November 2012 – Page 34 – InvestMacro Forex News

November 2, 2012

Market Review 2.11.12

The Japanese yen slipped to a fresh four-month low against the US dollar last night, following better than expected US employment data yesterday which boosted investor confidence in the US economic recovery. The USD/JPY, currently trading at 80.32, has gained close to 40 pips in the last 24 hours.

Concerns regarding Greece’s willingness to institute new austerity measures, required to secure a new round of bailout funds, caused the euro to fall against several of its main rivals in Asian trading. The EUR/USD fell more than 50 pips last night, and is currently trading below the 1.2900 level.

Both crude oil and gold saw minor downward corrections last night, as concerns about Greece also weighed down on higher-yielding commodities. Still, analysts were quick to warn that investors are likely to hold off on opening big positions for commodities until after key US employment data today.

Main News for Today

US Non-Farm Payrolls – 12:30 GMT
• The Non-Farm figure is widely considered the most important indicator on the forex calendar
• Following yesterday’s better than expected ADP Non-Farm Employment Change, analysts are forecasting today’s news to show growth in the US employment sector
• Any better than expected data could help the USD/JPY extend its recent bullish trend

US Unemployment Rate- 12:30 GMT
• After last month’s surprising drop in the US Unemployment Rate, the dollar received a boost against the yen
• Any better than expected news could help the dollar once again today

Dollar Remains Strong Against Peers Prior to US Jobs Data

By TraderVox.com

Tradervox.com (Dublin) – The greenback advanced against most of its peers after US data increased expectations that the employment figures from the world’s largest economy will indicate that the economy is recovering. The euro continued with poor performance for the second day before the European data that is expected to show that the manufacturing sector in the region is dwindling. If the projections of contraction are confirmed, this would be the 15^th month the sector would contract. The yen continued with weekly declines against the dollar as signs of economic weaknesses started to show and as investors evaluate the effects of the Bank of Japan move to add 11-trillion yen as additional stimulus to bond-buying kitty.

According to Lee Sue Ann, who is a treasury economist in Singapore at United Overseas Bank ltd, if the employment data from the US are impressive, there might be a large number of people buying the dollar on relative basis as the dollar remains the better option for safe haven seekers. Sue added that if the data is too bad, the dollar might remain supported as it is a safe haven currency. The yen has dropped by 0.8 percent against the dollar since October 26 and is poised to register another weekly decline against the dollar. If the yen closes lower against the dollar, this will be the longest stretch of weekly declines since March 16. The yen has dropped by 0.5 percent against the euro in the past week while the US dollar has gained by 0.3 against the common currency in the same period.

The increased speculation of good employment data from the US lead to a 0.3 percent increase of the dollar against the euro to trade at $1.2901 at the start of trading in London today. The euro declined by 0.1 percent against the yen to exchange at 103.59 yen. The greenback advanced by 0.2 percent against the yen to trade at 80.28.

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November 2, 2012

US Non-Farm Payrolls Set to Create Major Market Volatility

Source: ForexYard

The USD/JPY was able to extend its bullish run throughout the day yesterday, following a batch of positive US economic news which boosted faith in the American economic recovery. The better than expected news also resulted in moderate gains for the euro, as investors decided to shift their funds to higher yielding assets. Today, US news is once again forecasted to generate major volatility in the marketplace. Specifically, the all-important US Non-Farm Payrolls figure, set to be released at 12:30 GMT, could boost the dollar further if it comes in above its forecasted level.

Economic News

USD – Positive US News Boosts USD/JPY

A batch of better than expected US news yesterday, specifically the ADP Non-Farm Employment Change and ISM Manufacturing PMI, resulted in the US dollar extending its gains against the Japanese yen. The USD/JPY spent most of the day trading at around the 80.10 level, just below a recent four-month high. The greenback did not have as much luck against some of its higher-yielding currency rivals. The positive news resulted in investors shifting their funds to riskier assets, causing the dollar to fall against the Swiss franc. The USD/CHF fell close to 40 pips during mid-day trading, eventually 0.9298.

