news for money

2009-05-27T21:07:00.000-07:00

Records Show Billions Withdrawn Before Madoff Arrest

2009-05-12T18:58:00.001-07:00

About $12 billion was pulled out of accounts at Bernard L. Madoff’s firm in 2008, according to several people briefed on an analysis of Mr. Madoff’s business records.

About $6 billion, or half, was taken out in just the three months before the financier was arrested in December and charged with operating an extensive Ponzi scheme, these people said.

Those figures offer a bit of hope for Mr. Madoff’s thousands of defrauded customers. Under federal law, the trustee overseeing the Madoff bankruptcy can sue to retrieve that money from the investors who withdrew it.

Indeed, the trustee, Irving H. Picard of Baker & Hostetler, filed two lawsuits on Tuesday seeking the return of a total of $6.1 billion, which he estimated had been withdrawn over the last decade.

One case seeks the return of $5.1 billion from various trust funds and partnerships run by Jeffry M. Picower, a prominent Palm Beach, Fla., investor whose charitable foundation was considered one of the notable victims of Mr. Madoff’s fraud.

Mr. Picard also sued to recover $1 billion withdrawn last year by Harley International, a hedge fund based in the Cayman Islands and administered by a unit of the Dutch bank Fortis.

Both lawsuits were filed in Federal Bankruptcy Court in Manhattan. And both assert that the defendants, as professional investors, should have realized that their profits were too high and too consistent — and Mr. Madoff’s paperwork and procedures were too sloppy — to be legitimate.

But the complaint against Mr. Picower goes further, accusing him of participating in a web of transparently false transactions with Mr. Madoff that were aimed at compensating him for “perpetuating the Ponzi scheme” at the expense of other investors.

In 1999, for example, one of Mr. Picower’s accounts posted an annual profit of more than 950 percent, the suit said. That account was one of two that reported annual returns from 1996 to 1999 ranging from 120 percent to more than 550 percent, the suit said.

In other accounts, backdated transactions generated billions of dollars of fictional year-end losses and one account grew by 30 percent in just two weeks in 2006 — thanks to trades that purportedly occurred months before the account was even opened.

A lawyer for Mr. Picower and his wife, Barbara, who was also named as a defendant, denied the allegations.

“Mr. and Mrs. Picower considered themselves friends of the Madoffs for over 35 years,” said the lawyer, William D. Zabel of Schulte Roth & Zabel. “They were totally shocked by his fraud and were in no way complicit in it.”

Mr. Zabel added: “They lost billions in personal assets, and most dear to them, all of the assets of their esteemed foundation.” The Picower Foundation closed its doors after Mr. Madoff’s arrest.

According to people familiar with the analysis of Mr. Madoff’s cash records, most of the $12 billion that flowed out of his fraudulent money-management operation last year was withdrawn by various “feeder funds,” which had raised cash from investors and pooled it to invest with Mr. Madoff.

Several of those feeder funds have already been the targets of lawsuits by Mr. Picard, who is searching for assets to be shared among customers who lost what they believed to be almost $65 billion in the Ponzi scheme.

It is not clear where the cash taken out of the Madoff accounts is located, or how much of it can be recovered through litigation.

In the lawsuit seeking to recover more than $1 billion withdrawn by Harley International, Mr. Picard asserts that the fund should have detected the fraud before investing more than $2 billion of its clients’ money.

According to that complaint, Harley International made 14 transfers out of its Madoff account over the last six years, including $425 million that was withdrawn three months before the Ponzi scheme became public.

A spokeswoman for Harley International, Jamie Moss, did not return calls seeking comment.

In the complaint, Mr. Picard said Harley International, which invested client money with Mr. Madoff since at least 1996, received “unrealistically high and consistent annual returns” of about 13.5 percent. That outpaced the swings in the stock index on which Mr. Madoff had apparently based his trading strategy.

Trading records indicate that the Madoff firm, Bernard L. Madoff Investment Securities, made at least 148 stock trades in Harley International’s account in the last decade at prices that did not match the trading range for those stocks on the dates the trades supposedly occurred.

Mr. Picard claims those trades should have raised red flags for “any investment professional managing the account.”

The Harley lawsuit is similar to one Mr. Picard has filed recently against J. Ezra Merkin, the New York financier who lost over $2 billion investing with Mr. Madoff.

The lawsuit against Mr. Picower mirrors similar allegations Mr. Picard made in a complaint against Stanley Chais, an investment manager and prominent Los Angeles philanthropist. Both investors have said they intend to fight the lawsuits.

Mr. Picard has raised about $1 billion in assets for Mr. Madoff’s victims, but the lawsuits filed in the last two weeks could push that number much higher.

Mr. Madoff pleaded guilty on March 12 to running the biggest Ponzi scheme in history. He is scheduled to be sentenced next month and faces 150 years in prison.

http://www.nytimes.com/

Nomination Hearing for Regulatory Czar, Cass Sunstein

2009-05-12T18:32:00.000-07:00

There were no TV network cameras or overflow crowds of press or lobbyists at the May 12th nomination hearing of Cass R. Sunstein to head up the Office of Information and Regulatory Affairs (OIRA) at the Office of Management and Budget. The low-profile hearing was in keeping with the relative obscurity of OIRA.

But what the agency does is crucial to business and to ordinary Americans. If confirmed, as expected, Sunstein will be the regulatory czar, sitting in judgment of the rules coming out of agencies like the Environmental Protection Agency. OIRA “exerts enormous influence

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Antitrust’s Big Break
Posted by: Theo Francis on May 11

Anyone who listened to Barack Obama’s presidential campaign can’t be terribly surprised that his Justice Department in breaking with the Bush Administration on antitrust doctrine.

Still, it’s worth noting the vehemence with which Christine A. Varney, Justice’s newly minted antitrust czar, repudiated her predecessors’ "Section 2" report, issued last September (and now bearing a virtual sticky-note linking to the current administration’s rejection of it).

