Central Banks Have Gone Wild! Here’s What To Do…

A lot has happened over the past 24 hours, but I wouldn’t change your trading mindset any time soon…

A landmark healthcare decision, an early morning EU bank bailout and, oh yeah….China is still trying to secretly take over the world currency market. All in a day’s work!

Today let’s take a look at what rocked the markets this morning and where the big, tangible indicators are pointing our investment dollars…

Yesterday’s healthcare verdict created nothing more than a ho-hum market day. But the long-term implications could be massive. In fact, you’d be foolish to think that this government controlled health care program won’t need a little help from the Fed’s deep pockets.

But, although the markets didn’t move on yesterday’s healthcare verdict, the same can’t be said for the overnight action in Europe…

“Comex gold futures prices are sharply higher and have pushed above the key $1,600.00 level in early U.S. trading Friday” reports Kitco’s Jim Wyckoff. “The precious metals and many other markets are rallying strongly in the wake of surprising results coming out of the European Union summit meeting in Brussels.”

So you see, although the writing (cash-printing) isn’t on the wall yet for the Obama healthcare overhaul, the EU bailout was pretty cut and dry.

“After 13 1/2 hours of talks” Bloomberg reports, “ending at 4:30 a.m. in Brussels today, chiefs of the 17 euro countries dropped the requirement that taxpayers get preferred creditor status on aid to Spain’s blighted banks. They also opened the way to recapitalizing lenders directly with bailout funds once Europe sets up a single banking supervisor.”

Talk about trying to cover up the story! A 4:30am announcement? And on the heels of the landmark, headline-stealing, healthcare deal?

The cover-up was to no avail and the hard asset markets weren’t fooled by the impending Central Bank action. Resource prices are much higher this morning — notably gold is up more than $30, cresting over $1,600 an ounce and oil made a quick reversal from Thursday’s sell-off now sitting $4 higher near $82.

Rounding out the 24-hour news cycle was another quiet blurb out of China, this too will have an impact on resource markets…

According to the BBC, “China has said that it is planning to set up a special zone to experiment with the yuan’s convertibility, the latest step in its bid to open up its capital markets.”

The convertible currency, which we’ve talked about before, is another step towards China’s ultimate goal to be a world reserve currency. Along with these penultimate steps you can rest assured that China is stockpiling gold.

All said, central banks across the globe have gone wild! The EU is set for a steroid-laced, bond-buying, money-printing fest. The U.S. is set to embark on its latest round of debt creation, which can only lead to an inflationary future. And the Chinese are laughing all the way to the gold bank. Could we have a better setup for our investment thesis here?

Three Ways To Play This Central Bank Bugaboo…

Okay, so central banks the world over have gone wild. Some are spending frivolously some are secretly plotting and some are just in long-term trouble (like our own Federal Reserve) — what’s an investor to do?

If you’ve been reading for a while you’ll know that there’s a 3-prong strategy to making sure you stay afloat in this dicey investing space. Here goes…

#1 Don’t Forget The Home Team…

I’ll keep this section short because I’m sure you’ve heard the story.

The U.S. is enjoying a massive energy renaissance and it’s changing the investment landscape right here at home. With more oil and gas coming out of the ground in North America you and I don’t have to look far for safe, profitable energy plays.

In fact, this unforeseen energy gift is actually leading the U.S. to a previously-unachievable goal: reducing the need for Mideast oil to NOTHING.

Over the next decade the U.S. and Canada are expected to boost oil and gas growth substantially. In fact, according to the U.S. Energy Information Administration by 2020, 82% of U.S. crude demand will be supplied by the Americas.

And check out this blurb from the front page of the Wall Street Journal:

“By 2035, oil shipments from the Middle East to North America ‘could almost be nonexistent,’ the Organization of Petroleum Exporting Countries recently predicted, partly because more efficient car engines and a growing supply of renewable fuel will help curb demand”

So you see, the production coming out of the U.S. and Canada is starting to make a dent in global supply and demand statistics. This boom of production is also set to keep a lot more American wealth right here in the states.

The best way to grab your piece of this wealth is looking at long-term ways to play this energy trend. Oil service providers like Halliburton (HAL: NYSE) will be booked solid for years. Companies like Statoil (STO: NYSE) will be ramping up their oil production in places like the Bakken and Eagle Ford. And pipeline owners and manufacturers could soon be swimming in cash.

#2 This Metal Still Glitters

Gold crested over $1,600 this morning on news out of the EU. Indeed, until central banks the world over learn how to deal with financial crises in a different way, you can expect to see rampant money printing.

The case for gold is simple, but very important today. Instead of holding all of your wealth in a currency controlled by a central bank or Federal Reserve, it’s important to preserve your purchasing power with the “once and future money,” gold.

Right now with gold off its $1,900 high there’s still reason to believe long-term prices will be heading much higher. Continue to buy on the dips in this huge bull market.

#3 Get Paid While You Wait

Allow me to re-emphasize a quote I’ve shared with you before. It comes from Kevin O’Leary, the “Donald Trump of Canada”…

“I’d rather own a service provider that mines copper or provides utilities to the copper mine that pays me a dividend.”

“I’d rather own a pipeline than the oil that flows in it, because commodities have this nasty habit of being very volatile. And they don’t pay you to wait. Where’s my cash? Where’s my check every month?”

“I don’t want to speculate what copper’s worth next week. I’d rather own a company that’s providing high pressure trucks to copper mines that sends me a 5.5% dividend — and I do own that company! I get paid every single quarter. Cash, cash, cash, cash, cash, that makes me feel warm and fuzzy.”

Over the past month (including a few mentions this week) we’ve been stressing the need for dividend-paying equities. An oil producer, fertilizer company, or pipeline player that pays a dividend offers you two ways to profit.

First you can profit from the substantial dividend, even if the company’s share price doesn’t rise. Second, you can cash in when the market turns higher and shares follow.

Indeed, a solid dividend paying resource company is the perfect way to get paid while you wait for the market to turn.

Here are a few of our recent dividend-paying standouts:

Statoil (STO: NYSE) - pays a 4.4% dividend and offers you substantial growth potential from America’s energy renaissance.

Terra Nitrogen (TNH: NYSE) - pays a 7% dividend and offers you a “double dip” way to play the increasing demand for fertilizer and the decreasing price of natural gas!

AGL Resources ( GAS: NYSE) - pays a 4.7% dividend and, as Jim Nelson showed us earlier this week, can profit from natural gas even if prices head lower.

Newmont Mining (NEM: NYSE) - pays a 2.9% dividend. Better yet Newmont’s dividend is tied directly to the price of gold. It’s all laid out on paper, too. If the price of gold heads higher to say, $1,800, $2000, $2,200, etc., the dividend payout just keeps moving higher.

Now’s the time to stick to our guns. Looking forward there’s still plenty of long-term opportunity for resource investors, like us. Prices are down over the past few months, meaning you can lock in your favorite companies at a discount. Plus if you’re looking for dividends, now’s the time to lock in substantially higher yield.

Keep your boots muddy,

Matt Insley

Central Banks Have Gone Wild! Here’s What To Do… was originally featured in The Daily Resource Hunter. Check out the newest Daily Resource Hunter research video “The Price of Gas Explained”.

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