Month: November 2013

By MoneyMorning.com.au

Do you remember what we wrote last week?

We said if the Australian stock market didn’t do as we expect we’d end up with a lot of egg on our face.

We also said you could ‘hold the eggs’ because the Australian market would have a year-end rally.

Well, get those eggs ready to fling in our general direction. If the folks at Goldman Sachs are right, 2014 could be a tough year for the Australian economy and Australian stocks.

But then again, from an economic standpoint everyone pretty much knew that right? So is Goldman Sachs revealing anything new? We’ll give you our take below…

CNBC reports on the Goldman Sachs research note:

‘As the global economy continues to recover next year Australia will be left behind, according to Goldman Sachs, which tips it as the only developed market likely to see lower growth.

‘In a portfolio strategy research note published Monday, the global investment bank said they expect the world’s 12th largest economy to expand by 2 percent next year, slower than the consensus expectation of around 2.5 percent and down from 3.8 percent in 2012.‘

In other words, the Australian economy will grow, but not by as much as many had thought. But here’s the thing. We’re not convinced anyone in the mainstream really believed that the Australian economy was heading for stellar growth.

That explains why Australian stocks have lagged other markets for the best part of three years. Confirmation of that view is in another quote from CNBC…

Too Many ‘Crash Chasers’

The CNBC report goes on:

‘With 22 years of consecutive growth Australia was the envy of the developed world, however many analysts have turned bearish on the economy amid a number of worrying headwinds. The most prominent concern has centered on the slowdown in the country’s once booming mining sector, caused by declining demand from its major trading partner China. Many worry that Australia’s non-mining sectors will not be able to pick up the slack.‘

We’ve bolded the key part. The increase in bearish views on the Australian economy is something we’ve pointed out for well over a year. Having failed to predict the 2008 crash, there are now legions of ‘Crash Chasers’ trying to make a name by predicting the next one.

But here’s the problem for the ‘Crash Chasers’ – crashes tend not to happen when people expect a crash. Most crashes come from nowhere, with just a few on the fringe predicting them.

Those predicting a crash then don’t get many column inches in the press or airtime on national TV. And if they do it’s only so the mainstream columnist or host can laugh at the ‘lunatic from the fringe’.

Think back to the 2008 crash. We remember it well. The market slowly went down during the first eight months of 2008. Analysts were sure it was just a short-term drop and that there was nothing to worry about.

Contrast that to today, when most analysts see nothing but bad news for the economy and bad news for stocks. When everyone is taking the normally contrarian view (that the market will crash), you can bet your bottom dollar it’s not a real contrarian view anymore…it’s a mainstream view.

And that’s exactly why we say a stock rebound and rally to a record high in 2015 isn’t just possible, or even probable…it’s darn near a certainty.

The Market in a State of Surprise?

What most folks forget (and this is surprising because it’s an investing basic) is that stock prices simply represent the price of future company earnings.

Yet most investors seem to worry more about yesterday’s or today’s earnings.

Not only that, but most mainstream investors appear to believe the market is always in a state of surprise. They assume that just because they can’t think any further into the future than next week, that other folks can’t either.

The report from Goldman Sachs isn’t a surprise. In many ways the Goldman’s report probably paints a picture of the obvious.

But how much of this have investors already factored into stock prices? In other words, have stock prices failed to follow pace with overseas markets because investors expected lower growth anyway?

If so, it tells you that the market is now looking further ahead. The fact is that the Goldman Sachs report is just about useless to investors today. We’re looking at the potential for the market to rally through next year based on projected earnings for 2015 and 2016.

If you’re after a contrarian view…a view that seeks to predict the next market move before it happens, then this is it: a stock rally next year.

As for the idea of a major crash on the Australian market, we’ll cop it if we’re wrong (although you could take advantage of rising and falling prices here). As far as we’re concerned, predicting a crash is about as obvious and non-contrarian as it gets.

You can still hold those eggs. We haven’t seen anything yet to change our view on a stock rally through next year.

