Silver to continue its run but next big move to belong to gold - RBC

by Geoff Candy

According to RBCCM, silver is likely to continue to perform in the short to medium term but supply side issues are likely to cap prices in the longer term.

While gold's record-breaking run through $1,500 an ounce has been impressive, it is silver's performance year-to-date that has caught many an investor's attention.

And, while just eight months ago, the ratio of silver price to that of gold was 68:1 eight months ago, at the time of writing the frequently watched measure sat at 33:1.

And, while there are some that expect the silver to continue closing the gap between it and its yellow sister, some, like RBC Capital Markets think that the next leg of the race is going to belong to gold.

However, the bank says the move is not going to happen in the short term.

"Our new silver price forecasts assume that the gold:silver ratio stays in the 40s:1 for the next several years. We do not expect gold to rally while silver falls, but rather we believe that two more likely scenarios would be either a pullback in both metals (with silver declining at a greater rate than gold) or gold outperforming silver during the next upward rally in both metals." RBCCM says.

Over the short to medium term, the bank remains rather bullish on silver for a number of reasons. Firstly, the bank is bearish on the outlook for the U.S. dollar as it expects "The U.S. Government and the U.S. Fed to walk a tightrope of fiscal stability, with potential difficulties in extracting the record liquidity that was injected into the system over the past couple of years." It says that these difficulties are likely to weigh on the performance on the currency and thus be generally positive for precious metals."

Secondly, the bank paints a rather bullish picture of demand, particularly investment demand, over the 1 to 3 year horizon.

While traditionally, silver demand has come predominantly from industrial uses, jewellery and photography, the rise of digital photography has seen silver demand from that sector wane. This, decline has, however, been more than covered by the rise in demand from silver ETFs, which grew to account for 17% of total silver demand in 2010, up from 15% in 2009 and 5% in 2008.

With the enhanced transparency of the various silver ETFs (which trade on several regulated exchanges around the world), both retail and institutional investors have shown a renewed interest in silver investing," the bank writes.

Adding, " For 2010, total silver ETF holdings grew by ~115 million oz, including 45 million oz for the SLV. Looking ahead through 2011, we expect continued strength, perhaps at similar levels to 2010, with our forecast of 125 million ounces."

As a result of these factors and largely stable supply, at least in the short term, RBCCM has revised its price forecasts for the metal.

It now expects silver to average $37.50 in the second quarter of this year, $34.14 in Q3 and $36.50 in the last quarter of 2011.

That said, the bank does have some "medium- to longer-term concerns due to increasing primary silver mine supply, which we believe could eventually cap the upside for silver prices."

According to RBCCM, primary silver production is expected to increase in the near future with a couple of large scale operations either currently ramping up or slated for start-up over the next few years, including: Tahoe Resources' Escobal project in Guatemala and Pan American Silver's Navidad mine in Argentina.

By-product production is also expected to increase over the next five years with the ramp up of Barrick's Pascua-Lama operation and Goldcorp's Peñasquito mine.

While some of this output will be offset by the closure of existing capacity, RBCCM says "These new primary and by-product operations could add over 100MM oz of annual silver production (+14% of global mine supply)."

It adds that, one also needs to take into account the role of China, which is difficult to accurately estimate given the preponderance of thousands of small producers.

CHINA MAY BE INCREASING ITS SILVER STOCKPILES

"China's stockpiles were created by an over-production of silver mining during the 1970s and 1980s. From the early 1980s, production expanded rapidly, so that by the end of the decade, mined output had substantially exceeded local demand" says the bank. "Given lower reported exports of silver for the last few years, in our view China has been either using silver production domestically or increasing stockpiles of silver. While we expect there has been a growth in domestic Chinese demand for silver, the increase in copper and lead/zinc concentrates imported to China for processing by smelters has, we believe, yielded much more silver by-product than domestic demand growth."

It adds, "While total global aboveground stocks may have declined to a few hundred million ounces of silver or less, our supply/demand forecasts suggest these levels may be sufficient to meet the demand gap for a number of years should they enter the market."

As a result of this, The bank believes that silver is likely to average $35 in 2012, before falling to $27.50 in 2013, $25.00 in 2014 and $22.50 in 2015.

See the original article >>

Will sugar market's uncanny echo of 2010 continue?

by Agrimoney.com

Is the sugar market going back to the future?

The resemblance between prices this year and last is striking. New York futures in early February set a record high of 36.08 cents a pound nearly to the day when they set a high last year.

And, on both occasions, the peak has been followed by a rapid decline - albeit last year's, at approaching 60% peak to trough, proving nearly twice as large as the correction suffered this year.

"The market is wary that the current sell-off could continue to mimic the 2010 experience," Luke Mathews at Commonwealth Bank of Australia said.

In which case a sustained rebound in prices, starting early next month, would be on the cards.

Canaplan vs Unica

Such fears have gained been given increasing credence by renewed worries about Brazil, the top sugar producer and exporter.

Analysis group Canaplan estimated the crush from Brazil's Center South region, the main producing area, at 541m tonnes – 28m tonnes less than the figure from industry association Unica.

Canaplan estimated the region's sugar output at 32.1m tonnes, 2.5m tonnes below the Unica figure.

"This has caused market participants to question previous assumptions about sugar availability this season in the Center South," Nick Penney at Sucden Financial said.

'Logistical jams'

Concerns have also re-emerged that buyers may be forced to run the gauntlet of limited port facilities that hampered shipments last year.

Attache estimates for Brazil sugar, 2011-12 and (year-on year change) Cane production: 631.0m tonnes, (+2.1%) Sugar-ethanol split: 46.6%-53.4%, (45.95%-54.05%) Sugar production: 39.6m tonnes, (+3.8%) Sugar exports: 27.3m tonnes, (+6.4%) Domestic use: 12.55m tonnes, (+4.6%) Ending stocks: -585,000 tonnes

Mr Penney clocked "fears that an expected large line up of vessels will materialise at the beginning of the crush season - similar to that experienced last year - and a lack of sugar at port terminals causing logistical jams".

And, after all, US Department of Agriculture attaches overnight estimated the rise in Brazilian exports at 6% in 2011-12, half the rate of increase the country has enjoyed so far in the 2000s, citing an ageing and less productive cane crop and growing domestic consumption.

Furthermore, mills are coming under increasing pressure to direct cane at ethanol, and keep domestic fuel prices in check, rather than manufacture sugar, and solve (albeit at a profit) importers' problems.

