Month: February 2013

By MoneyMorning.com.au

It is in the air and has no name, but something wicked this way comes. Stirrings of another cold war – this time with the giant in the East.

In what follows, we’ll take a look at a potential flash point in the South China Sea, run over some geopolitical history and circle back with investment conclusions.

The impetus to take to the keyboard starts with the worrisome tensions between China and Japan over a mishmash of contested islands.

If that were all, it would be bad enough. But it is far worse. As The Wall Street Journal reports, recent naval encounters ‘heightened fears of a military conflict between the Asian giants – one that could entangle the U.S.’ The italics are mine.

How could the U.S. get dragged into this? We pick up again from The Wall Street Journal:

‘The continuing tensions put Washington in a bind. While the U.S. doesn’t want a war in Asia, it also can’t risk weakening Japan and emboldening China without undermining its entire strategy in the Pacific…The U.S., Japan’s largest military ally, is bound by a six-decade old security treaty to defend Japan from any attack.’

There is so much that is awful here; I hardly know where to begin…

The Nightmare of US Foreign Policy Begins

The root of this “strategy” and “security treaty” is a flawed worldview, one hatched by flaccid old men who look at the world as a chessboard.

It is the kind of thinking that led to the Cold War with the Soviet Union, the Korean War, Vietnam and all our costly adventures abroad since. It all began just after World War II.

The blood spilled in WWII had not yet dried, the ruins of European cities had not yet ceased to smolder. Yet the powers that be were already itching for another fight.

On the evening of April 25, 1945, the United Nations Conference on International Organization opened at the San Francisco Opera House. Eyewitnesses likened it to a Hollywood opening of a film, with camera flashbulbs popping and huge crowds.

There, the architects of world politics gathered. They were an unimpressive lot, a bunch of gray and stooped and wrinkly men in suits and ties. Save for the flowing robes and headdresses of the Saudis, the group looked like they might work at an IBM building or a Social Security office.

Appearances deceive because what was happening here was sinister and foreboding. Reporters on the scene picked up the unmistakable vibe.

Walter Lippmann, the renowned journalist, wrote ‘that the main preoccupation of so many here has not been Germany, but the Soviet Union.’ He added that normal relations with the Soviet Union would be impossible ‘if we yield at all to those who, to say it flatly, are thinking of the international organization as a means of policing the Soviet Union.’

The San Francisco conference was a failure of diplomacy. Both sides were at fault. (I don’t need to remind you about the crimes of Stalin.) And looking back on accounts of the conference today, later events seem inevitable.

If San Francisco was the coin toss before the game, what came next was the kickoff.

Historian Alan Milchman, writing for the journal Left & Right in the spring of 1965:

‘The Cold War can be said to have begun in earnest in March 1947 when the president issued his now famous Truman Doctrine. The Truman Doctrine was a declaration of war on communism throughout the globe in which encirclement of the Soviet Union was arrogantly proclaimed.’

In 1949, the Western powers created NATO, which would further chill relations with a host of excluded countries.

For the next few years, the U.S. would fight a war in Korea that would cost more than 35,000 American lives. Barely a decade later, the U.S. would find itself in an even bloodier conflict in Vietnam. And so the whole nightmare of American foreign policy unspooled.

The Parallels of History Today

When I think about the potential conflict between China and Japan (with the U.S. invariably fouled up in the mess because of its entangling alliance with Japan), I frame it in this context and cannot miss the parallels.

From a geopolitical point of view, the most important outcome of WWII was the emergence of the Soviet Union and America as the world’s superpowers. This rivalry would cast a long shadow for a long time.

Keep that in mind and let’s look at the rise of China as a muscular force on the world stage.

I turn now to one of my favorite history books, Power and Plenty: Trade, War and the World Economy in the Second Millennium. Authors Ronald Findlay and Kevin O’Rourke write that the rise of India and China ‘to their natural roles as major economic and political superpowers’ poses a great geopolitical challenge.

‘In the past,’ they write, ‘the world has found it very difficult to adjust to the emergence of industrial ‘latecomers,’ new powers eager to play an equal role with the dominant nations of the day.’

And thus history threatens to repeat. Perhaps a new Cold War will emerge between the U.S. and its allies against China and its allies. Pushed by abstract ideals and “strategy,” will the world powers fumble along a path to war?

I hope not, but let’s ask the question: What would a new cold war mean for investors?