Cheers,
Kris+

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By MoneyMorning.com.au

By MoneyMorning.com.au

‘No, no. It’s not like that. My worry isn’t this year’s or even next year’s, it’s a long-term worry.‘

‘Then it’s not worth calling a worry. We live in an atomic age, Mr. Wormold. Push a button — piff bang – where are we? Another Scotch, please.‘

— Our Man in Havana, Graham Greene

You remember the nuclear disaster at Fukushima? It was a horrible human tragedy that is still playing out – and in ways I am sure you will be surprised to learn.

The disaster also set back the so-called nuclear renaissance that was then in swing. Uranium prices fell like a piano tumbling down a flight of stairs, only recently crashing down to five-year lows and laying waste to uranium stocks.

But it’s been over two years since the meltdown at Fukushima, and memory is short. Here is Barron’s over the weekend, on its optimistic appraisal of Cameco, the world’s largest publicly traded producer of uranium:

‘Cameco shares recently rallied after stronger-than-expected third-quarter earnings, but are still flat for the year. They fetch just 15.2 times what the company has earned, well below its decade median of 24 times, and the low-cost producer generated net profit margins near 22% even when uranium prices slumped. Improving prices can only energize the stock.‘

Among the ‘reasons for optimism‘, Barron’s included ‘gradual progress toward the cleanup in Japan‘.

Barron’s piece inspired me to write to you today. As a long-term investor, I am not tempted – at all – by the apparent bargain in uranium stocks.

I want to preface what follows by saying I get the bullish case for uranium and nuclear power. I was a bull for a time and took positions in uranium stocks in February 2010, just before they started to lift.

The incident at Fukushima made me reverse course. We sold our uranium stocks in March 2011, shortly after the disaster. We took a 70% gain on Kalahari and saved a slim 7% profit on Paladin Energy. Kalahari got bought out and no longer trades. But Paladin, which I recommended selling at $3.29, is today 44 cents. In C&C, I also saved a 10% gain on Cameco and sold at $30. Today, it’s $20.

As good as the uranium story sounds, I think there are bigger reasons to avoid the stocks as anything other than trades.

First, because the disaster at Fukushima could easily have an Act II that could be worse than anything we’ve seen so far.

The cleanup is not front-page news, but perhaps it should be. Here is a good summary of the challenges that remain, as reported by Kevin Zeese and Margaret Flowers in CounterPunch:

‘There are three major problems at Fukushima: (1) Three reactor cores are missing; (2) radiated water has been leaking from the plant in mass quantities for 2.5 years; and (3) 11,000 spent nuclear fuel rods, perhaps the most dangerous things ever created by humans, are stored at the plant and need to be removed, 1,533 of those in a very precarious and dangerous position. Each of these three could result in dramatic radiation events, unlike any radiation exposure humans have ever experienced.‘

All three pose significant dangers, but the biggest threat is from No. 3.

The spent fuel rods weigh 400 tons and are packed tightly together like cigarettes. They hold the radiation equivalent of the atomic bomb that went off at Hiroshima — times 14,000.

They now sit in a damaged, tilting building, which is vulnerable to collapse. They must be removed. If they hit each other or break, they could explode and release massive amounts of radiation. They might have to evacuate Tokyo in such a case.

As The Japan Times reports:

‘The consequences could be far more severe than any nuclear accident the world has ever seen. If a fuel rod is dropped, breaks or becomes entangled while being removed, possible worst-case scenarios include a big explosion, a meltdown in the pool or a large fire. Any of these situations could lead to massive releases of deadly radionuclides into the atmosphere, putting much of Japan – including Tokyo and Yokohama – and even neighboring countries at serious risk.‘

Aside from the terrible human costs of such an event – which I do not want to minimise – what do you think it would do to uranium stocks?

Besides, there are still ongoing effects of the disaster we are only now beginning to understand. See, for example, recent headlines about the damaged thyroids of California babies exposed to radiation that traveled 5,000 miles across the Pacific.

Of course, the nuclear lobby is well-heeled and has its silver-tongued apologists who will do their best to discredit such stories. Beyond the despicable aspects of this, you should consider, from an investment point of view, the risk that the industry loses control of the public relations battle as more stories emerge – and legal consequences ensue.

