Month: March 2013

London Gold Market Report
from Ben Traynor
BullionVault
Wednesday 20 March 2013, 08:45 EST

GOLD dropped below $1610 an ounce Wednesday, as stocks, commodities and the Euro all regained some ground lost since news of the Cyprus bailout negotiations broke over the weekend.

“We still believe that an interim low was made in February and that the precious metal should reach the January low at “1625.77 in the weeks ahead,” says Commerzbank senior technical analyst Axel Rudolph.

Gold in Euros fell back below €1250 an ounce as the Euro rallied from a four-month low against the Dollar, following news that Cypriot lawmakers have rejected plans to impose levies on bank depositors.

Silver prices meantime failed to break above $29 an ounce, drifting down towards $28.80 by lunchtime in London following what Rudolph calls a “sluggish bounce”.

Banks in Cyprus remained closed Wednesday as part of the extended bank holiday that could now last until next week, while press reports suggest Cyprus is discussing the option of capital controls.

Cyprus central bank governor Panicos Demetriades predicted yesterday that depositors could withdraw 10% or more of total deposits when banks reopen.

The Cypriot parliament yesterday rejected revised plans to impose a levy of 6.75% on bank depositors with more than €20,000 and 9.9% on those with more than €100,000. No member of parliament voted for the proposals, which form part of a €10 billion European Union-International Monetary Fund bailout out currently under discussion.

Cypriot president is expected to speak to Russian president Vladimir Putin today, after Cyprus’s finance minister flew to Moscow last night.

“The Cypriot authorities wanted to conduct [Tuesday’s] vote so that they could reaffirm the extent of their difficulties to the Europeans…[it] is not the end of the process, but instead kicks off a further round of negotiation with Moscow and Berlin,” says Alexander White, London-based European political analyst at JPMorgan Chase.

“[Germany’s] objective in this case is to remove the implied support for the Cypriot banking system, so that it can no longer function as a large offshore financial center whilst receiving a European [Central Bank] backstop… absent such a transformation, Germany appears ready to live with the consequences of Cyprus stepping out of Europe.”

“Germany wants a solution,” said German chancellor Angela Merkel this morning.

“We will continue negotiations, primarily via the troika [of the EU, ECB and IMF].”

“As recently as in January, Cypriot banks offered 4.5% for a 1-year deposit while other peripheral countries, including Italy and Spain, offered about 2.5%, and Germany 0.9%,” points out a note from UniCredit, adding that depositors putting their money in Cypriot banks would have made around €23,000 more since 2008 than those depositing in Germany.

“Why does the Cypriot parliament (and many commentators) seem to suggest that a 15% tax on such deposits…would be unreasonable now the banks are in trouble, but that German, Italian and other Eurozone taxpayers should rather foot the bill? To me, the Cypriot position is simply un-sellable in the rest of the Eurozone.”

The situation in Cyprus is “a good thing for Russia,” says Sergey Cheremin, head of Moscow’s department for economic and international relations.

“It’s totally changed the perception of Cyprus…it shows those Russians who keep their accounts in Cyprus that it’s not a heaven, it’s a hell. It will encourage a lot of Russian companies to concentrate their resources in Moscow.”

In London meantime, UK chancellor George Osborne unveiled his latest Budget Wednesday, announcing that the official growth forecast for the UK this year is 0.6%, down from its previous forecast of 1.2%.

The Pound fell against the Dollar following the news, reversing gains made earlier in the day following the publication of Bank of England minutes.

BoE governor Mervyn King, who steps down this summer, again voted for an extra £25 billion of quantitative easing at this month’s Monetary Policy Meeting, the minutes show. As in February’s meeting, King was in the minority of a 6-3 vote.

Over in the US, the Federal Reserve makes its latest policy announcement later today, with most analysts predicting no change to the Fed’s $85 billion a month QE purchases.

Gold’s premium over platinum meantime narrowed to around $50 an ounce this morning, having hit $60 yesterday, from a discount of $80 a month earlier.

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.

By OilPrice.com

While most would think that the risks junior oil and gas companies are taking in exploring new frontiers as far away as the remote reaches of Africa are related to government instability and conflict, another risk they face is right at home and lies right beyond their network firewalls.

