It is a question preoccupying a lot of the contrarian investment experts we publish daily at Contrarian Profits.

Earlier today, we published a bearish article on gold by Today’s Financial News editor J. Christoph Amberger. He says oil, copper, gold and other speculative assets that promised unlimited upside are now caught in “an accelerating downward spiral,” as funds liquidate losing positions.

Other investment newsletter writers disagree.

Lee Lowell in The Smart Profits Report says gold is extremely oversold right now and is likely to trend higher as the dollar rally fizzles out.

Eric Roseman in The Sovereign Society also remains bullish on gold’s prospects. He says a major correction in gold prices is coming. Like Lee, Eric doesn’t think the fundamentals of the US ecnomoy support a long-term dollar upswing.

Steve Sjuggerud, writing in DailyWealth today, takes more of a middle road.

Steve says you can explain at least half of gold’s fall by the nearly 10% rise in the dollar. And, like Lee and Eric, Steve reckons the dollar’s rise is a temporary phenomenon. 

He also says history shows gold has fallen as much as 50% before continuing a huge bull market and that helps put the recent 20% fall in perspective. And if  history is any guide “over the course of the next five years, gold could fall farther than you think… and then soar higher than you can imagine.”

The pound slumped to 17-month lows of $1.9225, while the euro hit five-month lows of $1.5195. Does this signal a turnaround for the buck?

Steve Sjuggerud in DailyWealth says it’s time to start betting against the euro – which is as expensive as it’s ever been. But Charles Delvalle in Investor’s Daily Edge argues that continued weakness in the US economy means the dollar will have a hard time finding traction for a long-term move.

Steve’s believes the US-eurozone interest-rate trends are likely to reverse in the near future. This is because he sees Europe on its way toward recession.

As The Daily Reckoning’s currency expert Chris Gaffney pointed out yesterday, the eurozone has been posting some pretty poor numbers lately. For instance, yesterday Germany reported 2Q factory orders down for a seventh straight month in June, weighed down by euro strength.

However, Chris says the ECB “has never wavered from their mandate for price stability,” and that this “dogged fight against inflation will help maintain the long-term value of the euro.”

Chris also argues that the dollar rally just doesn’t make sense when you look at the overall global economic picture. Growth in the euorzone is slowing, and Germany may be slipping awfully close to a recession. But Chris says the US is already in a recession. “And while the impotent FOMC sits back and ‘hopes’ that inflation will abate, the ECB has had the courage to continue its fight against inflation.”

Meanwhile, Charles in Investor’s Daily Edge says it’s “highly unlikely” that dollar strength will last long enough to reverse the multi-year long dollar downtrend.

He says: “Since March, the U.S. Dollar Index (NYBOT: DX) has been consolidating between the 70 and 74 cent range. Since mid-July the dollar has mounted a strong rise to the top of this range. But with the continued risk of more foreclosures, multi-billion dollar losses in the financial sector, ballooning deficits and a sluggish economy, the dollar will have a hard time finding traction for a long-term move.”

Nevertheless, the dollar is trending upwards against the euro, prompted for the most part by the European Central Bank’s (ECB) decision yesterday to hold rates steady.

And adding to the euro’s woes were ECB chief Jean-Claude Trichet’s dovish comments following the interest-rate decision.

Adding to the woes were comments from the bank’s chief that economic conditions in eurozone were worsening. And the US economy is showing signs of growth.

If the eurozone slides further toward recession expect the dollar to continue to climb further…

Phase 1 Investor editor Rob Fannon recently wrote that biotech was one of the few market sectors to show positive returns as  many other stocks were getting hammered. He sees great values in the sector.

There’s a good reason for this strength. A struggling economy won’t hurt biotech and medical as much as, say, an automaker, retailer, or restaurant chain… And biotech is one of the few industries showing solid sales growth.

A big holding in the S&P Biotech ETF, Gilead Sciences, just reported a 22% increase in quarterly sales growth. A slew of big biotech players report earnings next week, and I expect more great numbers.

Several ETFs give you broad exposure to biotech. Just enter “biotech” in the search box on www.etfconnect.com for a full list of funds. (A warning on the HOLDRs Biotech ETF – I’d avoid it… It’s ridiculously weighted toward just four high-profile companies.)

The really huge gains in biotech will be made with the best individual companies. Pick the right one and you could easily multiply your money by four or five times.

