Stocks fell sharply on Tuesday in the single largest decline for 2012 due to data that rekindled concerns about global growth, while a deadline loomed for private holders of Greek debt to agree to taking substantial losses. Gold was also down around 2% in and hovering near a 6-month low.
The Reserve Bank of Australia (RBA) kept the cash rate on hold at 4.25%. The RBA said: “With growth expected to be close to trend and inflation close to target, the Board judged that the setting of monetary policy remained appropriate for the moment. Should demand conditions weaken materially, the inflation outlook would provide scope for easier monetary policy. The Board will continue to monitor information on economic and financial conditions and adjust the cash rate as necessary to foster sustainable growth and low inflation.”
The Bank previously previously cut the cash rate by 25 basis points at its November and December meetings, meanwhile the RBA last increased the interest rate by 25 basis points in November 2010. Australia reported annual consumer price inflation of 3.1% in Q4 last year, compared to 3.5% in Q3, 3.6% in Q2, and 3.3% in Q1, and 2.7% in the December quarter of 2010, and only just outside the Bank’s inflation target of 2-3%.
As the saying goes, there are many possible reasons for an insider to sell a stock, but only one reason to buy — they expect to make money. So let’s look at two noteworthy recent insider buys.
In trading on Tuesday, grocery & drug stores shares were relative leaders, down on the day by about 0.6%. Leading the group were shares of Primo Water (PRMW), up about 6.8% and shares of Supervalu (SVU) up about 2.7% on the day.
Source: ForexYard
The USD continued to make gains against traditionally riskier currencies on Tuesday. The greenback has solidified gains against the NZD, AUD, and CAD as a series of announcements have driven traders to the more stable USD. During afternoon trading on Thursday the AUD/USD stood at $1.0567, the NZD/USD was hovering around $0.8121 and the USD/CAD was close to $1.000.
Worries over the Chinese economy after its 2012 growth forecast was cut down to 7.5% prompted many investors to head towards the greenback as the dollar has traditionally provided a degree of stability. Also, the Australian government has left the option open to further interest rate cuts, thus increasing the overall uncertainty abound in the market.
Read more forex 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.
Nutrisystem (NTRI) announced that it lost four cents per share in its fiscal fourth quarter, above analyst estimates of two cents per share. Revenue dropped to $66.9 million from $87.9 million a year ago.
Imagine buying a property that’s guaranteed to go down 3% to 5% every year. I’m not talking about the drop in the real estate market since the collapse, but a 3% to 5% drop every year, even during the best times in real estate.
To virtually everyone, except maybe IRS auditors, this is insane, but it’s exactly what most people get when they retreat to cash.
Here’s a real conversation I had last week, on this exact subject, with a couple while I was in Naples, Florida for The Oxford Club’s Chairman’s Circle meeting.
We were waiting for a table at the bar in a restaurant and I struck up a conversation with them. He and his wife are real estate developers from Atlanta.
This guy told me he made a bundle on his properties by getting out at exactly the right time in 2007. Not a planned exit, rather an opportunity popped up and he jumped on it. The timing just happened to be pure gold.
The bad news, Bob and his wife have been sitting on a huge amount of cash since then. He’s not sure what to do, but is leaning toward bonds of some type; he likes the safety. She is sure cash is the safest place and she’s not budging.
Bob knows cash is a losing proposition, but can’t get his wife off the fence.
So, I took my best shot at explaining how they might reach a good middle-of-the-road compromise in corporate bonds, my kind of corporate bonds, ultra-short maturities.
But first we had to convince the wife…
So, I tried the straight-up approach that cash is a losing proposition in any market. By the time you pay taxes on any interest, if you can call what cash is earning now interest, and inflation takes it bite, you always end up losing.
The wife wasn’t budging, “At least we aren’t getting killed in the market!” she said.
“Ok,” I said, “think about how much you have missed since the bottom of the collapse, even if all you did was play the spy.”
Her response was, “No more stocks, too risky. We’re getting too old to take that kind of risk.”
My next volley, the house example, “How can you justify buying any property that loses money every year, good years and bad?”
