Sept. 27 (Bloomberg) — Steen Jakobsen, chief economist at Saxo Bank A/S, talks about possible solutions to the euro-zone sovereign debt crisis. He speaks from Hellerup, Denmark, with Linzie Janis on Bloomberg Television’s “Countdown.” (Source: Bloomberg)
De Wet Favors Precious Metals on Weaker Economic Outlook
Sept. 27 (Bloomberg) — Walter de Wet, head of commodities research at Standard Bank Plc, talks about the outlook for precious and industrial metals amid a weaker global economic outlook. He speaks with Francine Lacqua on Bloomberg Television’s “The Pulse.”
Gold & Stocks Rally as “Hong Kong Housewives Queuing Up for Gold”, New Eurozone Plan “Treats Symptoms, Not Causes”
London Gold Market Report
from Ben Traynor
BullionVault
Tuesday 27 September, 08:30 EDT
U.S. DOLLAR prices to buy gold rose to $1676 an ounce Tuesday morning London time – a 9% gain on yesterday’s spot market low – as stocks and commodities also rallied and government bonds fell as reports circulated that European officials were drawing up new plans to battle the ongoing debt crisis.
The price to buy gold has now recovered all of yesterday’s losses.
“Housewives are queuing up outside jewelry shops to buy gold after the dip,” says one gold bullion dealer in Hong Kong, citing local press reports.
“At the current level people are buying,” confirms another Hong Kong dealer, Ronald Leung at Lee Cheong Gold Dealers.
“They believed what happened in the past few days was only a correction.”
“We continue to believe that gold will push higher into 2012,” says Walter de Wet, commodities strategist at Standard Bank.
“However, until short-term funding, especially in Europe has been resolved, we remain neutral on gold.”
Silver prices climbed to $33.54 per ounce – 28.2% up on Monday’s low.
Overnight deposits made by Eurozone banks with the European Central Bank – rather than with each other – rose to a two-week high of €165.12 billion yesterday, a 9.6% jump from Friday’s figure. Overnight ECB deposits hit their 2011 peak on September 12 at €197.75 billion.
Eurozone policymakers are currently devising a plan aimed at providing assistance to distressed European banks, according to a report published by financial news outlet CNBC on Monday.
Stock markets surged Tuesday morning – with the FTSE up 3% and Germany’s DAX up 4.4% by lunchtime – in what CNBC’s Jim Cramer hailed the ‘No More Lehmans’ rally, in reference to the plan.
The plan reportedly involves the European Financial Stability Facility – the Eurozone’s €440 billion ad hoc bailout mechanism set up last year – as well as the European Central Bank and the European Investment Bank, which is owned by the 27 member states of the European Union.
The AAA-rated EIB, according to its website, exists to make “long-term finance available for sound investment” – including microfinance and loans to small businesses.
Under the new plan, the AAA rated EIB would set up special purpose vehicle capitalized by funds from the EFSF. This SPV would then issue bonds to private investors, using the money received to buy troubled sovereign debt. The SPV’s bonds could also be used by the institutions that hold them – such as banks – as collateral against loans from the ECB.
The EIB “is certainly not a bailout-institution for the Eurozone,” adds Jim Reid, head of global fundamental credit strategy at Deutsche Bank.
“[We understand the] EIB’s charter currently does not allow sovereign or bank bond buying…changes to the EU Treaty with regards to the EIB’s mandate would require a lengthy political process…[which] may involve all 27 EU member states rather than just the single-currency ones.”
“Buying bonds,” adds Standard Bank analyst Steve Barrow, “or recapitalizing banks works on the symptoms of the problem, not the causes…Eurozone growth will stay weak, leaving periphery countries like Italy and Spain fighting an uphill battle whether the EFSF can buy large amounts of their bonds or not.”
Senior members of Germany’s Free Democratic Party, the junior partner in the coalition government, said on Monday they would not vote for any plan that involves leveraging the EFSF – a suggestion made earlier this month by US Treasury secretary Timothy Geithner.
Over in Greece parliament is due to vote Tuesday on a new property tax aimed at cutting the country’s deficit – while tax collectors are set to join a 48 hour strike in protest at the tax and other austerity measures. Greece is still awaiting confirmation that it will receive the next installment of its bailout funding – without which the government expects to run out of money within weeks.
Second hand home sales in Beijing meantime have fallen 73% in the last year, according to Chinese media reports.
Also in Beijing, Chinese consumers were given the chance to buy gold from the country’s first gold vending machine over the weekend – although the machine was soon switched off again as it was not producing receipts.
China has been the world’s fastest-growing source of private gold demand in recent years, and is currently the world’s second-largest market behind India, according to World Gold Council figures.
