Month: January 2014

By CentralBankNews.info

By MoneyMorning.com.au

As you know from reading Money Morning, we’ve made it clear that you can’t afford to be out of the stock market.

One reason is that for most Aussie investors there just isn’t a wide enough range of alternative investments.

You can own cash, stocks or property. That’s pretty much it in terms of main investments. Yes, you can also invest in gold, but we don’t see gold as a wealth builder; we see it as a wealth protector.

And since property investing is so expensive (it costs thousands in transaction and financing costs) most investors only have two choices: cash or stocks.

That puts you in a bind. Wherever you choose to invest, you’ve got to face a big risk – the risk of being in stocks versus the risk of not being in stocks. But one financial planning veteran says the choice is a no-brainer.

This veteran says investors should only own one asset. And unlike most financial planners he won’t make a penny in commissions if you follow his advice…

In fact, we can tell you right now what asset he recommends putting 100% of your money into.

He won’t mind, because he openly tells anyone who’ll listen. The asset? Cash.

It’s plain and simple advice. But why does this financial planning veteran tell investors to only hold cash? And how does that sit with your editor, who says investors should have up to 50% of their investable assets in stocks?

It’s an interesting (some would say confusing) conflict of opinion. The thing is, while we may have different views on asset allocation, our view on the overall state of the world economy is broadly the same. We’ll explain more on that in a moment.

It really comes down to the timing, your attitude to risk, and the risks you’re prepared to take (or not take) in order to achieve your investment goals.

Cash Tsunami to Strike Markets

Our position is clear. We say that central banks and governments will do all they can to unleash continued torrents of cash into financial markets.

In fact, these torrents will become so large that the only way to describe them will be to call them a financial tsunami. This huge inflow of freshly printed cash into the markets will help central banks and governments to achieve their goal – more inflation.

And what will that mean? From a non-investment standpoint it means a higher cost of living. Put another way, things will become more expensive.

The most dangerous aspect of this is that gradual and persistent inflation is a ‘silent killer’. It’s hard to spot as it’s happening. For the most part you only notice it years down the line, when you suddenly notice that things are more expensive than they used to be.

So how can you combat this? Well, there isn’t a guaranteed solution. Many people think that gold is the best way to hedge against inflation. That’s not necessarily true. The best way we know of to beat inflation is the stock market.

That’s why we suggest investors have up to 30% of their investable assets in dividend paying stocks. We also suggest investors have another 20% of their investable assets in speculative small-cap and blue-chip growth stocks.

We know there’s a risk that stocks could fall if the world economy goes through a repeat of 2008. But our bet is that’s not on the agenda…yet. To tell the truth, our bet is the central banks could keep the tsunami of new cash flowing into the market for another 10 or 20 years…perhaps even longer!

That’s where we differ with Vern Gowdie – the veteran financial planner we mentioned at the top of this letter.

Stocks or Cash?

At first glance it seems impossible to reconcile the idea that two people who offer completely opposite investment advice could agree on the outlook for the economy and markets.

But we do. We both see big trouble ahead if central banks and governments keep meddling in the economy.

Our big point of difference is when the day of reckoning will occur. As we mentioned above, right now we say the current situation could last for 20 years. That’s why we’re in no hurry to ditch stocks.

We’re so bullish that we’ve gone on record to say the Australian market will hit 7,000 points in 2015. And we’ll go on record now to say that if it takes out that high, the next target for the index would be 10,000 points and even 15,000 points.

That may seem unlikely today, but that’s the thing with inflation-induced stock rallies, they tend to soar to previously unthinkable highs.

But what about Vern’s view and his 100% cash allocation? Unlike your editor, Vern doesn’t see the current situation lasting another couple of years, let alone 20 years. That’s why he says it’s just not worth the risk to own anything other than cash.

Many may see this as an extreme view. Others will see it as a prudent way to allocate, manage and preserve their wealth.

Whatever happens, you can’t afford to sit on your hands and not think about it. Be in no doubt that the meddling will lead to an unpleasant outcome. But whether that happens within the next two years or in 20 years is impossible to say today.

All we can say is, for months you’ve heard our view on the subject. If you’re still undecided on what you should do, you would be doing yourself a disservice if you didn’t at least look at Vern’s point of view as well. 100% cash? It may sound crazy, but for you it could be the best advice you’ll get all year. You can find out more on the subject here.

Cheers,
Kris

PS: Vern’s special report outlines five Aussie stocks he says are overvalued following their rally from the 2009 low. If you own any of these five stocks it may be time to cash in your chips and look for better value elsewhere. Go here for more.

Special Report: The Recession Strategy

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By MoneyMorning.com.au

By MoneyMorning.com.au

Dear Resource Hunter,

‘A penny saved is twopence clear,‘ wrote Benjamin Franklin in his now-classic Poor Richard’s Almanack, published annually between 1732-58. Franklin’s Almanack embodied – and perhaps shaped – the ethos of money in Colonial America.

Today, we’re a far from pennies earning more pennies. Heck, we hardly even talk about pennies after a century of inflation. These days, if you deposit money in a bank, you receive historically low interest rates. I’ll show you an astonishing chart in a moment.

First, though, consider… What are the implications of low interest rates? How should you tailor investing to low interest? In this write-up, I have some thoughts on beating the low interest problem while preserving your wealth over the long haul…

How bad are interest rates – for savers, at least? Look at the chart below, based on data going back to 1790. It puts a new spin on Ben Franklin’s old quip about a ‘penny saved’. A penny saved earned strong interest, back in Franklin’s day!

