By www.CentralBankNews.info Morocco’s central bank held its interest rate steady at 3.0 percent in light of inflationary risks that are “slightly tilted to the upside” though inflation forecasts remain consistent with the bank’s medium-term price stability objective.
The Bank of Morocco, which has held rates steady since March 2012, said after analyzing the impact of a new index system of certain petroleum products that inflation is broadly in line with the bank’s forecast from June, taking note of projections that show an average inflation rate of 2.2 percent this year, 1.7 percent in 2014, 1.5 percent in the fourth quarter of 2014, and an average of 1.8 percent over the forecast horizon.
Morocco’s headline inflation rose to 1.9 percent in August from 1.6 percent in July for an average of 2.4 percent in the first half.
Morocco’s economy expanded by 4.3 percent in the second quarter, down from 4.8 percent in the first and the central bank expects full-year growth of between 4.5 and 5.0 percent.
The central bank said Morocco’s trade deficit narrowed by 3.1 percent in August due to lower imports and net international reserves rose by 4.3 percent to 150.2 billion dirhams, representing four months and four days of imports of goods and services.
Investing in Healthcare in the ObamaCare Era
By The Sizemore Letter
Last week I explained why I hate ObamaCare. I won’t get into those details again, but I will explain some of the issues we face as investors.
The biggest issue is simply that of the unknown. Because ObamaCare–officially called the Patient Protection and Affordable Care Act–has so many moving parts, it’s hard to say what its long-term effects will be on the assorted companies that make up the health care sector.
I’ll start with insurance. Given that Americans will now be required to buy health insurance, the industry as a whole should expect to see 48 million new customers (i.e. the number of Americans currently without health insurance). This should be a major boon to insurers like UnitedHealth (UNH), Humana (HUM) and Aetna (AET), right?
Not necessarily. In fact, American Health Insurance Plans—the industry lobby group—spent $102 million trying to defeat the legislation.
ObamaCare will bring a boost to insurance company revenues. But it will almost certainly come at the expense of margins. Remember, some of the currently uninsured are people who are effectively uninsurable, or those with preexisting conditions. These new customers are money losers for the industry.
Muddying the waters more are the provisions regulating the “medical loss ratio.” Under ObamaCare, insurance companies will have to spend at least 80% of the premiums you pay on actual health care expenditures (as opposed to administrative overhead). Or flipping the numbers around, the insurance companies would have to limit their overhead to no more than 20% of their premiums received. Any insurance company that went over these levels would have to pay their customers a rebate. Currently, many health insurers have numbers closer to 25%-30%.
And because ObamaCare give the federal government unprecedented regulatory control over the industry—and given the politicization of health care—it’s hard to see the insurance companies being allowed to fully benefit from any improvements. “Excess” profits will result in calls for premium reductions or rebates.
I’m not defending the health insurance industry. In fact, I dislike these people on a personal level. Give me five minutes alone with the CEO of any major health insurance company, and I don’t know that I would be able to stop myself from brutally kneecapping them with a tire iron. My hostility is a product of years of filling out maddening paperwork and spending a small fortune on premiums for lousy coverage.
But I digress. My point is simply that, over the long term, ObamaCare is not necessarily bullish for health insurance stocks.
The story is a little less ambiguous with for-profit hospital chains, such as HCA Holdings (HCA) and Tenet Healthcare (THC)—both of which are up big this year.
Reducing the number of uninsured patients eases the strain on the emergency rooms and eliminates a large chunk of the hospital’s bad debts. It won’t eliminate them, mind you. There will always be some number of people without insurance—such as those who are habitually unemployed and don’t file tax returns—and some low-income patients may have a hard time paying their deductibles and copays. But it potentially makes a big problem a lot smaller. Doctors and nurses may find some of the legislation’s micromanagement to be costly and cumbersome, but for the hospital companies themselves ObamaCare is mostly a positive.
The most frustrating aspect for an investor looking to allocate funds to the health sector is that politics and regulatory muddle trump economics and demographic trends. It’s great to know that the aging of the Baby Boomers will create unprecedented demand for medical services and devices. But how do you invest accordingly knowing that the profit margins will be taxed and regulated away?
My favorite way to play the sector is via medical office REITs. Doctors face years of bureaucratic hassle in implementing ObamaCare that may affect their take-home pay. But they are still going to pay their rent every month. The rising health needs of the Baby Boomers will create an ongoing need for new medical facilities, and frankly, I’d rather be the landlord than the doctor.
A medical office REIT I particularly like is the Healthcare Trust of America (HTA). The REIT has a growing portfolio currently consisting of 250 properties with a total purchase price of $2.7 billion. It also happens to pay a handsome 5.2% dividend which I expect to see grow in the coming quarters.
