The speculative trading portfolio guesses wrongly on market movement. Nevertheless, it is still confident that panic selling would not happen as investors have learned from the financial crisis.
Market may move violently as market particicpants are fighting for profit. The excess capital from households and corporations flows in the financial market seeking return on investment.
A Smoking June for Hedge Funds
For some investors in the municipal-bond market, June added insult to injury.
Tobacco bonds have been part of the municipal-bond market for about a decade. They are sold by states and backed by payments from cigarette manufacturers that flow from a legal settlement in the late 1990s. The downgrade of many of the bonds by Standard & Poor's in November caused forced selling by municipal-bond funds that aren't able to hold noninvestment-grade debt.
The exodus helped trigger a broader wave of selling across the market.
Big hedge funds like Brigade Capital and GoldenTree Asset Management snapped up the debt on the cheap, according to people familiar with the matter. Smaller firms such as Venor Capital Management and Foxhill Capital Partners also jumped in.
A Better Deal in Corporate Bonds
After a nearly 12-months tear, companies have been issuing fewer bonds — a sign bond investors are tired of settling for low yields and weak investor protections, say market watchers.
Yields on corporate bonds both investment grade and high yield — have inched up over the last few months as investors deemed them riskier investments and started demanding better rates, says Andrew Catalan, managing director of investment grade strategies for Standish.
In the meantime, investing pros recommend sticking to only higher-quality corporate bonds and reducing exposure to junk, says Lonski. Fund manager Young says investors should also consider high-quality dividend paying stocks, which provide stable payments but could also rise if the economy improves, says Young. "I would approach the current situation with a great deal of caution," says Lonski. "This may not necessarily be the best time to increase your exposure to risk."
Whatever Happens, Commodities Win: Jim Rogers
"If the world economy gets better, I earn money on commodities. If the global economy gets worse then they will print more money and I will make money in commodities," Rogers said in an interview with CNBC on Monday.
Riskier Loans Make a Comeback, as Private Firms Take the Field
According to analysts, a handful of private investment firms have started making home loans to borrowers who fail to meet banks' requirements, which got tighter post-crash and have largely stayed that way.
Given the recent economy, that includes a lot of people. With housing prices still so relatively low, many people may want to buy, which analysts say could fuel a boom in this sector.
Foreclosures Down 29% in First Half, But It’s No Time to Celebrate: RealtyTrac’s Sharga
Home foreclosures fell 29% to 1.17 million during the first six months of this year compared to the first half of 2010, according to RealtyTrac's Midyear 2011 Foreclosure Market Report. The findings also show foreclosures for the second quarter to be the lowest since the end of 2007.
One solution being discussed in Washington to solve this never-ending slump is to implement a foreclosure moratorium. But Sharga says that will only make the problem worse. "You could see a significant number of people just decide to put the money in their own pockets" instead of making mortgage payments on homes which are underwater, or worth less than the amount still owed on them.
Why You Shouldn't Buy Those Quarterly Earnings Surprises
This month, market strategists, television commentators and other investing pundits will bombard you with breathless updates on the percentage of companies in the Standard & Poor's 500-stock index that have reported profits even higher than what analysts expected—in Wall Street lingo, a "positive earnings surprise."
Even in the depths of the financial crisis, from the third quarter of 2008 through the first quarter of 2009, between 59% and 66% of companies beat expectations, according to Wharton Research Data Services, or WRDS.
With trading volumes down on Wall Street and commission rates near record-low levels, brokerage firms are starved for the revenue that stock trading used to provide. Since changes in earnings forecasts encourage many investors to buy or sell, analysts have an incentive to revise their predictions more often. But that hasn't made the forecasts more accurate.
Markets and Economy Are at Fulcrum Point: Don Hays
"Look back just a year ago, the June-July period, the market was much weaker then than it is now," he says. "When you start to think about it, when do you buy stocks? When the economy is somewhat suffering, when people are negative and they're sitting on the sidelines with huge cash reserves," Hays boldly states.
Add in a concerted effort by "the people in power" (including Ben Bernanke - who Hays thinks is the right man at the right time) who are doing everything they can to try to improve the economy and that's exactly what's happening now."
And then he offers the other side of perspective acknowledging that "you have to recognize that we've moved 100% in 30 months.
China's U.S.-Listed Stocks Are Junk
By now, everyone has heard of the Muddy Waters research alleging fraud at Sino-Forest that tripped up investor John Paulson.
For a long time, the largest and better-quality mainland companies listed in Hong Kong, often with secondary overseas listings in New York or London.
That changed as Shanghai's stock market came of age in recent years. While Hong Kong continued to get chunky dual listings with Shanghai, London and New York were largely no longer needed.
Hong Kong is attracting more established companies, which partly comes down to differences in regulation. Perhaps the key listing requirement of Hong Kong is its three-year profit rule, which means companies must have some discipline and wait before seeking a listing payday.
Hong Kong has had its own fraudulent listings in the past, but arguably regulators have grown more wise to them. Back-door listings or reverse takeovers, for instance, that have been the core of fraud in the U.S., have been discouraged here and are now rare.
Debt ceiling: What Obama wants in taxes
Taxes. It's become the most controversial issue in the debt ceiling talks.
Republicans say President Obama wants to enact "job killing" tax hikes "now." Obama says that's not so: He says his tax increases would be targeted so as not to hurt the economy and would not take effect until 2013.
First, he wants to get rid of some corporate tax breaks enjoyed by oil and gas companies as well as buyers of corporate jets. Together, those changes might generate close to $50 billion in revenue over 10 years. He also wants to restore some Bush-era tax rates for high-income households -- a move that could raise roughly $700 billion over a decade. The Bush tax cuts are set to expire at the end of 2012.
In other words, roughly $750 billion in revenue raisers out of what the president hopes will be a $4 trillion package or "grand bargain" even though it's looking more likely that a final package will be much smaller.
"Is the package that we're talking about exactly what I would want? No. I might want more revenues and fewer cuts to programs that benefit middle-class families ... My point is, is that I'm willing to move in their direction in order to get something done," Obama said.
While very high taxes can dissuade businesses from hiring or investing at least in the near term, it's not at all clear how much, if any, job killing would occur if the proposals Obama has acknowledged publicly were implemented.
For one thing, it's not known how many jobs business owners in the top two tax brackets actually create. The IRS collects information on businesses income but not on jobs. And some types of business income -- such as income from rental properties or investment partnerships -- may generate few if any jobs.
Finally, Obama said that he offered to work with Republicans on tax reform that lowered income tax rates in exchange for eliminating most tax breaks.
But he added one caveat: He would only get behind such reform "as long as that package was sufficiently progressive so that we weren't balancing the budget on the backs of middle-class families and working-class families and we weren't letting hedge fund managers and authors of best-selling books off the hook."
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