AUDUSD remains in downtrend from 1.0751, the rise from 1.0053 is treated as consolidation of downtrend. Key resistance is now at 1.0342, as long as this level holds, downtrend could be expected to resume, and another fall to 0.9800 is still possible. On the other side, a break above 1.0342 will indicate that the fall from 1.0751 had completed at 1.0053 already, then the following upward move could bring price to 1.0600 zone.
Nov. 15 (Bloomberg) — Gilles Moec, co-chief European economist at Deutsche Bank AG, talks about the likelihood of a recession in the euro zone. He speaks with Maryam Nemazee on Bloomberg Television’s “The Pulse.”
Does Investing in Wind Power Make Sense?
by David Fessler, Investment U Senior Analyst
Tuesday, November 15, 2011
The answer is a qualified, “Yes.” You just have to pick the right company. U.S. investors typically aren’t familiar with the “Who’s Who” of wind turbine manufacturers. That’s not surprising. Compared to other places around the world, wind power isn’t exactly taking off here.
According to U.S. Secretary of the Interior Ken Salazar, in a speech at the American Wind Energy Association’s Offshore Wind Conference, just the offshore wind potential represents four times the present electrical demand of the country. And that’s only for turbines located off the eastern coast of the United States.
Without juicy government incentives and ready access to capital, wind growth is like a turtle heading out of the starting gates at the Kentucky Derby.
Installed wind power capacity in the United States as of June 1011 amounted to about 42.4 gigawatts, a miniscule percentage of our total load. You can check out the map below from the U.S. Department of Energy to see how much, if any, your state gets from harnessing the power of the wind.
As a result, few domestic manufacturers are located here. With a few exceptions, foreign wind turbine companies are reluctant to invest huge amounts of capital to build factories here.
General Electric Company (NYSE: GE) is the most notable U.S. wind turbine manufacturer. Globally speaking, they’re not a very big player.
On the opposite end of the spectrum, China has close to 100 manufacturers (not a typo) for wind turbines. Like everything made in China, there are a few good Chinese wind turbine manufacturers. There’s also a boatload I wouldn’t touch with a 10-foot barge pole. But wind power in China is a topic all in itself.
Europe is in the Wind Power Driver’s Seat
Large, commercial wind power really got its start in Europe. According to the European Wind Energy Association’s (EWEA) latest figures (February 2011), there are over 12,000 wind turbines installed there, mostly in European Union countries.
They’re cranking out a combined 84 GW, or roughly twice what’s installed in America. 2010 saw an additional 9.3 GW of wind power added at a cost of €12.7 billion. Again, most of that was in countries belonging to the European Union.
Why aren’t we seeing that kind of growth here? America just can’t seem to get its act together with regards to a national energy policy that might foster more rapid deployment of wind power.
So can wind companies make money without Americans in the wind energy mix? Let’s take a look a two large European wind turbine companies. One’s doing well, and one isn’t.
Let’s start with Danish wind turbine maker, Vestas Wind Systems A/S (OTC: VWDRY.PK).
With a market capitalization of $3 billion, Vestas is the largest maker of wind turbines in the world. It’s installed over 44,000 turbines in 65 countries around the globe.
As of the end of last year, Vestas shipped 2,025 turbines with a total generating capacity of 4,057 megawatts (MW).
But the company’s stock performance has been less than stellar over the same period, off about 54 percent since the beginning of the year.
The company announced that it had recorded revenue of €3,798 million for the first nine months of 2011, or about the same as last year. But instead of the €136-million profit recorded in 2010, it posted a €84-million loss.
It attributed its poor performance to weak economic growth in OECD countries, and it plans to trim its fixed costs by €150 million in 2012. The company expects to book about 4.5-GW worth of orders for 2012.
But a little further south, Gamesa Corporacion Technologica SA (OTC: GCTAF.PK), a Spanish maker of wind turbines, is a different story.
With a market cap half the size of Vestas, Gamesa is doing well. It expects about 3.5-GW worth of orders next year. It’s already booked over 1-GW of that figure. About 95 percent of its business comes from outside of Spain, and it recently saw a surge in business from Latin America and India.
For the first nine months of 2011, the company posted a 13-percent increase in sales and its net income rose 20 percent to €30 million. Its shares are also off year to date about the same as Vestas.
If you want wind in your investment sails, Gamesa’s growth prospects, leaner operating expenses and ability to make a profit make it a better bet.
