Month: June 2012

By Central Bank News
    The Reserve Bank of New Zealand kept its benchmark Official Cash Rate (OCR) unchanged at 2.5 percent, as expected.

By Central Bank News
    Countries with major financial institutions are making gradual progress toward ensuring that compensation for top executives reflects the real risks that the firms are taking on, the Financial Stability Board said in a progress report.


    The FSB, which groups authorities in charge of financial stability in 24 countries, said those countries — Argentina, India, Indonesia, Russia and South Africa — that in 2011 showed significant gaps in implementing the FSB’s Principles and Standards (P&S) for Sound Compensation Practices had now made progress in implementing the principles. 
    But in Indonesia and Russia, the FSB said necessary regulation was still under review and had not yet been issued. Argentina, Brazil, China, India and Turkey had decided not to implement some of the FSB’s principles due to domestic limitations, such as labour laws.
    “These jurisdictions will need to continue their efforts to overcome impediments to full implementation in order to ensure an outcome that is fully consistent with the objectives of the P&S,” the FSB said.
    The Group of 20 leading economic powers has made the FSP responsible for monitoring and coordinating reform of the financial sector following the global financial crises that began in 2007. The FSB’s principles were endorsed by the G20 Leaders at their Summits in London in April 2009 and Pittsburgh in September 2009.
    Compensation practices at large financial institutions were a key contributing factor to the global financial crisis. The FSB’s principles were developed to align compensation with prudent risk-taking, particularly at significant financial institutions where executive pay typically was tied to short-term profits but not the longer-term risks.
    For further details, please see the FSB’s full report.


www.CentralBankNews.info
    

By The Sizemore Letter

I’ll let you in on a little secret, dear reader. In those moments when I have doubts, I like to look over the shoulders of great investors to see what they are doing. (Actually, it’s really not much of a secret. It’s a topic I discuss quite openly and frequently. See “When in Doubt, Follow the Greats.”)

Back in grammar school, your teacher might have called it “cheating,” but this isn’t grammar school. It’s the rough-and-tumble real world of investing, and we can all learn a lot from following the trades of great investors.

Every year in January, Barron’s assembles an “all-star team” of sorts to participate in their Roundtable discussion. The 2012 team includes familiar names such as Pimco founder Bill Gross, Gloom, Boom & Doom Report Editor Marc Faber, and Senior Investment Strategist of Goldman Sachs Abby Joseph Cohen.

In the June 9 issue of the magazine, Barron’s checked up on the Roundtable to get their investment outlook in light of the turbulence coming out of Europe (see “Caution: Sharp Turns Ahead.”)

Views among the ten panelists run the gamut, but a couple themes showed up with consistency.

1. Europe’s sovereign debt crisis continues to be the single biggest threat to both the global economy and the capital markets.
2. China’s slowdown is also a major concern.
3. The United States—while healthy by comparison—faces the “fiscal cliff” of tax hikes and spending cuts next year barring a deal between the White House and Congress.

The panelists might as well have added that the sky is blue, as these conclusions will come as a surprise to no one. Still, their recommendations for how to navigate the storm are varied and insightful.

Felix Zulauf, President of Zulauf Asset Management, is the most bearish of the bunch. Zulauf notes that stocks are cheap—adjusted for inflation, Italian stocks trade at “levels last seen in Mussolini’s era”—yet that does not guarantee good returns going forward. Zulauf sees the West more or less caving in on itself under the weights of its debts.

Abby Joseph Cohen notes that “Individual investors have had the stuffing knocked out of them” in recent years, which explains their skittishness. No one wants to sit through another 2008 meltdown, so investors tend to sell first and ask questions later.

This has created bargains, however. Like Zulauf, Cohen considers stocks to be cheap by historical standards: “Stocks are selling at low price/earnings ratios [and] companies have strong balance sheets.”

Of course, as Cohen notes, this means nothing in the short-term. Stocks can go from cheap to cheaper.

Meryl Witmer, General Partner of Eagle Capital Partners, has the views closest to my own. Says Witmer, “The exodus from the market has created bargains. You have to stay unemotional and analytical and try to find companies that, in the long run, will generate free cash and increase in value. Usually, when stocks get cheap like this, things get better.”

Witmer takes a play out of Warren Buffett’s book, arguing that you should only buy a company “if the market were to close for 10 years, you would still be happy owning that company.”

I will note that when I have made the biggest mistakes in my investing career, it is usually because I failed to take that advice. You don’t have to actually hold the stock for ten years. You should just make sure that everything you own is something you’d be willing to hold for ten years if the market were to close tomorrow. It’s a sound rule of thumb.

