Dec. 16 (Bloomberg) — Bob Parker, senior adviser at Credit Suisse Asset Management, discusses stocks, euro-zone bonds, China and India. He talks with Owen Thomas on Bloomberg Television’s “Countdown.”
Central Bank of Sri Lanka Retains Interest Rate at 7.00%
The Central Bank of Sri Lanka kept its benchmark repurchase rate steady at 7.00%, and also held the reverse repurchase rate at 8.50%, and the Statutory Reserve Ratio at 8%. The Bank said: “While supply side improvements, particularly with respect to agricultural produce, have helped bring down domestic prices, the expected favourable performance of the domestic agricultural sector in the forthcoming year coupled with the ongoing improvements to infrastructure includingtransportation, will help mute inflationary pressures in the period ahead.”
Sri Lanka’s central bank also kept its monetary policy settings unchanged at its November meeting this year, while the Bank last cut its key interest rates in January this year. Sri Lanka reported an annual headline inflation rate of 4.7% in November, down from 6.4% in September, 7% in August, 7.5% in July, 7.1% in June, and 8.2% in May.
Sri Lanka is aiming for 8.5% GDP growth in 2011, after its economy expanded 8% in 2010, meanwhile inflation is expected to slow to 6% by the end of 2011. Sri Lanka reported 8.2% annual GDP growth in the second quarter (7.9% in Q1).
The Bank said broad money supply (M2) grew 19.8% year on year in October, while credit to the private sector grew 34.1%. The Sri Lankan Rupee (LKR) last traded around 114 against the US dollar. The Central Bank of Sri Lanka next meets on the 13th of January 2012.
Paterson Says Europe Recession Would Hit Asia `Acutely’
Dec. 16 (Bloomberg) — Stewart Paterson, the Singapore-based co-founder of Riley Paterson Investment Management Pte, talks about Europe’s debt crisis and its impact on Asian financial markets. Paterson speaks with Rishaad Salamat on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)
Is Embraer (NYSE: ERJ) An Emerging Defense Industry Leader?
Is Embraer (NYSE: ERJ) An Emerging Defense Industry Leader?
by Mike Kapsch, Investment U Research
Friday, December 16, 2011
It’s already the fourth-largest aircraft manufacturer in the world…
Brazil’s Embraer S.A. (NYSE: ERJ) has produced over 5,000 aircraft that operate in 92 countries on five continents. Annual revenue from commercial and private jet sales alone total nearly $4 billion.
But the company isn’t satisfied. It’s expanding its defense and security operations, as well. And it may have struck gold in its home country…
According to SunTrust Robinson Humphrey Senior Analyst Peter Skibitski, three pending defense deals with Brazil’s government could add “several billions of dollars” to Embraer’s coffers “over the next four or five years.”
Considering Embraer’s current annual revenue is $5.28 billion, an additional $1 billion a year is an enormous opportunity. The only question is, is Embraer ready for the challenge?
Three Reasons Embraer’s Shares Could Fly
Although it has spent the majority of its time producing aircraft for commercial and private use over the last 40 years, Embraer has also spent plenty of time building a solid framework for its defense and security business.
Only problem is… defense and security make up just 10 percent of Embraer’s total revenue. But that’s set to change…
- Embraer is preparing to build Brazil’s first geostationary satellite: The construction of this satellite alone is a $400-million opportunity. And Brazil can use it to help improve its communication, remote imaging and weather prediction services.
- Embraer is in the final stages of capturing a border security program in Brazil: Drugs and arms smuggling across borders with Bolivia and Paraguay has plagued Brazil for decades. But using drones made by Embraer should help prevent a good amount of drugs and guns from entering Brazil. For Embraer, this is a $4-billion opportunity.
- Embraer singed a deal with Brazil’s Air Force to build a new aerial refueling tanker: The contract has Embraer set to provide 23 refueling tankers, its KC-390, for $1.3 billion. Service is expected to begin in 2015.
There’s still more, too… Embraer boasts a $16-billion order backlog. It recently put in a $950-million bid for a contract with the U.S. Department of Defense. And its Super Tacano fighter jet just received FAA approval in the United States.
Take into account shares are trading at 33 percent of its 52-week high and it seems Embraer has nowhere to go but up. But a concern still remains…
Embraer is being probed for a potential corruption charge by the U.S. Justice Department. The company hasn’t been charged with anything. And its CEO said the investigation won’t hinder business.
But if the Justice Department does find something, Embraer could be barred from doing business with the U.S. government in the future as a worst-case scenario. Right now, it looks premature to think that the situation will reach this point, though.
Final Departure
In all, Embraer looks set for a great run… These three defense deals with Brazil’s government could essentially double the firm’s revenue over the next few years. Therefore investors will certainly want to keep an eye on the stock and its legal situation in 2012.
