Month: May 2013

By WallStreetDaily.com

By The Sizemore Letter

The numbers came in last week: France is in recession again, for the third time in five years.  A triple-dip recession. Sacre bleu!

There is some debate as to whether this is a double-dip or a triple-dip recession; that mini-recession in 2012 was questionable.  But there is no escaping the broader point here.  France has a serious growth problem, and so does most of the rest of Europe.

As a block, the Eurozone’s economy has been shrinking for six consecutive quarters, and the unemployment rate has crept up to 12.1%.  Ever the country to outdo its neighbors, Italy has seen its economy shrink for seven quarters in a row.  Even the German economy—the engine that is supposed to be driving the rest of the continent—is showing weakness, growing at a pitiful 0.1%.

Years of policy paralysis and a broken banking system have taken their toll. The European economy has official ground to a halt.

The upside?   Well, to start French President Francois Hollande has promised an “offensive” to bring “more growth and less austerity.”

Wow, that’s brilliant.  Why didn’t anyone think of that before?  Clearly, all Europe needs to get out of its on-again / off-again, five-year recession was for the President of France to go on an offensive. (Please feel free to insert the joke of your choice about French military prowess in the last two world wars, Vietnam and Algeria here.)

Ok, now the real upside.  Mr. Hollande’s impotent pronouncements about “offensives” aside, serious pressure is mounting on France to reform its labor markets and relax some of the bureaucracy that makes doing business in France so miserably difficult.  Being a man of the left, Hollande has a better chance of actually ramming the reforms through in the sense that only an American foreign policy right-winger like Richard Nixon could normalize relations with Red China.  The French state is so resistant to change, that if it is going to happen it has to led by “one of their own.”

Is Hollande up to the task?  We’ll see. But he is at least starting to say the right things, such as indicating that French workers would have to work longer in order to qualify for their pensions.   Let’s hope he’s serious. The world economy needs a strong Europe, and Europe needs a strong France.

The broader issue of Europe’s banking system being broken also has some promising developments.  In the “bad news is good news” world of central bank policy, the European Central Bank promised to keep its loose monetary policy in place for “quite a long time.”

As John Maynard Keynes pointed out decades ago, stimulative monetary policy in the absence of real aggregate demand is akin to “pushing on a string.”  That is basically where we are today.  Credit is being made available, but it’s not making its way into the real economy or having much of an effect.

Part of this is due to lack of demand, but certainly not all.  Small and medium-sized companies in Spain and Italy—the companies most needed to hire new employees and get the economy moving again—are being starved of capital because the funds that the ECB are making available are not flowing through the local banking systems and into their treasuries.

Desperate times call for desperate measures, and that is exactly what ECB President Mario Draghi has promised to deliver. Draghi has publically suggested lowering the deposit rate than the ECB pays on bank deposits to below zero, meaning that the ECB would effectively be taxing Europe’s banks for not lending.

Will it spur the banks to lend to one another…and to the corporate borrowers that need the funds the most? We shall see.  But the ECB’s willingness to go to extreme means to shock the system out of stasis is a major positive.

And finally, we come to Germany.  Germany’s low growth rate is disturbing, but all of the news on that front isn’t bad.  The low overall growth was affected by low levels of investments and masked a strong performance by German consumers, who have been criticized throughout the crisis for being too frugal.

The situation in Europe looks bad, but I continue to believe that things are moving in the right direction there, even if it is slowly and in fits and starts.  And in the meantime, I continue to be bullish on European equities.  European equities tend to have better exposure to emerging markets than their American counterparts and particularly to the emerging markets I find most promising, such as Africa.

European equities are also attractively priced at the moment.  The iShares MSCI France ETF ($EWQ) trades for just 12 times earnings and is dominated by some real gems, including fashion powerhouse LVMH Moet Hennessey Louis Vuitton ($LVMUY), food products company Danone ($DANOY) and international oil major Total ($TOT), among others.