Gold value calculator | Buy gold online at live prices
Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
Why It’s the Perfect Time to Invest in Shale Oil Stocks
Why It’s the Perfect Time to Invest in Shale Oil Stocks
by David Fessler, Investment U Senior Analyst
Tuesday, September 27, 2011: Issue #1609
On Monday, West Texas Intermediate (WTI) crude oil rose above $82 as traders showed faith that European leaders are finding a way to address the region’s financial instability.
The macroeconomic situation around the world is certainly concerning. Falling crude inventories, a shortage of energy carriers, uncertainties in production expansion and the European economy will all play a role in supporting crude prices.
But regardless of what the day-to-day markets are doing, the long-term outlook for oil remains bullish, particularly in light of a continued, steady increase in global demand…
Natural Gas Drillers Shifting to Liquid-Rich Shale
It’s especially true here in the United States, where most of the large natural gas drillers have shifted over to the liquid-rich areas of shale plays.
As evidence of that, take a look at the following graph from the Energy Information Administration (EIA).
It clearly shows the dramatic rise in crude oil and condensate production, particularly from the Barnett and Bakken shale formations.
The most interesting part of this graph is that the 2009 number of about 55 million barrels is going to seem very small in just a couple of years.
All of the plays listed in the graph – plus a few more not shown – have acreage that’s rich in liquids. Some more than others. That’s where the drillers have moved their rigs to, and they’re actively drilling there.
Why? With natural gas prices around $4.00, there’s a lot more money in the liquid part of the plays for the drilling companies, and that’s what they’re targeting.
For instance:
- North Dakota’s Bakken formation is a very rich oil play, with a small percentage of natural gas. Liquid production there increased 150 percent since 2005.
- Drillers are using the same horizontal drilling and fracking techniques used for shale gas formations to produce oil from the Bakken.
- Annual output from the Bakken has increased from about one million barrels annually in 2005 to over 146 million in 2011. That’s over 400,000 barrels per day.
Its recoverable reserves keep rising, too. Continental Resources (NYSE: CLR), the top producer in the Bakken, estimates recoverable reserves of as much as 24 billion barrels of oil buried there.
Right now, the Bakken is limited to about 800,000 barrels per day, but new designs for increasing the pipeline infrastructure will raise overall capacity to about 1.1 million barrels per day in just a few years.
What About Other Shale Oil Areas?
While the Bakken is certainly a hot area right now for liquids, other shale plays previously known for natural gas production are now producing significant volumes of liquids:
- The Barnett in Texas saw overall liquids production double from 2005 to 2009.
- The Woodford Shale in Oklahoma saw liquids production surpass one million barrels in 2009, an increase of 83 percent from the previous year, and eight times the volume of 2007.
- Eagle Ford, another Texas formation, saw 2009 liquids production increase five-fold over the previous year. Current output is about 71,000 barrels per day, and that number should increase to about 421,000 barrels per day by 2015.
- Liquids production from the Marcellus Shale in Pennsylvania quadrupled in 2009 and is on track for similar increases this year.
Chesapeake Energy (NYSE: CHK) expects 50 percent of its increase in revenue in 2011 to come from increased liquids production in the Marcellus shale formation.
Drilling for shale oil is big business. Baker Hughes, Inc (NYSE: BHI) indicates in their weekly rig count that there are currently 1,099 rigs drilling horizontal wells in the United States. That’s an increase of 19 from the prior week and 221 from the year before.
While Hughes doesn’t break out rigs that are specifically drilling horizontally for oil, its U.S. oil rig count is up 420 from a year ago. We can certainly infer that a lot of those rigs are horizontal units operating in the shale plays.
With natural gas prices still near historic lows, the best profitable plays will be in companies who are and will continue to be drilling and producing in the liquids-rich shale plays in North America. They include, but aren’t limited to, the two companies mentioned above.
Good investing,
David Fessler
Article by Investment U
Mentel Says Gold a `Speculative Asset,’ Sees Volatility
Sept. 27 (Bloomberg) — Lothar Mentel, chief investment officer at Octopus Investments Ltd., talks about investment strategy for commodities and equities. He speaks with Owen Thomas on Bloomberg Television’s “On the Move.” (Source: Bloomberg)
CoreLogic Acquisition Rumors Flaring Up
CoreLogic Acquisition Rumors Flaring Up
by Justin Dove, Investment U Research
Tuesday, September 27, 2011
Back on August 30, data and analytics company CoreLogic (NYSE: CLGX) announced that it hired investment bank Greenhill & Co.to help advise a potential sale.
Friday, rumors were picking up steam as analysts predicted the company’s stock could fetch a premium of between 30 and 50 percent. By Friday afternoon, CoreLogic options activity was up 382 percent more than normal, signaling optimism at a possible sale.
