Month: March 2013

Richard Wiltshire is Chief of Foreign Exchange Dealing at ETX Capital – a spread betting company in London.

After what seemed like an eternity, EU and IMF representatives finally agreed upon bailout conditions for Cyprus.  The 11th hour deal on Sunday evening means that Cyprus will be receiving the €10billion it needs to refinance its beleaguered banks, but will it have ramifications in the currency market?

The bailout conditions state that Cyprus’ two biggest banks, The Bank of Cyprus and Laiki, will be split into a “good bank” and “bad bank” respectively.  The premise that sparked the bank run in the country last week, a tax on all depositors, has now been avoided, with deposits below €100k being protected by the new good bank.  However, larger deposits and underperforming loans will be “reformed” by the bad bank, effectively resulting in a tax for deposits above €100k.

During the sustained talks last week, the Euro performed relatively strongly, perhaps being galvanised by rumour risk sentiment.  The EUR/USD pair defended a key support level of the 200 DMA, which came in at 1.2870/80.

Indeed, risk sentiment looked to be strong when the positive news emerged on the bailout on Sunday night.  The 1.3050 level was reached in the EUR/USD pair before profit takers came in and the cross even survived a dip to 1.2940 when Cypriot president Anastasiades threatened resignation.

Can this risk sentiment be maintained?  Well, at looks as though any rally that was there has been overwhelmed by bearish tones.

The Cyprus agreement was something of a catastrophe for the IMF and the Troika, particularly after seeing the massive flight of capital from the island nation last week.  Ministers have been quick to point out that the Cyprus case is unique and a “one-off”, but further bank runs in Cyprus are expected this week and could be followed in Greece, Spain or Italy.

This is because of the comments made by Eurogroup President Jeroen Dijsselbloem, who stated that the Cyprus deal could be a new “template” on how the IMF and Troika will handle bailout negotiations from now on.  This means that we could see further action taken against depositors, with the natural reaction for those wanting to protect their investments being to withdraw them from the banks.

A precedent has most certainly been set.  Germany’s rhetoric over the negotiations shows that they are keen on the idea of taxing depositors to fund bailout money – and Germany often gets its way.  Despite the assurances, investors will be wondering what is stopping the paymasters from applying this medicine to Spanish and Italian banks in the future.

Monday saw Moody’s issue a credit rating warning to several French banks and shares in the Spanish bank Bancaria took a dive at the start of the week as well.  With the Euro consolidating the sentiment by falling below 1.300, it would appear that the bears are controlling the market as of late.

The risk of similar measures spreading to bigger economies like Spain or Italy is very real.  Cyprus is also not certain to remain in the single currency, adding a whole different contagion argument.  This negative outlook will probably keep the Euro under wraps in some crosses, with a bearish outlook for the short term.  The EUR/USD pair is likely to see the 1.3000 range be a significant level for the bears.

We’ve broken through support at 1.2980 and we appear to have gone through 1.2920/30 support as well.  Stops below for the 1.2840 area wait. In the long-term, a clean break of this level could open up 1.2660/90 lows, last seen in mid November last year.

For the bulls out there, if we consolidate in the 1.2980 to 1.3050 range, the market may gain some confidence for a test above 1.3050/60, which would open up technical resistance level at 1.3130 (38.2% retracement). Above here stops are reported circa 1.3160 and a decisive break could see 1.3390/00 in play.

London Gold Market Report
from Ben Traynor
BullionVault
Tuesday 26 March 2013, 08:30 EST

U.S. DOLLAR prices to buy gold dipped back below $1600 per ounce Tuesday morning in London, though it remained above yesterday’s low hit following news of the Cyprus bailout, while stocks and commodities were broadly flat and US Treasury bonds dipped.

“We continue to target the $1625.77 January low despite Monday’s sell-off,” says Axel Rudolph, senior technical analyst at Commerzbank.

“Given the business cycle is in the ‘recovery’ stage, investors lack a reason to increase their exposure to gold at present,” says a note from Bank of America Merrill Lynch, which today cut its 2013 gold forecast by $10 an ounce to $1670, and its silver forecast from $32.70 to $32.40.

“Nevertheless, we believe markets have become very myopic and prices should pick up as inflationary pressures start to emerge and central banks continue to diversify reserves. Hence, we maintain a $2000 per ounce price target for 2014.”

