I was in Manhattan last week attending Grant’s Fall Investment Conference. The U.N. General Assembly is meeting there, and the streets were blocked off in places. The NYPD was out in full force. I heard one passerby complain about the inconvenience of it all to one police officer. He responded, “Don’t blame the NYPD, blame the General Assembly.”

With the General Assembly in Manhattan and the G-20 in Pittsburgh, government has taken over the headlines this week. It seems half the world is mostly preoccupied with telling the other half what to do. No doubt, bossiness is in a bull market.

At Grant’s conference, I heard presentations on gold, the dollar, oil, real estate and more by a slate of luminaries, including John Paulson. Paulson is one of the best hedge fund managers in the world. There were many others, including Grant himself, who has created something of a stir lately.

Jim Grant, the host and editor of Grant’s Interest Rate Observer, has turned bullish on the recovery. In a Wall Street Journal piece on Saturday, the great bear turned in his claws and picked up the horns of a bull.

In a phrase, Grant’s thesis runs this way: The sharper the decline, the stronger the rebound. For this, he finds ample evidence in the historical record. The economy bounced back strongly after each sharp contraction — such as those in 1893-94, 1907-08, 1920-21 and 1929-31.

In the current recession, GDP (a rough measure of economic activity) contracted nearly 4% from peak to trough, which is a sharp recession as these things go. So, Grant reasons, the rebound will follow the historical pattern.

Grant loves to challenge the consensus. And the consensus this time around is that the recovery will be weak. I loved the quote he pulled from economist A.C. Pigou: “The error of optimism dies in the crisis, but in dying it gives birth to an error of pessimism. This new error is born not an infant, but a giant.”

Grant makes an eloquent and thoughtful case, as he always does. He goes on to conclude in his editorial: “The world is positioned for disappointment. But in economic and financial matters, the world rarely gets what it expects. Pigou had humanity’s number.”

I hope Grant is right. It is an appealing case, but I don’t buy it. Too many of the problems of the prior boom remain unresolved. There is still too much leverage and debt in the system. And on a more basic level, business is not good across a spectrum of sectors. The contraction is still ongoing. I’m inclined to remember the old bearish refrain that things are never so bad that they can’t get worse.

It’s All About Markets

It’s true we’ve had a sharp contraction, but there is no rule that says we can’t contract more. A nearly 4% decline in GDP could turn into an 8% contraction when all is said and done. The move from 4% to 8% would be painful, indeed. Even then, we would be a far cry from the dark woods of the Great Depression.

In some ways, the whole discussion is irrelevant anyway. As investors, we care about markets, and not GDP growth. There is a great fallacy out there that if the economy does well, stocks should do well (or if the economy does poorly, stocks should do poorly). Hence, too many so-called investors waste an inordinate amount of time talking about recovery, or lack thereof.

It’s possible that Grant is right: GDP does expand strongly. But investors could still lose. We have one glaring historical example: From 1964-1981, GDP grew 370%. And the sales of the Fortune 500 more than sextupled. Yet the Dow Jones industrial average went from 874 on Dec. 31, 1964 to 875 on Dec. 31, 1981.

As Warren Buffett once wrote: “Now, I’m known as a long-term investor and a patient guy, but that is not my idea of a big move.”

For investors, it is all about the price paid. The really relevant question is not one of whether or not the economic recovery is real. The question is: are stocks cheap enough? To answer that, you have to look at stocks and compare them with the alternatives.

My answer is some stocks are cheap and some are not. It is hard to generalize. In my view, investing is a craft of the specific. It is in the picking of the trees in which investing skills pay off the most, not in assessing the forest. There are, undoubtedly, specific stocks that will prove nice investments over the next few years. Finding them is what we are all about.

Sincerely,
Chris Mayer

Source: Are the Bears Turning Bullish?

Do Corporate Insiders Really Have All the Answers?

Let’s start with an obvious fact: To a great extent, the future is always cloudy. Corporate insiders don’t know what the market is going to do any more than you or me.

