InvestMacro FX

Signs of deflation are visible but the public will be fooled

By Elliott Wave International

Deflation requires a precondition: a major societal buildup in the extension of credit (and its flip side, the assumption of debt).
— Conquer the Crash, 2nd edition (p. 88)

Has the United States met that precondition?

Well, consider that total credit market debt as a percent of U.S. gross domestic product was

• 280 percent in 1929 at the start of the Great Depression
• 380 percent in 2008

The current build-up of credit goes far beyond major — it’s unprecedented.

It’s been rising steadily for 60 years. The slope literally looks like the side of a steep mountain.

Bank credit and Elliott wave expert Hamilton Bolton studied every major depression in the U.S. In 1957, he made this observation:

All were set off by a deflation of excess credit. This was the one factor in common…the signs were visible many months, and in some cases years, in advance. None was ever quite like the last, so that the public was always fooled thereby.

Let’s read again from the second edition of Conquer the Crash (p.92):

A deflationary crash is characterized in part by a persistent, sustained, deep, general decline in people’s desire and ability to lend and borrow…

The U.S. has experienced two major deflationary depressions, which lasted from 1835 to 1842 and from 1929 to 1932 respectively. Each one followed a period of substantial credit expansion. Credit expansion schemes have always ended in bust. The credit expansion scheme fostered by worldwide central banking…is the greatest ever…If my outlook is correct, the deflationary crash that lies ahead will be even bigger than the two largest such episodes of the past 200 years.

Is there evidence now that a deflationary trend is underway? Dear reader, the evidence is abundant and growing by the day.

To begin with, just a casual observation of our national economic life reveals a deep general decline in people’s desire and ability to lend and borrow.

But there are many specific signs pointing to bankruptcy, default and a deflationary spiral.

Yet they’re not grabbing the headlines. The “good” economic reports and levitating stock market are. The public will likely be fooled again. But make no mistake, the signs are there.

Learn Why Deflation Is the Biggest Threat to Your Money Right Now Discover Robert Prechter’s views on the unfolding deflationary trend by reading the 90-page report, The Guide to Understanding Deflation. This guide will help you survive a major deflationary trend, and even equip you to prosper. Plan and prepare for your financial future. Download Your Free 90-Page Deflation Survival Guide eBook.

At last week’s Investment U Conference in San Diego, I made the case (again) for my favorite Asian growth proxy bank: Standard Chartered (OTC: SCBFF.PK).

Life is full of tests.

When I was first approached to write my Global Gambits column for Forbes Asia, the publisher first suggested a test. Would I put together a column on why a bank can be a great proxy for economic growth in a country or region?

My argument was that big banks have deep and broad tentacles in an economy through making loans, taking deposits and providing all sorts of financial services that lubricate the engines of capitalism.

Their performance does indeed tend to reflect the overall health of the economy.

Banks are also a conservative way to play this growth since, if they’re managed conservatively, they tend not to go overboard and manage risk pretty well.

Emerging markets, particularly in Asia, have been rebounding nicely so far this year after a lackluster 2011. If you’re still gun-shy, consider the conservative strategy of investing in quality financial and banking stocks.

This approach offers several advantages.

First, many Asian financial institutions are in a relatively healthy capital position since they’re richly funded by deposits from conservative savers.

Second, Asian banks are well positioned to penetrate untapped markets with an emphasis on consumer outreach and education. Mortgages, credit cards and auto loans are becoming more popular among the three billion Asian consumers who are the backbone of a rising global middle class. As these urban consumers spend more, there’s likely to be an increase in demand for financial products.

Every day, approximately 180,000 people in developing countries move from the countryside to cities such as Shanghai, Jakarta and Johannesburg.

And 75 million people from emerging markets join the global middle class every year. Some estimate that by 2030, more than 90% of the world’s middle-class consumers will reside in developing nations. The opportunity for financial companies to service these new customers is both clear and compelling.

This is coupled with the extremely low level of penetration of financial products and services into Asian households. For example, Andrew Frost, of Matthews Asia Funds, notes that only five years ago medium- and long-term mortgages didn’t exist in Asia (excluding Japan). In addition, Asia’s emerging market capital markets are also extremely underdeveloped.

At last week’s Investment U Conference in San Diego, I made the case (again) for my favorite Asian growth proxy bank: Standard Chartered (OTC: SCBFF.PK).

This hidden gem was founded in 1859 in Hong Kong, but is actually headquartered in London. With over half a trillion dollars in assets, this bank packs a punch well above its weight.

