Month: February 2012

U.S. officials confirmed Israel financed, trained and equipped a terror group responsible for the recent killing of an Iranian nuclear scientist.

CIT Group (CIT) was upgraded by Morgan Stanley (MS) to overweight from equal-weight. Shares of CIT are currently higher by 1.6%.

It was a clear sell signal for Enron.

I worked with Enron during the early 1990s on some energy projects in Asia. They were smart, aggressive, swashbuckling types who could also turn on the Texas charm at the drop of a hat.

The Chairman, Ken Lay, primarily handled the power broker side of the business, schmoozing with world leaders and politicos.

Rich Kinder, Enron’s President, was the straight-talking lawyer and detail man who kept the train on the tracks.

But in 1996, Enron’s board decided not to give the top job to Kinder.

He promptly resigned to go into the hard asset pipeline business he preferred. McKinsey guru Jeff Skilling was selected to fill Kinder’s job with a mandate to plunge into the energy trading business.

You know the rest of the story…

But the lesson here is that who is at the top of big complex companies like Enron is a big deal. Corporate leadership changes can sometimes provide buy or sell signals.

This brings me to Brazil’s Petrobras (NYSE: PBR).

The Largest Company in Latin America

Brazil is a big deal in Latin America, representing 40% of the region’s entire economic output. In some ways, it offers a better bet for investors than China since it’s a democracy offering not only a surging middle class but also abundant natural resources.

And Brazil has the largest company in Latin America – resource-rich Petrobras.

David Fessler writes and speaks about Petrobras often, and points out that the company has the potential to become the largest energy company in the world.

Petrobras CFO Almir Barbassa agrees, and in an interview with Forbes, said he expects the company’s oil production rate to match Exxon Mobil. Petrobras also discovered an unbelievable amount of deep-water reserves of both natural gas and oil.

So why is its stock trading way below its $70 high in 2008 and quite a ways from the $50 price it opened in 2010?

In my opinion, it’s because the company is being mismanaged by government appointed executives.

Mr. Sergio Gabrielli has been CEO since 2005. An economics professor with little oil and gas experience, he’s leaving this week to pursue “politics.”

His biggest mistake was the high-handed $70-billion public offering announced in early 2010. While it raised some capital from private investors, the government grabbed $42.5 billion in shares in exchange for “giving” the company the right to develop some reserves.

This brought the government’s ownership up from 40% to 48%.

Diluted private shareholders expressed their disappointment by the only vote they have – selling the stock.

The new CEO taking the helm today is a well-respected technocrat steeped in the energy business – Maria das Gracas Silva Foster.

While a confidant of Brazil’s president, she’s expected to be less political and more business. And as current head of Petrobras’ gas and energy group, she knows the business inside and out, plus how to manage the bureaucracy.

Could she be a Rich Kinder?

As you can see, Petrobras has recently begun an upward trend.

My advice?

Jump onboard now with a 15% trailing sell stop in case our hopes of much better management are dashed.

Good Investing,

Carl Delfeld

Article by Investment U

Despite positive news lately, there’s a lot going on in the markets right now, and it isn’t good. The most terrifying aspect of all is that the doom and gloom is spread worldwide.

Europe is a mess right now. Two of its four largest economies teeter on disaster. Meanwhile, Greece is the troubled teenager who knows he needs to get his act together but continues to find himself in bad situations. Germany and France are still experiencing menial growth…

Eurozone authorities recognize there’s a problem, but it may be a too little too late.

Then the United States has its own problems.

Our Central Bank has come under fire for its “quantitative easing” monetary policy, which was primarily ineffective. Its latest initiative of flattening the yield curve may prove detrimental to long-term investment. The dysfunction of Washington policymakers is well noted and, finally, there’s that $14-trillion national debt thing.

Even from peaks earlier this year, Japanese markets are down over 20% due to natural disasters.

In times like these, it’s wise to go bargain shopping. Good companies sometimes get dragged down along with the ebbs and flows of a volatile market. For no fault of their own, they may be undervalued.

Morningstar’s Buyback List

One indication that a stock is undervalued is a company buyback. A few months ago, I wrote about Warren Buffet’s buyback announcement of Berkshire Hathaway’s Class A and B Shares (NYSE: BRK.A, NYSE: BRK.B). In September, Berkshire Hathaway’s board approved a plan to buy back the company’s stock, an indication that Buffett believed the stock was undervalued.

