CAD Lower as Canadian Economic Data Flat this Week

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The Canadian dollar (CAD) has been stagnating this week with much of the economic news out of Canada appearing flat. Today’s New House Price Index (NHPI) released by Statistics Canada, as an example, revealed 0% growth in the price of new homes purchased this past month by Canadians.

The data did not represent market contraction, per se, but rather a slowing down, or stagnation. The CAD was hard-pressed to make gains following this week’s reports, with the USD/CAD moving from its recent low of 0.9440 to its current price near 0.9650. Safe haven currencies like the Japanese yen (JPY) also made gains this past week, with the CAD/JPY moving to 83.80 from a recent high of 89.50.

Monday’s housing starts figure was below expectations, but not enough to warrant a rapid sell-off for Canada’s currency. Yesterday’s trade balance figures out of Canada also revealed not shrinkage, but stability. The C$0.6B growth in the northern giant’s surplus was not enough to awe investors and generate a buy-in for the Loonie.

Overall, Canada is not in a bad spot economically. It has undergone a wave of growth unmatched in most other countries and its job sector is in good shape. This past week’s short period of stagnation represents either a slow-down in line with a global faltering among industry and manufacturing, or a sluggish period as many provinces adjust from winter to summer schedules. Either way, traders reading this forex blog should note the CAD’s recent weakness brought on by this sluggish data. Such weakness does not appear systemic, though, and such bearishness will likely not last.

Australia Loses 22,100 Jobs in April

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The Australian unemployment rate held steady at 4.9% this past month, though April’s employment change report revealed a contraction of 22.1K jobs. The Australian dollar (AUD) took a loss this morning as expectations for an interest rate hike later this month faded with today’s job report.

Many analysts do not expect this month’s reading to have a major impact overall, given the Australian economy’s ability to add over 300K jobs over the past year. The Wall Street Journal noted Australia’s announced plan to ambitiously add another 500K jobs in the 2011-2012 fiscal year.

The fact that unemployment held steady amid this job loss gives impetus to these plans and a possibility for interest rate hikes if other fundamentals come in line with current expectations. The Reserve Bank of Australia (RBA) signaled its willingness last week to raise rates in its impending meetings, but speculation took hold this morning with the severely depressed jobs report.

Tuesday’s trade balance figures out of the Australian economy, as noted in a previous article, also revealed solid growth in the nation’s surplus, with the mining industry’s export boost lending a helping hand. With jobs being the only factor holding an interest rate hike in check, the AUD may gain support if other data can induce such a move by the RBA.

Mid-Week Trading: Markets at a Tipping Point with US Dollar

By Chris Vermeulen, thegoldandoilguy.com

This week we are seeing fear across the board from traders and investors as they dump their long positions is stocks and commodities. Just in the past two trading sessions alone we have seen extreme overbought conditions and extreme oversold conditions which generally mean another big move is brewing…

Fear (panic selling) has very distinct characteristics when looking at the intraday charts and we are seeing those price and volume patterns forming now. When waves of buying and panic selling start to take place back to back, I start to prepare for a trading setup which should form within a couple of trading sessions.

Keep in mind that fear is a much more powerful force in the market and once extreme levels are reached, we typically tend to see continued selling for 1-3 more days afterwards. This is the reason I tend to scale into oversold market conditions as I can potentially enter at lower prices within the next couple of sessions to build a position with a reduced cost basis.

SPY 10 Minute Chart of My Market Sentiment Readings
Panic selling, coupled with oversold NYSE market conditions and fearful options traders makes for an extreme reading in stock prices.

GLD 10 Minute Chart of My Market Sentiment Readings
Sentiment readings many times carry over into the precious metals sector and can be used as a gauge also for tightening stops, adding to long positions etc..

Mid-Week Market Trading Update:
In short, I feel the market is at a major tipping point along with the US Dollar. It is just a matter of time before we get another low risk setup and take a position for the next move in either direction.

Get My Weekly Reports Free Here: http://www.thegoldandoilguy.com/trade-money-emotions.php

Chris Vermeulen

The Silver Lining in the Real Estate Thunderclouds

I’ve written several times about the housing market and its potential for another drop. Last year I saw very credible estimates that our residential market could see an additional 30% plunge.