Today, US dollar traders will want to pay close attention to the US Non-Farm Payrolls and Unemployment Rate, both scheduled to be released at 12:30 GMT. The employment data is widely considered the most important indicator on the forex calendar and consistently leads to volatility in the marketplace. Today’s news is expected to show that 123K new US jobs were added in October, slightly better than the 114K added in September. Should today’s news come in above 123K, the dollar could see additional gains against the yen.

EUR – Risk Taking Boosts Euro

Better than expected US economic indicators yesterday led to risk taking among investors, which helped boost higher yielding currencies, like the euro, throughout the day. Against the US dollar, the euro was able to advance more than 40 pips during mid-day trading, eventually trading as high as 1.2980 at the beginning of the US session. The EUR/JPY moved up over 50 pips throughout the European session to trade as high as 104.00. A minor downward correction brought the pair to 103.89 during afternoon trading.

Today, the euro is virtually guaranteed to see volatility following the release of the US Non-Farm Payrolls figure. Following yesterday’s better than expected ADP Non-Farm Employment Change figure, many investors are feeling confident that today’s news will show additional growth in the US labor sector. If true, riskier assets like the euro could see additional gains before markets close for the weekend. That being said, traders will want to remember that Non-Farms figure is notoriously difficult to predict. Should today’s news disappoint, the euro could turn bearish.

Gold – Global Economic Fears Cause Gold to Slide

The price of gold fell more than $10 an ounce during mid-day trading yesterday, as fears regarding the pace of global economic growth caused the precious metal to reverse some of its recent gains. Prices fell as low as $1716.48 by the afternoon session. That being said, losses were limited due to better than expected US economic data and the overall trend remained bullish.

Turning to today, gold traders will want to pay attention to highly important US employment data set to be released at 12:30 GMT. Any better than expected news could help relieve fears about the pace of the global economic recovery, which may help boost higher yielding assets, like gold, before markets close for the weekend.

Crude Oil – Drop in US Inventories Boosts Price of Oil

A significantly lower than expected US Crude Oil Inventories report yesterday resulted in the price of oil spiking by more than $1 a barrel during afternoon trading. The US data, which came in at -2.0M, signaled to investors that demand has gone up in the world’s leading oil consuming country. As a result, oil was able to trade as high as $87.30.

Today, oil trades will want to continue monitoring news out of the US, particularly the Non-Farm Payrolls figure. Any better than expected news may signal to investors that demand for oil will continue to increase, which may help crude extend yesterday’s bullish trend.

Technical News

EUR/USD

A bearish cross on the daily chart’s MACD/OsMA is indicating that this pair could see a downward correction in the near future. This theory is supported by the weekly chart’s Williams Percent Range, which has crossed into overbought territory. Traders may want to open short positions for this pair.

GBP/USD

In a sign that this pair could see a downward correction, the Relative Strength Index on the weekly chart is approaching the overbought zone. Furthermore, the MACD/OsMA on the same chart appears close to forming a bearish cross. Traders will want to keep an eye on these two indicators, as they may soon point to impending bearish movement.

USD/JPY

While the Williams Percent Range on the weekly chart has crossed over into overbought territory, most other long term technical indicators place this pair in neutral territory. Traders may want to take a wait and see approach for the time being, as a clearer picture is likely to present itself in the near future.

USD/CHF

A bullish cross on the weekly chart’s Slow Stochastic indicates that this pair could see an upward correction in the coming days. Additionally, the Williams Percent Range on the same chart is currently in oversold territory. Traders may want to open long positions for this pair.

The Wild Card

Silver

The Bollinger Bands on the daily chart are narrowing, indicating that a price shift could occur in the near future. Furthermore, the MACD/OsMA on the same chart has formed a bullish cross, indicating that this price shift could be upward. This may be a good time for forex traders to open long positions ahead of a possible upward correction.

Forex Market Analysis provided by ForexYard.

November 2, 2012

Euro Strengthens Against the Yen as EU Leaders Urge Greece on Austerity Measures

By TraderVox.com

Tradervox.com (Dublin) – The 17-nation currency strengthened against the Japanese currency as European governments pushed Greece to make deeper spending cuts. Eurozone leaders want Greece to adhere to these spending cuts in order to keep aid flowing and as they discuss measures to resolve the region’s debt crisis that has lasted for the last three years. The euro dropped against the dollar earlier as traders avoided riskier assets due to Hurricane Sandy. However, the euro strengthened against most of its major counterparts as Portuguese lawmakers prepare to vote on 2013 budget proposal.

