Month: February 2013

By www.CentralBankNews.info     Zambia’s central bank held its policy rate steady at 9.25 percent, saying in a brief statement that it had  noted the moderation in inflationary risks to inflation in March “mainly due to continued improvement in the supply of maize to millers by the Food Reserve Agency coupled with the expected increase in fish supply follow the lifting of annual fishing ban.”
    The Bank of Zambia, which raised its policy rate by 25 basis points in 2012, also said a stable supply of vegetables was expected to moderate inflationary pressures.
    “This is in spite of some inflationary risks associated with the cost push pressures arising from lagged pass-through effects of the deprecation of the Kwacha,” the bank said in a statement.
    The kwacha was rebased on January 1 and the central bank has been selling dollars in recent months to support the local currency.
     Zambia’s inflation rate eased to 7.0 percent in January from 7.3 percent in December
   
    www.CentralBankNews.info

AUDUSD stays within a downward price channel on 4-hour chart, and remains in short term downtrend from 1.0373, the rise from 1.0182 could be treated as consolidation of the downtrend. Resistance is located at the upper line of the channel, as long as the channel resistance holds, the downtrend could be expected to resume, and another fall to 1.0100 area is still possible. However a clear break above the channel resistance will indicate that the downward movement from 1.0373 has completed, then further rise to test 1.0373 key resistance could be seen, about this level will indicate that the whole downtrend from 1.0597 has completed.

Forex Signals

By MoneyMorning.com.au

Two things move markets.

That’s right, only two things.

You wouldn’t know that from all the fluff you see in the mainstream.

Based on what you read elsewhere, we would forgive you for thinking that markets (including stock markets) are much more complicated.

The truth is you don’t need a physics, maths or engineering degree to understand it all.

You just need to know the two things…just two things…that move markets. If you get that you’re well on your way to understanding how and why markets move, and how you can potentially profit from those moves…

We know our colleagues in the financial services industry won’t like this, but investing isn’t difficult.

It’s not like performing open heart surgery, taking apart and fixing a car engine, or building a house from scratch. That’s tricky…and it’s why you won’t find your editor tackling any of those tasks.

As far as stock investing is concerned the only two things you need to look for…the two things that move markets…are interest rates and earnings.

If you break everything down to the base elements, you’ll find that everything results from these two factors. You can call them the primary colours of investing…

The Importance of Investing’s Primary Colours

We did some fishing around earlier this week. The amount of meddling in financial markets has created a lot of confusion for investors.

The most confusing has been the amount of money printing and interest rate meddling.

Just yesterday we posted a link on our Google+ page to a Daily Mail article. The article suggests the Bank of England could move to a negative interest rate environment. That simply means the Bank of England would charge banks to hold cash at the Bank of England.

Why would they do that? The idea is that if banks hold cash at the Bank of England it means they aren’t lending it to consumers and businesses…and that’s why the economy is in recession. The charges would deter banks from holding cash at the Bank.

Of course, that’s not the reason for the recession. The reason is that there has been too much credit for too long. The economy needs to readjust.

A recession is simply the economy telling people it’s exhausted and needs to stop growing…the Bank of England is trying to ignore that.

But let’s break that down. What’s at the core of this issue? That’s right, interest rates and company earnings.

This link is the key to how an economy will perform. The thing is over the past few years the link between interest rates and earnings has flipped. And investors better get used to it, because it isn’t going to change…

The Key Chart Explains it All

One of the things we wanted to find out was the link between interest rates and earnings. The best way to show this (in our opinion) is to show a chart of interest rates and dividend yields (earnings paid to investors).

The chart below shows you the Reserve Bank of Australia (RBA) Cash Rate (blue line) from January 2000 through to February 2013. The red line is the dividend yield for stocks in the All Ordinaries index:

As you can see, between 2000 and mid-2008, the RBA Cash Rate was higher than the All Ords dividend yield. In fact the Cash Rate was an average of 1.79 percentage points above the All Ords’ yield.

That relationship flipped as the financial system collapsed and the RBA cut interest rates to a record low. Things appeared to revert to normal during 2010, but that didn’t last long.