Cyber security breaches are becoming more common place as the ranks of junior companies swell and take on new exploration venues with a great deal of energy. But at home their firewalls are not safe and hackers are being paid to find out what juicy exploration news is being discussed in their boardrooms.

In Canada—home of some of the most tenacious of these exploration juniors—local media reported late last year that the internal firewall of Telvent Canada Ltd. had been breached by foreign hackers.

These hackers can represent anyone from a competitor to an organized crime group to political and environmental activists. And the information they want can be anything from preliminary exploration results, merger and acquisition talks and expansion plans to geological data and technological information. All of it is valuable. All of it is sellable.

According to Ernst & Young, most oil and gas companies don’t have high enough network security standards. This is demonstrated by the rising incidents of external cyber attacks. Some companies in the industry don’t even have a formal security framework in place.

Everything changes with everything else, and while exploration is getting both smaller and bigger at the same time, cyber attacks are being more targeted, taking advantage of individuals who use their own electronic devices to connect to their company’s network. This is where the biggest weaknesses emerge.

There is an accelerating trend for oil and gas companies to require their employees to use their own mobile devices for work. It’s such a trend, in fact, that it even has its own acronym: BYOD, or bring your own device. But because of the security implications this entails, analysts predict that 65% of enterprises will adopt a mobile device management solution in the next five years.

What this means is that they will need a more secure way to handle sensitive information if their employees are using their own devices, storing company information on those devices and linking up to company networks. Lines between personal and corporate data can be very blurry and this is exactly what cyber attackers are targeting.

There are other weak links, too. Smaller oil and gas exploration and production companies often require external assistance to identify opportunities in foreign countries, to network with the right people and to navigate government figures and regulations. The help they enlist creates another chink in the armor as important data is sent back and forth.

Source: http://oilprice.com/Energy/Energy-General/Oil-Explorers-Beware-Hackers-Are-Eyeing-What-You-Know.html

By. Jen Alic of Oilprice.com

By www.CentralBankNews.info     South Africa’s central bank held its benchmark repurchase rate steady at 5.0 percent, saying its policy  stance is “appropriately accommodative” given the economy’s negative output gap and events in Cyprus that could further undermine growth prospects. This is balanced against inflationary risks.
    The South African Reserve Bank (SARB), which has been in an monetary easing cycle since December 2008, said the global economy was still characterised by a multi-speed recovery, with recent events in Cyprus increasing risk and uncertainty in Europe with “the potential to reignite the banking and sovereign debt crises and undermine growth prospects further.”
    In addition, the global outlook is clouded by fiscal gridlock in the United States, the bank said.
    South Africa’s growth prospects are subdued despite a better-than-expected fourth quarter GDP with the bank raising its 2013 forecast to 2.7 percent, from a previous forecast of 2.6 percent, but cutting its 2014 forecast to 3.7 percent from 3.8 percent.
    South Africa’s Gross Domestic Product bounced back to a 2.1 percent growth in the fourth quarter from the third for annual growth of 2.5 percent, up from 2.3 percent in the third quarter.
     For the full 2012 year, South Africa’s growth eased to 2.5 percent, despite a 9.3 percent contraction in the mining sector, from 3.5 percent in 2011.

