Oct. 11 (Bloomberg) — Naomi Fink, head of Japan strategy at Jefferies Japan Ltd., talks about the effect of fiscal stimulus on Japan’s economy. She speaks from Tokyo with Linzie Janis on Bloomberg Television’s “Countdown.” (Source: Bloomberg)
Gold Falls Back from Two-Week High, Euro Meeting Delay “Will Enable Comprehensive Strategy”, Paulson Gold Fund Underperforms Gold
London Gold Market Report
from Ben Traynor
BullionVault
Tuesday 11 October, 08:30 EDT
THE SPOT MARKET gold price fell to $1655 an ounce Tuesday morning in London – a gain of 1% for the week so far – while stocks and commodities were mostly flat ahead of a Slovakian parliament vote that could potentially jeopardize efforts to tackle the Eurozone debt crisis.
Earlier on Tuesday the gold price hit its highest level in over a fortnight at $1685.
“The [gold] market is starting to show some price sensitivity around the current level,” said one Hong Kong bullion dealer during Asian trading.
“Volumes remain light with little conviction evident in the precious metals markets,” agrees Marc Ground, commodities strategist at Standard Bank.
“We don’t expect a strong push higher today…[but] strong support around $1650 from physical buying is still very much in place, which should protect gold from significant downside.”
The Hong Kong dealer reports sales of contracts for ‘four nines’ gold – which is 99.99% pure – came close to hitting a new record on the Shanghai Gold Exchange yesterday, as traders returned from China’s National Day Golden Week last week.
“This super strong post Golden Week sales figure implies a very upbeat Q4 2011 and Q1 2012 physical market,” he says, adding that peak sales volumes are normally hit around January or February.
Silver prices meantime fell to $31.42 – down from $32.54, but still a 0.8% gain on the week.
Following a four-day rally, European stock markets traded sideways Tuesday morning – with the FTSE showing a 0.7% loss and Germany’s DAX down 0.2% – as investors awaited a parliamentary vote that could derail Eurozone rescue plans.
Slovakia’s parliament is due to vote today on whether or not to ratify the European Union agreement of July 21, which includes increasing the scope of the European Financial Stability Facility – the Eurozone’s €440 billion ad hoc bailout vehicle set up last year.
The Freedom and Solidarity Party (SaS), which is one of the four members of the ruling coalition, has said Slovakia should reject the creation of the European Stability Mechanism – the permanent bailout fund due to replace the EFSF in 2013 – and has made this a condition of its agreeing to approve the July 21 agreement. SaS also wants Slovakia’s participation in any EFSF rescues to be restricted.
“We are going to support countries like Italy via bond buys,” says SaS leader Richard Sulik.
“We will be saving French banks holding billions in assets,” he adds, pointing out that Slovakia is one of the smallest economies in the Eurozone.
Slovakia is the only Eurozone member yet to ratify the agreement, following Malta’s approval on Monday.
“A rejection of the measures [by Slovakia] would probably result in a second vote being called almost immediately,” says a note from Mitsui Precious Metals this morning.
“[However it] could jolt the markets and erode some of the confidence that has accumulated over the past few days.”
“I don’t think [the vote] is going to be a dealbreaker,” adds James Buckley, fund manager at Baring Asset Management in London.
Elsewhere in Europe, leaders have postponed by one week a crisis summit that was due begin next Monday.
“Further elements are needed to address the situation in Greece, the bank recapitalization and the enhanced efficiency of stabilization tools,” explained European Council president Herman van Rompuy yesterday.
“This timing will allow us to finalize our comprehensive strategy on the Euro area sovereign debt crisis.”
Germany has led calls for private sector creditors, including banks, to take greater losses on their Greek debt holdings than the 21% agreed on July 21. Jean-Claude Juncker, who chairs the Eurogroup of single currency finance ministers, said this week that banks’ losses on Greek debt could be more than 60%.
The European Central Bank has said it is opposed the imposition of private sector losses.
“The high interconnectedness in the [European Union] financial system has led to a rapidly rising risk of significant contagion,” ECB president Jean-Claude Trichet told the European Parliament Tuesday, in his last appearance before he steps down at the end of this month.
“Sovereign stress has moved from smaller economies to some of the larger countries. The crisis is systemic…it threatens financial stability in the EU as a whole and adversely impacts the real economy in Europe and beyond.”
Hedge fund investor John Paulson meantime saw his gold investment fund lose 16.4% of its value in September – compared to a fall of just 11% in the gold price– according to the Wall Street Journal, which cites “people familiar with the situation”.
Since the start of 2011, the WSJ reports, Paulson’s gold fund – which likely contains gold mining stocks as well as exposure to the metal itself – is up 1%, compared to a gold price gain of 16%.
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.
