Month: November 2011

Nov. 16 (Bloomberg) — Lars Seier Christensen, co-chief executive officer of Saxo Bank A/S, discusses assets under management, new clients and volatility in financial markets. He talks from Copenhagen with Francine Lacqua on Bloomberg Television’s “On the Move.”

The Future of China’s Economic Growth

by Ryan Fitzwater, Investment U Research
Wednesday, November 16, 2011

In 2010, China surpassed Japan to become the world’s second-largest economy and is now in the rear view mirror of the United States – currently at number one.

Over the past 30 years, China has amazed the world as its fastest-growing large economy, with an average growth rate over nine percent.

But this amazing story of growth faces an extreme obstacle… China’s aging workforce.

China’s interior is mostly made up of less-developed rural regions, while the coastal area is much more industrialized.

The country depends on young workers, who generally move from interior rural areas to urban centers, to work in the low-wage factory sector.

And because China is the largest exporter of goods in the world, it relies on young inexpensive labor to feed its monstrous exporting economy.

The only problem: The number of young workers is dwindling rapidly…

Why China’s Labor Pool is Shrinking

China’s steep drop-off is the result of three decades of a one-child population control policy.

The United Nations estimates that by 2025, the number of 15 to 24 year old people will fall by almost 62 million – a 35-percent dip. And the tightening of the labor market is already affecting factory owners in China.

This caused companies like Wenzhou Dazhan Photoelectricity, which used to manufacture cheap products like $2 sunglasses in the 1990s, to shift to higher-end products like LEDs and solar energy components. According to the company’s owner Xu Hui, you either make the switch to high-end, high-tech manufacturing or you’ll be left out in the rain.

There are two prevailing factors causing this shift:

• A shrinking labor force lowering the supply of workers and is pushing up labor costs.

• The rapidly rising land costs that China is currently facing raises overhead.

With investors expecting China to continue to hold up the global economy with crutches, manufacturers will have to begin to adjust to these demographic changes. If not, investors will look elsewhere.

Look No Further Than Japan

Look at what Japan did in the late 1960s as an example. Japan managed to make the shift to manufacturing high-end goods. Once they did so, they went from being a net importer of manufacturing equipment to a net exporter of those goods. This pushed Japan into the huge economic boom it saw in the 1970s and 1980s.

South Korea saw a parallel experience when it made the same switch in the late 1980s, and today sits as the thirteenth-largest economy in the world.

The answer is simple: China will need to prepare itself for a shift in the goods it produces to higher-end products or prepare for a slowdown in economic growth.

Keep an eye on high-end Chinese manufacturers such as Hon Hai Precision Industries Co., Ltd. (OTC: HNHAF.PK), which manufactures Apple (Nasdaq: AAPL) products through its subsidiary Foxconn.

Look for high-end manufacturers to lead the future of China’s economic growth.

Good investing,

Ryan Fitzwater

Article by Investment U

Source: ForexYard

An early morning rebound in both the EUR and Italian bonds were short lived while the BoE preps for additional quantitative easing with its latest inflation report.

The ECB through its SMP program was out in full force buying Spanish and Italian bonds. There were reports circling of the ECB buying up to EUR 1 bn in Italian bonds alone. Despite the ECBs best efforts the Italian 10-year bond yield was up above the 7% level. The Greek 2-year sank to a new low with yields climbing to 115.50%. The spread between the 10-year French German yield was also at an EMU high of 195 bp. European equities are also lower with the German DAX down close to 1%.

Early in the European trading session the EUR/USD looked to put in a low of 1.3425 at a technical support level, climbing to a high of 1.3555 before quickly being pushed lower to 1.3470. There is lots of market chatter of traders targeting the 1.3145 October low. Yesterday the EUR/JPY made a decisive close below the 104.70 support line. There is a lack of support on the daily chart until the 100.75 low from early October.

The BoE is prepping for additional quantitative easing as the UK central bank said it sees the risk for price pressures to the downside and growth will be slower than expected. This may be the first step the BoE is taking on a path to additional bond buying above the GBP 275 bn which it has already bought. Additional bond buying is likely a negative for Sterling. The GBP/USD has support at the October 18th low of 1.5630.

Read more forex trading news on our forex blog.

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.

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

Sentiment in Europe is deteriorating as the pressure remains on Spanish and Italian bonds. Both the USD and German bunds are outperforming in this type of trading environment while commodities are generally lower. Crude oil is the lone exception as the price is testing the psychological $100 level.

