January 12, 2015 - 9 a.m. - Reminder - Mr. Quist on Wealth DNA Radio Program

Hello World,

Here is the link for the radio show, this coming Monday.  You can use this link to set a reminder for yourself, listen live, or if you miss the program, you will be able to access it in the archive.

This program is a must listen for those in Real Estate or interested in real estate.

http://www.blogtalkradio.com/boomerandbabe/2015/01/12/ron-nawrocki--wealth-dna

IMPORTANT NOTICE - Seminar, Scottsdale, Arizona

Hello World,

H. L. Quist will be conducting a seminar at the Southwestern School of Real Estate on Thursday September 18th at 12:00PM Noon.

In July 2005 Mr. Quist and the Southwestern School held a special seminar to alert Realtors and investors to an inevitable and devastating crash in the equity and real estate markets which proved to be accurate. Mr. Quist is NOW forecasting another major financial crisis precipitated by the crash of the US dollar. Given that Mr Quist has forecast almost every major boom and bust cycle since 1987, Realtors and investors should benefit from this two and one-half hour presentation and discussion. There is a $10 fee by the school for non-Realtors attending the seminar.

The seminar will be held at the Camelback Scottsdale Resort at 6302 East Camelback Road, Scottsdale. Please call 602 840-4117 if you plan to attend.

--H. L. Quist

Free Preview of CMV For January, 2011

Hello World,

The CMV Recommended List grew 45.17% in 2010!!!

The comparative results for 2010 were as follows:

The CMV Portfolio +45.17%

Dow Jones Industrial Avg. +10.95%

S&P 500 +12.80%

NASDAQ Composite +17.36%

Below is a preview of the CMV (Contrarian Market View) Newsletter for January, 2011.  See the end of this post for a free book offer with the purchase of a subscription to the full monthly newsletter. (Note: due to the limitations of a blog post the appearance of this preview is not as it will appear in the actual subscriber copy.)

January, 2011

H. L. Quist’s

Contrarian Market View

Newsletter

* * * *

REMINDER

Free Presentation and Luncheon Courtesy of

Golden Peaks Resources (GDPEF).

(Shareholders Only)

Reservations are Required.

Respond to: H.L Quist at 602 840-4117

or hlquist@djmwealth.com

January 14, 2011

The Sanctuary

11:30 a.m. - 2 p.m.

* * * *

Market Overview

Absent the following events that could have a material impact and alter or change our outlook for 2011, CMV offers its’ Contrarian forecast for 2011.  These “X” factors are:

1.  A Cyber attack on Wall St., the banking industry or government that would significantly impair commerce and confidence in our government ability to curtail this type of activity.

2.  A series of terrorist attacks on highly visible and innocent targets that would instill fear in the populace.

3.  A breakout of hostilities in the Korean Peninsula or the Mid-East.

Assuming none of these above events occur, here is CMV’s best guesstimate of major events that will influence your business, your investments and your family in 2011.

1.  The Economy and Financial Markets Will Surprise to the Upside.

Barron’s Magazine polled 10 prominent strategists and investment managers who collectively see the S&P 500 finishing 10% higher than this year’s close at 1258 or 12.80%.  Despite the Fed’s Reflation Plan to prop up asset prices while maintaining interest rates at historical lows they all agree that inflation will not be a problem.  David Kelly at JP Morgan Funds forecasts the highest S&P earnings at $98/sh for 2011 and the 10 year T-Note at 4.25% by the end of 2011.  When questioned as to what sector will best perform in the year ahead, 5 out of the 10 picked technology as the number one performer.  Remarkably, none of the 10 experts chose precious metals in their four or five favorite sectors.  One could assume that they missed the numero uno sector (gold funds) which have out-performed all sectors for the past 10 years.  CMV’s position is that S&P earnings are going to be tempered by higher raw material costs and the 10 year T-Note could be a full 100 BPS or more above the consensus of 4.00% despite Bernanke’s attempt to “cap” it.  Inflation by the end of 2011 will be the most off-repeated word in the English language but remains foreign to Wall St..

Despite the fact that the US economy will not reach the Nirvana of robust earnings, low interest rates and no inflation as forecast by these experts, the economy and the markets will surprise to the upside and you should be fully invested after mid-January.  An added impetus will be provided by the major banks who will aggressively increase their business lending in 2011 contrary to prominent pundits.