One nice aspect of HTA is that it is a young REIT. The REIT was founded in mid-2006 and only began trading in 2012. This means that HTA missed most of the run-up in property prices in the mid-2000s and has comparatively few “legacy” properties purchased at inflated priced.
And as an added sweetener, HTA saw a steady stream of insider buying throughout the summer’s “taper tantrum” that saw the prices of many REITs — including HTA — get hammered. Four company officers bought a combined 33,000 shares worth $343,940 in the month of August alone.
Charles Lewis Sizemore, CFA, is the editor of the Sizemore Investment Letter and the chief investment officer of investments firm Sizemore Capital Management. As of this writing, he was long HTA. Click here to learn about his top 5 global investing trends and get your copy of “The Top 5 Million Dollar Trends of 2013.” This article first appeared on InvestorPlace.
This article first appeared on Sizemore Insights as Investing in Healthcare in the ObamaCare Era
Nigeria holds rate steady, sees lower risk of FX instability
By www.CentralBankNews.info Nigeria’s central bank held its Monetary Policy Rate (MPR) steady at 12.0 percent citing a “benign” outlook for inflation over the next six months and a significant reduction in the risks of currency instability following the Federal Reserve’s decision to delay a tapering of its asset purchases and an improved outlook for financial stability in Europe after the German elections.
The Central Bank of Nigeria (CBN), which has held rates steady since October 2011 and last month introduced a controversial 50 percent cash reserve requirement on public sector deposits by banks, said one of its 12 council members had voted to cut the MPR by 50 basis points.
Despite the stability of the naira’s exchange rate due to the central bank’s “very tight” policy and support during the recent depreciation of many currencies of emerging and frontier markets, the CBN said the Federal Reserve’s eventual tapering of its asset purchases and higher long-term interest rates “portends uncertainties in external conditions for emerging markets and developing economies, including Nigeria.”
“The clarifications provided by the Fed over its QE3 policy brought substantial relief to the financial markets globally and initiated a reversal of the trend in capital outflows from the country,” the central bank said.
The naira weakened sharply in early June but has appreciated in the last two weeks. It was trading at 160.75 to the U.S. dollar earlier today compared with 156.14 at the start of the year.
The CBN said a survey of more than 30 countries showed that the naira had remained one of the most stable, depreciating by only 2.3 percent year-to-day compared with “the massive depreciation in the value of other currencies, such as the Indian Rupee, the Indonesian Rupiah, the Brazilian Real, the South African Rand and the Ghanaian cedi.”
Nigeria’s inflation rate eased to 8.2 percent in August from 8.7 percent in July “in response to the tight stance of monetary policy” with core inflation up 7.2 percent from 6.6 percent in July.
The CNB noted with satisfaction that headline inflation had remained below 10 percent for eight straight months, representing the lowest level achieved over the past five years and the longest stretch since 2008, and that outlook indicates that inflation will remain in single digits for the next six months.
“The Committee was nonetheless, conscious of the potential risks on the horizon, including the possibility of pressures coming from the fiscal activities of the government in the later part of the year, and in the run up to the 2014 elections,” the CBN cautioned.
Nigeria’s external reserves had slipped to US$45.27 billion as of Sept. 19, though the were still up by 9.91 percent from end-September 2012.
However, the central bank said this level of increase was too low “given the relatively high price of crude oil and further underscores the need for much-needed reform of the oil sector.”
The expansion of Nigeria’s economy slowed in the second quarter with the Gross Domestic Product expanding by an annual 6.18 percent, down from 6.56 percent in the first quarter.
“Overall, GDP growth for fiscal 2013 was projected at 6.91 percent, up from 6.58 percent in 2012,” the CBN said.
Pavel Molchanov: How to Make Money with Clean Tech Energy (It Can Be Done!)
Source: Peter Byrne of The Energy Report (9/24/13)
AEIS GTLS ENOC KIOR SZYM Let’s get one thing straight: Clean tech is much more than solar panels. So if you’re squeamish about the Solyndra bankruptcy, it’s time to do some more homework. Raymond James Energy Analyst Pavel Molchanov is following clean tech companies around the world that help utilities avoid rolling blackouts, connect solar systems to the grid and produce biofuels that don’t compete with food crops. Discover these fascinating stories in this interview with The Energy Report and find out which names Molchanov is recommending for short- and long-term profits—as well as stocks to steer clear of.
The Energy Report: A large number of photovoltaic (PV) manufacturing firms went bankrupt during the past year. What is the outlook for solar energy firms?
