Month: September 2013

By Profit Confidential

Another earnings season is upon us and there are already some solid benchmark stocks reporting decent numbers. It remains, however, a very slow-growth environment, and this expectation should be with every equity market investor going forward. The days of three-percent-plus real growth in U.S. gross domestic product (GDP) are gone for the foreseeable future.

FedEx Corporation (FDX) is a worthy benchmark stock. For its first quarter 2014 (ended August 31, 2013), the company did a solid job of increasing its earnings with lackluster revenue growth. Total global sales grew two percent to $11.0 billion. Earnings grew seven percent to $489 million, and the company reaffirmed its full-year outlook with earnings-per-share growth of between seven and 13% over last year’s adjusted results.

Oracle Corporation (ORCL), which is still a good benchmark among blue-chip technology stocks, reported anemic revenue growth, similar to that of FedEx, of two percent to $8.4 billion for its fiscal 2014 first quarter (ended August 31, 2013). Earnings grew eight percent to $2.2 billion. The company’s sales for the quarter were below consensus.

Oracle is still a solid dividend-paying technology stock, but near-term, it’s potential for high single-digit sales growth is stalled.

Also recently reporting was Steelcase Inc. (SCS), with its results for its fiscal 2014 second quarter (ended August 23, 2013). This company manufactures furniture, chairs, walls, and doors, mainly for corporate and government customers. Consolidated sales for its latest fiscal quarter grew only 1.7% to $758 million. Earnings fell to $27.6 million from $29.5 million in the comparable quarter last year. Diluted earnings per share fell to $0.22 from $0.23.

General Mills Inc. (GIS) reported decent first-quarter 2014 (ended August 25, 2013) earnings that were in line with Wall Street consensus. Revenues slightly beat the Street, and the company reiterated its previous outlook for fiscal 2014.

And finally, Adobe Systems Incorporated (ADBE) beat just slightly with its third-quarter earnings results. The company’s been in transition to a cloud-based, subscription revenue generator. Investors bid the shares after the numbers. The stock is at an all-time record high.

But if there is one immediate trend that stands out from early reporting companies, it’s that sales growth is once again anemic. Even those corporations that are beating Wall Street revenues estimates are only doing so by a slight margin, and we’re still mostly talking about top-line growth in the low single digits.

Like last quarter, there’s not much to be excited about with current earnings reports. Once again, the action in the markets is looking low and slow for the foreseeable future. (See “Why Key Stock Indices Can Still Advance in Wake of New Monetary Policy.”)

And still, the stock market is at an all-time high, which (as it’s been all year) is such an odd metric for mediocre financial growth. The monetary expansion continues with no regard to its consequences. As it rarely pays to fight the Fed, this is an equity investor’s market with a monetary backdrop favorable for stocks.

The Fed’s decision to maintain current quantitative easing is a catalyst for near-term gains in equities. But I wouldn’t be loading up on stocks because of it. I’d stick to what corporations say about their businesses. The trend is that business is steady, but barely growing.

Article by profitconfidential.com

By Profit Confidential

You can learn a lot about the welfare of the global economy by looking at global bellwether stocks such as FedEx Corporation (NYSE/FDX), MasterCard Incorporated (NYSE/MA), and Visa Inc. (NYSE/V). These are the companies that tend to ebb and flow along with the action of the global economy, so I generally follow them as a benchmark for some of my market analysis.

FedEx just reported its fiscal 2014 first quarter (ended August 31, 2013) that saw the delivery company beat the Thomson Financial consensus earnings-per-share (EPS) estimate by $0.03 per diluted share. Revenues expanded at 1.9% year-over-year. In my books, the revenue growth, while acceptable, does not suggest a boom in the global economy. The global economy is progressing along at a steady rate.

For 2014, FedEx is predicting EPS to expand at a rate of seven to 13% year-over-year. The estimate is based on U.S. gross domestic product (GDP) growth of 2.1% and 2.6% growth in the global economy. The assumptions are more or less in line with the Organisation for Economic Co-operation and Development (OECD) and International Monetary Fund (IMF) estimates, suggesting that the global economy will continue to grow at a moderate pace in 2014.