Morningstar reported a list of other companies whose Board of Directors are likely to or have given the “okay” to buy back stock. Here is a list of four companies mentioned:

1. CSX Corp. (NYSE: CSX)
2. Union Pacific Corp. (NYSE: UNP)
3. Norfolk Southern Corp. (NYSE: NSC)
4. United Parcel Service Inc. (NYSE: UPS)

Is There a Formula for Finding These Companies?

In fact, there are several…

Morningstar reports that to find firms in the position for a possible buyback, you can look for stocks trading at their 52-week lows with low debt – this would be measured by the total debt to total equity where the lower the number, the better – and high cash balances as measured by cash-long term debt/market capitalization.

Another option for determining possible buyback opportunities, according to Michelle Swartzentruber, a research analyst with Morningstar, would be able to identify companies that have enough cash left over to do buybacks even after paying off debt.

And a third option would be to look for stocks with strong balance sheets, strong sales growth and better-than-average dividend yields.

Even when the 24/7 news cycle is reporting doom and gloom, it doesn’t mean that every stock in the market is rubbish. As in any heap of rubbish, you can always find something valuable if you know where to look.

Good Investing,

Jason Jenkins

Article by Investment U

KISS your way to Forex Freedom –

Being a widely used acronym, the K.I.S.S. principle, if used correctly, can be used by FX traders for consistent success. K.I.S.S. stands for Keep It Simple Stupid. Although we’re not saying traders are stupid, the keep it simple part of the acronym is a beneficial principle to follow.

Trading need not be as complicated or frustrating as many make it. It can be said that a trader’s best friend is simplicity. A simple approach is often the most effective approach, generally leading to successful and consistent trading.

Many traders fall into the trap of over analyzing and complicating the markets with complex indicators and strategies. Apart from trading blind (no analysis/gambling), price action trading is one of, if not the most, simple ways to approach and trade the markets. Price action trading consists of the trader using the most basic aspects of trading; The Price. No lagging indicators or complex mathematical formulas are used to predict the markets next move. The trader simply uses the only real information they need to successfully trade; The Price.

By conducing simple analysis of what is currently happening in the markets, the trader can react to these price changes by either, placing a trade, or deciding to sit on his or her hands (often the best trades!) and waiting for the next set up.

The KISS principle does not only relate to analysis and trading, but can and should be applied to the traders overall approach to the FX market. A simplistic approach should be applied to the traders: forex plan, money management and trading psychology.

A simple forex trading plan comprises of basic but critical rules the trader follows in order for successful trading. The traders plan includes, the rules they follow for entering and exiting the market (their system/strategy), along with how much they are prepared to risk in order to find out if the market movies in their direction. Successful traders always have a hard copy of their trading plan with them at all times while analyzing/trading the markets. Their simple approach reminds them that their plan can quite easily be lost if its ‘stuck in their head somewhere’, whereas keeping a hard copy in a visible location is hard to dismiss. The traders plan should be simple yet effective or short and sweet cutting out needless information and noise.

Trading psychology is possibly the most important aspect that determines a trader’s long term success. A simple psychological approach requires the trader to trade without emotion. Leaving his or her emotions at the door is easier said than done, however once a simple approach is applied to this important aspect of trading, a traders longevity is often improved.

Physically kissing your way to forex freedom is impossible, however remembering to follow the K.I.S.S. principle while trading can dramatically improve a trader’s success. Novice traders often find themselves engulfed in the newest system, or EA to hit the market, constantly switching from one idea to the next, painstakingly searching for the ‘holy grail’ of trading. Unfortunately they soon realize there is no such thing and their constant impatience leads only one way… failure. A simplistic approach may sound like a boring way to trade to some people, however, to the lucky few traders who consistently make money the KISS principle is their ‘holy grail’.

Albert Einstein once said ‘’Make everything as simple as possible, but not simpler’’. Although he was not a trader, I’m sure you’d agree he was a pretty smart guy…

Article by vantage-fx.com

Akamai (AKAM) shares surged this morning after the company reportedly posted better than expected 4th quarter earnings. GAAP net income for the 4th quarter increased 42% over last year to $0.33 per diluted share.

Pepsico (PEP) shares dropped in early trading this morning after the company forecast 5% lower core constant currency EPS for 2012 over last year. This is due to several strategic and macroeconomic factors.

By TraderVox.com

It was an important day for GBP as Bank of England was to decide two important matter- interest rate and quantitative easing. The interest rate was kept unchanged at 0.5%. There were rumors of pumping in more money than expected 50 billion pounds. Bank of England introduced only 50 billion pound so the market reacted positively and pound rose to high of the day at 1.5885. It has since retraced those gains and is currently trading at 1.5858, up about a quarter of percentage. Now the support lies at 1.5850 and below 1.5820. The resistance may be seen at 1.5900.

