Month: March 2013

By MoneyMorning.com.au

Energy: How One Start-Up Thinks They Have
the Answer to Nuclear Power…Using Nuclear Power.

Nuclear is a dirty word. It has undertones of war, disaster, suffering, and horrible atrocity. It’s unfortunate this is the case. But it’s understandable considering the recent Fukushima meltdown and horrible tragedies of the past like Chernobyl.

When you actually look at nuclear technology, the mechanism of using a nuclear reaction to create heat, and subsequently using steam to power a steam turbine is highly effective. Also in terms of reducing carbon emissions and the reliance on fossil fuels, nuclear is a relatively ‘green’ way to go. The huge downside is when things go wrong, they go really wrong!

But now with advances in technology, and some really smart people, there’s an alternative nuclear solution.

A couple of Massachusetts Institute of Technology nuclear science grads and Russ Wilcox (the guy who invented E-Ink, the stuff in your Kindle) have created a company called Transatomic. They’ve designed a new type of nuclear power plant, but not like the 437 in operation worldwide today.

Their innovative plant design uses a Waste-Annihilating Molten Salt Reactor (WAMSR). Basically it uses nuclear waste to create energy by dissolving nuclear waste into molten salt.

Transatomic claim, ‘Conventional nuclear reactors can utilize only about 3% of the potential fission energy in a given amount of uranium before it has to be removed from the reactor. Our design captures 98% of this remaining energy.’

Using existing stockpiles of nuclear waste, Transatomic believe there’s the potential for an additional $7.1 Trillion of energy per year and electricity to power the world through to 2083!

If this design becomes reality it means more power, reduced radioactivity and highly increased safety. But the next step for the team is to get the required funding to now actually build a plant.

It might be in an early stage, but so far there’s no one else in the world with a safer and more efficient design for nuclear power.

Gold: Why High Commodity Prices Doesn’t Mean High Stock Prices

Our in-house technical analyst, Murray Dawes, showed us an ugly looking chart yesterday. It’s the price of Newcrest Mining [ASX: NCM] (black line) compared to the gold price (blue line):

Click here to enlarge

We guess it shows you that a high commodity price on its own won’t guarantee a high share price for companies dealing in that commodity. Another example is Woodside Petroleum [ASX: WPL] and the oil price:

Click here to enlarge

The oil price has stay high, yet the Woodside share price has slumped…although it has recovered somewhat over the past year or so.

The issue of high commodity prices and low stock prices is a subject we covered in the latest issue of Australian Small-Cap Investigator. We argued that stocks need a number of factors to fall into place in order to get a stock surge. For instance, in order for stocks to surge from 2003 to 2007 the market needed three things to fall into place:

1. Chinese economic growth
2. Credit expansion
3. Rising commodity prices

If any one of those was absent in 2003 it’s possible you wouldn’t have seen stocks go up so much. You only have to look at the stock market over the past five years to see how when any one of these is lacking it leads to a choppy market.

Sure, China continues to grow, but not at the break-neck speed seen 10 years ago. Yes, there has been credit expansion, but it has been government-led money printing rather than consumer-led demand. More often than not the government doesn’t spend money in the right places, which means the economy doesn’t get the full benefit.

Finally, you have seen rising commodity prices, but it hasn’t been across the board. You’ve seen falling commodity prices too. Look at gold, iron ore, and natural gas. The volatility in commodity prices creates caution among investors. Unlike the 2003-2007 bull run, investors aren’t sure whether current price rises will last.

You can’t blame them after the huge falls in 2008.

But we’re taking a different view…a contrarian view. We believe that over the next 12 months investors will start to shift from dividend-paying stocks into growth stocks.

That will come on the back of Chinese growth; expanding credit as the money flows into the Australian financial system; and rising commodity prices as the underinvestment in resources projects in recent years causes a strain on supply.

All this, plus the demand among investors for growth, should see a new stock market boom that will at through until at least 2015…when the S&P/ASX 200 will match its previous high of 7,000 points.