For example, Vickers was already ringing the alarm back in July, noting that insider selling to buying was 4.16-to-1, the highest ratio since the market’s all-time high in October 2007.

Jonathan Moreland, editor of Insider Insights, concluded at the time that insider behavior “seems totally inconsistent with this rally continuing unabated.”

Yet that’s exactly what’s happened in the two months since.

It’s important to understand that there is no piece of data – or combination of data – that will tell you in advance what the market is going to do. You might as well put on your lab coat and start trying to turn iron into gold.

Why Form 4 is Important When Watching Corporate Insider Activity

History shows that corporate insiders have excellent predictive powers, but not about the market. Sometimes they turn bullish long before the market bottoms. Sometimes they sell heavily way before the market tops.

What is important, however, is what companies they’re buying. (You’ll notice they’re not plunking for index funds.)

The unfair advantage that insiders have is a lot of material, non-public information about their own companies. That’s why they’re required to file a Form 4 with the SEC within two days of any purchase or sale of their own company’s shares.

What do corporate insiders know that you don’t? Plenty…

Corporate Insiders Profit From Vital Information… And You Can, Too

Corporate insiders have access to crucial information that other investors don’t. For example…

• Top executives and board members generally know the direction of sales since the last quarterly report.
• They know whether the company has gained or lost any key customers or employees.
• They know of any new products or services that are about to be announced.
• They know of any unexpected expenses, legal problems, or whether there is about to be a product recall.
• They know whether the company is ripe to receive an unsolicited takeover bid.

It pays to keep a close eye on what insiders are doing. Not so you can know what the market will do, but because you can discover which stocks are most undervalued (and therefore likely to outperform the market).

It’s tough to get a better buy signal than when you see top executives buying significant amounts of their own company’s stock with their own money at current market prices.

Just remember: The important factor is not the aggregate ratio of insider sellers to buyers in the market. It’s how heavy and widespread the insider buying is at those companies that are experiencing it.

History shows that those stocks are likely to be superior investments, no matter what the market has in store.

Good investing,

Alex Green

Source: What Corporate Insiders Are Telling Us

The dollar gave up most of its earlier gain against a basket of currencies, boosting the appeal of oil and commodities to investors. European stocks firmed and U.S. equity futures pointed to a higher opening.

“It’s making some progress back up, largely due to the dollar,” said Rob Montefusco of Sucden Financial. “At the same time, we haven’t seen demand pick up and we need that to draw strength back into this sector at the moment.”

U.S crude was up 8 cents to $66.10 a barrel by 1308 GMT, after earlier falling as far as $65.41. London Brentwas down 11 cents to $65.00.

Iran test-fired a type of missile on Monday which defence analysts have said could hit Israel and U.S. bases in the Gulf region, state television reported.

The drills coincide with increased tension in Iran’s nuclear dispute with the West, after last week’s disclosure by Tehran that it is building a second uranium enrichment plant.

Tensions over Tehran’s nuclear programme have supported oil prices in recent years. The country is the second-largest oil producer in the Middle East.

In late 2008, Iran threatened to block the Strait of Hormuz, through which about 40 percent of the world’s globally traded oil passes, when tensions rose in another row with the United States around the nuclear work.

Even so, sluggish oil demand, reinforced by some lacklustre economic data from the United States last week, continued to command investors’ attention.

“The Iranian situation is not having much influence. If it was, we’d be back towards $70 again,” said Christopher Bellew, a broker at Bache Commodities in London.

Oil prices posted their largest weekly decline in around 2-3 months last week, pressured by government data showing U.S. crude oil inventories had risen, suggesting demand remains weak.

U.S. durable goods orders dropped by the largest amount in seven months while a rise in new home sales was less than forecast, according to data from the U.S. Commerce Department on Friday.

Sept 28 (Reuters)

This afternoon, we have been invited for a private tour of a grotto not far away. According to our information, the grotto was sealed off by falling rock hundreds of years ago. Thus it was protected and preserved remains of human habitation from 30,000 years ago.

