17 Reasons America Needs a Recession

17 Reasons America Needs a Recession.

1. Purge excesses of housing boom.
2. Reverse dollar's free fall by giving government a wake-up call.
3. Expose Wall Street's shadow-banking system.
4. Force fiscal restraint back into government.
5. Wake up short-term investors.
6. Rating agencies have conflicts of interest and favor Corporate America.  Shake them up.
7. Trigger internal recession in China.
8. Force energy and auto industries to get serious about emission standards.
9. Expose core inflation.
10. Slow the Fed from cutting rates.
11. Force Washington to get honest about how it's going to pay for wars.
12. Expose CEO compensation.
13. Stop privatization of federal government.
14. Force congress to get serious about Social Security/Medicare disaster.
15. Pressure consumers to reduce spending and increase savings.
16. Lobbyists have replaced regulation.  Stop this.
17. America has always performed better during crisis'.

Read the entire are at Marketwatch.

Popularity: 3%

Patiently Waiting

I have no open positions.  I try not to trade against the trend anymore so I'm patiently waiting.

• DOW down -55.29 to 12987.55 (-.42%)
• Gold down big -12.00 to 795.7 (-1.49%)
• Oil down -0.80 to 93.82 (-0.85%)
• Dollar index up 0.83% to 76.033

What's up for the rest of the week?

• Tuesday - US PENDING HOME SALES M/M at 3:00 pm EST
• Wednesday - US PPI and BERNANKE speak at 8:30 am EST and 9:10 am EST respectively
• Thursday - US CPI
• Friday - US TIC at 9:00 am EST and US INDUSTRIAL PRODUCTION at 9:15 am EST

Popularity: 1%

Markets Recap - November 9, 2007

• DOW down -223.55 (-1.69%)
• Gold closes at 833.7 down -3.80 (-0.45%)
• Oil closes at 96.2 up 0.74 (+0.78%)
• US Dollar Index closes at 75.39 up .055 (+0.073%)

• UK trade deficit widens to record as exports drop
• US trade gap narrows to two-year low
• Canada's trade surplus at lowest level in decade
• US consumer confidence hits two-year low

Thanks to http://themessthatgreenspanmade.blogspot.com for "The Bernanke Cycle":

1. Federal Reserve cuts interest rates
2. Equity markets surge
3. Dollar decline accelerates
4. The price of oil and gold soar
5. Treasury reiterates "strong dollar policy"
6. Housing market problems get worse
7. Credit market problems get worse
8. Dollar decline accelerates
9. The price of oil and gold soar
10. Federal Reserve talks tough on inflation <—– YESTERDAY
11. Treasury reiterates "strong dollar policy"<—– YESTERDAY
12. Equity markets plunge <———— YOU ARE HERE
13. Go to step 1

Popularity: 1%

Alternative To Forex Factory?

I saw that there is another player in the world of economic release calendars.  I was thinking about developing a competitor to Forex Factory last year but came to the conclusion that it would just take too much development work and up keep.  I guess it could have been fully automated, pulling release projections and the actual release numbers but it's just another one of those things I couldn't follow through on.  Fxfisherman has an economic calendar that emulates the Forex Factory functionality which include actual, forecast, and previous economic release numbers and expected volatility.  They take it a step further by also including a predictor with preferred currency pair to trade after the release, the predicted direction, and possible range in pips.   Only time will tell if this is a useful tool but since I don't trade the news, I probably won't be able to tell you.  I've added the site to my "Massive List of Forex Resources" page but you can browse directly to it at http://www.fxfisherman.com/forex/economic-calendar/.

 

 

 

 

 

Popularity: 1%

Inflation Concerns Around The World

There's a quick read in the Economist regarding the inflation concerns around the world.  The Bank of England unexpectedly raised rates; who's next? Many speculated that the United States would start lowering rates this year but instead, we may see rate hikes.   

"The most worrying possibility was raised by Mervyn King, the head of
the Bank of England, last year: that China, India, and other rapidly
growing Asian nations may have been behind the low inflation
experienced by much of the world in the past decade or so."

Bobbing Back Up?

Popularity: 4%

It’s All About Interest Rates

Thanks to Daily Dopeness for mining this information and ~chaffcombe for providing the content.  Here is what you should be clearly thinking about during each and every economic announcement at this point in time:

"Finally, 99% of market moves following economic announcements are based upon
perceptions on how the information may affect interest rates. If it’s bullish
for rates, the price goes up; if it’s bearish for rates, the price goes
down."

Popularity: 1%

Buy The Rumor, Sell The News Part II

I've been hearing a lot of the phrase, "Buy the rumor, sell the news." This Wall Street Proverb sounds intelligent and is freely thrown around forum posts everywhere but what is the real meaning of it all.

Often a rumor will circulate about some future news release.  Rumors can quickly start from anywhere such as news articles, forums, and just about any other communication media available. Let's take as an example the New Home Sales report released last week.  The consensus was for New Home Sales to come in at 1105K.

