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By HY Markets Forex Blog

Crude prices was seen advancing for a second day on Thursday, boosted by the surprising Fed decision to postpone the tapering of its stimulus program and also driven by the US inventories dropping to the lowest level since March 2012.

The West Texas Intermediate deliveries for November edged up 0.46% at $108.59 a barrel on New York Nymex at the time of writing, while the European benchmark crude Brent jumped 0.31% higher to $110.94 a barrel.

Both crudes saw its bigger gains in three weeks on Wednesday as the US dollar weakened..

Crude Prices- US Stockpiles

The US crude stockpiles saw an unexpected drop of 4.37 million barrels to 355.6 million in the week ended September 13, the Energy Information Administration confirmed on Wednesday.

Recent data published showed that the stockpiles at Cushing, the largest US oil-storage hub, dropped 861,000 barrels to 33.3 million, the lowest since February 2012. Gasoline inventories declined by 1.63 million barrels last week, while distillate supplies lost 1.08 million.

Crude Prices – Low Supplies

Regardless of the eased worries in the Middle Eastern region, Goldman Sachs, investment bank warned that the global crude supplies are still an issue. Analysts from the bank forecasted the loss from Libya (the largest oil reserve in Africa), and Iraq (Organization of Petroleum Exporting Countries (OPEC) second largest crude producer) is expected to surpass 100 million barrels by the end of this month.

“It comes at a time when total inventories in the OECD are nearly 80 million barrels lower, and nearly all major regional markets are far tighter, as evidenced by strong physical grade differentials and nearly universally backwardated markets,” Goldman analysts said in a note. “This fundamental tightness will support prices and we maintain our near-term Brent price target of $115.00 a barrel,” he added.

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The post Crude Prices In Green On Fed Stimulus Decision appeared first on | HY Markets Official blog.

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By HY Markets Forex Blog

Stocks across the Asian region was seen rising  on Thursday, boosted by the surprising   decision by the US Federal Reserve (Fed) to keep its $85 billion monthly monetary stimulus unchanged.

“We have decided to await more evidence that progress will be sustained before adjusting the pace of its purchases,” Fed policymakers said in a statement. “We could begin later this year, but even if we do that, the subsequent steps will be dependent on the continued progress of the economy,” Bernanke said during a press conference following the statement release.

The Japanese yen was seen advancing 0.45% higher at ¥98.37 against the US dollar at the time of writing, while the Australian currency was 0.39% higher to $0.9486 at the same time.

Gold futures for December gained 4.09% to $1,361.10 an ounce after the unexpected decision by the Federal Reserve until the time of writing.

Asian Stocks – Japan

The Japanese benchmark Nikkei 225 climbed 1.80% higher to 14,766.18 points on Thursday, while the Tokyo’s broader Topix index rose 1.88% to 1,215.48 points. Japan’s ministry of finance announced that the country’s trade balance advanced to ¥790 billion in August.

Pacific Metals, stainless steel manufacturer, saw the most gains on the Nikkei 225, rising 9.3% higher, while Pioneer Corporation declined 1.2%.

The Bank of Japan’s (BoJ) Governor Haruhiko Kuroda is expected to speak at the National Securities Industry Convention in Tokyo, later today and on Friday.

While the Central Bank’s board member Takahide Kiuchi, spoke earlier in Hokkaido. He said that BoJ should not aim to achieve its 2% inflation rate in two years because he predicts the period is too short.

“At this point, under the current commitment, I can’t deny the possibility that the BoJ will be influenced by external factors such as market expectations and will be forced to respond in such a way,” he said.

Asian Stocks – Hong Kong Gains

Hong Kong’s benchmark Hang Seng rose 1.58% higher to 23,490 points at the time of writing, boosted by the series of upbeat data’s released recently.

Sino Land, real-estate developer saw the most gains during the session with 5.9% gains, while the hygiene products manufacturer Hengan International Group dropped 2%.

Interested in trading shares in Asian Markets?  Visit www.hymarkets.com today and start trading from $50! 