Good Investing,
Michael Kapsch
Article by Investment U
What the Heck Happened to Gold?
Written by Sara Nunnally, Editor, Inside Investing Daily, insideinvestingdaily.com
Gold prices have slid. For smart traders, it has created an opportunity. The currency war is far from over.
It took gold prices nine months to go from $1,400 an ounce to $1,900 an ounce, but it’s only taken prices a month to fall $200.
Look at the action over this past year…
Gold prices have fallen slightly below their long-term uptrend. But this might not be a bad thing. In fact, it could be a great opportunity. Look at this chart:
This chart shows the price of gold over the past 10+ years. See that blip back in ’08? That’s the financial crisis. And after that, the price of gold went ballistic, climbing 153% in two and a half years! I don’t think even the hard and true gold bugs believed gold could move at this pace.
In 2008, we had a massive financial crisis that sent investors running to cash and ultra-safe bonds. This sent the U.S. dollar through the roof. Demand for greenbacks made their value increase, despite all the printing that the Federal Reserve was doing.
Now, in 2011, the euro is crashing hard. The European debt crisis is having the same effect on the U.S. dollar — giving it a much higher value.
As a result, dollar-denominated assets, particularly gold, are dropping in price. Never mind that the U.S. dollar is only up because folks have such little faith in the euro.
So what does this mean for the future price of gold?
Things are going to stay crazy — with a lot of price swings — until one of two things happens: The price of gold drops far enough to stimulate physical demand, or the currency war ends.
Here’s what’s happening. The Federal Reserve has agreed to provide cheap dollar loans to inject liquidity into the European market. What’s been happening is that folks are dropping the euro and picking up the dollar.
Look at the action between the CurrencyShares Euro Trust (FXE:NYSE) and the PowerShares DB U.S. Dollar Index Bullish (UUP:NYSE) over the past six months. The U.S. dollar is creaming the euro.
On Tuesday, I told my Macro Trader readers to take 33% profits on half of our position playing FXE put options. But the potential for profits was much greater. At the end of the day, they could have walked away with 43%, and we’re still holding the second half with 47% gains as of Thursday morning.
This sets up a unique idea for gold investors.
Gold prices are no doubt in a bit of a slump. I see this as a buying opportunity, but in all honesty, we don’t know when the market is going to turn back to gold.
That means investors can take advantage of the currency war happening right now. As long as the euro continues to be shaky, the U.S. dollar is going to maintain its value. Things like gold will struggle to move higher, and will likely fall in price.
But by investing in currencies, you can balance those price movements.
I think the FXE has some more downside before all is said and done, and could provide you with a nice gain over the next three or four months if you use put options to bet the ETF will fall. That’s why we’re still holding the second half of our FXE put position in Macro Trader.
In all, I think gold prices are starting to look attractive again. We’ve seen price support at $1,300 back in January, $1,500 back in May, and $1,600 in September.
This last is the level we just broke. If $1,600 doesn’t hold, I’d be a strong buyer at $1,500.
Editor’s Note: We are one headline away from a massive spike in gold prices. We are ignorant to believe an age-old war between the Sunnis and the Shias will fade away simply because we lowered our flag and went home.
The sad truth is, we are in worse shape now than we were eight years ago. And if what we think is about to happen becomes reality, it is great news gold investors. If you want the in-your-face details, you need to read my urgent report on the situation.
Donovan Says Cost of Euro Breakup Would Be `Horrific’
Dec. 16 (Bloomberg) — Paul Donovan, deputy head of global economics at UBS AG, talks about the costs of a potential breakup of the euro zone. He speaks with Linzie Janis on Bloomberg Television’s “First Look.”
Phys. Demand “Huge” as Gold Touches $1600, but “Bears in Driver’s Seat” as European Govts Fear Possible Downgrades
London Gold Market Report
from Ben Traynor
BullionVault
Friday 16 December, 08:45 EST
SPOT MARKET gold prices briefly touched $1600 an ounce Friday lunchtime in London – 2.3% up on this week’s lows – while stocks and commodities were broadly flat compared to Thursday’s closing prices.
“Physical market demand continues to improve,” says Walter de Wet, commodities strategist at Standard Bank.
“The demand is not stellar, but much stronger than a week ago.”
“We saw huge physical demand [on Friday] from Thailand and Indonesia,” adds one dealer in Singapore.
“But there isn’t much demand from India, mainly because the Rupee is very weak.”
Silver prices rose to $29.96 per ounce – still 7.0% down on last week’s close – while on the currency markets the Euro rallied against the Dollar despite fears that Eurozone government downgrades may be imminent.
