Month: September 2012

By The Sizemore Letter

As I wrote last week, the central bankers of the world are staging a monetary arms race to see who can pump more liquidity into the world economy.  ECB President Mario Draghi and Fed Chairman Ben Bernanke have each taken turns upstaging the other.

Now, it’s Japan’s turn.  The world’s third-most-powerful central bank has joined the fight, launching a fresh round of monetary stimulus of its own.  The Bank of Japan is expanding its asset purchase scheme by another 10 trillion yen to a full 80 trillion—or about $1.02 trillion in US dollars.

I don’t expect this to be the last shot fired.  The ever quotable Guido Mantega, Brazil’s finance minister, has reiterated his claim that the world is in a “currency war.”  He’s also made it clear that Brazil does not plan on losing it, meaning that Brazil will resort to loose monetary policies too in order to prevent Brazil’s currency from getting unmanageably expensive.

What does any of this mean for investors?  In an interview with the Financial Times this week, Mantega said that “risk aversion had fallen and animal spirits have increased.”

I couldn’t have said it better myself.  Until the market shows any real signs of weakening, I recommend that investors maintain an aggressive portfolio.  And right now, this would include frontier markets such as Africa and the Middle East.  I recommend investors pick up shares of the Market Vectors Africa Index ETF ($AFK) and plan to hold for the remainder of 2012.  As always, use a stop loss that is appropriate for your risk tolerance.

This piece originally appeared on Trader Planet.

Related posts:

• An ETF Portfolio for the 4th Quarter

By Central Bank News
     Countries should pick a supervisor with overall responsibility for an entire financial conglomerate to prevent any supervisory blind spots and coordinate and monitor all  risks, according to a final report on “Principles for the Supervision of Financial Conglomerates” by the Joint Forum.
    The global financial crises highlighted the glaring shortcomings of the supervision of financial conglomerates with their myriad of regulated and unregulated units that span national and industry boundaries. Deciding which supervisory body was responsible for which unit was not always clear.
    In response to the crises, the Joint Forum – set up in 1996 to include banking, insurance and securities regulators – published an initial framework in 1999 for how to avoid such supervisory gaps.
    These principles have now been updated to reflect progress made by the Joint Forum’s parent committees: the Basel Committee on Banking Supervision, the International Organization of Securities Commissions (IOSCO) and the International Association of Insurance Supervisors (IAIS).

    “The 2012 Principles reaffirm the importance of supervisory cooperation, coordination and information sharing, clarifying the importance of identifying a Group-level Supervisor whose responsibility is to focus on group-level supervision and the facilitation of coordination between relevant supervisors,” the report said.
    The principles are aimed at giving national policy makers and supervisors a set of internationally agreed standards that ensure effective supervision of financial conglomerates.
    Among the updated principles is ensuring that supervisors have the necessary legal power and authority to perform a group-wide supervision of financial conglomerates and ensure that these companies have robust capital, liquidity and risk management frameworks.
    “Supervisors should ensure that financial conglomerates develop and follow appropriate policies to  manage capital on a group-wide basis sufficient to help ensure the entity remains able to withstand a period of adverse conditions,”according to the Principles.
   
   www.CentralBankNews.info

By Central Bank News
    The Bank of Israel (BOI) held its policy interest rate steady at 2.25 percent and revised upwards its 2012 growth forecast but cut its 2013 forecast due to the fallout from Europe’s economic contraction.
    The Israeli central bank now expects the 2012 Gross Domestic Product to expand by 3.3 percent, up from a June forecast of 3.1 percent.  The bank’s upward revision follows that of Israel’s Central Bureau of Statistics, which revised upwards it forecast for 2012 growth to 3.5 percent after 4.6 percent in 2011.
    But the forecast for 2013 growth was revised down to 3.0 percent, from 3.4 percent previously, due to the impact of Europe’s slowdown.
     The forecast also looks for the central bank to keep interest rates steady until the end of 2013 and the inflation rate to accelerate over the next year due to higher indirect taxes, higher commodity prices and the past deprecation of the shekel. The inflation rate of the next four quarters until the end of the third quarter 2013 is expected to be 2.6 percent, the bank said.
    Inflation in August rose to a higher-than-expected 1.90 percent from 1.35 percent in July, but the bank said this was due to supply side factors. Inflation expectations, however, remained stable.
    The Bank of Israel has cut its interest rate by 50 basis points so far this year, most recently in June.
    The Bank of Israel said the recession in Europe was deepening and signs of slowing in emerging economies persist while it appears that the slowdown in China “reflects real weakness.”
    “The level of economic risk from around the world remains high, and with it the concerns over negative effects on the local economy. Real economic data around the world continue to indicate weakness. Assessments are that the debt crises will continue to be a major risk,” the bank said.

