InvestMacro Forex News

Article by Investment U

It’s tough making money in a flat market.

And with all the uncertainty looming, investors don’t really seem to know what to do with their investment dollars.

If the overall market doesn’t grow by itself, you really have to dig deep under the macro issues and into sectors to find fast-growing trends.

For instance, wireless tower companies comprise a sector that supports the telecom industry by leasing space on antennas to multiple carriers.

These companies are simply purchasing an asset and making it available to multiple carriers. The basic idea behind this business isn’t rocket science, but if you’re AT&T (NYSE: T), you just don’t want to offer your real estate to Verizon (NYSE: VZ) or Sprint (NYSE: S).

This is a cash intensive business that was below the carriers and needed to be outsourced. It generated cash, but racked up huge losses and piles of debt. The balance sheets of companies like Crown Castle International (NYSE: CCI) and American Tower (NYSE: AMT) looked terrible 10 years ago because they weren’t generating enough profit per tower.

The Data “Toll Collectors”

But that was during the dark ages, before the mobile data revolution. The thing that carriers didn’t count on however was that cell phones would eventually be used more for data than for voice. Now that Verizon and Sprint all have the iPhone, carriers have to compete on data speed, not just handset choice. This means investing in their networks to widen a path for the increasing wireless data traffic. And guess who the toll takers are on this wireless highway? You guessed it, the tower operators.

The tower companies don’t care whether more Google (Nasdaq: GOOG) Android handsets are sold than Apple (Nasdaq: AAPL) iPhones. In fact, as Apple and Google duke it out by making their phones MORE feature-rich, carriers have to foot the bill for the network upgrades.

The competition isn’t only between the handset vendors, though. Sprint is offering an all-you-can-eat data plan to attract AT&T and Verizon subscribers. By adding the application Pandora (NYSE: P) into the mix, I’ll never have to listen to commercial radio when I’m in my car again.

Revealing the Hidden Strength

The growth driven by carrier competition is enough to get excited about the industry – but two tactics these companies are implementing will continue to drive growth in the share prices:

1) Real estate acquisition

2) REIT conversion

If you look at Crown Castle’s last quarter, the company only generated $42 million in profits but a look behind the income statement shows $200 million in cash from operations. If you do a deep dive into a company’s financials, you often see hidden problems – not hidden strength.

One of the things the tower operators are doing with their excess cash is buying the land that the towers are located on. This reduces the risk of having to renew leases at much higher prices as well as reducing operating expense (which will make earnings look better).

Looking at American Tower vs. Crown Castle

American Tower has set a trend by converting its operating entity to a real estate investment trust (REIT). This is a substantial benefit for investors because it eliminates double taxation. As a REIT, American Tower pays out 90%of its taxable income to investors and you pay taxes at your individual rate. In the case of retirees who are paying exceptionally low tax rates, this could be a good source of low-tax income. AMT has seen its share price increase 23% this year since converting to REIT status and is the first in the group to do so.

While the new operating structure is convenient for shareholders, this may not be the best course of action for AMT’s competitors. Crown Castle International has publically stated that it will move toward REIT status as well, but not today. Due to the high level of tax advantaged operating losses building up on the balance sheet over the years, the company is already has tax shelters and there is little reason to make the conversion today.

A more likely time frame for the conversion is in 2015 as the “operating losses” run out and the company has to begin paying increased levels of income tax. This delay in REIT conversion might be better for shareholders in the long run. Since CCI is not expected to pay a high dividend at this time, the company can reinvest all available excess cash into new projects at a time when carriers are dramatically increasing LTE spending. So far, CCI has seen a 46% increase in its share price this year.

Given a choice between the two companies, Crown Castle looks to be a better investment – even though the stock has already had a strong run this year. The stock looks expensive on a P/E basis, but depreciation hides the earnings power. If you look at cash from operations rather than net income, the company generated $200 million rather than $43 million in the current quarter.

