Month: December 2013

Guest Post By Dennis Miller – How to Judge Your Financial Advisor

A friend of mine used to have three financial advisors whom he forced into competition. If one started underperforming, he would pull some money from him and give it to the other two. I’ve heard of similar strategies several times now. In some ways, it makes sense. However, this strategy misses the real purpose of having a financial advisor.

What makes one financial advisor better than another is not whether he earned 15% this year while the other guy earned 13%. (Now, if we’re talking about a mutual fund manager, that’s a different story.) Nonetheless, many investors evaluate their financial advisor in this way. They see advisors as stock pickers. It doesn’t help that advisors often portray them­selves in this same light.

However, you have to remember your financial advisor’s role in a financial institution. For your purposes as a client, advisors are the salespeople. That does not mean “sales­people” is a dirty word. The truth is quite the opposite; a trustworthy salesperson can be indispensable. However, their job is to find you the right product, not to pick the winning stocks.

Your advisor is not staying up late reading company annual reports. He does not create valu­ation models of stocks. He doesn’t know the ins and outs of P/E ratios, PEG ratios, liquidity ratios, etc. Those are all roles of a proper equity research department. At best, the advisor has read through research reports and has a very basic and surface understanding of an invest­ment. For this reason, it doesn’t make sense to fire an advisor based on him earning a few points less than another one; but there are other ways to gauge their performance.

If returns aren’t the responsibility of the advisor, what services can they provide us and how should we judge them? Here is a checklist of questions to consider:

1. Is the advisor acting in your best interest? In particular, whether or not the advisor owes you a fiduciary duty is extremely important. I’d rather have an advisor who put me in a low, 0.5%- fee fund that earned 10% last year than an advisor who put me into a fund with near 2% fees that earned 15%. In the short run, the returns can blind you from the high expenses, but you shouldn’t reward a financial advisor for getting lucky. In the long run, you want someone who will find you the cheapest funds available. The job should be to save you money in the investment process; it is not to earn returns.
2. Is the advisor knowledgeable beyond your investment portfolio? Since the advent of online brokerages, you really don’t need someone buying and selling stocks for you. You can basically do it on your own – especially with the help of a few good newsletters. Where an advisor can really add value is by organiz­ing your finances across the spectrum – from estate planning to insurance to your investment portfolio. Once again, it is not about returns, but rather how much the advisor knows about various financial products, some of which (like insurance) produce no return at all. The broader the advisor’s knowledge base, the better.Also, remember to test their knowledge beyond just the basics. What do they sug­gest for inflation protection? Do they have more than one boilerplate idea like TIPS? And are they aware of interest-rate risks surrounding bonds? Your advisor does not need to be an expert in every field, but he should have a basic understanding of the options out there and the ability to reach out to other specialists when needed. The broader the advisor’s knowledgebase the better.

   Remember the premise from the movie Wall Street.  “I have hundreds of guys who tell me stuff I already know.  What I want is someone to tell me what I don’t know.”  There are too many times what we don’t know can hurt us financially; particularly when it comes to taxes.  This is where a good advisor really separates himself from the ordinary stock pickers.

3. Has the advisor adequately matched investments to your risk profile? Since everyone is different in risk tolerance, we can’t tailor our Money Forever recommendations to every person’s financial situation. As a result, working with a financial advisor can help you allocate investments to match your risk tolerance. Again, it’s not about return, but instead matching your risk tolerance.If your port­folio earns 40% next year, you might be very happy, but the risks taken might have been extreme. Anything that can go up 40% can go down 40%. The advisor needs to find investments that meet your comfort level. Judge your advisor by your nights of sound sleep rather than percentage points gained.
4. Are the investments performing as promised? This last category has a little bit to do with return, but not entirely. If your advi­sor says that your equity portion should move up with the market but it doesn’t, there’s a problem. If the market moved up 10% and your equity portion moved up only 8%, it isn’t necessarily grounds to fire an otherwise trustworthy advisor. However, suppose your investment only moved 2% in a similar market move. Then, there seems to be a problem with the investment selection. Maybe the advisor didn’t understand them properly, or perhaps the research department seriously messed up. Either way, there are some competence issues that need to be addressed; either the investment or the advisor needs to go. Also consider that if an advisor and his research team can’t properly predict perfor­mance under certain circumstances, then how can they possibly match the invest­ments to your risk profile?

