Month: August 2011

By Sutton & Associates, LLC

With the debt deal now signed and the crisis proclaimed to be over by the government and the mainstream lapdog media, it is time to take a serious look at the debauchery that was just perpetrated on the American people – again. The names have barely changed from 2008. The tactics certainly haven’t. The magic of government accounting has had another chapter added to it as something that actually adds to the deficit and requires money be borrowed on its behalf is now a ‘cut’. Isn’t that just special? There are several big myths about the past few weeks that we need to uncover before anyone is really going to understand what is really going on here.

QE3 in Disguise

QE2 was winding down and when you go back and look at it, the USFed had already been blamed (quite properly too) for record high food prices around the globe and some of the unrest in certain locales as well. The overt monetization stage is generally the last one in the fiat life cycle, and obviously it is in Bernanke et al’s best interests to prolong the fleecing, er, rather prosperity, as long as they possibly can. The debt ceiling non-issue was really a work of semi-genius when you think about it. Set an artificial date for the end of the world, get your buddies in the media to put countdown clocks all over their news broadcasts – really a nice touch guys, and then proceed to scare the daylights out of everyone that those checks might not go out if everyone doesn’t get together and take one for the banksters. Uh, the team. So what really happened on 8/2 anyway? Well, I will tell you. QE3 was born. Come again? Here’s the stick. The consumer is now in pullback mode – again. The government is up against the wall with the full light of day being shown on its foolishness. The only institution with any wiggle room is the fed.

I have gotten confirmation from several well-placed sources that the USFed is now buying nearly 80% of all new Treasury bond issues. Most of these are being purchased directly from the primary dealers, who are required to place bids at all auctions. This is one of the reasons why it seems everyone around the world is divesting; yet the Treasury always has plenty of buyers for new debt. Pension funds and other mutual/closed-end funds are good for most of the rest. So follow the logic. The USFed needs cover to launch another round of monetary stimulus even though the first two were an abysmal failure. The USGovt needs to be able to issue a trainload of bonds to make payments on a bunch of ill-advised promises. The best bet at this point would be to borrow enough to divest everyone from SocSec at a 4% per annum rate and opt everyone out and shut the system down. People could invest their own money accordingly and at least if they blow it, it would be on them. And here’s the carrot: we get a debt ceiling extension for $2.8 trillion-ish and this gives the government the ability to borrow and spend while giving the Fed cover for the next round of semi-overt monetary stimulus.

The mechanisms may be slightly different, but this one will likely mimic QE1 and 2 in most ways. The fed will be monetizing debt and the government will be spending more of its borrowed money to try to stimulate an economy, and, more and more lately, appears to be beyond stimulation. It would appear that we’ve now reached the phase in Keynes ‘theory’ where the long run is upon us and we’re not dead so now what? Unfortunately, Keynes left us no answers because there weren’t any and he knew it. This may come as a shock to many Keynes proselytizers, but we’re in uncharted territory, with not even the basis of a clue as to how to right this ship. So what we can expect moving forward is more of the same. The ‘cuts’ in this debt deal, from what I’ve been able to see so far, are going to gut the middle two quartiles of the economy. Not at once or immediately, but slowly. Many of the prescribed cuts won’t happen for a while, but others are yet unknown. The ‘super congress’ will have frighteningly dictatorial powers in deciding the winners and the losers and obviously there will be fierce battles by industries, corporations, banks, and pretty much everyone with a lobbyist – except the American people – to get people sympathetic to their cause on that commission. Go figure that 300 million Americans have not one single suite on K Street. Not even a single kiosk. Nothing.

Priming Demand for GBonds

On cue, USEquity markets have deteriorated over the past several weeks, pushing investor money across the aisle into Treasuries. I have made the case both anecdotally and factually in our paid publication for almost 2 years that the small investor is largely out of markets. Much of Middle America’s investments are in managed plans such as 401s, pension plans, and the like. Funds and banks have been driving the markets for quite some time now, shaving pennies off each other each day, with everyone claiming victory at the end of the quarter. I’ve chronicled how several firms have bragged on quarter long winning streaks. When you look at all the information, it becomes very clear that the big banks are running that show now more than ever. So why the recent selloff? There are a couple of reasons really, and the first is the easiest to understand. The general public, for the most part, regards the stock market as the economy itself. Running down the markets was one way of making the fear campaign launched by Washington stick. Thanks to subterfuge and disinformation, Main Street really doesn’t understand most of the economic reporting other than unemployment, and perhaps GDP, but it certainly understands the stock market. Dropping the markets was part of the psyop against the American people over the past several weeks. Secondly, there is typically a flow from more risky to less risky assets. Let me be clear that I preface both of those qualifiers with ‘perceived’. Perceived increased risk in the equity markets will push money into bonds and vice versa. That has been a basic paradigm for many years now and is fairly well understood by most investors. That paradigm is going to be ending in the not-too-distant future, but that is another article for another week.

