Month: August 2011

By Shae Smith

Judging by the mainstream media, financial Armageddon was on your doorstep nearly two weeks ago:

‘$100 billion wiped off the market’

‘Another $50 billion lost in early morning trade’

‘Almost $165 billion gone in four days’

Those were the type of headlines you might have seen while eating your Weet-Bix.

You may have wondered if it was time to pack your bags, get the kids’ pop-up tent and teach your family how to live off the land.

I don’t blame you if you did.

When your portfolio has taken a hit, it’s hard to ignore it.

Greg Canavan, editor of Sound Money. Sound Investments said that’s part of the problem with ‘…day to day headlines. When stocks were crashing, you could be forgiven for thinking the global economy was unravelling.’

Then, yesterday morning greeted punters with more terrible headlines:

‘Wall Street plunge on recession fears’

‘Stocks in for bleak day’

‘World put on recession watch’

This is where headlines do investors no favours.

Investing after the credit bubble pops

You see, the global economy is changing. And the market is reflecting that.

Years of money printing have forced companies and governments to deleverage. No longer can they pump paper money into the system to improve the economy – even though they may still try. And companies can’t rely on debt to pump up their earnings.

Greg explained what’s happening in the market to his readers:

‘This is what investing is like in the aftermath of a credit-bubble bust. Economies experience very little growth, slip in and out of recession and then revert to low growth again.’

Mainstream papers bombard you with stomach-churning headlines. But according to Greg, the market is reacting the way it should after the past few years of money expansion.

‘The market is finally beginning to get it.’

As ‘Mr Market’ adjusts to this new normal, investors start to back away.

Traditionally, volume drops significantly during a bear market. Declining volume can lead to liquidity issues. And bear markets can wipe out over-confident investors.

Yet, there’s still money to be made in a bear market.

You just have to adapt your strategy.

Cash is your secret weapon in this market

Greg is aware of the effect money printing has on stocks. His strategy is about ‘focus[ing] on the business, not the price’.

‘In a bear market, cash is king’, says Greg.

Telling his readers ‘The industry has conditioned investors to think cash is useless and you’re doing yourself a disservice by holding it. Apparently your wealth is not working for you.’

Greg agrees that cash is not exactly a high returning asset, ‘…but neither are equities in an environment of falling earnings and expensive prices.’

‘Cash is valuable not for what it will earn you now, but for what it enables you to buy later…’

Holding cash is often seen as the last option when talking about your investments. But, if you’ve got cash on the sidelines, now could be the time to jump in – with caution.

Confident that you can take ‘action’ to prevent your wealth from being lost in this bear market, Greg shared this plan for investing with his readers.

‘My strategy here is to continue scaling into the market and buy during sharp falls or market panics. I’ll continue to identify quality stocks trading well below a conservative estimate of value so you can be ready to buy those companies at an opportune time.’

The financial world may look like it’s falling apart. But according to Greg it’s the chance to ‘…step back and take a look at the big picture.’

‘Only then can you see what is really going on in the world. And only then you can take action to protect your wealth.’

A bear market doesn’t mean buying shares is over. It’s all about waiting for the right opportunities. Click here to see what Greg believes are the best companies right now.

Regards,

Shae Smith.
Assistant Editor, Money Morning

Money Morning Article: Don’t Let Bad News Stop You Investing

Aug. 22 (Bloomberg) — Thomas Harr, head of Asian currency strategy at Standard Chartered Plc in Singapore, talks about global currencies. Harr, who also discusses the U.S. economy and Federal Reserve monetary policy, speaks with Susan Li on Bloomberg Television’s “First Up.” (Source: Bloomberg)

Aug. 22 (Bloomberg) — Geoff Kendrick, head of European currency strategy at Nomura International Plc, talks about currencies and prospects for the Swiss National Bank to curb gains in the franc. Kendrick, speaking with Francine Lacqua on Bloomberg Television’s “On the Move,” also speaks about the outlook for Federal Reserve Chairman Ben S. Bernanke’s remarks at the Fed’s annual symposium in Jackson Hole, Wyoming, later this week. (Source: Bloomberg)

A much needed quiet Monday morning allows for a rundown of the major happenings in the markets. PMI surveys from Europe and the Bernanke speech at Jackson Hole highlight the week. European politicians don’t seem to be on the same page while traders are anticipating further action from Japan.

Market sentiment is currently in the dumps when a 1.50% decline in the S&P is considered a calm day. Fear of a double dip recession in the US and a dramatic slowing of growth in Europe have fueled an equity sell-off across global bourses. This morning European equities have stabilized somewhat today with the FTSE 100 up 1.59%. The ECB continues to buy the sovereign debt of Italy and Spain and has succeeded in stabilizing the falling euro zone bond market. A total of EUR 22 Mn has been purchased. Both Italian and Spanish 10-year yields have fallen below 5% though the Greek 2-year spread over the equivalent German bund has ballooned this morning.