This was already evident in a revived premium in New York's July lot over the sugar for October delivery, Mr Penney said. In midday deals, the premium had recovered to 0.24 cents a pound, from 0.06 cents a pound at last night's close.

'Historically elevated'

Mr Mathews noted another bullish signal. "The recent improvement in the [London] white sugar-[New York] raw sugar futures spread indicates that physical demand may enter the market at these levels."

Indeed, he forecast that the correction this time would not prove "as severe" as last year's.

"The downside risks to Brazilian sugar production, and therefore exports, suggest that global sugar prices should remain historically elevated over the coming six-to-12 months," he said, adding that the likelihood of Chinese buyers stepping in looked set to limit price falls too.

'Downside risks'

However, nor did he foresee prices bouncing as hard as they did last year, forecasting New York sugar ending the year at 23.20 cents a pound.

It ended last year at 32 cents a pound.

And in 2011-12, the world looks like having more sizeable exports from India, the second-biggest producer, to count on with USDA attaches pegging the increase in shipments at 1m tonnes, to 1.8m tonnes, with output boosted by the impetus that higher prices have given to cane planting.

"The downside risks are mounting," Mr Mathews said.

See the original article >>

Silver Breaks Above $46 on Short Squeeze Rumour

By: GoldCore

Gold and silver have surged to new record nominal highs in dollar terms (all time and 31-year) with the dollar falling sharply on international markets. Silver has continued to surge in all currencies and has surged to a new record nominal high of $46.25/oz (£27.85/oz and £31.54/oz) on growing rumours of a short squeeze involving a billionaire or state interest attempting to corner the silver market (see FT news story below). 

Bloomberg Composite Silver Inflation Adjusted Spot Price – 1975-2011 (Weekly) 

Traders and technically minded investors are firmly focused on silver’s record nominal high of $50.35/oz. Some with a longer term fundamental focus continue to see silver in triple digits if it is to match the real record highs of $130/oz seen in 1980. The inflation adjusted silver chart puts the present sharp rise in the all important historical context. 

The massive concentrated short positions of some Wall Street banks have incurred serious losses and a desperate attempt to close their futures positions due to the tight physical marketplace may be leading to a short squeeze. This is something that GoldCore and a few other analysts have warned for some time. 

We have long said that the very small silver market was ripe for cornering by private or state interests and that appears to be happening on some level. However, there is an increasingly large number of silver buyers who realise the market can be cornered and they are buying in anticipation of this event. 

The blogosphere has again been ahead of the curve and dismissal of much circumstantial evidence of silver manipulation, a short squeeze etc. as “conspiracy theories” is becoming less easy to do. It looks like many investors internationally and one or a few private individuals and states are cornering the silver market. 

At one stage the Hunt Brothers cornering of the market was a “conspiracy theory” - it soon became fact.

Silver’s volatility is set to increase and sharp corrections are likely, however the sharp falls seen after the Hunt Brothers manipulation ended are unlikely today given the very strong supply and demand fundamentals. 

US Dollar Index – 5 Year (Daily) 

Gold’s movement today, unlike in previous weeks and months, is a function of dollar weakness as gold has remained at the same price in terms of other major currencies. 

The degree of complacency regarding the risk of the dollar coming under severe pressure remains high (as seen in Financial Times Lex column on gold and the US dollar today – see below). 

Below the lows of 71.32 on the US Dollar Index (see chart above) is unchartered territory and the US’ massive $14 trillion plus debt will likely lead to the dollar continuing to fall particularly against gold. In a worst case scenario, it could lead to a form of a run on the dollar when speculators smell blood as happened to sterling when the Bank of England was “broken” by George Soros.

Gold
Gold is trading at $1,503.80/oz, €1,031.34/oz and £907.49/oz.

Silver
Silver is trading at $45.80/oz, €31.41/oz and £27.63/oz.

Platinum Group Metals
Platinum is trading at $1,811.00/oz, palladium at $759/oz and rhodium at $2,250/oz.

News
(Financial Times) -- Silver surge prompts conspiracy theorists
In 1980 it was the Hunt brothers. In 1998 it was Warren Buffett. And in 2011? 

For anyone unversed in the history of the silver market, those dates refer to market squeezes that caused surges in the silver price. The talk among some conspiracy-minded traders and analysts is that something similar could be happening today. 

It is easy to see why: during the past 12 months the price of silver has risen 154 per cent, outpacing gold (32 per cent), wheat (65 per cent), oil (45 per cent), and indeed almost any investment you’d care to mention. 

Perhaps the most telling measure, the ratio between the price of silver and that of gold (ie the price of an ounce of gold divided by the price of an ounce of silver) has dropped to 33.5 times – after averaging 60-70 during the past decade. 

The last time the ratio fell even close to this level was in 1998, when Warren Buffett’s Berkshire Hathaway quietly accumulated a huge position in the silver market, driving prices up 90 per cent in a few months to what was then a 10-year high of $7.90. On Wednesday, silver hit $45.37. 

Before that, the last time the ratio was below 40 was in the early 1980s, following the most notorious silver market squeeze – that of William Herbert Hunt and Nelson Bunker Hunt, two billionaire oil baron brothers.

Is something similar happening today? 

The silver market is never short of a wild rumour. The difference this time, though, is that the conspiracy theories are being seriously considered by senior figures in the industry. 

As one senior banker puts it: “I just do think it has the smell of somebody with a pretty significant buying programme ... Silver is the sort of market that every decade attracts someone.” 

The reason why the conspiracy theories have taken hold is because few traders or analysts can see a convincing reason for silver’s astonishing rise. According to data from consultancy GFMS, the silver market was in a surplus of 178m ounces last year. 

Crucially, of course, that surplus was mopped up by investors. But visible investor positioning is hardly overwhelmingly positive – indeed, last week, even as silver prices rose, investors cut their bullish positions in the US futures market by 8.4 per cent. 

Hence the conspiracy theories. Some of the whispers making the rounds in dealing rooms in London and Zurich include: 

• A Russian billionaire with an eye for silver has been discreetly buying (for some reason Russia seems to be the most popular location of this putative billionaire – he or she could also be Middle Eastern or perhaps East Asian). 

• There has been a secretive silver buying programme by the People’s Bank of China or some other central bank (but China is the favourite). 

• Chinese traders are using silver imports as collateral to obtain credit in a similar way to copper – thus vastly inflating the country’s silver demand. 

It is impossible to say if there is even a grain of truth in any of these tales. While some traders are taking them seriously, others believe the rise in prices is perfectly well explained by very strong, inelastic industrial demand plus extremely high retail demand in the US, India and China. 

