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Business Cash Advances and Credit Card Processing Basics

Money maker — Thu, 18 Mar 2010 00:25:33 +0000

It is frequently a excellent thought to get back to basics, and this is particularly appropriate for small business owners when they are reviewing if they can increase their cash flow with business cash advances while reducing credit card processing costs. Because many businesses have experienced both decreased sales and increased difficulty in obtaining bank financing, this review of basic working capital management processes should be helpful to most commercial borrowers. The possibility of reducing a significant business expense is likely to be appealing to even the most successful small businesses.

For a business which does not accept credit cards from customers as a payment option, there are other working capital financing options to consider, but they will not be discussed in depth here. In most cases, to obtain business funding based upon credit card factoring requires a minimum monthly volume of credit card sales which typically varies from $5000 to $10000. When merchant cash advances are obtained by a business, a lump sum payment is received based on projected future credit card processing transactions. The amount of business financing is then repaid gradually (typically over six to nine months) and automatically as credit card buys are processed. In general, this strategy for obtaining working capital is used by many diverse businesses because they do not have another reliable commercial funding source. The need to consider this option has also increased because banks are routinely reducing or eliminating business lines of credit in nearly all areas for small businesses.

Because this approach to working capital financing is tied so directly to credit card processing volume, it provides the perfect opportunity to review the cost structure currently in place for a business. Many small business owners chose their credit card processor based upon a recommendation from a colleague or banker. It is not unusual to hear that costs or terms were not reviewed thoroughly before signing a processing agreement.

As noted, business cash advances are repaid by using future credit card processing activity. A part of each transaction is automatically allocated toward repayment. In order for this to happen, the processor must agree in advance to handle it properly. Some providers of credit card processing will not agree to help with the payment process required to repay a merchant cash advance. When this occurs, alternative processors can usually be arranged with minimal impact on daily business operations. Because costs were often overlooked when the initial agreement was signed, a common occurrence is for a small business to realize significant cost reductions when replacing one credit card processing provider with another.

One of the primary precautions to observe when a small business owner is considering a business cash advance is to ensure that the company providing the business financing does not rush to change credit card processors before determining if they can complete the desired working capital financing. During the past several years, one of the most serious abuses seen for companies appearing to offer merchant cash advances is indicated when they try to change processing arrangements immediately. A more normal and appropriate approach is for the commercial funding provider to initially evaluate whether they can provide financing and in what amount. If this is acceptable to the business, the next step would be to check with the existing processor to determine their ability to facilitate repayment of the working capital to be advanced to the business borrower. While it might not be a normal way to proceed, some businesses should consider asking for a review of cost saving opportunities involving their credit card processing even if their current processor is willing to work with the business cash advance provider.

Stocks climb after Fed pledges to hold rates low

Money maker — Wed, 17 Mar 2010 17:58:57 +0000

The stock market continued its slow and steady advance of the past month after the Federal Reserve said it would keep interest rates low to revive the economy.

The Dow Jones industrial average rose 50 points in afternoon trading for its seventh straight advance. The gain means the Dow has joined the Standard & Poor’s 500 index and Nasdaq composite index in reaching levels not seen since 2008.

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The latest climb came from the Fed’s choice Tuesay to hold its key lending rate at a record low of essentially zero. A government report that prices at the wholesale level fell by the largest amount in seven months added to confidence that inflation is contained. That would enable policymakers to keep rates low.

The Labor Department’s Producer Price Index fell 0.6 percent in February, its steepest drop in seven months. Economists polled by Thomson Reuters forecast a drop of 0.2 percent. A drop in energy prices helped push the index lower.

The report was the latest bit of news to build confidence about the economy. It’s clear that investors are feeling more upbeat. Since Feb. 8, the Dow is up 7.9 percent. That’s a huge gain that might ordinarily take a year to assemble but the Dow had slumped 7.6 percent in the month before that so a rebound isn’t surprising.