Power and Plenty provides a clear answer. The book deals mainly with international trade. What the authors show is that such global trade is fragile. Openness between borders ebbs and flows. Times of peace lead to great expansions of trade. Political turmoil leads to its contraction. Here is Findlay and O’Rourke:

‘The comparatively peaceful 19th century saw an unprecedented trade expansion; World War I, World War II and the Cold War all had large, negative, long-run effects on trade. The most recent globalization coincided with the end of the Cold War, and took place in a period in which warfare remained all too common, but tended to be national or regional, rather than global in scope.’

Power and Plenty points out that trade between East (Eastern Europe and the Soviet Union) and West (Western Europe and the U.S.) contracted immensely as a result of World War II and the Cold War.

From the East’s perspective, trade with the West was 73% of all trade in 1938, but only 14% by 1953. From the West’s perspective, trade with the East was 9.5% of all trade in 1938 but only 2.1% by 1953.

In short, trade collapsed. So we have our investment conclusion. Should relations between China and Japan/U.S. turn frigid, then trade between the two camps would be the first casualty.

Hence, any businesses in one camp dependent on doing business in the other camp would be hurt. Said another way, you would want insular ideas not so exposed to international trade flows.

It will be a shame if that happens. I am watching developments in Asia with interest. American foreign policy has been a travesty for a long time, which is ironic given the country’s founding.

Everything America needs to know about how to conduct its foreign policy comes from two early sources — the farewell address of George Washington in 1796 and the inaugural address of Thomas Jefferson in 1801.

Washington advised the U.S. to ‘steer clear of permanent alliances’. And Jefferson most eloquently encouraged ‘peace, commerce and honest friendship with all nations, entangling alliances with none’.

Yet look how far we have strayed from this wisdom today. Now we apparently have an ‘entire strategy in the Pacific’ to quote from The Wall Street Journal. One that was never put up for a vote. One that the people have had no say in crafting. One that – like other stupid doctrines created by flabby old men behind closed doors – leads to young men dying in rice paddies or mountain passes far from home.

The great libertarian Randolph Bourne’s most famous epigram comes to mind. ‘War is the health of the state’. It pretty much sucks for everyone else.

Chris Mayer
Contributing Editor, Money Morning

From the Archives…

Two Questions to Ask Before You Buy Another Stock
8-02-2013 – Kris Sayce

Are These 5 Blue-Chip Stocks Still a Good Buy?
7-02-2013 – Kris Sayce

Don’t be Long and Wrong on this Stock Market Rally
6-02-2013 – Kris Sayce

Perceptions of Beauty and Stock Valuations
5-02-2013 – Satyajit Das

AUDUSD stays below a downward trend line on 4-hour chart, and remains in downtrend from 1.0597, the rise from 1.0226 is treated as consolidation of the downtrend. As long as the trend line resistance holds, another fall could be expected after consolidation, and next target would be at 1.0200 area. On the upside, a clear break above the trend line resistance will indicate that a cycle bottom has been formed at 1.0226, and the fall from 1.0597 has completed, then the following upward movement could bring price to 1.0700 zone.

Forex Signals

By The Sizemore Letter

Southerners are a proud, prickly lot who, not that long ago, used to demand satisfaction for slights real or imagined with pistols at dawn.

An offended Bourbon drinker demanding satisfaction

The executives at Beam Inc, (NYSE:$BEAM) might want to watch out because their decision to water down their premium Maker’s Mark has offended the sensibilities of Bourbon lovers in the South and beyond.

And why would Beam do such a dreadful , dreadful thing?

They’re running out of quality aged Bourbon to sell.  High-end Bourbon has become so popular, Maker’s Mark lacks sufficient inventory to meet demand.

Bourbon is a fantastic business to be in.  I recently wrote about the massive competitive advantages that premier Scotch whisky brands have over their would-be competitors.    Unlike vodka, which can be produced from anything and has no aging requirements, Scotch has incredible barriers to entry.   A bottle of Scotch worth drinking is filled with whisky that has been aged for well over a decade.  Not too many start-up distilleries can afford to wait that long.

On a side note, once whiskies are bottled, the aging process stops.  Wine continues to age after it is bottled, but it is the only alcoholic beverage for which that is the case.  So if you have a good bottle of Scotch or Bourbon you’ve been itching to open, go for it.  It won’t have value five years from now as a collector’s item.

For American Bourbon, the rules are little looser.  Unlike Scotch, Bourbon has no required aging period.  But a bottle worth drinking has been “aged to taste.”  And in the case of Maker’s Mark, that aging period tends to be about five to six years.

If you’re the executives running Maker’s Mark, what do you do?  Shorten the aging period and risk lowering the quality of the finished product?  Accept shortages?  Raise prices and risk losing customers to other brands?

