Beyond Comprehension

We’re finally back after a very short holiday. Surprisingly, we couldn’t be happier. This week, we’re going to talk about what you need to watch out for in the coming months and also give you an idea of what a trillion dollars really looks like…you won’t believe it until you see it. So read on…

We’re finally back after a very short holiday. Surprisingly, we couldn’t be happier.

This week, we’re going to talk about what you need to watch out for in the coming months and also give you an idea of what a trillion dollars really looks like…you won’t believe it until you see it.

So read on.

2010 gave us a much needed sigh of relief as the economy rebounded and resource stocks battled their way through a strong ceiling of resistance. While many of the resource plays have pulled back last week from their year highs, that doesn’t mean the run is over. In fact, it might just be a blip in the stock charts for 2011.

Recent financings already show increased funding and activity in the commodity sector with millions upon millions being raised for exploration.

What Goes Up, Must Come Down

The markets closed very strong last year and as such, we would not be surprised to see a slight pullback between now and Q1 earnings. However, if a pullback happens, we believe the rebound could send stocks a lot higher this year.

What goes up, must come down…but will go up again.

But that doesn’t mean everything is fine and dandy. The truth is, we consider the overall equities market a mere trading opportunity and not a true long term investment. No matter how you look at the markets, the overall economic shape of the US, and the world, has not yet stabilized.

Real estate remains shaky. Job numbers, although improving, are nowhere near comfortable levels. And worst of all, we may see yet another subprime-like mess hidden in the depressed municipal bond market.

Some of the big states, such as New Jersey, Illinois, and even California, have major budget problems that remain to be solved. Some cities, such as California`s Chowchilla, have already begun to default.

Many of these states have a heavy debt load that can`t be covered by the property tax stream, which have been drastically reduced by record-level housing defaults. With such a grim outlook for the muni-bond market, investors have been clearing out. If this trend continues, we may easily see further defaults from many states over the next year.

As a matter of fact, many of the world’s biggest banks are already lining up to profit from the insecurities regarding the declining finances of U.S. cities and states.

According to the Wall Street Journal, “for the first time in two years, Switzerland’s UBS AG (NYSE: UBS) has begun making markets in derivatives tied to municipal bonds and other securities. The credit-default swaps obligate swap sellers to compensate buyers if a municipal issuer misses an interest payment or restructures its debt.”

But that’s not all.

The Big Banks Bet

The world’s biggest banks, including Bank of America Corp.’s Merrill Lynch Division (NYSE: BAC), Citigroup Inc. (NYSE: C), Goldman Sachs Group Inc. (NYSE: GS), J.P. Morgan Chase & Co. (NYSE: JPM), and Morgan Stanley (NYSE: MS) met in November 2010 to discuss standardizing the paperwork for “muni CDSs” in an effort to attract more buyers and sellers.

These credit default swaps, no matter how you look at it, signal a trend much like that of the subprime mess where speculators made billions upon the losses of others.

Cities and states believe that the “muni CDSs”

encourages speculators to bet on, and at times worsen, states’ financial distress.

That’s why many of the bond market experts are telling investors to stay away. While there are safe issues out there, the low risk/reward ratio means that there are much better opportunities for your money.

The Bright Side

When investors pull out of bonds, it signals more money into stocks.

That’s what Federal Reserve Chairman Ben Bernanke wants you to do with his QE2. Essentially, he is making investors pull out of less risky assets (bonds) and into riskier plays (stocks). A boost in the stock market means a boost in individual net worth. A boost in individual net worth means a growing economy. The problem is the government has to spend money no matter what.

Here’s how it works:

> Quantitative Easing gets implemented to create wealth in individuals through growth in stocks

> Bond markets get hurt

> States and cities default

> More government bailout

> More government spending

> More debt for the US

We’ve been tracking the national debt level in America for over a year now (see The Impressive News Release) and the growing numbers are staggering.

Back on December 6, 2009 the national debt level in America sat at an astounding $12 trillion. This number has now reached over $14 trillion.

US Debt Clock

click here to see the US debt in real time

$14 trillion dollars! Do we really even know what that number means?

What is a Trillion Dollars?

