InvestMacro Forex News

By Profit Confidential

One company that I use as a benchmark stock in manufacturing is Fastenal Company (FAST). The Street is looking for just a 6.5% gain in quarterly revenues and a three-penny improvement in comparable earnings. The company reports today.

Many corporations have reported similar guidance. Among many investors, there is little expectation in the way of revenue growth and even less in terms of earnings growth.

In an unscientific read of countless forecasts, Wall Street seems to be lumping the bulk of corporate profits into 2014. This year is still very much a recovery year in terms of the bottom line. It’s all about getting back to pre-recession levels.

As a publicly traded company, I find Fastenal to be expensively priced given its growth prospects. With a trailing price-to-earnings ratio of approximately 31 and a forward (2014) price-to-earnings ratio of approximately 25, this company isn’t cheap.

Alcoa Inc. (AA), another benchmark, reported numbers that were a little better than the first quarter. To me, Alcoa is not as much of an important benchmark as it used to be, but the company is still viewed by the Street as an important barometer of manufacturing.

The company slightly beat consensus by reporting sales of $5.85 billion and adjusted earnings per share that beat by a penny at $0.07. But what was truly notable about Alcoa’s numbers was the resilience the company saw in key markets, particularly in aerospace applications.

Over the last month or so, forward-looking earnings estimates for Alcoa have come down across the board. But that may change.

In terms of sales, the company has been treading water since 2011. And earnings have been all over the map.

Expectations for corporate earnings this season are low, and the numbers are likely to fit in the weaker global economic news we’ve seen, especially abroad. Big investors definitely aren’t expecting much, but once again, it’s likely that they will be rewarded with consistency from the safest names.

Another benchmark, WD-40 Company (WDFC) reported very solid financial results. For the fiscal third quarter (ended May 31, 2013) sales were $93.1 million. The company generated a solid seven-percent gain in revenues. Year-to-date fiscal revenues also grew seven percent.

Earnings gained 12% over the comparable quarter, reaching $10.3 million. Year to date, they reached $31.7 million, for an increase of 19% comparatively.

So basically what we have so far from benchmarks are modest, but decent, earnings results, with the exception of NIKE, Inc. (NKE), whose numbers were strong. (See “The One Stock That Always Seems to Keep on Rising.”)

The stock market has been due for a correction (which would be a very healthy development) for a number of months, but it’s all about financial results now.

Weak second-quarter earnings could be the catalyst. But the numbers so far are strong enough for institutional investors to stay in the game.

Article by profitconfidential.com

By Profit Confidential

As many of you know, I’m a big supporter of equities as an investment over the long run, especially with small-cap stocks.

But I’m also pragmatic and feel you should always look to take some money off the table—especially after such strong advances in the stock market as we saw in the first half of this year.

But there are also those bulls like Ron Baron of Baron Capital who estimates the Dow Jones Industrial will reach 30,000 in 10 years and 60,000 in 20 years. (Source: LaRocco, L.A., “Dow Will Hit 60,000 in 20 Years: Ron Baron,” CNBC, July 8, 2013.)

While the estimates by Baron appear to be crazy at first glance, they are actually achievable at a compounded rate of 7.73% per year for the next 10 years and 7.46% annually to reach 60,000 within 20 years. For this to happen, everything related to economic growth needs to play out positively.

But in reality, there will continue to be ups and downs in the stock market.

While Baron doesn’t really believe in trading the market and advises a buy-and-hold strategy, I’m leaning more toward taking some profits on strong advances and buying on stock market corrections.

The current situation points to another possible buying opportunity to come in the stock market.

After a correction that drove the S&P 500 down more than five percent from its May peak, the stock market has rallied to narrow the decline to a mere 2.74% from the peak.

I really had hoped for and expected more of a correction in the stock market as a buying opportunity. I still feel there will be another chance to buy coming soon.

Take a look at the chart of the S&P 500 below. Note the ovals indicating the selling pattern, and the recent selling that was associated with the mini correction in the stock market.

Chart courtesy of www.StockCharts.com

My concern is that the S&P 500 has trended lower from its May peak, characterized by two straight corrections. If the index fails to rally back to between 1,660 and 1,680 in the coming weeks, we could see another relapse to below 1,600, based on my technical analysis.

