Month: July 2012

By Central Bank News

Article by Investment U

Following the "right predictions" is not a winning investment strategy. Successful investors become financially independent by following the right principles.

When I speak at financial seminars and conferences around the country, I feel a tension – a palpable fear – that didn’t exist in the past.

Investors aren’t just nervous or uncertain. They’re scared. And who can blame them?

The economy is sputtering. The Eurozone threatens to come apart at the seams. And the stock market is gyrating wildly.

In response to all this, some stock market pundits are pounding the table, insisting that this is an historic buying opportunity. Others, however, are infected with anxiety themselves. And a few are actively fear mongering.

Who should you believe, the raging bulls or the rampaging bears?

CNBC won’t make you financially independent.

The answer is neither.

As historian David McCullough often reminds his audiences, there’s no such thing as the foreseeable future. None of these gurus has a crystal ball.

And that’s okay. Because financial independence is not about following the right predictions.

It’s about following the right principles.

Fortunately, the principles of successful investing are well understood.

Why don’t most people follow them? One reason is ignorance. There’s no shame in this. It’s a big, complicated world out there and we’re all ignorant of different things.

However, it’s unfortunate that most kids graduate from high school without a modicum of financial literacy. It’s tough to get a quick start in this world if you don’t understand compound interest, 401(k)s, adjustable-rate mortgages, or why we have a stock market.

Great principles will make you financially independent.

So what are the great principles of investing?

It’s tough to cover them all in a short column like this. (Although I cover the bases in my first book, The Gone Fishin’ Portfolio.)

But here are the nuts and bolts everyone should know:

For starters, few people get rich by founding a computer company in their garage, recording a platinum record, or playing third base for the Yankees. Most people with a net worth of a million dollars or more became financially independent the old fashioned way. They maximize their income, minimize their outgo, and religiously save and invest the difference.

As my friend Rick Rule likes to say, when your outgo exceeds your income, your upkeep becomes your downfall.

Six ways to make your money work for you…

Ok, let’s assume you’ve done what many people are either unable or too undisciplined to do: You’ve saved some money. Now what?

The next step is to understand that there are six factors that will determine what your investment portfolio is worth in the future:

1. The amount of money you save.
2. The length of time you let it compound. (Hands off.)
3. Your asset allocation. (This refers to how you diversify your portfolio among uncorrelated investments like stocks, bonds, cash and precious metals.)
4. Your security selection. (i.e. the individual investments you own.)
5. The amount you pay in commissions, fees and other expenses.
6. And the amount you fork over in taxes.

Note that there’s nothing here about forecasting the economy, timing the stock market, or figuring out how the European debt crisis will end. You cannot know the answer to those questions.

And that’s okay, too, because they will have little bearing on what your investment portfolio is worth five, 10, or 15 years from now.

If you’re investing to become financially independent, think long-term and forget about the day-to-day trivia that dominates the headlines and pays the salaries of so-called experts.

Focus instead on following proven investment principles. In other words:

• Save as much as you can.
• Start as soon as you can.
• Leave it alone as long as you can.
• Follow a sensible asset allocation.
• Diversify among high-quality securities.
• Minimize your investment costs.
• And tax-manage your portfolio.

The principles are not complicated. Spend less money than you earn. Save.

Put your savings into a diverse portfolio of uncorrelated assets. Diversify to prevent big losses. Live below your means, and let compound interest do the heavy lifting.

Want to learn more about becoming financially independent?

Our free white paper, How to Build Wealth, covers asset allocation, position sizing, tax management, and other sound investment principles in detail.

Did I mention that it’s free?

Until next time, heed the advice of Thomas Jefferson:

“In matters of style, swim with current; in matters of principle, stand like a rock.”

Good Investing,

Alexander Green

Article by Investment U

Article by Investment U

What’s the premise behind this whole downgrading business?

“Hindsight is 20/20.”

“Fool me once, shame on you. Fool me twice, shame on me.”

We’ve all heard these adages before – and so has Moody’s. Let’s go back to the mid-2000s…

There were a number of banks out there investing in a lot of things that rating agencies couldn’t comprehend. Since there was an inability to assess risk, agencies such as Moody’s gave AAA ratings to banks like coaches giving out trophies at a YMCA youth sports tournament –everybody was a winner.

