EURUSD is facing the resistance of the downward trend line on 4-hour chart. A clear break above the trend line resistance will indicate that the downtrend from 1.3711 (Feb 1 high) had completed at 1.2843 already, then the following upward movement could bring price to 1.4000 zone. On the downside, as long as the trend line resistance holds, the rise from 1.2843 would possibly be consolidation of the downtrend, one more fall to 1.2700 area to complete the downward movement is still possible.
The nice thing about being a member of the European Union is that you always get a second chance.
If you vote one way, and the Europeans don’t like it, they’ll give you another chance to vote the ‘right’ way.
Of course, this does rather undermine local democracy somewhat. But that’s all part of the price of being one big happy European family. Didn’t you realise that?
Anyway, now it’s the turn of Cyprus to go back to the drawing board. Having ditched its original plan to tax savings to secure a bailout, the Cypriots have been told to come up with a new deal.
Or else…
A quick recap of the Cyprus story so far.
Cyprus needs a bailout. It needs €17bn. But the ‘troika’ (Europe’s big bailout committee) is only willing to lend it €10bn, because they knowCyprus could never pay back the whole €17bn. Even €10bn will be a push, but we can at least pretend it’s feasible.
So Cyprus needed to raise the extra from somewhere else fast. That’s where the bright idea of taxing bank deposits came from. Everyone with less than €100,000 in the bank was set to lose 6.75%. More than that would be taxed at 9.9%.
Great idea. Except of course that it tore up pretty much every unwritten rule about bank deposit security, and was an open invitation to bank runs across the eurozone.
As the queues formed in front of the cash machines, Cypriot politicians had a rapid rethink. They rejected the bailout deal out of hand, without a single pro-vote.
That left everyone floundering around. The Russians don’t seem willing to help much, despite the Kremlin’s outrage and all the money they’re said to have on the island. And if the Russians aren’t willing to pay, that leaves two options: Cyprus leaves the eurozone, or the bailout deal is renegotiated.
No one really wants Cyprus to leave the eurozone. As Die Zelt editor Josef Joffe notes in the FT, Cyprus itself is just ‘a tiny sliver of the EU economy’.
But given the backdrop, if it leaves the euro now, you could see ‘millions of panicked savers start a run on their banks from Lisbon to Athens’. That in turn would unleash ‘a broad-scale attack by the markets. Auf Wiedersehen, euro.’
Cypriot citizens also realise full well that returning to the Cypriot pound would be a lot more damaging to their savings than even a 10% ‘haircut’. Any new currency would plunge in value against the euro – that might be good for the tourist industry, but the resulting social unrest probably wouldn’t be.
So quitting the euro isn’t an easy option. But as far as Germany is concerned, neither is giving Cyprus a no-strings attached handout. If it does that, everyone from Greece to Italy will want one. As Joffe puts it, Germany will be left ‘bleeding for the greater good forever’.
So it’s back to the drawing board for Cyprus. The European Central Bank (ECB) has threatened – once again – to pull the plug on Cyprus’s banks if it doesn’t come up with a plan.
At the moment, the European Central Bank emergency funding is the only thing keeping those banks open. So a deposit tax would be the least of savers’ worries if that happens.
So what’s likely to happen? And what does it all mean for your money?
In terms of the actual outcome, this is too close to call. It’s very hard to work out exactly what’s going on in policymakers’ minds.
A cynic might argue that this is just a cleverly-played, high-stakes negotiating game. You present everyone involved – the public, the troika, other politicians – with an utterly outrageous opening deal. And it doesn’t get much more outrageous than saying you’re going to take money that people thought was insured against loss.
As a result, whatever you end up with seems moderate by comparison. Chastened by the prospect of how bad things could have been, everyone involved walks away poorer, but feeling they’ve been let off the hook somehow.
But given the risks involved, it’s hard to believe this was deliberate. Regardless of what deal is reached, serious damage has been done to the banking system.
Why would anyone in Cyprus keep a significant amount of money in the bank now? They’ve seen how vulnerable the system is. When the banks re-open, a lot of people will be keen to get all their money out. Even if some sort of control is imposed to prevent that – as seems likely – it could get very messy.
It also damages faith in the rest of the European system, even at the margins. For example, if I’m travelling in Europe, I rarely bother getting hold of euros before I go. I just assume I’ll be able to get some from a cash machine when I land in the airport. I’ll not be doing that for the foreseeable future.
And for anyone assuming that a deal will get done because it ‘has’ to: it’s worth remembering that there was a point last year when almost all of us thought that Greece was going to walk out of the euro.
If Europe wants a test case to see just how to cope with a euro exit, Cyprus is the place to do it.
So far, markets are taking this in their stride. The euro has fallen, but no one is pricing in another Lehman Brothers. If Cyprus does leave the euro, you can expect more panic. But even then, I’d bet there are a lot of people ready to ‘buy the dips’ on this one.
The more important aspect of Cyprus is what it says about what happens when governments and banking systems go bust. In short, no one’s money is safe, and there are no risk-free havens.
