Wednesday, December 30, 2009

A Look Ahead To 2010 With Ted Peroulakis: Four Growth Sectors You Can Count On

Wednesday December 30, 2009

The 2010 Outlook: Four Growth Sectors You Can Count On

By Ted Peroulakis, Editor of Options Power Trader

Dear Investor's Daily Edge Reader,

2009 was an unusual year for the stock market. In March, we saw the end of one of the worst bear markets since the Great Depression. Then we witnessed one of the most impressive stock market rallies ever… the S&P 500 rallying more than 67% from its March lows.

I showed my readers how to make substantial gains on a slew of winners in 2009. And I'm even more excited about 2010. There is still a ton of money to be made in this market.

In March of 2009, many investors were selling their stocks and heading for the exits. But I saw an opportunity to buy some high-quality stocks at a discount. During that hectic period – when it looked like the end of the world was upon us – I was telling my readers to buy select undervalued stocks.

In fact, every single one of the stocks that I recommended in the first half of 2009 went up! They went up 69%, 77% – and one went up a whopping 192%.

My Options Power Trader did even better. I sent 17 alerts telling my paid subscribers to bank triple-digit gains. I'm talking about gains of 116%, 122%, and 194% in just days with my options plays.

I expect next year to be even more lucrative for my readers.

I'm bullish on the markets going into 2010. We could certainly see heavy volatility come back, and even some major pullbacks along the way. All in all, though, I believe that you have to be optimistic on stocks right now. Interest rates are set very low and capital is getting easier to come by for businesses. The economic stimulus coming from the government may be artificial, but it will continue to have a lifting effect on stocks. Once interest rates start to head higher, watch out! That will be your signal to be cautious and even go short…

Where to Invest in 2010

* Commodities

I'm extremely bullish on the commodities sector. I expect commodity prices to head higher for two main reasons:

(1) Increasing demand due to a rise in economic activity. Economies around the world are doing much better. The U.S. reported positive GDP growth for the third quarter, so we could be out of the recession. Germany and France could also be coming out of the recession. And the economies of China, Brazil, and India are once again running strong. This will lead to an increase in demand for commodities like oil, copper, grains, etc. A steady supply of commodities is needed to keep the engine of economic growth running.

(2) The prospect of higher inflation. America has a national debt of over $12 trillion. And deficit spending is out of control. I agree with Bob Irish and Andrew Gordon that the government's policy will be to inflate their way out of this problem. Washington can simply fire up the printing presses and print their financial obligations away. All that extra money in circulation should lead to higher inflation down the road.

Keep in mind that America was not the only country to dump money into its economy in order to save it. Many countries did it. Because of this, many major world currencies are destined to see high levels of inflation. The explosion in global money supply could lead to a decline in the value of all paper money around the globe. Investors everywhere are having less and less confidence in fiat paper money that's not backed by anything. As a result, they are jumping into commodity investments to protect themselves.

To protect against inflation rearing its ugly head in 2010, you want a portion of your portfolio allocated in commodities.

I suggest you look at energy, agriculture, metals, and even commodity-rich foreign markets.

Oil is certainly the lifeblood of our society. Gasoline made from crude oil is still the cheapest and most efficient fuel for our vehicles, and demand for gasoline is not going away any time soon. Oil is now an alternative currency to paper money and will rise as the fiat currencies lose their luster. Oil demand is increasing in emerging markets like China and India. Plus, the worldwide supply of oil is running thin and it's getting harder and more costly to get oil to the consumer. I expect oil prices to head over $100 per barrel in 2010.

I like the prospects for clean energy. This industry includes wind farms, nuclear power plant operators, and solar stocks. Governments around the world are offering tax breaks and other incentives to encourage clean energy use. This opens up significant potential for investors to profit.

Agriculture prices are poised to blast higher. The world's population continues to explode and food demand is constantly increasing. The standard of living in developing nations is rising – and that will push food prices even higher. I expect higher prices for food. There will be plenty of opportunities to profit by investing in raw food commodities and the fertilizer producers.

