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U.S. Markets

Blue-chip stocks pushed back toward the day’s highs as
investors grew hopeful that European leaders’ commitment to
preventing a banking crisis and Chinese purchases of euro-zone
debt could help resolve the region’s debt woes. The Dow Jones
Industrial Average rose 130 points, or 1.1%, to 11837 in recent
trading.

The blue-chip index shot up 162 points after the opening bell,
only to slide into negative territory amid discouraging headlines
about progress on the European debt crisis. Stocks shot up more
than 100 points to the day’s highs after reports that China would
invest in Europe’s bailout fund. The Standard Poor’s
500-stock index gained 10 points, or 0.8%, to 1239, while the
Nasdaq Composite added six points, or 0.2%, to 2644.

The gyrations began before the opening bell, after German
lawmakers approved leveraging the euro zone’s emergency bailout
fund. In the morning, reports suggested the size of the bailout
fund may not be clear for several weeks, damping some of the
initial enthusiasm.

Separately, Juergen Stark, a member of the European Central
Bank executive board warned Wednesday of new “distortions” in the
economy created by excessive liquidity in the financial markets
and stemming from the impact of low interest rates.

Amid the flurry of headlines, investors remained skeptical
about a quick resolution to the Continent’s debt crisis. Leading
the gains were energy, materials and financial stocks.

But Boeing was the strongest performer among Dow components,
rising 4.3% after the aerospace giant beat third-quarter earnings
estimates and raised its full-year outlook, though revenue was
weaker than expected. Weighing on the downside was Amazon.com’s
disappointing earnings number, which weighed heavily on consumer
discretionary stocks and dragged on the technology-heavy Nasdaq
Composite. Amazon.com slumped 12% after the online retailer
reported third-quarter earnings that missed expectations as well
as a drop in operating margins.

European Stocks

A pan-European stock index ended marginally higher Wednesday,
as investors largely retreated to the sidelines ahead of a
euro-zone summit aimed at producing a plan to tackle the
sovereign-debt crisis.

The Stoxx Europe 600 index gained 0.2% to 240.80. Among bank
shares, UniCredit SpA advanced 0.9% in Milan, Societe Generale SA
fell 1.2% in Paris and Commerzbank AG climbed 0.9% in
Frankfurt.

The spotlight is on the summit of European Union and euro-zone
heads of state that will take place Wednesday evening and at
which a package of measures to fight the debt crisis is expected
to be announced. Investors digested various media reports,
including a report by Bloomberg News that EU talks with banks on
Greek bond losses were deadlocked.

Europe’s major national benchmarks were mixed Wednesday.
Germany’s DAX 30 index fell 0.5% to 6,016.07, with Deutsche
Boerse AG closing down 3.2%. Shares of Adidas AG fell 3% after
the sportswear maker was downgraded to equal-weight from
overweight by Morgan Stanley.

Shares of Merck KGaA rallied 8.5% after the German chemical
and pharmaceutical firm reported a 7.5% rise in third-quarter net
profit and confirmed its full-year profit forecast. In France,
the CAC-40 index slipped 0.2% to 3,169.62, with bank BNP Paribas
SA down 2.5%. Car maker PSA Peugeot Citroen SA fell 0.9%.

Peugeot said it now expects full-year operating profit at its
automotive division to be close to break-even, citing intensified
pricing pressures in Europe since September. The U.K.’s FTSE 100
index rose 0.5% to 5,553.24, as silver miner Fresnillo PLC
rallied 4.4%, tracking gains in silver and gold prices. Shares of
retailer Next PLC fell 2.1% after Deutsche Bank downgraded the
stock to hold from buy.

Asia-Pacific Markets

Most of Asia’s major stock markets swung from opening losses
to closing gains Wednesday, as anxiety ahead of a key European
Union summit gave way to optimism over Chinese economic
policy.

Asian bourses had started broadly lower, with investors
cautious as EU leaders are set to meet later Wednesday to hammer
out a deal to enlarge a key financial rescue fund and other
issues to resolve the region’s debt crisis.

Reports of German opposition to allowing more bond-buying by
the European Central Bank helped fuel pessimism over the
likelihood of a comprehensive deal, with BNP Paribas analysts
writing early in the day that closure on the euro-zone saga is
far from being reached. But by the end of trading, Hong Kong’s
Hang Seng Index had moved from a loss of more than 1.0% to a gain
of 0.5%.

Japan’s Nikkei Stock Average pared a 1.0% opening loss to end
with a more modest 0.2% drop after rising into positive territory
just before the close.

South Korea’s Kospi rose 0.3%, and China’s Shanghai Composite
climbed 0.7%. KGI Asia Chief Operating Officer Ben Kwong said the
turnaround was due in large part to hopes that China may soon
begin a slight policy easing after a series of tightening moves
throughout much of the year to keep a lid on prices.

Hong Kong-listed shares of Chinese banks reacted well to Wen’s
speech, with Bank of China Ltd. rising 1.1% and Agricultural Bank
of China Ltd. up 4.1%. The performance in Tokyo was mixed, with
some names dragged down by strength in the Japanese yen.

Currency moves weighed on some Japanese exporters, with Sharp
Corp. losing 1.3%, and Honda Motor Co. dropping 0.6%, with the
latter also weighed by production problems caused by flooding in
Thailand.

But other blue-chip exporters shrugged off the strong yen,
including Hitachi Ltd, which saw its stock rise 3.7% after it
raised its forecast for fiscal first-half profit. Meanwhile,
Canon Inc. added 0.6% in Tokyo after posting a 14.2% rise in
quarterly net-profit and despite cutting its outlook. Aluminum
Corp. of China Ltd., or Chalco, advanced 3.9% in Hong Kong and
2.6% in Shanghai after posting a swing to third-quarter
profit.