One explanation for why the silver market is confusing to many bankers and traders may be that they typically deal with large investors and so see little of the flow to retail investors and industrial consumers. 

What is certain, however, is that with the view that silver is a speculative bubble so widespread, a sharp and painful correction can’t be ruled out. 

Again, history may be informative. After the Hunt brothers’ squeeze in 1980, the price of silver collapsed 80 per cent in four months; the Hunts were later sanctioned for market manipulation and went bankrupt. 

And following Warren Buffett’s silver play in 1998, the price of the metal dropped 40 per cent and Berkshire Hathaway recorded its worst annual results on record, relative to the S&P 500, in 1999. 

(Financial Times ) -- Lex - Gold and the dollar: bottoms up
As of this week, one troy ounce of gold will cost you more than $1,500. Meanwhile, the US dollar, on a trade-weighted basis, is back to a post-crisis low. These facts are not coincidental, and reflect well-embedded trading trends that could persist for a while longer. They do not, however, cohere with events in the real economy.

Gold’s ascent has been far greater in dollar terms than when measured in other currencies. Worries about US inflation are part of this, as are low interest rates. The real interest rate on cash is the opportunity cost of holding gold – so, with rates historically low, there is less reason not to hold gold. 

“Carry trading”, as investors borrow at low dollar rates and park money elsewhere, is made easier by very low levels of volatility. That money generally finds its way into the emerging markets commodity complex.

But this reflects mutual confusion. Sharply higher commodity prices are – even hawkish central bankers concede – deflationary. Discretionary spending falls when non-discretionary spending on essentials has to rise.

Meanwhile, continued rises in commodity prices, and the flows of funds they bring with them, have prompted capital controls in countries such as Brazil, and repeated measures to tighten money and to limit price rises in China. 

And, despite all the betting on emerging market exports, the weak dollar has had a predictable effect – strip out petroleum costs and the US trade balance has steadily improved as the dollar has made US exporters more competitive. 

Such market inconsistencies can carry on for a while. But if investors want signals that the dollar has bottomed, note that volatility looks unsustainably low and that real interest rates cannot fall much lower and are likely to rise with the end of the Federal Reserve’s QE2 bond purchases. 

The dollar is now almost exactly back to its post-crisis low point from last year, a classic point for chart-driven traders to start buying it again. 

(Telegraph) -- Gold Price Could Rise to $1,700 An Ounce
Gold's decade-long rally could last for another four years, with the price climbing to $1,700 an ounce, analysts predicted, as the precious metal reached another record high in morning trading. 

Inflation will help the price of gold go up, but the strong gains seen in recent months are likely to be tempered as the world economy improves. 

A poll of 12 analysts by Reuters found the average price forecast for gold in 2015 was $1,700, a 12.7pc rise on the all-time high of $1,508 reached today. 

The forecasts ranged from $1,000 an ounce to $2,750, but even if the price reached the top end of that, the pace of gains would be slower than in recent years. 

The price of gold increased by 24pc in 2009 and 30pc in 2010. 

Today, the spot price rose as high as $1508.88 an ounce, before falling back slightly to $1507.45, a 0.3pc increase on yesterday's closing price. 

The metal's price is being supported by worries over European sovereign debt, fighting in the Middle East and the state of the US public finances, which are weighing on the dollar, the other traditional safe haven for investors. 

"The US effectively lost its triple-A rating in the eyes of investors that really matter quite some time ago, back when gold broke $1,000 an ounce," said Fat Prophets commodities analyst David Lennox. 

(Irish Independent) -- A golden opportunity beckons but can the metal keeps its shine
Investors turn to gold in times of trouble, but the herd instinct has run riot. 

Gold is a bubble and wise investors would do well to avoid its charms. You would think that in this country, after getting so badly burned by the property bubble, we would be wise to another ballooning bubble. But not a bit of it. 

As in a lot of countries at the moment, gold is proving to be a very popular investment. 

Investors generally buy gold as a hedge against any economic or currency crises. But gold is displaying the classic characteristics of a bubble, and investors need to be careful that this is not the year that it bursts. 

A bubble occurs when a particular investment performs particularly well. This tends to draw the attention of investors. This in turn leads to more money being put into the investment which causes further price rises. 

Investors get even more confident. This leads to an upward spiral that takes prices far above the levels which can be justified by any rational assessment of the real value of the future cash flows an investment may generate. 

The gold bubble could stay inflated for a while. But that doesn't make gold less speculative and risky than it was a year ago. 

However, investors need to note that you will never look too wise tying to call a bubble. 

This week gold tipped over $1,500 an ounce, up from less than $500 just five years ago. That works out an eye-popping annualised return of 23pc. 

Fear is driving the price ever upwards. Investors have always turned to gold in times of trouble, but it is questionable if rises like this can be maintained. 

If you like bling, then gold is the thing. 

But if you are buying gold as an investment you need to consider that it is nothing more than a bet that someone else will be prepared to pay more for it tomorrow than you did. 

Heydays
This year could mark the last of the heydays for gold, warns Pat McCormack of Barclays Bank Ireland.

"The dollar isn't about to collapse, hyperinflation is not lurking around the corner, the gold price has already risen a long way and there is no yield -- nor any prospect of one. 

"It wouldn't be a surprise to see gold at some stage fall by 20pc to 30pc if investors were to regain confidence in other assets." 

You should never have more than 5pc of your investment portfolio in gold. This is especially so as gold has few industrial uses. 

Almost every industrial use of gold is also an industrial use of silver. Since silver is much cheaper than gold you can imagine that people would rather use silver than gold for industrial purposes. 

And gold does not pay you a return, unlike a share or a deposit. 

With a share you have some hope of getting your money back over time from dividends. 

In fact, if gold were a house, it would be one you could not live in and could not get rent from. 

One of the richest men in the world, and truly the most successful investor of our time, Warren Buffett, is not a gold bug.

Speaking about gold, he said recently: "Look, you could take all the gold that's ever been mined and it would fill a cube 67 feet in each direction. 

"For what that's worth at current gold prices, you could buy all -- not some -- all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. 

"Which would you take? Which is going to produce more value?" 

It is hard to argue against the Sage of Omaha. 

- Charlie Weston Personal Finance Editor 

(Editor's Note: A lack of facts, blind belief in ‘gurus’, preconceived notions and a little knowledge are dangerous things). 

(Irish Independent) -- Consumer demand in India and China will be long-term driver of stable high prices
With the price of gold continuing to test record nominal highs, it would be easy for investors to think they've already missed the boat if they're seeking decent returns. 

