Forex Trading versus Futures Trading

FuturesVSForexThose that trade the financial markets find themselves with many choices. There are many instruments out there – stocks, bonds, futures, and forex.  These products and their derivatives are each unique in their own way.

The futures market, which also includes the commodities markets, is probably best known for its financial futures. The E-Mini S&P future has become one of the most popular products to trade. The E-mini S&P offers decent volatility with good liquidity and allows traders to enter and exit the market in a timely fashion.

Other futures markets include natural gas, wheat, and corn. These markets, while being major products, are not as liquid and are driven by forces like weather. These markets are also primarily traded by corporates, farmers, and hedgers.

The Forex market is the largest market in the world. Trading at over $5 trillion a day, it eclipses all of the other markets combined. The Forex Trading market is truly a global market as it incorporates multiple currency pairs that are affected by events in different countries. Being a 24 hour market, the Forex market prevents position risk where futures traders and equities traders that hold positions are unable to exit them when those markets are closed.

Without a great deal of capital, a Forex trader can create an account with a Forex broker and develop many types of trading systems with low cost transactions. He or she can experience the flexible trading advantages that major hedge funds and other trading operations use. Global event’s present many opportunities for Forex traders. These events can happen any time and being able to trade 24 hours can help keep you in the game.

Overall, Forex trading has a distinct advantage over futures trading in that futures brokers require a great deal of capital for one to have an account set up.


To learn more please visit


Disclaimer: Trading of foreign exchange contracts, contracts for difference, derivatives and other investment products which are leveraged, can carry a high level of risk. These products may not be suitable for all investors. It is possible to lose more than your initial investment. All funds committed should be risk capital. Past performance is not necessarily indicative of future results. A Product Disclosure Statement (PDS) is available from the company website. Please read and consider the PDS before making any decision to trade Core Liquidity Markets’ products. The risks must be understood prior to trading. Core Liquidity Markets refers to Core Liquidity Markets Pty Ltd. Core Liquidity Markets is an Australian company which is registered with ASIC, ACN 164 994 049. Core Liquidity Markets is an authorized representative of Direct FX Trading Pty Ltd (AFSL) Number 305539, which is the authorizing Licensee and Principal.




Zambia raises rate 50 bps on upside risks to inflation

    Zambia’s central bank raised its policy rate by 50 basis points to 10.25 percent, saying the monetary policy committee’s “overall assessment is that risks to inflation are generally on the upside.”
    The Bank of Zambia, which raised rates by 50 basis points in 2013, said the further tightening of its policy should help put inflation on the path toward its 2014 inflation target of 6.5 percent.
   “The upward adjustment in the policy rate, including the recent increase in the statutory reserve ratio to 14.0% from 8.0%, will help address the high liquidity levels in the market and contribute to exchange rate stability,” the central bank said.
    Zambia’s inflation rate rose to 7.6 percent in February from 7.3 percent in January but the central bank said it expects inflationary pressures to moderate to due improvements in the supply of selected food as the harvest season gets underway and the fish ban is lifted.
    Last month the central bank held an emergency meeting with lenders to examine the decline in the Zambian kwacha against the dollar. Like many other currencies, the kwacha came under pressure last year and the pressure has continued this year.
    The kwacha was trading at 5.83 to the U.S. dollar today, down 5.5 percent this year.

Outside the Box: World Money Analyst Update on Europe

By John Mauldin

For the last two weeks on Thursdays we have brought you special editions of Outside the Box featuring World Money Analyst Managing Editor Kevin Brekke’s interviews with WMA contributing editors. We heard from Ankur Shah on emerging markets and Alexei Medved on Russia, and this week we wrap up the series with a frank, hard-hitting interview with Dirk Steinhoff, who covers the European and Scandinavian markets for WMA.

Kevin and Dirk are both based in Switzerland, and so they lead off with a discussion of the recent Swiss referendum on immigration. Dirk’s interpretation of the vote, which imposes quotas on the number of foreigners allowed to enter the country, is that it has implications for the entire European Union:

[T]he Swiss people basically decided that they want to control immigration themselves and do not want to give up this control to the centralized administration in Brussels. I think that this is a clear signal to the Swiss government that the Swiss people don’t want to give up more sovereignty and that they would like to see more decentralization in the future.

Which leads Kevin and Dirk to take up the broader issues of the unresolved Eurozone debt crisis, unemployment mess, and the fate of the euro. With EU parliamentary elections coming up in May, there is change in the air! OK, let’s turn it over to Kevin and Dirk for the details.

John Mauldin, Editor
Outside the Box
[email protected]

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World Money Analyst Update on Europe

World Money Analyst: With me today is Dirk Steinhoff. Dirk is a contributing editor at World Money Analyst and covers the European and Scandinavian markets. Great to have you with us.

Dirk Steinhoff: Thank you very much for having me.

WMA: Seeing that you’re in Zurich and I’m in Fribourg, let’s start with a look at developments in our own backyard. The Swiss are known for their system of direct democracy via use of the referendum. The recent success of a referendum that will restrict immigration into Switzerland made global headlines. What’s your position on the immigration issue and the consequences of this vote?

