Month: January 2014

By CentralBankNews.info
    The Bank of Japan (BOJ) maintained its target for raising the monetary base by an annual pace of 60-70 trillion yen and still expects inflation to rise in the next two years as “inflation expectations appear to be rising on the whole.”
    A majority of the BOJ’s board members maintained their forecast from October, expecting economic growth of 3.3 percent in fiscal 2014, which begins April 1, and 2.6 percent in fiscal 2015.
    Inflation is forecast to rise to 3.3 percent in fiscal 2014 and then ease to 2.6 percent in 2015. Excluding the impact of sales tax hikes in April this year and October 2015 to cut budget deficits, inflation is forecast at 1.3 percent in fiscal 2014 and 1.9 percent in fiscal 2015.
    For fiscal 2013 Gross Domestic Product is forecast to rise by 2.7 percent and inflation of 0.7 percent.
    The BOJ, which embarked on an aggressive easing campaign last April to rid the country of some 15 years of deflation, said Japan’s economy was “expected to continue a moderate recovery” – a phrase it has used in recent months – and has noticed front-loaded increases in demand ahead of the tax rises.
    “The year-on-year rate of increase in the CPI, excluding the direct effects of the consumption tax hike, is likely to be around 1-1/4 percent for some time,” the BOJ said.

    Japan’s headline inflation rate jumped to 1.61 percent in November from 1.1 percent in October, the sixth month in a row with higher prices after 12 straight months of deflation.
    “The Bank will continue with quantitative and qualitative monetary easing, aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner,” the BOJ said, adding that it would examine both upside and downside risks and make adjustments as appropriate.
     On Monday Japan’s economics minister, Akira Amari, said that Japan appeared to have escaped deflation but warned that a return of deflation could not be ruled out. While the BOJ aims to reach its inflation target in about two years, some of its board members have said this is too ambitious.
    Japan’s GDP rose by 0.3 percent in the third calendar quarter from the second for annual growth of 2.4 percent, up from 1.2 percent.
    While maintaining its growth and inflation forecasts from October, the BOJ also largely repeated its view of the economy, saying exports had been picking up along with fixed investment and corporate profits. Housing investment has also continued to rise while private consumption has remained resilient, an area where the BOJ has observed a front-loading of demand ahead of the tax rises.

    http://ift.tt/1iP0FNb

By MoneyMorning.com.au

Yesterday turned out to be a good day for stocks, just as we thought it would. The Australian share market closed up 36.5 points.

But it wasn’t the first good day for stocks over the past 12 months.

Recently released research shows that the whole of 2013 was good for stocks…just as we told you it would be.

Now of course we’re looking ahead to this year’s stock market performance. Will it be as good?

It could be. There’s even a chance it could be better than last year…

A research report from superannuation consultants Chant West revealed the performance of super funds in 2013.

The Australian reported:

‘Superannuation funds posted their best performance on average for the past 20 calendar years in 2013, according to new figures.

‘Super consultants Chant West said Australia’s most common superannuation funds finished calendar 2013 with a return of 17.5 per cent for the year, up from 12.8 per cent in 2012.

‘It’s the second highest return since the introduction of compulsory super in 1992, bettered only by the 23.9 per cent return in calendar 1993.‘

We’ve said it a million times already, but we’ll say it again – so much for the idea that rising interest rates would kill stocks last year. We told you to ignore those stories at the time. We bet you’re glad you did.

A quick stocktake of the 31 stocks we tipped in Australian Small-Cap Investigator and Revolutionary Tech Investor last year shows that 23 are currently up, one is flat and seven are down.

Importantly, the average result across all those stocks is a gain of 24.8%.

Rising Japanese Interest Rates? Stocks Still Went Up

That’s a good return by anyone’s standards. Even if you bought into the S&P/ASX 200 index at the low point for the year on 25 June, you couldn’t have beat that return. That would have only made you a 14.2% return.

That’s the beauty of investing in individual stocks. Sure, it can be risky, because there’s always a chance you’ll pick a dud stock. But if you spread your money across a small selection of carefully researched stocks (don’t pick too many, or you’ll just get index returns) your winners should more than beat your losers.

So, there’s your confirmation. Despite the wailing about China’s slowing economy and the supposed disaster of rising interest rates in Japan, guess what?

Stocks went up.

And not only did they go up, but they helped retirement savers build the best gains in 20 years.

Now, some folks will say that’s all well and good with the benefit of hindsight. But it’s not hindsight. If you’ve read Money Morning for the past year you’ll know we told you to ignore the shrill cries about a crashing market.

We told you to buy stocks on the cheap, before they went higher.

But that, as the saying goes, is history. What about the future?

Well, it seems that finally other folks are starting to jump on the ‘buy stocks’ bandwagon.

Big Bonus on Their Minds

A report from Bloomberg yesterday noted that:

‘International investors are the most upbeat about the global economy that at any time in almost five years, buoyed by the US-led revival of industrial nations, according to the Bloomberg Global Poll.

‘On the eve of the World Economic Forum’s annual meeting in Davos, Switzerland, 59 percent of Bloomberg subscribers surveyed last week said the economic outlook is improving. That’s up from 33 percent in November and marks the most optimistic result since the poll began in July 2009.‘

This is the kind of news that gives us more confidence in our call that the stock market is heading for another bumper year. If so, it would help push the market towards our 7,000-point target for 2015.

But doubtless the Bloomberg report will have the bubble watchers up in arms again. They’ll likely claim this is another ‘top of the market’ sign.

Naturally, we’ll argue that it’s not at all. Bloomberg surveys professional investors, including those at the big financial institutions. These aren’t the mug retail investors who arrive to the party too late, just as the market is about to turn.

These are the guys (and gals) who arrive just as things are getting exciting. You can bet your bottom dollar that a bunch of these investors missed out on the gains last year.

They now regret it. And in a world where returns against the benchmark index mean everything (and by everything we mean their bonuses depend on it), they’ll want to make sure they aren’t left behind for a second year running.

This is another reason why we’re convinced stocks are heading for a great year.

