Timing & trends

Where One of the Worlds Best Investors Would Put All His Money

Investor Jim Rogers, the chairman of Rogers Holdings who predicted a global commodities rally in 1999, said Myanmar is embracing reform as China did decades earlier and he’s optimistic about the resource-rich nation’s prospects.

If I could put all of my money into Myanmar, I would,’ Mr Rogers said at a conference in Singapore yesterday. ‘Myanmar is in the same place China was in early 1979, when Deng Xiaoping said we have to do something new. Myanmar is now opening up.’

Mr Rogers’ comments highlight increased investor interest in the economy that may be Asia’s ‘next economic frontier’, according to the International Monetary Fund (IMF).

The IMF is pushing for an overhaul of Myanmar’s finances as President Thein Sein releases dissidents and engages with opposition leader Aung San Suu Kyi in moves that have prompted the US and Europe to reassess sanctions against the former military dictatorship.

‘It’s right between China and India, 60 million people, massive natural resources, agriculture,’ Singapore-based Mr Rogers said at the gathering organised by New York-based INTL FCStone Inc. ‘You could feed much of Asia, they have metals, they have energy, they have everything.’

China’s Deng introduced capitalist reforms in the late 1970s, lifting more than 200 million people out of poverty and transforming the nation into the world’s second-largest economy and its biggest consumer of steel, copper and coal.

‘In 1962 Myanmar was the single richest country in Asia,’ said Mr Rogers, referring to the year that marked the start of military rule. ‘Now it’s the poorest because it’s been so badly managed in the past 50 years. But they are changing that now.’

Myanmar may grow 5.5 per cent in 2011-2012 and 6 per cent in 2012-2013 on commodity exports and higher investment, the IMF said last month. The country ‘could become the next economic frontier in Asia’ if it takes advantage of its natural resources and proximity to China and India, according to Meral Karasulu, who led an IMF mission to the country in January.

George Soros, the billionaire investor, said last month he had visited Myanmar recently and the president and his ministers ‘genuinely want an opening’.

Rice exports from Myanmar, formerly the world’s largest shipper, may more than double to 1.5 million tonnes this year, the Myanmar Rice Industry Association forecast last month. Sales totalled 700,000 tonnes in 2011.

China and India share more than 3,600km of border with Myanmar, whose 64 million people earn an average of just US$2.25 per day, according to IMF estimates. Both nations have sought increased access to the nation’s reserves of natural gas. — Bloomberg

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Interest Rate Outlook a Life – and Death Proposition

Debt vs Interest Rates

  • Recent central bank behavior, including that of the U.S. Fed, provides assurances that short and intermediate yields will not change, and therefore bond prices are not likely threatened on the downside.
  • Most short to intermediate Treasury yields are dangerously close to the zero-bound which imply limited potential room, if any, for price appreciation.
  • We can’t put $100 trillion of credit in a system-wide mattress, but we can move in that direction by delevering and refusing to extend maturities and duration.

The transition from a levering, asset-inflating secular economy to a post bubble delevering era may be as difficult for one to imagine as our departure into the hereafter. A multitude of liability structures dependent on a certain level of nominal GDP growth require just that – nominal GDP growth with a little bit of inflation, a little bit of growth which in combination justify embedded costs of debt or liability structures that minimize the haircutting of or defaulting on prior debt commitments. Global central bank monetary policy – whether explicitly communicated or not – is now geared to keeping nominal GDP close to historical levels as is fiscal deficit spending that substitutes for a delevering private sector. 