“Yes, there is a span of about 10,000 years in which there is little evidence of human habitation in Europe,” said the owner. “Maybe humans almost died out during that period; we don’t know what happened. But when this cave was opened, we found some remains that were dated from that era. It’s a remarkable find. A group of 20 scientists has been working there all summer. They told me they found 1,000 artifacts a day. Of course, we’re not talking about statues and battle axes. Most of these discoveries are bone fragments… maybe even grains of cereal…”

We’ll find out more this afternoon…

Meanwhile, we turn our attention to the world of money. And we begin by asking:

Just what are we trying to figure out?

Well, we want to understand what is going on… don’t we?

And we want to try to guess about what is likely to happen next, don’t we?

We’d like to know, for example, whether stocks were going up or down… and whether this is a good time to buy property… or gold… or Treasury bonds. We’d like to know, wouldn’t we?

Of course we would. Unfortunately, ‘it is not given to man to know his fate,’ as the ancients put it. All we know is what happened in the past… and the fate of men who came before us… Even that we know only in a wispy, uncertain kind of way. All we have are stories…

For 40,000 years – maybe longer – our ancestors have walked the very earth where your editor puts his feet. They lived. They died. What did they know? Scientists say they were as smart as we are. What did they talk about? What did they think about?

“Every time something is given, something is taken away,” we suggested over dinner last night.

“No, that’s not right. You’re saying that life is a zero-sum game… that it can never get better… that it can never really improve… that there can be no real progress…” Elizabeth replied.

“Well, not exactly… I’m saying that there are no free lunches in nature. That if a man is smarter, he is not likely to be faster too. But I’m not saying anything particular… or scientific… I’m just announcing a general principle… more like a vague intuition about the way things work. According to one theory, for example, mankind migrated from Africa to Europe. In Europe, during the Ice Age, he encountered a great challenge: cold weather. Most humans and pre-humans probably couldn’t survive it. But some did. And they did by evolving into maybe smarter… maybe slower… people with bigger heads. According to the latest thinking on the subject, the bigger brains were a disadvantage in warmer climates… because they got too hot. I guess they took up too much energy too. But they were an evolutionary necessity in colder climates… where the cold weather not only made possible a hotter head, but also made it a necessity. People needed bigger brains to anticipate the change of seasons and save for winter, for example. They had to see what was coming. They had to look at what was coming… and prepare for it. They had to work together too… to hunt large game… and to fight off competitors. Those who couldn’t do so died out. Well… that’s the theory…”

Every day, here at the Daily Reckoning, we give you information on the latest trends and events in financial markets. But everybody has access to the same information. And what is information, anyway? What is it worth? What does it mean?

For thousands of years, people exchanged information. Then, it must have been a different kind of information… things we can barely imagine… about where animals were getting their water… about where to find seeds and how to avoid sickness… how to prepare for winter… and how to fend off wild animals. Then, the dominion of the human species was not so sure. There were saber-toothed tigers, lions, wolves, even mastodons… giant sloths… Early man was probably as often prey as hunter. He had to be on his toes to survive.

Information was one thing. But there was more. He needed wisdom… and technology… as well as facts. He had to learn to store food for winter as well as beat back attacks by wild beasts. He had to know how to make cloaks out of animal skins… and how to stock firewood for a rainy, snowy winter… and how to find shelter.

We imagine tribes sat around the campfire and told stories. The stories reported victories and defeats… disasters and triumphs… heroes and enemies. But the stories were more than just information: they carried lessons… moral lessons… about what to do and what not to do.

That is the tradition to which we are heirs here at the Daily Reckoning. We pass along information: but without a story, the information is just noise.

Our story is the story of the seasons. It’s the story of heroes and villains… of fatal flaws and inevitable disasters.

The common flaw is an old one. The Greeks couldn’t seem to tell a story without mentioning it. ‘Hubris’… the kind of pride that goeth before a fall… the arrogance that leads people to think they can get away with something… that they not only can know their fates… but that they can control them.

