Month: August 2012

By MoneyMorning.com.au

The Eurozone debt crisis has taken a late summer vacation. Since it would be very inconvenient for a disaster to erupt while everyone is on holiday, it doesn’t.

That’s not to say this rule is infallible. One year, all the decision-makers went on holiday in late July, and came back to find themselves embroiled in World War I.

What traders and decision makers will find waiting for them when they get home from the beach could be almost as serious. Here’s why…

The Eurozone has a Laundry List of Problems

Greece has done nothing to redeem its position other than prepare an application for more money. Italy’s GDP declined by 0.7% in the second quarter, and we are shortly to enter the run-up to the next Italian election.

What’s more, Spain is trying desperately to avoid asking for a bailout, and may just succeed in doing so, but one more hiccup in its recalcitrant provincial governments will push it over the edge.

Then there’s Portugal’s economy, which has entered a deep recession, and is showing signs of missing its budget targets again.

And that laundry list of potential problems doesn’t include the biggest one of them all.

That is reserved for France, which elected a socialist government on an anti-austerity ticket in the spring, and is now proceeding to undo the modest progress towards fiscal sanity made by the previous government.

The new French government has raised the already onerous wealth tax and has partly reversed the previous government’s modest pension reforms. For many, the retirement age is back to 60 again, compared with an actuarially sensible 67 in Germany.

In the fall, France also plans to change the top rate of income tax up to a punitive 75%.

Of course, this is nothing more than economic suicide. The rich are much more mobile than they were in the 1980s, the last time a French government tried this kind of thing.

Even then, Guy de Rothschild, Jewish head of the famous banking dynasty, moved to New York, remarking, “To be a Jew under Marshal Petain (the World War II leader who collaborated with the Nazis) was bad enough, but to be a banker under Mitterrand is insufferable.”

These days there are many civilized places with low top tax rates and good broadband connections who would love to welcome French millionaires – not just the United States, but Singapore, where the top tax rate is 20%, and the somewhat less pleasant Dubai, where it is zero.

Assuming the French government goes ahead with its plans, the result will be a massive budgetary and economic crisis, starting in early 2013. GDP will decline fairly sharply and the tax base will decline even more sharply, as emigration will be accompanied by tax evasion.

The point is, even if the Eurozone scrapes by with its current problems, there’s another biggie coming soon.

Is the Sleepy European Bond Market About to Wake Up?

Meanwhile, the bond markets have muddled the relative risks involved – after all, it’s August, so only the most junior traders and analysts are at their desks.

They’ve priced Spanish 10-year bonds at a 6.24% yield, still uncomfortably close to the 7% yield at which government debt is currently supposed to be unsustainable (remembering as I do the days when 10-year U.S. Treasuries yielded 15%, I doubt this, but I let it pass.)

Italy, where the current Monti government was imposed by the EU and faces elections next March against Silvio Berlusconi (who seems likely to run on an anti-euro platform) has a 10-year yield of 5.55%.

Finally France’s economy, which has the worst policies of all and higher debt and deficits than Spain, enjoys a 10-year bond yield of only 2.14%.

One further complicating factor is that the bad boys’ nominal debt levels are not the full story.

Because of the immensely foolish design of the Eurozone’s “Target 2″ payments system, huge obligations have grown up between the central banks.

The German Bundesbank is due 727 billion euros (USD$850 million) from other countries as of July 31, while Greece’s obligations under Target 2 are themselves over 100 billion euros.

Since Greece has no hope of paying an extra 100 billion euros on top of its official debt, that’s not a cost of a Eurozone breakup; it’s money already lost, which will have to be repaid by German taxpayers.

Presumably Mrs. Merkel is aware of this, and will thus be flinty against Greek pleas for more money.

In any case, a “Grexit” is only a matter of time, and from the point of view of both Greece and Europe, the sooner the better.

However, given the other crises looming, Greece won’t be the only country to exit. At some point, probably after the top traders’ vacations end but before the French crisis actually looms, the markets will wake up to the French risk.

