Strategic returns to international diversification: An application to the equity markets of Europe, Japan, and North America (International finance discussion papers) …

European Union Will Collapse

Stock Markets Endure Another Volatile Week

Markets endured another volatile week, with US markets had a better time of it than their European counterparts. There were some clear psychological levels in play last week, as markets fell to fresh multi year lows, before recovering in the second half of the week. The Dow hit 11,000 for the first time since July 2006, and the S&P 500 hit 1,200 for the first time since October 2005. The CAC came close to hitting 4,000 for the first time since May 2005, the Dax hit 6000 for the first time since October 2006, and the FTSE reached its lowest point for over three years.

Markets started the week in promising fashion. News of a bailout for embattled US Government sponsored banks Freddie Mac and Fannie Mae, hit the wires on Sunday, buoying the financial sector throughout Europe and the US. Alliance & Leicester also added cheer when Santander confirmed a takeover proposal, sending the shares up around 50% on the day. However, the sellers soon gained traction. A run on regional bank IndyMac Bancorp spurred its collapse over the previous weekend, and a takeover by the Federal Deposit Insurance Corporation. Both clients and speculators are pulling their money out of other regional banks, as panic spreads over the prospect of runs on other regional banks.

The FTSE 100 was still one of the worst performers of the main global indices last week. The problem for the UK benchmark index is that it has one of the heaviest weightings of financial and energy Stocks of all the major stock markets. Oil stocks have come under pressure over the last couple of days and financial stocks endured a tortuous week. Financial stocks such as Barlcays and RBS were trampled on as investors fled out of banking stocks and equities in general. The RBS share price at one point fell below the level it was at around the time of the much trumpeted takeover of Natwest. At one stage RBS fell 50 pence below its rights issue and Barclays 40 pence below its share offering. Investors punished UK banks with the highest exposure to the US.

Towards the end of the week, financial stocks recovered strongly. Traders bought into the banks, believing they were pushed down too hard too fast. In the short term at least it looks as though investors are confident that banks have been beaten down well below fair value, and were stepping in to pick up some bargains. Better than expected Earnings from JP Morgan, Coca Cola, and United Technologies helped fuel the Wednesday/ Thursday rally further. Friday’s better than expected results from Citi Group helped counter balance some disappointing results from Merrill Lynch, Google, and Microsoft. The search giant Google saw Pay Per Click growth slow slightly, but stated that they were well positioned for a down turn, as consumers go online in search of bargains.

After the volatility of the last seven days, thankfully the coming week is much quieter in comparison. The first top tier announcement of note is BOE governor Mervyn King speaking in the morning on Tuesday, followed by FOMC member Plosser speaking around Midday. These speeches come ahead of the release of the minutes from the last FOMC meeting on Wednesday morning. UK rates policy is stuck between fighting inflation and helping the economy in difficult times. The minutes will be analysed extremely closely. Thursday brings UK retail sales, and US existing home sales. Friday is perhaps the busiest day of the week, with UK GDP figures, followed by US Core durable goods orders and new home sales in the afternoon.

Despite the late rally off technical lows of many indices, conditions are still fragile for the global economy. The US Housing Market Index fell to new lows for July, as the US housing collapse continues to show no signs of recovery. US CPI figures rose 9.2% year on year. Consumer prices surged the most since 1982, a time when interest rates were at 15.5%. Such inflation readings strongly counter the argument for a further rate cut from the US Government. The stagflation scenario seems to be taking one step closer to reality, as inflation rockets, and US retail sales growth slows to just 0.1%.

The UK is certainly not immune from this, with public sector workers striking over below inflation wage increases. Jim Rogers of the hedge fund Rogers Holdings is famous for accurately predicting that Gold would reach $1,000 and oil $100. He was less than sanguine about the state of the UK economy. He recently said “The UK economy has the highest rate of inflation since 1986” He implied that the UK government had the tendency to massage the figures, so if they are admitting it’s bad “You know it’s real bad”.

Traders at BetOnMarkets believes that Last week’s late recovery could be a useful point to enter trades predicting the sell off will continue. A No Touch trade predicting that the FTSE 100 won’t touch 6200 at any time during the next 6 months could return 21%.

About the Author

Address:
Regent Markets (IOM) Limited
3rd Floor, 1-5 Church Street,
Douglas, Isle of Man IM1 2AG,
British Isles.

Phone: 448003762737

Email: editor@regentmarkets.com

URL: http://www.betonmarkets.com & http://www.betonmarkets.co.uk

Bust $1.99 …

Kinder Bueno, CASE, 43 g x 30 bars $24.00 Excellent hazelnut filled wafers covered in chocolate. Imported….

Vegeta Gourmet Seasoning and Soup Mix (Sazon) 500 Gram Canister $4.01 The all purpose seasoning! Made from the finest vegetables, herbs and spices, Vegeta is an essential ingredient for all your cooking and with its own gourmet quality enhances the taste of all dishes….

Nokia N85 Unlocked Phone with 5 MP Camera, 3G, Wi-Fi, GPS, MP3/Video Player, and MicroSD Slot–U.S. Version with Warranty (Copper) $549.99 Harness the power behind this sleek, compact design. Capture your memories with the 5-megapixel camera and bring them to life in vibrant, natural colors on the stunning OLED display. Try the preloaded games and choose one to activate for free. Discover more games on-line and try before you buy. Assisted GPS shows where you are, the Internet helps you choose your destination, and Nokia Maps guides …

HTC HD2 Windows Phone (T-Mobile) $549.99 The HTC HD2 Unlocked GSM Cell Phone is so fast—and its screen is so big—that you might not even notice it’s a phone. When you’re watching a video, you’ll think it’s a TV. When you’re working, you’ll think it’s a computer. When you’re surfing the Web, you’ll miss your bus. This screen is our biggest yet, 4.3 inches corner to corner, with bright, lifelike 480×800 resolution. Change your ho…

Anatomy of a Breakdown

Forex: A down market typically means a stronger currency

This week has been a strange and yet interesting week on the Forex.  The volume has been incredibly light due to end of summer festivities in the US and Canada and Western Europe, however the flow of data and information has not ceased. 

We have seen officials declaring the recession over, and yet only a few hours later a piece of Data comes out that contradicts that idea. And we have seen the Dollar getting bounced around.

September in The Stock Market is normally the worst month, about an average of 3% loss are recorded each year since 1929. While October is the “crash month” (last year alone the market fell 13% in October) the downfalls are few and far between – so September is the hard month. 

A reason for this is that people come back from vacation and pull back their investments to gage the market and see what has happened – a portfolio reshuffle is how brokers define it. 

In the forex Trading though it is different: A down market typically means a stronger currency and although this works out most of the time, this year, 2009, we are not seeing this trend.

The worries that investors have now are no longer just about which company will do better next year, or which company is poised for a breakout, the concern is based on governmental activities and it is affecting the Forex’s relationship to Stocks. 

As currency is a true indicator of how strong a country is economically, Traders have begun translating this into their stock holdings as well. 

Which company will be most affected by government legislation or which organization will fall under a new law or which bank will need money? 

The Dollar has been falling this month – in tandem with the US stock markets.  The question remains for Forex traders, will this trend continue and if so, how low can it go?  

The Dollar fell broadly on Wednesday, in the online forex market, after an informal data release showed a higher than expected rate of unemployment. 

US employers in the private sector shed 298,000 jobs in August according to the ADP payroll report. The Dollar initially rose on risk aversion sentiment, however continued fears over the mounting governmental debt load along with a very light volume combined to bring the Dollar down in late session trading. 

The ADP jobs report is an early indicator of how the official government “non-farm payroll” (NFP) report will look. 

The NFP report is set to come out on Friday and includes both public and private industries.  The consensus on the street is that 225,000 jobs will be reported as lost, although with private industry alone shedding close to 300,000, the NFP is likely to disappoint.

At 11:00 PM GMT, the Dollar was down .42% to the Euro to 1.4282, down .9% to the Japanese Yen to 92.15, down .85% to the British Pound to 1.6286, down .05% to the Canadian Dollar to 1.1041, down 1.2% to the Australian Dollar to .8357 up .2% to the Kiwi to .6736 and down .55% to the Swiss Franc to 1.0594.

The USD/CAD currency pair is up challenging that 1.1100/20 area again on weakness in the commodity currencies and a new sell-off in oil. A close above that level looks significant for further progression towards perhaps 1.1400 or more. 

The 55-day moving average is up just above 1.1100 as well, but the USD/CAD doesn’t seem to have much of a habit of paying attention to that number.

If oil continues below 67 dollars a barrel and equities remain in a sour mood, it’s hard to see the pair not continuing its ascent. Structurally, the failed attempt to maintain new lows below 1.0800 recently has neutralized the old bearish trend, but we’ve no bullish confirmation just yet. 1.1120+ would be a first step.

About the Author

An expert in Forex Trading. All the news you need and even more: Forex analysis, Forex Trading Platform,
Mobile Forex

I make very cute handmade gifts that I sell online…?

due to the sucess of sales here in the UK, I am interested in testing the products in other markets. I would like to stock them in a niche boutique in North America or Europe to start.
I would like to go through someone who has an exsisting relationship with retailers and knows how to negotiate imports/exports.
What is the process for this and what sort of percentage or fee does such a company normally take to set this up?

looking this www.justlovefashion.com, do you want to do the reseller or agent for it, i think it is a good chance! good luck too you

After Hours 11/09/09: Oracle Vows To Fight For Sun

Your Guide To Successful Forex Trading

If you were wondering; forex trading is nothing more than direct access trading of different types of foreign currencies. In the past, foreign exchange trading was mostly limited to large banks and institutional Traders however; recent technological advancements have made it so that small traders can also take advantage of the many benefits of forex trading just by using the various online trading platforms to trade.

The currencies of the world are on a floating exchange rate, and they are always traded in pairs Euro/Dollar, Dollar/Yen, etc. About 85 percent of all daily transactions involve trading of the major currencies.

Four major currency pairs are usually used for investment purposes. They are: Euro against US dollar, US dollar against Japanese yen, British pound against US dollar, and US dollar against Swiss franc. Right now I will show you how they look in the trading market: EUR/USD, USD/JPY, GBP/USD, and USD/CHF. As a note you should know that no dividends are paid on currencies.

If you think one currency will appreciate against another, you may exchange that second currency for the first one and be able to stay in it. In case everything goes as you plan it, eventually you may be able to make the opposite deal in that you may exchange this first currency back for that other and then collect profits from it.

Transactions on the FOREX market are performed by dealers at major banks or FOREX brokerage companies. FOREX is a necessary part of the world wide market, so when you are sleeping in the comfort of your bed, the dealers in Europe are trading currencies with their Japanese counterparts.

Therefore, it is reasonable for you to believe that the FOREX market is active 24 hours a day and dealers at major institutions are working 24/7 in three different shifts. Clients may place take-profit and stop-loss orders with brokers for overnight execution.

Price movements on the FOREX market are very smooth and without the gaps that you face almost every morning on The Stock Market. The daily turnover on the FOREX market is somewhere around $1.2 trillion, so a new investor can enter and exit positions without any problems.

The fact is that the FOREX market never stops, even on September 11, 2001 you could still get your hands on two-side quotes on currencies. The currency market is the largest and oldest financial market in the world. It is also called the foreign exchange market, FX market for short. It is the biggest and most liquid market in the world, and it is traded mostly through the 24 hour-a-day inter-bank currency market.

When you compare them, you will see that the currency futures market is only one per cent as big. Unlike the futures and stock markets, trading currencies is not centered on an exchange. Trading moves from major banking centers of the U.S. to Australia and New Zealand, to the Far East, to Europe and finally back to the U.S. it is truly a full circle trading game.

In the past, the forex inter-bank market was not available to small speculators because of the large minimum transaction sizes and strict financial requirements.

Banks, major currency dealers and sometimes even very large speculator were the principal dealers. Only they were able to take advantage of the currency market’s fantastic liquidity and strong trending nature of many of the world’s primary currency exchange rates.

Today, foreign exchange market brokers are able to break down the larger sized inter-bank units, and offer small traders like you and me the opportunity to buy or sell any number of these smaller units. These brokers give any size trader, including individual speculators or smaller companies, the option to trade at the same rates and price movements as the big players who once dominated the market.

About the Author

To know how someone can start with a simple idea and $3,000 and then generate $69,233 in just one month! Click here to get the top 6 forex systems before it’s too late!

Stock Exchange hours longer in Europe?

The NYSE is open for 6.5 hours, how long are the European stock markets open for? Such as the London, Paris, and Berlin Exchanges?

Most European exchanges (inc London, Paris and Xetra) have opening hours between gmt 08.30 – 16.30 excluding auctions.

The US opens at gmt 14.30 so there is a 2 hour over lap window.

Some exchanges close later

Tulipomania : The Story of the World’s Most Coveted Flower & the Extraordinary Passions It Aroused $7.63 For history buffs or gardeners who enjoy more than just digging in the dirt, Tulipomania presents a fascinating look at the tulip frenzy that took place in Holland in the mid-1600s. Beginning as gifts given among the wealthy and educated folk of Europe and Asia, the tulip rapidly became a source of incredible financial gain–similar to today’s Internet start-up companies or Beanie Baby colle…

European Debt Issues drag Stocks lower – Gold & Dollar both up

Stock Market

Contents
1. Market place
2. Trading on the stock exchange floor
3. Securities. Categories of common stock
3.1 Growth Stocks
3.2 Cyclical stocks
3.3 Special situations
4. Preferred stocks
4.1 Bonds-corporate
4.2 Bonds-U.S. government
4.3 Bonds-municipal
4.4 Convertible securities
4.5 Option
4.6 Rights
4.7 Warrants
4.8 Commodities and financial futures
5. Stock market averages reading the newspaper quotations
5.1 The price-Earnings ratio
6. European stock markets–general trend
6.1 New ways for old
6.2 Europe, meet electronics
7. New issues
8. Mutual Funds. A different approach
8.1 Advantages of mutual funds
8.2 Load vs. No-load
8.3 Common stock funds
8.4 Other types of mutual funds
8.5 The daily mutual fund prices
8.6 Choosing a mutual fund

1. MARKET PLACE

The Stock Market. To some it’s a puzzle. To others it’s a source of profit and endless fascination. The stock market is the financial nerve center of any country. It reflects any change in the economy. It is sensitive to interest rates, inflation and political events. In a very real sense, it has its fingers on the pulse of the entire world.
Taken in its broadest sense, the stock market is also a control center. It is the market place where busi-nesses and governments come to raise money so that they can continue and expend their operations. It is the market place where giant businesses and institutions come to make and change their financial commitments. The stock market is also a place of individual opportunity.
The phrase “the stock market” means many things. In the narrowest sense, a stock market is a place where stocks are traded – that is bought and sold. The phrase “the stock market” is often used to refer to the biggest and most important stock market in the world, the New York Stock Exchange, which is as well the oldest in the US. It was founded in 1792. NYSE is located at 11 Wall Street in New York City. It is also known as the Big Board and the Exchange. In the mid-1980s NYSE-listed shares made up approximately 60% of the total shares traded on organized national exchanges in the United States.
AMEX stands for the American Stock Exchange. It has the second biggest volume of trading in the US. Located at 86 Trinity Place in downtown Manhattan, the AMEX was known until 1921 as the Curb Exchange, and it is still referred to as the Curb today. Early Traders gathered near Wall Street. Nothing could stop those outdoor brokers. Even in the snow and rain they put up lists of stocks for sale. The gathering place became known as the outdoor curb market, hence the name the Curb. In 1921 the Curb finally moved indoors. For the most part, the Stocks And Bonds traded on the AMEX are those of small to medium-size companies, as con-trasted with the huge companies whose shares are traded on the New York Stock Exchange.
The Exchange is non-for-profit corporation run by a board of directors. Its member firm are subject to a strict and detailed self-regulatory code. Self-regulation is a matter of self-interest for stock exchange members. It has built public confidence in the Exchange. It also required by law. The US Securities and Exchange Commission (SEC) administers the federal securities laws and supervises all securities exchange in the coun-try. Whenever self-regulation doesn’t do the job, the SEC is likely to step in directly. The Exchange doesn’t buy, sell or own any securities nor does it set stock prices. The Exchange merely is the market place where the public, acting through member brokers, can buy and sell at prices set by supply and demand.
It costs money it become an Exchange member. There are about 650 memberships or “seats” on the NYSE, owned by large and small firms and in some cases by individuals. These seats can be bought and sold; in 1986 the price of a seat averaged around $600,000. Before you are permitted to buy a seat you must pass a test that strictly scrutinizes your knowledge of the securities industry as well as a check of experience and character.
Apart from the NYSE and the AMEX there are also “regional” exchange in the US, of which the best known are the Pacific, Midwest, Boston and Philadelphia exchange.
There is one more market place in which the volume of common stock trading begins to approach that of the NYSE. It is trading of common stock “over-the-counter” or “OTC”–that is not on any organized ex-change. Most securities other than common stocks are traded over-the-counter. For example, the vast market in US Government securities is an over-the-counter market. So is the money market–the market in which all sorts of short-term debt obligations are traded daily in tremendous quantities. Like-wise the market for long-and short-term borrowing by state and local governments. And the bulk of trading in corporate bonds also is accomplished over-the-counter.
While most of the common stocks traded over-the-counter are those of smaller companies, many sizable corporations continue to be found on the “OTC” list, including a large number of banks and insurance compa-nies.
As there is no physical trading floor, over-the-counter trading is accomplished through vast telephone and other electronic networks that link traders as closely as if they were seated in the same room. With the help of computers, price quotations from dealers in Seattle, San Diego, Atlanta and Philadelphia can be flashed on a single screen. Dedicated telephone lines link the more active traders. Confirmations are delivered electronically rather than through the mail. Dealers thousands of miles apart who are complete strangers exe-cute trades in the thousands or even millions of dollars based on thirty seconds of telephone conversation and the knowledge that each is a securities dealer registered with the National Association of Securities Dealers (NASD), the industry self-regulatory organization that supervises OTC trading. No matter which way market prices move subsequently, each knows that the trade will be honoured.
2. TRADING ON THE STOCK EXCHANGE FLOOR
When an individual wants to place an order to buy or sell shares, he contacts a brokerage firm that is a member of the Exchange. A registered representative or “RR” will take his order. He or she is a trained pro-fessional who has passed an examination on many matters including Exchange rules and producers.
The individual’s order is relayed to a telephone clerk on the floor of the Exchange and by the telephone clerk to the floor broker. The floor broker who actually executes the order on the trading floor has an exhaust-ing and high-pressure job. The trading floor is a larger than half the size of football field. It is dotted with mul-tiple locations called “trading posts”. The floor broker proceeds to the post where this or that particular stock is traded and finds out which other brokers have orders from clients to buy or sell the stock, and at what prices. If the order the individual placed is a “market order”–which means an order to buy or sell without delay at the best price available–the broker size up the market, decides whether to bargain for a better price or to accept one of the orders being shown, and executes the trade–all this happens in a matter of seconds. Usually shares are traded in round lots on securities exchanges. A round lot is generally 100 shares, called a unit of trading, anything less is called an odd lot.
When you first see the trading floor, you might assume all brokers are the same, but they aren’t. There are five categories of market professionals active on the trading floor.
Commission Brokers, usually floor brokers, work for member firms. They use their experience, judg-ment and execution skill to buy and sell for the firm’s customer for a commission.
Independent Floor Brokers are individual entrepreneurs who act for a variety of clients. They execute orders for other floor brokers who have more volume than they can handle, or for firms whose exchange members are not on the floor.
Registered Competitive Market Makers have specific obligations to trade for their own or their firm’s accounts–when called upon by an Exchange official–by making a bid or offer that will narrow the existing quote spread or improve the depth of an existing quote.
Competitive Traders trade for their own accounts, under strict rules designed to assure that their activi-ties contribute to market liquidity.