After all, in dollar terms, at over $1,500 an ounce, the price has risen two-and-a-half fold in the past five years; and even over the past 12 months, it's up 37pc. 

Geopolitical turmoil, a yawning US deficit and concerns over its credit outlook, as well as instability in the euro region, are all elements that are helping to underpin gold prices. 

This week, Evy Hambro, who manages the $17bn (£11.7bn) Blackrock World Mining Fund, said that he believed gold prices may keep rising for "some years into the future". 

"When you look at the underlying fundamentals in gold, they're all very supportive of today's pricing points and of pricing points higher than where we're trading right now," said Mr Hambro. 

"So we would expect to see this positive, gradually rising price trend in gold to continue for some years into the future. I think some of the uncertainty that exists around exchange rates, quantitative easing, what paper money will buy you in the future, all of that is only helping gold from a financial point of view." 

But it's simple consumer demand that is also expected to sustain high gold prices. The World Gold Council (WGC) -- a London-based organisation that promotes the use of the metal -- recently estimated that by 2020 cumulative annual consumer demand for gold in India -- the largest market in the world for gold jewellery -- will increase to in excess of 1,200 tonnes. 

"India's continued rapid growth which will have significant impact on income and savings, will increase gold purchasing by almost 3pc per annum over the next decade," the WGC forecast. 

"In 2010, total annual consumer demand reached 963.1 tonnes [in India]," it noted. "As seen in the last decade, Indian demand for gold will be driven by savings and real income levels, not by price." 

Mark O'Byrne, the founder of Dublin-based GoldCore, a company that acts as a broker for well-heeled clients wanting to buy gold bullion and which also has a wealth management arm, also believes that consumer demand in India and China will be the long-term driver for sustained high gold prices. 

In China, citizens weren't permitted to own gold from 1950 until 1982 -- although significant amounts of gold were reportedly smuggled into the country from Hong Kong and Singapore. 

Commercial gold trading only resumed in China in 2003. It's only in recent years, however, that as the country's middle class expands, that gold jewellery has become an affordable luxury for many. 

Mr O'Byrne also points out that the price of gold might be at a nominal high, but it's still way off what has previously been reached in real terms. 

Around 1980, gold almost reached $2,400 an ounce in real terms when adjusted for inflation; and today's price would probably have to touch $2,200 an ounce or so to match that performance. Mr O'Byrne thinks $2,400 an ounce remains a realistic long-term price target. 

But more than just buying gold in the hope of big returns, Mr O'Byrne says he and his team advise clients that about 5pc of their investment portfolio should be gold, helping to provide a shield against the vagaries of inflation, currency and equity fluctuations. 

"With interest rates remaining low in most countries, there is little reason not to own gold, as the metal currently offers the best returns around," according to Gavin Wendt, founding director with Australia-based MineLife. 

He believes that coupled with the debt turmoil in Europe and violence in the Middle East "it's a perfect storm for precious metals, including gold and silver". 

(Bloomberg) -- Gold Climbs to Record on Dollar, Debt Concern; Silver Advances
Gold climbed to a record in London and New York for a fifth day, trading above $1,500 an ounce, as a weaker dollar and debt concerns boosted demand for the metal as an alternative investment. Silver rose to a 31-year high. 

The dollar slid to the lowest level since August 2008 against a basket of six major currencies. Greek two- and 10-year government bond yields reached euro-era records amid speculation the nation won’t be able to avoid restructuring its debts. 

Fighting in Libya and Japan’s nuclear crisis helped gold, which typically moves inversely to the greenback, to gain 6.1 percent this year. 

“The key element determining gold’s near-term direction right now is the U.S. dollar,” Edel Tully, an analyst at UBS AG in London, said today in a report to clients. “Sovereign debt concerns in U.S. and Europe along with inflation fears provide a good backdrop for gold.” 

Immediate-delivery bullion gained as much as $6.32, or 0.4 percent, to $1,508.88 an ounce and was at $1,507.70 by 11:21 a.m. in London. Gold for June delivery was 0.6 percent higher at $1,507.80 an ounce on the Comex in New York after reaching a record $1,509.50. 

Bullion rose to $1,507 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,501 at yesterday’s afternoon fixing. Seventeen of 20 traders, investors and analysts surveyed by Bloomberg, or 85 percent, said bullion will rise next week. Two predicted lower prices and one was neutral. 

Dollar Decline
The U.S. Dollar Index dropped as much as 0.9 percent before a report forecast to show U.S. house prices fell for a fourth month, underscoring prospects the Federal Reserve will maintain monetary stimulus. Central banks in Europe and Asia have raised interest rates to help combat accelerating consumer prices. The U.S. Treasury Department projects the government could reach its debt ceiling limit of $14.3 trillion as soon as mid-May and run out of options for avoiding default by early July. 

The uprising in Libya, which began Feb. 17, has settled into a military stalemate near the central oil-port city of Brega. Italy, France and the U.K. said they are sending military advisers and trainers to help Libya’s disorganized and poorly equipped rebels, as French President Nicolas Sarkozy called for intensifying airstrikes against forces loyal to Muammar Qaddafi. 

“Trading is expected to be thin today and next week as market participants will be out” because of holidays, UBS’s Tully said. “The lack of liquidity means that gold may not be as orderly as it has been this week and we could see large price swings.” 

Silver for immediate delivery climbed as much as 1.8 percent to $46.07 an ounce, the highest price since January 1980, the year the metal reached a record $50.35 in New York. It was last up 1.5 percent at $45.9188 and has surged 49 percent in 2011. An ounce of gold bought as little as 32.73 ounces of silver in London today, the least since June 1983, data compiled by Bloomberg show. 

Palladium was 1.2 percent higher at $769 an ounce. Platinum rose 0.7 percent to $1,816 an ounce.

See the original article >>

Stock Market Too Many Similarities to a Year Ago!

By: Sy_Harding

Exactly a year ago today the stock market was celebrating first-quarter earnings reports, reaching for new highs, after recovering from a stumble in February on concerns about situations outside the U.S., notably rising inflation in Asia and the debt crisis in Europe.

This week the stock market is celebrating first-quarter earnings reports, reaching for new highs, after recovering from a stumble in February on concerns about situations outside the U.S., notably inflation in Asia, the return of the debt crisis in Europe, and the earthquake/tsunami disaster in Japan.

