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Archive through September 17, 2010

Chart Forum » Hilarius' Hall Of Fame » Our Daily Bread » Archive through September 17, 2010

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billt
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Monday, September 13, 2010 - 04:05 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



I don't really mind which way the market is going, but to go against the current USA economic trend requires a lot of courage and imagination:

GDP is falling,
National Debt rising & will accelerate due to more stimulus
Deficit rising & will accelerate
Unemployment is rising
Real Personal Income if falling
Real Personal Spending is slowing
Housing Starts sharply falling
Homes Sales sharply down
Building Permits sharply down
Auto Sales 28 year low
Real non-residential flat
Non Defense Shipments falling
ISM Services falling
ISM Manufacturing falling
Chicago PMI falling sharply
Food Stamp Recipients rising
300 banks bust, many more to come

Friends in the UK, Europe, Middle East and Eastern Europe are saying it 'feels like a double dip recession' to those in the Service Industries already!

With the SPX inching up but recording its lowest weekly volume last week in 18 months (outside of Xmas & Thanksgiving) it doesn't fill me with confidence to go long...


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eblode
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Monday, September 13, 2010 - 05:08 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Paint,
Thanks for the news. Good news is always welcome. My ARP & FGE are also flying north.

Billt,
Never ever believe the United States is weak in the knees. They may stumble and lose their way and just when the whole world thinks they are losing their bundle they will emerge stronger than ever. This is a resilient nation that takes bad times in their stride and never buckle under.

Eugenio







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eblode
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Monday, September 13, 2010 - 05:10 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



MM,

Have you checked your mail lately?

Eugenio


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ody
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Monday, September 13, 2010 - 05:20 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Some contrasts in the information flow ...

[Addition about the $A: in contrast to Peter Loh, I do NOT see 93 cents as reassuring. That's the sort of level at which one expects it to FALL again.]

Peter Loh is right about commodities going up, and spot prices on Kitco do confirm that. The copper figures are important in that the metal is in demand in more than one place, including the US. It is that sort of information which makes one unwilling to anticipate a double dip as at all a certainty.

But the figures which Bill produces are, nevertheless, very telling, and it is indeed hard to see just on what evidence share markets would go up substantially, and particularly for any significant length of time. There certainly are many negatives.

The general picture strikes me as one that perhaps makes it most likely that it will take genuine time for economies to heal, and that any rallies right now would be likely to be based on a premature sense of substantial economic improvements. I feel little doubt that by and large Peter is wrong about both Europe and the United States, for example: even with some "green shoots", one would still expect stagnancy for quite some time. Certainly in those large economies, and Peter produces no evidence of convincing improvements.

Peter Switzer - whose opinions I generally do not respect - was on a post I saw on Yahoo arguing in typical black and white fashion, to the effect that we would not have a double dip, and that THEREFORE markets would go up only. This completely overlooks the third, and to my mind most likely, scenario: one in which markets will go up and down according to varying expectations and guesses, with economies showing self-contradictory tendencies in that some things will be better than expected and others worse.

It is within the nature of the human mind, when it comes to a phenomenon like a share market, to think (if that is the word) in terms of hope and fear. A balanced attitude towards what happens is quite rare: at any time, most people are either bulls or bears. They feel better that way, for they are setting up some sort of emotional security for themselves.

Yet, although these impulses do send markets up and down, often they do so only to a very limited extent. For something like a year we have, despite the April high, most of the time had a market going sideways. One needs to look constantly at the longer graphs to see this, as it is very easy, in the current uncertain situation, to allow oneself to be misled by sudden signs of hope - or fear.

On such evidence as I see, one would have to conclude that there is no clear picture emerging of strong moves in either direction at the moment. To me the negative news predominates, so that I still think a fall, e.g. to a figure below 4000 (on both indices), would be quite on the cards. But undeniably there are also opposing pointers, and they cannot be ignored.

Is this a SAFE time to put money in the market in the expectation that we shall definitely see 5000 or even 6000? I would not have thought so, though - as in April - the market MIGHT be taken up to 5000. I don't see that as very likely, as I believe the negative news is too strong, globally. Or if we went there (to 5000) I'd expect the market fairly readily to turn south.

But I shall not argue that we couldn't, for example, see 4800, or even just a trifle more. But that would be on some recent positive figures, and not really take into account all that's "wrong with the world". However ... it would be not at all impossible that we are due once again for a slight move up, once again to be followed by another one down. I just would not know quite what to "pick" in this respect. Certainly, as my own investments are usually made for a number of months rather than weeks, and for gains of some significance, I do not feel attracted to the market. And I must say that the earnings figures for Australian shares, and the warnings by many companies, greatly put me off. If anything I continue to think of many companies as overvalued rather than anything else. The kind of "basis" for a rise that some see appears to me still very shallow indeed.

(Message edited by Ody on September 13, 2010)


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billt
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Monday, September 13, 2010 - 06:01 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



"The union of the Roman Empire was dissolved; its genius was humbled in the dust; and armies of unknown barbarians, issuing from the frozen regions of the North, had established their victorious reign over the fairest provinces of Europe and Africa.

At the hour of midnight the Salerian gate was silently opened, and the inhabitants were awakened by the tremendous sound of the Gothic trumpet. Eleven hundred and sixty-three years after the foundation of Rome, the Imperial city, which had subdued and civilized so considerable a part of mankind, was delivered to the licentious fury of the tribes”

Just a thought Eugenio?


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ody
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Monday, September 13, 2010 - 06:24 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Bill, - the US

I see the decline as probably one of a whimper rather than a bang: a drawn-out process during which the pampered, self-deceiving Americans continue to live in a state of denial, trying to fix their problems with more printing of money, building up of debt, blaming the Chinese for keeping their currency too low, etc. The odd war seems likely, too. The state of living will undeniably sink, but for as long as they can Americans will refuse to acknowledge that.

What they will almost certainly NOT do is properly recognise what has caused their malaise, and that constant financial games of deceit (of others AND oneself), resulting in more and more bubbles and bursts, should cease to be played if they are to get their house in order. Eugenio does nothing other in this respect than actually half-jocularly state what obviously most Americans essentially feel: that theirs is a nation of riches where money will always be available, and that they are not only entitled to that by virtue of where they are, but are also so different from, and superior to, other peoples that they will always be able to find some "creative" way of enriching themselves. They reinforce this way of thinking and feeling amongst themselves as a community, so that they can all share the myth, and that way continue to reassure themselves, as they all feel the same - so that they must, surely, be right.


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billt
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Monday, September 13, 2010 - 06:52 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



'the licentious fury of the tribes'

yes Ody,

...and they need to fear 'the licentious fury of the tribes' from within...

$13 trillion of US Debt is tied up in the pensions and superannuation accounts of the heart and soul of America - including the Military! Imagine if the Fed 'default' or have to depreciate the debt by 'hyper inflation'. The American Dream will look a lot less appealing.

Hopefully not in our lifetimes Ody - but I have another 40 to go?

Bill

(well written piece of literature - 'the licentious fury of the tribes' - thought that might appeal)


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eblode
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Monday, September 13, 2010 - 08:30 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Ody/Billt,

Fortunately my thick American skin can never be penetrated by barbs and arrows of subliminal jealously of what is and will always be the most powerful and successful leader of the free world.

Eugenio


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cat_lady
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Monday, September 13, 2010 - 09:40 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



if it took rome 1,100 odd years to fall, maybe America has a few good years left in it? maybe. who knows.

eugenio, you looked at ORL? OZL is making me pretty happy at the moment as well. well done on ARP. I have it on my watch list.

cheers
cat lady


Without my morning coffee I might as well be a dog

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ody
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Monday, September 13, 2010 - 10:25 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Eugenio, cat lady, Bill:

1100 is an unduly long period to consider, really, for the fall of Rome in that the actual decline took much less long than that. And indeed, today a decline is likely to be much more rapid again. Certainly America is doing a good job of spoiling its own economy, and its standard of living and ranking among the world's nations has already slipped significantly.