Dirk: First of all, I should mention that I was born and raised in Berlin and moved with my family to Switzerland in 2007. One of the main reasons why I decided to leave Germany and come to Switzerland, next to the great Swiss landscape, was the strongly centralized development of the European Union, which reminds me painfully of the political system in the former DDR [communist East Germany].

European politicians live a life that is completely detached from those that don’t belong to this elitist political class. Their decisions are based on distorted experience and lobbyist influence and not on real life experience and independent judgment. The strong, centralized power of Brussels, in combination with the desire to regulate everything in life, increasingly limits personal freedom, limits the development of entrepreneurship (and therefore the creation of non-government-related workplaces), and eliminates local, regional, and national characteristics.

The state is much less dominant in Switzerland, mainly due to its federalist and decentralized political system, which limits the power of the federal government. Due to my own background and my own moral conviction, I personally believe that every human being should be able to live and work wherever he or she wants, as long as they are self-reliant, willing to integrate, and do not become a burden to the community they recently entered.

My interpretation of the referendum is that the Swiss people basically decided that they want to control immigration themselves and do not want to give up this control to the centralized administration in Brussels. I think that this is a clear signal to the Swiss government that the Swiss people don’t want to give up more sovereignty and that they would like to see more decentralization in the future.

It also interesting to note that most of the media in Europe (even Swiss media) were shocked by the outcome of the vote. In sharp contrast, other polls in various European countries actually show that most citizens would have voted similarly to the Swiss, and some by an even higher margin than the outcome of the Swiss vote. I think that in the long run more and more of the European people will ask for the Swiss model of democracy to be implemented in their home countries.

Although the rhetoric used by politicians in Europe might change to the negative in the short term, I do not think that the referendum will have a long-term negative effect on the relations between Switzerland and Brussels. I believe that Brussels has to come to terms with our form of democracy and has to respect our sovereignty, even if they might disagree with some of our decisions.

WMA: The immigration debate is not unique to Switzerland, of course, and is a divisive issue across Europe. This seems to be part of a trend where we’ve seen a rise in popularity of nationalist and anti-euro parties? What’s your view?

Dirk: You are right. The severe criticism of Switzerland because of the outcome of the referendum has eclipsed the fact that many European countries face the same issue. People are not only unhappy with the immigration politics within the EU, they are becoming more EU skeptical in general.

The political parties critical of the European Union – like the UK independence party in Great Britain, the Finns Party (formerly the True Finns) in Finland, the Lega Nord in Italy, the FPÖ in Austria, the AfD in Germany, the French Front Nationale, the Golden Dawn in Greece, and the Party of Freedom in the Netherlands – are gaining popularity. Of course, the reasons for and the scope of their EU criticism vary a lot.

I think this trend can be summed up as follows: the people want to have a voice and be able to decide their own fate! Pretty much everybody in the EU is unhappy about one issue or another. The Southern European countries are unable to cope with the austerity measures, and on the other hand you have a large part of the German population that is simply unwilling to continue financing the complete EU.  I believe this trend will gain momentum, and it will bring some surprises in the elections to the European Parliament in May 2014.

Europe has so many different cultures that centralization just doesn’t work, because there isn’t a one-size-fits-all answer to most issues. The euro is a perfect example of this!

WMA: That’s an important point on the euro. With the continued rise of anti-euro sentiment, what is your outlook for the currency? Will the euro survive?

Dirk: I don’t know. There are different scenarios that I can imagine for the euro: strong countries leaving the Eurozone, unwilling to pay for a bottomless pit of EU debt; weak countries leaving the Eurozone in order to be able to devalue their currencies and regain competiveness; or a split into a strong northern euro and a weaker southern euro. Or some combination of these. As you can see, there are many possibilities, and what we will see depends on economic and political developments in European countries over the next several years. In my view, something will happen and we won’t have the same euro in five years time that we have today.

WMA: The adoption of the common currency has limited how individual countries can respond to fiscal stresses. News about the euro debt crisis has been very quiet lately. What is the situation?

Dirk: As you say, there has hardly been any news recently regarding the troubles in the EU, which does not mean that the problems are solved. They are still bubbling under the surface. With the current papering-over and continuation of indebtedness, the need to address the problems, with their inherent negative consequences for most people, has been postponed. Because of that, most of the harsh protest has faded and turned away from the streets and is canalized into the euro-skeptic political parties. And when there have been noteworthy protests, such as last November in French Brittany, media coverage was excluded.

What has changed in the last year? Absolutely nothing fundamentally! So the euro crisis will at some point reappear with all its inevitable consequences.

WMA: You mention France, so let’s continue down that path. The small and mid-sized Eurozone countries – Spain, Portugal, Italy, and Greece – are essentially bankrupt as measured by GDP and in receivership by Brussels. Today, there is growing speculation that France, too, is headed for trouble soon. What do you think?

Dirk: I totally agree! They have too much debt, a radical socialist government, and absurd, business-unfriendly regulation. I have several friends who are business owners in France, and they are all contemplating leaving the country and moving their businesses abroad.  The quantity of regulation they have to comply with simply cannot be handled by a normal business, and the labor laws are so strict that no business owner in their right mind wants to take on the risk of employing someone.

