InvestMacro FX

By Zachary Storella, CountingPips.com

Today, I am pleased to share a forex interview and commentary on this week’s major events and forex trends with currency analyst David Song from DailyFx.com. As an active trader, David relies on technical analysis for shorter-term forecasts while focusing on economic developments and central bank rhetoric to forecast long term currency price action.

David has been quoted by many major news sites including Reuters, Dow Jones Marketwatch, and CNN Money and his areas of expertise include central bank policy, economic indicators, and market events.

This week happens to be a very busy week of economic data releases that includes inflation reports, interest rate decisions and retail sales data. What do you feel will be the one or two most important events and themes to pay attention to for the week?

The biggest event risk for this week will be the FOMC interest rate decision followed by the Swiss National Bank on Thursday. The Federal Reserve is widely expected to maintain its current policy in December, but we may see the central bank talk down speculation for another large-scale asset purchase program as Fed officials expect economic activity to gradually gather pace in 2012.

As the fundamental outlook for the world’s largest economy improves, we should see the committee continue to carry out ‘Operation Twist,’ but Chairman Ben Bernanke may keep the door open to further expand the balance sheet in order to combat the protracted recovery in labor market.

We will also be keeping a close eye on the Swiss National Bank’s policy statement as we expect the central bank to keep the benchmark interest rate on hold, and the SNB may toughen its pledge to stem the marked appreciation in the Swiss franc as it drags on the real economy.

In light of the recent developments coming out of the euro-area, with the region facing increased threats of a credit rating downgrade, the EUR/USD broke below 1.3200 as market participants turned increasingly pessimistic towards the economy.

As European policy makers struggle to restore investor confidence, we expect the single currency to face additional headwinds over the near-term, and the sovereign debt crisis is likely to drag on the exchange rate for some time as the heightening risk for contagion bears down on trader sentiment.

The USD/JPY has maintained a relatively tight trading range since Japan’s Ministry of Finance intervened in the forex market to weaken the yen back on October 30th. Do you feel the outlook for this currency pair will continue to be ultimately bearish (following the long term trend) or do you think there is case for a more bullish expectation taking place?

I would not advocate fighting the long-term trend in the USD/JPY despite the threats of a currency intervention, and the Japanese Yen may continue to appreciate against its U.S. counterparts as currency traders remain heavily long against the pair. The DailyFX Speculative Sentiment Index (which tracks retail positions with FXCM account holders) currently stands at 4.22, reflecting that 4.22 traders are long for every trader that short.

The USD/JPY SSI ratio has held in positive territory since the pair has traded back around 90.00, and it seems as though we will see more declines in the exchange rate as traders remain heavily short the Yen.

The U.S. dollar should continue to appreciate over the medium to long-term as the fundamental outlook for the world’s largest economy improves.

As Fed officials see the recovery gradually gathering pace in 2012, there’s limited scope for the central bank to conduct another large-scale asset purchase program, and we should see market participants turn increasingly bullish against the USD once the FOMC brings its easing cycle to an end.

Although some Fed policy makers have voiced their opposition against more quantitative easing, the committee needs to show a greater willingness to start normalizing monetary policy to see the recent U.S. dollar rally be maintained over the medium to long-term.

Economic South Asian superpower India has firmly embraced solar power, advancing the target date by five years for selling solar-generated electricity at the same rate as electricity generated by fossil fuel plants, from 2022 to 2017.

According to government officials, the reason for moving the date forward is plummeting tariffs in the latest solar development projects, a trend that they believe is likely to continue.

Ministry of New and Renewable Energy Joint Secretary Tarun Kapoor said, “The prices will come down further next year and will continue to fall. Earlier, our aim was that solar power will achieve grid-parity by 2022, but looking at the upbeat response from the industry, we have now reduced our target to 2017. Some big names from India have proved that a large investment will soon be possible in solar projects, as huge as 2,000 megawatts. There are other reasons as well. Internationally, the price of solar cells has come down and with improved technology, the cost of operation as a whole has been reduced, thereby increasing the efficiency.”

All is not yet completely sunny for India’s solar energy drive, however. Kapoor noted that several solar projects benefiting under a state program offering favorable tariffs to build 20,000 megawatts of capacity have already been delayed, adding that developers may lose contracts if deadlines are missed, commenting, “Two of the projects are behind schedule. In a few months, we should have a clear picture.”

The pair of miscreants are Entegra Ltd., whose majority shareholder is MW Corp Pvt., which has yet to begin building a 10 megawatt solar-thermal plant in Rajasthan and Enterprise Business Solutions, cited for delays in an October deadline to build a 5 megawatt photovoltaic plant in Punjab.