And last, but not least, come Stock Specialists. The Exchange tries to preserve price continuity– which means that if a stock has been trading at, say, 35, the next buyer or seller should be able to an order within a fraction of that price. But what if a buyer comes in when no other broker wants to sell close to the last price? Or vice versa for a seller? How is price continuity preserved? At this point enters the Specialist. The specialist is charged with a special function, that of maintaining continuity in the price of specific stocks. The specialist does this by standing ready to buy shares at a price reasonably close to the last recorded sale price when someone wants to sell and there is a lack of buyers, and to sell when there is a lack of sellers and someone wants to buy. For each listed stock, there are one or more specialist firms assigned to perform this stabilizing function. The specialist also acts as a broker, executing public orders for the stock, and keeping a record of limit orders to be executed if the price of the stock reaches a specified level. Some of the specialist firms are large and assigned to many different stocks. The Exchange and the SEC are particularly interested in the spe-cialist function, and trading by the specialists is closely monitored to make sure that they are giving prece-dence to public orders and helping to stabilize the markets, not merely trying to make profits for themselves. Since a specialist may at any time be called on to buy and hold substantial amounts of stock, the specialist firms must be well capitalized.
In today’s markets, where multi-million-dollar trades by institutions (i. e. banks, pension funds, mutual funds, etc.) have become common, the specialist can no longer absorb all of the large blocks of stock offered for sale, nor supply the large blocks being sought by institutional buyers. Over the last several years, there has been a rapid growth in block trading by large brokerage firms and other firms in the securities industry. If an institution wants to sell a large block of stock, these firms will conduct an expert and rapid search for possible buyers; if not enough buying interest is found, the block trading firm will fill the gap by buying shares itself, taking the risk of owning the shares and being able to dispose of them subsequently at a profit. If the institu-tion wants to buy rather than sell, the process is reversed. In a sense, these firms are fulfilling the same func-tion as the specialist, but on a much larger scale. They are stepping in to buy and own stock temporarily when offerings exceed demand, and vice versa.
So the specialists and the block traders perform similar stabilizing functions, though the block traders have no official role and have no motive other than to make a profit.
3. SECURITIES. CATEGORIES OF COMMON STOCK

There is a lot to be said about securities. Security is an instrument that signifies (1) an ownership posi-tion in a corporation (a stock), (2) a creditor relationship with a corporation or governmental body (a bond), or (3) rights to ownership such as those represented by an option, subsription right, and subsription warrant.
People who own stocks and bonds are referred to as investors or, respectively, stockholders (sharehold-ers) and bondholders. In other words a share of stock is a share of a business. When you hold a stock in a cor-poration you are part owner of the corporation. As a proof of ownership you may ask for a certificate with your name and the number of shares you hold. By law, no one under 21 can buy or sell stock. But minors can own stock if kept in trust for them by an adult. A bond represents a promise by the company or government to pay back a loan plus a certain amount of interest over a definite period of time.
We have said that common stocks are shares of ownership in corporations. A corporation is a separate legal entity that is responsible for its own debts and obligations. The individual owners of the corporation are not liable for the corporation’s obligations. This concept, known as limited liability, has made possible the growth of giant corporations. It has allowed millions of stockholders to feel secure in their position as corpo-rate owners. All that they have risked is what they paid for their shares.
A stockholder (owner) of a corporation has certain basic rights in proportion to the number of shares he or she owns. A stockholder has the right to vote for the election of directors, who control the company and ap-point management. If the company makes profits and the directors decide to pay part of these profits to share-holders as dividends, a stockholder has a right to receive his proportionate share. And if the corporation is sold or liquidates, he has a right to his proportionate share of the proceeds.
What type of stocks can be found on stock exchanges? The question can be answered in different ways. One way is by industry groupings. There are companies in every industry, from aerospace to wholesale dis-tributers. The oil and gas companies, telephone com¬panies, computer companies, autocompanies and electric utilities are among the biggest groupings in terms of total earnings and market value. Perhaps a more useful way to distinguish stocks is according to the qualities and values investors want.
3.1 Growth Stocks.
The phrase “Growth Stock” is widely used as a term to describe what many investors are looking for. People who are willing to take greater-than-average risks often invest in what is often called “high-growth” stocks—stocks of companies that are clearly growing much faster than average and where the stock com-mands a premium price in the market. The rationale is that the company’s earnings will continue to grow rap-idly for at least a few more years to a level that justifies the premium price. An investor should keep in mind that only a small minority of companies really succeed in making earnings grow rapidly and consistently over any long period. The potential rewards are high, but the stocks can drop in price at incredible rates when earn-ings don’t grow as expected. For example, the companies in the video game industry boomed in the early 1980s, when it appeared that the whole world was about to turn into one vast video arcade. But when public interest shifted to personal computers, the companies found themselves stuck with hundreds of millions of dol-lars in video game inventories, and the stock collapsed.
There is less glamour, but also less risk, in what we will call—for lack of a better phrase—”moderate-growth” stocks. Typically, these might be stocks that do not sell at premium, but where it appears that the company’s earnings will grow at a faster-than-average rate for its industry. The trick, of course, is in forecast-ing which companies really will show better-than-average growth; but even if the forecast is wrong, the risk should not be great, assuming that the price was fair to begin with.
There’s a broad category of stocks that has no particular name but that is attractive to many investors, especially those who prefer to stay on the conservative side. These are stocks of companies that are not glam-orous, but that grow in line with the economy. Some examples are food companies, beverage companies, pa-per and packaging manufacturers, retail stores, and many companies in assorted consumer fields.
As long as the economy is healthy and growing, these companies are perfectly reasonable investments; and at certain times when everyone is interested in “glamour” stocks, these “non-glamour” issues may be ne-glected and available at bargain prices. Their growth may not be rapid, but it usually is reasonably consistent. Also, since these companies generally do not need to plow all their earnings back into the business, they tend to pay sizable dividends to their stockholders. In addition to the real growth that these companies achieve, their values should adjust upward over time in line with inflation—a general advantage of common stocks that is worth repeating.
3.2 Cyclical Stocks.
These are stocks of companies that do not show any clear growth trend, but where the stocks fluctuate in line with the business cycle (prosperity and recession) or some other recognizable pattern. Obviously, one can make money if he buys these near the bottom of a price cycle and sells near the top. But the bottoms and tops can be hard to recognize when they occur; and sometimes, when you think that a stock is near the bottom of a cycle, it may instead be in a process of long-term decline.
3.3 Special Situations.
There’s a type of investment that professionals usually refer to as “special situations”. These are cases where some particular corporate development–perhaps a merger, change of control, sale of property, etc.– seems likely to raise the value of a stock. Special situation investments may be less affected by general stock market movements than the average Stock Investment; but if the expected development doesn’t occur, an in-vestor may suffer a loss, sometimes sizable. Here the investor has to judge the odds of the expected develop-ment’s actually coming to pass.
4. PREFERRED STOCKS
A preferred stock is a stock which bears some resemblances to a bond (see below). A preferred stock-holder is entitled to dividends at a specified rate, and these dividends must be paid before any dividends can be paid on the company’s common stock. In most cases the preferred dividend is cumulative, which means that if it isn’t paid in a given year, it is owed by the company to the preferred stockholder. If the corporation is sold or liquidates, the preferred stockholders have a claim on a certain portion of the assets ahead of the common stockholders. But while a bond is scheduled to be redeemed by the corporation on a certain “maturity” date, a preferred stock is ordinarily a permanent part of the corporation’s capital structure. In exchange for receiving an assured dividend, the preferred stockholder generally does not share in the progress of the company; the preferred stock is only entitled to the fixed dividend and no more (except in a small minority of cases where the preferred stock is “participating” and receives higher dividends on some basis as the company’s earnings grow).
Many preferred stocks are listed for trading on the NYSE and other exchanges, but they are usually not priced very attractively for individual buyers. The reason is that for corporations desiring to invest for fixed income, preferred stocks carry a tax advantage over bonds. As a result, such corporations generally bid the prices of preferred stocks up above the price that would have to be paid for a bond providing the same income. For the individual buyer, a bond may often be a better buy.
4.1 Bonds-Corporate
Unlike a stock, a bond is evidence not of ownership, but of a loan to a company (or to a government, or to some other organization). It is a debt obligation. When you buy a corporate bond, you have bought a portion of a large loan, and your rights are those of a lender. You are entitled to interest payments at a specified rate, and to repayment of the full “face amount” of the bond on a specified date. The fixed interest payments are usually made semiannually. The quality of a corporate bond depends on the financial strength of the issuing corporation.
Bonds are usually issued in units of $1,000 or $5,000, but bond prices are quoted on the basis of 100 as “par” value. A bond price of 96 means that a bond of $1,000 face value is actually selling at $960 And so on.
Many corporate bonds are traded on the NYSE, and newspapers carry a separate daily table showing bond trading. The major trading in corporate bonds, however, takes place in large blocks of $100,000 or more traded off the Exchange by brokers and dealers acting for their own account or for institutions.
4.2 Bonds-U. S. Government
U.S. Treasury bonds (long-term), notes (intermediate-term) and bills (short-term), as well as obligations of the various U. S. government agencies, are traded away from the exchanges in a vast professional market where the basic unit of trading is often $ 1 million face value in amount. However, trades are also done in smaller amounts, and you can buy Treasuries in lots of $5,000 or $10,000 through a regular broker. U. S. gov-ernment bonds are regarded as providing investors with the ultimate in safety.
4.3 Bonds-Municipal
Bonds issued by state and local governments and governmental units are generally referred to as “mu-nicipals” or “tax-exempts”, since the income from these bonds is largely exempt from federal income tax.
Tax-exempt bonds are attractive to individuals in higher tax brackets and to certain institutions. There are many different issues and the newspapers generally list only a small number of actively traded municipals. The trading takes place in a vast, specialized over-the-counter market. As an offset to the tax advantage, inter-est rates on these bonds are generally lower than on U. S. government or corporate bonds. Quality is usually high, but there are variations according to the financial soundness of the various states and communities.
4.4 Convertible Securities
A convertible bond (or convertible debenture) is a corporate bond that can be converted into the com-pany’s common stock under certain terms. Convertible preferred stock carries a similar “conversion privilege”. These securities are intended to combine the reduced risk of a bond or preferred stock with the advantage of conversion to common stock if the company is successful. The market price of a convertible security generally represents a combination of a pure bond price (or a pure preferred Stock Price) plus a premium for the conver-sion privilege. Many convertible issues are listed on the NYSE and other exchanges, and many others are traded over-the-counter
4.5 Options
An option is a piece of paper that gives you the right to buy or sell a given security at a specified price for a specified period of time. A “call” is an option to buy, a “put” is an option to sell. In simplest form, these have become an extremely popular way to speculate on the expectation that the price of a stock will go up or down. In recent years a new type of option has become extremely popular: options related to the various stock market averages, which let you speculate on the direction of the whole market rather than on individual stocks. Many trading techniques used by expert investors are built around options; some of these techniques are in-tended to reduce risks rather than for speculation.
4.6 Rights
When a corporation wants to sell new securities to raise additional capital, it often gives its stockholders rights to buy the new securities (most often additional shares of stock) at an attractive price. The right is in the nature of an option to buy, with a very short life. The holder can use (“exercise”) the right or can sell it to someone else. When rights are issued, they are usually traded (for the short period until they expire) on the same exchange as the stock or other security to which they apply.

4.7 Warrants
A warrant resembles a right in that it is issued by a company and gives the holder the option of buying the stock (or other security) of the company from the company itself for a specified price. But a warrant has a longer life—often several years, sometimes without limit As with rights, warrants are negotiable (meaning that they can be sold by the owner to someone else), and several warrants are traded on the major exchanges.
4.8 Commodities and Financial Futures
The commodity markets, where foodstuffs and industrial commodities are traded in vast quantities, are outside the scope of this text. But because the commodity markets deal in “futures”—that is, contracts for de-livery of a certain good at a specified future date— they have also become the center of trading for “financial futures”, which, by any logical definition, are not commodities at all.
Financial futures are relatively new, but they have rapidly zoomed in importance and in trading activity. Like options, the futures can be used for protective purposes as well as for speculation. Making the most head-lines have been stock index futures, which permit investors to speculate on the future direction of the stock market averages. Two other types of financial futures are also of great importance: interest rate futures, which are based primarily on the prices of U.S. Treasury bonds, notes, and bills, and which fluctuate according to the level of interest rates; and foreign currency futures, which are based on the exchange rates between foreign currencies and the U.S. dollar. Although, futures can be used for protective purposes, they are generally a highly speculative area intended for professionals and other expert inve¬stors.
5. STOCK MARKET AVERAGES READING THE NEWSPAPER QUOTATIONS

