Tag Archives: debt

With the current wild Euro-debt ride we’ve been on that’s had everyone stumbling all over the market, what better time than now to reevaluate where alternative investments stand in your portfolio?

Alternative investments are basically any component of an investment portfolio that isn’t traditional long-only stocks or bonds. Their primary purpose is to provide diversification within an investor’s portfolio by giving them a place to allocate their money that is not correlated to the stock market. Today, with the prevalent volatility of stocks and their concert movements with the European debt crisis, alternatives have been generating traction amongst weary investors. Of course, they can also be influenced by current global economic conditions, but not in equivalence with stocks and bonds.

Most recently, the hedge fund industry’s been receiving a fair amount of attention, as the media seems to like tracking its performance quite closely.  The Wall Street Journal provides a good summation of a June 2012 Citigroup survey entitled Institutional Investments in Hedge Funds. In it, forecasts were made that the current hedge fund industry could very well double in size its managed assets to become over $5 trillion within the next five years.

The survey gathered information from 80 hours of interviews with 73 investors, consultants, and money managers who see the hedge fund industry progressing beyond its formerly private, limited access status into a more mainstream investment option. Where before, hedge funds made up a smaller portion of alternative investments, they are now making moves to a more central position within portfolios. With this transformation comes stricter regulation, compliance demands, and transparency within the industry, all additions that will hopefully help in legitimizing hedge funds and projecting them in a less risky light.

One of the stronger historic examples illustrating how hedge funds have come in clutch during rough market times was back in the early 2000’s as portfolios that had them incorporated were able to out perform their traditional 60 percent equity/ 40 percent bond structured brethren portfolios. This induced a surge of more than $1 billion in capital flow directed into this asset class for the proceeding few years.

The idea of today’s projected five-year hedge fund boom is based primarily on a predicted increase of established institutional investors using them as a diversification and risk management tool. This alone could generate $1 billion in hedge fund strategy allocations, while another $2 billion could come from these funds marketing themselves as a more commonplace regulated alternative investment product competing with traditional asset managers.

In a June 11 MarketWatch article announcing how hedge funds are establishing a presence in China’s growing alternative investment industry, Hedge Fund Association (HFA) president Mitch Ackles states that globally, hedge funds are moving into the investment mainstream. PerTrac, a leading worldwide aggregator of hedge fund data, found that there were 658 hedge funds in China as of April 2012; half of them having been formed within the past two years.

In the US, Neuberger Berman made a bit of investment history by being the first asset manager of its caliber (US$199B in AUM) to create the first Multi-Manager Fund. This fund is basically a hybrid investment mechanism structured after a mutual fund, but operated using hedge fund strategies. It is run by a group of fund of hedge fund professionals who feel that this type of investment should be available to a wider range of investors who in the past, have not been able to access hedge funds. The benefits of this hedge fund inspired investment vehicle are daily liquidity, lower investment minimums, full portfolio transparency, and no performance based management fee.

Neuberger Berman’s Multi-Manager Fund could be a big step in the direction of closing the gap between non-high-net worth investors and the ability to access hedge fund strategies. This is really fascinating to me because it is the same concept that inspired the creation of Currensee. Currency trading, a different type of alternative investment, was at one time only possible for professional foreign exchange traders, multinational banks, and high-net worth investors. Now, with the advent of trade replication software, investors of any kind can have equal access the world currency markets.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

It's been almost four years since the global financial crisis reached its climax, and the world economy is still unable to reach escape velocity without ongoing life support from central banks and governments.  The perennial optimists remain unmoved by the unimpressive economic expansion, and continue to believe that reflation efforts will ultimately prove successful, and that growth will return to its historical trajectory in the not-too-distant future.

However, the level of long-term interest rates offered on government bonds across a number of markets including Canada, Germany, Japan, the Netherlands, the U.K. and the U.S., is at odds with this view.  Indeed, sub-two per cent yields in many of the world’s leading economies are simply not consistent with robust future growth.

The economic data reported during the current upturn to date confirms that something is fundamentally different about this cycle.  The U.S. economy for example, is currently experiencing the weakest recovery on record with growth running at less than half the pace that is typical for this stage in the cycle.  Meanwhile, the euro-zone’s economic performance since the ‘great recession’ struck is even less inspiring, and trails the Japanese experience following the deflation of its twin property and stock market bubbles more than two decades ago.