Since 2009, the average spread between the Cash Rate and dividend yields is now -0.64 percentage points. In other words, dividend yields are now higher than the Cash Rate.

So, what does that mean? Well, it’s the key to investing over the next two years…

Why This ‘Flip’ is Great News for Growth Stocks

To be honest, we can’t see that relationship flipping back anytime soon. The RBA will have to keep interest rates low in order to try to stimulate the Australian economy (not that we agree the RBA should do this, we’re simply saying this is what they’ll probably do).

That will force normally conservative investors to buy dividend-paying stocks.

We’re reluctant to use the word, but it could create a temporary ‘floor’ for Aussie stocks as long as the central bank keeps rates low. Note the emphasis on ‘temporary’.

Interest rates look set to stay low for the time being. That’s typically good news for stocks. All that remains to know is whether companies can maintain or grow earnings and dividends.

As we said at the top, that’s all that really matters in the stock market – interest rates and earnings.

That said, we also believe that dividend stocks have already boomed.

We don’t think you’ll see further big gains. If dividend stocks do go up, it’s more likely to be low single-figure gains, even if as Doc Cowie expects, you see a new credit boom due to low interest rates and China’s infrastructure spending.

In short, if the days are over for income and growth from dividend stocks, it’s only natural that speculators will look for big gains elsewhere. That should mean a good year ahead for growth stocks, especially small-cap growth stocks.

If the last six months was all about yield, our bet is the next year will be all about growth.

Cheers,
Kris
Join me on Google+
From the Port Phillip Publishing Library

Special Report: The Gold Mirror of Kaieteur Falls

Daily Reckoning: Ben Bernanke… What a Fraud… What a Phoney

Money Morning: Revealed: Inside a Share Trader’s Den

Pursuit of Happiness: Exclusive: Your Eight-Point Wealth Protection To-Do List

By MoneyMorning.com.au

A few months ago, the insightful and engaging financial market observer, James Grant, drew a comparison between ‘witchcraft, on the one hand, and modern central banking, on the other.’

Grant presented this novel comparison in an address to the ‘Investment Decisions and Behavioral Finance’ meeting at the Harvard Kennedy School.

‘I won’t spend much time defining terms,’ Grant began. ‘Witches, as you know, cast spells, make storms and fly on goats or broomsticks to diabolical night time rendezvouses called sabbats. Modern central bankers override the price mechanism, conjure money from thin air and undertake to boost economic growth by raising up stock prices.’

In other words, both activities rely greatly on a kind of mysticism – beginning with the notion that combining bizarre ingredients in a cauldron can work magic…and ending with the notion that mere mortals can wield supernatural powers.

The Fed’s Beguiling Wizardry

Ben Bernanke’s ‘eye of newt’ is quantitative easing (QE). According to American folklore, Bernanke casts benevolent spells, simply by tossing just the right amount of QE into the economic cauldron at just the right time.

‘One might almost call it witchcraft,’ Grant concludes his address.

Between Grant’s opening remarks and his conclusion, he presents one very striking, and somewhat alarming, comparison between witchcraft and central banking. Both superstitions emerged and then flourished during a time of relative enlightenment. Educated and enlightened populations embraced both beliefs.

Quoting an essay entitled, ‘The European Witch Craze of the 16th and 17th Centuries,’ by British historian, H.R. Trevor-Roper, Grant remarked, ‘The belief in witches was not,’ Trevor-Roper writes, ‘a lingering ancient superstition, only waiting to dissolve. It was a new explosive force, constantly and fearfully expanding with the passage of time…

‘Creduality in high places increased, its engines of expression were made more terrible, more victims were sacrificed to it. The years 1550-1600 were worse than the years 1500-1550, and the years 1600-1650 were worse still… If those two centuries were an age of light, we have to admit that, in one respect at least, the Dark Age was more civilized.’

After contemplating Grant’s observations, a hard-money guy or gal, couldn’t help but think of the ‘Dark Ages’ of the gold standard, in contrast to the Enlightened Age of central banking.

During the monetary Dark Ages, the gold-backed dollar fended for itself, without the benefit of central bank wizardry.

