Month: December 2013

By HY Markets Forex Blog

Those who trade forex can benefit from knowing about how the US dollar recently surged to its highest level in more than five years against the yen, and the circumstances that surrounded this situation.

The greenback recently appreciated to its highest value relative to the yen since October 2008, rising to 104.64, Reuters reported.

USD/JPY – Central Bank Stimulus Key to Exchange Rate

The decisions made by the central banks of both the United States and Japan relative to their use of quantitative easing are a major factor that has been cited as having an impact on the exchange rate for the currencies of these two nations, according to Bloomberg.

Markets responded to an announcement made by the Federal Reserve that the financial institution would taper its current pace of bond purchases starting in January 2014. Global market participants had been waiting for the nation’s central bank to specify the timeline it would use to lower the pace of these transactions since Federal Reserve Chairman Ben Bernanke stated back in June that this form of stimulus could be reduced as soon as 2013.

He made this statement at the end of a policy meeting held by the Federal Open Market Committee, and also said that quantitative easing could potentially be eliminated altogether as early as 2014.

BOJ Maintains Current Policy

While the Fed indicated specific plans for reducing its stimulus at the conclusion of the most recent FOMC meeting on Dec. 18, the Bank of Japan recently announced on Dec. 20 that it will keep its existing regimen of stimulus in place in an effort to meet a goal of 2 percent annual inflation, the media outlet reported. The BOJ made this announcement after a two-day meeting conducted in Tokyo was finished.

Haruhiko Kuroda, governor of the BOJ, has stated that he isn’t trying to achieve a specific value for the USD/JPY or other currency pairs that involve the yen, according to the news source. However, at the end of the central bank’s latest meeting, his board reiterated its prior promise to add between 60 trillion ($580 billion) and 70 trillion yen ($670 billion) to the nation’s money supply every year.

Amid this robust stimulus, the currency of the Asian nation has experienced some depreciation, and most of the companies taking part in a recent Reuters poll predicted that within the first six months of next year, the BOJ will push the yen lower in value. The decline that this currency has experienced has helped provide tailwinds to economic conditions in Japan, Kurodo has asserted.

“The correction of an excessively strong yen has been a plus for Japan’s economy,” Kuroda told members of the media following the conclusion of the BOJ meeting, according to Bloomberg. “Corporate profits have been boosted, sentiment among economic players has turned positive, stocks have risen and growth has accelerated.”

While the progress that the nation’s economy has made recently is apparently not enough to get the BOJ to reduce its stimulus, the most recent report provided by the U.S. Commerce Department on the nation’s third quarter gross domestic product growth helped support the strength of business conditions in the world’s largest economy, Reuters reported. The latest estimate provided by the government agency revealed that during the three-month period, the nation’s economy grew at an annualized rate of 4.1 percent.

While the FOMC did announce that the current rate of bond purchases will be reduced starting in January, the group of officials released a statement indicating how the U.S. economy will be bolstered by the continued transactions, according to Bloomberg.

“The committee’s sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery,” the FOMC said, the media outlet reported.

USD/JPY – Fed Announces Tapering Plans

As a result of these purchases made by the Fed, the balance sheet of the financial institution recently surpassed $4 trillion, according to the news source. Bernanke has emphasized that given the current situation, the Fed could slowly decrease the amount of stimulus that is used.

Economists taking part in a recent Bloomberg News poll predicted that during the next seven policy meetings held by the Fed, the financial institution will likely lower the current stimulus by $10 billion at every one of these events.

In addition, those who trade forex might benefit from knowing about the results of a separate survey conducted by the media outlet, in which 27 out of 35 market experts predicted that after April, the current stimulus used by the BOJ will be increased. Of the individuals who participated, only two predicted that when the fiscal year that ends on March 2016 is over, the the BOJ will have succeeded in reaching its 2 percent annual inflation target.

The post Recent Surge in USD/JPY Impacts Forex Trading Market appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

By MoneyMorning.com.au

It used to be such a lonely place.

But now it’s becoming a more crowded place.

As a contrarian investor we’re not keen on crowds.

We prefer to run ahead of the crowd, and then duck into a quiet side alley when things start looking dangerous.

At the moment things aren’t too dangerous. But the crowd is starting to grow. That means it’s still too early to sell stocks yet…

If you’re bullish on stocks you’ll love the report we came across from Bloomberg News yesterday.

According to the report:

‘European stocks are poised for a third year of gains, restoring almost all the losses suffered during the financial crisis, as economic growth overcomes record pessimism on earnings.

‘Equities will rise 12 percent in 2014, according to the average projection of 18 forecasters tracked by Bloomberg News. Ian Scott of Barclays Plc says the Stoxx Europe 600 Index can rally 25 percent because shares are cheap even after a 49 percent gain since 2011…

‘The average estimate is the most bullish since at least 2010, with no strategist predicting a gain of less than 3.3 percent…‘

No one with even the mildest bullish bent could fail to smile after reading that report. It goes some way to confirming what we’ve said for some time; investors and analysts are starting to turn bullish on stocks after spending most of the previous two years worrying about central bank policy decisions.

But now, thanks to the implied message from the US Federal Reserve last week that money printing, bond buying and low interest rates will be around ‘forever’, investors are starting to understand that the future for stocks is only pointing in one direction – up.

Don’t Watch This Boom from the Sidelines

Before we go on, one thing.

Remember that despite our bullish view we’re still cautious about putting too much money into stocks. Unlike the mainstream analysts, we understand this market for what it is – a central bank induced bubble.

And you know what happens to bubbles. At some point they pop.

