Finance and Wealth Building

1. Capitalization
The term “capitalize” means registering the quantity of an entity in a balance sheet account against the income statement. Capitalizing can be different in different companies depending on their turnovers. But a big company would not do that. Moreover, in case of leased equipment, if it is a disguised purchase and not a rental agreement, then the lease should be capitalized. A process whereby anticipated future income is converted to one lump sum capital value. A Capitalization Rate is divided into the expected periodic income to derive a capital value for the expected income
There are basic differences between capitalization and depreciation.

Capitalization refers to adding the sum to the balance sheet. Suppose, a house is constructed after taking loans ,then some interests of it will be added to its cost, which in total with the cost will be shown as an asset on your balance sheet.

Whereas, depreciation is the reduced amount registered on the balance sheet. It refers to the systematic allocation of the price of an asset from the balance sheet and reporting it as depreciation expense on the income statement. In short, capitalization refers to the addition and depreciation refers to the subtraction of an amount from the balance sheet.

Though not distinctly different, following types of capitalization are predominant.
o Mega cap: it includes the companies, whose market capital is over $200 billion. The most publicly traded companies like the Exxon are the leaders, which is not applicable to the majority of companies.
o Big/large cap: their market capital is between $10 billion and $200 billion. The well noted companies like the Microsoft, Wal-Mart, General Electric and IBM fall into this category. The large capital stocks are considered to be steady and safe. These stocks are also known as blue chips.
o Mid cap: the companies under this category are considered to be more unstable than the mega and large capital companies. A considerable part of this capital is characterized by the Growth Stocks. Some of the companies under this category are on the verge of becoming the industrial leaders.
o Small cap: the comparatively new and young companies having the capital between $300 million to $2 billion. They offer the possibility of greater capital increase but leaving the risk factor.
o Micro cap: The companies primarily consist of penny stocks ranging between $50 million to $300 million. They have equal upward and downward potential and thus are risk prone. You should do a lot of research before venturing into this position.
o Nano cap: capitals below $50 million are the indicator of this category. This is the riskiest of the categories and offer for very meager gain. The stocks normally trade on the pink sheets or OTCBB.
o This categorization does vary with the variation in the actual market.

2. Unemployment rate nearing 700ks, it may get worse

The last statistics for the job-cut given by the Labor Department in February this year reflected the worse picture than was speculated in January. The previous one registered 598,000 job-cuts in the private sector, which the February stat projected 650,000. The figures according to Briefing.com were somewhat different, which anticipated a hike of 11% in the unemployment rate from January’s 614,000 to February’s 697,000. This burning scenario would create wrinkles in the forehead of President Obama and would dent his administration’s futuristic expenditure plans envisioning the dynamicity of the stumbling economy in the coming years.

The stark discrepancy between the White House’s statement as 3.8% decline of the economy and the daily life of the Americans was evident from the actual 6.2%, the worst since 1982. Economists though are neither ready to compare the severity with that of the 1930’s 25% and nor with the twin depressions of the 1980’s, yet some are forecasting of more worsening. They are emphasizing on the term “depression” to describe the much longer span of crisis, which cannot be connoted by the term “downturn”. The alteration of terms is much more decisive, when the govt. is strategizing to further straining of cash for the critical banks and the aid for the automobile industry.

Mark Zandi, chief economist of Moddy’s Economy.com, predicted that the unemployment rate would reach 10.5% by the end of 2011, from 7.6% of end January, the average home prices would fall 20% over the already reached 27% and the financial system losses would more than treble, to $3.7 trillion. The chief global economist of Decision Economics, Allen Sinai maintained that the economy is already at depression. He added that Washington’s assumption of the 3.2% hike in 2010 should only be a hope, not a confirmation. And in this situation, the government would be bound to reduce expenditure, increase taxes and run larger deficits. The Federal Reserve chairman, Ben S. Bernanke predicted the rise of unemployment rate to touch 8.8% next year as against the current speculated rate of 10.3%.

Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C., censured Sinai for predicting so early and estimated the ratio to over 12%, the highest since 1948. Zandi gave the rate as 9.3%. The inseparable connection among the financial system, the job market and real estate has resulted in the pink slips even in stable companies. This in turn reduces the investment by the laid offs, further cutting on the revenue from different sectors. A downward spiral is thus set to act.

3. Relation between politics and Wall Street.

Since the December take over of the Wall Street Journal by Rupert Murdoch, it has developed a sharp edge on the political issues and asserted its influence on the presidential campaign. With the fresh approach to place journalism on a new trajectory of paramount, Murdoch stressed on a broader cover area in the newspaper. Along with the primary feature on the Federal Reserve’s endeavor to salvage the Bear Stearns from the seemingly inevitable crash, it also focused on the Finance Chairman Penny Pritzker and the burning Tibet issue.

In the time of bulk dismissal of the newspaper staffs and financial collapse, Murdoch has raised the volume of the journal and also expanded the Washington bureau, not leaving the foreign coverage. The 1940’s approach of the newspaper to focus only on the business news and discount the breaking news is now a history, and it was also called for at the most exciting campaign moment. In fact, politics now occupies double its earlier space in it. It got reflected from the campaign backbiting of the two advisers of Hillary Clinton to the advantage of Barrack Obama in Texas due to the strife between the blacks and Latinos.

With the increased co-existence of finance and politics, the legendary A-heads are losing their importance to be constricted to the page-bottom. Murdoch led the daily for extensive campaign coverage to make it the master of journalism. But this effort may raise the question in future of its becoming the jack of the business journals.
According to Charlie Cook, a political analyst, WSJ has been barely maintaining its stand in the business, save the business coverage and a fun story on the front page, though the standard has somewhat augmented. To add to the popularity, WSJ has started a weekly sports page, publishes recipes in the Saturday edition and has plans to commence a quarterly magazine on fashion and travel.

Murdoch once donated $1 million to the California Republican Party, had his New York Post go after selected liberal politicians, and yanked BBC News from his Sky TV satellite service in China to appease the Beijing authorities. Despite his well-spoken authority on news judgments, the journal does not seem to have evolved under the News Corp. takeover. According to him newspapers in Britain and Australia had sometimes endorsed Labor Party candidates.
Marcus Brauchli, the chief editor has stated that Murdoch allows independence to his editors to find the means to achieve the goals he has set for the journal. But at the same time, he also waves his hands to maneuver their decisions, whether visibly or not.

4. “Trend is your Friend”?

It is very crucial for you to follow the correct trend whether you are investing in stocks, dollar or interest rates. There are no such investments that are free of risks, not even the government bonds. 95% of the Americans, having net worth of less than $1,000,000 are not allowed the choices as the rich are. They are also not expected to be that savvy of the risks in stocks, stock options, futures, mutual funds and a whole lot of very high risk investments and presumed to be incapable of understanding the risks in hedge funds. The existing system which relegates most investors to second class status is economically wrong, philosophically decadent and politically discriminatory.
While a considerable time is given to track the accurate direction of the stock, a cautious observation to the support and the resistance lines can make the trend your friend, as shown below.

These “Trend Lines” directs to the general trends of the stock movement. Not useful for daily tracking, they are used for a long-term purpose for the stock, mutual fund or commodity.

The trend lines can also guide you for even years, than weeks or months. But they are mostly the speed-breakers, as the stocks show their inconsistency to move along these lines, and then spring back to the reverse.

If you are skilled enough to fish a stock as it springs off the support line, which is the ideal time to purchase, as you will find an authentic and valid point to stop. This could be near the support line, just below it and would reduce your amount at risk.

The stocks that are purchased just as the stock breaks through overhead resistance and forms new patterns, ensures the best performers. You should hold the stock for months or even years, until it breaks the support line to enhance your winning chance.

Often the logic behind the stocks’ heightened leap is not made up. It can occur after days or weeks or even years. But the leap of that extent to break the trend line is always talked about.

