Tuesday, March 27, 2012

BRICs’ move to unseat US dollar as trade currency

South Africa will this week take some initial steps to unseat the US dollar as the preferred worldwide currency for trade and investment in emerging economies.

Thus, the nation is expected to become party to endorsing the Chinese currency, the renminbi, as the currency of trade in emerging markets.

This means getting a renminbi-denominated bank account, in addition to a dollar account, could be an advantage for African businesses that seek to do business in the emerging markets.

The move is set to challenge the supremacy of the US dollar. This, experts say, is the latest salvo in the greatest worldwide currency war since the 1930s.

In the 30s, several nations competitively devalued their currencies to give their domestic economies an advantage over others.

And this led to a worldwide decline in overall trade volumes at the time. (more)

Jim Rogers on Being Successful, Investing in the Future, and Preparing for Civil Unrest

Future Money Trends just released a new inter­view with investor Jim Rogers. This inter­view focuses on how to sur­vive and thrive in the cur­rent econ­omy, what degrees, what busi­ness, and what would a young Rogers do today if he wasn’t already rich, and how he would re-build his empire in today’s environment.

Natural Gas Producers Are A Bargain: BHI, CHK, DVN, FCG, FST, KWK, UPL

What a difference a few years makes. After experiencing a virtual drought of natural gas and $15 per million BTUs pricing, the United States is awash in a sea of the fuel. New advances in drilling techniques have allowed a variety of E&P firms to tap into the nation's shale formations and finally access the trapped hydrocarbons. However, retrieving this abundance has had some unintended consequences. Now faced with a glut, natural gas prices have fallen to their lowest levels within a decade and many producers have begun ending production. Given these historically low prices, now could be the best time for investors to add the sector to a long-term portfolio.

A Glut of Gas
The growth in hydraulic fracturing is causing a major headache for natural gas producers, as the drilling technique is causing a dearth of fuel. Without a real source of domestic demand, storage levels within the U.S. have risen rapidly and currently sit at 2.7 trillion cubic feet. That's more than 45% higher than a year ago and nearly 52% higher than five-year averages. This has resulted in a price slide not seen in decades. Overall, prices for natural gas futures have fallen about 80% since 2005, when the fuel was trading as high $15. Since the beginning of the year, prices have continued their slide downward and now have reached a decade low of $2.27 per million BTUs.

These decreasing prices have caused a variety of E&P firms to cut production in the face of unprofitable conditions. According to oil service firm Baker Hughes (NYSE:BHI), the number of rigs looking for natural gas have dropped by 212 versus a year ago. Likewise, share prices for many firms associated with the sector have decreased as well.

However, there may be signs that things are turning around for the industry. First, many analysts believe that prices for natural gas will have to rise, as they are currently below the marginal cost of production for many drillers. As various hedges begin to expire, you'll see more E&P firms cut production and drive-up prices. Secondly, while storage levels continue to be high, they have been dropping. According to the EIA's latest storage report, inventories have fallen for the 17th consecutive week and represent a 38% reduction in storage during the past four months.

Playing The Turn Around
Overall, the International Energy Agency (IEA) estimates that global consumption of natural gas will rise by more than 50% over the next 25 years. That's certainly a bullish long-term prediction and many analysts estimate that current natural gas pricing can't get much lower. Now could be the best time for investors to strike. Featuring exposure to a who's who of natural gas firms, including like Chesapeake (NYSE:CHK) and Ultra Petroleum (NYSE:UPL), the First Trust ISE-Revere Natural Gas ETF (NYSE:FCG) is still the easiest way to gain access to the producers of the fuel. The fund tracks and equal-weights 29 of the largest E&P firms that derive the majority of their revenue from natural gas. The ETF charges 0.60% in expenses and has been roughly flat since its inception.

Recently receiving attention from a variety of foreign sources has been producer Devon Energy (NYSE:DVN). The firm recently cut a $2.2 billion deal with China's Sinopec (NYSE:SNP) for a piece of its production from five different fields. The deal provides Devon with a large cash infusion to continue carrying out expensive unconventional drilling. Shares of Devon currently can be had for a dirt cheap P/E of less than seven and currently yield 1.1%. Similarly, Quicksilver Resources (NYSE:KWK) can be had for a P/E of about 10.

The Bottom Line
Given the advances in drilling techniques, natural gas prices have continued to fall by the wayside. However, production cuts at a variety of firms may be finally working. The sector's turnaround could be at hand. For investors, now could be the best time to pounce. The previous picks, along with Forest Oil (NYSE:FST), make ideal selections to play the rebound.