Economic News

USD – US Economy Continues to Show Improvement

Data released yesterday shows the US economy continues to recover. Retail sales numbers climbed by 0.5% on consensus forecasts of 0.3%. Also positive for the US economy, core retail sales climbed by 0.6% in October, above analyst forecasts of 0.5%. The Empire State Manufacturing survey was also stronger and suggests further growth in the sector.

The data piece that sticks out from yesterday’s crowded economic calendar is the larger than expected contraction in producer prices. PPI for the month of October fell by -0.3% m/m. Consensus forecasts were for a decrease of only -0.1%. The drop in inflationary pressures is a concern that Fed Chairman Ben Bernanke has voiced on multiple occasions. This makes today’s headline inflation release all the more important. Should CPI show a decline in the inflation numbers, this may support the Fed’s case of a deflationary threat to the US economy and increase the likelihood of the Fed using more tools to ease US monetary policy (QE3). Another round of QE will most likely weaken the USD versus the majors.

EUR – Signs of Stress in the Markets Due to Europe

There are several indicators that hint at elevated levels of tension in the financial markets. Italian 10-year bond yields are back near the dangerous 7% level. A rumor of an Italian downgrade may be behind the sharp move. Spanish 10-year yields are also well above 6%. In addition, the spread between the German 10-year bund and the French equivalent has skyrocketed to 185 bp. This shows the stress is not only being felt in the bonds of the peripheral nations but also in the core of Europe. Adding to the tension in the European bond market is talk of increased margin requirements for Spanish bonds. Last week an increase in margin requirements for Italian bonds sparked mass liquidation of positions, increasing the selling pressure on the EUR.

Economic woes are also catching up with the euro zone. Data on Monday showed both the French and German economies continue to expand at a moderate pace. However, economic sentiment is moving lower with the German ZEW falling to -55.2, the lowest level for the survey since autumn 2008.

A combination of fiscal problems and a slowing economy are not a good combination for the EUR and further declines in the 17-nation currency may be seen. Near-term support remains at the November 10th low of 1.3480 with a close below this level opening the door back to the October low of 1.3150. Resistance is found off of Monday’s high near 1.3800.

JPY – No Changes Expected from the BoJ

The Bank of Japan concludes their two day policy meeting and no policy change is expected. Given that the BoJ loosened monetary policy at their October meeting by increasing its asset purchase program and the better than expected Q3 GDP numbers the BoJ will likely continue to emphasize its resolve to support the Japanese economy and fight JPY strength.

The JPY continues to rise both against the USD and in the crosses as traders seek out safe havens given the European debt crisis. The most recent COT IMM data shows speculators increased their long JPY positions versus the USD despite the threat of intervention from the Ministry of Finance. Support for the USD/JPY is found at Monday’s low of 76.80 followed by the all-time low at 75.55. Resistance comes in at Monday’s high of 77.50.

Crude Oil – Spot Crude Oil Rises Despite Stronger USD

The price of spot crude oil was higher on the day despite USD gains. The catalyst for the move higher was positive economic data from the US. Both retail sales and the Empire State Manufacturing survey came in well above consensus forecasts. Another driver for the commodity gains may be expectations for additional monetary policy stimulus by the Fed (QE3). Spot crude oil prices have risen almost 33% since putting in a low in October. Perhaps the crude oil market expects an improved US economy?

It is rare to see crude prices rising while the USD is strengthening as there is typically a negative correlation between the two assets. Traders should be eyeing the psychologically important $100 mark. Spot crude oil hasn’t traded at a level this high since July. For additional technical analysis please see the Wild Card section in today’s FOREXYARD Daily Analysis.

Technical News

EUR/USD

The resilience of the EUR has led many traders to adopt the strategy of selling the EUR/USD on rallies. The key resistance level is 1.3860 from the early November consolidation pattern. This is also the 50% retracement from the late October to early November downtrend (1.4246-1.3483). Approaches to this key level and the pair may run into selling pressure. Both monthly and weekly stochastics continue to move lower and initial support may be found at 1.3650, followed by last week’s low of 1.3480. A break here could open the door to 1.3145 from the October low. Additional resistance is located at the 200-day moving average at 1.4105.

