Month: November 2011

By MoneyMorning.com.au

The most eye-catching predictions are usually the biggest and boldest… The Dow up to 20,000 points or down to 500 points… Gold up to $50,000 or down to $300.

So, what will happen to the Aussie stock market, the Dow or the price of gold in 2012?

Well truth be told… in such a volatile market we’ve no idea.

But that won’t stop us making a prediction… even if it’s wrong. Because as we’ll explain (with apologies to Alfred, Lord Tennyson), “It is Better to Predict and be Wrong Than Never Predict at All”.

But before we give you our stock market predictions for 2012, take a moment to read this quote from Paul Tudor Jones, the famous hedge fund manager:

“The accumulation and then the repayment of debt basically drives every economic cycle that there is. Right now we have probably explored the envelope with regard to mortgaging our future earnings. The next part of this cycle will be the repayment of what we’ve enjoyed now for the past four or five years… We’re in the largest post-war business expansion cycle in history.”

He should know what he’s talking about. He’s the 336th richest person in the world.

But what’s most interesting about the quote is when Jones said it.

It was 25 years ago… in 1986.

He was talking about the 1980s stock market bull-run. At the time, Jones believed the market was heading for a crash. Turns out he was right… and wrong.

In 1986 Paul Tudor Jones and his chief analyst, Peter Borish, predicted the stock market would crash in March or April 1988. And not just any old crash, it was going to be the big one. So, what happened to the Great Crash of 1988?

That’s right, it never happened.

But Paul Tudor Jones wasn’t completely wrong. It’s just that the Great Crash of 1988 came early. It became known as the 1987 stock market crash.

The point is, even though Jones got the date wrong he still made a 201% gain for his clients. Why? Because he wasn’t tied to the date. The date was a guide. More important was that he understood the boom wasn’t sustainable.

But that’s not all. Despite knowing a crash was on the way, he also believed the market would gain another 40% before it crashed. This is exactly what happened.

He figured there was no point sitting and waiting for the market to fall when there was the chance to make money from the market going up.

Bottom line: He made a prediction… got part of it wrong… but still made a bucket load of cash.

In a Volatile Market Diversification Won’t Help You

You see, predicting the future is part of being an active investor. But most investors have been brainwashed to think investing in a diversified portfolio will make them money in a rising market and protect them in a falling market.

That led most investors to lose a lot of money in what they thought were safe investments during the 2008 stock market crash.

They thought diversification could save them. It didn’t. As the following chart shows:

What we’re saying is this… Some will say stock market predictions are pointless, because no-one can predict the future. We argue that predictions are vital to understanding what could happen and how it could help you make money and protect your wealth.

So, here’s our prediction for next year: we believe by the end of next year stocks will be no higher or lower than they are today. But that doesn’t mean stock prices won’t move. In fact, we’ll say in 2012 markets will be just as volatile as they’ve been in 2011.

If that scares you, it shouldn’t. Because a volatile market could give you the chance to make a lot of money.

However, before you think about making money you’ve got to think about saving money. That’s why we recommend investors put most money in “safe” assets first:

The Safe Assets Allocation Model

Before you say anything, yes. We know it doesn’t add up to 100%. The idea is you choose the level of exposure you’re comfortable with. Remember, this is your capital. This is what you’ve already worked for… you need to make sure you don’t destroy it by risking too much of it.

Of course, you have to risk something. You can only make more money by risking money. That’s where your “punting” money comes in. Not surprisingly, our preference is small-cap stocks. Mainly because you get leverage without borrowing from a bank or financial institution.

And unlike other forms of leverage (CFDs, futures, some options strategies), you can’t lose more than you invest.

The sectors we’re looking at for next year are:

Naturally, there are other ways to put your “punting” money to work. You can use CFDs, futures or options. Just understand they require more attention and more active investing.

The thing for you to take away from this strategy and prediction is this…

How to Play a Volatile Market

Although we believe the market won’t be any higher or lower than today, 2012 will be very volatile.

