Month: November 2011

Nov. 29 (Bloomberg) — Ian Lyngen, a government bond strategist at CRT Capital Group LLC, talks about the possibility the U.S. credit rating will be downgraded and the outlook for the Treasury market and economy. He speaks with Lisa Murphy on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

London Gold Market Report
from Ben Traynor
BullionVault
Wednesday 30 November, 08:45 EST

U.S.DOLLAR gold bullion prices leapt 1.7% in 30 minutes Wednesday lunchtime in London – hitting $1744 an ounce – following an announcement of coordinated action from central banks worldwide aimed at increasing Dollar liquidity in the global financial system.

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank will all lower the price on existing Dollar liquidity swap arrangements by 50 basis points (0.5 percentage points), effective Monday.

As well as strengthening Dollar liquidity provision, the central banks “judge it prudent” to make arrangements to offer enhanced liquidity provision in other currencies ” so that liquidity support operations could be put into place quickly should the need arise”, a Bank of England statement said.
On the currency markets the Dollar fell sharply following the central banks’ announcement.

Despite its rally, the price of gold bullion this lunchtime remained only marginally above where it began the month.

Spot market silver bullion prices also surged – jumping 3.5% to $32.51 per ounce in the space of 36 minutes – while stocks and commodities also rallied.

By Wednesday lunchtime in London the FTSE was up over nearly 3% on the day – while Germany’s DAX was up more than 4%.

A few hours earlier, ratings agency Standard & Poor’s cut its ratings on 15 of the world’s largest banks late Tuesday – while at the same time raising its rating for two Chinese banks.

Bank of America, Barclays, Citigroup, Goldman Sachs, HSBC, JPMorgan Chase, Morgan Stanley, Royal Bank of Scotland and UBS all had their debt ratings cut by one notch each – reportedly as a result of changes in ratings methodology at S&P.

Despite this technical explanation, the downgrades “will likely raise concerns about their short term funding,” says Andrew Fraser, investment director at Standard Life Investments, speaking before the central banks’ announcement.

“They will be sidelined by money market funds who are the traditional buyers of that short-term paper.”

S&P could also change its outlook on France’s AAA rating from stable to negative “within a week, perhaps 10 days” reports French newspaper La Tribune, citing an anonymous diplomatic source.

European leaders meantime “are now entering the critical period of 10 days to complete and conclude the crisis response of the European Union,” European economic and monetary affairs commissioner Olli Rehn said Wednesday.

The next European leaders’ summit is due to take place on December 9.

Eurozone finance ministers meantime agreed Tuesday on measures aimed at boosting the Euro area’s rescue fund, the European Financial Stability Facility.

One mechanism will be a “partial protection certificate” for government bond investors, worth 20-30% of the initial amount invested. These certificates, will be detachable and separately tradable, according to an official EFSF statement.

The other measure agreed involves creating “one or more Co-Investment Funds”, to attract additional investment.

“Both options are designed to enlarge the capacity of the EFSF,” said Klaus Regling, the rescue fund’s chief executive.

“[However] it is really not possible to give one number for leveraging because it is a process…we will need money as we go along.”

The EFSF’s current effective lending capacity if €440 billion, backstopped by guarantees from Eurozone governments. Some of that €440 billion is already committed in loans, however, while the guarantees offered by countries like Italy and Spain have been compromised by those countries’ recent fiscal difficulties.

There are widespread concerns that the EFSF is not large enough to rescue either of those two nations should they require a bailout.

“We will have to look at the IMF,” Dutch finance minister Jan Kees de Jager told reporters after Tuesday’s meeting.

“We have talked about leverage though private money, but it would be two or two and a half times an increase so not sufficient… I think countries in Europe and outside of Europe should be prepared to give more money to the IMF.”

Tuesday’s meeting also brought an agreement to release €8 billion of bailout funding to Greece.
A poll of economists by newswire Reuters meantime shows a majority expects the ECB to cut interest rates when it meets next week.

Switzerland has become the number one destination for Italian exports – primarily owing to a large jump in gold bullion shipments, Italian business daily Il Sole 24 Ore reports.