The Best Result for 20 Years

Of course, it’s all well and good to bang on about another great year for stocks, but where should you put your money?

We’ve got two or three (actually, a few more than that) ideas in Australian Small-Cap Investigator.

<Small-cap analyst Tim Dohrmann wrote to subscribers last week filling them in on a new 'Turbo Cap' stock that he says has a bright future. We agree.

A ‘Turbo Cap’ stock is simply a small-cap stock that’s profitable and that either pays a dividend, is about to pay a dividend, or is on the verge of raising its dividend.

We call it a ‘Turbo Cap’ because in this current market, where investors are searching for growth and dividends, a company that can increase its dividend payout can reward investors with capital gains and a higher income stream.

Most mainstream analysts and investors seem to think the hunt for yield is over. We’ve got no idea why they think that. It can only be because they think interest rates are going up.

That’s not going to happen. The dividend and ‘Turbo Cap’ play is still active, and if investors gain more confidence about the global economy then even regular growth stocks look set to clock up more gains – on top of those achieved last year.

The financial world may still have a lot of problems to face and solve, but don’t for a moment think it will be a handbrake on stock prices.

According to Chant West, 2013 was the best year for retirement savers in 20 years. The way things are going, 2014 has a real chance of trumping that result.

Cheers,
Kris

Special Report: Five Fatal Stocks

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By MoneyMorning.com.au

By MoneyMorning.com.au

Yesterday turned out to be a good day for stocks, just as we thought it would. The Australian share market closed up 36.5 points.

But it wasn’t the first good day for stocks over the past 12 months.

Recently released research shows that the whole of 2013 was good for stocks…just as we told you it would be.

Now of course we’re looking ahead to this year’s stock market performance. Will it be as good?

It could be. There’s even a chance it could be better than last year…

A research report from superannuation consultants Chant West revealed the performance of super funds in 2013.

The Australian reported:

‘Superannuation funds posted their best performance on average for the past 20 calendar years in 2013, according to new figures.

‘Super consultants Chant West said Australia’s most common superannuation funds finished calendar 2013 with a return of 17.5 per cent for the year, up from 12.8 per cent in 2012.

‘It’s the second highest return since the introduction of compulsory super in 1992, bettered only by the 23.9 per cent return in calendar 1993.‘

We’ve said it a million times already, but we’ll say it again – so much for the idea that rising interest rates would kill stocks last year. We told you to ignore those stories at the time. We bet you’re glad you did.

A quick stocktake of the 31 stocks we tipped in Australian Small-Cap Investigator and Revolutionary Tech Investor last year shows that 23 are currently up, one is flat and seven are down.

Importantly, the average result across all those stocks is a gain of 24.8%.

Rising Japanese Interest Rates? Stocks Still Went Up

That’s a good return by anyone’s standards. Even if you bought into the S&P/ASX 200 index at the low point for the year on 25 June, you couldn’t have beat that return. That would have only made you a 14.2% return.

That’s the beauty of investing in individual stocks. Sure, it can be risky, because there’s always a chance you’ll pick a dud stock. But if you spread your money across a small selection of carefully researched stocks (don’t pick too many, or you’ll just get index returns) your winners should more than beat your losers.

So, there’s your confirmation. Despite the wailing about China’s slowing economy and the supposed disaster of rising interest rates in Japan, guess what?

Stocks went up.

And not only did they go up, but they helped retirement savers build the best gains in 20 years.

Now, some folks will say that’s all well and good with the benefit of hindsight. But it’s not hindsight. If you’ve read Money Morning for the past year you’ll know we told you to ignore the shrill cries about a crashing market.

We told you to buy stocks on the cheap, before they went higher.

But that, as the saying goes, is history. What about the future?

Well, it seems that finally other folks are starting to jump on the ‘buy stocks’ bandwagon.

Big Bonus on Their Minds

A report from Bloomberg yesterday noted that:

‘International investors are the most upbeat about the global economy that at any time in almost five years, buoyed by the US-led revival of industrial nations, according to the Bloomberg Global Poll.

‘On the eve of the World Economic Forum’s annual meeting in Davos, Switzerland, 59 percent of Bloomberg subscribers surveyed last week said the economic outlook is improving. That’s up from 33 percent in November and marks the most optimistic result since the poll began in July 2009.‘

This is the kind of news that gives us more confidence in our call that the stock market is heading for another bumper year. If so, it would help push the market towards our 7,000-point target for 2015.

But doubtless the Bloomberg report will have the bubble watchers up in arms again. They’ll likely claim this is another ‘top of the market’ sign.

Naturally, we’ll argue that it’s not at all. Bloomberg surveys professional investors, including those at the big financial institutions. These aren’t the mug retail investors who arrive to the party too late, just as the market is about to turn.

These are the guys (and gals) who arrive just as things are getting exciting. You can bet your bottom dollar that a bunch of these investors missed out on the gains last year.

They now regret it. And in a world where returns against the benchmark index mean everything (and by everything we mean their bonuses depend on it), they’ll want to make sure they aren’t left behind for a second year running.

This is another reason why we’re convinced stocks are heading for a great year.

The Best Result for 20 Years

Of course, it’s all well and good to bang on about another great year for stocks, but where should you put your money?

We’ve got two or three (actually, a few more than that) ideas in Australian Small-Cap Investigator.

<Small-cap analyst Tim Dohrmann wrote to subscribers last week filling them in on a new 'Turbo Cap' stock that he says has a bright future. We agree.

A ‘Turbo Cap’ stock is simply a small-cap stock that’s profitable and that either pays a dividend, is about to pay a dividend, or is on the verge of raising its dividend.

We call it a ‘Turbo Cap’ because in this current market, where investors are searching for growth and dividends, a company that can increase its dividend payout can reward investors with capital gains and a higher income stream.

Most mainstream analysts and investors seem to think the hunt for yield is over. We’ve got no idea why they think that. It can only be because they think interest rates are going up.