The company isn’t likely to attempt to achieve REIT status until the tax haven of old operating losses is exhausted. Until that time, the company will reinvest cash flow and leave a stronger operating model to generate dividends when the time comes.

Good Investing,

David

Article by Investment U

London Gold Market Report
from Ben Traynor
BullionVault
Tuesday 20 November 2012, 07:30 EST

SPOT MARKET prices for buying gold traded above $1730 an ounce throughout Tuesday morning in London, up 1% for the week so far, while the Euro also held onto gains made yesterday despite news that a second ratings agency this year has downgraded France.

Gold rose by more than $20 during Monday’s trading, following reports that a deal may be done between US politicians on the so-called fiscal cliff.

“People are feeling a bit at ease about the budget talks in Congress,” says Yuichi Ikemizu at Standard Bank in Tokyo.

“But gold is in a tight range between $1,700 and $1,740 until we see a result of the talks at the year end, as the ‘fiscal cliff’ is the focus of the market.”

Silver meantime traded around $33.20 an ounce this morning, up more than 3% from last week’s close.

Most European stock markets ticked lower this morning, with the exception of Germany’s DAX, while commodities were broadly flat.

Moody’s last night became the second rating agency this year to downgrade France. Moody’s lowered its credit rating for France by one notch, from Aaa to Aa1, while maintaining a negative outlook.

“Moody’s is now giving France the same rating as Standard & Poor’s,” French finance minister Pierre Moscovici said Monday following the downgrade announcement.

“[This rating] has allowed us to live with low interest rates for many months.”

Although S&P stripped France of its AAA rating back in January, benchmark yields of 10-Year French governments bonds have fallen, from above 3% to close to 2%.

In its ratings rationale, Moody’s cites “sustained loss of competitiveness” and “deteriorating economic prospects” as reasons behind the decision.

In addition, Moody’s argues that France’s membership of the Euro and therefore its lack of monetary sovereignty could make it more difficult to deal with a rise in borrowing costs.

“While the French government’s debt service costs have been largely contained to date, Moody’s would not expect this to remain the case in the event of a further shock,” a statement from the ratings agency said.

“A rise in debt service costs would further increase the pressure on the finances of the French government, which, unlike other non-Euro area sovereigns that carry similarly high ratings, does not have access to a national central bank that could assist with the financing of its debt in the event of a market disruption.”

Eurozone finance ministers meantime meet in Brussels today, where they will discuss whether to approve payment of the next installment of bailout money for Greece. If they agree, national parliaments will then vote on the matter.

The Eurogroup is also expected to discuss policies aimed at improving Greece’s debt sustainability. Policies reportedly under discussion include cutting interest rates in loans to Greece and extending the time for repaying loans.

Germany has suggested a debt buyback of privately held debt at haircuts of 75%, CNBC reports, while Finland’s finance minister has confirmed politicians are also looking at using profits from the European Central Bank’s Securities Markets Programme, which formally ended in September.

Under the SMP, the ECB bought the debt of distressed sovereigns in the open market. Because it bought bonds that were trading below their par value, the central bank is due to make a profit on this debt if it is held to maturity.

Athens meantime rejected a demand yesterday by the International Monetary Fund to cut an additional 22,000 civil service jobs.

Spain meantime sold more debt than anticipated at an auction of 12- and 18-month Treasury bills this morning, raising €4.9 billion. The yield on the 12-month bills was down slightly compared to the last auction of such debt, although 18-month yields rose.

Spain has over €100 billion of debt due to mature in 2013.

In the UK, chancellor George Osborne is considering reducing tax relief on the pension contributions of wealthier people, ahead of next month’s Autumn Statement on the economy, the Financial Times reports.

India’s central bank meantime has banned banks from lending money for the purposes of buying gold.

“It is advised that no advances should be granted by banks for purchase of gold in any form, including primary gold, gold bullion, gold jewellery, gold coins, units of gold Exchange Traded Funds (ETF) and units of gold mutual funds” said a statement issued by the Reserve Bank of India Monday.