John Stepek
Contributing Editor, Money Morning
Publisher’s Note: This article originally appeared in MoneyWeek
From the Archives…
Why You Should Buy This Falling Stock Market
22-03-2013 – Kris Sayce
Stock Market Warning: Part II
21-03-2013 – Murray Dawes
New Developments on Whether You Can Get Your Mortgage Cancelled
20-03-2013 – Nick Hubble
Your Retirement or Your Mortgage?
19-03-2013 – Nick Hubble
Get Used to This Stock Market Action, It’s Set to Last…
18-03-2013 – Kris Sayce
By www.CentralBankNews.info Israel’s central bank held its policy rate steady at 1.75 percent, saying inflationary expectations were stable and economic activity continues to improve but it was still too early to determine if activity is on an upward trajectory and the economy has turned the corner, the same view the bank had last month.
The Bank of Israel, which cut rates by 100 basis points in 2012, said the global macroeconomic picture was mixed, and while there are signs of a recovery in the U.S., the slowdown continues in Europe.
However, it “appears that there has been a decline in the probability of a crises occurring, a development which has reduced the high level of uncertainty that prevailed in the last year,” the BOI said, a reference to the lack of volatility in financial markets – so far – to last week’s events in Cyprus.
Although the BOI is largely neutral in its policy guidance, it said that it was keeping a “close watch on developments in the asset markets, including the housing market” and cautioned that a larger government deficit would lead to higher interest rates.
“The path of the interest rate in the future depend on developments in the inflation environment, growth in Israel and in the global economy, the monetary policies of major central banks, and developments in the exchange rate of the shekel,” the BOI said in a statement.
The BOI said that one of the sources of economic uncertainty was the government’s fiscal policy, which the deficit having to be reduced according to the expenditure rule. Even after such a deficit reduction, the BOI said the budget would reflect a real 4.5 percent rise.
“Deviation in the government deficit is liable to lead to increased interest rates in the economy,” the BOI said.
Israel’s inflation rate was steady at 1.5 percent in January and the BOI said forecasters’ projections for inflation over the next year on average were 1.8 percent.
Israel’s Gross Domestic Product rose by 0.6 percent in the fourth quarter from the third quarter for annual expansion of 2.7 percent, down from 2.9 percent in the third quarter.
“Updated indicators of economic activity in February point toward continuation of the signs of improvement which began to be seen in January, but it is still too early to determine if this is a positive turning point,” the BOI said.
Growth this year is forecast by the BOI’s staff at 3.8 percent and 4.0 percent in 2014, including the impact of natural gas production. This 2013 forecast is similar to the bank’s forecast from December.
Excluding the effects of natural gas production from “Tamar” drilling, GDP growth is expected to be 2.8 percent in 2013 and 3.3 percent in 2014, the BOI said.
The BOI’s highly-respected governor, Stanley Fischer, is stepping down on June 30 after more than eight years in his post.
www.CentralBankNews.info
By CountingPips.com
The latest weekly Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that large futures traders slightly added to their bullish bets in favor of the US dollar for a sixth consecutive week last week. Long positions for the American currency continued to be at their best overall standing since July 17th 2012, according to Reuters research and calculations.
Non-commercial large futures traders, including hedge funds and large International Monetary Market speculators, registered an overall US dollar long position of $25.753 billion as of Tuesday March 19th. This was a rise from a total long position of $25.46 billion on March 12th, according to position calculations by Reuters (US dollar positions against the total positions of eurofx, British pound, Japanese yen, Australian dollar, Canadian dollar and the Swiss franc).
Individual Currencies Large Speculators Futures Positions:
The individual currency contracts quoted directly against the US dollar last week saw increases for the Japanese yen, Australian dollar and the Swiss franc while the euro, British pound sterling, New Zealand dollar, Canadian dollar and the Mexican peso all had a declining number of net contracts for the week.
Individual Currency Charts:
EuroFX:
EuroFX: Large trader positions for the euro decreased last week after improving slightly the previous week. Euro contracts declined to a total net position of -44,884 contracts in the data reported for March 19th following the previous week’s total of -24,787 net contracts on March 12th. This is a change of -20,097 contracts from the previous week.
Euro spec positions are now at their lowest level so far in 2013 and the lowest standing since November 27 2012 when positions stood at -66,693 contracts. EuroFx speculative contracts have now been in bearish territory for four weeks in a row.
March 12th 2013 Cot Report Data
Total Open Interest: 195073
Non-Commerical Large Traders Net Positions: -44,884
Commercial Traders Net Positions: +58162
Small Traders Net Positions: -13278
Great Britain Pound:
GBP: British pound sterling spec positions continued to decline last week for a ninth consecutive week and to the lowest standing since October 2011. British pound speculative positions decreased last week to a total of -61,480 net contracts on March 19th following a total of -49,800 net contracts reported for March 12th. This was a weekly change of -11,680 in large trader contracts.