The post Asian Stocks Jumps After Fed’s Unexpected Decision appeared first on | HY Markets Official blog.

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By WallStreetDaily.com

Does Barron’s have a point? Or is it simply spreading fear?

In the latest issue, Randall W. Forsyth warns about passing by your local newsstand.

Apparently, there’s an image lurking there that’s the “kiss of death” for the stock market.

It’s so ghastly, in fact, that it prompted the researcher who tracks these appearances to gasp and use the Lord’s name in vain. (Repent!)

Supposedly, the appearance alone means there’s an 80% chance that the current bull market will come to an end within a month.

Now, we’ve made it a habit here to routinely dispel market mistruths.

Case in point: We told you to shrug off the fearmongering in the headlines about September being the worst month for stocks. Why? Because the double-digit rally we witnessed leading up to this month actually pointed to even more gains.

Sure enough, the S&P 500 Index has traded higher in nine out of the last 11 sessions. Total gain for the month so far? A stout 4.4%, compared to the average return the mainstream financial rags told you to expect for the month of negative 1.1%.

Armed with the data, it’s time to dish out the truth again. So here goes…

Warning: Graphic Content

This is the image that should scare you stockless.

It’s the latest cover of TIME Magazine, emblazoned with the iconic Wall Street bull.

As Forsyth says, “The cover of general-interest magazines has been a redoubtable contrarian indicator, since, well, Henry Luce came up with the idea of TIME Magazine in the 1920s.”

Forget the content of the articles, though. (The most recent TIME article isn’t irrationally exuberant.)

According to expert magazine tracker, Paul Macrae Montgomery of Universal Economics, it’s the image that matters most. It carries utmost importance because of the broad message it sends to everyday Americans.

In fact, Montgomery told Forsyth, “If historic probabilities reliably forecast the future, there’s an 80% chance the market will top in a month and will be lower a year from now.”

No doubt, that’s what prompted Forsyth to write his most ominous line, “For stock market investors, there is no kiss of death like seeing a bull on the cover of TIME.”

Scared? Don’t be.

It’s Different With TIME

The classic example of the magazine cover indicator is, of course, the August 1979 issue of BusinessWeek. It proclaimed “The Death of Equities.” And then the markets went on to enjoy two decades’ worth of prosperity.

Apparently, Forsyth forgot to ask if the accuracy of the indictor changes with each circulation. Because according to Laszlo Birinyi of Birinyi Associates, things are different when it comes to TIME.

“Over the last 65 years, TIME Magazine has featured the picture of a bull on its cover multiple times,” says Birinyi. “We’ve gone back and pulled the historical TIME Magazine covers and have found that the myth has been mostly incorrect.”

Almost 70% of the time, stocks are actually higher one year later, averaging a return of 12.79%. There’s only been one instance, back in 1948, when the market hit the skids.

So much for that “kiss of death” thing, huh?

Bottom line: Don’t automatically do the opposite of what magazine covers tell you. And shame on Barron’s for suggesting as much. Not long ago, on April 22, its cover featured a bull on a pogo stick and the headline “Dow 16,000!” Yet they weren’t exactly telling investors to bail because of it.

Now, I’m not saying the stock market is guaranteed to go higher from here. Only that nobody knows when it’ll stop for sure. Not even the top brass at magazines who decide on the art and headlines to accompany each issue.

And that means, as always, the best strategy for us is to stay invested and simply mind our protective stops. Period.

Ahead of the tape,

Louis Basenese

The post Get a Load of This Bull From Barron’s appeared first on Wall Street Daily.

Article By WallStreetDaily.com

Original Article: Get a Load of This Bull From Barron’s

By Profit Confidential

Action in biotechnology stocks remains robust, and the NASDAQ Biotechnology Index continues to soar. While it’s pretty easy to lose you shirt speculating in biotechnology stocks, following strong trading action can yield good opportunities.

Speculative traders certainly can piggyback strong trading action, riding the momentum of a new approval or drug discovery. For risk-capital portfolios, it’s definitely worth having a few revolving positions in biotechnology stocks, simply because the rewards (when stock market activity is buoyant) are mostly worth the risk.

