Month: December 2012

By MoneyMorning.com.au

The Best Investment of 2012 to Repeat in 2013?

Toward the end of last year, the editors here at Port Phillip Publishing got up on stage at our Doomers’ Ball, to give our ‘Big prediction for 2012′.

To paint the picture, at the end of 2011 the market had been well and truly beaten up.

The Metals and Mining index (XMM), Small Ords (XSO) and Emerging Companies indices (XEC) all fell more than 22% over the year. So it was a bit challenging to find a sunny patch in the market to get excited about for a ‘big call for 2012′.

Admittedly, when I made my call, there was a fair bit of heckling!

I even caught a few folks checking their eyelids for holes, and catching the odd fly for good measure.

But thankfully, twelve months on – so far – my big call has turned out to be the best performer of 2012…

What was the call?

It was SILVER.

So far this year silver has gained 18.4%.

For comparison gold has gained 8.8%.

The Metals and Mining index (XMM), Small Ords (XSO) and Emerging Companies indices (XEC) are all down again.

The S&P500 is up 12%, and the ASX200 has surprised with a gain of 11%.

The only thing supporting our market is the financial sector: the ASX200 Financials index (XJF) is up 18%. So the Australian banks were one of the few sunny spots.

But humble silver still beat them, and with a lot less effort involved too.

Just the Start for Silver

The downside with silver is that it comes with plenty of volatility. All the silver bullion globally is worth just $60 billion – just half the size of BHP Billiton’s (ASX:BHP) market cap. So the silver price can be prone to some big swings.

The upshot of this is that, if you get the timing right, you can trade it for accelerated profit. Back at the end of July, I wrote to you to say:

‘Watch silver. It looks interesting […] it looks increasingly as though the worst may be over…

‘While gold has gained an average of 17% a year in $US terms, silver has outshone it, gaining an average of 22% each year. The trick to profiting from this has been buying silver on the dips to get these gains – and just maybe we are staring at one of those dips right now.’

In the four months since I wrote to you about this, silver has gained 18.4%. This is equal to its overall gain over the whole year.

Silver – a gain of 18.4% makes it the best performing asset of 2012

The good news is that it looks like silver’s move has only just started in earnest.

The effects of the latest round of quantitative easing (QE) have only just started flowing through into the silver price.

During the first round of QE, silver gained 74%; and during QE2 (starting from the Fed pre-empting the program) silver gained 94%. These are huge moves for any commodity.

So with the Fed now ‘printing’ $40 billion a month indefinitely, silver is well poised to maintain its new rally.

It’s critical to note that silver was the best performing asset class during Obama’s first presidential term.

The humble metal more than tripled<, gaining 208% over the four-year period.

The only other asset to put in a triple-digit percentage gain was gold, with 122%.

This incredible performance is probably why the US mint has just had its busiest month on record. The prospect of another four years like the last four, with money printing, debt and fiscal deficits, is very bullish for precious metals.

Silver’s technical chart looks excellent as well.

Silver is a Great Investment Opportunity

When the technical price action backs up the fundamental picture – it can often translate into a great investment opportunity. In other words, if the idea is good, and the timing also looks right, then the shot could be a winning one.

To get here, the market has been through some pain in the last 18 months. The second half of 2011 was horrendously volatile for silver. It set a record high on Anzac Day, only to fall more than 30% within weeks straight after. Then in September, silver got smashed down by 30% AGAIN.

Most of this year has been spent regaining its footing after last year’s abuse. It has taken time, and many speculators have left the market, understandably fed up with the volatility.

But this mass clear-out has set the stage for the next leg up. The technical chart confirms this and has turned bullish again. In late September, silver traced a golden cross. This technical signal has been a solid predictor of the start of a new up-trend.

Even better, since then the 200-day moving average held fast during its test. Now silver has broken up above the 50-day moving average – and stayed there. This paints a bullish technical picture of a price in strong uptrend.

All the stars seem to be aligned for silver now.

We didn’t have a ‘Doomer’s Ball’ in 2012, as we hosted a big conference in Sydney earlier in the year.

