Tuesday, September 18, 2007

How Do They Do It?

The secret of Chinas startling economic growth during the past decade is nowhere to be found in Confucius teachings. The Chinese economy has grown at a steady 8 percent per annum and 2006 promises to be no different. This is roughly three to four times the rate of a typical western advanced economy, even when the latter is working well. What is even more startling, manufacturing production in China has gone up 16 percent in the last six months alone! So the question of the year for us poor capitalistic trainees has got to be: how do they do it?

When confronted with this question, politicians here in North America on both sides of the border are typically of no help at all. The standard response muttered is that China has a lot of catching up to do. This, of course, is a non-answer. We all know that they are catching up or we wouldn't have asked the question in the first place. Besides, who is doing the 'catching up'? Is it the government? Or the entrepreneurs? Or the people? The most extreme responses I can remember have been rendered by two top politicians, one American and the other Canadian. When asked the question of Chinas explosive rate of growth last July, Vice-president Dick Cheney said, well, absolutely nothing. Pure silence. I think in acoustics they refer to it as white noise. Which, by the way, should not come as a surprise to anyone since the Vice-president is an expert only in the field of Halliburtons Economics, which these days seems to be expanding at pretty much the same rate of growth as Chinas. On the opposite side of the spectrum, instead, lies the glorious response rendered by former Canadian Prime Minister Paul Martin. Contrary to the American Vice-president, Mr. Martin embarked in a five-minute tirade on national television which, however, was given in French, so that we common mortals kind of missed the gist of it all.

It seems to me that none of Chinas entrepreneurs, people and much less their government are trying to 'catch-up'. None of them has any means of knowing on a daily, monthly or even annual basis whether they are 'catching up' or not. Economic development is not a race. Nevertheless, something is happening. There's some extra vitality in China, which we have either lost or never had. The real answer, of course, lies with the cause of all economic growth - demand. And in the case of China, it is specifically the quality of demand that counts. Consumers all over Asian countries are buying as many status goods as they can and as quickly as they can. Unlike consumers in western countries who have bought status goods as they appeared one by one over the course of the last 200 years from the onset of the Industrial Revolution, and incorporated them successively into their culture as ordinary possessions, Asia is seeing the whole catalogue of brand new status goods from cars to electronics, from clothes to real estate developments - simultaneously. And China, the most populated of all Asian countries, is at the forefront of it all.

Of course, just like everything else, these expansion times of the Chinese economy are destined to come to an end. When Chinese consumers finally will manage to buy all the status goods of the West - as the Japanese have done - then they will be in the same predicament as Westerners are today in not knowing what else to spend their money on. Or else they wont have the time or energy available for using any more goods because they will be so darned tired of traveling back and forth to work every day and, besides, TV will take care of whatever few hours they will have left for leisure.

As in all sustainable economies, the trick is to stimulate demand so as to stimulate production. Failing this, well, here we are then. That's the problem that politicians in Japan, Europe and America are facing right now.

Luigi Frascati

Luigi Frascati is a Real Estate Agent based in Vancouver, British Columbia. He holds a Bachelor Degree in Economics and maintains a weblog entitled the Real Estate Chronicle at http://wwwrealestatechronicle.blogspot.com where you can find the full collection of his articles. Luigi is associated with the Sutton Group, the largest real estate organization in Canada, and is based with Sutton-Centre Realty in Burnaby, BC.

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Stock Research - Hedge Funds - If Bear Stearns Doesn't Know - Who Knows?

As the hedge fund world becomes bigger and bigger as more and more hot money seeks the elusive alpha of maximum performance, it is becoming apparent that more and more newspaper space will be devoted to hedge funds, and private equity. Recent news has taken us into the inner sanctum of Bear Stearns, truly a dominant investment firm in the world today. It might be argued that Bear Stearns is the best managed Wall Street firm in existence. Some might say Goldman Sachs. In any event Bear Stearns would have to be on the short list.

Investment firms for almost a decade sat by and watched hedge funds form, and amass vast investment capital pools while successfully charging 2% management fees, and 20% of the profits. Some of these hedge funds in a few years, have grown to possess capital bases equal to that of investment banking firms that have been around for generations. Taking some of the risks that were involved to achieve this performance is now coming home to roost.

