Month: May 2012

By MoneyMorning.com.au

My weekend was going well – calm and peaceful, I was sifting through the weekend papers whilst sipping my morning coffee. Then I read an article that nearly made me spit my coffee right out again. The Times really made my blood boil and has been simmering ever since. It takes a lot to rile me, but this article really vexed me.

What utter, utter rubbish

The Times tackled the matter of DIY investing. ‘Is it worth a shot?’ it asks.

DIY investing means investing directly into shares and making your own choices. To help answer its question The Times called upon some financial advisers. Here is what they said.

‘Direct investment‘, says one, ‘is for people who can afford to lose most of their initial investment.’

‘We very much see the element of a client’s portfolio in individual stocks as that part of their portfolio which they manage themselves for enjoyment… and that any potential losses will have a negligible impact on their overall finances.’

In other words, they imply, you are pretty much certain to lose some, if not all of the money that you personally manage. But so long as you get some fun out it, regrettably they cannot prevent you from this misguided endeavour.

‘If a client insists on individual stocks representing a core part of their financial planning strategy,’ he goes on, ‘they would probably need a minimum investment of 250,000 to obtain a diversified portfolio of holdings and to justify costs and charges.

So not only is direct share investment a bad idea, these so-called experts would have you believe, it is also only for the big boys.

I cannot find the words to adequately express just what utter rubbish this is. Let me refute just some of these utterings.

Direct Investing – You Can Succeed

First of all, you do not need a huge amount of money to invest directly on the stock market. You have to start somewhere, and if you only have a little, don’t let that put you off.

Second, in my opinion, diversification is overrated. Of course you should not put all your eggs in one basket, but rather than deciding how many shares you should own you should concentrate on buying good ones without having to feel you ought to make up the numbers with a lot of poor ones.

Next, it is not true that direct investment is doomed to failure. I know plenty of people who invest directly in the stock market and make a very good return from it. But I know absolutely no-one who has been made rich by his fund manager or financial adviser.

Strangely The Times chose to illustrate its article with a photo of Warren Buffett who has, of course, made a fabulous investment return by investing directly into the shares of good companies and sticking with them.

For sure you will make some mistakes and take some losses. But you will learn from these and, as with anything else in life, the more you practise the better you will become.

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…

Why Graphite is the High Tech Commodity of the Future
2012-04-27 – Dr. Alex Cowie

Why Gold is Hands-Down the Best “Money” You Can Buy
2012-04-26 – Kris Sayce

12% Compulsory Super – Get Ready for the Government’s Next Tax Grab
2012-04-25 – Kris Sayce

Westfield – The Aussie Retail Stock That Could Make You Money
2012-04-24 – Shae Smith

Why Natural Gas Is Still My Favourite Resource Opportunity
2012-04-23 – Kris Sayce

Why You Can Succeed at Direct Investing

By The Sizemore Letter

Sizemore Capital is making a strategic allocation shift for all ETF portfolios with U.S. large cap exposure.  This affects the Tactical ETF Portfolio and the Strategic Growth Allocation.

To be consistent with Sizemore Capital’s focus on dividend growth, we are eliminating our long-term positions in the iShares S&P 500 Index (NYSE:$IVV) and replacing them with the Vanguard Dividend Appreciation ETF (NYSE:$VIG). 

The Vanguard Dividend Appreciation ETF tracks the performance of the Dividend Achievers Select Index, which consists of U.S. stocks that have long history of raising their dividends.  Every stock in the portfolio must have raised its dividend for a minimum of 10 consecutive years.

Much of our research and investment in recent years has focused on income and income growth, and for good reason.  Capital gains can be ephemeral, and the only way that investors can realize their returns is by selling shares.  Rather than enjoying the milk in the form of dividends, you end up slaughtering the cow. And continuing this analogy, once the cow is gone investors are left with nothing to eat.

I should note that both the Tactical ETF Portfolio and Strategic Growth Allocation are long-term growth models with current income as only a secondary objective. But even for growth-oriented investors with years or decades until retirement, a dividend-growth strategy makes sense, and the Vanguard Dividend Appreciation ETF is very consistent with a growth strategy.

