Posts Tagged ‘fundamental analysis’

Fundamental and Technical analyst alike are employing news to guide their trading decisions. Though their degree of usage may vary, it’s better for beginner traders to familiarize themselves with terms that are usually found within the news. Quantitative Easing for one.

Quantitative Easing is an unconventional monetary policy used by central banks to induce support on an economy. It is a stimulant aimed to assist an economy if in case it is in an unfavorable state. The concept behind it is that additional money will flood the market which will give the economy a push by by promoting an increase in lending and liquidity.

It is often carried out by buying financial assets from commercial banks and other private institutions with the newly created money to induce a specific amount of money in the economy.

At present, the world has already witnessed the said boost for three times already. First was during the time of George Bush back in 2008 wherein $500 billion was initially spent on mortgage backed securities. An additional $750 billion was made during the time of Barack Obama’s first term. By June of 2010, $2.1 trillion worth of assets was already bought by the bank.

The second round was demonstrated in 2010 when Federal Reserve provided $600 billion for long-term government bonds. Some claim that this effort was put in vain because the money just ended up in EU’s foreign reserves.

The third was the most recent. The buzz started when Ben Bernanke, chairman of the Federal Reserve in America, had announced last September 14,2012 that the third round of the quantitative easing will be given for the $40 billion a month bond purchasing program and also to continue the very low rates policy.

Though the unconventional way boosted the economy at first, its effect is dwindling as years passes by. Doubts and debates regarding its effectiveness arose from every corner and some became pessimistic about it. The previous rounds taught traders that they should perceive the possible chain reactions that the third easing will produce rather than just the short term effect.

Stephen Stevenson

One of the key points in the recently concluded election was about how the “would be president” then would tackle the ominous fiscal cliff. But many, especially non Americans, are still unfamiliar with the term.

The term “Fiscal cliff” was an expression that was used throughout the history especially on budget talks. According to research, the earliest reference to the term was traced back in 1957, when it was used in a New York Times article about home ownership.

At present, the term denotes the effect of a number of laws in the United States which may lead to spending cuts and tax increases. The whooping $7 trillion in spending cuts and tax increases was scheduled to take place at the beginning of this incoming year, 2013, which is approximately 35 days from now. The buzz word first entered the scene during a speech by Federal Reserve Chairman Ben Bernanke to the House committee on Financial Services last February 29,2012.

Under current law, on January 1st, 2013, there is going to be a massive fiscal cliff of large spending cuts and tax increases. I hope that Congress will look at that and figure out ways to achieve the same long run fiscal improvement without having it all happen at – at one date.

The laws involved are the Bush tax cuts and the Budget Control Act of 2011. The Bush tax cuts or Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 is an act centered on the two-year extension of the Economic Growth and Tax Relief Reconciliation Act of 2011 provisions which was intended to delay the return of tax rates similar to the Clinton administration. It was passed by the United States Congress back in December 16,2010 and was signed as law by President Barack Obama a day after. It is scheduled to expire at the start of 2013 which would result to tax increases.

Meanwhile, the Budget Control Act of 2011 is a federal statute and was signed as a law by President Barack Obama on August 2,2011 which mainly focuses on debt ceiling and deficit reduction. It is also scheduled to expire almost the same time as the Bush tax cuts and would result to spending cuts.

The two effects would lead to a reduction in the budget deficit in 2013. The abrupt deficit would then lead then to an increased recession on the same year which would greatly damage its present economic recovery.

Stephen Stevenson

After eight days of unrest, both Israel and the Palestinian group Hamas had finally agreed to call upon a cease-fire. The move was initiated by the Egypt’s new Islamist government and supported by the United States.

The conflict which had just been recently reignited by Israel’s “Operation Pillar of Defense,” resulting to numerous civilians casualties for both sides. Four years after the Gaza War back in the winter of 2008-2009. The ideal – rooted conflict can be traced way back in 1988 when the founding charter of Hamas declared for a Jihad – Holy War.

