Las Vegas Real Estate ClubISSUE: MAY 2011 Economy Report An integrated approach to nurturing your wealth and achieving your financial goals. MAY 2011 EconoMic outlook In The May Economic Newsletter You Will Learn: We are in interesting times and we have Changes in the Feds policy will see interest many choices before us. This month’s report rates rise. Quantitative Easing ends in includes strategies that could help you capture June and the gradual outcome will be higher profits and keep you on the right side of interest rates, a stronger US dollar and a changing trends. weaker stock market. Read this month’s report to see how this policy change may impact Geopolitics are changing the game. your investments this year and into 2012. Right now the world is experiencing great uncertainty surrounding the protests in The US dollar and debt - Wheels within the Middle East and Northern Africa. This wheels. Why is no serious plan in place to political volatility is impacting more than just deal with the U.S. debt and the declining the people living in these countries. How will US dollar? A weaker US dollar makes U.S. it impact you, the investor? equities cheaper to international buyers and US goods cheaper to international shoppers, Is the US the next nation to face political which is good for the US economy and upheaval? In any economy with large debt stock market. This month’s report opens a and high unemployment it is inevitable that discussion about possible motivations behind calls for extreme political change occur. We current US fiscal policies. are seeing it abroad. Will we see it in the U.S.? What else can explain Donald Trump as the As markets become more complex and most prominent GOP presidential candidate? international power plays change the geopolitical landscape, it is critical that you Good earnings continue to drive the discuss the investment ideas in this month’s markets. Once again, companies report Economic Outlook with a qualified financial earnings that beat estimates, the Dow pushed advisor, focus on your strategy and take through 12,800 and we are seeing strong action. merger and acquisition activity. However, much of the activity is due to the weakening dollar. My report suggests strategies to position your investments for the probable downturn to take effect in 2012. The GDP and employment rates. U.S. unemployment numbers fell for the fourth straight month and net employment increased. So, why did April’s jobless claims jumped unexpectedly? With overseas talent pools competing with U.S. workers, what is the employment outlook going forward and how will it impact U.S. GDP? Inside This Issue: PAGE 3: EArnings drivE A strong stock MArkEt PAGE 4: The stock market responds to strong earnings and efficiencies PAGE 6: cAnAdA’s strong EconoMY MAY fAltEr with thE coMing ElEction And Much More...
grow. protect. invest. MAY 2011 EconoMic outlook This month’s report is somewhat over-weighted The United States has done an excellent public with positive news and the impacts of a stock market relations job portraying this as “justice served” and not continuing to move upward. But even as the markets “revenge”. Some persons on this planet who cause continue to move in a bullish trend there are still misery to mass numbers of people are better off dead. indicators we must watch closely. So, this month I will discuss some prudent steps investors can take to That list includes the murderous Zimbabwe tyrant continue capitalizing on the gains in the market, while Robert Mugabe, Hugo Chavez from Venezuela who sharing my interpretation of events that could cause a has destroyed his nations economy and Muammar correction in many sectors. Gaddafi who has stolen billions from Libya while the majority of his citizens live well below the poverty line The information I am giving you is based on my and is the cause of thousands of deaths as this sociopath opinions, observations and interpretations of events will not step down. Yes there are people who are better around the world. However, my conclusions are not off dead and the United States bravely took one tyrant necessarily right nor are they the only opinion you off the list today and did humanity a huge favor. should consider when making decisions. I am not a licensed financial advisor. I strongly urge you to Let’s commend the USA under the leadership of discuss any of my opinions with a licensed financial President Obama for a brave and necessary action. For advisor before you take any action. Ultimately, you are American it is a day to be proud! accountable for your own investment decisions. With such an event happening it is not always a smooth Let’s start with the unfolding story of the death of transition to discuss the economy but let’s do so. First Osama bin Laden. Some may argue that it is never the bin Laden death had no effect on the markets today. good to celebrate a death but the death of Osama bin There is however a host of economic indicators that we Laden comes with a gigantic “BUT”. It is never good must discuss. to celebrate any persons death BUT when a person’s sole purpose is to under mind peace on an international level then that person is better dead. Osama bin Laden had many attacks against not only military targets but also civilian targets. The very short update if you have been shut out of existence for the last 16 hours is that President Barack Obama ordered an attack at bin Laden’s suspected location at Abbottabad, Pakistan. The high risk operation without the involvement of Pakistan was successfully carried out by United States Navy SEALS. Bin Laden was shot in the head and killed by the SEALS. With his corpse in custody, genetic testing was done to verify that it was indeed bin Laden. Shortly after verifying his identity, he was given a burial at sea.
