Month: March 2013

By Aaron – insideinvestingdaily.com

Last week, I showed you why education is crushing not only young people, but also their baby boomer parents. If you haven’t already read the shocking truth behind America’s education costs, you can find my essay here.

Young Americans now carry over $1 trillion in total student loan debt. And their parents — maybe you included — are forced to borrow against their futures to help pay for their kids’ college educations.

Last week I told you about two revolutionary online resources that offer alternatives to crushing college debt: www.coursera.org and www.openculture.com. These sites allow you to take university-level coursework — for free.

This week I want to put forward another controversial idea: that an associate degree is far more valuable on a dollar-for-dollar basis than a bachelor’s degree from a university.

An associate degree is an undergraduate degree that’s usually awarded by a community college or technical college after a course of study usually lasting two years. A bachelor’s degree, on the other hand, typically takes four years to complete and is awarded by a
university.

It is amazing how poorly the distinction is understood. Most folks still believe associate degrees don’t provide a meaningful gateway to a sustainable career path. But the evidence points to the contrary.

According to new research from The Hechinger Institute, 30% of associate degree holders earn more than those workers with bachelor’s degrees.

For instance, in Tennessee the average associate degree holder makes $38,948 a year — $1,300 more than the average bachelor’s degree holder. And in Virginia, associate degree holders make $2,500 more a year, on average.

This actually makes perfect sense. Associate degrees tend to focus on real world skills, such as lab tech jobs, therapists, paralegals and machinists.

And the costs are WAY lower. A degree from a private university costs on average $172,000. According to the College Board, the average cost of a two-year associate’s degree is $6,262.

In other words, the average bachelor’s degree costs 27 times what the average associate degree costs.

These are important considerations. Grandparents are now the targets of 529 college savings plan ads. Mom and dad are tapped out. So the college savings cartels are turning to grandmom and grandpop.

My advice is to get your kids to take free college courses on coursera.org and openculture.com. When they have identified a clear interest, encourage them to consider an associate degree, if one is available.

Ignore the snobs who think a costly bachelor’s is somehow “better” than an affordable associate degree. And remember that one of the first steps to building unconventional wealth is having the guts to ignore the mainstream view.

Best regards,

Aaron

insideinvestingdaily.com

London Gold Market Report
from Ben Traynor
BullionVault
Friday 8 March 2013, 07:00 EST

U.S. DOLLAR gold bullion prices hovered near $1580 an ounce Friday morning, broadly in line with where it started the week, as stocks edged higher and the US Dollar weakened ahead of the publication of the latest US nonfarm payrolls and unemployment rate data.

Gold in Sterling meantime dipped below £1050 an ounce by lunchtime in London, while in Euros it fell towards €1200 an ounce as both currencies gained against the Dollar.

“The gold price is currently under pressure from two sides,” says today’s commodities note from Commerzbank, citing heavy outflows from gold exchange traded funds since the start of the year as well as less bullish positioning by speculative traders on the New York Comex.

Silver meantime dipped below $28.80 this morning but stayed within a tight range while other commodities were also broadly flat and major government bond prices dipped.

In Washington, President Obama has been dining with key lawmakers from both major parties this week, and plans to do the same next week, as part ongoing negotiations over the US budget.

On Thursday, Obama had lunch with, among others, Paul Ryan, chair of the House Budget Committee and architect of the so-called ‘Ryan Plan’ which would see changes to Medicare and Medicaid programs as well as the 2010 health care legislation known as ‘Obamacare’.

Last Friday Obama signed into law the so-called sequester that was originally passed as part of the August 2011 debt ceiling deal.

“There is increasing talk of another ‘grand bargain’ being in the cards,” says Ed Meir, metals analyst at brokerage INTL FCStone.

“Should an accord be reached, we could see yet another round of selling in gold, as the ‘deficit prop’ that has been instrumental in the bullish argument for the precious metal will look somewhat more wobbly.”

On the currency markets, both the Euro and the Pound ticked higher this morning, ticking back above $1.31 and $1.50 respectively, after both the Bank of England and the European Central Bank left interest rates on hold yesterday. In London, the BoE also voted not to extend its quantitative easing program by a further £25 billion to £400 billion.

The British public meantime expects inflation to average 3.6% over the next 12 months, according to the latest quarterly Inflation Attitudes survey published by the BoE this morning. The previous survey three months ago reported expectations for inflation of 3.5%.

Since the BoE began its quantitative easing program in March 2009, inflation has been above the 2% target in 41 out of 47 months.