2.  The Us Dollar Loses Luster.

CMV described in the December issue that China and Russia had organized the Shanghi Co-Operation Organisation (SCO) which garnered very little notice in the US media.  In mid-November China allowed its’ currency, the yuan, to be bought and sold outside the mainland for the first time.  This is a critical step moving to full convertibility of the yuan and Americans are oblivious of the impact this will have on the international financial landscape and the value of the USD.  The goal of China and Russia and other states that are coming on board SCO, is to circumvent the USD in international trade and allow countries to settle transactions in currencies other than the USD.  The dollar has been the world’s reserve currency for over 60 years and 2011 will mark the beginning of the end of the dollar’s role.  When China severs the yuan’s link to the USD, the value of our currency will sink like a rock in a swimming pool and the prices of imported goods will skyrocket.

3.  The “Shock and Awe” Real Estate Loan Program.

The Obama Administration is actively in negotiations with Fannie Mae (FNM), Freddie Mac (FRE), and the Federal Housing Administration (FHA) to develop a new government program that would be aimed at reducing loan balances where borrowers owe more than their homes are worth. FNM and FRE which own or guarantee about half of the all the mortgages in the US, would transfer the reduced loans to the FHA and of course, losses will be absorbed by you guess who!  In addition FNM and FRE and other lenders plan to recoup somewhere between $200 and $400 billion from banks who sold them the toxic subprime loans.  CMV expects FNM and FRE to be “restructured” ostensibly using the bank proceeds.  CMV sees this imitative as a “game changer” and will stop the bleeding in the residential real estate market in 2011 if the plan comes together.  The plan will be adopted by the US Treasury and the Obama Administration without review of Congress and the cost heaped on you and I, the taxpayers.

4.  The Bond Bubble To An Asset Bubble.

The Federal Reserve Board Chairman’s goal is to create asset inflation by driving investors from near zero return bonds to higher risk appreciating assets — stocks, commodities and eventually real estate.  In CMV’s opinion, Mr. Bernanke will succeed in the near term.  There is an almost inestimable amount of trillions in government, corporate and municipal bonds that are, and will be ever-increasingly, diverted to risk assets.  Viola!  Asset inflation.  We have Mr. Bernanke’s “100% certainty that the Fed can control inflation.”  CMV believes that the Chairman will fail on this promise.  Unfortunately, with Federal deficits running in excess of a trillion per year, the US Treasury issuing new debt and re-funding old debt at about $4.3 trillion per year, interest rates will rise, reminiscent of the late 70s.  In late 2011 and into 2012 CMV believes that US bond investors will conclude that they will never be paid back with anywhere near close to the same purchasing power and the Fed will find itself in a series of accelerating QE programs which will inevitably lead to Hyper-Inflation.  CMV doesn’t know what the time frame may be but in the end trillions of dollar denominated debt will disappear and never be repaid.  More on pages 3 and 4.

5.  City and State Governments Will Default.

Meredith Whitney, the Wall St. analyst who accurately forecast the sub-prime debt crisis well in advance, recently said that there will be “fifty to one hundred sizable Muny defaults amounting to hundreds of billions of dollars in the next 12 months.”  In addition, some analysts are also including the states of Illinois, New York and California as candidates for default.  Many defaults would have occurred in 2010 had it not been for $140 billion in Build America Bonds that these governments used to pay interest on old debt, salaries to employees and pension payments to retirees.  The BABs are scheduled to end on December 31, 2010.

On December 27, however, Republican Congressman John Mica said, “I can almost guarantee” that the program for subsidized bonds will be funded next year.  Ignoring the Tea Party’s mandate, Mica is playing to Wall St. which made $700 million in the past 2 years on fees off of BABs!  Proving once again that the system is corrupt and will fail.

Austerity measures could be met with denial, anger and rioting.  It’s human nature for US citizens to take the position that ‘It can’t happen here” and refuse to accept the possibility that we’re no different than Euroland, Latin America or even third world countries.  Civil unrest could be the primary event of 2011 and 2012.  George Soros, who CMV revealed as “the most dangerous man in America” basks in the glory of the chaos he’s created in his quest to kill the capitalistic system and profit from its demise.

Ben’s Inflation Bubble

It is difficult for the average person to grasp the meaning of the term and the presence of “inflation” for a number of reasons:

-- We’re constantly reminded by the talking (Wall St.) heads on CNBC that “there is no inflation” because it undermines their purpose of a “Goldilocks” economy..

--  The Bureau of Labor Statistics has modified the methodology that produces the Consumer Price Index (CPI) to the extent that the index is worthless.  Removing food prices from the core index at a time when these prices are exploding is a perfect example how government deceives its citizens while it steals from them.

--  Economists tell us that we can’t have price inflation during periods of high unemployment, low money velocity and low GDP growth whereas it has suddenly appeared when those conditions exist.