Prices for metals are poised to head higher due to growing demand. The industrial metals (copper, aluminum, and silver) will see strong demand as economic activity picks up. And gold will head higher as people lose faith in paper currencies and turn to gold as an alternative currency. (Remember, gold can't be produced out of thin air on a printing press.) I expect gold to continue to hit new highs in 2010. I predict that gold will head well over $1,500 and silver will head over $20 per ounce.

There is also an opportunity to take gains in select commodity-rich economies. I like Brazil and Australia. These are just two of the countries that will benefit from a continued bull market in commodities.

Yes, I'm bullish on commodities. But in case the economy weakens or the dollar strengthens, it's important to diversify your portfolio with other asset classes. That said, utilities, technology, and health care are three additional sectors that I expect to perform extremely well in 2010.

* Utilities

This sector includes companies that deal with the delivery of electricity, gas, and water to customers.

Utilities need considerable infrastructure to operate. So they often hold high levels of debt. Interest rates should remain low well into 2010, and utilities will benefit from the lower borrowing cost.

Investing in the utility sector is considered a non-cyclical defense play because it's less susceptible to a market selloff. I recommend that you hold utilities in your portfolio because of that and for added diversification.

* Technology

The companies in this space include those that make computers and cell phones as well as those that create software.

Tech was one of the best performing sectors in 2009, and should do exceptionally well into next year too. It will benefit from economic growth, which will boost orders and profit margins.

People are still spending money on technology, even in this difficult economic environment. Tech companies have been cutting costs and building up large cash reserves. The tech sector is quite healthy, indeed.

I expect some of the best plays to involve cutting-edge technology that can change the world. This includes cloud computing, smart phones, and military technology.

* Health Care

This sector includes hospitals, drug manufacturers, and producers of medical products.

Some kind of health care reform is coming soon, and you can profit from it. There will be many winners as a result of this new legislation, like hospitals and pharma companies.

With more Americans getting health insurance coverage, health care use will go up – and so will drug sales. That means higher revenues for the drug makers.

In Conclusion …

So there you have it. In 2010, put your money in commodities, utilities, technology, and health care. I'll be recommending highly leveraged plays on these sectors in Options Power Trader. My goal is to continue to show my readers 100% or more winners with my options plays.

Best Wishes,

Ted Peroulakis

Bob Irish - Investment Director
Andy Gordon - Editor
Jon Herring - Editorial Contributor
Ted Peroulakis - Editorial Contributor
Christian Hill - Managing Editor
Dr. Russell McDougal - Editorial Contributor
Steve McDonald - Editorial Contributor
Michael Masterson - Consulting Editor

Tuesday, December 29, 2009

The Debt Bomb

Celebrating A Decade of Reckoning
US Edition Home Contributors Media & Testimonials archives DR's 10th Anniversary DR's 10th Anniversary

The Daily Reckoning
Tuesday, December 29, 2009

  • What an explosion in the world's monetary base means for your stash,
  • Tracking the 'flation wars in an era of "Great Moderation,"
  • Plus Bill Bonner muses on why he's moving back to the US and more....
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Joel Bowman, with a few quick words from Taipei, Taiwan...

We're approaching one tenth of the way through this new century and already the world is getting a taste of things to come...

The world's temporary reserve currency, the US dollar, has shed roughly one third of its purchasing power against a basket of major paper competitors this decade. Gold, having begun the millennium in the dumps, has roughly quadrupled against the greenback over that same period. And stocks, after peaking back in 2007, are down about 7% for the same period.

Booms...bubbles...busts of epic proportions...

In short, the era was everything except what Federal Reserve Chairman Ben Bernanke thought it would be: an era of "Great Moderation." In fact, it would be hard to think of a more incorrect way to describe the times we live in.

We carry wars into the new decade, too. There are wars on terror, on unemployment, on the economy and, yes, even on the weather. That's not to mention the carry-over wars from political rally posters of yore; wars on drugs and poverty, wars so poorly-fought, grossly-mishandled and ill-defined that they've become permanent taxes rather than popular election talking points.