Here are a couple of headlines that could have affected your thoughts on the New Home Sales report:

"Horizon Gloomier for US Economy"

"Analysts Expect Home Sales to Drop by 10% This Year"

"New Home Sales Report Could Put Nail in Dollar Coffin" 

Before the report is released, you're being bombarded with speculative information that only deteriorates your view of the consensus which in this case was 1105K.  Traders acting on rumor start to fill their minds with random numbers typically less than the consensus.  

What Trader's May Be Thinking

"I see tons of for sale signs around my house but nothing under contract.  There's no way the number will come in at 1105K"

"1000K" 

"A real estate broker I talked to said houses are taking 5 months to sell now where last year it only took 4 weeks.  New Home Sales won't be 1105K.  I'm thinking it will be 900K"

"850K"

Before the news is actually released, traders are bidding against the USD based on these wild assumptions.  These rumors alone can beat down the USD.  But once the announcement is released, the facts rarely end up being as bad as the rumors.  Since all of the greatest possibilities have already been priced into the currency pair, the news actually causes the currency pair to "re-price itself" to the facts.  Last week, the actual New Home Sales was 1072K and the USD gained against most of the majors.  It gained because the worst possible news had already been priced in.

Popularity: 3%

Buy the Rumor, Sell The News

WHY DID WE SEE THE EURO/STERLING/YEN decline against the USD?

Here were the consensus figures and actual figures of the economic news reports this morning:

Durable Orders 

Consensus: -.8% Actual: -2.4%

Initial Claims

Consensus: 315K Actual: 313K

New Home Sales 

Consensus: 1105K Actual: 1072K

Looks bad for the USD, right? Wrong.

Here are some reasons stated by members of the Oanda forums:

1. The bad numbers were expected therefore it was already priced into the market
2. Fear
3. Big longs have to take a profit and doing so during the news is a great time due to increased volatility
4. No reason
5. The "big guys" don't trade on impulse.  They need more complicated approvals, conference calls, board meetings, red tape, etc.
6. It's August.  Expect the unexpected.  Wild moves in the summer that just don't make sense are commonplace for this time of the year

Other points:

• A lower EUR/USD is needed to play the news tomorrow and now we have it.
• The prior day gives a pretty good indicator of the rumor

So I don't know what is true or not but the simple fact that there ARE so many reasons for something that is expected not happening really puts the markets in perspective.

Popularity: 3%

Economic News Delayed

For those of you that are news trading or just interested in keeping up to the minute on any news developments, you know how hard it is to obtain it in real-time.   It isn't so hard if you have the money to subscribe to Bloomberg which will run you in the thousands per month. (http://about.bloomberg.com/contact/sales.html) 

Most of us don't have the luxury of doing so therefore the alternative is newsstrike.  Newsstrike uses TeamSpeak software to call out news in real-time though I've heard it lags by a couple of seconds.  TeamSpeak became popular in the Gaming world with games such as Medal of Honor where teams could speak to each other while they blew each other up.  The software requires you to configure a connection to Newsstrike with a username and password.  You can get these by subscribing to the service which is FREE at http://newsstrike.com/subscribe.shtml

Some of us again don't have the luxury of listening live to news while we are slaving away at our full-time jobs so another alternative is to go to the government website responsible for the news release and find the URL of the latest news release.  This requires you to constantly hit REFRESH on your browser until the newest release is actually posted.  I've found that sometimes it's within seconds and sometimes within minutes.  For instance, the US Census bureau handles the release of the Durable Goods report so you can go to the URL http://www.census.gov/indicator/www/m3/adv/index.htm and keep refreshing until you see this month's report was updated.

Yet another way of getting the news which is my preferred method when I'm not looking for real-time but looking for it quick, is to get it from Briefing.com.  I find that the news comes through in the same minute that it is released and if there are multiple reports released at a particular time, you can see them all on 1 page.  The calendar can be found at http://www.briefing.com/Investor/Public/MarketAnalysis/Calendars/EconomicCalendar.htm

These are the best ways I've found over the last year of getting economic report data as quick as possible.  If you know of any additional ways, please share.  

Popularity: 3%

Waiting on the Bank of Japan

I am alive and watching the market somewhat.  I am watching what unfolds at midnight EST when the Bank of Japan announces whether they are increasing interest rates or not.  If they do, it would mark the first time in six years.  Supposedly, they are expected to raise rates by at least 25 basis points.  According to Kathy Lien, even if BoJ does raise rates, it doesn't necessarily mean bullish times for the Yen.  According to her, there are 3 possible scenarios that can happen tonight:

1. Leave interest rates alone which would clearly be Yen bearish.  LONG USD/JPY
2. Raise rates 25 basis points and signal that in the upcoming months more rate increases are expected.  This is clearly Yen bullish. SHORT USD/JPY
3. Raise rates 25 basis points and indicate that just because they are raising rates now doesn't mean they will continue to raise rates.  This is a highly likely scenario and one which doesn't give a clear directional signal.

I don't know what I will do if anything to trade this pair tonight.  The pair is trading right now at its highest since the end of June at 115.87.

If you want to follow the Bank of Japans decision, go to http://www.boj.or.jp/en/theme/seisaku/kettei/index.htm  

Popularity: 1%

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