Thursday, February 16, 2012

Is Copper Set For A Comeback? : FCX, NEM, RIO, SCCO

Companies positioned in the copper mining business faced more than their fair share of adversity in 2011. Labor strikes coupled with a gloomy global economic outlook kept a lid on the share prices of many copper mining stocks for much of the year. There are some indications that the worst may already be in the past for copper bulls, but it is unlikely that volatility in copper prices will be going away anytime soon.

Shrinking Stockpiles
According to Barclays Capital, copper inventories are currently near two-year lows, following a 200,000 metric ton drop in production in 2011. This trend may not reverse itself anytime soon.

The Denver-based copper miner Newmont Mining (NYSE:NEM) is already predicting that its copper production in 2012 will be down between 17.5 and 27.2% when compared to its preliminary 2011 full-year results. A similar theme has unfolded at Rio Tinto (NYSE:RIO). Last week, the company said that its mined copper output slid 23% last year due to lower ore grades.

Lagging production by miners is only going to tighten global supplies and push copper prices upwards in the months ahead. The demand for this industrial metal is still going to be there. China is expecting GDP growth of 8.2% in 2012, and the emerging market nation consumes approximately 40% of the world's copper according to the Copper Development Association.

Labor Unrest
In addition to ore grade declines and adverse weather, Southern Copper (Nasdaq:SCCO) has previously cited labor unrest as being one of the biggest contributing factors for drops in production. Looking ahead, the company has said that it expects many of these very same factors to remain prevalent throughout the year in 2012.

Freeport-McMoRan Copper & Gold (NYSE:FCX) is another miner that has suffered heavily from labor disruptions. Striking workers at its Grasberg complex hampered results significantly in the fourth quarter of 2011. Although the situation has since been resolved, it is unlikely to be the last work stoppage that the company will have to face.

The Bottom Line
There is still a fair amount of uncertainty surrounding the direction of copper prices, but I am inclined to say that market fundamentals will prevent the metal from heading significantly lower. Copper stocks have already been hit by labor strikes, weak economic outlooks and diminished production. There may be some challenges ahead, but now is the beginning of a stretch in which copper is set to shine.

"Poor America" - How the Broke are Surviving

Martin Armstrong - Greece Prelude to the Fall What's Going On?

Greece Prelude to the Fall

What's Going On?

click here to read in pdf

John Embry: Is Greece’s Situation Bad for Gold?

from King World News:

With gold and silver continuing to consolidate, today King World News interviewed John Embry, Chief Investment Strategist of the $10 billion strong Sprott Asset Management. Embry told KWN that we have seen “peak gold.” He also filled us in on what the Greek situation really means for gold: “Gold is in a bit of a stranglehold here and has been since almost the beginning of February. It sort of coincides with this whole Greek saga where they seem to have a solution every morning and by the end of the day somebody points out another flaw. I think this is extremely bullish for gold.”

John Embry continues: Read More @

Chart of the Day - Sherwin-Williams (SHW)

The "Chart of the Day" is Sherwin-Williams (SHW), which showed up on Tuesday's Barchart "All Time High" list. Sherwin-Williams on Tuesday edged to a new all-time high of 100.00 and closed up +0.66%. TrendSpotter has been Long since Dec 20 at $86.85. Sherwin-Williams was last featured on "Chart of the Day" with the Dec 12 close of 84.93. In recent news on the stock, Sherwin-Williams on Jan 26 reported diluted Q4 EPS of 14 cents versus expectations of 83 cents due to an increase in tax expenses related to an asset impairment charges and an IRS settlement. Sherwin-Williams, with a market cap of $10 billion, is a manufacturer, distributor and retailer of paint, coatings and related products.


How To Be A Trader - Part 1, Rockwell Trading

According to Google, "how to be a trader" is one of the most active search terms. It seems that these days many people are interested in becoming a trader.

But what does it take to become a trader? What are the steps?

In this article series you will learn how to be a trader.

The Mindset of a Trader

Many people are intrigued by the idea of "making millions in minutes" while working from home or any place they want. No commute to work, no boss yelling at you, no deadlines, no annoying coworkers, no cubicles, no demanding customers.... and the list goes on.