--  People don’t equate Fed monetary policy and fiscal stimulus with asset and price inflation which is the direct result of current policy.  Inflation is first and foremost a monetary phenomenon.

Let’s look at some specifics:

   Corn is closing in on $6.00/bushel — up 50% since June.

   Spring wheat is $12/bushel — up 20% from a year ago.

   Feeder cattle is $124.75/100 wt — up 25% from a year ago.

   Coffee is $2.25/lb — up 7.5% in a week.

   Sugar is $32.5/lb — up 12% in a week.

  Cotton is $1.50/lb — up over 100% in a year.

To fully appreciate the cause and effect that’s going unnoticed in virtually all areas of the US (except farming country) is the incredible boom in farm land prices.  According to the WSJ (December 9, 2010) two tracts of farmland in O’Brien County in Iowa sold recently for $9,700/acre.  The article says that “land fever is running rampant” in the mid-west.  John Deere & Co. Says that net farm cash income will rise 31% this year and it’s the most profitable agricultural year in US history!  CMV can’t think of any group of hard-working Americans who deserve it more but consumers won’t agree.  Do Not blame it on our farmers!

Land prices are a factor of higher crop prices but what’s driving crop prices?  Some experts claim there’s a global food shortage particularly in China but there’s also the inescapable fact that our exports are priced in USD and our currency is melting as fast as a snowball in Phoenix in July.  Washington is ecstatic that exports are soaring but now you know why the reign of the USD is going to end — and much sooner than experts figure.

Here’s another aspect of this emerging picture that isn’t obvious.  Americans, since 2008, have been buying groceries and goods on a “just in time” basis or a few items at a time.  When it becomes apparent to homemakers that prices are escalating they’ll buy in larger quantity.  Bingo — demand impacts supply — prices increase and panic buying could ensue. Consumers will be shocked by the increases in food prices in 2011.

Another sign of the times.  Copper has popped to $4.25/pound.  It has been reported that one US source is hoarding close to a billion dollars of copper by warehousing the metal at the London Metal Exchange!  China is utilizing the same technique hoarding uranium, rare earths and gold.  The Chinese have this whole future scenario figured out and are trading dollars now for goods needed later.  In addition to massive price increases, could we see a trade war?  We’re on the cusp — The Future isn’t what it used to be! 

Ben Bernanke’s objective through QE2 is to create asset inflation and at the same time (with 100% certainty) control wage and price inflation.  Will he follow in the footsteps of his mentor, Alan Greenspan, who set out to inflate real property prices but failed to intercede to curtail the mania that followed?  Or, will he turn off the QE spigot and raise the Fed funds rate?  In CMV’s opinion, the Fed Chairman doesn’t make that decision — the banksters and politicians who “anointed” him make that decision.  Bernanke is simply a hired gun. By the end of 2011 the economy will be running on all cylinders and the banksters and the President won’t want it to stop.  The result?  Ben’s Bubble — the Fed’s FIFTH since the seventies.  Asset bubbles create profits. Investors take profits and pay taxes.  It’s like the 1990s all over again.  The same market frenzy during the .com bubble created a budget surplus and made Bill Clinton the teflon man.  BO wants to replicate his success.

As CMV has reiterated numerous times — this new bubble is the “Last Rodeo.”  Our creditors will lose confidence in our fiscal and monetary management and will refuse to lend to the world’s largest debtor nation..Our citizens will also lose confidence in the purchasing power of their currency.  The result?  HYPERINFLATION.  Ben will lose his job and the privately controlled Federal Reserve Bank of the United States will be dissolved.  When?  It’s just a matter of time.

The 2011 (Good) Surprise

In September 2010, CMV saw a change underway in the economy that most economists, market analysts and observers missed. While most experts were focused on the “double dip” and a decelerating economy ahead, CMV saw stealth evidence that the US economy was about to surprise on the upside in the fourth quarter.  Here are some observations that validate CMV’s forecast for a sharp economic rebound in 2011.

--  The Nation’s GDP rose at a 2.6% rate in the third quarter of 2010 and the consensus projection was a 2.4% growth for the fourth quarter.  CMV saw a massive increase in exports amongst other signs that would result in a much higher GDP growth in Q4. The port of Los Angeles’ activity was nearly at 2007 levels.  Barron’s had boldly forecast a 4% GDP increase and CMV saw an increase of 4.5%.  As of this writing economists are scrambling to revise their estimates upward for Q4 and the year 2011.

