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Watch it Now: China Makes its Move in Ecuador

noreply@blogger.com (Unknown) — Wed, 08 Jan 2014 06:15:00 +0000

Dr. Moors was a guest on Chinese national television last night via a live satellite link. The topic was the increasing Chinese involvement in Ecuador

Long-time readers will recall that Kent has been advising on a refinery project in Ecuador for some time now. The Pacifico project, also known in country as Refineria
Project costs have swelled to about $13 billion with the government still saying that the 300,000 barrel per day complex will begin operations in 2017.
The real story, however, lies in the combination of interests surrounding the facility.
Kent explains what China is up to in the video below:

Why “Energy Rebalancing” Means Huge Profits This Year

noreply@blogger.com (Unknown) — Wed, 08 Jan 2014 06:01:00 +0000

by Dr. Kent Moors

Marina and I have a little less than a week left on the island before we head back to the mainland. I hope our pipes haven’t frozen back in Pittsburgh!

As we head home to begin the New Year, there are several new wrinkles in the energy market that I have my eye on.
And as always, I’m looking for new ways to profit from them.
These new wrinkles revolve around what I call the “energy balance” – and its changing fast.
It involves big shifts in sourcing and systems that will combine with some major revisions in finance that will alter the landscape for investors.
It’s not about new energy breakthroughs or big oil discoveries. And it’s certainly not about entirely new structures.
Rather, it’s about the accelerating changes in elements you’re familiar with.
Think of it, if you will, as a “rebalancing” of what already exists.
It’s an unstoppable trend that promises to hand us huge profits…

The 2014 Plan: Leveraging a Gigantic Advantage

For us, of course, this “rebalancing” gives us a gigantic advantage: we identified this trend a long time ago. In fact, I’ve discussed it in these pages before.
At present, there are three overarching dimensions to these changes: the energy network itself, the geographical considerations, and the financial arrangements.
As as the market rebalances, it will require we change our investment strategy to profit from it -especially the with first two.
As for the third, we have just about single-handedly revised the approach to finance all by ourselves.
Today, however, I want to talk about the networking dimension.

Networking involves the entire sequence of energy (oil, natural gas, electricity) transmission from production, through gathering and transit, to refining, distribution and retail. This remains the upstream-midstream-downstream sequence that has become a mainstay of the energy sector.
In the case of operating companies, our target interests will consider the basins worked, the company’s focus, market cap and field size, along with the more or less traditional considerations of management style, balance sheet, and market position.
We will also see some interesting rebalancing in the refinery space, as those processors able to bridge the domestic market and rising oil product exports, as well as the conventional/unconventional sourcing mix, will have a substantial advantage.
And then there are the huge transport revisions that are on the way. We have talked about two of these primary developments before, but will be watching their progress with added interest this year.

Fundamental Changes = Big Opportunities

The first is the fundamental change in the worldwide balance occasioned by the rapid expansion of the liquefied natural gas (LNG) market.
This remains the single most significant revision globally to take place over the next decade. The rise of LNG exports from the U.S., fueled by the largess of shale and other unconventional gas sources, will be fundamental to this revolution.
On the other hand, there is another revision that may be just as significant in generating investor profits from the export trade.
I’m referring to crude oil, but with some new elements contributing to another change in the balance. I’m talking about oil exports.
In the future, we will see a concerted move to export oil in new directions – starting with transit from the U.S. For some time, exporting oil from the states has been considered a national security issue, making the trade very difficult.
In this case, two exceptions have been allowed: one permitting the export of heavy, lower quality crude from California (for which the argument can be made of an insufficient domestic demand); the other allowing certain tolling contracts.
Tolling is a process whereby raw materials are exported to be processed abroad with the finished product then imported back in. The justification for this allowance has been the concern over maintaining sufficient domestic stock of oil products, especially diesel. That concern has now abated with the advent of significant reserves of tight oil (“shale” oil actually being only one category of such unconventional sourcing).
None of this would have been considered possible only a few years ago. Being dependent on imported oil, American policy makers were understandably dismissive about allowing the export of finished products from U.S. refineries.
But not any longer…
As is the case with natural gas and LNG, there is now ample local supply. That opens up the market for rising oil product exports.
As a result, I suspect that tolling will rise again – owing to the limitations on overall U.S. refinery capacity – but will increasingly service a jump in the exports of those products. The cost differential in utilizing foreign processing facilities makes this approach quite profitable.

The Big (And Profitable) Global Changes Ahead

Then there is the expanded use of the completed East Siberia-Pacific Ocean (ESPO) pipeline in Russia.
An earlier spur from ESPO has for several years moved oil south to China. But the new impact of the pipeline on wider Asian demand will become far more pronounced.
ESPO export oil will become a new benchmark crude rate, a major development for all of Asia. As this develops, the ESPO benchmark will replace London’s Brent as the standard for trade in wide portions of that market.
This is what makes this so significant. End users in Asia have paid a premium over what it costs to buy the same quality oil for delivery to Europe. ESPO will undercut that tradeoff and provide a genuine boost to Asian economic development. ESPO oil has a lower sulfur content as well meaning it is “sweeter” than Saudi export. That is another big advantage for Asia.
Other export changes will come from a number of geographic market-specific revisions. Western Europe will be importing more LNG as nations like Germany also phase in a wider usage of renewables.
These LNG imports will add pressure on the pricing points for long-term pipelined gas contracts, while improving prospects for investments in the expanded liquefied trade.
What’s more, a matter I have addressed before and had meetings about over the last several weeks, has begun to change how people view oil and gas sourcing in the Caribbean.
It involves the emergence of China as a major conduit of energy funding in South America and the rapidly accelerating networking of production, refining, and transport throughout northern South America and the Caribbean basin.
The combination rising Chinese influence and an existing system called “Petrocaribe” will produce some major changes that will impact North American markets.

Thomas Edison's secret war with the Federal Reserve decades back has led to a new currency rising up today. It threatens the dollar, EURO, Pound, and the entire international monetary system. But it's also making everyday Americans rich. A Silicon Valley venture capital veteran investigates this exciting phenomenon.

End Of America : Fed is Dying

noreply@blogger.com (Unknown) — Tue, 01 Oct 2013 07:04:00 +0000

America’s path from fiscal improbity to political impasse
ONCE a stalwart of good governance, America looks like a rodeo clown. If the House and Senate cannot agree to continue funding for discretionary spending by midnight on September 30th, the federal government will experience one of its periodic shutdowns. There have been 10 such episodes since 1981, the date of the first one under the current budget-making rules, so a brief hiatus in government functions need not be frightening. Some non-essential services would be suspended and inconvenience caused—in addition to sending the US Treasury market into mild gyrations. Far worse is the idea that Congress might fail to authorise the raising of the debt ceiling in mid-October. Republicans in Congress have a shopping list of demands in exchange for allowing this; the president has said he will not negotiate. If America were in real danger of missing a debt payment it is likely that President Obama would find some constitutional justification for ignoring Congress rather than set off a financial meltdown.
Read full article here
Further Reading

Government Shutdown Begins As Deadlocked Congress Flails

Warren Buffett on Gold vs. Hommel on Gold!

noreply@blogger.com (Unknown) — Thu, 26 Sep 2013 05:57:00 +0000

Warren Buffet explained why he does not see the value in gold in his annual report from 2011.
http://www.berkshirehathaway.com/letters/2011ltr.pdf

http://ivanhoff.com/2013/04/15/warren-buffett-on-gold/

It was republished by ivanhoff, and came to my attention last week, which gave me this occasion to respond.   Here I go.

Buffett:
The second major category of investments involves assets that will never produce anything, but that are purchased in the buyer’s hope that someone else – who also knows that the assets will be forever unproductive – will pay more for them in the future. Tulips, of all things, briefly became a favorite of such buyers in the 17th century.

Hommel:
Buffett is claiming that Gold's value exists only because other people will buy it. True. True of all assets. And this is exactly why gold is a good thing, because of all things, gold is most likely to be valuable in more places to more people than nearly any other item that you can consider, precisely because it is money. But Buffett presents this as a bad thing, calling gold "unproductive". Well, let's see, how is gold productive? It can go up in value, just like stocks or bonds or housing, or any other asset. People recognize that gold has value not because it gains value, but because it does not decay or rot or go bad. Food makes a horrible form of money, partly because it goes bad. One of the longest lasting kinds of food is the wheat kernel, which can last up to twenty years. Gold lasts 6000 years, with no decay.

Buffett:
This type of investment requires an expanding pool of buyers, who, in turn, are enticed because they believe the buying pool will expand still further. Owners are not inspired by what the asset itself can produce – it will remain lifeless forever – but rather by the belief that others will desire it even more avidly in the future.

Hommel: True, gold buyers do not buy gold for what gold will produce, but most of my gold buyers are buying gold because they do believe it will go up in value, because they do believe that others will see what they can see, that gold is special, and cannot be printed to excess like paper money is being created to excess these days. Gold buyers buy gold also because they recognize that gold does not decay, because it has a very high value for the weight and density which makes it portable, and because it can be hidden.

Buffett: The major asset in this category is gold, currently a huge favorite of investors who fear almost all other assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however, has two significant shortcomings, being neither of much use nor procreative. True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end.

Hommel: True, gold is not procreative. But this does not mean that gold cannot go up in value. Gold does have a use. The use is as a store of value. The use is to communicate value over time. Gold has three primary uses: as a store of value, as a unit of account, and as a medium of exchange. These days, it is not used much as a medium of exchange, because no government on earth is issuing gold as circulating currency, but because all nations issue paper money. This is making gold an excellent store of value, because gold is increasing in value more than all the paper money being continually printed. The key use of gold in our times is not only in that it holds value, but gains value. This is because the new supply of gold is far less than demand. The world prints nearly $5 to $10 trillion worth of paper money per year, which is $5,000 to $10,000 billion. In contrast, the world mines about 83 million ounces of new gold, at $1334/oz, is worth only a mere $111 billion. Clearly, there will be more and more buyers of gold in the near and far future.

Buffett: What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As “bandwagon” investors join any party, they create their own truth – for a while.

Hommel: Gold buyers are derided as "fearful" by Buffett. And he notes this has recently been correct. But also wise. He could have written, "The ranks of the wise will grow". Perhaps more apt.

Buffett: Over the past 15 years, both Internet stocks and houses have demonstrated the extraordinary excesses that can be created by combining an initially sensible thesis with well-publicized rising prices. In these bubbles, an army of originally skeptical investors succumbed to the “proof” delivered by the market, and the pool of buyers – for a time – expanded sufficiently to keep the bandwagon rolling. But bubbles blown large enough inevitably pop. And then the old proverb is confirmed once again: “What the wise man does in the beginning, the fool does in the end.”

Hommel: True, bubbles happened in stocks and houses. And probably still are in a bubble. Is gold in a bubble? When less than $100 billion is being mined each year? I think not. His buddy Bill Gates could buy half the world's annual gold production, and would probably become a lot more wealthy if he tried. I say tried, because there is no way he would succeed, because his stock is not liquid enough to sell that much, and the gold market is too tight to buy half the gold market without pushing the gold price up, too. My point is that the gold market boom is still in the beginning stages.