The ECB meantime left its main policy rate at 0.75%, the record low to which it was cut last July.

“In the medium term, we continue seeing the beginning of a gradual recovery [in the Eurozone economy],” ECB president Mario Draghi told a press conference yesterday.

“The ECB seems ready to accept an excruciatingly slow recovery and very low inflation [and] will continue to sit on its hands,” says Nick Kounis, head of macro research at ABN Amro in Amsterdam.

“We don’t believe that the Eurozone economy will recover and we also believe that inflation will fall dangerously below the 2% target,” adds today’s currency note from Standard Bank.

“If that’s correct, the ECB really needs to be easing policy, not just through rate cuts but also in other ways to try to get credit flowing to firms and consumers again.”

The world’s number two gold buying nation China saw its trade balance post an unexpected surplus last month, as exports grew more strongly than expected year-on-year and imports fell more sharply, according to official data published Friday.

Chinese gold imports from Hong Kong meantime fell to 51.3 tonnes in January, less than half the volume of the previous month, according to Hong Kong customs data published Friday. Just under 24 tonnes of gold flowed the other way, leaving Chinese net imports from Hong Kong, a major conduit for bullion going into China, at 27.3 tonnes, a 3.7% drop from a year 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.

Senior Analyst Jeffrey Kennedy shows you how these volatility indicators support pattern recognition

By Elliott Wave International

As a technical trader, are you able to view financial market fluctuations clearly and reliably?

At Elliott Wave International, we hold that the Elliott Wave Principle is the most effective tool for analysis. Yet the Wave Principle works well with other technical tools. If you are ready to trade with Elliott, our educational subscription editor Jeffrey Kennedy can teach you how to integrate ancillary technical indicators — such as Bollinger bands — to build high-confidence setups in the markets you trade.

Bollinger bands identify periods of increased and decreased market volatility. Learn about the significance of these fluctuations in this video about Bank of America Corp. (BAC) taken from Jeffrey’s Elliott Wave Junctures service:

Here are Jeffrey’s notes from the lesson:

Bollinger bands form a two-period standard deviation channel based on a 20-period simple moving average. This channel will contain 95% of all price action with the moving average acting as a center line, which often provides support and resistance. The width of the Bollinger bands increases and decreases with market volatility.

Narrow Bollinger bands coincide with low market volatility, which often leads to big price moves. Option traders like this because option prices are low at this time. Conversely, wide bands imply that market volatility is high, which translates into expensive options.

The recent narrowing of the Bollinger bands in BAC signals decreasing volatility. Since periods of low volatility precede periods of high volatility, look for a big move in the days to come.

By www.CentralBankNews.info Here’s today’s Central Bank News link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.

By www.CentralBankNews.info     Sri Lanka’s central bank held its benchmark repurchase rate steady at 7.50 percent and said inflation is expected to start declining in March and “reach a more favourable level by the end of the year.”
    The Central Bank of Sri Lanka, which raised rates by a 50 basis points in 2012, said the decline in inflation should also offset the upward pressure from an expected revision to administered prices.
    Sri Lanka’s inflation rate was steady at 9.8 percent in February from January, reflecting the remaining impact of changes to administered prices and disruptions to food supplies.
    “Inflation has been at single digits over the past 49 months and the positive outlook for inflation is expected to continue, supported by well contained demand and favourable domestic and global supply conditions,” the central bank said.
    But the central bank voiced concern that after its rate cut in December, commercial lending and deposit rates remain high. However, following recent discussions with leading banks, the central bank expects rates to be adjusted and this should “stimulate private sector economic activity towards the growth targets for 2013.”
    The central bank raised rates by 75 basis points during 2012 to rein in credit growth but then cut its rate by 25 basis points in December and removed its ceiling on loan growth as inflation was declining.
    Credit extended to the private sector continued to ease in January to an annual rate of 15.5 percent from the peak of 35.2 percent last March, “indicating that the relaxation of monetary policy in December 2012 is yet to be reflected in bank lending,” the bank said.
    Sri Lanka’s balance of payments has also continued to rise and “comfortable surplus is anticipated in 2013” even if the central bank has bought $US 486 million net this year. The exchange rate has been stable due to increased foreign exchange flows to the government bond market and from tourism and private transfers, the bank said.
     Sri Lanka’s Gross Domestic Product expanded by an annual rate of 4.8 percent in the third quarter, down from 6.4 percent in the second. The central bank expects economic growth to reach 7.5 percent this year, above the International Monetary Fund’s forecast of 6.25 percent. In 2011 Sri Lanka’s economy expanded by 8.3 percent.

    www.CentralBankNews.info

USDCAD failed to break above 1.0341 resistance and stays in a trading range between 1.0216 and 1.0341. Key support is at 1.0216, as long as this level holds, the price action in the range could be treated as consolidation of the uptrend from 0.9932, and another rise to 1.0400 is still possible after consolidation. On the downside, a breakdown below 1.0216 will indicate that lengthier consolidation of the longer term uptrend from 0.9815 (Jan 11 low) is underway, then the pair will find support around 1.0150.