But the Age of Monetary Enlightenment changed all that. The Federal Reserve began casting its spells 100 years ago, and the US dollar has been bewitched ever since. The greenback has lost 97% of its purchasing power since the Federal Reserve came into existence.

The Fed’s beguiling wizardry continues nonetheless. Ben Bernanke concocts his bubbling brews of QE #1 through QE-infinity, while other PhDs at the Fed publish illuminating manuscripts like the recently released, ‘Computing Dynamic Stochastic General Equilibrium Models with Recursive Preferences and Stochastic Volatility’. (Thanks, Jim Grant.)

Given their impressive array of charms and potions, it should come as no surprise that the wizards at the Fed believe in their own magic; the surprise is that the investing public also believes in it…and remains spellbound by the Fed’s incantations.

Just this week, Chairman Bernanke repeated his familiar incantation, ‘More QE…More QE…Whatever may be…More QE.’

The Dow Jones Industrial Average promptly rallied more than 100 points. The masses were awed by his power.

‘In the current economic environment, the benefits of asset purchases, and of policy accommodation more generally, are clear,’ Bernanke told the Senate Housing and Urban Affairs Committee, referring to the $85 billion of Treasury and mortgage-backed securities the Fed buys under its current quantitative easing program.

‘Monetary policy is providing important support to the recovery,’ the Chairman-Wizard continues, ‘while keeping inflation close to the [Fed’s] 2% objective.’

Beguiling words, to be sure. But Bernanke’s spells may not be quite as potent as he would have us believe. The ‘important support to the economy’ that QE provides is literally invisible.

Meanwhile, in the Real World…

The so-called recovery of the last four years has logged the slowest growth rate – by far – of any recovery since WWII, despite the fact that Bernanke has conducted more the $2 trillion of QE programs during that time frame.

Many are the data points that call into question the ‘success’ of QE. For starters, US GDP contracted in the final three months of 2012. Accordingly, unemployment remains stubbornly high and consumer spending stubbornly low.

Just last week, Wal-Mart’s VP of finance and logistics groaned in an internal email:

‘In case you haven’t seen a sales report these days, February MTD (month-to-date) sales are a total disaster…The worst start to a month I have seen in my seven years with the company.’

The retail giant also reported that its sales are tracking very closely to what it calls the ‘paycheck cycle’ – i.e., sales spike twice a month…on paydays.

‘[This trend] speaks to a strapped consumer that lacks the confidence to spend unless they literally have cash in their pocket,’ blogger, Jeff Macke, observes. ‘Living paycheck to paycheck isn’t something you typically see in the fourth year of an economic recovery.’

Nevertheless, very few investors exhibit any desire to consider the downside. Perhaps for good reason. Why fret over ‘Bubble, bubble, toil and trouble’ when Chairman Bernanke provides continued helpings of ‘Bubble, Bubble’?

Despite Bernanke’s dubious power over the economy, the man sure knows how to conjure a stock market rally out of thin air. The Dow has soared about 250 points since he began addressing the Senate.

One might almost call it witchcraft.

Eric Fry
Contributing Editor, Money Morning
Join Money Morning on Google+

From the Archives…

The Biggest Crisis to Hit the Stock Market Since the Last One
22-02-2013 – Kris Sayce

My Wife and Warren Buffett
21-02-2013 – Kris Sayce

How a Share Trader Approaches the Market
20-02-2013 – Murray Dawes

The Poster-Child for the US Shale Gas Revolution
19-02-2013 – Dr. Alex Cowie

The Two-Dimensional Diamond That’s Set to Turn Your World Upside Down
18-02-2013 – Dr. Alex Cowie

By MoneyMorning.com.au

It’s America’s final frontier for shale. And the payout will be huge.

Get this…

If you add up the recoverable resource estimate for the oft-mentioned Bakken formation in North Dakota, as well as the Eagle Ford in South Texas…then DOUBLE it, you’ll get close to the number of recoverable barrels of oil that remain trapped in the heart of this untapped ‘mega’ shale deposit.

Put another way, according to the US Energy Information Administration, this one massive shale play represents 64% of the total recoverable shale oil resource base in the country.

It’s the big kahuna, and today we’ll take a look at how the profit opportunities are stacking up for this behemoth…

The Big Kahuna in Shale

But first, let’s tackle what I’d consider the most important question when it comes to any resource investment: why now?