Taking into consideration the unhealthy debt levels they have, the unsustainable social programs they offer, and the complete lack of any growth impulses, I have to believe that the French are indeed headed for trouble soon. And, as the second largest economy in the EU, France matters. If France stumbles, the EU is at risk.

WMA: Drawing on your comments about strict labor laws, the unemployment numbers in many EU countries are mind-boggling. You discussed this situation in your recent article for World Money Analyst. Can you talk about this for a minute?

Dirk: As we have seen since 2008, the trillions in newly created fiat money have mainly fueled asset bubbles. However, the real economy has not profited from it, because this money has not been lent to private industry. We are still facing 30% lower money velocity than before 2008 and that means that more than 30% of credit in circulation has disappeared. This is also why the real economy is still going down the drain.

Most jobs have been created within the government or government-related entities; and as we all know, these jobs are paid for by the taxpayers and are not a source of production. Therefore, I personally believe the situation in the labor market will further deteriorate, especially among the young generation, below 25; they are going to suffer the most. The current youth unemployment rates in Spain and Italy are just shocking: 58% and 42%, respectively. We are losing a whole generation, and we cannot predict how drastically the damage we are doing to them will play out in the future.

WMA: High and sustained rates of joblessness can lead to frustration and anger by the unemployed that turns to civil unrest and protests. We’ve seen riots in several EU countries, including France, Greece, and Bosnia. Is that also a real danger for the stronger European countries?

Dirk: Yes, this is a real danger. As soon as the deterioration of people’s personal economic situations reaches a certain level they will be on the streets, and that includes the streets of the stronger countries. At the moment, most people still believe that all the debt and all the rescue programs come for free.

WMA: What does this all mean for the outlook for European stocks and bonds?

Dirk: That you have to watch closely what the European Central Bank and governments do. It’s a tricky situation – you don’t want to miss any upside rallies in equities and bonds induced by loose monetary policies. Yet, on the other hand you know the party could end at any time. Risk management is essential.  The day of reckoning can be postponed by governments and central banks much further – as we know from the US and Japan – than common sense would allow for.

WMA: In your opinion, what European countries have the best economic outlook?

Dirk: The countries that have been strong in the past, with competitive industries and with sound current-account and budget balances. Countries like Germany, Austria, Denmark, Sweden, and Norway. And Switzerland.

WMA: As you mentioned above, in May 2014 there will be the EU Parliament election. Will that change anything?

Dirk: The potential increase of parliamentarians that are critical of Europe I mentioned before could intensify tensions within the EU and complicate the functioning of the EU system. But I don’t expect a quick change.

WMA: We must talk about the un-loved Swiss franc. Since Switzerland began intervention in the currency markets to halt the rise of the franc against the euro, the mainstream consensus has it that the franc is doomed. But the performance of the franc against other currencies, in particular the US dollar, has been very strong. What’s your take on the Swiss franc going forward?

Dirk: It’s hard to say. In a euro crisis I would expect the Swiss National Bank [the central bank] to remove the floor to the euro. In such a situation the power of the SNB to keep the floor would be simply too small, I think. There are also attempts in Switzerland to once again constitutionally back the Swiss franc by gold. We’ll have to see. The Swiss franc, to me, still belongs to the upper class of paper currencies.

WMA: Do you have any last thoughts for our readers?

Dirk: Globally, we have entered a time when substantial corrections of past misadventures are likely to occur. It’s not the end of the world, but it’s worth being prepared.

WMA: I really appreciate your insights on the European markets. Thank you for taking the time to speak with us today.

Dirk: The pleasure was mine.

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Angola holds BNA rate, raises liquidity absorption rate

    Angola’s central bank maintained its policy rate, the BNA rate, at 9.25 percent, and the rate on its Standing Lending Facility Liquidity at 10.25 percent, but raised the Liquidity Absorption rate by 50 basis points to 1.25 percent from 0.75 percent.
    The National Bank of Angola (BNA), which last month maintained its BNA rate but cut the reserve requirement on local currency deposits to 12.5 percent from 15.0 percent, did not provide any reason for the increased liquidity absorption rate apart from saying its monetary policy committee had based the decision on an analysis on the country’s economy based on January data.
    In January Angola’s inflation rate rose to 7.84 percent from 7.69 percent in December, but it was still well below the 10 percent that the central bank has long targeted. The last time Angola’s inflation rate topped 10 percent was in July 2012 at 10.02 percent and since then inflation has trended lower.
    The central bank, which cut its rates by 100 basis points in 2013, said the LUIBOR overnight rate was at 4.15 percent while maturities of 3 and 12 months were 7.49 percent and 9.42 percent, respectively.

    Credit to the country’s economy grew by 1.62 percent in January to a stock of 2,975,840 million kwanza, with the national currency component up by 2.4 percent and the foreign currency component up by 0.28 percent.
    The central bank said the kwanza’s exchange rate was stable in January, with an average exchange rate of 97.86 against the U.S. dollar. A total of US$ 3.031 billion was traded in the foreign exchange market, of which $1.636 billion was traded in the primary market and the rest in the secondary.
    In 2013 the kwanza depreciated by only 1.8 percent against the dollar and has remained stable so far this year, trading at 97.60 to the dollar today compared with 97.61 at the end of 2013.
    Angola’s Gross Domestic Product rose by 7.4 percent in 2013, up from 2012’s 5.2 percent growth.

