March 2012 – Page 33 – InvestMacro FX

March 19, 2012

Fresh Concerns Rises over the Fate of Euro Region

By TraderVox.com

Tradervox (Dublin) – Fresh concerns over the fate of the euro region have been raised as a possible Greek scenario is expected to be repeated in Portugal and Italy. Italy’s Prime Minister, Mario Monti, is set to meet labor unions to discuss a possible restructuring of the labor laws in the country. Analysts are warning that Italy and Portugal may be on the verge of possible Greece-case scenario.

This has come amid fears that Greece might need a third round of bailout funds as the new bonds are not doing well in the market. German Chancellor Angela Merkel have indicated that the European officials are discussing possibility of combining its rescue funds which might lead to increase in the total crisis fund kitty to 692 billion Euros.

In Italy, the Prime Minister is holding talks with labor unions and employers as the nation seeks to reach an agreement this week. Policy makers in the euro region have, however, issued warning against complacency as they finalized on the Greece bailout fund. The world’s largest debt restructuring will be completed tomorrow when the money will be disbursed.

Christine Lagarde, the IMF managing director, warned that the optimism in the euro region should not be construed to give a sense of security. She said that things cannot be “business as usual” as oil prices are expected to rise as Iran crisis continues. The emerging risks of default in Italy and Portugal are other factors that should be monitored closely as the region tries to avert a dangerous credit crisis.

According to the IMF, the Greek crisis solution holds possible risks that might lead to disorderly exit from the monetary union if not handled carefully. An IMF staff indicated that the materialization of such risks requires the region to have a backup plan to offer additional support. These sentiments seem to coincide with Luxembourg Prime Minister Jean-Claude Junker’s remarks that the leaders have a plan B in case the efforts made by the region fail to work. However, investors are still keeping a close eye to see whether contagion will spread to Italy, Portugal and Spain.

Disclaimer
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Article provided by TraderVox.com
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March 19, 2012

Investing in State-Owned Monopolies

Just why is it that so many people are bad at the game of monopoly?

Growing up, our family monopoly games were raucous affairs with a lot of shouting (and when necessary, wrestling). My younger brother John was always in charge of the cash because no one else was deemed trustworthy.

In retrospect, most of my six siblings never really got the game at all. They carefully managed their cash and picked up random properties. This allowed them to stay in the game for a long time but made ultimate victory impossible.

As for me, I always went for the kill with a strategy of feast or famine.

It was either a great monopoly, like Boardwalk and Park Place, or I would crash and burn and then bolt to play basketball with the neighborhood gang.

Just why is it that so many people are bad at the game of monopoly?

I think it’s because we’re taught at a tender age that tycoons adept at cornering markets are the greedy bad guys. This belief is compounded when we go to college and economics professors rant about evil monopolies and the need to “regulate” the free market.

Enter Carlos Slim

Apparently, Carlos Slim, the wealthiest tycoon in the world according to Forbes, never studied economics.

Carlos Slim’s fortune was built on the back of Mexican telecom monopolies and, as a hobby, he bailed out The New York Times. Companies controlled by Slim have captured 80% of Mexico’s telephone lines, 70% of the cellphone market, and account for an incredible 34% of the value of the country’s entire stock market.

Maybe monopolies aren’t all that bad?

Lasting monopolies are tough to find in America, but there are plenty of them in emerging markets.

Why?

The best way to convince government regulators to protect your market is to be owned by the government itself.

And there are many of these monopoly-like state-owned and -controlled giants in emerging and frontier markets.

China Mobile: The Poster Child

The poster country of this “state capitalism” is China and one high-profile monopoly is China Mobile (NYSE: CHL). The government’s 70% ownership stake is a strong incentive to protect the company’s dominant market position.

So despite my strong personal distaste for state capitalism, now may be a good time to look at China Mobile when many are questioning the country’s growth prospects.

For 2011, the company’s customer base grew 11.6% to reach 650 million with profits of $19.9 billion. As a defensive consumer business with a 4.1% dividend yield, CHL should hold up rather well in the toughest of markets.

This stock has done a lot better than that so far in 2012 – up 15.5%. Despite this impressive surge, the stock is trading at only a bit over ten times 2012 expected earnings.

China Mobile’s trump card is a $50-billion stockpile of cash reserves ($13 per share) that is sure to cover (or buy out) even the most intrepid of its competitors.

So don’t be shy about investing in monopolies. After all, only one company (Parker Brothers) makes the game of monopoly.

