How to Invest for Retirement

Investing for retirement is more complicated than opening an IRA or maxing out your 401(k). In fact, according to a 2010 survey by Charles Schwab of people 50 and older, nearly one in three say they find investing for retirement a bigger challenge than dealing with expenses or saving money. And no wonder: Pensions have mostly given way to so-called defined contribution plans — think 401(k), 403 (b) and 457 plan — which have placed the burden of investing to provide for a steady income on your shoulders.

Park your money in the right accounts. The U.S. tax code offers several advantages for retirement investors.

  • Go to the max. The government sets annual contribution limits on retirement accounts. Do your best to max them out: 401(k) accounts and other workplace retirement plans have a $16,500 annual contribution limit ($22,000 for those 50 or older). IRAs and Roth IRAs both have $5,000 limits ($6,000 for those 50 or older).
  • Save even more. Any extra savings for retirement should go into a taxable brokerage, certificate of deposit or bank account. A common goal is to save at least 20% of your income each year, more if you’re way behind.
  • Pay attention to “asset location.” For people who have both tax-favored retirement accounts like 401(k)s and IRAs, as well as brokerage accounts, it can be a challenge to figure out in which accounts to put which investments. Two recent studies conclude that you should put a higher percentage of stocks into your taxable accounts, while taxable bonds are better off in your tax-favored retirement accounts like your IRA.
  • Additional resources: Check out the IRS Retirement Plans Community for details on these plans; figure out how much you need to save to meet your retirement goals with the SmartMoney Retirement Planner.

Focus on asset allocation. One key study shows that 91% of a portfolio’s performance is determined by allocation of assets, not individual investments or market timing.

  • Age rules. Some financial advisers recommend stock market or equity exposure equal to about 120 minus your age. If you’re 55, at least 65% of your portfolio should be in stocks, regardless of which types of accounts you are using to invest for retirement.
  • Fixed income matters. The remainder of your portfolio should in so-called fixed-income investments like bonds, bond funds or CDs, which generate annual interest income.
  • Additional resources: Test whether your asset allocation is in line with your goals with this SmartMoney Asset Allocation System. Check out sample asset allocations here.

Pick the right investments. Misguided investment choices can cost you tens of thousands of dollars over a lifetime.

  • Fees add up. Investment fees come in many forms, including expense ratios on mutual funds, commissions for stock or ETF trades, and account fees from advisers. Fees should be no more than 1% of your total portfolio.
  • Diversify. For the stock portion of your portfolio, consider index funds and mutual funds and get exposure to domestic and international markets, as well as small, medium and large cap stocks; for the fixed income portion of your portfolio consider bonds, bond funds, CDs or possibly real estate or commodities.
  • Ask for help. A financial adviser can help you pick low-cost investments to help you meet your retirement goals. Be mindful, however, of how that adviser gets paid.
  • Additional resources: Select a range of investments for optimal diversification. Find a financial advisor using

What not to do. Think rationally, not emotionally.

  • Don’t try to time the markets. A study by Morningstar found that people who try to time the markets end up with significantly lower returns than those who buy and hold.
  • Don’t tinker too much. Don’t change your investments on a whim; instead, once a year, make review your portfolio, either on your own or with an adviser. Investors who rebalanced their $100,000 portfolios once a year ended up with roughly $31,000 more over a 20-year period than those who didn’t re-balance and nearly $20,000 more than those who rebalanced monthly, according to a study by T Rowe Price.
  • Don’t assume you can make up for lost time. Many people delay maxing out their retirement account contributions, assuming they can make up for lost time later on.



Spain’s Record Yields Show Italy Bailout Risk as Crisis Spreads

Spain’s benchmark borrowing costs climbed to a record yesterday, raising the specter of sovereign bailouts for the government in Madrid and then Italy that would stretch European Union finances to their limit.

The yield on Spanish 10-year government debt rose for a third day, touching 6.83 percent, the highest since 1997, after Fitch Ratings predicted that Prime Minister Mariano Rajoy will miss budget-deficit targets he’s made the foundation of his economic policy. Italian 10-year yields rose to the highest in almost six months.

The bond rout wiped out the effects of 1.1 trillion euros ($1.4 trillion) in official funding for euro-region banks that has held yields in check since December. Spain’s 10-year yield is close to the 7 percent level that forced Greece, Ireland and Portugal to seek bailouts. Italy, the second-biggest sovereign borrower in the euro area, may need to seek a rescue within months, said James Nixon, chief European economist at Societe Generale SA (GLE) in London.

