tagged w/ Stock Market
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How does betting on food prices in financial markets work? How does that affect the price?
Futures contracts’ were first created in the United States in the 19th century to help farmers deal with the uncertainties involved in growing crops, such as unforeseen weather conditions. A ‘futures contract’ enables farmers to sell their crops at a future date, at a guaranteed price. This gives farmers greater certainty when choosing which crops to grow.
To buy a futures contract you do not need to buy or sell actual food and so financial players such as banks started to buy and sell these contracts which in turn undermined the system as it caused price fluctuations in real food.
Following the Wall Street Crash in the 1930s, regulations were introduced by the US government to limit speculation on food prices. But these regulations were weakened in the 1990s through corporate lobbying and so banks were able to engage in rampant betting on food markets.
Complex contracts were created called ‘derivatives’. This just means that the value of the contract is ‘derived’ from the commodity being traded. But no actual trading of the physical commodity needs to take place. Derivatives are based on the concept of a ‘futures’ contract but have become more complex.
The price of derivatives in food is affected by demand and supply. As more derivatives in a food are bought, the more the price of a derivative contract rises. This causes the ‘future’ price of food to rise. As mentioned above, this rising price of food in the future has a knock-on effect on the real price of food now.How does betting on food prices in financial markets work? How does that affect the... more
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Goldman Sachs collected $2.9 billion from the American International Group as payout on a speculative trade it placed for the benefit of its own account, receiving the bulk of those funds after AIG received an enormous taxpayer rescue, according to the final report of an investigative panel appointed by Congress.
The fact that a significant slice of the proceeds secured by Goldman through the AIG bailout landed in its own account--as opposed to those of its clients or business partners-- has not been previously disclosed. These details about the workings of the controversial AIG bailout, which eventually swelled to $182 billion, are among the more eye-catching revelations in the report to be released Thursday by the bipartisan Financial Crisis Inquiry Commission.
The details underscore the degree to which Goldman--the most profitable securities firm in Wall Street history--benefited directly from the massive emergency bailout of the nation's financial system, a deal crafted on the watch of then-Treasury Secretary Henry Paulson, who had previously headed the bank.
"If these allegations are correct, it appears to have been a direct transfer of wealth from the Treasury to Goldman's shareholders," said Joshua Rosner, a bond analyst and managing director at independent research consultancy Graham Fisher & Co., after he was read the relevant section of the report. "The AIG counterparty bailout, which was spun as necessary to protect the public, seems to have protected the institution at the expense of the public."
Goldman and AIG both declined to comment.
When news first broke in 2009 that Goldman had been an indirect beneficiary of the AIG bailout, collecting the full value of some $14 billion in outstanding insurance polices it held with the firm, the officials who brokered the deal justified these terms as a necessary stabilizer for the broader financial system. As the world's largest insurance company, AIG's inability to cover its outstanding obligations could have threatened the solvency of the institutions holding its policies, asserted the Federal Reserve Bank of New York, which oversaw the deal.
Goldman fended off claims that the arrangement amounted to a backdoor bailout by asserting that none of the money from the AIG rescue landed in its own coffers. Rather, those funds went to compensate clients or institutions on the other side of its trades, Goldman said.
But the report from the financial crisis commission, obtained by The Huffington Post in advance of its release, appears to challenge that assertion: The report reveals another pot of money conveyed to Goldman--the $2.9 billion to cover trades the Wall Street investment house made for itself. That money went straight to the bank's bottom line, according to the report.
Over the last two years, Goldman has reported nearly $22 billion in profits, according to its official earnings statements. During those years, it has paid out $31.6 billion in compensation to its employees.
According to the report, the financial crisis commission first learned that the $2.9 billion in AIG funds landed in Goldman's account through an e-mail the bank sent to the panel on July 15, 2010 in response to questions.
Previously, Goldman executives had testified that the AIG bailout funds the bank collected went to compensate its clients and institutions that held the other side of its trades.
At a hearing on July 1, 2010--two weeks before Goldman sent the e-mail acknowledging how $2.9 billion in AIG funds wound up in its own account--the crisis panel questioned Goldman's chief financial officer, David A. Viniar and managing director David Lehman. Both said they knew nothing about AIG funds landing in the bank's private coffers, according to a transcript of the hearing.
The report concludes that Goldman collected the $2.9 billion as payment for so-called proprietary trades made for its own account--essentially successful bets on large pools of financial instruments.
