InvestMacro Forex News

By MoneyMorning.com.au

Do you believe company executives have a vested interest in seeing their company stock price go up? Or that they are the best people to ask about the company and the product the company deals in? After all, they’re surely in the best position to know.

Two weeks ago Jim Chanos confirmed that his hedge fund has short sold shares in Fortescue Metals Group [ASX: FMG]. His reasons for short selling the iron ore firm? He says a falling iron ore price could mean FMG won’t be able to repay their debts if its creditors come calling.

Chanos said (emphasis added is our own),

‘Increasingly, with any kind of reversion to the mean of iron ore prices to $US100 per tonne or less, we’re going to see a dramatically lower ability to service the debt and to service the capital programs they have. And a stock price materially lower than it is today.‘

Currently Fortescue has about $6 billion of debt. This is just over twice the company’s revenue. And Chanos seems sure that falling prices for iron ore – Fortescue’s bread and butter – will have a major impact on the company’s ability to service its debt.

Because of this, he’s not sure why anyone would want to buy Fortescue shares.

Yet Andrew Forest, chairman of Fortescue, doesn’t see it that way. He’s confident his company would still be profitable even if iron ore prices drop to $90-$100 per tonne.

So, with iron ore currently trading at $140 per tonne, is it possible it could fall below $100?

Iron Ore – Still Trades at $140 Per Tonne

Click here to enlarge

Over the past two years the iron ore price has fallen more than 20% on two different occasions. Yet, it still hasn’t gone below three figures per tonne since November 2009.

But right now, it would only take a 30% fall in iron ore prices for the price to hit $100 per tonne.

Now, before you write off Chanos and his hedge fund as another American company with no understanding of the Australian market, read this:

‘They’re highly leveraged and exposed to the iron ore price. If we experience another downturn in the iron ore price like last year, you wouldn’t want to be caught long this stock.’

That’s from our very own Slipstream Trader editor Murray Dawes.

So if you are holding onto Fortescue stock… check out this chart first.

In March 2010 when iron ore prices dropped 26%…Fortescue’s stock price took a 31% hit.

And towards Christmas last year when the iron ore price hit the skids again…the miner’s share value went south by 33% over a couple of months.

A repeat of those falls could be on the way. Major Swiss bank UBS suggests ore prices will slide further, to $90 by 2016.

If that happens, Murray thinks it could be curtains for Fortescue and possibly other highly leveraged iron ore stocks. But Murray’s not just worried about iron ore stocks. For some time he’s told his Slipstream Trader members the entire Aussie market isn’t as healthy as some would have you believe.

To find out where Murray sees the Aussie market heading next, click here for more…

Shae Smith

From the Archives…

Why China’s New Consumer Economy Won’t Give You the Trade of the Decade
2012-05-04 – Kris Sayce

Why China Could Be The Next Destination For the Financial Crisis
2012-05-03 – Merryn Somerset Webb

How Did We Get It So Wrong on Australian Housing?
2012-05-02 – Kris Sayce

This Indicator Shows the Copper Price Could Be Set to Soar
2012-05-01 – Dr. Alex Cowie

How Gold Nanoparticles Will Create A New Kind of Gold Rush
2012-04-30 – Michael Robinson

Fortescue Metals: Why This Stock Will Slump When Iron Ore Prices Fall

Article by Investment U

Mega funds have been stocking up on shares of small cap oil and gas stocks such as HGT, PBT, and SJT.

In focus this week: The bulls are running income, small-cap gas and oil stocks, trouble with the credit business and the SITFA.

Despite incredibly low interest rates, CitiGroup said this week they are bullish on the income sector and see no problem with long durations.

In case you aren’t fluent in income-ese, duration is a measure of how much an income investment, that is an interest rate sensitive one, will drop in value when rates move up one, two, or even three points.

Since interest rates are at zero, rates moving up seems to be the only option, and so a short duration to protect yourself against the drop in market value seems to be a prudent move.