While Standard Chartered is active in more than 70 countries, the bulk of its revenue and profits comes from emerging Asia, and 20% of revenue comes from Hong Kong and Singapore alone. India and Southeast Asia are also key growth markets. In 2011, its 10.2% revenue growth was well balanced, with consumer markets up 12%, conservative and steady trade finance up a robust 25%, and corporate banking up 9%.

I really like that consumer banking forms a solid core of earnings, with 40% of its retail income generated by deposits and related fees. This gives management the flexibility to adjust and to pass on higher interest rates – actually boosting profit margins.

The gold standard for banking stocks is delivering consistent performance. This is where Standard Chartered really shines – 10 consecutive years of up revenue, profits and dividends. The bank currently offers a solid 3.5% yield that’s paid semi-annually.

Finally, while Standard Chartered is always on the prowl for smaller banks to acquire in these high growth markets, it’s oftentimes talked about as a takeover target itself.

The stock has surged 38% since my October recommendation, but still trades at about 1.2 times book value and just a bit over 10 times 2012 earnings estimates. Take a small position now and accumulate on any weakness, but don’t forget to have a 15% sell stop in place in case markets move against us.

Good Investing,

Carl Delfeld

Article by Investment U

London Gold Market Report
from Adrian Ash
BullionVault
Thurs 29March, 08:10 EST

The WHOLESALE-MARKET gold price fell beneath last week’s finish on Thursday in London, nearing its second consecutive monthly fall against all major currencies bar the Japanese Yen as US Treasuries rose with the Dollar.

Italian and Spanish debt prices fell, pushing interest rates higher. Frankfurt’s stock market fell for the seventh time in 9 sessions.

Brent and WTI crude oil slipped to one-week lows as France again said a joint European-US release of strategic stockpiles is likely to depress prices.

Losing 2.0% in February, the gold price in US Dollars fell today to $1657 per ounce, 7.0% beneath its start in March.

Gold hasn’t dropped for more than two consecutive months since spring 2001 versus the Dollar, since autumn 2006 vs. Sterling, and since mid-2007 vs. the Euro.

“The view that the US economic recovery is looking more sustainable is becoming increasingly accepted,” writes UBS strategist Edel Tully in a new report, cutting the Swiss banks’s average 2012 gold price target by 18% to $1680 per ounce.

“Gold is at risk, for it needs persistent inflows of investor money to keep it on its upward trajectory.”

“Investors need to put in well over $100 billion to the gold market in 2012 to keep prices high,” said GFMS chairman Philip Klapwijk at a CME conference in Singapore today, quoted by Reuters.

Globally, gold investment demand rose 33% by Dollar value to $83bn in 2011, according to GFMS data.

New data today showed Russia selling down its gold bullion reserves for the first time in 5 years last month.

Slipping by 3.8 tonnes, Russia’s gold reserves have doubled by weight since 2007 to 883 tonnes, and quadrupled as a proportion of its total foreign exchange reserves by value to 9.8%.

Figures from Data Explorers, quoted by CityWire, say that hedge funds and other investors have sharply increased their short sales of gold mining stocks, with 10% of Chinese miner Zijin Mining Group currently out on loan so that investors can bet on falling prices.

“Indian [gold] demand has been dead for three months,” said a senior Swiss logistics executive to BullionVault on Thursday, as the strike by India’s jewelry retailers protesting a hike in import duties to 4% by value entered its 14th day .

“Nothing’s moving, everyone’s waiting.”

“If the excise duty is corrected, the trade will be happy,” MarketWatch quotes Bhargav Vaidya of the Bombay Bullion Association.

“The strike will not be indefinite, and customers will not go high and dry during [the key] wedding season.”

Meantime in the UK – which the OECD today said has fallen back into recession – daily petrol sales jumped 81% and diesel sales by 43% on Wednesday, according to the Petrol Retailers Association, blaming Government minister Francis Maude for the “panic buying” by advising motorists to fill jerry cans ahead of a possible strike by tanker drivers next week.

More broadly, and with crude oil prices near all-time records in Sterling and Euros today, “It is the perceived potential shortage of oil keeping prices high – not the reality on the ground,” says Saudi oil minister Ali al-Naimi writing in the FT today.

“There is no lack of supply. There is no demand which cannot be met.”

“Used to be that Saudi Arabia produced more oil when it wanted lower oil prices,” notes Olivier Jakob at Petromatrix. “Today, when Saudi Arabia wants lower prices it produces an op-ed in the Financial Times.

“It shows that you either do not want or can’t produce more.”

Also in the UK today, Bank of China Ltd applied for membership of the London Metal Exchange, the world’s #1 base metals exchange.