Daily Forex Forecast

By MoneyMorning.com.au

We had lunch with a couple of old broker pals yesterday. The broad opinion was that we were all worried that the stock market was heading for a fall.

But not the whole stock market, just one bunch of stocks in particular.

Trouble is those bunch of stocks happen to make up a big percentage of the market. We’re talking about dividend stocks.

As one of our lunch pals said, ‘It’s hard to recommend [Commonwealth Bank] when it’s trading near $70.’

However, just because a market or stock hits a new high, it doesn’t mean it will fall straight away. That’s because there’s one key factor you can’t ignore – the Reserve Bank of Australia (RBA).

As long as the RBA keeps interest rates low it will be difficult for investors to sell stocks yielding 5% or 6% in favour of bank deposits paying 3% or 4%.

So how long could this last? This is where we can look to the US for an insight. Here’s a chart of the Dow Jones Industrial Average that this week broke through to an all-time high:

Click here to enlarge

As you can see from the chart, the Dow muddled around in about a 10% trading range for a year…before eventually breaking out higher.

It meant that investors in the US faced the same problem that Aussie investors face now. Do you stick with stocks that may not grow any further, and which pay dividends that may not grow either? Or do you sell and get next to nothing in a low-risk but low paying bank account?

Here’s our advice…

Our Two Favourite Assets for 2013

For the past couple of years we’ve tried to keep things fairly simple.

We told you to buy dividend-paying shares to get better-than-the-bank income. That strategy paid off…although not in the way we expected. We didn’t bank on boring old dividend-payers rocketing up 30% or 40% in just a few months.

We tipped income stocks because we expected them to be stable and offer a stable income.

That’s why at the lunch yesterday there was some caution about the outlook for these types of shares.

But if you’ve followed all my advice you won’t just own dividend shares. By now you should have your assets nicely spread across a few asset classes (eg. Gold, cash, dividend shares, small-caps).

The next trick is to work out where you’ll put your incoming cash flow to work. You’ll need to decide which of those assets you believe will perform best over the coming months.

Until recently, we thought gold was the best bet, but we’re having second thoughts. We’ve even held off on an expected gold purchase. Instead, we’re looking at two other asset classes for the short term – dividend stocks and small-caps stocks.

Small-caps are obvious. The stock market has beaten them to a pulp over the past year, but we’re so convinced that the time is right to buy small-cap stocks that we’ve hired a research analyst (Sam) to help us scour the market for quality (and speculative) small-cap stocks.

You’ll hear from Sam and get to see some of his analysis later in the week.

The other asset class – dividend stocks – may not seem so obvious. That’s especially so if you look at the big run up these stocks have had recently…

Keep a Look Out for ‘Cheaper’ Shares

But if we look at the Dow Jones index as a template for what can happen after a big run, it’s plain to see that the Australian share market could follow the same pattern.

That is, after reaching or getting near a key level (in the Aussie market’s case, 5,000 points), investors will take a break. As we mentioned above, investors find it emotionally hard to buy shares when they’re trading at the top of a trend.

But after stocks have traded at or around a certain level for some time, investors can get used to it. And importantly, they start taking more notice of the fundamentals. They’re looking for an excuse to either buy or sell shares.

The US market suffered this fate for a year. Stocks traded in a range until investors had an excuse to buy and push prices even higher. The catalyst in the US market (aside from money printing) was higher company profits.

Today, it appears that investors feel that this is as much as they’ll pay for stocks based on current earnings and dividend levels. Or that’s how we’re reading the recent spate of volatility.

In short, while we’re still bullish on the stock market, it always makes sense to revisit your investing gameplan. Right now, we wouldn’t be surprised to see stocks wobble either side of 5,000 points for most of the rest of this year.

That should give you plenty of chances to put some of your free cash flow to work by buying dividend stocks as they slip to ‘cheaper’ levels.

