Month: February 2013

By MoneyMorning.com.au

The crisis in paper money has put currencies in the mainstream spotlight.

If you’ve caught the news lately, you know the Bank of Japan is debasing the yen. Last year it was the crisis in the euro. The Swiss did the unthinkable and devalued the franc. The US dollar’s flaws as an international reserve currency are being exposed.

In other words, there is no sound currency left. Welcome to the largest market in the world: foreign exchange. You must understand this market, according to one of the all-time greats of investing.

It’s the task of today’s Money Weekend to see why…

Jim rogers: Master of the Hedge Fund

History and philosophy aren’t usually the subjects that spring to mind when you think of investing. But that’s what Wall Street veteran Jim Rogers suggests everybody learns. Rogers first went to Wall Street in 1964. It’s stretching into one long career. Rogers just released his memoir, Street Smarts.

The life of Jim Rogers makes a great story. A poor boy from Alabama now worth millions (maybe billions). If you haven’t heard of him, he founded one of the first international hedge funds with fellow speculator George Soros. In ten years, the fund returned 4,200%.

It doesn’t get better than that. They did it by investing in everything – bonds, currencies, stocks and commodities, both long and short. By the sounds of it, they were leveraged to the hilt the whole time. They got it right and won.

Rogers retired at 37 in 1980 to manage his own money. In 1998 he founded a commodity index, predicting a bull market in natural resources. It’s up 280% since.

Rogers’ not only has a long history of making money, but also a long history of accurate predictions. (For example, if you pick up a copy of Jack Schwager’s 1989 book Market Wizards, Rogers says at the time: ‘I guarantee that the Japanese stock market is going to have a major collapse – possibly within the next year or two.’ It did.)

But for our purposes today, we’ll single out one trend he sees: more turmoil in the currency markets. And for him, that means smart investors can make money. But what does he mean by turmoil?

Ben Bernanke in a Toga

Rogers says that governments will keep printing money to finance their debts. It’s the wrong thing to do, but that won’t stop them.

Here’s the man himself in Street Smarts:

‘When governments run out of money, they do not stop spending. It was no different two thousand years ago than it is today. Politicians know no bounds. If Rome was running out of silver, if its economy was being mismanaged and it was running trade deficits, the only way to keep the good times rolling was to create more money.

‘Think of Ben Bernanke in a toga. Adulterate the coinage, crank up the printing press – only the technology changes. Governments keep running out of money, and as long as that happens, bureaucrats and politicians will keep coming up with ways to create it.’

Governments can do this because they have such a lock on the money market. Legal tender laws make it illegal for competing mediums of exchange.

The right solution is to let the free market decide and get the government out of the market altogether.

Don’t hold your breath.

In the meantime, Rogers predicts currency crises will persist as capital moves around the world, looking for a safe harbour. Enormous debts overhang the major economies of Japan, Europe, and the US. As long as capital can flow freely, it’s going to flow away from places like these as they continue to debase their currencies.

He doesn’t specify, but it’s clear he has in mind places like Singapore, Hong Kong and – eventually – Shanghai becoming the leading financial centres, not London and New York and Zurich.

Different Piggy Banks

Rogers’ position is that American capital will diversify in a big way into foreign currencies (until the government makes it illegal) thanks to the US Fed trashing the US dollar.

Reading between the lines, his outlook is for foreign currencies becoming another asset class for mainstream investors, maybe as common as having a stock portfolio. He points out that in the 1960′s most people would have thought it quite odd to own common stocks. Most people invested in bonds.

So it’s likely that more FX Exchange Traded Funds (ETF’s) will spring up catering for the demand, the way commodity ETF’s and Exchange Traded Notes have sprung up thanks to the bull market in raw materials.

Foreign exchange is already the most popular among CFD (contracts for difference) traders, where it accounts for more than half of all trades.