Yet the imagination and management of the transition ushers forth a plethora of disparate policy solutions. Most observers, however, would agree that monetary and fiscal excesses carry with them explicit costs. Letting your pet retriever roam the woods might do wonders for his “animal spirits,” for instance, but he could come back infested with fleas, ticks, leeches or worse. Fed Chairman Ben Bernanke, dog-lover or not, preannounced an awareness of the deleterious side effects of quantitative easing several years ago in a significant speech at Jackson Hole. Ever since, he has been open and honest about the drawbacks of a zero interest rate policy, but has plowed ahead and unleashed his “QE bowser” into the wild with the understanding that the negative consequences of not doing so would be far worse. At his November 2011 post-FOMC news briefing, for instance, he noted that “we are quite aware that very low interest rates, particularly for a protracted period, do have costs for a lot of people” – savers, pension funds, insurance companies and finance-based institutions among them. He countered though that “there is a greater good here, which is the health and recovery of the U.S. economy, and for that purpose we’ve been keeping monetary policy conditions accommodative.” 

My goal in this Investment Outlook is not to pick a “doggie bone” with the Chairman. He is makin’ it up as he goes along in order to softly delever a credit-based financial system which became egregiously overlevered and assumed far too much risk long before his watch began. My intent really is to alert you, the reader, to the significant costs that may be ahead for a global economy and financial marketplace still functioning under the assumption that cheap and abundant central bank credit is always a positive dynamic. 

 

….read the full article HERE

Precious Metals Monitor: Both Gold & Platinum to Break $1900, But One Has More Upside

We offer our latest analysis on the precious metals market.

After two weeks of consolidation, precious metals finally awoke from their slumber over the past few days. Gold, silver and palladium spiked to the top of their recent ranges, while platinum broke out to fresh multi-month highs.

A strike at the world’s largest platinum mine, Rustenburg in South Africa, has led to the loss of more than 80,000 troy ounces of the metal over the past month. The mine’s operator, Impala Platinum, said resumption of full production will take weeks, at least. 

Analysts warn that the situation could get uglier if labor unrest spreads to other companies.

South Africa’s total output was 4,775,000 troy ounces in 2011, which represented 75 percent of global output. 

Prices for platinum have surged in recent sessions, now trading at a five-month high. The metal is quickly closing in on parity with gold prices. 

platinumtechnicalchart20120222

After the recent breakout, prices have a clear path toward the multi-year high above $1900, leaving substantial upside from here.

While gold also has been performing well, the gold/platinum ratio has been quickly falling amid platinum’s outperformance. It was last trading near 1.02 after peaking above 1.15 late last year.

Over the past three decades, the ratio has been significantly below 1. Thus, continued platinum outperformance over gold would not be surprising as the ratio declines further.

goldplatinumratio20120222

Even so, the outlook for gold is bullish as well. The yellow metal moved up to the top of its recent range this past week and looks poised to move toward the next level of resistance at $1800


GOLD


…..read more on Gold, Silver, Palladium, US Dollar and view 25 charts HERE

The Bottom Line & An Outlook for Crude Oil

The Bottom Line

Downside risk in equity markets and most sectors exceeds short term upside potential. Short term weakness will provide an opportunity to enter into seasonal plays this spring including Energy, Mines & Metals, Chemicals and Auto sectors. Energy already is showing early signs of seasonal strength. 

An Outlook for Crude Oil

Crude oil recently entered into a period of seasonal strength. What are prospects this year?

EquityClock.com notes that West Texas Intermediate (WTI) crude oil prices during the past 20 years have a period of seasonal strength from the middle of February to the end of July. Average gain per period is 7.5 per cent. The seasonal “sweet spot” is from the middle of February to the end of May. Average gain per period was 6.0 per cent.

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Strength in WTI crude oil prices during the “sweet spot” is related to rising seasonal demand triggered by a recovery in the economy following the slower winter season. Notable gains are recorded by the transportation, construction and auto sectors. Once again, demand by these sectors is expected to rise this spring, particularly in Canada, United States, Japan, China and India.

Crude oil prices during the “sweet spot” this year are expected to be impacted by several special events that have limited supply. The price of Brent crude oil has jumped more than 14 per cent since mid-December despite a gain of only 8 per cent by WTI crude oil. Brent prices have responded to a decision by European buyers to switch from production from Iran to other sources including North Sea oil. Rising Brent prices slowly, but surely, is filtering back to WTI crude oil prices.

