Month: April 2012

By MoneyMorning.com.au

When notorious American thief Willie Sutton was asked why he robbed banks he replied “Because that is where the money is”. Similarly, if you were to ask mining executives why they are heading to West Africa and they might equally reply, “Because that is where the gold is”. In a recent report, [UK] natural resource broker Old Park Lane Capital describes West Africa as the “destination of choice in the gold space”. But the report also reveals that, as Willie Sutton could have told today’s gold explorers, you cannot make easy money without bearing a bit of risk.

Why is this region, stretching from Sierra Leone to Ghana, becoming such a hotbed of activity? Its promise lies in its geology. Of particular importance is the Paleoproterozoic Birmian granite-greenstone terrain – this is the dominant source of gold in West Africa.

3 Reasons Gold Explorers Have Ignored West Africa

Firstly; the terrain which dominates West Africa is largely surrounded by dense jungle, deserts and a deep overburden that this area is already a major gold producing region. But the area is still relatively unexplored and Old Park Lane believes that it has the potential for fresh world class discoveries.

Aside from the technical challenges, the biggest threat is political. This poor region has had a particularly volatile political history. Driven partly by the need to attract foreign investors, things are beginning to calm down, but there is still plenty of scope for unnerving surprises.

Only last month, Captain Amadou Sanogo seized control of Mali, claiming that he needed more support to fight rebel groups returning from Libya where they had backed Muammar Gaddafi. Ivory Coast’s industry was disrupted by a disputed election in 2010. Al-Qaida insurgency is a threat in Niger. Senegal saw deadly protests in the run-up to elections this year.

But there have been success stories too, most notably in Liberia where Africa’s only female president, Ellen Johnson Sirleaf, was re-elected last November.

Political turmoil and harsh terrains are not the only concern of foreign mining companies. There is also a creeping increase in the state share of mining proceeds. Ghana has increased its rate of corporate tax from 25% to 35% and proposed a 10% windfall tax. Mali wants to increase its stake in new mining projects from 20% to 25%. A new mining code in Guinea will allow the state to acquire a further 20% stake in mining projects, albeit on a fully paid basis, alongside its 15% free carried interest.

West Africa’s Dependence on Natural Resources

West African countries are heavily dependent upon natural resources; mining contributes 28% of Mauritania’s GDP and 30% of Sierra Leone’s. It is hard to criticise West African countries for their grasping. And there is not that much foreign miners can do about it, short of withdrawing and losing everything that they have invested hitherto.

Whether the West African nations need the foreign miners more than the latter need them is debatable. But still these nations cannot afford to kill the goose that is laying the golden egg, and one good way to encourage the miners is to improve infrastructure. Power, water and transport links are crucial to mining projects and West African countries are beginning to make the necessary investments, not only on their own but also in concert. For instance, Ivory Coast and Burkina Faso recently signed an agreement to jointly develop road, rail and energy projects.

In this environment miners can only persevere while keeping their fingers tightly crossed. But the rewards are there. The average grade for West African gold deposits is around two grammes per tonne, with some newer discoveries in excess of three grammes per tonne. Land holdings can be large and sufficient for the achievement of the two-million ounce resource that, according to Old Park Lane, gives a developer a serious chance of putting a mine into production.

Tom Bulford
Contributing Editor, MoneyWeek (UK)

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

From the Archives…

Small Caps – A Way to Bet on Developing Markets…Without Investing Overseas
2012-04-013 – Kris Sayce

All Transactions to be Conducted in the Presence of a Tax Collector
2012-04-12 – Simon Black

How You Can Use Government Intervention to Profit on the Stock Market
2012-04-11 – Kris Sayce

Australia – The Pacific Pawn in USA Versus China
2012-04-10 – Dr. Alex Cowie

If Ron Paul Were US President…
2012-04-09 – Mark Tier

The West African Gold Rush is Heating Up

EURUSD stays within a upward price channel on 4-hour chart, and remains in uptrend from 1.2995, the fall from 1.3262 is treated as consolidation of the uptrend. As long as the channel support holds, uptrend could be expected to resume, and next target would be at 1.3300 area. On the other side, a clear break below the channel support will indicate that a cycle top has been formed at 1.3262, then the following downward movement could bring price to 1.2800 zone.