Sure, we’ve always known California has oil. Starting early in the 20th century, black gold was flowing up and down the West Coast – propelling business and riches alike.

Of course, like most of the other conventional deposits in the US, output has slowly but surely declined.

Today, though, the shale revolution is turning those declining deposits around. From Texas to North Dakota and even towards the East Coast, shale oil and gas are changing America’s energy future. Natural gas is plentiful and oil is coming to the surface, more each day.

That is, except for one untapped shale deposit – what I call the big kahuna – California’s Monterey shale.

Unlike other shale turn-around stories California’s energy output has continued on a downward path. Once a 1.1 million barrel per day (Mbpd) state, California is now producing just half of that – around 500,000 bpd. But when operators in that area finally crack the code, you can bet production will rocket higher.

The best analogy is what we saw recently in Texas.

Once the code was cracked and companies found a way to produce shale oil and make money, total production for the state skyrocketed. Today, Texas is well on its way to eclipsing the mid-80s production level above 2.4 Mbpd. Take a look:

Put in perspective, California’s Monterey is truly a sleeping dragon.

The sheer size of this deposit is staggering. In shale terms, the Monterey formation could hold as many as 400 billion barrels of oil. Of that 400 billion, over 15 billion barrels are considered recoverable with today’s technology. That trumps the recoverable estimates from the Bakken and Eagle Ford – by a factor of 2.

Getting back to the eye-popping statistics above, that represents a whopping 64% of America’s recoverable oil shale reserves. And the way I see it, it’s only a matter of time before this behemoth is spitting out profit opportunities.

That brings us to the other bit of timeliness to this story.

An Energy Bailout

If we were talking about any state other than California (or maybe New York) this energy turnaround story would already be under way. Indeed, the Monterey would be a ‘household’ shale player – with hundreds of rigs spinning as we speak.

But alas, this is California. The political and environmental red tape in the state have brought energy development to a virtual halt.

Of course, if that were the end of the story I wouldn’t be writing to you today. Instead, the way I see it, there’s big change on the horizon. Soon, I believe California’s shale will be open for business…

What’s the one thing that shale-producing states have in common?

Well for starters, governments like Texas, North Dakota and Pennsylvania have enjoyed a boost to tax revenues via shale production. Along with that, unemployment rates are lower than the US average and energy prices are affordable.

Currently California finds itself on the opposite end of this spectrum – a huge budget deficit, high unemployment and expensive energy. As the days pass and deficits increase, pressure mounts to tap this hidden revenue stream.

Another factor at play here is time. Each passing day with, safe, reliable, affordable, US shale production ramping up, there’s more reason for California lawmakers and politicians to look towards shale production as a potential saviour for out of control government budgets.

One recent example of this is New York State. New York was the first state to quickly ban shale development. But recently legislation is gaining steam to allow shale production. Indeed, if New York goes the way of shale, the road may be paved for California.

The Tipping Point Coming for Californian Shale Production

I believe today we’re at the tipping point. Two months ago, California Governor Jerry Brown released draft regulations that could speed up shale development in the state. Along with that, also in December, the US Bureau of Land Management auctioned off a handful of leases in the state.

The writing is on the wall for a ramp-up of California’s Monterey shale. There are two key factors to keep an eye on here – permits and production.

First, we’ll want to keep an eye on the permit process out west. If sweeping changes open up the permit process – allowing for a massive increase in permit approvals – it’s only a matter of time before the major players skyrocket (California’s usual cast of characters include: Chevron, Shell, Exxon, Occidental and Venoco).

A change in tone from the political side could fuel this permit turnaround, and the impending shale boom. Is the incumbent Gov. Jerry Brown the pioneer for the job? We’ll see.

However, there is one other force that could boost permitting.

In a similar way that more permits can lead to more production, production can lead to permits. What I’m looking for here is a ‘code crack’ for the Monterey shale.

For instance, if an operator in the area can ‘crack’ the Monterey code, and start drastically increasing the production per well, we could see a turnaround for the whole state.