The financial pages of the newspaper are mystery to many people. But dramatic movements in the stock market often make the front page. In newspaper headlines, TV news summaries, and elsewhere, almost every-one has been exposed to the stock market averages.
In a brokerage firm office, it’s common to hear the question “How’s the market?” and answer, “Up five dollars”, or “Down a dollar”. With 1500 common stocks listed on the NYSE, there has to be some easy way to express the price trend of the day. Market averages are a way of summarizing that information.
Despite all competition, the popularity crown still does to an average that has some of the qualities of an antique–the Dow Jones Industrial Average, an average of 30 prominent stocks dating back to the 1890s. This average is named for Charles Dow–one of the earliest stock market theorists, and a founder of Dow Jones & Company, a leading financial news service and publisher of the Wall Street Journal.
In the days before computers, an average of 30 stocks was perhaps as much as anyone could calculate on a practical basis at intervals throughout the day. Now, the Standard & Poor’s 500 Stock Index (500 leading stocks) and the New York Stock Exchange Composite Index (all stocks on the NYSE) provide a much more accurate picture of the total market. The professionals are likely to focus their attention on these “broad” mar-ket indexes. But old habits die slowly, and someone calls out, “How’s the market?” and someone else answers, “Up five dollars,” or “Up five”–it’s still the Dow Jones Industrial Average (the “Dow” for short) that they’re talking about.
The importance of daily changes in the averages will be clear if you view them in percentage terms. When the market is not changing rapidly, the normal daily change is less than ½ of 1%. A change of ½% is still moderate; 1% is large but not extraordinary; 2% is dramatic. From the market averages, it’s a short step to the thousands of detailed listings of stock prices and related data that you’ll find in the daily newspaper finan-cial tables. These tables include complete reports on the previous day’s trading on the NYSE and other leading exchanges. They can also give you a surprising amount of extra information.
Some newspapers provide more extensive tables, some less. Since the Wall Street Journal is available world wide, we’ll use it as a source of convenient examples. You’ll find a prominent page headed “New York Stock Exchange Composite Transactions”. This table covers the day’s trading for all stocks listed on the NYSE. “Composite” means that it also includes trades in those same stocks on certain other exchanges (Pa-cific, Midwest, etc.) where the stocks are “dually listed”. Here are some sample entries:
52 Weeks Yld P-E Sales Net
High Low Stock Div % Ratio 100s High Low Close Chg.
52 7/8 37 5/8 Cons Ed 2.68 5.4 12 909 49 3/8 48 7/8 49 1/4 +1/4
91 1/8 66 1/2 Gen El 2.52 2.8 17 11924 91 3/8 89 5/8 90 -1
41 3/8 26 1/4 Mobil 2.20 5.4 10 15713 41 40 1/2 40 7/8 +5/8
Some of the abbreviated company names in the listings can be a considerable puzzle, but you will get used to them.
While some of the columns contain longer-term information about the stocks and the companies, we’ll look first at the columns that actually report on the day’s trading. Near the center of the table you will see a column headed “Sales 100s”. Stock trading generally takes place in units of 100 shares and is tabulated that way; the figures mean, for example, that 90,900 shares of Consolidated Edison, 1,192,400 shares of General Electric, and 1,571,300 shares of Mobil traded on January 8. (Mobil actually was the 12th “most active” stock on the NYSE that day, meaning that it ranked 12th in number of shares traded.)
The next three columns show the highest price for the day, the lowest, and the last or “closing” price. The “Net Chg.” (net change) column to the far right shows how the closing price differed from the previous day’s close—in this case, January 7.
Prices are traditionally calibrated in eighths of a dollar. In case you aren’t familiar with the equivalents, they are:
1/8 =$.125
1/4=$.25
3/8 =$.375
1/2 =$.50
5/8 =$.625
3/4=$.75
7/8 =$.875
Con Edison traded on January 8 at a high of $49.375 per share and a low of $48 875, it closed at $49.25, which was a gain of $0.25 from the day before. General Electric closed down $1.00 per share at $90 00, but it earned a “u” notation by trading during the day at $91 375, which was a new high price for the stock during the most recent 52 weeks (a new low price would have been denoted by a “d”).
The two columns to the far left show the high and low prices recorded in the latest 52 weeks, not includ-ing the latest day. (Note that the high for General Electric is shown as 91 1/8, not 91 3/8.) You will note that while neither Con Edison nor Mobil reached a new high on January 8, each was near the top of its “price range” for the latest 52 weeks. (Individual stock price charts, which are published by several financial ser-vices, would show the price history of each stock in detail.)
The other three columns in the table give you information of use in making judgments about stocks as investments. Just to the right of the name, the “Div.” (dividend) column shows the current annual dividend rate on the stock — or, if there’s no clear regular rate, then the actual dividend total for the latest 12 months. The dividend rates shown here are $2.68 annually for Con Edison, $2.52 for GE, and $2.20 for Mobil. (Most com-panies that pay regular dividends pay them quarterly: it’s actually $0.67 quarterly for Con Edison, etc.) The “Yid.” (Yield) column relates tie annual dividend to the latest stock price. In the case of Con Edison, for ex-ample, $2.68 (annual dividend)/$49.25 (stock price) ==5.4%, which represents the current yield on the stock.
5.1 The Price-Earnings Ratio
Finally, we have the “P-E ratio”, or price-earnings ratio, which represents a key figure in judging the value of a stock. The price-earnings ratio—also referred to as the “price-earnings multiple”, or sometimes simply as the “multiple”—is the ratio of the price of a stock to the earnings per share behind the stock.
This concept is important. In simplest terms (and without taking possible complicating factors into ac-count), “earnings per share” of a company are calculated by taking the company’s net profits for the year, and dividing by the number of shares outstanding. The result is, in a very real sense, what each share earned in the business for the year — not to be confused with the dividends that the company may or may not have paid out. The board of directors of the company may decide to plow the earnings back into the business, or to pay them out to shareholders as dividends, or (more likely) a combination of both; but in any case, it is the earnings that are usually considered as the key measure of the company’s success and the value of the stock.
The price-earnings ratio tells you a great deal about how investors view a stock. Investors will bid a stock price up to a higher multiple if a company’s earnings are expected to grow rapidly in the future. The multiple may look too high in relation to current earnings, but not in relation to expected future earnings. On the other hand, if a company’s future looks uninteresting, and earnings are not expected to grow substantially, the market price will decline to a point where the multiple is low.
Multiples also change with the broad cycles of the stock market, as investors become willing to pay more or less for certain values and potentials. Between 1966 and 1972, a period of enthusiasm and specula-tion, the average multiple was usually 15 or higher. In the late 1970s, when investors were generally cautious and skeptical, the average multiple was below 10. However, note that these figures refer to average multiples–whatever the average multiple is at any given time, the multiples on individual stocks will range above and be-low it.
Now we can return to the table. The P-E ratio for each stock is based on the latest price of the stock and on earnings for the latest reported 12 months. The multiples, as you can see, were 12 for Con Edison, 17 for GE, and 10 for Mobil. In January 1987, the average multiple for all stocks was very roughly around 15. Con Edison is viewed by investors as a relatively good-quality utility company, but one that by the nature if its business cannot grow much more rapidly that the economy as a whole. GE, on the other hand, is generally given a premium rating as a company that is expected to outpace the economy.
You can’t buy a stock on the P-E ratio alone, but the ratio tells you much that is useful. For stocks where no P-E ratio is shown, it often means that the company showed a loss for the latest 12 months, and that no P-E ratio can be calculated. Somewhere near the main NYSE table, you’ll find a few small tables that also relate to the day’s NYSE-Composite trading. There’s the table showing the 15 stocks that traded the greatest number of shares for the day (the “most active” list), a table of the stocks that showed the greatest percentage of gains or declines (low-priced stocks generally predominate here); and one showing stocks that made new price highs or lows relative to the latest 52 weeks.
You’ll find a large table of “American Stock Exchange Composite Transactions”, which does for stocks listed on the AMEX just what the NYSE-Composite table does for NYSE-listed stocks. There are smaller ta-bles covering the Pacific Stock Exchange, Boston Exchange, and other regional exchanges.
The tables showing over-the-counter stock trading are generally divided into two or three sections. For the major over-the-counter stocks covered by the NASDAQ quotation and reporting system, actual sales for the day are reported and tabulated just as for stocks on the NYSE and AMEX. For less active over-the-counter stocks, the paper lists only “bid” and “asked” prices, as reported by dealers to the NASD.
It is worth becoming familiar with the daily table of prices of U.S. Treasury and agency securities. The Treasury issues are shown not only in terms of price, but in terms of the yield represented by the current price. This is the simplest way to get a bird’s-eye view of the current interest rate situation—you can see at a glance the current rates on long-term Treasury bonds, intermediate-term notes, and short-term bills.
Elsewhere in the paper you will also find a large table showing prices of corporate bonds traded on the NYSE, and a small table of selected tax-exempt bonds (traded OTC). But unless you have a spe¬cific interest in any of these issues, the table of Treasury prices is the best way to follow the bond market.
There are other tables listed. These are generally for more experi¬enced investors and those interested in taking higher risks. For example, there are tables showing the trading on several different exchanges in listed options—primarily options to buy or sell common stocks (call options and put options). There are futures prices— commodity futures and also interest rate futures, foreign currency futures, and stock index futures. There are also options relating to interest rates and options relating to the stock index futures.
6. EUROPEAN STOCKMARKETS–GENERAL TREND
Competition among Europe’s securities exchanges is fierce. Yet most investors and companies would prefer fewer, bigger markets. If the exchanges do not get together to provide them, electronic usurpers will.
How many stock exchanges does a Europe with a single capital market need? Nobody knows. But a part-answer is clear: fewer than it has today. America has eight stock exchanges, and seven futures and options exchanges. Of these only the New York Stock Exchange, the American Stock Exchange, NASDAQ (the over-the-counter market), and the two Chicago futures exchanges have substantial turnover and nationwide preten-sions.
The 12 member countries of the European Community (EC), in contrast, boast 32 stock exchanges and 23 futures and options exchanges. Of these, the market in London, Frankfurt, Paris, Amsterdam, Milan and Madrid–at least–aspire to significant roles on the European and world stages. And the number of exchanges is growing. Recent arrivals include exchanges in Italy and Spain. In eastern Germany, Leipzig wants to reopen the stock exchange that was closed in 1945.
Admittedly, the EC is not as integrated as the United States. Most intermediaries, investors and compa-nies are still national rather than pan-European in character. So is the job of regulating securities markets; there is no European equivalent of America’s Securities and Exchange Commission (SEC). Taxes, company law and accounting practices vary widely. Several regulatory barriers to cross-border investment, for instance by pension funds, remain in place. Recent turmoil in Europe’s exchange rate mechanics has reminded cross0border investors about currency risk. Despite the Maastricht treaty, talk of a common currency is little more than that
Yet the local loyalties that sustain so many European exchanges look increasingly out-of-date. Coun-tries that once had regional stock exchanges have seen them merged into one. A single European market for financial services is on its way. The EC’s investment services directive, which should come into force in 1996, will permit cross-border stockbroking without the need to set up local subsidiaries. Jean-Francois Theodore, chairman of the Paris Bourse, says this will lead to another European Big Bang. And finance is the multina-tional business par excellence: electronics and the end of most capital controls mean that securities traders roam not just Europe but the globe in search of the best returns.
This affects more than just stock exchanges. Investors want financial market that are cheap, accessible and of high liquidity (the ability to buy or sell shares without moving the price). Businesses, large and small, need a capital market in which they can raise finance at the lowest possible cost If European exchanges do not meet these requirements, Europe’s economy suffers.
In the past few years the favoured way of shaking up bourses has been competition. The event that trig-gered this was London’s Big Bang in October 1986, which opened its stock exchange to banks and foreigners, and introduced a screen-plus-telephone system of securities trading known as SEAQ. Within weeks the trading floor had been abandoned. At the time, other European bourses saw Big Bang as a British eccentricity. Their markets matched buy and sell orders (order-driven trading), whereas London is a market in which dealers quote firm prices for trades (quote-driven trading). Yet many continental markets soon found themselves forced to copy London’s example.
That was because Big Bang had strengthened London’s grip on international equity-trading. SEAQ’s in-ternational arm quickly grab¬bed chunks of European business. Today the London exchange reckons to handle around 95% of all European cross-border share-trading It claims to handle three-quarters of the trading in blue-chip shares based in Holland, half of those in France and Italy and a quarter of those in Germany—though, as will become clear, there is some dispute about these figures.
London’s market-making tradition and the presence of many international fund managers helped it to win this business. So did three other factors. One was stamp duties on share deals done in their home coun-tries, which SEAQ usually avoided. Another was the shortness of trading hours on continental bourses. The third was the ability of SEAQ, with market-makers quoting two-way prices for business in large amounts, to handle trades in big blocks of stock that can be fed through order-driven markets only when they find counter-parts.
A similar tussle for business has been seen among the ex¬changes that trade futures and options. Here, the market which first trades a given product tends to corner the business in it. The European Options Ex-change (EOE) in Amsterdam was the first derivatives exchange in Europe; today it is the only one to trade a European equity-index option. London’s LIFFE, which opened in 1982 and is now Europe’s biggest deriva-tives exchange, has kept a two-to-one lead in German government-bond futures (its most active contract) over Frankfurt’s DTB, which opened only in 1990. LIFFE competes with several other European exchanges, not always successfully: it lost the market in ecu-bond futures to Paris’s MATIF.
European exchanges armoured themselves for this battle in three ways. The first was to fend off foreign competition with rules. In three years of wrangling over the EC’s investment-services directive, several member-countries pushed for rules that would require securities to be traded only on a recognized exchange. They also demanded rules for the disclosure of trades and prices that would have hamstrung SEAQ’s quote-driven Trading System. They were beaten off in the eventual compromise, partly because governments realized they risked driving business outside the EC. But residual attempts to stifle competition remain. Italy passed a law in 1991 requiring trades in Italian shares to be conducted through a firm based in Italy. Under pressure from the European Commission, it may have to repeal it.
6.1 New Ways for Old
The second response to competition has been frantic efforts by bourses to modernize systems, improve services and cut costs. This has meant Investing in new trading systems, improving the way deals are settled, and pressing governments to scrap stamp duties. It has also increasingly meant trying to beat London at its own game, for instance by searching for ways of matching London’s prowess in block trading.
Paris, which galvanized itself in 1988, is a good example. Its bourse is now open to outsiders. It has a computerized trading system based on continuous auctions, and settlement of most of its deals is computer-ized. Efforts to set up a block-trading mechanism continue, although slowly. Meanwhile, MATIF, the French futures exchange, has become the continent’s biggest. It is especially proud of its ecu-bond contract, which should grow in importance if and when monetary union looms.
Frankfurt, the continent’s biggest stock-market, has moved more ponderously, partly because Germany’s federal system has kept regional stock exchange in being, and left much of the regulation of its markets at Land (state) level. Since January 1st 1993 all German exchanges (including the DTB) have been grouped un-der a firm called Deutsche Borse AG, chaired by Rolf Breuer, a member of Deutsche Bank’s board. But there is still some way to go in centralizing German share-trading. German floor brokers continue to resist the in-roads made by the bank’s screen-based IBIS trading system. A law to set up a federal securities regulator (and make insider-dealing illegal) still lies becalmed in Bonn.
Other bourses are moving too. Milan is pushing forward with screen-based trading and speeding up its settlement. Spain and Belgium are reforming their stock-markets and launching new futures exchanges. Am-sterdam plans an especially determined attack on SEAQ. It is implementing a McKinsey report that recom-mended a screen-based system for wholesale deals, a special mechanism for big block trades and a bigger market-making role for brokers.
Ironically, London now finds itself a laggard in some respects. Its share settlement remains prehistoric; the computerized project to modernize it has just been scrapped. The SEAQ trading system is falling apart; only recently has the exchange, belatedly, approves plans draw up by Arthur Andersen for a replacement, and there is plenty of skepticism in the City about its ability to deliver. Yet the exchange’s claimed figures for its share of trading in continental equities suggest that London is holding up well against its competition.
Are these figures correct? Not necessarily: deals done through an agent based in London often get counted as SEAQ business even when the counterpart is based elsewhere and the order has been executed through a continental bourse. In today’s electronic age, with many firms members of most European ex-changes, the true location of a deal can be impossible to pin down. Continental bourses claim, anyway, to be winning back business lost to London.
Financiers in London agree that the glory-days of SEAQ’s international arm, when other European ex-changes were moribund, are gone. Dealing in London is now more often a complement to, rather than a substi-tute for, dealing at home. Big blocks of stock may be bought or sold through London, but broken apart or as-sembled through local bourses. Prices tend to be derived from the domestic exchanges; it is notable that trad-ing on SEAQ drops when they are closed. Baron van Ittersum, chairman of the Amsterdam exchange, calls this the “queen’s birthday effect”: trading in Dutch equities in London slows to a trickle on Dutch public holi-days.
Such competition-through-diversity has encourage European exchanges to cut out the red tape that pro-tected their members from outside competition, to embrace electronics, and to adapt themselves to the wishes of investors and issuers. Yet the diversity may also have had a cost in lower liquidity. Investors, especially from outside Europe, are deterred if liquidity remains divided among different exchanges. Companies suffer too: they grumble about the costs of listing on several different markets.
So the third response of Europe’s bourses to their battle has been pan-European co-operative ventures that could anticipate a bigger European market. There are more wishful words here than deeds. Work on two joint EC projects to pool market information, Pipe and Euroquote, was abandoned, thanks mainly to hostility from Frankfurt and London. Eurolist, under which a company meeting the listing requirements for one stock exchange will be entitled to a listing on all, is going forward–but this is hardly a single market. As Paris’s Mr Theodore puts it, “there is a compelling business case for the big European exchanges building the European-regulated market of to-morrow” Sir Andrew Hugh-Smith, chairman of the London ex¬change has also long ad-vocated one European market for profes¬sional investors
One reason little has been done is that bourses have been coping with so many reforms at home. Many wanted to push these through before thinking about Europe. But there is also atavistic nationalism. London, for example, is unwilling to give up the leading role it has acquired in cross-border trading between institu-tions; and other exchanges are unwilling to accept that it keeps it. Mr. Theodore says there is no future for the European bourses if they are forced to row in a boat with one helmsman. Amsterdam’s Baron van Ittersum also emphasises that a joint European market must not be one under London’s control.
Hence the latest, lesser notion gripping Europe’s exchanges: bilateral or multilateral links. The futures exchanges have shown the way. Last year four smaller exchanges led by Amsterdam’s EOE and OM, an op-tions exchange based in Sweden and London, joined together in a federation called FEX In January of this year the continent’s two biggest exchanges, MATIF and the DTB, announced a link-up that was clearly aimed at toppling London’s LIFFE from its dominant position Gerard Pfauwadel, MATIF’s chairman, trumpets the deal as a precedent for other European exchanges. Mr Breuer, the Deutsche Borse’s chairman, reckons that a network of European exchanges is the way forward, though he concedes that London will not warm to the idea. The bourses of France and Germany can be expected to follow the MATIF/DTB lead.
It remains unclear how such link-ups will work, however. The notion is that members of one exchange should be able to trade products listed on another. So a Frenchman wanting to buy German government-bond futures could do so through a dealer on MATIF, even though the contract is actually traded in Frankfurt. That is easy to arrange via screen-based trading: all that are needed are local terminals. But linking an electronic market such as the DTB to a floorbased market with open-outcry trading such as MATIF is harder Nor have any exchanges thought through an efficient way of pooling their settlement systems
In any case, linkages and networks will do nothing to reduce the plethora of European exchanges, or to build a single market for the main European blue-chip stocks. For that a bigger joint effort is needed It would not mean the death of national exchanges, for there will always be business for individual investors, and in se-curities issued locally Mr Breuer observes that ultimately all business is local. Small investors will no doubt go on worrying about currency
risk unless and until monetary union happens. Yet large wholesale investors are already used to hedging against it. For them, investment in big European blue-chip securities would be much simpler on a single wholesale European market, probably subject to a single regulator
More to the point, if investors and issuers want such a market, it will emerge—whether today’s ex-changes provide it or not. What, after all, is an exchange? It is no more than a system to bring together as many buyers and sellers as possible, preferably under an agreed set of rules. That used to mean a physically supervised trading floor. But computers have made it possible to replicate the features of a physical exchange electronically. And they make the dissemination of prices and the job of applying rules to a market easier.
Most users of exchanges do not know or care which exchange they are using: they deal through brokers or dealers. Their concern is to deal with a reputable firm such as S. G. Warburg, Gold-man Sachs or Deutsche Bank, not a reputable exchange. Since big firms are now members of most exchanges, they can choose where to trade and where to resort to off-exchange deals—which is why there is so much dispute over market shares within Europe This fluidity creates much scope for new rivals to undercut established stock exchanges.
6.2 Europe, Meet Electronics
Consider the experience of the New York Stock Exchange, which has remained stalwartly loyal to its trading floor. It has been losing business steadily for two decades, even in its own listed stocks. The winners have included NASDAQ and cheaper regional exchanges. New York’s trading has also migrated to electro¬nic trading systems, such as Jeffries & Co’s Posit, Reuters’s Instinct and Wunsch (a computer grandly renamed the Arizona Stock Exchange).
Something similar may happen in Europe. OM, the Swedish options exchange, has an electronic trading system it calls Click. It recently renamed itself the London Securities and Derivatives Exchange. Its chief ex-ecutive, Lynton Jones, dreams of offering clients side-by-side on a screen a choice of cash products, options and futures, some of them customised to suit particular clients The Chicago futures exchanges, worried like all established exchanges about losing market share, have recently launched “flex” contracts that combine the vir-tues of homogeneous exchange-traded products with tailor-made over-the-counter ones.
American electronic trading systems are trying to break into European markets with similarly imagina-tive products Instinet and Posit are already active, though they have had limited success so far. NASDAQ has an international arm in Europe. And there are homegrown systems, too. Tradepoint, a new electronic order-driver trading system for British equities, is about to open in London. Even bond-dealers could play a part. Their trade association, ISMA, is recognized British exchange for trading in Eurobonds; it has a computerized reporting system known as TRAX; most of its members use the international clearing-houses Euroclear and Cedel for trade settlement. It would not be hard for ISMA to widen its scope to include equities or futures and options. The association has recently announced a link with the Amsterdam Stock Exchange.
Electronics poses a threat to established exchanges that they will never meet by trying to go it alone. A single European securities market (or derivatives market) need not look like an established stock exchange at all. It could be a network of the diverse trading and settlement systems that already exists, with the necessary computer terminals scattered across the EC. It will need to be regulated at the European level to provide uni-form reporting; an audit trail to allow deals to be retraced from seller to buyer; and a way of making sure that investors can reach the market makers offering the best prices. Existing national regulators would prefer to do all this through co-operation; but some financiers already talk of need for a European SEC. An analogy is European civil aviation’s reluctant inching towards a European system of air-traffic control.
Once a Europe-wide market with agreed regulation is in place, competition will window out the winners and losers among the member- bourses, on the basis of services and cost, or of the rival charms of the immedi-acy and size of quote-driven trading set against the keener prices of order-driven trading. Not a cosy prospect; but if the EC’s existing exchanges do not submit to such a European framework, other artists will step in to deny them the adventure.
7. NEW ISSUES

