Archive for July, 2010:
‘Tis But a Scratch!
By: Adrian Ash, BullionVault
The bull market in gold is a long way from losing both arms and legs just yet…
WHATEVER FORCE you spy behind this week’s swoon in gold prices to $1160 per ounce and lower, ’tis but a scratch – a flesh wound – so far.
“I’ve had worse!” as Monty Python‘s Black Knight says.
First, the current options contract on gold futures expired Wednesday, guaranteeing volatility. Because as bullish speculators moved to close and rollover their position in the derivatives market, those banks taking the other side of the trade were only too happy to oblige.
Call that manipulation if you must (double-check your facts first), but more broadly, long-time investors and traders would always expect to see a seasonal lull – if not drop – in gold prices between July and Sept. India’s gold-hungry millions don’t buy over the summer, waiting instead until autumn’s post-harvest Diwali festival. And after the huge gains spurred by the Greek crisis of April and May, a pullback in gold investment pressure looked due.
Of course, that’s not to say the gold bull-market starting a decade ago hasn’t just met its end. Some in the finance media would like to believe it’s over (even if, like this article at the Sydney Morning Herald, they seem more driven by resentment than analysis). But for now, recent history says the bull market in gold is a long way from losing both arms and legs just yet…
Dropping a little over 9% from last month’s top to date, the gold price in Dollars would have to reach $1073 an ounce before matching the 15% drops of Dec ’09-Jan ’10 and Feb-Apr ’09.
Gold would need to hit $948 an ounce before matching the 25% drop of May-Jun ’06. And it would have to reach $834 before matching the 33% Mar-Sept. loss of 2008.
This current swoon is also a good way from setting new records for pace, too. Top to bottom, it’s nothing – so far – next to the 16% week-on-week drops of June 2006 and Sept. 2008.
Western government deficits are set to keep rising, meantime, while real interest rates remain below zero everywhere, slowly destroying the value of cash. Gold, in contrast, continues to find favor with central-bank reserve managers, and private Chinese gold demand is undimmed.
Indeed, “with all the deregulation we’ve seen in China and the Chinese gold market being so alive, it may just turn out to become a bit of a casino atmosphere over there,” says gold-mining magnate Pierre Lassonde, speaking to MineWeb – “a gambling atmosphere [that] could very well push the gold price beyond anything that we believe is reasonable.”"
Small comfort to investors or traders picking early July’s dip as a bargain, perhaps. But so far, it’s only a scratch. And whatever nemesis gold has stumbled across in July, it’s certainly got nothing to do with the long-term drivers of its four-fold gains to date.
Adrian Ash
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2010
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.
Top Gun Options Course Now Open to First 250 Registrants
Just got word that the doors for the Top Gun Options training program have just officially opened.They’re only accepting the first Two Hundred Fifty registrants…and I have a feeling that these spots will get snapped up at supersonic speed.
Follow this link and I think you’ll understand why…
==>http://www.fox3options.com/iscript.php?10908_A98133_13
Here’s the deal: The Top Gun Options Program was designed by F-18 fighter
pilots who graduated from the elite US Navy Weapons School, Top Gun…
And who figured out how to leverage their military-learned disciplines and
methodologies to achieve superior execution (and results) in options trading.
So even if you are a total novice and can’t spell the word “OPTIONS” or
you’re a “Jedi Master” options trader, this elite training program
can give you the edge you need to be trading options successfully, FAST
Follow the link below and check it out:
==>http://www.fox3options.com/iscript.php?10908_A98133_13
By the way, I’ve previewed the course and, trust me, it’s the real deal.
Cheers,
Alan
Physical Buying “Supporting Gold” Amid Slow Summer Dealing
By: Adrian Ash, BullionVault
THE PRICE OF GOLD gave back an early rally on Monday morning to trade just below Friday’s close of $1190 an ounce amid what one Hong Kong dealer called “a typically slow summer day.”