Pound speculator positions have now been in a bearish position for six straight weeks since crossing over on February 5th and are at the lowest level since October 11th 2011 when positions equaled -61,972 contracts.
March 12th 2013 Cot Report Data
Total Open Interest: 212517
Non-Commerical Large Traders Net Positions: -61,480
Commercial Traders Net Positions: +93602
Small Traders Net Positions: -32122
Japanese Yen:
JPY: Japanese yen speculative contracts rebounded last week after a sharp fall the previous week and declining to the lowest level since December. Japanese yen positions improved to a total of -79,993 net contracts on March 19th following a total of -93,763 net short contracts on March 12th. This is a weekly change of +13,770 positions.
Yen positions, on March 12th, were at their lowest point since December 11th 2012 when short positions equaled -94,401 contracts.
March 12th 2013 Cot Report Data
Total Open Interest: 216674
Non-Commerical Large Traders Net Positions: -79993
Commercial Traders Net Positions: +118962
Small Traders Net Positions: -38969
Swiss Franc:
CHF: Swiss franc speculator positions rebounded slightly last week after falling for four consecutive weeks. Net positions for the Swiss currency futures rose to a total of -10,996 contracts on March 19th following a total of -13,488 net contracts reported for March 12th. This is a weekly change of +2,492 contracts.
Swiss franc net positions had been on the short side for four straight weeks and dropped to the lowest level since August 21st 2012 when positions totaled -15,662 contracts before last week’s turnaround.
March 12th 2013 Cot Report Data
Total Open Interest: 50,580
Non-Commerical Large Traders Net Positions: -10,996
Commercial Traders Net Positions: +23,194
Small Traders Net Positions: -12,198
Canadian Dollar:
CAD: Canadian dollar positions continued lower last week to drop for a ninth consecutive week. Canadian dollar positions decreased to a total of -65,331 contracts as of March 19th following a total of -53,397 net contracts that were reported for March 12th.
This is a weekly change of -11,934 net contracts following a weekly change of -6,734 the previous week.
March 12th 2013 Cot Report Data
Total Open Interest: 308,970
Non-Commerical Large Traders Net Positions: -65,331
Commercial Traders Net Positions: +76,642
Small Traders Net Positions: -11,311
Australian Dollar:
AUD: The Australian dollar jumped sharply last week to rise for a second consecutive week. Aussie speculative futures positions increased to a total net amount of +54,055 contracts on March 19th after totaling +23,266 net contracts as of March 12th. This is a weekly change of +30,789 in net positions following the previous week’s +16,117 change.
Australian dollar contracts, on March 5th, were at their lowest level since June 26, 2012 when positions equaled just -2,159 contracts.
March 12th 2013 Cot Report Data
Total Open Interest: 158,807
Non-Commerical Large Traders Net Positions: +54,055
Commercial Traders Net Positions: -64,010
Small Traders Net Positions: +9,955
New Zealand Dollar:
NZD: New Zealand dollar speculator positions decreased sharply last week after a small increase the previous week. NZD contracts dropped to a total of +12,477 net long contracts as of March 19th following a total of +19,350 net long contracts on March 12th. This constitutes a weekly change of -6,873 net contracts.
The New Zealand dollar positions had stayed above the +19,000 contracts threshold for ten consecutive weeks before last week’s decline.
March 12th 2013 Cot Report Data
Total Open Interest: 28,933
Non-Commerical Large Traders Net Positions: +12,477
Commercial Traders Net Positions: -13,120
Small Traders Net Positions: +643
Mexican Peso:
MXN: Mexican peso speculative contracts fell last week after advancing the previous week. Peso positions decreased to a total of +109,376 net speculative positions as of March 19th following a total of +113,770 contracts that were reported for March 12th. This is a weekly change in net large peso speculator positions of -4394 contracts.
Peso speculative positions have been over the +100,000 threshold for a second straight week after falling under this level on March 5th for the first time since November 27th 2012.
March 12th 2013 Cot Report Data
Total Open Interest: 156,281
Non-Commerical Large Traders Net Positions: +109,376
Commercial Traders Net Positions: -118,821
Small Traders Net Positions: +9,445
The Commitment of Traders report is published every Friday by the Commodity Futures Trading Commission (CFTC) and shows futures positions data that was reported as of the previous Tuesday (3 days behind).
Each currency contract is a quote for that currency directly against the U.S. dollar, a net short amount of contracts means that more speculators are betting that currency to fall against the dollar and a net long position expect that currency to rise versus the dollar.
(The graphs overlay the forex spot closing price of each Tuesday when COT trader positions are reported for each corresponding spot currency pair.)
See more information and explanation on the weekly COT report from the CFTC website.
Article by CountingPips.com – Forex News & Market Analysis
By Investment U
In focus today; four kinds of inflation driven by money printing, Apple (Nasdaq: AAPL) is a buy again and the slap-in-the-face award.
When most people think of inflation they think of price and wage inflation.
But there are five types of inflation:
Money printing drives four of the five and we are in the midst of the money printing Olympics. So this is something we need to address.