The positives of the moderate growth are that inflation likely won’t play a major factor and central banks around the world will maintain their record-low interest rates.

Now, if the assumptions are correct, I would expect the jobs market to improve and corporate revenues to rise, which are two key areas in my view. The U.S. GDP grew at 2.5% in the second quarter, so it looks like the expected growth is on target.

With this in mind, the official unemployment rate used by the U.S. Department of Labor could decline towards the seven-percent level and below in 2014, where we could begin to see speculation of interest rates edging higher. The Federal Reserve said rates will remain status quo until the unemployment rate falls to 6.5%, which likely won’t happen until late 2014 or 2015.

For the global economy, the key will be the progression in China and Europe. If China can drive its domestic consumption, and if Europe and the eurozone can recover from their recession, then we could see a rise in the growth in the global economy and the United States.

A key component to the growth will be consumer spending. Keep an eye on credit card companies such as MasterCard (set to report on October 28) and Visa to get a sense of this.

If the projections pan out, I would expect the stock market to edge higher in 2014, but driven more by stronger revenue and earnings growth than the easy money policies.

Article by profitconfidential.com

By Profit Confidential

After yesterday’s Federal Reserve antics, we were taken by the reaction of one well-known writer, who said, “I didn’t know whether to laugh or cry.” That is truly the most apt phrase for the current situation.

To sum up the bigger picture:

Almost 100 years ago to the day, the U.S. “subcontracted” money and the banking system to third parties. These third parties called themselves the “Federal Reserve” but, of the few unchallenged facts one can determine about the actual ownership of the Fed, it becomes clear they are neither “federal” nor a “reserve.”

As an aside, the only two presidents in U.S. history who fought the central banking system tooth and nail were Lincoln and Kennedy. The original “greenback,” named by Lincoln, was named so because it was “free” money not based on debt. This is a historical fact.

Once the Fed was in place, the U.S. moved from an economy that paid for goods with free money, to an economy that paid for goods with debt or promises. Any doubts about this were completely removed in 1971, when Nixon took the U.S. off the gold standard. However, within a year, by 1972, Nixon had put deals in place with Middle Eastern countries that effectively made the greenback the only way to buy oil. This effectively made the buck the world’s reserve currency, and the U.S. was back on top.

By the 1980s, scholars began to notice that the U.S., as well as other countries that had adopted the central banking template, were in danger of imploding via deflation. The computer revolution of the 1990s delayed the evolution of the deflationary scenario temporarily, culminating in the 2000 stock market crash as expectations exceeded reality.

In the same approximate period, “central planners” loosened the chains that for decades had kept the banks in the role as enablers to the system, and allowed the banks to become deal-makers in their own right. This is now considered part of the paradigm by which the U.S. attempted to transition from a manufacturing to a pure service economy, and the derivative market exploded.

Cynics began to note that, when the economy produced a widget or a loaf of bread, the consumer could actually use the widget or eat the bread. Plus, there were jobs to be had making the widget or growing the wheat for the bread. However, when the economy produced profits through 100% paper trades in the invisible derivative market, the gains (which were indeed real) provided benefit to only a very tiny percentage of the economy, a portion which later came to be known as the “1%.” And there, because of the efficiencies in the banking sector, no new jobs were created or even needed, as the older manufacturing jobs continued to disappear.

This was hardly a viable model. Strange and bizarre attempts were made to artificially boost this new “Franken-conomy” by, for example, encouraging anyone with a pulse to buy a home on credit (the so-called NINJA loans—NO INCOME NO JOB NO ASSETS NO PROBLEM).

This, in turn, created yet another “bubble” or Ponzi scheme, whereby neighbors were flipping homes to neighbors at higher and higher prices. The banking sector, in its new role as Master (not Slave) could not resist taking all the new debt being created in the bubble and re-packaging it into a new type of derivative instrument, and then selling it at a profit to less predatory organizations seeking a higher return.

