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Dec. 5 (Bloomberg) — Douglas McWilliams, chief executive officer of the Centre for Economics and Business Research, talks about the global economy. McWilliams also discusses the outlook for Europe’s debt crisis and the euro. He speaks from Kuala Lumpur with John Dawson on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)

The Bangko Sentral ng Pilipinas kept its overnight borrowing rate unchanged at 4.50% and the overnight lending rate at 6.50%, and kept reserve requirements unchanged at 21%.  The Bank said: “decision is based on its assessment that the inflation outlook continues to be manageable, with within-target headline inflation and well-contained inflation expectations. Latest baseline forecasts indicate that the annual inflation rates for 2011-2013 are likely to fall within the 3-5 percent target range. The Monetary Board also took into account the data showing subdued domestic economic activity in the third quarter, due to the weather-related slowdown in the expansion of the agricultural sector, weak global economy and concerns over Europe’s sovereign and banking sectors.”


The Philippine central bank also held the rate unchanged at its last meeting, and last raised its interest rate in May this year by 25 basis points to 4.50%, and increased reserve requirements by 100bps at its previous meeting.  The Philippines reported annual consumer price inflation of 5.2% in October, 4.8% in September, compared to 4.7% in August, 4% in July, 4.7% in June, 4.5% in May and 4.3% in April.  Inflation is currently tracking just outside the Bank’s inflation target range of 3%-5%.  

Agriculture Making a Comeback in the U.S. Economy

by Jason Jenkins, Investment U Research
Monday, December 5, 2011

This summer I wrote about how Jim Rogers loves buying undervalued assets. What he saw in gold and silver over a decade ago, he currently sees in the agricultural sector. Agriculture prices are – on a historical basis – extremely depressed and this is where he saw his next opportunity.

Well, it seems that foresight is coming to fruition. The U.S. Department of Agriculture (USDA) said this week that the net value added of agriculture to the U.S. economy – when you add in inflation – will be the highest this year since at least the early 1970s. And the boom is likely to continue.

The official numbers show that in 2011, U.S. farmers will take home for the first time more than $100 billion in a single year. Agriculture Secretary Tom Vilsack stated, “Agriculture continues to be a bright spot” in the U.S. economy. Indeed, farming, together with natural resources production, particularly oil, is one of the few bright spots.

As the Financial Times reported this week, there has been a surge in farm income as a result of a rarely seen uptick in agricultural commodities. The past three decades have experienced infrequent increases in food prices. And these spikes were not across the board. More commonly, there was an isolated spike in a specific commodity. What we see now is an increase in price across the agricultural commodity board at the same time.

And what’s caused this boom?

Well here are three major catalysts:

• There has been a strong demand for agricultural commodities in emerging markets – most notably China and India.

• There has been really strong demand for the U.S. bio-fuel industry.

• There have been supply and trade disruptions for other key commodity producers, such as Russia and Australia.

Fertilizer Stocks

Fertilizer stocks have been getting rocked over the past month due to fears that falling crop prices will reduce farmers’ ability to invest in potash and other nutrients.

There has been a sharp increase in costs, with fertilizers up 28 percent year-on-year and fuel up 27 percent year-on-year. Overall, production expenses will rise 12 percent to a record $320 billion. Some say this year’s jump is reminiscent of the worrying increase in expenses witnessed we saw three and four years ago.

And here are the reasons for a rosy outlook:

• A rising global population that just reached seven billion people.

• Higher protein consumption in the world’s developing economies translates into a bigger demand for feed.

• High potential for industry consolidation.

These three points are crucial because it creates a longer-term bid – and a strong institutional investor base – for these stocks.

The Strongest Play

Companies from the seed and pesticides producers to agricultural commodities traders have reaped the benefits of this boom. However, take a look at Deere & Co. (NYSE: DE).

Last week Deere & Co. – the leading manufacturer of tractors and combine harvesters – reported off-the-chart earnings that beat market expectations and came in 46 percent above last year’s numbers. Deere & Co. also raised its outlook for next year as it expects strong commodity prices and another good year for the farming industry.

Good investing,

Jason Jenkins

Article by Investment U

Dec. 5 (Bloomberg) — Clive McDonnell, Singapore-based head of emerging-market equity strategy for Standard Chartered Plc, talks about the outlook for emerging markets in Asia and their exposure to Europe’s debt crisis. McDonnell also discusses the U.S. jobless rate. He speaks with John Dawson on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)

Why This Market Truism Just Isn’t True

by Alexander Green, Investment U Chief Investment Strategist
Monday, December 5, 2011: Issue #1657

In my first book, The Gone Fishin’ Portfolio, I made a confession that startled some readers…

I retired from the investment services industry while I was still in my early 40s, but many of my clients had not become financially independent. This was not because I advised them poorly. I dealt with my clients honestly and gave them the best advice and service I could.