The mere fact that so much money is piling into the long end of the yield curve reeks of manipulation since it simply defies common sense. A stay of execution is not a pardon, and the ridiculous spending spree in Washington will continue, albeit, most likely to a lesser extent in Middle America’s direction. There will be plenty of money for wars, regulation, and plenty of money for the next bailout when the banksters get zapped (most likely by design) by the derivatives time bomb they’ve created on a global scale. Nothing has been done to alter the trillions that SocSec and Medicare pass onto the nation’s plate in terms of unfunded liabilities each year. Perhaps the plan is simply to make the liabilities go away, and then there will be no need for funding. The supercongress could easily have that as its mandate. It will not be comprised of Ron and Rand Paul types, that is for sure, or even main line fiscal conservatives. Or advocates for the people. I wouldn’t be surprised if General Electric CEO Jeff Immelt wasn’t given a spot despite the fact that he isn’t even a Congressman.

Gold Smells the Rat(s)

In short, the run-up of the bond market is to push the perception that US government bonds are safe. There is likely a minor residual effect from the ongoing (and worsening) crisis in Europe, which is spreading well beyond Greece. Gold is properly responding to the debt and derivatives mess globally. At this point, it is one of the few markets that is ‘working’ yet the mainstream press calls the rally ‘ludicrous’. And make no mistake, the roiling of markets is just as much about derivatives as anything else. Remember all the credit default swaps that were written on junk US mortgages? There are plenty of those written against various European (and American) government bonds, banks, and pretty much anything else that isn’t bolted down. And the nature of the derivatives time bomb is such that it will not matter where it begins, once the avalanche starts, it will take the entire financial system with it. That is the magnitude of the greed that has been poured into this rather unknown and virtually unregulated arena.

Ratings Russian Roulette

Another benefit to pushing up the bond market is to cover what declines may occur if a ratings agency actually does something other than talk about downgrading USGovt bonds. At this point at least it would appear to be a rather safe bet that this will not happen. Moody’s has already affirmed the top rating while saying everything negative they possible can in a vain attempt to save face. These agencies are merely political animals, serving the masters who pay their exorbitant fees. Nothing more. They are not independent by any stretch, because as anyone can understand, your allegiance is to who pays you. When a bank pays the agency to rate its mortgage tranches, the rating agency has a choice. Make the rating pleasing to the customer or lose the business. It is very simple. Amazingly the agencies essentially admit this, claiming their sovereign ratings are ‘more independent’. More independent than what? Than the AAA ratings slapped on C mortgage tranches?

If the Eurozone nations want the ratings agencies to stop arbitrarily and capriciously downgrading them, then they’d better take some of that rescue fund and send a large check. That is what appears to work best with these firms – a large application of money. There is also a little talked about motivator in there for the ratings agencies to keep the USGovt’s rating sterling. If they cut it that could very well mean that fewer bonds will be issued, and therefore diminished demand for ratings. When in doubt, always, always, follow the money.

There was certainly a lot of borrowed money to be followed today as the debt curve resumed its relentless upward climb to oblivion and the loss of the American standard of living we’ve come to enjoy. Meanwhile, awful economic reports continue to flow out of the various reporting agencies and if nothing else, maybe this time folks will come to understand you just can’t put humpty dumpty back together with endless monetary and fiscal stimulus; it is truly the ultimate exercise in financial futility.

If you haven’t taken an opportunity to download our free report entitled ‘If You Have Paper Assets… There are Three Things You Must Consider’, think about doing so now. As debt contagion swirls in Europe and now on our shores, it is more important than ever to take a protective stance towards the entirety of your assets. Simply Click Here to go to the download page. No obligations, no hassles, just common sense investing wisdom. There are also several other compilations available by clicking the above link as well.

Until Next Time,
Andy

Andrew W. Sutton, MBA received graduate honors in the field of Economics and is the Chief Market Strategist for Sutton & Associates, LLC, a Registered Investment Adviser in the Commonwealth of Pennsylvania. For more information about the company, its products and services, or contact information, please visit our website. Please feel free to distribute, copy or otherwise disseminate this information.