     The SARB, which cut rates by 50 basis points in 2012, estimates the economy’s potential output growth at 3.5 percent and the important mining sector bounced back with annual growth of 7.3 percent in January.
    “Nevertheless the (mining) sector is expected to remain under pressure given the unsettled labour relations environment,” the SARB said, adding that the unresolved labour disputes pose a significant risk to the exchange rate and economic growth.
    However, a lower rand exchange rate provides an opportunity for the country’s manufacturing sector to become more globally competitive but to sustain this will require improved productivity and containment of wages and other cost, which underlines the need to control inflation, the bank said.
    South Africa’s consumer price inflation rate for all urban areas rose to 5.9 percent in February from 5.4 percent in January, mainly due to higher medical insurance costs, hitting core inflation which rose markedly to 5.3 percent from 4.7 percent.
    Incorporating the new CPI weights, a rebasing and lower electricity prices, the SARB forecasts inflation to average 5.9 percent in 2013 and 5.3 percent in 2014 compared with previous forecasts of 5.8 and 5.2 percent.
    In the third quarter of this year, inflation is expected to temporarily breach the bank’s upper target range, with prices averaging 6.3 percent and then easing to 5.2 percent in the final quarter.
    “This deteriorating is largely due to the depreciation of the rand and higher petrol prices, which more than offset the impact of the lower electricity price increases and lower starting point,” the bank said.
    In 2012 inflation averaged 5.6 percent, in the upper end of the central bank’s 3-6 percent target.
    “The MPC continues to assess the balance of risks to the inflation outlook to be on the upside, mainly due to the exchange rate and wage pressures,” the SARB said, adding underlying inflation appears to be relatively contained and there is lower risk from food price inflation.
    The government’s projected deficit for the past fiscal year of 5.7 percent of GDP is wider than initially budgeted due to lower revenue from weaker growth and for the 2013/14 fiscal year it is budgeted at 5.1 percent, declining to 3.6 percent by 2015/16.
    Earlier this month the Organisation for Economic Co-operation and Development (OECD) recommended that SARB cut interest rates despite rising inflation to support the economy while taking steps to prevent the rand from becoming overvalued.
 
    www.CentralBankNews.info

By www.CentralBankNews.info     Iceland’s central bank held its benchmark seven-day lending rate steady at 6.0 percent, saying it will be necessary to raise interest rates as spare capacity disappears from the economy but the pace of this normalisation will depend on inflation.
   The Central Bank of Iceland, which raised rates by 125 basis points in 2012, said the economic recovery has lost some of its previous pace, which means the margin of spare capacity in the economy has narrowed further while it’s accommodative stance is still supporting economic growth.
    But if inflation declines slower than forecast, it will be necessary to reduce the monetary slack sooner  than otherwise required, the central bank said.

    Inflation rose to 4.8 percent in February from 4.2 percent in January and the highest rate in eight months. The central bank targets inflation of 2.5 percent.

    Iceland’s central bank said the outlook is still for a gradual economic recovery and leading indicators are consistent with that prospect.
    Inflation, however, “proved considerably higher in February than previous anticipated,” the bank said, while on the other hand the Icelandic krona has appreciated.
    The bank’s decision in February to suspend regular foreign currency purchases and support the krona through foreign exchange intervention has proven effective. 
    “The Bank’s actions have reduced the risk that self-fulfilling expectations of a depreciation will weaken the króna still further, and in this way they have supported monetary policy,” the bank said.
    Iceland’s Gross Domestic Product expanded by only 0.5 percent in the fourth quarter from the third, down from the third quarter’s expansion of 4.8 percent from the second. Annual growth in the fourth quarter was 1.4 percent  down from 2.2 percent.
 
    www.CentralBankNews.info
  

By www.CentralBankNews.info

By MoneyMorning.com.au

Yes, this is getting old, but this week a new Mediterranean country became the centre of the financial world’s attention.

It’s not even big enough to be one of the PIIGS, which used to make all the headlines.

But Cyprus is important for a whole new reason.

This time around, bank depositors will take a hit in the effort to bail out the banks.

And that’s causing panic across Europe…

What you need to know about this isn’t in the details. They’re a complete mess and keep changing from one hour to the next. One moment all depositors will lose a few percent of their deposits, the next only some will.

What’s really important is the signal this sends. We’re entering into the next stage of the financial crisis. The stage where governments turn on their citizens.

This is exactly in keeping with Kris’ theme in Money Morning. He’s written about this for over four years, including the Australian government’s attempts to take your wealth, like they’re going to do in Cyprus. It’s not just Cyprus, by the way.

In Japan, the government hopes to stimulate the economy by creating inflation. That will have a similar effect on the country’s savers as confiscating a proportion of their deposits would. In Italy, the German bank Commerzbank is expecting a wealth tax to be brought in. France’s ill fated 75% tax may not last, but it shows what’s making popular politics these days.