Today, Steve Sjuggerud of Daily Wealth calls biotech, the first “screaming buy” of 2008.

I asked Rob about the Genentech buyout offer from Roche – the one that I called the “catalyst” for the sector back in July.

Rob said the Genentech bid “is a bad move for Roche… but it’s terrific for the industry, for a couple reasons.”

• First, big, profitable biotech companies like Biogen (BIIB), Gilead (GILD), Genzyme (GENZ), or Celgene (CELG) are perceived as safer ways to play biotech. Like Genentech, these companies already have drugs on the market that command premium pricing and offer multiple years of remaining patent protection. They could be takeover candidates as well.

• Second, once Genentech is acquired, $40 billion of money dedicated to biotech will need to find a new home. Investors will search for new spots to park this cash… We’re seeing it already. Sector valuations are already on the rise.

According to Rob, the whole sector “is prone to swift surges of joy.” An easy and diversified way to own biotech is through the SPDR biotech ETF (XBI). It holds mostly mid- and large-cap companies.

But Rob says the real money will be made in small-cap biotechs – like the ones he often features in his newsletter. He told his readers, “I’m betting the entire small-cap space could jump as high as 25% in the coming months. And that could be just the beginning…”

I trust Rob, who’s finally bullish about biotech. Everything is lined up, as far as our “cheap, hated, uptrend” mantra goes. And the sector has just begun to rise. You haven’t missed a thing.

In short, if you haven’t bought biotech yet, buy it now! It’s the first “screaming buy” of 2008.

Likewise, Jim Nelson in the Penny Sleuth sees great profit opportunities for biotech right now.

You see, investors have been too busy buying up investment banks and mortgage fiascos. Now that the dust is starting to settle (even though we expect that to take quite a while), more and more interest is being paid to technologies and biotechs. That hasn’t happened on any large scale since the tech bubble burst.

A few weeks ago, Big Pharma went head first into this recent breakout, when Switzerland-based Roche Holdings offered to buy up the other 44% of Genetech Inc. (NYSE:DNA) that it didn’t own. The news of this possible deal sent shares flying 15% overnight.

Just a few days ago, Bristol-Myers Squibb (NYSE:BMY) offered to buy ImClone Systems (NASDAQ:IMCL) — a small $5 billion biotech — for $60 per share. While that one was instantly rejected it did send ImClone shares flying, giving investors a nice, one-day 40% gain.

These stories are starting to roll in now.

The euro fell as far as $1.5464, its lowest point since June 18.

The dollar’s climb could be a sign of things to come says DailyWealth editor Steve Sjuggerud.

In DailyWealth, Steve says that the euro is now “extremely overvalued” versus the euro – a full 50 percent overvalued, in fact.

A concrete example of this is The Economist magazine’s Big Mac Index. This is an informal way of measuring the purchasing power parity (PPP) between two currencies.

According to The Economist, early 1995 was the last time a Big Mac was 50% more expensive in Europe than it was in the US. And as Steve points out, “The last time Europe’s currency got this expensive, it crashed by nearly half.” 

Steve says it’s time to make a safe wager. “Bet against the euro while it’s extremely overvalued and get out in two years or so. The euro will probably still be too expensive, but it’ll be a lot cheaper than it is now.”

The fundamentals aren’t exactly rosy for Europe either.

Britain’s The Guardian newspaper reports today that the eurozone’s economic outlook “received fresh blows today from falling services sector morale [...] boosting expectations that the European Central Bank will leave interest rates on hold.”

And separate data showed eurozone retail sales saw their biggest ever annual fall in June, confirming that high prices of energy and food are hitting people’s spending power.

Leuthold also knows how to invest in stocks – his his Grizzly Short Fund (GRZZX) has been top of the stock funds over the last 12 months.

If you stick with Steve Leuthold’s advice, says Steve Sjuggerud in DailyWealth, you’re be well on your way to bumper profits…

Greetings today from Minneapolis, Minnesota – home of one of DailyWealth’s favorite investment advisors, Steve Leuthold…Mr. Leuthold never ceases to amaze us. He’s done it for 30 years now…

Today, one of his mutual funds is the best-performing U.S. stock fund over the last 12 months. It ranked No. 1 on Morningstar’s list of 19,500 mutual funds – an exceptional performance.

And nearly 30 years ago, he wrote the exceptionally prophetic book The Myths of Inflation. Back in 1980, contrary to every other prognosticator out there, Leuthold was optimistic. He predicted inflation would fall to 3%. He predicted oil prices would calm down. And he predicted stocks and bonds would perform well. It was just brilliant stuff.