In the end, management decided that lowering the alcohol content by 3% was the least bad option and that its drinkers would not notice a difference in taste.  Other than risking an honor challenge from an offended white-glove-wearing Kentucky colonel, this would seem the least risky course of action.

Rival Brown-Forman (NYSE:$BF_B) lowered the alcohol content of its signature black label Jack Daniels from 86 proof to 80 proof in 2002.  It caused a little grumbling but it did no long-term damage to the brand.  In the case of Beam and Maker’s Mark, it should be safe to assume the same.  If spreading the whiskey a little thinner helps Beam to maintain its high sales growth a little longer, then this is a positive for Beam shareholders.  It also suggest that price hikes might be coming next, which suggest higher margins.

This boom in Bourbon demand is happening alongside a boom in Scotch demand.  As I wrote in my last article,  £2 billion in new distillery investment is underway in Scotland, much of it funded by the major brands like Diageo’s (NYSE:$DEO) Johnny Walker.

But while the economics of the whiskies businesses have never been better, I’d recommend steering clear of bourbon stocks.  Beam and Brown-Forman both trade for 25 times trailing earnings, which is a little too rich for my tastes.  I like spirits stocks, but not at any price.

Diageo is far from cheap at 18 times earnings, but I consider it the safest bet of the three.  I’ve owned shares for years, and I continue to reinvest my dividends.  But I’m not making any major new purchases at current prices.

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The post Watering Down the Whiskey: Bullish or Bearish for Beam? appeared first on Sizemore Insights.

By The Sizemore Letter

Charles Sizemore gave his thoughts Erika Morphy of the E-Commerce Times on the shareholder revolt that is threatening to de-rail the leveraged buyout of Dell (NYSE:$DELL) by a group led by founder Michael Dell:

These investors have valid points as they make their case against the LBO, said Charles Sizemore, manager of the Dividend Growth and Tactical ETF models at Covestor.

“Applying a P/E ratio of just 12 would get you a stock price of nearly $18. Applying a price/sales ratio of just 1 would get you to $33 per share,” he told the E-Commerce Times. “Even though Dell’s offer to pay what amounted to a 25 percent premium over the pre-announcement market price, there is a case to be made that it is far too low.”

Indeed, if Michael Dell raises his price, Dell would presumably have to take on more debt to make the deal happen, Covestor’s Sizemore said. “Having too high a debt load is risky for a company in a fast-changing sector like tech.”

What Dell can do to bring these shareholders on board with the plan is unclear.

Dell could change the terms and raise the price above the $13.65 that’s on the table, suggested Barry Randall, who runs the Crabtree Technology Model for Covestor.

It could include a one-time dividend payment to current, pre-private investors, he added.

Dell could also remind investors that the share price had been languishing and that the market had largely given up on the stock, Sizemore said.

Dell is worth more than what was offered, but the bottom line is that a company is only “worth” what someone is willing to pay for it, Sizemore maintained.

To read the full article, follow this link.

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The post Sizemore on the Dell Shareholder Revolt appeared first on Sizemore Insights.

By John, TradingSpotSilver.com

For most traders and especially with beginners, using stop losses in their trades might at times seem like a difficult principle to follow. The idea of allowing enough ‘breathing space’ for a trade before moving in the intended direction is a thought that is tempting enough to trade with no stops at all. However, more often than not, this (trading without stops) is in fact one of the key reasons why most traders tend to blow up their accounts.

Stops are for a reason and the ones who ignore it are either not serious or just don’t know how to use them. But fret not. I will divide the subject of stop loss into two articles, wherein, in this first article, I’ll explain the concept of stops and how to use them… even at times when you think using stops is futile and in the second part, I will cover the aspect of how to use stop losses to break even on your trades and compliment your take profits.

But first let’s understand what a stop loss is in forex trading.

A stop loss is nothing but a way of telling your broker to close your trade if price hits your stop price. In other words, using stop loss, you limit the risk exposure to your capital. Stop Loss is one of the most basic aspects of a trade (besides Take Profit). If you often wonder why you need to use a stop, then you are just not trading right, but rather gambling… taking a chance with your trade. I find this similar to playing poker when a player goes all in. It’s either a hit or a miss. Making such blind calls in forex doesn’t get you too far.

In forex you aren’t trading against another trader but with the markets. Bear in mind, the entities that make up the markets. Big institutional players that are the primary reason for bringing liquidity to the markets, the central banks and their monetary policies that are fundamentally responsible for currency exchange rates, the governments and the economic policies and many more aspects.

