Google searches offer an insightful glimpse into economic expectations

By Elliott Wave International

The last thing on the minds of most people is deflation. It’s easy enough to determine that with a quick quiz — and that quiz is found in the just-published Elliott Wave Theorist.

In this July-August Theorist, Robert Prechter uses Google searches to make a point about deflation:

“When I typed ‘Inflation for 2013,’ there were 47,700 results. On March 13th, when I put this slide together, I also typed in “Deflation for 2013.” How many results do you think I got?”

Prechter reveals that the answer is 5. (You could have googled it yourself, but we don’t want you to have to take the time.) He then goes on to search other phrases pertaining to deflation and inflation, which you can learn more about via a risk-free read of the Theorist. Just know that the number of Google searches for “Deflation for 2013” was nowhere near the number of searches for “Inflation for 2013.”

Get a FREE 2-page sample of Robert Prechter’s Elliott Wave Theorist.

Yet, consider that the state of the economy remains precarious. For one thing, Detroit just became the largest American city ever to file for bankruptcy. But that’s not the half of it.

An MSN Money article points out that municipal financial problems extend far beyond Detroit to cities like Chicago, Newark, New Haven, Baltimore and Louisville:

10 cities selling stuff to get by

When your finances are in trouble, sometimes you have to unload precious items to survive. For some cities, that means parting with sailboats, landmark buildings and even Santa Claus. (MSN Money, July 22)

Here’s some irony: Almost no one expects deflation, yet consider this June 14 Marketplace.org headline: “Millennials face uncertain future with part-time work.” In other words, many young adults want full-time jobs but can find only part-time positions. This employment scenario is more in line with economic contraction than expansion.

This contrast between reality and the apparent lack of concern about deflation can be seen most remarkably in Europe:

Eurozone business still going backwards (CNNMoney, May 23, 2013)

This article quotes a market firm’s chief economist, “Weakness remains broad-based, with Germany stagnating, France contracting steeply and the rest of the region also clearly entrenched in an ongoing downturn of worrying severity.”

But this CNNMoney article barely scratches the surface of why Europeans and U.S. citizens alike should prepare for the most devastating of all financial trends — deflation.

In a recent Theorist, Prechter writes: “Deflation nearly always manifests as a contraction in the amount of outstanding debt. Let’s look at where we are in terms of debt in Europe and the United States. …”

See what Prechter presents to subscribers of The Elliott Wave Theorist with no obligation for 30 days. The just-published September issue is packed with insights you won’t see anywhere else. Preview what’s inside and learn how to get your risk-free review.

By The Sizemore Letter

It’s been a rotten year for emerging markets.  The iShares MSCI Emerging Markets ETF (EEM)—the most popular way for investors to play the sector—is down 13% year to date.  And several individual country funds have gotten hit a lot harder.  The iShares MSCI Brazil ETF (EWZ) is down 23% year to date,  and the iShares MSCI Turkey ETF (TUR) is down a whopping 26%.

Ouch.

A slowdown in China, a political crisis in Turkey, and the Fed’s “taper scare” combined to mix a lethal cocktail for the sector.  But now that the dust has settled, are emerging markets a buy?

Yes.  With American stocks looking close to fully-valued, investors are shifting their attention to developed Europe, where valuations are nearly 40% lower.  And as risk appetites return, I expect them to turn to emerging markets next, where pricing is even better.  As measured by their price/book ratios, emerging markets as a group trade for less than half their pre-2007 valuations.

The question is not “whether” to buy emerging markets but “how.”  As a general rule, I’ve avoided the iShares MSCI Emerging Market ETF because I consider it far too heavily weighted to developed markets such as South Korea and Taiwan and to companies that get a large chunk of their revenues from exporting to America and Europe.  Its underlying index recently started to include Greece.

Yes, Greece.  While I agree that Greece shouldn’t be classified as a developed market, I don’t see a lot of “emerging” going on there.

Other broad ETFs give better access to the emerging market consumer.  One that I use in my asset allocation portfolios is the Emerging Global Shares Emerging Market Consumer ETF (ECON).  The underlying companies get about 90% of their revenues from selling within their home markets and to other emerging markets.