 

  • A trillion dollar bills laid end to end would reach the sun, which is 149,597,870.7 kilometres (92,955,807.27 miles). So at $14 trillion, we can make 7 round trips from the Earth to the Sun before we run out of money.
  • One trillion dollars can fund the entire military of every NATO country combined
  • One trillion dollars is more than double the size (2.2 times) of the largest US budget deficit in history of $455 billion recorded in fiscal 2008. At $14 trillion, the current US national debt is almost 31 times that number.

To get an idea of what it actually looks like in $100 bills, you HAVE to see it to believe it:

What Does One Trillion Dollars Look Like? (Click To See)

So while the next few months remain volatile, we expect the markets to climb – especially when the story breaks out that the bond markets are really in trouble.

With no end in sight of the spending by the US Government, the real investments will remain in emerging markets, gold, silver, oil, gas, food, and commodities related stocks.

When they dip, as they have over the last week, it may signal an indicator for us to dip back in.

Minco Silver (TSX: MSV)

Just before the holidays, Minco Silver (TSX: MSV), one of our featured Special Report Edition companies, had its target price raised again by Raymond James.

Minco Silver (TSX: MSV) was trading at $2.56 at the time of our original report (see the Brink of Milestone). Since then, analysts have continuously raised their target prices.

On December 20, 2010, Raymond James raised Minco Silver’s (TSX: MSV) target price to $7.50, which now represents a potential increase of over 32% from Friday’s close should Minco shares hit that target.

So while the holidays started late and ended early, this year could be a very profitable year. And profits make us happy.

That’s why we will be looking to introduce other trading opportunities in the commodities sector in the coming weeks and months. So be sure to stayed tuned…a new Special Report will soon be on its way.

Companies mentioned in our Special Reports, including Minco Silver, are paid advertisers and we are often consultants to them. We own, or have owned, both shares and options in these companies. Companies in our Special Report Editions often represent core holdings in our own portfolio. This means we are extremely biased because we invest to make a profit. It wouldn’t make sense to introduce our readers to these companies if we didn’t own them ourselves. Investing is risky, especially in juniors. Please do your own due diligence and conduct your own research.

Until next week,

Ivan Lo
Managing Director, Equedia Weekly
Equedia Network Corporation
www.equedia.com

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Forward-Looking Statements

This Newsletter and report contains certain forward-looking statements that may involve a number of risks and uncertainties. Actual events or results could differ materially from current expectations and projections. Except for statements of historical fact relating to the project, certain information contained herein constitutes “forward-looking statements”. Forward-looking statements are frequently characterized by words such as “plan”, “expect”, “project”, “intend”, “believe”, “anticipate” and other similar words, or statements that certain events or conditions “may” or “will” occur.

Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These factors include the inherent risks involved in the exploration and development of mineral properties, the uncertainties involved in interpreting drilling results and other geological data, fluctuations in prices & marketplace, the possibility of project cost overruns or unanticipated costs and expenses, uncertainties relating to the availability and costs of financing needed in the future and other factors. Circumstances or management’s estimates or opinions could change. The reader is cautioned not to place undue reliance on forward-looking statements.

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Disclaimer and Disclosure Equedia.com & Equedia Network Corporation bears no liability for losses and/or damages arising from the use of this newsletter or any third party content provided herein. Equedia.com is an online financial newsletter owned by Equedia Network Corporation. We are focused on researching small-cap and large-cap public companies. Our past performance does not guarantee future results. Information in this report has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. This material is not an offer to sell or a solicitation of an offer to buy any securities or commodities.

Equedia.com has been compensated to perform research on specific companies and therefore information should not be construed as unbiased. Each contract varies in duration, services performed and compensation received. Equedia.com is not responsible for any claims made by any of the mentioned companies or third party content providers. Equedia Network Corporation., owner of Equedia.com has been paid six thousand four hundred and thirty Canadian dollars plus gst/hst per month for 7 months which totals forty five thousand dollars plus gst/hst of advertisement coverage on Minco Silver Corporation. The company (Minco Silver Corporation) has paid for this service. Equedia.com has sold our shares of Minco Silver Corporation but may purchase shares without notice. If we do, we intend to sell every share we own for our own profit and may sell shares in Minco Silver Corporation without notice to our subscribers.

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