Month: October 2011

As a huge arena for making serious profits Forex reminds me of a pendulum swing: when it goes aside we should not forget that it certainly comes back. Beware! Forex huge profits also mean the potential dangers. Some of them, for instance, come from the outside (e.g. false information from so called “experts” etc.). And some of them are actually the creations of traders themselves. We now speak about self-created FX myths.

Here comes the first one – Forex gives an immediate and huge profit. It’s not even close to the reality. Even opposite. The actual statistics is harsh: more than 90% of all trades in the FX market turn into losses. So this is what you may get in the first place. Not profits.

Misconception №2. Jumping into a trillion-dollar market without any preparation (mental, physical and emotional). Just say: you would never drive a car before you get a license and really know how to make this damn vehicle move from your garage. Without making researches, having sufficient funds and correspondent knowledge you’re going to crash into one of the Forex “poles.”

So before “driving” the Forex roads, you better start a demo account and study the industry. Or… you’ll be meeting your “multi-$$$” fortune only in your dreams

Beware of Leverage and Care for Your Margin

Some people believe that the Great Pyramids in Egypt were created by aliens. Indeed, how could the stone blocks (2-6 tons weight each) be put together as tight as possible on that height?! Historians are pragmatic. They say the Egyptians used long angle levers and the leverage power which actually helped us to get one of the greatest world’s miracles.

However with Forex the picture may be different. The one thinking high leverage is a base of success will fail sooner or later. So what is leverage itself and how it refers to what is margin?

Let’s consider the situation. You are willing to get a bank loan to purchase Hugh Hefner’s “Playboy mansion” with all of his housekeepers (somebody has to do that someday!). But you can’t afford this deal in front so you go to the bank. It checks your salary and sees if you are capable of paying installments per month. The bank allows you to leverage the salary and therefore, loans the money needed for the House of Dreams.

So leverage here is the ability to use your available funds to have more money borrowed from an external body. Margin is basically your capital.

High Leverage is a Killer

Remember the pendulum I spoke in the beginning? With high leverage, it makes a strong move aside: you can open positions worth hundreds of thousand dollars with your only five hundred or less. It’s attracting, isn’t it? So think many people drawn to trade Forex. However, the closer glance discovers another danger – the pendulum might surprisingly come back. So trading with leverage of 100:1, 200:1 or 400:1 can easily destroy your account. The bigger leverage is the more change of currency rate influences your account.

Every $50,000 of the account means one standard lot. This is the way many professionals trade. Mini account then means trading one mini lot for every $5,000 of the account, etc. If pros do like that, why newbies think they will definitely succeed trading thousands of dollars with their $50?
Because some brokers say YOU CAN! Most of them impress newbies with incredibly high leverage available. If those brokers are not the Gates family going for charity – it is not the kindness but the attempts to lure you into trading. Stop and consider your abilities! My advice is the less leverage, the better.
Tip: If you want to trade during the News release – download free Forex Indicator FX Pulse.

When Volatility and Leverage Unite

Market volatility is one of the primary characteristics of the Forex market. Already high volatility becomes even higher with leverage. Your risk per lot rockets as well. If you are so cool trading with no leverage, you might lose the only way – if a currency lost all the value. Imagining that with Dollar or Euro is an Apocalypse (where Mr. Bruce Willis is powerless), but unlikely. So, no leverage in trading these currencies is more than just safe.

Let’s turn to school and math. I have 40 trades per month with leverage of 20:1 and 5 pip spread. I have already “deserved” $4,000 expense without losing a single trade! If my bud-trader loses %35 of the trades (not so bad, you know), he will lose 14% of his account in the end. If you are a bright mind, you will turn the scenario to your side and break even. Alternatively, you will fail as most traders do.

Next “hit” from leverage is the distraction. You are losing focus from market developments what makes you obsessed by volatility and your personal account evolution. Big chance to end up with incorrect conclusions about your strategy.