“The crisis will inevitably roll on to the next domino, and that’s Italy,” Nixon said in a telephone interview. “The southern European economies are effectively in free-fall and market appetite for southern European debt is rapidly drying up. I can’t see anything to turn that dynamic around.”

European policy makers face a series of hurdles in the coming days as bond investors spurn the 100 billion-euro rescue package for Spanish banks that the European Central Bank said yesterday would bolster financial stability. Italy is due to sell as much as 9.5 billion euros of bills and bonds at auctions today and tomorrow while auditors are due to report on the extent of Spanish banking losses from next week.

Greek Vote

Greeks will vote June 17 on whether to back Alexis Tsipras, who wants to scrap the austerity plan dictated by the EU and the International Monetary Fund, as a condition of its bailout. New Democracy leader Antonis Samaras, who supports the bailout conditions, said backing Tsipras will see Greece effectively thrown out of the euro.

Mounting tensions were illustrated in the past two days when Austrian Finance Minister Maria Fekter made a prediction she then retracted that Italy would need “help payments.”

“As I consider inappropriate the comments by the minister on the situation of another member state, I abstain from commenting on such remarks,” Italian Prime Minister Mario Monti told journalists yesterday in Rome.

Merkel’s Message

In Berlin, German Chancellor Angela Merkel and her Finnish counterpart, Jyrki Katainen, who both manage AAA rated economies, yesterday told southern European nations to keep implementing the austerity plans that have driven them into recession. They said Europe wasn’t ready for debt sharing through euro bonds.

Introducing euro bonds “is putting the cart before the horse and absolutely leads us down the wrong road,” Merkel said.

European leaders will see the risks of a euro breakup increase unless they can develop a plan for resolving the crisis, Fitch Managing Director Ed Parker said at an event in Oslo yesterday.

“Euro-zone politicians need to take further steps forward to reduce the risks there and we think that further steps will be required in the area of public finances,” Parker said. “We believe Spain will miss its budget deficit targets again this year and next by a substantial margin.”

Deficit Forecasts

The European Commission forecasts that Spain will post deficits of 6.4 percent of gross domestic product this year and 6.3 percent in 2013 even after unveiling 45 billion euros of spending cuts and tax increases. Rajoy’s aim is a deficit of 5.3 percent of GDP this year.

Investors are pricing in an increasing risk of a sovereign bailout for Spain as German officials signal the ECB is unlikely to take further measures to support lending after offering about 1 trillion euros of three-year loans since December.

“We have done our part,” Bundesbank board member Andreas Dombret said in a June 11 interview in London. “Now it’s up to the political leaders to deliver on the fiscal and structural policy side.”

Rajoy stuck to his deficit target again when he discussed the bank bailout on June 10, saying that a balanced budget is the first plank of his plan to restart the Spanish economy, which slipped into its second recession in three years in the fourth quarter of 2011. Rajoy’s cuts are so deep, equivalent to about 4 percent of last year’s GDP, they are undermining growth and reducing tax revenue, according to economists at Goldman Sachs Group Inc. (GS) (GS)

“The deficit target is close to impossible at this point,” Pavan Wadhwa, global head of interest-rate strategy at JPMorgan Chase & Co. (JPM) (JPM), said in a telephone interview yesterday. “It’s going to be very hard for Spain to hold on.”

To contact the reporters on this story: Ben Sills in Madrid at;

To contact the editor responsible for this story: James Hertling at

Original Article News From Bloomberg


US STOCKS-Spain bailout rally brief as Wall St slides

Mon Jun 11, 2012 4:37pm EDT

* Investors concerned about terms of aid deal for Spain
    * Worries persist over Greek elections
    * Wall St coming off S&P's best week of 2012
    * Indexes off: Dow 1.1 pct, S&P 1.3 pct, Nasdaq 1.7 pct