Brain Kim has noted that the risk-off mood in the market is partly due to the discussions going on about Greece. Kim, who is a currency strategist at Royal bank of Scotland Group Plc, in Stamford Connecticut, added that the support from Euro zone leaders discussing Greece bailout was expected as there is general consensus that everything should be done to keep Greece in the monetary union. The euro rose against the yen as Standard & Poor’s 500 Index remained high, increasing by 0.5 percent.

According to Sireen Harajli, who is a foreign currency strategist at Credit Agricole in New York, EU leaders discussing the Greece issue are showing flexibility but without giving up the ultimate goal of positive development in the country and the region as a whole. The euro has dropped against the dollar as the region tries to resolve debt crisis issues. On November 27, Portuguese Parliament will hold a final budget vote while the Greek government is presenting the budget to the parliament today.

The 17-nation currency strengthened against the Japanese currency by 0.2 percent to close the day at 103.38. It had gained to 104.59 on October 23, the strongest it has been since May 4. The euro remained unchanged against the dollar at $1.2960 after it appreciated by 0.5 percent.

November 1, 2012

Microsoft the Better Long-Term Bet, But Apple and Big Tech a Short-Term Buy

By The Sizemore Letter

Last week, I suggested that Microsoft ($MSFT) would be the ultimate winner in the long war for dominance of the smartphone and tablet markets.

Though Apple ($AAPL) dominates today, it has no real defensible “moats” that would prevent an aggressive competitor from muscling in on its turf. Consumers are notoriously fickle, and there is little to lock them into the Apple ecosystem. You can access your key services—such as Facebook ($FB), Twitter, Skype and even Apple’s iTunes—from just about any device, after all. And if Microsoft is able to leverage its dominance of the desktop market by familiarizing users with its Windows 8 operating system—which looks and feels more or less the same on desktops, tablets and smartphones—Microsoft may well dig the elusive moat that Apple has thus far been unable to dig.

Moreover, Apple’s “idea man,” the late Steve Jobs, is not something that can be replicated, and going forward Apple will find it increasingly harder to stay ahead of its competition.

As Apple discovered to its dismay during the PC era of the 1980s through the mid-2000s, computers are ultimately commodity products for which it is difficult to charge a premium (and yes, I lump smartphones, tablets and PCs together as “computers”). The iPhone’s popularity has been bankrolled by generous subsidies by service providers like AT&T ($T), Verizon ($VZ) and Sprint ($S). But as these carriers start to push back against subsidies, Apple will find it harder to maintain its margins without lowering its prices—something the company will be reluctant to do. In a very short period of time, Apple may again see itself fall from the position of industry leader to that of a niche provider.

None of this suggests Apple’s imminent demise, of course. I’m talking about a long war of attrition.

But none of this matters in the short term. For the remainder of 2012, I see investor risk appetites returning, and I see Apple and its competitors Microsoft and Google ($GOOG) leading a rally in technology shares.

I recommend investors pick up shares of the Technology Select SPDR ($XLK) and plan on holding for the remainder of 2012.

With the bad earnings releases of the third quarter mostly digested, I expect to see a broad-based market rally, and I expect more cyclical sectors such as technology to lead.

Disclosure: Charles Sizemore is long XLK through his Tactical ETF Model. This article first appeared on TraderPlanet.

The post Microsoft the Better Long-Term Bet, But Apple and Big Tech a Short-Term Buy appeared first on Sizemore Insights.

November 1, 2012

USDJPY is facing 80.37 resistance

USDJPY is facing 80.37 previous high resistance, a break above this level will indicate that the uptrend from 77.43 has resumed, then further rise towards 82.00 could be expected. Support remains at the lower line of the price channel on 4-hour chart, only a clear break below the channel support will suggest that lengthier consolidation of the uptrend from 77.43 is underway, then range trading between 79.27 and 80.37 could be seen.

usdjpy

Forex Signals

November 1, 2012

More Bad News for the Asian Century

By MoneyMorning.com.au

‘Climate change adviser Ross Garnaut has lambasted Australian executives for destroying shareholder funds in the blind belief China’s demand for Australia’s big three mining exports would continue to climb.’ – The Age

Perhaps Mr Garnaut should ask why company executives are blowing up shareholder funds.