    www.CentralBankNews.info

By Central Bank News
    The central bank of Mauritius kept its key repurchase rate steady at 4.90 percent, as expected by most economists, and cut its growth forecast amid increasing inflationary pressures.
    The Bank of Mauritius, which cut is repo rate by 50 basis points in March, said it now projects economic growth of 3.3 percent for 2012, down from a previous forecast of 3.8 percent. Mauritius’ Gross Domestic Product rose a real 4.1 percent in 2011, the same rate as in 2010.
    Despite recent measures announced by the European Central Bank and the U.S. Federal Reserve, the central bank said there were significant risks of “prolonged sub-par growth in the main export markets.”
    “Considerable uncertainty remains with regard to the domestic economic outlook,” the bank said in a statement following a meeting of its Monetary Policy Committee.
    It said that upside risks to domestic inflation had risen, partly due to higher global food and energy prices. In August, annual inflation in Mauritius was steady at 3.7 percent, with the annual average down to 4.6 percent from 4.9 percent in July.

    The inflationary risks were: recent rupee depreciation, public sector wage increases expected in upcoming salary review, a possible upward pull from public to private sector wages and the expected change in retail petrol prices.
    “On current trends, y-o-y- inflation could stay at high levels,” the bank said.
    The monetary policy committee discussed a rate cut due to the growth outlook but a majority of the committee members felt there was  need to remain cautious given the global uncertainties, continuing negative real rates of interest on savings and rising corporate indebtedness.

    www.CentralBankNews.info
 

By TraderVox.com

Tradervox.com (Dublin) – The Euro-dollar pair recovered from the losses that started last week but could not break above the resistance level at 1.30. With Greece making some strides towards reaching an agreement with its international creditors, the euro is projected to make some comeback. However, tensions are rising in Spain between the state of Catalonia and the government of Spain. This could be a black spot for the currency which could pull it down during the week.

The pair has started the week with a plunge to 1.2906 on Monday. While the downward trend is not expected to last for long, the intraday trading forecast for the euro-dollar pair remains neutral to bearish. However, the pair is expected to remain above the support level of 1.2816, which is the 38.2 percent retracement of 1.2255 to 1.3171 at 1.2821. An upward breakout from this level is anticipated, where a break above the resistance level of 1.3171 would pave way for 1.3486 resistance level.

The resistance levels to look at today include the resistance level at 1.2936, which has been weak last week. If the pair breaks above this level, the resistance at 1.2951 this paves way for 1.2967. Some of the important support levels in the coming days include support at 1.2905, 1.2889 and 1.2874. The pair is expected to trade at an average of 1.2920 this week. In the medium term, if the pair increases above the 1.3486, this should be an indication of an upward trend which would be limited by the resistance at 1.5. The medium term sentiments for the euro-dollar cross remains bullish as the support level of 1.25 is staying firm.

Some of the EUR/USD sentiments that are in play this week includes the tensions that are rising in Spain over Catalonia and the discussion ranging over the bailout conditions; this is generally negative for the euro. There are also sentiments that Greece is getting closer to a deal with its international creditors. However, the country is seen as failing to meets bailout targets set during its aid discussions. The discussions of a European recession are also spurring fear in the market and investors might avoid the 17-nation currency.

Further, the increasing geopolitical tensions between China and Japan have spurred tension in the global economy. The rising protests in China against Japanese targets have led to closure of some Japanese factories and businesses. The market expects some tension in the UN Assembly as US tries to quell the situation while supporting Japan.