Then there's the war being waged between the forces of inflation and deflation, with the market pulling in one direction and the Feds yanking in the other. And that's where we begin today's musing. In the issue that follows, Dan Amoss, Puru Saxena and Daily Reckoning founder, Bill Bonner, talk us through the epic battle being waged in The War of the 'Flations.

First up, Dan Amoss, editor of the Strategic Short Report, described the scene in yesterday's 5-Minute Forecast...

"Now that fears of a deflationary spiral have waned, a rising Treasury note yield is bearish for stocks. Rising Treasury yields increase mortgage rates and decrease the attractiveness of rate-sensitive stocks like utilities, banks, and REITs.

"A rising trend in Treasury yields is especially dangerous," continued Dan, "when you consider that the biggest threat to the economy in 2010 is the backlog of mortgage foreclosures that have yet to work their way through the system. As these homes work their way through the system, it will be another deflationary shock to the banking system. In this deflationary shock, I doubt we'll see Treasury yields move anywhere near their 2008 lows. Higher Treasury yields will keep pressure on interest rate-sensitive stocks, while the continued deflationary pressures in housing will keep pressure on credit-sensitive stocks.

"All of this adds up to a much more hostile environment for the stock market than we've seen in 2009. With valuations high, long-term interest rates heading up, and credit stress still an issue, the environment for short selling is growing more favorable."

And now, over to Hong Kong where Puru Saxena has a few thoughts...

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The Daily Reckoning PRESENTS: Can the world's governments mop up their liquidity spills before it's too late? Do they even want to? Most people think their central banks are trying to protect their nations' currencies – probably because that's the line they feed the public. But, as usual, what we're told ain't necessarily so. In today's issue guest essayist, Puru Saxena, offers a few words on the consequences of "competitive devaluation." Please enjoy...

The Debt Bomb
By Puru Saxena
Hong Kong, China

Make no mistake; the developed world is drowning in debt and there are only two viable options – a global economic depression or very high inflation. It is our contention that the policymakers have chosen the latter option and over the following years, we will experience the trauma of severe inflation.

Look. The American government is staring at total obligations of US$115 trillion, America's debt-to-GDP ratio is off the charts and the American public is also up to its eyeballs in debt. Under this scenario, you can bet your bottom dollar that the American establishment will try to reduce this debt overhang through a process known as monetary inflation. If you have any doubt whatsoever, take a look at the chart below, which captures the incredible expansion in America's monetary base.

US Monetary Base

As you can see, over the past two years, the monetary base in America has expanded from US$827 billion to an astonishing US$1.93 trillion! Until now, this surge in the monetary base has not produced a highly visible inflationary impact...yet.

But it is notable that America is not alone in pursuing inflationary policies. All over the world, the developed nations are printing money and debasing their currencies. In this era of globalization, no country wants a strong currency and everyone is engaged in competitive currency devaluations. This massive money and debt creation will cause an inflationary boom over the coming years.

In fact, those who erroneously believe that deflation is unavoidable should review Figure 2, which highlights the mind-boggling expansion in the balance sheets of various central banks. As you can see, America is not the only nation guilty of printing money; the Europeans have also jumped on this train to Inflationville.

Global Balance Sheet Expansion

Now, we are aware that many prominent commentators are still calling for deflation. "After all," they argue, "how can inflation be a problem when bond yields are so low?" Well, these deflationists seem to be missing the point because the US Treasury market is no longer an entirely free market. We would argue that the Federal Reserve's intervention is largely responsible for keeping bond yields artificially low. Over the past several months, the Federal Reserve has purchased most of the net new issuance of Treasury securities. The American central bank is engaged in this desperate act in order to keep interest-rates low. However, it is buying these Treasuries by creating money out of thin air. This is inflationary.

