Month: March 2013

London Gold Market Report
from Ben Traynor
BullionVault
Wednesday 13 March 2013, 08:15 EST

U.S.DOLLAR gold prices ticked higher to $1597 per ounce Wednesday morning, holding gains from a day earlier, as the Dollar fell against the Euro despite warnings from a prominent Eurozone policymaker that the crisis in the region is not over.

Gold in Euros rose to its highest level this month at €1229 an ounce, in contrast with gold in Sterling, which failed to move back above £1070 an ounce as the Pound recovered some ground against the Dollar after hitting a fresh two-and-a-half-year low yesterday.

Silver dipped briefly below $29 an ounce this morning before rallying 20¢, while stock markets ticked lower, commodities were broadly flat and US Treasury bonds gained.

A day earlier, gold climbed above $1590 an ounce for the first time in March Tuesday after Bundesbank chief Jens Weidmann said he does not believe the Eurozone crisis is over.

A number of analysts have suggested the speed of yesterday’s move reflected so-called short covering of gold positions, whereby traders who have bet on the price of gold falling cover themselves as it rises by taking bets in the opposite direction i.e. buying gold.

“The price rise yesterday will not sustain as there was no major change in fundamentals,” reckons Jinrui Futures analyst Chen Min in China.

“We’ll see strong influence from technicals on prices as there isn’t much data on the plate this week.”

Speaking publicly again Wednesday, Weidmann told an audience in Cologne that European governments are “not giving clear direction” and reiterated yesterday’s comments that an end to crisis “is not in sight”.

Weidmann also said it does not make sense “to speculate about individual countries leaving the Euro area”, having been asked about a comment from a German politician last week who suggested Italy may exit the single currency.

“In fact, Italy’s already out of the Euro,” Italian comedian-turned-politician Beppe Grillo, whose Five Star movement won the biggest share of the vote in last month’s Italian election, says in an interview published by German newspaper Handelsbaltt Wednesday.

Northern European countries, he adds, will keep Italy in the Euro “until they are able to get back the funds their banks invested in Italian government bonds. Then they will drop us like a hot potato.”

China can only invest around 1% to 2% of its foreign currency in gold as the market is too small to invest any more, the deputy governor of the central bank and head of the State Administration of Foreign Exchange (SAFE), Yi Gang, told reporters Wednesday. Yi added however that gold is always an option for China.

In January, SAFE created a new unit, the SAFE Co-Financing office, tasked with exploring new investments through which to diversify China’s $3.3 trillion of foreign exchange reserves.

Two percent of this would equate to just under 1300 tonnes of gold at today’s price, more than the 1054.1 tonnes the World Gold Council reports in its latest World Official Gold Holdings. China however does not regularly report when it adds to its official reserve, and has not reported how much gold it holds since 2009.

China’s Renminbi currency, along with Australian assets and gold, “emerge as the most important assets for diversification” for central bank reserves, according to a report published this morning by the World Gold Council.

Using portfolio optimization analysis the authors of the report, ‘Central bank diversification strategies: rebalancing from the Dollar and the Euro’, found that “gold received a prominent 8% allocation, surpassing the 4% allocation to Renminbi and 3% to Australian assets.

“Gold’s allocation,” the report adds, “was matched only by Japanese Yen which was also weighted at 8% of the optimized portfolio.”

The latest World Official Gold Holdings shows that the top three nations by size of official gold reserves, the US, Germany and Italy, have 75.6%, 72.7% and 72.2% of their reserves as gold respectively.

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 Robby Brookings

The viability of bitcoin is the question on many interested people in the world of finance, politics and technology. Bitcoin exists at an interesting crossroads where the three worlds collide.

If bitcoin were to sustain any amount of viability into even the near future it could be a game changer for the global currency markets and the financial world as a whole. Since bitcoin has a fixed volume that is estimated to be fully in public circulation by the year 2040 it could not be easily manipulated. The price of goods could fluctuate but the supply of bitcoins would not fluctuate.