When your stock jumps over its overhead resistance, you can be confident that it would continue to do so.
One should be careful, if the support line of mutual fund or stock is broken. This will be the high time to sell a portion or the entire position. One will consider at risk, if the support line is broken, which indicates that supply is now clearly in command.

5. What are Trailing Stop and how to use them?

It is equally crucial for you to decide the time to put your hands off the trade as it is to put then on, whether in the case of long-term investing and short-term trading. Usually, selling exerts more pressure on your heart than buying. Therefore, you can not make up your mind when to exit from the trade and when you are profiting from it. Same happens when you incur a loss and cannot think to quit but wait, expecting the recovery. But prioritizing on these emotional deliberations is irrational and illogical. Despite the existence of many state-of-the-art trading techniques, a whole lot of general techniques are also available to save you from awful losses and simultaneously guarantees for awesome profits.

This calls for the use of the Trailing Stop technique. The term “Trailing Stop” refers to a stop-loss order set at a percentage level below the market price – for a long position. The trailing stop price is adjusted as the price fluctuates. The trailing stop order can be placed as a trailing stop limit order, or a trailing stop market order. Therefore, the trader is confident about the minimum profit that he or she is going to gain.

Momentum-Based Trailing Stop:

The trickiest part to set up a trailing-stop system is to predict the suitable profits or tolerable losses. This can be exemplified as a trader’s entry to the position after watching and waiting for a consolidation and by placing the stops below that consolidation. It needs patience.

Apart from that, the concept of ‘being overvalued’ requires basic research. The trailing stops are to be squeezed to a lower percentage if the stock starts to show a P/E higher than its historical P/E. This situation aggravates when a stock enters a “blow-off” period and this can last even up to several months. The daring traders can still continue with profiting by avoiding the losses with the help of the trailing stops. But there is risk.

The Parabolic Stop and Reverse (SAR)
The traditional traders prefer to stick to the more disciplined outlook in a systematic market and the parabolic stop and reverse (SAR) suites them. It provides stop-loss levels for both sides of the market, moving incrementally each day with changes in price. The SAR is a technical indicator plotted on a price chart that will occasionally intersect with price due to a reversal or loss of momentum in the security in question. When this intersection occurs, the trade is considered to be stopped out, and the opportunity exists to take the other side of the market. The key stipulation of the SAR is the irregularly moving security that in the unbalanced market, your trading charges and other costs will be exhausted. Another clause of the utility of the SAR would be in the security that is not showing a significant trend. You will never reach the stop, if the trend is too feeble. So the SAR is inefficient here and only most suitable in between the two extremes.

6. Work duration on demo account
The demo account is an account which is funded virtually, but acts as a real one. All the costs and dealings are the replica of the actual business. If you want to open a demo account, you will get ready help from any brokers of Forex . They would provide you with a guidance kit to create it. To proceed, you have to fill up an online form with the help of your chosen broker and after following some simple steps; your demo account would be ready. The virtual fund depending on the brokers can range from $50,000 to $100,000.

It would be helpful for you, if you retune the balance amount of the demo account according to your actual trading amount, as it is not gambling. You will also have to learn the tactics of the trading platform, which is different with different brokers. When they offer for different orders, you will have to be attuned with the facts of placing market orders accurately, setting up targets, preventing loss and other nuances. You must have the answers to the following questions: Are contingent orders available? One cancels other (OCO)? How far from market price can you place limit buy/sell order? And more. These also vary and must be well-researched before investing, as the lack of the knowledge has led to huge amount of losses.

But, don’t worry. You have the option to practice it with your demo. Before you start, get acquainted with the technical expertise that the trading software requires. You should also know whether the policy offers for system integration, automated trading, news feed and back testing capabilities. As the software are getting more intricate and are offering unnecessary features, you have to be clear about your real need before opting for them.

A common mistake is mostly done by the traders that they forget about the demo after starting the real account. One more important question is, whether to keep the demo alive, and the answer is yes. You should keep it so as long as possible; whether or not you have to re-register it after every 30 days, as some of them expire after that. Don’t forget to check its health regularly by the brokers.