If our assessment is correct, somewhere down the road, the Federal Reserve will lose its battle and T-bond yields will soar. As more and more bond investors wake up to the looming inflationary menace, they will start demanding a higher rate of return on their capital. When that happens, the dyke will break and the Federal Reserve will become irrelevant.

America has run out of choices. If the Federal Reserve does not inflate away this mountain of debt, the biggest sovereign default in history is guaranteed. Now, given the ability of the Federal Reserve to create confetti money, we are convinced that it will opt for the inflationary solution. Inflation would certainly make America's debt more manageable, but it would also dilute the purchasing power of the dollar. Of course, this inflationary agenda is not a secret and this is why many creditor nations with huge reserves are beginning to diversify away from the American currency.

In the past, when inflationary episodes spiraled out of control, hard assets were the prime beneficiaries and this trend is likely to remain intact in this inflationary episode. If our assessment is correct, over the coming years, stocks, precious metals, commodities and real estate will appreciate in value versus paper currencies. Furthermore, on a relative basis, we expect precious metals and commodities to outperform all other asset-classes. Conversely, we anticipate that cash and fixed- income instruments will probably turn out to be the worst assets to own over the next decade.

Bearing in mind the looming inflationary nightmare, we urge you to protect your purchasing power by allocating capital to precious metals and commodities-related businesses. Finally, we suggest that you consider allocating a portion of your capital to the fast-growing economies in Asia, like China, India and Vietnam. Such investments should prosper during the low-growth, high-inflation environment to come.

Joel's Note: Puru Saxena publishes Money Matters, a monthly economic report, which highlights extraordinary investment opportunities in all major markets. In addition to the monthly report, subscribers also receive "Weekly Updates" covering the recent market action. Money Matters is available by subscription from

Puru is also the founder of Puru Saxena Wealth Management, his Hong Kong based firm, which manages investment portfolios for individuals and corporate clients. He is a highly showcased investment manager and a regular guest on CNN, BBC World, CNBC, Bloomberg, NDTV and various radio programs.

Copyright © 2005-2009 Puru Saxena Limited. All rights reserved.


And now over to Bill Bonner, who has today's reckoning from Ouzilly, France...

"It's not that simple!"

We wish it were easier, simpler...more predictable. We wish there were a reliable road map. Will someone please give us an owner's manual!

What are we talking about? Stocks...the economy...the gold market?

No, we're talking about life!

"Your children are all at a transitional age," explained a neighbor last night. "They don't know what they are going to be doing in life...or how to do it. So, they need a lot of support. I don't know whether they need advice, exactly....and it's probably better not to give it in many cases...but they need to know you are there."

But where are we? More on that below...

Meanwhile, we return to our dreary métier on a dreary day. We are looking back at the year almost finished, and trying to figure out what lies ahead. The surprise of 2009 was that the stock market didn't turn down again. Stocks worldwide were cut in half. Then, they bounced. A textbook, classic bounce...Normally, you'd expect the bounce to peak out after 5 or 6 months. This one hasn't...yet. Our guess is that it will...

Of course, we could be wrong...

The 'classic' depression...a la Japan...comes about when an economy needs to make some fundamental changes. It discovers that a lot of what it has been doing was wrongheaded. Assets, valued at bubble levels, need to be marked down. People need to find new jobs; because the old ones no longer make sense. Businesses need to be restructured and retooled. Households, typically, need to stop spending and pay down debt.

This process is long and hard. The story of bubbles always begins cheerfully enough. But it always ends at Chapter 11, in long workouts...painful write-offs...and court cases.

"Recession Begins Flooding into the Courts," says a headline in yesterday's New York Times..

If this were a classic depression, we could anticipate another leg down in the stock market...more unemployment...and on-again, off-again growth over the next few years.

Our guess still is that it IS a classic depression...and that we should see stocks go down...along with all the other phenomena that usually accompany a depression.

But, it's not that simple.

Because there are a lot of other things going on too. The feds are hell-bent on avoiding a painful restructuring of the economy. First, they made sure the bankers got their bonuses. The banks deserved to go bust...and the people who ran them should have been fired. But the fix was in from the beginning.

