Month: August 2012

Source: ForexYard

The euro took extended yesterday’s losses against the US dollar and Japanese yen in overnight trading, following disappointing German economic data yesterday and the ECB’s continued inaction to lower borrowing costs in Italy and Spain. Weak euro-zone growth prospects also continued to weigh down on the price of gold, which has fallen close to $10 an ounce since last night and is currently trading just below the $1608 level.

Main News for Today

UK PPI Input- 08:30 GMT
• Figure is expected to come in at 1.4%, well above last month’s -2.2%
• If true, risk taking could help sterling recover some of its recent losses against the dollar before markets close for the weekend

Canadian Employment Change- 12:30 GMT
• The Canadian dollar has taken losses against both the USD and JPY recently
• Should today’s news come in above the forecasted 9.6K, the loonie could see gains against its safe-haven currency rivals

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

Finally, mainstream bankers and economists admit the market has beaten them.

No, we’re not talking about multitrillion dollar banking bailouts. And we’re not talking about the unending European debt crisis.

So what is it that has Australian banking and economic minds stumped? It is…wait for it…$2.

That’s right, $2. Not $2 billion, or $2 trillion, just a lazy old $2.

It’s no wonder the global economy is in such a mess.

Central bankers run the world (even last weekend’s Australian Financial Review admitted it). They directly and indirectly control multitrillion dollar economies.

They pull levers and push buttons. They try to fine tune and run the economy. And yet they can’t solve a simple $2 puzzle. Well, luckily for them, we can help out. But we don’t think they’ll like the answer. Read on for details…

The mainstream press still serves a purpose. They help bring our attention to things we would normally ignore.

For instance, yesterday afternoon an email dropped into your editor’s inbox. It was the release of a discussion paper from the Reserve Bank of Australia (RBA). The title was, RDP 2012-03, ‘ATM Fees, Pricing and Consumer Behaviour: An Analysis of ATM Network Reform in Australia’.

What a yawn. So we ignored it.

It was only when we read Peter Martin’s article in today’s Age that we realised we’d missed a gem of mainstream economic puzzlement.

Peter Martin writes:

‘Australians have banking economists stumped.

‘They thought they knew what we would do when in 2009 the Reserve Bank outlawed largely hidden payments between financial institutions that were usually passed on to us as account-keeping fees whenever we used a so-called “foreign” teller machine owned by another bank.

‘They thought we would do nothing…

‘But the size of the charge, typically two dollars, didn’t change. All of the economic models — including the Reserve Bank’s own model — suggested we would use ATMs pretty much as we had before. The incentives were much as they had been.

‘Instead withdrawals from foreign machines dived from around half of all ATM withdrawals to just 40 per cent. Among senior citizens the proportion fell to less than 10 per cent. The group the Reserve Bank had thought would be the least able to shop around turned out to be the keenest to drive across entire suburbs to avoid the two-dollar charge.’

But here’s the best part of Mr Martin’s article:

‘A Reserve Bank study released yesterday says it’s behaviour that “cannot be accounted for by the model of ATM fees presented in this or any other existing paper.”‘

In short, the RBA’s fancy pants economists and fancy Dan models, couldn’t work out that when consumers know about a fee in advance that they would try to avoid the fee (rather than not knowing about or remembering the fee until it appears on their statement).

Is it a mind-blowing revelation? Or is it flamingly obvious? The latter of course…

You Can’t Put That in a Model

When you know in advance that something will cost you more, most people will decide whether to accept the higher cost or try to avoid it.

We’ve explained this before in Money Morning, using the example of buying a can of Coke. Your editor can either walk across the road to the local milk bar to pay $3.40 for a can of Coke, or we can walk five times the distance to the IGA to pay about $1.50.

If we can spare the time and effort, we’ll walk the extra distance. If it’s raining or we don’t have the spare time then we’ll pay the higher price.

ATM users make the same choices. Is it worth spending $1 on petrol to save $2 on ATM fees…or walking an extra 10 minutes rather than paying $2? The answer depends on who you are and the circumstances.

Importantly, it’s something you can’t put into economic models or mathematical equations.

But here’s the thing (a point we wished Mr Martin had made), if the supposed finest minds in Australian economics and their fancy Dan models can’t figure out the impact of a $2 charge to consumers, how on earth can they figure out the impact of trillion dollar bailouts, interest rate movements, and money printing?