Eugenio: I don't take particular joy in the thought of America's financial decline, but the thought of that country leading the world is already one that in many ways fills me with horror, as the world learns a lot of bad things from it, and the US has internationally caused considerable harm in recent times. You must surely have noticed that American prestige has suffered greatly in recent years, outside the US itself. Even in a country like Holland, which to my mind has been sickeningly and staunchly pro-American for much too long, the US is now often viewed with great hostility and irritation. This, I fear, is particularly due to the presidency of George W. Bush and the decisions which he took. In truth, it should be added that economically Reagan, Greenspan, and Bernanke deserve much of the blame for years of mismanagement. They in essence provided a license for Wall Street to misbehave, and encouraged its criminality by such things as zero interest rates, lack of punitive action, and support provided by taxpayers' money.

Economically, by the way, I have currently considerable respect for the way the new British PM is actually trying to MANAGE that country's economy, and abandoning the Keynesianism which the Americans are still far too ready to embrace. And for which Rudd c.s. have been praised far too much in Australia.


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ody
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Monday, September 13, 2010 - 10:50 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Some of the stocks mentioned: ARP, OZL and ORL

If the market continues to go up, of course all three may well continue to go up.

Fundamentally, I like OZL the least, as, though its earnings are strong and predicted to remain that until the end of the year, for 2011 consensus has Earnings Per Share Growth on only 2.56%, which would imply the need for caution. One might soon go over the top and then down with this one.

ARP is a Stock Doctor star stock, and inherently a strong company, which has moreover a strong position within the industry area where it operates. The predicted earnings, however, are nowhere near as high for the future as they have been.

Of the three, I like Oroton (ORL) by far the most. It still has solid earnings predictions for 2010 and 2011, with EPS growth projected at 18.33% and 12.12% - very acceptable. It should also be stressed that this company has been greatly turned around by its excellent manager. It is a good retailer. The figures remain very sound, with a PEG of no more than 0.57 currently, though that may mean less for the future as earnings - though good - will probably not be as good (going by the projected figures) as they have been. (And it is also possible that the projections are still too positive.) But I like the company and its record. It pays a very strong dividend as well, 5.52% fully franked. I would hardly expect a serious collapse in the business per se. So long as the share price continues to go up this would be a sound one to hold, I must say, and if I were to play the market myself at this stage I'd rather do it with this than either OZL or ARP - particularly because there have been considerable share price rises already. If sentiment were to turn negative, I would expect Oroton to look the most solid and safe of the three.


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billt
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Tuesday, September 14, 2010 - 06:44 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



The US federal government is on track to deliver a record equaling deficit of all time with one month left in the budget year.

Deficits of $1 trillion in a single year had never happened until two years ago. The $1.4 trillion deficit in 2009 was more than three times the size of the previous record-holder, a $454.8 billion deficit recorded in 2008.

Last year's deficit was equal to 9.9 percent of the total economy -- the highest percentage in 65 years.

For 2011, the administration is forecasting a deficit of $1.42 trillion with the red ink totaling $8.5 trillion over the next decade.

The National Debt should therefore explode from $13 trillion to over $20 trillion.

Meanwhile the Fed is busy buying billions of dollars of 6-10 year Treasuries to fund the Deficit – well someone has to!! Keep those printing presses going Uncle Ben!

....overnight I shorted the US market


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market_mad
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Tuesday, September 14, 2010 - 08:37 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Eugenio,

Got home last night and there was a ticket from Australia Post to pick up a parcel - I will hopefully make it there today! Thanks mate the timing is good as we have friends arriving this friday from overseas so we will be sure to give that bottle a good nudge!

Thanks again
MM

PS Hope you are enjoying this rally coz it's just about over!


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peterloh
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Tuesday, September 14, 2010 - 08:49 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Ody,

You have always given an informative an factual posting of what is happening to the US and other parts of the world which is beneficial for most of us. It is not my intention to give doubts to what you said.

In my post, I am only giving an observation that all things may not be as bearish as what some of the economists and some of the posters here made it out to be. I only mentioned that I am hopeful that Europe and the US will recover at a slower pace. I hope that this is not a bear's corner and will not entertain other thoughts. I did not state that US or Europe are doing well and thus did not elaborate or go on to prove otherwise with statistics or facts to that effect.
Last night the S&P 500 traded above the 200days moving average.This may attract longer term momentum traders back to the market, if they have not already done so through shorting the market.The equities market may continue to improve even if economic recovery staggers along.With confidence improving(hopeful) the trillions on the sideline, held by fund managers and others may venture gingerly at least or test the water in time to come.
All is not loss yet as some indicated here.For the last 2 years, I have been long on commodities and continue to do so.Last night commodities price continued to rise which may indicate that demand is still in order. The strength of the ozzie dollar which I am alluring to is due to the strength in demands for our products.If this continue, which I have no doubt that it will not, other parts of our economy will also enjoy this prosperity in time to come.

Cheers

Peter

PS: Warren Buffet gave his view last night that there is absolute no chance that the US economy will relapse into the a double dip recession.


-------------------------------------------------
Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.

The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.

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market_mad
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Tuesday, September 14, 2010 - 09:07 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Peterloh,

Buffett may be right - only because I believe the US never got out this recession in the first place, therefore no need to 'double dip' if you are still in one!

The stimulus artificially propped up the economy and as Bill has pointed out, things in the US are not recovering, no matter how you try to paint it.

Anyone who thinks this is the start of a new bull market, I've got one word for you - JAPAN

Cheers
MM


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eblode
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Tuesday, September 14, 2010 - 09:56 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



MM,
Glad to know that you will have liquid supplies in time for your guests this weekend. Had to laugh that a super trader like yourself is relying on outside reinforcements to accomodate them. Enjoy.

Eugenio


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eblode
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Tuesday, September 14, 2010 - 10:07 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Ody,
I agree with you that the USA has made serious mistakes. No doubt about it.
However in the balance this great power will correct those mistakes and lead the world and itself into prosperity. Looking at the greater picture for Australia and the reason the USA must remain strong is simply this; The only deterrent between 230 million Islamic Indonesians and the empty, wealthy Australian continent 200 miles to the south is the U.S. Seventh fleet. The same fleet that destroyed the Imperial Japanese navy when they had the same idea. Lest we forget.

Eugenio


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market_mad
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Tuesday, September 14, 2010 - 10:14 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Eugenio,

You know what us Scots are like - hardened drinkers!! We'll polish that bottle off just warming up!

Cheers
MM


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peterloh
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Tuesday, September 14, 2010 - 11:05 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



MM,

Japan is a complete different situation. I was surprised no one has ever brought this point up yet. Japan completed its own development and industrialization in the 1970s. I was aware of this because the company I was with had several joint ventures with them. They exported almost all their industries from the early 1970s onwards. The countries that benefited are Taiwan, Singapore, Korea, Malaysia, Indonesia and Thailand and more recently China. They retained the heavy industries, vehicles and mainly the IT industry. Even most of the vehicles are now manufactured overseas.They manufactured all the other products overseas and shifted all their plants and equipments just to increase the profitability because of the lower cost base.Although they don't have many industries left in Japan, they still owned substantially all these companies overseas.Thus they are able to retain their wealth. The strength of their currency is an indication of the reserves they have.

Can you also enlighten me MM, that you said the States is still in recession,how come their GDP is about 2%? Is the high employment rate a definition of recession? Whenever there are opposition parties, there is always a chance that they will talk down the economies, and that include the hedge funds and some of the "shorters" because of their interest to do so.I have no doubt that lacking in confidence is something which is not easy to overcome for the US especially they had several bad incidents which include September 11, sub-prime, banks not lending to each other etc.
I am in accord with Eugenio, that the US managed to benefit from all these smart people after the second world war and they always have a way to get out of trouble and made their country a nation of strength.
I wasn't even implying that Europe and the States are doing well, but I am surprise by the sensitivities by suggesting I am only "hopeful" that they are recovering.

