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May 31, 2010

ECB ignores the “d” word

Filed under: Central Banks — Tags: , , — admin @ 5:48 pm

The ECB should be printing money left and right, the NY Times seems to conclude.

GBPUSD might be forming a cycle top at 1.4609

Filed under: Forex News — Tags: , , , , — admin @ 3:14 am

GBPUSD might be forming a cycle top at 1.4609 level on 4-hour chart and the fall from 1.4609 could possibly be resumption of downtrend from 1.5522 (Apr 15 high). Another fall to test 1.4230 would more likely be seen later today, a breakdown below this level could signal resumption of downtrend. Resistance is at 1.4609, only rise above this level will indicate that lengthier consolidation is underway.


Forex Signals

Oil spill damage spreads through Gulf economies

Filed under: Business — Tags: , , , , , — admin @ 12:22 am

NEW YORK ( — As efforts to plug the ruptured well in the Gulf of Mexico continue to fall short, the stakes for the region’s economy grow ever higher.

The numbers being batted around when it comes to how much the oil spill will ultimately cost BP and the local Gulf of Mexico economies are huge. $3 billion. $14 billion. One politician put it at over $100 billion.

The range is so big because two important questions remain unanswered: When will the leak be sealed, and will most of the oil wash ashore? Until those are answered no one will know the price tag of the damages for sure.

But there have been studies done looking at what’s broadly at stake, and the number is quite large indeed.

The four biggest industries in the Gulf of Mexico are oil, tourism, fishing and shipping, and they account for some $234 billion in economic activity each year, according to a 2007 study done by regional scholars and published by Texas A&M University Press.

Two thirds of that amount is in the United States, with the other third in Mexico.

If the Gulf of Mexico were a country, it would be the 29th largest economy in the world.

Oil and gas

Ironically, the largest chunk of that money is generated by the oil and gas industry, and they may ultimately be the ones that lose the most.

Oil and gas interests generate $124 billion or 53% of the total money, according to Jim Cato, a former economics professor at the University of Florida and one of the authors on the study.

As of Thursday, all new offshore drilling in U.S. waters in the Gulf remained closed following the sinking of the Deepwater Horizon oil rig last month, which claimed 11 lives and left an uncapped oil well leaking thousands of gallons a day into the water.

Oil production from existing wells has been largely unaffected and drillers have been busying themselves with wells begun before the explosion. But the longer the ban remains intact, the harder the economic bite.

“If the moratorium is continued through June, lost revenue from shallow water drilling is estimated at $135 million,” said a letter Friday from ten senators urging a lifting of the ban.

The ban may eventually be lifted, but how much more the oil industry will have to pay for royalties or spill prevention, plus restricted access to new drilling sites, remains to be seen.


Tourism is the second largest industry in the Gulf, and it ranks right behind oil. About 46% of the Gulf economy, or over $100 billion a year, is from tourism dollars, according to the A&M report.

With tourism, it’s not necessarily the oil that washes up on the beach that hurts the industry, but how much oil people think will wash up on the beach. And people seem to think it will be bad.

In Florida, state tourism officials recently told CNN they’re getting cancellations as far as three months out.

In Mississippi it’s even worse.

Ken Montana, President of the Mississippi Gulf Coast Tourism Commission, said cancellation rates are running at nearly 50%.

“The perception is that everybody has oil on the beach and we are all closed up,” Montana told CNN. “No beaches are closed, period.”

Fishing and shipping

Fishermen are perhaps the most directly impacted by the spill. The government has already closed over 25% of federal waters for fishing activities and many of them are out of work.

But commercial fishing and shipping together only account for 1% of the Gulf’s total economic activity.

While the number is small in terms of Gulf cost dollars, it does not factor in the impact a shut-down in shipping could have, which could halt grain and other cargo from traveling up and down the Mississippi River.

According to the Port of New Orleans, no disruption in shipping is foreseen. The Coast Guard has set up five washing stations for ships to get scrubbed if they come into contact with the oil, but so far none have been used, said a port spokesman.

Clint Guidry, president of the Louisiana Shrimpers Association, said Saturday the fishing ban is especially disappointing because this year’s harvest was expected to be the best since 2000.

“This is a sad situation,” he said. “Everything east of Mississippi has been shut down, nobody’s been able to work in those regions.”

What’s at stake

Obviously, the oil spill isn’t going to shut down the Gulf’s entire economic output.

When the spill first happened, researchers at the Harte Research Institute for Gulf of Mexico Studies, who also contributed to the A&M report, estimated the economic damages might be $1.6 billion. That number included $400 million in direct economic costs, and another $1.2 billion in services provided by wetlands that might be compromised — things like water filtration and such.

