Month: October 2011

Oct. 3 (Bloomberg) — Neil Corney, head trader at the Tel Aviv unit of Citigroup Inc., talks about the performance of and outlook for Israeli stocks. He speaks from Tel Aviv with Francine Lacqua on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)

Tired Of Waiting on Keystone XL? Here Comes Wrangler

by Justin Dove, Investment U Research
Monday, October 3, 2011

Activists and politicians continue to delay any action on the proposed Keystone XL pipeline from the Alberta oil sands to refineries in Illinois and Oklahoma.

Even the Dalai Lama has spoken out against the darned thing…

Environmentalists are weary of the TransCanada (NYSE: TRP) pipeline traveling over sensitive areas, such as the Ogallala Aquifer in Nebraska.

According to the Vancouver Sun, Keystone XL “would run through 411 kilometers of the Cornhusker State, crossing the eco-sensitive Sand Hills and the vast Ogallala Aquifer, which provides 80 percent of Nebraska’s drinking water.”

But proponents say the proposed line would create much-needed jobs and economic growth throughout the Midwest. It may also lower gas prices in the United States and curb foreign dependence.

The U.S. Department of State claims it’s committed to making a final decision by December 31, 2011, but there’s no guarantee.

Wrangler in the Pipeline

Investors banking on the Keystone XL are undoubtedly tired of waiting for the ordeal to play out. But for those tired of waiting, there are plans for another big pipeline that likely won’t face the same opposition.

The proposal for the Wrangler pipeline includes:

• It will transport bubblin’ crude from the oversupplied hub at Cushing, Oklahoma to the Gulf Coast refining complex in Texas.

• It will initially have capacity to transport up to 800,000 barrels of crude oil per day.

• It will accommodate the medium-to-light crude oil currently stranded in Oklahoma and priced at a discount to the oil imports being used by Gulf Coast refiners.

• The pipelined will be designed to be easily expanded.

• It will originate in Oklahoma and extend approximately 500 miles south. It would closely follow existing pipeline corridors, making the environmental impact slight. It would conclude at a storage facility in Harris County, Texas.

Two JV Energy Players With Solid Dividends

The proposed Wrangler pipeline is a joint venture between Enbridge Energy (NYSE: EEP) and Enterprise Products Partners (NYSE: EPD). Enbridge owns the terminal in Cushing where the line will originate and Enterprise owns the storage terminal in Texas where it will conclude.

Enbridge is also involved in the Northern Gateway project, which will take crude from the Alberta oil sands to the British Columbian coast. From there, tankers will carry it to the ever-growing Asian markets. That 1,100-kilometer, $5.5-billion pipeline will enter regulatory hearings in January and has been backed by Chinese oil companies Sinopec (NYSE: SHI) and MEG Energy (OTC: MEGEF.PK).

In 2010, Enbridge incurred a $611-million non-recurring expense, which kept it from being profitable. However, the Houston-based company has reported a profit in the first two quarters. Assuming Enbridge has similar results in the third and fourth quarters, it should carry a P/E ratio of approximately 16.

Enbridge also has a strong record of paying dividends. It’s currently yielding just over $2 a year (7.7 percent) and has raised its dividend every year since it went public in 1992.

Enterprise has a market cap of more than $33 billion, about five times that of Enbridge. It’s paying a slightly higher dividend of $2.42 a year (six percent). Enterprise has also raised its dividend consistently since it went public in 1998. However, its P/E of 22.96 isn’t quite as attractive as Enbridge.

The Bottom Line: Keystone and Wrangler’s Future

The future of the Keystone XL pipeline is very much in question, with so much high-profile opposition. If it does in fact get the nod to commence, it will likely be great news for TransCanada. If not, TransCanada will likely take a dip, considering it’s somewhat priced to include the proposed pipeline.

In the meantime, Wrangler may have a much better chance at survival and could create a great opportunity for investors. The added advantage of solid dividend yields from both concerned parties sweetens the pot a bit.

Good investing,

Justin Dove

Article by Investment U

Oct. 3 (Bloomberg) — Philipp Baertschi, chief strategist at Bank Sarasin & Cie AG, talks about the prospect of a European Central Bank interest rate cut at its meeting on Oct. 6. Baertschi, speaking from Zurich, also discusses European bank liquidity and his investment strategy with Francine Lacqua on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)

Oct. 3 (Bloomberg) — Martin Abbott, chief executive officer of the London Metal Exchange, says the bourse will make money no matter which way prices move. Olivia Sterns and Owen Thomas report on Bloomberg Television’s “Countdown.”