Is It Game Over for the Eurozone?

At that point, the game will be up, and the Eurozone will be forced to break up of its own accord.

There are a number of possibilities for what follows. My guess is that since both France and Italy are badly run, they will see the Eurozone breakup as a chance to spend some more mad money. Thus both countries will go their own way, restoring the franc and the lira.

On the other hand Germany, Scandinavia and the Netherlands, all well-run, will want to keep the benefits of a common currency, and so will form a strong “Northern Euro” which will rise in value steadily against the dollar and other currencies.

The most interesting possibility is that Spain and Portugal, fairly well run but unable to bear a strong common currency, may combine with Slovenia, Slovakia and possibly Ireland and Belgium, to form a weak but stable “Iberian Euro.”

Greece and probably Cyprus, meanwhile, will be sent off to the dunces’ corner, to join the likes of Bulgaria and Romania outside any common currency.

For us as investors, it’s probably best to steer clear. Every summer I’ve ever seen eventually comes to an end.

Let’s just say it promises to be interesting.

Martin Hutchinson
Contributing Editor, Money Morning

Publisher’s Note: This article originally appeared in Money Morning (USA)

From the Archives…

Read This Gold Price Warning Before You Buy Another Stock
24-08-2012 – Kris Sayce

Stocks Are Up – Is it a Good Time to Buy?
23-08-2012 – Kris Sayce

It’s About Freedom of Speech: What if We Couldn’t Write to You Anymore?
22-08-2012 – Kris Sayce

Things Are Looking Up for Gold
21-08-2012 – Bengt Saelensminde

The Good News About Europe’s Missing Pre-nup
20-08-2012 – Nick Hubble

Eurozone Debt Crisis on Holiday…But Not For Long

Article by Investment U

Four more years…

For some people, that’s terrific news. For others, the idea makes their blood pressure spike.

But it looks like President Obama is headed for re-election.

At least that’s what the smart money on Wall Street is saying.

I’m not talking about with words. Most of the players on Wall Street will tell you they would rather see Mitt Romney in the White House come January. But more important than the words coming out of their mouths, is what they’re saying with their money.

Don’t get me wrong, they’re still donating to Romney like crazy.

According to The Daily Beast, Wall Street employees have donated $56 million to Republican candidates versus $35 million for Democrats – a sharp reversal from 2008, when 75% of Wall Street employees’ money went to the Democrats.

On Monday, health insurer Aetna (NYSE: AET) announced it would acquire Coventry Health (NYSE: CVH) for $5.7 billion in cash. It’s essentially a $6-billion bet on Obamacare being upheld.

By acquiring Coventry Health, Aetna “substantially increases its Medicaid footprint creating more opportunity to participate in the expansion of Medicaid and to pursue high acuity positions as they move into managed care,” according to the company’s press release.

The Affordable Care Act (Obamacare) expands the number of patients eligible for Medicaid.

Other deals have taken place in the sector, giving the acquirers more exposure to the expanding Medicaid base. In July, Wellpoint (NYSE: WLP) announced it will buy Amerigroup (NYSE: AGP) for $4.9 billion and in January, Cigna (NYSE: CI) completed its $3.8-billion purchase of HealthSpring.

While these deals might make sense regardless of whether Obamacare remains in place, the timing of it is surely interesting. You’d think that a Romney victory in November would lower the price of a deal, as the Medicaid patients wouldn’t be quite as valuable to an acquiring company. So the fact that Aetna and Wellpoint are acting now suggests that they think healthcare reform is here to stay and they want to get ahead of the curve.

They’re not the only ones talking with their money.

Outspoken hedge fund manager Dan Loeb, one of the smartest and most successful investors around, is a former supporter of the President, but now is a harsh critic.

That didn’t stop him from placing bets on companies poised to grow under Obama’s watch. Loeb, along with David Einhorn, another very talented investor, both bought shares of health insurers Aetna, Cigna, Humana (NYSE: HUM) and UnitedHealth Group (NYSE: UNH) in the past quarter – companies that should all do well under the new healthcare regulations.