But that number was arrived at when the oil spill was estimated to be 1,000 barrels a day, said David Yoskowitz, chair of socio-economics at Harte.

As many as 19,000 barrels (798,000 gallons) of oil were spewing into the ocean every day, according to government scientists, which could make this disaster twice the size of the 1989 Exxon Valdez spill.

BP vowed Sunday to redouble its efforts to contain the well after its most ambitious operation failed Saturday. The company said it will move forward with a plan to install a containment cap over the well nearly a mile below the surface.

Prior to the scrapping of the “Top Kill,” effort, BP said Friday its costs have totaled $930 million to date. That includes expenditures on the spill response, containment, relief well drilling, grants to the Gulf States, claims paid, and federal costs.

Moreover, both the Harte study and the A&M report only look at the Gulf of Mexico. Yet there are reports that the oil is getting caught up in the so-called loop current, which could bring it up the eastern seaboard.

“If that happens, all bets are off,” said Yoskowitz.

–CNNMoney staff reporter Ben Rooney contributed to this report  To top of page

5 Funds With a Low Turnover Rate

Filed under: Investing — Tags: , , — admin @ 12:06 am

With market volatility on the rise, it’s easy to see why the average investor might be a little more active in managing their portfolio. But what about the professionals?

In this environment, some mutual funds have begun raising their turnover ratio, the percentage of their holdings that are sold every year. More aggressive funds tend to have higher turnover ratios, but so do funds that are struggling to regain footing, says Legend Financial advisor Jim Holtzman.

High ratios typically mean more fees because each trade adds an incremental cost. They can also mean more capital gains taxes. For this reason, advisors keep an eye on the metric. “If it’s extraordinarily high, you have to be asking questions,” says Holtzman.

According to Morningstar, 20% to 30% would be a low turnover figure indicating a buy-and-hold strategy, and a figure over 100% would indicate an investment strategy “involving considerable buying and selling of securities.” Actively managed funds, which rotate in and out of different sectors, have higher turnover ratios – a ratio over 100% wouldn’t be an anomaly — so it’s not a reason to dismiss a fund, Holtzman says. But optimally, a fund should have a low turnover ratio and outperform, minimizing added costs.

A low turnover ratio also means the fund manager has a buy-and-hold mentality. If a fund with low turnover is outperforming, the manager is successfully picking stocks to weather the storm. A lot of buying and selling paired with poor performance indicates panic, says Holtzman. Since there seems to be enough panic — the CBOE Volatility Index (VIX), considered a gauge of market fear, has been raising eyebrows – we decided to look this week at funds with a buy-and-hold mentality and a solid performance record.

Morningstar tracks 2,637 funds and share classes that have a turnover ratio of less than 15%. (Morningstar takes its turnover ratios from funds’ annual reports.) We searched for funds that had performance track records over the trailing three- and five-year time periods that put them in the top 20% of their peer group. In addition, the funds had to be outperforming the S&P 500 for 2010. We also required that the funds keep their annual expenses nominal. Below are five funds that fit our criteria. All of them have a five-star rating from Morningstar and are in positive territory for the year, with gains of between 2.5% and 6.5%. (The S&P 500 is down 1%, year to date.)

Most large-blend offerings have 70% to 90% turnover rates, but Mairs & Power Growth (MPGFX) is known for staying in the single digits. Among its five largest of 45 holdings, Target (TGT) and Emerson Electric (EMR), are up 12.7% and 9.1%, year to date, respectively. The fund is up 5.2% this year. Another fund that made the list, Royce Special Equity Investment (RYSEX), is up 4.9% so far in 2010. Two of its top five holdings, specialty chemical company Lubrizol (LZ) and specialty foods, glassware and candles manufacturer Lancaster Colony (LANC), are up 21.4% and 10.0%, year to date, respectively. Fund manager Charlie Dreifus, who focuses on stocks that are safe in rough markets, won Morningstar’s Domestic-Stock Fund Manger of the Year award in 2008.

The Criteria: The funds on the table had turnover ratios of less than 15% in their last annual report. They are open to new money, require a minimum investment under $5,000 and charge an annual expense ratio under 1.5%. In addition, their performance track records put them in the top 20% of their category over the trailing three- and five-year time periods. They’re also ahead of the S&P 500 so far this year. As usual we did not include load funds.

