Month: July 2013

Article by Investazor.com

In his speech today, Mario Draghi maintained the structure of his last talk. Constrained by the obvious reality, he had to admit the lent pace of recovery and the long list of problems that are not yet solved, as the weak conditions in the labour market and the economic slowdown. On the other hand, the accommodative position of the monetary policy together with the improvements made since mid-2012 and the banking union system should keep the stability of the euro zone.

The heart of Euro zone, Germany, is pumping the same weak and negative sentiment about the current economic situation, announcing a contraction of -0.1% in the industrial production as well as a decreasing trade balance (14.1B). It is difficult to expect positive results in an environment dominated by instability and lack of trust in the Government’s institutions. On the long term, we may be witnessing of improved conditions if the pace of restructuring is maintained.

The post Europe Is Still Struggling appeared first on investazor.com.

Article by Investazor.com

Dis you missed an analysis on commodities? Well, we thought of updating an older analysis on WTI Crude Oil, because a lot of interesting things have happened since then.

In our last analysis, WTI Crude Oil Looking Bullish More than Ever, we have made a technical analysis on the evolution of the WTI Crude Oil and we were expecting a breakout through 97.45$ per barrel. Our setup was helped by a series of fundamental events.

In Egypt a riot started against the President Mohamed Mursi which couldn’t be settled not even after a clash between the security forces and the supporters of the president.  This political problem had a big impact over the WTI Crude oil prices because there are shipments which go through the Egypt’s Suez Canal.

Last week because of the problems in Egypt, combined with a fall of 10.3 million barrel in the US stocks, the price of WTI broke 100$ per barrel. The up move was sustained by the good US labor market data and got up to 104.50$ per barrel this week. Tomorrow the API (American Petroleum Institute) will release their estimates for this week and it is possible for the price to react again.

Chart: WTI Crude Oil, Monthly

Getting to the technical analysis part, we will see that this month the price has broken the 97.45 resistance and got up to 104.50. If the direction would be maintained the next resistance it is found at 110$ per barrel. It is pretty important to look for a throwback to 100$ per barrel level and also to see how this month would end.

If the breakout will be confirmed we should project the target of the triangle on the upside, while if it will be only a false breakout we should look for a drop back under 90$ per barrel.

The post WTI Crude Oil Rallies above 100$ per Barrel appeared first on investazor.com.

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

By The Sizemore Letter

Warren Buffett is known for keeping the investment process simple.  He avoids complex models, and once joked that if calculus were required, he’d have to give up the money business and go back to his childhood job of delivering papers.

But not even Warren Buffett can match Mohnish Pabrai when it comes to having a Spartan investment philosophy.  Pabrai has effectively boiled the entire process down to the logic of a coin flip: “Heads, I win.  Tails, I don’t lose too much.”

I love it.  Short, simple, and yet profound.

For anyone not familiar with Pabrai, he is the principal of Pabrai Funds and the author of The Dhando Investor, a book on value investing I strongly recommend.

Pabrai is a Warren Buffett disciple who takes Buffett’s comments on diversification seriously:  “Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing.”

According to his latest SEC filings, Pabrai has just six stocks in his $340 million portfolio—and half of its value in just two stocks: Citigroup ($C) and Bank of America ($BAC).

So what is Mr. Pabrai buying these days?

Zinc…and a lot of it.

Throughout the month of June, Pabrai made several large additions to his holdings in Horsehead Holding Corporation ($ZINC), a producer and seller of zinc- and nickel-based products and the leading supplier of zinc in North America.

This is not a sexy business…as there is nothing particularly interesting or exciting about a company that mines zinc or produces zinc power…and it’s not even a particularly profitable one.  In fact, ZINC posted a loss in its last full year of reporting.

It’s not exceptionally cheap for a commodity producer either.  Horsehead sells for 13 times forward earnings and at 1.5 times book.  To put that in perspective, Teck Resources ($TCK), a diversified miner, trades for 8 times forward earnings and 0.63 times book.