Listen to What the Market is Saying

The stock market is a leading indicator. In early 2009, we were smack dab in the middle of the financial crisis. A President was elected who opponents said had no business experience. His harshest critics called him a Marxist. Yet the market bottomed and went on to more than double in two years. Over the past year, the S&P 500 is up nearly 27% and year to date, the market has climbed 12.8%.

That doesn’t mean that the market necessarily sees a sharp rebound in the economy or a return to the golden days of the late 90s, but the action, particularly in 2009, did signal that we were not going to go over the cliff as so many had feared.

Similarly in early 2000, as dot com companies were hiring Kiss, The Who and James Brown to play at parties celebrating new funding, stocks started to slide, indicating the good times were over. Many dot coms didn’t start imploding for another year, but the market knew what many clueless CEOs apparently didn’t.

You can go back and look throughout history at many examples of the market climbing ahead of economic recovery or falling before economic weakness.

Looking at Presidential election years going back to 1980, when markets were weak, the incumbent party was voted out of office. The one exception was 2004 when George W. Bush narrowly defeated John Kerry. When the markets were strong, other than 1980, when Ronald Reagan won, the incumbent party was re-elected.

Average return when incumbent party was re-elected: 9.89%.

Average return when incumbent party is voted out: 0.19%.

If you agree with the smart money, you can follow them into health insurance stocks like the ones mentioned above. Wellpoint might be the best positioned to take advantage of the expansion of Medicaid, as it will be the top private manager of Medicaid benefits.

Master Limited Partnerships

Income investors should also consider master limited partnerships (MLPs). These are stocks that have a high yield, where most of the cash distribution is tax deferred. If the President is re-elected and the Bush tax cuts are allowed to expire on December 31, dividend income will be taxed at ordinary income rates, so a tax-deferred strategy might be even more attractive.

However, be sure to speak with your accountant before investing in MLPs, because there are significant tax considerations when investing in MLPs and you want to make sure the costs and risks are worth it.

Some examples of MLPs include Enterprise Product Partners (NYSE: EPD) and Energy Transfer Partners (NYSE: ETP).

Investors love to track where the smart money is investing. So although the two Presidential candidates are pretty much tied according to the latest polls, you can see some of the smartest money on Wall Street are placing their bets on Obama and stocks that will do well if he remains in the White House.

Good Investing,

Marc

Article by Investment U

Article by Investment U

Numbers reported earlier this month continue to support the growing belief that the real estate market is on its way back – slowly but surely.

Standard & Poor’s reported that home prices in its S&P/Case-Shiller 20 City Index rose 0.9% from April to May of this year. If you do all the seasonal adjusting, that’s an increase of about 2.6% from the beginning of the year.

The Joint Center for Housing Studies at Harvard University in their annual State of the Nation’s Housing Report summarized the current market in these terms:

“Housing markets are showing signs of reviving. While still in the early innings of a housing recovery, rental markets have turned the corner, home sales are strengthening, and a floor is beginning to form under home prices. With new home inventories at record lows, unless the broader economy goes into a tailspin, stronger sales should further stabilize prices and pave the way for a pickup in single-family housing construction over the course of 2012…”

What’s even more striking is that its managing director stated in the report that inventories of new, single-family homes in March were at their lowest point in nearly a half century. This means that it would take less than six months to sell all of it. A five-to-six-month period is considered a balanced market.

With this budding rebound in housing, let’s not sell ourselves short. There are other ways to take advantage of a real estate comeback than just single-family homes.

Over the last few months, I’ve searched for some of the best ways to play a rebound in real estate. Here are three of the most popular…

1). Start With the Homebuilders

If we believe we’ve reached a bottom in the market, there’s data to show we could be reaping the benefits of a recovery for years to come. The International Monetary Fund found that on average, after home prices hit rock bottom, the rebound lasted about seven years. They found this to be true in the 55 housing rebounds worldwide over the last five decades.