The answer is they can’t figure it out.

That’s why everything central bankers have done over the past four years has resulted in unintended consequences or ineffectual policy decisions.

Natural Free Markets v Perverse Planned Markets

The reality which the central planners don’t want to admit is that human action is often unpredictable and illogical. That’s why central planning doesn’t work.

Given the same choices some people act in different ways to others. That’s the beauty of the human race. It’s why humans are so successful…and it’s why mainstream economists are so terrible at forecasting.

The fact is no-one, however smart, can accurately predict consumer behaviour. So it’s foolish for central bankers and central planners to even try to steer an economy in a certain direction.

The only real way to run an economy is by not running it. By leaving it to the free market. By allowing individuals to keep the reward of their labour (wages) and letting them spend, save or invest it as they see fit.

The result is a free market influenced and guided by the natural actions of millions of individuals. Instead, what we have is a perverse market guided by the unnatural actions of banks, crony capitalists (or fascists, they’re much the same), vested interests, central bankers and governments.

It’s this kind of perverse market that’s ruining and suppressing entrepreneurial instincts in the West. So that the West is fast following the example of China’s crony capitalist bubble economy — a subject our old buddy, Greg Canavan has written about here.

Central planners can’t direct huge economies as they see fit…not without creating a lot of problems. The fact that the RBA couldn’t predict consumer reaction to a $2 fee, tells you it’s dangerous to give them the power to set the price of money.

Bottom line, the more central banks interfere and try to fix things, the worse things will get, and the longer it will take for the world economy to recover.

Cheers,

Kris
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By MoneyMorning.com.au

The Mekong river courses through the very heart of Southeast Asia.

It starts in Tibet and snakes its way through many of the fastest developing economies on the planet — Myanmar, Laos, Thailand, Cambodia and Vietnam. Through fishing, aquaculture and irrigation, it sustains 65 million people.

In Thai, Mekong literally means “our mother” — as it provides an abundance of fish and, allegedly, was the way some of their ancestors came from Southwest China a millennium ago.

It is also one of the best-kept secrets of Thailand: long-term resident foreigners prefer its coolness and tranquillity to the hot beaches and hectic island parties. I regard the countryside as the real, less exploited part of Southeast Asia. A place I love to come to rest — the final frontier for tourism in this part of the world.

But all that could soon change. The city I’m writing to you from, Bangkok, could soon play a pivotal role in transforming this former economic backwater. And it presents us with some formidable investment opportunities.

Let me share with you how I see Bangkok being the great winner as it links Myanmar, Cambodia and Laos to the rest of Asia. And why I’m particularly bullish on the Myanmar-Thai nexus.

The Huge Opportunity in the Greater Mekong

After the fall of the Berlin Wall in 1989, Eastern Europe embarked on a new era that brought about closer integration and cooperation with the rest of Europe. It led to a period of strong economic growth, rising asset prices and buoyant stock markets.

Something similar is now happening in Southeast Asia and its least developed economies.

In 1992, the Asian Development Bank (ADB) set up the Greater Mekong Subregion (GMS), 2.6 million square kilometres and a combined population of around 326 million.

They forged a plan to enhance economic relations among six countries: Cambodia, the People’s Republic of China (PRC, specifically Yunnan Province and Guangxi Zhuang Autonomous Region), Lao People’s Democratic Republic (Lao PDR), Myanmar, Thailand, and Vietnam.

20 years later the time for the Greater Mekong has finally arrived.

This region is benefiting hugely from the introduction of the Asean Free Trade agreement. This trade agreement will bring about the most exciting investment story of the decade. It’s a story where a $2.5trn region will be transformed as it asserts its independence from China and India.

Billions are being invested in infrastructure and export industries as this 600 million strong region forges trade links under the Asean pact. You simply won’t find a better growth story to invest in this year.

The other salient component in the Greater Mekong story is geopolitics. When Eastern Europe opened its doors to the West, American participation helped to ensure that the economic integration succeeded and lifted its status on the global political agenda. The Americans built military bases in these countries. And in return, received serious foreign direct investment.

