Month: October 2013

Article by Investazor.com

The most expected indicator of the American labour market failed to bring the expected numbers. Thus, the Non-Farm Payroll was reported at the value of 148k new jobs created last month.  Taking in consideration the last period of time, economists seem to become reluctant when it comes to consider the NFP in the general picture of the economy. At all events, 148 000 new jobs created doesn’t say about the economy that is strengthening but it rather hardly keeping at a pace close to the normal one.

The unemployment rate positively surprised reaching 7.2%, a value last time hit five years ago. Still, the unemployment rate is far from the Federal Reserve’s target of 6.5% required to start increasing the interest rate. All this together with the latest episode consisting of the 2 weeks of government shutdown and the unsolved federal debt are clearly indicating that the American economy is not closing the year on an optimistic tone. Investors are choosing as safe investments the Euro, gold and stocks. Moreover, economists keep postponing the moment of tapering and the 4^th quarter report is expected to show a shrink of the economy with 0.25%.

The post The American Jobs Report Doesn’t Indicate Any Direction appeared first on investazor.com.

By Mitchell Clark, B.Comm. For Profit Confidential

There are countless factors that support the case that the bull market for stocks can continue.

Interest rates are low, inflation is modest, monetary policy is very accommodative, and new initial public offerings (IPOs) are opening up well above their offering prices.

There are even some decent earnings results, which you wouldn’t necessarily expect given the headlines and economic data.

Snap-On Incorporated (SNA) is a $6.0-billion company that sells small tools and equipment to vehicle technicians. The Kenosha, Wisconsin-based company beat Wall Street consensus on revenues and earnings in its most recent quarter.

Third-quarter sales grew 5.8% to $753.2 million, while diluted earnings per share grew 13.5% to $1.43. The stock is up 25% year-to-date and 50% over the last two years.

PPG Industries, Inc. (PPG) is a Pittsburg-based company that supplies coatings and specialty products to industrial customers in the automotive, military, and aerospace industries.

The $24.0-billion company announced record third-quarter financial results. Total sales grew 17% to $4.0 billion, while earnings beat the Street by a wide margin.

And Winnebago Industries, Inc. (WGO) surprised once again by beating expectations on both revenues and earnings. The Forest City, Iowa-based manufacturer of recreational vehicles said that sales in its fiscal fourth quarter (ended August 31, 2013), jumped 32% to $214.2 million. Earnings grew to $10.6 million compared to adjusted earnings of $4.0 million (excluding a one-time tax benefit).

This is the company’s sixth consecutive quarter of increased sales in its order backlog. Management expects gross margins to improve throughout fiscal 2014.

Not everything is rosy, but in many cases so far, those numbers are about a company not meeting Wall Street consensus (Overstock.com, Inc. [OSTK] is just one example). That doesn’t mean there isn’t growth out there.

Corporations are continuing to do what they’re good at—hoarding cash, squeezing costs, and keeping expectations for the future as modest as possible.

Like the second quarter, investor expectations were brought down considerably, so it doesn’t take much for a company’s shares to soar if they slightly beat consensus.

And not all financial metrics have to beat the Street for a company’s share price to take off. Chipotle Mexican Grill, Inc. (CMG), which has been a hot stock over the last 12 months, soared on the stock market after announcing that sales at existing restaurants rose an industry-beating 6.2% during the third quarter. Earnings grew to $83.4 million, or $2.66 per share, compared to $72.3 million, or $2.27 per share. This was below Wall Street consensus of approximately $2.78 per share for the third quarter of 2013. (See “Two Old Restaurant Stocks Offer Investors Growth.”)

The action is the action, and there remains a positive disposition to this market now that there is some near-term certainty from Washington. With several key stock indices pushing new highs, it won’t take much for the stock market to keep ticking higher on a short-term basis.

This article “Third-Quarter Earnings Season Rosier Than It Appears?” originally posted at Profitconfidential

By Michael Lombardi, MBA

Optimism towards key stock indices is increasing each day. The U.S. stock market “seems” to be a safe place, and it’s common to hear stock advisors suggesting we are going higher on key stock indices.