Pavel Molchanov: Most of the solar bankruptcies that took place in the U.S., Europe and China have occurred among companies that manufacture solar modules. But it’s important to note that a bankrupt company does not necessarily shut down production. About 75% of these companies, as measured by production capacity, have continued to operate, either on a stand-alone basis during bankruptcy or following an acquisition by a strategic partner.
Take, for example, China’s Suntech Power Holdings (STP:NYSE). It was the largest solar manufacturer in the world as recently as 2011. It declared bankruptcy in March, and continues to operate and generate revenue. Solyndra, of course, has been wiped off the face of the earth. But such liquidation is a very rare outcome for large solar companies that take temporary refuge in bankruptcy.
TER: Are bankrupt, producing solar companies attractive investments?
PM: Rule of thumb: Do not invest in a bankrupt company! The broader point is that bankrupt solar companies are continuing to contribute to the overcapacity that plagues parts of the industry. A year ago, the amount of production capacity exceeded demand by a ratio of 2:1. In other words, the industry had twice as much production capacity as there was global demand. Obviously, that is an absolute nightmare. Since 2012, though, overcapacity has been reduced a bit as certain bankrupt firms were liquidated. Meanwhile, demand for solar modules has picked up. My best guesstimate of the overcapacity in the solar industry is about 60%–which is still a challenging situation for any manufacturing industry, but not as bad as it had been.
TER: Please explain what you mean by the term “clean tech.”
PM: Clean tech is an investment theme that comprises a broad set of industries, including solar, wind, biofuels, natural gas fuels, fuel cells, electric vehicles and smart grid. The overarching theme is production and distribution of energy using technologies that are more environmentally sustainable than conventional methods
TER: What are solar inverters?
PM: Inverters transform DC current to AC current and connect a solar system with the grid. Modern inverters are very sophisticated pieces of electrical equipment. The competitive landscape for inverters is much more manageable than for solar panels.
TER: What firms are hot in the solar inverter space?
PM: Advanced Energy Industries Inc. (AEIS:NGS; AEIS:BSX) is the third biggest inverter company in the world behind SMA Solar Technology AG (S92:Xetra) from Germany and ABB Ltd. (ADR:NYSE) from Switzerland. It is the biggest U.S.-based manufacturer of inverters. On average, inverter gross margins are in the 20–30% range, double the margins for panel manufacturers.
TER: Is Advanced Energy a start-up?
PM: Advanced Energy has an interesting history. Until about five years ago, it was barely involved in the solar industry. It was primarily a semiconductor capital equipment provider selling to customers such as Applied Materials Inc. (AMAT:NASDAQ). Through acquisitions and organic growth, Advanced Energy has morphed into much more of a solar company; this year more than half of its revenue comes from the sale of solar inverters.
TER: What other promising clean tech firms do you follow?
PM: EnerNOC Inc. (ENOC:NASDAQ) is a one-of-a-kind company. It provides demand response services to utilities and energy management services to enterprises. About 90% of its revenue comes from utilities and 10% from enterprise customers. For utilities, demand response aims to prevent blackouts in times when power demand exceeds supply. Traditionally, utilities compensated for excess demand by building peak-power plants, which are capital-intensive investments that mostly just sit there and depreciate. By contrast, EnerNOC connects electric utilities with commercial and industrial power consumers, reducing the need to build peak-power plants. It prevents blackouts—most recently in the mid-Atlantic region in September—by carefully controlling and curtailing power consumption, spreading the pain across a broad base.
TER: What happens when a utility signs up with EnerNOC?
PM: The utility assigns EnerNOC a quota of megawatts that EnerNOC’s sales force needs to fill. Commercial and industrial power users in that utility’s region sign up to enter EnerNOC’s network. When the grid is stressed and demand is at the risk of exceeding supply, the utility automatically signals EnerNOC’s computers. The machines take over and reduce power consumption by the commercial and industrial consumers. In an office building, for example, thermostats will go from 72 degrees to 74 degrees in the summer. Most people will not even feel that increase. Or if there are 10 production lines in a factory, one line might be turned off. It is much more controlled and manageable than rolling blackouts.
TER: How does this affect the price of electricity?
PM: The utility pays EnerNOC a fee for having the megawatts available, even if the energy is never utilized. In other words, if the utility does not end up needing any of this demand response, then EnerNOC gets paid anyway. And, best of all, when there are demand response events, and EnerNOC is called upon to activate its network, it is paid extra. About half of EnerNOC’s revenue is transferred to the commercial and industrial power users as their compensation for simply being in the network.