That’s not going to happen. The dividend and ‘Turbo Cap’ play is still active, and if investors gain more confidence about the global economy then even regular growth stocks look set to clock up more gains – on top of those achieved last year.

The financial world may still have a lot of problems to face and solve, but don’t for a moment think it will be a handbrake on stock prices.

According to Chant West, 2013 was the best year for retirement savers in 20 years. The way things are going, 2014 has a real chance of trumping that result.

Cheers,
Kris

By MoneyMorning.com.au

By MoneyMorning.com.au

An interview with Paul van Eeden, founder of Cranberry Capital

Yesterday, we published part one of an interview from our US sister publication, The Daily Reckoning America, with Paul van Eeden. He explained to you how he discovers gold’s intrinsic value; the key, according to him, is using his ‘Actual Money Supply’ measure, which he described yesterday. (If you missed Part One of the interview, you can read it on our website, right here.) Below, the conversation continues…

The Daily Reckoning: Today, we’re here again with Mr. van Eeden.

Paul, thanks for joining us.

Paul van Eeden: Thank you for having me again…

The Daily Reckoning: Since the Fed’s started inflating its balance sheet by trillions, there have been many calls, especially here in the DR, that, eventually, gold will have to shoot into the stratosphere. Why, in your opinion, has this ‘gold to the moon’ scenario not played out?

Paul van Eeden: That’s a very complicated question. One of the reasons is that the people who were expecting the gold price to go up dramatically were looking almost exclusively at the Federal Reserve balance sheet. They looked at the tremendous expansion of the Federal Reserve balance sheet and they said, ‘Well, if the Federal Reserve balance sheet goes from $500 billion to $3 trillion, what’s that – a sixfold increase? – then that should imply a sixfold increase in the value of gold.’

Well, no, it doesn’t. Because you have to look at how that money flows into the economy and into the ‘Actual Money Supply’ that’s available to the economy.

See, the Federal Reserve balance sheet counts deposits that commercial banks have at the Federal Reserve Bank. When the Federal Reserve creates money, they typically do so by buying US government Treasuries in the open market. So let’s say the Fed goes and buys $1 billion worth of US government Treasuries. The counterparty to the Fed is a bank. There’s a select group of banks that can be counterparties to the Fed.

So the bank is selling a government Treasury to the Fed, and the Fed pays the bank. But the money that the Fed pays doesn’t actually go into the bank’s general bank account, where it can spend it; it goes into that bank’s account at the Federal Reserve Bank. That money the bank has on deposit with the Federal Reserve is unavailable to the bank. The bank cannot draw on that money. It cannot spend that money. The only thing the bank can do is use that money as a reserve asset when it does its reserve asset calculations. That’s it. It cannot withdraw it ever.

The only way that money gets out of the Federal Reserve account is if the Fed sells any Treasury or debt instrument back to the bank. The bank can now use that money in its deposit account at the Fed to pay for that Treasury; that’s how the money comes out of the money supply.

So the creation and destruction of money, the mechanism by which the Fed is creating and destroying this money, is intimately tied to the commercial bank accounts at the Federal Reserve, called reserve accounts. But because that money cannot be spent by the bank or by you or by me or by anybody, that money isn’t functionally in the money supply.

Let’s say that an investment company has $1 billion worth of government Treasuries, and they want to sell these Treasuries. So the Federal Reserve buys $1 billion worth of Treasuries from the bank, that money gets into the reserve account; the bank buys a Treasury from an entity, from the investment company and pays the investment company. That money that was created by the Fed wasn’t created and went straight to into the economy; it got stuck there in the reserve accounts. So you cannot look at the increase in the reserve account balances and make an extrapolation or make a deduction as to what that means to the money supply. You have to actually count the money supply to see what impact it has, and that data is on my website. I update it every week.

So what went wrong for these guys is they looked at the Federal Reserve Bank balance sheet and they said, ‘My God, look at the money printing. This is massive, this is hyperinflation, this is Armageddon.’ But it wasn’t, because it wasn’t in the money supply. What the Fed was doing was actually changing the structure of Federal Reserve Bank balance sheets, and they were creating the ability for banks to create money in the economy.

The Daily Reckoning: So just to reiterate, the potential is there for the money supply to increase, but going off of your Actual Money Supply measure, which you explained yesterday, you just don’t buy the hyperinflation story.

Paul van Eeden: Right. But the banks cannot create the money if the demand for the money isn’t there or if the match between credit demand and creditworthiness isn’t there. So the other part you have to understand and think about is when the Federal Reserve prints money, as I said, it goes into the reserve bank account.

The entity that actually creates the money supply is not the Federal Reserve Bank. It’s the normal commercial banks. It’s when you take out a car loan, that creation of the loan is the creation of money. When you pay back a car loan, that’s deflation, that’s destruction of money. That’s how the money supply increases and decreases. So all the Federal Reserve Bank did was enable the banks to create a whole bunch of money. But the rate at which the banks actually created the money depended on the economic demand for that money. And we can measure what the increase in the money supply is very accurately. So while everybody was talking about this massive hyperinflation and the gold price going to $2,000, $3,000, $5,000 an ounce, I was looking at the money supply and saying there’s no basis for that.

By MoneyMorning.com.au

By CentralBankNews.info
    Nigeria’s central bank maintained its Monetary Policy Rate (MPR) at 12 percent but raised the cash reserve requirement (CRR) on public sector deposits by a further 25 basis points to 75 percent to tighten monetary conditions and support the naira’s exchange rate.
    The Central Bank of Nigeria (CBN), which has held its policy rate steady since October 2011, voiced its concern over the continuous fall in revenue from oil and a depletion of reserves, saying this was “undermining the ability of the Central Bank to sustain exchange rate stability.”
    “The Committee therefore, urged the fiscal authorities to block revenue leakages and rebuild fiscal savings need to sustain confidence and preserve the value of the naira,” said the CBN, which has often called attention to the damaging effect of oil theft.
    Nigeria’s gross external reserves fell by 2.23 percent, or $980 million, to US$ 42.85 billion at the end of 2013 from end-2012 due to a slowdown in portfolio and direct investment inflows in the fourth quarter, resulting in a higher cost to the CBN of stabilizing the naira.
     The central bank attributed a reduction in portfolio inflows to the start of the U.S. Federal Reserve’s tapering of quantitative easing, concern over the naming of a new central bank governor and continued depletion of the Excess Crude Account (ECA).
    “The reduction of the US stimulus especially, could in addition, trigger capital flow reversals and put greater pressure on the naira exchange rate,” the CBN said.