Despite the mixed fixed income market the euro continues to be well bid with the EUR/USD rising above 1.4425 earlier today. Last week’s high of 1.4515 is the initial test and could provide a potential selling opportunity as the euro zone politicians continue to talk down the idea of euro bonds. Tomorrow’s PMI surveys will be the first glimpse into euro zone Q3 GDP. At the 2nd half of the year expires the growth appears to be slowing just as higher ECB interest rates are taking effect, something that will likely further reduce aggregate demand. The recent struggle to secure additional Greek funding that was agreed upon on July 21st may weigh on the EUR. Support for the EUR/USD comes in at 1.3450 followed by the bottom of the triangle pattern which comes in at 1.4200.

This week the Troika, a combination of the IMF, EU, and ECB, will visit Greece to weigh the progress from the austerity program. The approval by the Troika is key to Greece receiving its next expected tranche of aid. Should Greece show a lack of progress regarding growth and budget cuts this could undermine the fragile state of investor confidence and send the market looking for safe haven assets. This makes for a good segue into our next topic.

Japanese government officials continue to jawbone the yen lower but have had little success. Prime Minister Kan said the government will take action in the FX markets when necessary and Finance Minister Noda said the price moves of the yen if they continue could have a negative impact on the economy. Rumors of sizable retail forex trading positions in have been built in favor of additional intervention while positions in this week’s CFTC data show only a slight increase in long JPY futures market positioning. The risk is for Japanese officials not to act and when the next crisis comes around investors seeking safe haven assets will push the yen higher.

This week’s highlight is the two day economic summit in Jackson Hole Wyoming with the keynote speaker Ben Bernanke . The Fed chief has a lot to live up to as in the previous year he announced QE2 at Jackson Hole which helped to spark a dollar sell-off that continued through May. Expectations are for the Bernanke to leave the door open for more quantitative easing but the risk is for Bernanke to disappoint markets given the increased inflation levels. I’m skeptical of the Fed’s ability to increase its bond purchasing program for fear of losing control of inflation. Additional commentary will follow leading up to Friday’s main event.

Read more forex trading news on our forex blog.

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

FeD-chairman Ben Bernanke is scheduled to speak Friday at the yearly Jackson Hole-conference.

On of this weeks most important events, according to Senior Strategist Ib Fredslund Madsen.

Also a lot of focus on Tuesdays PMI’s out of Europe and China.

Legal information

Video courtesy of en.jyskebank.tv

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

By ForexYard

Today’s publications are set to be euro-heavy. Liquidity will likely be higher in today’s early trading as several European events are being published in rapid succession. Most significant will be the publication of France and Germany’s flash figures on services and manufacturing.

Economic News

USD – US Dollar Expecting Climb Ahead of Busy Week

The US dollar (USD) may be seen trading mildly bullish Monday morning if traders see the global stock market persist in its decline. Although the value of US credit was downgraded, investors have little place else to move their troubled assets outside of US Treasuries. The downturn in the stock market last week has played into the strength of the US economy: its traditional store of value.

Though analysts view the downgrade as overall bearish for the USD, a sharp downturn was held in check by a continued purchase of bonds by European investors. Similar declines and ratings downgrades of several European peripheral nations have made the USD and gold all the more attractive as valued safe-havens.

As for this week, the US economic releases will focus mostly on housing, GDP, and manufacturing. Today’s publications, however, are euro-heavy. Liquidity will likely be higher in today’s early trading as several European events are being published in rapid succession. French and German liquidity will be heightened, and Canada will contribute to today’s movements with its retail sales reports. Traders will want to pay close attention to today’s euro zone data.

EUR – EUR Mixed as Periphery Struggles with Debt

The euro (EUR) was seen trading with mixed results this morning following pessimistic reports on euro zone debt woes. Against the US dollar (USD) the euro was trading somewhat bearish in early morning hours Monday as the greenback moved upward against all currency rivals. The euro, however, does not appear in a position to capitalize on the gains being seen elsewhere; its structural weaknesses are gouging its value worldwide.

Traders are looking for a way to balance a renewal of risk aversion with continued shakiness in global markets. A mildly pessimistic sentiment towards investing in the US dollar at the moment, due to the S&P downgrade, has many investors on edge. An embattled euro zone, fending off market bears amid turmoil in its peripheral nations, also looks to be losing ground in financial markets as safe haven assets such as the Swiss franc (CHF) and Japanese yen (JPY) make gains; though central bank interventions in Japan may offset the JPY’s gains.

