Month: October 2013

Article by Investazor.com

As anticipated, the American Government was saved at the eleventh hour. Following an agreement between Republicans and Democrats, the nation’s borrowing limit will be raised until the 7^th of February and  the Government will reopen until the 15^th of January. As the top priority of the Republicans, it has been decided to maintain the sequesters’ constraints.

The American officials promised to come up with a long term debt plan by 15^th of December, in order to avoid this kind of situations for the future. Now that the promises have been made, nothing was left but to expect the Senate and the Congress to pass the agreement.

The relief of the markets was expressed by the intraday highs of the American Indices but still the reluctance of investors is visible, as this episode questions the confidence in the Unites States’ Government. The level of uncertainty also touched historical highs and seems to remain on an upward trend. Pessimistic voices already occurred, reinforcing the idea that each such chapter brings the American economy closer to a collapse that at some point in the future will be unavoidable. As the mistrust sprouts in the investors’ portfolios, the triple A rating of America looks now as an unfair vote of confidence. Investors expect now the rating agency to take in consideration the recent events.

A positive signal was send by the Bank of American Corp which posted higher than expected profits in the third quarter.  The increased was calculated at 32%, registering a very productive activity and strategic management of its assets during the financial crisis. The Bank’s officials are expecting for the next quarter the mortgage loan production to fall.

The post The Government Shutdown Will Be Avoided? appeared first on investazor.com.

Source: Peter Byrne of The Energy Report (10/15/13)

http://www.theenergyreport.com/pub/na/colorado-floods-highlight-opportunity-in-oil-and-gas-services

Flash flooding in Colorado took a considerable toll, but there is always opportunity in crisis—this time, that opportunity lies in service companies. In this interview with The Energy Report, Jason Wangler, analyst with SunTrust Robinson Humphrey, recounts how emergency service, information technology and small infrastructure-building companies have found a profitable niche in making oil and gas operations safer and more responsive in the event of disaster. He also tips us on some international plays with hidden values and a few firms with great risk/reward profiles in the domestic shale fields.

The Energy Report: Jason, how did the recent flash flooding in Colorado impact the Wattenberg oil field?

Jason Wangler: It was a very nasty flood and all the companies on the ground are working hard to assess the damage. There have been reports of tank leakages and other problems. But the wells were turned off during the flood, so drilling operations were not affected much. The questions that remain are how much work is necessary to fix the roads? And when can the drillers safely turn the wells back on?

TER: Given the ever-present possibility of natural disaster, what type of emergency preparations do oil and gas drillers typically take?

JW: In the past, production companies could not do much to avoid the impacts of major earthquakes and floods. But now, our cellular and software technologies can turn off, edit or suspend wells from remote locations. Noble Energy Inc. (NBL:NYSE) is one of the largest players in Colorado. It can remotely turn off wells without having to put boots on the ground. The world needs safer oil and gas operations and there is a clear demand for improved information technology (IT) in that arena. In addition to advancing IT response capability, most companies have a select group of firms on-call to respond to rig fires and explosions, such as Wild Well Control Inc. (private) and Halliburton Co. (HAL:NYSE).

TER: What are the main operational constraints for companies looking to ramp up exploration in the ever-expanding shale oil fields?

JW: Improving infrastructure and training workers are vital to developing the fields in North Dakota, West Texas, South Texas and in the Ohio-Pennsylvania fields, where the majority of growth is occurring right now. Getting the oil to the surface is one thing, but then it has to be transported to markets in Oklahoma, the Gulf Coast, the West Coast and the East Coast. Sourcing fresh water and sand for drilling is also an issue. The most successful exploration and production companies (E&Ps) have ample capital and liquidity to support growth without constraining themselves too much in case of a downturn.

TER: Are lenders interested in solving these types of infrastructure and transportation problems by shaking loose some capital?