Puru Saxena Short Almost `Everything,’ Likes Dollar
Oct. 11 (Bloomberg) — Puru Saxena, chief executive officer of Puru Saxena Wealth Management, talks about the economies of the U.S. and China, the outlook for the European debt crisis and his investment strategy. Saxena speaks with Susan Li, Zeb Eckert, Rishaad Salamat and John Dawson on Bloomberg Television’s “Asia Edge.” (Source: Bloomberg)
Forex CT 11-10-11 Video News 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.
ForexCT’s Afternoon Market Thoughts for 11 October 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.
Canadian Housing Data on Tap
Data on the Canadian housing sector today may indicate mild optimism that could drive the value of the Canadian dollar (CAD) higher in the short-term. Recent news has done little to alter the current direction of the forex market, though news could hold values steady should they come in near forecasts.
Economic News
USD – US Dollar Stabilizes as Markets Come Off Holiday Break
The US dollar (USD) was seen trading mildly bullish early Tuesday morning as investors seemed somewhat less pessimistic about growth in Europe and Asia, but still uncertain due to an assumed temporary state of things at present. Sentiment does not seem to be as stable as many economists would like, though, as investment does seem to be shifting eastward away from the US.
Data on the North American housing sector today may indicate mild optimism that could drive the greenback lower in the short-term. Recent news has done little to alter the current direction of the forex market, though news could hold values steady should they come in near forecasts. Housing Starts in Canada are forecast to hold steady this week, which could have the effect of lifting the value of riskier assets, though this will need further data to be confirmed.
As for today, there will be only one US economic release, with most news focused on other economies. Liquidity will likely be higher in today’s early trading as these data points are published, though the impact of Britain’s Manufacturing Production reading may not be enough to force a surge in any direction on USD pairs and crosses. Housing and consumer confidence are in focus this week and traders will want to pay attention to the latter in the case of mounting pessimism and its affect on dollar values.
EUR – EUR Trading Flat as Trichet Prepares Speech
The euro (EUR) is expected to be seen trading with mildly bullish results this week ahead of a slew of reports on the region’s consumer confidence and manufacturing sector. Against the US dollar (USD) the euro has been trending upwards from a recent flight to higher yields after the weekend’s optimistic jobs reports. Today’s speech by ECB President Jean-Claude Trichet could offer more insight into what is happening across the euro zone.
Traders are looking for a way to balance a renewal of risk aversion with continued shakiness in global markets. A mildly pessimistic sentiment towards investing in global stocks at the moment has many investors on edge and looking for safety. An embattled euro zone, fending off market bears amid turmoil in its peripheral nations, also looks to be losing ground in financial markets as safe haven assets make long strides.
Sentiment across the euro zone has turned slightly more positive, with many analysts and economists expecting moves towards higher yielding assets by traders this week. Great Britain, moreover, appears positioned for a relatively better quarter than its southerly neighbors. With several minor reports expected all week, most expecting bullish figures, the GBP is in a position to continue its recent streak, though the same cannot be said for the EUR.
JPY – Japanese Yen Consolidating as Traders Weight Global Sentiment
The Japanese yen (JPY) was seen trading mildly lower versus most other currencies this morning as its value as an international safe haven was being challenged by an air of impending intervention by the Bank of Japan (BOJ). 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 JPY has been experiencing several long strides lately from the various shifts into riskier assets.
The latest moves of the yen are causing some concerns, however, as many speculators are anticipating another round of intervention by the BOJ. With industrial production data out this week, traders are waiting to see what the BOJ will do in the face of a downturn. 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. As the island currency remains bullish, the pressure begins to mount for the expected bank move to lower its currency strength.
Oil – Oil Prices Holding Steady amid Market Turmoil
Crude Oil prices held steady Monday as sentiment appeared to favor a mild downtick in global stocks following policies of monetary stagnation being executed by several central banks last week. Data releases out of Europe and the US are still driving many investors back into safe-haven assets as many reports suggested a surprise downtick in growth among global industrial output and consumer spending.
An expected jump in dollar values due to this week’s risk sensitive environment has helped many investors ram up their short-taking positions on physical assets, but with the USD’s gains leveling off this morning, sentiment appears to have the price of crude oil holding steady near $90 a barrel. Should Crude Oil sentiment continue to flatten this week, oil prices may reach a decision point which forces a wide swing by mid-week.
Technical News
EUR/USD
The EUR/USD cross has experienced a bullish trend for the past few days. However, it seems that this trend may be coming to an end. The RSI of the 8-hour chart shows the pair floating in the over-bought territory, indicating that a downward correction will happen anytime soon. Going short with tight stops might be a wise choice.