The issue for you as an investor is whether you take the risk and play along with the asset bubble (that’s what we suggest you do) or do you sit on the sidelines earning a few bob in interest and grumble about how the market is rigged…all the while missing out as stock prices ratchet higher.

As much as we criticise investors for sitting on the sidelines, we understand why they do it. No one wants to lose money. And with the market this risky there is a chance investors could lose money.

But the way we figure it, and the way two particular sectors are set-up right now, it’s a risk most investors should take.

Before we explain which two sectors (you can probably already guess), we’ll explain which stocks may disappoint investors over the next 12 months…

These Stocks are High and Going Higher

A group of stocks we still like, but we’re not expecting huge gains from, are dividend stocks.

That’s not to say you shouldn’t own dividend stocks, because you should. In fact small-cap analyst Tim Dohrmann is still on the lookout for what we call ‘Turbo Cap’ stocks as part of his work in Australian Small-Cap Investigator.

But what we’re saying is that you shouldn’t expect the big double-digit or triple-digit gains that you saw during the early part of this year.

Instead we like two sectors that have had differing fortunes over the past two years. We’re talking about technology stocks and resource stocks. To show you what we mean by ‘differing fortunes’, cop a look at this chart:

Source: Google Finance
Click to enlarge

The NASDAQ technology index is the blue line. It’s up 65.5% since late 2011. The S&P/ASX 200 Metals and Mining index is the red line. It’s down 26.1% since late 2011.

It’s clear where the smart money has gone since 2011. Now, you could look at this chart and say, ‘Tech stocks are overvalued and mining stocks are undervalued.’ We’ll agree with half of that. Mining stocks are undervalued.

But there’s no way we can agree with the statement that technology stocks are overvalued. You only have to look at the way the tech sector is merging with and infiltrating every part of every industry to see that technology and the global economy are pretty much a single entity.

The Best Stock in the Sector

In a way that sums up the work Sam Volkering is doing in Revolutionary Tech Investor. Sam’s big focus heading into 2014 is ‘immersive technology’.

There isn’t enough space in this letter to outline the complete story behind ‘immersive technology’, but the gist of it is that human interaction with technology will eventually become passive rather than active.

That’s the best way we can think of to explain it. Some folks may find that idea a bit scary, but they shouldn’t. We’re not talking about the rise of the cyborgs. We’re talking about a situation where humans, machines and technology interact impulsively.

For instance, it could be where in the future your clothing contains tiny microscopic sensors. These sensors monitor your body and provide you with a continuous update on your health. These sensors could help you stave off a cold or other illness by giving you instructions on changes to your diet.

Another way immersive technology could develop is with driverless vehicle technology. You would get in your car and the car would instantly know your destination. Perhaps it could be voice activated instructions – ‘the office’. Or maybe the cars of the future would instinctively know your destination based on your clothing or the time of the day.

These things may seem crazy to you. Heck, they seem crazy to us as we’re writing them! But that’s the amazing thing about technology; crazy things have a habit of happening.

Sam knows this. That’s why he recommended what he says is the best ‘immersive technology’ stock on the market in the December issue of Revolutionary Tech Investor, and it’s why he has more ideas on this theme to come.

This is why we’re so bullish on the tech sector. Resource stocks look great to us as a value play. They are the most beaten-down bunch of stocks on the market. But every investment you make doesn’t have to be about finding beaten-down value.

It can also be about finding stocks that are exploiting an explosive new trend. That’s what the tech sector is all about. And it’s why we say tech stocks should be part of every investor’s portfolio in 2014.

It’s set to be a bumper year…especially as the NASDAQ creeps closer to its all-time high.

Cheers,
Kris+

Special Report: The ‘Wonder Weld’ That Could Triple Your Money  

Join Money Morning on Google+

By MoneyMorning.com.au

By MoneyMorning.com.au

It may be hard to believe, but the European banking system is in worse shape than it was in 2008.

Nonperforming loans, or NPLs, are loans for which a bank has not received a scheduled payment for at least 90 days. These are the deadbeats, in other words. Well, European banks hold 1.2 trillion euros worth of NPLs – that’s double what they reported in 2008.

Banks have to get rid of these loans. There are new rules taking effect next year, called Basel III. They tighten every year through 2018. To meet these hurdles, the banks must clean up their books. This means they have to sell a bunch of assets. And they are selling them at deep discounts.

You want to be a buyer of these assets.

The ‘smart money’ is all over this idea and has been for at least two years. Blackstone, Apollo and other private equity firms have raised billions to buy distressed loan portfolios from European banks.

The reason you want be a buyer is because the banks will sell these assets at discounts to the face value of the notes. For real estate loans, the discount varies greatly, depending on where the property is and other details. See the chart below to get a sense for the discounts on deals that already closed in the last two years.

Click to enlarge

That chart shows you what investors paid. The tallest tower is in the 41-50 cents per euro range. Meaning, the buyers paid 41-50% of the face value of the mortgage. The discounts have largely held over the past few years. It’s not as if the discounts are going away.

So think about this: A banker lends 75% against the value of the property during the boom. The thing goes bust. You can pick up the property for half the value of the note. On a $10 million apartment with a $7.5 million mortgage, a 50% discount means you pay only $3.75 million.

Maybe it’s 70% leased. It didn’t work with a $7.5 million mortgage. The owner couldn’t make the payments. But now you come in at $3.75 million. And say you put $2.5 million of debt on it. The property works now. You pencil it out and figure you’ll earn a 12% cash-on-cash return in the first year. And you own the property, with a chance to boost occupancy over time. In a few years, you could double your investment as the property value recovers.

This is exactly what private equity firms did in the aftermath of the crisis in the US. It’s taken longer in Europe, but it’s happening.