But if we had to go on stage today and make a big call for 2013, I’d have found it very hard to look past silver – again!

Dr Alex Cowie
Editor, Diggers & Drillers

From the Port Phillip Publishing Library

Special Report: The Fuse is Lit

Daily Reckoning:
The Australian Banking Behemoth

Money Morning:
The Long, Drawn Out Retreat in Australian House Prices

Pursuit of Happiness:
Will New UN Deal Force the Government to Deny Climate Change?

Diggers and Drillers:
How You Can Use a Bottomed-Out Silver Price to Quadruple Your Returns

Why Silver Could Be the Best Investment in 2013

By MoneyMorning.com.au

According to efficient market theory, people are only interested in one thing – making money.

They will only buy an asset if they think there’s a decent chance of making a good future return. They’ll only sell when this stops being the case.

Because investors are ‘rational’, they won’t buy overvalued stuff. And they won’t sell undervalued stuff. So prices will almost always be about right.

This is utter nonsense, of course. But not for the reasons you might think. People aren’t always rational, but they generally try to invest to make a profit.

The real reason that markets get things so badly wrong is because the people investing on your behalf, don’t always care about your profits. And that’s yet another good reason to take charge of your own finances rather than handing the job to a fund manager.

Let me explain…

People are Rational – but Markets Aren’t

Efficient market theory has never made much sense.

Recent history proves that. Two catastrophic stock market crashes inside 10 years. A devastating global property bubble. Today’s burgeoning bond bubble. None of this is evidence of an efficient market.

And it’s hard to believe that anyone beyond the most isolated ivory towers in academia takes it seriously these days.

The reason the theory has survived so long is because it provides a convenient, clever-sounding rationale to excuse the self-serving behaviour of everyone involved in investment markets.

Central bankers, for example, argued that if markets were efficient, then bubbles couldn’t exist (because prices would always be correct). So who were they to puncture them?

They ignored the fact that the very existence of a central bank, which sets the most important price of all (the price of money), destroys the idea of an efficient market.

Especially if the central bank only ever acts to prop up falling asset prices.

But it’s not just central bankers who are the problem. It’s the people we pay to manage our money for us. The FT’s John Plender has written an interesting piece on a new paper by Paul Woolley and Dimitri Vayanos of the London School of Economics.

The problem, say Woolley and Vayanos, is ‘information asymmetry’. What this boils down to is that when you give your money to an intermediary to invest on your behalf, the incentives change.

These intermediaries ‘act rationally in the pursuit of profit – but not necessarily the profit of the ultimate beneficiaries [the actual investors]‘.

The Strategy You Can Use:
Steer Clear of the Fund Management Herd

Fund managers make money by increasing their assets under management. The more money they manage, the more money they make. Being able to demonstrate a decent track record is only one small aspect of attracting new money.

More importantly, to avoid losing clients, you don’t have to be the best fund manager. You just have to avoid being the worst.

So there’s a huge incentive to stick ‘close to the fund management herd’, as Plender puts it. It doesn’t matter if you lose money for a client, as long as everyone else is losing at least as much.

Throw all this into the mix, and it’s no wonder that markets are anything but efficient. You have an entire group of intermediaries who control the majority of the money in the market, investing on the basis of what all the others are doing.

Notes Plender: ‘it seems probably a majority of equity investment is carried out without regard to the value of the equities being traded.’

In other words, the ‘irrational’ behaviour in markets is nothing to do with people as a whole being irrational. The real problem is that we hand the job to a financial industry which is more interested in its own profits, than in our returns.

This is why it’s worth taking charge of your own money. Because not only do you get to cut out the middlemen. You can also take advantage of their herding behaviour, by buying the assets that they are neglecting, and avoiding the ones that they are piling into.