The hard evidence would appear to suggest that the deleveraging of balance sheets to correct for the excessive build-up of debt throughout the developed world, and across all sectors of the economy, in the years leading up to the financial crisis, will exert a heavy toll on growth for years to come.

The extent of the debt accumulation over a period spanning three decades is simply staggering.  The level of non-financial sector debt relative to GDP in the developed world increased from 170 per cent in 1980 to almost 310 per cent by 2010, well above the thresholds that have been shown empirically to retard growth.  In other words, the rate of debt increase outpaced economic growth by more than four percentage points a year on average for three decades.

The late American economist, Herbert Stein famously wrote in “What I Think: Essays on Economics, Politics & Life” that “If something cannot go on forever, it will stop.”  The unsustainable private sector borrowing spree duly came to an end with the arrival of the ‘great recession’ in 2008, but the upward trend in outstanding debt continued, as declining tax revenues and automatic stabilisers increased the pressure on government finances.

The bottom line is that deleveraging has barely begun, with combined public and private sector debt relative to GDP across the developed world still close to an all-time high.  It is important to recognise that never before in modern history has so many of the world’s leading economies been saddled with so much debt.

Indeed, an analysis of the U.S. experience post-1945 reveals that total non-financial sector debt rarely strayed far above 150 per cent of GDP until the 1980s.  Simply put, the negative growth impulse arising from balance sheet rightsizing in one sector of the economy was traditionally offset by an increasing debt-to-GDP ratio in another sector.

Academic research by Stephen Cecchetti and others at the Bank for International Settlements reveals that debt begins to hurt growth when it reaches 85 per cent of GDP for the public sector, 90 per cent of GDP for the non-financial corporate sector, and 85 per cent of GDP for the household sector.

In aggregate, each of these levels has been surpassed across the industrialised world or an area that accounts for two-thirds of global economic output.  In other words, there is simply no balance sheet slack available to counteract the effect of deleveraging, and as a result, growing out of the problem does not appear to be a feasible option.

Several commentators argue that the debt will ultimately be inflated away.  However, as repeated rounds of quantitative easing in the U.S. demonstrate, inflation is not that easy to generate in the presence of persistent economic slack, and when the credit channel of monetary transmission is impaired.  Further, high inflation rates relative to the emerging world could potentially harm the labour market, as production shifts overseas to exploit lower costs.

The developed world is drowning in debt, and near-zero interest rates and unconventional monetary policies have failed to ignite an economic recovery that is sufficiently robust to allow for a fall in aggregate debt levels to more sustainable levels.  Lacklustre economic growth should be expected for several years to come.  Welcome to the ‘new normal.’

www.charliefell.com

 

 

Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

Today’s roster of top tier bulge banks holds some of the most colossal and well-known institutions in finance. JPMorgan Chase & Co., Deutsche Bank, Citigroup Inc., Morgan Stanley and Goldman Sachs; a few names that everyone’s heard, and almost everyone has an opinion about (usually in regards to their size). Of late, JPMorgan and Morgan Stanley have been receiving the majority of media flack with the whole $2B trade loss and Facebook equity underwriting investigation.

Though one bank has been doing a very good job at laying low for the past few months, and it wasn’t long ago that Goldman Sachs could hardly keep itself out of the news for more than five minutes. So one must wonder now, without the media blowing them up left and right, what has this large investment bank been up to?

A CNBC article answered this question by revealing that the bank has been doing a good job of being well, not so large. This fall, the firm is said to name less than 100 new partners; a group of higher ups at the firm that's shrinking steadily. After scrupulous vetting of these potential hires, the selected few are compensated handsomely (senior partner and CEO Blankfein pulled in an annual salary of $12 million in 2011) while gaining access to prestigious jobs at the firm. This alone would make one question why over the past year Goldman has seen a steady exodus of those employees fortunate enough to hold partner positions at the bank.

After reducing its total employee count by about 8 percent in the last year, as well as laying off about 50 last week, it’s clear that something is amiss with the firms growth pattern. As Goldman deflates as a whole in size, the heft of its partnership base usually lessens in congruence.

So where is this drastic size reduction coming from? Greece.

A few weeks ago, I wrote a post about how a potential Greek euro exit would likely affect the US. One of the main concerns was that it could set in motion a widespread panic amongst investors, who would then impulsively retract their allocated capital. Today, a Bloomberg article showed evidence of this theory starting to make its presence known.

The piece provided insight about how European turmoil is directly correlated to success amongst the investment banking industry. More specifically, the article looks at Greece and their potential abandonment of the euro for a return back to the drachma.

