What Weak Global Economic Data Means for Futures Traders

Posted by Deb | Guest Post | Saturday 7 April 2012 10:45 pm

Your Way To Financial Freedom

Guest post contributed by Hayley Russell, a freelance forex currency trading writer, on behalf of sunbird cfd trading. All views and opinions expressed are those of the writer and do not necessarily represent Sunbird forex brokers.

It wasn’t that long ago that Europe agreed to bail out Greece. However, low interest rates, and a free-flowing monetary policy hasn’t stopped Europe from entering another financial ice age. Europe looks to be in another, new, recession, and there’s no one coming to the rescue.

America can’t save Europe. It has its own financial problems. Back in 2010, Fed Chairman Ben Bernanke set the U.S. up for its current financial woes by writing:

“Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. … And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.”

Surprisingly, his view hasn’t changed much since then. Benanke’s ongoing insistence that quantitative easing will lead to a “virtuous cycle” of growth and profits (and higher income) is lost on the marketplace, which is seeing the velocity of the M1 money supply fall precipitously. This means that the Federal Reserve is pushing more and more money into the banking system, but banks aren’t lending. If banks aren’t lending, none of Benanke’s predictions can come true.

What’s worse, China has started to contract and is focused on protecting domestic supplies of rare Earth minerals and other natural resources. Spain may be next in line for a bailout, since the country is about to be hit with a wave of mortgage defaults. Where does all of this leave futures traders? Right now, the markets are taking a beating. Natural gas has recently hit a 10-year low.

The Dow Jones Industrial Average futures are off by about 70 points, and S&P500 futures are down about 9 points. NASDAQ futures are down 14 points. Futures traders don’t have many options these days. Europe has to contract for the foreseeable future.

The Greek debt crisis is far from over, and other European countries are just starting to join Greece. With Italy’s high unemployment rate, Spain, Portugal, and Ireland’s financial problems, and Greece’s inability to repay its debts without being bailed out, the European union will not be a great place for investment going forward.

China has to contract too. It’s been growing at an unprecedented rate for the last 10 years. However, none of that growth has been accompanied by long-term earnings. Back in 2009, China urged its citizens to buy gold. Perhaps it suspected its reign was coming to an end. By buying gold, the Chinese markets would deflate. Perhaps the real estate market would also contract. Buying into precious metals would help stabilize the economy since money would be moved out of the yuan and into an asset that is not backed by debt.

It seems like a Chinese commitment to buy gold would help gold futures, but it’s not. Gold futures are down and the precious metals market, in general, has been taking a beating lately. India has recently placed a higher tax on gold bullion purchases, helping to depress the price of gold while gold futures have dropped to their lowest levels since mid-January.

Gold futures are expected to find support at $1,612 per oz, which might help investors. However, the precious yellow metal has been under pressure recently due to hedge funds and other institutional investors selling off long gold positions.

Oil, another favorite of the futures market, is also down. Copper, grains, soybeans, and even coffee futures all slid this week. It may be time to for investors to give up the futures market for now and retreat to higher ground. Until or unless global economies recover from their financial problems, there’s not going to be much of a future to invest in.




Your Way To Financial Freedom

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Trading in Futures – the Origins of Speculative Investment

Posted by Deb | Guest Post | Sunday 26 February 2012 1:39 pm

by Anna Lipton

Futures are seen by more conservative investors as a wild and speculative way to invest money. Subject to wild fluctuations in potential profit or loss they are difficult to understand at first and nearly impossible to master. Those who do master them, however, enjoy superstar status. Those who fail are the rogue traders of the future. In the current maelstrom of opportunity that is the future market there is still a traceable path to history. The early futures contracts enabled greater productivity and stability boosting the economy whilst allowing some the opportunity to make huge profits on their trades.

Financial Markets Are Born To Serve A Purpose

The early railroads would not have been easily funded with debt alone. Calculating the return on a new line was tough enough in England where the distances were short and the population density high let alone when trying to calculate the possible future profit of the almost impossible to construct Canadian Western Railroad routes through the Rocky Mountains.

Train companies issued stock to speculators. Those who had cash and were looking for the extraordinary returns only possible through taking a chance on the huge potential future profits of the railroads. Thanks to the financial markets and the huge sums of money unleashed people, goods and cargo were moved swiftly across previously impossible distances.

A Tale Of The Price Of Grain

By the mid 1800’s, American farming had progressed beyond subsistence farming and basic plantations to developments that could produce significant amounts of grain. This came with significant planting, harvesting and labour costs. Add to that the cost of transporting the grain to market and farmers suddenly were developing complex business issues which could be seriously derailed by price fluctuations.

Some of their problems were solved by local commodities exchanges. These provided systems for the grading, classification and trading of commodities such as grain. There was a need for stocks in storage to be fungible – any part of an equal size would be equally suitable to use in discharging an obligation. This led to homogeneous units of grain which could be accurately priced and traded.

