59. How the Fed Changes Interest Rates
Produced By:
InformedTrades on 19 Feb 2008
Tags: howtotradetradingeconomy(more...)fedfederalreservedaytradeinvestingbusinessforexfuturesstockmarket
informedtrades(less)
Description: http://www.informedtrades.com/
A lesson (more...) on open market operations and how the federal reserve increases and decreases the money supply in order to move interest rates and what this means for traders of the stock, futures, and foreign exchange markets.
In our last lesson we looked at the structure of the Federal Reserve and the components of the FOMC, the portion responsible for implementing Monetary Policy. Now that we have an understanding of this, we can look further into exactly how monetary policy is facilitated and what happens to markets under differing scenarios.
Monetary Policy very simply is anything which relates to action by the Federal Reserve to influence the amount of money and credit available in the economy. To understand exactly what this means, one first must understand the concept of fiat monetary systems.
Fiat Monetary Systems: The United States, like most major economies, has what is known as a fiat monetary system. A Fiat Monetary system very simply is any system which uses a monetary unit (in this case the US Dollar) which is not convertible to some commodity, in general a precious metal such as gold.
Fiat money, is money that is backed by the credit of some entity, normally a government, and the value for which is derived from its relative scarcity and the faith placed in it by the population which uses it.
This is important to us as traders because the fact that the Dollar is not convertible to a commodity such as gold gives the Federal Reserve the ability to increase or decrease the money supply as it sees fit, or in other words to enact Monetary Policy.
With this in mind the 3 tools available to the Fed for enacting monetary policy are:
• Open Market Operations
• The Discount Rate
• Reserve Requirements
The most common tool that the Fed uses, and therefore the one that we will cover, is Open Market Operations. Once we have an understanding of this and how increases or decreases in the supply of money affect demand and prices, the other two less commonly used tools will be more easily understood.
Through something which is known as the Open Market Committee, the Fed increases and decreases the supply of money by buying and selling US Government securities.
When The Fed wishes to reduce interest rates they will increase the supply of money by buying government securities using money that was not available in circulation before they made their purchase. As with anything, when additional supply is added and everything else remains constant, price normally falls. In this case the price that we are referring to is the cost of borrowing money or interest rates.
Conversely, when the fed wishes to increase interest rates they will instruct the open market committee to sell government securities thereby taking the money they earn on the proceeds of those sales out of circulation and reducing the money supply. (less)
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Duration: 04:06
Citibank Thailand Ready Credit
Produced By:
citibankthai on 21 May 2009
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Easier Credit Freezes
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moneytalks on 02 Nov 2007
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64. Trading the News - Non Farm Payrolls (NFP's)
Produced By:
InformedTrades on 28 Feb 2008
Tags: howtotradeNFPNon(more...)FarmPayrollseconomyfundamentalanalysisinvestingforexfuturesstockmarket
informedtrades(less)
Description: http://www.informedtrades.com/
A (more...) lesson on Non Farm Payrolls and what traders need to watch for when trading and investing in the futures, forex, and stock markets.
Link to the BLS NFP Data Section: http://www.bls.gov/ces/#news
Link to this lesson on InformedTrades.com: http://www.informedtrades.com/15030-trading-news-non-farm-payrolls-nfps.html
As there are so many things which can be measured in an economy, there are tons of economic releases every month, with new numbers coming out on almost a daily basis. With all this data it is easy to get overwhelmed when looking at the economic calendar and trying to determine what is important to us as traders. While the importance of different economic indicators to the markets changes depending on current economic conditions, there are approximately 10 major economic indicators that have and always will be important to the market. Most of the other data that is reported throughout the month is similar to one of these 10 indictors, so once we have an understanding of the main numbers everything else will make a lot more sense.