But Citi is saying, don’t worry about rates going up and you can still buy long duration investments, which are always long maturity investments.

Citi supported their position with a list of technical factors that all point to a stable, bullish income market, especially in munis.

Thomas Reuters was quoted in a Journal article saying that the decreasing supply of munis in the market and the huge position of uninvested cash will keep pressure on the muni and broad income market for some time.

They like the five-to-seven-year maturity area for the value. The strange part, five-to-seven-year bonds do not have a high duration. In fact, that’s considered a very short maturity and therefore a short duration in almost all cases.

I like the five-year average maturity range for return and limited downside in bonds, as well, and have for about four years. So I’m half in agreement with Citi.

Watch yourself with any income investment with long maturities or duration. If you don’t, you could wake up to a terrible surprise when rates do move up.

Small-Cap Gas and Oil Stocks

Thirty of the tens of thousands of funds that invest in the United States control 35% of all the stock in the United States.

A recent Seeking Alpha article listed the small-cap gas and oil stocks these mega funds are accumulating.

If you follow these videos regularly, you know I’m very bullish on gas and oil despite the slowing in the BRICs and the incredibly low price of gas. So I liked this emphasis on what the big guys are buying, most at bargain prices.

Hogoton Royalty Trust (NYSE: HGT) – mega funds bought $42 million worth of this trust in the last two quarters. Bank of America was the biggest buyer.

Shares are at multi-year lows. Think the megas know something you don’t about this one?

Permian Basin Royalty Trust (NYSE: PBT) – This is the second time I have seen this one recommended in as many weeks. Permian seems to be doing everything right in their trusts.

$39 million of this one was bought up by mega funds in the just the last two quarters. The megas own 5.2% of this one.

Bank of America again was the biggest buyer. It’s pretty pricey here, so watch it. It has tripled since 2009.

San Juan Basin Royalty Trust (NYSE: SJT) – $42 million worth was picked up in the last two quarters and it’s at multi-years lows. BAC has $26 million of this one.

Other names mentioned in the article: ATP Oil and Gas, QR Energy, HyperDynamics Corp. and Triangle Petroleum.

The emerging markets are expected to increase pressure on the oil and gas prices, and NG is expected to be at about $3 by the end of the summer and $4 by the end of the year. Now is when you should be building your positions.

Trouble in the Credit Industry

The Journal ran an article about the fees banks and credit card companies charge, and that may have a lot of folks wondering about the future of the credit business.

The merchant class is in revolt about the fees they’re charged. Some of them are as high as $0.45 every time a card is swiped regardless of the size of the charge.

Charges are the second-highest operating expense for small merchants according to the Journal, second only to payroll.

According to Sanjay Sakhrani, credit analysts for Keefer, Bruyette and Woods, Banks are charging 1.5% to 2% on all charges and only paying the credit card companies 0.1% to 0.2% of the revenue.

Sakhrani sees the possibility of a backlash against banks and many are heavily dependent on credit charges for their revenue, but credit card companies themselves, Master Card, Visa, Discover and Amex, should outperform.

Merchants filed suit against the banks for unreasonable charges and congress reduced the fees charged, but only for debit cards. Credit cards are still open range.

Buyers are hooked on cards and there is no sign of their use slowing anytime soon. But watch for action against the bank’s fees. It could be a big hurt to those dependent on them.

The SITFA

This week it goes to the prosecutor’s office of Manhattan.

Twenty Manhattan District Attorney’s employees, including 15 prosecutors, battling barristers the Journal called them, went toe to toe in a sanctioned charity-boxing match last week.

The organizer, a former marine who boxed as an amateur, was concerned about the brainy crowd getting into it, but some attendees said the atmosphere was very professional.

Except, you knew there was one coming, right? Except when one prosecutor had her, yes, her contact lens knocked out of her eye during the first round.

A hard right left her with just one good eye, but she toughed it out for the three rounds.