It’s also worth beginning to think about the consequences that rejection will have, because they’re potentially far-reaching.

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Obama Administration Trumpets Budget Cuts
Posted by: Theo Francis on May 06

It's budget day again as the Obama Administration releases a detailed spending plan on Thursday -- and this time, officials are pointing to a more extensive list of spending cuts and program terminations.

The overall budget is still huge, of course, but the administration will be emphasizing cost-cutting measures: 121 programs totaling $17 billion in savings in 2010 and more down the road. While some of the proposals have been heard before -- including Defense Secretary Robert Gates' proposals last month -- an administration officials says 80 of them will be entirely new. About half the cuts will be from the defense budget and half from elsewhere; most will be from the "discretionary" budget -- ie, not from entitlements like Medicare and Social Security.

The message of the day: "This is an important step in the process, but it's only a step." In other words, there's more to come.

The same administration official trotted out five examples of cuts the administration is proposing -- including at least one that has had big backing from Dems in the past.

Napolitano on H-1B: Hire Americans First?

By Moira Herbst

At Wednesday’s Senate Judiciary Committee hearing on oversight of the Department of Homeland Security, Senator Dick Durbin (D-Ill.) asked for DHS secretary Janet Napolitano’s views on the H-1B visa program. (The exchange starts around the 56-minute mark.)

Durbin said that he and Senator Charles Grassley (R-Iowa) “feel that our first obligation is to American workers. And to encourage, if not hold accountable, those firms that are looking to fill spots to first turn to the talent pool in America, and particularly those who've lost a job. Do you have any opinions on the H-1B visa program?”

“I agree with you,” Napolitano said. “Our top obligation [is] to American workers, making sure American workers have jobs.”

The comments were Napolitano’s first public statements on the H-1B visa program since she was named DHS Secretary by President Barack Obama. It was unclear from her remarks whether she was indicating support for the bill Senators Durbin and Grassley introduced on April 23. That bill would require that employers seeking an H-1B visa pledge they have first tried to hire an American worker for the position. Currently, only employers identified as heavy users of the H-1B visa program are required to make such a pledge.

Kosovo's Trip to Washington
Posted by: Steve LeVine on May 01

Dozens of the world’s central bankers rolled into Washington last week for the spring summit of the World Bank and the International Monetary Fund. Members of the elite Group of 7 nations and the more representative Group of 20 discussed under what terms China would contribute a few tens of billions of dollars in IMF financing for the troubled economies of the world; how and when to transform the IMF leadership so it actually reflects how the global economy has evolved over the last half-century; and how to implement an agreement to regulate the financial systems of the world’s leading economies.

But the meeting is also the scene of many smaller, personal missions, and among them last week was that of Ahmet Shala, economics minister of the world’s newest nation, Kosovo. Some five dozen countries have since recognized the Balkan province since it broke off from Serbia and declared independence in February of last year. But the exceptions – among them China, Russia and Spain – have prevented Kosovo from obtaining economic assistance from the IMF, the World Bank or the European Bank for Reconstruction and Development.

Hence Shala’s trip to Washington. He is in a bid to persuade more than half the IMF’s 182 members, or 92 of them, to support Kosovo’s membership application. His feeling was that he was one or two short, hence his nervousness.

http://www.businessweek.com/blogs/money_politics/

Why Are Oil Prices Rising?

2009-05-12T18:12:00.000-07:00

Many are asking the question about oil prices: Is this deja vu all over again? Didn’t we just go through a several-year run-up in prices based largely not on fundamentals, but on traders bidding them up, ultimately to $147 a barrel? Only then to see them plunge to $32 a barrel?

If one puts stock in the plunge, then there appears to be air in the run-up today to a six-month-high of $60 a barrel. How much is anyone’s guess. The other day, one exceedingly smart oil analyst privately put it in the range of $5 to $10 a barrel.

Here is the case for a price bubble: Oil inventories are at a 19-year high; the U.S. alone has some 1 billion barrels sitting in storage tanks, according to Mark Williams at the Associated Press. Demand for oil is set to fall to its lowest level in five years, says the U.S. Energy Information Administration.

The opposite case goes as follow: The market is factoring in expected inflation because of global deficit spending; Chinese investment spending is reviving. Over at Alaron, Phil Flynn says these are also genuine “fundamentals.”

Regardless, there always seems to be reason offered up to trust in a price run-up. After all, markets are all about emotions, as Robert Shiller notes. Yet, there are still sober voices. In my view, the Financial Times’ Chris Flood delivers it straight: Prices are rising because of various types of trading gambles. Flood quotes Mike Wittner, a senior oil analyst at Société Générale saying the following: “Recent price strength is not based on fundamentals, but on financial flows.”

Over at the Oil Drum, Rune Likvern says up to 3 million barrels a day of oil is being bought purely for storage, including on the sea. But he predicts that such purchases – which help to prop up prices – will decline because storage is becoming harder and harder to find; when they do, Likvern says, prices will fall substantially.

It’s a fool’s game to predict oil prices. That doesn’t stop a lot of people, of course, especially the traders.

Reader Comments
bob
May 12, 2009 06:54 PM
Ask Goldman Sachs who writes many of the oil contracts. Someone has to pay for all of those Derivative Exposures!
Percentage of total exposure to Risk Based Capital is over 1,000%. And we know every Memorial Day many take to the skies and highways, what a better way to pay off some of that Debt. Consumers get played with again.