Click to enlarge

Throughout most of US history, you could ‘earn’ decent money by following Franklin’s advice and saving pennies. For over two centuries, US interest rates have seldom been less than 4-5%. Often, rates were higher. If you’d followed Franklin’s advice and saved pennies, you’d have earned decent returns over the long haul.

Not anymore! In the past five years, interest rates have crashed below even previous rock bottoms during the Great Depression and the Second World War. How low is low these days? Let’s take a closer look, using a chart of interest rates over the past six decades, prepared by the Federal Reserve Bank of St. Louis.

Click to enlarge

Just eyeballing the chart, you can see the 5% interest level running across much of the past six decades. Rates were lower sometimes and higher at other times. For example, look at how the fed funds rate spiked up strongly during the recessions of the 1970s and early 1980s, in a battle against inflation.

But look at interest rates since 2008. Over the past five years, they plummeted. Where’s Ben Franklin when you need him? After the crash of 2008, the Fed dropped rates like a stone, and kept them down near zero.

Ben Bernanke vs Ben Franklin

Savers suffer at zero interest. Down at the bank, you don’t even earn pennies on the dollar. The Federal Reserve and its principals know this. In fact, they know it and don’t care!

Last year, none other than Fed Chairman Ben Bernanke cried crocodile tears over the low interest issue. In a speech, Bernanke stated, ‘I know that people who rely on investments that pay a fixed interest rate, such as certificates of deposit, are receiving very low returns, a situation that has involved significant hardship for some.‘

Yes, and boohoo for you. If you’re a saver, Ben Bernanke feels your pain. But pain or no, the Fed has kept interest rates low, and that’s the plan looking ahead.

Even worse, there may be more pain to come, because lately there’s talk of banks charging fees to hold your funds. That is, you’ll pay the banks, in a form of ‘negative’ interest! In the brave new world of modern money, the Fed’s Ben has turned the other Ben – Mr. Franklin – on his head.

The Wall of Risk

Low interest rates rob the noble saver. The saver defers instant gratification, yet receives nothing for the effort. It goes against history. It ought to change, ‘one of these days’. But we’re stuck with this situation for now – even as we enter the Janet Yellen era.

Along the way, it’s infuriating to do the ‘right thing’ and save but then get kicked around for it. All that and, broadly speaking, it’s not so much individual savers who are harmed by low interest rates. Large-scale damage from low interest rates affects institutional money and pension funds. We’re not talking about ‘pennies saved’ here. We’re looking at literally trillions of dollars of pension funds and such all seeking return.

With low interest rates, many basic assumptions behind large-scale saving and future returns go out the window. Institutional and fund managers look ahead, run the numbers and foresee account deficits. Then? Well, then they change their behaviour. Often as not, people do things inconsistent with long-term economic growth. Like what?

Consider that at low interest rates, many individuals save more, borrow less and pay down debt. That’s good for the individual, perhaps, but slows the economy.

Elsewhere, businesses divert funds from new capital expansion to bulk up pensions. Meanwhile, institutions beat up company managements to cut costs (often as not by laying off workers) and fund share buybacks. Fewer workers? Less capex? There goes the future seed corn for growth.

Even governments bite the bullet. The political tendency is to raise taxes and/or scale back on, say, maintenance on infrastructure, while steering funds to undercapitalised pension accounts.

At the Fed, policy honchos – welcome to the club Janet Yellen – claim that low interest rates stimulate borrowing and spur the economy. So after five years of low rates, where’s the spurred-on economy? One can just as easily argue that low interest rates lead to less money going to concrete, steel and new machinery. If the past five years are any guide, economic growth is slow when interest rates are zero.

Plus, low interest rates create large amounts of essentially ‘dry tinder’ across the economy. That is, people and firms borrow simply for the sake of borrowing at low interest. It’s more fun to play with somebody else’s money, right?

But looking ahead into 2014 and beyond, what happens when the business cycle turns and profits or incomes fall? How does the borrower service debt? Or worse, what happens when (not if) those interest rates go back up? Where’s the money? Well, I suppose that’s what bankruptcy court is for.

Investing Around Low Interest

In an era of low interest rates, investors aren’t getting return down at the bank. To paraphrase that famous line from the television show Seinfeld, ‘No Ben Franklin for you!’

Meanwhile, we have to wait for the other interest rate shoe to drop from the Fed. My concern is what will happen when the markets sense the first signs of interest rates rising. Eventually, somebody has to pull that trigger and get rates back to some semblance of historical norm. On that day, expect heavy selling pressure as people book gains.

We’re not there yet – even in the face of the taper, nobody is raising rates. For now, you need to appreciate the situation. As investors, we have to balance the need for return in a time of low rates with the risk of what happens when things begin to turn. Stick to those quality dividend payers. I’ll write about this much more as 2014 unfolds.

Thanks for reading.

Byron W. King
Contributing Editor, Money Morning

Ed Note: Ben Bernanke vs Ben Franklin was originally published in Daily Resource Hunter.

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By MoneyMorning.com.au

By CentralBankNews.info
    Following is the 2014 calendar for meetings by central bank committees that decide monetary policy.
    The table includes scheduled meetings for more than 25 of the world’s central banks. In the event that meetings by monetary policy committees take place over several days, the date listed below is for the final day when decisions are normally announced.
    Work is underway to expand the number of central banks covered. You may replicate the table in part or in full only if you link to this page. The calendar can always be accessed at this link.
    The calendar is updated regularly to reflect the latest information as some central banks only release tentative schedules at the beginning of the year and then finalize their calendar as the meeting nears.

By Investment U

We’ve closed the book on 2013, and it’s time to make resolutions for the new year. Alexander Green’s “Four Resolutions That Will Make You Rich” is great advice for investors. Now, let me share with you my five resolutions.