Analysts are focusing not on the size of the gain but the way the market is climbing: in nearly a stairstep pattern. The Dow hasn’t swung by more than 100 points in 11 of the past 13 trading days.

The more modest advances signal that investors aren’t getting overconfident.

“This market is behaving just the way you like to see,” said James Meyer, chief investment officer at Tower Bridge Advisors in Conshohocken, Pa.

Meyer said investors are cautious but relieved as huge problems like unemployment and housing appear to be getting better, even if the improvement is slow. Most reports signal that the economy is recovering. The occasional bursts of excellent news have helped overshadow some of the more downbeat economic numbers.

The steady climb continued Wednesday. In early afternoon trading, the Dow rose 51.85, or 0.5 percent, to 10,737.83. The Dow traded above its recent closing high of 10,725.43 from Jan. 19 and is at its highest level since Oct. 1, 2008.

The S&P 500 index rose 7.23, or 0.6 percent, to 1,166.69, while the Nasdaq rose 15.11, or 0.6 percent, to 2,393.12.

Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.65 percent from 3.66 percent late Tuesday.

The dollar fell against other major currencies. Gold prices rose.

Crude oil rose 61 cents to $82.31 per barrel on the New York Mercantile Exchange.

More than two stocks rose for every one that fell on the New York Stock Exchange, where volume came to 470.9 million shares compared with 439.1 million shares traded at the same point Tuesday.

The Russell 2000 index of smaller companies rose 4.71, or 0.7 percent, to 684.29.

Britain’s FTSE 100 gained 0.6 percent, Germany’s DAX index rose 1 percent, and France’s CAC-40 climbed 0.6 percent. Earlier, Japan’s Nikkei stock rose 1.2 percent.

First of several job-creation bills clears Congress

Money maker — Wed, 17 Mar 2010 17:58:57 +0000

A package of tax breaks and highway spending cleared Congress on Wednesday, the first of what Democrats hope will be several efforts to bring down the 9.7 percent unemployment rate.

The Senate passed the $17.6 billion measure by a vote of 68 to 29 and sent it to President Barack Obama, who praised the bill and is expected to sign it into law.

“It is the first of what I hope will be a series of job packages that will help to continue to place people back to work all across America,” Obama said.

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With congressional elections looming in November, Democrats hope to show they are committed to reducing an unemployment rate that has remained stubbornly high even as the economy has begun to recover from the worst recession in decades.

None of their efforts is likely to approach the scale of last year’s $863 billion stimulus package, which has made up to 2.1 million jobs but spurred a backlash among voters concerned about record budget deficits.

“We have a long way to go — I’m not sugar coating where we are in this economy — but we are moving forward a step at a time and this is a very excellent step,” said Democratic Senator Barbara Boxer.

The bill sent to Obama would exempt businesses from paying the 6.2 percent payroll tax on new employees who had previously been out of work. Employers would also get a $1,000 tax credit if those workers were still on the job a year later.

Some economists and liberal lawmakers question that approach, saying it will only go to businesses that plotted to expand anyway.

The bill also subsidizes state and local construction bonds and allocates $19.5 billion to shore up a highway-construction program and extend it through the end of the year.

The bill’s costs, other than the highway fund, are offset by a crackdown on offshore tax shelters.

Obama hailed the 11 Republicans who voted with the Democratic majority to pass the bill, though some had opposed it in previous procedural votes.

OTHER BILLS PENDING

Both the House and the Senate have passed larger job-creation bills but they have yet to resolve their differences.

The Senate passed a $140 billion package of tax breaks and unemployment aid last week, but House Democratic leaders have indicated they are likely to change it.

That bill closes several tax loopholes to bring down its price tag by roughly $37 billion, but Obama wants to use some of those loopholes to help pay for his massive healthcare overhaul.

The House passed a $154 billion jobs bill in December centered on increased highway spending and state aid, but the Senate has ignored it so far. House lawmakers may try to go those approaches separately or attach them to other bills.