Two years ago, I called it ‘the biggest fire sale on earth‘. Here was my perspective at the time:

‘This fire sale is your opportunity. There is no better, more-reliable way to make money than to buy something from someone who has to sell. Bankers are the best people in the world to buy from. Believe me, I know.

‘I was a vice president of corporate banking for 10 years before I started writing newsletters in 2004. I would get at least three or four requests every year from some investor group asking if we had any assets we were looking to unload. Why? Because they know banks are stupid sellers.

‘I once had a big real estate deal go bad on me. But I knew I was covered by good collateral twice over. You’d never know it based on the pressure I got to get rid of the thing once the borrower stopped paying and the bank took the asset. I knew, given a little time, I could sell the property and make a bundle for the bank. But the folks at the top didn’t want to hear it. They wanted that bad loan gone. They wanted to wipe it off the books fast.

‘So I sold it quickly, basically at fire-sale prices. It was still the most-profitable loan the bank made that year, because I got a price a good 35% above the loan amount. But the group I sold it to – which could’ve been more patient in marketing the property – flipped it again and made an easy 50% above that. The bank left a lot of money on the table and knew it – and didn’t care.

‘But institutionally, banks can’t really hold bad debts for long. As soon as they report a big bad debt on a quarterly financial statement, some annoying things happen. It means they have to put aside more capital for this particular loan, which they hate to do, as it lowers profitability and requires a lot of paperwork. It can raise the attention of regulators, which banks hate. It can raise shareholder suspicions about lending practices, which banks hate. So the usual way to deal with bad debts is to clear ‘em out as fast as possible. (Unless you’re swamped with bad debts in a full-blown crisis, in which case you try to bleed them out and buy time to earn your way out, and/or patch them up as best you can to keep up appearances while you pray for a miracle – or a bailout.)‘

Two years on, my bankers-are-stupid-sellers theory has been proven correct. Even better, my recommendation on the fire-sale theme has nearly doubled since – but incredibly, the opportunity ahead of it is bigger still. Astonishing as it sounds, the idea is timelier today. After two years of foot-dragging by the banks, the fire sale is only really beginning in earnest now.

‘Asset sales by banks have absolutely accelerated,‘ according to David Abrams, who manages 3.9 billion euros in European debt for the private equity firm Apollo. ‘We’re five years into the crisis, but it’s just the beginning of the disposition process.‘

And Marc Lasry of Avenue Capital, which invests more than $8 billion in distressed loans, says in a Bloomberg story that ‘bank after bank’ has been offering his firm assets for sale.

I could dig up many more such quotes and anecdotes. The key point is the pace is picking up.

PwC estimates that when the books close on 2013, we’ll have a new record of asset sales by European banks. Yet as I pointed out, the mountain of NPLs is bigger now than ever. Take a look at the below chart.

Click to enlarge

This mountain is (once again) your opportunity.

Chris Mayer
Contributing Editor, Money Morning

Ed Note: The above article originally appeared in The Daily Reckoning, USA.

Join Money Morning on Google+

By MoneyMorning.com.au

Source: Kevin Michael Grace of The Gold Report  (12/23/13)

http://www.theaureport.com/pub/na/levi-spry-highlights-quality-australian-projects-that-will-find-funding

Quality will win out, says Levi Spry, senior resources analyst at GMP Securities Australia. In this interview with The Gold Report, Spry contends that funding project capital expenditures is a problem only when the underlying economics are marginal. In other words, high grades plus low costs ensure victory, and he suggests a handful of Australian companies, in gold, lithium, copper and nickel, that boast the quality needed to earn high margins.

The Gold Report: Australia has a new Liberal Party government under Prime Minister Tony Abbott. Parliament’s lower house has voted to repeal the previous Labour government’s mining tax. Is this a done deal?

Levi Spry: We’re expecting repeal, even though both the Labour Party and the Greens currently oppose it. The bill to repeal the mining tax has passed in the Lower House of Federal Parliament but current opposition means it will likely be blocked until the Senate changeover next July. I should mention that this tax affects only Australian iron ore and coal producers.

TGR: Rio Tinto Plc (RIO:NYSE; RIO:ASX; RIO:LSE; RTPPF:OTCPK) has accused the state government of Western Australia of a stealth plan to raise its own royalty rates. Could you explain the Australian federal system and its relation to the mining industry?

LS: The way the royalties work in Australia is that the states claim them as revenue-based rent when the ore is mined. Federal profit-based taxes come in on top of that. So it appears Western Australia is looking to grab more before the federal government gets its take.

TGR: How important is Western Australia to Australian resources as a whole?

LS: All the iron ore and the majority of the gold production are in Western Australia, with coal in Queensland and New South Wales. Western Australia accounts for over half of Australia’s mineral and energy exports.

TGR: The share price of Newcrest Mining Ltd. (NCM:ASX), the leading Australian gold producer, has fallen 80% over the last two years. Is Newcrest a one-off in the Australian gold industry, or do its problems affect the industry as a whole?

LS: It’s a trend across our gold sector. Many of the smaller- or mid-cap gold producers are down similar, if not greater, amounts over that same period; having seen their cost line run up to meet the gold price, they are now experiencing lower prices and a stubbornly high Australian dollar.

TGR: Newcrest has, of course, slashed costs. Which gold producers have done a particularly good job in expenditure reduction?

LS: Cost-cutting is happening across the sector, but we’re still waiting to see that reflected in the quarterly results, to be honest. Broadly speaking, GMP remains very much focused on the quality of deposits.

TGR: Which Australian gold company stands out on grade?