The First Crack: $270 Billion In Student Loans Are At Least 30 Days Delinquent

from Zero Hedge:

Back in late 2006 and early 2007 a few (soon to be very rich) people were warning anyone who cared to listen, about what cracks in the subprime facade meant for the housing sector and the credit bubble in general. They were largely ignored as none other than the Fed chairman promised that all is fine (see here). A few months later New Century collapsed and the rest is history: tens of trillions later we are still picking up the pieces and housing continues to collapse. Yet one bubble which the Federal Government managed to blow in the meantime to staggering proportions in virtually no time, for no other reason than to give the impression of consumer releveraging, was the student debt bubble, which at last check just surpassed $1 trillion, and is growing at $40-50 billion each month. However, just like subprime, the first cracks have now appeared. In a report set to convince borrowers that Student Loan ABS are still safe – of course they are – they are backed by all taxpayers after all in the form of the Family Federal Education Program – Fitch discloses something rather troubling, namely that of the $1 trillion + in student debt outstanding, “as many as 27% of all student loan borrowers are more than 30 days past due.” In other words at least $270 billion in student loans are no longer current. That this is happening with interest rates at record lows is quite stunning and a loud wake up call that it is not rates that determine affordability and sustainability: it is general economic conditions, deplorable as they may be, which have made the popping of the student loan bubble inevitable. It also means that if the rise in interest rate continues, then the student loan bubble will pop that much faster, and bring another $1 trillion in unintended consequences on the shoulders of the US taxpayer who once again will be left footing the bill.

Read More @ ZeroHedge.com

Forget Money On The Sidelines, Institutional Investors Are All-In


We have discussed the money-on-the-sidelines fallacy a few times recently in the context of the circular money-flows (clear misunderstanding of the idea of a buyer and a seller) as well as mutual fund cash levels, retail sentiment, demographic shifts, and insider transactions. There is mounting evidence, as Morgan Stanley's Michael Wilson notes, that 'make no mistake...institutional investors are all-in' as the rolling beta of mutual funds relative to the S&P 500 tops 1.10x at multi-year highs, institutional investors are most exposed to high beta sectors since MS data began, and long/shorts funds are near their most levered long since MS records began. Combine this with the massive surge in Insider Selling transactions in the last few weeks (apropos Charles Biderman's comments on the rally's support by Insider buying til now) and perhaps bearish retail sentiment will lead this market down as we hope that finally 'money-on-the-sidelines' fades from the parlance of all but the most aged and incompetent of market prognosticators.

Mutual Fund 1 Month Rolling Beta vs S&P 500 at record highs and well over 1x...

The percent of institutional investors who are most overweight the high beta sectors is at record highs...

And long/short funds are increasingly highly levered long with Gross (Delta-adjusted) near record highs... (more)

Lindsey Williams - Alex Jones Show Sunday 25 March 2012

On the Sunday edition of the Alex Jones Show, Alex talks with pastor and author Lindsey Williams about the timeline on the financial crash, what currency is a safe bet, and why Obama may not be re-elected due to his involvement in Keystone Pipeline.

Richard Russell – Gold & Silver Being Bought Up By Billionaires

King World News
March 25, 2012

With gold remaining in a trading range below the $1,700 level, the Godfather of newsletter writers, Richard Russell, had this to say about what is happening with regards to gold, silver, stocks, inflation and the Fed: “Technically, both the US and Europe are dead broke, and their GDPs would have to run wild on the upside to make the debt to GDP ratio more acceptable. How will it all end? It will end with the central banks churning out junk fiat inflation-adjusted money in order to service the debts. Meanwhile, the precious metals and other tangibles are being bought up by millionaires and billionaires as they await their turns to feast on the remnants.”


Pento – Ultimate Collapse & Real Reason Interest Rates Rising

from King World News:

Today Michael Pento accused the mainstream media of misleading the public once again. Pento, who founded Pento Portfolio Strategies, writes exclusively for King World News about the ultimate collapse and the real reason interest rates are rising: “The prevailing notion among the mainstream media and economists is that interest rates are rising because of improving economic growth. But like many of the readily accepted tenets of today’s world of popular finance, this too has its basis in fallacy.”

Read More @ KingWorldNews.com

Young Consumers Pinch Their Pennies

Millennials were supposed to be the next golden ticket for retailers. A cohort of 70 million consumers roughly between the ages of 18 and 34, this was the first generation of Americans to grow up with cell phones and the Web. Marketers could reach them in myriad ways—tweets, Facebook pages—that were unavailable when their boomer parents started out. “Marketers thought, ‘Here come the Millennials, we’re going to have an awesome time selling to them,’” says Max Lenderman, a director at ad agency Crispin Porter & Bogusky. “They were waiting for a boom. Then comes the financial crisis, and all of a sudden the door has almost slammed in their face.”