In Vietnam meantime a number of gold bullion refiners are reported to have shut down their processing operations following a central bank draft decree that some fear will hand a monopoly to a single refiner, Saigon Jewelry Co.

The State Bank of Vietnam has previously allocated gold bullion import quotas to refiners, one trader in Ho Chi Minh City says.

“Over the last few months [though] only the Saigon Jewelry Co was allocated quotas.

SBV governor Nguyen Van Binh last week announced that the central bank has “administratively acquired” SJC – the latest in a series of moves aimed at regulating Vietnam’s gold market.

Ben Traynor
BullionVault

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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.

(c) BullionVault 2011

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.

Is Bank of America Playing a “Shell Game” With Its Derivatives?

by Chris Matthai, Investment U Research
Wednesday, November 30, 2011

According to Bloomberg, Bank of America (NYSE: BAC) is currently shifting derivative contracts between its retail deposit bank, Bank of America NA, and its wholly owned brokerage arm, Merrill Lynch.

At first glimpse, no big deal right?

Wrong… Not when we’re talking about $75 trillion in derivatives contracts that B of A is backing. And regulators may soon be putting an end to these transfers.

Problems for Bank of America

What’s at issue is that derivatives contracts usually require counterparties to post collateral in amounts that can increase if their creditworthiness deteriorates. And Bank of America’s September downgrade from Moody’s Investor Service is causing problems for B of A.

At stake for Bank of America is the continuing ability to shift derivative obligations between its operating units – thereby reducing billions of dollars in collateral payments to counterparties.

Due to the Moody’s downgrade, Bank of America Corporation has designated the retail-deposit unit, Bank of America NA, as the new counterparty on certain Merrill Lynch contracts. The transfers lower collateral obligations because the retail unit still has a higher rating than the Merrill Lynch subsidiary after the downgrades.

However, the FDIC is not too keen on the idea of shifting derivatives contracts into the books of a deposit-taking bank (that’s covered by FDIC insurance) and putting depositors at risk of failure.

On the other hand, the Federal Reserve, operating under the “Too Big to Fail” policy, has signaled that it favors moving the derivatives to give relief to the bank holding company.

Stay Tuned

The other two major ratings firms – Standard & Poor’s and Fitch Ratings – are re-evaluating Bank of America and may also cut its credit ratings. If that happens, expect the tempo of B of A’s shell game to accelerate.

While federal regulators remain at odds over B of A’s derivatives strategy, there should be no doubt in your mind about investing in Bank of America… Don’t do it. There’s still way too much uncertainty surrounding these shares.

Good investing,

Chris Matthai

Article by Investment U

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.

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.

By ForexYard

Citing a failure of the Congressional super committee to address the US deficit Fitch moved to change its outlook on US government debt to negative from stable.

Economic News

USD – Fitch Warns on US Credit Rating

Yesterday Fitch warned on the US credit rating. Citing a failure of the Congressional super committee to address the US deficit Fitch moved to change its outlook on US government debt to negative from stable. Technically this means there is a chance of a ratings downgrade within the next two years. This puts Fitch on the same level with Moody’s and one level above S&P who downgraded the US credit rating in August, igniting a storm in the financial markets.

The move by S&P to lower the AAA rating of the US fueled sharp declines in equity markets and a rush to safe haven assets such as US Treasuries and the USD. This scenario could happen again should Moody’s or Fitch also cut the US credit rating. However, the 2-year window leaves ample opportunity for Congress and the President to tackle the deficit issue after the 2012 election. Any additional rating downgrade would likely weaken the USD in the medium-term, fueling additional declines in the USD.

SEK – Swedish Economy Rolls On

There is one bright spot in Europe and it is Sweden. The Swedish economy grew 4.6% y/y in Q3. Consensus expectations were for GDP growth of only 3.8%. This is up 1.6% when compared to Q2 GDP numbers. A 3% surge in exports helped support the strong economic data which took place during a rocky period for financial markets.