Bill Gross’s comments were particularly interesting. For a man known around the world as the “Bond King,” Mr. Gross is not at all bullish on bonds, noting that “Treasuries are overvalued and getting more so.”

Gross sees roughly a decade ahead of slow growth with the economy on central bank monetary “life support.” Yet he is bullish on select emerging market bonds and, interestingly, Sizemore Investment Letter recommendation Siemens ($SI) and French pharmaceutical giant Sanofi ($SNY)—both European companies in the heart of the sovereign debt crisis.

I’ll wrap this up with comments from “Dr. Doom” Marc Faber.

Faber, uncharacteristically, is surprisingly light on the doom and gloom. Though he expects things to get worse before they get better, he believes that “stock markets are oversold” and that “the U.S. bond market is overbought.”

Not surprisingly, Faber likes gold. He’s a long-time gold bug. But rather than recommend investing in a bunker in Idaho, Faber also likes Singapore REITS at current prices, as well as select European blue chips—including Sizemore Investment Letter recommendation Nestle ($NSRGY).

So there you have it. The All Star team is cautious, but they’re not exactly running for the hills either. By and large, they are recommending selective buying on dips, particularly of high-quality, dividend-focused equities.

Sound advice, I would say.

Disclosures: SI and NSRGY are Sizemore Capital holdings.  This article first appeared on MarketWatch.

London Gold Market Report
from Adrian Ash
BullionVault
Weds 13 June, 09:05 EST

The WHOLESALE MARKET gold price rose again as New York trading began on Wednesday, extending yesterday’s 1.8% jump to reach $1620 per ounce as new data showed US retail sales falling faster-than-expected in May.

Silver bullion recovered an earlier slip to trade just shy of $29.00 per ounce. The Euro currency held flat but European stock markets slipped with commodity prices.

Spanish borrowing costs rose to new Euro-era highs at 6.73% for 10-year debt, while Italian bond yields also rose to a 6-month record, unwinding the effect of €1.1 trillion in LTRO loans made by the European Central Bank to commercial lenders last winter.

Rome today cut to €6.5 billion the amount of new 1-year debt being sold at auction, but it still had to pay investors 3.97% per year in interest – well over one-point-five percentage points more than at the last time of asking in May.

“If Euro bond yields continue to escalate,” says one gold dealer in Asia, “gold could remain [well] bid.”

Weaker-economy Eurozone bond yields have now reached or breached levels seen before the European Central Bank lent commercial banks €1.1 billion in 3-year loans starting December last year.

The gold price for Euro investors today jumped €41,500 per kilo, a level first reached in mid-August 2011 and approached this week on what analysts variously called “central bank…Chinese [or] Indian…private banking [or] electronic buying.”

“Who knows?” asks one precious metals strategist in a note. “Apparently no one in the market.”

Tuesday was “the 7th consecutive day of alternating between ‘Up’ and ‘Down’ days” in the gold price, notes Russell Browne at market-making bullion bank Scotia Mocatta.

“From a price perspective, the 1559 support is key ahead of 1528 [while] 1640 is the topside trigger for a move higher.”

“Consolidation is ongoing,” agrees Axel Rudolph at Commerzbank in Luxembourg, also saying the gold price “remains essentially range bound within the confines of its major 1532 support zone…and the 1641 current June peak.”

Buying commodities such as gold “at current lows” has “always been profitable” over the last 18 months, said Kevin Norrish, managing director of commodities research at Barclays, speaking in Johannesberg, South Africa today.

“A break below [current levels] would be a major change” to the long-term trend, he said.

After Finnish finance minister Jutta Urpilainen said Helsinki wants collateral for its portion of the €100 billion credit line agreed with the Spanish government to support its banking sector last weekend, “Rumors about backing for the EFSF [Eurozone stability fund] could prove to be bearish news for the gold price,” says a note from Swiss refining and finance group MKS, “as countries may have to use their gold reserves if they run out of other assets to post, should gold be allowed as collateral.”

Over in the United States, says a new presentation from Societe Generale’s Cross Asset Research team, “The prospect of the Fed launching QE3 soon now that the US economy appears to be slowing [means] gold should rally.

“We see scope for the gold price to trade back above $1700 soon, but we are no longer forecasting new all-time highs,” says SocGen, pointing to weak jewelry demand.

“A significant supply surplus” requires what the banks’ analysts call “investors and speculators” to buy almost 2,000 tonnes both in 2012 and 2013 to balance the market.

Meantime in the Eurozone, withdrawals from Greek banking deposits “have seen a marked increase” according to un-named bankers speaking to Reuters.

Daily outflows from ATM cashpoints, investment and Greek bank accounts to other Eurozone member states now total some €500-800 million per day, say the sources.