Key stock indices like the S&P 500 are making fresh highs. Google Inc. (NASDAQ/GOOG) has surged above the $1,000-per-share mark. Just take a look at the chart below.

Recently, we heard the “Godfather of Charts,” Ralph Acampora, turn bullish on the key stock indices as well. Not too long ago, he held a very bearish view on them. In August, his stance was that key stock indices like the Dow Jones Industrial Average would decline 20% to 12,000. (Source: Wall Street Journal, October 17, 2013.)

Hold on a second! This all looks too familiar!

Chart courtesy of www.StockCharts.com

Whatever happened to what Sir John Templeton said about the bull run stock markets? If I remember correctly, it went something like this: “They are born when investors are most pessimistic, rise when they are skeptical, mature once optimism builds up, and come crashing down once there’s euphoria.”

It’s almost as if investors have forgotten everything that we saw with the stock market in 2007 and 2008—how it went crashing down after optimism surged.

And remember 1999? Investors were so bullish on the key stock indices that they were investing in companies that did not have any revenues or weren’t going to make money in the long run. After that euphoria, we saw it all come crashing down. Investors forgot one basic principle: when stocks keep reaching new highs; fundamentals really matter when it comes to the stock market.

Have we reached peak optimism on the key stock indices on the current rally?

One of the major factors behind the bear market rally we have seen since 2009 was easy money. It’s still around. I can potentially see key stock indices going a little higher, as the punch bowl is still on the table and I hear the new Fed chairman wants to keep the easy money policies in place as well.

In the short term, key stock indices are showing robust price rises, and that’s what the bear dressed as a bull does best. Unfortunately, take away easy money, and there is not much for stocks to celebrate. That’s why I don’t buy into this stock market rally.

This article Has The Stock Market Reached Peak Optimism? was originally published at Profit Confidential

By George Leong, B.Comm.

There are still many on Wall Street who frown on Chinese stocks and China. When word was spreading that the country’s real estate market was going to implode, China was a cesspool for capital.

Well, I don’t belong in that group of investors. Many of my readers will recall how I remain bullish on China and Chinese stocks in particular. Just take a look at many of the top-performing stocks over the past few weeks, and you’ll see that there are numerous Chinese small-cap stocks charging up on the charts. The buying has been driven by a move to seek more returns in regions, like China, that have largely not followed U.S. stocks higher.

Take a look at the S&P 500, as shown by the red candlesticks in the chart below, versus the Shanghai Composite Index, as reflected by the green line.

The obvious finding is that the S&P 500 has continued its upward move, while the Shanghai Composite Index has been unable to find any rhythm on the chart, based on my technical analysis.

Chart courtesy of www.StockCharts.com

In my assessment, the divergence between the two indices has resulted in a buying opportunity for Chinese stocks.

Since making its initial acquisition in a 20% stake of specialty chemicals maker China National BlueStar in 2008 for $600 million, private equity firm The Blackstone Group L.P. (NYSE/BX) has been steadily involved in buying Chinese companies. Blackstone just signed a definitive merger agreement to buy China-based IT services firm Pactera Technology International Ltd. (NASDAQ/PACT) in a $600-million deal. Of course, the Chinese government, via its overseas investment fund, invested $3.0 billion in Blackstone back in 2007, which clearly is a factor.

The reality is that China continues to hold vast opportunities for investors. The country is not set to implode; in fact, it’s showing decent growth, while the rest of world appears to be struggling.

China’s gross domestic product (GDP) growth expanded at 7.8% in the third quarter, according to the National Bureau of Statistics. (Source: “Overall Economic Development Enjoyed Momentum of Steady Growth in the First Three Quarters of 2013,” National Bureau of Statistics of China, October 18, 2013.) The reading was the highest pace of growth this year, and it runs counter to the views by some pundits who predicted the Chinese economy would only see growth in the five-percent range this year.

In addition, industrial production grew at a healthy 10.2% year-over-year in September. Fixed asset investment also continued to be strong, growing at 20.2% year-over-year in September.

Consumer spending, a key area of the country’s growth strategy to drive domestic spending, continues to rise. Retail sales, while stalling on this side of the Pacific, expanded at 13.3% year-over-year in China in September.