GBP/USD

Sterling has been met with selling pressure on approaches to its 200-day moving average which comes in at 1.6140. This moving average comes in just above a bull flag pattern located on the daily chart. The support line of the chart pattern falls from the October 26th low and has a potential measured move of 480 pips which makes the August high at 1.6615 a convenient target. Should the pair fail to break out of the consolidation pattern, support may be located at 1.5850 as well as 1.5680.

USD/JPY

Yen strength has reemerged after a period of little movement. The USD/JPY may find support at its 55-day moving average at 76.95 though the one way movement in the price action hints at additional declines in the pair. Additional support may be located at 76.10 from the bottom of the September consolidation with a final destination at least the all-time low at 75.63. Resistance may be found off of the September high of 77.85 while the long term downtrend from the 2007 high is located at 79.30.

USD/CHF

The USD/CHF made a breach but failed to make a significant move above the 0.9080 resistance from the October 20th high. An additional push higher will likely target the October high of 0.9310. Traders should also have their eye on the 20-month moving average which comes in at 0.9450. Initial support is located near 0.8950 followed by the November low of 0.8760.

The Wild Card

Crude Oil

Spot crude oil prices have risen almost 33% from their October lows, stopping just shy of the key psychological level at $100. Forex traders should note this price has additional significance as it is near the 61% Fibonacci retracement ($99.50) from the move lower stemming from the May high to the October low. Resistance is found at $103.40 and $104.50 from the mid-May consolidation. Support is back at $94.50 from the October high.

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.

Crude oil Daily outlook – 16 November

Last week our analysis suggested we may see crude heading towards 100.00 of the back of the Hikkake pattern that formed at the start of the month. The bulls did indeed continue pushing the market higher with yesterday’s price almost reaching the all important 100.00 level.

Price action is now suggesting we may see a ‘bounce’ of the 100 area with a possible retracement in the coming days.

The 100 area has proven in the past to be a both psychological and technical support/resistance area. Between May and July this year 100 held the market well with May – June seeing a lot of chop and July finally seeing the market rejecting the level and falling to lower ground.

The strength of 100.00 is further confirmed by a 61.8% Fibonacci retracement level sitting just below at 99.58. Taking the highest swing in 2011 to the lowest swing in 2011 we can see the market is now nearing the 61.8% which could prove to be a strong level of resistance

With the strong psychological and technical level at 100 tied in with the 61.8% Fibonacci retracement level we may see the market ‘bounce’ from this area with a push back lower. It’s important to take into consideration the strong bullish momentum we’ve been experiencing since Sept/Oct; however resistance at 100 is looking like it could hold. We will be looking for price action rejection signals at this area before placing any shorts with an initial target of 94.00 and potential for 90.00 depending on market conditions should we see a fall.

Analysis by vantage-fx.com

Source: ForexYard

This morning the EUR/USD slipped below the key 1.35 level versus the USD before finding some buying interest at technical levels. Today has a large amount of data releases on the economic calendar but the political issues should not be ignored, especially in Greece as Prime Minister Lucas Papademos will have one of his first political tests.

The Bank of England will release its Quarterly Inflation Report as well as jobs data. Markets will be looking for hints of additional quantitative easing to come from the BoE. Sterling has been supported despite the additional GBP 75 bn of QE. Only now is the pressure being felt in the GBP/USD. The pair has support at the October 16th low of 1.5630. Resistance comes in at 1.5850 from the bottom of the late October-November consolidation pattern.

Today at 13:00 GMT new Greek PM Lucas Papademos will face a confidence vote in Parliament. Papademos is expected to get the necessary number of votes but a failure would likely signal difficulties in passing the necessary austerity measures to receive the next EU bailout funds.

The EUR/USD has risen from 1.3425 to 1.3525 upon the opening of the London trading session. There is a falling wedge pattern forming on the daily chart from the October high and the November 1st low. The chart pattern typically is considered bullish. Resistance on the chart pattern is at 1.3710 and falling. Support is located at today’s low followed by the October low of 1.3145.

Read more forex trading news on our forex blog.

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.

By MoneyMorning.com.au

In today’s Money Morning: Gold experts say, buy gold…! Nixon should have been shot… Feeling uneasy… What if you’re wrong…? Beware idolatry, but still buy gold…

The Working Man’s (and Woman’s) Best Friend

Your editor is writing from our Sydney hotel this morning, before we head to the airport.

Yesterday we chaired the second day of the Sydney Gold Symposium.

Keynote speakers were Richard Karn, Alf Field, Ben Davies and John Embry.