Goods and services, the inflation most of us watch as a measure of overall inflation, isn’t always driven by the printing presses in D.C.
In the 60’s we had output or GDP growth inflation, in the 70’s goods and services inflation and in the 90’s, and early 2000’s, we had investment or asset inflation. Trade deficit inflation, the fifth types is too complex to explain in the short time I have here and is the one that has the least effect on individual’s portfolios.
A recent Seeking Alpha article recommended several ways to protect your portfolio and at the same time benefit from the effects of all types of inflation. But most interesting were three big surprises about inflation.
The best way to protect yourself from inflation of good and services, according to the Seeking Alpha article, is with TIPS; inflation adjusted treasuries. Gold traditionally has been thought of as the best inflation hedge, but it has a terrible .22 correlation factor.
That means only 2.2 times out of 10, gold moved up in price with goods and price inflation. Surprise number one!
The other big surprise was the stock market. There appears to be no correlation between the stock market and GDP inflation or over heated growth. Corporate bonds and preferred stocks do better when the GDP is roaring. Surprise number two.
Obviously stocks do best during times of asset inflation, but the pick for outperforming during these periods; a broad market play like SPY or a similar ETF. Number three!
During savings or debt repayment inflation, treasuries are the play. Treasury prices run up during periods like these.
The conclusion of the SA article, you can protect yourself and benefit from all forms of inflation by holding treasuries, stocks, corporate bonds and TIPs. That should sound very familiar to Oxford Club members.
[Editor’s Note: We all like to throw around the term “money printing.” But the fact is that 93% of U.S. currency now exists only in a computer – simply as a series of ones and zeros.
And things are only going to get worse.
Soon, physical currency may actually become extinct as we know it. And our friends at The Oxford Club have just uncovered the inconvenient truth that this could happen as soon as this year. But there are ways to profit handsomely from this “extinction,” of sorts.
For all the details, click here.]
Apple – The Market King – is Back
Brett Jensen of RealMoney says AAPL, despite its drop from the highest market cap in the world, is back in a buy range.
Jansen stated in a recent article that $420 was its bottom and all the numbers point to another run up in price.
In a down market day recently the disappointing debut of Samsung’s newest smart phone was good for a 2% jump in AAPL’s price.
Positive comments by the legendary Bill Miller are adding to the renewed interest in the stock as well. Miller said in a CNBC interview that AAPL is trading at a lower EV to EBITDA multiple than even HP and he’s buying January calls on it. If you remember the EV to EBITDA was the primary measure for buying a company.
Miller also talked about the likelihood of a major payout by the company as a regular dividend increase or a special dividend. According to Miller, either will cause a great deal of anticipation in the stock price.
And, in recent trading, AAPL has posted both higher highs and higher lows and on almost any sort of valuation basis this stock looks cheap. It is priced at just seven times forward earnings, has $140B in cash, is expected to have double digit revenue growth and has a PEG of .53, under 1 is considered a buy.
If you’ve been waiting for a jumping in point now may be it. Of course, no one can ever call the exact bottom, but the numbers are pointing to a run up in price. The 2.5% dividend and expected dividend increase are icing on the cake.
SITFA: Morgan Housel Edition
And now – the real reason you watch this video – the SITFA
This week, two pearls of wisdom from one of my favorites, Morgan Housel.
These are brutal. First up, a snipe at our business:
“There is virtually no accountability in the financial pundit arena. People who have been wrong about everything for years still draw crowds.”
And the truest of all Morgan’s bits of wisdom…
“The analyst who talks about his mistakes is the guy you want to listen to. Avoid the guy who doesn’t – his mistakes are even bigger.”
Good Investing,
Steve
Article By Investment U
Original Article: Apple (Nasdaq: AAPL) Is a “Buy” Again… and Money Printing
By www.CentralBankNews.info
Last week nine central banks took policy decisions with six keeping rates on hold while Colombia and India again cut rates, and Egypt became the first emerging market central bank to raise rates this year in an attempt to stem inflationary pressures despite the fragile economic environment.
But the latest developments in monetary policy – even the Bank of England’s expanded remit and a U.S. Federal Reserve meeting – were overshadowed by the latest installment in the running euro zone drama, an event with the potential to reignite last year’s crises and “undermine growth prospects further,” as the South African Reserve Bank observed.
Much was written about the awful decision to impose a tax on Cyprus’ small bank depositors. Philip Lowe, deputy governor of the Reserve Bank of Australia, summed up much of the criticism, saying the decision threatens the integrity of all euro zone bank deposits and could lead to a run on banks in other countries – hardly the way to create a stable banking system and boost confidence.
Through the first 12 weeks of the year, 78 percent of the 112 policy decisions taken by the 90 central banks followed by Central Bank News lead to unchanged rates, the same percentage as after the first 11 weeks.
The six central banks that held rates steady last week included those from Nigeria, the United States, South Africa, Iceland, Trinidad & Tobago and Uruguay.
Globally, 19 percent of policy decisions so far this year have lead to rate cuts, largely by central banks in emerging economies, a ratio that was steady from last week.