Exactly a year ago U.S. economic reports, particularly from the housing industry, consumer confidence, and GDP growth, were starting to weaken as government stimulus efforts, including the home-buyer rebates and ‘cash for clunkers’ programs expired. And economists were beginning to lower their estimates of second quarter GDP growth.

Currently, for the last several months there have been a string of negative economic reports from the housing industry, consumer confidence, and slowing GDP growth. Economists are dramatically lowering their forecasts of first-quarter GDP growth. On Thursday it was reported that the Federal Reserve’s Philadelphia Index of manufacturing activity slumped significantly in April, from 43.4 in March to 18.5, a five-month low.

Exactly a year ago, as the Fed’s April, 2010 FOMC meeting approached, and in spite of the return of negative economic reports, the Fed was saying QE1 had worked and the economy was looking good. And it began preparing markets for unwinding of the stimulus efforts and its easy money policies.

Currently, the Fed is saying the same thing about the economy, in spite of the return of negative economic reports. In its announcement after its March FOMC meeting it said “The economic recovery is on firmer footing, and overall conditions in the labor market appear to be improving gradually.” And it’s widely expected that at its FOMC meeting next week the Fed will decide it’s time to begin preparing markets for the expiration of its QE2 program in June, and the exit from its easy money policies.

Exactly a year ago, oil had spiked up from $72 a barrel in February to almost $90 at the end of April (a high not seen again for 7 months), raising concerns that high oil prices would be a problem for the economy.

Currently, oil has spiked up from $84 a barrel in February to $112 a barrel, raising concerns that high oil prices could be a problem for the economy.

Exactly a year ago, gold was in a nice rally after a pullback low in February. Currently, gold has been in a nice rally after a pullback low in February.

A year ago, the respected Shiller ‘Cyclically Adjusted P/E Ratio’ (CAPE) indicated that the S&P 500 was 30% overvalued. It currently shows it to be 40% overvalued.

A year ago, the Investors Intelligence sentiment survey of investment newsletters had climbed into its historic danger zone of more than 50% bullish. Last week it reached 55.4% bullish, only 16.3% bearish, the largest spread since the bull market top in 2007, and higher than its level in late April last year.

A year ago today, the VIX Index (also known as the Fear Index), which measures the sentiment of options players, was at an extreme low 16.3, showing a total lack of fear or bearishness (high level of bullishness and complacency), a level usually seen at market tops.

The VIX today is at 14.7, an even more extreme low, showing even less fear.

A year ago today we were approaching the market’s ‘Sell in May and Go Away’ unfavorable season, and complaining about the low trading volume. The market rally this week, as we approach this year’s ‘Sell in May and Go Away’ unfavorable season, has been with low volume of fewer than 1 billion shares traded daily on the NYSE.

That’s not even a complete list of the similarities to a year ago today.

And it’s uncomfortable. Because exactly a year ago today, in the midst of the excitement over earnings reports, the market was just three trading days from topping out into the scary April-July correction of last year.

By the time the correction ended in July, GDP growth had slowed to just 1.7% in the second quarter, and the Fed panicked, reversed its plans to end the stimulus efforts, and began promising another round of quantitative easing (QE2).

See the original article >>

What's Different About $1500 Gold?

By: Adrian_Ash

The golden constant stands out amidst the US Dollar's latest plunge...

So what's different about gold at $1500 per ounce...?

Nothing. Absolutely nothing. There's no more or less of it in the world today than there was a day or a week ago, and very little more than a month ago.

There's barely 15% more today, in fact, than there was a decade ago at $270.

Gold still has very few industrial uses - only 11% of 2010 global demand - and the stuff remains indestructible. It never changes or does anything. Hell, it won't even rust.

But what is changing is everything else - the volume and quality of debt, in particular, and the volume of US Dollars most especially. That's what make the golden constant stand out against the noise of the Dollar's latest plunge.

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Gold and Silver, What’s Driving Their Prices Higher?

By: Submissions

Ian R. Campbell writes: 

Gold and Silver continued making headline news yesterday and this morning, with everyone reading this likely being well aware that both breached, and so far have held above U.S.$1,500 and U.S.$45 respectively. At 11:30 a.m. ET this morning they trading at U.S.$1,504.14 and U.S.$46.02. To put these two prices in context, on January 1, only 80 calendar days ago:

physical gold closed at U.S.$1,338.30 (or thereabouts depending on which exchange one looks at). This morning's gold price is 12.4% higher only 80 calendar days later. This is an annualized price increase of 56.6%; and

· physical silver closed at U.S.$28.02 (or thereabouts depending on which exchange one looks at). This morning's silver price is 64.2% higher only 80 calendar days later. This is an annualized price increase of 292.9%.

So what are today's gold and silver prices telling us?

The first question I ask is "what macro-economic events have occurred since January 31 that reasonably can be said to not have been predicable on that date, but are now 'in the market'"? My thoughts:

· riots began in Tunisia in December, 2010, and hence can be said likely to be 'well considered' by January 31;

· riots began in Egypt on January 25, and hence by January 31 might reasonably be said to have been 'relatively new' with their impact being more speculative on January 31 than currently is the case;

· the Libyan revolution that has led to the current ongoing turmoil in that country started on February 15, so awareness of that was not 'in the market' on January 31;

· the largest of the recent Japanese earthquakes and resultant tsunami occurred on March 11, with the ongoing Fukushima nuclear disaster happening in its aftermath. Clearly, these events were not 'in the market' on January 31;

· the U.S.$ exchange rate has deteriorated from $0.74 to just under $0.69 against the Euro in that 80 day period, notwithstanding the EuroZone Sovereign Debt issues have again 'come to the fore' in the past two weeks;

· after January 31 the political polarization in Washington has become (or so I think) ever more apparent. Witness the 11th hour (literally) budget debate that on April 8 came close to shutting the U.S. Government down, and the issues of the U.S. Debt Ceiling and 2012 Federal Budget that will be debated in the next few weeks and months;

· there has been an increased emphasis on U.S. non-durable goods inflation after January 31 - or again, so I think. Note that the WTI oil price was over U.S.$112 this morning;

· there has been increasing discussion around whether the U.S.$ will continue as the world's reserve currency;

· from my perspective there is comparatively little change in the volume of commentary that has been made about gold after January 31. However, that is not to say that more people and investment groups have not become more conscious of physical gold, and it potential importance to them as a 'real money' 'safe haven'. 

Silver, on the other hand, seems to me from observation to have been much more in the public eye after January 31 than it was before that date, with the possibility that increased 'silver publicity' has caused more physical silver buying traction for 'investment' purposes than was the case prior to January 31; and,

· add your own thoughts here to what I am not holding the foregoing out to be an 'all inclusive' list.

