Month: September 2011

By James Woolley

Forex signals are a great help for many people because although everyone wants to make money trading the currency markets themselves, the reality is that many fail to do so. So by accessing third party forex signals you can still generate profits without having to make any trading decisions yourself. When looking for signal providers you basically have two options.

The first option is find a profitable forex trader who will send their signals to you whenever a set-up occurs. They find the signals and send them directly to your inbox, or maybe send them to you via text message or via an instant online messenger service. It is then up to you to place the same trades yourself in your own trading account.

This is the basic offering, but many subscription services also include a live trading room these days as well. So this basically means that the subscribers can watch the trader in action, ask them any questions and learn some useful tips and strategies along the way. They can also generate some decent profits because the trader will announce their trades in real time, and often before they actually place the trade, so you have lots of time to place the same trades yourself.

Of course not everyone has the time to stay in a live trading room all day and wait patiently for the trader to give them potential trades. That’s why the second main option is often the better one.

I’m talking here about automated trading signals. Automated signals enable you to generate profits from forex trading without having to place any trades yourself. Therefore they are ideal if you do not have a lot of spare time during the day, or whether you simply cannot be bothered to trade yourself.

There are a few websites that offer this service and they generally look to bring signal providers and people who are looking for signals together. They offer this service for free because they make money from every trade that is placed, and there are many benefits for all parties.

For those people looking for profitable signal providers, you should have no problem finding them. There are hundreds, if not thousands of different providers on some of these sites and in many cases it’s just a matter of doing your homework to pick the best ones. To help with this task, there are usually detailed trading records and full statistics so you can see what kind of draw-down you can expect, for example.

The only drawback is that you have to open an account with one of the brokers that the host company currently works with, although this isn’t a major problem. Once you open an account you can trade the signals of as many different providers as you want and there are no subscription fees whatsoever. The trades are placed in your account in real time and you will therefore achieve exactly the same results as the traders that are providing the signals.

So the point is that you have two main options when looking for profitable signal providers. You can either get your forex signals from a paid subscription service where the signals are sent to you for you to trade yourself, or you can choose an automated signal service, which is more of a hands-off approach. They can both provide you with decent profits, so ultimately the final decision rests with you.

About the Author

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(Video) Bob Prechter Explains ‘Triple Top’ Forming in U.S. Stock Market

This excerpt from the special video issue of the August Elliott Wave
Theorist brings you Bob Prechter’s analysis of the triple top
that has been forming in the U.S. stock market over the past 12 years.
Watch as Bob himself explains what this pattern means for you and the markets.

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Clarity to the Future.”

You’ll get a glimpse into the in-depth analysis Robert Prechter presents
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his most recent issues.

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Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world’s largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.

The past week in monetary policy saw 13 central banks review interest rate levels and monetary policy settings.  Those that changed rates were: Belarus +300bps to 30.00%, Kenya +75bps to 7.00%, and India +25bps to 8.25%.  Russia and Denmark also adjusted the bands of their deposit and lending rates, while holding their main rates steady.  The Banks that held rates unchanged were: Mauritius 5.50%, Mozambique 16.00%, Russia 8.25%, New Zealand 2.50%, Switzerland 0-0.25%, Georgia 7.50%, Latvia 3.50%, Denmark 1.55%, Sri Lanka 7.00%, and Chile 5.25%.  Also making headlines in central banking was the announcement from the ECB of joint US dollar liquidity operations as a move to augment European banking system liquidity.

Looking at the central bank calendar, next week there are a number of European central banks meeting (Hungary, Turkey, Iceland, Czech Republic, Norway), no doubt they will make due reference to the developments in the Euro sovereign debt crisis.  Of course, the other key event on the radar is the US FOMC meeting on the 20th – Bernanke announced at Jackson Hole the meeting would be extended to 2 days to allow the FOMC to consider implementing QE3 or QE2.1.