In Australia, the miners, polluters and ‘super profiteers’ are the target…for now. And on May 31st, the government will raid small superannuation accounts and unused bank accounts.

All around the world, governments are beginning to see their citizens as ATMs to pay for political promises. Whether its entitlements, bank bailouts, wars or insulation schemes. Sure, simply taking people’s deposits is particularly audacious. But you don’t even know if we’re referring to Australia or Cyprus in that sentence. Both are up to the same sort of confiscation.

By the way, if you’re thinking this is just a question of finding the right kind of politicians to solve the problem, you’re going to be disappointed. Remember the ‘there will be no Carbon Tax’ promise? Well, the President of Cyprus was only elected three weeks ago, and promised deposit taxes wouldn’t be part of any plan to bail out the banks. You never know what you’ll get from a politician.

Reuters reports that Cyprus’ President initially stormed out of negotiations with the IMF, EU and ECB when they demanded a tax on depositors’ funds. But he quickly changed his tune when faced with the bankruptcy of Cyprus’ two largest banks by Tuesday, after Monday’s bank holiday.

Now the bank holiday has been extended to Thursday, which really means indefinitely, because the bailout plan wasn’t passed by Cyprus’ parliament.

If we wrote to you about deposit confiscation, bank holidays, bank runs, and all the rest of it a few years ago, would you have laughed it off? Would it have seemed absurd?

Well, suddenly stuffing cash under your mattress seems a whole lot less eccentric. Suddenly, owning physical gold outside the banking system looks smart.

Nickolai Hubble.
The Daily Reckoning Weekend Edition

Join me on Google+

From the Port Phillip Publishing Library

Special Report: Australia’s Energy Stock BLOWOUT

Daily Reckoning: Cyprus: An Old Fashioned Crisis in Europe

Money Morning: Your Retirement or Your Mortgage?

Pursuit of Happiness: Where Cyprus Got the Idea for its Savings Raid

By MoneyMorning.com.au

If you’re not familiar with the story on how you could have your mortgage cancelled, why not take a quick peek at the one-minute long movie trailer? You can find it here.

Our recent articles about this opportunity have really thrown the cat amongst the pigeons. People affected by the crisis have sent in their thanks, feedback, criticism and remarkable stories.

One couple that emailed were a victim of the kind of manipulation the video exposes not once, but twice. Both when they got their initial loan and when they refinanced. They only found out because the banks sent them the proof by mistake.

But we’re just getting started. Soon, anyone in Australia will be able to find out if they can get their mortgage cancelled too.

The thing is, we’re not the only ones exposing this mess. Denise Brailey has worked hard in the name of individual wronged borrowers, as well as spearheading the effort to wake up Australians generally.

In her latest email to me she laid out her plans. Her evidence is explosive and cannot be ignored any longer. If you’re interested in the story, why not become a member of her dedicated consumer support association here.

Now, the real question is what will be done about the scandal as it goes mainstream. Will the regulators allow hundreds more borrowers to cancel or reduce their loans? Where would that leave the banks? One subscriber wanted to know what would happen to our housing market:

‘Hi,

‘My question is whether this is going to force financial institutions to become honest and cease giving out “easy money” and is this going to impact on getting our housing market more honest? Do you see this as a beginning of the end of our “Fannie Mae” housing market and its leveraged pricing bubble?

‘Regards,
Sarah’

You never know what effects something will have in the financial world. It’s driven by people’s perceptions, and those are very unpredictable. The same piece of news can have drastically different effects on different days.

You might recall American big-wigs like Ben Bernanke assuring the world that sub-prime debt was just a small problem. The rest is history.

Well, we don’t even know how big this problem is yet. That’s part of the fuss Denise Brailey is making. This could be an enormous issue, but nobody knows and nobody in government seems to want to find out.

There’s certainly a chance it will cause a real upset for Australia’s banks and housing market. That’s a big problem because housing and financial shares are two of Australian retirees‘ biggest financial assets.

Speaking of which, Murray has just positioned his subscribers at Slipstream Trader to profit from a struggling Australian financial sector. You can find out more here.

