Month: January 2012

Verizon Wireless (NYSE:VZ) and Vodafone (NYSE:VOD) said they would no longer roll out smartphones and tablets on its network that don’t support 4G LTE connectivity.The new requirement is no doubt, an effort to exploit its lead over AT&T (NYSE:T) in utilizing and advancement of LTE services, and could serve as a positive catalyst for Qualcomm (NASDAQ:QCOM) due to the higher chip content requirements in 4G products.The move could also signal the utilization of LTE in the upcoming iPhone 5 (NASDAQ:AAPL).

JPMorgan Chase & Co. announced this morning that its fourth quarter earnings were lower by 23 percent, which analysts had expected, mainly due to the effects of the European debt crisis.

Iran Sanctions, the Strait of Hormuz and Oil Prices

by David Fessler, Investment U Senior Analyst
Friday, January 13, 2011

On New Years Eve, President Obama dropped an “oil bomb.” He signed legislation that effectively prohibits anyone who’s doing business with the United States from doing business with Iran’s central bank.

The intent of the law is clear: prevent Iran from completing any oil-related transactions, effectively using its abundant oil as a weapon against itself. That’s a huge problem for Iran, since the revenue it gets from exporting crude fuels much of its economy.

Iran fired an “oil missile” back at the United States. It said that if boycotting its oil transactions was implemented, it would block the Strait of Hormuz to prevent shipment of any oil, Iranian or otherwise. Every day, about 14 supertankers pass through the Strait of Hormuz to fill up.

Would Ahmadinejad actually order his military to fire on one of these tankers? Highly unlikely…

The more likely scenario is that he has his six-shooters loaded, holstered and pointed at his own feet. Of course the mere threat of any conflict has caused oil prices to jump, and oil traders remain edgy at the prospect.

Who Loses if the Iranian Boycott Becomes Reality?

Who are the big users of Iranian oil? Here’s the top four, according to data from Reuters:

• Italy: 249,000 bpd
• Spain: 149,000 bpd
• Greece: 111,000 bpd
• France: 78,000 bpd

Those top four importers account for about 23% of Iran’s oil exports, estimated to be 2.5 million barrels per day (mb/d). How effective would a ban on Iranian crude be? Would the above countries immediately descend into chaos?

Probably not, but like everything with oil, it’s not a simple answer. It depends on a number of factors, many of which are in a constant state of flux. Let’s take a look at a few of the big ones.

Can Anyone Makeup a 2.5 mb/d Shortfall in Supply?

The Saudis say they can increase their 10 mb/d current output an additional 1 to 1.5 mb/d. But the real question is: Will they?

After all, they have a vested interest in keeping oil prices high. They’re increasing their own spending roughly 7% annually to keep the average Saudi citizen happy. They don’t want to become the next Arab Spring uprising.

Libya should be back at full capacity by the middle of 2012, about six months ahead of schedule. That’s another 1.6 mb/d on the plus side. So even if Iranian oil exports were completely blocked, Libya and Saudi Arabia supplies alone could conceivably make up the difference.

Iraq is also returning as a major world supplier of crude. According to Hussain al-Shahristani, Iraq’s deputy prime minister for energy affairs, Iraqi crude production is at a 20-year high of just over three mb/d.

Iraq is home to the world’s fifth-largest deposits of crude oil and natural gas. Shahristani indicated that by the end of 2012, crude production will be close to 3.5 mb/d. By the end of 2013, he expects to have port loading facilities in place that will allow exports of as much as 3.6 mb/d.

Of course, this scenario assumes nothing goes awry anywhere else in the world. That’s a big assumption. Nigerian rebels seem to take endless delight in blowing up oil pipelines. As much as 30% of Nigerian supply is offline at any given time.

The reality is, oil prices are set at the margins. That is, if a small amount of supply – as little as one million barrels per day – is knocked off-line for even a short period of time, it can (and will) have a profound impact on oil prices. Crude will quickly rise, as traders will leap before they have all the facts.

That impact is based more on perception and emotion than reality, as it turns out. History is ripe with examples of attempts to use oil as a weapon. Let’s take a look at a few, and the results in the aftermath.