GBP/USD
The cross has experienced much bearishness yesterday, and currently stands at the 1.5630 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 cross has been dropping for the past two days now, as it now stands at the 0.9040 level. The Slow Stochastic of the 4- hour chart shows a bullish cross has recently formed, indicating that an upward correction is imminent. This view is also supported by the RSI of the 2-hour chart. Going long with tight stops may turn out to be the right choice today.
The Wild Card
Crude Oil
Crude oil prices rose significantly yesterday and peaked at $ 86.06 for a barrel. However, the 8-hour 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.
Bank Indonesia Cuts Interest Rate 25bps to 6.50%
Indonesia’s central bank, Bank Indonesia, dropped the BI reference rate 25 basis points to 6.50% from 6.75%. Bank Indonesia Governor, Darmin Nasution, said: “We are bringing the policy rate to a level that is more reasonable,” further noting “we saw the 6.75 percent rate as too high, unless we estimated inflation next year to be very high.” Nasution also noted the impact of global conditions; “The global crisis has not hit our real sector except for the financial market,” and pointed out that “Private consumption and investment remain the driver in economic growth.”
At its September meeting, the Bank held the key monetary policy rate (the BI Rate) unchanged at 6.75%. Previously the Bank raised the BI rate by 25 basis points to the current 6.75% in February 2011. Indonesia reported annual inflation of 4.61% in September, compared o 4.79% in August and July, 4.61% in June, 5.98% in May, 6.16% in April, and 6.65% in March, and just inside the inflation target of 5% +/-1% in 2011 (which changes to 4.5% +/-1% in 2012).
Nasution said the Bank expects “inflation next year will be below 5%”. Bank Indonesia has previously forecast GDP growth of 6.3-6.8% in 2011 and 6.4-6.9% in 2012 for the Indonesian economy, meanwhile Indonesia reported annual GDP growth of 6.5% in the June quarter this year.
The Indonesian Rupiah (IDR) has gained about 1% against the US dollar so far this year, and the USDIDR exchange rate last traded around 8,995.
Ditch the Copy-Cats and Back the Innovators
By MoneyMorning.com.au
Unless you’ve been living under a rock, you would have heard Apple Inc., [NASDAQ: AAPL] co-founder, Steve Jobs died on 5 October.
Your editor was living under a rock… well, a self-imposed news blackout anyway. So we didn’t read about it until four days later.
We’re not going to write a eulogy or obituary praising the man. That’s not our style. Besides, we never met him. And we never knew him. So we’ve no idea what he was like. Instead, we’ll focus on what we do know…
Entrepreneurialism.
In today’s Money Morning we’ll try to explain what are and aren’t entrepreneurial companies. And most importantly, why this is must-know information for investors.
Bottom line: if you’re a growth investor, finding innovative growth opportunities early on can be the best way to maximise gains on the stock market.
It can mean the difference between a steady and dependable gain of 5 or 10% per year in a non-innovative (or what we like to call, “copy-cat”) company… or potentially making 100%, 200% or 500% from genuine game-changing innovators.
But before we go on…
What is entrepreneurialism?
To be honest, different people have different ideas about it.
But here’s our definition: it’s about creative destruction or disruptive technologies. It’s about improving on an idea… replacing an old technology… or even just giving a technology, product or service a nudge and taking it in a new direction.
For instance, Apple is an innovative and entrepreneurial company. Steve Jobs was an innovator and entrepreneur.
By contrast, another well-known technology firm, Hewlett Packard [NYSE: HPQ] is a copy-cat company. It no longer innovates.
Now, don’t get us wrong. There’s nothing wrong with copying ideas. And there’s nothing wrong with copying an idea and offering it for a cheaper price.
In fact, for you as a consumer it’s great.
But for you as an investor it’s not so great.
Investing in copy-cat companies is usually a low-risk and low-return affair. Why?
Because unless the new firm is able to add value to the product and service, it’s unlikely it will be able to charge more for its product. In fact, it’s more likely the copy-cat firm will have to undercut the firm it’s copying in order to win customers.
Generally (but not always) this means a race to the bottom for revenues and profits… especially if the barriers to entry are low.
A good recent example is tablet computing…
Finding Game-Changers
Apple was the first to market. And because it had built a strong brand with its iPod and iPhone, it could charge high prices for a genuinely innovative product.
Firms that just tried to copy Apple by releasing a tablet computer have met with mixed success. Mainly because they didn’t have a “sticky” brand… they had spent years commoditising their products and training customers to buy on price (we’re thinking of the PC and mobile phone companies).
A classic example is Hewlett-Packard’s (HP) TouchPad disaster. After poor sales it withdrew the product. But because it had already made a bunch of the things it sold them off for a cut-price $199… a 60% discount to the original retail price.
Not surprisingly, at $199 the product sold out in hours… because that’s the price consumers would pay for a commoditised product.
