Month: August 2012

After a long period with positive equity markets this week might be the week where the market should take a pause says Jyske Bank Senior Strategist Ib Fredslund Madsen.

Legal information

Video courtesy of en.jyskebank.tv

Source: ForexYard

The US dollar hit a five week high against the Japanese yen on Friday, amid an increase in optimism in the US economic recovery highlighted by a better than expected US consumer confidence figure. Meanwhile, the euro took moderate losses against the greenback before markets closed for the weekend, as investors continue to wait for any news regarding plans to lower Spanish and Italian borrowing costs. This week, traders will want to pay attention to a number of potentially significant news events, including the FOMC Meeting Minutes on Wednesday and euro-zone manufacturing and services data on Thursday.

Economic News

USD – US Indicators Set to Drive Market Volatility This Week

The US dollar was able to finish out last week on a bullish note, following the release of a better than forecasted Prelim UoM Consumer Sentiment figure. The indicator, combined with positive retail sales data from earlier in the week, lifted the dollar to a five-week high against the Japanese yen. The USD/JPY advanced more than 30 pips for the day to reach as high as 79.54. The greenback also advanced more than 70 pips against the Swiss franc to peak at 0.9772 during the European session. A downward correction resulted in the pair finishing the week at 0.9739.

Turning to this week, dollar traders will want to pay attention to a number of economic indicators out of the US that could potentially generate market volatility. Home sales data on Wednesday and Thursday is forecasted to show growth in the US real-estate sector. If true, the dollar may be able to extend its upward trend against the yen in the coming days. Additionally, investors are eagerly anticipating Wednesday’s FOMC Meeting Minutes to see if the Fed will hint at a new round of quantitative easing to boost the US economy.

EUR – Investors Eagerly Await ECB Action to Boost EU Recovery

The euro had a mixed trading session on Friday, as positive US news led to losses against the greenback, while risk taking in the marketplace resulted in the EUR/JPY hitting a six-week high. The EUR/USD fell close to 90 pips during European trading, eventually hitting 1.2288, before staging an upward correction to close out the week at 1.2330. Against the JPY, the common-currency advanced close to 50 pips during early morning trading to reach 98.38, its highest level since early July. Downward movement later in the day resulted in the pair finishing out the day at 98.09.

This week, in addition to any announcements from EU leaders regarding the current state of the euro-zone, traders will want to note the results of several indicators out of the region. Thursday in particular is likely to be a volatile day, as manufacturing and services data is set to be released out of Germany, France and the EU as a whole. Should any of the data come in higher than forecasted, the euro may be able to recover some of its recent losses against the US dollar.

Platinum – Violence at South Africa Mine Sends Platinum Higher

Violence between miners and police at a South African platinum mine sent the price of platinum to its highest level since the beginning of July on Friday. Overall, the precious metal advanced more than $39 for the day before finishing out the week at $1474.10.

This week, traders will want to continue monitoring the ongoing situation in South Africa, the world’s leading source of platinum. Recent violence between striking workers and police has led to supply side fears that have driven prices higher. Unless the situation in the country is resolved peacefully in the near future, the price of platinum may continue spiking.

Crude Oil – Middle East Turmoil Sends Oil to 3-Month High

Crude oil hit its highest point since the middle of May on Friday, as tensions in the Middle East continue to drive supply side fears among investors. The price of crude was up by more than $1 a barrel to reach as high as $96.24 during mid-day trading. A slight downward correction later in the day resulted in the commodity finishing out the week at $96.14.

This week, developments in the Middle East are likely to be the driving force behind any movements in the price of oil. Any escalation in the conflict in Syria or in the current tensions between Iran and Western powers could drive oil higher. In addition, traders will also want to pay attention to Wednesday’s US Crude Oil Inventories figure. If the indicator signals that demand in the US has gone up once again, crude could see gains during mid-week trading.

Technical News

EUR/USD

The Bollinger Bands on the weekly chart are beginning to narrow, signaling that this pair could see a price shift in the coming days. A bullish cross on the same chart’s MACD/OsMA indicates that the price shift could be upward. Going long may be the wise strategy for this pair.

GBP/USD

The Williams Percent Range on the weekly chart is approaching the overbought zone, indicating that this pair could see downward movement in the near future. This theory is supported by the Slow Stochastic on the daily chart, which has formed a bearish cross. Opening short positions may be the wise choice.

