With a decade of surging gold prices behind us and a more recent period of weakness that has sent bullion back to mid-2011 levels, investors are left wondering what to do. This question actually consists of two real dilemmas. Firstly, for those owning copious amounts of bullion, gold stocks, or other precious metals - do I sell? For everyone else the question reduces down to, should I buy because gold is "cheap"?

Burdening the decision making of investors is the overabundance of polarized articles by "gold-bugs" and those less in favor of the yellow metal. Even billionaire investor Warren Buffett is frequently cited in the debate through his 1998 observations on gold in which he stated, "Gold gets dug out of the ground… we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would

To an income oriented investor, today's low interest rates are proving to be a challenge. The "easy money" policies of most central banks have driven interest rates "lower for longer" and created a demand for income oriented equities. The boards of many publicly traded companies have responded to the demand by promising to return cash back to shareholders through increased dividends and stock buybacks.

While dividends are the most well-known method of returning cash to shareholders stock, buybacks are becoming increasingly important because of the sheer dollar volume of these transactions. A stock buyback is when companies purchase their own shares in the open market. Where the cash for these purchases comes from is important: it is either borrowed or generated from operating cash flow. For companies with strong credit ratings, borrowing to fund share buybacks can make financial sense.

There has been considerable debate as to whether or not

In the 1980s, "Japan Inc." was a popular term used to describe the strength of corporate Japan and the country's economic system. Volumes of books were written on why the Japanese economic system should serve as a model for other countries. By the start of the 1990s, Japan entered into a stagnation that has lasted for over twenty years.

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The length of Japan's stagnation has likely surprised even the most bearish of Japanese observers. Many investors have made rational and well thought out cases for shorting Japanese bonds. The basic premise has been that the country will have to inflate its way out of its debt problems or default. So far, Japan has managed to beat the odds. However, in August 2011, Japan did receive a debt downgrade from Standard & Poor's. What is not mentioned

History has shown us that U.S. presidential election cycles too often become fixated on a single issue or phrase that defines the election. In the 1980 election it was Reagan's "Are you better off than you were four years ago?" and in 1992 the Clinton campaign was able to define the election around the phrase "It's the economy stupid." In the current election, one of the hot button issues seems to be the price of gasoline.

(Click to enlarge) Chart Source: Bloomberg

While the price of gasoline is a serious economic issue that has the potential to slowdown the budding recovery, the solutions and rhetoric are not matching the importance of this issue. On the Republican side, the solution most often heard during the primaries was rooted in the idea that there had to be more drilling which would increase the supply of oil. In theory, this new found

Canadian Real Estate bulls have continued to cite the fact that real estate valuations have appeared "expensive" for years, yet, the momentum has continued to take prices higher. Real estate bears, on the other hand, claim that home prices have been so stretched from fundamental valuations that past price momentum is irrelevant. As with all asset classes, a change to investor sentiment regardless of the catalyst that triggers the change (eg. rising interest rates, government policy, extreme valuations, etc.) will dictate future real estate returns.

To attempt to monitor real estate sentiment analytically, we examine the number of Google searches for the term "housing bubble", summarized by the originating city of the searches. The table below displays the top ten cities globally in which the term "housing bubble" was searched in each year from 2004 to 2012. The highest number of city-sourced searches for "housing bubble" arise from Canadian cities,

Only three years ago it was thought that Saudi Arabia - the largest oil exporter and second largest producer in the world - could generate large budget surpluses with oil at $70/barrel. In recent weeks, new estimates state that the country would need oil at $75/barrel just to balance the budget - never mind trying to post a budget surplus.

The country's oil minister has stated that the nation would work to stabilize prices at the $100/barrel level - which is a first. Saudi Arabia has traditionally held the role of OPEC moderate while Iran and Venezuela have been hawks who favor higher oil prices. Saudi Arabia has always balanced its need for oil revenues with the knowledge that if left unchecked, high oil prices have tended to precede recessions.