     Nigeria’s ECA – a government account that was set up in 2004 to save oil revenues and provide a buffer against lower-than-projected oil prices on budgets –  fell to $2.5 billion as of Jan. 17 from $11.5 billion in December 2012.
    The central bank spent some $26.6 billion to support the naira last year, according to local press reports, with the naira falling by 2.3 percent against the U.S. dollar on the inter-bank market against the U.S. dollar, trading at 159.90 today. But on the bureau de change (BDC) segment of the market, the naira was quoted at 172 to the dollar, a depreciation of 7.8 percent.
    The central bank said its policy committee had considered allowing a further depreciation of the naira currency to avoid further policy tightening and depletion of reserves but decided that “the cost of a weaker naira far outweigh the benefits to the Nigerian economy and the core mandate of the CBN,” and thus re-affirmed its commitment to a stable exchange rate.
    “Furthermore, having looked at all the options, the Committee decided against excessive reliance on external reserves to supper the exchange rate and opted for monetary tightening until fiscal buffers are rebuilt,” the CBN said.
    While all members of the monetary policy committee voted to raise the CRR on public sector deposits, three members voted to raise the CRR on private sector deposits to 15 percent from 12 percent while five voted to retain it.
    Helped by the relatively stable exchange rate and tight policy stance, Nigeria’s inflation rate remained in single digits throughout 2013 – the first time since 2007 – with inflation ending the year at 8.0 percent in December, marginally up from November’s 7.9 percent but down from a year high of 9.5 percent in February.
    The central bank, which had targeted inflation of 6-9 percent in the second half of 2013, said it took note of the pressure on core inflation and said this could be due to the widening spread between the official and BDC exchange rates.
    “In order to head off the specter of rising inflation in 2014, concrete actions will be needed to stabilize the currency and minimize the divergence between the two segments of the foreign exchange market,” the CBN said.
    Nigeria’s Gross Domestic Product is estimated to have risen by an annual rate of 7.67 percent in the fourth quarter, up from 6.81 percent in the second quarter, with the growth rate for fiscal 2013 estimated at 6.87 percent, up from 6.58 percent in 2012.
   
    http://ift.tt/1iP0FNb

USDCHF remains in uptrend from 0.8986, the fall from 0.9156 could be treated as consolidation of the uptrend. Support is located at the lower line of the price channel on 4-hour chart. As long as the channel support holds, the uptrend could be expected to resume, and one more rise towards 0.9400 is still possible. On the downside,a clear break below the channel support will indicate that lengthier consolidation of the longer term uptrend from 0.8799 is underway, then pullback to 0.9000 area could be seen.

Provided by ForexCycle.com

Source: Kevin Michael Grace of The Mining Report  (1/21/14)

http://www.theaureport.com/pub/na/amanda-van-dyke-a-dozen-gold-copper-phosphate-and-uranium-standouts

Amanda Van Dyke of Palisade Capital is confident that China’s reforms will ensure that the commodity supercycle will continue for some time to come. In this interview with The Mining Report, Van Dyke argues that investors should worry less about the right balance of specific commodities and more about the right mix of early-stage, development-stage and producing companies. She expands on a dozen she believes have the right stuff to succeed.

The Mining Report: In December Federal Reserve Chairman Ben Bernanke announced a $10 million ($10M) cut in monthly quantitative easing (QE). He also said that interest rates would remain at zero for the foreseeable future. What effects will these decisions have on the economy and on precious metals?

Amanda Van Dyke: Precious metals have been trending down for a number of reasons. One was the perception, starting about March 2013, that the Federal Reserve was going to taper QE and an end to QE was in sight.

The Fed is shutting down the printing presses because they were never intended to be a permanent crutch to the economy, and because there are green shoots in the economy that would suggest the time has come to begin tapering. Car sales and home sales are up, which are very good indicators. Gold prices react to money supply only in relation to the velocity of money. When the economy as a whole picks up, the stalled velocity of money within the economy picks up as well. But all the money the Fed has printed in the last five years is still out there. And as the velocity of that money begins compounding via the money multiplier, gold prices will change. The real question is when and how much the gold price will go up in relation to the money that’s been printed.

TMR: Previous hints of tapering have panicked the markets. Do you think the Fed is really committed to this new policy?

AVD: I don’t think it has an option. The market has gotten addicted to cheap money, but governments must pay this money back, so there is a limit to the amount of debt that can be issued.

TMR: If interest rates remain at zero, how can private capital be saved for lending?

AVD: Zero rates are good for the banks, but they’re just not tenable. In the past, there was a 1% or 2% premium on money re-lent in mortgages or in loans by general commercial banks. We’re not seeing that anymore; we’re seeing 4% and 5% for major corporate loans and mortgages, and for corporate bonds we’re seeing anywhere from 6% to 12%. The government is trying to stimulate the economy with low rates, but the people who need stimulating aren’t benefitting because they’re still paying higher rates.

TMR: Your presentation at the New Orleans Investor Conference stressed that gold is not a commodity like any other. What are the drivers of its worth?

AVD: Regular commodities are a function of demand and supply. as well as their price of extraction. But the demand for gold is not as a consumed commodity; it is largely stockpiled. I’ve heard that up to 95% of the gold ever produced is still around. Demand for gold largely depends on three areas: consumers who invest via jewelry, coins and bars; professional and institutional investors who buy tradable investment commodities; and central banks that add it to their reserves.

Consumer sentiment in the Western world might be down, but investor sentiment is definitely very, very down. That has had a huge effect on gold prices because investors have been selling, and there is extra supply in the market. But I don’t believe this trend can persist because the real factors that affect the gold price are all positive.