Sentiment across the euro zone has turned negative, with many analysts and economists expecting moves towards safety by traders this week. Any more bearishly-leaning news out of any major global economy will likely pull down on the EUR even further as investors flee risk. With a heavy news day ahead, many traders are anticipating significant data releases to move the market. If today’s data persists negative, the EUR is likely to take another hit.

JPY – JPY Bullish as Speculators Anticipate BOJ Intervention

The Japanese yen (JPY) was seen trading moderately higher versus most other currencies this morning as its value as an international safe haven continues to push its value bullish. Being linked to international risk sentiment, the yen has experienced an expected uptick during a period when shifts away higher yielding assets became prominent. The JPY has been experiencing several long strides lately from the various shifts into riskier assets.

The latest moves of the JPY are causing some concerns, however, as many speculators are anticipating another round of intervention by the Bank of Japan (BOJ). A strengthening yen has benefits for the buying power of the island economy, though its dependence on exports makes a strong yen unfavorable for longer-term growth in Japan’s current financial model.

Gold – Gold Price Increasing Monday Morning

The price of Gold found support over the past week amid the plummeting strength of the US dollar, the currency in which such assets are valued. Gold has been trading with rather mild price action since June, but traders have been awaiting price resurgence due to the rampant increase in risk aversion due to rising tensions from the euro zone’s periphery and a recent downgrade of US debt by S&P’s ratings agency.

As investors seek safety, the value of gold, which has been seen trading with mixed results, is expected to rise, but a selloff in commodity futures pulled down on precious metals last week. A sudden rise in dollar values due to this week’s uncertain environment is expected to assist the sentiment favoring gold. Should risk sentiment continue to bounce in sporadic directions this week, the price for this precious metal may continue to experience similar swings in value.

Technical News

EUR/USD

The push to 1.4500 found willing offers and the falling resistance line from the May high has kept the pair trading in a relatively defined 500 pip range since late-July. This scenario could change this week as the pair encroaches on the bottom of a triangle pattern that runs underneath the July and August lows at 1.4190. A move below this trading range is favored as both daily and monthly stochastics are declining. A break here could test the rising trend line from May 2010 and may have long term technical ramifications. To the upside last week’s high of 1.4515 will serve as initial resistance followed by 1.4700.

GBP/USD

Following a failure to move below its 200-day moving average Cable has underwent an impressive run to the 1.66 level. However, three failed attempts to close above the 1.6540 level points to sterling weakness. The pair also looks to be oversold as daily, weekly, and monthly stochastics are all turning lower. An initial move lower could run into support at the 20-day moving average at 1.6370 followed by the August 11th low at 1.6110. A deeper move could test the July low at 1.5780. Should the momentum continue to the upside initial resistance is found at 1.6580 with the most likely target at the April high of 1.6750.

USD/JPY

Last week the pair briefly moved below the March low and the 76 yen level but the dollar was quickly bid and the daily candlestick formed a doji. While often a sign of an impending reversal a doji by itself is not enough to change the technical picture. Bias remains to the downside and a close below 76 would signal further declines in the pair. A lack of support on the long term charts makes it problematic to forecast a target but the big round number of 70 yen stands out. Should the doji pattern hold and a reversal ensue; the pair will encounter plenty of selling opportunities with the most likely of entry points found at 78.50, 79.50, and 80.20.

USD/CHF

A rebound in the pair made it as high as 0.8015, just above the 50% retracement level from the May to August move. This move looks like it may have more room to run as weekly and monthly stochastics are rolling higher. Additional resistance comes in at the falling trend line from the February high at 0.8150. A break here would target the 61% Fibonacci retracement at 0.8220. However, traders should remember the long term trend is to the downside and support is found at 0.7800 followed by 0.7550.

The Wild Card

EUR/JPY

Recent consolidation in the pair has formed a falling wedge pattern. Based on the chart pattern the bias is for a breakout higher. Initial resistance is found between 111.00-15 and a move above here has a convenient target at 114.15 from the trend line off of the April high which coincides with the post intervention high. Forex traders can place a protective stop at 110.15 inside the wedge pattern to protect against a false breakout to give a profit to loss ratio of roughly 3:1.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By Mike P. Kulej

Everybody who has taken more than few trades knows that some of them result in loss. Some people stay in loosing positions in hopes for markets to turn around and produce profits. While it might work on few occasions, it is only a matter of time before this kind of trading will end in a margin call, effectively ruining account. Or, the wait period is measured in months or years, before price turns in the direction desired and reaches profitability. To avoid this, most traders use stops to cut looses short and preserve trading capital.

