InvestMacro FX

By MoneyMorning.com.au

A few days ago, it was rumoured India and Iran agreed to trade in hard assets… India will give Iran gold. In exchange, Iran will give India oil.

This is a huge trade. India imports about US$12 billion of Iranian oil each year. To give you an idea, $12 billion dollars of oil equals about 6.87 million ounces of gold!

In one transaction both countries have ignored the value of paper dollars. Instead, they’ve bartered one commodity for the other.

The thing is, the Indian-Iranian deal isn’t the first to use bullion as payment. But it may be the first on billion-dollar scale.

But one thing’s for sure. It’s further evidence that the way we value paper money is changing.

In fact, paying with bullion is happening more than you may think. It’s not just gold either. Consumers are using silver for smaller transactions…

Take the case of a US blogger. He recently revealed that two different people bought guns from him on eBay with silver coins.

Then there’s the Backwoods Home magazine in the US. If you don’t want to pay in cash, you can pay your subscription in silver coins.

Or the Oregon Service station that’ll reduce the cost of petrol to 20 cents a gallon if you pay using old coins…

At the time this photo was taken in May last year, two pre-1964 silver dimes were worth $5 based on their 90% silver content. Gas prices in America were nearing $4 a gallon at the time.

And there’s even a mini mart in Los Angeles that prefers junk silver instead of greenbacks as payment for your groceries….

(NB: Junk silver simply refers to American coins pre-1965, which have 40% to 90% silver content. See this video to find out more.)

It’s clear there’s a growing number of people and businesses who are ditching paper money for real assets.

Smart Knowledge is an investment newsletter service that firmly supports the gold standard. To the extent that they only offer memberships priced in ounces of gold….If you’re after their premium membership service, that’ll be 5.75 ounces, thank you.

And in September last year, Donald Trump accepted a $176,000 deposit for a commercial lease in one of his skyscrapers. But not in cash or a cheque. The company taking the lease (APMEX a precious metals investment firm) paid the deposit using three 32-ounce gold bullion bars.

It might look like a marketing stunt. But Trump’s not alone to wanting to do business with the shiny yellow metal.

In November 2010, the ICE Europe futures exchange started accepting gold bullion as a margin deposit for its crude oil and natural gas futures. Less than two months later, JP Morgan announced it would accept physical gold as collateral for some trades.

According to a Casey Research report from March last year…

‘The World Gold Council is gaining traction in its push to have the Basel Committee on Banking Supervision accept the precious metals as a Tier-1 asset for banks, along with government bonds and currencies.’

It’s surprising that precious metals aren’t already considered a top notch asset for a bank.

But maybe these few transactions are just a sign of things to come.

Because using real assets, like gold, as payment could continue to happen on a billion-dollar scale. And the more it occurs, the more it shows that people are losing faith in the US currency and paper money in general.

The world’s reserve currency is losing partners willing to trade in it. Iran has managed to completely avoid getting stuck with potentially worthless US dollars by snapping up a tangible asset.

Ironically, that puts Iran in the same camp as Donald Trump. Both are buying gold!

Now, this doesn’t mean we’ve returned to the gold standard… yet. But consumer and business trading in gold is a sign some people value precious metals more than cash.

As more and more merchants open up to the possibility of trading with bullion, maybe it won’t be long until gold is used as money for every day transactions… whether governments like it or not.

Shae Smith
Editor, Money Weekend

Ed Note: Gold and silver will be two of the big themes at the first ever Port Phillip Publishing investing conference. Held in Sydney next month, attendees will hear firsthand from Kris Sayce and Dr. Alex Cowie on where the markets are headed this year and which assets you should buy to profit. It’s not too late to book your seat for this exclusive event. Click here for details…

Dr. Alex Cowie is the editor of our resource newsletter Diggers & Drillers. He also has to sleep somewhere at night. We all do – hence the constant debate over real estate in Australia. Last year Alex sold his property in Melbourne and parked the proceeds elsewhere. In this article, he breaks down why he is bearish on Aussie property. It’s a calculated approach we all should be considering.