Technology: Why Time Travel Is (Technically Speaking) Closer Than You Think

The Concorde had its final flight on 26th November 2003. Since then, aerospace behemoths like Boeing have claimed they have the successor to the Concorde in the pipeline. None have succeeded so far.

But don’t forget we’re in the middle of a new ‘Space Race’. Savvy companies are not only looking at the commercial possibility of craft to fly to space. They’re also looking at how to use the technology for travel on earth.

Regardless, we’re yet to have another commercial passenger jet capable of safely flying supersonic across the globe. One of the main reasons is there simply hasn’t been the proven, safe technology to justify a speed in excess of 1,236kph (Mach 1).

You see, when travelling at many times the speed of sound, in this case 6,180kph (Mach 5), a big problem is air flow. At that speed, the compression of air into the engine creates a tremendous amount of heat. In excess of 1,000 degrees Celsius! With temperatures that hot, it melts the metals and circuitry in a typical jet turbine.

Reaction Engines, a British engine manufacturer, have invented and tested a world first new engine capable of supersonic speeds. It’s called the Synergetic Air-Breathing Rocket Engine (SABRE). There is one key difference in Reaction’s engine compared to a normal jet engine. The SABRE has a heat exchange, a ‘precooler,’ that cools down the compressed air from 1,000 degrees to minus 150 degrees in 1/100th of a second.

Cooling down the air in the precooler (the blue section above) allows the engine to be run fast, efficient and safe. This is game-changing technology in the development of jet engine propulsion.

‘We’re looking at a revolution in transportation equivalent to the jet engine, access to space, access to anywhere in the world within 4 hours.’ – Founder and Chief Engineer Alan Bond.

Reaction is focused on two goals:

• Using the SABRE engine for a reusable plane/rocket for the space industry.
• Using a scaled down version of the SABRE, called the Scimitar, for high speed, supersonic terrestrial aircraft.

Their work has drawn the attention and approval of the European Space Agency (ESA). Currently they’re in development in a European Union 50% funded project called ‘Long-term Advanced Propulsion Concepts and Technologies’ (LAPCAT). The aim of this project is to reduce the duration of antipodal (opposite sides of the earth) flight to less than two to four hours.

Factoring in time differences, it’s mind blowing to think that you could leave Sydney in the morning and arrive in London technically before you left Sydney…so is this the first example of time travel? We think it might be.

Health: Could Robo-Rehab be the Answer to Healthcare Problems?

A study from the University of Massachusetts is proving that using robots in the rehabilitation of stroke patients is a practical method of treatment.

Usually stroke victims receive intense ongoing physical therapy and rehab. This helps them regain mobility and quality of life. The problem is there aren’t enough rehab therapists to meet demand.

Sadly this means many patients don’t receive the rehab they need. They then have great difficulty in daily tasks, often fall into depression, lose touch with their communities and end up in care facilities.

However with the advancement in robotics, in particular humanoid robotics, researchers have found that robo-rehab works.

Excitingly their results show patients respond as well, and sometimes better, to rehab with robots than humans. By using humanoid robots to assist with rehab in the home environment, patients stay out of busy care facilities. They also engage with the community more and have a much better overall quality of life.

So this poses some interesting questions. Why do we seem to respond better to robots than other people? Do we respond better due to the perception robots do not have emotion or ‘intelligence’?

To some extent a study by the Mississippi State University answers this question. In this test researchers showed 100 ‘witnesses’ a crime being committed. One group of 50 was interviewed by a human and the other 50 by a NAO robot (You can read more about NAO here). They asked the groups the same questions about the crime, and intentionally introduced new false information.

The result? The NAO interviewed group were 40% more accurate with their recollection of the crime than those interviewed by a human.

This goes a long way to proving that people can be subconsciously influenced by the perception of other people when under instruction. Introducing a robot as part of the process, people appear to be more open and responsive to their instruction.

Results from studies like these give more credence to the use of robotics in health care situations. The benefit is the longer term well-being of our communities. It means people could stay at home longer and be more active within the community, which means putting less strain on the health care system.

It’s not so crazy to think we could each have our own humanoid robot at home to help take care of our medical needs. Surely that’s a good thing for the future of health care systems.