We know the results of that process. Banks took on a lot of risk and didn’t have the capital requirements to back it all up. It all hit the fan four years ago and rating agencies lost massive credibility.

Last week, Moody’s made the attempt to regain some of that lost prestige. But the markets basically told them, “We already knew this.” Markets took little notice after Moody’s downgraded the ratings of 15 of the world’s largest banks. We all knew it was coming.

So, was there anything new we learned from the latest downgrades?

Dividing Banks into Three Tiers

One of the biggest problems that wasn’t addressed four years ago was how banks would deal with certain financial crises. Remember that the Federal Reserve did stress testing with some of the bigger banks a few months back to see how they would do against a European banking collapse and other economic fiascos. Well, Moody’s looked at the same thing when it downgraded banks.

With their ratings downgrades, Moody’s Investors Service further divided some of the world’s biggest banks. The divisions are based on each bank’s strength and if it can weather storms with access to cheap customer deposits. And this makes sense.

“Safe haven” banks are those institutions that fund themselves with steady retail deposits rather than the climate in capital markets. Moody’s designated its highest ratings to three safe havens – HSBC (NYSE: HBC), Royal Bank of Canada (NYSE: RY) and JPMorgan (NYSE: JPM) – because it argued that these three are protected by their deposits and thus have an edge to absorb hits better than their peers.

A new trend that evolved after the banking crisis is weaker banks with less “shock absorbers” getting hammered for taking risk. Meanwhile, stronger banks are rewarded for being more conservative, guaranteeing lower costs and greater margins.

Those banks with lower ratings will not only see their cost of business increasing (i.e. through reduced access to funds or by paying more for funding), but could see trading partners ask for more collateral. Most likely, you’ll see a lot of business guided to banks that the market perceives as stronger. If you’re a bank that’s severely dependent upon markets for funding, the lower your rating, the harder it is to get that funding because of the debt crisis in Europe and the worldwide economic slowdown.

Just in case you’re curious, there were three tiers of strength. I’ve talked about some the strongest, but there’s the middle tier. Moody’s said these banks depend on unreliable capital market revenues to make shareowners happy. Goldman Sachs (NYSE: GS) fell into this group.

The last group is those that had been roughed up by their risk management and/or have “shock absorbers” not up to par with their banking peers. Morgan Stanley (NYSE: MS), Bank of America (NYSE: BAC) and Citigroup (NYSE: C) were all placed here.

Downgrades May Be An Opportunity for Regional Banks

People yelled that these banks were too big to fail. But what about all the other banks? How are they affected by Moody’s rate cuts?

That’s a good question, because there should be an opportunity here. Enter the big regional banks such as:

• U.S. Bancorp (NYSE: USB)
• PNC Financial Services (NYSE: PNC)
• BB&T (NYSE: BBT)

Don’t get me wrong, they take hits like the big boys do. They move in step with the economy and fall prey to the same information and economic influences. However, the big regional banks don’t possess all the complicated trading practices or the derivative operations that are still so secretive. These are some of the reasons for the downgrading of the global banks. They also started to and are expected to take more market share in areas like commercial lending from bigger banks.

Also keep in mind that the banking sector has been undervalued for a while. David Sterman for Financial Adviser reported at the beginning of the year that analysts were stating that bank stocks were cheap and that the financial services sector was bound for a rally. For instance, The Oxford Club’s Trading Portfolio is even sitting on a 58% gain with its position in BB&T – since Alexander Green recommended it in August of 2011. And remember, Warren Buffett’s bets in Wells Fargo (NYSE: WFC) and Bank of America last year are starting to pay off.

Points Worth Noting…

• I think that investors have seen the appeal of value in banks and the financial sector. The investment is worth the money according to the fundamentals. Look for movement into the sector by means of the larger regional banks – such as the ones mentioned above.
• Regional banks also look to be a bargain on terms of trailing profits and/or book value.
• For some safety in diversification, investors could look at some ETFs to possibly alleviate some of the risk in individual bank stocks. One of the more affordable ones is the SPDR S&P Regional Banking ETF (NYSE: KRE). While it has an expense ratio of .35%, it’s a lot cheaper than its peers and it has exposure to a bigger spectrum of regional banks.