A good analogy is the US federal government’s ability to run deficits that contribute to their debt and then monetize that debt with money created out of thin air. This practice destroys the value of the currency and it is done on an ad hoc basis. There is no long term plan on when to stop the monetizing of the debt, only loose targets for employment and inflation. So that is the situation where the US dollar finds itself. Bitcoin however is more akin to how individual states inside of the United States are forced to balance their budgets or borrow money by issuing bonds. The bonds need to be paid back on time or it may hurt their ability to receive reasonably priced loans in the future.

If bitcoin where to play a major role in the world, governments and private citizens alike would have to operate within the money supply that is provided. Governments would not have the ability to pay down debt with devalued currency. The value of the currency would be driven solely by the market. Once the entire bitcoin money supply was in circulation there is a decent likelihood that bitcoin could achieve a level of stability. Bitcoin would force any entity whether it be governments or private citizens to think twice before going into debt to live outside of their means. The reason being that currently as the world reserve currency is on a perpetual slope of decreasing value as a result of inflationary policy at the Federal Reserve and US Treasury. When the currency had the ability to go either towards inflation or deflation any borrower runs the risk of being forced to pay back their loan with more expensive money.

The key is that direct manipulation as it exists now would be impossible. The currency markets would be driven solely by wider market forces and not just the latest news out of the Federal Reserve, European Central Bank, Bank of Japan and the Bank of England.

About the Author

If you are interested in the latest bitcoin updates you can go to http://miningforbitcoins.com.

By www.CentralBankNews.info

By WallStreetDaily.com

Holy smokes, Batman. Meredith Whitney is at it again!

You’ll recall, she’s the banking analyst who infamously predicted in an interview with “60 Minutes” that “hundreds of billions” of dollars in municipal bond losses would occur in 2011.

She was way off the mark, though. Only about $3 billion in losses was actually reported. So we gave her the honor of making The Worst Prediction of 2011.

Well, fast forward to today, and she’s dusting off her crystal ball again – on Bloomberg Television, no less. This time around, she’s predicting that “Bank of America (BAC) is the stock to own this year.”

Is this just another attention-grabbing media stunt? Or a bona fide prediction that we should consider acting on? My answer might surprise you…

The Only Smart Way to Invest

First things first, I need to confess that my crystal ball doesn’t always work, either. So I can’t be too tough on Whitney.

Take, for instance, my call back in August 2011 that Bank of America was a screaming “Buy” on the heels of Warren Buffett’s investment.

By the end of the year, shares dropped almost another 30% in value.

Of course, I did double down on my erroneous call, saying that Bank of America would “rally mightily in 2012.” And it did. In fact, it ended up being the top-performing stock in the Dow Jones Industrial Average last year, rising 109.5%.

I bring this up not to brag. Instead, I want to put Whitney’s call into perspective.

It’s more about momentum than boldness. And based on the results of our own personal “stress test” on Bank of America, I’ll concur with her that the momentum will most likely continue. But I don’t agree with her on how to profit from it. (More details on that in a moment.)

First, let’s cover the six reasons why I expect the bullish trend to continue for Bank of America in 2013…

~Reason #1: First in, First Out

The banks got us into the financial crisis. So it stands to reason that they need to lead us out, too. That recovery is undeniably underway. But given the severity of the downturn, we still have a long way to go.

Just look at Bank of America’s results. In the six years leading up to the recession, it averaged about $14.5 billion in net income. Over the last 12 months, though, the company’s net income checked in at roughly $5.5 billion. By that metric alone, profits need to more than double before we’re back to pre-recession averages. And since share prices ultimately follow earnings, it’s not a stretch to expect that shares could double again, too.

~Reason #2: Top of the Tier

Bank of America has engaged in an aggressive effort to shore up its finances by restructuring, cutting costs and selling off assets. In fact, the company remains on track to shed $8 billion in annual costs by mid-2015.

The end result? Its Tier 1 Capital Ratio, which is the industry standard measurement of financial stability, currently ranks at the top of the list for the nation’s largest banks, at 9.25%. So if we’re betting on a banking recovery, it makes sense to bet on the bank that’s the strongest financially, right?