No group was hit harder by the Great Recession than the Millennials. Their careers are stalled. They hold record levels of education debt. And an estimated 24 percent have had to move back home with parents at least once, according to a recent Pew Research Center survey. Almost a quarter of them describe lives of financial desperation, reports researcher WSL Strategic Retail. “It’s a culture shock because this generation has grown up entitled,” says Wendy Liebmann, WSL’s chief executive officer.

That’s bad news for the movie studios, clothing retailers, and home improvement chains that had hoped for better. Walt Disney (DIS) and Sony Pictures Entertainment (SNE) need Gen Y-ers to fill seats at summer blockbusters. Gap (GPS) and Abercrombie & Fitch (ANF) are counting on 18- to 34-year-olds because they typically spend big on clothes. Williams-Sonoma (WSM) and Home Depot (HD) thrive on household formation—economist-speak for marrying, having kids, and buying a home—but many cash-strapped Gen Y-ers have put those modern rites of passage on hold. Twenty percent of 18- to 34-year-old respondents in a recent Pew survey said they had postponed marriage for financial reasons, while 22 percent put off having a baby for similar reasons.

It’s easy to understand why: In 2009 households led by those younger than 35 had 68 percent less inflation-adjusted wealth than such households in 1984, according to Pew in November. That compares with a 10 percent increase in net worth for all Americans over the same period. One contributing factor: Average student loan debt for 2008 grads receiving bachelor’s degrees hit $23,000, up 35 percent from $17,000 in 1996.

Getty Images(7); Corbis(1); Bloomberg(1)The job climate also hurts. The share of employed 18- to 24-year-olds in 2009 was 54 percent, the lowest since the U.S. began collecting data in 1948. “This customer doesn’t pay up for product, and they might not turn into a 45- to 50-year-old who will,” says Eric Beder, an analyst at Brean Murray Carret. “Retailers need to worry about how to build a relationship with this consumer.”

Hooking this generation was always going to be a challenge. Plugged into the Web’s endless information and choices, Millennials are pickier and less brand loyal than their parents. They also came of age amid eroding respect for institutions, including corporations and brands. Even before the recession they craved authentic products—for example, buying footwear from Toms Shoes, which donates a pair to poor children for every one it sells. The Millennial credo is “buy less and do more,” says David Maddocks, who runs an eponymous consulting firm that’s advised such brands as Nike’s (NKE) Cole Haan and Keds. “Boomers were about abundance, whereas this generation is about having enough.” The disproportionate impact of the recession could make Gen Y even less acquisitive.

Carmakers have struggled to woo the group. While Toyota Motor’s (TM) Scion has the youngest buyers of any car brand, sales have been paltry. And Honda Motor’s (HMC) youth-oriented Element sold so poorly that it’s no longer offered in the U.S. Clothing chains, however, have little choice but to chase Gen Y. Americans 25 to 34 spend the most on apparel and services annually of any age group.

Gap’s namesake brand chose Millennials as its target customer in 2010 and has since run ads featuring residents in young, hip enclaves such as Austin, Tex., and done design collaborations with fashion blogs popular with younger consumers. “Based on our research, we know style is important to them and they’re willing to spend money on pieces that are ‘trend right’ yet timeless in terms of quality and style,” says Art Peck, president of Gap North America. Macy’s (M) on March 21 unveiled its own Gen Y program, saying it will use social media, mobile shopping, and merchandise designed around locales and lifestyles popular with Millennials (say, college town or first adopter) to boost sales to them.

Unfortunately, getting 18- to 34-year-olds in the door increasingly means discounting, says Beder. This age group “is only drawn in by sales and promotions,” he says. “Maybe they want to be wired and fashion-driven, but they’re not willing to pay for it.” So companies that want to attract Millennials often cut prices. MGM Resorts International (MGM) is offering spring break vacations at its Las Vegas properties starting at $29 a night with such perks as $25 buckets of beer and $1 Jell-O shots. After starting with its budget inns, MGM has expanded the deals—a room for $69 a night—to its higher-end Mandalay Bay and MGM Grand hotels.

Gen Y frugality could eventually hurt the luxury market, too, says Pam Danziger, president of research firm Unity Marketing. She says a 25-year-old who shops at Gap typically trades up to Nordstrom (JWN), Saks (SKS), and perhaps Tiffany (TIF) decades later. But today, Danziger says, “We have a group of people who are seeking only to live within their means.”

Aware that Millennials can’t afford its wares, Be & D, a New York-based purveyor of luxury bags and shoes, is layering in lower-priced goods, such as an entry-level tote for $300. The company doesn’t expect to generate many sales from Gen Y that way; instead it hopes to build brand awareness for the future. “Without that generation, we’re missing a huge percentage of sales,” says co-founder Steve Dumain. “We need to stay relevant to them and be patient as they eventually will come back.”

The bottom line: Retailers have long sought 18- to 34-year-olds. But with their wealth down 68 percent since 1984, spending is at risk.