Our old pal, Diggers & Drillers editor Dr Alex Cowie, has spent the past week in Hong Kong. He attended the Mines & Money conference.

It’s a big event. Based on the dispatches he’s sent back, it sounds as though he’s got a bunch of information out of it that he’s sure to share with his Diggers & Drillers subscribers.

So, what is the outlook for the mining sector?

Here’s the text of an email the Doc sent me earlier this week:

‘The conference starts in earnest tomorrow [Wednesday]. Today was a smaller affair just focusing on precious metals. A bunch of small companies presented but it was mostly explorers with dwindling cash balances looking a bit anxious. Nothing stands out.

‘I got my hands on some stats today from Mining Pulse, for my talk – there are 127 junior ASX gold explorers under $20 million. The average cash balance is $1.8m, and the average quarterly burn is $0.6m – so most of them will cease to exist by Christmas unless they raise money. It’s a car crash waiting to happen! Probably explains the long faces today.

‘That said, everyone is saying this is a more cheerful conference compared to the big ones in Cape Town and Toronto so far this year, which were morose affairs.

‘For some reason there was a big focus on diamond explorers, which was odd.’

That tells you something about the rising costs for the Australian mining sector. But it’s not just rising costs for explorers; gold producers have seen costs soar too. The Doc showed that with the following slide in his presentation to the Mines & Money conference:

This explains the performance of mining stocks over the past two years. The S&P/ASX 300 Metals & Mining index has fallen 38.7% since early 2011. There’s even the chance it could fall to the 2008 low. If so, it would see the index fall another 27.3% (a 55.4% fall from the 2011 high point).

So, does that suggest it’s a good time to buy resources stocks, or a bad time? We’ve got our view. We laid out our reasons in yesterday’s Money Morning…

Kris Sayce and Sam Volkering

Join Money Morning on Google+

From the Archives…

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

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

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

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

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

By www.CentralBankNews.info     Colombia’s central bank cut its benchmark intervention rate for the seventh time since last July, saying the country’s economy is expected to continue to operate below its potential in coming quarters and inflation is forecast to remain below the banks’ 3.0 percent target.
    Banco de la Republic Colombia, which has cut rates by 200 basis points since it embarked on its easing cycle in July 2012, added that its rate cuts appeared to be transmitted to the economy slower than it would have desired.
    Colombia’s economy expanded by 4.0 percent last year, down from 2011’s revised 6.6 percent, with the slowdown hitting hard in the second half of the year due to a sharp drop in investments. Last year’s economic growth was slightly above the central bank’s forecast of 3.3-3.9 percent.
    “For the first quarter of 2013, the deterioration in business expectations and the fall in the index of consumer confidence and auto sales suggest a less dynamic private consumption,” the central bank said, adding that the country’s industry was continuing to contract.
    Colombia’s inflation rate fell to 1.83 percent in February from 2.0 percent in January, its lowest level in almost 60 years, and below the bank’s target range of 2-4 percent.

    “The recent decline in international prices of energy and other commodities means less pressure on inflation,” the bank said.
    It added that credit to households continues to slow down but is still expanding at a rate that is above nominal GDP growth. A slowdown in the leverage of firms and households is reducing the risk of financial excess during the current expansionary phase of monetary policy, it added.

    www.CentralBankNews.info

By www.CentralBankNews.info     Uruguay’s central bank held its policy rate steady at 9.25 percent although the bank said the actual inflation rate and inflationary expectations were well above the bank’s target range.
    However, considering the need to balance economic policy objectives and the recent rise in marginal reserve requirements, the bank’s monetary policy committee said it decided to maintain the policy rate.
     The central bank of Uruguay, which raised its policy rate by 50 basis points in 2012, is raising marginal reserve requirements on local and foreign currency deposits from April 1 to slow down credit growth and inflation.
    The reserve requirement for deposits in Uruguayan peso will rise to 25 percent from 20 percent while the requirement on foreign currency deposits will rise to 45 percent from 40 percent.
    Uruguay’s inflation rate rose to 8.89 percent  in February from 8.72 percent in January, significantly above the central bank’s target of 4-6 percent.

