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  • ECB June Meeting: Draghi's Bombshell

    The European Central Bank stands ready to act to fight the low inflation within the euro area. The next ECB meeting on June 5th could be one of the decisive moments in the market this year.

    May's announcement

    The ECB press conference in May gave a clear indication that the dovish stance of a number of ECB members could lead to firm action in June.

    Mario Draghi when questioned stated unexpectedly that the 'ECB would be comfortable acting in June' regarding interest rates. The comment led to a major re-pricing of the yield curve as traders started to factor in possible central bank action. The comments took place in the Q&A session of a monthly press conference directly after the interest rate decision.

    What could the ECB do?

    The ECB has a number of tools at its disposal should the central bank decide to act. The most probable outcome is that there will be an interest rate cut to one or all of the main refinancing, marginal lending and deposit rate. The main refinancing rate which is the head line rate currently stands at 0.25%. The Deposit rate is at 0% but could be pushed negative.

    Local Shops
    Local Shops © by LaserGuided

    The effect of this would be to charge banks to deposit money with the ECB with the goal of forcing the commercial institutions that sit on money to lend to small businesses and help kick start the ailing economy which could in theory foster growth and inflation.

    As well as this the European Central Bank could restart its cheap loan policy in an attempt to flood markets with excess liquidity and again spur lending.

    The final most controversial option would be to engage in its own form of quantitative easing. Mario Draghi has already stated that the ECB have discussed all non standard measures including printing money to buy assets however, this is seen as the least likely outcome given the complexity of such an operation.

    Analyst estimates

    The overall outlook for euro zone interest rates going forward has changed from what was priced in a month ago. According to a recent Reuter's survey, The European Central Bank will cut its main interest rate to 0.1% from 0.25% next week and push the deposit rate below zero in an attempt to stop the euro from rising and inflation from falling any further.

    As well as this some analysts are arguing that the ECB could see a return to its long term refinancing operation, where money is pumped into the market in the form of cheap loans. The goal of this is to stir lending and investment and push growth and inflation.

    Market impact

    The impact of any move by the ECB is likely to be met by a mixed response if the majority of analysts are to be believed.

    Building © by Simon

    "The ECB will cut its deposit rate only to follow up on their promise last month and not disrupt markets," said a money market trader at one of the biggest European dealers.

    Whether or not there will be a long term weakening is still up for debate and will be linked to what Draghi follows up with in his press conference. If he continues to highlight actual measures that could be used, the currency could weaken somewhat but after already falling from the 1.40 handle down to 1.36 most are arguing that there would need to be a firm commitment in order to push the value of the EUR down further.

    Join tradimo's professional traders in the Trading Classroom on June 5th

    This live event with be covered throughout the day by Steve Ruffley and Jack Inman. Jack will be covering the preview of the ECB announcement and Steve will be trading it live in a so-called Live Trading Classroom.

    Register at to join the event.

    Jun 02 9:29 AM | Link | Comment!
  • Facebook - How Should You Value It?

    Investors and traders buy a stock either for technical or fundamental reasons or even out of 'peer pressure'. That said I would like to focus on the technical and fundamental analysis.

    Despite a rough market in the past few days, Facebook (NASDAQ:FB) is in a steady uptrend. The chart below compares the S&P 500 versus Facebook stock development between 15th August 2013 to 21st August 2013.

    Facebook vs S&P

    When preparing a fundemnatal stock analysis, the time horizon of the the investment matters, therefore I will differentiate between short, medium and long term.

    More about fundemnatal analysis and how you can do it yourself, can be found on tradimo/learn stock-trading/fundemntal analysis.

    Short term foucs analysis

    Short-term, investors are often news-driven. They assess whether it is likely that there will be further positive news in the near term and if those news will be better than the current ones. In the case of Facebook, several analysts have published news over the last days upgrading their rating even more based on expectations that the new video advertisement formats will drive additional revenue. In the short-term traders have jumped on the oppertunity.

    Medium-term focus analysis

    Medium-term investors assess whether the next quarterly earnings report will fulfill the expecations, exceed them or underperform them. What has already been priced in, i.e. have speculators already driven the price up so high that the outlined expectations will not be enough to drive the price higher or is there still room? In the case of Facebook, following the last earnings release the price has risen substantially making it difficult to assess if the next earnings will outperform the current expectations. This could be the reason why Facebook stock has not substantially increased for the last 10 days. Another reason why investors are careful is also the plan by the Federal Reserve Bank to stop pumping $85bn into the market each month by end of September 2013.

    Long-term focus analysis

    Now we get to the most interesting bit and I believe this is the core question. What is the true, long-term value of Facebook? Why should Facebook become a $300 billion company like Google or Apple? This is where personal assessment comes in and where opinions will be controversial.

    Here is my opinion

    Facebook is in a strategic position to be a market place for many key future internet revenue streams. These include:

    · Internet streaming: The battle between Netflix, Amazon, Apple, Hulu and international copy-cats of these providers might have one common winner, Facebook. Netflix and Facebook already have made a deal, Facebook has integrated the movie recommendation features from IMDB and can leverage its user base for driving revenues in streaming.

    · Localisation based shopping: Groupon, Yelp, etc. all try to win in the market for localisation based offers and use Facebook for this. Meanwhile Facebook has integrated the features Groupon and Yelp offer into its own platform and millions of users are already using it. Considering that Groupon and Yelp themselves are valued at several billion, this has substantial value, whether Facebook outperforms these or cooperates with them.