Investors had been hoping for a rate cut next month by the Riksbank but in light of the better data this will likely not happen. While the SEK may outperform in the near term the currency is ultimately subject to larger macroeconomic forces outside of Sweden. Yesterday’s price action is a good example of this. The USD/SEK moved as low as 6.8590 where the pair found support at its previously broken trend line from the February 2009 high. A bounce higher will likely test the November 24th high of 7.0180, followed by the November 2010 high of 7.0700.

AUD – AUD Up on Improved Market Sentiment and Ratings Upgrade

The AUD has made an impressive move versus the USD with the pair climbing back above parity. The AUD initially gapped higher to start the week as traders responded positively to a potential EU deal to support the EFSF and additional European integration. Also supporting the high yielding currency yesterday was a ratings upgrade of the Australian foreign-currency rating by Fitch to AAA from AA+. Fitch cited low government debt levels and flexible governmental policies for its rating change.

The AUD/USD has climbed from 0.9660 to yesterday’s high of 1.0075 where the pair ran into resistance at the 55-day and 20-day moving averages. A continuation of the move higher would likely find selling pressure at 1.0340 from the November 13th high. A close above the 1.0050 resistance from the November 10th low would support this view.

Crude Oil – US Economic Data Supporting Crude Oil Prices

Spot crude oil prices bounced higher along with US equities as better than expected US consumer confidence numbers helped to support higher yielding assets. The risk on trading was sparked by the CB consumer confidence index which climbed to 56 from a revised 40.9 reading in October. This was the largest monthly gain since 2003. Also boosting crude oil prices was strong demand for an Italian bond auction.

The trend of improving US economic data has become noticeable and may continue this week and today will have the ADP non-farm payrolls report. The data is often seen as a preview to Friday’s jobs report but there doesn’t seem to be any correlation between the two job numbers. Thursday will have the ISM manufacturing PMI and a strong survey could help to push crude oil prices back above the psychological $100 level. A sustained break here would likely find resistance at $103.30 from the November 17th high.

Technical News

EUR/USD

The EUR closed last week below the psychologically important 1.35 level and a close below it on the monthly chart will carry an even greater significance. Both monthly and weekly stochastics continue to fall and a break of 1.3210 will likely test the October low of 1.3145. Below here at 1.3040 there is the 61% Fibonacci retracement of the move from June 2010 to May2011 though this may only prove to be a mile marker in the new downtrend for the pair. Support is located at the January low of 1.2870. The November 18th high of 1.3610 stands out as resistance.

GBP/USD

Falling monthly and weekly stochastics may have the GBP/USD testing the October low of 1.5270 as the pair is pulling within striking distance of its long term uptrend from the 2009 low which comes in at 1.5050. Any move higher will likely encounter heavy selling from the July pivot at 1.5780.

USD/JPY

The downtrend for the USD/JPY remains firmly intact and only a break above 78.95 from the falling trend line from the 2007 high may reverse the pair’s bearish technical sentiment. A break above this line may have the pair testing the most recent post-intervention high of 79.50, a level that coincides with the pair’s 200-day moving average. To the downside the November 18th low of 76.55 is the initial support, followed by the all-time low of 75.56.

USD/CHF

The USD/CHF is testing its October high at 0.9310 and a break here will likely open the door to the pair’s 20-month moving average at 0.9460 and the February high of 0.9775. Initial support is located at the November 18th low of 0.9080 with a deeper move perhaps taking the pair to the November low of 0.8760.

The Wild Card

EUR/GBP

Yesterday the pair breached the rising support line from the November 10th low. This hints at a renewed test of 0.8485. Forex traders should note that the pair will initially need to overcome support from the mid-November lows of 0.8520. Resistance is found at the October 21st low of 0.8670.

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.

EUR/USD Daily outlook – 30th November

Fiber closed yesterday producing a bearish pin bar suggesting the market may be in for further losses in the coming days. The bearish pin bar was strengthened as it was showing a clear and solid rejection of upper resistance sitting at the 1.3420 area. A clear trend line can be seen on the daily timeframe which the market has so far been respecting. Yesterday’s bearish pin also showed a clear and solid rejection of the trend line with almost a perfect bounce of it.