I’m having a hard time seeing Pabrai’s angle here.  He has a long track record of buying distressed companies and what he calls “low-risk, high-uncertainty businesses.”   Horsehead could certainly fall into this latter camp, as commodities businesses are anything if not uncertain.

But this essentially looks like a large bullish call on the price of zinc.  It appears that Pabrai is making a large bet that zinc—which has drifted lower for most of the past three years—is about to get a lot more valuable.

He might have another angle, and I expect that he does.  It would be unlike Pabrai to wager a decent chunk of his investors’ capital on the price of a traded commodity.  But because I can’t figure out what that angle is, I’m not going to follow suit.

But might any of Pabrai’s other holdings have potential?

I’m somewhat bullish on Chesapeake Energy ($CHK), as I am bullish about the long-term prospects for natural gas and I see this as a “scandal stock” with most of the bad news long ago priced in.  I also like Pabrai’s bet on General Motors ($GM) via long-term warrants

Otherwise, Pabrai is essentially just long financials in a big way.  Buying Citi or Bank of America at substantially below book value should be a fairly low-risk investment.  Bank stocks will continue to get knocked around with every Fed announcement, but if you are content to “buy and forget” for a few years, it’s hard to see losing a lot of money on that trade.  And the upside could easily be 100% or more over the course of the next 2-3 years.

Or, as Pabrai likes to say, this is a case of heads, you win.  Tails, you’re not likely to lose too much.

Strangely, none of that happened. Silver benefits by being both a precious metal and an industrial metal. As an industrial metal, investors need to actually see enough economic growth before they can ride that bandwagon. As a precious metal, silver is being taken along for the ride by investors fleeing gold.

In fact, silver is being treated more like a precious metal than an industrial one these days. The following chart shows that silver, over a 50-day period, shares a 0.98 correlation coefficient with gold (a 1.00 result would mean the two move in perfect step with each other).

Instead of being the 2013 star of the precious metals community, silver has turned into the dog. Trading near $19.70 an ounce, silver has lost more than 35% of its value since the beginning of the year (and on track for its worst performance in almost 30 years). Gold, on the other hand, has dropped just 25%, while platinum is down about 13%.

Chart courtesy of www.StockCharts.com

But for contrarian investors, silver has never lost its shine—its role as a safe haven hasn’t really changed. The U.S. economy continues to be fragile. Unemployment is hovering at 7.5%, first-quarter gross domestic product (GDP) growth came in well below expectations, home values are still 25% below their pre-market crash levels, wages are stagnant, and the number of Americans relying on food stamps is at record levels. On top of that, the eurozone continues to be in trouble with Portugal surfacing as the latest victim, China’s economy is stalling, and global bailouts are still in place.

In spite of silver’s retreat, all of the ingredients for a rally are still set—a fact that has not been lost on the average American investor. According to the U.S. Mint, during the first half of 2012, it sold approximately 17.37 million one-ounce American Eagle silver coins. During the same period in 2013, it sold 25.0 million Eagles—a year-over-year increase of 43.9%. In fact, the U.S. Mint is predicting that its gold and silver coin sales could reach record numbers in 2013. (Source: “2013 American Eagle Bullion/Sales Figures,” U.S. Mint web site, July 4, 2013.)

Investors who have been watching silver for a number of years know that the precious metal can bounce back. In March 2008, silver was trading near $21.00 an ounce, and by October, it had fallen 60% to around $8.40; however, by April 2011, it had bounced back, soaring over 400%.

Interestingly, if you look at silver’s long-term trend dating back to 2002, you’ll see that it currently is nearing its support level.

While silver has clearly declined, as long as the global economy remains uncertain and central banks continue to print more and more money, silver will continue to be in demand as a store of value.

This article This Resilient Commodity to Ready for a Big Comeback was originally published at Investment Contrarians

By Sasha Cekerevac

With corporate earnings season starting today, many investors will eagerly be looking at the results to determine if there is an investment opportunity for the next six to 12 months.

