Colin Twiggs, Author at the patient investor

June 10, 2012

Authoritarian Rulers Get Subtler: Putin, Chavez, China's Chiefs – WSJ.com

WILLIAM J. DOBSON: A handful of retrograde, old-school dictatorships have managed to limp into the 21st century. They are the North Koreas, Turkmenistans and Equatorial Guineas of the world. But they represent dictatorship’s past….

Today’s smarter dictators, by contrast, understand that in a globalized world, the more brutal forms of intimidation—mass arrests, firing squads, violent crackdowns—are best replaced with more subtle forms of coercion.

Rather than arrest members of human-rights groups, Russia’s Vladimir Putin deploys tax collectors or health inspectors to shut down dissident groups. In Venezuela, Hugo Chávez ensures that laws are written broadly and then uses them like a scalpel to target groups that he deems a threat….

via Authoritarian Rulers Get Subtler: Putin, Chavez, China's Chiefs – WSJ.com.

Colin Twiggs

Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.

June 10, 2012

Berlin is ignoring the lessons of the 1930s – FT.com

Germans must understand that bank recapitalisation, European deposit insurance and debt mutualisation are not optional; they are essential to avoid an irreversible disintegration of Europe’s monetary union. If they are still not convinced, they must understand that the costs of a eurozone break-up would be astronomically high – for themselves as much as anyone.

After all, Germany’s prosperity is in large measure a consequence of monetary union. The euro has given German exporters a far more competitive exchange rate than the old Deutschmark would have. And the rest of the eurozone remains the destination for 42 per cent of German exports. Plunging half of that market into a new Depression can hardly be good for Germany.

via Berlin is ignoring the lessons of the 1930s – FT.com.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

June 8, 2012

S&P 500: It's all on the price chart

All indicators do is highlight information that is already visible on the price chart. That is why you need to be careful making decisions based solely on an indicator — because when you summarize (information) you sacrifice. 63-Day Twiggs Momentum displays a bearish divergence, with declining peaks over the last two years while the index has been rising. Careful study of the price chart reveals the same information: a healthy trend should display symmetrical, equally-weighted corrections and advances, you can tell momentum is slowing when advances are weaker and corrections stronger. A trend reversal would only be clear on the monthly chart if the S&P 500 crossed below support at 1100, but declining momentum should warn well in advance that it is forming a top. Recovery above 1400 is unlikely, but would signal that the trend has regained momentum — especially if the Fed introduces QE3.

S&P 500 Index

The Nasdaq 100 is also losing momentum, but slightly. Respect of support at 2400 would indicate a healthy up-trend. Likewise a trough above zero on 63-day Twiggs Momentum.

Nasdaq 100 Index

* Target calculation: 2800 + ( 2800 – 2400 ) = 3200

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

June 8, 2012

Canada: TSX 60 head and shoulders

Canada’s TSX 60 Index threatens to complete a large head and shoulders reversal with a break below support at 640. The first shoulder is in April 2010 and the second in March 2012. The recent iceberg on 63-day Twiggs Momentum warns of a primary down-trend. Failure of support would offer an immediate target of 560* and a long-term target of 460*.

TSX 60 Index

* Target calculation: 640 – ( 720 – 640 ) = 560; 640 – ( 820 – 640 ) = 460

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

June 8, 2012

Basic economics: Aggregate Demand

This lesson introduces the macroeconomic concept of Aggregate demand.

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

June 7, 2012

Forex: Australia – be careful what you measure

The Aussie Dollar rallied strongly off support at $0.96 against the greenback, on the back of strong GDP numbers. Expect a test of the declining trendline around $1.02. A peak below zero on 63-day Twiggs Momentum, however, would warn of a strong primary down-trend.

Australian Dollar/USD

Be careful what you measure!

Australian Real GDP may have grown by 1.3 percent for the first quarter, but as Stephen Koukoulas points out: Nominal GDP (before adjustment for inflation) only grew by 0.3 percent. The cause of the Real GDP surge is a sharp fall in the GDP price deflator, used to adjust for inflation. Falling prices may be welcomed by the consumer but they warn of a deflationary contraction — as in 2008/9 when nominal GDP fell by 5.0 percent.

Australian GDP

In the long-term, the Australian Dollar normally follows commodity prices. At present the CRB Commodities Index is falling sharply and the Aussie is likely to follow.

CRB Commodities Index/Australian Dollar

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

June 7, 2012

Forex: UK and Europe

The Euro retraced to test resistance at the former primary support level of $1.26. The peak that respected the zero line on 63-Day Twiggs Momentum warns of a strong primary down-trend. Respect of resistance would strengthen the signal, indicating a test of the 2010 low at $1.20.

Euro/USD

Pound Sterling is correcting after strong appreciation against the Euro. Expect a test of the rising trendline around €1.21/€1.22. Penetration would warn of weakness, but respect and/or a 63-Day Twiggs Momentum trough above zero would indicate a healthy primary up-trend.

Pound Sterling/Euro

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

June 7, 2012

Stronger dollar, weaker commodities: gold, copper and crude

The US Dollar is in a primary up-trend, the Dollar Index having broken resistance between 81 and 82. Retracement is likely to test the new support level; respect of 81 would confirm a healthy up-trend. Respect of the zero line by 63-day Twiggs Money Flow would likewise strengthen the signal.