Just remember, don’t invest all your cash. You still need a big cash buffer (20% minimum is our tip), but the next ten months could give you the perfect chance to grab stock market volatility by the scruff of the neck and get it to work for you rather than against you.

Cheers,
Kris
Join me on Google+

From the Port Phillip Publishing Library

Special Report: Australia’s Energy Stock BLOWOUT

Daily Reckoning: The Australian Shale Rush Begins

Money Morning: Why the Dow Jones Record High Doesn’t Matter

Pursuit of Happiness: Here’s Why I’m Positive about the Future and Technology

Australian Small-Cap Investigator: Why Invest in Small-Cap Stocks? And Why Now?

By MoneyMorning.com.au

[Kyoto, Japan] – I think I hear the sounds of helicopter engines warming up in Tokyo.

Newly elected 2nd time Prime Minister Shinzo Abe has officially tapped Haruhiko Kuroda as the next head of the Bank of Japan and the financial markets here seem quite pleased.

Since rumours of his nomination surfaced in conjunction with Shinzo Abe’s election campaign last November, the Nikkei has risen nearly 30%. But the Nikkei’s rise is based on little more than hope and ‘Abenomics’ – which is not unlike US markets that have risen with each new infusion of Bernanke Bucks.

Unfortunately, disappointment is the more likely outcome when reality sets in.

It’s not that there is anything wrong with Kuroda-san. He’s aggressive and has a solid track record as president of the Asian Development Bank. Like many here he wants to ease monetary policy even further to stimulate the Japanese economy out of the hole it’s dug for itself over the past 23 years.

I just question what ‘else’ he possibly can do to fix it.

Even More Stimulus for the Japanese Economy

Interest rates, which are a primary monetary policy tool here like they are in the United States and Europe, are already staggeringly low with benchmark 10- year rates at 0.678%, according to the Ministry of Finance’s website. Kuroda can’t take them much lower. Zero is still zero any way you cut it.

Like a long truck backed into a tight alley, he’s got very few options at his disposal.

Speaking of which, Abe made a big deal out of setting higher inflation rates on the campaign trail last year. Not surprisingly, the Bank of Japan acquiesced in a 7-to-2 vote to double the official inflation target to 2% up from 1%.

Considering the bank’s official inflation target for 2014 is 0.9%, and the Japanese economy has been unable to hit even 1% despite 23 long years of trying and 8 to 10 failed stimulus plans (depending on how you count them), this is a big deal made all the more critical on the heels of three straight quarters of economic contraction.

Further, as my colleague Martin Hutchinson recently observed, moving the needle to 2% would require a massive bond purchase scheme of about $1.2 trillion by January 2014, plus another $150 billion per month after that. Bernanke’s madcap plans are presently running $85 billion a month, to put that figure into context.

As Martin points out, ‘that’s nearly twice the size of Ben Bernanke’s stimulus program for the United States, and Japan’s economy is only one-third the size of the US economy.’

Plus, if interest rates actually increase by as little as 2%, the Japanese economy has another problem. The nation will have to spend its entire current budget servicing debt. Its entire budget.

There’s also been talk of Kuroda buying so-called ‘exotics’, like gold, corporate bonds and various ETFs. He is, after all, known for thinking outside the box, but I think he’s unlikely to get the kind of support needed here to pull that off.

Besides, even if he does, there simply isn’t the kind of liquidity he needs in the global market to absorb Japan’s purchases without sending prices haywire.

Kuroda could also decide to purchase foreign currency bonds. However, in doing so he risks the unthinkable – a 1930s style currency war that would sweep through global markets faster than one of Berlusconi’s so-called bunga-bunga parties.

Following a Dangerous Path

I believe, though, that Kuroda will do his best to steer clear of the more radical solutions being proposed even though they do potentially address the biggest thorn in his economic side – deep structural imbalances in everything from demographics to productivity.

For example, Seiko Noda, a Japanese legislator who’s served since 1993 and in several cabinet level positions, recently suggested banning abortions as a means of improving the birth rate and raising a productive workforce.

That might strike you as extreme, but she’s not kidding and she’s not a fringe lunatic. The Japanese have one of the world’s lowest birthrates, and it’s placing serious strains on the financial system at a time when Japan literally can’t afford to have this happen.

As I have noted many times previously in Money Morning, this translates into a decreasing pool of productive, taxpaying workers while simultaneously draining both health care and retirement programs, further decreasing productivity and hampering recovery efforts.

Taro Aso, Japan’s Finance Minister who also serves as Deputy Prime Minister, stands at the other end of the spectrum. He drew fire recently for suggesting that Japanese seniors should hurry up and die.