grow. protect. invest.EArnings drivE A strong stock MArkEt The U.S. markets remain very strong and are being led This is why I suggest that investors start a discussion by strong earnings. Strong earnings by S&P companies with their financial advisors about taking money slowly are a sign of a recovering economy and a stronger out of the market and moving to a larger cash position, consumer. So far, 74 percent of companies reporting because when Quantitative Easing ends the gradual their earnings have far exceeded expectations and it result will be higher interest rates, a stronger US dollar is estimated that growth year over year for company and a weaker stock market. profits will be at 14.7 percent. The Feds don’t state it publicly, but they are delighted The sector that has out performed all other sectors with a weak US dollar. The reason behind their is technology. The main reason is because the US optimism is the fact that cheaper US goods and services dollar is so weak it has made U.S. exports much more help increase the sales and profits of U.S. companies attractive on a competitive level. and that is good for the economy. Strong earnings news, especially from high profile The GDP and employment rates companies like Intel, Delta Airlines, Ford Motor and 3M, have reignited the bullish mood in the stock On the negative side, U.S. economic growth for the market. By the end of April, the Dow Jones Industrial first quarter was only 1.8 percent. This is a decline Average was trading at its highest level since May of from 2010’s fourth quarter growth rate of 3.1 percent. 2008. Smaller stocks were doing even better, with the This drop is not going to do anything to help the Russell 2000 Index also approaching a record. unemployment situation in the United States. In order to see a significant decline in unemployment numbers Strong earnings have helped investors shake off news we would need to see U.S. GDP growth hit 5 percent or of the S&P downgrade of the credit outlook for the U.S. more and stay there for an extended period of time. government. It seems at this time investors are able to On the positive side, the U.S. unemployment rate tune out bad news and drive stock prices to new highs. declined for the fourth straight month to 8.8 percent and net employment increased by 216,000 jobs. So, we have Bernanke breaks his silence seen some improvement there. For the first time ever Bernanke held a press However, during the last week of April jobless claims conference. The Federal Reserve Chairman lifted the unexpectedly jumped by 25,000 to 429,000. This is the veil of secrecy and mystique that has shrouded the highest claims level since January 2011. Although this Central Bank for decades. He stated that inflation is is negative news it reflects only one week, so we’ll be “stable” and that there is no need to raise interest rates monitoring this to see if it becomes a trend. at this time. This means we will have a continued weak dollar, which is good for gold, U.S. exports and a robust To give you some historical perspective about where stock market. we are with regard to employment, in 1982 the unemployment rate rose as high as 10.8 percent and in In my opinion, the most important thing that Bernanke 1953, during the post war boom, unemployment was accomplished was he managed to handle the first ever as low as 2.5 percent. I believe it will be a very long news conference following the release of a policy time before we see the unemployment rate return to the statement and was able to give the Central Bank a more historical average of 5.7 percent. human face, which allowed him to convey the Fed’s core message without rattling the markets. This is mainly due to the huge labor pool of educated talent in other countries that offers U.S. companies He did this while affirming that Quantitative Easing high quality, yet inexpensive labor. For example, will end in June. The end of quantitative easing is a China and India are consistently graduating high level negative for the markets as interest rates will eventually engineers, who score higher than American graduates rise as a result. Still, it will be many months before on qualification tests. we see the effects of the end of the quantitative easing practice. This high level outsourcing will have a long term impact on the U.S. labor markets. America may create This change in policy will likely have strong negative new jobs, but the quality of those jobs will decline as impacts on the stock market in 2012. Unless the many of the jobs created by S&P companies will be off- economy continues its positive momentum it is likely shored to a cheaper labor and talent market. that this change will make 2012 a sell-off year for America stocks.
