Month: May 2013

The International Monetary Fund (IMF) has officially lowered its growth expectation for the Chinese economy, the second-biggest engine in the global economy. The IMF expects China to grow 7.75% this year compared to the eight percent it previously projected.

The First Deputy Managing Director of IMF, David Lipton, said, “while china still has significant policy space and financial capacity to maintain stability even in the face of adverse shocks, the margins of safety are narrowing.” (Source: “IMF Forecasts Lower China Growth, Warns on Debt,” Wall Street Journal, May 29, 2013.) This will be the first year since 2009 that China’s economic growth is in the single digits.

France, a key economy in the eurozone and the fifth-biggest in the global economy, is back in a recession for the third time in five years, as the economic slowdown in the country continues to take its toll. In May, consumer sentiment in the French economy reached lows not seen since July of 2008. (Source: France 24, May 28, 2013.)

As I have written before, there is no way the economic slowdown in the global economy will not end up affecting America. The price action in the stock market doesn’t show this, but in the first quarter of 2013, of the 11 companies on the Dow Jones Industrial Average that reported their revenues in Europe, nine of them posted a decline in sales from that region! (Source: FactSet, May 28, 2013.)

Dear reader, while the U.S. economy still hasn’t recovered from the last economic slowdown, more troubles from outside our domestic control lie ahead.

China and France are just a few of the many examples of what’s actually happening in the global economy. Other nations like Japan are facing severe scrutiny as well.

There are several countries in the eurozone that are in an outright depression. The youth unemployment rate in some eurozone countries is close to 50%. In Cyprus, the government has gone so far as to take money right out of its citizens’ bank accounts if their deposits totaled over 100,000 euros.

While you don’t read or hear as much about it as you did last year, the economic issues in the eurozone are dire—and the ramifications for the global economy are very real. Should Germany’s economy soften further, we could see all of Europe come under economic pressure, the winds of which will surely sail across the Atlantic to the West.

What He Said:

“Even the most novice investor can now read the chart of the Dow Jones U.S. Home Construction Index and see that it is trading at its lowest level in five years. If, like me, you believe that stocks are an indication of what lies ahead, this important index is telling us housing prices are headed to 2002 levels! What would that do to the economy? Such an event would devastate the U.S.” Michael Lombardi in Profit Confidential, December 4, 2007. That devastation started happening in the first quarter of 2008.

Article by profitconfidential.com

Miles out in the Atlantic Ocean, our ship started to sink.

It was a catamaran. The rental company didn’t properly secure the pontoon drain plugs. We were slowly taking on water the moment we sailed.

Because of air pockets, the catamaran only sank about three feet underwater. But even with wetsuits, the cold water was numbing.

Equally as unbelievable as the situation we found ourselves in, after a time, an empty cargo vessel sailed right by us. In a twist of fate, it happened to have a grapple arm. It picked up the catamaran and brought us home. It was a fortuitous experience.

Brunswick Corporation (NYSE/BC) is a company you might be familiar with. It’s a big marine business selling many brands of boats (Bayliner, Meridian Yachts, Lowe Pontoons) and engines (Mercury, Mariner, Quicksilver). The company also sells fitness, bowling, and billiard gear.

As a business, the company’s been all over the place. On the stock market, the position has been the same—a trader’s dream for the ups and downs.

Earnings estimates for the company recently went up.

According to management, revenues in the first quarter of 2013 were led by outboard marine products and parts. Sales grew four percent to $995.3 million.

The company’s earnings grew 25% to $49.8 million. Adjusted diluted earnings from continuing operations grew 46% to $0.76 per share. The company reported that its first-quarter earnings results would have been better if not for cooler weather in important boating markets.

The company’s management forecast 2013 will produce sales growth between three and five percent. Adjusted earnings from continuing operations should be between $2.30 and $2.50 a share, up approximately 10%–20% from last year.

Investors need to be careful with this kind of stock, because when you’re dealing with luxury items or hobby gear, these stocks are the first to go when business conditions get tight.

A company like Harley-Davidson, Inc. (NYSE/HOG) is still very much a successful operation, but because of the maturity of its marketplace, genuine growth in revenues and earnings is lackluster. (See “Key West: Paradise for Bikers And Consumer Spending.”)

A company like Brunswick is worth following, however, for the simple reason that its business conditions are a gauge on consumer spending in the marine market, as well as confidence in the U.S. economy.

Brunswick is a high-beta stock, and this is evidenced in its strong stock market moves, both up and down.

With decent earnings results, this position can move nicely higher. But predicting those earnings is difficult.

As I learned from the catamaran incident, it’s important to do your own inspection of any piece of equipment before operating. What transpired was an extraordinary combination of events and luck. In the stock market, this translates to research and an inspection of a company’s stock market beta before investing.