Today, Ben Bernanke is our tragic hero. His flaw is as obvious as his challenge. He thinks he can stop the world from turning… stop the seasons… avoid the hard, correcting winter by tempting the sun with bailouts, stimulus and cheap credit. His arrogance is an affront to the gods.

The old tales tell us what will happen. He will fail. But when… how? That is a different story. It is the story future generations must tell. We must live it.

Source: Don’t Count on China

“No rally can be sustained with yields and P/Es so poorly valued,” says underground investor Chris Weber, writing for DailyWealth. Chris is a very special kind of investor. When he was 16 years old, he turned just $650 (saved from his paper route) into $1.8 million through a series of remarkably insightful investments. So naturally we’re all ears when Chris gives his opinion on the direction of the market.

Chris is bearish on US stocks. (He’s mainly in cash and precious metals.) Why? Because there’s no value in the US stock market.

As of the end of July, the dividend yield on the S&P 500 has fallen to only 2.13%. When the rally began in March, the yield was over 3.5%. That is a huge fall in a short time.

Then, as stock prices have soared, earnings of companies have just not kept pace. In many cases, they are down sharply. This imbalance in price to earnings is shown in the weird spike in the P/E ratio on the S&P 500. It is now up to 127 times annual earnings, up from less than 20 times earnings at the rally’s start in March.

In other words, the dividend yield and the P/Es were not what you see at real bottoms. In really low markets, investors are shaken so much that years are required for them to regain bullishness.

Instead, I think what we’ve been seeing are the types of violent rallies within bear markets we saw throughout both the 1930s and the 60s-early 70s.

So once again, I’m just watching the stock markets. My position is that if the Dow Industrials and Transports can both better their previous record highs that they reached back in the second half of 2007, then I’ll be interested and ready to say that we are really off to the races again.

What I think is more likely is a repeat of the period of 1966 to 1975, where we’ll see a series of rallies within a bear market. In other words, this will be an easy time to lose money, and a hard time to make it.

Porter Stansberry has another take on stocks. He reckons we’re in the early stages of a “massive inflation.” Porter’s argument is simple. As long as the government keeps printing up trillions of dollars a year and holding short-term rates at nearly 0%, financial stocks are going to rise… And as long as financial stocks rise, the rest of market will follow.

Financial stocks are on a roll, as you can plainly see from the nearby chart of the financial sector ETF (XLF). Now, ask yourself a very simple question: Are investors buying financials because of their strong balance sheets and smart management or are they buying because they know that the government intends to keep pumping money into these boated behemoths?

Say what you like, US stocks are rising. All we know is we don’t like it one little bit. And we wouldn’t touch stocks knowing what we do about the market. As Chris Weber says, “This will be an easy time to lose money, and a hard time to make it.” Amen to that.

So today we turn away from the markets and focus on something more important: basic investment principles. As Alexander Green, investment director of The Oxford Club, puts it over at InvestmentU.com, “It’s not uncommon to run into investors who are knee deep in option trading, currencies, short selling, or sophisticated arbitrage strategies without mastering – or even understanding – basic investment principles.”

Here’s what Alex believes are the six factors that determine the value of your portfolio’s. Only one of these six factors is beyond your control: your assets’ annual compounded return. That means it only makes sense to focus on the other five.

1. The amount of money you save. To put it bluntly you have to start by maximizing your income, minimizing your outgoing and paying yourself first. Why? Because expenses always rise to meet the income available. As soon as you get a raise or a higher paying job, you’ll find that you need a new car, a bigger house, better furniture and a new set of Callaway irons. But you have to draw the line somewhere. You can’t save a pittance and expect your portfolio to perform miracles each year.

2. The length of time your money compounds. The sooner you start investing the better. And the longer you leave it alone the better. If you start too late – or raid your portfolio to redo the kitchen or take the kids to Disney – you’re going to have a lot of catching up to do down the road. The old chestnut is true: Don’t touch your capital. It’s like eating your seed corn.