USD/JPY

The weekly chart’s Bollinger Bands have begun to narrow, indicating that this pair could see a price shift this week. Furthermore, the Slow Stochastic on the daily chart has formed a bearish cross while the Williams Percent Range on the same chart is in overbought territory. Going short may be a wise choice for this pair.

USD/CHF

While the weekly chart’s MACD/OsMA has formed a bearish cross, most other long-term technical indicators show this pair range trading. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the coming days.

The Wild Card

DAX 30

The Relative Strength Index on the daily chart is approaching the overbought zone, indicating that downward movement could occur in the near future. Furthermore, the Slow Stochastic on the same chart has formed a bearish cross. This may be a good time for forex traders to open short positions ahead of a downward breach.

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 Central Bank News

Article by AlgosysFx Forex Trading Solutions

With market sentiment improving on hopes for fresh action to stem the protracted Euro Zone debt crisis and on progress on the economic front, the US dollar is deemed to lose ground opposite its Australian counterpart to begin the week. The markets await developments regarding the crisis as European officials hold a number of talks to try and sort out the debt turmoil. Luxembourg Prime Minister Jean-Claude Juncker, who also heads the group of Euro Zone finance ministers, is slated to visit Athens to discuss Greece’s fiscal adjustment program. Meanwhile, German Chancellor Angela Merkel and French President Francois Hollande meet in Berlin on Thursday to reconcile their differences and seek a way forward in tackling the crisis.

Ahead of the crucial meetings, investors already received optimism yesterday after the German news weekly Der Spiegel reported that the European Central Bank is considering buying the bonds of vulnerable Euro area nations to ensure that borrowing costs do not rise above a pre-determined level. According to the report, the central bank will likely define an upper limit for borrowing costs in Spain and Italy and intervene in the markets to make
sure that it is not breached. The ECB Governing Council would decide at its September policy meeting whether to implement the plan, which would serve to prevent borrowing costs from soaring to unsustainable levels. Amid such optimism, risk-on trades are presumed to weaken the Greenback.

Heading over to the US, mounting signs that the world’s largest economy is picking up is deemed to further incite optimism. Last Friday, two economic reports released provided a slightly encouraging picture of the US economy. The University of Michigan reported that American consumer confidence rebounded to a three-year high this month as retail sales
rose and low mortgage rates spurred consumers to boost their buying plans. The preliminary reading on consumer sentiment rose from 72.3 points to 73.6 points in August, exceeding expectations of a slight rise to 72.5. Economists say that the strong retail sales in July has
justified the view that economic growth will pick up in the second half of the year, and the report suggests that the primary driver of growth is likely to sustain its momentum. Meanwhile, a gauge of future economic activity rose in July due to a drop in Jobless Claims and an increase in housing permits. The Conference Board reported that its index of Leading Indicators rose by 0.4 percent last month, reversing the 0.4 percent drop recorded in June. With views that the US economy is likely to regain momentum in the coming months, improved sentiment is deemed to weaken the US dollar in favor of the Aussie. As such, a long position is advised today.

For more news, analysis, technical charts and candlestick analysis, visit AlgosysFx.

By TraderVox.com

Tradervox.com (Dublin) – After the Bank of Japan intervened in the currency market as the yen strengthened against the dollar to post WWII record of 75.35, the currency weakened to 84.18 yen per dollar, which is an 11-month low. However, the yen has strengthened again reaching 77.91 yen this month. The failure of the Bank of Japan to announce any measures to weaken the currency has forced the market to change its forecast on the yen. In a recent survey, the market expects the yen to strengthen to 79 yen per dollar by the end of this year, which is stronger than the 85 level predicted in April.

The Japanese currency declined by 1.6 percent last week to 79.66, and has taken a 79.54 average for the year. The market predicts that BOJ will intervene if the currency continues to advance against the dollar. This has come as intervention measures taken in March are seen to have failed to maintain the yen at above 80 yen per dollar. The banks efforts have been hindered by the popularity of the government’s bonds. Companies that have been hard hit by the strong currency include the Sony Corp, Sharp Corp and Panasonic Corp which have resulted to cutting employees and earnings. Japan’s Finance Minister Jun Azumi has called on the central bank to take more action to curb the currency gains.