The implication for Aussies is the Australian dollar stays high, if it stays at the top of the shopping list for international investors…until that is, traders turn bearish, then you could see the Aussie dollar quickly fall.

It will be interesting to see if a trend like this develops in Australia. We know Greg Canavan, editor of Sound Money Sound Investment, took advantage of the strength in the Aussie dollar and extreme pessimism in the euro recently to diversify the portfolio for his subscribers.

Slipstream Trader Murray Dawes analyses the major currencies every week for his traders, watching for significant shifts in capital flows.

Currently, you can get currency exposure via Betashares to the Euro [ASX: EEU], US dollar [ASX: USD] and UK pound [ASX: POU].

Even so, it’s a short list. Hopefully it won’t be long until there are more options for retail investors, especially exposure to currencies in Asia.

Until then, continued currency debasement around the globe keeps a bullish outlook for precious metals, too, if you’re thinking long term.

Callum Newman
Editor, Money Weekend
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PS. Don’t forget if you want to keep track of the latest things we’re reading and brief commentary on events that happen through the day, check out our Google+ page here or Kris Sayce’s here.

From the Port Phillip Publishing Library

Special Report: How to Hunt Down 2013′s Biggest Stock Market Winners

Daily Reckoning: As Gold Flows Eastward, It’s No Longer Money

Money Morning: Four Things to Look Out for When Buying Gold Stocks

Pursuit of Happiness: Put the Future on Hold, Plan for Today First

By Jim, Inside Investing Daily

Dividend investors tend to look at telecom companies for growth and high yields.

That’s because telcos such as AT&T (T:NYSE) and mobile technology companies like Qualcomm (QCOM:NASDAQ) have long track records of fast-growing dividend payments.

Problem is this telecom sector in the U.S. is looking expensive right now.

View Larger Image

In the chart above, you can see the SPDR S&P Telecom ETF (XTL:NYSE), in blue, going back to before the 2012 presidential election. XTL tracks the largest companies in the U.S. telco industry. This is plotted against the S&P 500, in red.

As you can see, XTL is pricy right now relative to the overall market. XTL yields 3.1%, compared with the S&P 500’s 2.2%, which is not bad. But a better way to go is the SPDR S&P International Telecom Sector ETF (IST:NYSE), which tracks large telecom companies all over the world.

View Larger Image

IST has lagged the U.S. telecom market (XTL) and the general stock market over the last few months. That leaves plenty of room for catch-up.

Even better, IST yields 5.1%. That’s the equivalent of the dividend yield of the S&P 500 plus the current yield on XTL.

I MUCH prefer the overseas telecom sector right now. The U.S. market is already saturated with customers. This leaves little room to growing revenues. Overseas, there are plenty of pockets of high growth left.

You could buy IST and lock in that 5% dividend yield. But you can do even better by buying individual stocks in this sector.

One of my favorites right now is Philippine Long Distance Telephone (PHI:NYSE), the leading provider of mobile phone and broadband Internet service in the Philippines.

The Philippines is one of the fastest-growing markets in the world right now. In the most recent quarter, its economy expanded at a rate of about 6% (compared with a rate of just 2.7% in the U.S).

PHI is taking advantage of this growth by signing up more customers for its mobile and broadband services. Over the last five years, the number of PHI cellular subscribers has nearly doubled – from 35.2 million users to 68.6 million users. And the number of broadband subscribers grew from 1 million to 3.2 million over the same period.

And you can’t get much better than PHI’s monster 6.9% dividend yield.

Another great way to access the high yield and high growth this sector has to offer is to buy shares in PT Telekomunikasi Indonesia (TLK:NYSE) – the industry leader in the world’s fourth most populated country.

With a population of 240 million people and an economy growing at 6.5% as of last year, Indonesia has buckets of potential. TLK is the perfect way to take advantage of it. The company controls over half the entire market for both mobile phones and broadband Internet service.