Yet, in many ways, they operated at a disadvantage. Some had a poor understanding of investment fundamentals. Others found it impossible to commit to a long-term investment plan. Many were simply too emotional about the markets, running to cash at the first hint of danger.

Contrarian instincts are rare, too, I learned. Few people are emotionally stirred by low stock prices. But every time there was a correction, a crash, or financial panic, my Scottish blood would surge, my pulse would rise, I’d rub my hands together, and start buying.

My clients, on the other hand, often did just the opposite, sometimes because they were too nervous but often because they bought into the old chestnut that a good investor doesn’t buy into a market downturn.

“The trend is your friend,” they’d say. Or “Don’t try to catch a falling knife.” This is surely the conventional wisdom in some quarters, but it’s not particularly wise. Here’s why …

For the last several months, traders have obsessed over problems in the Eurozone and the strength (or perceived weakness) of the U.S. economy. Taking a decidedly downbeat view, the market had a pretty horrendous November. But sentiment can turn on a dime and stocks can put on a furious – and completely unexpected – rally.

If you don’t already own stocks, it’s tough to catch the train after it has left the station.

Yet many gurus, including growth-stock advocate William O’Neill and his widely read publication Investor’s Business Daily, often insist that you shouldn’t but a stock unless the market itself is in a confirmed uptrend.

That may make sense in theory, but it often fails in practice. For instance, on page one each day, that paper reports whether the market is in a confirmed uptrend or downtrend. (And sometimes hedges, using language such as “Uptrend Under Pressure.”)

As we all know, this has been a volatile year for the market with the major indices bouncing up and down repeatedly. But you could hardly have chosen a worse strategy than to wait until the market was in a confirmed uptrend before buying. All that meant was that you bought into every short-term spike and then hit your trailing stops over and over again. (It must feel like banging your head against the wall.)

The Oxford Club has hit a number of its stops this year, too, sometimes protecting profits, other times protecting principal. But by buying great companies when the market was under pressure, we ended up with a lot of attractive entry points and plenty of both realized and unrealized profits.

True, if stocks go into a secular bear market, you can end with losses no matter how well you timed your entry points. However, you can never know whether a market drop is merely a correction or something more ominous until you are looking in the rear-view mirror.

You have to stick your neck out occasionally, pick your spots and buy stocks. If you don’t, what are you going to do? Buy bonds yielding 2.5 percent? Hold a money market paying less than one-tenth of one percent? It’s tough to beat inflation or meet your financial goals that way.

Let me make one thing clear, however. It’s most definitely a mistake to buy a troubled company that’s in a downtrend, no matter which way the broad market is heading. (That only works for those with exceptionally long time horizons – and often not even then.) But buying great companies when the broad market is a downtrend gives you a chance to obtain good prices on fine long-term investments and take advantage of tradable short-term rallies, too.

The next two months are traditionally one of the strongest periods for the stock market. No one can say, of course, whether that tradition will hold. But it’s a reasonable strategy to buy great companies when the market is down.

If your goal is to sell high, you have to start by buying low. And market corrections – like the one we’ve seen lately – give you an excellent opportunity to do just that.

Good investing,

Alexander Green

Article by Investment U

London Gold Market Report
from Ben Traynor
BullionVault
Monday 5 December, 09:00 EDT

THE DOLLAR gold price fell to $1731 per ounce by Monday lunchtime – 0.8% below where it ended last week – while stocks and commodities edged higher and US Treasury bond prices fell ahead of a meeting between the leaders of France and Germany in Paris.

“There is likely to be a fair amount of volatility on the political front this week,” warns Nic Brown, head of commodities research at Natixis.

“Should sentiment improve further in the market,” adds Commerzbank analyst Eugen Weinberg, “it wouldn’t be surprising if [the gold price]falls again, but it may also come under pressure if the rest of commodity sector comes under pressure.”

The silver price meantime dipped to $32.53 per ounce – still broadly in line with Friday’s close – while yields on Italian and Spanish bonds continued to ease.

Italy’s “huge public debt…is not Europe’s fault,” Italian prime minister Mario Monti told a press conference on Sunday.

“It is the fault of Italians.”

Monti – who is also reported to be giving up his salary – was unveiling €30 billion of emergency austerity measures, including plans to remove inflation index-linking for many pensions.

Italy’s welfare minister Elsa Fornero dissolved into tears when she tried to announce the measures, unable to utter the word ‘sacrifice’.

In Paris meantime, French president Nicolas Sarkozy met German chancellor Angela Merkel today to discuss how the 17-member Eurozone might move towards the creation of a fiscal union. Merkel has repeatedly argued that greater fiscal discipline among Eurozone national governments – with a tougher set of budget rules – is the only way to provide a lasting solution to the crisis.