So when you are trading without a stop, you are in a way swimming in a sea without any support to bail you out against the ‘sharks’ and believe me, they (institutional traders) are called ‘sharks’ for a reason.

There are many key elements to a successful trading strategy… money management being one of them, and let’s not forget, using stop loss and take profits. So let’s dig a bit deeper into this concept of using stops. We’ll explore different ideas on how to use stops in order to trade better, now that we have an idea of what stops are in forex and why you should not trade without a stop loss.

Trading with Stops

Currency traders can be classified into two types; those who ‘chase the price’ and the ones who ‘wait for the price’. Obvious from this, traders who wait for price to come to them are those who use stops and take profits (and are more successful in setting their stop losses and take profits) while the ones who ‘chase price’ are the kind of traders who lose out most of the time… and the few who do set up stop losses while chasing the markets quite often see their trades being stopped out due to price hitting their
stop levels.

So what is the best approach to using stops?

Understanding risk – If you are trading with a capital of $1000, and your risk is 2%, in effect you are exposing no more than $20 for a particular trade. Convert this into pips, by taking the example of EURUSD and your stop would be set 20 pips away from your entry. But what do you do if price is moving closer and closer to your stop loss? There are only two possible outcomes; either price is indeed reversing or just retracing. If price did take out your stop loss level, you just prevented exposing all of your capital and in way managed to limit your losses on this particular losing trade.

Waiting for price – If you think chasing price is the only way to success, then you are mistaken. Let’s not get this confused with riding the trend, that’s a different story. Chasing price is when you see a couple of bullish or bearish candlesticks and think to yourself that it would be a great opportunity to place an order immediately.

As we know, price is unpredictable and chasing this is akin to a wild goose chase. Using stops in such situations (unless you really know what you are doing) results in the market eating up your capital rather than you feeding off it.

Volatility – Ever noticed some really big bullish or bearish bars, especially during the US trading session when some economic news is being released? Well, stops basically help to minimize your losses during such events when the market does a U-turn and comes back to bite you. Using stops softens the landing which at times can leave a bad taste in the mouth.

Tips for using stops effectively

In real time trading we know that things are not set in stone and most often, you might see price move a few pips or even more against your entry before going back in the intended direction. Being stopped out on such a trade would only leave you beating yourself up, potentially resulting in some impulsive revenge trades, which we all know only results in more damage than anything else. So here are some tips to follow on how to use stops effectively.

Good analysis results in more realistic stop levels

Forex trading is 99% planning and 1% execution. The moment your trade is executed, you are at the mercy of the markets. Therefore it is imperative to spend more time studying the market than to jump in impulsively. A good analysis often results in better stop losses, the kind of stops that don’t get hit, and in the event they do indicate a price reversal.

Support and Resistance to the rescue.. when everything else fails

The very basic, simple concept in forex trading that is often overlooked is support and resistance. Identifying the strong support and resistance levels is a great way to set up your stop loss (and take profit levels). There are different ways to do this. Some traders simply plot the levels on a chart as if it was second nature (which requires lot of experience and practice), but if this is something you are not very comfortable with, then there are many free tools available for you. To point some out:

• Daily Pivot Points (including Monthly/Weekly Pivots)

• Fibonacci Levels

I conclude my first part of the article covering stop losses. So far we understand that trading without a stop loss is a recipe for suicide (for your capital). Stop losses, while might seem like a pain at times, helps us to limit our risks against adverse price movements. In my next part, I’ll cover the subject of how you can use stop losses and in fact use them to compliment your trading system/style as well as working in conjunction with your take profit levels.

About the Author

John is a full time forex trader and contributes regularly to tradingspotsilver.com, a blog focused on trading systems, trade analysis and MT4 tutorials.

See Part 2: Forex Stop Losses – Trailing Your Stops to Lock Your Profits

By James Stafford of Oilprice.com

Pipelines used to be things that were just built without blinking. It is said that there are enough pipelines now in the US to encircle the Earth 25 times with enough left over to also tie a bow around it. Today, getting a pipeline built is not so easy – there are too many environmental concerns and the industry has become highly polarized. But here’s one thing that could bring everyone together: pipeline safety technology. And it’s something we all want, especially for those who live along the thousands of miles of aging pipeline routes that carry hazardous liquids.

Spawned by research that started in space, remote-sensing technology designed to detect dangerous leaks in pipelines has the potential to provide the neutral ground for decisions to be made and consensus to be formed. The clincher: This technology is not only affordable -it saves money and could eventually save the industry.

