Yen Strengthens as Spain Bailout Bid is Delayed

By (Dublin) – Spanish Prime Minister Mariano Rajoy has decided to wait for a while longer before requesting for bailout for his country. The move has boosted the demand for safe haven assets, which has strengthened the yen. The Japanese currency has gained against most of its major trading peers as three major regions Spain applied for emergency loans from the central government. In the meantime, Moody’s Investors Service has indicated that Spain’s rating will be extended through September and there is a higher chance that they will be reviewed downwards. However, the dollar held firm as investors speculated about Ben S. Bernanke’s speech.

According to Ken Takahashi, an Assistant President of Global Market at Sumitomo Mitsui Trust Bank Ltd in New York, the yen has remained strong as investors seek safety. He also suggested that Bernanke is likely to refrain from making any commitment to specific policy at Jackson Hole. These comments came after Spanish Prime Minister indicated, in a meeting with French President, that the nation will not be seeking sovereign bailout until European leaders are clear on their conditions. Moody’s also indicated that Spain will retain its BAA3 debt rating after downgrading it in June 13 from A3 rating.

The yen also increased against its major after it become apparent that three regions in Spain, Valencia, Murcia, and now Catalonia, have requested for bailout from the national government. These statistics have forced the euro to drop 0.1 percent this week against the dollar but has registered a monthly increase against the US currency. The Japanese currency has strengthened 0.3 against the dollar and 0.4 against the euro this week.

The news of Spanish bailout request delay spurred the yen to a 0.2 percent advance against the dollar to exchange at 78.46 yen. The Japanese currency has advanced by 0.3 percent against the euro to trade at 98.06 per euro.

Disclaimer is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at are those of the individual authors and do not necessarily represent the opinion of or its management. 

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Gold Headed for Third Straight Monthly Gain, Bernanke Speech “Unlikely to Give Clear Policy Signal”

London Gold Market Report
from Ben Traynor
Friday 31 August 2012, 07:15 EDT

WHOLESALE prices to buy gold bullion  hovered close to $1660 an ounce Friday morning in London, around ten Dollars below where they started the week, while stock markets gained and US Treasuries sold off, ahead of today’s much-anticipated speech by Federal Reserve chairman Ben Bernanke and Monday’s Labor Day holiday in the US.

Silver bullion rose to $30.67 per ounce, slightly below last week’s close, while other commodities were also broadly flat.

Based on London gold fix prices, Dollar gold bullion prices looked set for a third straight monthly gain by Friday lunchtime in London, trading around 2.3% higher than the final July fix price.

The gold price in Sterling looked set for a 1% monthly gain. Gold in Euros by contrast was trading slightly below where it ended last month, dropping to €42,358 per kilo (€1317 per ounce) during Friday morning’s trading.

“For now, we have a bit of a cautious approach to the gold market,” says Credit Suisse analyst Tobias Merath.

“Expectations for more [Fed] monetary easing would have to be fulfilled to break higher here.”

Bernanke is due to speak later today at the annual Jackson Hole conference of central bankers.

“We believe that Bernanke will avoid sending a clear signal about Fed intentions for the September meeting,” says a note from Barclays, referring to next month’s Federal Open Market Committee meeting.

“The market’s disappointment could have a modest negative effect on risk appetite in coming days.”

“This is a speech, not an FOMC meeting,” adds Michael Feroli, chief US economist at JPMorgan.

“We do not think Bernanke is inclined to front-run the Committee less than two weeks ahead of the next meeting.”

Indian gold bullion importers were waiting for further falls in the gold price Friday, according to a report from newswire Reuters.

“There’s not much sale of gold scraps,” adds one dealer in Hong Kong.

Here in Europe, the European Commission has proposed that the European Central Bank be given supervisory authority over all Eurozone banks, removing such powers from many national bodies, the Financial Times reports.

Also writing in the FT, German finance minister Wolfgang Schaeuble counters that a supervisory body should only focus on those larger banks that “pose a systemic risk at a European level”.

“This is not just in line with the tested principle of subsidiarity,” writes Schaeuble.

“It is also common sense; we cannot expect a European watchdog to supervise directly all of the region’s lenders – 6000 in the Eurozone alone – effectively.”