Maybe it’s because for 30 years, Australian governments have spouted off about the Asian economic boom.

And now the Aussie government has just released the Asian Century white paper. The gist of the white paper is that Asia will undergo an economic boom for another 100 years.

But before you trust everything the government says, just remember that they can’t even correctly forecast their budgets six months in advance. So we find it hard to take a 100-year forecast with anything more than a pinch of salt.

Our advice? Ignore the long-range forecast and look at history instead. That’s because history tends to offer useful lessons for the future…including a lesson Australia could learn from previous Asian booms and busts…

Take this report from the New York Times in 1996:

‘Are East Asia’s fiercely competitive tiger economies starting to lose their fangs?
‘Things probably have not gotten quite that bad. But if the teeth are still intact, they have lost some of their sharpness of late. Export growth for many countries in the region – including the original “Four Tigers” of Singapore, Taiwan, Hong Kong and South Korea, as well as a half-dozen other countries that are following the same fast-growth path – has slowed sharply this year. And China’s exports have actually declined.
‘The deceleration in part reflects a healthy cooling off of economies that were running the risk of overheating. But it also raises questions about the staying power of East Asia’s export-driven economic boom. In particular, it translates into a deterioration of the region’s trade balance.’

One year later, the Asian Economic Crisis was in full flow. The Asian Tiger economies collapsed and their currencies were devalued. To rub the salt in, the International Monetary Fund (IMF) handed out bailout money.

In simple terms, the cause of the Asian Economic Crisis was over-investment, over-borrowing, and over-enthusiasm…

Asian Tiger Slaughtered

It was a classic bubble. An investment or economy begins growing on its own fundamentals. This attracts attention. So more people invest. Things get even better…imagine if growth continued at this rate.

Then the snake-oil salesmen arrive. In this case they called it the ‘Asian Tiger’. Businesses expanded and new businesses appeared. But because they hadn’t saved enough, they had to borrow money.

The banks cautiously loaned money at first. But when they started seeing the returns, they imagined what they could have made if they had loaned twice or three-times as much.

You get the picture. In the end, like every investment bubble in the history of mankind, the world runs out of fools who are prepared to buy into the bubble.

The euphoria that sucked everyone in disappears. Replacing it is fright as everyone rushes for the exit.

They sell the investment at a loss. Businesses can’t sell enough goods to repay the loans. That means loans go unpaid. The currency falls as investors abandon it for safe haven currencies…and finally, the whole economy collapses in a heap.

That’s the (abridged) story of the Asian Financial Crisis. And it’s the story of every other asset or economic bubble…and it’s the story of the Chinese economic bubble.

‘Oh, but Kris, China is different, it doesn’t have a bunch of external debt. It owns other nations debts, so it will be fine.’

We often hear that excuse.

But, it’s worth paying attention to an article in Forbes earlier this year:

‘Here’s some terrific news about China’s economy: at the end of last year, the debt-to-GDP ratio of the Chinese government, the key measure of its fiscal sustainability, stood at 16.3%. That’s an improvement from the already impressive 17% at year-end 2010.
‘Based in large part on Beijing’s low debt load, the Economist’s “wiggle-room index,” which ranks economies on their ability to afford stimulative measures, assigns a great rating to China. Of 27 emerging nations, only petroleum-blessed Saudi Arabia and Indonesia look stronger…
‘All this sounds wonderful, but none of it correlates with the facts. The 16.3% calculation excludes Beijing’s “hidden liabilities.” Once you add them in, China’s debt-to-GDP ratio increases to somewhere between 90% and 160%. And if you believe Beijing has been overstating its GDP recently – it has, at least starting from the last quarter of last year – China’s ratio approximates Greece’s 164%.’