A Pair of Top Picks, a Risky Pair and an Ace in the Hole: Justin Anderson Shows His Hand

Source: Tom Armistead of The Energy Report  (2/27/14)

Since its inception in 2007, the Salman Partners’ Top Pick Index has made a 251% return. The index is a huge pot for investors in the international oil and gas space to bet on, but it’s not for the untutored. Salman Partners Analyst Justin Anderson walked The Energy Report through the risks and returns of the game. Find out how he plays his hand.

The Energy Report: Justin, welcome. Tell us about Salman Partners Top Pick Index. Why was it established?

Justin Anderson: Top Pick Index was established to contrast the performance of our company’s favorite investment ideas against a Canadian benchmark of general stocks and to see how those investment ideas performed. Analysts look at the stocks under their coverage and then they try to pick one or two stocks that they think are going to be the best performers in that group over the next 12 months.

TER: What’s the track record? Do Top Picks generally perform as advertised?

JA: So far it’s been a really good track record. Since inception in 2007, the Top Pick Index of Salman Partners has had a 251% return versus the benchmark index, which has returned 30%. Over the last two years, the Top Pick portfolio has returned 38% versus 21% in the general S&P Index.

TER: Canacol Energy Ltd. (CNE:TSX) just earned the Top Pick recommendation in December. How did that happen?

JA: Over the last half of last year, Canacol was increasingly interesting for us, especially when it made a discovery called Labrador in the Llanos Basin of Colombia. That was an important discovery, not just for the intrinsic value of the discovery itself and the potential long-term cash flow that it would add to the company, but also because it meant that Canacol was going to be able to get to the finish line with respect to some of its other assets. What I mean by getting to the finish line is that Canacol has built up a very impressive Middle Magdalena basin unconventional position, very sensitive to time and funding. This conventional discovery at Labrador unlocked some less noticeable value in its Middle Magdalena position. That got us very interested. Then, when it made an additional discovery in the Llanos Basin called Leono, that discovery by itself looked really good, but the compounding benefit to the rest of the portfolio was very strong, so we upped it to a Top Pick.

TER: What are the most exciting positives about Canacol?

JA: To use a baseball analogy, I think Canacol is not really looking for the solid base hit. It’s looking to hit a home run. This company really wants to go big. That’s exciting, when you have a management team that is aggressively looking to make a multiple big return for its shareholders. The reason it’s in that position, as I said, is that it built up this large unconventional position in Colombia. It’s a position that, in terms of acreage, is second only to Ecopetrol SA (ECP:TSX; EC:NYSE), the national oil company there. Should the unconventional Colombia space ever take off, look out. This is a company that will perform extremely well if that happens.

TER: What’s the biggest concern?

JA: I think it’s the other edge of the same sword. If the unconventional Colombian space never does take off, if some of the initial well results are not that great, then you could get in a situation where that acreage becomes less important overall. I think that’s actually the biggest risk to the company as well. The nice thing about Canacol is that it has a very robust conventional portfolio that gives you a lot more downside protection in that scenario than some other companies that may be so exposed.

TER: South America is not the most stable operating environment. What are the political and security conditions in Canacol’s main operational areas of Colombia and Ecuador?

JA: For Canacol, I think the main issue is in its heavy oil portfolio. That’s in the center of Colombia; it has a bunch of heavy oil blocks. Those blocks are very close to some previous FARC strongholds, FARC being the organization that has been agitating through violence in the country to cause a communist revolution. Because of that proximity, people have been dissuaded from ramping up development activity in the area. It has affected Canacol’s heavy oil exploration appraisal work. I think that’s the biggest risk that it’s exposed to. On the plus side, I don’t think stockholders really care about its heavy oil position at this point, and it’s of tertiary concern to the market.

TER: What about Ecuador?

JA: Ecuador is much more of a basket case than Colombia. Ecuador is problematic because it’s not just lingering terrorist groups; the government itself is the issue. That being said, the contract Canacol signed with the government of Ecuador is one that provides much lower netbacks. It is a direct service agreement with the government. It’s an isolated issue for the company; I don’t really see any risk there.

TER: You created an unconventional portfolio for the Middle Magdalena unconventional play. Why?

JA: Unconventional positions, especially in the international locations, are extremely sensitive to initial results. You might have a very large position, but the fracking response, the geology and the capex/opex of the initial wells are going to have a major impact on the long-term development of the play—then slap political risk on top of that. We wanted to look at unconventionals in a unique way, rather than value all of that acreage in one blow. We built a stochastic or Monte Carlo model to try to capture the range of scenarios that those sensitive initial conditions could provide. That’s why we set up this separate unconventional portfolio. The effect that you get is a much more tailing effect: Either things go very poorly and you get no value or things go extremely well and you get a huge amount of value. There isn’t really much of a middle ground for these emerging unconventional plays.

TER: Why was it necessary to separate the unconventional portfolio from the other parts of your portfolio?