Russia added to its gold reserves for the fourth month in a row last month, buying just under seven tonnes, according to International Monetary Fund data published Tuesday. Azerbaijan, Belarus, Kazakhstan, Kyrgyz Republic, Mongolia and Ukraine also bought gold in February.

Silver meantime continued to hover close to $28.80 an ounce this morning, in line with where it has spent much of the last three weeks.

On the currency markets, the Euro hovered below $1.29 against the Dollar during Tuesday morning’s trading. After initially ticking higher following the Cyprus bailout agreement, the Euro dropped by more than 1.5% against the Dollar yesterday, following comments from Jeroen Dijsselbloem, chair of the Eurogroup of single currency finance ministers.

“If there is a risk in a bank,” Dijsselbloem said yesterday, “our first question should be ‘Okay, what are you in the bank going to do about that? What can you do to recapitalize yourself?’ If the bank can’t do it, then we’ll talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalizing the bank, and if necessary the uninsured deposit holders.”

Later on Monday however Dijsselbloem “back-tracked a bit” says Standard Bank currency strategist Steve Barrow.

“These sorts of comments perhaps suggest that rather than a new toughness around the bailout process, Dijsselbloem has, perhaps, just been a bit naïve and not appreciated that his comments could spark deposit flight [though we still think], the EU’s approach will be similar in the future should over-extended banking systems require bailouts.”

Following Dijsselbloem’s comments “international investors will be monitoring deposit flows [from European Central Bank data]” says a note from Dutch bank ING.

“[They will] also be looking at Luxembourg and Malta, given that bank assets to GDP is now a popular metric.”

“Now that Cyprus has broken the mold,” agrees INTL FCStone metals analyst Ed Meir, “we would not be surprised to see Europeans funneling their deposits away from banks domiciled in riskier countries to those in stronger ones. This could worsen the banking situation in the process and only intensify the ‘north-south’ divide.”

“If you live in Spain or elsewhere you would look at this and feel much more relaxed about the security of deposits,” counters Jim Leaviss, head of fixed income at M&G.

“It is obviously good news that the Eurozone deposit guarantee remains in place…in some ways it is good that it was tested to destruction, almost failed, but eventually held firm in the face of a collapsing banking system.”

Banks in Cyprus will remain closed until Thursday, according to this morning’s press reports, with a daily withdrawal limit of €100 from ATMs of the country’s two largest banks – one of which is to close as part of the bailout deal – in place since Sunday. Cyprus is also drawing up plans to keep capital controls in place once banks reopen.

“Capital controls are a major step backwards for Europe,” says Andrew Milligan, Standard Life Investments head of global strategy.

“It is very difficult for markets to understand the processes and procedures when a country needs assistance, which adds to the level of uncertainty and risk – even if it is manageable for now.”

Greek branches of Cypriot banks meantime are expected to open tomorrow, according to newswire Reuters, citing the Greek finance ministry.

Nine out of ten business leaders in Italy would support using the country’s gold reserves to collateralize a bond issue, while 85% of the general public would also back the idea, according to an Ipsos-Mori poll commissioned by the World Gold Council.

Ben Traynor

BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben can be found on Google+

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

EURUSD

Positive attitude towards the EURUSD that prevailed in the Asian session on Monday was changed into the negative one in the European session, as much as to say that the Europeans know better what is going on with the single currency. But it is decreasing, and there is no end in sight. Attempting to continue the increase that started at the end of the previous week has ended at 1.3047, from which the pair renewed it decrease. As a result the support at 1.2880 was passed; the euro touched the 1.2830 level and returned to the resistance of 1.2880. Theoretically, it should restrain the recovery attempts, where the pair should continue decreasing from. In case the strong support at
1.2825 is lost, the euro will drop towards the 27th figure. In order to improve its prospects, the pair is to move higher and consolidate above 1.3050.

GBPUSD

The GBPUSD also decreased yesterday, but this was not due the weakening of the British currency. Nevertheless, the pair dropped to the 52nd figure, overcame it and reached the level of 1.5142. Overall, yesterday’s decrease does not mean the end of its upward correction, thus it is early for the pair bears to be happy about it. The decrease to 1.5140-1.5060 will not be a tragedy for the pound, but the loss of the last level is quite able to cast a gloom on its prospects. The continued growth towards the 1.5300-1.5320 proximity still looks quite possible.

