InvestMacro FX

Written by Sara Nunnally, Editor, Inside Investing Daily, insideinvestingdaily.com

If you are going to get rich, you have to do it without the help of the thieves in Washington and on Wall Street. It will take hard work… and the truth.

Last Thursday, I was watching The Colbert Report and the guest on the show was none other than infamous lobbyist Jack Abramoff…

He’s got a book out, called Capitol Punishment: The Hard Truth about Washington Corruption from America’s Most Notorious Lobbyist.

In the interview, he basically said the game in Washington is rigged for corruption, and he was just following the rules. “Most of the notoriety and most of the things that are a little strange in Washington are legal. That’s the problem. Most of what I did was legal. I crossed a few lines and did things that were illegal, and was punished for it,” he said.

He’s now a “changed man.” Or so he says…

On Friday I talked about how no one tells the truth any more. But Abramoff isn’t the only guy spilling the beans.

Lee Munson also has a new book out on how Wall Street is rigged. It’s called Rigged Money: Beating Wall Street at Its Own Game.

The young broker made a name for himself in the 1990s, raking in hundreds of thousands of dollars playing the game.

He had a filthy mouth and a high-rolling lifestyle, and now he’s written a book. In it are three ways Wall Street has an edge on individual investors.

Like how Wall Street invents products and creates demand for them, or how most ETFs are little more than scams. Specifically, he talks about leveraged ETFs. These, he says, are not leveraged or accurate, and are correlated on a day-to-day basis.

Let me explain what this means, with an example from our Macro Trader portfolio. Last Wednesday, we closed out our position on the PowerShares DB Gold Double Long ETN (DGP:NYSE) for a 25% gain.

The DGP gives investors twice the daily performance of gold. (More specifically gold futures, but let’s keep things simple.)

This sounds like a great deal, right?

If gold moves 2% in a day, the DGP should move 4%, right? This performance is recalculated every day. So if gold — over a five-day period — moves 2%, 1%, 1%, 3% and 5% for a 12% gain in five days, DGP’s return is 24%.

Not bad when gold is soaring, but things get hairy when gold is falling.

Say gold moves -3%, 1%, 1%, -3%, and 2% for a net move of -2%. The DGP falls -4%. If you’re holding gold for the long term with DGP, these kind of bad streaks can really eat into your gains. And DGP’s going to take 0.75% in fees every year no matter what.

That’s why we took our gains when we could — before they slipped through our fingers.

There’s a strong connection here between Wall Street’s moneymaking policies and Washington’s law-making policies. They both take money, and neither gives guarantees for performance.

The difference, though, is that sometimes paying off a congressman does work. And that monkey is hard to get off your back.

For both the lobbyist and the congressman. I don’t have a lot of faith that if Abramoff were to get back into the lobbying business all his deals would be on the up and up. And I don’t have a lot of faith that the congressman is going to turn down $25,000 in campaign contributions.

But for investors, it takes a healthy dose of skepticism and a whole lot of independence to make your own wealth, through hard work and discipline.

Something that’s been seriously lacking in our government and on Wall Street.

I’m really surprised that two insiders are exposing the inner workings and corruption in Washington and in the markets.

Take it all with a grain of salt, of course, but take it. The disconnect between Wall Street and Main Street, and Washington and Main Street for that matter, is not knowing how each thinks and makes decisions. An eye into how the “other side” works will always be valuable.

That’s what we strive to do here at Insiders Strategy Group. Our editors show subscribers how Wall Street thinks, and the inside moves big institutional investors make that the little guy doesn’t know about.

It comes down to one word. Trust.

I said it on Friday… no one tells the truth anymore. That two insiders are coming out with “tell all” books speaks a lot to the environment of lies and corruption. That one of them is a “former” thief says all the more.

Editor’s Note: On Dec. 20, 2011, we’ll be making a special announcement to readers. To learn all the details on what it involves and how it can save you as much as $133,000, put your name on our list of advanced registered recipients of the announcement. Go right here. We’ll send you details.

Dec. 13 (Bloomberg) — Michael Buchanan, chief Asia-Pacific economist at Goldman Sachs Group Inc., talks about Europe’s debt crisis, and the outlook for Asian economies and financial markets. Buchanan speaks with Susan Li, John Dawson, Angie Lau and David Ingles on Bloomberg Television’s “Asia Edge.” (Source: Bloomberg)

London Gold Market Report
from Ben Traynor
BullionVault
Tuesday 13 December, 08:30 EDT

U.S. DOLLAR gold bullion prices climbed 1% Tuesday morning in London – reaching $1669 per ounce around lunchtime – while stock and commodity markets also regained some ground, despite mounting evidence of funding stresses in the banking sector.

