Month: August 2013

Article by Investazor.com

As the time of modifying the Quantitative Easing program is nearing, the possible effects started to be analyzed. Jackson Hole Symposium was the main event of the last days as central bankers, finance ministers, academics, and financial market participants from all over the world gathered to discuss the most important issues of the actual economic situation. Even if the man with the answers (Ben Bernanke) missed this even, other important persons came to draw a warning signal. Thereby, we can list Christine Lagarde, Janet L. Yellen and Haruhiko Kuroda.

Another worry that was added to the existing basket of problems is the way that QE3 influences countries from around the world. In the context of tapering this program, emerging markets could be affected. It’s true that the countries that have supported unconventional monetary policies have also been able to maintain a balanced economic climate and financial stability, and the whole system get used with this pulse, but stopping a program that calmed an entire world, may stir things up. This is what Christine Lagarde suggested and tried to draw the attention on the necessity to find the best way to make this change. On one side U.S. is doing well, making its economy to go more fast offers it the power to interrupt this program while emerging countries have to deal with these conditions and find solutions to face new challenging conditions.

Somehow or other, the “September moment” was also confirmed by Jackson Hole Symposium. Ben Bernanke wants to see its job finished until he ends its mandate and the current economic conditions seem to offer him the right moment to end his plan. On the other side of the ocean, the Europe and Japan may still enjoy the ultra-easy monetary policies they have already integrated so far.

The post Tapering QE3 Challenges the Whole World appeared first on investazor.com.

By www.CentralBankNews.info     Israel’s central bank held its policy rate steady at 1.25 percent, as expected, in light of the shekel’s steady exchange rate, inflationary expectations that are slightly below the midpoint of the central bank’s target range and economic activity that is similar to the past two years.
     But the Bank of Israel (BOI) also noted that home prices had begun to rise again and mortgages continue to be taken out in large volumes so it would “keep a close watch on developments in asset markets, including the housing market.”
    Last week the BOI continued its campaign to cool the Israeli housing market, unveiling draft guidelines that cap the share of mortgage repayments out of household income, limits the share of a loan that may have a variable interest rate and bans mortgages in excess of 30 years.
    In June banks granted some 5 billion shekels of new mortgages, up from a monthly average of 4.4 billion since the beginning of this year, and the housing component of the consumer price index rose by 1.0 percent in July, up from 0.3 percent in June, for an annual rise of 3.1 percent.
    This compares with a 0.3 percent rise in overall consumer price inflation in July from June for an annual rate of 2.2 percent, within the bank’s target range of 1-3 percent.
    Last month the BOI had taken note of a slight decline in home prices in April-May but it had also said that it was too early to determine if that represented a change in trend.
   Inflationary expectations of private forecasters rose slightly to 1.9 percent for the next 12 months while expectations based on bank’s internal interest rates eased to 1.5 percent and capital market prices showed unchanged expectations of 1.4 percent, the BOI said.
    Expectations for August inflation average 0.4 percent and expectations for the BOI’s policy rate one year from now rose slightly to 1.3 percent.
    Gauges of economic activity in Israel are being boosted by the recent start of natural gas production, but excluding that effect, the BOI said the economy is expanding at a rate that is similar to the previous two years as higher domestic demand offsets the decline in exports.
    Initial estimates of second quarter growth shows Israel’s Gross Domestic Product rising by an annual 5.1 percent, boosted by the start of gas production, with private consumption up by 6.7 percent while exports declined by 8.2 percent, excluding diamonds and start-up companies. In the first quarter, the economy expanded by 2.7 percent.
    In May the BOI cut rates twice to weaken the strong shekel, but since the bank’s last policy meeting in late July, the shekel has remained largely stable, weakening 0.8 percent against the euro. The shekel’s effective exchange rate has risen by 5.7 percent against the euro since the start of 2013.
   Globally, the BOI said advanced economies continue to show improvement compared “with moderation, and in some cases deterioration, in emerging economies.”
    “Global capital markets operated under the shadow of concerns over the tapering process and there is still uncertainty about when the process will begin, and its strength, ” the BOI said, adding that this uncertainty surrounding the Federal Reserve’s quantitative easing policies is “expected to increase financial market volatility.”

    www.CentralBankNews.info

By The Sizemore Letter

There is no precise or fool-proof way to know that a stock has bottomed out after a large decline.  Successful timing is often more of an art than a science.  All the same, there are certain signs you can look for.  And in my view, one of the most useful signs is the way a stock reacts to bad news.  If a stock stops reacting to bad news, then chances are good that the selling is exhausted.  The less-committed holders have already sold out.