The Six-Day War

Also known as the 1967 Arab-Israeli War, it was fought between June 5 and June 10, 1967. Israel launched an attack against its neighbors: Egypt, Jordan and Syria. Israel launched missiles against opposition forces, and ended up taking control of the Gaza strip and the Sinai Peninsula.

Arab states discussed ways to punish the West in response to the air strikes Israel conducted on Egyptian targets. They agreed to suspend oil sales to the United States and Great Britain.

The embargo backfired, however. The Soviet Union, desperately in need of cash but flush with oil, agreed to fill the supply gap. The lost revenue was such a financial shock to the Arabs, the embargo was lifted after only a few days. The first instance of oil as a weapon was a dismal failure.

The Yom Kippur War

After the outbreak of yet another war in the Middle East, in October of 1973, the OPEC cartel decided it would nearly double the price of crude from $2.90 a barrel to $5.11.

It also indicated it would cut production by 5% until Israel withdrew from the areas it occupied from the war discussed previously. I remember this one, as it was only a few years after I started driving.

The reaction in Western nations was nothing short of an oil panic. Gas lines and rationing were common. Germany banned driving on Sundays. Fortunately, the gas lines weren’t too long at the station near my house.

It turns out the fears over the embargo were greatly overdone, as the world remained well-supplied with crude from other sources. By December 1973, Saudi Arabia distanced itself from the embargo, and it crumbled just as quickly as it started. Using oil as a weapon failed once again.

Will it Be Different This Time?

The answer is: Probably not. Could we temporarily see $200 a barrel crude? You bet. But here’s the reality: The world’s oil supply is diverse and widespread. Don’t be fooled: Producing countries are all in it for the money.

If Iran oil is blocked, the shortfall will be quickly made up from elsewhere. There will be two big losers in this latest oil war if an “oil bomb” is dropped on Iran.

The first will be Iran itself. Without its main source of revenue, it will be forced to comply or to appear to do so with the terms laid down by Western powers.

The other big loser will be the American and other gas-buying consumers around the world. We’ll likely be paying sky-high prices for gasoline until the whole thing settles down. Here’s hoping whatever happens, it doesn’t last long.

Good Investing,

David Fessler

Article by Investment U

The Greatest Contrarian Play of 2012

by Dr. Mark Skousen, Investment U Contributing Editor
Friday, January 13, 2011: Issue #1686

“Real estate prices may be bottoming out.”
– Robert Shiller

Over the weekend, I attended the annual American Economic Association (AEA) meetings in Chicago, and ran into Yale economist and long-time friend Robert Shiller at a luncheon.

Bob is famous for his book Irrational Exuberance, wherein he predicted the tops of both the stock market in 2001 and the real estate market in 2006. He is also co-inventor of the Case-Shiller Real Estate Index.

I asked him if the index suggested a bottoming pattern. He didn’t know for sure, but he noted that the futures market for real estate looked promising.

Clearly the Case-Shiller Home Price Index, covering major cities across the country, looks promising.

Moreover, a new report issued on Monday states that “the number of improving housing markets nearly doubled,” including Dallas, Denver and Philadelphia.

Housing starts are also up. Metrostudy, which researches all 84 metropolitan statistical areas (MSAs) around the country, predicts that housing starts will increase nationwide 12% in 2012. It forecasts:

Total starts: 660,000 (up 12.0%)

Single-family starts: 469,000 (up 9.8%)

Multi-family starts: 191,000 (up 17.9%)

No wonder homebuilding stocks such as PulteGroup (NYSE: PHM), D. R. Horton (NYSE: DHI) and Toll Brothers (NYSE: TOL) have risen sharply in the past three months. That trend could continue. I’m recommending them in my trading services.

I also interviewed New York Times columnist Paul Krugman at the AEA meetings and he told me an interesting story:

Nouriel Roubini, the notoriously bearish economist from New York University, recently bought a house in the New York area. “That’s a clear sign of a bottom,” Krugman said with some glee.

Bob Shiller was kind enough to ask me about my new book. I told him that The Maxims of Wall Street is selling well. I shared with him some of the classic Wall Street lines. One of the best has to deal with real estate:

“Want to make a million dollars?”