--  The cost of money was never cheaper and corporate balance sheets were never stronger at the end of Q3.  Private Equity firms and Wall St. can’t resist “free money” plus the obvious flow of funds exiting bonds that would be a catalyst for a dramatic turnaround in the stock market and corporate investment.  Wal-Mart and Coca Cola borrowed massive amounts of capital through the sale of bonds at an absurd yield of a fraction over T-Notes. CMV rests its case.  Bernanke’s QE2 announcement in August was frosting on the cake.  The “Fix” was in.

--  The election results, in CMV’s opinion, had much more of a significant economic impact than most may have been willing to admit.  A huge cloud of “uncertainty” was lifted from the shoulders of those businessmen and women who make the decisions on corporate expansion, capital investment and hiring that ultimately would reverse the unemployment picture.  An increase in new jobs in Q1 2011 will lead to a further increase in 2011 GDP.  CMV cautioned however that unemployment would not drop to (what has been considered normal) 5 to 6%   The “new normal” will be more like 8% but that will still spur the economy in 2011.

--  As late as the end of November the National Retail Foundation and retail pundits were projecting a modest increase in Christmas sales.  CMV, the true Contrarian, saw a much different picture.  Consumers were saving at a 5% to 6% rate during the entire year of  2010, credit card outstanding consumer debt was finally declining and “frugal fatigue” would result in a robust Christmas season.  As of this writing sales are estimated at $451 billion, or up nearly 4% over 2009 and very close to 2007 highs.  The surprise of course, was Internet sales up about 15% to $36 billion and a new phenomenon appeared which foretells problems for the sector.  Best Buy reported a dramatic drop in sales.  Why?  A potential buyer walks into Best Buy shopping for a wide-screen TV with all the bells and whistles and gets the full demo and info from the sales clerk.  He then pulls out his cell phone, locates a site that directs him to an Internet vendor that offers exactly the same model for 20% less.  Before the ex-potential customer leaves the store he buys the TV on-line.  Retail sales may be up on the aggregate but there is a massive marketing shift and re-apportioning of the pie.  Another certainty, sales taxes are coming on all on-line transactions — but prices will still remain cheaper.

For those experts who maintained steadfastly that consumer spending would not increase when there’s high unemployment, don’t know how to assess a change in public sentiment. CMV takes the position that American’s should be accumulating as much cash and investing every available dollar in order to prepare for the Great Reckoning which is a virtual 100% certainty.  We just don’t know WHEN.

Your writer was on a panel with two other pundits over a year ago.  One was the Treasurer of the State of Arizona and the other a stock market broker and analyst.  Both of these experts maintained that there wouldn’t be an upside economic reversal (the likes we’re about to see) because so much money was lost and consumers and investors were so psychologically damaged they would refrain from taking any risk.  Since March, 2009 the S&P 500 has produced a return of 81.6% through November 2010.  High beta stocks not including the resource sector are up a hard-to-believe 213.3% according to Barron’s!  As a testament to investor’s appetite for risk, margin debt is now $269 billion which is the highest since the over-leveraged market prior to the September 2008 crash.  These panelists like a majority of Americans, missed the “bus to Omaha.”

CMV can understand our State Treasurer’s negative outlook.  Every day he had to deal with a mounting deficit and borrow $2 billion to keep the lights on at the Capitol.  CMV fully recognizes that the fiscal situation at all levels, federal, state, and city, is unsustainable and can not continue. The choice that leadership at all levels has taken is to INFLATE the problem away which is now underway.  Like an Alka-seltzer, its’ a ‘Fizz’ or, temporary relief.  Assets will appreciate, tax revenues will increase and an euphoria of relief will change sentiment and all will appear that all is well again.  CMV’s value to you is that amidst all the gloom we saw the bloom despite the fact that the petals will again wilt and fall.  NOW is the time to make serious money.  By the time that the herd decides to join the game it will be too late.  The party will be over.

Randall Forsyth writing in Barron’s on December 17, 2010, articulated exactly what CMV has told you ad nauseam:

“...the Federal Reserve’s adoption of QE2 may turn out to be mere footnotes to the bigger story.  2010 could be the watershed marking the beginning of the end of the dollar-based, Western-centric monetary system...”

The rest of the newsletter is only available to paid subscribers and includes the portfolio of recommendations.

Subscription box in in the left side bar here on the blog.

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Financial Questions? Contact hlquist at djmwealth dot com

Happy New Year!

-- H. L. Quist

Take a class with H L Quist

Hello World,

My program Arizona Real Estate Cycles and Trends is scheduled in November and December. Offered through Southwestern School of Real Estate the classes are scheduled at the Scottsdale Camelback Resort, 6302 E. Camelback Road, Scottsdale on the following dates:

In this program I discuss cycles and trends in real estate with an overview of the current economy.

November 16th -- 12:00 to 2:45 p.m.