By The Sizemore Letter

Writing for the New York Times, Louise Story and Graham Bowley note that large market swings are becoming a lot more common than they used to be.  (See “Market Swings are Becoming New Standard”)

“It has become more likely for stock prices to make large swings—on the order of 3 percent or 4 percent—than it has been in any other time in recent stock market history,” write Story and Bowley, referring to NY Times analysis of daily stock price changes going back to 1962.

But while volatility has certainly ticked up in recent years—and particularly in the last month—there is very little new under the sun.  Markets tend to go through long periods of relative calm interrupted by violent outbreaks of volatility that can last from a couple days to a couple years.

Consider Figure 1, which shows the daily price changes of the Dow Jones Industrial Average.  A couple things immediately jump off the page.  The first is the 1987 stock market crash, caused by “portfolio insurance” programs run amok.  But ignoring 1987, we see something that looks a little like a barbell.

Figure 1

Volatility was high in the late 1920s and throughout the Great Depression decade of the 1930s before entering nearly four decades of relative calm.  Stocks got a little more volatile in the 1980s, returned to relative calm for much of the 1990s, and then all hell broke loose.

There was a surge in volatility during the late 1990s that coincided first with the Long-Term Capital Management meltdown and then the dot-com bust and the fallout from the September 11, 2001 terror attacks.  Volatility died down a bit during the mid-2000s…and then exploded as the mortgage crisis struck.

Pondering Von Mises, no doubt

Today, there is a lot of figure-pointing as to whom or what is responsible for the uptick in volatility.  Austrian economists—who have enjoyed a high profile after Tea Party presidential candidate Michele Bachmann recently remarked that she read Von Mises on her beach vacations—might argue that excess liquidity and ultra-loose Fed policy are to blame.  There is certainly some amount of truth to this.  The liquidity provided by the Fed has a way of seeping into the financial markets, where it can play the role of gasoline poured liberally onto a bonfire.  But liquidity alone cannot explain the roller coaster ride of recent years.

In the New York Times article, Story and Bowley suggest that high-frequency trading and the proliferation of new exchange-traded funds (ETFs) are to blame.

The “high-frequency trader” has grown into an almost mythical boogeyman in recent years and particularly after the May 2010 Flash Crash, in which the Dow dropped 1,000 points within minutes and then gained most of it back—within minutes.

High-speed quantitative traders are nothing new, of course.  But in recent years, they have come to control as much as 60% of daily trading volume, which is fine—except when they all vanish at once and cause liquidity to disappear, as they did during the Flash Crash.   To this day, there has never been an adequate explanation for what “caused” the Flash Crash, and that is unfortunate because that event—even more than the post-2008 bailouts—proved to many investors that they are indeed playing a game that is rigged against them.

Given the size and liquidity of global stock markets, I remain skeptical about the effects that ETFs are having on volatility.  But the commodities markets are an entirely different story.  The havoc that commodity ETFs are wreaking on metals, energy and materials prices is a topic I have covered recently in Sizemore Insights (see “The Myth of Commodities Investment.”)

The commodities markets have fallen victim to “financialization.” It is the capital markets—composed of everyone from multi-billion-dollar hedge fund traders to do-it-yourself individual investors—that now set prices and not the supply and demand dynamics of real producers and consumers. This renders the all-important price signals all but meaningless. Producers are thus left to “guestimate” what real demand is and adjust their production accordingly.

Edward Hadas recently recounted a joke told by disenchanted Soviet era economists that I think is appropriate:

Soviet patriot: “The USSR will invade and conquer every country in the world, except New Zealand.”
 
Curious observer: “Why leave New Zealand out of the global communist economy?”
 
Patriot: “So we can find out the market price of goods.”  (To view Hadas’ full article, follow this link.)

Lenin and Stalin must be laughing at us from hell right now. The West might have won the Cold War, but Soviet-style central planning has become the de facto method of setting commodity production because the capitalist system has become perverted beyond all recognition by its own capital markets.