Standard & Poor’s downgraded the long-term rating of the US government and federal agencies from AAA to AA+.  In response the US Federal Reserve has said: “For risk-based capital purposes, the risk weights for Treasury securities and other securities issued or guaranteed by the U.S. government, government agencies, and government-sponsored entities will not change.  The treatment of Treasury securities and other securities issued or guaranteed by the U.S. government, government agencies, and government-sponsored entities under other federal banking agency regulations, including, for example, the Federal Reserve Board’s Regulation W, will also be unaffected.”

The past week in monetary policy saw 12 central banks reviewing monetary policy settings, with 2 expanding asset buying programs, and just 3 adjusting interest rate levels.  Those that adjusted interest rates were: Pakistan -50bps to 13.50%, Uganda +100bps to 14.00%, and Turkey -50bps to 5.75%; Switzerland also adjusted its interest rate target range downward to halt gains in the Swiss franc.  Meanwhile those that held rates unchanged were: Botswana 9.50%, Uzbekistan 12.00%, Australia 4.75%, Japan 0.10%, Romania 6.25%, Russia 8.25%, EU 1.50%, UK 0.50%, and the Czech Republic 0.75%.

Other than interest rates, the Bank of Japan announced a 10 trillion yen expansion of its asset purchase (quantitative easing) program, Japan was also reported as intervening in the foreign exchange market to weaken the Yen.  Similarly the European Central Bank recommenced its bond buying program in efforts to stabilize financial markets.  Such moves spurred speculation that the US Federal Reserve may also adjust its quantitative easing program when it meets next week.  Elsewhere the People’s Bank of China announced a ban on foreign Yuan loans for purposes other than import/export.

Perhaps the most interesting or notable theme of the week was the currency factor, with Switzerland and Japan both announcing measures to counter excessive appreciation of their currencies against the US dollar.  Last month Brazil’s central bank also announced measures to halt the rise of the surging Brazilian real-USD exchange rate. So is this an escalation of the so-called currency wars? The US has been criticized by some for using its quantitative easing program to weaken the US dollar, indeed the US dollar has experienced a period of significant weakness. The trend towards currency interventions, and currency oriented monetary policy decisions marks a course in the opposite direction of the coordinated global monetary policy response during the financial crisis, and time will tell what effects it may bring.

Other than exchange rates, central banks showed over the week that they were thinking about the usual problems of balancing inflation and economic growth. Indeed, the source of inaction for most of the central banks was managing that balance, but one key element that was similar in most bank’s monetary policy statements was concerns about tail risks. Indeed, the US debt drama, and the ongoing sovereign debt crisis in the Euro area was explicitly mentioned as causing policy and economic outlook uncertainty; unfortunately signs are that these risks will persist in the medium term.

Following are some of the key quotes from the key central banks, and those announcing adjustments in monetary policy settings:

• Reserve Bank of Australia (held rate at 4.75%): “Year-ended CPI inflation has been high, affected by the extreme weather events earlier in the year.  As these effects reverse over the next couple of quarters, CPI inflation should decline. But measures that give a better indication of the trend in inflation have begun to rise over the past six months, after declining for the previous two years.”
• Bank of Japan (held rate at 0.10%, expanded QE): The Bank said it “deemed it necessary to further enhance monetary easing, thereby ensuring a successful transition from the recovery phase following the earthquake disaster to a sustainable growth path with price stability,”.
• European Central Bank (held rate at 1.50%, resumed bond buying): “an adjustment of the accommodative monetary policy stance was warranted in the light of upside risks to price stability.  While the monetary analysis indicates that the underlying pace of monetary expansion is still moderate, monetary liquidity remains ample and may facilitate the accommodation of price pressures.  As expected, recent economic data indicate a deceleration in the pace of economic growth in the past few months, following the strong growth rate in the first quarter.  Continued moderate expansion is expected in the period ahead.  However, uncertainty is particularly high”.
• Central Bank of Turkey (dropped rate -50bps to 5.75%):  “Concerns regarding sovereign debt problems in some European economies and the global growth outlook have continued to intensify, increasing the risks highlighted in the July Committee meeting.”  On the rate cut the bank said it was intended “to reduce the risk of a domestic recession that may be caused by the heightened problems in the global economy.”
• Bank of Uganda (increased rate +100bps to 14.00%): the move was “intended to reduce the growth of bank credit in the economy, which expanded very rapidly in the 2010-11 fiscal year, and to provide some support for the nominal exchange rate, which affects domestic prices of imported goods,”. 
• State Bank of Pakistan (cut rate -50bps to 13.50%):  “The key parameter in this assessment is the outlook of inflation that indicates that average inflation in FY12 is expected to remain in line with the announced target.  No adjustment in the interest rate would have entailed further tightening of monetary policy in real terms, which is not warranted given the decline in private investment.”
• Central Bank of Russia (held rate at 8.25%): “considering current domestic and external economic conditions and the effect of the monetary policy measures, implemented in recent months, the Bank of Russia judged that the current level of money market interest rates was appropriate to maintain the balance between inflation risks and risks to economic activity in the coming months”
• Swiss National Bank (announced a series of measures aimed at the CHF): the Bank noted that it “considers the Swiss franc to be massively overvalued at present.  This current strength of the Swiss franc is threatening the development of the economy and increasing the downside risks to price stability in Switzerland”.