But wise investors will also be keeping an eye on the macroeconomic situation: we are entering a period of time in which the U.S. dollar will remain strong as our economy is set to outperform those of most other developed nations. As I’ve previously mentioned in these pages before, the outlook for the eurozone remains weak, China’s economy is slowing, and Japan’s economy is just now trying to emerge from having virtually no growth over the past decade.

The strength of the U.S. economy is relative—though it is better than its competitors, it is not growing at a very rapid rate. However, remember: the strength of a currency is based on relative value, not absolute.

That relative strength in the U.S. economy will translate into a stronger dollar, higher corporate earnings and investment opportunities. As a large investor, for example, I would much rather be invested in U.S. assets than European assets.

While a stronger dollar hurts exports, it improves the corporate earnings of importers. A perfect example of the recent shift is Starbucks Corporation (NASDAQ/SBUX).

The investment opportunity that Starbucks is able to monetize is the strength of the U.S. dollar as compared to currencies like the Brazilian real. Combining record-level harvests of coffee beans this year and last year with the real hitting a four-year low, the price of Brazilian coffee beans has dropped dramatically. Similarly, Columbia’s currency has also dropped significantly against the dollar, and has seen exports of its coffee beans increase significantly this year.

That lower cost of imported commodities for companies like Starbucks is creating an investment opportunity by generating higher corporate earnings. It’s a perfect example of a U.S. company benefiting from a stronger dollar.

Chart courtesy of www.StockCharts.com

Clearly, I am not alone in thinking that Starbucks will generate strong corporate earnings, as indicated by the strength of the above chart.

Starbucks is a company that continues to grow worldwide, as it sees an investment opportunity in building its brand globally. The reduction in the input cost of coffee beans will also help the company improve its corporate earnings, in addition to top-line revenue growth from expanding into new markets.

The point I would like to make is that, as investors, our goal is to look for companies that can increase their corporate earnings through an investment opportunity that suits their business models. Whether it is a higher dollar or a weaker dollar, it really doesn’t matter, as there are firms that can generate higher corporate earnings in either case. The key is to shift and reallocate assets into companies with higher probabilities of generating corporate earnings.

This article The One Company to Watch as the U.S. Dollar Strengthens was originally published at Investment Contrarians.

London Gold Market Report
from Adrian Ash
BullionVault
Monday, 8 July 08:00 EST

The GOLD PRICE ticked higher in London trade Monday morning, rising from its lowest weekly close in three years as Asian stock markets fell but Eurozone shares jumped over 2% higher.

 Major government bonds ticked higher, easing interest rates down, while the US Dollar held steady after last week’s strong gains on the currency market.

 A Wall Street Journal survey says the majority of economists think that Friday’s jobs data mean the US Federal Reserve will start reducing its quantitative easing program as early as September.

Silver bullion today ticked back above $19.22 per ounce, regaining half of last week’s 3.6% drop.

“Unlike the April rout [in gold prices],” says the latest monthly report from brokers INTL FCStone, “which drew out a slew of buyers, we are not seeing the same type of reaction this time around.

 “[This suggests] the complex remains vulnerable from the physical side as well.”

 The gold price is now “near the lows of the year,” says David Govett at fellow brokers Marex Spectron, but “For the moment at least, I do think we have done enough.

 “I now think we are moving into the good old summer lull. Overall direction will be sideways.”

 New curbs on gold bullion imports to India – where the Hindu calendar’s Chaturmas will now keep gold demand low until September – cut legal inflows by 81% in June from May’s record high of 162 tonnes, a government official told journalists today.

 Sales are however “expected to go up again” because of the gold price, the official added.

 “India’s gold imports will be somewhat the same or slightly more for July,” agrees Commtrendz Research’s Gnanasekar Thiagarajan, quoted by Reuters, “as some bargain hunting interest was seen.”

 The Indian Rupee fell Monday to fresh all-time lows against the Dollar, reducing the gold price discount for buyers in the world’s No.1 consumer market.

 “The [Reserve Bank of India] is definitely concerned about Rupee weakness,” says Nick Verdi at Barclays in Singapore.