Unfortunately, vast majority of people entering trading arena have only gains in mind, leaving them unprepared for losses which are inevitable. They do not know how to deal with this reality of trading and how to manage them properly. This creates huge psychological problems, mental blocks, fear and eventual departure from trading.

Losses should be viewed as a cost of doing business, not much different than paying phone bill, rent or any other customary expense. Another analogy could be made with retailers who stock up on merchandise that doesn’t sell. They discount it, sell it at as small loss as possible in order to recover capital. Then other items can be acquired, which, hopefully, will sell much better and recoup previous loss. Trading is exactly the same. If price moves against the trade, one has to get out, salvage as much funds as possible and wait for better opportunity.

Next, trader must find “comfort level” for loss. This is very personal and will depend on risk tolerance, account size and other similar variables. It can not be discovered from books and trading manuals but rather through personal trading experiences. One should experiment with position size in order to find out when losses don’t bother him/her too much. This is easy to do now, as most brokers offer not only standard size lots, but also minis. Some even allow trading in hybrid lot sizes, which is great, since it permits really precise tailoring of amounts traded.

For example somebody trading $10,000 account might find it hard to stomach an average loss of $1000, but $50 or $100 would likely be easy to take. This could be a starting point. Position size small enough that a loss is no larger than, say $100. Once a trader doesn’t have any problem with this level of an average loosing trade, position size can be increased and process repeated. One has to also remember that loosing trades often come in streaks. This process of starting small will help trader to deal with multiple failed trades in a row.

Profits also depend largely on the size of an average position, so a careful balance has to be established. One person might be willing to take greater risks in order to reach bigger gains, while other will concentrate on keeping account draw downs to minimum at the expense of gains. This is very personal, for which there is no universal, fit all mold. Everybody has to find his/her own comfort zone.

This process of starting very small and increasing trading levels might take some time before optimal position sizing for given trader is discovered. It could easily last several months, but is well worth it. Not only will it built loss tolerance, thicken the skin, but will greatly enhance trader’s chances for long time success. Becoming a trader is not an event but a process and requires time.

About the Author

Mike P. Kulej is a Chief Forex Strategist for Spectrum Forex LLC. He specializes in mechanical trading systems as explained on www.spectrumforex.com. Spectrum Forex LLC offers numerous services to individual traders. He also publishes trading blog www.fxmadness.com. With questions and comments e-mail him at [email protected].

Article by Harjeet

The Indian real estate sector has been seeing huge investment from non resident Indians (NRIs) and Overseas Citizens of India (OCIs) who have now started applying online and checking out top ranking brokers to buy homes and properties across India. The organizers are building properties comparable to the rest of the world to cater to the growing demand from overseas Indians. Most of these are premium properties with amenities not seen anywhere else.

Many RE companies in India are multinationals, and, therefore, are capable of producing replicas of integrated properties found in countries such as the US and UK. Their target clientele are the NRIs and everything is created with their requirement in mind.

Participation of foreign banks
NRI investment in RE has become more lucrative with major foreign banks in India and financial institutions funding this sector in India. Rise in demand for quality properties for housing and the upswing in the hospitality and hotel industry in India have brought a number of such institutions in direct competition to invest in this sector. There is also a boom in the stock prices of RE companies.

The Indian Government has relaxed many rules and regulations regarding NRI investment in real estate to attract more investment from this sector. It is also pumping in more money in the real estate sector in India. The government has also updated the property tax act, the rent control system and the land ceiling regulations and made them more investor friendly for NRIs wanting to invest in this sector. There is further liberalization of foreign exchange regulations to get more NRIs into buying, selling and investing in this sector.

Government measures
Among the many progressive measures taken by the government to promote demand and investment in this sector are allowing 100% FDI in townships, housing, built-up infrastructure and construction development projects through the automatic route, subject to guidelines as prescribed by DIPP.

It has also allowed 100 per cent FDI under the automatic route in development of Special Economic Zones (SEZ), subject to the provisions of Special Economic Zones Act 2005 and the SEZ Policy of the Department of Commerce.

Returns have also skyrocketed for private equity players who have found an excellent business opportunity in real estate over the last few years. For NRIs it is profitable to invest in real estate and see property prices appreciating over the next two or three years.

According to the data released by the Department of Industrial Policy and Promotion (DIPP), housing and The real estate sector attracted a cumulative foreign direct investment(FDI) worth US$ 9,405 million from April 2000 to January 2011 Compared to US$ 1,048 million during April-January 2010-11. This includes construction of cineplex, multiplex, integrated townships and commercial complexes etc.

About the Author

Harjeet is an Indian – born mass-market novelist, who covers the world internet related topics . He writes columns and articles for various websites and internet journals in the domain of Investing in India and Investment Sectors.