Showing posts with label stock market. Show all posts
Showing posts with label stock market. Show all posts

Saturday, March 15, 2014

Wall Street Shaken By The Ukrainian Crisis Ends Down

Wall Street
Wall Street finished in the red on Friday as investors fearing an escalation of tensions around the Ukrainian crisis since the absence of diplomatic agreement between Russia and the West hence the Dow Jones dropped 0.27 % and the NASDAQ 0.35%. According to final results, the Dow Jones Industrial Average lost 43.22 points and the NASDAQ, dominated by technology lost 15.02 points. Indices fell late in the session after reaching equilibrium stay around for much of the day. Peter Cardillo of Rockwell Global Capital told that obviously the United States failed to prevent the holding of a referendum in the Crimea Sunday and we could end up with a complicated situation on Monday.

The inhabitants of the Ukrainian peninsula must decide if they want to separate from Kiev to attach to Moscow. In the days before the election, the U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov in London have failed to find a amicable solution after two weeks of intense diplomatic activities. Indices were also weakened in early trading by two indicators on lackluster U.S. economy, namely a slight decline in producer prices in the U.S. in February and surprise morale of U.S. household’s fall in March.

The impact of these figures, however, remained limited because their weakness is attributed to bad weather mentioned by Christopher Low of FTN Financial. On the values front, Yahoo! closed up 0.99% at $ 37.6, benefiting from news reports on the arrival of the Chinese Wall Street giant Alibaba e -commerce, which he is a minority shareholder. The General Mills, which has published quarterly forecasts lower expectations, lost 2.43% to 49.77 dollars. The automaker GM remained unchanged at $ 34.09. A consumer protection agency said Thursday that some of the recently recalled by the automaker models had a problem with airbag involved in 303 deaths. Liberty Media, one of the holdings of U.S. billionaire John Malone, jumped 7.22% to 135.25 dollars.

The group said Thursday that he would take full control of U.S. satellite radio Sirius XM (2.08 % to 3.44 dollars), which is already the majority shareholder. Banking stocks were in the red. The U.S. agency guarantees bank deposits has launched legal action against several of them for manipulation of Libor interbank rate, including JPMorgan (-1.08 % to 56.80 dollars), Citigroup (-0 95% at $ 46.88) or Bank of America (-2.10 % to 16.80 dollars). The bond market, considered safer than stocks and popular with investors in times of uncertainty, closed slightly higher. The yield on 10-year Treasury fell to 2.645 % against 2.653 % Thursday evening and the 30-year 3.587 % against 3.601 % on Friday.

Sunday, October 6, 2013

Exchange Traded Funds and Securities Lending



What about the liquidity of these investment vehicles? In normal operation, market makers are constantly present to disseminate buyer and seller and act as counterparty investors. Their presence ensures the liquidity of the ETF, even if it is built on the underlying assets or not illiquid. This is where we must bear in mind another practice widespread market: securities lending. Securities lending are at two levels in the world of ETFs. First, the fund issuer may be required to pay the securities in the portfolio to improve profitability. This additional income can be used to reduce the tracking error, or simply return the funds. In this case it should be distributed to the investor again. Second, ETFs are exchange-traded, investors can sell short.


This possibility is heavily used by hedge funds because ETFs can speculate down on an entire index, avoiding the hassle of selling each individual underlying security. The speculator must borrow the security sold short during the holding period of the short position. On the stock market, the stock of available titles is limited, hence a strong demand in the bond market makes way more expensive to borrow, which discourages speculators. It is not the same on the ETF market and they can be created on demand, which allows borrowing amount and so building significant short positions.

This leads to a rather unlikely situation first, where some of the ETF amount of short positions is several times the number of shares actually outstanding! Many holders of ETF therefore hold shares actually "ghosts”, which were sold to them by a short seller, the latter saying that the shares can be created anyway when the time comes. If sellers orders flock to the ETF arbitrage trading seen above, which we have seen, are fully automated trigger.