Schaeuble adds that Europe “must eschew yesterday’s light-touch approach for good and endow this supervisor with real and clearly defined responsibilities, coercive powers and adequate resources.”

Germany has said the creation of a single Eurozone banking supervisor is a pre-requisite before Eurozone bailout funds can be loaned directly to banks. Currently, any government borrowing money to support its nation’s banking sector must take that borrowing onto its own books, raising its national debt-to-GDP ratio.

In June, Spain agreed a €100 billion credit line to fund the restructuring of its banking sector. Despite this, Madrid is considering using its own money to support the country’s biggest lender Bankia rather than use European Union money, in order to avoid forcing bondholders to take losses, news agency Bloomberg reports.

Eurozone inflation rose to 2.6% this month – up from 2.4% in July – according to data published Friday, while unemployment in the single currency area remained at 11.3%.

German Bundesbank chief Jens Weidmann has on several occasions considered resigning over ECB plans to intervene in sovereign bond markets as it went against the central bank’s policy of not financing governments, according to a report in Friday’s edition of tabloid Bild. Weidmann has however agreed to stay on the urging of the German government, the report says.

“Opposition [to ECB bond buying] from Weidmann and reservations from some other [ECB Governing] Council members will mean that ECB bond purchases would be highly conditional,” says Holger Schmieding, economist at Berenberg Bank.

“[It would] be focused on the short end and would not aim to bring yields down quite as much as Italy and Spain might like to see.”

Ben Traynor

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. Ben writes and presents BullionVault’s weekly gold market summary on YouTube and can be found on Google+

(c) BullionVault 2012

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.


Bernanke Speech Set to Create Heavy Volatility

Source: ForexYard

The marketplace was relatively quiet yesterday, despite a positive Italian ten-year bond auction which signaled to investors an improving economic situation in the euro-zone. Today, the main piece of news is likely to be an eagerly anticipated speech from Fed Chairman Bernanke. Speculations that Bernanke will hint at possible new steps to boost the US economic recovery today have boosted higher yielding assets in recent weeks. Should there be any mention of quantitative easing today, riskier assets, like the euro, crude oil and gold, could see major gains as a result.

Economic News

USD – Dollar Range Trades before Bernanke Speech

The US dollar spent most of the day yesterday range trading against its main currency rivals, as investors were hesitant to open new USD positions before a key policy speech from Fed Chairman Bernanke. The USD/JPY dropped close to 20 pips during the European session to trade as low as 78.48. A slight upward correction later in the day brought the pair back to the 78.55 level. Against the Canadian dollar, the greenback fell 15 pips, eventually reaching the 0.9902 level.

Today, all eyes will be on a speech from Fed Chairman Bernanke, scheduled to take place at 14:00 GMT. Analysts appear to be divided in their predictions about whether there will be any mention of new steps from the Fed to boost the US economic recovery. If Bernanke does mention a new round of quantitative easing, the dollar could take significant losses as investors shift their funds to higher yielding assets. That being said, given that US economic news has been generally positive in recent weeks, the Fed may hold off on any major announcements. In such a case, the dollar could recoup some of its recent losses.

EUR – Risk Taking Gives EUR a Mild Boost

Expectations that the European Central Bank will soon unveil plans to stimulate economic growth in the euro-zone helped keep the common-currency bullish during trading yesterday. Still, investors were largely hesitant to open new positions before a potentially significant US policy speech later today. The EUR/USD advanced more than 25 pips during the European session to trade as high as 1.2562. Against the Australian dollar, the euro was up close to 30 pips for the day, eventually peaking at the 1.2158 level.

As markets get ready to close for the weekend, the euro is likely to see significant volatility following a speech from US Fed Chairman Bernanke, scheduled to take place at 14:00 GMT. If Bernanke refrains from any mention of quantitative easing, or other steps to boost the US economic recovery, higher-yielding assets like the euro could take heavy losses as a result. At the same time, with the ECB potentially getting ready to announce its own economic growth measures, any euro losses could be limited.