BoC’s UK commodities arm is the first Chinese-owned business to apply for membership. Barclays Capital reckons that China now buys some 40% of annual global demand for copper, aluminum and nickel.

In the last 3 months of 2011, Chinese households overtook Indian consumers as the world’s top buyers of physical gold according to GFMS data, despite the gold price recording its second-ever highest quarterly average against the Yuan.

Adrian Ash
BullionVault

Gold price chart, no delay   |   Buy gold online at live prices

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(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.

Source: ForexYard

Prices of both gold and silver steeply declined during yesterday’s trading and therefore cancelling out the gains made in the beginning of the week.The price of the yellow metal fell on Wednesday by 1.61% to $1,660 while silver also showed a decline of 2.41% to $31.83. Overall during the month of March Gold has dropped by 2.97% whilst silver dropped by 8.11%.

The U.S core durable report was published yesterday and the results were positive, even though the figures fell short of the projections.The report not only affected metals, but other instruments too,including  US Stock market indexes as well as other commodities.

Meanwhile, the European finance ministers will be meeting today, and there is a possibility that they will agree to raise the rescue funds to 1 trillion Euros in order to keep the debt-crisis at bay and ease market concerns.If this outcome will take place, the Euro could be boosted as well as having a positive affect on both gold and silver prices.

Besides the finance ministers meeting today,there are a few additional economic events taking place today. This includes the U.S Jobless Weekly Update,Final U.S GDP 4Q 2011 Estimate and Fed Chairman Ben Bernanke is due to say a few words.

Over the past few trading days we have seen both metals change direction rather sharply whilst moving in no clear direction. Certain reports and figures have disrupted gold and silver’s gains made early in the week and the recent protests in India which have moved into their second week,are also partly responisbile for the decline in gold prices.

Today the EU Summit will take place and its possible that the outcome of the meeting will have a strong affect on the Euro and as a result, could affect the direction of the two metals.The U.S jobless weekly update is another report which has the potential to impact the commodities market due to its possible affect it will have on the US dollar.

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.

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

The USD was able to stage a recovery during yesterday’s trading session following two economic indicators showing an increase in US production last month. Yesterday’s Core Durable Goods Orders figure, considered a leading indicator of production in the US, came in at 1.6%, well above last month’s -3.0%. Following the news, the dollar moved up against several of its main currency rivals, including the yen and euro. Turning to today, traders will want to pay attention to the weekly US Unemployment Claims figure. A positive result could help the dollar extend its recent bullish trend.

Economic News

USD – Unemployment Claims May Help Dollar Extend Gains

After spending the first part of the week stuck in a bearish cycle, the dollar was able to stage a recovery during yesterday’s trading session. The US Core Durable Goods Orders figure, which came in significantly better than last month’s, helped the greenback reverse its bearish trend against both the yen and euro. The USD/JPY, which had dropped as low as 82.59 during the Asian session, spent most of the day moving up. The pair reached as high as 83.16 before staging a mild reversal during the late afternoon.

The EUR/USD, which had spent the first part of the week in an uptrend, tumbled during the afternoon session yesterday. The pair dropped from a daily high of 1.3372, falling as low as 1.3297 before staging a reversal during the evening session.

Turning to today, the US Unemployment Claims figure is likely to be the highlight of the trading day. The labor sector in the United States has seen steady gains in recent months, and has led to an increase in optimism regarding the economic recovery. Should today’s figure come in at or below the forecasted 351K, the greenback may continue moving up as we begin to close out the week.

EUR – EUR Sees Mixed Trading Day

After spending the first part of the week in a bullish trend, the euro saw a mixed trading session yesterday against its main currency rivals. Against the US dollar, the common currency spent most of the afternoon session trading below the 1.3300 level. Overall, the EUR/USD was down some 75 pips for the day. That being said, the euro was able to extend its recent gains against the Australian dollar, which has been adversely affected by recent Chinese news. The EUR/AUD reached as high as 1.2833 before stabilizing around 1.2815 during the evening session.

Turning to today, euro traders will want to pay attention to any announcements out of the euro zone, particularly in regards to the current debt situation in Portugal. Portugal is widely seen as the next euro-zone country that will need to restructure its debt. Any negative news may turn the euro bearish. In addition, the weekly US Unemployment Claims figure may lead to further euro losses against the dollar, providing the figure comes in as expected.

JPY – JPY Moves Up Against Riskier Currencies

The end of the Japanese fiscal year, typically a time when a large amount of liquidity is injected into the Japanese economy, led to gains for the yen during yesterday’s trading session. The EUR/JPY fell over 90 pips over the course of the day, reaching close to the 110.00 level during the afternoon session. The GBP/JPY saw an even steeper drop. The pair fell well over 100 pips yesterday, reaching as low as 131.25 late in the afternoon.