The system collapsed. Books and Hollywood movies have been done about this event. The current issue of Businessweek right now is 100% devoted to the behind-the-scenes stories of this event. The federal government intervened on a scale never before seen in the history of the modern world and used public money to “bail out” the banking sector on the grounds the sector was “too big to fail.”

The banking sector happily accepted the money and gave much of it back to its own people as bonuses for the year. To this day, no executives have been punished for any of this.

Meanwhile, the public was told this was all in their best interest.

Although the banking sector was now in great shape, the rest of the economy was in tatters. Also, the federal government itself was painfully aware that much of the debt service it owed to foreign countries from the decades prior to the crash would become un-payable if rates of interest on that debt rose or remained high. Although this was never made clear to the public, the U.S. was close to bankruptcy.

The Fed then proposed a solution. It would use its money creation power to intervene in credit markets and purchase its own debt. Even now most Americans still do not understand this process. You owe Visa a lot of money. You are a poor risk. Visa charges you 22% a year on the balance. You call Visa and say that, because you are able to print money under the law, you are going to buy back all your debt from them with new money.

Wait, it gets better. Because you have just created such a strong demand market for your own debt (after all, you are buying it) you suggest to Visa that they should not charge you 22%, which is the rate for a poor risk creditor, but rather one percent, which is the rate for a rock-solid credit risk. Visa agrees, and drops your rate to one percent. As word gets around that Visa now considers you a great risk, and is only charging you one percent, everyone else wants to loan you money (because you are such a great risk) and also offers one percent. Bang! One percent is now the new lending rate because of the key trend-setter.

The new ultra-low lending rates really, really help your pals in the banking sector (who can now make money by reinvesting in any investment with a rate of return higher than one percent, which is most of them!) and also helps lower the service costs on your own payments to foreign creditors. You are happy.

Once again, the public is told this is in their best interest (hah!) and it will bring in a new era of prosperity. But the new era of prosperity does not arrive as planned. Jobs disappear. Manufacturing disappears. More Americans are on food stamps than at any prior time in history.

Flash-forward to September 2013. The Dow Jones Industrial Average “has been well managed.” It is up. Gold has been well managed. It is down. Politicians have been demanding that the “heroin” of the low rates (from the self-buying of debt) be removed from the system, because it is addictive and is stifling what little remains of the capitalist system. You want to do this. You announce you will do it (taper). But the numbers, even after being re-defined many times to the point of insanity—ARE STILL BAD. The experts say that removing the medicine will kill the patient.

Against this backdrop, you surprise everyone by saying the current regime of low or manipulated rates will continue until there is improvement. (Well, not quite everyone. Your “pals” knew what was coming and were able to make millions by front-running key markets. Zerohedge asked in an editorial yesterday, “WHO TOLD THE TRADERS IN ADVANCE?”)

Analysts who read your pronouncement and understood the implications “don’t know whether to laugh or cry.”

And now, kind reader, you understand why.

(Reprinted from Lombardi’s Profit Taker e-Alert issued September 19, 2013.)

Article by profitconfidential.com

By MoneyMorning.com.au

Today’s Money Weekend begins with seaweed.

The Australian reported on Monday that researchers from James Cook University ‘are close to producing a low cost biofuel extracted from seaweed that will be powerful enough to fly a jet aircraft.‘

Intriguing, isn’t it?

The seaweed is a macro-algae. After harvest, it can turn into different products, from biofuel to food, depending on the environment where it grew. 

There’s something even more fascinating. It can grow on polluted water and help clean the degraded site.

The technology and research are still very much in the early stages. But this could prove to be part of a much larger trend, one that is set to shake up major global industry… 

Big Market, Big Problem

That trend is how technology and research can combine to reduce pollution. It’s happening across so many different industries.  