Daily Forex Forecast

Article by Investment U

Selling naked put options is easy, simple and much safer than most investors imagine if you just stick to my six tips.

Let’s say you’ve been interested in buying Microsoft stock and you feel $20 is a good price to pick up some shares. It currently trades at $23.50 per share, so you’ll need it to fall in price a bit before getting filled on the trade.

Most stock traders would just put in a “limit buy” order to buy the stock if/when Microsoft falls down to $20 per share. But there’s no guarantee that Microsoft will ever fall to $20 per share, and there’s no one paying this stock trader upfront for his time while they wait to buy Microsoft at $20…

That is, unless you’re using a put selling strategy…

As an option trader, you can take the transaction one step further by selling a Microsoft $20 put option contract – you’ll receive the going rate for that option and receive instant income.

In the past, I’ve shown Investment U readers some of the ins and outs of put options – you can read all about them, but right now I’m going to show you how to profit from a real life example of selling put options.

Selling Naked Put Options – Strike Prices and Option Chains

When selling naked put options, it can be hard to grasp how the strike prices and contract prices work together until you understand what an option price list – or option chain – looks like.

Take a look at this historical Microsoft’s option chain below:

This is a typical option chain for Microsoft options that expired in January 2010.

• The strike prices are listed in the column in black. Since we’re interested in the $20 strike price, we’ll look at the JAN10 20.00 line.
• Scan over to the “bid” column that shows how much you can receive for selling that $20 put option contract. The bid column shows $1.30 as the price. This translates into $130 you will receive for every $20 put option contract you sell because all prices are listed in per share costs. And an option contract controls 100 shares of stock.
• For a typical 1,000 share stock trade, you can sell 10 put option contracts and instantly receive $1,300 in your account, no questions asked.

This is money for you to use anyway you see fit. No matter what happens, this money is yours.

In exchange for selling those 10 put option contracts and receiving your instant $1,300, you’d be obligating yourself to buy 1,000 shares of Microsoft at a price of $20 per share until the expiration day in January 2010.

At this point, you know ahead of time that you will be obligating yourself to buy 1,000 shares of Microsoft at $20 per share, for a total investment of $20,000.

Not only do you get to collect $1,300 upfront just for placing the option trade, but you’re also giving yourself a chance to buy a stock that you want to own, at the price you want.

How great is that?

As long as you know this potential future transaction is within your financial means and trading plan, then it’s a win-win situation for you.

When Selling Options, What Happens on Options Expiration Day?

So, when selling put options or any options, people often ask, “What happens when options reach their expiration date?”

Only two things can occur at expiration – either the price of the stock is above the chosen strike price or it’s below.

• If the stock finishes above the strike price, then the trade is over and the option expires worthless. The option buyer walks away with nothing while the option seller gets to keep the upfront cash with no further obligations.
• If the stock finishes below the strike price at option expiration, the option buyer will “exercise” his right to the contract and you will be required to fulfill your end of the agreement – which means you end up having to buy a stock you wanted at the price you wanted.

Sounds pretty good to me. And all the while you still get to keep the upfront cash.

So in the case of our Microsoft example above…

• If Microsoft closed below $20 in January 2010, you’d be obligated to purchase your 1,000 shares at $20 each. With the $130 received upfront for each option contract, this essentially reduces your cost basis to $18.70 per share once the transaction is complete. Not bad.
• If Microsoft closed above $20 at January 2010 expiration, the trade is over and the option expires worthless. You keep the $1,300 and are free to repeat the process again for another expiration period. This is the key to income generation.

As I mentioned in a recent closed-door meeting to Investment U members in California, up to 90% of option contracts will expire worthless, leaving you with the upfront cash payment.