    · Online social gaming: Zynga and the millions of other, even better and more successful games producers are a turning over several million dollars per month and still growing fast. The first among them have started with real-money gambling offers on Facebook. Facebook could become the world's online casino - a huge market, despite its reputation.

    · Internet growth: The internet itself is still growing fast and the number of services are growing exponentially on a global scale. Developing markets are just catching up and Facebook is on the forefront of securing their market share there via Facebook for every phone and Ultimately this is a race for the last internet user and Facebook is ahead. We live in a world with seven billion people (and growing) who will one day all use the internet. Social has come to stay and Facebook is becoming the social infrastructure of the global internet via "Login via Facebook". Every app provider uses its social features, giving Facebook huge power. Internet growth itself does not help each internet company equally. The question is also how product/IT/tech driven a company is. Facebook has some of the world's best programmers and is set up well for this development.

    · Payment/e-wallet: Facebook is in a relatively good position to turn its login via Facebook infrastructure into a widely used e-wallet, maybe even better so than Google.

    · Advertisement growth: The aforementioned are direct (except internet growth) means of monetization, not strictly advertisement. On the advertisement front Facebook is in a position only Google and LinkedIn have as well with regards to customer insights and the ability to market that. The internet advertisement market is still growing and there are just a couple of websites like Facebook, Google and YouTube that almost every internet user visits every day. These sites will exponentially benefit from advertisement growth.

    How much value you attribute to each of these and how many other angles you consider is up to you.

    FB performance

    Disclosure: I am long FB.

    Additional disclosure: I personally had gone short on Facebook at the IPO on short-term basis.Then I bought the stock at $25 as a medium-term trade before the last earnings report and sold it at $33 which I posted here: I have made a few smaller trades thereafter on a short-term basis and have left a small long-term position open.

    Tags: FB
    Aug 28 7:27 AM | Link | Comment!
  • Women In Trading

    Women in trading

    It may seem strange that in the 21st century, the trading markets are still a male-dominated field, in which chauvinism and prejudice can dissuade women to invest their time and money. However, that hasn't stopped a number of women flourishing in the market, with various experts putting forward a very strong case that women are often better traders than men.

    Getting past prejudice:

    The first step women take into the market can often be a difficult one, as most firms worldwide are staffed by a majority of men and some female traders may have difficulty being accepted into the working environment. In an interview with the New York Times, Ilene H. Lang, president and chief executive at Catalyst, described some of the difficulties women face as they try and tackle their work aggressively:

    "Women who behave in those macho ways are […] perceived as being very masculine, and that's considered very unattractive. While men are aggressive, women are labeled with the 'B word.' It is behavior that's admired in men but despised in women."


    Lang, who is very prominent in the market, proves that results cannot be argued withand a successful trader will soon earn the respect they deserve from their peers, no matter their gender. Indeed, there have been studies showing that female traders are generally better equipped for the job.

    What Makes Women Better Traders?

    The psychiatrist, Richard L. Peterson, stated that the fact that many women are more in contact with and in control of their emotions, they often trade without acting on impulse and as such do not follow trends blindly. Peterson observed that men tend to be less willing to admit defeat, watching a stock plummet and hoping for it to recover, whilst a female trader is more likely to cut her losses. Male traders often choose to ignore their emotions, but act on them subconsciously and are therefore more likely to take more pride in their profits and be ashamed to admit their defeats. Peterson states:

    "Mistakes happen when there is too much emotion, causing investors to overreact to new information by buying or selling when they shouldn't. We see this in the brain imaging. But we also see that mistakes occur when there isn't enough emotion."


    It is not only the opinion of psychiatrists that women have the upper-hand, but also professional traders. The "hedge-fund boss" Lex van Dam said in an interview with Forbes:

    "Women tend to be more patient and trade less frequently than men. That's why they end up paying much less commission to their broker - which makes a significant difference to performance. And that is why they are often better traders."


    This calculation of risk and reward suggests that women often make a better return in regards to percentage. It also shows that each investment is weighed up carefully and not taken on due to impulse.

    The two paths

    There are two paths and potential trader can pursue, either as a professional, or a part-time trader, who molds their work around their everyday life. Even for those with a busy home life, trading is still very much a viable option and that can be squeezed into one's free time. Tradimo user, LadyDale, explained how she has managed to incorporate trading into her daily schedule:

    "If you have time to at least trade in the morning, you can choose a strategy that fits this time window. Trading the way I do it makes me much more flexible than most people think. You can decide relatively quickly where you to want to go and choose a type of trading that is right for you." (

    With markets such as Forex being open 24 hours a day, 5 days a week, it obviously gives those with a busy schedule more opportunities to work within the financial market.

    Regardless of the above observations, ultimately, whether you are a female or male trader is all but superfluous. Each of the quoted experts have stated the importance of patience, consideration and moderation, traits that Richard L. Peterson may argue are typically more common in women, but that isn't to say they are qualities exclusive to female traders.

    Everybody has an equal opportunity to benefit from trading, and the rewards are waiting for those willing and able to collect them. For now, companies may be dominated by male traders, but it is becoming increasingly apparent that this is a trend that will not last forever and there is no doubt that more women will be entering the financial market.

    Jun 12 11:29 AM | Link | Comment!
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