1. Adjust the Signal-to-Noise Ratio. I read and study voraciously, and a lot of that is done on the Internet. There is a tremendous amount of information out there. But separating the signal (useful) from the noise (harmful) can be difficult.

   I want to adjust that ratio so my useful signals are stronger and I absorb less noise.

   This means tuning out the people who beat the same note over and over, and those who draw conclusions that just don’t line up with the facts.

2. Don’t Panic. Bad news often sells well in financial publishing. So, in the time it takes me to go out for coffee, my inbox will fill up with articles from prominent people predicting imminent catastrophe. These people were wrong all during the 30% gain the S&P 500 racked up this year, and many of them have been wrong for the entire 63% gain that the market has racked up since the last major bottom in October 2011.

   That doesn’t mean the market won’t pull back. Heck, it may be overdue for a pullback. A correction of up to 10% wouldn’t surprise me. But any pullback is a buying opportunity, not a reason to panic.

   This market is incredibly resilient. We should call it the “Flubber” market because it bounced back higher than ever from several scares this year, including drumbeats of war in the Middle East, the budget crisis in Washington and more.

   Every single pullback was a buying opportunity… despite the constant cries of alarm from the merchants of fear.

3. Find the Contrarian Opportunities. It’s easy to let your thinking get into a rut. And it’s so, so easy to go along with the crowd. The problem with going along with the crowd is you miss the opportunities in untrodden pastures. And if you find those opportunities early, the payoffs can be extraordinary.

   Mind you, there’s no point in being a contrarian just for the sake of it. If the fundamentals of any investment class are getting worse, then that investment class is likely to get cheaper. It’s only when things bottom out – when bad news is greeted by higher prices – that the real contrarian opportunities can be found.

   My resolution is to find more of those contrarian opportunities in 2014.

4. Argue Less, Discuss More. There’s a poster that I’m going to print out and put over my desk. Here’s what it says: “There are some people who always seem angry and continuously look for conflict. Walk away; the battle they are fighting isn’t with you, it is with themselves.”

   In the past, I’ve been one of those dummies who thinks that just because some person is loudly, angrily wrong on the Internet, I have to engage them. I don’t. I’ll be a happier person – and probably a better trader – if I limit my discussions to people who are expressing interesting points of view, even if those are points of view I currently disagree with.

   After all, they might be right. If I don’t engage people who disagree with me, I can’t find out if I’m wrong. But I can give my blood pressure a break by avoiding arguments with people who seem to love bickering for its own sake.

5. Keep an Eye on the Long Game. I don’t know about you, but it’s time for me to start planning my estate, something I’ve put off for far too long. Mortality is one of those inescapable eventualities. If you think you’re getting out of this alive, it’s time for a rethink. And it’s time for meto think hard about estate planning.

   I can’t control where and when I’ll die. But I cancontrol the financial picture I leave behind. It could be a simple process that makes things easy on my family, or it could be a giant mess. So this month my wife and I are going to update our wills, which is long overdue, and make a list of who gets what in the safety deposit box, so there’s no fighting. We also need to formally appoint guardians for our children in case we kick the bucket at the same time.

   I also need a living will and to appoint someone to make medical decisions if I become incapacitated.

Your own list of resolutions may be different. But it’s time to make that list of resolutions, and stick with it.

Here’s to a great 2014,

Sean

Article By Investment U

Original Article: My Top 5 Resolutions for 2014

Weekend Update by  www.thepracticalinvestor.com

January 3, 2014

— During Christmas Week it appears that VIX completed declining in a Primary Wave [5].  This week it closed at weekly Intermediate resistance at 13.84 and still has to overcome Long-Term resistance at 14.05, but the reversal appears real.  Confirmation of a change in trend lies above that level with confirmation of the trend change at 16.44 to 16.75.

SPX reverses within the Broadening Top.

— SPX made its final intraday high on December 31, then closed the week within the Orthodox Broadening Top, which began forming in mid-November.  The Orthodox Broadening Top is formed by three successively higher tops and two bottoms, the second of which must be lower than the first. This forms a “Megaphone” pattern.  A decline from this peak through the bottom trendline of the Broadening Top completes the formation and sets up the initial downside target.

(ZeroHedge) The weakness in stocks accelerated after Europe’s close, was briefly stalled by algo wildness and VWAP buys on Bernanke’s completely non-news speech this afternoon, then dropped into the close, but was far outweighed by the moves in commodities. WTI Crude has dropped over 6% in the last 4 days – its biggest such drop in almost 8 months. The last 2 days have seen gold rise at its fastest pace in almost 3 months.

NDX closes the week at its trendline.

— NDX closed the week at the upper trendline of its Ending Diagonal formation after making a new closing high on Tuesday.   The 4.8 year rally may now be finished.  Confirmation of that would come with a decline beneath the trendline followed by a further decline below the Cycle Top line at 3447.58.

(ZeroHedge)  As we warned was likely to happen back in February of 2013 (given the typical trajectory of earnings expectations through a year), JP Morgan has confirmed that the S&P 500 is now more expensive on a forward P/E basis than it was at its peak in October 2007. So, despite the self-referential bias of each and every talking head asset-gatherer on mainstream media’s denial, stocks do not offer value here… no matter how many TINAs or BTFATHs you hear…

The Euro reverses at its Cycle Top.

.  

           — The Euro reversed down this week after challenging its Cycle Top resistance at 138.07 for the past two weeks.  It closed just above its weekly Intermediate-term support at 135.81.   Final support is at 132.93 and 130.88, beneath which the Euro decline may accelerate.