India is tradtionally the world’s biggest gold buying nation.

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben writes and presents BullionVault’s weekly gold market summary on YouTube and can be found on Google+

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

By Central Bank News
    The central bank of Turkey kept its benchmark one-week repurchase rate steady at 5.75 percent but again narrowed its interest rate corridor and said it may narrow it further and even cut the policy rate if necessary for financial stability. The central bank also expects inflation to continue to fall.
    The Central Bank of the Republic of Turkey said it would cut its overnight lending rate by 50 basis points to 9.0 percent but keep the lending rate at 5.0 percent. The interest rate on borrowing facilities for primary dealers via repo transactions would be cut by 50 basis points to 8.5 percent.
     As last month, the central bank also reduced the lending rate on its late liquidity window by 50 basis points to 12.0 percent while the borrowing rate was retained at 0 percent.
    “If deemed necessary for financial stability, a measured cut may be considered in the policy rate and the overnight borrowing rate in the forthcoming period,” the central bank said in a statement.
    The central bank also said year-end inflation is expected to be lower than the forecast in the October inflation report due to a decline in unprocessed food prices, and it would continue to monitor the effect on medium-term inflation from recent increases in administered and energy prices. 

    In the October inflation report, the central bank cut its forecast for end-year inflation to 6.2 percent from 7.4 percent.

   Turkey’s inflation rate eased to an annual 7.8 percent in October, the lowest rate this year. The central bank targets inflation of 5 percent but said last month that it expected inflation to remain above its target for some time due to the hike in administered prices.
   The bank repeated its previous statement that domestic demand continues to follow a moderate pace while exports increased further despite the weakening global outlook.

    “Overall aggregate demand conditions support disinflation and the current account deficit continues to decline gradually,” the bank said, repeating last month’s statement.
    Turkey’s economy has continued to grow despite the global slowdown with second quarter Gross Domestic Product up 1.8 percent from the first quarter, for an annual growth rate of 3.2 percent.
    Turkey’s central bank has kept its policy rate steady since August but continued to narrow the interest rate corridor which it varies daily. 
    A recent upgrade of Turkey to investment grade by a ratings agency has kept the central bank focused on holding down the lira currency which face upward pressure if international investors turn their attention to Turkish assets amid low rates in most advanced economies.

    www.CentralBankNews.info

Source: ForexYard

Higher-yielding assets, including the euro and Australian dollar, saw modest gains to start off the week yesterday, as hopes that Greece will be able to secure a new round of bailout funds in the near future led to risk taking in the marketplace. Today, traders will want to pay close attention to a meeting of euro-zone finance ministers, scheduled to take place throughout the day. Any positive developments out of the meeting with regards to Greece receiving a new bailout package could result in additional gains for the euro.

Economic News

USD – Bernanke Speech Set To Impact Dollar Today

The US dollar turned bearish against several of its main currency rivals yesterday, as hopes that a deal can be reached to avert the upcoming US “fiscal cliff” led to some risk taking in the marketplace. In addition, signs that Greece is closer to receiving a new round of bailout funds helped boost higher-yielding assets. Against the Canadian dollar, the greenback fell more than 40 pips during European trading, eventually reaching as low as 0.9960. The AUD/USD advanced close to 50 pips to trade as high as 1.0410.

Today, dollar traders will want to pay attention to several US news events. At 13:30 GMT, the Building Permits figure is forecasted to come in at 0.85M, slightly below last month’s 0.87M. If the indicator comes in worse than expected, the dollar could extend yesterday’s bearish trend. At 17:15, Fed Chairman Bernanke is scheduled to deliver a speech regarding the pace of the US economic recovery. Any indication that the US economy is slowing down could lead to further dollar losses.