Good Investing,

Carl Delfeld

Article by Investment U

March 19, 2012

Australian Dollar Making Gains

Source: ForexYard

The Australian dollar has seen growth against the JPY this afternoon. At the moment, the aussie is hovering around 88.37. Following last month’s decision by the Bank of Japan to inject millions of yen into the economy, the yen has been consistently dropping against several currencies. Many analysts predicted that we would see some resurgence from the yen but so far predictions have turned up incorrect. Heading towards the end of March, we will see the business year-end for Japan. Traditionally, this time of the year sees an increase in foreign investment in the Japanese economy. If the past repeats itself in this regard, we may well see the yen bounce back from its recent slump.

Yen Gains as Speculation of Overrated Declines Continues

By TraderVox.com

Tradervox (Dublin) – There have been rumors that yen declines registered last week were excessive reversing the trend of the yen against the dollar. In the Asian session, the yen increased against the dollar as Asian stocks declined. However, the euro had earlier touched four and half months high after Angela Merkel, the German Chancellor indicated that euro zone officials had discussed the possibility of combining the euro zone bailout funds as effort to strengthen the financial firewall of the region.

The demand for the currency was also supported by the speculations about the result of Mario Monti’s meeting with the euro zone employers. They are expected to make some changes in the labor laws of the region.

Further, the 17-nation currency was supported by speculation about the German PPI report expected on Tuesday March 20. The European Current account report has also affected the EURJPY pair. The yen gained 0.5 percent against the euro to trade at 109.37 yen per euro after dipping to 110.15 earlier in the day. This is the weakest the yen has been against the euro since October 31. Against the dollar, the yen increased by 0.4 percent to settle at 83.08 yen per dollar.

Last week, the Japanese currency had performed poorly against its peers decreasing by 1.5 percent during the week. The increase against the euro can be attributed to the sentiments from the region about another debt crisis in Portugal and Italy. According to Melinda Burgess, the euro is selling off as negative reports indicate that the region’s economy is lagging behind. Many investors and analysts are speculating the decline of the yen against the dollar as reports from the US read more than expected figures.

Investors are also looking forward to the results of Italian Prime Ministers meeting with the euro region leaders on discussions about labor laws. Analysts are also waiting to see how the EU region will deal with the emerging news of Portugal debt crisis.

March 19, 2012

Forex CT 19-3-12 Market Update & Outlook

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.

March 19, 2012

USD Tumbles Following Disappointing CPI Figure

Source: ForexYard

The US dollar reversed some of its recent gains to close out the week on Friday, following the release of a disappointing US Core CPI figure. The figure, which came in at 0.1%, led to investor doubts that US interest rates would go up earlier than planned. As a result, the EUR/USD shot up well over 100 pips on Friday to close out the week at 1.3174. Turning to next week, a relative lack of news events means that the dollar could remain bearish for the near future. Still, US housing data, scheduled to be released on Wednesday and Friday, may give the greenback an opportunity to recoup its recent losses.

Economic News

USD – USD Takes Losses vs. Main Rivals to Close out Week

Worse than expected fundamental indicators out of the US led to significant dollar losses to close out last week’s trading session. Both the Core CPI and Prelim UoM Consumer Sentiment figures came in below analyst forecasts. The Core CPI figure in particular dampened hopes that the Federal Reserve would increase US interest rates earlier than expected.

In addition to losses against the euro, the dollar also fell vs. the Japanese yen and Swiss franc. The USD/JPY fell as low as 83.18 on Friday before staging a mild recovery to close out the week at 83.44. The USD/CHF, which peaked at 0.9254 during the morning session, tumbled 100 pips to close out the week at 0.9154.

Turning to this week, a lack of significant news events means that the dollar may not have many opportunities to reverse its current bearish trend. Still, there are several indicators that may turn out to generate market volatility. US housing data, scheduled to be released on Wednesday and Friday, may signal further gains in the American economic recovery. In addition, Thursday’s weekly Unemployment Claims figure is forecasted to show ongoing improvements in the labor sector. If true, the dollar could see gains as a result.

EUR – EUR Has Mixed Session to Close out Week

The euro saw significant gains against its safe-haven currency rivals to close out last week’s session. The EUR/USD reversed its downward trend on Friday, and gained well over 100 pips to close out the day at 1.3174. Against the Japanese yen, the euro was up close to 100 pips to close out the week at 109.92. Analysts attributed the common-currency’s reversal to disappointing news out of the US which caused investors to shift their funds away from the dollar and yen. That being said, the day was not all positive for the euro. The EUR/CHF maintained its bearish trend from Thursday to close out the week at 1.2060. Beginning on Thursday morning, the pair has dropped close to 100 pips.