USDCHF

Yesterday, there was not a pleasant experience for the bears in the USDCHF pair. Reduction in the pair ended at 0.9380. There the dollar started increasing again until it reached the resistance on the way to the 95th figure. Thus, there is still no movement observed in any particular direction, since the pair was trading in the range between the 0.9350 and 0.9566 levels. However, positive attitude towards the dollar remains, and it continues to be bought out on wanes. The pair’s drop below 0.9300 would weaken the American dollar.

USDJPY

The USDJPY finally broke through the support near 94.40-94.00, which caused the rates further to 93.53. But the bears failed to hold below the 94th figure, since the pair returned to the 94.45 resistance this time. However, the pair is still trading below the descending resistance line, which involves further development of the downward correction. Its increase above the 95th figure would mean resumption of the bullish trend in the pair.

provided by IAFT

By www.CentralBankNews.info    Angola’s central bank held its main policy rate, the BNA rate, steady at 10.0 percent, taking note of the inflation rate and stability in financial markets following the introduction of a new family of kwanza banknotes and coins.
    The National Bank of Angola (BNA), which cut its rate by 25 basis points in January after cutting by 25 points in 2012, said inflation rose by a monthly 0.82 percent in February, up from 0.61 percent in January.
    On an annual basis, inflation was largely steady at 9.04 percent in February from January’s 8.9 percent, which was a new low in Angola’s recent history.
    The BNA has for many years strived for an inflation rate below 10 percent.
    Credit extended to the economy rose by an annual 16.42 percent in February, continuing the recent growth and overnight LUIBOR was 6.2 percent, the BNA said.

    The average exchange rate of the kwanza against the U.S. dollar was 95.962 at the end of February from 95.94 end of January, maintaining its stability.
    The International Monetary Fund (IMF) forecast in October that Angola’s economy would grow by 5.5 percent this year and 6.6 percent last year.

    www.CentralBankNews.info

USDCHF remains in downtrend from 0.9567, the price action from 0.9379 is likely consolidation of the downtrend. As long as 0.9567 key resistance holds, the downtrend could be expected to resume, and another fall towards 0.9200 is still possible. On the upside, a break above 0.9567 will indicate that the longer term uptrend from 0.9021 (Feb 1, low) has resumed, then the following upward movement could bring price to 0.9750 area.

Daily Forex Analysis

By MoneyMorning.com.au

How does the prospect of making 200% in twelve months sound to you?

Far-fetched?

Well this is exactly what happened for gold stock investors between 2008 and 2009. The HUI gold stock index was intensely oversold in October 2008, and went on to soar 200% over the next year.

That was back then, of course.

But right at this very moment we’re looking at a near identical set up in the markets. Gold stocks are just as unloved and oversold. They’re at similar relative valuations. It won’t take much of a catalyst to see a serious move from here.

And it’s certainly not just me banging the golden drum today…

Last week in Hong Kong for the Mines and Money conference, I was extremely lucky to score a meeting with and interview keynote speaker and legendary precious metals expert, Eric Sprott…

An Investing Legend

Eric Sprott is the CEO and Senior Portfolio Manager of Sprott Asset Management, currently managing $11 billion in the precious metals markets.

With 40 years of experience making money in the precious metals markets, his views are worth listening to.

The good news is that right now he thinks it would only take a 6% move in gold, to pass $1700, to catalyse a massive move for gold stocks.

Our interview went for a full 25 minutes, on economics, politics, and the huge opportunity brewing in gold, gold stocks,silver, and silver stocks, as well as platinum group metals.

I’m working with my production team to get the whole interview out to you. It’s a tough ask in this short week, but look out for it on Easter Monday. Here’s a sample of what we talked about:

Alex: If we could move to gold equities, they’re at record lows whichever way you want to slice and dice them, whichever metrics you want to look at. Do you see an inflection point happening there soon?

Eric: Well I’ve always said the stocks won’t go up until the metals go up, because everyone looks at the metal price and says, ‘Oh my god the price of the metal went down I don’t want to own the stocks,’ but typically when the metal goes up, the stocks outperform by at least two to three times, so if we can get a sustained move here – and we can’t just go to 1650 and give it up again, we’ve got to look like we’re going to a new high here, then of course the metal stocks have so much to get back again. And out of the 2008 bottom, the metal stocks put on a 200% gain…

I think that as [gold] approaches 1700, people will realise it’s going to be a sustained rally, and it’s not as though the stocks haven’t started moving already.