“There is physical gold buying coming in as prices are below $1200,” said a Seoul-based trader.
“Physical gold demand is supporting the market towards the $1185 level,” said Afshin Nabavi of MKS Finance in Geneva, also speaking to Bloomberg.
“A lot of the interest we are seeing at the moment is from long-term investors, and we don’t see that abating,” the Wall Street Journal quotes Barclays Capital analyst Suki Cooper in London.
Dealing in Asian and European equities was also quiet early Monday, leaving London’s FTSE100 index unchanged from last week’s two-month closing high.
Crude oil slipped from an 11-week high near $79 per barrel. Major-economy government bonds rose, nudging the yield offered by 10-year US debt back below 3.00%.
Platinum and palladium both hit a 5-week high, some 3.6% and 13% higher for 2010-to-date respectively.
Silver prices slipped back from an early repeat of Friday’s one-week high at $18.33 an ounce, but held above $18 an ounce – some 6.6% higher for the year so far – as the start of US dealing approached.
“In technical terms, gold looks bearish,” says Walter de Wet at Standard Bank. “However, in the physical market, buying interest is providing support around this crucial range gold.”
Looking at the latest Commitment of Traders data from the US gold futures market, non-commercial “speculative” players last week cut their bullish position to the equivalent of 639 tonnes net long, de Wet says, “the lowest level since March this year.
“As a percentage of [all] open interest, the non-commercial net long position now stands at 25.5% – the lowest level since Nov 2008. We therefore foresee more gold longs.”
Over on the currency markets on Monday, the Euro held steady against the Dollar around $1.29, but the British Pound jumped once again, challenging 5-month highs above $1.55.
Nomura bank analysts in New York say in a new report that central banks added a record $24.5 billion of “other” currencies to their portfolios between Jan. and April – meaning currencies outside the Dollar, Euro, Sterling or Japanese Yen.
Typically led by the “commodity Dollars” of Canada and Australia, Norway’s “petro” Krone, plus the higher-yielding New Zealand Dollar, these “other” currencies accounted for 3.7% of central-bank reserves worldwide by April, Nomura thinks, up from 1.5% a decade ago.
Gold bullion has gone from 12.2% of central-bank reserves by value in early 2000 to 10.0% in Q1 2010, according to World Gold Council research.
“Current news is not indicating an inflation threat and the sovereign debt-crisis is gradually vanishing from public attention,” says Wolfgang Wrzesniok-Rossbach in his latest Precious Metals Weekly for German refinery Heraeus.
Last week’s upbeat European banking “stress test” results – much-challenged by private-sector analysts – said only 7 out of 91 institutions now need to raise extra capital.
“If the Indian gold merchants also sit back in August, Western investors will again have to get active,” says the Heraeus report. “[But] demand for investment gold bars in mid-Europe in the last ten days has been again at a low level, and the relatively low prices in Euro terms have not had much effect on this.
“Here in Europe, scrap-gold supplies [have] continued to flow at unchanged (robust) levels.”
Today the gold price in Euros bounced higher after re-touching Friday’s 3-session low of €29,500 per kilo, while the price of gold for UK investors fell to its lowest level since late April below £766 an ounce.
Luxembourg’s Commerzbank notes that, on the World Gold Council’s data – compiled by London consultancy GFMS Ltd – the supply of “scrap” gold from unwanted jewelry worldwide fell 43% in the first quarter of this year from the start of 2009, down to 343 tonnes.
Adrian Ash
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2010
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.
Credit Deflation Lands in Britain
By: Adrian Ash, BullionVault
Credit deflation just hit the UK for the first time on post-war records…
HMMMM…This looks telling.
UK banks will soon be able to post raw loans – rather than securitized loans that have been bundled into asset-backed bonds – as collateral against short-term liquidity aid from the Bank of England.
This will mean lending central-bank cash against the commercial banks’ major assets, as the Old Lady of Threadneedle Street puts it, rather than against that sliver of their balance-sheets held as securitized loans. Which seems prescient, for two reasons.