Turning to this week, traders will want to note several potentially significant economic indicators out of the euro-zone. Thursday in particular could see heavy volatility, as manufacturing data out of Germany and France, the euro-zone’s two biggest economies, are scheduled to be released. In addition, a speech from the ECB President may provide investors with additional insight into the current state of the euro-zone economic recovery. In the meantime, the euro may see additional gains in the coming days if news out of the US once again comes in below analyst predictions.

Crude Oil – Crude Oil Sees Gains to Close out Week

Crude oil reversed losses taken earlier in the week to close out Friday’s session at $107.18 a barrel, up almost $2 a barrel for the day. Analysts attributed the increase in the price of oil to worse than expected US fundamental indicators which caused the dollar to slip on Friday. Typically, a bearish dollar causes commodities like oil to go up, as they become more attractive to international buyers. In addition, supply side fears caused by the upcoming EU ban on Iranian oil drove the price of oil higher.

Turning to this week, oil may continue to see gains, providing the dollar extends its bearish trend. Traders will want to note the results of several US indicators, including Tuesday’s Building Permits and Wednesday’s Existing Home Sales figures. Should either of them come in below expectations, the USD may drop further which could help support a higher price for oil.

Dow Jones – Dow Jones Takes Mild Losses during Friday’s Session

The Dow Jones capped its gains on Friday, following seven consecutive sessions of upward momentum. The Dow closed out the week at 13158.25, down from Friday’s high of 13222.25. While the downward reversal was attributed to worse than expected US fundamentals, analysts were quick to note that the gains for the week were the biggest so far this year.

This week, traders will want to note the results of several US indicators, particularly the Existing and New Home Sales figures scheduled for Wednesday and Friday. Any signs that the American economic recovery is gaining momentum are likely to help the US stocks see gains. Should either of the housing indicators come in above forecasts, the Dow Jones may resume its upward movement.

Technical News

EUR/USD

Most long-term technical indicators show this pair range-trading, meaning that no significant movements are forecasted at this time. That being said, traders may want to take a wait and see approach, as a clearer picture may present itself in the near future. The daily chart’s Williams Percent Range, which is trending upward at the moment, may eventually reach overbought territory. In such a case, a bearish correction could occur.

GBP/USD

The weekly chart’s Williams Percent Range is currently hovering in the overbought zone, indicating that a bearish correction could occur in the coming days. A bearish cross on the daily chart’s MACD/OsMA lends further support to this theory. Traders may want to go short in their positions.

USD/JPY

A bearish cross on the weekly chart’s Slow Stochastic indicates that a downward correction could occur in the near future. Furthermore, in another sign that the pair could move down, the daily chart’s Williams Percent Range is currently at -20. Going short may be the wise choice for this pair.

USD/CHF

A narrowing of the Bollinger Bands on the weekly chart indicates that a price shift could occur in the coming days. That being said, most other technical indicators are not showing a clear picture as to which direction the shift could be. Traders may want to take a wait and see approach for this pair.

The Wild Card

GBP/JPY

A bearish cross on the 8-hour chart’s Slow Stochastic indicates that this pair could see a downward correction. This theory is supported by the Relative Strength Index on the same chart, which is right around the 75 level. Forex traders may want to go short in their positions ahead of a possible downward correction.

Forex Market Analysis provided by ForexYard.

March 19, 2012

Dividends: One Stock, One ETF, and One Mutual Fund

By The Sizemore Letter

If you are a bond investor looking for current income, you have to be feeling a little down these days. With the 10-year Treasury barely yielding 2%, the only way to get a decent return is by dipping into more exotic territory like high-yield junk bonds or emerging market bonds. In most bond offerings, you’re looking at a stream of income that is too low to meet current needs yet promises to actually get worse with the passing of time. This isn’t investing; it’s slow-motion lifestyle suicide.

For a stream of income that is both tolerably high today and likely to keep up with inflation tomorrow, you need to invest in dividend-paying stocks. The yields on the stocks of many world-class, blue chip companies are higher than what you can get in the bond market, and unlike bonds—whose coupon payments are fixed—healthy companies can and do raise their dividends with time.

So, in the spirit of bluesman John Lee Hooker—and his classic One Bourbon, One Scotch, One Beer—I’d like to offer one dividend stock, one dividend ETF, and one dividend mutual fund.

We’ll start with the stock. I can think of nothing to cure the low-yield blues than a fat 9% dividend, and that is exactly what Spanish telecom giant Telefónica (NYSE: $TEF) is offering at current prices.

