InvestMacro FX

A lot of people keep wondering what Forex Managed Accounts are. There’s a Forex currency market in which there are always currency rates changes going on. A lot of professional traders constantly make money on these rate changes. But there are also traders who manage clients’ accounts for a percentage of profit and this is called Managed Forex Accounts.

How do you choose a correct managing trader or managing company? First of all you should pay attention to how long the company exists and what sort of trading experience the managing trader has.

The schemes of accepting money by the company or trader are also very important. There are 2 schemes. First one is accepting money to their own accounts; second one is suggesting to open PAMM (Percentage Allocation Management Module) with a different broker. The 2nd sort is preferable as accounts with a different broker are opened into your name and it’s only you that can withdraw funds from them. In this way you protect yourself from possible cases of fraud.

Profit statistics is another important issue. Don’t chase super profits. The profit of 100% annual or more is very doubtful and risky. In Forex just like in any other business there’s a simple rule that applies: the more the profit is the higher the risk is and the lower the profit is the more risk-free the endeavor is. It’s very important to choose a balanced option. 50% to 70% annual is a normal average profit for Managed Forex Accounts.

I’m a Forex trader for over 9 years by now. The experience I gained gives me a chance to tell about most typical failures that beginner traders and investors make.

Article by fxmorgan.com

By MoneyMorning.com.au

A not-so-funny thing happened on the way to the latest Greek bailout.

The terms and conditions of the bond swap Greece agreed to before getting another handout constitutes a theoretical default – but not a technical default.

That’s not funny to CDS holders.

Greece hasn’t defaulted (so far), but some of the buyers of credit default swaps, basically insurance policies that pay off if there is a Greek default, claim the terms and conditions of the bond swap constitutes a “credit event” or default.

If it is, they want to get paid.

While on the surface this looks like a fight over the definition of a default, underneath the technicalities, the future of credit default swaps and credit markets is at stake.

In other words, the ongoing Greek tragedy is really becoming a global tragedy of epic proportions.

Greece needs to make a 14 billion euro ($19 billion) payment on its huge outstanding debt on March 20, 2012.

The problem is Greece doesn’t have the money, even after the previous 100 billion plus euro bailout.

If it doesn’t make the payment it will be in default and all hell will break loose.

That means banks that hold Greek bonds won’t get all their money back and they will have to write down Greek debts to zero.

That will trigger contagion as other countries in Europe will be seen as vulnerable to default too, and as panic in Europe grows from depositors trying to get their money out of insolvent banks, the spillover will infect world markets.

That’s the case for contagion.

While cobbling together another bailout for Greece, this one worth 130 billion euros ($172 billion), the ECB, the EU, and the IMF (the Troika) are asking existing “private” bondholders, meaning banks and investors, to swap bonds they currently hold, with their high interest coupons, for bonds with half the face amount paying less than 4% interest.

The idea here is that there’s no point in bailing out Greece with fresh money if it won’t have enough money to make payments on the new debts it is incurring.

By swapping their existing bonds with a face value of 100 euros for new bonds with a face value of 50 euros (that’s known as a 50% “haircut”) and accepting a lot less interest, bondholders will be getting something as opposed to nothing if Greece defaulted and repudiated its outstanding debts.

The bond swap is being called “voluntary,” meaning private investors will be swapping their bonds because they choose to.

There’s only one reason to make such an unprecedented offer to existing bondholders, that’s because if it wasn’t voluntary it would constitute a “credit event.”

If the Committee says a credit event is a credit event, it constitutes a default and triggers the payment process, known as an auction, by which credit default swap holders get paid.

That’s a global problem that nobody wanted to face and would likely trigger its own version of contagion.

No one knows exactly how much CDS paper has been issued and in the event of a Greek default, who will owe whom how much, or if the counterparties that owe buyers of CDS insurance have the money to pay them.

So who bought a lot of this insurance? The banks that hold Greece’s bonds bought CDS insurance.

Who did they buy the insurance from? Each other and hedge funds.

The problem is twofold when it comes to this scenario.

First, banks have been pretending that the Greek bonds they own and haven’t marked down don’t have to be marked down, because they have insurance on them.

Second, what will bank balance sheets look like if they have to pay out on the CDS paper they wrote, and what will they look like if they don’t get paid by other banks or hedge funds that don’t have the money?

