Month: June 2011

Let NFC Smartphone Technology Give Your Wallet the Boot

by David Fessler, Investment U’s Senior Analyst
Tuesday, June 14, 2011: Issue #1534

How often have you left home and forgotten your wallet? Or had to get a credit card replaced because a stranger lifted your number at a restaurant? As a frequent traveler, I’ve had both happen to me on numerous occasions.

With plastic credit cards fast becoming as obsolete as paper money – Visa, the giant credit card issuer, has created an amazing new technology it calls “payWave” that enables you to leave your wallet, cash and credit cards home. Easily allowing consumers to turn their smartphones into electronic wallets.

PayWave uses something called near field communication (NFC). NFC is a short-range, wireless technology that allows secure communications between two proximate devices. You simply bring your smartphone within a couple of inches of the transaction terminal, and voila, a transaction is complete.

Despite the obvious benefits, the e-wallet industry has had a slow, rocky start.

• One one side, the mobilephone users saw no need to incorporate NFC into their devices.

• On the other side, retailers wouldn’t install mobile payment readers if consumers didn’t own phones that could use the technology.

It’s been a bit of a chicken-and-egg thing…

GSMA Issues Call to Arms to Encourage NFC Devices

Back in 2008, GSMA challenged device manufacturers to begin embedding NFC technology into their devices. Fast-forward to 2011, and the next generation smartphones (still a year or two away) will all have NFC capability.

But Visa didn’t wait. It provided a way to use today’s smartphones to take advantage of NFC-enabled vendors. It involves inserting a special micro-SD (secure digital) card into the slots on some phones. For the iPhone 3 and 4, Apple developed a special plastic skin to hold the chip.

Now, users simply download Visa’s special app, and they can begin NFC transactions. So far, 11 banks, including Wells Fargo, Bank of America, Chase and U.S. Bank, all offer the payWave technology.

MasterCard’s PayPass and Amex’s Express Pay are similar e-wallet systems using NFC technology, and all three are compatible with the terminal readers.

Bill Gajda, global head of Visa Mobile, spoke to CNET at the Mobile World Congress earlier this year in Barcelona, Spain. He believes the transition to cardless transactions is well underway. “NFC technology will take off in 2011,” said Gajda. “The move from leather wallets to mobile wallets will come this year.”

So far, vendors include CVS stores, McDonalds and 10,000 taxicabs in New York City. In San Francisco, you can use your e-wallet to buy your groceries at Whole Foods, and pay for public transit in Los Angeles and New York.

(If you’ve already plugged into this technology, or want to see merchants who are participating in your area, you can visit Visa’s payWave merchant locator.)

The 800-Pound Apple in the Room…

Gajda said customers are already installing the chips and skins in their existing smartphones: “People don’t want to wait two years for new NFC-enabled phones to come out or to switch phones. You can make payments today on the iPhone 3 and 4.”

So far, iPhones, certain Blackberry models and Samsung’s Android-based Galaxy S II are sure bets for NFC-based payments.

According to an EE Times article, that appeared back in January, Apple, Inc. (Nasdaq: AAPL) has been in discussions with both retailers and its contract manufacturers about supporting mobile payments.

Quoted in the article, Richard Doherty, Principal at consulting firm Envisioneering, says NFC could be a game-changer for both Apple and retailers.

“Apple could significantly lower the costs credit card companies charge retailers to verify and complete transactions, a major source of irritation for retailers. Tens of billions of dollars [would] flow through Apple in the next several years.”

While no one knows Apple’s plans for sure, it’s a safe bet that the iPhone 5 will be NFC-enabled.

Taking a little piece of every transaction would represent a huge, new incremental revenue stream for Apple. And one thing’s for sure… As the company has with just about everything else, Apple will set the NFC mobile payment device standard that all other manufacturers will be scrambling to copy.

• With its tightly integrated handsets, operating systems and online payment systems already in place, Apple’s in an envious position to be able to leapfrog the competition in the mobile payment space.

• It owns several key patents that have to do with implementing NFC, and it hired an NFC specialist over a year ago.

• Analysts expect most other manufacturers will soon follow, as NFC becomes a standard feature on new phones.

This isn’t just a U.S. phenomenon, either. Consumers in Japan and Korea are adopting NFC-enabled mobile payment systems, with Brazil, India and other countries hot on their heels. Visa has been developing its payWave system for its European customers, as well as Turkish iPhone users.

So how easy is it to use? You simply open the app, unlock it with a swipe of your finger and place your phone near the terminal to complete the purchase.