Concern about political instability in the Middle East also is an influence. Iran has threatened to close the Straits of Hormuz if attacked. International concerns about Iran’s nuclear program likely will continue to escalate this spring. On Wednesday, Iran denied a rumor that oil shipments to six European nations had been halted due to recent plans taken by European nations to discontinue purchases of crude oil from Iran by July.

On the charts, the technical picture on WTI crude oil prices is positive and improving. Intermediate trend is up. Support is at $95.44 and resistance is at $103.74. Crude oil recently bounced from near its 200 day moving average at $94.59 and broke above its 50 day moving average at $99.32. Short term momentum indicators are recovering from oversold levels. A break above resistance implies intermediate upside potential to $112.75 per barrel.

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Investors can participate in seasonal strength in crude oil directly or indirectly. The direct method is to accumulate futures and Exchange Traded Funds that track the price of crude oil. The best known and most actively traded Exchange Traded Fund is United States Oil Fund LP (USO $39.18). In Canada, Horizons offers several currency-hedged Exchange Traded Funds trading in Canadian Dollars that are directly related to crude oil futures. The indirect way to invest in crude oil is in “oily” stocks.

 

Don Vialoux is the author of free daily reports on equity markets, sectors,

commodities and Exchange Traded Funds. . Daily reports are

available at http://www.timingthemarket.ca/. He is also a research analyst for

Horizons Investment Management Inc. All of the views expressed herein are his

personal views although they may be reflected in positions or transactions

in the various client portfolios managed by Horizons Investment Management.

RANKED # 1 BY TIMER DIGEST – The Todd Market Forecast for Wed Feb 22

Some downbeat economic numbers from Europe combined with disappointing earnings from Dell Computer to hold stocks under water on Wednesday.

The stock market has been acting somewhat tired, particularly after the so called “deal” on Greece. There doesn’t seem to be a catalyst to push stocks meaningfully higher on the short term.

Besides the overbought condition, one indicator that concerns us is the number of new yearly highs. over the past two weeks, as the market has pushed higher, new highs have attenuated (arrow). That is frequently a signal that the market needs a short rest. We can see this in the chart below courtesy of Decisionpoint.com.

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Stephen Todd was the #1 2011 Timers Digest Gold Timer of the Year – More #1 Rankings listed below

GOLD: Gold started off rather lackluster, but came on strongly as the day progressed. The yellow metal is looking pretty good here.
BONDS: Bonds rebounded somewhat on Wednesday.                
THE REST: The dollar was up a bit and this probably helped push down silver, copper and crude oil, but gold bucked the trend.
BOTTOM LINE:  

  • Our intermediate term systems are on a buy signal.
  • System 2 traders are in cash. Stay there for now.
  • System 7 traders are in cash. Stay there for now.

NEWS AND FUNDAMENTALS:
Existing home sales came in at 4.57 million, less than the expected 4.69 million. On Thursday we get initial jobless claims and oil inventories.      
       ————————————————————————————–

  • We’re on a sell for bonds as of December 21.
  • We’re on a sell for the dollar and a buy for the euro as of January 18.              
  • We’re on a buy on gold as of Feb. 21.              
  • We’re on a buy on silver as today Feb. 21.        
  • We’re on a buy for crude oil as of Feb. 13.      
  • We’re on a buy for copper as of December 20  

We are long term bullish for all major world markets, including those of the U.S., Britain, Canada, Germany, France and Japan.

Screen shot 2012-02-22 at 3.07.32 PM

About the Todd Market Forecast:

RANKED # 1 BY TIMER DIGEST
Timer Digest of Greenwich, CT monitors and ranks over 100 of the nation’s best known stock market advisory services.           

Once per year in January, Timer Digest publishes the rankings of all services monitored for multiple time frames.

For the years 2003, 2004 and 2005, The Todd Market Forecast was rated # 1 for the preceding ten years. For the year 2006, we slipped to # 3 and in 2007, we were ranked # 5.

Our bond timing was rated # 1 for the years 1997, 2007 and 2008.

Gold timing was rated # 1 for 1997 and # 2 for 2006. and # 1 for 2011.