Meanwhile, centrist Democrats want to cut spending or raise taxes elsewhere in the budget to avoid adding further to the budget deficit, which is projected to hit a record $1.5 trillion this fiscal year, according to the nonpartisan Congressional Budget Office.

It could take several weeks to resolve the issue, as healthcare is expected to dominate the agenda before the spring break, which starts March 29. The House was scheduled to vote on a small-term extension of unemployment benefits to avoid disruption when they expire in coming weeks.

Separately, the House could vote later this week on a bill that would cut capital-gains taxes on certain small-business stocks and further expand subsidies for state and local construction bonds.

Eli Lilly Thieves Grab the $75 Million Loot, Make Getaway

Money maker — Wed, 17 Mar 2010 17:58:55 +0000

In a Hollywood-style heist, thieves cut a hole in the roof of a warehouse, rappelled inside and scored one of the largest hauls of its kind—not diamonds, gold bullion or Ancient World art, but about $75 million in antidepressants and other prescription drugs.

The pills—stolen from the pharmaceutical giant Eli Lilly LLY 36.195 0.015 (+0.04%) in quantities huge enough to fill a tractor-trailer—are believed to be destined for the black market, perhaps overseas.

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“This is like the Brink’s pill heist,” said Erik Gordon, a University of Michigan business professor who studies the health care industry. “This one will enter the folklore.”

The thieves apparently scaled the brick exterior of the warehouse in an industrial park in Enfield, a town about midway between Hartford and Springfield, Mass., during a blustery rainstorm before daybreak Sunday. After lowering themselves to the floor, they disabled the alarms and spent at least an hour loading pallets of drugs into a vehicle at the loading dock, authorities said.

“Just by the way it occurred, it appears that there were several individuals involved and that it was a very well plotted-out and orchestrated operation,” Enfield Police Chief Carl Sferrazza said. “It’s not your run-of-the-mill home burglary, that’s for sure.”

Experts described it as one of the largest pharmaceutical heists in history.

Edward Sagebiel, a spokesman for Indianapolis-based Eli Lilly, place the wholesale value of the drugs at $75 million and said they included the antidepressants Prozac and Cymbalta and the anti-psychotic Zyprexa. No narcotics or other painkillers were in the warehouse, he said.

Other pharmaceutical warehouses have been hit with similar burglaries in recent years, but experts said the value of the Eli Lilly heist far eclipses any other prescription-drug thefts they have tracked. The thieves could easily net $20 million to $25 million, Gordon said.

Enfield police would not say whether the building had surveillance video or whether employees are being investigated. The building is unmarked and unprotected by fences.

The FBI was called in.

Experts said the heist shared many traits with warehouse thefts of pharmaceuticals last year near Richmond, Va., Memphis, Tenn., and Olive Branch, Miss. Those thieves also cut through ceilings and sometimes used trapeze-style rigging to get inside and disable the main and backup alarms. In some cases, they sprayed dark paint on the lenses of security cameras; in others, they stole disks in the security recording devices.

Enfield police and the FBI would not comment on whether some of those techniques were also used in the Eli Lilly theft.

“The level of sophistication in these thefts is very high,” said Dan Burges, director of intelligence at FreightWatch International, a Texas-based security company. “These thieves actively target certain products. They find out where they are, they go there, they come looking for it. They probably were conducting surveillance on that warehouse for days, if not weeks, before that theft occurred.”

Burges and Gordon said the thieves probably already had a buyer lined up, possibly an online pharmacy or someone in South America or Asia, where drug regulations are lax. Gordon said it is unlikely the drugs would end up at a local hospital or drugstore chain.

“The people with a reputation to protect, a CVS or a Target or a Kroger or most hospitals, they don’t want to take any chances,” he said. “It’s too huge a risk. You’re talking about people’s health.”

But, stolen drugs have made it into the U.S. health care system, often through Internet suppliers or bent wholesalers.