What are we to take away from all of this?  Will volatility be “permanently” higher, as Story and Bowley suggest?

History suggests that this too shall pass.  Markets have a way of adapting, eventually, and I see no reason why this time is different.  Still, this doesn’t mean that the volatility cannot persist for months or even years.

While it’s difficult to invest with confidence in this kind of market, investors can use the volatility as an opportunity.  Investors that keep a little cash in reserve can use the violent downdrafts in the market to accumulate shares of high-quality, dividend-paying companies—the kinds of businesses that will survive and thrive in any economic conditions (see “Wintel: The Ugly Sister and the Buy of the Decade”).

For investors with a long time horizon and a healthy amount of emotional detachment, volatility is nothing to be afraid of.  We should consider those immortal worlds of Warren Buffett: “Be greedy when others are fearful and fearful when others are greedy.”

Given the fear out there, I would say a little greed is in order.

Related Post: Risk, Return, and Reality Revisited

If you liked this article by Sizemore Insights, you’d probably enjoy The Sizemore Investment Letter, our premium members-only newsletter. Click here for more information.

The Banco Central de Chile maintained its monetary policy interest rate unchanged at 5.25%.  The Bank noted the impact of slowing developed market growth  and volatility, and on its own economy said: “Domestically, output and demand figures show signs of moderation, in line with projections in the Monetary Policy Report. Labor market conditions are still tight and faster growth in nominal wages is observed. CPI inflation indicators have hovered around 3% y‐o‐y, while core inflation measures remain contained. Inflation expectations are close to the target.”

Chile’s central bank previously also held the monetary policy interest rate unchanged at 5.25% at its August meeting.  The Bank last raised its monetary policy interest rate by 25 basis points to 5.25% at its June meeting this year.  Chile reported annual consumer price inflation of 2.9% in July, compared to 3.4% in June, 3.3% in May 2011, and 3.2% in April this year; within the Bank’s inflation target of 2-4%.  The Chilean economy grew 8.4% in the first half of 2011, driven by strong domestic demand; full year GDP growth is expected around 6.5%, while inflation is seen around 4% by the end of the year.

The Central Bank of Sri Lanka kept its benchmark repurchase rate steady at 7.00%, and also held the reverse repurchase rate at 8.50%, and the Statutory Reserve Ratio at 8%.  The Bank said: “It is expected that the moderation of world economic activity along with the slowing down of both advanced economies as well as emerging economies would have some dampening effect on credit and therefore monetary expansion in the period ahead,”.  Also noting: “if warranted, appropriate monetary policy action would be taken to contain monetary expansion, going forward.”

Sri Lanka’s central bank also held its monetary policy settings unchanged during its August meeting this year, while the Bank last cut its key interest rates in January this year.  Sri Lanka reported an annual headline inflation rate of 7% in August, down slightly from 7.5% in July, 7.1% in June, and 8.2% in May.  Sri Lanka is aiming for 8.5% GDP growth in 2011, after its economy expanded 8% in 2010, meanwhile inflation is expected to slow to 6% by the end of 2011.  Sri Lanka reported 8.2% annual GDP growth in the second quarter (7.9% in Q1).

Investing in Telefonica Stock (NYSE:TEF)

by Louis Basenese, Wall Street Daily Chief Investment Strategist
Friday, September 16, 2011

It’s Time to Go Dumpster Diving (Again) in Europe

In the summer of 2010, the contrarian in me was salivating over the opportunity in Europe.

Then, much like now, the eurozone was in an awful tailspin. The culprit? Fears over a sovereign debt contagion.

Go figure, but that’s exactly what’s weighing on the markets again. As MarketWatch reports, “European stock markets fell sharply on Monday on increased fears that Greece is headed for a default.”

So much for time healing all wounds! Despite multiple rounds of bailouts, we’re literally right back where we were a little over a year ago.