Answer: “Borrow a million dollars and pay it off” – by buying real estate.

Good Investing,

Mark

Article by Investment U

London Gold Market Report
from Ben Traynor
BullionVault
Friday 13 January 2012, 08:45 EST

SPOT MARKET Dollar gold prices dipped to $1637 an ounce Friday morning London time – a 1.4% fall from Thursday’s high – as the Euro fell against the Dollar following a successful-yet-disappointing Italian bond auction.

In contrast to Dollar gold prices, the gold price in Euros gained throughout Friday morning, hitting €41,326 per kilo (€1285 per ounce) around lunchtime.

Silver prices dipped to $29.69 – 3.3% below yesterday’s peak – while stocks and commodities were mostly flat and government bond prices gained.

“We feel the market is once again comfortable with gold,” says Scotia Mocatta’s latest technical analysis report, “but will liquidate on a break of $1605.”

Heading into the weekend, gold prices are up 1.5% in Dollar terms, while on a fortnightly basis gold is looking at a gain of 4.7%. Based on PM London Fix prices, this would be gold’s biggest two-week gain since the fortnight ended 4 November.

Italy successfully auctioned €4.75 billion of 3-Year government bonds this morning, paying an average yield of 4.83% – down from 5.62% paid at a similar auction two weeks ago.

“On the whole [however] the auction results are mixed to soft,” cautions Rabobank strategist Richard McGuire, adding they were “certainly far from the humdinger we saw in Spain yesterday.”

“It doesn’t defeat the notion that the [European Central Bank] extraordinary liquidity provisioning will support peripheral debt but it perhaps tempers expectations as to what degree these operations will support.”

ECB president Mario Draghi argued yesterday that last month’s 3-Year longer term refinancing operation – at which European banks borrowed close to €500 billion – had averted a potentially disastrous funding crisis.

“The ECB can be rightly justified in saying that the Armageddon we were facing toward the end of last year does seem to have been addressed,” reckons James Nixon, chief European economist at Societe Generale.

Speaking at a press conference following the announcement that the ECB would leave interest rates on hold, Draghi said that “the [ECB’s] monetary stance is and will remain accommodative”.

“Further rate cuts,” says SocGen’s Nixon, “will only be forthcoming if, for example, we see signs of an outright credit crunch.”

The decline in the Euro in the second half of last appears to have boosted the Eurozone’s trade balance.

The 17-nation Eurozone saw its external trade surplus grow strongly in November – rising to €6.9 billion from €1.0 billion a month earlier – data published Friday by Eurostat show. However, the full 27-member European Union still ran an external trade deficit of €7.2 billion, though this was less than half that run in October.

The Euro ended December around 12% below its 2011 peak against the Dollar, and currently trades around $1.28.

“With a rate of $1.29 or $1.30 … [the Euro] is still too high,” said French president Nicolas Sarkozy back in January 2011.

Hungary – whose government debt is now rated as junk by all three major ratings agencies – must show “strong commitment” to economic reform before the International Monetary Fund will consider opening negotiations on a bailout, IMF managing director Christine Lagarde said Thursday, following a meeting with Hungarian officials.

“We fully understand and agree with the experts from the IMF,” said Tamas Fellegi, the Hungarian minister appointed to negotiate with the IMF.

Hungary’s prime minister Viktor Orban said this morning however that “there are areas where views differ significantly” between his government and the IMF.

China meantime saw its foreign exchange reserves fall to $3.18 trillion in the fourth quarter of last year, a period that included the first consecutive monthly fall (in December) since early 2009.

“The decline in foreign exchange reserves in Q4 is consistent with the sharp reversal in capital flows out of emerging markets in general and the region in particular,” reckons Andy Ji, economist at Commonwealth Bank of Australia.

The news “might also be contributing to gold’s downward movement,” reckons Standard Bank commodity strategist Marc Ground.

“This can be explained in terms of the negative effect that a slowing down in Chinese foreign-exchange reserve accumulation would have on global liquidity and the ability of governments, especially those of developed nations, to borrow.”

Copper and gold provide “the best value opportunities” for investment this year, according to a report published by Goldman Sachs on Friday.

