plan to Beat the Bear

William Patalon III — Wed, 08 Oct 2008 14:51:11 +0000

William Patalon III says the US economy is heading into recession and there is little the Fed or Treasury can do to stop it.

But that doesn’t mean contrarian investors can’t make a profit. History is littered with examples of investors that made a fortune during the darkest days for the economy.

William has a four-point plan to beat the bear this time round: 1) Load up on high dividend stocks; 2) Buy gold; 3) Stick to ‘global titan’ companies; and 4) Stay relaxed…

This report from Money Morning:

No. 1 – Stock up on Dividend stocks

Many investors are so scared by the wild gyrations the stock market has seen of late that they’ve jettisoned everything in their search for safety.

Not only is this a massive mistake from a timing standpoint, it’s also a major misstep because of all the dividend income those folks are going to forego.

Dividend-paying stocks tend to be more stable than their non-dividend paying brethren -particularly during rocky stock markets. In other words, stocks that have income streams attached are treated better, especially when the going gets tough.

They also outperform non-dividend paying stocks by even more in down markets than they do in up markets.
By consistently reinvesting dividends during down markets, investors can substantially expand their asset base, which puts them way ahead of the game when markets recover and stock prices soar – as they always eventually do.

And the savvy investors who owned them watched as their own portfolios easily outperformed the market averages and roundly trounced the returns of portfolios that were devoid of or light on dividend-paying shares.

And there are some excellent investment candidates. Two of the best are the PowerShares International Dividend Achievers Fund (AMEX:PID) and the Alpine Dynamic Dividend Fund (MUTF:ADVDX), two exchange-traded funds (ETFs) that we like a great deal.

The PowerShares International Fund is a global-income portfolio that can help you spread your risk, while also earning income. The Alpine fund is a more-specialized fund that uses a “dividend harvest strategy” that can boost the fund’s yield.

Both funds invest in companies that have survived countless business cycles, and that are likely to survive this downdraft, too.

Because dividend-paying stocks tend to be downdraft resistant, portfolios with higher yields tend to last longer and pay stronger. That’s something that’s important to all of us, but especially to investors who are nearing retirement, or who have already retired.

No. 2 – Go for Gold

When times are tough, gold soars.

And frankly, the economy has been tough: $4 gasoline, the housing crisis, rampant inflation, plummeting stocks…

But all the while, gold prices vaulted a cool 26.5% in the past year.

Missing out on gold is already costing investors a pretty penny. What’s more, most experts are forecasting gold prices to rise at least another 75.6% by the end of this year.

So, how does one profit from gold? It’s simple. You don’t have to wade through a plethora of flashy websites offering bullion or risk it all on a junior mining company.

Instead, here are five ways to profit from gold right away – from the most lucrative to the least risky.

Gold Fields Ltd. (NYSE:GFI): South Africa’s Gold Fields Ltd. is the world’s fourth-biggest gold producer – with about 90 million ounces in reserve from its operations in Africa, South America and Australia.

It recently reported that its fourth-quarter production would beat its previous forecast by up to 120%.

Overall, the company has a solid balance sheet and ample reserves. But if anything scares investors away, it’s Gold Fields’ location.

South Africa mines are frequently a political tool between the country’s labor unions and state-owned utility provider Eskom Holdings Ltd. (OTC: ESKAY), which controls 95% of the country’s power.

Eskom recently jacked electricity prices up 27.5%, and unions decided to hit the government where it hurts – by striking- thus gutting the government of taxes from its vast gold profits.

That is just one example of why this stock is a risky gold play. Gold could reach another record but Gold Fields may not see a penny of it if its miners are on strike.

Yamana Gold Inc. (NYSE:AUY): When gold prices are high, investors should pay extra attention to mining companies with increasing production levels because they translate into a bigger bottom line.

For its second quarter this year, Yamana Gold Inc. produced almost 10% more gold than it did in the previous quarter.

What’s more, its gold production is expected to double to 2.2 million ounces per year by 2012, primarily from its Brazil and Argentina mines.