The second reason I don’t want to own uranium stocks long term: Because there is certainly another Fukushima, another Three Mile Island, in the deck. We just don’t know when it will turn up.

Just look at the US, which produces more nuclear energy than any country on Earth. It has over 104 reactors. Most of them are old. Twenty-four of them have the same design at the Fukushima reactors.

The late Alexander Cockburn and Jeffrey St. Clair, again in CounterPunch, wrote in 2011 about the number of aging reactors on US soil, several that sit on fault lines. They walk through a number of them, citing the age of the plants, past incidents and the potential for disaster.

The real takeaway for me, though, was the wisdom at the end:

‘Look at the false predictions, the blunders. Remember the elemental truth that Nature bats last, and that folly and greed are ineluctable parts of the human condition.

‘Why try to pretend that we live in a world where there are no force 8-9 earthquakes, tsunamis, dud machinery, forgetful workers, corner-cutting plant owners, immensely powerful corporations, permissive regulatory agencies, politicians and presidents trolling for campaign dollars?‘

Yes, why indeed?

This reminds me of another bit of wisdom I heard from Paul Singer, the excellent investor behind the hedge fund Elliott Associates. He said this at the Grant’s conference this fall:

‘Trading as if the world is always poorly managed and you can’t figure it out is right almost all the time… [However], never in my 37 years have I ever successfully timed a crash or a bear market, despite having a pretty good sense for what’s going on in the world.‘

Human beings make many mistakes. We are a disaster-prone species, as any casual review of our bloody, imbecilic history will show. As an investor, is it not wiser to assume things will not go according to plan? Doesn’t it seem better to assume that bad things will happen? And with nuclear power, we have clear potential for such errors, not to mention a record of rare but devastating disasters. Timing is the only thing that is uncertain.

If you adopt this kind of thinking, then uranium stocks are a no-go as a long-term investment.

Chris Mayer
Contributing Editor, Money Morning

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By MoneyMorning.com.au

Source: Peter Byrne of The Energy Report (11/26/13)

http://www.theenergyreport.com/pub/na/xavier-grunauer-small-oil-and-gas-companies-are-rising-stars-in-latin-america

Independent oil and gas companies with technical skills, local know-how and bottom-up knowledge are playing a larger role in Latin American oil and gas, according to Xavier Grunauer, analyst with Edison Investment Research. Rather than looking to national oil companies and global oil majors, the “fallen stars” operating in the region, Grunauer tells The Energy Report that investors would be wise to get up to speed now on some of the smaller independent oil and gas companies that are poised to unlock value in Colombia, Argentina and Brazil.

The Energy Report: Xavier, Edison Investment Research recently published an investment report titled, “Fallen Angels, Rising Stars: Old Latin American Basin Creating Fresh Opportunities,” in response to demand from investors for a better understanding of the Latin American oil and gas space. Can you get our readers up to speed on what’s happening in Latin America?

Xavier Grunauer: We realized that over the last five years, global investors have mostly associated the Latin American oil and gas space with Colombia and Brazil. They think of Petrobras (PBR:NYSE; PETR3:BOVESPA) and gigantic oil fields that have attracted global oil companies to Brazil’s offshore basins.

When we took a fresh look at investment opportunities in the region, we found smaller, independent oil and gas companies that have outperformed Petrobras, Ecopetrol S.A. (EC:NYSE; ECP:TSX) and OGX Petróleo e Gás Participações S.A. (OGXP3:BZ). Most of these smaller companies are traded on Toronto, New York and U.K. exchanges, and are bringing North American oil and gas experience and technology not only to Colombia, but also to Argentina, Peru, Brazil and Chile. This technology transfer has been successfully implemented in Colombia, and we think that success could be repeated in Argentina, Chile, Peru, Trinidad, Paraguay and onshore Brazil.

Our investment report outlines 18 independent oil and gas companies that operate in Latin America and are listed in New York, Toronto and the U.K., and breaks them down by risk level, current operations, opportunities and where we see them going forward.

TER: Does the report focus solely on South America?