This is required because trading is something that mandates regular updating of the trader’s awareness. Be it a tool launched by your broker, a new approach or a new system; first give it a try in your demo. And the most interesting part of it is, it is available free of cost.

7. Use of multiple time frames in trading

To ensure constant profit, you must know and follow the trend that is in, as a trader. The most common formulae include “trade with the trend” and “the trend is your friend”. These are categorized as primary, intermediate and short term. But that does not entail that the market would remain in a specific trend, rather in a conjoint frame. It is quite obvious that a particular stock will be in a primary uptrend while being stalled in intermediate and short-term downtrends. It is the common practice of the greenhorn traders to deal in a specific time frame, often overlooking the even powerful primary one and the others usually disregard the importance of the short-term. But, you can have the guidelines as how to keep yourself updated with these trends.

A generalized convention is that the more stretched the time span, the more consistent the signals are. The further you go into the time frames; the charts would become more clumsy and full with deceptive move. To have an idea of their trading patterns, you should start and continue with the primary trend for a considerable time period. As you get the firm idea of the trade, you can venture into the intermediate time frame and then to the short term. For your assistance, some typical trading terms are illustrated below.

o Swing trader: you can focus on the daily charts, especially the weekly charts that set the primary timeframe and the 60-minute charts for the short-term trend.
o Day trader: the 15-minute charts are useful, where the 60-minute charts would define the primary trend and a 5-minute chart or a tick chart to define the short-term trend.
o Long-term position trader: while using the weekly charts, the monthly charts can be used to define the primary trend and daily charts for refining the entries and exits.

Although the ideal chart combination is the sole choice of you, yet, you should opt for the main timeframe of your interest and balance it by two timeframes above and below it. You can use the long-term chart to define the trend, the intermediate-term chart to provide the trading signal and the short-term chart to refine the entry and exit. Short-term charts are predominantly used to analyze the decisions taken in the primary chart.

A careful analysis can assure your chances of increased profit. While the long-term charts provide for the traders the advantage to assess their propositions, it also gives a caution when the different timeframes are not organized. The short timeframes give the chance to augment the entries and exits. In a nutshell, the combination of multiple timeframes gives you the complete picture of your trade and increases your confidence.

8. The History of Japanese Candlesticks

The study of candlestick methodology would lead you to the Japanese “Age of Country at War” from 1500 to 1600. It was developed during the military era and often uses related terms. You have to be as alert and cunning as a military general, with the psychology of a competitor and an aggressor to succeed in this battle named business.
In the mid-1700’s, “The god of the markets” Munehisa Homna’s research on the price-movement and weather conditions concretized into the concept of candlestick. His “Sakata Rules” laid the foundation of the Japanese investment strategy. The candlestick has always been a very open and widely practiced methodology throughout Japan, but did not create interest in the US market until 25 years back. But the recent economic setback has led the researchers to look up to it. Popularizing this technique to the west is the contribution of Steve Nison’s extensive research.

This theory stresses more on the real price action than on the causes of it, as the reports, wages etc. all the statistics are clearly shown in the price and the market would be controlled by the apprehension and the ravenousness of the buyers and the sellers.

12 candlestick models explaining 40 different market signals are available, which are reliable enough in terms of price-move. The 12 major signals provide sufficient outlook for the market-situations, but the others are also useful for profit-making. Though the candlestick uses the basics of a bar chart like the open, close, high and low values over the fixed phase, but it shows various connections of them with the “real body” drawn, and expressed through different colours.

Personal Finance and Debt Lessons From Our Past

There are many debt considerations in personal finance, whether to take a new loan, apply for a new credit card or accept student loans to help kick start your career. Following the government’s example we would all spend with abandon and borrow with recklessness. Tough economic times, though, are helping to get the message that the best debt is no debt at all.

When money and credit were easy, and the economy was experiencing persistent growth during the boom years of real estate and technology, borrowing and spending seemed a sound financial decision to leverage your cash capabilities. Current times have reversed this financial wisdom, teaching the necessity for ready cash on hand and a freedom from debt liabilities that will benefit many for the years to come.