Remember, the Vanguard Dividend Appreciation ETF does not have current income as its primary objective.   With a current dividend yield of 2.0%, it doesn’t pay significantly more than the S&P 500’s 1.9%.

Its focus on dividends is instead a focus on quality.  When a company raises its dividend, it sends a powerful message that management sees better days ahead. The discipline required to consistently pay a dividend also has a way of discouraging management from wasting shareholder money on quixotic empire building or on overpriced mergers that fail to deliver value.  It forces management to be efficient.  And importantly, it also helps to keep management honest.  Paper earnings can be manipulated, but dividends have to be paid in cold, hard cash.  Dividends don’t lie.

My good friend Albert Meyer of Bastiat Capital refers to his own strategy as “an index fund, but without all the rubbish.”  (It sounds classic in his professorial South African accent.)

This is how I like to think of the Vanguard Dividend Appreciation ETF.  With a portfolio turnover of only 14% per year and a management fee of only 0.13%, VIG enjoys the best aspects of an index fund—tax and fee efficiency—but without the baggage of the lower-quality companies that bog down most indices.

The Strategic Growth Allocation currently already has a position in the iShares Dow Jones Select Dividend ETF (NYSE:$DVY). It is fair to ask whether an additional position in the Vanguard Dividend Appreciation ETF is redundant.  But to this question, I would give an emphatic “no.”

DVY is primarily an income-focused ETF with a heavy allocation the utilities sector.  VIG is a growth-focused ETF with greater exposure to the consumer and industrial sectors.  Though they both have “dividend” in their titles, their strategies are vastly different (see “Dividend ETFs for Growth and Income”).

Disclosures: IVV, VIG and DVY are positions in Sizemore Capital accounts.

Article by Investment U

Meridian Biosciences (Nasdaq: VIVO) and Portugal Telecom (NYSE: PT) have a high risk of cutting their dividends.

Dividend investors are enamored with yield. Obviously, they want to get paid as much as they can. It’s why stocks like Annaly Capital Management (NYSE: NLY) and its 13.5% yield are so popular.

But what many investors ignore in their search for yield is safety. What good is a high yield if the dividend is cut in the near future? Not only does an investor receive less income when a dividend is cut, capital can be lost, as the stock usually tanks as a result.

When I look to add a stock to The Perpetual Income Portfolio, yes, I’m looking to obtain as high a yield as I can, but only if I’m comfortable the dividend is safe. If I’m not confident, then I won’t recommend the stock no matter how juicy the yield is.

To analyze the safety of a dividend, look at the payout ratio, which is the percentage of net income paid out in dividends – although I use a slightly different formula. I look at cash flow from operations and free cash flow instead of net income, because net income, or profits, can be manipulated fairly easily with accounting tricks. Cash flow, which represents the actual amount of cash that came into a business versus the cash that went out, is a more accurate representation of a company’s business.

So let’s take a look at a couple of companies whose dividends may not be entirely safe.

The first one is Meridian Biosciences (Nasdaq: VIVO). It pays a 3.7% yield and business has been strong. I applaud management’s desire to return a significant portion of profits to shareholders. However, they return too much. Their stated goal is to have a payout ratio (based on earnings) of 75% to 85% each fiscal year.

My threshold for the payout ratio is 75%. Anything higher and the dividend could be in jeopardy if the company has a bad year.

Meridian just reported quarterly results and earned $9.6 million in the quarter. Its dividend payment of $0.19 per share should come out to approximately $7.9 million, which equals 82% of its net income.

The company’s cash flow results weren’t released. But in the last quarter, dividends ate up over 80% of free cash flow and in the three prior quarters, dividend payments were more than 100% of both earnings and free cash flow. The company has about $24 million in cash and no debt.

With earnings expected to grow this year and next year, paying the dividend shouldn’t be a problem if Meridian hits its numbers. However, if they experience a hiccup in business and net income falls, the company may have to dip into its cash to keep the dividend the same. And if business stalls for more than a quarter or two, the company would have to think seriously about cutting its dividend.

Let’s look at another.

Portugal Telecom (NYSE: PT) paid a dividend equal to all of its free cash flow in 2011. It did the same in 2010, but dividends didn’t eat up all of its free cash flow prior to that.