Often people dream of living in an exotic location, trading for a few hours in the morning and then enjoying life.

And although this might be reality for some traders, the vast majority of traders have a different reality. They put in a lot of time and money, spend countless hours in front of their computers (often more than they did while they still had a "real" job) and yet their account is not growing. In fact, it is said that the majority of traders LOSE money.

If you want to become a trader, then you MUST be willing to invest the time, money and effort to learn how to be a trader.

You won't become a trader overnight. In the beginning, trading can be grueling and frustrating. Your results will not match your efforts. And this is why many traders give up.

However, if you do follow a structured approach and understand that trading is not another "get-rich-quick-scheme", then there's a chance that YOU might achieve your goals.

Do You Really Want To Be A Trader?

Trading is a business. It's a profession. And it takes time to learn how to trade.

Anybody who tells you differently, is a liar. Sorry for being harsh, but it's the truth.

You can't just buy "the magic system" that automatically puts money into your bank account overnight. It doesn't exist!

Realistically, it can take you several weeks and and often even months before you have your first profitable trade. And in the beginning you might even lose some money, no matter how well you prepare. Because when trading, there's always the risk of loss!

But here's an approach that can increase your chances of making it as a trader:

Step 1: Setting Realistic Goals

Here's the problem:

Many aspiring traders have unrealistic goals. They start with a $5,000 account and expect to make $5,000 in their first month of trading. No wonder many traders fail.

Focus on small, but consistent profits!

Trading is a function of risk and reward. The more you risk, the higher the profit potential. Or in "traders language": The larger the stop loss, the higher you can set your profit target.

Let me give you an example: A good reward/risk ratio is 1.5 to 1. This means that you are willing to risk $100 trying to make $150. If you start with a $5,000 account, your stop loss of $100 would be exactly 2% of your account. I'm sure you already heard about the "2% risk rule." It's widely used and many trading experts recommend it.

Now let's say you are right every other trade, i.e. your trading system has a winning percentage of 50%. This means that in the long run you can expect as many winning trades as losing trade.

For our example, let's say you place 10 trades - 5 of them are winning trades and 5 of them are losing trades.

So you would make $750 on your winning trades (5 * $150), and lose $500 on your losing trades (5* $100). Your gross profit after 10 trades would be $250. You now need to deduct your commissions, which should be around $50 - $70 for 10 trades, depending on your broker and the markets you trade.

Therefore your net profit after 10 trades would be around $180-$200.

Now the question is: How many trading signals does your system produce?

If you get 10 trading signals per week, then you can expect a weekly return of $180-$200 on a $5,000 account.

Which is a phenomenal result!

Think about it: With a simple trading strategy like this you could expect $720 - $800 per month on a $5,000 account. That's a whopping 14% - 16%! Per month!

Now, keep in mind that there's also the possibility of LOSING money.

So let's talk about losses:

If you had 10 LOSING TRADES in a row, then you would lose $1,000, since you are risking $100 per trade. That's 20% of your account. Ouch!

But honestly: If you manage to have 10 losing trades in a row, you should stop trading immediately. Because the chances of getting 10 losses in a row when trading a strategy with an expected winning percentage of 50%, is less than 0.1% (!!!)

Summary of "How To Be A Trader - Part 1"

Before you even start trading, you need to know what to expect from trading.

Have realistic expectations, and understand the risks of trading. Set small goals. Don't shoot for the stars. Try to make $100 per week on a trading account of $5,000. That would be $400 per month, or 8% based on your capital. Per month!!!

You might not achieve your weekly goal every week. There might be some weeks when you make less. Or you might even lose some money. But in the long run you should be ahead and see your account grow. And with proper risk and money management, you should be able to control your risk while growing your account.

So the key is to find a trading strategy with a winning percentage of 50% while achieving a reward-to-risk ratio of 1.5 to 1.

And that's what we will cover in the next blog post "How To Be A Trader - Part 2"

John Paulson Says Greece May Default, Spurring Euro Breakup

Paulson & Co., the $23 billion hedge fund whose founder John Paulson is seeking to recover from record losses last year, said Greece may default by the end of March, triggering the breakup of the euro.