On top of the complex costs farmers were starting to endure they often would not have sufficient capital to develop their land. Unlike the stock investing railroad speculators we discussed earlier, the banks were keen to see that upon development on the land the resultant crops would repay the loan (much as modern credit card companies making balance transfer offers look to calculate their likelihood of repayment and future profit from interest after the initial period).

A forward contact for the delivery of that grain would significantly enhance a farmer’s chance of securing finance. On top of that, a forward contract would significantly aid the planning of a farmers business. No longer would it be mere guesswork as to what price the grain would be sold in the future – he would know exactly how much he could expend on stock, labour, finance and transport in order to return a profit at a known future price.

From Forwards To Futures

Even in these early times there developed a secondary market for forward contracts – speculators hoped to make a greater profit by taking on an obligation. There were a number of issues with these early arrangements – not least the settlement of obligations on the contract completion date. It is easy to find gamblers willing to take a bet, it’s sometimes not so easy to find a losing gambler to pay up and take delivery of the grain.

The other issue for speculation is the physical transportation or obligation to provide an amount of grain on a future date. I may feel that the market has priced forward delivery contracts on grain incorrectly but if I have no use for the tonnes of super cheap grain I obtain by making that guess it’s not ideal. Futures contracts enabled the sophisticated settling of these transactions in cash without the need for actual delivery of the underlying asset.

If grain had moved above the price specified the farmer would owe money – thus ensuring he would receive the specified price for the grain. If the grain price fell, the farmer would receive a lower price for grain but a profit on the futures contract leading again to the receipt of the specified price for the grain. This cash settlement of futures contracts offered a huge advantage over actual settlement of forward contracts when it came to speculation. By 1891 the Minneapolis Grain Exchange had put in place the kind of formal clearing and offset arrangements we see in modern futures clearing houses.

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The Son of One of Hammas Leaders Speaking

Posted by Deb | Politics | Tuesday 15 November 2011 11:26 am

Mosab Hassan Yousef, the son of Sheikh Hassan Yousef Halil, one of the establishers of the Hammas movement, speaks about his experience and his understanding of the Palestinian problem

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Cheap Online Shopping

Posted by Deb | Guest Post | Saturday 5 November 2011 9:14 pm

Cheap Online Shopping - A Beginners' GuideHi there,

My name is Carol Spykes, and I am thankful to Deb who let me write a quick note here. I wanted to invite you to read my newly written Kindle eBook: Cheap Online Shopping – A Beginner’s Guide. This eBook, as indicated by its name, is a guide for anyone who wants to learn more about internet shopping. I explain there how to find deals on eBay and Amazon, how to find other good bargain online stores, how to get bargains by finding coupons and promotion codes. I also explain there how to be careful and avoid scams, which is the number 1 obstacle making many people afraid of buying online.

You also get there an introduction to using PayPal, which is probably the safest way to buy things online, and is getting to be a popular way to buy on many online stores.

In short, if you want to learn how do your first moves on internet shopping, or if you have already made some purchases but do not yet feel sure of yourself, or if you want how to find good and safe deals in eBay, this eBook would be a good starting point. And it’s cheap too! It sells now in the Amazon Kindle store for only $5.22.

Get this book now! Click here to get the Cheap Online Shopping Guide on Amazon.

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Gilad Schalit is Back Home

Posted by Deb | Day Trading Journey | Wednesday 26 October 2011 11:59 am



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Organ Stolen in Syria

Posted by Deb | Politics | Tuesday 11 October 2011 12:49 pm

The following video is not easy to watch. It shows one of the civilian protesters in Syria in the city of Homs, Talbisa. This young man (who is reported to be 20 years old) was arrested after caught hit in his left kidney with an explosive bullet, and then taken to the military hospital in that city. Apparently in this hospital all his inner organs were stolen by the so-called doctors, and then his body was given back to his family.

This 20-year man, who was married with a child, had been severely tortured before he was killed by the Syrian security forces. Although the crime of stealing people’s organs existed in Syria even before the latest riots, it has now become more wide-spread and is even shown to the public in such videos whose purpose is to frighten those citizens who support the Syrian Freedom Movement.

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I am Busy With My eBook

Posted by Deb | Uncategorized | Tuesday 11 October 2011 10:43 am

Yes, I know. I have neglected this blog for too long. I am still on a break from trading. I am waiting till I have enough spare money to put into my trading account so I can start trading again with a significant sum. Trading with a tiny account, as I had learnt, does not leave any freedom to take risks and then you can lose very quickly.

Currently, I am busy writing my first eBook. I have promised to do so long ago, but kept procastinating the actual job. Now I am working on it, and hope to put it out real soon. I hope I can get proficient in writing eBooks so that the next one will not take me so long.

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