If you believe, as I do, that Europe will muddle through this crisis intact, then keeping an allocation to European shares makes sense at current prices.  I expect most major European indices to outperform their first-world rivals in North American and Japan over the next five years.

Sizemore Capital is long EWQ and LVMUY.

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.

London Gold Market Report
from Adrian Ash
BullionVault
Mon 20 May, 08:15 EST

WHOLESALE PRICES for gold and silver rallied from a fresh plunge in early London dealing on Monday, rising to stand unchanged and 2.3% lower respectively from the end of last week’s trade by lunchtime.

Asian stock markets closed sharply higher, even as the Japanese Yen reversed Friday’s drop to new 4-year lows against the US Dollar.

Commodities ticked lower as did major government bonds. Silver prices today touched the lowest level in 44 months, dropping within 25¢ of $20 per ounce.

This morning London’s silver Fix came in at $21.66, very nearly one-third below the start of 2013.

Initially extending Friday’s late drop to touch $1340 per ounce for only the second time since January 2011, gold rallied from new 5-week lows for Euro and British Pound investors.

“Investors are very bearish at the moment,” said Bruce Ikemizu at Standard Bank’s Tokyo office to Reuters this morning.

“The stock market and the Dollar are quite strong. It’s a natural move for investors to switch their money from commodities to equities.”

Versus private households buying gold coins and small bars, most notably in India and China, “Financial investors hold the upper hand,” says a note from Denmark’s Saxo Bank, “[with] hedge funds now holding the biggest ever bet on falling prices.”

New data released Friday showed the net long speculative position in US gold derivatives held by money managers and other non-industry players as a group falling to new four-and-a-half-year lows in the week-ending last Tuesday.

Down to the equivalent of 214 tonnes, the difference between bullish bets and bearish bets on New York gold futures and options has shrunk by 55% since the start of 2013, driven by a doubling in the number of “short” contracts.

The amount of bullion held to back shares in exchange-traded gold trust funds shrank again Friday, taking the combined total of the GLD and IAU products down 16 tonnes for the week at 1,230 tonnes altogether.

The two largest US gold E.T.F.s have now shed 22% of their holdings since New Year.

Despite silver E.T.F. holdings remaining much steadier, the silver price “is trekking a similar path to gold,” reckons analyst Yang Xuejie at Galaxy Futures Co. in China – a division of a state-owned brokerage group.

More particularly, “Investment demand is slowly falling and there are doubts about industrial demand, which is the primary driver.”

Some 60% of annual offtake in the silver market goes to industrial uses, rather than jewelry and other store-of-value forms like coin or bar. That compares to less than 15% for gold.

Solar panel demand, which has helped plug some of the gap left by the collapse in photographic demand for silver over the last decade, flat-lined in 2012 according to analysis from French investment bank and bullion dealer Natixis.

Back in gold bullion, “We have some left over consignment stocks,” an Indian importer told Reuters this morning, pointing to the Reserve Bank’s latest import restrictions to the world’s largest gold-consumer market.

Local premiums over and above the world’s benchmark London pricing doubled and more in response to the Indian central bank’s new rules, imposed a week ago.

“For the time being we are catering to jewelers,” the importer speaking to Reuters added today. But despite this tightness in domestic supplies, Indian gold prices continued to fall on Monday, dropping 1.5% in line with international prices.

The drop in Indian gold prices is hurting the gold-backed consumer loans sector, India Today reports, with non-performing loans – raised with the pledge of gold jewelry as collateral – tripling over the last year to 1.5% of the largest gold-loans book, built by Muthoot Finance.

Shares in competitor Manappuram Finance, India’s first stockmarket-traded gold loan company, have dropped by 40% in the last month, says the paper.

“Gold, I think, is deep in our psyche and to take people away from gold, greater steps are needed,” says State Bank of India chairman Pratip Chaudhuri, quoted Saturday by ZeeNews.

