See the insider story of how hedge funds manipulate the stock market and earn your money.
Monday, March 23, 2009
How hedge funds manipulate the market
Start of the devaluation of the dollar
The Fed will buy up $300 billion worth of treasury debts plus $750 billion of mortgage-backed securities.
With the news, gold again rose to $950 level because of the massive injection of cash into the markets? What will happen to the dollar?
If the economy does not recover, we will have the double edged sword of stagflation - economic stagnation and price inflation. Looking seriously into gold now is probably a good idea...
Wednesday, November 26, 2008
Rise of the dollar post war
The current banking system could trace its roots back to the Bretton Woods agreement after the war in 1945. With the dust of war settling, an unprecedented raw market of possibilities were opened for inventions of the West to rebuild society.
Unfortunately, these markets are restricted from capital inflows by currency system and trade rules of individual nations. In order to foster greater economic prosperity (for the elitist), a free trade system must be developed with the creation of an international body that facilitates the settlement of payments between countries and provide lending to developing nations. It was with this notion, that the IMF and World Bank was formed.
The IMF was tasked to maintain stability in the international monetary system and enable countries to settle their payments to one another. The World Bank was created to fund the developing economies with a pool of funds contributed by major economies. In order to develop an open market, the currencies would need to be interchangeable with one another. Back then, the gold was the standard used by countries in international trade and currencies were required to be pegged to the gold to ensure interchangeability.
However, the lack of gold reserves (most of it was in Soviet Union) would restrict liquidity and hence the dollar was introduced as the next best option with its peg to gold at $35/ounce, the rising US economy and increased liquidity. This would mean that countries would peg their currencies against the dollar instead. That was the birth of the dollar as the de facto reserve currency of many countries.
Monday, November 24, 2008
From gold to promised note to?
Since the Great Depression, the dollar has been evolved from a promised note redeemable in gold to a promised note for all debts.
This note in 1907 is redeemable in gold
In 1933, during the Great Depression the Roosevelt's administration worried that there was not enough gold in the vault to make payments, so a law was enacted to "lawfully" confiscate gold from the people exchanging them with silver certificates.
A year later, the Gold Reserve Act 1933 was passed giving the government rights to the gold confiscated. In the same year, the value of dollar/gold was increased from $20.67 to $35 dollars/ounce, eradicating 40% value from their gold.
This note in 1934 is redeemable in lawful money
On November 2, 1963 a new set of federal notes were released in circulation no longer redeemable in anything!
This current note, legal tender or must be accepted to pay all debts.
Citi bailout, at the expense of your money
I'm very impressed at how the US federal government keeps bailing out ailing financial giants like AIG and Citigroup. The latest bailout being $20 billion fresh funds and $306 billion guarantee of its toxic assets. How can the federal government with $59.1 trillion of public debt find that amount of money?
There are three ways the government can get money - tax, borrow or print. In this case, tax is out of the question as lower taxes is needed to stimulate spending; borrow, well I don't think anybody dares to lend to the U.S government who is currently on heavy trade deficits. That leaves them with print.
The Federal Reserve (which is neither federal nor having any reserves) will have to be the money making machine, injecting more liquidity into the system. What does that mean to you and me? It is like giving crack cocaine to an addict. The entire economic system is like an addict now, and feeding it with more credit will only provide momentary relief but pave the road for imminent collapse. It is reinforcing the problem that caused the financial crisis - unrestrained credit. Eventually with so much liquidity in the market, the dollar that you and I hold will be useless.
Friday, November 7, 2008
How to Prosper in the Global Financial Crisis?
The media plays a powerful role in shaping our minds on the current financial crisis. News of doom and gloom permeates the media space. Somehow people love to flock to televisions and newspaper stands to read about calamities. As we glance the news reports, our senses are naturally programmed to be attuned to negative news. It attracts readers like honey attracts bees. The media knows, and capitalizes on it to propagate a surge of viewers to their websites. Focus on the gloom is the tactic.
However, we need to stand out from the crowd and look into the crisis with a new pair of lens - not the lens given through the news media. The chinese word of crisis so aptly describes the full understanding of crisis as finding opportunity in the midst of danger. We can ride the wave of this global financial crisis if we choose not be sucked in the spiral of pessimism together with the rest of the world. Remember, winners think differently. I'm not advocating a contrarian approach to investing but rather a holistic, focused and critical approach to the crisis.
How can you benefit or even prosper in this financial crisis?
Number one, in times of recession cash is NOT king. Wisdom is. Recession is defined as two successive quarters of economic contraction resulting in low or negative profits and high jobless rates. But think about it - money in the globe is circulated. Profits are never lost, but transfered. In times when fuel prices are high, the airline industry suffered but the oil and gas industry prospered. In times of recession, spending does not stop but rather controlled. Everyone needs to eat, drink and relax whether we are in economic downturn or upturn. The key is to ride on the recession mentality - prudent spending and safe investment. If you can provide these two values to people, you are riding on the wave and not sucked in the spiral.