The company has 6.4 billion euros in debt and 5.7 billion euros in cash and it’s located in a country that’s facing difficult times right now. Keep in mind, it does a lot of business in Brazil, so it’s not solely focused on Portugal. But the Portuguese portion of the business is something to worry about, particularly since its payout ratio based on free cash flow is 100%.

Should the company run into trouble, it will likely cut the dividend the way some of its peers have. The 7.2% yield is attractive. But I’m concerned it’s not sustainable.

For both companies, I’m not saying a cut in the dividend is imminent, but if you’re an investor in these stocks, you should be watching the financial statements very closely to see if there’s any trouble on the horizon. Often, a company won’t cut the dividend immediately after reporting a bad quarter. They’ll wait to see if things improve. But then a quarter or two down the road, investors get hammered when the dividend is reduced.

Keep a close eye on these two. You’ve been warned.

Good Investing,

Marc Lichtenfeld

Article by Investment U

Source: ForexYard

The US dollar fell vs. the safe-haven JPY throughout European trading yesterday, as a batch of worse than expected international data led to an increase in risk aversion. Specifically, a worse than expected euro-zone manufacturing PMI followed by a disappointing US ADP Non-Farm Employment Change figure resulted in the USD/JPY tumbling over 50 pips over the course of the day. The pair dropped as low as 80.04 before staging a slight upward correction. The euro-zone news resulted in the EUR/USD dropping over 90 pips to reach its lowest level in close to a week and a half. The pair eventually stabilized around the 1.3130 level during the afternoon session.

Turning to today, dollar traders will want to pay attention to the weekly US Unemployment Claims figure scheduled to be released at 12:30 GMT, followed by the ISM Non-Manufacturing PMI at 14:00. Yesterday’s employment news led to increased doubts among investors regarding the pace of the US economic recovery. Should today’s news come in below analyst expectations, the dollar may continue to slide against currencies like the yen and Swiss franc.

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.

London Gold Market Report
from Ben Traynor
BullionVault
Wednesday May 2012, 08:30 EDT

THE SPOT MARKET gold price rallied to $1658 an ounce ahead of Wednesday’s US trading, following the release of disappointing US jobs data – though gold in Dollars remained down on the week so far.

The ADP National Employment Report shows the US economy added 119,000 nonagricultural private sector jobs in April – less than many analysts had forecast. The ADP report is closely watched as a precursor to the official nonfarm payrolls report, which is out this Friday.

Federal Reserve chairman Ben Bernanke said last week that the US needs to add between 150,000 and 200,000 jobs each month to meet Fed projections.

Earlier in the day, gold dipped back below $1650 per ounce during Wednesday morning’s London trading – 1.23% down on yesterday’s high – while European stock markets were mixed and the Euro fell following the release of disappointing economic data.

London’s FTSE lost 0.6% by lunchtime, while French and German stock markets were up following yesterday’s May 1 absence. Commodity prices ticked lower, with copper down nearly 1.3% on the day.

The silver price meantime fell to $30.59 per ounce – 2.2% down on the week so far.

“[Silver’s] inability to bounce above $31.50 remains a concern for longer term bulls,” says technical strategist Russell Browne at bullion bank Scotia Mocatta.

On the currency markets, the Dollar this morning extended the rally that it began on Tuesday shortly after the publication of better-than-expected manufacturing data.

“Growth is more anemic than any of us would want,” said Federal Reserve Bank of Dallas president Richard Fisher last night.

“But it’s positive.”

Fisher added that he would not support further monetary stimulus such as quantitative easing “unless truly horrific data were to come forward”, although the Dallas Fed president is not due to become a voting member of the Federal Open Market Committee until 2014.

Fisher added that Congress now has “to do their part; we’ve done ours”.

“[The] central scenario is now for further Fed monetary accommodation to be implemented only in the fourth quarter instead of June,” said a note from French bank BNP Paribas this morning.

BNP has cut its average gold price forecast for 2012 from $1855 per ounce to $1715, and its silver price forecast from $37.50 to $33.10.

Fisher’s comments meantime echo those of European Central Bank Executive Board member Joerg Asmussen, who said last month that “Europe has done its part” in fighting the sovereign debt crisis, and that the onus was now on the International Monetary Fund.

