Month: April 2012

By MoneyMorning.com.au

QE is off the table – for now.

Our financial system is nothing short of absurd.

We have a global marketplace, where millions of people trade countless different products, both real and financial. You can buy exposure to virtually any economy in the world, and any asset class you like.

An almost infinite number of variables are acting on this system at any given time. Everything from the weather in Bangkok to the mood swings of European finance ministers has an effect on it.

And yet, more than anything else, the price movements across this whole elegant network are dependent on one thing: the mutterings of a small group of men in a room in Washington DC.

So much for free markets…

The Fed and Spain Spook the Market

Wondering why the wind has dropped out of the markets’ sails in recent days? It’s mainly down to the Federal Reserve.

Minutes from the Fed’s latest meeting on monetary policy came out. In short, the Fed looks less likely to print more money than investors had expected. On the news, the US dollar shot up, gold slid, and stocks took a knock too.

Even the normally ‘dovish’ San Francisco Fed president John Williams noted that “the downside risks to the US economy have lessened”, and that “the arguments for doing another dose of monetary stimulus aren’t nearly as strong” as they were for the early bursts of quantitative easing (QE).

Obviously, the news that the real economy might be improving panicked investors. If that’s true, then they won’t get any more free money to punt in stock markets.

Things weren’t helped when an auction of Spanish government debt also had trouble getting away. This was doubly painful, because the Spanish government has committed to some pretty severe austerity measures. Whether you believe the country can do it or not, it’s at least making an effort.

What’s really worrying is that, as Justin Knight of UBS tells the FT, “the international investors who have left the Spanish bond market will probably not come back”. That suggests that the poor appetite for the bonds means that Spanish banks – the main buyers these days – might be “running out of LTRO money and therefore stop buying as well”, which would be “serious news for the market”.

Are Central Banks Really Going to Pull the Plug?

What does all this mean for your money? Let’s deal with the Fed first. We’ve pointed a number of occasions that QE3 might not be quite as readily available as investors had expected.

There are a number of reasons for this. One of Ben Bernanke’s stated main goals has been to drive up stock prices, and so make consumers feel wealthier. Given the first quarter rally, he’s certainly achieved this for now.

QE is also politically questionable. We’re in the run-up to a US presidential election. It’s quite tricky for the Fed to take any steps to boost the economy that aren’t easily justifiable. They’ll get accused of favouritism otherwise.

So what it comes down to is that QE3 is off the table until stocks tank again. That’s pretty simple.

So What Could Make Stocks Tank Again?

It strikes me that two things have underpinned the recent optimism in the markets. Firstly, the signs of a nascent recovery in the US. It’s still the world’s biggest and most important economy. If the good news can continue then that might outweigh the absence of QE3.

But there’s a second issue. Everyone has effectively assumed Europe away into the background. The base case is that there’ll be a recession there, but that there won’t be a systemic collapse, because the European Central Bank (ECB) will do what it takes to support the eurozone’s banks and sovereign governments.

I don’t necessarily think this is wrong. However, I do think the market is underestimating the amount of pain it’ll take to get to that point. And that brings us back to Spain.

The ECB is walking a much finer line than even the Fed. Mario Draghi is a more pragmatic man than his predecessor Jean-Claude Trichet seemed to be. But even Draghi can’t ignore the Germans.

Currently, European monetary policy is too loose for them. German unions are getting more aggressive with their pay demands. There’s even talk of a housing bubble. But if Draghi indulges Germany, then he throws Spain (not to mention the rest of the eurozone) to the wolves.

An ugly tug of war between Germany and the rest of the eurozone would rattle markets again. And if the ECB doesn’t step in to print money quickly enough, there’s every reason to think that Ben Bernanke and his friends might be forced to instead.

So in short, I don’t think the money printing is over yet. But there may well be another plunge in the markets before we get another dose.

John Stepek

Contributing Editor, MoneyWeek (UK)

Publisher’s Note: This is an edited version of an article that first appeared in MoneyWeek (UK).