I view another move below 1,600 as a potential buying opportunity; but be careful, as the index could falter to as low as 1,540.

While there will likely continue to be volatility in the S&P 500, the overall indicators remain bullish and I see stocks moving higher—but not at the same torrid pace as we saw in the first half.

Article by profitconfidential.com

Article by Investazor.com

The press conference of Bank of Japan announced its optimistic view concerning the next 2 years period. In this matter, the latest data about Japan came better, together with the successful implemented quantitative easing, promise to keep Japan safe. Thereby, an increase in exports and public investments along with a moderate increasing in industrial production and accommodative financial conditions have great potential to lead in maximum 2 years to the targeted 2% inflation. The monetary stimulus activity has been shown to have great results so far and is being maintained for the moment with the possibility of adjustments. Moreover, the International Monetary Fund rised its forecast for Japan from 1.6% to 2% growth this year, becoming the only bright economy from the Group of Seven industrialized economies.

On the other hand, the slowing economy of China is posing serious problems, as well as the weak Europe, the fragile United States and the weakening of the commodity-exporting economies.

The post Should We Believe in Japan’s Recovery? appeared first on investazor.com.

By The Sizemore Letter

Listen to Charles discuss Fed Chairman Ben Bernanke’s recent comments and what they mean for the stock and bond markets with Mike Robertson and Peggy Tuck on Straight Talk Money Radio.

Article by Investazor.com

In this article you will find 6 essential hints scalpers use in order to end up with profitable trading sessions. As it is the second episode of our trading strategy guide, we invite you to  read the first article on forex scalping.

In the previous article we defined forex scalping as being a small steps strategy, in which short opened transactions are meant to bring profit. However, it is important to know that a good scalper will not manage to be profitable only by using his/her intuition and that luck is not enough for maintaining long term positive results.

Furthermore we are going to give you some hints in order not to restrict your trading strategy, but to improve it by giving evidence of some main untold secrets.

1) Analysis, Forecast and Money management are the key

In order to have a positive outcome and to constantly maintain the incomes, scalpers use strategies and analyses that attract the probability on their side. For this purpose technical and fundamental analysis techniques are used, together with money management. Of course personal intuition and scalper’s flair is important but always guided by strong analysis and long term strategies.

2) Learn about the instrument you are trading

It is mandatory for the scalper to be acquainted with the characteristics of the instrument that is traded. Knowing its volatility, its movement force, the conditions that facilitate the moves and the factors that contribute to the movements of the traded instrument are some basic notions that a good investor must know.

3) Hunt sharp price movements

It is recommended to base your trading sessions on sharp movements and not on slow movements that happen in the markets. This is not only the case of the currency market, but also of the commodities  and equities markets and is directly related to volatility. The challenge is to be aware of the trade opportunities created by the shortages of liquidity that lead to imbalances in the market.

4) Use Leverage

Leverage is a mechanism through which a brokerage house offers to the investor the opportunity to use a bigger amount of money than the initial investment. It depends on the broker you work with, but normally it is of 50:1, 100:1, 200:1 or even 800:1 and more, but these values are not quite recommendable. In relations with our strategy, this mechanism of leverage has been proven as being useful in order to overcome small profits obtained with little amount of money and repeated short transactions. The level of leverage remains a tender spot of the discussion, because the risks increase proportionally with the leverage amount.

5) Use fundamental analysis

It is often said that fundamental analysis is not useful for scalpers. We can only partially agree with this affirmation and we are to explain why. Indeed, fundamental analysis at a global level offers a general image on what can happen to an economy and with the evolution of a financial instrument over a longer period of time. However, it is proven to be useful for the scalper in the sense that it can be used also on isolated events such as the release of some macro-economical indicators, that lead to sudden moves, often fairly powerful of the market. Therefore, together with technical analysis, fundamental analysis can offer to the scalper a strategy with high probability of success.

6) Correctly choose the strategy that suits you

Even though is considered a trading strategy good for the beginners and novices, we want you to know that it is a complex method of trading. It is very important to know that there are some auxiliary tools and automated systems that ca contribute to successful transactions. Only by having a complete image on all the possibilities offered by a trading strategy you are going to be able to choose the one that fits you. Of course, experimented investors can also choose to trade only manually, without using other tools.