By Chris Vermeulen, thegoldandoilguy.com

Oct. 3 (Bloomberg) — David Wilson, director of metals research at Societe Generale SA in London, talks about the outlook for copper and gold. Wilson also discusses Chinese copper demand and the impact of the European debt crisis on metals markets with Owen Thomas on Bloomberg Television’s “On the Move.”

These Investors Are About to Get Slaughtered

by Alexander Green, Investment U‘s Chief Investment Strategist
Monday, October 3, 2011: Issue #1613

When the market turns rocky, it’s understandable that some investors run to safety. But these are unusual times. And many of these investors are running straight into a buzz saw.

If you’re one of them, you need to take preventive action immediately. Let me explain why…

While attending my daughter’s choral concert at her school the other night, I overheard two fathers chatting during the break.

“I finally threw in the towel on the stock market,” the first said.

“Me too,” said the other. “I’ve tucked everything away into Treasury bonds instead. I’m not earning much but at least I can sleep at night.”

He’s in for a nightmare instead. Nothing is more devastating to investors than when they plow huge amounts of money into a seemingly safe investment and their world gets turned upside down.

That’s the risk now with Treasury bonds.

Please understand, I’m not suggesting that the United States is a poor credit risk. No one lends money to a deadbeat at 1.9 percent for 10 years or three percent for 30 years. (That’s the current yield on 10- and 30-year Treasuries.)  But the good times for Treasuries – which began way back in the hyperinflationary early 80s when the prime rate hit 21.5 percent and long bond yields topped 16 percent – are almost certainly coming to an end.

Welcome to The Treasury Bubble

In the last 12 years, we’ve experienced the technology stock bubble, the real estate bubble and the gold bubble. Now… welcome to the Treasury bubble.

Let’s start with the basics. Bonds work like a seesaw…

• When interest rates come down, bond prices go up.
• When interest rates go up, bond prices go down.

Yields on Treasury bonds have plunged in recent weeks, thanks to fear of recession, chaos in the Eurozone and assorted other unsavory news. That buying has driven 10-year yields sharply lower – from 3.25 percent to less than two percent just in the past few weeks. Investors, of course, aren’t buying these bonds for their potential return. They’re buying them for the perceived safety.

Yet their statement values will plunge in the months (and years) ahead.

Don’t get me wrong. Despite our $14.5-trillion budget deficit, tens of trillions more in unfunded liabilities, this year’s political brinksmanship and the recent Standard & Poor’s downgrade, the creditworthiness of Uncle Sam isn’t an issue. If our government doesn’t have the cash to meet its obligations, it can do something no private borrower can: Crank up the printing presses.

Why Treasury Bonds Are Still a Big Risk

I hope it doesn’t come to that because it would likely be inflationary. Yet aside from any inflation risk down the road, Treasury bonds are still a big risk. And most investors don’t understand why. For example, the other day a friend told me he had recently plunked for the Vanguard Long-Term Treasury Fund (VUSTX).

“Why?” I asked.

“Well, because Treasuries are safe and the fund has returned 8.3 percent annually since its inception 28 years ago.”

Never has the boilerplate “past returns are no guarantee of future results” been more apropos. It isn’t just unlikely that this fund will generate this kind of return over the long haul. It’s mathematically impossible. And the only way it could generate a decent return in the short term is if the United States enters a full-blown deflationary depression, a long shot at best.

U.S. Treasury bonds are priced for calamity. Granted, times aren’t the best right now. We may get a double-dip recession. Perhaps even a nasty one. We may see Greece default on its sovereign debt. (In fact, I hope we do. That would be the first step toward cleaning up the mess in Europe.) But – despite the many Chicken Littles out there – we’re not on the verge of economic Armageddon. That means Treasury bonds will soon start to fall. Hard.

Short-term Treasury notes and bills aren’t terribly risky. (Although they pay almost nothing.) But Treasury bonds (and Treasury bond funds) are an extraordinarily poor bet for the short to medium term.

If you own them – and prefer not to learn the hard way – do yourself a favor and get out of them.

Now.

Good investing,

Alexander Green

Article by Investment U

Oct. 3 (Bloomberg) — Michael Lewis, managing director and head of commodities research at Deutsche Bank AG, discusses the outlook for precious metals, oil and corn. He speaks with Francine Lacqua on Bloomberg Television’s “Countdown.” (Source: Bloomberg)

London Gold Market Report
from Ben Traynor
BullionVault
Monday 3 October, 08:00 EDT

U.S. DOLLAR gold bullion prices began the week strongly, climbing to $1663 per ounce Monday morning London time – a 2.4% gain on Friday’s close – while stocks and commodities fell and government bonds rose following news that Greece’s second bailout agreed less than three months ago is unlikely to be enough.