That’s because Yamana Gold went on a spending spree in the past two years, buying up junior mines around the world to lock in reserves.

“Now it is about production, cash flow and earnings,” Chief Executive Officer Peter Marrone told Reuters.

It’s also about dividends. The company recently kicked up its investor payout by 300%, a strong vote of confidence to its production and stock performance.

Barrick Gold Corp. (NYSE:ABX): Like Yamana, Barrick Gold Corp. has also been on a spending spree. Over the past year, it has gobbled up stakes in a half-dozen mines, multiplying its reserves and production capacities in light of record gold prices.

All totaled, Barrick owns 27 mines in five continents and produces over 8 million ounces of gold a year, making it the world’s largest gold miner.

We consider this a medium-risk investment because – despite its solid operations, profitability and efficiency – it’s vulnerable like any tradable stock.

But since it’s the world largest gold producer, its stock will move closest in line with gold compared to other gold miners.

And as an added bonus, it just kicked up its biannual dividend by 33%.

SPDR Gold Trust (NYSE:GLD): Some investors want to buy gold but feel uneasy about storing it overseas, by another person… and for a commission nonetheless. But at the same token, not many
want to make their homes a burglary target by stashing gold reserves in their basements.

Enter SPDR Gold Trust (GLD), an ETF that trades like a stock, but whose value directly tracks the price of gold bullion. Only 1.82 percentage points separate the gains made by gold price and Gold Trust in the past year.

Gold Trust has a $17 billion-plus market cap, giving it ample liquidity. Simply put, it’s the easiest way to buy gold without buying physical bullion or coins.

EverBank Select Metals Account has a minimum deposit that is 98% lower than its competitors, and its commission costs are up to 86% lower than other metals brokers and bullion banks.

Second, it offers two types of gold accounts:
Unallocated: Your purchased gold is pooled with that of other investors, eliminating storage and maintenance costs. The minimum deposit amount for unallocated accounts is a scant $5,000.
Allocated: You directly own the gold you purchase, held in your own private account. The minimum deposit for allocated accounts is $7,500.

Both types of accounts can be set up 24/7 online. But if you prefer the phone, call 866-326-6241, and be sure to give them the code 12608 when setting up an account.

We should point out that the publisher of Money Morning has a marketing relationship with EverBank, but that’s because its products are best in show.

No. 3 – Grab the “Global Titans”

There are a handful of companies that are either located in, or focused on, overseas markets that remain poised for growth – even if the U.S. market slows down. We call those companies “Global Titans” because they usually derive a hefty portion of their sales and profits from outside U.S. borders.

The old adage that “when the U.S. economy sneezes, the rest of the world catches a cold” is becoming increasingly less valid, due to an economic process known as “decoupling.” This means that – eventually – such economies as China and others will be able to show respectable growth, even if the U.S. economy slows down or even drops into a recession.

In the immediate term, even the partial decoupling we’ve seen means that these other economies could continue to grow, even if we get mired down by the housing meltdown, subprime crisis and ensuing credit woes.

While those markets may take a near-term hit because of the maladies of the U.S. economy, their longer-term growth is much less dependent than ever before on the U.S.-centric model of the global markets.

And Money Morning has identified a portfolio of Global Titans whose quarterly earnings and stock prices are laughing in the face of the gloomy U.S. market: The Coca-Cola Co. (NYSE:KO), PepsiCo Inc. (NYSE:PEP), Diageo PLC (NYSE:DEO), Yum! Brands Inc. (NYSE:YUM), McDonald’s Corp. (NYSE:MCD) and The Boeing Co. (NYSE:BA).

No. 4 – Relax, Breathe

No one knows how long this economic vortex will last, but two things are dead certain:

• We’ve been here before.
• No matter how bad it gets, it will pass.

So far, we’ve gone through the Price/Earnings (P/E) Ratio peak crash of 1901; the Great Crash of 1929, the “Black Monday” stock market crash of October 1987, the Asian Contagion of 1997, loan defaults in South America and Russia, and even then 9/11 terrorist attacks.