Good investing,
David Fessler
Article by Investment U
Legendary investor Warren Buffett’s Berkshire Hathaway (BRKa, BRKb) is one of the driving forces in the day’s stock trade for the second consecutive session. The firm discloses its recent stock holdings in a regulatory filing after the close of trading yesterday.
Yum! Increases Exposure to China’s Expanding Market
by Jason Jenkins, Investment U Research
Tuesday, November 15, 2011
Yum! Brands, Inc. (NYSE: YUM), known for its KFC and Pizza Hut fast-food chains, won approval by China’s Ministry of Commerce to buy Mongolian “hot pot” seller Little Sheep Group Ltd.
Little Sheep Group Ltd is the Chinese operator or franchisor of 480 Little Sheep hot pot restaurants. This will extend Yum!’s lead as the nation’s biggest restaurant operator. Little Sheep’s shares surged to a record high in Hong Kong trading Tuesday. The stock jumped 15 percent to HK$6.37 at the close, the highest level since its initial share sale in June 2008.
Once the deal has been finalized, Yum! will own over 93 percent of Little Sheep. The purchase will enable Yum! to grow its full-service presence in China. The remaining 6.8-percent stake in Little Sheep will belong to the chain’s founders, Zhang Gang and Chen Hongkai.
What This Does for Yum!
Yum! currently has 4,100 locations in China where the company brings in more sales than it does in the United States. Most of these locations are in the quick-service sector. As of the end of its third quarter, the company had 3,475 KFC units and 127 Pizza Hut Home Service locations in China, compared with 564 Pizza Hut casual-dining restaurants.
The Little Sheep acquisition costs about $566 million and gives the company around 460 outlets across China and 22 units outside that country offering a local cuisine. Before the merger, Yum! didn’t have an Asian or Chinese full- service operation and authentic Chinese food is still much more vast market than that for Western food.
Little Sheep specializes in Mongolian hot pot, a dish in which customers dip raw meat or vegetables into a communal pot of boiling broth. These types of independent eateries account for more than 90 percent of restaurant sales in China.
Sara Senatore, restaurant industry analyst with Bernstein Research, wrote in a research note that Yum!’s interest in Little Sheep “reflects its intent to be the leading brand in every significant category among restaurants in China.”
“We believe the decision to increase its stake reflects Yum!’s intent to be a leading brand in the ‘significant categories’ of Asian quick service and Asian full service,” she wrote. “Yum! dominates the Western Quick Service and Full Service Restaurant segments with KFC and Pizza Hut, but is largely absent from the Asian corollaries, which are dramatically larger markets.”
The Colonel Would Be Proud
I think the Colonel would be proud of this deal. It’s a win/win for both companies, so definitely take a long position on both. Yum!’s muscle behind the Little Sheep brand will also help the hot pot brand grow on the global stage. It’s a big win for Little Sheep Group to leverage Yum!’s seasoned international expertise and resources.
And as Jing-Shyh Sam Su, Chairman and Chief Executive of Yum! Restaurants China states, “This is another important step in executing our strategy of being Rooted in China, Part of China.” Yum! Brands is another one of the huge multinationals seeing a great deal of their profits coming from China – and they’re looking to grow there.
Good investing,
Jason Jenkins
Article by Investment U
Betting Heavily on Natural Gas Prices
by David Fessler, Investment U Senior Analyst
Tuesday, November 15, 2011: Issue #1643
Most natural gas drillers have been scrambling to reposition their drill rigs over oil-rich acreage… And why not?
With oil once again hovering near the $100-a-barrel mark, you can hardly blame them.
But Monday’s news from BHP Billiton Limited (NYSE: BHP) contradicts that notion.
Billiton announced that it plans to spend somewhere around $4.5 billion on shale gas development. That’s not a typo. Perhaps even more amazing is that’s just what it’s going to spend next year.
That’s an enormous amount of money compared to what some other natural gas companies are spending. Many of them have repositioned their rigs and their business plans around drilling for shale oil.
But the real message Billiton is telegraphing is far more exciting than the $4.5 billion it’s planning on spending next year.
The Long-Term View on Gas
What do they know that all the other companies don’t?
Nothing, of course…
It’s just that Billiton is taking a long-term view on natural gas. They’ve developed and are executing a business plan that will pay off for decades to come.
Billiton is betting the price of natural gas here in the United States will rise more than 50 percent in less than 10 years. It also feels the LNG export opportunities here are too good to pass up.
To quote BHP Petroleum’s CEO Michael Yeager, “This [shale gas] is going to be a game-changer around the world, and for BHP Billiton not to be a part of it would be irresponsible.”