I mean they have, we had a day recently where the gold price went up half a percent and the gold stocks went up 2.5%, because they are so oversold here. Plus you’ve got short positions on them so there’s a bit of vulnerability from the guys that are short.

Look out for more from Eric next Monday.

At the conference, I also had my chance to get up on the stage and talk gold too. Part of my talk had been to remind investors what that move from the 2008 bottom looked like.

The 200% gain, or three-fold increase, during 2008/2009 was breathtaking. The increasingly realistic chance of a repeat of this is worth getting ready for.

And if you’re fed up of hearing it from me, then take it from Eric Sprott, a man who has invested $11 billion on this probability!

A tripling in gold stock prices wouldn’t be something to sniff at. However, the previous big move in gold equities, which started in 2001, saw the HUI index increase ten-fold. That kind of move isn’t just breathtaking, it can be life-changing:

HUI Index Increases Tenfold in Seven Years

Fantastic moves, no doubt.

Now consider that these charts show the HUI, which is made up of the big-cap gold stocks.

Small-cap and mid-cap stocks, the type I tip in Diggers and Drillers, stand to do better than 200%, or even 900%. As Eric told me:

‘The small companies always outperform the big companies, because they have more room to expand. I’d much rather buy a guy whose producing 100,000 ounces who can go to 200,000 ounces, ie who could double his income, than a major guy who’s at five million who thinks he might get to 5.5 million in three years, so there’s not the same growth element. So I always prefer the small to midcap guy, as providing by far the bigger return.‘

That’s something worth thinking about.

What Can Light the Spark?

But could we really be looking at a move of that magnitude from here?

What needs to happen to drive a major move in gold equities like this?

Some dividends wouldn’t go amiss, but that’s a story for another day. Before that happens, essentially the gold price needs to start rising faster than the production costs. This hasn’t been the case for a few years. Margins have been pinched, and gold stock prices have fallen as a result. I’ll explain why a reversal of this is possible in a moment.

First I’ll show you one more chart so you can see where we are in the valuation cycle. In short – we’re at the bottom of the cycle. Gold stocks don’t come much cheaper than this! This shows the HUI index divided by the gold price to show its relative valuation. Today it’s exactly at the same level it was in late 2008, as well as 2001.

The importance of this is that as you can see in the two charts above, late 2008, and mid-2001 are exactly when the last two major gold stock rallies started.

Gold Stock Index Divided by Gold – Telling You to Buckle Up, Buttercup

Of course you could argue that gold stocks are sagging because production costs are out of control? Indeed they are. In fact costs have increased by 256% in the last ten years. Ouch.

However, the reason for this is mostly because major miners have been mining super-low grade iron ore, which is expensive, to increase production volume. Rising labour costs, fuel costs, and costs of consumables like explosives haven’t helped matters.

But I can’t tell you how much grovelling we saw at the conference from the CEO’s and MD’s from the major gold companies about their costs. Each one promised cost-cutting programs, and a big change in strategy, focusing on profits over production volumes.

It’s probably no coincidence that we saw this grovelling, considering Barrick and Kinross, both top ten gold producers, fired their CEO’s for high costs in recent months. A whole swathe of other mid-cap gold stocks have followed suit since.

If the new guys, or any of the others who’ve hung on, actually want to keep their jobs – then cost cutting is mandatory.

They’ll whine that it can’t be done of course. Yet we saw gold companies cut costs by 25% between 1997 and 2001 – so it’s not impossible. On a positive note, a recent report by PwC researched the whole industry and reported this cost cutting has started.

It remains to be seen how successful this will be, but imagine if they come through with the goods, and gold sector costs actually fell, or even just levelled off.

And then imagine that gold also then hits a new high this year, as Eric Sprott and I both believe it will.

Gold producers’ profit margins will increase from the top and the bottom, taking them from ‘skinny’ to ‘obese’.

This would see stock prices do a massive U-turn from currently oversold levels, and a three-fold, 2008-2009 type, move for the HUI would be quite possible from here.

Then throw some dividend growth into the pot, stir vigorously and just maybe…a 2001-2007, ten-fold type move could be possible too…

Dr Alex Cowie
Editor, Diggers & Drillers
Join me on Google+

From the Port Phillip Publishing Library

Special Report: Australia’s Energy Stock BLOWOUT

Daily Reckoning: Inflation: When You’re In the Government’s Sights

Money Morning: You Want Proof the Stock Market’s Heading Up? Try This…

Pursuit of Happiness: Learn This Lesson from Cyprus Before it’s Too Late

Diggers and Drillers:
Why You Should Invest in Junior Mining Stocks

By MoneyMorning.com.au

The first time I heard about 3-D printing, I thought to myself, ‘Impossible!’ But then I thought, ‘What if it actually is possible?’