Is Ben Bernanke Secretly Buying Gold and Silver Stocks?
By Dr. Alex Cowie

Institutional investors rely on precious metal price forecasts to work out how to value gold stocks. So, higher gold and silver price forecasts will lead to higher gold and silver stock valuations and prices. Something very interesting has already happened with analysts’ gold price forecasts recently. For the first time, they are starting to forecast gold prices to go up…

How Warren Buffett Plays the Tortoise and Not the Hare
By Greg Canavan

Investing is a marathon. Slow and steady wins the race. Trying to catch every rally and moving from one sector to the next ‘hot’ area of the market is a mug’s game. It makes you feel like you’re doing something but you’re really just chasing your tail…

How to Win Even if the Australian Stock Market Doesn’t Go Up
By Kris Sayce

In fact, we’ll argue the best time to buy risky assets is when the market is at its most risky. Mainly because the market has priced in much of the doom and gloom. And while we won’t say the market is at its most risky today, it’s pretty darn close to it. What’s more, it seems even the pros are giving up…

Your Money is Better Off in Stocks Than in the Housing Market in 2012
By Kris Sayce

If you’re an investor who’s concerned about the future, do you really want to take out a six-figure mortgage and pay tens of thousands of dollars in buying and holding costs? Or would you rather stick cash in the bank and take a few speculative punts on the stock market?

Buying Guns, Magazines and Petrol With Silver…

By MoneyMorning.com.au

Last week, a massive liquidity injection from the European Central Bank (ECB) was the catalyst for change in market direction and sentiment.

While this has removed the immediate threat of a European credit crunch, it has not altered the underlying fundamentals. The Eurozone remains structurally flawed. I still believe that at some point you will see a breakup of the euro, led by Germany exiting the currency union.

Greece remains in an intractable debt problem. Portugal is not far behind. Without genuine debt relief (even the plan to reduce Greece’s debt ‘voluntarily’ by 50 per cent will not solve its problems) this saga will continue.

But debt relief means writedowns, which will trigger the payout of billions of euros in derivative insurance payments. The global banking system is not strong enough to handle such an event, so it will be avoided at any cost.

So don’t expect to see any meaningful reform in Europe.

Meanwhile, the market is acting as though the liquidity injection has solved the problem. Time and time again throughout this prolonged crisis the market has responded positively to central bank intervention. But time and time again the liquidity injection provided only a fleeting boost to prices.

I don’t expect things to be any different this time around.

The chart below shows the S&P500, the most important stock index in the world. Since the panic sell-off in August 2011, the S&P500 has advanced within a channel, identified by the blue lines. It momentarily broke below that channel in early October and then above it during the subsequent rebound in November.

It’s coming up against the top of the channel again. I think any break above it will be a false break and we’ll soon see a correction back down to the lower part of the channel. There is definitely strong momentum and sentiment behind global equity markets now. But given the still fragile fundamental economic backdrop, I expect reality to return soon.

Click here to enlarge

The Australian All Ordinaries chart index looks a little different. The pattern of the past four months or so resembles a ‘bearish flag’ formation. In general, these formations serve to consolidate the moves of an existing trend – in this case a downtrend that began in April 2011. Once the consolidation period is over, the trend continues.

Click here to enlarge

I’m not a chartist. But when you combine a weak economic outlook with fragile-looking charting action there’s good reason to remain cautious.

I still believe you’re seeing a pretty convincing bear market rally.

The bear market might feel like finding goods stocks is hard.

But keep in mind when searching for stocks, value and price are two different things.

With the market firmly focused on price, it’s easy to ignore (or not even care about) value.

As investors in businesses, it’s our job to focus on value not price. It’s very hard to do and not everyone’s cup of tea.

Put simply, when you estimate intrinsic value you’re estimating what a company’s really worth. This is different to its share price, which is only based on Mr Market’s emotional judgement – not rooted in sound knowledge of a company’s financial position or business fundamentals.

In the last few months, I’ve increasingly heard that value investing is useless in this environment. To be successful you need to trade and take a shorter-term view. That might work for some people. But it’s precisely at these times of great uncertainty that value investing can protect your wealth.

Greg Canavan
Editor, Sound Money. Sound Investments.

From the Archives…

Is There a Reason You’re Not Using the 90/10 Strategy?
2012-01-27 – Kris Sayce

In the Market or Under the Mattress?
2012-01-26 – Keith Fitz-Gerald

What if the Australian Dollar Was a Stock?
2012-01-25 – Kris Sayce

Why Tungsten and Other Strategic Metals Could Prove Good Investments
2012-01-24 – Dr. Alex Cowie

Will These Commodities Help You Claim The Best Investment Gains Of 2012?
2012-01-23 – Dr. Alex Cowie

A Bearish Pattern Forms – Stick with Value Investing

The Central Bank of Nigeria maintained its monetary policy interest rate at 12.00%.  The Bank also held the cash reserve ratio at 8%.  Bank Governor, Lamido Sanusi, said: “We are holding our first meeting of 2012 at a time that is possibly a turning point in the economic history of the country.  The dark clouds in the global horizon remain present.  Forecasts are for slower growth rates in the developed world and emerging markets.  The violence and tragic bombings in northern Nigeria continue to pose a source of concern for investors, and efforts are underway to find a lasting solution.  The recent demonstrations by citizens and opposition parties against fuel subsidy removal have also raised temperatures in the political space“

Previously the Nigerian central bank raised the the monetary policy rate by 275 basis points to 12.00% at its October meeting, after increasing by 50 basis points in September rate 75 basis points in July, and increasing it by 50 basis points at its May meeting this year.  Nigeria reported annual headline inflation of 10.3% in December, compared to 10.5% in October, 9.3% in August, down from 9.4% in July, 10.2% in June, 12.4% in May, 11.3% in April, and 12.8% in March, and just above the Bank’s inflation target of 10%.  

The Central Bank of Egypt held its overnight deposit rate unchanged at 9.25%, and the overnight lending rate at 10.25% and 7-day repo at 9.75%.  The Bank said: “Looking ahead, the current political transformation may continue to have ramifications on both consumption as well as investment decisions, adversely weighing on key sectors within the economy. Moreover, downside risks surrounding the global recovery have mounted on the back of fiscal and banking sector challenges facing the Euro Area and possible spillovers to other regions. These factors, combined, pose downside risks to domestic GDP going forward.”

Previously the Bank maintained its interest rates unchanged when it announced policy settings in October this year.  Egypt reported annual consumer price inflation of 9.55% in December, up from 8.21% in September, 8.49% in August, 10.4% in July, compared to 11.8% in June, 11.9% in May, and down from 12.1% in April.  The toll of the revolution was seen as Egypt’s gross national product contracted by 4.2% year-on-year in the third quarter of the 2011/2012 fiscal year and investment fell 26% due to uncertainty arising from the political upheaval.

Real GDP expanded by 0.3% in Q1 2011/2012 (0.4% in Q4 2010/2011), full year GDP growth was 1.8% in 2010/2011 vs 5.1% in the 2009/2010 year.  The Egyptian pound (EGP) has weakened about 3% against the US dollar over the past year, while the USDEGP exchange rate last traded around 6.03

The Ceska Narodni Banka held the two-week repurchase rate at 0.75% as expected, and kept the discount rate unchanged at 0.25% and Lombard rate at 1.75%.  The Bank said: “Monetary-policy relevant inflation will be close to the target over the entire forecast horizon. Headline inflation will rise temporarily to just above 3% in 2012 owing to a VAT increase, but will fall back below the target at the start of 2013. Consistent with the forecast is stability of market interest rates in the near future and a modest decline thereafter. The risks to the forecast are balanced.”

The Czech central bank also kept the repurchase rate unchanged at its November meeting last year; its last change was a 25 basis point cut in May 2010.  The Czech Republic reported annual inflation of 1.8% in September, compared to 1.7% in August and July, 1.8% in June, 2% in May, 1.6% in April, and 1.7% in March this year, and within the Bank’s official inflation target of 2%.  

The Central Bank of Kenya kept its benchmark lending rate steady at 18.00%, and held the Cash Reserve Ratio at 5.25%.  The central bank Governor, Njuguna Ndung’u, said: ” In view of developments and the need to ensure that inflation declines to levels consistent with the Government’s target, the Committee decided to retain the Central Bank Rate at 18.0 percent. This will allow time for the policy measures in place to work out and deliver decisive results on inflation and inflation expectations.”


At its December meeting the CBK increased the interest rate by 150bps to 18.00%, after hiking by 550 basis points and raising the Cash Reserve Ratio by 50bps to 5.25%at its November meeting .  That move followed a 400bp increase of the interest rate to 11.00% at its October meeting, after raising 75bps in September, and previously increasing, and subsequently decreasing the discount window rate by 75 basis points to 6.25%.