Then, they turned to consumers. The feds are using every trick they have to lure consumers back into bubble mode – buying things they don't need with money they don't have.

Is it working? Well, the results are mixed and confusing. Every day seems to bring more noise. Today, for example, we learn that spending is up 3.6% this holiday season. We have to could that be? Fewer people have jobs. Those who have jobs are working fewer hours and earning less money. And the bankers – bless their greedy little hearts – are not passing on the feds' cash to consumers. Consumer credit is going down at the fastest pace since the Great Depression. So, how can consumer sales go up? We'll just have to wait to find out.

The Dow rose 29 points yesterday. Gold went up $3. We would like to see both of them go down. Then, we would sure our 'classic depression' hypothesis is correct. In the meantime, we're watching...waiting...and wondering...along with everyone else.

And more thoughts...

We reported that the US government would need to roll over $2.5 trillion worth of debt next year. We probably erred. The number was right, but it was meant to be over the next two years. During the next two years also, worldwide, banks need to roll over $7 trillion. Whether it is over one year or two years, we're talking big money.

Most people who bother to think about it are coming to the conclusion that this is very inflationary...and very bullish for gold. They think the Fed will need to "monetize the debt" directly, or indirectly. One way or another, they say, the central bank will have to increase the volume of money so that the government can finance its deficits.

Paul Krugman, Nobel Prize winner in economics, suggested that the Fed add another $2 trillion to the nation's monetary base, partly to accommodate federal borrowing...and, he believes, to stimulate employment.

This idea is widespread. Richard Koo, one of the few economists to understand the Japanese depression and what awaits the US, thinks along similar lines. The US economy is going into a depression, like Japan; the government must spend huge amounts of money in order to keep GDP from falling.

Japan's top man shocked the nation last week when he announced the largest budget deficit ever. The government will spend about $1 trillion – a new record. And it will collect less than half that much in taxes. Meaning, most of what the Japanese government spends is borrowed – something the Japanese haven't done since the days when Americans were dropping bombs on them.

The Japanese government is doing what it should do, says Koo. It is replacing missing private spending with public spending. So doing, it has avoided a drop in GDP and employment. Throughout its 20 year slump, Japan's GDP has never fallen below the peak set in 1989. Nor has unemployment ever risen above 6%. Bravo!


Thanks to this new budget, Japan's national debt will reach a new record...nearly 200% of GDP. The Japanese have a lot of private savings, but they also have a lot of public debt. And what have they gotten for it? Well, they have kept people employed....and have allowed the private sector to pay down its debts. Or, to put it another way, they have lived through a classic depression fairly comfortably. Instead of forcing the banks to fess up to their mistakes and clean up their balance sheets, the Japanese government saved them. Instead of allowing big companies to go broke...and other companies to take their places...the Japanese propped up the 'brain dead' firms...and kept them alive with taxpayers' money. Result? A depression that should have been over in, say, 5 years...has been stretched out to 20. And now the Japanese face a public debt that is bound to cause them big problems in the years ahead.... What kind of problems?

Well, Japan is going broke... just like the US.

But we will save that for another day... You editor is on the move again... Most of his children are already in the US...or headed in that direction. He is following them.

Yes, dear reader, after 15 years in Europe, your editor is headed back to the US. He will take up residence in Bethesda, Maryland. Why Bethesda? Why not the ol' family farm near Annapolis? Because...

Our youngest child, Edward, has another year and a half of high school. But he's done all his education in French...and in France. Putting him into an American high school would be a big shock. Yes, he'd probably adapt without any trouble. But we figure he might as well finish up in the same system he began – the French school system. Fortunately, there's a French lycee in Bethesda, Maryland. It's where French diplomats send their children. From what we hear, it's not a bad school.

But why follow the children to the US?

Here's the way we look at it. The children are all starting out in life. There will be a couple of years in which we MIGHT be of help to them. After that, it will be too late. They will have set their course in life, for better or for worse.