Previous << Forex Scalping – Beginner to Advanced Strategy Guide <<

The post 6 Essential Scalping Tips For Beginners appeared first on investazor.com.

By www.CentralBankNews.info

By The Sizemore Letter

It’s hard to take something called a “Magic Formula” seriously.  But you should.  It’s beaten the market by a wide margin over the past two decades and with less volatility.

The Magic Formula—a stock screener designed by hedge fund guru Joel Greenblatt –ranks stocks by two factors:

1. Profitability (based on Greenblatt’s chosen metric, Return on Capital)
2. Earnings yield (the inverse of the P/E ratio, defined here by Greenblatt as EBIT / Enterprise Value)

Buying good, profitable companies at cheap prices is not exactly a revolutionary idea; this is what Warren Buffett has successfully done for decades.   But Greenblatt has created a systematic way to do it, and most of the heavily lifting of number crunching is done by the screener.

By Greenblatt’s analysis, the Magic Formula generates annual returns in excess of 30% per year.  Independent back tests have generally come up with smaller returns, though the general consensus is that the Magic Formula does indeed beat the market, even after taxes and transactions costs are taken into effect.

For the casual investor, Greenblatt recommends buying a portfolio of 20-30 Magic Formula stocks, holding for one year, and then re-running the process annually.  That’s one way to do it.  But I prefer to use Greenblatt’s screener as a starting point for ideas.  I like to see which sectors are overweighted on the screen.  And while I am not a big fan of technical analysis and charting, I do take a quick look at a chart to see what the stock price is doing.  It’s usually a bad idea to try to catch the proverbial falling knife; all else equal, I like to see a stock in the early stages of a new uptrend.

So with all of this said, let’s take a peek at which stocks make the Magic Formula cut as of July.  I ran a screen of for the top 30 Magic Formula stocks with market caps over $1 billion, and here are the results:

A few names jump off the list, such as former market darling Apple (AAPL).  It’s a strange world  in which the second-largest company in the world by market cap appears in a value stock screen with a strong bias towards small caps.  But Apple is cheap enough—and profitable enough—to make the cut.

After spending most of the fourth quarter of last year in free fall, Apple has traded in a range of 400-450 for most of this year.  Could the stock have further to fall?  Absolutely. But it fits the Magic Formula criteria, and the price seems to have a fairly hard floor just below $400.

Apple’s old PC nemesis Microsoft (MSFT) also made the list, as did Cisco Systems (CSCO)—both of which I own in my dividend-focused portfolios.

Technology companies make up a full third of the screen.  In addition to the three I already noted, video game maker Activision Blizzard (ATVI), enterprise IT solutions companies CACI (CACI) and Unisys Corporation (UIS), semiconductor maker Cirrus Logic (CRUS), computer manufacturer  Dell (DELL), cyber security firm SAIC (SAI) and hard drive manufacturer Seagate Technologies (STX) made the screen.

Health and nutritionals company Abbott Labs (ABT)—a Sizemore Capital holding—also made the cut, as did Big Tobacco firm Lorillard (LO) and defense giant Northrop Grumman (NOC).

There are a couple points to note here.  First, cheap companies—even those with high returns on capital—can stay cheap for a long time.  Microsoft and Lorillard have both been regular fixtures on the Magic Formula screen for several years.  (Of course, both have also beaten the S&P by a healthy margin over the past five years, so duration of time on the list is not necesarily a bad thing.)

Second, some companies are not really investable at this point, or at least shouldn’t be.  I’ll use Dell as an example.  Given that Dell is currently in the midst of heated dispute over whether to take the company private, this is probably a company you should avoid.

I might also add that you don’t have to use my screen.  Greenblatt allows you to set a much lower market cap minimum (as low as $50 million), though you’ll want to be careful when trading in small, illiquid stocks.  And you can also expand the list from 30 to 50 stocks to give yourself a larger pool to research.

One final note: the math behind the Magic Formula is explained in Greenblatt’s book, The Little Book that Beats the Market. 

SUBSCRIBE to Sizemore Insights via e-mail today.