Cheers

Peter


-------------------------------------------------
Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.

The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.

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ody
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Tuesday, September 14, 2010 - 12:52 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Peter Loh, - Japan

The way I read MM's message is not that he is comparing Japan with China, but is setting it up as an example of a country that despite many hopes and attempts to get itself out of trouble has now been in the doldrums since the last major crash, the one of 1987. In other words, there is no guarantee that a once great economy (like that of the US) cannot decline, or at least grow stagnant. Japan lived in a similar state of denial as to its true condition as the US is doing now, and, again as the US is doing, failed to tackle its problems at source. As a result, it is now in a state of comparative mediocrity, and it is truly hard to make money on its share market. Just in the same way, many who have studied both economies fear that the US may go down the same path and decline.

China of course has still got terrific growth in it. Recent figures there have once again amply shown that, and they are no doubt a current incentive to global share markets. There is not much evidence that Europe and the US are doing well, but China does now once again to many look like a beacon, and it - virtually alone - seems to affect investment sentiment strongly. However, there are risks. China appears to have come to a soft landing after the brakes were put on, but once again growth is picking up very sharply, and unfortunately that brings with it the risk of inflation. And that is an ongoing problem: if inflation increases, the government must once again put the brakes on, and so on, and so on. It is not a simple matter.

And the problem re China is aggravated by the slow growth (or decline) in other countries, including major ones: there just is, therefore, undeniably a two-speed division in the world economy, with China and some countries dependent on it growing, and others failing to do so. Unfortunately this continues to set up problems and dangers.

For the moment, because of favourable Chinese growth figures, markets might well go up a bit further. However, both Europe and the US ARE in trouble, in that at the least growth will be slow, and this will greatly impede progress for economies and investment markets globally.


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ody
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Tuesday, September 14, 2010 - 01:02 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Eugenio: US

What guarantee is there that the US WILL correct its mistakes? So far I see more evidence of its doing the wrong things in relation to its problems - in particular in repeating failed policies and not going down a radically different paths. (I am referring to economics, but its attitude in foreign policy does not strike me as markedly improving either.)

You say that to protect Australia against assault/invation, the US MUST remain strong. I would say it would perhaps be good if it WERE strong, but that is quite different from the assumption that it can continue to be so: its debt is now so huge that it cannot continue to increase its defence/attack operability to the same extent as it has done in the past. Indeed, it has nothing like the kind of money it once had to do many things that ideally it should/would do.

There simply is no guarantee that a strong nation will not decline. Indeed, history is full of that happening almost as a matter of routine. Strong nations tend to become such things as complacent, less efficient, corrupt, self-indulgent, un-enterprising, inclined to underrate competition from others. Rome is merely one example. The rise and decline of nations is a much-studied phenomenon, and it appears few nations remain consistently strong.

I'd bet that, even if in ways we might not like and might possibly be erratic, China WILL be strong. I'd not place the same bet on the US.


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eblode
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Tuesday, September 14, 2010 - 01:37 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Ody,
Where we essentially disagree is that you feel that America cannot continue to spend millions and billions indefinitely. To you it defies logic that a nation can continue to spend, and spend, and spend. I on the other hand have seen with my own eyes such sheer extravagance and waste by the United States that I finally realized that there is no bottom to their wealth. Simply no bottom. This is perhaps a difficult philosophy to conceive. During the 2nd world war Henry Kaiser was in charge of ship building for the war effort. He produced the Liberty Ship. It was a large freighter, complete in every detail. The work began on Monday and continued 24 hours until Friday noon. By then a complete ship was built from stem to stern, This ship then was placed in a convoy and sent to Europe with tanks and material. The government only intended for this ship to make one successful voyage and then it was either sold to a foreign power or maybe torpedoed in the convoy. The US government couldn't care less. In 1952 I was given an assignment as a radio operator to join the SS William Tyler, a Liberty ship in "mothballs" since 1945 and ship grain to India. When I arrived in Delaware, in Chesepeake Bay, I saw 450 vessels chained together, side by side for miles, all covered in a tarpaulin material awaiting a new war or a new government program. Try and figure what this cost and for all I know those ships are still there. Another example is a friend of mine was the "moral officer" aboard the 7000 crew air craft carrier "Ronald Regan". His job was to ask each crew member what his hobby was. Painting, photography, you name it and then within 3 weeks that crew member got his gift from "Uncle Sam". And not a cheap paint set but the best money can buy. We petty mortals just don't have the mental capacity to visualize such sheer wealth. Just go to Pima Arizona and see thousands of the latest fighter planes lined up 100 in a row for miles and miles on end. It's mind boggling. So don't worry about the USA ever running out of money, it's a bottomless pit.

Eugenio


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ody
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Tuesday, September 14, 2010 - 01:45 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Some interesting material from The Daily Reckoning

This is only a part of a much longer piece, but it relates to the state of America, etc. Interesting, I can guarantee. One thing I particularly like is that - as I have done so often in recent years, to the annoyance of many - they warn about having undue confidence in Warren Buffett as an investor for our times. Readers here are probably aware that Buffett has recently suffered considerable losses, and shown some serious misunderstanding of the present economic world.

Anyway, here goes:
---------------------------------
--One thing your editor notices after being out of contact with the financial news for the better part of two days is that most financial news is rubbish.[xxx - work out the reason for this break, Ody!] It doesn't matter much, at least when it comes to be the big underlying themes moving markets that we like to discuss here at the Daily Reckoning.

--For example, once we were able to log on to the World Wide Web at our hotel on Maryland's Chesapeake Bay, we learned from Bloomberg that Warren Buffett has ruled out a double dip recession in America. Gadzooks! Somehow, while we were sleeping over the Pacific, America became a command economy subject to the whims of Warren!

--Buffett, in his role as aloof spokesman for a bygone era, said, "I am a huge bull on this country … We will not have a double dip recession at all. I see our businesses coming back almost across the board."

--All of that is interesting. But only some of it is relevant. Berkshire Hathaway's shareholders would be more concerned with the actual performance of its units than how Buffett feels about America. But to the extent that Buffett himself has become a brand (cliché), then exuding confidence about future profits is probably part of his job.

--Buffett being bullish on America the brand may be an example of generational attitudes.
-----------------------------------------------------
I say Amen especially to that last statement. Buffett's dogmatic confidence in the US, which you, Eugenio, seem to share, even if you are partly playing the role of "enfant terrible", IS that of a previous generation which has never considered that America is NOT invulnerable. And NOT destined to greatness and recovery at all times. He obviously greatly underrates the problems the US is facing, which are EXPONENTIALLY LARGER THAN ANYTHING HE HAS EVER SEEN.


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ody
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Tuesday, September 14, 2010 - 01:52 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Eugenio: "bottomless wealth"

There simply IS, quite factually, no such thing as bottomless wealth for ANY nation. You are, quite frankly, simply deluded by appearances to the contrary. Money does not grow on trees, there is a limit to what even hard work can do, and there are limits to what can be found in the soil. The US is in this respect subject to just the same limitations, even if on a large scale, as any other country. It is not superhuman, it is not something that operates outside the laws of nature, and it is not something that any higher power could or would single out for undeserved protection. You merely kid yourself with some kind of superstition if you ignore these simple facts. The trouble is that many Americans do just that, which can only hasten the country's decline.


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billt
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Tuesday, September 14, 2010 - 02:43 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



The Irrational Optimist

"In the second century of the Christian Era, the empire of Rome comprehended the fairest part of the earth, and the most civilized portion of mankind. The frontiers of that extensive monarchy were guarded by ancient renown and disciplined valor. The gentle but powerful influence of laws and manners had gradually cemented the union of the provinces. Their peaceful inhabitants enjoyed and abused the advantages of wealth and luxury."