What’s more, what if there are insurance companies, like AIG (NYSE: AIG) that wrote them insurance and can’t make good on it?

The unknowns are off the charts.

But, things got worse.

The ECB didn’t want to take any hit or haircut on the 40 billion euros of Greek bonds it had bought to support the market. It swapped them with Greece for some new bonds that pay them less interest, but they didn’t have to haircut the principal they’re owed.

That was clever. You see, the new bonds they swapped for are, well, new bonds.

They aren’t subject to the haircut that the private bondholders are being asked to take on the “old” bonds.

Nice trick, right? Yes, it was.

On top of that, as private bondholders got upset, it was decided that because not all of them might volunteer to take big losses, new, retroactive covenants would be put onto the old bonds.

These collective action clauses, or CACs, now allow a vote of 2/3 of existing bondholders to make decisions that all bondholders have to comply with.

All this is making CDS holders very angry. Well, not all of them.

The banks that wrote CDS insurance don’t want to have to pay each other or anyone else. They’d rather hide behind the voluntary swap and get on with pretending Greece will survive.

But, by the ECB essentially screwing private bondholders by unilaterally taking a “senior” creditor position and by forcing collective action clauses on bondholders that never imagined buying bonds that had such clauses (they didn’t when they bought them), the whole swap deal has created a hole in what constitutes a credit event.

The Determination Committee (made up mostly of the same big European banks that own Greek debt and wrote CDS paper to each other) determined the swap wouldn’t constitute a credit event. Although they also said, that could change.

The problem now is what to do about credit default swaps. Are they worthless?

Will anyone ever trust them again as being legitimate insurance on credit instruments? What will happen to this $300 trillion market? …

What will this mean for less than stellar debt issuers who are able to sell their suspect bonds because investors could buy default insurance?…

What does all this mean for the sanctity of contracts? After all, bonds are contracts.

Global markets are going to have to figure out the answers to these questions and what it will mean for future markets.

Today, it is completely muddled.

The best we can hope for is that there’s time to figure it all out before sceptical investors pack it in and sell what they have no control over and have no faith in anymore.

Unfortunately, the Greek default tragedy is only the first act.

Regards,

Shah Gilani
Contributing Editor, Money Morning (USA)

Publisher’s Note: This article originally appeared in Money Morning USA.

This article originally appeared in Money Morning USA.

From the Archives…

The Stock Market Financial Winter is Coming
2012-03-02 – Dan Denning

Why You’ll Want to Watch This ‘Bad’ Retail Stock Very Closely
2012-03-01 – Kris Sayce

Higher Oil Prices – Government Guaranteed
2012-02-29 – Dr. Alex Cowie

Asymmetric and Economic Warfare with Iran
2012-02-28 – Dan Denning

Why the Greek Debt Crisis Has Nothing to Do With the Euro
2012-02-27 – Nick Hubble

A Greek Default, the CDS Market and the End of the World

This tenth trading week of 2012 comes to a close with investors keeping a close eye on oil prices and unfolding events in Greece. Hi.

The past week in monetary policy and central banking saw just one central bank change interest rates, with Brazil cutting rates 75 basis points to 9.75%.  Meanwhile those that held interest rates unchanged were: Australia 4.25%, Kenya 18.00%, Poland 4.50%, New Zealand 2.50%, EU 1.00%, UK 0.50%, Korea 3.25%, Serbia 9.50%, Peru 4.25%, Canada 1.00%, Malaysia 3.00%, and Indonesia 5.75%.  The Reserve Bank of India also made headlines, cutting its Cash Reserve Ratio by 75 basis points to 4.75%.

Looking at the central bank calendar, the main event next week is the US Federal Reserve’s FOMC (Federal Open Market Committee), Wall Street will be watching the release closely for any signs of further Quantitative Easing e.g. “QE3” or even sterilized quantitative easing. The Bank of Japan meeting and Swiss National Bank meetings will also be worth watching.

By MoneyMorning.com.au

In 1998, upmarket US department store chain, Nordstrom [NYSE: JWN], launched its online shop. It was one of the first big department stores to move from catalogue shopping (a large American trend in the 1990s) to internet sales.

And now, a decade later, this transition has paid off. It has created a shopper-friendly website, helping online sales top $1 billion dollars last year. About 10% of Nordstrom’s total revenue. The stock price hasn’t done too bad either.