TER: Are EnerNOC’s financial fundamentals sound?
PM: One reason that I like EnerNOC as a stock is it has a high free-cash-flow yield, not just by clean tech standards, but by anyone’s standards. This year, we estimate that EnerNOC’s free cash flow yield will exceed 12%. Next year, it could exceed 16%. These are very high numbers. Because its business model is based on recurring revenue, there is a certain similarity between EnerNOC and the software-as-service platform, which is justifiably popular among investors.
TER: Are you following any natural gas companies involved in exporting liquefied natural gas (LNG)?
PM: Exporting LNG—whether from North America or Australia or Qatar—is an interesting theme, but it is not part of clean tech. What does fall in the clean tech category is the production of liquefied and compressed natural gas for powering fleets of trucks and buses.
There are several companies that participate in this market. They are not all buys, but I am very positive onChart Industries Inc. (GTLS:NGS; GTLS:BSX). Among other things, it makes the equipment that is installed at fuel stations to convert natural gas into LNG for trucking transport. Chart Industries is a diversified business. It has leverage to many other types of gas consumption, not just LNG. It is a profitable company with positive free cash flow. And it has nice leverage to various international markets, especially China, not just North America.
I watch some other companies in the natural gas transportation theme. Clean Energy Fuels Corp. (CLNE:NASDAQ) is a fuel distributor for both compressed natural gas and LNG, but the stock is overvalued right now. If investors are looking for a good trade, I suggest go long Chart Industries and short Clean Energy Fuels. Both companies are connected to the same theme—but one is very well positioned, and the other not so much.
A Canadian company with leverage to this theme is Westport Innovations Inc. (WPT:TSX; WPRT:NASDAQ). It makes engines for natural gas vehicles. It is an interesting company with a differentiated technology, but it is also a very expensive stock and not worth chasing at current levels. I am neutral on Westport for the time being.
TER: What about clean tech consumer products?
PM: There are some public companies that use renewable feedstocks, especially sugar cane, to produce materials that can be turned into cosmetics or nutrition products. Solazyme, Inc. (SZYM:NASDAQ) uses an algae technology platform. It is going into commercial production in the U.S. and Brazil to make oils that can be turned into nutrition and cosmetics products. In the long run, I anticipate that Solazyme will focus more on chemicals and fuels—but for now, it has good traction in the consumer arena.
TER: Are clean tech industries as a whole responsive to political crises like the oil and gas industry is?
PM: One of the nice things about clean tech companies is that they do not have to worry about wars in the Middle East. They do not have to worry about nationalizations. They do not have to worry about oil spills: You cannot spill solar power or wind power. You could spill some ethanol, but that would hardly be the end of the world.
Political risk for these companies does exist, but that is related to governments suddenly changing policies that support the adoption and deployment of renewable energy. For example, in Europe, solar subsidies have been cut, and that has slowed down solar installations in Europe. Conversely, in China, the solar market went gangbusters this year because the government is pushing very aggressively for it.
In the U.S., renewable fuels have historically been politically popular in Washington on a bipartisan basis. The Renewable Fuels Standard, a set of regulations developed by the Environmental Protection Agency, requires the industry to use increasing amounts of biofuels through 2022. Meeting the standards will require increased production of advanced biofuels and cellulosic biofuels, both of which are early-stage industries. Corn ethanol has lately caused some political controversy, but the newer kinds of biofuels have not.
Advanced biofuels can be manufactured from different types of biomass, including sugars, vegetable oils and corn, whereas cellulosic biofuels are made from non-food materials. That means no sugar cane or soybean oil resources are used—nothing that would compete with food production. Cellulosic fuels are based upon switchgrass, miscanthus, wood chips or municipal solid waste, all of which have the advantage of lower input costs.
We also like a company called KiOR, Inc. (KIOR:NASDAQ), which is the only public pure play on cellulosic biofuels. It makes gasoline and diesel, not ethanol, from wood chips. KiOR’s first commercial plant, in Mississippi, began producing earlier this year and is currently in the process of ramping up.
TER: Any final thoughts to share with investors?
PM: Political leaders the world over have almost unanimously concluded that cleaner, lower-carbon, renewable energy should be supported by governments. Europe has historically led the way in solar and wind adoption. Biofuels are much more prevalent in the U.S. and Brazil. China is now becoming a major driver of demand for renewable energy. In markets that some people may not normally associate with renewable energy, such as Thailand, South Africa and Chile, the clean tech sectors are starting to get traction at the political level. All that is encouraging for clean tech investment in the long run. It’s worth keeping in mind that some of these companies are earlier-stage businesses that are a ways off from profitability, so the risk profile of clean tech tends to be on the high side.
