Month: November 2011

Source: ForexYard

Yesterday saw the first real volatility in the USD/JPY since the MOF intervened. This morning’s low coincides with a key technical level.

The pair has fallen as low as 77.50, a 50% Fibonacci retracement from the 75.55/79.50 intervention rally and there may be scope for additional moves lower in the pair. A break of the 77.45 support from the mid-October highs cold have the pair testing both its 61% Fibonacci retracement at 77.07 as well as its 55-day moving average at 76.94. The bearish tone could be reversed with a move back above 78.25.

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

“Hooray!”

The market cheered this morning. Italian prime minister, Silvio “bunga-bunga” Berlusconi will resign.

A statement from Italian president, Giorgio Napolitano read, “Once this commitment [to pass a new budget] has been carried out, the prime minister will submit his resignation to the head of state.”

The U.S. market gained more than 1% on the news. And the Aussie market has moved higher this morning too. So, where will it go next? And how can you make a buck from it? We’ll get to that later.

First, you need to know the reason why this market rally is no stronger or longer-lasting than the one before…

Things move quickly in Italian politics. Just yesterday Berlusconi had posted the following message on his Facebook page, “Le voci di mie dimissioni sono destituite di fondamento.”

According to Google Translate, in English it reads, “The rumours of my resignation are groundless.”

By the way, it’s good to see the PM has a nice photo of him on his Facebook page holding hands at a 2009 G-8 conference with… the late Muammar Gaddafi!

They make a lovely couple.

Quite what difference a change of PM will have on Italy’s public finances is beyond your editor’s understanding. Even so, the markets love it – for now.

But one thing we know: you’ve got to be kidding if you think the Italians will actually cut public spending. They can’t… it’s impossible. Just as it’s impossible for any other welfare dominated state to cut spending.

The reason is simple. Once a nation embarks on the path of becoming a welfare state it’s a slow but certain economic death.

You see, governments are obsessed by economic growth. In their view an economy must never stop or take a breath. It must grow forever. That’s why governments love credit growth and banks. Credit growth means pumping more money into the economy.

The actual investments don’t matter. As long as the new credit pays off the old credit. (That’s why infrastructure projects are so popular with governments. Build a road and people will use it. Build a real business and there’s not the same guarantee. But it’s easier to hide losses in a new road because it’s “for the public good”.)

And as long as the government is prepared to provide a bailout when everything goes wrong… credit can keep growing. Well, for a limited time anyway.

Because as we both know, growth can’t go on forever. At some point it stops.

And because credit provides a leveraged boost as the market expands, it provides a leveraged knock when the economy busts. Firms go bust, banks cop the fallout from bad debts, and governments see a big drop in tax revenue.

That’s why all the talk about budget cuts and austerity is a smokescreen. Politicians the world over are making the right noises about cutting spending. But they’re doing the complete opposite. They’re increasing spending.

Western governments now account for 30-50% of all national spending. So, if governments stop spending then the economy will go into recession. That’s when you get firms going bust, banks copping bad debts… and governments raising less tax money.

Now, in our view that would be great. Governments should get out of the way of market forces. But no politician wants to cut spending because they know the consequences.

So they have to keep the spending party going.

The U.K. is a perfect example…

If you keep tabs on the Old Dart, you’ll know the Conservative-Liberal Democrat coalition made a big song-and-dance about cutting spending. They said it was for the good of the country… they couldn’t go on living beyond their means… etc.

As we wrote at the time:

“We’ve taken a look at the so-called savage cuts made by Tory Chancellor of the Exchequer, George Osborne, and we’ve come to the conclusion that it’s nothing more than a not-so-elaborate smokescreen…

“[When] you look at the actual spending review… [you] see that the supposed £81 billion (AUD$130 billion) of savings over the next few years actually results in an increase in government spending of £43 billion (AUD$69 billion).”

And according to UKpublicspending.co.uk, net public debt over the next three years will be 53% higher than in 2010:

So much for savage cuts and austerity.

The same is happening in the U.S. The same will happen in Greece… and in Italy. Whether or not Bunga-Bunga Berlusconi is PM.

You’ve seen what happens when an indebted economy stops growing. Government bond yields rise as investors worry the debt-riddled governments won’t raise enough tax revenue to repay the debts.

But asking governments to stop spending when they control between one-third and one-half of all spending just isn’t going to happen. So they have to make all the right noises about cutting spending while at the same time making sure spending (and therefore debt) keeps going up.

In short, as we’ve warned for the past three years, the problems that led to the near collapse of the global economy in 2008 haven’t been fixed. The problems are still there… and are getting bigger by the day.

All the current crop of politicians is doing is scrambling to patch things up as best they can. To make sure the final collapse doesn’t happen while they’re still in office.

But one day (exactly when, we can’t say) the postponed depression of 2008 will return. Only it’ll be much bigger. As the market not only tries to purge all the bad investments and debts from before 2008, but purges the many more bad investments and debts made since 2008.

As an investor, that puts you in a tough spot. You know the market is living on borrowed time. But you also know fools could push the market higher… and that’s something you don’t want to miss out on.

That’s why we continue to recommend small-cap stocks for explosive growth (the type of stocks that tend to surge the most when the market rallies), and blue-chip stocks for leveraged gains to the upside… and downside (if you’re comfortable short-selling).

In other words, the only way to play this market right now is if you’re prepared to buy and sell. This is neither a buyers nor a sellers’ market. It’s a timers’ market. Because getting the timing right is the most important factor when investing today.

Cheers.
Kris.

P.S. So, what do you do? The markets love the latest non-event from Italy. But the excitement will soon wear off and the market will fall. Then we’ll get another non-event… which the market will love… until that wears off too.

The trick is figuring out when to buy and sell. That may sound obvious. But trust us, today it’s a lot harder to pick the buy and sell points than it was three years ago.

That’s why each week, for the past few months we’ve religiously tuned into Murray Dawes’ Slipstream Trader YouTube channel. Every Wednesday, Murray lays out his thoughts on the markets. We asked Murray – before he started recording today – where the market is going next. In short, the key level to look for is around 4,400 points on the S&P/ASX 200.

What that means for the markets is revealed in the free weekly video update. Click here to watch later on today.

Related Articles

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The Gold Bubble and China

What a 2,300 Year-Old Coin Reveals About Gold

Gold Investing Far From a Bubble

From the Archives…

Your Retirement Savings – The Day the Government Began to Raid Them
2011-11-04 – Kris Sayce

Fed Up With Inflation…
2011-11-03 – Kris Sayce

All for Gold… But is There Gold For All?
2011-11-02 – Dr. Alex Cowie

Why Australia Needs More Losers
2011-11-01 – Kris Sayce

Qantas – A Grounded Investment?
2011-10-31 – Dan Denning

For editorial enquiries and feedback, email [email protected]

Neither a Buyer nor a Seller Be… You’ve Got to be Both

USDCHF stays above a rising trend line on 4-hour chart, and remains in uptrend from 0.8569. As long as the trend line support holds, uptrend could be expected to continue, and next target would be at 0.9150-0.9200 area. On the downside, a clear break below the trend line will indicate that the uptrend from 0.8569 has completed at 0.9067 already, then the following downward movement could bring price to 0.8000 zone.

Ticonderoga believes that the rapid bankruptcy of MF Global (NYSE:MF) will bring increased regulatory scrutiny on the smaller broker dealers like Jeffries (NYSE:JEF). This could drive tougher capital requirements and risk taking rules, as well as an emphasis on long-term forms of financing, Ticonderoga says. The firm thinks Jeffries’ cost of capital is likely to go higher, and has concerns about the company’s long-term profitability.

British Parliament is now investigating whether News Corp. (NASDAQ:NWSA) executives, and perhaps James Murdoch himself, used unscrupulous tactics in pursuit of news scoops at the company’s now-defunct London tabloid “News of the World”. The phone hacking scandal may derail CEO Rupert Murdoch’s wish to have James succeed him. The Guardian is also reporting this morning that News of the World hired a private investigator to gather information on two of the lawyers representing phone-hacking victims in a bid to pressure the litigators to stop their work. News Corp (NASDAQ:NWSA) has potential upside of 23.3% based on a current price of $16.95 and an average consensus analyst price target of $20.89.

Mr Top Step’s Danny Riley talks about how the SPZ sold off from its 1289 high down to 1208 , a 6% decline and has made a series of higher lows. Riley also talks about how despite some negatives both in the US and in Europe the markets are marching higher.

As we see challenges in the global economies, we must also simulate new models not only to get us through the survival mode but also to make our organizations stronger and more powerful than ever before. However, the question we must ask ourselves as the executives of our comprehensive domain, can we handle the growth? Are we ready for the paradigm shift?

With or without you, this shift is happening across various industries and sectors and it has never been as aggressive in the past. Paradigm shift is contributing and making its presence appreciative in the organizational structure of many creative companies and bring worlds together and making them smaller. It is now that we must embrace and accept it by formulating new strategies for not only growth but sustaining current state.

This recession brings abundance of opportunities for any business regardless of industry they are in. If you are an entrepreneur and can’t seem to find that gold nugget, I say you are not looking hard enough. You need to look harder and find the opportunity within your industry. We simply have to position ourselves to be on the receiving side and not on the giving side.

In the next few years will encounter a number of changes in the business world and many times these changes will affect us as well, but we have to be the judge of whether that impacts us in a positive manner and not negative. This shift needs to be initiated in every organization from the frontend such as business development and sales to the backend like the financials, etc.