A Goldman analyst showed last week that for a third year straight, revenue from investment banking and trading is in danger of dropping at least 30 percent from the first quarter. The deadly combination of deal volume slowing, wider credit spreads, heightened volatility, and equity and credit markets falling, can all be traced back to fears of a Greek euro exit, followed by the spread of the European sovereign-debt crisis. These ingredients are the direct result of investors putting themselves into a defensive monetary state over the aforementioned euro woes.

This tension is taking its toll on the paychecks of investment bank employees, as 11 analysts reduced earnings estimates for the New York based Goldman Sachs in the past four weeks. The question now is whether these declines are cyclical, or indicative of a general phasing out of the investment banking industry. Boston Consulting Group, Inc. stated in late April that banks of this kind will see very little revenue growth during the next few years and will be forced to cut up to 30 percent of their managers.

Jamie Dimon and Lloyed C. Blankfein, CEOs of JPMorgan and Goldman Sachs respectively, are in adamant agreeance that this is, of course, is nothing more than a phase and the industry will undoubtedly bounce back. David Konrad, an analyst at KBW Inc. in New York, gives a bit of hope to the fighting back of these banks by pointing out that due to their large amounts of capital and strong liquidity, any program coming out of Europe that the market responds positively to will inevitably have a bold impact on valuations. He recalls how stocks have been known to jump up to 30 percent on just a bit of breathing room.

So could all of this drastic shrinking represent the end of the age where grand investment banks rule the financial industry?  Or is it in fact no more than a shock absorption effect occurring as they bend to accommodate European turmoil? As we all know, yes, they are big. But are they really too big to fail?

 

 

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

Things were looking up for Spain June 7 yesterday after the country conducted a surprisingly successful bond auction. The New York Times reports that the Spanish treasury sold 2.1 billion euros (2.6B USD) worth of bonds, which was higher than anticipated due to an unexpectedly strong level of demand. Offered at the sale were two short-term note options with maturities of two and four years, as well as 10-year maturity bonds.

Despite the success of the auction, Spain still faces the obvious harrowing downside: interest rates. During Spain’s last auction in April, the 10-year coupon rate was listed at 5.74 percent. Yesterday, that number crept up to 6.04. Further fueling this increase was a chop in the country’s credit ratings that sparked a sharp interest rate rise to 6.177. While the interest rose, Fitch Ratings new label on Spain that was based on speculation of an imminent bailout for Madrid, brought down their credit rating from A to BBB.

The big taboo stigmatism here is that by being classified in “BBB” status, Spain is now just two paltry steps from “junk bond” status.

Junk bond status? That illustrious name sounds like a pretty trust worthy and secure investment option if I’ve ever heard one.

But, before letting their unbecoming title fool you, know that this classification of bond happens to possess the appealing ability to provide investors a substantially higher yield than a traditional investment grade bond. This being due to the fact that a borrower with scathed credit gets to a point where they have no other option for obtaining needed capital; hence they must succumb to paying the lender a much higher amount of interest. Of course, there are risks that need to be assessed prior such as the possibility of the borrower defaulting.

For now, bonds will provide strength to Spain’s economy, but this isn’t a long-term solution. Given that Spain did rely solely on the sell off of their hefty debt, with interest rates as high as they are, the potential for their situation to transition into a full blown government-debt crises becomes very realistic.

 

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

An article on CNNMoney about Greece’s pending decision on exiting the euro (or the “Grexit," as it is called) brought up a very good question: why isn’t more attention being paid to what the country’s choice will mean for the US? The clock certainly has not stopped ticking and the election that will likely make or break the country’s euro membership is set to take place next month.

Well, the good news is that in terms of trade, the US economy will hardly feel the tremors produced by the potential Grexit threat, should it materialize. Only a meager 0.1% of American exports go to Greece, with 14% going to the euro zone in general. If Europe is shaken by their decision, US trade should come out relatively unscathed.

The place of worry with this situation is actually a bit more speculative. Economists fear that should a Grexit occur, it could trigger big time panic amongst investors, who will then make mad dash bank runs, which in turn will further disrupt the Euro that includes bigger debt-laden countries. How’s that for looming dark cloud syndrome?

With over 20% of all loans that happen in the US coming from European banks, a debt selloff could potentially hinder their willingness to lend. Though US banks have been actively reducing their exposure to peripheral euro zone countries, a great deal more exposure to the wider euro zone in general still remains.

Does this mean the US should really start focusing on a contingency plan should Greece decide to return to the drachma?

 

View the full article here.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

It is only a matter of weeks since a number of European leaders, including the French President Nicholas Sarkozy and Italian Prime Minister Mario Monti, declared the euro-zone crisis to be “almost over.”  Financial markets jumped to the same conclusion following the large provision of liquidity by the European Central Bank (ECB) in two large three-year long-term refinancing operations last December and late-February respectively.

The calm provided by the ECB’s unconventional liquidity facilities proved fragile however, and stress returned to the zone’s sovereign bond markets once data confirmed that economic conditions continue to deteriorate.  The contraction in economic activity is frustrating efforts to meet ambitious fiscal goals, with both Spain and Italy indicating that they will not reach the initially projected deficit targets.  The evidence confirms that the fiscal consolidation strategy is not working, and a less restrictive policy mix will ultimately be required to save the euro-zone’s troubled periphery.

The economic challenge facing the periphery is far more complex than simply reversing the large fiscal deficits and stabilising the outstanding stock of public debt relative to GDP.  The sizable external deficits that persisted in the years before turmoil struck must be eliminated in order to stabilise the level of net external liabilities as a percentage of GDP.

The average current account deficit among the periphery increased from just four per cent of GDP in 2003 to almost eleven per cent by the time the crisis struck, which caused net external liabilities to rise to more than seventy per cent of GDP in Greece, Portugal and Spain.  Meanwhile, net payments abroad averaged three per cent of GDP in Greece, Portugal and Spain by 2007, or one-quarter of the current account deficits in each country.

By 2007, external debt indicators all vastly exceeded levels that had previously triggered crises in developing countries, and continued to deteriorate in subsequent years.  The latest available data indicates that net external liabilities exceed 100 per cent of GDP in both Greece and Portugal, are close to 100 per cent in Ireland, and more than 90 per cent in Spain.  Not surprisingly, net payments abroad are capturing an ever greater share of GDP.

In order to return the external indicators to more sustainable levels and avert a balance of payments crisis, simply eliminating the current account deficits is unlikely to prove sufficient; large surpluses will be required over several years in order to paydown external debt.  However, unlike previous balance of payments crises, this task cannot be accomplished via a substantial depreciation of the exchange rate, which means that the adjustment required can only be realistically achieved in the short-term through a reduction in domestic demand.

A decline in domestic demand however, is virtually certain to lead to a contraction in economic output in those peripheral countries including Greece, Portugal, and Spain, where trade openness is relatively low.  A fall in the overall level of economic activity makes it all the more difficult to meet ambitious fiscal targets, which means that the upward pressure on borrowing costs is unlikely to abate.  In turn, the external deficit is likely to prove more difficult to finance, increasing the pressure to effect the necessary adjustment more rapidly.

Further, the ability to run a current account surplus in the troubled countries – apart from Ireland – is constrained by the de-industrialisation of these economies in the recent past.  This means that the economic structures of Greece, Portugal and Spain are such that they can be expected to run external deficits for a ‘normal’ level of domestic demand.

The bottom line is that a sizable contraction in domestic demand will be required to return external debt indicators to a more sustainable level.  The cost in terms of higher unemployment however, is a cost that the sovereigns in difficulty may not be willing to pay.  The rate of joblessness is already unacceptably high in the periphery, particularly among the young, and further declines in the numbers employed may well lead to social unrest and political upheaval.

The external position has already shown marked improvement in the euro-zone’s periphery – apart from Greece.  The current account in Ireland has been close to balance since the beginning of 2010, while the deficits in both Spain and Portugal have narrowed considerably from almost ten per cent of GDP in 2007 to below four per cent last year.  Nevertheless, despite the impressive progress, further adjustment is required and particularly so in the Iberian Peninsula where the incremental social costs may well prove to be too onerous.

The fiscal consolidation strategy currently being applied in the euro-zone’s periphery is not working, and will continue to fail so long as much-needed private sector deleveraging and a reversal of unsustainable external deficits continue to frustrate government’s best efforts.  A less restrictive policy mix will ultimately prove necessary to save the euro.

Previously posted on www.charliefell.com

 

Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

The seemingly never-ending Greek saga has weighed on market sentiment for more than two years, as investors increasingly questioned the troubled sovereign’s ability to repay its debt.  European policymakers insisted throughout that there was “no risk” of default, but the rhetoric ultimately proved long on hope, as the Hellenic Republic succumbed to the inevitable in recent weeks, and became the first developed country to default on its debt in six decades.