~Reason #3: A Building Recovery

We can all agree that the residential housing market is recovering. It’s still in the early stages, though. So as consumers refinance and take out new mortgages, banks stand to book even more profits. In other words, the housing market is finally switching from being a hindrance to a help in terms of banks’ profitability.

~Reason #4: Still on Sale

Even after the impressive run-up last year, Bank of America’s stock represents a good bargain. The forward price-to-earnings (P/E) ratio of 9.4 is 32.4% less than the forward P/E ratio for the average stock in the S&P 500 Index.

As Stephen Weiss of Short Hills Capital notes, the stock is “still” cheap on a price-to-book (P/B) basis, too. Shares currently trade at about a 40% discount to the industry P/B ratio.

~Reason #5: Institutional Support

When it comes to investing, I typically advise against betting with the crowd. The one exception? When the crowd is heavy-hitting institutional investors. The size of their bets provides much-needed support to share prices.

If you have any doubt, just ask Apple (AAPL). New data from Reuters suggests that the massive drop in Apple’s share price in the fourth quarter was precipitated by big hedge funds selling out of their positions.

In Bank of America’s case, however, institutional investors are mostly doing the opposite. For instance, Europe’s largest hedge fund, Lansdowne, purchased 26.5 million shares in the fourth quarter, according to regulatory filings. Both Adage Capital Management LP and Arrowstreet Capital LP purchased 14.7 million more shares. The list goes on.

It’s also important to note that these purchases came after the stock rose 55% in the first three quarters of 2012. It stands to reason that hedge funds wouldn’t be making such sizeable bets in recent months unless they expected much more upside ahead. Any additional purchases promise to provide an additional boost to share prices, too.

~Reason #6: Dividends, Please

Retail investors’ love affair with dividend-paying stocks continues to heat up. And if Bank of America increases its dividend this year, which is a strong possibility, it could lead to a massive influx of dividend investors.

The trick, of course, is being positioned ahead of any such moves.

Buying Shares isn’t Enough

To be fair, risks remain for Bank of America’s business. Like unknown settlement costs for past mortgage practices, continued deleveraging by consumers and historically low interest rates, which squeeze profit margins.

No doubt, such factors prompted some institutional investors to take their profits and run. In the last quarter, hedge fund, Perry Corp., sold out of its entire 7.5 million-share position.

Meanwhile, other investors, like Boston-based Geode Capital Management LLC, pared back their holdings by about 10%.

On the whole, though, the investment case for Bank of America remains much more bullish than bearish.

Whitney expects the stock to top $15 per share in the next six to nine months. I think that’s a conservative estimate. But let’s go with it anyway. Doing so implies that the stock carries about a 25% upside to current prices.

I’m sorry. But that’s not enough profit potential to earn a “must own” distinction from yours truly.

Bottom line: Forget simply buying Bank of America’s stock, as Whitney suggests. If you want to profit from this momentum trade, I recommend buying just “out-of-the-money” LEAPS options, instead.

Doing so involves tying up about 90% less capital. So it limits our downside and frees up capital to invest in other compelling opportunities.

At the same time, it also increases our profit potential by putting the power of leverage to work in our favor.

Less risk and more potential profits? Who doesn’t want that?

Ahead of the tape,

Louis Basenese

Article By WallStreetDaily.com

Is Bank of America (BAC) Truly “A Must Own Stock” for 2013?

By MoneyMorning.com.au

Let us tell you about three banking and retirement scams the Australian government is getting ready to inflict on you. Two are already in operation and a third is in the works.

Australian savers, investors and retirees are about to be slapped about by our country’s two biggest institutions. The banks and the Australian government are both going to take a swipe at your savings. And there’s even more swiping to come. Below, you’ll find out exactly how this is going to happen, and what you can do about it.

Scam Number 1 – The Bank Account Scam

You expect the government to steal some of your income in income taxes. And you know it takes 10% of your money when you spend it too. When you invest and when your business makes money, the government takes another cut. Heck, even if you leave your money in a savings account, the government will tax the interest.