    By Edward Krudy
    NEW YORK, June 11 (Reuters) - U.S. stocks fell on Monday as
Europe's aid package for Spanish banks did little to alleviate
investor concerns about the euro zone's finances and a slowdown
in the wider global economy.
    The equity market bounced in early trading, but the rally
was quickly snuffed out by sellers and a sharp decline
accelerated into the market's close.
    Spanish bond yields rose as a bailout of up to $125 billion
for the country's struggling banks failed to quell concerns that
Madrid may be locked out of funding markets and forced to seek
external help.
    "They're borrowing more money, not doing anything about
growth," Paul Zemsky, head of asset allocation at ING Investment
Management in New York, said. "Today we're not worried about
Spain's banking system falling off a cliff, but other than that,
nothing has changed."
    The New York-traded stock of Spanish lender Banco Santander
fell 3.1 percent to $5.92. Weakness in Europe's financial sector
was mirrored in the United States where the S&P financial index
 fell 1.9 percent and was the weakest performing sector. 

    Shares of Morgan Stanley, which has recently been a
barometer of concerns about Europe due to perceptions of the
investment bank's exposure to the region, fell 2.5 percent to
    Spain's 10-year bond yields ended higher at
6.5 percent as an early rally in prices quickly evaporated. Some
investors were concerned the new debt would put existing
bondholders lower in the capital structure, which increases the
risk for those holders.
    "This is a realization that Spain, while providing money for
its banks, is going to add to its debt-to-GDP ratio, and it's
going to potentially subordinate some of the current Spanish
sovereign debt, which doesn't make those bondholders happy,"
said Zemsky.
    The Dow Jones industrial average dropped 142.97
points, or 1.14 percent, to 12,411.23. The Standard & Poor's 500
Index fell 16.73 points, or 1.26 percent, to 1,308.93.
The Nasdaq Composite Index lost 48.69 points, or 1.70
percent, to 2,809.73.
    Investors fear a crisis in Spain would compound the currency
bloc's troubles as June 17 elections loom in Greece, which many
think could lead to Greece's exit from the euro zone.
    The worries come at a time when economies the world over are
showing signs of slowing. China's inflation, industrial output
and retail sales all flagged in May. It was the second straight
month of sluggish growth.
    Trading volume was light on the NYSE, Nasdaq and AMEX with 6
billion shares traded, about 14 percent below its 10-day moving
average. About four shares fell for every one that rose on NYSE.
    U.S. companies are finding it more difficult to increase
revenue now than at just about any time since the financial
crisis. Firms that make up the S&P 500 are expected to boost
sales by just 2.2 percent in the current quarter, according to
Thomson Reuters data.
     AK Steel Holding Corp tumbled 14 percent to $4.99
after two brokerages cut their ratings on the small cap,
including a "sell" rating from Goldman Sachs, which cited a
highly leveraged balance sheet and weak steel prices.
    U.S. steelmakers are struggling with weak demand, rising
costs and narrowing margins. Production capacity has yet to
fully recover from the most recent recession.
    Shares in US Steel Corp fell 6.5 percent to $17.89.
    Apple Inc took the wraps off its own mobile mapping
service and made its enhanced Siri voice-search available for
iPads as it rolled out souped-up software and hardware on Monday
to help it wage war on Google Inc.
    But Apple's shares fell 1.6 percent to $571.17 after the
announcement at the company's developers conference on Monday.
Google's shares fell 2.1 percent to $568.50.
    Goldman Sachs is close to striking a deal over the
sale of its hedge fund administration business with State Street
Corp, the Financial Times reported. The move would
create the largest administration services provider to hedge
funds worldwide. Goldman's stock fell 1.8 percent to $92.80.
State Street added 1.5 percent to $42.79.

Original Article



Spain could ask for bank bailout this weekend

MADRID (AP) — Spain could ask for a rescue of its struggling banks this weekend when European finance ministers hold an emergency conference call Saturday to discuss the country’s financial problems, a move that would make it the fourth member of the 17-nation eurozone to seek outside help since the continent’s financial crisis erupted two years ago.

The ministers will discuss a potential rescue package for Spain as pressure mounted on the country to prop up the banks hurt by toxic assets after a property boom went bust.

A report from the International Monetary Fund released estimated Spanish banks need a recapitalization injection of at least €40 billion ($50 billion) following a stress test it performed on the country’s financial sector. That report came out early Saturday, three days ahead of schedule, underscoring the urgency of the situation.

