Month: February 2014

By CentralBankNews.info
    Last week in global monetary policy Romania cut its rate for the second time this year, but then called a halt to further cuts, while Ghana raised its rate to boost the yield on its assets and counter the fall in its currency and thus dampen inflation.
    But the main change to the outlook for global monetary policy came from the Reserve Bank of Australia (RBA), which shifted into a neutral policy stance and eased up on three months of concerted efforts to verbally push down the exchange rate of the Australia dollar.
    The U.S. Federal Reserve’s modest start to to its long-awaited tapering of asset purchases in January is having a dramatic effect on financial conditions worldwide as capital – much of it highly leveraged – drains away from emerging markets and heads back toward advanced economies.
    In the case of Australia, a rate cut in May 2013 triggered a decline in the Australian dollar – known as the Aussie – that was further fueled by weaker external demand for its raw materials and the Fed’s signal on May 22 that it was getting ready to change course after five years of pumping money into the global economy.
    The Aussie dropped 15 percent from a 2013-high of 94.8 cents per U.S. dollar in early April to 1.122 end-December and the pass-through of this decline is now feeding into Australia’s inflation rate, which hit a two-year high of 2.7 percent in the fourth quarter.
    In addition to saying that “the most prudent course is likely to be a period of stability in interest rates,” in last week’s policy statement, the RBA toned down its efforts to talk down the Aussie.
   Starting last November, the RBA began describing the Aussie as “uncomfortably high” and its governor, Glenn Stevens, even held out the prospect of intervention in foreign exchange markets as the central bank started a campaign of using exchange rates instead of interest rate cuts to ease financial conditions and spur economic growth.
    But the RBA has now changed tack.
    Last week it merely said that if the recent decline in the exchange rate is sustained, it would asset in rebalancing the economy, signaling that it is comfortable with the current level of the Aussie.
    The combination of a shift to a neutral policy stance and the change in tone about the exchange rate immediately pushed up the Aussie by 2 percent, with the currency ending the week at 1.12 to the U.S. dollar, or 89.6 U.S. cents, slightly higher than the level of 85 cents that Stevens had mentioned in December.
   
    Through the first six weeks of this year, five central banks have raised rates while rates have been cut six times, or 11.3 percent of this year’s 54 policy decisions.
    Four of this year’s rate rises have come from major emerging market central banks (South Africa, Turkey, India and Brazil) with Ghana the fifth to raise rates.
    Only one of this year’s rate six rate cuts have come from an emerging market central bank (Hungary), while three from frontier market central banks (two cuts by Romania and once by Jordan) while the other two have been carried out by central banks from other markets (Tajikistan and Uzbekistan).

• Dominican Republ. Maintains policy rate at 6.25%
• Gambia holds rate at 20.0% to anchor inflation expectations
• Mauritius holds rate, mulls move to counter inflation risks
• Australia holds rate and sees period of stable rates
• Romania sees sharp drop in H1 inflation, then within target
• Uganda holds rate, drops warning about inflation
• Poland maintains rates, still sees steady rates until end-H1
• Philippines holds rates, says inflation is manageable
• Bank of England maintains rate, QE size, as expected
• Czech holds rate, FX targets, cuts Q1 inflation forecast
• ECB says euro area in prolonged inflation period
• Ghana raises rate 200 bps on elevated inflation, FX risks
• Botswana holds rate on positive inflation outlook

• Emerging market c.banks face tough choices-BIS paper 

Here’s one good reason why: a historic market sentiment extreme

By Elliott Wave International

The DJIA, S&P and NASDAQ are struggling to bounce. Yet the bullish convictions remain high. Says a February 5 Investor’s Business Daily headline:

“Why Mutual Fund Investors Need Not Panic After January Sell-Off”

When is the best time to get out of the stock market? When everyone else is invested and extremely optimistic. When is the best time to buy, then? Exactly: when you see the opposite sentiment.