In fact, it’s possible we could even see a 40% rally… followed by a 40% fall!

Long term our belief is that the volatile market will head south. But that won’t stop us taking a punt on potential shorter-term gains.

Because if we do get another quick rally, that’s where small-cap stocks can benefit. And that’s why we’re still in this volatile market.

But whatever happens. Whether it’s a raging bull market, bear market or sideways market, you’ll have 85-95% of your money in relatively safe investments.

Whether we’re right or not, we won’t know for another year.

But at least if you’re actively watching this volatile market and you understand what’s happening, you’ve got a much better chance of protecting and building your wealth than most mainstream investors.

And as Paul Tudor Jones showed, it’s better to predict and be wrong, than never predict at all.

Cheers.
Kris.

P.S. If you’d like to know which small-cap stocks I believe will benefit from a volatile stock market, click here to access my latest stock tips now…

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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]

How to Play a Volatile Market for Profit

Back in July Larry Page became Google’s new chief executive and immediately began a campaign to reign in Google’s projects and focus their resources. This was due to the stiff competition they were facing in mobile computing and social networking from Apple and Facebook, and also investor sentiment towards increasing expenditure on none core businesses.

One of the latest casualties of this “spring cleaning” was the big green initiative, RE<C (Renewable Energy cheaper than Coal), which was an ambitious idea to make renewable energy cost competitive with coal-fired power plants. The plan was to build cheaper and more efficient heliostats, mirrors that reflect the suns rays onto water-filled boilers in order to create steam and generate electricity in turbines.

The easiest way to increase the competitiveness of solar based energy is to increase the efficiency of the system, and decrease the running costs. Google used it’s brainpower to try and develop a new type of Brayton Engine that would run on compressed hot air rather than steam, because solar plants are generally constructed in the desert where water is hard to come by.

Google’s senior vice president, Urs Hölzle, justified the cancellation of the CE<C project by saying “At this point, other institutions are better positioned than Google to take this research to the next level……we’ve published our results to help others in the field continue to advance the state of power tower technology, and we’ve closed our efforts.”

However this set back does not signify that Google is moving away from championing greener energy, it is merely going to use its bank account to further the cause rather than its brainpower. In fact they have already increased their investment in renewable technologies, granting $850 million of investment into solar power, wind farms and other projects.

Source: http://oilprice.com/Alternative-Energy/Renewable-Energy/Google-Reins-in-Spending-on-Renewable-Energy-Technology.html

By. James Burgess of http://oilprice.com

Nov. 28 (Bloomberg) — John Purcell, founder of London-based executive search firm Purcell & Co., talks about hiring and bonuses in the financial-services industry. He speaks from London with Stephanie Ruhle on Bloomberg Television’s “InsideTrack.” (Source: Bloomberg)

Adam Hewison’s Afternoon Financial Market Update & Technical Analysis

January Crude Oil closed lower for the second consecutive week but losses could have been worse if not for a strong comeback on Friday. The primary reason for the weakness throughout the week was concern that the European debt crisis would trigger the start of a global recession. As bearish conditions spread throughout the Euro Region, traders pressured the Euro, driving up the U.S. Dollar and lowering demand for the dollar-based crude oil market.

The soft crude oil market firmed up on Friday on the news that violence had erupted in Saudi Arabia. With unrest already taking place in Egypt and Yemen, the news that it had spread to Saudi Arabia led to speculation that an escalation of events may destabilize the country. Egypt and Yemen are small players in the oil game while Saudi Arabia is the world’s biggest crude oil exporter. Increased violence in this country would drive oil prices sharply higher on the fear that supply would be reduced.

Movement in the crude oil market is coming down to simple supply and demand analysis. If the Euro Zone problems continue to expand beyond the peripheral nations such as Greece, Italy and Spain then demand is likely to fall for crude oil, sending prices lower. “Risk-off” sentiment continues to drive investors into the U.S. Dollar, making crude oil more expensive to foreigners.