“For several months now, it’s Merkel who decides and Sarkozy who follows,” Francois Hollande, French Socialist Party presidential candidate, said last week. Fellow Socialist Arnaud Montebourg has described Merkel’s policy as “Bismarck-like” – a reference to Germany’s chancellor at the time of the Franco-Prussian war of 1870-71 – while Pierre Moscovici, an aide to Hollande, said today that a budgetary union would “erode our national sovereignty”.

Front National leader Marine Le Pen – who has called for France to quit the Euro – also said this weekend that France’s sovereignty is under threat.

Should agreement on further fiscal integration be reached at this Friday’s European Union summit, then “the door should swing open for the [European Central Bank] to become more aggressive” reckons Erik Nielsen, global chief economist at Italian bank UniCredit.

Eurozone national central banks meantime could provide hundreds of billions of Euros to the International Monetary Fund, money that would then be put into a special fund from which to aid distressed European sovereigns, according to a report in German newspaper Die Welt. The US Federal Reserve may also contribute, the newspaper added.

The Netherlands has the most debt-burdened households in the Eurozone, according to a report in the Wall Street Journal. Many Dutch, it reports, took out mortgages worth 125% of their home’s value in the years before the global financial crisis – leaving Netherlands households with a debt-to-income ratio of 249.5%. Second on the list is Portugal, the report says, with a ratio of 128.6%.

“From a financial stability perspective, we think the mortgage loan-to-value ratios are too high,” says Gerbert Hebbink, senior economist at the Dutch National Bank.

“This debt makes the economy much more vulnerable to shocks in the housing market, interest rates and employment.”

The number of bullish minus bearish contracts held by noncommercial gold futures and options traders on New York’s Comex exchange – the so-called speculative net long – fell for a second week running in the week ended 29 November, dropping 2.5%, according to data published Friday by the Commodity Futures Trading Commission. Over the same period, the Dollar gold price rose 0.5%.

Total open interest meantime – the total number of unsettled contracts from the period – fell 4.7%, its third weekly fall.

“That the gold price has risen against falling open interest on Comex does imply a weaker market, with caution central for now and somewhat transfixed on both positive and negative news flows,” said a note from precious metals consultants VM Group this morning.

Over in India – the world’s largest source of private gold bullion demand – the Rupee gold price approached all-time highs Monday morning as the Rupee fell against the Dollar.

Despite India being in the middle of the wedding season, “there is virtually no demand for gold” says Prithviraj Kothari, president of the Bombay Bullion Association.

“Demand is very slack,” agrees Vasu Acharya director at Parker Bullion in Ahmedabad.
“If you compare it with last year, it is just 20% of the sales.”

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.

Source: ForexYard

In light trade this morning the EUR is higher after Italy presented new austerity measures to help calm bond investors who have been pressuring Italy over the past two months. According to the most recent IMM data FX traders continue to favor bearish bets against the EUR.

Italy unveiled an austerity program designed to save EUR 30 bn over the next 3-years. This has helped 10-year Italian bond yields to fall as low as 5.83% from their highs above 7%. This week is an important week in the European debt crisis. Today there will be meetings between Sarkozy and Merkel in Paris. US US Treasury Secretary Geithner will be making the rounds to push European leaders to come to an agreement. The hectic week of meetings will culminate with the EU economic summit in Brussels where EU leaders are expected to form an agreement for closer fiscal ties.

What this all means for currency traders is that the FX markets will be more driven by the headlines and press conferences that follow these meetings. FX markets appear to be fairly illiquid this morning with the EUR up slightly both versus the USD and in the crosses. The Financial Times has reported a number of liquidity providers have seen lower volumes since the end of Q3.

The most recent COT report of the IMM data shows EUR speculative shorts continue to grow, rising to a net short position of -104K contracts, the largest short position since the summer of 2010. The risk is for European leaders to come to an agreement on Friday which would induce a large amount of EUR short covering.

The EUR/USD has support at last Friday’s low of 1.3360 with a rising trend line on the hourly chart from the November 25th low which comes in at 1.3315. Resistance is found at last Friday’s high of 1.3550 and the November 18th high of 1.3610. The EUR/JPY is moving higher towards the resistance of 105.65 where the pair’s 55-day moving average comes into play. Support is seen back at the November low of 102.50.

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.

Dec. 5 (Bloomberg) — Mykolas Majauskas, an economic adviser to Lithuania’s prime minister, speaks about the country’s plans to achieve financial stability before joining the euro. He speaks with Linzie Janis and Mark Barton on Bloomberg Television’s “Countdown.”

Dec. 5 (Bloomberg) — Jane King summarizes the top stories this morning on the Bloomberg Business Report. (Source: Bloomberg)

Senior Strategist Ib Fredslund Madsen talk about a ‘summit fever’ that can support the financial markets leading up to this weeks main event: The EU summit in Brussels Thursday and Friday.

Hopes are that the eurozone leaders Friday night can present a solid solution to the dept crisis.

Ib Fredslund Madsen outlines best and worse case scenarioes before the EU summit.

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