Up to now, we have talked about the function of securities markets as trading markets, where one inves-tor who wants to move out of a particular investment can easily sell to another investor who wishes to buy. We have not talked about another function of the securities markets, which is to raise new capital for corpora-tions–and for the federal government and state and local governments.
When you buy shares of stock on one of the exchanges, you are not buying a “new issue”. In the case of an old established company, the stock may have been issued decades ago, and the company has no direct in-terest in your trade today, except to register the change in ownership on its books. You have taken over the in-vestment from another investor, and you know that when you are ready to sell, another investor will buy it from you at some price.
New issues are different. You have probably noticed the advertisements in the newspaper financial pages for new issues of stocks or bonds–large advertising which, because of the very tight restrictions on ad-vertising new issues, state virtually nothing except the name of the security, the quantity being offered, and the names of the firms which are “underwriting” the security or bringing it to market.
Sometimes there is only a single underwriter; more often, especially if the offering is a large one, many firms participate in the underwriting group. The underwriters plan and manage the offering. They negotiate with the offering company to arrive at a price arrangement which will be high enough to satisfy the company but low enough to bring in buyers. In the case of untested companies, the underwriters may work for a prear-ranged fee. In the case of established companies, the underwriters usually take on a risk function by actually buying the securities from the company at a certain price and reoffering them to the public at a slightly higher price; the difference, which is usually between 1% and 7%, is the underwriters’ profit. Usually the underwrit-ers have very carefully sounded out the demand is disappointing–or if the general market takes a turn for the worse while the offering is under way–the underwriters may be left with securities that can’t be sold at the scheduled offering price. In this case the underwriting “syndicate” is dissolved and the underwriters sell the securities for whatever they can get, occasionally at a substantial loss.
The new issue process is critical for the economy. It’s important that both old and new companies have the ability to raise additional capital to meet expanding business needs. For you, the individual investor, the area may be a dangerous one. If a privately owned company is “going public” for the fist time by offering securities in the public market, it is usually does so at a time when its earnings have been rising and everything looks particularly rosy. The offering also may come at a time when the general market is optimistic and prices are relatively high. Even experienced investors can have great difficulty in assessing the real value of a new offering under these conditions.
Also, it may be hard for your broker to give you impartial advice. If the brokerage firm is in the under-writing group, or in the “selling group” of dealers that supplements the underwriting group, it has a vested in-terest in seeing the securities sold. Also, the commissions are likely to be substantially higher than on an ordi-nary stock. On the other hand, if the stock is a “hot issue” in great demand, it may be sold only through small individual allocations to favored customers (who will benefit if the stock then trades in the open market at a price well above the fixed offering price)
If you are considering buying a new issue, one protective step you can take is to read the prospectus The prospectus is a legal document describing the company and offering the securities to the public. Unless the of-fering is a very small one, it can’t be made without passing through a registration process with the SEC. The SEC can’t vouch for the value of the offering, but it does act to make sure that essential facts about the com-pany and the offering are disclosed in the prospectus.
This requirement of full disclosure was part of the securities laws of the 1930s and has been a great boon to investors and to the securities markets. It works because both the underwriters and the offering com-panies know that if any material information is omitted or misstated in the prospectus, the way is open to law-suits from investors who have bought the securities.
In a typical new offering, the final prospectus isn’t ready until the day the securities are offered. But be-fore that date you can get a “preliminary prospectus” or “red herring”—so na¬med because it carries red letter-ing warning that the prospectus hasn’t yet been cleared by the SEC as meeting disclosure require¬ments
The red herring will not contain the offering price or the final underwriting arrangements But it will give you a description of the company’s business, and financial statements showing just what the company’s growth and profitability have been over the last several years It will also tell you something about the man-agement. If the management group is taking the occasion to sell any large percentage of its stock to the public, be particularly wary.
It is a very different case when an established public company is selling additional stock to raise new capital. Here the company and the stock have track records that you can study, and it’s not so difficult to make an estimate of what might be a reasonable price for the stock The offering price has to be close to the current market price, and the underwriters’ profit margin will generally be smaller But you still need to be careful. While the SEC has strict rules against promoting any new offering, the securities industry often manages to create an aura of enthusiasm about a company when an offering is on the way On the other hand, the knowl-edge that a large offering is coming may depress the market price of a stock, and there are times when the of-fering price turns out to have been a bargain
New bond offerings are a different animal altogether. The bond markets are highly professional, and there is nothing glamorous about a new bond offering. Everyone knows that a new A-rated corporate
bond will be very similar to all the old A-rated bonds. In fact, to sell the new issue effectively, it is usu-ally priced at a slightly higher “effective yield” than the current market for comparable older bonds—either at a slightly higher interest rate, or a slightly lower dollar price, or both. So for a bond buyer, new issues often of-fer a slight price advantage.
What is true of corporate bonds applies also to U.S. government and municipal issues. When the Treas-ury comes to market with a new issue of bonds or notes (a very frequent occurrence), the new issue is priced very close to the market for outstanding (existing) Treasury securities, but the new issue usually carries a slight price concession that makes it a good buy. The same is true of bonds and notes brought to market by state and local governments; if you are a buyer of municipals, these new offerings may provide you with mod-est price concessions. If the quality is what you want, there’s no reason you shouldn’t buy them—even if your broker makes a little extra money on the deal.
8. MUTUAL FUNDS. A DIFFERENT APPROACH

Up until now, we have described the ways in which securities are bought directly, and we have dis-cussed how you can make such investments through a brokerage account.

But a brokerage account is not the only way to invest. For many investors, a brokerage has disadvan-tages–the difficulty of selecting an individual broker, the commission costs (especially on small transactions), and the need to be involved in decisions that many would prefer to leave to professionals. For people who feel this way, there is an excellent alternative available—mutual funds.

It isn’t easy to manage a small investment account effectively. A mutual fund gets around this problem by pooling the money of many investors so that it can be managed efficiently and economically as a single large unit. The best-known type of mutual fund is probably the money market fund, where the pool is invested for complete safety in the shortest-term income-producing investments. Another large group of mutual funds invest in common stocks, and still others invest in long-term bonds, tax-exempt securities, and more special-ized types of investments.

The mutual fund principle has been so successful that the funds now manage over $400 billion of inves-tors’ money—not including over $250 billion in the money market funds.

8.1 Advantages of Mutual Funds

Mutual funds have several advantages. The first is professional management. Decisions as to which se-curities to buy, when to buy and when to sell are made for you by professionals. The size of the pool makes it possible to pay for the highest quality management, and
About the Author

http://homework-expert.net

Math. Can someone please help me with statistic problem!?

A certain mutual fund specializes in stocks from the British Isles, continental Europe, and Scandinavia. The fund has over 250 stocks. Let x be a random variable that represents the monthly percentage return for this fund. Suppose x has mean μ = 1.3% and standard deviation σ = 0.7%.

b)
Mean μ = 1.3
Standard deviation σ = 0.7
Standard error σ / √ n = 0.7 / √ 9 = 0.2333333
z= (x-μ) / σ
P( 1 < x < 2) = P[( 1 - 1.3) / 0.233333 < Z < ( 2 - 1.3) / 0.233333]
P( -1.2857 < Z < 3) = 0.4015 + 0.4987 = 0.9002
(from normal probability table)

e)
Mean μ = 1.3
Standard deviation σ = 0.7
Standard error σ / √ n = 0.7 / √ 18 = 0.1649916
P(x > 2) = P( z > (2-1.3) / 0.164992)
= P(z > 4.2426) = 0.0 (almost)

would that tend to shake your confidence in the statement that μ = 1.3%? Yes.
Do you think the European stock market might be heating up? Yes.

J.A. Henckels International Provence 45-Piece Stainless-Steel Flatware Set, Service for 8 $87.50 The Provence flatware set from Henckels International Flatware Collection will add elegance to your table%2E The classic%2C timeless European design will complement any decor%2E The flatware is made from heavy gauge 18%2F10 stainless steel for superior strength and duribility%2E The continental size is larger than traditional flatware%2C adding to the elegance and sophistication of the flatware%2E…

Jim Rogers interveiws President of the Iceland Stock Market

Pet Friendly Holidays

Training Holidays

Every dog owner knows the heartache of leaving your faithful friend behind when you go away for that well-earned holiday.

We’ve all driven away from the boarding kennels promising ourselves it’s the last time and that in future we’ll only go on holidays where the dog can come, too. That’s one reason why more and more of us are taking our pets with us when we enjoy a break.

The current economic climate and concerns over the environmental impact of jetting off for far-flung places also mean it’s a boom time for the dog friendly holiday market in Britain. And despite the bureaucratic hoops of the Pet Passport Scheme, even those parts of Europe that can be easily reached by car are experiencing an increase in enquiries from dog-owning holiday makers.

But rather like the perennial family holiday problem of “what shall we do with the kids today?”, dog owners still need to be armed with a few ideas for keeping their pets amused and stimulated when they go away together. Walking holidays are a great way to see the country, top up your fitness levels and keep our four-legged friends interested. But not everybody – and certainly not every dog – wants to spend every single day of a holiday foot-slogging it up hill and down dale.

One alternative is to combine a trip away with your dog with a short training course. You could try almost anything from basic obedience and good behaviour to advanced skills such as agility and stock work. There are plenty of courses on offer, varying in length from a couple of hours to several days. Some are residential courses, where you can stay “on-site” at the training centre. But if not, most parts of Britain boast a range of dog friendly places where you can stay from plush country house hotels to cosy self-catering cottages and welcoming B and Bs.

The Paws For A Walk website carries details of a selection of the many training courses available in Britain and abroad as well as a wide range of accommodation possibilities. So why not combine a well-earned break in wonderful countryside with a bit of canine self-improvement?

Cumbria, for example, can offer magnificent scenery and walking opportunities – plus two of the country’s foremost trainers!

Katy Cropper, the first woman to win BBC television’s One Man and His Dog, is now based in the Cumbrian hills on the eastern edge of the Lake District, where she offers a range of courses in sheepdog handling. Drawing on her huge success in the field, Katy provides courses lasting from just an hour to three days and promises to get well and truly inside your dog’s head. For the frustrated pastoral dog as much as for the owner , it is guaranteed to be an unforgettable and life-changing experience.  

Pembrokeshire Sheepdogs is run by Anna Lou Daybell and Marion and Brian Loverig at Tremynydd Fach, a working sheep farm in this beautiful part of Wales. Courses cover all aspects of sheepdog handling, from basic training for farm work, to advanced tuition for trials.

Self-catering cottage holidays and bed and breakfast in the farm are available. Private lessons, half day up to 4 day courses . Training is tailored to suit you and your dogs level in a friendly and relaxed atmosphere.  Situated 3 miles from St Davids and close to the beautiful  Whitesands Bay.

Debbie Connolly is an Animal Behaviourist with over 27 years experience.  She believes in a natural approach, teaching owners to understand and sometimes mimic the pet’s behaviour to get the right result.  Safepets offers residential holidays with behavioural help and training, lessons are also offered in sheep herding and trials.

Holiday training opportunities don’t have to be totally serious or goal-orientated, of course. These days it’s not so uncommon to find dog friendly holiday lets which provide fun activities for keeping your pet active and occupied.

Burnells Gardens is a small family run farm bed and breakfast, situated in the beautiful Aville Valley on Exmoor. Close to Minehead and Dunster and with moorland, valleys and beaches within easy reach this is a lovely place from which to explore Exmoor. The agility course is available for guests to use.

In  County Durham, close to Barnard Castle,  Mandy and Mark Bainbridge have self catering accommodation in this Area of Oustanding Natural Beauty.  Laverock Holiday Cottages are part of a working sheep farm where they offer agility and sheepdog training lessons.

Ashleygrove Gundogs is based in the Hertfordshire countryside.  They offer handling skills to gundog owners through private lessons and group courses.  Avis Boreham has developed training methods which are based on building a sound relationship with your dog and learning some basic canine communication skills to achieve trust on both sides.

Working Canines are based in South West Fife, near to the Forth road bridge. They offer basic obedience and gundog training. An area of lochs, beaches, fields and woodland make this a lovely base for a holiday.

Further afield  France offers relaxing gites and  friendly and welcoming Chambre d’hotes, and whichever part of France you choose you will find plenty to do, plenty of villages and towns to explore and bring back some wonderful memories.  La Belle Vilaine has friendly, family run gite accommodation in South Brittany. Located in the heart of the picturesque Morbihan countryside the area offers an authentic  flavour of France. The owners have dogs of their own and this is a great place for a dog friendly holiday, with walks directly from the cottages,  beaches close-by and even an agility course to have a go at under supervision.

 Paws for a Walk
www.pawsforawalk.co.uk
info@pawsforawalk.co.uk

About the Author

Nokia N85 Unlocked Phone with 5 MP Camera, 3G, Wi-Fi, GPS, MP3/Video Player, and MicroSD Slot–U.S. Version with Warranty (Copper) $549.99 Harness the power behind this sleek, compact design. Capture your memories with the 5-megapixel camera and bring them to life in vibrant, natural colors on the stunning OLED display. Try the preloaded games and choose one to activate for free. Discover more games on-line and try before you buy. Assisted GPS shows where you are, the Internet helps you choose your destination, and Nokia Maps guides …

No 1 Trader Vince Stanzione Live Making Money From Global Financial Markets

Europe Is Being Held Together With Duct Tape

Among its many other sins, the greenback is a press hog. The world’s reserve currency, loved and loathed as it is, simply gets most of the ink these days.

In that light many a U.S.-based commentator, not least your cynical Taipan Daily scribes, have repeatedly waxed eloquent on the long-run death of the dollar.

But in our zeal we sometimes forget that, in order for the dollar to die, it has to die relative to other fiat currency offerings… and some of those others are looking pretty sick too. (The main exception, of course, being gold – the one and only “stateless currency” not subject to the whims of a printing press. As Grant’s Interest Rate Observer quips, “Show us a monetary asset whose value is not subject to governmental debasement and we will show you a Krugerrand.”)

In short, the dollar is not the only basket case out there. Take the euro, for example. Now there’s a troubled currency if ever one existed.

As pollyanna stock market bulls are finding out the hard way, rising interest rates (via falling bond prices) can have ugly consequences. The same is true of a rising currency when coupled with a weak economic backdrop.

In this particular case, the stronger the euro gets, the more it cuts into European export sales. At a time when most all of Europe is sick, the economic pain of a too-strong currency becomes intense above a certain threshold.

On top of that, various bits of Europe are in the process of blowing up… or falling apart… or both. There is deep trouble brewing in multiple corners of the continent. Let’s take a quick look on a country-by-country basis to see why Europe is being held together with duct tape.

Britain on the Brink

We’ll start with Britain – not an adopter of the euro, but a member of the EU (European Union) nonetheless.

