If we recall the middle of 2009, one of the hottest debates among traders and economists was revolving around the subject of US economy experiencing inflationary or deflationary pressure. Many experts expected that, following the unprecedented central banks’ expansionary money supply policies, the G7 countries would witness a rapid increase in the level of prices. Exactly like the first half of 2009, the US CPI during the 1H10 has hovered near the flat line. Moreover, the all-item inflation numbers shifted into negative territory when oil went through a price correction. The annualized core inflation rate from December 2009 to May 2010 stands at only 0.3%, the tamest five-month annualized rate since early 1960s. If things remain status quo, is US in danger of turning into a Japanese non-inflationary experience? Continue reading ‘Back To Safe Heaven’
The 2010 World Cup has a strong South American flavor. During the group-level stage, the five teams from that continent – Argentina, Brazil, Chile, Paraguay and Uruguay, have won 76 percent of the total available points, whereas the thirteen teams from Europe have posted a 47 percent record. Not surprisingly, four out of five South American teams have qualified for the quarter-final stage, whereas three out of thirteen European teams have made it to the last eight. This is the best ever world cup record, where South Americans clearly dominated the Europeans. Continue reading ‘South America 4, Europe 3′
Fundamental analysis (FA) is aimed at capturing both systematic risk and idiosyncratic risk associated with a given security. While the market risk encompasses the macroeconomic factors – like monetary policy, economic cycle or unemployment rate, the residual risk includes company-specific factors – like financial ratios, management style or market share. Technical analysis (TA) is a method of evaluating securities by analyzing statistics generated by market activity, such as price and volume. It does not measure the intrinsic value, but instead it uses charts to identify patterns that can predict future price activity. Knowing how to perform both fundamental and technical due diligence is essential for successful investors and traders. Continue reading ‘FA, TA or FA&TA?’
As a continuation of the two articles “Becoming A Trader”, I am prepared to jump into a very delicate subject: finding the balance between the professional trading career and the personal life. Needless to say that one has a better chance of winning the lottery than becoming an accomplished trader and concurrently having a successful personal life. For me, there is no magic one-size-fits-all solution when solving for the optimal balance of the amount of time spent earning money and the amount of time spent with the family. Bottom line, it is all about time, not about money. Whether we are at the beginning of our career or toward the end of it, we are constantly trading our time for money. Everyone knows that the amount of time we have at our disposal is limited and irreversible. If we could find ways to earn more money, we could never make more time or turn back the clock. Continue reading ‘Between Fame And Pain’
The American Recovery and Reinvestment Act (ARRA) signed into law by President Barack Obama on February 17, 2009 did rewrite Section 111 of the Emergency Economic Stabilization Act of 2008 (EESA) and did provide modified rules for the Troubled Asset Relief Program (TARP). The Stimulus or Recovery Act is worth $787 billion and it contains multiple programs: Tax Cuts – $244 billion, Aids For State and Local Government – $217 billion, Relief (Extended Unemployment, Health Insurance for Unemployed) – $120 Billion, Infrastructure – $101 Billion, Energy Efficiency – $59.5 Billion, and Human Capital – $45.5 Billion. TARP allowed the US Department of the Treasury to purchase up to $700 billion of difficult-to-value assets – MBS and CDO – from banks or other financial institutions. Since the enactment of TARP in October2008, more than 360 US banks have received at least $353 billion of funds from the Treasury. Continue reading ‘TARP Barometer’
Almost twenty-nine years ago, I had the chance to watch the great football team of Internazionale Milano, and since then it has been my favorite Italian club. In the summer of 2006, the Nerazzurri (black and blue) team broke a seventeen-year Seria A title drought. After forty-five years of European misfortune, Inter has won the UEFA Champions League against the famous German team of Bayern Munich. This victory meant that the Inter coach Jose Mourinho completed the Continental Treble, winning the Champions League (CL), the Italian league (scudetto) and the Italian cup. This accomplishment has never been done by anyone in the 102-year-old club’s history. With no more to prove in Milan, the highly controversial Portuguese coach would very possibly start a new endeavor with another emblematic football club: Real Madrid. At the Bernabeu Stadium, Michel Platini handed the CL cup to Javier Zanetti, the captain who won the trophy in his 700th appearance for the club. Continue reading ‘The Name Of The Game’
According to the Treasury Department, the global demand for US financial assets strengthened in March to a record level, as investors from China to the UK purchased, amongst others, the largest amount of US Treasury bonds since November 2009. Overall, foreign investors were buying equities, notes and bonds in amount of $140.5 billion in March, after a net buying of $47.1 billion in February. It is a clear signal that foreign institutions and investors are returning to the US as the ultimate safe haven. Not surprisingly, China remained the biggest foreign holder of US Treasuries after its holdings rose by $17.7 billion to $895 billion in March. Japan, the second-largest holder, increased its holdings by $16.4 billion to $785 billion in March. Holdings in the UK gained $45.5 billion to $279 billion. Continue reading ‘The Return To Risk Aversion’
The controversial economist John Williams once said “If the federal government were a corporation, the President and senior Treasury officers would be in federal penitentiary.” Paraphrasing his statement, I would say: if governments around the world were business school students they would gloriously fail every single subject and get kicked out of school after their very first semester. I have always been a strong believer in the idea that the socialist system was the biggest failure of the twentieth century. It is all understood that socialism does not create a system built on incentives, becoming a theory inconsistent with human nature and ultimately doomed to fail. The recent financial crisis could be considered a failure of capitalism followed by a failure of the governments’ policies. The process of socializing the private losses from this crisis has shifted the troubled liabilities of the private sector (e.g., large banks, financial institutions and households) onto the books of the sovereign. Continue reading ‘Why Bother To Vote?’
One-Year Anniversary
A year to the day, I took the dazzling initiative of setting up the “It Is What It Is” blog. First and foremost, all I intended was to share with my readers an unbiased and educated opinion about the complicated world of finance. Today I would like to walk through the main topics that I have addressed over the last twelve months. Where should I start? Maybe back in the summer of 2008, when I have been invited to the Romanian Diaspora Conference and where I presented my research paper “Financial Meltdown – Effect on CEE Credit Markets”. The conclusion of my work stated that Hungary, the Baltic countries and Romania are the most vulnerable economies to the global credit crunch. We all know what happened in the following months thereafter. Continue reading ‘One-Year Anniversary’