InvestMacro Forex News

By Investment U

In focus today; four kinds of inflation driven by money printing, Apple (Nasdaq: AAPL) is a buy again and the slap-in-the-face award.

When most people think of inflation they think of price and wage inflation.

But there are five types of inflation:

• Wage and price
• Economic output\GDP
• Savings and debt repayment or default
• Financial asset inflation
• Trade deficit inflation

Money printing drives four of the five and we are in the midst of the money printing Olympics. So this is something we need to address.

Goods and services, the inflation most of us watch as a measure of overall inflation, isn’t always driven by the printing presses in D.C.

In the 60’s we had output or GDP growth inflation, in the 70’s goods and services inflation and in the 90’s, and early 2000’s, we had investment or asset inflation. Trade deficit inflation, the fifth types is too complex to explain in the short time I have here and is the one that has the least effect on individual’s portfolios.

A recent Seeking Alpha article recommended several ways to protect your portfolio and at the same time benefit from the effects of all types of inflation. But most interesting were three big surprises about inflation.

The best way to protect yourself from inflation of good and services, according to the Seeking Alpha article, is with TIPS; inflation adjusted treasuries. Gold traditionally has been thought of as the best inflation hedge, but it has a terrible .22 correlation factor.

That means only 2.2 times out of 10, gold moved up in price with goods and price inflation. Surprise number one!

The other big surprise was the stock market. There appears to be no correlation between the stock market and GDP inflation or over heated growth. Corporate bonds and preferred stocks do better when the GDP is roaring. Surprise number two.

Obviously stocks do best during times of asset inflation, but the pick for outperforming during these periods; a broad market play like SPY or a similar ETF. Number three!

During savings or debt repayment inflation, treasuries are the play. Treasury prices run up during periods like these.

The conclusion of the SA article, you can protect yourself and benefit from all forms of inflation by holding treasuries, stocks, corporate bonds and TIPs. That should sound very familiar to Oxford Club members.

[Editor’s Note: We all like to throw around the term “money printing.” But the fact is that 93% of U.S. currency now exists only in a computer – simply as a series of ones and zeros.

And things are only going to get worse.

Soon, physical currency may actually become extinct as we know it. And our friends at The Oxford Club have just uncovered the inconvenient truth that this could happen as soon as this year. But there are ways to profit handsomely from this “extinction,” of sorts.

For all the details, click here.]
Apple – The Market King – is Back

Brett Jensen of RealMoney says AAPL, despite its drop from the highest market cap in the world, is back in a buy range.
Jansen stated in a recent article that $420 was its bottom and all the numbers point to another run up in price.

In a down market day recently the disappointing debut of Samsung’s newest smart phone was good for a 2% jump in AAPL’s price.
Positive comments by the legendary Bill Miller are adding to the renewed interest in the stock as well. Miller said in a CNBC interview that AAPL is trading at a lower EV to EBITDA multiple than even HP and he’s buying January calls on it. If you remember the EV to EBITDA was the primary measure for buying a company.

Miller also talked about the likelihood of a major payout by the company as a regular dividend increase or a special dividend. According to Miller, either will cause a great deal of anticipation in the stock price.

And, in recent trading, AAPL has posted both higher highs and higher lows and on almost any sort of valuation basis this stock looks cheap. It is priced at just seven times forward earnings, has $140B in cash, is expected to have double digit revenue growth and has a PEG of .53, under 1 is considered a buy.

If you’ve been waiting for a jumping in point now may be it. Of course, no one can ever call the exact bottom, but the numbers are pointing to a run up in price. The 2.5% dividend and expected dividend increase are icing on the cake.

SITFA: Morgan Housel Edition

And now – the real reason you watch this video – the SITFA

This week, two pearls of wisdom from one of my favorites, Morgan Housel.

These are brutal. First up, a snipe at our business:

“There is virtually no accountability in the financial pundit arena. People who have been wrong about everything for years still draw crowds.”

And the truest of all Morgan’s bits of wisdom…

“The analyst who talks about his mistakes is the guy you want to listen to. Avoid the guy who doesn’t – his mistakes are even bigger.”

