How a Trading Algorithm Went Awry

Everyone remembers the infamous glitch of 6th May when the whole stock market tanked for 20 minutes and no one knew what was going on. It was later found out that a technical error from the part of Waddell and Reed- a mid size financial and asset management firm, caused the chaos. There were few lucky investors who made use of the opportunity but there were many who thought that this was a repeat of the 2008 crash. So is the US stock market as technologically advanced as it seems to be? Does it still need certain regulations to prevent these events from happening? Thoughts?

Gold prices set record high on weaker dollar

Gold prices on friday increased again on friday to new record highs. In the month of September gold has kept pushing higher especially with the dollar performing weekly. The big question in the US markets is gold or equities? Gold hit the price is 1322 an oz on friday. The dollar is particularly weak because of speculation of the FED buying more government debt. This month should be interesting markets were particularly strong in September. It should be interesting to see gold return vs the stock market. October is a historically a terrible month for equities. This is mainly due to black monday 1929, weather the 'october effect' takes place or not this year it should be interesting weather gold keeps going up or not.

ideas? forecast for the markets in october?

French unions launch new pension plan protests

Thousands of people protested in France today. The reason is because prime minister Nicolas Sarkozy wants to raise the retirement age from 60 to 62. Frances pension system would fail with out reform, it is obvious that people are living longer and need to work longer. This is one of third protest in months and even the police are marching. The overall goal is to cut costs.

"Police put nationwide turnout at 899,000, down 10 percent from protests Sept. 23. But unions said the movement was going strong: The CFDT union said 2.9 million protested, on par with last time."

Should the US raise its retirement age to cut costs? Germany is raising there retirement age to 67 should we?

The Recession is Over, but Pessimism Still Reigns

In this article Americans are said to have extremely low consumer confidence due to the current recession. Even though it may appear to be over people are still holding on to their money because they are still pessimistic in their views of where are economy is heading. Compared to other recessions this the only one where people expected their own incomes to fall. This pessimism is said to have been caused also by the poor performance of major asset categories. An now due to the low confidence people are depending a lot more on their stocks because more people see there retirement depending upon their own investments.

Number of the Week: 41.7 Million Spend Too Much on Housin

an encouraging sign in the housing market.. The census says that people are getting there housing costs back under control, slowly but surely. 36% of Americans were said to be spending of 30% of their pre-tax income on housing within the last couple years, which they say is the threshold of affordable. This is good to see that people are able to keep the housing crisis from getting worse, the last thing we need is more foreclosure in the housing market..

Danish Commission on Climate Change Policy reveals plan for an oil free Denmark

The Danish Commission on Climate Change Policy has unveiled a plan aimed at making Denmark completely independent of fossil fuel power by the year 2050; Denmark currently relies on fossil fuels for 80 percent of its power. This plan is extremely ambitious in that it calls for heavy government taxes on fossil fuels by 2030, and in that it proposes an oil-free state, as opposed to a 60 to 80 percent reduction like the European Union is proposing. The scientists in the commission claim that the technology is already available to carry out this plan, but it is now up to the government to implement the policies. President Obama has revealed a plan to reduce American dependency on oil, but it is not nearly as reaching as the Danish plan. According to energy economists in the US like Chris Lafakis at Moody's Analytics, this is because the US consumes a much more substantial amount of oil on a daily basis, and it will be much more difficult to rid the US of that dependency.

Older Workers Say No to Retirement

The number of workers who have been working past the age of 65 has been on the rise the past two decades. Workers are not retiring not just our of necessity but because some want to continue to work. This year 18% of workers will work past 65 and by 2018 the numbers will be up to 22%. Even wealthy workers will retire at older ages. At least half of the high wage earners will work past 65. These high wage earners are working because they enjoy working, not out of economic necessity.

Can stocks put together a fourth-quarter drive?

Over the past three months, the stock market has seen an 11% return. This includes one of the best September's since 1939. Many believe these statistics to be deceiving and misleading but why? S&P rose 9%, the DOW 8%, and NASDAQ almost 12%. Actually every sector of the market was up so again why has there been this impressive market jump lately? Market Analysts say nothing has happened to make the market be so prosperous. Any thoughts?