After implementing this strategy for a while, you will come to see that most of the trades will expire and you’ll keep padding your account with instant income. It’s kind of like being the casino.

Using a Put Selling Strategy – Six Tips to Selling Options

A few guidelines to keep in mind when selling naked put options:

• Only sell put options on stocks you want to own. Do not use this options trading strategy on high flyers just to receive the upfront income.
• Only sell enough contracts to stay within your comfort zone. If you normally trade in 500-share blocks, then only sell five option contracts.
• If you’re uncomfortable at any time during the trade, or do not wish to own the stock at the strike price you’ve chosen, then you can unwind the trade at any point. All you have to do is buy back the put options you’ve sold.
• The option price will fluctuate during the course of the trade. It may get cheaper or more expensive while you hold it. The bottom line is – you’ll either get to buy the stock at expiration or the option will expire with no value.
• You will need to have an approved “option trading account” with your broker. This needs to be set up before making these transactions.
• You’ll always know ahead of time what your potential total outlay will be if obligated to buy the shares. No surprise endings.

That’s all there is to selling put options. It’s easy, simple and much safer than most investors imagine if you just stick to my six tips above.

Good Investing,

Lee Lowell

Article by Investment U

Article by Investment U

These three big data companies could go public now that Splunk’s IPO sent shockwaves through Wall Street.

A little over a year ago, my wife and I bought our first house.

While we’re both very happy with our purchase (especially the location and price), the property sat vacant for a year before we closed on it.

As a result, I had my fair share of home projects to get the place back up to snuff.

I’m no “Bob the Builder,” though.

So I often use Google (Nasdaq: GOOG) to search for any home issues I’m having.

Nine times out of 10, if there’s a problem, I can find a solution in minutes. And I’ve saved so much money and time searching for tips and tutorials on various projects.

Now why am I telling you all this?

Because last Thursday Splunk Inc. (Nasdaq: SPLK) made its debut on Wall Street.

The stock exploded from $17 to $32 in its first day of trading before closing out the week at $36.

And word is quickly spreading that it’s the “Google of the business world.”

A Game Changer

You see, behind every website, server, network and system is a mountain of data. It’s very expensive and time consuming for companies to try to make sense of it all.

But this is where Splunk comes into play.

In essence, Splunk is a search engine and analytic software program that captures the full scope of a company’s IT data (even in real-time) so it can focus on what’s really important… building its business.

From tracking social media feeds to customer behavior, user transactions and security threats to fraudulent behavior and more, Splunk uses the vast amount of a company’s IT data to enable them to make better-informed decisions about their business.

But don’t take it from me…

Macy’s (NYSE: M) raves, “The money we’ve spent on licensing Splunk, we’ve captured back over and over again. We’ll spend two or three minutes using Splunk, versus five or six hours before.”

Today, over 3,700 customers use Splunk, including half of the Fortune 100 companies. I’d expect to see this number jump even higher now that the company is public.

But perhaps even more important, Splunk is also just the first of many potential big data IPOs to come within the next 12 to 18 months.

Three More Potential Winners

Just take a look at these companies that could go public now that Splunk’s IPO sent shockwaves through Wall Street:

1. Cloudera: Based out of Palo Alto, California, Cloudera develops and distributes a popular open-source software framework called Hadoop.

According to Reuters, Hadoop “helps others companies, including Nokia, Qualcomm and Groupon, store and crunch big data.”

But Hadoop is also used by the likes of Google, Yahoo! and IBM. And Splunk appears to even compliment its use. Perhaps this explains why the company is growing as rapidly as it is. It just raised another $40 million in late 2011.

2. Tableau: Tableau is on a mission to help anyone – businesses and people alike – see, understand and share data.

Today, more than 7,000 companies, including a number of government agencies, use Tableau software to analyze and visualize their data. Some of these customers include Bank of America, Barclays Capital and the CIA, just to name a few.

But that’s not all.