It is this ‘abuse of the advantages of wealth and luxury’ which underlines the concern for those that live beyond their means.

America needs to take a reality check – spending trillions of dollars per year more than they have will end in tears. It simply is not sustainable.

I really did not understand the ‘irrational optimist’ viewpoint – today I learnt something new!


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market_mad
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Hi Ody,

Thanks for the explanation to Peterloh - that is exactly what I was getting at. I wasn't comparing Japan to China at all.

Eugenio, I feel you are somewhat disillusioned with the US and their 'bottomless pit' - not sure if it is because of the patriot within you or not. Their day of reckoning is coming, it may not be this year or next or even 5 years but it will come eventually. As Bill quite rightly put it - it is simply not sustainable.

Cheers
MM


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ody
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Tuesday, September 14, 2010 - 05:07 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Opposing forces in world share markets, and their causes

The Australian regularly publishes material from The Wall Street Journal, and today's page 23 gives a good idea of what people's concerns currently are. Broadly, they divide into distrust of the US and Europe (as well as Japan),and a degree of (cautious) faith in China and emerging markets. Simply put, investors expect the "old economies" to go on performing badly, and China and (other) emerging markets to make far more money, although not with a guarantee of safety.

(1) An article on the US starts as follows:

"Two years after Lehman Brothers collapsed into bankruptcy, the impact of the financial crisis can be seen on almost every market around the globe.

"The preference of investors for reliable income streams from bonds of all types has led to big rallies in both safe-haven U.S. Treasurys and risky "junk" bonds, even amid a chorus of warnings about a "bond bubble."

"But many stock markets, most notably in the U.S., haven't reclaimed losses suffered since Lehman filed for bankruptcy on Sept. 15, 2008. The Dow Jones Industrial Average remains more than 900 points below its pre-Lehman level.

"U.S. financial stocks, at the epicenter of the crisis, remain nearly a third lower than where they were two years ago. And, since August 2008, investors around the world have pulled $203 billion out of developed-market stock funds, according to EPFR Global. That is 8.5% of the $2.4 trillion in developed-market stock funds at the time.

"Instead, investors are gravitating toward emerging markets. That isn't because they want to take on risk. Those economies, with lower debt levels and strong outlooks, are now seen as having taken on the role of driving global economic growth from the developed economies."

(2) Meanwhile Geithner still "does not get it" and feels the US should continue to try and spend its way out of trouble:

"Treasury Secretary Timothy Geithner says Washington is at risk of undercutting an already sluggish economic recovery if it fails to provide quick, additional support to business and individuals. . . . He urged Congress to take up the White House's recent proposals to give tax incentives to business and fund new infrastructure projects."

(3) But elsewhere on the page we see where the real action is and from what source the new optimism in investment (currently) arises:

"China's major economic indicators picked up in August after slowing for several months, data issued over the weekend show, an unexpected rebound that could help prospects for global growth.

"Industrial production, a major gauge of overall activity in China's manufacturing-driven economy, was up 13.9 per cent from a year earlier in August, accelerating from 13.4 per cent growth in July.

"The figure was well above market expectations, and reversed - at least for the moment - recent months' gradual slowdown from the 20.7% per cent pace of the beginning of the year.

"The positive news from China contrasts with the loss of momentum in other major economies ..."

---------------------------------------------------------
Major questions for investors in Australia, as I see them:

(i) Do I expect the US, Europe and Japan to go on performing poorly (both economically and in share markets), even allowing for volatility, over the months and probably years to come?

My answer: in large measure, and over time, YES. (Not necessarily eternally, but most likely for several years.)

(ii) Will, if the answer to (i) is YES, China and (other) emerging markets, including also a China-dependent country like Australia, perform better, at least economically, and plausibly in their share markets, than the "old" economies?

My answer would be a qualified YES. Economically, I think there can be little doubt that, certainly over time, they will, though there will be hitches, particularly because China will at times inflate, then put the brakes on and thus reduce growth, so that zig-zagging (in the popular sense of the word) can be expected in both China and China-dependent countries (including Australia). This will lead to rather unsettled share markets, but those very tightly tied to China, or which are otherwise "emerging", such as Brazil, will probably economically outperform overall, and to an extent also in share markets. However, not too much should be expected, as all of these countries do, still, depend greatly on the US, Europe and Japan, and will not perform in isolation. That is the major qualification, along with relative lack of financial expertise in less well-developed nations. Australia, notably, still looks much to the US for guidance, and a bad performance in the US share market will, at least in the short to medium term, not fail to make a mark on Australia's share market performance. However, over time the "new" economies/markets (including Australia) will probably TO AN EXTENT "decouple". In Australia's case that should be facilitated by its strong relationship with China, although China itself cannot totally decouple either, as it is dependent on the "old" world for much of its exports.

(iii) Should one's investment strategy be influenced by this situation?

My answer: definitely YES. Investment in the US, Europe, and Japan should be largely avoided, unless and until really STRONG evidence emerges of a GENUINE change there. It will not be good enough to go by shallow "recoveries": there needs to be evidence of these countries truly getting on top of their problems.

On the other hand, over-enthusiastic confidence in the share markets of China and other emerging countries (including in part Australia) should also be avoided, as they cannot "go it alone" without the "old" world, and have a number of shortcomings of their own. For example, China is still not a well-developed financial market for investment, with immature share markets. It also does not have a democratic government. Australia is an insufficiently diversified economy, which is too dependent on raw resources - though it does have financial maturity and systems, and is a democracy.

(iv) What, then, in practice might an investor do, assuming that at this moment one finds real estate too expensive to be likely to go up much further?

Answer: I think this depends significantly on the risk profile and temperament of the investor. I believe that for people at ANY age investment solely in ANY share market at the moment is risky indeed, as there are so many uncertainties. Nevertheless, if I was young, and earning a good income, I might well invest 30% or so in shares. These would for the most part go into emerging markets, including China, through the most capable managers I could find. I would at this stage still invest little in Australia, as I see too many uncertainties there, but I would keep about 10% or so of capital at the ready to go into the market here at a better time. For the years to come, as they look at present, I think that 40% investment in shares should be the absolute maximum, as, with the "old" world being what it is, we cannot go into a global bull market. But 30% or so in emerging markets might well prove quite lucrative, even from here on. I go back here, mentally, to what I did during much of the 80s and 90s, when investment in the "Pacific Basin" was very profitable. I think that share market investment currently is VERY MUCH A MATTER OF PICKING THE RIGHT COUNTRIES. Nevertheless, investment in emerging markets (which I favour) is not "safe", so one should be prepared to go in and out depending on the prospects for these markets. Overall, though, I am fairly bullish on those (more so than the "half-emerging" Australia).

With 10% to be kept ready for Australia, I would place - even if young - 60% of my capital in deposits and similar fixed interest investments, as I think these will - particularly in Australia - do well, and have a much higher level of safety than shares. My strategy would be to use the fixed interest for both safety and ongoing growth (rather than income, of course) through the receipt of the cash flow, which I'd keep re-investing (as I'd live on what I earn). I'd structure virtually everything I could into a superannuation structure, for tax reasons. Even though super may be tinkered with, it is likely to remain the most tax-sheltered environment.

As an older man who does not need to invest in any share market and is making significant money on significant capital by using fixed interest, but is no longer in the work force, I am coy about share markets at present. However, I cannot deny I am beginning to look with more seriousness at emerging markets (not so much Australia, and certainly not the "old" world). However, I think it is STILL very likely that we shall see considerable underperformance in most of the world, and that that will impact on China and other emerging markets as well: so I intend to wait, even if that means missing out on possible upside. If once we see the kind of improvement in financial management that the "old" world needs - and particularly after market falls there which I still expect (I see Greece etc as a timebomb, along with the US) - then I'd probably invest 10-20% in emerging markets. I might, of course, also include Australia at that point.