Entegra Ltd. is disputing New Delhi’s claims of sluggish performance, with its Chairman Mukul S. Kasliwal commenting that his firm faced problems raising financing for its $38 million development but that the company expects to complete the Rajasthan facility plant by its 2013 deadline. Shifting responsibility for delays to the Indian government, Kasliwal commented in an interview, “We haven’t started because we’re not going to do something that doesn’t make sense financially. Had we been allowed to function as an SPV (special purpose vehicle), then we would’ve finished financing long ago.”

Despite the travails of Entegra Ltd and Enterprise Business Solutions, other members of India’s burgeoning solar energy community are optimistic about the government’s latest pronouncements. Azure Power CEO Inderpreet Wadhwa, whose company has secured government contracts to establish solar projects to generate up to 35 megawatts said, “Solar has the same potential as personal computers had in 1970’s. Technology innovations and improvements in manufacturing would drive down costs further.”

Support for India’s solar ambitions comes from some heavyweight fiscal analytical groups. Ernest and Young partner Sanjay Chakrabarti observed, “The extent of price reduction since 2008 has been very sharp. Although solar prices will continue to drop the fall in future may not be so sharp.”

Kapoor is under no illusions however as to why foreign companies are closely following India’s interest in solar energy, noting wryly, “The only reason is that India is an emerging market and one of the few countries where solar energy is encouraged at such a massive level.”

And that emerging market is potentially lucrative indeed, as last year the Indian government launched its “National Solar Mission,” whose objective is to establish India as a global leader in solar energy, by creating the policy conditions for its diffusion across the country as quickly as possible.

The program’s goals are nothing if not ambitious, as the government had initially hoped to boost the nation’s solar capacity by the equivalent of about 18 nuclear power plants by 2022, at date that’s now been brought forward by five years.

Investors, anyone?

Source: http://oilprice.com/Alternative-Energy/Solar-Energy/India-Embraces-Solar-Power-Says-Price-Will-Equal-Thermal-Power-in-Five-Years.html

By. John C.K. Daly of Oilprice.com

Amazon. om (AMZN) said today it has extended the free shipping deadline for delivery by Christmas.

Cyber Security Investments 2012

by Chris Matthai, Investment U Research
Tuesday, December 13, 2011

Individuals, businesses and governments are under attack… cyber attack. Collectively, we’ve never faced as many online threats as we do today.

Why is so much hacking happening now? The answer is simple: More valuable information is stored online now than ever before and – at the same time – many organizations’ cyber security measures are still not up to snuff.

And, unfortunately, our international competitors are taking full advantage of these shortcomings.

An Onslaught of Foreign Intrusions

According to a recent U.S. government report from the Office of the National Counterintelligence Executive, government agencies and private companies are still failing to shield their networks from foreign hackers and illicit programmers.

But the surprise revelation was that the report pointed the finger directly at China and Russia as the leading perpetrators of cyber espionage in the United States, citing repeated efforts to target trade secrets and other sensitive data. But it didn’t stop there… It claimed the pace of cyber espionage is accelerating.

At risk is an estimated $398 billion in U.S. spending on research and development.

Hackers and “black hat” programmers are pursuing sensitive information from a broad array of U.S. agencies and industries, including defense, pharmaceuticals, information technology, alternative energy and advanced materials, according to the report. The assessment drew on 2009 through 2011 data from at least 13 agencies, including the CIA and the FBI.

U.S. corporations and computer security specialists have confirmed an “onslaught” of network intrusions originating from internet protocol addresses in China and Russia. In addition, over the last two years, the number and sophistication of those attacks is on the uptrend.

However, the report went on to indicate the technical difficulties in determining whether such attacks were state-sponsored. Needless to say, government spokespeople from both China and Russia denied any state-sponsored involvement.

The unreported conclusion… For better or worse, the country of origin, the number and the sophistication of cyber attacks can all be determined. But as for eliminating or preventing cyber crime… forget about it… it isn’t going to happen.

For government, businesses and individuals, the only option is to fully protect your data.

Who Do You Call?

The release of this damaging report comes at a particularly inopportune time for the Federal government, which is in the midst of trying to help its workforce become more productive by approving additional mobile devices and specifically addressing employees’ requests for an alternative to Research In Motion (Nasdaq: RIMM) smartphones.

RIMM has been the government’s main smartphone provider since 2001, with security a major selling point. RIMM has a lot of the security controls – encrypted servers, etc. – already built in that allow agencies to control the device and access to data… unlike devices produced by Apple (Nasdaq: AAPL) or other manufacturers.