Half of this year’s 21 rate cuts worldwide have come from emerging market central banks and last week India and Colombia continued to ease their policy stances, as widely expected.
But while the Reserve Bank of India said it has limited room to cut rates further given inflationary pressures, Banco de la Republica Colombia complained that its rate cuts have not been transmitted fast enough to the economy and inflation is forecast to remain below target.
Egypt became the first emerging market central bank to raise rates this year, a decision that must have pained its policy makers given the battering its economy has taken during two years of political turmoil following the overthrow of President Hosni Mubarak.
But the Central Bank of Egypt judged that “disanchored inflation expectations are more detrimental to the economy in the medium term,” and raised rates by 50 basis points. It warned that it would not hesitate to change rates again to ensure price stability.
The Federal Reserve’s Federal Open Market Committee decided to continue with its monthly purchases of $85 billion of housing-market debt and Treasuries, a decision that was widely expected.
The Bank of England (BOE) was in the news last week with the UK Chancellor of the Exchequer, or finance minister, adjusting its remit, giving it more flexibility to tackle the sluggish economy.
The Chancellor, George Osborne, confirmed the 2 percent inflation target and re-stated the primacy of price stability in the monetary policy framework instead of picking a nominal growth target as had been discussed in media.
He confirmed that the BOE should be flexible in its interpretation of this medium-term inflation target. This means that as long as inflation is trending toward 2 percent, the BOE can use “monetary activism” and deploy new unconventional policy instruments – in consultation with the government – that other central banks have used to help stimulate growth.
But the BOE’s remit was adjusted in two important ways.
Firstly, the BOE can now “deploy explicit forward guidance,” a phrase that describes how central banks manage expectations by informing investors of the expected future path of policy rates.
As long as the central bank is credible, the thinking is that financial markets will then align market rates, especially long-term rates, to reflect the central bank’s guidance and thus support its policy.
Secondly, this forward guidance – used by a growing number of central banks worldwide – will now be linked to specific thresholds of the BOE’s own choosing. This is similar to the Federal Reserve which started in December telling markets that it expects to maintain ultra-low rates at least as long as the unemployment rate is above 6.5 percent and inflation doesn’t top 2.5 percent.
The BOE will give an assessment of the use of thresholds and which it may employ in its August inflation report, the month after Bank of Canada Governor Mark Carney takes over from Mervyn King. Under Carney, the Bank of Canada was the first central bank to start using forward rate guidance in April 2009.
There was good news from global banking regulators.
In its latest survey of how major banks would do under the new Basel III regulations, the Basel Committee on Banking Supervisors found that the largest global banks now only have a capital shortfall of 3.7 billion euros, down by 8.2 billion in the first half of 2012.
One of the factors restraining banks from lending and thus stimulating economic activity has been the need to shore up their capital base in light of new tougher banking regulations. Once the banks meet those regulations, they should become more eager to extend loans.
Illustrating the subdued state of global banking, the latest quarterly review from the Bank for International Settlements (BIS) said total cross-border lending by major banks rose by only 0.1 percent, or $33 billion, in the third quarter of 2012, the smallest quarterly rise registered by the BIS in 13 years.
But while lending to the euro zone continued to contract, the BIS highlighted the growth of Asian capital markets. Central bankers have worked for many years to deepen Asia’s markets.
BIS data showed that global bank lending to Asia-Pacific is contracting while private, non-banks, especially high net worth retail investors, are plowing funds into that region as corporate bond markets develop.
The inflow of capital to emerging economies from banks dropped to $147 billion in 2012 from $154 billion in 2009, while the inflow of private funds to those economies has exploded to $365 billion from $155 billion.
| COUNTRY | MSCI | NEW RATE | OLD RATE | 1 YEAR AGO |
| INDIA | EM | 7.50% | 7.75% | 8.50% |
| NIGERIA | FM | 12.00% | 12.00% | 12.00% |
| UNITED STATES | DM | 0.25% | 0.25% | 0.25% |
| SOUTH AFRICA | EM | 5.00% | 5.00% | 5.50% |
| ICELAND | 6.00% | 6.00% | 5.00% | |
| EGYPT | EM | 9.75% | 9.25% | 9.25% |
| TRINIDAD & TOBAGO | 2.75% | 2.75% | 3.00% | |
| COLOMBIA | EM | 3.25% | 3.75% | 5.25% |
| URUGUAY | 9.25% | 9.25% | 8.75% |
| COUNTRY | MSCI | MEETING | RATE | 1 YEAR AGO |
| ISRAEL | DM | 24-Mar | 1.75% | 2.50% |
| ANGOLA | 25-Mar | 10.00% | 10.25% | |
| TURKEY | EM | 26-Mar | 5.50% | 5.75% |
| MOROCCO | EM | 26-Mar | 3.00% | 3.00% |
| HUNGARY | EM | 26-Mar | 5.25% | 7.00% |
| GEORGIA | 27-Mar | 4.75% | 6.50% | |
| TAIWAN | EM | 28-Mar | 1.88% | 1.88% |
| ZAMBIA | 28-Mar | 9.25% | 9.00% | |
| CZECH REPUBLIC | EM | 28-Mar | 0.05% | 0.75% |
| FIJI | 28-Mar | 0.50% | 0.50% | |
| ROMANIA | FM | 28-Mar | 5.25% | 5.25% |
By Bill Bonner – billbonnersdiary.