Spain as of early Saturday afternoon had not asked for help, “but we want to prepare if the call comes,” said Guy Schuller, a spokesman for Luxembourg Prime Minister Jean-Claude Juncker, who chairs the meetings of eurozone finance ministers. Spanish officials neither confirmed nor denied a request for a bailout was imminent

A phone call among senior officials Saturday morning meant to prepare the finance ministers’ call ended without a formal request from Spain, an EU official said. He spoke on condition of anonymity because he was not authorized to release the information.

Spain’s Development Minister, Ana Pastor, did not tell reporters Saturday whether the country would ask for a bailout but said: “What we’re working on at the moment is the recapitalization of the financial entities that need it, nothing else.”

Spain initially tried to get European leaders to directly fund aid to the banks so the government wouldn’t have to ask for it and suffer the stigma of being lumped together with Greece, Ireland and Portugal as nations forced to ask for outside help.

But Germany, Europe’s paymaster, dashed that idea. So Spain is trying for a “light” form of a bailout only for its banks under a measure approved by Europe last July. That allows the European Union to lend money for the purpose of recapitalizing banks in countries not already receiving bailouts.

The rules say the money has to be funneled through the government. But conditions attached to the bailout would not have to be as over-arching as those attached to bailouts of government finances.

“The Spanish government has to do what is necessary to support, strengthen and stabilize our financial system,” said Maria Dolores Cospedal, leader of Prime Minister Mariano Rajoy’s Popular Party.

News of the call came just one day after Spanish Deputy Prime Minister Soraya Saenz de Santamaria said the government would wait for the results of three reports, including the IMF one and two from independent auditors due no later than June 21, before acting. But pressure was mounting on Spain to take action.

In an interview published Saturday, the head of Germany’s central bank, Jens Weidmann, called on Spain to tap Europe’s bailout fund, the EFSF, to prop up its banks.

“If Spain is overwhelmed by the financing need, it should use the instruments created for that case,” he was quoted as telling Germany’s Welt am Sonntag paper. “The motto cannot be to avoid using the rescue fund at all costs.”

Juncker has also said the situation is coming to a head.

“The solution will have to be found quickly,” he told German public radio station Deutschlandradio.

Spain was hit Thursday with a downgrade of its credit rating to just two notches above junk by credit rating agency Fitch, which estimated Spanish banks may need as much as €100 billion ($124.7 billion). Then on Friday, Moody’s Investor Services warned it could downgrade Spain and other countries in the eurozone.

Moody’s said Spain’s banking problem is largely confined to that country and not likely to spill over to other eurozone nations, with the exception of Italy — where the European Central Bank has already stepped in to buy government bonds as a way to help lower the country’s borrowing costs.

Spain has been criticized for being too slow to set out a roadmap to resolve its problem. European business leaders and analysts have stressed that Spain must find a solution quickly so that it is not caught up in any market turmoil sparked by the Greek elections on June 17. There are concerns that anti-bailout left-wing party Syriza could become the largest party in the Greek parliament, putting the country’s membership in the eurozone at risk.

But others said it’s more important for Spain to correctly assess how to shore up its banking system than it is to hurry into a bailout ahead of the Greek elections. The audits that Spain’s government is waiting for are crucial to determining precisely how much capital the nation’s troubled banks need, said Mark Miller, an analyst with Capital Economics in London.

“Any notion of rushing, that would be very unwise, in fact I think it could make things much worse,” he said. “I think it’s important to get it right rather than simply say that there is a rather appealing idea of a one-week window of opportunity, relative to getting a solution ahead of Greek elections.”

If Spain doesn’t get a request for outside help right the first time, “then you are in second bailout territory,” Miller said.

Working in Spain’s favor is the fact that its public debt is actually quite low, at 68.5 percent of its gross domestic product at the end of 2011.

Its debt is predicted to hit 78 percent by the end of the year, but even that figure would be below the debt-to-GDP ratios of Europe’s strongest economy, Germany.

But Spain’s economy is in terrible condition. It is in its second recession in three years, unemployment is nearly 25 percent and there is little hope for improvement this year. Rajoy’s government has imposed a wave of austerity measures since he took office in December that have raised taxes, made it cheaper to hire and fire workers and cut government funding for education and health care.

Investor doubts about a country’s ability to maintain its debts can lead to higher borrowing costs, which in turn undermine the government’s ability to finance itself. Greece, Ireland and Portugal have all fallen victim to such market doubts and were forced to take bailouts.

