As the economy continues to teeter and totter despite a strong stock market, one alternative for those who think the market will drop is to buy gold.  In the face of high unemployment and low interest with economic instability, Gold has long acted as a hedge to the US Dollar. The US Dollar Index, a six-currency gauge of the greenback’s strength, slid as much as 1.1% to a 2009 low as gains in manufacturing in the US, China and the UK reduced demand for a currency haven.

Until 1999, gold was used as a standard for monetary exchange, but this practice has been abandoned with the rise of fiat currency.  When paper money was introduced, it typically was a receipt redeemable for gold coin or bullion. In an economic system known as the gold standard, a certain weight of gold was given the name of a unit of currency.  By 1961 it was becoming hard to maintain this price, and a pool of US and European banks agreed to manipulate the market to prevent further currency devaluation against increased gold demand.

Since April 2001 the gold price has more than tripled in value against the US dollar, prompting speculation that this long secular bear market (or the Great Commodities Depression) has ended and a bull market has returned. In March 2008, the gold price increased above $1000, which in real terms is still well below the $850/oz peak on January 21, 1980. Indexed for inflation, the 1980 high would equate to a price of around $2400 in 2007 US dollars.

In the last century, major economic crises (such as the Great Depression, World War II, the first and second oil crisis) lowered the Dow/Gold ratio (which is inherently inflation adjusted) substantially, in most cases to a value well below 4. During these difficult times, investors tried to preserve their assets by investing in precious metals, most notably gold and silver.

We at the Wealth Alchemist believe there is some rationale in placing part of your investment in gold especially in an environment with weak currency and a seemingly rebounding economy.  However nothing is for certain and we believe the market is due for a huge 25% pullback in the next 3 months!  We also suggest treading carefully and looking at stocks to purchase for the mid-term (3-5 years), starting with our 2009 portfolio which is up about 60% YTD!  Here is Fortune’s top 10 stocks for 2009.

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Despite the voracious stock market rally and not-so-crappy corporate earnings, the unemployment rate is still sky high and jobless claims continue to rise to add to the 15 Million of out-of-work population.  As much as Goldman Sachs calling for the next leg of the bull market, the reality is we are still mired in a high unemployment state.  With population increase and education opportunities now harder to come by (a combination of budget pull-back for public institutions as well as increase competition for private schools and graduate/MBA programs), it is imperative that you learn the proper job hunting or interview skills.

Sure times are hard but don’t be too desperate. Desperation is a turn-off and will surely let the hiring manager or company become the boss of your destiny.  Instead look to improve your job interviewing skills and here are 6 things to avoid:

1. Rely only on ads and online sites - During the good times, companies need to hire so the easiest and most scalable method is to post online.  Now, companies are very picky and they will only hire the good ones, so the really good jobs are rarely posted anywhere.  Instead you need to rely on word-of-mouth and your network to really find something that is worth pursuing.  Of course, if you unemployed, take what you can get; but immediately upon landing the position, start looking for a better one.

2. Avoid just listing activities in your resume - Don’t prepare a laundry list because no one will read it.  Instead, highlight achievements that you can easily give color commentary to during your interview that puts you in the best light.  Whenever possible quantify the achievements so they have a more immediate contrast.

3. Don’t go to the interview unprepared - Research your interviewer (use LinkedIn) and the company (use CrunchBase, Venture Beat, and company website) so when you arrive, you are already comfortable with what the company does and who will be talking to you.  You have to know that they are hiring because they have a problem that they cannot resolve, so you need to show up as the immediate solution that they must have.  Being prepared also will make you less nervous and presumably give you a better shot at answering the questions in a confident and smart manner.

4. Don’t confuse “Networking” with job-hunting - Networking is to develop business relationship; don’t ask them for jobs because that is inappropriate.  Instead talk to them to learn and find out information about their job nature, the peers and specific people, or the company product and industry.

5. Don’t treat support staff poorly - 61% of top executives consider the opinion of their executive admin to be very important.  Even in a stressful situation, be nice to the receptionist or the assistant; treat them the way you would like to be treated.

6. Failing to tap resources - Don’t forget there are non-profit resources out there that can offer you some knowledge and training to get you ahead.  The internet is always a great place to learn new skills you can bring to the interview and show off.  Never give up and be resourceful.
For more about job hunting, here’s a collection of sites and articles that should help you.