Turning to today, a relatively slow news day means that the yen may be able to extend its bullish trend, especially against riskier currencies like the euro. That being said, the US Unemployment Claims figure could lead to JPY losses vs. the greenback, providing the indicator shows continued growth in the US employment sector. Traders will want to pay attention to the figure. Should it come in at or below the expected 351K, the USD/JPY could move up.

Crude Oil – Crude Oil Tumbles Following US Inventories Figure

Risk aversion in the market place combined with a significantly higher than expected US Crude Oil Inventories figure, led to a major drop in the price of oil during yesterday’s trading session. The US inventories figure came in at 7.6M, well above the forecasted 2.8M. Typically, a high inventory means that there is less demand in the US, which can lead to a drop in price. The price of oil fell almost $2 a barrel, reaching as low as $104.88 before stabilizing at $105.20.

Turning to today, the price of oil may be influenced by the weekly US Unemployment Claims figure, set to be released at 12:30 GMT. Should the figure show continued growth in the US labor sector, the USD could see gains as a result. In such a case, crude oil may drop further ahead of markets closing for the week.

Technical News

EUR/USD

A bearish cross on the daily chart’s Slow Stochastic indicates that the pair may see downward movement. This theory is supported by the Williams Percent Range on the daily chart, which is currently at -20. Going short may be a wise choice for this pair.

GBP/USD

Most long term technical indicators show this pair trading in neutral territory, meaning that no major movements are forecasted at this time. Traders may want to take a wait and see approach, as a clearer picture may present itself in the coming days.

USD/JPY

Both the Relative Strength Index and Williams Percent Range on the daily chart have moved into the overbought zone, indicating that the pair could see downward movement in the coming days. Traders may want to go short in their positions ahead of a possible bearish correction.

USD/CHF

The daily chart’s Williams Percent Range is currently in oversold territory, indicating that the pair could see an upward correction in the near future. In addition, the Slow Stochastic on the same chart has formed a bullish cross. Going long may be the wise choice for this pair.

The Wild Card

Gold

The Bollinger Bands on the daily chart are narrowing at the moment, indicating that a price shift could occur in the near future. The Slow Stochastic on the same chart, which has formed a bearish cross, shows that the shift could be downward. Forex traders may want to go short in their positions ahead of a possible downward breach.

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.

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 TraderVox.com

Tradervox (Dublin) – Euro managed to stay above the 1.3300 levels during the Asian session only to plunge below it on the back of poor economic data from EMU and formed a low of 1.3270. The single currency is trading near the low, down about a third of a percent for the day.

The support may be seen at 1.3250 and below at 1.3200 levels. The resistance may be seen at 1.3280 and above at 1.3325. EMU released economic and industrial confidence data which came below expectation at 94.4 and -7.2 respectively. GDP data from US will be released later in the day and the US economy is expected to show expansion.

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

Shares of Amylin Pharmaceuticals (NASDAQ:AMLN) rose 48% to $22.81 in morning trading after Bloomberg reported the company rejected a bid from Bristol-Myers Squibb for $3.5 billion, or $22 a share.Amylin Pharmaceuticals should find initial support at its 50-day moving average (MA) of $15.60 and further support at its 200-day MA of $12.20.In the last five trading sessions, the 50-day MA has climbed 1.61% while the 200-day MA has risen 0.37%.

By TraderVox.com

Após passar a primeira parte da semana em tendência de alta, o euro viu uma sessão de trade mista ontem, em relação as suas principais rivais. Em relação ao dólar, a moeda europeia passou a maior parte da sessão da tarde, sendo negociada abaixo do valor de 1.3300. No total, o EUR/USD caiu 75 pips no dia.

Com tudo, o euro conseguiu estender seus recentes ganhos em relação ao dólar australiano, o que foi negativamente afetado pelas notícias chinesas. O EUR/AUD alcançou a alta de 1.2833, antes de se estabilizar em torno de 1.2815 na sessão do fim do dia.

Por hoje, investidores de euro devem querer prestar atenção a qualquer anúncio proveniente da zona do euro, particularmente no que diz respeito a atual situação da dívida de Portugal. Portugal é fortemente visto como o próximo país da zona do euro a precisar reestruturas os seus débitos.

Qualquer notícia negativa pode derrubar o euro. Além disso, o relatório semanal de pedidos de seguro-desemprego pode conduzir o euro a perdas em relação ao dólar, caso os números cheguem dentro do previsto.

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