XG: Also included in this report is Trinidad, which has a long history of oil and gas production. We find Trinidad has been encouraging smaller companies to come to its mature onshore basins that were previously drilled using older technology. Several independent oil companies are already operating in Trinidad using modern methods to increase production. Recently, Trinidad has announced a move to lower taxes, which is quite encouraging, given that taxation can be a significant hurdle in Trinidad.

TER: How do you compare what’s happening in South America with what has happened in North America? I’m thinking, for example, of the use of hydraulic fracturing (fracking).

XG: We’re all learning as we go, but it is worth noting that the more successful companies in the North American shale boom have been smaller companies with technical knowledge and local know-how, first-movers who picked off the choicest acreage. We expect similar outcomes in Latin America.

TER: Is the political risk worth the reward in Latin America?

XG: I think so. Risk is always part of the equation when it comes to oil and gas production, regardless of where operations are based, and it can come in unexpected forms, such as environmental issues, the shutdown of fracking activities or a proposed key infrastructure asset not getting government approval. But there are also big rewards. The risks we see in Latin America as a whole are not new. Companies will continue to prosper in this part of the world. Those who choose to participate will reap bigger rewards than those that never participated at all.

TER: Argentina nationalized some oil and gas a couple years ago. Should investors be weary of wading back into those waters?

XG: Argentina devalued its currency in 2002 and has been involved in legal battles with investors since then. The point here echoes what I said earlier: Smaller independent oil companies do not attempt to have a monopoly hold on a national asset. Instead, we see independent oil companies operating in Argentina, companies that are keen on technology transfer and the development of conventional and unconventional assets—while realizing fair market value for their oil and gas production. We remain of the opinion that over the next two years, as President Cristina Fernández de Kirchner enters her last term, there will be change in Argentina.

TER: In mid-October, the U.S. was producing 7.9 million barrels of oil per day (7.9 MMbbl/d)—the most since 1989. Record-high crude oil supplies and weak U.S. economic data point toward even lower oil prices. Do oil and gas prices influence your investment thesis for Latin American oil and gas equities?

XG: First off, I would point out that Edison doesn’t publish buy, hold, sell recommendations. We find net asset value (NAV), which we realize making use of discounted cash flow models. We use an $80/bbl oil price, which we think is quite neutral, if not conservative. This removes the overlay of a top-down call on oil, and allows us look at the rocks, drilling programs and the proposed sequence of events, which then leads us to our published NAVs.

TER: You make a distinction between bottom-up and top-down knowledge. Can you tell our readers more about that concept?

XG: Largely over the last 10–15 years, equity investments in Latin America have been top-down driven. By that I mean choosing an investment was largely influenced by local economies and top-down metrics. What investors need to look for now is more bottom-up metrics: Who operates in these basins? What is management’s experience? Who are their partners? What have their results been to date? Where does the experience come from? I am of the opinion that all 18 companies highlighted in our report are worth taking a look at.

TER: Tell us about some of the companies in your report that have compelling stories.

XG: The main story thus far has taken place in Colombia. The Pacific Rubiales Energy Corp. (PRE:TSX; PREC:BVC) merger with Petrominerales Ltd. (PMG:TSX) could be a sign of more consolidation to come. The big story though, and what most people are looking to medium term, is the southern cone, and in particular the unconventional oil and gas potential of Argentina. I would point to three companies in our report: Madalena Energy Inc. (MVN:TSX.V), Americas Petrogas Inc. (BOE:TSX.V) and Crown Point Ventures Ltd. (CWV:TSX.V).

American Petrogas recently hired a large investment bank to look at its operations with an eye toward joint ventures or merger and acquisition. Americas Petrogas’ story has risks, and a lot of potential, should it be able to monetize its below-ground potential.

Madalena Energy is in a similar situation in Argentina, and has an added advantage of producing assets in Alberta. The Alberta assets can help support the company’s day-to-day cash flow and operations while Madalena continues to develop its large asset base in the southern cone.

TER: Crown Point also has some assets in the Neuquén Basin and Tierra del Fuego. Where is the company-maker asset in that mix?