Greece is Nothing Compared to China

Wow! The European Union is on the verge of collapse, and asset markets have crashed due to Greece’s debt problems. Given the relative size of the Greek economy to the Chinese economy…

Click to enlarge

…can you imagine what will happen to asset prices when the Chinese economy implodes? It almost doesn’t bear thinking about. Only you have to think about it because the Australian economy is handcuffed to the Chinese economy.

Now, we’re not saying that China won’t be an economic force…to a large degree it already is. But what we are saying is something we’ve said for the past couple of years.

That is, regardless of a country’s strength, economic growth doesn’t go up non-stop forever. Booming economies will always have periods of bust.

If an economy sees excessive credit growth and an economic boom, as sure as night follows day, that economy will see credit contraction and an economic bust.

Bottom line: 100 years is a long time, and anything can happen. But don’t fall for the spin that Australia’s future wealth is safe.

The Chinese economy is following the same path as every other economic boom…and it will soon follow the same path as every other economic bust.

History will show that the Asian Financial Crisis was nothing compared to the coming fallout from the Chinese Financial Crisis.

Cheers,
Kris

From the Port Phillip Publishing Library

Special Report: After the Bust

Daily Reckoning:
It Won’t Be Long Before the Problems in Greece Resurface

Money Morning:
Is the Asian Century Already Kaput?

Pursuit of Happiness:
Tax = Theft

Australian Small-Cap Investigator:
The Power of Small Cap Stocks

More Bad News for the Asian Century

November 1, 2012

When Will Government Bond Markets Implode?

By MoneyMorning.com.au

I read [UK] Conservative MP Doug Carswell’s, The End of Politics.

I recommend it. It will fill you with optimism.

Carswell describes how the shrinking of the state is inevitable. The collective intelligence generated by the digital age means it will just not be possible for states to operate in the opaque, suffocating and expensive way that they do.

The tax receipts will no longer be there. The possibility of endless government borrowing will not be there. And the option to inflate the currency will not be there as, thanks to digital alternatives, governments will lose their monopolies on money.

So the state must shrink or die.

If he’s right – and I hope he is – the world will be a better place for it.

But I fear we’ve a long way to go before we reach any such golden age. And in the meantime investors need to be prepared for a painful transition.

Welcome to the Great Stagnation

Nobody can say for sure what would have happened if governments and central banks had acted differently in 2008. What if the banks had not been bailed out? And what if central banks had not chosen massive economic and financial intervention?

I like to think that asset prices would have fallen considerably lower, that a free-er and fairer system of money and finance would have emerged and that economies would now be growing in a much healthier way. But neither I, nor anybody else, can prove what might have been.

Now a feeling of stagnation and limbo pervades. Politics is mired in debates over whether economic stimulus and spending or cutbacks are the answer. Businesses are reluctant to borrow and invest.

Banks are reluctant to lend. The housing market has atrophied. Stocks are neither compellingly expensive, nor compelling cheap, stuck in a cycle of panic followed by stimulus.

And investment decisions are being made often not on the merits or otherwise of a company, but on how inflationary the actions of a central banker are anticipated to be.

In the late 1970s and early ’80s, governments were forced to take certain measures because they had lost control of currencies, interest rates were spiralling and the bond vigilantes were forcing them down a certain path. But that is not the case now. The bond markets are still in bull mode.

We won’t see Carswell’s “end of politics” – or the Great Purging that was avoided in 2008 – until we get a reversal in bonds. The big question is, when, if ever, will we get that turn?

Have Bond Markets Peaked?

In the UK, the Bank of England is now buying 50% of UK gilts – and, effectively, printing the money to do so. It’s an artificial situation, but that doesn’t mean it can’t carry on. I’ve called the top in bonds before and been wrong.

Look at Japan if you want to get an idea of how long these things can go on for – 23 years and counting since the crash of 1989. Gilts are perceived as a safe haven, even if real inflation is higher than the yield they pay.

Here’s a chart of UK interest rates since the 1970s. They continue to be the lowest they’ve been in history.

And here, thanks to Nick Laird of sharelynx.com we see ten-year yields. I must say I am surprised to see that they are not quite at all-time lows.