Our bearish bias and outlook is supported by a 50 – 61.8% Fib retracement & rejection from the pair’s most recent swing. A look at the chart below shows yesterday’s bearish pin bar rejecting both the 50% and 61.8% Fibonacci retracement levels suggesting further bearish momentum could be on the cards.

A downwards stepping formation can also be seen on the daily TF which again supports the bearish outlook on the euro at this time. The chart below shows the series of H, L, LH, LL, LH, LL, LH, LL, LH, LL. We would need to see the most recent LL broken for this pattern to continue; however the pattern looks strong at this time with the sheer number of highs and lows.

With the Price action & resistance rejections the market is showing we would expect the bearish momentum to continue with the most recent lows (October) at 1.3150 being the next area of support we may see the pair struggle at. However should we see a push through this area we could see further losses with 1.30 in sight.

Article by www.vantage-fx.com

Source: ForexYard

Month end fixing may end up being USD positive as banks’ funding costs for USDs continue to rise. Trading in Asia was off to a rocky start with the Heng Seng down 1.80%. The economic calendar is crowded today but investors will continue to focus on the meeting of European finance ministers.

Bank funding costs are rising as lenders scramble to secure USD funding. Today’s end of month trading may increase demand for USDs, especially in Japan.

The meeting of European finance ministers continues into its second day and an article in The Telegraph highlights comments by German Finance Minister Wolfgang Schauble saying European finance ministers have not agreed on the terms of the EFSF.

This afternoon in the North American session we will have the ADP jobs report and US pending home sales, along with Canadian GDP data.

The USD could continue to firm in light of a failure of the European finance ministers to come away with concrete steps to shore up Europe’s finances. The EUR/USD has support at the October low of 1.3145. A break here and the pair could move to 1.0350, the 61% Fibonacci retracement of the June 2010 to May 2011 bullish trend. Resistance is found at yesterday’s high of 1.3440 and the November 18th high of 1.3610. The CAD/USD found support at 1.2060 and could now test the weekly high of 1.0520.

Read more forex trading 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 MoneyMorning.com.au

Australia has a problem.

It’s called bravado. Australia is walking with a swagger.

That means trouble. Because you know the old saying: pride comes before a fall.

Pride is one of the biggest pitfalls for most investors.

That’s why you should try to avoid it. Because if you do, it will give you a clear view of the market… and help you save money and make money too.

Below we’ll give you our three top tips to avoid investor pride so you don’t have an investing fall.

But first…

A Social Experiment

“For a few souls at the employment margin who might make up that rise to a 5.5 per cent unemployment rate, one hopes they will be able to take compensatory pride in belonging to the nation that’s leading the developed world in returning to a budget surplus.” – Michael Pascoe, Sydney Morning Herald

Perhaps the publishers of the Sydney Morning Herald could help us with a two-step social experiment.

It was suggested by Slipstream Trader, Murray Dawes after we sent him a copy of the Pascoe article…

Step 1: Move Michael Pascoe to the “employment margin”.

Step 2: Ask him if he’s proud that Australia is “leading the developed world in returning to a budget surplus.”

We look forward to hearing the outcome of the experiment!

[Ed note: by the way, as we write, Murray has just finished recording his latest free weekly stock market update video on the Slipstream Trader YouTube channel. Click the market update link to view it.]

The Pascoe quote is a perfect example of Australian mainstream arrogance. Things are so wonderful even those who lose their jobs will stand back, suck on their pipe and say, “it’s great to be unemployed.”

Mainstream commentators are convinced Australia is a special case… immune from overseas debt problems. So they overlook what is obvious.

That’s pride and blinkered thinking. It’s the old head-in-the-sand treatment. And it’s also one of the biggest mistakes most investors make.

Fortunately, ditching your pride to become a disciplined investor isn’t hard. You just need to follow three easy tips…

Sounds obvious right?

Wrong. Investors overpay for stocks all the time.

They see a stock price going up and figure it must be good.

By the same token, those same investors also see a falling stock and assume it must be cheap, “Why, it was a dollar last week, today it’s only 50 cents… apart from the price nothing has changed.”