The Greater Mekong region is in a similar political sweet spot. Recently Hillary Clinton became the first US secretary of state to visit Laos in 57 years. She also participated in the 19th Asean Regional Forum last month in Phnom Penh, Cambodia, which gathered together the foreign ministers of Asian countries and beyond. Secretary Clinton also visited Myanmar at the end of last year.

Why is this important? Well, the Americans recognise an economic miracle when they see one. But they also recognise the strategic importance of these countries. Strategically located between the two emerging economic giants, China and India, Asean is regarded as a key ally for the US. The US has declared it will seriously increase its military presence in Asia over the next few years.

Connectivity is the Buzzword

How can we profit? Well the most important word to keep in mind is connectivity. Greater Mekong policy-makers are focused on creating a market of over 150 million consumers (excluding China), who are increasingly tied together by banking, trade, investment, infrastructure and people-to-people links.

Infrastructure investments worth $10bn have either been completed or are being completed. Among these are the upgrading of the Phnom Penh to Ho Chi Minh City highway (Cambodia to Vietnam) and the east-west economic corridor that will eventually extend from the Andaman Sea to Da Nang.

Over the next decade, Asean nations will require approximately $60bn a year to fully address the region’s infrastructure needs, according to ADB. That could spell enormous gains for investors in everything from material stocks, construction groups to the banks, commercial property and logistic groups that are forging new trade links between these nations.

And Bangkok in particular could be a key factor in making all this happen. Here’s why…

Bangkok — the Gateway to the Mekong Region

While Cambodia (one listing) and Lao PDR (two listings) have recently set up stock exchanges (and Myanmar plans to have one by 2015), the real near-term beneficiary in this story is Bangkok. This is for several reasons.

Firstly, there is a serious shortage of funding for these projects in the Greater Mekong region. The savings rates for Lao PDR and Cambodia are about 10-15%. Whereas in Thailand and Malaysia you are likely to see savings rates around 25-30%. So Thailand and Thai banks can play a pivotal role in kick-starting this region.

Again this is yet another story of Southeast Asian countries looking out for their own. At the conference I have just attended in Bangkok, it was called ‘bahtisation’ of the region (from baht, the Thai currency). And it is already happening, from what I can see. Anyone who has recently travelled in the region can attest to the prominence of Thai goods and companies.

Secondly, the Stock Exchange of Thailand (SET) has approved the promotion of fundraising for Thai companies with core investments in Cambodia, Laos, Myanmar and Vietnam, in the form of holding companies.

That makes perfect sense as Thailand is probably the largest investor in GMS over a number of years. SET has also approved primary listing of foreign companies on the SET, meaning that stocks from Cambodia, Laos (and in the future Myanmar) can be listed through a depository receipt.

Thirdly, a Thai listing provides benefits such as higher valuation, improved research coverage, liquidity and lower cost of funds. And most importantly of all, this stock market is easily accessible.

Let me tell you the best way to invest in this story…

Keep an Eye on this Area

I am particularly bullish on the Myanmar-Thai nexus. Myanmar has the largest population (60 million), largest land area and perhaps most importantly, Myanmar’s natural gas export accounts for 30% of Thailand’s consumption.

Recoverable oil reserves are estimated to stand at 3.2 billion barrels while that of natural gas is at 18 trillion cubic feet. Thailand needs Myanmar, and Thai energy companies are heavily involved there. There are a number of initiatives on the drawing board (ports, energy, manufacturing and service sectors) that are likely to offer great potential for Thai corporations and the SET.

The situation resembles Malaysia and Indonesia after the Asian financial crisis in 1998, where Malaysian companies took advantage and made a number of astute investments that have helped to expand an already sizeable domestic market.

For now though, there are more immediate opportunities.

So far this year, the Thai stock market is up 16.4% and many stocks related to the consumer sector have moved substantially. No wonder, as the potential consumer base has more than doubled with the GMS initiative.

The hunt for Myanmar-Thai proxies is set to intensify. There are at least a handful of companies that already have operations in the country, and they have expressed a willingness to invest more.

So in summary, what does the Mekong region teach us? In the new millennium a new world will emerge where the best opportunities lie in identifying marginal changes within each region or intra-emerging markets. This is an important and bullish message in a world that is infatuated with negative developments in the EU and the US.