“Despite the [gold price] push above $1600,” says today’s note from Standard Bank’s commodity analysts, “physical demand remains fairly robust.”

However, the bank adds, the premium over benchmark London prices asked by Shanghai dealers “came off slightly” overnight, indicating a market “that is cautious on gold and unwilling to add long positions.”

World #1 gold consumer India could see its credit status cut to “junk”, said the Standard & Poor’s rating agency Monday, owing to the slow pace of economic reforms and yawning

Taking the Rupee back towards all-time record lows against the US Dollar, “this has resulted in near record prices for gold in Rupee terms,” says Standard Bank, “and a consequent fall-off in physical buying from India.”

Adrian Ash
BullionVault

Gold price chart, no delay   |   Buy gold online at live prices

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2012

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) – Concerns Euro regions will plunge into further turmoil after Greece election forced New Zealand and Australian dollars to decrease against major currencies as appetite for riskier assets dampened. The Australian currency dropped as Reserve Bank of Australian Governor Glenn Stevens said that the exchange rate for the Aussie is high and a report showed that consumer confidence remained at its lowest level. On the other hand, the New Zealand dollar increased against the Aussie prior to a RBNZ meeting tomorrow. Euro region’s concerns are dampening the demand for riskier assets as concerns about Greece, Spain and Italy continue to worsen.

An economist at St. George Bank Ltd, Mr. Janu Chan said in Sydney that the market would continue to be volatile up until after the Greece election which is expected to determine the Greece status in the euro area. Euro area concerns have kept the Australian dollar below parity and after Greece elections this might change. The Reserve Bank of Australia has cut interest by 75 percent this year in a bid to encourage growth in the country. The currency has also been boosted by the Moody’s comments that the country’s AAA status is secure and the economic strength in the country is very high. The government is struggling to deal with low consumer confidence as retail sector continues to deteriorate.

The market expects the Reserve Bank of New Zealand is expected to keep interest rate at 2.5 percent when its policy makers meet tomorrow. The New Zealand currency was little changed against the US dollar trading at 77.69 US cents after it reached 77.89 the strongest level since May 15. It gained 0.1 percent against the yen to trade at 61.87 yen.

The Australian dollar dropped by 0.1 percent against the US dollar to trade at 99.50 US cents after it had gained by the same margin earlier in the day. It was little changed against the yen trading at 79.24 yen from 79.20 yen it traded yesterday.

Disclaimer
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By Central Bank News
    The Central Bank of Iceland raised its interest rates by 25 basis points as the domestic economy continues to recover with robust growth in demand and growing signs of a rebound in labour and real estate markets.
    But the central bank cautioned that the global economic outlook had become more unclear and it would be ready to action if warranted.



    “Uncertainty about the global economy has increased in recent weeks, not least because of the financial crisis in Europe. This causes additional uncertainty about the domestic economic and inflation outlook. In the near future, monetary policy may need to respond to developments that could significantly affect output growth and inflation in Iceland,” the bank said following a meeting of its monetary policy committee.
    The central bank’s four key interest rates would be raised by 25 basis points, with the overnight lending rate now at 6.75 percent and the seven-day collateralised lending rate at 5.75 percent.
    The central bank has been on a path of raising interest rates this year, increasing rates by 50 basis points on May 16 following a 25 basis point hike on March 21.


www.CentralBankNews.info

By Central Bank News

By Central Bank News
    The Bank of Thailand kept its policy rate unchanged at 3.0 percent, as expected, but said it would monitor the growing risks to the global economy and take action if warranted.

Stocks typically fall faster than they rise

By Elliott Wave International

Rising stock prices vs. investor fear: When one is present, the other is usually absent.

Yet the two were actually in each other’s company around the time of the most recent high in the Dow Industrials (May 1):

This week the Dow carried to a new recovery high without generating a corresponding new low in the VIX. This suggests a sudden hesitancy compared with the all-out, risk-on stance registered by the VIX’s behavior in March. The NASDAQ’s non-confirmation against the Dow’s new high also suggests a sudden reticence to ramp up portfolio risk. Last year, EWFF used a similar hiccup in the VIX to help identify the May 2011 high. With the Dow at or near the end of its rally, the odds favor a similar outcome now.

Elliott Wave Financial Forecast, May 3, 2012

Here’s the accompanying chart from that issue (wave labels removed):

When the markets were still going up at the beginning of 2012, were you warned that they would soon go down?