Buffett: Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A.

Hommel: Today, one to two years later, gold prices are down to $1335. Buffet was right for one year out of a thirteen year bull market in gold. Buffett will likely be wrong next year. But 170,000 metric tonnes at $1335/oz. is x 32,151 oz/tonne is $7.3 trillion today.
The tiny size of the cube of gold in pile A also explains why gold is valuable. It contains a lot of value in a small space, making it very portable. Some people wonder why gold should be any different than copper or any other metal, asserting that the other metals could be used just as easily as silver and gold. Really? Well, I have a 33 kilo block of copper that cost about $300, about the same as a ten oz. bar of silver. Which would you rather carry to the grocery store? Also, the copper has a spread on it to buy and sell of over 50%. Or, would you prefer a quarter oz. of gold for about $330?

Buffett: Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?

Hommel: Can you imagine an investor with $7.3 trillion to begin with? There are no investors who are worth so much, are there Mr. Buffett? Besides, even if there were, there is no evidence that the entire world supply of gold is being all offered at the current asking price for gold. The vast majority of gold does not trade each year. World annual mine supply ads only about 1.5% to the pile per year. Well, let's calculate it. http://www.goldsheetlinks.com/production2.htm 170,000 tonnes in existing stock. World annual production about 2600 tonnes. 1.529%. Yup, still the same after all these years.
But Buffett's point is that he cannot imagine any investor buying the gold instead of the farmland and oil companies. But let's compare more clearly, $40 billion x 16 Exxon Mobils is $640 billion, plus the $200 billion from crops, which means the oil companies and land produce about $840 billion. Well, how much does the pile of the world's gold produce? Gold is likely to exceed $1900 in the next year or two, from $1336 today. As it does, the pile of gold will go up from $7.3 trillion to $10.4 trillion. Now let's compare shall we? $640 billion gain in the oil companies, and $3.1 trillion, or $3100 billion in the gold pile.   I think I've made my point, but let me go further. In actual fact, 16 Exxon Mobils don't exist. It's a pure fantasy choice, as in, "not real". The gold is real. That makes the gold choice not only several times better, but infinitely better, doesn't it?

Buffett: Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices.

Hommel: As we have seen, the existing annual production of gold is now $111 billion, and being purchased not by "frightened individuals, or speculators", but by "wise investors," and even central banks now! And again, with $5000 to $10,000 billion dollars worth of currency being printed world wide, I think the new gold will have plenty of ready buyers for decades to come. In fact, Gold is acting not only as a value preserver, but value gainer, for those investors who don't want be robbed by governments.

Buffett: A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.

Hommel: I'd wager that a century from now, none of the world's currencies today will have any value at all, but the gold still will. Gold is not a choice between oil and gold, it's a choice between paper money and gold. No investor will ever go out and buy 100 barrels of oil at $103/barrel to store on his lawn, to preserve $10,000 worth of paper money value, because the oil is extraordinarily inconvenient, and expensive to store and ship for the relative value. But anyone can buy 7 gold eagles that will fit into the palm of your hand for $10,000, which takes up about 1/10th of the space as a stack of 100 of the $100 bills.

Buffett: Admittedly, when people a century from now are fearful, it’s likely many will still rush to gold. I’m confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B.

Hommel: In contrast, I'm supremely confident that the world's pile of gold will increase in value far faster than oil. The reason is that gold has been money for about 6000 years of human history, and mankind has only been using oil for about 160 years or so. Furthermore, the world's bankers began attacking gold as money about that far back, so the world has never had a good historical gold to oil ratio in place during a time when the world used gold as money! Therefore, we have to use intuition to determine a proper value for gold as compared to oil, assuming the world returned to using gold as money, and it probably will. I would supsect that the world's gold production should be valued more than the world's oil production, because the world'd gold production must be spend on more than "just oil". As it is, oil is no more than 5-10% of the world's economy, but let's assume oil were as much as 50%. Well, then, the world's gold production would be worth about twice as much as world oil production, because people would need some gold left over to buy everything else. That would assume a value for gold as follows:
World annual oil production is about 90 million barrels per day.
x 365 days/year x $100/barrel =
That's about $3.3 trillion per year in dollar value, of oil production.
If world gold production of 83.5 million oz. were worth $6.6 trillion per year, that divides out to $79,000 per oz. for gold!
Oh yes, in the last five years, gold and silver have solidly outperformed Birkshire Hathaway stock.
http://finance.yahoo.com/q/bc?t=5y&s=BRK-A&l=on&z=l&q=l&c=slv%2C+gld&ql=1
And I suppose gold and silver have significantly outperformed BRK in the last 13 years.
https://www.google.com/#q=brk.b
Since the year 2000, BRK.B has gone from $40 to $114, an increase of 2.85 times.
Since the year 2000, Gold has gone from $255 to $1314, an increase of 5.1 times.

I strongly advise you to take possession of real gold and silver, at anywhere near today's prices, while you still can.   The fundamentals indicate rising prices for decades to come, and a major price spike can happen at any time.

Please note our new shorter hours, I'm working in each shop every other day.

JH MINT in Grass Valley
Open 11AM to 4PM Pacific Time, Monday, Wednesday, Friday.
Closed Tuesday, Thursday, weekends and bank holidays. (Also Closed from Dec. 25th to Jan 1st)
13241 Grass Valley Ave
Grass Valley, CA 95945
(530) 273-8175
www.jhmint.com

Silver Stock Report : 6 Myths of Inflation

noreply@blogger.com (Unknown) — Wed, 21 Aug 2013 05:45:00 +0000

6 Myths of Inflation (Six myths regarding infaltion and hyperinflation in the USA!) by Jason Hommel, August 20th, 2013

1. As the currency goes down, everything else goes up at roughly the same rate. Not true. 2. The law today will be the law tomorrow during hyperinflation. Not true. 3. I'll be able to ride it out here in the back woods of Colorado or Alabama during hyperinflation. Maybe, and maybe not. 4. There is no risk of inflation when the bigger risk is deflation. Not true. 5. The dollar will not go down in value, because everyone who owes dollars has a short position on the dollar that must be covered. Not true. 6. The amount of currency must expand to have an expanding economy. Not true. 1. As the currency goes down, everything else goes up at roughly the same rate. Not true. Or, in other words, if bread goes up ten times in price, and if silver goes up ten times in price, it does not matter what I buy, and does no good to buy silver... Not true. Put $100,000 into bread, try to find the storage place to store it, and watch your investment turn moldy before your very eyes! Or else, keep your money in cash, and watch 90% or more of the value vanish. Silver going up at the same rate of bread is still 100% better than buying bread, and ten times better than cash! In the last twenty years, fruit prices for apples and oranges have been a steady $1-2 per pound. But silver has moved from a low of $5 to a high of $50, and back to $23 today. Silver prices have already dramatically outperformed the price of fruit over the last decade. It has been mostly true that for most hyperinflations, that the price of things as denominated in foreign currency, has been somewhat stable. But the other hyperinflations will be significantly different from the inflation in the US, because of the size of the US economy, and by the education level of the populace, and by the options available. As there was hyperinflation in Zimbabwe, consider... how many coin shops were there in Zimbabwe offering silver to their people? None? There are 4500 coin shops across the USA! And then there is the difference in buying power. The people of the USA have enough money, and enough buying power, to significantly change the world market price of silver, but not the people of Zimbabwe! There is barely $2 billion worth of annual investment demand for silver. When the people of the USA decide they want silver, and can actually buy it, silver demand will actually significantly increase, and it will really move the silver price, and it already has! But consider also. Merchants raise their prices at different rates, such as whenever they feel like it. There is no national governmental council board directing industrialists and capitalists and businessmen on when to raise prices to devalue the currency that government prints! Some express another version of this myth. They say, "it does not matter what asset I buy to protect myself from inflation; housing, stocks and bonds, all are assets, and all will go up at similar enough rates." Not true. Bond values collapse as interest rates rise to match the inflation rate. Housing values collapse if there is capital flight and too many liberal policies in government, such as happened in Detroit. Stock values collapse if tax rates go sky high or during nationalist confiscations or socialization or communism, or even by bankruptcy! And we have seen all of that in this past decade alone during this bull market in silver and gold! The point is that silver and gold will outperform nearly all other things. Monetary demand will not flow into food items. Monetary demand will not flow into bonds that are being sold due to rising interest rates. Monetary demand will flow into silver and gold, the only forms of true money. People will not be buying cowrie shells by the tens of billions of dollars. People will not be buying beaver pelts by the tens of billions of dollars. They will buy silver and gold. Like they always do when they can, and should. 2. The law today will be the law tomorrow during hyperinflation. Not true. Laws will change dramatically as the governments collapse, and can get much worse, or much better, after a change in government or liberty led revolution. This is why I consider education, specifically political education on the topics of freedom, liberty, and libertarian ideals, to be as important, if not more important, than advocating the purchase of silver bullion to protect yourself from inflation. But yes, buy silver bullion too! This way, the owners of the wealth of tomorrow will be more able to form a more free society in the future after the demise of the current forms of government around the world that rely on paper money for the source of their power. 3. I'll be able to ride it out here in the back woods of Colorado or Alabama during hyperinflation. Maybe, and maybe not. Many times, most of the wealthy people are forced to flee the country before or as things are really deteriorating. Many fled communist China and ended up in Hong Kong. Many fled Nazi Germany, even officers in the military, as depicted in the classic movie "The Sound of Music". God's great grand plan might be for most people to flee to Israel. Israel is said to grow rich in gold and silver in the time of the end. Ezekiel 38. Zechariah 14. So, again, buy silver and gold! But remember, that might not be enough. 4. There is no risk of inflation when the bigger risk is deflation. Not true. Deflation is a non existent risk when government prints money to bail out the banks. Deflation only happens when banks fail, and when deposits go "poof" and vanish with the failing bank. Banks may be failing, and are failing, and are often merged into larger banks. But no depositors deposits are going "poof" and vanishing! The entire point of there even being a Federal Reserve is to prevent deflation, and they do. They do more than that, they create inflation. Deflation only happens when there is a gold standard, and when there is not enough gold to back up the deposits. Then, the total amount of "currency" can go down, back down the limited amount of gold. But deflation cannot happen when on demand deposits are not backed by gold, and they are not today. Instead, if people want gold or silver, they have to go to a bullion dealer, and when they buy silver and gold, they cause the value of their dollars to go down and gold and silver go up, which is the exact opposite of deflation, which would happen when they go to the bank and redeem their deposits for gold. 5. The dollar will not go down in value, because everyone who owes dollars has a short position on the dollar that must be covered. Not true. Defaults happen! People actually fail to repay their debts! Can you imagine that?! Yes, the Federal Reserve bails out banks to prevent their failures. But who bails out individuals who must pay down debt? Nobody. When they fail to repay debt, it's the lenders who lose, but when those lenders are the banks who get bailed out, then no deflationary forces take place. Furthermore, look at the nature of this argument. Is debt like a short position on dollars? No, it's not. Consider the differences. The investor who puts on a short position in futures markets must deliver or buy it back, or their brokerage must, or the exchange must. A person or nation who owes dollars does not have two other wealthy and solvent entities who have signed on as co-lenders to securitize the debt. Also, most dollar denominated debt is collateralized, such as by housing. In contrast, a short position in the silver market does not necessarily have the corresponding silver to back it up. Also, consider who is short silver. It's the banks. They will not likely be able to ever buy the ten years worth of annual production of silver to give to people who are content to let the large banks store their non existent silver for them. Since the banks know they will not be able to cover, they never will. They may cover some shorts in the futures market from time to time to create extra volatility, and to earn an extra income from moving the market around, but they will never call up all their silver depositors and say, hey, we are delivering your silver to you for free, and now it's up to you to store it yourself! Never. But the people might wake up, and either demand delivery, or cash out, and buy silver elsewhere. And who is short dollars, or in dollar debt? Many nations around the world? Many cities? Many states? Many of these are sovereign entities who have the right and duty to their people to default and not pay dollars. Many have defaulted already. Many have the legal right to declare bankruptcy, and they will. Did Argentina move heaven and earth to buy dollars? No. They defaulted and devalued their currency. Same thing will happen all over. Debts are not always paid, they are often defaulted, bankrupted, or simply not paid. Dollar denominated debts that are not paid do not prop up the dollar. They devalue the dollar, because they drive up interest rates as bond values crash. 6. The amount of currency must expand to have an expanding economy. Not true. This is a lie! The value of money can go up as the economy expands. In fact, that is exactly what took place in America for over 100 years, from 1776 to 1913. There was consistent deflation at about 2% per year, and America grew from nearly nothing to becoming the powerhouse of the world that won World War I! All on deflation! Deflation is the natural birthright of increased productivity. As productivity goes up, prices go down. This is not a function of money, but rather, something that masks the hidden forces of inflation. I absolutely hate the simple myth in the gold community that an ounce of gold has always been worth about the price of a man's suit. Utter nonsense! By the time machines could make clothes, the value of a man's suit came way down! For over 100 years, gold was $21.66/oz.! Here is evidence online that it was $3-6 for a man's suit in 1903. http://www.gti.net/mocolib1/prices/1903.html Another way this myth is stated, is that if gold itself expands at 2% or less, then businesses, on average, cannot expand more than 2% growth rates, and thus, nobody would ever invest money into the economy and thus, there would be no economic growth. Well, the experience of the United States from 1776 to 1913 is proof that this is not true. Simply because the average returns are 2% does not mean that nobody would ever invest. Some businesses make more, others make less. Some businesses lose money. Yes, losses actually take place, and yes, some businesses go bankrupt! That creates more opportunities for others who can buy things at distressed prices, and other businesses who no longer have to compete against failing businesses! If the 2% investing rule were true, nobody would ever buy bonds that pay less than 2%! Yet many people in today's world do exactly that! And I would wager that everyone who buys bonds that pay less than 2% is not actually even getting 2%, but rather, they are actually losing money, because that's so much lower than the real inflation rate, yet people continue to choose to make decisions that guarantee an economic loss, because that seems safer than earning nothing in cash, and safer to them than "volatile silver" or "mysterious barbaric gold". Read full Article here