XG: Crown Point’s production is currently focused on low-risk conventional oil and gas in Tierra del Fuego. The company is looking to increase netbacks and drill more conventional wells in 2014, and in the process will get a “free look” at the unconventional potential.

TER: Do you have other stories you’d like to discuss?

XG: Edison covers President Energy Plc (PPC:LSE), which operates in Paraguay. Some of the same basins that run in Argentina stretch into Paraguay. President Energy has recently signed a contract with Schlumberger Ltd. (SLB:NYSE) to drill exploration wells. The International Monetary Fund is also quite interested in these developments and is helping companies like President grow a sustainable business in Paraguay.

TER: You mentioned the opportunity for investors to position themselves in select equities now, in anticipation of a potential breakout. How far off is that?

XG: It’s always difficult to time these events. You have to be realistic about catalysts.

The North American shale gas boom wasn’t built overnight. In Latin America, especially in Argentina, there are political uncertainties, at least until the outcome of presidential elections are known in 2015. But if you wait until 2015 to invest, it will be a little late.

TER: Can you leave us with one more thought about investing in the explorer and producer space in Latin America?

XG: Independent oil companies are expected to continue playing a larger role in Latin America’s next wave of oil and gas production. The days of bringing financing to the table as your main contribution are behind us in Latin America. Increasingly, we will see national oil companies reaching out to smaller companies for joint ventures, technical expertise and know-how. Knowing more about these independent oil companies is a must, and could prove quite profitable for investors.

TER: Xavier, thank you for your time and insights.

Xavier Grunauer has more than 15 years of experience as an oil and gas analyst. He has spent the last six years working for Nomura, and prior to this worked for Dresdner Kleinwort Benson and ING Barings. His oil and gas coverage has focused on emerging markets and has included companies operating in Latin America, Eastern Europe, South Africa, China and Australia. Grunauer is a chartered financial analyst and has an engineering degree from the University of Toronto.

Want to read more Energy Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Interviews page.

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.

2) The following companies mentioned in the interview are sponsors of The Energy Report: Madalena Energy Inc. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.

3) Xavier Grunauer: 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: President Energy Plc. 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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By J.W. Jones – OptionsTradingSignals.com

By MarketTrendForecast.com

Elliott Wave Forecast: Back on September 12th  with the SP 500 at 1689 we forecasted a run in the SP 500 to 1829, a very specific number.  We use Elliott Wave Theory and Analysis in part to come up with projected pivots for the SP 500 and this was our projection.

Elliott Wave Analysis is based largely on Human Behavioural patterns that repeat over and over again throughout time. It’s really crowd behavior or herd mentality as applied to the broader stock markets. This can also apply to individual stocks, precious metals and more.  At the end of the day, an individual stock is worth what investors believe it is worth, and it won’t necessarily reflect what a private valuation may accord it.

With that in mind, the stock market as a basket of 500 stocks can pretty easily be patterned out and then we can apply our Elliott Wave Theory to that pattern and predict outcomes. Back in mid-September, we believed we were in a 3^rd wave up of the bull market as part of what we call Primary wave 3.  The primary waves are 1-5 and Primary 3 is usually the most bullish of the 5 primary waves with 2 and 4 being corrective.  Well, within Primary wave 3 you have 5 major waves… and we projected that Major wave 3 would be running to about 1829.

This projection was based on the 1267 pivot for Major wave 2 of Primary Wave Pattern 3 which was a corrective wave. We then simply applied a Fibonacci ratio to the Major wave 1 and assumed that Major wave 3 would be 161% of Major 1.  That brings us to about 1822-1829… and here we are a few months later heading into Thanksgiving with the SP 500 hitting 1807 and getting close to our projection.

What will happen afterwards should be a Major wave 4 correction.  We expect this to be about 130 points on the shallow side of corrections, and as much as 212 points.

So the Bull Market is not over, but Major Wave Pattern 3 of Primary 3 is coming to an end as we are in a seasonally strong period for the market. We would not be shocked to see a strong January 2014 correction in the markets as part of Major wave 4.

Below is our September 14th elliott wave forecast chart we sent to our subscribers and you can see we continue now along the same path.