No leverage – alike an old movie. Less visual effects show the real actors’ play. Your Forex accomplishments reflect the success of your trading tactics (not leverage). High leverage can both drain your account and “steal” your trading logics.

In conclusion, high Forex leverage is like a mighty sword of a Middle-Age warrior. If it’s too big and heavy to handle it makes no use and can’t protect him. High-leverage-offering strategies are developed by marketers of various brokers. Their thinking scheme (as we talked above) is clear: high leverage gives traders small chances to get on top, so these would be market makers who would profit from our losses as a total result.

Article was written by Alexander Collins, who is CEO of Forexeasystems.com Creator of currency trading system and Forex expert advisor that works since 2007.

Insider Buying, High Yield Bonds and Barry Diller’s Misuse of IAC Funds

by Steve McDonald, Investment U Research
Monday, October 17, 2011

Legendary investor Jim Rogers said recently that he owns all commodities, but that he likes agricultural commodities most of all.

Agriculture, according to Rogers, is in the worst shape of all in terms of commodity supply. Why? No one wants to be a farmer and the world population growth is outpacing the growth of food production.

According to UN figures, farmland is in short supply and is expected to lag food demand. By 2050, food demand is projected to grow by 70 percent and increased land availability by five percent.

The seriousness of the pending food shortage and the potential wealth this situation presents has not yet hit the markets, evidenced by the fact that the S&P Global Agribusiness Index is down 16 percent this year. This despite what Barron’s reported this week as a very bright long-term outlook and strong earnings and profit gains by almost all of the major agribusiness players.

The UN’s food and agriculture organization, the FAO, predicts that, between now and 2050, we will have to produce a billion more tons of cereal and 200 million more tons of meat.

The FAO also estimates it will require an annual investment of at least $83 billion in agriculture production in the developing world and billions more in seed, fertilizer, farm equipment and irrigation just to tread water.

That’s $83 billion annually, just to meet demand expectations. Remember, this isn’t a new luxury item or techno gadget, this is food we’re talking about. No one goes hungry for long.

Roy Steiner of the Bill and Melinda Gates Foundation says this is an incredible opportunity for smart companies to make a difference, and a profit.

Sam Allen, the CEO of John Deere, says the right equipment in the right places will be able to boost food production. All of the macro trends in agriculture are favoring Deere according to Allen, and Deere is having the best year in the history of the company. The stock is off its 52-week high by almost 30 percent.

Farm income is expected to rise 31 percent this year and almost all the agriculture players are really cheap, with some paying decent dividends. Most are in the middle to low end of their 52-week range.

Right now, it’s all about seed, fertilizer, irrigation and equipment.

Some of the major players are:

• Monsanto (NYSE: MON)
• Dupont (NYSE: DD)
• Agco (NYSE: AGCO)
• CNH Global (NYSE: CNH)
• Syngenta (NYSE: SYT)
• Potash (NYSE: POT)
• Agrium (NYSE: AGU) on the fertilizer side.

Insiders are Riding Avis

A group of insiders, including the CEO, Vice Chairman, President of the European, Middle East and African Operations, Executive Vice President, four directors and others, have jumped into their own stock, Avis Budget Group, with both feet.

The group has plowed around $815,000 dollars into stock in Avis, with the CEO accounting for almost half of that amount.

This was the first reported buying spree by insiders at Avis in a long time and it comes at a time when the stock hit a 52-week low.

Insider buying is one of the best indicators of positive trends in a company, not an infallible one, but one with a strong success ratio.

When this many officers buy at once it is usually a good sign of things to come. Avis Budget Group (Nasdaq: CAR) is currently about 62 percent below its 52-week high.

High-Yield Bond Prices Slipping

Prices of high yield bonds have slipped 10 percent since July and that has pushed yields to very, very attractive levels.

Barron’s says prices may slip more, but patient investors will be rewarded and anyone looking for yield should be looking at the high-yield area.

This recent drop in bond prices is the worst since the 2008 crash, with yields on a key index topping 10 percent. That’s up from seven percent in May.