And there is one country where pollution is so chronic it’s estimated that 80% of its rivers cannot support any aquatic life.

You probably already guessed – China.

Regardless of your view on Chinese growth and local government debt levels, tackling the pollution in China surely must be a megatrend of the next decade or more.

It’s already showing up in one industry – automobiles.

Take this from the Wall Street Journal this week:

‘China rolled out a new incentive program for environmentally friendly cars and buses to help battle increasing levels of pollution. Buyers of electric cars can receive up to 60,000 yuan ($9,800) in subsidies, while buyers of certain gasoline-electric hybrids can get as much as 35,000 yuan…The program seeks to "speed development of the new-energy automobile industry, reduce emissions and help control pollution," the ministry said.‘

China is the biggest car market in the world. 

The problem for the Chinese government is that, even with the subsidies, sales of electric cars and hybrid vehicles are a minuscule percentage of the market. According to the WSJ, sales of electric cars were just over 11,000 out of total vehicle sales of 19.3 million.

That’s a lot more regular cars on the road. It’s also a lot of exhaust fumes. As you can see…

Sources: Business Week

One of the problems for the growth of electric cars is a lack of battery-recharging infrastructure across the country. That hinders the growth of the market. That’s a typical problem everywhere, especially in a country as big as China.

Regardless, the automakers have plenty of plans for alternative-energy vehicles on the table. After all, it’s not just China that wants to reduce pollution. It’s a global market and a global problem.

 Over in the US, they plan to double the average fuel efficiency of regular cars in America. By 2025, the benchmark will be 54.5 miles per gallon (5.2L per 100km).

Pollution isn’t a problem with easy solutions. But it is spurring on entrepreneurs to find an answer.

If Kris Sayce and technology analyst Sam Volkering over at Revolutionary Tech Investor are right, there’s one way car manufacturers are tackling this problem in particular that might be the one worth focusing on for investors. 

They make the case that the answer lies in reducing the weight of both electric and petrol cars to make them more fuel efficient. 

A New Material That Could Change Everything

‘When you reduce the weight of a car without changing its engine capacity you get greater power to weight ratio,’ reports Revolutinary Tech Investor in the latest issue.

They continue:

‘Now if you reduce the weight of the car and reduce its overall capacity you get the same performance as before but the added benefit of lower fuel consumption…

‘In the case of electric cars, carmakers need to be conscious of the weight. If carmakers try and run an electric car using a typical car frame it will drain the battery fast.‘

But how do you reduce the weight?

You might remember a while ago we mentioned that carmakers were working with aluminium. It’s lighter than steel.

The problem is aluminium is not as strong as steel. The aluminium solution, even mixed with steel, isn’t ideal. But what if there was a material that could match the strength of steel but increase the fuel efficiency?

Revolutionary Tech Investor says it will be a lightweight material that’s five times as strong as steel and more resilient to extreme temperatures.

The problem until now has always been the cost of producing it.

This is what has Kris and Sam so excited. They’ve identified a company with a proprietary process to produce a unique version of this material that could cater to the automakers (and other industries) without the crippling costs.

That could put a huge wind at its back as fuel efficiency becomes a dominant trend of a trillion dollar industry. That’s a pretty good place to be in anyone’s book.

The even better news is it trades on the ASX. For the full story, click here. 

Callum Newman+
Editor, Money Weekend

From the Port Phillip Publishing Library

Special Report: Are You Waiting for a Real Estate Crash That Isn’t Going to Come?

By MoneyMorning.com.au

13 is meant to be an unlucky number. However, 2013 has been lucky for share investors, with the Australian market up over 10%.

If we hark back to 2012, that year started with investors feeling far from lucky. The uncertainty facing Europe had markets on a knife-edge. Thanks to the ‘unlimited’ and ‘indefinite’ money-printing rhetoric of US and European central bankers, 2012 ended in a state of near euphoria – as highlighted in this Financial Times article:

click to enlarge

The bulls have indeed reigned supreme in 2013.