grow. protect. invest.The stock market responds to strong earnings and efficiencies prices due to supply and demand. There can be no question that the floods in Australia, the drought in Russia, the bad weatherThe Dow recently pushed through 12,800, which is a multi- in the crop belt of the United States as well as the tornadoes thatyear high. It remains a good time to remain invested in all ripped through the American South recently have all compoundedsectors discussed over the last year in my newsletters. The main to push food prices up.discussion you want to have with your financial advisor at thispoint is to “stay the course, but take some profits and start moving The most surprising news is that consumer sentiment has not beeninto a higher cash position.” I’ll talk more about this later. dampened by the sharp rise in oil prices. However, if gasoline and food prices continue to skyrocket then we will definitely see aMeanwhile, the market remains in an uptrend. For many years weaker consumer.there has been a saying “Sell in May and go away.” This idea wasbased on the behavior of many Wall Street Traders, who would Why is the United States debt level the highest in the world?sell their positions in May, take extended holidays and return tothe market in September. This is no longer the case and I don’t The U.S. debt is the largest in the world. How did it get so large?believe we are going to see liquidity problems in May due to the Well, I can see a couple of reasons.fact that earnings reports are too strong and people are staying inthe market. First, purchasers of Treasury bills still reasonably expect the U.S. economy to recover enough to pay them back. Second, AmericaIn addition, the markets are being driven by strong merger is such a large customer of foreign goods, investors like Chinaand acquisition activity. This is always a sign of a recovering and Japan allow the U.S. to run up a huge tab, so that it will keepeconomy. It indicates that many corporations are spending again buying their exports.and stronger balance sheets have allowed them to stockpilecash. Those strong balance sheets are in part due to the Great But that’s not the whole picture.Recession, which caused companies to achieve a much greaterefficiently from employees. • Even before the economic crisis the U.S. debt grew by 50 percent; ballooning from $6 to 9 trillion between 2000 and 2007.How the American consumer deals with price increases • By December of 2008, the $700 billion bailout had kicked the debt up to $10.5 trillion.The U.S. consumer drives two thirds of the U.S. economy. As theconsumer spends money companies see sales revenue increase. Now, here is the interesting part.As a company’s revenues increase their profits increase. Ascompany profits increase their earnings reports get stronger. As The US debt is now at 95 percent of its GDP. This is up from 51earnings improve investors increase their wealth. As investors percent in 1988.increase wealth they redeploy capital by spending more. Thus theeconomy grows. To give you an idea of where the U.S. stands compared to other countries, the debt level of the Euro Zone with its debt plaguedThat is the cycle of wealth and the importance of the U.S. countries is at 85 percent of GDP. At 95 percent the U.S. debt as aconsumer. percentage of GDP exceeds the European Central Union.According to the Bureau of Economic Analysis consumer Interest on this debt was $414 billion in 2010 up from $383 billionspending rose 0.6 percent last month. Taken at face value, this in 2009. Low interest rates are the main reason the debt paymentanalysis would indicate that consumers continue to grow their is not much higher.spending modestly despite rapidly rising gasoline prices and foodprices. However, it is interesting to speculate that the increase in The interest on the debt is the fifth largest budget item afterconsumer spending may be due simply to the price inflation of Defense and Security combined at $890 billion, Social Security atnormal everyday goods, rather than any deliberate choice to spend $730 billion and Medicare at $490 billion.more money. As I said, in 2010 we paid $414 billion just on interest for ourSo, although the U.S. consumer is showing much stronger signs national debt. The problem is that this debt payment will only getof spending, we can’t ignore potential setbacks. High oil prices as bigger as interest rates increase.a result of geopolitical tensions in the Middle East and NorthernAfrica are pushing gasoline prices up into the $4 range in moststates. This is having a negative impact on consumer spending.In addition, consumers have less money to spend, because inaddition to paying inflated prices for food, they are paying higher