Article by profitconfidential.com

Consumer spending on luxury goods continues to ramp up.

The easy monetary policy by the Federal Reserve has created a whole new generation of millionaires, or the “new rich,” as the stock market propels to new records.

The spending on high-end goods in the retail sector was further confirmed on Tuesday after high-end jeweler Tiffany & Co. (NYSE/TIF) delivered an impressive quarter, driven by a rise in global spending. The fact that spending on luxury goods is on the rise globally is bullish.

Recall my recent Profit Confidential article in which I stated that the rich continue to spend (see “Higher Taxes: Who Cares? Not the Rich”). The Shullman Luxury and Affluence Monthly Pulse, which is an excellent metric detailing the spending habits of consumers making over $250,000 annually, suggested that higher taxes will not impact the spending patterns of 61% of those earning over $500,000 annually. (Source: Frank, R., “Wealthy Say Higher Taxes Don’t Hurt Spending,” CNBC, March 27, 2013.)

It appears Tiffany is proving the research correct.

In the first quarter, Tiffany reported a nine-percent rise in its worldwide sales to $895 million. If you looked at the sales numbers on a constant-exchange-rate basis, the increase was 13%. Interestingly, the sales increase was worldwide, which bodes well for Tiffany.

In the main Americas region, sales increased six percent to $408 million, representing 46% of total sales. I feel this allocation will shift, as Tiffany expands its presence in Asia, which currently accounts for about 41% of total sales.

The Asia-Pacific region including China but excluding Japan reported impressive sales growth of 15% year-over-year to $223 million. Tiffany’s key comparable store sales jumped nine percent.

The results from Japan were affected by the weak yen, which made the currency translation impact quite noticeable. Yet sales still managed to rise two percent to $145 million. On a constant-exchange basis, sales in Japan surged 20%, with comparable store sales up a whopping 21%. See what the easy monetary policy in Japan is doing?

Even the economically challenged eurozone region managed to pull off a six-percent increase in sales to $93.0 million, which is good, given the mess in this region.

With the report, Tiffany’s shares surged to a new 52-week high on Tuesday and have outperformed the S&P 500 over the past 52 weeks.

Chart courtesy of www.StockCharts.com

While Tiffany reported excellent results, my favorite luxury-brand stock continues to be apparel and accessories-maker Michael Kors Holdings Limited (NYSE/KORS).

In the handbag area, I continue to favor Coach, Inc. (NYSE/COH), which you can read more about in “These Stocks Benefiting as Rich Spend Lavishly at High-End Retail.”

Article by profitconfidential.com

London Gold Market Report
from Adrian Ash
BullionVault
Thurs 30 May, 08:10 EST

SILVER and GOLD retreated from one-week highs Thursday morning in London, dropping back as European stock markets reversed earlier losses.

Tokyo’s Nikkei stock index had ended the day 5.5% lower, its second slump in 6 sessions after nearly doubling in six months to hit 5-year highs.

New York stock futures pointed higher however, while commodities slipped and major government bonds held steady.

Silver bullion tracked the gold price’s earlier 1.4% rise, before slipping back beneath $22.60 per ounce.

Gold edged back below $1400 per ounce, a “psychologically important” level according to Marex Spectron’s David Govett, advising short-term traders to buy gold “if we can break and hold above” that mark.

“Physical buyers have helped to limit declines,” says Cinda Futures’ senior trader Yang Shandan in Hong Kong, pointing to the recent surge in Asian gold demand.

“But they have also become more price-sensitive and tend to stay on the sidelines near $1400.”

“The physical market seems to be loosing a little steam,” agrees a note from Swiss refining and finance group MKS.

“The bearish trend remains in place,” says a technical note from bullion bank Scotia Mocatta, even though “we are short-term neutral until this consolidation period is resolved.”

The base of gold’s current consolidation sits at $1339, says Scotia, pegging resistance at last week’s gold price high of $1414 – the same level identified today by UBS’s chart analysts.

Following mid-April’s 17% crash in gold prices, “Important liquidations in percentage terms are familiar in this market,” says the latest analysis from Italian bullion supplier Italpreziosi.

Pointing to the gold price slumps of May 2006 (-26%), spring 2008 (-30%), and Sept. 2011 (-21%), “what seems different is that the crash was accompanied by a ‘bear media campaign’, which could undermine confidence in the multi-annual bull trend,” says the note.

Wednesday saw the first uptick in nearly 3 weeks in bullion holdings at the world’s largest exchange-traded gold trust fund, the SPDR listed in New York (ticker: GLD).

Only the 6th increase in 2013 to date, however, it left the SPDR’s total holdings more than 5% down for the month of May, and 25% below the record of Dec. 2012.

Gold demand in Asia in contrast is on track for a record quarter said market-development organization the World Gold Council on Wednesday.

