Money & Investing - Banks.com

Many people have been watching the markets with trepidation. And, of course, looking at some of the deals that went down earlier this year. Some of them were real losers. CNN Money offers 3 deals this year that really should have been done differently:

1. Cash for Clunkers: While many people got a new car, the program created unintended consequences, such as benefiting foreign automakers, creating a huge cleanup for junked clunkers and running up prices. On top of that, Cash for Clunkers diverted discretionary income from other spending and directed it toward more consumer debt. Not to mention the fact that it didn’t actually boost consumer confidence in a meaningful way.
2. Citi undersold Phibro: Instead of driving a hard bargain on its sale of Phibro, Citi basically got the shaft as it only went for book value just to unload. And, of course, with the U.S. government owning 34% of Citi, that means that the taxpayers got a bum deal as well.
3. How to sell TARP warrants: CNN Money analyzes the way TARP warrants worked — and how they cut us out of some potentially valuable earnings: “The smartest part of the Troubled Asset Relief Program, as far as taxpayers are concerned, was the Treasury’s getting stock purchase warrants from the institutions that borrowed TARP money. The dumbest: Forcing the government to immediately sell back the warrants to institutions that repaid TARP loans and were willing to go through a complex pricing procedure.

   Consequently the strongest borrowers, with the most attractive stocks, repaid the loans early and got their warrants back just as their stocks were rising. In the real world, the idea is to cut your losses short and let your profits ride. At TARP our gains were cut short.”

But it’s not all horrible. GM plans to return its bailout money, and that means the bailout isn’t as expensive as we thought:

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Gold can’t be stopped — for now. The precious metal just surged to another high of $1,133 before falling back to $1,132. Gold bugs are celebrating as investors buy gold on the assumption that economic recovery is underway, and might bring with it inflation. Equities are markedly higher as well, banking on economic recovery optimism. Stock markets in Asia and Europe were higher today, and the U.S. market opened with a rallying cry. The bulls are charging, and that is helping commodities like gold.

And, of course, the fact that an economic recovery can’t negate difficult underlying fundamentals (like massive amounts of U.S. government debt) have investors quite nervous about the U.S. dollar, which is tanking spectacularly today against every major currency. Including the yen.

Oil is also up today, since it often moves in tandem with gold (and opposite the U.S. dollar). There are hopes that economic recovery will increase demand for commodities, and that is sending the speculators hurrying to buy.

Investing in precious metals

Investing in precious metals has become much easier in recent years. Index funds, ETFs and other instruments make it possible for nearly anyone to diversify his or her portfolio with precious metals, like gold and silver.

But is it really a good idea to go for gold right now? There are some that believe that all this gold craziness is a bubble, and that it can’t go much higher. Even if it does, the argument goes, gold will have to crash sometime. And when it does, it is most often the consumers who got in at the end who suffer. The biggest gainers are those who invested more than five months ago. Indeed, if you are looking to get rich fast, you better get in, clock some gains, and get out. Fast. And even that is a risky move. Who knows how long this frenzy will last?

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

While many investors have their eyes full of gold, some investors are turning toward silver. It’s hard to ignore the fact that gold is still sitting above $1,100 an ounce. But some argue that gold is already near its high for now, and that, even if it goes higher, it might not provide the kind of returns that have been seen the last couple of months. Instead, say some investors, it is time for silver.

Indeed, silver often out performs gold as bulls in the stock market gain the upper hand. MarketWatch reports on silver as an investment:

Silver is a precious metal, after all, one that has historically outperformed gold in a bull market and doubles as an industrial metal — and supplies of it are depleting at a much more rapid pace.

“Silver is unique in terms of being both a monetary and an industrial metal,” the Bullion Services Team at GoldCore said in a recent report, pointing out that it’s severely undervalued. “Silver remains the investment opportunity of a lifetime.” …

“Silver is highly correlated to the safe haven of gold and is, in effect, a leveraged sister of the precious yellow metal,” according to GoldCore, an international bullion dealer. “Thus, informed investors use gold more for wealth preservation purposes and silver in order to make a return.”

It’s an interesting thought. With many investors turning toward precious metals as U.S. economic fundamentals erode (recent reports showed another increase in the trade deficit, investors look for more tangible investments, eschewing the dollar.

Even if you decide that investing directly in silver is not for you, there are ETFs and other instruments that make it relatively easy take advantage of rising silver prices — if they really do materialize.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions.