Currencies

Buy, Sell or Hold: BHP Billiton is Poised to Pick Up Big Gains on the Back of a Global Commodities Bull

Face it, commodity prices are in a secular rally - and there are three big reasons why.

  • Loose Monetary Policy
  • Growing Demand in Emerging Markets
  • And the Congruent Devaluations of Major CurrenciesWe've already profited from this inflationary trend in the Money Map VIP Trader.  And - just like I did with the broadband revolution - today I am presenting you with a stock that stands to benefit from these developments - BHP Billiton Ltd. (NYSE ADR: BHP).
First, let's talk about policy. Immediately following the 2008 financial crisis, the Group of 20 (G20) countries agreed to stimulate their economies simultaneously.  And, while the emerging economies almost unanimously have already returned to strong rates of growth, most advanced economies are just now turning the corner.

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Why the Bulls Can Stand Strong at Home and Overseas

Stocks enjoyed another plus week, closing one of the better Marches of the past 80 years. It seems like ages since volatility has been this low, and there have been many complaints about complacency and listlessness. Yet those concerns may be misplaced if indeed we are enjoying the second leg of a normal bull cycle. Low volatility in a bearish phase does suggest complacency, to be sure, but in a bullish phase it serves more to keep expectations in check. 

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China Manufacturing Data Could Presage a Rising Yuan

Manufacturing activity in China and much of Asia continued to expand in March, underscoring the region's role as a driving force in the global economic recovery.

China's official Purchasing Managers' Index (PMI) rose to a seasonally adjusted 55.1 from 52 in February, according to Li & Fung Group, a Hong Kong-based company that releases data for the Federation of Logistics and Purchasing. It marked the 13th straight month the index showed expansion and was in line with the median estimate in a Bloomberg News survey of 13 economists. A reading above 50 indicates growth.

Another PMI for China released by HSBC Holdings PLC (NYSE ADR: HBC) was even more positive, showing a rise to 57.0 in March from 55.8 in February.

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Money Morning Mailbag: The Capital Wave That Could Blunt the U.S. Recovery

Question: How can banks justify not giving out mortgage money in light of the fact that they can now qualify their applicants to a level not previously seen? I am talking about literally millions of people applying for loans with 800-plus FICO scores and Loan-to-Value (LTV) Ratios that are better than ever before.

How can banks and lending institutions take our money and then turn around and shut nearly everyone out - which simply prolongs this recession? Can anyone explain why the present administration and regulatory bodies are not forcing the banks to loan monies to qualified applicants?

At this rate, we will be dead soon.   Without borrowing, we will die.  

•  (Signed) Living in Costa Rica

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Money Morning Mailbag: Capital Wave Investing Strategies Spotlight the World's Top Profit Plays

Question: Shah, your article on capital-wave investing was outstanding. In fact, I would love to see a follow-up piece for those of us who are not traders and who are not out and about following the current short-term market trends.

For example, when you talk about the Obama administration's determination to keep interest rates low - this has consequences. What will those rates be in, say, a three-year to five-year time frame? What if the European countries keep having implosions like Greece - meaning that countries like Portugal, Spain and Italy follow suit?

In your opinion, will that eventually sink the euro, or does the Eurozone have to bail out those countries with a plan that's similar to the one that it is developing for Greece? What happens to other currencies in either of these scenarios?

Finally, is it your opinion that China is trying to curtail its growth to keep itself from overheating? Can Beijing successfully continue to do this - or will this blow up in China's face? If you look down the road, say, three to five years, what do you believe the consequences, if any, will be?

Again, Shah, this was a really informative article. I would love to hear your views on what you actually see playing out in each of these areas during the next few years.

Answer: Thank you for your kind words about the article and for taking the time to pose your questions - which are excellent ones, by the way. Let's take a look at them, one at a time...

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Goldman Backs Money Morning Prediction That China's Yuan Will Dethrone the Dollar

Back in May, just after he'd completed his latest investing tour of China, Money Morning Chief Investment Strategist Keith Fitz-Gerald made a bold prediction: China's currency, the yuan, is destined to dethrone the U.S. dollar as the world's chief reserve currency.

Earlier this week, Fitz-Gerald's prediction acquired a powerful new disciple: Goldman Sachs Group Inc. (NYSE: GS) Chief Economist Jim O'Neill.

In an essay that's part of a report published Friday for Chatham House, a London-based foreign-affairs researcher, O'Neill wrote that China's yuan is destined to become a global reserve currency on par with the U.S. dollar or European euro.