“Even if E.T.F. outflows continue in the United States,” managing director Marcus Grubb told Reuters, “it is quite likely that gold will find a ready market among Indian, Chinese and Middle Eastern consumers who are taking a long-term view.”

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 www.CentralBankNews.info     Moldova’s central bank maintained its basic rate at 3.5 percent along with its 1.5 percent rate on overnight deposits and 6.5 percent rate on overnight credits.
    The National Bank of Moldova (NBM) did not issue any statement in connection with the decision by its council to keep rates steady.
    Moldova’s central bank last changed rates on April 25 when it cut its rates by 100 basis points. The central bank targets inflation of 5.0 percent, plus/minus 1.5 percentage points.
    Moldova’s inflation rate eased to 4.5 percent in April from 5.4 percent the previous month and down from an average of 4.7 percent in 2012. The International Monetary Fund forecasts 2013 inflation at 4.6 percent.
    Moldova’s Gross Domestic Product grew by 0.91 percent in the fourth quarter of 2012 from the third quarter for an annual contraction of 2.5 percent, a sharper decline than the third quarters’s 0.2 percent fall.
    Last year Moldova’s economy contracted by 0.8 percent due to severe drought and reduced demand for its products by its main trading partners, Romania and Russia.
    Moldova is one of the poorest countries in Europe, located between Romania and the Ukraine.  
    In January the NBM governor forecast that Moldova’s economy should expand by 3 percent this year and 4 percent in 2014.

    www.CentralBankNews.info

By www.CentralBankNews.info

By HY Markets Forex Blog

West Texas Intermediate crude traded close to the lowest price in four weeks, according to reports released by the American Petroleum Institute (API), which indicated that the U.S stockpiles increased the most in a month.

The report also indicates that the U.S crude inventories increased by 4.4 million barrels last week to 395.1 million barrels, the highest in over three decades.  WTI crude oil was slightly up 0.13% trading at $93.26 a barrel, while Brent crude rose up to 0.31% trading at $102.72 a barrel on Thursday morning.

Futures in New York fell by 2 percent yesterday, marking its biggest drop since May 1^st.

Oil investors are focusing towards the Organization of the Petroleum Exporting Countries (OPEC) meeting, which is due to take place on Friday in Vienna. Members of the board and investors are expected to tackle and discuss the issues and topics regarding oil production. OPEC supplies about 40%of global oil supply and now producing 30.4 million barrels per day.

The meeting is expected to review the group’s target for oil production to keep the oil prices above $100 per barrel level. Economists and analysts are predicting, there won’t be a change in the output target.

“Only a little above the organization’s target and this reflects the demand on its crude,” the United Arab Emirates’ Energy Minister Suhail Al Mazrouei said this week. Global demand for crude is expected to stay “relatively weak this year” at around 800,000 barrels per day more than in 2012, the minister added.

The Market sentiment was hit by reports from the OECD that cuts its growth forecast for the global economy from 3.4% to 3.1 this year.  While the trader’s outlook got hit after the international Monetary Fund cut its projection for China’s growth in the economy to approximately 7.75% this year.

The post WTI trades flat before the OPEC meeting appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

By HY Markets Forex Blog

European stocks rose from a three-week low on Thursday. Investors from around the world are predicting the U.S economy had expanded by 2.5 percent in the first quarter. Investors are still awaiting the US gross domestic product reports for the first quarter.

The Stoxx Europe 600 Index inched up 0.2 % to 303.14 at 8:08am GMT .While the German’s DAX reduced by 0.10% to 8,328.29, Standard & Poor’s 500 index fell by 0.1% .Franc e CAC 40 increased by 0.43% to 3,990.82 and the UK’s FTSE 100 gained 0.27% to 6,645.30.

With the Stoxx 600 dropping by 1.9 yesterday, investors raise concerns in the U.S. Treasury market that the Fed will narrow the bond purchases as the economy strengthens.

Meanwhile in Spain, the final gross domestic product fell by 0.5 percent in the first quarter. In Italy, the retail purchasing managers’ Index for the euro zone stood at 46.8 points in May compared to April’s record of 44.2. According to the National institute for statistics, Producer prices in Italy fell by 0.4% from month to month in April after a flat reading in March.

In Rome, the government will try to sell five-year bonds with a fixed coupon of 2.84%, with bonds growing in 2023 with a fixed coupon of 3.94%. The target for the sale is an estimated 5.75 billion euros.

The German Chancellor Angela Merkel met with French President Francois Hollande to discuss plans on how to strengthen the management of the 17-nation boost of the industry.

The post European stocks increases ahead of U.S data appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

EURUSD is facing 1.2998 key resistance, a break above this level will indicate that the downward movement from 1.3242 had completed at 1.2796 already, then the following upward movement could bring price to 1.3500 area. On the downside, as long as 1.2998 resistance holds, the price action in the trading range between 1.2796 and 1.2998 is treated as consolidation of the downtrend from 1.3242, one more fall to test 1.2747 support is possible after consolidation.