December 8th -- 8:30 to 11:15 a.m.

The program for real estate professionals is also open to the general public. There is a small fee to attend either class. Call 480 773-5343 for registration information.

School Website

My books are now available as an ebook or iPad version. Visit my publisher's page for my books click here. Of course the print copies are still available through your favorite book seller.

-- H. L. Quist

Free Preview of October CMV Newsletter

Hello World,

Below is a preview of the CMV (Contrarian Market View) Newsletter for October. See the end of this post for a free book offer with the purchase of a subscription the full monthly newsletter. (Note: due to the limitations of a blog post the appearance of this preview is not as it will appear in the actual subscriber copy.)

October, 2010

H. L. Quist's

Contrarian Market View

Newsletter

Market Overview

Given your inquiries and comments, many CMV subscribers are confused, flummoxed and depressed. The common thread in the preponderance of your emails and calls is your inability to determine the future direction of the economy or in a more macro sense, the direction of the country. This issue of CMV is deliberately dedicated to bring clarity and profitability into your life. Focusing on the economy and reducing the possible outcome to a minimum, CMV envisions three distinct scenarios looking forward to 2011 and beyond:

1. The Bernanke Re-Flation Plan Succeeds
On September 21st, the Federal Reserve's Open Market Committee made it abundantly clear that it wants more INFLATION. The Committee announced, "Measures of underlying inflation are currently at levels somewhat below those the committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability."

In short, we know what the Fed will do. What we don't know is, will their strategy be successful? CMV believes it will and it could open the door to enormous profit-making opportunities for you — IF you dare to share CMV's vision.

Under this scenario the following results most likely would occur:

The new Congress would cut off additional stimulus funds, extension of unemployment benefits etc., thereby putting more pressure on the Fed to create "growth and employment opportunities." (As stated)

The Fed would undertake massive Quantitative Easing (QE-2) which would flood the markets with liquidity and further devalue the US dollar.

Stock and commodity prices would surge as a result and the appetite for risk would become ravenous. Bond investors would nail down profits while freeing up multi-trillions of investment capital that eventually would find its' way into real estate.

In the early stages of the RE-FLATION CYCLE, manufacturers and retailers would discover pricing power and new profit margins, employment demand would increase, consumer sentiment would turn positive and the illusion of permanent prosperity would return echoing the sights and sounds of THE GREENSPAN PLAN of 2002.

THE BERNANKE RE-FLATION PLAN is another short-term fix that ultimately results in another longer-term problem — a crack-up boom. As the Wall St. Journal editorial opined on September 23rd, "Central Bankers who wish for more inflation usually get their wish, and the result is rarely benign." In the interim, however, enormous profits can be realized. (See pages 15-18)

2. The Bernanke Re-Flation Plan Fails.
Ultimately it will. It's simply a matter of time. CMV's position is that there is one LAST RODEO — meaning, the RE-FLATION PLAN will be the last desperate attempt to cover up all the Fed and political transgressions of the past 50 years. The only question is, will the US (and most of the world) have a temporary reprieve before THE GREAT RECKONING? CMV's answer is yes.

Let's reduce these two widely divergent scenarios to the minimum. Given a choice between INFLATION and DEFLATION (aka Depression) what choice would bankers take? Inflation, of course! Why? The Fed believes (firmly) that they can prevent Inflation from getting out of control. Deflation, on the other hand, is a death knell that has little chance of resuscitation. Although it hardly needs to be said, the following results would quite possibly occur.

Gross Domestic Product (GDP) would continue its decline and return to negative in 2011-2012.

Unemployment would rise significantly above the Bureau of Labor's fallacious 10% and consumer sentiment would plunge. Prices of most goods and services would decline dramatically as demand disappears.

The Federal Debt and the Budget Deficit both would explode as the Treasury's tax revenue plummets and QE-2 balloons. An international monetary crisis looms large as the prospect of default by the US on its sovereign debt becomes possible.

Fed Chairman, Ben Bernanke, has resolved that this scenario will not occur on his watch.

3. Slogging To The Future.
What in the world is a "slogging economy?" A perfect model is Japan from 1990 to the present. Remember, Japan's efficient and torrid economy in the 1980s was the model for all the world to duplicate. What has the 20 year SLOG produced?

The Nikkei Dow reached almost 40,000 at the end of 1989. A resounding crash took the index down to 7,000 and their market has never recovered.

The outrageously over-valued real estate market which sported the highest inflated prices in the world collapsed about 70% and has only recovered modestly since the 90s. The Japanese acquired trophy real estate properties all over the world at premium prices such as Pebble Beach, the Rockefeller Plaza, etc. and either walked from their obligations or sold at severe discounts.