Strategery
May 12, 2009 07:15 PM
Here's what I don't understand about the 'free' market: why are consumers the ones paying for an oil bubble? If it were truly a free market, the investors would be the ones paying for the bad bets and consumers would pay the true price based on supply and demand. The bubble became obvious in 2008 when the price of oil and gasoline both peaked on the SAME DAY. Economists claim that there is a disconnect between oil and gas prices, so how do you explain that event? Looking at the numbers, supply was UP while demand was DOWN during 2008. The oil bubble in 2008 was created by the same big investment banks that were losing big money on bad loans--the same banks that have received TARP money. Don't count on a 2009 oil bubble--Obama will not let the market run afoul as it did last year. Also, on the demand side, the number of vehicles on the road is actually falling and any new vehicles are expected to get better gas mileage as hybrids become mainstream.

http://www.businessweek.com

Obama berates AIG and vows to try to block bonuses

2009-03-16T17:40:00.000-07:00

WASHINGTON – Joining a wave of public anger, President Barack Obama blistered insurance giant AIG for "recklessness and greed" Monday and pledged to try to block it from handing its executives $165 million in bonuses after taking billions in federal bailout money. "How do they justify this outrage to the taxpayers who are keeping the company afloat?" Obama asked. "This isn't just a matter of dollars and cents. It's about our fundamental values."

Obama aggressively joined other officials in criticizing American International Group, the company that is fast becoming the poster boy for Americans' bailout blues.

The bonuses could contribute to a backlash against Washington that would make it tougher for Obama to ask Congress for more bailout help — and jeopardize other parts of the recovery agenda that is dominating the start of his presidency. Thus, the president and his top aides were working hard to distance themselves from the insurer's conduct, to contain possible political damage and to try to bolster public confidence in his administration's handling of the broader economic rescue effort.

Obama had scheduled a speech Monday to announce new help for recession-pounded small businesses. But first, he said, he had a few words to say about AIG. He lost his voice at one point and ad-libbed, "Excuse me, I'm choked up with anger here." It was just a light aside, but he meant the sternness of his remarks to come through.

"This is a corporation that finds itself in financial distress due to recklessness and greed," Obama declared.

He said he had directed Treasury Secretary Timothy Geithner to "pursue every legal avenue to block these bonuses and make the American taxpayer whole."

Later, White House spokesman Robert Gibbs said the administration would modify the terms of a pending $30 billion bailout installment for AIG to at least recoup the $165 million the bonuses represent. That wouldn't rescind the bonuses, just require AIG to account for them differently.

Gibbs said the tough talk from Obama and other administration officials was aimed in part at pressuring bonus recipients to turn them down. Anyone accepting the money should "think long and hard" about whether keeping it was appropriate "given the performance of the company," he said.

On a separate track, New York Attorney General Andrew Cuomo said Monday he would issue subpoenas for information on the bonuses after AIG missed his deadline for providing details. Cuomo said his office would investigate whether the employees were involved in AIG's near-collapse and whether the $165 million in bonus payments were fraudulent under state law.

AIG spokeswoman Christina Pretto told The Associated Press, "We are in contact with the attorney general and will of course respond to his request."

One reason that the AIG bonus giveaway is such a compelling story — and a politically troubling one for Obama if not neutralized — is that it offers a simple story line that appears to sum up ways in which the federal bailouts have gone awry.

"This is just the kind of issue that galvanizes public outrage," said Paul C. Light, professor of public service at New York University. "It's always the tangible stuff, the things that ordinary Americans can relate to. They don't know the first thing about credit default swaps. But they do know about bonuses. And it's just the sort of thing that will undermine any future bailout activity."

Bailout steps for AIG totaling over $170 billion since September have effectively left the federal government with an 80 percent stake in the faltering insurance giant.

Obama's comments came on the same day a new poll showed slippage in his approval rating. The poll by the Pew Research Center showed it dropped from 64 percent in February to 59 percent this month amid divisions of opinions over his economic proposals and what the pollsters said was a growing perception that the president is listening more to his party's liberals than to its moderates.

Still, those surveyed generally gave the president favorable marks for doing as much as he can to try to fix the economy, and few blame him for making the economy worse.

Andrew Kohut, Pew's director, said in an interview that people are most angry with banks and companies but there's also "pushback against Washington generally. And, of course, the buck stops with Barack Obama these days."

Obama's sharp words continued an insistent administration drumbeat over the past few days designed to pressure the bonus recipients to forgo them. Thus far, American International Group officials have refused to rescind the payments.

In a letter to Geithner over the weekend, the government-appointed chief executive of AIG, Edward Liddy, said the bonuses were legally binding obligations and the firm's "hands are tied."

Still, pressure was building on that issue — and on the government to rework its AIG bailout to make sure the company repays as much of the $170 billion as possible.

So far, the company has been honoring its contracts with U.S. and foreign banks, paying out more than $90 billion in economic bailout funds to big banks and others. The government agreed to uphold those contracts when it seized control of AIG in September, contending that failure would bring even worse global economic problems.

However, Obama officials made the rounds of Sunday talk shows to denounce the insurer. And even Federal Reserve Chairman Ben Bernanke weighed in, saying on CBS' "60 Minutes" that the AIG bailout angered him the most and that he "slammed the phone more than a few times on discussing AIG." Still, he said a collapse of AIG would have wreaked havoc on the global economy.

Obama was planning an appearance later in the week on Jay Leno's NBC talk show, perhaps to add a lighter touch to his efforts to show himself in command of efforts to resuscitate the economy.

The AIG bonuses were revealed over the weekend. It also was disclosed that AIG used $90 billion-plus in federal aid to pay foreign and domestic banks, some of which had received their own multibillion-dollar U.S. government bailouts.

The recipients included Goldman Sachs, at $12.9 billion, and three European banks — France's Societe Generale at $11.9 billion, Germany's Deutsche Bank at $11.8 billion, and Britain's Barclays PLC at $8.5 billion. Merrill Lynch, which also is undergoing federal scrutiny of its bonus plans and which is now part of Bank of America, had received $6.8 billion as of Dec. 31.

The money went to banks to cover their losses on complex mortgage investments, as well as for collateral needed for other transactions.

AIG reported this month that it had lost $61.7 billion for the fourth quarter of last year, the largest corporate loss in history.

Outcries against the company have also come from congressional leaders.

"I call upon the executives at AIG to right the wrong they have done to American taxpayers, who are footing the bill for the most expensive government rescue in history," House Speaker Nancy Pelosi, D-Calif., said Monday.