Specialized intermediaries massive demand the return of the underlying securities of the issuer. But the issuer may either not hold at all, or have lent. He will not be able to deliver immediately, or not being able to deliver at all. However, there are provisions limiting the daily volume of refunds on the money, especially if short positions identified above a certain threshold.

In addition, an “Authorized Participant" must prove , when requesting a refund on the one hand , that it is "real" and not the result of a securities loan at any level of the chain. If such clauses may allow the fund to survive individually in a debacle, they are unlikely to calm the markets. Indeed, if investors are denied the ability to obtain repayment of the shares that they were sold as completely safe and liquid , it is more likely that the panic spreads to all ETF , then why not the underlying assets.

Tuesday, October 1, 2013

Exchange Traded Funds may be the next bubble! -1



Exchange Traded Funds currently experiencing rapid development in the United States, where they constitute more than half of the daily trading volume in the equity markets. The expansion of these instruments is less visible for the moment in Europe, because in U.S. where half of the market is held by individual investors where as in Atlantic the investors are mainly institutional investors are present in this class asset. Just may be feared that the development of the ETF market is currently powering the next financial meltdown? Recall that the ETF are the basis of funds, that is to say, collective investment vehicles such as UCITS, whose purpose is to replicate the performance of a market index, upward or downward, and whose shares are traded on the stock exchange just like stocks. They offer investors the opportunity to take a position, with management costs and tax costs reduced on a market index, including inaccessible or illiquid markets such as emerging markets, small caps, etc.

There are ETFs on all sectors of the market, and if a little unlikely sector is not yet covered today and in tomorrow it will emerge as new ETF. This is happening almost daily. We will soon invest in the segment of companies specializing in the balloon or tie pins, or companies based in anywhere. If there is no index representing the performance of the sector concerned, no problem, it creates the index and the ETF in stride. The phenomenon went beyond the stock market and extends to all asset classes, bonds (ETN Exchange Traded Notes), commodities (ETC Exchange Traded Commodities), futures, currencies (ETV Exchange Traded Vehicle) etc. The set is grouped under the term FTE, Exchange Traded Products. In short it is a beautiful alphabet soup simmering and is reminiscent of a previous recipe, the securitization (remember the ABS, MBS, RMBS, CMBS, CDO, etc), which had overflowed with some damage collateral for the past 5 years from now.

On the road there is nothing simpler than ETF investor buys an index, and as follows, upward or downward, the performance of the index being tracked. But precisely how this replication is obtained? There are two main methods: physical replication and synthetic replication. With physical replication, the issuer of the ETF actually holds the portfolio securities of the index being tracked. It calculates and communicates information two times: first, the net asset value equal to the valuation at market prices of assets held , divided by the number of shares issued and secondly the market price of the share , which comes from the comparison of buying and selling interests in exchange just like a stock. Both figures; net asset value and share price must be the same to a small margin near.

What will happen in case of divergence? These are specialized intermediaries (“authorized participants "), mandated by the fund issuer, which come into action. If the market value of the share exceeds the net asset value then the ETF is moving faster than the rise in the index, they will buy a basket of stocks in the index. This then delivers their new units; they can sell on the market, realizing a capital gain. Conversely, if the market price is below the net asset value of the fund, they will buy ETFs on the market and present it to again, which reimburses them by delivering the underlying assets. They can then sell these securities on the market and making a profit. These so-called arbitrage transactions are fully automated and have the effect of “realign " asset prices that were uncorrelated. It is the development of algorithmic trading has led to the development of ETFs.