Roughly 50,000 people also use Tableau to share data in their blogs and websites. And the company was ranked by research firms Gartner and IDC as the world’s fastest-growing business intelligence company in 2011.

As if this news wasn’t promising enough either, Tableau has already spilled the beans it expects to IPO in 2013.

3. Sumo Logic: Sumo Logic can be considered as the cloud-computing version of Splunk.

Currently, Splunk works across on-site computer servers rather than cloud-based servers. But Sumo Logic takes the analytics power of Splunk and applies them to the cloud.

By doing this, Sumo Logic eliminates the need for software upgrades and ongoing system maintenance.

And since more and more firms are embracing cloud-based services, Sumo Logic could just be the next generation of data maintenance and analytics.

Big Data: The Next Great Tech Trend

No matter how you slice it, companies specializing in making machine data easy to understand, graph and share are likely going to be one of the hottest tech trends of the next decade and beyond. Just be sure to keep your eyes and ears open for opportunities to jump in.

Good Investing,

Mike Kapsch

Article by Investment U

Article by Investment U

Investors looking to invest in robotics and minimize risk should look to FANUC (PINK: FANUY), a Japanese robotics company with two trends on its side.

In the futuristic hit television series The Jetsons, launched in 1962, the goal of the creators was to imagine what life would be like a century later – in 2062.

Fifty years later, and many of the gadgets in the show are still creations of cartoon sci-fi. Surely, George Jetson’s “space car” – which folds up neatly into a briefcase – would save millions in parking garage fees for urban commuters. And we don’t take a “food pill” for dinner, as George, Elroy, Judy and wife Jane did on occasion.

But the Jetsons did have a robot maid named Rosie. And in that area, our sci-fi present may finally be catching up with our sci-fi future…

Danger, Will Robinson?

Take Amazon’s (Nasdaq: AMZN) recent $775-million acquisition of Kiva Systems. Kiva makes self-propelled turtle-like robots designed for use in warehouse “picking” operations. For some context, keep in mind that Amazon’s human-based warehouse fulfillment operations cost $3.5 billion a year. Amazon’s purchase demonstrates that mobile robots (automakers have used robotic floor-mounted welding systems for years) are no longer research projects – they’re capital investments.

Robots are also lifesavers. The U.S. Army and the Marines recently ordered 1,200 “micro robots” from a private firm, ReconRobotics, for use in high-risk tactical operations. The devices, equipped with infrared cameras and batteries, weigh a little over one pound and can be physically tossed into a room, like a grenade, and maneuvered by remote control so soldiers can see what’s on the other side of a darkened entryway.

By Pentagon terms, the order is tiny – a total of $15 million. But then again, so were orders for UAVs (unmanned aerial vehicles) like the Predator years ago, until the military grasped the value of the drone aircraft.

Boston’s iRobot (Nasdaq: IRBT) is another story worth watching. The company went public seven years ago, and already sells millions of those disc-shaped Roomba vacuum cleaners to consumers and thousands of PackBot bomb-disposal units to the Pentagon.

But this year, the company restructured its business units because it sees rapid growth for robots in other markets.

Its latest creation is “Ava,” a five-foot three-wheeled automaton with an iPad tablet for a brain and Xbox motion sensors. iRobot developed the device as a platform for a myriad of business uses. Building security is one possibility. So is healthcare. The company is testing Ava’s use as a robotic “physician’s assistant.” iRobot’s CEO recently said the company will even pilot test Ava as a “shopping assistant” in retail store environments.

iRobot’s strategy has potentially high rewards. But it also has high risk if the company can’t execute on its strategy.

WALL-E World

On the other hand, there’s another lesser-known robotics company with more promise and less risk: FANUC (PINK: FANUY), a Japanese blue chip with zero debt plus a cash stockpile of $7 billion.

Headquartered in the shadow of Mount Fuji, FANUC (pronounced FAN-uk) is the world’s leading manufacturer of computerized numerical control (CNC) devices, used in machine tools and as the “brains” of industrial robots.