Good Investing,

Jason Jenkins

Article by Investment U

Source: ForexYard

The US Dollar received some added support yesterday evening after the Federal Reserve issued a statement saying there are clear signs that the American economy is on its way to recovery. While the Fed stopped short of raising record low interest rates, the positive statement was enough to boost the Dollar against both the EUR and Yen.

As of this morning, the USD had reached below the 1.44 price level against the EUR, and seems poised to stay above 90 Yen throughout the day. If today’s market news continues showing positive American data, and relatively stable European data, this trend will likely hold for the rest of the week.

Additionally, we have on one hand a rising Dollar, which normally puts downward pressure on commodities like Gold and Crude Oil. On the other hand we have large declines in oil inventories which suggest a boost in demand, or a shortening of supply, both of which are driving oil prices back up towards $75 a barrel. I suspect that the rising dollar simply has not yet been felt in oil trading and we should see some downward corrections later today.

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 4 July 2012, 07:00 EDT

WHOLESALE MARKET gold prices held steady around $1615 an ounce during Wednesday morning’s London trading – 1.1% up on last week’s close – while stocks edged lower and the Dollar gained, amid reports that the European Central Bank is expected to cut interest rates tomorrow.

A day earlier, gold prices rallied as high as $1624 an ounce during Tuesday’s US trading, the last trading day before today’s Independence Day holiday.

“Short covering and bargain hunting helped support the rally,” says a note from Commerzbank, referring to the practice of traders who have bet on gold going lower closing their position by buying gold futures or options.

Spot silver prices meantime climbed as high as $28.41 an ounce this morning – 3.2% up on the week so far – as other industrial commodities edged lower.

On the currency markets, the Euro fell below $1.26.

“The main focus of the week is Thursday’s ECB meeting, where a rate by of 25 basis points [one quarter of a percentage point] by the ECB is expected,” says a note from Swiss bullion refiner MKS.

The ECB’s main policy rate currently stands at a record low of 1% – though it remains higher than those of the Bank of England and the Federal Reserve.

“The economic case for a 50 basis-point rate cut is pretty watertight,” says Ken Wattret, chief Euro-area economist at BNP Paribas.

“But for now it’s easier to just cut by 25 basis points…that is enough to show you are standing ready to do something,” he adds, noting that a cut in rates would benefit banks that borrowed over €1 trillion at the ECB’s three-year longer term refinancing operations (LTROs) in February and December.

Cutting interest rates would be “a bold move and will lead the ECB into uncharted territory” says Julian Callow, chief European economist at Barclays Capital in London.

“With soaring unemployment and few signs of the economy recovering, some strong monetary medicine is needed. But let’s be honest, a rate cut by itself will not end the recession, we need much more for that.”

The services sector of the Eurozone economy continued to contract last month, although at a slowly rate than in May, according to purchasing managers index data published Wednesday. The June Eurozone Services PMI was 47.1 – up from 46.7 in May (a figure below 50 indicates sector contraction).

Germany’s Services PMI meantime fell by more than expected, from 51.8 in May to 49.9 last month.

Here in London, the Bank of England is also due to announce its latest policy decision on Thursday, when it is widely expected to announce at least a further £50 billion in quantitative easing asset purchases.

“As everybody now expects QE the announcement effect has already happened so there will be very little negative impact [on Sterling], if any at all,” reckons Adam Cole global head of FX strategy at investment bank RBC Capital Markets.

Last month’s UK Services PMI showed a bigger sector slowdown than most analysts were expecting, coming in at 51.3 – down from 53.3 in May.

The front pages of British newspapers are dominated today by the appearance before the Treasury Committee of former Barclays chief executive Bob Diamond (available to watch live at 2pm UK time), after written evidence from Barclays included reference to a conversation between Diamond and the Bank of England’s Paul Tucker.

Tucker, the Bank’s deputy governor for financial stability and a possible replacement for Mervyn King as governor, was one of two Bank staff members cited by the Telegraph this week as having benefited from pension pot gains in excess of £1 million over the last year, “due mainly to a fall in gilt yields”.

The US economy meantime will grow at 2% this year, according to revised International Monetary Fund forecasts. The IMF also cut its 2013 growth forecast yesterday, from 2.4% to 2.25%, citing the risks posed by the so-called “fiscal cliff” – the combination of spending cuts and tax rises due to come in next January unless lawmakers agree alternative policies.