    In December, Banco Central del Uruguay (BCU) also said inflation and inflationary expectations were well above its target.

      The central bank said the country’s economy was growing at a reasonable rate but the current composition of growth cannot mitigate the inflationary impulses at the desired pace.

    “Inflation is a major concern among the risks facing Uruguay’s economy,” the bank said, adding:
    “Both the actual inflation rate and the expectations of the agents remain well above the target range.”
    Uruguay’s Gross Domestic Product expanded by a quarterly growth rate of 1.2 percent in the third quarter for annual growth of 3.0 percent, down from the second quarter’s 3.8 percent.
    The central bank said earlier this month that the economy expanded between 3.0 percent and 3.5 percent in 2012, down from 5.7 percent in 2011 due to drought and weak global growth.
    In its latest annual review of Uruguay, the International Monetary Fund said the country’s main challenge was to tackle inflation and the central bank should maintain a tightening policy bias.
    The high inflation rate reflects “robust domestic demand, extensive wage indexation, food price shocks, and insufficiently tight monetary stance, and an inflation target that is not anchoring expectations within the range,” the IMF said, adding higher global food prices had added to the inflationary pressures.
    Uruguay is also experiencing heavy capital inflows due to its high interest rates and its investment grade rating.

   www.CentralBankNews.info

London Gold Market Report
from Ben Traynor
BullionVault
Friday 22 March 2013, 08:30 EST

U.S. DOLLAR gold prices continued to hover around $1610 per ounce Friday morning, dipping back below that level after making gains in Asian trading, while stocks and commodities were flat on the day ahead of a vote by Cyprus’s parliament on measures aimed at raising money and securing a bailout.

“[Gold’s] $1620 high from Feb 26 will be a key level,” says the latest technical analysis from bullion bank Scotia Mocatta.

“If we can close above there, it will open up a test of the top of the bearish trend channel, currently at $1643.”

“The slow movement in prices has really drained the interest in the market,” one Hong Kong trader told newswire Reuters this morning.

“If we can break through $1620, more people will take a look at it and think maybe there will be some momentum.”

Heading into the weekend, gold looked set to record its biggest weekly gain since November by Friday lunchtime in London, up around 1% from last week’s close.

By contrast, the world’s biggest gold exchange traded fund, the SPDR Gold Trust (ticker GLD), was on course for its 12th week of outflows, having lost 11.7 tonnes between last Friday and yesterday.

Since the start of 2013 the GLD has seen the volume of gold held to back its shares drop by nearly 10%.

GLD investors “are exiting at more than twice the rate of sales at the nearest US competitor [the iShares Gold Trust, IAU] as a rebounding economy dims the appeal of bullion,” reports news agency Bloomberg.

Gold in Euros meantime looks set to record its fourth straight weekly gain later today, despite dropping back below €1250 an ounce as the Euro ticked higher against the Dollar.

“[Gold’s gains this week are] due to substantial short-covering by speculative funds,” says a note from VTB Capital, “as the Cyprus crisis has reminded markets that significant potential pitfalls remain in Europe… However, gold remains in a strong downtrend since the failed attempt to break above $1800 in October.”

Silver meantime drifted back towards $29 an ounce this morning, having broken above that level during Thursday’s trading.

Lawmakers in Cyprus are due to vote today on plans for a national solidarity fund aimed at raising the €5.8 billion needed to secure a €10 billion bailout, after talks with Russia failed to secure financial support.

Options to be discussed include using state assets as collateral for selling bonds and the imposition of capital controls to reduce deposit withdrawals when banks reopen, as they are scheduled to do next Tuesday.

Politicians are also expected to discuss restructuring the banking sector, with the European Central Bank saying it will cut off emergency liquidity provision on Monday for any banks it considers insolvent.

A plan to split Cyprus’s second-biggest lender Laiki into “good” and “bad” banks has been rejected by European leaders, the Financial Times reports today, with German chancellor Angela Merkel objecting to the idea of nationalizing Cypriot pension funds.

