Featured Trades: (McCARTHY HEARINGS),
(GOLD), (ABX), (PCY), (LQD)

2) If you are wondering about the long term prospects for gold, just ask the guy who has the biggest bet in the market. That would be Peter Munk, founder and CEO of Barrick Gold (ABX). His company produced the 8 million ounces of the barbaric relic last year, has the world?s largest reserves, and mined 6 billion ounces of copper as a sideline. In September, Munk set the cat among the pigeons when his company announced that it would take off its gold hedges at a cost of $5 billion. The move provided the launching pad for a 25% spike up in gold to a new all time high. Munk?s confident explanation was that the long term future of the yellow metal was so secure that the hedges were no longer needed to smooth out his company?s earnings. No other asset class was up every year for the past decade. Investors are so scared from the events of the financial crisis, with banks dropping like flies and fund managers blowing up right and left, that it will influence their investment decisions for decades. That means building a core holding of gold to protect against the next crisis, whether it ever comes or not. Munk recommended against short term trading the shares of gold miners, but to keep a permanent asset allocation to the sector. Uncertainty is rising, is now a permanent feature of the investment landscape, and a short term rally in the stock market isn?t going to change that. The rise of middle class gold buyers in emerging markets is also something that isn?t going away in our lifetime. ?They make cheap suits in China, but not cheap gold,? he said. Munk?s comments reconfirm my own view that we may see some sideways action in precious metals for six months before the next blast up to a new high, getting us closer to my own target of $2,300. Better take another look at gold futures, coins, bullion, the ETF (GOLD), and ABX shares themselves.

3) Last year, I suggested emerging market sovereign debt ETF?s as safe, high yielding investments in which to hide out in case the equity markets swoon again. The stock mrket looked pretty grizzly last week, so let?s see how they performed. The Invesco PowerShares Emerging Market Sovereign Debt ETF (PCY), which has 40% of its assets in Latin American bonds and 31% in Asia, was more or less unchanged. The two year old fund now boasts $451 million in market cap and pays a handy 6.29% dividend. This beats the daylights out of the one basis point you currently earn for cash, the 3.65% yield on 10 year Treasuries, and still exceeds the 5.37% dividend on the iShares Investment Grade Bond ETN (LQD), which buys predominantly single ?A? US corporates. The big difference here is that the countries that make up the PCY have a much rosier future of credit upgrades to look forward to. It turns out that many emerging markets have little or no debt, because until recently, investors thought their credit quality was too poor. No doubt a history of defaults in Brazil and Argentina in the seventies and eighties is at the back of their minds. Not so for the US, which has bond issuance going through the roof, and downgrade noises growing ever louder. A price appreciation of 125% over the past year tells you this is not exactly an undiscovered concept. Still, it is something to keep on your ?buy on dips? list.

?You don?t give an arsonist a medal for putting out the fire,? said a commentator today about the battle over the renomination of Ben Bernanke.

2)Friday lunch had me sharing a cold, congealed chicken salad with Bill Clinton?s Secretary of Labor, Robert Reich at San Francisco?s Fairmont Hotel, who says that easy money is creating new bubbles around the world, especially in China and commodities, that will only end in tears. The Middle Kingdom is the first country where inflation may break out to the upside. There is also a new form of protectionism that has emerged under the guise of competitive devaluations, where counties printing paper money are racing to the bottom, which will eventually force a revaluation of the Chinese Yuan (CYB). A US GDP that is 71% dependent on consumer spending is unsustainable, since they can no longer afford it, can?t get credit, no longer have a personal ATM in the form of home equity loans, are worried about losing their jobs, suffer under a huge debt burden, and are now unexpectedly having to save more for their retirement since their houses have dropped in value by half. Scott Brown?s surprise win for the Massachusetts senate seat will only cause uncertainty in Washington to explode, not exactly a stock market friendly development. The Obama administration committed a major error by devoting one third of its massive $870 billion stimulus program to tax cuts, which in this environment, will get saved, not spent. The TARP money, while succeeding in rescuing the financial system, only ended up in Treasury bills and never made it to Main Street. The best way to revive the economy is to give money to the states directly, which, unable to run deficits, can only cut spending and raise taxes. This will create a $350 billion drag on the economy during 2010-2011, in effect an ?anti stimulus? that cancels out a third of the federal government?s reflationary efforts. I took two of Bob?s economics classes at UC Berkeley, and know too well his wry humor, acid wit, and preference for backing up arguments with mountains of empirical data. Bob warned his guests not to take his investment advise, as he bought his home in Berkeley at the 2006 market top, and has since had to to eat a 10% cut in his Berkeley professor?s salary forced on him by state budget cutbacks. A Rhodes Scholar who dated Hillary Clinton at Yale and ran for governor of Massachusetts, Bob is never without an original thought, nor a stranger to controversy.

3) The first 300 foot, 6,800 ton segment of the new approach to the Oakland Bay Bridge was delivered this week. This massive wing shaped piece of steel is the first of 28 to be delivered that will be used to rebuild the 73 year old symbol of the Foggy City. Out of towners may recognize this as the bridge that terrified motorists by partially collapsing during the 1989 Loma Prieta earthquake, paving the way for a ground up seismic retrofit. Where was it built? You guessed it, China, where inferior steel, shoddy welds, and poorly translated plans caused a 15 month delay in the fabrication, pushing completion of the new structure off to 2014. Despite delays caused by an El Nino winter, the new component made it over from Shanghai on a specially designed ship in only 22 days. Local unions bitterly opposed the offshoring of the project to the Middle Kingdom, even though a wholly American made bridge would have more than doubled the anticipated $6.3 billion cost. Looks like I?ll still have to hold my breath while driving over to San Francisco, even after it?s finished. It says a lot that the Chinese can rebuild one of America?s greatest engineering icons, ship it across the Pacific Ocean piecemeal like a giant Lego set, and erect it here at half the cost of the local help. It?s another ominous ?tell? on the future of the global economy.