But in the end, cancelling your mortgage is the best way you can go about protecting yourself from any financial debacle in Australia. It’s part of ‘definancialising’ your life. That’s a trend we hope to build on in The Money for Life Letter.

The recommendation in our next monthly issue will have more in common with bears than shares…and it could be just as profitable, and far more enjoyable.

Nickolai Hubble.
The Daily Reckoning Weekend Edition

Join me on Google+

From the Port Phillip Publishing Library

Special Report: Australia’s Energy Stock BLOWOUT

Daily Reckoning: Cyprus: An Old Fashioned Crisis in Europe

Money Morning: Your Retirement or Your Mortgage?

Pursuit of Happiness: Where Cyprus Got the Idea for its Savings Raid

By MoneyMorning.com.au

Even by the standards of the EU bureaucracy, raiding the private deposits of Cyprus’ banks is spectacularly foolish.

For a measly €5.8 billion, the EU has now put the entire Eurozone on edge – not to mention the entire global economy.

It revolves around something as simple as trust. And as a former banker, I can tell you that there’s no substitute for the belief that your deposits are safe and sound.

It’s a thin line, and once it’s been crossed it’s nearly impossible to repair.

Now savers in Spain, Italy and elsewhere in the Eurozone are left to wonder about the safety of their own accounts.

Here’s why savers everywhere should be concerned…

The Problem with the Cyprus ‘Bailout’

Like Ireland and Iceland, Cyprus has a banking sector that’s not only shaky but is far bigger than its overall economy, with deposits of around $90 billion, or five times its GDP.

Unlike most banking systems, more than half of those deposits are in large chunks of over €100,000, the limit of Cyprus’ deposit insurance. Indeed, about $20 billion of Cyprus’ deposits are held by the Russian mafia.

Since Cyprus’ president Nicos Anastasiades didn’t want to shut down the island’s attraction as a money haven and playground for the Russian jet-set, he agreed to a deposit tax of 6.7% on deposits up to €100,000 and 9.9% on deposits above €100,000, to satisfy the EU’s demand of 5.8 billion euros part of the bank bailout.

But like most schemes designed by politicians and EU bureaucrats, this one has huge flaws, including the fact it angered Russian president Vladimir Putin. Even at this level, with much of the money coming from Cyprus’ modestly well-off citizens , Putin described it as ‘unfair, unprofessional and dangerous.’

But the main flaw isn’t about Putin. It has to do with the idea of deposit insurance itself.

Under a separate scheme introduced by the EU after the 2008 financial crash, deposits under €100,000 are insured by the Cyprus government.

Of course, the ‘tax’ on deposits is a supposedly clever way to get around this without the Cyprus government itself defaulting. However, all this little trick does is call into question deposit insurance throughout the EU and, indeed, worldwide.

That’s why this tiny country, with a population of only 800,000 and $17 billion in GDP, has roiled the world markets – it attacked the central principle of deposit insurance.

After all, if governments can just seize deposits by means of a ‘tax’ then deposit insurance is worth absolutely zippo.

Meanwhile in Cyprus, there were a number of alternatives to breaking this underlying bond of trust. The banks have some bond debts outstanding, which certainly should have been written down before the deposits were attacked. In fact, the tax is an attempt to avoid this, and should be resisted on that ground alone.

Instead, because the large deposits are so big, you could raise the required €5.8 million simply by a 15% tax on large deposits – but that would make Putin REALLY angry (he personally may or may not have money in Cyprus, but lots of his friends do).

They could also write down Cypriot government bonds, but because the banking system is relatively so huge the write-off would have to be a big one. To get €5.8 billion it would take more than a 50% write-down.

In the big picture, Cyprus doesn’t matter much, unless EU incompetence and the recalcitrance of its own politicians makes it leave the euro altogether, in which case that currency unit yet again faces the prospect of break-up.

Who Can You Trust?

But in this case, the effect on global deposit insurance systems is much more important.

Deposit insurance was first invented in the United States during the Great Depression as a means to reassure savers about the solvency of banks, a third of which had just gone belly-up. It worked beautifully.

Americans trusted the federal government (at least, they did back then), so once deposit insurance was in place savers came to have complete trust in the banking system.