To sum it up, remember that your financial advisor is in the business of sales (a laudable field). And if he’s a good financial advisor and salesman, he or she will steer you toward investments that best suit your needs at the most reasonable prices. However, he’s not a stock picker, so your evaluation of an advisor’s services shouldn’t be primarily about return. Don’t praise his knowledge of hot tech stocks but rather his knowledge of financial products and ways to better organize your financial life.

You have to judge the financial advisor for what he does  by looking at the overall picture.  . If the market tanks by 30% that is beyond his control and you will take some losses.  At the same time, did he have proper safeguards in place to protect you from catastrophic losses.   When the market is rising, your financial advisor can make money for your portfolio is by saving you money on fees, insurance policies, and tax issues along the way. Those savings are a measure of his or her worth, as they are the direct result of his actions, not a roll of the dice in the stock market.

Financial advisors may all be salespeople, but that’s not such a bad thing in my book.

I trained salespeople all over the world for 35 years and worked with 40 of the Fortune 500 companies in the process. As a general rule, the top 20% of salespeople are respon­sible for 80% of sales.

At one point, several of my clients funded a study to find out what made their top sales­people different from the others. I traveled with these super-salespeople to pinpoint the attitudes and habits that set them apart.

During this study, I quickly discovered that it made no difference what they sold; the extraordinary salespeople all did the same thing. I recall one in particular – a salesman who sold plastic pellets, a fungible commodity – for a Fortune 500 company. I met the president of one of his largest clients and asked why he did business with this salesman’s company even though he knew its prices were a bit higher than the competition’s.

He went on to tell me a story. While he was having a casual lunch with the salesman, he complained that his company’s healthcare costs were skyrocketing. The salesman listened intently and said, “I think I can help you.”

The salesman went back to his own company, found the person responsible for its health­care costs, and asked if he would give his customer some ideas for saving money. He set up the meeting, and the end result was that his client saved over $1 million by implementing some of the ideas presented. On top of that, the salesman also brought in resources from his own company to help his client become ISO certified, which also saved a lot of money and improved the quality of its product.

In a nutshell, this salesman acted as a business consultant on his own initiative. The plastic pellets he sold were almost a secondary consideration. No one would dare dump this salesman’s company as a supplier. He saved his clients too much money by matching up his resources with their needs.

In my travels with the top salespeople, they were all doing the same thing: business con­sulting. They dealt with high-level management and helped solve their problems. In exchange, their clients were loyal and continued to buy from them.

This indeed is also how truly independent, professional financial advisors operate. They have a lot of product-specific knowledge, but they put their clients’ big-picture needs first. And if a client has a particularly thorny issue, they will consult a specialist, maybe an estate-planning attorney or an insurance expert. Just like the plastic-pellet salesman, they elevate themselves above average-Joe financial advisors by looking out for their clients’ overall best interests. This global, client-centric approach is what keeps clients coming back.

Integrity, my friends, is the name of the game. The top salespeople act as though they are fiduciaries, regardless of what they sell or what technical background they have. Who they are and how they do business is what sets them apart.

The Money Forever team is here to help you sift through the rubble and find the exceptional advisors. If you’d like to receive more information on how to find an advisor to prescribe the right financial solutions for you, please check out our special report, “The Financial Advisor Guide.” If you are not already a subscriber, you can still get your own copy HERE.

London Gold Market Report

from Adrian Ash

BullionVault

Tues 10 Dec 08:25 EST

The PRICE of gold rose to touch $1250 per ounce for the first time in 7 sessions Tuesday morning, as major government bonds also rose after comments from US Fed officials on the odds of reducing their monetary stimulus at next week’s policy meeting.

 European stock markets crept higher, but Asian shares closed lower.

 Silver broke to a 2-week high above $20 per ounce as commodities rose. The British Pound hit a new 2-year high vs. the Dollar, capping gold in Sterling at £760 per ounce.

 “A recovery may be gaining pace,” said Bank of England governor Mark Carney in a speech in New York overnight, “but our economies are a long way from normal.”