Its stock was trading around $11.50 on Friday – 47 percent above its low in late August, but 43 percent less than its 52-week high.
Reuters reported that TPG Capital paid “about 11 times EBITDA” in buying CoreLogic-competitor MDA DataQuick last year. That means someone could pay up to $18 per share for CoreLogic – a 56-percent increase over Friday’s price.
CoreLogic Wooed By Up to Seven Suitors
Reuters also reported that “at least two strategic buyers and five private equity firms have shown interest in the company.”
Companies listed as showing interest are:
- IBM (NYSE: IBM)
- InfoSys (Nasdaq: INFY)
- Accenture (NYSE: ACN)
- Fidelity National Information Services (NYSE: FIS)
The more suitors there are for an acquisition, the higher the probability of a bidding war. If these rumors prove true, CoreLogic and its shareholders may stand to benefit.
CoreLogic’s Core Data and Analytics Products
CoreLogic is a data and analytics company spun off from First American Financial Corp. (NYSE: FAF) last year. The company operated at a profit the last two quarters, but failed to deliver for investors since its spin-off.
CoreLogic’s core data and analytics products provide things from risk and fraud analysis to risk management and specialty financial data.
But considering its bread and butter is mortgage data and analytics, the company is struggling along with the housing market. Some analysts also believe that a complicated business plan is also holding back the newly independent company.
“They have a bunch of things going on at the same time,” an analyst told HousingWire.com. “It’s a complicated business model which makes it tougher for investors.”
CoreLogic: Just Parts of a Whole?
This assumption makes some wonder if CoreLogic will be sold as a whole, or whether it will just sell pieces of its company to lighten the load.
- CoreLogic already sold off its India-based operation to Cognizant (Nasdaq: CTSH) in July. This all came after expansion earlier this year.
- In January, CoreLogic bought RP Data, a firm that operated in similar segments in Australia and New Zealand, to increase exposure to the Asia-Pacific region.
- Then in March, it bought cloud-computing firm Dorado Network Systems Corp. to enable data cloud options to its clients.
CoreLogic certainly could just be optimizing its operations, but analysts, such as Morningstar’s Brett Horn, believe the company is most valuable as a whole.
“I think their complete business is more valuable than in pieces,” Horn told Reuters. “Just selling these pieces separately to different buyers is probably not going to be the most effective way to realize their value.”
CoreLogic’s Struggling Bottom Line
CoreLogic, although profitable, is struggling. There’s also the potential that it will only sell pieces of its business. But if the whole company is sold to a strategic buyer or investment firm, investors could make a quick profit on the premium.
A potential sale is somewhat priced into the stock, as shown by its 40-percent gain since the announcement. But the stock is likely undervalued due to a slumping overall market and a poor housing industry, but should still garner a further premium from a potential buyer.
Considering the 52-week high is above $20 per share, there’s reason to think a possible a buyer could pay close to that amount. It also bodes well that there are up to seven suitors. A bidding war could drive up the premium.
It may be wise to stay tuned to see if CoreLogic does in fact get bought out as a whole and how much companies are willing to fork out.
Good investing,
Justin Dove
Article by Investment U
Forex CT 27-9-11 Video News Fundamental Update
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.
Blain Says Enlarged EFSF Still Vulnerable to Speculators
Sept. 27 (Bloomberg) — Bill Blain, co-head of the Special Situations Group at Newedge Group, talks about the euro-zone sovereign debt crisis and efforts to bolster the European Financial Stability Facility. He speaks with Owen Thomas on Bloomberg Television’s “On the Move.”
Afternoon Market Thoughts for 27 September 2011
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.
Markets Recovers on Hopes for European Action
Following several days of sharp declines, yesterday’s session brought trading correction all over the globe. In the forex market, the euro managed to correct losses against the U.S. dollar, rebounding from a 10-month low. In commodities trading, crude oil saw a 500 pips gain and reached as high as $82.45 a barrel.
Economic News
USD – Dollar Drops versus Majors on Speculation Greece Might Prevent Default
The U.S dollar depreciated against most of the major currencies during Monday’s trading session on speculations European policymakers will manage to prevent Greece’s economy from default, lowering risk-aversion in the market and reducing demand for the greenback as a safe-haven currency.
The dollar is falling sharply against the euro and the British pound on Tuesday’s morning session on expectations that the euro-zone will soon combine a plan to rescue the sluggish Greek economy.
The dollar fell about 200 pips vs. the euro since market opening and the EUR/USD pair is now trading near the 1.3540 level. The GBP/USD pair is currently trading near the 1.5570 level, up about 130 pips from market opening.