Since the markets are being driven primarily by the headlines from Europe and the Middle East, the impact of positive economic news from the U.S. has been diminished. This condition is likely to continue until Europe comes to a concrete agreement on how to manage its sovereign debt crisis. Up until now it’s been “all talk and no action”. Until this mind set changes, positive U.S. economic news is likely to have effect on the price of crude oil in my opinion. From now until the end of the year, Europe and other outside events are likely to set the tone in the market.

From a supply perspective this means that inventories are likely to remain high if Euro remains the key issue. If the emphasis shifts to the potentially explosive situations developing in the Middle East then the only thing that can be guaranteed is extreme volatility. What this market has come down to is this. If traders focus on Europe, the market is likely to weaken due to the stronger Dollar. If traders lean toward the possibility of supply disruptions in the Middle East then look for the market to rise.

In addition to the eruptions of violence in Egypt, Yemen and Saudi Arabia, traders shouldn’t forget about Iran. Last week the U.S. announced a plan to sanction Iran because it is producing military grade uranium in its nuclear plants. Late in the week, France called for a European embargo on crude supplies. With Iran controlling the Strait of Hormuz, oil prices could soar if there is a military confrontation.

Factors Affecting Crude Oil This Week:

Supply and Demand: The U.S. supply and demand situation comes down to which set of fundamentals speculators decide to follow. If they follow the headlines out of Europe and decide to trade on a weaker Euro/stronger Dollar scenario, then look for oil prices to weaken. If the events in the Middle East escalate into full-blown confrontation then look for higher prices because of supply disruption concerns.

European Sovereign Debt: Last week Portuguese and Hungarian debt was downgraded to junk status. In addition, the European Central Bank’s Italian bond buying campaign seems to have failed. With European leaders unable to come up with a plan to manage the spiraling debt situation, the problems are likely to worsen. Europe seems to be facing either a sovereign debt default or a major bank collapse. It is likely to be both. This would plunge the region into a recession and perhaps the world greatly lowering demand for crude oil.

U.S. Economy: If Europe falls, the U.S. is likely to face another recession. The Fed has done just about all it can to keep the economy afloat but there are some things it has no control over. U.S. economic news is not as important at this time and is not likely to move the market. Traders are focusing on Europe and the Middle East.

Middle East Conflicts: Egypt, Yemen, Saudi Arabia and Iran. What is it going to take to draw the U.S. into any one of these conflicts? While unlikely to move on the events in Egypt and Yemen, the U.S. has direct interests in Saudi Arabia and Iran. These scenarios have to power to drive oil prices sharply higher.

Source: http://oilprice.com/Energy/Oil-Prices/Crude-Oil-Analysis-for-the-Week-of-November-28-2011.html

By. Oilprice.com

Nov. 28 (Bloomberg) — Richard Grace, Sydney-based chief currency strategist and head of international economics at Commonwealth Bank of Australia, talks about the European debt crisis, and its implications for global currencies. Grace also discusses New Zealand Prime Minister John Key’s re-election and its potential impact on the nation’s currency. He speaks with Susan Li on Bloomberg Television’s “First Up.” (Source: Bloomberg)

Robert Prechter explains what’s the real problem with today’s market
November 28, 2011

By Elliott Wave International

What is the real problem with today’s market? Watch this excerpt from Robert Prechter’s special, video issue of the August 2011 Elliott Wave Theorist. Prechter shows you how the buildup of dollar-denominated debt has brought us to what he calls a critical market juncture.

Get even more information about current market trends and how to prepare for what’s ahead with our new 14-page investing report. See details below.

The Most Important Investment Report You’ll Read for 2012 Every year or two Elliott Wave International (EWI) publishes analysis with a message so critical that they decide to share it, FREE. They have just released The Most Important Investment Report You’ll Read for 2012, a free report to help you navigate the markets and prepare for what’s ahead. You’ll get hard facts, 25 eye-opening charts and 14 pages of straightforward commentary that will put the volatile market action of the past months into perspective within the “big picture” to help you position for the years to come. Download your free report now.