 In case of synthetic replication, the issuer does not directly hold securities of the index, but other assets. It will then go to a specialized intermediary , typically a bank, to negotiate with him a "total return swap " the bank pays the issuer of the ETF 's performance index, while it reverse the performance of assets held in the portfolio. Physical replication is mainly practiced in the United States, where regulation severely limits the use of derivatives by collective investment funds. In Europe, ETFs are equally divided between the two modes of replication. We are mainly interested here in the physical replication, in which today we have a little more perspective. All this cooking takes place behind the scenes between specialized players (asset managers, hedge funds, brokers and banks financing and investment), thus preserving the image of simplicity and transparency between the final investor.

This should not, however, be fooled: many intermediaries are involved in constantly, and we must be aware that they do not by pure philanthropy, but because they have an interest. There was a second there the resemblance securitization market: the first beneficiaries of financial innovation are not the ultimate investors, but those who create and distribute these innovative instruments. That said, proponents point out that these ETF products are primarily funds, and so most of them are within the regulatory framework for the funds. These regulations, both in Europe in the United States, are very demanding especially in terms of transparency to investors . It is up to them to read the prospectus in which he will find, in principle, all the necessary information.

Monday, April 15, 2013

The Euro fell against the Dollar!



The Euro lost ground against the dollar on Monday as investors flee to the safe and is that the flat after the release of Chinese and U.S. indicators bode well for global economic growth.. The European single currency fell against the Japanese currency to 126.05 yen against 128.91 yen Friday. The dollar also fell against the Japanese currency to 96.72 yen against 98.35 yen on Friday. The currency market "is marked by a combination of lower than expected indicators in China and the United States that suggest that the global economic recovery is losing some of its momentum," noted Kathy Lien BK Asset Management . China has indeed made from a slowdown in growth to 7.7% annual rate in the first quarter, reviving concerns about the fragility of the analysts of the second world economy. Along with the United States in March, the growth in manufacturing activity in the New York area slowed more than expected and homebuilder confidence fell. "The fact that the world's two largest economies are showing signs of weakness at the same time" gives rise to "feelings of anxiety" among traders, said the expert. These concerns weighed on investor sentiment that favored currencies deemed safer, as the dollar and the Yen, at the expense of risk currencies like the Euro. The decline of the single currency, however, remained limited during most of the session with "a stronger than expected figures on foreign trade," noted Ms. But the announcement in late NY session, several explosions in Boston has strengthened the curve. For its part, the yen continued to gain momentum, traders reaping profits after the fall of the yen due to the decision of the Bank of Japan (BOJ) a new wave of monetary easing. Around 2100 GMT, the British pound advanced slightly against the euro at 85.29 pence per euro but fell to 1.5283 dollar. The Swiss currency advanced against the euro at 1.2140 Swiss francs to the euro but fell at 0.9312 Swiss francs to the dollar. The ounce of gold finished at $ 1,395 at auction tonight against USD 1,535.50 Friday, before falling to $ 1,335.30, its lowest level since February 2011. The Chinese currency finished at 6.1869 Yuan to the dollar, the highest closing level of the Yuan since 1994, when China has pegged its currency to the dollar, against 6.1921 Yuan on Friday.

Thursday, February 11, 2010

Trading is a Business


I have been a trader in stock Market for the past 10 years. Whenever I introduce myself as a stock market trader to any new people, they just blink at me and look at me somewhat skeptical at me. The reason is simple. If you are a trader in a speculative market, people look at you as gambler.

Gambling is different from speculation. Playing cards and betting on horses is a gamble. In this two, you are betting on a thing whose performance is not in your command. You are betting on a performance, not on any asset.

But in trading, you are putting money on an asset i.e. stock. The money you have invested in market is backed by the fundamentals of the company. More over you would have invested in that stock after analyzing the performance of the stock fundamentally and technically.

So, here the outcome is predictable. But in gambling the outcome is not predictable. So if the outcome is predictable, then how can we say it is gambling if we trade in stocks.

Every business is risky. The same risk is associated with trading in stocks also. Then why some body say it as gambling. So, stock trading is also a business as some other business.

Thursday, January 7, 2010

Sentiments and Trend reversal in Markets.


