Finance And Economics Basics
Federal Reserve Chairman Ben Bernanke on Thursday said in remarks to a
Redefining Investment Strategy Education forum held at the University of Dayton,
one of the lessons of the financial crisis is the need for all citizens to have
a "basic knowledge of finance and economics." Schools should ensure that
students graduate with the financial literacy skills they need to navigate the
modern financial world and ways should be found to give adults the opportunity
to refresh what they have learned, Fed Boss said. "These skills not only help
people provide a better life for themselves and their families, but, by
deepening their understanding of the world economy, having such skills also
helps equip them to be engaged citizens and informed voters," Bernanke said.
Atlanta Federal Reserve Bank President Dennis Lockhart said on Thursday that the
Federal Reserve will not rule out tapering quantitative easing - QE3 - and
announcing an end date. Lockhart acknowledged the Fed recognizes there may be
unintended consequences of the build-up of its balance sheet in relation to this
program. With more intentions of investments from businesses, the tone on the
economy is more optimistic than before, in reference to the Southeast region
although, there was more cautiousness on hiring prospects. Lockhart added that a
long-term creditable deficit-reduction plan from Congress is needed.
According to Esther George, President of the Kansas City Federal Reserve Bank on
Thursday, Federal Reserve policy is currently "overly accommodative," causing
market distortions and posing risks to financial stability and inflation
expectations. The Fed has been buying $85 billion per month of Treasurys and
mortgage-related assets in a bid to get investors to move into riskier assets.
George said there has been a sudden sharp rise in lending related to the recent
rise in farmland values, raising concerns that the wealth effect in agriculture
"could trigger a leverage cycle similar to past farm booms when farm incomes and
asset values faded." She added that it is "not realistic" to think that bank
regulators will be able "to single-handedly identify and contain" the risks of
overheating introduced by the Fed's policies. "Whether this increased risk
proves healthy and supportive of economic activity, only time will judge,"
George said in a speech to a business group in El Reno, Oklahoma.
European Central Bank President Mario Draghi told reporters on Thursday that ECB
monetary policy will remain "accommodative" for as long as needed. ECB left its
key lending rate unchanged at 0.75%, as expected. Monetary Policy Committee
voted to leave the key lending rate at a record low of 0.5%, where it has stood
since March 2009. The stock of purchases under the ECB’s asset-buying plan, the
centerpiece of its quantitative-easing strategy, was left unchanged at 375
billion pounds ($564 billion). An expected euro-zone recovery in the second half
is "subject to downside risks", Draghi said. Noting that price outlook is
"broadly balanced", Draghi dismissed any threat from inflation and added that
inflation expectations remain "firmly anchored." While improving confidence in
financial markets should eventually feed through to the economy, Draghi said
stronger global demand should help exports for the euro zone.
The Bank of Japan on Thursday announced a massive easing program aimed at ending
deflation in the Japanese economy. BOJ, led by Governor Haruhiko Kuroda, said it
would increase the Japanese government bond holdings at an annual pace of 50
trillion yen ($530 billion), with JGB holdings expected to double in two years.
Kuroda pledged to fight long-running deflation in Japan as the BOJ vowed to
achieve a 2% inflation target in two years. The BOJ also delivered a radical
overhaul of policy with a new base money target and a sharp increase in asset
According to data released Thursday by outplacement consultancy Challenger, Gray
& Christmas Announced layoffs in March declined to nearly 49,000, down 11% from
February. Longer-term trends however reflect a pausing labor market. Large
federal spending cuts making up the sequester could curb job growth going
forward, per Challenger. Led by downsizing retailers, plans for job cuts were up
30% from same period in 2012. Q1 announced layoffs reached nearly 145,000 for
the highest amount seen since Q3 2011.
The U.S. Labor Department said Thursday the number of Americans who applied for
new unemployment benefits last week jumped to a four-month high, as initial
jobless claims rose to 28,000 to a seasonally adjusted 385,000 in the week ended
March 30, striking the highest level since end of November 2012. The four-week
average of claims rose to mark a one-month high, up 11,250 to 354,250.
Continuing jobless claims fell by 8,000 to a seasonally adjusted 3.06 million.
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April 4, 2013