TER: Thanks for your time, Pavel.
PM: Cheers, Peter.
Pavel Molchanov joined Raymond James & Associates in June 2003 and has worked as part of the exploration and production research team since that time. He also initiated coverage on the alternative energy sector in fall 2006. Molchanov became an analyst in January 2006. He graduated cum laude from Duke University in 2003 with a Bachelor of Science degree in economics with high distinction.
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1) Peter Byrne conducted this interview for The Energy Report and provides services to The Energy Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Energy Report: None. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Pavel Molchanov: I or my family own shares of the following companies mentioned in this interview: None. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: Chart Industries Inc. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
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Look Beyond Gold for Compelling Risk/Reward Ratios: Michael Curran
Source: Kevin Michael Grace of The Metals Report (9/24/13)
http://www.theaureport.com/pub/na/look-beyond-gold-for-compelling-risk-reward-ratios-michael-curran
Diversify, diversify, diversify—that’s Michael Curran’s advice for metals investors. So if you’ve been obsessively eyeing gold and silver prices, you might want to focus your attention elsewhere in the mining sector, says the Beacon Securities mining research analyst. Nothing wows the market like discoveries, and exploration success in the copper, zinc and uranium spaces are making some shareholders very happy indeed. In this interview with The Metals Report, Curran shares his top speculative picks for a diversified mining portfolio.
The Metals Report: A lot of investors concentrate exclusively on precious metals. Why is diversification something they should consider?
Michael Curran: Because investments focused on exploration success should result in share price appreciation regardless of the commodity, especially when high-grade discoveries are made.
TMR: There are a great many low-price metal stocks today, but how do we find the real bargains?
MC: We concentrate on assets, location, management and balance sheets. We’re looking for assets with potential for high-grade discovery. We’re looking for low political risk in the location of these assets. We’re looking for strong management with backgrounds in exploration and discovery or people who have demonstrated past involvement in success stories. And we’re looking for companies that have enough cash to do exploration in the short term or a combination of assets and management expertise sufficient to raise money, which is not the easiest thing to do in this market.
TMR: What copper-gold speculative plays do you find most attractive?
MC: The first is Colorado Resources Ltd. (CXO:TSX.V). The company’s North ROK project is in northwest British Columbia, near the Alaska Panhandle. It had one pretty impressive drill result back in the spring that took the stock from $0.30 to $1.50.
More recent drilling has been less spectacular in terms of grade, and the stock has come back down. The excitement has waned a bit, but the property remains open, and there’s still potential for future drill results to compare more favorably to the hole that got the stock moving last April.
TMR: North ROK is 15 kilometers from Imperial Metals Corp.’s (III:TSX) Red Chris copper-gold mine. How significant is this?
MC: Very significant. When a neighbor 15 kilometers away is spending $500 million ($500M) to build a very large open-pit mine, it does have implications for the size of deposit that Colorado would need to find.
If there were nothing going on around it, we suspect Colorado Resources would need to find a deposit of similar size to what Imperial has found. But with Red Chris so close, that lowers the threshold for economic discovery. If Colorado Resources finds something small but high grade, then certainly it’s not hard to imagine that Imperial might be interested in something smaller that’s truckable to its processing plant.
TMR: So Colorado is a possible takeover target?
MC: I think it’s too early for that, but I’m sure Imperial is watching the drill results from North ROK. If Colorado gets more results like the first hole—0.63% copper and 0.85 grams per tonne gold (0.85 g/t) over 242 meters, which is about double Imperial’s reserve grade—Imperial would be much more interested.
TMR: What is your second copper-gold play?
MC: Antofagasta Gold Inc. (AN:TSX.V), which is in Chile. We were first interested in the company for its gold play, which is very close to Yamana Gold Inc.’s (YRI:TSX; AUY:NYSE; YAU:LSE) El Peñón mine, a high-grade, narrow-vein gold-silver deposit that’s been in operation since 2000.
More recently, Antofagasta has picked up a very large land package in the heart of Chile’s copper country. This land hasn’t really been explored for several decades and was held previously by a non-copper company. Antofagasta will start to explore it next year. This is an area where a half-dozen very large copper mines are being run by several of the biggest mining companies in the world.
TMR: How do you rate Chile on geopolitical stability and mining friendliness?
MC: Chile is one of our more favorable jurisdictions, especially in South America. It’s been stable for decades. We have seen an increase in the royalty rate, which most people attribute to the devastating earthquakes a couple of years ago, which was required for Chile to rebuild its infrastructure.
TMR: Are Colorado Resources, Imperial Metals and Antofagasta well funded?