We have seen that whenever a market is viewed by all participants as bullish, a trend reversal takes place and turns bearish. Likewise, whenever a market is expected to be bearish by all, it turns bullish against their view.

When Crude oil was trading around 145 USD in 2009, everybody is thinking it will go to 200 USD levels. The Media is bullishly covering Crude oil. Everybody is expecting the demand for the Crude to go up because of growing world Economy. Every Analyst has turned bullish on Crude, but it has turned otherwise. Crude fell from 145 USD to 30 USD within 6 months.

Why is this happening, when everybody is in one view but the Market turns otherwise? Let me explain the internal dynamics in it.

Market movement is influenced by demand and supply. There is always a demand or supply potential for a market. Demand is inversely proportional to Supply. If the participants in a market feel bullish about a particular market, they will start to accumulate the asset. Like this slowly, every participant acquires the asset. In initial stages, the demand potential will be high, but as the time progress and as more number of participants acquires the asset, the demand potential slowly recedes.

But the sentiment in the market will slowly turn bullish, as more number of peoples have already bought the asset. As this process continues, almost all of the Investors would have bought the asset and the sentiment would be highly bullish by this time.

Now the buying potential is already receded because the potential Investors have already bought the asset. Now a selling potential is created, as those who have bought it will sell it for a profit. As the buying potential recedes, a selling potential increases.

At some point of time, the demand potential and supply potential will be same. And after some time, demand potential will be overwhelmed by supply potential. But at this time, the bullish sentiment would grip the Investors.

At one point of time, everybody would have bought the asset and nobody is left, so everybody is highly bullish, but the selling potential would be at its highest and buying potential would be at its lowest in this point time.

This is the time, trend changes from bullish to bearish because of the change of balance of buying and selling potential in the market. That is why, even though the sentiment is bullish, the trend changes from bullish to bearish and vice versa.

Understanding the internal dynamics of the Market is essential for successful Investing.

Friday, January 1, 2010

Mutual Funds or Stocks?

Many Investors have doubts about whether to invest in stocks directly or in Mutual funds. If we can analyze the performance of the Mutual during the Bull Markets and Bear Markets, it would give a clear answer about it.

The present bull market started around 2003 and ended in 2008. The Mutual funds performed well during that period but still their performance lagged behind the performance of Stock Indices. In India, Bombay Stock Exchange Index Sensex appreciated by seven times. But no fund appreciated by seven times in this time. If we take into consideration some well performed sectors like, Reality, Power and Infra, the performance of the funds is far more less, which clearly indicates, Mutual funds have not performed extraordinarily. They have performed as an ordinary investors do.


Had an Investor invested directly in stocks, he would have multiplied his money manifold. So, Mutual fund Managers are not smarter than us. I prefer investing in Stocks directly instead of Mutual funds.


But investing directly in stocks do have some risks. Had anyone invested in Hindustan Unilever in Bse or General Motors in USA, he would have not seen his investment appreciate far the last five years. So, picking the right sector and right stock is more important in investing. Any secular bull market will sustain for five years to ten years. Always hold your investments till the bull market is over. Don’t shuffle your stocks in your portfolio frequently.

If one can follow the rules propounded here, then one can prefer stocks over Mutual funds.

Which one do you prefer?

Monday, December 28, 2009

How should be your investment portfolio?


The short term trader is meant to the people you who trades in the Derivatives Market (Futures and Options Market) in Stock Markets or Commodities Market. A trader takes a position in the market in futures or options and holds it for few days. Normally, we can see one month, two month or three months contract in the derivatives market, but we have contracts ranging from months to years.
The trader holds the positions until he makes a profit or until he cuts his losses. Not all trades end up in profits. If the trade goes against his position then he has to close it before he makes a substantial loss. Anyway, he has to close the position with profit or loss or at cost. If he feels, the underlying security move as per his expectation for the next month also, then he can carry forward the contract to next month also. Likewise, he can carry forward the position to unlimited number of months.
So a person trading in this time frame is called a short term trader. In a futures positions, he has to pay a margin to hold a futures position (whether it is short or long). In case, if the position he holding is loss, then he needs to pay the extra margin to make up the loss and also to continue to hold the position. So, there is always a risk of holding these type of positions. Unlike, holding a delivery share, holding a futures position would anytime invite margin call. If we are not prepared for that, then we have to close the position in loss, if it goes our way in the near futures.


