Month: December 2011

By Amy Calistri, GlobalDividends.com

The economy is still struggling to find solid ground. The holidays are coming. And these two facts alone make investors more vulnerable to the kind of get-rich-quick pitches I see from companies like this one.

As an investor, I get unsolicited “get-rich-quick” investment advertisements. Lately, I’ve been swamped with them. And that makes me worry.

The economy is still struggling to find solid ground. The holidays are coming. And these two facts alone make investors more vulnerable to the kind of get-rich-quick pitches I see in many of the investment advertisements I receive.

Most times, I just throw them away without another thought. But once in awhile, out of curiosity, I spend a few minutes researching their recommendations.

For example, earlier this year I received a mailing that touted a “stealth” oil and gas play, apparently ready to pop for an 800% gain. The stock was Titan Oil & Gas (OTC: TNGS).

The promotion spoke volumes about the company’s ability to reap huge profits in the energy sector — soon! On close examination of Titan’s financial reports, however, it was hard to see how that could happen.

For instance, in the quarter ended November 30, 2010, the company could report no revenues and stated that it had “no products or services.” And even its own financial reports admitted that conditions “raise substantial doubt about the company’s ability to continue as a going concern.”

Since then, the company has generated some revenues — $15,323 from a 6% working interest in a handful of wells in Canada — but by the end of May it also showed a net loss of $111,608 for the previous nine months.

I don’t mean to pick on Titan Oil & Gas. It may turn a profit someday. Unfortunately, since I received that promotion in the mail, Titan Oil and Gas shareholders have not done well.

In the chart below, I’ve shown the performance of TNGS versus one of my favorite “get-rich-slowly” securities in my Daily Paycheck portfolio — Magellan Midstream Partners (NYSE: MMP). Magellan is a master limited partnership (MLP) that produces a steady stream of revenues by transporting and storing oil and gas. It also pays a 5.0% yield.

As you can see in this chart, shares of TNGS have dropped more than 90% since February. Conversely, investors in MMP have seen a steady appreciation of 12% over the same period.

Not included in the chart are the $3.11 per unit in distributions MMP paid during that time — an additional 5.5% return on an investment made at the beginning of February. Of course, dividend reinvestment would have yielded an even higher return.

It’s been said that the two most powerful forces in the market are fear and greed. Maybe those emotions are hardwired into us as human beings. Fear is a good protective instinct, helping us avoid danger and unnecessary risk. Greed can help us accumulate more than we need in good times — helping us to survive during lean times.

It turns out fear and greed, however, are poor allies when judging potential investments.

Patience, research and dividend reinvestment may not be able to compete with dreams of a lottery-like score — but these are the building blocks to grow the kind of income we will need to rely on as we get older.

Again, I don’t mean to pick on Titan Oil & Gas. But it illustrates an important lesson: Whether it’s an unsolicited advertisement in the mail or a pick from a trusted newsletter — including mine — it’s important to do due diligence on your own to make sure the investment is suitable for your needs.

[Note: One common mistake is to think that stable income stocks can’t deliver strong returns. I have a number of holdings with dependable, above-average yields in my Daily Paycheck portfolio that are up more than 40%.

But I can’t — and won’t — promise you that I can double my subscribers’ money in “X” amount of time. However, we can find solid income investments that will provide us with the opportunity to patiently grow our income. For more on the opportunities I’m finding, I invite you to visit this link.]

Good Investing!

Amy Calistri
Chief Investment Strategist — The Daily Paycheck

Disclosure: StreetAuthority owns shares of MMP as part of its various “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.

Dec. 1 (Bloomberg) — Lothar Mentel, chief investment officer at Octopus Investments Ltd., talks about Italian bonds and his investment strategy. He speaks with Francine Lacqua on Bloomberg Television’s “On the Move.”

Time to Take the “Emerging” Out of Emerging Markets

by Jason Jenkins, Investment U Research
Thursday, December 01, 2011

Ten years ago, while working in Goldman Sachs Group’s economic research department, Jim O’Neill wrote a paper predicting that, by 2050, Brazil, Russia, India and China would be richer and more powerful than most of the world’s current major economic powers.

He was first to coin the BRIC acronym that refers to the emerging-market nations of Brazil, Russia, India and China.

“Growth Markets”

Last week, in a speech at the Confederation of British Industry’s employers’ conference in London, Mr. O’Neill stated that it was now time to stop categorizing some of these nations as “emerging.” Over the past decade, O’Neill said that China alone saw its gross domestic product rise by over $5 trillion. “The phrase I use is growth markets,” he said.