Nordstrom [NYSE:JWN] stock up 267.78% since the web store launch

Click here to enlarge

Gerry Harvey (owner of the Harvey Norman retail chain) argued back in March 2011 that goods bought online from overseas merchants don’t have GST on top of the price… This makes them cheaper for Aussies to buy, which, Harvey says, is stealing sales from Aussie-based retailers.

But perhaps Aussie retailers don’t have that to worry about after all…

The Australian Communication and Media Authority’s (ACMA) ecommerce report on internet shopping habits for Australians had some surprising results.

According to the ACMA’s latest ecommerce report…

• 59% of Australians shop online
• Online shopping is up 53% from two years ago
• 70% of Aussies in remote locations buy stuff on the web
• And, surprisingly, 53% of Aussies like to buy from Aussie retailers

The evidence from the ACMA report clearly suggests Aussies want to buy from domestic companies. But big Australian retailers, like Myer, David Jones and Harvey Norman have been slow to embrace this.

Probably because no one wanted to make the first move into the market after the dot-com crash of 2000…

No Aussie business wanted to be the first to invest heavily in another ‘dot-bomb’ enterprise.

Maybe it was fear. Or retailers were too late to capitalise on a growing trend. But by letting the chance slip past, retailers such as Harvey Norman, Myer and David Jones have seen their stock prices tank.

But that may be about to change…

Since Nordstrom announced its $1 billion sales success using the web, David Jones [ASX: DJS] has decided it wants to copy Nordstrom’s model. ‘They’ve been operating an online business for just over a decade and they’re doing about 10 per cent of sales and about 20 per cent of EBIT (earnings before interest and tax) which has come from online,’ said CEO of David Jones, Paul Zahra, on Nordstrom’s online turnover
The thing is, DJs has dabbled in online retail before.

It set up an online shop in 2000. But after the dot-com crash, DJ’s management shut down the shop front. That seems a waste, considering the company spent $28 million to set up the site.

But the ‘relaunch’ of the David Jones online store (in November 2010) hasn’t done much to boost investor sentiment. Since the web shop started up, the David Jones share price is down 44.46%.

DJs may want to copy Nordstrom’s $1 billion turnover, but reaching 10% internet sales might be harder than it thinks. For the 2011 financial year, David Jones turned over $2.017 billion. Internet sales for the company accounted for just 0.2% of revenue. Barely $3 million. In order to reach 10%, it’s going to need to increase its online sales 5,000%.

DJs isn’t alone in the below expectations internet revenue department either.

Australia’s other major department store chain, Myer [ASX: MYR], launched its limited online store in 2007 (selling mostly perfumes and gift cards). And the full shopping website came online in March last year. In 2011, internet sales accounted for $5 million of Myer’s sales… on par with David Jones at a small 0.18% of revenue. And the share price has tanked 35.73% in that time.

And what about Gerry Harvey? He had high hopes of Harvey Norman [ASX: HVN] capturing 5% of revenue through online sales… and less than two months since its launch, internet sales make up 0.5% of sales.

Of course, it’s still early days. And given the time to grow and develop, Gerry could one day make 5% of all his sales through the internet. When that will be, who knows?

The fact is, the opportunities for online sales were there a decade ago. Yet the major Aussie retailers just weren’t interested

Sure, growth in retail is small, coming in at 0.1% for the December quarter last year. But would these companies’ revenues and stock prices have suffered as much if they had developed an online shopping outlet sooner?

As you’ve probably seen in the past, taking chances can pay off. And it certainly did for this one small Aussie company who made the move online and returned higher revenues and a much higher stock price to investors.

Oroton Group [ASX: ORL] isn’t an everyday company. It specialises in luxury items. Handbags, wallets, belts, small luggage bags, heck even a key ring from the company will set you back a pretty green $100 note. The average handbag from Oroton costs about $500.

In 2006, when Oroton Group Ltd’s share price was scraping around the bottom, the company took a gamble. It launched a website to sell its goods online. Since then, its share price has moved 346.93% higher.

And despite offering leather goods that cost more than a set of tires for a small car, it was able to report a 12% increase in revenue for 2011.

Sally MacDonald, the chief executive for the company, confirmed its commitment to its online presence rather than physical stores.