Telefónica has taken a beating in recent years due primarily to weakness in the Spanish fixed-line market. Yet Telefónica’s promising Latin American markets—which make up nearly half of revenues—continue to grow. While mobile phones are already ubiquitous in Latin America, many consumers still use simple prepaid plans or share a single phone with multiple family members. The upgrade cycle to smart phones with expensive data plans is just beginning, and Telefónica is in excellent position to capture this trend.

Telefónica cut its dividend last year to conserve cash during the Eurozone debt crisis; yet even after the cut, the yield stands at 9%, and I believe that the payout is likely to significantly rise again within a year. Telefónica is a stock that you can plan to hold for years, milking the dividend all the way.

Moving on, with the market looking at risk of a short-term correction, having some part of your portfolio allocated to more defensive sectors would seem prudent. And the iShares Dow Jones Select Dividend ETF (NYSE: $DVY) fits the bill quite nicely. Nearly half of the ETF is invested in utilities and consumer staples, and all of the companies included have a long history of consistent dividend payouts. This was the first ETF formed with a specific dividend-focused mandate, and it remains one of the best.

At current prices, DVY yields 3.33%, which is considerably more than what you will find in the bond market. This ETF is a fine investment option for yield-hungry investors irrespective of what happens in the broader market.

Finally, for the mutual fund, I’m going to go a slightly different direction. Rather than focus on high yield today, I recommend that investors buy shares of the Vanguard Dividend Appreciation Fund (VDAIX) with a mind towards tomorrow. The Vanguard fund follows the investment methodology of the Dividend Achievers Index, meaning that it only buys shares of companies that have raised their dividends for a minimum of ten consecutive years.

We’ve had a pretty rough go of it over the past ten years, and particularly the last five. If a company was able to raise its dividend through something like the 2008 meltdown, you know that it has the ability to survive Armageddon. And VDAIX is loaded full of companies that meet that description.

Currently, the fund yields just shy of 2%, within basis points of the 10-year Treasury. But unlike that Treasury note, the Vanguard fund will almost certainly pay you a larger check next year and every year after that. In addition to being a reliable source of income, this is a fund that you can make the core of your growth portfolio.

So, dear reader, don’t despair. There are income options out there besides traditional bonds. And if these three don’t lift your spirits, perhaps putting on an old John Lee Hooker record will help.

Charles Sizemore is editor of the Sizemore Investment Letter and principal of Sizemore Capital. TEF and DVY are held by Sizemore Capital clients.

March 19, 2012

USD Takes Losses vs. Main Rivals to Close out Week

By TraderVox.com

Worse than expected fundamental indicators out of the US led to significant dollar losses to close out last week's trading session. Both the Core CPI and Prelim UoM Consumer Sentiment figures came in below analyst forecasts. The Core CPI figure in particular dampened hopes that the Federal Reserve would increase US interest rates earlier than expected.

US housing data, scheduled to be released on Wednesday and Friday, may signal further gains in the American economic recovery. In addition, Thursday's weekly Unemployment Claims figure is forecasted to show ongoing improvements in the labor sector. If true, the dollar could see gains as a result.

March 19, 2012

AUD/JPY Weekly outlook 19 March – 23 March

AUD/JPY Weekly outlook 19 March – 23 March

Last week our analysis for the AUD/JPY recommended waiting for a 50% retracement of the weekly candle before entering a long. The pair did indeed retrace 50% of last week’s price before pushing back higher.

Importantly, we mentioned a break and close above 88.00 could lead to further gains. Last Friday saw the market breaking, holding and closing above 88.00 which the pair has been unable to do for quite some time now.

audjpyweeklyoutlook19-23march

With the Yen expected to continue to weaken, we’ll be continuing to hold our current long position, with an initial target in mind at 90.00 which is the next level of resistance the pair may face. Traders who were unable to enter last week’s trade may look to enter on the lower timeframes if/when the market retrace’s to the 88.00 level.

Article by vantage-fx.com

March 19, 2012

Crude Oil Weekly outlook 19 March – 23 March

Crude Oil Weekly outlook 19 March – 23 March

Crude, last week formed a long tailed bullish pin bar bouncing almost perfectly of the strong support and resistance level at 104.00.

With the last 4 weeks of trading seeing choppy range bound conditions traders may look to long the oil back up to the upper area of the range.

crudeoilweeklyoutlook19-23march

After waiting for a 50% retracement of last week’s price, we’ll be looking to long the market placing our stops just below 104 with an initial target at 110 giving an excellent R:R trade.

Article by vantage-fx.com