"The total was for proprietary trades," the report asserts. "Unlike the $14 billion received from AIG on trades in which Goldman owed the money to its own counterparties, this $2.9 billion was retained by Goldman."
A spokesman for for the crisis commission said it would be premature to discuss the panel's findings.
"I have no comment on the commission's report until it is released on Thursday," said crisis commission spokesman Tucker Warren.
Goldman collected at least half the money at issue after AIG received the first round of a public bailout whose tab eventually swelled to $182 billion, according to the commission's report.
The winning bets that Goldman collected on through the AIG bailout are known as credit default swaps--essentially, a type of insurance, albeit one that operates in the shadows, beyond purview of regulators. The insurance giant wrote trillions of dollars worth of these policies during the real estate boom without setting aside sufficient cash to cover losing bets, positioning itself for potential catastrophic losses.
According to the crisis commission report, Goldman bought credit default swaps from AIG as a form of insurance on investments known as Abacus, which were pools of mortgage-linked securities. One such pool put Goldman cross-wise with federal regulators: Last year, Goldman agreed to pay $550 million in fines to settle securities fraud charges filed by the Securities and Exchange Commission.
According to the lawsuit, Goldman allegedly concealed the fact that it designed the basket of mortgage-linked securities to fail at the behest of another client who netted about $1 billion by betting against them. Goldman sold the same investments to other clients--mostly European banks--without disclosing their provenance, according to the SEC's lawsuit.
The crisis panel did not disclose whether this Abacus deal was among those on which Goldman collected a portion of the AIG bailout funds.
The AIG bailout, which paid holders of its insurance policies 100 cents on the dollar, was aggressively defended by federal regulators as a critical immunization against a potential financial pandemic as the insurance company teetered on the verge of collapse in the fall of 2008.
Treasury Secretary Timothy F. Geithner, who led the New York Fed at the time the AIG rescue was crafted, later told Congress that a collapse risked "large and unpredictable global losses with systemic consequences--destabilizing already weakened financial markets, further undermining confidence in the economy, and constricting the flow of credit." Both the New York Fed and Treasury declined to comment.
Analysts say such fears caused the officials who crafted the bailout to lean heavily toward speed and size, while failing to factor in fairness.
"At the time, the idea was the sucker could go down because there wasn't enough liquidity in the system, money wasn't moving, and you could see a domino effect,"
said Ann Rutledge, a principal at R&R Consulting in New York, which specializes in structured finance.
In reality, she contends, those fears were overblown: There was ample money in the financial system. Rather, individual institutions did not have enough cash on hand to survive their losses, she asserts. But the fear of a broader liquidity crisis was used as justification for what now appears to have been a backdoor means of bailing out Goldman, said Rutledge.
The details in the commission's report leave Goldman "naked," she added. "It doesn't have the fig leaf of a systemic risk argument. Normally what happens when you have a sophisticated institution that's doing stupid credit stuff is you let them eat it, but that didn't happen in the bailout."
http://www.huffingtonpost.com/2011/01/26/goldman-sachs-aig-backdoor-bailout_n_814589.htmlGoldman Sachs collected $2.9 billion from the American International Group as payout... more
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The Securities and Exchange Commission (SEC) has charged Banc of America Securities (BAS) with securities fraud for its part in an effort to rig bids in connection with the investment of proceeds of municipal securities.The Securities and Exchange Commission (SEC) has charged Banc of America Securities... more
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Sharemarketindia.co.in is a online trading website which offers trading in share market india. Visit the site for more information about indian share market, share prices, share market tips etc.Sharemarketindia.co.in is a online trading website which offers trading in share... more
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Are you new to investing? Do you wish you knew something about a way to invest your money for a more secure future but think you just can’t understand all the ins and outs of the Stock Market? Well, although many people think the stock market is way too confusing and complicated, the stock market is easy to understand.
Yes, there are subtleties involved that can only be enhanced through experience, but that is true with most things; that does not mean, however, that you should be too intimidated to look into the stock market as a way to increase your wealth. There has truly been no other comparable vehicle to long-term growth of wealth than the stock market, and even though there is a lot of terminology to learn and lots of different economic conditions can affect the market (and vice versa), the basic premise behind the stock market is easy to understand.