Market sentiment is one indicator you don’t hear much about on financial networks. Yet we’ve seen sentiment extremes repeat at every recent market top and bottom. What’s more, as Robert Prechter, the president of Elliott Wave International, puts it, “the greater the degree of the advance that is ending, the greater the optimism at its peak.”

This contrarian view of the market can be a financial lifesaver.

Below is an excerpt from Prechter’s recent Elliott Wave Theorist, a monthly newsletter he has published since 1978. It shows you one way how Bob finds bearish and bullish extremes in the market.

Conviction Among the Bulls
(Robert Prechter, The Elliott Wave Theorist, December 2013)

The Daily Sentiment Index (trade-futures.com) reported 93% bulls twice, on November 15 and 22. Two readings this high are a rarity.

The weekly Investors Intelligence poll on December 11 and 18 showed over 80% bulls among committed advisors (i.e. bulls/(bulls+bears), omitting those expecting a correction), the highest reading since 1987.

Such extreme readings in conjunction are even rarer.

The Rydex family-of-funds data afford good sentiment indicators. Recent figures show a record low investment in conservative money-market funds, meaning nearly everyone is invested in stocks and bonds.

At the same time, the ratio of money in bullish stock funds vs. bearish stock funds is over 5:1, and per sentimenTrader.com the ratio of money in leveraged bull vs. bear funds (see Figure 2) is 10:1!

This reading leaves past extremes in the dust. If you study Figure 2, you will notice that the biggest rush has come in the past six months, which is precisely the time that stocks’ ascent has been slowing!

In other words, optimism is soaring while upside momentum is waning.

Once this epic complacency melts, I doubt we will see such a ratio again in our lifetimes.

Bad Start for Stocks in 2014: Buying opportunity or more pain to come? You can benefit greatly from looking at charts that take a historical look at what’s going on in the financial markets. Robert Prechter has just released an issue of his Elliott Wave Theorist publication that includes 15 charts of the S&P 500, NASDAQ, gold, and mutual funds — along with his analysis.With this information, his Elliott Wave Theorist subscribers are now prepared for 2014. And you can be, too, because you can get the full 10-page issue, FREE. Download your free 10-page report now >>

GOLD: Risk is now building up on the 1,279.08 level, its Jan 27 2014 high. This is coming on the back of its past week gains. A decisive break and hold above the mentioned resistance will pave the way for a run at the 1,300.00 level, its big psycho level. A clearance of here if seen will turn focus to the 1,350.00 level. Further out, resistance stands at the 1,400.00 level, its psycho level. Conversely, the risk to this analysis will be a continued hold below the 1,279.08 level and an eventual return to the downside towards the 1,231.48 level. Further down, support resides at the 1,218.35 level, representing its Jan 08’2014 low. This level must hold to prevent the commodity from returning to the 1,182.33 level, its Dec 31’2013 low. However, if that level is violated it will turn attention to the 1,150.00 level followed by the 1,100.00 level. All in all, GOLD remains biased to the upside short term.

Article by www.fxtechstrategy.com

Weekend Update – www.thepracticalinvestor.com

February 7, 2014

— VIX probed impulsively to Cycle Top resistance before closing just beneath mid-Cycle support/resistance at 15.83.  This constitutes a 65% retracement, implying the pullback may be complete, or nearly so.  It has also broken through the Triangle trendline near 20.30 and paves the way for a higher move next week.  Once it clears Cycle Top resistance and its Diagonal trendline, its most probable target may be its October 4, 2011 high at 46.88.

SPX pierced its megaphone pattern.

SPX pierced the lower trendline of its Orthodox Broadening Top (Megaphone formation) at 1748.00 and reversed to its Intermediate resistance at 1798.10.  This completed phase 7 of that pattern.  The Phase 8 may be a potential crash, since this is a major reversal pattern.  The red trendline of its trading channel is also a reversal pattern, implying a decline to its origin at 1343.35.