Dan Janis, Senior Portfolio Manager of the John Hancock Strategic Income Fund, says there is massive value in high-yield bonds. With junk default rates running at only two percent, well below the long term average of six percent, he sees great returns with below average risk.

Kathleen Gaffney, of the Loomis Sayles Bond Fund, said this week in a Barron’s article that the bond market has already priced in a recession and much higher default rates than we are actually seeing.

One rumored reason for the big drop in bonds was a selling spree by Japanese retail investors in something called double-decker bond funds.

Barron’s described these funds as having about $900 billion in the high-yield market and are tied to the Brazilian real, which is too complex to explain here. But the point is, as the selling started in bonds, the real also dropped in value and accelerated the drop in the value of these Japanese funds.

This one-two punch accelerated selling in the Japanese market in an effort to cut losses and, voila, we have huge buying opportunity.

High-yield bonds, one of my favorites, and if you’re looking for income and capital gains, you should be looking here.

Barry Diller’s Misuse of Shareholder’s $300K

This week the cheek smacker goes to the stock holders of IAC, Barry Diller’s internet holding company.

Barry recently appointed Chelsea Clinton to the board of IAC and gave her a $50,000 retainer and a grant of $250,000 in stock.

Diller’s connection to the Clintons goes all the way back to the ’92 presidential elections.

The Journal article that announced the move this week said she doesn’t have much experience with public companies, but she did work briefly at one in her 20s.

If I were an IAC stock holder, I would have a lot to say to Mr. Diller about his choice and his use of $300,000 of shareholders’ money.

But this appointment isn’t entirely absurd. She does serve on the boards of the Clinton Global Initiative and the Clinton Foundation. Huh?

One of the most irritating parts of the article was a quote by Paul Lapides of the Corp Governance Center at Kennesaw State University; he said, “Maybe all those connections helped her.”

Ya think, Paul?

Chelsea in her new role will be rubbing elbows with fellow IAC board members Michael Eisner of Disney fame and Edgar Bronfman Chairman of the Warner Music Group.

I’m sure Chelsea’s brief stint in a public company will carry a lot of weight with these two.

Long term, it’s about delivery… Companies like Seaboard for example…

Good investing,

Steve McDonald

Article by Investment U

Oct. 17 (Bloomberg) — Andrew Freris, senior investment strategist for Asia at BNP Paribas Wealth Management, talks about global financial markets, economies, and Europe’s sovereign debt crisis. Freris speaks in Hong Kong with Susan Li, Rishaad Salamat, Angie Lau, and John Dawson on Bloomberg Television’s “Asia Edge.” (Source: Bloomberg)

Panera Bread: A Restaurant for the Recession

by Jason Jenkins, Investment U Research
Monday, October 17, 2011

A new Technomic report found that bakery-café chains are stealing market share from quick-service and casual-dining brands at a feverish pace.

The Bakery Café Consumer Trend Report reported that in 2008, only 43 percent of consumers had visited a bakery café, such as Panera Bread (Nasdaq: PNRA). This year, that figure shot up to 71 percent. Among that 71 percent, 72 percent visit at least once a month.

About the Technomic Report

Operators and suppliers use these types of reports to understand consumption behavior, identify purchase and traffic drivers, explore catering usage and size up the competition, which allows them to take advantage of growth and better compete.

Bakery-café patronage is increasing as consumers take a pass on traditional full-service restaurants to save a few bucks. On the other hand, they spend a little more money and trade up from fast-food restaurants for higher quality and healthier options.

The report also hints at the growth in sales over the last three years. How much? The bakery-café segment has grown to $5 billion in annual sales and about 3,600 restaurant locations. Since 2008, total units have increased 4.2 percent and total bakery-café sales have risen 12 percent.

Panera Leading the Growth

According to Darren Tristano, Executive Vice President of Technomic, “Bakery-café chains continue gaining market share in a zero-growth environment. More consumers are visiting these restaurants and gaining familiarity, but nearly one in three consumers surveyed still say they have never been to a bakery-café concept.”