KYTHERA Biopharmaceuticals, Inc. (KYTH) illustrates the potential to engage in piggyback trades on good news.

KYTHERA is a clinical-stage company that’s working on the development and commercialization of prescription products for the aesthetic medicine market. This might not be “cutting edge” or the kind of “pure play” bioscience that some investors want, but that doesn’t matter, because it’s what the stock market wants. (See “Old Adage of ‘Don’t Fight the Fed’ Stands, but Big-Cap Earnings Uninspiring.”)

The company’s current focus is on the facial aesthetics market, which accounts for the majority of the aesthetic medicine sector. Its lead product candidate is “ATX-101,” an injectable drug currently in Phase III clinical development for the reduction of submental fat, otherwise knows as a “double chin.”

In August of 2010, Bayer signed a licensing and collaboration development agreement with KYTHERA, obtaining development and commercialization rights to ATX-101 outside of the U.S. and Canada. This is exactly how you want your clinical-stage biotechnology stocks to develop—in collaboration with a brand-name pharmaceutical company that has a thick wallet.

Bayer recently completed two pivotal Phase III trials of ATX-101 in Europe for the reduction of submental fat. KYTHERA completed enrollment in its Phase III clinical program for ATX-101 in more than 1,000 people in 70 centers across the U.S. and Canada in August 2012 and is working on the final results. The stock jumped on this news.

KYTHERA was also upgraded by a Wall Street firm, seeing a big price target increase. Then it got upgraded by another Wall Street firm, and the stock soared again. The company’s stock chart is featured below:

Chart courtesy of www.StockCharts.com

Among many biotechnology stocks, this company came to market with a specific technology and a specific target market. Company management knew that financial markets would be willing to finance developments for the aesthetic market because profit margins for these treatments are so robust.

KYTHERA finished the second quarter with approximately $76.0 million in cash and spent $7.8 million in research and development for the completion of the treatment phase of its Phase III trials in the U.S. and Canada. The company is now in the follow-up phase of those trials.

Keeping an eye on big share price moves and news from biotechnology stocks can yield solid piggyback trades for aggressive investors. But a trade is a trade, and it’s important to cut losses quickly and take profits without remorse. Biotechnology stocks are 100% risk-capital securities.

Article by profitconfidential.com

By Profit Confidential

There was so much anticipation and hype for new, cheaper “iPhones” to be introduced by Apple Inc. (NASDAQ/AAPL) on September 10—but something went astray. It was akin to waiting with bated breath for a big moment to happen and then nothing materializes.

Prior to the announcement, cheap iPhones were going to take over in the emerging markets and China, where consumers just don’t have the means to pay that much for a smartphone.

But since the announcement launching the next generation iPhone, the share price of Apple has retrenched over 10%.

Here’s the problem: Everything seems great for the new “iPhone 5S,” which is much more powerful and twice as fast with the 64-bit “A7” chip. The 5S may be a better iPhone, yes, but the lack of selling has to do with the “iPhone 5C.”

With the so-called “cheaper” 5C priced at $99.00 with a contract, the price tag is still way too steep for lower-income users in the emerging markets, which is where Apple needs to excel. Who cares about America?—Apple is already the boss of smartphones here.

However, the $100.00 lower cost of the plastic-bodied iPhone 5C could still cannibalize the iPhone 5S sales in the United States and other industrialized countries.

For the company, the failure to offer a cheaper iPhone 5C, say for under $50.00, was not smart. Apple is clearly going after margins, as has always been the case. In this instance, though, this is clearly not the right strategy.

Apple should have come out with a super-cheap smartphone to compete with Samsung Electronics Co. Ltd., Nokia Corporation (NYSE/NOK), HTC Corporation, and others in the emerging markets. At $99.00-plus, I doubt the iPhone 5C will gain much traction in the emerging markets.

All Apple had to do was look at Nokia and Samsung’s strategies in the emerging markets and realize it cannot be about margins in this space, but rather it needs to be based on the price point.