Last June, thieves stole 129,000 vials of insulin in North Carolina. The drugs were not properly refrigerated, and later surfaced at a medical center in Houston. The Food and Drug Administration said in August that some patients suffered unsafe blood sugar levels after using them and that it had recovered just 2 percent of the stolen insulin.

“We know that any number of unscrupulous people interested in profit find ways to convince some secondary wholesalers to place these products back into circulation and on into pharmacies,” FDA spokesman Tom Gasparoli said in a statement.

Pharmaceuticals made up 5 percent of the thefts of commodities in 2009 in the U.S. The average such heist was worth about $2.5 million, according to FreightWatch. Pharmaceuticals are usually stolen from trucks or cargo containers—there were a few dozen such thefts last year—though Burges said warehouse break-ins are on the rise as thieves become more sophisticated.

“They’re very creative, they’re very excellent at what they do, and catching them is a very hard thing,” he said.

Zyprexa and Cymbalta were Eli Lilly’s two best-selling drugs last year. Prozac was Lilly’s first billion-dollar drug and the company’s top seller before it lost patent protection several years ago. The thefts will not cause any national shortages of the products, Sagebiel said.

Playing both long and short opportunities in the markets: Podcast

Money maker — Wed, 17 Mar 2010 17:25:10 +0000

Playing both long and small opportunities in the markets: Podcast

By Jeff Benjamin

March 17, 2010 11:07 am ET

Harry Rady, chief executive and portfolio manager at Rady Asset Management LLC, shared some insights on how the stock market is uniquely poised to present both small and long investment opportunities in what he calls a “tale of two markets.’ Click here to download.

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Related Tales

Too much market optimism, says Harry Rady

Harry Rady on small-sale targets: ‘Like shooting fish in a barrel’

Credit Card Consolidation – Why Bother With the Hassle?

Money maker — Wed, 17 Mar 2010 16:50:30 +0000

Sometimes people who are thinking about credit card consolidation wonder if it’s worth the hassle. They reckon, “I have a lot of debt, but I’m not behind on my bills so why should I bother consolidating my debt?” It certainly IS worth doing, and there are three huge reasons why you should consider doing it.

Save Money

The number one, absolute best reason to consolidate your debt is because you will save money. Add up all of the balances of your revolving credit accounts, including charge cards, gas cards, and department store accounts. Now write down the interest rate that you are paying on each of those accounts and figure out the average interest rate on the total of your revolving credit. In most cases, the credit card consolidation companies can give you a much lower rate than whatever your average interest rate is right now.

Pay Off Your Debt Quicker

The second best reason to consider consolidating your debt is that you will be able to pay off your total balance a lot quicker. As we talked about earlier, you will be saving money on your interest rate. If you take that money that you are saving and use it to pay down your balance you will pay off the total a lot quicker, which will save you even more money.

And Most Importantly…

The third reason is probably the most vital one, but not for the obvious reason. When you consolidation your debt you will only have one payment to make on your revolving accounts each month. This has three enormous benefits:

It’s more convenient

You are less likely to forget a payment and have to pay late fees and interest

By avoiding late fees you also maintain your excellent credit rating

This last point is the really vital one. By making your payments on time, you not only avoid interest and late fees, you also keep a excellent FICO score which will allow you to get car loans, mortgages, etc, with a lower interest rate in the future.

Your next step is to do some simple research on the credit card consolidation companies. Take advantage of any free consultations and see if they are able to offer you a lower interest rate than the one that you are paying right now. If they are, accept the offer and start saving both your money and your credit rating.

Why Do Forex Traders Lose Money and How to Stop Losing Yourself?

Money maker — Wed, 17 Mar 2010 16:50:19 +0000

Estimates place the ratio of Forex winners to losers at 1:19, meaning that 95% of traders lose money while only 5% end up with consistent profits. Why is that? Why do so many people end up losing money?

Some people say it’s all a matter of luck, that the Forex market is so volatile it can’t be predicted anyway and so it’s just a matter of dumb luck who ends up a winner and who a loser.