The Goldman report also argues that there was a “wedge” between gold prices and real interest rates towards the end of last year. Short-term gold lease rates – the difference between the return on lending cash and the return on lending gold – were negative for much of 2011, falling towards the end of the year.

“Demand for US Dollars drove the gold lease rates to unprecedented negative levels as US Dollars became increasingly more valuable than gold,” the report says.

“This new demand for Dollars was mostly from European banks using the gold market to source US Dollar liquidity when their funding from the US money markets dried up, which created a significant amount of gold selling.”

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

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.

Jan. 13 (Bloomberg) — Thailand’s Deputy Prime Minister Kittiratt Na-Ranong talks about the impact of a weaker baht and the worst flooding in almost 70 years on the nation’s economy. Thailand’s baht dropped to the lowest level in almost 17 months as international investors cut holdings of the nation’s equities this week amid concern Europe’s debt crisis will slow global economic growth. Kittiratt spoke yesterday in Singapore with Bloomberg Television’s Haslinda Amin. (Source: Bloomberg)

By Elliott Wave International

You can probably relate: Every year, come January 1, I just can’t help but feel that “every little thing is gonna be all right,” as Bob Marley sang.

This year, the mainstream financial community is sharing the same sentiment. Here’s how EWI’s Steve Hochberg summarized it [emphasis added]:

At its conclusion, 2011 was marked by back-and-forth stock swings that resulted in essentially a flat market. My Bloomberg screen shows that the DJIA ended up 5.53% for the year, the S&P was flat…while the NASDAQ was down 1.80%. The broadest aggregate measure of stock market performance, the DJ Wilshire 5000, which includes nearly all stocks that trade, ended 2011 down 1%.

The Dow’s action masks a strongly negative stock market performance overseas. For instance, in U.S. dollar terms, the Euro Stoxx 50 Index was down nearly 20% in 2011, with the FTSE down almost 6%, the French CAC off almost 20% and the German DAX down over 17%. Asian markets were also hit hard. The S&P Asia 50 lost over 15%, the Nikkei declined 13%, the Hang Seng was off 20%, the Shanghai Composite ended 2011 down over 18%, while Australia was lower by 14%. All were down in euro terms, too.

But not to worry: a recent USA Today article notes that a “quick survey of New Year’s prognostications from investment strategists suggests stocks might deliver the double-digit gains that they have put up, on average, over the long term. A snapshot of 2012 year-end-price targets from five firms shows an average gain of 10.5% for stocks.”

Very optimistic, indeed!

Except, when have we heard that kind of talk before?

Hochberg continues:

The “10.5%” forecasted gains for the coming year is interesting because it is almost exactly the average forecasted gains for stocks for 2011, as the subheading in the following Barron’s cover story from December 2010 shows.

That’s right. A year ago, forecasts for stocks in 2011 were just as optimistic as they are now for 2012 — and largely for the same reasons: improving economy, recovering real estate and jobs markets, and a host of other “better fundamentals.”

From an Elliott wave perspective, the reason 2011 mainstream financial forecasts fell flat was simple: Stocks don’t follow the economy. It’s the other way around: The economy follows stocks.

What’s Really Ahead for 2012? There is a lot of optimism building around the stock market, but is it based on sound analysis or hope created by recent economic news reports? Elliott Wave International has released a free report to help you navigate the markets and prepare for what’s ahead. You’ll get hard facts, 25 eye-opening charts and 14 pages of straightforward commentary that will help you see the “big picture” so you can position yourself for the years to come.

Download The Most Important Investment Report You’ll Read for 2012 now.

Jan. 13 (Bloomberg) — Switzerland’s central bank returned to profit last year as the valuation of gold holdings and foreign currency reserves helped bolster earnings. Simone Meier reports from Zurich on Bloomberg Television’s “Countdown.”

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.

Source: ForexYard

The euro pared recent losses against its main currency rivals on Thursday, following a successful Spanish bond auction. The EUR/USD climbed well above the 1.2700 level, while the EUR/JPY saw steady gains throughout the day. Today, US news is forecasted to generate some market volatility. Traders will want to pay attention to the US Trade Balance and Prelim UoM Consumer Sentiment figures for clues as to what direction the markets will take to close out the week.