JW: Absolutely. In particular, the private equity markets are stepping up in a big way to fund infrastructure and transportation start-ups. There is a lot of private money out there looking to capitalize on aspects of the shale opportunities that the public markets sometimes do not bother to look at. The public market likes to step in when the infrastructure is already built and earning revenue, with solid earnings before interest, taxes, depreciation and amortization (EBITDA). Often, the privately financed facilities are sold to publicly traded master limited partnerships (MLPs). But you do not see public capital building much in the way of infrastructure from scratch. Public companies are more interested in acquiring already-producing fields linked to accessible markets. After they see cash value pumping at the wellhead, they will jump in to capture returns from producing facilities and pipelines. That is why private equity is increasingly fundamental to early-stage development and where it goes, investors can follow.

TER: How does oil field infrastructure in the U.S. compare to the international E&P space?

JW: Stateside, we are still looking for oil and gas, even though prices are depressed. There is no telling exactly when that will turn positive. And although the infrastructure in the States is not perfect, it is ample and largely available. Internationally, the explorers are hunting for elephants. Again, one of the biggest constraints is understanding how much a company will have to spend to build out enough infrastructure to bring new energy to the market. Internationally, gas prices are much more robust, so finding gas in underdeveloped areas is not a bad thing, because there is such an upside to developing new sources. Companies are focused upon finding large, economic plays for oil, gas or even natural gas liquids (NGLs). There is risk in exploring and developing a region so that the cash can flow. But the rates of return can be phenomenal.

TER: What companies are you following internationally?

JW: One small firm that we like is called Harvest Natural Resources (HNR:NYSE). It has assets throughout the international space. In Venezuela, Harvest is attempting to monetize a major asset. It has a handshake agreement to that effect with a company called Pluspetrol in Argentina. It also has some assets in offshore Gabon, West Africa, and a shale play in Colombia, and several promising assets in Indonesia and China. If it sells the Venezuelan assets, it will be able to focus more on its Gabon wells, which have a lot of prospectivity. For instance, there was recently a Total S.A. (TOT:NYSE) well in the same area that had a very nice result. Harvest is looking to have the Gabon production online in the next 18–24 months, which would be a quick turnaround with potentially significant gains, and Harvest is looking for help to finance its Gabon growth.

International assets are generally a tough sell to investors because investors have a hard time valuing foreign assets. In the States, an investor can look at what firms are producing next door to a certain well, and have a degree of confidence, but it is more difficult to make that kind of assessment internationally. Of course, the international space has many great assets, and Harvest has the expertise to find and develop profitable wells.

TER: What is the shape of Harvest’s debt:equity ratio and cash flow?

JW: Its cash flow is effectively zero. Harvest has producing assets in Venezuela, which it is selling because the Venezuelan government has asked it very politely not to take any money out of the country. It does not get to repatriate the cash flow. The Gabon asset is close to generating cash flow, however.

Harvest’s debt:equity ratio is not bad. It carries $80 million ($80M) in debt. The equity value is $200M. So its debt:equity range is 25–30%. The company intends to pay off its debt with cash from the Venezuelan sale. But the current cash flow, in my opinion, is not the best way to value Harvest, because the true value is in it assets—either for development or for sale.

TER: How can investors make money off of Harvest?

JW: Right now, the stock is trading in the $5-and-low-change range. If the deal with Pluspetrol goes through, Pluspetrol will take over Harvest Natural Resources, and pay about $6/share in cash—and every other asset will be spun off into a new company. So $5.14/share means $6 in cash and a spun-off asset of everything but Venezuela, which has had its share of headaches, anyway. Again, $6/share in cash and about $3/share in new stock is a good return. Obviously, Harvest has to complete the deal in Venezuela, which is not necessarily a walk in the park, but there is ample upside to it.

TER: Why does Pluspetrol, an Argentinean company, want to buy a Venezuelan operation?