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Source: ForexYard

The markets saw very little movement yesterday, as the combination of a slow news day and worries about the outcome of the upcoming elections in Greece caused investors to limit the number of new positions they opened. That being said, more volatility is likely to occur today, as the US is scheduled to release three potentially significant indicators during the mid-day session. Traders will want to pay attention to the Retail Sales, Core Retail Sales and PPI, all being released at 12:30 GMT. With analysts predicting that both the Retail Sales and PPI will come in significantly below last month’s figure, the USD could see downward movement against its main currency rivals.

Economic News

USD – US Retail Sales Data May Turn Dollar Bearish

The dollar traded steadily against the euro yesterday, largely due to the lack of significant news releases during the European trading session. The EUR/USD advanced some 30 pips over the course of the day, reaching as high as 1.2528 during the morning session. Against the JPY, the dollar received a slight boost during overnight trading following comments out of the International Monetary Fund that the yen is overvalued. The USD/JPY was up just over 40 pips for the day, reaching as high as 79.68 before staging mild downward correction to stabilize at 79.55.

Turning to today, dollar traders will want to pay attention to the US Retail Sales, Core Retail Sales and PPI figures, all scheduled to be released at 12:30 GMT. Analysts are forecasting that the Retail Sales and PPI figures will come in well below last month’s figures. If true, the USD could see downward movement against the yen and euro during afternoon trading. That being said, given the poor state of the euro-zone at this time, any losses the dollar takes against the euro may turn out to be temporary.

EUR – Euro-Zone Crisis May Be Spreading to Italy

The euro saw little movement against most of its main currency rivals yesterday, as investors, already concerned with what the outcome of next week’s Greek elections will be, remained hesitant about opening new trades. That being said, the EUR/GBP and EUR/AUD both spent most of the day in a bearish trend. The EUR/GBP fell over 50 pips during European trading, eventually reaching as low as 0.8028. Against the aussie, the euro dropped some 52 pips, reaching the 1.2576 level by the afternoon session.

Turning to today, traders will want to monitor any developments out of the euro-zone, and in particular Italy. Now that Spain has secured a bailout to help its banking sector recover, all eyes have turned to Italy as it now appears the most likely to be hit by the euro-zone debt crisis. Any negative news could weigh down on the common-currency. Furthermore, the euro could see additional volatility if any fresh predictions about the Greek elections are released.

Gold – Gold Advances past $1600 Level

The price of gold advanced close to $20 an ounce late in European trading yesterday, eventually reaching as high as $1610 an ounce. With many investors still uncertain about how the upcoming elections in Greece will affect the rest of the euro-zone, gold has seen gains in recent days due to its status as a safe-haven asset.

Turning to today, any announcements out of the euro-zone may impact the price of gold. With the debt situation in Italy being closely eyed by investors, any negative news out of the country may result in the precious metal extending its current upward trend.

Crude Oil – Crude Oil Stages Slight Upward Correction

After dropping to a nine-month low at $81.02 earlier in the week, crude oil staged a mild recovery over the course of the day yesterday. Crude traded as high as $83.38 a barrel yesterday, up close to $2 during European trading. That being said, the commodity was not able to maintain its upward momentum, and was trading around the $82.60 level by the evening session.

Turning to today, crude may see downward movement if US indicators come in below their expected levels. Part of the reason oil has been bearish recently is because of low demand out of the US, the world’s leading oil consuming country. Any disappointing American data today may signal that demand for oil will continue to drop.

Technical News

EUR/USD

Technical indicators on the weekly chart show that this pair is currently range trading, meaning that no defined long-term trend can be predicted at this time. That being said, the daily chart’s Williams Percent Range has crossed over into overbought territory. Traders may want to open short positions, as downward movement could be seen in the near future.

GBP/USD

A bullish cross has formed on the weekly chart’s Slow Stochastic, indicating that this pair could see upward movement in the coming days. In addition, the Bollinger Bands on the daily chart are beginning to narrow, meaning that a price shift could occur in the near future. Opening long positions may be the wise choice.

USD/JPY

While a bullish cross appears to be forming on the weekly chart’s Slow Stochastic, most other long-term indicators show that this pair is in neutral territory. Traders may want to take a wait and see approach, as a clearer trend is likely to present itself in the near future.

USD/CHF

Technical indicators are providing mixed signals for this pair. While the Williams Percent Range on the daily chart is in oversold territory, the weekly chart’s Slow Stochastic has formed a bearish cross. Traders will want to use a wait and see strategy for this pair.

The Wild Card

EUR/SEK

The Slow Stochastic on the daily chart has formed a bullish cross, indicating that this pair could see upward movement in the near future. Furthermore, the Relative Strength Index on the same chart appears to be on its way to crossing into oversold territory. Forex traders may want to go long in their positions ahead of an upward breach.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

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