Also keep in mind that little tidbit about the new single-family home inventory period. Well, with that period signaling a decrease in home supply, it gives homebuilders a bit of optimism.

If you add low interest rates to this equation, you could be looking at a good amount of growth in the industry going forward. Think of big companies like Lennar (NYSE: LEN), which may be best suited to handle an increase of demand. The company is also diversified and can take advantage of any boom in real estate.

If you’re more of a mutual fund or ETF investor, you probably want to take a look at the iShares Dow Jones US Home Construction Index Fund (NYSE: ITB). As of earlier this month, it was up 35% for the year. But be careful, because you may have already missed the run. As I mentioned last month, you can also consider the SPDR S&P Homebuilders (NYSE: XHB). This ETF has broad exposure to housing-related stocks. The index is up over 20% since opening the year at $17.44.

2). The Investor Turns Landlord

It seems like such a logical step, but when you think about it, it can come with all types of risk. But there’s a strong case for being a landlord. I just mentioned that the homebuilders have seen a run-up this year, however, the prices of single-family homes haven’t. That’s an opportunity.

When in the purchasing process, keep in mind:

• Cash is king. If you have it, you can most likely negotiate a better price.
• Most banks are able to give investors funding for investment properties if they have that magic 30% down payment on the property.

According to some measures, home valuations are near a 14-year low. Some big wigs in the market like Mr. Buffett are well aware of this. That’s why he’s been planning to bid on the loan portfolio of failed mortgage lender Residential Capital. Others are being more creative.

For those who want to play in the single-family housing market but don’t want the headaches of dealing with tenants, an alternative is on its way.

Back in the spring, private-equity firm Kohlberg Kravis Roberts (NYSE: KKR) and homebuilder Beazer Homes (NYSE: BZH) announced that they will go public with a REIT that will own and manage single-family homes. Look for this to be a trend with other investment managers in the near future.

3). REITs, REITs, REITs!

There are two types of REITs: equity and mortgage REITs.

Equity REITs own real estate. They buy and manage commercial and rental properties. And primarily concentrate on profits by means of acquisition and management.

Mortgage REITs own debt. They invest in mortgages on real estate properties. And have the property only as collateral for the loans in which they invest.

Make no mistake. I’m referring to equity REITs, and they’re up 15% in 2012 after dividends.

To quote Rick Ferri, Founder of Portfolio Solutions, “… investors should put a hefty chunk of their portfolio in REITs because most commercial real estate isn’t publicly traded, so broad stock market funds grossly understate the sector’s importance to the economy…”

Frank Haggerty of Duff & Phelps Investment Management Company adds, “REITs that will benefit most from an economic turnaround will be those with shorter lease terms that can quickly raise rents, making those that own hotels, apartments and storage units the strongest players. High-quality mall properties also will fare better in a slowly expanding economy….”

The simplest way to get in the REIT market would be fee-friendly index fund. A good fit would be the Vanguard REIT ETF (NYSE: VNQ). You’re looking at an expense ratio of 0.10% and a dividend of about 3.3%. With the dividends, it’s up 17% for 2012.

If everything is cyclical as they say, investing now may put you in on the ground floor of a six-to-seven-year boom.

Good Investing,

Jason

Article by Investment U

By Central Bank News

   Central banks have been successful in boosting economic activity and avoiding deflation by resorting to unconventional monetary policies after the eruption of the global financial crises in 2008, according to a study released by the Bank for International Settlements (BIS).
    While other studies have reached similar conclusions, the BIS working paper stands out because it specifically includes data from most advanced economies and exclusively focuses on the period 2008-2011 when central banks cut their interest rates to effectively zero.
    “As policy rates approached and ultimately got stuck at their effective lower bounds, central bank balance sheets basically replaced interest rates as the main policy instrument,” the three economists said.    
    “The challenge is to figure out a suitable econometric approach for analyzing the macroeconomic impact of central banks balance sheet policies in a crisis period when interest rates reach the zero lower bound,” they added.