The bottom line: smart investors should consider looking at moving some capital to Chinese stocks for added returns. (Read “Your Portfolio Stopped Growing? Here’s Why You Really Need to Think Chinese.”)

by John Paul Whitefoot, BA

Sometimes, economic forecasts are way off—in a good way. In late 2012, the International Energy Agency (IEA) predicted that the U.S. would surpass Saudi Arabia as the world’s leading oil producer within a decade.

It was announced last week that the U.S. is expected to best Saudi Arabia as the world’s biggest total supplier of oil this year (which includes natural gas liquids and biofuels). In 2013, the U.S. is expected to produce an average of 12.1 million barrels per day, which is 300,000 barrels per day higher than Saudi Arabia and 1.6 million barrels per day greater than Russia.

America’s position as the leading producer of oil and gas has surged as a result of shale oil found in the Bakken fields. According to the United States Geological Service, the Bakken—shorthand for the entire eight-million-acre Williston Basin area underlying North Dakota and Montana—contains 4.3 billion barrels of recoverable oil and gas equivalents. Others predict recoverable oil reserves could be as high as 24 billion barrels.

 Chart courtesy of the U.S. Energy Information Administration; www.eia.gov/oil_gas/rpd/shale_gas.pdf, last accessed October 21, 2013.

Thanks to improved horizontal drilling technology and hydraulic fracturing processes, oil and natural gas producers can drill lengthwise through shale deposits. That means billions of once uneconomically unrecoverable barrels of shale oil are now readily available, helping kick-start the second biggest oil boom in history and turning the U.S. into the world’s top oil producer.

Over the last four years, shale output in the U.S. has increased by 3.2 million barrels per day. This is the biggest climb since between 1970 and 1974, when Saudi Arabia raised its own oil production.

Case in point: in January 2010, the Bakken was producing around 236,000 barrels of oil per day. At the time, many were speculating that oil production in the Bakken would reach one million barrels per day by the end of the decade. This past August, over 911,000 barrels of oil were pumped out of the Bakken each day; that’s a 3.5-year increase of 285%. The truth of the matter is that it could reach a million barrels of oil per day by the end of 2013, or within the first few months of 2014 at the latest. (Source: “ND Monthly Oil Production Statistics,” North Dakota, Department of Mineral Resources web site, August 2013.)

Those looking to diversify their investment portfolio might want to consider looking at oil and gas drilling companies. After all, it’s one thing to find oil but another to have the technology to extract it.

While it’s imperative to do exhaustive due diligence, a good place to start looking is with companies like Precision Drilling Corporation (NYSE/PDS), Nabors Industries Ltd. (NYSE/NBR), and Trinidad Drilling Ltd. (TSX/TDG). They’re three financially solid, profitable companies with great momentum.

The point is that to get more oil out of the ground, whether it’s through traditional rotary rigs or horizontal drilling, you need to develop more wells, both domestically and internationally. And with strong oil prices and a rebounding economy, there are no signs of slowdown in oil and gas exploration companies.

This article No Signs of Slowdown in These Oil and Gas Exploration Plays was originally published at Daily Gains Letter

by Mohammad Zulfiqar, BA

As Congress has come to a decision about the debt ceiling and kicked the can a few months down the road, I hear a significant amount of noise about the U.S. dollar losing its reserve currency status.

With this, I ask: could this really happen anytime soon?

Before coming to any conclusions, let’s dive into the basics. A reserve currency is the currency that is commonly used in the global economy; central banks keep it in their foreign exchange reserves and businesses do international transactions with it. One of the other characteristics of the reserve currency is that it is thought to be able to remain strong and stable over time. Currently, the U.S. dollar holds reserve currency status.

So what’s next?

You see, over the past few years, and especially since the financial crisis, the fundamentals of the U.S. dollar have gone downhill. The U.S. dollar is losing its stability and strength; for example, look at the long-term chart below of the U.S. dollar compared to other currencies in the global economy. You will see there’s a clear downtrend.

            Chart courtesy of www.StockCharts.com

But this is just the picture of what has happened in the past. Going forward, the fundamentals are deteriorating further, and the speed at which it’s happening is picking up the pace as well.