Guess what? It’s possible…and it has the potential to change the ways of global manufacturing forever. Forbes says, ’3-D printing will change absolutely everything it touches.’ Wired proclaims, ’3-D printing will be the next industrial revolution, and [it] will compete with mass manufacturing in many areas.’

3-D printing holds the promise of unlimited customization of the kinds of products you want to use and buy. You’ll have greater control, and more of a say in how things are created… how they come into the physical world.

This technology could create many new jobs and careers and strengthen the economy. It will also decrease the cost in time, money and materials it takes to transport your possessions. But at the same time, the resulting technological disruption facing existing industries is likely to shift the balance of wealth around the world.

The last time there was such a shift in the standard of manufacturing may very well have been the early 1900s, when Henry Ford invented mass production for his Model T automobiles.

For roughly 30 years, 3-D printing has been in development under the name ‘rapid prototyping’. But in the past five years, it has finally gained real traction within the marketplace. Now both inventors and investors have hit the ground running.

Soon enough, the 3-D printer will be as familiar to you as the personal computer. Catch the idea before the idea catches on and you could put some extra cash in your pocket.

3-D Printing isn’t when a 2-D image is applied onto a 3-D surface. That’s called pad printing. And it’s not printing 2-D holograms. That’s holography.

Think about the 2-D printer in your office, and in just about every office in the developed world. That 2-D printer uses ink from its cartridges and paper from its tray to print something on a flat piece of paper.

First, as always, you start with an idea. Then you use computer software as a tool to develop your idea. When you’re ready to have the real thing, you click ‘print’ and the command travels through a computer network and out from your printer. That’s what you’re used to.

But a 3-D printer is an ‘evolved’ 2-D printer.

You develop your idea on a computer-aided design (CAD). After you’re finished, it travels through a network and out from a 3-D printer as…an object. An object! A real three-dimensional object. Not an image on a piece of paper. A design that’s become incarnate!

It’s…alive! Well, not quite…not yet anyway. That’s another story.

OK, OK…So How Does 3-D Printing Work?

There are a few methods, but let’s keep it simple for now.

3-D printers lay down successive layers of micro-thin ‘ink’.

In between each layer, a binding agent may be applied. A fully automated laser eventually fuses everything together. After doing this many times, it builds up from a series of cross sections and becomes a 3-D object.

In other cases, the nozzle of the printer acts like a hot glue gun.

Click here to see an example.

The ‘ink’ is typically a polymer or metal, and it comes in a fine powder or molten liquid form. The ‘paper’ is actually the object itself, and the applied binding agent helps hold it all together. Those ingredients are often held in a heated container so they don’t clump.

Eventually, what usually happens is that a fully automated laser fuses together the “ink” and the ‘paper’ until the whole thing solidifies. This means that 3-D printing is a kind of ‘additive manufacturing’ and can create almost any shape with extreme precision.

It’s a revolutionary upgrade and distinctly different from the traditional machining method of ‘subtractive manufacturing’. That is, when you have to mould, cut, drill or beat something out of a larger chunk of material.

It is, therefore, extremely cost-effective. The leftover raw material can be reclaimed and used just as easily for what you print next. It also allows products to be made in a matter of minutes to hours, not days or weeks.

This method is a way to build from the bottom up, from small to big. And it can build from the inside out. Another great advantage with this technology is that it derives from computer-aided design (CAD). That means there’s virtually no limit to customization.

Luckily for everyone: When industrial-scale technology advances enough, it has a way of finding itself into people’s homes.

Just remember how personal computers got here. Computers used to be the exclusive tool of the military, science labs and a select few universities. Then visionaries like Steve Jobs and Bill Gates made a market that enabled the PC to infiltrate your own life.

And just remember, before the personal computer revolution took off, Ken Olsen, founder of Digital Equipment Corp. in 1977 said, ‘There is no reason anyone would want a computer in their home.’ You know how that turned out. It’s likely that 3-D printing will follow suit.

Technologies like 3-D printing don’t disrupt industries as soon as they’re discovered and invented. They disrupt industries when there is a cost-efficient business model that allows them to spread through the greater population.