Britain has been hurled into political chaos, thanks to an unholy combo of deep financial crisis, explosive Labour Party scandals, and the hapless lame-duck status of embattled Prime Minister Gordon Brown. Cabinet Ministers are resigning left and right in protest as Brown’s popularity plummets, calling for the PM to step down. Election results tallied this week showed the Labour Party (Brown’s party) putting in its worst showing since 1918.

Philip Stevens, chief political commentator for the Financial Times, sees an ominous chain of events now set in motion. “Everyone thought the [election] results would be bad,” Stephens reports. “But these [results] are calamitous… the Prime Minister was prepared, if you like, for very bad results. He’s now got to grapple with absolutely terrible results.”

If the Brown government fails, Britain will be left rudderless in the midst of the worst fiscal storm in decades. In a worst-case scenario where bad events lead to worse decisions, opines Stephens, the domino chain could even lead to a British exit from the EU.

This outbreak of chaos is awful and unsettling for the British economy – and by extension awful and unsettling for Europe. As of this writing, it is not yet clear whether Prime Minister Brown can survive a political coup… or even whether he would be better off resigning, Dick Nixon style, in the interest of sparing greater turmoil.

Latvian Pressure Cooker

Elsewhere in Europe, Latvia, a tiny country of 2.2 million, threatens to unleash havoc on the entire continent.

Latvia’s currency, appropriately known as the lat, is officially pegged to the euro. Latvia set up the currency peg to speed up official entry into the EU. But now the fiscal discipline of maintaining the peg is crushing the Latvian economy.

At one time, Latvia was an Eastern European tiger, growing by leaps and bounds. But, like many other countries, Latvia found itself badly caught out by the financial crisis. Just when credit lines were needed the most to shore up a cratering home front, Latvia found it suddenly impossible to borrow. Credit was desperately needed. An attempt to issue $100 million worth of lat-denominated bonds resulted in no takers.

Normally, a small country with an imploding economy would simply devalue the currency to make exports more competitive. But if Latvia devalues now, all kinds of ugly fallout will follow.

For one, the Swedish and Austrian banks that lent heavily to Latvia would take huge, destabilizing losses. Worse, other Eastern European neighbors, like Lithuania and Estonia (and Bulgaria farther south), would see their own currency pegs threatened.

And even worse still, a wholesale lat devaluation would crush many Latvian businesses (due to loads of foreign currency-denominated debt on the books) and kill Latvia’s shot at eventual EU acceptance.

So, with the help of emergency financing from the IMF and European Union, Latvia has vowed to keep on keeping on. The currency peg will not go undefended. But in order to maintain that peg in the face of economic hardship, Latvia will need to cut wages and spending to the bone. This, too, is dire medicine for a small country struggling under the weight of great debt.

Some believe Latvia will be forced to devalue, in spite of all the pain it would cause for both the tiny country itself and many surrounding neighbors. The pressure might just prove too great, as the pressure was too great in 1992 when Britain was forced to devalue the pound and drop out of the European Exchange Rate Mechanism (ERM).

In a way, Latvia is damned if it does and damned if it doesn’t. Some argue that the peg must be defended at all costs, lest the whole of Eastern Europe be lost. If Lithuania and Estonia are sucked into a currency pain vortex, the EU could lose its political hold on the region – and Russia could rush in to fill the torment-filled vacuum.

It would be so much easier (and simpler) if the value of the euro were to fall from current high levels. This would ease Latvia’s pain, as well as a number of other struggling countries. But there is a huge and intractable obstacle there – Germany.

Germany in a World of Its Own

As the global financial crisis has unfolded, Angela Merkel, the Chancellor of Germany, has been looked on with increasing amounts of admiration and horror, depending on the observer’s vantage point.

Those who admire Merkel do so because Germany has appeared to completely go its own way in the midst of turmoil. As other countries have stimulated and relaxed and eased to fight the fires of slowdown, Germany has said “Nein!” to anything that smacks of lax fiscal policy.

In a speech last week, Chancellor Merkel even went out of her way to slam the Federal Reserve and the Bank of England, stating plainly that “I view with great skepticism the powers of the Fed… and also how, within Europe, the Bank of England has carved out its own line.” Within the subtle context of diplomacy and statecraft, those are amazingly blunt words. Merkel has all but called the stimulators a bunch of out-of-control fools.

Many admire Germany’s fiscal backbone. But others are horrified, and terrified, by Germany’s lack of willingness to show any type of bend or flex in monetary policy.

Remember the Latvia problem? Many other rapidly imploding European economies, like those of Ireland and Spain, are also struggling with the weight of a too-strong euro hurting export prospects. But in its zeal for fiscal responsibility, Germany will probably remain steadfast in its opposition to any loosening of the purse strings.

The stance is cultural and historical. Having lived through the horror of hyperinflation in the Weimar Republic in the 1920s, Germany emerged from its baptism by fire as a zealous hard-money advocate. Rigid fiscal discipline has been a political rallying cry in Germany ever since. So when Chancellor Merkel takes an especially hard line against the easy-money inflationists, she is doing so with an eye for public approval ratings at home.

The trouble is, even Germany can barely afford its own righteousness. The German economy still depends heavily on exports… and so an overly strong euro hurts Deutschland too.

The Rise of the Far Right

Last but not least, a surprising new trend has arisen from the EU-wide elections held in the past few days.

“Conservatives raced toward victory in some of Europe’s largest economies Sunday,” the Associated Press reports, “as initial results and exit polls showed voters punishing left-leaning parties in European parliament elections in France, Germany and elsewhere.”

The rise includes not just the right, but the far right. In Britain, the British National Party – an openly racist party that only admits whites – gained a seat for the first time. In various other countries, openly nationalist parties gained fresh power either for the first time also, or for the first time in quite a long while.

“It is not clear why a chunk of the blue-collar working base has swung almost overnight from Left to Right,” says Ambrose Pritchard of the U.K. Telegraph. “But clearly we are seeing the delayed detonation of two political time-bombs: rising unemployment and the growth of immigrant enclaves that resist assimilation.”

A Poisonous Stew

There are still other problems in Europe we haven’t really touched on, like the Spanish real estate markets headed for freefall, the dire state of the Irish economy (joke du jour on the Emerald Isle: What’s the difference between Ireland and Iceland? The letter ‘C’) and the toxic leverage still lurking in European banks.

Put all this together, and what you get is a truly poisonous stew. Half of Europe is still committed to fiscal stimulus and economic coordination… while the other half has swung inward and hard right, towards a nationalist and isolationist stance, at a time when exports are weak and the whole continent is in trouble.

If Pritchard is right in his gloomy assessments, we could be witnessing a scenario where steely fiscal discipline, though a virtue early on, becomes a terrible vice this late in the game. “The irony is that those fretting loudest about inflation may themselves tip us into outright deflation, with all the perils of a debt compound trap,” Pritchard opines. “It is Angela Merkel who plays with fire.”

By now the Trading takeaway should be fairly obvious. The dollar is not the only paper currency with crash and burn potential. The euro could make for one hell of a great short when the time is right. Whether that time comes sooner or later depends on how events unfold… and how quickly the threat of deflationary vice grip leads to inflationary panic (as ultimately occurs in all unsound paper regimes, when the desperate hope of the printing press is embraced as last resort). Macro Trader will be watching the charts with keen interest.

About the Author

Justice Litle is Editorial Director for Taipan Publishing Group. He is also a regular contributor to Taipan Daily, a free Investing and trading e-letter, editor of Taipan’s Safe Haven Investor and Justice Litle’s Macro Trader.

Can a person living in Africa invest in British and US Markets and how ?

My friend , who lives in Zimbabwe which currently is experiencing hyperinflation wants to invest his foreign currency earned from his flower export on British and USA stock markets or investment companies so that he does not loose his retirement funds .he has about US10 000 . He is worried sick and i cannot help .Any specific Investment vehicles he can use since he can not come physically to Europe .

The standard requirement to open a brokerage account is to provide enough identification to prove where you live and who you are. That normally means they take a copy of your passport and a utility bill. I have opened a brokerage account in the UK and the US and both times it was quick and easy once I produced an identification.

In most cases it doesn’t matter where you live. The rules are the same for everyone, and the brokerage companies will be happy to take your money even if you’re living on the other side of the world. If you can pass the identification requirements and pay the fees then you’re in.

There are a tiny number of countries where the US and UK regulators consider that there are no effective money laundering controls in place and they will not allow citizens of those countries to open brokerage accounts. It is considered too dangerous – accounts from those countries would be used for criminal purposes. You need to check but I’m pretty sure Zimbabwe is one of those countries. The others I know of are Burma, Iraq, Iran, Syria and North Korea.

So a person living in Zimbabwe will not be able to directly invest in the British and US Markets.

Bust $1.99 …

Tulipomania : The Story of the World’s Most Coveted Flower & the Extraordinary Passions It Aroused $7.63 For history buffs or gardeners who enjoy more than just digging in the dirt, Tulipomania presents a fascinating look at the tulip frenzy that took place in Holland in the mid-1600s. Beginning as gifts given among the wealthy and educated folk of Europe and Asia, the tulip rapidly became a source of incredible financial gain–similar to today’s Internet start-up companies or Beanie Baby colle…

Why Did the Great Depression Happen? (Moments in History) $10.42 …

Stock Market Crash 27 28 OCT 2008 BAM. BOOM..

The 1987 Crash – What Was That All About?

Long before CFDs became commonplace, we lived in a land of early programme Trading, extended settlement and mainly phone based dealing, and almost twenty years to the day occurred what is now known as ‘Black Monday’

This was the session on Monday, October 19th 1987, when the benchmark Dow Jones Index fell by a 508 points, which was then 23% and the biggest one day percentage decline in Stock Market History, with huge drops also seen right across the world’s equity markets.

The falls actually cascaded from the Far East, through Europe to the US and back again, and it felt to some like the end of the financial world was upon us, but of course the situation resolved itself after a few weeks of turbulence. Nevertheless, it was a momentous day in stockmarket history and worth looking back on for Traders and investors alike.

It is interesting to note that the terms ‘Black Monday’ and ‘Black Tuesday’ were first coined after the days October 28th and 29th 1929, some fifty years earlier. These occurred after ‘Black Thursday’ on October 24th, which began the market crash of that year, but the falls on the Monday twenty years ago were much larger and quicker. So what happened exactly?

The background up to that weekend

There is some confusion associated with the 1987 crash, and it has often been seen as a one-of-a-kind event, but in truth the series of events that provided the background could just as easily conspire again, allowing for each market’s current trading limits before any suspension.

The actual cause of the crash has never been truly agreed upon, but what did happen differently to the falls in 1927 was how quickly the Federal Reserve and other central banks acted to put liquidity into the system to prevent further problems. Indeed, this process has continued ever since, and some have argued it has placed an artificial floor on stockmarkets, which might rebound on the bulls at some stage. Either way, the worst was over quickly, and the Dow Jones actually bottomed on day two, October 20th. Although it was volatile, that time could be seen in retrospect as an excellent long term buying opportunity.

In 1986, the growth in the US economy had began to slow down, resulting in a soft landing, and then corporate Earnings began to pick up again, leading to a resumption of the bull market in 1987. During that year the Dow rose 44% by August, and then on October 14th it dropped 95 points to 2412.70, a record fall at the time, and fell another 58 points the next day, so it was already down over 12% from the August high. On the Friday, October 16th, it fell another 108.35 points to close at 2246.74 on record volume.

Over the weekend, Treasury Secretary James Baker had stated his concerns about the falling prices, and the crash began in earnest in Far Eastern markets during the morning of October 19th. Later that morning, two US warships shelled an Iranian oil platform in the Persian Gulf, but this simply added to the sense of panic, despite turning out to be of no consequence.

The main causes of the rapid decline

There were several main areas that were seen as significant towards causing the huge declines seen on the Monday, but many factors have often been quoted.

The first and most serious aspect was the effect of programme trading, which was blamed for exacerbating the declines.

US Congressman Edward J. Markey had been warning about the possibility of a crash, and stated afterwards that programme trading was the principal cause. What happened on the day was that computers performed rapid stock executions based on external inputs, such as the price of related securities.

There were several strategies that were used in programme trading including arbitrage, where for instance the index futures might be trading lower than the cash market, so the computers gave stock selling orders until the disparity was resolved. On the day, the futures market in Chicago was consistently lower than The Stock Market, and instead of buying in Chicago and selling in the New York cash market, which would be a normal response, instructions were given to sell into the falling market.

Portfolio insurance was another aspect of these strategies, whereby sell signals were given to reduce asset, sector and stock allocation as the value of these fell, in effect to act as insurance against further falls, which clearly did not happen. There were several accounts suggesting that almost half the trading on October 19th was a small number of institutions with portfolio insurance, and all that happened was that they continued to sell as the value of their equity dropped.

Other reasons

It has since been argued that although programme Trading Strategies were used primarily in the US, other markets fell just as hard, so there must have been other reasons. The crash actually began in Hong Kong, then spread to Europe, and hit the US only after many markets had already declined by a significant margin.

So other reasons have been put forward, and another possible cue for the crash was the simple overvaluation of equity markets which had put them at p/e ratios not seen since 1929. (It might be worth noting that p/e ratios in the last ten years have often been higher still). The view here was that value investors had already begun to bail out of the market during the late summer, and the crash was simply the end of the decline.

There were also some macroeconomic concerns at the time, which included international disputes about foreign exchange and interest rates, and fears about inflation, but these in themselves would have been unlikely to trigger such a derating so quickly.

Another common theory states that the crash was a result of a dispute in monetary policy between the G-7 industrialized nations, whereby the US, which desired to keep the dollar high to restrict inflation, tightened policy faster than European central banks.

An opposing argument stated that the crash happened because of the breakup of the Louvre Accord, which was a monetary pact between the US, Japan, and West Germany to keep currencies stable. Just prior to the crash, Alan Greenspan had said that the dollar would be devalued. You can take your pick from both of these somewhat contradictory arguments.

A final factor which affected the UK market was the Great Storm of 1987 in England, which occurred on the Friday before the crash. At that time, most dealing was done by phone, and brokers had to physically get to work in London to carry out deals. That morning, many routes into London were closed and consequently many traders were unable to reach their offices in order to close positions by the end of the week. This added to the panic selling which occurred on the following Monday on the FTSE 100 index, which fell around 250 points that day, and another 250 points on the Tuesday before a massive rally retraced some of the losses.

Conclusion

As can be seen, the classic market crash was in retrospect the result of various inputs, and it is hard to pin down one trigger. Indeed, despite efficient market theory suggesting that falls of the magnitude seen on Black Monday are a once in a lifetime (possibly a millennium) occurrence, we have since seen some hefty falls on a daily basis in the last twenty years.

One point should be mentioned in particular, and that is that markets were already in short term downtrends before the crash started, so the drops did not occur without warning. This is food for thought for CFD traders in these uncertain and somewhat faster moving times, and provided stops are used, these happenings can present major opportunities for profit for the astute trader.

About the Author

Mike Estrey is the Head of Research for Blue Index, specialists CFD Brokers, providing seminars on how to trade CFDs and offering a Live Trading Simulator.

what do you think will happen in this year?

i think tribulation will starts
look to:
the big one will happen
stock market crash
people more and more evil
the election will not happen
american economic collapse , europe starts to dominate the world
war between iran x israel
israel will attack Syria first
etc
and you know will happen?

Violence will increase.

HTC HD2 Windows Phone (T-Mobile) $549.99 The HTC HD2 Unlocked GSM Cell Phone is so fast—and its screen is so big—that you might not even notice it’s a phone. When you’re watching a video, you’ll think it’s a TV. When you’re working, you’ll think it’s a computer. When you’re surfing the Web, you’ll miss your bus. This screen is our biggest yet, 4.3 inches corner to corner, with bright, lifelike 480×800 resolution. Change your ho…

Bust $1.99 …

Wood Says European Loan Package Is Necessary for Markets: Video

Rejection of Bailout has Effect on Forex Market

In a move sure to reverberate throughout the financial world the US House of Representatives failed to pass the US bailout by a vote of 228 to 205. Stock markets reacted quickly and violently with the Dow falling 700 points. Political bickering was blamed for the defeat but several Republican legislators refused to support the bailout plan proposed by the Bush administration.

Democrats said the bill does not do enough to protect average Americans. In an excerpt from Speaker of the House Pelosi’s speech she stated, “Democrats insisted that legislation responding to this crisis must protect the American people and Main Street from the meltdown on Wall Street. The American people did not decide to dangerously weaken our regulatory and oversight policies. They did not make unwise and risky financial deals. They did not jeopardize the economic security of the nation. And they must not pay the cost of this emergency recovery and stabilization bill.” Representative John Culberson, a Republican from Texas, said the measure would leave a huge burden on taxpayers. “This legislation is giving us a choice between bankrupting our children and bankrupting a few of these big financial institutions on Wall Street that made bad decisions.”

Credit markets remain frozen and the crisis has spread to Europe. Several banks have been taken over recently and in the UK the government had to bail out mortgage giant Bradford and Bingley. Banks and financial firms in both the US and Europe have essentially ceased loaning money to each other in recent weeks creating a serious credit crisis. Forex markets also reacted and the future of the US dollar remains uncertain. The crisis stems from mortgage backed securities which saw their value plunge as home prices have gone into their worst slide since the Great Depression. In turn the market for these toxic securities evaporated leaving many banks holding greatly devalued securities which could cause the failure of firms holding these securities.