During the depression era of the early 20th century, our forbearers learned hard taught lessons about personal finance at the verge of starvation and desperation. They learned sound financial principles of frugality and saving your money for a rainy day. Farmers of the dust bowl learned the hard lesson that debt collateralized homes were not truly their own, without the security of debt free ownership. These lessons were dearly learned by the depression generation, and they served them well, but these lessons were all too often lost to following generations.

Now, the lessons of living debt free, with a frugal lifestyle and an eye towards wise personal finance are returning. Reckless consumerism and the idea of endless credit and boom economic growth left many of us in a state of shock when things turned, but these lessons can only be ignored at our peril.

So what does history have to tell us about personal finance, and what lessons should we remember? The best debt is no debt at all, and one should mind carefully their personal finances. A penny saved is a penny earned, and moderation in spending is not to be frowned upon. Save for rainy days, as today’s boom is tomorrows bust. Money is not free, and one would do wise to learn its ways of increase. Your finances are like a garden, and should be cultivated with care. Neither a borrower nor a lender be.

Finances and Saving is Dominating Consumer Behavior

Due to all the doom and gloom purported by the mass media after the mortgage crisis fallout, and stock market collapse; many financial commentators have stated things like; “it’s like the consumer just fell off the cliff all of a sudden.” Meaning that the consumers stopped buying, and retailers noticed this right away.

People stopped buying cars, electronic equipment, imported Chinese goods, and they even cut back on the amount of food they were buying. Some might say this is a good thing because consumers were spending tons of money on credit cards. Due to all the layoffs many people have had their houses foreclosed on and they have stopped paying their credit cards.

In fact, the fallout rates are very similar to the unemployment rates which continue to rise. Even those people who are not losing their jobs are worried about them and they have started saving more, and spending a lot less, worried more about their budgeting. The savings rate of consumers is now a 10% which is unheard of in the last four decades.

Thus, finances and savings are dominating consumer behavior, and it is slowing the chances for a robust economic recovery. Some economists believe we will have a slow recovery, which is probably better to guard against inflation. But most all economists believe we will have a recovery and that we’ve already hit the bottom of the recession and the consumers will get back on board as the news changes from bad to better, which is already happening in the stock market, which generally leads the economy by 6 to 8 months. I hope you will please consider all this.

Online Finance and Banking Training

Finance and banking are two of the leading forces behind the economy. Both categories are applicable to business, corporate jobs, and personal usage. With money being a driving force in the world people have the option of gaining specialized training in these areas.

First, let’s look at the definitions for each field of study to gain a better understanding of where an online class will head as a student progresses through the coursework. Finance is the commercial activity that provides funds and capital. It is the branch of economics that studies the management of money and assets.

Banking is the business of keeping money for savings and checking accounts that enable the bank to exchange or issue loans, credit, and more. An individual transacts business with the bank via depositing, withdrawing, or requesting a loan. In essence a bank is a financial institution licensed by the government.

Length and pricing will vary depending on the course load, school, and degree desired. Certain schools have a wide range of courses priced at $159 a class. A student can take classes one at a time like above or obtain a degree based on a curriculum given online. A student has the option of finding a school to gain a master’s degree in banking and financial services. Some programs at this level may consist of 12 courses for a total of 48 credit hours. Class structure would have the student taking two, seven-week courses online per semester. The length of this type of program will take an average of two years to complete.

Students have the option of completing a degree program online that encompasses finance and banking or gaining a degree in finance and banking separately. Different online schools offer programs starting with an associate’s degree to a doctorate in finance and banking. The right fit will depend on previous schooling and the career goals an individual has.

Gaining a Bachelor of Science in Business Administration for Finance can be an option for an individual who has strong career goals in the business field. Learning as a student will give the capability to research, solve, diagnose, and evaluate business troubles in a team environment.

Graduating with a Bachelor of Business Administration for banking enables a graduate for a wide range of managerial jobs in business, government, and non-profit organizations. Skills acquired are practical and professional. These skills prepare a student to understand all phases of business, which include decision making and problem solving.