Greece: A Gathering Storm Threatens Europe and America

noreply@blogger.com (Unknown) — Thu, 14 Mar 2013 08:25:00 +0000

Greece: A Gathering Storm Threatens Europe and America

By Elliott Wave International/the Socionomics Institute

The similarities between Greece and pre-WWII Germany are striking.

Nazi salutes.
Praise for Adolf Hitler.
Swastika-like banners.

Now, before you write off this warning as a run-of-the-mill, Nazi-name-dropping scare tactic, consider this recent report from the Socionomics Institute, a U.S.-based think tank that studies global trends in social mood. Here's an excerpt from the Institute's February publication of The Socionomist.

A rising political party known as Golden Dawn is resurrecting such practices, all hallmarks of Hitler's Third Reich, in modern-day Greece, which has suffered a dramatic, five-year stock market decline.
From 1927 to 1932, Germany suffered a disastrous stock market decline, falling 73% over five years. Six million people were unemployed, and the government was weak. Germany suffered outside financial pressure in the form of reparations required by the Versailles Treaty and consequences of its involvement in World War I.
Adolf Hitler argued that the German government betrayed its people by signing the Versailles Treaty. He promised that if he were elected, the nation would stop paying the reparations. The position appealed to the German people's anger and helped the Nazi leader become chancellor in January 1933.
Modern-day Greece has experienced an even larger five-year decline than 1920s-1930s Germany did, falling 88% since 2007, and the country has suffered a debt crisis. As a condition for bailouts aimed at helping Greece recover, the European Union has imposed tough austerity measures. The Greek government has implemented the measures. Meanwhile, the deepening negative social mood has fueled protests against them.
Nikos Zydakis, editor of the daily newspaper Kathimerini, says Greece is in an economic depression like that experienced by Germany in the 1930s. More than 90% of Greek households have experienced income reductions, with the average drop 38%. Unemployment in Greece now stands at a record 26.8% and is nearly 60% among Greece's young adults. In November the Greek Parliament imposed tax hikes and spending cuts demanded by creditors. Supermarket sales in the country declined by 500 million euros ($669 million) last year, and people are burning wood because the price of electricity has risen and taxes on heating oil have increased.

"History doesn't repeat itself, but it does rhyme," goes an old saying attributed to American author Mark Twain. And new research from the Socionomics Institute sees a disturbing pattern of rhymes between modern-day Greece and pre-WWII Germany.
To be sure, market and political developments in Greece will have a significant impact on the future of Europe, the Americas and beyond.

The Socionomics Institute is an independent research firm devoted to the study of social mood and social action. As a partner to the world's largest market forecasting firm, Elliott Wave International, the Institute puts the most important developing social trends around the world into context with Robert Prechter's socionomic theory, which posits that social mood drives social action (not the other way around).
Read the rest the Institute's new February report to learn more about the developing threats out of Greece. The full report is available for free as part of a special promotion run by the Institute with EWI. Follow this link to read the full February issue of The Socionomist (a $19 value) - for free.

Weekly Outlook and Technical Analysis Forex Currency Pairs

noreply@blogger.com (Unknown) — Sun, 18 Dec 2011 04:24:00 +0000

EUR/USD Weekly Outlook

EUR/USD's fall accelerated after taking out 1.3145 support last week and reached as low as 1.2946 before making a temporary low there and turned sideway. Initial bias is neutral this week for some consolidations. But recovery should be limited by 1.3212 support turned resistance and bring fall resumption.

Below 1.2946 will target 1.2873 support first. Whole decline from 1.4939 should head to 100% projection of 1.4939 to 1.3145 from 1.4246 at 1.2452 and below. In the bigger picture, price actions from 1.6039 are unfolding as a consolidation pattern in the long term and is still in progress. Fall from 1.4939 is a falling leg inside the pattern and has just resumed. Further decline could be seen to 1.1875 and below.

Nonetheless we'd expect strong support above 1.1639 key level to contain downside. On the upside, above 1.3538 is need to be the first signal of bottoming while break of 1.4246 resistance is needed to confirm completion of fall from 1.4939. Otherwise, we'll stay bearish even in case of recovery.

In the long term picture, EUR/USD turned into a long term consolidation pattern since reaching 1.6039 in 2008. Such consolidation is still in progress and we'd expect range trading to continue for some time between 1.1639 and 1.6039.

USD/JPY Weekly Outlook

USD/JPY failed to break 78.28 resistance last week and formed a temporary top at 78.15 and retreated. Initial bias is neutral this week for some sideway trading. Another rise is mildly in favor as long as 77.49 minor support holds. Above 78.15/28 resistance zone should extend the rebound from 76.57 to 100% projection of 76.57 to 78.28 from 77.13 at 78.84 and above.

Nonetheless, note that such rebound is viewed as the second leg of the consolidation pattern from 79.52. Hence, we'd expect strong resistance below 79.52 to bring another near term fall to continue the consolidation, as the third leg. Meanwhile below 77.49 minor support will flip bias back to the downside for 77.13. Break will suggest that recovery from 76.57 is finished and target this support and below.

In the bigger picture, note again that there is no sign of long term trend reversal in USD/JPY yet even though downside momentum is diminishing with bullish convergence condition in weekly MACD. USD/JPY is still trading inside the falling channel that started back in 2007 at 124.13, and below the falling 55 weeks EMA. Not to mention that it's far below the falling 55 months EMA. Rebound from 75.56 low could extend higher and beyond 80 psychological level. But it could turn out to be a corrective three wave rally in the end. So, we'd at least prefer to see sustained break of 55 weeks EMA (now at 79.98) before considering the case of reversal. And break of 85.51 resistance will need to confirm. Otherwise, anything happens now will be viewed as corrective and an eventual break of 75.56 low to 70 psychological level is still favored.

In the long term picture, the long term down trend in USD/JPY is still in progress. Such down trend is expected to extend further into uncharted territory with 70 psychological level as next target. In any case, we'd at least need to see sustained break of 85.51 before considering trend reversal.

GBP/USD Weekly Outlook

GBP/USD dripped to 1.5409 last week, attempted to resume fall from 1.6165 but lacked follow through selling. Initial bias is neutral this week and stronger recovery cannot be ruled out. But we'll stay cautiously bearish as long as 1.5779 cluster resistance holds (50% retracement of 1.6165 to 1..5409 at 1.5787) and expect another decline. Below 1.5409 will target a test on 1.5271 next. Break there will confirm resumption of whole decline from 1.6460 too and should target 1.5 psychological level and below.

In the bigger picture, no change in the view that price actions from 1.3503 are treated as consolidations to long term down trend from 2.1161. At this point, we're favoring the case that such consolidation is either finished with three waves to 1.6746, or five waves as a triangle at 1.6165. Break of 1.5271 support will affirm either case and should target 1.4229 key support. Decisive break there should extend the long term down trend through 1.3503 low. Meanwhile, strong rebound ahead of 1.4229, or a break of 1.6165, will dampen the immediate bearish view and extend the consolidation from 1.3503 instead.

In the longer term picture, the corrective nature of the multi-decade advance from 1.0463 (85 low) to 2.1161 as well as the impulsive nature of the fall from there suggests that GBP/USD is now in an early stage of a long term down trend. Another low below 1.3503 is anticipated after consolidation from 1.3503 is confirmed to be completed.

USD/CHF Weekly Outlook

USD/CHF's rally extended further to as high as 0.9547 last week before forming a temporary top there. Initial bias is mildly on the downside for deeper retreat. But break of 0.9065 support is needed to confirm short term topping. Otherwise, recent rally from 0.8567 and that from 0.7065 is still in progress. Above 0.9430 will flip bias back to the upside first. Break of 0.9547 will confirm rise resumption towards 0.9916 cluster resistance next.