Greece may need an unprecedented 90 billion euros ($117 billion) to meet funding requirements under the anticipated agreement on private sector involvement, the recapitalization of the banks and other funding needs, Paulson estimated in a year- end letter sent to clients this month.

“We believe a Greek payment default could be a greater shock to the system than Lehman's failure, immediately causing global economies to contract and markets to decline,” the hedge fund said in the letter, a copy of which was obtained by Bloomberg News. The euro is “structurally flawed and will likely eventually unravel,” it said.

Two years after pledging to pull Greece back from the brink, European leaders are torn between pouring more aid into the country or risking an unprecedented national bankruptcy that might force the nation out of the euro and spur renewed market turmoil.

“It seems likely that the pressure to keep the euro together becomes too great and it ultimately falls apart,” Paulson said in the 100-page letter. The firm said its biggest concern are European banks, which have borrowed more than their U.S. counterparts and don't have enough equity to withstand a credit crisis.

‘Biggest Disappointment'

Paulson, who became a billionaire in 2007 by betting against the U.S. subprime mortgage market, lost 51 percent in one of his largest funds last year as his wagers on a U.S. economic recovery went awry. He sold his entire stakes in Citigroup Inc. and Bank of America Corp. last quarter before the shares rallied this year.

“Bank of America has been the biggest disappointment in our banking portfolio,” Paulson said.

The holdings, which he began aggressively building in 2009, were among his largest last year.

“While we have seen a reasonable recovery in the U.S. with leading indicators in early 2012 trending positive and equity valuations well below historical norms, the European sovereign debt crisis remains the overriding risk in the markets,” the hedge fund said.

As a result, Paulson said it cut its so-called net exposure in its Advantage funds, which are among the firm's largest, to 32 percent as of Jan. 31 from 82 percent at the start of last year. Those funds seek to profit from corporate events such as takeovers and bankruptcies.

Demand for Gold

Armel Leslie, a spokesman for New York-based Paulson, declined to comment on the letter.

The hedge fund reiterated its view that government spending around the world will fan inflation, supporting demand for gold and that now is the time to invest in the metal.

“By the time inflation becomes evident, gold will probably have moved, which implies that now is the time to build a position in gold,” the hedge fund said, adding that it expects the price differences between bullion and gold miners to narrow this year.

Paulson said it expects continued market volatility and the European debt crisis to affect merger activity in 2012. The firm said it still sees opportunities for investment gains in Motorola Mobility Holdings Inc., which Google Inc. is planning to acquire, as well as AMC Networks Inc., Ralcorp Holdings Inc. and Delphi Automotive Plc.

M&A Outlook

Paulson started 2011 expecting an increase in mergers and acquisitions, a position that cost the Paulson Partners Enhanced Fund, which invests in shares of merging companies and lost 19 percent last year. Heightened price swings affected the firm's positions in takeover targets, Paulson said.

Paulson partners' capital in the firm's credit funds climbed to 69 percent at the end of last year from 57 percent at the end of 2010, while the portion of outside investor money dwindled after the Credit Opportunities Fund fell 18 percent in 2011. Paulson reduced its credit exposure, which includes investment-grade corporate bonds, high-yield and distressed securities, because risks related to the European debt crisis remain, the firm said.

7 Things You Didn't Know Affect Your Credit Score

We all know to pay our bills on time and carry as little debt as possible, and most of the time, that is all that matters in your credit score. Yet, there are other, smaller factors that many people aren't aware of that can cause your score to suffer.

Small Unpaid Private Debts
Many people pay their mortgage, credit card and utility bills with unflappable consistency, yet neglect smaller debts. They may feel that these debts are illegitimate or that they will just go away if ignored. For example, municipalities have been known to report unpaid parking tickets and even library fines to credit bureaus. Unfortunately, any unpaid debt can weigh down your credit score.

Tax Liens
You might not think of the IRS as an agency that reports to credit bureaus, but Uncle Sam figured out long ago how to use your credit history as leverage. In fact, these records remain in your credit history for 15 years; even longer than a bankruptcy. If you have an unpaid tax lien, paying it off will certainly help your credit score, but it can't undo all the damage done by having there in the first place.