She was quoted as saying, “I probably broke my nose, but it’s the fifth time, so who cares.” Now that’s a tough DA.

Boxing with contact lenses, this has to be a first.

Article by Investment U

By TraderVox.com

Tradervox (Dublin) – The Japanese currency was one of the beneficiaries of the election results in Europe as safe haven demand increased the currency’s demand in the market. The yen gained against most of its most traded pears as investors ditched higher yielding currencies for safety. This was fueled by the poor payrolls in the US which were poor than forecasted and the election results in Europe which show a shift to anti-austerity leadership in France and Greece.

As the euro was falling against major currencies on elections in the region, the US dollar lost favor among save haven seekers as US employers were reported to have added the least jobs in six months, which fueled concerns that the world’s largest economy is faltering in its recovery efforts. This also added concerns that the Fed may consider making another round of asset purchases. Investors were more attracted to the yen, causing it to strengthen against major currencies in the market.

Forex analysts have also added their concerns, saying that the US economy seem to be deteriorating hence bringing back to the table the possibility of a third round of quantitative easing. Further, they are adding that the risks associated with the elections in Europe have forced traders to move to the sidelines as they await for signs from the regions; all these events have led to investors choosing the yen as the best bet for the moment.

The Japanese currency strengthened against the greenback by 0.4 percent to trade at 79.85, breaking the resistance level of 80. The yen might be headed to 79.64, which it touched in May 1 and is the strongest it has been since February 21. The yen registered a weekly gain of 0.5 percent last week. Against the euro, the Japanese currency rose 0.9 percent to trade at 104.49.

Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management. 

Article provided by TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
Follow us on twitter: www.twitter.com/tradervox

Article by Investment U

Francois Hollande’s answer to this budget crisis? Still more spending and a proposed 75% tax rate on job creators.

Winston Churchill famously said “You can always count on Americans to do the right thing – after they’ve tried everything else.” Now we can say the same about the European Union.

Global financial markets are down sharply this morning in response to election results over the weekend. In France, French Socialist candidate Francois Hollande narrowly squeezed out President Nicolas Sarkozy and his unpopular austerity measures.

Yet Hollande insists his campaign was not about the incumbent. “My real enemy,” said the President-elect, “is the world of Finance.”

He has chosen the wrong antagonist.

Governments can control fiscal policy. They can control monetary policy. But they cannot control financial markets. French voters have voiced their opinion about Hollande. And now financial markets will voice their opinion of him.

He’s not going to like it.

We’ve all the heard the nattering between economists about Europe’s choice between austerity or growth. Stronger countries, like Germany, want southern members of the Eurozone to demonstrate fiscal responsibility and cut out-of-control spending. But the citizens of these countries – especially Spain with its unemployment rate of 25% – want jobs. They want growth.

Fortunately, austerity and growth are not incompatible. Unless you believe it’s achieved through still more reckless spending and painful taxes on risk takers.

Recognize that France already has one of the highest overall tax burdens, yet it continues to bleed red ink. Debt is 90% of GDP. Trillions in unfunded pension and retiree health-care obligations loom in the not-too-distant future.

Hollande’s answer to this budget crisis? Still more spending and a proposed 75% tax rate on job creators.

To be sure, this has populist appeal among some voters, especially those who believe national governments are giant candy stores funded by millionaires and billionaires.

Let’s set aside the obvious folly of piling new debt on top of old in the midst of a fiscal crisis. Entrepreneurs and other business owners – being rationally self-interested like the rest of us – will take every step imaginable to avoid a punitive 75% tax rate. Many, in fact, will choose to take their money out of the country – or not invest it at all.

A businessman or businesswoman under a high-tax regime always does a simple back-of-the-envelope calculation. It goes like this: If I start or expand my business, I will face the risk of substantial losses for which I will be solely responsible. But if through hard work, enterprise and a bit of luck I beat the odds and succeed, the government will take up to three-quarters of what I make.