I would not wait for ALL "old" economies to embrace better policies, but want to see (a) necessary falls in assets and acknowledgement of debt problems, and (b) a shift in direction whereby Keynesianism is abandoned, saving becomes acknowledged, and debt largely eradicated. So long as that does not happen, I am not going to invest money in the share markets of countries which do not embrace these principles, and that in part includes Australia, with its absurdly large amount of private (not public) debt.

I think one reason why Asian countries will win out is that they have, still, a strong sense that money needs to be earned, that debt should be restricted, and that money needs to be saved so as to act as a buffer against difficulties, as well as for future investment. In Europe Germany, particularly, has this sense too, and I like that as a potential investment, but, alas, it is part of Euroland. The introduction of the euro is to my mind one of the most serious European economic blunders since WW2. Without that, Germany and other countries would almost certainly have left Greece etc out in the cold, as should have happened: now, Germany has taken on the bad debts of defaulters.


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ody
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Wednesday, September 15, 2010 - 10:47 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



An interesting analysis from Greg Peel (FnArena)

It seems a good piece. At at the end of it all he in effect explains WHY gold went up quite a bit last night, and why it might be in effect the main thing people might unite in feeling positive about. I am not sure how long THAT will last either, as the whole essay makes plain just how intricate and indeed confusing and variable the various current thoughts of investors are.

I must say that I am happy to have deposits etc which give me a known rate of return - either completely known or sufficiently stable for me not to have to worry about all sorts of intricacies of the kind that Peel describes. And I am prepared to stay with the Aussie dollar, too, as this is where we live, and I find the various currency moves too hard to pick. Gold, too, for that matter, can go up more than down, but also vice versa - and it has no yield. A chief reason for buying ETF GOLD, on my part, would have to be that I think I can pick the currencies, and I am not sure I can or want to try to.

All in all a very unsatisfactory scene. What a lot of convoluted moves to read about, below!
------------------------------
The Overnight Report: New High For Gold
FNArena News - September 15 2010

By Greg Peel

The Dow closed down 17 points or 0.2% while the S&P lost 0.1% to 1121 and the Nasdaq rallied 0.2%.

On any given overnight session across the globe it is usually straightforward to see how the pieces of the puzzle fit together – to understand relative movements in all of stocks, bonds, commodities and currencies. Last night, however, a confusing muddle was the end result. We might start by noting the Dow was down 45 at 10am, up 45 at midday, square at 2pm, up 40 just after 3.30pm, and down 17 at the close.

Ahead of the bell, Germany had announced that its monthly ZEW survey of analysts and institutional investors showed a drop in the sentiment index from plus 14.0 to minus 4.3. That's the fifth month of falls but the second in a row which has gone against economist expectations.

Yet one might argue that the result is no shock. Europe is in the grip of forced austerity measures, sovereign debt issues still hang as a threatening cloud, and while a weaker euro provided a boost for German exports earlier in the year, the euro has now recovered substantially.

One might assume the euro would then fall on the ZEW result, but instead it was up 0.9% to US$1.30. Any weakness suggested was actually swamped by selling in the US dollar.

The selling in the US dollar was sparked by the release of the monthly US retail sales results, which showed a rise of 0.4% compared to expectations of 0.3%. This was the second consecutive gain and the biggest jump since March. Sales ex-autos rose 0.6% compared to a 0.4% expectation.

It was supposedly another nail in the coffin of the double-dippers. And the retail sales release was backed up by the release of July business inventories and sales, which showed gains of 1.0% and 0.7% respectively, also ahead of expectation. While inventory growth remains ahead of sales growth, the gap is not yet widening.

If the US economy is not going to double dip as previously feared, then logic would assume that's a positive for the US dollar. But that's not how it works in today's world. With a cash rate near zero, the greenback is the carry trade currency of choice into risky asset investment. Good economic news thus means US dollar selling, and last night the dollar index was down another 0.8% to 81.21.

Weakness in the dollar was supported by another new 15-year high in the yen – the previous carry trade currency of choice. The risk currency of choice – the Aussie – jumped another 0.4 of a cent to US$0.9396.

Strength in the Aussie implies strength in commodities and commodity producers. But investors be warned that pretty soon stock analysts are going to upgrade their 2010 average Aussie dollar forecasts, and resource stock earnings forecasts are going to be downgraded as a result (unless commodity price and volume forecasts are equivalently upgraded, but that's all up to China).

So the currency movements are telling us that last night the world was embracing risk again. But such an embrace would usually translate into gains in stocks and commodities and falls in bonds and other “safe haven” assets.

Yet the US stock market was slightly weaker, and the US ten-year bond yield fell another 7 basis points to 2.66%, meaning bonds were heavily sought. And while gold will find support in a weaker US dollar, easing fears of a US double-dip might otherwise restrain that buying. Yet last night gold jumped US$23.70 to a new record nominal high of US$1268.70/oz.

Why? Well on the bond front, the suggestion is the ten-years were sold too sharply earlier in the month on “bond bubble” fears and that the buyers are still happy to support low yields rather than try their hand in the stock market. But then there was also a report out last night from Goldman Sachs.

Goldman Sachs speculated in its report that the Fed would be forced to step up its quantitative easing (meaning kick start QE2) as early as November with some US$1 trillion of fresh Treasury bond purchases to reinvigorate the post-stimulus economy. This is not a lone opinion in the woods, but recent more positive economic data have suggested the Fed might not need to intervene, given the Fed has stated it would only launch QE2 were conditions to “deteriorate appreciably”. Last night's retail sales result adds to the positive data.

A cynic might suggest Goldman Sachs actually runs the US Treasury, and either way such speculation in isolation would be enough to send the US dollar south and gold north on monetary inflation fears.

What do “real” commodities do amidst all this? Square up mostly. Oil was down US39c to US$76.80/bbl following strong recent gains, and base metals were mixed on relatively small moves in London also following a bit of a surge.

So how does one put all this together?

The S&P 500 is now sitting at its 200-day moving average once more following a good rally – a level it has failed five times to breach since May. Volumes remain pathetic. While a double-dip may not seem as likely as it did a month ago, investors are still favouring bonds over stocks. There remains a sufficient interest in emerging market investment (with the Aussie as a proxy for such) but there also remains a great deal of uncertainty. Double-dip or not double-dip, the speculation is that the US will have to re-stimulate, both fiscally and monetarily, to have any chance of reducing unemployment. Add it all up, and gold seems like the safest and most sensible place to be.

The SPI Overnight lost 10 points or 0.2%.

It's consumer confidence day in Australia today and industrial production night in the US tonight.


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jaded
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Wednesday, September 15, 2010 - 01:07 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Ody,
Would you do a Lincoln Check on Clover [CLV]?
It's recently divested itself of some dud enterprise while announcing 'great' profits from another division.

Chartwise CLV is nearing break out of a few months consolidating position and may be going into All Time High Territory,at least for the last 5 years.{I've got some glitch,settings writing so I can't do a chart at the moment]

Anyway,Clover is Wash Soul Patterson and I'm thinking that this Divestment and "Good" Profit Forecast may/should give it a Lift.
It seems CLV is in a Recession Proof Business as well.Food Additives/Omega or something.I'm not too keen on such a Sector but CLV may be a Leader,Efficient and could be 'worthy' of Long Term/DIY Super consideration.

It pays dividends once a year presently but maybe this new business,profit forecast etc could Increase Dividend Pays?
Especially with Wash Soul voting for cash flow into their 'action' ie actively advocating increasing Dividend Rate.Of course Div Increase would enhance Capital Gain/price increase.