Most likely, there's probably not much parents can do. We give advice when it is asked for. We try to anticipate problems. We look back at our own experience and try to warn the children against falling into the same traps.

Does any of this really make any difference? We don't know. But we have been working on these children for the last three decades. This may be the last time we have any influence at all. Beyond that, it may be helpful to them to know that we are on the same continent...and ready to help out, if the occasion arises.

So, for the next two years – more or less – your editor will make Bethesda his home. Back in the USA...

What will it be like living in the US again after all these years? Has the country changed? Have we changed?

Don't know...but going to find out...


Bill Bonner,
for The Daily Reckoning
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5 Min Forecast

December 29, 2009

  • Fed balance sheet back to near record… details reveal Bernanke's new master plan
  • Dan Amoss on the market that's just been "de facto nationalized"
  • Chris Mayer wraps up the worst decade for stocks ever…. and shares his focus for 2010
  • Plus, one sector on the verge of a new (government backed) boom

The 5 hasn't kicked off with an announcement like this in almost a year, so hear us out:

At midnight tonight, we will stop accepting new members to the Agora Financial Reserve. If you're serious about investing in 2010 – and beyond – this is the best help we can possibly offer. There's no telling when we'll accept new members again, and when we do, the membership fee will almost certainly be higher. So if you want in, this is the absolute last chance.

One good reason to guard your finances in 2010: The Federal Reserve's balance sheet has quietly ballooned back to near-record highs. The Fed announced yesterday that it's balance sheet expanded to $2.22 trillion last week, it's grossest level in nearly a year and just a hair from an all time high. Hmmm… if Mr. Bernanke assures us the recession is "very likely over," then why is the Fed balance sheet in crisis mode? What are they worried about? Here's the answer:

The Federal Reserve went from a non-existent player in the mortgage backed security market a year ago to owning $904 billion of the stuff today. The "private" bank has clearly moved its aim from the financial sector to housing, loading up on MBS, debt spilling out of Fannie Mae and Freddie Mac and Treasury bonds (a handy way to suppress mortgage rates).

Coupled with the Treasury's black check to Fannie and Freddie, we're detecting a trend.

Fannie Mae reported yesterday that "serious delinquencies" in its mortgage portfolio rose to 4.98% in October. That's up 172% from this time last year.

"The market will eventually adopt the view that Fannie Mae and Freddie Mac have been nationalized," opines Dan Amoss of the Strategic Short Report. "Last week's elimination of limits on Treasury's capital infusion into Fannie and Freddie is a de facto nationalization. In other words, there's no longer much chance of a re-privatization, but instead we'll see a gradual transformation of these Frankensteins into new branches of government. They'll implement the official government agenda for housing, without much regard for prudent lending.

"This will have huge consequences for the Treasury market. While the federal government will stick to its Enron-style accounting, and not officially consolidate Fannie/Freddie assets and liabilities onto the government balance sheet, the smarter foreign creditors will. These creditors will start viewing Fannie/Freddie liabilities as equal to Treasuries in terms of default risk. But this doesn't mean that spreads on Fannie/Freddie liabilities will tighten down to Treasuries; rather, it will substantially increase the long-term default risk of Treasuries, and Treasury buyers will demand higher rates to compensate for this risk.

"In summary: the Treasury's Christmas Eve announcement (link)adds substantially to the case for higher Treasury yields in 2010."

The stock market is enjoying a bit of a Santa Claus rally. The S&P has risen (albeit by small amounts) six days in a row, and along with the Dow, started this morning at a 2009 high. These indexes opened to small gains today, as the Case Shiller home price index showed a very moderate improvement for October while the latest consumer confidence reading inched up in December.

More proof investment optimism is back: Investors dumped $11.1 trillion in U.S. stock funds last week, the highest level since June 2008 (three months before the market crashed).

