Fraud & Bankruptcy

One sector that has been notably wound during this crisis establishment has been financials. Within the financial sector, the weakest of the weak has been regional banks, which will see little in the way of benefits from TARP 2.0 and stand to lose a great deal if the consumer credit crisis continues to deepen, as almost everyone now expects will be the most likely scenario.

However, risk aversion still a threat for markets and forex investing, which shows that the rescue plan that FED presented, might not be enough relief to avoid the current crisis. Alongside, a study from Deloitte Financial Advisory Services LLP DLTE.UL showed that fraud incidents were much more likely in a company in bankruptcy court. Bankrupt companies are three times more likely to have been cited for fraud by U.S. regulators, according to the study released on Monday.

Fraud-linked bankruptcies like Enron, WorldCom and Adelphia have kept U.S. courts busy for years, and the study revealed that companies that are cited for financial-statement fraud were twice as likely to file for bankruptcy as those that were not cited.

It was not clear whether employees at bankrupt companies are more likely to commit fraud or whether the microscope of bankruptcy makes it easier for regulators to detect it. The most common type of fraud detected at both bankrupt and nonbankrupt companies was improper revenue recognition.

The study tracked companies with annual revenues of more than $100 million, comparing 519 bankrupt companies to a group of 2,919 non-bankrupt companies from about 2000 through 2007. About 9 percent of the bankrupt companies were the subject of enforcement actions reported by the U.S. Securities and Exchange Commission, compared with 3 percent of the nonbankrupt companies.

This does not mean that regional banks are doing some sort of fraud. The point is that there is evidence about the motivation that companies in bankruptcy have had to cheat on governments. In order to recover the health of our economy we must recover the strength of our banks –even when they deserve their fate. However, there is a need to identify those who can jeopardize the health of our economy with their action and we must encourage for more control and regulations over them. If we let them do what they want – once again- they are going to do what is best for them and not for our economy.

Technical Analysis

The methods used to analyze and predict the performance of a company’s stock fall into two broad categories: fundamental and technical analysis. Those who use technical analysis look for peaks, bottoms, trends, patterns and other factors affecting a stock’s price movement and then make buy/sell decisions based on those factors. It is a technique many people attempt, but few are truly successful at it. The world of technical analysis is huge today. There are literally hundreds of different patterns and forex indicators that investors claim to have success with. We have tried to keep this tutorial as short as possible. Our goal is to introduce you to the different types of stock charts and the various technical analysis tools available to investors.

Technical analysis is a method of evaluating securities by analyzing statistics generated by market activity, past prices and volume. Technical analysts do not attempt to measure a security’s intrinsic value; instead they look at stock charts for patterns and indicators that will determine a stock’s future performance. Technical analysis has become increasingly popular over the past several years, as more and more people believe that the historical performance of a stock is a strong indication of future performance.

The use of past performance should come as no surprise. People using fundamental analysis have always looked at the past performance of companies by comparing fiscal data from previous quarters and years to determine future growth. The difference lies in the technical analyst’s belief that securities move according to very predictable trends and patterns. These trends continue until something happens to change the trend, and until this change occurs, price levels are predictable. There are many instances of investors successfully trading a security using only their knowledge of the security’s chart, without even understanding what the company does. However, although technical analysis is a terrific tool, most agree it is much more effective when used in combination with fundamental analysis.

Stream of Negative Data Outside the Euro-Zone

The US Dollar lost ground to the Euro and the British Pound in overnight trading as Asian stock markets registered substantive gains, pointing to improved risk appetite. Japanese data continued to reflect deepening recession and it has shown producer inflation slow over 62% since peaking in August as commodities tumbled and global economic activity turned increasingly sluggish.

The EUR experienced a bullish trading session yesterday, as it appreciated against most of its major currency pairs. Outside of Euro-Zone economic news, Britain experienced further negative news. These past weeks, the UK has been provided with a stream of data which has pushed the Bank of England (BoE) closer to adopting the EUR as its official currency. Coupled with the possibility of other countries, such as Iceland, Bulgaria, and other East European countries, also joining the EUR, investors may see a sudden reemergence of the EUR as a powerful currency capable of becoming the main contender with the USD as the safest safe-haven.