In the bigger picture, at this point, we're treating rebound from 0.7065 medium term bottom as part of a consolidation pattern only. Hence, strong resistance is expected at next cluster level at 0.9916 (61.8% retracement of 1.1730 to 0.7065 at 0.9948, 61.8% projection of 0.7065 to 0.9315 from 0.8567 at 0.9958) to limit upside and bring reversal. Meanwhile, break of 0.8567 support should mark the completion of whole rebound form 0.7065 and turn near term outlook bearish.

In the longer term picture, long term down trend from 2000 high of 1.8305 is still in progress and there is no indication of a reversal yet. Such down trend would extend to 100% projection of 1.8305 to 1.1288 from 1.3283 at 0.6266 after finishing the consolidation from 0.7065.

EUR/JPY Weekly Outlook

EUR/JPY dropped to as low as 101.04 last week before forming a temporary low there and turned sideway. Initial bias remains neutral this week for some more consolidations. But recovery should be limited by 102.98 resistance and bring fall resumption. Below 101.04 will extend the decline from 111.57 to 61.8% projection of 111.57 to 102.48 from 105.54 at 99.92, which is close to 100 psychological level. Also, sustained trading below 100 will confirm resumption of the larger down trend and should target 61.8% projection of 123.31 to 100.74 from 111.57 at 97.59.

In the bigger picture, EUR/JPY moved further away from the falling 55 weeks EMA and affirmed the case that downtrend from 2008 high of 169.96 is still in progress. 100 psychological level should be taken out eventually towards 100% projection of 139.21 to 105.42 from 123.31 at 89.52, which is close to 88.96 all time low. On the upside, break of 111.57 resistance is needed to be the first signal of reversal. Otherwise, we'll continue to stay bearish in the cross.

In the long term picture, up trend from 88.96 (00 low) has completed at 169.96 and made a long term top there. Based on the five wave structure of the rise from 88.96 to 169.96, we're favoring that fall from 169.96 is corrective in nature. Hence, we'll look for reversal signal ahead of 88.96 low.

Daily Report: Dollar Weak as Risk Appetite Lifted by Solid Asian Data

noreply@blogger.com (Unknown) — Mon, 24 Oct 2011 10:18:00 +0000

Dollar remains broadly weak as the week starts as markets sentiments are boosted by solid Asian economic data. The preliminary HSBC China Manufacturing PMI rebounded from 49.9 to 51.1 in October, back in expansionary territory for the first time since July. HSBC noted that the data confirmed their view there is no risk of hard landing in China. Japan trade deficit narrowed to JPY -0.02T in September. Impressively, exports rose 2.4% yoy, marking the second month of growth following five month decline after the March natural disaster. Asian stock indices are broadly up today, partly following the QE3 triggered rally in US last week. Nikkei is up 1.9%, HSI up over 4%, Aussie All Ordinaries up 2.62%, crude oil is back above 88 level while dollar index is pressing 76.

After the EU summit on Sunday, no agreement was made on major issues including bank recapitalization, private sector involvements in Greece second bailout and the way to boost the EFSF. Though, one thing seemed to be sure is that using ECB to leverage the bailout fund is ruled out. The latest news flow said that policymakers are threatening to trigger a formal default on Greek debt unless banks accept losses of as much as 140B euro on their holdings or a haircut of around 50%. Both Reuters and Bloomberg also quoted the need of around 100B euro for bank recapitalization. The Reuters report also mentioned a haircut of 50% but emphasized that 'several major areas of disagreement remain', especially in the EFSF plan and 'it will require vast amounts of hard negotiation between Sunday and Wednesday to strike a deal that convinces financial markets and Europe's major trading partners that the crisis is in hand' while according to the Bloomberg report policymakers are heading toward using the EFSF to 'guarantee bond sales as a way to extend its reach. A second option is to set up an EFSF-insured fund that would seek outside investment in troubled bonds'.

Data from Australia saw PPI rose less than expected by 0.6% qoq, 2.7% yoy in Q3. The year over year rate was much lower than Q2's 3.4%. The data is arguing inflationary pressures have eased further in Australia. RBA would be on hold for longer than expected and is raising the prospect of a rate cut if global economic conditions deteriorate further. Though, the CPI data to be released later this week will be more crucial in near term rate outlook.

Looking ahead, Eurozone PMI data will be the main focus. German PMI manufacturing is expected to drop slightly to 50 in October PMI services is expected to recovery to 49.8. Eurozone PMI manufacturing and services are expected to drop to 48.1 and 48.5 respectively. Eurozone industrial orders are expected to rise 0.1% mom in August.

EUR/AUD Daily Outlook

Daily Pivots: (S1) 1.3350; (P) 1.3424; (R1) 1.3463;

EUR/AUD's fall from 1.4086 resumed by taking out 1.3368 and reaches as low as 1.3327 so far today. Intraday bias is back on the downside and further decline should be seen to retest 1.3022 support next. On the upside, note that break of 1.3497 resistance, though, will indicate short term bottoming, possibly on bullish convergence condition in 4 hours MACD, and will bring stronger rebound.

In the bigger picture, price actions from 1.2926 are treated as a medium term consolidation pattern, which is still in progress. Such pattern might extend further in range of 1.2926 and 1.4341. Nevertheless, we'll stay bearish as long as 1.4341 resistance holds and favor an eventual downside breakout. Sustained trading below 1.2926 should pave the way to 1.2 psychological level next.

Economic Indicators Update

MT	Ccy	Events	Actual	Consensus	Previous	Revised
23:50	JPY	Trade Balance (JPY) Sep	-0.02T	-0.11T	-0.29T	-0.27T
0:30	AUD	PPI Q/Q Q3	0.60%	0.80%	0.80%
0:30	AUD	PPI Y/Y Q3	2.70%	2.90%	3.40%
4:00	CNY	HSBC Flash China Manufacturing PMI Oct	51.1		49.9
7:30	EUR	German PMI Manufacturing Oct A		50	50.3
7:30	EUR	German PMI Services Oct A		49.8	49.7
8:00	EUR	Eurozone PMI Manufacturing Oct A		48.1	48.5
8:00	EUR	Eurozone PMI Services Oct A		48.5	48.8
9:00	EUR	Eurozone Industrial New Orders M/M Aug		0.10%	-2.10%

Aussie Dollar in a Copper Cauldron!

noreply@blogger.com (Unknown) — Sat, 22 Oct 2011 14:22:00 +0000

I keep thinking that any day now the Australian dollar will take a dirt nap. It took one back in mid-2008, falling a stunning 39 percent in just three months in the midst of the credit crunch. This shows just how vulnerable the Aussie can be to a growth accident that slams the world economy; it is the premiere risk currency among the major dollar currency pairs.

Global growth is fading fast again, and copper seems to be highlighting that story. It could be lights out for the Aussie again if that’s the case.

As you can see in the chart below, the copper futures weekly uptrend line is broken, and the primary trend is down. The yellow rectangular box shows what happened in the midst of the great credit crunch of 2008.

And as you may know, copper is considered a key industrial metal; its price movement is often used as an indicator of the direction of growth in the global economy.

Copper Has Taken on an
Important Role in Financing

An increasing number of Chinese firms have been stockpiling the metal and using it as collateral — because the government’s measures to curb inflation have limited the firms’ access to credit. Such financing links the price of copper to other key elements of the Chinese economy, including the growing speculative real estate bubble.

China’s tightening monetary policy has made it more difficult to access credit through official channels. As a result, Chinese small- and medium-size enterprises have increasingly turned to copper for use as collateral in loans, which are then funneled into other sectors of the economy.

The falling price of copper means that the collateral initially put up for the loans in yuan is no longer worth what it once was, decreasing the likelihood that the borrower will be able to pay back the loan.

If firms default on debts, then others connected in the chain will default — and determining where loans have been invested is nearly impossible.

Banks and state-owned enterprises (SOEs) are also potentially vulnerable. A high number of SOEs have also used copper as collateral. These firms are often involved in the real estate sector — even if their primary function is not always directly linked to it — and are therefore exposed to the country’s growing real estate bubble.

The government would bail out the more politically favored SOEs if necessary. But that would leave fewer resources to be allocated to the private sector, which is crucially important to China’s growth.

It is all about feedback loops. And …

This One Could Turn Quite Vicious
for China and In Turn the Aussie Dollar!

The Australian economy is highly dependent on China for its own growth. For a while now, I’ve been saying that Australia has effectively become a satellite country of China. Take a look at this chart showing China’s imports from Australia thru September.

Lower copper prices could put a real damper on Australia’s growth. Another major hit is already in play: Falling consumer demand from the euro zone and the U.S.

And if the bubble were to finally pop in Chinese real estate, it would be much uglier indeed.

So we have the potential for real demand in copper and other commodities to decline sharply. Toss in the added thumping from the internal Chinese speculation, which would likely push the metal back toward its credit crunch low, and you get another 50 percent decline in the red metal.

And guess which currency has been tightly correlated to the price of copper over the last few years? If you said the Aussie dollar, you were right on!

There are two key takeaways from the following chart of the Aussie/U.S. dollar vs. copper:

1) There is a very large divergence between the two price series; and

2) In the past the series have been highly correlated.

I suspect we will see a big move one way or the other. It could be copper soars. But for now, I’m betting the Aussie tanks.

Stay tuned.

Jack

Market Salutes Mass Confusion with Further Risk Rally

noreply@blogger.com (Unknown) — Fri, 21 Oct 2011 15:10:00 +0000

The coming “solution” to the EU’s debt crisis is creating ever mounting piles of research outlining the if’s, and’s and but’s – so the market shrugs its shoulders and says “they’ll figure something out.”

The discussion surrounding the potential form of the EFSF has become an endlessly confusing cacophony for which readers can find far better sources than this column to review and understand all of the various nuances of the proposed solutions and the questions outstanding. The bulls have largely made their case on the potential outcome for what is now next Wednesday (Summit, part Two) with the extensive rally in the rear view mirror. The bears are licking their wounds and still running for cover. The essential bottom for the bigger picture here boils down to three interlocking questions, none of which are likely to be answered beyond the next couple of weeks to couple of months, in my view.

Confidence? All of the solutions rely on the market’s confidence and the hope that officialdom has gone far enough in back-stopping sovereign debt to a sufficient degree far more than the actual deployment of funds. The solution is more one of – if something goes wrong, we’ll be there – trust us! It works as long as market participants believe it will work, in other words. But if enough confidence is lost and the actual mechanisms are being tested, is there really enough firepower in place? Which leads us to the next question…

Where is the money? The issue of leverage has not been resolved. Yes, an all-out money printing fiesta from the ECB or something closer to what the French wanted could have generated a more QE2-like large scale liquidity-induced rally, but none of the currently more likely sounding resolutions generate huge liquidity – only implied liquidity via backstopping. This is a highly complex, have-our-cake-and-eat-it-too tight money solution to the situation.