I continue to recommend ECON as a long-term holding.  But there are other ways to slice and dice the emerging markets universe, such as by dividend yield.  James P. O’Shaughnessy, the author of What Works on Wall Street, wrote a paper earlier this year that found that a strategy of buying high-dividend emerging market stocks outperformed the broader emerging market universe by 10.6% per year.  Yes, you read that correctly.  10.6% per year.

If you’re looking for an ETF solution, Emerging Global Shares offers one: the EG Shares EM Dividend High Income ETF (EMHD).  The portfolio has an eclectic mix of emerging-market stocks you’re not likely to find anywhere else, such as Bangkok Expressway (BKENF), Telecom Egypt, and Ford Otomotiv Sanayi, Turkey’s local Ford subsidiary.  In total, it holds the 50 highest-yielding stocks in the FTSE Emerging All Cap ex Taiwan universe, equally weighted, and is expected to sport a dividend yield around 8% (the shares only recently started trading, so there is no actual dividend history as of this writing).

As attractive as EMHD is as a portfolio diversifier, it’s too thinly traded to buy at this time.  Its average daily trading volume is a tiny 4,350 shares.

A more liquid option is the WisdomTree Emerging Markets Equity ETF (DEM).   DEM is based on a fundamentally weighted index that is comprised of the highest dividend yielding stocks selected from the WisdomTree Emerging Markets Dividend Index.  At current prices, DEM yields 4.2% in dividends.

DEM is a little too heavily allocated to basic materials for my liking, and its top two holdings—which collectively make up more than 10% of the portfolio—are Russian oil and gas companies.  Still, if nothing else, DEM offers a way to get non-traditional exposure to emerging markets and access to companies you’re not going to get in the more popular emerging market funds.

Disclosures: Sizemore Capital is long ECON. This article first appeared on MarketWatch.

Charles Lewis Sizemore, CFA, is the editor of the Sizemore Investment Letter and the chief investment officer of investments firm Sizemore Capital Management. Click here to learn about his top 5 global investing trends and get your copy of “The Top 5 Million Dollar Trends of 2013.”

This article first appeared on Sizemore Insights as Choosing the Right Emerging Market ETF

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London Gold Market Report
from Adrian Ash
BullionVault
Thurs 26 Sept 09:10 EST

The WHOLESALE price of gold and other precious metals touched 4-session highs Thursday morning in London, after US Treasury secretary Jack Lew warned yesterday that the government will run out of money in just 3 weeks’ time if Congress doesn’t approve new debt.

 World stock markets ticked lower with major government bonds as the US Dollar rose on the FX market.

 Gold touched $1339 per ounce, and silver hit $22.11 before retreating 1.5%.

Industrial commodity prices ticked higher, but European Brent crude oil held below $110 per barrel.

 “Extraordinary measures will be exhausted no later than October 17,” Lew wrote to House speaker John Boehner, urging Congress to raise the United States’ $16.7 trillion debt limit.

 Estimating that the Treasury will have only $30 billion in hand by that deadline, Lew said net expenditure can reach $60bn per day.

 That’s equal to $191 for every member of the US population.

 “If we have insufficient cash on hand,” says Lew, “it would be impossible for the United States of America to meet all of its obligations for the first time in our history.”

 Analysts at ANZ Bank said in a note today that they expect headlines around the US debt debate “to drive” the gold price and other precious metals.

  “Gold could receive something of a bid over the short-term,” says INTL FCStone’s Edward Meir, “as worries rise over the debt ceiling talks.

 “But we doubt whether this variable alone will be enough to keep the complex elevated for long.”

 Turning to US monetary policy, meantime, last week’s vote by the Federal Reserve to continue buying $85 billion of Treasury bonds through quantitative easing “will not only stem the rise in real yields,” says Deutsche Bank in a note, “but also remove important interest rate support for the US Dollar.

 “On this basis, we expect this will introduce a strong floor…and may even provide some upside risks.”

Adrian Ash

BullionVault

Gold price chart, no delay | Buy gold online

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can fully allocated bullion already vaulted in your choice of London, New York, Singapore, Toronto or Zurich for just 0.5% commission.

(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.