According to Tristano, problems with location and unfamiliarity are the most common reasons given by consumers who have not yet visited bakery-cafés. This means it’s easy to assume that as more stores open and awareness increases, growth and success in the segment should be sustained.

Technomic also reported that 69 percent of the polled bakery-café consumers said they visit Panera occasionally, if not more often. Further, 69 percent of those customers said they go to Panera at least once a month.

According to the Nation’s Restaurant News’ Top 200 census, Panera had U.S. system wide sales of $2.9 billion and 1,324 domestic locations last year. That number far exceeds its closest competitor, Tim Hortons, which only had $443 million in annual U.S. system wide sales last year.

Panera and The Bakery-Café Concept’s Bottom Line

So here is the outlook: The segment has positioned itself between the over $10-per-person eating experience that most Americans no longer think they can afford and the $5-to-$6-per-person eating experience that most of us are told to avoid for health and nutritional reasons.

The bakery-café experience also gives a different aesthetic atmosphere that’s not exactly fine dining, but isn’t a drive thru, either. According to the numbers, the more that people are exposed to the experience, the more they go back. Expect Panera to keep expanding in this uncertain economic landscape that’s going to be around for some time.

Good investing,

Jason Jenkins

Article by Investment U

London Gold Market Report
from Ben Traynor
BullionVault
Monday 17 October, 08:00 EDT

THE SPOT MARKET Dollar price to Buy Gold rose to $1694 an ounce Monday morning – the highest level since September 23 – before dropping back to roughly where it ended last week.

“[A gold price of] $1,650 should remain as good support with sovereign and physical bids coming in at that level,” reckons one London bullion dealer.

The price to buy gold in Euros, by contrast, held onto most if its gains after hitting €39,335 per kilo (€1223 per ounce), reflecting a near-1% fall in the Euro against the Dollar this morning.

Silver prices hit a high of $32.66 per ounce – 1.2% down on last week’s high – while commodities were broadly flat and US Treasury bonds gained.

European stock markets started the day strongly – with the FTSE at one point up 1.4% and Germany’s DAX up 1.0% – though like gold in Dollars they too retreated before lunchtime.

“Too much uncertainty remains in the market,” reckons UBS precious metals analyst Edel Tully in London.

“[There are] questions over issues such as guarantees of European sovereign debt, a Greek default and debt sustainability…while there is no rush to buy gold here, it is equally clear that investors who are long the yellow metal are not willing to let go of holdings either.”

G20 finance ministers gave Eurozone leaders until the end of this week to reveal their strategy for tackling the Eurozone debt crisis, according to press reports on Monday.

“The risk of a recession would be increased dramatically were the Europeans to fail to accomplish goals that they’ve set for themselves,” said Canada’s finance minister Jim Flaherty on Saturday, the day the G20 meeting ended in Paris.

“We’re aware of our responsibility,” said German finance minister Wolfgang Schaeuble.
“We’ll solve the problems in the Eurozone.”

A spokesman for German chancellor Angela Merkel, however, said the search for a solution “surely extends well into next year”.

Schaeuble today indicated that EU leaders may agree to raising banks’ Tier 1 capital ratios to 9% – up from the 4% recommended under the Basel II regime, the set of accords published by the Basel Committee on Banking Supervision in 2004.

Over in New York, the net long position of bullish minus bearish gold futures and options contracts held by noncommercial – so-called ‘speculative’ – Comex traders rose for the second week running last week, gaining 3.5% in the week to 11 October.

“Much like in the previous week, the increase in the net position was mostly attributable to the decrease in speculative shorts,” says Marc Ground, commodities strategist at Standard Bank.

“Given the modest nature of the past two weeks’ improvement in the net position, we still feel that the speculative market remains cautious about gold’s short-term prospects. However, the decline in speculative shorts is encouraging.”

The Occupy Wall Street movement – which began last month when demonstrators pitched a tent outside the New York Stock Exchange to protest against the banking sector – has spread to other global financial centers.