Join us to stay on top of the Elliott Wave Forecast Trends in 2014 at www.MarketTrendForecast.com

By George Leong, B.Comm.

The number of references to a “bubble” that we’re hearing in the mainstream is on the rise, along with the S&P 500 and Dow Jones Industrial Average, which are advancing to new record heights.

Some say the stock market will continue to rise, driven by the Federal Reserve’s likely strategy to maintain its low interest rates for another two years. There are those nervous about the tapering, but I don’t really care about that; in my view, the low interest rates are much more critical.

The stock market participants are now faced with a dilemma of whether to chase equities higher. With the gains we have seen, it makes sense to take some profits.

The reality is the broad stock market strength has also rewarded weak companies, which have been supported by the overall enthusiasm to buy stocks.

Some traders are looking at the short side, especially the hedge funds that believe the stock market is overvalued. The problem is that short-selling is not easy, especially in this kind of market. It has been difficult to make money from the short side, and as long as the bullish bias holds, I expect shorting will continue to be a tough path to making money. (Read “How to Profit by Buying ‘Bad’ Companies.”)

A better alternative to shorting individual stocks or indices would be to play a possible stock market correction via the use of bearish exchange-traded funds (ETFs), such as the Direxion Daily S&P500 Bear 3X Shares (NYSEArca/SPXS).

You can also play a possible stock market correction via the use of put options.

As a hedge, you can buy downside protection for your equities by buying put options on your stocks, a certain sector, or an index, such as the NASDAQ, Russell 2000, or S&P 500. This strategy is pretty easy, and it allows you to have some protection in exchange for paying a premium.

Another strategy you can use to play a possible stock market correction is if you want to buy stocks on weakness. If you are looking to buy on a market dip, you can wait for this to happen or you could write or sell put options on a particular stock you are interested in or an index. Under this strategy, you essentially set the buy price for a certain stock or index.

For instance, say you want to buy Facebook, Inc. (NASDAQ/FB) but not at its $47.00 share price as of Thursday. You feel the stock market or Facebook may head lower for a buying opportunity. Say you feel a correction is coming by February 2014. You determined that $38.00 is what you want to pay for Facebook. You can sell the February 2014 $38.00 put option and receive $1.09 per share in premium income. By selling the put, you are liable to buy Facebook should it fall to $38.00. Add in the premium, and your adjusted cost, should this happen, is $36.91 per share.

Of course, you can always take profits in cash, and avoid the sleepless nights.

This article Five Profitable Plays for the Coming Stock Market Correction is originally posted on Profitconfidential

London Gold Market Report

from Adrian Ash

BullionVault

Tues 26 Nov 11:45 EST

AN OVERNIGHT RALLY in gold evaporated in London trade Tuesday, pulling the metal back to last week’s closing level of $1243 per ounce.

“Gold’s rally over the past 24 hours,” said a note from bullion and investment bank Standard Bank earlier, “we ascribe to small-scale short-covering” by bearish traders closing their positions.

 “We still expect selling into rallies to be the main strategy.”

 Last week’s 4-month lows, says German refining group Heraeus, “led to a strong increase in demand” for investment bars.

 “Private investors appear to have considered gold below $1250 a good buy-opportunity and reacted consequently.”

 Overnight Tuesday, “Purchases of physical gold in Asia,” says the commodities team at Germany’s Commerzbank, “China in particular, may well also have helped prices recover.

 “Demand for gold is likewise high in India, though only little gold is being imported due to the restrictions imposed by the country’s government and central bank.”

 “Evidences of renewed demand,” agrees a separate note from a London trading desk, “is emerging from [emerging-market] countries, Turkey and India mostly.

 “[But] it is clearly not enough to counter the cyclical bear momemtum in gold that is currently building around the Fed, the taper and debt-ceiling.”

 The State Bank of Vietnam, “foresee[ing] a downward trend in the price in the next six months or one year,” is planning to buy gold for its foreign currency reserves, according to Vietnam.Net.