Silver bullion meantime hovered around $31.30 per ounce – nearly 3% down for the week so far.

“Gold remains under pressure,” says Walter de Wet, commodities strategist at Standard Bank.

“The next crucial support is said to be pegged at $1650,” adds a note from Swiss gold bullion refiner MKS.

“If the metal happens to break this support than it is very likely to test lower, all the way down to $1500s.”

Earlier in the day, gold bullion traded as low as $1652 per ounce – a drop of 3.4% from Friday’s close.

“This pullback finally encouraged a response from the physical community,” says today’s note from UBS precious metals analyst Edel Tully.

“The physical response seen this week, though not yet enough to call a trend, should somewhat calm these investors.”

“The price slide comes partly on the back of a very firm US Dollar,” says Daniel Briesemann, Frankfurt-based analyst at Commerzbank.

“[We] do not exclude the possibility of a further drop in the price of gold in the short term. That said, we are still convinced that gold can serve mid- and long-term as a store of value.”

Eurozone banks’ overnight deposits at the European Central Bank hit another 2011 high yesterday, as banks deposited €346.4 billion – up from €334.9 billion last Friday, which was the previous record for the year.

The 3-month LIBOR-OIS spread – the gap between the London Inter-Bank Offered Rate (the rate at which banks lend to other banks) and the Overnight Index Swap rate (determined with reference to a published overnight rate such as the Federal Reserve’s federal funds rate) rose above 45 basis points (0.45 percentage points) yesterday for the first time since for first time since May 2009.

Banks in Europe are raising cash by selling their “crown jewels”, news agency Bloomberg reports.
Spanish and Portuguese banks, for example, are selling “the most profitable parts of their business”, says Azad Zangana, London-based European economist at asset manager Schroeders.

“They’re being forced by regulators to sell them off…your business model stops working if you’re being forced to lend only to an economy that’s going through a very deep recession.”

“Many of [the shares in] those banks are trading at 50% of their book value,” points out Symon Drake-Brockman, managing partner at London-based private-equity firm Pemberton Capital Advisors.

“If you can sell an asset at more than that, it’s a cheaper way to raise capital [than issuing equity].”
Hedge funds meantime saw redemptions more than triple in October compared to the previous month, according to independent Iowa-based hedge fund data and analysis provider BarclayHedge.

There are also reports that Dollar funding stress is impacting on the gold bullion market.

“People are lending gold out to raise Dollars,” an unnamed senior metals banker told the Financial Times last week.

Over in the US, analysts expect today’s Federal Open Market Committee meeting will yield no new policy developments, with a third round of quantitative easing considered unlikely by some.

“The base case is that QE3 probably will not unfold,” reckons Sam Bullard, senior economist at Wells Fargo Securities, adding that the US economy has “got some momentum”.

“The data that’s been coming in has been stronger than expected and prior months’ data have been revised up.”

The Federal Reserve has held its main interest rate below 0.25% since December 2008.

Here in the UK, inflation as measured by the consumer price index fell to 4.8% last month – down from 5.0% in October – official data published today show.

“Looking ahead we can be reasonably confident that inflation will fall sharply at the start of next year as the contributions of VAT, energy and import prices decline,” BoE governor Mervyn King said last month.

“The extent and the pace of the fall, however, remain uncertain.”

The Bank of England has held its main interest rate at 0.5% since March 2009. That same month it launched its first round of quantitative easing – a £200 billion asset purchase program that in October grew to £275 billion.

“Yes: QE is inflationary,” BoE chief economist Spencer Dale said in a speech today.

“And yes, inflation would almost certainly have been lower had we not undertaken the first round of asset purchases in 2009. But no, that does not mean that the MPC is any less determined to bring inflation back to target.”

The BoE launched its initial round of QE, Dale explained, because it feared “that if the recovery faltered and our economy fell into a further prolonged recession, underlying inflationary pressures in our economy would weaken and there would be a risk that inflation would materially undershoot the inflation target in the medium term.”

China’s gold bullion imports from Hong Kong – viewed by many as a measure of its wider gold imports – hit a fresh monthly record in October, according to Hong Kong government statistics.
China imported 85.7 tonnes of gold bullion from Hong Kong that month – 50% higher than September’s figure, and 40times what it shipped in from Hong Kong during October 2010.

India, by contrast, is set to see gold bullion imports for 2011 come in lower than those for 2010, according to the Bombay Bullion Association – which predict a 16% drop to 800 tonnes.

Ben Traynor
BullionVault

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.