Many will choose to punt. Their businesses will not be expanded. The unemployed will not be hired. Tax revenue will not be raised. Economic growth will not expand. And neither will corporate profits. That bodes ill for Europe’s equity markets.

And it gives us a foretaste of what lies ahead in the United States if our so-called leaders in Congress don’t get their act together. Politicians on both sides of the aisle don’t want to confront the reality of our unsustainable budget deficits. Yet, ultimately, financial markets will force them to. As you can see today, the purple thunderheads are gathering.

It’s funny how words and expressions enter and leave the language. A few years ago, for instance, no one had heard the phrases “Great Recession,” “the one percent,” or “the Arab Spring.”

Want to know my prediction? You’ve already heard the last U.S. economist or politician say he favors “the European model.”

Good Investing,

Alexander Green

Article by Investment U

Article by Investment U

Delta Airlines (NYSE: DAL) will soon become the first airline ever to provide itself with its own domestic fuel.

If all goes according to plan, by the end of June, Delta Airlines (NYSE: DAL)…

• … will start saving $300 million a year on fuel costs.
• … will add 5,000 new jobs to its payroll.
• … will see its share price steadily rising for the foreseeable future.

How does it expect to do all of this?

By being the first airline ever to provide itself with its own domestic fuel. Let me explain…

Delta’s Bold Move into Oil Refinement

Last year, domestic prices for airfare hit an all-time record high according to the U.S. Department of Transportation.

The No. 1 reason for this is fuel cost. For Delta, nearly 40% of its revenue went to keeping its planes fueled.

And so far this year, these costs only continue to rise.

That’s why, earlier this week, Delta agreed to pay ConocoPhillips (NYSE: COP) $150 million for an oil refinery that was otherwise going to close in May in Trainer, Pennsylvania.

The refinery is set to process 185,000 bpd of crude oil, and Delta expects it’ll cover 80% of its fuel costs in the United States beginning in 2013.

Even Pennsylvania contributed an additional $30 million because it will save the jobs of 5,000 workers currently employed at the refinery.

It’s undoubtedly a risky move. Some are even calling Delta crazy. After all, the oil refining business can be just as volatile at times as the airline industry.

But others, myself included, see it as a potential game-changer…

The Road Ahead

As MSNBC explains, “For one thing, the refinery is located in one the carrier’s most important markets and will be able to provide a steady fuel supply to the company’s operations at JFK, LaGuardia and other East Coast airports.

For another, ConocoPhillips, the refinery’s current owner, was in the process of idling the plant and reportedly “eager to sell.”

In other words, not only is the refinery in a key locale, Delta also purchased the facility at a very steep discount.

Delta expects an additional $100 million into the plant will turn it into a top-notch jet fuel producing facility by next year.

And in order to make sure everything stays on task, Delta hired 25-year refinery veteran Jeffrey Warmann to manage the refinery’s operations.

In fact, prior to joining forces with Delta, Jeffrey was a refinery manager for Murphy Oil Corp. (NYSE: MUR). So if anyone’s going to get the job done, it’s going to be this guy.

How do investors feel about the deal?

Delta’s Shares Are on the Rise

Over the past few weeks, Delta’s stock price climbed 20%. You can bet if Delta’s oil refinery ends up being a big money saver, as well, shares will likely soar even higher.

And if other companies follow suit, it could end up being a home run for Delta’s shareholders. The bottom line: This is certainly a development worth keeping your eye on. Keep watching.

Good Investing,

Mike Kapsch

Article by Investment U

By TraderVox.com

Tradervox (Dublin) – The Euro/dollar cross started the week with a break of the uptrend support of 1.30. The election result in France and Greece has been unfavorable for the euro and it has found support on low support. The euro/US dollar downfall started on Sunday after the election results in France where Sarkozy was defeated; in Greece the New Democracy and PASOK parties which are the major proponents for austerity program in Greece have not gotten the 151 majority required to win an election and the coalition government in the country is unlikely.