LS: Doray Minerals Ltd. (DRM:ASX) is our preferred gold exposure on the Australian Securities Exchange (ASX). It has the Andy Well gold project, a new gold mine in a historical province near Meekatharra in Western Australia. Production began in August. This is a small-scale underground mine and is mining ore grades of 15 grams per ton (15 g/t).

We expect FY/14 production of 70,000–80,000 oz (70–80 Koz) at cash costs of A$500/oz and an all-in costs of A$730/oz. We’ve given it a Buy rating with a price target of $0.90/share.

TGR: Will production increase beyond 70–80 Koz?

LS: Doray’s processing plant can probably handle increased production once it increases its resources and reserves. Now that the mine is built, and it is ramping up, the focus will move back to exploration. Doray has some pretty attractive targets to add mine life. Once that’s done, there’s a chance to increase its production profile as well.

TGR: Will Doray have enough cash for the exploration necessary to increase its resources?

LS: We think its funding should be fine.

TGR: What other ASX-listed gold producers do you like?

LS: Alacer Gold Corp. (ASR:TSX: AQG:ASX) has the Çöpler gold mine in Turkey. It’s heap leach and low cost. The company should produce around 270 Koz this year at less than $425/oz all-in costs. In mid-2014, Alacer will deliver a bankable feasibility study on a potential sulphide operation. That’s when we’ll see the costs associated with that, capital expenditures (capex) and operating expenditures, going forward. Çöpler has a large resource base, highly prospective exploration ground and good operating parameters.

Beadell Resources Ltd. (BDR:ASX) is doing a very good job currently at its Tucano mine in Brazil. The company had a new discovery called Duckhead, which means it is processing higher grades than originally planned. That means higher production and lower costs. We have a Buy rating and a price target of $1.10/share.

TGR: Australia is one of the top two lithium producers in the world. There are 14 ASX-listed lithium companies. How significant do you consider the just-announced joint venture (JV) of Rockwood Holdings Inc. (ROC:NYSE) taking 49% of Talison Lithium Ltd. (TLH:TSX) and Chengdu Tianqi Industry Group Co. keeping 51%?

LS: The deal could be very significant for the lithium space. It points to more consolidation on the supply side in a high-growth sector, which is very positive on where the price is going to go. Also significant is the potential for Tianqi to become an investor in Rockwood itself.

TGR: So you anticipate higher lithium prices?

LS: Yes. Lithium demand is growing at about 10% per annum, and supply is limited.

TGR: Are increased prices dependent upon newly emerging technologies?

LS: Yes, as those technologies become more mainstream. The obvious one is electric cars. You’ve probably seen the good growth numbers put out by industry leaders like Tesla Motors Inc. (TSLA:NASDAQ). This points to quicker-than-expected uptake, considering that the company is already profitable at such low-production volumes.

TGR: Which Australian lithium companies do you like?

LS: There is only one with a real project: Orocobre Ltd. (ORL:TSX; ORE:ASX). Its flagship project, Olaroz, is located in the Argentinian Andes. It is a JV with Toyota Tsusho Group (TYHOF:OTCPK). Construction is advanced, and the company is talking about production in mid-2014. It will be very low on the cost scale (~US$2,000/ton) and has a $229 million ($229M) capex. High grades and good chemistry mean production costs will be low, and there is a readily expandable resource base. It is well funded with the package Toyota brought to secure its 25% share.

We’ve given Orocobre a Buy rating with a price target of $2.85.

TGR: Argentina has been troublesome for a lot of mining companies. Olaroz is in Jujuy. How does this province rate on mining friendliness?

LS: Everyone’s interests are aligned there. Toyota’s funding is Japanese government backed, and the local Jujuy government owns 8.5% through the joint venture. Olaroz is going to have a good impact on that region with jobs, royalties and future dividends.

TGR: When you consider Australian projects outside that country, what qualities are paramount?

LS: First, we look at the geology. Second, we look at the political and fiscal regimes involved. In many cases we are willing to take on higher jurisdictional risks for the orebodies.

TGR: With that in mind, is there any foreign copper project you’re keen on?

LS: We really like Hot Chili Ltd.’s (HCH:ASX) Productora copper project, which is 500 kilometers north of Santiago in Chile. Productora is near surface, near the coast, at low altitude and has significant infrastructure advantages. Importantly for a Chilean project it has access to power and water.

Nearby it has a second project, Fronterra, which is adjacent to the Payen copper-gold project that Coro Mining Corp. (COP:TSX) optioned 70% of to Freeport-McMoRan Copper & Gold Inc. (FCX:NYSE) in August for $35.5M.

Hot Chili may partner with Compañía Minera del Pacífico S.A., its largest shareholder, which will ensure access to infrastructure and low-capex intensity. Lundin Mining Corp. (LUN:TSX) also owns over 8% of the company, so it has done a bit of due diligence for us, if you like, and we think it is a good judge. We’ve given Hot Chili a Buy rating with a price target of $1.15/share.

TGR: When will Productora go on-line?

LS: The company is just completing a prefeasibility study, which should be published in mid-2014. A bankable feasibility study should follow in mid-2015, with commissioning in late 2017. We are looking at 60,000 tons per annum (60 Ktpa) copper production at cash costs of $1.30-1.40/pound for 20 years.

TGR: What’s the capex?

LS: We think it will come in around $650M. Low capex intensity terms (~US$10,000/ton of annualized capacity) because of its infrastructure advantages and grades.

TGR: How does financing look?

LS: That’s yet to be sorted out. We’re not expecting it to be finalized for another 12–18 months, but what we would say is that good projects find financing.

TGR: Coming back to Australia, which nickel project stands out?