EUR – Euro-Zone Meetings May Result in Euro Volatility

Speculations that Greece may be closer to receiving a new round of bailout funds led to risk taking among investors, which helped the euro advance against several of its main currency rivals yesterday. The EUR/USD advanced more than 30 pips to trade as high as 1.2786 toward the end of European trading. Against the British pound, the common-currency gained more than 25 pips during the mid-day session to trade as high as 0.8038.

Today, traders can anticipate significant euro volatility, as a meeting of euro-zone finance ministers is set to take place. The meeting is expected to largely revolve around whether Greece is eligible to receive a new round of bailout funds. The euro could see bullish movement against both the US dollar and yen if there is an announcement that Greece will receive the funds. Conversely, if the finance ministers fail to reach an agreement regarding Greece, risk aversion may cause the euro to reverse yesterday’s gains.

Gold – Bearish Dollar Leads to Gains for Gold

Gold saw moderate gains during European trading yesterday, as a bearish US dollar resulted in the precious metal becoming cheaper for international buyers. The price of gold advanced close to $10 an ounce, eventually reaching as high as $1732, before dropping back to the $1728 level.

Today, gold traders will want to pay attention to the Eurogroup meetings, scheduled to take place throughout the day. The meetings may result in approval for Greece to receive a new round of bailout funds. If true, the dollar may take further losses against the euro, which could help gold extend its bullish trend.

Crude Oil – Supply Side Fears Drive Oil Prices Higher

The price of oil saw additional gains yesterday, as an escalation in Middle East violence generated supply side fears among investors. Crude advance close to $1.50 a barrel during European trading, eventually moving above $89, its highest price in nearly two weeks.

Today, oil traders will want to continue monitoring developments regarding the ongoing conflict in Israel. There have been rumors in recent days that a cease-fire between Israel and Hamas may soon come into effect. If true, the price of crude could reverse some of its recent gains. At the same time, any increase in violence may result in oil prices climbing further.

Technical News

EUR/USD

In a sign that upward movement could occur in the coming days, the MACD/OsMA on the weekly chart appears close to forming a bullish cross. That being said, most other long-term technical indicators place this pair in neutral territory. Traders may want to take a wait and see approach until a clearer picture presents itself.

GBP/USD

The Bollinger Bands on the daily chart are beginning to narrow, indicating that a price shift could occur in the near future. Additionally, the MACD/OsMA on the same chart has formed a bullish cross. Opening long positions may be the smart choice for this pair.

USD/JPY

The Slow Stochastic on the weekly chart appears close to forming a bearish cross, indicating that this pair could see downward movement in the coming days. This theory is supported by the Williams Percent Range on the same chart, which has crossed into overbought territory. Opening short positions may be a wise choice for this pair.

USD/CHF

Most long-term technical indicators indicate that this pair is range trading, meaning that a definitive trend is difficult to predict at this time. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the coming days.

The Wild Card

EUR/SEK

The Williams Percent Range on the daily chart has crossed over into overbought territory, indicating that a downward correction could take place in the near future. Additionally, the Slow Stochastic on the same chart has formed a bearish cross. This may be a good time for forex traders to open short positions ahead of possible downward movement.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Source: ForexYard

Hey Everyone,

Below are some market trends for today.

Good luck!

-Dan

Gold- May see a downward correction today
Support- 1711.10
Resistance- 1748.58

Silver- May see a downward correction today
Support- 32.21
Resistance- 33.97

Crude Oil- May see a downward correction today
Support- 87.20
Resistance- 90.12

Dax 30- May see a downward correction today
Support- 6993.48
Resistance- 7184.75

EUR/USD May see a downward correction today
Support- 1.2679
Resistance- 1.2875

Read more forex news on our forex blog

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Source: ForexYard

The euro saw moderate gains against the US dollar in overnight trading, as hopes that a deal will soon be reached to provide Greece with a new round of bailout funds led to risk taking. After gaining close to 40 pips to trade as high as 1.2802, the EUR/USD saw a slight downward correction and is now trading at 1.2790.