Stock Rally Might Be Best Economic Stimulus

Former Federal Reserve Chairman Alan Greenspan announced a plan he think would work to stimulate the economy. A stock rally for Wall Street might be beneficial because in many ways the prices of the stock market represent the national confidence in the economy. If we can increase prices by pumping money into the stock market, consumers would be more into investing, people would become more involved, and it could be a better solution than spending the money elsewhere. They note the "wealth effect" where people spend money on something (i.e. stocks) when they feel as though they are making money on it. The more money they make, the more they will keep investing.

Fewer U.S. CEOs Project Gains in Sales, Employment

CEO's in the United States are not confident that sales or employment will improve anytime soon. Firms are using the current lull in the economy to invest in equipment and other capital, not new hires. Consumers and firms are cautious and confidence is low. Most CEO's are not fearing a "double dip" recession but they feel that the recovery will take a longer period of time compared with your average recession. CEO's and members of the Business Roundtable are in favor of China strengthening their currency and the Bush tax cuts remaining in the tax structure. CEO's won't start hiring until they see signs of stable growth in the U.S. economy.

Japanese Smokers Buoying GDP by Hoarding Before New Tax

On October 1st, the Japanese government will increase the tax on tobacco by 40%. Smokers, as a result, are stocking up on cigarettes. The current hoarding could cause up to a 1.4% increase in this quarter's annualized economic growth rate. The Japanese tobacco industry is expecting an additional 12 billion cigarettes in aggregate demand before the tax introduction on October 1st. The supply of cigarettes has been increased 5 times above the usual amount supplied. A government's involvement in economic systems can have a drastic, large-scale impact.

Fixing Social Security: The 'low hanging fruit'

Social Security is a very “hot-button issue” this year because many economists believe it could really help stabilize the U.S. economy. In terms of international standing, many argue that fixing social security could build confidence among the international community and especially with foreign lenders. The whole point here is to assure that interest rates do not go up too high so the U.S. has more time to deal with other economic issues like tax, healthcare and budget reform.

The issue is that this year, social security is believed to be taking in less revenue than it is paying out in benefits, a first for the nation – and it does not look any better in the future. CNN highlights that within the next few years social security is going to permanently go into “the red”. Though many government and economic officials have argued that this is a problem that can be dealt with later, it seems that it is essential to start implementing policies to save the social security system NOW. The article gives a variety of options to make sure that social security does not run out: increasing the retirement age, reducing growth in benefit levels and raising the payroll tax.

Turbocharged Germany

Its seems like the European model is working well as opposed to the U.S Model. Most European country experienced growth in the 3rd quarter as well as falling in unemployment rate. Germany's growth owed a lot to a surge in exports, especially come from customer such as China. Meanwhile the relationship between America and China is quite unstable and who knows if China might be the savior, after all, of the world's economy, "If German exporters are thriving, it means that someone out there in the world economy is still spending freely."

German Consumer Confidence on the Rebound

German consumer confidence is currently the highest it has been in over three years. While this might seem odd considering the current economic climate, economists are tracing it back to job optimism and the fact that unemployment is at 7.6%, matching the level it was at prior to the drastic downturn. This, some would argue, is where Germany's economic system comes into play. With its emphasis on stability, despite the fact that growth is limited in the economic booms, it rebounds during recessions faster than the rest of the developed world. Germany is effectively back on track with where it was economically before all of this began. Perhaps the rest of us can learn a few things from Mitbestimmung

Report on the Millennium Development Goals

We are now ten years and 2/3 of the way through the 15 year plan established in 2000 to alleviate poverty commonly known as the Millennium Development Goals. There has indeed been significant progress towards these goals; however, it is debatable whether this is because of the MDGs or not. For example, the percentage of global population living below $1.25 has fallen from 46% to 27%, almost achieving the MDG of 23%. But this is due mainly to the drop in China's povery rate from 60% to 16% which has raised at least 400m people out of poverty. It is also nearly impossible to measure progress at the country level. The goals are also severely underfunded. Are the MDGs responsible for improvements in human conditions in the past decade? Should they be extended beyond the time allotted to continue a focus on human development?

people say governments misspend

Article says that across the world people are disappointed with their governments. Some want government to get more involved, the United States wants less government regulation. The main issue is that "governments misspend the money." Will government ever be able to make the people happy? How can government more adequately meet the needs of the people? Problem is is that there never is one coherent people...

Cuba issues plans to expand its private sector

After cutting down many public sector jobs, Cuba has finally relaxed some of it policies on private employment. They are now giving out licenses to people to run their own businesses and be self employed. "Under the new rules, Cubans will be able to rent out rooms to tourists, work as self-employed gardeners, iron clothes and shine shoes". The government believes that this will increase productivity and efficiency in the economy.