So Apple disappoints investors, and the subsequent reaction should not have been a surprise. And until Apple does lower its price or launch a cheaper iPhone, it’s going to be tough for the company to make way outside of the U.S. market.

Given this, I would gravitate towards Samsung over Apple. I may even take a long look at Microsoft Corporation (NASDAQ/MSFT) after its recent proposal to buy the cellular business of Nokia. (Read “And the Loser in the Smartphone Battle Is…”)

Article by profitconfidential.com

By Profit Confidential

Major cities across the U.S. economy are struggling. Yes, we saw great cities like Detroit go bankrupt. But don’t for a second believe it’s all over. The reality is we will have more situations like Detroit.

Take the City of Los Angeles, for example. In his budget proposal to the city council, the mayor of the city, Antonio Villaraigosa, said Los Angeles will have a budget deficit of $216 million in the current fiscal year. (Source: City of Los Angeles, April 20, 2013.)

But Los Angeles isn’t the only problem city in California. When I look at San Francisco, it shows even more trouble for the municipal bonds market. The city’s controller says the budget deficit will increase from $283 million last year to $829 million by fiscal 2015/2016. (Source: City of San Francisco, Office of the Controller web site, last accessed September 16, 2013.)

Minneapolis, Minnesota was downgraded by Moody’s Investors Service recently. This puts the city’s $679 million worth of general obligation municipal bonds on the line. (Source: Moody’s Investors Service, July 29, 2013.) A couple of the reasons for the downgrade by Moody’s were that property values in the city have declined and it has a pension liability of 4.3 times the operating revenue it received in fiscal 2012!

Risks are growing in the municipal bonds market. Let’s not forget: in Detroit, over 100,000 municipal bond investors were told, “Sorry, we can’t pay you.”

What we are seeing with U.S. cities sinking in debt should alarm us, but just like other crisis situations, like auto loans and student debt, no one wants to talk about it.

Municipal bonds continue to be issued at a rapid pace; in the second quarter of 2013, 8.9% more municipal bonds were issued than in the previous quarter. California, where we have been seeing a significant number of municipalities posting budget deficits, raised $13.6 billion worth of bonds in the second quarter. (Source: “Municipal Bond Credit Report,” Securities Industry and Financial Markets Association web site, last accessed September 16, 2013.)

The more I look into the municipal bonds market and how cities across the U.S. are registering budget deficits, the more I really wonder if it’s a safe place to be. My conclusion is that the municipal bonds are becoming dangerous. There are too many troubles with the cities backing the municipal bonds, which can’t be easily solved. Caution is the best option for those who are involved in the municipal bonds market.

Michael’s Personal Notes:

Last week, I attended the Toronto Resource Investment Conference, which is organized by Cambridge House International. This annual conference features companies involved in the resources sector, mainly gold bullion and silver explorers and producers.

To say the very least, the sentiment at the conference was dismal, and the “hope factor” just wasn’t there. After attending this annual conference for a few years, you tend to get an idea about what you will see and what kinds of opinions you will hear. This time was different. Attendance was way down, as were the number of gold companies exhibiting.

Those who pitched gold explorers, and gave their tips, were saying, “But you have to be really careful.” The “feeling” was gold bullion producing companies, be they senior miners or junior miners, face an anemic future ahead. And for those companies that explore for the precious metal, the “feeling” was that they will have trouble raising money.

But one thing all the speakers did agree on was that demand for the precious metal is increasing. I heard China is buying gold bullion; demand for the precious metal in India is robust; production at mints around the world is in overdrive mode; and so on. This is what I have already been writing about in these pages.

It was unusual to see the regular gold bugs actually being cautious on where the gold prices are going next. They were very clear that the damage that took place in the most recent sell-off would take some time to recover. They were concerned the price of gold bullion is being manipulated.

To me, all of this is negative sentiment—something I haven’t seen in years—is a bullish signal for gold prices. Attending the conference reminds me of what the “buy when there’s blood on the street” saying actually means.