ECB president Mario Draghi meantime called for a “growth compact” last week when he appeared at a European Parliament hearing, though he added that fiscal austerity measures are “unavoidable”.

“The only answer to this,” said Draghi, “is to persevere and for the ECB to create an environment that is as favorable for this as possible.”

Eurozone manufacturing activity continued to fall last month – and at a faster rate – according to official purchasing managers’ index data published this morning.

The Eurozone-wide manufacturing PMI fell from 46.0 in March to 45.9 for April.

The Eurozone’s unemployment rate meantime hit its highest level in nearly 15 years in March – rising to 10.9% – according to data published Wednesday by Eurostat, the European Union’s official statistics agency.

German manufacturing activity also contracted last month, with April’s PMI falling to 46.2, down from 48.4 in March.

German unemployment meantime grew by 19,000 last month to hit 6.8%, in line with March’s figure, which was adjusted higher from 6.7%.

The Euro dropped sharply against the Dollar this morning, and by Wednesday lunchtime was down 1.2% on yesterday’s high. Against the Pound, the Euro fell to its lowest level since June 2010.

The Euro gold price meantime hit a two-week high, breaking through €40,500 per kilo (€1260 per ounce).

The ECB should lend money to the European Stability Mechanism, the permanent bailout fund that

Here in the UK, Bank of England figures released Wednesday show M4 money supply grew by £8.2 billion in March, excluding money held by institutions the Bank classifies as ‘intermediate other financial corporations’ i.e. companies that facilitate transactions between banks such as clearing counterparties.

Of this, the ‘household sector’ portion of M4 rose by £2.8 billion, while ‘private non-financial corporations’ saw a decline in money holdings of £1.4 billion.

The bulk of M4 growth was accounted for by ‘non-intermediate other financial corporations’ – which include insurance companies and pension funds. These saw their M4 holdings grow by £6.8 billion in March.

M4 excluding intermediate OFCs saw year-on-year growth of 6.4% in the first quarter of the year, although M4 lending fell by 0.3%.

“Severe credit tightening would drag the economy back into a deep recession,” say economists at Moody’s Analytics.

“Further quantitative easing by the Bank of England is unlikely to be announced at the May monetary policy meeting, but future action will not be ruled out.”

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 TraderVox.com

Tradervox (Dublin) – The US dollar rose for the third day against the euro as reports from the 17-nation trading bloc showed that European manufacturing shrank for the ninth month as unemployment rose in the region’s greatest economy. The report has escalated concerns that the debt crisis in the region will slow the regions economic growth.

After the report, the euro came to close to two-week low against the yen prior to European policy makers meeting tomorrow. Investors and analysts are speculating that the policy makers will signal steps towards interest rates cut to spur growth.

According to Ian Stannard of Morgan Stanley in London, the weak data from the euro zone reflects the deterioration that has been seen in the region. He also added that the trouble is not limited to the struggling countries alone but is now affecting the large economies in the region. Some analysts have projected that the euro will come under immense pressure from major currencies. The dollar has improved against most of the currencies in the last few days and its expected to continue on this trend through out the week.

The US dollar increased by 0.7 percent against the euro to trade at $1.3145 per euro. It had earlier climbed by 0.8 percent which is the strongest since April 23. The greenback also increased against the yen by 0.3 percent to trade at 80.31 yen. The 17-nation currency declined against the yen by 0.4 percent to exchange at 105.56 yen. The euro had dropped against most of its peers after reports from the region and downgrading of Spain.

The yen continued to decline against the dollar after Moody’s Investor Service indicated that sentiments from Ichiro Ozawa who is a lawmaker in tax reforms may have impact of country’s credit rating. The US QE3 speculations continue to be dampened by reports and sentiments from the world’s largest economy.

Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management. 

Article provided by TraderVox.com
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By The Sizemore Letter

Investing is not all that different from choosing a spouse.  At some point in every man’s life, he has to make a choice.  Does he go for the alluring but volatile young vixen who will ultimately put him in an early grave, or does he take the more rational course of action and choose a mature, dependable companion to spend his life with?  (Women face similar choices themselves; to marry the handsome but unpredictable young buck or the more stable—if somewhat boring—workhorse?).