China gets a lot of attention, but it’s not the only BRIC that has probably outgrown the acronym. Over the past few years, Brazil has seen itself placed into the spotlight due to burgeoning economy and dynamic growth trajectory. GDP is predicted to total $2.4 trillion for this year.

I think the term “emerging market” comes with a stigma to some investors. Since O’Neill made the statement, let’s look at Brazil and other BRIC nations versus Great Britain – which at the end of this year Brazil will overtake as the world’s sixth-largest economy.

Ten years ago, the British economy was $1.5 trillion larger than that of China, and the aggregate size of the economies of the four BRIC nations was less than $3 trillion. The present day British GDP is approximately $2.6 trillion, while Brazil, Russia, India and China have an aggregate GDP of $13.5 trillion.

Over the course of the last decade, the BRIC nations have effectively created the equivalent of close to five new British economies, O’Neill said.

Oil Will Be Key to Brazil’s Future

Sometimes it’s better to be lucky. Four years ago, Brazil discovered vast oil fields off the coast of Rio de Janeiro, which became known locally as the “pre-sal” – a translation of pre-salt.

Brazil’s National Petroleum Agency estimated that nearly 50 billion barrels of oil have been identified to date, which makes the find the greatest oil discovery in the country’s history. This may put the country into the top-five category of the world’s oil producers.

Going forward, the most important aspect of Brazil’s new oil industry is the Brazilian government’s pledged to use its oil revenue to revamp the country’s public school and healthcare systems and give a big boost to the country’s failing infrastructure.

According to Gustavo Mendonça, an economist at the management firm Oren Investimentos in Rio, “If we go in the right direction, we’ll be a richer country, with one of the biggest oil service industries in the world, a more highly skilled labor force and a more educated and healthier population. In summary: We’ll be much more productive than we are, not only in oil, but as a country.”

Playing Brazil’s Growth

For the last few months we have talked about plays in Brazil for the aforementioned reasons and more:

• Institute of Applied Economic Research – a Brazilian government-led research organization dedicated to the generation of macro-economical, sectorial and thematic studies – reported in September that Brazil stands to be a major destination for foreign investment in 2012.

• Brazilian stocks are trading at lows due to the European crisis.

With so much emphasis on the oil industry, you may want to look at offshore drilling company Petrobras (NYSE: PBR). In September, the company opened the Lula-Mexilhao pipeline, which in the future will pump 10 million cubic meters of natural gas daily.

Good Investing,

Jason Jenkins

Article by Investment U

Invest in the “Starbucks of China”

by Carl Delfeld, Investment U Senior Analyst
Thursday, December 01, 2011: Issue #1655

Imagine my surprise when I arrived in Tokyo decades ago as an eager student and found more coffee shops per block than bars in Milwaukee.

I had thought that Japan, like most of Asia, was a land of tea drinkers. It turns out that with rising incomes and western influence, Japanese people love coffee (with lots of sugar and milk) alongside their green tea.

Right now, Japan’s per capita coffee consumption is 75 percent of America and still trending upwards.

As you can see from the chart below, this is pretty much the pattern South Korea followed.

China will also follow this trend. How can we get a piece of the action?

To put China’s coffee upside potential in perspective, I drink more coffee per day than the average Chinese drinks in a year right now! That’s three cups of coffee complements of my neighborhood Starbucks (shout out to Katie and Matt).

Which brings me to two very different companies hoping to cash in on coffee growth in the Middle Kingdom.

Blue Chip Starbucks vs. Taiwan Rival

As much as I admire the Starbucks brand, it’s hard not to notice that it already penetrated just about every possible nook and cranny in America.

That’s why the company is going international in a big way and sees China as a major target of growth.

CEO Howard Schultz said Starbucks (Nasdaq: SBUX) is still in the “very early days” with its efforts in China. But its goal is to triple its number of stores there to more than 1,500 by 2015. It’s growing fast in China, with quarterly sales growth of around 20 percent.

International sales rose a nice 15 percent in the quarter, but account for about 30 percent of overall revenue. In contrast, U.S. sales were up six percent.

For the year ending September 30, Starbucks recorded $12 billion in revenue and posted revenue of $1.7 billion. Starbucks stock has done well over the past year, up over 30 percent and up 500 percent from its 2008 lows.