Trading for the short term is always risky. But the profits we make in the short term is substantial. You no need to hold it for a long time. Your money will not be blocked for a long time. You can quickly use your funds.
But in the long term investments, your money will be blocked for a long time. There may a time when your money would remain idle without appreciating for years. But it is less riskier than short term positions.
I prefer any investor to invest more than seventy percent of their investments in long term and trade only twenty five percent of your investments in short term trading.

Friday, December 18, 2009

TRADING TIMING CHANGE , THE REASON BEHIND IT

SHARE MARKET TIMING CHANGE , THE REASON BEHIND IT



The ego battle between India’s two exchanges comes to a permanent halt.  Bombay stock exchange advanced its timing by ten minutes, reacting sharply to it National stock exchange advanced its time by 55 minutes to 9 A.M.  As there is no other option the Bombay stock exchange also announced opening at the same time.  There is so many mixed reactions in the market most of the peoples object this arbitrary move.




The original move was to check the foreign fund managers using the Singapore market to beat the Nifty by short selling the Nifty futures options over the Singapore market.  Even now also they could not resolve this problem, why because the Singapore is still open well ahead of our revised timings.


Before this revision the BSE will set bench mark prices because by that time NSE may remain closed and hence the BSE will set bench mark prices.  But now the NSE will lose this opportunity.


But there is so many operational hardships are there.  The banks will not open that much earlier hence arranging funds will be a problem other than the strain on their daily routine.


Most of the peoples related to this field oppose this arbitrary move and they feel that they should be consulted before taking this move.


Thursday, December 17, 2009

Economy and Stock Markets

Economy and Stock Markets
Are Economic growth and Stock Markets are interrelated. Half of the economists will say ‘Yes’ and half of them will say ‘No’.
According to me it is ‘Yes’. Stock Markets and Economic growth are interrelated because the rise of Stock Markets would attract small investors into the Market which will propel the stock Markets further, which in turn fuel the start of new companies and projects, which in turn help grow Economy.
A rising Stock Market would invite retail Investors and Foreign Investors to invest in the Stock Markets through secondary Markets and also through Initial Public offerrings. This process will infuse huge amount of idle money into the system
The money that came for circulation would be used by the companies to expand, backwared integrate and forward integrate. Thus the production capacities of all companies increases, so they produce more end products.
These end products has to be sold and this will be done by exploring new Markets locally or internationly. Thus the earnings of the companies will increase, which in turn means increased tax for Governments.
Thus a rising stock Market will surely propel a Economic growth.

Monday, December 14, 2009

Which is the long term Investment bet? Deposits,Gold, Stocks or Real estate?


Which is the long term Investment bet? Deposits,Gold, Stocks or Real estate?
During the 20th century, investments in the real estate showed steady returns. Sometimes the price rise is fast and sometimes it is slow. But the rate of return is some what better than the Fixed deposits and also above Gold. But is somewhat riskier than fixed deposits.
Likewise, Investments in the Gold also showed good returns and at times it is stagnant. It sometimes performed better than fixed deposits and at times it is under performed when compared to fixed deposits. But is riskier than fixed deposits.
Investments in the Stocks is the riskiest of these investments. But the returns were phenomenal during the Bull Market and it showed negative growth in bear markets. But on Average, it performed better than other investment avenues. But the risk factor is much more in Stocks.
My investment plan would be to invest 30% in Stocks, 30% in Real estate, 20% in deposits and 20% in Gold. Any investment plan should take into consideration atleast 5 years time frame. And the best way to invest is to invest at bear markets.