JA: A conventional prospect is more independent. If you have five conventional blocks, it makes sense to value them separately and then aggregate the results of those valuations, whereas with an unconventional position, you might have the same five blocks, but in this case they’re either all going to work or none of them will work. It’s much more common to see significant correlations between the successes or the failures, as opposed to a conventional portfolio, where it’s completely normal for, say, two of the five blocks to work out.

TER: Outside North America, shale development has an uneven record. Why is Canacol’s holding of 545,000 net acres of Colombian shale a positive thing?

JA: If you asked people in North America 10 years ago what would be the status of the Eagle Ford or the Montney or the Bakken, I think people would probably have been very skeptical about how those plays would perform. Ten years later, we’re seeing massive growth in these resource plays. There’s absolutely no reason why some of the best quality resources around the world won’t see the same kind of activity that those plays have seen. We’ve seen it in North America first simply because we’ve got the most stable political environment, but the rocks are the same around the world and you’re going to see the same booms in other countries.

The question simply becomes, where are we going to see the next boom? The answer to that question is, you’ve got to have great-quality rocks. We see some of that in Colombia. We see some of that in Argentina. We see some of that in places in Africa, India and China. Then the next question you have to ask is, considering those most prospective areas, where is the most likely place to see near-term capital flows? That’s really a political question. In this department, Colombia actually shines for its relative stability. Combine quality rocks with good political environment, and Colombia starts to look pretty attractive. Obviously there’s still a lot of uncertainty as to which way the tail will go in this one, but I think it’s a pretty good speculative bet.

TER: One of the problems that has affected the viability of shale oil and gas outside the U.S. is that the quality of the rocks is different in new areas, like Poland, for example, than what they were anticipating.

JA: It depends on the location. I would argue that the best rocks in the world for unconventionals outside of North America are probably in Argentina, in the Vaca Muerta. That is an extremely high-quality resource. I would say that Colombia is comparable in quality to Argentina and the Eagle Ford. It’s not as big, but the quality’s likely there. Arguably the quality is actually a more important factor for early-stage development than quantity alone.

TER: Is Canacol management looking for a buyout?

JA: I think they’re open to it. One of the great things about Canacol is its management is very down to earth. They’re there to return money to shareholders, as opposed to some companies where we see them establishing a corporate kingdom. Canacol is focused on shareholder value. If a company comes in that offers that, I think they would go for it.

TER: Parex Resources Inc. (PXT:TSX.V) is another Top Pick. Why?

JA: Parex is an interesting company. It’s a company that has a very undervalued production stream. It’s trading at multiples far below comparable companies in Canada and the U.S. Nearly all of its acreage is in the Llanos Basin of Colombia. The Llanos Basin is known for high decline rates, quick payout times and light oil.

What happens is, investors are very focused on the near-term reserve number, and they do the calculation against production and say, oh, this is a short reserve life. Then they apply a significant multiple discount to the company. The problem is you can’t just look at the reserves; in some cases you have to look at acreage as well. Parex has enough acreage where reserve adds are a foregone conclusion. It has built up such a robust position of acreage that it is going to book new reserves in the future.

Not all exploration acreage is equal. This company is sitting on exploration acreage that will become reserves. I think the market is not giving it any value for that when in fact it should be. That’s the source of the opportunity with Parex, where the actual reserves in the future will be much more than the current reserves, but you’re only paying depressed current reserve multiples to get access to the stock.

TER: The Parex stock has trended up since July of last year. You recently reiterated your Top Pick recommendation and raised your target from CA$9.30 to CA$10/share. What is the driver here?

JA: The strategy’s working. We got really excited about this name mid-2013, when Parex had some drilling success, started to diversify its portfolio and also made some acquisitions to expand its acreage running room. All of this put the company in a position to apply its operational expertise to these different plays and take advantage of that.

What we’ve been seeing over the course of the last nine months is the company executing on the strategy, adding reserves. We just saw a great reserve number recently. The stock has climbed. That’s being partially driven by reserve adds that the market seemed surprised to see.

TER: Parex is indexing its oil price to Brent instead of to West Texas Intermediate. What’s the significance of that?

JA: It probably just underscores even further the ridiculousness of the low multiple that it’s trading at because its production is more valuable than a lot of the Canadian domestic production, which is getting more depressed realized prices. When you look at the production multiples you just say, how is this possible when the company’s selling its crude to Brent prices? It just exaggerates the opportunity that much more.

TER: Africa Oil Corp. (AOI:TSX.V) is not a Top Pick; it’s a Hold. Is that because of the risky neighborhood it’s in?

JA: There are two major issues there. One overriding issue is, will it see development anytime soon of some of the impressive discoveries that it has made over there? Africa Oil is not far from Uganda, where there have been significant discoveries that no one has been able to monetize, and Africa Oil’s nearby discoveries are newer. Yes, the company is in Kenya. It’s a little bit closer to the market, but at this point, there’s still not as much oil discovered there as in Uganda. It is earlier stage. It’s going to take more time to appraise it. There’s still a lot of risk that it won’t find enough oil there to justify a major development and pipeline project.