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Today the S&P 500 broke the psychological 1,000 mark and many are cheering as they believe this ushers in a true rebound in the economy.  For one, the 1,000 mark was the highest level for S&P 500 in 9 months, making this even more significant in the face of such dire economic conditions.  True, many aspects of the economy are slowly rounding out and getting better, but are these improvements enough to vault us back to the heydays of the past?

The S&P 500 is an important index as it is used as a benchmark by professional investors, and it’s also the foundation for mutual funds in many individual 401(k) accounts.  Therefore, the psychological crossing should have a bigger impact than Dow passing the 9,000 mark.  For that matter, the bulls in the market have predicted Dow to hit 10,000 this year and 15,000 in the next 2!  Better-than-expected corporate earnings reports and economic data propelled the Dow Jones industrial average 725 points in July to its best month in nearly 7 years and restarted the spring rally that had stalled in June.

As much as this market is hinged on economic recovery, there is a large part of the recent market surge related to mass psychology of investors.  A trade group predicted U.S. manufacturing activity will grow next month, the government said construction spending rose in June and Ford Motor Co. (F) said its sales rose last month for the first time in nearly 2 years.  All these added to the surprising optimism and we are starting to see a virtuous cycle develop.

However we at the Wealth Alchemist believe all of this hype will be short-lived.  Again the fundamentals to the economy has not improved that drastically to warrant a rebound in the stock market.  We are probably 6-12 months too early in this rally as the worst of the unemployment hike and housing debacle has not passed yet. We are close to seeing GE Capital go bankrupt and that will cripple the nation if not the entire world.  The US banking system is in shambles and we have yet to begun recovery work.  California as a state will not be allowed to file for bankruptcy, which will only lead the administration to resort to cut-backs and government layoffs adding only to the fire we thought was contained.

The bottom line: don’t be surprised on the downside by sudden market movements.  Think longer term in your investments and buy into stocks that are fundamental to the recovery of this recession.  Take a look at our 2009 portfolio which is up a good 60% year-to-date!  Be patient and know that the market will turn for the worse; be prepared to make some good buys when the prices are a bit depressed.

http://finance.yahoo.com/news/US-futures-up-sharply-reflect-apf-12879424.html?x=0&sec=topStories&pos=2&asset=&ccode=&sec=topStories&pos=main&asset=c52120f7b501c35f73155801d834bbff&ccode=1

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In the USA, many states are facing budget shortfalls and are on the verge of bankruptcy, for examples Florida, California, New Jersey and Arizona. For more details, please see the article by Center on Budget and Policy Priorities[1]. This scenario to me seems like the Fall of Roman Empire.

The market capital of the USA has shrunk to account for only 29.7% of the world market cap while the total market capital of China and Hong Kong, India, Russia (Brazil àWest) has grown to 19%. Please see the attached chart for more details. We might see the USA market capital continue to shrink to account for only 25% of world market capital while BRIC (plus Hong Kong) will grow to 25% from 19%. The US will be less and less significant and money might flow to other markets, looking for better opportunities. When the go gets tough, how the USA can get out of so much trouble? Twin deficit, subprime, credit card problem, stock market crashed, national debt, lack of growth, unemployment, lack of credibility. The USA either needs to issue more debts or print more greenbacks or start a war aggressively or impose higher tax or all of the above.

Instead of waiting for these problems to be fixed, I would rather stay away from the US market, and short US dollar to long AUD dollar and CAD dollar. That’s why I recommend (in my 2009 Year Ahead Report and many subsequent newsletters) BRIC especially China instead of the USA. Year to date Shanghai SE Composite Index up 84%, Shenzhen SE Composite Index up 97%, Hang Send Index up 38.4% while Dow only up 4%, S&P 500 up 8%, NASDAQ Composite Index up 25%. So the theme ‘Go East’ has been a success.