Sticking to Their Guns
Fund Name Ticker Assets
(In Millions)
Avg. Annual
Avg. Annual
Principal MidCap Blend Inst PCBIX 1100 6.24 -2.92 5.03 0.69
Royce Special Equity Investment RYSEX 1600 4.86 1.46 6.09 1.17
Neuberger Berman Genesis Inv NBGNX 9800 3.18 -1.43 5.06 1.08
Mairs & Power Growth Inv MPGFX 1900 5.15 -3.44 2.12 0.71
Westport R WPFRX 295.9 2.53 -1.13 5.04 1.31

Source: Morningstar
Note: Data as of May 28, 2010

Try our powerful Select Fund Screener to discover investment opportunities that meet your criteria.

May 30, 2010

USD/JPY ticks higher again, talk of sovereign buyer

Filed under: Central Banks — Tags: , , , , , , — admin @ 5:51 pm

Getting reports of sovereign buyer down around 91.10/15. We’re presently back up at 91.28.

Despite Poor GDP, Spot Crude Oil Rises Gains Again

Filed under: Forex News — Tags: , , , , , , — admin @ 3:14 am

By Russell Glaser – Spot crude oil prices jumped to a two week high on Thursday following a Chinese commitment to European investments, in particular European debt instruments. This propelled traders into riskier investments such as commodities while selling the dollar. Markets have shrugged off most recent negative economic data as this was the case yesterday.

The price of spot crude oil rose to $75.39, following an opening price of $71.50. Spot crude oil trading has risen 9% over the past 3 days.

The rise in prices comes on the heels of a sharp $20 decline following fresh worries over the solvency issues surrounding Greece, Portugal, and Spain.

Yesterday’s gains in spot crude oil trading were driven by comments from China’s State Administration of Foreign Exchange (SAFE). The agency denied reports that it is reducing its holdings of European debt. Comments from SAFE also helped to support the euro as the EUR/USD rose to a high of 1.2393. The price of spot crude oil typically trades in a negative correlation with the dollar. As the dollar weakens, spot crude oil prices rise.

Spot crude oil prices could continue to increase upon further signs of economic improvement. Yesterday’s downward revision of 1st quarter U.S. GDP did little to halt spot crude oil bulls.

Next week’s U.S. Non Farm Payrolls report will provide further insight as to where the economic recovery stands. Positive results will likely mean spot crude oil prices rising to the $80 level.

Forex Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Oil industry lashes out at drilling ban

Filed under: Business — Tags: , , — admin @ 12:28 am

NEW YORK ( — The extended ban on deep water oil drilling could have broad economic consequences, an industry group said Friday, leading to potential job losses and higher energy prices.

The American Petroleum Institute, the main U.S. trade association for the oil and natural gas industry, said the six-month moratorium, announced Thursday in response to what is considered the worst oil spill in the nation’s history, could stifle economic activity.

“An extended moratorium on safely producing our oil and natural gas resources from the Gulf of Mexico would create a moratorium on economic growth and job creation,” said API’s president Jack Gerard. The ban, he said, will hurt growth “by undercutting our nation’s access to affordable, reliable, domestic sources of oil and natural gas.”

The government instituted a freeze on offshore drilling activities in April after a drill rig exploded and sank in the Gulf of Mexico. The disaster uncapped a well nearly a mile below the surface and caused a massive oil spill, which has already devastated parts of the Louisiana coastline.

BP (BP), the company that leased the ruptured well, has come under withering criticism from environmental groups and the public for failing to stanch the flow of oil. The government has also been under fire for what some see as a history of deferential treatment to oil companies.

Gerard said he understands the frustration many feel towards the industry, but he said lawmakers should reconsider any decisions that would limit access to domestic sources of oil.

“This issue is much larger than the oil industry since access to affordable energy impacts every sector of our economy, every state in our nation and every American family,” he said.

President Obama, who visited Louisiana on Friday to view the damage caused by the spill, extended the ban from 30 days to six months on Thursday, pending a review by an independent commission.

The ban on new permits extends to any operation over 500 feet deep. That’s a more stringent definition of the term “deepwater” than what is used by the industry, according to analysts at research firm Platts. The industry generally defines deepwater as anything over 1,000 feet deep.

Complete coverage

The government also said wells currently being drilled in deep Gulf waters will be required to halt at the first safe stopping point, and then take steps to secure the well.

In addition, the administration suspended planned exploration of two drill sites off the Alaskan coast. It also canceled lease sales off the coast of Virginia and in the Western Gulf because of environmental concerns.

The API’s Gerard objected to these measures, saying the additional limits on drilling “have the potential to significantly erode our energy and economic security.”

The API said “extended development delays” could cut oil production by as much as 400,000 barrels per day. While oil prices have trended lower in recent weeks despite the ban, the group argued that the law of supply and demand means prices could go up if development is put off for too long.