Hamas

Is an acronym for Harakat al-Muqawamah al- ‘Islamiyyah which can be literally translated as “Islamic Resistance Movement.” It is a militant fundamentalist Islamic organization who currently occupies the West Bank and Gaza. Originally, it is an alternative group of Palestinian Liberation Organization (PLO) which is founded by Sheikh Ahmed Yassin aimed in establishing a network of charities, schools and clinics in the region. But certain ideologies and circumstances had urged it to engage into several bloody conflicts with Israel.

A year after the declaration of Jihad, its founder was convicted by an Israel court for giving orders to its members to kidnap and kill two Israeli soldiers which gained him a 9 year sentence in jail. He died 7 years later from an airstrike by Israel. According to reports, the group has been targeting Israelis with suicide bombing which now tolled to 500 individuals since 1993.

The group is viewed differently depending on the audience. Israel, United States, UK, and other western countries treats it as a terrorist group. Meanwhile, Arab and Muslim nations has a different perspective regarding them. They considers them as a victim of Israeli aggression.

Israel

a formidable ally of the United States in the middle east, Israel had age-long conflicts with its neighbors. Many Muslim countries and groups had outrageously deny its existence and called for its destruction. Hamas is one of them. The military power of Israel proved to be more capable than their foes which gained them territories in the Six-Day War.

Over time, some had yielded their advocate but conflicts still ravages on. Gaza War is one of those. It is a result of an offensive measure of Israel against Hamas over the disputed Gaza Strip, a strip of coastal land on the Mediterranean sea. It resulted to more than a thousand Palestinian and 13 Israeli soldiers dead.

Present Conflict

The present conflict was temporarily halted after a truce between the two sides has been agreed upon which took effect 14:00 EDT on Tuesday. According to reports, It stopped a supposedly Israeli ground

invasion which may lead to further casualties aside from 162 Gazans and 5 Israelis dead from bombing and rocket fires. Unfortunately 37 of the present casualties are children.

Stephen Stevenson

Understanding The Fundamentals –  Unemployment rate
Unemployment rate is the percentage of the labor force who doesn’t have a job but are willing and actively seeking work. It is one of the macroeconomic indicators that most fundamental analyst are observing in case of a long term investment decision and is usually published at 8:30 EST (NY) on the 1st Friday of the  month.
The unemployment rate is calculated by dividing the number of unemployed individuals by all individuals currently in the labor force.
Effects of Unemployment in the Society and Economy:
Counter-productiveness
Instead of spending their time, effort, and resources in performing a job, the unemployed part of the labor force are obligated to drain their efforts first in seeking out  new jobs. The individual’s counter-productiveness may even worsen if the hunt will turn out to be a failed attempt.
Impoverishment leading to social unrest
Idle individuals have lesser financial means to dispose thus allocating most of it only on the “needs” in order to survive. In the the long run, this may result to dissatisfaction which may escalate once certain individuals started to fill-in their “wants” through dishonest means. The dishonest means which is used to gratify the “wants” may then lead to unrest in the public.
Exploitation of labor
Since there is a surplus of workers because everyone is seeking out a job, there is a high tendency that laborers will be exploited. Most company will take an advantage on this situation since laborers are forced to accept what is offered to them because of fear to lose their job. The exploitation may be in different forms like lower wages, fewer to none benefits, unpaid overtime pay, longer working hours, etc.
Less People Pay Taxes
An individual without any source of income cannot pay his dues to the government. Only those that are employed have the capability to pay the taxes and no tax is certainly a “no no” to the government. Without taxes, the economic activity will slow down because taxes is like a fuel that keeps the economy running.
Bankruptcy of Businesses
Unemployed individuals spends only for things that they needed to survive. The decrease of purchasing activity of consumers will certainly cut those companies that manufactures products that are not essential in the day-to-day activities of individuals.