First, securitization of UK consumer, mortgage and business debt has all but collapsed. Net-net, there haven’t been any sizeable securitizations of UK bank lending for six months running – the longest period since 1998.
The two months before that actually saw securitizations paid back, and at the fastest pace on record, down by £26 billion. Which is a pity for the UK’s formerly go-go-crazy-bones credit bonanza.
In the 10 years ending Dec. 2009, securitization added £325 billion to the growth in UK bank lending, expanding new credit by more than 20%. And why not? Securitizing bank loans, by parceling them up and then selling the debt to investors both foreign and domestic, gave banks the chance to lend the same Pound twice, skimming a profit both times. It also gave insurance and pension funds the chance to invest in Britain’s record debt bubble…a boom which ended with more people working more hours to service more debt than ever before in history.
That bout of collective insanity has now got the DTs. Because second, and as a result of securitization’s collapse (or so we guess here at BullionVault), private-sector UK loan growth overall last quarter did what it’s never done before (not since records began in June 1963, at least) and actually turned negative.
The Bank of England’s decision thus looks timely, if ineffective against the credit deflation already underway.
To repeat: UK bank lending to the private sector has never previously shrunk, not in the 47 years of available data. And lending cash to commercial banks Walter Bagehot-style – albeit by accepting their debtors in turn as collateral, and not charging that “high rate” the 19th-century economist recommended either – is what central bankers are for, after all.
Concluding her 3-month consultation with the banking sector, the Old Lady said Monday that she’ll start accepting “raw loans” as collateral for short-term liquidity, dispensed via the Discount Window Facility, in 2011. That expands the list of eligible collateral which banks can post from securitized debt (those asset-backed bonds accepted since Dec. 2007 on top of government gilts), just so long as the loans are residential or commercial real-estate mortgages, consumer loans (but not including credit cards), or corporate loans to non-bank borrowers.
Unlike the Bank’s failed attempt to inject cash into the UK economy via Quantitative Easing, this latest wheeze to underwrite the credit-supply will at least keep the Old Lady’s cash onshore. Because the raw loan’s end-borrower “must be UK-based.” Which should stop the tabloids screaming about “foreigners stealing” this particular chunk of Britain’s monetary easing when it begins.
Whether it stems the UK’s credit deflation remains to be seen. And whether that deflation ever gets to stem the ongoing inflation in prices still awaits history’s verdict, too. Because while private net lending shrank between April and July, quarterly consumer-price inflation meantime rose to 1.3%, knocking 3.3 pence off the purchasing power of each Pound Sterling compared with 12 months prior.
Deflation in credit but inflation in prices? With the fastest GDP growth in four years coming in at 1.1% at market (i.e. unadjusted) prices across the quarter? Economists from Mervyn “monetarist” King to Paul “Keynes re-born” Krugman say this confluence of pain can never happen. So best wheel out the Bank of England’s printing press yet again, just to get reality back on track with theory.
Adrian Ash
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2010
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.
Breaking news: Bernanke slams U.S. economy! What to do …
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A momentous event just occurred this afternoon:
For the first time in many years, the Chairman of the Federal Reserve went before Congress, set aside his rose-colored glasses, dispensed with most of his sugar-coated platitudes and made some hard-hitting statements about the U.S. economy.
Bernanke on jobs:
“This is the worst labor market since the Great Depression.”
Bernanke on housing:
“The market remains weak, with the overhang of vacant or foreclosed houses weighing on home prices and construction.”
Bernanke on fears about the future:
“Most … viewed uncertainty about the outlook for growth and unemployment as greater than normal, and the majority saw the risks to growth as weighted to the downside.”
Bernanke on tight credit for small businesses:
“Bank loans outstanding have continued to contract. Small businesses, which depend importantly on bank credit, have been particularly hard hit.”