 In gold, “We see short-covering and some bargain hunting,” Bloomberg quotes David Govett at London metals brokerage Marex Spectron, “coupled with signs of some physical demand in China.

 But the market “is still limited on the upside,” Govett adds. “We continue to wait for next week’s Fed meeting.”

 Gold’s rise “is no doubt due to a large extent to speculative financial investors covering their short positions,” agrees Germany’s Commerzbank in a commodities note, “having previously built up record-high bets on falling prices.”

 But again, and looking ahead to the US Federal Reserve vote on Weds 19 December, Commerzbank says the debate about possible Fed tapering of its $85 billion per month in quantitative easing “hangs like the sword of Damocles over commodities in general and gold in particular.”

 “It is time to taper,” said Richard Fisher, president of the Dallas Federal Reserve Bank, in a speech in Chicago yesterday, warning of “financial shenanigans” thanks to “a surfeit of excess liquidity sloshing about in the system.”

 Fisher, who has repeatedly called for an end to quantitative easing – and who said in August that “We have artificially suppressed rates…this cannot go on forever” – will become a voting member of the Fed in 2014.

 But also speaking Monday, “Inflation continues to surprise to the downside,” said current voting policy-maker James Bullard, president of the St.Louis Fed.

 “This is a concern that often gets lost amid other encouraging economic metrics like jobs [which] a small taper might recognize.

 “Should inflation not return toward target [currently at 2.0% per year], the Committee could [then] pause tapering at subsequent meetings,” Bullard added.

 Pointing to the fact that gold “tends to struggle” when real interest rates rise, “If you have a view on US 10-year rates and US inflation, you can formulate a view on gold,” says a note from Canadian bank CIBC.

 “With the latest [US] October inflation reading at 1.2%, we see little room for inflation to fall further without instigating fears of deflation,” says the note – a trend likely to boost QE from the Fed, rather than tapering.

 Because of the US Fed’s stated policy of keeping interest rates low to support housing and credit, “We also see limited scope for a material rise in 10-year yields,” add the bank’s analysts, who said gold’s “glorious run” was over in Feb. 2013, eighteen months after the peak but shortly before the metal’s worst crash in three decades.

 On the supply side meantime, and recovering from a series of violent wildcat strikes in late 2012, South Africa’s gold mining production jumped 75% in October from a year earlier, the government said today.

 The former world No.1, but now the fifth largest gold mining nation after annual production more than halved from record levels a decade ago, mined only 170 tonnes of gold last year.

 China, the current world No.1, mined 347 tonnes of gold in the year to October, new data showed Tuesday, versus 403 tonnes in full-year 2012.

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 John Whitefoot for Daily Gains Letter

A raft of positive economic news came in last week; suggesting that the U.S. economy may actually be getting stronger. On Friday, the Bureau of Labor Statistics reported that the unemployment rate fell from 7.3% to seven percent in November, the non-farm employment numbers improved by 203,000, and unemployment claims fell to 298,000. In addition, preliminary gross domestic product (GDP) growth climbed from 2.8% in October to 3.6%, soaring past the three percent forecast.

Normally, this kind of news would help shore up the stock market and send it rallying higher. But that’s not what happens in a Federal Reserve-fuelled market; in fact, the Dow Jones Industrial Average, S&P 500, and NASDAQ all responded with a losing streak.

Why the fear? Two words: quantitative easing. Since implementing the first round of quantitative easing in 2009, the Federal Reserve has flooded the market with over $3.0 trillion. Quantitative easing has translated into artificially low interest rates. The low-interest-rate environment has also been the primary fuel behind the stock markets’ unprecedented rally.

The Federal Reserve has said it will begin to taper (not discontinue) its quantitative easing strategy when the markets improve, which many believe means an unemployment rate of 6.5% and inflation at 2.5%.

Not surprisingly, the sharp decrease in unemployment has made the markets jittery. Tapering quantitative easing bond purchases means interest rates will increase, which could put a wet blanket on the U.S. economy. Back in May, the Federal Reserve hinted it was thinking about tapering quantitative easing; Wall Street responded by sending the markets lower, and banks responded by sending mortgage rates higher.