TMR: It seems that Asia continues to believe in gold bullion.

AVD: The Asian countries have believed in gold for 3,000 years, and events since 2008 have certainly justified that belief. While the Western world doesn’t love gold right now, its importance to the gold market is decreasing because the major buyers of gold are no longer in the West.

China, Singapore, Thailand and the Philippines are buying bullion and jewelry at a very rapid rate. The Chinese government is increasing the amount of gold it buys on the open market, has officially encouraged its population to save money in gold and is tapering its purchases of U.S. Treasury bonds.

TMR: Could China’s gold be used to backstop its currency or its U.S. treasuries?

AVD: China has said that it aims to have as much gold as the U.S.—8 million tons (8 Mt). I believe it only has around 2 Mt now. That’s an indication that it believes gold is a more secure currency than America’s. It isn’t a big stretch to conclude that China’s gold purchases represent its belief that gold is a secure form of investment as a reserve.

TMR: How long do you think the commodity supercycle will last?

AVD: The commodity supercycle is the exponential increase in demand for commodities associated with urbanization and economic development in heavily populated Third World countries that began around 2000. Urban development also requires intensive phases of commodity use for infrastructure creation. This process was led by the half of the world’s population living in the BRIC nations: Brazil, Russia, India and China.

That process is, I believe, still largely intact. What’s changed is that it isn’t happening in a smooth line; the steep growth curve was interrupted. The global recession caused a hiccup. The commodity-intensive portion of the supercycle still has many more years to play out, and even when that development slows to a long-term moderate rate—let’s say sometime in the next 15 years—we’ll still need double or triple the amount of raw materials we needed 10 years ago. I’m very happy with 5–10% growth; it bodes well for the long-term consumption and demand for commodities.

TMR: China is growing at 7% annually, down from 14%. How important are China’s reforms to the supercycle?

AVD: China has announced 11 key features of its new 10-year plan. A new role for the government and market-driven resource allocation, state-owned enterprise reform, fiscal reform, integrated rural urban development, democratic consultation, judiciary reform, an anticorruption campaign, social media and Internet management, a new state security committee and environmental protection.

This plan is excellent news for the natural resources industry. It means that uneconomic, subsidized, environmentally dangerous Chinese mines are going to be slowly shut down over the next 10 years. It also means that China is going to actively develop the poor rural regions of China. They will need to source a number of commodities they presently get from their own mines on the global market, and they are going to continue to develop and urbanize in new areas of the country. That is a clear indication for the continuation of the global commodity supercycle.

TMR: You’ve said that the three most important factors in mining success are management, management and management, but all successful managers were once novices. How can we spot those novices likely to demonstrate great success?

AVD: A successful mine requires the management of the resource itself, management of the mine plan and management of the local communities, governments and the environment. Really good management manages to balance all those factors. It’s an art form.

As for young blood, I stick to people who have worked on mines before and performed a variety of tasks within the industry. A young person who grew up in a mining family would probably be a better bet than, let’s say, a 40-year-old geologist who’s only ever done geology and hasn’t been exposed to other parts of mining. Ultimately, you need to find talented, smart people who have had the foresight to try to work in many different facets of the mining industry.

TMR: You place great importance on proper corporate governance. What is your checklist of required attributes in this regard?

AVD: A good board, in my opinion, has a minimum of six elements. You need a mining engineer. The best management team with the best deposit cannot necessarily build a mine, a mining engineer can. You need a geologist, someone who can properly educate and guide the rest of the board as to the realistic potential of an ore body.

You also need an accountant. A mine is first and foremost a business that needs to make profits. What was recently one of the best mining companies on the planet, Xstrata PLC (XTA:LSE), was run by an accountant. A lawyer is also very useful in guiding the decisions regarding the thousands of contracts, permits and licenses required.

A banker or someone with a finance background is quite important. The single largest determining factor in a mining company’s success is its ability to finance itself and maintain its share price. Last, but certainly not least, you need a local, someone who knows the political and social lay of the land.

TMR: What else does a good board need?

AVD: For a board to be effective, it needs to be more than a rubber stamp. It needs to be the company’s sober second thought, it needs to use its experience to guide a company and steer it in the right direction, and it needs a vested, significant interest in the company. Finally, board members should demonstrate diverse backgrounds in age, gender and ethnicity.

TMR: Can the benefits of diversity be quantified?

AVD: McKinsey & Co. Inc., Catalyst Inc. and KPMG have all done studies on listed companies. I’ve done studies on mining company boards. There is a direct correlation between better sales, profitability, reserve ratios, enterprise value and risk mitigation to the number of women on your board.

But I don’t want to sound like a gung-ho feminist who thinks companies should put women on their boards just because. Mining boards globally are largely made up of older men of very similar backgrounds. The reality is that modern global business needs guidance from new technology, new ideas and a sound understanding of the many and myriad risks of operating a mine today. It’s not that I don’t think age and experience aren’t valuable, but rather that you need many types of experience on a board to make it valuable. A board completely composed of similar people will not be able to compete and effectively protect shareholder interests.

TMR: What mix of precious metals commodities and fuels do you recommend for investors?

AVD: I personally have about 30% in precious metals, 30% in energy and about 40% in other commodities, but such weightings are not particularly important. People need to think more in terms of a broad mix of early-stage, development-stage and producing companies. Specific commodities are less important than a specific company’s quality. This is a stock picker’s market, so investors want to pick good-value, well-managed companies.

TMR: Which gold companies do you like?

AVD: I’m a big fan of Randgold Resources Ltd. (GOLD:NASDAQ; RRS:LSE), AngloGold Ashanti Ltd. (AU:NYSE; ANG:JSE; AGG:ASX; AGD:LSE), Columbus Gold Corp. (CGT:TSX.V) and Belo Sun Mining Corp. (BSX:TSX.V).

TMR: What’s your opinion of Randgold’s new Kibali mine in the Democratic Republic of the Congo (DRC)?