A closer union or not? The risk at all times given the incredibly cumbersome EU framework is one of one more bad actor spoiling the party – Greek exceptionalism in this department is an awfully risky assumption. Most are discussing Greek defaults only. Every round of this crisis has shown how tenuous the political EU framework remains, and the trend doesn’t appear to be toward a firmer commitment to union, but rather the opposite. The framework may survive this round, but what about the next one?

These are awfully big questions. Yes, we could see confidence for a time because yes, there may be enough funding for the center to hold – but the third question is the real challenger down the line. If the confidence fails because more money is needed or more money is needed because confidence fails, the political will for another round of bailouts is unlikely to be there as our Chief Economist said in yesterday’s Chronicle – maximum intervention will eventually yield to Crisis 2.0, whether it is in this quarter or not until next year.

Meanwhile, back in the East
Two things going on in Asia at the moment: China’s equity market is looking very shaky and satellite indicators like the price of copper are a significant cause for concern, particularly given copper’s odd use in China’s collateralized credit market in recent years. Meanwhile, AUDUSD is following equity markets and the Euro-phoria rather than its more traditional orientation with industrial commodities – an awkward path at best for the currency. The direction of AUDUSD and copper/China indicators is unlikely to diverge for much longer – one of the two markets is “wrong”.

Elsewhere, complacent USDJPY longs were attacked in the early US hours as the USD was crumbling across the board in today’s trade as risk appetite stormed higher and 76.0 was taken out as USDJPY briefly touched a new all-time low. There is risk of further downside if Japanese officialdom prefers to wait for the other side of the G20 to make its presence more forcefully felt. The move lower is actually at odds with the interest rate spreads at the short end of the US/Japanese yield curves, though there has been a general move away from these kinds of correlations holding much sway of late.

Looking ahead
So what are the potential outcomes once we are on the other side of next week’s EU summit and the G20 in early November? A further extension of the rally for the shorter term is quite possible if the EU solution continues to generate more complacency – so we have to allow for, for example, EURUSD to challenge anything from its 55-day MA above 1.3900 to its 200-day MA above 1.40. But that’s our line in the sand, as we discuss in the chart below.

EURGBP pulled a number on the market today – as EURGBP took out downside stops before rallying well back into the range, a move that makes sense as GBP and USD are in similar boats and their general direction versus the EUR is likely to remain loosely correlated at minimum.

Chart: EURUSD scenarios
Assuming that the EURUSD isn’t preparing for a full trend change to the upside, the scenario indicated on the chart below is a possible trajectory for the pair – a brief further extension of the rally as we head into/out of the EU Summit followed by a reversal and then disappointment further down the line. If the pair remain above 1.40 for any length of time, we’ll have to reconsider our assumptions.

Have a great weekend and stay careful out there.

Economic Data Highlights

Germany Oct. IFO out at 106.4 vs. 106.2 expected and 107.4 in Sep.
Canada Sep. CPI out at +0.2% MoM and +3.2% YoY vs. +0.2%/+3.1% expected, respectively and vs. +3.1% in Aug.
Canada Sep. CPI Core out at +0.5% MoM and +2.2% YoY vs. +0.2%/+2.0% expected, respectively and vs. +1.9% YoY in Aug.

Upcoming Economic Calendar Highlights (all times GMT)

US Fed’s Kocherlakota to Speak (1700)
US Fed’s Fisher to Speak (1720)
US Fed’s Yellen to Speak (1900)
US Fed’s Duke to Speak (Sat 1400)
Japan Sep. Merchandise Trade Balance (Sun 2350)
Australia Q3 Producer Price Index (0030)
China Oct. HSBC Flash Manufacturing PMI (0230)

Stocks Fly as Fitch preserves French AAA Rating for Now

noreply@blogger.com (Unknown) — Fri, 21 Oct 2011 15:05:00 +0000

Fitch does not see EFSF plans changing France's AAA Rating
European stocks were slightly up in the early session before Fitch announced that it does not see changes to the European Financial Stability Facility as a threat to France's AAA rating, and that a strong EU solution would likely preserve Spain's and Italy's ratings as well. Following Fitch's announcement the DAX Index jumped 1.7 percent.

GE meets expectations on finance unit; McDonald's delivers as always
GE reports 3Q operating EPS 0.31 in line with estimates of 0.31 as improvements in GE Capital offset weakness and margin contraction in its energy division. Investors are slightly disappointed sending the shares down 1.4 percent in pre-market trading.

McDonald's delivers what the market always wants, namely better-than-expected earnings, as the company reports 3Q EPS 1.45 beating estimates of 1.43 driven by market-share gains across the globe. The shares are up 2.9 percent in pre-market trading.

Other earnings releases out in pre-market are:

Schlumberger reports 3Q operating EPS from continued operations of 0.98 missing estimates of 1.01.

Verizon reports 3Q operating EPS 0.56 beating estimates 0.55

Why the Gold Selloff is Not Over Yet

noreply@blogger.com (Unknown) — Fri, 21 Oct 2011 15:03:00 +0000

At this point, I think it's pretty clear the general stock market is now in the initial phase of a new bear market. It's trying to generate a bear market rally over the last three weeks, but so far it's been pretty weak. That doesn't bode well once the cyclical and secular bear trend resumes.

The HUI mining index is now on the verge of breaking down out of the multi-month megaphone topping pattern. Once it does, that will confirm that the bear now has his teeth in the last holdout sector. The sector that led the bull market over the last 2 1/2 years and now the last sector to succumb to the deflationary forces.

As I have noted in the chart, I do expect the miners will find at least temporary support at the 200-week moving average. That should correspond with gold putting in an intermediate degree bottom sometime in the next two or maybe three weeks. Presumably, it will come with gold below...

Read full article (with charts)...

Non-partisan gov't report shows the Federal Reserve is even worse than we thought

noreply@blogger.com (Unknown) — Fri, 21 Oct 2011 15:01:00 +0000

The non-partisan Government Accountability Office released a report today showing widespread corruption and conflicts of interest in the Federal Reserve.

Senator Sanders – who was instrumental in forcing the Fed to release some details of its lending operations – summarizes:

A new audit of the Federal Reserve released today detailed widespread conflicts of interest involving directors of its regional banks.

"The most powerful entity in the United States is riddled with conflicts of interest," Sen. Bernie Sanders (I-Vt.) said after reviewing the Government Accountability Office report. The study required by a Sanders Amendment to last year's Wall Street reform law examined Fed practices never before subjected to such independent, expert scrutiny.

The GAO detailed instance after instance of top executives of corporations and financial institutions using their influence as Federal Reserve directors to financially benefit their firms, and, in at least one instance, themselves. "Clearly it is unacceptable for so few people to wield so much unchecked power," Sanders said. "Not only do they run the banks, they run the institutions that regulate the banks...

Read full article...

This Country's Banks Could Offer Europe's "Best Place to Hide" from the Euro Crisis

noreply@blogger.com (Unknown) — Fri, 21 Oct 2011 15:00:00 +0000

Nordic banks may offer investors the best protection against a recapitalization wave that threatens to dilute the share values of Europe's lenders, said UBS AG. (UBSN)

"It is a very attractive place for European investors to hide from the ongoing eurozone problems," Nick Davey, a London-based analyst at UBS, said in an interview.

Scandinavian banks, including Nordea Bank AB (NDA) and DnB NOR ASA (DNBNOR), have negligible holdings of bonds sold by Europe's most indebted nations and are better capitalized than most of their European peers. Nordea Chief Executive Officer Christian Clausen said this week his bank has no plans to sell shares. At the same time, Nordic governments have some of Europe's smallest budget deficits. Norway has the biggest budget surplus of any AAA rated nation, offering an extra layer of protection to investors.

Shares in DnB NOR rose 3.2 percent to trade at 62.95 kroner as of 10:59 a.m. in Oslo, outperforming the 46-member Bloomberg index of European financials, which gained 1.9 percent. Nordea rose as much as 1.8 percent, before trading 0.6 percent higher in Stockholm.

In Norway, "the banking industry has a good solvency position, satisfactory profitability and low loan losses," the head of the country's financial regulator, Morten Baltzersen, said in an interview. "These factors provide a good starting point to meet potential challenges."

'No Immediate Need'

Swedish Finance Minister Anders Borg said Oct. 18 he sees "no immediate need" for the country's banks to raise their capital buffers.

The European Union may require banks in the region to increase core capital ratios to 9 percent of their risk-weighted assets, according to a person with knowledge of the plans. The deadline for meeting the increased capital levels may be the middle of next year, German Finance Minister Wolfgang Schaeuble told a closed parliamentary committee this week, according to two lawmakers who attended the meeting. That's almost seven years ahead of the target set by the Basel Committee on Banking Supervision.

Nordea, the biggest Nordic lender, had a core Tier 1 capital ratio – a measure of financial strength – of 9.2 percent in the third quarter. DnB NOR had a capital adequacy ratio of 11.7 percent at the end of the second quarter, the most recent reported figures show.

Sidestepping EU

Nordea passed the European Banking Authority's July stress tests with a 9.5 percent capital ratio, almost twice the minimum requirement of 5 percent. DnB NOR passed with a 9 percent ratio. Another round of exams would help European leaders identify capital needs.

Sweden's lenders need to maintain higher capital levels than their foreign peers because the country's bank industry is four times the size of the economy, Financial markets Minister Peter Norman said in Stockholm today.

The country is also ready to sidestep European Union efforts to impose caps on capital buffers beyond minimum ratios set by the Basel Committee on Banking Supervision, said Lars Frisell, chief economist at the Financial Supervisory Authority.

Sweden "will of course use pillar 2," which focuses on risk management, to enforce higher capital requirements for its banks if the country is unable to do so under pillar 1, Frisell, who is also a member of the Basel Committee, said at an event in Stockholm today.

Tapping Debt Markets

Nordic banks are among the few in Europe still able to tap wholesale funding markets. Two Swedish lenders issued senior unsecured notes last week; SEB AB sold 750 million euros ($1.03 billion) in floating rate notes due in 2013, while Svenska Handelsbanken AB (SHBA) sold 1.25 billion euros in notes due in 2021.

"That sends a pretty clear message to the market: we are amongst the few funding safe havens still left standing in the European banking index," Davey said.

Besides Nordic lenders, Germany's Deutsche Bank AG and Commerzbank AG (CBK) have sold unsecured debt since September, as have London-based HSBC Holdings Plc (HSBA) and Rabobank International of the Netherlands.

Banks in Norway and Sweden "have very little that they need to demonstrate in this round of stress tests," Davey said. "Capital ratios already have extremely thick buffers above this required hurdle rate and they simply don't have a lot of exposure to volatility to sovereign debt prices."

Raising Capital

Europe's banks may need to raise 150 billion euros ($205 billion) to 230 billion euros to meet additional capital requirements, Kian Abouhossein, a JPMorgan Chase & Co. analyst in London, wrote in an Oct. 1 note.

The EBA estimates Europe's banks need to an additional 70 billion euros to 90 billion euros in capital, the Financial Times reported yesterday, citing people familiar with the talks.