   Earlier studies that have attempted to gauge the effectiveness of monetary policy in a post-crises world had several drawbacks.
    Firstly, they mainly looked at prices in financial markets, for example in money markets, and not the broader economy.  Secondly, the models used were developed prior to the financial crises, and this may not be adequate for the current situation. Thirdly, there have been a number of papers looking at the Bank of Japan’s experience with zero interest rates but it’s not clear whether that experience can be applied to a global level.
    The economies that were included in the paper’s panel analysis were  Canada, the euro area, Japan, Norway, Sweden, Switzerland, the United Kingdom and the United States.
    “For most economies, we find a significant positive temporary impact on economic activity and also the magnitude of the effect appears to be fairly similar. The effect on the price level is, however, somewhat more dispersed across countries. In only half of the countries the impact on prices seems to be significant.”
    Click to read the paper: “The Effectiveness of Unconventional Monetary Policy at the Zero Lower Bound: A Cross-Country Analysis”
    www.CentralBankNews.info

By Central Bank News

London Gold Market Report
from Ben Traynor
BullionVault
Friday 24 August 2012, 07:30 EDT

SPOT MARKET gold bullion prices hovered just below $1670 an ounce for most of Friday morning’s London trading, a few Dollars below yesterday’s four-month high.

Stock markets ticked lower and US Treasuries gained, as analysts continued to speculate on the prospects for more quantitative easing from the US Federal Reserve.

Heading into weekend, spot market Dollar gold prices looked set for a gain of more than 3% on the week, after gold rallied following Wednesday’s publication of Fed policy meeting minutes.

“Additional stimulus is inevitable, the question is how it comes,” reckons Charles Morris, who manages around $2.5 billion at HSBC Asset Management.

“There’s no doubt about it, this is gold’s moment. All the long-term trend signals suggest that gold is in a very strong bull market.”

Going by the PM London gold fix, a fix of $1668 or higher this afternoon would make this gold’s biggest weekly gain since January.

Federal Open Market Committee minutes published Wednesday said that “many members” judge that more monetary stimulus, such as a third round of quantitative easing (QE3), could be needed “fairly soon” if economic data did not point to a recovery.

“If [August’s nonfarm payrolls report shows] another 150,000 or more jobs added, that buys them some time,” says Tom Porcelli, chief US economist at RBC Capital Markets, referring to the monthly report from the US Bureau of Labor Statistics showing the net addition of private sector jobs added by the economy.

“If it’s 100,000 or below,” adds Porcelli, “I think they will consider teeing up QE3 for September.”
August’s nonfarm payrolls report is due to be published September 7, with the FOMC meeting the following week.

The volume of gold bullion held to back shares in the SPDR Gold Trust (GLD), the world’s largest gold ETF, rose to its highest level since April yesterday at 1286.5 tonnes.

On the Shanghai Gold Exchange meantime, gold forward contracts hit their highest levels in nearly five months Friday, with trading volumes also rising.

Wholesale silver bullion prices meantime hovered above $30.30 per ounce Friday morning – nearly 8% up on the week – while other commodities were also flat on the day.

“In the short-term, it would be difficult to see considerably higher commodity prices without quantitative easing from central banks,” says Daniel Briesemann at Commerzbank.

“In the long term [though], I don’t think that commodities need quantitative easing measures, as they can rise without it. The economy should recover and demand in emerging markets is still relatively robust.”

Here in Europe, leaders must “stand by [their] obligations” according to a statement from German chancellor Angela Merkel, released following Thursday’s meeting with French president Francois Hollande to discuss Greece.

“We, and I, will encourage Greece to pursue the path of reform that demands a lot from the people,” said Merkel.

A day earlier, Eurozone finance chief Jean-Claude Juncker said it “would not be advisable to put further demands” on ordinary Greek people who “have suffered a lot”.

Greek prime minister Antonis Samaras is due in Berlin today for talks with Merkel, where he is expected to ask for additional time to implement austerity measures. Samaras then heads to Paris tomorrow to meet Hollande.