(ZeroHedge)  Despite the short-term memory-losing recency-biased perspective that a 2-day rally in stocks has seemingly set in investors’ minds, Citi’s FX Technicals group remains concerned that the S&P 500 is stretched by historical standards. At this point, they add, the S&P is more stretched than in 2007 and a bit less stretched than 2000 with the line in the sand around 1,700.

NDX retraces nearly two-thirds of its decline.

NDX retraced 66% of its decline, closing above all resistance.  This was expected and is a normal retracement for a Wave 2.  This type of rally is a bull trap, keeping investors reassured that all is well.  However, once supports are broken, even if the index rallies above them, they are prone to retesting and may lose their ability to hold the index in the next decline.

(ZeroHedge)  Following the 2nd dismal jobs print in a row, it would appear the market’s new “common knowledge” is that the Fed will be forced to un-taper – despite Hilsenrath’s “Fed stays the course” perspective.  Everything is up today (apart from the USD).  The disconnect from recent correlations were extreme as stocks lost the plot against FX carry, commodities, and bonds. The best 2 days in a row for stocks in 4 months sent most indices to critical technical levels and dragged all but Trannies and the Russell back into the green on the week.

The Euro has an “inside” week.

After making several successive lower highs and lows, the Euro closed above weekly Short-term support at 136.47.  An inside week indicates indecision on the part of investors.  The inability to make a new high indicated this may be a bearish pattern.

(Bloomberg)  European Central Bank President Mario Draghi said the ECB could take action to counter low inflation as soon as next month, when more data on the euro area’s economy will be available.

“We are willing and we are ready to act,” Draghi said in Frankfurt today after the ECB left its benchmark interest rate on hold at a record-low 0.25 percent. “The reason for today’s decision not to act has really to do with the complexity of the situation that I described and the need to get more information.”

The Yen reversed at Intermediate-term resistance.

The Yen attempted to rally above its weekly Intermediate-term resistance at 98.21, but failed to close above its.  This reversal was anticipated by the Cycles Model. The next break of the Head & Shoulders neckline may bring the Yen beneath its 2008 lows.  That may not be so bad for some Japanese companies, noted below.

(BBCNews)  Toyota is forecasting record annual operating profits as the weaker yen helps to boost sales abroad.

For the financial year ending in March, it expects operating profit to reach 2.4tn Japanese yen ($23.7bn; £14.5bn).

The continuing weakness in the yen also helped Toyota post better-than-expected earnings for the third quarter, with operating profit of 600bn yen.

That is nearly five times higher than earnings in the same quarter a year earlier.

U.S. Dollar also had an inside week.

The dollar eased down, closing above Intermediate-term support at 80.61.  This is the sixth week that the dollar has hovered above that support.  This week was an inside week, neither breaking higher than last week’s highs nor going lower than last week’s lows.  It must break through Long-term resistance at 81.56 in order to appear convincingly bullish.  Once accomplished, it has the potential to challenge the Cycle Top at 83.83.

(Reuters) – The dollar drifted lower after a weaker-than-expected U.S. jobs report on Friday that muddies the waters but is seen as unlikely to dissuade the Federal Reserve from diverting from its path of steadily removing monetary stimulus from the U.S. economy.

U.S. nonfarm payrolls growth in January came in at a disappointing 113,000 against a consensus of 185,000, initially sending the greenback sharply lower. However, a bright spot in the report showed the proportion of working age Americans who have a job or are looking for one increased

Treasuries are repelled at Long-term resistance.

Treasuries reversed on Tuesday before reaching weekly Long-term resistance and a potential Trading Channel trendline at 134.32.  It is probable that resistance may be tested again this coming week.  Unfortunately, the Cycles Model suggests a renewed decline into the month of March.

(Bloomberg)  U.S. Treasury Secretary Jacob J. Lew said U.S. borrowing authority may not last past Feb. 27 and urged Congress to extend the debt ceiling as soon as possible.

Extraordinary measures used by the Treasury to keep under the debt ceiling “are likely to be exhausted in less than three weeks,” Lew said today in a letter to House Speaker John Boehner, a Republican from Ohio.