How Interest rates affect the Stock Market?

How Interest rates affect the Stock Market?
Interest rates are the percentage at which the Lenders lend the money to creditors. The lenders may be Banks or Individuals or Financial Intstitutions. The creditor may be any one.
But here, the Interest rates we are talking about is the rate at which a central bank or federal bank of any country lends the money to other banks. In USA, the central bank is Federal Reserve and in India, it is Reserve Bank of India.
Central Banks world over lends money to other Banks of their country. The Interest rate at which it is being given to the Banks really matters. If there is inflation, in order reduce the price rise, Central banks increase their lending rates in order to reduce the flow of money in to the system. This in turn reduce the price rise.
And in times of deflation ( prices decline steadily ), Central banks reduce the lending rates to inject money in to the system.

If interest rates are hiked, then the Banks will increase their lending rates and the Industry which is financed by Banks will get affected by the rising interest cost. Thus it affects the bottomline of the Company.
Since companies bottomlines are affected by rising Interest cost, their earnings will be affected which in turn affect the sentiments of the stock Market, which in turn affect the stock prices of the companies.

Friday, December 11, 2009

Is the Bear Market over Worldover?

January 2008 saw the start of a bloody decline in stock markets World over and it terminated the bull run in the stock markets that started on 2003. The decline continued till  october2008 in most of the Asian Markets and the decline terminated around february in US and European Markets.



People ranging from ordinary men to investors in the stock market panicked and the period saw many layoffs in all sectors of the Economy. Unemployment rose in US and world over. The severely affected country was USA.


Many Banks and Financial Institutions in USA went bankrupt mainly because of sub prime crisis which is due to the burst of real estate bubble and Stock Market decline. The tremors are felt heavily in European countries and it is felt mildly in Asian Economies. It was said at that time, that World was going to face the worst bear market.


Ever since that, Governments offered stimulus packages to boost their respective countries economies. The stock Market were recovered from the lows very quickly. Now, everybody saying that the bear market is over. The stimulus packages given by their governments boosted the economy and everything is normal today.


But My opinion is, even though Stock Markets have rallied for the past 9 months, the present rally seems to be temprory.


No bear market completes its term in just 9 months. So, the real and the worst bear market is yet to come. It may take another five or six years to complete. Hisotry will always repeat itself.


Be prepared for it.


Thursday, December 10, 2009

Sectors for the Next Bull Markets

Sectors for the Next Bull Markets
World over each Bull Market will be lead by any particular sector or any particular set of Sectors of the Industry. The 1990s rally was lead by Old Economy Sectors like Cement, Steel, and Automobiles. The next Bear Market was also lead by the same sectors.
The 2000 rally was supported by ICE sectors. ‘ICE’ shortly denotes Information, Communication, and Enterntainment Sector. The Stock prices of Companies like Microsoft, Apple, Oracle, Adobe, Sun, IBM went to dizzy heights. In India, Infosys, Satyam, Wipro, Hcl Tech are the companies saw a massive bull run.
Zee tv, Himachl Futuristics, Global Tele systems were the stocks from Media and Telecom Sector that are in bull Run.
Globally, Telec om Multinational Companies like AT&T saw bull run in all European Stock Exchanges.
Like wise in the previous Bear Market, the same sectors which lead the bull rally, lead the next Bear Market.


The Bull Rally that started in 2003 Globally, is supported by Power, Infra, and Reality Sectors. Globally, the companies in this sector was in demand in all Stock Exchanges.  Like wise, the bear market in 2008 was also lead by these sectors.
So, which sector is going to lead the next bull rally. Technical studies reveal Pharma, FMCG, Financials will lead the next rally Globally in all Stock Markets.
Be prepared for that.