Right now I would like to caution you to Go Ease on the ‘Go East’ theme. As we just mentioned the Shanghai and Shenzhen Composite Index has been up 84% and 97% respectively, I think it’s prudent to expect a pull back on the technical side. Given Shanghai Index is lagging behind of Shenzhen Index. I do expect Shanghai Index to catch up and might go up a bit more say 10-15% to around 3700 level. Shenzhen will go up also but at a lesser pace. However, I do expect both indices to correct 25% from interim high once the market loss its momentum. With that, I would recommend taking profit at least 50% for those who have Shanghai and/or Shenzhen stock exposure. For 2008, unemployed Chinese increased to 25 millions in cities. The number of still unemployed college graduates jump from 0.5 million in 2007 to 1.5 millions in 2008, and finally climb to 6 millions in 2009. I think the Chinese Government still need to resolve some social fundamental problem rather than just pumping money into the financial market to get instant relief.

Stock market is doing well temporarily is not because things are getting better or everything is ‘OK’ now. As a matter of fact, I know most of the businesses/trades are not doing well. It is due to low interest rate environment and quantitative easing monetary policies of central governments. Investors cannot extract decent return from bank deposit. They are also afraid of capital lost and avoid long dated bonds, (as interest rate is at an abnormally low level). Once the interest rate cycle turns, the Fed starts to increase interest rate. The bond market will be in trouble.

From 15 Jun – 16 Jul, the market was absolutely flat as I have suggested you to take a rest (in my newsletter “Season to take risk, Seasons to take rest”). In my last newsletter ‘Wild Wild West, Wild Wild Guess’, I made a wild guess that market might go to level 21,000-22,000 level. So far it is still on track as the Hand Seng Index went up 5.9% over last week and the market has been up all these time.

FYI, when I see Hang Seng Index hit level 21,000, I will recommend you to sell half of the remaining 35% equity portion. So if you have been following my recommendations, you will have only 15-17% long position left. Once HSI corrects, it might also loss 25% in value and might find support around level 15,700.

GO Easy on your investment and spend more time with your family.

Authored by our VIP Columnist:

Gary Hung had over 17 years of Director of Investment from Merill Lynch. Currently Gary formed an independent Investment house and continue to managing investment for high net worth clients. Being active in the Asia Market with MBA from University of Southern California, Gary represent an unique and unbiased voice on his view on the international markets. For his complete list of Newsletter Archive, please visit here.

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As soon as Dow reaches year-high and pierces through the 9,000 mark, bulls are coming out of the woodworks to even predict Dow hitting 15,000 in 2 years.  Today investors received good news that existing home sales rose in June (again, for the 3rd straight month) and by a higher-than-expected amount; this propeled and extended the buying spree that has lifted Dow 11% in just 9 days, creating $1.2 Trillion in market value.

Adding to the buying fury is blue chip company and the world’s largest semiconductor chip maker, Intel Corp (INTC), which announced better than expected Q2 earnings.  Most people believe the fundamental of the tech sector is in semiconductors, and Intel’s positive quarter is an indication that the rebound is well under way.

Charles Lemonides, chief investment officer with ValueWorks, says there’s plenty of upside left due to improved fundamentals in US companies.  He is predicting the Dow hits 15,000 in 2 years, breaking the all-time high for the index.  In his view, “interest rates modulate economic activity.“ And, with rates essentially as low as they can go, he expects asset inflation.

We at the Wealth Alchemist still believes the celebration is coming a bit too early.  There are still lots of pitfalls for the economy and a lot can still go wrong before the fundamentals improve.  Most of the earnings that come out have been average, but great in comparison to artificially low expectations. Unemployment is expected to grow and despite improved housing sales, the housing prices have stayed stagnant with $1+ Million homes on the verge of crashing.  At this rate, with Dow hitting 9,000, we expect a mini-crash of sorts of about 10% by the end of this quarter taking us back to a more depressed value that better reflects the time horizon to recovery.  The last thing we as investors want is a V-shaped recovery founded on nothing but artificial triggers that got ourselves in this mess in the first place.  Check out our portfolio for companies to invest in during the recession.

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In a surprisingly strong week on the heels of a 7% gain last week, Dow is now close to approaching 9.000 as we roll into the middle of the earning season with just about every company beating the low earnings bar set in advance of the reporting.  Despite the positive performances that has pushed Dow to new highs this year, there are still a lot of worries in the economy ranging from unemployment to housing that should naturally pull the market down.  This market rally from 8,300 to 8,900 has been uncharacteristic particular in that this happened in the summer doldrum, which points to the fact a lot of the buying could just be temporary and not really any large institutional buys.