According to Fredric Neumann, of HSBC Holdings Plc in Hong Kong, the Bank of Japan did not provide enough easing hence the yen did to weaken as expected. Fredric added that the bank’s decision not to intervene in its recent meeting is indicative of its timid approach to the strengthening yen. Masafumi Yamamoto has indicated that despite the simmering speculation of BOJ intervention, the yen will continue to strengthen against the yen. Yamamoto has worked at BOJ for ten years and is currently the Chief Currency Strategist at Barclays Plc in Tokyo.

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

Forex Daily review brought to you by REAL FOREX | www.Real-forex.com

 

 

 

Article by Investment U

On August 13, 1979, BusinessWeek famously ran a cover article entitled The Death of Equities, arguing that investors should shun stocks due to concerns about the long-term health of the U.S economy.

The timing was less than auspicious. Within months, the stock market began the longest and most powerful bull market in U.S. history.

Earlier this month, Bill Gross, the co-founder and co-chief investment officer of Pacific Investment Co. (better known as PIMCO), argued in his widely-read blog that the “cult of equity is dying.”

Investors aren’t just buying his argument. They seem to have predicted it. How else do you explain the fact that they have yanked some $200 billion out of equity funds since January 2011.

These investors are making a huge mistake, especially if they’re plowing the proceeds into bond funds like Gross’s. Here’s why…

A Premature Autopsy…

Gross labels the high returns on U.S. stocks since 1912 a “historical freak,” one that won’t be duplicated soon. But grand predictions like these should always be taken with a grain of salt. Besides, there are a number of problems with his analysis.

The first is that Gross seems to be unaware that foreign markets have generated ultra-long-term returns very similar to those in the United States. (For a thorough historical analysis, read Jeremy Siegel’s Stocks for the Long Run, now in its fourth edition.)

The second problem with Gross’s premature autopsy is his insistence that corporate earnings cannot grow faster than the overall economy. Yet history shows no direct correlation between GDP growth and corporate earnings over the long haul. Although there is a strong correlation – in fact a causality – between corporate earnings growth and stock market performance. And please note we’re currently in a period of record corporate profits, record profit margins and record corporate cash on hand.

Pundits and bloggers have been quick to jump on Gross’s comments over the last couple weeks, some agreeing, others disagreeing.

A Great Contrarian Indicator

One of the voices you should listen to is Burton Malkiel, author of the investment classic A Random Walk Down Wall Street. In an op-ed piece in The Wall Street Journal this week he wrote, “Equities are more attractive relative to bonds than at any other time in history. Locking retirement funds into ‘safe’ 1.5%-yielding Treasury securities is likely to be a sure loser after inflation… The only hope – both for individuals and for institutions running retirement portfolios – is to increase, not decrease, the share of the portfolio devoted to equities.”

As in the old BusinessWeek cover, high-profile predictions like Gross’s are often great contrary indicators. This one may well precede another delightful rise in equities.

It won’t be an easy climb, of course. Stocks will always be a volatile asset, one that engenders queasy stomachs and sleepless nights. That’s simply the price you pay for earning returns much higher than cash or bonds.

This year is proving to be no exception. The S&P 500 is currently up 12% year-to-date and, with dividends reinvested, has more than doubled over the last three and a half years. If this is “the new normal,” sign me up.

In addition, when bonds start to sell off – as they will eventually – investors will realize they have made a terrible bargain. Hoping to accept low but positive returns in exchange for peace of mind, they will end up with neither.

If PIMCO didn’t have more than $1.5 trillion in fixed-income assets under management, perhaps that is what Gross would be warning investors about.

Good Investing,

Alex

Article by Investment U

Article by Investment U

To the distraction of friends and family, I do a lot of thinking about why some countries are so much more successful than others and what America needs to do to get back on track and stay on top.

One conclusion I have come to is that prosperity and freedom are highly correlated.

This is not a hunch.

For many years, I have been following the Index of Economic Freedom produced by the Heritage Foundation in partnership with The Wall Street Journal. It ranks countries based on a 100-point grading system that covers four areas of economic freedom: rule of law, limited government, regulatory efficiency and open markets.