A busy economic calendar lies ahead in European trading hours but traders are unlikely to see anything that does not fit with themes already priced into exchange rates. Risk trends remain the dominant force driving forex price action. Asian stock markets registered substantive gains in overnight trading and US index futures are up well over 1% ahead of the opening in Europe, suggesting capital will continue to flow out of safe haven assets and pressure the US Dollar lower.

Chinese Economic Stimulus Package Boosts the US Dollar

The greenback has rebounded against the EUR after it initially dropped earlier to an intra-day high of $1.2925 in late New York trading. The U.S. Dollar gained after the initial optimism regarding China’s economic package had quickly faded, ending the day at 1.2737. However, China’s plan may not be enough to help avert a global recession. Some analysts said that though the initiative from China was a step in the right direction, it was unlikely to provide an immediate fix to the struggling global economy. Some parts of the program have already been announced, such as tax breaks for exporters and property developers.

The worst financial crisis in 80 years, prompted by huge banking losses in the U.S. housing market, has now fostered a broad economic downturn, with even fast-growing China proving not to be immune. Many in Europe want a root-and-branch reform of financial regulation but others have sounded more reluctant. The EU’s top trade official, however, said a growth-boosting deal on the Doha round of trade talks could be struck within weeks and the summit should fall fully behind it.

Chinese import growth slowed in October and inflation fell to a 17-month low as domestic demand cooled, raising the likelihood Beijing will cut interest rates soon to back up the government’s new economic stimulus plan. Growth is expected to slow sharply across the region, which is likely to lead to an easing of monetary policy, although at a different pace in the individual countries.

Europe Has Been Hit

Crisis also hit European firms where Man Group shares fell more than 27 percent after actions it took at its poorly performing Man Global Strategies (MGS) product raised fears it was preparing for acceleration in client cash-ins. However MGS delivered a negative return of 18.6 percent to its investors in the six months to the end of September, raising the prospect of lower management fees. This caused the group to bring forward a $107 million amortization charge on sales commissions. AXA, Europe’s biggest insurer by market value, posted a 0.9 percent fall in sales in the first nine months of the year, with revenue affected by outflows at its asset management division due to the market turmoil.

The 15-nation euro zone’s economy, which had grown steadily since the bloc’s creation in 1999, contracted by 0.2 percent in the second quarter this year and most economists expect further shrinkage in third quarter GDP figures on November 14. Britain’s economy shrank 0.5 percent in the third quarter and many experts do not expect a recovery until 2010. Banks and insurers across the globe have been hit by the worst financial crisis in around 80 years, which began when U.S. homeowners started to default on their loans.

Despite interest rate cuts by the Bank of England and the European Central Bank, investors feared the global economy will fall into a protracted recession. We had economic data out of both Euro zone and UK and both printed really disappointing numbers, with Halifax house prices out of UK printing -2.2% and factory orders from Europe -8%!. The data suggest that rate cuts is only a way out of many to go for both banks and let’s wait to see what happens.

Reductions in European rates come against a backdrop of further data highlighting the scale of a slowdown in the global economy. German manufacturing orders suffered the biggest fall since reunification in 1990 in September while UK house prices fell at their sharpest rate in at least 25 years in October. Some analysts speak of optimism but it has become really hard to see it at the moment.

Global Solutions

The global financial crisis has given European leaders an unexpected political boost, but those gains could vanish as quickly as they came once recession takes hold and jobless rates start to creep up across the bloc.

As Europe heads into what economists believe could be a deep downturn, however, the bloc’s leaders may find it increasingly difficult to escape the wrath of voters, whose anger over lost jobs and a wave of bank bailouts will only build.

Governments need to take out troubled assets and force the recognition of losses. Asset purchases must be done transparently at fair market value. The reasons are not moralistic, though there is such an imperative, but pragmatic.

If prices are inflated, then banks will inevitably have to make good the losses that fall on the taxpayer in the US case, they would have to issue shares to the government, thus diluting other shareholders. But losses deferred to the future prevent new private capital from flowing into banks.

If such capital is to be attracted, it is better to pay a lower price now, recognize losses, and give banks an upside if the implied loss turns out to be smaller.

A high degree of international cooperation has become urgent. Unfortunately, recent measures have been taken with national interests in mind, and not enough has been done to prevent unintended “beggar-thy-neighbor” consequences that only exacerbate problems for others.

Looking beyond the immediate crisis, it is clear that the international community needs to work to close the many loopholes in the global regulatory architecture that allowed financial institutions to minimize capital even as they concentrated risk.