Federal Reserve Chairman Ben Bernanke, who restated the Fed’s view that the economy is still on track to recover this year, but slowly.  This echoes the sentiment of Dr. Doom in his previous public appearnace.  Bernanke also predicts rising unemployment, which should easily pierce the double digit % we talked about, finally agreeing with Warren Buffett on this matter.  This will really lead to a glut of jobless population that will take years for the economy to chew away, and with rising population growth and new college grads entering the workforce, the economy needs to grow at a much faster pace to outstrip the increase in job demands.

The rest of this week is marked by further earning releases.  Tomorrow (Wednesday) is likely a technology stock day with AMD announcing and Apple’s after-market positive earning dominating the theme.  Apple (AAPL) profits were up 15% on sales of iPhone and laptops, continuing its streak of being an anti-recessionary company.  Apple welcomed Steve Jobs back from his medical leave and blew its expectations away with its iPhone 3GS launch and higher laptop sales prompted by reduced pricing admist a hyper-competitive and struggling PC market.

Despite all the good news we at the Wealth Alchemist believe the celebration should be temporary. Too many unknowns still exist in this market and the economy is still at the brink of disaster should something bad happens.  We wrote about 10 things that could still bring the economy down.  Unemployment is still out of control and this recession is starting to look like the Great Depression.  We are likely to see Dow 7,500 rather than Dow 9,500 so we suggest conservatism and only investing in securities after long periods of due diligence.  Check out our 2009 portfolio, which is up greater than 50% year-to-date!  Be patient and wait for good opportunities to buy growth stocks at discounted values.

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The phase “Wild Wild West” gives me an impression of chaos & instability. This is how I feel about the USA & western countries in general these days.

“It is the policy of the United States and it will remain the policy of the United States to remain committed to a strong dollar”, said Mr. Timothy Geithner, United States Secretary of the Treasury, in an Al-Arabiya television interview. From Mar 08, US dollar index has already weakened by 11%. From 5 years ago, it has down 12%. Either Mr. Geithner said something that he doesn’t mean or the USA is not able to deliver what it wants to do on the currency side. Wild Wild Guess! Given the current economic environment, I simply don’t understand how a strong dollar can benefit the US economy, apart from giving comfort to the Arabian & Chinese leaders, versus a weak dollar. Maybe some readers with strong economic background can enlighten us?

Current National Unemployment is 9.5% with 6.7 million continuing jobless claims. On 15 July 09, Federal Reserve predicted the unemployment in the US will top 10% in 2009. For your information, the average national unemployment rate back in Feb 09 was 8.1%. In my Year Ahead Report on 24 Dec 08, I predicted the unemployment rate in the US to rise to 10-13%. According to Associated Press (of USA), President Obama’s economy team initially predicted that the stimulus would prevent the unemployment from going higher than 8%. I believe President Obama and his team should have lots of data and information regarding the job market and economic situation to make such claim. Wild Wild Guess! Both Geithner and President Obama need to work harder to cash their cheque.

I suggested you to sell a portion of your long holdings on June 15 and I made the same recommendation on June 23. By now, if you follow exactly what I recommended you to do. You should have 35% equity portion left in your portfolio. I will make a wild wild guest given we are light on long position which is my strategy in this given Bear market rally environment. I think the market can go to level 21,000 – 22,000 unless there are some unforeseen man-made or natural disasters. We are at a point where the market can drop another 15% or up another 15%. (I mentioned this in my 15 June newsletter that HSI can go up 6-15% or go down 15%-30%.) Since then, HSI closed 18499 on 15 June and HSI closed 18361 on 16 July. The difference is only 138 points which is a very narrow range! Remember my last newsletter (“Seasons to take risk, Seasons to take rest”)? You are better off to sell position and raise cash in June as the market had a roller coaster ride down first and up. Let’s see how good my wild wild guess is as compared to Mr. Tim Geithner and President Obama!

Authored by our VIP Columnist: Gary Hung had over 17 years of Director of Investment from Merill Lynch. Currently Gary formed an independent Investment house and continue to managing investment for high net worth clients. Being active in the Asia Market with MBA from University of Southern California, Gary represent an unique and unbiased voice on his view on the international markets. For his complete list of Newsletter Archive, please visit here.