US Dollar Index

* Target calculation: 82 + ( 82 – 78 ) = 86

Spot gold is also testing a new support level — this time on the daily chart — after breaking resistance at $1600/ounce. Penetration of the declining trendline suggests that the down-trend is weakening, but 63-day Twiggs Momentum remains firmly below zero. Follow-through above $1640 would strengthen the bull signal — as would recovery of Momentum above zero — but failure of $1600 would re-test $1540.

Spot Gold

* Target calculation: 1550 – ( 1800 – 1550 ) = 1300

Other commodities have reacted negatively to the stronger dollar, suggesting that gold will continue its downward path. Copper is in a clear down-trend, headed for a test of the 2011 low at 6800.

Copper Grade A

Brent crude broke its mid-2011 low at $100/barrel, offering a long-term target of $75*.

ICE Brent Afternoon Markers

* Target calculation: 100 – ( 125 – 100 ) = 75

Nymex WTI Light Crude is similarly headed for a test of long-term support at $75/barrel.

Nymex WTI Light Crude

CRB Commodities Index is similarly headed for a test of support at 250. The peak below zero on 63-day Twiggs Momentum warns of a strong primary down-trend. First, expect retracement to test resistance at 295; respect would confirm the down-trend.

CRB Commodities Index

* Target calculation: 290 – ( 330 – 290 ) = 250

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

June 6, 2012

Stiglitz, Conard Debate Income Inequality

Some sweeping generalizations from Stiglitz and Conard denial that the Fed was architect of the 2007/2008 asset bubble but some interesting insights from both parties.

http://youtu.be/U4T2aqZyM9w

Edward Conard, a former managing director at Bain Capital LLC, and Nobel Prize-winning economist Joseph Stiglitz, talk about the U.S. economy and income inequality. They speak with Betty Liu on Bloomberg Television’s “In the Loop.”

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

June 6, 2012

SMSF Education: So…how much can I contribute?

SMSF Education is a free online education resource for SMSF trustees and their advisers.

SO…HOW MUCH CAN I CONTRIBUTE?

There are two types of contributions that can be made to superannuation. These are known as Concessional (pre-tax) contributions and Non-Concessional (post-tax) contributions. There are contribution caps that determine the maximum amount that can be contributed in any one year for each type of contribution.

A Concessional contribution is a contribution made to superannuation where a tax deduction has been claimed. This includes contributions such as the Superannuation Guarantee Charge (SGC), salary sacrifice and personal deductible contributions. Concessional contributions incur contributions tax of 15% upon entering superannuation. From 1 July 2012, this contributions tax increases to 30% on Concessional contributions for individuals with an income greater than $300,000.

The maximum Concessional contribution that can be made into the account of a superannuation member is dependant on their age. Currently, a member under the age of 50 is able to have contributions of up to $25,000 made to their account as a Concessional contribution in any one year. For those over age 50, the cap is $50,000. However, as of 1 July 2012, the Concessional contribution cap will be a universal $25,000 for all members regardless of age. In saying this, the Government has announced that members over age 50 will be able to have up to $50,000 (potentially $55,000 due to indexation) contributed to their accounts as a Concessional contribution from 1 July 2014 if their superannuation member balance is below $500,000.

A ‘non-concessional’ contribution is a contribution made to superannuation with after-tax dollars – where income tax has already been paid. No tax is incurred on this type of contribution upon entering superannuation.

The maximum Non-Concessional contribution that can be made in any one year is $150,000. However, members under the age of 65 have the ability to ‘bring forward’ two years’ worth of the Non-Concessional cap. This means that up to $450,000 may be contributed in any one year, with no further Non-Concessional contributions being made for the following two years. The ‘bring forward’ rule is triggered in a financial year if more than $150,000 is contributed as a Non-Concessional contribution.

Exceeding the Cap

Where a member receives Concessional contributions in excess of their relevant cap, the excess amount is subject to excess contributions tax of 31.5% and the amount in excess will then count towards their Non-Concessional cap.

For various reasons, many individuals have been incurring excess contributions tax as a result of circumstances out of their control. From the 2012 financial year, new measures in place provide certain individuals with the ability to have excess contributions refunded to them and taxed at their marginal tax rate, so as not to incur excess contributions tax. However, this is only available in limited circumstances where the excess contributions equal less than $10,000 and there are no excess contributions for an earlier financial year (excluding years prior to 2012). This option for a refund is only available once for each individual’s lifetime. It is not available in the years subsequent to a refund being claimed.

In cases where the Non-Concessional contributions cap is exceeded, excess contributions tax of 46.5% is incurred. This is after income tax has already been paid on the amount contributed.

There are some instances where 93% in tax on contributions could be payable. This occurs when the Non-Concessional contribution cap has been reached and a Concessional contribution is made, which causes the Concessional contribution cap to be exceeded. In this case, the concessional contribution will incur contributions tax of 15% and then excess contributions tax of 31.5% for exceeding the Concessional contribution cap. Because the contribution has exceeded the Concessional cap, it will count towards the Non-Concessional cap. However, because the Non-Concessional cap had already been reached, excess contributions tax of 46.5% will be payable for exceeding the Non-Concessional cap – totalling 93% in excess contributions tax.

Contribution caps for relevant years (excluding indexation):
SMSF Contributions

Ideally, all contributions should be made to your superannuation account a couple of weeks prior to the end of the financial year. The end of the tax year is a hectic time for superannuation funds. By getting your contributions in early, it should ensure that any delays in transaction or processing time will not affect your ability to claim a tax deduction in the current financial year.

Warrick Hanley
For more information, please go to www.smsfeducation.com.au

Colin Twiggs

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.