"We're just about to wrap up the worst decade ever for owning stocks," Chris Mayer writes to his Special Situations readers. "That's not really a surprise to those of us who pay attention to the price paid to own stocks. They were too expensive and too popular for a long time. In late 1999, the S&P 500 traded for 44 times earnings -- an all-time high. In 1982, when the great bull market began, the S&P 500 traded for something like 8 times earnings.

"These are overly simple measurements and not worth paying attention to most of the time, but when they reach extremes, they can tell us something valuable. We are not in extreme territory anymore. The WSJ points out that the S&P 500 trades for 20 times earnings today. That's not cheap. But it's also not horribly expensive, either, especially if you consider that we are in a recession and profits may well improve big-time over the next few years…

"I think there are more bargains in the smaller-cap stocks than the big stocks. Jeremy Grantham thinks U.S. large-cap stocks are about 30% overpriced. Grantham is co-founder of money manager GMO. He has made a lot of good calls, including his 1999 prediction that stocks would lose money in the next decade. (They did, though not as much as he thought.)

"I can see this too in my own research. I always have ideas for Mayer's Special Situations because MSS makes its living in small and underfollowed stocks. In MSS, all of the stocks we picked up in 2009 -- save one -- had a market cap below $1 billion. I'd expect this trend to continue in 2010."

"The market for dividend yielding stocks is becoming overpriced," cautions our income investor, Jim Nelson. "Dividend changes are cyclical. So instead of tracking them on a rolling monthly basis, let's look at the rate of year-over-year change. Below is the rate of change for only dividend increases…

"In November, the downward slide ended. It was the first month since pre-recession to see the number of positive income actions increase year over year.

"Now, if you've been reading The 5 long enough, you probably aren't surprised by this. After all, the market is never logical. It is constantly overcompensating for momentum. Oftentimes, this gives us opportunities to buy cheap shares of income payers. Unfortunately, we are at the other extreme right now -- an overpriced market.

"You hear pundits and politicians alike claim that we may not be fully recovered to pre-recession levels, but we are on a straight path toward it. That's what the chart is showing. The boards of directors behind the recent dividend changes are, obviously, listening to the pundits and politicians. This will most likely cause a second crash in both share prices and income payments.

"In short, there will be safe plays out there, but not necessarily the ones jacking up their dividends. We strongly believe our Lifetime Income Report portfolio will stand up to the test. As we write, there are four companies in the portfolio left in our buy range. We suggest you get into them as soon as possible."

Commodities are staying on the sidelines today. After a hefty rise over the last week, oil is taking a breather at $78 a barrel. Gold's been in trouble lately, and is now resting at $1,100.

Last today, and opportunity: Nuclear power in America is about to enter a new era. Likely this week, the Energy Department will announce the first wave of nearly $18.5 billion in loan guarantees for expanding the nuclear industry in the U.S. This is a subsidy almost five years in the making, and should it pass, the first of its kind since the Three Mile Island fiasco.

"I find it interesting," a reader writes, "that Hugo Chavez is dictating to Toyota about production quotas on SUVs with a threat to seize the production plant and getting the Chinese to run it. Chavez has no clue how the Toyota production system works. It is set up to meet demand as demand dictates. All other manufactures work on a batch production system and if you try to use batch methods in a TPS environment, it will fail badly. And if the Chinese aren't familiar with the Toyota system, they won't be able to make it work either. I would like to see Chavez take over the Toyota plant and see how many pieces of junk that won't work he can get produced."

The 5: We doubt he knew more about oil services than Exxon, but that certainly didn't stop him.

What's interesting to us is his point of view. Currency controls in Venezuela make it tough for any foreign company to do business. Labor laws make it even harder for a large manufacturer. And the auto market there is really small to begin with. Yet Chavez says Toyota (capitalism in general) doesn't play fair.

"The founding fathers would have NEVER supported an internal ethical and moral compass as far adrift as we find now," a reader writes, referring to yesterday's inbox. "NEVER would they have advocated the road to communism we now find ourselves on. Should this administration achieve all that is proposing, the Federal Government will own/run 71% of the entire U.S. economy. Want to see the U.S. not far from now? Just look a little south to Venezuela. We're on an express train.