3. Your asset allocation. Studies consistently show that how you divide your portfolio among non-correlated assets – stocks, bonds, real estate investment trusts, precious metals, etc. – determines 90% of your portfolio’s long-term return. (The rest is due to security selection.) If you’re too conservative – or too aggressive to stick with your program – you simply won’t meet your goals.

4. Your assets’ annual return. This, of course, is the great unknown. Not even Warren Buffett or Ben Bernanke can say what their portfolio will return each year. But the better your security selection and asset allocation decisions, the higher your annual compounded returns.

5. What you pay in expenses. Don’t be oblivious to what all those financial intermediaries are charging you. You can sacrifice far too much in commissions, bid/ask spreads, wrap fees, management expenses and other costs. All things being equal, the lower your expenses the higher your net returns.

6. How much you pay in taxes. Too many investors are oblivious to the tax ramifications of their investment moves. When possible, put your high-yielding investments in your tax-deferred accounts and your tax-efficient funds and individual stocks in your non-retirement accounts. (I call this your asset location strategy.) Hold positions 12 months or more to qualify for the lower long-term capital gains tax rate. Offset your capital gains with capital losses if possible.

You see what most investors don’t understand (and probably never will) is that market timing and stock picking make up only a small part of serious wealth building. It’s a secret the “ultra wealthy” have known for a long time. And they spend a lot of time and money making sure these six factors are right (and others, too, that would be too complicated to explain here). It’s how they hold onto their wealth for generations.

It’s actually what we’ve been working on while here in France. Along with my dad and your Notes co-editor, Chris Hunter, we’ve been researching these wealth preservation secrets. And we’ve discovered that wealthy families nearly always have something called a “family office.”

Most of these require massive amounts of cash to join. (One group in London my dad went to talk to was looking for a $200 million minimum!) So that’s why we decided to set up Bonner & Partners Family Office. It puts all of the money management secrets of the ultra wealthy to work… without the massive price tag.

Partners will enjoy the following benefits:

Access to what my family is doing with its money. Over the years we’ve spent literally hundreds of thousands of dollars on high-level wealth management advice. It’s been distilled into our family portfolio, which partners will have full access to.

Twice-daily market advice from full-time money manager Simon Mellon. The family has spent a lot of money, and considerable time, finding the right investment director for the family office. Simon has a resume as long as your arm. And his insight into the market is the kind that comes only with years in the trenches in New York and London.

Full-time tax planning advice from Raife Nueman. Raife went to university with your editor at St John’s College. And he’s one of the brightest attorneys we ever come across. (He has been elbow deep in the US tax code over the past two months, and he’s identified a way to drastically reduce your tax spend – to as much as 0% in some cases.)

Access to all of Agora trading advice and investment research. Family office partners will have full access to the entire daily output of Agora, the family publishing company. This amounts to 34 trading and investment research services. (A total of over $97,000 worth of subscription services a year.)

We will be sending out an invitation to join us as a family office partner this week. As a Notes reader, you can join the invitation list early by sending an email to info@contrarianprofits.com. Just make sure to put “Family Office” in the subject line so our staff will be able to quickly add you to the list before the invitation goes out…

Since March 9, the S&P 500 is up 48%. The small-cap index, the Russell 2000, is up 65%. The EAFE international index is up 67%. And the MSCI Emerging Markets index is up 79%.

Yet five months ago, investor sentiment was black as Halloween night and equity mutual funds were experiencing massive outflows.

How did millions of investors get it so wrong?

The short answer is they didn’t know what they didn’t know. They didn’t know that the economy can’t be reliably forecast and the stock market can’t be consistently timed. They didn’t know that abject pessimism is the long-term investor’s best friend.

Why We Were Never Heading Into Another Great Depression

And, perhaps most importantly, they didn’t know that it was never likely that we were heading into another Great Depression.

Read your history. The Depression was caused by policy errors: tight money, higher taxes and protectionist legislation.

The Federal government has done a lot of things wrong since this economic crisis began. But it hasn’t been so foolish as to make the same mistakes it did almost 80 years ago.