Daily Forex Forecast

By MoneyMorning.com.au

When we hear news reports about consumer spending being soft and businesses struggling, frankly we think it’s all rubbish.

From our perspective, no other time in history has been so promising for people with a great idea (some call them entrepreneurs) to go from zero dollars to a million overnight.

And the way they do this is from other normal people with great ideas.

You see people are willing to spend their money. But…only on great ideas or great people. And in the digital world, there’s plenty of both.

As money flows into the digital economy it takes great ideas and turns them into multi-million dollar businesses. Because of this, it’s the best time to have a great idea; you just have to get it out to the people…

The exciting part about it all is its happening more regularly and frequently as we get more entrenched in the digital world.

It isn’t some inflated bubble of an industry. It’s a whole new financial system. And the reliance on financial institutions and borrowing has gone out the window. Hoorah!

Most people will spend a dollar. You see a single dollar is psychologically insignificant. Some will spend ten and some a hundred with the same mindset. But the point is there’s plenty of spare money floating around.

And the best example of this is the explosion of crowdfunding thanks to the internet and social networks.

Crowdfunding, A Huge Trend Developing

Crowdfunding takes a big job (a project) and breaks it down into thousands of little jobs. That is, instead of trying to raise one lot of $100,000 from a bank, it’s possible to raise 100,000 single dollars from 100,000 people. It about getting funding from the ‘crowd’.

And this isn’t some fad. Crowdfunding projects rose to over $2.7 billion in 2012. It’s projected crowdfunding will swell to over $5.1 billion in 2013. At this rate, crowdfunding will likely surpass $10 billion by the end of next year.

The great thing about crowdfunding is anyone can become an entrepreneur. If you want to start a business making paper planes or cat memes you can raise a project on one of the many crowdfunding websites.

If your project is good enough people will fund you. It could be a dollar, it could be $10,000. The key to it is being able to sell your project online. A great video and graphic illustration of the project is a good start.

You might have heard of some of the crowdfunding sites, Kickstarter, Indiegogo and RocketHub. Either way, if you haven’t, you should. Because anyone can be a success through these sites.

Take for example the biggest crowdfunded project ever. The Pebble watch. It’s a watch with an e-ink display. It’s Bluetooth connected to your smartphone and displays some of the key information from your phone, on the watch.

Initially the project needed $100,000 to launch their product. At the end of the funding timeframe, the project had raised over $10.2 million.

Let’s just consider the scope of that. Crowdfunding led to the project being 10,000% overfunded.  And if a project is overfunded it just means the project creators get more cash to grow the business.

The Pebble project has been an outstanding success. It’s even inspired a whole new range of consumer technology. Apple’s now doing a smart watch like the Pebble, as are Microsoft and Samsung. The disruptive potential for successful projects is mind-blowing.

Of course the catch is for anyone that funds a project, they usually get something in return. Usually a pre-release product, a limited edition version or multiple products. They get something for the dollars they put in.

Unleashing the Entrepreneurs with Crowdfunding

Pebble isn’t alone either. Some other recent projects are now rolling in millions thanks to crowdfunding. Oculus Rift, a Virtual Reality head-mounted display, raised $2.4 million. Ouya, a new type of game console, raised $8.5 million. Even a start-up that makes a durable hoodie raised over $1 million.

For every million dollar project there are five more in the hundreds of thousands. And for every 5 of those, there’s 20 in the tens of thousands. It’s like Matroyshka dolls made from cash.

We’re talking small projects that instantly become million dollar companies. Literally sometimes overnight, Pebble hit a million dollars within 28 hours of listing on Kickstarter. Crowdfunding is simply going in the same direction as the App Revolution. Or as we like to put it, the ’99 cent craze’.

Think about it like this, the Apple App store is almost at 50 billion downloaded apps. That means, in a roundabout way, every single person on earth has 7 apps.

And the average app price in the Apple App store is $1.43. That makes an industry of over $71 billion. And that’s just the Apple Apps. Android downloads are around 25 billion.  Ahem…who said consumer spending was slow?

Crowdfunding is heading along the same trajectory. What has grown into a multi-billion dollar system in just 4 years will soon hold more power and sway than the largest financial institutions, who have been around for hundreds of years.

If you’re anything like me, Kickstarter and Indiegogo will sit high on your online bookmarks. I regularly trawl through new projects looking for the next great product, or novel, or game, or piece of design.

Because crowdfunding and the companies they create aren’t going away. But what it might do is turn out the next Google or Apple. And if you’re savvy enough it’ll be the chance to get in literally at the earliest stage possible.

Sam Volkering
Technology Analyst, Money Morning Australia

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