Senate Republican Leader Mitch McConnell called the bonuses "appalling" and said he hoped "the administration gets the message from the taxpayers on this issue."

___

AP White House Correspondent Jennifer Loven and Business Writers Stevenson Jacobs, Ieva M. Augstums and Daniel Wagner contributed to this report.

#15 Roman Abramovich

2008-12-01T20:07:00.000-08:00

Reuters/Eliana Aponte
Age: 41

Fortune: self made

Source: oil

Net Worth: $23.5 bil

Country Of Citizenship: Russia

Residence: Moscow , Russia, Europe & Russia

Industry: Diversified

Marital Status: married, 5 children

Education: Drop Out

Orphaned as a child, Abramovich dropped out of college, then made a fortune in a series of controversial oil export deals in early 1990s. His fortune took off in 1995 when he teamed up with Boris Berezovsky (now also a billionaire) to take over oil giant Sibneft at a fraction of its market value. (When Berezovsky fled Russia in 2000 to escape fraud charges, he sold out to Abramovich.) In 2003 to 2004 he sold stake in Russian Aluminum to fellow billionaire Oleg Deripaska, who is now ranked 9th in the world. In 2005 Abramovich liquidated his biggest asset, selling 72.6% stake in Sibneft to gas titan Gazprom for $13 billion. In 2006 he bought stake in the country's largest steelmaker, Evraz Group, and early in 2008, a piece of Highland Gold, a U.K. mining company with operations in Russia. He also spent some of his cash buying U.K. soccer club, Chelsea. He recently finalized divorce from the mother of his five children, Irina, but largely stays out of public eye, except for occasional spottings with rumored girlfriend Daria Zhukova.

http://www.forbes.com

The World's Billionaires #1 Warren Buffett

2008-10-19T21:23:00.000-07:00

Age: 77
Fortune: self made
Source: Berkshire Hathaway
Net Worth: $62.0 bil
Country Of Citizenship: United States
Residence: Omaha, Nebraska , United States, North America
Industry: Investments
Marital Status: widowed, remarried, 3 children
Education: University of Nebraska Lincoln, Bachelor of Arts / Science
Columbia University, Master of Science

America's most beloved investor is now the world's richest man. Soared past friend and bridge partner Bill Gates as shares of Berkshire Hathaway climbed 25% since the middle of last July. Son of Nebraska politician delivered newspapers as a boy. Filed first tax return at age 13, claiming $35 deduction for bicycle. Studied under value investing guru Benjamin Graham at Columbia. Took over textile firm Berkshire Hathaway 1965. Today holding company invested in insurance (Geico, General Re), jewelry (Borsheim's), utilities (MidAmerican Energy), food (Dairy Queen, See's Candies). Also has noncontrolling stakes in Anheuser-Busch, Coca-Cola, Wells Fargo. Insurance operations flourished in 2007. "That party is over. It's a certainty that insurance-industry profit margins, including ours, will fall significantly in 2008." The Oracle of Omaha issued a challenge to members of The Forbes 400 in October; said he would donate $1 million to charity if the collective group of richest Americans would admit they pay less taxes, as a percentage of income, than their secretaries. Had long promised to give away his fortune posthumously. Irrevocably earmarked the majority of his Berkshire shares to charity in 2006, mostly to the Bill & Melinda Gates Foundation. Gift was valued at $31 billion on day of announcement; donation will far exceed that sum so long as Berkshire shares continue to rise.

http://www.forbes.com/

Stock Investing Basics

2008-10-14T18:04:00.002-07:00

Stock Investing vs. Saving
Whereas investing represents a proactive activity the opposite is true for saving. Saving incorporates compounding, in which it is similar to investing.

Mutual Funds vs Individual Stocks
Many investors face the dilemma of whether to select mutual funds or stocks as their investment tool. In order to decide which tactic best fits your needs, you should be well grounded in the pros and cons of each of them.

Classes of Assets - Asset Class Definition
Basically there are four major classes of assets. When constructing your investment portfolio you may select any of them and make combinations out of them.

Investment Goals Planning
The first step before you embark on any investment activities is the setting of investment goals. You may find it difficult to harmonize your goals since some of them may conflict each other or may not coincide with your way of life.

Stock Investing Basics
Before you start investing on the stock market you should be well familiar with the general stock market terms and definitions like stocks, types of stocks, class A and class B stocks, investment risk, etc.

Bond Definition and Concepts
Many financial experts recommend the combination of stocks and bonds in investment portfolios. Bondholders are classified as creditors, whereas stockholders are referred to as company owners.

Zero Coupon Bonds Basics
Zero coupon bonds (also known as zeros) don’t give their holders interest rate payments on regular basis. However, the interest rate is accumulated and paid at maturity.

Convertible Bonds Basics
In order to decide whether you should own convertible bonds or not you should make a careful consideration of both the negative and positive sides and see whether they represent the tool that coincides with your financial goals.

US Treasury I Bonds Basics
If you want your principal to be guaranteed and to exempt yourself from taxes on the generated income, I Bonds may be the investment solution you need.

Discount Stock Brokers vs Full Service Brokers
In the past it was easy to divide stock brokers into either full service or discount ones. Now it is difficult to categorize brokers into separate classes, but still, you should be able to distinguish them according to the types of services they provide.

Financial Advisor Job Description
Many investors lack the time and sometimes the knowledge encompassing the stock picking activities or the setting of a successful investment portfolio. In such a case the services of a financial advisor can be extremely valuable.

Certified Financial Planner Designations
You may find it difficult to qualify a certain individual as a financial advisor or a financial planner, since most states don’t have specific regulations directed toward such identification. Nevertheless, there are several criteria in order to designate someone as a certified financial planner.

Stock Broker Categories
Internet provides vast amounts of information to which most individual investors have a free access. As a result not only the amount of information available to investors has increased, but also the range of brokers from which investors can choose.