Good Investing,

Steve

Article By Investment U

Original Article: Apple (Nasdaq: AAPL) Is a “Buy” Again… and Money Printing

By www.CentralBankNews.info
    Last week nine central banks took policy decisions with six keeping rates on hold while Colombia and India again cut rates, and Egypt became the first emerging market central bank to raise rates this year in an attempt to stem inflationary pressures despite the fragile economic environment.
    But the latest developments in monetary policy – even the Bank of England’s expanded remit and a U.S. Federal Reserve meeting – were overshadowed by the latest installment in the running euro zone drama, an event with the potential to reignite last year’s crises and “undermine growth prospects further,” as the South African Reserve Bank observed.
    Much was written about the awful decision to impose a tax on Cyprus’ small bank depositors. Philip Lowe, deputy governor of the Reserve Bank of Australia, summed up much of the criticism, saying the decision threatens the integrity of all euro zone bank deposits and could lead to a run on banks in other countries – hardly the way to create a stable banking system and boost confidence.
    Through the first 12 weeks of the year, 78 percent of the 112 policy decisions taken by the 90 central banks followed by Central Bank News lead to unchanged rates, the same percentage as after the first 11 weeks.
    The six central banks that held rates steady last week included those from Nigeria, the United States, South Africa, Iceland, Trinidad & Tobago and Uruguay.
    Globally, 19 percent of policy decisions so far this year have lead to rate cuts, largely by central banks in emerging economies, a ratio that was steady from last week.
    Half of this year’s 21 rate cuts worldwide have come from emerging market central banks and last week India and Colombia continued to ease their policy stances, as widely expected.
   But while the Reserve Bank of India said it has limited room to cut rates further given inflationary pressures, Banco de la Republica Colombia complained that its rate cuts have not been transmitted fast enough to the economy and inflation is forecast to remain below target.
    Egypt became the first emerging market central bank to raise rates this year, a decision that must have pained its policy makers given the battering its economy has taken during two years of political turmoil following the overthrow of President Hosni Mubarak.
    But the Central Bank of Egypt judged that “disanchored inflation expectations are more detrimental to the economy in the medium term,” and raised rates by 50 basis points. It warned that it would not hesitate to change rates again to ensure price stability.
    The Federal Reserve’s Federal Open Market Committee decided to continue with its monthly purchases of $85 billion of housing-market debt and Treasuries, a decision that was widely expected.
   
    The Bank of England (BOE) was in the news last week with the UK Chancellor of the Exchequer, or finance minister, adjusting its remit, giving it more flexibility to tackle the sluggish economy.
    The Chancellor, George Osborne, confirmed the 2 percent inflation target and re-stated the primacy of price stability in the monetary policy framework instead of picking a nominal growth target as had been discussed in media.
    He confirmed that the BOE should be flexible in its interpretation of this medium-term inflation target. This means that as long as inflation is trending toward 2 percent, the BOE can use “monetary activism” and deploy new unconventional policy instruments – in consultation with the government – that other central banks have used to help stimulate growth.
    But the BOE’s remit was adjusted in two important ways.
    Firstly, the BOE can now “deploy explicit forward guidance,” a phrase that describes how central banks manage expectations by informing investors of the expected future path of policy rates.
    As long as the central bank is credible, the thinking is that financial markets will then align market rates, especially long-term rates, to reflect the central bank’s guidance and thus support its policy.
    Secondly, this forward guidance – used by a growing number of central banks worldwide – will now be linked to specific thresholds of the BOE’s own choosing. This is similar to the Federal Reserve which started in December telling markets that it expects to maintain ultra-low rates at least as long as the unemployment rate is above 6.5 percent and inflation doesn’t top 2.5 percent.
    The BOE will give an assessment of the use of thresholds and which it may employ in its August inflation report, the month after Bank of Canada Governor Mark Carney takes over from Mervyn King. Under Carney, the Bank of Canada was the first central bank to start using forward rate guidance in April 2009.

    There was good news from global banking regulators.
    In its latest survey of how major banks would do under the new Basel III regulations, the Basel Committee on Banking Supervisors found that the largest global banks now only have a capital shortfall of 3.7 billion euros, down by 8.2 billion in the first half of 2012.
    One of the factors restraining banks from lending and thus stimulating economic activity has been the need to shore up their capital base in light of new tougher banking regulations.  Once the banks meet those regulations, they should become more eager to extend loans.
    Illustrating the subdued state of global banking, the latest quarterly review from the Bank for International Settlements (BIS) said total cross-border lending by major banks rose by only 0.1 percent, or $33 billion, in the third quarter of 2012, the smallest quarterly rise registered by the BIS in 13 years.
    But while lending to the euro zone continued to contract, the BIS highlighted the growth of Asian capital markets. Central bankers have worked for many years to deepen Asia’s markets.
    BIS data showed that global bank lending to Asia-Pacific is contracting while private, non-banks, especially high net worth retail investors, are plowing funds into that region as corporate bond markets develop.
    The inflow of capital to emerging economies from banks dropped to $147 billion in 2012 from $154 billion in 2009, while the inflow of private funds to those economies has exploded to $365 billion from $155 billion.

   
    www.CentralBankNews.info

By Bill Bonner – billbonnersdiary.com

Will gold be the “worst investment of 2013”?

Has been so far…

View Larger Chart

Gold held above $1,600/oz yesterday. You’d think it would do better. Ben Bernanke just pledged to keep his printing presses whirring… even though some areas of the economy — such as housing — are improving.