This is where I see triple-net REITs today.  Triple-net REITs are some of the most conservative and stable dividend payers you can find, which is why they became bond substitutes for millions of investors desperate for yield.  So, when bond yields started to rise in May, this sector got hit a lot harder than most.  Prices on some of the most popular triple-net REITs fell by as much as 20-30% from their 2013 highs…at a time when the broader market held up relatively well.

Take a look at the chart above, which includes four of the most popular triple net REITs.  Over the last five trading days, at a time when the 10-year Treasury has yield has continued to push higher—and now yields a few basis points away from 3%–Realty Income (O), Cole Properties (COLE) and American Realty Capital Properties (ARCP) are all flat.  National Retail Properties (NNN) is down slightly, but again, it has reacted far less dramatically than recent weeks.

Does this mean that the bottom is in?  Maybe, maybe not.  Markets are fickle, and there are no guarantees that investors won’t find a new reason to dump these.  Prices are attractive, however, and in my view it makes sense to start aggressively buying.  Each of these REITs pays a dividend in the 5-7% range and I expect all to aggressively raise their dividends in the years to come.

Disclosures: Sizemore Capital is long O, NNN, ARCP, COLE. This article first appeared on TraderPlanet.

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By www.CentralBankNews.info
    Last week three central banks (Thailand, Namibia and Iceland) held their rates steady while Turkey again raised its short-term lending rate to ease the pressure on its currency as investors have become increasingly jittery over next month’s possible reduction in asset purchases by the U.S. Federal Reserve.
    Emerging markets – especially Turkey, India and Brazil – continue to respond to an outflow of capital and currency depreciation through a combination of foreign exchange market  intervention, regulatory or macro prudential measures and interest rate hikes.
    An explanation of why investors have reacted with such force and determination to the Fed’s plan to slowly wind down quantitative easing (QE) came from papers delivered this week to the Jackson Hole Economic Symposium.
   The papers didn’t just dissect the recent and past volatility in global markets, they also made specific proposals on how the Fed should unwind its large-scale asset purchases (LSAPs), why central banks should strengthen their cooperation on exiting QE and how nations can limit some of the negative consequences of the global financial cycle.
   
    Due to uncertainty of how large-scale asset purchases precisely affect economic activity, the Fed has been deliberately vague in spelling out the conditions for increasing or decreasing asset purchases. This contrasts with the specific thresholds it has set for changing the fed funds rate.
    One of the distinguishing features of the Fed’s large-scale asset purchases (LSAPs) is that they focus on longer maturity assets in an attempt to keep those yields low. But yields on longer assets are much more sensitive to expectations than shorter assets, putting the onus on the Fed to control those expectations.
    The consequence of this deliberately vague and flexible stance is that investors have linked a gradual and measured tapering of these purchases – in itself a monetary stance that is looser than ever before – to the much more drastic step of raising the fed funds rate.
    “By being imprecise in the state-dependence of LSAP policy, the Fed has left it to investors to form expectations over the future of LSAPs,” according to a paper presented by Arvind Krishnamurthy and Annette Vissing-Jorgensen.
     “Investors only understand that LSAPs are a tool to be used when the zero-lower-bound is binding. Thus when the Fed communicates that it plans on not using LSAPs, investors assume that the zero-lower-bound will not be binding and that rate hikes will follow,” they wrote.
    Krishnamurhy and Vissing-Jorgensen also proposed a specific plan for how the Fed should exit QE.
    First, it should stop buying Treasury bonds and then sell its portfolio as this would have the least negative impact on economic activity. Secondly, the Fed should sell its higher-coupon, older mortgage backed securities and the final step is halting the purchases of current-coupon housing debt, the area where its asset purchases have had the largest economic impact.
    In his paper, Robert E. Hall was relatively optimistic about the prospects for economic recovery given that most of the factors that led the U.S. into the 2007-2009 crises were self-correcting and were finally improving. However, he also cautioned the Fed against contracting its policy too early and raising the rate its pays on its reserves. 