Dec. 13 (Bloomberg) — Billionaire Mikhail Prokhorov is seeking to tap the dissent that sparked Russia’s biggest anti-government demonstrations in a decade, pledging to run against Prime Minister Vladimir Putin for the presidency next March. Elliott Gotkine reports on Bloomberg Television’s “Countdown” with Owen Thomas. (Source: Bloomberg)

Dec. 13 (Bloomberg) — Sean Callow, a senior currency strategist at Westpac Banking Corp., talks about European leaders’ efforts to contain the region’s debt crisis and its impact on global financial markets. Callow also discusses European sovereign credit ratings. He speaks from Sydney with Linzie Janis on Bloomberg Television’s “First Look.” (Source: Bloomberg)

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 up across the board yesterday prior to today’s FOMC meeting. With such key events occurring near the end of last week perhaps investors took the weekend to digest the news from Europe before sending the EUR and equities lower.

Economic News

USD – USD Strengthening Prior to FOMC Meeting

After a period which lacked significant US data releases the USD returns to the limelight today with the Federal Reserve FOMC meeting. We’ll also get CPI and retail sales numbers prior to the FOMC statement. The Fed is not likely to change its policy in today’s statement but the central bank could sound more upbeat given the trend of better US data over the past 2-months. The next opportunity for the Fed to announce a potential QE3 program will be at its meeting on January 24, 2012.

The USD could continue to find support as Europe lacks a credible solution to the European debt crisis in the near-term. Liquidity may be on the light side with the approaching holidays and this could push short term trends even further. The EUR/USD has support at 1.3145 from the October low. A break here will put in play 1.3050, the 61% Fibonacci retracement of the 2010-2011 rally from 1.1875 to 1.4940.

EUR – EUR Falls as Equities are Crushed

With such key events occurring near the end of last week perhaps investors took the weekend to digest the news from Europe before sending the EUR and equities lower. The EUR/USD was down more than 1.00% while the German DAX was lower by 3.36%.

The ECB made it clear it would support the European banking system and has flooded banks with liquidity. However, investors were disappointed when Draghi stressed it was not the ECB’s duty to fund EU sovereign debt. The ECB did lower interest rates but scuttled investors’ hopes for quantitative easing to support the EU economy which is quickly falling into a recession.

While some commentators see the most recent EU summit as a failure, European leaders made significant steps towards increased fiscal coordination and enforceable EU budget rules. Unfortunately the policy changes will be slow to implement and do little to support economic growth in the near term. Most likely the austerity measures will stiffen growth and intensify an EU recession. The absence of a political solution could keep the pressure up on both European bonds and EUR as we close out the year.

GBP – Sterling Supported Despite UK Rejection of EU Plan

The UK decided against joining the EU in agreeing to tighter deficit and debt restrictions. There have scathing criticisms of UK PM David Cameron from a variety of media sources for his rejectionist policy. However, markets have reacted positively to both sterling and gilts. After moving below its initial support level at 1.5560 from last week’s low the GBP/USD found a bid. Gilts were also stronger with the 10-year yield falling to 2.12%. 1-week ago the 10-year was yielding 2.33%.

Today we’ll get UK CPI data which is expected to fall to 4.8% from 5.0%. A confirmation of declining inflationary pressures would confirm the BoE’s forecast and lend additional support to more QE from the BoE.

The EUR/GBP is testing the bottom of its consolidation pattern from Q2 which comes in at 0.8450. The next support below here is at 0.8390 from the chart pattern from October 2008 low. Resistance is found at 0.8620 from the December high.

Gold – Look for 23% Fibonacci Level

Yesterday’s price declines have taken spot gold below its triangle chart pattern. The commodity originally had support at $1,665 from the rising support line off of the September 29th low. A measured move from the chart pattern suggests gold could fall an additional $80. There may be additional support beforehand at $1,622, the 23% Fibonacci retracement from the September collapse in the price of spot gold.

Technical News

EUR/USD

The 20-day moving average is now at 1.3420 and has served as a significant resistance level with the EUR/USD last closing above this line on November 3rd. While weekly stochastics are beginning to look oversold the monthly stochastics still have room to move lower. With the downtrend firmly entrenched the supports from the November low of 1.3260 and the October low of 1.3145 are within striking distance. A move higher may find willing sellers at the December high of 1.3550 and the November 18th high of 1.3610.

GBP/USD

Sterling has been caught in a range trading environment between the levels of 1.5780 and 1.5660 where the 55-day moving average is found. With daily and monthly stochastics moving lower the November and October lows of 1.5420 and 1.5270 look to be within reach. Resistance for the GBP/USD can be found at the November 18th high of 1.5890 followed by the falling trend line from the August high which comes in at 1.5925.