So you can see why an irrational Wall Street would be stressed about an improving economy and a pullback in quantitative easing. The markets would have to stand on their own merits—namely, revenue and earnings. That’s something it isn’t ready to do just yet.

They may not have to for a while yet, as the numbers needed to trigger a pullback on quantitative easing still aren’t firmly in place. Two Cleveland Federal Reserve researchers do not think the unemployment rate will get to 6.5% until the first quarter of 2015 at the earliest, but most likely no later than the third quarter of 2015. The inflation rate, meanwhile, may not break through 1.75% until 2016. (Source: Knotek II, E.S. and Zaman, S., “When Might the Federal Funds Rate Lift Off?” Federal Reserve Bank of Cleveland web site, December 4, 2013.)

But, as the old saying goes, “buy on rumor, sell on news.” However, the losing streak won’t last for long.

Since hitting a low in March 2009, the S&P 500 has soared almost 165% and is up 26% so far this year. Since hitting a pre-recession high in mid-October 2007, the S&P 500 has climbed 16%.

As long as the Federal Reserve continues its quantitative easing policy—or rather, keeps interest rates artificially low—the markets will continue to be bullish, and any losing streak will have a limited downside.

After all, where else can investors go with their money? Thanks to short-term interest rates being near zero, it doesn’t make sense for investors to park their money in bonds or leave it in cash.

When it comes to a jittery market, it’s always a good idea to hold financially solid stocks with a long history of providing not just capital appreciation and dividends, but also increased payouts; some examples of this type of stock may be Cathay General Bancorp (NASDAQ/CATY) and Oxford Lane Capital Corp. (NASDAQ/OXLC).

Despite all the good economic news, quantitative easing will stick around and the markets will continue to advance—and Wall Street will get it right for the wrong reason.

By Mitchell Clark, B.Comm. for Profit Confidential

There is going to be considerable pressure on interest rates and the Federal Reserve very soon, and it’s very likely that we’re going to get some choppy trading action in stocks. The reason for this is, of course, positive economic news, which is increasing the likelihood of a decrease in monetary stimulus. As contradictory as it may seem, good economic news is actually bad news for stocks; that’s just the way the counterintuitive system of the stock market works—buy on rumor, sell on news. But what’s transpired recently goes more like buy on expectations, sell on hints of growth.

While economic recovery is inconsistent, regional, and industry-specific, there is considerable evidence from many corporations that business conditions are improving.

Conns, Inc. (CONN) is a Texas-based company selling appliances, electronics, furniture, and mattresses. The company’s share price has been soaring on genuine operational growth. On the day of its recent earnings report, the company’s shares jumped 15% to $67.00 a share. The stock was trading around $11.00 a share at the beginning of 2012.

According to the company, its fiscal third quarter of 2013 produced record financial results: quarterly revenues accelerated a whopping 51% to $311 million; its retail gross margin jumped 460 basis points to 40.1%; diluted earnings per share grew to $0.66, way up from earnings of $0.35 per diluted share last year; and company management said November retail sales jumped 49% comparatively, while same-store sales grew 32%.

The company said that its biggest comparative gain in sales was in appliances, with growth improving 96%, followed by home offices with sales growth of 77%, consumer electronics at 45% sales growth, and home appliances with 37% sales growth.

The company’s latest quarter beat the Street on earnings and revenues, and management raised its fiscal 2014 and 2015 guidance to well above previous consensus.

Clearly, there are some regional factors at play with the economic growth at Conns. The company’s comparative numbers are impressive and representative of what I consider to be pent-up demand from consumers who have kept a tight fist on their wallets since 2009. (See “Four Companies with Earnings Growth That Shines.”)

And the same can also be said for corporations, which have been unwilling to spend their cash hoards on new plant, equipment, and employees.

With any positive economic news, there is going to be further pressure on share prices and the Federal Reserve’s ability to maintain artificially low interest rates. This is going to make for some serious stock market volatility.

But realistically, there is no trend yet. Massive monetary stimulus and artificially low interest rates haven’t given rise to a new business cycle; rather, they’ve resulted in a reflation of the value of equity securities.