The Model T Ford, for example, was not the first automobile. Cars were luxury items for the rich. It was when Henry Ford found a way to make them affordable and mass-produced them that the market was disrupted.

That’s where 3-D printing is now. It’s becoming more affordable, and it’s going to change the landscape on which your investments sit. And the rug will be entirely pulled out from under some industries.

Josh Grasmick
Contributing Editor, Money Morning

Join Money Morning on Google+

From the Archives…

Why You Should Buy This Falling Stock Market
22-03-2013 – Kris Sayce

Stock Market Warning: Part II
21-03-2013 – Murray Dawes

New Developments on Whether You Can Get Your Mortgage Cancelled
20-03-2013 – Nick Hubble

Your Retirement or Your Mortgage?
19-03-2013 – Nick Hubble

Get Used to This Stock Market Action, It’s Set to Last…
18-03-2013 – Kris Sayce

By MoneyMorning.com.au

Like Lehman Brothers before it, Cyprus may well come to be seen not so much as the cause of further crisis but as yet another symptom of the ‘long emergency’ that continues to suffocate the western economies.

We would describe this emergency as, fundamentally, an inevitable crisis triggered by an unsustainable explosion of credit; western banks and western governments are now like Macbeth’s ‘…two spent swimmers, that do cling together / And choke their art.’

The prime minister of Luxembourg, Jean-Claude Juncker, has provided two clear insights into this world of deceit:

‘We all know what to do, we just don’t know how to get re-elected after we have done it.’

And,

‘When it becomes serious, you have to lie.’

This is what we now have by way of government: a self-serving elite who cannot be trusted, operating to a timetable defined by, and limited to, the electoral cycle.

This liberty deficit is possibly more severely damaging than the supposedly intractable fiscal one that lies beneath it. Yet whatever emerges from the disaster, Cyprus has reminded us of a couple of awkward truths:

1) A deposit in a bank is not a riskless form ofsaving.

We may not see eye to eye with the FT’s Martin Wolf on many aspects of modern economics and central banking in particular, but he described banks well last week:

‘Banks are not vaults. They are thinly capitalised asset managers that make a promise – to return depositors’ money on demand and at par – that cannot always be kept without the assistance of a solvent state.’

2) When states become insolvent, the piper must ultimately be paid. Fatal, embarrassing insolvency is not a problem that can be perpetually or painlessly deferred.

Cyprus matters not because of the size of its economy or because it is (for the time being) a member of the euro zone.

It matters because the inept handling of its crisis last week threw one facet of modern banking into sharp relief: if a deposit guarantee is seen to be fraudulent or sufficiently fragile to be easily smashed by politicians, then confidence in banks, and in unbacked paper currency itself, will be vulnerable to an unpredictable run.

CLSA strategist and financial market historian Russell Napier writes as follows:

‘The key impact will be long term as the citizens of the Euro, like the citizens of the Soviet Union or the American colonies before them, eventually reject the sacrifice of political rights necessary to support the system.

‘When the history books are written, the Brussels-imposed sequestration in Cyprus will be seen as the tipping point when the citizens of the Euro system realised that the socio-political sacrifice needed to sustain a single currency was just too great.’

Actions have consequences. Cyprus may end up being a storm in a teacup. Like Russell Napier, we fear it may well be the start of something altogether more sinister.

If you have yet to consider the sanctity, stability, ‘store of value-ness’ and true safety of the paper currency you hold within the banking system, now might be a good time to start.

Tim Price
Contributing Editor, Money Morning

Join Money Morning on Google+

Publisher’s Note: This article first appeared in Sovereign Man: Notes From the Field

From the Archives…

Why You Should Buy This Falling Stock Market
22-03-2013 – Kris Sayce

Stock Market Warning: Part II
21-03-2013 – Murray Dawes

New Developments on Whether You Can Get Your Mortgage Cancelled
20-03-2013 – Nick Hubble

Your Retirement or Your Mortgage?
19-03-2013 – Nick Hubble

Get Used to This Stock Market Action, It’s Set to Last…
18-03-2013 – Kris Sayce

If your technical approach needs improvement, you are not alone. Our FREE report can help!

By Elliott Wave International

Long-term trading success depends on more than the right trading method: adequate capitalization, money management skills and emotional discipline are also vital.

Yet it isn’t always easy to put your finger on which elements of trading success may cause you to struggle in the markets. Elliott Wave Junctures editor Jeffrey Kennedy shares some of his insights on what often gets in the way of trading success.