Fear In World Finance

News of a contraction in Britain’s economy deepened fears of a worldwide recession stemming from the worst financial crisis in 80 years. China warned the outlook was grim. Foreign exchange markets saw extreme volatility with the yen rocketing to multiyear highs against the dollar and euro. The euro/yen rate fell 10 percent at one point.

Bank shares tumbled Friday amid expectations that government efforts to stabilize the financial system won’t keep economies worldwide out of a deep recession and that losses from bad loans will soar. Banks worldwide are trying to reduce balance sheet risk after taking on too many mortgages and complex debt, which no longer have buyers.

The industry has also seen soaring credit losses, which are likely to keep rising if housing prices keep falling, unemployment moves higher, and deteriorating economies make it more difficult for retail and business customers to pay bills. Tokyo, Seoul, and Sydney stocks plunged as regional markets braced for the prospects of a global recession.

The picture is not looking good. Stock markets were in freefall around the world as panicked investors moved to liquidate risky positions. Many economists expect the decline to continue into the current quarter and the first three months of 2009, if not longer. The classic definition of a recession is at least two consecutive quarters of negative growth. Even though, governments are doing nothing to confer trust back in the market, as uncertainty keep growing, our decision can be our worst nightmare.

Yen Falls as US Stocks Rally by Globicus

The dollar traded mixed in NY volatile trading Thursday. US industrial production plunged the most since 1974, consumer prices were flat, initial jobless claims remained at recessionary levels, the Philadelphia Fed business index dropped to the lowest level since October 1990, and homebuilder confidence fell to the lowest since 1985.

The euro fell modestly as crude oil dropped below $70 a barrel to the lowest since June 2007. Despite falling oil prices and large declines in precious metal prices, the Australian and Canadian dollars gained. Sterling rose slightly.

The USD/JPY rose as US stocks rallied in a volatile trading day. Having recently traded between the 99-handle support and the 103-handle resistance, the USD/JPY failed to break the 99 support today. The USD/JPY long-term trend is still down, but we expect further sideways trade this week.

Trading Forex

Demo Accounts

Demo accounts are the first account you should register if you are new to Forex trading. It’s risk-free. You are trading the real-time Forex but the money is not real. You may practice for three or six months, maybe a year before trading a “live” account. Of course you can buy a book, teaching you some techniques. You should also look for Forex tutorials on the internet. You will find really good information, just use Google.

If you have enough money you can also open a Forex managed account. This kind of account is managed by a professional trader. Lots of brokers now offer this feature. You don’t need any particular skill since you do not trade yourself. The broker will take a percentage of your net profit. I have personally noted that a 20% is generally taken by the broker. You may think that this percentage is high, but you are not taking any risk. You are not spending hours in front of the charts waiting for the biggest opportunity of the day.

Automated Forex Trading Accounts

I was interested at a moment. I never really tried this kind of accounts. Well actually, this option can be offered in two ways. You download a software that analyses the market, then trades when it detects good opportunities. Again, you don’t have anything to do, except setting it up with your own parameters. If you decide to try this, set the software to trade your practice account first.

The second way in automated Forex trading accounts does not involve you to download any software. All you have to do is to transfer your funds to the broker. The broker then uses his own auto-trading software. We can suppose that their software will trade using trading signals, signals which are sent by other software.

Forex Signals

If you decide to trade, signals can really help you. Subscription for trading signals can be from $100 to $600 depending of the subscription duration, and the broker or signals provider. Signals tell you the exact entry and exit points. You know which pair to trade, when to trade, and the estimated profit. Signals are a great resource for every trader. Maybe you can see if you make a good profit from them.

What Is Forex Anyway?

Forex trading is a real money making opportunity. But it’s not a game. Risk management and emotions control are the main skills of a trader. If you decide to try forex trading, you must read and practice a lot. Do not invest what you cannot afford to lose. If you or your family needs money, do not risk it.

Forex trading is nowadays a home business opportunities. Anyone with an internet connection can make money online trading the Forex market. Well that is not completely true. You need an internet connection, some dollars (few hundreds to start), and some trader skills.

So if you do not want to learn the Forex basics and how to manage the risks, you should not even think of trading currencies yourself. Of course you can practice. Almost all of the Forex brokers online will allow you to open a demo account, or practice account. You will get something like $10,000 or more and see how you are doing.