The pair has dropped to 1.2970 at the time of writing this, where it started its decline at 1.3023 and it has not been able to regain the 1.3050 line or its uptrend support of 1.3065. The pair continued to decline and broke the psychologically important round number of 1.30. It found a bottom at 1.2955, which is close to support at 1.2945, which is the lowest since January. Analysts are warning that if the 1.2945 breaks; the pair will find its next support at 1.2873.

Apart from the French, Greece, and German local elections, the pair will also be affected by the Sentix Investor Confidence report which is expected to be released on Monday. The reading is expected to drop from -8.2 to -14.7 which show increased pessimism in the regions economy which is bad for the euro. Further, German Factory Orders, which are expected to rise to 0.5 percent from previous reading of 0.3 percent, is expected to have very little effect on the euro. Other reports from Germany include the German Industrial production which will be released on Tuesday and the German Trade Balance on Wednesday. The same reports from France will be released on Thursday and Wednesday respectively.

The ECB monthly bulletin which will be released on Thursday is also likely to affect the trend of the euro/dollar pair. The pair is expected to remain under pressure and it has a bearish outlook for the week.

Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management. 

Article provided by TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
Follow us on twitter: www.twitter.com/tradervox

The outcome of the elections in France and especiallly Greece is weighing heavily on the financial markets this Monday morning.

In addition last weeks growth nervousness  is also carrying over to this week.

Listen to how Senior Strategist Ib Fredslund Madsen looks at these two themes and their impact on the financial market.

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Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

Source: ForexYard

A disappointing US jobs report resulted in the safe-haven US dollar sliding against the Japanese yen while rallying against riskier currencies like the AUD and EUR to close out last week’s trading session. Turning to today, elections held in France and Greece over the weekend are forecasted to generate significant market volatility. Any indication that Greece could back away from recent austerity measures as a result of the election could result in the euro extending its current bearish trend.

Economic News

USD – US Jobs Report Causes USD/JPY to Tumble

Last Friday’s US Non-Farm Payrolls figure came in at 115K, well below the forecasted 173K. The news represented the third month in a row of declining hiring in the US, and resulted in renewed speculation that the Fed may initiate a new round of quantitative easing in the near future. Following the news, the USD/JPY tumbled close to 50 pips before closing out the week at 79.86. Against riskier currencies, the dollar did see fairly significant gains, as investors decided to revert their funds to safe-havens following the news. The AUD/USD dropped close to 90 pips on Friday to finish the week at 1.0176.

Turning to today, dollar movement is likely to be determined by how investors interpret two euro-zone elections held over the weekend. Any signs that Greece could back away from austerity measures it recently enacted could result in further gains for safe-haven currencies like the USD. Later in the week, traders will want to pay attention to a speech from Fed Chairman Bernanke scheduled for Thursday. Any indications that a new quantitative easing package is on the way could result in further dollar losses against the yen.

EUR – Risk Aversion Leads to Significant Euro Losses

The euro turned bearish against most of its main currency rivals during trading last Friday, as a negative US jobs report combined with concerns about French and Greek elections led to risk aversion in the marketplace. Investors fear that new governments in either France or Greece could result in a conflict with Germany regarding the best way to help bolster euro-zone economies. The EUR/USD, which peaked at 1.3176 early in the day, fell close to 100 pips to finish the week at 1.3082. The EUR/JPY dropped around 115 pips to close out Friday’s session at 104.47.

Today, the euro is forecasted to see significant volatility as investors interpret the results of the two euro-zone elections. Further losses could be seen if Greece is seen as backing away from austerity measures it agreed to in order to receive an international bail-out package several months ago. Additionally, the German Retails Sales figure could result in modest euro losses if it comes in below the forecasted 0.8%. As the biggest economy in the region, German indicators tend to have a significant impact on the euro.