No question, Starbucks is a great global coffee play, but a purer play on China’s potential to grow exponentially as a coffee market is Taiwan’s 85C Café Bakery operated by Gourmet Master (TPE: 2723).

(If your broker doesn’t support foreign exchanges, you may want to look into a site such as this one.)

“Low-Price Luxury”

The company’s “low-price luxury” appeal is right on target. The Founder, Mr. Wu Cheng-hsueh, came up with the idea of after getting a stiff bill for coffee and pastries at a five-star hotel in Taipei. Mr. Wu is an experienced entrepreneur who went from one good idea to another before founding this gold mine.

85C Café Bakery has a base of 325 stores in Taiwan and expects to increase its stores in China six-fold to 1,000 by 2015. The company has three stores in the United States and its highest grossing store is in Irvine, California where it offers 80 varieties of pastries as well as its famous sea salt coffee.

The company’s edge is three-fold: its coffee pricing advantage of 30 percent to 50 percent over rival Starbucks, its absolute focus on growth in mainland China, and its Taiwan base gives it political savvy to run the thicket of regulations put up by China’s mandarins.

In addition, from reading scores of comments online, it seems that 85C’s major pull is its bakery with waiting lines like Disneyland. Of special note are its coffee mochi bread, taro bread, half moon cakes and squid ink buns.

85C’s stock, like many boom chip stocks, has been on a wild ride since its November 2010 IPO. The stock rocketed 138 percent out of the gate before settling down as Taipei’s market pulled back 22 percent in 2011. The stock was trading since August about 20 percent above the IPO price.

This is a great entry point, and by putting 85C and Starbucks in your saddlebag, you can hedge your bets and put a shot of caffeine your portfolio.

Good Investing,

Carl Delfeld

Article by Investment U

Dec. 1 (Bloomberg) — Liu Li-Gang, head of Greater China economics at Australia & New Zealand Banking Group Ltd., talks about the outlook for interest rates and inflation as China cut lenders’ reserve-ratio requirement. He speaks from Hong Kong with Linzie Janis on Bloomberg Television’s “First Look.”

Dec. 1 (Bloomberg) — Gavin Stacey, chief interest-rate strategist at Barclays Plc in Sydney, talks about the Australia’s economy and central bank monetary policy. Stacey also discusses global currencies, China’s economy, and the coordinated efforts by six central banks to ease Europe’s sovereign-debt crisis. He speaks with Susan Li on Bloomberg Television’s “First Up.” (Spacey spoke before China released November data for a manufacturing index. Source: Bloomberg)

Dec. 1 (Bloomberg) — Qu Hongbin, a Hong Kong-based economist for HSBC Holdings Plc, talks about China’s economy and central bank monetary policy. China yesterday cut the amount of cash that banks must set aside as reserves for the first time since 2008 as Europe’s debt crisis dims the outlook for exports and growth. Qu speaks with Susan Li on Bloomberg Television’s “First Up.” (Source: Bloomberg)

London Gold Market Report
from Adrian Ash
BullionVault
Thurs 1 Dec., 08:50 EST

WHOLESALE PRICES in the gold investing market continued to rise Thursday morning in London, extending yesterday’s 2.8% jump after the world’s biggest central banks offered unlimited short-term loans to their local banking sectors.

Crude oil also held near two-week highs after the United Kingdom called for “international financial isolation” of Iran following this week’s attack on its embassy in Tehran.

The Euro currency traded just shy of $1.35 – some 2.5¢ above Wednesday’s start – as Spain successfully sold €3.75 billion in new 5-year debt, offering the highest interest rate since 2005 according to Bloomberg.

European stock markets failed to extend yesterday’s 3% jump, however, drifting sideways by lunchtime.

“The ECB’s monetary policy is constantly guided by the goal of maintaining price stability in the Euro area over the medium term,” said Mario Draghi Thursday morning in his second speech as European Central Bank president.

“And when I say this, I mean price stability in either direction,” he added – meaning both the threat of inflation and of deflation in prices.

There are “only 10 days to save the Euro” said a raft of newspaper and website headlines Thursday, quoting Euro commissioner Ollie Rehn’s reference yesterday to the European summit to be held in Brussels at the end of next week.

Urging tighter Eurozone fiscal co-operation, “A credible signal is needed to give ultimate assurance over the short term,” said the ECB’s Draghi today.

Wednesday’s $30 rise in gold investing prices saw the metal “trading right through the previous trendline resistance,” says the latest chart analysis from bullion bank Scotia Mocatta.