FANUC, whose name is an acronym for Fuji Automatic Numerical Control, is a world leader in robotics since the early 1970s. It was founded as a wholly owned subsidiary of Fujitsu in 1955 after the electronics giant decided to enter the factory automation business.

FANUC offers investors a pristine balance sheet with impressive profit margins (42% operating, 26.7% net). The company’s profits dropped during the 2008 to 2009 recession, but rebounded; the last nine-month earnings report showed an earnings gain of 22%, a 23% jump in sales and solid top line revenue growth of 15.8%. The stock is up 15% so far this year.

Looking ahead, I see two trends that will boost FANUC:

• Robust demand from China. Wage inflation is growing at a 20% annual clip. Manufacturers there, like everywhere else, see robots as a way to help keep a lid on wage pressures and increase factory productivity. FANUC’s China subsidiary just built a new $16.8-million plant in Shanghai to meet this need, and expects to reap annual sales of $150 million.
• A weakening Japanese yen (down 6.6% so far in 2012) will boost FANUC’s exports. FANUC does most of its manufacturing in Japan. And the company hopes to raise its price competitiveness by concentrating even more of its production in its home country. To that end, FANUC recently said it’ll build a new factory near Tokyo to double its domestic output capacity of machine tools used in the manufacture of smartphones.

Keep in mind that FANUC, although it’s a Japanese blue-chip company with a $40-billion market cap – trades on the pink sheets.

This is quite common for established foreign companies these days (Rolls-Royce, Nestle and the Swiss pharmaceutical giant Roche are three prominent examples) wanting exposure to U.S. capital markets – but not the bureaucratic hassles and expense of listing on the Nasdaq or NYSE.

That said, FANUC’s unsponsored ADR pink sheet listing, FANUY, trades around 100,000 shares a day (with occasional spikes of four or five times that amount). It’s not a stock to trade short term. So if you’re going to buy shares, use care in building a position and be prepared to hold it as the robotics revolution rolls on.

Good Investing,

Carl Delfeld

Article by Investment U

London Gold Market Report
from Ben Traynor
BullionVault
Thursday 26 April 2012, 08.00 EDT

SPOT MARKET prices for gold bullion traded steady Thursday morning, around $1650 an ounce during London’s morning session – slightly higher than where they started the week.

“[Gold] trend line support is seen at $1627 on the weekly chart,” says the latest technical analysis from Scotia Mocatta.

“A close below this level on Friday will bring in liquidation selling of stale long gold positions.”

Gold prices briefly touched $1627 per ounce on Wednesday following the latest Federal Reserve interest rate decision, before rallying to touch a one-week high at $1653 this morning.

The gold price in Sterling meantime briefly hit a four-month low at £1008 per ounce following Wednesday’s Fed decision, before it too bounced back higher.

Silver bullion meantime failed to break above $31 per ounce – remaining around 3% down on the week so far – while stocks and commodities were also broadly flat as markets digested the latest statements from US policymakers.

In its official statement yesterday, the Federal Open Market Committee reiterated its view that economic conditions “are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014”.

The Fed however published projections showing that only four FOMC participants expect that the appropriate rate at the end of that year will still be 0.25% or below, compared to six when projections were last published back in January.

By contrast, ten of the seventeen participants expect the appropriate rate at the end of 2014 will be 1% or above – up from eight in January.

“The Fed’s interest rate forecasts,” writes Robin Harding at the Financial Times, “are getting the bank into a real bind.”

Harding points out that Bernanke defined “exceptionally low” rates as “close to where we are now”, meaning the FOMC statement is at odds with participants’ projections.

“The result is a complete mess,” writes Harding.

“This confusion undermines the cause of greater transparency that Mr. Bernanke has worked so hard to advance.”

“Strains in global financial markets,” adds yesterday’s FOMC statement, “continue to pose significant downside risks to the economic outlook.”

This was identical to the phrase used in March’s statement, with the exception that this time the FOMC did not say these strains have eased.