USD/JPY

The doji candlestick from December 8th stands out as the day’s low coincides with both the 55-day and the 100-day moving average. This may be the start of a base being formed for a test of the June 2007 trend line which comes in at 78.50. A break here will expose the post-intervention high of 79.50. To the downside the November 18th low of 76.55 is the last support prior to the pair’s all-time low at 75.56.

USD/CHF

The pair continues to struggle to overcome the 0.9330 resistance level despite multiple attempts to move higher. A concerted move higher may find resistance at the 20-month moving average of 0.9380 followed by this year’s high of 0.9780. The downside may be capped at the support of 0.9065 which coincides with the pair’s 55-day moving average. Additional support is located at the November low of 0.8760.

The Wild Card

Gold

Yesterday’s price declines have taken spot gold below the triangle chart pattern. The commodity originally had support at $1,665 from the rising support line off of the September 29th low. A measured move from the chart pattern suggests gold could fall an additional $80. Forex Forex traders may find additional support beforehand at $1,622, the 23% Fibonacci retracement from the September collapse in the price of spot gold.

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.

Source: ForexYard

The most recent CFTC IMM data shows speculators reduced their EUR bearish bets though the market’s short position remains close to levels last seen in the summer of 2010.

The EUR non-commercial short position declined to 95k which is just shy of the May 2010 high of 113k. While non-commercial shorts reduced their position by over 1.5k contracts the decline in the net short position may be explained by a resurgence of EUR bulls with the non-commercial long position rising by 6.9k contracts. To put this data in perspective the cutoff date for the report was Tuesday December 6th, just prior to the ECB meeting and EU economic summit.

It is also worth noting that CHF shorts have climbed to their largest position since June.

Read more forex trading news on our forex blog.

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.

Source: ForexYard

The EUR sunk to its lowest level since early October following comments by both Moody’s and Fitch. The rating agencies criticized last week’s EU economic summit which fell short of a solution to the current fiscal problems. There is a risk of additional sovereign credit downgrades before the end of the year which would weigh on market sentiment and the EUR.

Equities are off to a poor start today with the Shanghai Composite finishing lower by 1.9% to close on a 33-month low. Today we’ll be getting a slew of data releases from Europe. This morning there will be UK CPI which is expected to show a decline from last month’s high. Should inflation come in under last month’s 5% reading this would support additional QE from the BoE. The GBP/USD has support at 1.5520 followed by the November 25th low of 1.5420.

German sentiment is expected to fall further as the EU economy looks set to slip into a recession. The EUR/USD has support at 1.3145 from the October low. A break here will put 1.3050 in play, the 61% Fibonacci retracement of the 2010-2011 rally from 1.1875 to 1.4940. Resistance is found at 1.3210 the November 25th low and 1.3240 the bottom of the channel line from December.

The highlight of the day will be the FOMC meeting. No policy changes are expected though the Fed could restructure some of its methods of communication with the public. The recent appreciation in the USD/JPY appears to be a result of overall USD strength rather than JPY weakness as the JPY is strengthening in the crosses. As such the USD/JPY could find resistance at 78.50 from its long term trend line from 2007.

Read more forex trading news on our forex blog.

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.

The Bank of Mozambique dropped its standing facility lending interest rate by 100 basis points to 15.00% from 16.00% previously.  The Bank also reduced the required reserve ratio by 25bps to 8.5% from 7 Jan 2012.  The Bank said [translated]: “The Monetary Policy Committee considers it important to consolidate the results macroeconomic obtained until now, through the continuous enhancement of policy coordination and determination of policy instruments used to regulate liquidity in the market, with a focus on inflation targeting in the short to medium term. In this context, considers the relevant economic agents and the general public redouble efforts to maintain price stability, which is the festive season approaches.”


Previously the Bank held its interest rate unchanged, and last cut the key lending rate by 50bps to 16.00% at its August meeting, after raising the rate by 100 basis points to 16.5% at its January meeting this year, where it also raised the interest rate paid on deposits by 100 basis points to 5%, and lifted the required reserve rate by 25 basis points to 9%.  

Mozambique saw inflation in it’s largest city, Maputo, of 7.7% in November, down from 8.3% in October, 7.8% in September, 7.9% in August, 7.7% in July, and lower than 9.3% in June.  Mozambique’s economy expanded 6.8% in the June quarter, compared to GDP growth of 8.1% in the March quarter, meanwhile the IMF is forecasting economic growth of 7.5% in 2011 and 7.8% in 2012.  

Mozambique’s currency, the Metical (MZN) last traded around 26.3 against the US dollar, and according to Bloomberg the Metical has gained about 22 percent against the US dollar so far this year, making it one of the best performing currencies.  The Bank of Mozambique next meets on the 10th of January 2012.