MC: Each has $4–10 million in cash. Our view is they have sufficient funds for their current programs and perhaps even through to the second half of 2014.
TMR: Moving on to base metals, what do you like?
MC: After copper, our favorite base metal is zinc. One of the prospective zinc explorers we like isWolfden Resources Corp. (WLF.V, WLFFF:OTCPK). The company is in New Brunswick, not far from the old Brunswick #12 mine that shut down in May. Wolfden is a very early stage explorer, chasing high-grade boulders that are showing grades similar to what the Brunswick mine had.
TMR: The Brunswick mine hosted reserves greater than 100 million tonnes (Mmt) of 9% zinc, 3.65% lead and 100 g/t silver. How close to that would Wolfden need to find to be economic?
MC: The closer the better. To date, the boulders—loose rocks scattered along the surface—are showing as much as 20–30% combined lead-zinc, plus some copper and meaningful gold and silver. These grades actually exceed the reserve grade of the Brunswick mine. But, of course, Wolfden must find where the boulders came from. That’s the short-term challenge, chasing the boulders to their bedrock source.
TMR: We’ve seen a fair amount of activity in New Brunswick of late.
MC: There’s certainly more activity than we’ve seen for the last few years. There are a number of other juniors exploring for both gold and base metals in New Brunswick. Wolfden also has a gold deposit there.
TMR: It’s quite a mining-friendly jurisdiction, is it not?
MC: That’s our view, especially after the closure of Brunswick #12. New discoveries would mean that the miners that have had to move away could then return to New Brunswick.
TMR: No pun intended, but uranium has become a hot commodity again. There’s an enormous amount of activity in Saskatchewan’s Athabasca Basin, isn’t there?
MC: It’s long been the biggest producer of uranium in the world. The focus of attention now is the recent high-grade discovery by the 50-50 joint venture of Fission Uranium Corp. (FCU:TSX.V) and Alpha Minerals Inc. (AMW:TSX.V). Fission just recently announced a friendly merger with Alpha. If you take these companies together, the market’s valuing their new discovery at around $360M.
The previous big discovery in the Athabasca Basin was Hathor Resources, which was bought out in 2012 by Rio Tinto Plc (RIO:NYSE; RIO:ASX; RIO:LSE; RTPPF:OTCPK) for over $650M. High-grade uranium has certainly been highly rewarded by the market.
TMR: Is there a speculative play you like there?
MC: A newly listed company called NexGen Energy Ltd. (NXE:TSX.V). We really like its land position, immediately to the east of both Fission-Alpha’s Patterson Lake South discovery and the Hathor discovery at Roughrider. So NexGen has got two kicks at the can there. In a single small-cap exploration company, that’s as good as you can get.
TMR: Could you talk about the importance of the risk-reward profile in investing, particularly with juniors and micro-caps?
MC: All the companies we’ve talked about have early-stage projects. And it is here that we want to see strong risk-reward ratios. We’re talking about upsides of 100%, 200%, 500%.
When Colorado published drill results that weren’t viewed as being particularly positive, its stock fell close to 40% in a day. But Colorado still has lots of room at North ROK to replicate its early drilling success. That’s why we’re sticking with it.
TMR: Obviously, all projects are speculative until they go into production. But how far advanced must a project be before we stop calling it a speculative play?
MC: When projects get advanced enough so that we’ve got preliminary economic studies on them, and we can do discounted cash flow analysis of what a potential mine is going to look like, that’s when we start thinking about removing the speculative qualifier. Colorado, Antofagasta, Wolfden and NexGen are early-stage explorers without proven discoveries, so they are clearly speculative.
TMR: Not that long ago, we heard a great deal about the “death” of the TSX Venture Exchange. Has the panic subsided, or can we expect a further cull of juniors?
MC: Well, unfortunately, we still see some pain to come. If we look back to 2010–2011, when gold made its run to $1,900/oz, the entry point for new companies was quite low. All a company needed was a property and a pitch, and it could go public, raise money and start exploring. And so we saw the listing of a lot of new junior explorers. Two years later, we can see a great many unsuccessful exploration efforts. The balance sheets of those juniors and micro-caps have been depleted, and they’re finding it difficult to secure any additional financing. We expect a further cull of companies like this, and, in general, we view it as healthy for the overall market going forward.
TMR: Mike, thank you for your time and your insights.
Michael Curran, CFA, is a managing director and a mining research analyst with Beacon Securities Ltd. in Toronto. He was previously a managing director and a mining research analyst with RBC Capital Markets. Curran received the #1 Ranking for Mining and Metals research coverage in The Wall Street Journal’s Annual Best on the Street Survey in May 2013. He holds a Master of Science degree in mineral exploration, a Master of Business Administration and is a CFA charterholder.