From the Archives…

Disruptive Technology Stocks For Smart Small-Cap Investors

2012-04-06 – Kris Sayce

ASX 200: This Market is Toast

2012-04-05 – Murray Dawes

Why Every Bank Will Soon Be a Tax Collector for Every Government Everywhere

2012-04-04 – Merryn Somerset Webb

Not Even Saudi Arabia Can Save Us From High Oil Prices

2012-04-03 – Jason Simpkins

Good News For Oil and Resource Investors

2012-04-02 – Dr. Alex Cowie

For editorial enquiries and feedback, email [email protected]

QE: Why We Can Expect More Money Printing from Central Banks

By JW Jones – www.OptionsTradingSignals.com

In the not-so-distant past arguing that precious metals prices were setup to fall generally elicited a response which was not real pleasant. In fact, during gold’s infamous bull market rally on several occasions I called for pullbacks which regardless of the accuracy of my call generated hate mail that seemingly never ended.

Fast forward to the present and hardcore gold bugs remain transfixed on the idea that precious metals must rise. The gold bull market has ended, at least for now and those still holding the bag are looking at large losses from the all time highs set back in 2011.

These same gold bugs will cite a litany of reasons why gold should be moving higher from the unprecedented printing of money by global central banks to the deficit spending and eventual fiscal day of reckoning facing most Western nations. I do not disagree with the gold bugs that in the long run gold prices will rally above the all time highs, but in the short to intermediate term there are several forces which have the potential to drive gold prices lower.

Gold prices cannot rise continually,regardless of the macro-economic backdrop. Nothing, not even Apple Computer (AAPL) or Priceline.com (PCLN) will rise forever. Eventually prices will come back down to earth and revert to the long term mean. It has happened in gold and it will happen to Apple Computer and Priceline.com at some point in the future, it is simply a matter of time.

Before I discuss my reasoning as to why gold and silver are likely to pullback in the intermediate term, I need to remind readers that I remain long-term bullish of precious metals. While the long-term remains bright, the short-term is especially murky and dark.

The first primary concern for gold bugs should be the price behavior of the U.S. Dollar Index recently. The Dollar has rallied sharply higher after carving out a higher low on the daily chart (bullish). The Dollar is on the verge of breaking out above a major descending trendline on the daily chart. Once that breakout to the upside has occurred it will become likely that the recent highs will be tested and possibly taken out. The daily chart of the Dollar Index is shown below.

Dollar Index Daily Chart

The U.S. Dollar’s price action shown above is not indicative of bearish expectations. In fact, I would argue that the Dollar is, and likely will remain in a bull market in the short and intermediate time frames. However, it is important to recognize that strong periods of volatility will persist as Ben Bernanke and the Federal Reserve will continue to try to break the Dollar’s rally as it tries to grind higher.

The Federal Reserve hates deflation, and a stronger Dollar will push risk assets like equities lower and right now that is not part of the Federal Reserve’s election playbook. QE III will likely be announced at some point in the future as an attempt to break the Dollar’s rally and to put a floor underneath stock prices.

The Federal Reserve has used QE I and QE II to help prevent economic disaster. Recently “Operation Twist” has also been used to increase liquidity while keeping the bullish game going. Low interest rates and additional easing adjustments have staved off disaster before and they will likely be utilized again by the Federal Reserve.

Ultimately the free market and cycles will exert their will and the Federal Reserve will be left helpless. The day where monetary easing has no major impact is coming, but we are not quite there just yet.

In addition to the strength in the Dollar Index, the gold miners have been under major selling pressure. In fact, the gold miners have recently broken down out of a major consolidation zone that will likely lead to lower prices in the near term.

Unless gold miners can regain the breakdown level on a major reversal this coming week, the most we can hope for is a backtest of the support trendline sometime in the near future once the miner’s become significantly oversold. The weakness in the miners is just another example as to why lower prices for gold appear to be likely in the short to intermediate time frames. The weekly chart of the gold miners ETF is shown below.

Gold Miner’s (GDX) Weekly Chart

The gold miners are likely to lead equity markets lower in the near term, but lower prices for gold miners is certainly not positive for gold either. Obviously there are several economic factors which could still see gold prices working higher such as a collapse of the Eurozone, however at this moment the likelihood of that outcome in the short to intermediate term is not likely.