The ban could also mean layoffs in the energy industry, particularly in the Gulf Coast region, according to API. The group said 150,000 jobs are at risk if deep water production is significantly reduced over a period of five years.

“Deepwater is where the new action is in the Gulf,” said API spokesman Bill Bush. “If that’s shut down, there could be serious jobs impacts.”

Environmentalists praised the moves, but said the government needs to do more to regulate the oil industry.

“President Obama is right to impose a moratorium on new offshore drilling,” said Frances Beinecke, president of the Natural Resources Defense Council. “But the president needs to go further.”

Beinecke said all offshore development, including deep and shallow water drilling, should be halted pending a six month safety review. In addition, she said drilling in Arctic waters should be off limits until the environmental impacts can be fully assessed.

Obama made the announcement after receiving an initial safety review of offshore drilling from the Interior Department, the branch of government that manages the nation’s natural resources.

The review offered preliminary recommendations on ways the government could increase safety and prevent the types of mechanical malfunctions that led to the fire and explosion on the BP drill rig, called the Deepwater Horizon. It also proposed new inspection procedures and reporting requirements for companies engaging in deep water drilling.

“Prudence dictates that we pause and examine our drilling systems thoroughly so that we can ensure that this type of disaster does not happen again,” said Interior Secretary Ken Salazar.

BP is reviewing how the recommendations and moratorium could impact its operations, said company spokesman John Pack. But the company is awaiting the outcome of the six month independent investigation, he added.

“We welcome the review of safety and environmental impacts and look forward to working with the federal government,” he said.  To top of page

Thanks for Nothing, China. Really.

Filed under: Investing — Tags: , , , — admin @ 12:06 am

At the moment the panic seems to have subsided. And all it took was a word from China, the new lord and master of the financial universe. On Thursday the Chinese authorities let it be known that they intended to do nothing. Equity markets around the world thunderously celebrated.

Huh? Well, under these circumstances, the Chinese doing nothing is a wonderful thing. You see, the Chinese government holds about $600 billion in government bonds issued in Europe. That’s right — the bonds of Greece, Portugal, Ireland, Spain — the so-called “PIGS” nations who have been in the throes of a credit crisis that has rattled the whole world.

It’s not that these countries are intrinsically going out of business. It’s just that if bond holders panic and refuse to lend them more money when their existing bonds come due and have to be replaced, they’ll be forced into insolvency for lack of financing. China, the single largest holder, signaling that it has no intention to reduce or abandon its existing investments was a huge risk off the table.

Don’t think the Chinese can’t move the bond world. They can. They have. Why do you think in December 2008 the Fed announced it was going to buy billions in mortgage-backed securities — and then in March 2009 upped the number to over a trillion? It’s because the Chinese wanted to sell. If that Fed hadn’t bought them, who would have? Not me!

Same thing for European bonds. If the Chinese had wanted to sell, who would have bought them? The European Central Bank, the equivalent of our Fed, doesn’t have the statutory authority to do that. They’ve already bent their rules a lot in the PIGS crisis, but that would be tearing up the rule book and studding the shreds in the trash compactor.

How about European banks? Sorry. The banks of France, Germany and the Netherlands already own more than twice the PIGS debt that China owns. They aren’t interested in owning more, believe me.

So with China a solid holder, and with the announcement several weeks ago that the stronger countries in Europe will bail out the weak ones, I think the crisis really has passed.

But so what?

Does that mean the fantastic bull market that took the U.S. stock market up 80% from the March 2009 lows to the April 2010 highs will just get right back into high gear and make another sensational leg up? I really doubt it.

There are plenty of people who think that’s what will happen. They see the 12% drop in stocks since the high last April as just a brief and necessary correction in a great bull move.


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May 29, 2010

Headlines like this won’t help euro

Filed under: Central Banks — Tags: , , , , , — admin @ 5:49 pm

“Rift between ECB and Germany widening”  is not a plus for the euro…

EURUSD remains in downtrend

Filed under: Forex News — Tags: , , — admin @ 12:23 pm

EURUSD remains in downtrend and the price action from 1.2144 is more likely consolidation of downtrend. Rang trading between 1.2144 and 1.2671 is expected to continue next week. Support is at 1.2144, a breakdown below this level will indicate that the downtrend from 1.5144 has resumed, then deeper decline could be seen to 1.1300 area. Resistance is at 1.2671, above this level could bring price back to test 1.3000 key resistance.

For long term analysis, EURUSD broke below 1.2329 (Oct 28, 2008 low), suggesting deeper decline towards 1.13000 area. Only rise above 1.3000 could trigger another rise to 1.5000 area.


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