Gold – Gold Takes Slight Losses but Remains Bullish Overall

After gaining close to $8 an ounce during the first half of the day yesterday, the price of gold turned bearish during afternoon trading amid concerns that the Span’s debt issues may be bigger than originally thought. Still, the precious metal spent most of the day trading around the $1656 level, well within reach of its recent 4 ½ month high.

Today, the price of gold may see a fair amount of volatility before markets close for the weekend. With the Fed Chairman set to give a major policy speech, traders will want to note the direction the US dollar takes throughout the day. Any bullish activity from the greenback could result in the price of gold turning bearish.

Crude Oil – Crude Oil Extends Bearish Trend

The price of crude oil fell by over $1 a barrel yesterday, after a tropical storm in the US spared oil refineries from major damage. In addition, a higher than expected crude oil inventories figure from earlier in the week signaled that demand in the US may be decreasing. The price of crude fell as low as $94.22 by the end of European trading, down from a high of $95.57.

Turning to today, oil could see additional losses if Fed Chairman Bernanke refrains from outlining concrete steps to stimulate economic growth in the US during a speech set to be delivered at 14:0 GMT. If investors shift their funds to safe-haven assets as a result of the speech, the USD could see upward movement which may lead to oil extending its current downward trend.

Technical News


The Williams Percent Range on the weekly chart is approaching the overbought zone, signaling that a downward correction could occur in the coming days. This theory is supported by the daily chart’s Slow Stochastic, which has formed a bearish cross. Going short may be the wise choice for this pair.


While the Williams Percent Range on the weekly chart has crossed into the overbought zone, most other long term technical indicators place this pair in neutral territory. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the near future.


The Bollinger Bands on the weekly chart are beginning to narrow, signaling that a price shift could occur in the near future. In addition, the daily chart’s Williams Percent Range is approaching the oversold zone, indicating that the price shift could be upward. Opening long positions may be the best choice for this pair.


The Relative Strength Index on the daily chart is approaching oversold territory, signaling that an upward correction could occur in the near future. Furthermore, the Slow Stochastic on the same chart has formed a bullish cross. Going long may be wise strategy for this pair.

The Wild Card


A bullish cross on the daily chart’s Slow Stochastic indicates that this pair could see upward movement before markets close for the weekend. Furthermore, the Williams Percent Range on the same chart has dropped into oversold territory.
Forex traders may want to go long in their positions today.

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.



Why There’s No Such Thing as a Floor Price Just the Market Price


It’s not just housing spruikers and small-cap tipsters that fall for false optimism. Even senior mining executives and nationally syndicated newspaper columnists fall victim to it.

Yesterday the Age reported:

‘The Fortescue chief executive said he expected the sharp decline in iron ore prices to be followed by a swift rebound, within a couple of months, to $US120 a tonne.’

Today the iron ore price is USD$88.70 a tonne. For the previous two years the markets believed that iron ore had a ‘floor price’. And that floor price was USD$120.

Only a Market Price

What the mainstream bozos didn’t realise is that there’s no such thing as a floor price. All that exists is the market price…even in a manipulated market.

Even when governments or cartels try to create a false market, it doesn’t necessarily reflect the real market price.

The gold price is a good example. For over 30 years the US tried to peg the gold price at USD$35 an ounce. In fact, that was the official New York price for gold until the early 1970s. But that didn’t stop a free market price for gold developing.

During the 1950s and 1960s, the free market gold price frequently traded higher than the official price. Sometimes trading higher than USD$50 an ounce.

It’s the same on the reverse side. A cartel can try to restrict supply and demand to prop up a price, but eventually the market will win…because a free market is significantly more powerful than any government or private cartel.

As for the iron ore price bouncing to USD$120? Well, it’s possible, but as the chart below shows, the trend isn’t favourable for iron ore bulls:

Click here to enlarge

Source: Bloomberg

The price has dropped from USD$140 in May to just USD$88.70 today.

But does the iron ore price really matter? After all, that’s just one part (albeit it a big part) of the Australian economy. But our old pal, Michael Pascoe still reckons Australia is in the sweet spot.

It’s What Business Were Thinking Two Years Ago

Yesterday Mr Pascoe wrote:

‘Never mind businesses saying times are tough and uncertain, that their confidence is low and the sun won’t come out tomorrow. Instead, pay attention to what businesses are doing with their money: increasing their investment in Australia.