And not only did we survive each; our economy rebounded to become bigger, stronger and leaner.

Source: US Economy: Are We Nearing the End of the American Dream?

4 Ways To Recession Proof Your Portfolio

William Patalon III — Mon, 15 Sep 2008 13:38:22 +0000

Wall Street is on its knees, and the taxpayer is on the hook for well over a trillion dollars to prop up the financial system.

Meanwhile, the wider US economy is sliding into a recession.

William Patalon III says there are four solid ways to protect your portfolio from these forces: 1) Buy dividend-paying stocks; 2) Buy gold; 3) Buy companies focused on overseas market; and 4) Don’t panic…

The following extract is taken from a research report published over the weekend by Money Morning…

No. 1 – Stock Up on Dividend stocks

Many investors are so scared by the wild gyrations the stock market has seen of late that they’ve jettisoned everything in their search for safety.

Not only is this a massive mistake from a timing standpoint, it’s also a major misstep because of all the dividend income those folks are going to forego.

Dividend-paying stocks tend to be more stable than their non-dividend paying brethren -particularly during rocky stock markets. In other words, stocks that have income streams attached are treated better, especially when the going gets tough.

They also outperform non-dividend paying stocks by even more in down markets than they do in up markets.
By consistently reinvesting dividends during down markets, investors can substantially expand their asset base, which puts them way ahead of the game when markets recover and stock prices soar – as they always eventually do.

And the savvy investors who owned them watched as their own portfolios easily outperformed the market averages and roundly trounced the returns of portfolios that were devoid of or light on dividend-paying shares.

And there are some excellent investment candidates. Two of the best are the PowerShares International Dividend Achievers Fund (PID) and the Alpine Dynamic Dividend Fund (ADVDX), two exchange-traded funds (ETFs) that we like a great deal.

The PowerShares International Fund is a global-income portfolio that can help you spread your risk, while also earning income. The Alpine fund is a more-specialized fund that uses a “dividend harvest strategy” that can boost the fund’s yield.

Both funds invest in companies that have survived countless business cycles, and that are likely to survive this downdraft, too.

Because dividend-paying stocks tend to be downdraft resistant, portfolios with higher yields tend to last longer and pay stronger. That’s something that’s important to all of us, but especially to investors who are nearing retirement, or who have already retired.

No. 2 – Go for Gold

When times are tough, gold soars.

And frankly, the economy has been tough: $4 gasoline, the housing crisis, rampant inflation, plummeting stocks…

But all the while, gold prices vaulted a cool 26.5% in the past year.

Missing out on gold is already costing investors a pretty penny. What’s more, most experts are forecasting gold prices to rise at least another 75.6% by the end of this year.

So, how does one profit from gold? It’s simple. You don’t have to wade through a plethora of flashy websites offering bullion or risk it all on a junior mining company.

Instead, here are five ways to profit from gold right away – from the most lucrative to the least risky.

Gold Fields Ltd. (GFI): South Africa’s Gold Fields Ltd. is the world’s fourth-biggest gold producer – with about 90 million ounces in reserve from its operations in Africa, South America and Australia.

It recently reported that its fourth-quarter production would beat its previous forecast by up to 120%.

Overall, the company has a solid balance sheet and ample reserves. But if anything scares investors away, it’s Gold Fields’ location.

South Africa mines are frequently a political tool between the country’s labor unions and state-owned utility provider Eskom Holdings Ltd. (OTC:ESKAY), which controls 95% of the country’s power.

Eskom recently jacked electricity prices up 27.5%, and unions decided to hit the government where it hurts – by striking- thus gutting the government of taxes from its vast gold profits.

That is just one example of why this stock is a risky gold play. Gold could reach another record but Gold Fields may not see a penny of it if its miners are on strike.

Yamana Gold Inc. (AUY): When gold prices are high, investors should pay extra attention to mining companies with increasing production levels because they translate into a bigger bottom line.