Although TLK’s dividend yield at 3.4% is not as eye-popping as the current yield on PHI, it has a history of surprise special dividends and a huge amount of share appreciation potential.

Get into these high-growth, high-income overseas opportunities. And forget about the puny yields in the U.S. telecom sector.

Sincerely,
Jim

http://www.insideinvestingdaily.com/

By The Sizemore Letter

Charles Sizemore of Sizemore Capital Management and Jeff Reeves of InvestorPlace discuss Daimler AG (PINK:DDAIF), maker of the iconic Mercedes-Benz and Charles’ top pick for 2013, and chipmaker Intel (NASDAQ:$INTC), which Charles holds both personally and in his Dividend Growth Portfolio at Covestor.

To briefly recap:

Daimler remains a decent long-term buy with a 5% dividend and continued reliance of both upper-class customers as well as emerging market consumers. Europe’s GDP troubles and broader economic software around the globe aren’t grand, but Germany’s Daimler just posted strong earnings and is selling at a good clip.

Intel remains a decent long-term play based on its 4% dividend yield and massive market share of the semiconductor business. Furthermore, the post-PC negativity is overdone since there remains a good utility in laptops and PCs even if tablets are on the rise. Maybe it hasn’t figured out mobile yet, but it is rolling out chips that will work with Google(NASDAQ:$GOOG) Android devices soon that could make a big splash.

You can get all the details by listening to the above podcast.

And check out the complete list of Best Stocks for 2013 on InvestorPlace.com. Current frontrunners include the REIT Two Harbors (NYSE:$TWO), which is up about 13% year-to-date, and Great Lakes Dredge & Dock (NASDAQ:$GLDD) up about 11% YTD.

SUBSCRIBE to Sizemore Insights via e-mail today.

The post On The Slant: Intel and Daimler Remain Top Buys for 2013 appeared first on Sizemore Insights.

By Harjeet

The power sector in India has undergone significant progress after Independence. When India became independent in 1947, the country had a power generating capacity of 1,362 megawatt (MW). It is now one of the fastest growing economies with ever increasing demand representing an attractive destination for the power industry. The Indian power sector will add nearly 45,000 MW to its total installed capacity by 2013-14 to the existing production, according to a RNCOS research report, ‘Indian Power Sector Analysis’.

Investment options in Indian power industry

The investment climate is very positive in this sector. Due to the surge in the sector, it has witnessed higher investment flows than envisaged. The Ministry of Power has sent its proposal for addition of 76,000 MW of power capacity in the Twelfth Five Year plan (2012-2017) to the planning commission. The ministry has set a target for adding 93,000 MW in the Thirteenth Five Year Plan (2017-2022).

The industry attracted foreign direct investment (FDI) worth Rs 172.80 crore (US$ 31.57 million) in the month of May 2012.

The Government of India has initiated several reform measures to create a favourable environment for the newly added generating capacity in the country and attract investments from the overseas Indians. The policies and reforms have put in place a highly liberal framework for generation of power in the country.

Government initiatives to boost Indian power sector

The Government of India has initiated several policies to promote and garner investments in the power sector in India. To accelerate capacity addition, several policy initiatives have been undertaken by the Ministry of Power.

In order to attract foreign investments in this sector, the Government of India as per extant policy has permitted 100 per cent FDI under the automatic route in this sector. Accordingly, any foreign power company and non-resident Indians (NRIs) can enter and invest in the Indian power sector through FDI route.

India and Malaysia have agreed to strengthen economic engagement and promote cooperation in renewable energies, and to take necessary steps to encourage their development for mutual benefits, as per Dr Farooq Abdullah, Union Minister for New and Renewable Energy (MNRE).

Growth scenario of Indian power sector

Development of this sector is the key to the economic engagement. The power sector has been receiving adequate priority ever since the process of planned development began in 1950. With a large swathe of rivers and water bodies, India has enormous potential for hydro power. Twelfth Five Year Plan (2012-2017) includes additional 30,000 MW of hydro-electric power generation. India currently has 4.4 gigawatt (GW) of net electricity generation capacity using nuclear fuels (across 20 reactors) and aims to increase it up to 20 GW by 2020; with one of the world’s largest reserves of thorium, India has huge potential in nuclear energy.

