Equity Investing

Over the last few months, our team at Investomax have been working hard to deliver breaking news and opinion.  We have analyzed major economies and have identified potential opportunities to earn risk reward returns.  Our approach is global macro, we don’t limit ourselves to North America.  Therefore, we look for profitable investments in all countries.  Once we have identified potential targets we use a Top- Down approach to find key players and potential opportunities within each specific industry. 

From an equity standpoint we strongly recommend you consider the following stocks in your portfolio

3D Printing

3D Printing will change everything from medical implants to how companies manufacture goods. 
Here is how it works

 

3D Systems Corp.  (DDD. NYSE)  
This company has personalized the 3D-printing process. What was once used in large scale prototype manufacturing is now available for home users.  In future years we expect to see this technology in the design of organs such as kidneys. Patient receives 3D printed bladder (starts at 10minutes)

Gold Stocks

With Gold reaching all time highs, gold companies will start production of new mines and engages in M&A.
Senior Gold Companies to consider are
BarrickGold (ABX:TO) and GoldCorp (G.TO)
Potential takeovers to consider are
Nova Gold Resource(NG.NYSE)
Cramer jumped on the bandwagon see clip.

Centamin plc. (CEE.TO)  and St. Andrew Goldfields (SAS.TO)  have very attractive deposits with a relative small market cap.

Canadian US Housing play.

Recent figures have shown that Canadian Housing specifically in the GTA have declined.  August sales are down 64% from last year.  Vancouver is showing greater signs and we expect this trend to continue.  On the flip side, US housing starts have increased due to all time low interest rates.
We recommend going long on US homebuilders ETFs and Short Canadian mortgage companies like Home Capital.
ITB.NYSE

HCG.TO

Is Now a Good Time to Invest in Currencies?

If you are looking to invest your money somewhere, currencies like the Euro or the U.S. dollar may not be the best option for you right now. Although currencies have always been a significant component of pension funds in countries like the U.K. and the U.S., since the market crash of 2008 currencies have had a less than stellar performance as an investment instrument. Up until the crash, a successful investment strategy was to borrow in a currency that had a low yield and use that money to invest in a currency that had a high yield. That story changed after 2008. In terms of performance, last year was perhaps as bleak as it would get for top currency indices.  Considering the debacle in which the European Union is right now, it might not come as a surprise that the Euro has been getting weaker and weaker every month for the past twelve months. Here is a chart highlighting the Euro’s performance against the Canadian dollar for the past five years:

 

 

For those Europeans who saw this coming, even as late as six months ago, a good investment strategy would have been to get into a currency future. A currency future is a futures contract to exchange one currency for another at a specified date in the future at a price (exchange rate) that is fixed on the purchase date. 

Economics 101 tells us that the above graphical trend makes European imports cheaper for Canadians and Canadian exports more expensive for Europeans. Luckily for Canada, exports make up only 29 percent of the country’s GDP. That somewhat explains why Canada’s GDP continues to grow despite the adverse global conditions. Moreover, the USD-CAD exchange rate has been hovering at around parity for almost a year now (see below). Despite Canadian exports becoming more expensive for Americans, the United States continues to be Canada’s biggest trading partner. With the Canadian dollar being as strong as it is, it would be to Canada’s advantage to form ties and trading agreements with emerging markets as opportunities for trade are aplenty across the Pacific and Atlantic oceans. 

 

Individuals looking to invest in currencies can also use the same proposed strategy on a micro level.  Analysts say pension funds are nowadays “investing in emerging market currencies, though this is currently more popular among UK funds than those in the US”.

The Bottom Line:

If you are thinking of investing in currency these days, it is much better to expand your horizons and invest in emerging market currencies rather than one of the top currency indices. In the long term this is a much better investment strategy, as returns on these sorts of currency investments are expected to be considerably high according to experts and trends. 

Ali Kazerani

Weekly Review

 

What a week!  Looks like the major central banks fired some bullets with the intent to fuel the economy.  Lets take a further look into specific regions...........

China
This is the second time in a month (second time in four years!)  that the Peoples bank of China have cut interest rates.  One year lending rate decreased 31basis points and one year deposit rates dropped 25 basis points. 
The effects were felt immediately! Chinese property shares rose the the most in four months.  The Shanghai Composite Index added 350basis points.  Companies like China Vanke and Poly Real Estate Group benefited from this despite governments restriction on the property market.  Lets keep in mind that Chinese rates are currently sitting at 6% which gives them lots of fire power.

Eurozone
ECB president Mario Draghi adopted Bernanke style Economics by cutting the Benchmark rate to a Record Low of 0.75% and the overnight deposit rate to 0!  Unlike China's 6%, the ECB doesn't have much fire power left and will eventually fall into a liquidity trap. 
How have the European markets responded?...............Not Good!.  Despite the the rate cut and the EU plans to recapitalise the banks, Spanish yields are back up to 6.95% from 6.25% earlier this week (7% is very likely a tipping point).  There's not much the ECB can do now without some sort of Fiscal unity.  I say lock the EU leaders up in a cabin somewhere in the Alpes and don't let them out until they reach an agreement. 
Will the Euro Zone break up?...............  Roger Bootle thinks so, he is managing director at Capital Economics Ltd and talks about the outlook for the euro zone, central bank rate cuts and monetary stimulus. Bootle recently won the Wolfson Economics Prize for proposing a contingency plan for the breakup of the euro. 

England
Recovering from the Rupert Murdoch scandal of last year, England was hit with another one.  The Bank of England has been drawn into the scandal over Barclays Plc's rigging of LIBOR rates.  Nonetheless, the Bank of England raised its target for bond purchases by 50billion pounds to stimulate the economy.  The Bank has grown particularly concerned that rising borrowing costs could trigger defaults that cause bank losses to mount, setting off “an adverse feedback loop” that would weigh on economic growth and threaten the health of the financial system as a whole. Barclays is the most exposed of all UK lenders to the eurozone periphery, with loan and sovereign debt exposures equivalent to 170% of its entire equity capital. Royal Bank of Scotland also has dangerously large total exposures to the region.

US
After the FOMC and the extension of Operation Twist on June 20th we saw positive signs in the economy.  Home sales rose the most since April 2010 and the markets showed some signs of improvements.  But what's really happening? In the last month, two municipalities of California, Stockton and Mammoth Lakes filed for Bankruptcy.  A bad economy, housing problems and unfunded pension obligations seems to be the root cause of the problem. 
Just look the numbers! official data showed firms had created only 80,000 new jobs in June, leaving the jobless rate unchanged at 8.2%.  Job creation remains below the 100,000 judged necessary by the Federal Reserve for a stable job market, according to the US Labour Department.
So what will the Fed's do now?  Do I smell QE3?  TD economists tend to think so placing the odds of a third round of quantitative easing at  a relatively high possibility!