“With this debt scenario, it comes as no surprise that credit rating agencies are looking at lowering theirratings on U.S. credit worthiness. If this occurs it will add to the upward pressure on interest rates.”Efforts by Congress and President Obama’s I also want to point out a fascinating fact thatadministration’s to reach an agreement on the often gets missed in the face of our mounting2011 federal budget came up with a $38 billion debt.reduction in spending. Right now U.S. interest payments are very lowThe current deficit stands at $1.4 trillion. in relation to GDP. This is because we are payingCutting $38 billion will have little impact on very low interest rates. Many people believe wewhat ultimately needs to be accomplished. The are paying a fortune in interest, but relativelywidening gap between spending and receipts speaking that is not the case.is unsustainable. The only way to reduce thedebt is through shared sacrifice and cut backs on I think the Feds have taken the attitude that debtentitlement programs such as Social Security and means nothing when interest rates and interestMedicare. payments are so low. But that won’t be the case forever. We are nearing a day of reckoning whenTen-thousand baby boomers are retiring inflation causes interest rates to rise and theevery day and health care costs are running major portion of our debt payments go to payout of control. If you go to the website www. interest on the debt rather than toward necessaryusdebtclock.org you can see the U.S. debt government services.growing by almost $20,000 a second. It iscurrently hovering at the $15 trillion mark. It is With this debt scenario, it comes as no surprisefascinating to watch, but tragic at the same time. that credit rating agencies are looking at lowering their ratings on U.S. credit worthiness.• The U.S. budget deficit has been increased to If this occurs it will add to the upward pressure$1.5 trillion for 2011 and this is approximately on interest rates. High interest rates will cause10 percent of GDP for 2011. dire consequences for the U.S. economy because of the interest payments we are making on the• Revenue for the government will be about $2.2 U.S. debt. This is the main reason why the Fedstrillion, coming mostly from taxes. will continue with policies to keep interest rates low.• Outlays are estimated at $3.7 trillion.These numbers make it clear why we must So, what should investors continue to do in thiscontrol the U.S. entitlement programs! environment of a weak US dollar, low interest rates and high debt? I’ll get into more detailHowever, the bottom line is that there still is no a bit later in this report, but I can sum up myconcrete plan to cut the U.S. debt. If a serious recommendations in these few words: “Stay thedebt plan is not undertaken the US dollar will course in everything we have been discussingcontinue to decline. for the last few years, but start taking profits and over time to increase your cash position to 50This causes me to speculate as to why no serious percent of your current holdings.”plan is being made. Is it possible that the Fedsdon’t want to make a serious effort to control the This recommendation is based on my belief thatdebt and strengthen the US dollar? It is a fact that we will probably see a correction and a majoras U.S. equities become cheaper, they become market sell off in 2012 that will allow investorsmore attractive to international buyers. Thus, to pick up new positions cheaply.from that perspective a weak US dollar is goodfor the stock market.The weaker US dollar is also why U.S.companies on the S&P 500 are reporting suchstrong earnings. Tech companies especiallyhave huge exposure to the export market and area major beneficiary of a weak US dollar. Onepossible conclusion we might draw from thesefacts is that we are seeing a deliberate effortto weaken the dollar and thus prop up the U.S.markets.
United States politics are unpredictable and forming a coalition government. As Jack Layton from the NDP would have the second largest number ofIn an economy with such a large debt and high seats in Parliament, he would automatically become theunemployment it is inevitable that calls for extreme Prime Minister.political change occur. This is what we are seeing inmany countries already and it appears that America’s Now, a lot would have to happen as far as deal makingsituation is veering in the same direction. between parties in Canada, but it would be scary to hear the words “Prime Minister Jack Layton.” This wouldThis is a dreadful pity, but it explains why Donald be a devastating result with regard to the perceptionTrump has become a lead contender for the GOP of Canada’s economic direction by the world players.nomination. Now, as his credentials become better This would definitely cause a sell off in the stockknown I believe Trump’s support will wane. Still, it is market and downward pressure on the Canadian dollar.interesting to observe how disenchanted the averageAmerican must be to even consider Donald Trump as If Canadians value a strong economy they would nota possible next President. With Trump as President want a coalition government with Jack Layton as thethe United States would totally lose its international Prime Minister. Canada continues to ride a worldcredibility. So, as a betting man, I’m betting Trump commodity boom and as oil prices and commoditywon’t happen. Instead, I believe Trump’s prominence prices remain high, so does the huge growth in theas a GOP candidate is just a short burst of rebellion by Canadian economy, which is rich with resources.American voters. However, even in this boom one sector is suffering.Also with Obama’s great handling of the bin Laden That is the manufacturing sector in Ontario andsituation the GOP Party will now have to find a worthy Quebec, because its goods and services have becomeopponent and I believe Trump will quickly fade. too expensive due to the strong Canadian dollar.Canada’s strong economy may falter with the Canadian GDP growth will remain strong as long