Will gold be the “worst investment of 2013”?
Has been so far…
Gold held above $1,600/oz yesterday. You’d think it would do better. Ben Bernanke just pledged to keep his printing presses whirring… even though some areas of the economy — such as housing — are improving.
Won’t an improving economy bring more of this printing press money out in the open… where it will bid up prices?
And if the economy doesn’t improve, won’t Ben Bernanke keep printing
money… even increasing the output of his dollar-printing machines…
until the old buck finally gives way?
So, why is gold doing so badly? Is the bull market in gold, which began nearly 14 years ago, finally over?
Those questions were put to a panel of which we were part, in
Cafayate last weekend. The questioners were mostly “hard money” people.
The questioned, including your editor, had a generally gold-buggish bias
too.
So, what were the answers?
We can only recall our own:
“A couple years ago a cache of gold objects and coins was found in
Yorkshire. These were items that had probably been buried to hide them
from the fighting that was going on in the area during the 8th century.
No one knows what happened to the owners, but they never returned to dig
up the treasure. Instead, it was found by accident, 1,300 years later.
“And yet the gold of which the objects were made is just as good as
it was then. And the value of it — compared to goods and services on
offer — is also about the same, at least inasmuch as we are able to
piece together prices from that era and compare them with prices today.
“That… and everything else we know about it… leads me to believe
that gold in the future will be worth more or less what it is worth
today too. In our lifetimes, we’ve seen gold go up and go down. But it
doesn’t go away. And if you had gone out to buy a new Buick in 1935 or
so… you would have paid for it with about 25 gold ounce coins. You can
do that today, too.
“So, if you are thinking of the long run, you will definitely want to
hold gold rather than shares in today’s corporations… or today’s
paper dollars… or promises by government to repay you in its own IOU
paper currency.
“Of course, I know that many of you are not concerned with the long
run. In the long run we’re all dead. So what does matter? It’s the short
run that matters. And in the short run what is gold likely to do?
“Who knows? But it would be very strange for a 14-year bull market to
end with its subject still reasonably priced. Typically, they end with
unreasonable prices.
“Gold is not especially overpriced now. There is no gold mania happening. The cover of TIME
magazine is not featuring a gold coin or predicting the end of paper
money. Adjusted for even the Bureau of Labor Statistic’s inflation rate,
gold still hasn’t come near its high set 32 years ago.
“Most people in America have still never seen a gold coin. But they
will. Unless this time really is different… unless this really is a
new monetary era… you can presume that what happened in the past will
happen again. And what happened in the past was that paper money systems
always blew up and gold always becomes infinitely expensive in terms of
the depreciating paper money.
“We don’t know when this will happen. But we don’t see any reason why
it shouldn’t. They keep telling us that the Fed is doing no harm by
printing $85 billion more each month.
“Official inflation rates are low… and falling, they say. But if
they calculated the inflation rate the way they did when people were
wearing Whip Inflation Now buttons, back in the Carter years, the CPI would be at 9.6%. And bond yields would be at 10% or 12%.
“… and people would be struggling to pay 13% mortgages… and the
feds would be desperate to sell bonds with 15% coupons… and the dollar
would be collapsing… and the entire system would have the shakes…
“… and we wouldn’t be having this discussion. We’d all be expecting
inflation to hit 20% and happily waiting for gold to reach $5,000 an
ounce.
“No one in this room or anywhere else knows where the price of gold
is going next year or the year after. All we know is that the risks of
owning it are fairly low… while the risks of not owning it are high.”
Regards,
Bill
Load Your Portfolio with the World’s Strongest Investment
I don’t have to tell you, stocks and bonds aren’t paying off for
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want to tell you all about this market and how to play it for maximum
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By Aaron Gentzler –
Charles J. lives in San Jose, Calif. He works as a software developer.
But ever since November 2009 Charles has been collecting $332.67 in extra income each month. That’s $3,992 a year. All Charles had to invest to set up that perpetual income was $40,000.
That works out to a net annualized yield on his investment of 10% —
or about five times what he could make investing in Treasury bonds.
And thanks to the power of compounding, at this rate a $25,000
investment will become $64,725 in 10 years. And a $50,000 investment
will become $129,451.
This income — and the potentially massive compounding returns it can
create — has nothing to do with Charles’s job. It’s not from rental
income on a second home either. And it’s not from stock market dividend
yields… options premiums… or the bond market.
The checks come from an entirely different source. Put simply, Charles has become a “bank.”
You read that right. Charles earns his income checks by lending to
other Americans who need money. To date, he’s helped over 4,000 people.