All these global issues coupled with the waning effects of the QE3 and the mixed US data last week and the expected reports this week will affect the movement of the cross.

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

Hear why Jyske Bank Senior Strategist Ib Fredslund Madsen sees markets going higher this week.

Also hear Ib Fredslund Madsen outline the most important events of the week.

Legal information

Video courtesy of http://en.jyskebank.tv

London Gold Market Report
from Ben Traynor
BullionVault
Monday 24 September 2012, 07:15 EDT

WHOLESALE MARKET gold bullion prices dropped to $1757 an ounce Monday morning in London – 1.7% off a seven-month high hit briefly last Friday – as stocks, commodities and the Euro also ticked lower and US Treasuries gained amid signs of ongoing political stalemate in Europe.

Silver bullion dropped to $33.71 per ounce – 4% down from Friday’s high.

Despite the falls, analysts continue to forecast higher prices for gold bullion, while dealers in India report increased physical demand toward the end of last week as local prices came down.

“[There is a] lack of obvious catalysts in the near term to take gold prices higher,” says Deutsche Bank analyst Daniel Brebner.

“But I do think we will likely see over the next quarter or so greater policy action both in Europe and China to support growth within those regions…and that could keep the gold price moving higher. We think we will see $2000-plus gold prices in the first half of next year.”

“I’m not worried at all about gold,” says UBS analyst Dominic Schnider.

“Despite the short-term retracement, gold is still a buy.”

“I think gold should be a portion of every one’s portfolio to some degree because it diversifies the portfolio,” hedge fund boss Ray Dalio, founder of Bridgewater Associates, told CNBC Friday.

“We have a situation now where we have too much debt, and too much debt leads to printing money…[gold] is the alternative to money.”

The world’s biggest gold ETF SPDR Gold Shares (GLD) saw its gold bullion holdings climb to 1317.8 tonnes Friday, their highest level since July 2010.

Silver bullion holdings backing world’s largest silver ETF iShares Silver Trust (SLV) held steady at 9940.7 tonnes, an 11-month high.

The aggregate net long position of gold futures and options traders on New York’s Comex continued to grow more bullish in the week to last Tuesday, weekly data published by the Commodity Futures Trading Commission show.

Palladium prices meantime fell by more than 3.5% this morning, dropping below $640 per ounce, after the world’s largest nickel and palladium miner Norilisk said it plans to cut its investment by 10%, citing a weak outlook for the metal’s price.

Eurozone leaders may allow the new permanent bailout, the European Stability Mechanism, to use leverage to increase its capacity to bail out struggling Euro members, German magazine Der Spiegel reported Sunday.

The ESM, which is expected to come into effect October 8 and will be capitalized with €500 billion, could be augmented with private sector investment to raise its capacity to €2 trillion, the report said.

“If Europe decided to leverage the ESM – and this discussion is going on – we would of course involve the German Bundestag,” Steffen Kampeter, Germany’s deputy finance minister, said Monday.

Last October, European leaders agreed to leverage the ESM’s temporary predecessor, the European Financial Stability Facility, under arrangements that use EFSF money to absorb losses and give private sector investors partial loss protection.

France’s President Hollande and Germany’s Chancellor Merkel meantime failed to reach agreement on the timetable for creating a single European banking supervisor when they met over the weekend.

Hollande said he wants the idea implemented “the earlier the better”, while Merkel said “it has to be thorough…and then we’ll see how long it takes”.

The creation of a single banking supervisor is a prerequisite before ESM money could loaned directly to banks, rather than channeled via governments and added to national debt burdens.

Elsewhere in Europe, Greece should be given more time to hit its deficit target, French prime minister Jean-Marc Ayrault said Sunday. Greece’s budget deficit is double most estimates at €20 billion, according to Der Spiegel, which reports that Greek prime minister Samaras has asked some of the governments creditors to forgive some debt.

The Greek government failed to reach an agreement on spending cuts with the so-called troika of the European Commission, European Central Bank and International Monetary Fund last week, without which Greece will not receive its next tranche of aid. Troika officials are taking a one-week break from negotiations. Payment of the €31.5 billion tranche could now be delayed until November.