JW: In July 2012, Harvest tried to sell the asset to a company called PT Pertamina, the state-owned Indonesian company, for $715M. One of the contingencies of the agreement closing was that PT Pertamina and Indonesia and Venezuela sign off on the deal. But the Indonesians walked away and the stock fell from $10–11 to the $3–4 range, where it languished. It recently popped on the news of the $373M Pluspetrol deal, which is tax friendly because the ability for Pluspetrol to buy Harvest as a whole means that the entire $373M can enter the States. Harvest then can pays off its $80M debt. After fees, there will be $240M left for the equity holders, which, with 40M shares outstanding is $6/share in cash. At that point, the shareholder is responsible for the taxes. This allows the shareholder to get a much larger amount of capital or cash while still having all the other same assets in a more tax-friendly situation.

TER: What other acquisitions or sales are in play with companies that you follow?

JW: Gulfport Energy Corp. (GPOR:NASDAQ) is one of my favorite names. It has a sizable oil sands position through a 25% interest in a company called Grizzly Oil Sands ULC (private). It is expected to bring production online for its SAGD project in Canada before year-end. That will unlock a lot of value and allow Gulfport and its partners to monetize assets through an initial public offering or an outright sale of the company in a year or so.

Bill Barrett Corp. (BBG:NYSE) is taking competitive bids on three different properties—gas assets in the Piceance Basin and the Uintah Basin and oil assets in the Powder River Basin. It plans to monetize one of these three assets to pay down debt in order to keep its liquidity position strong and to reform its balance sheet. It started the year at a debt level of $1.1 billion ($1.1B), and it has vowed to not let that level move any higher from Dec. 31, 2012 to 2013 through utilizing an asset sale.

In the Denver area, Triangle Petroleum Corp. (TPO:TSX.V; TPLM:NYSE.MKT) is diversifying into services under the leadership of Peter Hill, who used to work at BP Plc (BP:NYSE; BP:LSE). Hill saw that hydraulic fracking services are tough to get, especially for a smaller company. Midstream fracking services are effectively nonexistent in the Bakken. Hill decided to expand production and acreage position in the Williston Basin while investing in building infrastructure to move oil to the market. Triangle runs a portfolio approach, which is a bit of a rarity within the industry. There are a few companies that do something similar, but usually they are larger than Triangle. Triangle itself is a self-contained company. It rents rigs and equipment while drilling its own acreage. It has midstream pipes for transporting water, gas, and oil. It fracks for itself and also for third parties.

TER: How is its stock performing?

JW: In the last six months, Triangle’s stock has doubled. It has grown its acreage position. It has continued to see better and better returns on both the fracking business and the midstream transport business. Investors get excited about an asset when it starts producing revenues, cash flow, EBITDA and earnings per share numbers. All of the Triangle segments now produce positive EBITDA. That is a huge win for the small conglomerate.

TER: Are there any other companies that investors should pay attention to?

JW: Resolute Energy (REN:NYSE) has a nice legacy asset in Southern Utah called the Aneth field. It has been producing for a very long time. It gets great oil production out of it. Resolute is free cash flow positive, which is a rarity in this day and age, and a high growth rate in the 5–10%/year range. The company is in the Permian basin and it has purchased 22,000 net acres in both the Delaware and Midland basins, where it is drilling horizontally under the radar of the boom. It should have results in the next couple of months.

TER: Thank you for spending time with us today, Jason.

JW: You are welcome, Peter.

Jason Wangler has over five years of equity research experience focused on the exploration and production and oilfield services sectors of the energy space. Jason previously worked at Wunderlich Securities Inc. and Dahlman Rose & Company before moving to SunTrust Robinson Humphrey. He also previously worked at Netherland, Sewell & Associates, Inc. as a petroleum analyst. He received his Masters in Business Administration from the University of Houston where he was also named the 2007 Finance Student of the Year. He received his Bachelor of Science degree in Business Administration with a focus on Finance from the University of Nevada where he was named the 2003 Silver Scholar award winner for the College of Business Administration. In 2010 he was highlighted as a “Best on the Street” analyst by The Wall Street Journal and has been a guest on CNBC.