Economic News

USD – Dollar Stages Downward Correction against Euro

The EUR/USD turned bullish on Thursday, as the combination of a successful Spanish bond auction and the European Central Bank’s decision not to lower euro-zone interest rates helped turn investors onto the common currency. Analysts were quick to warn that the overall trend for the pair is still strongly bearish and the gains can be partly attributed to traders correcting the huge euro sell-off in the last few weeks.

Thursday also saw the release of several important US indicators that came in below expectations. Both the Retail Sales and Core Retail Sales figures proved to be disappointing , while a higher than forecasted number of Americans filed for unemployment benefits last week. The news cast doubts on the strength of the US economic recovery. How traders will react to the poor economic data will likely depend on US indicators set to be released today.

Today, traders will want to pay attention to the US Trade Balance and Prelim UoM Consumer Sentiment figures. While the Trade Balance figure is forecasted to come in slightly worse than last month, the Consumer Sentiment figure is expected to increase slightly. Positive news is likely to help the USD against its main safe-haven currency rivals, especially the yen and Swiss franc, to close out the week.

EUR – Euro-zone bond auction gives EUR Slight Boost

The euro saw some positive upward movement yesterday, following a successful Spanish bond auction which boosted investor confidence in riskier currencies. The EUR/USD approached the 1.2800 level, while the EUR/JPY came off an 11-year low reached earlier in the week. While the common currency saw a largely bullish day on Thursday, analysts were quick to warn that these gains were largely incidental and that a significant upward correction is unlikely to occur in the near future.

Today, traders will want to pay attention to the on-going developments in the euro-zone. Investors are largely pessimistic that a solution to the euro-zone debt crisis can be found. Until a plan is implemented, it seems less and less likely that the euro will reverse trends. Any further negative euro-zone news may cause the currency to slip to new lows.

CHF – Franc Gains on USD as Traders Return to Safe-Havens

The Swiss franc moved up against most of its main currency rivals on Thursday, as investors returned to safe-haven currencies following disappointing US economic news. The USD/CHF tumbled following the release of the US Retails Sales and Unemployment Claims figures. Similarly, the EUR/CHF maintained its overall bearish trend.

Today, traders will want to pay attention to US economic indicators, specifically the Trade Balance and Prelim UoM Consumer Sentiment figures. Should either of them disappoint and come in below expectations, the franc may see another bullish day to close out the week.

Crude Oil – Oil Sees Gains Following Bullish EUR Reversal

Crude oil climbed well above the $102 a barrel level on Thursday. The commodity received a healthy boost after positive euro-zone data helped boost demand for oil among international buyers. Oil typically turns bullish when the euro increases in value, and international buyers can afford to purchase more.

Whether oil can maintain these gains to close out the week largely depends on news out of the euro-zone. Any positive developments with regards to the euro-zone debt crisis will likely keep the commodity at or above its current levels. In addition, continued tensions in the Middle East are forecasted to keep oil above the $100 level, as supply side worries tend to drive up prices.

Technical News

EUR/USD

A bullish cross on the daily chart’s Stochastic Slow is a sign that upward movement may occur in the near future. This theory is supported by the Relative Strength Index on the same chart, which has drifted into the oversold zone. Traders may want to go long in their positions today.

GBP/USD

The Williams Percent Range on the weekly chart has dipped well into the oversold region, indicating that bullish movement may be on the horizon. Additionally, the Relative Strength Index is hovering close to the 20 level. Going long may be the preferred strategy today.

USD/JPY

Technical indicators are still providing mixed signals for this currency pair. While the Relative Strength Index on the 8-hour chart is in oversold territory, most other indicators are in the neutral zone. Taking a wait-and-see approach may be the preferred strategy today.

USD/CHF

The daily chart’s Williams Percent Range has drifted above the -20 level, indicating that bearish movement may occur in the near future. Traders may want to go short in their positions before any downward correction.

The Wild Card

AUD/NZD

Daily chart technical indicators are showing a possible bullish correction for this pair in the near future. The Relative Strength Index is right on the border of being oversold, while a bullish cross has formed on the Stochastic Slow. Forex traders may want to go long in their positions before an upward correction takes place.

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.