But now, several federal agencies are exploring the use of Google’s (Nasdaq: GOOG) Android-powered phones, and iPhones and iPads made by Apple.

And here’s where the monster opportunity presents itself…

Apple, Google and most other potential suppliers would require custom applications to make them secure enough to handle sensitive government data… creating a potential profit gusher for any cyber security firms chosen to handle the task.

Standing at the ready are vendors like Cisco Systems (Nasdaq: CSCO), LogMeln (Nasdaq: LOGM), Citrix Systems (Nasdaq: CTXS), Juniper Networks (NYSE: JNPR), Symantec (Nasdaq: SYMC) and Check Point Software (Nasdaq: CHKP) – which all provide software and security to support wireless devices.

Cyber Attacks: The Hackers Keep on Comin’

Due to the increasing number of cyber attacks and the improving sophistication, there’s going to be plenty of business for everyone. Right now, commercial espionage is a larger problem than efforts to penetrate U.S. government computer systems. However, the U.S. government’s move to expand its approved list of mobile devices only increases the need for additional, and highly sophisticated, cyber security.

A likely scenario for the government’s business will be a giant infrastructure contract with the usual cast of characters receiving part of the contract. This would include the large system integrators like Computer Sciences (NYSE: CSC), SAIC, Inc. (NYSE: SAI), Unisys (NYSE: UIS), Hewlett-Packard (NYSE: HPQ) and International Business Machines (NYSE: IBM).

They, in turn, would start filling in all the parts of the contract, including signing on the companies mentioned earlier that specialize in mobile device management and data security. This group includes Citrix, Symantec, Check Point Software, Juniper and others mentioned above.

Although the process of following and waiting on government contracts can be a long and drawn out procedure, it certainly appears that the government will be joining the party sooner or later.

Nonetheless, the cyber security business is moving full speed ahead. Protecting critical data is moving up the to-do list of more and more businesses. Just ask Sony, RSA, Citigroup and Google – who all suffered high-profile cyber attacks in 2011 – about the cost and damage control required to resolve these embarrassments after the fact.

Put buying some cyber security stocks on your to-do list. We view this as a great growth industry for at least the next five years. But don’t wait – start preparing your portfolio now.

Good Investing,

Chris Matthai

Article by Investment U

European Central Bank Makes EU Summit Irrelevant

by Jason Jenkins, Investment U Research
Tuesday, December 13, 2011

Sometimes I get the feeling that international markets are the naive girl next door who’s dating the EU bad boy. He knows exactly what to say to send her heart a flutter. But in true bad boy form, he’s going to break her heart.

Last Thursday, a bombshell dropped before European officials could even get together. Mario Draghi, President of the European Central Bank (ECB), declared that he could only aid European banks and didn’t have any institutional power to act as a lender of last resort to sovereign states.

The ECB brought to an end almost all hopes that it would put its bond-buying program in overdrive to aid in the Eurozone’s sovereign debt crisis. Uneasy markets had believed in the days leading up to the summit that a grand bargain would be reached to end the turmoil.

What the ECB did do was cut rates to a record low of one percent and offered a graciously long three-year financing to banks while easing regulations and collateral requirements for banks to tap its funds.

Draghi, playing down expectations the bank would boost its bond purchases, was disappointed and surprised that markets were hoping the ECB would ramp up its bond buying ability if Eurozone officials came to some sort of austerity agreement this weekend.

Less Than Expected

The ECB President denied his December 1 remark that “other elements” could follow a push toward fiscal union was a signal the ECB could step up its bond-market intervention, saying he was “kind of surprised” it had been interpreted that way.

Under his interpretation, the European Union treaty prohibits the European Central Bank from “monetary financing” and the bank is constrained by its institutional setup.

The market wanted the ECB to fire a “bazooka.” Instead, it’s getting a six-shooter. The bazooka would have been for the ECB to launch a quantitative easing to offset the obsessive austerity measures the Eurozone could have agreed upon this weekend.

And apparently, this would have saved Europe from the brink. Or would it? Was the market’s response over the last couple of days based on political and economic logic or was it just the current market acting as it has repeatedly over the past few months – overreacting to headlines?

How sound was this plan heading into the weekend?

Ask yourself these two important questions and see what you get:

• Why was there so much optimism in the first place for the ECB saving sovereign states? The bank is very conscious that it’s a European institution and has to abide by EU treaty law, and Article 123 of the Lisbon Treaty prohibits the financing of governments.
• Does the plan submitted by German Chancellor Angela Merkel and French President Nicolas Sarkozy bear any resemblance to Draghi’s ideas of “fiscal compact?” More importantly, can their plan actually win the support of all EMU states? Hungary’s EU Commissioner Laszlo Andor said the plan was a joke and that any fiscal union “needs collective, democratic decision-making.”