To begin with, we have increasing national debt. It’s not very commonly said in the mainstream, but the U.S. government has the most debt, in nominal terms, than any other country in the global economy. And after Congress came to a consensus, it pretty much promised it would increase further—we will probably see such an increase in January. The debt of the U.S. economy is increasing more than the income—not a sustainable trend.

Then we have the continuous printing of the U.S. dollar through quantitative easing. Currently, the Federal Reserve prints $85.0 billion a month in hopes of economic growth. You have to keep in mind that the more it prints, the lesser the value of the U.S. dollar will become due to its abundant supply.

All things considered, one thing that should also be kept in mind is that the reserve currency changes over time. Those who are familiar with history will know that the British sterling pound was considered a reserve currency not too long ago, before the U.S. dollar took that status after World War II.

It could take many years before the U.S. dollar loses its reserve currency status. But here’s what I think: at their cores, all currencies around the world are operating on the same principle of printing more. Maybe we will need a new currency that is backed by something. But in the meantime, I’d say gold will be able to save investors’ portfolio from all the unwarranted volatility in the foreign exchange markets.

This article How Long Until the U.S. Dollar Loses Its Reserve Currency Status? Was originally published at Daily Gains Letter

By www.CentralBankNews.info     Jordan’s central bank cut its benchmark rediscount rate by 25 basis points to 4.50 percent, it’s second rate reduction this year, citing “recent positive economic and monetary developments, particularly the robust growth in foreign exchange reserves and the contained inflationary pressures.”
   The Central Bank of Jordan (CBJ), which cut its rate by 25 basis points in August for a total cut of 50 points this year, also lowered the rate on its other policy rates by 25 points. The rate on the overnight repurchase agreement was cut to 4.25 percent, the rate on one week or more repurchase agreements to 3.75 percent and the rate on the overnight window deposit facility to 3.50 percent.
    “It is expected that this decision will reduce borrowing cost for both the private and public sectors, which will positively contribute to stimulating aggregate demand,” the CBJ said, adding the lower rediscount rate would be applied to its credit that has been extended to targeted sectors as part of its initiative to provide medium and long-term advances.
    Jordan’s headline inflation rate rose to 5.45 percent in September from 5.04 percent in August and the central bank said in May it expected inflation of 5 percent this year, up from 4.5 percent in 2012 but down from an earlier estimate of 6 percent due to lower food prices.
    Data from the CBJ shows foreign currency reserves of $11.748.4 billion at the end of August.
    Although Jordan’s economy has suffered from political unrest in the Middle East, including the influx of Syrian refugees and lower remittances from Jordanian workers abroad, the country’s economy has been recovering on higher government spending, stronger exports and domestic consumption.
     The economy expanded by an annual 3.1 percent in the second quarter, up from 2.6 percent in the first quarter, and the CBJ’s governor said in May that he expected growth of around 3.5 percent this year, up from 2.8 percent in 2012. The International Monetary Fund projects 3.3 percent growth.
    In addition to the cut in its policy rates, the central bank said the rate on medium and long-term advances to investors would be cut to 2.5 percent from 2.75 percent.
   
    www.CentralBankNews.info

The U.S. Dollar Stuck Ahead of U.S. Labour Market Data

The EURUSD Trading Below 1.3700

The first trading day of the new week was tedious and boring. The EURUSD exercised a kind of fluctuations within 38 points, between 1.3650 and 1.3688. Apparently, speculators are not in a hurry to do anything before the release of today’s data on the U.S. labor market. Thus, the situation remains the same: the bulls need to break through this year`s high of 1.3710 , but the pair may need some correction below to attack this level again. So do not exclude a decline towards the 36th figure. It is better to stay out of the market prior to nonfarm payrolls will be released.

The GBPUSD Retreats to Support 1.6118

The GBPUSD was not very active. The pair slowly crawled until it reached to the support level around 1.6118. As might be expected, the pair has entered a phase of consolidation, which can end today, after U.S. nonfarm payrolls release. In general, a positive sentiment, as well as the likelihood of a return to the current maximum of 1.6259 remain. Nonfarms often provoke surge in volatility. So, it is better not to hasten with the opening of new positions before the release of statistics on the U.S. labor market.