By www.CentralBankNews.info     The Czech Republic’s central bank left its benchmark two-week repo rate steady at 0.05 percent, as expected, and said it was “ready to use the exchange rate if further monetary policy easing becomes necessary.”
    “The probability of launching foreign exchange interventions has not changed and remains high,” said the Czech National Bank (CNB), adding that interest rates are first forecast to rise in 2015 and “given the zero lower bound on monetary policy rates, this points to a need for easing monetary policy using other instruments.”
    “The risks to the inflation forecast are slightly on the downside, tilted toward the need for slightly easier monetary conditions,” the strongest sign to date that the CNB is ready to intervene in foreign exchange markets to push down the koruna’s exchange rate.
    The Czech central bank first raised the possibility of selling the koruna currency in September 2012 and cut rates to essentially zero in November. It has repeatedly said it is ready to use foreign exchange intervention as a way to ease policy conditions further.
    The koruna has depreciated gradually since last September but has been largely steady in the last three months, trading at 25.7 to the euro today, the same as on June 1 but down some five percent from 24.36 to the euro in mid-September.

    The CNB said its current inflation report “does not predict an increase in inflation pressures and no tangible risks of such an increase in inflation pressures can be identified either.”
    Inflation in the Czech Republic in August eased to 1.3 percent, down from 1.4 percent in July, continuing the trend of declining inflation seen since mid-2012. The CNB forecasts 1.7 percent headline inflation this year, 1.9 percent next year and 2.1 percent in 2015.
    The central bank targets inflation of 2.0 percent, plus/minus one percentage point.
    “No cost-push inflation pressures are apparent and the outlook for administered prices is shifting downward,” the CNB said in its presentation.
    The Czech economy expanded by 0.6 percent in the second quarter from the first but in annual terms Gross Domestic Product contracted by 1.3 percent, the sixth quarter of economic contraction. In the first half, the economy shrank by an annual 1.9 percent.
    The CNB forecasts average growth of only 0.3 percent this year,, 1.4 percent in 2014 and 2.0 percent in 2015.
   
    www.CentralBankNews.info

German DAX futures are in bullish move since start of September, showing an impulsive price action. Impulse is a five wave pattern so we expect more upside as current decline from the highs appears to be a fourth wave, a temporary contra-trend movement. For now, we don’t see a completed pull-back yet, but market could find a support around 8510-8570 region where we see an open gap. Those gaps could react as a reversal, in our case as a support in wave 4 for a reversal up into wave 5. Targets for wave 5 are around 8860 where we see a 200% extension of a previous decline from 0845 to 8090 in August.

Basically those fourth waves are pull-backs that could represent an opportunity to join the larger trend. However, if you are looking for any set-ups after wave four retracement its important to know some rules of the Elliott Wave principle. One of the most important rule is that wave 4 must never retrace back to the area of a wave 1. In our case this comes in at 8279, so as long market is above this level bullish view remains valid.

German DAX 4h Elliott Wave Analysis

Written by www.ew-forecast.com | Try EW-Forecast.com’s Service Free For 7 Days at http://www.ew-forecast.com/service