Callous? You bet, at least to Western ears, but he’s not that far off either, numerically speaking and human costs aside.

Seniors make up more than 25% of Japan’s population and the number of ‘silvers’ is increasing dramatically. Estimates suggest that the number of seniors will outnumber those 15 and younger 4 to 1 in less than 20 years.

For investors, lighten up on Japanese companies, using each rally to move up trailing stops and harvest winners. I don’t believe Kuroda is going to be able to achieve anything markedly different from his predecessors despite lots of big talk and aggressive posturing.

That means somebody is going to be left holding the bag: don’t let it be you.

There is one final thought, albeit a very disturbing one – what’s happening in Japan now is a look into the USA’s in the not-too-distant future.

Our leaders would be wise to study what’s happening here very carefully or risk subjecting the US to the same kind of ‘recovery’ that’s plagued Japan’s economy for the last 23 years.

Keith Fitz-Gerald
Contributing Editor, Money Morning

Publisher’s Note: This is an edited version of an article that originally appeared in Money Morning (USA)

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From the Archives…

Gold’s Dark Hour Before Dawn
1-03-2013 – Dr. Alex Cowie

The Primary Colours of Investing
28-02-2013 – Kris Sayce

Revealed: Inside a Share Trader’s Den
27-02-2013 – Murray Dawes

Where to Find Value in this Rising Stock Market
26-02-2013 – Kris Sayce

China Bull Versus China Bear – There Can Only Be One Winner
25-02-2013 – Dr. Alex Cowie

By www.CentralBankNews.info     Peru’s central bank maintained its policy rate at 4.25 percent as inflation recovers from supply-side shocks and economic growth remains close to potential.
    The Central Reserve Bank of Peru (BCRP), which has held rates steady since April 2011, said it expects inflation to converge towards 2.0 percent in coming months due to improvements in the supply of foods and productive activity that is close to potential in a generally weak economic environment.
    Peru’s headline inflation rate fell to 2.45 percent in February from January’s 2.87 percent, primarily reflecting a decline in food prices, the central bank said.
    The underlying annual inflation rate was 3.22 percent in February and inflation excluding food and energy was 2.20 percent, the bank added.
    Peru’s Gross Domestic Product expanded by only 0.6 percent in the fourth quarter from the third quarter for an annual rate of 5.9 percent, down from the third quarter’s pace of 6.8 percent.
    The BCRP targets annual inflation of 1.0-3.0 percent.
 
    www.CentralBankNews.info

Thursday, February 7, 2013

By www.CentralBankNews.info     The European Central Bank (ECB), which earlier today held its benchmark refi rate steady, said its accommodative policy stance was supporting economic recovery and it is up to governments to bolster confidence through structural reform and continued fiscal tightening.
    ECB President Mario Draghi told a press conference that the ECB’s governing council had discussed a rate cut but “the prevailing consensus was to leave rates unchanged,” raising the prospect that rate cuts will be discussed in future council meetings if the economy remains mired in recession and inflation is below the ECB’s target.
     Draghi remained cautiously optimistic that the euro area’s struggling economy should start to recover later this year on the back of stronger global demand, despite a downward revision in economic forecasts by the ECB staff.
    The ECB’s latest forecasts calls for average real Gross Domestic Product growth in the 17 nations that share the euro of between -0.9 and -0.1 percent in 2013 and between 0.0 and 2.0 percent  in 2014. 
    In the fourth quarter of 2012, the euro zone GDP shrank by 0.6 percent, the fifth quarterly contraction in a row, for an annual drop of 0.9 percent.

    The ECB cut its benchmark refinancing rate by 25 basis points to 0.75 percent in 2012.
    Although euro area inflation has declined below the ECB’s target and is expected to remain contained, Draghi only said this would “allow our monetary policy stance to remain accommodative.”
    Some economists had speculated that the decline in inflation to under 2.0 percent would allow the ECB to start thinking of cutting rates. The ECB targets inflation of below, but close to 2 percent.
   In February the euro area inflation rate fell to 1.8 percent from January’s 2.0 percent and the latest ECB staff forecast calls for inflation of 1.2-2.0 percent this year and between 0.6 and 2.0 percent in 2014.
    “In order to support confidence, it is essential for governments to continue implementing structural reforms, to build further on the progress made in fiscal consolidation, and to proceed with financial sector restructuring,” Draghi said, basically saying the ECB has done its part to boost growth and now it is up to governments to do their part.

    www.CentralBankNews.info