We were # 1 in long term stock market timing for the years 1998 and 2004 and # 4 in 2010.

To subscribe go HERE.


We provide daily commentary via e-mail for the stock market, gold,monthly newsletter.

Our approach is mainly technical in nature. We pay attention to chart patterns, volume, overbought – oversold indicators and market sentiment.  However, consideration is also given to fundamentals such as interest rates, Fed policy, earnings and the economy.

We have two main approaches. First we seek to provide specific entry and exit points for conservative investors who utilize mutual funds and ETFs. We also give precise instructions for short term traders who utilize ETFs, Options and stock index futures. To subscribe online go HERE



INDICATOR PARAMETERS
 Monetary conditions (+2 means the Fed is actively dropping rates; +1 means a bias toward easing. 0 means neutral, -1 means a bias toward tightening, -2 means actively raising rates). RSI (30 or below is oversold, 80 or above is overbought). McClellan Oscillator ( minus 100 is oversold. Plus 100 is overbought). Composite Gauge (5 or below is negative, 13 or above is positive). Composite Gauge five day m.a. (8.0 or below is overbought. 13.0 or above is oversold). CBOE Put Call Ratio ( Below .80 is a negative. Above 1.00 is a positive). Volatility Index, VIX (low teens bearish, high twenties bullish), VIX % single day change. + 5 or greater bullish. -5 or less, bearish. Advances minus declines three day m.a.( +500 is bearish. – 500 is bullish). Supply Demand 5 day m.a. (.45 or below is a positive. .80 or above is a negative).
 No guarantees are made. Traders can and do lose money. The publisher may take positions in recommended securities.

A Prime Opportunity to Buy Gold Stocks is Imminent

Update: Mark Leibovit’s pre-opening Gold Comment for 02/22/12. GOLD – ACTION ALERT – BUY
Metals took off for the same reason stocks rallied. Platinum saw a new recovery high of 1646 along with Palladium which traded at 717. Silver touched 34.58, just four cents under its February 34.62 peak. Gold fell a tad short too touching 1761.50 versus its February 3 peak at 1764.20. The burden of proof is on the bulls here, but ‘seasonality’ for gold is beginning to run out. I would still like to see silver push back toward my projected 30-31 pullback zone. Afterwards, my target is first 37 on its way to 42-43. Gold targets to the mid 1800s and perhaps back to its record 1922 high, but I was thinking we should first see more of a pullback, perhaps into the 1600s. So far, this market has said it has other plans. Stay tuned.

A Prime Opportunity to Buy Gold Stocks is Imminent

The price action of the past six trading days made it clear that contrary to our previous thinking the XAU did not break out to the upside late last month. A definitive upside breakout and confirmation that the intermediate-term correction ended in late December will require a daily close above 205. (last nights close 198.20)

XAU 170212

By its nature, confirmation of an important low will usually be belated and will therefore usually not coincide with a good short-term buying opportunity. In general, buying should be done in response to pronounced weakness, not strength. For example, it made more sense to buy near the start of trading on Thursday 16th February, with the gold stock indices having just fallen for 9 days in a row and looking like they were about to extend the losing streak to 10 days, than to buy at the end of January with the XAU appearing to have just broken out to the upside.

It’s possible that the gold-stock indices bottomed on the morning of 16th February, but at this stage the price action is non-committal. If a short-term bottom had been put in place last Thursday it would have been normal for there to be some follow-through to the upside on Friday, so the fact that Friday was another down-day leaves open the possibility that the indices will make new multi-week lows this week.

If a break to new multi-week lows occurs this week it will create an opportunity for under-exposed speculators to do some buying. It won’t, in our opinion, signal that major additional weakness lies ahead. There is a realistic possibility that the HUI and the XAU will test their late-December lows before the end of this month, but very little chance that they will do worse than that before commencing their next tradable rallies.

 

The mission of The Speculative Investor (TSI) is to provide our subscribers with information that not only helps them understand and profit from changing financial market trends, but is also interesting and thought-provoking.