And never forget: All this is coming from a man whose job invariably makes him extremely reluctant to admit to negative trends in any sector at any time — if Bernanke is saying things are bad, you can bet your bottom dollar they’re actually far worse.
Our recommendation:
- Act on our warnings to greatly reduce your exposure to the stock market, especially in the sectors we’ve been pinpointing as vulnerable to a double-dip recession: Housing and construction, retail, manufacturing, banking and more.
- Keep most of your money safely tucked away in short-term Treasury bills or equivalent. The return on your money (no matter how low) is not nearly as big of an issue as the return OF your money.
- To hedge against any threat to the purchasing power of your dollars, maintain a core position in gold — through bullion, a gold ETF or both.
- Above all, stay safe!
Good luck and God bless!
Surefire Trading Challenge ending soon – Get it now before it’s too late!
Hi!
“You’re Probably Not Going To Make A Single Dollar
In The Forex Market Unless You Act NOW!”
A couple of days ago we opened the doors to the
most elite trading club in the world but sadly we’ve
just about hit capacity and it’s time to shut it all
down once more.
Needless to say, the response has been overwhelming
and we’re barely keeping up with all the testimonials
streaming in from traders up to their necks in pips!
I can literally count the number of available spaces
left on my fingers so by the time you read this it may
be all over. Just in case though, head on over here
real quick and see if there’s still a chance you can
get in to my club:
http://www.surefireforextradingchallenge.com/
We’re weighing anchor and heading out into open
water. Everything’s coming down as soon as the last
space is filled up. Remember the videos, interview
and sound bites from last week?
I really hope that you had a chance to check them
out because this stuff is reserved exclusively for
the eyes of the traders in our special group. It may
be a very long time before you get to see the kind of
info real traders are used to seeing again.
In fact, I’d have taken these down already if I knew
how to do it myself but, you still have a chance to see
if before the tech crew arrive on the scene so make
the most of it while you can. This is how the winners
in the market get things done:
http://www.surefireforextradingchallenge.com/
Check out some of the comments traders have posted
as well. The response to these great videos have been
way better than expected!
You see, most traders go through their entire
trading careers and far too many dollars
that may have been better spent without even knowing
that there is a place where they can go to get tried
& tested systems that actually work.
Look, I’m not gonna kid you, the ‘trading’ materials
you are currently using were most likely put together
by a marketer or a writer hired by a marketer. Neither
have any real ‘in the trenches’ experience but they do
put together a mean sales pitch 
Heck, I’ve been duped more than a few times myself.
That’s why I got to take it all down. In order to ensure
that the traders in my community get the edge over
everyone else out there we have got to be EXCLUSIVE!
http://www.surefireforextradingchallenge.com/
This is what the 5% that actually make a killing in
the Forex market use to get the job done:
* The winning systems from the most gruelling Forex
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* The winning systems from the previous 8 trading
competitions.
* Access to a very special forum where you can talk
with the winners and hundreds of other likeminded
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* You will be able to attend bi-weekly webinars
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maybe even make a trade or two with them.
* You can take part in live apprentice trading where
someone will hold your hand as you learn to trade.
What would that be worth to you?
* You will be able to see the results of their live
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* Access thousands of articles and videos of trading
techniques. More added each week from traders (not
authors) all over the world.
* Speak with professional traders who will help you
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* These proven winning systems will save you years
of learning and thousands of dollars in potential
losses.
* You will be able to trade more confidently knowing
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* If you have never traded before or you’re just about
ready to start, there’s no better place than a whole
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http://www.surefireforextradingchallenge.com/
If you’re reading this, then it’s clear that you have
been reading my emails for some time now so, I would
just like to extend a very personal invitation to you
to be a part of my inner circle while you still can.
I’m calling you out Today’s the day you decide whether
you’re going to run with the big dogs or just going to sit
on the porch. The clock’s ticking… your move
Good Trading
Mark McRae
P.S. Where else can you find trading systems that have
been put through such rigorous testing and still come
out on top? It’s never been done until now:
Last Chance To Learn To Trade Forex With Ease
There’s only a few days left to join the most elite
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* All the research has been done!