(ZeroHedge)  One of our favorite themes in the past year has been watching Mario “Whatever it takes” Draghi reel powerless before the relentless contraction in Eurozone credit. Most recently, inNovember we reported that “when the ECB announced a “surprising” rate cut, 67 out of 70 economists who never saw it coming, were shocked. We were not. As we observed ten days prior, Europe had just seen the latest month of record low private sector loan growth in history. Or rather contraction.

The Yen is now testing its Head & Shoulders neckline.

–The Yen slipped below the Head & Shoulders neckline at 96.00 over the holidays. It appears to be breaking down beneath the neckline in a Primary Wave [5] in a very strong decline that may last through mid-February.

The US Dollar closed above mid-Cycle resistance.

— USD closed above its weekly mid-Cycle resistance at 80.95 and has closed above its December high.  The Cycle Model suggests the next phase of the rally lasting through late January that may bring the USD above its inverted Head & shoulders pattern shown in the chart.  The bear trap for dollar shorts has now been sprung.

Gold bounces from a new Head & Shoulders formation.

— Gold bounced from its new Head & Shoulders neckline at 1181.40 and appears to have stopped its retracement just under Short-term resistance at 1243.77.  Indications are that gold may turn back down early next week.  A bearish Cup with Handle formation has already been triggered, so any additional rally may be limited in breadth.

(ZeroHedge)  Sales of gold coins are booming even as the precious metal’s price is falling (and it’s not just central banks). Despite gold futures 28% drop in 2013 (its worst since 1981), the WSJ reports that demand for gold coins shot up 63% to 241.6 metric tons in the first three quarters of 2013.

Treasuries decline beneath the Broadening Wedge.

— USB declined beneath the trendline of its massive Broadening Wedge formation and may be threatening its 32.25-year trendline.  The Broadening Wedge suggests a probable 20% loss beneath this support level.  More importantly, the loss of a long term uptrend is in jeopardy.

(Bloomberg)  Treasury yields traded at almost the highest levels since 2011 as Federal Reserve Chairman Ben S. Bernanke said the headwinds that have held back the U.S. economy may be abating, leaving the country poised for faster growth.

Crude has a mighty reversal this week.

— Crude plunged nearly 6% in two days, turning a mildly bullish outlook in WTIC to bearish.  This implies that further downside beneath the prior low at 91.77 may confirm that a downtrend is already in place.  Upside movement, should it appear, may be inhibited by the overhead resistance between 94.25 and 98.73.

(Bloomberg)  West Texas Intermediate crude fell, capping the biggest weekly decline in 19 months, after a government report showed that U.S. supplies of distillate fuel and gasoline climbed.  Futures dropped 1.6 percent today and 6.3 percent this week. The Energy Information Administration said stockpiles of distillate fuel, including heating oil and diesel, rose 5.04 million barrels last week to 119.1 million. Gasoline inventories gained 844,000 barrels to 220.7 million. Fuel demand tumbled 7.2 percent, the most since January 2012. Crude supplies slid as Gulf Coast refiners curbed deliveries to reduce local taxes.

China stocks take a plunge.

–The Shanghai Index consolidated at new lows not seen since last Summer.  SSEC may continue its decline through mid-January in what appears to be a growing liquidity crunch.  In the process, it has a high probability of making some new lows.  The duration of this decline may not be finished until mid-March..

(Reuters) – About 3.33 million hectares (8 million acres) of China’s farmland is too polluted to grow crops, a government official said on Monday, highlighting the risk facing agriculture after three decades of rapid industrial growth.

China has been under pressure to improve its urban environment following a spate of pollution scares.  But cleaning up rural regions could be an even bigger challenge as the government tries to reverse damage done by years of urban and industrial encroachment and ensure food supplies for a growing population.

The India Nifty retreats back to support.

— The India Nifty retreated back to Short-term Support at 6177.33 this week.  The decline into early January came as expected and may continue through mid-February.  This decline may be deflationary to an extreme, since equities have become thoroughly saturated with liquidity from India’s central bank and simply cannot absorb any more.  Indian investors are leveraged to the hilt.  The potential for a panic decline to the weekly Cycle bottom (4741.71) is very high.

The Bank Index  is still flying high.

— BKX  has closed exactly at 50% of its decline from 2007 to 2009.  The momentum oscillators are winding down and the 50% Fibonacci level may be all it takes for a reversal.  The resumption of the secular bear market may be most spectacular in BKX.

(ZeroHedge)  On December 31 we demonstrated the biggest operation in the history of the Fed’s temporary open market operations: a $198 billion reverse repo under its brand new fixed-rate scheme, which, at least according to the Fed, was supposed to be a mechanism designed to prepare the market for the “normalization” of the Fed’s balance sheet and allow seamless liquidity extraction. What the Fed did not announce was that it was also the biggest collateral window-dressing scheme ever conceived (that there was $200 billion in free liquidity sloshing around was a distant second highlight).

(TheEconomist) “NAUGHTY or nice” is not a discussion investment bankers have with Santa before Christmas but one they have with their bosses early in the new year. The haggling usually opens with the boss saying what a tough year it has been and the bankers, often experienced traders and dealmakers, talking about how valuable they are. This year’s negotiations will be unusually tense. At stake will not simply be pay, an issue complicated by the introduction on January 1st of a bonus cap in Europe, but also jobs.

After peaking at the end of 2010, employment in the investment-banking industry has been declining steadily. Deutsche Bank reckons that the number of bankers employed by the ten largest firms will fall by about 3,000 in 2014, leaving the total 20% below its peak. Add in job losses at smaller firms and declines in support staff, and total worldwide employment in the industry may fall by 20,000 this year.