Research in Motion (RIMM) was downgraded today by Jefferies (JEF) to underperform from hold with a price target of $15 price target, ad the company may delay or abandon plans to license its OS. Shares are lower by over 1.3 percent.

By The Sizemore Letter

You know that you’re up against some fierce competition when a stock you recommend is up by more than double the S&P 500’s return and yet you’re in 5^th place.  Yet such is life in early 2012.

Turkcell (NYSE: $TKC), my pick for the InvestorPlace “10 Best Stocks for 2012” contest, is off to a great start.  Through February 1, the stock was up 12 percent for the year, compared to the 5.5 percent gains in the S&P 500.

With the January rally in industrials and materials firms, Caterpillar (NYSE: $CAT) and Alcoa (NYSE: $AA) jumped out to an early start, up 22 percent and 18 percent, respectively.  Long-time Sizemore Investment Letter recommendation Microsoft (Nasdaq: $MSFT) has also enjoyed a nice bounce this year, up 15 percent.  But the real winner so far has been medical device maker Mako Pharmaceutical (Nasdaq: $MAKO), up a remarkable 44 percent.

The best performing stocks on the list are some of the most cyclical, and I am quite happy to see that.  It means that investor risk appetites are returning.   Barring a major blowup coming out of Europe, I expect this to continue and I recommend that investors maintain over-weighted positions in the beaten-down markets of Europe and emerging markets.

2011 was a bad year for emerging markets in general and Turkish stocks in particular, and the strong start to 2012 leads me to believe the rout is officially over.  All things in life are fleeting, and perhaps nothing more so than stock market gains.  Still, buying shares of world-class companies when their prices are temporarily depressed is as close to a fool-proof investment strategy as I have ever seen, and the 2011 emerging market bear market has given us a great opportunity in Turkcell.

Vote for Turkcell

Apparently, republican presidential candidate Mitt Romney agrees. Upon releasing his tax returns to public scrutiny, it was revealed that the former Massachusetts governor is a Turkcell shareholder.

In past articles, I written about the virtues of following the trades of other investors (see “When in Doubt, Follow the Greats”).  I’m not so sure Mr. Romney qualifies, but his ownership of the shares certainly raises their profile.

In other news, Turkcell confirmed recent media reports saying it is interested in acquiring Bulgarian telecom operator Vivacom.   An expanded presence in Bulgaria would be a natural growth strategy for Turkcell.  In addition to expanding in its home market, which is still far from saturated, Turkcell continues to establish itself as a leading telecom provider in Eastern Europe and the Middle East.  Turkcell faces stiff competition for assets and new consumers in these markets from Britain’s Vodafone (NYSE: $VOD), among others, though the company has repeatedly proven that it can compete against its much larger rivals.

2012 is off to a great start, and I expect it to be a very profitable year for emerging market investors.

While the story for solar power in the developed world has been nothing investors can clap about, they might find something worth their applause in emerging markets.

For a majority of the world, solar power costs much more than energy from conventional power plants, particularly if you include battery costs for storing energy. But for those living in undeveloped regions, solar power actually offers substantial benefits in cost.

The dropping prices of polysilicon, coupled with other technological advances, are opening up an enormous market for solar power. Along with some incredible buying opportunities for solar energy stocks.

Currently there are about 1.3 billion people around the globe who live in areas that have no access to grid electricity. And while most of these people are very poor, they actually pay a lot more for lighting their homes than people in developed countries.

Why are people paying more for lighting in undeveloped areas?

Because they’re using inefficient kerosene lamps, an archaic technology widely used almost a century ago in the United States.

It Makes Economic Sense

Today, kerosene lamp lighting costs twice as much compared to solar power.

Then there’s safety.

It’s estimated that 1.6 million people are killed each year due to indoor air pollution caused by burning kerosene, not to mention the deaths that occur from fires. And safe, solar powered bulbs can be 10 to 20 times brighter than kerosene lamps.

The switch to solar isn’t just for providing safer and cheaper light; there’s another power demand on the rise… mobile phones.

Mobile phones have become increasingly popular in Africa, where half the population of one billion now has a mobile phone. But in order for many to charge their phones, they have to rent a charger since they have no grid access or other form of electrical power.

