Financial news 07/03/2012

• InvestorPlace: Transportation infrastructure a big money cash-flow target
• BI: American entrepreneurship waning per ex-Kaufman Foundation Pres.
• CNNMoney: Happier workers end up with higher incomes per think tank
• Daily Finance: Individual U.S. debt falling at fastest rate in 5 decades
• Reuters: U.S. municipalities have over $2 trillion in underfunded pensions
• NYT: Obamacare will save MA $1.27 trillion, but cost CA $2.98 trillion
• ISM: June manufacturing index shrank 3.8% to 49.7
• CNBC: Wall Street moving jobs overseas and throughout the states
• Bloomberg: European coal use increases to 6 yr high after 27% price drop
• BBC: Eurozone unemployment reaches 17 yr high of 17.56 mln or 11.1%
• MarketWatch: Oil up on Iran oil embargo, & after U.S. market rally

Advantages of familiarising with online trading using a demo account

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Using a financial services demo account prior to initiating trades with capital is very useful in ascertaining the level of risk management needed when trading securities and financial products. Demos provide detailed instructions on trading mechanisms such as financial spread betting, and offer trading simulations using a synthetic account balance that costs nothing. The simulation benefits account holders by safely developing knowledge of the trading process and performance prior to utilizing real capital.

Optimisation

Since online financial service firms provide an exceptional financial opportunity in terms of liquidity and gearing, becoming familiar with the trading process is a good idea when optimising capital and limiting opportunity cost. For instance, a demo account assists with the development and implementation of hedging techniques such as betting on inverse spreads to lower risk or hedge trade positions. Additional optimisation tools include stop loss orders and trailing stop orders, the latter of which automatically ensure profits are acquired before price movements prevent that from happening.

Technology

The technology made available through online financial services firms is powerful. It enables traders to access numerous securities markets and make a wide range of monetary transactions relating to those securities. Analysis tools, stock screeners and real time order execution mechanisms equip account holders with a means to better understand how to capitalize on price movements within different asset classes. such For example, a spread betting demo and technical analysis tools including candlestick charting allow traders to zoom in on price movement patterns and trading procedures.

Features

Being aware of technicalities that cause price changes is also a benefit of familiarizing with trading before trading in real life. To illustrate, if a currency price quote gaps up or down due to a sovereign credit downgrade, knowing how to protect against this ahead of time with specific orders such as a good for day (GFD) buy order or guaranteed stop order is useful. Trade features including automatic buy and sell orders that execute when specific price targets are reached are also an asset when planning for market contingencies.

Gearing

When using margin or credit to make trades gearing transactions amplifies gains and losses. Using a demo account develops an awareness of how easily both scenarios can happen, and evolves trading ability that helps facilitate more effective decision making. For example, key technical factors such as overbought and oversold indicators, in addition to underlying financial fundamentals including issuer solvency and asset liquidity are all legitimate factors to consider before gearing a transaction. Free research services that accompany trading platforms enable account holders to better assess the risk of gearing their transactions.

Financial news 07/02/2012

• IBD: Federal & state loans account for 26% of college financing
• Bloomberg: Hiring in June slowest in more than two years
• Business Insider: Jobless claims correlate perfectly with S&P 500
• CNNMoney: Medicaid provision in Obamacare limits access to program
• InvestorPlace: Uncertainty in healthcare law to pressure markets down
• Reuters: Fiscal Cliff possibly unavoidable due to Congressional gridlock
• CNBC: Financial Armageddon inevitable despite EU deals
• NYT: Delaware tax haven robs other states amid state revenue deficits
• Zero Hedge: Bank of England advised Barclays to cover up debt costs
• MW: Chinese June manufacturing slowest in 7 months

Why stock dilution is relevant to investors

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Corporate stock dilution is a result that occurs when new shares of company stock are issued. More specifically, when new corporate shares are issued the price of total shares decline to equal the total value of shares before new shares were issued. For example, suppose ABC Company has 100,000 common shares valued at $10.00 per share. If ABC Company issues 100,000 more shares, the value of total shares will remain the same, but the price will drop to $5.00 per share in order for this to happen.

Stock dilution in terms of shareholder wealth can be measured by calculating the earnings per share and diluted earnings per share. Earnings per share is calculated by dividing total earnings after dividends are paid by the total number of shares outstanding. Diluted earnings per share is essentially calculated in the same way, but when convertible securities are added, the EPS goes down. Furthermore, earnings per share measures the amount of a company's earnings that are available for each share, whereas diluted earnings per share measures the value of shares if outstanding stock options and convertible securities are converted into shares. In the case of convertible securities such as debentures, a company may be trying to raise new capital to finance business projects according to the Securities and Exchange Commission.

Forward stock splits are an additional cause of stock dilution. In the case of forward stock splits, the existing amount of shares are split into more shares. For example, in a 2:1 stock split, two shares replace an existing old share. According to a study performed by economics faculty at the University of Indonesia, a noted affect of forward stock splits is an increase in share trading volume prior to the stock split. Even though the mathematical affect of stock splits on actual worth at the time of the split is naught, the announcement of the stock split itself may affect market psychology. For example, the stock split and stock dilution may be seen as a good thing thereby increasing share activity. 