Unfortunately, that same trust had a very bad effect on the banking system itself.

From leverage ratios of $4-5 of assets to $1 of capital in the 1920s, banks leveraged themselves ad infinitum, having leverage ratios of $10-12 of debt to $1 of capital in the 1970s, and up to $30 of assets to $1 of capital in 2008.

Even today, after de-leveraging, J.P. Morgan Chase, in many ways the most solid of the big banks, had assets of $2,359 billion at the end of 2012 and tangible equity of only $146 billion – or a ratio of 16.2 to 1. As recently as 2010, JPM’s leverage was 19.3 to 1.

At those levels you can see the dangers that kind of leverage presents.

In fact, I counselled the National Bank of Croatia to this effect, when they were designing their deposit insurance system in 1996-97, advising them to have insurance covering only 90% of deposits. Unfortunately the politicians in the Croatian parliament overruled us, so Croatia now has the same damaging 100% insurance as everywhere else.

So the depositor today ends up with the worst of both worlds. He can’t rely on the banks not to go bust, given their current absurd levels of leverage (which are of course encouraged by Ben Bernanke’s money printing). On the other hand, now there’s a question of whether he can rely on deposit insurance either.

If these worries become really serious, it will be devastating for the world economy. Small savers will take their money out of banks and resort to household safes and a shotgun.

If savers no longer have a solid place in which to put their money, we will have undone the financial revolution of the last 300 years, and returned to a world in which Samuel Pepys didn’t trust the local goldsmith, so buried most of his wealth in the back garden. Needless to say, that won’t do much for small business – the entire flow of finance will seize up altogether.

The solution is to do away with deposit insurance, forcing banks that want to attract depositors to hold $1 of capital for every $4-5 of assets, at most.

Eliminating Ben Bernanke and going back to a gold standard will probably be necessary too – even though that’s not likely to happen anytime soon.

But if politicians continue behaving as badly as those who designed the Cyprus bailout, the gold standard will be the only economically viable alternative.

With this ‘bailout’ all the EU has done is open up a Pandora’s Box.

Martin Hutchinson
Contributing Editor, Money Morning

Join Money Morning on Google+

From the Archives…

Can This Indicator Predict The Dow Jones Next Move?
16-03-2013 – Kris Sayce

Seven Situations to Watch in the Pacific Currency War
15-03-2013 – Dan Denning

Stock Market Warning: Next Week Could be a Blood Bath
14-03-2013 – Murray Dawes

REVEALED: One Opportunity to Escape Your Mortgage
13-03-2013 – Nick Hubble

UK Property: How You Can Buy a House For Less Than 250 Grand
12-03-2013 – Dr. Alex Cowie

By MoneyMorning.com.au

In 2012, Turkey was the best performer among the emerging markets we track on our Periodic Table showing a decade of returns. All developing countries rose last year, but stocks in Turkey climbed an astounding 56 percent.

While visiting the country, I was happy to see my explicit knowledge of Turkey’s market growth was supported by my tacit knowledge.

Istanbul has been in the midst of a fantastic transformation from an impoverished population to one of affluence. Popping up among the beautiful Ottoman mosques, Byzantine churches, palaces and bazaars are ultra-contemporary art sculptures, shopping malls and lush landscaping.

This blend of ancient with modern fits well with the young, vibrant and culturally diverse crowd that hangs out in the local cafes, shops and galleries.

A New Era In Turkey

Investment managers like me aren’t the only ones showing increased interest in Turkey’s new-found prosperity. US Secretary of State John Kerry visited Turkey during his first overseas trip as America’s top diplomat.

German Chancellor Angela Merkel, the powerhouse figure of the European Union, was also in Ankara recently to meet with President Abdullah Gul and Prime Minister Recep Tayyip Erdogan. The topic of their discussion is not new, but suggests a ‘new chapter’ for Turkey’s market. These leaders are picking up the conversation started years ago regarding Turkey entering the European Union (EU).

Tim Steinle, portfolio manager of the Eastern European Fund, says that unlike Greece, which fudged its numbers to join the EU, Turkey was held to a higher standard.