My Thoughts: Create positive synergies amongst your partners and related industries; don’t wait for them to happen! Be creative and think logically before making a commitment, especially long term commitment. Are we ready for the Paradigm Shift? Or should I ask are you ready for the Shift?

Rahim Thawer /
CEO of Waterbury Financial Strategies Inc
http://www.waterburyfs.com

Social psychology precipitates economic depressions

By Elliott Wave International

Don’t blame Martin Van Buren for America’s first deflationary depression. Social mood rode higher in the saddle than did our 8th President, who only stood 5′ 6″.

Elected in 1836, by the time Van Buren assumed office in March 1837 a speculative bubble had burst and a banking crisis was at hand (sound familiar?) — the national mood had turned south and the “Panic of 1837” followed. Van Buren was known as “The Little Magician,” but he could not pull an economic recovery out of the hat. He met defeat seeking a second term.

America’s first deflationary depression lasted until 1842. Van Buren blamed over-zealous business practices and a credit bubble (sound familiar 2x?). The panic precipitated bank failures; many speculators who bought land to capitalize on railroad expansion lost everything. The depression worsened as Van Buren continued Andrew Jackson’s economic policies. Businesses failed and unemployment was widespread. There were even “food riots” in several cities.

(Author’s note: Because of substantial revenue inflows into the Treasury during the boom of the early 1830s, the United States government became debt free in 1835. Ironically, this was the very year the depression began. Stock prices fell sharply despite the federal government paying off all of its debt. Conventional wisdom would have us believe reducing the national debt, or paying it off entirely, would lift stock prices. It didn’t happen in 1835, so there must be something else at work. That “something else” is social mood.)

The 1837-1842 deflationary depression comprised Supercycle Wave II, the end of which saw the beginning of the biggest economic expansion in history — Supercycle wave III! The 1929-1933 Great Depression still grabs more attention, but in fact the earlier Supercycle Wave II decline set the stage for the United States becoming the greatest economic and military power the world has ever known.

President Herbert Hoover held office during the 1929 Crash and onset of the Great Depression, a.k.a. Supercycle Wave IV. Yet no U.S. President has thus far been at the helm during a Grand Supercycle market decline. The last decline of that degree had its origin in the South Sea Bubble in 1720, when Great Britain’s King George I was on the throne. The rampant speculation of the time spread beyond the financial class, such that porters and ladies’ maids had enough money to buy their own carriages. Members of the clergy took part in the mania. Poof! Life savings were wiped out. England’s Postmaster General committed suicide. Hundreds of members of Parliament lost money. As for the directors of the South Sea Company itself, they were forced to give up their property and arrested to boot.

Martin Van Buren led the nation during our country’s first Supercycle depression — as President he was powerless to stop it. Who will occupy the Oval Office when the next Grand Supercycle depression develops? This we believe: That individual will be powerless to prevent it. He or she will only be a President.

What is more powerful than a President of the United States? The answer is “social mood.” How is this powerful force shaping the economy?

Discover the answer in the 90-page Free Report called the Deflation Survival Guide.

Now is the time to prepare for a deflationary depression. Start by reading the 90-page free eBook, Deflation Survival Guide, which includes Robert Prechter’s most important analysis and forecasts regarding deflation. This guide will help you survive a major deflationary trend, and even equip you to prosper. Download your free eBook, the Deflation Survival Guide, now >>

Nov. 8 (Bloomberg) — David Owen, chief European economist at Jefferies International Ltd., discusses the European Central Bank monetary policy, the region’s sovereign debt crisis and Italian bond yields. He speaks with Owen Thomas, David Tweed and Linda Yueh on Bloomberg Television’s “Countdown.”

Source: ForexYard

Last week began with positive releases from the U.S. economy. The data had created speculation that the U.S. economic recovery is advancing, and that global recovery will follow as well. As a result the U.S. dollar fell on all fronts. However, two disappointing publications from the U.S. on Thursday were enough to reverse the trend, boosting the dollar and yen as a result. It seems that fears of a potential slow down in the global economic recovery are currently driving the market from riskier assets like the euro and U.K. pound.

This trend is likely to continue for the foreseeable future, and considering the heavy news week ahead, traders should be able to generate several profitable positions.

Here are today’s leading economic publications:

• 07:30 GMT, German Flash Manufacturing PMIServices PMI – This is a purchasing managers’ index (PMI), which attempts to reveal the current market conditions in Germany. Analysts’ expectations for both indicators are just a little above average. If the end results will beat expectations, the euro might be supported as a result.

• 08:00 GMT, Euro-Zone Flash Manufacturing PMIService PMI – These PMI’s are for the entire euro-zone, not just Germany. These releases tend to have a smaller market impact, however an unusual result could create volatility. If the end result will beat expectations, the euro may rise as a result.

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.