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* See the live and demo statements from the winners.
* You get more than 35 pages of system rules and
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* Watch over 60 videos from chart setup to live
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By the time you go through half of these materials
you will know how to trade systems that have been
tried, tested and proven to work! To be sure that
you’re not left out in the cold just make you way
down here and sign up now:
That’s just the materials from the latest trading
challenge, they have done 8 previous challenges and
each series comes with just as much if not more of
the same.
Just take a look at some of the other stuff that you
get included as a member of this elite trading community:
* The winning systems of the latest trading
competition.
* The winning systems from the previous 8 trading
competitions.
* Access to a very special forum where you can talk
with the winners.
* You will be able to attend by weekly webinars where
you can watch the winners trade live.
* You can take part in live apprentice trading where
someone will hold your hand as you learn to trade.
* You will be able to see the results of their live
trading robots review page (How cool is that? Never
get suckered in to buying a bogus robot again!).
* Access thousands of articles and videos of trading
techniques.
* Speak with professional traders who will help you to
become a successful trader.
* These proven winning systems will save you years of
learning and thousands of dollars in potential losses.
* If you’ve traded before then you will be up and
running with these systems in hours.
* There is a community of traders who have already
used the systems that can tell you how they get the
very best from the systems.
* You will be able to trade more confidently knowing
you have a whole community behind you, ready to help
and give you guidance.
* If you have never traded before or your just about
ready to start, there’s no better place than their
community of traders.
* They have professional traders and 2 of the most
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by to help with any questions you might have.
That’s more than you will find anywhere else on the
World Wide Web! They’re about to close the doors soon
and stop accepting new club members so don’t get left
out in the cold. Get it before it’s gone:
Check out the link above and remember that all this
great content will be taken down soon so this will be
the only time you get a chance to see it.
All the best
Alan
P.S. Testimonials are streaming in from traders all
over the world that are already making pips just a
few days after the release. You better get this one
before it’s gone for good. Find out more here:
=================================================
Information, charts or examples contained in this
blog post is for illustration and educational purposes
only. It should not be considered as advice or an
endorsement to purchase or sell any security or
financial instrument. We do not and cannot give
investment advice. On certain occasions we have a
material link to the product or service mentioned in
the email. This may be in the form of compensation or
remuneration.
=================================================
Probably the best forex trading systems in the world
Today, Tuesday 13th July 2010, at 9 AM EST, trading systems of more than 40 champion traders from all around the globe and so much more, will be disclosed.
The systems, interviews, videos and live trading presentations of Mark McRae’s current SureFire Trading Champion V2 top guns, and all the previous champions, will be accessible to only a few and you have been invited to join that elite group – effective TODAY!
Not only have these “over achievers” notched up staggering gains, they each have fully disclosed their systems.
- Videos on how the champions make their trades
- Detailed descriptions of the method or system that each champion uses
- A lively member’s forum, where members discuss and improve where they can on any system together
- Interviews with the champions and other veteran traders
- Live trading webinars hosted by champions and veteran traders and suitable for newbie’s and advanced traders alike
- An exclusive library of learning material, videos and more
- Access to EAs not found anywhere else, that have been exclusively developed for use of member’s only by in-house expert programmers
- A community of like- minded traders who assist and learn from each other every day
http://www.surefireforextradingchallenge.com/
Here’s a recap of the leaked information that started tongues wagging and astonished everybody:
# Banned System Video
An insider cracks it into the top twenty and then went on to reveal his method that is so staggeringly easy, yet hit the bulls-eye and landed him a top spot.
# 1,306.50% PM System
A recent Trading Challenge winner revealed how he made 1306.50% in just 1 Month. He proved, yet again, that a successful trading system needn’t be complicated.