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DISCLOSURE:
1) Kevin Michael Grace conducted this interview for The Metals Report and provides services to The Metals Report as an independent contractor. He or his family own shares of the following companies mentioned in this interview: None.
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Armenia holds rate, lower inflation to allow looser policy
By www.CentralBankNews.info Armenia’s central bank kept its benchmark refinancing rate steady at 8.5 percent, repeating that it expects inflation to decline in coming months and this would allow it loosen monetary conditions.
The Central Bank of Armenia (CBA), which raised its rate last month by 50 basis points, said it does not expect any significant inflationary pressures from the external environment and the domestic economy is characterized by weakening demand due to lower private consumption and investment.
In addition, a restrictive fiscal policy is affecting demand, the CBA said.
Last month the CBA also said it expected to be able to loosen its policy as inflation falls and that it expects inflation to ease in the short-term and hit its target range.
In August Armenia’s inflation rate rose by 0.3 percent from July for an annual rate of 9.3 percent, up from 8.52 percent. The central bank targets inflation of 4.0 percent within a 1.5 percentage point band.
Armenia’s Gross Domestic Product expanded by an annual 0.6 percent in the second quarter, down from 7.5 percent in the first quarter.
Hungary cuts rate 20 bps, sees further cautious easing
By www.CentralBankNews.info Hungary’s central bank cut its base rate by another 20 basis points to 3.60 percent, its 14th rate cut in a row, and said “further cautious easing of monetary conditions may follow” due to muted inflationary pressures and a signficant degree of spare capacity in the economy.
The National Bank of Hungary, which has cut rates by 215 basis points so far this year, also said any shift in financial markets’ perceptions of risks associated with the country’s economy may influence the room for manoeuvre in monetary policy.
“Achieving the 3 percent inflation target over the medium term provides scope for further monetary easing,” the bank said after a meeting of its monetary council.
Hungary’s inflation rate fell to 1.3 percent in August from July’s 1.8 percent, continuing the decline since a recent high of 6.6 percent in September 2012, due to subdued domestic demand, lower external inflationary pressures, reductions in regulated prices and the adjustment of inflation expectations.
Government measures to raise production costs are likely to feed through to the corporate sector, the bank said, though the pass-through to consumer prices is likely to be partial due to low demand.
“Overall, inflationary pressures are likely to remain muted over the medium term,” the bank said.
Hungary’s central bank started its easing cycle in August last year to counter slow economic growth and has now cut rates by a total of 3.40 percentage points since then. The rate cuts were in 25 basis points increments until last month when the central bank slowed the pace of easing to 20 basis points due to the cuts already carried out and the volatile conditions in global financial markets.
The central bank expects growth to pick up gradually in coming quarters, helped mainly by exports with the installment of new capacity in the country’s automobile industry and some improvement in domestic demand.
“Overall, demand is likely to remain below the productive capacity of the economy, and therefore the real economic environment is expected to remain disinflationary looking ahead. The negative output gap may close at the end of the forecast horizon,” the central bank said.
In the second quarter, Hungary’s Gross Domestic Product expanded by 0.1 percent from the first quarter for annual growth of 0.5 percent, the first quarter with a positive growth rate since the fourth quarter of 2011.
Forex Traders Use Too Many Indicators
Traders are fond of creating complex systems composed of sophisticated technical indicators, but novice traders often neglect a solid system’s key component: the filter. A system’s filter limits the trader’s exposure to risk while still allowing the system to provide a satisfying number of signals. As such, a filter, coupled with sound money management, can tilt the odds in the trader’s favor in the long term.
One type of filter utilized by many traders consists of a simple moving average set to 100 periods or more. At this periodicity, the moving average presents extreme lag and thus provides a ready indication of the price’s long-term trend.
If, for instance, the 100 period moving average is above the price and the trader’s system produced a buy signal, the trader would disregard said signal. This is because with the price floating below such a long term moving average, the trader can be sure that it is, or has been very recently, trending down. It is therefore likely that a buy signal generated in such circumstances would produce a failed trade.
There are two primary types of filter: traditional technical indicators, such as the moving average and MACD, and indicators that interpret volume data. A forex trader can use any lagging indicator as a filter provided that it illuminates the long term trend. Non-lagging indicators such as the Renko and candlestick signals can be of use so long as the trader is sufficiently versed in them. These filters often complicate matters, however, as they are complete systems unto themselves.