Lars Henriksson
Contributing Editor, Money Morning

Publisher’s Note: This article originally appeared in MoneyWeek (UK)

From the Archives…

Revealed: Government to Get Hands on More Retirement Savings
03-08-2012 – Kris Sayce

Olympic Badminton Farce Shows How Capitalism Beats Socialism
02-08-2012 – Kris Sayce

How Low Natural Gas Prices Are Causing Energy Havoc
01-08-2012 – Dr. Alex Cowie

Silver Bounces Off Key Level, Where’s it Going Next?
31-07-2012 – Dr. Alex Cowie

How No ‘Plan B’ For The Australian Economy Could Boost Aussie Stocks
30-07-2012 – Kris Sayce

The Gateway to the Mekong Boom

EURUSD stays above the upward trend line from 1.2042 to 1.2134, and remains in uptrend, the price action from 1.2389 is treated as consolidation of the uptrend. Another rise towards 1.2600 is still possible after consolidation, and a break above 1.2442 could signal resumption of the uptrend. On the downside, a clear break below the trend line support will indicate that the rise from 1.2042 has completed, and the longer term downtrend from 1.3486 (Feb 24 high) has resumed, then further decline towards 1.1700 could be seen.

Daily Forex Forecast

Before you start to invest in Forex, you need to make a choice of a Forex broker and create a Forex account with it. For the uninitiated, a Forex broker is a financial company that offers Forex traders access to the Foreign Exchange market. Currency exchange brokers buy and sell Forex as per the trader’s selection. The providers normally will not charge up fees for giving FX traders admission to the forex markets. Rather, they receive income from the difference between their bid and ask rates or simply referred to as spreads.

Taking into consideration that every single Currency exchange broker is fairly distinct, it’s crucial you check out the broker company selection process as an imperative requirement for financially rewarding forex currency trading. Let me share a detailed bunch of the most required elements in choosing the best trading firm.

1. Regulation of the Forex Broker Company

The Foreign exchange market is unregulated and has no central marketplace. Additionally, based on the fact that forex currency trading usually requires a large amount of cash, it’s of importance to forex traders – novices and veteran alike – to have their capital handled by good companies. The task of the regulatory bodies is to make sure of fair forex trading practices and arbitrate at any time there are trader-broker conflicts. To discover if a Currency exchange broker is regulated, find out which country the broking service is registered in. Make sure to choose a broker that conducts business in a country where their methods are checked by a regulatory organization.

2. Trading Platform and Software

Trading programs vary relatively from one broker to another and it’s highly recommended that you check out the demo accounts from 2 or 3 fx brokers and find out about which you are most confident with. A great investing platform whether or not web-based or downloadable – indicates live price ranges that you might actually trade at, more than just indicative
quotes. You might need a dependable and effective system in a fast-moving finance business.

3. Customer Assistance

Considering the fact that Foreign currency exchange market is a 24 hour business, your broker company must also offer a 24 hour support, ready to be of service at any time of the day. Even if you might not be forex trading at 4am, you can never predict when you’ll bump into some difficulties in your trades so make certain to deal with a brokerage that has a really good support service. It’s also a smart idea to check out if it is possible to exit positions over the telephone. This can turn out to be key in circumstances when your PC got damaged or perhaps you lose your web connection at a critical forex currency trading moment.

4. Execution

A reliable broker company is one which offers the exact Buy and Sell rate as stated in their trading platform. The most convenient way to find this out is simply by setting up a demo forex account with the broking service and give it a test drive.

5. Spread

If you are akin to the majority of market players, then you absolutely prefer reduced transaction expenses. Unlike stocks and futures, currency pairs are not bought and sold by means of a central marketplace. Which means that; the spread could possibly be distinct from one broker to another. It’s seriously worth examining a few out prior to when you open up a forex account. Furthermore, come to a decision whether you seek a fixed or variable spread.

Article by http://dubaiforexrates.blogspot.com/

By TraderVox.com

Tradervox.com (Dublin) – The 17-nation currency has weakened against most majors following a drop in German Industrial production and poor UK growth forecasts. In addition, Spain and Italy were lowered in their credit ratings hence causing concerns that the debt crisis is spreading.