Won’t an improving economy bring more of this printing press money out in the open… where it will bid up prices?

And if the economy doesn’t improve, won’t Ben Bernanke keep printing
money… even increasing the output of his dollar-printing machines…
until the old buck finally gives way?

So, why is gold doing so badly? Is the bull market in gold, which began nearly 14 years ago, finally over?

Buried Treasure

Those questions were put to a panel of which we were part, in
Cafayate last weekend. The questioners were mostly “hard money” people.
The questioned, including your editor, had a generally gold-buggish bias
too.

So, what were the answers?

We can only recall our own:

“A couple years ago a cache of gold objects and coins was found in
Yorkshire. These were items that had probably been buried to hide them
from the fighting that was going on in the area during the 8th century.
No one knows what happened to the owners, but they never returned to dig
up the treasure. Instead, it was found by accident, 1,300 years later.

“And yet the gold of which the objects were made is just as good as
it was then. And the value of it — compared to goods and services on
offer — is also about the same, at least inasmuch as we are able to
piece together prices from that era and compare them with prices today.

“That… and everything else we know about it… leads me to believe
that gold in the future will be worth more or less what it is worth
today too. In our lifetimes, we’ve seen gold go up and go down. But it
doesn’t go away. And if you had gone out to buy a new Buick in 1935 or
so… you would have paid for it with about 25 gold ounce coins. You can
do that today, too.

Thinking for the Long Run

“So, if you are thinking of the long run, you will definitely want to
hold gold rather than shares in today’s corporations… or today’s
paper dollars… or promises by government to repay you in its own IOU
paper currency.

“Of course, I know that many of you are not concerned with the long
run. In the long run we’re all dead. So what does matter? It’s the short
run that matters. And in the short run what is gold likely to do?

“Who knows? But it would be very strange for a 14-year bull market to
end with its subject still reasonably priced. Typically, they end with
unreasonable prices.

“Gold is not especially overpriced now. There is no gold mania happening. The cover of TIME
magazine is not featuring a gold coin or predicting the end of paper
money. Adjusted for even the Bureau of Labor Statistic’s inflation rate,
gold still hasn’t come near its high set 32 years ago.

“Most people in America have still never seen a gold coin. But they
will. Unless this time really is different… unless this really is a
new monetary era… you can presume that what happened in the past will
happen again. And what happened in the past was that paper money systems
always blew up and gold always becomes infinitely expensive in terms of
the depreciating paper money.

“We don’t know when this will happen. But we don’t see any reason why
it shouldn’t. They keep telling us that the Fed is doing no harm by
printing $85 billion more each month.

“Official inflation rates are low… and falling, they say. But if
they calculated the inflation rate the way they did when people were
wearing Whip Inflation Now buttons, back in the Carter years, the CPI would be at 9.6%. And bond yields would be at 10% or 12%.

“… and people would be struggling to pay 13% mortgages… and the
feds would be desperate to sell bonds with 15% coupons… and the dollar
would be collapsing… and the entire system would have the shakes…

“… and we wouldn’t be having this discussion. We’d all be expecting
inflation to hit 20% and happily waiting for gold to reach $5,000 an
ounce.

“No one in this room or anywhere else knows where the price of gold
is going next year or the year after. All we know is that the risks of
owning it are fairly low… while the risks of not owning it are high.”

Regards,

Bill

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By Aaron Gentzler – insideinvestingdaily.com

Charles J. lives in San Jose, Calif. He works as a software developer.

But ever since November 2009 Charles has been collecting $332.67 in extra income each month. That’s $3,992 a year. All Charles had to invest to set up that perpetual income was $40,000.

That works out to a net annualized yield on his investment of 10% —
or about five times what he could make investing in Treasury bonds.

And thanks to the power of compounding, at this rate a $25,000
investment will become $64,725 in 10 years. And a $50,000 investment
will become $129,451.

This income — and the potentially massive compounding returns it can
create — has nothing to do with Charles’s job. It’s not from rental
income on a second home either. And it’s not from stock market dividend
yields… options premiums… or the bond market.

The checks come from an entirely different source. Put simply, Charles has become a “bank.”

You read that right. Charles earns his income checks by lending to
other Americans who need money. To date, he’s helped over 4,000 people.

Some of these people need money to pay off high-interest credit card
balances. Some need money to cover medical expenses, or to complete a
home repair, or even to start a business.

Charles doesn’t like taking risk. In fact, he’s ultra-conservative
about who he lends to. He helps folks who have been at their current job
for a year or more. He also likes folks who need $20,000 or less.

The borrowers Charles invests in have an average FICO score of 708 —
about 18 points better than the national average. They have an average
15% debt-to-income ratio (excluding mortgage debt). Most bankers will
tell you that less than 30% is considered “financially healthy.”