For its second quarter this year, Yamana Gold Inc. produced almost 10% more gold than it did in the previous quarter.

What’s more, its gold production is expected to double to 2.2 million ounces per year by 2012, primarily from its Brazil and Argentina mines.

That’s because Yamana Gold went on a spending spree in the past two years, buying up junior mines around the world to lock in reserves.

“Now it is about production, cash flow and earnings,” Chief Executive Officer Peter Marrone told Reuters.

It’s also about dividends. The company recently kicked up its investor payout by 300%, a strong vote of confidence to its production and stock performance.

Money Morning’s 5 Best Gold Investment Plays

Contrarian Profits — Wed, 30 Jul 2008 14:11:03 +0000

MoneyMorning.com is one of our favorite contrarian investing websites here at Contrarian Profits. That’s because it puts out tons of great investing insights every day.

And today is no exception. Money Morning has just published a great special report: The Five Best Ways to Invest in Gold Today.

Frankly, this is one of the best gold investing guides we’ve come across. It’s well worth reading. And considering gold prices have already jumped 43.25% in the past year, it could prove extremely lucrative…

Gold Play #1: Triple-Digit Production Gains

Many gold investors are innately averse to risk, which is why some don’t consider buying stocks in mining companies as “buying gold,” per se.

But unlike many other publicly traded companies, mining shares can rise sharply when the value of what they’re extracting is spiking.

In this case, gold miners today are getting 182% more for the yellow metal compared to spot prices five years ago.

And – barring the increased cost of oil – mining the gold costs relatively the same, further widening a mining company’s profitability.

South Africa’s Gold Fields Ltd. (ADR: GFI) is the world’s fourth-biggest gold producer – with about 90 million ounces in reserve from its operations in Africa, South America and Australia.

It recently reported that its fourth-quarter production would beat its previous forecast by up to 120%.

Overall, the company has a solid balance sheet and ample reserves. But if anything scares investors away, it’s Gold Fields’ location.

South Africa mines are frequently a political tool between the country’s labor unions and state-owned utility provider Eskom Holdings Ltd. (OTC: ESKAY), which controls 95% of the country’s power.

Eskom recently jacked electricity prices up 27.5%, and unions decided to hit the government where it hurts – by striking- thus gutting the government of taxes from its vast gold profits.

That is just one example of why this stock is a risky gold play. Gold could reach another record but Gold Fields may not see a penny of it if its miners are on strike.

Gold Play #2: All About “Cash Flow and Earnings”

When gold prices are high, investors should pay extra attention to mining companies with increasing production levels because they translate into a bigger bottom line.

For its second quarter this year, Yamana Gold Inc. (AUY) produced almost 10% more gold than it did in the previous quarter.

What’s more, its gold production is expected to double to 2.2 million ounces per year by 2012, primarily from its Brazil and Argentina mines.

That’s because Yamana Gold went on a spending spree in the past two years, buying up junior mines around the world to lock in reserves.

“Now it is about production, cash flow and earnings,” Chief Executive Officer Peter Marrone told Reuters in May.

It’s also about dividends. The company recently kicked up its investor payout by 300%, a strong vote of confidence to its production and stock performance.

Unlike Gold Fields, Toronto-based Yamana Gold has operations in relatively stable parts of the world – making it less risky on the geopolitical front.

But despite its name, Yamana Gold isn’t purely a gold miner. It also produces copper, silver, and zinc. How well the company continues to mine those metals – as well as their fluctuating prices – will also affect Yamana’s stock value regardless of gold prices.

Gold Play #3: Multiplying Profits with “Free Oil”

Imagine how much money you’d save if you owned your own gas station. Just fill up. Go anywhere. Forget worrying about dishing out $100 a tank.

Now, multiply the size of your oil consumption by 3,600 barrels.

Then multiply that by 365 for each day of the year.

That’s how much “free oil” Toronto-based Barrick Gold Corp. (ABX) is going to have now that its $410 million takeover offer was accepted by Cadence Energy (PINK: CDSFF), an oil and gas producer.