Commenting on the central bank’s campaign to deter gold demand – first by imposing those new import restructions, but also by asking commercial banks to promote coins and bars less aggressively, in a bid to reduce India’s trade deficit – “I don’t know whether it would lead to reduction in consumption,” Chaudhuri says.

“In India there is such a fascination for gold. What stops people from going to the jewelry shops and banks?”

Adrian Ash

BullionVault

Gold price chart, no delay | Buy gold online

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold and silver in Zurich, Switzerland for just 0.5% commission.

(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 HY Markets Forex Blog

Yahoo‘s board has finalized a deal to buy blogging and social network service Tumblr for $1.1bn according to reports.

This deal is believed to be Marissa Mayer Yahoo CEO’s largest deal since taking helm of the iconic company “Yahoo “in July 2012.Yahoo intends to gain wider and younger audience through the blogging and social site Tumblr.

The $1.1bn deal would mark a significant premium on Tumblr $800m valuation when it raised money from private investors.According to the homepage on tumblr, the blogging site now hosts over 100 million blogs and a total of 50.7bn posts.

Yahoo stands one of the biggest sites in the internet world with around 600 million visitors to its websites every month.

The New York based company “Tumblr “was founded by David Karp at the age of 20 with barely any qualification then is high school certificate. David Karp network enable users to share and post short comments, pictures and videos which attracted an estimate of $125m in venture funding but gained a profit of only $ 13m last year.

Yahoo Inc declined to make any comments before the announcement but hinted that it would be streamed live.

Under the terms of the acquisition, Tumblr would continue to operate as an independent business, according to the Wall Street Journal.

Unlike its rival facebook and Google, Tumblr has been slow to pull in advertiser’s .With the new Yahoo deal; the opportunity could bring the ability to attract advertisers.

The post Yahoo finalize $1.1 billion deal to buy Tumblr appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

By HY Markets Forex Blog

With gold plunging over 1.5 on Monday, the yellow metal has cleared all previous gains after more than two year low of $1,322.06 per troy ounce in April.  While Silver has been trading at a level last seen in 2012.

 
The yellow metal dipped 1.65% to $1,342.40 per troy ounce while Silver tumbled 4.69% to $21.305 an ounce. With silver correlating with gold, it touched its two-year low on Monday, losing its safe status. Silver has already lost 38% while gold has lost more the 22% this year.Central bank gold rose to an eight year high due to the massive buying from Russia and some of its former states according to reports.

The Dollar index is said to have traded at 84.071 confirming US dollar’s strengthening this month.

Philly FE’s Charles Plosser acknowledged the US economy continuous recovery as he said the job market had improved for the Federal Reserve to reduce the pace of its $85 billion monthly QE.

Should labor market conditions and inflation continue to evolve as I project, then I would view ending the purchases by year-end as appropriate,” Plosser said on Tuesday.

The Sore Fund Management LLC lowered its investment in SPDR Gold Trust which is the biggest ETP by 12% to $530,900 shares since March 31^st. The reduction followed 55 % cut in the fourth quarter last year.

The post Gold goes down while silver drops to 2-year low appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

By MoneyMorning.com.au

It’s not often we agree with US Federal Reserve chairman, Dr Ben S Bernanke.

But over the weekend, Dr Bernanke claimed, ‘Both humanity’s capacity to innovate and the incentives to innovate are greater today than at any other time in history.‘

We couldn’t agree more. It’s why we’ve hired a specialist analyst – Sam Volkering – to help us launch a new technology investment service. While others preach doom and gloom, and fear modern technology, we look forward to it. Why? Because we believe technology improves the quality of life.

We’ll reveal more on this new service in the coming weeks.

Of course, we’re not about to give Dr Bernanke a free kick on his running of US (and indirectly, global) monetary policy. It has been a total disaster. Despite that, it has opened up a lot of opportunities for investors to make money, and that’s set to continue…

The idea that a central bank can artificially stimulate an economy without side effects is naive. The 1920′s and 1930′s saw huge leaps in industrial innovation, but it didn’t stop the Great Depression and more than a decade of misery.