The second thing I continue to think about is how much froth currently may be in the silver market in particular, resulting from 'lemming like' activity on the part of investors and speculators. I have to believe there is currently some 'exuberance influence' currently in the silver market, and to some degree perhaps in the gold market as well. When I read articles and listen to interviews or presentations I look for balanced positive and negative commentary (on any subject, not just on gold and silver). I don't see much negative commentary these days.

All that said, gold and silver are priced in U.S.$. Can the rising gold and silver prices simply be the result of the gold and silver markets telling us they are becoming each day more convinced that in the face of America's debt load, ongoing monthly net trade deficits, lost manufacturing jobs and unemployment levels, and broad-based world uncertainties, the U.S. Federal Government and Mr. Bernanke will be unable to 'economically right the good ship America' in a way that will get the U.S. even close to where it was on the world economic stage ten years ago? 

Only last Friday (April 15), when the physical silver price was about U.S.$42.50, in a commentary titled 'Silver - Too Fast?' I said that "having regard for my own circumstances, I am prepared to hold my physical silver position for the time being, but plan to watch things very closely every day, and make a new decision on my sell/hold/buy view each day. Six days later, having read numerous further articles speaking to the run-ups in both the gold and silver price, I am still of that same mind - but particularly in the case of silver, I am becoming ever more wary of its rapid price increase (about 8% since last Friday).

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Silver Set to Soar as Fiat Paper Currencies Fold

By: John_Browne

As a result of active "demonetization" efforts by the IMF and its member central banks, gold and silver have experienced the type of volatility that has given conservative investors reasons not to perceive the metals as dependable cash alternatives. Instead gold and silver have become known as the asset class to hold as a hedge against inflation.

However, during the 1990's, when inflation was in general much higher than it has been since the turn of the millennium, gold and silver prices drifted lower and stagnated. However, since 2000, gold and silver have risen by over 400 and 700 percent respectively. Remarkably, this has occurred over a time frame during which, by most accounts, low inflation has prevailed. How can this be explained?

In 1944 when the U.S. dollar was considered 'as good as gold,' it was made the international reserve currency. This unique status is the reason that Fed Chairman Ben Bernanke was recently able to say that, "The U.S. Government has a technology, called the printing press that allows it to produce as many dollars at it wishes at essentially no cost."

Today, with the Federal Reserve treating the greenback as a never ending lottery ticket for deficit spending politicians, many investors feel the U.S. dollar is good for nothing. As a result there is an increasing international pressure to remove the U.S. dollar's reserve status. Given that there is no widely accepted alternative to the dollar (the euro has many problems of its own), this is creating fears of an international currency crisis, which has fueled interest in precious metals. So metal prices have risen even with low inflation expectations.

In order to paper over the effects of the financial collapse, central banks around the world are printing as fast as their presses can manage. But unlike prior periods of monetary inflation (like the 1970's), some major powers (China) are withdrawing liquidity. In addition, emerging market manufacturers are holding down prices even as currencies lose value. This may explain the strong performance of metals despite seemingly manageable inflation. But if higher prices emerge into the light of day (as they already have in commodities), currency uncertainty combined with high inflation should intensify the market for precious metals. The question then becomes how to play the market.

Gold has always been the reserve asset of choice for central banks and major private investors. But now, as smaller investors become aware that paper dollars are under threat, many are looking towards silver. Taken in aggregate, these smaller investors have enormous buying power. Through ETF's and mining stocks they are not bound by government restrictions on holding precious metals in retirement funds. In contrast to gold, central banks do not hold much silver. They are therefore less able to push down the price of silver by dumping inventory when rising metal prices undermine currency confidence.

Indeed, so far this year, silver is up nearly 50% while gold is up only about 6%. Given these figures, investors may be forgiven if they feel that the big move in silver may be over. Technical analysis may provide comfort.

According to the U.S. geological survey silver is about 17.5 times more abundant than gold in the earth's crust. This ratio has long been appreciated by civilizations throughout history. Thus, in 1792 the newly formed U.S. Congress passed the First Coinage Act, which legally set the valuation ratio of gold/silver at 15 (it was raised to 16 in 1834). In the early 1990's, with silver out of favor with investors, the ratio approached 100. At the beginning of this century gold stood at some $250 an ounce and silver at $4, putting the ratio at about 62. Today, with gold at around $1,500 an ounce and silver at $45, the ratio has closed to around 33. But this is still far higher than the ratio seen in the late 1980's (silver's last mega spike), and if far higher than the natural proportions of gold and silver would suggest.

The demand for physical silver also remains strong, which supports the market for spot silver. Smaller investors may find gold too expensive at $1,461 an ounce, but may be nevertheless prepared to buy several ounces of silver for much less. Potentially, this 'poor man's gold' market may help drive silver prices far faster than gold.

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Yuan continues climb to end at record; revaluation seen unlikely

By Lu Jianxin and Jason Subler

The yuan ended at a fresh record high on Friday as the central bank continued to allow the currency to rise to help fight imported inflation, but onshore traders remained convinced it would not resort to any one-off revaluation despite rumors overseas.

The People's Bank of China (PBOC) has set repeated record highs for the yuan's daily mid-point over the last several weeks, engineering an accelerated rise against the dollar that means it has now gained nearly 5 percent since it was depegged last June.

Those recent gains, together with comments this week by PBOC adviser Xia Bin that he would not rule out another one-off revaluation, have sparked talk among forex traders, especially those offshore, that such a move could be imminent.
But a number of reasons argue against such a possibility.

Policymakers as senior as Premier Wen Jiabao have repeatedly ruled out the possibility of another one-off revaluation, meaning any surprise would put the government's credibility at risk and could spark a backlash from the politically strong export sector.

Traders also point to the fact that the PBOC could allow a spurt in the yuan of 2 to 3 percent over the course of a few trading days if it wanted to, just by continuing to set its mid-point higher and allowing the currency to rise in daily trade, negating the need for any one-off move.
"There would be huge pressure for the government to explain if it conducted another one-off yuan revaluation of 2 or 3 percent -- a goal it can now easily reach via the market," said a senior trader at a major Chinese state-owned bank in Beijing.

"An even larger one-off yuan rise would surely create a huge political storm in a country where quite a large number of people still believe yuan appreciation is part of a Western conspiracy aimed to contain China's development."

CONTAINING FALL VERSUS BASKET

Still, what has become clear is that Beijing is increasingly ready to let the yuan strengthen against the dollar as a way to help contain the rising cost of imports, which was one reason why the country racked up a rare trade deficit in the first quarter.