The largest sovereign default in history was greeted by investors with a mere shrug of the shoulders, a far cry from the violent reaction that policymakers long feared would bring the financial system to a standstill.  Simply put, the game has long since moved on, as investors relegated the Greek crisis to an uncomfortable but manageable sideshow, and the more pertinent question today is who’s next.

Policymakers argue that the Greek situation is a ‘unique and exceptional’ case, but such claims are certain to fall on deaf ears, given such rhetoric’s lack of credibility.  Indeed, investors have already placed Portugal firmly in their sights, and the beleaguered country’s sovereign debt has failed to participate in the meaningful downtick in euro-zone government bond yields precipitated by the first tranche of the ECB’s three-year long-term refinancing operation late last year.

Portuguese policymakers have expressed confusion at the debt market’s reaction to their seemingly heroic efforts to more-or-less meet the fiscal targets set-out by the troika in last year’s rescue package.  Indeed, the second review document published by the IMF last December revealed that the Lusitanian government managed to reduce the fiscal deficit by more than three percentage points of GDP last year to below six per cent, an impressive achievement against the background of a rapidly contracting economy.

Careful analysis however, suggests that the fiscal improvement is not as stellar as it might appear which will make it far more difficult to meet the targets for both this year and beyond.  In this regard, it is of concern to observe that last year’s effort would have fallen well short of target, but for the use of accounting cosmetics that masked the true magnitude of the underlying adjustment.

In fact, the reported deficit would have come in almost two percentage points below the desired level, but for a last-minute transfer of banking-sector pension funds to the government social security system.  This transfer accounted for almost sixty per cent of the fiscal adjustment in 2011, and removing this once-off item implies that the underlying improvement was actually 1.3 percentage points of GDP, considerably less than the ‘fudged’ reported number.

More importantly, the true fiscal position today reveals that the necessary adjustment to meet the target for 2012 is far greater than it appears in official documentation.  The deficit in 2011 – excluding the transfer of banking-sector funds – was 7.8 per cent rather than the 5.9 per cent reported, which means that the adjustment required to satisfy the 4.5 per cent target this year is more than three percentage points of GDP or two and a half times larger than the improvement implied by the unadjusted data.

The additional fiscal drag alongside an accelerating pace of domestic demand destruction and rapidly decelerating export growth means that this year’s economic contraction could well be much greater than the 3.3 per cent percentage point decline pencilled in official forecasts, which will make this year’s targets virtually unattainable.

Indeed, the year-on-year decline in domestic demand accelerated from below five per cent in last year’s third quarter to 9.5 per cent in the final three months of 2011, while export growth decelerated by more than three percentage points to below six per cent between the second and fourth quarter, as demand sagged in its major trading partners, most notably Spain.

Given the negative momentum, it is not difficult to construct a scenario in which the economy contracts by more than five per cent during the current year.  Given such an outcome, disappointing tax revenues alongside the strain on government expenditures could well see the fiscal deficit come in at seven per cent in 2012, while the level of outstanding public debt could jump to more than 120 per cent of GDP.

Needless to say, the notion that Portugal could return to the markets in the autumn of 2013 as currently envisaged under the rescue plan, would completely evaporate under such a scenario, while the pressure to restructure the Portuguese sovereign’s debt would likely prove insurmountable.

Further, it is important for investors to be aware that unlike Greece, the Portuguese crisis originally stemmed from excessive private-sector debts that currently amount to almost 200 per cent of GDP.  The large and persistent decline in the economy is certain to make a vast number of loans unserviceable, and the eventual losses incurred by the banking system could well become public debt.  In a nutshell, there could well be no option but to restructure Portugal’s sovereign debt in order to place its economy on a more sustainable path.

An ‘orderly’ debt default has been orchestrated in the case of Greece, but the insistence that it is a ‘unique and exceptional’ case looks empty as the spotlight turns to Portugal.  The negative momentum evident in the Lusitanian economy suggests that the restructuring of Portuguese sovereign debt could well prove unavoidable.  Investors should note that the euro crisis is far from over.

Previously posted on www.charliefell.com

 

 

Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

Our Two Cents – Week of 2/21/12

While many Americans enjoyed a restful holiday weekend, financial officials in Greece busily discussed and ultimately approved the nation’s new rescue plan.