 Rather than intervening to support the Rupee with cash trades, however, “It will look to combat this mostly through verbal intervention,” he reckons.

 Meantime in Egypt, the 12th largest private gold consumer in 2012, the main stock market sank almost 3% as fighting continued after more than 40 supporters of ousted president Morsi were killed at the weekend.

 “Tensions in Egypt put pressure on local [gold] demand,” says German refining group Umicore in a quarterly trading update, “as some retailers started to think of closing their shops for fears of looting.”

 With the gold price now 36% below its Dollar record of September 2011, Russia’s state treasury Gokhran – the official trader of gems and precious metals – is preparing to buy gold on the domestic market after a two-year gap, Reuters reports.

 Invited to sell gold onto the open market when prices neared their 2011 peak, “We were forbidden to buy gold directly [from Russian miners],” a source tells the newswire.

 “If we receive permission, we will be happy to start buying gold again,” the source added.

 Russia’s central has continued to acquire gold bullion for its own reserves, adding more than 78 tonnes in the last 12 months and rising to 7th place amongst the largest nation-state holders.

 Western Europe’s central banks, in contrast, have so far sold only 4.3 tonnes of the 400-tonne limit set by their Central Bank Gold Agreement this year.

 Running from September, the agreement was first signed in 1999 to cap erratic sales by European governments as the gold price sank to three decade lows.

 “Gold prices are going to generally drop down throughout the year,” reckons Société Générale’s head of commodities research, Michael Haigh, speaking today at a media briefing in Singapore.

 Pointing to possible “price hedging” by gold-mining producers, “They’ll start selling into the market,” Haigh warned, “which puts more downward pressure on gold prices.”

 SocGen’s outlook for gold is in stark contrast to its broader view of the commodities “super cycle”, which Haigh believes will continue for another 15-20 years thanks to “population and urbanization” in emerging Asian economies.

 “But it’s not going to be an upward price for all.”

 Forecast by many analysts to overtake India as the world’s No.1 gold consumer in 2013, China imported its second greatest monthly volume of gold bullion through Hong Kong in May, data showed last week.

 Through the first 6 months of the year, separate data showed Friday, gold bullion deliveries made to traders using the Shanghai Gold Exchange totalled 1058 tonnes.

 That was precisely 50% of the 2012 full-year total.

 The plunging gold price however saw shares in Zijin Mining – the largest gold miner in world No.1 mining nation China – today drop 11% after it forecast “very poor results, below expectations.”

 “The fact that the gold price has fallen is actually going to be very healthy,” said gold-mining fund manager Evy Hambro of Blackrock to Bloomberg last week.

 “We need to see costs taken out of the industry; we need to see the companies stop producing the ounces that don’t make money and focusing on the ones that do.”

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.

There is focus on especially Greece at the Euro Finance Ministers Meeting Monday and Tuesday.

In the US second-quarter earnings season kicks off this week with Alcoa.

Senior Strategist Ib Fredslund Madsen with his take on this weeks most important financial events.

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Video by en.jyskebank.tv

By WallStreetDaily.com

File this one under “Much ado about nothing!”

As I pointed out on Friday, stocks in the most popular emerging markets are getting clobbered. Truthfully, the entire emerging markets space is taking it on the chin right now. Not just Brazil – but Russia, India and China, too.

Case in point: The MSCI Emerging Markets Index is down 10.7% this year, compared to a 13.2% rise for the S&P 500 Index.

The disconnect isn’t accidental, either. As Ruchir Sharma, Head of Emerging Markets at Morgan Stanley (MS), shared in our recent interview, the fundamentals in the United States actually outclass much of the world. (Shocker, right?)

Nevertheless, I’m already starting to hear chatter that the unfolding crisis in emerging markets is going to undercut the bull market here in the United States.

Some even liken the impact of emerging markets on the rest of the world to a worm spreading through bad apples.

Hogwash! And in honor of Myth-Busting Mondays, I’m going to prove it.