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DISCLOSURE:

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.

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3) Jason Wangler: 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: None. 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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London Gold Market Report
from Adrian Ash
BullionVault
Weds 16 Oct 08:05 EST

LONDON GOLD moved in a $10 range Wednesday morning around $1281 per ounce – the early August low, down more than 10% from that month’s peak – as both the US House and Senate were due to meet in what headline writers called “a last ditch attempt” to resolve the government’s debt-limit deadline, set for tomorrow.

US debt will likely be downgraded from its AAA status, the Fitch ratings agency warned yesterday, if the government hits a technical default when it reaches the current debt ceiling of $16.7 trillion on Thursday.

The US debt downgrade by S&P in summer 2011 is widely credited with helping investors take gold to record highs above $1900 per ounce.

US debt sales scheduled for Wednesday included $68 billion in 1-month Treasury bills.

Prices for outstanding 1-month T-bills fell early Wednesday, pushing their yield up to 5-year highs of 0.37% annualized.

“We feel that the onus of providing the countervailing deficit [in trade, to balance export surpluses worldwide] will eventually fall on the United States,” Reuters today quotes Deutsche Bank strategist Sanjeev Sanyal.

US deficits will continue to offer the rest of the world’s “savings glut” a home in US Treasury bonds, the newswire explains, extending the huge central-bank reserves already seen in Japan and China.

 Sanyal has long argued that “the Dollar will most likely remain the dominant global currency long after the US has been [economically] surpassed,” pointing to the persistence in world trade of Roman coin, Spanish silver and British Pounds after those empires began their decline and actively devalued their currencies.

The Chinese Yuan today hit a new record high vs. the Dollar for the third session running.

With gold rallying 2.9% at one point from yesterday’s sudden 3-month low, world stock markets slipped.

“If the deadline is crossed, it could send gold higher,” says Swiss investment bank UBS analyst Daniel Morgan. “But that would be combined with other financial market moves that would exert a lot of pressure on policymakers to find a solution.

“I wouldn’t be looking to buy gold on the basis of this short-term debt ceiling issue.”

“It is inconceivable,” says the daily note from brokers INTL FCStone, “that the politicians in Washington will come up empty-handed.”

That makes next week’s US Federal Reserve meeting “about the only source of support” for gold.

 Speaking Tuesday, Dallas Fed president Richard Fisher said “I personally would have a hard time arguing for us to dial [quantitative easing] back.

 “My personal opinion is that [tapering QE is] not in play. This is just too tender a moment.”

 “Extended spending/quantitative easing augments our constructive view on gold,” says a note from Japanese financial group Nomura.

 “[So does] tail-risk potential from a US government default, a low-probability outcome, but a noteworthy associated non-linear impact.”

Meantime in India, domestic gold prices rose to record highs above international benchmarks as local shortages worsened thanks to the government’s strict anti-import policies and the failure – so far – to mobilize existing Indian holdings for resale through gold banking deposits.

 Indian premiums over London quotes today hit $100 per ounce, according to dealers, up from $40 only a week ago.

 “There is a little demand due to festivals,” says Bachhraj Bamalwa of the All India Gems & Jewellery Trade Federation. But “there are no supplies in the domestic market.

 “What little supplies that come, go to exporters,”

 The Rupee edged higher against the Dollar on Wednesday morning, and the British Pound also jumped, hitting a 1-week high above $1.60 after new data showed the UK’s jobless count falling faster than expected in September.

 Wednesday morning’s London Gold Fix still rose £10 per ounce from Tuesday AM’s near-2013 low of £787, the lowest price in Sterling since end-June’s 3-year low.

 UK wages meantime rose only 0.8% on average this summer from a year earlier, separate data said Wednesday.

 The slowest growth in average UK earnings on record, that was less than one-third the pace of consumer-price inflation, reported Tuesday at 2.7%.