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The reason for this change in policy would most likely be due to the country's response to

One of the most glaring benefits of weak global equity markets over the last year has been the fact that dividends yields are at their most attractive levels in nearly 30 years. This is especially so when we compare dividend yields to government bond yields. This has been a rare event over the last six decades. Despite the historic opportunities too many investors are ignoring them and are still fleeing into the bond market. Recent fund flow data shows that capital is rolling into the bond markets – despite the cratering of interest rates.

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Looking at the dividend data for the S&P 500 companies shows that 109 companies do not pay a dividend currently. If we take the remaining 391 companies, we can glean a few insights that would prove helpful to anyone looking at enhancing their portfolio’s dividend income.

One of the mistakes investors commonly make

In the 1960s, an economic adviser to President Lyndon Johnson came up with the idea of an index to measure the general economic hardships felt by the masses. This index, known as the "Misery Index,” is calculated by adding the unemployment rate to the inflation rate. As inflation and unemployment eased during the 1980s, the term seemed to fade from economic discourse.

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However, with rising inflationary pressures and stubbornly high unemployment levels now in both Canada and the U.S., this index may be more relevant than ever. With the 2012 presidential election around the corner, it would not be surprising to hear the term “Misery Index” dusted off for use in the political arena.

While Canada has earned accolades from politicians and individuals for its fiscal prudence and strong banking system, many Canadians are not receiving the

Over the last several weeks, investors have been served a grim reminder of the volatility that markets are capable of and are being reminded of the events of 2008. The conventional wisdom is that the markets are reacting to the debt downgrade in the U.S. or the threat of default. As the U.S. debt ceiling talks went down to the wire, the world thought it was going to serve as a catalyst to propel the global economy forward only to have Standard & Poor’s downgrade U.S. debt one notch from AAA.

But to infer that this is what is preoccupying markets would not be correct. To borrow a phrase made famous by James Carville, the chief strategist of the 1992 Clinton Presidential campaign - ”It’s the economy, stupid”. The debt downgrade has been a distraction from the real issues.

The global economy was impacted in the

Gold stocks have received relatively little attention from investors despite surging gold bullion prices, which have risen over 200% in the last half decade to over $1500 an ounce. As a result, if an investor were stranded on a deserted island and returned after a two-year absence, and first learned that gold has almost doubled during that time period, that person might be justified in assuming his or her portfolio of gold stocks would be up dramatically. However, that assumption would be incorrect.

As the chart shows, investors have not rewarded the senior gold producers with an increase in their valuations as a result of rising gold prices. By examining the five year return of the S&P/TSX Global Gold Index, investors who adopted a buy-and-hold approach would have returned just under 5% annually on a compounded basis. One of the common arguments put forward to explain this valuation gap is

By now most investors have a pretty strong grasp of the problems facing the US. These problems range from massive US debt, unemployment, depressed real estate, and the list goes on. Conversely, the image of China as a country with a supercharged economy and seemingly no real challenges on the horizon is perhaps only partly true.

With that out of the way, a somewhat contrarian perspective to the China/US comparison might be in order. To be specific, few investors seem to be considering the challenges facing China

On the economic front, China has a real estate problem of its own that might make the US real estate debacle seem like small potatoes. It is estimated that the country has over 60 million empty residential units. To put this number into perspective, 60 million empty housing units is enough to provide a single home to each and every man, woman, and

As Canadians go through yet another election, politicians of all stripes are busy dusting off campaign slogans, attack ads and policy books. Each party puts forth its best ideas to fix what ails the country and what will propel it forward on a wave of prosperity.

The amazing part of this election campaign is that nobody seems to be addressing the 800 pound gorilla in the room. That gorilla is named Canadian Real Estate. The overvaluation of real estate (“bubble” is so overused it has lost its shock value) in many parts of Canada has been propelled by a Canadian addiction to debt and federal government policies that helped to create a runaway freight train in the form of real estate prices. Outside of the Canadian political campaign trail the Conservatives have paid lip service to the issue through their recent series of mortgage lending restrictions, however, this tightening

Many investors make their investing decisions based in part on economic forecasts. This style of investing is called "top down" investing. The idea is to take the consensus economic forecast and allocate capital to sectors and industries that will fare the best under the forecasted economic numbers.