She was stumped. How could that happen? That makes no sense. The house example was close enough to home that it registered. Her facial expression changed as the paradigm shift settled in.
I’m pretty sure she’ll never look at cash the same way, again.
I had hit pay dirt, she was listening.
“That’s exactly what’s happening to your cash,” I said. “Depending on your tax bracket, after taxes and inflation, you’re losing about 3% to 5% of the value of your money every year. It’s virtually the same thing as losing money on a property every year.
“How safe does that feel?” I asked.
Investors who run to cash during tough times have the same mental block about the safety of cash, and it’s tough to get them to see the real effect taxes and inflation have on their money.
The problem is that most investors who retreated to cash are there because they won’t or can’t afford the risk of the stock market and don’t know what else to do with their money. Getting them to move anywhere else is a very big deal.
Here’s one play for the “still stunned by the collapse” folks out there that will make a decent return even after taxes and inflation take their share.
Phh (Cusip: 693320af0) has a bond that has a 7.125% coupon that’s selling for a little premium at 101.9, $1,019. The annual return on this bond is around 5.09%, and it matures next March 15, 2013.
Normally, I don’t buy premium bonds… but this is the exception.
Remember, we are trying to get shell-shocked folks out of cash and into something safe and with a very short maturity to avoid any fluctuation if rates go up before next March. That puts severe limits on the number of available choices, so we’ll bite the bullet and pay a little bit more for this bond. Its annual return and very short maturity justify it.
A one-year maturity paying 5.09% with a BB- rating is as rare as flexible divorce lawyers. That’s a huge return in this market.
BB-, a little over 5% for less than one year; that’s a great deal in this market.
The ultra-short maturity gives us very limited market exposure – less than a year – and very good protection from a big drop in value if rates move up. That gives us a better bet of being able to get out at break-even if the cash is needed or the jitters return before maturity.
While the shell shocked among us may never be ready to get back into stock investing, this is a way to put some money to work to make something while they’re treading water.
The key to success in this bond market is to limit how much you put into each bond, always keep the maturities ultra short, a five-year average is best, avoid leveraged bond mutual funds and bonds funds with maturities over five years.
There are alternatives to the cash crash that’s silently robbing most folks, but these alternatives will require some level-headed decision making and realistic expectations. Unfortunately, that rules out a lot of people.
If you can stay out of the rate pig category, and not jump on the highest yield you can find, you can earn a very respectable return with almost no interest rate risk and virtually none of the risk of the stock market.
Cash is a guaranteed loss. Do something about it…
Good Investing,
Steve McDonald
Article by Investment U
Article by Investment U
The Chicago Board Options Exchange’s (CBOE) VIX is a term that’s been thrown around a lot lately. Many investors use it as a market-timing indicator, but most of us don’t know what it is or how it works. Let’s take a look…
VIX is the symbol for the Chicago Board Options Exchange’s volatility index. It’s a weighted mix of the prices for a blend of S&P 500 Index options, from which implied volatility is derived. In laymen’s terms, it measures how much people are willing pay to buy or sell the S&P 500, with a higher volume of options suggesting more uncertainty in the marketplace.
Implied volatility is the expected volatility of the underlying security – so we’re looking at a wide range of options on the S&P 500 Index. The VIX concentrates on the price volatility of the option markets, not the volatility of the index itself.
If implied volatility is high, the premium on options will be high, and the opposite is true. When investors see options premiums increase, there’s the assumption that we can expect future volatility of the underlying stock index, which represents higher implied volatility levels.
This VIX is an attempt to quantify fear in the marketplace because it reflects investors’ best predictions of near-term market volatility, or risk.
Rule of Thumb (usually): The VIX goes up when there’s turmoil in the market, and goes down when investors are quite content or at ease with the economic outlook.
This can get pretty convoluted, so let’s recap:
Now how can the VIX be useful? Volatility works well to help identify market bottoms based on high volatility.
