Standard & Poor’s, Moody’s Investors Service and Fitch Ratings are masking burgeoning losses in the market for subprime mortgage bonds by failing to cut the credit ratings on about $200 billion of securities backed by home loans. The highest default rates on home loans in a decade have reduced prices of some bonds backed by mortgages to people with poor or limited credit by more than 50 cents on the dollar and forced New York-based Bear Stearns Cos. to offer $3.2 billion to bail out a money-losing hedge fund. Almost 65 percent of the bonds in indexes that track subprime mortgage debt don’t meet the ratings criteria in place when they were sold, according to data compiled by Bloomberg.
That may just be the beginning. Downgrades by S&P, Moody’s and Fitch would force hundreds of investors to sell holdings, roiling the $800 billion market for securities backed by subprime mortgages and $1 trillion of collateralized debt obligations, the fastest growing part of the financial markets.
“You’ll see massive losses from banks, insurance companies and pension managers,” said Joshua Rosner, a managing director at investment research firm Graham Fisher & Co. in New York and co-author of a study last month that said S&P, Moody’s and Fitch understate the risks of subprime mortgage bonds. “The longer they wait, the worse it’s going to be.”
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Although the Federal Reserve left the target federal funds rate unchanged at 5.25% today, it made some important adjustments to the wording of its statement on the stance of monetary policy. The changes in language suggest an improved forecast for real GDP growth and a tougher standard for assessing inflation risk.
First, instead of dwelling on the fact that real GDP growth slowed in the first quarter, The Fed said growth “appears to have been moderate during the first half” of 2007. Given that the Fed, like everyone else, knew real GDP growth was 0.7% in the first quarter, calling growth in the first half “moderate” implies the Fed is forecasting strong growth in the second quarter. Otherwise, growth would not be “moderate” in the first half, but rather “slower than trend.”
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Welcome to the 4 Hour MACD Forex Strategy. This strategy is aimed at simplicity as well as high probability trades. I have been in the equity market for almost ten years now and in the forex market for two years. I learned very early that forex trading is not for the shaky ones. One must have a tested and definite trading strategy as well as well organized discipline to follow the strategy and execute the plan as to the letter. One must be exact and precise.
Therefore I paper traded for almost two years and read everything I could lay my hands on. I bought books and courses. I attend a 5 day live web seminar. All this did not help me at all as it did not fit my style of personality and I just did not seem to connect with all this different strategies. Over two years of watching the graphs with different indicators, moving averages etc. I started to get a feeling for the movement and motion of the market especially the EurUsd around certain moving averages.
It wasn’t till late last year that I discover a setting with the MACD that gives easy to read signals on a regular basis on a 4 hour timeframe. I like the 4 hour timeframe as one are not glued to the screen full time. Read the rest of this entry »
Larry Williams published a description of a short-term trading method in 1979, a valuable one that is based on a pattern observed often in markets. The methodology was presented in his book, How I Made One Million Dollars Trading Commodities. It is still used by many traders with varying adaptations. The OOPS signal is a gap trading method that fades the direction of the opening gap. It is named thus, according to Williams, because when a broker would report to his clients that they were stopped out, he would call them and say, “Oops, we lost.” Read the rest of this entry »
1) Knowledge Deficiency – Most new FOREX traders don’t take the time to learn what drives currency rates (primarily fundamentals). When news or a statement is due out they must close out their positions and sit out the best trading opportunities. They are taught to only trade after the market calms down. So essentially they miss the whole move and then trade the random noise that follows a fundamental price move. Just think for a moment about technically trading the aftermath of a price move; there is no potential.
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At some point, if they last long enough, all traders discover that successful trading is not the inevitable result of a good trading strategy or system. If all we needed was a good system or indicator we would all be successful traders. Yet clearly we are not, far from it, there are very few traders making their living consistently from the markets.
Technical analysis is a vast and well researched subject. Many minds have poured their heart and soul into searching for the holy grail of trading: the system, strategy or indicator that will yield to them unlimited wealth and glory. Yet with all this depth of knowledge readily available, trading profits remain as elusive as ever.
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A large number of traders that I work with express the feeling that they are somehow sabotaging themselves: repeating the same mistakes day after day, giving back valuable profits in a fraction of the time it took to earn them. Their intuition is that there is some kind of pattern to what they’re doing; they’re repeating the same mistakes again and again. They realize that they’re not mentally ill and don’t have a history of out-of-control behavior, so they are understandably confused as to why they can’t stop shooting themselves in the foot.
In this article, I will summarize a few ideas central to brief therapy, a discipline which uses very active techniques to accelerate change processes that might otherwise take months or years. Brief therapies have been subjected to considerable research scrutiny, and the consensus is that they are highly effective in changing emotional and behavioral patterns over a period of weeks, especially among people who do not have chronic, diagnosable mental health problems. A summary of this research, as well as a thorough description of the how-to’s of brief therapies, is included in a text for beginning therapists that I recently co-edited. Applications of brief therapy to trading can be found on my free website and in my book The Psychology of Trading. All of those sources are linked below. This article will focus on ways that traders can serve as their own brief therapists.
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After hitting an all-time high of 13,676 on Monday June 4, 2007, the Dow Jones Industrial average fell 1.5% through Wednesday, and is down again today, along with other broad market indices.
In terms of reaction, analysts and pundits can be divided into three groups. The “Bears” argue the market was overvalued, is still overvalued, and that the US economy is in trouble unless the Fed cuts rates. In other words this is just the beginning of the bad times.
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