Looking to the central bank calendar, next week’s focus will no doubt be squarely on what the US FOMC does; will Bernanke follow Japan and the EU and expand the Fed’s asset buying (quantitative easing) program? Also on the agenda is the Bank of England’s inflation report on the 10th of August, also on the 10th is China’s inflation data, so keep an eye on that; there are rumors that the People’s Bank of China may opt for another interest rate increase.

• USD – USA (Federal Reserve) – expected to hold at 0.25% on the 9th of Aug
• IDR – Indonesia (Bank Indonesia) – expected to hold at 6.75% on the 9th of Aug
• NOK – Norway (Norges Bank) – expected to hold at 2.25% on the 10th of Aug
• KRW – South Korea (Bank of Korea) – expected to hold at 3.25% on the 11th of Aug

Source: www.CentralBankNews.info

Article source: http://www.centralbanknews.info/2011/08/monetary-policy-week-in-review-6-august.html

By Ulli G. Niemann

A recent cartoon in my daily newspaper showed two guys sitting in a bar. One is saying to the other: “I did learn something from my broker…how to diversify my investment losses.”

While this struck me as funny, there is certainly an element of truth to it judging by the number of tragic e-mails and phone calls I have received over the past couple of years.

This was brought home even more so by a reader who responded with strong disagreement to one of my articles. I advocate a methodical, disciplined approach to investing in no-load mutual funds. It keeps me invested during up markets and on the sidelines during down markets. It was exactly this approach that got me and my clients out of the market in October, 2000 and put us back in to take advantage of the April, 2003 upswing.

Judging from the reader’s e-mail it appears that he works for a major bank and is adamant about Buy & Hold and Dollar Cost Averaging. Maybe it’s the approach he has chosen and he doesn’t like hearing that the emperor is wearing no clothes. Nothing personal, honestly, but I find it incomprehensible that anyone, after the bear market and the financial disasters most people experienced, can even consider such theories. The results are just too black & white.

Here are his three main points:

1. “There is no real feasible way to know whether the market is going to be up or down and when exactly to invest.

2. “The only logical way for an investor to make money is through the buy and hold approach. This method is used by Warren Buffett and he has consistently beaten the best with an average annual return of 29%.

3. “Dollar cost average helps to hedge against the ups and downs of the market; moreover, one should have been buying up stocks during the last 3 years, though I do agree with your cashing out at in 2000. I do not wish to insult you, but that seems to me more luck than intuition.”

It appears that the only thing that I can agree with him on is, as he says, there is no reasonable way to “know” whether the market is going to be up or down. However, this statement also underscores that he is not familiar with trend tracking methodologies and the idea that one does not need to “know” or “predict” in order to make profitable investment decisions.

I’ve put together the composite for my trend tracking index in the 80s and it has consistently served me and my clients well by getting us into and out of the markets in a timely manner.

The reader cites Warren Buffett’s success. Sure, he is legendary, but remember that he made most of his fortune during one of the greatest bull markets. He is probably now considered beyond good and evil. But what about the numerous stories in the press over the past 3 years of the heavy losses he sustained in Coca Cola and other stocks, by stubbornly holding on to this positions. When you have enough money invested in a wide range of holdings, you become almost bullet proof. Do you fit in that category?

Furthermore, Buffet has resources available that the investing public simply does not have. Saying that he is successful only because of his buy and hold approach, and everyone following this technique will be too, is an oversimplification and does not factor in all the issues.

How many non-millionaires have enough spare capital to keep buying and holding and buying some more while stocks plummet? How long can they wait for the upswing when their cost-averaged holdings will start to show a profit? Do the math! Yes, the market will eventually turn up. But will it recover enough fast enough to reverse your losses in time to do you any real good? If you’re 20, then maybe. If you’re 60, who knows?