Remember the Alamo Euro Crisis!

You’ll recall, in late 2011 and much of 2012, investors worried that the crisis in Europe would sabotage the rally in the United States.

Such a belief wasn’t without merit, either.

As I shared at the time, U.S. companies rely heavily on international sales.

According to Standard & Poor’s Howard Silverblatt, foreign sales recently accounted for 46% of total revenue for S&P 500 companies. Of that, 29% came from Europe. That works out to about $0.14 out of every dollar in sales coming from Europe.

That’s significant enough that any slowdown in Europe promises to create a ripple effect in the United States. Indeed, this time last year, headlines like this one from Reuters cropped up everywhere: “U.S. Companies Blame Europe for Earnings Warnings.”

Did the euro crisis spell disaster for the bull market in U.S. stocks, though? Not at all.

But why bring any of this up? Because it’s necessary to put the impact of a slowdown in emerging markets on U.S. companies into perspective.

Whereas Europe accounts for about 14% of sales for S&P 500 companies, emerging markets only account for about 5%, according to Goldman Sachs’ (GS) David Kostin.

And emerging markets account for just 6% of total profits for U.S. economies. That figure is trending lower, too. Take a look:

The end result? “Weaker [emerging markets] growth poses little risk to S&P 500 earnings,” says Kostin.

Or, more plainly, don’t freak out!

Still scared?

Stick With “Made (and Sold) in the U.S.A”

If you’re still reluctant to believe that the United States can escape the slowdown in emerging markets (with profits intact), there is a solution.

Start looking for companies that derive the overwhelming majority (or all) of their sales from the United States.

Believe it or not, blue chips like McDonald’s (MCD) generate more than 50% of their sales from overseas.

However, an analysis by Bespoke Investment Group reveals that companies with mostly domestic sales exposure are outperforming companies with more than 50% of sales coming from overseas – by an average of five full percentage points this year (16% versus 11%).

Bottom line: The natural tendency is to assume that U.S. companies rely much more heavily on foreign sales than they really do. Now you know the truth. And there’s absolutely no reason to freak out about emerging markets sabotaging the bull market in the United States.

Ahead of the tape,

Louis Basenese

The post The Biggest Myth About Emerging Markets appeared first on  | Wall Street Daily.

Article By WallStreetDaily.com

Original Article: The Biggest Myth About Emerging Markets

By HY Markets Forex Blog

The European markets opened positive on Monday, while investors and the finance ministers in the euro zone are yet to conclude as they discuss Greece last aid tranche worth approximately 8.1 billion euros from its creditors.

The Stoxx 50 gained 1.12% to 2,625.00 just as the market opened, while the French CAC advanced 1.10% to 3,796.30 at the same time. In Germany, the DAX index rose 1.11% to 7,893.10, while UK FTSE 100 gained 0.82% to 6,428.50.

The finance ministers are expected to attend the meeting later today in Brussels, as the final conclusion is expected to be based on the Troika’s assessment of progress from the Greece government on its adjustment program.

Reports from the Federal Statistical Office (Destatis)   showed that the German’s trade surplus were at 13.1 billion euros in May, compared to the previous record of 18 million euros and estimated value of 17.6 billion euros.

The imports in Germany increased by 1.7%, while the exports fell 2.4% in May, according to reports released.

Analysts forecasted a fall of 0.5% for the month-to-month industrial production in Germany for the month of May, compared to previous record of 1.8% in April.

Meanwhile, the President of the European Central Bank Mario Draghi is expected to speak to the European parliament later today, which may hint when the central bank would change the rates from the record low.

Investors have raised concerns that the European market gains may fall if the Federal Reserve (Fed) decided to proceed with cut back of its asset –purchasing program, after the labor data showed that the US economy has improved.

The US data released showed the US non-farm payrolls boosted by 195,000 in the month of June, while the unemployment rate was at 7.6%, according to the Bureau of Labor Statistics.

The post Europe Market climbs as Euro group to discuss Greek’s tranche appeared first on | HY Markets Official blog.

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