Gold buyers in India have benefited from a “golden era” for the metal over the last three years, while “investments in equities have not even given a simple bank interest rate equivalent”, according to a study published by the Associated Chambers of Commerce and Industry of India.

“Net-net, gold has really outdone other asset classes and it is likely to remain an attractive bet as long as uncertainties over the global economy stays,” says Assocham’s secretary-general DS Rawat.

Jewelry dealers in Mumbai’s Zaveri Bazaar meantime saw sales rise by around a fifth during Thursday and Friday trading, as Rupee gold prices fell, India’s Business Standard reports.

“Buying interest is much higher than last week,” added one Mumbai dealer speaking to newswire Reuters.

“[This is] mostly because the Rupee has appreciated substantially.”

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. Ben writes and presents BullionVault’s weekly gold market summary on YouTube and can be found on Google+

(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.

Article by AlgosysFx Forex Trading Solutions

The US dollar is presumed to benefit from risk averse trades to begin the trading week on views that the European leaders’ crisis-fighting measures are encountering another roadblock. Meanwhile, concerns over a slowing Chinese are once again deemed to underscore the dire state of the global economy, deterring demand for the commodity-linked Australian dollar.

German Chancellor Angela Merkel and French President Francois Hollande remained at odds over plans to monitor Europe’s crisis-hit banks, overshadowing an occasion marking Franco-German reconciliation after World War II. Despite affirmation that European unity was the only way out of the debt crisis, they differed over tighter checks on Europe’s banking sector. Hollande is all for banking union, saying that such a framework should be in place preferably before the year ends. For her part, Merkel urged a more cautious approach to ensure success while at the same time refusing to set a target date. Back in June, EU leaders concurred over new bank supervision as part of an agreement to allow the region’s rescue funds to lend directly to struggling banks instead of passing it through countries. Nonetheless, the deadlock outlined once again Germany’s doubts about placing the European Central Bank in charge of bank supervision beginning January 1. Another point of contention is the terms on which struggling countries should request bailout assistance, with German Finance Minister Wolfgang Schaeuble warning against a Spanish application for aid. With European leaders seemingly failing to deliver on their pledge to resolve the crisis, the markets are foreseen to pare risk appetites today.

Meanwhile, a key survey of Chinese manufacturers and retailers reveal that optimism over sales levels are waning and that more are cutting jobs. China’s Beige Book found that 43 percent of manufacturing firms reported higher revenues this quarter, down 20 percent from the previous release. Those expecting higher sales in the next six months dipped 18 points to 53 percent while companies expecting lower sales doubled to 20 percent. Retailing growth is also feeling the pinch as 20 percent reported a drop in sales, almost double the prior figure. The economic slowdown is prompting more companies to reduce jobs and halt hiring. Those cutting employees rose from 13 percent to 20 percent this quarter. The results suggest that the world’s second largest economy slowed for the seventh consecutive quarter to its weakest annual expansion in 22 years this quarter. According to economists, the survey also failed to provide an encouraging sign that a recovery is in the offing. China is Australia’s largest trading partner, and a continued slowdown there is seen to further dampen the outlook for the Land Down Under. Considering these, a short position is deemed viable for the AUD/USD.

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

By The Sizemore Letter

As I wrote late last week, we are in the midst of a monetary arms race in which Fed Chairman Ben Bernanke and ECB President Mario Draghi are tripping over themselves to see who can inject more liquidity into the financial markets.   The result will be a bull run in just about everything: stocks, non-treasury bonds, commodities, real estate.  You name it, and it’s probably going to enjoy a nice finish to 2012.

Through gritted teeth, I would even include gold in the list, though not for the reason most gold bugs would expect.  No, I do not see gold rising as a viable inflation hedge or crisis hedge; I see it rising precisely because it has become a risk asset like everything else (see “A Bad Investment and Getting Worse” for my views on the barbarous relic.  The article is old but the arguments are as valid as ever.)

There are still risks, of course.  Europe could still come unhinged due to political infighting, and the United States is still staring over a fiscal cliff.  China may slow worse than the even the bears expect, and the Middle East could erupt into a full-blown war at any time.