1. Inability to Admit Failure
“Have you ever held on to a losing position, because you ‘felt’ that the market was going to come back in your favor? This behavior is the ‘Inability to Admit Failure.’ No one likes being wrong, and for traders, being wrong usually costs money. What I find interesting is that many of us would rather lose money than admit failure. I now know that being wrong is much less expensive than being hopeful.”

2. Fear of Missing the Party
“This one is responsible for more losing trades than any other. Besides encouraging overtrading, this pitfall also causes you to get in too early. How many of us have gone short after a five-wave rally just to watch wave five extend?

The solution is to use a time filter, which is a fancy way of saying, wait a few bars before you start to dance. If a trade is worth taking, waiting for prices to confirm your analysis will not affect your profit that much. I would much rather miss an opportunity than suffer a loss, because there will always be another opportunity.”

3. Systems Junkie
“My own biggest, baddest emotional monster was being the ‘Systems Junkie.’ Early in my career, I believed that I could make my millions if I had just the right system. I bought every newsletter, book and tape series that I could find. None of them worked.

I even went as far as becoming a professional analyst — guaranteed success, or so I thought. Well, it didn’t guarantee anything really. Analysis and trading are two separate skills; one is a skill of observation, the other is a skill of emotional control. Being an expert auto mechanic does not mean you can drive like an expert, much less win the Daytona 500.”

It isn’t easy to come to terms with our mistakes, yet, if you are serious about improving the quality of your trades, this is a vital step!

What is one of the biggest obstacles to successful trading? According to Kennedy, it is lack of patience:

“Impatience stems more from a sense of not wanting to miss anything. And because we’re afraid of missing the next big move, or perhaps because we want to pick up some lost ground, we act on less-than-ideal trade setups.

Another reason traders lack patience is boredom… as traders wait for these “textbook” Elliott wave patterns and ideal, high-confidence trade setups to occur, boredom sets in. Too often, we get itchy fingers and want to trade any chart pattern that comes along that looks even remotely like a high-confidence trade setup.

The first step in overcoming impatience is to consciously define the minimum requirements of an acceptable trade setup and vow to accept nothing less. Next, feel comfortable in knowing that the markets will be around tomorrow, next week, next year and beyond, so there is plenty of time to wait for the ideal opportunity. Remember, trading is not a race, and over-trading does little to improve your bottom line.”

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By OilPrice.com

Cyprus is preparing for total financial collapse as the European Central Bank turns its back on the island after its parliament rejected a scheme to make Cypriot citizens pay a levy on savings deposits in return for a share in potential gas futures to fund a bailout.

On Wednesday, the Greek-Cypriot government voted against asking its citizens to bank on the future of gas exports by paying a 3-15% levy on bank deposits in return for a stake in potential gas sales. The scheme would have partly funded a $13 billion EU bailout.

It would have been a major gamble that had Cypriots asking how much gas the island actually has and whether it will prove commercially viable any time soon.

In the end, not even the parliament was willing to take the gamble, forcing Cypriots to look elsewhere for cash, hitting up Russia in desperate talks this week, but to no avail.

The bank deposit levy would not have gone down well in Russia, whose citizens use Cypriot banks to store their “offshore” cash. Some of the largest accounts belong to Russians and other foreigners, and the levy scheme would have targeted accounts with over 20,000 euros. So it made sense that Cyprus would then turn to Russia for help, but so far Moscow hasn’t put any concrete offers on the table.

Plan A (the levy scheme) has been rejected. Plan B (Russia) has been ineffective. Plan C has yet to reveal itself. And without a Plan C, the banks can’t reopen. The minute they open their doors there will be a withdrawal rush that will force their collapse.

In the meantime, cashing in on the island’s major gas potential is more urgent than ever—but these are still very early days.

In the end, it’s all about gas and the race to the finish line to develop massive Mediterranean discoveries. Cyprus has found itself right in the middle of this geopolitical game in which its gas potential is a tool in a showdown between Russia and the European Union.

The EU favored the Cypriot bank deposit levy but it would have hit at the massive accounts of Russian oligarchs. Without the promise of Levant Basin gas, the EU wouldn’t have had the bravado for such a move because Russia holds too much power over Europe’s gas supply.

Cypriot Gas Potential

The Greek Cypriot government believes it is sitting on an amazing 60 trillion cubic feet of gas, but these are early days—these aren’t proven reserves and commercial viability could be years away. In the best-case scenario, production could feasibly begin in five years.