ascoming election the commodities boom remains intact and driven by demand from China and other emerging nations. TheMany subscribers are from Canada so we always focus only thing that stands in the way of investors benefitingsome time on what is happening in Canada. from this boom in Canada is politics. I am closely monitoring the situation.Right now there are no signs of a slow down on theCanadian dollar. It is currently at $1.05. I believe thatas long as there is no realistic plan to curb the U.S. debtand until the United States raises its interest rates wemay see the Canadian dollar climb to $1.10 or $1.12.Canada’s economy is strong for several reasons. Thespike in commodity prices has certainly helped. Also,Canada’s banks are better regulated than those inother countries and for the most part they avoided thehousing collapse.The big issue on the table right now is the Canadianelection. The Tories are Canada’s business friendlyparty and they have strong fiscal management skills, sothey will likely win a minority government.By the way, today is Election Day in Canada and whileI am delivering this report, results of the election areliterally being announced on the air.The problem I see is that when the Tories announcetheir first budget there is a chance the opposition partiesmay vote against it, thus bringing the government down
grow. protect. invest.Geopolitics are changing the game will continue as long as the uncertainty exists. This brings me to the closing section of this month’s report. WhatWe are still in the midst of the most active time geopolitically that can investors do now?we have seen in years. Libya has turned into a full scale civil war.Syria is shooting its own people and the United States has stepped What can investors do now?in to freeze the worldwide assets of Syrian leaders. Yemen andMorocco may be the next dominos to fall. Both economic and geopolitical factors are driving the global economy right now. I’ve given you my interpretation of theseThe Middle East and Northern Africa are riddled with issues, along with some of my ideas about how events may unfoldauthoritarian regimes that are being exposed under a global and impact economies in the near future.microscope. Historically and presently, any dissent amongcivilians has often been met with violence as government forces It is now your job to take the information and discuss it with yourattempt to crush any potential alternative voices. financial advisor. It is your job to take a few of my suggestions and do your own thorough due diligence and research beforeWhat has changed in recent weeks and months is the meshing of investing.various compelling issues, which have combined in ways thatare forcing changes upon these regimes. These potent issues The key to using this information is to avoid becoming ainclude the global financial crisis, rising food prices, increasing generalist. Wealth is built by focusing on a few specific strategiesunemployment, and ethnic and cultural divisions, to name just a and investment sectors. Don’t try to do everything!few. So, here are my suggestions for how to weather the currentThe response from discontented civilians to these issues is economic climate and position yourself for where I see theappearing almost daily in headlines around the world. What we markets going.are seeing is unprecedented action being taken into the hands of alarge population of well-educated, Middle Eastern youth. 1. Increase your cash position to somewhere between 25 and 50 percent of the money that you have invested in the markets andThis young population is also experiencing very high wait for a market correction. Eventually, with the high U.S. debtunemployment, so it is natural that we are seeing a lot of potential and interest rates due to increase upon the end of Quantitativepolitical energy being channeled towards protest and change. Easing, we are going to see a huge market correction.This youthful population is also the first internet-savvy generationand it is effectively using tools like Facebook to mobilize their So, let us say you have $1 million net worth. You might holdprotests. $500,000 of your net worth in your home and other investments. If you have $300,000 in the stock market then I suggest that, afterThere can be no doubt that decades of authoritarian rule have a discussion with your financial advisor, you take a cash positionforced citizens in these countries to suppress their thoughts and for a portion of that $300,000. I’m recommending at leastopinions. Now, when combined with all these other issues, we are $75,000 and as high as $150,000 of that $300,000. By doing thisseeing these ideas bubbling to the surface, written on the signs and you will be able to pick up bargains once they have reached thecalled out in angry voices. bottom after the correction.In some countries like Syria and Libya we have seen the protests 2. The tech sector is showing strong growth as a result of globalturn violent, yet in other countries like Oman the public protests demand for technology products and increased business spendingto date have been non-violent. As the world watches the Mid East on software and equipment. Also, in this weak US dollarundergo this upheaval, the biggest concern appears to be around environment technology stocks will continue to do well. Findwho will grab control as these regimes fold. With the fall of each a financial advisor who can help you select tech companies thatof these governments there is the possibility of the rise of a radical export to other countries and benefit from the strong US dollar.government led by Islamic extremists.Right now the world is experiencing great uncertainty about thepotential outcome of the current protests, as well as protests thatmay erupt in other countries in the future. This political volatilityis impacting more than just the populations of these countries.Oil prices are moving up, but it is not due to supply and demandfundamentals. Right now demand is weak in relation to supply.Rather, geopolitical risk is being built in the price of oil and that