The average borrower Charles helps also has 14 years of credit
history and a personal income of $69,924. That’s in the top 10% of the
U.S. population.

How does Charles become the “bank” and earn an extra $4,000 a year?

He uses a groundbreaking peer-to-peer financial community www.LendingClub.com. It’s the most revolutionary and groundbreaking financial innovation of your lifetime.

Lending Club cuts out banks altogether by bringing together
creditworthy borrowers with savvy investors so that both can benefit.
(Which is why so few people have heard about it.)

Since opening in May of 2007, Lending Club has loaned out over $1.5 billion. And it is issuing $2.7 million in new loans each day by putting to work the capital that folks like Charles J. invest.

This is not some risky, fly-by-night operation. It’s strictly for
creditworthy borrowers. Lending Club immediately denies any applicant
not meeting strict lending standards. In fact, it denies 90% of all loan requests.

This gives lenders… people like Charles J… a big margin of
safety. The numbers speak for themselves: 93% of investors at Lending
Club (regardless of how many notes they’re invested in) make between
6-18% annual return, net of all fees and defaults.

I recommend you visit Lending Club’s website immediately and
familiarize yourself with the big idea behind “peer-to-peer” lending. It
not only will hand you a super-safe yield outside of the financial
markets, but also has the potential to radically transform how Americans
manage their wealth and work their way out of debt.

In fact, I am so excited about this idea that I am recommending that paid-up subscribers of my advisory service, Unconventional Wealth, put 25% of their available capital to work in Lending Club immediately.

I have also given them a number of insider secrets on how to maximize their returns
and minimize their risks. But even without these secrets, this is hands
down the safest way to make a 9+% yield available in America today.

Best Regards,

Aaron

By www.CentralBankNews.info     The Central Bank of Trinidad & Tobago held its benchmark repo rate steady at 2.75 percent, saying its current accommodative stance was appropriate in light of subdued price pressures, slow demand for credit and an expected improvement in economic activity in the course of 2013.
    The central bank, which cut rates by 25 basis points in 2012, said the headline inflation rate rose by 0.3 percent in February for an annual rate of 5.9 percent, down from January’s 7.3 percent, due to a decline in food price inflation to 10.6 percent from 13.8 percent.
    The annual core inflation rate, which excludes food, slipped to 2.1 percent in February from 2.2 percent in January, the central bank added.
    Credit to the private sector remained subdued, slowing to an annual rise of 1.9 percent in January from 2.1 percent in December as credit to private businesses declined for the second consecutive month while loans to consumers and real estate mortgage lending rose.

    “On account of significant net domestic fiscal injections and relatively low demand for credit, liquidity in the financial system continued to increase,” the central bank said, with banks’ excess reserves at the central bank up to a daily average of $5,961.9 million from $5,125.5 million.
    The central bank said foreign exchange sales helped remove $415 million from the banking system and the “the central bank stands ready to employ additional measures in coming month based on the evolution of financial system liquidity.”
    Trinidad and Tobago’s Gross Domestic Product contracted by an annual 1.79 percent in the second quarter.

    www.CentralBankNews.info

By MoneyMorning.com.au

It is the task of today’s Money Weekend to predict the future, which is a fool’s errand. But the point in trying, for investors, is to get ahead of the big trends and profit from them before they’re obvious.

With energy, that means looking not just years out, but decades. Where will the demand come from? And more importantly, where will the supply come from? If you can figure that out, you stand a chance to make some far-sighted investments that could begin delivering profits today. The financial stakes are high for entire countries as well. Cheap energy is the ultimate competitive advantage.

But before that, doesn’t the news just keep flying out of Tokyo? In the last few months, the Japanese politicians have managed to debase their currency, pump up their zombie stock market and strip away any pretence of an independent central bank – all with a straight face.

Since November last year, the Nikkei index of Japanese stocks has rallied over 30% to its highest point since 2008. The yen has fallen 18% against the US dollar. Japan’s new central bank governor, Haruhiko Kuroda, is all set to renew the two decade-long fight with deflation in Japan. He ‘is expected to begin buying trillions of yen more in bonds, along with other moves,’ according to the Wall Street Journal.

Now comes news of a possible breakthrough in the energy market: ‘flammable ice’.

A New Source of Energy

Two weeks ago, a Japanese drilling team extracted natural gas from deposits of methane hydrate trapped under the seabed off the coast of Japan. According to energy company Royal Dutch/Shell, a methane hydrate consists of methane gas trapped in ice-like structures of water molecules. They’re thought to be abundant around the world.