Nordea has "no direct exposure" to bonds sold by Portugal, Italy, Ireland, Greece or Spain, it said on Oct. 19. Norway's six largest banks hold less than 1.3 percent of their managed capital in assets from those countries, the financial regulator said in June.

Norway, which channels most of its oil income into a $530 billion sovereign-wealth fund, has been shielded from the worst of the euro area's debt crisis, helping keep unemployment below 3 percent, Europe's lowest rate. This has allowed banks such as DnB NOR, the country's biggest, to benefit from lower risk premiums than the rest of Europe, the Financial Supervisory Authority said last month.

No Crisis

"The Norwegian banking industry is clearly not in a state of crisis," Baltzersen said.

Lenders including Deutsche Bank AG (DBK) have said they oppose recapitalization because it would dilute existing shareholders without addressing the risk of sovereign debt defaults. BNP Paribas SA and other banks have said they can meet increased capital requirements without cash injections.

Concerns over a potential default by Greece and contagion in other debt-ridden nations have pushed the 46-member Bloomberg Europe Banks and Financial Services Index down 31 percent this year. DnB has lost 23 percent and Nordea has dropped 24 percent.

Norwegian banks' "situation is quite solid, especially in relative terms compared to an average European bank," Oeystein Olsen, the governor of the central bank of Norway, said in an interview this week.

"The further down the road we get the more the Norwegian sovereign wealth looks like an attractive backdrop in which to operate," Davey said.

To contact the reporter on this story: Josiane Kremer in Oslo at jkremer4@bloomberg.net.

To contact the editor responsible for this story: Tasneem Brogger at tbrogger@bloomberg.net.

Daily Report: Sentiments Reversed Again as Expectations for EU Summit Change

noreply@blogger.com (Unknown) — Thu, 20 Oct 2011 10:15:00 +0000

News from Eurozone continues to drive markets up and down. This time, sentiments were hurt by reports that France and Germany are clearly still having diverged stance on the role of ECB in solving the debt crisis. France is still pushing the proposal to have the EFSF turned into a bank licensed with ECB for leveraging the capacity. But Germany maintained its opposition to this idea. And European officials are playing down the expectation for this weekend's EU summit. German Chancellor Angela Merkel stated that 'it won't be the final point where we regain the confidence of others, but it will be a stepping stone, a marker on the road' and 'all of the sins of omission and commission of the past cannot be undone by waving a magic wand'. EC President Jose Barroso also said that 'even if we do arrive at a political decision on everything that's on the table, which I hope we will, that doesn't necessarily mean that there will not then have to be an implementing phase'.

The US monthly Beige Book covering the period on the before October 7 indicated that many districts described the pace of growth as 'modest' or 'slight' and there was higher uncertainty for business decision making, although economic activities continued to expand. Consumer spending improved 'slightly' in most districts as driven by auto sales and tourism. Business spending also increased due to the rise in expenditure in construction and mining equipment and auto dealer inventories. Yet, restraints in hiring and capital spending remained. While the October report may be slightly better than the previous one, economic outlook on the US remained uncertain and is highly determined by global factors.

It's reported that Japan will set up a task force to tackle the problems caused by yen's persistent strength. The task force will involve vice cabinet ministers and a BoJ deputy governor. The fund shifted to state-run Japan Bank for International Cooperation to help exporters would be boosted by 25% from JPY 8T to JPY 10T. In addition, there was also call for BoJ to use "bold" monetary policy in close coordination with the government to manage the yen.

On the data front, UK retail sales will be a main feature in European session, together with Swiss ZEW expectations. From US, initial jobless claims are expected to remain elevated at 400k. Existing home sales is expected to drop to 4.90m in September, leading indicator rose 0.2%. Philly Fed survey is expected to improve to -9.5 in October.

EUR/JPY Daily Outlook

Daily Pivots: (S1) 105.15; (P) 105.84; (R1) 106.36;

At this point, we're still favoring the case that EUR/JPY's rebound from 100.74 is finished at 107.67 already. Below 104.77 will extend the fall from 107.67 to retest 100.74 low first. On the upside, though, above 107.67 will invalidate this immediate bearish view and bring another rise. But upside should be limited by 38.2% retracement of 123.31 to 100.74 at 109.36 to finish off the rebound.

In the bigger picture, whole down trend from 2008 high of 169.96 is still in progress and is building up downside momentum again. Sustained trading below 100 psychological level should pave the way to 100% projection of 139.21 to 105.42 from 123.31 at 89.52, which is close to 88.96 all time low. On the upside, break of 111.93 resistance is needed to be the first signal of medium term reversal. Otherwise, we'll stay bearish.

Economic Indicators Update

MT	Ccy	Events	Actual	Consensus	Previous	Revised
0:30	AUD	NAB Business Confidence Q3	-4		6	5
6:00	EUR	German PPI M/M Sep	0.30%	0.20%	-0.30%
6:00	EUR	German PPI Y/Y Sep		5.50%	5.50%
6:00	CHF	Trade Balance (CHF) Sep		1.37B	0.81B
8:30	GBP	Retail Sales M/M Sep		0.20%	-0.10%
8:30	GBP	Retail Sales Y/Y Sep		0.60%	-0.10%
8:30	GBP	Retail Sales w/Auto Fuel M/M Sep		0.00%	-0.20%
8:30	GBP	Retail Sales w/Auto Fuel Y/Y Sep		0.60%	0.00%
9:00	CHF	ZEW Survey (Expectations) Oct			-75.7
12:30	USD	Initial Jobless Claims		400K	404K
12:30	CAD	Wholesale Sales M/M Aug		0.40%	0.80%
14:00	EUR	Eurozone Consumer Confidence Oct A		-20.1	-19.1
14:00	USD	Existing Home Sales Sep		4.90M	5.03M
14:00	USD	Leading Indicators Sep		0.20%	0.30%
14:00	USD	Philly Fed Survey Oct		-9.5	-17.5
14:30	USD	Natural Gas Storage		111B	112B

GBPUSD - Cautiously Bearish below 1.5787

noreply@blogger.com (Unknown) — Thu, 20 Oct 2011 06:19:00 +0000

Wednesday’s reversal of initial downside was extended yesterday but this demand stalled ahead of last week's highs. The subsequent setback corrected half of early gains for GBPUSD and this change in investor sentiment has continued in Asia, with positive momentum showing signs of reversal too. In view of this our call is Cautiously Bearish while below 1.5787. The immediate objective is 1.5711 with a move beneath that point targeting yesterday's 1.5697 low or even towards this week's bottom at 1.5632.
The risk to this call is that selling pressure stalls although a fresh outright Buy signal would only be generated by a move through 1.5787, the overnight high. Prices and sentiment should then improve to 1.5811 then last week's 1.5854 top.

Action, not words, required to take pressure off the EUR

noreply@blogger.com (Unknown) — Tue, 18 Oct 2011 09:48:00 +0000

An element of doubt came back into the mind of market participants Monday as (in particular, German) officials began to raise the possibility that the much vaunted ‘grand plan’ (which the rhetoric and inference by eurozone leaders commentary has been since the initial formulation by Merkel and Sarkozy on the 9^th October) may not be the all-encompassing solution to the woes of the eurozone.
German Government spokesman Seibert stated “Dreams of a swift Euro solution won’t materialise”. In conjunction with the German Finance Minister’s statement that the “upcoming EU summit will not present [a] final solution for [the] eurozone debt crisis.” Both comments added to the weigh of an already seemingly faltering EUR.
Broader risk assets also struggled yesterday as concerns filtered through into the banking sector, despite the significantly better than expected Q3 earnings figures from Citigroup. With little in the way of top tier data this week, headlines will continue to dominate sentiment. A clear example of this was seen yesterday when a Der Spiegel online article suggested that “top German economists are warning that France’s AAA rating could be in danger should additional measures become necessary to prop up indebted eurozone members of to save ailing banks.” This is not a new concept and, indeed, it is one which I have discussed on this page a number of times. But the timing of the story into a market already feeling vulnerable top bad news exacerbated the impact.
This morning the spread between French and German 10 year yields has hit another new record at 100bps and despite Finance Minister Baroin’s protestations that France will do “everything” to maintain its debt ratings, we have reached a pinnacle. We have reached the point at which the rousing, determined words of officials are no longer enough; a point where action is needed. Schaeuble’s words yesterday, that seem to have undone all the calming work of the G20, could well see the EUR decline back to the lows, seen before the irrationally exuberant, Merkozy-inspired rally, over the next week.
In China overnight data came in better than broad expectations as Industrial Production and Retail Sales data picked up again in September after a decline in August. Fixed Asset investment was broadly stable yet GDP for Q3 slowed to 9.1% (its slowest pace since 2009). Whilst GDP growth is the envy of the developed world it is widely believed that the structure of the Chinese Economy requires it to maintain growth above 8% to maintain stable unemployment. The current easing of growth saw interest rate swaps fall as, in addition to a marked slowdown in money supply and an easing in inflation, the market has begun to price in a halt to monetary tightening in order to support growth.
In the UK today we get CPI data for September, where the market is expecting a print close to the 5%, up from 4.5% in August. In the eurozone we await the ZEW economic sentiment index but as I suggested yesterday the current market is not driven by the data but predominantly by the politics and that will continue until we get a resolution in the eurozone.

For the rest of the week I would anticipate that the EUR, in particular, but broad risk assets (including the AUD) will underperform, and after the capitulative deleveraging rally of last week, the support on the downside is likely more fragile than before. I still favour EURGBP throughout this week, but risk off sentiment is likely to pick up as we approach the weekend.

Correlated GBPUSD & GBPJPY Could Offer Shorting Opportunities

noreply@blogger.com (Unknown) — Tue, 18 Oct 2011 09:46:00 +0000

Both GBPUSD and GBPJPY have been moving in tandem and we had a clear downside break Monday. Any correlated pullback to the line could be seen as a chance to short with tight stops in place.

Placing lines is never an exact science so having two charts for reference will be a help for fine tuning the entry point.

Weekly Commodities Update : Commodity Pessimists Feel the Squeeze as Futures Rally

noreply@blogger.com (Unknown) — Tue, 18 Oct 2011 09:41:00 +0000

The dramatic rally in riskier assets continued last week with stocks and commodities rallying hard while bonds sold off. Improved U.S. economic data has given traders enough confidence to believe that a recession is now more or less out of the question. The 23 October EU summit is expected to yield a substantial announcement and European politicians therefore have got less than a week to hammer out a sustainable strategy to finally get the European debt crisis under control.

So far the market has been prepared to believe that a solution is coming and stock markets have responded in a dramatic fashion while the dollar has dropped out of favour, at least for now. The main downside risk now lies with another round of extreme risk aversion, which could spark broad-based liquidation, as in September.

The Reuters Jeffries CRB index is four percent higher over the past week and in just two weeks the index has rallied 8.5 percent from the early October low. Some of the rally can be explained by the dollar - which has slumped by 4 percent during the same time. The agriculture sector which, surprisingly, had seen long exposure being reduced dramatically over the last couple of months, rose the most as traders returned to rebuild long exposure, especially in corn, soybeans and rice.