While the official view in Beijing is that the yuan is no longer vastly undervalued, PBOC governor Zhou Xiaochuan pointed to the need to rely on the yuan in the inflation fight a week ago, echoing earlier comments by Premier Wen.

The need to move further on appreciation comes in part because the dollar has recently fallen to three-year lows.

Even though the yuan has risen by over 1 percent against the dollar so far this year, it has been falling against the currencies of other major trading partners given the dollar's weakness, making imports from places such as Europe more expensive.

So in a sense, the PBOC is just limiting the yuan's fall against other currencies, not engineering a rise outright, something traders said showed the government's continuing caution about disrupting exporters and other rate-sensitive sectors.

Spot yuan closed at a record high 6.5067 versus the dollar, up from Thursday's close of 6.5205. It has now risen 4.91 percent since it was depegged in June 2010, and 1.27 percent so far this year.

The PBOC has set a series of record high mid-points -- the level from which the dollar/yuan exchange rate can trade up or down 0.5 percent on a given day -- to express the government's intentions for the yuan to rise.

FASTER, PLEASE

Judging by official comments, one might not expect a rise such as that over the last few weeks to continue for long.

Guan Tao, an official with the State Administration of Foreign Exchange (SAFE), said in remarks published in China Finance that the yuan should not be allowed to rise sharply, even while Beijing takes steps to rein in the growth in the country's foreign exchange reserves.

Still, traders said it may be more to China's benefit to let the yuan appreciate faster to take advantage of the higher value of the currency to fight inflation, while the PBOC could still pull back the currency quickly if market conditions change.

If the yuan rises too slowly, lagging conditions in the global market, China's economy may not be cushioned in time from the effects of imported inflation, traders said, noting that it was possible that policy makers had reached a common understanding on the necessity for quicker appreciation.

Revaluation or no revaluation, offshore traders continued to price in heightened expectations of accelerated appreciation over the next several months.

One-year dollar/yuan non-deliverable forwards (NDFs) were bid at 6.3220 in late trade, down from 6.3400 at Thursday's close.
Those levels imply the yuan will appreciate 3.06 percent in a year's time, compared with 2.76 percent implied a day earlier, leaving open a window to bet on more yuan strength in the NDFs.

NDFs appeared to be playing catch-up with widespread expectations of 5 to 6 percent yuan appreciation for 2011 after they lagged in forecasting the rise so far this year, partly due to capital outflows from the NDF market into Hong Kong's expanding yuan market.

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JEFF GUNDLACH SAYS THE USA WILL DEFAULT

by Cullen Roche

At last week’s Morningstar Investor Conference in Chicago Jeff Gundlach, bond guru and founder of DoubleLine Capital said the USA is confronted with a terrible deflationary battle that will ultimately end in default (see the full presentation here). I was shocked to read this from Gundlach who is truly a master of the debt markets. He appears to connect all of the dots with near perfection only to come to what I believe is a maniacal conclusion (that we will default).

At the presentation Gundlach focused primarily on the government debt level without focusing heavily on the difference between private sector and public sector debt levels (which is absolutely crucial in my opinion). He said:

“The problem for the near term is that the load of all of this debt is deflationary. We need to work through these deflationary outcomes. Debt growth creates a headwind where we need more and more and more debt.”

Of course, deficits are as American as apple pie. As you can see below, the USA has essentially always run deficits. Throughout many of our most prosperous periods we have run large deficits and been deep in the red. Government has spent more than its brought in for almost the entirety of the existence of the USA yet we have never had trouble paying for our children’s futures or “financing” anything. This confounds the inflationistas and those arguing that we will default. How can a nation never be in surplus and still be, arguably, the greatest economic engine ever known to man?

The answer is a matter of accounting. Private sector net savings is public sector deficit. TO THE PENNY. This is simply an accounting identity. The government cannot be in surplus at the same time the private sector is in surplus.

The Gundlach commentary got decidedly more negative from there. He essentially blames government spending for our current woes:

“Government workers are being paid with taxes on borrowed money. If you are going to create government jobs, you are just borrowing more money. Those aren’t real jobs.”

This is a blanket falsehood. First of all, the USA doesn’t “borrow” money. We are no different than an alchemist who funds his spending internally. As the monopoly supplier of currency in a floating exchange rate system we are our own banker. Not China, not Japan. Just like the alchemist, we simply press a button and wahlah! Money appears. The bogey for the alchemist is not “funding” himself. The bogey for the alchemist is ensuring that there continues to be demand for his currency – that he does not inflate away its value. But as Gundlach earlier pronounced there is no risk of inflation….Only deflation as the private sector continues to destroy money via debt reduction.

The other flaw in his thinking is with regards to jobs. I don’t know where this idea comes from that government spends no money on productive labor. Most of us know our local police officers, fire fighters, perhaps someone in the military? Government employees are VERY real. These are not fake jobs at all. These are productive jobs that put real dollars into Main Street’s pockets. We can argue over the effectiveness of a large portion of these jobs or whether they are all necessary, but saying they are fake is simply erroneous. Would you rather we put those dollars into the pocket’s of bankers because that is what Ben has done for the last 18 months. How is that working out for us? I am the last person on earth to advocate a fully run government economy (I wouldn’t refer to the site as Pragmatic CAPITALISM if that were the case), but this idea that government is always and everywhere a bad thing is simply false. They are blanket falsehoods based on nothing more than political beliefs that cloud rational thought.

Where Gundlach nails the argument is in his deflation/stimulus argument. He clearly recognizes that the environment we are in has been and remains a deflationary threat. As I have argued for several quarters, Gundlach says that the removal of government aid will reveal a private sector that is still deeply in debt and unable to “run with the baton” (as I have previously described):

“Take the stimulus away, and you’re going to have a double-dip recession or a significant contraction or slowdown of economic growth.”

The flaw in Gundlach’s larger argument is the same one that David Einhorn and Alan Greenspan have recently made. It is this inability to differentiate between private sector debt and public sector debt (of which there is really none – a sovereign nation which has monopoly supply of currency in a non-convertible floating exchange rate system never really has any “debt”) which leads them to believe that the US government is no different than a household. This of course is what is leading us all to believe we are the next Greece. It’s sheer lunacy. And it is why we are implementing austerity measures almost universally. Because of this, Gundlach says tax increases are on the way:

“You have a tax increase coming and a radical policy shock that will affect investments in the economy.”