‘Online is giving access to a consumer pool that their store network previously did not allow for, which is bringing very strong sales through their online channel.’

In fact, the company plans to close less profitable stores when leases expire and invest that money back into web sales.

In 2010, the Oroton online store became one of the company’s ‘top 5′ most profitable stores. Reducing business costs along the way.

And even though the company has distribution rights to another luxury brand, Ralph Lauren in Australia and New Zealand, the Oroton online store accounted for more than 6% of total brand sales last year.

Not only has there been significant capital growth. Investors have seen the dividend grow 10 times – from 5 cents to 50 cents – since the company introduced web sales.

The market presented an opportunity and the Oroton Group took the risk.

Let’s say, that Oroton ‘read’ the market right. And Myer, David Jones and Harvey Norman got it wrong. Judging by the way the market is pricing them right now, they’ve paid the price.

Does that mean you should snap up these beaten-down retail stocks now, in the hope their new web presence will turn sales and sentiment around? After all, now they know what went wrong, they’ll fix it and before you know it… they’ll report triple-digit gains?

Not likely.

They’re behind the times. The internet is old. Mobile technology is growing. These companies aren’t leading the pack. They’re chasing the crowd.

If you’re looking to bag yourself an explosive triple-digit winner, you should look at companies willing to try something new. Something innovative. Not another ‘me-too’ company chasing after the game changers.

Like Oroton, those companies are out there. But you have to find them. And investing in them means you take on the risk that they’ll fail – and if they do, you’ll lose your money or get stuck with a worthless stock.

But, they could turn out to be onto something… something the consumer wants.

And if the company calls it right, buckle in and enjoy the triple-digit ride.

Shae Smith
Editor, Money Weekend

The Most Important Story This Week…

The worst enemy of every investor is usually themself. Because investors almost always allow their emotions to run riot in the very moments that call for calculation and logic. The fact that every investor is aware of this phenomenon doesn’t alter the crowd response. People sell in bear markets and buy in bull markets. But to “buy low and sell high”, you need to do the opposite – accumulate beaten down shares in the bear market and sell in the bull.

When investor sentiment turns to fear, risky small cap stocks are crushed. For certain companies, prices drop far below fair value. These are the very winners that will rise the highest in the next bull market. But you need to buy them when you natural reaction is to want to play it safe on the sidelines. As Kris Sayce writes in Why I Couldn’t Care Less About The Next Bailout When it Comes to Buying Shares, with an appropriate risk management strategy, the rewards for courage can be staggering gains.

Other Highlights This Week…

Dan Denning on Why Energy Resources Are The Only Reason to be Invested in This Market: “If you’re going to be in the market at all right now, you might as well own companies that give you the chance to make five or 10 times your money in the next five years. Unconventional energy stocks fit that description. In the bigger picture, you want an investment portfolio you can sleep with at night.”

Matthew Partridge on Even China Admits a Hard Landing is Getting More Likely: “On the one side, you’ve got those who think the Asian giant is going to keep growing, growing… and growing. Others point out that China is not immune from the rest of the world’s woes – and that it has its own batch of problems to deal with on top. We’re in the bearish camp.”

David Stevenson on A Warning From Warren Buffett’s Top Economic Indicator: “That’s why it’s worth keeping an eye on what Buffett is doing – and on what he’s watching. So today we want to take a look at Buffett’s favourite economic indicator. It’s the one that tells him all he needs to know about the US economy. And it’s not looking good…”

Greg Canavan on Using Aussie Dollar Gold to Hedge Against Deflationary Turmoil “So don’t be seduced by the price action. Be wary of the crowd. Stay away from the running, blundering herd. And most of all, be patient. It won’t be long before deflation rears its head again. At which time steel yourself to wade into the market and buy some very undervalued companies.”

Dr. Alex Cowie on why This Could Be A Very Profitable Couple of Months for Small-Cap Mining Stocks: “You just have to look around the market to see that we are back into a market where risk-tolerant investors can make good money on explosive moves. It’s not just gold, silver and oil stocks. One copper explorer has jumped 109% in eight trading days… Put another way, this intersection contains more copper than the result that put Sandfire Resources on the map.”