LS: Sirius Resources NL’s (SIR:ASX) Nova-Bollinger nickel-copper project in Western Australia. This is one of the most exciting new nickel projects in the world: high grades with costs in the lowest quartile. A feasibility study is due in mid-2014, and production could begin in mid-2016. Anticipated production is 28 Ktpa nickel and 12 Ktpa copper at cash costs of US$2.84/lb nickel.

We’ve given Sirius a Buy rating with a price target of $3.20.

TGR: How firm is Nova’s preproduction capex of $471M (with a $51M contingency)?

LS: There is still some work to be done refining that number, and we think Sirius can probably reduce it. Again, good projects find funding, so there are plenty of funding routes open to that project because its economics are so robust.

TGR: In recent years, there has been a strong reaction against high capexes. Is there any kind of cutoff point beyond which a capex dollar figure comes to be seen as critical?

LS: I would say no. In the mid-cap space, we’ve seen companies chase scale in order to use economies of scale to reduce costs and build marginal projects. Now, we’re seeing that unwinding. The gold sector is a good example of this. It’s now all about margin as opposed to volume. Doray is a good example of that because it’s quite small scale but very high grade and high margin as opposed to the kind of large, low-grade operation that so often comes with high capex and more risk.

TGR: The bear market in precious metals equities has lasted so long that many investors have become gun shy. What should investors be looking for in mining companies?

LS: Asset quality. Mines that will produce through the cycles. Grades, all-in costs, balance sheets and management. Those are our four criteria.

TGR: Levi, thank you for your time and your insights.

Levi Spry is senior resources analyst at GMP Securities Australia, covering the gold, base and specialty metals sectors. Previous, he worked for Deutsche Bank Australia and as a mining engineer with Newcrest Mining Ltd., Harmony Gold Mining Co., Western Metals Ltd., Barminco and SRK Consulting. He holds a Bachelor of Engineering (mining; Honors) and a Bachelor of Applied Science (geology) from the University of South Australia, a Graduate Diploma in Applied Finance and Investment from the Financial Services Institute of Australia and is currently completing a masters in mineral economics at Curtin University. In 2010 and 2011 Spry was ranked Top 3 in his sector in the Peter Lee surveys and, in 2012, Spry was named one of the Top 10 equities research analysts by the Sydney Morning Herald.

Want to read more Gold 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 Streetwise Interviews page.

DISCLOSURE:
1) Kevin Michael Grace conducted this interview for The Gold Report and provides services to The Gold 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 Gold Report: Hot Chili Ltd. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Levi Spry: 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.
4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.
5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer.
6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

Streetwise – The Gold Report is Copyright © 2013 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.

Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

Participating companies provide the logos used in The Gold Report. These logos are trademarks and are the property of the individual companies.

101 Second St., Suite 110
Petaluma, CA 94952

Tel.: (707) 981-8999
Fax: (707) 981-8998
Email: [email protected]

By Michael Lombardi, MBA

Quietly, without much fanfare or news, the bellwether 10-year U.S. Treasury hit a yield of 2.9% this past Friday—double what it yielded in June of 2012. (Source: Treasury.gov, last accessed December 20, 2013.)

Yes, the Federal Reserve only slightly pulled back on its money printing program and interest rates are already spiking.

And the standard 30-year mortgage rate hit 4.52% last week, up from 3.35% in November of 2012. Mortgage rates have increased by about a third in one year’s time. (Source: Freddie Mac web site, last accessed December 18, 2013.)

In the statement issued by the Federal Reserve last week, it said, “Beginning in January, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $40 billion per month rather than $45 billion per month.” (Source: Press Release, Federal Reserve, December 18, 2013.)

In other words, the Federal Reserve will continue to print $75.0 billion a month in new paper money as opposed to the $85.0 billion a month it used to print. If the Federal Reserve continues to print $75.0 billion a month through the year 2014, its balance sheet will grow by another $900 billion. Yes, by the end of 2014, we will be looking at a Federal Reserve balance sheet that shows close to $5.0 trillion in newly created money on it.

I’d like to end this year’s last editorial issue of Profit Confidential by making my most important message of the year.

All this printing of new money (out of thin air) that the Federal Reserve has undertaken since the credit crisis of 2008 hit will come back to haunt us in the form of higher interest rates and inflation. The higher interest rates, as I have outlined above, have already started. While the “official” government figures don’t show it, inflation is a problem too.

As interest rates and inflation rise, the economy will soften. But isn’t the economy soft already, you ask?

Wal-Mart Stores, Inc. (NYSE/WMT) opened two new locations in Washington D.C. The two stores ended up getting 23,000 job applications for the 600 job openings they had. (Source: CNN Money, December 9, 2013.)

I understand these two stores aren’t representative of the entire U.S. jobs market, but we must acknowledge that after $4.0 trillion in newly printed money from the Federal Reserve, which was supposed to jumpstart the economy, we still have an underemployment rate of 13%…and now interest rates and inflation are going to rise?

Further damage to an already soft economy is coming in 2014.

This article Small Pullback in Money Printing = Big Spike in Interest Rates? is originally published at Profitconfidential

By Nick Giambruno, Senior Editor, International Man, Casey Research

I am very pleased to have had the chance to speak with Jim Rogers, a legendary investor and true international man.

Jim and I spoke about some of the most exciting investments and stock markets around the world that pretty much nobody else is talking about.

You won’t want to miss this fascinating discussion, which you’ll find below.

Nick Giambruno: Tell us what you think it means to be a successful contrarian and how that relates to investing in crisis markets throughout the world.

Jim Rogers: Well, there are two aspects of it. One is being a trader, being able to buy panic, and nearly always if you are a trader or an investor, if you buy panic, you are going to do okay.