    Another important point to emerge from Jackson Hole was the Fed’s influence on the movement of global financial assets.
    In her paper, Helene Rey showed how global capital flows, asset prices, credit growth and financial leverage tend to move in sync with the VIX, a proxy for risk aversion in financial markets.
   Rey then looks at the factors that drive the VIX and the global financial cycle and finds that it’s mainly the Fed’s policy stance.
    In his paper, Jean-Pierre Landau touches on the same theme as Rey and finds that the flow of capital from investors’ portfolios has become much more volatile in recent years in comparison with banking flows and is now part of global liquidity.
   Portfolio flows are thus also driven by risk appetite – reflected in the VIX – rather than interest rate differentials. Another recent feature is the growth in funds that focus on emerging markets. This allows investors to easily arbitrage between advanced and emerging economies.
    The ultra-easy monetary policy in advanced economies in recent years means that risk appetite has become much more important in influencing the direction of global liquidity, amplifying the spillover of monetary policy from advanced to emerging markets.
   Landau acknowledges that portfolio flows may be much smaller than direct investment or banking flows, but importantly they represent the “marginal investor, the one that instantly determines the market equilibrium and its price, with huge impact in times of stress when market liquidity dries up.”
    The combination of daily fluctuations in the value of dedicated funds and their limited volume sets up the perfect conditions for runs by investors when risk perceptions shift, much as investors right now are repricing the risk of investing in emerging markets by demanding higher yields to compensate for likely currency losses in those countries faced with high current account deficits.

    Once again, the papers presented at the Jackson Hole symposium were highly relevant to current economic challenges, just like Michael Woodford’s paper last year heralded the popularity of forward guidance.
    If last year is any guide, there are three likely outcomes from this year’s symposium.
    First, the Fed is likely to become much more specific in its guidance around the tapering of asset purchases.
    Second, attempts to manage and control the free flow of capital across borders is likely to rise. Rey showed how the Fed’s policy is transmitted worldwide and she raises serious questions about the benefits countries have derived from the massive rise in cross-border investments.
    Third, central banks worldwide are likely to strengthen their cross-border cooperation in coming years to better internalize the global spillover of domestic monetary policy, especially from advanced economies.

LAST WEEK’S (WEEK 34) MONETARY POLICY DECISIONS:

 This week (week 35) seven central banks are scheduled to hold policy meetings, including Israel, Hungary, Pakistan, Brazil, Moldova, Fiji and Angola.

    www.CentralBankNews.info

The rising bond yields in the US continues to worry investors. They are waiting for new signals about reducing stimulance from the central banks.

The Indian rupee has hit its all time low against the US dollar.

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

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Video courtesy of en.jyskebank.tv

EURUSD also now reversing from our »do or die« level placed at 1.3400, but still need a channel break and impulsive structure (five waves down) from above 1.3400 to make sure we are going lower.

EURUSD 1h Elliott Wave Analysis

For now we are sitting on our hands, no official trades, but we are watching USDCHF, EURUSD and AUDUSD very closely for possible USD long set-ups. But at the moment however, I think it’s too soon for trades, it’s still only Monday and also holiday in the UK, so I believe it’s better to wait on more price action and see it then if USD rally has already began or no, and then go with the flow.

Try EW-Forecast.com’s Services Free for 7 Days – http://www.ew-forecast.com

By HY Markets Forex Blog

The euro started the trading week a little changed against the greenback during the early hours of the European session, as the currency advanced to $1.3880 from $1.3330 in the previous session when the disappointing US housing data dragged the US dollar lower. As of 6:52am GMT, the euro was selling at $1.3366 against the US dollar.