Nov. 28 (Bloomberg) — Wolfgang Matejka, founder of Matejka & Partner Asset Management, talks about the outlook for a resolution to the European sovereign-debt crisis and his investment strategy. He speaks from Vienna with Maryam Nemazee on Bloomberg Television’s “The Pulse.”

After the post independence strong socialistic & economic reforms, the economic growth climbed steadily & after 1991 the embracement of open market principles for international completion & foreign investment, Business in India today offers great Investment Opportunities for domestic & international sectors. Strong foreign fund buying has kept the share market chart favorable in spite of recent fluctuation in world stock market. Recently Indian Rupee was raised to 21 paisa against one time ruler US dollar. Initiating a business involves certain steps. A directorate of Industries is the nodal agencies who guide new entrepreneurs. An interface between industry & various agencies are provided. Support provided regarding Investment Strategies & single point window service can be availed.

Special economic zones are created for foreign investments. In the export oriented units 100% foreign direct investment is permissible. A tax relief is provided thus making India a Mecca for Investment Opportunities. Among the non-export incentives no tax levied for the first five years. The Indian business trend was Information technology bent from early 90s. Currently there are huge investment options in infrastructure, petrochemicals, pharmaceuticals, and telecommunication & service industries. Considering the nature of business the Investment Strategies are designed accordingly. Foreigners are utilizing billion heavy Indian markets not for only their expansion but to use as operational hub also.

Some key areas like infrastructure, power, automobile, electronic hard ware etc. are receiving attention not only for foreign but domestic ventures also. The principle of inclusive growth is striking the right balance by creating huge job opportunities for semi skilled or unskilled enormous work force. The compliance to inclusive growth has definitely contributed to the GDP rate. India with a quite matured capital market backed by liberal policies& strong banking system has turned to a profitable business ambience both for domestic & international businessmen.

Both Mutual Fund and Equity Fund investments suggest a favorable & significant return. Considering the service industries like hotels, restaurants, placement concerns Indian scenario is enviable. Along with development & advancement as mentioned before the infrastructure industry in India is booming, which can accommodate both types of investors. As far as strategies are concerned they vary from one to another business. Business strategies always have to take into account government policies, restrictions & relief. It is not only foreign investors the domestic counterparts are also getting various reliefs for promoting a particular type of business which may benefit people at large.

In a nutshell today India can boast of enriched business environment guaranteeing high return & offering employment to huge work force.

About the Author

Harjeet is an Indian – born mass-market novelist, who covers the world internet related topics . He writes columns and articles for various websites and internet journals in the domain of Investing in India and Investment options.

The Bank of Israel cut its benchmark interest by 25 basis points to 2.75% from 3.00%.  The Bank said: “The decision to reduce the interest rate to 2.75 percent for December is consistent with the interest rate policy that is intended to entrench the inflation rate within the price stability target of 1–3 percent inflation a year over the next twelve months, and to support growth while maintaining financial stability. The path of the interest rate in the future depends on developments in the inflation environment, growth in Israel, the global economy, the monetary policies of major central banks, and developments in the exchange rate of the shekel.”

Previously the Bank cut its monetary policy interest rate in September, after leaving it unchanged at its June, July, and August meetings, and increasing the interest rate by 25 basis points to 3.25% at its May meeting this year.  Israel recorded annual inflation of 2.7% in October, 2.9% in September, 3.4% in August and July, 4.2% in June, 4.1% in May, and 4.0% in April and just inside the Bank’s inflation target range of 1-3%.

Israel reported GDP growth of 4.8% (annualised) in the March quarter, and 3.3% in the June quarter.  The Bank said: “The GDP growth forecast is 4.7 percent for 2011, and 3.2 percent for 2012.”  The Israeli Shekel (ILS) has weakened about 7% against the US dollar this year, while the USDILS exchange rate last traded around 3.78