The package of measures is a fiscal union in name only. There’s no joint debt issuance, no shared budget and no fiscal transfer. Will it even be enforceable? Sanctions will be imposed by EU ministers, but France and Germany will each have a veto.

Eurozone governments are now left to do the heavy lifting. And they have shown time and time again that the burden is too great. Headline risk and volatility will remain in the short-term market, so keep the faith with those strategies we’ve been preaching over the last several months.

Good Investing,

Jason Jenkins

Article by Investment U

The Commerce Department reported retail spending in the U.S. rose slightly in November with a 0.2% increase followed by a sharper 0.6% increase in October. Analysts had expected a 0.6% increase in November. Sales excluding the volatile auto sector also rose 0.2% last month. Purchases by consumers account for as much as 70% of U.S. growth suggesting the economy will not grow as fast in the fourth quarter as forecasters were predicting. The November gain was the smallest since a similar rise in June. The figures come as Federal Reserve policy makers meet today on interest rates.

The Bank of Mauritius trimmed its benchmark interest rate by 10 basis points to 5.40% from 5.50%.  The bank said: "The MPC observed a decline in externally-generated inflationary pressures…. The MPC is of the view that the Key Repo Rate is  broadly appropriate in view of the expected impact of the 2012 budget measures. However, to signal its concern about the low level of business and consumer confidence, it has decided to cut the Key Repo Rate by 10 basis points."

Weight Watchers: Becoming More About Health Than Vanity

by Jason Jenkins, Investment U Research
Tuesday, December 13, 2011

This New Year’s many people will embark on the annual tradition of trying to change things they don’t like about themselves. Many people will want to shed a few extra pounds to look more like someone in magazine…Or even just a co-worker or neighbor.

And Weight Watchers (NYSE: WTW) has built an empire on this inherent desire of people to improve their looks.

Admittedly, when you see the before and after pictures of its clients in ads, the final product looks a little glamorous.

The Growing International Obesity Problem

But it’s not that the rest of the world wants to be glamorous… and the following statistics can show you why Weight Watchers could easily become a world-wide healthcare and wellness necessity:

Being overweight or obese is the fifth leading risk for global deaths.

• At least 2.8 million adults die each year as a result of being overweight or obese.
• Forty-four percent of the diabetes burden, 23 percent of the ischemic heart disease burden and up to 41 percent of certain cancer burdens are attributable to being overweight or obese.

And the numbers become even scarier when you talk about children globally:In 2010, around 43 million children under five were overweight.

• Once considered a high-income country problem, being overweight or obese is now on the rise in low- and middle-income countries, particularly in urban settings.
• Close to 35 million overweight children are living in developing countries and eight million in developed countries.

And right here at home in the United States, obesity has grown by leaps and bounds. Presently, 34 percent of adults are obese. Over 17 percent of children and adolescents are overweight or obese.

Where Weight Watchers Comes In…

Weight Watchers is the world’s largest provider of commercial weight loss services, focusing on education and group support through its company-owned and franchise operations.

It holds over 45,000 meetings each week, where members receive group support and learn about healthy nutrition patterns, behavior modification and physical activity. WeightWatchers.com is the company’s subscription-based online weight management program and is the leading internet-based weight management provider in the world.

And all this is led Weight Watchers’ third-quarter results, which were very solid – ahead of analyst expectations and consensus. Management again raised its full-year earnings per share forecast roughly three percent. Third-quarter revenue came in at $428 million, up 30 percent year over year.

Some of that uptick can be attributed to brand-building efforts.

Even with the dysfunction in Europe and its attempts at fiscal austerity measures, the reported drop in meeting revenue and attendance were relatively not that bad – a drop of 10 and 15 percent, respectively. North America and internet sales growth remained solid in the quarter, up 23 percent and 68 percent.

Weight Watcher’s Initiatives

And here’s how Weight Watchers is attempting to take advantage of this business opportunity:

• Employer-Relationship Building: Employers now see the advantages of being proactive with employee healthcare and wellness. Future business-to-business relationships will allow Weight Watchers to team up with employers to promote its products. It also plans to adapt its IT system to the reporting needs of employers. This approach should create a huge sales opportunity.
• Expanding its Distribution Network: Weight Watchers is partnering with Merck (NYSE: MRK) to bring its products and services directly to doctors and healthcare professionals. A pilot outreach program of this sort began earlier this year. The results are highly promising, as doctors are viewed as a reliable source of health information.

Weight Watchers looks like a promising play as it grows it business and deals with an increasingly compelling global obesity problem.

