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Lat chance to save euro crisis

Since the eurozone crisis started more than two years ago, skeptics have been quick to dismiss the simmering problem as much ado about nothing.

Shoot, they’re just a bunch of socialists getting their comeuppance, right? And the Greek economy is insignificantly small, at around $300 billion. That’s worth just 2% of the U.S. gross domestic product.

While the financial markets have been jumpy over the issue since it started, the slow, drip-drip deterioration of the situation across the Atlantic has started to bite in very real ways. The unemployment rate is rising again here at home, factory activity has stalled around the world, and much of Europe has fallen into a new recession.

According to Bank of America Merrill Lynch economist Ethan Harris, there are “growing signs of a synchronized global slowdown.” From China to India, Hong Kong and Australia, GDP forecasts are being slashed as global trade slows. Harris sees “a significant risk of a global recession” later this year or in early 2013.

As a result, something that once seemed innocuous and maybe a little funny has assumed a deadly seriousness. There’s a key date to mark on your calendar: June 17. That’s the date of the next parliamentary election in Greece. And without substantial action between now and then, the situation gets much worse for everyone.

Europe divided

In the context of all of this, the political fabric that binds the eurozone together is fraying badly, as countries and institutions group themselves into two corners.

Troubled nations including Spain and Greece — supported by Italy, France and the European Commission — want more leniency and help as they try to rebalance their economies, address structural inefficiencies, pay down debt, close budget deficits, recapitalize banks and return to growth — all at the same time.

This pro-growth bloc is pushing hard for things like a eurozone bank deposit insurance program (ending bank runs via a eurozone version of the FDIC, the deposit insurance program in the U.S.) using eurozone bailout funds to recapitalize weak banks (instead of making Spain’s government help its banks, which would take pressure off of its budget deficit); and the issuance of “eurobond” debt backed by the entire eurozone (to push down borrowing costs for troubled nations). They also want the European Central Bank to step up its stimulus efforts.

The pro-austerity bloc, including Germany and the Netherlands, wants progress on things like economic reforms, constitutional commitments to balanced budgets and state asset sales before any of this happens. The worry is that cheap money, in the form of ECB loans to the financial system, could unleash dangerously high inflation.

Salvos are being exchanged, and positions are hardening. The ECB is caught somewhere in the middle, with its executive board dominated by pro-growth nationals while the German Bundesbank still wields enormous influence.

You can see who is ahead in this debate in the results of the recent French presidential election, which replaced pro-austerity Nicolas Sarkozy with pro-growth Fran├žois Hollande. This has changed the balance of power and has emboldened the pro-growth faction.

What we have now is an epic game of chicken spiced with daily doses of rumor and conjecture about who will win.

Commodity tips | forex tips | stock tips

Intraday trading tips commodity market update gold silver copper crude tips 10apr 2012

Commodity Market update

Commodity type: Gold
Transaction: Buy
Target: T1-28410 T2-28460
Stop/Loss: 28270

Commodity type: silver
Transaction: Sell
Target: T1-55650 T2-55555
Stop/Loss: 56250

Commodity type: Crude
Transaction: Sell
Target: T1-5200 T2-5180
Stop/Loss: 5270

Commodity type: Copper
Transaction: Sell
Target: T1-422 T2-420
Stop/Loss: 426.50

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Investment tips from later 1950

It is often said that investors these days are navigation uncharted territory. The world’s largest economies are inundated with massive amounts of debt, the Fed essentially locked in a zero interest rates and a weak outlook for corporate profits to grow.

Many investors are paralyzed in this environment is unlike anything I have not seen them in their adult life. As a result, they are hunkering in cash and a super-safe government bonds. But, as often happens, investors can look back and find potential guide for building a portfolio for today’s markets.

In this case, history suggests that stocks with higher dividend may for a long period of healthy returns. In view of the broad stock market, history also suggests that stocks in general, relative to government bonds, long rates by the Fed, which is contrary to conventional wisdom in the fight against today reduced. But in the longer stocks are a better choice than bonds.

Where can I get the best returns

Where can I get the best returns

For its lessons of history, investors should set your Wayback Machine for the period from the end of 1940. There was a time, do not float in the bond market, interest-free, as is usually done, but the government has closed at a low level, to manage the country, the enormous debt accumulated during World War II.

Economists have a dismal-sounding term for the bond market, where prices are directly or indirectly, is limited to below the inflation rate. This is called “financial repression”.

Today the Fed is engaged in a similar push. This means the purchase of billions of dollars of bonds, an attempt to lower market interest rates to help repair, maintenance of the economy. The Fed said it expected to keep interest rates near zero by 2014.

/>Barry Knapp, head of U.S. portfolio equity strategy at Barclays Capital, studied this period and the period after the Fed’s loose reins in prices in 1951.
Low interest rates

For the postwar period, in which the Fed reduced rates, as is the case today, investors earned a modest harvest. During this time, the Fed keeps rates were north of the 1% level, which was lower than inflation.

It is worth noting, however, that by raising prices, the Fed bond prices also fell. “The performance was about to go under the CAP price anywhere,” says Knapp.

Meanwhile, the share price struggled during this period. Conventional wisdom in the markets these days is to make this move a very low government bond investors from their money into riskier assets like equities. But, says Knapp, “that this is not what happens, go back to the (bond) prices to normal.”

As was the case in 2011, at the end of 1940, stocks usually suffer from lower prices and wage rates, fewer investors willing to pay for future growth in corporate profits rebound. In 1948, government bonds posted returns 1.1 percentage points higher than the twists and turns, when dividends are included, according to Barclays.

The bonds were in most cases better investment than stocks, as long as the U.S. Federal Reserve raised the cap on rates in 1951. Years of flooding reversed bonds and stocks are greater than 25 percentage points, according to Barclays. In addition to the years of recession, this trend out performance in equities in a decade. (It was in 1954, by the way, when the Dow Jones Industrial Average ($ INDU gained 0.15%), including its pre-1929 level.)

The downside of investing in bonds coming back are covered, it was clear when the caps were removed: Growing crops pushed prices of existing bonds.

“Investors can not invest only in bonds and expect a refund in excess of inflation,” says Jason Trennert, chief investment strategist at Strategic research partners of gas.

In early 1951, the real yield of long-term U.S. Treasury bonds – was negative and amounted to 6.5%, depending on the strategy of the gas – which measures the rate of return net of inflation.