Yes, it’s a time of elevated pessimism for gold bullion. Can it get worse? After all, we are hearing once again how The Goldman Sachs Group, Inc. (NYSE/GS) is calling for lower gold bullion prices ahead—even saying it could fall below $1,000 an ounce.

When I look at gold prices, I don’t look at daily fluctuations; I look at the big picture. When I do just that, I see the precious metal is still trending higher, as you can see in the chart below.

Chart courtesy of www.StockCharts.com

I remain bullish on gold bullion. I’m very interested to see if Goldman’s recent “sell recommendation” on gold pushes the metal’s price down again. And I like all the growing negativity surrounding gold bullion. Are we getting to the point we were at in 2001, when bearishness for gold bullion reigned? To me, these are all bullish signs.

What He Said:

“I see a deal when it’s a deal. And right now there’s a good ‘for sale’ sign flashing on gold bullion and gold producer shares. In fact, after peaking at the $690 an ounce level earlier this year, gold could be a bargain at its current price of around $650 per ounce. As a reader, you are undoubtedly aware of my negative stance on the general stock market and the U.S. economy. As the economic problems that continue to brew in the U.S., as these problems develop into others, and as they are finally exposed, what other investment but gold will worldwide investors turn to?” Michael Lombardi in Profit Confidential, March 14, 2007. Gold bullion was trading under $300.00 an ounce when Michael first started recommending gold-related investments. Many gold stocks recommended in Michael’s advisories gained in excess of 100%.

Article by profitconfidential.com

By Profit Confidential

Last week, I attended the Toronto Resource Investment Conference, which is organized by Cambridge House International. This annual conference features companies involved in the resources sector, mainly gold bullion and silver explorers and producers.

To say the very least, the sentiment at the conference was dismal, and the “hope factor” just wasn’t there. After attending this annual conference for a few years, you tend to get an idea about what you will see and what kinds of opinions you will hear. This time was different. Attendance was way down, as were the number of gold companies exhibiting.

Those who pitched gold explorers, and gave their tips, were saying, “But you have to be really careful.” The “feeling” was gold bullion producing companies, be they senior miners or junior miners, face an anemic future ahead. And for those companies that explore for the precious metal, the “feeling” was that they will have trouble raising money.

But one thing all the speakers did agree on was that demand for the precious metal is increasing. I heard China is buying gold bullion; demand for the precious metal in India is robust; production at mints around the world is in overdrive mode; and so on. This is what I have already been writing about in these pages.

It was unusual to see the regular gold bugs actually being cautious on where the gold prices are going next. They were very clear that the damage that took place in the most recent sell-off would take some time to recover. They were concerned the price of gold bullion is being manipulated.

To me, all of this is negative sentiment—something I haven’t seen in years—is a bullish signal for gold prices. Attending the conference reminds me of what the “buy when there’s blood on the street” saying actually means.

Yes, it’s a time of elevated pessimism for gold bullion. Can it get worse? After all, we are hearing once again how The Goldman Sachs Group, Inc. (NYSE/GS) is calling for lower gold bullion prices ahead—even saying it could fall below $1,000 an ounce.

When I look at gold prices, I don’t look at daily fluctuations; I look at the big picture. When I do just that, I see the precious metal is still trending higher, as you can see in the chart below.

 Chart courtesy of www.StockCharts.com

I remain bullish on gold bullion. I’m very interested to see if Goldman’s recent “sell recommendation” on gold pushes the metal’s price down again. And I like all the growing negativity surrounding gold bullion. Are we getting to the point we were at in 2001, when bearishness for gold bullion reigned? To me, these are all bullish signs.

What He Said:

“I see a deal when it’s a deal. And right now there’s a good ‘for sale’ sign flashing on gold bullion and gold producer shares. In fact, after peaking at the $690 an ounce level earlier this year, gold could be a bargain at its current price of around $650 per ounce. As a reader, you are undoubtedly aware of my negative stance on the general stock market and the U.S. economy. As the economic problems that continue to brew in the U.S., as these problems develop into others, and as they are finally exposed, what other investment but gold will worldwide investors turn to?” Michael Lombardi in Profit Confidential, March 14, 2007. Gold bullion was trading under $300.00 an ounce when Michael first started recommending gold-related investments. Many gold stocks recommended in Michael’s advisories gained in excess of 100%.