Indicators that interpret volume data, such as the Market Facilitation Index, Acceleration Bands or Accumulation Distribution, can be particularly useful as filters as they illuminate underlying factors that traditional technical indicators cannot show, such as moment-by-moment consolidation.
It is important to note, however, that filters do not increase a system’s accuracy. They merely provide an “opinion” on the system’s signal. If the trader takes the filter’s recommendations faithfully, the net result will be that fewer trades take place over time. With a good system, more of the trades that are taken will be winners rather than losers. Moreover, if the trader is practicing sound money management, they will enjoy a definite advantage over their counterparts who are not using a filter.
For instance, if a trader as a rule always closes a trade either in profit of 20 pips or a loss of -10 pips, they need only secure the former two times out of five to achieve an aggregate profit. A simple filter that can prevent them from trading against the trend—a common cause of losing trades—can improve profitability by culling some of the losers, and improving the ratio of good trades to bad.
Traders deploy different types of filters depending on the particular signal their system generates. A system that utilizes the MACD as its signal generator, operating on the 15 minute time frame, would see benefit from a filter composed of the same MACD indicator but operating on the 4-hour time frame. The second instance of the MACD is taking a wider view of the market, and it can alert the trader to changes in the longer term trend that would undermine their trade.
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Essentially, a good filter causes the chart technician to become aware of a wider flow of data. It can be very tempting to a take a well-tested system’s signal at face value, but doing so is an unnecessary risk that can cost equity in the long run.
The U.S Dollar Continues to Consolidate
The EURUSD Trading Below the 35th Figure
Despite the weakness of the U.S. currency, the EURUSD is not able to continue its growth and still stays in a phase of consolidation. Yesterday the pair`s currency rate declined from resistance of 1.3544 to support of 1.3479. The pair is currently being traded below the 35th figure. The Parabolic SAR is above the price chart on the 4-hour timeframe. The lack of progress in the upward momentum development could trigger a more massive profit-taking and, therefore, leads to pair decrease. In this case, the bears may test the support around 1.3415-1.3397. A drop below would weaken the bullish momentum.
The GBPUSD May Be Corrected Below
The bears` enthusiasm on the GBPUSD has also curbed. The pair hesitantly rose to 1.6072, and then fell to 1.6016. So, now it is under pressure. Most speculators` activity is low. The Parabolic SAR is above the price chart on the 4 hour time frame that can be a precursor to a larger decline in the pair, at least to support around 1.5986-1.5922. Without endangering the uptrend, the pair may be corrected up to 1.5750. To breakout the current highs and rising above the bulls do not have clearly enough incentives, and they are unlikely to appear in the near future. So, it is early to expect its growth.
The USDCHF Drifting Near the 91st Figure
There are no any volunteers to sell the USDCHF from the 91st figure or to buy it. Therefore, during yesterday the pair was traded slightly higher or lower then this level, without being able to move in one direction or another. The bears` inability to traverse through the support and be consolidated lower then it could trigger profit taking and resumption of the dollar. Then its currency rate will rise to 0.9200-0.9218. If it rises, the bearish momentum will be weaken, and traversing through the resistance of 0.9454 would mean formation of base at the current levels, reversal and upward trend development.
The USDJPY Approaching 99.00
Yesterday the USDJPY currency rate traversed through the support at the level of 99.00 and fell to 98.64. Nevertheless, this movement failed to be developed, and today the U.S. is trying to get back to the traversed level. Therefore, uncertainty towards the pairs remains. On the one hand, the bulls on the pair can start to open long positions at the current levels if they have not reached better levels for buying, and then resumption of the uptrend happens. On the other – the bulls` inability to develop upward momentum could trigger profit-taking, and then the dollar will fall to 97.00 at least. We can only wait to see how to market makers behave themselves.
Elliott Wave Forecast For EURUSD and USDCHF
The market has been very slow for the last few sessions, so we suspect that pairs are trapped in corrective price action that will send USD lower in the near-term, particularly against the EUR, GBP and CHF, while commodity currencies such as AUD and CAD could stay under pressure or maybe sideways while metals, oil and other commodities are weakening.
Our focus is still on EURUSD where we see a three wave move from the top which we think its corrective wave (iv) that already tested 38.2% retracement area so uptrend could resume soon up in wave v).
EURUSD 1h
USDCHF is also slow and sideways in 45 pip range which its personality of a corrective price action. As such, pause around 0.9100 area is most likely just another correction within a downtrend. We believe its wave iv) which will send prices down in wave v) towards 0.9050 in this week. The only question is from where weakness will resume; from current prices or from 0.9160 where it’s a 38.2% retracement area.
USDCHF 1h
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