The European Central Bank and the Federal Reserve are not going to give up that easily. The process of admitting defeat will take time and global central banks will print money until they feel they have papered over the issue. It is the culmination of either QE III or other monetary easing around the world that will eventually move gold back above the all time highs. Unfortunately the short term price action of gold will most certainly remain under selling pressure barring any major unexpected announcements. The daily chart of gold futures is shown below.

Gold Futures Daily Chart

As shown above, I believe that short term targets to the downside are likely somewhere in the 1,475 – 1,525 price range. I think gold will find a major bottom near these levels and a strong bounce will play out. For long term buyers, I would take advantage of the forthcoming pullback. However, I would be mindful that further selling is quite possible before gold finds a major bottom.

As I said before, the longer term is bright for gold. However, the short to intermediate term will likely see more selling pressure. Until either the Dollar tops or some form of major quantitative easing is announced, I would anticipate lower prices in the yellow metal.

In the near term gold does not look attractive, but the longer term the catalysts for a major move above recent highs are present. The real question has become when and where will the Dollar top? When the Dollar tops and gold finds a major bottom, the potential for a monster move higher will become likely.

Until then, risk remains high.

Looking for a Simple ONE Trade Per Week Trading Strategy?
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Jw Jones

This material should not be considered investment advice. J.W. Jones is not a registered investment advisor. Under no circumstances should any content from this article or the OptionsTradingSignals.com website be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for educational purposes only.

By The Sizemore Letter

Listen to Peggy Tuck’s interview of Charles Sizemore on Mike Robertson’s Straight Talk About Money.  Charles discusses the pitfalls of bond investing and gives his thoughts on business development companies, among other topics.  Tune in here.

Source: ForexYard

During Monday’s trading, the U.S dollar dropped points against the Euro as a result of a poor labor report from the U.S regarding employment in the nation. The highly anticipated Non-Farm Payroll report which is released on the first Friday of ever month reported surprisingly low figures on Friday last week.

The NFP report released figures of 120,000 which came as a surprise due to the fact that that 210,000 was the expected figure. The report put some downward pressure on the greenback as the figures show fewer jobs were created, leading to concerns over the health of the economy’s recovery.

This week will see a number of economic events  that could possibly affect the movements of the currency and commodity markets as we look ahead to data such as the American Trade Balance, U.S Initial Jobless Claims and the Bank of Japans Press Conference to name a few.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Article by Investment U

"People who live in a Golden Age usually go around complaining how yellow everything looks." –Randall Jarrell

A few weeks ago at our 14th Annual Investment U Conference in San Diego, I discussed and recommended a number of investment opportunities in the U.S.

Afterwards, an attendee pulled me aside and privately declared that my optimistic outlook was not just wrong but naïve.

He then recited the litany of woes broadcast daily and recycled hourly by the national media: the weak economy, high unemployment, rising energy prices, the continuing housing slump, troubles in the Eurozone, tensions in the Middle East, political gridlock in Washington, the growing national deficit and so on.

(By the time he was done, I could have sworn he said the sun was too bright and the birds were singing too loud.)

“You really need to look at The Big Picture,” he said. Indeed, let’s do that…

We all know the recent downturn was severe and the recovery has been long and slow. But the United States still has the most dynamic economy in the developed world. The best research centers, universities and companies are here. Our country still attracts more immigrants and investment capital than any other. And the industries of the future, from biotechnology to nanotechnology, are centered here.

Many people are still hurting. Yet, despite the gloomy headlines, the majority of us have it pretty darn good.

Consider that in the first half of the twentieth century, most people earned a subsistence living through long hours of backbreaking work on farms or in factories. In 1850, the average workweek was 64 hours. In 1900, it was 53. Today it is 42 hours. On the whole, Americans work less, have more purchasing power, enjoy goods and services in almost unlimited supply, and have much more leisure.

Formal discrimination against women and minorities has ended. There is mass home ownership, with central heat and air-conditioning – and endless labor saving devices: stoves, ovens, refrigerators, dishwashers, microwaves and computers. Senior citizens are cared for financially and medically, ending the fear of impoverished old age.