# Live Trading
A SureFire Trading Champion on 3 consecutive challenges, showed why he was able to do it. He is caught on video as he sets out to tame the markets.
# Secret Of Trading
Master Webinar host Ty Young, on display as he mentors member’s in a one of his many Live trading sessions. Some of these can last between 8 to 16 hours!
# The Master
A powerful interview with veteran trader Alan ‘Pipsqueak’ DeWett, as he gave his whole system away. This is the same system that he bagged $50,000.00 with last year alone!
# The Wall of winners
Portions of interviews, with every champion trader, provided valuable insight into their thoughts and perspectives.
Its all up for grabs…9AM EST. One more thing before I go…
Mark is only allowing a small group of new traders in. He has shut the doors to new applicants before and is set to do it again as soon as you and a few select others join him and his team. He could close the doors anytime. He does this to keep support for
each member at the highest level possible and maintain exclusivity.
With a site this valuable, not just anybody gets the nod, so now is YOUR chance to take your trading to the highest level.
http://www.surefireforextradingchallenge.com/
Make sure you don’t pass up this chance!
All the best
Alan
P.S. This site is GOLD. What the members are exposed to here you just can’t find anywhere else. This is the rarest of invitations to get in and rub shoulders with the best of the best. Join up- Join the best:
http://www.surefireforextradingchallenge.com/
=================================================
Information, charts or examples contained in this
email is for illustration and educational purposes
only. It should not be considered as advice or an
endorsement to purchase or sell any security or
financial instrument. We do not and cannot give
investment advice. On certain occasions we have a
material link to the product or service mentioned in
the email. This may be in the form of compensation
or remuneration.
=================================================
How To Trade Options Like A Fighter Pilot
I just got word that some of my friends that specialize in options
education are GIVING AWAY an amazing (and really unique) options
trading course.
It’s like nothing you’ve ever seen!
Not sure how long it will run or how many they are giving away, so
check it out as soon as possible.
Here is the link:
==> http://fox3options.com/iscript.php?10908_A98133_1
I got a preview the other day and it is really impressive and relevant
to traders of all levels. (and don’t be intimidated if you don’t even
know what an option is…)
Again, it’s like nothing you’ve ever ‘seen’ before.
By the end of this complimentary training, you’ll be well on your way
to becoming an expert options trader.
It’s all laid out in a series of easy-to-follow online videos.
Here’s the link again:
==> http://fox3options.com/iscript.php?10908_A98133_1
I hope you enjoy it!
Sincerely,
Alan
P.S. I’m not sure how long you’ll be able to get this unique options
trading course online, so don’t waste any time.
Get going now to grab your copy!
Here is that link again:
What Little Investment Means Christmas in July?
Enjoy the Gifts that Keep on Giving When
You Invest ‘Down Under’
New Zealand is an awkward place for an American at Christmastime, as I learned during a trip there this past December.
That’s mid-summer in the Southern Hemisphere, and families spend their holiday at the beach. Yet, all the winter trappings of Santa season are on display wherever you look. Really disconcerting.
I’m reminiscing now because it’s Christmas in July in New Zealand (where it’s now winter and, thus, oddly appropriate). And it has a summer fruit that’s ripe for the picking right now. I’ll explain…
Central bank governor Alan Bollard is playing Kris Kringle. His agency, the New Zealand Reserve Bank, raised interest rates for the first time in three years.
They pushed up the Official Cash Rate last month by 0.25% (or 25 basis points, to the hardcore finance crowd).
Small nudge, true. But the move means the land of Middle Earth is now on board with central bankers in Canada, Australia and Norway, who have also recently raised rates. They all sense what’s really going on with all this phony money sloshing around the world.
They all want to head off inflation before inflation takes the head off their economies.
For an investor like me (someone who globe-trots to find profitable opportunities outside America), this is fine news! Suddenly, New Zealand is back on the investment radar.
Anytime a stable, financially viable country raises its rates vis-à-vis my hometown U.S. dollar, I perk up.