In an exclusive interview with Oilprice.com, Adrian Banica, founder and CEO of Synodon – the forerunner in leak detection systems – discusses:

• How a technology that started in space has the potential to quell intensifying protests

• Why Keystone XL will eventually be a reality – sooner rather than later

• How remote sensing technology can fingerprint pipeline leaks

• How remote sensing technology can find the little leaks before they become big leaks—at no extra cost

• Why North America’s new pipelines aren’t the problem and why the focus should be on aging pipelines that are going to experience a lot more leaks

• How this technology could bring the industry and environmentalists together

• How external leak detection can save lives in high-risk areas

Interview with James Stafford of Oilprice.com

James Stafford: Now that pipelines are the hottest topic on the oil and gas scene and have found themselves on the frontline of conflict between environmentalists and the industry, high-tech leak detection systems such as Synodon’s remote sensing technology seem to be offering a way out of the chaos. Can you put this into perspective for us?

Adrian Banica: Yes. In North America alone, there are upwards of a million kilometers of transmission pipelines – and this does not even count the gathering and distribution pipelines. What we offer is attractive to both sides in this conflict: environmentalists want it and the industry can afford it.

Methods for inspecting pipelines have existed for many decades. What we’re providing is a better way of doing it. Synodon’s technology offers an accurate and precise method of oil and gas leak detection. This technology detects small leaks before they become big leaks.

James Stafford: In layman’s terms, how does it work?

Adrian Banica: It is relatively simple. Synodon has developed a remote sensing technology that can measure very small ground level concentrations of escaped gas from an aircraft flying overhead. This “realSens” technology is mounted on a helicopter and piloted by GPS over a pipeline.

Think of this gas sensor as a big infrared camera that is particularly adept at detecting very, very small color changes in the infrared spectrum. The color changes that we detect are caused by various gasses that the instrument looks at. Every gas in nature absorbs and colors the infrared light that passes through it in a very specific way. From the shade of the color, we can also infer how much methane or ethane we can see with our instruments. In effect, it’s like a color fingerprint of the gas.

James Stafford: Can you give us a sense of how this technology has evolved into what it is today—essentially the potential tool for bringing environmentalists and industry leaders together over the pipeline issue?

Adrian Banica: Yes. It started in space. Back in the 1990s, I was aware of technology being developed for various space programs, including Canada’s and NASA’s. I was looking for technologies that could solve oil and gas problems, but that were also novel, unique. That is how the whole idea started: It was matching a technology that the Canadian Space Agency funded to develop an instrument that measured carbon monoxide and methane from orbit.

So the idea then was if one can detect methane from space, why couldn’t we adapt that technology to detect methane by flying it on a plane? In 2000, I founded Synodon in order to monetize and commercialize this.

James Stafford: How effective are automated leak detection systems?

Adrian Banica: They are typically only able to detect high level leaks above 1% of the pipeline flow. They measure the volume of the product that passes a sensor (flow measurements) and the pressure in the pipeline–if there is a leak the pressure will be lower downstream from it, among other things. However, as a recent report from the Department of Transportation in the US points out, these systems only detect a leak at best about 40% of the time, irrespective of how big a leak is.

It is also important to differentiate between catastrophic leaks and small leaks. For catastrophic leaks, most pipelines use these flow meters which operate 24/7. But smaller leaks can only be detected by performing an above-ground survey either by foot patrol, vehicle or aircraft. The predominant technologies used would be sampling gas sensors, thermal cameras, laser detection or our remote sensing system.

James Stafford: So this remote sensing technology uses a sort of “fingerprinting” to detect leaks, but we understand that it has much more to offer the industry …

Adrian Banica: Yes. The core offering is the technology we developed for natural gas and liquid hydrocarbon leak detection, but there is a basket of services designed to reduce the overall costs for our clients. During our leak detection surveys, we collect a lot of different types of data such as visual images, thermal images and very, very accurate GPS information. We’ve repackaged all those data sets into new value-added products. We can provide these extra services without incurring additional costs.

For instance, we could offer some of those services for new construction, in which case it would speed up the process of getting all the information required for the necessary regulatory filings.

The most important thing, as I mentioned earlier, is trying to find small leaks before they become large leaks. All our services and all the data we provide are geared towards preventative maintenance. We sought to add services beyond leak protection because all pipeline operators still need to get their other data sets from somewhere. We are consolidating everything they need in a very cost effective and efficient manner.