But it doggedly pursued its aspiration, and in the process of implementing the European Union accession chapters, such as the Right of Establishment & Freedom to Provide Services, Company Law, Financial Services, Information Society & Media, Statistics, Financial Control, and Science & Research, had modernized its economy, making it competitive with those of Western Europe.

In addition, open trade with the EU allowed it to build a diversified export economy.

Turkey’s admittance to the EU had stalled over Cyprus, but more recently, France and Germany seem to be warming to the idea. Under newly elected President Francois Hollande, France is opening another chapter to the accession, and Angela Merkel’s visit to Turkey is signalling a shift in Berlin’s position on Turkey’s membership.

This wasn’t the only time Turkey reformed its policies. In 2001, the country experienced its own devastating financial crisis, and as a result of that experience (with which the rest of the world can now sympathize), the government adopted tough, but important financial and fiscal reforms.

These reforms helped the country rebound, and its strong banking regulations kept banks well capitalized compared to the US and Europe.

Turkey on the Rise

In the charts below, you can see the result of the government’s determination. From 2010 through 2012, Turkey’s GDP exceeded that of Europe, the Middle East and Africa (EMEA), as well as the rest of the world.

Through 2015, GDP is also expected to be greater than EMEA’s GDP as well as overall world GDP. Simply stated, Turkey ‘remains superior in the region,’ says Wood & Co.

Turkey’s manufacturing sector, in areas such as the automotive industry, white goods that include refrigerators and washing machines, and glass makers, has also been growing in strength.

For nearly two years, Turkey’s purchasing managers’ index (PMI) has been significantly stronger than Europe’s and ‘outstrips global averages,’ says Wood & Co.

Although the PMIs around the world fell rapidly in mid-2011, Turkey’s manufacturing hasn’t fallen below the expansion number of 50 as often, and as significantly, as Europe. According to Wood, Turkey’s PMI also recovered, ‘signalling growth ahead’.

Turkey’s manufacturing PMI number of 53.5 in February was slightly lower than its January figure of 54.0, but manufacturing remains solid and in expansion territory. Businesses are reporting an increase in new orders, new products and new clients and ‘new business from abroad increased at the fastest pace since January 2012,’ says HSBC.

With the country exhibiting positive demographics, strong consumer demand and an open, competitive economy, Turkey is at a figurative, as well as literal, crossroad between Europe and Asia.

The European Energy commissioner Günther Oettinger annoyed Germany when he suggested that the EU needed Turkey more than Turkey needed the EU. ‘I would like to bet that one day in the next decade a German chancellor and his or her counterpart in Paris will have to crawl to Ankara on their knees to beg the Turks, ‘Friends, come to us.”

However, Spiegel Online reports Erdogan hinted that the emerging economy may consider joining the Shanghai Cooperation Organization, which includes countries such as China and Russia, instead. ‘The economic powers of the world are shifting from west to east, and Turkey is one of these growth economies,’ remarked the prime minister.

My visit to Istanbul was thrilling, and I’m equally excited about the continued investment prospects for Turkey as it gains in economic strength.

Frank Holmes
Contributing Writer, Money Morning

Join Money Morning on Google+

From the Archives…

Can This Indicator Predict The Dow Jones Next Move?
16-03-2013 – Kris Sayce

Seven Situations to Watch in the Pacific Currency War
15-03-2013 – Dan Denning

Stock Market Warning: Next Week Could be a Blood Bath
14-03-2013 – Murray Dawes

REVEALED: One Opportunity to Escape Your Mortgage
13-03-2013 – Nick Hubble

UK Property: How You Can Buy a House For Less Than 250 Grand
12-03-2013 – Dr. Alex Cowie

USDCAD breaks above the downward trend line on 4-hour chart, suggesting that the downtrend from 1.0341 had completed at 1.0180 already. Further rise to test 1.0341 previous high resistance would likely be seen, a break above this level will indicate that the longer term uptrend from 0.9815 (Jan 11 low) has resumed, then the following upward movement could bring price to 1.0500 area. Support is at 1.0230, followed by 1.0180, only break below these levels could signal completion of the uptrend from 0.9815.

Forex Signals