Some of these people need money to pay off high-interest credit card
balances. Some need money to cover medical expenses, or to complete a
home repair, or even to start a business.
Charles doesn’t like taking risk. In fact, he’s ultra-conservative
about who he lends to. He helps folks who have been at their current job
for a year or more. He also likes folks who need $20,000 or less.
The borrowers Charles invests in have an average FICO score of 708 —
about 18 points better than the national average. They have an average
15% debt-to-income ratio (excluding mortgage debt). Most bankers will
tell you that less than 30% is considered “financially healthy.”
The average borrower Charles helps also has 14 years of credit
history and a personal income of $69,924. That’s in the top 10% of the
U.S. population.
How does Charles become the “bank” and earn an extra $4,000 a year?
He uses a groundbreaking peer-to-peer financial community www.LendingClub.com. It’s the most revolutionary and groundbreaking financial innovation of your lifetime.
Lending Club cuts out banks altogether by bringing together
creditworthy borrowers with savvy investors so that both can benefit.
(Which is why so few people have heard about it.)
Since opening in May of 2007, Lending Club has loaned out over $1.5 billion. And it is issuing $2.7 million in new loans each day by putting to work the capital that folks like Charles J. invest.
This is not some risky, fly-by-night operation. It’s strictly for
creditworthy borrowers. Lending Club immediately denies any applicant
not meeting strict lending standards. In fact, it denies 90% of all loan requests.
This gives lenders… people like Charles J… a big margin of
safety. The numbers speak for themselves: 93% of investors at Lending
Club (regardless of how many notes they’re invested in) make between
6-18% annual return, net of all fees and defaults.
I recommend you visit Lending Club’s website immediately and
familiarize yourself with the big idea behind “peer-to-peer” lending. It
not only will hand you a super-safe yield outside of the financial
markets, but also has the potential to radically transform how Americans
manage their wealth and work their way out of debt.
In fact, I am so excited about this idea that I am recommending that paid-up subscribers of my advisory service, Unconventional Wealth, put 25% of their available capital to work in Lending Club immediately.
I have also given them a number of insider secrets on how to maximize their returns
and minimize their risks. But even without these secrets, this is hands
down the safest way to make a 9+% yield available in America today.
Best Regards,
Aaron
By www.CentralBankNews.info The Central Bank of Trinidad & Tobago held its benchmark repo rate steady at 2.75 percent, saying its current accommodative stance was appropriate in light of subdued price pressures, slow demand for credit and an expected improvement in economic activity in the course of 2013.
The central bank, which cut rates by 25 basis points in 2012, said the headline inflation rate rose by 0.3 percent in February for an annual rate of 5.9 percent, down from January’s 7.3 percent, due to a decline in food price inflation to 10.6 percent from 13.8 percent.
The annual core inflation rate, which excludes food, slipped to 2.1 percent in February from 2.2 percent in January, the central bank added.
Credit to the private sector remained subdued, slowing to an annual rise of 1.9 percent in January from 2.1 percent in December as credit to private businesses declined for the second consecutive month while loans to consumers and real estate mortgage lending rose.
“On account of significant net domestic fiscal injections and relatively low demand for credit, liquidity in the financial system continued to increase,” the central bank said, with banks’ excess reserves at the central bank up to a daily average of $5,961.9 million from $5,125.5 million.
The central bank said foreign exchange sales helped remove $415 million from the banking system and the “the central bank stands ready to employ additional measures in coming month based on the evolution of financial system liquidity.”
Trinidad and Tobago’s Gross Domestic Product contracted by an annual 1.79 percent in the second quarter.
It is the task of today’s Money Weekend to predict the future, which is a fool’s errand. But the point in trying, for investors, is to get ahead of the big trends and profit from them before they’re obvious.
With energy, that means looking not just years out, but decades. Where will the demand come from? And more importantly, where will the supply come from? If you can figure that out, you stand a chance to make some far-sighted investments that could begin delivering profits today. The financial stakes are high for entire countries as well. Cheap energy is the ultimate competitive advantage.
But before that, doesn’t the news just keep flying out of Tokyo? In the last few months, the Japanese politicians have managed to debase their currency, pump up their zombie stock market and strip away any pretence of an independent central bank – all with a straight face.
Since November last year, the Nikkei index of Japanese stocks has rallied over 30% to its highest point since 2008. The yen has fallen 18% against the US dollar. Japan’s new central bank governor, Haruhiko Kuroda, is all set to renew the two decade-long fight with deflation in Japan. He ‘is expected to begin buying trillions of yen more in bonds, along with other moves,’ according to the Wall Street Journal.
Now comes news of a possible breakthrough in the energy market: ‘flammable ice’.
Two weeks ago, a Japanese drilling team extracted natural gas from deposits of methane hydrate trapped under the seabed off the coast of Japan. According to energy company Royal Dutch/Shell, a methane hydrate consists of methane gas trapped in ice-like structures of water molecules. They’re thought to be abundant around the world.