Speculative positions reduced despite rally
Another reason for the strong rally in commodities over the past week has been due to hedge funds and large investors rebuilding long positions. Recent data (to 11 October) from the CFTC shows that exposure to commodities fell to the lowest level since September 2009. The data was compiled at a stage where the rally was into its second week, showing that speculators had continued to offload positions and most likely would have spent the remainder of the week rebuilding exposure thereby adding to the upside pressure.

Brent crude approaching critical level
The ongoing speculation about a solution to the European debt situation and improved U.S. economic data continued to drive oil markets last week. With the dreaded fear of recession having moved to the backseat investors has been piling back into the black gold.

Brent crude outperformed U.S. WTI crude on a combination of continued tightness in the European markets together with news from Dow Jones UBS that its commodity rebalancing at the beginning of 2012 will support Brent crude. The DJ-UBS is estimated to have around 80 billion dollars of funds tracking the commodity index and they announced that the weighting of WTI will be reduced from 14.7 to 9.7 percent while Brent crude will be added for the first time with a weighting of 5.3 percent. The adjustments to its positions will take place between the fifth and the ninth working day of January and could result in the Brent WTI spread widening back out to its recent record given that many other fund managers will adapt the same strategy.

Technically Brent crude will find tough resistance ahead of 115 dollars per barrel as it seems to have moved ahead of levels that current economic activity can justify.

Gold slow recovery continues
Investors continued to regain some of the confidence that was lost after the biggest slump in three years. Their return to gold was highlighted in the last week's CFTC data which showed that long exposure to gold was increased for the second week in a row. After having been a clear choice for months its relation to risk has confused many over the last month as gold has moved in line with other riskier assets.

Its strength will be tested soon as we approach resistance around 1,700 dollars per ounce. Gold priced in Euros has traded flat over the past two weeks indicating that much of the new found strength has been down to dollar weakness and on that basis further progress could slow down as the Euro approaches strong resistance at 1.3950 versus the dollar.

Crops rally from oversold situation
Crops like corn, soybeans and rice, were the main performers last week as exports kicked back to life, especially to China, while the United States Department of Agriculture in a report forecast a smaller-than-expected 2011/12 production for corn and soybeans. The price of wheat continues to suffer amid ample supply both in the U.S. and the world. The dramatic fall in prices have led U.S. farmers to hold back some of their production hoping that reduced supply eventually will trigger higher prices.

The latest data from the CFTC showed that investors continued to dump agriculture commodities despite the ongoing recovery, something that will add to the momentum if and once a rally takes hold.

Gold's Schizophrenia: Pulled Apart By Commodity And Safe Haven Status

noreply@blogger.com (Unknown) — Sun, 16 Oct 2011 05:54:00 +0000

Gold's Schizophrenia: Pulled Apart By Commodity And Safe Haven Status

Agustino Fontevecchia

www.forbes.com

Gold appears to have entered a new phase, acting as a hybrid, sometimes sympathizing with risk assets and other times acting like a safe haven, UBS' Edel Tully explains. While this makes it incredibly difficult to trade the yellow metal, the gold strategist remains bullish.

After falling about $20 on Tuesday in response to a stronger dollar, gold recovered its footing on Tuesday, hitting $1,693.90 an ounce, its highest level in two weeks. By 1:25 PM in New York, the yellow metal had given up some of those gains and was trading up $19.50 or 1.17% to $1,679.20 an ounce.

Gold's relentless climb, when any and all headlines seemed to fuel the precious metal's bull run, came to an end after peaking above $1,920 an ounce last August, falling almost 20% in a few weeks to bottom out around $1,562.

Still, the yellow metal remains up about 20% this year and most analysts remain bullish. It's as hard to explain gold's skyrocketing rise as it is its precipitous fall; UBS strategist Edel Tully notes gold is now behaving like a hybrid, acting as commodity or safe haven as investors try to find balance amid opposing forces.

Tully had said she expects gold to hit $1,920 in a month and $2,100 in three months, but recognizes gold's safe haven't status isn't keeping it afloat anymore. "Trading the yellow metal [has become] very challenging, as while one can have a view on an event such as US payrolls for example, deciphering how gold reacts has become a lot more difficult. And while buyers are nimbly returning, it is no surprise that there is caution given the struggle for conviction."

Regardless, gold will continue to react to macroeconomic news, particularly in Europe. While the yellow metal barely flinched in reaction to Slovakia's failure to ratify the EFSF (markets appear to factor in a positive vote sometime this week), the Merkel-Sarkozy "comprehensive package" could be setting investors up for a big disappointment, Tully says. "And considering how gold has been behaving recently, market reaction to euro-negative developments will not be as straightforward as it has been historically."

Gold miners have been an alternative to holding physical gold, either via an ETF or through the physical metal. Miners continue to under perform bullion, though, with the Market Vectors Gold Miners ETF flat in the last three months compared with a 5% gain for the GLD gold ETF. Barrick Gold, GoldCorp, and Freeport McMoran are among some of the underperformers within the mining group.

Weekly Preview & Outlook : Forex Currency Pairs

noreply@blogger.com (Unknown) — Sat, 15 Oct 2011 09:46:00 +0000

EUR/USD Weekly Outlook

EUR/USD's rebound from 1.3145 short term bottom extended further to as high as 1.3893 last week and closed strongly. Initial bias remains on the upside this week and current rise should target 61.8% retracement of 1.4548 to 1.3145 at 1.4012, which is close to 1.4 psychological level. On the downside, break of 1.3685 minor support will indicate that such rebound has likely finished and should flip bias back to the downside for retesting 1.3145 low.

In the bigger picture, as this point, we're still favoring the case that whole rise from 2010 low of 1.1875 has completed at 1.4939. Fall from 1.4939 is viewed as resuming the whole corrective fall from 2007 high of 1.6039 ad should eventually take out 1.1875 support. However, the stronger than expected rebound from 1.3145 reduced our confidence on this scenario. Sustained trading back above 1.4 psychological level will argue that fall from 1.4939 is finished and the corrective nature in turns indicate that rise from 1.1875 is not over.

USD/JPY Weekly Outlook

Much volatility was seen in USD/JPY last week but the pair's rally attempt was limited at 77.48. Also, there is no follow through buying to help USD/JPY sustain above near term falling trend line yet. More choppy sideway trading could be seen between 76.11 and 77.48 initially this week. But we'll remain slightly bearish in USD/JPY as long as 77.48 resistance holds and favor an eventual downside break out through 75.94 support. Nevertheless, sustained break of 77.48 will argue that whole decline from 85.51 is possibly over and further rise would be seen back towards 80.23 resistance.

In the bigger picture, USD/JPY is still staying well inside the falling channel that started back in 2007 at 124.13. There is no indication of trend reversal yet even though medium term downside momentum is diminishing with bullish convergence condition in weekly MACD. Such down trend is still in favor to continue to 70 psychological level. In any case, break of 80.23 resistance is first needed to indicate completion of fall from 85.51. Secondly, break of 85.51 is needed to be the first signal of medium term reversal. Otherwise, we'll stay cautiously bearish in the pair.

In the long term picture, current decline suggests that the long term down trend in USD/JPY is still in progress. Such down trend is expected to extend further into uncharted territory with 70 psychological level as next target. In any case, we'd at least need to see sustained break of 85.51 before considering trend reversal.

GBP/USD Weekly Outlook

GBP/USD's rebound from 1.5271 short term bottom extended further to as high as 1.5817 last week and closed strongly. Initial bias remains on the upside this week and current rally should continue towards 61.8% retracement of 1.6618 to 1.5271 at 1.6103. On the downside, below 1.5666 minor support, though, will indicate that such rebound is likely finished and should flip bias back to the downside for retesting 1.5271 low first.

In the bigger picture, price actions from 1.3503 are treated as consolidations to long term down trend from 2.1161 and should be near to an end, if not finished at 1.6476. Near term outlook is quite mixed as the nature of the rebound from 1.5271 has many possibilities of roughly equal chance. But in any case, upside should be limited below 1.6618 resistance. Eventually, we'd expect a break of 1.4229 support to signal resumption of the down trend from 2.1161 and that should send GBP/USD through 1.3503 (2008 low).

USD/CHF Weekly Outlook

USD/CHF's fall last week confirmed short term topping at 0.9315. Initial bias remain son the downside this week and the pull back from 0.9315 should extend to 0.8647 and below. Though, we're expecting strong support above 0.8246 (50% retracement of 0.7065 to 0.9315 at 0.8190) to contain downside and bring resumption of rebound from 0.7065. On the upside, above 0.9039 minor resistance will argue that such pull back is finished and flip bias back to the upside for retesting 0.9315 first.

In the bigger picture, medium term down trend from 1.1730 is already completed at 0.7065. But there is no indication of long term reversal yet. Rebound from 0.7065 is treated as part of a medium term consolidation pattern. Such rebound would possibly extend to 0.9916/1.1730 resistance zone. But strong resistance should be seen there and bring reversal. On the downside, break of 0.8246 resistance turned support will indicate that rebound from 0.7065 is finished and should turn outlook bearish for a retest on this low.

In the longer term picture, long term down trend from 2000 high of 1.8305 is still in progress and there is no indication of a reversal yet. Such down trend would still extend to 100% projection of 1.8305 to 1.1288 from 1.3283 at 0.6266 after finishing the consolidation from 0.7065.

AUD/USD Weekly Outlook

AUD/USD rebounded further to as high as 1.0345 last week and closed strongly. Initial bias remains on the upside this week for near term falling channel resistance (now at 1.0389) first. Break there should pave the way to 1.0764 resistance and above. On the downside, below 1.0104 minor support will turn bias neutral and bring consolidations. But another rise will remain in favor as long as 0.9865 support holds.

In the bigger picture, AUD/USD drew strong support from 0.9404 despite a brief breach and the development retained bullish outlook in the long term. Whole up trend from 2008 low of 0.6008 is still in progress and price actions from 1.1079 should merely be a consolidation pattern. Having said that, though, we'd be cautious on reverse signal as AUD/USD enters into 1.0764/1079 resistance zone and there would be another near term decline before consolidation from 1.1079 finishes. But in any case, we'll stay bullish as long as 0.9387 support holds and favor an eventual upside break out.

In the longer term picture, whole up trend from 0.4773 (01 low) extended to a point where it just missed 100% projection of 0.4773 to 0.9849 from 0.6008 at 1.1084. While AUD/USD might be reversing in medium term, there is no signal of long term topping yet. We'd stay bullish as long as 0.9404 support holds and expect an eventual break of 1.1084 to 138.2% projection at 1.3023, which is close to 1.3 psychological level, in the long term.

USD/CAD Weekly Outlook

USD/CAD's fall from 1.0656 short term bottom extended further to as low as 1.0096 last week. Initial bias remains on the downside this week for 50% retracement of 0.9406 to 1.0656 at 1.0031. But we're expect strong support from there, which is close to 1.0009 support, parity and 55 days EMA (now at 1.0039) to contain downside and bring rebound. Above 1.0272 minor resistance will suggest that pullback from 1.0656 is finished and flip bias back to the upside for retesting this high.