Quality healthcare was almost non-existent 85 years ago. In 1927, President Calvin Coolidge’s sixteen-year-old son Calvin Jr. developed a blister playing tennis without socks at the White House. It became infected. Five days later, he died. Before the advent of antibiotics, tragedies like these were routine.

Advances in medicine and technology have eliminated most of history’s plagues, including polio, smallpox, measles and rickets. There has been a stunning reduction in infectious diseases. Heart disease and stroke incidence are in decline. A new study from the Centers for Disease Control reports that overall rates of new cancer diagnosis have dropped steadily since the mid-1990s.

We complain about the rising cost of healthcare. But that’s only because we routinely live long enough to depend on it. The average American lifespan has almost doubled over the past century.

We take a lot for granted today. Light is a good example. To get an hour of artificial light from a sesame-oil lamp in Babylon in 1750 B.C. would have cost you more than fifty hours of work. The same amount of illumination from a tallow candle in the 1800s required six hours’ labor. Fifteen minutes of work was the trade off for an hour from a kerosene lamp in the 1880s. Yet for an hour of electric light today, the average American labors half a second.

Or take transportation. For millions of years, we only got somewhere by putting one foot in front of the other. Six thousand years ago, we domesticated the horse. In the 1800s, going from New York to Chicago on a stagecoach took two weeks’ time and a month’s wages. Today you can fly to virtually any major city in the world in under 24 hours and – even with oil near recent highs – for less than a thousand dollars.

And speaking of oil… How many reports have you heard about gas surging to more than $4 a gallon recently? Contrast that with how little you’ve probably heard about the price of natural gas. Four years ago, it was $13. Today it sells for $2. The average American who heats with natural gas saved about $1,000 last year.

Or take computing. In 1987, a megabyte of memory cost $5,000. The Mac II sitting on my desk – with one megabyte of memory and a running speed of 16 megahertz (which Apple described as “blindingly fast”) – cost $5,500. Today an exponentially smaller, faster and better machine costs less than a tenth as much. As for memory, you can buy a terabyte drive today for less than 60 bucks.

Scientists say human beings evolved to have a heightened sense of fear and suspicion. (Those who lived on the plains of Africa without this quality didn’t leave many descendants.) Yet by seizing on the negatives, we often miss the good things happening around us.

In their new book Abundance, technology gurus Peter Diamandis and Steven Kotler offer an alternative view:

“What does the world really look like? Turns out it’s not the nightmare most suspect. Violence is at an all-time low, personal freedom at a historic high. During the past century child mortality decreased by 90% while the average human life span increased by 100%. Food is cheaper and more plentiful than ever (groceries cost 13 times less today than in 1870). Poverty has declined more in the past 50 years than the previous 500. In fact, adjusted for inflation, incomes have tripled in the past 50 years. Even Americans living under the poverty line today have access to a telephone, toilet, television, running water, air-conditioning, and a car. Go back 150 years and the richest robber barons could have never dreamed of such wealth.

“Nor are these changes restricted to the developed world. In Africa today a Masai warrior on a cellphone has better mobile communications than the President of the United States did 25 years ago; if he’s on a smartphone with Google, he has access to more information than the President did just 15 years ago, with a feast of standard features: watch, stereo, camera, video camera, voice recorder, GPS tracker, video teleconferencing equipment, a vast library of books, films, games, music. Just 20 years ago these same goods and services would have cost over $1 million…

“Right now all information-based technologies are on exponential growth curves: They’re doubling in power for the same price every 12 to 24 months. This is why an $8 million supercomputer from two decades ago now sits in your pocket and costs less than $200. This same rate of change is also showing up in networks, sensors, cloud computing, 3-D printing, genetics, artificial intelligence, robotics and dozens more industries.”

Despite relentless media negativity – designed to attract viewers and thus advertisers – most of society’s trend lines are overwhelmingly positive.

We enjoy economic, political and religious freedoms denied to billions throughout history. All forms of pollution – with the exception of greenhouse gases – are in decline. Our culture gives us an unprecedented ability to store, exchange and improve ideas. And we benefit enormously from the ultimate renewable resource: human imagination and creativity.