Bond market intervention by the European Central Bank aimed at lowering sovereign borrowing costs would not represent a breach of the central bank’s mandate, German finance minister Wolfgang Schaeuble says in today’s Irish Times.

Last Saturday, by contrast, Schaeuble suggested that such a policy would be “like when you start trying to solve your problems with drugs.”

ECB president Mario Draghi said Friday that the central bank will wait until a preliminary ruling by Germany’s Constitutional Court before revealing any details of a bond buying plan. The Court is due to make a ruling on September 12 over whether creating the Eurozone’s permanent bailout fund violates German law.

Here in the UK, the economy shrank by 0.5% in the second quarter, according to second estimate gross domestic product figures published Friday.

In a report published Thursday, the Bank of England argues that its quantitative easing policy has had a “neutral” effect on people preparing for retirement, since while annuity rates have fallen, the value of assets in pension pots has risen.

In addition, “asset purchases have boosted the value of households’ financial wealth held outside pension funds,” the report says, “although holdings are heavily skewed with the top 5% of households holding 40% of these assets.”

Across the Atlantic, the creation of a “gold commission” to examine the possibility of restoring the Dollar’s link to gold bullion is set to become official Republican party policy, the Financial Times reports.

“There is a growing recognition within the Republican party and in America more generally that we’re not going to be able to print our way to prosperity,” says American Principles Project chairman Sean Fieler.

A similar commission three decades ago recommended not returning to gold, with Ron Paul dissenting and writing the minority report, which was later published as ‘The Case for Gold’

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 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

By TraderVox.com

Tradervox.com (Dublin) – The dollar plunged to its weakest level in seven weeks against the euro after jobless claims data rose to the highest in a month. The data has spurred speculation of a potential third round of quantitative easing, which many economists are predicting will be made in the coming two months. The dollar had declined earlier against most of its counterparts as Federal Reserve and China indicated that they are prepared to make more monetary easing to spur economic growth in the respective countries. The euro’s advance was limited as Angela Merkel, the German Chancellor, reiterated that she will stand by her obligation to the 17-nation single currency bloc. She was talking to the press after meeting with French President Francoise Hollande in Berlin.

Talking about the Jobless Claims in US, Eric Viloria, a Senior Currency Strategist in New York at Gain Capital Group LLC, indicated that the figures were not what the market was expecting. The data has sparked speculation of QE3, but Eric said if there is any improvement in the coming Payrolls report, then this would be quelled. The payrolls report is due on September 7. The Jobless Claims data released yesterday by the Labor Department showed a rise of 4,000 to reach 372,000 against a market expectation of 365,000.

According to a report released by the Labor Department this month, employers increased their workforce by 163,000 in June, registering the biggest rise since February. The report also indicated an increase in Unemployment rate to 8.3 percent from 8.2 percent the previous month. The report by the department forced the dollar down by 0.3 percent against the euro to trade at $1.2564 at the close of trading yesterday in New York. The euro-dollar pair had reached 1.2590, which is the strongest level it had been since July 14. The greenback dropped by 0.1 percent against the yen to trade at 78.49 yen.

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. 

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Article by AlgosysFx Forex Trading Solutions

In the previous European trading session, the Euro rose against the British pound on expectations that the European leaders would make significant progress in stemming the debt crisis, boosting demand for the former. With such optimism continuing to impact the markets, the single currency is expected to be getting a lift in today’s European trades.

German Chancellor Angela Merkel and French President Francois Hollande expressed commitment to work together on their approach to Greece. Eurogroup Head Jean-Claude Juncker has backed the Hellenic Republic in its efforts to steer the economy back on track. Today, Merkel is set to meet with Greek Prime Minister Antonis Samaras to discuss related matters. In her prepared statement late yesterday, the German chancellor said that they would continue to encourage Greece to pursue the path of reform that demands a lot from the people. Also, reports surfaced that Spain is already negotiating with the Euro Zone over bailout conditions, although no final decision to seek for financial aid has been made yet by the bloc’s fourth largest economy. Accelerated measures to contain the debt crisis are seen to help the shared currency.