Market psychology surrounding corporate finance is dynamic, but a reason stock splits may be seen as a positive indicator is strong financial growth according to StreetInsider. Moreover, a company's stock price and price per share relative to earnings may rise too high in the wake of strong revenue and earnings growth making it difficult to maximize capital investment. In such case, stock dilution can be financially positive because it reflects growth and allows the business to obtain capital investment that may have otherwise been left out due to high share prices. Thus, in the case of a successful corporation, even if the price of shares go down after new shares are issued, they can rise again in successive stock trading after being diluted; this is quite possibly a "bifurcated" aim of lowering the price per share.  

Another reason market psychology can be affected by stock dilution is the affect on corporate financial statistics. To illustrate, suppose a company has an overly inflated stock price and P/E ratio; if the company issues new stock, the price to earnings ratio is affected. Furthermore, since the PE ratio is used as a gauge of corporate performance, an increase in shares outstanding leads to an increase in P/E  if it is followed by a share price rise. In such case, the company may subsequently appear to have improved investor confidence because the P/E ratio becomes inflated by a rise in stock price following the dilution. 

Financial news 06/29/2012

• Business Insider: U.S. among least favorable equity markets per Citi
• CNNMoney: Investors sold $1.8 bln of mutual funds in week ending 06/13
• InvestorPlace: Obamacare ruling bullish for health care stocks in long-run
• CNBC: FDIC proposes gold be considered a tier-1 banking capital asset
• NYT: Business profits declined .3% in Q1; first decline since 2008
• RT: J.P. Morgan income subsidized up to 77% via bailout funds
• AOL: Diagnostic tests to be free under Affordable Health Care Act
• IBD: Slow housing recover despite lower household credit card debt
• Bloomberg: Euro forgoes seniority in event of bailout loan default
• Reuters: Fee income for global investment banks falls 25 percent in Q2

Debit card review: Maestro debit card

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Maestro debit card services is a division of MasterCard that is licensed to financial institutions that issue debit cards. These debit services allow clients to make payments from their checking accounts or using pre-paid debit cards. Maestro cards use the MasterCard Maestro transaction network which is a payment system that communicates between merchants and financial institutions to authorize debit transactions. Cards that use Maestro debit card services can be used to make payments at merchant locations that subscribe to the Maestro network. The cards can also access a vast number of ATMs findable using the MasterCard ATM locator.

Interchange fees

The costs charged for allowing Maestro card consumer debit transactions across European Economic Area country borders were limited by a December 2007 ruling by the European Commission per MasterCard’s 2011 Q1 Form 10-Q. However, in 2009 this ruling was bypassed with MasterCard’s compliance with the EU's condition that MasterCard “create efficiencies that outweigh the restriction of competition.” For Maestro debit card transactions this fee is limited to .003 percent of the transaction cost.

Wireless transactions

A unique feature of the Maestro debit card service network is that it includes the Maestro Paypass. This is allows Maestro Debit Card holders to simply tap their Maestro card instead of swiping and entering in a personal identification number. Only merchants with tap technology equipment are able to process debit card transactions in this way. As easy as the wireless tap payment method is for the Maestro card holders, it is limited to 10 pounds sterling and is only functional at merchants with tap technology equipment. This may protect against the wireless theft of account information or funds, but also limits the functionality of the technology.

International use

The Maestro debit card service can be used in numerous countries and primarily serves the United Kingdom and European Economic Union countries including France, Germany and Italy. According to MasterCard, The Maestro debit card is accepted at over 960,000 locations within the U.K. Additionally, MasterCard claims there over 100 countries with Maestro card access in its 2011 Q1 Form 10-Q. This network integration assists with making payments while overseas and limits the need for cash. MasterCard’s quarterly report also claims these types of transactions are also more profitable for them as a corporation.

Prepaid debit cards

In addition to account based debit cards, Maestro cards can also be acquired using a prepaid method. Prepaid Maestro cards do not require a credit check, but do require identification to be purchased; these cards are also re-loadable. According to Maestro card services, Maestro prepaid cards can be used at millions of retail locations worldwide and allow both internet transactions and internet access to card information via the Masestro debit card online services.

Security features

Maestro debit cards issued by HSBC, NatWest and The Royal Bank of Scotland can be registered for a security protection feature called SecureCode. SecureCode protects transactions with an additional secret code. A transaction history is also recorded when transactions are made using these cards. Since debit card transactions are recorded on account statements, the identification of possible fraudulent transactions in real time and via historical records also facilitates the security of using the Maestro card.

Financial news 06/28/2012

• Reuters: Orders for manufactured goods unsustainable per Commerce Dept.
• Business Insider: USDA has spent $3 million marketing food stamps
• Daily Finance: Ethical misconduct costs economy more than Madoff Ponzi
• HGTV: Texas woman wins HGTV green home grand prize worth near $800,000
• InvestorPlace: Surge in Q2 home buying difficult to sustain in joblessness
• DOL:  Jobless claims for week ending 06/23, 386,000, mvng avrg 386,750
• IBD: Low Q2 revenue & earnings guidance, and stock-split lower retail stocks
• NYT: JP Morgan Chase loss mount up to as high as $9 billion
• Bloomberg: Monetary and fiscal tightening in Europe match events from 1931 
• MarketWatch: May Japanese retail sales decline .9% year over year
• CNNMoney: Euro summit believed to be a cul de sac for economic resolution
• AP: Barclay's bank to pay $453 million to settle interest manipulation charges
• BBC: Joblessness and post-marriage issues "causing" many suicides in India