Specifically, it ranks countries by benchmarks that are at the heart of my latest book, Red, White and Bold: The New American Century:

• Tax burden
• Government spending
• Property rights
• Corruption
• Freedom to start and run a business
• Monetary freedom
• Free trade and investment
• Private and independent banking system

Here are the top-ranked countries for 2012 and their corresponding country exchange-traded funds. (Mauritius was ranked No. 8 but does not have a country ETF.)

1. Hong Kong (NYSE: EWH)
2. Singapore (NYSE: EWS)
3. Australia (NYSE: EWA)
4. New Zealand (NYSE: ENZL)
5. Switzerland (NYSE: EWL)
6. Canada (NYSE: EWC)
7. Chile (NYSE: ECH)
8. Ireland (NYSE: IRL)
9. United States (NYSE: SPY)
10. Denmark (NYSE: EDEN)

Looking through the numbers in this report, five things jumped out at me.

First, as we head down the stretch in a presidential election, it’s telling that America’s ranking has fallen sharply from No. 5 in 2008 to No. 10 this year. The economic freedom agenda might just be the ticket to victory and a chance for the U.S. stock market to equal past recoveries when emerging from recessions. In the nine U.S. recessions since World War II, in four of those recessions the stock market actually soared: 40% in 1954, 22% in 1961, 30% in 1980 and 30% in 1991.

Second, it’s interesting to note that five of the top six slots are countries associated with the British economic and political system (sorry, Jefferson Francophiles, it looks like Anglophile Alexander Hamilton was right on, France is ranked No. 67 down from No. 48 in 2009).

Third, the BRIC countries (Brazil, Russia, India and China) rank surprising low, and with the exception of Brazil have dropped in the rankings over the last three years. Brazil is at No. 99, India at No. 123, China at No. 138 and Russia at an abysmal No. 144. All of these countries are in the basket labeled “mostly unfree.”

No question, these BRIC countries have experienced higher economic growth greater than the top-ranked countries, but what about going forward? My opinion is that it’s very unlikely that China and India can maintain growth rates without addressing these freedom speed bumps as soon as possible. The market may be telling us much the same.

On the other hand, just think of the possibilities for progress if countries in the mostly “unfree” and repressed countries, many of them frontier markets, launched an ambitious freedom reform agenda? The results for their citizens and investors alike would be staggering.

Fourth, I was happy to see that seven of the top 10 investable countries are Pacific Rim countries. They’re well positioned to capture the biggest slice of what I call our “Blue Ocean Century” of wide and deep Pacific Rim prosperity.

Fifth and most importantly, I noticed that the top 20% of countries ranked have per capita incomes twice that of the next 20% and a stunning five times that of the bottom 20%. It’s essential that economic freedom trickle down – and the sooner and faster the better.

Finally, while it’s a tough and tricky time to put new capital to work, why not start with the freest economies in the world? Execute a simple and low-cost economic freedom portfolio today by equally weighting these 10 countries in a freedom portfolio.

You will reap the rewards.

Good Investing,

Carl

Article by Investment U

Article by Investment U

Strange happenings are afoot in the platinum market…

Despite prices falling as much as 28% over the past year, investors are still betting heavily on further declines to come.

As The Wall Street Journal reports, “In recent months, a number of money managers have ratcheted up their bets on a decline in platinum prices to the highest level ever in the futures market.”

And the U.S. Commodities Futures Trading Commission says these positions now account for a third of the platinum futures and options market.

What exactly is going on?

Well, it seems the biggest problem lies with everyone’s favorite scapegoat… Europe.

Western Europe: Platinum’s Largest Market

According to The Wall Street Journal, Europe is by far the world’s largest market for diesel-fueled vehicles.

And platinum’s main industrial use is for the catalytic converters of these cars.

It’s estimated automotive sales in Europe are on pace to hit a 20-year low this year.

Knowing these facts, it makes sense why platinum has been on a steady decline. But things might get worse for the industry before they get better.

That’s because not only are platinum prices closely tied to the ups and downs of Europe’s automotive industry, South Africa controls 80% of the world’s platinum reserves.

And it’s estimated that over half of listed platinum miners doing business there are either taking on losses or are on the verge of doing so.

In other words, however rare platinum is in nature, there’s too little demand for it in our current market environment, leaving too much of it to go around.

Mining.com also reveals a number of new mining projects outside of South Africa that could further add to the supply glut over the next two years, especially if Europe’s fiscal crisis continues.

But that’s not all. In fact, there’s another red flag that’s making platinum investors nervous… Gold prices.