Whereas consumers who buy for the brand and perceived quality are happy (or foolish) to pay three-times that amount for Apple’s iPad product.
The difference shows through clearly in the revenue and profit numbers for Apple and HP. For the last financial year HP made sales of USD$126 billion and net income (profit) of USD$8.7 billion.
That’s pretty good. But now look at Apple…
It made half the sales of HP – just USD$65 billion. Yet its profit was 60% higher than HP’s at USD$14 billion.
OK. The companies are different. It’s not a direct comparison. But it’s a good comparison between the returns you can expect from investing in an innovative and entrepreneurial firm like Apple… and the returns you can expect from a copy-cat firm like HP.
Innovator or Copy-Cat?
To show you even more clearly, check out the chart below:
Source: Google Finance
Apple (blue line) shares are up 400% in five years… HP (red line) shares have halved!
Of course, it wasn’t always that way. In the early days HP was innovative too. But that’s long in the past. Today it’s just one of many computer companies scratching around for profits in a low margin business.
And maybe one day Apple will be a copy-cat firm like HP. Who can tell?
In short, the message is this: when you’re investing for growth you should avoid the copy-cats. Copy-cat investing is fine for a steady and dependable income stream. But it’s not for growth investors.
To get big triple-digit gains to boost your portfolio performance, you should always look for the innovating firm. Of course, these firms are riskier. And the punt won’t always pay off. But if it does the rewards can be huge.
That’s why, in our view, if you’re happy to take a risk, punting on innovators and entrepreneurs is a risk well worth taking. Who knows where or when the next Apple will emerge…
But that shouldn’t stop you from looking for it.
Cheers.
Kris.
PS. If you’d like more details on how I pick innovating stocks from the crowd, click here to view this free presentation.
Huge Rally – Is the Low in?
By MoneyMorning.com.au
Who would have thought the ASX 200 could be up nearly 9% in three days. I thought markets were supposed to go up by the stairs and down by the elevator. Instead we are seeing reverse crashes.
I am sure that a great bulk of the buying over the last few days has been short covering, but I also suspect there are people trying to pick a bottom.
Perhaps we have seen the low for the next few weeks or months, but I have a feeling we are going to see lower prices before you could call the low of the bear market.
The task at the moment is to survive the volatility.
After six months of the market selling off it’s natural for the market to bounce. Whenever any trade gets overcrowded the market will always manage to shake the weak hands out. The bearish sentiment over the last few weeks had reached an extreme point and the vicious rally will have meted out some punishment to any stubborn bears.
But if you look at the underlying macro-economic situation, nothing has really changed. All we have seen is more posturing by those in power to convince the market that all is well.
The Bank of England has started printing again and the US Federal Reserve is thinking about more money printing in the United States.
It feels like the central banks are taking turns in printing. Maybe the European Central Bank is next.
The world’s economy is still struggling to keep its head above water and none of the policy actions are aimed at actually fixing this situation. It’s all about supporting and protecting the banks. We are now at a point where the banking system is a parasite sucking the life out of the economy rather than the facilitator of growth.
The irrational fear of prices falling has politicians scared to death. They are willing to throw unlimited amounts of other people’s money at the problem to stave off the markets attempt to return to equilibrium. The unravelling of 30 years of credit creation can’t be swept under the carpet.
But the illusion created by printing money is too alluring. They will continue to take, what to them is, the easy path…
Until it blows up in their face!
Murray
PS. Want more market analysis? Check out Murray’s YouTube channel. Each week, Murray adds a free video, full of detailed analysis of what’s happening in the markets. You can click here to watch his latest analysis and subscribe to Murray’s YouTube channel to receive instant notice when his next video is available.
Related Articles
A Bright Future for Destruction
Watch What the Rich Do, Not What They Say
Is Australia Killing its Entrepreneurs?
How to Profit from a Disruptive Market
How to Turn Pennies into Pounds With Australia’s Most Exciting Companies
From the Archives…
What Debt Crisis?
2011-10-07 – Greg Canavan
Enjoy the Rally, It Won’t Last for Long
2011-10-06 – Greg Canavan
Why the Fed’s Actions Make Perfect Sense
2011-10-05 – Murray Dawes
Too Big to Bail
2011-10-04 – Murray Dawes
What Can We Expect Next From Commodities?
2011-10-03 – Dr. Alex Cowie
For editorial enquiries and feedback, email [email protected]
AUDUSD’s upward move extended to as high as 1.0014
AUDUSD’s upward move from 0.9390 extended to as high as 1.0014. Support is now at 0.9850 followed by 0.9800, as long as these levels hold, uptrend could be expected to continue, and next target would be at 1.0100-1.0150 area. However, a breakdown below 0.9800 will indicate that a cycle top has been formed on 4-hour chart, and the rise from 0.9390 is complete.