Free markets deliver an enormous bounty based on specialization and exchange. Just a small example: Our forebears couldn’t conceive our typical salad bar today because they couldn’t imagine a global transportation network capable of providing green beans from Mexico, apples from Poland and cashews from Vietnam together in the same meal.

Even the world’s poorest are being pulled upward. According to the World Bank, the number of people living on less than $1 a day has more than halved since the 1950s. That still leaves billions in destitution, but according to scientist Matt Ridley, author of The Rational Optimist, at the current rate of decline the number of people in the world living in “absolute poverty” will be statistically insignificant by 2035. The spread of microfinance and cellphone technology in many developing countries, for example, are creating countless opportunities and greater prosperity.

To know how much better off you are than your distant ancestors, you have to recognize how they lived. In his essay A History of Violence, Harvard psychologist Steven Pinker writes:

“Cruelty as entertainment, human sacrifice to indulge superstition, slavery as a labor-saving device, conquest as the mission statement of government, genocide as a means of acquiring real estate, torture and mutilation as routine punishment, the death penalty for misdemeanors and differences of opinion, assassination as the mechanism of political succession, rape as the spoils of war, pogroms as outlets for frustration, homicide as the major form of conflict resolution – all were unexceptionable features of life for most of human history. But, today, they are rare to nonexistent in the West, far less common elsewhere than they used to be, and widely condemned when they are brought to light.”

Thank your lucky stars that you won the lottery simply by being born in the modern era. This is not to downplay our current challenges, including the most predictable crisis in the nation’s history: huge and growing state and federal deficits.

Yet you’ll notice that the extreme forecasts always begin with the words, “If nothing is done…”

Something will be done. Only the most hardened cynics believe that politics will ultimately trump the national interest. The solutions are not politically easy, but they exist. Simpson-Bowles and other bi-partisan commissions have already set the stage for fiscal sanity. State governors like Chris Christie and Andrew Cuomo are now tackling deeply entrenched problems, such as pension shortfalls, that threaten to destroy state budgets. It won’t happen in this election year of political polarization and heated rhetoric, but reform at the national level is coming.

I know some, like the gentlemen in San Diego, will disagree. And it’s true that we all have gaps in our knowledge, biases and blind spots. However, it would be nice if the prophets of doom conceded that as well.

The truth is most of us have it better than we could have imagined a few decades ago. Most of us live long lives, in good health and in comfortable circumstances. By almost any measure, we are living better than 99.9% of those who came before us. Yet we routinely tell pollsters that life is hard and things are getting steadily worse.

As the essayist Randall Jarrell observed:

“People who live in a Golden Age usually go around complaining how yellow everything looks.”

Carpe Diem,

Alexander Green

Article by Investment U

Source: ForexYard

Before the outcome of the FOMC Meeting Minutes, both gold and silver were showing some strength and trading up. The reason for the drop in bullion prices was due to the fact that the Fed decided there was no need for a further stimulus plan until the US Economy slows down. This had a negative affect on the two metals as they tend to drop when there is positive news for the U.S Dollar.

Overall for last week’s trading, gold prices sharply fell by 2.5 percent whilst silver also saw a drop for the week of just under 2.4 percent.

Even though there was no commodity trading on Friday due to “Good Friday”, the Labor department released disappointing figures for the month of March. The result was well below what was expected, as a result, gold and silver prices could show a slight correction to the recent falls. A strong Non-Farm Payroll report would have a positive affect on the U.S Dollar, potentially causing bullion prices to fall as a result.

The Euro also experienced sharp falls against the Greenback last week falling 1.8 percent whilst the Canadian dollar and the Australian dollar showed some resistance but in the end also showed slight drops versus the U.S dollar. The weakening of the “Aussie”,”Loonie” and the 17-nation currency could have assisted in the decline of both gold and silver prices last week. If the precious metals continue to fall, it could have a negative impact on the bullion market and could put downward pressure on bullion prices for the week ahead.