Utility Bills
Your electricity bill or gas bill is not a loan, but failing to pay it will hurt your credit score. While these companies won't normally report their customer's payment history, they will report delinquent accounts much more quickly than other institutions, so be careful.

Too Many Recent Credit Applications
It can be tempting to sign up for various credit cards that offer some bonus for your business. Banks can offer tens of thousands of points or miles, while retailers grant in-store discounts when you apply for their credit card. By themselves, these applications have an insignificant effect, but too many credit checks in too short of a time period can lower your credit score. To avoid this problem, limit the number of applications for credit, especially when you are shopping for a home, car or student loan.

Long-Term Loan Shopping
Consumers may know that too many credit inquiries will lower their credit score. Nevertheless, to allow consumers to shop around for the best rates on automobile, student and home loans, the FICO will not penalize borrowers who have multiple credit checks in a short period of time. Various FICO formulas negate multiple inquiries with either 14 or 45 days. Therefore, continuing to shop around for a loan over several months will fall outside of this safe harbor and will lower your score.

Business Credit Cards
Do you have a credit card in the name of your business? Nevertheless, almost all banks will still hold you personally responsible for your debts. Furthermore, your payment history is reported to the credit bureaus. Therefore, any late payments or unpaid debts in the name of your business will affect your personal credit, so long as you are the primary account holder on a business card.

Any incorrect information in your credit history can hurt your score. For example, people with common names frequently find other people's information in their file. In other cases, typos and clerical errors result in adverse information affecting your score. This is one of the reasons why consumers are encouraged to complete soft inquires at least once a year and dispute any mistakes they find.

The Bottom Line
By paying close attention to the decisions they make, consumers can avoid taking actions that seem harmless, but can really hurt their credit.

U.S. Dollar May Trump Greek Drama If UUP overcomes 50-day it may mean decline in stocks regardless of EU news

The Greece story was in focus again yesterday. The U.S. markets were in negative territory for most of the day as a result of negative sales data, a downgrading by Moody’s of the debt ratings of several eurozone countries’ debt, and negative outlooks for France, Austria and the UK.

But in the last 30 minutes of trading, the Dow Jones Industrial Average jumped 88 points as a result of a supportive statement by one of the opposition leaders in Greece who had been blocking further measures necessary to meet the zone’s criteria for capital injection.

At the close, the Dow was up 4 points to 12,878, the S&P 500 fell a point to1,351, and the Nasdaq was unchanged at 2,932. The NYSE had another day of light volume with just 743 million shares trading while 475 million shares traded on the Nasdaq. Decliners exceeded advancers by 1.7-to-1 on both exchanges.

Dow Chart
Click to Enlarge

After weeks of buyers and sellers focusing on earnings, economic issues and technical analysis, this week they have reverted back to reacting to every nuance of news from Greece. This chart tells the story of a market going bonkers. With this sort of volatility the sole logic appears to be, “if it’s low buy it, and if it’s high sell it.”

UUP Chart
Click to EnlargeTrade of the Day Chart Key

In Thursday’s Daily Market Outlook, I noted that the U.S. dollar, as shown by the PowerShares DB US Dollar Index Bullish Fund (NYSE:UUP), had reversed following a buy signal from our internal indicator, the Collins-Bollinger Reversal (CBR). Since the dollar andU.S. stocks usually trade opposite to each other, this was a warning that stocks would likely head lower.

The dollar was up again yesterday, but traders were more focused on last-minute happenings in Greece and hopped on stocks in a low-volume, highly volatile rush to buy. Their last-minute market gymnastics don’t change the fact that stocks are still overbought and a minor pullback is under way.

However, instead of watching the Greek drama, watch the movement of the dollar. Its 50-day moving average is a major technical barrier, which, if overcome, could lead to a decline in stocks.

