Month: January 2012

In trading on Monday, biotechnology shares were relative leaders, up on the day by about 2.1%. Leading the group were shares of Inhibitex (INHX), up about 142.2% and shares of Idenix Pharmaceuticals (IDIX) up about 36.9% on the day.

Jan. 9 (Bloomberg) — Guy Verhofstadt, member of the European Parliament and former prime minister of Belgium, discusses the European sovereign-debt crisis and the option of a common euro bond. He speaks with Maryam Nemazee on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)

Jan. 9 (Bloomberg) — Philipp Hildebrand resigned as head of the Swiss central bank after a currency transaction by his wife last year dented the credibility of the franc’s chief guardian. Betty Liu and Sara Eisen report on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)

The Swiss National Bank announced that Chairman, Philipp Hildebrand, “is resigning from his office as Chairman of the Governing Board of the Swiss National Bank” with immediate effect.  The SNB Governing Board also noted that it would continue its policy of a minimum exchange rate of CHF 1.20 against the Euro, with “utmost determination”.  Hildebrand’s resignation followed allegations that his wife had acted on insider information about an impending SNB policy move in regards to foreign exchange transactions.  Vice Chairman, Thomas Jordan, will hold the position of Chairman in the interim.

Jan. 9 (Bloomberg) — David Roche, president of Independent Strategy and a former Morgan Stanley global strategist, talks about the outlook for the European debt crisis, and its impact on emerging stock and commodity markets. Roche speaks with Rishaad Salamat and Susan Li on Bloomberg Television’s “Asia Edge.” (Source: Bloomberg)

Jan. 9 (Bloomberg) — The most accurate foreign-exchange forecasters say the euro will depreciate against the dollar for a third straight year, equaling its longest slump since its creation in 1999, as Europe slips into recession. Linzie Janis and Mark Barton report on Bloomberg Television’s “Countdown.” (Source: Bloomberg)

London Gold Market Report
from Ben Traynor
BullionVault
Monday 9 January 2012, 08:40 EST

U.S. DOLLAR gold bullion prices touched $1623 an ounce Monday morning London time – a 1% rally from the low hit during Asian trading – before falling back slightly, while stocks, industrial commodities and major government bond prices all ticked lower.

“[Gold bullion] remains above its 3-year bullish support that now lies at $1544,” says technical analyst Russell Browne at bullion bank Scotia Mocatta.

Prices for silver bullion rose to $29.26 per ounce – 1.9% down on last week’s high – while the Euro rallied against the Dollar in early European trading but couldn’t sustain momentum.

“The strength of the Dollar is playing a role in limiting appetite [for commodities],” says Nick Trevethan, Singapore-based senior commodity strategist at ANZ Bank.

“But Europe is still a basket case and investors are hoping to see more easing out of the European Central Bank at some point.”

Germany successfully auctioned €3.9 billion of 6-month government bills – known as Bubills – Monday morning. However, the bid-to-cover ratio was down on the previous auction last month, falling from 3.8 to 1.8.

In addition, some of the bills were sold at negative nominal interest rates – with the average yield coming in at minus 0.0122%.

Monday’s was the first auction at which bidders could bid in terms of price rather than yield.

“Through the submission of price bids with prices above 100 it is possible to submit price bids reflecting negative yields,” said a Bundesbank statement issued before the auction.

In other words, some investors were this morning prepared to pay more than €100 today in order to receive €100 in June.

Elsewhere in Berlin, German chancellor Angela Merkel is set to have talks with French president Nicolas Sarkozy today on how to implement tighter budgetary rules agreed at the December 9 summit.

“It’s important we do start to see some progress,” says Goldman Sachs chief European economist Huw Pill, adding that the Eurozone crisis will not be fixed without “German largesse”.

Banks meantime will need to take “substantial haircuts” on their holdings of Greek debt, reckons International Monetary Fund chief economist Olivier Blanchard. Representatives for the banking sector agreed to take losses of 50% as part of an agreement reached last October, but their losses “may have to be larger” Blanchard said Friday.