 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.

Article by Investazor.com

Chart: XAUUSD, Daily

The price of gold started to fall at the end of august. In less than 2 months it touched a low at 1251$ per ounce, marking a loss of 12.6% from the high of this second half of 2013. The down trend seems to have lost its power with every swing low and yesterday the price has drawn a reversal candle, Hammer.

Looking at the form of the down trend on both, candle stick chart and line chart, we can observe that the price has drawn a Falling Wedge. This pattern usually signals a reversal. A breakout through the upper line of the price pattern it would be enough to confirm a rally. The price target of this Wedge sits around 1400 dollar per ounce.

Even though there are bullish signals, traders should wait for a clear confirmation in the price action. If the price will continue to make new lows, than it means that investors have already set their mind and the down trend might continue all the way to 1200$ per ounce.

The post Gold Signaling Reversal, Target 1400$ appeared first on investazor.com.

By Michael Lombardi, MBA for Profit Confidential

While I avidly follow the actions of central banks to see where the gold bullion prices may be headed next, when I look at them today, their actions are speaking louder than words.

Central banks have pretty much stopped selling gold bullion, which is very important. In 1999, a number of central banks in Europe formed an alliance and agreed that they would not sell more than 400 tonnes of gold bullion per year. The agreement was called the Central Bank Gold Agreement (CBGA). In 2004, the CBGA was renewed again; this time the limit was 500 tonnes. Once again, it was renewed for another five years in 2009, and the limit is back to the sale of no more than 400 tonnes of gold bullion per year.

The chart below shows how much gold bullion the central banks in Europe sold in each period of the CBGA. (Source: World Gold Council web site, last accessed October 11, 2013.)

* Sales are until 2013.

Notice anything different? The central banks in Europe have put the brakes on their sales of gold bullion. In fact, from September 27, 2012 to September 26, 2013, these central banks only sold 5.1 tonnes of gold bullion! This is hands down the lowest amount sold since the agreement started in 1999.

When it comes to stocks, if owners of a stock aren’t selling and there’s a significant number of buyers who want to buy, the price of the stock usually goes up as the simple rule of economics come into play: supply and demand.

Sadly, when it comes to gold bullion prices, this is not the case. Gold bullion prices are actually going down despite less supply and more demand. The price action in the gold market doesn’t make sense. What if all the conspiracy theories I keep reading about in respect to gold bullion prices being manipulated are right?

As I ponder manipulation in the gold bullion market, I heard recently that the U.S. Justice Department is looking into manipulation in the $5.0-trillion-a-day foreign exchange market. Traders in big banks around the global economy are accused of manipulating key exchange rates. (Source: Reuters, October 11, 2013.) If the biggest market in the global economy can be manipulated, why can’t the gold bullion market be manipulated?

I’m sticking to my guns; the depressed prices of well-managed senior and junior gold-producing companies are a screaming opportunity for investors.

By WallStreetDaily.com

I routinely get railed for my optimistic bias. But this week, I’ve been receiving an inordinate amount of fan mail, expressing the same disgust.

They all go a little something like this…

“The nation is on the brink of total collapse. Yet you’re out issuing bullish memes? How could you possibly be so ignorant? I’m unsubscribing from this nonsense immediately!”

I’ll miss you. Seriously. But I’ll be here to welcome you back with open arms once you realize it has nothing to do with ignorance.

It has everything to do with ignoring what Peter Lynch appropriately deemed “background noise” – events that ultimately have no bearing on our long-term investments. Instead, I focus on meaningful market information that does.

With that in mind, there’s a serious bullish undercurrent in the market that warrants turning a blind eye to the tussle in Washington and staying the course.

So whether you’re a bull, bear, or flat-out confused, listen up…

Small Caps Breaking Out

There’s no better leading indicator than small caps.

Or as Sam Stovall, Chief Equity Strategist at S&P Capital IQ, said, “We found that small-cap stocks, as long as we’re in bull market mode, tend to be in a leadership position.”