The Japanese regard the result as a world first. It’s still very early days yet, of course. The Japanese government puts commercial production at least five years away, and there are technical and environmental hurdles to clear. But it might be a key breakthrough in tapping an alternative energy source in the oil and gas industry. This is something Japan needs.
Japan’s Achilles heel has always been an almost complete lack of natural resources to fuel its huge manufacturing base. It has to import practically every raw material. But with its trade surplus now gone, the cost of those imports is mounting. This is especially true when it comes to energy, which brings us to the Australian investment angle.
The Fukushima disaster meant shutting down almost all of Japan’s nuclear reactors. With barely any domestic power source, Japan has to import Liquefied Natural Gas (LNG). In fact, Japan is the world’s biggest importer of LNG. And it gets the majority from Australia. That’s good news for Aussie producers.
Of course, this has put a huge level of demand into the market. Reuters reported in January that, ‘Japan’s LNG imports soared 11.2 percent to a record high of 87.31 million tonnes in 2012.’
And the latest news isn’t getting much better for Japan, either. ‘Japan recorded a trade deficit of 777.5 billion yen ($8.1 billion) in February despite the weaker yen as exports of cars and auto parts slipped while energy-related imports surged nearly 12 percent,’ reported the Associated Press on Thursday.
For the moment, demand for Australian natural gas is putting pressure on prices at home. On the front page of the weekend Australian Financial Review recently was this headline: ‘Consumers and business face the prospect of a new wave of power and gas price increases driven by shortages of natural gas’.
This is especially true for New South Wales and Queensland. Regulatory changes to the energy market are one reason for prices to rise. The second catalyst will be when the various LNG projects currently under construction around Gladstone, QLD, begin exporting gas within the next two years. All of that natural gas is marked for export.
Higher prices will always eventually bring in more supply. That’s the way markets work (if they’re allowed to work). But where will the natural gas come from? It probably won’t ever be methane hydrates in Australia, even if the industry turns out to be viable elsewhere. Estimated offshore deposits look very thin around our coast.
It might be shale gas. Our mate Dan Denning is telling anyone who’ll listen about the opportunities in this industry. In fact Dan was one of the first movers in recognising shale gas as an investable opportunity. He’s written about it since 2005.
If the shale gas resource estimates in Australia prove accurate, and the gas extractable, this industry can tap into the growing demand just when a sweet spot exists in the market. The potential could see Australia become an energy giant. Dan says the next six months are crucial for the shale gas industry. You can read his report to see why here.
Shale gas could play a key role in the future, according to energy major Royal Dutch/Shell. It recently released ‘New Lens Scenarios’, a trend analysis of the future energy market stretching into 2020 and 2030, even 2100. It’s a kind of thought exercise on plausible outcomes depending on a bunch of inputs.
Royal Dutch/Shell takes two views on the global energy revolution, the first called ‘Mountains’ and the other ‘Oceans’.
‘Mountains’ favours natural gas. It paints the following picture about the future: Shale and other unconventional sources play a big role as technology unlocks constant new supply of natural gas. It becomes the most important fuel on the planet. This plentiful gas can fuel entirely new markets and industries with cheaper energy. By 2030, gas knocks off oil as the largest global energy source.
The second scenario is ‘Oceans’. Here’s how that scenario pans out: there is sluggish energy supply in the face of rising demand, mainly from emerging economies. Oil and gas prices are high. OPEC holds a grip on low cost petroleum reserves.
The new major gas reserves never happened but natural gas is still in the top four energy sources. A variety of inputs in this scenario say solar will be the dominant global energy source in 100 years. But 100% renewable energy is still not on the table.
Royal Dutch/Shell isn’t the only one making predictions. ExxonMobil has released a similar report, too. Here’s a quick rundown of their take:
Hmm. Is it even fruitful to think about the future this far ahead? Predictions that turned out to be wrong, if not completely ridiculous, litter the record books. But these scenarios can at least show where the energy majors see the market going.
Oil and energy companies have to look years ahead in order to make plans. Every drop of oil produced and sold this year needs a new discovery to replace it. That’s not even considering growth in oil use. And not only do you spend billions of dollars exploring for it, there is hundreds of billions on long-life capital spending.
That’s why oil companies put so much thought into the future of supply and demand. If they get the trends wrong, they’ll go out of business. It’s telling, then, that natural gas plays such a key role in their long term forecasts.
The fact is that Australia has already replaced Qatar as Japan’s leading LNG supplier. The investment in the conventional LNG industry will begin to result in more gas exports in the next three years.
But beyond that, the total energy market is growing. And natural gas is commanding a larger percentage of the market. The chance is there for the taking for the Australian shale gas industry.
Callum Newman
Editor, Money Weekend
From the Port Phillip Publishing Library
Special Report: Australia’s Energy Stock BLOWOUT
Daily Reckoning: As the Bank Run Hits Cyprus, Dr Cowie Hits Hong Kong
Money Morning: Why You Should Buy This Falling Stock Market
Pursuit of Happiness: The Bright Side of the Cypriot Banking Crisis