But you don’t expect the government to simply take all the money out of your bank account just because you haven’t used it recently. Believe it or not, that’s exactly what’s about to happen.

From May 31st, any bank account which has been inactive for three years can be raided by the government. The legislation making this possible was rushed through the parliament and includes all accounts with more than $1 in them. You can keep the change. The raid could take up to $109 million of Australians’ money.

Here’s what one subscriber sent to our feedback inbox:

‘Got a letter from St George today about a bank acc…that has not been operated on for just under 3 years. Will transfer to the gov coffers if I do not operate on it before the three years are up. Gov obviously desperate for money. Imagine the hassles, time wasted, and public teat time and cost in getting your money back.’

It’s time to go digging through your old paperwork for any old accounts you might have forgotten about. If you find any, it’s time to withdraw or deposit a dollar to keep the account active. Also, let your family and friends know.

If you’re sceptical you could be hit, keep in mind that $109 million is going to come from somewhere. Chances are, the big losers of this will be Australians living overseas who kept an account open here. They’ll return to find it empty.

Scam Number 2 – The Retirement Scam

The government isn’t just raiding ordinary bank accounts. It’s also raiding retirement accounts.

Forcing someone to deposit 9% of their income into an account the government later gets to raid is audacious even for politicians. But that didn’t stop them from scheduling their first raid for the 31st of May. Yes, that’s the same day as the bank account raid.

For now, only inactive bank accounts with less than $2000 can be raided. That’s still an impressive $760 million at stake.

Scam Number 3 – Retirement Scam Stage 2

The political genius of the retirement system is that it creates a huge pool of money for politicians to play with. They can force you to invest certain amounts in certain ways and siphon off funds as needed. That sounds harsh, but once again, it’s all real.

The latest plan is to increase Super contributions from 12 to 15 percent, and then allocate that money to something other than your retirement pot!

The Australian newspaper reported that, ‘Mr Keating…said the additional money raised by increasing [the] compulsory guarantee from 12 to 15 per cent should be paid into a government “longevity insurance fund” which would be used to help fund the retirements of people over 80.’

If you don’t live past 80, tough. Someone else gets your money.

Not only that, an accounting body recently issued ‘… a warning that the system could collapse if retirees are given too much freedom in how much money they spend’. Yes, the government took your money for safe keeping and now you don’t even get to choose how you spend it.

Here’s what the accountants are worried about: People are so indebted, even by the time they retire, that retirees will take lump sum payouts and use the cash to pay off their debts. That will leave them with no income from their investments, putting a bigger burden on the pension.

If you want to join Kris Sayce’s protest about all this, you can sign his petition here. But you can also fight back in other ways…

You Have One Big Advantage

It’s frustrating that there isn’t more outrage over these thefts. You should do what you can to protect yourself and your friends and family. But in the end, there’s a different front you can fight on, with much greater consequences. That’s what we want to tell you about later in the week.

You see, the government can only make incremental changes to banking and retirement laws without causing public outrage. But you can pick a fight on the things that really matter. And few financial decisions matter more than your mortgage…

Nickolai Hubble.
The Daily Reckoning Weekend Edition

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From the Port Phillip Publishing Library

Special Report: Australia’s Energy Stock BLOWOUT

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By MoneyMorning.com.au

The Aussie banks and the Australian government have made a crucial mistake. One that could turn out to be very profitable for you. It’s a huge opportunity for Aussie battlers to get their own back by enforcing their rights against two of the biggest bullies in their financial lives.

This opportunity could see you burn your mortgage decades before you hoped to, without having to sell your house. Yes, that’s hundreds of thousands of dollars in debt…gone.

We’ve just finished recording a controversial video presentation that reveals exactly what you need to do to find out if you can take the banks to the cleaners. You can watch it later this week.

Why should you find the time to see us explain all this to you on camera?

Simply: this story is HUGE…

Could You Cancel Your Mortgage?

You see, in their rush to churn out mortgages as fast as possible in order to earn commissions, some lenders made a big mistake. They altered people’s financial details on seemingly unimportant loan paperwork to get them past lending standards.