‘The important part of today’s private capital investment figures is what miserable-by-nature chief financial officers are telling the Australian Bureau of Statistics about how much they are sinking into capex this financial year.’

Mr Pascoe explains that the latest figures for 2011-2012 show a 30% increase in capital spending. And the number for the current financial year is 21% higher than last year.

Good times? Maybe. But maybe not.

Remember that capital spending involves spending on big-ticket items…factories, plants, and mining facilities.

These aren’t items a business buys on a whim. They’re typically long-term purchases decided on months in advance. You only have to look at the process a company goes through to decide on whether or not to go-ahead with a mine.

The company doesn’t think about it over a morning coffee and then start digging the same afternoon.

This process takes months…years even. Look at the proposed liquefied natural gas (LNG) plants planned for Gladstone, Queensland. We first started writing about LNG in 2008. Even then it wasn’t a completely new story.

Four years later and there still isn’t a functioning LNG facility in Gladstone. Capital spending decisions take a long time.

So just because a company says it’s planning to spend a billion dollars in the next year, doesn’t mean they made that decision today. Odds are the company made that decision one or two years ago. And that now it’s too late to pull out even if they wanted to – signed contracts, infrastructure built, and so on.

Bottom line, relying on backward looking data that tells you about decisions made by chief financial officers one, two or three years ago, isn’t the best way to predict where the economy is heading next.


Related Articles

Market Pullback Exposes Five Stocks to Buy

How China’s Anti-Entrepreneurial Economy is Failing

Why China’s Monetary Policy is Bad News For Australian Resource Stocks

Why There’s No Such Thing as a Floor Price Just the Market Price

Australian Housing Hung, and Soon to be Drawn and Quartered


‘Building approvals in surprise slide’ – Age

Surprise to whom?

It doesn’t surprise us. The only people who were surprised by the fall in building approvals were those with their heads stuck in the sand.

It’s funny, in recent weeks we’ve seen a bunch of commentary talking about a recovery in the Australian housing market. We’ve even seen a few housing bears sayings things are looking on the up.

The reality is far different.

If they think the housing price falls they’ve seen over the past two years were the worst of it, they’re kidding themselves. As we’ll explain this morning, the worst is yet to come…

Look, in a lot of ways the reaction is understandable.

Heck, we’ve fallen into the same trap. We’ve occasionally jumped in too early when picking penny stocks in Australian Small-Cap Investigator.

The fact is most people are naturally optimistic. It must be a genetic thing. Arguably, the human race wouldn’t have become the most successful and intelligent of all living species if it wasn’t for this natural optimism.

By the same token, it’s humanity’s ability to recognise danger and have a questioning mind that has also contributed to this success.

Worse to Come for Australian Housing

Yesterday’s Age reported:

‘Building approvals dived 17.3 per cent in July from the previous month, the latest sign of weakness in the housing market.

‘Approvals, a gauge of future activity in the housing sector, fell at triple the 5 per cent pace tipped by economists. The drop was the biggest in at least six years, according to Bloomberg data.

‘Approvals were also 10.6 per cent lower than a year earlier, the Australian Bureau of Statistics reported. Economists had expected approvals to by 6 per cent up [sic].

As we said before, the housing bulls had gotten all excited after a couple of positive signs on Australian house prices.

But like the iron ore bulls and the Australian economy bulls, they’ve jumped in far too quickly. The reality is this…

What most in the mainstream believe has been a bearish housing market is just the beginning of the drop.

It’s the equivalent of someone who’s about to be hung, drawn and quartered, screaming as they get a bit of rope burn from the noose…little do they realise the real pain that awaits when the executioner really gets down to business.

Remember what we wrote yesterday. The money that comes into Australia from the resources boom has a direct impact on the Australian housing market.

The money from China goes into the Australian banks and the banks leverage this up nine- or ten-times to lend to home buyers.

Make no mistake, with iron ore prices (and coal prices too) slumping by almost 50% in three months, this will have a big impact on the amount of dollars coming into Australia and how much Aussie banks can lend.