“There was some discussion of going back to the original plan of a bank levy,” the FT quotes an unnamed source, “but there are objections from the [Cypriot] central bank.”

Cypriot lawmakers rejected plans earlier this week that would have imposed a levy of 6.75% on deposits below €100,000 and 9.9% on those above that level.

“The European project is crashing to earth,” former Cyprus central bank governor Athanasios Orphanides says in an FT interview, adding that conditions attached to a potential bailout have made “a mockery” of European Union treaties.

“We have seen a cavalier attitude towards the expropriation of property and the bullying of a people,” Orphanides says.

Elsewhere in Europe, German businesses have become more pessimistic this month about current and future economic conditions than they were in February, according to IFO survey data published this morning.

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 The Sizemore Letter

So I hung parliament. Sue me.

If Silvio Berlusconi couldn’t set off a Eurozone crisis, then there is little chance that Cyprus will.

Is this reasoning a little on the simplistic side?  Yes.  But that doesn’t mean it isn’t completely true.

For anyone not up to speed on the matter, Cyprus is days away from national bankruptcy and systematic bank failure unless they come to an agreement with the “Troika” of the European Commission, the European Central Bank and the IMF.  How did they get into this mess?  Essentially, Cyprus’ massive banking sector borrowed heavily and used the proceeds to buy Greek government bonds, among other questionable investments.  Cyprus also happens to be a convenient place for wealthy Russians to dodge taxes and launder money; about 25% of the deposits in Cypriot banks belong to Russian nationals.

Germany and the rest of the EU has a hard time asking their taxpayers to guarantee the deposits of shady Russian billionaires, which is essentially what they would be doing if they bailed out Cyprus.  This is why they demanded that Cyprus fund part of the bailout with a levy on uninsured bank deposits (i.e. deposits not covered by Cyprus’ equivalent of the FDIC).

The Cypriot parliament vetoed the deal…which brings us to today.  The ECB gave Cyprus an ultimatum to reach a deal with its lenders by Monday…or the emergency liquidity funds being provided to its banks would be cut off.

Suffice it to say, it’s going to be a long weekend in the Eastern Mediterranean.

And this brings me back to the opening lines of this post.  The indecisive Italian election last month, in which a resurgent Silvio Berlusconi prevented the market’s preferred center-left coalition from getting a majority, caused a few days of market volatility.  But it most certainly did not cause the Eurozone to collapse into crisis again.  And likewise, the Cyprus standoff—which may well result in Cyprus ditching the euro—has caused a few days of volatility but little else.

Call it the “Draghi put” or call it crisis fatigue, but the message is clear.  A year ago, this would have caused a massive market crash and fevered speculation that the Eurozone was coming unwound. But today, the market has stopped reacting to bad news.  And that is unambiguously bullish.

I wouldn’t touch Cyprus with a ten-foot pole right now.  The country’s banking system will probably be wiped out before all is said and done, and it’s far too early to try your luck at bargain hunting.  But I would take the recent volatility as an opportunity to accumulate shares of blue chips in Spain and Italy.

One stock in particular that I like is Spanish banking giant Banco Santander (NYSE:$SAN).  Santander is a solid bank with an international deposit and lending base.  If you believe, as I do, that the Eurozone is stable for now, then Santander is a steal.

Action to take: Buy shares of Banco Santander.  Plan to hold for 12-18 months or for total returns of 100% or more.  Set an initial stop loss near the November lows just below $7.00.

This article first appeared on TraderPlanet.

SUBSCRIBE to Sizemore Insights via e-mail today.

The post If Silvio Berlusconi Couldn’t Blow Up Europe, Then Neither Will Cyprus appeared first on Sizemore Insights.

By Investment U

In case you haven’t noticed, the market has been on a tear. Since mid-November, the S&P 500 is up 16%. It has gone practically straight up since February 26. It’s gone up 10 of the last 13 trading sessions.

So it’s no surprise that bears and skeptics are looking for reasons for the market to turn south.

And last week they got a good one. Actress Mila Kunis told CNBC she’s started investing in stocks.