• The Fed has taken short-term rates to zero, a powerful tonic.
• Bernanke is flooding the system with money.
• Plus, Uncle Sam is spending money like there’s no tomorrow. (Too much, in fact.)
• And there have been no trade wars with foreign nations.

Bear in mind, economic knowledge in the 1930s was like medical knowledge in the Victorian era. We’ve come a long ways since then. No one is going to bleed the economy with leeches.

The Gloom-&-Doomers See Clouds in Every Silver Lining…

Yet the gloom-and-doomers, the folks who see the cloud in every silver lining, have never understood this.

Not only have they completely missed out on the stock market’s big gains, but the highest-yielding money market in the nation yields less than 1%. Gold is stuck in neutral. And many with the strength of their convictions are holding double-short funds that have lost most – or nearly all – of their value.

These investors never seem to realize that the media delivers the world through a highly distorted lens.

When you hear five times a day that…

• The economy is in contraction
• Unemployment claims are increasing by more than 400,000 a month
• The U.S. housing market is spiraling down
• Consumer spending is anemic
• Business investment is down and credit is tight

…It’s tough to muster much confidence to buy stocks.

The Greatest Buying Opportunities of Our Lifetimes

But as I wrote in this space just one week before the market bottomed:

“Irrational exuberance is as dead as Che Guevara. And while true contrarianism is by definition a lonely business, 10 years from now this market is likely to be viewed as one of the great buying opportunities of our lifetimes. Many investors will disagree, of course. And that’s fine. As George Santayana famously said, ‘Those who cannot learn from history are condemned to repeat it.’”

It hasn’t take 10 years, of course. Or even 10 months. (Although it’s unlikely that we’ll see this bull market reach much higher levels without a few interruptions.)

Two of our core principles are:

• Number one, owning a diversified portfolio of profitable businesses is the best way to protect and enhance long-term wealth.
• And number two, the best time to buy will always be when the majority of investors are despondently selling.

Yes, these principles have served us in good stead.

That’s why we call them principles.

Good investing,

Alex

Source: How Did Millions of Investors Get It So Wrong?

U.S. data showed the number of U.S. workers filing new claims for jobless benefits rose slightly more than expected last week, but a gauge of underlying labor trends fell for a fifth straight week.

Spot gold was bid at $933.50 an ounce at 1311 GMT, against $929.00 an ounce late in New York on Wednesday. U.S. gold futures for August delivery on the COMEX division of the New York Mercantile Exchange rose $6.20 to $933.40 an ounce.

“If this is welcomed by the equities market and triggers a fresh boost, that could benefit gold,” said CMC Markets strategist Ashraf Laidi.

The dollar was down 0.39 percent at 79.3 against a basket of currencies and was lower against the euro following the data. Traders are now eyeing U.S. data on second-quarter GDP due on Friday for clues as to the next direction of the economy.

European shares rose as investors digested a raft of broadly positive corporate earnings, while U.S. stock futures extended gains after the jobs report.

Oil was also boosted by stock markets and rose above $64 a barrel. Firmer crude prices can support gold, which can be used as a hedge against oil-led inflation.

Gold demand in India, the world’s biggest bullion consumer, is recovering after recent price falls, but a further decline will be needed for buying to significantly recover.

“There are advance orders in decent quantities in the range of $900-920 an ounce,” said one dealer with a state-run bank.

Overall demand in India remains weak, however. The country’s gold imports have reached a provisional 8-10 tonnes in July so far, well below the 24 tonnes recorded last June, the Bombay Bullion Association said.

INVESTMENT SOFT

Investment demand for gold remained soft, however, as ETF holdings slipped further. Holdings of the largest bullion ETF, the SPDR Gold Trust, fell over 10 tonnes on Wednesday, and are down nearly 48 tonnes in the last four weeks.

Jason Toussaint, managing director for exchange-traded gold with the World Gold Council, said there was evidence investors were selling out of the SPDR fund to buy shares.