India is set to become a global manufacturing hub with investments across the value chain. About 82 GW worth of generation capacity is set to be added during FY11-FY15; future investments will benefit from strong demand fundamentals, policy support, and increasing government focus on infrastructure.

About the Author

Harjeet is an Indian – born mass-market novelist, who covers the world internet related topics. He writes columns and articles for various websites and internet journals in the domain of Investments and Investing in India.

By Bill Bonner

The Wall Street Journal reports that the rally in U.S. stocks is turning into a real bull market.

Why? Because there’s so much money around.

There’s a “superabundance of capital” in the world, says Bain &
Co. It’s in banks, investment funds, corporate treasuries —
everywhere, except where it is needed. Households are tight. But the
financial and business sectors are flush.

Bain said that the world will be “awash in capital” until 2020, when
financial assets are expected to be 10 times the size of the world
economy: $900 trillion, compared with a world GDP of $90 trillion.

Whee!

Whom do we thank for all this money, money, money? Central banks!

The Fed has its “QE to Eternity” program. The Bank of Japan has
announced it will start one of its own next year. Mario Draghi, head of
the European Central Bank, said last week that he would do more to
provide liquidity to the flagging euro zone. And the Bank of England —
under incoming governor Mark Carney — is scheduled to make a policy
statement this week. Odds are it’ll join the crowd and announce even
easier money policies.

As head of the Bank of Canada, Carney presided over a system with
even more private debt to disposable incomes than the U.S. Although
this measure of debt continues to fall in the U.S., it continues to
rise in hockey country. Today, debt to disposable income is at 108% in
the U.S. — after peaking out at 130% in 2007. In Canada, the ratio is
166%.

Bent… Twisted… and Corrupted

So what happens to all of this new cash and credit?

Well, somebody is putting up $24 billion to take Dell private.
Virgin Media got a bid for $23 billion. And the U.S. stock market is
near an all-time high.

Meanwhile, big-time investors such as Blackstone are buying thousands of single-family homes — for cash.

Apple has $137 billion in cash that David Einhorn is trying to get
it to share with stockholders. And, oh yes, U.S. corporations have
about $5 trillion in cash in total — including some $2 trillion said
to be overseas.

But there are many who still want the feds to do more. According to
University of Michigan economics professor Justin Wolfers: “By their
own framework, they’re not doing enough.”

But it’s their own framework we’re worried about. It’s bent. Twisted. Corrupt, even.

Let’s see… What is really going on? What kind of game are central bankers playing?

Central banks give their friends and favorites access to almost
unlimited amounts of money at nearly zero rates of interest. What do
these privileged few do with the money? They buy assets — houses,
office buildings, companies, gold and silver.

Look Who’s Buying America

Ordinary Americans aren’t getting the money; it’s locked up in the
hands of the 1% — or even the 0.001%. And there aren’t enough of these
rich insiders to move consumer markets. Toilet paper and gasoline move
up slowly. But prices for stocks, bonds, Manhattan real estate and
expensive works of art go up fast.

Meanwhile, home ownership, by the people who live in their houses, is going down.

Stock ownership, by the middle class, is also on the decline.

Powerful, well-financed groups are buying. Middle America — short of funds — is not.

The elegance of this scam is breathtaking. Central banks print money
to “stimulate the economy.” But it doesn’t stimulate the real economy.
GDP growth is still chugging along at stall speed. Instead, the Fed’s
“EZ money” simulates the financial markets and financiers’ profits,
instead.

In a real boom, most people would become wealthier and better-off.
In a phony boom, only a few become wealthier. A phony boom does not
create wealth; it just transfers existing wealth.