By www.CentralBankNews.info    Taiwan’s central bank held its benchmark interest rates steady, as expected, saying the current policy stance was “conducive to price and financial stability as well as economic growth.”
   “In sum, the domestic economy has expanded moderately, and inflationary pressures are subdued. On the other hand, global economic recovery is proceeding at a gradual pace, and uncertainty in the global economic outlook remains,” said the Central Bank of the Republic of China (Taiwan), which has held its discount rate steady at 1.88 percent since June 2011.
    Although Taiwan’s dollar has been largely steady since mid-February, the central bank said massive foreign capital movements had impacted its exchange rate and if there is excess volatility and disorderly movements in the exchange rate, the bank “in line with its statutory mandate, will step in to maintain an orderly market.”
    The Taiwan dollar has risen slightly against the U.S. dollar since late August, trading at 29.5 to the U.S. dollar today, up from 30 in late August but slightly below 29.05 at the start of the year.
    Exports from Taiwan have been growing mildly “amid stabilizing demand from the US, Europe and China, while private demand and investment were both muted,” the bank said, noting the government forecasts growth of an annual 2.61 percent in the fourth quarter, slightly higher than 2.47 percent projected for the third quarter.
    In the second quarter, Taiwan’s Gross Domestic Product expanded by 0.58 percent from the first for annual growth of 2.49 percent, up from 1.62 percent in the first quarter.   
    For the full year, the central bank said the economy is forecast to expand by 2.31 percent before strengthening to 3.37 percent in 2014 as improved global growth boosts exports.
    The central bank said economic growth in advanced economies had recently gained some momentum while emerging economies, including China, had stabilized and international forecasters are projecting a pick up in global growth.
    “However, the issues of the US debt ceiling and the Federal Reserve’s withdrawal from quantitative easing, coupled with volatile cross-border flows, have increased financial instability in some emerging economies,” leading to heightened uncertainty about global financial stability and recovery.
    Taiwan’s inflation rate turned negative in August, with consumer prices falling by 0.79 percent from July’s scant rise of 0.06 percent and the central bank said inflation averaged 0.87 percent in the first eight months of the year.
    The government forecasts a slightly higher inflation rate of 1.64 percent for the fourth quarter and an average 1.07 percent for 2013 due to the supply of fruit and vegetables constrained by typhoons and torrential rains in recent months.
    Next year inflation is forecast to average 1.34 percent due to “gentle inflationary pressures across the globe due to moderate economic recovery and stable international raw material prices.”
    New housing loans extended by Taiwan’s five leading banks since the beginning of the year have been mostly lower compared with the same period last year, but the central bank cautioned that it was keeping an eye on banks’ management of mortgage related risks and since mortgage payments were now exceeding 30 percent of household income, “borrowers are advised to be mindful of risks stemming from future interest rate changes.”

    www.CentralBankNews.info
   

By HY Markets Forex Blog

Retail sales in Italy declined for the second month in July, with a fall of 0.3% month-on-month in July, compared to previously recorded 0.2% fall in June and exceeding analysts’ forecast of 0.1%, according to reports from the National Institute of Statistics (Istat).

Retail sales edged 0.9% lower on an annual basis, after a 3% drop in June while analysts estimated a 2.8% drop.

Retail Sales – Consumer Prices

In Italy, inflation rose to 0.4% in August, Istat reported on September 12. While on an annual basis, inflation advanced 1.2% in August.”The stability of Italian inflation was mainly the result of opposite movements,” Istat reported.The reports showed that the annual growth of food and non-alcoholic beverages prices was growing at a slower pace.

The Index of wages measures the growth of wages and salaries, which are determined by the contractual provisions, set by agreements.

At the end of July 2013, the coverage rate was at 47.3% when it came down to employees, while the total amount of wages was summed up to 45.8%.

In July, the hourly index rose by 0.1% while the per employee index remained unchanged, compared to July last year, the indices both advanced by 1.5%. Between January- July 2013, the hourly wage index rose by 1.4%, while the per employee index increased by 1.5%.

Italy’s GDP

The economic output for Italy was seen falling in the second quarter of this year, the preliminary figures confirmed on August 6 by Istat.

The flash second-quarter for Italy’s gross domestic product (GDP) dropped 0.2% quarter-on-quarter after a decline of 0.6% in the past three month period. Analysts predicted a fall of 0.4%.

Italy’s GDP declined 2.0% in the second quarter on an annual basis.

Find out how you can earn extra profit when trading European Stocks Online and open an account with us today! www.hymarkets.com 

The post Retail Sales In Italy Drops, Exceeding Analysts’ Forecasts appeared first on | HY Markets Official blog.

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By HY Markets Forex Blog

European Stocks were seen green on Thursday as investors worries over the futures if the US budget, while Congress is expected to pass a spending a bill before October 1 for the government to stay funded.

Futures of the European Euro 50 rose 0.27% higher at 2,919.50 at the time of writing, while the German DAX futures edged 0.32% lower to 8,683.30 at the same time. Futures for the French CAC 40 advanced 0.31% to 4,197.80 and the UK FTSE 100 futures gained 0.23% higher to 6,526.80.

European Stocks – Market Movers

Talks over the US budget and debt ceiling are still ongoing in the US, the Congress need to take action before the US government funding expires on October 1^st.

