Economics in the Market

Bank of America Issues Economic Warning

Analysts from Bank of America Merrill Lynch recently released a note of warning to their clients indicating that the U.S. market is about to enter a bear market. The forecast extends to both stocks and bonds, and claims that peaks have been hit across different asset classes. With assets across the board at high points, it stands to reason that many are overextended, and once this is detected by the general public, a major pullback will occur. This will lead to large drops in stock prices, pulling indices down across every sector in the U.S. marketplace. Investors especially need to be cautious here, but the warning also extends to traders—even binary options traders. (more…)

What the Brexit Means

The vote for England to leave the European Union was more of a political move than it was an economic one. In fact, this move was so political that Prime Minister David Cameron had announced that he would be stepping down thanks to the fact that he no longer felt like he was the right person to lead his country. However, as political of a move as the Brexit is, traders need to be focused on the economic side of things as this is what moves prices and creates or eliminates your personal wealth.

The immediate impact on the GBP, as you might already know, is that the pound fell dramatically against the other major currencies. (more…)

Advice from Bill Ackman

We live in a world where fund managers can become superstars, even if their results are not that great at times. All that’s needed is a big personality and a publicized platform to make their views known from. There have been a number of managers that have gained notoriety in this way, ranging from Jim Cramer, to Martin Shkreli, to Bill Ackman. These people have all managed funds at one time or another, and they’ve all made headlines because of their outspoken personalities. However, it wasn’t their personalities alone that made them famous. They’ve also gained publicity for being in positions of authority when it came to the markets.

Right now, Bill Ackman is the only name on that list that currently manages a hedge fund. And his recent comments about a possible “index fund bubble” have been met with intense scrutiny. Bubbles usually mean bad things, but without knowing what Ackman meant, the comment is completely meaningless. (more…)

International Bubble Protection

There’s a story that plays out in cycles all over the world’s financial markets: a bubble grows and grows, creating all sorts of wealth and hype. And then suddenly, the bubble bursts. Much of that wealth that was built up is lost. Companies go out of business, and so on. It has happened many times in the U.S., and the Federal Reserve and the executive branch have learned that there are steps that can be taken to prevent such occurrences. Interest rates are heavily monitored. Trading activity is strictly regulated, and sometimes certain impositions–like a moratorium on short sales–need to be imposed. Even big issues, like the housing market crash of 2008, can usually be resolved very quickly.

However, that does not mean that the U.S. economy is immune from events outside of its jurisdiction. For example, the current crash that is ongoing in China has had an impact upon the U.S. economy (more…)

U.S. Economy Propped Up By a Few Sectors

One recent analysis paints a very different picture of the U.S. economy than what it looks like on the surface. A broad look at things shows us that the major indices keep hitting record highs, the dollar is strong, and things look like they will keep going this way. But if you look into it a tiny bit deeper, it becomes clear that not all of the market is as rosy as this. Some sectors of the market are outperforming others, and they are buoying the rest of the market with them. Small cap stocks, biotechnology, and banking stocks are doing better than ever, and they seem to be pulling other sectors upward with them.

For now, this is a good thing. It’s leading to more and more growth, and there’s a chance that this type of growth could help other sectors get to the levels that biotech and banking are at, especially if the small cap companies lead the way there with their unprecedented growth. (more…)

Trading Small with Oil

The Use of Oil TradingOne thing that most traders are never able to successfully trade is commodities. The reasons for this can be broken down into two main categories: a lack of understanding, and a lack of sufficient capital. However, commodities can be some of the easiest assets to trade, so a lack of understanding shouldn’t be what keeps you from making money here. A lack of cash can be a hindrance, but binary options give traders an opportunity to take advantage of this sector of the market with little money. Where it might take tens of thousands of dollars to trade barrels of oil with a profit, you can do the same with binaries with just a few hundred dollars. (more…)

New Developments in Greece

The euro is up against an interesting challenge right now. Recent elections in Greece have put into power the anti-austerity party, and they seem to be very much against reliance upon the EU as a whole. This is fine, except for the fact that they currently owe the IMF 9.0 billion euros in back debt for this year, including 2.3 billion over the course of the next two months.

The excessive debt of the Greek nation has been a thorn in the side of the European Union for several years now, but the problem keeps escalating in severity. The EU and the IMF have offered Greece another loan to help delay the problem so that the Grecian economy can buy more time to strengthen itself, but this has been turned down. Experts say that Greek reserved do not have enough capital to make it through February, thus making the situation all the more dangerous. Now, add to this the fact that private banks also have about 15 billion euros worth of debt that needs to be repaid in the near future and you can see just why there is so much worry here.

The government, led by Prime Minister Alexis Tsipras, has said that they want to meet with creditors one on one to discuss payments. (more…)

Using Politics for Profits

Political events all over the world influence asset prices, both short and long term. And right now, the biggest political event is what’s going on in Scotland and their failed bid for independence from Great Britain. The secession was shot down, and this had an immediately positive impact upon markets in London, but it also brought up some new concerns. One of these is the fear of a “Great Stagnation,” an economy where growth is nonexistent for a while.

Trade with the Politics in MindRecently, the G20 announced that they were considering adding a $2 trillion global stimulus to the world’s economy, which would create millions of new jobs all throughout the world, but as of right now, this is just talk. Furthermore, it underlines that something negative is going on below all the positive news that major economies are experiencing. It seems to say that the growth that’s currently going on will not be sustained for long, and that something needs to be done to prevent an economic slowdown. Europe is a leading example of this so called stagnation. There economy has remained pretty ho-hum for months, and there doesn’t seem to be an end in sight. A lot of emerging markets are also in the same boat. (more…)

Does the Boom on Wall Street Affect the Dollar?

The U.S. dollar is the world’s most heavily traded currency, usually paired up with the EU’s euro. But, with all of the gains that U.S. stocks have been making on Wall Street over the last several months, has the dollar been losing its grip in the worldwide trading community?

History would indicate that yes, this will happen. Typically, what has happened in the past is that as the U.S. markets get stronger, the dollar loses value in a sort of negative correlation. This is not a hard and fast rule, but it does make sense. When you are not hoarding dollars, but instead investing it, the demand for the dollar goes down and the supply goes up. Basic economic theory says that this will negatively impact price. But, the world’s economy is so huge and complex that this doesn’t need to happen every single time dollars are spent. Other currencies will also affect the price of the dollar, which is why you need to look at the bigger picture when trading within the Forex market. In other words, if other currencies are being spent faster than the dollar, even the weak demand for one currency can be offset by an even weaker demand for another. And this happens far more often than you might think. (more…)

The Twitter Question

There is a lot of speculation amongst the most popular stocks. Twitter is just one example of this. It’s a newly offered stock, in a hot sector (technology), and it has seen a lot of trading volume over the last few weeks. So what should you do with it? Should you buy into the hype, short it, or just stay away from it?

Let’s start with the facts. There is much agreement that Twitter is highly overvalued. In theory, this means that prices should come down soon. For short term traders, though, it’s not quite that easy–especially if you are day trading the stock or trading binary options. When you’re trading in these fast paced markets, you want the asset to be moving quickly, too. (more…)