The payment is immediately charged to your credit card or debited from your bank account depending on your preference. Banks and retailers can also present the user with discounts, specials and coupons through the payWave system.

That’s Great, But How Safe is NFC Technology?

That was my question when I first heard of NFC technology. Criminals can clone existing plastic cards with ease. Cards can also be easily swiped a second time on a separate reader connected to a computer that lifts all of your card information that can later be sold.

With all the cyber criminals out there, are we just one hack away from having our credit cards stolen electronically?

In actuality, it’s virtually impossible for someone to steal a credit card number with the new systems.

• First, the phone has to be two to four centimeters away from the transaction device to work, making it extremely difficult for someone else to intercept the transaction.

• Second, NFC software generates a new authentication code for each transaction. That differs from current credit card technology where the security code is always the same. Once thieves have the credit card code, they’re off to the races (or in my case, they were off to JCPenney’s).

• Third, most phones have the capability of being password-protected by the user, adding another level of security.

Visa’s payWave system monitors credit card use in real time, and can instantly alert a customer within minutes of a suspicious transaction. Compare that to current credit card technology, which can take days to notify you of a bogus purchase.

In a paper written three years ago, mobile security expert Collin Mulliner performed a detailed study on ways to attack mobile phones equipped with NFC technology.

After talking to Visa, he admitted their system was safe from the types of attacks he envisioned. He plans further tests on a payWave-enabled phone, but for now, his feeling is that it’s a far more secure system than plastic.

Deepak Jain, CEO of Visa technology partner DeviceFidelity, said attacks would be nearly impossible. Multiple electronic barriers are in place to prevent them.

Digital keys, the heart of the authentication process, are encrypted on the chip itself. The Visa app is the only app recognized by the device, and the digital keys aren’t stored locally. They all come from the Visa network.

NFC transactions will eventually become the norm rather than the exception. By the end of this year, Apple could be driving a completely new NFC-enabled bus… all the way to the bank. Its competition will once again be scrambling to catch up, and fighting over 10 to 15 percent of the market that Apple leave for them.

Good investing,

Dave Fessler

Today’s publication by the Great Britain and the United States regarding their level of consumer and producer inflation (CPI and PPI, respectively), and US-based retail sales, had many investors seeking higher yielding assets. The news spurned calls for growth, especially as consumer spending in the US shrank less than forecast.

After digesting the bullish inflation reports, investors now appear to be anticipating tomorrow’s CPI and TIC Long-Term Purchases data out of the US. The inflationary figure is expected to highlight the same solid growth patterns as today’s news, but the long-term purchases investment data is forecast to show a near-doubling of foreign investment in US-based long-term securities.

The report could be highlighting a downturn in US investments overseas, or a shift into US securities by foreigners. Either way, more capital is flowing (or staying) in the US, which should help the USD in the short- to mid-terms.

Read more forex trading news on our forex blog.

A report published by Statistics Canada this morning revealed a downturn in new motor vehicle sales by approximately 1.1%. The figure mildly surprised investors as expectations were for a monthly growth of 1.8%, mildly down from the previous month’s 2.0% growth reading.

The news, however, does not seem out of touch with levels of investment, consumer spending and manufacturing output from across the globe. Canada’s manufacturing and industrial sectors were seen in decline these past several weeks and it only makes sense for consumers to put off buying a new vehicle while gas prices continue to soar.

Read more forex trading news on our forex blog.

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

Source: ForexYard

The UK Office for National Statistics is due to release several significant data reports today; most impactful will be the 9:30 GMT publication of the CPI and RPI inflationary figures. The US will also be publishing its retail sales figures, and PPI data.

Economic News

USD – USD in Decline ahead of Retail Sales, PPI Reports

The US dollar was seen in decline in late trading yesterday as low market liquidity combined with a positive industrial production figure in Italy to generate an uptick in euro values. With most of Europe coming back online today following yesterday’s hiatus, traders appear anxious to evaluate the value of the region’s currencies after last week’s muted response to hints at a future rate hike by the ECB.

The US economy was also largely absent yesterday, with only a minor speech by President Barack Obama about the economy at lighting manufacturer, Cree Inc., in Durham, NC. The impending vote on patent reform in the US Congress has been hyped recently with national politicians harkening towards a strengthening of the US manufacturing and industrial innovation sectors via revisions to patent law which would make it easier for firms to obtain licenses and protection for their products.