Why it May Be Too Late for Retailing Slow-Coaches to Get Online

Ford (NYSE:F) CEO Alan Mulally reaped the benefits of breathing life back into the downtrodden car maker, receiving $58.3 million in stock as part of a plan from 2009.Ford compensated the CEO over $100 million in stock over the prior 2 years.Ford Motor Company designs, manufactures, and services cars and trucks. The Company also provides vehicle-related financing, leasing, and insurance through its subsidiary.Ford Motor is currently above its 200-day moving average (MA) of $11.80 and should find resistance at its 50-day MA of $12.17. In the last five trading sessions, the 50-day MA has climbed 1.04% while the 200-day MA has slid 0.34%.

Indonesia’s central bank, Bank Indonesia, held the BI rate unchanged at 5.75%.  The Bank said: “To control short-term temporary inflation pressure, the policy will be focused on strengthening monetary operation and managing short term excess liquidity. Besides strengthening policy coordination with the government at national level as well as at regional level through TPI and TPID forums. Although there is a tendency of inflation to go beyond the target due to temporary impact of government policy on fuel subsidy, with various policy implemented by Bank Indonesia and the coordination with the government, Bank Indonesia is confident that inflation in 2013 will return to its range of 4.5% ±1%.”

The Bank cut the rate by 25 basis points at its previous meeting, and cut the interest rate by 50 basis points at its November 2011 meeting, and also cut the key monetary policy rate (the BI Rate) by 25 basis points to 6.50% at its October meeting.  Previously the Bank raised the BI rate by 25 basis points to 6.75% in February 2011.  Indonesia reported annual inflation of 3.56% in February, compared to 3.7% in January, 4.1% in November, 4.61% in September, 4.79% in August and July, 4.61% in June, 5.98% in May, 6.16% in April, and 6.65% in March, and just below the inflation target of 5% +/-1% in 2011 (which changes to 4.5% +/-1% in 2012).  

Bank Indonesia has previously forecast GDP growth of 6.3-6.8% in 2011 and 6.4-6.9% in 2012 for the Indonesian economy, meanwhile Indonesia reported annual GDP growth of 6.5% in the June quarter last year. The Indonesian Rupiah (IDR) has weakened by about 5% against the US dollar over the past year, while the USDIDR exchange rate last traded around 9,135.  Bank Indonesia next meets on the 12th of April this year.

The Bank Negara Malaysia kept its Overnight Policy Rate (OPR) steady at 3.00%.  The Bank said: “Headline inflation is expected to moderate in 2012. Nevertheless, upside risks to inflation could emerge arising from the risk of supply disruptions and the possible financialisation in commodity markets, which would result in higher energy and commodity prices. In the MPC’s assessment, while global financial conditions have improved, downside risks to the global economy remain. The high global commodity prices continue to pose risks to inflation. The MPC will continue to carefully assess these evolving conditions and their implications on the overall outlook for growth and inflation.”

The Bank Negara Malaysia previously kept the rate unchanged at its February meeting, and last increased the OPR by 25 basis points to 3.00% in May last year, it also increased the Statutory Reserve Requirement (SRR) by 100bps to 3.00% at that meeting, and increased the SRR again in July by 100bps to 4.00%.  Malaysia saw inflation of 2.7% in January, down from 3.4% in September, 3.3% in August, 3.4% in July, 3.5% in June, 3.3% in May, 3.2% in April, and 3.0% March.  

Green Mountain (GMCR) was downgraded today by Bank of America/Merill Lynch (BAC) to neutral with a price target of $63, as new Starbucks (SBUX) offerings could create new competition. Shares are lower by over 15.6 percent.

The Bank of Canada held its target for the overnight rate at 1.00%.  The Bank noted on the Canadian economy: “Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. With the target interest rate near historic lows and the financial system functioning well, there is considerable monetary policy stimulus in Canada. The Bank will continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks, and set monetary policy consistent with achieving the 2 per cent inflation target over the medium term.”

Previously the Bank of Canada also held the target interest rate unchanged at its January meeting; it’s last move was a 25 basis point increase to 1.00% in September last year.  Canada reported annual CPI inflation of 2.5% in January, compared to 2.9% in November and October, 3.2% in September, 3.10% in August, 2.7% in July, 3.1% in June, 3.7% in May, and 3.3% in April, the same as March, according to Statistics Canada.  The Bank of Canada has an inflation target of 2 percent over the medium term.