 “It is still not clear about the timing, but we have got ready,” says director of the Foreign Exchange Department, Nguyen Quang Huy, at the central bank – currently not holding any sizeable gold reserves according to IMF data, and unlikely to try buying gold directly from private citizens rather than dealers, according to local analysts.

 China’s top jewelry retailer, Chow Tai Fook, meantime reported better-than-forecast 6-month profits today, nearly doubling net income from March-Sept. 2012.

 Shares in the world’s largest jewelry stock by market cap have slipped 1.1% so far in 2013, the newswire notes, compared with a 4.5% gain in Hong Kong’s broader Hang Seng index and a 26% drop in bullion prices.

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.

By George Leong for Investment Contrarians

Retailers are likely sitting on the edge as we head into the Thanksgiving weekend on Thursday, which means Black Friday is nearly here. The three days from Friday to Sunday are the most critical period in the shopping calendar for the retail sector, followed by “Cyber Monday” (the Monday after Black Friday when many retailers offer steep discounts online), which has historically been the biggest one-day online shopping event of the year.

So these four days are make-or-break for some retailers. What happens during these days could also help dictate what happens in December and 2014. And of course, what happens with consumer spending and the retail sector will dictate the gross domestic product (GDP) growth.

Yet while I was previously more positive towards the retail sector, I’m beginning to have some doubts. Not only am I worried about the weak jobs market, but confidence levels aren’t exactly high now, either. Currently, I expect the retail sector will face greater headwinds in December and early into 2014.

The reality is that the average consumer is uneasy about their economic situation, so they are nervous and hesitant to spend. This will impact the fourth-quarter GDP and make it much more difficult for investors to play the retail sector.

Retail sales advanced for the second straight month in October; albeit, at a muted pace, but it was still nonetheless better than what the market watchers expected. Sales on an ex-auto basis increased 0.5% in October, above the 0.4% Breifing.com estimate and in line with September’s reading. It was also the second straight up month for the retail sector.

But despite these advances, with the jobs picture not improving and the economy stalling a bit, I have become less optimistic towards the retail sector in December. In fact, I believe merchants may be forced to discount merchandise and clear inventory just to boost sales this holiday season, which will, of course, impact operating margins.

On top of all this, we have been seeing some flat results and poor guidance from some retailers.

Wal-Mart Stores, Inc. (NYSE/WMT), which is a bellwether stock in the retail sector, is struggling with cautious consumer spending worldwide. Rival Target Corporation (NYSE/TGT) also struggled due largely to costs associated with its Canadian expansion. Other major retailers, such as Sears Holdings Corporation (NASDAQ/SHLD), The Gap, Inc. (NYSE/GPS), and Abercrombie & Fitch Co. (NYSE/ANF), also offered muted results and/or disappointing guidance.

And while I still continue to like the discount retailers, discounter Dollar Tree, Inc. (NASDAQ/DLTR) reported a shortfall in its earnings and lowered its earnings guidance for its fourth quarter. The company cited caution towards the retail sector and consumer spending.

All of this makes me nervous. Given these numbers, investors should tread carefully and see how things unfold with the holiday shopping season, getting a better picture of where the retail sector is headed before creating an investment strategy or buying retail stocks for your portfolio.

http://www.investmentcontrarians.com/stock-market/whats-making-me-nervous-about-my-favorite-retail-stocks/3345/

By Mitchell Clark, B.Comm.

As evidence of the fervor to which institutional investors are bidding this market, Johnson Controls, Inc. (JCI) jumped five percent on the day the company announced a new $3.65-billion share buyback program and a 16% increase to its dividends.

These are good times for corporations and equity investors. Companies can borrow on the cheap, and they are keeping shareholders happy with rising dividends and share buybacks.

Johnson Controls is based in Milwaukee and sells a great deal of equipment to the automobile and the heating, ventilation, and air conditioning (HVAC) industries.

The company’s dividends have been rising consistently, and for the quarter ended June 30, 2013, earnings per share grew an impressive 32%.

Not surprisingly, the stock’s been doing extremely well. At the beginning of the year, it was trading around $31.00 a share; now, it’s around $50.00.