The USDCHF Stays Above the 90th Figure

So far the U.S. dollar in pair with the Swiss franc have failed to stay above the 90th figure and the dollar cannot rise above 0.9044. The pressure on the dollar remains, although it may be corrected to 0.9100-0.9177 before returning to the current low of 0.8967. It is unlikely that the USDCHF may be corrected above 0.9177-0.9220. So approaching these levels should be considered as an opportunity to sell the pair.

The USDJPY Rises to 98.36

The USDJPY was traded with a positive sentiment during the entire trading day and the Asian trading session and rose 97.84 to 98.36. The overall picture remains unchanged: the pair continues to be traded within a range, the output of which will indicate its direction. The data on employment in the U.S. non-agricultural sector tend to have a strong impact on the USDJPY dynamics, so they are out of the market.

provided by IAFT

London Gold Market Report
from Adrian Ash
BullionVault
Tues 22 Oct 07:55 EST

WHOLESALE gold held in a tight $5 range Tuesday morning in London, drifting around $1315 per ounce ahead of delayed data on US unemployment.

 The monthly Non-Farm Payrolls report had been due more than two weeks ago. It was set for release Tuesday after Congress’s 3-month deal on the $16.7 trillion debt ceiling ended the shutdown of government services.

 Alongside gold, world markets in equities, bonds, commodities and currencies also sat tight ahead of the US jobs data.

 Silver prices slipped 1.1% from Monday’s near 2-week high of $22.33 per ounce.

 “If the US September employment report, due on Tuesday, comes in surprisingly robust, it could trigger another sharp reversal in both gold and the US Dollar,” reckons Swiss bank and London market maker Credit Suisse in a note.

 Amongst Western traders, “market participants lack conviction that gold could stage a decent performance going into 2014,” says a note from Russia’s VTB Capital, pointing to “expectations for gradually improving [interest rates] and completion of the Fed’s accommodative policy stance.

 “There is little rationale in inflation hedging or safe haven buying at the moment. No one expects the [gold] market to rally in a similar fashion to the past decade with annual gains in excess of 10%.”

 Positions held through the SPDR Gold Trust – the world’s largest exchange-traded gold fund (ticker: GLD) – shrank again Monday, with a further 11 tonnes shed from the gold needed to back its shares.

 That took the month-on-month change in GLD assets to its worst drop since early August, down 4.4% to a new four-and-a-half-year low beneath 872 tonnes.

 Over in China – the world’s No.2 gold consumer market, and likely to overtake India as No.1 in 2013 – “physical demand currently remains subdued,” says a note from ANZ Bank in Sydney, Australia.

 Because “increasing interest [will show] ahead of Chinese New Year,” says ANZ, “it is unlikely to be evident before December.”

 Meantime in India, premiums on gold bars – over and above the benchmark London price – today held at record highs above $120 per ounce, according to Reuters, as the government’s anti-import rules met increasing demand ahead of the key Diwali festival.

 “Demand is picking up and supplies have dried up,” the newswire quotes Bachhraj Bamalwa of the All India Gems & Jewellery Trade Federation.

 Yet jewelers are struggling to make sales, counters the Economic Times of India from Kolkata, saying that many retailers are using incentives to push jewelry sales.

 “This festive season you can a win a trip to Dubai or get a brand new Skoda with the jewellery you buy,” says the paper.

 Mehul Choksi of the giant Gitanjali chain says gold jewelry sales have fallen 30% compared with the same period in 2012.

 “We do not see a sudden surge in demand coming this festive season,” he says. “The mood is very bearish.”

 “Demand for bullion from the Middle East and Asia remains robust,” says Credit Suisse’s note today, “but we do not expect it to get close to the level of demand for physical bullion that the market experienced” in the first-half of 2013.

Adrian Ash

BullionVault

Gold price chart, no delay | Buy gold online

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can fully allocated bullion already vaulted in your choice of London, New York, Singapore, Toronto or Zurich for just 0.5% commission.

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

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