A Spanish bank bailout could also turn market focus to Italy, which has the second-highest debt load in the eurozone after Greece at some 120 percent of gross domestic product. Italy’s budget is in better shape but its growth prospects have sagged and the willingness of Italian politicians to tackle the country’s long-standing problems with choking bureaucracy, taxes and regulation remains in doubt.


Associated Press writers Juergen Baetz in Berlin, Sarah DiLorenzo in Paris and Slobodan Lekic in Brussels contributed to this report.

Original Article

Yahoo Finance


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Make Fast Money Trading Binary Options

The Fastest Way to Make Money Online is Trading Binary Options


Forex trading is one of the ways to make money fast and easy.  Second choice is to trade binary options, because there is no faster way to make money than the hourly turnover in the binary option market.

A binary option is an option that pays a fixed amount or nothing, whether a certain condition is fulfilled when the option expired. These types of options are also referred to as all-or-nothing options, since it is a type of option where the payoff is all or nothing. The return is therefore fixed and it comes to no surprise that such options are also known as: FRO’s-Fixed Return Options,Digital Options is another common term. More simply put all a trader needs to speculate about the direction of an instrument and decide whether the underlying asset price is going up or going down without taking other factors under consideration.
Binaries considered to be one of the simplest trading products out there, as the constructed investment product the trader know at the time of the trader what is the maximum profit and loss. Binary options trading is the best online trading option available to earn good money in a short period of time.

A binary option trading is the best online trading option available to earn good profit in short time. It is a type of online trading in which a buyer agrees to enter in a contract to buy or sell an underlying asset in the future. The buyer does not store the asset; he does not purchase the asset in real. The buyer places an order to purchase or sell an asset at a fixed price at a pre-determined time and the order is executed as soon as the price of asset becomes equal to the fixed price. The fixed price quoted by the buyer is called the strike price. The contract will expire if the pre determined time is over and will not be executed after the contract has expired.

In Binary options trading, you can earn profit only if the price of asset changes according to your predictions before the contract expires. In these types of trading options, there are two possible outcomes. Either the order is executed before the contract expires and the owner or the buyer receives the desired payout or the contract expires before and the buyer does not receive profit but loose his money. So the risk of loosing money is also associated in the binary options trading online. The traders can only benefit in these trading transactions if their predictions are more accurate. Not studying  the previous trend can be harmful so strike price of any asset should be decided only after detailed study of past trend.

The important aspects to this type of trade are the underlying asset, expiry time; strike price and the direction in which the price of asset will move. The underlying asset in the binary trading option is the item that is used for trading. Traders order these underlying assets to gain profit. The underlying assets could be currencies, commodities, stocks or indices. The expiry time is the time after which a contract expires. Expiry time can vary from hours to months. The buyer is responsible to decide the expiry time. The strike price is the price at which the underlying asset is purchased “Strike price is controlled by the buyer”. The price of an asset movement is the last important aspect of binary trading options but the price movement of assets cannot be controlled by the buyer.


The binary options trading have two options, the call option and the put option.

Call option, the direction of the asset moves up

Put option, the direction of the asset goes down.

The buyer places the Call Option if he expects the price of the asset to rise above the strike price before the expiry time.

The buyer places the Put Option if he expects the price of the asset to decrease and not rise by the end of the expiry time.

The price movement cannot be controlled by the buyer; you have to have accurate predictions to earn high profit.

In the Binary Trading Options, the buyer is always aware about the possible profit or loss from the trade because strike price is fully controlled by the buyer.

The traders can do binary options trading using a Binary Options Trading Platform.

Traders should use 100% web based platform and don’t require software to be downloaded to ensure a smoother buying experience because there are no software updates are needed and purchasing can be made from any computer. The online trading platform should be easy to understand for beginners. The trading platform should support maximum assets. Accuracy of settlements.

The trading platform should have used the most advanced technologies to facilitate secure transactions and provide satisfaction to their customers. To find out about a reliable binary options trading platform, you have to do your home work buy searching and reading reviews or comments posted by other users and you should join one with no dispute or at least should have a minimum dispute.

Common Terms Used In Binary Option Investing

Strike Price: This is the price of the underlying asset when the initial investment is made. This determines whether you are “in the money” or “out of the money”.