Interest rates for both borrowers and savers have consistently been the lowest in the world. Global investors have for years borrowed in Yen at about one percent and invested elsewhere at much higher yields in what is known as the "carry trade." The lesson learned is that low interest rates did not result in domestic economic growth. Is the US dollar the carry trade currency of the future?

The point of this exercise is that, in CMV's opinion, option number one is the most likely. The outcome of a successful RE-FLATION will present unique and alternative investment opportunities for those who dare to be different. As you will soon discover by reading the remainder of this issue of CMV, the INFLATION TRADE has already begun. Here's the bottom line:

The Bernanke Re-Flation Plan, if successful, should present unique profit opportunities for outsized gains that should be realized during the next two to three years. An inflation-induced boom will end in a resounding crash. You and your family are dependent on your ability to see that the future isn't what it used to be!

RARE EARTHS (REE)

It appears that most readers of CMV have missed the opportunity in Rare Earth Elements that was presented to them many months ago. Advisor clients of H. L. Quist, however, discovered them in their portfolios. To get your attention and validate CMV's recommendations here are some of the results:


Symbol Date - Recommended Entry - Price/Sh Current - Price/Sh Unrealized Profit
MCP -- 8-20-10 -- $13.00 (1) -- $26.00 -- 100%
REE -- 1-01-10 -- $3.86 (2) -- $8.60 -- 123%
TASXF -- 8-01-10 -- $.81 -- $1.84 -- 128%

(1) #1 on the NYSE with an increase of 25.3% for the week ending 9/24/10.
(2) In July, 2010 the price/share declined to $2.00. Ranked #1 on NYSE/AMEX at 36.8% increase for the week ending 9/24/10

What are these 17 elements and what are they used for? Molycorp Minerals (MCP), the owner of a mine in Mountain Pass, California, and has the richest REE deposit outside of China, provides the following:

"Rare Earth materials create enabling technologies that are found throughout Hybrid Electric Vehicles (HEV), Plug-in HEVs (PHEV), all-Electric Vehicles (EV) as well as in standard gasoline or diesel vehicles. Powerful neodymium-iron-boron (NdFeB) magnets are vital in the electric motor and regenerative braking systems found in the above electric vehicle categories and are also crucial to several other systems in the vehicles. Virtually all HEV, PHEV, and EV on the road today also rely on Rare Earths (primarily lanthanum) in the battery pack which stores energy normally wasted during coasting and braking and saves it until needed by the electric motor. To estimate positive impacts to our environment, the US EPA assumes each HEV will have twice the mpg and only half the emissions as an equivalent gas or diesel vehicle. For every 100,000 HEVs (such as the Toyota Prius) that replace existing vehicles we save well over 1 million pounds of CO2 emissions per year and 4.8 million gallons of fuel. HEV, PHEV, and EV contain from 20 to 25 pounds of Rare Earths, where a standard vehicle can contain on the order of 10 pounds. Demand for energy-efficient electric vehicles is growing significantly. Global demand is projected to be 4 to 6 million vehicles per year by 2013 so the impact on the Rare Earth market could be staggering. Additional Rare Earth supply sources must come on line to support this growing industry. Hybrid electric vehicles: Headlight glass: neodymium. Hybrid electric motor and generator: neodymium, praseodymium, dysprosium, and terbium. Component sensors: ytterbium. LCD screen: europium, ytterbium, cerium. Glass and mirrors polishing powder: cerium. UV cut glass: cerium. Diesel fuel additive: cerium and lanthanum. Hybrid NiMH battery: lanthanum and cerium. Catalytic converter: cerium/zirconium and lanthanum." Source: Molycorp Minerals, 23 Jul 10

In August, the Chinese government which controls 97% of all the existing production of REEs, announced that they would cut their exports which amounted to about 64 million metric tons in 2005, by 70%. Two of the primary REEs, cerium oxide and lanthanum oxide increased in price by over 2,000% on the news! Now, here's the big news — if the above is not compelling enough to get your attention — from the September 24th issue of the WSJ:

"The Department of Defense is completing a study to identify the potential national security risks of rare-earth dependency."

In addition, the House Committee on Science & Technology in late September began marking up a bill that would encourage the US government to hedge against rare earth shortages. It's well within the area of possibility that the federal government would declare rare earths as "strategic to the national security" and purchase a proven deposit. Could MCP or REE be a prospect?