The failure of the bailout plan follows weeks of sobering news from the US banking sector. Monday morning, the Federal Deposit Insurance Corp. arranged for the sale of the banking assets of Wachovia, the nations fourth largest bank to CitiGroup for 2.2 billion dollars in stock. In other news, the Fed bailed out insurance giant American International Group, loaning it $85 billion in return for a nearly 80% ownership, and Washington Mutual became the biggest bank failure in US history.

Both the White House and Congressional representatives and Senators have indicated that the plan is not dead and that a compromise can be worked out. Markets around the world including Interbank Forex will be watching with intense interest.

About the Author

Anthony Wayne works in the marketing department of the Forex Interbank site Interbank-FX in Pennsylvania. He is also editor of the Internet Bingo Blog a great source of internet bingo information.

News Flash *** Stocks drop across asia and Europe on news of Hillary’s win in primaries!?

The market doesn’t lie.
Her policies are socialist and bad for the economy.

Nice try. Poor lie.

What is really bad for the economy is the record national debt Bush has run up while helping the already wealthy become even more wealthy and while screwing the middle and lower classes. What has hurt the economy is the billion dollars a day we are providing to the likes of Halliburton in Iraq while Bush’s oil companies are price fixing gas prices and driving up the price of everything else. What is hurting the country is the deregulation that allows and encourages price fixing, monopolies and the shipping overseas of our jobs. What is really hurting our economy is Bush allowing China to buy our bonds and effectively control our economy.

You’re either a paid political tool or you’re not very knowledgeable or you’re in denial.

(Such foolish and unfounded statements make me embarrassed to call you a fellow Texan. Any chance you’ll move to Alabama or Mississippi?)

Markets Tumble, European Financial Officials Promise Support for Greek Debt Restructuring

Dubai Drops a Turkey on Global Markets! November 27, 2009

Being Street Smart

Sy Harding

Dubai Drops a Turkey on Global Markets!  November 27, 2009.

This was shaping up to be such a calm and enjoyable Thanksgiving week.

A lot of important economic reports were crammed into the first three days of the week. Most of them provided positive surprises, supporting the scenario of a nicely improving economy. It wasn’t good that the economic recovery in the third quarter wasn’t as strong as previously reported, with 3rd quarter GDP being revised down to 2.8% from the previously reported 3.5%.

However, other economic reports included that new unemployment claims fell by 35,000 the previous week (to the lowest level in 13 months); existing home sales shot up 10.1% in October; new home sales rose a better than expected 6.2%; home prices rose again in October; and consumer confidence was up again. The Stock Market was following its tradition of usually providing a positive Thanksgiving week, closing up each of the first three days of the week.

What a nice backdrop for the beginning of a long and relaxing Thanksgiving holiday weekend in the U.S., with the market closed Thursday and open only half a day Friday, and a three-day Islamic holiday in much of the Middle-East,

However, Dubai World, Dubai’s government owned ‘sovereign investment company’ stuffed the Thanksgiving turkey with a bombshell announcement that gave many investors indigestion before the bird was even carved.

As everyone is well aware by now, Dubai World announced a plan to delay payments on its global debts for six months. Dubai acknowledged that it realized how global markets would react, but will not provide more details until next week, for which it is being accused of irresponsibility and ineptitude.

Stock markets in Europe, open at the time, plunged an average of 3.2%. When Asian markets opened Thursday night they plunged between 3% and 4.8%. Dow futures were down more than 300 points overnight Thursday before improving some by Friday morning. But even so, when the U.S. market re-opened Friday morning the Dow was down 230 points in less than five minutes.

Meanwhile, the U.S. dollar and Treasury bonds soared as safe havens, while gold, oil, and most commodities plunged along with stock markets.

The Dubai announcement is generating enough ghosts, goblins and things that go bump in the night to remind me of Halloween rather than Thanksgiving.

Investors are worried that a default on its debts by a government-owned ‘sovereign investment company’ will create a ripple effect through global financial markets. Most of Dubai World’s debts are related to its massive commercial real estate developments in Dubai, as well as mortgage-debt on its large global real estate investments.  Most readers will remember the considerable publicity and political debate a few years ago when Dubai World bought the seaport operations of major cities on both coasts of the U.S. It has much more quietly acquired other large holdings around the world. Freezing its debt payments cannot help but cast a pall over global banks already experiencing rising defaults on commercial loans and mortgages, perhaps leading to even less willingness to make loans.

However, the initial reactions may have been overdone.

Dubai’s total debt is estimated as between $60 and $80 billion, large in relation to the country’s GDP of $75 billion. But, since any losses would only be some percentage of that, defaults spread globally could be quite easily absorbed, not likely on their own to create a new global credit crunch.

The danger of course is that fear could cause a ripple effect in financial markets similar to the aftermath of the failure of Lehman Brothers last September, a panic by investors to get out of all investments without discrimination.

We will have to wait and see. It was encouraging that after plunging more than 3% in kneejerk reaction on Thursday, European markets closed up on average of more than 1% on Friday. Meanwhile, the U.S. market, which was closed on Thursday, had a less panicked reaction than the rest of the world when it opened on Friday, closing down ‘only’ 1.7% on the day. It also almost salvaged a traditional positive Thanksgiving week, the Dow down only 9 points, or 0.1% for the week, and the S&P 500 exactly unchanged for the week.

However, the Dubai announcement did ruin what had promised to be an unworried weekend for investors, and adds considerable importance to next week. Retailers reports of Black Friday sales, and anticipation of the important employment reports due out next week, may take a backseat to renewed debate over the financial foundation of the fledgling economic recovery.

Sy Harding is president of Asset Management Research Corp, publishers of the financial website www.StreetSmartReport.com, and the free daily market blog, www.syhardingblog.com.

About the Author

Sy Harding is CEO of Asset Management Research Corp., author of 1999’s Riding the Bear and 2007’s Beat the Market the Easy Way, editor of www.StreetSmartReport.com, and www.SyHardingblog.com.

Can a USA foreigner hold an online account to invest on Shares?

I am an US Foreign, based in Europe, my legal residence is in Kenya. and I would like to open an online account to operate on Stocks with a serious company (any name or reference will be welcomed). I do not know exactly what i am looking for, but I would like something easy to operate on line and capable to invest online on several market places (like USA, Europe, Asia).
I would like also to understand how the taxes on gains, if any, are applied (where, from which gain level and at what percentage), and if any loose happen, if it can be reported on my own income taxation scheme.
Thanks

Maybe you should look into the Forex market. Whaen I stumbled upon the FreedomRocks system I found the easiest system in all my investment career. I have now pulled all my stocks and put my funds into the forex market using this system. Some of my trades have averaged over the past 500 days over 30% ROI monthly. Actually one of my trades profited over 500% within the 500 day period I have logged so far. I literally spend 15 – 20 minutes a week on my investments now. Check it out if you are open to other forms of trade that allow you to trade in other countries. Oh yeah my favorite part of forex is that I am earning daily interest on 400:1 leverage. Don’t get that in the stock market.

Sincerely,
Brandon Wells
877-773-5345

http://www.yourforexinvestor.com

Make Money Online Trading Stock Symbol ADRU 20080314

Economic Justice and Democratization of Economy to Create Ideal Society

Economic Justice and Democratization of Economy to create Ideal Society

By
Prof Viswanathan,
Director,
International Socio-Economic Research Bureau
(E Mail Id : economist@dataone.in)

DECLARATION OF JUSTICE AND HUMAN RIGHTS

We, the people of all the countries, in harmony with the sovereignty of the Universal Justice hold these truths to be self-evident that every creator has inalienable ‘Right to Ownership’ on his creations and the Natural laws empowers the creators that only he should use his creations exclusively for the welfare and uplift of the human society as a whole, in which he is an inseparable member.

We declare with all judicial power derived from Natural laws that among all creations of man, his creation of capital alone has enormous ‘economic power’ capable of transforming all the socio-economic-political structures and reconstitute them to suit the aspirations of the owners of capital.

We further declare in unequivocal terms since the capital is created by the collective labor of the people as a whole it should be directly owned by the people and then only the people would secure equal ‘Economic power’ and requisite ‘Fundamental Economic Rights’ with which they could establish an ‘Ideal Society’ in the way in which they desire.
In accordance with ‘Economic Justice’ when the capital is directly owned by the people, we declare that the people would naturally secure what we consider the best among the ‘Fundamental Economic Rights’ like ‘Right to live’, ‘Right to work’, ‘Right to Economic Equality’, ‘Right to economic liberty’, ‘Right to Economic Security’, ‘Right to participate in the management’, ‘Right to capital creation’, ‘Right to live with fraternity’, and requisite ‘socio-economic-political rights to pursuit of decent happiness’

We further proclaim when the people secure the above mentioned ‘fundamental rights’ they would succeed ultimately to establish an Ideal Society or Just Society for which they were tirelessly striving in transforming one form of society into another since the dawn of civilization, and to execute their noble concept of ‘One World, One Government, and One Humanity’ and in the end the people would be victorious in choosing what form of ‘Economic System’ that would be the best of all other systems for the establishment of an Ideal Society for which they would secure all requisite authorities of Natural laws that bestow on them.

1. Emergence of Economic Systems:

Different economic systems had emerged on the horizon of the history of mankind whenever different kinds of ‘Capital Ownership’ sprang up. Especially capitalism and socialism emerged after industrial revolution on the determinant factor of ‘capital ownership’. Generally in all economic systems ‘the ownership of capital’ forms the ‘basic structure’ of a society on which the fabrics of super structure of society are determined. The super structure usually exhibits the qualitative fabrics of society such as religion, culture, education, laws, customs and conventions etc. which are determined according to the aspirations of the owners of capital. In short the social elements are dependent factors of capital ownership.

During the turbulent period of 1750s when Industrial Revolution burst upon the England and other European countries it introduced gigantic machines – a kind of capital – in the factory system of production of goods and services. It engulfed the mankind like huge deluge and tossed the world societies and changed each and every super structural elements of society in such a manner not to even to trace out their originality. We, the people, at that period were deeply perplexed and confused what to do as we were in the vicinity of utter economic ignorance.

2. Two Economic Affidavits:

During Industrial Revolution the economic environments in the factory system was not only in muddle but also demoralizing the societies. No one had any knowledge how the economy was operating and how should it be operated. Everyone was expecting for the worst to come. Whole Europe was plunged into utter ignorance. At that crucial period of time it was Adam Smith, the Father of Economics, published his famous book ‘An enquiry into the Nature and Cause of the Wealth of Nations’ in 1776.

3. Economic Affidavit of Adam Smith: In his book Adam Smith spelt out an ‘Economic Affidavit’ solemnly and sincerely that if we, the people, entrusted our capital to a few capitalists in the name of ‘Capitalism’ (Individualism), they would not only change even the sand into gold but also drive the mankind to march towards an ‘Ideal Society’ by modernizing production potentialities with the help of scientific technologies and division of labor. Completely ignoring the working class who constitutes the society, Adam Smith concentered and focused his interest on a few capitalists and advocated that they without the interference of State would accumulate wealth of nations with the help of division of labor using modern machines and assured that the few independent capitalists would moreover create a favorable climate for the establishment of Ideal Society by increasing production many folds. Adam Smith completely neglected the equitable distribution of wealth to the mass working class. He linked the establishment of an ideal society with the mass production but not equitable distribution of wealth. Thus he misguided the whole world convincingly and decisively for a long period during which the working class was thrown into appalling poverty and horrible living hood.

Ricardo and Malthus, drawing he thread of arguments from the wisdom of Adam Smith, eloquently presented their views in favor of a few capitalists and equally convinced the people to surrender their capital in the possession of capitalists who would solve all the socioeconomic problems of mankind. Thus when the people entrusted their capital in the hands of a few capitalists a ‘Capitalistic Mode of Production’ emerged with strong magnitudes in England and some other European countries. This capitalistic mode of production, shattering hitherto existing highly valuable cultures and customs of people, created a complex and conflicting, and highly demoralizing ‘Capitalistic Society’.

The newly emerged ‘capitalistic Society’ forced the social elements such as law, art, culture, customs, religion, education and other economic and political rights and liberties to work for the benefit and security of a few capitalists because on their welfare the welfare of mass working class was depending on. The capitalistic mode of production converted the ‘Right to live’ of mass working class into a dependent factor of the security of the capitalist class who owned the capital and modern factories. This was because if a capitalist collapsed with his factory, the livelihood of the workers working in that factory would also collapse. So all the social elements ranging from culture to human liberty had to work for the security of a few capitalists. Thus the Ideal Society which the people dreamt for long span of time became a myth and mirage. In the capitalistic mode of production the Ideal Society was meant by ‘Capitalistic Society’ representing a few capitalists.

4. Counter Economic Affidavit of Karl Marx:
Having abundant flow of sympathy on the exploited mass working class and endless stream of hatred on the capitalists who caused for the appalling poverty of workers the mentally and morally agitated Karl Marx and Engels declared a ‘Counter Affidavit’ in 1848 in their ‘Communist Manifesto’ and Karl Marx alone in 1867 in his magnum opus the Das Capital. In their counter affidavit they advocated that if We, the people, forfeited our capital from the few capitalists with the help of Bolsheviks (communists) and entrusted the capital in the hands of the ‘State’ under the control of ‘Proletariat Dictatorship’, that the ‘State’ would lead us ‘Towards an Ideal Society’ and establish ‘One World’.* Believing their ‘Counter Affidavit’ word by word, in the October Revolution of 1917 we forfeited our capital from the few capitalists and handed over it to the trustworthy of the ‘State’. The State introduced a ‘Socialistic mode of production’ and on the basis of this, a fearful and subjugating ‘Socialistic Society’ emerged. The working class was engulfed with awe and fearsome and terribly perplexed on the outcome of the ‘Revolution’ and utterly disappointed for not even tracing any hope of achieving ‘Ideal Society’ which their Bolshevik masters promised during the ‘Revolution’.
__________________________________________________________________
*In the words of Karl Marx : “ In a higher phase of communist society, after the enslaving subordination of the individual to the division of labor, and therewith also the antithesis between mental and physical labor has vanished; after labor has become not only a means of life but life’s prime want; after the productive forces have also increased with the all-round development of the individual, and all the springs of cooperative wealth flow abundantly – only then can the narrow horizon of bourgeois right be crossed in its entirety and society inscribe in its banners : From each according to his ability, to each according to his needs!”
– Marx(1875), pp 21-23

Karl Marx and Engels were not alive at that time of October Revolution. They were great champions for working class and ‘buts’ about it. They worried wept for working class, they suffered for working class, they sacrificed everything for the working class, and above all they were exiled, especially Karl Marx, from country to country for the cause of working class, and they really wanted to see the working class of all the countries in an ‘Ideal Society’. But the ‘October Revolution’ in Russia proved that their ‘Theory and Practice’ did not coordinate with each other and did not function in harmony. There was something wrong in the ‘Theory and practice’ which resulted in utter collapse of Socialism at the end process. What was the fault that penetrated for its collapse?
I have same streak of opinion in respect of Adam Smith and Malthus as well. I believe when they advocated that we, the people, should entrust our capital in the possession of few capitalists, they believed that the capitalists would not exploit the working class. But when their theories put into practice it was the selfish capitalists who manipulated their theories as convenient and convincing tools to exploit the mass working class. It was the capitalists who portrayed the theories in a darkest dark when they put them in practice because of their selfish motives. In other words there was unbridgeable disparity ( a deep wide chasm) between the theory and practice which the capitalists utilized it to fulfill their selfish motive of maximization of profit in exploiting the mass working class. What was the terrible fault that was penetrating here also?

Though the original proponents of capitalistic and socialistic theories were not enemies of working class, the executors of these theories, the capitalists on one hand and the ‘State’ on the other hand misled the working class for their selfish motives. The primary fault was that we, the people, instead of retaining the capital with us, separating ourselves into two diametrically opposite poles, surrendered our capital to a few capitalists in West European and North American countries and to ‘State’ in Russia, China and other East European countries.

The inherent contradictions that deeply and widely penetrated in the theories and practices of the two economic systems originated a fierce vicious spiral and exploded like a ‘Big Bang’ and scattered away violently but suddenly all the socio-economic problems throughout the world like inextinguishable fire balls. Instead of establishing an ‘Ideal Society’ these two systems, even after a prolonged period of experiments, have pushed the mankind at the verge of nuclear holocaust and wide spread day – to-day terrorism.

5. Democrism – People’s Direct Ownership of Capital:

As long as more than 200 years, Capitalism had left no avenues unexplored to establish an Ideal Society but disastrously collapsed during 1930s throughout the world due to the pressure of its own weight of self contradictions and brutal ambition of maximization of profit. On the same footing, Communism too after exerting all methods of cruel tortures (Stalin’s roughshod treatment of the kulaks) in the name of ‘Proletariat Dictatorship’ for nearly 75 destroyed itself in 1992 in its own breeding place. As both the systems are now struggling for their own survival, they have now decided to end the ‘cold war’ between them. Since the both the systems pushed us into great disappointments and they did not effective economic techniques to solve our economic problems in accordance with ‘Economic Justice’, we, the people, hereby declare to forfeit our own capital both from the capitalists and the ‘State’ and retain it under our direct ownership in peaceful manner or by force if necessity demands and create a ‘new economic system’ known as ‘Democrism’ on the basis of people’s Direct Ownership of Capital and we, further declare the Natural Laws have entrusted upon us all executive powers to do so as our birth right.

On the People’s Direct Ownership of Capital a just economic system known as ‘Democrism’ will in the world and it will provide us ‘Democratic Mode of Production’ which is an inevitable must for the establishment of an ‘Ideal or Just Society’. I venture to say in short,

“Capitalism is popular and popularly defective;
Socialism is destructive and destructively popular;
Democrism is justifiable and justifiably inevitable.”