The Great Britain pound advanced against the euro to a more than a month high after Marvyn King, the Bank of England Governor, indicated that cutting the interest rates may be counterproductive. This dampened speculations that the BOE would reduce borrowing cost to boost economic growth in the country. Talking about the euro, Brian Kim, a Currency Strategist in Stamford, Connecticut at Royal Bank of Scotland Group Plc said that the looking at the euro from a medium-term point of view, people are looking for economic divergence between Europe and the rest of the world which is keeping the market negative about the euro. He predicted that this might continue for the next three quarters. According to Kathleen Brooks, who is a Research Director at Forex.com in London, the euro might drop to as low as $1.2280 in the coming week.

These comments have come at a time when the euro dropped by 0.3 percent against the dollar at the close of trading in New York to trade at $1.2365, the 17-nation currency had advanced to $1.2444 on August 6, which is the strongest it has been since July 5. The euro also depreciated by 0.5 percent against the yen to exchange at 96.97 yen. The Japanese currency climbed against the dollar to trade at 78.43 per dollar, which is 0.2 percent higher than it close the previous day.

Neil Jones, who is the head of European hedge-fund sales at Mizuho Corporate Bank Ltd have forecasted doom for the euro, saying that it may drop to parity in the next one year. Another currency strategist Neils Christensen noted that there is a lot of focus on safe haven currencies which is leading to a weak euro. Neils indicated that investors are choosing safe haven currencies.

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) – In a statement to reporters today, the Bank of England Governor Mervyn King indicated his continued support for the Prime Minister David Cameron’s budget squeeze plan. In the same statement, King noted that UK’s economic recovery will be a slow process and he gave grimmer economic growth forecast. The UK government has introduced new spending cuts which along with the euro area debt crisis have slowed demand in Britain. In addition, the UK economy shrank in the second quarter by most in three years, signaling continued struggle to recovery from the double dip recession it is facing.

The Chancellor of the Exchequer and Prime Minister David Cameron have been vocal in fighting opposition Labor Party’s opinion that the fiscal program should be scaled back. They have held the view that the fiscal program is important in shielding the UK economy from effects of the euro area debt crisis. Speaking to press after publishing a central bank quarterly inflation report which showed that the Gross Domestic Product is projected to grow at about 2 percent in two years as compared with the projection in May of 2.5 percent, King said that there is no need for the government to have a plan B as the measures taken so far are yielding results.

King also explained in details his support for deficit-reduction program and cutting public spending. He also supports automatic stabilizers and the focus being made on tax rates. He added that the government has cut spending quicker than it was originally planned causing slower than expected economic performance. He, however, justified this saying that there will be less consolidation to do in the future. In the report, the BOE explained that economic contraction experienced in the second quarter were exaggerated by one factor but noted that the economy is likely to remain subdued in the short term. The report also noted that the UK economic growth outlook remains unusually uncertain due to the uncertainty in the euro area debt crisis.

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

Article by Investment U

The entire income side of the investment world has been so wrong about interest rates for so long that I’m beginning to believe this market will never get back to normal.

To give you an idea of how out of whack this market has become, consider this: Two years ago, the 10-year was in the 3.5% range and the whole bond world was predicting a run-up in rates from there. No one thought it could go down any further. Surprise!

Right now I’m looking for the 10-year Treasury to drop to the 1.1% to 1.25%. It’s currently around 1.5%. I see nothing going on that would drive rates higher in the near future – three to five years.

The worldwide charge to safety has driven any investment with any degree of stability or reliability to multi-century highs with multi-century low interest rates.

The incredible part of this, even at the ridiculously low rates we have now, is that money is still pouring into these same investments. There seems to be no end in sight.

Even munis, which are paying nothing, are seeing huge amounts of new dollars moving into them.

Driving this insane shift are four major factors, and all are big red flags.

• First, most small investors, or what the business calls retail investors, are still in shock following the massive losses most took at the bottom of the collapse in 2008 and early 2009. This retail investor still hasn’t returned to the stock market and is nowhere in sight.
• Second, these same investors have flocked to the traditional safe side of the house, dividend-paying stocks and bonds. Add to these numbers the investors who have always held these so-called safe investments, conservative or retired investors, and you have one very over-bought segment of the market.
• Third, as the EU moves closer to a default or reorganization, money from that market has poured into the same “safe” sector of the U.S. market.
• As unbelievable as it may seem, we now have a fourth element moving in the same direction – and this is the biggest red flag of all – investors willing to accept a guaranteed loss in the name of safety. They don’t know it’s a loss in the making. They see it as the last ditch effort to protect their money. But when these rates turn around, and they will, the market prices of most interest sensitive investments will crumble and the losses will be monstrous – not because of the bonds – but because of the people who own them.