Bear Stearns is the latest firm to stub its toe in the hedge fund industry. The firm is FAMOUS for quantifying and judging RISK before making its bets. This time however it seems that Bear Stearns threw its usual caution to the wind in embracing the formation of two hedge funds over the last year or so.

The second hedge fund was considered a more highly-leveraged version of Bears High Grade structured Credit Strategies fund which was formed last year. Both funds were managed by Ralph Cioffi, who up until recent events took hold, had the reputation of being a MASTER at this game, and the game is the subprime mortgage bond business.

Most people are not aware of it but Bear Stearns is the finest fixed income trading firm on the planet bar none, and this has been true for several generations. This makes recent events even more perplexing to understand.

Jimmy Cayne who is Bears CEO is embarrassed at the very least, and certainly upset enough that there will be major changes in the leadership of the units responsible for the pain being inflected on the firms reputation. This should not have happened at Bear Stearns, thats the point.

Actions Taken and Implications

Mr. Cayne has made the decision to inject $3.2 billion of Bear Stearns capital into a bail-out of the older fund. Bear is also negotiating with the banks that put up the credit facility for the other fund, the highly leveraged High-Grade Enhanced Leveraged fund. What Bear is trying to prevent is the forced sale of the debt obligations underlying the funds investments. These issues trade by appointment as they say, which means they rarely trade at all. Bear knows the Street smells blood, and will take advantage of any weakness that Bear shows.

So what are the implications of this latest hedge fund debacle? It clearly shows that the most sophisticated investors on the planet who put their money into hedge funds may in fact have NO IDEA what they are investing in. Instead, they are betting on the institutional reputation of the firms standing in back of the hedge funds. In this case nobody knew more about this market segment than Bear Stearns, yet they caught in a terrible position.

This is not Caynes fault, but as CEO, it is always his responsibility. I believe him to be the finest Wall Street executive of his generation. Nevertheless, his underlings certainly let him down, and they are among the highest paid people in the world today. Some of these industry veterans are drawing $10 million dollar annual incomes. Let the investor beware is the rule of the day, especially when it comes to hedge funds.

Richard Stoyecks background includes being a limited partner at Bear Stearns, Senior VP at Lehman Brothers, Kuhn Loeb, Arthur Andersen, and KPMG. Educated at Pace University, NYU, and Harvard University, today he runs Rockefeller Capital Partners and StocksAtBottom.com/. for a fuller version of this article please visit our website. http://www.stocksatbottom.com/bear_stearns_hedge_funds.html

Day Trading Your Way To Success

If you are interested in day trading you first need to know what it is all about and to understand the basics of day trading. For starters, a day trader is a person who is very active in the stock market and makes several trades a day in an attempt to make quick gains by buying and selling stocks in a short time span.

As the market is never the same day to day, no one particular day trading strategy will work each time. To be successful, you first need to understand how the market works and get a feel for the market.

This includes recognizing the stocks' basic trend, the long and short setups, when to enter a trade, and where to place stops. Another very important basic is how to protect your profits and minimize losses.

Once you have learned the basics and are ready to try your first day trade, here are some tips and guidelines you should keep in mind that is essential to your success as a day trader.

Being a day trader requires a lot of time and practice before you get used to the everyday volatility in the market. Do not expect to become an expert day trader overnight. No matter how many books you have read or day traders you have watched, that will not make you an immediate expert.

There are day trading websites that simulate trading. Practice with their trading platform first before trying out the real thing. It could save you a lot of money and you will learn the ropes faster this way.

If you are ready for real live trading, do not be scared by the thought of losing money. There are ways to minimize your loss such as with stop orders.

If you lose money, do not worry, as some loss is to be expected. Just remember, with increased experience and sensitivity to the market, you will start turning a profit soon.

If you profit large sums of money, stop trading. Do not gamble it away by trying to gain even larger profits. You can always trade another day.

Sometimes the market will not perform as you expected. When you encounter this situation, it is best that you do not trade at all.

Once you gain more experience in day trading, you may be able to predict the direction of a stock price. However, try not to pick top stocks or bottom stocks. This is one of the most common mistakes of a beginner.

If you cannot predict where the market is heading, it is best if you stand aside and wait, or you can always go home and trade again another day.

It is a good idea to record all of your day trading results. This way you can learn what works and what does not, and be more effective in trading.