(ZeroHedge) The ongoing debacle of Italy’s Banca Monte dei Paschi (BMPS) took a turn for the worst today. The bank’s largest shareholders (MPS Foundation) approved (read – forced through) a delay in a EUR 3 billion capital raise, which the bank needs to avoid nationalization, until May. The delay (which will cost the bank EUR 120 million in interest) allows MPS more time to liquidate their 33.5% holding before their stake is massively diluted. Management is ‘considering’ resignation and is “very annoyed,” but the city Mayor is going Nationalist with his delay-supporting comments that “we cannot let the third biggest bank in this country fall prey to foreign interests.” So Europe is recovering but they can’t even raise a day’s worth of POMO to save the oldest bank in the world?

Is this progress???

Regards,

Tony

Anthony M. Cherniawski

The Practical Investor, LLC

P.O. Box 129, Holt, MI 48842

www.thepracticalinvestor.com

Office: (517) 699.1554

Fax: (517) 699.1558

Disclaimer: Nothing in this email should be construed as a personal recommendation to buy, hold or sell short any security.  The Practical Investor, LLC (TPI) may provide a status report of certain indexes or their proxies using a proprietary model.  At no time shall a reader be justified in inferring that personal investment advice is intended.  Investing carries certain risks of losses and leveraged products and futures may be especially volatile.  Information provided by TPI is expressed in good faith, but is not guaranteed.  A perfect market service does not exist.  Long-term success in the market demands recognition that error and uncertainty are a part of any effort to assess the probable outcome of any given investment.  Please consult your financial advisor to explain all risks before making any investment decision.  It is not possible to invest in any index.

The use of web-linked articles is meant to be informational in nature.  It is not intended as an endorsement of their content and does not necessarily reflect the opinion of Anthony M. Cherniawski or The Practical Investor, LLC.  

P.O. Box 129  Holt, MI  48842  (517) 699-1554  Fax: (517) 699-1558

Email: [email protected]  www.thepracticalinvestor.com

By MoneyMorning.com.au

I read this in an article on The Age website the other day:

‘Smartwatches, which connect to your smartphone, are going to create an entirely new category of computing in the coming year," said Sarah Rotman Epps, a former Forrester analyst who specializes in wearable computing. She noted that the long-awaited Apple smartwatch, which is expected to be announced in 2014, could change the way we engage with our wrist in the same way Apple changed the cellphone industry in 2007.‘

The bit that had me in tears was ‘…could change the way we engage with our wrist in the same way Apple changed the cellphone industry in 2007.‘

The way in which we engage with our wrist? Are you kidding me? That’s just utterly ridiculous.

Every analyst, forecaster and predictor has his or her view on technology. And that’s okay. But I’m pretty sure the only time humanity has ever engaged with their wrist is through slap bands and telling the time.

Of course the argument will be, ‘Well you didn’t realise how much you needed this until it was invented.’ That was pretty much the reasoning behind every Steve Jobs product release.

But let me clear one thing up. It’s a part of human nature to make life easier for ourselves. That’s why we invented things like the toaster, the car, the PC and doors. They all make life easier.

The smartphone too makes life easier. It’s a mini supercomputer in your pocket. Now the smartwatch comes along and purports to do what a smartphone does…on your wrist. Remember, humans want to make life easier, not more difficult, right?

So here’s my challenge. Take a watch, any watch. If you already have a smartwatch, put that on. But a boring old analogue watch will do. Now put it on. Now imagine typing a text message on the face of that watch. Hmmmm…

How about an email? Or even better try and take an imaginary photo with the face of that watch. If you’re a professional contortionist the last problem doesn’t apply to you.

Let me make this simple for you if you haven’t done any of the above. A smartwatch does one thing really well. Tell the time. It also does a lot of other things rather poorly, or average…maybe satisfactory at best.

But typing an email, sending a text message, taking a picture…snapchatting, tweeting, vineing, and instagramming? These things would be next to impossible. (Note: most smartwatches can’t do any of those things anyway).

‘But Sam, a smartwatch will have voice recognition technology. So that solves the email, texting issue.’

Does it?

Ever been on a packed tram, train or bus? Think about broadcasting to the world your personal text messages in a crowd of 100. Maybe at pub with some mates and your girlfriend/boyfriend is texting you. Feel like telling everyone how much you miss ‘Snookum’ or ‘Lovey Love’?

You get the picture.

For what it’s worth I have a smartwatch. It’s the Sony SmartWatch 2. It’s a handy bit of kit for telling me the time and checking part emails and part text messages without getting my phone out of my pocket. But that’s it!

No smartwatch will ever replace the mini supercomputer in my pocket. Smartwatches from Apple, Samsung, Microsoft and whoever else might get a lot of headlines this year. But so did Minidisc when it came out. Revolutionise music it will, put an end to big record labels it must…nope. It didn’t.

MP3′s and the RIO, Zune and iPod came along to end that little blip on the radar.

Or then there’s the wonderfully promising yet ultimately pointless technology, the QR code. Great idea…pointless execution. When you think about it, how does it make your life any easier at all? Open an app to line up a square barcode that takes you to a website.

How about open up your web browser and go to the website? See what I mean? Technology is supposed to make life easier, better, more efficient. QR codes don’t do that. The Minidisc didn’t either.

Smartwatches will have the same fate. The common claim is it will replace your smartphone. Nope, same situation. Technology will move faster than it takes smartwatches to get interesting.