James Stafford: A late-2012 study on leak detection by the U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration (PHMSA) has brought this subject to the forefront. Dr. David Shaw, one of the report’s authors, says that pipeline leaks, ruptures, and spill are “systematically causing more and more property damage…in bad years you have $5 billion in damages due to pipeline-related accidents”. The logic of the study is that pipleline operators could be spending 10 times more on leak detection given what kind of damages they are being awarded now.

Adrian Banica: Yes, the study makes the most valid point here, and that is that leak detection systems represent a bottom line savings, not an expense. For instance, Dr. Shaw has pointed out that pipeline companies would likely be justified in spending $10 million per year for every 400 miles of pipelines because they are already spending more than that on public property damage.

We have demonstrated that we can detect a leak that is less than 1 liter/min or 380 gallons/day. If our technology was deployed every 30 days and the leak were to happen in the middle of this period (on average), the total spill would be 5,700 gallons (380×15 days), which is 50 times smaller than the standard technology daily leak rate. That’s a huge difference.

Another difference is that pipeline operators pay around $12 per hour to have personnel walk the pipeline, and they can only catch leaks that are close enough for them to see.

James Stafford: Could leak detection systems also save lives?

Adrian Banica: Yes. The PHMSA study points out that 44% of these old hazardous liquid pipelines are in High Consequence Areas (HCAs)—which means that peoples’ lives are at risk if they blow up. We’re talking about 44% of over 170,000 miles of these pipelines. On a public platform, this alone should lend a new urgency to the leak detection debate. The point is that remote—or external—sensors can head off a dangerous leak faster than an internal system.

The challenge then is to convince pipeline operators to adopt external technologies that actually detect leaks rather than relying on the inconsistencies of visual detection, which sooner or later would see the pools of oil, but it might be a while.

James Stafford: Is the market ready for this technology?

Adrian Banica: The market is ready, but not necessarily because of leak detection—it’s the overall basket we discussed earlier.

There is a tremendous need in the industry for remote leak detection. But we had to account for budget constraints within our potential clients. We think we’ve developed a technology that’s very capable of providing the information our customers are looking for and doing so at a competitive price they are willing to pay.

We’ve been operating on the North American market for the last 2.5 years. It’s a very large market that has lately been in the eye of the media and the environmentalists. We’re talking about over 55 companies in Canada and almost 700 pipeline operators in the US, where some 100 companies operate or control roughly 80% of the pipeline infrastructure. It is also a regulated market, and regulators require operators to perform some level of leak detection surveys.

James Stafford: Will Keystone XL—or the San Bruno pipeline explosion—have any notable impact on the regulatory environment or the market for remote sensing technology?

Adrian Banica: Personally I don’t think that either of these will impact the leak detection practices in the industry. Rather, the driver will be the aging pipelines which will continue to have incidents and spills which the public will not accept.

James Stafford: And how is this playing out on the regulatory scene?

Adrian Banica: Congress passed a new law a year ago on this topic. The US regulators have yet to act on new regulations based on this law, but the trend is indeed there. Pipeline companies are concerned about potential upcoming new regulations and are working with the regulators to try and come up with proactive solutions and preempt their moves. There are a lot of discussions going on in the US on this topic right now and the regulator has proposed a set of new rules which are out for comment and discussion in the industry. It is a slow and drawn out process.

James Stafford: Everyone is waiting for the Obama administration to make a decision on Keystone, and while most analysts seem to think it will be given the final green light, the protest movement shows no sign of letting up. How do you see this playing out?

Adrian Banica: With the governor of Nebraska now approving it, I think the administration has no choice and no excuses for not approving it.

James Stafford: Would regulations governing pipeline safety actually boost support for Keystone XL?

Adrian Banica: Personally, I don’t think so. The most vocal opposition for Keystone comes from the side of the environmental movement that does not want to see the pipelines build in order to decrease our overall dependence on oil rather than their concern for spills. So it is a philosophical position based on decreasing CO2 emissions rather than one based on spills in the environment which will not be appeased by regulations.

James Stafford: What about any potential regulatory protection leak detection systems could offer pipeline companies?

Adrian Banica: The benefit to our customers is that they can demonstrate due diligence and that they have employed the best techniques available to ensure pipeline integrity. They will be covered if there is any court action or regulatory action. The value of our data in case something does happen could be quite substantial.

There may be small differences in the regulations with the US being somewhat stricter and tighter than the Canadian regulations. So there are a few more incentives for US based customers to use our service.

James Stafford: Protests continue over the Enbridge pipeline in Vancouver, for instance. How could this play out. Could big pipeline players like Enbridge be able to embrace something like your technology to quell some of those protests?