As for today, several leading economic releases are expected from the U.S. The most significant publication looks to be the Consumer Confidence survey, which is scheduled at 14:00 GMT. Analysts are forecasting that confidence among U.S consumers rose to 46.2 points in September from 44.5 in August. Such a result will be a good signal for the U.S. economy and the greenback might correct some of yesterday’s losses as a result.
EUR – Euro Corrects Losses after Asian Shares Advance
The euro began this week’s trading session with a rising trend against most of its major currency counterparts on hopes that the euro-zone will manage to bailout the deteriorating Greece economy; a rally of Japanese stocks in Tuesday’s morning session has boosted the 17-nation’s currency bullish trend.
The euro is rising against the safe-haven currencies on Tuesday morning session on speculation that the European Central Bank (ECB) will take action and convince the European leadership to region’s rescue fund in order to prevent Greece from reaching bankruptcy.
The shared currency is strengthening after Asian shares saw gains, reducing risk-aversion pressure and weakening demand for safe-haven currencies, such as the U.S. dollar and the Japanese yen.
The euro gained about 200 pips against the dollar and the EUR/USD pair peaked at the 1.3565 level. The EUR/JPY pair reached as high as the 103.60 level, marking a 160 pips gain since market opening.
As for today, traders are advised to follow any update regarding the European debt crisis, as any positive news is likely to have a positive impact on the 17-nation currency.
JPY – Yen Tumbles as Demand for Safe-Haven Currencies Plunges
The Japanese yen fell against most of its major currency rivals as speculation that European policymakers will agree on a rescue plan for the sluggish Greek economy has reduced demand for the Japanese currency as a safe-haven investment.
Since the opening of this week’s trading session the global press is filled with estimations that European leadership will once again bailout Greece’s economy in order to prevent a global crisis. This has reduced the appeal of both the yen and the U.S. dollar as alternative investments in time of crisis.
The yen fell about 160 pips against the euro, and the EUR/JPY cross has reached as high as the 103.60 level. The Japanese currency has dropped about 140 pips against the British pound, taking the GBP/JPY cross to the 119.10 level.
Looking ahead to today, the main event that looks to impact the yen remains the fragile European debt crisis. In case that Greece will in fact manage to prevent default, the Japanese currency looks to continue with the bearish trend. Otherwise, yesterday’s losses will be no more than a temporary technical correction.
Crude Oil – Crude Oil Bounces off 7-Week Low to reach $82.45 a Barrel
Crude oil saw a significant bullish move on Monday’s trading session, reaching as high as the $82.45 level on optimism that European policymakers will tame debt crisis.
Crude rose 2.8 percent following the biggest quarterly decline since the Lehman Brother crisis in 2008. Currently, it seems that speculation regarding another rescue package for the Greek economy is enough to boost oil prices.
Crude is currently trading near the $82.30 level after reaching as high as the $82.45 from a 10-week low of $77.10 a barrel.
As for today, traders are advised to follow the leading release from the euro-zone and the U.S. economy, as these are likely to have the largest impact on oil prices. Any positive data, especially from the euro-zone has potential to extend crude’s bullish correction.
Technical News
EUR/USD
Following several days of sharp declines, the EUR/USD pair managed so correct some of its losses during yesterday’s trading, and is currently trading near the 1.3515 level. In addition, as the MACD on the 4-hour chart continues to point upwards, it seems that another bullish session might be expected. Going long seems to be the right choice today.
GBP/USD
The cable continues to correct losses and has reached as high as the 1.5595 level during Tuesday’s morning session. However, as a bearish cross takes place on the 4-hour chart’s Slow Stochastic, it seems that today the GBP/USD pair might resume the bearish trend. Going short with tight stops might be the right strategy today.
USD/JPY
The USD/JPY pair continues with the flat-trading and is currently trading near the 76.40 level. Nevertheless, as both the Slow Stochastic and the MACD on the daily chart are providing bearish signals, it seems that the pair might see a bearish move today, with potential to reach the 75.70 support level.
USD/CHF
There is a very distinct bullish channel formed on the 1-day chart, as the USD/CHF pair is now trading near its upper border. After several failed attempt to breach through the 0.9185 resistance level, the pair has slightly corrected gains and is currently trading near the 0.9030 level. Today, the pair might see another attempt to cross the resistance level. If it manages to breach it, the USD/CHF could reach as high as the 0.92500 level.
The Wild Card
Silver
Silver saw a remarkable correction yesterday, rising close to 600 pips and reaching as high as the $31.85 level. In addition, as all both the MACD and the RSI on the 4-hour chart are providing bullish signals, it seems that another bullish session may be intact. This might be a good opportunity for forex traders to join the technical correction.
Forex Market Analysis provided by ForexYard.
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