It was so brilliant that, after reading it, DailyWealth’s own Tom Dyson felt compelled to fly into Minneapolis just to meet with Leuthold’s contrarian research firm, the Leuthold Group. On my trip to the “North Country” this year, I chose not to bother the Leuthold guys. Instead, I’m in the Minneapolis airport, headed home after a quick vacation with my wife and kids. (My father grew up in Northern Wisconsin, and my parents now have a lake house there. My wife and I brought the kids up for a few days.)

A few years ago, Steve Leuthold made a huge bet on commodities. He bought tons of commodities… literally! Leuthold was the only fund manager I’m aware of who was actually stockpiling tons of base metals in warehouses.

He recently just closed out his fund’s position in commodity-related stocks with something like a 450% return in just a few years. (I don’t have the stats on this trade with me here in the airport… But trust me, the returns were exceptional.)

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Leuthold not only got the call right on commodities, he got the trade right, too. He really maximized his profit…

He was bold enough to take a big position when nobody else wanted to. And then he had the stomach to hold on for a long time, when other value investors would have gotten scared out of the trade.

Leuthold also brilliantly took a big short position in financial stocks in his Grizzly Short Fund (GRZZX). That bold position pushed the Grizzly Fund to the top spot in stock funds over the last 12 months.

So his Grizzly Fund is at the top of the list now… But Leuthold makes bets in both directions. So maybe another of his funds will be No. 1 down the road. (For more on Steve Leuthold and his funds, click here.)

He told Barron’s, “Our valuation models are indicating that there is not a huge amount of downside risk” in stocks right now. But as far as I know, he doesn’t have a big call at the moment. According to Barron’s, Leuthold is currently “neutral” on the markets. It’s not for a lack of looking… Leuthold just spent weeks traversing China sizing up its investment prospects.

The DailyWealth list of legitimate “market experts” is surprisingly short. One of the few names on that list is Steve Leuthold.

He’s done his homework and made prescient calls for 30 years… from calling the end of inflation in 1980, to stuffing warehouses with commodities a few years ago, to betting against financials lately.

When you see comments from Steve Leuthold or the Leuthold Group, stop and listen. You’ll probably hear some great advice…

Source:  The Best-Performing Stock Manager in America This Year

A few years ago here in DailyWealth, I shared what I called the “Generation Switch” idea… You see, investment themes move in cycles – or “generations” – that last about 17 years or so.

One generation gets enamored with an investment idea, and it soars beyond reason. Then it busts, and the next generation gives up on it forever. You can see it in the table from a few years ago: Triple-digit profits one generation, losses the next:

100 YEARS OF INVESTMENT GENERATIONS Generation Commodities (CRB Index) Stocks (S&P 500) Years 1914-1930 -14% 159% 16* 1930-1947 244% -30% 17 1947-1965 -18% 503% 18 1965-1981 123% 35%^ 16 1981-1999 -9% 1054% 18 1999-2016 ? -? 17 * Data starts in 1914, so we don’t have 17 years of data ^ While stocks had a small positive return for 1965-1981, if you adjusted the number for inflation, it would be negative

This one simple table would have made you rich…

If you’d have sold your stocks and bought commodities at the end of 1999, you’d have made bigger profits than anyone you know this decade.

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Commodities are up by triple digits since the end of 1999, and stocks are down in that time. The scary thought is… if the pattern holds, we could see stocks underperform until as late as 2016.

In my newsletter True Wealth, we wait for opportunity… We buy things that are cheap, hated, and in the start of an uptrend.

I don’t think we’ll have to wait until 2016… but we haven’t seen the uptrends yet. It’s an understatement to say it’s an ugly market out there. We’re simply doing our best to avoid catching falling knives.

It’s best to wait for the falling knife to hit the ground and come to a stop before carefully picking it up. By waiting for the uptrend, we might miss the first 20%-25% of a move… but it’s completely the right way to go now. We can’t know where the bottom is.

Right now, I’m seeing more cheap and hated opportunities than I ever have in my career. That’s what I’m excited about. And that’s the positive thing about bear markets… They create value.

Many investments around the world are as cheap as I’ve seen them. Investors coming into the market in the next few years will get in at good values. And chances are, they’ll make money.