Types of Brokerage Accounts
Now that you have decided to use the services of a broker, it is time to make your mind about the type of brokerage account you will open.

Stock Buyback Reasons
Companies issue stock in order to obtain resources for the financing of particular projects and they have the right to buy them back under specific conditions. This action is known as stock buyback.

Stock Basics
In order to get a clear view of how the stock market operates you should become familiar with the essence of stocks themselves.

Stock Dividends Basics
Dividends represent the profits that a company distributes to its owners. Many investors consider stock dividends as a good way to meet their financial goals.

Stock Market Cycles
Many investors get panicked when they hear that the market has dropped significantly. However, experienced stock investors are well aware that such falls are absolutely normal being part of the stock market cycle.

Federal Reserve Board (Fed) Functions and Importance
The Fed can be defined as the driver of the markets since it regulates its speeds. So, keep a close eye on the meetings of the Fed and the announcements they make after the meetings, since a view on the interest rate direction can be made.

Stock Market Sectors Classification
There are many ways in which stocks can be classified. One of the most preferred ones is by the sector in which the particular business that issues the stocks falls.

Stock Split Basics
There are times when a company may decide to split its stocks. However stock split is not an enough indicator that the company is worth of investing in and further research should be done to see whether it is really reasonable to invest there.

Stock Market Indexes and Fair Value Indications
Stock market indexes and their relationship to “fair value” give investors a hint on how the market will open.

Stock Share Types
Stock investing includes many terms with which every investor should become familiar in order to make educated decisions. Additionally, the different shares, such as authorized, treasury, outstanding and etc. have different characteristics.

Bid and Ask Prices
As an educated investor you should be acquainted with the meaning of bid and ask prices and the difference between ask and bid prices, referred to as the spread.

Stock Trading Basics and Order Types
Trading is facilitated by many additional tools that minimize the possibility of disparities. There are different types of orders through which you can avoid losses due to too much time between your intentions of selling and the actual execution of the sale.

Market Makers Role and Responsibilities
The role of the market maker is clearly identified in the NASDAQ. Market makers at NASDAQ are responsible for the provision of a market for the listed securities and the provided prices (both ask and bid prices).

NYSE and Market Specialists
The New York Stock Exchange (NYSE) is the oldest stock exchange in the US. The key role in NASDAQ is played by a market maker, whereas in the NYSE it is allocated for a specialist, who is a market professional part of a specialist firm.

Company Market Capitalization
When you decide on the investment in a particular stock you should consider the size of the company that issues it. This is required since companies of different sizes react in a different way to market conditions and changes.

Stock Order Types
Using the services on online brokers includes familiarization with the different types of orders that are in use for the execution of the various trades by investors.

Setting Stock Prices
The setting of stock prices depends on many factors. It is not a simple process, but instead a complex one which, however, is easy to understand.

Newspaper and Online Stock Quotes
Your successful participation on the stock market depends on many factors one of which is the clear understanding of the numbers that are daily quoted by the different sources.

Stop Loss Order Fundamentals
Stop loss orders are used to alleviate the losses that may be incurred if the price of your stocks falls under the desired level. Under this type of order the broker is required to sell the stock when a certain level is hit.

Trailing Stop Order Basics
Trailing stop orders are a form of stop loss orders. Their major purpose is to protect the profit from a stock. If used appropriately, trailing stops can follow an increasing price of a stock.

Book Value Explanation
When deciding on the investment in a particular company through the purchase of stocks of the company, many investors refer to its book value as one of the components that guide their decision regarding the investment.

Dividend Yield Explanation
Dividend investors, searching for a stock that will return them stable current income, should use Dividend Yield in their comparison of the different stocks available on the market, which fall under the investor’s consideration.

Stock Price Influences
Stock prices are vulnerable to many market changes. You should become familiar with these influences in order to be able to identify whether the change in the price gives you a signal to sell, buy or do nothing with a particular stock.

Advance Decline Ratio Basics
One of the indicators that give you an idea on what has happened during the trading day is advance/decline ratio. Use advance/decline numbers whenever you need to make a judgment on the performance of the market.

Value Investing Basics
Value investing refers to the purchase of stocks that have been overlooked by the market and as a result their price is below their real value.

Rising Interest Rates and their Effects
Changes in interest rates may have influence over the performance of companies. This in turn may reflect on the movement of your stocks.

Foreign Stocks Basics
As part of your investment portfolio you should not overlook foreign stocks. Depending on your conservativeness regarding investing include the appropriate percentage of foreign stocks in your portfolio.

Asset Allocation Basics
In order to protect your assets from sustaining losses when a sector suffers a decline you should practice asset allocation, meaning you spread your resources among different categories of investments.

Stock Market Movements
The stock market is characterized by its volatility. What exactly causes its rises and falls has several explanations. Some of them are obvious whereas others are not so easily determined.

Earnings Season Basics
Earnings season represents the time when many companies give a report on their quarterly profits or losses. Thus, this term is often mentioned during the year.

CPI Basics
The most well known and widely quoted economic indicator is the CPI (Consumer Price Index). It represents an estimation of the change in prices of consumer goods and services.

Inverted Yield Curve Implications
An inverted yield curve results when short-term interest rates are higher than long-term interest rates.

IPO Basics and Strategies
Initial Public Offerings (IPOs) represent the transition point of companies from a private status to a publicly held status. Thus, IPOs represent a new trading opportunity.

Option Basics and Types
Some investors tend to sign option contracts, which include the right to buy or sell securities when a certain price is reached. There are two major types of options.

Consumer Price Index Basics
CPI stands for Consumer Price Index. It is commonly referred to as a measure of the rate of inflation.

Stock Market Investing Basics
Learn the basics in investing in the stock market in order to understand how the stock market works.

Why Do Companies Go Public
To go public means that you have to list the company on a stock exchange and offer stock to the public. The money you get from the stock sale is known as initial public offering.