“This has shifted intermediate term technicals to neutral. We would like to see the trendline hold on the downside, around $1720, to confirm a trend reversal” after gold investing prices slid from a record peak of $1920 in early September.

“The 30-week moving average at $1652.61 continues to offer good support,” according to the latest technical analysis from Axel Rudolph at Commerzbank.

But “Year-end is approaching and few investors want to be heroes,” says UBS precious-metals analyst Edel Tully, citing a stronger Dollar and a lack of “conviction” amongst gold buyers for gold not attracting “safe haven” flows amid the Eurozone crisis.

The MSCI Barra index of global stock markets surged 3% on Wednesday to end November 0.8% higher.

Physical gold prices rose 1.4% last month against the US Dollar, while the Euro currency fell over 3% and silver prices fell more than 8%.

Wednesday saw the Gold/Silver Ratio – which shows how many ounces of silver it takes to buy 1 ounce of gold – jump to 55.7, its highest level since late September.

Averaging 53 since the gold price was allowed to float in 1968, the Gold/Silver Ratio hit a 3-decade low of 32 in May this year, as silver prices doubled inside six months to near all-time record highs.

“[Gold investing] clearly cannot be defined as having been a bubble,” Bloomberg today quotes Credit Suisse’s precious metals analyst Tom Kendall.

The volume of gold bullion held to back shares in exchange-traded trust funds yesterday rose to a fresh record of 2,356 tonnes, the newswire says, worth $133 billion at today’s London Gold Fix.

Jewelry sales in China – the world’s No.2 gold consumer market – could reach CNY330 billion ($52bn) in full-year 2011 according to Cheng Binghai, chairman of the Shanghai Gold & Jewelry Trade Association.

China now accounts for a quarter of Australia’s mineral and energy exports, which reached a quarterly record of A$49 billion (US$50bn) between July and Oct. according to new data today, driven by higher prices for coal and gold mining output

But a survey from HSBC Bank yesterday showed China’s manufacturing sector contracting for the first time since Feb. 2009, with new export orders falling sharply, while the People’s Bank of China cut the amount of savers’ deposits which commercial banks must keep back, rather than lending on, by half-a-percent to 20.0%.

“This is the first time in 3 years that the central bank has lowered the required reserve requirement,” says Beijing’s Economic Observer, “an indication that the central bank may gradually be starting to loosen monetary policy settings.”

Japan’s steel industry will cut its output sharply this quarter, the head of Nippon Steel told a conference today.

Brazil’s central bank yesterday cut interest rates in Latin America’s largest economy by half-a-point for the third month running.

“Given the low growth environment [worldwide], we do not feel it is prudent to be long on the commodity complex indiscriminately,” said a report from Morgan Stanley analysts earlier this week.

“The defensive nature of gold should continue to support investment demand as investors look for safe havens,” the report says, repeating the investment bank’s call for gold investing to outperform other commodities in 2012, rising to an average price of $2,200 per ounce.

“A continued low or negative real interest rate environment will also provide support” for gold investing, the Morgan Stanley team believe.

Adrian Ash
BullionVault

Gold price chart, no delay   |   Buy gold online at live prices

Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(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

Successful bond auctions in Spain and France have kept the markets buoyant with Asian equities rallying, though this may be just be markets playing catch up with their American counterparts after yesterday’s rally. European stocks are mixed while the major currencies appear to be consolidating. This is not surprising as we approach some important US data both this afternoon and tomorrow.

European bonds are up for the day with French 10-year bonds the best performers following decent bond auctions in both Spain and France. The move to increase USD liquidity has carried over into today but market players may be overlooking European data that was released this morning. Euro zone final manufacturing PMI was in-line with market expectations at 46.4 but is down for the sixth straight month and well below the 50 boom/bust level. Traders will now turn their attention to US data releases with the ISM survey today and the jobs report tomorrow.

The EUR/USD is within yesterday’s wide range but a move above yesterday’s high and the pair could test the 1.3610 resistance from the November 18th high. Support is found back at 1.3410 from this morning’s low.

The kiwi is looking stretched after rallying 5.5% from last week’s lows against the USD. The NZD/USD has found resistance at its 55-day moving average at 0.7820. A break here could propel the pair to the 0.8020 from the trend line off of the August and October highs. Support comes in at yesterday’s low of 0.7575 and the November low of 0.7400.

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.