On Wednesday, the US Treasury Secretary Jack Lew said he predicted that the US debt ceiling would be almost reached on October 17 with an estimated $30 billion cash.

Meanwhile in Greece, the government banks are trying to impose tougher collateral and assurance standards on domestic borrowers, which is expected to open the prospects of new credit tightening, according to reports by eKathimerini. Greek’s deputy Prime Minister Evangelos Venizelos said that the country could avoid the need of a third bailout if the global bond markets is accessible next year.

European Stocks – Economic News

Italy’s retail sales were seen edging 0.1% lower in July on a monthly basis, after a previously recorded 0.2% fall in the previous month, while retail sales are estimated to drop 2.8% year-on-year.

Meanwhile in Rome, the country’s government is expected to hold an auction of Treasury bills maturing in 6 months, with a maximum target to raise €8.5 billion.

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By WallStreetDaily.com

At this point, we might as well relocate the New York Stock Exchange to Washington, D.C.

Why? Because instead of focusing on individual economic and corporate fundamentals emanating from the financial center of the world, investors can’t stop obsessing over policy decisions being made in our nation’s capital.

For weeks, investors fretted over whether or not the Federal Reserve would start tapering its bond purchases.

And now?

They’re panicked (and paralyzed) by the possibility of a government shutdown, thanks to the latest partisan impasse on the budget and debt ceiling limit.

Case in point: Stocks entered Wednesday on a four-day losing streak – determined to extend it to five – as every major market index opened to the downside.

Fear not, though. We’ve been here before. As for the latest political impasse, it promises to be no different. (Sorry speeders. Police will still be on active duty – and using radar – during any government shutdown.) 

Here’s proof – and, more importantly, how we should be responding…

All Bark, No Bite

While politicians on both sides of the aisle desperately want us to fear the impact of a government shutdown starting October 1, we shouldn’t.

Why? Do you remember the fiscal cliff fears from last December?

For weeks, politicians uttered dire predictions about the debilitating impact of massive tax hikes and draconian spending cuts. A deal was struck at the last minute. No nasty side effects materialized. And, sure enough, stocks tore out of the gates in 2013 as if nothing had happened.

In short, the fiscal cliff was “a bunch of sound and fury signifying nothing,” says Jeffrey Saut, Chief Investment Strategist at Raymond James. Indeed!

As for the latest political impasse, it promises to be no different.

“In spite of all the brinkmanship being talked about… there will be a deal, and then we will move on,” says Stephen Massocca, Managing Director at Wedbush Equity Management.

I couldn’t agree more. Not only does recent history back us up, so does the longer-term data.

A History Worth Mentioning

While a government shutdown might sound like a rare event, it’s not. In fact, we’ve experienced a total of 17 since 1975. In other words, politicians have a history of extreme discord.

By the same token, politicians also have a history of reaching a compromise (quickly) when there’s no time left to grandstand for their respective parties.

You see, shutdowns rarely last very long. Only eight have lasted more than three days. And the average shutdown duration is only 6.4 days.

What if we’re in store for an outlier this time? Statistically, it’s possible. But there’s no real reason to worry.

For one thing, credit default swap (CDS) prices for U.S. Treasury notes aren’t flashing any legitimate warning signs.

According to Bloomberg, CDS prices trade at about 23 basis points, compared to an average of 41 basis points over the past three years. If a shutdown were going to be particularly bad for the economy, CDS prices would be trending higher.

Also, we can’t overlook the fact that the Fed has our back.

You’ll recall, at the September 18 news conference, Fed Chairman Ben Bernanke revealed part of his reason for not tapering, when he said, “Upcoming fiscal debates may involve additional risks to financial markets and to the broader economy.”

Translation: I’m here to paper over any damage politicians do by being stubborn and creating a protracted shutdown.

Above all else, though, we shouldn’t fear a government shutdown, because stocks ultimately don’t.

Stocks Just Don’t Give a Darn

During the last two government shutdowns, the stock market didn’t even flinch.

In 1995, the S&P 500 Index actually rose 1.3% between November 13 and 19. And from December 15, 1995 to January 6, 1996, the Index eked out a 0.1% gain, according to Bespoke Investment Group.