In our brand new video presentation, released later this week, you’ll be able to see for yourself exactly what’s been going on. But for now you should know that the initial victims of this fraud have unwittingly exposed an opportunity for wronged Aussie borrowers to cancel or reduce their loans. And yes, they get to keep their house.

If it seems like this couldn’t apply to you, you should definitely watch the video to find out just how widespread this problem is. It’s the biggest source of feedback we’ve been getting lately, all from readers who were willing to find out if the opportunity applied to them.

The government and financial world’s arcane rules and manipulations are enough to make your head spin. But they also create opportunities. No opportunity is as big as the one presented by Australia’s mortgage fraud scandal.

Keep an eye out later this week for the step by step guide you need to find out if you can cancel your mortgage too.

(In the meantime don’t forget to check out the latest analysis from our trading expert Murray Dawes. In this report he reveals what he calls the ‘Market Matrix’ and the impact it could have on your investments. Check it out here…)

Of course, we’re well aware that big financial scandals are losing their power to shock. So maybe the thought that bankers and brokers are fiddling mortgage application paperwork is no big surprise to you.

And maybe it’s no surprise to learn that this is just one way those in a position of power are looking to manipulate, embezzle and acquire the fruits of your hard work and saving.

Let us tell you about three more thefts the government and banks are getting ready to inflict on you. Two are already in operation and a third is in the works.

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: Hugo Chavez, RIP

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Pursuit of Happiness: Can You ‘Pygmalion’ Your Finances?

By MoneyMorning.com.au

Every year since 2007, bank and brokerage analysts have as a group predicted that the gold price would fall, sometimes dramatically, over the next four-year period. That’s not merely bad advice; that’s flawlessly bad advice.

Bank and brokerage analysts certainly know their sectors. But when it comes to helping you make an informed decision about where the gold market is headed, they have ‘a record unblemished by success,’ as resource stock expert, Rick Rule, is fond of saying.

Every year, major banks and brokerage houses provide their four-year forecasts for the gold price. The following chart documents the average price projection of 25 top analysts over the past seven years, many of whom specialize in the resource industry. I might suggest pushing away from your desk so that when your jaw drops it doesn’t hit the keyboard.

In 2007 the consensus of all estimates was that gold would decline from US$656 to US$523 by 2011. Instead, the gold price rose 140% to an average of US$1,572 that year. The consensus has issued similarly errant forecasts every year since then. So far, they’ve been wrong every time.

Some Big Implications on Gold

For the most part, these are analysts who do nothing but study the resource markets all day long. It’s their job. No one gets it right all the time, but this kind of track record is embarrassing.

The obvious lesson for investors is to ignore price predictions from the major banks and brokerage houses – they just don’t get it. I’m sure most readers of this publication already know that.

However, there’s a much bigger implication of this data that may not immediately come to mind…

• Why would I as a fund manager or institutional investor buy a gold stock if my analysts tell me the price of gold is going to fall?

  Answer: I wouldn’t.

  If the price of the product a company sells is expected to decline over the next few years, would you buy the company’s stock? Its earnings are almost certain to fall. As a manager of millions (or billions) of dollars, you wouldn’t buy any investment with this kind of outlook.

  There’s more. These same banks and brokerages have also been predicting the price of oil would rise (almost) every year. While they’ve occasionally been right about that, it means that margins for the gold producers would be expected to fall, since roughly 10% of their costs are related to fuel. So again…

• Why would I as a fund manager or institutional investor buy a gold stock if my analysts tell me profit margins are expected to fall?

  Answer: I wouldn’t.

  It doesn’t matter that analysts have been consistently wrong. What matters is that if the institutional world believes the gold price is likely to decline and/or that margins are likely to fall, they’re not going to stick their necks out and buy gold stocks. They could lose their bonuses or even their jobs if their analyst’s predictions came true and they’d bet against them.

  This could be the explanation for why hedge funds, institutional investors, and other large investors haven’t entered this market en masse, and could also account for the disconnect between the price of gold and the trajectory of gold stocks.