John Stepek
Contributing Editor, Money Morning

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

From the Archives…

How You Can Use Small-Cap Stocks to Leverage Your Share Returns
7-12-2012 – Kris Sayce

How to Make Cash-Like Returns Using Shares
6-12-2012 – Kris Sayce

How Long Can the Market Ignore These ‘Warning Signs’?
5-12-2012 – Murray Dawes

Is There Any Good News to Come from the US Debt Crisis?
4-12-2012 – Dr. Alex Cowie

Buy Small Caps Now While Investors Are Crying
3-12-2012 – Dr. Alex Cowie

Why Fund Managers Are Not Your Friends

The Elections Paper: Socionomics and Politics Achieve Peer Review

By Robert Folsom |  2012

The Socionomics Institute is pleased to announce that on Nov. 2, 2012, its latest research, “Social Mood, Stock Market Performance and US Presidential Elections,” published in Sage Open, a peer-reviewed journal of the social and behavioral sciences.

By The Sizemore Letter

Part of me really missed the guy.  There was something naturally endearing about Silvio Berlusconi.

Perhaps it was his ability to charm women 50 years his junior or his complete disregard for the conflicts of interest involved with being your country’s national leader and one of its richest men and the owner of its most influential media group.  Or maybe it was his willingness to change the laws of his country on a regular basis to protect himself from criminal prosecution or the fact that he ruled Italy—the third most powerful country in continental Europe—like a mafia don.  Through it all, naughty ol’ Silvio seemed to prove that, with a few winks and nods, a ton of money and a total lack of shame or scruples, a guy really could have everything he wanted in life.

On a serious note, I was not happy to see Mr. Berlusconi reappear on the political stage. It is a potential disaster for Italy, the Eurozone, and investors around the world.

Berlusconi’s party withdrew its support for Italy’s technocratic prime minister Mario Monti—the one political figure in Italy that both the international bond market and the other leaders of Europe took seriously—prompting Monti to turn in his resignation over the weekend.

Not surprisingly, Italian stocks sold off Monday morning — the iShares MSCI Italy Index (NYSE:$EWI) had lost more than 3% before recovering slightly by midday — the euro fell, and Italian bond yields shot up.  And across the Mediterranean, Spanish stocks fell, and Spanish bond yields rose.

The market is not happy about Silvio Berlusconi’s return.  The fragile peace we’ve had for much of the past year has been due to a belief that we finally had an adult running Italy.  Bond yields had been steadily dropping as a sign of confidence in Mario Monti and his austerity reforms.  An Italy without Monti is the same dysfunctional Italy that ran up debts of 120% of GDP while showing no real GDP growth in over a decade…proverbially fiddling while Rome burned.

Berlusconi will not win the upcoming election.  His party is a tattered mess, and most Italians are sick of the man.  And Mario Monti may yet stage a comeback, either as the head of a centrist movement or as a finance minister in a center-left government headed by Pier Luigi Bersani.

But Berlusconi’s presence is enough of a distraction to have the markets worried.  My fear is that he rattles the bond market out of its complacency and creates another self-reinforcing cycle of loss of confidence leading to higher yields and vice versa.

It’s too early for me to recommend dumping European stocks just yet.  Thus far, the market seems to have confidence in ECB President Mario Draghi’s ability to keep the entire dog and pony show together with creative monetary policy, and Europe’s leaders are slowly muddling through to a political solution to the debt crisis.  But given the ability of investor sentiment to turn on a dime, I would recommend tightening stop losses.  Or at least start keeping a closer eye on your European stock holdings.

SUBSCRIBE to Sizemore Insights via e-mail today.

This article first appeared on InvestorPlace.

The post He’s Back: What Silvio Berlusconi Means For Italy and the Euro Crisis appeared first on Sizemore Insights.

David Banister – ActiveTradingPartners

Gold stocks have been in another recent downtrend, which makes sense during a “wave 2″ correction in GOLD.

If we review the GDX ETF for Gold Stocks we can see a possible triple bottom formation. This one though looks bullish for a reversal trade to the upside near term as GOLD forms a C wave bottom.

This triple bottom looks like a series of higher lows should the 43-44 GDX ranges hold near term. The MACD line is still trending down, but in very oversold territory as in the prior two lows that had massive rallies.

Ways to play a reversal for the aggressive stock investor is NUGT ETF, which is a 300% long leveraged ETF based loosely on the GDX ETF (1x).