“It is critical to remove the uncertainty created by the ‘fiscal cliff’,” the IMF’s report says, “as well as promptly raise the debt ceiling, pursuing a pace of deficit reduction that does not sap the economic recovery.”

“No country can go on with heavy and growing debt,” added IMF managing director Christine Lagarde.

“In order to bring the debt under control, action needs to be taken over a period of time…it needs to be gradual, not so contractionary that the economy stalls.”

“Americas debt/GDP [ratio] at close to 100% is not near-term threatening,” says Bill Gross, founder of world’s largest bond fund Pimco, in his monthly Investment Outlook.

“But if continued upward on trend could be absolutely debilitating….an authentic debt crisis – which the world is now experiencing – can only be ultimately cured in two ways: 1) default on it, or 2) print more money in order to inflate it away. Both 1 and 2 are poison for bond and stock holders.”

Back in Europe, Deutsche Bank has cuts its gold forecast for 2012 to an average gold price of $1726 per ounce – down from the previous forecast of $1800 – with analysts citing the “holding pattern” they say has been adopted by central banks. Next year, however, Deutsche Bank forecasts gold will average $2050 per ounce – more than 25% higher than its current level.

“While we question the effectiveness of [monetary policy] in sustainably supporting growth in the western world,” a note from Deutsche says, “we do believe that it will have the effect of pushing up gold prices as the metal responds to the implied erosion in value of money in Dollar terms.”

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 Central Bank News

By TraderVox.com

Tradervox.com (Dublin) –After last Friday’s announcement by the EU leaders, the market has been volatile with risk appetite growing by the day. Today, the Services PMI report in England and the Retail Sales in Australia are what investors are looking at. However, some of the reports that are shaping sentiments today include the Final Services Purchasing Managers’ Index which shows the results of a monthly survey on the rate of business conditions including employment, supplier deliveries, inventories, and new orders. This is expected to remain at 46.8 points for June. Further, the retail Sales in Europe is expected to show an increase to 0.2 percent. Investors will also be keen on the Final Gross Domestic Product for the euro region.

Prior to BOE rate decision meeting tomorrow, the market will be treated to PMI report which is expected to come at 53.0 this time down from 53.3. Great Britain Housing Equity Withdrawal report is due to be released today where a rise to negative 7.9 billion pound is expected. In addition, the market will be waiting for the Retail Sales report from Australia which might add to the strength of the Aussie as an increment to 0.3 percent is expected from last month’s 0.2 percent.

Investors will be looking at the indications of stimulus in those reports and we might see the market preparing for stimulus which will increase the demand for riskier assets. Economists and analysts are also looking at conditions in Germany to see whether the recent decision by the EU summit will give euro the required impetus to rally for longer. Further, as Spain troubles continue with some countries in the euro region opposing the decision to give ESM the ability to buy bonds directly, Italy has been seen as the next bailout-case in the euro region. Finally, there are sentiments regarding the Fed’s action that have added to the demand for riskier assets.

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
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
Follow us on twitter: www.twitter.com/tradervox

By TraderVox.com

Tradervox.com (Dublin) – There is a upsurge in demand for riskier assets in the market as speculation that central banks around the world are making efforts to spur growth in their respective economies. This has led to the weakening of safe haven currencies such as the US dollar and the yen. The yen has dropped the most against most of its peers as investors scramble for riskier assets.

According to the Bank of Tokyo-Mitsubishi UFJ Ltd, the US job data expected to be released may add to the case of Federal Reserve adding stimulus to spur growth in the US economy which has faltered according to the recent data. The Dollar Index fluctuation has been associated to the expected results of the job data. Further, economists are also projecting a rate cut by the European Central Bank which meets tomorrow. According to Adrian Schmidt of Lloyds Banking Group Plc, economists are expecting the ECB to lower interest rates and the Bank of England to engage in more quantitative easing or large-scale buying of assets.

The European Central Bank and the Bank of England will publish their policy decisions tomorrow. The ECB officials are set to announce a reduction in interest rate to 0.75 percent while the deposit rate will be set at zero. Market analysts have also suggested that the Bank of England will announce quantitative easing measures as the Governor of the BOE had voted to add stimulus in their last meeting. The Fed is expected to add stimulus through quantitative easing as poor employment figures continue to show signs of economic slowdown. Nonfarm payrolls due on Friday July 6 will is expected to show a drop.