And that oil is sorely needed.

You see, gold prices have no doubt added billions to the bottom lines of mining companies. But 25% of the cost to mine that gold goes to oil.

Factor in gold’s projected 58% climb, and this company will have a huge profitability advantage over its mining peers and the average S&P 500 Index stock.

Like Yamana, Barrick has also been on a spending spree. Over the past year, it has gobbled up stakes in a half-dozen mines, multiplying its reserves and production capacities in light of record gold prices.

All totaled, Barrick owns 27 mines in five continents and produces over 8 million ounces of gold a year, making it the world’s largest gold miner.

We consider this a medium-risk investment because – despite its solid operations, profitability and efficiency – it’s vulnerable like any tradable stock.

But since it’s the world largest gold producer, its stock will move closest in line with gold compared to other gold miners.

And as an added bonus, it just kicked up its biannual dividend by 33%.

Gold Play #4: Tracking Gold Dollar for Dollar

Some investors want to buy gold but feel uneasy about storing it overseas, by another person… and for a commission nonetheless.

But on the same token, not many want to make their homes a burglary target by stashing gold reserves in their basements.

Enter SPDR Gold Trust (GLD), an exchange-traded fund (ETF) that trades like a stock, but whose value directly tracks the price of gold bullion.

Only 1.82 percentage points separate the gains made by gold price and Gold Trust in the past year.

Gold Trust has a $17 billion-plus market cap, giving it ample liquidity.

And with the ongoing skid in the U.S. dollar, investors have been fleeing the greenback and investing in gold. As it gains investors, the Gold Trust has continued to add to its gold holdings.

At the same time, central banks have been selling their gold reserves. That’s important to mention because it elevates Gold Trust’s status on the list of global gold holders.

Right now, it has the eighth-largest gold holding in the world – meaning that it has more gold than 97% of all the countries in the world. What does this mean?

Simply put, it’s the simplest way to buy gold without buying physical bullion or coins.

Gold Play #5: The Safest Gold Play Out There

Investors often shy away from bullion account providers because of their steep premiums and minimums. And reasonably so…

In addition to charging a 3% commission, Perth Mint also has a $250,000 minimum investment requirement – not exactly an amount many first-time gold investors have in between their couch cushions.

Kitco charges a 6% premium for 1 oz. Gold Eagle coins. Shipping and handling costs are also added, but varies on the size of the order.

Monex is perhaps the worst. On top of the 3% to 5% difference between what it buys and sells, there are commission rates ranging from 0.5% to 2.0%. Then there are shipping costs of $15 per transaction plus $1 per ounce. Then there are handling charges of $75 per unit ordered.

After all that, it’s hard to get excited about collecting profits.

That’s why we recommend an EverBank Select Metals Account.

First off, EverBank’s minimum deposit is 98% lower than its competitors, and its commission costs are up to 86% lower than other metals brokers and bullion banks.

Second, it offers two types of gold accounts:

Unallocated: Your purchased gold is pooled with that of other investors, eliminating storage and maintenance costs. The minimum deposit amount for unallocated accounts is a scant $5,000.

Allocated: You directly own the gold you purchase, held in your own private account. The minimum deposit for allocated accounts is $7,500.

Both types of accounts can be set up 24/7 online. But if you prefer the phone, call 866-326-6241, and be sure to give them the code 12608 when setting up an account.

PS. We should point out that the publisher of Money Morning has a marketing relationship with EverBank.

Source: The Five Best Ways to Invest in Gold Today

South African World Cup Reveals 129% Profit Strike on the Horizon

Sandy Franks — Tue, 01 Jul 2008 12:24:49 +0000

The World Cup scheduled for 2010 in South Africa is showing deep cracks in the country’s economy — positioning investors to reap gains of 129%.

FIFA and UEFA (that’s Fédération Internationale de Football Association and Union of European Football Associations to non-football folks) are becoming increasingly vocal about South Africa economic woes.