Ultimately, however, Gundlach says the USA will be forced to default as we truly are the next Greece:

“some type of polite default, at a minimum, will happen.”

And I would like to politely say, that Mr. Gundlach is wrong. The United States will not default unless we choose to default due to some mental lapse by the US Congress. On the other hand, we could effectively default by creating hyperinflation, but that is in direct contradiction to the rest of Mr. Gundlach’s argument. The US consumer might be on the verge of default, but there is no solvency risk in the United States at the government level, unlike the single currency nations in Europe.

Unfortunately, no one cares to listen to these vitally important facts (and simple accounting identities) so bring on the tax hikes. Bring on the austerity. Bring on the pain. We’ve become a world of masochists. Let’s see how well we handle it. My guess is not so well. Fortunately for Mr. Gundlach his bond portfolios will likely benefit enormously.

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World Gold Bug Article on WSJ Front Page

Front page WSJ story today — World Is Bitten by the Gold Bug:

“Gold continued its upward march in a time of global financial tumult, closing above $1,500 an ounce Thursday for the first time as investors seek safe haven in the metal

In a remarkable performance for any sort of asset, gold has notched a record high every day this week—on days when investors were alternately gloomy and optimistic. On Monday, as stocks swooned after Standard & Poor’s warned about the credit rating of the U.S., gold reached a new high. It kept rising on Tuesday and again on Wednesday, as stocks soared on impressive corporate earnings.

On Thursday, gold rose $4.90 an ounce to $1,503.20, another nominal record high and its first settlement above $1,500. Gold is up for five straight weeks, and has gained 5.8% so far this year.”

Front page stories are not great usually for investments — although this is the WSJ, not Time or Newsweek. It has much less of a contrarian indication.

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TradeStation to be acquired by Monex

by Futures Magazin

TradeStation Group, Inc. (Nasdaq:TRAD - News) ("TradeStation" or the "Company") and Monex Group, Inc. (Tokyo Stock Exchange: 8698) ("Monex") today announced that they have entered into a definitive agreement pursuant to which a subsidiary of Monex (the "Merger Sub") will acquire all the outstanding common stock of TradeStation for $9.75 per share, or approximately $411 million in aggregate, through a cash tender offer followed by a merger.

  Under the terms of the agreement, which has been unanimously approved by TradeStation and Monex's respective Boards of Directors, TradeStation's shareholders will receive $9.75 in cash for each outstanding share of TradeStation common stock they own, which represents a 39% premium to TradeStation's share price 30 days ago, on March 21, 2011, and a 32% premium to TradeStation's closing stock price on April 20, 2011, the last full trading day before today's announcement.

"We are pleased to announce this transaction, as it delivers significant value to our shareholders," said Salomon Sredni, Chairman and Chief Executive Officer of TradeStation. "Monex is a leader in Japan's online brokerage market, and we believe it will be a great partner as we go forward as part of the Monex family."

Oki Matsumoto, Chairman and CEO of Monex said: "TradeStation has a well-established, award-winning platform that is poised for continued growth and has a proven track record among the active trader segment of the United States. Through this acquisition, we expect TradeStation and Monex to complement one another via cross-utilization of technological development capabilities, customer and revenue bases. We are truly excited to work with TradeStation to realize our global vision."

Under the terms of the agreement, it is anticipated that Merger Sub will commence a tender offer for all of the outstanding shares of TradeStation by May 10, 2011.

If the tender offer is successfully completed, the parties expect the transaction to close early in the 2011 third quarter. Completion of the tender offer is subject to, among other things, the satisfaction of the minimum tender condition of at least a majority of TradeStation's outstanding common shares on a fully diluted basis, required regulatory approvals, including those of the Federal Trade Commission under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976, the Financial Industry Regulatory Authority (FINRA), and the United Kingdom Financial Services Authority (FSA), and other customary closing conditions.

J.P. Morgan is acting as financial advisor and Bilzin Sumberg Baena Price & Axelrod LLP is acting as legal counsel to TradeStation on this transaction. Deutsche Bank is acting as financial advisor and Simpson Thacher & Bartlett LLP is acting as legal counsel to Monex.

PLANTATION, Fla. and TOKYO, April 20, 2011 (GLOBE NEWSWIRE) -- TradeStation Group, Inc. (Nasdaq:TRAD - News) ("TradeStation" or the "Company") and Monex Group, Inc. (Tokyo Stock Exchange: 8698) ("Monex") today announced that they have entered into a definitive agreement pursuant to which a subsidiary of Monex (the "Merger Sub") will acquire all the outstanding common stock of TradeStation for $9.75 per share, or approximately $411 million in aggregate, through a cash tender offer followed by a merger.

  Under the terms of the agreement, which has been unanimously approved by TradeStation and Monex's respective Boards of Directors, TradeStation's shareholders will receive $9.75 in cash for each outstanding share of TradeStation common stock they own, which represents a 39% premium to TradeStation's share price 30 days ago, on March 21, 2011, and a 32% premium to TradeStation's closing stock price on April 20, 2011, the last full trading day before today's announcement.

"We are pleased to announce this transaction, as it delivers significant value to our shareholders," said Salomon Sredni, Chairman and Chief Executive Officer of TradeStation. "Monex is a leader in Japan's online brokerage market, and we believe it will be a great partner as we go forward as part of the Monex family."

Oki Matsumoto, Chairman and CEO of Monex said: "TradeStation has a well-established, award-winning platform that is poised for continued growth and has a proven track record among the active trader segment of the United States. Through this acquisition, we expect TradeStation and Monex to complement one another via cross-utilization of technological development capabilities, customer and revenue bases. We are truly excited to work with TradeStation to realize our global vision."

Under the terms of the agreement, it is anticipated that Merger Sub will commence a tender offer for all of the outstanding shares of TradeStation by May 10, 2011.

If the tender offer is successfully completed, the parties expect the transaction to close early in the 2011 third quarter. Completion of the tender offer is subject to, among other things, the satisfaction of the minimum tender condition of at least a majority of TradeStation's outstanding common shares on a fully diluted basis, required regulatory approvals, including those of the Federal Trade Commission under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976, the Financial Industry Regulatory Authority (FINRA), and the United Kingdom Financial Services Authority (FSA), and other customary closing conditions.

J.P. Morgan is acting as financial advisor and Bilzin Sumberg Baena Price & Axelrod LLP is acting as legal counsel to TradeStation on this transaction. Deutsche Bank is acting as financial advisor and Simpson Thacher & Bartlett LLP is acting as legal counsel to Monex.

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