The Japanese currency dropped by 0.7 percent against the euro to trade at 100.72 yen per euro yesterday during the New York trading session. The yen also dropped by 0.4 percent against the US dollar to trade at 79.79 but the greenback fell against the euro by 0.4 percent to trade at $1.2622.

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
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
Follow us on twitter: www.twitter.com/tradervox

Daily Market Analysis by Real-Forex

Tracking the EUR/USD pair

Date: 03.07.2012   Time: 18:36  Rate: 1.2622

Daily chart

Last Review

The price has stopped at the 1.2436 price level and created a large green candle in the weekend. Breaching the 1.2750 price level will indicate that an uptrend is building up while this level is the neckline of the “Double bottom” pattern which has a target around the 1.3090 price level. On the other hand, if the price will not break the 1.2750 price level and will move downwards under the 1.2436 price level will indicate that the price will descend at first stage to the last low on the 1.2290 price level.

Current review for today

The price has descend to check the Bollinger moving average which is suppose to use as a dynamic support, in case it will actually become a support- the price should breach the 1.2750 price level since this level is the neckline level of the “Double bottom” pattern and its target is around the 1.3090 price level. on the other hand, if the price will not break the 1.2750 price level and go back under the 1.2436 level, it is possible to assume that in first stage the price will check the last low on the 1.2290 price level.

You can see the chart below:

4 Hour chart

Date: 03.07.2012   Time: 18:07 Rate: 1.22621

Last Review

The price has stopped at the 1.2440 support level, jumped to the 1.2690 price level and stopped at this level while correcting the last move upwards by exactly 38.2%. Stoppage of the price at the current area and its breaking of the 1.2690 price level will probably continue the uptrend while its first target is the last peak on the 1.2750 price level. On the other hand, breaking of the 1.2580 price level will probably continue the correction with targets at the 1.2550 and the 1.2516 price levels.

Current review for today

It looks like the price has stopped at the 38.2% Fibonacci correction level of the last uptrend (blue broken line) and it is possible to assume that its first target from this point is the 1.2690, while breaking this level will lead the price towards the last peak on the 1.2750 price level. on the other hand, proven breaking of the 1.2580 price level will probably continue the correction towards the 1.2550 and the 1.2516 price levels.

You can see the chart below:

GBP/USD

Date: 03.07.2012   Time: 17:10  Rate: 1.5690

4 Hour chart

Last Review

The price went back to the 1.5540 support level and went back to check the trend line which connects the lows (points 2 and 4). Breaching of the 1.5716 price level will indicate that it is possible that the price will check again the last peak on the 1.5777 price level. On the other hand, breaking of the 1.5660 price level will indicate that the price is headed towards the closest support on the 1.5613 price level.

Current review for today

The price is clearly supported by the dynamic support in the shape of the Bollinger’s moving average which sharply goes upwards and brings power to the ascending move. Breaching the 1.5716 price level will probably lead the price to check again the last peak on the 1.5777 price level. on the other hand, breaking the 1.5660 price level will probably lead the price towards the closest support level at first stage.

You can see the chart below:

AUD/USD

Date: 03.07.2012   Time: 17:22  Rate: 1.0282

4 Hour chart

Last Review

The price did break the 1.0075 price level and reached the target of the last review on the 1.224 price level and even passed it. At this point the price is checking whether the resistance level can be used as a support, while breaching of the 1.0278 price level will continue the current uptrend. On the other hand, breaking of the 1.0224 price level will indicate that it is possible that we will see a correcting move towards the 1.0171 price level at first stage, this is a 38.2% Fibonacci correction level of the move upwards )blue broken line).

Current review for today

The price breached the 1.0278 price level and currently going back to check whether this level can switch its role from a resistance to a support. In case it will, the first target will be the 1.0326 price level. On the other hand, breaking of the 1.0224 price level will probably lead the price to a correction towards the 1.0170 price level at first stage, this is a 38.2% Fibonacci correction level of the last move upwards (blue broken line)

You can see the chart below:

Important announcements for today:

09.30 (GMT+1) GBP – Services PMI

Daily Market Analysis by Real-Forex

By Central Bank News