The US economy meantime needs to add between 150,000 and 200,000 jobs each month to meet fed forecasts, Fed chairman Ben Bernanke told a press conference following the interest rate announcement.

America’s economy is facing a “fiscal cliff” at the end of this year, US Treasury secretary Timothy Geithner warned Wednesday.

“The simultaneous expiration of tax cuts and large across-the-board cuts in spending… presents a risk,” Geithner said.

“If you try to restore fiscal balance without a penny of additional revenue, then you have to cut deeply – too deeply – into critical functions of government.”

“If Congress can’t respond to the prospect of much tighter fiscal policy,” says Steve Barrow, currency analyst at Standard bank in London, “then it may be up to the Fed again to cushion the economy through easy monetary policy.”

Here in Europe, “the soundness of banks’ balance sheets will be a key factor in facilitating both an appropriate provision of credit to the economy and the normalization of their funding channels,” European Central Bank president Mario Draghi told the European Parliament Wednesday.

“I consider it of crucial importance that banks strengthen their resilience further, including by retaining earnings and by retaining bonus payments.”

European banks borrowed over €1 trillion at the ECB’s two longer term refinancing operations in December and February, with Draghi saying it is “encouraging” that much of this money was borrowed by small banks as these “are best placed to refinance the real economy”.

In the UK, British bank Barclays on Thursday reported a 22% rise in first quarter pretax profits compared to Q1 2011.

Over in India meantime, early reports suggest there was a significant drop in gold buying for this year’s Akshaya Tritiya festival, which fell on Tuesday this week, compared to last year.

Gold bullion sales are estimated to have dropped by around 50% to 10 tonnes, newswire Reuters reports.

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

By The Sizemore Letter

Ah, to be back in South America.  Long-time Trading Deck readers might recall that I spend a fair bit of time in Peru (see “Going Long Two Beaten Down Euro Stocks”).  When you marry a Peruvian, you don’t really have a choice.

Not that I’m complaining.  I can say in all seriousness that I’ve never had a bad meal in Peru.  Not in more than five years of regularly visiting.  (If you haven’t had lomo saltado or proper Peruvian ceviche, then you haven’t lived.)  And as the father of a young toddler, I can happily say that I’ve never had to change a diaper there either.  A Peruvian man can live happily aloof of such responsibilities.  Such a shame I had to return to Dallas…

I was recently in Lima with the wife and kid to root for my father in law, Lucho Vasquez, in the Concurso Nacional, the once-per-year national championship for Peruvian paso horses (see “Paijan and the Legendary Peruvian Paso Horse”).

The Vasquez family have a long history of success as breeders, and last year Lucho won the prize for Champion of Champion stallion (LV Jardinero, the horse on the left in the photo below).  Alas, 2012 would not be a repeat.  The best stallion this year belonged to long-time breeder Alfredo Elias Vargas.  Oh well.  Can’t win ‘em all.

(Anyone interested in viewing the past years’ champions (and who can read Spanish) can visit http://www.ancpcpp.org.pe/inicio.html, click on “Identidad” and then on “Campeones.”)

One might legitimately wonder what Peruvian horses have to do with investing.  My answer would be “everything.” 

During rough economic times, there are two basic ways to run a successful business.  You can go the Walmart (NYSE:$WMT) or Amazon (Nasdaq: $AMZN) route of providing basic goods and services that people need regardless of the state of the economy. Or, you sell a specialized niche product to a dedicated core of consumers that is not sensitive to price. With a niche product like high-end Peruvian Pasos, you have a base of aficionados so fanatically dedicated to the breed that nothing short of death or incapacitation will cause demand to fall much.  Sure, at the margin, there will be the occasional aficionado who has to cut back his operation due to business setbacks elsewhere.  But for the best horses, demand simply doesn’t fall.

I’m not recommending that readers run out and buy a Peruvian horse (unless, of course, horseback riding is a passion of yours).   A breeding operation can be a fantastic investment.  But making it so requires years of experience and massive initial capital outlays for land, labor, feed, and—most importantly—high-quality breeding stock. For the vast majority of breeders, Peruvian horses are a luxury expense.   Afición isn’t cheap.