So Ody what does the Doctor say about CLV getting a pilgrim to Mammon in clover?


" Hear what you Say...
But see what you Do!"

Sir Zelman Cowen c 1970.

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billt
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hi Ody

Your post 5368 made very interesting reading.

The conclusion you have come to is not that much different to my own.

Going 'long buy & hold' on any market for any length of time is fraught with problems in the face of world wide economic uncertainty.

One point of difference though, I am not overly convinced on the Emerging Market idea - not for a long 'buy & hold'. If you look at the MSCI Emerging Markets Index it has followed the US indices fairly closely over the past few years. MSCI Emerging Markets Index has contained within it the best companies within China 18%, Brazil 17%, Korea 13%, and India 8%, who rely heavily on a healthy World Market to maintain their strength. For the Emerging Markets to head off in another separate direction to the rest of the world is difficult to see.

The only solution I see is to trade the rallies or corrections as best you can. The days of 'buy and hold' in any market are over - at least for the time being. 'Long' the best, and 'Short' the worst, and don't be greedy!

If you choose not to trade, fixed interest is the obvious choice. The risks there have still not evaporated: will the financial institution still be there in a melt down; or will the asset become 'illiquid' in a credit crisis! What many think as a 'safe' option, may be the riskiest of all!

With the debasement of the Fiat Monetary system, I do not discount that holding physical gold bullion for the long term is such a crazy idea. Cash a bar in when you need to! It is a 'Middle Age' concept - but perhaps the only one that will maintain your wealth. If you did that 5 years ago you would have doubled your money. In 2015 I bet you will be able to say exactly the same....in any meltdown the shiny bars will still be there!

Interesting piece Ody, as it made me revisit my investment strategy - hopefully it made others do to!

I continue to 'short' the worst - US markets, and 'long' what I see as the best - gold. I am selling all my residential property, but not my yacht!

cheers

Bill


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ody
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jaded: Clover

Thanks for the message, jaded. I did report favourably on this stock before (being aware also, of course, of the SOL connection which we like). However, I think that may have been a few months ago, and I shall look at Stock Doctor right now for the latest I can find there (latest update being yesterday 6.00 pm).

Actually the figures tend to be far less straightforward than I thought. EPS growth as recorded for the year to June 30 was MINUS 131.55%. Stock Doctor reports:

"CLV remains in a position of Strong financial health following analysis of the company's latest annual results. Weakness on its profit statement was offset by strength of its cash flow statement and balance sheet. The company is exposed to manageable levels of financial risk and it is able to satisfy Golden Rule No. 1 - Financial Health. [It is classified as "Strong", - Ody]

"Net operating profit before tax and significant items has fallen from 4.468 million in the previous corresponding period to $1.567 million. Return on assets (ROA) has fallen from 14.15% to 4.94%. Pre abnormal Earnings per Share (EPS) fell from 1.87 cents to -0.59 cents. This translates into EPS decline of -131.55%. As both ROA and EPS growth are below 8%, the company fails to meet Foldne Rule No. 2 hence it cannot be considered for Star Stock status."

Hmmm - not encouraging. No EPS growth is forecast for June 11, but 36.36% is mentioned for June 12. There is no PE or PEG mentioned (no doubt too difficult to work out). It is supposed to pay a good, and growing dividend which is fully franked. Trade is extremely thin, which might mean that this is a time to pick it up if noone else wants it, but would also suggest it would be hard to sell. The market cap is close to 50 million.

A reason for buying the stock would be, in my view, evidence that there is a strong turn-around occurring, or due to occur, in the negative figures.

You have looked at it with some real care, jaded, and will therefore know what to do. I can only produce these figures and make one or two very superficial comments. I must say I am surprised by its seeming misfortunes (or faults?). As far as I can see right now I would not buy, but there may be special circumstances of the kind you refer to which augur well for a shareholder.


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billt
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hi again Ody

One issue I forgot to add to my previous post: CHINA

Although one could easily promote a 100 year onward story about the growth of China, I still find it difficult to support an investment strategy around a country that has a closed system, an undeveloped financial market, a poor legal system, an undemocratic government, and a land full of potential internal division & strife.

China's Industrial Production was greatly effected during the GFC (see year on year graph), and I worry that it will turn south again if the West enters another crisis.

Putting all your eggs in that particular basket is also problematic....still, its about the best we have at the moment, which just about sums things up!

Bill






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ody
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Wednesday, September 15, 2010 - 03:36 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Bill - investment view

[Additional note re your post on China: rest assured that, of the 30% or so that I would probably as a young man expose to emerging markets, China would only get a portion. I see it as a pretty dangerous place, as you do, so would favour a spread of Asian (and other) emerging markets rather than undue emphasis on just China. If I had to invest a million dollars, even, in either China or Singapore, it would go into Singapore. As it happens, I could invest a million in either, but it is going into neither!! My key reasoning is this: (a) most of one's money should NOT be in share markets during a wobbly period for the global economy; (b) if one does look for growth through investing in business life, then that is most likely to be found in emerging markets, with a strong emphasis on Asia - in such countries as China, India, Singapore, etc. I might well, even if I was young, still wait before moving into these markets: but I think that they are the ones where money will be earned, rather than those that are heavily dependent on debt, stimulus, and zero interest rates.]

We aren't that far apart, really. I can even see the argument for gold, but actually it has had quite a bit of volatility at various times, and one does have to take into account currency factors. I am somewhat of an agnostic, for that reason. But I am certainly not hostile to gold, for all that, as some are.

As for emerging markets, I should perhaps explain that I am NOT, and never have been, a buy-and-hold buyer. There ARE stocks I have kept for long times, occasionally. I held BRL Hardy, when that was still an independent public company, for something like 8-10 years, as it never failed to inspire me. This was during a very good period, not just (much of the time) for shares, but particularly for this company: Australian wine was just beginning to be of interest in the UK etc when I bought the stock, and BRL seemed just the company to ride that market - and so it amply turned out. An exceptionally good little company, of the kind I REALLY like: very transparent fundamentals, and a top-class manager. Operating absolutely in the right area, too.

But in general I am what Rudy would (I believe) call a swing-trader. That may be as good a word as any. I am in fact OPPOSED to a buy-and-hold strategy in the share market, as I think that is much too dangerous: one will inevitably see a significant decline in the capital one carefully builds up in a bull market. I believe very strongly in trying to be IN the market during a bull phase (even accepting corrections), and mostly OUT during a bear phase, unless there is a very strong rally (as we sw during 2009), when I believe one should be back in with PART of one's money (in a bull market I expose MOST of our capital - or at least have done so far, since 1983, when I started).

So when I advocate emerging markets, it is NOT in the belief that they cannot horribly go down: they can, and do - I have gone through such patches with them in years past, here and there (particularly when I was less hostile to buy-and-hold than I am now - but those markets kept coming back up, so the policy, at the time, wasn't bad!).

As things now stand, my ONLY point in favour of holding any shares at any time is that there are periods when they go up in value, and that is the time for holding them, then. One exits the market when wealth destruction is a real threat. In bear markets I am not concerned about missing out on the odd share that does go up, or on minor rallies. Protection is my chief concern. In bull markets it's a matter of taking advantage of predominantly positive sentiment. So, I am on the whole greedy when others are greedy, but leave them while they are still greedy, as otherwise their greed will harm me when it turns into fear. While others are fearful, I am EXTRA fearful, and I will only expose significant capital in a bear market when a rally is unequivocally strong.

Can I time these events? Not with 100% accuracy, but certainly - and easily - well enough for the method to work greatly to my advantage.

I do NOT - to be quite clear - believe that emerging markets will not be volatile. I do think, though, that all in all they will be much better than those in Europe, Japan, or the US. And I imagine you would agree with that, if one gets the timing right.