Call Options:

A call option, often labeled a “call”, is a financial contract between two parties, it  is the binary option that will expire “in the money” when the underlying asset is above the strike price at expiration. It will expire “out of the money” when the underlying asset is below the strike price at expiration.



Put Options:

put option is a contract between two parties to exchange an asset.


Underlying Asset:

This is the stock, commodity, currency pair, or index on which you are basing your option. This is the basis for the entire binary option.



This is the point at which the option will either pay, or expire in a loss. This is when the underlying asset must be higher to end in the money on a call option, or lower to end in the money on a put option.

By: Adma Dababneh



Between Facebook and JPMorgan, Wall St. woes mount

The Associated Press

NEW YORK -Almost four years after the financial crisis, Wall Street still can’t get it right.

Investor anger mounted Wednesday over the initial public offering of Facebook stock last week, which was fumbled by the banks that managed the deal and complicated by technical problems at the Nasdaq stock exchange.

Shareholders filed at least two lawsuits against Facebook and Morgan Stanley, the bank that shepherded the IPO, over reports that it withheld negative analyst reports about Facebook from some clients before the company went public.

It was the second stumble this month by a major Wall Street firm. JPMorgan Chase, usually revered for taming risk, has yet to contain a growing $2 billion loss in one of its trading units.

The missteps are further eroding the confidence of Main Street, or what was left of it after the financial meltdown of 2008, and reinforcing the sense that the game is rigged.

Judson Gee, a financial adviser in Charlotte, N.C., placed a call Wednesday morning to a client who had plowed $50,000 into Facebook stock on Friday, the day of the IPO.

Gee said he called to tell the client, a restaurateur, about reports that Morgan Stanley had told only select customers about an analyst’s reduction of revenue estimates for Facebook just before the IPO.

“I could see his jaw dropping on the other side,” Gee said. “A lot of expletives came out.” He said his client had asked: “How can they give that information to the big boys and not give it to the public?”

In the final planning of the IPO, Facebook, working with Morgan Stanley, raised the total number of shares being offered for sale by 25 percent, to 421 million. They expected extraordinary demand for the stock by investors.

That appears to have been a miscalculation. Facebook stock jumped from $38 to as high as $45 in the opening minutes, but quickly sank toward $38 again. It dropped to about $34 on Monday and $31 on Tuesday. The stock recovered somewhat on Wednesday and climbed $1.

Dayna Steele, a motivational speaker in Houston, said she planned to wait and buy the stock “when everybody finishes suing each other.”

The shareholder lawsuit, filed in federal court in Manhattan, accuses Morgan Stanley of withholding the negative analyst report from some clients while it prepared to take the stock public.

One of the investors suing, Dennis Palkon, a professor at Florida Atlantic University, said that IPOs are tricky, but “this one had a lot of glamour, had a lot of interest. It has a lot of users. I thought it’d be a pretty good investment.”

He bought 1,800 shares of Facebook at $38 through his ETrade account, meaning that after Tuesday, he was down more than $12,000 on paper.

“I think there were problems all over the place,” he said. “It was totally poor planning to raise the price as high as they did and then to add all those extra shares.”

Morgan Stanley declined comment on the suit, but it said on Tuesday that it had complied with regulations in how it handled analyst reports before the IPO. Facebook called the lawsuit “without merit.”

The Senate Banking Committee, the Securities and Exchange Commission and other regulators also plan to look into the IPO.

Regulators will probably want to comb over Facebook’s prospectus, the information it provided to potential investors, to make sure the company’s disclosures were accurate and complete.

State securities laws and industry rules, mostly broader in scope than SEC rules, give state and industry regulators a wider berth to sanction investment firms that they accuse of failing to act in investors’ best interest.

The first trading in Facebook stock, originally set for 11 a.m. Friday, was delayed half an hour by technical glitches at the Nasdaq Stock Market, and brokerages are still sorting through problems with orders.

A person familiar with the matter, speaking on condition of anonymity because the person was not authorized to speak publicly, told The Associated Press that Facebook was in talks with the New York Stock Exchange to move its stock listing there from Nasdaq.

The bungled IPO came little more than a week after JPMorgan CEO Jamie Dimon disclosed the $2 billion loss.

He has said the bank was hedging against financial risk, but regulators have questioned whether it was a gamble for profit instead, and have seized on the loss to make the case that Wall Street has not cleaned up its act.