Sometimes it is better for the traders, because when there is a panic—a war breaks out or something like that—everything collapses, and some people are very good at jumping in and buying. Then, when the rally comes, the next day or the next month, they sell out.

Now, the people who are investors can also do that, but it usually takes longer for there to be a permanent rally. In other words, if there’s a war and stocks go from 100 to 30 and everybody jumps in, it may rally up to 50, and then the traders will get out, it may go back to 30 again. I’m trying to make the differentiation between investors and traders buying panic.

As an investor, nearly always if you buy panic and you know what you are doing, and then hold on for a number of years, you are going to make a lot of money.

You also have to be sure that your crisis or panic is not the end of the world, though. If war breaks out, you have got to make sure it’s a temporary war.

I used to work with Roy Neuberger, who was one of the great traders of all time, and whenever stocks would panic down, he was usually one of the few buyers, because he knew he could get a rally—if not that day, at least maybe that week or that month. And he nearly always did. No matter how bad the news, especially if there’s a huge drop, it’s probably a good time to buy if you’ve got the staying power and your wits, because you will likely get a rally. In terms of panic buying or crisis situations, that’s normally the way to play.

Now, it’s not always easy, because you are having everybody you know, or everybody in the media shrieking what a fool you are to even try something like that. But if you have your wits about you and you know what you are doing, and you know enough about yourself, then chances are you will make a lot of money.

Nick Giambruno: What is the story behind your most successful investment in a crisis market or a blood-in-the-streets kind of situation?

Jim Rogers: Certainly commodities at the end of the ’90s were everybody’s favorite disaster, and yet for whatever reason, I had decided that it was not a disaster. In fact, it was a great opportunity and there were plenty of things to buy. In 1998, for instance, Merrill Lynch—which at the time was the largest broker, certainly in America and maybe the world—decided to close their commodity business, which they had had for a long time. I bought. That’s when I started in the commodity business in a fairly big way. So that’s the kind of example I am talking about. Everybody had more or less abandoned or were in the process of abandoning commodities, and yet, that’s when I decided to go into commodities in a big way, because of what I considered fundamental reasons for doing it, but the fact that Merrill Lynch was getting out buttressed in my own mind anyway that I must be right, because, you know, everybody was out. Who was left to sell? There was nobody left to sell at that point.

Nick Giambruno: What about a particular country?

Jim Rogers: I first invested in China back in 1999 and then again in 2005. The market at those times was very, very bad. I invested again in November of 2008, when all markets around the world were collapsing, including in China.

So I have certainly made investments in countries with crisis markets, and I’m getting a little better at it than I used to be, because I have had more experience now. That’s why I keep emphasizing that you have to know what you’re doing. And by that I mean paying attention to and doing your homework on a stock or a commodity or a country. If you do that with a crisis market, then chances are you can move in and make some money.

Nick Giambruno: In your opinion, which countries today do you think offer the best crisis or blood-in-the-streets-type opportunities?

Jim Rogers: I think Russia is probably one of the most hated markets in the world. I don’t think many people have a nice thing to say about Russia or Putin. I was pessimistic on Russia from 1966 to 2012—that’s 46 years. But I’ve come to the conclusion that since it is so hated—and you should always look at markets that are hated—that there are probably good opportunities in Russia right now.

Nick Giambruno: Doug Casey and I were recently in the crisis-stricken country of Cyprus, which is also a pretty hated market, for obvious reasons. While we were there, we found some pretty remarkable bargains on the Cyprus Stock Exchange which we detailed in a new report called Crisis Investing in Cyprus. Companies that are still producing earnings, paying dividends, have plenty of cash (in most cases outside of the country), little to no debt, and trading for literally pennies on the dollar. What are your thoughts on Cyprus?

Jim Rogers: When I saw what you guys did, I thought, “That’s brilliant, I wish I had thought of it, and I’ll claim that I thought of it” (laughs). But it was really one of those things where I said, “Oh gosh, why didn’t I think of that,” because it was so obvious that you are going to find something.

It’s also obvious, after what happened in Cyprus, that it’s a place where one should investigate. Whether it is right to buy now or not, you are certainly right to look into it. If you stay with it and you know what you are doing, you do your homework, you are probably going to find some astonishing opportunities in Cyprus. It’s the kind of thing that I’m talking about and that you are talking about.

(Editor’s Note: You can find more info on Crisis Investing in Cyprus here.)

Nick Giambruno: Speaking of hated markets that literally nobody is getting into, I heard that you managed to find a way to get some sort of exposure to North Korea through bullion coins. Could you tell us about that?

Jim Rogers: Yeah, you know, it’s illegal for Americans to invest in North Korea. It’s probably illegal for us to even say the word “North Korea” (laughs). I look around to see which countries are hated. In North Korea there is no stock market, and there is no way to invest, especially if you are an American, but sometimes you can find something in a secondary market.

Stamps and coins were the only ways I knew of that one could get some sort of exposure. This is because you are not investing in the country, obviously, because you are buying them in a secondary or tertiary market. That said, I think the US government is going to make owning stamps illegal too.

There were people once upon a time—and maybe even now—who invested in North Korean debt. I have not done that, but it may be another way that people can invest in North Korea. I don’t even know if North Korean debt still trades, but it was defaulted on at some point.

Nick Giambruno: Another hated market that actually does have a pretty vibrant and dynamic stock market is the Tehran Stock Exchange in Iran. Have you ever taken a look at this market?

Jim Rogers: Yes, at one point I did invest in Iran, back in the 1990s and made something like 40 times on my money. I didn’t put millions in because there was a limit on how much a person could invest. But this was over 20 years ago. I would like to invest in Iran again, but I don’t know the precise details on the sanctions and the current status of Americans being able to invest there. But Iran is certainly on my list. And so are Libya and Syria. I’m not doing anything at the moment in these countries, but they are places that are on my list.