Gold – Gold Sees Significant Gains to Finish Week

Gold turned bullish for the first time in a week last Friday, as poor US employment data sent investors to safe-haven assets. Gold has steadily increased its status as a stable asset in recent months and has generally benefitted from poor global data. The precious metal finished out the week at $1642.03 an ounce, up from $1626.35 during morning trading.

Turning to this week, traders will want to continue monitoring data out of both the euro-zone and US. Any signs that the global economic recovery is slowing down further could result in gold extending its bullish trend. That being said, any positive indicators could result in risk taking in the marketplace, which may cause the precious metal to give up some of its recent gains.

Crude Oil – Crude Oil Falls below $98 Following US News

The price of crude oil tumbled over $4 a barrel during trading on Friday, reaching as low as $97.49, as a worse than expected US jobs report led to risk aversion in the marketplace. In addition, a general slowing down in the pace of the global economic recovery along with steadily increasing crude oil inventories in the US have been taken as signs that demand for oil has decreased, which has contributed to prices dropping.

Turning to this week, oil traders will want to pay attention to news out of the euro-zone. Any indications that this past weekend’s elections will cause additional risk aversion in the marketplace could lead to oil dropping further. Additionally, a speech from the Fed Chairman later in the week could result in market volatility. Mention of a new round of quantitative easing may result in oil extending its bearish trend.

Technical News

EUR/USD

The Williams Percent Range on the weekly chart has dropped into oversold territory, indicating that this pair could see upward movement in the coming days. Furthermore, the MACD/OsMA on the same chart appears to be forming a bullish cross. Traders will want to keep an eye on this pair, as it could stage an upward correction in the near future.

GBP/USD

A bearish cross has formed on the weekly chart’s Slow Stochastic, in a sign that downward movement could occur for this pair. In addition, another bearish cross on the daily chart’s MACD/OsMA is providing further evidence of an impending correction. Traders may want to go short in their positions.

USD/JPY

Most long term technical indicators place this pair in neutral territory, meaning that no definitive trend can be predicted at this time. The one exception is the weekly chart’s MACD/OsMA, which has formed a bearish cross. Traders will want to keep an eye on some of the other indicators on the weekly chart for signs of an impending downward correction.

USD/CHF

The Williams Percent Range on the weekly chart has crossed over into overbought territory, indicating that this pair could see downward movement in the near future. Furthermore, the Relative Strength Index (RSI) on the same chart is moving upward and appears poised to cross into the overbought zone as well. Traders will want to keep an eye on the RSI. If it crosses above 70, it may be a good time to open short positions.

The Wild Card

AUD/USD

A bearish cross has formed on the daily chart’s Slow Stochastic, indicating that this pair could see an upward correction. This theory is supported by the Williams Percent Range on the same chart, which has dropped below the -80 level. This may be a good time for forex traders to open long positions ahead of upward 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.

By Central Bank News
The past week in monetary policy saw two central banks altering official interest rates; the Reserve Bank of Australia cut its base rate 50 basis points to 3.75%, while the National Bank of Rwanda hiked rates by 50bps to 7.50%.  Those central banks that held interest rates unchanged were: Colombia 5.25%, the EU 1.00%, Thailand 3.00%, Uganda 21.00%, Kenya 18.00%, Egypt 9.25%, Romania 5.25% and the Czech Republic at 0.75%.  Elsewhere Peru’s central bank announced alterations to its required reserves, Jordan’s central bank reduced bank loan rates and the People’s Bank of China stepped up liquidity operations; prompting some to expect imminent RRR cuts.

Looking at the central bank calendar, the week ahead sees the Bank of England announcing reviews of interest rate and asset purchase program settings – the market will be watching and hoping for any further quantitative easing. Other central banks meeting this week include the National Bank of Poland, the Norges Bank (Norway), Bank Indonesia, and the Central Reserve Bank of Peru.

Source: www.CentralBankNews.info