The other issue is, it’s a really exciting stock. Africa Oil has done some incredible things in terms of exploration. Unfortunately, an analyst doesn’t necessarily look at how well the company is performing. We look at how we think it will perform in the future relative to the expectations, which are reflected in the stock price. From that perspective, I see a company that could go one of two ways: It’s either going to perform very well if it’s able to make some more discoveries, perhaps extend the trend a little further north and find well over a billion barrels in that basin. Alternatively, if it’s unable to open up any other basins in the area and there’s a risk of stranded oil discoveries, then the stock could get killed. A buyer of the stock is going to go one of those two ways, big upside or big downside. The question then becomes, what price are you willing to pay? The current price just doesn’t give me a compelling reason to say it’s a good bet.

TER: When do you think you’ll have a clearer picture of its prospects?

JA: I think it’s going to be over the next six months. It’s doing a ton of drilling this year, which is exciting, both in the Lokichar, where it’s had its discoveries, and outside the basin. I think the Lokichar wells are far less important than the wells outside the basin. It’s drilling on Block 9, for example, in a different basin. It’s drilling north of its discoveries and it’s also doing some work in Ethiopia. If any one of those three other play concepts that it’s tinkering around with turns out to be successful, then it’ll be an excellent story. We should know that in the next six months, but I think that all three of those other plays are very risky. Investors are taking on a big risk. If all three do not work then you could be in a tough situation with the stock.

TER: Mart Resources Inc. (MMT:TSX.V) is another hold and also another African operator. What’s the status of its Umugini pipeline?

JA: It’s under construction. It’s been unfortunately delayed by forces beyond the company’s control. Estimates are that it should be completed midyear 2014.

TER: How will the pipeline’s completion benefit Mart’s stock price?

JA: I think people appreciate that the company needs the pipeline to make the operation more robust. That is probably reflected in the stock. I don’t actually see a huge potential from the pipeline completion alone. I think the more important thing will be production. If everything goes perfectly, the pipeline gets commissioned, production goes past 20,000 barrels/day through the line and the losses are cut to under 10% or 5%, that would be a positive thing for the stock, there’s no question. It’s certainly a possible scenario. The greatest concern for me is how much capacity is behind the pipe. How much can Mart ramp up production once the pipeline is installed?

Talking to investors who hold the stock, I think there are a lot of high expectations for how much capacity is behind the pipe. If you compare that to the reserve numbers, I’m a little skeptical over how much it will be able to push through there. The other issue I have is regarding the Pioneer tax status that has come to an end for the company. It started this year. Once it chews through all the tax credits, that will start to affect the cash flows in a material way as well.

TER: How will Mart ensure the Umugini pipeline will be more secure than the one it’s using now?

JA: It will have to do the same things it’s doing now, trying to make agreements with the government about the losses. It is encouraging see recent news that it’s talking to the government and establishing a committee to review the losses. Just having two export options will be a good thing for the company. That, more than specific details of what it’s going to do to protect the pipeline, is important.

TER: You have a lot more companies than those four under coverage. What are you really excited about right now?

JA: The other one to highlight would be Gran Tierra Energy Inc. (GTE:TSX; GTE:NYSE.MKT). It has been our Top Pick for a long time. Just recently, we rated it a Buy only because we felt Parex and Canacol were even more compelling stories, but Gran Tierra remains a very exciting story. It’s made major discoveries in Peru and it’s a long-term, value-player’s dream because it’s getting a very cheap multiple on its reserves right now and has a lot of extra-exciting exploration in Peru.

TER: Justin, you’ve given us a lot to think about. I appreciate your time.

JA: Thank you.

Justin Anderson joined Salman Partners in December 2011 as an oil and gas investment analyst. He is the founder of the research company Xedge, which specialized in rigorous stochastic analysis of oil and gas exploration portfolios. Previously, he worked for the investment banking energy group at BMO Capital Markets, after having worked on energy company strategy and valuations at McKinsey & Co. Anderson completed a Bachelor of Science in mechanical engineering and a Bachelor of Science in Russian studies at the University of Calgary. He then completed a Master of Science in aeronautical engineering at MIT, with his research and thesis focus on energy economics. While at MIT, Justin founded and commercialized a high-tech company called Waybe and was an executive chair of the MIT Energy Club.


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1) Tom Armistead conducted this interview for The Energy Report and provides services to The Energy Report as an independent contractor. He or his family owns shares of the following companies mentioned in this interview: None.
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3) Justin Anderson: I or my family own shares of the following companies mentioned in this interview: Canacol Energy Ltd. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: We seek to do business with all of the companies mentioned (other than Ecopetrol) but have never done any business with them in the past. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
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Stocks In Europe Trades Mixed

By HY Markets Forex Blog

Stocks in Europe were seen trading mixed on Friday while traders focus on macro-data from European Union countries.

The European Euro Stoxx gained 0.02% to 3,140.00, while the German DAX index added 0.34% to 9,621.00 at the time of writing.

At the same time the French benchmark CAC 40 edged 0.10% higher at 4,400.80, while UK’s benchmark FTSE 100 lost 0.4% to 6,807.50.

Stocks in the Asian region were trading mixed on the last day of the trading week as Japan’s stocks were dragged lower by the government’s month-end data.

The German drug-makers Bayer added 0.9%, while its net income rose from 2.403 billion euros in 2012 to 3,189 billion euros in 2013.