The Japanese regard the result as a world first. It’s still very early days yet, of course. The Japanese government puts commercial production at least five years away, and there are technical and environmental hurdles to clear. But it might be a key breakthrough in tapping an alternative energy source in the oil and gas industry. This is something Japan needs.

Japan’s Achilles heel has always been an almost complete lack of natural resources to fuel its huge manufacturing base. It has to import practically every raw material. But with its trade surplus now gone, the cost of those imports is mounting. This is especially true when it comes to energy, which brings us to the Australian investment angle.

The Fukushima disaster meant shutting down almost all of Japan’s nuclear reactors. With barely any domestic power source, Japan has to import Liquefied Natural Gas (LNG). In fact, Japan is the world’s biggest importer of LNG. And it gets the majority from Australia. That’s good news for Aussie producers.

Of course, this has put a huge level of demand into the market. Reuters reported in January that, ‘Japan’s LNG imports soared 11.2 percent to a record high of 87.31 million tonnes in 2012.’

And the latest news isn’t getting much better for Japan, either. ‘Japan recorded a trade deficit of 777.5 billion yen ($8.1 billion) in February despite the weaker yen as exports of cars and auto parts slipped while energy-related imports surged nearly 12 percent,’ reported the Associated Press on Thursday.

For the moment, demand for Australian natural gas is putting pressure on prices at home. On the front page of the weekend Australian Financial Review recently was this headline: ‘Consumers and business face the prospect of a new wave of power and gas price increases driven by shortages of natural gas’.

This is especially true for New South Wales and Queensland. Regulatory changes to the energy market are one reason for prices to rise. The second catalyst will be when the various LNG projects currently under construction around Gladstone, QLD, begin exporting gas within the next two years. All of that natural gas is marked for export.

Higher prices will always eventually bring in more supply. That’s the way markets work (if they’re allowed to work). But where will the natural gas come from? It probably won’t ever be methane hydrates in Australia, even if the industry turns out to be viable elsewhere. Estimated offshore deposits look very thin around our coast.

It might be shale gas. Our mate Dan Denning is telling anyone who’ll listen about the opportunities in this industry. In fact Dan was one of the first movers in recognising shale gas as an investable opportunity. He’s written about it since 2005.

If the shale gas resource estimates in Australia prove accurate, and the gas extractable, this industry can tap into the growing demand just when a sweet spot exists in the market. The potential could see Australia become an energy giant. Dan says the next six months are crucial for the shale gas industry. You can read his report to see why here.

The Future of the Natural Gas Market

Shale gas could play a key role in the future, according to energy major Royal Dutch/Shell. It recently released ‘New Lens Scenarios’, a trend analysis of the future energy market stretching into 2020 and 2030, even 2100. It’s a kind of thought exercise on plausible outcomes depending on a bunch of inputs.

Royal Dutch/Shell takes two views on the global energy revolution, the first called ‘Mountains’ and the other ‘Oceans’.

‘Mountains’ favours natural gas. It paints the following picture about the future: Shale and other unconventional sources play a big role as technology unlocks constant new supply of natural gas. It becomes the most important fuel on the planet. This plentiful gas can fuel entirely new markets and industries with cheaper energy. By 2030, gas knocks off oil as the largest global energy source.

The second scenario is ‘Oceans’. Here’s how that scenario pans out: there is sluggish energy supply in the face of rising demand, mainly from emerging economies. Oil and gas prices are high. OPEC holds a grip on low cost petroleum reserves.

The new major gas reserves never happened but natural gas is still in the top four energy sources. A variety of inputs in this scenario say solar will be the dominant global energy source in 100 years. But 100% renewable energy is still not on the table.

Royal Dutch/Shell isn’t the only one making predictions. ExxonMobil has released a similar report, too. Here’s a quick rundown of their take:

• Energy demand in emerging economies will rise 65% by 2040.
• Oil will remain the number one fuel but natural gas will be the fastest growing major source
• ‘Unconventional’ sources of fuel are critical to meet rising demand. By 2040, close to 80% of North American gas supplies will be from unconventional sources.
• Technology will enable development of once hard-to-produce resources.

Think Back on This in 2040

Hmm. Is it even fruitful to think about the future this far ahead? Predictions that turned out to be wrong, if not completely ridiculous, litter the record books. But these scenarios can at least show where the energy majors see the market going.

Oil and energy companies have to look years ahead in order to make plans. Every drop of oil produced and sold this year needs a new discovery to replace it. That’s not even considering growth in oil use. And not only do you spend billions of dollars exploring for it, there is hundreds of billions on long-life capital spending.

That’s why oil companies put so much thought into the future of supply and demand. If they get the trends wrong, they’ll go out of business. It’s telling, then, that natural gas plays such a key role in their long term forecasts.

The fact is that Australia has already replaced Qatar as Japan’s leading LNG supplier. The investment in the conventional LNG industry will begin to result in more gas exports in the next three years.