AVD: Kibali is a world-class mine, no question. There are risks involved in operating in the DRC, but CEO Mark Bristow has built and developed mines all over Africa. He knows what he’s doing.

TMR: Randgold’s other big project is its Loulo-Gounkoto project in Mali. How do you rate Mali after the recent disturbances?

AVD: There are areas of Mali that are still quite dangerous to operate in, but a lot of the trouble is regional, and there are lots of areas where miners are effectively getting on with business and doing quite well. In general, the situation there has quieted down. Companies need to have significant local knowledge to effectively operate in Mali, and they need to do their homework about its various regions. Companies that have stayed throughout the trouble have gained themselves a great deal of credit by sticking with Mali and not abandoning it, and I believe they will be rewarded by the new regime, which is very aware of the fact that it needs mining revenues to rebuild the country.

TMR: What do like about AngloGold?

AVD: Besides Kibali, which is AngloGold’s joint venture with Randgold, it also has Tropicana in western Australia. That’s two mines coming on this year with fairly low gold prices. I think that both will produce profitably within the present gold-price environment. There are not a lot of companies that have significant catalysts coming in this year, but this is one of them.

TMR: How does Belo Sun’s Volta Grande project in Brazil stand for funding?

AVD: It’s not fully funded yet. That said, Volta Grande is a world-class gold deposit. It’s huge. I think that a lot of the dampening of the share price on that particular stock has been based on people thinking that it won’t go ahead because of a misunderstanding of environmental concerns and the regulatory environment in Brazil. But the federal government and the government of Para, which is one of the poorest states in Brazil, are very motivated to get that mine permitted. Once the market is reassured that it will be permitted, then we will hopefully see a rerate in the stock price.

TMR: Columbus Gold’s Paul Isnard project in French Guiana is also huge, right?

AVD: Yes, and it’s fully funded by Nord Gold N.V. (NORD:LSE), which has a significant amount of money invested in making it a successful operation. One of the major problems for gold companies everywhere that are in the development stages is that they simply don’t have the money to effectively develop. Columbus Gold is completely carried by Nord Gold up to the bankable feasibility study.

TMR: Are there any other gold companies in Mali that you like?

AVD: There is a small miner, Legend Gold Corp. (LGN:TSX.V), that I have been watching for some time. Its geologists have about 20 years of experience in Mali and know where and how to build a mine effectively. When it comes to Africa, local knowledge cannot be underestimated. Legend Gold also has some very serious backing from well-known mining investors that believe in the management team’s ability to build an African mine. The company is fully bent on consolidating West African gold companies and land as a prospect generator model. It’s doing exactly what you should be doing in these market conditions—a hell of a lot of M&A!

TMR: Can you suggest a gold micro cap?

AVD: Inca One Resources Corp. (IO:TSX.V) is actually a toll-milling operation in Peru. It makes about $250/ounce on everything it treats. This is a great margin at a time when many gold companies have no margin. It will make good money consistently. This is a slightly alternative pure mining investment in the gold space, but I think a very good one.

TMR: Many companies in Peru have suffered a great deal of political difficulty in recent years. Is this a countrywide problem or more of a local issue?

AVD: My understanding is that it’s a local issue. There are several gold processing operations in Peru that are exporting millions of ounces illegally every year. The Peruvian government has given these companies two years to shut down, and in the future, processing may go only to government-approved mills like the ones Inca One owns.

Peru is trying to modernize its mining industry and make it more environmentally sustainable. Success in Peru requires a very good relationship with the Peruvian government. It’s all about mining in a modern way. Peru has a longstanding mining tradition and a lot of in-country investment. I’m always inclined to invest in a company where people have significant skin in the game. Investors should look for mines in Peru that have been endorsed by the Peruvian people. There are a quite a few of them.

TMR: Which copper companies do you like?

AVD: I like Nevsun Resources Ltd. (NSU:TSX; NSU:NYSE.MKT) quite a lot. It has historically been a gold company in Eritrea and has just gotten into the copper-heavy area of its deposit. Many people aren’t fond of Eritrea, but anyone who’s gone there knows that it’s a much safer jurisdiction—at least where the Nevsun mine is—than is popularly believed. The company is paying a 4% dividend, and it has tons of free cash flow. In this market, that’s a really nice thing.

Central Asia Metals Plc (CAML:LSE) is interesting as well. Its Kounrad waste-retrieval facility in Kazakhstan is producing quite profitably. And it has just paid $3.2M to buy half of Copper Bay Ltd. in Chile (with an option to acquire up to 75%). Coppers Bay’s Chañaral Bay project has a resource of 288 Mt copper. I think Central Asia Metals could do quite well.

TMR: Any others?

AVD: I generally like Discovery Metals Ltd. (DML:ASX) and its Boseto project in Botswana.

TMR: Botswana is rated quite highly in Africa.

AVD: Deservedly so. It is like the Switzerland of Africa. It has a small, relatively peaceful population that supports development. Anyone I know who’s ever worked in Botswana thinks it’s heaven compared to most of the rest of Africa.

TMR: Which fertilizer and fuel companies do you like?

AVD: If you have to have one uranium company in your basket, I’d go for Fission Uranium Corp. (FCU:TSX.V). It’s a no-brainer. Its new project, Patterson Lake in Saskatchewan, has the most exceptional grades I’ve ever seen, and it’s close to surface. It has a management team that has shown that it’s very effective in doing deals that are accretive to shareholders.

TMR: You’re confident in the future of the uranium market?

AVD: Very confident. I know that’s controversial, especially given how horrible the current price is. The Fukushima disaster put the market into oversupply, but this cannot continue indefinitely. There are too many reactors under construction, and they will require fuel. China is building something like 50 reactors, and five are being built in the Gulf States. The world needs more energy, and nuclear energy is the cheapest, most efficient form there is.

Even Japan will eventually need to put its reactors back online; it simply cannot afford to keep buying gas. So the short-term outlook is bad, but everything points to a much higher uranium price in the long term.

TMR: Are there any phosphate companies you like?