Google Glass, Vuzix, and Recon Jet are some visual devices that will streak past the Smartwatch within the next year or so. And there will be others that come to market that currently don’t even exist. The future is one of ‘Immersive Technology’ that will reshape the way day-to-day life happens for everyone.

In fact, you can already buy Vuzix and Recon Jet. Then of course there are implantable chips, electronic tattoos and bendable, printed plastic electronics. These are technologies that, although they might seem scary and even a little crazy, are the ones that will add more benefit to day-to-day life than a fancy watch.

Technology rarely stands still. Sometimes the timing just doesn’t fit for some technologies. Smartwatches are one where you’ll look back in a couple years and think, ‘That was good kit but ultimately pointless.’

It’s technology for technology’s sake. And that never works.

Regards,
Sam Volkering+
Technology Analyst

Publisher’s Note: Before the Christmas holiday we mentioned that we were exploring the idea of launching a free daily technology eletter edited by Sam Volkering. In order to gauge the demand for such a service we asked readers to complete a short survey. The results are in and the response is unequivocal — 94.9% of respondents said they would read the letter if we launched it.

Clearly there’s a strong demand for information and analysis on what’s happening in the tech world today and what could happen in the future. And so, to meet that demand we’ve decided to give the project a green light. We’ll give you more details over the next two weeks, including the name of the new eletter, the topics Sam will cover, and how you can subscribe to it.

Stay tuned for more details…

Special Report: 574 Years in the Making

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By MoneyMorning.com.au

By MoneyMorning.com.au

In my career recommending investments, I’ve worked with some of the sharpest minds in the business.

I’ve drilled hyper-educated Wall Street analysts about their financial models.

I’ve dealt with some of the most ferocious floor traders in London’s Square Mile.

I’ve sat at the table with CEOs of companies from Beijing to Boston.

And I’ve advised smart self-funded retirees on how to manage their portfolios through volatile markets.

I’ve chosen to work in the global financial markets because I’m passionate and curious about what drives them. And now I’m bringing this experience to the Australian Small-Cap Investigator team.

Why?

Because this market is full of brilliant small-cap opportunities. I couldn’t have picked a better time to join.

So today by way of introduction, I’d like to share with you the three sectors of the Australian market I’m most excited about for 2014.

But before I do that, let me run you through the points of my background that qualify me to steer readers of Australian Small-Cap Investigator to the best small companies trading on the ASX.

I hold a Bachelor of Commerce and a Bachelor of Science from the University of Melbourne, with majors completed in Finance and Physics.

People often tell me that Science and Commerce is a funny combination. I disagree. The analytical skills you need to measure subatomic particles in a lab are surprisingly similar to the skills you need to size up markets and forecast cashflows.

I’ve also completed Level 1 of the Chartered Financial Analyst (CFA) program. The CFA is the gold standard for investment specialists worldwide.

After my studies I took a role in the London office of a global investment bank. It was my job to analyse every sector of the global economy and scour the US markets for investment prospects. I learned how fund managers operate, and what’s more, I learned the ways that individual investors can stay one step ahead. I’m looking forward to sharing these lessons with readers in the coming weeks and months.

Before I joined Kris’s team as the small-cap analyst, I was an investment adviser with an Australian stockbroking firm. During this time I worked with one of Australia’s most highly regarded small-cap advisory teams. Together we unearthed and analysed emerging companies, generated quality trading ideas and delivered these ideas to private investors just like you.

The key lesson I’ve learned during my time in the markets is that the small-cap space is the only place you’ll find turbo-charged stock returns. In the context of a global economy that’s ‘just going’, there’s only one way to grow your portfolio in leaps and bounds. I’m talking about carefully selecting shares in businesses that are busy penetrating, innovating and consolidating.

Those are the opportunities I love to find, and that’s why I’m so excited to join Kris and his team. Now for my top three small-cap sectors for 2014…

Technology

Innovation never stops.

Barely a month goes by without news of that fact.

Another industry disrupted. Another middleman cut out of the game. Another piece of high technology entering the hearts, minds and households of ordinary Australians.

We’ve known for a while that Australia boasts a wealth of creative know-how in technology. Wise investors are now cottoning onto the opportunities this creates.

In 2013, the money and backing available to early-stage start-ups took a great leap forward. Groups like Rampersand, Square Peg Capital and Tank Stream Ventures are queuing up to support small companies with good ideas.

Even Telstra and Optus are seeking a slice, with both recently unveiling new technology start-up incubators.

In my view this flow will continue in 2014, and the prospects for select Tech stocks should improve accordingly.

If you’ve acted on Kris’s stock tips in the Tech sector, such as AdSlot and BigAir, you should have seen strong growth in 2013. I’m looking forward to crunching the numbers and leading you to some more exciting Tech stocks that should become household names in 2014 and beyond.

Small Financials

I’m sure you’ve followed the fortunes of the big four banks with great interest in 2013.

Revenues, earnings and dividends all going from strength to strength.

Stock prices surging on the back of low interest rates and an insatiable thirst for dividend yield.

If you’ve been along for the ride, you’ve done well. So well, in fact that valuations have blown out to a massive premium versus the global banking peers.

I believe the major banks will struggle to deliver the level of earnings in the future that’s implied by share prices today.

I like smaller firms that are flexible enough to embrace alternative lines of business. I’m talking about anything from purchasing non-performing debt, to short-term lending, to coming up with innovative structured transactions. In other words: places where the big banks fear to tread.

These are the spaces where nimble, aggressive firms can rack up amazing growth in a matter of months.

Agriculture

Food security has been gaining momentum as an Australian investment theme for some time now.

It’s not hard to see why. The megatrends are well-documented.