Eurozone finance leaders agreed to the $172.1 billion rescue deal for Greece—a plan that would have the country’s private creditors take larger losses than previously agreed. The package could help Greece reduce its government debt from about 160 percent to about 120 percent by 2020. Greek Prime Minister Lucas Papademos called the agreement “historic,” giving his country a new economic lifeline.

Here in the U.S., economic confidence resounded. According to a new Pew Research Center poll, almost half of all Americans expect the economy to be better by 2013. Also, according to a new CBS News/New York Times poll, as many as 34 percent of Americans say the economy is getting better—up from 28 percent who thought so a month ago. One of the factors for an improved economy is jobs. Jobless claims fell to a new low, now at 348,000, and retail sales grew by 0.4 percent. In the institutional arena, hedge funds, commodity trading advisors and private equity funds are expected to increase allocations in 2012, according to an AlphaMetrix survey.

While we were reading the world’s biggest financial headlines, Currensee itself received some ink. FINalternatives profiled the Trade Leaders Investment Program, speaking with our CEO Dave Lemont. The publication said Currensee is aiming to “revolutionize money-under-management CTA world.”

 

 

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

Our Two Cents – Week of 2/13/12

While many of us in the U.S. watched the Grammy Awards this past weekend, Greece made significant next steps in its debt talks and Americans continued to see economic confidence after completing the first month of 2012.

After Greece passed its austerity plan, which sparked strings of riots, the nation’s leaders rushed to identify about 3.25 million euros in budget cuts because they omitted longer-term issues of debt sustainability and growth. On Feb. 12, the country passed its rescue package, which included a 22-percent cut in benchmark wages and 150,000 government layoffs by 2015. Arriving at that agreement—via a vote of 199 in favor and 74 opposed (and 27 absentations or blank ballots)—came after days of intense debates. As officials approved economic reforms in Greece, the U.K. city of Bristol decided to introduce its own currency. Called the Bristol Pound, officials designed the monetary unit to “support independent businesses in and around Bristol, retaining and multiplying the benefit of every pound spent for ordinary people and businesses.” Also in Britain, the British Monetary Policy Committee increased the Asset Purchase Facility by an additional 50 billion pounds, as expected.

In the U.S., economic optimism prevailed. The U.S. federal and state authorities agreed to a $26 billion settlement with five major banks, and The Corporate Executive Board’s Business Barometer report found consumer spending expected to rise. A recent Gallup chart showed that Americans have become less and less worried about the economy for five full months. The year 2012 saw an upbeat start, according to a report by IHS Global Insight. January saw the lowest level of jobless claims (325,000), and the fourth quarter of 2011 posted a nearly 3-percent growth—the strongest quarter of 2011. In the hedge fund world, the investment fund in January added 2.6 percent, according to the HFRI Fund Weighted Composite Index.

 

 

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

Our Two Cents – Week of 1/23/12

There’s nothing better than kicking off the week on some high notes—especially coming off last night’s victory from the New England Patriots, sending them to the Super Bowl.

In the U.S., optimism remained the key theme last week. Jobless claims dropped 50,000 to 325,000—down from 402,000 last week—marking the lowest level since April 2008 and the biggest drop since September 2005. Experts said the sharp decrease illustrated signs of an upward-ticking economy. According to new survey results, 40 percent of wealthy Americans have optimistic thoughts about the U.S. economy in 2012, the highest level of optimism in six months. The findings came from the December 2011 Ipsos Mendelsohn Affluent Barometer, which examines lifestyles, spending patterns and media habits of wealthy Americans (those whose household income is $100,000 or more). While wealthy Americans signaled their optimism for 2012, the hedge fund industry also displayed early signs of a good year. In terms of inflows, more than half of investors planned to boost their hedge fund investments this year, according to a Barclays survey. In the Forex world, U.S. client profitability has increased on average 6.4 percent in Q4 of 2011.

Signs of economic confidence even transcended the Atlantic to Europe. Spain enjoyed a successful auction of benchmark 10-year bonds that investors gobbled up. In Italy, Prime Minister Mario Monti said Germany—in its own self-interest—must assist Italy and other embattled euro zone nations to help lower borrowing costs. Monti heralded Germany’s

“culture of stability” as “a precious German product [that] has been marvelously exported.” In Greece, officials and private creditors continued to devise solutions for its debt, nearing agreements to write down 50 percent of the face value of the country’s debt by exchanging existing bonds for newer ones with longer maturities and lower interest rates. Officials are expected to meet Jan. 23 to further discuss and resolve Greece’s debt.

 

 

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.