“Congress is scheduled to be out of session for part of that time, and it would be a mistake to wait until the last possible minute to act,” he said.

Gold also had an indecisive week.

Gold bounced from Short-term support at 1240.37 before challenging its Trading Channel trendline and weekly Intermediate-term support at 1262.35.  This was also an “inside” week for gold.  The Cycles Model calls for a month-long decline that may break through the lower trendline, or Lip of a Cup with Handle formation.  The potential consequences appear to be severe.  See the article below to determine who may have a problem when this comes to pass.

(ZeroHedge)  Perhaps the only question we have after seeing the attached table, which shows that as of Q3, 2013 JPMorgan owned $65.4 billion, or just over 60% of the total notional ($108.2 billion) of all gold derivatives in the US, is whether the CFTC will pull the “our budget was too small” excuse to justify why it allowed Jamie Dimon to ignore any and all position limits and corner the gold market?

Crude is approaching its 50% retracement.

Crude rose above Long-Term resistance at 99.21, but the rally may not last.  The Cycle Model suggests a strong reversal as early as Monday.  There is a Head & Shoulders formation at the base of this rally, which, if pierced, may lead to a much deeper decline.

(ZeroHedge)  Whether driven by real supply-demand issues, concerns over terrorism (sparked by the Sochi plane debacle), or hopes a renewed un-tapered QE on the basis of 2 piss-poor jobs reports in a row is unclear. What is clear is that WTI crude is having its best day in over 2 months – now at its highest in 2014, back above $100 a barrel and its most expensive in history for this time of year.

China stock ready for a meltdown?

The bounce from the January 20 low may not be complete.  However, the bounce may extend no higher than Intermediate-term resistance at2116.92 by mid-week.  Once accomplished, the secular decline resumes with the next significant low in mid-March.  There is no support beneath its Cycle Bottom at 1954.15.

(Bloomberg)  On any list of banking accidents waiting to happen, China is assured a place at the very top. But could a crash there take the entire global economy down with it?
Absolutely, says Charlene Chu, who until recently was Fitch’s headline-generating analyst in Beijing. Chu has fearlessly trod into an area that China is trying desperately to keep off limits: its vast shadow-banking system. Now that she’s working for a private firm that doesn’t have to rely to governments for revenue, as do rating companies, Chu is free to speak completely openly. And is she ever.
“The banking sector has extended $14 trillion to $15 trillion in the span of five years,” Chu, who is now with Autonomous Research, told the Telegraph. “There’s no way that we are not going to have massive problems in China.” What’s more, she added, China “could trigger global meltdown.”

The India Nifty “saved” by Long-term support.

The CNX Nifty bounced from its Long-term support at 5976.89.  The potential loss of Long-term support at 5976.89 could be deadly for India stocks.  The Cycles Model calls for a decline through mid-May. Could there be some economic disappointments ahead?

(Bloomberg)  India forecast a faster acceleration in economic growth than analysts had estimated, a prediction facing risks from interest-rate increases to quell inflation and expenditure curbs by the government.

Gross domestic product will rise 4.9 percent in the 12 months through March 31, compared with the decade-low 4.5 percent in the previous fiscal year, the Statistics Ministry said in New Delhi yesterday. The median of 24 estimates in a Bloomberg News survey had been 4.7 percent. The projection may be revised upward later and the final growth rate is unlikely to be less than 5 percent, Finance Minister Palaniappan Chidambaram said in a statement e-mailed today.

The Banking Index breaks, then retraces to its trendline.

BKX unmistakably broke through its lower Trading Channel trendline and Intermediate-term support at 67.77.  The uptrend line is broken and, more importantly, stands as a resistance to any further rally.  The Cycles Model suggests a new low may be seen in less than three weeks.  Might there be a flash crash?