There are a number of reports due for release this week which could have an impact on commodity prices.
Coming up on the economic calendar this week is the U.S Consumer Price Index,American and Canadian Trade Balance,Bank of Japan’s rate decision and monetary policy,U.S PPI and U.S jobless claims weekly.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Article by Investment U

Target funds seem like a good idea, but besides performance, there are two major concerns in the make-up of these vehicles.

It seemed like such a good idea 10 years ago when discussing allocation options for 401(k) and 529 college savings plans. Rather than doing your own research and rebalancing in your portfolio, you can just invest in a fund that does it for you depending on your time horizon.

Back then, target-date mutual funds were a niche product, and now in the present, they’re a fixture in the retirement-savings industry.

These instruments are relatively still new – they were created in 1993.

The funds invest in a mix of stocks, bonds and other investments that gets more conservative as an investor’s retirement, or target date, approaches, rebalancing automatically for investors who prefer not to or don’t know how to do it themselves. They’re available in more than 80% of larger 401(k) plans.

As part of the Pension Protection Act of 2006, target-date funds were made one of a few permissible “default options” for retirement plans with an automatic enrollment feature, meaning some employees are automatically enrolled in the funds.

Investments in the funds have ballooned more than 380% since 2005 to about $343 billion.

The Two Major Concerns

This does seem like a good idea, but besides performance, there are two major concerns in the make-up of these vehicles.

1. The fund is only as good as the fund company managing these investments. Because these are funds that are invested in other funds, a company typically will use funds within their own line-up. If the fund company isn’t up to par in certain investment areas, you may be out of luck and take some losses. The overall quality of the company is very important to the quality of the fund you’re investing in.
2. Are the expenses worth it? For the cost-conscious investor, the expenses built into target-date funds can be out of hand. Since they are “funds of funds,” they spread assets among multiple other investment vehicles. As a result, target-date fund expenses span an unusually wide range. The differences can add up. According to human resources consultant Towers Watson, an increase of just $50 per $10,000 in target-date fund fees could cost a high earner the equivalent of eight years’ worth of retirement savings over the length of his career.

The Last Four Years…

The average fund with about four years until its target date fell 0.4% last year, according to Morningstar, Inc. That lags behind the S&P 500 Index, which gained 2%, including dividends, and is well below the Barclays Capital Aggregate Bond Index, which rose nearly 8% for the year.

Many target funds also had a lackluster performance during the market crash of 2008. Afterwards, they seemed to be doing well until 2011.

Analyst state that target funds’ wide variety of investment holdings was detrimental to their returns in 2011, as many investors fled to blue chips and Treasuries. “They’re intended to be diversified, and that should be an advantage over the long term,” says Josh Charlson, a fund analyst with Morningstar. “But it’s not always going to work so well, particularly when there’s a flight to quality in the market.”

And take note. Presently, the average fund approaching its target date is allocated in about 40% equities. This is only down three percentage points from 2008 when there were similar struggles, according to Lipper.

Time horizons and This New Normal

Depending upon your target date, you probably want to take control of your portfolio because these funds have shown they do worse than their peers during economic adversity. As far as expenses are concerned, an index fund could serve that purpose without fees taking some of your return.

Also take into account that the last few years have shown this new normal where what we think should happen really doesn’t come about (i.e. printing money and inflation or Treasuries with a 0.2% return).

Good Investing,

Jason Jenkins

Article by Investment U

Article by Investment U

This week: corporate insiders are selling, a lot, but Jeremy Siegel says look for 17,000 on the Dow, Hitachi is glowing in red-hot Japan, and the SITFA.

This year alone, Hitachi (NYSE: HIT) raised its full year profit forecast by 40%, and its shares are up 31%. But will Hitachi’s success continue?

According to the Thompson Reuters, a dollar-based ratio of insider corporate sales, was at 40 this past week and 35 the week before. Twenty is considered a negative market indicator.

It has been above 20 for six of the last 10 weeks.

Insider selling isn’t a perfect indicator of the market, but the last time it was this high was last May just before the summer sell-off.

The Journal also reported a steady flow of money out of stock mutual funds and into yield-oriented investments, bonds and dividend-paying stocks.

But, on the other side of the coin, Barron’s reported that professional traders have bought into the stock rally at a 77% bullish reading by the Consensus Index.