Observe good traders. Look at how and when they sell or buy. Generally, good day traders often buy on bad news and sell on good news.

Beginners often get emotional in their trades. Avoid this at all cost, stay emotionally detached and professional.

Learn to trust your instincts. Relying too much on analysis may mean letting a few good trades slip away from you.

As you gain experience, you will see that different day trading strategies are required on different days and required on different stocks. Be flexible.

Bad day traders often focus on too many stocks that are not manageable and often lose track on where each stock is heading. It is wise to limit your stocks in manageable numbers.

With patience and practice, you can be successful in day trading, and as your experience grows so do your profits. Everyday you can learn new day trading strategies in the market, which you can use to your advantage.

For a more in-depth look at day trading drop by Susan's site at Day Trading Strategy. Susan also enjoys writing on a variety of topics at Health and Fitness Hub.

A Beginner's Guide To The World Of Forex Trading

You will undoubtedly have heard of the foreign exchange, or Forex, market and will also probably be well aware of the buzz that currently surrounds it. You may also have heard of the many advantages that it offers over other forms of trading, such as trading on the stock market, and have thought about trying it out for yourself. But just where do you start?

Well, in this short introduction, we'll cover the basics of Forex trading and give you an idea of just what you need to join this exciting and fast growing world.

Until about twenty years ago the foreign exchange was the preserve of large players such as national banks and multi-national corporations. However, during the 1980s, new rules were introduced to permit smaller investors into the market and their entry was facilitated with the introduction of margin accounts. Without going into too much detail here, a margin account means that it is possible to trade with more money than you have in your trading account. For example, a 200:1 margin account would allow you to participate in trading a block of $200,000 with an investment of just $1,000. In other words, it is no longer necessary to have the huge sums of capital available to the major financial institutions in order to trade in the Forex market.

Now, although the entry level has been lowered, this does not mean that Forex trading is easy. The world of Forex trading is complex and, like any other market, it is not without its risks. The first tool in your armory therefore is education. Before you embark on any form of trading you will need to sit down and study the foreign exchange markets carefully. Arming yourself with knowledge about the Forex market and how it works is the only way to ensure that you are making wise investment decisions right from the outset.

Forex traders normally require a broker to handle transactions for them and, as a beginner, you would be well advised to start by finding yourself a good broker. The majority of brokers are reputable and work alongside large financial institutions, such as banks. A reputable broker will be registered with the Commodity Futures Trading Commission (CFTC) as a Futures Commission Merchant (FCM) which is important as this provides you with protection against abusive trade practices and fraud.

Opening an account with a broker is normally a simple process of filling out a form and producing a suitable form of identification and, once this has been done and you have added funds to your account, you can begin trading. Your agreement with the broker will specify the margin on which you are allowed to trade through him and will also normally give the broker the authority to prevent a trade on your account where the broker feels that the trade carries too high a risk. This is simply to protect the broker as, on a margin trading account, you are essentially trading with his money and not your own.

Brokers will usually offer a variety of different accounts to suit individual investors and many will have "mini" accounts which allow you to start trading with as little as $250. Standard accounts will require an initial deposit of between $1,000 and $2,500 depending on the broker. The margin, or leverage, allowed will also vary between accounts.

Most brokers will also have facilities for those people coming into the Forex market for the first time to learn the ropes by carrying out simulated, or paper, trades for a period of time. In this case trading is conducted in the normal manner but no money is involved and each trade simply takes place on paper. This gives the newcomer an excellent opportunity to see trading in action without the associated risks while gaining an understanding of the market.

Many of the online brokers, though whom an increasing amount of trading is being done, have simulated accounts which allow you to make free paper trades for up to 30 days and every newcomer would be well advised to take full advantage of this facility.

Brokers will also have their own set of software tools to assist in making transactions and you should take your time to familiarize yourself with these before launching headlong into trading. In addition, there are several tools that are common to all Forex brokers such as real time quotes, news feeds, technical analyses and charts, and profit and loss analyses and you will also need to acquire a good basic understanding of how each of these can be used.

One final point to remember is that trading in the Forex market is free of commission and so, unlike many other markets, you can make several trades in the course of a single day without worrying about running up huge brokerage fees. The brokers will make his money from the difference between the buying and selling price on each transaction.

Visit ForexOnlineTradingSystem.info to discover more about how you can learn forex trading online