  But once the facts sink in and the institutional world becomes convinced gold and silver prices will maintain a sustainable uptrend, they’ll be much more attracted to the equities – and just as stubborn about changing their minds once they’re on board.

  Now, it’s possible this group may have to be beat over the head by relentlessly rising precious-metals prices before they enter the sector. They’ll have to believe that, say, gold hitting US$1,900 again isn’t a temporary fluke but a sustainable uptrend.

  I don’t know what price the metal would have to maintain or how long it would have to stay there before they’d jump on board. Given the above chart, I think it’s safe to say they won’t be the first to the party.

Position for When the Gold Herd Comes

Whenever and however it happens, though, the stampede from institutional investors into this tiny industry will be sudden and dramatic, because they tend to have a herd mentality. No one wants to be left behind. Just like they don’t want to risk buying something all their colleagues are ignoring now, they’ll rush to own the popular and exciting investment when gold stocks have their day.

The consequence of this group-think will result in dramatically higher stock prices. How high? Well, ‘fair value’ for Newmont Mining (NEM), based on its reserves, would be about US$200/share (it’s currently trading around US$40). And that’s at US$1,700 gold – as the spot price rises, the value of NEM will rise exponentially, since the gold price would be rising faster than costs.

That is why I’m excited about the producers. It’s the first place the institutional world will turn when gold makes a sustained move higher.

Come the day those investors believe gold is about to become part of the monetary system, that bonds are no longer a safe place for money, that inflation is about to get out of control, or whatever it might be that changes their paradigm, they’ll flood into our little market and push share prices higher by an order of magnitude.

Jeff Clark
Contributing Editor, Money Morning

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From the Archives…

Why the Stock Market Boom is on Pause
8-03-2013 – Kris Sayce

Why the Dow Jones Record High Doesn’t Matter
7-03-2013 – Murray Dawes

Taking China’s Economic Pulse from Hong Kong
6-03-2013 – Dr Alex Cowie

Buy Gold When They’re Crying…Sell Gold When They’re Yelling
5-03-2013 – Dr Alex Cowie

Do You Want to Be Right About Investing, or Do You Want to Make Money?
4-03-2013 – Kris Sayce

By MoneyMorning.com.au

Even as the US market hits a new all-time high, all the little niggling worries that kept investors on their toes last year are starting to rear their ugly heads again.

Italy’s election results have resurrected the threat of a messy eurozone crisis. The inability of US politicians to agree on the nation’s finances are raising fears of another argument over the debt ceiling later this year.

And now China’s economy is back in the spotlight. It seems a ‘hard landing’ isn’t as out-of-the-question as everyone had hoped.

Can markets keep climbing the ‘wall of worry’? Or will gravity reassert itself?

China’s Big Problem

China has quite a serious dilemma.

At the moment, the country’s growth is overly dependent on building stuff (that’s the technical term). Indeed, no country in history has ever been this dependent on building infrastructure, without suffering some sort of horrible crash.

So China wants to get more of its growth from its citizens trading goods and services with one another. Consumption, in other words.

This is what everyone means when they talk about China’s economy ‘rebalancing’. Trouble is, it’s easier said than done.

That’s because China also has to try to keep the population happy while it manages this rebalancing act. And that’s not straightforward.

According to Bloomberg, China’s Gini coefficient, which measure the gap between the rich and the poor, came in at 0.474 last year. That’s ‘higher than the 0.4 level that analysts say signals the potential for social unrest.’

Meanwhile, inflation rose more rapidly than expected last month, driven mainly by food prices. In a nation where many people still spend a large chunk of their income on food, that’s another potential trigger for social problems.

So at the same time as China is trying to encourage consumption, it’s having to crack down on many of its key drivers. For example, in the first two months of this year, retail sales growth slowed sharply. This is down to the government’s ‘anti-extravagance drive’, notes China Weekly.

China is trying to have a visible crackdown on corruption. One way to do that is to stamp on high-rolling party officials. As a result, ‘luxury’ businesses are feeling the pain. ‘Upscale restaurants in cities such as Beijing, Shanghai and Ningbo saw revenues fall by 35%, 20% and 30% respectively, year on year in January,’ reports the site.