Emerging economy diets are becoming more intensive. This means fewer cereals and more meat, dairy, sugar and oils. These economies are leading the growth in global demand for food.

According to the United Nations Food & Agriculture Organisation, between 2010 and 2040, the world will consume as much protein as it has throughout history until now. That’s an astonishing statistic. It demands attention in an agricultural exporting nation like ours.

Who can guarantee supply for this enormous unmet demand?

Will it be companies like Australia’s fourth-largest milk processor, Warrnambool Cheese & Butter, where patient investors have made a mint as the battle for control has reached fever pitch?

Or will it be other, smaller companies who understand the challenges of disease, quality and food security?

The companies best-placed to benefit from the rise of Asian consumption are largely unknown today. Watch this space as I investigate innovative little companies with guts, foresight and first-mover advantage. Their stock trades at just cents in the dollar today, but these are the companies that could crack the Asian export enigma and generate massive returns for your portfolio.

These are the corners of the market that are getting me energised right now. There are so many opportunities in this market that I don’t believe any investor has an excuse for being on the sidelines.

Here’s to a happy, successful and prosperous 2014.

Tim Dohrmann,
Small-Cap Analyst, Australian Small-Cap Investigator

Ed Note: The above article is an edited extract from an update published on 6 December to readers of Australian Small-Cap Investigator.

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By MoneyMorning.com.au

By Jeff Clark, Senior Precious Metals Analyst, Casey Research – New Trend Guarantees Higher Gold Prices

If you’re like me, you’ve bought gold due to the money printing policies of most developed countries and the effect those policies will have on the future purchasing power of our paper money. Probably also because there’s no viable way for governments to escape the consequences of all the debt they’ve piled up. And maybe because politicians can’t be trusted to formulate a realistic strategy to avoid any number of monetary, fiscal, or economic crises going forward.

These are valid, core reasons to hold gold in a portfolio at this point in time. But a new trend is under way, and someday soon it will be just as much a driving force for gold prices as anything else: a good old-fashioned supply crunch.

A few metals analysts have mentioned it, but it escapes many and certainly is off the radar of the mainstream financial media. But unless several critical factors reverse course, a supply shortage is on the way with clear implications for the price of gold.

The following four factors are combining to diminish gold supply. While we’ve touched on some of them before, put together they’re creating a perfect storm that will, sooner or later, impact the gold market in several powerful ways. As these forces gather steam, you’ll want to make sure you’ve already built a substantial position in physical bullion.

Factor #1: Production Pullbacks, Development Delays, Exploration Cancelations

Gold producers don’t operate in a vacuum. If the price of their product falls by 30% over a two-year period, they’ve got to make some adjustments. And those adjustments, more often than not, result in lower production, delayed mine development plans, and cuts in exploration budgets. The response is industrywide, and even low-cost producers are not immune.

The drop in metals prices means some mines can’t operate profitably, and if the losses exceed the cost of closure (and possibly, restart in the future), these mines will be shut down. As operations come offline, global output falls.

While lower metals prices are not what any of us want, they’re long-term bullish because, as they say, the cure for low prices is low prices. If prices drop further, a greater number of projects will be unable to maintain production levels. For example, we know of several operating mines that, in spite of large reserves, will be forced offline if the gold price falls to the $1,100 level.

The impact on development and exploration projects is even greater—it’s easy to postpone construction on tomorrow’s new mine when you’re worried about cash flow today. As a result, many companies have cut drilling projects and laid off geologists.

The chart below shows the precipitous decline in the number of drilling projects around the world.

Through the first nine months of 2013, 52% fewer drills have been turning compared to the same period last year. And it’s not just fewer holes being poked in the ground—ore grades are declining too.

As of last year, ore grades of the ten largest gold operations are less than a third of what they were just five years ago, and less than a quarter of what they were 14 years ago.

Here’s the troubling aspect: This trend cannot be easily reversed.

It takes about a decade to bring new projects on line, and even shuttered, recently producing mines held on “care and maintenance” take time and money to get going again.

In other words, even when gold prices start rising again, new mine supply will take years to rebuild. Many companies will find themselves with a lack of readily available ore, and the market with fewer ounces.

Lower metals prices obviously have an impact on how much metal gets dug up. This alone is bad enough for supply, but unfortunately it’s not the only factor…

Factor #2: Now You See ‘Em, Now You Don’t

Many mining projects have both low-grade and high-grade zones. When prices fall, a company can mine the richer ore and still make money. It may sound shortsighted, but it can be the right thing to do to stay profitable and be able to survive in a temporarily weak price environment.

But high-grading, as it’s called, can make low-grade ore part of a disappearing act. Here’s how:

When metals prices are low and companies focus on high-grade ore, the low-grade material is temporarily bypassed. It’s still physically there, so one might assume the company will come back at a later time to mine it. But not only is it not economic at lower metals prices, it may never get mined at all.

That’s because some low-grade ore only “works” when it’s mixed with high-grade ore. Even when gold moves back up, it doesn’t matter, because the high-grade ore is gone. So it’s not just gone legally, as per regulatory definitions of mining reserves—it may be economically gone for good.

Miners could return to some of these zones in a very high gold price environment (something well north of $2,000), but that’s a concern for another day. The point for now is that many of today’s low-grade zones would be written off if the high-grade they need to work is gone.

Critical point: You may read reports early next year that global production is rising. However, to the degree that’s due to high-grading, it virtually guarantees lower production is around the corner.

Factor #3: Greed Is Good—Says the Politician

It’s become increasingly difficult for mining companies to navigate the political minefield. Many governments have become so rapacious that supply is already suffering.