"The 5 is the only newsletter I seek out to read daily. Keep up the great work."

"I would LOVE to see the faces of the founding fathers if they reappeared today!" exclaims another reader. "Can you imagine how they would react to seeing a 'slave' (?) running the country! Probably about the same as Charlton Heston's character in Planet of the Apes. After all, most of them had slaves when they started this "mess" we love so much."


Ian Mathias
The 5 Min. Forecast

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Harry Reid's power.

Human Events
Below please find a special message from one of our advertisers, Sue Lowden for U.S. Senate. From time to time, we receive opportunities we believe you as a valued customer may want to know about. Please note that the following message reflects the opinions and representations of our advertiser alone, and not necessarily the opinion or editorial positions of Human Events or Eagle Publishing.

Fellow Conservative,

Donate Today Harry Reid has sold out to the liberal special interests and used pork projects to buy the votes of Democrat Senators with our tax dollars. He's spent millions of campaign dollars claiming to be the most powerful U.S. Senator in our state's history. But he's used that power to make taxpayers pay for abortions, raise the cost of health care, and dramatically increase our national debt.

Harry Reid knows I'm the proven conservative who can kick him out of the Senate. He'll lose the power he covets and his ability to do any more damage to America's taxpayers. I'm the proven conservative who beats him by ten percentage points and I'm the only conservative who according to recent polls would beat him with more than 50% of the vote!

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I'm reaching out to you, because it's essential we post the highest possible fundraising numbers. Harry Reid, the media and even the far left will look to our fourth quarter fundraising report to judge the strength of our opposition to Reid and his Democrat majority in Congress.

The government take over of health care is Harry Reid's plan - and he is proud of it. But you and I both know that this radical, big government scheme will have terrible consequences on American families, and I guarantee you this bill will be Harry Reid's "Waterloo."

Thanks to Reid's strong-arming and selling of pork projects, the Democrat majority in Congress is imposing a government take over of health care that will limit our ability to choose our doctors, decimate the quality of our health care, astronomically raise our taxes and force taxpayers to help pay for abortions.

Unseating the liberal Senate Majority Leader will not be easy. Harry Reid has proven time and again that he's not afraid to take and spend liberal special interest money on his campaign. Make no mistake; the radical left will work hard to keep him in power.

We need to send a clear message with our December 31st reporting deadline that we want to kick Harry Reid out of power. Please follow this link immediately to contribute $50, $100, $250, $500 or more before midnight on December 31st.

Americans have had enough of Harry Reid's selfish ways. Times are beyond tough, but Harry Reid has chosen to make passing the Congressional Democrat's radical agenda into law his top priority instead of providing relief to America's families.

We must kick Harry Reid out of the Senate! If I am fortunate enough to be elected to the U.S. Senate, I will proudly work to defend life and prevent taxpayer dollars from being used to fund abortion. I will actively work to protect our 2nd Amendment rights. I will consistently vote against pork spending and will work to roll back the growth of government. I am opposed to any tax increases. Soon after announcing my candidacy I signed the Americans for Tax Reform pledge to not raise taxes.

December 31st marks our first major reporting deadline, and we need your financial support to post the strongest possible numbers. Please follow this link now to make a generous contribution before midnight on Thursday, December 31st.

Thank you in advance for your support, and have a happy New Year.


Sue Lowden

P.S. As families celebrated the holiday season, Harry Reid and his Congressional Democrats have worked over time to impose their radical, government take over of health care on us. Join me in kicking Harry Reid out of the Senate by following this link now!

Sue Lowden for US Senate

Paid for by Sue Lowden for U.S. Senate

Obama gives foreign cops new police powers in U.S. A Free Press For A Free People
Obama gives foreign cops
new police powers in U.S.

A little-discussed executive order from President Obama giving foreign cops new police powers in the United States by exempting them from such drudgery as compliance with the Freedom of Information Act is raising alarm among commentators who say INTERPOL already had most of the same privileges as diplomats.

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