As for residential property: I think you are right to sell, though I am not sure we'll see a big fall, which would be unusual in Australia; and there is little evidence of people defaulting (as yet). More typical would be a period of up to ten years with no price rises, which in itself would mean that this is a bad investment market. So even on that basis alone you are no doubt doing what you should. IF the market went up much more, it would truly set itself up for a big crash, for there are good arguments for seeing it as strongly overvalued even right now.

With respect to financial institutions: I am not greatly worried about major Australian banks, though I would certainly not buy NAB as a stock, and am not keen on the others either as companies to invest in on the assumption that share prices will go up. But I think they (ANZ, CBA, WBC) will survive, and would do so even without government support, in our economy. In any case, even if that is wrong, governments WILL support them as far as deposits are concerned - I feel no doubt about that, and Australia, in contrast to many other countries, does still own quite a bit of public money, despite very bad government during the last three years.

Interest rate securities, which I also hold, are not as safe as deposits, though not, I think, hyper-dangerous either, if e.g. from CBA or WBC. But I do watch these, and keep an eye on the health of the banks also, for sure, as far as I can do so (it's not an easy task).

But I cannot just live on gold. Nor can anyone else, which is why I am reasonably confident about the money I have sitting in banks or invested in their notes!

Incidentally, I can still see a good argument for not buying ANY shares, including those in emerging markets, and for anyone, at any age. But probably, if I were young, I'd put some money into emerging markets, perhaps even now, with most of my capital still in cash plus fixed interest to protect myself should any of those markets blow up. But for the most part, I think that the economies of Asia, notably, outside Japan, are fundamentally strong, so that although shares would prove volatile, they are ultimately better countries to buy them in than those which are addicted to debt and self-indulgence. In other words, I'd worry less about getting ruined than if I placed my money in e.g. the US. The mentality of people in a nation like Singapore, for example, is a business mindset which I see as one of proven competence and security, while I see the US as increasingly incompetent and reckless.

(Message edited by Ody on September 15, 2010)


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jaded
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Wednesday, September 15, 2010 - 03:53 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



thanks for that,Ody re Clover.
"Skim Reading" the news it seems Revenue/Profit went UP but they 'chose' to do these write offs/book entries on an underperforming Division.Loans to this mob were written back along with last years Capital Loss etc blah these things can make my head hurt untangling them.

Bottom Line is Cash in Bank Increased to now $12mil[very respectable for a $50mil Market Capper]and it seems Management is very positive of Further Growth[as is to be expected and believable in a Wash Soul 'auspiced' company]

Anyhow,I'm getting a whiff of Turnaround Company that may weather any double dip whatever.I'll do some more 'research'/develop some scenario angles and open a new thread on it in Long Term later.
Anyone interested in Buying instead of shivering with fear of we all should be ALL CASH or Gold?See you in Long term.


" Hear what you Say...
But see what you Do!"

Sir Zelman Cowen c 1970.

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ody
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Wednesday, September 15, 2010 - 04:42 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Bill: All Ords vs Straits Index

There is no doubt that both are volatile, and when markets collapsed in 2008 and for a little longer, the fall in the SES was somewhat bigger, at the bottom, and from a greater height, than with the XAO. But - and this is my point - the rise for the SES since that fall has been SUBSTANTIALLY bigger than for the XAO, and to me this reads like confirmation of greater faith in the SES, with Australia temporarily having a glittering economy, but one that people know to be thinly based, and in many ways not well managed by our Labor government.

I do not mean, however, that the SES would not go down in the event of a significant international sell-down. But I do think the economic prospects are probably better, or at least more secure. Singaporeans work extremely hard and effectively, and are in a wonderful strategic position to take advantage, in much the way that Venice did in the 15th century, to take advantage of international trade, much of it sure to be within the region where Singapore occupies a central position. By comparison, we are actually a quarry to be taken advantage of, and as the minerals get sold, one way or another, we eventually get poorer. Similarly if their prices go down.


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paint
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Thursday, September 16, 2010 - 08:56 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi MM,

Re your recent post on EWW regarding SPI.

Am I right to conclude that this buyer is going to be left with a mountain of stock (I'm guessing index moving stocks) that could hit the market after 10:10 today?

Also - where do you get your SPI data ie volume, open interest etc.

Cheers


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billt
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Thanks Ody for your detailed response.

I did slightly misunderstand your earlier posts.

If and when I feel confident to ‘swing’ trade to the north the MSCI Emerging Markets Index (China/Brazil/Korea/India) is one which I would be prepared to run with for a bull run, on the basis of an ‘outperform’ viewpoint.

I have an ETF in mind to trade the next sustained rally (EDC Daily Emerging Markets Bull 3X Shares) which will rocket along. Despite the inherent ‘emerging’ nation problems, China, Brazil, Korea, & India at least respect the fact that you have to earn a dollar and not just print one!

Singapore is definitely a great choice too.

Cheers

bill


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ody
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Thursday, September 16, 2010 - 11:14 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Bill - economies

We clearly have virtually identical ideas on how they should, or should not, be run, so inevitably we ultimately come to the same conclusions as well. AND we share the idea that buy-and-hold is in general NOT a good policy. So our consensus is logical!

I meant to say that Korea is also a great little nation that I'd be keen to support. Of course there is a political risk, but probably not a really serious one, and they are a class act in what they are producing.

As you say, these nations still realise that money has to be worked for, not just printed. The Americans are apparently just about to print more again, and their dollar is falling further as a result. This is something to be remembered about ETF GOLD, I think. Our rise against the US$ is in part a matter of it sinking, and gold, I feel, is also in part strongly bought to protect against a fall in the AMERICAN dollar. In a way the metal is probably better than ETF GOLD, so as to eliminate at least some of the currency problems.


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market_mad
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Thursday, September 16, 2010 - 11:50 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Paint,

No the buyer gets the closing print price on the Setp contract which was 4676 - the highest point it got to. So that buyer will receive cash settlement for all the contracts he purchased. He isn't left with a mountain of stock - instead left with a mountain of cash!!!

With the futures market - if people buy (or sell) the SPi it moves the cash market and will trigger buy or sell orders for stocks from the instos. So a large player in the futures market can move our ASX index with relative ease.

I don't have access to open interest etc on the SPI, but I do get volumes through webiress

Cheers
MM


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billt
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Thursday, September 16, 2010 - 12:09 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



hi Ody

Your point on Etf GOLD is well understood.

Whilst our economy here in Aus' outperforms the major economies of the world, the $AUD will maintain its strength. Not the best environment for a medium term position on GOLD.

My thought on Gold Bullion is more on a much longer time frame - a Buy & Hold strategy for the years ahead. I appreciate its not everyones preferred option for investment for the reasons you have stated.

cheers

Bill


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rdumas
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Thursday, September 16, 2010 - 12:27 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Ody,

From what I have been reading of late what happens with the USD is rather complicated.

On the one hand if Bernanke ups the ante with the printing presses, that would devalue the USD. The added complication however is what happened with Japan's currency yesterday. I'm led to believe that they actually took the step of attempting to devalue their currency. Unfortunately for the US is that most (if not all) currencies are tied to the USD. If there were to be a trend for other countries to follow Japan's lead, it would cause an appreciation of the USD. This is one of the reasons the US are upset about the Chinese and their currency. AAAHHHH the joys of a fiat based currency.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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ody
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Thursday, September 16, 2010 - 12:57 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Gold ... such a complicated matter!