The specific timing of entering NUGT is of course tricky and best saved for our ATP trading service. That said, assuming GOLD does bottom at 1681 or 1631 near term, the GOLD stocks tend to lead the metal higher… so they will bottom BEFORE the metal.

Below is the GDX long term chart showing what looks like an emerging Tradeable low:

Learn more about ATP at www.activetradingpartners.com and review recent samples here

David Banister – ActiveTradingPartners

By Central Bank News
    Here’s today’s Central Bank News link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.)

Jyske Bank Senior Strategist Ib Fredslund Madsen on the outlook for 2013 and how the different asset classes are expected to perform.

Legal information

Video by en.jyskebank.tv

By Central Bank News
    Russia’s central bank kept its benchmark refinancing rate steady at 8.25 percent, as expected, but narrowed its interest rate corridor by raising the fixed-term deposit rate and cutting the swap rate, saying this was neutral in terms of monetary policy but should reduce volatility in the money market and strengthen the effect of monetary policy on the interest rate channel.
    The Bank of Russia, which raised its refinancing rate by 25 basis points in September to combat inflation, raised the fixed term deposit rate by 25 basis points to 4.50 and cut the rate on the daily ruble currency swaps by the same amount to 6.50 percent.
    The central bank said inflation had stabilized in November but remained above the bank’s target and this could affect expectations and remains a source of inflationary risk.
    “On the other hand, the increase in the Bank of Russia’s monetary interest rate in September 2012 had to some extent anchored inflation expectations and there is no significant pressure on inflation from the demand side,” the central bank said in a statement after a meeting of its board of directors.
    Russia’s headline inflation rate was steady at 6.5 percent in November from October and core inflation remained at 5.8 percent, with the rise in prices of industrial goods slowing, the bank said.
    The Russian central bank targets annual inflation  of 5-6 percent.

    Russia’s Gross Domestic Product expanded by 0.6 percent in the third quarter from the second for annual growth of 2.9 percent, down from 4 percent, “reflecting a cooling of economic activity” and indicators point to a continuation of the trend.
    But sentiment indicators and the labor market remain positive, which should support demand. Aggregate output remains close to its potential level.
    “Given the current domestic and external macroeconomic trends, the emerging level of money market rates is regarded as acceptable for the near future,” the bank said.

    www.CentralBankNews.info 

London Gold Market Report
from Ben Traynor
BullionVault
Monday 10 December 2012, 07:30 EST

SPOT MARKET gold bullion prices rose to one-week highs above $1710 an ounce Monday morning, while European stock markets fell following news that Italy’s prime minister plans to resign.

“Gold continues to consolidate its gains from August-September, and is still respecting its long term uptrend,” says the latest technical analysis from bullion dealing Scotiabank.

Italy’s FTSE MIB index was down more than 3% on the day by Monday lunchtime, after technocrat Italian prime minister Mario Monti announced over the weekend his intention to resign once Italy’s next budget is passed by parliament.

Monti’s announcement comes after members of former prime minister Silvio Berlusconi’s People of Liberty party last Thursday declined to support a package of economic measures proposed by Monti’s government.

Berlusconi wrote on his Facebook page Saturday that he intends to contest next year’s elections.
“Everybody agrees that we need an acknowledged leader to win,” he said.

“Such leader, a replica of what Berlusconi was in ’94, has not been found. It is not a matter of not having searched: we have indeed searched for one, but he does not exist…it is with desperation that I am returning to take interest in public affairs, and once again I am doing so out of a sense of responsibility.”

Over in Athens meantime, the Greek government has extended until noon tomorrow London time the deadline for bondholders to participate in its bond buyback, through which Greece hopes to buy back debt with a face value of around €30 billion, spending €10 billion since the bonds are trading below par.

“Investors should bear in mind that even if Greece accepts all bonds tendered in the Invitation, it will continue to engage with its official sector creditors in considering further steps to put its debt on a sustainable path,” says a statement from the Greek finance ministry.

“Future measures may not involve an opportunity to exit investments in Designated Securities at the levels offered for this buy back.”