Unemployment rate is the percentage of the labor force who doesn’t have a job but are willing and actively seeking work. It is one of the macroeconomic indicators that most fundamental analyst are observing in case of a long term investment decision and is usually published at 8:30 EST (NY) on the 1st Friday of the  month.

The unemployment rate is calculated by dividing the number of unemployed individuals by all individuals currently in the labor force.

Effects of Unemployment in the Society and Economy:

Counter-productiveness

Instead of spending their time, effort, and resources in performing a job, the unemployed part of the labor force are obligated to drain their efforts first in seeking out  new jobs. The individual’s counter-productiveness may even worsen if the hunt will turn out to be a failed attempt.

Impoverishment leading to social unrest

Idle individuals have lesser financial means to dispose thus allocating most of it only on the “needs” in order to survive. In the the long run, this may result to dissatisfaction which may escalate once certain individuals started to fill-in their “wants” through dishonest means. The dishonest means which is used to gratify the “wants” may then lead to unrest in the public.

Exploitation of labor

Since there is a surplus of workers because everyone is seeking out a job, there is a high tendency that laborers will be exploited. Most company will take an advantage on this situation since laborers are forced to accept what is offered to them because of fear to lose their job. The exploitation may be in different forms like lower wages, fewer to none benefits, unpaid overtime pay, longer working hours, etc.

Less People Pay Taxes

An individual without any source of income cannot pay his dues to the government. Only those that are employed have the capability to pay the taxes and no tax is certainly a “no no” to the government. Without taxes, the economic activity will slow down because taxes is like a fuel that keeps the economy running.

Bankruptcy of Businesses

Unemployed individuals spends only for things that they needed to survive. The decrease of purchasing activity of consumers will certainly cut those companies that manufactures products that are not essential in the day-to-day activities of individuals.

Stephen Stevenson

Take it or leave it
The euro crisis’ conclusion is fast approaching and the situation is intensifying by the minute.
As the crisis situation escalate, the famous multimillionaire investor George Soros adviced Germany to either lead over the common currency or just quit it.
According to the veteran investor, Germany should now take the reins on euro’s carriage to either  overcome the situation or fall into a drastic ending along with it. ”Germany must take full responsibility for the Europe. Either throw in your fate with the rest of Europe, take the risk of sinking or swimming together, or leave the euro, because if you left, the problems of the Eurozone would get better,” he commented.
According to some experts, the euro crisis will be ended once a single financial regulator will established. A single financial regulator may provide guidance for economic growth especially for the PIGGS country who are on a financially unhealthy diet.
Germany, which still has an unresolved dispute with France, who is also a leading player, is trying to amend on their current situation despite their unsynchronized  goals. The history long dispute may have a shimmering hope after two huge aeronautical companies from each country is trying to form a merge and is seeking to a friendly relationship to both governments. The combined company seeks a help from their respective countries to back up their aeronautical campaign which will also lead to a pan-European corporate champion.
The euro crisis’ conclusion is fast approaching and the situation is intensifying by the minute.
As the crisis situation escalate, the famous multimillionaire investor George Soros adviced Germany to either lead over the common currency or just quit it.
According to the veteran investor, Germany should now take the reins on euro’s carriage to either  overcome the situation or fall into a drastic ending along with it. ”Germany must take full responsibility for the Europe. Either throw in your fate with the rest of Europe, take the risk of sinking or swimming together, or leave the euro, because if you left, the problems of the Eurozone would get better,” he commented.
According to some experts, the euro crisis will be ended once a single financial regulator will established. A single financial regulator may provide guidance for economic growth especially for the PIGGS country who are on a financially unhealthy diet.
Germany, which still has an unresolved dispute with France, who is also a leading player, is trying to amend on their current situation despite their unsynchronized  goals. The history long dispute may have a shimmering hope after two huge aeronautical companies from each country is trying to form a merge and is seeking to a friendly relationship to both governments. The combined company seeks a help from their respective countries to back up their aeronautical campaign which will also lead to a pan-European corporate champion.
Stephen Stevenson