One problem with central bank meddling is that it creates an uneven economy.

For instance, although the banking sector has reaped the benefit of cheap money (Commonwealth Bank of Australia [ASX: CBA] and Wells Fargo & Co [NYSE: WFC] are up 48.2% and 28.9% respectively over the past 12 months), the arguably more productive resource sector hasn’t done so well.

Mining giant BHP Billiton [ASX: BHP] has gained just 7.6% in 12 months, and Freeport-McMoRan [NYSE: FCX] has gained just 2%.

Sadly, those are some of the better performers in the resource sector. Many resource stocks have slumped in recent months as investors shun risky stocks in favour of ‘safe’ income stocks.

Banks Creating Assets from Thin Air

But the resource stock collapse has puzzled many people. How can bank stocks rise when all they own are pieces of paper called mortgages, while mining stocks digging iron ore, copper and gold from the ground own real hard-as-rock assets?

Well, that’s where you can thank Dr Bernanke and the banking system. For start, banks can do something mining companies can’t – banks can create money from thin air in order to create an asset.

Mining companies however, have to beg for money from banks, other financial institutions and investors. And rather than just stamping ‘approved’ on a loan form to create an asset, resource stocks have to spend millions to obtain their assets.

Financial Services Index – blue line; Metals & Mining Index – red line
Source: Google Finance

The thing is, at some point investors will surely look at the above chart and think, ‘I’m gonna buy the cheap stocks and sell the expensive stocks.’

If they do that, resource stocks should be near the top of the list.

Of course, it’s not as simple as buying cheap and selling dear. If it was that simple you’d just buy every beaten down stock and wait for other investors to pile in and drive the price higher.

You have to be more selective than that. You have to work out what investors want.

A Surprising Place to Find Income

As we explained in our latest issue of Australian Small-Cap Investigator, most of the commentary suggests investors want income. That’s not true. What investors actually want is growth and income.

But rather than getting growth from growth stocks, over the past 12 months they’ve gotten that growth and income from blue-chip income stocks. With those stocks now trading at a premium, investors know they need to look outside the top 50 stocks if they want income and growth, or even just plain old growth.

It may surprise you to know that we’re looking at the income and growth angle in Australian Small-Cap Investigator. Far more small-cap stocks pay a dividend than you may think.

But Doc Cowie has taken a slightly different approach in Diggers & Drillers. Saying that, our strategies have one thing in common – cash.

The Doc has recently put into play a strategy he used to good effect from 2009 to 2010…the last time resource stocks went bonkers, and the Metals & Mining Index more than doubled (many small-cap resource stocks did even better). The strategy is simple to explain, but requires a lot of analysis to put into practice.

Simply put, it’s about ripping apart resource companies‘ balance sheets and production schedules, and working out which stocks have the cash flow to succeed.

After all, mining is an expensive game. Just because a company has found a resource doesn’t mean they’ll ever dig the stuff from the ground. It can cost millions, sometimes tens or hundreds of millions to get a project through to production.

That’s why it’s important that mining companies have enough working capital to move from exploration to production. And that’s where the Doc’s analysis makes the difference.

Lower Aussie a Boon for Resource Stocks

You’ve seen the Doc’s writings in Money Morning over the past few weeks. We don’t think we’ve ever seen him so excited about the opportunities in the resource sector.

In fact, he was almost delirious when he showed us this quote from the Australian on Friday:

‘An analysis by RBC Capital Markets found that a further pull-back in the value of the dollar against the US dollar to US89c could see net profit at some Australian mining companies soar by more than 36 per cent.‘

Most analysts have given up on resource stocks. But not the Doc. And right now it’s the perfect time to do the analysis the Doc excels at. Hundreds of small mining companies have recently released their quarterly cash flow reports.

This reveals how much cash these small miners and producers have on the books. It means the Doc can crunch the numbers to find which stocks have the best cash flows to progress their projects.