It’s nice if you can have it all, of course; romance and stability in a partner.

For investors, much the same can be said about stocks.   Sexy “glamour” stocks—and the heartburn they often bring—are best left to shorter-term traders.  Bonds offer stability but nothing in the way of excitement.   If you are looking for something in the middle—predictable, long-term wealth building—dividend-paying stocks are likely your best option.  They allow you reach your financial goals while still managing to sleep at night.

Today, I’m going to recommend five boring stocks with sexy yields.  We’ll start with that most mundane of American retailers Wal-Mart (NYSE: $WMT).

Wal-Mart is about as dull as it gets as a company; the world’s largest retailer of the basic “stuff” of modern life—everything from food to build-it-yourself furniture.

But Wal-Mart also  happens to be a dividend-growing dynamo.  In 2002, just 10 years ago, Wal-Mart paid $0.075 per quarter in dividends.  Today, it pays $0.398—an increase of more than five times.

With Wal-Mart’s domestic expansion slowing in the years ahead (and thus needing less cash for investment), I expect the company to continue aggressively raising its dividend.  The stock currently yields an attractive 2.7%, which is substantially more than what most bonds pay.

Next on the list is consumer products giant Kimberly-Clark (NYSE:$KMB).  If you thought it was impossible for a company to be more boring than Wal-Mart, then you failed to consider Kimberly-Clark.  The company manufactures and sells diapers, Kleenex, and other basic products you might find in your bathroom.

But like Wal-Mart, Kimberly-Clark is a dividend-raising dynamo.  Over the past decade, its quarterly dividend has risen from $0.30 to $0.74; not too shabby when you consider what a volatile decade it has been.  Kimberly-Clark currently yields 3.7%.

I can’t mention Kimberly-Clark without mentioning its much larger rival Procter & Gamble (NYSE: $PG).  Chances are good that half or more of the products in your bathroom and laundry room were made by Procter & Gamble, at least if you are an American (overseas, rival Unilever (NYSE:$UL) tends to dominate).  They make Crest toothpaste, Gillette razors, Charmin toilet paper, and Pampers diapers, among many, many other brands.  This is a company that Warren Buffett has dabbled in for years, and it’s easy to understand why.  Demand for its products is stable, and its brands have incredible intangible value.

Over the past decade, P&G has raised its quarterly dividend from $0.19 to $0.562; again, not a bad run.  The stock currently yields 3.5%.

Moving on, let’s take a look at the oh-so-boring world of natural gas transportation.   On this front, I recommend Williams Companies (NYSE: WMB).

Stop for a minute and think.  Can you think of anything more boring than natural gas transportation?  Yeah, me neither.

But William’s dullness is its strength.  Natural gas pipelines are stable, predictable businesses, regardless of what happens to the price of gas.  And if anything, the current glut in natural gas supplies should bode well for pipeline companies like Williams.  Cheaper prices encourage higher consumption.

Williams Companies is an IRA-friendly way to get access to the master limited partnership Williams Partners (NYSE:$WPZ).  For tax reasons that go beyond the scope of this article, master limited partnerships cannot be held in IRA accounts.  But as a corporation with a large ownership interest in a partnership, WMB can.

Williams Companies  currently yields 3.1%, and I expect this to rise substantially over time.

Finally, I want to put out one recommendation that is likely to get your pulse racing a little more than the rest: Spanish telecom juggernaut Telefonica (NYSE: $TEF).

There is little more boring than a telecom utility.  While you may “ooh and ah” over your latest iPhone, you generally spend very little time thinking about the company that provides cellular service to it.

Telefonica would have to be considered “riskier” than the rest of these recommendations by virtue of being domiciled in Spain.  But with a yield of over 11% at current prices, I consider it a risk worth taking.

Telefonica gets nearly half of its revenues from the fast-growing markets of Latin America, so continued recessionary conditions in Spain do not present an undue risk to Telefonica’s business.  Disruptions to the European financial system could result in the company cutting its dividend to preserve cash, but I consider this unlikely and, again, a risk worth taking for the potential rewards.

Disclosures: All securities mentioned are holdings of the Sizemore Capital Dividend Growth Portfolio.