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As we had expected here on Wealth Alchemist, stocks continue to pull back in the summer and have now posted their 4th week of straight loss.  With worries over the economic well-being, mounting unemployment numbers, falling consumer confidence and poor housing performance, investors have had nothing to cheer about of late.  With Q2 2009 earnings set to release starting next week, we could see some big drops in the market as bad news continue to pile on one another creating a vicious cycle and weakening investor confidence.

Specifically, investors are paying a lot of attention to these earnings reports to learn of the forecast they have for the company, industry, and economy.  Expectations are generally low as investors worry that they were too quick to expect a rebound in the economy; the “green shoots” camp that Ben Bernanke has swiftly supported has been blasted by the realists like Warren Buffett and Dr. Doom.  But since the latter two have been more spot on with their predictions, the stock market has followed their own sentiments and languished over the last month or so.

We at the Wealth Alchemist believe the earning reports will be lukewarm, with some beating the already low expectations and some investors will cheer certain segments of the economy. However overall the economy is still weak and the recovery is a slow process.  We will not likely to see any kind of rebound in the stock market and should expect to see Dow pierce 8,000 points any day now.  The best strategy is still to have a longer-term outlook and dip into stocks that have come down a bit.  Review our picks in our 2009 portfolio for some ideas and when in doubt, tread carefully or sit on the sideline: cash is always king!

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Warren Buffet, the legendary investor and CEO of Berkshire Hathaway (BRK-B), has publicly said that he would not be suprised for unemployment to hit 11%.  As we exited June 2009, the unemployment rate was at 9.5%.  “We’re not in a freefall, but we’re not in a recovery either,” Buffett says.  What will take us out of this funk is a second stimulus package, which the Obama Administration has not planned to put in effect.

We at the Wealth Alchemist agree that unemployment is certainly headed towards double digit.  We will likely not see unemployment starting to drop until mid-2010 and even at that point the drop will be insignificant.  We as a nation and as an economy will have to deal with the large group of out-of-work population and deal with the negative consequences generated by the inefficiency created.  Consumption will drop as disposable income decreases, slowing down and weakening any sort of recovery as Buffett has suggested.

If unemployment hits 11% and stays there for a prolonged period of time, we will clearly be looking at a Depression and not just a recession.  What we need to do as a population is garner the proper personal finance skills to weather this storm and emerge smarter and debt-free.  For tips on how to do this, check out the 5 must-read books during this recession, Personal Finance 101 page and our Investment 101 page.  Our 15 stock picks for 2009 has also done well.  All in all, Buffett does offer an uplifting message at the end of the day: “We’re going to come out of this better than ever, the best days of America lie ahead but [just] not next week or next month.”

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June 2009 unemployment officially hit 9.5% ever inching towards the 10% benchmark that starts to hint at a prolonged recession (aka depression) than just a mere recession.  This psychological double-digit mark is affecting the mass investment psyche as represented in today’s almost-3% stock market decline.  The data was especially disappointing since it broke a trend of four straight months of improvement in job losses

The statistics are staggering.  Since the start of the recession in December 2007, the number of unemployed persons has increased ed by 7.2 Million in the US.  Not a small number and as much as the monthly unemployment keeps stabilizing, we are still adding to that stockpile of unemployment which will not peak until mid-2010.  It will take awhile, and not some quick government stimulus plan, to really chip away and find work for at least 50% of the unemployed, taking us down to 5% unemployment which is historically known as “full employment” in macroeconomic terms.

Meanwhile a gauge of volatility in the stock market, the Chicago Board Options Exchange Volatility Index, or VIX, jumped 1.73, or 6.6%, to 27.95 Thursday afternoon.  Overall the market appears to be heading down and what we had predicted to be bear market signs are now beginning to really manifest.  We should see Dow in the 7500-8000 range fairly soon this summer, probably by the end of July.

For those who still think the “green shoots” are about to sprout into full-bloom, think again.  Warren Buffett’s right in his caution about the market, and only after careful selection will you be able to find yourself some good deals in the market.  Look at our 15 stocks to invest in for 2009 to see our picks, which are up 50% for the year.

http://finance.yahoo.com/tech-ticker/article/273113/Job-Losses-Gain-in-June-Unemployment-Reaches-9.5?tickers=dia,spy

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