By www.CentralBankNews.info     Latvia’s central bank cut is refinancing rate by 50 basis points to 2.0 percent, narrowing the large gap to the European Central Bank’s (ECB) 0.50 percent refi rate, saying “inflation indicators are consistently low and the rate of economic growth poses no risks to price stability.”
    Latvia will become the 18th nation to adopt the single currency on January 1, 2014.
    The Bank of Latvia, which last cut its rate in September 2012, also said it was lowering its forecast for inflation this year to 0.7 percent, from a previous forecast of 1.0 percent, while it was raising its forecast for economic growth, with Gross Domestic Product forecast to rise to 4.1 percent from a previous forecast of 3.6 percent.
    Latvia’s GDP expanded by 1.4 percent in the first quarter from the fourth for annual growth of 3.6 percent, down from 5.1 percent in the fourth quarter.
    The inflation rate rose to 0.2 percent in June from deflation of 0.1 percent in May.
    In addition to cutting its refinancing rate, the Bank of Latvia also cut its marginal lending facility rates  with the size of the cut dependent on the length of time banks are using the facility.
    In its convergence report from June, the ECB said the high level of foreign deposits in Latvian banks posed “an important risk to financial stability.” Most of the foreign deposits are believed to be from Russia and amount to about one-third of Latvia’s GDP.

    www.CentralBankNews.info

By www.CentralBankNews.info     Serbia’s central bank left its key policy rate steady at 11.0 percent, saying inflation continues to decline due to lower demand and repeated that it should return to the central bank’s target range by October.
    The National Bank of Serbia (NBS), which embarked on a monetary tightening campaign last year to hold down inflation before cutting rates by a total of 75 basis points in May and June, said a good agricultural season and global market prices should lower domestic food prices and a deceleration in credit activity and lower growth in wages “confirm that low aggregate demand will continue to be the key disinflationary factor in the period ahead.”
    Serbia’s inflation rate eased to 9.9 percent in May from 11.4 percent the previous month, continuing the decline since hitting a recent high of 12.9 percent in October last year. The central bank targets inflation of 4.0 percent, plus/minus 1.5 percentage points.
    Like other emerging markets, Serbia’s markets have been hit by an outflow of funds from the Federal Reserve’s plan to taper quantitative easing later this year, and the central bank last month intervened in foreign exchange markets several times to slow the decline in the dinar.

    From the beginning of May through July 9, the dinar has depreciated just over 3 percent against the euro, quoted at 114 to the euro earlier today.
    “Unfavourable movements in international financial markets have led to higher investor risk aversion, which has sparked an increase in risk premia and depreciation pressures almost throughout the  region,” the central bank said.
    The central bank again appealed to the government to reduce its deficit further. Last month the government said it would cut spending to reduce this year’s deficit to 4.6 percent of Gross Domestic Product after the International Monetary Fund warned is could reach 8 percent.
    “The Executive Board holds that the effects of additional fiscal consolidation measures and the implementation of structural reforms will contribute to further subsiding of inflationary pressures and aggregate demand and will help increase investor interest in the Serbian economy.”

    www.CentralBankNews.info

By www.CentralBankNews.info     Malaysia’s central bank held its overnight policy rate (OPR) steady at 3.0 percent, as expected, but said the weak global economy may impact the country’s economic growth though domestic demand continues to support growth.
    The Central Bank of Malaysia, which has held rates steady since June 2011, said domestic demand in emerging economies remains a important source of growth for the global economy but the prolonged weakness in the “external environment has begun to affect domestic economic activity in these economies.”
    “For the Malaysian economy, domestic demand has continued to support growth amid the continued moderation in external demand. The sustained weakness in the external sector may, however, affect the overall growth momentum,” the central bank, known as Bank Negara Malaysia, cautioned.
    Malaysia’s Gross Domestic Product contracted by 4.9 percent in the first quarter from the previous quarter for annual growth of 4.1 percent, down from 6.5 percent. The bank has forecast growth of 5-6 percent this year compared with 5.6 percent in 2012.
    But the central bank said private consumption in Malaysia is still expected to remain steady, underpinned by higher incomes, while capital spending in domestic-oriented industries and infrastructure projects will support investment

    Malaysia’s inflation rate rose slightly to 1.8 percent in May from 1.7 percent but the central bank said it should rise in the second half of the year due to domestic supply and cost factors.
    “Pressures from global commodity prices are also likely to be contained given the moderate global growth prospects,” the central bank said.

    www.CentralBankNews.info