The USD/JPY fell close to 20 pips during Asian trading, after the BOJ announced that Japanese interest rates would remain at 0.10% for the time being. The pair, which is currently trading at 81.15, remains within reach of its recent seven-month high of 81.59.

After posting steady gains since last Friday, the price of crude oil fell close to $0.60 during the overnight session and is currently trading at $88.60 a barrel. That being said, analysts were quick to warn that any further escalation in the current round of Middle East violence could result in the commodity resuming its bullish trend.

Main News for Today

Eurogroup Meetings- All Day
• Euro-zone finance ministers will be meeting today to discuss the Greek economic situation
• Should an agreement be reached to provide Greece with a new round of bailout funds, investors may shift their funds to riskier assets, which could boost the euro

US Building Permits- 13:30 GMT
• The building permits indicator is forecasted to come in at 0.84M, slightly below last month’s 0.87M
• Any worse than expected data could lead to dollar losses against the yen

Fed Chairman Bernanke Speaks- 17:15 GMT
• The Fed Chairman is scheduled to discuss the current pace of the US economic recovery
• Any signs that the US economy is slowing down could lead to losses for the dollar, which may boost commodities like gold and silver as a result

Read more forex news on our forex blog

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By Central Bank News
Here’s today’s Central Bank News link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.)

By Central Bank News

By Central Bank News
    The Bank of Japan (BOJ) held its in benchmark overnight call rate unchanged at zero to 0.1 percent and made no mention of a further expansion of its asset purchase program, but added the economy is expected to remain weak and then gradually return to a moderate recovery path as domestic demand remains resilient and overseas economies should slowly improve.
    The BOJ, which has held its call rate unchanged since December 2008, said overseas economies remain in a deceleration phase and Japan’s economy has been weakening due to soft external demand.
    “With regard to the outlook, Japan’s economy is expected to remain relatively weak for the time being, and thereafter, it will return to a moderate recovery path as domestic demand remains resilient on the whole and overseas economies gradually emerge from the deceleration phase,” the BOJ said in a statement after a meeting of its policy board.
    It added that inflation is expected to remain around 0 percent for the time being and there is still a high degree of uncertainty regarding Japan’s economy, Europe’s debt problem, the momentum of the U.S. economy, a sustainable growth path for emerging economies and “the spreading effects of the recent bilateral relationship between Japan and China.”

     The BOJ, which last month expanded its asset purchase program by 11 trillion yen to 91 trillion – its fourth expansion this year – repeated earlier statements that it would “pursue aggressive monetary easing in a continuous manner by conducting its virtually zero interest rate policy as well as steadily increasing the amount outstanding of the Asset Purchase Program.”
    Japan’s economy contracted by 0.9 percent in the third quarter for an annual rise of 0.10 percent while consumer prices fell further in September. The annual inflation rate was minus 0.30 percent in September, the fourth month in a row with deflation.
    
    www.CentralBankNews.info
    

By MoneyMorning.com.au

Many mining executives had a chance to feel like Oliver Twist this year.

They stood humbled and downtrodden in front of the equity markets, cap in hand, saying, ‘Please sir…can I have some more?’

It’s been brutal for them. Plenty of companies with solid projects and great management got a total shellacking from the markets simply for trying to top up the company cash balance.

So I knew things have been pretty bad for some small resources stocks.

But nothing prepared me to see the numbers showing just how tight the equity markets have become in 2012…

The secondary market, which is what companies use to top up the kitty, has fallen from $42 billion last year – to just $17 billion worldwide this year: a stunning drop of 60%.

And the primary market, for listing new companies, has been smashed from $27 billion to just $5 billion globally. A drop of over 80%!

Ouch.

When the taps turn off, the market dries out. This is exactly why exploration companies have been decimated this year – they can’t get funding. And if they can’t get funding, it doesn’t matter how many ounces of gold are in the ground, because that gold will never see the light of day.