Adrian Banica: This is a good case in point. Yes they absolutely could, and should. I’m very firm on that answer and I think they are looking at it. Enbridge is a customer of ours already in the United States and they’re very aware of what we offer and do.

James Stafford: So these are early days for commercial viability?

Adrian Banica: These are very early days, and we have just turned the corner from a science concept into something that is commercially realizable. We spent 2011 and 2012 working very hard to penetrate the industry and to convince clients that this is not a science project anymore—this is a genuine commercially viable technology. We are now starting to see the adoption of our technology and services. So I believe we are at the tipping point and by no means do I think that shareholders have missed the boat.

James Stafford: Adrian, thank you for your time. This has been a very interesting discussion and the topic is one we will be following closely over the coming months. Hopefully we will get a chance to talk later in the year to see if any of the developments discussed have come to pass.

Adrian Banica: Absolutely, I’d be delighted to catch up later in the year.

Source: http://oilprice.com/Interviews/Can-Leak-Detection-End-the-Pipeline-Impasse-Interview-with-Adrian-Banica.html

By James Stafford of Oilprice.com

EURUSD

After dropping to 1.3357, the EURUSD entered a stage of consolidation. The increasing attempts are limited by the resistance at 1.3427. The pair is still unable to consolidate above the 34th figure, that may indicate the potential to decrease to more important support levels 1.3300 — 1.3265. Theoretically, these levels should form the bottom, from which the euro would resume its growth. Therefore, if the pair tests these levels, it will explore the possibility of buying from them. Thus it is wise not to rule out the possibility that the current support still provides the support for the hike. The growth and ability to consolidate above 1.3427 would mean the upward momentum recovery.

The GBPUSD was subjected to sales again and as a result, it dropped from 1.5810 to 1.5641. Thus, the pair returned to its lows and is trying to form the bottom here again. It is obvious, the prospects for the British pound deteriorated after dropping below all the moving averages on the 4-hour chart. The overall reduction of the GBPUSD pair was primarily due to the EURGBP increase, whose possible drop can support the GBPUSD pair a little bit. However, on the daily, weekly and monthly charts, the pair’s picture is not encouraging and suggests a further decrease of the British currency. A rise above 1.5900 would weaken the bearish pressure.

No specific changes happened to the USDCHF pair yesterday. The pair found the support at 0.9156 which is trying to develop an upward trend, but the increase attempts are limited by the level of 0.9213. It is wise to note that the U.S. dollar still manages to hold above 0.9150 that indicates the potential for its growth. The loss of this level would worsen the pair’s outlook and it would decrease to 0.9060. The EURCHF continues to drive up and down that further complicates predictions of the USDCHF pair’s movements.

The Japanese currency is still the “best seller”, even the British pound cannot be compared with the yen. It is being sold again and due to this fact, he USDJPY bounced from the support at 92.53 and increased to 93.50, and after a little hesitation — up to 94.46. A rollback back to 93.87 only attracted the buyers, and the dollar hiked again. Thus, the correction was limited again, that didn’t give the opportunity to test important levels for the pair and buy at a good price for us. The next stop, in theory, will be around the 95th figure. It is likely that speculators will sell, and maybe they will wait for the super serious level of 100.00.

Provided by IAFT

London Gold Market Report
from Ben Traynor
BullionVault
Tuesday 12 February 2013, 07:00 EST

U.S. DOLLAR gold bullion prices failed to recover yesterday’s lost ground Tuesday morning, hovering below $1650 per ounce, as stocks and commodities eased higher and the Euro gained against the Dollar, following news of a fresh nuclear test in North Korea and denials from policymakers that a currency war is taking place among major economies.

Like gold, silver also failed to make up ground lost yesterday, trading below $31 throughout this morning.

The G7 group of economies reaffirmed their “longstanding commitment to market determined exchange rates” in a joint statement published Tuesday.

“We reaffirm that our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates,” said the statement attributed to G7 finance ministers and central bank governors.

“We are agreed that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability. We will continue to consult closely on exchange markets and cooperate as appropriate.”

G7 member Japan last month announced it will implement open-ended quantitative easing next year when its current QE program ends, as part of efforts to raise the inflation rate towards a new 2% target.

Following the start of the financial crisis in 2007, the Yen appreciated against the Dollar from over ¥120 to just over ¥75 by August 2011. That month, Japan intervened in the market by selling ¥1 trillion, while the Bank of Japan increased the size of its QE program. The Yen has since fallen against the Dollar to more than ¥90.