Commodities

Base metals closed the day mostly lower on the London Metal
Exchange Wednesday, following a volatile trading session that saw
the metals swing in wide ranges on the back of newsflow out of
Europe.

At the close, LME three-month copper was up 2.0% at $7,680 a
metric ton. The metal earlier rallied 5.2% to a five-week high at
$7,920/ton after German lawmakers approved an expanded mandate
for the euro zone’s EUR440 billion bailout fund, but pared gains
later in the session.

Copper’s “knee-jerk” reaction to the news out of Germany
served as a further reminder of how firmly locked the attention
of metal markets have been on the unfolding situation in Europe
in recent weeks, said a senior market participant.

The rest of the base metal complex closed mostly lower
Wednesday, with tin falling the most at the kerb close to finish
3.7% lower at $21,375/ton. Nickel was down 3.2% at
$19,125/ton.

Oil futures pulled back Wednesday after the U.S. government
reported a bigger than expected increase in oil stockpiles. The
news undercut fears of supply shortages, which had pushed the
market up 8% in the previous three sessions.

Light, sweet crude for December delivery settled down $2.97,
or 3.2%, at $90.20 a barrel on the New York Mercantile Exchange.
Brent crude on the ICE Futures Europe exchange settled down
$2.01, or 1.8%, to $108.91 a barrel.

A sharp increase in oil imports sent crude inventories last
week rising 4.7 million barrels, according to a weekly survey by
the Department of Energy.

Analysts had expected only a 400,000-barrel build. Gold
futures settled at a five-week high, buoyed by renewed appetite
in low risk assets ahead of the European Union’s announcement of
a comprehensive plan for Europe’s debt problems. The most
actively traded contract, for December delivery, gained $23.10,
or 1.4%, to settle at $1,723.50 a troy ounce on the Comex
division of the New York Mercantile Exchange.

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A few weeks ago I called my bank. Exasperated, I explained that the
0.3 percent annual interest being earned in my money market account
was ridiculous.

Now, I know it’s really not the bank’s fault. I’m well aware that
‘Helicopter’ Ben Bernanke and his low interest rate policy are the
real culprits.

Nevertheless, I instructed the bank representative to take a
significant portion of my money market account and transfer it to
my
$100k Portfolio

.

In all fairness, the funds in this money market account were never
intended to be an “investment.” Rather, I’ve always figured that
it’s smart to keep some of my savings completely liquid – not in
stocks or bonds.  

Keeping it on the sidelines means it’s available for whatever
unexpected events might occur.

It used to be that money in the bank would pay an annual interest
rate of three to five percent. However, that’s not the case today
(and hasn’t been for some time now).

With interest rates at 0.3 percent, the monthly interest I received
on my money market account was a pittance.  Over 12 months, I
could expect to earn enough to take my wife out for a light dinner,
but not enough to even be considered real income. It’s almost a
rounding error.

Given the negligent yield, I began asking myself, “What’s the real
impact of holding funds in a savings account today?”

The government tells us that the Consumer Price Index – which
measures the inflation in a basket of goods purchased by consumers
- is growing at an annual rate of 3.6 percent. But that’s just part
of the story, since the CPI excludes gasoline which has risen over
30 percent over the last year and food items that have also
increased significantly.  

When considering these items, it’s likely that real inflation is
increasing at a rate of closer to five percent a year.

The reason I’m telling you all of this it to make a very simple
point.

In the savings account where I had money stashed away, I was
earning a 0.3 percent yield. Compared with the rising costs of life
as measured by CPI, my money was actually losing value in real
dollar terms every year.  

Suppose you were reading
The Wall Street Journal

and you saw an advertisement from Citibank that said, “Deposit
thousands of dollars today. You’ll earn negative 3.3 percent over
the next year, reducing your savings!”  Would you consider -
even for a minute – opening an account?  I suspect not.

It’s for this very reason that I’m withdrawing my savings from my
bank.

Perhaps you don’t have money in a savings account. But the same
argument can be made for many other types of low-yield “safe”
investments – Certificates of Deposit (CDs), municipal bonds, U.S.
Treasuries, and even some corporate bonds.

The yields on these investments are so low that they aren’t even
keeping up with inflation. As a result, if you own any of these
securities, the value of your savings sinks year after year.

The bad news is that there is no end in sight. Chairman Bernanke
has made it clear that he has every intention to keep short-term
interest rates where they are today – at zero percent – through at
least 2013.  Keeping these rates so low is a direct ultimatum:
buy riskier assets or lose money.

As savers, we have a choice to make. We can either see our savings
dwindle, becoming worth less and less every month, or we can seek
out attractively priced investments that are likely to deliver
returns that exceed inflation.

The good news is that there is a better way forward. There are
compelling opportunities today to invest in world-class stocks at
the lowest valuations we’ve seen since March 2009.

For this reason, I’ve pulled a good portion of my cash savings out
of the “safety” of my bank account and have added it in one lump
sum to the
$100k Portfolio

.

If you’re similarly starved for income from your “safe”
investments, then I urge you to consider taking similar action
today.

What will become of this money?

I’m going to ‘Buy America’ at a point when many financial pundits
are saying our country is going down the drain. For investors with
cash on the sidelines today, there are numerous attractive
opportunities.

Keep an eye on your inbox. I’ll be sending you updates on what I’m
doing with this money in the

$100K Portfolio

over the coming weeks.

Disclosure: none

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