Before getting started here it is important to understand that economic releases are designed to try and give a picture of either:
1. What has already happened in the economy based on past numbers (referred to as a lagging indicator)
2. What is anticipated going forward based on past numbers. (referred to as a leading indicator)
3. What is happening right now based on current data. (referred to as a coincident indicator)
Economic indicators are designed to try and give a picture of the growth the economy is experiencing, the level of price increases or inflation that the economy is experiencing, or both.
One of the most important and therefore market moving economic numbers after GDP is the Non Farm Payrolls (NFP), which is released at 8:30 am on the first Friday of each month. Released by the Bureau of Labor Statistics the Non Farm Payrolls Number is meant to represent the number of jobs added or lost in the economy over the last month, not including jobs relating to the Farming industry. The Farming Industry is not included because of its seasonal hiring which would distort the number around harvest times as farms add workers and then release them after the harvest is complete for example (less)
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Duration: 06:34
61. Why Markets Move Ahead of Interest Rate Announcements
Produced By:
InformedTrades on 25 Feb 2008
Tags: tradinginvestingdaytradeeconomy(more...)financeinterestratesfundamentalanalysisbusinessforexfutures
stockmarkethowto(less)
Description: http://www.informedtrades.com/
A lesson (more...) on how markets and traders anticipate interest rate changes for stock, futures and forex traders.
Link to FOMC Rate Announcement: http://www.federalreserve.gov/newsevents/press/monetary/20080130a.htm
In our last lesson we looked at how The Fed is expected to react at different points in the business cycle, and what the expected market movement will be as a result. In today's lesson we are going to look at how the Fed goes about signaling to the market changes in their thinking on the direction of monetary policy, so we can begin to understand why markets react not only to Fed interest rate announcements but just as importantly to events which change the markets anticipation of how the Fed may react.
While we have simplified the situation in order to better understand the basics of how The Fed uses monetary policy, as you can probably tell by now, forecasting economic conditions and using monetary policy to try and manage those conditions is a very difficult process. The members of the FOMC are constantly analyzing economic data from across the country to try and gauge where the economy is in the business cycle and what if any monetary policy action is needed.
As we have touched on in previous lessons, the FOMC has 8 regularly scheduled meetings throughout the year where they meet to discuss current economic conditions and expectations of future conditions. It is at these meetings that decisions on what changes if any in monetary policy need to be made. Upon completion of these meetings a press released is issued an example of which you can see at the link below if you are watching this video on InformedTrades.com or in the description section if you are watching this video on Youtube.
http://www.federalreserve.gov/newsevents/press/monetary/20080130a.htm
As we've learned in previous lessons, what the FOMC decides to do with their target for Fed Funds Rate at this meeting has wide ramifications for the economy and therefore the markets. With this in mind the results of these meetings are closely followed by market participants. It is important to understand however that the market not only looks for whether or not the FOMC takes action on the Fed Funds Rate and by how much, but also for any clues in the Fed's Statement as to what their bias may be for future rate decisions.
This is a very key point to understand because the markets are always trying to anticipate what is going to happen and therefore they move up and down depending on what people think will happen to rates going forward. Anything that comes out from this meeting or any thing else that is in line with what the market expects should have little or no effect on the market. Conversely anything that comes out which changes the markets forecasts on what if any Fed action will be, can cause drastic moves in the markets as participants react to this new information and markets adjust accordingly. (less)
credit repair
Produced By:
LoanMod on 26 Nov 2008
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Description: credit repair, Bad credit will ruin your (more...) life. There is a way out for more info go to http://www.homevalueshuntingtonbeach.com or http://www.2ndchancemortgage.com (less)
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Duration: 01:48
63. Trading the News - Economic Numbers - GDP Part 2
Produced By:
InformedTrades on 27 Feb 2008
Tags: howtotradeGDPGross(more...)DomesticProducteconomyfundamentalanalysisinvestingforexfutures
stockmarketinformedtrades(less)
Description: http://www.informedtrades.com/
The (more...) second lesson in a series on trading and how the components which make up the Gross Domestic Product number affect the stock, futures, and forex markets.