(ZeroHedge)  Raise your hand if you are surprised that, as has emerged, virtually every major bank was manipulating currencies (and everything else)whether as part of the “Bandits’ Club”, the “Cartel” or some other – until recently- secret message room.

That’s what we thought.

Now raise your hand if you thought the manipulation could be so pervasive, so glaring and so in your face, that even the oldest central bank – the Bank of England – and who knows how many other monetary authorities, were openly encouraging traders from these private banks to do more of the illegal activity they had been engaging in – namely manipulating currencies – with their explicit blessing knowing very well such behavior is undisputedly illegal.

(ZeroHedge)  Shadow banks in China come in a variety of forms and guises.  The term is applied to everything from trust companies and wealth management products to pawnshops and underground lenders. What surprising is that China’s biggest shadow bank is actually a creation of the central government and receives billions in financing directly from the banks.  Even more interesting, this shadow bank recently pulled off a successful international IPO where it raised billions of dollars.

First, let’s deal with the terminology. The “shadow” in shadow banking doesn’t imply nefarious doings, although it frequently involves a bit of regulatory arbitrage. At the most basic level, shadow banking is borrowing funds and extending credit outside of normal banking structures.

(ZeroHedge)  Plain vanilla bank runs are as old as fractional reserve banking itself, and usually happen just before or during an economic and financial collapse, when all trust (i.e. credit) in counterparties disappears and it is every man, woman and child, and what meager savings they may have, for themselves. However, when it comes to shadow bank runs, which take place when institutions are so mismatched in interest, credit and/or maturity exposure that something just snaps as it did in the hours after the Lehman collapse, that due to the sheer size of their funding exposure that they promptly grind the system to a halt even before conventional banks can open their doors to the general public, the conventional wisdom is that this is a novel development (and one which is largely misunderstood). It isn’t.

(TheTelegraph)  Davide Serra, the founder of the hedge fund Algebris Investments and the man on the speed dial list of central bank governors and finance ministers, rues the day he was photographed striding into Downing Street with a sheaf of papers under his arm.

The documents detailed Serra’s views on the Royal Bank of Scotland and “the case for improving viability”– just ahead of a Government-backed decision to split off £38bn of badly performing RBS loans into a non-core division.

Have a great week!

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.

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EURUSD: EUR took back most of its previous week gains to close higher the past week. This development now leaves the pair aiming at the 1.3739 level where a breach will target further upside towards the 1.3800 level, its psycho level.This view is consistent with its long term uptrend which is on hold due to corrective price action. Conversely to annul its past week gains it will have to return to the 1.3476 level. Further down, support comes in at the 1.3400 level, representing its psycho level where a breach will aim at its weekly 200 ema at the 1.3346 level. Additionally, support stands at the 1.3300 level where a break will target the 1.3250 level and possibly lower towards the 1.3200 level. All in all, EUR remains biased to the downside below its broken trendline.

Article by www.fxtechstrategy.com

The FX market is by far and away the largest market in the world. At over $5 trillion traded on a daily basis this by far supersedes the daily volume of the NYSE and all other global major markets combined. Most people that are trading the FX market are most familiar with what are referred to as the major currency pairs.

Pairs like the EURUSD and the USDJPY offer traders excellent liquidity throughout the various trading sessions.  Many of the automated trading systems that are out there are designed with the major currency pairs in mind.

Until recently, traders would not even think to consider trading some of the forex exotic pairs as well. Forex brokers have begun to offer these pairs and they are offered with deep liquidity and can expand a trader’s opportunity instead of just being limited to 4 or 5 pairs that most of the other traders are looking at as well.

One would think that it would make perfect sense to incorporate some of the fastest-growing economies and their currencies into one’s trading strategy. Countries like China and India have seen growth in recent years. The respective currencies the Yuan and the Rupee have seen dramatic increases in terms of volume traded. This is primarily due to market forces and also due to the fact that the respective governments have relaxed any trading restrictions.

As global markets look to these countries for guidance these currencies provide themselves with many opportunities to Forex traders.