My view remains the same. Blue chips are a hold going into 2014, and I would not be chasing any positions. A serious stock market correction is overdue, and when it finally hits, it will likely be an excellent buying opportunity.

This article Why a Serious Stock Market Correction is Overdue is originally published at Profitconfidential

By Sasha Cekerevac for Investment Contrarians

One of the hottest investment strategy themes over the past few years has been to invest in emerging markets. For years, these markets were very attractive to investors, as these economies tended to have much higher growth rates when compared to growth in the developed countries.

However, this investment strategy is now beginning to look questionable, as it appears that growth rates are much lower than many had expected.

The latest look at emerging markets from a fundamental standpoint comes from Paul Polman, CEO of Unilever PLC (NYSE/UL).

Polman stated that he believes that economically, these markets will continue to remain quite slow for some time, as these nations now need significant structural changes following their boom years. (Source: Bloomberg, December 2, 2013.)

This type of information is certainly a negative for any long-term investment strategy in the emerging markets. Structural reforms do not happen overnight; here in America, it’s obvious how slow and difficult it is to make any real structural changes.

For many, the investment strategy in emerging markets appears enticing because it seems so exotic. But comments such as those from the CEO of Unilever should be an eye-opener to these investors. Unilever obtains most of its revenue from emerging markets, so the company can feel the pulse of what’s really happening on the ground in these markets.

Frankly speaking, this isn’t a surprise to me; in these pages, I’ve mentioned seeing several warning signs that have alerted me to the weakness in not only the domestic economy, but the emerging markets as well.

Chart courtesy of www.StockCharts.com

The three-year chart above shows the activity of the exchange-traded fund (ETF) iShares MSCI Emerging Markets (NYSEArca/EEM) compared to the activity in the price of copper (as indicated by the solid black line).

As you can see, the price of copper and the activity in the emerging markets were extremely correlated up until the end of 2012. In 2013, copper prices continued selling off, while these markets began to rebound.

I believe this divergence is a result of money printing allowing institutions the ability to allocate capital into the emerging markets, even though fundamental drivers, such as copper, are indicating that these economies are not accelerating.

In my experience, this type of divergence doesn’t last forever. The latest information from the CEO of a company that has extensive operations in emerging markets globally has, yet again, increased my worry that the current move in many stock markets around the world is not based on fundamental strength.

Chart courtesy of www.StockCharts.com

More specific to the emerging markets, this chart shows the iShares Emerging Markets ETF against an inverse ETF, the Direxion Daily Emerging Markets Bear 3X Shares (NYSEArca/EDZ).

As you can see, the inverse ETF moves in the opposite direction of the ETFs that mimics the emerging markets. A note of caution: the inverse ETF is three-times leveraged, which means it can be extremely volatile and should not be a long-term holding. Highly leveraged ETFs will erode over time, so they should only be used as a hedge over a short holding period.

I continue to favor an investment strategy that reallocates capital away from sectors that are not showing fundamental strength. Emerging markets, in my opinion, still remain fragile; if I had exposure to that sector, I would certainly look to add a very small portion of capital into an instrument that can hedge my risks.

The big picture is that while all stock markets keep moving higher, executives at companies such as Unilever remain extremely cautious and continue to wave warning flags. At some point, fundamentals will matter and having an investment strategy that is diversified and partially hedged will pay off over the long run.

Original Article: http://www.investmentcontrarians.com/recession/caution-emerging-markets-show-warning-signs/3413/

By HY Markets Forex Blog

The New Zealand dollar continued to advanced to its fourth day in a row against the US dollar on Tuesday, after  reaching its highest level since November 20 in the previous session and driven by the upbeat trade balance report from China.

The New Zealand dollar rose 0.10% higher at $0.8289 against the greenback as of 6:15am GMT on Tuesday, heading toward the last sessions highs at $0.8320. The kiwi climbed to almost a three-week high on Monday, driven by the upbeat Chinese trade balance data, which showed a surplus of $33.8 billion in November.

New Zealand Dollar – China

China’s industrial production eased to 10.0% lower, compared to the previously recorded 10.3% in November on an annual basis and below analysts’ forecast of 10.1%.

The country’s retail sales for November showed a rising trend, rising 13.7% higher than the same period last year.