UK Ten-Year Bond Yield Chart

The longer this artificial stimulus carries on, I’d say the more inflation is being stored up for further down the road. Once rates do start to rise, the chances are prices will run far ahead of them.

Turning now to the US, we see the yields on ten-year Treasuries are even lower.

US Ten-Year Bond Yield Chart

Next we see a chart of the 30-year bond price.

US 30-year Bond Yield Chart

This is a bull market that began in 1982. It’s extremely orderly and well behaved – as you can see by the two blue tram lines.

Using a dotted red line I have also marked the 377-week exponential moving average (the average price of the last 377 weeks, exponential meaning recent weeks carry more weight). A 377-week average might seem an odd average to use, but it works beautifully, as you can see. Every few years it comes back there to find long-term support.

The Next Move for Bond Prices

The current bond price of 148 is less than 5% off the all-time high of 153 which came earlier this year. We are trading near the top of a well-defined range and I see a return to the 123-5 area as a distinct possibility (see the green circle on the graph) over the next year or so.

But, in such an event, that structure I have drawn would still be intact, even though such a move would add pressure. While that structure remains, it’ll be business as usual. Limbo continues.

But the game changes, in my view, if we sink below those levels, below that lower rising blue line. That’s when rates start to rise, debt becomes much harder to service, defaults increase, governments lose control, perhaps they print more, raise taxes even further – and we head into Carswell’s “end of politics”.

Of course, if we do ever get bond market mayhem and Carswell’s “end of politics”, gold will be very much the place to be. Perhaps that’s when we see its much touted final blow-off phase. After that the green shoots of economic – or Kondratieff spring – will come through.

Dominic Frisby
Contributing Editor, Money Morning

Publisher’s Note: This is an edited version of an article that originally appeared in MoneyWeek

From the Archives…

Does Excessive Government Spending Make You the World’s Best Treasurer?
26-10-2012 – Kris Sayce

Why a Return to the Gold Standard Could Actually Be Bad
25-10-2012 – Kris Sayce

A Safer Than Super Investment?
24-10-2012 – Nick Hubble

Agricultural Commodities – The Best Way to Play Rising Food Prices
23-10-2012 – Merryn Somerset Webb

Stock Market ‘Barometer’ Speaks: The Bulls Won’t Like it…
22-10-2012 – Kris Sayce

When Will Government Bond Markets Implode?

November 1, 2012

Three Things You Need in a World of Creative Destruction

By MoneyMorning.com.au

Visionary empire builders like Carnegie and Rockefeller created fantastic conglomerates that made huge fortunes for investors.

We also saw how these businesses were ultimately subject to what economic historian Jo Schumpeter terms ‘creative destruction’. This is the idea that competitors who find innovative new ideas will ultimately destroy those that dominated an industry in the past.

Creative destruction works for economies too. And boy, are we seeing destruction in the economy today.

Today I want to look at the three most important things you need to tough it out in this destructive world. Let’s start with a great example of creative destruction – the internet.

What We’re Up Against

Last week, book publishers Penguin and Random House announced plans to get together. And the reason is pretty clear. They need to take tough action against the increasing power of the likes of online retailer Amazon.

They’ve seen the way the music industry has been taken apart over the last ten or 15 years. They want to wrest control of pricing back into their own hands by allying forces. Will it work? I doubt it.

The industry needs to develop and evolve to survive. But innovation nearly always comes from small companies, or start-ups. If it is to come out of the incumbents, it’s usually a business insider that breaks out on his own.

I’ve seen the internet shake up my own business. Having established a new brand and brought it to market (largely online), sales went very well for a few years.

But of course, as the thing started to grow, competitors ultimately came in and copied our products. We had to adapt. How? Well, I bit the bullet by moving into wholesaling products to the competition.

Though the internet is a significant force for destruction (and reconstruction) of industry, it’s not all we need to worry about. Globalisation has brought on fantastic changes too. Some firms are loving it. Others aren’t coping.

We need to adapt too. I’d urge you to take a hard look at your investments and decide which ones looking vulnerable. Here are the three qualities that you need in your portfolio right now…

Three Crucial Things to Look for
When You Invest

Factor 1: Flexibility. We’re looking for companies that are malleable and ready to move. That may mean physical mobility – like the ability to move production to wherever it’s most cost effective. It could be wages, taxes, or a whole host of factors at play.