The innovative companies below have seen an opportunity here, and are manufacturing and selling inexpensive solar lamps with special plug-ins for cellphones.

A Tool to Change the World

The San Francisco-based company d.light offers their d.light S250, a solar lamp with a mobile-phone charger that can provide up to 12 hours of light on a single day’s charge.

Currently on display in the British Museum, its curator Neil MacGregor has written a book A History of the World in 100 Objects, where he describes the d.light S250 as a tool that will change the world.

The S250 provides a highly efficient LED light that can illuminate an entire room and last over 50,000 hours. With four different brightness settings, it can provide up to 12 hours of bright light and 100 hours of bed light setting.

The S250 also offers the convenience of in-home mobile-phone charging. Designed with an outlet that can charge a wide range of mobile phones, it takes away the need for people to go out and rent costly chargers.

And the S250 is not alone; the company provides three different solar lantern models costing from $10 up to $45.

The company has really cracked into this market, and has sold more than a million lights in 40 countries. But d.light has even bigger goals for the future.

By the end of 2015, they hope to have their products in the hands of 50 million people. And by the end of 2020, they expect to have improved the quality of life of 100 million people.

Eight Minutes and Nineteen Seconds

Another smaller player trying to grab a piece of this growing market is Eight19. Based out of Cambridge, U.K., the company takes its name from the time it takes sunlight to reach the earth – eight minutes and nineteen seconds.

What separates Eight19 from d.light is its larger IndiGo system that includes a 2.5-watt solar panel (installed on the roof or a pole outside a home), a lithium-iron phosphate battery pack and two LED overhead lamps.

The cost for IndiGo is less than $50 and pays for itself in less than two year. And while the upfront price is too costly for many, Eight19 (along with other companies) offers a payment plan to make the system affordable.

Customers simply pay $10 for the system upfront and then pay a weekly fee for the power it generates. Every week, IndiGo users go to a local vendor and buy a scratch card for about $1. The card will give them a number that they then text to Eight19 for verification.

The company texts them back a code they put into a keypad that unlocks electricity from the device for a week, supplying power to the phone charger and LED lights.

While several competitors are trying a pay-as-you go system, Eight19 is ahead of the curve since they let customers upgrade their system once they have paid off their previous device (which takes about 18 months).

IndiGo customers can upgrade to bigger solar panels, larger batteries, more lights and the ability to power smaller devices.

It’s a great system. By using the money that would have been spent on renting cellphone charges and kerosene, customers can instead progressively build up their system.

Eventually a home could have enough power for larger appliances like refrigerators, or a sewing machine (something that can make them some money).

This technology can bring light and electricity not to just homes, but schools and workplaces in developing markets. Helping power internet connections, enabling laborers to work through the night and providing light for children to do their homework in the dark.

A Brighter Future for All

This is an incredible opportunity to invest in solar energy stocks. All the conditions are right for these solar power products to expand in emerging markets.

You have large, poor rural populations living in excessively sunny regions with no access to grid energy, who are also currently paying excessively high prices for their lighting needs.

For those who can even afford power, they spend a large portion of their income on kerosene for lamps (which provides no return) or have to travel to bigger towns a number of times a week to charge their phones.

Amid the declining cost of batteries, LED lighting and solar panels, in concert with inventive business plans, millions of households in Africa and other developing regions will continue to switch from unsophisticated kerosene lamps to safer and cleaner solar electrical lighting.

And while the companies mentioned above aren’t publicly traded, investors should keep an eye on the growing solar demand in emerging markets.

Two Solar Energy Stocks

Those who produce solar panels, like First Solar, Inc. (Nasdaq: FSLR), and manufacture polysilicon, like GT Advanced Technologies, Inc. (Nasdaq: GTAT), will start to see demand for their products increase as people with no access to grid energy continue to purchase products from companies like d.light and Eight19.

Good investing,

Ryan Fitzwater

Article by Investment U

Simon Property Group (SPG) announced its quarterly dividend of 95 cents per share, an increase of about 6% over its prior dividend in November of 90 cents. The company also reported that it earned $363.8 million, or $1.24 a share, last quarter, compared with a profit of $218.8 million, or 74 cents a share, in the same period last year, beating analyst estimates of 90 cents.