With inflation higher than is comfortable, meanwhile, the government has to be more cautious about monetary policy. It can’t just pump more money into the economy for fear of driving prices higher.

A third front in the battle against inequality is the property market. Chinese house prices are rebounding from last year’s slowdown. But that’s the last thing the government wants. Property bubbles merely widen the gap between the haves and the have-nots. And they’re very destructive when they eventually blow up.

So many of the traditional drivers of consumption (in the West, at least) – property booms, conspicuous consumption, loose monetary policy – are not easily available to China’s leadership.

As a result, as Louis Kujis of Royal Bank of Scotland tells Bloomberg, growth so far this year is still showing ‘an old-fashioned pattern, relying especially on exports and investment, with consumption lagging.’

The Impact of a Chinese Slowdown

But why should you care what happens in China?

For a start, China is the world’s second-biggest economy. Trouble there can’t fail to have an impact on the rest of us. Around half of global GDP growth is expected to come from China’s economy this year. If that doesn’t happen, then sales growth from companies around the world, all trying to expand in emerging markets, will disappoint.

Any such disappointment may be felt most keenly in the US market. Why? Because it’s one of the most expensive. The US economy is already showing more than a few signs of life. Friday’s employment data soared past expectations. But the stock market is priced for it.

As the Wall Street Journal points out, the S&P 500′s price/earnings multiple is nearly 18, based on earnings over the last 12 months. ‘That multiple would rise into the low-20s if [profit] margins reverted to past form.’ So it’s vulnerable to nasty surprises.

There will also of course, be a big impact on commodities markets. In short, the ‘supercycle’ is still over. Beyond ‘dash for trash’ rallies, we wouldn’t make any big bets on the mining sector coming back.

A potentially bigger worry is if fears over the economy make China more belligerent. It’s very tempting to appeal to nationalism by ramping up rhetoric against foreigners when your domestic economy is ailing.

The most obvious flashpoint is Japan and China’s dispute over the uninhabited Senkaku/Diaoyu islands. Hopefully the two countries will work out a way to sort out their differences peaceably, but it’s worth monitoring.

There is, however, at least one very interesting, more positive, opportunity in China – pollution. Problems with toxic smog and other forms of pollution are becoming one of the single biggest causes of social unrest.

That means we can expect the government to prioritise dealing with it. And that’s good news from the companies providing the equipment needed to help China tackle pollution.

John Stepek
Contributing Editor, Money Morning

Publisher’s Note: This article originally appeared in Money Week

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From the Port Phillip Publishing Library

Special Report: Australia’s Energy Stock BLOWOUT

Daily Reckoning: Hugo Chavez, RIP

Money Morning: A Small-Cap Speculator’s Delight

Pursuit of Happiness: Can You ‘Pygmalion’ Your Finances?

USDCHF’s fall from 0.9552 extends to as low as 0.9436. However, the fall is likely consolidation of the uptrend from 0.9021. Key support is located at the upward trend line on 4-hour chart, as long as the trend line support holds, the uptrend could be expected to resume, and another rise to 0.9600 area is still possible after consolidation. On the downside, a clear break below the trend line support will indicate that the uptrend from 0.9021 had completed at 0.9552 already, then the following downward movement could bring price back to 0.9200 zone.

Forex Signals

By Louis Basenese, Chief Investment Strategist, wallstreetdaily.com

Almost two years ago to the day, I boldly proclaimed: “The exploding use of mobile devices promises to be the fastest-growing – and possibly biggest – technological trend ever.”

Since that time, reality has lived up to all my hype. (Phew!)

Even better, WSD Insider subscribers have parlayed the historic growth into multiple double- and triple-digit profit opportunities. And they continue to do so with companies like InterDigital (IDCC).

The best part? The “Mobile Revolution,” as I like to call it, isn’t even close to petering out.

To the contrary, the growth is actually accelerating.