grow. protect. invest.3. Agriculture continues to be a major beneficiary of the dividends during the economic recession. Now in 2011 aprice inflation resulting from the natural disasters we are total of 157 companies have had dividend increases in theexperiencing in different parts of the world. The export S&P 500.market for agricultural products is strong as we’ve seen withitems such as wheat skyrocketing due to droughts in Russia, 7. Avoid the Euro. Europe’s over-reaching “right ofUkraine and Kazakhan. Prices have also risen for corn, passage” policy decreed that all its citizens required acotton, meat and dairy products. Be sure to consult with long list of social programs including shorter work weeks,your financial advisor about how to invest in agriculture longer holidays and more benefits. This policy has createdstocks that benefit from inflation. a continent of individual countries that have an inability to pay for all those policy perks. Greece will default on its loan4. Natural Gas has been on a huge upswing since the and Spain and Portugal are very weak. The Euro is NOT adisaster in Japan. Natural gas is now being viewed as a safe currency to hold in your portfolio.alternative to nuclear energy. Thus, having some exposure tonatural gas is prudent even after its recent increase. Natural 8. As I have stated for the last three years “AVOIDgas prices are still depressed compared to oil. INVESTING IN BANKS.” Now, many famous economists say that you can’t have a strong market unless banking5. Oil is mainly driven by geopolitical risk and not supply stocks are doing well. I disagree. For the first time in a veryand demand fundamentals. Oil is a depleting resource and long time we are seeing that the markets can do well andthe long term outlook due to much higher cost recovery of don’t have to be led by a healthy banking sector.the resource means that the outlook for oil prices will alwaysbe bullish. My belief is that due to the balance sheet shenanigans caused by mark to market rules, banks are just too risky.Oil will continue to go up as the US dollar drops. High And another thing - AIG has now started to file lawsuitsoil prices will continue to have a drag on U.S. consumers, against the banks. I predict that banks will be the target ofwhich as you know, drive two-thirds of the economy. an endless stream of lawsuits for many years to come. It is inevitable that banks are going to suffer – and it is inevitableAt the world oil conference this month a new term was that they will pass their suffering along by subtractingcoined. Most are in agreement with the term “Peak Oil” the cost of all these lawsuits from their future dividendwhich refers to the idea that we have recovered all the cheap payments. As I see it, US banks will continue to showoil available and that from now on we will pay much more weakness and are a sector to be avoided.for newly discovered oil due to the fact that it is much harderto find and much more expensive to recover. 9. Also avoid insurance companies. The Japanese earthquake and tsunami, along with the tornadoes this weekIn addition, oil resources are depleting and over a long in the United States are going to cause huge liabilities forperiod of time they will run out. That is not a new concept. many insurance companies. In fact, some of them could goThe new concept is “Peak Demand.” Peak Demand refers out of business as they look for ways to avoid paying outto the idea that as oil prices continue to rise, consumer claims. I’m sorry, but that is the way the industry works.demand for oil will weaken as consumers look at other Buying any insurance company without understanding whoalternative fuels. it has insured and its current exposure is a huge risk.With a weakening US dollar and depleting resources, all 10. Due to the total lack of any plan to control the US debtinvestors should have exposure to oil. we are seeing gold maintaining a strong bullish upward trend. Gold has reached over $1,500 per troy ounce. Ultra6. Companies with rising dividends are outperforming loose monetary policies and interest rates near zero willother companies in the S&P 500. One of the reasons for this continue to lead many investors to favor non-yielding goldis that once companies start to pay dividends these stocks due to the lack of opportunity cost. In addition, inflationarycan be purchased by many new funds. This creates more pressures are good for gold, as well as the debasement of alldemand for the stock. Starbucks, Marriott Hotels, Travellers currencies, sovereign debt and geopolitical concerns.Group and many oil stocks have benefited from theirannouncements to increase dividend payments.Investing in companies with increasing dividends is a way tostay ahead of inflation and secure higher income.It is amazing because in 2008 most companies were cutting