Nick Giambruno: Switching gears a little, do you have any final words for people who are thinking about internationalizing some aspect of their lives or their savings?

Jim Rogers: Most people have a health insurance policy, a life insurance policy, fire insurance, and car insurance. You hope that you never have to use these insurance policies, but you have them anyway. I feel the same way about what you call internationalizing, but I call it insurance. Everybody should have some of their money invested outside of their own country, outside of their own currency. No matter how positive things are in your home country, something could go wrong.

I obviously do it for many other reasons than that. I do it because I think I can make some money finding opportunities outside your own country. Many people are a little reluctant, you know. It’s tough to leave your safe haven. So I try to explain to them, “Well, you have fire insurance, why don’t you look on investing abroad as another kind of insurance?” and usually what happens is people get more accustomed to it. And they often invest more and more abroad because they say, “Oh, my gosh, look at these opportunities. Why didn’t somebody tell us there are all these things out there?”

Nick Giambruno: Jim, would you like to tell us about your most recent book, Street Smarts: Adventures on the Road and in the Markets? I’d strongly encourage our readers to check it out by clicking here.

Jim Rogers: I’ve done a few books before, and then my publisher and agent said, “Look, it sounds like it must be quite a story to have come from the back woods of Alabama to living in Asia with a couple of blue-eyed girls who speak perfect Mandarin. How did this happen? Why don’t you pull this all together and it might be an interesting story?” So I did, somewhat reluctantly at first, and then, lo and behold, people tell me it’s my best book. Whether it is or not, I will have to let other people decide, but that’s how it happened, and that’s what it is.

Nick Giambruno: Jim, thank you for your time and unique insight into these fascinating topics.

Jim Rogers: You’re welcome. Let’s do it again sometime.

By John Whitefoot for Daily Gains Letter

Investors are a surprising lot. Since May, any suggestions about tapering by the current Federal Reserve chairman, Ben Bernanke, or even one of the dozen district Federal Reserve economists, sent the markets reeling.

Back in May, just the whisper of a hint from the Fed that it might consider tapering its $85.0-billion-per-month bond buying program was enough to stop the bull market in its tracks. It recovered, of course, but only after Bernanke soothed the markets by saying he had no intention of pulling back on the Fed’s quantitative easing (QE) policy anytime soon.

The general fear, of course, was that any reduction in QE would translate into an immediate rise in interest rates. Having kept interest rates artificially low (near zero), the Fed made it cheaper for people to borrow. As a result, these artificially low interest rates are generally recognized as being the fuel that’s been propelling the stock market increasingly higher.

The Federal Reserve quashed those fears last week after announcing a $10.0-billion monthly cut in its QE strategy by telling investors it wouldn’t raise interest rates until unemployment hits 6.5%. By the Fed’s own estimates, the country will not hit this target until late 2014 to mid-2015. So, artificially low interest rates live on.

The assurance of cheap money kept the markets upbeat; so much so that the following day, the Dow Jones Industrial Average and S&P 500 opened at record highs, and the NASDAQ opened at a 13-year high.

News on a few key economic indicators released last Thursday, the day after the Federal Reserve’s announcement, probably didn’t hurt either, as these indicators suggested the economy isn’t doing as well as some had thought.

November existing-home sales in the U.S. housing market dropped (4.3%) for the third consecutive month to an annual rate of 4.9 million—the weakest pace since last December and the first time since April that the U.S. existing housing market pace has dipped below 5.0 million. (Source: “Existing-Home Sales Decline in November, but Strong Price Gains Continue,” National Association of Realtors web site, December 19, 2013.)

The eternally optimistic National Association of Realtors still thinks total housing market sales this year will be 5.1 million—the strongest level since 2007 (just before the housing market bubble popped), but below the 5.5 million sales threshold that’s associated with a healthy housing market.

But that housing market target won’t be hit because of eager young first-time homebuyers. This demographic accounted for just 28% of sales in the November housing market, down from 30% a year ago. In a healthy housing market, first-time homebuyers make up at least 40% of all buyers. The financially well-heeled seem to be taking it all in stride. All-cash buyers accounted for 32% of purchases—up from 30% last year. Investors made up 19%.

A renaissance in the U.S. housing market is contingent upon a strengthening jobs market, which would buoy consumer confidence levels. That exuberance may have to wait a little while; shortly before announcing weak existing-home sales, investors were told that first-time claims for U.S. unemployment benefits rose for the second consecutive week, hitting a nine-month high… Happy holidays!

Initial jobless claims climbed to 379,000 for the week ended December 14 from a previous 369,000 and the forecasted 336,000. This time last year, when the economy was much worse (according to most mainstream analysts), claims totaled 366,000. (Source: “Unemployment Insurance Weekly Claims Report,” United States Department of Labor web site, December 19, 2013.)

Negative economic indicators, such as weak declining U.S. housing market sales, strong housing market price gains, and high unemployment claims numbers bode well for keeping interest rates artificially low.

With cheap easy money fuelling the stock market, investors might want to consider an exchange-traded fund (ETF) that tracks the broader S&P 500 index, like the SPDR S&P 500 ETF Trust (NYSEArca/SPY); it’s up 32% year-to-date and 118% since 2009.

Source: http://www.dailygainsletter.com/stock-market/how-to-profit-from-qe-tapering/2278/

By CentralBankNews.info
    Angola’s central bank kept its policy rate steady at 9.25 percent, citing “the favorable trend observed in the economic climate indicator.”
    The National Bank of Angola, which has cut rates three times this year by a total of 100 basis points, also said the exchange rate of the kwanza had remained stable, credit to the economy had risen by 6.78 percent since the start of the year while the average interest rate of loans issued was 14.19 percent.
    Angola’s inflation rate fell further to 7.94 percent in November from 8.38 percent October, setting a new low for the year.

    www.CentralBankNews.info

By George Leong, B.Comm.