The Re-Flation of Real Estate

First, the bad news:

The Central Planners in Washington now recognize that despite all the loan modification programs like HAMP and other initiatives, the housing sector is not going to lead America to an economic recovery. In fact, it could lead to either Option #2 or #3 as outlined in the MARKET OVERVIEW, (Page 1). There are about 11 million residential properties whose mortgage balances exceed the home's value and a shadow inventory of an additional 3.7 million vacant homes. David Rosenberg, Chief Economist at Gluskin Sheff says, that if prices drop another 5% to 10%, 40% of all American homeowners would be "underwater" on their mortgages. That would be catastrophic for not only the homeowners but the real estate industry and the US economy.

Added to this witches brew of "toil and trouble" is that investors in 2,300 residential mortgage securities, worth approximately $500 billion, are suing the banks that originated or are servicing faulty subprime mortgage loans to repurchase them. The lawsuits contend that the originators stuck them with "flawed loans marred by poor underwriting and faulty appraisals" (WSJ September 23, 2010). Can you say fraud?

Here are a few of the prospective re-purchasers and their potential liability:

Bank of America -- $35.2 billion
J. P Morgan Chase -- $23.9 billion
Deutsche Bank -- $14.1 billion
Royal Bank of Scotland -- $ 9.4 billion

And, the list goes on. The question is, to what extent will these buy-backs effect the reserves of these banks? The principal benefactors of the buy-backs would be Fannie and Freddie and by proxy, the US taxpayer.

The Good News?

If, and it's unquestionably a big IF, the BERNANKE RE-FLATION PLAN is successful, there should be re-mediation of the mortgage mess. Here's why. Mortgage debt is a constant. The appreciation of real property values through inflation will reduce the number of 11 million homeowners that are underwater. More importantly it will change market sentiment and psychology.

A significant number of home owners, witnessing an uptick of home prices in their neighborhood, will be encouraged to pay their mortgage and wait to walk. Investors also witnessing the uptick will be encouraged to invest risk capital in search of a higher return and the residential market will be on its way to recovery. CMV believes that, as simple as this solution may seem, RE-FLATION will begin to fix the problem. Funny, why didn't the MOTUS (Masters of The Universe) think of that?

Or, have they?

Serious Money

Macro Investing

A good friend and former client shared with your author that he had interviewed recently with an advisor who, after analyzing the portfolio mostly intact from your author's management four years ago, stated that the client was too over-loaded in one sector and needed to ‘diversity.' The over-loaded sector was precious metals. The advisor's recommendation? Sell the Precious Metals and diversify into an array of equity funds. Completely ignored was the past ten year performance of the names in his previous portfolio.

For example, Oppenheimer Gold & Special Minerals Fund (OPGSX). During the past ten years, this fund has had an average annual return of 24% which includes the precipitous drop of 30% during the crash of 2008. In fact, this sector is the only one that has not only made a 100% "V" correction but has gone on in 2010 to robust new highs up 35% as of September 24, 2010. Most individual names in the portfolio mirror this result. The message here is that:

TRADITIONAL PORTFOLIO MODELS ARE DOOMED TO FAIL

My friend is again my client.

It is CMV's opinion that the investment climate in America and quite possibly the entire world has radically changed. The clouds are dark, foreboding and unpredictable. Buy & Hold, Asset Allocation, Model Portfolios, and even stock picking based upon earnings and fundamentals are no longer the keys to wealth accumulation. Macro Investing with Active Management has become the new model for sophisticated investors.

David Einhorn of Greenlight Capital said in a recent WSJ article:

"For years I had believed that I didn't need to take a view on the market or the economy because I considered myself a ‘bottom-up' investor. The lesson I've learned is that it isn't reasonable to be agnostic about the big (Macro) picture."

Mr. Einhorn has placed a huge macro bet that gold prices will continue to rise because of concerns that the out-of-control US budget and federal debt has a negative impact on the US dollar. Do you want to follow the "smart money" or follow the advice of an advisor who still believes that Microsoft, GE and GM are good growth stocks?

There is no question that High Frequency Trading (HFT) has un-leveled the playing field. Another "Flash Crash" is almost inevitable. Super computers such as "The Beast" featured previously in CMV contribute greatly to market volatility. On any day the HFT is buying high risk assets and the next day makes a 180° turn to safe-haven US treasuries or currencies.

CMV took a Macro View years ago when he told audiences and clients that Macro Trends were the key to investing. Realtors, for example, refused to accept the fact that the boom was unsustainable.

The irony, of course, is that there is SERIOUS MONEY to be made in MACRO INVESTING at exactly this point in time and CMV can position you if you are serious about SERIOUS MONEY.