It’s always tempting to pick the bottom of the market after a big fall. But our bet is that iron ore, the Australian economy, and Australian housing still have much further to fall yet.


Related Articles

Market Pullback Exposes Five Stocks to Buy

How China’s Anti-Entrepreneurial Economy is Failing

Why China’s Monetary Policy is Bad News For Australian Resource Stocks

Australian Housing Hung, and Soon to be Drawn and Quartered

The Best Mining Stocks to Buy Now


Miners are in for a hard time.

China has been an accident waiting to happen ever since the financial crisis blew up.

You can’t base your country’s entire business model on exporting cheap goods and then expect to keep prospering when the rest of the global economy is falling off a cliff.

So what China did was to pile even more money and resources into expanding its infrastructure. But rising inflation, shoddily-built projects, and soaring property prices saw the government crackdown on credit availability.

Now it seems clear that China is having the hard landing that the bulls always said was impossible.

And a hard landing for China spells disaster for the mining sector…

The Trouble With Mining

We’ve been bearish on China for quite some time. As a natural result, we’ve been bearish on mining stocks too. China is the biggest driver of commodity demand. If China’s economy slows, commodity demand drops, and so do prices. If commodity prices fall, miners run into trouble.

That’s how it’s played out so far.

There’s probably more to come. The problem with mining is that it’s a cyclical business. It’s as boom and bust as they come. The trouble is that mining projects take so long to develop, whereas commodity prices move pretty quickly.

At the bottom of a commodity cycle, when prices are low, no one is investing in new capacity. Miners are barely making money as it is. So when prices rise, there’s no rush to open new mines.

As prices continue to rise, interest picks up. Some projects that were uneconomic, become viable. But supply still tends to lag behind demand, because no one wants to commit to making big investments while they’re still not sure that demand will continue.

Eventually of course, prices get a lot higher, everyone decides that the demand will be never-ending, and you get a lot of investment in projects that are only viable at high prices.

At that point, any drop-off in prices becomes a real problem. Because miners are still geared up to expand, based on commodity prices being at stratospheric levels. So you end up with revenues being unable to cover costs.

It looks as though we’re at this point in the cycle. The bulls are increasingly being forced to stake their hopes for the sector on a fresh bout of ‘stimulus’ from China, or on a Chinese consumption boom, which would boost certain metals at the expense of others.

But from where I sit, it’s pretty clear that this particular supercycle is over. It doesn’t mean the global economy is going to collapse, or that China will never build another road or city again. But the best times for the mining sector, for this business cycle, are over.

Why Asset Allocation Matters

That’s why I see no compelling reason to hold most mining stocks. We’ve always said that one of the most important parts of your investment strategy is your asset allocation. You make money by being in the parts of the market that are going up, and avoiding the ones that are going down.

Rather than spend your time looking for the best stocks in sectors that are in a downtrend, you’d be better off hunting for a mix of stocks in sectors that are in an uptrend. So with fundamental conditions for miners clearly deteriorating fast, the best bet for most investors is just to avoid or get out of the sector altogether.

The one area in the industrial sector I’d perhaps exclude is the mining of coal used in power generation. Getting the right energy mix in the years to come is going to be tough, and we may find we’re more reliant on coal than we’d like.

But beyond that, there is one area of mining I’d definitely say you should keep in your portfolio: that’s gold miners. Gold miners have had a pretty miserable time for the past few years. But unlike industrial metals miners, demand for their product – gold – isn’t collapsing. In fact, gold miners could benefit from the rest of the industry’s woes.

Why? A key problem for all miners has been input costs. The same demand that pushed up commodity prices also drove up raw material costs for miners. On top of that, demand for mining equipment, and skilled staff, drove up wage and machinery costs too.

But as projects get delayed or cancelled, that’ll all change. As the FT reported earlier this week, “one sliver of positive news from the miners was that rampant cost inflation, which has eaten into earnings and pushed up the cost of big development projects, seems to be abating.”

Anglo American, for example, “expects costs to rise by about 2% in the second half of [2012] – down from 4% in the first half, and 8% in 2011″.

That’s got to be good news for gold miners. If cost pressures ease up, but the price of gold stays strong or rises further, that should lead to higher profit margins.