Some positive developments were also seen for Euro as well. ECB kept the interest rate unchanged at 1%. Some reports of clinching Greek deal by Greek politicians propelled Euro break the 1.3300 levels within minutes. It formed a high of 1.3320, level last seen almost 2 months back. It is currently trading at 1.3285, up about 0.20%. The support now may be found at 1.3260 and 1.3220. The resistance will be seen at 1.3300 and 1.3330.

Australian dollar hit many times to an important psychological level of 1.0800. But after hitting a high of 1.0825, it failed to hold the levels. The support is at 1.0870 and 1.0730. The resistance may be seen at 1.0800 and at 1.0830.

The USD/CHF pair has come closer to 0.9100 levels again during the US session. The risk appetite has forced the pair lower. The support may be seen at 0.9070 and 0.9050. The resistance may be seen at 0.9120 and 0.9150.

An exception to US dollar weakening move is USD/JPY pair. It is taken out the previous high of the day and formed a new high of 77.46. It is currently trading near the high at 77.42, up about half a percentage. The support may be seen at 77.25 and below at 77/77.10. The resistance may be seen at 77.50 and 77.70.

The dollar index is trading at 78.54. The US dollar is clearly under the pressure as the Greek deal seems to be a reality now. An official announced on the deal may push the Euro higher towards 1.3400 levels.

Article provided TraderVox.com
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The Bank of Korea kept its 7-day repurchase rate at 3.25%.  The Bank said: “In Korea, economic growth has slowed, with domestic demand subdued overall and exports also decreasing. On the employment front, however, the uptrend in the number of persons employed is being sustained, led by the private sector. The Committee anticipates that the domestic economic growth rate will gradually return to its long-term trend level going forward, although viewing downside risks as likely to remain high for some time due mostly to the impact of external risk factors.”

At its January meeting the Bank of Korea also held the interest rate unchanged at 3.25%, after increasing the 7-day repurchase rate by 25 basis points to 3.25% at its June meeting.  South Korea reported a steady consumer price inflation of 3.4% in January, down from 4.2% in November, compared to 3.9% in October, 4.3% in September, 5.3% in August, 4.7% in July 4.4% in June, 4.1% in May, and 4.2% in April. 

The inflation rate is currently just within the Bank’s inflation target of 2%-4% through 2012.  The South Korean economy grew 0.7% in Q3 (0.9% in Q2), placing annual GDP growth at 3.4% (3.4% in Q2).  The South Korean Won (KRW) has gained about 1% over the past year against the US dollar, while the USDKRW exchange rate last traded around 1,120.

The European Central Bank (ECB) kept its Main refinancing operations rate at 1.00%.  ECB governor, Mario Draghi, said: “Inflation is likely to stay above 2% for several months to come, before declining to below 2%. Available survey indicators confirm some tentative signs of a stabilisation in economic activity at a low level around the turn of the year, but the economic outlook remains subject to high uncertainty and downside risks…. A very thorough analysis of all incoming data and developments over the period ahead is warranted.”

The ECB previously announced (noting further collateral approvals) a series of measures “to support bank lending and money market activity”. These measures included longer-term refinancing operations (LTROs), reduction in the reserve ratio to 1% from 2% presently, and increasing collateral availability through reducing the rating threshold for asset-backed securities (ABS), and allowing national central banks to accept bank loans as collateral. Essentially the moves are designed to prevent a freezing up of credit markets and liquidity akin to that seen during the global financial crisis. 

Previously the ECB cut the interest rate by 25 basis points at its November and December meetings.  The ECB last increased the interest rates by 25 basis points at its July meeting; pausing in May and June, after raising the rate by 25 basis points to 1.25% in April last year.  The Euro Area reported annual HICP inflation of 2.7% in January, 3% in November and October and September, 2.5% in August and July, 2.7% in June (same as May) and above the Bank’s inflation target of maintaining inflation below, but close to, 2% over the medium term. 

The Euro Area reported quarterly GDP growth in the September quarter of 0.2% (1.4% y/y); the same as the June quarter of 0.2%, following a 0.8% increase in the March quarter, and a 0.3% increase in the December quarter of 2010.  The Euro (EUR) has weakened by about 3% against the US dollar over the past year, while the EURUSD exchange rate last traded around 1.33

www.CentralBankNews.info