According to a statement from the Deputy Governor of Reserve Bank of New Zealand, Grant Spencer, new residential construction loans will be exempt from the loan-to-value (LVR) restrictions introduced by the Reserve Bank in October.

“The Reserve Bank has recently consulted with the building industry and banks on the impact of LVR restrictions on residential construction activity,” Spencer said in the statement. “While high LVR construction lending is only around 1% of total residential lending, it finances around 12% of residential building activity.”

New Zealand Dollar – US Labour Sector

On Friday, the Bureau of Labour Statistics posted its jobs release for November, showing an addition of 203,000 new employees in the US economy during the month.

The Non-farm payrolls data revealed 203,000 new jobs were added in November, up from the 200,000 recorded in the previous month and exceeding analysts’ forecast of 185,000, according to the Bureau of Labour Statistics.

Market participants remain focused on the Federal Reserve’s (Fed) next meeting; which would likely hint when the central bank could  to begin taper its asset-purchases scheme.

Federal Reserve Bank of St. Louis President James Bullard said that the improvement in the jobs market is one of the key conditions for tapering.

“A small taper might recognize labor market improvement while still providing the Committee the opportunity to carefully monitor inflation during the first half of 2014,” Bullard said.  “Should inflation not return toward target, the Committee could pause tapering at subsequent meetings.”

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The post New Zealand Dollar Rises Towards 3-week High appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

By HY Markets Forex Blog

Major Asian stocks were seen declining on Tuesday. While data for China’s industrial production came in lower than expected after three Federal Reserve (Fed) policymakers signaled tapering might start as soon as next week.

Some indices within the region were fluctuating between gains and losses during the session. While traders focused on the most important data of session, China’s industrial production; which came in below expectations.

Both Japan and Australia saw some under-forecasted reading during the session. With global stocks, European stocks closed the market flat, while Asian advanced in the previous session, after China posted its biggest trade surplus in almost five years.

 Asian Stocks – Japan

The Japanese benchmark, the Nikkei closed the market 0.25% lower to 15,611.31 while Tokyo’s Topix index edged up 0.08% to 1,256.33 at the time of writing.

The yen dropped 0.01% lower against the US dollar at ¥103.27 at the time of writing, after Japan’s business sector showed a slowdown in the fourth quarter.

The nation’s Business Outlook Survey Index came in at 9.7 for the fourth quarter, down from 15.2 recorded in the previous quarter. The domestic economic conditions climbed over the quarter, with the sub-index edging 25.5 higher. The Employment condition for all industries rose from 11.4 to 16.5 points.

Household confidence for November came in 42.5 points higher, up from 41.2 registered in the previous month, the Cabinet Office confirmed.

Yahoo! Japan was the market main movers of the session on the Nikkei 225, as stocks came in at 5.5%. Shares in anti-virus software developer Trend Micro, declined 2.6%.

Asian Stocks – China

Hong Kong’s Hang Seng index ticked down 0.36% at the time of writing, at 23,733.66, while the mainland major gauge in Shanghai rose 0.18% higher to 2,234.19, clearing gains from the previous session after the release of the nation’s downbeat data.

The country’s industrial production came in below expectations, the official data revealed on Tuesday. The report released by the National Bureau of Statistics of China showed that the industrial production had dropped to a 10.0% rise from a 10.3% rise in the previous month and below analysts’ forecast of 10.1%.

A separate data from the bureau showed that China’s retail sales rose 13.7% higher at an annual rate, from 13.3% recorded in the previous month.

The Chinese Academy of Social Sciences (CASS) said tightening the monetary policy may not be the key to control inflation, if it surpasses 3.5% which could affect the economic recovery.

Crude & natural gas driller, Kunlun Energy saw the most gains in Hong Kong as it rose 4.0% higher. While China Coal Energy slipped 2.6% during the session.

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The post Asian Stocks Drops on Disappointing Chinese Data appeared first on | HY Markets Official blog.

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By John Whitefoot for Daily Gains Letter

Back in March, a Canadian man listed his house for sale in exchange for Bitcoins—5,362 of them. At the time, the digital currency was exchanging hands at US$73.00, which means the house was available for about $395,000. (Source: “Canadian house first on sale for Bitcoin currency,” RT.com, March 25, 2013.)