Introduction to Stocks
Stock represents a piece of ownership of a particular company. Though stock investing carries a certain degree of risk, it can be very profitable for an educated investor.

Stock Price Volatility
Stock prices are characterized by volatility. When significant changes occur, investors tend to panic.

Large Cap Stock Characteristics
The biggest players in the stock market are companies that have large market capitalization. Due to their large market capitalizations, such companies tend to have a major influence over the economic activities.

Small Cap Stocks Characteristics
In order to classify a stock as of small cap character its market value should be below $1 billion. Small cap stocks are generally considered to be highly volatile and if market conditions are not stable, they can carry a high level of risk.

Foreign Stock Characteristics
In today’s global economy investors are given the opportunity to purchase stocks of foreign companies. Foreign stocks provide an additional piece of diversification to your portfolio.

Technology Stock Characteristics
Technology stocks represent one of the most attractive investment solutions. However, technology stocks are not deprived of their drawbacks.

Fundamental Analysis Technique Basics
In order to make an analysis of target stocks, you can choose from a number of tools. One of them is the fundamental analysis technique.

Technical Analysis Basics
Technical analysts tend to use different mathematical techniques in order to predict future trends in the prices of a target stock.

Importance of Current Assets and Current Liabilities
When you study the figures of a target company it is worth examining its current assets and current liabilities.

Price/Book Value Advantages and Disadvantages
Price/book value is best applicable to companies that have many tangible assets, banks and insurance companies.

Understanding Return on Equity and Return on Assets
Two ratios that are usually used in order to measure management efficiency are return on equity (ROE) and return on assets (ROA).

Understanding Inventory Turnover Ratio
You should compare the turnover ratios of companies in order to determine their efficiency of inventory management.

Price to Earnings Growth Ratio (PEG) Explanation
High growth rates are one of the factors that greatly attract investors to a particular stock. As a result of the increased attention, the price of the stock may hit the skies. A ratio that manages to explain this attention is the price/earnings growth ratio (PEG).

Price to Earnings (P/E) Ratio Basics
One of the most widely used ratios is the P/E ratio (price/earnings). Despite some of its disadvantages, it is favored by most investors for its easy of understanding and calculating.

Price to Sales Ratio (PSR) Explanation
There are many tools you can use in order to valuate a stock. One of them is the price/sales ratio (PSR).

source: http://www.stock-market-investors.com/

Stock Market Risk Premium

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Risk and returns go hand in hand when speaking about stock investing. In order to achieve better results with your stocks you should harmonize the level of risk with the rewards you expect to get from the particular stock.

What is certain in stock investing is the existence of risk. On the other hand, rewards are almost ever preceded by the word "potential".

Nevertheless, for every stock investor it is important to evaluate the potential returns s/he will gain from the particular investment. This should be done in order for the investor to be sure that the rewards s/he will eventually get are in accordance with the risk levels s/he is comfortable with.

In order to do this, you should first identify "risk-free" returns offered in the market. A risk-free investment can be qualified as the type of investment which possession doesn't expose your money to any risk. Additionally, risk-free investment provides you with the basis for making your measurements.

For instance, you can use US Treasury Bonds for a yardstick against which to make measurements. Many investors use this type of bonds since they are guaranteed by the US government. As a result investors that use US Treasury Bonds as a benchmark should invest in stocks that give as a return more than the five percent offered by the bonds.

If there are investment returns above the five-percent level, this amount is referred to as risk premium. Therefore, if the potential return of a stock you have purchased is 10%, the risk premium is calculated by subtracting five percents from 10%, which results in 5% risk premium.

Next, you should determine whether the risk premium is enough in case the stock doesn't achieve the expected return. This depends on the type of stock you have purchased. For instance, a 5% risk premium is enough for a well-established large-cap stock, whereas for a small-cap stock, which is not so well-established, the risk premium may not be enough.

Risk premiums are a suitable yardstick for judging the worthiness of investing your money in particular stocks. However, when calculating the potential returns and their justification regarding the levels of risk you take, you should take into consideration many other factors.

To be a successful investor you need two main things - the knowledge and the right trading platform. For knowledge we can highly recommend you Get The Wall Street Journal for 75% off!. For a trading platform we can recommend you Zecco. It offers free stock trades, no account minimum, real time quotes, trading community, and is also insured and protected against loss by SIPC. Opening a Zecco account to benefit from $0 Stock/ETF trading is a smart idea. Free stock trades allow you to preserve more of your wealth and save money, which you can invest instead of paying brokerage commissions.

High Risk, High Return

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Many investors purchase a particular stock with the intention of making a big profit over a short period of time. However, this action is not investing, but a pure gambling. The reason for this is that you are never guaranteed that you will get the high returns you hope for over such a short period of time.

There may be times in which stocks have put a record on short-term growth, but these occurrences are very rare. On average stocks have returned from 10% to 12%. However, this doesn't mean that all stocks return at these rates.

The stock market is characterized by the trade-off between risk and return. The higher the risk the investor is willing and able to take, the higher the potential rewards from the investment. Therefore, if a particular investment offers you high returns, it is an indication that it will come with a high risk burden.

As part of the selection process, you should determine the risk level of the stock as well as your risk tolerance. If you are looking for high returns you should be able to meet high potential losses as well.

Many investors prefer young technology-oriented companies over blue chip companies, because the first provide higher returns than the latter. However, the latter provides its shareholders with regular dividends to compensate for the modest growth.

So, the next time you are offered a stock that is expected to triple in value over a short time period, think carefully whether to invest in it, because the chances of it failing to reach this level of return is extremely high.

Final Piece of Advice
Remember that there is no safe investment that will provide you with high returns over a short period of time. Therefore, you should direct your resources toward long-term investments that are more likely to reward you for the patience with high returns.