Exports are even further afield, with some analysts suggesting 2020 as a start date.

In 2011, the first (and only) gas was discovered offshore Cyprus, in Block 12, which is licensed to Houston-based Noble Energy Inc. (NBL). The block holds an estimated 8 trillion cubic feet of gas.

To date, the Greek Cypriots have awarded licenses for six offshore exploration blocks that could contain up to 40 trillion cubic feet of gas. Aside from Noble, these licenses have gone to Total SA of France and a joint venture between Eni SpA (ENI) of Italy and Korea Gas Corp.

But the process of exploring, developing, extracting, processing and getting gas to market is a long one. Getting the gas extracted offshore and then pumped onshore could take at least five years and some very expensive infrastructure that does not presently exist. The gas would have to be liquefied so it could be transported by seaborne tankers.

The potential is there: Cyprus’ gas discoveries adjoin Israeli territorial waters where the discovery of the massive Leviathan gasfield (425 billion cubic meters or 16 trillion cubic feet) and smaller Tamar gasfield (250 billion cubic meters or 9 trillion cubic feet) have foreign companies in a rush to cash in on this.

There are myriad problems to extracting Cypriot gas—not the least of which is the fact that some of this offshore exploration territory is disputed by Turkey, which has controlled part of the island since 1974.

Gas exploration has taken this dispute to a new level, with Turkey sending in warships to halt drilling in 2011, and threatening to bar foreign companies exploring in Cyprus from any license opportunities in Turkey. The situation is likely to intensify as Noble prepares to begin exploratory drilling later this year in Block 12.

In the meantime, there is no shortage of competition on this arena. Cyprus will have to vie with Israel, Lebanon and Syria—all of which have made offshore gas discoveries of late in the Mediterranean’s Levant Basin, which has an estimated total of 122 trillion cubic feet of gas and 1.7 billion barrels of oil.

Blackmailing Cyprus?

While Greek Cypriot citizens are not willing to gamble away their savings on gas futures, Russia and the European Union are certainly less hesitant.

This is both a negotiating point for Cyprus and a convenient tool of blackmail for Russia and the EU. Essentially, the bailout is the prop on a stage that will determine who gets control of these assets.

Theoretically, Cyprus could guarantee Russia exploration rights in return for assistance. As much as this is possible, the EU could ease its bailout negotiations if it becomes clear that a Russian bailout of sorts is imminent.

Gas finds in the Mediterranean and particularly across the Levant Basin—home to Israel’s Leviathan and Tamar fields—could be the answer to Russian gas hegemony in Europe. The question is: How much does Cyprus count in this equation? A lot.

Though only half of the estimated resources in the Levant Basin, Cyprus’ potential 60 trillion cubic feet of gas could equal 40% of the EU’s gas supplies and be worth a whopping $400 billion if commercial viability is proven.

Russia is keen to keep Cyprus and Israel from cooperating too much toward the goal of loosening Russia’s grip on Europe before Moscow manages to gain a greater share of the Asian market.

Russia is also not keen on Israel’s plan to lay an undersea natural gas pipeline to Turkey’s south coast to sell its gas from the Leviathan field to Europe. Turkey hasn’t agreed to this deal yet, but it is certainly considering it. This is fraught with all kinds of political problems at home, so for now Ankara is keeping it as low profile as possible.

With all of this in mind, Russia is doing its best to get in on the Levant largesse itself. While it’s also courting Lebanon and Syria, dating Israel is already in full force. Gazprom has signed a deal with Israel that would give it control of Tamar’s gas and access to the Asian market for its liquefied natural gas (LNG). Tamar will probably begin producing already in April at a 1 billion cubic feet/day capacity.

In accordance with this deal, which Israel has yet to approve, Gazprom will provide financial support for the development of the Tamar Floating LNG Project. In return, Gazprom will get exclusive rights to purchase and export Tamar LNG. It is also significant because Tamar is a US-Israeli joint venture—so essentially the plan is to help Russia diversify from the European market.

What does this mean for Cyprus? The chess pieces are still being put on the board, and both fortunately and unfortunately, Cyprus’ gas potential will be intricately linked to its bailout potential.

Source: http://oilprice.com/Energy/Natural-Gas/Cypriot-Bailout-Linked-to-Gas-Potential.html

By. Jen Alic of Oilprice.com