I can’t go back and save people who didn’t read my writings back in 2000, when stocks were expensive. (In my January 2000 newsletter cover story, I said, “We are at the peak of most likely the greatest financial mania that will ever be seen in our lifetimes and quite possibly the greatest ever witnessed.”)

But I can tell you today, in 2008, stocks are as cheap as they’ve been in a long time. While they can (and likely will) get cheaper, I am excited. For the first time in many years, we’re seeing once-in-a-generation values.

Source:  The One Positive Thing About This Bear Market

If You Think Obama Will Be President, Buy These Bonds

By Steve Sjuggerud

In my 13-year investment career, I’ve found there’s one thing you can always count on to stir up investment opportunities… the government.

For instance… back in 2002, we bought an investment I called “virtual banks” in my True Wealth advisory. These types of banks borrowed money at low rates, and lent it out at high rates through government-guaranteed loans. Leverage ensured they could pay us safe, double-digit dividends.

We held the position a little over three years, and made more than 50%… all because the government guarantees many of the mortgages in America.

And take gold…

Gold coins, gold stocks, and gold ETFs have all made terrific gains in the past few years. Much of the gain has come from the flight out of paper money and into real assets. People simply don’t trust governments to manage their currencies…

Today, I’m going to tell you what could be the best government opportunity you’ll hear about this year: Muni bonds.

Tax-free municipal bonds are more attractive than they’ve been in half a century, as I’ll show. And if you think Barrack Obama will be elected, then they’re even more attractive. Let me explain…

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Municipal bonds are very simple to understand. When a state needs to build a new toll road, for example, it issues a municipal bond to get the money to build it.

The U.S. government gives investors an offer they can’t refuse on municipal bonds… Investors don’t have to pay income taxes on the interest they earn on their bonds. So when interest rates are 6%, then tax-free municipal bonds ought to pay about 4%.

That’d make them about “equal” for high-end taxpayers. Once you pay taxes on your 6% interest, you’re left with about 4%. In essence, you’re no better or worse off with 6% taxable interest or 4% tax-free interest.

But today, we have a crazy phenomenon… Tax-free municipal bonds pay more interest than taxable bonds.

It’s true… Tax-free municipal bonds are paying about 4.6% tax-free.

Meanwhile 10-year Treasuries are paying closer to 4.2%, taxable. This makes no sense…

We’ve hardly ever seen this in history. And right now, the opportunity is as good as it’s ever been. It could get even more attractive…

If Obama is elected, the biggest investment winner could be tax-free municipal bonds.

You see, without a doubt, Obama will be raising income taxes on high-income families. For example, if your income is $1 million, and he raises income taxes by five percentage points, that’s an additional $50,000 in income tax you’ll pay.

High-income families will have a huge incentive to find ways to get tax-free income. And they’ll discover something many of them have never even looked at before: Municipal bonds… That’ll drive prices up significantly higher.

Of course, as the prices of bonds soar, you’ll have to pay taxes on those capital gains when you sell the bonds… but that means you made more money while collecting high returns tax-free. It’s a good problem to have!

If you’re interested in this idea, my advice is to find an ETF that bundles together a lot of individual muni bonds. Money manager Van Kampen has several good issues that do this for investors. Click to see a full list of Van Kampen’s muni funds.

According to Van Kampen’s website, you’d need to earn 8.8%-9.25% in a taxable account (at the highest tax rates) to equal what Van Kampen is paying out on several of its funds (around 5.7% tax-free). You can find other muni-bond funds by typing “municipal” into the search box at www.etfconnect.com. This is a great website for information on ETFs.

Where are you going to find a safe, taxable 8.8% to compete with 5.7% tax-free? I don’t know… and it’s my job to find these things. That tells me it’s time to buy municipal bonds!

Source: If You Think Obama Will Be President, Buy These Bonds

The AAA annual Fourth of July travel forecast says different, according to the The Washington Times. It says record gas prices and soaring airfares will deter few Americans from traveling over the holiday weekend.

DailyWealth editor Steve Sjuggerud says be skeptical about anyone who claims to know where the price of oil or gas is going. But considering that oil has shot up tenfold in the last ten years and gas has only risen fourfold, Steve is surprised that we’re not already seeing higher gas prices.

“First, nobody knows where the price of oil or gas is headed.” You should be extremely skeptical of anyone who says otherwise. “But here’s what I do know…” Then I shared with him some simple math:

To give you some perspective, I put together this chart:

You think gas is expensive now? Consider this:

The chart shows the price of a barrel of oil on the left scale, versus the price of a gallon of unleaded gas on the right scale.