His quote was part of an investor presentation he’s giving to allay shareholder fears about the company’s foray into shale gas.
Going All In
And what a foray it’s been. In just the last year, BHP made two acquisitions totaling $17 billion. In return for its investment, it swallowed natural gas producer Petrohawk Energy, and some prime acreage from Chesapeake Energy Corporation (NYSE: CHK).
But BHP is just getting started. It plans to spend $5.5 billion by 2015, and as much as $6.5 billion annually by 2020 on American shale gas. Both numbers are about a billion higher than the company’s previous estimates.
It’s clear from BHP’s past moves and the money it’s throwing at shale gas moving forward that it sees prices for gas gradually rising from their present near-record lows.
It’s not too surprising, really. With seemingly limitless supplies here, many utilities are looking at natural gas as the fuel of choice for new power plants. They’re also spending billions to convert existing coal-fired plants to run on it.
A Contrarian Strategy
And we have yet to even scratch the surface as far as natural gas-powered transportation goes. But many of Billiton’s competitors, lured by rising oil prices, have switched to drilling for oil, since it brings higher margins.
Wells cost the same to drill and hydro-frack, regardless of what’s down the hole. And right now, oil gives them a higher rate of return for each dollar spent drilling.
But Billiton is a huge, diversified resource exploration and production company. Shale gas fits right in with its portfolio of iron ore, coal, copper, uranium and petroleum businesses.
The company plans to spend $80 billion in the next five years to expand production across its entire portfolio of commodities. Natural gas from shale fits right in with its plans. The company is projecting 545 billion cubic feet (bcf) equivalent of natural gas next year.
Yeager also commented on concerns by some investors and analysts that hydro-fracking has problems. “The technology used here has been proven and used for a long, long time. We’re subject to inspection at any time… I think the opportunity for the industry to cut corners at any level is small.”
The reality is that over the next few years, natural gas prices will slowly rise for reasons mentioned earlier. Billiton is positioning itself to be one of the top producers and exporters here in the United States. Investors who want a diversified mining and natural resource production company would be hard-pressed to find a better play than BHP Billiton.
Good investing,
David Fessler
Article by Investment U
By Nathan Slaughter, GlobalDividends.com
They aren’t stocks, and they aren’t bonds… but these securities yield up to 13%, offering investors the chance to capture high yields and explosive growth. Their spectacular returns have even made them the top-performing asset class during the last decade.
One of the most successful high-yield energy investments in the world is a type of security that few investors even know exists, let alone own.
They aren’t stocks, and they aren’t bonds, but they are the #1 performing asset class over the past 10 years — up 288%. Stocks are up just 31% over that stretch and bonds, which have been in a major bull market, are up 71%.
Many of these companies have raised dividends at an almost 10% annual pace over the last decade. And their prices have also risen, generating total annual appreciation in the 15%-20% range.
That’s why these investments give you the exact same double whammy — high yields and explosive growth — that has propelled so many big winners to the top of the 21 best income stocks of the past decade I told you about in the last issue of Dividend Opportunities.
The securities I’m talking about are called master limited partnerships — or MLPs for short — and they have two overriding characteristics. They are overwhelmingly in the energy business, and they usually pay high yields — 5% to 7% on average — and upwards of 13% for some profitable firms.
What drives the yields of these securities is the business they’re in.
MLPs are publicly traded limited partnerships that run critical “midstream” energy infrastructure. That’s the pipelines, storage tanks, terminals and ships that move energy from producer to user.
In short, they are the arteries through which our economic lifeblood flows.
And the beauty of MLPs is that while they are energy companies, they are insulated to some extent from price fluctuations in commodities.
For MLPs, it’s more about demand. For most of their revenues, it doesn’t matter if oil is at $50 a barrel or $150. As long as the stuff keeps flowing through their pipelines, they profit — along with their investors.
That’s one big reason why MLPs have steadily churned out double-digit total returns year after year, despite volatile commodity prices.
Another reason is because MLPs pay out upwards of 90% of their profits to investors — making them some of the highest-yielding investments on the planet.
While most investors are drawn to the high yields these businesses throw off, plenty of these partnerships have also grown impressively, creating sizable capital gains for investors.
For example, Enterprise Products Partners (NYSE: EPD) was launched in 1998. A $10,000 investment back then would now be getting $5,322 a year in distributions — a 53% annual yield on the initial investment. And that’s on top of a capital gain of about 150%. Assuming distributions were reinvested, the total gain today would be more than $80,000.