However the year is not yet over. A little look back at history tells us the number 13 and the last four months of the year have been decidedly unlucky for investors.

In 1974, the S&P 500 index started the year around 100 points. In September 1974 the market fell 35% to 65 points (hard to believe it was ever that low).

From its 1974 low the S&P 500 climbed to 335 points – guess when? August 1987 (13 years later). We all know what followed – October 19, 1987. The day they call Black Monday triggered a fall of 33%.

The share market phoenix again rose from its 87/88 low of 220 points to reach 1520 points in August 2000 (bingo, 13 years later). The tech wreck started the slide and over a year later the market ground its way 46% lower.

Here we are today, 13 years later and the S&P 500 has risen from its 2000/01 low of 800 points to over 1700 points.

Note to superstitious share investors: perhaps you should consider taking some profits while the S&P is riding high.

There is still time for 2013 to be the year the market finally meets its long-awaited fate with economic reality. If this does eventuate, be assured central bankers will cease all talk of ‘taper’ and increase the rhetoric to ‘tamper’ further with market mechanisms.

Besides death and taxes, the only other certainty is that desperate governments and their sycophant bankers will do all they can to maintain the illusion of economic recovery.

Debt and deception are the fraying ropes holding this whole rotten mess together. Yet, for now, the vast majority is happy for the charade to continue. So 2013 may or may not be the year the ropes break and the extent of the deception is revealed.

Lance Armstrong’s deceit also happened to last 13 years (1999 to 2012) so Bernanke and Co. could easily mask their use of Economic EPOs for a little while longer.

Complicit in this deception are various government agencies. Over the past three decades the official reporting mechanisms on unemployment, inflation and other economic indicators have been doctored so much they bear no resemblance to the truth – I refer to them as Michael Jackson statistics.

ShadowStats.com is a website dedicated to ‘keeping the bastards honest’. John Williams (who publishes ShadowStats) produces data using the pre-tampered methodology. Williams’s data shows the US is in its seventh consecutive year of recession and US unemployment rate as 20%.

God forbid if the public knew the real state of the economy. More mushroom treatment awaits the uninformed.

Deficit spending is another part of the deceit. Governments spending money they don’t have creates an illusion of health in an economy. To highlight this fact, look at those European countries that have been forced to adopt austerity measures (live within their means).

All of them are either in recession or depression. This is the harsh reality of the underlying economic conditions in those countries. Governments’ spending money they don’t have (temporarily) hides this reality.

This would not be a major problem if the world were not already awash with private and public debt.

Running annual $1 trillion deficits is why the US continually encounters fiscal cliffs and debt ceilings. The enormity of the debt problem means it just keeps raising its ugly head on a more frequent basis.

Groundhog Day is here again with the next US debt ceiling due to be hit in mid-October. The political players will all muscle up for a very public show of brinkmanship and at two minutes to midnight guess what – the debt ceiling is raised another few metres. Why bother with the whole charade?

Given the lack of political will to address this issue it’s going to continue to fester and at some stage no amount of lying, statistical trickery and useless dollars notes will hide this monstrous gaping wound from the public’s view.

According to Professor Laurence Kotlikoff of Boston University the total US government debt and unfunded pension and healthcare liabilities is approx. $222 TRILLION (this is 14 times the official government debt of $16 TRILLION). Baby boomer retirees are only going to further increase this liability. Clearly this situation is untenable.

• Either welfare and health entitlements are reduced or
• Future generations gladly agree to pay higher levels of taxation to fund the excessive consumption of an era they did not live in or
• Successive US administrations embark on a path of high inflation to dilute the level of debt or
• A combination of some or all of the above.

This dilemma is not unique to the US; it is a problem facing all western governments.

In a token attempt to address this looming welfare disaster and get the US budget back in the black, agreement was reached to ‘raise taxes and decrease spending’ by 31 December 2012.