This is how it works, in a very simple nutshell; for purposes of explanation, lets use an example. Lets say you and your wife both come from a family of shoemakers from Germany. You can repair shoes as well as produce a really decent pair of shoes. So, you open a shoe repair shop together. You make a decent living after a few years of struggling hard, and soon you discover that in the next town over, the only shoemaker has closed up shop. You want to expand your business into the new town with the expectation of growing your business even more.
You and your wife meet with a banker and discover that although he is willing to lend you money, you are leery of carrying so much debt. So, you meet with a business consultant and decide to go public. That means, that in exchange for giving up partial control of Smiths Shoes by selling off shares of stock in the company, you get the revenue needed to expand, and you have no debt.
So, why would anyone buy shares of stock in your company or any other company, for that matter? Well, quite simply put, every shareholder now owns a small piece of Smiths Shoes. They want to invest in your ability to make even bigger profits than you already have in the hopes that your success will also become their success. As tiny little owners, they share in your growth by having the value of their shares of stock increase in value, so they can now sell them for more than they paid for them; hence, they have profit. You make money, and they make money. And that’s the basic idea behind the stock market, and the stock market really is easy to understand, right?
More about UK financial information and stock markets visit http://www.thefinanceworld.co.ukAre you new to investing? Do you wish you knew something about a way to invest your... more
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The mainstream media is full of happy economic news these days. The S&P 500 has shot up 16 percent since the beginning of July. Ford Motor Company just reported a profit that jumped nearly 70 percent in the third quarter. It was Ford's best third quarter performance in twenty years and it was the 6th quarterly profit in a row for the company. Other major firms have announced earnings that have far exceeded expectations in recent weeks. Hooray! The pundits are proclaiming that the economic collapse is over and that the U.S. economy has won. It is almost enough to make one tear into a stirring rendition of "Happy Days Are Here Again". But perhaps we should take a moment and get a hold of ourselves first. After all, the underlying economic fundamentals have not changed.The mainstream media is full of happy economic news these days. The S&P 500 has... more
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Analyzing almost 10 million tweets, research finds public mood can predict Dow days in advance
Measurements of the collective public mood derived from millions of tweets can predict the rise and fall of the Dow Jones Industrial Average up to a week in advance with an accuracy approaching 90 percent, accordiong to new research by Indiana University Associate Professor Johan Bollen and Ph.D. candidate Huina Mao.
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The team found the correlation between the value of the Dow Jones Industrial Average (DJIA) and public sentiment after analyzing more than 9.8 million tweets from 2.7 million users during 10 months in 2008.
Using two mood-tracking tools to analyze the text content of the large-scale collection of Twitter feeds, Bollen and Mao were able to measure variations in public mood and then compare them to closing stock market values.
One tool, OpinionFinder, analyzed the tweets to provide a positive or negative daily time series of public mood. The second tool, Google-Profile of Mood States (GPOMS), measured the mood of tweets in six dimensions: calm, alert, sure, vital, kind, and happy. Together, the two tools provided the researchers with seven public mood time series that could then be set against a similar daily time series of Dow Jones closing values. The researchers then correlated the two sets of values -- Dow Jones and public mood -- and used a self-organizing network model to test a hypothesis that predicting stock market closing values could be improved by including public mood measurements.
"We were not interested in proposing an optimal Dow Jones prediction model, but rather to assess the effects of including public mood information on the accuracy of the baseline prediction model," Bollen said. "What we found was an accuracy of 87.6 percent in predicting the daily up and down changes in the closing values of the Dow Jones Industrial Average."
A graph of Dow Jones Industrial Average values (center, blue) and tweets identified with a "calm" mood during a time series (bottom, red) running three days prior are overlaid in the top graph to show gray areas of significant overlap.
By implementing a prediction model called a Self-Organizing Fuzzy Neural Network (SOFFNN) similar to one already used to successfully forecast electrical load needs, the researchers were able to demonstrate that public mood had the ability to significantly improve the accuracy of the most basic models currently in use to predict Dow Jones closing values. Bollen described this particular SOFFNN as a five-layer hybrid neural network with the ability to self-organize its own neurons during a learning process that included information of past Dow Jones and public mood time series values.
"Given the performance increase for a relatively basic model such as the SOFNN, we are hopeful to find equal or better improvements for more sophisticated market models that may in fact include other information derived from news sources and a variety of relevant economic indicators," he said.