Enterprise is by no means an isolated example. And if you’re looking for sky-high yields, a quick search shows the top yielder in the group is Niska Gas Storage Partners (NYSE: NKA), which pays more than 13% — and at least eight other MLPs come close to matching that impressive number.
Now, I’m not saying that MLPs represent a risk-free investment. They tend to deliver steadier results, but they’re not without risk.
For example, the Alerian MLP Index — which is a handy proxy for the major MLPs — fell sharply in 2008.
But there are some compelling reasons that I think will drive MLPs higher over the next three to five years — and maybe into the much longer term.
Global demand for energy has been, and continues to be staunch. In fact, we’ve only seen one decline in annual energy consumption in the past 30 years.
Meanwhile, the spread of production technologies like directional drilling and hydraulic fracturing have opened huge new sources for oil and gas production from shale formations in the United States. According to industry insiders, the energy being produced from the shale in places like Eagle Ford in south Texas is already outstripping the available pipeline and storage capacity. This shale boom has led to a big increase in the need for the energy infrastructure that these MLPs provide.
[Note: For more on MLPs and the high-yield opportunities you can find from the energy sector, I invite you to watch my latest presentation. I’m convinced there is no better place to search for income than the energy field. In fact, of the 21 best-performing dividend payers since 2001, more than half are energy stocks. You can get all the details, including the full list of all 21 securities by visiting this link.]
Good investing!
Nathan Slaughter
Chief Investment Strategist
Energy & Income
Disclosure: Nathan Slaughter does not own shares of the securities listed in this article. StreetAuthority owns shares of EPD as part of the company’s various $100,000 “real money” portfolios. In accordance with company policies, StreetAuthority always provides readers with at least 48 hours advance notice before buying or selling any securities in any “real money” model portfolio.
Congressional Insider Trading: The Double Standard
by Jeannette Di Louie, Investment U Research
Tuesday, November 15, 2011
In 1934, Congress enacted the Securities Exchange Act, which banned what is now commonly known as “insider trading.” At the time, taking revenge on corporations and Wall Street for their roll in the 1929 stock crash and subsequent depression seemed like a good idea to just about everybody.
Members of Congress, in particular, probably thought that voting “yes” on the measure meant that they could escape similar criticism for the poor economic policies that also contributed to the mess. Politicians, of course, will say and do just about anything to get another vote.
In both former Speaker of the House Nancy Pelosi (D-CA) and current Speaker of the House John Boehner’s (R-OH) cases specifically, that apparently means voting for heavy restrictions on the business world while flagrantly flouting them in the political realm.
The Sarbanes-Oxley Act
Consider the Sarbanes-Oxley Act of nearly a decade ago, which Congress – including both Pelosi and Boehner – passed nearly unanimously. As The New York Times aptly put it, “It took just five weeks after the WorldCom accounting scandal erupted in 2002 for Congress to pass, and President George W. Bush to sign, the Sarbanes-Oxley Act.”
In other words, not a whole lot of thought went into it…
Lawrence Kudlow, host of CNBC’s “The Kudlow Report,” noted back in 2006 that “700 corporate crimes have been punished with 250 million in fines since 2002… [all] based on pre-Sarbox laws and regulations.”
In other words, we didn’t really need it anyway…
It was just a big publicity stunt, and one that Kudlow also noted put so many rules and regulations on private businesses that a mere eight percent of global IPOs were listed in the United States after its passage… down from 50 percent before.
Politicians Don’t Measure Up to Their Own Rules
For all of the posturing politicians did about the issue back then, apparently they didn’t take the issue nearly as seriously as they wanted us to believe they did. Or at least they didn’t think that the rules they forced onto corporate America should apply to them.
Thanks to an edition of “60 Minutes” that aired on Sunday, November 13, it’s come to light that Congress can do as much insider trading as it’d like to.
(Courtesy: CBS, 60 Minutes)
No wonder the San Francisco Gate reports that “stock portfolios on Capitol Hill outperform the market!”
Nancy Pelosi, for instance, bought up over $1 million in Visa stock during its IPO in March 2008… the same month that she made sure the Credit Card Fair Fee Act, which credit card companies like Visa didn’t care for, never made it to the floor for a vote.
Unfortunately, she isn’t the only one who will come under scrutiny on Sunday’s “60 Minutes.” That kind of trick seems to be a fairly rampant practice among lawmakers, who act on knowledge the public doesn’t have access to in a way they wouldn’t let anybody else get away with.