With today’s retail sales and PPI figures impending, many analysts are trying to evaluate what impact the data will have on this upcoming vote. The need for patent reform has been a leading issue in many areas of the US economy and both sides of the House and Senate appear poised to favor the agenda item. A bipartisan agreement could boost confidence and lift the USD in the short- to mid-term.

GBP – CBI: British Unemployment Expected to Rise in 2011

The British pound (GBP) was seen trading with mixed results yesterday, ahead of today’s news. The UK Office for National Statistics is due to release several significant data reports today; most impactful will be the 9:30 GMT publication of the CPI and RPI inflationary figures.

While the pound was seen climbing sharply against the euro and US dollar yesterday, it appears to have touched a record low against the Swiss franc and was trading sideways versus the Japanese yen. Safe-haven currencies are on the rise lately, and even the relatively stronger pound wasn’t immune to downfalls against these dominating currencies.

A recent report by the Confederation of British Industry (CBI) highlighted the structural weaknesses found in the UK economy, focusing intently on the labor market.

The report directed attention to a weakness in the British labor market that masked by astounding growth during the years prior to the financial meltdown of 2007-08. These structural weaknesses are not likely to abate this year, and the CBI is forecasting a growth in unemployment through the remainder of 2011 which will likely drag on the pound as the months progress.

JPY – Japanese Yen Bullish as Traders Seek Safety

The Japanese yen has been trading higher against most of its currency rivals recently as investors move toward safety. Japan’s economy has published several positive figures over the last week, much of which has helped establish the yen’s recent bullishness. With today’s rate statement affecting JPY values, traders are likely to see heightened volatility as the day moves ahead.

While the yen suffers from its own economic concerns, particularly downturns in manufacturing and industrial output, shifts in consumer sentiment have helped lift yen values against a number of its rivals. The allure of buying the JPY has also gained from an increased focus on interest rate differentials and carry-trades. Many nations are beginning to lift interest rates, making a carry-trade with the JPY more enticing. Traders appear to be expecting a strengthening JPY this week.

Oil – Oil Prices Plummet ahead of China and US Data

Oil prices dropped sharply this morning with the $97 price level approaching fast. Data releases out of China and the US today are driving many investors away from physical assets in expectations of a decline in growth among two of the world’s largest economies. The weakness of OPEC, revealed in last week’s meeting, also suggests that production output may become a more unilateral decision in the weeks ahead, possibly leading to boosts by Saudi Arabia and other Western allies.

The value of the US dollar versus the euro in recent trading has also dropped towards a six-day low of 1.4530, which has helped prevent oil prices from taking off after last week’s surprisingly unhinged OPEC meeting. With today’s steady sideways movement, traders appear likely to see oil reaching a decision point this week; which may have taken place yesterday. A test of this weekly low is expected over the next few days.

Technical News

EUR/USD

A three week rally was met with a failure of the pair to breach 1.4700, a level not far from the previous trend line which opened the door for a significant pullback that retraced 50% of the late May to early June gains. The week’s declines ended at the 20-day moving average at 1.4330 and will serve as initial support. Falling daily stochastics suggest the move lower may have scope to continue where the pair may find resistance at 1.4250, a level that coincides with the 61% retracement and the rising trend line from the May low. A breach here and the pair will test the 100-day moving average followed by the May low at 1.3970. To the upside, resistance will likely come in 1.4570 followed by 1.4700.

GBP/USD

The weekly candlestick suggests further declines may be in store as last week’s candlestick ended on a shaven bottom, indicating momentum is moving to the downside. A confirmation will be needed from this week’s trade to confirm the bearish pattern. In the meanwhile the move lower finished at the 38% retracement level of the December to April move and is quickly approaching the trend line off the May 2010 low at 1.6180. The pair could receive a bounce from this level, as was the case in late May. Resistance is located at 1.6400 and 1.6460, and 1.6550. Should the pair not receive a bounce at the trend line declines could mount to 1.6060 and the April low at 1.5935.

USD/JPY

The yen was relatively unchanged from the previous week after an attempt to breach below the 80 yen level was only briefly successful before the pair was bid higher. While most oscillators remain in neutral territory, the pair continues to trade lower with resistance at the falling trend line from April high which comes in near the 20-day moving average at 81.00. This level may offer traders a better price to enter short. Further resistance is located at 81.75 from the May 31st high followed by 82.25 of the May 19th high. Support comes in at the May low of 79.50 followed by the all-time low at 76.11.