And yet, in today’s Taipan Daily, I’m going to tell you to consider buying real estate.

In fact, I’d like to dedicate this to a reader (and new Millionaire’s Circle member) by the name of Vincent M. He joined about the same time Japan had its rumbles. In other words, the world (including the Earth) was correcting and he was stepping right into the mix.

So, Vincent M., while equities have been less than kind to you and everyone else over the past 60 days, let me point you in the direction of real estate.

Even as I write that last line, I think, “Buying property? That sounds nuts.”

From experience, though, I know that all disasters have a silver lining — often far greater than the problems at hand. One need only search for it.

Real estate definitely qualifies as a disaster. Here’s the silver lining.

What I’m recommending is for you to investigate tax-lien certificates. Sometimes they are called tax deeds or even sheriff sales. These little gems allow you to profit from the delinquencies of others.

The majority of counties sell these at an auction, and some even sell them online.

Almost all people I’ve met think they understand how their local county handles collections. The reason few people actually do know what goes on is that most folks pay their taxes on time.

We assume that if a property owner doesn’t pay the taxes on their home, then after a year, sometimes two, the county sells it to repay the amount owed.

That explanation is nearly correct. There is one piece missing from this puzzle though. It is this lost bit of knowledge where we’ll find our profits.

What really takes place in most locations is the county sells a lien against the delinquent property owner’s home for the amount of taxes, plus any premium (not the actual property).

If you’ve purchased one of these liens, you’ll have the right to take the property after a certain amount of time. In the case of the three certificates my wife bought last August (first time she ever stepped foot in this sort of thing), the time to redeem for the property owner is fast approaching the one-year mark.

If they choose to pay what they owe, I’ll get the taxes I paid for them and the penalties the county charges, plus any fees I may have incurred. In Missouri this amounts to 10% on the past taxes, and 8% on any taxes I paid this year for the owners.

I know of no real estate investment that offers so much upside with so little downside.

Every county can handle things differently. You’ll have to do some legwork. However, with a little digging, you should be able to find the state statutes that cover these regulations, and most now have websites outline everything.

My experience has been that about 90% of the property owners finally repay their taxes and you’ll get your money back, with the penalty (that is profit to you) of somewhere between 6% and 18%.

Not bad for a one-year loan.

If you’re lucky enough to have someone not retire their obligation, however, you’ll end up with the property. This can be a good thing depending on how much you paid.

In a falling real estate market, trying to pick the bottom is like trying to catch a falling knife. The key to this opportunity is to never pay too much for a tax lien. The first reason is that you may not get any return on the level of premium you bid to win at the auction.

The second, and more important, reason is that we’re not intentionally trying to become real estate investors. We’re seeking to lend money to counties to cover delinquent taxes that are well collateralized with real estate.

If you’ve not paid too much, and the taxpayer chooses to walk, then you’ll become the proud owner of some piece of property for what amounts to pennies on the dollar.

For me, this upcoming August, I hope to find myself the owner of a 40-acre farm and two residential lots in a quaint little antebellum town my wife and I love to visit.

For the lots, we paid exactly what was owed on them: Less than $500 each. If the 90% repayment stat holds true, we’ll have picked up 10% in a year.

On the farm, we bid a premium of about $7,000 over the taxes owed. Why the premium? I wanted the agricultural land. I was also seeking a mega-profit.

Prior to bidding, I drove around the area. Most farm properties nearby have an asking price that is $4,000 per acre. Which works out to be a piece of property worth $160,000. Even if I place it at fire-sale levels, say $2,000 an acre, I’ll still have a remarkable profit.

With any potential reward of this magnitude, there is usually an equal or greater amount of risk. My downside on this, as far as I can see it, is less than $700 in potential earnings on my seven grand, because it’s not sitting in my bank account drawing nearly no interest.

A risk of about $700 to make potentially more than $100,000 sounds like a deal only available to Hillary Clinton trading the futures markets. But in fact, it is available to most anyone with a few bucks in the bank.

I’m a big believer in the saying, “if something is too good to be true, it probably is.” And this definitely fits that category. But sometimes the deal really is that good. So, before you think, “this is not for me,” visit the website for a few counties in the state of Arizona. I’ve linked one county here.