The listing was considered a risky (and bizarre) idea; after all, the digital currency is experimental, decentralized, and can be transferred to anyone, anywhere in the world. Until recently, it was debatable as to whether or not this currency would even gain traction.

Because it is digital, the currency does not exist in a physical sense. It also isn’t issued by any central bank, and that might be part of the appeal; without a central bank, accounts cannot be seized or frozen. (That’s an attractive point for those in Cyprus who had 10% of all savings and deposits seized by the government.)

The lack of an intervening central bank also means the currency cannot be manipulated. While the digital currency is regularly being “minted,” there is a limit to how much can be created; this is to prevent inflation. There are currently around 12 million Bitcoins in circulation. After the year 2140, no more will be minted, and the total amount available will stand at a maximum 21 million.

Still, the price of a Bitcoin can fluctuate wildly. First introduced in early 2009, the digital currency floundered, coming in at about US$14.00 earlier this year. Now, the digital currency is “worth” around $1,080. Had the above-mentioned house sold for 5,362 Bitcoins, and had the owner held onto those coins, his investment would be worth around $5.8 million today—an attractive sum.

So will Bitcoins become a universally accepted alternate currency, or is it the modern day version of the tulip mania bubble?

Former Federal Reserve Chairman Alan Greenspan says Bitcoins are a bubble, and that in order for a currency to be exchangeable, it has to be backed by “something.” This is a bit rich when you consider how readily the Federal Reserve prints off trillions of dollars of currency that is backed by nothing. (Source: Kearns, J., “Greenspan Says Bitcoin a Bubble Without Intrinsic Currency Value,” Bloomberg web site, December 4, 2013.)

Not everyone agrees with Greenspan. The Bank of America just initiated coverage on the Bitcoin and said it has a fair value of $1,300. One Wall Street analyst sees the digital currency’s value topping US$10,000 in the next two years, and Ron Paul thinks it could destroy the U.S. dollar. (Sources: Ro, S., “BOOM: A Major Wall Street Bank Just Initiated Coverage On Bitcoin And Identified A Fair Value,” Business Insider Australia, December 5, 2013; “Nick Hodge: Bitcoin Will Reach $10,000 in the Next Two Years,” Long Island Newsday web site, December 5, 2013; Pagliery, J., “Ron Paul: Bitcoin could ‘destroy the dollar,’” CNN Money web site, December 4, 2013.)

Still, Bitcoins are experiencing some growing pains. China’s central bank said last week that it is banning financial institutions from using the digital currency. The announcement sent the price of Bitcoins plunging from a high of US$1,240 to a low of $870.00 before recovering. (Source: Mullany, G., “China Restricts Banks’ Use of Bitcoin,” The New York Times web site, December 5, 2013.)

Thanks to the Great Recession and the Federal Reserve’s love of printing money, investors are looking for different ways to protect their capital should the markets tank or go through a major correction. With a single Bitcoin rivaling an ounce of gold, many investors may be wondering if the digital currency is the new gold.

Bitcoins are still in their infancy, and up until earlier this year, the currency wasn’t really on anyone’s investing radar. That doesn’t mean it isn’t a legitimate option for speculative investors; clearly, it is, as the digital currency is responsible for the making of many new millionaires this year with only more to come. At the same time, the currency’s volatility makes it less of a safe haven than gold or silver.

And if an objective investor looked at the incredible ride the digital currency has been on over the last year, it would be hard to conclude that it’s been anything but an unsustainable bubble that’s ripe for some sort of correction.

When it comes to a store of value, nothing beats gold or silver.

http://www.dailygainsletter.com/investment-strategy/bitcoin-the-new-gold/2184/

By George Leong for Investment Contrarians

Taper or no taper? When? How much? These are the worries that are currently driving tensions in the stock market on a daily basis. As I wrote in a previous article, no one seems to care that corporate revenue growth is muted and consumers aren’t spending.

Last week, we saw jobs market data that helps support the Federal Reserve’s reasons to begin tapering its bond buying program.