Don’t Be a Rate Pig

Losses in mutual funds that hold long maturity bonds and are leveraged will have the worst losses, and that’s where most retail investors have their money. Leveraging and the long maturities produce the highest yields and the largest losses, and that’s what the little guy buys.

“Rate pigs” is the term used to describe this type of investor. Those who ignore or have no understanding of the effects of maturity or leveraging, and just buy the highest yield number.

Instant death! This is never a good idea, but in this market it’s just plain dumb.

There’s a strategy that will allow you to buy into the “safe side,” still earn a decent return, significantly limit the downside when these rates turn around and, if you structure the portfolio properly, make cash regularly available to take advantage of a rising interest rate market.

There is just one little problem. Well… really two.

• First, most investors have neither the discipline nor the bond understanding to make it work. They can get the understanding; the discipline is another thing entirely.
• Second, the investment required is a very specific type of bond that isn’t easy to find. They’re out there, but I spend several hours a day, five days a week looking for them and I am lucky to find two good ones a month.

A properly structured portfolio of these particular short-term, high-yield corporate bonds will pay you far more than what the stock market on average is returning – or leveraged bond funds. They hold their value better than almost all interest sensitive investments during a sell-off and they leave you a decent return after taxes and inflation take their bite.

I call it the “Any Market Portfolio.”

The Any Market Portfolio

Now, when rates turn around – I can’t guarantee that a bond with a two-year and three-year maturity won’t see any drop in market value – it shouldn’t be enough of a drop to panic you and make you sell at a loss.

You see, it isn’t the bonds that have or will have problems; this type of bond in this market has a 97% success ratio. It’s the people who own them who are the problem.

People who own bonds will do all the wrong things when rates start to run up, namely sell at a loss, and that’s where the blood bath will begin.

Using the Any Market Portfolio can help you over the rough spots, get you to the point of making a very good return and keep you out of all the usual minefields that only create losses.

Using this portfolio strategy successfully will require you do few things differently:

• Have at least one bond per year maturing. That will make cash available on a regular basis to buy into a rising interest rate market.
• Own only ultra-short bonds. That’s a maximum of an eight-year maturity. That will limit the downside and hopefully keep you in the game when the market starts to sell off.
• Buy small positions. It’s one thing to watch a $5,000 investment drop in value. It is an entirely different picture to watch a $50,000 one dropping. It’s a head game I know, but it works.

Even in this market, there’s a lot of safe money to be made in bonds, but it’ll require you play by a few new rules. You can be on the “safe side,” but you have to own the right bonds and recognize that at some point their market value will drop. Then you have to have enough market sense to know that selling at a loss only benefits you at tax time.

The “Any Market Portfolio” isn’t perfect, but it will allow you to stay in investments that have a high degree of predictability and reliability, and turn the eventual sell-off in bonds into a big payday.

Sounds like magic, but it isn’t. It’s just good old-fashioned applied money sense with a lot of buy and sell discipline.

Unfortunately, that’s exactly what most people don’t have, a sound buy and sell discipline.

Good Investing,

Steve

Article by Investment U

Article by Investment U

I know, you’ve probably heard it a thousand times by now…

Investing in gold 10 years ago would’ve been one of the greatest decisions you could’ve ever made.

And it’s true.

Since August 2002, gold prices have exploded as much as 418%.

However, momentum has certainly slowed.

Over the last two years, gold prices have climbed 35%. Per year, that’s almost 7% slower than its average growth rate over the last decade. Still not horrible.

But the slowing growth has been tragic for gold mining companies

If you had simply invested in the two largest gold producing companies – Barrick Gold Corp. (NYSE: ABX) and Newmont Mining Corp. (NYSE: NEM) – over the last two years, you’d actually be down by an average of 20%.

There are a litany of likely reasons for the declines in mining companies over the last few years. Among them are higher energy prices, along with the mass exodus by investors from using gold mining companies as a proxy for precious metals. Ever since ETFs exploded on the scene, they’ve become the preferred gold proxy.