John Stepek
Contributing Editor, Money Morning

Publisher’s Note: This article originally appeared in MoneyWeek (UK)

Publisher’s Note: This is an edited version of an article that originally appeared in MoneyWeek (UK)

From the Archives…

Read This Gold Price Warning Before You Buy Another Stock
24-08-2012 – Kris Sayce

Stocks Are Up – Is it a Good Time to Buy?
23-08-2012 – Kris Sayce

It’s About Freedom of Speech: What if We Couldn’t Write to You Anymore?
22-08-2012 – Kris Sayce

Things Are Looking Up for Gold
21-08-2012 – Bengt Saelensminde

The Good News About Europe’s Missing Pre-nup
20-08-2012 – Nick Hubble

The Best Mining Stocks to Buy Now

Oil Explorers – Out of Fashion, but Could be a Great Buy


Theprice of oil is rising. Throughout July and August, the price of Brent crude oil edged higher – hitting over $115 last week. And that wasn’t supposed to happen.

As global growth slows, we’re supposed to need less of the black stuff. Then there’s all the shale oil production coming out of the USA – that should be depressing the price.

But oil is rising. And it’s beginning to cause serious problems.

Here in France, fuel prices are as high as they’ve ever been. And the French aren’t having any of it. President Hollande has promised to cut prices; he wants make the oil companies pay and kick it back to punters in the form of a tax break.

But by my reckoning, the French and everyone else are going to have to prepare for higher oil prices. Today, I’d like to explain why I think we are heading for a serious oil shock.

And rather than suffer as prices rise, I’d like to show you how you could profit from the situation.

Believe it or not, oil is cheap.

An awful lot of work and effort goes into getting your litre of petrol. It starts with oil exploration, the costs of which are mind-bogglingly high.

You need to raise hundreds of millions, if not billions, if you want to drill offshore – and even then, you may not find anything. If you do, you still need to get it out of the ground from some remote and often inhospitable place.

Then it’s got be transported, refined and then safely transported again before it reaches your local garage. And let’s not forget the government’s take.

Then there are all the taxes the government hits the oil companies with.

And yet, despite all of these significant costs, fuel is cheap.

But this happy situation won’t last.

The recent run up in the oil price may stem from sanctions on Iranian exports and lost output as Hurricane Isaac shuts down production in the Gulf of Mexico, but don’t be fooled into thinking this is just a short-term hiccup.

Huge Forces are Driving the Oil Price

First, we have to look at the oil supply.

We recently noted how precious few investors are willing to fund oil exploration these days. The sector is deeply out of fashion. Yet we desperately need to find more oil. As recently as four years ago, the International Energy Agency (IEA) warned we’d need to invest a massive $20trn in exploration.

But it’s not happening. Money is hard to come by in the financial markets today, and even if you can get a load of cash and can make a find, you run the risk of a greedy government coming in and grabbing your bounty.

Of course, the industry hasn’t ground to a halt, but there’s nowhere near enough oil exploration going on. And that’s going to cause supply issues down the line.

Sure, OPEC countries can increase supplies from time to time. But there’s no doubt that reserves are dwindling. And supply will remain tight over the coming years. Then there’s demand.

After the Fukushima disaster, the Japanese switched off their nuclear generators. Germany did the same. And while these guys may be able to find some new ways of producing a bit of sustainable electricity, the burden will fall mainly on conventional fossil fuels.

Then, of course, there is the growing demand from emerging markets. Despite what you may read, these economies are still growing – and some at a very healthy lick. Just take China. For the most part, China’s spent the last 20 years making stuff for the rich West to consume.

Yet in the recently released five-year plan, they’re talking about doing it for themselves. That is, they’re looking to use some their resources to lift the living standards of their own folk. Energy requirements will grow for decades to come.

Short of a revolution in sustainable energy, the oil price will only rise. Well, that’s my take on it anyway. I totally see that new technology is helping to increase production, but I just can’t see it keeping up with global demand.

One Last Good Reason to Own Oil

Oil is a ‘real’ asset. And real things are useful to hold if you’re concerned about the state of the financial world. And as I’ve just mentioned, oil is very much in demand. In my opinion, you should have a decent slug of exposure – maybe 10% of your portfolio.