The only thing that did happen? “Volatility did pick up during – as well as after – the shutdown,” says Bespoke.

In other words, temporary buying opportunities materialized in the midst of the political negotiations. And that’s instructive.

It means we should treat any pullbacks on worries over the current impasse in Washington as a time to buy.

Chris Hyzy, Chief Investment Officer at U.S. Trust, agrees. “Any market drawdown would be temporary in nature,” says Hyzy.

Bottom line: The biggest threat to this bull market isn’t Washington. A government shutdown sounds much scarier than it promises to be. If anything, it represents a compelling time to put new money to work in the stock market.

And based on the legislation being considered to avert the October 1 shutdown, we might get another such opportunity before long. (It only funds the government through November 15.)

But don’t worry. I’ll serve up a friendly reminder to be greedy when others are fearful (again), as that deadline draws near.

Ahead of the tape,

Louis Basenese

The post Don’t Fret a Government Shutdown (Stocks Won’t) appeared first on Wall Street Daily.

Article By WallStreetDaily.com

Original Article: Don’t Fret a Government Shutdown (Stocks Won’t)

By HY Markets Forex Blog

Even though gold has enjoyed more than 10 consecutive years of price gains, several market experts predicted recently that the precious metal will depreciate in the near future.

Forecasts such as this could prove beneficial to any individuals who want to make money trading gold.

Citi Predicts Gold Decline Below $1,250

While there have been many predictions for what the price of gold will do, one that has managed to generate visibility recently is a forecast from Citi analysts that the metal will depreciate to less than $1,250 per ounce before 2013 is over, according to MarketWatch.
These individuals also projected that the metal will have an average price of $1,250 an ounce in 2014.

The analysts who wrote the note cited several variables to back up their prediction, Barron’s reported. They emphasized the tapering of quantitative easing that everyone expects will happen in the near future. In addition, the market experts projected that the emergence of increasingly stronger economic data will push gold prices lower. The analysts also asserted that while the price of the metal has enjoyed a rally lately, this general uptrend will not last forever.

“Our expectation is that the postponement of the tapering decision by the [Federal Open Market Committee] represents only a short-term reprieve for gold,” they wrote in the note, according to the news source. “U.S. unemployment continues to grind closer to the Fed target level, with the current reading at 7.3 [percent], although concerns remain that labor force participation is weak and the Fed has indicated ongoing support for low rates at the front-end for the next several years.”

Goldman Sachs Prediction

While the forecast that Citi made might seem bearish, individuals who want to make money by trading gold might be interested to know that Jeffrey Currie, head of commodities research for Goldman Sachs, stated in a recent interview that the price of the metal could fall below $1,000 per ounce in the near future, MarketWatch reported.

Like the analysts at Citi, Currie also noted the importance of both economic data and also the bond purchases made by the Federal Reserve, according to the news source. He stated that once the information about the strength of the nation’s economy – such as data related to the jobs market – is released, gold selling will surge.

“While we agree with the mid-cycle price somewhere around $1,200, we believe that at least near term it can overshoot to the downside, which is why we have $1,050″ as a target price, he stated, the media outlet reported. “It clearly could trade below $1,000.”

Forecast From Morgan Stanley

Another major financial services firm that recently predicted declines in the price of gold was Morgan Stanley, according to MarketWatch. This firm projected that next year, bullion will have an average value of between $1,200 and $1,350 an ounce and then decline after that.

“While any further postponement would likely continue to benefit gold prices in the near term, we still think it is just delaying the inevitable,” Peter Richardson and other analysts at Morgan Stanley wrote in a note, the media outlet reported. “The longer-term narrative for gold remains in place – waning investor appetite for a risk and inflation hedge, challenged physical demand and a rising USD.”

These predictions were made after the precious metal experienced twelve consecutive years of gains and rose to more than $1,900 per ounce late in 2011. Gold has managed to draw substantial visibility over this period, and many have thought of it as a safe haven from economic turmoil.

In 2013, gold has experienced sharp enough depreciation to fall into a bear market in April and then move into a bull market in August. Even after its recent recovery, the price of the metal is sharply lower for the year.

The post Several Market Experts Predict Falling Gold Prices appeared first on | HY Markets Official blog.

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