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How Capital Waves Are Creating the Biggest Profit Opportunities in Today's Markets

Back when oil was trading at a record high of $145 a barrel - and was generally expected to go higher - I concluded that the forces at play were speculative, not fundamental - driven by new institutional money looking to diversify away from too many concentrated equity bets. I argued these forces were temporary, and not entrenched, meaning that oil prices were actually headed for a fall.

The "forces" I was referring to are called "capital waves." Capital waves create some of the biggest trading opportunities in the markets today. Investors who are able to spot capital waves and identify their likely impact have a huge advantage over those who don't.

With oil, for instance, pundits were calling for new highs of $200, $250, $300 and even $500 a barrel. But behind the curtain, there was a major capital wave at play: I knew that oil was being pumped out of the ground like mad, and that shipping rates were exploding because oil was being stored in offshore, idled tankers. I knew that as little as $20 billion had been "re-allocated" out of the equity markets and into this new-asset-class investment for pension fund accounts.

As a speculative frenzy seemed to be enveloping the oil market, I called for oil prices to plummet - to more than a few looks of incredulity or outright guffaws.

When the secondary capital waves took hold, the speculative advance in oil prices first stalled - and then oil prices plunged as capital exited in another wave.

Don't feel bad if you missed this opportunity. That's the important thing to remember about capital waves - they're out there if you know where to look and how to interpret them. In fact, as good as this oil play was, I see even better opportunities ahead.

To learn about the Top Five "capital waves," read on...

Currency Intervention Won’t Halt the U.S. Dollar’s Nosedive

By Peter D. SchiffGuest Columnist Last week the U.S. Federal Reserve moved one step closer to acknowledging reality. Unfortunately, it didn't let that admission move it from a policy course firmly guided by fantasy – meaning the central bank opted to stand pat on interest rates, despite the clear escalation of inflationary pressures. In the […]

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Analysts Anticipate an International Intervention to Rescue Falling Dollar

By Jason Simpkins Associate Editor Central banks around the globe could launch an initiative to buoy the dollar, as the greenback’s continued slide seems to warrant foreign intervention. “We’re on intervention watch,” Stephen Jen, head of foreign exchange research at Morgan Stanley (MS), said in an interview with Bloomberg News. “While I don’t think we […]

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The Five Top Plays to Profit from the Gold Boom

By Martin Hutchinson Director of Global Investing Research [Editors Note: The Second of Two Parts. To Read Part I of this story, please click here]. If you were a gold investor back in the good old days of 1895, life was pretty easy. You'd spend the day in a huge leather armchair at your London […]

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With Oil, Uranium and Gold, There’s Nothing Crazy About This Canadian Loonie Tune

By Martin Hutchinson Director of Global Investing Research The Canadian dollar – also known as “The Loonie” – moved above $1 last week, an extraordinary turnabout for a currency that was languishing down around $0.62 in January 2002. Americans are used to acting somewhat condescending toward their northern neighbor, but in this period of high […]

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Canadian Dollar Reaches Par Against the Greenback

From Staff Reports The Canadian dollar rose to parity against the U.S. dollar for the first time since 1976 yesterday (Thursday), supported by surging oil prices and broad weakness in the greenback, the Financial Times reported. RBC Capital Markets analyst Adam Cole expects the Canadian dollar to continue its upward trajectory. The reason: “Canada produces […]

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Investments For A Weak Dollar World

By Martin Hutchinson Director of Global Investing Research The European euro hit a record value of $1.39 this past week, and the Japanese yen strengthened again to 114 to the dollar, well above the 120 it’s traded at most of the year. The British pound Sterling is at $2.03, back to levels it hadn’t seen […]

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Euro Debt Market Faces 'Pivotal' Test With $140 Billion Maturing

From Staff Reports Companies in Europe face a situation in which they need to refinance nearly $140 billion worth of commercial by the end of next week, according to Deutsche Bank AG, Germany's biggest bank. This will increase corporate borrowing costs. According to Bloomberg News, Deutsche Bank Credit Strategist Jim Reid wrote in a research […]

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Asian Markets: Pounded in Friday, Soar Today

From Staff Reports Asian shares were pounded Friday in the wake of continued turmoil in the global credit markets. But then they soared today (Monday) in a powerful rebound, fueled by the U.S. central bank's interest-rate action on Friday. In Japan, shares suffered their worst single-day decline in seven years – with heavy selling in […]

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