That was the investor thinking behind the rush to buy BlueScope Steel [ASX: BSL] “on the dips” this past six months:

And why not? Three years ago BlueScope Steel was trading at $12 per share. Today it’s around 40 cents a share.

Bottom line, a falling share doesn’t mean it’s cheap… and a rising share doesn’t mean it’s good.

When it comes down to it, there’s no substitute for doing proper analysis (technical or fundamental), rather than jumping on a bandwagon… or thinking you’re a contrarian just by buying a falling stock. That’s not contrarian. In many cases it’s just plain dumb.

The great thing about buying shares is no-one else needs to know about it. If you pick a stock and it’s a dog, you don’t have to tell anyone… you don’t need to be embarrassed… you can just lick your wounds and sell it.

Of course, as the editor of a share tipping newsletter (Australian Small-Cap Investigator), when we tip a stock, people do know… all 20,000 of our subscribers.

But here’s the thing: whether you tip stocks for your own benefit or for others to invest in, admitting you’re wrong is just as important as picking a stock-doubler.

The thing is, when do you know you’re wrong?

Mostly, you know you’re wrong when the price is going against you. But many investors ignore the message. The easy way is to deny you’re wrong… to make excuses for why the stock is falling, “It’s a great company, I can’t believe the price is going down.”

Remember the aim of investing is to make money.

You can’t make money if the stock price is falling (unless you’re like Murray and you short sell stocks).

So, if the price goes against you, it’s important to swallow your pride. You sell. Now, doing that is hard… because pride is a powerful emotion. That’s why we use trailing-stop orders.

If a stock price falls to a set level, we tell our Australian Small-Cap Investigator subscribers to sell. Sometimes we get bad mail from subscribers who are annoyed… they’d prefer it if we stuck with it.

That’s pride too. But we prefer to tell subscribers to cut their losses and get out. After all, after reflecting on the stock, we can always get back in.

This is the first thing many investors lose when they enter the stock market.

Not only do they buy and hold on when they shouldn’t… but many investors start making up outcomes to fit their investments rather than thinking about what investments to make to meet expected outcomes.

The housing spruikers are a classic example. Because the Aussie housing market didn’t crash in 2008, the spruikers picked out everything that appeared to be different in Australia and claimed those were the reasons why Aussie prices would never crash:

Housing shortage… population growth… coastal cities… “marvellous water views”… and so on.

It didn’t matter that each of those reasons had nothing to do with Aussie house price growth – it was all about the credit bubble.

We see the same in the Aussie stock market. When investors have so much skin in the game they justify their position rather than stepping back to reconsider whether their position makes sense.

That’s all part of fear and greed… of missing out if stock prices rise after they’ve sold.

All up, investing is only as hard as you make it.

But if you apply these three simple tips to your investments it should reduce your investing mistakes, and help you get out of any unforeseen mistakes you do make… because believe us, you’ll still make mistakes. It’s how you manage them that counts.

Cheers.
Kris.

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It’s Time for the Market to Decide

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From the Archives…

Stock Market Predictions
2011-11-25 – Kris Sayce

Stocks on the Australian Market Today – Three Things You Need to Know
2011-11-24 – Shae Smith

The Gospel of Gold and Silver
2011-11-23 – Kris Sayce

China’s Bubble Will Pop in 2012
2011-11-22 – Greg Canavan

ASX Stock Market Winners, Losers and the Newly Dumped
2011-11-21 – Aaron Tyrrell

For editorial enquiries and feedback, email [email protected]

Ditch Your Investor Pride to Avoid an Investing Fall

USDCHF had formed a cycle top at 0.9329 on 4-hour chart. Range trading between 0.9085 and 0.9329 would likely be seen in a couple of days. As long as 0.9085 support holds, the price action in the range is treated as consolidation of uptrend from 0.8569, another rise towards 1.0000 is still possible after consolidation, and a break above 0.9329 could signal resumption of uptrend. On the downside, a breakdown below 0.9085 will signal completion of uptrend, then pullback to 0.8400 could be seen.

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