P.S. As usual, any comments or questions can be directed to me at [email protected].

Article brought to you by Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed. Republish without charge. Required: Author attribution, links back to original content or www.taipanpublishinggroup.com.

About the Author

Joseph McBrennan is the Editor of free financial market e-letter Taipan Daily. He comes from at least five generations of investors and traders on both sides of his family, dating back more than 150 years. He brings to Taipan Publishing Group over two decades of experience in the investment banking business.

Conflict in the Financial Stock Market… Protect Yourself Now!

I have a 94-pound Anatolian Shepherd named Simone. She’s a great dog… She has a sensitive soul and loves belly rubs. But she’s also pretty tough. When she and Rowan, our 40-pound hound mix, get going, it’s hard to believe that she’s enjoying herself.

In other words, she is super insensitive to rough play. Most times she just rolls around while Rowan bites her neck and shoulders and hind legs.

Simone just keeps going…

That’s how the financial stock market has been for the past two years — as insensitive as our Anatolian Shepherd. Sky-high unemployment? No problem! Soaring government debt? So what! Housing still in the dumps? Who cares? We’re having fun!

Right?

You couldn’t really fight this bull market, even though it felt funny to watch stocks climb while our economy still struggled.

But we’re starting to see some conflict.

A Heavyweight With Teeth

Simone loves playing, but when she’s done, she’s done. She’ll chase Rowan away, and 94 pounds of shepherd is more than enough to make Rowan hightail it out of reach.

The past few days of trading have had some sharp swings in everything from the Dow Jones Industrial Average to commodities like gold and silver. The market is conflicted… It went from being an insensitive, playful pup to a big heavyweight with teeth.

The good thing about Simone is that her corrections are short, and then she gets right back to playing.

I don’t think the stock markets are going to be as forgiving.

We’ve been saying this for a while now, but investors need to protect themselves. And the key to preserving wealth is to have those protections in place before the market turns against you.

The Bullish Run Is Over

Here’s another reason why having some safeguards is important right now.

DOW Chart
View larger chart

This is a five-year chart of the Dow. You’ll see a similar chart in the S&P 500. Marked in red is a pattern called a head-and-shoulders bottom. It’s made up of three price dips. The first on the left is the first shoulder, the middle bigger dip is the head, and the third dip on the right is the second shoulder.

The peaks between the shoulders make the neckline. This is also considered the breakout point.

These patterns are bullish, and as you can see, the Dow has climbed 44% since breaking through the neckline.

Normally, according to Charles Bulkowski’s Encyclopedia of Chart Patterns, a head-and-shoulders bottom pattern climbs an average of 34% from the neckline. Right now, markets are well above that average.

This is kind of like the point where our Anatolian Shepherd Simone says, “Enough!”

Yesterday, the Dow fell more than 130 points. Oil has traded between $109 and $95 a barrel in the past five days. And gold, which had fallen below $1,480, climbed as high as $1,524 on Wednesday.

This is some serious conflict…

We’ve talked to you about having gold in your portfolio so often that this move should be hardwired into your investment brain.

So let’s look at some other ways of protecting your portfolio.

Quick Portfolio Protection

Get Rid of Risk. When stock markets are climbing, adding riskier investments to your portfolio can give your returns a boost. Ultra-conservative investors think that any risk is too much risk… and they point to market downturns as proof.

Riskier investments are often the first to fall, and they tend to fall harder than safer investments.

Smaller companies called small caps might be first on your list to go. A Forbes article recently said that money managers might be getting out of small caps, and a MarketWatch.com article suggests that prudent investors should have a good chunk of cash in addition to big blue-chip companies.

Get Out of the U.S. MarketWatch.com also said that investors should be holding emerging market companies.

This, of course, doesn’t mean you should dump all your U.S. stocks… But investors should be looking at certain international markets to add to their portfolio. You should think about adding some companies from emerging markets.

Another option would be to look for U.S. companies that do a lot of business in growing countries, either directly, or through joint ventures.