Many of the oil majors should be a good bet. Like the oil explorers, they’re out of fashion and trading on multiples far below ten times earnings.

For the adventurous, there are some interesting opportunities in the oil exploration sector.

Bengt Saelensminde
Contributing Editor, Money Morning

Publisher’s Note: This is an edited version of an article that originally appeared in MoneyWeek (UK)

From the Archives…

Read This Gold Price Warning Before You Buy Another Stock
24-08-2012 – Kris Sayce

Stocks Are Up – Is it a Good Time to Buy?
23-08-2012 – Kris Sayce

It’s About Freedom of Speech: What if We Couldn’t Write to You Anymore?
22-08-2012 – Kris Sayce

Things Are Looking Up for Gold
21-08-2012 – Bengt Saelensminde

The Good News About Europe’s Missing Pre-nup
20-08-2012 – Nick Hubble

Oil Explorers – Out of Fashion, but Could be a Great Buy

EURUSD breaks below channel support

EURUSD breaks below the lower line of the price channel on 4-hour chart, suggesting that lengthier consolidation in the range between 1.2465 and 1.2589 is underway. Key support is at 1.2465, as long as this level holds, the price action in the range is treated as consolidation of the uptrend from 1.2241, and another rise towards 1.2700 is still possible. On the downside, a breakdown below 1.2465 could signal completion of the uptrend from 1.2241, then further decline to 1.2400 area could be seen.


Daily Forex Forecast

Jackson Hole theme: "The Changing Policy Landscape"

By Central Bank News

   Once again, financial markets worldwide will turn their attention to Jackson Hole, Wyoming on Friday for fresh clues to whether the Federal Reserve will embark on further moves to stimulate the U.S. economy.
    With no meetings scheduled for the Federal Reserve’s policy-making body until Sept. 12-13, Chairman Ben Bernanke is expected to use the conference in the northern Rockies to update markets on his vision of how the economy has evolved since the FOMC’s last meeting on July 31-Aug. 1.
    Bernanke’s speeches at the symposium, organized by the Federal Reserve Bank of Kansas City, have become famous after he aired the idea of a new round of quantitative easing (QE) in August 2010. Three months later the Fed launched QE2, sparking a nine-month period of optimism.
    Will Bernanke again show his hand?
    Speculation has been building for weeks, with commentators initially confident that another round of QE was coming. Recently, however, analysts are starting to doubt that further stimulus is necessary given better U.S.  economic data.

    The Kansas City Fed has sponsored a symposium for central bankers, finance ministry officials and other financial market participants on important economic issues every year since 1978. Since 1982 the symposium has taken place in Jackson Hole.
    This year’s topic is “The Changing Policy Landscape”: 
    “The 2012 Jackson Hole Symposium will provide a range of perspectives on the challenges facing policymakers in the aftermath of the financial crises and the changing policy landscape in which they now operate,” the program says.
    The conference takes place at the Grand Teton National Park in Jackson Hole, Wyoming and starts on Thursday, August 30 with a dinner.
    August 31: After breakfast, Ben Bernanke gives his opening address, followed by a presentation by Professor Kristin Forbes of the Massachusetts Institute of Technology on “Identifying and Mitigating Contagion.”

     Then Andrew Haldane of the Bank of England talks about “Ensuring Long Term Financial Stability” followed by Professor Michael Woodford of Columbia University who talks about “Accomodation at the Zero Lower Bound.”
    After lunch, Bank of International Settlements General Manager Jaime Caruana ends the formal session with a speech about “Policymaking in an Interconnected World.”

    Saturday, Sept. 1: Professor Markus Brunnermeir of Princeton University speaks on “Leverage, Business Cycles and Monetary Policy” followed by Profession Edward Lazear of Stanford University who addresses the topic of “Labor Markets and Monetary Policy.”
    The conference ends with a panel discussion about “Global Policy Perspectives” where European Central Bank President Mario Draghi was scheduled to participate along with Professor Alan Blinder of Princeton and Governor Zeti Akhtar Aziz of the Central Bank of Malaysia. Draghi pulled out of the conference to focus on issues in Europe.