To be a successful investor you need two main things - the knowledge and the right trading platform. For knowledge we can highly recommend you Get The Wall Street Journal for 75% off!. For a trading platform we can recommend you Zecco. It offers free stock trades, no account minimum, real time quotes, trading community, and is also insured and protected against loss by SIPC. Opening a Zecco account to benefit from $0 Stock/ETF trading is a smart idea. Free stock trades allow you to preserve more of your wealth and save money, which you can invest instead of paying brokerage commissions.

Currency Futures

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Currency futures are futures markets where the underlying commodity is a currency exchange rate, such as the Euro to US Dollar exchange rate, or the British Pound to US Dollar exchange rate. Currency futures are essentially the same as all other futures markets (index and commodity futures markets), and are traded in exactly the same way.

Futures based upon currencies are similar to the actual currency markets (often known as Forex), but there are some significant differences. For example, currency futures are traded via exchanges, such as the CME (Chicago Mercantile Exchange), but the currency markets are traded via currency brokers, and are therefore not as controlled as the currency futures. Some day traders prefer the currency markets, and some day traders prefer the currency futures. I recommend the currency futures as they do not suffer from some of the problems that currency markets suffer from, such as currency brokers trading against their clients, and non centralized pricing.

Settlement and Delivery
As currency futures are based upon the exchange rates of two currencies, they are settled in cash, in the underlying currency. For example, the EUR futures market is based upon the Euro to US Dollar exchange rate, and has the Euro as its underlying currency. When a EUR futures contract expires, the holder receives delivery of $125,000 worth of Euros in cash. Note that this only happens when the contract expires, and as day traders do not usually hold futures contracts until they expire, they should not be involved in the settlement, and will not receive delivery of the underlying currency.

Popular Currency Futures
Many of the most popular futures markets that are based upon currencies are offered by the CME (Chicago Mercantile Exchange), including the following :

EUR - The Euro to US Dollar currency future
GBP - The British Pound to US Dollar currency future
CHF - The Swiss Franc to US Dollar currency future
AUD - The Australian Dollar to US Dollar currency future
CAD - The Canadian Dollar to US Dollar currency future
RP - The Euro to British Pound currency future
RF - The Euro to Swiss Franc currency future

Market Profiles
Complete descriptions of many of the above currency futures, including the exchange rate that they are based upon, the futures contract specifications, and the market holidays, are available in their Market Profiles.

source: http://daytrading.about.com/

Limited Power of Attorney

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This agreement allows someone other than the customer to place buy and sell orders in the account. However, the third party may not withdraw funds or securities from the account. This is commonly set up when an investment advisor or money manager is trading on the customer's behalf.

source: http://www.stockboulevard.com/

Options Agreement

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This agreement is required before options may be traded in a cash or margin account. The options agreement includes a statement of the client's net worth, liquid assets and investment experience. Brokerage firms require varying amounts of income and net worth depending on the types of option strategies a client intends to use. (Since our entire trading system uses specific option strategies, we will get into more detail later regarding these limits and how to get accounts open without necessarily proving any such figures). All customers opening an option account must receive the ?full disclosure? document approved by the options exchanges and the Options Clearing Corporation (OCC) at or prior to the account being approved.

Margin and Loan agreements

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The margin agreements must be signed by the customer and returned to the firm prior to placing an order to buy on margin or sell short for the customer's account. When purchasing and maintaining securities on margin, the customer must agree to abide by exchange and Federal Reserve requirements. (again, margin will be handled in detail later).

Joint Account Forms

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Joint Tenants Agreement - This form establishes joint tenancy with rights of survivorship (JTWROS) between two parties to an account. Each party owns an undivided and equal interest in the account. In the event of death, his or her portion of the account belongs to the surviving party and bypasses the decedents estate.
Joint Tenants in Common - This agreement states the account is shared by two or more persons and specifies the percentage ownership of each. Upon death of any party, that person's equity in the account belongs to his or her estate.
Community Property Agreement - This establishes that funds and securities held in this account are the community property of a married couple.

Accounts and Margins

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A customer may buy securities either in cash, by paying the entire amount of the purchase or on margin by depositing the required amount and borrowing the balance from the brokerage firm. A new account form is required for all types of accounts with the following information from the owner of the account: Name, Address, Age, Marital Status, Occupation, Tax ID Number, Citizenship, Bank Reference, Listing of other brokerage accounts, Investment objectives, Relationship, if any, to the broker, Signature of the customer (s), broker and manager.

Categories of Stock

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Blue Chip - High grade, high quality companies, major corporations, usually well established and have a track record of paying dividends and increasing earnings. An example would be General Electric (GE)
Defensive - Businesses which seem resistant to recession for example utility companies.
Income - Pays a higher than average dividend. Investors who seek consistent income that is higher than average would buy income stocks.
Growth - Market share, earnings and sales are expanding at a rate faster than average. Dividends are usually small because earnings are being reinvested back into the company for growth. Many technology companies are growth stocks.
Seasonal -Earnings fluctuate with the calendar and changing seasons. Retail stores are often seasonal.
Cyclical -Businesses such as automobile manufacturing and steel are cyclical. Earnings and stock price tend to fluctuate with the business cycles. Not the same as seasonal because the business cycle is not always in a one year cycle.

Market Value

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The market value of a stock is the price listed multiplied with the number of shares that an individual owns. (For example: An investor owns 100 shares of a $50 stock, the market value is $5,000) Market value can fluctuate many times during a single day of trading and is dependent on supply and demand.

Preferred Stock

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Companies also issue preferred stock. The advantage of preferred stock is that it usually pays a stated dividend. The par value is normally $100, so that the dividend can be expressed as a percentage of par (IE: 5 ¼% preferred). There is also a market value to the stock and it trades, however, the value normally does not fluctuate as much as common stock. Preferred stock holders have no voting rights.