I have received countless e-mails and phone calls from individuals who have been led astray by brokers, financial planners and others using buy-and-hold and dollar cost averaging. Stories abound of retirees having to go back to work just because someone told them that “the market can’t go any lower” or “let’s dollar cost average.”

As for his last point, when I gave the signal to cash out on October 13, 2000, it had nothing to do with either luck or intuition. I had no clue how good of a call that would be; I simply let my indicators be my guide. They pointed to a sell, we considered, and then followed through based on our experience. We held true to our philosophy and kept our emotions, speculations, fears or greed out of the equation. This disciplined approach is what I advocate.

This year it has led us to buy back into the market on 4/29/03. And my detailed analysis and evaluation of a range of funds led us to select some of the best; my top fund being up some 50%.

So, not to be cynical, but to me dollar cost averaging is just a way to spread the pain over a longer period of time and to cloud the obvious with the hope the market will turn around tomorrow. After all, it can’t go any lower. Can it?

© Ulli G. Niemann

By DividendOpportunities.com

If you’re a longtime Dividend Opportunities subscriber, you might remember an issue back in November where I hunted down the safest dividend in the S&P 500.

The response to the article was overwhelming. So I decided to provide an update to my newest readers — taking the same rigorous metrics I applied before to discover where the safest dividend in the S&P is today.

Thankfully, the draconian cuts that we saw in 2008-2009 are history. Believe it or not, these cuts added up to $52 billion in lost income during 2009 — and that’s for just the cuts from stocks in the S&P 500. To put that figure in perspective, losing $52 billion would put Warren Buffett into bankruptcy.

Today the news looks much brighter. Among the 7,000 companies that report dividend information to Standard & Poor’s, there were more than 1,700 dividend increases in 2010, compared to just 145 decreases. And so far in 2011, companies are on pace for more than 1,800 increases. Even so, dividend safety still has its place for any income investor.

So to make sure you don’t have to worry about dividend cuts, I’ve taken a look at every dividend-payer in the S&P 500 to find the safest yields available right now. Let’s see who takes home the title…

Safety Criteria #1: Yield

When it comes to yield, it usually takes something above 5% to garner even a second look from me. So I started my search with all the stocks within the S&P 500 that yield above that magic 5% number.

The common stocks in the S&P 500 don’t offer much in the way of yields overall, but you can still find a few individual companies offering attractive payments. (For the record, I typically broaden my income search to include closed-end funds, exchange-traded bonds, master limited partnerships — and a bevy of other asset types — to bring readers of Dividend Opportunities and my premium High-Yield Investing newsletter the most attractive yields.)

In total, just 19 stocks in the S&P (only 3.8% of the total) yield 5% or more. Of those, the highest-yielding stock is Frontier Communications (NYSE: FTR), which pays investors 10.2% a year.

With this handful of stocks in focus, I turned to my next metric to uncover the safest dividend: earnings power.

Safety Criteria #2: Earnings Power

It’s not uncommon for “sick” stocks to carry high yields. Based on a poor outlook, investors will dump the shares, boosting the yield. To combat this potential pitfall, I looked at the 1-year growth in operating income for each of the stocks with a yield above 5%.

Operating income is the profit realized from the company’s day-to-day operations, excluding one-time events or special cases. This metric usually gives a better sense of a company’s growth than earnings per share, which can be manipulated to show stronger results.

Given the slow recovery in the economy, I searched for companies on my high-yield list able to manage any growth in operating income over the trailing twelve months, indicating the business is still able to thrive after one of the worst recessions in recent memory. After screening for positive 1-year growth in operating income, we’re left with the 13 candidates shown in my table:

Safety Criteria #3: Dividend Coverage

No measure of dividend safety carries as much weight as the payout ratio. By comparing the amount of cash available each quarter against how much is paid in dividends, we can know whether a company can continue paying its current dividend even if conditions worsen.

For the payout ratios, I looked at free cash flow over the trailing 12 months (TTM) compared to dividends paid. Many investors look at earnings, but earnings can sometimes be misleading. Instead, free cash flow is a measure of cash generated by the company after capital expenditures. This cash can be used for just about anything — expansion, research and development, or most importantly, dividends. Here’s what I found:

You can see that many of these high-yielders don’t cover their dividends with free cash flow (shown by a ratio above 100%). This doesn’t necessarily mean the company will cut the payment, but the risk appears much higher than with the other members of our list. So in the search for what I think is the safest dividend in the S&P 500, I kept my focus only on those seven companies seeing enough free cash flow to cover their dividends.

Safety Criteria #4: Proven Track Record

To finally nail down what I think is the safest dividend in the S&P, I looked at the track records of the seven stocks left in the running.