We’ve mentioned this issue before, but take a look at how governments and NGOs (nongovernment organizations) put an effective halt to some of the biggest precious metals discoveries seen this cycle…

Pebble Project in Alaska. Anglo American (AAUKY) spent $540 million on one of the biggest copper/gold discoveries ever, but recently announced that it will walk away from it. The company said it wants to focus on lower-risk projects and is undoubtedly tired of putting up with ongoing environmental scares and regulatory delays.

Fruta del Norte in Ecuador. Kinross Gold (KGC) bought Aurelian shortly after what many called the discovery of the decade, but the politicos demanded such a big slice of the pie that Kinross stopped developing the project.

New Prosperity Mine in British Columbia. Taseko Mines (TGB) has been relentlessly challenged by environmental activists at the world’s tenth-largest undeveloped gold/copper deposit and pushed politicians to continually delay permitting.

Pascua-Lama in Argentina & Chile. This giant deposit has been postponed for several years, largely due to environmental issues and unmet regulatory requirements. Some analysts think it may never enter production.

Navidad in Argentina. Pan American Silver (PAAS) was forced to admit that the Navidad silver deposit—one of the world’s biggest silver-primary deposits—was “uneconomic at any reasonable estimate of long-term silver prices” when the local governor announced he wanted “greater state ownership” and increased royalties from 3% to 8%.

Minas Conga in Peru. Newmont’s (NEM) multibillion-dollar project was put on the back burner last year when the government gave the company two years to develop a way to guarantee water supplies for residents of the Cajamarca region.

Certainly bigger projects attract greater attention and scrutiny, but as it stands now, none of the above projects are in operation.

This list is by no means exhaustive; large numbers of smaller projects all around the world face similar challenges.

The bottom line is that finding economic gold deposits in pro-mining jurisdictions is getting increasingly difficult. The result? The metal stays in the ground.

Factor #4: Implosion Explosion

As you’ve likely read, the gold mining industry in South Africa is imploding.

• Labor strife: Strikes are common, and layoffs have numbered in the thousands this year.
• Rising costs: Labor and power costs have doubled since 2009. Some projects have been taken off line due to the one-two punch of higher costs and lower metals prices.
• Maturing assets: Many mines in South Africa are past their heyday and have forced companies to dig deeper. The deepest mine is now 2.4 miles below surface and takes workers a full hour to reach the bottom.
• Power inefficiencies: Electricity shortages are at their worst in five years. Poor power supply has led to blackouts and mining stoppages, and has made expansion difficult.
• Political interference: The industry has faced frequent calls for nationalization. Miners were told earlier this year they can stay private, though in exchange they were forced to pay higher taxes. How gracious of the politicians.

The breakdown in South Africa is important because as recently as 2006, it was the world’s top producing country; it’s now #5. Unfortunately, there’s every reason to expect this trend to continue, in many countries around the world.

The result is—you guessed it—fewer ounces come to market.

These four factors are already affecting gold supply. Gold production in the US was already 8% lower in the first half of 2013 vs. the first half of 2012. Through June of each year, output dropped from 655,875 ounces last year to 623,724 in 2013.

The net result of this perfect storm is that we should expect gold supply to decline until prices are much higher. Even when prices do rise, management teams will be reluctant to expand operations, reopen mines, or buy new projects until they feel the new price level is sustainable. As a result, this trend will almost certainly last several years.

Based on the research we’ve done, it is my opinion that after a bump in output early in 2014, the shortfall will become increasingly evident by the end of the year and reach fractious levels by 2015.

If demand remains at current levels, or even if it falls by less than the decrease in supply, gold and silver prices will be forced up. And in an environment of currency depreciation, we should see more demand, not less. We have the makings of a classic supply squeeze.

Higher metals prices are not the only ramification, however: Investors will be required to pay higher premiums on bullion. Further, we can expect a lack of available product, most likely resulting in delivery delays or even rationing.

That’s why it’s so important to buy bullion now, before the storm. Even if you need to sell a little to maintain your standard of living, the effects on you will be all positive. The product you sell will…

• Fetch much higher prices
• Return the premium you paid—perhaps more than you paid
• Have a steady stream of ready customers

All it takes to capitalize on this opportunity is to recognize the supply shortage that’s on the way and act accordingly.

Critical point: Buy the physical gold and silver you think you’ll need for the future NOW.

One of the best places I know has among the lowest premiums available in the industry, and also offers several international storage locations in case things get bad in your home country. This breakthrough program is as liquid as GLD and offers greater safety than storing bullion at home. Click here to find out more.

By CentralBankNews.info
    Uganda’s central bank held its Central Bank Rate (CBR) steady at 11.5 percent but said it “shall take appropriate action to ensure that annual core inflation remains around the policy target of 5 percent in the medium term.”
    The Bank of Uganda, which cut its rate by 50 basis points in December, said it still assesses the risk to the inflation outlook to the upside despite better-than-expected inflation in the last few months.
    “Monetary policy therefore has to balance current modest inflation outturn against the likelihood that inflationary pressures will rise over the medium term,” the bank said.
    Uganda’s inflation rate eased to 6.8 percent in November from 8.1 percent and the bank said headline inflation eased further to 6.7 percent in December, reflecting mainly the decrease in transport and communication, beverages and tobacco prices.
    Annual core inflation fell to 5.7 percent in December from 7.0 percent in November.
    The bank forecasts inflation will edge further down in the near term, but rise to 6.5-7.5 percent in the latter part of 2014, with the rise depending on the exchange rate, changes in commodity prices and the degree to which economic activity spills over into cost and price pressures.

    www.CentralBankNews.info