Question:

Will there not be a time lag? This will most commonly cause frictional unemployment- will this not negatively affect the economy for a short period? How does the government plan to accommodate this potential negative growth?

The MDG's: Global targets, local ingenuity

In the past ten years the living conditions for the world's poor have been improving, but not necessarily due to the UN's Millennium Development Goals (MDG's). This article discusses how even though many of the MDG's seem to be within reach, it is difficult to give credit to the goals themselves. There are several economic problems with the MDG's. For example, "the goals are [often] reduced to working out how much money is needed to meet a particular target and berating governments for not spending enough". The article points out that countries who have made the most progress in cutting poverty in half do so by encouraging faster economic growth rather than public spending. Also, it is very important how money is spent and what it is used to buy. For example, they suggest that in order to improve primary education money would be best spent on solving the problem of teacher absenteeism with incentives such as performance pay. In one rural area of India this is three times more effective at raising students test scores than "the equivalent amount spent on school supplies". Other problems that need to be addressed include "leakage" of funds, when funds disappear before reaching their intended recipients. Hopefully some of the problems of the MDG's will be addressed and fixed in the coming years however, for many there is a long and hard road a head in order to meeting these lofty goals.

Fed Mulls New Bond Approach

The Fed is in two minds on whether to restart the process of buying treasury bonds and securities. Economists at the Fed are not very pleased about the growth rate of the country and so are debating the continuation of quantitative easy.

"A decision on whether to buy more bonds depends on incoming data about economic growth and inflation; if the economy picks up steam, officials might decide no action is needed."

The Fed under normal conditions would lower or increase interest rates, however, since interest rates in this case have been lowered to almost zero, this is the only other option left.

Many economists are against this plan saying that it is too far fetched; however, many others are for it.

The Fed is also contemplating the quantity of treasury bonds to buy and at each meeting will decide whether to continue the process (if started).

Small Business bill becomes law

This is the developing story that we have been tracking, from Senate to Congress to the desk of President Obama. He signed the bill into law today, giving $42 billion to small businesses, and hopefully, creating jobs- an estimate of 500,000 jobs could be created.

Help Wanted: Manufacturing Position

This article points out how manufacturing firms are increasing their employment, while other private sector jobs are still laying off or not hiring. This increased demand for labor is presumably stemming from the increase in production output and the demand for manufactured products. This is interesting, because manufacturing jobs have tended to be the most stable and long-term field of labor, and some say that these blue-collar jobs could be back on the rise in popularity.

Recessions and Recoveries Are Not All the Same

This article attempts to argue that the current reccession is, in fact, different than previous recessions. The main reason for this is due to the large hit the finance industry took. I would agree that this recession is certainly different than the two previous recessions, but it is certainly not unprecedented. For example, the recession of the 1930's saw a similar downturn in the finance industry and the recovery was indeed long. When the finacial sector goes bad it will take a long time for significant growth the reemerge because money is tight and there no place to find capital. I don't think there is anything new or mysterious about the current recession.

French court convicts Google CEO Eric Schmidt of defamation

Court's jurisdiction on Cyber-issues have been quite a head spin for the past few years, because the government intended to keep the fast-pace free flow of public communications. Nevertheless, one French man claimed that when a person Googled his name,the terms "rapist" and "satanist" came up in Google's Suggest feature. This does not bode well for his job prospects. As a result, he contacted Google to have the terms disassociated with his name, but that was to no avail. As a result, Google and its CEO, Eric Schmidt, have been convicted for defamation under the French court's jurisdiction. The court's ruled that the search engine's linking his name to such words was defamatory and fined Google €1 settlement plus €5,000 for the man's court cost.

`Fragile' Economic Recovery in Canada Remains `on Course,' Flaherty Says

The Canadian Finance Minister, Jim Flaherty, forecasts the economy of Canada to experience moderate growth to finish out the year. He sees the current economic environment as a "fragile" one, but Canada's C$47 billion stimulus package has been highly beneficial to the economy. Also, Flaherty mentions that the challenges and problems in the U.S. economy have a direct impact on the Canadian economy. Canada is the United States' #1 trading partner, measured by the sum of exports and imports. If national income in the U.S. decreases and has a negative impact on consumption, the export businesses in Canada will face challenges due to a lower demand for their product.