Central bankers give new money to their friends. The friends use it
to capture a larger share of the real wealth in the nation.

Regards,

Bill

http://www.billbonnersdiary.com/

London Gold Market Report
from Adrian Ash
BullionVault
Fri 15 Feb, 08:10 EST

GOLD PRICES fell again Friday morning in London, trading at a 6-month low beneath $1627 per ounce as the US Dollar continued to rise on the currency market.

Gold for Sterling investors touched a 2-week low beneath £1050, and Euro-gold held above Tuesday’s 8-month low at €1220 per ounce.

India meantime approved use by exchange-traded gold trust funds of household gold deposits made at retail banks.

New US regulatory data yesterday showed big-name hedge fund manager George Soros halving his gold ETF position in the final 3 months of 2012.

“If the equities market continue to roll higher,” Reuters quotes Bill O’Neill at Logic Advisors in New Jersey, “investors could divert more money away from gold in the near term.”

“[Gold] has fallen out of fashion,” agrees a wholesale-market dealer in London. “All eyes are on equities and [platinum-group] metals.”

Platinum ticked higher Friday lunchtime after losing 2.0% from Thursday’s near-18 month highs.

European stock markets also recovered early losses to trade unchanged for the week, as did the broad commodity indices.

Major-government bond prices eased back, nudging 10-year US and UK interest rates towards their highest weekly closes since April above 2.00% and 2.20% respectively.

“Prospects for better global growth,” says the latest Metals Metals Monthly from bullion-bank Scotia Mocatta, “have increased the opportunity cost of holding gold.”

For silver, in contrast, “The potential for economic recovery is boosting the outlook for industrial demand,” Scotia adds.

Silver prices also fell Friday morning, outpacing gold’s 2.3% drop for the week but hitting only a 5-week low of $30.20 per ounce.

When gold prices were last at current Dollar levels, in August 2012, the price of silver was more than $2 lower than it was at lunchtime in London today.

“There is some skepticism out there that February is not going to be a great month,” says one stock broker quoted today by Reuters, “but I think there’s more room to run.”

Looking at this week’s raft of worse-than-forecast Europan data, “We’re not hopeful that the Eurozone will overcome its economic crisis anytime soon,” writes Standard Bank’s currency strategist Steven Barrow this morning.

“As long as that’s the case, we need to be ready for financial strains to re-emerge, just as they are re-emerging in the UK.”

Finance ministers from the G20 group of nations now meeting in Moscow today said they want to switch debate from “competitive devaluation” – where countries fight to gain export sales by weakening their individual currencies – to discussing economic growth instead, reports CNBC.

But “currency war is what we need to get the global economy out of the crisis,” writes Lars Christensen, head of Emerging Markets Research at Danske Bank, on his personal blog, The Market Monetarist.

“Monetary easing is much preferable to the populist alternative – protectionism and deflationism.”

Gold prices “will ultimately benefit from the debasement of currencies,” says a London bullion dealer in a note, as governments continue “rolling today’s problems onto our children and grand-children.

“Why do you think that central banks and sovereign funds are still buying gold?” he asks, noting yesterday’s news of a 5-decade high in official-sector gold demand reported in the World Gold Council’s quarterly Gold Demand Trends.

Adrian Ash
BullionVault

Gold price chart, no delay   |   Buy gold online

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold and silver in Zurich, Switzerland for just 0.5% commission.

(c) BullionVault 2013

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 The Sizemore Letter

Constellation Brands (NYSE:$STZ) shot up 37% yesterday and Anheuser-Busch InBev (NYSE:$BUD) rose a not-too-shabby 5% on speculation that the U.S. Department of Justice might let AB Inbev acquire  Grupo Modelo (Pink:GPMCF) after a few small revisions to the deal were made.

The Department of Justice torpedoed the original deal last month on fears that it would give AB Inbev nearly half the U.S. market and the monopoly pricing power that would come with it.