The euro rose to $1.3451, its highest level in over six months. The euro was assisted by the statement released by Bundesbank, which showed that the low rates that were set by the European Central Bank on Monday may not be guaranteed.

In the statement released by Bundesbank it stated “The actual key ECB interest rates will continue to depend on the medium-term outlook for inflation, which is based on expectations regarding future developments in the real economy and on credit and monetary aggregates.”

The ongoing speculation over the Federal Reserve tapering its quantitative easing program later this year, has been affecting the market, as investors focus on the next Fed meeting on September 17-18 for more clues.

The minutes from the previous Federal Open Market Committee (FOMC) gathering, indicated that the policymakers were at ease with the tapering of the bond-buying program by the end of year.

According to discussions that were held in July, Fed members were looking into presenting more specific details regarding the tapering of its $85 monthly bond-buying program, but decided to withdraw from doing so because of the possibility of stirring uncertainty about the policy’s aim.

Weak US Housing Data

The housing sector were disappointed by the biggest monthly fall in over three years. According to the housing data released, the realtors’ contracts closed in 13.4% on some of the new homes, summing up a total number of sold units to 394, 000, the US department of Commerce reported.

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The post Euro Flat Amid Disappointing US Housing Data appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

By HY Markets Forex Blog

Majority of the Asian stocks started the trading week in green for the second time in row, assisted by analysts’ predictions that the Fed may delay tapering its stimulus bond-buying program till December, after the release of the US housing data.

Sales of new houses in the US advanced 13.4% on an adjusted annual rate of 394,000 in July, while the other four regions showed declines, the released government data confirmed. The weak housing data released pushed commodity prices higher, as investors saw it as a indication that the Federal Reserve (Fed) is likely to postpone its tapering of its bond-buying program until December.

Asian Stocks – Japan’s Tax-Hike Worries

Japan’s benchmark Nikkei 225 index was seen at a low 13,636.28 points, declining 0.18%. The choppy trade occurred due to worries on whether Tokyo would proceed with increasing the consumption tax as predicted.

The Prime Minister Shinzo Abe discussed about the proposed tax rise on Monday, with a plan to increase sales tax from5% to 8% from April next year. The construction and real-estate shares rose with Sumitomo Realty & Development by 3.9%. The improvement in the housing market was assisted by the government stimulus and purchases before the expected consumption tax boost in April.

However, the Japanese yen was strengthened, hurting the country’s exporters. Out of the exporters that were affected are Mitsubishi Electric edged down 0.4%, the carmakers Suzuki Motors lost 1.9% and Konica Minolta fell 3.3% as the US dollar still remained under the ¥99-threshold.

Tokyo’s broader gauge, the Topix index fell 0.23% to 1,139.06.

Majority of the stocks in the trading session in China were seen in green, with Hong Kong’s Hang Seng edged up 0.66% to 22,007.30 points, while China’s mainland Shanghai Composite rose1.45% to 2,087.29 points. Shares of China Construction Bank in Hong Kong rose 1.2%, while in Shanghai edged up 0.9%, after the bank posted an increase of 13% in its first-half profit.

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The post Asian Stocks In Green On Weak US Housing Data appeared first on | HY Markets Official blog.

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By Profit Confidential

Precious metals stocks have been slammed by the weakness in spot prices for gold and silver. The strongest sector for resource speculation remains oil. Oil prices are firmly holding above $100.00 a barrel; profitability among junior producers is solid.

In virtually all cases, resource stocks move with spot prices. Many junior oil stocks are trading right near their highs, but they aren’t accelerating with spot prices in consolidation around $105.00 a barrel for West Texas Intermediate (WTI) crude. But the numbers are still good, and it’s not just those companies with exposure to the Bakken oil region; many junior producers are posting solid production and financial growth, and should continue to be good investments.

One company doing well in Colorado is Synergy Resources Corporation (SYRG). This growing oil and gas producer has assets mostly in the Wattenberg Field in the Denver-Julesburg Basin, northeast Colorado.