Guess what? They’re leading.

At the first whiff of an accord between Republicans and Democrats on Monday, calm returned to the broader market. The S&P 500 held its 50-day moving average support line.

Small caps, on the other hand, did much more than just hold firm. They broke out. In fact, the Russell 2000 Index surged to a new all-time high.

If you’re an institutional buyer or hedge fund manager ignoring small caps right now, well… you might lose your job!

Small caps will continue to drive the market for the foreseeable future, too.

As we all know, small caps tend to be the most sensitive to the domestic economy. So if politicians really posed a long-term threat to the economy – and, in turn, the bull market – small caps would be sinking, not soaring.

That’s not happening.

In fact, over the last six months, the performance gap between small caps and the S&P 500 actually widened. After trading neck and neck for the year, small caps are now up 20%, compared to a 10% rise for the S&P 500 since April.

Now, before the week is out, we’ll be releasing our latest issue of WSD Insider, which reveals two more bullish undercurrents in the market that also warrant your attention right now. To discover what they are – along with the latest small-cap stock I’ve uncovered to capitalize on the situation – sign up for a risk-free trial here.

Ahead of the tape,

Louis Basenese

The post A Bullish Undercurrent That’s Impossible to Ignore appeared first on Wall Street Daily.

Article By WallStreetDaily.com

Original Article: A Bullish Undercurrent That’s Impossible to Ignore

By www.CentralBankNews.info     Thailand’s central bank held its policy rate steady at 2.5 percent, as expected, saying the Thai economy was stabilizing and should gradually recover, and the current accommodative policy stance should support “economic recovery in the periods ahead, given uncertain global economic and financial conditions.”
    The Bank of Thailand (BOT), which cut its rate by 25 basis points in May amid growing economic risks and a rise in the baht currency, said its monetary policy committee had voted unanimously to maintain the policy rate. Last month one committee member had voted to cut the rate and at today’s  meeting one member was absent.
    The BOT said the economy had expanded more slowly than previously assessed but there have been signs of improvement in some sectors and exports have begun to recover in line with better global demand while private consumption and investment have stabilised.
    “The outlook points towards a gradual growth recovery, supported by accommodative financial conditions,” the bank said, adding that key downside risks stem from the uncertain global economy and a delay in fiscal disbursement for infrastructure projects.
     Thailand’s Gross Domestic Product contracted by 0.3 percent in the second quarter from the first, the second quarterly contraction in a row, for annual growth of 2.8 percent, down from 5.4 percent in the first quarter.

    Thailand’s inflation rate eased to 1.42 percent in September from 1.59 percent in August while core inflation was 0.61 percent, in the low end of the BOT’s core inflation target of 0.5 to 3.0 percent.
    The BOT also mentioned that household debt had decelerated somewhat and inflation had edged lower due to subdued production costs and domestic demand.
    The BOT noted the downside risks to the global economy with the U.S. expanding at a moderate pace on the back of private consumption. But while the impact of the U.S. government shutdown should be limited, “failure to lift the debt ceiling poses a substantial risk to global financial and economic stability.”
    “The region remained exposed to global market volatility amid uncertainties about the timing of QE tapering and the US fiscal impasse,” the BOT added.
    The BOT did not make any references to the Thai baht, which has been largely steady since mid-September, trading at 31.25 to the U.S. dollar today, down 2.0 percent for the year.
    From the start of the year to late April the baht rose by almost 6 percent, hitting a high of 28.6 baht to the dollar on April 26. But it started to depreciate after Thai authorities voiced their concern over the impact of the strong bath on exports and continued to drop following May’s rate cut.

    www.CentralBankNews.info

AUDUSD stays above a upward trend line on 4-hour chart, and remains in uptrend from 0.9280. As long as the trend line support holds, the uptrend could be expected to continue, and next target would be at 0.9650 area. On the downside, a clear break below the trend line support will indicate that lengthier consolidation of the longer term uptrend from 0.8847 (Aug 5 low) is underway, then deeper decline to 0.9300 area to complete the consolidation could be seen.