Heading into the weekend, Dollar gold prices were down 6.9% for the week. Based on gold prices at the afternoon London Fix, the last time gold fell further in one week was the first week of December 2008.
Bigger Friday-to-Friday falls were seen in October of that year. Today’s London Fix would have to come in below $1488.75 per ounce to surpass the 12.9% weekly drop in gold prices seen in the week ended 17 October 2008.
Nevertheless, net outflows saw the volume of gold bullion held to back shares in the SPDR Gold Trust (ticker: GLD) – the world’s largest gold ETF – fall yesterday by nearly 15 tonnes to just under 1280 tonnes, the biggest one day outflow by volume since August this year.
“Bears are in the driver seat,” says Miguel Perez-Santalla, New York-based vice president of sales at Heraeus Precious Metals Management.
“But the problems in Europe have not been solved and buying will come back and we will see higher prices because of a lack of confidence in the financial system.”
“Could Eurozone sovereign ratings be cut as early as this evening?” asks this morning’s note from Standard Bank currency analysts Steve Barrow and Jeremy Stevens.
Ratings agency Standard & Poor’s last week announced it had placed every country in the Eurozone on CreditWatch negative, stating that Eurozone governments have demonstrated they “are not prepared to act collectively in a way that convinces markets”.
“This sounds to us very reminiscent of the warning S&P gave to the US government ahead of the August 2 debt ceiling deadline,” note Barrow and Stevens.
“The US had its AAA rating taken down to AA+ a few days later. Notably the rating cut occurred late on Friday August 6, after the markets had closed.”
The potential downgrade of France – which is currently rated AAA – “does not seem justified based on economic fundamentals,” Bank of France governor Christian Noyer said Thursday.
“Or if it is, they should start by downgrading the UK, which has a bigger deficit, as much debt, more inflation, weaker growth and where bank lending is collapsing.”
“It is true,” agreed French finance minister Francois Baroin today, “that the economic situation in Britain is very worrying today and one prefers to be French than British at the moment on the economic level.”
“If the international community doesn’t work together,” International Monetary Fund chief Christine Lagarde warned last night, “[it risks] retraction, rising protectionism, isolation…this is exactly the description of what happened in the Thirties and what followed is not something we are looking forward to.”
Lagarde added that the Eurozone crisis “is not a crisis that will be resolved by one group of countries taking action”.
“It is going to be hopefully resolved by all countries, all regions, all categories of countries actually taking action.”
European Central Bank president Mario Draghi meantime has repeated that the ECB’s program of buying government bonds – which is said to be capped at €20 billion per week – is “neither eternal nor infinite.”
In a speech given in Berlin yesterday, Draghi also said a “firewall” to prevent contagion across different sovereign debt markets “will be in place and can be activated when needed subject to proper conditionality”.
Eurozone leaders have agreed to “assess the adequacy of the firewall by next March,” he added.
Ratings agency Fitch meantime has cut the credit ratings of seven major banks. Bank of America, Citigroup and Goldman Sachs have been downgraded by one notch from A+ to A. Barclays, BNP Paribas, Credit Suisse and Deutsche Bank have all been cut by two notches from AA– to A.
“With access to liquidity being constrained, market participants have increasing problems to refinance,” says a note from Credit Suisse researchers.
“As a result they have to sell their assets – including precious metals – to raise the much needed cash. This is the main reason why gold prices fall on days of increasing funding stress.”
Over in the US, the House of Representatives is due to vote today on a spending bill agreed last night that, if approved, will avert a shutdown of government agencies.
Negotiations continue meantime on a separate deal to extend unemployment benefits and a payroll tax cut.
“Congress should not and cannot go on vacation before they have made sure that working families aren’t seeing their taxes go up by $1,000 and those who are out there looking for work don’t see their unemployment insurance expire,” US president Barack Obama said Thursday.
Gold value calculator | Buy gold online at live prices
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.
Darby Says Swiss Stocks to Perform `Very Well’ in 2012
Dec. 16 (Bloomberg) — Sean Darby, global head of equity strategy at Jefferies Group Inc., talks about the outlook for China’s economy, global stocks and his investment strategy. Darby speaks with John Dawson on Bloomberg Television’s “Asia Edge.” (Source: Bloomberg)
BofA’s Bhundia Favors Yuan, Philippine Peso, Ringgit
Dec. 16 (Bloomberg) — Ashok Bhundia, a fixed-income strategist at Bank of America Merrill Lynch in Hong Kong, talks about Reserve Bank of India monetary policy, and investment strategy for global currencies. India’s inflation slowed to the lowest level in a year, boosting the central bank’s scope to support growth by pausing its record interest-rate increases. Bhundia speaks with Rishaad Salamat on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)
Forexct 16-12-11 Video News Update & Outlook
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.