Silver bullion prices also rose, climbing to $31.43 per ounce – 4.9% above where they ended last week.

“Surprisingly gold and silver has been rallying in a very thin market,” said one Hong Kong bullion dealer this morning.

“If there is no more fund liquidation in the beginning of a new quarter, and given that doomsday is just a few weeks from us, is the safe haven property of precious metals back in fashion again?”

The net long position of bullish minus bearish contracts held by noncommercial – so-called speculative – gold futures and options traders on New York’s Comex exchange fell by more than 20% in the week ended September 27, according to data published Friday by the US Commodity Futures Trading Commission.

Speculative net longs fell to 158,754 100-ounce contracts – the lowest level since May 2009, and equivalent to 494 tonnes of gold bullion – as the number of short positions rose while long positions decreased.

“The continuation of the decline in speculative longs indicates the increased caution with which participants are approaching the gold market,” says Marc Ground, commodities strategist at Standard Bank.

“Taken together with the increase in speculative shorts – which are currently at relatively high levels – gold appears to have returned to the vulnerability of several weeks ago.”

As a percentage of all open interest, speculative net longs fell to 19.2% – the lowest level since the week ended 18 November 2008, when the figure was 12.3%. The price of gold bullion at the PM London Fix that day was $738 per ounce – it has not been lower since.

The gross tonnage of gold held to back shares in the SPDR Gold Trust (ticker GLD) – the world’s
largest gold ETF – also fell last week, following a sharp rise that started towards the end of August.

The GLD held just under 1232 tonnes of gold on Friday – down from 1252 tonnes a week before.

“The continued mix of default fears and economic slowdown are likely to trigger further pockets of cash generating long liquidation,” warns a note from Swiss gold bullion refiner MKS.

Despite the outflows, Friday’s GLD holdings were less than one tonne below the amount held on 6 September, the day the gold price hit its all-time intraday high of $1920 per ounce.

“To be clear, physical demand right now is not just decent, it is exceptionally strong,” noted UBS precious metals strategist Edel Tully last week.

The CFTC data also show a sharp drop in speculative net long silver positions – together with a corresponding fall in net short positions held by commercial traders (including miners, refiners and bullion banks) who take the other side of that trade.

In Europe meantime, the Greek government announced Sunday that it expects to miss deficit targets agreed earlier this year with its ‘troika’ of creditors – the European Central Bank, European Union and International Monetary Fund – despite announcing fresh austerity measures.

Greece now expects its deficit is to be 8.5% for 2011 – compared to the 7.6% forecast on which a
second bailout worth €109 billion was agreed in July.

“Greece is bankrupt,” says Michael Fuchs, deputy parliamentary floor leader for Chancellor Merkel’s Christian Democratic Union party.

“Probably there is no other way for us other than to accept at least a 50% forgiveness of its debts.” Private sector banks agreed in July to accept a 21% write-down in the value of their Greek debt holdings.

“I am warning in the most forceful way against any material revision [of July’s agreement],” said Deutsche Bank chairman Josef Ackermann on Sunday.

Ackerman is also head of the International Institute of Finance, which agreed the terms under which
private creditors would undertake a bond swap.

“If we reopen the voluntary accord of July 21, we will not only lose precious time but quite possibly also private investor support…the impact of such a move will be incalculable.”

Over in China meantime – the world’s second-largest source of private gold bullion demand – manufacturing growth accelerated in September, according to official data published Saturday.

China’s purchasing managers index (manufacturing) rose to 51.2 – up from 50.9 for August (a figure above 50 indicates sector expansion).

Here in Europe, data published today show German manufacturing grew slightly last month, with PMI rising to 50.3 from 50.0 last month.

For the Eurozone as a whole, however, manufacturing activity continued to contract, with the PMI coming in at 48.5 – down from 49.0 in August. Here in the UK, manufacturing PMI rose to 51.1 – up from 49.4 for August.

Ben Traynor
BullionVault

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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.

Source: ForexYard

Financial markets in Europe took another hit on Monday with more news coming from Greece regarding its debt woes.

According to a deal brokered with the IMF and the EU, Greece agreed to cut its deficit to 7.6% of GDP. However, as of Monday Greece indicated that this year’s deficit would be well over 8%.

With this target budget being missed, there is an increased possibility that Greece will default.

With news like this emanating from the EU, investors may indeed maintain reservations on the strength of the euro.

Forex Market Analysis provided by ForexYard.

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