Stick to Your Stops. One of the simplest, most overlooked protections is the stop-loss. This is especially true when a long-term bull market starts to turn against you. It’s natural to want to eke out every last cent of profit, but it’s not practical, and it’s not disciplined.

Another thing — and this is something that I have had trouble with in the past — don’t buy more of a stock that’s losing. It’s called averaging down, meaning you can lower your overall buy price by buying more shares of stock when the price drops.

I was reading a letter from a friend that really opened my eyes on this. If a company’s share price is falling, why on Earth would you want to buy it?

The truth is, we’re emotionally attached to our investments, and we can convince ourselves that we’re not wrong… And that we’re just not right yet. As a result, if we think a company is worth investing in at $25 a share, then it’s an even better deal at $19.

This method can really eat away at your portfolio — and your sanity. If you’ve got money and happiness to spare, then average down all you like. Most investors will be better off cutting their losses and moving on to the next opportunity.

That’s why stop-losses are so important. They can help you take your emotions out of the decision. Pick your stop-loss wisely, based on clear reasoning, and stick to it.

Everyone talks about protecting your portfolio in clear times of market downturns. But the time to start putting safeguards in place is well before the market swings against you. We’re already starting to see conflict in the markets. Simone is just starting to show her teeth, and at 94 pounds, it’s a signal to be respected.

Editor’s Note: I stole these winners from billionaire hedge fund managers. Here’s why Uncle Sam helped me do it. Steal from the funds like they stole from American investors. Get all the details from Safe Haven Investor.

Article brought to you by Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed. Republish without charge. Required: Author attribution, links back to original content or www.taipanpublishinggroup.com.

Producer Price Index Increases 0.8% In April

The Producer Price Index for finished goods increased a seasonally adjusted 0.8% in the month of April, rising a tick faster than the 0.7% increase in March, the Bureau of Labor Statistics reported today. Three quarters of the advance in the index can be attributed to a 2.5% increase in prices for energy, the seventh consecutive monthly rise. Gasoline prices climbed 3.6% in the month alone. The core index, which excludes food and energy, was up 0.3% in the month, with the largest jump being a 1.2% rise in civilian aircraft prices. Prices received by manufacturers of intermediate goods rose 1.3% in the month, and the crude goods index climbed 4.0%. For the 12 months ended April 2011, prices for finished goods are up 6.8%, the largest 12-month increase since September of 2008.

Dollar Correction Continues to Build Strength with Declines in Silver

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The rally in the dollar continues to build on last week’s gains as silver prices have fallen below last week’s low in line with gold and crude oil prices. The sell-off in commodities and global equities has helped to strengthen the dollar as long commodity trades are unwound.

Silver is limit down today as the selling from yesterday carried over into today’s European trading. The commodity is being sold as a bout of risk aversion has hit financial markets. An initial cause of the selling may be linked to a flare up in the Greek debt crisis as European leaders search for alternative measures. According to a Dow Jones Newswires report a majority of European countries believe a Greek debt restructuring (also known as default) is inevitable.

Another explanation for the sell-off in commodities may be due to the expected ending of the Fed’s QEII program. With the withdrawal of liquidity and cheap funding opportunities, the supply of commodity buyers are dwindling, leaving speculators holding onto silver at prices above the $40 level.

Silver prices plummeted for the second consecutive day, trading on their low of $32.57 from $32.30. The commodity is down 16% over the past two days. Interestingly enough, today’s low coincides with trend line rising off of the late August and January lows. After such sharp declines in silver prices, one must ask at what point will real money reenter the picture and begin bidding the price higher.

Other commodities are also lower with crude oil trading below $100 at $95.23 and gold falling lower to $1477 from $1504.

In addition to the selloff in commodities there are other signs of risk aversion. Global bourses are lower with the FTSE trading down by 1.26% and the Nikkei falling by 1.50%.

The selling of equities and commodities has helped to strengthen the dollar as the correction lower continues. Today the EUR/USD dropped to a low of 1.4123, below the 1.4150 support/38.2% Fibonacci retracement from the January to May move. Sterling is lower at 1.6234 versus the dollar despite yesterday’s monetary policy changes announced by the Bank of England.

The dollar correction continues to build strength with the decline in commodities and the greenback should be supported as long as silver and other commodity trades are unwound.