New Zealand’s assets are suddenly more attractive. The interest-rate spread between the N.Z. dollar, or “kiwi,” and the greenback has widened.
This makes the kiwi more appealing – it is worth more and more of my dollars. And that means good things for my preferred global investments: dividend paying companies.
The way I see it, if the kiwi’s appealing, then kiwi dividends are even more appealing.
When an economy is growing (which a rate hike clearly hints at), then corporate profits are expanding.
When corporate profits expand, companies generally share the wealth in the form of bigger dividend payouts.
And larger dividend payments when the kiwi is gaining ground on the dollar equals more greenbacks when you bring your money back home.
Sounds pretty good to me!
Got Milk?
I’m not saying N.Z. stocks are suddenly up, up and away. The world remains a dicey joint.
Economic, market-based and politician (yes, you read that last one right) risks lurk around every corner. Sometimes they’re waiting in broad daylight with a big club to beat you over the head – particularly the politician risk (and particularly the U.S. politician risk).
That said, N.Z.’s baby step toward interest-rate normality means one thing to me as an investor … that it’s time to start mining this tiny nation for investment values before professional investors jump in with two hands groping for an alternative to the S&P 500 and the Dow.
Commodities – agriculture in particular – rule New Zealand’s economy.
Here’s a fun fact: Despite a Hobbit-sized land mass, New Zealand accounts for about 35% of the global dairy trade.
Kiwi cows are keeping Asia, especially China, fat and happy. In case you haven’t heard, dairy consumption is growing in Asia faster than you can say “cheese.”
And early investors in this sector are going to smile – all the way to the bank.
Kiwi interest rates will keep climbing and New Zealand’s commodities will gain a higher profile. And the best gains will come not to those who wait. Don’t be late to the party.
Now, this rate decision could definitely be a case of central bankers testing the waters.
Sure — maybe they just want to gauge how markets react and how the economy responds. The new rate-hike cycle may not go full force until fall. Who knows?
But whatever the case, the point remains the same: Institutional money will hit New Zealand sooner than later.
And I think you should be there first.
Look, N.Z. is not a huge market – just $50 billion or so. For comparison, Dow Jones Industrial Average component 3M Co. alone is $53.3 billion, give or take. An inflow of money into such a smallish exchange bears meaningfully on returns.
So, where would I be looking?
Yield, Baby, Yield …
I’ve been involved in New Zealand’s markets since 1995, and I can tell you the industries I’m nosing around include telecom, manufacturing, building materials, property, retail, healthcare and food.
N.Z. has some fine companies paying very attractive dividends – attractive like 4% to 9%!
So, I mean Attractive.
And these aren’t those loopy dividends that a troubled company is likely to axe in a couple of months. These are stable dividends paid by stable companies, whose stock prices just happen to be down these days because of that little global dustup we had.
I know some will grumble about “the consumer,” given the supposed near-extinction of that animal amid The Great Purging of the last few years. But N.Z.’s economy is looking up. Joblessness has fallen. Consumer sentiment is up, though consumers do remain cautious. Nevertheless, those are wonderfully divergent trendlines, given what the U.S. still struggles with.
And others will kvetch that higher interest rates are, in textbook terms, bad news for companies since rising borrowing costs pinch earnings. True. But coming off such low levels—the new rate is just 2.75%, after all—interest rates need to rise a good deal before hindering corporate growth and spooking investors.
Think about it this way: In the 1990s and the middle years of the last decade, rates in the US were in the 5% range … and down in N.Z. they were jumping around between the 6% and 8% range … and stock markets were whistling a carefree tune.
So I don’t have big fears that a new interest-rate cycle will suddenly clamp off profit growth and send N.Z. stocks back into hibernation.
For those who like the taste of kiwi—and those who’ve never tried it—now’s a good time to start digging in the dirt down under.
Until Next Time, Keep a Global View.
Jeff D. Opdyke
Senior Editor, The Sovereign Society