Instead I want to draw broader investment conclusions from recent developments in the world of Peruvian horses.

The first is the internationalization of the breed.  Every time I come to a horse show I see new faces and hear stories about a new breeder from a new country looking to enter the fray.  The breed’s popularity has expanded beyond its homeland to cover virtually all of Spanish-speaking South America and Central America.  It’s also gaining popularity in Europe, and it even has a small foothold in India.  (Ironically, the breed is struggling in the United States, which used to be one of the stronger markets.  There are now only a handful of internationally-competitive American breeders and a pronounced dearth of young breeders to carry the torch.)

While I am not aware of much in the way of Asian interest, I’m sure it’s coming.  Chinese companies are active all over South America, and it is just a matter of time before a Chinese investor decides to “go native” and buy a ranch.

This fits into my investment theme of luxury goods as both a play on the rise of emerging markets and on the rise of the global nouveau riche (see “Profiting from the Art Boom”).  While the middle class continue to suffer with impaired home equity and stagnant real wages, the world’s wealthy are doing just fine.  The crisis in Europe notwithstanding, corporate profits are at all-time highs.

It also makes a case for alternative investments with little correlation to global stock markets and relatively little exposure to the bends and twists of the global economy.   In a global bust, a champion horse will hold its value better than most financial assets.  This was certainly the case during the 2008-2009 meltdown.  Based solely on the prices paid for top-quality horses, one might not have noticed there was a crisis at all.

Of course, it helps that horses are rarely purchased with debt and that hedge funds have thus far ignored them.  The day I see a solicitation for a hedge fund or ETF that buys Peruvian horses, I’ll probably cry a little.  Just wait…that day will come.

If you take away one lesson from this article, it should be this:  If you want stability, buy assets that are not held by others with excessive debt or that have been “financialized” with ETF issues.

The financialization of commodities and other previously-uncorrelated assets has caused correlations to shoot upward in recent years and has been a major contributor to the upswing in volatility we’ve had to endure (see “The Myth of Commodities Investment”).  Everything is correlated to the stock market now because everything is traded on the same exchanges by the same people with the same borrowed money.  Diversification is dead.

As for your capital that is invested in traded financial assets, use their inherent volatility to your advantage.  Buy investments that no one else seems to want.  As an example, with Spain’s stock market near its 2009 lows, many Spanish blue chips are trading at prices we may never see again in our lifetimes.

My favorite?  Telecom giant Telefonica (NYSE: $TEF).  Roughly half its revenues come from the high-growth markets of South America, and it pays a dividend that could be cut in half and still be one of the highest-yielding stocks in Europe.

This article first appeared on Market Watch

Disclosures: TEF and WMT are held by Sizemore Capital clients.  TEF is held by the Covestor Sizemore Investment Letter Model

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

Source: ForexYard

The euro was able to maintain its recent bullish trend throughout the European session yesterday, as investors continued to support riskier assets as a result of strong euro-zone debt auctions earlier in the week. Turning to today, traders will want to pay attention to a batch of US news, including the weekly Unemployment Claims figure and Pending Home Sales. With both figures expected to signal growth in the US economy, the dollar may be able to recoup some of its recent losses.

Economic News

USD – US Data May Help Dollar Today

The US dollar was bearish throughout European trading yesterday, as positive euro-zone news from earlier in the week led to increased risk taking among investors. The EUR/USD reached as high as 1.3235 during the morning session. Overall, the dollar dropped some 50 pips vs. the common-currency yesterday. Against the Japanese yen, the dollar reversed its gains from Tuesday. The USD/JPY dropped as low as 81.06, down 50 pips for the day.

Turning to today, traders will want to monitor the US Unemployment Claims and Pending Home Sales figures, set to be released at 12:30 and 14:00 GMT, respectively. Analysts are forecasting that the number of people who filed for unemployment insurance last week dropped slightly from the week before. Furthermore, today’s housing data is expected to show a significant increase in sales from last month. Should today’s news come in at or above the forecasted 1.4%, the US dollar may be able to recoup some of yesterday’s losses.