In most cases, when the VIX goes up, the S&P 500 goes down. When the VIX is at a high, the S&P 500 is at a low, which may be an excellent buying opportunity. However, you must ask yourself: If the VIX is very high, is there still a possibility that the market could take a further tumble?
This underlying fear makes buying during high stock market volatility an act not for the faint of heart. But, investors who used the high on the VIX to time their buys entered the market at or near the low. For us long-term investors, it’s a pretty good indicator of when the stock market is at or near a high – these are times when we see low or little volatility.
Remember, the VIX doesn’t give you the exact market high or low, but it’s going to put you in the neighborhood of both.
Good Investing,
Jason Jenkins
Article by Investment U
The gold mining industry is watching its production costs surge amid rising energy prices, inflation and increasing labor costs.
In 2012, Barrick Gold (NYSE: ABX), the world’s largest primary gold producer, says its total cash operating cost could increase 13% to 22%. Meanwhile, Newmont Mining (NYSE: NEM), another key gold stock, expects to see a 6%-to-14% rise in costs applicable to gold sales.
The industry is hoping that rising gold prices will buoy the hike in production costs. An annual survey of industry predictions by the London Bullion Market Association forecasts gold could top $2,000 an ounce this year.
The outlook – made by 26 leading precious metals analysts from the world’s largest bullion-dealing banks and trading houses – underscores bullish speculation of gold prices in the broader market.
All but two forecasters predicted that gold would surpass $1,900 an ounce this year, while 73% of those surveyed believe gold will top $2,000 an ounce.
Even though the expectations for gold prices are high, many of the larger gold mining stocks – including Barrick and Newmont – aren’t taking steps to significantly increase output in 2012. That’s partially because the gold industry has already ramped-up overall output over the past few quarters, and could be currently operating at near capacity.
Global gold production increased nearly 4% last year, reaching an all-time high. According to the World Gold Council, miners pulled 2,810 tonnes of gold from the ground last year – that’s nearly 100 million ounces, worth over $170 billion at current prices.
The surge in output was a clear response to rising gold prices, which approached $1,900 an ounce last year. But historic mine production levels did little to depress gold demand last year – particularly due to intense buying from the world’s central banks, which purchased the highest annual tonnage in nearly a half century.
Global reserve banks were net sellers for decades. But over the past several quarters, gold sales from central banks have dried up. Meanwhile, the official sector in emerging markets is furiously buying the yellow metal to hedge the sovereign debt crisis in the United States and Europe.
Central banks were vigorously ramping up their gold reserves last year. In total, gold purchases from the official sector in 2011 swelled some 470% over the previous year.
Last year, the world’s central banks stuffed a total of 440 tonnes (15.5 million ounces) of gold in their vaults last year. The World Gold Council says this was the biggest bullion purchase from the official sector since 1964.
Experts believe it’s likely that central banks will continue buying gold, seeking diversification of their foreign exchange reserves. The World Gold Council reports:
“The trend in central bank buying is expected to continue given the lack of decisive action in dealing with the underlying issues in both Europe and the U.S., as well as low relative allocations to gold among emerging markets.”
For gold miners everywhere, renewed central bank interest in the metal bodes well, as global reserve banks have sufficient cash to make significant purchases. But for gold miners with plans to increase production, it’s even better news.
Yet, as I mentioned, many of the larger producers won’t be significantly increase production, partially due to the uptick in production in recent quarters. Nevertheless, there’s a handful of significant miners that do have plans to increase output in 2012.
And I contend that with global limitations in output increase from major producers – and now central banks positioned as serious net gold buyers – mining firms with increasing production are better positioned to leverage rising gold prices.
With that in mind, I’ve pulled out three significant gold stocks from the market that are expecting a significant increase in gold production in 2012.
Canadian-based Kinross Gold is one of the world’s top five gold producers. With operations that span four continents, the company produced 2.61 million ounces of gold last year, a 12% increase over the company’s output in 2010.
The boost in production helped fuel Kinross’ cash flow amid rising gold prices – firing revenue up 31% to nearly $4 billion last year.
For 2012, Kinross says that it expects to produce approximately 2.6 to 2.8 million gold equivalent ounces from its current operations.