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Adjusted for inflation, the price of unleaded gas had been relatively stable – around $2 a gallon – for nearly two decades. The price of oil adjusted for inflation had been somewhat stable as well… around $30 a barrel since 1986.

Then, boom! The price of oil shot higher. Yes, the price of gas has doubled from $2 to $4. But that’s nothing compared to oil’s massive moonshot.

When you realize that the biggest part of the price of gas is the price of oil… then you can easily see how the price of gas can go higher from here.

Here’s where your gas money goes…

Refiners, distributors, convenience stores, you name it, they’ve been squeezed trying to get you gas cheaply. {Exxon (NYSE: XOM) is actually getting out of the service station business!}

The high price of oil is what’s done us in. Quite frankly, knowing what we know about the price of oil, I’m surprised we’re not paying even more for gas now.

“When will we get relief from the high gas prices?” I wish I could be more optimistic with my friend the car dealer, and with you. But I have to be honest…

When I size up the two pictures above, my simple answer to you is “not soon.”
Source: The Real Numbers Behind High Gas Prices

From March 2007 to March 2008, Exxon’s profit margin was just 10%. Meanwhile, its income tax rate was about 43%.

Compare this with Microsoft: Microsoft’s (NASDAQ: MSFT) profit margin was over 28%. And Microsoft’s tax rate was under 30%.

Microsoft makes a much bigger profit margin than Exxon. And it’s taxed way less. Heck, if anyone deserves an “excess profits tax,” it’s Microsoft, not Exxon, right?

Do you think Microsoft’s Office software is outrageously expensive? And if so, is the right solution to tax Microsoft more? Does that fix the problem for consumers?

Right now, people just want to hear that the government is doing something to fix high gas prices. Many people naively believe the gas stations and Big Oil companies like Exxon are gouging them.

But calling for a windfall tax on Big Oil is among the dumbest policies you can possibly support… and there are a lot of dumb ones to consider.

Steve Sjuggerud

Source: The Dumbest Tax Policy You Could Possibly Support

The spread of yields between investment grade corporate bonds and treasury bonds is at its highest since 2002. Soon after that point came a sharp correction back to the long-running average.

A similar adjustment now, says Steve, will make someone a lot of money. He’s calling it a “once-in-a-generation opportunity”…

Someone Will Make a Lot of Money on This Market Anomaly

By Steve Sjuggerud

In the latest issue of True Wealth, I shared with subscribers “The Next Big Thing(s) – Nine ideas for a difficult market. “To me, it’s exciting to be able to have that many unique opportunities to share. That’s the biggest unseen benefit of the rough market we’ve had over the last 12 months.

The nine ideas I shared come from all over the globe, in all kinds of investments (stocks, bonds, and whatever else). So they’re not all correlated… If one doesn’t work, another will more than make up for it.

And I believe a few of those ideas will turn out to be “life changing” investments. The opportunities are that good. Most of them are “once in a generation” trades.

Today, I want to share with you yet another possible once-in-a-generation opportunity…

Right now, “investment grade” corporate bonds are as cheap as they’ve ever been, relative to Treasury bonds.

The only time we saw a similar anomaly in the last 50 years was in October 2002. It was a great buy signal…

In less than eight months, “boring” investment-grade bonds soared 19% in price. And don’t forget, the bonds were paying more than 7% (compared to just 4% in Treasury bonds)… So you’d have picked up a good amount of interest in addition to your capital gains.

Today, we’re seeing a nearly identical situation… Investment-grade corporate bonds are paying more than 7%, while Treasury bonds are paying around 4%. Take a look at the chart and you’ll see what I mean:

There’s another way to put the trade on… You could do it hedge-fund style, where you buy LQD and make the equal and opposite bet against Treasuries. One way to bet against Treasuries is through the ProFunds Rising Rates 10 (RTPIX), which will profit if Treasury prices fall.Again, I’m not bold enough for these trades yet. The trends are against me so far. And with all the turmoil in anything related to borrowing money, I can’t recommend getting in right now.

But it is an extraordinary anomaly… one we should only see once in a generation. Soon, we will have a safer moment to capitalize on it. Someday, someone will make a lot of money here. We’ll do our best to pick the right time to get in…

Source: Someone Will Make a Lot of Money on This Market Anomaly