This April is looking very much like the last two with professional traders bullish, volatility low and prices for most big caps not looking too stretched at the moment.

So the picture is ambiguous at best.

But not for Jeremy Siegel.

Jeremy Siegel is one of the most respected minds in the money business and an economics professor at the University of Pennsylvania. When he talks, the money world listens.

He sees this market as cheap compared to bond yields. In fact, one of the cheapest he’s ever seen, and that goes back quite a ways.

He also thinks it cheap based on historical data and returns five and 10 years after really bad markets.

He’s optimistic for a lot of reasons.

The ECB has put off its crisis and that has eased a lot of fears in the market.

Earnings are good and we have low interest rates.

He believes rates have to move up and that will drive more investors out of bonds and into stocks.

And, he’s not at all worried about inflation and stated that history tells us the bulls will run for one to five years even after the Fed tightens.

So, two very different market perspectives, but I’ll tell you, for my money, Siegel is the man.

Historically, insider selling isn’t as good a predictor as insider buying. I think the bulls still have room.

Hitachi is Hot!

Hitachi was on the ropes after a huge $9.5-billion loss in 2009, but the picture is changing rapidly.

The Journal is reporting they have under gone big cost cutting measures, refocused to infrastructure for energy, transportation and telecommunications, and are leaving their competitors in the dust.

This year alone they raised their full year profit forecast by 40%, and their shares are up 31%.

Further cost cutting in the next four years should shave another $5.4 billion, which should help them double their operating margin to the stated 10%.

Their competitor Toshiba only shows a 6% margin for the next two years.

Hitachi’s goal, according to the Journal is to go after profit margins two to four times higher than present; on par with GE and Siemens. That’s considered tough for Japanese conglomerates, but not out of Hitachi’s reach.

Its 200-day chart is on the screen now.

It’s looking pricey now, about $10 above its 200-day, but if the projections are right, this could be very big. Buy on the dips and keep this one on your screen. The market loves companies like this one, and with profit margins soaring, there isn’t much not to like.

Finally, the SITFA.

This week it has to go to BAC top dog Brian Moynihan. It seems he is the only Executive Officer at BAC that didn’t get a cash bonus this year.

Not only that, three of his underlings earned more than he did.

In news releases, the bank’s board said each of the officers who received bonuses met and exceeded expectations, but those words were not in Mr. Moynihan’s description.

Even a new executive hired in 2011 earned as much as this week’s winner.

In fact, last year Mr. Moynihan was described as a strong leader, this year the word strong was omitted from comments about him by the board.

Boy, that’s a tough week. I have some as tough but they weren’t published in the WSJ for all to see.

But fear not, Brian should make up for it in next year’s bonus; BAC’s stock is up 75% this year so far. Let’s hope for his sake and sanity it holds up until 2013.

Article by Investment U

Source: ForexYard

Monday’s trading saw crude oil prices significantly drop during the European trading session. The commodity took a big hit from the Non-farm Payroll figures on Friday as well as escalating news from Iran regarding their nuclear Program.

The Commodity Markets were shut on Friday due to the “Good Friday Holiday” but we did see crude prices slightly increase the previous trading day during Thursday as it rose 1.8% before sliding today.

Once again doubts over the U.S Economy created a stir in the oil market after figures from the Labor Department on Friday were disappointing to say the least. The data from the report showed that 120,000 jobs were created in March,falling well short of the 210,000 figure that was expected. Positive news coming out of the U.S, in particular data or reports that indicate strength in the U.S Economy tends to boost Crude Oil Prices.On the other hand,  negative data as well as poor results will have a downward affect on the commodity as it loses demand.

Crude oil also came under strong pressure ahead of talks between Iran and global powers including China and the U.S.The talks are set to take place this week and will discuss Iran’s nuclear program.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

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By The Sizemore Letter

The following is an excerpt from Sizemore Capital’s First Quarter Letter to Investors.

2012 is off to a torrid start.  The S&P 500 finished the first quarter up 12 percent, its best start to a year since 1998.  The Nasdaq had an even better quarter, up nearly 19 percent—its best start since 1991.The more staid Dow Jones Industrial Average gained “only” 8.1 percent, but this put the index to within just 7 percent of a new all-time high.  Most European and Asian markets posted healthy gains as well.  The German Dax rose a full 18 percent.   Spain was a notable exception, as the only major market to see a decline.