Article by profitconfidential.com

By Profit Confidential

Next month, one of my favorite benchmark stocks reports its third-quarter earnings. The company is Union Pacific Corporation (UNP), which is a great barometer on the U.S. economy.

The stock’s been in consolidation since May, and rightly so. This company has been going up in value on the stock market since 2000 with a major hiccup during the most recent financial crisis.

During its March low in 2009, the company was trading around $35.00 a share. Now it’s near $160.00 a share, not including dividends (current dividend yield is approximately two percent).

The railroad business is a mature and slow-growth area; but real economic growth is a tough thing to come by these days, and Union Pacific has been delivering the goods.

Last year, the company’s revenues were about $21.0 billion; in 2011, they were $19.6 billion and in 2010, revenues were $17.0 billion. Earnings were $3.9 billion in 2012, $3.3 billion in 2011, and $2.8 billion in 2010.

So while the growth is relatively unexciting, it’s still decent when combined with dividend increases. The marketplace has proven over the last few years that you can make great money on the stock market with dividend-paying, old economy names.

I think this trend will still be valid throughout 2014. The stock market is still a very risky place, and investment risk is high for equities. This is why institutional investors are sticking with the safest, dividend-paying names. In my view, Union Pacific is one of these names, and the company’s outlook remains sound.

This year, Wall Street expects Union Pacific to grow its earnings some 15%. Total sales growth for the year is currently expected to be 5.9%.

The company’s shares, in my view, are appropriately valued with a trailing price-to-earnings (P/E) ratio of approximately 17.8 and a forward P/E ratio of 14.3, according to Thomson Reuters.

The last time the company split its shares was in May of 2008 (two for one). It’s due for another share split any time now. (See “Strong Cash Flow, Increasing Dividends Make This Old Economy Stock Attractive.”)

In the first three quarters of this fiscal year, Union Pacific paid a dividend of $0.69 a share. Its next quarterly dividend, to be paid on October 1, 2013, will be a substantial increase at $0.79 a share.

A rising stock like Union Pacific, combined with increasing dividends, compounds wealth for stockholders. This is especially the case if those dividends are reinvested in new shares.

I think any long-term equity portfolio should have some exposure to the railroad business. It is old economy, but the business of freight is still a good business to be in and rail works very well.

The company is expected to report its third-quarter earnings on October 17, 2013. Analysts haven’t budged from their current consensus of $2.56 a share.

Union Pacific has a history of delivering on expectations, and I think the third quarter will be another good one for the company. I wouldn’t expect another dividend increase this year, but a share split would please the market.

Union Pacific is a worthwhile company to consider when it’s down. Generally speaking, railroad stocks are always worth following in terms of stock market dynamics and for individual stock selection.

Article by profitconfidential.com

By Profit Confidential

The stock market surged on Monday, but it wasn’t due to the report of any major positive economic data.

The S&P 500 surged on news that stimulus-friendly Fed Vice Chairman Janet Yellen may become the next leader of the Federal Reserve after front-runner Lawrence Summers announced his withdrawal. The boost to the stock market was due to the assumption that Summers was a supporter of tapering and less monetary stimulus.

Yet while the upward move was welcomed by Wall Street, it’s not what the U.S. economy needs. What the stock market and America really need are stronger economic numbers that support the rise in the stock market.

We need to see the jobs market picking up instead of losing steam, as was the case in August. After spending trillions of dollars on stimulus, we still need more growth in the economy.

Also, with the third quarter coming to an end in a few weeks, we need to see a boost in earnings in corporate America as a result of revenue growth, not because of aggressive cost-cutting and income manipulation. Revenues are estimated to grow 2.6% in the third quarter, according to FactSet. (Source: “Earnings Insight,” FactSet Research Systems Inc., September 13, 2013.) The estimate has already been revised downward from the three percent in June, so I’m skeptical.