But beyond that, the total energy market is growing. And natural gas is commanding a larger percentage of the market. The chance is there for the taking for the Australian shale gas industry.

Callum Newman
Editor, Money Weekend

From the Port Phillip Publishing Library

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Join Money Morning on Google+

By MoneyMorning.com.au

Energy: How One Start-Up Thinks They Have
the Answer to Nuclear Power…Using Nuclear Power.

Nuclear is a dirty word. It has undertones of war, disaster, suffering, and horrible atrocity. It’s unfortunate this is the case. But it’s understandable considering the recent Fukushima meltdown and horrible tragedies of the past like Chernobyl.

When you actually look at nuclear technology, the mechanism of using a nuclear reaction to create heat, and subsequently using steam to power a steam turbine is highly effective. Also in terms of reducing carbon emissions and the reliance on fossil fuels, nuclear is a relatively ‘green’ way to go. The huge downside is when things go wrong, they go really wrong!

But now with advances in technology, and some really smart people, there’s an alternative nuclear solution.

A couple of Massachusetts Institute of Technology nuclear science grads and Russ Wilcox (the guy who invented E-Ink, the stuff in your Kindle) have created a company called Transatomic. They’ve designed a new type of nuclear power plant, but not like the 437 in operation worldwide today.

Their innovative plant design uses a Waste-Annihilating Molten Salt Reactor (WAMSR). Basically it uses nuclear waste to create energy by dissolving nuclear waste into molten salt.

Transatomic claim, ‘Conventional nuclear reactors can utilize only about 3% of the potential fission energy in a given amount of uranium before it has to be removed from the reactor. Our design captures 98% of this remaining energy.’

Using existing stockpiles of nuclear waste, Transatomic believe there’s the potential for an additional $7.1 Trillion of energy per year and electricity to power the world through to 2083!

If this design becomes reality it means more power, reduced radioactivity and highly increased safety. But the next step for the team is to get the required funding to now actually build a plant.

It might be in an early stage, but so far there’s no one else in the world with a safer and more efficient design for nuclear power.

Gold: Why High Commodity Prices Doesn’t Mean High Stock Prices

Our in-house technical analyst, Murray Dawes, showed us an ugly looking chart yesterday. It’s the price of Newcrest Mining [ASX: NCM] (black line) compared to the gold price (blue line):

Click here to enlarge

We guess it shows you that a high commodity price on its own won’t guarantee a high share price for companies dealing in that commodity. Another example is Woodside Petroleum [ASX: WPL] and the oil price:

Click here to enlarge

The oil price has stay high, yet the Woodside share price has slumped…although it has recovered somewhat over the past year or so.

The issue of high commodity prices and low stock prices is a subject we covered in the latest issue of Australian Small-Cap Investigator. We argued that stocks need a number of factors to fall into place in order to get a stock surge. For instance, in order for stocks to surge from 2003 to 2007 the market needed three things to fall into place:

1. Chinese economic growth
2. Credit expansion
3. Rising commodity prices

If any one of those was absent in 2003 it’s possible you wouldn’t have seen stocks go up so much. You only have to look at the stock market over the past five years to see how when any one of these is lacking it leads to a choppy market.

Sure, China continues to grow, but not at the break-neck speed seen 10 years ago. Yes, there has been credit expansion, but it has been government-led money printing rather than consumer-led demand. More often than not the government doesn’t spend money in the right places, which means the economy doesn’t get the full benefit.

Finally, you have seen rising commodity prices, but it hasn’t been across the board. You’ve seen falling commodity prices too. Look at gold, iron ore, and natural gas. The volatility in commodity prices creates caution among investors. Unlike the 2003-2007 bull run, investors aren’t sure whether current price rises will last.

You can’t blame them after the huge falls in 2008.

But we’re taking a different view…a contrarian view. We believe that over the next 12 months investors will start to shift from dividend-paying stocks into growth stocks.

That will come on the back of Chinese growth; expanding credit as the money flows into the Australian financial system; and rising commodity prices as the underinvestment in resources projects in recent years causes a strain on supply.

All this, plus the demand among investors for growth, should see a new stock market boom that will at through until at least 2015…when the S&P/ASX 200 will match its previous high of 7,000 points.

Technology: Why Time Travel Is (Technically Speaking) Closer Than You Think

The Concorde had its final flight on 26th November 2003. Since then, aerospace behemoths like Boeing have claimed they have the successor to the Concorde in the pipeline. None have succeeded so far.

But don’t forget we’re in the middle of a new ‘Space Race’. Savvy companies are not only looking at the commercial possibility of craft to fly to space. They’re also looking at how to use the technology for travel on earth.