Take oil majors. Wasn’t it interesting to see that [Chancellor of the Exchequer] George Osborne has finally renounced (to some degree at least) previous tax hikes on North Sea oil production? Did he do that out of the kindness of his own heart? No, of course not. It was because the oil majors had cut North Sea production and decided to drill in lower tax jurisdictions.

Now imagine if companies like BP, or Centrica didn’t have mobility and alternatives on their side? I strongly suspect our chancellor wouldn’t have been quite so generous. Love them or hate them, large multi nationals have flexibility.

Factor 2: Emerging-market focus. I’m always keen to bang the drum for the emerging markets. In terms of creative destruction, we have a lot to be thankful for and worried about. The businesses most likely to cope with the brave new world are ones that can benefit from the emerging markets story.

I mean just look at Jaguar Land Rover. It’s fantastic to see the renaissance of this company. It’s growing strongly in the emerging markets.

This is a great example of a business that’s benefitting from the emerging markets story. There are plenty of others. Multi-nationals like Diageo and our giant pharma businesses are making hay while the sun shines over the whole globe.

But it’s not all about size…

Factor 3: Small is beautiful. The problem with the first two factors I’ve identified is that they’re generally associated with large companies. The ability to enter new markets abroad and the flexibility offered to the multi-nationals point the finger toward the biggies. But, when it comes to innovation, we know that the big boys are often stymied.

So is what we’re looking for unachievable?

No, of course not. It just means we need to look a little harder. The smaller the business, the quicker it is off the mark, and the more likely it is to be innovative.

So that’s the three things I look for in an investment to survive the constant threat of creative destruction.

Of course these aren’t the only things we look for in an investment, and given time, the factors will likely change. After all, that’s the nature of the beast.

Bengt Saelensminde

Contributing Editor, Money Morning

Publisher’s Note: This is an edited version of an article that originally appeared in MoneyWeek.

Three Things You Need in a World of Creative Destruction

November 1, 2012

Microsoft, Apple and Big Tech for the Remainder of 2012

By The Sizemore Letter

Last week, I suggested that Microsoft ($MSFT) would be the ultimate winner in the long war for dominance of the smartphone and tablet markets.

Moreover, Apple’s “idea man,” the late Steve Jobs, is not something that can be replicated, and going forward Apple will find it increasingly harder to stay ahead of its competition.

None of this suggests Apple’s imminent demise, of course. As I wrote in the previous article, I’m talking about a long war of attrition that may take a few years to play out.

But none of this matters in the short term. In the short term, I expect most Big Tech stocks to move together in a fairly tight correlation as investors reassess the economic picture. For the remainder of 2012, I see investor risk appetites returning, and I see Apple and its competitors Microsoft and Google ($GOOG) leading a rally in technology shares.

I recommend investors pick up shares of the Technology Select SPDR ($XLK) and plan on holding for the remainder of 2012.

With the bad earnings releases of the third quarter mostly digested, I expect to see a broad-based market rally, and I expect more cyclical sectors such as technology to lead.

Disclosure: Charles Sizemore is long XLK through his Tactical ETF Model. This article first appeared on TraderPlanet.

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The post Microsoft, Apple and Big Tech for the Remainder of 2012 appeared first on Sizemore Insights.

Economic News

USD – Positive US News Boosts USD/JPY

EUR – Risk Taking Boosts Euro

Gold – Global Economic Fears Cause Gold to Slide

Crude Oil – Drop in US Inventories Boosts Price of Oil

Technical News

EUR/USD

GBP/USD

USD/JPY

USD/CHF

The Wild Card

Silver

Asian Tiger Slaughtered

Greece is Nothing Compared to China

Welcome to the Great Stagnation

Have Bond Markets Peaked?

UK Ten-Year Bond Yield Chart

US Ten-Year Bond Yield Chart

US 30-year Bond Yield Chart

The Next Move for Bond Prices

What We’re Up Against

Three Crucial Things to Look for When You Invest

Three Crucial Things to Look for
When You Invest