In the bigger picture, that down trend from 2009 high of 1.3063 has finished at 0.9406 on bullish convergence condition in weekly MACD. Rise from 0.9406 should at least be part of a long term consolidation pattern from 2007 low of 0.9056 and should extend through 1.0851 resistance (38.2% retracement of 1.3063 to 0.9406 at 1.0803), possibly to 61.8% retracement 1.1666 and above. However, break of 1.0009 support will dampen this view and firstly, suggest that rebound from 0.9406 is finished. Secondly, such development will also argue that price actions from 0.9406 are merely consolidating the down trend from 1.3063. In such case, focus will be turned back to 0.9406 low in near term.

In the longer term picture, there is no clear indication that the long term down trend from 2002 high of 1.6196 has reversed even though bullish convergence condition was seen in monthly MACD. The fall from 1.3063 to 0.9406 looks corrective and could either be part of a sideway pattern from 0.9056, or a corrective to rise from there. The long term outlook, i.e., the possibility of taking out 1.3063 high, will depend on whether rise from 0.9406 would eventually develop into a strong impulsive wave. We'll wait and see.

EUR/GBP Weekly Outlook

EUR/GBP rose further to 0.8786 last week but lost momentum ahead of 0.8795 resistance. Initial bias remains neutral this week and some sideway trading could be seen first. Note that while another rise cannot be ruled out, we'd maintain that outlook will remain bearish as long as 0.8795 resistance holds and the whole decline from 0.9083 is still in favor to continue lower. Below 0.8687 minor support will flip bias back to the downside for retesting 0.8529 first. Nevertheless, break of 0.8795 will dampen the bearish view and turn focus back to 0.8884 key near term resistance.

In the bigger picture, price actions from 0.9799 (2008) should be unfolding as a consolidation pattern in the long term up trend. The first leg is completed with three waves down to 0.8067. Second leg should also be finished at 0.9083. Fall from 0.9083 is treated as the third leg and should target 0.8067 first and possibly further to 61.8% projection of 0.9799 to 0.8067 from 0.9083 at 0.8013 (which is closes to 0.8 psychological level). Nevertheless, we'd expect strong support from 0.7693/8186 support zone to contain downside to finish off the consolidation. On the upside, break of 0.8884 resistance is needed to invalidate this view or we'll stay bearish now.

In the long term picture, long term up trend from 2000 low of 0.5680 shouldn't be over yet and the choppy fall from 2008 high of 0.9799 should be a correction only. We'd expect such correction to be contained by 0.7963/0.8186 support zone and bring up trend resumption. Rise from 0.5680 is still expected to extend beyond 0.9799 high eventually

USDCAD - Very Cautiously Bullish above 1.0133

noreply@blogger.com (Unknown) — Thu, 13 Oct 2011 07:53:00 +0000

In line with yesterday's bearish outlook for sentiment, Tuesday’s limited rally was entirely overturned by fresh selling interest. Steady losses throughout the day took USDCAD to the most bearish levels traded for three weeks. The speed and scope of this decline also took the currency pair to oversold intraday extremes and overnight trading has seen the market attempt to correct that situation. This rally is likely to be temporary but it does leave the immediate bias positive. In view of this our call is Very Cautiously Bullish above 1.0133 The immediate objective is 1.0208, the overnight high, with a move beyond that point targeting 1.0239, half of yesterday's net fall, or even towards 1.0281.
Selling through 1.0133, yesterday's low,, is the risk to this call as it signals that selling pressure is greater than currently assessed. The market should then decline to 1.0108 then towards 1.0035.

Daily Report: Risk Appetite Continues on European Optimism, But Losing Momentum

noreply@blogger.com (Unknown) — Thu, 13 Oct 2011 07:49:00 +0000

Risk appetite continued on optimism on European bank recapitalization plan. European Commission president Jose Manuel Barroso presented a "comprehensive package" yesterday and urged immediate actions from European policymakers to resolve the current crisis. The recommendations include "decisive action" on Greece including the next tranche of bailout fund and a second "adjustment program" with private sector involvement. Banks should be strengthened "urgently" as sovereign contagion and banks are now "linked". Barroso also called for another assessment of the banking system and "fast track" policies of enhancing stability and recovery in Europe. Finally, Barroso said European Union should complete the "monetary union with a real economic union". Also, markets are also hopeful that Slovakia will finally become the last country in Eurozone to approve the EFSF expansion today or tomorrow. The opposition party made an agreement with parties in departing the Slovak coalition that they'll vote to pass through the EFSF expansion in exchange for early elections in March.

Some new information was delivered in the September FOMC minutes published overnight. First, most policymakers lowered their forecasts for the rest of 2011 and 2012. Yet, recession is not their concerns. Second, most members saw advantages in improving communication regarding the goals for inflation and unemployment. However, there were concerns about a proper mechanism to avoid misunderstanding. Moreover, 3 policy options for managing the size and composition of the System Open Market Account (SOMA) were discussed during the meeting: a reinvestment maturity extension program, a SOMA portfolio maturity extension program, and a large-scale asset purchase program. While the second option, known as operation twist, has been chosen, 2 members favored stronger action while 3 members dissented to take additional accommodation'.

On the data front, New Zealand business manufacturing index dropped to 50.8 in September. Japan Tertiary industry index dropped -0.2% mom in August. China trade surplus narrowed to USD 14.5b in September. Australian job market expanded more than expected by 20.4k in September while unemployment rate dropped to 5.2%. Swiss PPI, UK trade balance, Canada trade balance, US trade balance and jobless claims will be released later today.

While risk appetite extends further this week, note that DOW is starting to lose some momentum ahead of 11716/11862 resistance zone. We'd be cautious on reversal signal with focus on 11261 minor support. Break of which will at least trigger a pull back, with prospect of near term reversal for a test on recent low at 10400. Dollar index

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.9945; (P) 1.0076; (R1) 1.0286;

AUD/USD rises further to as high as 1.0232 so far today and intraday bias remains on the upside for near term channel resistance (now at 1.0412). Sustained break there will pave the way for 1.0764 resistance and above in near term. On the downside, below 1.0104 minor support will turn bias neutral and bring consolidations. But another rise will remain in favor as long as 0.9865 support holds. However, break of 0.9865 will suggest that rebound from 0.9387 has completed and will bring retest of this support.

In the bigger picture, focus remains on 0.9404 key support level. As long as this support holds, price actions from 1.1079 is treated as a correction, or part of a consolidation pattern to the up trend from 0.6008 only. And, in such case, AUD/USD should still made another high above 1.1079 before forming an important top. However, sustained break of 0.9404 will indicate that rise from 0.6008 is already finished and would possibly bring deeper fall towards 61.8% retracement of 0.6006 to 1.1079 at 0.7945.

Storming Aussie Employment Data, but China trade Data Halts AUD

noreply@blogger.com (Unknown) — Thu, 13 Oct 2011 07:44:00 +0000

Asia saw a busier day on the macroeconomic front Thursday, and though there were arguments for both risk-on and risk-off, currencies remained at the top of their ranges.

For the pro-risk brigade, Australia’s employment data was a stormer with 20.4k jobs added in September, more than the 10.0k expected and more than compensating for the revised 10.5k jobs lost in August and halting a 2-month declining streak. Jobs gains were spread almost evenly between full-time and part-time workers and an unchanged participation rate of 65.6% was enough to tilt the unemployment rate a tad lower to 5.2% from 5.3%. Seen as a solid number, the AUD rocketed higher across the board with AUDUSD reaching 3-week highs.

After we had settled at higher levels, the China trade data was released and slightly disappointed. The trade surplus shrunk for the second successive month, declining to +$14.51 bln from +$17.76 bln with a drop in exports seen as the main culprit. Exports grew “only” 17.1% y/y and, perhaps more disappointingly, growth in imports fell to +20.9% y/y after recording 30.2% y/y in August. This took some of the shine off the AUD’s gains and AUDUSD retreated sub-1.02 again.

During the session we had additional dovish comments from BOE’s Bean who felt the outlook for the UK economy had worsened in the past 3-4 months which, if prolonged, would need an additional round of QE. He was of the opinion that inflation will cool in 2012, just in time for the Olympics! His comments on the economy echoed those we heard from BOE’s Dale who expressed concern about UK growth prospects for the rest of the year. GBP traded sidelined for most of the Asian session though.

The broader risk-on trade had extended overnight to the detriment of the greenback with a number of events forcing the EUR squeeze higher. Slovakian leaders said a second EFSF vote was likely by week-end and expected to pass while the EU Commission offered a framework for a European bank recapitalization plan. Euro-zone data was also impressive with industrial production up 1.2% m/m, 5.3% y/y, well above forecasts and higher than the previous month. EURUSD squeezed up to 1.3830+, one-month highs, before finding some resistance.

Economic Data Highlights

CA Aug. New Housing Price Index out at +0.1% m/m, +2.3% y/y, both as expected and unchanged from prior
US Aug. JOLTs Job Openings out at 3,056 vs. revised 3,213 prior
NZ Sep. Business PMI out at 50.8 vs. revised 52.7 prior
JP Sep. Bank Lending out at -0.3%y/y vs. -0.5% expected and -0.5% prior
JP Aug. Tertiary Industry Index out at -0.2%m/m vs. -0.3% expected and revised -0.3% prior
AU Oct. Consumer Inflation Expectation out at 3.1% vs. 2.8% prior
AU Sep. Employment Change out at +20.4k vs. 10.0k expected and revised -10.5k prior
AU Sep. Unemployment Rate out at 5.2% vs. 5.3% expected and 5.3% prior
China Sep. Trade Balance out at +$14.51b vs. +$16.3b expected and +$17.76b prior
China Sep. Exports out at +17.1% y/y vs. +20.5% expected and +24.5% prior
China Sep. Imports out at +20.9% y/y vs. 24.2% expected and 30.2% prior

Upcoming Economic Calendar Highlights
(All Times GMT)

GE CPI (0600)
Swiss PPI (0715)
Sweden Unemployment rate (0800)
UK Trade Balance (0830)
CA Int’l Merchandise Trade (1230)
US Trade Balance (1230)
US Initial Jobless Claims (1230)
US Bloomberg Consumer Comfort (1345)
US Fed’s Kocherlakota to speak (1830)

Return to 50% retrace Could Create Long Opportunities in EURGBP

noreply@blogger.com (Unknown) — Wed, 12 Oct 2011 09:40:00 +0000

For the last week or so our charts have been bullish on the EURO/STERLING. The rally has been quite strong and may continue towards the 8800 area and beyond in the coming days. Longs could be taken while we are above the 8710 area. A break down through this level and we may see a fall back towards the lovely 50 percent retrace line we have been trading off lately. With the recent volatility in all pairs we haven't ruled out a return to that area at some point soon. If that did happen, it could create another chance to re-enter low risk longs again.

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