Good Investing,

Jason Jenkins

Article by Investment U

Bakken Boom Pumping Profits into “Pipelines on Wheels”

by David Fessler, Investment U Senior Analyst
Tuesday, December 13, 2011: Issue #1663

Around the end of the Civil War, many soldiers looked to return home by hitching a ride on a freight train. Others, looking for work, hid in freight cars headed westward in the late nineteenth century. They became known has “hobos.”

But these days, hopping a freight train in North Dakota, especially in the dead of winter, would be a death knell for a hobo. That’s because all the cars are tankers, loaded with crude. There’s no place to hide from the cold. They’re all headed south, delivering oil to refineries along the Gulf Coast.

Most investors in the energy sector are thoroughly familiar with the “Bakken Boom.” The Bakken formation is a 25,000-square-mile chunk of oil- and gas-bearing rock that underlies part of North Dakota, Montana and Saskatchewan.

It’s responsible for the revolution in shale oil and shale gas that’s taken the area by storm over the last few years. It’s the primary reason North Dakota’s overall unemployment rate is a whopping two percent. That’s less than a quarter of the national average.

Estimates for how much oil the Bakken contains vary. According to North Dakota’s Geological Survey, up to 169 billion barrels of oil may lie trapped within Bakken shale. That would run the entire country for over a decade at present usage rates.

The oil- and natural gas-bearing rock is an average of 150 feet thick. However, it can be as thin as fifty feet in some places. Oil and natural gas were discovered here way back in the 1950s.

It proved impractical to extract either, mostly because they were tightly trapped in the thin layer of shale rock that makes up the Bakken formation.

But horizontal drilling and hydraulic fracturing changed all that. Drilling companies are able to drill down to the oil- or natural gas-bearing layer, turn the drill bit, and then follow it for miles.

Once the well is completed, the surrounding rock is hydraulically fractured, and the cracks are propped open. This allows oil and gas to flow out of the well to the surface.

These two processes have completely changed oil and gas drilling in the United States. Nowhere is that more apparent than in the Bakken.

The “Bakken Boom” is responsible for the quadrupling of North Dakota’s oil production since 2005. Take a look at these charts from the EIA. The data is based on information from the North Dakota Department of Mineral Resources.

This past September, the state’s oil production averaged over 460,000 barrels per day (bbl/d). That’s nearly five times September 2005 levels. Oil production has increased to the point where North Dakota oil production is only surpassed by Alaska, Texas and California.

But the Bakken is just beginning to be exploited. Just over 200 rigs are currently drilling there. Projections are for at least 10 more by the end of the year, according to a study undertaken by the Associated Press.

No Way Out

All that drilling has created a backlog on the back end of the process. North Dakota Department of Mineral Resources (DMR) data currently indicated there are over 350 drilled wells awaiting fracturing services.

As more and more wells are fractured, oil production will continue to increase. The DMR is forecasting an oil production jump of 100 percent to as much as 750,000 bbl/d by 2015. This is higher than the 700,000-bbl/d estimate it gave earlier this year.

There’s just one problem: There isn’t enough pipeline capacity to get all this oil out of North Dakota. The proposed BakkenLink Pipeline, which will connect up to nine terminals to the big TransCanada Pipeline, won’t be completed for at least two years.

The Keystone Pipeline, designed to haul crude from the Alberta oil sands and transport it south, was also supposed to pick up crude from the Bakken.

It’s also “under review” by the EPA, and won’t be addressed until after the 2012 elections. This will eventually get approved, but right now it’s a political football being used by the party in power to garner votes. Bad idea…

All this pipeline posturing presents a golden opportunity for the freight transportation method that’s been a mainstay of the United states for well over 100 years: railroads.

Keystone Pipeline Delay Spells Opportunity for Railroads

Even when these pipelines get approved, it will take years to build them. The Keystone is 2,000 miles long. That means railroads will be the transportation method of choice for years to come.

Hess Corporation (NYSE: HES), one of the operators developing Bakken acreage, understands this all too well. This year, it’s spending a big chunk of the $1.6 billion earmarked for its Bakken operations on a new railroad loading terminal and storage facility.

When completed, Hess will be able to ship 130,000 barrels a day via rail. The company has plans to triple its Bakken shipments in the next five years to over 80,000 barrels per day from its current level of 25,000.

With pipelines on hold and oil flows continuing to rise at record rates, railroads servicing the Bakken are sitting on a cash cow for the foreseeable future. Investors might want to consider using dips in the market to pickup shares of any of the three companies mentioned above.

Good Investing,

David Fessler

Article by Investment U