That got wannabe contrarians in a lather, calling a market top. It must be, they suggest, when a 29-year-old who is better known for playing opposite Ashton Kutcher in That 70′s Show rather than for her financial acumen starts spouting off about the stock market.

I’m guessing, however, that most of those calling a top didn’t watch the interview. Kunis was asked what she does with her money. She mentioned she’s very conservative and likes to keep it in the bank, but is being “pushed” to invest in stocks. So it sounds like she’s getting some good guidance from her financial adviser.

There is no reason why someone with decades before retirement should be in all cash. It’s not like Kunis is pretending to be a financial expert, because she’s made a few good trades.

Which brings us to Rachel Fox. The 16-year-old actress has been making the rounds on financial television, advocating the benefits of day trading. The Desperate Housewives star is apparently a successful day trader and blogs about her thoughts on the market and individual stocks.

Fox doesn’t use fundamental or technical analysis, she just claims to have a feel for stocks and can tell when they’re overbought or oversold.

That got the contrarians going. When a 16-year-old actress trades stocks based on feel and then goes on TV to talk about it, the bull market must surely be near its end.

Or when a wrong-way Corrigan ex-Fed chairman, Allan Greenspan, says stocks are not overvalued, surely they must be. Right?

Signs of a top?

Just because a beautiful woman who doesn’t know much about the markets, a kid who thinks she does, or an octogenarian with a lousy track record, say that stocks are a good investment, doesn’t mean they aren’t.

Not There Yet…

For sentiment to be at extremes, we need everyone talking about stocks, not just a few people who make us snicker. Remember during the dot-com boom when taxi drivers were giving stock tips? When doctors and lawyers were day trading from their offices, or even giving up their practices entirely?

Or how about during the housing boom when instead of trading eBay (Nasdaq: EBAY), those same doctors and lawyers were flipping houses? When everyone was seemingly investing in real estate because “it’s the only way to make money.” That’s when sentiment is at an extreme.

We’re not there yet.

And valuation is certainly not at an extreme level.

The S&P 500 is currently trading at 15.3 times earnings. Over the past six years, the average has been 15.4. Since 1871, the average has been 15.5. So stocks are hardly overvalued.

But let’s give the naysayers the benefit of the doubt for a moment. Let’s call this the Kunis top. (I prefer the image of a Kunis top rather than a Greenspan top.)

The market has always come back to hit new highs after a bear market. If you’re invested for the long term, you should have nothing to worry about. For those of you with a short time horizon, go ahead and sell your stocks to Mila Kunis. Maybe it is the top. Or maybe we have another 100% to go before this bull has run its course. I don’t try to time the market, so I’m not too worried about it.
Rather, what I do is invest in great companies that pay rising dividends.

Those stocks tend to outperform no matter what the broad market is doing. And if the market goes against me, I get paid 4% to 6% to wait it out – reinvesting those dividends at lower prices if we do in fact experience a bear market.

So let people mock Kunis, Fox and Greenspan. Maybe those who are looking at this trio as a contrarian indicator will get lucky and will time this thing right – although few people ever do. You should just stick to your plan and not worry about what others are saying about the market – or even worse, what others are saying about what others are saying about the market. Even if those others are A-list Hollywood starlets.

Good Investing,

Marc

Editor’s Note: Marc outlined his 10-11-12 System for building significant wealth with dividends in his best-selling book, Get Rich With Dividends. And now he’s launching a special monthly newsletter – along with three exclusive portfolios – based on his system and how to generate superior income in any market.

It’s called The Oxford Income Letter, and the timing couldn’t be any better. Marc has spotted what he thinks will be a make-or-break event for our retirement goals. And it could hit as soon as April 4. In his brand new report – over $100,000 and 17 months in the making – Marc lays the groundwork for his current investment thesis. To learn more, click here.

Article By Investment U

Original Article: Is This the Mila Kunis Top?

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.