No prizes for guessing their views on gold (and silver). The message was buy both. And buy them now.

To be honest, the 100% bullish view made us a little uneasy.

But more on that in a moment. First, following on from Monday’s Money Morning, a few highlights from the Gold Symposium…

Monday’s keynote speaker was Egon von Greyerz. Here are a few choice quotes:

“There are three types of money. There is money which is worthless (Zimbabwe), there is money that will become worthless (US dollar), and there is real money (gold).”

“100,000 people earning average $40,000 have to work for 350 years to produce as much income as Ben Bernanke can print $1.4 trillion in a fraction of a second.”

What’s the difference? The first is mostly productive work… The latter is a man pressing a button!

“Nixon should have been impeached for going off the gold standard, not Watergate… or shot even! It was the worst criminal act I’ve ever seen.”

The afternoon session saw our old pal, Dan Denning take the stage:

“The gold standard should be the friend of the working man…

“You cannot have true liberty without gold as real money.”

And on the sham of central banks having an inflation target, Dan pointed out an inflation target of 3% means the central bank is authorising the steady erosion of personal wealth… by 3% each year.

But “under a gold standard [the people] cannot be robbed by the central bank in that way.”

The second day was a ripper too. But as we were chairing, we did not have the chance to take as many notes as we would have liked. Richard Karn’s talk on specialty metals was the best of the crop.

His best slide compared nations’ money supply growth and reported inflation rates. Turns out Australia’s money supply is growing faster than the U.S. Yet officially our inflation is under control!

But getting back to our point from the start of this letter, some parts of the Gold Symposium made us feel a bit uneasy.

We know it was a gold conference. And we knew everyone would be bullish on the yellow metal. But still, we had hoped for some counter arguments. Or at the very least for one of the speakers to say, “Of course, if I’m wrong, this will happen…”

The closest any of the speakers came to this was (we think) John Embry of Sprott Asset Management. To paraphrase, he said: “Be careful what you wish for. If there is hyperinflation it will be terrible for everyone.”

It’s an argument we’ve made here many times. We know the gold bugs won’t like us saying it. But the best outcome for gold investors is probably for the world’s economies to experience more of the same… bailouts and central bank money printing.

That will be bad news for those who don’t own gold as they’ll remain unaware of the silent destruction of their wealth. But for gold and silver investors it could (or should) see precious metals crank higher over time.

Back to our point. Whenever someone tells us it’s inevitable the price of something will go higher, as we said, it makes us uneasy.

Just in the same way we were uneasy with the “buy a house now before you miss out” craze. To us the housing spruiker argument didn’t make sense. So we dug deep and it turned out we were right… house prices don’t always go up. And what’s more, sometimes they can fall.

Every month in Australian Small-Cap Investigator we write about what we think are some of the best small-cap stocks on the market. We write about them because we believe they could give investors whacking great gains.

But here’s the thing: we also know there’s a chance we’re wrong. That the stock we’ve spent all that time researching turns out to be a dud.

Of course, you don’t want that to happen. But there’s a chance it could. And so we always warn our dear subscribers of what could happen if we’re wrong. It’s risk management 101.

And so, despite the big names and cracking small Aussie companies presenting, the one thing missing was the answer to the question, “What if you’re wrong?”

Before we go on, let’s make something clear… your editor is super bullish on gold (and silver, although we see silver as higher risk). And we’re convinced paper currencies will devalue at a rapid rate of knots.

So, hold some gold and silver (at least 15% of your portfolio would be a good start). Or we think you’re asking for trouble in this high inflation environment.

Anyway, the panel discussion gave us the opportunity to ask “What if you’re wrong?” Although – and this might have been a mistake – we didn’t ask the question directly.

First we asked:

“According to a report by the World Gold Council in 1996, written by Stephen Harmston: ‘In 1896 if an ounce of gold had been sold for dollars… [and invested] in the composite index of stocks it would have been possible in 1996 to buy approximately 444 ounces of gold.’ Is there any reason why the same can’t happen again? Is it possible that if we have high inflation, stocks will outperform physical gold many times over?”

Remember, an alternative to selling the ounce of gold in 1896 would have been to keep the ounce of gold. But 100 years later, one ounce of gold would still be one ounce of gold… whereas the stock investor could buy 444 ounces of gold.

Our second question was this:

“In Australia, 97.7% of all financial transactions don’t involve cash. Is hyper inflation possible without the physical printing of paper money? Is hyperinflation just as much psychological as monetary?”