By contrast, the governor of Cyprus’s central bank, Athanasios Orphanides – who is also a member of the European Central Bank’s Governing Council – has called on Eurozone leaders to abandon plans to impose private sector losses.

“It is a thoroughly inefficient way of dealing with the moral hazard issue that we are still paying for now,” he wrote in Friday’s Financial Times, arguing that reversing the decision would reduce financing costs for other Eurozone countries, even though it would raise them for Greece.

Officials from the European Union and IMF are due to visit Greece on Saturday. Before then, the ECB will hold its first interest rate meeting of 2012 on Thursday, while Italy and Spain hold bond auctions on Thursday and Friday.

China’s money supply grew by 13.6% in the year to December – more than the consensus analysts’ forecast of 12.9% – following the central bank’s decision at the end of November to cut the amount of cash banks are required to hold relative to their assets, known as the reserve requirement ratio.

A note from economists at JPMorgan this morning says it expects the PBOC to announce three cuts in the reserve requirement ratio in the first six months of this year.

This prediction follows an interview given by PBOC governor Zhou Xiaochuan to news agency Xinhua, in which he said the PBOC needs “to be prepared for a poor external environment”.
Gold volumes on the Shanghai Gold Exchange – which hit record highs last Wednesday – remained strong on Monday, traders report.

Chinese Lunar New Year falls on 23 January this year – the earliest since 2004, when it fell on January 2002. China’s banks were last week “on the bid” to buy gold head of Lunar New Year, one trader noted last week.

In addition, last month China’s authorities banned all gold exchanges with the exceptions of the Shanghai Gold Exchange and the Shanghai Futures Exchange.

Gold bullion, however, “is not cheap in local currencies in Asia,” says one Singapore-based dealer, adding that his firm only saw “light buying” on Monday, although premiums over Spot Prices were up to $1.70 from $1.30 the week before.

Over in New York, the difference between the number of bullish and bearish contracts held by noncommercial gold futures and options traders on the Comex exchange – the so-called speculative net long – fell slightly the week ended last Tuesday at the equivalent of just over 422 tonnes of gold bullion, the latest data from the Commodity Futures Trading Commission show.

The decline marks the fourth-straight week of falls in the speculative net long, taking it to its lowest level since April 2009.

“The sustained deterioration in the net position is a signal that the speculative market remains wary of gold’s prospects, which might explain the failure of gold to sustain upward momentum,” reckons Marc Ground, commodities strategist at Standard Bank.

The rebalancing this week of index funds that track commodity prices could weigh on gold and silver prices, according to one dealer, who reckons around $5 billion of gold bullion will be sold.

“The rebalancing is mostly but not exclusively a matter of selling the previous year’s outperformers and buying the underperformers to bring the portfolio composure back in line,” says a note from Saxo Bank.

Swiss National Bank head Philipp Hildebrand has resigned over the controversy surrounding his wife’s purchase of US Dollars three week’s before the SNB pegged the Swiss Franc to the Euro, newswires Bloomberg and Reuters reported Monday lunchtime.

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.

By CountingPips.com

The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that large futures speculators decreased their overall long bets for the US dollar last week against the other major currencies despite Euro short positions rising to a new record level.

Non-commercial futures traders, usually hedge funds and large speculators, decreased their total US dollar long positions to $15.71 billion on January 3rd from a total long position of $20.35 billion on December 27th, according to the CFTC COT data and calculations by Reuters which calculates the dollar positions against the euro, British pound, Japanese yen, Australian dollar, Canadian dollar and the Swiss franc.

Individual Currencies:

EuroFX: Currency speculators continued to add to their Euro short positions as of January 3rd and raised their short bets to a new record high surpassing the previous one registered two weeks ago. Euro short positions numbered to a total of 138,909 net contracts from the previous week’s total of 127,879 net short contracts.