Remember the US ‘fiscal cliff’ debate dominating the news late last year? As it turned out, it was more like a ‘pothole’. They went straight over the top of it. The following chart from ZeroHedge shows you how much the agreed tax increases will raise compared to the extent of the deficit problem.

After all the posturing nothing really changed and it is business as usual – continue spending more money (courtesy of the Fed’s printing press) than you raise in taxes and keep adding to the official US$16 TRILLION debt pile.

At the time, the compromise to avert the ‘fiscal cliff’ gave Wall Street sufficient reason to push markets higher. Dig yourself deeper into debt and the markets rejoice. Go figure.

However this pattern of behaviour has been repeated time and again throughout the year. The mere hint of restraint sends the market into a temper tantrum. Conversely, confirmation the ‘money candy’ is not going to be withdrawn is greeted with great delight. To be fair, irrational behavior is not confined to Wall Street.
 
Have you ever wondered why rational thought and basic common sense does not prevail in the hallowed halls of power? My guess is rational people are not hypocrites. Without this character trait they are therefore unsuited for high office.

Prior to being elected President in 2008, Barack Obama was a US Senator. In 2006, President Bush requested an increase in the US debt ceiling.

Senator Obama’s response to this request was: ‘Increasing America’s debt weakens us domestically and internationally,‘ and ‘Leadership means that ‘the buck stops here’. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren.‘

In conclusion, Obama said ‘raising the debt ceiling would constitute a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.‘

The following chart shows just how expensive that failure of leadership (hypocrisy) has been and continues to be.

click to enlarge

Another six trillion dollars of debt and seven years later, Senator Obama’s common sense approach was replaced with President Obama warning Congress the markets will go ‘haywire’ if US Debt Ceiling is hit and not extended. My layperson interpretation of this comment is, ‘The markets will throw a big fat tantrum if we don’t keep spending money we don’t have.’

I sincerely hope Obama exercises a more disciplined approach in his parental role than he does with his economic reasoning. Feeding the markets more sugar may provide a short-term feel good, but longer term it leads to decay.

So expect more of the same hyperbole in the coming weeks as the mid-October debt ceiling deadline approaches. The debt sand pile continues to mount up – not just in the US but also in every other major western economy.

The GFC should have been the wake-up call on an era of excess – those responsible for taking us to the brink (Wall Street banks) should have been punished, not rewarded. Instead, it provided the impetus for a bunch of professional academics and spineless, self-serving politicians to impoverish a country while enriching those on the inside.

Time will soon tell us whether the 13-year cycle repeats itself in the next few months or not. However each day this charade of economic stability continues, we are one day closer to it being a very unlucky day for investors who believe you can manufacture prosperity out of thin air.

Regards,

Vern Gowdie+
for The Daily Reckoning Australia

Join Money Morning on Google+

By www.CentralBankNews.info     India’s central bank began to wind up its recent exceptional measures aimed at shoring up the embattled rupee currency, raising the policy rate by 25 basis points to combat inflation while cutting the marginal standing facility (MSF) rate by 75 basis points to ease short-term liquidity conditions.
    The Reserve Bank of India (RBI), which saw the rupee plunge from May through August, also cut the minimum daily maintenance of the cash reserve ratio (CRR) to 95 percent from 99 percent while keeping the overall CRR rate unchanged at 4.0 percent.
    The repo rate under the liquidity adjustment facility (LAF) was raised to 7.50 percent from 7.25 percent, reversing some of the RBI’s rate cuts earlier this year when it was seeking to boost growth. The RBI has now cut its policy rate by a net 50 basis points this year.
    As a consequence, the reverse repo rate under the LAF is adjusted to 6.5 percent and the Bank Rate down to 9.5 percent so the MSF and bank rate are recalibrated to 200 basis points above the repo rate.
    “We believe that easing the exceptional liquidity measures was warranted given that the external environment has improved and given that the government and the RBI have used the time since the measures were put in place to narrow the current account deficit and ease its financing,” the new governor of the RBI, Raghuram Rajan, said.
    The RBI raised the MSF rate – the rate at which banks access funds for emergency needs – by 200 basis points in July as part of a series of tightening measures aimed making the rupee more attractive.
    Following news that the U.S. Federal Reserve was planning to reduce its asset purchases in the second half of this year, the rupee depreciated by some 20 percent from early May through August as investors adjusted their global portfolios.
    Helped by a string of tightening measures, the rupee bounced back in late August and was trading at 62.6 to the U.S. dollar today compared with 68.6 in late August.
    As part of the RBI’s exceptional tightening measures, the MSF became the central bank’s effective policy rate but Rajan wants the repo rate to return to its role as the effective policy rate as policy slowly returns to more normal conditions.
     “Recognizing that inflationary pressures are mounting and determined to establish a nominal anchor which will allow us to preserve the internal value of the rupee, we have raised the repo rate by 25 basis points,” Rajan said.
     The exceptional tightening measures, coupled with the Federal Reserve’s decision this week to delay a tapering of quantitative easing, has given the RBI some breathing room, but Rajan also cautioned that the “postponement of tapering is only that, a postponement.”