It’s no big surprise that Congress likes to follow the “Do as we say, not as we do” philosophy. But that doesn’t make it any less destructive considering the conflict of interest presented. As was stated on the show, the only interest for politicians should be improving America… How legislation can increase personal wealth should not become a factor in that equation.
Good investing,
Jeannette Di Louie
Article by Investment U
London Gold Market Report
from Ben Traynor
BullionVault
Tuesday 15 November, 08:30 EST
U.S. DOLLAR gold prices bounced to $1771 an ounce Tuesday lunchtime in London – still nearly 1% down on where they started the week after sharp falls yesterday and this morning.
“The yellow metal continues to find good scaled down buying interest towards $1750 as safe haven diversification continues,” says a note from Swiss precious metals group MKS.
“Yet the metal still has to overcome the technical resistance of $1800.”
Physical gold premiums “recovered another couple of Dollars” on the Shanghai Gold Exchange, says one Hong Kong dealer – referring to Tuesday’s $5 sudden drop from $1775.
“[This indicates] that there is some physical demand around below current price level in gold.”
Silver prices rallied to $34.32 – 1.2% down on Friday’s close.
Stock markets fell Tuesday morning and commodities were broadly flat, while US, UK and German government bond prices all gained as market anxiety focused on Spain.
Yields on Spanish 10-Year government bonds continued to rise Tuesday morning, hitting 6.3% – the highest level since the European Central Bank began buying Spanish and Italian bonds back in August.
The spread between Spanish yields and 10-Year German bunds hit a Euro-era high, breaching 457 basis points (4.57 percentage points).
“[This is] an ominous sign that market attention is beginning to shift Spain’s way,” says one London gold dealer.
Belgian and French spreads over bunds also set Euro-era records on Tuesday, with French spreads hitting 173 basis points.
“With the core now suffering the effects of contagion, the Euro can be expected to remain vulnerable,” says Jane Foley, senior foreign exchange strategist at Rabobank.
The Euro fell for the second day running against the Dollar, while Euro gold prices climbed steadily to €1308 per ounce – within 5% of September’s all-time high.
Europe needs “to build the political union that we didn’t manage to achieve in the 1990s,” German finance minister Wolfgang Schaeuble the CDU party conference yesterday.
“That means a fiscal union.”
Schaeuble told news agency Reuters he wants to see changes to the Lisbon Treaty to enable closer integration, and that these should be pushed through by the end of next year.
Over in New York – where police this morning began evicting Occupy Wall Street protesters – the number of bullish minus bearish contracts on the Comex exchange held by noncommercial gold futures and options traders (known as the speculative net long position) rose for the third week in a row in the period up to 8 November.
Data published Monday by the Commodity Futures Trading Commission show the speculative net long grew 12.9% to the equivalent of 625.1 tonnes of gold bullion.
“Unlike in the previous week, the change in the net position was largely due to speculative longs being added…with only a marginal decrease in speculative shorts,” notes Standard Bank commodities strategist Marc Ground.
“Given the sustained improvement in the net position…the speculative market is showing a growing confidence in gold’s prospects.”
Over the same period, the gross tonnage of gold held to back shares in the SPDR Gold Trust (ticker GLD) – the world’s largest gold ETF – grew by 1.7%. As of Monday, GLD was backed by 1268.3 tonnes of gold.
Hedge fund Paulson & Co. – which offers its clients the option of gold-denominated holdings – cut its exposure to GLD by one third during the third quarter, a US regulatory filing revealed yesterday.
Paulson reduced its holding from 31.5 million shares to 20.3 million – though it remained the largest holder in the GLD at the end of September. Reuters reports the sale is equivalent to around 1.1 million ounces – or 34.2 tonnes.
Between June 30 and September 30, GLD saw net inflows of 23.7 tonnes of gold bullion.
Here in the UK, consumer price inflation fell to 5.0% in October – down from 5.2% the previous month – according to official figures published this morning.
Bank of England governor Mervyn King has written an open letter to chancellor George Osborne explaining why inflation is above the Bank’s 2.0% target.
“The key consideration for monetary policy is the outlook for inflation in the medium term, and the balance of risks around it, rather than the current rate of inflation,” explains King.
“Uncertainty about the prospects for the global economy…[make] it more likely that inflation would undershoot the 2% target in the medium term.”
In his reply, Osborne notes that “monetary policy has a critical role in supporting the economy as the government delivers on its commitment to necessary fiscal consolidation.”
The Bank’s governor is obliged to write to the chancellor whenever inflation is more than one percentage point above target – as has been the case for the last 23 months.
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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.