Lisa Lindsley, director of capital strategies for the American Federation of State, County and Municipal Employees, which has 1.6 million members and handles pension assets of $850 million, said the union was “very concerned about the lack of internal controls at all three firms,” referring to Facebook, JPMorgan and Morgan Stanley.

Elizabeth Warren, architect of the Consumer Financial Protection Bureau and a Democratic candidate for Senate from Massachusetts, said Wall Street has lost an image that once said, “We are solid and we will be here forever.”

“Banking should be boring,” she said, “because boring creates confidence.”

As if small investors needed a reason to feel queasier, the stock market is having its worst month of the year, mostly because of concerns about a debt crisis in Europe and whether Greece will exit the euro currency group.

The Dow Jones industrial average gained 9 percent during the first four months of the year, but that has withered to 2 percent.

The Standard & Poor’s 500 index more than doubled in the three years after its financial crisis low, in March 2009, and is still up 93 percent. But small investors, mistrustful of the market, are still pulling money out of stocks.

Investors withdrew $85 billion from U.S. stock mutual funds last year and have pulled more money out than they put in for five years in a row — significant given how many Americans automatically put money in through 401(k) accounts.

They had already withdrawn $6 billion through April this year, and the decline in May figures to make the withdrawals accelerate.

To be sure, Main Street has a love-hate relationship with Wall Street. For the 1980s and 1990s, and for much of the 2000s, it tilted toward love, and bankers were hailed as masters of the universe.

When booms turn to bust, as after the crash of 1987, the bursting of the dot-com bubble in the early 2000s and crisis of 2008, the relationship quickly turns sour.

But for the institutions of Wall Street, these recent missteps could hardly come at a worse time. The presidential election is less than six months away, and the economy and the role of large financial institutions figure to play large roles.

When Congress passed an overhaul of financial laws in 2010, it was designed to prevent a repeat of the 2008 crisis. The details are still being written, and the financial services industry is fighting hard against many of those changes.

Two weeks ago, Treasury Secretary Timothy Geithner said the JPMorgan loss “helps make the case” for tougher rules for banks.

William Black, a former bank regulator who now teaches law and economics at the University of Missouri at Kansas City, said he believed the banks would still be able to water down the regulatory changes, even after these embarrassments.

The banks, he said, “are bringing a gun to a knife fight.”

But the issues are not clear-cut. Michael Barr, a law professor at the University of Michigan who was an architect of the overhaul, said he was concerned that the Facebook episode might make it harder for other companies to raise money by taking themselves public.

“The more the system feels like it’s rigged, the harder it is going to be for companies to raise money and for investors to freely participate,” he said.

Ernie Patrikis, a former top official at the Federal Reserve’s New York branch who is now partner in the banking regulatory practice at the law firm White & Case, said banks deserve part of the blame for spooking investors in 2008.

But he said regulators have been more rigorous since, some financial institutions have closed, and “a lot of CEOs went missing.”

“I don’t want to see a day of reckoning” for the banks, he said. “The banks are our lifeline.”—

AP Business Writer Marcy Gordon in Washington, AP Technology Writer Barbara Ortutay in New York and AP Radio correspondent Julie Walker in New York contributed to this report.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
2012-05-23 17:50:49


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Make Money Selling Money? Why Foreign Currency May Be a Smart Investment


Diversify, diversify, diversify: It’s among the most common — even cliched — advice from financial experts to investors.

But what if you want to go further with that than the usual methods of playing different sectors in the stock market, or putting a share of your portfolio into conservative bonds or riskier international markets?

You might consider trading foreign currencies, which just a couple of decades ago was an option mostly restricted to big money investors. Now, it’s widely available to the general public, and generating increasing interest.

And in today’s age of social networking, foreign exchange has gone social too: In addition to seeing that a friend “liked” a photo or a business on Facebook, you can now trade on sites that let you see when that friend bought Swiss francs or sold yen.

Foreign currency trading, which became possible for the average investor about 15 years ago, has added that social aspect — and been made all the easier — thanks to online broker OANDA and its retail platform, fxUnity, which has mobile and gamification features. The idea behind their sites is to remove as many barriers to entry as possible, so that anyone — not just savvy investors, can use them.

“It was designed for your mother,” said OANDA CEO Michael Stumm. “The client has to have an opinion on currencies based on economic news. If you think the yen is going to go up, you can make a wager on it.”