Link to this lesson on InformedTrades.com: http://www.informedtrades.com/14918-trading-news-gross-domestic-product-part-gdp-part-2-a.html
In addition to looking at the growth or lack thereof in the overall GDP number, traders will also look at the growth or lack there of in the different components that make up the number. As GDP represents the value of everything in an Economy you can imagine the amount of data that goes into compiling the number, much of which is published for market participants to view. By looking at the different pieces which make up GDP we can get a good picture of what is happening not only with the overall economy but with all the different components of the economy which are reported on to come up with the final number. .
Now we could spend many lessons going over all the data that is in this report. The goal here however is to build a framework for understanding the major components so we as traders can understand what is going on when the market reacts to certain pieces of the report and will recognize when to dig deeper for more information on what is happening in a certain sector. The broad categories that it is important to have an understanding of are:
1. Personal Consumption Expenditures -- as over 65% of the US economy is made up of this category, what the individual consumer is doing ie the growth or lack thereof in their consumption, as well as on what goods and services they are spending their money on is heavily focused on.
2. Private Investment - This includes purchases of things such as computers, equipment and inventories (known as fixed assets) by businesses, purchases of homes by individuals, and of businesses investing in inventories of goods to sell. These are all obviously important things, as how much businesses are investing is a good indication of how they feel about future growth prospects, and how much growth the housing market is experiencing is also an important component of the economy.
3. Government Spending -- this includes pretty much everything the government spends money on besides social programs.
4. Exports -- Imports -- an important number which shows how wide the gap is between how much the country exports and how much it imports.
What the GDP number is going to give you a feel for is how much each of the above grew for the quarter and what their overall contribution to the economy was. The above numbers will then be broken down into more detailed numbers which go into compiling the final number for the above 4 categories. (less)
65. Trading the News - Economic Numbers - Retail Sales
Produced By:
InformedTrades on 29 Feb 2008
Tags: howtotradeRetailSales(more...)Financeeconomyfundamentalanalysisinvestingforexfuturesstockmarket
informedtrades(less)
Description: http://www.informedtrades.com/ A look at (more...) how the make up of the Retail Sales number and how this economic indicator moves the stock, futures, and forex markets.
Example Release: http://www.census.gov/svsd/www/marts_current.html
Lesson on InformedTrades.com: http://www.informedtrades.com/15297-trade-news-how-interpret-retail-sales-number.html
The retail sales number is released at 8:30 am on or around the 13th of each month, and is an estimate of the sales of goods by all retail establishments in the United States. These goods fall into the personal consumption expenditures category, which as we discussed in our lesson on GDP, makes up over 65% of the US Economy. Although the number does not include anywhere near the data that is included in GDP, since this number is released for each month (where GDP is released for each quarter) it is closely watched by the Fed and other market participants as a timelier indicator of what is happening with the consumer.
In addition to the widely reported headline number, the report that is issued along with the retail sales number includes a breakdown of retail sales growth by category. With this in mind the report is not only a good indicator of overall consumer activity, but also for how different parts of the economy such as automobile, restaurant, clothing and electronics sales are fairing. If you are trading the stock of a company which sells products related to one of the categories reported in the retail sales release, then it is obviously important to understand that what happens with the growth of that category is most likely going to have a direct affect on the price of the stock that you are trading. (less)
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Duration: 04:48
Turning the Interest Tables
Produced By:
moneytalks on 16 Jul 2007
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Description: You've seen the offers... 0% interest if (more...) you transfer your credit card balance to a new card. But have you ever considered borrowing at zero and earning money on the bank's with the bank's money? (less)
Getting Out of Your Car Lease
Produced By:
moneytalks on 26 Sep 2007
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Description: There are many things in life that are (more...) easier to get into than out of. Like a car lease for example. If you've ever wondered whether you can walk away once you've signed on the dotted line, money reporter Stacy Johnson has your answer. (less)