British bookmaker William Hill confirmed its net income climbed 16% to £1.486 billion in the last 12 months, from £1.276 billion added in the previous year.

Stocks – Janet Yellen’s Testimony

The new Federal Reserve (Fed) Chair Janet Yellen delivered her testimony on monetary policy before the Senate Banking Committee as part of the Fed’s semi-annual policy report known as Humphrey Hawkins on Thursday. During the Q&A session Yellen said the US economy’s growth slowed down since her last testimony.

Yellen also said the string of data recently released, has been weal and were due to the extreme cold weather in the US.

The US Federal Reserve reduced its monthly bond purchases by $10 billion at each of its two meetings, leaving its monthly stimulus at $65 billion. The yellow metal surged 70% from December 2008 to June 2011 as the central bank added over $4 trillion into the financial system to boost growth.

Other News

In Germany, the country’s retail sales rose 2.5% higher in January, compared to 2.1% recorded in the previous month.

While in Switzerland, the Swiss Barometer increased to 2.03, rising above forecasts of 2 in February, according to reports from KOF Leading Economic Indicators.

The Statistical Office of the European Union (Eurostat) is expected to release the Consumer Price Index (CPI) data later in the day.


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Yen Boosted By Upbeat Industrial Production Data

By HY Markets Forex Blog

The Japanese yen strengthened against the US dollar on the last day of the trading week. The yen was supported by the upbeat industrial production data in January.

The yen gained 0.44% against the US dollar, trading at 101.65 yen at the time of writing.

The nation’s currency eased 13% against the greenback since April 4 2013, when Japan’s central bank introduced the stimulus program of bond purchases to boost the monetary base to 279 trillion yen by the end of 2014 to achieve the inflation target of 2%.

Yen – Japan Industrial Production

Japan’s industrial output climbed higher than expected, rising 4.0% higher in January, compared to analysts forecast of a 3.1% rise in output, data from the Ministry of Economy, Trade and Industry (METI) confirmed.

Other Data’s released by the METI showed that retail sales for the previous month climbed by 1.4% month-on-month, rising above analysts forecast of a 1.3% rise.

The unemployment remained at a five-and-a-half year low of 3.7 in January.

Japan Consumer Prices

Consumer prices in Japan continued to climb in January, while household expenditure surpassed estimates. The core Consumer Price Index (CPI), climbed at a steady pace of 1.3% year-on-year in January.

Janet Yellen’s Testimony

The new Federal Reserve (Fed) Chair Janet Yellen delivered her testimony on monetary policy before the Senate Banking Committee as part of the Fed’s semi-annual policy report known as Humphrey Hawkins on Thursday. During the Q&A session Yellen said the US economy’s growth slowed down since her last testimony.

Yellen also said the string of data recently released, has been weal and were due to the extreme cold weather in the US.

The US Federal Reserve reduced its monthly bond purchases by $10 billion at each of its two meetings, leaving its monthly stimulus at $65 billion. The yellow metal surged 70% from December 2008 to June 2011 as the central bank added over $4 trillion into the financial system to boost growth.


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The post Yen Boosted By Upbeat Industrial Production Data appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

Fibonacci Retracements Analysis 28.02.2014 (EUR/USD, USD/CHF)

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Analysis for February 28th, 2014

EUR USD, “Euro vs US Dollar”

Eurodollar rebounded from local level of 38.2% and started moving upwards. During correction, I opened another buy order. Target is still near several upper fibo-levels at 1.3800.

According to analysis of temporary fibo-zones at H1 chart, upper levels may be reached in the beginning of the next week. Possibly, after reaching them, price may start new and more serious correction.

USD CHF, “US Dollar vs Swiss Franc”

Just as we expected, Franc rebounded from local level of 38.2% and upper border of descending channel. During correction, I opened one more sell order. Lower levels may be reached in the nearest future.

At H1 chart we can see, that price made a reverse right inside temporary fibo-zone. Possibly, pair may start reach new minimum on Friday. In this case, I’ll move stops into the black.

RoboForex Analytical Department

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Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.





Forex Technical Analysis 28.02.2014 (EUR/USD, GBP/USD, USD/CHF, USD/JPY, AUD/USD, GOLD)

Article By

Analysis for February 28th, 2014

EUR USD, “Euro vs US Dollar”

Euro formed the third structure of descending wave, which may be considered as correction. We think, today price may form another descending structure to reach minimum of this wave and then continue moving upwards to reach target at level of 1.3900.

GBP USD, “Great Britain Pound vs US Dollar”

Pound is still forming consolidation channel; market may yet continue moving downwards.  We think, today price may move downwards to reach level of 1.6575 and then continue growing up towards level of 1.7000.

USD CHF, “US Dollar vs Swiss Franc”

Franc completed another structure of the third ascending wave. We think, today price may form one more ascending structure to reach level of 0.8930 and then continue falling down towards level of 0.8730.

USD JPY, “US Dollar vs Japanese Yen”

Yen couldn’t continue its ascending movement towards level of 103.30 and right now is moving downwards. We think, today price may break its consolidation channel downwards and then continue falling down towards level of 100.00. Later, in our opinion, instrument may reverse and start growing up to return to level of 102.80.