Rising production costs have, however, cut into Kinross’ revenue over the past several quarters. Full-year production costs in 2011 averaged $596 per gold equivalent ounce, versus $506 per gold equivalent ounce for full-year 2010.
Kinross says production costs are expected to rise again in 2012 in the range of $670 to $715 per gold equivalent ounce. So the rise in production costs may offset rising revenue from increased production if the market sees weaker gold prices.
Kinross’ gold stock currently pays a semi-annually dividend. The company recently declared a dividend of US$0.08 per common share, payable on March 31, 2012 to shareholders of record at the close of business on March 23, 2012.
The company’s projects contain a total of 62.6 million ounces of gold reserves, plus an additional 43.7 million ounces of gold in the NI 43-101 measured, indicated and inferred resources.
Eldorado Gold is a mid-tier gold mining company with significant production, development, and exploration stage properties and land positions in China, Brazil, Greece and Turkey. The company is noted as being the first North American company to successfully build and operate a gold mine in China. Production from Eldorado’s Tanjianshan Gold Mine in Western China commenced in 2007.
In 2011, Eldorado produced 659,000 ounces of gold – a 4% increase over the previous year. The company expects to ramp up gold production again this year to the tune of 730,000 to 775,000 ounces.
Rising production costs have also plagued Eldorado. Cash operating cost increased to $405 an ounce last year from $382 an ounce in 2010. The company says cash operating costs may rise again to $430 to $450 an ounce. Rising production costs may also cut into revenue from increasing output, save higher gold prices.
Eldorado’s gold stock also pays a semi-annual dividend. The company recently paid a dividend of C$0.09 per share on February 14, 2012. The next dividend payment information has not been announced yet.
Eldorado’s projects contain a total of 19.0 million ounces of gold reserves, plus an additional 31.5 million ounces of gold resources across all three NI 43-101 resource categories.
Yamana Gold is a significant gold mining, exploration and development company with projects in Brazil, Argentina, Chile, Mexico and Colombia.
Revenue exceeded $2.2 billion in 2011, as the company reached record production of 1.10 million gold equivalent ounces – a 5.3% increased over the previous year.
This year Yamana expects output to be in the range of 1.2 to 1.3 million gold-equivalent ounces – a 13% increase over 2011.
Going forward, the company says production is expected to increase to 1.5 to 1.7 million gold equivalent ounces by 2013, and 1.75 million ounces gold-equivalent ounces by 2014.
Yamana’s co-product cash costs increased 5% last year to $463 per gold equivalent ounce. The company has not yet announced a guidance of operational costs across all its projects for 2012.
Yamana increased its dividend by 10% on February 22, 2012, making the company’s dividend yield one of highest in the industry. The firm recently declared a quarterly dividend of $0.055 per share, payable April 13, 2012 to shareholders on record at the close of business on March 30, 2012.
Yamana controls a total of 22.1 million ounces of gold reserves across 13 of the company’s projects, plus an additional 23.5 million ounces of gold resources in all three NI 43-101 categories.
Despite a record in mine output and prices last year, the demand for gold is seemingly unwavering, emphasized by large central bank purchases last year. And I believe, with the expected surge in production costs in 2012, gold stocks with increasing production may greatly outperform those with flat or declining production.
Good Investing,
Luke Burgess
Article by Investment U
Pioneer Natural (NYSE:PXD) announced that it was acquiring Carmeuse Industrial Sands unit in a deal valued at $297 million.Pioneer Natural expects to realize savings of $75 million – $80 million per year from the Carmeuse Industrial Sands acquisition.The savings estimate assumes PXD could replace the current brown sand supply at market prices.SmarTrend currently has Pioneer Natural Resources in a Downtrend. Since 2008, SmarTrend subscribers trading Pioneer Natural Resources using our alerts outperformed the stock by 62%. We are monitoring these developments and will alert subscribers to any change in trend.Pioneer Natural Resources Company is an independent oil and gas exploration and production company with operations in the United States, South Africa, and Tunisia.