Provided by ForexCycle.com

By MoneyMorning.com.au

Too many investors fear the wrong thing in investing.

They fear something that’s good for them.

Something that could make them a lot of money.

When we tell you what it is you probably won’t believe us, but it’s true.

They actually fear making money.

We’ll explain what we mean…

Since stocks began to soar last November we’ve heard a constant stream of the same message – ‘Don’t buy stocks, the market is about to crash.’

We won’t argue with the reasons behind the message.

In fact we agree with it almost entirely. Stocks will fall…at some point. But it has been almost a year since the rally started.

And despite a few bumps (including one or two big bumps) the Australian stock market is 19.8% higher than it was last November.

Missing Out on Fat Dividend Cheques

So why is it that so many investors fear making money?

The way we see it, many investors get so caught up with thinking about the worst thing that could possibly happen that they become too worried to think about the positives.

The sad thing in the case of the stock market is that many investors have missed out on the potential for double-digit gains, and the accompanying dividend cheques.

So instead they’re still in cash…at what has been an ever-decreasing interest rate.

It’s important to remember the point of investing and what it means. You invest because you want to make money. But investing comes with the risk of losing money too.

The key is to weigh up the odds of making money versus the odds of losing money. If the odds are in favour of making money then you should invest. If the odds are against making money then maybe you shouldn’t invest.

This is what we mean about investors being too scared to make money. Because any way you slice and dice things during that time, the odds were always in favour of investors making rather than losing money.

We’ll Ask You One Question

And we’re not using hindsight here. We’ve said that in one way or another all along.

If you’re new to Money Morning feel free to scan through the archives. You’ll see we’ve consistently said this is a buyer’s market.

There was a simple reason. There was no way on Earth that anyone in charge of fixing interest rates would allow rates to rise and therefore create a negative environment for bond and stock prices.

Yet that didn’t stop many investors from fretting about what would happen when interest rates eventually have to rise. Even though rates may not rise for another two, three or five years.

And if things are really bad interest rates may not go up for another 20 years – see Japan.

Even now, as bad as thinks look in the US, you still have to play the odds. So what are the odds right now?

Well, let’s stop and think about it. We’ll ask you one question…

Do you think US politicians will come to an agreement to prevent a default?

If you answer yes, then that can only be a positive result for the market. In that case you should continue to hold and, if you’re so inclined, buy stocks.

If you answer no, then that can only be a negative result for the market. In that case you should sell your stocks and stay in cash.

But be realistic with your answer. If you answered no, do you honestly believe that any politician will do anything to allow the government to default on its bond payments?

Think about why politicians enter politics. They do it so they can gain office. Trust us, there are very few votes to be won by bringing on a collapse of the US bond market and the US dollar.

Don’t Miss This Chance to Boost Your Wealth

So instead of worrying about what may happen years into the future and letting it impact your investment decisions today, we say that it’s great you understand the long-term fall-out of current policies, but don’t let it cloud your need to invest and make money today.

Because that’s one of the most important things. Even with all the nonsense going on in Washington DC, stocks are still moving. And in most cases they’re moving up.

We’re talking tiny small-cap stocks as well as big blue-chip stocks. We’re talking technology stocks with innovative ideas as well as solid industrial stocks paying a handsome dividend.

But after all we’ve said today, if you don’t believe us, maybe you’ll believe the market. We’ll put it this way. The Australian market hit an intra-day high of 5,314 points on 27 September. The next day the markets panicked as fears spread of a possible US debt default.

Yesterday the Aussie market closed at 5,259.

In other words, for all the talk and fear and panic over the US government potentially defaulting on its debt obligations, the Australian market has lost a grand total of 55 points. That’s just over a 1% fall.

And even if the market falls by another 50 points today, you’re barely looking at more than a 2% drop from the peak.