    India’s inflation rate has started accelerating as the pass-through of fuel price increases has been compounded by the sharp depreciation of the rupee and rising international commodity prices.
    India’s wholesale inflation rate – the RBI’s preferred inflation gauge – rose to 6.1 percent in August from 5.79 percent in July. The RBI aims to maintain WPI inflation at 5.0 percent by March 2014 while it’s medium-term objective is to keep it at 3.0 percent.
    “As the inflationary consequences of exchange rate depreciation and hitherto suppressed inflation play out, they will offset some of the disinflationary effects of a better harvest and the negative output gap,” the RBI said.
    But while inflation is rising, India’s economic growth is weakening with continuing sluggishness in industrial activity and services, the pace of infrastructure project completion is subdued and new project starts are muted, the RBI said.
    “Consequently, growth is trailing below potential and the output gap is widening,” the RBI said.
    In the second half of the fiscal 2013-14 year, growth could pick up as infrastructure projects are expedited and the government approves investments, it added.
    India’s annual growth rate fell to 4.4 percent in the second quarter of 2013, the 14th quarter in a row with a falling growth rate.

    www.CentralBankNews.info
 
  

Article by Investazor.com

As Wednesday Fed decided to maintain the Quantitative Easing Program in place, we could see the American dollar dropping but indices as DAX, Standard & Poor’s 500, Nasdaq and Dow Jones Industrial Average reaching historical highs. This decision was felt and integrated in the price of gold. Since Ben Bernanke announced a possible change of the stimulus program, we saw the price of gold increasing at a steady pace.

Since the beginning of 2013, gold lost nearly 20% anticipating a reduction in the stimulus program but starting with June, when the possible tapper was announced, gold start climbing, like it encapsulate the uncertainty and lack of trust of the investors, and clearly indicating the continuity of the QE3. Also, Lawrence Summers’s withdrew as a candidate to head the Federal Reserve made the gold climbing as a proof that Janet Yellen has now more chances to assume Ben Bernanke’s responsabilities and to continue the unconventional monetary policy.

If Fed will cut the stimulus, gold is expected to get on an increasing trend, reaching $1400 per ounce while if the stimulus is maintained, gold will oscillate at lower values, most probably respecting the boundaries of a range. Even if by the end of the year the FOMC will meet again, there are poor chances to see the QE3 tapered. Most probably, the decision will be taken by the new chairman of Fed which will integrate the decision in a new strategy to run the American economy.

As St. Louis Fed’s Bullard delivered a speech later today, he expressed his view regarding the stimulus program which is effective and benefic for the economy. He doesn’t see any problem in having Yellen as head of Fed. Also, the fact that the QE3 wasn’t tapered at the last meeting isn’t a surprise for him who doesn’t expect this decision to be taken by the end of this year. Even if they would have decided to taper, $10 billion would have made a difference, in his opinion.