This is a big deal for Constellation for the reasons I gave earlier this month: Whisky and Beer Still Better Long-Term Bets than Wine.

Getting access to Modelo’s highly-recognizable brands like Corona and Negro Modelo is good for Constellation’s long-term future.  But investors need to sober up: the U.S. beer market is flatter than a week-old keg of Budweiser.

American domestic beer sales rose slightly in 2012 after falling for three straight years.  And within the domestic beer space, the growth is in high-end microbrews.  The big beer brands you are used to seeing in Superbowl commercials—such as AB InBev’s Bud Light or Molson Coors’ (NYSE:$TAP) Coors Light—are having a hard time getting the attention of drinkers.

Part of this is due to a bad economy; young blue-collar men got hit worse than anyone in the Great Recession.  But a bigger issue—and one that won’t improve with a recovering economy—is changing demographics.  The Baby Boomers are well past the heavy drinking stage of life, and Generation Y (made up of current 20-somethings and early 30-somethings) tends to prefer flavored cocktails over beer.

Generation X—my generation—still likes a good beer.  But we’re a small lot and we prefer microbrews when we can get them.

Big Beer knows that the domestic market is dead, which is why AB InBev, SABMiller (Pink: SBMRY) and Heineken (Pink:HEINY) have gone on an emerging market buying spree over the past decade.

AB Inbev has the best brand portfolio in Latin America, but the best growth potential today is in Africa, where SABMiller and Heineken are the best-positioned.  This was my rationale for recommending Heineken in the Sizemore Investment Letter and why I continue to hold it today.  Heineken already gets more than a fifth of its profits from Africa, and SABMiller gets well over a third.  This will only rise as African living standards continue to improve.

So, if you buy beer stocks, make sure you’re buying for the right reasons.  The large mega brewers are long-term plays on the rise of the emerging market consumer.  Just don’t expect too much from the domestic American market.

And on that note, I’m off to crack open a Shiner Bock, which is, alas, not a publicly-traded company.

Disclosures: Sizemore Capital is long HEINY.

The post Sober Up: The American Beer Market is Flat appeared first on Sizemore Insights.

By www.CentralBankNews.info

The Euro is deemed to weaken alongside the US dollar today as the Euro Zone economy contracted in the fourth quarter at their fastest pace since the depth of the financial crisis as most countries fell short of estimates, raising concerns of a deeper recession. Analysts say that the larger than expected drop in output suggests that the Europe’s economic and financial crisis is far from over.

Eurostat reported yesterday that the economy of the 17-nation bloc shrank by 0.6 percent in the fourth quarter, worse than the estimated 0.4 percent decline. The figure is the sharpest contraction since the beginning of 2009 and marks the first time the region failed to grow in any quarter within a year. For 2012, the bloc as a whole fell 0.5 percent. Spanish GDP fell at a 2.8 percent annualized rate. Portugal and Greece also suffered deeper contraction. Meanwhile, Italy’s drop of 3.7 percent last quarter at an annualized pace added to fears that the country’s depressed economy could lead to further political instability. Nevertheless, the performance of the region’s major economies particularly worried the markets. Germany saw its output contract by 0.6 percent on declining exports and investment, larger than the 0.5 percent expected drop. French GDP, meanwhile, fell at a 0.3 percent annual rate.

The bleak economic figures call into question the timing of a recovery that was tipped to begin later this year. European Central Bank President Mario Draghi painted a positive picture of the Euro Zone, saying that positive contagion is already working its way through the economy. The region’s deepening downturn challenges European authorities’ insistence that fiscal austerity will lead to growth by boosting business confidence. While such optimism is still not completely erased, hopes for an economic revival this year could prove fleeting. Analysts deem that with the grim figures, any return to growth over the course of 2013 will likely only be minimal. With the figures calling into question the regional economy’s road to recovery, a short position is then advised for the EUR/USD to conclude the trading week.

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