Quite simply, OANDA offers real time currency exchange rates and allows participants to act upon that information by speculating and hedging on an interactive dashboard through fxUnity.

Advantages at Home

Beyond diversity, one perk of currency exchange trading is that when the economy at home is going south, an investor can easily benefit from the downward trajectory.

“If you’re worried about the politics in the U.S. — you’re a naysayer — you can bet against the U.S. dollar, and benefit if it does worse,” said Stumm.

If you’re frustrated with a declining Dow or bearish market indicators, you can take advantage of the doom and gloom with a more well-rounded stab at the market.

“It’s best to delve into different asset classes,” Stumm said. “Most of the general public is used to trading in equities. It’s best to diversify, and the forex market is orders of magnitude bigger and more liquid.” Indeed, it’s 30 times bigger than the Nasdaq and NYSE combined, with over $4 trillion in trades daily.

A Risk, But a Limited One

As exciting as the adrenalin rush of foreign exchange trading can be, it requires as much homework as any other investment, and even then, of course, there are no guarantees. As with any investment, the odds can turn against you. But currency trading offers a bit of protection by being a bit less flexible: You can’t buy any nation’s money on margin, so unlike equity trading, where a bad leveraged buy can leave you owing more than your initial investment, in the currency exchange market, your risk is limited.

“You can lose money, but the big advantage on our platform is you can deposit a dollar, and that’s the maximum amount you risk,” said Alex Case, a product developer at fxUnity and OANDA. “We recommend you put what you are willing to use.”

Though forex trading can help you take advantage of market changes at home, the true advantage can be more global.

Tapping Into Opportunities Abroad

It’s difficult for individual investors, whether serious or casual, to perform truly effective due diligence on companies abroad. Meanwhile, in a time of turmoil in the European sovereign bond market and our ongoing global economic issues, the risks can be magnified. Forex trading, though, offers the common investor a more general way to bet on markets abroad.

You can read about the various ways in which, say, Asia is booming, and gain enough insight to let you decide if you want to invest in Asian currencies. It’s more difficult to do the research on individual Japanese companies, for example — unless you’re fluent in Japanese. Only some of the reports or articles are going to be translated.

Also, whereas U.S. companies are scrutinized fairly closely by the SEC, the standards elsewhere around the globe are not always quite as rigorous.

“Regulation is much more lax abroad,” Stumm said. “If you think of the Olympus story and the extremely scandalized situation — you’re more apt to have that with foreign companies.”

Of course, the vicissitudes of the market are complex: The euro went up in value during the European debt crisis.

“The euro has surprised people,” Stumm said. “It was the governments that were intervening to keep the euro prices up. Pumping a lot of money into the economy, so people started buying the euro. Some people are always pessimists and optimists and it plays out on the market, and the market’s always right.”

Though it’s not a shoo-in for capital gains nor a get-rich-quick guarantee, the currency market is gaining traction — with 20% of global trades happening on OANDA.

Why Forex Is So Popular

“It’s a trend,” Case said. “If you go back 10 years or so, forex wasn’t available to retail [investors] at all. Now it’s 10% of every large market. More globalization, people are looking worldwide [rather] than just in their own countries. It’s difficult to make wise investment choices.”

And there are several advantages to trading in the forex markets. It is as easy to sell a currency short — betting on a value decline — as it is to go long — hoping for an increase. With equities, your options are limited in going short. And, whichever way your investment goes, you can close your position and sell anytime: It’s a 24-hour market. By contrast, stocks in U.S. companies get traded till 4 p.m Eastern Time, after which the markets close and the investments become illiquid.

A Social Platform

There were many impediments to entry into the foreign exchange market — even when it became available to retail investors.

“We found that a lot of traders found [foreign currencies] more complicated,” Case said. “We wanted to create a new offering for aspiring currency traders without being a detriment to experienced traders.”

That has meant adding a social networking element to the site that connects participants to a wider group of traders, who can help t make more educated decisions.

“There’s a community feed, just like on Facebook where you can see somebody likes Taco Bell.”

The difference is that when s “likes” the dirham on OANDA, the stakes are higher. “They put their money where their mouth is,” Case said.

There are also no brokerage or transactions fees; OANDA only makes money on the spread. It’s free for all, and it’s allowing more people to enter.

“The platform is democratizing the market,” Case said



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