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 AUD took heavy losses vs. its main currency rivals during yesterday’s trading session, falling a bigger than expected cut in Australian interest rates. The AUD/USD fell over 100 pips following the news, reaching as low as 1.0304 during early morning trading. The aussie also fell close to 100 pips against the JPY and 145 pips against the euro. Turning to today, traders will want to focus on the UK Construction PMI at 8:30 GMT, followed by the US ADP Non-Farm Employment Change at 12:15 GMT. Any positive news could help both the British pound and US dollar reverse their current bearish trends.

Economic News

USD – US Manufacturing PMI Gives USD Boost

After taking losses against most of its main currency rivals throughout the overnight and morning sessions yesterday, the USD was able to stage a mild recovery following a better than expected US ISM Manufacturing PMI. The news resulted in a spike of over 30 pips for the USD/JPY, bringing the pair back above the psychologically significant 80.00 level. Against the Swiss franc, the dollar was able to move up over 50 pips reaching as high as 0.9087.

Turning to today, all eyes will likely be on the US ADP Non-Farm Employment Change figure, scheduled to be released at 12:15 GMT. The ADP figure is considered an accurate predictor of Friday’s all important Non-Farm Payrolls figure, and consistently leads to market volatility. At the moment, analysts are forecasting today’s news to come in at 178K, well below last month’s figure. If true, the dollar may reverse the gains it made yesterday. That being said, the ADP figure has proven notoriously difficult to predict. If today’s news comes in above analyst forecasts, the dollar may be able to extend yesterday’s bullish momentum going into the second half of the week.

EUR – EUR Stays Range Bound During Slow Trading Day

While most European markets were closed yesterday due to the May Day holiday, the euro saw mild gains as poor news out of the US and UK continued to drive market sentiment. The EUR/USD was up around 30 pips during mid-day trading, reaching as high as 1.3275 before staging a downward correction following positive US news. The pair eventually stabilized at 1.3220. The common-currency saw similar gains against the Japanese yen. The EUR/JPY traded as high as 106.02 before correcting itself and stabilizing at 105.80.

Turning to today, euro traders will want to pay attention to the German Unemployment Change figure at 07:55 GMT. As the strongest euro-zone economy, German indicators tend to have a significant impact on the EUR. With analysts predicting the figure to come in worse than last month’s, the euro may take some losses during mid-day trading today. Additionally, the European Unemployment Rate, scheduled to be announced at 09:00 GMT is forecasted to go up to 10.9%. If true the euro could turn bearish against safe haven currencies like the USD and JPY.

Gold – Gold Reverses Gains Following Positive US News

The price of gold steadily went up in value during the first part of the European session yesterday, as poor global data caused investors to shift their funds to the precious metal. That trend abruptly changed, following a better than expected US ISM Manufacturing PMI which resulted in increased demand for the US dollar. Gold fell over 600 pips following the news before stabilizing around $1662 an ounce during afternoon trading.

Turning to today, gold traders will want to pay attention to the US ADP Non-Farm Payrolls figure, scheduled to be released at 12:15 GMT. With analysts predicting today’s news to come in below last month’s, gold may rebound during the afternoon session. That being said, should the US indicator come in above expectations, gold may see further downward movement today.

Crude Oil – US Manufacturing Data Signals Increase in Oil Demand

A better than expected US ISM Manufacturing PMI signaled an increase in demand for crude oil in the world’s largest oil consuming country yesterday, and resulted in a significant boost in prices. Following the news, crude oil shot up over $1.50 a barrel, reaching as high as $106.29 during the afternoon session.

Whether or not oil can maintain its current bullish trend is largely dependent on US news scheduled to be released later today. Should the ADP Non-Farm Employment Change figure exceed expectations, it may convince investors that the US economic recovery is continuing, despite several setbacks in recent weeks. Investors could take any positive news as a sign of increased demand for oil, which could help the commodity extend its gains.

Technical News

EUR/USD

The Williams Percent Rang e on the daily chart has crossed over into overbought territory, indicating that downward movement could occur in the near future. Additionally, a bearish cross has formed close to the 80 level on the same chart’s Slow Stochastic. Going short may be the wise choice for this pair, ahead of a possible downward correction.