It has been a frustrating ride for many gold enthusiasts. But I’m writing you because there is an alternative gold investment that has flat-out blown away the returns of the top gold mining stocks and even the price of gold itself.

I’m talking about gold royalty companies.

More Gold Exposure, Less Risk

No, we’re not talking about royalty in the sense of kings and queens. Rather, these companies earn royalties on mines, sort of like musicians earn on sales of their hit songs.

Gold royalty firms provide financing to gold miners in exchange for payment in the future. You can think of them kind of like a bank, but for mining companies.

And these future payments can come in one of two ways:

1. The royalty company finances a mining exploration project in exchange for a royalty on any future sales produced from any discovery.
2. The royalty company helps finance a mine’s construction and receives a royalty payment called a “stream.” Streams commit the company getting the financing to either give away a certain number of ounces of the metal per year to the royalty company or a certain percentage of the ounces produced each year from the mine.

You’ll find royalty streams are more commonly preferred for mining companies. And royalty firms also provide financing for miners involved in a number of commodities including zinc, silver, copper, nickel and platinum.

In short, gold royalty companies are a great way to gain exposure to gold miners and producers without necessarily taking on all the risks that come with them.

That’s because the best-run royalty companies will typically have themselves vested in anywhere from 10 to 50 different mines that are paying them royalties and streams.

If one of their mining investments goes sour, they still have a number of other deals that can offset their downside exposure. Also, because they’re simply collecting “tolls,” their value is much less sensitive to drops in the precious metal’s value.

Even Better Than Gold

So what are some of the biggest gold royalty companies today?

Well, the two largest are Franco Nevada Corp. (NYSE: FNV) (TSX: FNV) and Royal Gold, Inc. (Nasdaq: RGLD) (TSX: RGL).

And you may be surprised at just how well they’ve performed.

Franco Nevada made its initial public offering in December 2007 and shares have increased 234% since then.

But even though Franco has only traded on the NYSE for the last four and a half years, don’t be fooled, it didn’t just come on the mining scene.

It’s actually been in business for over 25 years. And today it holds the crown as the world’s largest gold royalty company.

Meanwhile, Royal Gold is the second-largest gold royalty company in the world today.

Astonishingly, as gold prices have increased as much as 418% in the last 10 years, Royal Gold popped even higher… a whopping 457%.

In addition, the company is involved in a few large properties that it expects will pay off for decades.

Now, would it have been best to get in on the companies years ago before real estate fell apart and the global financial crisis hit?

Of course.

But there’s no point reveling in what might have been. And as long as gold prices head higher, you can expect Franco Nevada and Royal Gold to head that way, too… perhaps even much higher if history is any indication.

Good investing,

Mike

P.S. More interested in finding out about silver royalty companies than gold? Check out this article by Investment U Executive Editor Justin Dove. It also covers some of the tax advantages of using royalty mining companies as a proxy for the metals.

Article by Investment U

By Central Bank News
     Serbia’s central bank, facing political and economic challenges, raised its policy rate by a further 25 basis points to 10.50 percent in a bid to dampen inflationary expectations.
    The Belgrade-based Narodna Banka Srbije, which recently lost its former governor and three other members of its governing council following new laws that tighten political influence over the bank, said inflation had approached the upper bound of its tolerance band and prices were expected to rise further due to higher food prices from a poor harvest and higher administrative and import prices.
     “In view of such developments and an increase in the country’s risk premium, the Executive Board voted to raise the key policy rate in order to moderate inflationary pressures and act preemptively to contain inflation expectations,” the central bank said in a statement.
     The bank also said the “degree of future monetary policy restrictiveness” would depend on fiscal consolidation, food prices and global developments, indicating a bias toward tightening rates further.
     It is the third month in a row that the bank has raised rates for a total rise of 100 basis points.
     The annual inflation rate in Serbia rose to 5.5 percent in June, hitting the upper limit of the bank’s target range of 4.0 percent, plus or minus 1.5 percentage points.
    “Inflation is expected to peak in the first half of 2013 and the start retreating towards the target,” the bank said.
    The meeting of the bank’s board was the first under the new governor of Jorgovanka Tabakovic, who was appointed on Monday. On Tuesday Standard & Poor’s cut Serbia’s credit rating by one notch to BB- due to its budget deficit and worries over the central bank’s independence.
    www.CentralBankNews.info