USD/CHF

The pair is testing a short term resistance level at 0.8450 and a breach here would expose the resistance at 0.8855 which lies just below the 20-day moving average. A rise to this price may offer traders better levels at which to enter short. Above these levels rests the falling trend line from the mid-February high which comes in at 0.8720. Support is found at the all-time low at 0.8325.

The Wild Card

Oil

Spot crude oil prices broke below the rising support line from the triangle consolidation pattern that the commodity has been trading in over the past month. Thus forex traders may want to be short on spot crude oil with a first target at $93.00. This level has added significance as it coincides with the January highs as well as the rising trend line from the August low.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Oil Prices: Headed Up or Down?

by David Fessler, Investment U’s Energy and Infrastructure Expert
Tuesday, June 14, 2011

Are oil prices headed up or down? If Saudi Arabia has anything to say about it, quite possibly down. Over the past several months, the kingdom has been clandestinely raising production levels. It’s been undertaking this in advance of Wednesday’s OPEC meeting.

It’s attempting to placate American, Chinese, and European oil consumers. According to an article in the Financial Times, the Saudis want to bring crude prices down to more “comfortable levels,” i.e. $80 to $90 per barrel.

The FT says Saudi Arabia raised its May output by 200,000 bpd, and has plans to raise it another 200,000 to 300,000 bpd this month.

That would peg its overall output above 9 million bpd for the first time since 2008. With global refinery demand for oil on the rise, especially from China, the increase couldn’t come at a better time.

Why is the demand from refineries increasing? It’s the end of their annual spring refinery maintenance shutdown period, when refinery outputs are traditionally at their lowest points of the year. During outages, demand for oil lessens. Just the opposite happens when they restart operations.

But part of the rise is due to the Saudi’s own power requirements. It’s hot in the desert, and air conditioning loads go up dramatically during the summer months.

Nine million bpd is about 1 million bpd more than the low point (8 million bpd) reached when the Saudis cut demand in response to the worldwide recession back in February of 2009.

OPEC’s Contentious Cartel Meeting Coming

Wednesday’s OPEC meeting will likely be contentious and argumentative. Shady cartel characters Venezuela and Iran will likely argue for no production increases to keep prices high.

In addition, Libya is managing to send a representative, Omran Abukraa, even though its output has been reduced to a mere 200,000 bpd. He’s the former head of the country’s national electric authority.

The Libyan oil minister, Shokri Ghanem, defected last month and has aligned himself with the rebels. While they control much of the country and some of its current oil output, the rebels will have no representation at the meeting. Prior to the crisis, Libyan crude oil output was 1.6 million bpd.

Ironically, Qatar and the United Arab Emirates – both OPEC members – have openly announced their support of the rebels.

That will make for increased political tension in what was already seen to be a very difficult meeting.

What Should Investors Do?

In a word, nothing. Until the OPEC meeting is over and a production quota agreement is reached, traders are all being cautious. Investors with short-term investment horizons should exercise the same caution.

Longer term? Any pullback in the price of oil is going to be temporary. Middle East tensions aren’t slacking off, and neither is the demand coming from China. As the U.S. recovery lollygags along, demand has remained relatively constant.

Investors should use any pullback in the price of oil-sensitive refining stocks like ExxonMobil Corporation (NYSE: XOM), Valero Energy Corporation (NYSE: VLO) and Tesoro Corporation (NYSE: TSO) or big producers like Petrobras (NYSE: PBR) and Anadarko Petroleum Corporation (NYSE: APC) to accumulate shares.

Skeptics will argue that Brent Crude continues to trade in the same range it’s been in for the last 4 months: $105-125 a barrel. One thing is a sure bet, though: global demand for oil will continue to head in one direction: up.

Good Investing,

David Fessler

Yesterday’s decline in the value of the USD was sudden and sharp. The euro and the pound rallied into the New York close and continued their gains early this morning in the Asian session. The moves higher by the European currencies are surprising given the lack of market moving events yesterday. Traders will now look to economic data from both the UK and the US for market direction.

Today’s Economic Data Releases:

GBP – CPI y/y – 08:30 GMT
Expectations: 4.5%. Previous: 4.5%.
UK inflationary forces are expected to remain at higher levels as the BoE delays any potential interest rate hike so as not to derail the tepid UK economic recovery. Yesterday BoE MPC member Martin Weale put forward his case for an increase in UK rates citing the BoE has strayed from its inflation mandate. The inflationary numbers may indeed come in higher and support the pound in the short term but the BoE appears firm in its inaction. Cable has resistance at last week’s high at 1.6470 and the May 31st high at 1.6550. Support is located at the rising trend line from the May 2010 low at 1.6190.