Assuming that the BERNANKE RE-FLATION PLAN succeeds these are a few of the Macro sectors that should significantly outperform any other investing strategy:

The Devaluation of the US Dollar — Sell Short

The Appreciation of Precious Metals — Buy Long

The Panic Demand for Rare Metals — Buy Long

The Number One Alternative Energy (Nuclear) — Buy Long

The Rise in Interest Rates (US Treasuries) — Sell Short

The Rise in Commodities — Buy Long

There is one critical supposition to support CMV's Macro Investing. If CMV is correct, the US is at the cusp of a short-term inflationary cycle that could morph into Hyper-Inflation. All of the above sectors should perform extremely well given this environment BUT it will come to a calamitous end when it has run its' course in a "crack-up boom." CMV's strategy is simple and direct:

Make Huge Gains And Get The Heck Out of Dodge!

(The Financial Markets)

When the next crash occurs CASH will be king. That cash may be in Canadian or Aussie dollars or Swiss francs but those that have no debt and cash will be wealthy, independent and positioned to seize opportunity. The non-believers will become wards of the government.

The Inflation Jeannie Reappears

CMV's favorite metaphor has lifted her lovely body out of the bottle. While the talking heads on CNBC continue to remind us that "there is no inflation" evidence to the contrary is surfacing everywhere. To wit:

Arizona cotton farmers are celebrating as they prepare for the harvest of this year's cotton crop. Early in 2009 the market price of cotton was about $.40/lb. Last week, cotton for October delivery reached $1.09/lb — the highest price since (get this) the Civil War!

Retailers, with lean inventories and current and discounted sales are faced with a major dilemma. Should they restock at higher prices or wait and hope they can get through the Christmas rush with current inventory.

In a related sector, Nike reported a 9% increase in operating profit of $559 million in its latest quarter due to improvement in demand for its athletic apparel and less costly discounting. What impact will the 150% increase in cotton prices have on Nike next quarter?

The travel industry has reported that Americans have spent much more on airplane seats, hotel rooms and rental cars than experts had projected. Hotel revenue which plunged 30% from 2007 to 2009 has now recaptured all the decline in less than a year. Revenue passenger miles has returned to 2007 traffic levels at the airlines which have increased fares 3.9%. Travel employment increased 2.5% in the second quarter of 2010. What's ahead? Increased prices, of course.

Steel prices have risen for some types of products as high as 12% and as low as 1% since this past summer. China, which produces about 50% of the world's output, has cut production 3% to 5% and recently increased its prices on plate steel by 12%.

Other base metal prices that have risen off their 2009 lows are:

Aluminum + 65% -- Nickel +154%
Zinc +105% -- Copper +164%
Tin +120% -- Titanium +265%
Lead +151%

The penultimate evidence that inflation is poised to have a decided impact on personal budgets will be witnessed by shoppers. Commodity prices have already seen a market increase this year.

"GREED" and "PROFIT" are now available for you iPad users.

You can also pay for the year's subscription to the CMV (just $99) plus receive both books free (USA addresses only) by clicking here for the paypal payment window link.

Financial Questions? Contact hlquist at djmwealth dot com

-- H. L. Quist

Inflation "Jeannie" is out of Her Bottle!

Hello World,

Well the Inflation "Jeannie" is out of the bottle and I am having a love affair and we are making money together! Watch and listen to my youtube and podcast on the opportunities to recover profits.

Both on on the sidebar here on the blog. Just click and learn.

My Contrarian Market View Newsletter will aid investors and you can realize profits of 200 - 300% this year. Subscribe today, by clicking on the sidebar here on the blog.

-- H. L. Quist

The Myth Is: The Planet is Doomed!

Hello World,

Al Gore received a Nobel Prize and an Oscar for claiming in his film "An Inconvenient Truth" that humans cause global warming. Now over 31,000 scientists say Al Gore is WRONG! In addition, a British judge has ruled that Gore's film cannot be shown in UK schools because it contains 9 factual errors.

In December, Barrack Obama will sign away US sovereignty and commit its' citizens to the biggest scam and tax increase in history. LISTEN TO THE MYTH BUSTER AND STOP THIS HYSTERIA!

Go To These Sources:

Not Evil Just Wrong -- Global Climate Scam -- Phoenix Tea Party

I will be will be speaking to the tea party group Tuesday, Oct. 27th, 6:30pm, Rocking R Ranch, 6136 E. Baseline Rd.,Mesa, AZ. (Info -480-797-2896 organizer)

Listen to my podcast on this Myth here, or click on the podcast on the sidebar on this blog.

-- H. L. Quist

Profit From an Inflationary Boom

Hello World,

Check out my new video message, see the sidebar here and also on youtube.com/hlquist.


--H.L. Quist aka "The Myth Buster"