Whatever race we relate to, whatever language we speak to, whatever color we cover to, whatever religion we follow to, whatever nation we belong to, we are always being influenced by justice and by its emphatic authority of supremacy. The laws may be in transient from time to time, and vary from country to country, but the concept of justice remains illuminant everywhere. We want justice, only the justice and nothing but the justice. Throughout the long passage of history we have honored justice; we have kept in high esteem the men of justice right from king Solomon to Gandhiji . We have unshakable faith that justice is perpetual and ever pervading. We have always fought for justice and it has united us without any discrimination. In his book ‘Anatomy of Liberty’, William O. Douglas, the Justice to the United States Supreme Court, says this truth in every respect as follows:

“The appetite for justice is indeed a cementing influence amon all races, whatever language they speak, whatever of their skin”
-Douglas,William O. “Anatomy of Liberty” (p: xxiv) : (1965)

The universal fact is that if there is justice there will be harmony and immortality. The scientific facts are immortal because they are based on experimental truths. On the other hand if the socio-economic-political principles want to be immortal they should based on justice, only the justice and nothing but justice and perhaps on natural justice. The capitalistic and socialistic principles lack application of justice and therefore they struggle vainly to solve our life problems and they are marching towards their last destiny – the inevitable grave yard. Keeping the above facts in mind I have with utmost care and concern formulated the economic principles on the natural justice in the name of ‘DEMOCRISM’ which will secure universal acceptability. The genesis of all natural justices is to uphold ‘People’s Direct Ownership of Capital’ for which we have to forfeit our capital from the few capitalists and the ‘State’. Why?

“People’s Direct Ownership of Capital : Why do we want?”

1. Denying the natural justice of ‘Right to live’ by Capitalism and Socialism: (Capital promotes and intensifies war)

We, the people of all the countries, unanimously hate intensely the wars which germinate in any form or for any cause. Naturally we are peace loving people. Despite our strong protests the wars have been fought all over the world and billions and billions of innocent people having no association with the war, have been brutally killed and massacred and the skeletons of these people have been heaped like mountains in graveyards. What cause underlies for these wars? The answer is simply one word – ‘the capital’. It is the ‘Ownership of Capital’ by a few capitalists or the ‘State’ that attributes for all kinds of war that negates one’s ‘Right to live’ in the name of patriotism in particular.

Let us for time being set aside the wars fought before Industrial Revolution. The factory system facilitated for the production of ‘weapons of mass destruction’ that can be employed from the land, from the ocean and from the air. The whole world turned into open battle field for the nuclear bombs, ballistic missiles, supersonic jets, various kinds of military rockets and the military satellites orbiting the earth. Whatever might be the causes of First and Second World Wars, but their consequences were horrible that pushed the mankind to the very verge of its extinction from the earth planet. Why?

Wars before and after Industrial Revolution: Before the industrialization the wars were fought on a particular battle fields and between two hostile warriors only. The range of destruction was very narrow and limited in coverage because the warriors used only spears and swords. The weapons were manufactured in cottage industries or by the warriors themselves. Natural boundaries like mountains, rivers, oceans and great deserts prevented the enemies to enter into a independent country.

After industrial revolution, weapons of mass destruction were produced with the help of highly sophisticated technologies with help of huge capital in factories owned by a few capitalists and the ‘State’. The natural bounties disappeared and the whole world became open battle field. These weapons were maneuvered only by the highly skilled technocrats. The technocrats used these weapons on the common innocent people to terrorize the enemy-governments to surrender immediately. For example, in World War II USA used nuclear atom bombs to bombard on millions of Japanese civilians and terrorized the government to surrender without fighting in the battle field. Nowadays the battle fields are disappeared and the whole world has become open battle field in the face of mighty ballistic missiles and nuclear atom bombs. They can be produced only with the help of scientists and huge capital owned by the ‘State’ and a ‘few capitalists’. As long as the capital is owned by the ‘State’ and ‘few capitalists’ we cannot escape from nuclear holocaust. Originally Capital was created by the working class to assist them to increase their productivity of consumption goods. As soon as the capital went into the illegal ownership of ‘State’ and ‘Capitalists’ it was used for the production of mass destructive weapons. If we scrutinize the expenditure of the world governments we can detect that a large portion of government expenditure has been allocated for ‘military up gradation’ than for the ‘promotion of education’ and ‘elimination of poverty’.

2. ECONOMIC THEORY OF WAR :

Firstly “if the accumulation of destructive capital increases the temptation for war will increase and vice versa”. The destructive capital means the capital that is used for the production of destructive weapons used by military forces. Secondly the difference in economic ideology of a country prompts it to increase its military power to show its ideological success over the other country and spread its ideology over other countries through war. For example USA and Russia used war as a weapon to spread their capitalistic and socialistic ideologies over other countries. The pages of recent past history will illustrate the fact and also the reason for accumulation of nuclear weapons and other variety of scientific weapons of mass destruction. Thirdly on the globalization of world economy the capitalist rich countries invest huge volume of their excessive capital in poor and developing countries. In order to protect their huge capital from nationalization by the beneficiary countries a mighty military force is required by the Investing countries. For instance the American war and threatening of war over Arabian countries to protect her huge capital invested in exploration of petrol and fuel industries. Now American capitalists are investing billion and billions of dollar in I T industries of India and other developing countries. The American capitalists believe that they can protect their capital by their country’s military power. If any country try to nationalize these industries it will result in war. Fourthly the over production of industrial goods by rich countries force them to dump their over production in poor countries through their military power.
Economic reason for two world wars : Virtually after Industrial Revolution in most of the European countries the capital was owned by a few individuals. Since the very aim of capitalism was ‘maximization of profit’ the workers were paid less and it resulted in deficiency of effective demand which caused for ‘over production’. These European countries occupied the poor countries by their military power and converted them as their ‘political colonies’ and with the concept of ‘Free Trade’, they dumped their over-production in the colonies and also exploited the wealth of the colonies. India was the notorious example for that.
With the help of exploited wealth these ‘mother countries’ strengthened mainly their military power. The safety and security of the other ‘Dictatorial European countries’ which had ‘State or less individual Ownership of Capital’ were in jeopardy and unprotected in front of the mighty capitalist countries. On detection of the geographical track these countries found that there were no countries in the world to occupy them as their colonies for exploitation in order to increase their wealth and thereby their military power. These lately wakened dictatorial countries sniffed the fact that their ‘political and military supremacy’ would be pulled down rapidly on the downward track. In order to surpass the supremacy of the Capitalistic European Countries the ‘Dictatorial European Countries, found no other alternative except ‘war’ on the Capitalistic European Countries and on their colonies all over the world. The ‘lust for supremacy’ over the other countries forced them to wage two world wars. Napoleon and Hitler waged war against all of Europe because for the sake of supremacy.
Ayn Rand emphatically points out the genesis for the two world wars in his book ‘Capitalism’ as follows:

“……World War I was started by monarchist Germany and Czarist Russia,
who dragged in their freer allies. World War II was started by alliance of
‘Nazi’ Germany with the Soviet Russia and their attack on Polland” *
- Rand Ayn :“Capitalism: The Unknown Ideal” (New American Library-1967) p:37

In this nuclear age we witness a political and economic turbulence all over the world for a mad race for military equilibrium and economic supremacy. Both the Capitalism and Socialism have no blue-print to terminate the opportunity for Third World War. The rich capitalist and socialist countries want to become richer and richer by pushing the vast majority of poor countries to become poorer and poorer as per World Economic Reports. At present the silent turbulence boiling in the poor countries will burst into a Third World War which will be fought between the rich northern countries and the poor southern countries of the world and result in nuclear holocaust. That is why the USA is very keen on preventing the proliferation of nuclear technology among the southern countries using its military might. The only way left for the mankind to stop the flow of ever threatening danger of nuclear war is the execution of economic equality by rich countries in extending their helping hand to poor countries to pull them up from poverty and to reduce the economic imbalance between rich and poor. The capitalist countries will not permit the economic equality within and without but fight for upholding their economic supremacy which will be the ultimate cause for the Third World War.

We, the people, therefore, have no other alternative except to forfeit our capital from the capitalists and the ‘State’ and retain it under our ‘Direct Ownership’ to coordinate with the command of Natural Laws to save the mankind.

2.1. Consequences of World wars and destructive capital:

The First World War was fought between 1914 and 1918. During the span of 4 years the war was fought violently 120 million seconds. Nearly 48 million people (including soldiers) were dead and wounded.* In other words in every 10 seconds 4 people were killed either dead or wounded.
· Nehru, Jawaharlal : “Glimpses World History” : p.637

In the Second World War When the war was virtually approaching its end, on 6th August, 1945 an Atom bomb by name ‘Little Boy’ – a new war machine that the mankind hitherto never experienced – was dropped on Hiroshima. With in 10 seconds one million innocent people were killed. The first world war took 10 seconds to kill 4 people but the second world war, at its end, took 10 seconds to kill one million innocent people. The annihilation depends on the density of population of a city on which an atom bomb drops on. The Super Powers like USA and Russia, have now heaped in their arsenal million times more powerful atom bombs than the one that was dropped on Hiroshima.

No doubt the atom bombs that dropped on Hiroshima and Nagasaki were invented by the nuclear scientists. The billion dollar question is whether the scientists produced them with their bare hands or in cottage industries or in sophisticated industries created by huge capital. No capitalist will ever afford such huge capital for the production of weapons of mass destruction because their aim is always ‘maximization of profit’. Only the State can siphon huge capital for the production of atomic bombs only with the help scientists to threaten the other countries and to enjoy the status of ‘super powers’.

Though the atom bombs are the brain-children of atomic physicists the capital required to manufacture them is funded only by the governments secretly against the wishes of the people. As long as the capital is owned by the governments, irrespective of Socialist or Capitalist governments, they spend huge capital for the production of atom bombs in order to achieve military supremacy over other countries or to attain at least an equilibrium in military power. Extensively it is the hard-core radical politicians brain wash the people under the guise of ‘patriotism’, ‘National security’ and ‘National pride’ for the production of atom bombs and other ballistic weapons. Since most of the atomic scientists are the government scientists they have to produce atom bombs at the insistence of governments in the name of national security.

“In 1943 the Manhatten Project Laboratory at Los Alamos, New Mexico, with
J.Robert Oppenheimer as its director, was assigned the task of developing an
atom bomb. The first test at Alamogordo on July 16, 1945, was an outstanding
success (the desert sand was fused to glass for hundreds of yards around the
the site). In August two atom bombs were dropped on Japan”.

( * – Cantor, Norman F. – “Western Civilization : Its Genesis and Destiny” III –1970; pp:528-529)

I can arrive two conclusions from deducing the above historical facts:
Firstly, we have to free the atomic scientists from the clutches of governments.
Secondly, we have to forfeit our capital from the hands of governments and to keep it under our own control and possession.
Unless we, the people, forfeit our own capital from the governments and restore ‘people’s direct ownership of capital’ we could not prevent the governments from the mad race for producing ‘weapons of mass destruction’ ranging from AK-47 to atom bombs (of 20,000 megaton attack)

When we pay the tax-money to the governments, we intend tacitly that they would spend it to solve our poverty; but they do not do so. In a speech on April 16, 1953, President Eisenhower said :

“Every gun is fired, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed …
The cost of one modern heavy bomber is this: a modern brick school in more than thirty cities…… We pay for a single fighter with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than eight thousand people…………
This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron…….”

Professor Dallas W. Smythe of Illinois said, “Billions for defense but not a cent for socialism. It is not socialism to have the government spend 50 billion dollars for weapons; it would be socialism if the government spent the same amount for education or for public works”.

When we entrusted our capital to the capitalist as well as the socialist governments we constituted a tacit ‘Economic Contract’ with governments. The first and foremost element of the ‘Economic Contract’ was that the governments should utilize our capital to solve our basic economic problems such as poverty, unemployment, economic disparity etc. But the governments in violation of the Economic Contract have spent our capital to destroy our own survival by engaging in the production of weapons- mass-destruction. The governments with the help of scientists produce variety of ballistic missiles and nuclear bombs and test them day in day out to display their scientific genius and military power to other governments. The accumulation of such deadly weapons have now pushed the mankind to the very verge of nuclear holocaust. We, the people of all the countries, therefore, want to recover our capital from the governments and to keep it under our own control and ownership to preserve a perpetual world peace, our birth right.
__________________________________________________________________________________
“Little Boy” is the nick name given to the atomic bomb dropped on Hiroshima on August 6, 1945. It was Monday morning. Little Boy was dropped from the Enola Gay, one of the B-29 bombers that flew over Hiroshima on that day.
Little Boy
After being released, it took about a minute for Little Boy to reach the point of explosion. Little Boy exploded at approximately 8:15 a.m. (Japan Standard Time) when it reached an altitude of 2,000 ft above the building that is today called the “A-Bomb Dome.”
The July 24, 1995 issue of Newsweek writes:
“A bright light filled the plane,” wrote Lt. Col. Paul Tibbets, the pilot of the Enola Gay, the B-29 that dropped the first atomic bomb. “We turned back to look at Hiroshima. The city was hidden by that awful cloud…boiling up, mushrooming.” For a moment, no one spoke. Then everyone was talking. “Look at that! Look at that! Look at that!” exclaimed the co-pilot, Robert Lewis, pounding on Tibbets’s shoulder. Lewis said he could taste atomic fission; it tasted like lead. Then he turned away to write in his journal. “My God,” he asked himself, “what have we done?” (special report, “Hiroshima: August 6, 1945″)
note: Paul Tibbets was Colonel, not “Lt. Colonel,” when he was the pilot of the Enola Gay.
The Little Boy generated an enormous amount of energy in terms of air pressure and heat. In addition, it generated a significant amount of radiation (Gamma ray and neutrons) that subsequently caused devastating human injuries.
The people who saw the Little Boy often say “We saw another sun in the sky when it exploded.” The heat and the light generated by the Little Boy were far stronger than bombs which they had seen before. When the heat wave reached ground level it burnt all before it including people.

The strong wind generated by the bomb destroyed most of the houses and buildings within a 1.5 miles radius. When the wind reached the mountains, it was reflected and again hit the people in the city center. The wind generated by Little Boy caused the most serious damage to the city and people.

The radiation generated by the bomb caused long-term problems to those affected. Many people died within the first few months and many more in subsequent years because of radiation exposure. Some people had genetic problems which sometimes resulted in having malformed babies or being unable to have children.
It is believed that more than 140,000 people died by the end of the year. They were citizens including students, soldiers and Koreans who worked in factories within the city. The total number of people who have died due to the bomb is estimated to be 200,000.

The A-Bombs used over Japan; Little Boy (left) and Fat Man (right)
Just three days after the bomb was dropped to Hiroshima, the second atomic bomb called “Fat Man” was dropped to Nagasaki. Though the amount of energy generated by the bomb dropped to Nagasaki was significantly larger than that of the Little Boy, the damage given to the city was slighter than that given to Hiroshima due to the geographic structure of the city. It is estimated that approximately 70,000 people died by the end of the year because of the bombing.
We strongly believe that the world must learn about weapons of total destruction. We hope that the information presented here will help you understand the pain and devastation that nuclear weapons can cause. We don’t want you to just feel sorry for the people of Hiroshima and Nagasaki, the war inflicted untold pain and suffering on many people in Asia and the Pacific. Rather we want you to work with us to ensure that all of us can live in a safe world.
We hope this document helps you understand what it was, what it means and what we have to do.
____________________________________________________________________

2.2 The cause for dropping atom-bomb on Japan:

There are two theories for dropping atom bomb on Japan. The first is to take retaliation on Japan for its attack on Pearl Harbor. The second is to prevent Socialist Russia to capture Japan. The first theory do not sound reasonable because :

Hitler committed suicide on 30th April, 1945. Immediately on 7th May the Germans agreed to unconditional surrender. Moreover Mussolini and his mistress were killed on April by anti-Fascist Italian partisans. Japan’s position was now completely helpless, and the emperor supported a party in the Japanese government that wished to seek a negotiated peace. The second world war was more or less approaching to its end.
The second theory sounds well because :

On 16th July 1945 President Harry S. Truman - who had assumed office on Roosevelt’s death on 12th April, – was informed that an atom bomb had been successfully tested in New Mexico. The U.S. military found that no other weapon was so awful in destructive power as that of the atom bomb.
At the same time the military forces of Socialist Russia were rapidly advancing towards Japan – the border country of Socialist Russia – to capture it.

The Capitalist America was now in great distress that the Socialist Russia would not only capture Japan but also convert it a Socialist state. To uphold its supremacy America thought that it had no other choice except to execute two things:

1. to prevent immediately the invasion of Socialist Russia on Japan;
2. Instead, it had to capture Japan without sacrificing any more lives of American soldiers in the invasion of Japan.

In order to fulfill the above aims, the Capitalist America was left with only one option that was to use the awful new weapon – the atom bomb – on the civilians to force Japan to immediate surrender. Persuaded by the military strategy, Truman decided to use the bomb and it was dropped on the Japanese city Hiroshima on 6th August, 1945. About 80,000 civilians were killed immediately. Nearly 200,000 died later of radiation or were maimed for life.On the sudden turn of events, Soviet Russia sensed that Japan would go out its hand though it was within its reach. So two days later, on 8th August, Russia declared war on Japan and crossed the Manchurian frontier as the Japanese army remained committed to a fight to the finish.

Since there was a race for supremacy between Socialist Russia and Capitalist America to capture Japan and moreover Russian army crossed the Manchurian frontier, the Capitalist America was forced to act swiftly. So, a second atom bomb – Fat Man – was dropped on Nagasaki on 9th August, 1945 by Capitalist America. Nearly 70,000 civilians died immediately. The following day the Japanese government offered to surrender. On 14th August the terms laid down at Potsdam were accepted and the Second World War was over.