Analysts fear a broader liquidation of ETF gold holdings resulting from a recovery in risk appetite could jeopardise gold’s gains.

“Without strong physical demand to absorb metal coming back into the market and with funds cutting long exposure, the metal is at risk of a deeper correction,” said TheBullionDesk.com analyst James Moore.

On the supply side, the world’s largest gold producer, Barrick Gold , said it produced 1.87 million ounces of gold in the second quarter and is on track to meet its 2009 output target of 7.2-7.6 million ounces.

Among other precious metals, silver tracked gold up to $13.44 an ounce against $13.28. Spot platinum was at $1,177 an ounce against $1,170, while spot palladium was at $255 against $252.50

LONDON, July 30 (Reuters)

The greenback pared some of its earlier gains as stock markets in Europe gained ground and U.S. stock futures pointed to a higher opening on Wall Street .

Analysts said currency movements would remain subdued ahead of U.S. payrolls data and European Central Bank (ECB) and Sweden’s Riksbank comments expected later this week, while some said that the dollar may eke out some gains.

“There is some position squaring … Normally the week before payrolls numbers investors tend to be defensively positioned and right now being defensive means to be long dollar,” said Geoffrey Yu, FX strategist at UBS in London.

The market will pay close attention to U.S. payrolls figures, due on Thursday, for any signs of improvement in the economy’s health. According to a Reuters poll, forecasts are for a reading of -363,000 in June compared to -345,000 in May.

By 1035 GMT, the dollar index was essentially flat at 79.922. The euro slipped 0.1 percent to $1.4033, having touched the day’s low of around $1.3984 earlier in the day. The dollar was up 0.2 percent at 95.40 yen .

H1 PERFORMANCE

The dollar has suffered broadly in the first half of 2009 as recovering stock prices has stoked demand for risk — chipping away at the U.S. currency’s safe-haven appeal — while concerns about the U.S. fiscal position has also weighed on the currency.

The dollar has struggled the most against higher-risk currencies including sterling and the Australian and New Zealand dollars, which have each gained more than 10 percent this year.

Some analysts said that market focus may turn away from risk issues in the second half, while economic fundamentals may take up more of the spotlight, which could reward currencies whose economy are seen improving in the mid-term.

“The dollar should recover in the second half if U.S. recovery expectations increase,” said Johan Javeus, chief currency strategist at SEB Merchant Banking in Stockholm.

Other analysts agreed, but said the dollar may falter if concerns grow about Washington’s debt burden as it borrows aggressively to help its economy out of recession, along with ongoing speculation about reserves diversification.

The dollar had come under pressure last week as debate intensified about the use of an alternative global currency to the greenback, with China’s central bank renewing its call last week for a super-sovereign reserve currency.

However, China said at a meeting of central bankers in Basel at the weekend that the policy governing its currency reserves, which comprise mainly U.S. Treasuries, was stable and consistent with no sudden changes, giving some respite to the dollar.

Analysts said that while the issue of diversification would likely continue, any move away from the dollar as the reserve currency of choice could take a long time to materialise.

“There will be a structural shift away from the dollar as global players begin to diversity away from dollar assets as well (but) people are so cautious on the outlook right now. No one is too sure when to pull the trigger and they’d rather err on the side of caution,” said Yu.

In a sign that the economic downturn may be easing, euro zone economic sentiment improved more than expected in June.

A survey by the European Commission showed economic sentiment in 16 countries using the euro rose to 73.3 points in June from 70.2 points in May. The data had little initial impact on the euro.

LONDON, June 29 (Reuters)

Before you tell me I’m wrong, let me ask it this way…

• If inflation returns, or even hyperinflation…
• If the economic crisis persists and gets worse…
• If uncertainty and fear continue, and chaos and rioting begin…
• If stock markets languish or suffer another meltdown…
• If the recovery spending of the world’s governments proves futile…
• If government interference in the economy continues to increase…
• If the value of the U.S. dollar takes a major fall…
• If world recovery from the current recession/depression takes years…
• If you’re still wondering whether you have enough “safe” money…

…would you feel you own enough gold?