The non-farm payrolls reported the generation of 203,000 new jobs—better than the consensus estimate of 180,000 for the month of November. This represented the second straight month that more than 200,000 jobs were created, and while the jobs market has a long way to go, this is positive news. Jobs numbers were revised upwards in September and October.

Now it may be true that the quality of jobs created could be improved upon, as much of the increase in the jobs market continues to be driven by the service sector and other lower-skilled jobs. However, the results do suggest some action may be taken by the Federal Reserve.

The unemployment rate fell to a five-year low of seven percent, much better than the consensus 7.2% and October’s 7.3%. The rate appears positive on the surface.

The Federal Reserve had said it wants to see the unemployment rate fall to around 6.5% before it considers raising interest rates, but with a seven percent rate, you have to wonder if the Federal Reserve is thinking hard about when to rein in its monthly bond buying and reduce the stock market’s dependency on cheap money.

Yet I don’t think the Federal Reserve will begin tapering until the New Year. No matter if it’s under Ben Bernanke or Janet Yellen, the Federal Reserve likely wants to see more jobs growth before deciding on any actions toward tapering. Should the unemployment rate hold or fall below seven percent in December and January, I would think the Federal Reserve would take that as a signal to begin tapering.

The consensus feeling is that the Federal Reserve will hold off on any tapering until some time in the New Year, maybe some time in March or June. The central bank wants to make sure the economic renewal is on solid ground prior to tapering.

The strong third-quarter gross domestic product (GDP) growth of 3.6% reported last week will help to support tapering if it continues at this pace. The reading was well above the estimate of three percent.

Overall, the stock market will likely continue to focus on when the Federal Reserve will begin tapering for the next months, and this will make for some nervous trading.

The yield on the 10-year Treasury bond has edged higher to 2.84%, which could trigger some minor selling in stocks. Investors should be mindful of this.

The chart of the 10-year U.S. Treasury below recently showed the decline in the S&P 500 when yields rose, as indicated in the chart below (the first two blue ovals starting from the left). We are now seeing bond yields rise, but stocks appear to be holding on (as shown by the third blue oval on the far right of the chart).

Chart courtesy of www.StockCharts.com

If bond yields continue to rise as we move into 2014, we will likely see the stock market decline. You should be aware of this correlation and monitor the direction of the jobs market and bond yields; this will help you decide when to begin to take some money off the table.

Original Article: http://www.investmentcontrarians.com/stock-market/how-to-decide-when-to-take-some-profits-off-the-table/3417/

Article By RoboForex.com

Analysis for December 10^th, 2013

GBP/USD

GBPUSD, Time Frame H4 – Indicator signals: Tenkan-Sen and Kijun-Sen intersected above Kumo Cloud and formed “Golden Cross” (1); all lines are horizontal. Ichimoku Cloud is going up (2), Chinkou Lagging Span is close to the chart, and price is above the lines. Short‑term forecast: we can expect support from Tenkan-Sen and growth of the price.

GBPUSD, Time Frame H1 – Indicator signals: Tenkan-Sen and Kijun-Sen are influenced by “Golden Cross” (1); Kijun-Sen and Senkou Span A are directed upwards, other lines are horizontal. Ichimoku Cloud is going up (2); Chinkou Lagging Span is above the chart, and price is inside Tenkan-Sen – Kijun-Sen channel. Short‑term forecast: we can expect support from Senkou Span A and growth of price.

GOLD

XAUUSD, Time Frame H4 – Indicator signals: Tenkan-Sen and Kijun-Sen intersected below Kumo Cloud and formed “Golden Cross” (1); Tenkan-Sen is directed upwards, other lines are horizontal. Ichimoku Cloud is closed (2), Chinkou Lagging Span is above the chart, and the price is above the lines. Short‑term forecast: we can expect support from Senkou Span B and growth of the price.

XAUUSD, Time Frame H1 – Indicator signals: Tenkan-Sen and Kijun-Sen intersected above Kumo Cloud and formed “Golden Cross” (1); all lines are horizontal. Ichimoku Cloud is going up, Chinkou Lagging Span is above the chart, and price is on Tenkan-Sen. Short‑term forecast: we can expect resistance from Tenkan-Sen and support from Senkou Span A.

RoboForex Analytical Department

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.