EUR – Investor Risk Taking Helps Boost EUR

The euro largely held onto gains vs. the US dollar during European trading yesterday, as risk taking among investors continued to support higher yielding assets. The EUR/USD spent much of the day above the psychologically significant 1.3200 level. In addition, the common currency saw significant gains against the British pound, following poor economic news out of the UK. The UK Prelim GDP figure came in at -0.2%, well below the forecasted 0.1%. The news sent the EUR/GBP as high as 0.8220, up over 50 pips for the day.

Turning to today, traders will want to note that US news is likely to generate market volatility among euro pairs. Should the news come in better than expected, the euro could give back some of its recent gains vs. the greenback. At the same time, positive US news could generate some risk taking in the marketplace, which may help the euro move up vs. the safe-haven Japanese yen. Additionally, traders will want to remember that the euro-zone debt crisis still has the potential to bring the common-currency down. Any negative announcements today could result in euro losses.

AUD – Aussie Sees Mild Gains amid Risk Taking

The Australian dollar saw gains against several of its main currency rivals yesterday, following an increase in investor risk taking. The AUD/USD was up close to 40 pips during the European session, reaching as high as 1.0345. Against the British pound, the aussie gained over 100 pips for the day, following worse than expected news out of the UK. The GBP/AUD dropped as low as 1.5546 during morning trading.

Turning to today, traders will want to pay attention to news out of the US, as it is likely to dictate the level of risk taking in the marketplace. Positive indicators could cause the AUD/USD to reverse yesterday’s gains. At the same time, should the US news generate additional risk taking in the marketplace, the aussie could see gains vs. the safe-haven Japanese yen.

Crude Oil – Bearish USD Leads to Gains for Oil

Crude oil was bullish throughout yesterday’s trading session, as the combination of investor risk taking and expectations of another round of quantitative easing in the US sent the US dollar lower. Typically the price of oil goes up when the USD is bearish, as the commodity becomes cheaper for international buyers. Crude spent much of the day trading above the $104.00 a barrel, its highest level since last Friday.

Turning to today, oil traders will want to keep their eyes on the US Unemployment Claims figure and Pending Home Sales. Should either of the indicators come in better than forecasted, the USD could see some gains, which may cause the price of oil to drop during the afternoon session. That being said, should the USD extend its bearish trend today, oil may be able to move up higher.

Technical News

EUR/USD

Most long-term technical indicators show this pair range-trading, meaning that no defined trend can be predicted at this time. The one exception is the Williams Percent Range on the daily chart, which has crossed into overbought territory. Traders will want to take a wait and see approach for this pair, as a downward correction may take place in the near future.

GBP/USD

The Williams Percent Range on both the daily and weekly charts have crossed into overbought territory, pointing to a possible downward correction for this pair. Additionally, a bearish cross on the daily chart’s Slow Stochastic supports this theory. Going short may be the wise choice for this pair.

USD/JPY

A bullish cross on the daily chart’s MACD/OsMA indicates that this pair could see upward movement in the near future. That being said, most other indicators show this pair range trading at this time. Taking a wait and see approach for this pair may be a wise choice, as a clearer picture is likely to present itself in the coming days.

USD/CHF

The Williams Percent Range on the daily chart has crossed into oversold territory, indicating that a bullish correction could occur for this pair. The Relative Strength Index (RSI) on the same chart is pointing downward, and looks like it may also move into the oversold zone. Traders will want to keep an eye on the RSI. Should it cross below 30, it may be a sign of an impending upward correction.

The Wild Card

NZD/CHF

The daily chart’s Slow Stochastic has formed a bullish cross, indicating that this pair could see upward movement. Furthermore, the Williams Percent Range on the same chart has crossed into oversold territory. This may be a good time for forex traders to open long positions ahead of a possible upward correction.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

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