To learn more please visit www.clmforex.com

Disclaimer: Trading of foreign exchange contracts, contracts for difference, derivatives and other investment products which are leveraged, can carry a high level of risk. These products may not be suitable for all investors. It is possible to lose more than your initial investment. All funds committed should be risk capital. Past performance is not necessarily indicative of future results. A Product Disclosure Statement (PDS) is available from the company website. Please read and consider the PDS before making any decision to trade Core Liquidity Markets’ products. The risks must be understood prior to trading. Core Liquidity Markets refers to Core Liquidity Markets Pty Ltd. Core Liquidity Markets is an Australian company which is registered with ASIC, ACN 164 994 049. Core Liquidity Markets is an authorized representative of Direct FX Trading Pty Ltd (AFSL) Number 305539, which is the authorizing Licensee and Principal.

USDCHF: Closes The Week Lower, Eyes Further Weakness.

USDCHF: With USDCHF closing the week lower and reversing most of its past week gains, the risk as we enter the new week is for more decline to occur. As long as USDCHF trades and holds below the 0.9156/0.9079 levels this view remains valid. Support lies at the 0.8902 level, its Jan 24 2014 low where a violation will push the pair further lower towards the 0.8850 level. A cut through here will pave the way for a run at the 0.8800 level, its psycho level. Its weekly RSI is bearish and pointing lower supporting this view. Conversely, to resume its short term uptrend now on hold, it will have to overcome its resistance residing at the 0.9050/81 levels followed by the 0.9100 level and then the 0.9156 level, its Jan 21 2014 high. Further out, resistance resides at the 0.9200 level, its psycho. All in all, the pair remains biased to the downside medium term.

Article by http://www.fxtechstrategy.com/the-week-ahead-usedchf-new-22

By MoneyMorning.com.au

When you think of oil and gas investments, the Caribbean nation of Trinidad and Tobago isn’t the first place that springs to mind.

However, BHP Billiton think they might be onto their next big oil find. Or gas.

They’re not sure which.

Considering companies spend millions of dollars on data before acquiring a lease or plot, you’d think they would be more certain.

Anyway, it doesn’t matter to them whether it’s oil or gas. It’s gonna be big. BHP has thrown down a massive $500 million to begin a 3D seismic exploration within the next three months. And they have committed another $500 million for drilling wells and possible production.

Given that sort of financial commitment, you can assume they’re confident they’ll find something.

The thing is, while Trinidad does produce oil and gas, it’s mostly onshore or in shallow waters. Like the Angostura shallow water oil rig, which BHP has a 45% interest in.

But the thing is, in 2012 BHP acquired four blocks in a deep water area.

The data is limited, and the basins around the islands are vastly underexplored.

When a company is drilling in an area not known for producing oil, it’s often considered a wildcat play, as Diggers & Drillers resource analyst Jason Stevenson told subscribers last month when he detailed his latest find.

You see, Trinidad and Tobago are neighbours to Venezuela and Colombia, which both produce oil and gas. And estimates suggest that basins surrounding Trinidad and Tobago share the same geology.

So, no. It’s not quite a wildcat play. But it’s still a highly speculative punt on BHP’s side.

Let me explain.

As I said before, they are basically going on the best guess from geology reports.

And they’ve been snapping up blocks in the waters surrounding the nation for the past few years. With little confirmed data on what’s actually under the seabed.

To prove how sparse the interest is in the deep water exploration of Trinidad, David Rainey of BHP said: ‘…during the last decade a number of bid rounds (for offshore acreage) were held but nobody came, nobody participated.’

Clearly the big oil companies weren’t willing to take the risk.

What didn’t help were inflexible government policies. Upon announcing the project, Rainey said, ‘Until recently, the fiscal terms on offer in Trinidad did not allow us to make a satisfactory return on the risk of undertaking a deep water exploration program.’

Those fiscal terms were enormous government taxes.