The COT report is published every Friday by the Commodity Futures Trading Commission (CFTC) and shows futures positions as of the previous Tuesday. It can be a useful tool for traders to gauge investor sentiment and to look for potential changes in the direction of a currency or commodity. Each currency contract is a quote for that currency directly against the U.S. dollar, where as a net short amount of contracts means that more speculators are betting that currency to fall against the dollar and net long position expect that currency to rise versus the dollar. The graphs overlay the forex spot closing price of each Tuesday when COT trader positions are reported for each corresponding spot currency pair.

GBP: Bearish bets of the British pound sterling increased for a second consecutive week as of January 3rd. British pound positions saw a total of 31,899 short positions on January 3rd following a total of 29,172 net short positions registered on December 27th.

JPY: The Japanese yen net long speculative contracts surged higher, according to data on January 3rd. Yen long positions jumped to a total of 56,481 net long contracts reported on January 3rd following a total of 20,585  net long contracts that were reported on December 27th. The sharp rise in Yen speculative positions put them at their highest level since August 2nd when long positions registered 58,833 contracts.

CHF: Bets in favor of the Swiss franc decreased for a second consecutive week as of January 3rd. Speculator positions for the Swiss currency futures fell to a total of 12,355 net short contracts on January 3rd following a total of 10,798 net short contracts as of December 27th.

CAD: Canadian dollar positions declined slightly to a total of 23,371 net short contracts as of January 3rd following a total of 20,812 short contracts reported on December 27th. CAD speculators have had a bearish position against the US dollar since September 6th and positions have consistently hovered around the 20,000 short contracts level since late September.

AUD: The Australian dollar long positions rose for a second consecutive week as of January 3rd. Australian dollar positions increased to a total net amount of 46,537 long contracts on January 3rd following a total of 32,637 net long contracts reported as of December 27th. The AUD speculative positions are now at their highest level since September 6th when Australian dollar long positions totaled 48,041.

NZD: New Zealand dollar futures speculator positions edged slightly higher for a second consecutive week through January 3rd. NZD contracts increased to a total of 2,436 net long contracts as of January 3rd following a total of 1,405 net long contracts registered the previous week. NZD contract’s show a slightly bullish position against the USD and are improved from the December 20th standing (612 long contracts) which was the lowest position since March 29th when positions equaled 239 long contracts.

MXN: Mexican peso speculative contracts barely moved against the US dollar as traders continue to short the Mexican currency. Peso short positions numbered a total of 25,829 net short speculative positions as of January 3rd following a total of 25,685 short contracts that were reported on December 27th.

COT Currency Data Summary as of January 3, 2012
Large Speculators Net Positions vs. the US Dollar

EUR -138909
GBP -31899
JPY +56481
CHF -12355
CAD -23371
AUD +46537
NZD +2436
MXN -25829

Other COT Trading Resources:

Trading Forex Using the COT Report

The Two Stocks That Made the Dow Positive in 2011

by Jason Jenkins, Investment U Research
Thursday, January 5, 2012

You may wonder, with all that’s going on in the world in regards to political and economic woes, how could any stock index actually be up for 2011. But, through the market’s December 31 close, the Dow was up 640.05 points in 2011. Here’s why:

The Price-Weighted Index

The first part of the answer lies in its structure. Unlike many other stock indices, the Dow Jones industrial average is price-weighted. This means that the most expensive stocks have the biggest impact on the Dow’s movement. Other indices such as the S&P 500 and Nasdaq are weighted by each stock’s market cap.

Last week, Nicholas Colas, Chief Market Strategist at ConvergEx, a software provider for brokerage and investment technology firms, stated in a note just how much of a factor each Dow stock was in its advance. He also stated that big gains from two specific high priced companies had the biggest impact – IBM (NYSE: IBM) and McDonald’s (NYSE: MCD)

Colas found that nearly half of that advance came from these two giants – both of which accounted for more than 100 points.