USDJPY moves sideways in a trading range between 94.31 and 96.70. The price action in the range is likely consolidation of the uptrend from 90.93. As long as 94.31 support holds, another rise towards 100.00 is still possible after consolidation, and a break above 96.70 resistance could signal resumption of the uptrend. On the downside, a breakdown below 94.31 support will suggest that the uptrend from 90.93 had completed at 96.70 already, then the following downward movement could bring price back to 92.00-93.00 area.

Forex Signals

By MoneyMorning.com.au

Market up. Market down. Market sideways.

As Murray Dawes has been keen to warn you, the Australian stock market is at a key level.

Call it an inflection point if you like.

Based on Murray’s technical analysis, the stock market could either collapse or soar. Although he says the biggest risk is for a collapse.

It’s why he has positioned his traders to profit by short-selling a number of stocks.
But there’s more than one opportunity to profit from a falling market…

In Monday’s Money Morning we explained that a new game was on in the Australian stock market.

The balance had shifted from dividend stocks to growth stocks.

That’s not to say you shouldn’t buy dividend stocks, because you should. In fact, with the market now trading at the low point of what we believe will be a year-long sideways trend, topping up on dividend stocks makes sense.

We just don’t want you to think you’ll get the 20% or 30% gains that dividend stocks gave you over the past six months.

Here’s a chart of the S&P/ASX 200 that shows what we mean about a sideways trend:

We’re convinced this trend will tie down the Australian market for most of this year. Record low Australian interest rates will keep forcing investors to buy shares for income.

A Small Change Can Make a Big Difference to the Stock Market

But it’s not just Australian interest rates. This outcome also relies on US, European, UK and Japanese interest rates staying low too. Low interest rates in their domestic economies will keep up demand for high yielding Australian stocks.

And so over the next year you’ll see buyers step in and buy specific stocks if share dividend yields rise too high. Here’s an example using a popular Australian stock, AMP Ltd [ASX: AMP]:

It may not seem like it, but there’s a big difference between a 4.47% yield and a 4.93% yield. On a $500,000 portfolio, it’s a difference of $2,300 in income each year.

But you don’t want to overpay. After all, you can get close to 4% on a bank or term deposit, with supposedly no risk. Contrast that to the risk of capital loss with shares.

This is exactly why, providing central banks don’t raise interest rates (which doesn’t seem likely at the moment), you’ll see a yield-driven market for most of this year.

Of course, the stock market isn’t all about yield. In fact, of the 2,000 ASX-listed stocks, only a quarter of them pay a dividend. And about half of those are more growth stocks than income stocks.

We see falling stocks as an opportunity rather than a threat. Most investors don’t just want income, they want growth too. And if we’re right about the next 12 months, you won’t get much growth from dividend stocks.

Put These Unloved Assets Back on Your Buy List

That’s why we’re betting on growth stocks to make a comeback. Note that we’re not saying growth stocks will find favour straight away or within the next few weeks.

We are saying that over the next 12 months value and growth investors will start searching for beaten-down and undervalued stocks. Most of these will be the growth stocks that most investors have ignored for nearly two years.

As you may know, for most of the past two years we’ve suggested you stay away from blue-chip growth stocks. They weren’t the safe-as-houses stocks they used to be.

But with many growth stocks taking a beating in recent months and our forecast that investors will switch from dividend to growth, it now makes sense to put blue-chip and small-cap growth stocks back on your radar.

How much should you invest? That’s your choice. You should invest whatever amount is comfortable to you.

But know this: it’s still a risky strategy. Anytime you try to take a contrarian position on the market you’re always at risk of getting the timing wrong.

That’s why we don’t suggest you pile into growth stocks with every penny you’ve got. Instead, because it could take many months for this set-up to play out, we suggest buying into growth stocks gradually over the next few months.

In short, it’s wrong to always view a falling market as an opportunity to sell. You should think about why the market is falling and try to find the opportunities to buy.

Cheers,
Kris
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Special Report: Australia’s Energy Stock BLOWOUT

Daily Reckoning: As the Bank Run Hits Cyprus, Dr Cowie Hits Hong Kong

Money Morning: Stock Market Warning: Part II

Pursuit of Happiness: The Bright Side of the Cypriot Banking Crisis

Australian Small-Cap Investigator:
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