AVD: I’m quite fond of Arianne Phosphate Inc. (DAN:TSX.V; DRRSF:OTCBB; JE9N:FSE). It has a beautiful deposit in Quebec, a fully bankable feasibility study and a good internal rate of return in a safe jurisdiction. We don’t know when Lac à Paul will be green-lighted, but it is a great long-term investment. I have no doubt that eventually Arianne will be a significant part of the phosphate mix in North America.

Great Quest Metals Ltd. (GQ:TSX.V) is a small company in Mali. Its Tilemsi deposit could be significant, given that Africa has a huge population that desperately needs fertilizer but has very little domestic supply. An African company producing fertilizer for Africa might do very well.

TMR: This malaise in the mining industry has gone on a lot longer than most people ever imagined. How long will it last?

AVD: They say that when you’re at the absolute bottom, when everybody is out, that’s when you buy. I think we’ve reached the absolute bottom; every generalist investor has walked away. So I don’t think there’s any place to go but up.

TMR: Amanda, thank you for your time and your insights.

Amanda Van Dyke is managing director, Europe for Palisade Capital. Palisade Capital is an offshore merchant banking group that invests principal capital with a focus in the natural resource sector. It strategically supports its investments by applying bespoke business development strategies specific to junior resource companies. She worked previously for Dundee Securities, Ocean Equities and GMP as a mining specialist in equity sales, and has raised more than $500M in mining-related financing. She worked as a gemologist before getting her master’s degree in business administration and a master’s degree in international economics from SDA Bocconi. Van Dyke is also the executive chairman of Women in Mining UK, sponsored by Rio Tinto, Anglo American and BHP Billiton.

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DISCLOSURE:
1) Kevin Michael Grace conducted this interview for The Mining Report and provides services to The Mining 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 Mining Report: Fission Uranium Corp., Columbus Gold Corp. and Arianne Phosphate Inc. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) Amanda Van Dyke: I or my family own shares of the following companies mentioned in this interview: Belo Sun Mining Corp. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
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By CentralBankNews.info
    Hungary’s central bank, which earlier today cut its base rate by 15 basis points to 2.85 percent, said it may continue to cut rates in light of the outlook for inflation, but a reduction in the size of the rate cuts had become warranted in light of the risks and the improving economy.
    The National Bank of Hungary, which cut its rate for the 18th time in a row, said investors’ sentiment  toward Hungarian assets remained supportive despite the U.S. Federal Reserve’s decision to reduce the size of its asset purchases, as shown by lower bond yields and spreads on credit default swaps (CDS).
    However, the central bank also acknowledged that a “cautious approach to policy is warranted due to uncertainty related to the global financial environment.”
    “Considering the outlook for inflation and taking into account perceptions of the risks associated with the economy as well as the improvement in the pace of economic growth, further cautious easing of monetary policy may follow, but a reduction in the increment has become warranted,” the bank said.
    The central bank has now cut rates by 415 basis points since embarking on its easing cycle in August 2012 but reduced the pace of its rate cuts to 20 basis points from 25 basis points in August 2013 following massive capital outflows from many emerging markets as global investors started to reassess the prospects for growth and the Fed signaled it was considering its exit from quantitative easing.

    Although Hungary’s forint has held up much better than many other emerging market currencies, such as the currencies of Indonesia, Turkey and India, the central bank is very aware that investors’ sentiment that quickly change.
    “A sustained and marked shift in perceptions of the risks associated with the Hungarian economy  may influence the room for manoeuvre in monetary policy,” the bank said.
    But Hungary’s inflation rate is low and the economy is improving, helping attract global investors.
    Hungary’s inflation rate fell to a 43-year low of 0.4 percent in December, continuing the steady decline since September 2012 when inflation hit 6.6 percent, and the central bank said “there remains a significant degree of unused capacity in the economy and inflationary pressures are likely to remain moderate over a sustained period.”
    The drop in December inflation was mainly due to lower regulated energy prices, the bank said, adding that its own measures of underlying inflation also indicated moderate inflation pressures due to weak domestic demand and low inflation abroad.
   “The persistently low inflation environment may facilitate the adjustment of inflation expectations,” said the central bank, which has said it expects inflation to slowly move back toward its 3.0 percent target by the second quarter of 2015.
    Hungary’s economy is expected to continue to improve this year and next year, but the central bank said the level of output remains below the economy’s potential and while unemployment is starting to fall, it still exceeds its long-term level so “inflationary pressures in the economy are likely to remain subdued over the medium term.”
    Hungary’s economy expanded by 0.9 percent in the third quarter of 2013 from the second quarter for annual growth of 1.8 percent, up from 0.5 percent in the second quarter.
    The latest economic data show that growth has continued in the fourth quarter, with domestic demand expected to continue to strengthen and exports to rise, the bank said.

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Have you ever wondered what the difference is between a trader who manages to make the right choices consistently and calmly compared to one who constantly seems to be on an emotional roller coaster, umming and ahhing about how to conduct themselves in the forex markets?

Simple – Discipline!!!

No matter how you eventually decide to trade the forex markets being disciplined and having a rock solid set of rules in place, is a must! They are your guiding hand and a source of structure which the Forex markets do not impose upon us and something we have to do ourselves.

What would it be like if we had no rules in our society? -absolute chaos!!!

So we are used to being restricted and guided by set rules, even if we do not always completely agree with them, they help to impose structure in our lives.

Now because trading the forex doesn’t really have any rules, it’s basically a free for all. You can trade with robots, indicators, price action, so pretty much anything goes and the markets do not really care. This absolute freedom to do what you like is what can excite many new traders and suck them into trading. Little do they realise this is probably the biggest reason why traders get their accounts drained so quickly.

Once the market gets into your head and starts playing with your decision making. Every time you have to make a decision or enter a trade you will begin to second guess yourself, you basically lose control.

That little voice in your head goes into over drive and rather than being a calm and controlled trader you will probably be a complete nervous wreck, checking the charts frequently to see what the trades are doing.