Just yesterday I heard about a good mining junior that had $80 million in debt funding lined up to build the mine, but equity markets are so tight it couldn’t get its hands on just $20 million. It’s total madness.

How Do You Invest in this Drought Ridden Market?

It’s essential for investors to make sure explorers have a year (or two) of cash in the bank, or takeover appeal. At the very least they should have backing from a cashed up partner or institution.

As for the developers planning to build mines, they must have funding sorted. In this market they can’t ask for too much or investors will run a mile.

That means until the equity markets loosen the purse-strings, producers with comfortable cashflow are probably the least risky bet.

Seeing just how tight the capital market is now, I’m glad that for this year in Diggers and Drillers I’ve focused far more on producers and funded developers, as well as a few cashed up, well-supported explorers.

For example, the five gold stocks I’ve recently tipped in Diggers and Drillers include two cashed-up producers, two well-funded developers, and just one gold explorer (with plenty of cash, and exceptional takeover prospects).

With funding in such short supply, it’s damn hard for investors to get a result in this market. This means being very careful about which parts of the market to focus on, because which sectors get the funding depends on how much enthusiasm there is for their specific commodity.

Be Patient for When Gold Stocks Payoff

Gold stocks are still an absolute standout, particularly after taking a last week’s body-blow.

After rallying for three months, gold stocks fell hard in a few days between Wednesday and Friday last week.

The fall is still impossible to account for. Fair enough, the stock market had taken a knock, with the S&P down 1.5% in a few days, but gold was pretty stable, losing just 0.7% in the same time.

So when the gold stock indices tanked 7%, and major gold stocks like Newcrest (ASX: NCM) fell 6%, you have to scratch your head a bit.

To explain what I mean, I’ve compiled this table to show some of the moves we saw late last week in gold and some gold stocks, compared to the rest of the market:

I should be clear and point out that none of these are Diggers & Drillers tips. Rather they’re just some large cap gold stocks on the ASX to illustrate the move. Some smaller stocks fared much worse! There was no fundamental reason to explain the drops in these gold stocks that I could see, or have found since. All the prices above are recovering rapidly.

And looking back to the charts in mid July, the gold stock indices had a similar sized smashing. That then set them up for the massive multi-month rally.

So if history repeats itself, the current pullback in gold stocks looks like one of the last opportunities to buy gold stocks on the cheap.

Time to Go Shopping For Gold Stocks

This is what I wrote to Diggers and Drillers readers on Thursday evening. The good news is that since then, many gold stocks have already started recovering strongly. One of my gold tips had fallen from a gain of 55% to a gain of 35% last week, but is already back up to the 51% level again today. There was a great trade in there for those who took it.

Other gold stocks are recovering more slowly, or holding their ground at least. I’d be surprised if all gold stocks rallied uneventfully from here. It’s rare that a steep fall results in a simple bounce. So we may possibly see gold stocks being tested one more time before taking off in earnest.

When they do, they will be rallying from close to historically low prices relative to the gold price.

The important point is that this gives them a lot of space to rise even faster than gold.

So if you believe gold has much higher to go, the right gold stocks could ‘leverage’, or amplify these gains much, much more. For example, our gold tip that is up 51% has made that gain in the time that gold (in $US) gained just 8%.

And right now, with the Fed’s QE3 money yet to filter through into the system, and the Fed already openly talking about increasing the size of the QE3 program (to cater for the end of Operation Twist), it’s hard to argue that gold will fall from here.

This means that the quality gold stocks can be a very profitable investment from here.

But they must have the ‘right stuff’; like being in the right country, having low costs, long life, good management, and exploration potential, amongst many other things.

And of course, in these nightmarish equity markets, they need to be producing cash, or at least be funded to production!

Dr Alex Cowie
Editor, Diggers & Drillers

From the Port Phillip Publishing Library

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