I gave special credit to those companies that maintain — and raise — dividend payments through thick and thin. This shows dedication to paying dividends and also shows the company will maintain its payment should it hit a rough patch.

Looking into the track records of each of these companies offers mixed results. Frontier Communications, which has highest yield, recently cut its quarterly dividend to $0.188 per share from $0.25. This reduced dividend should ensure its safety for the years ahead, but it does leave a sour taste in the mouths of longtime investors. So while I think the dividend is safe, I want to look elsewhere.

Meanwhile, Ameren Corporation slashed its dividend nearly in half at the peak of the 2008-09 bear market.

The rest of our candidates all have above-average yields and have demonstrated an ability to pay their dividends under tough economic conditions.

But that doesn’t mean I’d consider them all to be the safest. For example, pharmaceutical company Eli Lilly has to deal with upcoming patent expirations on many of its drugs, which could cause issues. And HCP, Inc. — a healthcare REIT — has to contend with cuts to government healthcare spending in the coming years. On Monday its shares were down 6% on news of cuts to Medicare payment rates.

If pressed, I’d have to tip the scale toward one of the three telecom companies on the list — Windstream, CenturyLink, and Verizon. These are usually highly stable businesses, especially when compared to other industries. And based on the analysis above, it looks like these three telecoms should provide a high and stable yield for the coming years.

Good Investing!

Carla Pasternak’s Dividend Opportunities

P.S. — If you want more high-yield ideas, be sure to watch the presentation my colleague Dan Moser put together outlining some of the best income opportunities on the market. You can visit this link to start watching now.

It is difficult to find a highlight from this week; is it the compromise between Democrats and Republicans to stave off a bankruptcy and raise the debt ceiling? Two separate failed attempts by central banks to weaken their respective currencies? The ECB’s renewing sovereign bond purchases and emergency liquidity provisions? Or is it the 4.78% plunge the S&P 500 took after Italian and Spanish bond yields ballooned?

Wednesday and Thursday saw both the SNB and the BoJ attempting to weaken their respective currencies but at this stage of the game the market has apparently called the central banks’ bet. Japanese exporters were all too pleased to sell their dollars at the 80 yen level while traders seeking to avoid the euro pushed the EUR/CHF to a new low. Talk of the pair trading at parity sounds more than just a pipe dream given the spread of the euro zone debt crisis to both Spain and Italy.

In response to the pressure being felt in Italian and Spanish bond yields the ECB decided to resume its 6-month refinancing facility, an emergency measure that increases liquidity when at the same time ECB is tightening interest rates. The ECB has also resumed purchasing sovereign debt on the open market but only for the bonds of Portugal and Ireland. This move came with some objection as the Bundesbank was in firm opposition to this step. Markets now await the next move from the euro zone as deterioration in sentiment can be directly tied to events in the euro zone, including the dramatic plunge in equity values over the last two weeks.

But the highlight of the week goes to the US after the President and Republican congressman successfully agreed to raise the debt ceiling while allowing for some austerity measures to be put in place, an often overlooked asset as the European peripheral states can attest to. Tea party hawks were disappointed as the agreement does not address the large social welfare programs that are the main drag on the deficit but the silver lining to legislation may be the budget cuts puts the US on a path of fiscal austerity. Today’s positive non-farm payrolls report may also support the USD as it give the Fed some breathing room at its meeting next week to stave off the Q3 mongers for the meanwhile.

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.

By DividendOpportunities.com

Profit From One of the Biggest Bull Markets of the Decade… Without Risking a Penny

Commodities are on a tear.

Whether we’re talking about precious metals or energy futures, commodities have posted strong gains over the past ten years. Take silver for example. It’s up 127% this year alone. And oil touched $100 per barrel on Tuesday… and that comes after the peak of the summer driving season and the release of strategic reserves a few weeks ago.

But as an investment, commodities have historically proven to be very volatile — especially in recent years. Such dramatic ups and downs can be a huge turn-off for some investors, especially us income lovers who simply want a stable investment and a steady return.

But what if I were to tell you there was a way you can profit from the bullish outlook for commodities, without risking a penny?

That’s right. I’ve found an investment that can expose your portfolio to the potential offered by commodities with absolutely zero risk. It’s even insured by the FDIC — the same people that insure your savings account.

Now, I’ve told Dividend Opportunities readers about this investment before, most recently back in April.

Even so, this investment is still largely unknown. In fact, you won’t find it on any exchange, and you won’t find a price chart. But don’t worry, it’s simpler to understand than any stock.