This is similar to what happened in North Dakota, Texas and Pennsylvania. Quietly, but quickly, the shale-code was cracked and production per well started jumping off the charts. The immediate effect was a drastic increase in tax revenue for the state.

In the case of ND, TX and PA the states welcomed the bump in tax revenue with open arms and accommodating regulation – meaning plentiful permits.

If permits and production perk up, watch out. The shale boom on the West Coast could come fast. Keep your ear to the ground on this one.

Matt Insley
Contributing Editor, Money Morning

Join Money Morning on Google+

From the Archives…

The Biggest Crisis to Hit the Stock Market Since the Last One
22-02-2013 – Kris Sayce

My Wife and Warren Buffett
21-02-2013 – Kris Sayce

How a Share Trader Approaches the Market
20-02-2013 – Murray Dawes

The Poster-Child for the US Shale Gas Revolution
19-02-2013 – Dr. Alex Cowie

The Two-Dimensional Diamond That’s Set to Turn Your World Upside Down
18-02-2013 – Dr. Alex Cowie

By The Sizemore Letter

I spend quite a bit of time extolling the virtues of Dividend Achievers, companies with a long history of raising their dividends.  I consider them the single best long-term investment you can make, and not purely because of the income.  In fact, the income is often secondary.

That statement generally gets me a few raised eyebrows, but hear me out. A company with a history of raising its dividend consistently over time is a healthy company with stable and growing cash flows.  The discipline involved with paying a dividend also discourages money-wasting empire building by management or, even more importantly, financial or accounting shenanigans that mask the true financial condition of a company.

And particularly in the post-2008 world, a company that is able to raise its dividend throughout a once-in-a-lifetime financial crisis is a company that can survive Armageddon because, frankly, it already has.

Here are a handful of my favorite Dividend Achievers:

Wal-Mart (NYSE:$WMT) created a stir earlier this month when an email from one of its executives was leaked to the press that said that February sales for the world’s largest retailer were “a total disaster.”

Vice President of Finance Jerry Murray, the executive whose email was leaked, reported that Wal-Mart was off to its worst start in seven years.  Yet management must not have been too worried because just days later Wal-Mart announced it was hiking its dividend by 18 percent.

Wal-Mart’s annual dividend—which it has increased every year since 1974—was increased to $1.88 per share from $1.59.  The stock now yields a respectable 2.7% in cash dividends, and this says nothing of share repurchases.  Barron’s calculates that the combined value of dividends and stock buybacks over the past five years add up to more than a fourth of the Wal-Mart’s current market value.

Intel (Nasdaq:$INTC) is another company that has had a rough start to 2013.  A bad earnings release, an outright decline in PC sales, and a large planned expansion of its manufacturing capacity at a time of weak demand have led investors to abandon the stock, sending it into negative territory for the year.

Yet Intel has been a dividend-boosting powerhouse in recent years.  In 2003 Intel paid out $0.08 per share in dividend; in 2013, Intel will pay out $0.90 in dividends.  Over the course of a decade, Intel has raised its dividend by a factor of 11, and again, I haven’t said anything about share repurchases yet.  From 2008 to 2012, Intel shrunk its share count by 11%.

Intel may not be the growth engine it was a decade ago, but as the company has matured it has become far more shareholder friendly.  And there is plenty of room for more.  Intel’s dividend payout is a modest 41% of profits.

At current prices Intel yields 4.3%, making it one of the highest-yielding stocks in the S&P 500.

Another company that has embraced shareholder friendliness over the past decade is Intel’s fellow PC dominator Microsoft (Nasdaq:$MSFT).  Since initiating a $0.32 annual dividend in 2003, Microsoft has nearly tripled its payout to $0.92 in 2013.  And there was a large special dividend of $3.00 per share along the way.

Microsoft has also been busy on the share repurchase front after announcing a $40 billion buyback program in 2008.  Since then, the company has shrunk its share count by 10%.  Given Microsoft’s cash hoard and its relatively low payout ratio of 45% (on depressed earnings, I might add), I expect more to come.

I should note that Wal-Mart is the only company of the three that is currently on the “official” Dividend Achievers list as published by Indxis. Intel and Microsoft just barely fell short of the 10-consecutive years criteria the last time the index was constituted, but I expect they will be added soon enough.