grow. protect. invest.However, with the coming end of quantitative easing and with the national Median price, which has been the case fora likely rally in the US dollar at some time in the future, I 35 years prior to the mortgage meltdown.predict gold will see a sharp sell off and investors should belessening their exposure to gold. If you are interested in learning more about this market, join me on one of my fieldtrip tours of the Las Vegas11. Silver is in a strong upward trend, but at this point Real Estate Market. Simply send an email to education@investors are gambling. Despite what silver promoters say, allianceinvestor.com and we will get you our fieldtrip andsilver is not a precious metal like gold. Silver is first and tour schedule along with information to help you understandforemost an industrial metal. Silver may continue to move how you can profit in this market.upward, but at this time your involvement in silver is notjustified by supply and demand fundamentals. 14. One investment strategy that I have seen work extremely well is the purchase of non-performing mortgageHistorical trends show that we are in a very dangerous notes from the major banks. It is very difficult to dealposition with silver. Silver at this time is solely a directly with the banks, but mortgage notes can typically bemomentum play. As more people buy silver Exchange purchased for one cent on the dollar and there are companiesTraded Funds silver will move upward on more buying that are having great success in recovering a much highervolume. It could continue to rise much higher, however, the percentage of the debt. If you are interested in learningrisks are extreme at this time. Investors in silver now must more about the potential of this industry send an email tobe very careful. firstname.lastname@example.org and we’ll put you in touch with the right people.Here’s why. Silver is one of the smallest commoditiesmarkets and a few large buy orders can drastically run up I’ve given you over a dozen ideas for investing in today’sthe price of silver, just as a few large orders can result in a interesting environment, but remember what I said earlier:sell off that is both swift and severe. This is not the case for Focus your investing on just a few specific strategies. Don’tgold; gold trades in a much larger market and thus is less try to do everything! Wealth is build through focus, not bysubject to this particular kind of manipulation. being over-diversified.If investors are over-weighted in silver they definitely Lastly, I want to conclude this month’s report with someshould consider reducing their position to under-weight words of caution. Although the markets continue to movelevels. For example, if silver now constitutes 10 percent of in a positive direction there are still many concerns foryour total portfolio, you should talk with your investment investors.advisor about bringing that position down to one or two • Standard & Poors reduced its outlook on U.S. debt frompercent of your total portfolio. It is a good thing to take “stable” to “negative.” This sparked a broad sell off.profits at this time. • Also, unrest in the Middle East kept driving oil prices12. Overall, the credit ratings of many S&P companies higher, which is raising questions about consumer buyingare improving. It is interesting to note that a benefit of the power; the logic being that as consumers must spend moreGreat Recession is that companies became much leaner and on gas they have less to spend elsewhere.much better managers of money, assets and labor. Becausecompanies have become much more efficient we will never • Then consider the steep decline in the dollar and the surgesee the hiring levels of the pre-Great Recession days. But on in gold and silver prices due to uncertainty about the U.S.the upside, exposure to the S&P companies makes sense for debt and Washington’s unresolved budget debate.investors due to better management of those firms. • On top of all of this, June will see the end of13. Real estate is seeing some modest improvement. the Federal Reserve’s quantitative easing bond purchaseNationally, sales of existing U.S. homes were much stronger program, so summer will no doubt be very interesting.than expected in March and sales have risen for two monthsin a row. It appears the downtrodden housing market is All of these issues remain problematic and will continue tofinally stirring without the benefit of government programs. shape investment decisions at every level. So, talk to yourThis is a positive sign. The market seems to be recovering financial advisor about my ideas and focus, focus, focus.very slowly on its own. The next release of the monthly economic newsletter andIt is still my opinion that Las Vegas remains the best economic webcast will be in late June. Stay tuned to yourplace to invest. It has the strongest cash flows, the highest email for announcements giving specific details.affordability index and holds the dubious honor of beingthe real estate market that suffered the most extreme sell offduring the subprime crisis. Mike Lathigee Board Member, Las Vegas Real Estate ClubLas Vegas prices are currently 30 percent below the nationalmedian price. These prices will eventually be back on par