This kind of capital gain has been very common among countless blue chips. It is a highly unusual and monetary policy-fueled rise. In my view, in the case of Johnson Controls, the company’s share price is overvalued, even with the recent news regarding its dividends.

While there is certainly a lot of liquidity in the stock market now—and there is good action to be had, generally speaking—I’m very reticent to be a buyer. At the very least, it is difficult finding attractive stocks to buy that haven’t already gone up tremendously.

I view equities as one big hold right now, and I do think that share prices will be able to finish out the year strongly, given current information.

Looking at the financial results of countless large-cap corporations, there is operational leverage to be had next year if product and service demand continues to improve. Corporate balance sheets are in excellent condition, the cost of money is cheap, there’s lots of cash on the books ready to be put to work, and companies remain lean and mean.

There is definitely a lot of speculative fervor in the marketplace now. There are countless new initial public offerings (IPOs) to be had, and there’s been some tremendous wealth creation at exorbitant prices from many of these new listings. All this is indicative of a frothy and overbought stock market. But determining the time when it turns is virtually impossible. Right now, the market is hanging onto the Federal Reserve’s every word.

The fact that many large-cap, blue-chip companies are trading so strongly on the equity market commensurate with small-caps is a traditional sign of the beginning of a secular bull market. Of course, within a bull market, there can be spectacular declines as well.

But I want to come back to balance sheets and the fact that so many corporations are increasing their dividends and upping their share buyback programs in order to pay for them. (See “Why This Food Processor’s Numbers Are a Good Indicator for 2014.”)

Stock market action over the last four years has shown that dividends and large-caps are back in style. I think dividends are going even higher in 2014. Keep an eye on the market’s existing winners, as I believe they will keep on ticking higher until we hear a major policy change from the central bank.

This article If You Don’t Want to Leave This Market, Stick with These Proven Winners is originally posted on Profitconfidential

Free 10-page eBook can get you started

By Elliott Wave International

The moving average is a technical indicator which has stood the test of time. It’s been 27 years since Robert Prechter described this vital tool in his famous essay, “What a Trader Really Needs to be Successful.” What he said then remains true today:

A simple 10-day moving average of the daily advance-decline net, probably the first indicator a stock market technician learns, can be used as a trading tool, if objectively defined rules are created for its use.

What is a moving average? Here’s how EWI’s Jeffrey Kennedy puts it:

A moving average is simply the average value of data over a specified time period, and it is used to figure out whether the price of a stock or commodity is trending up or down.

He also says that you can think of a moving average as an automated trend line.

A 20-year veteran of technical analysis, Jeffrey wrote “How You Can Find High-Probability Trading Opportunities Using Moving Averages.”

[Descriptions of the following charts are summaries from that eBook]:

Let’s begin with the most commonly-used moving averages among market technicians: the 50- and 200-day simple moving averages. These two trend lines often serve as areas of resistance or support.

For example, the chart below shows the circled areas where
the 200-period SMA provided resistance
in an April-to-May, 2008 upward move in the DJIA (top circle
on the heavy black line), and the 50-period SMA provided
support (lower circle on the blue line).

Let’s look at another widely used simple moving average which works equally well in commodities, currencies, and stocks: the 13-period SMA.

In the sugar chart below, prices crossed the line (marked by the short, red vertical line), and that cross led to a substantial rally. This chart also shows a whipsaw in the market, which is circled.

Another popular moving average setting that many people work with is the 13- and the 26-period moving averages in tandem.

The chart of Johnson and Johnson shows a crossover system using a 13-week and a 26-week simple moving average of the close. Obviously, the number 26 is two times 13. During this four-year period, the range in this stock was a little over $20.00, which is not much price appreciation. This dual moving average system worked well in a relatively bad market by identifying a number of buyside and sellside trading opportunities.

You can read the first two chapters of this eBook FREE for a limited time.The first two chapters reveal: The Dual Moving Average Cross-Over System Moving Average Price Channel System Combining the Crossover and Price Channel Techniques Jeffrey’s insights are all about helping you become a better trader. Remember, the first two eBook chapters are FREE, so take advantage of this limited-time offer. Download your two free chapters now >>