If the Doc is right, it’s a great time to look at a select few beaten down resource stocks. And with the speed at which the market gobbles up value, these stocks may not stay beaten down for long.

Cheers,
Kris
Join me on Google+

From the Port Phillip Publishing Library

Special Report: IT’S A TRAP

Daily Reckoning: The Germans Dominate in Spain…and Look to Invade England

Money Morning: Cash is King in this Market

Pursuit of Happiness: What Drives Entrepreneur’s and Inventors

Australian Small-Cap Investigator:
How to Make Money From Small-Cap Stocks

By MoneyMorning.com.au

One of the main stories not being told about today’s oil market is the next round of turbulence set for the Middle East. It’s the oil war scenario, but with a new spin.

Last year when Byron King and I attended the Platts Crude Oil Conference, a main takeaway was an interesting OPEC break-even chart that shows how much money OPEC nations need to keep their governments funded. Take a look:

Click to enlarge

All’s well at $100 oil – all isn’t well at $80 oil. And all hell breaks loose if prices stabilize even lower at, say, $60…

Hold That Thought…

This year at the Platts oil conference, we saw two clear themes:

1. The US oil boom is bigger than expected. As I see it, this is more of a ‘duh’ observation. I’ve yet to see it slow down since 2008. In fact, this week, the International Energy Agency (IEA) in its Oil Market Report claimed that America’s shale boom is growing even larger than expected. It’s also set to have a profound effect on OPEC. Which brings me to the second theme…

2. OPEC is also set to produce (or have the capability to produce) a heckuva lot of oil. One main driver of that supply growth is Iraq. After a turmoil-filled decade, Iraq is coming back on line in a big way – and could add another 3 million barrels per day to the oil mix by 2018.

So you see, once you start lumping together all of this oil, the market seems a bit flush.

OK. So the US has lots of oil, and producing it at an ever-growing rate. And OPEC has a lot of oil and is either producing it or sitting on it.

And what’s funny is that if OPEC continues to cut supply via quotas, all it will do is help the US oil boom. They’ll essentially be crimping supply to boost prices…and we’ll benefit. Hah!

So How Does All This Shake Out?

From my perch, oil prices are set for a fallout. When I questioned some of the speakers at the Platts conference last week, there were only two ‘good’ answers for why oil prices are still high.

The first is just a simple ‘fear’ premium – the Middle East is still a big producer and fear is built into the price of oil (that begs the question: Do we really need $20-45 of fear premium?).

The second reason prices are still stubbornly high, I’m told, is that central banks are still printing money. Again, I’m not sure this is enough to demand $95 WTI oil – heck, just look at other commodities, like gold. (Where’s the support there?)

But at least it’s somewhat of an explanation. The Federal Reserve and the BOJ are printing away, and it’s probably only a matter of time before the ECB joins in.

You can take what you want from those two reasons – but that’s all I’m hearing about oil’s current price support.

I’m still looking for a price drop. When you’ve got a room full of 200 smart oil insiders, most of whom are scratching their head at current high prices or grasping at straws, something’s got to give.

When that happens, prices could drop and remain under pressure for a while – I’d look for stability around $80, but we could easily see oil trade below that. The break-even price for most American shale plays is around $50-60 – so don’t expect prices to fall much below there – but overall prices are a little lofty above $90.

Getting back to my point above, OPEC needs $100 oil. Member nations have become accustomed to a certain level of income rolling into their coffers. As the oil money rolls in, it’s quickly spent on government programs.

But what happens if they start checking the books and see 20-40% less income? All bets are off. Indeed…

We’re Setting Up for the Next Middle East Meltdown

A closer look reveals that the Saudis aren’t happy that Iraq is coming online. This could lead to a round of infighting among OPEC – with each nation trying to eke out the most money. Frankly, the Saudis have massive incentive to see Iraq fail. The same goes for Iran. Will that lead to anything? Who knows?

