Stock Market Information

As the Oracle of Omaha, Warren Buffett continues to age, many investors are continually anxious as to what will happen to to his beloved company, Berkshire Hathaway, once he’s gone. Given that the stock is down 30% from it’s peak, some are even beginning to wonder if Buffett has somehow lost his touch in his old age. A recent article at Yahoo! Finance suggested as much, giving a variety of reasons as to why Buffett has made some bad bets recently and that once he’s gone the psychological impact of his loss alone will bring the value of Berkshire Hathaway down.

I think they do have some valid points, and its certainly doubtful that Mr. Buffett’s successor will be able to run the company as efficiently and brilliantly as he has. The stock will also be sure to take quite a knock once he leaves, as some long term investors bail out upon his passing. That said, the company is still Financially solid and, as James Altucher points out, still has a number of positive factors going for it in the long run.

Banks and other financials have been absolutely crushed in recent months, but Buffett has been adding to those positions even as they continue to bleed. If you notice where he’s putting the company’s money, however, many of the banks he’s choosing are those that despite the recent financial troubles will still have their dividends protected and will likely survive the subprime mess not unscathed certainly, but with less competition. In the long term, buying down here at the bottom may prove to be an intelligent move in the future, but of course only time will tell.

Making a specific recommendation for stocks is beyond the scope of this blog, but Altucher at least feels that Berkshire is still a good buy based on it’s long term prospects.

It’s easy to see why many investors are attracted to the global foreign exchange market. Given the high liquidity as well as a tremendous amount of trading activity each day (Roughly $3.2 Trillion USD in daily turnover), as well as the relatively low costs of trading, many investors and firms come to get a piece of this lucrative market. Like anything else though, you’ll need to do your homework. Proper research, vigilance and an understanding of the Forex basics will be key in your ability to succeed and profit. Listed below are some basics to get you started, and we’ll continue to elaborate on other strategies and terms as we go along.

Knowing Your Margins

Foreign exchanges usually trade on margin. What this means is that small deposits hold sway over much larger positions in the market. Trading main currencies typically requires a 1% margin deposit. In this way if you want to trade a million dollars, you’ll need $10,000 USD.

This means that the potential for profit is much greater, but so too is the risk. A change of 2% in the value of your trade could mean a 200% profit or loss on your deposit. You’ll need to be disciplined if you expect to take advantage of opportunities.

Currency: Variable and Base

When trading, you’ll use a combination of 2 currencies. So you’ll buy U.S. Dollars and sell Japanese Yen, for example, or any combination that you like. This means that you’re speculating on one side or the other, expecting one currency to strengthen in relation to the other. You’ll typically trade in the currency with the highest value. For example you’ll buy or sell a fixed amount of US dollars. When closing your position out, it will also use the same amount of USD. Your profit or loss will be denominated in the other currency you decided to use, known as a price currency.

Try to digest what you’ve read and we’ll move on to Spot and forward trading, Interest Rate Differentials etc. in part 2.

There’s no question that many investors seemed quite sure that Fannie Mae and Freddie Mac were destined to go under, and in turn that the government would have to step in and snap them up. The stock has been mercilessly punished in recent weeks, but there are some signs of hope for the stock.

One sign in particular is that the stocks have been up for 3 days straight despite continual sell-offs in the broader market. What may have seemed like an imminent bailout could actually have been overblown, according to a number of analysts:

“Merrill Lynch analyst Kenneth Bruce wrote in a research note Wednesday that speculation about an infusion of capital by the U.S. government is “somewhat premature” as Fannie and Freddie’s financial cushion against losses won’t be depleted “for several quarters.” Investors “are overly discounting a possible catastrophic event,” he wrote.”

It isn’t all rose-colored glasses of course. While Freddie and Fannie currently have enough cushion for the next couple quarters, what will happen afterward if both companies continue to bleed profusely is less certain. The risks are certainly still very high. Given that the two government-sponsored firms hold or guarantee half the U.S. mortgage debt, there would more or less have to be an intervention on behalf of the government to prevent an economic collapse. Stockholders however, would be left in the cold in this case, as shares of both firms would likely be nigh on worthless in this event. While obviously some investors smell an opportunity if the firms survive there’s a distinct possibility that shares could still go to zero at some point.