Regardless, we’re yet to have another commercial passenger jet capable of safely flying supersonic across the globe. One of the main reasons is there simply hasn’t been the proven, safe technology to justify a speed in excess of 1,236kph (Mach 1).

You see, when travelling at many times the speed of sound, in this case 6,180kph (Mach 5), a big problem is air flow. At that speed, the compression of air into the engine creates a tremendous amount of heat. In excess of 1,000 degrees Celsius! With temperatures that hot, it melts the metals and circuitry in a typical jet turbine.

Reaction Engines, a British engine manufacturer, have invented and tested a world first new engine capable of supersonic speeds. It’s called the Synergetic Air-Breathing Rocket Engine (SABRE). There is one key difference in Reaction’s engine compared to a normal jet engine. The SABRE has a heat exchange, a ‘precooler,’ that cools down the compressed air from 1,000 degrees to minus 150 degrees in 1/100th of a second.

Cooling down the air in the precooler (the blue section above) allows the engine to be run fast, efficient and safe. This is game-changing technology in the development of jet engine propulsion.

‘We’re looking at a revolution in transportation equivalent to the jet engine, access to space, access to anywhere in the world within 4 hours.’ – Founder and Chief Engineer Alan Bond.

Reaction is focused on two goals:

• Using the SABRE engine for a reusable plane/rocket for the space industry.
• Using a scaled down version of the SABRE, called the Scimitar, for high speed, supersonic terrestrial aircraft.

Their work has drawn the attention and approval of the European Space Agency (ESA). Currently they’re in development in a European Union 50% funded project called ‘Long-term Advanced Propulsion Concepts and Technologies’ (LAPCAT). The aim of this project is to reduce the duration of antipodal (opposite sides of the earth) flight to less than two to four hours.

Factoring in time differences, it’s mind blowing to think that you could leave Sydney in the morning and arrive in London technically before you left Sydney…so is this the first example of time travel? We think it might be.

Health: Could Robo-Rehab be the Answer to Healthcare Problems?

A study from the University of Massachusetts is proving that using robots in the rehabilitation of stroke patients is a practical method of treatment.

Usually stroke victims receive intense ongoing physical therapy and rehab. This helps them regain mobility and quality of life. The problem is there aren’t enough rehab therapists to meet demand.

Sadly this means many patients don’t receive the rehab they need. They then have great difficulty in daily tasks, often fall into depression, lose touch with their communities and end up in care facilities.

However with the advancement in robotics, in particular humanoid robotics, researchers have found that robo-rehab works.

Excitingly their results show patients respond as well, and sometimes better, to rehab with robots than humans. By using humanoid robots to assist with rehab in the home environment, patients stay out of busy care facilities. They also engage with the community more and have a much better overall quality of life.

So this poses some interesting questions. Why do we seem to respond better to robots than other people? Do we respond better due to the perception robots do not have emotion or ‘intelligence’?

To some extent a study by the Mississippi State University answers this question. In this test researchers showed 100 ‘witnesses’ a crime being committed. One group of 50 was interviewed by a human and the other 50 by a NAO robot (You can read more about NAO here). They asked the groups the same questions about the crime, and intentionally introduced new false information.

The result? The NAO interviewed group were 40% more accurate with their recollection of the crime than those interviewed by a human.

This goes a long way to proving that people can be subconsciously influenced by the perception of other people when under instruction. Introducing a robot as part of the process, people appear to be more open and responsive to their instruction.

Results from studies like these give more credence to the use of robotics in health care situations. The benefit is the longer term well-being of our communities. It means people could stay at home longer and be more active within the community, which means putting less strain on the health care system.

It’s not so crazy to think we could each have our own humanoid robot at home to help take care of our medical needs. Surely that’s a good thing for the future of health care systems.

Our old pal, Diggers & Drillers editor Dr Alex Cowie, has spent the past week in Hong Kong. He attended the Mines & Money conference.

It’s a big event. Based on the dispatches he’s sent back, it sounds as though he’s got a bunch of information out of it that he’s sure to share with his Diggers & Drillers subscribers.

So, what is the outlook for the mining sector?

Here’s the text of an email the Doc sent me earlier this week:

‘The conference starts in earnest tomorrow [Wednesday]. Today was a smaller affair just focusing on precious metals. A bunch of small companies presented but it was mostly explorers with dwindling cash balances looking a bit anxious. Nothing stands out.

‘I got my hands on some stats today from Mining Pulse, for my talk – there are 127 junior ASX gold explorers under $20 million. The average cash balance is $1.8m, and the average quarterly burn is $0.6m – so most of them will cease to exist by Christmas unless they raise money. It’s a car crash waiting to happen! Probably explains the long faces today.

‘That said, everyone is saying this is a more cheerful conference compared to the big ones in Cape Town and Toronto so far this year, which were morose affairs.