Instead of begrudging the lack of progress, though, we need to embrace the opportunity. Because many blue-chip European companies with rock-solid fundamentals are getting unfairly punished.

And there’s one in particular that represents an opportunity too good to pass up…

Dialing Up Double-Digit Gains and Yields in Spain

My favorite beaten-down European stock right now is Telefonica (NYSE: TEF), the biggest telephone company in Spain.

Ever since Euro Crisis 2.0 hit, the stock’s off about 34%. And that’s almost exactly the amount the stock fell during Euro Crisis 1.0, before snapping back 48%. Take a look:

I’m convinced that the stage is set for exactly the same type of rebound. And if you’re not interested in earning a potential 48% profit – in a short period of time – you need to get your pulse checked.

A Rare Recession (and Euro Crisis) Resistant Dividend Stock

In addition to being Spain’s dominant phone company, Telefonica is also the largest wireless provider in Britain. It’s a major player in Latin America, too, particularly in Brazil.

And no matter what’s going on in the world or currency markets, people aren’t going to suddenly give up their telephones, mobile phones, or broadband internet connections.

They didn’t in the throes of the 2008 global downturn. They didn’t last summer. And they won’t do it this go-round, either.

At worst, the company might suffer a 1% to 3% drop in sales. But that’s hardly enough to justify the current selloff in shares.

If you need more tangible proof, take a look at Telefonica’s track record.

The company has increased its sales by an average of about 12% per year, since 2002. Pulling off such a feat doesn’t happen unless you operate a business with steady, undeterred and growing demand.

But demand aside, the real reason the latest euro crisis won’t torpedo Telefonica’s business is simply because the majority of the company’s sales – around 60% – don’t even come from the eurozone. They come from Latin American markets, which boast some of the strongest growth potential in the world.

So if anything, Telefonica is actually shielded from the collapsing value of the euro. (Remember, a weaker euro leads to a fatter bottom line, as the company enjoys gains on overseas profits, thanks to currency translation.)

Clueless investors are, of course, overlooking this reality. But let’s not be so myopic or foolish.

In the end, Telefonica represents one of the bluest-of-blue-chip stocks in the market. It operates a simple business with ever-steady demand. And it spins off gobs of cash – almost $17 billion in the last 12 months – which management kindly returns to shareholders via dividends.

Mind you, after the latest selloff, Telefonica now sports a safe and attractive 9.5% yield.

The fact that the stock’s trading on the super cheap, too, only makes the opportunity more irresistible.

At current prices, Telefonica trades at a price-to-earnings (P/E) ratio of just 6.22, which is about 50% cheaper than the average stock in the S&P 500 and well below the company’s five-year average P/E ratio of 11.5.

Bottom line: The thought of buying any European stock right now might be downright repulsive. But the 34% selloff in shares of Telefonica since Euro Crisis 2.0 began is flat out unjustified. So hold your nose and don’t let this rare opportunity for double-digit gains (and yields) pass you by.

Ahead of the tape,

Louis Basenese

Original article reprinted with permission from Wall Street Daily.

Article by Investment U

Sept. 16 (Bloomberg) — Ralph Silva, an analyst at Silva Research Network, talks about the outlook for banking regulation after a $2 billion loss reported by UBS AG yesterday from unauthorized trading. He speaks with Owen Thomas on Bloomberg Television’s “Countdown.”

Sept. 16 (Bloomberg) — Siddhartha Sanyal, chief India economist at Barclays Plc in Mumbai and a former Reserve Bank of India official, talks about the nation’s economy and central bank monetary policy. Sanyal speaks with John Dawson on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)

Sept. 16 (Bloomberg) — Claudio Piron, head of emerging Asia foreign-exchange and fixed-income strategy at Bank of America Corp.’s Merrill Lynch unit, talks about the outlook for currencies. Piron speaks with John Dawson on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)