Federal Reserve Chairman Ben Bernanke did something that many on Wall Street including myself did not believe he had the inclination to do: he began the tapering process in his final meeting as the head of the most powerful central bank in the world.

The Federal Reserve will cut its bond buying by $10.0 billion each month, which I believe is a sensible move at this point, given the economic renewal and jobs market growth.

Markets surged to new record-highs for the S&P 500 and Dow Jones Industrial Average, as now there’s a sense that the ongoing uncertainty of when the Federal Reserve will begin to taper has finally been removed, and traders like certainty.

In addition, by reducing the stimulus by just less than 12%, the Federal Reserve can also gage the market reaction and any negative impact tapering may have on the economy.

The intense buying following the announcement was based on the premise that the economy was moving along pretty well, and this could fuel consumer spending and gross domestic product (GDP) growth. The market was also pleased to hear that the record-low near-zero interest rates could remain, even if the unemployment rate fell below 6.5%.

With Christmas in a few days, it was nice that Bernanke graciously began to rein in the easy money flow. Now a plan has been put into place and the incoming Federal Reserve Chair Janet Yellen will continue it based on how the economy and jobs market progress.

In the meantime, the news also means potentially more stock market gains for investors—albeit, at a slower pace than this past year.

Bernanke showered the stock market with presents over his term. First, it was QE1, followed by QE2, and then the third installment through QE3. It has been a wonderful upward ride in 2013.

Imagine if I had told you back in January that the NASDAQ and S&P 500 would rise by more than 30% this year… The majority of you would have thought I was on something, and really, we were: the Federal Reserve pumped so much money into the economy this year that the market developed a dependence on the cheap money as if it were cocaine.

As we move into the New Year, the Federal Reserve must continue to wean the markets off the easy money as the situation warrants.

If job creation continues to come in at around 200,000 or more and the unemployment rate falls to below seven percent by February, then I would expect the Federal Reserve to continue to slash its buying in the bond market.

There will also clearly be more certainty in Washington as a proposed budget deal appears to be in the works, which should avoid another government shutdown.

The tapering by the Federal Reserve will allow the stock market to trade in a more “normal” fashion, with the focus on the economy and corporate America.

There will still be money to be made, but it will be more difficult. Some of you may want to play the certainty of index exchange-traded funds (ETFs). With only a few days remaining in the year, you might also want to take some profits off the table and cut some losing positions prior to the year’s end.

Read which stocks I believe could be hot picks in 2014 in “My Early Insights on the Big Stock Market Winners in 2014.”

This article Fed’s Move to Taper the Right Choice for the Stock Market in 2014? Is originally published at Profitconfidential

By CentralBankNews.info
   Israel’s central bank held its benchmark interest rate steady at 1.0 percent, as expected, saying inflation is within the bank’s target range, though slightly below the midpoint, while economic growth is stable and the growth rate should increase moderately next year.
    The Bank of Israel (BOI), which has cut rates by 75 basis points this year, also said that recent data indicated a moderation in the rate of price rises in the housing market, though “with that, a change in trend in the housing market cannot yet be indicated.”
    “The path of the interest rate in the future depends on developments in the inflation environment, growth in Israel and in the global economy, the monetary policies of major central banks, and developments in the exchange rate of the shekel,” the BOI said, echoing November’s statement.
     Over the last month, Israel’s shekel has risen by 1.1 percent against the nominal effective exchange rate and from long term perspective, the BOI said there had not been any change in the trend in recent months following a market appreciation in in the first half of the year.

    The BOI has been actively trying to keep down the shekel in recent months, not only by cutting interest rates but also by intervening in foreign exchange markets to help Israeli exports, which account for some 40 percent of the economy.

    The BOI has said it would buy $2.1 billion this year and $3.5 billion in 2014 to offset the impact of natural gas production on the currency. Israel’s shekel was trading at 3.50 to the U.S. dollar today, up 6.1 percent since end-2012.
    Israel’s inflation rate rose to 1.9 percent in November from October’s 1.8 percent.
   The BOI, which targets inflation of 1-3 percent, said inflation expectations had increased slightly this month with private forecaster’s projections for the next 12 months averaging 1.8 percent while expectations derived from capital markets reached 1.6 percent.
    It added that private forecasts do not expect the BOI to change rates in the next three months while data from the Telbor interest rate and makam curves show the probability of one reduction in rates in the coming three months.
    Israel’s Gross Domestic Product expanded by 0.5 percent in the third quarter from the second for annual growth of 3.2 percent, down from 3.8 percent in the second quarter.
    “Data that became available this month indicated that the growth rate of the economy is stable, and there are even signs of some recovery in activity,” the BOI said.
    It noted that foreign trade data indicates a 4 percent rise in goods imports in November and a 1.5 percent decline in exports.
    But the BOI added that the decline in exports followed three months of increases, so the trend continues to indicate a rise in exports, led by high-tech industries, primarily pharmaceuticals.
    The BOI has forecast 2013 economic growth of 3.6 percent and 3.4 percent for 2014.
    Earlier this month, the International Monetary Fund said the BOI should gradually raise interest rates if the economy grows faster than expected and the shekel’s appreciation eases to avoid fueling house price rises.
    The IMF forecast that Israel’s economy will growth 3.5 percent in 2013 and 3.25 percent in 2014, including natural gas output.

    www.CentralBankNews.info