He went on to say that the confidence investors have in the business models of companies viewed as industry leaders “may have something to do with the remarkably sanguine perspective the sell-side has on the earnings predictability” of Dow components. Even the most pessimistic analysts, he found, only differ about 9% from the consensus forecast for 2012 profits.

In English Please?

Basically, there are just some brands out there we trust no matter what. And apparently, IBM and McDonald’s are two of those brands, and with good reason.

The last time I wrote about McDonald’s, The Big Mac – Recession Proof, it was right after they released their third-quarter numbers. They were impressive. But what was more impressive was Micky D’s future direction. Here were the highlights:

McDonalds has adjusted its food selections to match the trend toward healthier eating choices, and added such options as fruit, oatmeal and smoothies to its menu.

• The burger giant also launched the McCafe concept, complete with free Wi-Fi and fancy coffee drinks, to compete with other popular coffee shops like Starbucks.
• It has remodeled restaurants and converted more locations to 24-hour operations.
• In China, McDonald’s increased its restaurant locations from about 1,200 to 1,400 over the past year.
• Revenue in Europe climbed 16%, and revenue in Asia/Pacific, the Middle East and Africa climbed 20%.
• And of course, McDonald’s belongs to an elite cadre of companies that have raised dividends for 25 consecutive years.

Since my last article, McDonald’s reported a larger-than-expected rise in November same-store sales. Comp-sales rose 7.4% globally. Analysts were anticipating a rise of 4.6%.

As economic troubles persist, McDonald’s may continue to beat market expectations. With the low rates and headline risk out there, more investors will probably head to this type of safer play.

What About IBM?

International Business Machines Corporation (IBM) creates business value for clients and solves business problems through integrated solutions that leverage information technology and deep knowledge of business processes. IBM solutions typically create value by reducing a client’s operational costs or by enabling new capabilities that generate revenue. These solutions are drawn from an industry-leading portfolio of consulting, delivery and implementation services, enterprise software, systems and financing.

This isn’t your father’s IBM that just produced and innovated through hardware. Clearly the focus is now on client services, emerging markets and research.

So What Was Warren Buffet Thinking?

Early in November, Warren Buffett bought about $10.7 billion worth of IBM stock. “I felt that IBM had a very good business,” said Buffett. Many commentators expressed surprise at this development, as Buffett has traditionally chosen to avoid technology stocks.

Mr. Buffett said he invested in IBM after reading its most recent annual report and was taken with IBM’s entrenched position providing technology services to businesses. That is a characteristic he has long sought in investments, which he calls a “moat” against competition.

In an interview with The Wall Street Journal, Buffett said IBM “fits all my principles… it’s something we expect to own indefinitely.”

Three Reasons IBM Could Reach $200

1. In the last 10 years, IBM has grown EPS from $4.35 in 2001 to $11.52 in 2010. Including in the 2008 to 2009 crisis period, IBM was able to grow EPS. For 2011, IBM should earn more than $12 per share.

2. Huge amounts of cash have been returned to shareholders in the last 10 years. On average, $10 billion annually has flown back to shareholders through stock buybacks and dividends. This is more than 85% of the free cash flow generated during this period.

3. IBM’s 5,896 patents in 2010 were the most U.S. patents ever awarded to one company in a single year. Over 70% of the patents issued in 2010 were for software and services. The company’s investments in R&D also result in intellectual property income of approximately $1 billion annually.

There’s no telling what 2012 will bring to the markets. But these two companies have certainly gained some nice momentum going into a new year.

Good Investing,

Jason Jenkins

Article by Investment U

Jan. 9 (Bloomberg) — Donna Kwok, an economist at HSBC Holdings Plc. in Hong Kong, talks about the outlook for Taiwan’s economic growth and relations with China.¶ Kwok speaks with Rishaad Salamat on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)