Breaking out of this mental torture is not as simple as flicking a switch back on. You almost have to start again and reprogram your brain to be able to resist the markets temptations, like over thinking trades, fiddling with trades and taking too many trades etc……

Rules Rules Rules

Rules are the glue that keeps traders stuck together. They give traders the structure they need to be consistent in all areas of trading.

The best way to instill discipline back into your trading is to have very strict rules written down, these rules must cover every aspect of trading and be decided upon before even entering a single trade. The rules you choose upon are only going to be as strong as the ability you have to follow them through.

It’s completely pointless having rules that you just don’t follow or respect.

The misconception that trading is all about the trading strategy is very common, trading looks from the outside like a very simple format, sell when price is expensive and buy when price is cheap. The biggest area traders tend to brush over when evaluating their trading results is actually their mind set and discipline.

The routine of a trader who hits a losing streak is to automatically look at the trading strategy itself and make alterations or even change strategy completely. Instead, it’s worthwhile looking into the mind-set you have and whether you are trading with a steady hand or making trading too personal.

It’s all about becoming the complete trader, someone who knows their trading strategy inside out and who has complete control over their mind. These traders are going to have a much better chance than someone who simply tries to wing it and makes decisions on the fly.

A lot is talked about trading from the gut and yes once we reach a certain level our sub conscious does give us clues to whether or not a trade is the right choice to take. We must harness these emotions but also have in place basic ground rules to keep everything solid.

Take for example a top sportsman, now they can train and train all day long but in those high pressure situations their mind-set is what gets them through the challenge and helps them perform as they should do. Trading involves the same processes, we need to be able to make the correct decisions on a very consistent basis, the market is a very ruthless environment and any weak decisions will be punished.

Analysis of trading

Being able to analyse your trading results is a great technique to find out any faults or weaknesses in our approach. This can only be carried out accurately if we are consistent in our approach to taking trades and how we manage certain trades, like trend trades or counter trend trades. How on earth can we analyse what’s working well and what’s not if we are all over the shop?

Examples of rules we can put in place

1)      Before entering a trade, we should always produce a trade plan to follow, this will include information like:  Entry point, stop loss, where to move to break even, where to place take profits, etc… N.B. the trade plan should always be written before you enter into the trade.

Incorporating a trade plan will reduce a lot of decision making whilst in a trade, as it’s much harder to be clinical once entered into a trade.

2)      Removing ourselves from the market, what I mean by this is to not follow every pip movement by sitting in front of the charts. The trade plan holds all of the decisions we need to make and so watching a trade is going to only increase temptation to alter the plan. Altering a trade plan once in a trade is a big no, no.

How can we expect to be consistent at trading if we can’t even follow a simple plan?

3)      When to look for trades and on what time frame is a key issue, we can’t go trawling through the charts for setups on random time frames. If we decide to stick to just the daily charts to begin with, these are the only charts we can use.

It’s very tempting to jump into the markets because of the feeling of not wanting to miss a trade. Trying remove this sensation is a challenge and yes it’s hard when a trade you passed up on turns into a corking winner, but who cares there will always be another trade around the corner. The feeling of being rushed and forced to trade is a confusing emotion. Instead focus on the exact criteria required to validate a trade.

4)      Not allowing other traders to affect how you trade, this boils down to your own confidence in your approach. If you take a trade and see another trader mention why it’s maybe not such a good trade, these comments should have no bearing on your trading at all. Letting others influence you is another mind game you need to conquer.

5)      Having exact rules regarding the actual structure of the setups you want to trade, this is very important. If a setup forms and does not exactly meet the criteria set, we have to pass it up. You may ask “surely there should be some give and take” but I say “no”, if the criteria is not met the trade should be ignored.

Being consistent in every aspect of your trading will breed consistent results. If you lose your consistency you are basically trading blind and hoping a trade will work out is not going to cut it in the forex markets. We need to be clinical and professional, no buts!!!

So what can you do to change and improve your discipline surrounding trading?

Here’s a few simple tips to get you started:

1)      Start by getting some rules in place, regarding the setups and where to look for trades.

2)      Produce a trade plan each time you enter a trade and stick to it.

3)      Try not to get too emotionally attached to trades. Each trade is just a number in a long list of trades you take. No single trade is more important than the next.

Remember, discipline is something that comes with time and is going to be a tough challenge but I guarantee if you can trade with discipline on your side the forex markets will be a lot less daunting and stressful.

I hope this article has got across just how vital discipline is to become a consistent trader and helps you on your trading journey.

Jeremy

About the Author

If this article gets you wondering if there is another way to trade the Forex, check out the many free articles and videos and learn more about trading with price action from Jeremy Poor at dontlettheforexdriveyouupthewall.com.

By CentralBankNews.info
    Macedonia’s central bank maintained its monetary policy stance, including the main interest rate at 3.25 percent, but said there were downward risks to inflation given that inflationary pressures have been lower than expected in recent months and import prices have the potential to decline further.
    The National Bank of the Republic of Macedonia (NMRM), which cut its rate by 25 basis points in 2013, also said indicators for the last quarter showed that the country’s economy would continue to grow, probably at a rate similar to the third quarter.
    This view is largely based on favorable developments in construction and industrial activity.
    Macedonia’s Gross Domestic Product expanded by an annual 3.3 percent in the third quarter, down from 3.5 percent in the second quarter.
    In its latest quarterly report from October, the central bank raised its 2013 growth forecast to 3.3 percent from an April forecast of 2.2 percent, and its 2014 growth forecast to 3.7 percent from 3.0 percent due to better exports and higher investments. In 2015 growth is forecast to reach 4.4 percent with credit growth rising to 5 percent in 2013, about 6 percent in 2014 and 8 percent in 2015.

    Macedonia’s inflation rate fell to 1.1 percent in November from 1.3 percent in October and the central bank said average inflation in 2013 amounted to 2.8 percent, in line with the NMRM’s forecast.
    Growth is expected to close the negative output gap by mid-2014, with inflation averaging 2.3 percent this year and about 2.0 percent for 2015.

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