There is good news in these numbers and bad news.  The good news is obvious, of course.  Stocks are enjoying one of their better rallies in memory, and the gut-wrenching volatility that defined 2011 seems more distant every day.  The downside is that stocks have already come close to returning in a quarter what most money managers—including Sizemore Capital—expected them to return for the entire year.

This leaves investors to wonder what to expect for the remainder of 2012.  Will the volatile opening weeks of the second quarter of 2012 be a harbinger of things to come?  2011 also started strong before degenerating into three quarter of “risk on / risk off” volatility.  Might we expect more of the same?

Sizemore Capital does not spend an inordinate amount of time pondering such questions.  Instead, we concentrate our efforts on finding attractively-priced investments that offer the potential for reasonable return with only modest risk.

Still, the overall direction of the market does matter, and the vast majority of equities and other traded securities—no matter how well researched—tend to follow the direction of the broader market.  And there are certainly times when it makes sense to be out of equities altogether.

We do not believe that this is one of those times.  

With the European sovereign debt crisis looking to enter another rough patch, we expect the month of April to be choppy and volatile.  And once all is said and done, 2012 may prove to be one of those years where it pays to “sell in May and go away.”  That would have been good advice last year, even if over the longer term that maxim has had a mixed record of success.

Still, looking at the bigger picture, we continue to find ourselves cautiously bullish.  While the March employment report disappointed investors and sent world markets sharply lower in early April, the economic news is for the most part improving.  Unemployment is falling, even if it is doing so slowly.  By many measures, it appears that the U.S. housing market is beginning to firm up (though a real recovery is still probably a few years away in most metro areas).

And perhaps most importantly, U.S. companies find themselves in the best fiscal health in recent memory.  Profits are near record highs, and corporate treasuries are flush with cash—cash that they are belatedly starting to put to work with dividend hikes and share buybacks.  Stocks are also relatively cheap by most measures and exceptionally cheap when compared to the returns offered on cash and most categories of bonds.

In Europe, the bond markets are rebelling against Spain’s more relaxed approach to cutting its budget deficit.  But given the safeguards put in place, it is difficult to see this degenerating into a repeat of last year.  The European Central Bank has made unlimited liquidity available to Eurozone banks, which has eliminated the possibility of a “Lehman Brothers” moment in which a major bank goes through a disorderly default.  Several large European banks—including UniCredit, BNP Paribas, and Société Générale—have already stated their intent to pay back their loans in the next 12 months, nearly two years ahead of schedule.  The performance of non-Spanish equity and debt markets also indicates that the concerns surrounding Spain will be contained.  Sizemore Capital remains bullish on Europe in general and Spain in particular, as we believe that the attractive prices on offer on some of Europe’s finest companies more than mitigates the risk of short-term volatility.

As contrarians, it is refreshing to see continued skepticism among individual investors.  American equity mutual funds continue to see weak inflows, and most investors we come into contact with are simply too paralyzed by the trauma of recent years to put their money to work.  Psychological indicators (like all tools in the investment management business) are imperfect and sometimes deliver contradictory results.  Randomness and “noise” play an enormous role in short-term market moves that often swamp any useful information gleaned from sentiment indicators and anecdotal investor behavior.  Still, we consider the skepticism of rank-and-file investors to be a bullish sign, all else equal.

Finally, we’d like to make a point about the sustainability of the current rally.  In the April 9, 2012 issue of Barron’s, Michael Santoli commented that the S&P 500 had risen 28 percent in the past six months—a feat recorded 20 times since 1927.  Santoli noted that after such a run, the market was generally higher in the one-, three-, and six-month periods that followed.

While Sizemore Capital would never depend on this kind of data mining for serious investment decision making, we mention it to make a point: the market’s strong return over the past six months does not mean that a serious reversal is imminent—or at least this has not been the case historically.

To read the full letter, please see Sizemore Capital First Quarter 2012 Letter to Investors.