How Does a Trader Who Runs from Risk Achieve THIS Track Record?

Peter Brandt is the “Real McCoy”
August 30, 2012

By Elliott Wave International

In the late ’70s, Peter Brandt emptied his trading accounts several times. He’d lose a string of trades, then refund his account, then “wipe out” all over again.

But he persisted because he knew he was meant for a trading career. His determination paid off.

In 1982, a currency chart “sang a song” for Brandt. By that time he had saved his earnings and supplied his trading account with a healthy sum.

The currency trade worked out very well. After that trade, he believed he could call himself a competent full-time trader.

Eventually, Peter Brandt’s trading earned an annual 42% return over an 18-year period.

Did he achieve this by “swinging for the fences” on every trade? No. In fact, he believes that successful speculation requires strict risk-management.

One other message became clear when I recently called and spoke with Brandt: successful speculation is also about managing yourself.

Here’s an excerpt from our Q&A:


Q: What’s the human factor and why is it so important to successful trading?

The biggest barrier to profitable trading is not the markets themselves. It’s not other traders. It’s not high frequency trading operations. It’s not the Wall Street trading machine out to get us. The biggest hurdle is ourselves. We have met the enemy, and the enemy is ourselves.

The human element comes into play immediately when an individual thinks he or she can make their living from trading. The human components that drive this mentality include pride, unrealistic expectations, wishful thinking, greed, disconnected hope.

If an aspiring trader can learn from and survive the mistakes of the first three to five years, they will finally figure out the real rules of the game…Most aspiring traders with four or five years of experience who know what they must do will readily agree that their real problem is actually doing what they must do. It is said that successful trading is an uphill run or upstream swim against human nature. How true!

Q. Risk management is very important to you as a trader, why? How do professional traders view risk differently from beginners?

I see this in two manifestations. First, professional traders expect to have losses — most lose more often than they win. They build losses into their processes and expectations. They factor losses into the equation.

Second, while the default expectation for professional traders is a losing trade, the default expectation of a beginner is for a winner. As a result, professional traders build aggressive risk management protocols into their trading operations.

One of the best traders I have ever known was a man named Dan Markey, who mentored me at the Chicago Board of Trade. He once told me that his job as a trader was as simple as liquidating every trade that closed at a loss. He focused on his losers. He ignored his winners.

Q: What steps did you take that led you to your successful track record of 42% over 18 years?

This is not easy to answer, mainly because I don’t want to give myself credit for any success I have achieved.

First, I didn’t need to make money from trading when I broke into futures. So that pressure was absent. I had income from several very large accounts. My proprietary trading started four years into my career in the markets.

Second, I had two very wise mentors. These were guys who told me about all the landmines I would encounter. They directed me to less risky paths. They were also very excellent traders and I could observe their habits.

Third, I stumbled across classical charting principles. Every successful trader has an approach that fits their personality, level of capitalization and risk tolerance. Some beginners never find a niche. I found a niche early on.

Fourth, I didn’t have my ego tied to every trade. I was able to take losses in stride.

Finally, I got lucky on a big score within the first two years of my proprietary trading. Now, people can say that luck is a process of a lot of things that come before it. But, luck is luck. I had a hunch and I bet a bunch — and I was right. I might have been wrong and the outcomes could have been very different.

I should also say that I’m a sequential thinker. For me that works because I go through the mental process of accounting for all the contingencies I can think of. If this happens, I’ve planned my response. If that happens, I’ve got my other response planned.


Learn more about Brandt — a veteran trader and one of a select few contributors to Bob Prechter’s Elliott Wave Theorist — in this exclusive FREE report:

Foundations of Successful Trading: Insights on Becoming a Consistently Successful Trader from Peter Brandt.

Whether you are an average investor, a novice trader, or an industry professional, you stand to benefit from what Peter Brandt has to say. You can learn more about Brandt and gain insights on his consistently successful approach to market speculation in this free 16-page excerpt from Part I of his book, “Foundations of Successful Trading.”

Download your free report and learn what leads to a lifetime of trading success >>


This article was syndicated by Elliott Wave International and was originally published under the headline How Does a Trader Who Runs from Risk Achieve THIS Track Record?. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.