USD – Retail Sales m/m – 12:30 GMT
Expectations: -0.3%. Previous: 0.5%.
In keeping with the trend of disappointing US economic data expectations are not high for today’s retail sales report. Traders should also be eyeing the core retail sales report that does not take into account gasoline, autos and building materials. The dollar could continue to decline on further negative US economic pessimism. EUR/USD resistance looks to be at 1.4550 at the 61% retracement of last week’s declines. Support is found at the overnight lows from Sunday at 1.4320.

USD – PPI m/m – 12:30 GMT
Expectations: 0.1%. Previous: 0.8%.
Regardless of a potential uptick in PPI numbers the Fed’s monetary policy has been well communicated with the market and the Fed is not expected to adjust interest rates higher in the near term.

Read more forex trading news on our forex blog.

About the Author

Jennie Gandhi has a passion for writing and writes on diverse topics including fashion, beauty, automotive, educational, motivational and even technical.

Will Peru Determine The Future of Copper Prices?

by Tony D’Altorio, Investment U Research
Monday, June 13, 2011

The debate continues to rage over the short term as to the direction of copper prices.

• The bears say that demand in China is slowing and that supplies are plentiful…

• Meanwhile, the bulls point to steady demand from China. They also point to those in the industry who say that supplies are dwindling due to a lack of big discoveries and the lower quality of the ore being mined today from all parts of the globe.

Bottom line: For the short-term the supply/demand equation for copper looks uncertain.

Over the longer term, however, the direction definitely looks to be positive for the bulls.

Demand for copper from the emerging world, as it builds out its infrastructure, will more than offset any slackening of demand from the developed world.

In addition, there’s no denying the lack of major copper finds, over the past several years, and the lower quality of the ore being mined today.

And now, copper bulls have another factor in their corner… geopolitics.

Peru’s Importance to The Global Copper Market

Mention copper-mining countries to most investors, and Chile quickly springs to mind. That South American nation is the world’s number one producer of the red metal, accounting for about one-third of global copper supplies.

But most investors are unaware of the importance of Chile’s neighbor – Peru – to the global copper market. It’s already the world’s second-largest copper producer, roughly equal to the United States and ahead of China and Indonesia.

Over the next five years, that country’s importance is poised to grow on the back of a string of expansion plans and new projects. This growth will be led by projects from companies such as Freeport McMoRan (NYSE: FCX), Anglo American (PINK: AAUKY) and Xstrata (PINK: XSRAY).

In fact, Macquarie Bank from Australia estimates that Peru will account for a hefty 32 percent of global mine output growth over the next five years.

With global supply and demand for copper in a delicate balance, supplies from these Peruvian projects will have a huge impact on the direction of copper prices.

This is where geopolitics enters the picture…

Peru Elects New President and GeoPolitics Enters the Fray…

Peru has just elected a new president, Ollanta Humala. He’s a former army officer who attempted a coup in 2000. Mr. Humala once espoused hard-left and nationalist views and was close to Venezuela’s president, Hugo Chavez.

During the campaign, he promised to raise taxes on the mining sector. He suggested that Peru could impose a windfall tax of up to 40 percent and also raise the corporate rate that miners pay to 45 percent. It’s currently 30 percent. Mining companies also pay a three percent royalty tax and other duties.

If Mr. Humala does raise taxes, some projects are at risk.

Projects for the few years up to 2014 appear safe. Mining companies have so-called stability agreements that protect them from any tax increases. But many of these agreements, negotiated in the 1990s, will expire over the next few years.

So expansion plans and new mines for years after 2014 – when Peru is expected to account for more than two-thirds of the global increase in copper mine output – would certainly suffer.

This would certainly push the supply/demand equation strongly in favor of the bulls.

Michael Bogusz, a mining analyst at Macquarie, put it this way: “We believe that investment in new mines may be delayed and marginal projects may even be canceled. As a result, any delay in investment decisions will further tighten the supply side.”

Humala Models Peru’s Governance After Lula’s Brazil

Mr. Humala insists though that his model for governance is not Hugo Chavez, but Brazil’s former president Lula.

Lula was also a leftist candidate. But he demonstrated it was possible to combine a business-friendly economic policy with social reforms that reduced poverty.

The path that President-elect Humala chooses – Lula or Chavez – may well determine Peru’s future.

And it will certainly help determine the future course of copper prices. If he chooses Chavez instead of Lula, look for much, much higher copper prices several years down the road.

Good investing,

Tony D’Altorio