The investment I’m talking about is a CD, or certificate of deposit. But this isn’t your run of the mill version you’d find at your local bank. Today, you’d be lucky to earn more than a couple percent from a regular CD.

That’s not the case here.

The official name is a “MarketSafe” CD, and right now the only ones of this breed I’ve found are offered exclusively by EverBank  — a specialty bank that offers many securities you can’t find elsewhere.

It works a lot like a regular CD. You open an account, purchase the CD, and then wait for the payout five years down the road. But your return is tied to the performance of a basket of assets — usually commodities.

If the prices of the commodities that the CD is tied to increase, at the end of five years investors get their money back plus the gain of the underlying assets during that time, capped at up to 50% (if the underlying commodities rise more than the cap, investors of this CD won’t see that extra return).

But here’s the best part. If the market takes a turn for the worst, and we see falling commodity prices, then you’re at least guaranteed your principal back at the end of the term.

EverBank offers a variety of these MarketSafe CDs that track different baskets of commodities. But each CD is only made available for a limited amount of time. For instance, EverBank’s current offering — the “Timeless Metals” CD — is only available to investors until August 18, 2011.

Now this investment may not be right for everyone. Like most CDs, you must hold this investment until maturity, and there are penalties for withdrawing early. So if you’ll need your money before the end of five years, you’ll want to look elsewhere. But for many investors, this may be a great way to diversify your portfolio without losing sleep at night.

With a minimum investment of $1,500, I think the MarketSafe CDs offers risk-adverse investors a great opportunity to enter into one of the most bullish runs we’ve seen this decade.

You can learn more about this investment by checking out EverBank’s website.

Always searching for your next paycheck,

Amy Calistri
Chief Investment Strategist — The Daily Paycheck

P.S. — Don’t miss a single issue! Add our address, [email protected], to your Address Book or Safe List. For instructions, go here.

By ForexYard

Most significant on today’s calendar will be the US publication of its Non-Farm Payrolls (NFP) data. Should today’s news foreshadow a modest growth in the largest economy’s employment sector, an assessment that seemed nigh impossible just days ago, there is a possibility that more investment will get pushed towards the storage ability of the greenback as investors flee the period of uncertainty wracking Europe.

Economic News

USD – USD Rallies ahead of Friday’s NFP Data

The EUR/USD was seen moving towards 1.4130 late yesterday as investors anticipate a return to risk aversion, but also optimism towards today’s Non-Farm Payroll report. An uptick in US private sector employment Wednesday added to risk-taking sentiment by many investors, but fears of European debt contagion are overshadowing the rise. Should today’s Non-Farm Payroll (NFP) data continue this trend of optimism, we may see the greenback making gains against its rivals as traders return to their traditional store of value en masse.

With the European Central Bank (ECB) holding interest rates steady, and private sector employment rising in the US, the value of the USD appears to be jumping higher as riskier currencies like the EUR dropped in yesterday’s afternoon and evening sessions. Bank interventions in Switzerland and Japan are also making the appeal of those safe-havens diminish, helping to lift the dollar in this week’s trading.

Most significant on today’s calendar will be the US publication of its Non-Farm Payrolls (NFP) data. Should today’s news foreshadow a modest growth in the largest economy’s employment sector, an assessment that seemed nigh impossible just days ago, there is a possibility that more investment will get pushed towards the storage ability of the greenback as investors flee the period of uncertainty wracking Europe.

EUR – European Central Bank Holds Key Interest Rate Steady

The euro (EUR) was seen trading bearish yesterday after the European Central Bank (ECB) chose to keep its regional Minimum Bid Rate steady at 1.50%. The statement released shortly after the release gave cause for pessimism among investors as ECB President Jean-Claude Trichet hinted that the region’s debt concerns were returning to the fore; specifically mentioning woes regarding Spain and Italy and recent ratings downgrades by Moody’s Investors Service.

The EUR/USD was seen moving strongly bearish yesterday as a result of the risk averse sentiment that arose from the rate announcement. The price moved from its recent high of 1.4370 to as low as 1.4140 before leveling off mildly. The EUR saw similar losses between 0.2% and 0.6% against its other currency rivals.

Europe’s economic calendar today will be significantly lighter than it has been of late. A report on the French trade is scheduled for 7:45 GMT, shortly before the publication of Germany’s industrial production figure. Italy will also be releasing data on its preliminary GDP for Q3. Most serious investors are focusing their attention on the American release of Non-Farm Payrolls (NFP), the most impactful news event affecting this week’s global economy.