The researchers found the OpinionFinder positive/negative sentiment input had no effect on prediction accuracy, while the Calm and the Calm-Happy combination of the GPOMS had the highest prediction accuracy.
"In fact, the calmness index appears to be a good predictor of whether the Dow Jones Industrial Average goes up or down between two and six days later," Bollen said.
The odds of the prediction accuracy rate of 87.6 percent being sheer chance were then calculated for a random period of 20 days and determined to be just 3.4 percent.Analyzing almost 10 million tweets, research finds public mood can predict Dow days in... more
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1. MarketWatch
The MarketWatch iPhone covering brings breaking markets and playing programme headings, complete-stories and real-time comments every finished the day. MarketWatch cheater gives you with a specially designated itemize of the day’s most alive stories, together with worldwide mart news, real-time quotes, and markets communicating and closes.
read more http://top10recent.com/top-10-iphone-apps-for-stock-market-investors%ef%bb%bf/1. MarketWatch
The MarketWatch iPhone covering brings breaking markets and playing... more
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Many couples believe in togetherness, which can be a good thing. However, there are dangers to investing jointly that should give even the closest duos pause.
Remember the best-selling book Men Are from Mars, Women Are from Venus, by John Gray? The difference in the way men and women view the world has particular applicability to investing.
As many women know, men generally don’t lack confidence. They typically love the “action” of buying and selling stocks. The fact that trading increases costs, which decreases returns, doesn’t dent their enthusiasm for risk taking. I’ve found that male investors tend to seek the “big score,” often unaware of the “big risk” of losing a significant part of their invested capital.
Many women have told me that they find the markets pretty intimidating. Many men don’t admit their fear. They believe they can handle it.
A lot of men consider themselves to be very knowledgeable investors. Women tend to have a different view of their investing knowledge. A 2009 survey found that 73 percent of men professed having “a general knowledge of stocks, bonds, and mutual funds,” compared to only 40 percent of women.
Given these vast differences in attitudes, you have to question the wisdom of men and women investing jointly.Many couples believe in togetherness, which can be a good thing. However, there are... more
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Believe it or not there's no magic formula that will ensure success in the stock market. Wouldn't it be great if you knew when the markets were going to take off or tank?
Market direction is driven by tomorrow's news. No one knows tomorrow's news. If we did, we would have predicted the oil spill in the Gulf of Mexico and the precipitous decline in the price of BP's stock.
The impossibility of predicting the unknowable does not stop the financial media and self-styled investment gurus from looking into their crystal ball and providing investors with advice.
The securities industry and the financial media work together to perpetuate the myth that someone out there has the ability to predict the direction of the markets. Hapless investors go from one "investment professional" to another seeking the holy grail: someone with predictive powers.
If you want to achieve your investment goals, you need to fundamentally change the way you invest.Believe it or not there's no magic formula that will ensure success in the stock... more
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Apparently the sharp minds who handle Harvard's endowment funds think Israeli company stocks may fall in value and have liquidated all their holdings.Apparently the sharp minds who handle Harvard's endowment funds think Israeli... more
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How will the United States and world economies and stock market do in 2010 - 2011. Astrology charts and prophecies. Book of Revelation prophecies. Predictions of economic trends.
How will the U.S. and world economy do in year 2010-2012? Predictions by astrology charts and Bible Prophecy of the Book of Revelation. Copyright 2010 by T. Chase. From the Revelation13.net web site, also see Revelation13.net (Revelation 13: Prophecies of the Future, Astrology, Nostradamus, Bible Prophecy, the King James version English Bible Code).How will the United States and world economies and stock market do in 2010 - 2011.... more
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Guest: Marty Dim, Instructor, Online Trading Academy
-Options fallacy number 1: 90% lose their money on options
Power Pick: (JBHT)Guest: Marty Dim, Instructor, Online Trading Academy
-Options fallacy number 1: 90%... more
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Guest: Justin Krebs, Instructor, Online Trading Academy
-A good trader must have a good eye on the market trends and conditions
Power Pick: (GBP-USD)Guest: Justin Krebs, Instructor, Online Trading Academy
-A good trader must have a... more
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Guest: Bruce Millbury, Instructor, Online Trading Academy
-As a trader, you must be able to master how to exploit the opportunity
Power Pick: (CVD)Guest: Bruce Millbury, Instructor, Online Trading Academy
-As a trader, you must be... more
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