The government was more interested in lining its pockets than encouraging foreign investment. Exploration costs were only 10% tax deductable and the company tax rate was a massive 50%. However last year policies were relaxed and in some cases 100% of the exploration costs are deductable. More enticing to corporations is the lower tax rate of 35%.

And finally, should a site move into the production phase, the government will share the costs with the firm.

These financial changes are the reason BHP is moving ahead with exploring the area.

A US Geology Survey reckons there’s an average of 21 oil fields and 104 gas fields of varying size undiscovered.

As the area has never had any oil and gas exploration, BHP is going on a ‘best guess estimate’.

In fact the whole seismic program will cover 17,000 square kilometres in total. One of the blocks, ‘Pegleg’ is 24km long by 8km wide. This isn’t a small operation.

But will it pay off?

Big companies like BHP don’t buy up blocks where there isn’t potential for a huge reward. They normally come in and swoop once a little mob has done the hard work. Here, they are taking an enormous risk to start from scratch.

Vincent Pereira, BHP’s country manager, said they believe, based on available reports, that the ‘deposition environment’ is similar to the Niger Delta and the Gulf of Mexico where BHP has interests.

Meaning it could be huge.

But like all exploration, it’s a gamble.

Shae Smith
Editor, Money Weekend

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By MoneyMorning.com.au

By MoneyMorning.com.au

Yuge is a 39-year-old Japanese man. Like most Japanese men his age, he wears the latest fashion. He has lots of fancy toys and gadgets. He lives in a trendy apartment in Tokyo and earns pretty good money.

Life is pretty good for Yuge and his girlfriend Ne-Ne.

However Yuge is a little different from other ‘typical’ male 30-somethings around the world….

Yuge is a Japanese ‘Otaku’. Meaning a Japanese ‘geek’. He’s obsessed with computers, manga and his virtual life.

The weird thing about Yuge though is his girlfriend. Because Ne-Ne’s not real. She’s Yuge’s virtual girlfriend on his handheld gaming device. And in this virtual world Yuge is pretending to be 17 and is in love.

To be more precise Ne-Ne’s a character from Love+. Love+ is a popular dating simulation game for the Nintendo DS. In Japan it’s one of the best selling games Nintendo [TYO:7974] has.

I haven’t made up the story of Yuge either. Yuge and his friend (who does the same thing) were a part of a recent BBC Documentary, No Sex Please, We’re Japanese.

The whole concept of falling in love with a program has also been portrayed in a new Spike Jonze movie, Her. In a similar premise, in the near future, the lead character Theodore Twombly falls in love with his operating system, Samantha. It’s an interesting concept derived from the whole user experience we currently have on the iOS with Apple’s, ‘Siri’.

But back to the real life example of Yuge. You see this kind of virtual life isn’t out of place in Japan. The virtual lives of many ‘Otaku’ is an increasing social norm in this highly traditional country.

And entrenched in this unconventional phenomenon is, possibly, the key to the future fortunes of Nintendo.

At the heart of Love+ and the movie Her is the concept of an immersive technology future. And as the world shifts to this immersive existence, interactive gaming is set to be a large part of it all.

Nintendo’s Changing Fortunes

Now there’s no doubt this may seem, well, just too weird. I agree. It’s strange. However that doesn’t mean you should ignore it. Just because you might not understand it, doesn’t mean you can’t profit from it.

The evolution of video games is helping us to connect to a more immersive world of technology. It’s something we’ve covered for some time. Sony’s PS4 and Microsoft’s Xbox One are two of the big gaming systems we’ve covered before.

However in a future interactive world Sony and Microsoft aren’t the only ones in a position to benefit. You see right now possibly the most hated and punished gaming stock in the world is Nintendo, and to me that smells like opportunity.

To see why there’s opportunity in Nintendo we should take a moment to wind back the clock and understand the evolution of the company.

Nintendo are pioneers when it comes to interactive experiences. Here’s a list of a few of Nintendo’s pioneering interactive technologies.