JPY – BOJ Intervention Not Enough to Halt JPY Ascent

The Japanese yen (JPY) was seen moving moderately bearish throughout the day following a move by the Bank of Japan (BOJ) to intervene in the forex market to drive its national currency lower against its primary rivals. The move came as the yen surged beyond previous intervention levels on heightened risk aversion in the global economy due to debt fears in Europe and the United States. The BOJ tends to resist an overly strengthened yen for the gouging effect it has on Japanese exports.

Weakening commodity prices, however, are helping offset the losses from an overly powerful yen, as is the general sentiment that the JPY acts as a solid store of value in times of uncertainty. Given reports that Italy may default in the near future, and that Spain may also follow suit, a period of heightened risk aversion appears inevitable. The JPY, therefore, is positioned to continue gaining despite attempts by the BOJ to prevent such an occurrence. It will be worth watching to see if the BOJ intervenes a second time in the days ahead.

Oil – Crude Oil Prices Falling towards $90 a Barrel

Crude Oil prices met solid resistance Thursday, moving towards $90 a barrel in late trading as sentiment appeared to favor a mild dip in global manufacturing demand. Data releases out of the UK and Europe yesterday were driving many investors back into safer assets as most reports suggested contraction among the major industrial nations of the West would gain momentum. If proven accurate, the new outlook would have oil prices falling back into a bearish channel as demand decreases further.

As investors seek shelter, the value of crude oil, which was seen plummeting all week, may continue to do so before today’s close. A sudden jump in dollar values due to this week’s sudden return to risk aversion is expected to drive many investors into lower investments on physical assets; driving oil prices even further down. Should Crude Oil sentiment hold steady today, oil prices may see another slump.

Technical News

EUR/USD

The weekly chart shows a bullish engulfing pattern was followed by a false breakout above the trend line falling off of the May and July highs. A pullback from this resistance line formed a doji reversal candlestick which hints at declines in the EUR/USD. The 200-week moving average looks to be the first support at 1.4025 followed by the 200-day moving average at 1.3930. The rising trend line from the May low could also be supportive at 1.3830. To the upside 1.4580 will need to hold to maintain the bearish technical picture. A close above this level could go on to test 1.4700 and this year’s high of 1.4940.

GBP/USD

Three weeks of consistent gains for cable are beginning to shift the technical picture from bearish to bullish. Sterling has moved above resistance levels that otherwise would have contained the pair. The first break occurred above the neckline of the head and shoulders pattern at 1.6185 and the second major break occurred at 1.6370 above the previous trend line rising from the May 2010 low. Initial resistance will be the May 31st high at 1.6550 followed by the April high at 1.6745. A move lower for the GBP/USD will likely test the base at 1.6260 followed by the previously broken trend line off of the April high at 1.6140. A breach of 1.6000 could have scope towards 1.5780.

USD/JPY

Yen strength has returned with a vengeance. Last week’s candlestick closed with a shaved bottom indicating momentum is to the downside. This week’s opening gapped higher but the price managed to hold below the current short term trend line from the July 20th high which comes in at 78.05. Additional resistance may be 79.60 and the 55-day moving average at 80.15 but the downside is calling. Support is found at 76.70 from last week’s low followed by the all-time low from March at 76.11. A break here and we move into uncharted territory where the psychological support at 75.00 and 70.00 come into play.

USD/CHF

The Swiss franc is in a similar position as the yen as the USD/CHF moves into uncharted territory. Bias remains to be short but Monday’s opening gap higher could create a Harami reversal pattern which may lead to slight gains for the pair. A daily close will be needed for confirmation. Resistance is found at 0.8080 and 0.8275. A move higher to these levels would provide for potential short entries back into the long term downtrend with targets at the big round number at 0.7800.

The Wild Card

Oil

Spot crude oil prices shed a dramatic 6% yesterday. Prices have continued to fall in today’s early morning trade hitting a low of $85.21, a 61% Fibonacci retracement from the May 2010 to May 2011 bullish move. Forex traders should note crude oil has supports at $83.80 followed by $80.25. Resistance may be found at $89.00.

Forex Market Analysis provided by ForexYard.

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The Ceska Narodni Banka (CNB) maintained the two-week repurchase rate unchanged at 0.75% as expected.  The Bank also held the the discount rate unchanged at 0.25% and the Lombard rate at 1.75%.  The Bank said: “Consistent with the forecast is broad stability of market interest rates at the start of the forecast horizon and a gradual rise in rates starting in late 2011/early 2012.  The rates do not react to the first-round effects of the VAT increase”.