The post Gold is Reacting to News About QE3 appeared first on investazor.com.

By The Sizemore Letter

I hate ObamaCare—but probably not for the reasons you might think.

I’m not an Obama basher, and I consider the latest republican threats to shut down the government unless ObamaCare is defunded to be a carnival sideshow.  But nonetheless, I hate the program and I’d love to see it scrapped.

Why?

Because it is a façade of reform that does nothing to actually fix our broken health system.  Rather than the radical change it is billed as by both its supporters and its detractors, ObamaCare is an incremental reform at best and one that does nothing to address the real reasons for soaring health costs: a system in which the user of health care—the patient—is generally not the payer and in which doctors are compensated for the amount of care provided, regardless of benefit, rather than for actual results.

All of this is made worse by the peculiar American notion that it is the employer’s job to provide health insurance.  Most other Western countries have socialized medicine paid for by the taxpayer.  But don’t think that the American taxpayer gets off easy.   The American taxpayer foots the bill too, albeit indirectly through corporate tax breaks.  The end result is a quasi-socialized model that effectively funnels public money to private insurance companies.  It also makes American labor more expensive than its foreign competitors and wastes company resources that would be better spent maximizing profit on providing social services.

There are other negatives that are underappreciated.  America is rightly proud of its dynamic, flexible labor market, and Americans are unique among Westerners in their willingness to uproot and move halfway across the continent for the right job.   Yet tying insurance to employment locks many Americans into less-than-optimal jobs, and worse, it discourages risk taking.  Given that most small businesses are run on a shoestring budget, losing employer-provided insurance is a major disincentive to the aspiring entrepreneur.  We’ll never know how many small businesses fail or are never even attempted due to the prohibitively high cost of health insurance.

To be fair, ObamaCare didn’t cause these problems, but it does makes this worse with its individual mandate.  Today, an entrepreneur can take his or her chances and choose to go uninsured  in the early stages of a new business when the shekels are tight.  And for a young person without a family to support, that is a sensible option.  But under ObamaCare, that will no longer be possible.  ”Self insuring” is not allowed.

I actually believe that President Obama had good intentions when he created the tax subsidies for low-income purchasers of health insurance.  But good intentions often have unintended consequences.  Subsidizing insurance for low income earners does nothing to address the reasons for it being expensive in the first place, and it actually exacerbates the problem by shielding patients from the true cost of the services they receive.  If there were not a deep-pocketed insurance company or government program to bilk, patients would push back against unnecessary or extravagant costs, and doctors and hospitals would be forced to run their operations more efficiently.

You want real reform?  Outlaw health insurance for everything but catastrophic injuries or illnesses.

Think about it.  You have homeowners insurance for major damage; think fires and tornados.  But you don’t use it every time you need to pay someone to re-caulk your bathtub.  Why should health insurance be any different?  It should be there in the event you need chemotherapy or brain surgery.  But do you really need your insurance to cover a round of antibiotics for strep throat?

Yes, there are some people who cannot afford even basic health care.  But provisions can be made for them.  And in any event, offering free basic care to low-income patients  is still cheaper than the status quo, which sees the uninsured clogging up hospital emergency rooms with non-emergency cases.

The other option, of course, is to go the direction of Canada and the UK and offer fully socialized medicine.  That’s not my preferred solution, but it’s not quite the horror story it’s made out to be in the American press.  I used the National Health Service while a student at the London School of Economics, and I had no complaints.  The UK’s medical services are roughly on par with those of the United States yet cost only half as much as a percentage of GDP. The difference in cost is shocking and indefensible.

And this brings us back to ObamaCare.  I still hate it.  Mr. Obama didn’t create the health care cost crisis, but his attempt at fixing it does nothing to address its root causes.  Until patients are aware of the costs and benefits of services they receive and doctors are incentivized to heal rather than perform a series of reimbursable procedures, there can be no real reform.

This article first appeared on InvestorPlace.

This article first appeared on Sizemore Insights as I Hate ObamaCare

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