Number two, in times of recession ride on the primary emotion. Never try to move against market sentiment. If the market is bearish, try shorting successively (according to your risk portfolio). If the general sentiment is fear, do not strive to negate the fear in your solutions but rather confirm and help people to overcome the fear. Build solutions that help people win and not just bring profits to yourself. Real value is recognized even during recession.
Number three, in times of recession know what is important. Health is; money is; survival is; hope is. Would people prefer jeopardize their health just because they are in a financial crisis? I doubt so. Rather, people will switch to nutritional products that gives more for less. Would investment be less popular? I doubt so - everybody still wants to save for retirement! Rather, people want investments that are more transparent, well regulated and securely guaranteed.
In essence, you need to know where to stand to draw the profits. People's needs will not change, but rather modified to adapt to the financial crisis. Knowing how to flexible in times of crisis and adapt to the changing market is pivotal not just for your prosperity but your survival in this economic mayhem.
Wednesday, November 5, 2008
Obama aka Robin Hood, Champion to the middle class
Some basics of Obama's economic stance :-
- Taxing on excessive oil company's profit ('robbing' the rich and giving to the poor')
- Provide middle class tax relief
- Fighting for fair trade with foreign countries, and tax companies who moved operations overseas (again 'robbing' the rich)
- Investing in clean energy
- Tax relief for small business
Read more here
Read more...
Thursday, October 30, 2008
Tuesday, October 28, 2008
Short term rebound?
After Wall Street has experienced the worst October ever due to the current financial crisis, is it time now for a rebound? The index gained 889 points yesterday on speculation of a rate cut from US, Europe and Japan. But would it be just a jab in the arm for a short term boost?
The overarching sentiment is still negative, with many companies yet to report their full year results. Technically, the volume is still not healthy enough to prop the momentum and any advance would probably be short lived. For those who are investing, swing or intra-day trading would be a good strategy. After all, it's safer to cash in profits than spend sleepless nights chasing the stock prices.
Wednesday, October 22, 2008
How to save money in a year to weather the financial crisis
From CNN:
"Stephanie Nelson, founder of couponmom.com, a site that tracks deals at your local grocery store, says that shoppers can save an average of $50 to $100 a week on their groceries if they spend about 30 minutes once a week planning out their supermarket trip."
Read more here Read more...
Sunday, October 19, 2008
Medicaid payouts delayed
From Las Vegas Sun: State delaying Medicaid payouts
"In an attempt to juggle a surge of Medicaid bills, the state is putting a hold on some payments to University Medical Center and other health care providers, prompting fears of delays in receiving large amounts of anticipated cash."
Read more here Read more...
Medicare and Medicaid shortfall is explosive
The total national deficit including medicare, medicaid and social security stands at a staggering $59 trillion. Among these, the medicare looms as a threat to the nation as funds are expected to be depleted by 2019. With the first baby boomers turning 62 this year, the first wave of the 78 million baby boomers are retiring and currently only three taxpayers are supporting one retiree with the number expected to dwindle. The bailout from the Fed for the financial crisis seems to spill over.
Why is the Medicare running a shortfall? Read here
Read about the Social Security and Medicare shortfall here
Read more...
Thursday, October 16, 2008
Oil falls below $69
Finally, the price of oil is back to more sane level after the financial crisis. Will it be back to $20??? Who knows.
Wednesday, October 15, 2008
The Next Crisis : Credit Card Debt?
While all eyes has been on the debilitating subprime mortgage crisis as the catalyst of the current financial crisis, there is a looming problem that deserves public attention. Plastic money.
According to latest information gathered by the US Census bureau, there were 164 million credit card holders in the United States in 2005 and that number is projected to grow to 176 million Americans by 2010. These same Americans own approximately 1.4 billion cards - an average of nearly nine credit cards issued per credit card holder. The number of credit cards circulated in US is larger than the rest of the world combined according to David Robertson, publisher of industry newsletter the Nilson Report. The total credit card debt of America is a staggering $962 billion and the average household in 2008 carried nearly $8,700 in credit card debt (Federal Reserve Statistics). In fact, Bank of America revealed on Oct 6 that $3 billion of it's $184 billion credit card portfolio has soured, a 50% increase from just a year ago.
In Canada, 25% of 4000 Canadians surveyed had $10,000-$40,000 consumer debts excluding mortgage.
In 2003, South Korea's economy was hit by credit card crisis where nearly 4 million South Koreans defaulted.
What is the cause the problem?
People are spending more than they are earning, compromising their future with temporal satisfaction. This is a result of generation than yearns for instant gratification with tomorrow's money. In essence, people are lured to the bliss that materials promise to provide - but that is never true. While basic necessities are required, true happiness comes from cultivating meaningful relationships.
Click here to more about handling credit cards
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