• The laser-gun game that predated all their electronic gaming systems.
• The ‘Game & Watch’ pioneered handheld gaming.
• The original Nintendo Entertainment System with Laser-Gun, Power Glove and R.O.B interactive robot.
• Gameboy, the third highest selling game console of all time.
• The Nintendo Wii, which pioneered motion-sensing gaming.
• And the Nintendo 3DS, the first 3D gaming system to not require 3D glasses.

The markets hate Nintendo right now. But sometimes that’s the best time to invest, when everyone else hates them.

And it’s looking like Nintendo is starting to change direction and become more than just a gaming company.

It started with a very popular game for the Wii. The game is Wii Fit. Wii Fit hit the Aussie market in May 2008. The game includes a small balancing board, slightly larger than a set of bathroom scales.

Wii Fit had over 40 activities in the game, from Yoga positions to strength training like push-ups. It was widely acclaimed as a breakthrough game for Nintendo.

According to gaming website VGChartz, Wii Fit sold 22.69 million copies worldwide. Its successor, Wii Fit Plus, sold 21.43 million copies. This hasn’t gone unnoticed in the leadership ranks.

In a recent Nintendo strategy briefing President Satoru Iwata explained that one of the key themes for Nintendo over the next 10 years will be quality of life through entertainment. In other words, Nintendo is refocusing their business to get people to interact with gaming to become healthier.

And the interesting thing is part of this shift into health is the use of what Nintendo call non-wearables. To me it sounds like sensors and accessories like the Wii Fit board to help monitor and maintain a healthy lifestyle. And it’s very likely that soon we might see another invention from the R&D of this master innovator.

Where Nintendo has an advantage is their recent penetration into new demographics. The Wii had global sales of over 100 million units at the end of 2013. And as Mr. Iwata explained, the Wii helped Nintendo reach people who may not have played games in the past.

With ever increasing ageing populations around the world, perhaps Nintendo is actually onto something. Perhaps they’ve realised the importance of this trend well before the likes of Sony and Microsoft.

Immersive tech is quickly becoming a way of life. And Nintendo will have a huge role in making it reality. What Nintendo and others are doing is effectively ‘gamifying’ life. That means they’re using principles from games and applying them to real life. It makes things more engaging, fun and immersive.

Remember, Nintendo is a 125-year-old company. They started off making playing cards and today are a global tech giant. So they know a thing or two about changing strategy.

Combining the coming future of immersive tech with the benefits of health and wellbeing could be a golden move for the company. They’ve been around the block a few times when it comes to pioneering technology, so I wouldn’t write off Nintendo for long.

Regards,
Sam Volkering
Editor, Tech Insider

Ed note: In response to the strong interest in Sam’s insights into the ever-changing world of technology, we’ll soon be launching a new daily free e-letter called Sam Volkering’s Tech Insider. Look out for more info next week.

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By CentralBankNews.info
    Botswana’s central bank held its bank rate steady at 7.5 percent, saying the medium-term outlook for inflation is positive with forecasts for it to remain within the bank’s 3-6 percent target range.
    The Bank of Botswana, which cut rates by 200 basis points in 2013 as inflation eased, said moderate domestic demand and benign external prices contributed to the positive inflation outlook.
    However, the bank cautioned that the outlook for inflation could be affected by unanticipated large rises in administered prices and levies, higher-than-expected increases in international food and oil pries, along with an increase in demand and inflation expectations from substantial wage rises.
    Botswana’s inflation rate was steady at 4.1 percent in December and November, a low for 2013.
    Botswana’s Gross Domestic Product expanded by 0.4 percent in the third quarter from the second quarter for annual growth of 7.1 percent.
    In the 12 months to September 2013, the central bank said GDP growth was estimated at 5.9 percent due to an 11 percent rebound in mining and a 5.1 percent expansion in non-mining output.
    The bank said non-mining output is expected to remain below potential in the medium term, generating low inflationary pressures while trends in government expenditure and personal income is expected to contribute to moderate demand on economic activity.

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