In other periods of hyperinflation, consumers could see the currency debasement (for instance, a lower silver content).

But now, you can’t see the devaluation of your money. It happens electronically… Most consumers don’t know what’s happening to their wealth. It’s out of sight and out of mind. Bottom line: who’s to say that won’t continue?

Who’s to say things won’t carry on as before… Who’s to say rising prices won’t keep amazing people without them twigging their wealth is being destroyed. That rather than catching on, consumers will just say, “Gee, I’ve just got to work harder.”

Unfortunately, we didn’t get the answers we were after. Maybe it was our fault. Maybe we could have phrased our questions better.

That said, it hasn’t changed our view on gold. We believe the gold price will go higher. And we believe Dan Denning is right (in hindsight, Dan’s comment was probably the most important of the two days), “gold is the friend of the working man.”

It’s not just for the rich. That’s why you should own some.

Of course, we can’t be 100% certain the gold price will go higher. No-one can.

Buy gold.

Buy silver.

But beware idolatry.

And always question those who are 100% certain in their views (even if you don’t end up getting the answers you were looking for!

Cheers,
Kris.

The Working Man’s (and Woman’s) Best Friend

By MoneyMorning.com.au

India is one of three countries in the world that has not signed the nuclear Non-Proliferation Treaty (NPT). And we (Australia) don’t sell our uranium to countries that don’t sign the deal.

But that might be set to change…

Yesterday Julia Gillard said she’ll push to lift the export ban.

This is one of the first things Tony Abbott said he would do if he got in power. So there’s a chance – a good chance – she’ll get the support she needs to push it through.

But this is old news in the US, Russia, France and China. They’ve sold their hot rocks to India since 2008 under the ‘Nuclear Suppliers Group’ deal.

It’s time we caught up. India could give a big boost to our small uranium sector.

There might only be three mines operating in Australia. But last year they exported one sixth of the world’s nuclear fuel. And that brought in $900 million to the Australian economy.

Within the next three years, the Australian Bureau of Agricultural Resources and Economic Sciences [ABARES] expects our exports to jump 40% to reach 14,000 tonnes.

That’s based on demand from our current export partners, like the US and Europe. Not India.

In fact, the Australian Uranium Association reckons sales of uranium could bring $14 billion to the economy by 2030. Not counting India.

So just imagine how selling to India could see the volume and the export value rise. And what that could do to the share price of small uranium miners…

(On yesterday’s news alone, a lot of these miners on the ASX saw gains of 10%… Small caps Deep Yellow [ASX: DYL] and Peninsula Energy [ASX:PEN] leapt by 20%.)

Within 10 years, India will have 12 more nuclear plants. That would see it need 2,000 tonnes of fuel a year – up from 450 tonnes today.

The extra 1,500 tonnes of fuel has to come from somewhere. And if it’s Australia, you – as an investor – could set yourself up for a windfall profit.

So what do you look for?

In the short term, early stage explorers and developers. Why? Well, the developed companies already have contracts to sell the uranium they produce.

In fact, there’s one small miner the Indians have already taken a chance on.

Three years ago, Indian company Reliance Industry pumped $3.45 million into Uranium Exploration Australia Ltd [ASX: UXA].  It did so in the hope that one day Australia would lift the trading ban.

This gamble may be about to pay off.

If the government lifts the ban on exports to India, Reliance Industry won’t be the last company that invests in Aussie uranium.

That’s why now could be a good time to scour the ASX for small uranium stocks…

Shae Smith
Money Morning Australia

Lifting the Ban on Uranium Exports Could Make These Two Miners Go Boom

Prechter talks with Mind of Money Host Doug Lodmell

By Elliott Wave International

Robert Prechter offers a broad overview of the Wave Principle in this interview clip with The Mind of Money host, Douglass Lodmell. As Bob explains, “The work we do is so different from what other people do.” Enjoy listening to Bob explain how the Wave Principle differs from fundamental analysis and how it can help you to anticipate important turns and changes in the markets.

Learn the Why, What and How of Elliott Wave Analysis

Financial media use news and economic events to explain market moves. Steer clear of this misguided approach. Learn what really moves the markets with The Elliott Wave Crash Course.

In this series of three FREE videos, Senior Tutorial Instructor Wayne Gorman demolishes the widely held notion that news drives the markets. Each video will provide a basis for using Elliott wave analysis in your own trading and investing decisions.