If the economy was truly healthy, we should be seeing consistent jobs growth, better manufacturing data, higher consumer spending, and rising corporate revenues.

These are the reasons why the stock market should advance higher, and not simply because the easy money is allowed to flow unabated into the economy. When this happens, it opens up the stock market to potential issues and selling down the road.

According to FactSet, earnings growth for the S&P 500 in the third-quarter earnings season is estimated at 3.5%, with the financials leading the way and healthcare trailing the group.

But as of September 13, about 88 S&P 500 companies have issued negative guidance for the third quarter, versus a mere 18 issuing positive guidance. The negative guidance representing 83% of the companies that have issued guidance is well above the five-year average of 62%. In my view, this implies corporate America is shakier now than in the past few years.

The stock market should advance based on solid fundamentals with reference to the economy and the companies. The problem over the last few years is that many poorly performing companies moved higher only because of the overall momentum of the broader stock market. Without the support of solid fundamentals, these companies could easily plummet on the charts. (Learn how to protect your investments from the Fed-induced stock market in “Worried the Market Will Crash, but Don’t Want to Sell Your Stocks? Buy This Insurance Policy.”)

With the third-quarter earnings season set to begin in a few weeks, it will be important to see if revenues are growing to drive earnings. If this is the case, then I would be more bullish.

Article by profitconfidential.com

By Profit Confidential

There’s a notion among central banks of the global economy that goes like this: if you lower interest rates, you will get economic growth. On the surface, it makes sense; easy monetary policies by central banks are supposed to bring confidence to an economy—they’re supposed to encourage consumers and businesses to borrow, which should translate to more jobs created and an improvement in the standard of living.

This phenomenon of lowering interest rates to spur the economy has spread through the global economy like wild fire.

Interest rates at the central bank of Australia have been trending lower since the financial crisis. In December of 2007, the cash rate (the benchmark interest rate) there was 6.75%. Fast-forwarding to today, this rate is 2.5%. (Source: Reserve Bank of Australia web site, last accessed September 16, 2013.)

Brazil’s central bank has lowered its benchmark interest rate since the end of 2008. The interest rate dictated by the country’s central bank stood at 13.75% near the end of 2008; now it stands at nine percent. (Source: Banco Central do Brasil web site, last accessed September 16, 2013.)

The benchmark interest rate in South Africa is down almost 50%. The South African Benchmark Overnight Rate (SABOR) was above 10% near the end of 2007. Now it stands at 4.82% and has been hovering around this level for some time. (Source: South African Reserve Bank web site, last accessed September 16, 2013.)

While we’ve been watching this happen, no one is really asking the question how are interest rates being kept low? The answer: to keep the interest rates low central banks print more paper money and stay involved in their bond markets.

Since central banks in the global economy started to lower their interest rates, their money supply has gone up significantly. For example, since the last quarter of 2007 to the second quarter of 2013, Brazil’s M1 money stock (the amount of notes and coins in circulation plus timed deposits, such as checking accounts) has increased over 52%. (Source: Federal Reserve Bank of St. Louis web site, last accessed September 16, 2013.)

But in spite of all the money printing and other games being played by central banks in their effort to keep interest rates down, the global economy isn’t seeing robust growth. The International Monetary Fund (IMF) has lowered its expectation on growth in the global economy repeatedly.

Hence, despite their easy money policies, central banks are failing in their attempts to revive the global economy. But what are the long-term effects of all this newly created money? One thing that really does concern me is inflation at the global level.

While the skewed government numbers don’t show it, inflation is a problem right now. Eventually, inflation will be reflected in the government stats. And to control that inflation, higher interest rates will be required. In fact, the massive jump in the yield of the 10-year U.S. Treasury bond (from 1.84% at this time last year to 2.85% today) is warning of inflation ahead.

The 30-year downtrend in interest rates may have finally come to an end. As an investor, you need to look at your investments (and your debt) and realign your affairs accordingly to account for higher inflation and higher interest rates ahead. And you better do it now before it’s too late!

Article by profitconfidential.com