SPX Chart
Click to Enlarge

And the S&P 500 is very close to major resistance at 1,356 to 1,371 (the high of last year). The near-term guideline has become clear. A violation of the support line at 1,333 will no doubt lead to a decline, and the penetration of the high at 1,371 should be followed by a major rally. But even if the 1,322 to 1,333 zone doesn’t hold, the overall trend is still up and weakness should be used as a buying opportunity.

Three Reasons To Own Eni : BP, COP, CVX, E, XOM

The Italian government announced January 20 that it plans to force Eni SpA (NYSE:E), Italy's largest oil and gas company, to sell its 52.5% ownership stake in gas distribution network Snam Rete Gas SpA. For years, competitors have accused Eni of using its ownership stake in the pipeline operator to keep prices high. New York-based asset manager Knight Vinke believes the sale of Eni's stake in SRG is a good move that will lower debt while placing greater emphasis on its utility operation, which is more easily valued. In the end, Knight Vinke believes Eni's true value is much higher.
Sum of the Parts
Knight Vinke divides Eni into five major segments with the two largest being exploration/production and gas/power. Valuing its upstream activities using debt adjusted cash flow (DACF), the asset manager suggests the assets are worth between about $79.4 billion and $97.1 billion, using the most recent currency exchange. This valuation puts its enterprise value to DACF multiple at 5.1 times its 2012 estimate, which is less than Exxon Mobil (NYSE:XOM) and ConocoPhillips (NYSE:COP), but slightly higher than both BP (NYSE:BP) and Chevron (NYSE:CVX). Let's split the difference, giving its upstream business a value of $88.3 billion.

Its gas and power business can be divided into five parts, with its 52.5% interest in SRG currently worth $29.3 billion on the Milan Stock Exchange. What price it is ultimately able to secure for the pipeline operator is tough to predict, given the state of the European economy. Knight Vinke attaches a value of $18.8 billion for the remaining four units, and a total of $48.1 billion for the gas and power operations in their entirety.

Of the remaining three segments, its oil services and engineering business carries the most value through its 43% interest in Saipem, which provides drilling and other services to oil and gas companies offshore and on. Again splitting the difference, the segment's value is roughly $18.3 billion.

Add everything together and the asset manager reckons Eni is worth somewhere between $100.1 billion and $123.3 million after subtracting $51.8 billion in debt. Its current market cap is approximately $82.6 billion, meaning it could be undervalued by as much as 33%.

Mozambique & Libya
In October 2011, Investopedia's Eric Fox detailed Eni's giant natural gas find offshore from Mozambique. The find is estimated to be anywhere from 15 trillion to 22.5 trillion cubic feet of gas. It is likely the largest operated discovery in its history. By 2018 and $50 billion later, it anticipates the Mamba South One prospect will lead to tremendous oil and gas development in the region, with much of the production destined for regional and international markets.

In Libya, Eni expects to restore its hydrocarbon output within 12 months. Prior to the war in Libya, Eni was producing 280,000 barrels a day of oil equivalent and had the largest foreign-owned operations in North Africa. Bernstein Research suggested in a report in late October that Eni's business will get even stronger as it brings more gas from Libya. Furthermore, given its exploration success in 2011, the sell-side research firm feels Eni is undervalued compared to its peers.

Share Price
Those unsure about making an investment in Eni should consider the history of its stock. Over the last seven years, it's traded below $40 for all of three month or less than 5% of the time. Since 2008, it's been relatively range bound above and below the $50 mark. In those three years, it's averaged a dividend yield of 4.6%. In the past 10 years, its total return on the upside has averaged 22.8% annually with seven years in the black.

On the downside, it averaged a loss of 14.1% annually in three losing years. However, when you consider that almost 70% of its losses were in 2008; a year in which the S&P 500 lost 37% compared to its own loss of 29%, you have to feel pretty confident about the future movement of its share price. At least I do.

The Bottom Line
Whether or not Eni is worth $55 or more is immaterial in my mind. What's important here is that you have an opportunity to buy into an international business with a good dividend and excellent potential for the future. The icing on the cake will come when investors realize the mispricing in its stock. Until then, enjoy the dividend and if it should happen to fall below $40, you should look to buy.

McAlvany Weekly Commentary

Dirk Steinhoff: Eurozone Disaster