Common Stock

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Stock is issued by a corporation so they can raise funds to either expand or continue business operations. Stock in a privately held corporation is owned by very few investors. Stock in a publicly held corporation can be purchased by the public. Publicly held shares are either traded on an exchange, the most famous being the New York Stock Exchange (NYSE) or the over the counter (OTC) market like NASDAQ. If a stock symbol has three letters or less, it is traded on an exchange. (for example: C-Citigroup, Inc., BA-Boeing & WMT-Walmart) and if the symbol is four or five letters, it is traded OTC (for example: MSFT-Microsoft). Stocks traded by the public are very liquid, which means they are easy to buy and sell. Stock is known as an equity security because it represents ownership or equity in the corporation. Common stock is the most basic type of equity security and gives the buyer the right to participate in the earnings and assets of the company as well as voting rights and any dividends that are paid by the corporation.

Index Investing: Introduction

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Stock market talk is everywhere, from TV and radio, to the newspapers and the web. But what does it mean when people say that "the market turned in a great performance today?" What is "the market" anyway?

As it turns out, when most people talk about "the market," they are actually referring to an index. With the growing importance of the stock market in our society, the names of indexes such as the Dow Jones Industrial Average (DJIA), S&P 500 and Nasdaq composite have become part of our everyday vocabulary.

This tutorial will define what an index is, discuss some of the major stock indexes and explain how you can invest in the stock market using index funds.

(If you aren't familiar with the stock market and mutual funds, we suggest that you check out our Stock Basics Tutorial and Mutual Fund Basics Tutorial before reading on.)

source: http://www.investopedia.com/

What is FOREX (Foreign Exchange)?

2008-09-09T02:36:00.000-07:00

The simple sense of Forex (Forex currency exchange, Foreign Exchange) is simultaneous purchase and sale of the currency or the exchange of one country's currency for the one of another country. The world currencies do not have a fixed exchange rate and are always fluctuating being traded in the currency pairs like Euro/Dollar, Dollar/Yen an others. 85% of daily trades are taken by major currencies trading.

Investments usually deal with 4 major pairs: Euro against US dollar, US dollar against Japanese yen, British pound against US dollar, and US dollar against Swiss franc or EUR/USD, USD/JPY, GBP/USD, and USD/CHF used to sign these pairs accordingly. These major pairs are considered as Forex market's "blue chips". You will not receive any dividends on the currencies. Well known "buy low - sell high" gives the profit for currency trades.

In case you have a forecast that one currency would get higher to another you can exchange the second one for the first one and wait for the profit. If you are lucky to see the trades following your forecast you can make an opposite transaction and to exchange currencies back gaining the profit.

Forex transactions are carried out by Forex brokerage companies, also known as major banks dealers. Forex market is worldwide and your European colleagues may make a transaction with Japanese traders when it's time for you to sleep in the North America. There are 3 shifts for the major institutions to work in due to 24-hours a day activity of the Forex market. It's possible to ask for overnight execution for take-profit and stop-loss orders of the client.

Prices in the Forex market fluctuate without any dramatic changes unlike stock market where considerable gaps are likely to be seen. There isn't any problems entering and exit the market due to its daily turnover of about $1.2 trillion. Forex market can not ever be forced to stop. The transactions were carried out even in 2001, on September, 11th.

Foreign exchange market (also called Forex of FX to shorten the name) is the oldest market in the world. It is also seen to be the largest one. Being currencies' primary market working 24-hours a day, Forex is also the largest market with highest liquidity. This is an interbank market carrying out spot (or cash) transactions. The currency futures market, to be compared with Forex is traded only 1% as much.

Forex market doesn't have any exchange center unlike the stock market. Forex trading seem to go after the sun around the world, from banks of the United States to other parts of the world like Australia, New Zealand, the Far East or Europe and back to the US some time later.

High minimum amount of transaction and strict financial requirements used to make this interbank market unavailable for small speculators. The only dealers of currency markets were banks, huge-amount speculators and largest currency dealers. They had an ultimate access to this market dealing with lots of primary exchange rates of the world currencies, the market with an extremely high liquidity along with an unusually strong nature of trends.

Nowadays small traders have an opportunity to purchase the small lots (units), as a result of the large inter-bank units being split by market maker brokers like FX Solutions, at the amount they like.

The traders of any size like small companies and individual speculators have an access to the market at the same price fluctuations and exchange rates which only large players used to enjoy recently. Market makers monitor the rates so that produce their profit on the difference of rates at which the currency was bought and sold.

Foreign Exchange Market has an acronymic name Forex. It has the largest size and the liquidity throughout the world nowadays. Forex daily transactions are carried out at the common amount from 1 to 3 trillion dollars. There is no stock market that is able to deal with a comparable amount of money.

This enormous market is like the dangerous sea where you can meet lots of sharks and dangerous waters but at the same time it is the only one where two weeks of trading can hypothetically bring you $1,000,000 out of $1,000 of initial investment.

This is certainly hypothetically because a lot of newbie traders deal with their trades as gambling, that surely bring them to having nothing in the end. You should always keep the phrase "be careful!" in your mind. This market would give you its profit possibilities only if you learn the basic things hard and make lots of demo trading.

The statistics is that as much as 95% of traders come to losing their money at Forex, 5% have profit and less than 1% of traders make large fortune at Forex. You shouldn't produce, sell or advertise anything trading at Forex. Your assets are your knowledge, experience and a small amount of cash.

This market is a platform for banks, transnational corporations and individual traders to change the currencies they possess into other ones. This is the spot Forex market. At this market you can trade with up to 1:400 leverage which means that you'll get $400 on your account for each dollar invested. So, you can trade with the $400,000 sum having invested $1,000 onto your account.

Still, lots of experienced traders consider such leverage dangerous and won't get started with it. Though, if you know how ho use such high leverage it will do you only good. But this is the place to stop speaking about the basic things. Keep reading these articles if you want to be aware of how this market has occurred and some of its historical matters.

Now it is time to speak about the strategies and the way of making money at Forex some traders use. First we should say that the things that work in one case do not certainly work in another. The fact is that currency trading surely means risk. Still, there are a number of strategies for the newbie to use to be the winner.