Of course, I don’t expect you to take my word for it. So I’m sharing five irrefutable statistics to prove it…

Five Undeniable Signs of a Hypergrowth Market

Longtime subscribers know that I like to anchor my investments to the market’s fastest, most sustainable growth trends. Ones that promise to continue, no matter what happens in the world or economy.

I mean, why wouldn’t we want to stack the odds so heavily in our favor?

Well, there’s no better example of such a “forever growth trend” than the mobile industry. And here are the five statistics to prove it, courtesy of Cisco’s (CSCO) latest market research:

~ Mobile Stat #1: A Market of 10 Billion (or More)

By 2017, mobile device subscriptions are expected to top 10 billion. That works out to 1.4 devices for every person expected to be on Earth at that time (7.6 billion). Previous estimates by Morgan Stanley (MS) had us hitting the 10-billion mark in 2020. So we’re now three years ahead of schedule. I’d say that growth is accelerating, wouldn’t you?

~ Mobile Stat #2: Data Overload (Part 1)

IBM (IBM) points out a fascinating fact that 90% of the digital data in the world has been created in just the last two years. However, we’re still nowhere close to slowing down. Mobile data traffic alone ballooned 70% in 2012. And Cisco expects it to increase another 13-fold by 2017.

~ Mobile Stat #3: Data Overload (Part 2)

Smartphones (those electronic leashes we all carry with us approximately 97% of the time – even to the bathroom) only make up about 18% of all handsets. Yet they account for roughly 92% of global handset traffic. Put another way, the average smartphone generated 50 times more mobile data traffic (342 MB per month) than the typical basic cellphone (6.8 MB per month). And that shocking discrepancy is only about to get bigger. By 2017, the average smartphone is expected to generate 2.7 GB of traffic per month, which works out to an eight-fold increase over the current average.

~ Mobile Stat #4: An Insatiable Need for Speed

Forget just processing more and more data. Consumers want to do it faster and faster, too. So it’s no surprise that the average mobile network connection speed more than doubled – to 526 kilobits per second (Kbps) – in 2012. But that still won’t cut it for the speed freaks. The end result? Mobile connection speeds are set to increase another seven-fold over the next five years, to reach almost 4 megabits per second (Mbps).

Newsflash: That’s not possible if companies don’t create new technologies to increase connection speeds. (Hint: investment opportunity ahead.)

~ Mobile Stat #5: Who Would Ever Want a Tablet? How About Everyone?!

It’s almost unfathomable that analysts originally doubted the market potential for tablets, particularly when Apple (AAPL) debuted its now iconic iPad. In reality, though, consumers are adopting tablets faster than any other consumer electronics device in history. However, we’re still nowhere near the peak of popularity or impact. Case in point: In the last year, the number of mobile-connected tablets more than doubled to 36 million. In the next five years, the amount of tablet-driven data will be 1.5 times higher than all mobile data traffic in the world today.

Against the backdrop of such runaway growth, a natural question arises: What’s the best way to profit?

Well, a single chart provides the answer.

It’s All About the Apps

We spend way more time using applications on our mobile devices than we do surfing the internet – more than six times as much per month, in fact, based on recent analysis by Business Insider.

Add it all up, and pure-play mobile application makers with patent-protected technologies represent the best way to profit from the Mobile Revolution.

Today I’m sending out an alert to WSD Insider subscribers detailing a $32-million market cap stock that could prove to be the most profitable mobile recommendation I’ve ever made. Shares could easily surge 300% to 600%, if all goes as planned.

That’s no exaggeration, either. The company is completely unknown to almost everyone on Wall Street. As a result, it’s trading for less than $0.50 per share.

In a matter of weeks, though, that situation will change. I say that because the company is getting ready to debut its game-changing application on Apple’s iTunes store. And once the word gets out, it won’t be long before shares start marching higher.

Out of fairness to paying subscribers, I can’t reveal the company’s identity. But if you want to find out when we send the alert later today, all you have to do is sign up for a risk-free trial here.

Ahead of the tape,

Louis Basenese

wallstreetdaily.com

Original: This is (Still) the Biggest Tech Trend Ever… and These Five Stats Prove It