GBP/USD

In a sign that a downward correction could occur in the near future, the Relative Strength Index has crossed into overbought territory. This theory is supported by the weekly chart’s Williams Percent Range, which is currently well above the -20 level. Going short may be the wise choice for this pair.

USD/JPY

The daily chart’s Williams Percent Range has crossed over into oversold territory, indicating that this pair could see upward movement in the near future. Additionally, the weekly chart’s Slow Stochastic seems to be close to forming a bullish cross. Traders will want to keep an eye on the Slow Stochastic. Should the cross form, opening long positions may be the wise choice.

USD/CHF

The daily chart’s Williams Percent Range has dropped into oversold territory indicating that upward movement could occur in the near future. That being said, most other long term technical indicators show this pair range trading. Taking a wait and see approach may be the best choice for this pair.

The Wild Card

Crude Oil

A bearish cross has formed on the daily chart’s Slow Stochastic, indicating that downward movement could occur in the near future. In addition, the Relative Strength Index (RSI) on the same chart is approaching the overbought region. Forex traders will want to keep an eye on the RSI. If it crosses above 70, it may be a good time to open short positions.

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.

By MoneyMorning.com.au

It’s hard to admit it when you get something wrong.

The fact is, we predicted a huge and painful Aussie house price crash.

With the exceptions of the Gold Coast, some areas in Perth, and the holiday home market, the house price crash hasn’t happened.

So, after getting it so wrong, how come we’re so keen to talk about it? The answer is simple…

While we predicted disaster for the Australian housing market, what we didn’t predict is what’s happening right now.

And that is something much, much worse than anything we could have predicted.

Lower Interest Rates Won’t Help Aussie House Prices

It’s funny, in recent months almost every reason the property spruikers gave to support their argument has collapsed.

One argument they could still fall back on was the idea that the Reserve Bank of Australia (RBA) could cut rates to support the Australian housing market.

But even that argument is dead. After the release of the latest RP Data housing index, National Australia Bank economist Rob Henderson told The Age:

‘Three months after two interest rate cuts, what has happened to house prices? They have fallen.

‘So it doesn’t suggest interest rate cuts are much of a panacea for the housing market does it?’

They laughed at your editor when we said lower interest rates wouldn’t help house prices.

Two years ago we pointed out the level of interest rates was only part of the reason for the housing bubble. The biggest factor was the credit boom.

The credit boom blew up the bubble…the lack of a credit boom would burst the bubble.

So when the credit boom ends – as it has – it would be over for the Australian housing market.

But rather than a crash, what’s happening to the Australian property market is worse. It’s a slow and painful death. The reason it’s so bad is that most homebuyers and homeowners can’t see what’s happening.

They assume because house prices haven’t crashed, they must be doing OK. But according to RP Data, Melbourne house prices fell 7% over the past year.

Add to that interest repayments of 7% and that’s a 14% hit. Add another year of even a flat housing market and thanks to interest repayments, the average homebuyer is down 21%.

We don’t know about you, but in our portfolio any investment where we lose 21% within two years is a bad investment.

As we’ve said many times, at these prices Australian housing is a bad investment.

And if you think low interest rates will help the Australian housing market, think again. You only have to look at the U.S. housing market to see that nearly four years of low interest rates haven’t helped to boost house prices.

Will an RBA Interest Rate Cut Matter?

If credit doesn’t expand, the interest rate doesn’t matter…house prices won’t rise.

Even so, the RBA has taken a desperate step to try and boost asset prices. It had an immediate – if short-lived – impact on the Aussie stock market yesterday.

You’ve probably seen the news that the RBA cut interest rates by 0.5%. That cut is the largest single rate cut since the RBA cut rates by 1% in February 2009.

So, was the RBA right to cut?

Why ask us? We don’t know. The fact is, no individual can know what the price of money (interest rates) should be.

The only true way to find the real price of money is to leave it to the market. That financial markets bet billions of dollars based on a decision by a group of faceless men and women is ridiculous.

They can’t possibly get it right. If a free market determined interest rates, the rate would change according to market forces. It would provide a clear signal to investors, letting them know if they should spend or save.

But when a central bank intervenes, investors get mixed messages. And so the market behaves in ways you wouldn’t expect.

Cheers.
Kris.

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