For all of these reasons, investors should stay nimble and be prepared to sell some of their more volatile positions if the need arises.  But in the meantime, it makes sense to be invested as aggressively as your blood pressure will allow to take advantage of the most bullish coordinated monetary easing in modern history.

With this said, how should investors position their portfolios for the remainder of 2012?

For moderately aggressive investors, I would recommend an ETF portfolio that looks something like this:

Sixty percent of the portfolio is allocated to high-quality American and international dividend-paying stocks via the positions in $VIG, $DLN, and $PID.  I would be comfortable holding this segment of the portfolio for the next 12-24 months, come what may in the capital markets.

With the remaining 40% of the portfolio, I recommend taking shorter-term tactical positions in technology shares ($XLK), beaten-down periphery Eurozone shares ($EWP) and select emerging market positions ($TUR and $AFK).

Within the emerging market sphere, I am particularly bullish on the Middle East and Africa.  With all of the investor fascination on the “BRICs” in recent years—and particularly on Brazil and China—Middle Eastern and African markets have been largely off the radar.  This means that there are far fewer disillusioned investors in these markets ready to foreswear them for the “next big thing.”   Furthermore, particularly in the case of Africa, the relative isolation and low economic baseline mean that these markets have been less affected by the fallout from the 2008 meltdown and have the best long-term growth prospects.

A prudent word of warning: this portfolio promises to be volatile, so make sure that you have stop losses in place or some other form of risk control, particularly in the 40% of the portfolio allocated to tactical positions.  I expect this portfolio to finish the year strongly, but the events of the past two years have taught us that it pays to have risk control in place. And as always, the standard caveat applies: this is intended as general information and not as specific investment advice.

Disclosures: Sizemore Capital is long VIG, DLN, PID, XLK, EWP, TUR and AFK in its Tactical ETF Portfolio.  This article first appeared on MarketWatch.

Related posts:

• What Does the Smart Money See for the 4th Quarter?
• How to Choose the Right Dividend ETF

By TraderVox.com

Tradervox.com (Dublin) – The greenback has regained some of the losses it has encountered since the announcement of third round of quantitative easing with impressive performance against the euro last week. This is the last week of the month and the dollar looks set to consolidate some of the gains it has made last week. Here is a brief overview of the seven major reports this week that will affect the market.

Monday 24

At 0800hr GMT, the market will receive the Euro Zone German Ifo Business Climate report. This has been a much awaited report as it is will set the mood for the week. The report had indicated a drop in the last four months with results in August coming in at 102.3 from 1.03.2 registered in July. With the announcement of the bond buying program and the general progress made by global central banks to avert a possible global economic slowdown, the report is expected to rise marginally to 103.0 this time round.

Tuesday 25

The major event this day will be the US CB Consumer Confidence data which will be released at 1400hrs GMT. The report showed a decline in August, registering 60.6 points from a July level of 65.4. Concerns about the job market are the main driving force of this indicator and currently the job market is not performing as would be expected. The market is predicting an increase to 63.2 this time round.

Wednesday 26

The US New Home Sales report will be the major report. Report for July showed an increase to 3.6 percent to reach 372,000 units after a good showing the previous month where it reached 359k. The housing market is the best performing sector in the US and is providing a ray of hope in the economy plagued by poor job market. The market is predicting a rise to 381k this time round.

Thursday 27

There are three major events on this day, all from the US. The first will be the Unemployment claims which will be released at 1230hrs GMT. People seeking claims dropped in the previous week less than the market had predicted, dropping to 382k claims from 385k the previous week. The market expects a report on this day to show last week’s jobless claims dropped to 377,000. At the same time, the US core Durable Goods order report will be released where a gain of 0.5 is expected. The US Pending Home Sales will be the last major report released at 1400hrs. The market is expecting a decline of 0.4 percent.

Friday 28

At 1230hrs, the market will be waiting for the Canadian GDP report. The previous report had indicated a rise by 0.2 percent in Real GDP in June after it increased by 0.1 percent in May. The gross domestic product is expected to expand by 0.2 percent this time.

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