Protesters began camping outside the London Stock Exchange on Saturday, hanging up a sign that reads ‘Jail the Bankers’.

“I want a government that will not just pander to the banks…I want to see stricter regulation of the finance system,” one told news agency Bloomberg.

One placard outside Australia’s central bank meantime reads: “When I do it, it’s counterfeiting. When the Reserve Bank does it, it’s called Quantitative Easing.”

“[Occupy] Wall Street has a campaign to start asking questions about capitalism but this is not enough,” said a protester in Hong Kong.

“I want to tear down capitalism.”

Elsewhere in Hong Kong, the Chinese Gold & Silver Exchange Society it launched its Yuan-denominated Kilobar Gold contract earlier today.

The world’s first Yuan-denominated contract to buy gold outside of mainland China “can truly help promote the internationalization of the Renminbi [Yuan],” says Haywood Cheung, president of the 100-year-old CGSE.

“There’s triple demand for this Yuan product…investors can enjoy the bull market in gold, the Yuan’s appreciation and hedge gold denominated in other currencies against the Yuan.”

Ben Traynor
BullionVault

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.

(c) BullionVault 2011

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.

Oct. 17 (Bloomberg) — Simon Derrick, chief currency strategist at Bank of New York Mellon Corp., talks about the outlook for the pound and euro. Derrick also discusses the prospect for a solution to the European sovereign debt crisis with Linzie Janis and David Tweed on Bloomberg Television’s “First Look.” (Source: Bloomberg)

Oct. 17 (Bloomberg) — Jane King summarizes the top stories this morning on the Bloomberg Business Report. (Source: Bloomberg)

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 ForexYard

Confidence and trade reports from the US and Canada last week portrayed a global economy somewhat stronger than what many had expected. The balance of imports to exports last Friday revealed a growing market, with smaller deficits, as businesses across the United States and Canada begin seasonal hiring for the holidays.

Economic News

USD – US Dollar Dips as Trade Data Supports Growth

The US dollar (USD) was seen trading mildly bearish Monday morning as traders saw a small decline in risk aversion following last week’s economic reports. The EUR/USD rose following the completion of a long-term consolidation trend, reaching a 4-day high. The GBP/USD saw somewhat higher gains, with the greenback inching the pair towards last week’s early high.

Confidence and trade reports from the US and Canada last week portrayed a global economy somewhat stronger than what many had expected. The balance of imports to exports last Friday revealed a growing market, with smaller deficits, as businesses across the United States and Canada begin seasonal hiring for the holidays. Such reports are likely to drive the US dollar lower as risk aversion declines and traders begin seeking out higher yields.

With a very light news day ahead, traders appear anxious for the week’s data which seems to be centered mostly on manufacturing reports. Today’s publications are somewhat limited to the US, however, with some figures on manufacturing due this afternoon. Liquidity will likely be held to a minimum making the market unlikely to experience any major swings, though.

EUR – EUR Trading Higher as Traders Seek Risk

The euro (EUR) was seen trading with largely bullish results this morning following last week’s mildly optimistic assessments from North American trade and confidence reports. Against the US dollar (USD) the euro was trading near a 4-day high, with few signs of halting the bullishness which appears to come on the coattails of a long-term consolidation pattern. Against the Great British pound (GBP), the EUR witnessed a similar, albeit weaker, gain in strength.

Traders appear to be clinging stronger to the 17-nation common currency with higher yielding investments in mind. With employment rising and trade increasing in the North American continent, it seems likely that more traders will opt for higher yields heading into the 2011 holiday season. Should data continue to move in such a direction, it is far more likely that the EUR will see further gains.

Economic sentiment across the euro zone remains negative overall, however, with many analysts and economists expecting moves towards safety by traders as early as next week. With a light news day ahead, many traders are awaiting more data releases later in the week before buying up further EUR. With today’s low liquidity, not much movement is expected, though random central bank statements could roil markets at any time.