Currently, the company is operating 218 wells and has ownership interests in 273 gross (219 net) wells. Synergy’s latest quarterly revenues grew 64% to $12.3 million. Average daily production increased to 2,256 barrels of oil equivalent (boe), a sequential increase of nine percent and comparable quarterly increase of 66%.

Being a junior producer, earnings were modest at $3.6 million, or $0.06 per diluted share, but this was a solid gain of 49% comparatively.

A Bakken producer that’s highly liquid on the stock market is Kodiak Oil & Gas Corp. (KOG). This growing company operates in the Williston Basin of North Dakota and Montana, as well as in the Green River Basin of Wyoming and Colorado. (See “How Rising Oil Prices Can Help Your Portfolio.”)

Kodiak’s second-quarter sales were $173.5 million, compared to $85.8 million in the second quarter of 2012. The company sold 2.1 million boe for a gain of 103%. Earnings were $44.3 million, or $0.17 per diluted share, compared to $93.1 million, or $0.35 per diluted share.

So there’s lots of growth in resources, but it’s mostly in oil and gas. The thing about junior resource investing is that it’s always high risk, and spot prices are equally—if not more—responsible for a growing company’s share price action. Even a company with a big discovery and lofty production forecast won’t do nearly as well if the spot prices are moving upward.

This is why growing companies like Kodiak and Synergy are currently experiencing a consolidation in their share prices. Spot prices are doing the same.

If I was to pick one speculative sector of the stock market that I felt had some of the most attractive prospects going into 2014, it would be the junior oil and gas companies. The price of oil is solidly holding at more than $100.00 a barrel and will advance on positive data on the U.S. and Chinese economies. And natural gas has nowhere else to go but up after its long price retrenchment (natural gas is a top buy low/sell high long-term trade).

As a speculator in junior oil and gas companies, valuation is an issue. Growth is growth, but not at any cost. The fundamental backdrop needed for this specific sector to keep on doing well is there. The marketplace is rewarding growing energy companies, and it’s through the drill bit.

Article by profitconfidential.com

By Profit Confidential

I recently had dinner with a friend who has a small business. This person is also an investor and has made some very good profits in the Fed-induced stock market. He is also aware that stocks have reached record heights due to the injection of easy money into the system.

The money made over the past four years in the stock market has not been that difficult, and therein lies the problem I continue to see every day: it has been a free ride in the stock market.

Many investors below the age of 25 probably have yet to experience a bear stock market. Of course, I’m assuming you didn’t have the capital to invest until you were around 21; but then again, based on the debt college students are accumulating, many probably still haven’t played the stock market.

I recall the situation was similar in 1987. Having started my first job at a bank in June of that year, I had debt and spent most of my earnings enjoying the good life. As a result, I was not impacted by the infamous crash of 1987, but I do remember the look on some of the older workers’ faces when the Dow Jones Industrial Average crashed and took with it the life savings of many investors.

So here we are. The S&P 500 and Dow traded at records on August 2. The Dow is down by more than four percent, and based on the investor sentiment turning neutral, we could see more weakness.

Going back to my friend, he asked me what he should do. I say take some profits, as I sense a bigger correction could be in the works for the stock market based on what I’m seeing in the retail sector. (Read “How Red Flags in the Retail Sector Are Threatening U.S. GDP Growth.”)

My friend really didn’t want to dump everything, so I told him to take profits on half of the positions that have seen any gains in excess of 100%. The rationale is straightforward: if you make over 100% and take profits on half of your position, you can let the other half essentially ride as free money. Of course, you should still have a stop in place on the remaining half to be safe.

Another investment strategy is to protect or hedge against a bigger downside move using put options.

Many of you probably already understand the concept of put options: you are basically buying insurance to protect a stock or group of stocks (index) against selling.

You pay the premium for the put options, and you make money on the options if the stock market moves lower depending on the cost of the premium. This helps to offset the loss on the underlying position. Of course if the stock market rises, you are fine and just lose the premium paid. Think of it as buying insurance on your car or home. If nothing happens, you just pay the premium. In the unfortunate situation that your car or home is damaged, your insurance pays the cost of repair. The same thinking forms the framework behind the use of put options.

Article by profitconfidential.com