In the meantime, we wish OPEC luck dealing with $80 (or cheaper) oil!

So there you have it. Today’s oil market has boiled down to some pretty simple inner workings.

The US and OPEC are set to produce much more oil. And even though US and Euro demand for the black goo is falling, demand from the oil-thirsty East is set to ramp up.

So we’ve got plenty of demand and at least a five-year window of shale gale-spurred supply.

In the short term, I expect supply to outrun demand – something that will lower prices across the board. And along with those lower prices, we’ll see some squirming from OPEC.

Will the government let the coffers run low and cut government programs? Or will the member nations decide to open the spigots and produce more quota-breaking cheap oil to keep the money rolling in?

Either scenario holds a drop in the market price for oil. And either scenario ends poorly for OPEC. Stay tuned. The next few months could get interesting.

Matt Insley
Contributing Editor, Money Morning

Join Money Morning on Google+

From the Archives…

The Foundations for the Great Lie We Have Built Our Lives Upon
17-05-2013 – Vern Gowdie

How the Aussie Dollar is Running Out of Friends, Fast
16-05-2013 – Murray Dawes

STOP PRESS…Resource Stocks Pay Dividends Too
15-05-2013 – Dr Alex Cowie

‘Best Week in Four Years’: Resource Stocks are Starting to Move…
14-05-2013 – Dr Alex Cowie

Why You Won’t See Me on ABC or CNBC Discussing Financial Markets…
13-05-2013 – Kris Sayce

USDCAD broke above the upper line of the price channel on 4-hour chart, suggesting that the downward movement from 1.0341 (Mar 1 high) had completed at 1.0013 already. Further rise to test 1.0341 resistance would likely be seen, a break above this level will indicate that the uptrend from 0.9632 (Sep 14, 2012 low) has resumed, then then next target would be at 1.0500 area. However, as long as 1.0341 resistance holds, the rise from 1.0013 would possibly be correction of the downtrend from 1.0341, one more fall towards 0.9500 is still possible after correction.

Daily Forex Forecast

US Dollar Speculators increased bullish bets last week to highest since June

By CountingPips.com

The weekly Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that large futures traders continued to boost their total bullish bets of the US dollar last week. Total US dollar long positions have increased for two straight weeks and are at a new high level since June 2012, according to data by Reuters.

Non-commercial large futures traders, including hedge funds and large International Monetary Market speculators, raised their overall US dollar long positions to a total of $32.27 billion as of Tuesday May 14th. This was an advance from the total long position of $26.83 billion registered on May 7th, according to position calculations by Reuters that derives this total by the amount of US dollar positions against the combined positions of euro, British pound, Japanese yen, Australian dollar, Canadian dollar and the Swiss franc.

See the full COT report & charts here…

Technical Outlook: US Dollar ended last week higher against the Major Currencies

The US dollar continued to show its strength in the currency markets last week and increased against the other major currencies across the board. Notably, the USD rose against the Australian dollar, New Zealand dollar, Canadian dollar, Swiss franc, British pound and the euro for a second straight week while advancing against the Japanese yen for third consecutive week.

See the full Technical Currency Pairs post and charts here…

Next Week’s Economic Events Highlights:

Tuesday, May 21

Australia — reserve bank meeting minutes
New Zealand — reserve bank 2-yr inflation expectation
United Kingdom — consumer price index
United Kingdom — producer price index

Wednesday, May 22

Japan — Bank of Japan rate decision
Japan — monetary policy update
United Kingdom — Bank of England minutes
United Kingdom — retail sales
United States — Ben Bernanke testimony
United States — FOMC meeting minutes
United States — existing home sales
Canada — retail sales

Thursday, May 23

United Kingdom — GDP report
China — PMI manufacturing
United States — jobless claims weekly
United States — new home sales
New Zealand — trade balance

Friday, May 24

Euro zone — Germany GDP report
euro zone — Germany business climate index
United States — durable goods orders report

See our economic calendar for full listing