In the UK, the Revised GDP figure is up for release and is expected to still show contraction of Britain’s economy in the second quarter of this year. With a sustained decline in economic activity in the UK, the Sterling is also seen to drop as a result. Taking into consideration all the foregoing factors, a long position for the EURGBP pair is recommended in today’s European trading session.

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

Source: ForexYard

After hitting a fresh seven-week high against the US dollar earlier in the week, the euro was unable to extend its gains during trading yesterday despite the release of positive French and German manufacturing data. In other news, weak Chinese economic data resulted in losses for both crude oil and the Australian dollar during the European session. Today, traders will want to note the results of the UK Revised GDP figure at 8:30 GMT, followed by the US Core Durable Goods Orders at 12:30. Any better than expected news could help both the GBP and USD before markets close for the weekend.

Economic News

USD – Core Durable Goods Orders Set to Impact USD

After taking significant losses earlier in the week as a result of the most recent FOMC Meeting Minutes, the US dollar was able to stabilize for the most part during European trading yesterday. The meeting minutes hinted at a possible new round of quantitative easing, which caused investors to sell the greenback. Yesterday, the USD/JPY gained close to 20 pips during mid-day trading, but quickly erased the gains following a worse than expected US Unemployment Claims figure. Against the Swiss franc, the dollar gained close to 25 pips to reach as high as 0.9578.

As markets get ready to close for the weekend, traders will want to pay careful attention to the US Core Durable Goods Orders figure, set to be released at 12:30 GMT. Analysts are forecasting the figure to come in at 0.5%, well above last month’s -1.4%. If the forecasts turn out to be true, the dollar could recoup some of its recent losses against the Japanese yen during mid-day trading. At the same time, should the news disappoint, it may fuel speculations that the Fed will soon begin a new round of quantitative easing and could result in losses for the greenback.

EUR – EUR Takes Modest Losses vs. USD and JPY

After hitting a fresh seven-week high against the US dollar during early morning trading yesterday, the euro took moderate losses later in the day, despite positive French and German manufacturing data. After reaching the 1.2571 level, the EUR/USD fell as low as 1.2535 during European trading. Against the Japanese yen, the common-currency fell more than 40 pips during the second half of the day, eventually reaching as low as 98.26.

Turning to today, euro traders should monitor announcements out of the euro-zone. German and French officials have been meeting in recent days to discuss the current situation in the euro-zone, particularly with regards to Greek progress in the steps it needs to take to get its economy back on track. Any positive news concerning Greece’s current debt situation may boost the euro before markets close for the weekend.

Gold – FOMC Meeting Minutes Continues to Boost Gold

Gold extended its bullish trend throughout European trading yesterday, following the most recent FOMC Meeting Minutes from earlier in the week. The meeting minutes, which hinted at a new round of monetary stimulus in the near future, led to risk taking in the marketplace. As a result, gold gained close to $16 an ounce to reach as high as $1673.

Today, gold traders will want to pay attention to US data, specifically the Core Durable Goods Orders figure at 12:30 GMT. If the news comes in above analyst expectations, it may lead to reduced speculations that the Fed is getting ready to initiate a new round of quantitative easing and could result in losses for gold.

Crude Oil – Chinese Data Leads to Losses for Crude Oil

A poor Chinese manufacturing indicator turned crude oil bearish yesterday. The news signaled to investors that demand for oil in China may decrease, and contributed to risk aversion in the marketplace. The price of oil fell close to $1 a barrel during European trading, reaching as low as $97.26 before bouncing back to the $97.65 level.

Turning to today, oil could see volatility if there are any announcements out of the euro-zone with regards to the current debt situation in Greece. Positive developments could lead to risk taking in the marketplace, which may boost the price of oil before markets close for the weekend. Conversely, negative developments in the euro-zone could result in oil extending its downward movement.

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

NZD/USD

The Williams Percent Range on the daily chart has crossed into the overbought zone, signaling a downward correction in the near future. Furthermore, the MACD/OsMA 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 possible 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.

