MoneyNews
Friday, July 15, 2005

(Headlines - scroll down for complete stories)

1. Resurgence: Tech Stocks Pay Off Again
2. Gold Guru: China Demand Could Lift Gold to $725
3. Oil at $100 Is No Joke

Story Continues Below

1. Resurgence: Tech Stocks Pay Off Again

A few weeks ago, here at MoneyNews offices of the HQ of NewsMax.com, your editor managed to convert editor Christopher Ruddy into a technology bull.

Ruddy is a Buffett style investor not easily dazzled by new technology.

Despite that Ruddy agrees with me that the wifi boom is about ready to be the next wave that will shake up the world, just as the internet did in the '90s.

So, my first trade recommendation with our new SectorTrade service -- where we seek to maximize returns by investing in key sectors that will benefit from emerging trends -- went with an investment that will definitely benefit from the wifi boom.

We made that recommendation on June 8. In just a matter of weeks, shares of our first sector pick have risen by as much as 7.7%. That's an annualized return well over 35%!

So how do we arrive at our selections? The process is painstaking and follows a carefully engineered formula to uncover hidden winners.

Find out why so many have joined the swelling ranks of SectorTrade members - just Go Here Now.

Technology stocks in general have performed exceptionally well recently. We just saw Apple shares jump almost 10% after iPod shipments beat analysts' forecasts by 16%, prompting considerable surprise.

CSFB analyst Robert Semple described the second quarter as a "blowout," while Piper Jaffray's Eugene Munster admitted, "I was shocked."

The news prompted no less than four equity analysts to raise their 2005 profit goals. Incredibly, Apple now gleans one-third of its profits from the tiny handheld music players.

Advanced Micro Devices Inc. also astounded analysts by announcing a profit – after the company was expected to deliver a loss for the quarter. The number-two maker of personal computer chips achieved record revenues due to unprecedented sales of PC processors.

With microprocessor sales up a whopping 38%, AMD CEO Hector Ruiz predicted that "sales growth looks set to exceed normal patterns" this quarter. Gains came from increased demand for notebook and server computer chips as AMD shares continue to rebound from a 13% decline for 2005.

With European markets at fresh three-year highs, local semiconductor makers have become investor favorites and continue to lead the up-hill march.

Investor appetite for technology shares might be partly explained by the migration to dividend payments – a result of the growing cash balances companies are finding themselves with. At the end of the first quarter, Standard and Poor's credit-rating agency reported a record balance of $634 billion in corporate coffers among S&P 500 index members. Technology companies accounted for 35% of the total value.

"Five years from now virtually every major technology company will be paying a dividend," says Michael Holland, chairman of Holland & Co. in New York, who manages $500 million.

Of the nine S&P 500 companies that started paying dividends this year, four were tech stocks: KLA-Tencor, National Semiconductor, Applied Materials and Siebel Systems.

These developments lead us to believe that technology may have entered a new era.

Editor's Note:

• SectorTrade: NewsMax's Brand-New Premier Investment Service! Get the Details

2. Gold Guru: China Demand Could Lift Gold to $725

In 2004, Indian consumers bought 517.5 tons of gold jewelry, making India the world's top buyer of the yellow metal. But a Merrill Lynch fund manager believes that growing Chinese demand will push that nation to the top of the leaderboard within five years.

With gold below its 2004 peak of $456 per ounce, the precious metal could rise by as much as 70% -- if gold fund bull Graham Birch's scenario pans out, that is.

Birch has a pretty good track record as manager of the Gold and General Fund, which was founded in 1988 and stands valued at $652 million. Its 82% rise in 2002 made it the best-performing stock in London, where it's listed. The next year saw further 40% gains before it lost 13% in 2004.

Birch sees China's population of 1.3 billion becoming more sophisticated consumers over time. And he predicts that while the Chinese already have a high savings rate, the nation will only get richer as the economy grows. Their tastes will develop and they will desire more fashionable and expensive items – including jewelry.

In 2004, China bought 224.1 tons of gold jewelry, and that means consumption will have to more than double to surpass the demands of 1 billion Indians.

China already consumes more steel, cement, copper, tin and iron ore than any other country. And Mr. Birch predicts that while it may not be next, gold will indeed join the list by 2010.

Pointing to a 4.4% decline in 2004 gold production, Birch poses the question: "Where is all that gold going to come from?"

According to this line of analysis, it simply comes down to supply and demand for the precious metal. Physical demand for gold jewelry is set to increase as the demand for gold assets continues to serve as an alternative to currencies.

While the dollar has risen lately, gold has not fallen far. Typically there is an inverse relationship since gold is priced in dollars. But in 2005, that's not working. Gold is standing firm in the face of a dollar rally.

What's more, the recent political turmoil in Europe has helped undermine the single continental currency. Local investors have been dumping the euro and buying gold instead. That much is evident from the recent record-high price of gold in euro terms.

Mr. Birch notes fresh European buying from investors from Germany, Switzerland and France.

If he's right, it's not just Chinese buyers dipping into the gold honey pot. It reminds us of how gold acts as a melting pot for all currencies – especially since the world got a fresh reminder that terrorist activities fester in the shadows.

Editor's Note:

• Five Practical and Lucrative Gold Investments – Learn More

3. Oil at $100 Is No Joke

Regular MoneyNews readers will remember our April 8 headline "$105 Oil Speculation is Just a Crap Shoot."

That article came hot on the heels of the "super-spike" prediction from a Wall Street analyst.

NewsMax readers were treated to an excellent visual at the very least. You can go back and read that article here.

While the expert's prediction was timed around April Fool's Day, it was certainly no joke.

And now yet another top fund manager makes a fresh prediction that $100 oil is by no means an unreasonable suggestion.

Tom Walker, a fund manager at Scotland-based Martin Currie Investment Managers, recently pointed out that "it's not beyond the realm of imagination to see the oil price rise significantly from here."

With the price of oil rising on a supply shortage, Mr. Walker sees "no viable alternative and demand is still increasing."

That leaves oil stocks playing an important role in his investments – the Martin Currie Portfolio Investment Trust holds shares in BP, Shell Transport and Trading Co. and Global Santa Fe Corp.

Walker also says it's time to stop worrying about the high price of oil and simply get on with it. He predicts high oil prices won't hinder U.S. economic expansion.

It's not hard to find more bullish predictions on oil prices.

Recently Zurich-based banking behemoth UBS raised its own price forecast for oil. They now see a barrel of oil averaging $52 in 2005 – up from $45.20.

However, while that institution bumped up their forecasts for the next two years, readers might be surprised to learn that the bank is predicting a fall for 2006 and 2007, when the bank says oil will average $46 and $40 respectively.

Of course, Financial Intelligence Report readers will recall that last April we predicted oil hitting $60 per barrel within a year. We were dead on. We have been predicting softer oil prices to come.

Editor's Note:

• Make Huge Profits as Oil Prices Continue to Rise – Go Here

Editor's Notes:

• SectorTrade: NewsMax's Brand-New Premier Investment Service! Get the Details
• Five Practical and Lucrative Gold Investments – Learn More
• Make Huge Profits as Oil Prices Continue to Rise – Go Here Now