If all those things come to pass, I suspect many of us, including myself, would wish we had a few extra gold coins or bars stashed away.

So let’s assume you answered “No” to my question and need to add some ounces to your collection… is now a good time to buy?

The Best Time to Buy Gold?

Before glancing at the chart below, if you had to pick the month with the weakest average gold price, which would you select?

In our current 8-year bull market, June has seen the lowest return for gold. In other words, it’s been, on average, one of the best times to buy.

How does this compare to the bull market of the 1970s?

In the last great bull market, summer also was a good time to buy gold (although April was even better.)

What about gold stocks?

Since 2001, July and October have been the weakest months for gold stocks, as measured by the AMEX Gold Bugs Index, and the best times to buy.

However, keep in mind that these are price tendencies and not certainties. There were Junes when gold was up, and some Julys when gold stocks were up. Meaning, avoid using this chart for trading purposes or in anticipation of an immediate gain. Instead, use it to prepare for possible gold price weakness ahead. And if the weakness shows up, treat it as a buying opportunity and add to your holdings to position yourself for the next leg up in the bull market. Consider that this summer could be the last chance to buy gold for three figures.

Don’t lose sight of where we are at this point in the recession – in an intermission in the bad economic news. When it becomes apparent that the good ole days aren’t coming back, sentiment – and markets – could move rapidly. And gold is one of the best forms of capital that can protect you in a financial Armageddon. That gold was up in 2008 is a reminder of its protective power.

How much gold should you have? Continue to accumulate physical gold until you can honestly say you don’t care how many dollars Ben Bernanke prints.

Having physical gold in your possession is always a good idea in times of economic turmoil – there is no “uncertainty hedge” like it. But to actually make money, you should also look at premium gold stocks. Our current favorite has been so consistently successful that we call it “48 Karat Gold.” Click here to learn more.

Nigeria’s main militant group said on Sunday it had attacked three oil installations belonging to Royal Dutch Shellin the Niger Delta, widening a month-old offensive against Africa’s biggest energy industry.

“We’ve got weakening stock markets and the dollar is starting to strengthen,” said Rob Montefusco, a trader at Sucden Financial. “Also technically, it all broke down on Friday.”

U.S. crude for July , which expires later on Monday, fell $2.10 to $67.45 by 1414 GMT. It traded as low as $67.05 intraday, the lowest price since June 8. Brent crude slipped $1.88 to $67.31.

The World Bank warned on Monday prospects for the global economy remained “unusually uncertain” despite recent signs of improvement in parts of the world and cut its 2009 growth forecasts for most economies.

Wall Street opened lower, European stocks lost ground and the dollar rose against a basket of other major currencies. A stronger dollar can limit the appeal of oil and commodities to investors.

Chart patterns are also pointing lower for crude. Both Brent and U.S. crude closed below the $70 mark on Friday, a bearish technical development. Even so, crude has more than doubled from a low of $32.40 in December.

Rebels in Nigeria have been carrying out attacks on the oil industry for years in what they claim is a struggle for a fairer share of the region’s energy wealth.

Also supporting the market was data showing China’s implied oil demand rose 6 percent in May over a year ago, its fastest growth since August 2008. China is the world’s second largest user of oil.

In the Middle East, Iranian opposition leader Mirhossein Mousavi urged supporters to continue protests over the re-election of President Mahmoud Ahmadinejad, in a direct challenge to the Islamic Republic’s leadership.

Some analysts say the political turmoil in Iran, a major oil exporter, so far is of limited significance for the markets due to high levels of unused production capacity and inventories. Others see it as supportive.

“The deterioration in the Iranian situation should prevent a sharper sell-off,” said Edward Meir, analyst at MF Global.

Crude oil speculators on the New York Mercantile Exchange slashed their net long positions nearly in half in the week to June 16, data showed on Friday. Long positions are bets that prices will rise.

LONDON, June 22 (Reuters)