‘For some reason there was a big focus on diamond explorers, which was odd.’

That tells you something about the rising costs for the Australian mining sector. But it’s not just rising costs for explorers; gold producers have seen costs soar too. The Doc showed that with the following slide in his presentation to the Mines & Money conference:

This explains the performance of mining stocks over the past two years. The S&P/ASX 300 Metals & Mining index has fallen 38.7% since early 2011. There’s even the chance it could fall to the 2008 low. If so, it would see the index fall another 27.3% (a 55.4% fall from the 2011 high point).

So, does that suggest it’s a good time to buy resources stocks, or a bad time? We’ve got our view. We laid out our reasons in yesterday’s Money Morning…

Kris Sayce and Sam Volkering

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From the Archives…

Can This Indicator Predict The Dow Jones Next Move?
16-03-2013 – Kris Sayce

Seven Situations to Watch in the Pacific Currency War
15-03-2013 – Dan Denning

Stock Market Warning: Next Week Could be a Blood Bath
14-03-2013 – Murray Dawes

REVEALED: One Opportunity to Escape Your Mortgage
13-03-2013 – Nick Hubble

UK Property: How You Can Buy a House For Less Than 250 Grand
12-03-2013 – Dr. Alex Cowie

By www.CentralBankNews.info     Colombia’s central bank cut its benchmark intervention rate for the seventh time since last July, saying the country’s economy is expected to continue to operate below its potential in coming quarters and inflation is forecast to remain below the banks’ 3.0 percent target.
    Banco de la Republic Colombia, which has cut rates by 200 basis points since it embarked on its easing cycle in July 2012, added that its rate cuts appeared to be transmitted to the economy slower than it would have desired.
    Colombia’s economy expanded by 4.0 percent last year, down from 2011’s revised 6.6 percent, with the slowdown hitting hard in the second half of the year due to a sharp drop in investments. Last year’s economic growth was slightly above the central bank’s forecast of 3.3-3.9 percent.
    “For the first quarter of 2013, the deterioration in business expectations and the fall in the index of consumer confidence and auto sales suggest a less dynamic private consumption,” the central bank said, adding that the country’s industry was continuing to contract.
    Colombia’s inflation rate fell to 1.83 percent in February from 2.0 percent in January, its lowest level in almost 60 years, and below the bank’s target range of 2-4 percent.

    “The recent decline in international prices of energy and other commodities means less pressure on inflation,” the bank said.
    It added that credit to households continues to slow down but is still expanding at a rate that is above nominal GDP growth. A slowdown in the leverage of firms and households is reducing the risk of financial excess during the current expansionary phase of monetary policy, it added.

    www.CentralBankNews.info

By www.CentralBankNews.info     Uruguay’s central bank held its policy rate steady at 9.25 percent although the bank said the actual inflation rate and inflationary expectations were well above the bank’s target range.
    However, considering the need to balance economic policy objectives and the recent rise in marginal reserve requirements, the bank’s monetary policy committee said it decided to maintain the policy rate.
     The central bank of Uruguay, which raised its policy rate by 50 basis points in 2012, is raising marginal reserve requirements on local and foreign currency deposits from April 1 to slow down credit growth and inflation.
    The reserve requirement for deposits in Uruguayan peso will rise to 25 percent from 20 percent while the requirement on foreign currency deposits will rise to 45 percent from 40 percent.
    Uruguay’s inflation rate rose to 8.89 percent  in February from 8.72 percent in January, significantly above the central bank’s target of 4-6 percent.

    In December, Banco Central del Uruguay (BCU) also said inflation and inflationary expectations were well above its target.

      The central bank said the country’s economy was growing at a reasonable rate but the current composition of growth cannot mitigate the inflationary impulses at the desired pace.

    “Inflation is a major concern among the risks facing Uruguay’s economy,” the bank said, adding:
    “Both the actual inflation rate and the expectations of the agents remain well above the target range.”
    Uruguay’s Gross Domestic Product expanded by a quarterly growth rate of 1.2 percent in the third quarter for annual growth of 3.0 percent, down from the second quarter’s 3.8 percent.
    The central bank said earlier this month that the economy expanded between 3.0 percent and 3.5 percent in 2012, down from 5.7 percent in 2011 due to drought and weak global growth.
    In its latest annual review of Uruguay, the International Monetary Fund said the country’s main challenge was to tackle inflation and the central bank should maintain a tightening policy bias.
    The high inflation rate reflects “robust domestic demand, extensive wage indexation, food price shocks, and insufficiently tight monetary stance, and an inflation target that is not anchoring expectations within the range,” the IMF said, adding higher global food prices had added to the inflationary pressures.
    Uruguay is also experiencing heavy capital inflows due to its high interest rates and its investment grade rating.

   www.CentralBankNews.info