Thanks, Bill. Longer-term it seems likely enough gold - especially the metal, per se - should be OK. Just one consideration, incidentally: Indian brides still markedly influence the price during the wedding season, and in any case because the country is getting richer, and it loves gold. That was until not so long ago the case in the West too, but ... for jewellery the West is now far more inclined to use other material, or at least in addition to the amount of gold used. Where once gold was seen as essential for the best jewellery, now it is often platinum as a fine metal, or several other substances. Indeed, a good deal of jewellery-for-wear is made of quite humble but visually exciting "new" materials. Aluminium, for instance, and especially titanium, which can be chemically transformed into something showing wonderful colours. Many designers, too, are fascinated by using humbler materials to great effect: they make extraordinarily beautiful objects out of sophisticated new plastics that are ideal for working with, and not only wear well, but are long-lasting as well - for example not likely to go brittle, as many domestic plastics have tended to do. For that matter, there is a great fashion, among collectors, for bakelite made in the 20s, which is often in excellent condition.

My point is that SOME of the arguments for gold as a metal that were incontestable for centuries are now no longer as potent as they once were. My wife has two excellent gold fillings going back to her youth, but they would now not be used. I have two beautifully strong dental "implants": both sit in my mouth, firmly attached to the jaw, but with posts made from ... titanium, that wonder metal. So even for dentists gold ain't no longer what it used to be ...

Meanwhile Asia still does crave gold and attaches value to it, and that is where there is more growth in both populations and economies, so from that viewpoint gold should, even for us, still be "safe" for quite some time. Indeed, if the popularity continues undiminished in that part of the world, the prospects might be EXTREMELY good.

Rudy: Thanks for that interesting material on the dollar, yen, etc. Somehow the idea of the US dollar consistently getting pushed up by other currencies strikes me as counter-intuitive at a time when the US economy is such a mess. But we HAVE seen the US$ go up before on seemingly improbable grounds, and it can happen again. These are reasons why I think that at least in the short term currency (and to an extent gold) "plays" are so hard. The play could easily turn into some sort of tragedy! Admittedly, if you stay with the Aussie $, you are making an investment in that - no doubt. But then, that to an extent also keeps things simpler ...


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paint
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Thursday, September 16, 2010 - 12:58 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



MM,

Thanks for your response - I misinterpreted "It appears that this buyer has been holding our market up, buying into closes and generally pumping it up." I read it as physical stock where in fact you were referring to buying futures at close.

Makes much more sense!!
Cheers


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rdumas
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Thursday, September 16, 2010 - 03:15 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Ody,

You may be interested in an article that I posted on my EWW thread about the following topic.

Since the Washington Agreement was first signed in September 1999, the central bank “gold year” has begun and ended in September. With this gold year almost at an end, gold consultant GFMS anticipates that global central banks will have net bought around 15 tonnes. The last time the world's central banks were net buyers rather than net sellers was in 1988.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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billt
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Thursday, September 16, 2010 - 07:14 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Ody

Beware the Great Australian Complacency

By Michael Stutchbury
The Australian 16 September

I am not sure whether you read the above article today.

Ross Garnaut stated this week:

“Australia will be going through a period when there is very little economic capacity to increase per capita increases in living standards. To become wealthier Australia needs to become more productive.”

Stutchbury adds: “Australia can no longer rely on either a debt-fuelled housing and consumption boom or a rising terms of trade to deliver further prosperity.”

It is a chilling analysis.

Garnaut is optimistic about the Emerging Markets (China/India/ Brazil/ Indonesia)

Interestingly, in this last 2 week rally, EDC Daily Emerging Markets Bull 3X Shares has risen 33.8%. My normal bull trade TNA Daily Small Cap Bull 3x Shares rose 37.3% in comparison. So it will be on my list of ETF’s to trade….

'USA Small Caps' beat 'Emerging Markets' - Eugenio will be able to claim bragging rights!

Bill


ps Very good to see that at least your wife has invested in gold....she'll be worth a fortune in the years to come!


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ody
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Friday, September 17, 2010 - 12:06 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Thanks, Bill. Did you see this one too? Has some interesting points.
------------------------------------


Australian economy 'more dependent on China than ever' - RBA

* From: AAP
* September 16, 2010 1:56PM

AUSTRALIA'S economic strength is no longer marching in step with the US economy and is instead increasingly reliant on China, the Reserve Bank (RBA) says.

RBA assistant governor Philip Lowe said there were risks and challenges ahead for emerging economic powers like China and India that would have an impact on Australia.

Over the past decade it had become apparent Australia's economy was growing in step with China, a major consumer of Australia's natural resources.

"A decade or so ago, we spent a lot of time puzzling over why quarterly movements in Australian GDP were so highly correlated with quarterly movements in US GDP," he said in a speech.

"We don't puzzle over this anymore - not because we solved the puzzle, but because the correlation has fallen.

"At the same time, the correlation between quarterly movements in Australian and Chinese GDP has steadily increased.

"Clearly what happens in the Australian economy is now more dependent upon what happens in China than has been the case at any time in our past."

But Dr Lowe also said the road to economic prosperity for China, as well as India, would have its challenges as well as benefits for Australia.

He said Chinese authorities faced a difficult task in rebalancing growth away from exports to investment and domestic consumption.

Meanwhile India needed to improve its infrastructure and deal with "the burden of red tape."

The surge in commodity prices seen over the past year would abate, he said, with new sources of supply being developed, while new technologies could reduce demand for Australia's main resources - coal and iron ore.

He said the farming sector could benefit as global demand for food, particularly in China and India, grew.

"Over the years ahead it is quite likely that global demand for protein will grow strongly, particularly if India and China continue on their current paths," he said.

"With Australia's strong history of agricultural production, this is another area where we have an advantage."

Dr Lowe was speaking at the NatStats 2010 conference in Sydney.


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gdd3
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Friday, September 17, 2010 - 12:56 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi GOLD ETF Interested Parties(some ODB and some EW threads)...

Having a simple T/A look at a weekly chart can support various reasons presented to buy now...or at least near present levels.

The weekly chart below covers the price action over the last 2 years and from it (A) I see she has found support this week at/near...

1)...2 year uptrend support line(yellow),
2)...mid-range 'decision' support line(mid orange),
3)...30wk EMA(150daily EMA..white MA).

(B)..(1)..3rd Weekly TAZ set-up from desired levels(both Williams%R's) last week and just needs only to trade above 134.50 for final confirmation,
.....(2)..This is very likely to be preceded by a break of the(yellow) downtrend line on the W's%R14 and the(blue) price downtrend line to give earlier hint of probable confirmation...ala WT.1 set-up.
.....(3)..WT.3 coming from the midrange support of the $116.50-$145.00 band would favour a 80% likelihood of seeing a test of the upper-range limit(Peter Steidlmayer..Market Profile)after the false breakdown at WT.2.
.....(4)..30EMA and 52EMA still strongly rising and price action remains above both.
.....(5)..Daily MACD, Slow Stochastics and RSI's have either turning up or have crossed from desired oversold zones.



Cheers
Dolphin

P.S. Rudy, I guess one short-term -ve is that I think that the $A hasn't yet completed it mini 5wave up from the Aug.24th low as the action since the recent high(~9457h) appears very corrective and this may only be a wave(iv) of the wave iii or at best wave iv of a i - v. Take a look at 90min or 120 min chart to see what I mean.

(Message edited by gdd3 on September 17, 2010)


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paint
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Friday, September 17, 2010 - 07:20 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Ody - it will be interesting to see how the issue of the Greens wanting to increase the mining tax plays out. It didn't take long for that curve ball to appear.


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rdumas
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Friday, September 17, 2010 - 08:13 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Dolphin,

Thanks for your thoughts on ETF GOLD......much appreciated. I'll do as you suggest and have a closer look at the pattern of the AUD. I only looked at the broader levels of support and resistance recently and didn't try to suss out the EW count.







I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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ehmu
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Sway:

A different look at XJO using stoch and chaikin money flow. Both on the verge of crossing south.

Also, I marked a horizontal battle zone where buyers and sellers most commonly gained or lost control of the price. My thinking is that ultimately the price needs to close outside of these price boundaries marking victory for either. I'm seeing $45.90 to $46.70 being the battle zone.

best
H



 
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