Platinum vs. Gold

For the last 20 years, platinum has been the most expensive metal around.

But today, it’s trading at a 27-year low compared to gold. As I write, gold is just over $1,600 per ounce. Meanwhile, platinum is trading at just under $1,400.

The platinum-to-gold ratio generally indicates two things:

1. If platinum prices are higher than gold prices, the global economy is expected to pick up.
2. If platinum prices are lower than gold prices, it signals fearfulness about the future state of the economy.

But while the near-term prospects for platinum may look bleak, you can expect a big opportunity for the market as soon as Europe gets back on track.

And you can be ready for the rebound by keeping platinum ETFs such as ETFS Physical Platinum Shares (NYSE: PPLT) on your radar, which is designed to track the precious metal.

Another long-term approach may be investing in companies that will reduce exposure to the price swings and production disruptions coming from South Africa.

Stillwater (NYSE: SWC), an American platinum mining company based in Montana, is a great example. It’s the only U.S. producer of platinum and palladium and is the largest primary producer of platinum group metals outside of South Africa and Russia, the world’s largest and second-largest holders of platinum, respectively.

Bottom line: Just be patient. Global auto sales are rising all around the world, except in Europe. And as soon as the European economy turns around, platinum prices should be coiled and ready to shoot higher.

Good Investing,

Mike

Article by Investment U

Article by Investment U

For the most part, the financial crisis in Europe has been a drain on publicly traded companies in America.

Consider that, despite the fact the S&P 500 climbed 9% this year, revenue targets for 60% of U.S. companies came up short last quarter.

What’s worse, those meeting expectations have only increased revenue by an average of 2%. The Washington Post says that’s the lowest revenue growth, outside of a recession, in nine years.

But just as Europe had a negative impact on the U.S. economy overall, not every industry is feeling Europe’s woes.

In fact, homebuilder shares are increasing at a record pace this year in America. And, believe it or not, Europe may actually be helping the recovery.

Europe’s Pain is U.S. Housing’s Gain

You see, Europe is the world’s second-largest consumer of copper.

In the first quarter of this year, the International Copper Study Group revealed, copper usage in the EU declined 9% compared to the same period last year.

In the second quarter, global copper prices fell 9%. They even hit a 2012 low in June.

And today demand for copper is still slipping. China, the world’s largest copper consumer, also reported last month that industrial output grew to its weakest level in three years.

It’s alarming news for the global economy, since copper is often used to gauge how economies are faring. However, the news has surprisingly been a boon for U.S homebuilders.

That’s because lower copper prices make it cheaper to build homes here. Every one that’s constructed needs copper for plumbing, heating, ventilation, wiring, etc.

Simply put, cheaper copper prices equal larger profit margins for companies that build new homes.

Add in that mortgage rates are hovering around all-time lows, consumer confidence has been rising and the U.S. economy continues to slowly improve, and it makes sense why the U.S. housing market is starting to make a significant turnaround.

In fact, I bought a home in December 2010 and, so far, the value of it has increased every year since. It has been an exciting, and rewarding, investment.

And it appears homebuilders are excited, too.

A Great Start in 2012

So far this year, shares of PulteGroup (NYSE: PHM), the largest homebuilder in the United States, are up 89%. Other big names such as D.R. Horton (NYSE: DHI), Toll Brothers (NYSE: TOL) and Lennar (NYSE: LEN) have jumped 39%, 45% and 54%, respectively.

Not to mention, even though the U.S. economy is only sputtering, according to the U.S. Commerce Department, new home construction rose to its highest level in four years in June.

What’s more, just as copper prices hit a 2012 low in June, orders to move copper out of warehouses monitored by New York’s Comex and the London Metal Exchange doubled.

It’s all positive news for U.S. housing over the near term. But the industry’s long-term outlook looks promising, as well.

Just a few days ago, Bloomberg reported new home sales are still “50% below the 40-year average.”

Bottom line: The recovery still has a long way to go. There’s no doubt about that. But so do the potential gains for investors willing to put their money into the U.S. housing rebound. Don’t get caught missing the boat entirely.

Good investing,

Mike

P.S. For even more information on the housing recovery in America, read this article posted last week from Investment U Chief Investment Director Alexander Green. You may be surprised at what’s really going on.

Article by Investment U