Disclosures: Sizemore Capital holds positions in WMT, INTC, and MSFT in its Dividend Growth Portfolio.  This article first appeared on MarketWatch.

SUBSCRIBE to Sizemore Insights via e-mail today.

The post Why I Love Dividend Achievers appeared first on Sizemore Insights.

By www.CentralBankNews.info

London Gold Market Report
from Ben Traynor
BullionVault
Wednesday 27 February 2013, 07:30 EST

U.S. DOLLAR gold bullion prices fell slightly in Wednesday morning’s London trading, but held above the $1600 per ounce level it rallied above yesterday after Federal Reserve chairman Ben Bernanke  told Congress that that Fed’s ongoing quantitative easing policy “is providing important support to the recovery” and that the benefits “are clear”.

Stock markets also posted gains this morning, making up some ground lost yesterday, while commodities were broadly flat and longer-dated US Treasuries gained.

Like gold, silver eased lower this morning but held above $29 an ounce by lunchtime in London.

In his testimony to the Senate Committee on Banking, Housing and Urban Affairs, Bernanke added “inflation expectations appear well anchored” and that the Fed does not expect to see “the development of significant inflation pressures”.

Bernanke also reiterated the importance of keeping the federal funds rate close to zero.

“Keeping long-term interest rates low has helped spark a recovery in the housing market and has led to increased sales and production of automobiles and other durable goods,” he said.

On the New York Comex the number of gold put options, which rise in value as gold falls below a given strike price, rose to a record following the publication of the latest Fed policy meeting minutes last week, according to news agency Bloomberg.

Following Bernanke’s testimony yesterday however “the market is a little less concerned about a premature exit of quantitative easing, which would be bad for gold,” says Nick Trevethan, senior commodity strategist at ANZ.

“Don’t forget that the Fed’s focus is on jobs and inflation. The job market has stabilized, but we are not seeing efficient job growth to make the exit of QE look imminent. There is still a long way to go.”

Britain’s economy meantime grew by 0.3% in 2012, according to the second estimate of fourth quarter gross domestic product published by the Office for National Statistics Wednesday, which revised last year’s growth estimate up from zero. The Q4 contraction of 0.3% reported in the first estimate however remains unchanged, while government spending rose 0.6% over the quarter and 2.6% over the year as a whole.

“Government spending can’t be sustained at that level,” says Deutsche Bank economist George Buckley, “so an important part of economic growth is actually going to be taken away and the risk is that exports remain negative and that consumption weakens because of higher inflation.”

The Bank of England’s Monetary Policy Committee has discussed the possibility of setting negative interest rates, MPC member and BoE deputy governor Paul Tucker told the Treasury Committee yesterday.

Holdings of bullion held to back gold exchange traded funds meantime are on course for their biggest calendar month drop since April 2008, according to data tracked by Bloomberg.

“The [gold] market has lost increasing support this year in line with other perceived ‘safe havens’ such as the Japanese Yen, Swiss Franc and US Treasuries,” says a note from Deutsche Bank this morning.

“We expect gold returns will eventually recover although this will most likely require a moderation in growth expectations and with it a correction in global equity and interest rate markets.”

“The fundamental background for gold remains reasonably supportive,” adds a note from Credit Suisse.

“It is rather that potential gold investors consider other classes more attractive…investors have the tendency to buy less of the precious metal in an environment where growth is stabilizing.”

Gold bullion imports worth $2.7 billion contributed to Thailand’s record trade deficit last month, the country’s Commerce Ministry revealed Wednesday. Over the whole of 2012 demand for gold from Thailand was worth $4.3 billion, according to latest World Gold Council figures.

The volume of gold imported by Thailand rose 133% year-on-year, Ministry figures show, although its report did not include figures for gold exports.

Last week India, the world’s biggest source of private gold demand, banned imports of gold jewelry from Thailand unless the authorities can be satisfied that the work in making the jewelry had added at least 20% to its value over and above that of the bullion content.

India last month raised its import duty on gold to 6%, although a trade agreement with Thailand meant that gold imported from there was only subject to a duty of 1%.

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 can be found on Google+

(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.