Greece was close to reaching its target for the buyback by Sunday, according to an unnamed finance ministry official quoted by news agency Bloomberg.

“They call this debt sustainability, but it’s only [sustainable] on paper,” says Commerzbank chief economist Joerg Kraemer.

“The buyback was a success because investors do not believe in the debt sustainability.”

Silver meantime hovered above $33.30 an ounce for most of Tuesday morning, up slightly on last week’s close, while other industrial commodities ticked higher and US Treasury bonds also gained.

Over in New York, the difference between bullish and bearish contracts held by gold futures and options traders on the Comex – known as the speculative net long position – fell 18.5% in the week ended last Tuesday, according to the weekly Commitments of Traders report published Friday by the Commodity Futures Trading Commission.

“The cracks in investor confidence that we saw in the preceding week widened considerably,” says Marc Ground, commodities strategist at Standard Bank.

“[However] despite the liquidations, we still feel that the prospect of continued monetary accommodation should provide support for gold over the medium term. Coupled with fairly robust physical buying, we maintain that dips below the $1700 level represent a good buying opportunity.”

Holdings of gold bullion backing the SPDR Gold Shares (GLD), the world’s biggest gold ETF, rose to a new high of 1353.3 tonnes on Friday.

The Federal Open Market Committee meets tomorrow and Wednesday to discuss Federal Reserve policy.

“The FOMC faces a tricky task in managing the end of Operation Twist,” says a note from ING, referring to the Fed’s maturity extension program, due to end this month, through which the central bank sells shorter-dated Treasury bonds and buys longer-dated ones with the aim of lowering longer-term interest rates.

“[The Fed] will be at pains to replace it with something that markets do not interpret as hawkish.”

“Market expectation is that there could be more quantitative easing towards the end of the month, and this will be supportive of gold,” says Lynette Tan, analyst at Philip Futures in Singapore, though she added that uncertainty over the so-called fiscal cliff is likely to keep gold range bound between $1680 and $1750 an ounce.

More recycled gold bullion will flow to Singapore from next year as a result of a new refinery being built there by Swiss refiner Metalor, according to Metalor’s Robert Gilles, quoted by Singapore’s Business Times Monday.

“What is happening now is you have the scrap going out of the region and coming back in the form of good delivery bars,” says Gilles.

Because it’s expensive to transport high value materials, it makes sense to have a refinery taking up the scrap, creating fine gold and then transforming this fine gold into bars.”

South Africa’s Rand Refinery announced last month that it is building an assaying and sampling facility in Singapore.

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.

After an unexpected increase in the Non-Farm Payrolls report for November, as well as a drop in the Unemployment Rate, the Canadian dollar gained intensively from the safety bet US currency. Just as had been the case in the waning hours of last week’s currency trades, a technical correction starts this week’s exchanges. The Greenback looks poised to pare its losses opposite the Loonie today.

Trade sentiment in the European markets propose a likely direction to the New York session’s exchanges, after Prime Minister Mario Monti announced that he intends to step down before his term ends. Political uncertainty from Italy weighed on the markets, especially as the move comes after the party of former Prime Minister, Silvio Berlusconi, withdrew its support for Monti’s technocratic government.

Bloomberg reports that Mr. Monti will try to corral his coalition, which includes his predecessor Silvio Berlusconi’s People of Liberty Party, for a vote to pass budget legislation before handing in his “irrevocable resignation,” national President Giorgio Napolitano’s office said in an e-mailed statement on December 8.

Turning the focus back to North America, US payrolls climbed by 146,000 following a revised 138,000 increase in October, according to Labor Department figures. The jobless rate likewise fell to 7.7 percent as the labor force shrank. The USDCAD dove 57 pips as a result of the fundamental data, but soon thereafter climbed back up to close at 0.9907. To start off the week’s trades, the currency pair opened at 0.9870 and attempted to extend the risk rally to as low as 0.9863, but has since then made a move to correct bullishly. More bullish price action is projected today for the Greenback-Loonie on the lack of support for another risk rally in the markets.

A buy bias is advised for the USDCAD today. Though be cautious of likely technical price corrections.

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