JPY – Japanese Yen Expecting Little Movement

The Japanese yen (JPY) was seen trading higher versus most currencies this morning as its value as an international safe haven begins to get challenged by the prevailing economic conditions. Being linked to international risk sentiment, the yen has experienced an expected uptick during a period when shifts away higher yielding assets became prominent.

The latest moves of the JPY are causing some concerns, however, as many speculators were anticipating a downturn following the Bank of Japan’s (BOJ) latest rate statement. A strengthening yen has benefits for the buying power of the island economy, though its dependence on exports makes a strong yen unfavorable for longer-term growth in Japan’s current financial model. The persistence of the yen’s rising strength is causing some furrowed brows in Japan’s economic circles, and this may be a cause of its mixed trading behavior.

Silver – Silver Price Continuing in Bullish Channel

The price of Silver found modest support over the weekend amid the surging strength of the US dollar, the currency in which such assets are valued. Silver has been trading with stronger price action since early August, but traders have been awaiting a price correction from the rampant increase in risk aversion due to rising tensions from the euro zone’s periphery and a sudden lift off in dollar values.

As investors seek safety, the value of Silver, which has been seen trading with mixed results since two weeks ago, is expected to rise following its current bullish channel, bouncing off a recent low near $39.60 an ounce after a selloff in commodity futures pulled down on precious metals last week. A sudden rise in dollar values due to this week’s uncertain environment is expected to assist the sentiment favoring Silver, however. Should risk sentiment continue to bounce in sporadic directions this week, the price for this precious metal may continue to experience similar swings in value, favoring an upside as Silver holds within its bullish pattern.

Technical News

EUR/USD

The price of this pair appears to be floating in the over-bought territory on the daily chart’s RSI indicating a downward correction may be imminent. The downward direction on the 8-hour chart Slow Stochastic also supports this notion. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.

GBP/USD

The cross has experienced much bullishness in the last few days, and currently stands at the 1.5810 level. There is much evidence in the chart’s oscillators that supports a possible bearish correction today. This is supported by the 8-hour chart’s Slow Stochastic. Going short with tight stops may turn out to bring big profits today.

USD/JPY

The pair has been range-trading for a while now, with no specific direction. The Daily chart’s Slow Stochastic providing us with mixed signals. The 4 hour charts do not provide a clear direction as well. Waiting for a clearer sign on the hourlies chart might be a good strategy today.

USD/CHF

The typical range trading on the hourly chart continues. The 4-hour chart RSI is floating in neutral territory. However, there is a fresh bullish cross forming on the daily chart’s Slow Stochastic indicating a bullish correction might take place in the nearest future. Going long might be a wise choice.

The Wild Card

Crude Oil

Crude Oil prices rose significantly in the last week and peaked at $87.69 per barrel. However, the daily chart’s RSI is floating in an overbought territory suggesting that a recent upwards trend is loosing steam and a bearish correction is impending. This might be a good opportunity for forex traders to enter the trend at a very early stage.

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.

AUD/USD – Weekly outlook 17 Oct – 21 Oct

October has so far been a very bullish month for the Aussie. We’ve had only 2 days that failed to close higher than their open and a break back above parity. The market is now nearing towards significant upper resistance areas. The coming day’s price movements could help determine the direction the Aussie takes for the remainder of the month.

1.0400 is the next area to the upside we will be monitoring. The level has held as support in June & August with it turning into resistance in early September. It is possible we see a bounce of this area in the coming week providing us with an opportunity to short this market, possibly back down to parity. Should we see any price action suggesting a rejection of the 1.04 area we will be looking to sell any bounces.

If we see a break and close above the 1.04 area the next significant resistance we will be monitoring is 1.06 and further upside resistance at 1.08.
 

The weekly chart below shows the market starting to form a downwards channel. Last week saw the price close almost perfectly at the upper resistance of the channel. If we are to see this channel pattern continue we would have to see the market sell off in the coming week back towards the lower line.

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