The problem is that economic forecasts can unravel quickly. For example, in December 2006, the Business Week Economic Forecast Survey of 2007 called for total economic growth of 2.6% and the Q4 2007 economic forecast has a consensus estimate of 3.0% economic growth. In actuality, it turned out to be 0.6% in Q42007and many economists and investment strategists began to wonder whether or not the economy had already entered recession. Some were of the opinion that this was a rough patch and interest rate cuts and certain data points led them to believe that 2008 would see the economy mend quickly.

As we

In the investment industry, there is never a shortage of data or opinions. Often times, the same data can support more than one opinion. One of the more intriguing pieces of data that makes the rounds is the American Association of Individual Investors (AAII) Sentiment Survey.

The true value of this survey is that it provides insight into the psychological leaning of the survey respondents who are generally comprised of everyday investors. Historically, extreme divergences between bullish and bearish respondents have often coincided with either sharp movements in the stock markets or market returns that are contrary to what the masses were expecting. Currently, just over 50% of respondents are bullish and about 20% are bearish – with the remainder being in the neutral camp. From the accompanying chart we can see that recent AAII survey data is showing a fairly strong bullish (optimistic) tint and the bears (skeptics) are

Given how markets are prone to disappoint the prevailing consensus, I was struck by the potential for this sort of logic to be turned on its ear. Today, we see investors running out of the bond markets in droves - almost as fast as the herd ran into it. The bond bandwagon had become too crowded, and in the financial markets, the crowded trade is often the one that feels the most comfortable but can turn out to be the most dangerous.

However, as recent events in the bond market have proven, investors who have been plowing into bonds for fear of deflation and the potential of a double dip recession, things could not have turned out any worse. It seems as if Santa has left coal in the stocking of bond investors. Within the last 90 days, bond prices have fallen enough that it will take close to two

Several weeks ago, upon seeing an analysis of the data that details the speculative long and short positions in the U.S. dollar by currency traders, it put into perspective how one-sided the Long Commodities & Long Equities & Short the U.S. dollar trade had become. According to the data as compiled by Credit Suisse First Boston, net speculative positions were the most skewed they have been since October 2007 -- just before the financial crisis began to gain speed and unravel equity markets around the globe.

(Data Source: StockCharts.com)

The markets have become so fixated on the Federal Reserve's quantitative easing (QE2) policy that they seem to exclude most everything else. It has become consensus that the Fed will ride to the rescue and be successful in its efforts to stimulate the economy back to a more sure-footed path. That is absolutely possible like almost anything. However, how much attention has the market paid to the possibility that it does not work?

As many investors know, consensus is the great enemy. History has shown that consensus leads to complacency and complacency leads to too much capital chasing the same theme. So it is important to ask ourselves "What if QEII Backfired?"

So far, commodities and stocks in general have been big winners of the QEII policy announcement. The exceptions or losers have been bonds and most bank stocks. The early impact from QEII has been an increased investor appetite

I t seems that these days most everyone has an economic forecast. Most of these forecasts can be categorized according to three broad potential scenarios playing out: Deflation, inflation, and double dip recession.

For many observers, the current shape of the economic recovery has been steeped in frustration. The source of the frustration comes from the fact that after an unprecedented globally concerted tidal wave of fiscal stimulus and some of the most accommodative monetary policies on record, unemployment is stubbornly high and the US housing market is making tepid steps (at best) towards righting itself.

Confusing the picture is that at one end, some economists are inferring that deflation (falling prices) is a step away and governments and central banks must continue to stimulate the economy. At the other extreme are those who say that inflation is already rampant and point to the run up in commodity prices and