“There is no such thing as a currency war,” says former Swiss National Bank chairman Philipp Hildebrand, writing in the Financial Times.

“Central banks are simply doing what they are meant to do and what they have always done. They set monetary policy consistent with their domestic mandates. All that has changed since the crisis is that central banks have had to resort to unconventional measures in an effort to revive wounded economies.”

In September 2011, the SNB pegged the Swiss Franc to the Euro at a rate of SFr1.20, saying it was prepared “to buy foreign currency in unlimited quantities” as part of a stated effort to achieve “substantial and sustained weakening” of the Swiss Franc.

The Franc fell against the Euro this morning following comments by current SNB chairman Thomas Jordan, who said he expects the SFr1.20 peg to remain in place and that the Franc will weaken against the Euro.

“Currencies should not be used for commercial purposes,” said French president Francois Hollande this morning, one week after calling for a “medium-term exchange rate” target in a speech to the European Parliament last Monday.

The Euro rallied against the Dollar this morning, regaining some of last Thursday’s losses. Gold in Euros fell to its lowest level since the start of the month, down 2% on the week at around €39,300 per kilo by lunchtime in London.

Gold in Dollars was down 1.3% on where it started the week, while gold in Sterling was virtually unchanged and gold in Yen was up.

Spain’s borrowing costs meantime rose this morning at an auction of one-year government debt, with average yields rising from 1.472% at an auction on January 15 to 1.548% this morning.

Spain’s prime minister Mariano Rajoy is due to meet European Central Bank president Mario Draghi later today, before Draghi makes a speech to the Spanish parliament.

UK inflation remained at 2.7% last month, official data published Tuesday show, the 38th month in a row that it has been above the Bank of England’s 2% target.

“Inflation is likely to remain well above the 2% target for quite some time,” reckons said James Knightley, economist at ING Bank in London, who adds that the Bank if likely to restart its QE program soon “which may continue to weigh on Sterling”.

Barclays meantime is to cut 3700 jobs worldwide as part of a strategic review aimed at cutting costs by £1.7 billion, the bank announced Tuesday.

Ben Traynor
BullionVault

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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 can be found on Google+

(c) BullionVault 2013

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By www.CentralBankNews.info      Russia’s central bank held its benchmark refinancing rate steady at 8.25 percent but cautioned that  inflation is expected to remain above its target in the first half of 2013 and this poses risks.
    The Bank of Russia, which raised its rate by 25 basis points in 2012 and is facing pressure to cut rates in light of declining economic growth, said the rise in January’s inflation rate to 7.1 percent from 6.6 percent in December was mainly due to higher prices for food and passenger transport while non-food goods inflation remained moderate.
    But the inflation rate may stay above the bank’s 5-6 percent target in the first half of 2013 and “taking into account the effect on economic agents’ expectations, the inflation rate staying above the target range for a prolonged period poses inflation risks,” the bank said after a meeting of its board.
    In early 2011 Russia’s inflation rate was above 9 percent but then gradually started declining in the second half of the year for an annual average of 8.4 percent as the central bank raised its rates. But inflation then started accelerating in mid-2012 and in September the Bank of Russia raised its rate to keep inflation from rising further. 
    With growth declining – third quarter Gross Domestic Product rose only 0.6 percent from the second quarter for annual growth of 2.9 percent – the central bank is facing pressure to cut rates. Last month the bank’s chairman, Sergei Ignatyev, rebuffed Russian President  Vladimir Putin, saying interest rates would first come down when inflation falls. Ignatyev is retiring in June.
    Russia’s economy is estimated to have expanded by 3.4 percent, down from 2011’s 4.3 percent.
    The Bank of Russia said industrial production remained subdued in December and investment in new production capacity continued to decelerate but capacity utilization in industry remains relatively high and economic confidence is positive. The labour market and credit expansion supports domestic demand and gross output “remains close to its potential level,” the bank said.
    “Taking into account still relatively high bank lending growth rates, the risks of a significant economic slowdown stemming from tighter monetary conditions are considered minor,” the bank said, adding it would continue to monitor the risks to inflation and economic growth, “including those stemming from the monetary conditions tightening.”
    The Bank of Russia also said it was introducing “single required reserve ratio on all categories of credit institutions’ liabilities of 4.25%,” as the necessity to use the ratio for capital flows regulation has decreased significantly.
    The new reserve ratio will be applied on banks for the reporting period March 1-April 1 and the bank said the introduction of the ratio was “neutral from the viewpoint of its influence on the banking sector and the current monetary policy stance.”

    www.CentralBankNews.info