The truth is still solid and sound that the atom bombs were dropped on Japanese cities not because Japan would succeed in the second World War but because the governments of Capitalist America and Socialist Russia were arrogantly desirous to show their supremacy over the other as their economic systems were quite contradictory with each other. Both Capitalism and Communism wanted to prove that it was their system that ultimately led the Second World War towards victory. This ideological conflict between the America and Russia, at the end of the war, resulted in nuclear holocaust of Japan.

There is no assurance to the people of all countries that another nuclear war will not burst out due to the ideological conflicts between the countries or to show their supremacy or for some other reasons the time will decide. Not only America and Russia but all the nuclear countries do not now wish either to destroy all their nuclear weapons or dismantle the industries which produce such weapons of mass destruction. Under these circumstances and ground realities how can we believe and console ourselves that yet another nuclear war will not threaten mankind and cause to vanish the very existence of mankind on the earth. So, we, the people of all the countries, declare to forfeit our capital from the few capitalists and the State and to keep it with ourselves. When we have ‘direct ownership of capital’ we will not allow our capital for the production of nuclear weapons or any other weapons of mass destruction.

3. Economic Justice in jeopardy and in peril:

When we handed over our capital to a few capitalists, we were under strong presumption, that they would in certain sense, solve at least our basic problems of poverty and unemployment. On the contrary, since the very basic aim of capitalists is ‘maximization of profit’ they execute all kinds of nefarious designs to exploit the laborers and treat them like other business commodities. So with the enrichment of new technologies the capitalists always intend to replace the workers or minimize the labor force by sophisticated machines. The capitalists never show any interest to promote the economic justice in solving the human problems like poverty, unemployment, economic inequality, unequal distribution of income and wealth etc.

But now the capitalists in some way or other have promoted the welfare of society only by way of promoting their own self interest. In other words if and only if the capitalists are assured that their self interest would be promoted then alone they will allow the betterment of welfare of other members of society. The welfare of huge majority of society is always considered to be a ‘dependent factor of a few capitalists’ in the system of private ownership of capital.

In other words the Welfare of Society (WoS) operates as ‘function of Interest of Capitalists (IoC)’. We can write it as

WoS = f(IoC) ……………. 1

The Interest of Capitalists, in turn, depends on their ‘Maximization of Profit (Max o P). So the equation becomes

IoC = f(Max o P) ……………. 2

The Maximization of Profit (Max o P) by the capitalists results in the ‘Exploitation of Working class’ (EoW). It may written as

Max o P = f(EoW) ……………. 3

The Exploitation of Working class (EoW) creates ‘Maldistribution of National Income’ (Md o NI).

EoW = f(Md o NI) …………….. 4

The degree of maldistribution of national income exposes how the workers are exploited in a country. Generally speaking in most of the countries the top 10% of population enjoys 80% of the national wealth and only just 20% of national wealth is distributed to a vast majority of 90% of population. The maldistribution of national income has always kept the vast majority of people to suffer with low purchasing power and in due course it results in over production. Due to over production the producers are forced to reduce their volume of production and level of employment. On finding the disequilibrium that the goods are not consumed at the rate at which they are produced the producers are forced to close their industries. The very aim of capitalists, the maximization of profit, not only crushes them but also the whole society. Therefore, the private ownership of capital will be dangerous to the whole society and the national capital capital should be equally distributed among the people for the welfare of the mankind. So, Betrand Russel says:

“Private ownership of land and capital is not defensible on the groundsof justice or on the grounds that is economical way of producing what the community needs”
– Russel, Bertrand : “Political Ideals” (p ; 35)

Equally the Marxian theory of “State Ownership of Capital” lacks perfection and threatens human rights. Marxian theory is formed on adamant and inflexible principle and it will not coordinate with the changing world conditions. It preaches a kind of ‘economic fundamentalism’ which wants the elements of society to remain in rigidity for ever. So Loucks rightly states:

“Errors in the theoretical of Marxian thought are so serious and so basic that they cannot be corrected by interpreting or modernizing Marx not can they be considered superficial”
Loucks : “Comparative Economic Systems” ( p : 166)4.

Poverty in the midst of plenty:

We, the people of all the countries, have accumulated capital more than enough and the goods that could be produced with the help of that capital is more than adequate to eradicate poverty in the world. The statistics of “World Development Report – 1991” substantiate that if we distribute the goods produced equally among the people of all the countries, each one would receive the goods approximately worth of Rs.300 per day, which is more than enough for one’s needs. But in contrary with this fact, two third of world population is now subjected to appalling poverty and suffering with hunger and various diseases for want of adequate notorious food.

The poverty prevails not only between the countries but also within the countries irrespective of whether the country is developed or developing. As there is darkness below the burning candle so is the poverty even in the affluent society due to maldistribution of income and wealth. John Meynard Keynes criticizes the capitalistic system with this ever prevailing paradoxical element of “poverty in the midst of plenty”. Since the capitalism do not know how to distribute income and wealth equally among the people, the capitalists have no moral right or legal right to keep our capital with themselves. They have to honestly return us our capital and we know how to solve our problems under ‘people’s direct ownership of capital’.5.

Absence of Right to Live:

Throughout the length and breadth of the world we can notice the youth both in rural and urban areas bearing great agony in their eyes, having no value for their education are wandering desperately on the streets in seeking employment. The unemployment has pushed them to strip away their dignity, self respect and equal status among others not only in the society but also in their own family. Everywhere they are treated as insignificant trivial and above all less than a human being. In the economic systems, both in capitalism and socialism, they feel that they have deprived of the possession of ‘Right to Live’ at all.

6. Origin of terrorism and economic crimes:

It is partly true that unemployment generates economic insecurity among the youth. But by and large it victimizes the youth an easy prey to drug addiction, trafficking, terrorism, and other socio-economic evils.
The universal accepted fact is that capitalism cannot solve unemployment. The function of capitalism is such that if we want to adhere with capitalism we have to live with unemployment at certain level. The advocates of capitalism have now proved that full-employment in capitalism is only a myth and mirage. Hence as long as capitalism is prevailing in the world, so long as the socio-economic evils will also be pervading in the world as its by products and they will be deteriorating all the well-nurtured cultural fabrics of society. If we want capitalism, we have to learn to live with terrorism and other socio-economic evils.
7. Economic Equality is a Mirage :

It is evident throughout the world, the economic inequality among the people not only within the country but also between the countries is going on widening with an accelerated momentum. In 1982 the per capita income of developed countries in average was 42 times more than that of developing countries like India and China, but the gap was still widening 56 times in 1989. As the gap is going on increasing the poor countries are becoming still poorer and rich countries are more richer. It is natural not only among the people but also among the countries to develop strong feeling of jealousy and hatred, and an impression of inferiority complex and a sentiment of economic slavery. In the complex and confused modern economic systems, the concept and reality of ‘economic equality’ is rushing over beyond the orbit of one’s reach. In this context, our strategic fiscal and monetary policies are reducing to be insignificant to face the challenges. Hence Jawaharlal Nehru rightly blames the capitalistic system of economy for the economic equality:

“Normally speaking it may be said that the forces of a capitalist society, if left unchecked, tend to make the rich, the richer and the poor, the poorer, and thus increase the gap between them”
- Nehru, Jawaharlal : “The Years of Power” (1960) p;294

It would be faulty conclusion that the economic inequality is inseparable function of capitalism alone; even in communist countries we can notice wide economic disparities among the people. Prof.P.T.Baur states:

“….. But there are evident wide differences in income in communist countries after decades of communist rule. And in Soviet Union (a country often thought to be dedicated to the removal of economic differences), the differences in income and living standards are quite as pronounced as in some market oriented societies and this after more than half a century of mass coercion”.*
-* Baur, P.T. : “The Grail of Equality”

The economic equality is one the three basic necessities of ‘Equality, Liberty and Fraternity’ for the establishment of an Ideal Society. But neither capitalism nor communism do not know any effective economic technique to ensure us ‘economic equality’. Hence I venture to say it is futile to allow our capital to remain in possession of some individual capitalists or the State.

8. No Right to Work :

Invariably the ‘Declaration of Independence’ of all the countries proclaim that man has ‘Right to Live’. On the introduction of ‘Division of Labor’ in the modern production system, no one can produce all the goods that require even to lead a very simple life, or a single whole commodity one needs.

On the Division of Labor, everyone is trained to produce only a part of a commodity for which he can receive his wage and with which he has to buy the necessary goods in the market to lead his life. Since a man cannot produce whatever he wants to live, his ‘Right to Live’ solely depends upon his ‘Right to Work’. But no Constitution of any country is powerful enough to provide ‘Right to Work’ as one of the ‘Fundamental Rights’ because the economic systems that the countries pursue are basically defective and incompetent to face the economic challenges. In the absence of ‘Right to Work’ irrespective of what kind of economic system a country follows, the employers never consider man as a man and not even as a commodity. On the other hand they treat man as a ‘rental commodity’ that can be engaged by paying wages as ‘rent’. The defect of economic systems have reduced man and humiliated him as mean and ignoble thing. With full of depression in heart, P.A.Samuelson exhibits the real condition of man as follows:

“Since slavery was abolished, human earning power is forbidden by law
to be capitalized. A man is not even free sell himself; he must rent himself at a wage” *
-* Samuelson, P.A. : “Economics” (p : 52)

9.Absence of Stable Just Price :

Universally in all economic systems – whether it is market oriented economy or State controlled economy – the prices in the market are behaving erratically and disorderly. Especially the prices of consumption goods of poor people are always enhancing. But the income of poor people is not increasing as much as the increment of price of their consumption goods. Consequently this economic phenomenon is horribly crushing the purchasing power of the poor. Hence the fact is universally accepted that ‘the poor people are born in poverty, live in poverty and die in poverty’ Whenever the governments declare that they have contained or reduced the rate of inflation it seems always to the benefit of the rich. The economic systems, existing now, do not know any economic techniques to sustain a just price level at stable for the welfare of the vast majority poor.

10. Injustice to Working Class:

In Jerusalem I heard the Israeli Supreme Court say : “It is better that ten guilty persons be acquitted than that one innocent person be convicted”.
This legal justice should not be confined only to the courts of justice but it should be equally extended to govern both the economic justice and economic systems. The economic systems, on the contrary, conveniently permit the economic criminals to escape from punishment and in turn punish the innocent workers who perform their social duty.

The utmost duty of a worker is to produce socially needed goods and services only; but it is not the duty of the worker to bear the responsibility whether the goods and services he produced are sold out. On the other hand it is the duty of the consumers to buy the goods and services that are produced for their consumption at a just price and at the rate at which the goods and services are produced for them.
On the contrary, the consumers, as a whole, behave in the market, guided by their erratic psychological factors, create time lags in purchasing the goods that are produced for their consumption and sometimes neglect the goods to buy at all. These negative and duly non-responsive factors affect the economy severely and ultimately result in the stagnation of goods in the markets. Due to the stagnation of goods in the market an equal volume of goods stagnated are not produced in the subsequent round of production. On the reduction of production of goods the workers who have fulfilled ‘the production – duty’ of the economy, have to lose their employment. The unemployment of a worker not only affects his ‘Right to Live’ but also of the whole family that depends on him. The unemployment of a worker ruins the education of his children, their future ambition in life and their morality and social dignity and their future economic security.

The present economic systems are not competent and efficient enough to secure and save the “Right to live” of the workers who have honestly accomplished their ‘production-duty’ of the economy.
To strengthen my argument I like to quote the words of Prof. Mrs. Joan Robinson :

“It is true, with adequate organization there need be no unemployment … There is always something useful that can be done even with a man’s bare hands”*
*– Prof. Mrs. Joan Robinson : “Economic Philosophy” (p : 114)

Joan Robinson too finds fault on the economic systems for wide range of unemployment; in other words, the economic systems that we pursue now are the primary reasons for the failure to provide “Right to Live” to the workers throughout the world. In the present economic systems and economic conditions ‘employment’ and ‘Right to Live’ are synonymous or just the same.
What is the basic cause, today, throughout the world, for billions of youth are crushed by the burden of unemployment? It is the cause :
“Every person, only up to the standard of education and technical training that the society has offered to him, can produce socially needed goods with his bare hands or with the help of small and simple capital that he can afford by himself and thus create ‘self-employment’ opportunities and secure right to live by himself. The creation of self-employment creates an expectation in the mind of the of the worker that the society i.e. the consumers should behave with a sense of ‘economic responsibility’ by consuming the goods at the rate at which he produces, at a reasonable price to sustain the livelihood of the worker. But every self-employed youth knows that the ‘economic responsibility’ is absolutely lacking in the minds of consumers. What is deeply rooted in the minds of unemployed youth is ‘a fear about the future’ that the consumers or the society that he belongs to would not perpetually and automatically accept the goods at a reasonable price that he produces by ‘self-employment’. The ‘fear about the future’ in the minds of the youth who wants to venture in ‘self-employment’ is reasonably justifiable. Due to ‘fear on the future’ the unemployed youth are not venturing in self-employment competing with the highly sophisticated industries. It is then whose fault if the youth are unemployed? The present economic systems have no economic techniques or ‘action programs’ to evacuate the ‘fear of the future’ in the minds of the unemployed youth and to induce ‘economic responsibility’ in the minds of society to save the ‘self-employed’ youth from the competition of well-organized industries.

I have to point out it is the fault of the economic systems for the cause of unemployment and moreover I wish to state that the capitalists and equally the governments should not lay blame on the ‘fate’ of the youth for their unemployment. On the other hand the capitalists and the governments are persistently blame the fate of the youth and try to escape from their ‘economic responsibility’. So we have no other alternative except to forfeit our capital from the them and retain it with ourselves as we know perfectly well how to solve our unemployment and other economic problems.

11.Economic Gambles:

The basic intention leading for the invention of money is it should be used as a ‘medium of exchange’ in buying and selling goods and services. On the contrary, our present economic systems have invariably paved way for the money not only to be used as a ‘medium of exchange’ but also at a large extent as a ‘Medium of Economic Gambles’ throwing away the honesty and morality of societies to the winds. The multi-millionaires, today, have idly and futilely invested billions and billions of money in The Stock Markets as a medium of gambles uprooting the very noble function of money. The electronic media and the news papers extensively propagating The Stock Market indices for the benefit of the rich gamblers, the economic criminals, who want to earn quick and easy money with out shedding even a drop of sweat. The present economic systems have accepted this kind of economic gambles without any shyness.

In addition, in the cradles of civilization, especially in the places of sports and games like cricket stadium, Tennis courts, Football grounds, Boxing arenas billions and billions of money are set into circulation as a ‘medium of gambles’. With the help of the ‘capital-power’ the capitalists today have vigorously transformed the noble arts, skillful sports, beautiful games and wonderful cultures into easy-money-earning centers instead of promoting these symbols of civilization. The capitalists in the name of ‘promoters’ have developed strong hatred not only in the minds of ‘players’ but also in the minds of ‘audience’. This kind of economic gambles is now rapidly spreading like dangerous virus in all four corners of the world. For example, the ‘Statesman’ in its 10th October 1978 issue states as follows :
“Britain is a gambling nation. Nearly 94 percent of population indulge in an occasional flutter on races, at the gambling tables, on foot-ball pools or on a variety of other sports. 39 percent of all Britons are habitual gamblers. In 1977 an estimated $ 800 million were stated on races and gamblers. In 1977 an estimated $ 800 million were stated on races and other sports”. Instead of producing socially needed goods and services and creating employment opportunities, the capitalists are utilizing ‘our capital’ for economic gambles extensively and demoralizing our long cherished cultures and civilizations throughout the world.
The capitalists now adopt a new business strategy to exploit the consumers : ‘First kill the civilization and then sell the goods’. The capitalists know the consumers will become a easy prey for sexual exposition. So they in all their advertisements use ‘women in half naked beauty’ to enchant consumers to buy their commodities. We know the capitalists are misusing ‘our capital’ to ‘sexually assault’ the consumers to maximize their profit at the cost of cultural destruction and spreading demoralization. With deep mental agony I like to state that millions of young women have now turned as prostitutes as a source of employment and the International Labor Organization (ILO) now recommends to accept prostitution as ‘flesh industry’ which contributes reasonable amount of foreign exchange for many countries.

12.Class distinction and failure of economic machinery :

In lieu of promoting fraternity among the people the present economic systems create various class distinctions such as 1. proletariat and capitalist, 2. consumer and producer, 3. savers and investors. The class distinction between proletariat and capitalist is always underlying at the bottom of strikes, lock outs and innumerable industrial disputes. The class distinction between ‘consumers and producers’ is attributable for the failure of determination of ‘just price’ in the market and for uneven distribution of goods among the people. The class distinction between ‘savers and investors’ is harmfully preventing the requisite acquisition of investment to eradicate poverty and unemployment expeditiously in the world. The present economic systems are full of contradictions without which they can not function. Our capital in the possession of few capitalists and the State is the root cause for all class distinctions. Once the capital comes under the ‘direct ownership of people’ all the class distinctions will disappear

13.Maximization of profit destroys morality of society:

In the present economic systems the industries project their ‘volume of profit’ as the ‘balance of judgment’ of their determination of ‘industrial success’ The industry which earns more profit is considered to be more successful. The mental attitude forces the capitalists even to destroy the natural environment extensively in order to produce goods cheaply. With the sole aim of maximization of profit, the capitalists have no even an iota of concern over the future welfare

Printed From http://www.articlesbase.com/economics-articles/economic-justice-and-democratization-of-economy-to-create-ideal-society-447002.html
Back to the original article

About the Author

Director, International Socio-Economic Research Bureau, India