As we say, take notice of the problems facing the world economy, and build long-term strategies to combat these problems into your investing gameplan.

But whatever you do, don’t let the bad news consume you. Don’t lose focus on the great opportunities that exist in the Aussie market today.

Cheers,
Kris+

From the Port Phillip Publishing Library

Special Report: UNAVOIDABLE: Australia’s First Recession in 22 Years

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By Chris Vermeulen – TheGoldAndOilGuy.com

Last week on October 8^th the financial market experienced a broad based sell off. Every sector was down with utilities being the only exception.

The individual leadership stocks, which are typically small to mid-cap companies (IWM – Russell 2K) that have a strong history and outlook of earnings growth, were hit hard as well.

Whenever the broad market experiences a price correction, one of the most important factors I analyze is how well leading stocks hold up and show relative strength to the broad market.

So, where does this leave us going forward?

When stocks that have been leading the market higher and only pausing during market corrections in the S&P500, Dow, and NASDAQ, it’s a positive sign. This tells us investors and big money continues to flow into the risk on assets (stocks).

Conversely, when these leading stocks/sectors begin succumbing to the selling pressure of the broad market, it quickly grabs my attention and tells us it’s time to be aware that a major top may be forming.

It looks as though the broad market rally is just barely hanging on. If the leading stocks and sectors begin breaking below their 50-day moving averages, my proprietary SP500 Market Timing & Trading System will shift to sell mode and things could get ugly for those who do not know how to trade a bear market.

Weekly Relative Strength Showing Negative Divergence

This chart has two important things I would like to point out. First is the fact that the RSI has being overbought twice in the past three years with the most recent one taking place a few months ago. The last time this took place the SP500 had a very strong correction.

The second insight the RSI is providing us with is the diverging price and relative strength as shown with the purple lines on the chart below. This is telling us that the power/momentum behind the market is slowing.

Daily Bullish Percent Index – Shows Negative Divergence

I always prefer to watch and analyze the NYSE as it’s the big board where all the HUGE money is flowing from traders and investors. The chart below clearly shows that less stocks are moving higher as seen with the purple bullish percent index line. With less stocks making new highs, yet the stock market continues to climb this is a warning sign that this bull market is slowly running out of steam.

Technology & Financial Sector Are Rising But For How Long?

Two very powerful sectors are holding up well but once they start to breakdown from these chart patterns things could get ugly real quick. Our 3x ETF trading newsletter becomes very active in bear markets as the upside potential is much larger.

The XLK technology sector looks to be forming a bearish rising wedge. If/once it starts to slide it will have a strong impact on the broad market.

Financial Sector XLF

The recent price action of scattered trading ranges looks to be similar to the top we saw in 2011. If this is the case then we have bearish head & shoulders pattern with a rising neckline forming. Once price breaks through the neck line we should expect sharp drop in price.

This sector is heavily weighted in the SP500 so if it start to drop, expect the SP500 to fall with it.

Major Market Top Lurking…

The chart below pointing out the next bear market likely to take place is a scary looking chart to most individuals. But if you know what you are doing, they can provide more profits in a shorter period of time than a four year bull market.

If this market is starting to stall out and is in the process of forming a top. Keep in mind that market tops are a process. They take typically 3-6 months to form before a true breakdown occurs and the bear market starts. And until then, price will be choppy and difficult to trade.

Cautious Trading Conclusion:

In short, this report shows you some major divergences in the financial market. Remember, you do not really trade off divergences, as they are not good at timing. They are simply a warning sign telling us that something large is brewing and that risk is higher than normal.

There are few ETFs I like on various sectors and commodities that show some oversized upside potential in the coming weeks/months. Depending on what takes place in Washington this week will move the market and likely trigger some sharp moves. Until then, sitting tight is the safe play.

Get my trading reports and my trade alerts at www.TheGoldAndOilGuy.com

Chris Vermeulen