AUD USD, “Australian Dollar vs US Dollar”

Australian Dollar completed the third descending weave and corrected it. We think, today price may form another descending structure to reach level of 0.8870, consolidate for a while, and then continue moving inside descending trend towards level of 0.8400.

XAU USD, “Gold vs US Dollar”

Gold completed the first descending impulse and right now is correcting it. We think, today price may return to level of 1336, form another descending structure towards level of 1303, and then return to level of 1320. Later, in our opinion, instrument may form the fourth correctional wave with target at level of 1285.

RoboForex Analytical Department

Article By

Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.




Why Myer Still Doesn’t Understand the Internet


Roughly calculated, Myer has 66 stores nationwide, using up 792,000 square metres (sqm) of retail space. That’s thirty eight times the fence to fence area of the MCG.

David Jones (DJ), on the other hand only has a 532,000 sqm retail footprint. Roughly 26 times the fence to fence area of the MCG. DJ has 38 stores.

And Bernie Brooks, CEO of Myer, is hell bent on controlling all of this retailing space.

Well that’s if David Jones come back and take up Brookes offer…

The problem is, Brookes is hardly the leader anyone would want controlling this.

He has openly admitted that he chose not to go down the online path when the opportunity presented itself.

As he told LeadingCompany last year:

I focused on fixing the fundamentals of the business, the supply chain, getting the product to the customer, the IT, the visual merchandise in store and didn’t focus enough on what would be the 2011 – 2013 and the 2011 – 2014 future.

I don’t think people realise when you lose $66 million how close you are to actually the alternative of breaking Myer up…

When Bernie Brookes took over Myer in 2006, he didn’t even bother to look at setting up an online shop. He was far more interested in, in his words, ‘fixing the serious financial problems‘ at the time:

You may recall a lot of Australian retailers expended large amounts of money, particularly in the late 1990′s and early 2000s on those websites and they didn’t come…that premature build frightened them off.

They are predominantly owned by shareholders who are looking for immediacy in return, and it means if you spend $50, $60 $70 million worth of capital getting ready for three or four years’ time, they don’t see that as an attractive an investment and something that gives you money today.

In other words, when Brooks had the chance to make Myer a retailing leader, he instead took the road that would make him popular with shareholders of the day by giving them immediate returns. Well, sort of.

The point is, rather than build a better business when he had the chance, he travelled the easy road. And that was pandering to what he thought stock holders wanted rather than tackle an issue that would lead to longevity for the company.

The reality is that investors want long term returns. No investor just wants the business they’ve invested in to just think about the next 3–6 months. This is really just an excuse to hide the fact that Myer messed up its online strategy.

Even now Myer heads are still proving they don’t truly understand the modern retail landscape.

According to the Australian, ‘Myer chairman Paul Clintock and CEO Bernie Brooks believe a merged entity can use its bulk to take on the overseas retailers, and perhaps even expand some kind of yet unspecified Myer-David Jones mishmash offshore.

The problem with the analysis from the Australian is it suggests that overseas retailers need to be tackled.

But as Tim Dohrmann recently told Australian Small-Cap Investigator subscribers, ‘It’s estimated that the Australia domestic retail industry brought in $225 billion in annual sales in July 2013. Within that, Australia’s online retail market was sized at just $14.1 billion…just 6.3% of all retail sales.

And the NAB online retail sales index expands on that further by pointing out that domestic retailers ‘continue to control the largest share of online sales – at around 73%’.

That means $10.2 billion was spent in local online shopping.

For a really clear picture, here’s our Australians spend their money online in 2013.

Source: NAB Online Retail Sales Index Indepth report — October 2013
Click to enlarge

It appears that Myer is using international web shopping as a scape goat for not lifting their game.

My point is, Brookes and other department store heads have had the opportunity to revolutionise department store retailing in Australia. However instead of being market leaders, they’re playing catch up.

Right now, Myer has the chance to radically challenge and reshape the retail landscape…instead they would rather blame others for their problems. And they could ultimately end up out of business anyway.

The thing is, I doubt the heads of Myer have what it takes to truly grow with the new retailing world Australians are embracing.

Two days ago, the Australian Financial Review commented on how Myer is re-evaluating its ‘strategic’ plan:

Myer is reviewing its five point strategic plan ahead of a strategy meeting next week and the release of first half results on March 20.

The plan is aimed at luring shoppers to Myer’s online and bricks-and-mortar stores through better service and merchandise.

The strategy was established last year. That’s right, as recently as last year folks in the corner office with a view at Myer still thought it could ‘lure’ people back into stores with new floor covering and softer lighting.

But realising this might not work anymore, Brookes has said he has a willingness to invest more in online retailing and decrease spending on store refurbishments.

As an investor, that’s not reassuring. That statement reminds me of the time I dragged myself to school to sit an exam I hadn’t studied for.

Investors want to be part of innovative companies that do things because they believe in it and have a strategy for the future, rather than doing something half-heartedly. Firms willing to take financial risks. Businesses catering for the modern consumer.

And Myer is none of those.

If you push aside these news-dominating retailing big boys, there are some amazing small retailing firms worth investing in. Meanwhile, it’s clear that Myer’s management still doesn’t have a clue.

Shae Smith+
Editor, Money Weekend

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