You see, South Africa’s having a bunch of problems this year, and some authorities are saying the problems aren’t going away anytime soon. Here’s what I mean…

– GDP growth came in a 2.1% (compared to expected growth of 4%) in Q1 2008.
– Inflation hit a five-year high of 10.1% year-on-year in April (interest rates were raised to 11.5%).
– Unemployment is incredibly high (at between 20% and 40% – that’s official vs. unofficial numbers).

But for the soccer organizations perhaps the worst drawback is South Africa’s undependable electricity supply.

In January 2008, Eskom Holdings Limited (ESKAY:OTC), South Africa’s state-owned electricity company, began cutting power exports because of shortages at home. Since then, reports have been flooding in that Eskom is “load shedding” in South Africa’s middle-class suburbs. Load shedding is abruptly cutting power when demand exceeds supply.

Those power problems could persist for the next 10 years, and that’s precisely what FIFA and UEFA are concerned about. Of course, this problem is not strictly isolated to soccer.

It could lead to job cuts at South Africa’s massive mines, and companies like Gold Fields, Inc. (GFI: NYSE) and Anglo American (AAUK:NASDAQ) could be cutting jobs and losing production. And that’s been leading to social shake-ups and as many as 68 people have died in socio-economic violence.

South Africa’s stock market has been riding high. In fact, it has more than tripled over the last few years.

But the bad news out of Cape Town is about to bring it all crashing down… However, as with most crisis situations, there are hidden opportunities. (In fact, savvy investors are already positioning themselves for a quick 129% gain.)

South Africa is fighting to dispel rumors that it could actually lose the 2010 World Cup. Unfortunately, Eskom’s load-shedding incidents are occurring at least four times a week and are starting to decimate South Africa’s economy.

Cape Town had been warned that these power shortages were coming. Eskom had informed President Thabo Mbeki that it needed more investment dollars to increase capacity. But the government didn’t listen. Now, South Africa is sinking… and the problem is getting worse.

Anglo American (LON: AAL), the world’s largest producer of platinum, says prices will soar by 50% due in part to power supply problems in South Africa. Platinum production could fall by 200,000 ounces this year, wiping out $397.4 million in revenue.

Gold Fields (NYSE: GFI) says that South African gold production could fall as much as a staggering 25% drop because of these power cuts. The industry would have to cut nearly 7,000 jobs.

To top it all off, Eskom is trying to increase its tariffs by 53% to help fund massive investment projects to increase its generating capacity. But the government is broke, and the South African Reserve Bank was forced to raise interest rate to 11.5%.

This is just the beginning. Eskom has confessed that South Africa will face power shortages for the next five years.

Bottom line: South Africa’s power problems are crushing the South African economy and the entire country is going to feel the pain.

GDP growth came in at half its expected rate in the first quarter of 2008. At the same time, inflation hit a five-year high. And worst of all, unemployment is at a startling 20%!

With no end in sight, foreign investment is bolting from South Africa… and the stock market gains of the last few years are about to implode.

Take a look at the chart below. It’s from Sara Nunnally, editor of Taipan Trader.

According to Sara’s research, the South African market has crossed into dangerous territory. It will not only likely fall… it will tumble hard!

Now if you’ll recall I mentioned that buried in every crisis is a hidden opportunity. Sara has isolated a safe, simple investment that will soar as South Africa’s market tumbles. In fact, Sara expects it will return a 129% gain.

This investment is easy to buy. In fact, you can own it without sending a single dime overseas.

Now here’s the thing: Sara’s research is spot on. Most every time she makes a prediction about an event happening in a foreign country, it comes true. She is the group’s most knowledgeable source on building wealth through foreign markets.

While Sara has already recommended this investment to her Taipan Trader readers, it’s not too late for you to participate in these gains.

For more details, please visit the Taipan Trader web site.

–Sandy Franks

Source: Upcoming World Cup Reveals That South Africa is in Shambles: 129% Profit Strike on the Horizon!