Article by Investment U

Your level of success as an investor typically boils down to how well you can do one thing – analyze business fundamentals.

That’s because, regardless of what the economy and the stock market are doing, companies that are increasing sales, compounding earnings at high rates, growing market share, improving operating margins, paying down debt and buying back shares of their own company will eventually deliver excellent returns.

Sounds simple, right? Well, considering that in the United States alone there are about 15,000 publicly traded companies, maybe not.

With so many businesses to invest in, uncovering the best ones can feel like trying to find a needle in a haystack. Especially in today’s stock market environment.

But I’m writing you today because it doesn’t have to be so difficult.

Truth is, there’s a little-known “cheat sheet” that can tell you within seconds which stocks should be on your radar. And you don’t need to use a stock screener or pay anyone to tell you where to find them.

They’re called Form 13F filings.

An Easy Way to Uncover Winning Stocks

Form 13F is a quarterly report that money managers with over $100 million in equity holdings must file with the United States Securities and Exchange Commission (SEC).

Basically, it’s a free glimpse into what the most successful money managers and investors are buying and selling each quarter.

And it can give you insight into companies and industries you may never have considered investing in before.

For instance, just last week, Warren Buffett’s Berkshire Hathaway (NYSE: BRK-A) filed its Form 13F from the second quarter.

Among the highlights:

• For the first time ever, the company initiated buys in two oil companies, Phillips 66 (NYSE: PSX) and National-Oilwell Varco (NYSE: NOV).
• After buying 9.3 million shares last year – worth over $200 million – of Intel (Nasdaq: INTC), Berkshire completely sold out of its position.
• The company added to its positions in Wells Fargo (NYSE: WFC), IBM (NYSE: IBM), DaVita (NYSE: DVA), Bank of New York Mellon (NYSE: BK), DirecTV (Nasdaq: DTV), Viacom (Nasdaq: VIAB) and Liberty Media Corporation (Nasdaq: LMCA).
• Berkshire cut back its holdings in Johnson & Johnson (NYSE: JNJ), Kraft (Nasdaq: KFT), United Parcel Service (NYSE: UPS), Visa (NYSE: V), CVS (NYSE: CVS), GE (NYSE: GE) and Ingersoll-Rand (NYSE: IR).

Getting Aggressive

Take a close look at the companies that Buffett added to and cut back.

Do you see how he’s moving cash out of defensive stocks and into more-aggressive ones?

Today, over half of Berkshire’s portfolio is weighted in either financials or technology.

These aren’t industries to invest in when the roof is about to cave in.

In fact, over the last quarter, shares of J&J were cut back so far that it’s no longer even a top 10 holding for Berkshire.

It was replaced for the most part by none other than DirecTV, the No. 1 provider of satellite television in the United States and Latin America.

I’d bet DirecTV isn’t a company you’d normally consider in today’s market environment.

But you may be surprised to know that the company is up a solid 19% this year alone.

And it’s exactly the kind of gem I described above.

DirecTV is growing sales at 9.5% per quarter, its overall customer base is growing, it’s buying back shares, its earnings and margins are expanding, and it’s looking to tap into new industries such as the broadband wireless market in Brazil.

Berkshire’s aggressive moves in its 13F filing seem to indicate that Buffett feels U.S. consumer discretionary stocks are cheap and the recovery is about to pick up.

But Buffett is just one example.

You can follow the moves of any big-time money manager who better reflects how you feel about the economy and the markets with 13F filings.

John Paulson and George Soros are two of the most famous examples of money managers putting their money into gold assets instead of U.S. equities.

Either way, 13Fs are a great tool to find out where the big players in the market are putting their cash today.

Good Investing,

Mike

Editor’s Note: One of my favorite websites that tracks 13Fs is called WhaleWisdom.com. Each quarter they construct a heat map of the most popular stocks among hedge funds. For the 13F heat map from the most recent quarter, click here.

Article by Investment U