I don’t believe this is the case. If all there was to this was luck then there wouldn’t be consistently profitable traders and there are. This means there is some objective reason why some traders make money and others lose it.

Another possible reason is Forex education or lack thereof. Some traders don’t invest in learning how the market works, why it behaves in certain ways, how to place high probability trades, and so on. These are really gamblers, not traders, and so they really depend on luck. Sooner or later, this luck runs out, leaving them with huge holes in their account balances.

Without getting a proper education, your chances of making it on Forex are pretty limited. I’d say they’re close to zero. So, get a few solid courses and trading systems and really master them. If you’re not ready to learn you will never succeed.

Even if you have taken courses in the past, realize that learning how to trade is an ongoing process. You need to continue investing in your trading capabilities. It never stops.

You should make sure that your education is diverse, involving different methods, styles, and approaches. A well rounded education should help you to make more money on Forex.

One of the things which most traders ignore and which may lead to tremendous losses is the psychology of trading. The truth is that there is a lot of anxiety involved in trading because you’re risking your hard earned money and you can never be fully sure of where the market is going and how each trade is going to turn out.

The problem is that this anxiety and pressure can lead to emotional mistakes which can prove very costly. I believe that it is these emotional mistakes that lead a large part of the 95% of losing traders to fail in Forex. If you don’t learn to control these emotions and be able to trade according to your brain and not your gut, you will not succeed.

This is why so many traders lose money on Forex.

BlackRock’s Kristi Mitchem to join SSgA: Sources

Money maker — Wed, 17 Mar 2010 16:14:05 +0000

BlackRock’s Kristi Mitchem to join SSgA: Sources

By Jessica Toonkel Marquez

March 17, 2010 10:54 am ET

Kristi Mitchem has been tapped to head the defined-contribution business at State Street Global Advisors, according to people familiar with the choice.

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Last week, InvestmentNews’ sister publication Pensions & Investments reported that Ms. Mitchem was leaving BlackRock Inc., where she a managing director and head of the company’s U.S. defined-contribution business.

Marie McGehee, a State Street spokeswoman, declined to comment. Lance Berg, a spokesman at BlackRock, was not immediately available for comment.

Ms. Mitchem joined Barclays Global Investors Inc. in 2006 as managing director and head of the firm’s U.S. defined-contribution business. When BlackRock bought BGI last year, she was chosen to lead the combined unit, which represented $213.3 in billion in assets as of Dec. 31, 2008, the latest data available.

Before that, Ms. Mitchem spent nine years at The Goldman Sachs Group Inc., where she held a variety of roles, including leading the West Coast derivatives group and the U.S. transition services.

SSgA had been searching for an executive to lead its defined-contribution business for several months, according to the sources, who declined to be identified.

Ms. Mitchem could not be reached for comment.

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Want to short Toy Story 3, Karate Kid 2010? Now, investors can place bets on movies

Money maker — Wed, 17 Mar 2010 16:13:39 +0000

Disney PIXAR

Want to small Toy Tale 3, Karate Kid 2010? Now, investors can place bets on movies

New futures exchanges in Chicago and New York let investors wager on whether movies will be hits or flops

By Lynne Marek

March 17, 2010 10:38 am ET

A new futures exchange that will let investors bet on contracts tied to soon-to-be-released movies is making its home in Chicago.

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Trend Exchange aims to open trading on the contracts by midyear, allowing investors to wager on whether movies will be a hit or a flop based on box-office receipts, said Robert Swagger, CEO of Veriana Networks LLC, the venture capital group backing and building the exchange.

Mr. Swagger expects the Commodity Futures Trading Commission to approve the exchange’s application for operation on March 24. In the meantime, he’s building its technology platform and partnerships, he said.

Despite its Hollywood focus, the exchange place its operations and 22 employees in Chicago because of the expertise that has grown up around the city’s other huge exchanges, Mr. Swagger said.

For instance, Mr. Swagger recruited Patrick Catania, a 40-year Chicago Board of Trade veteran, to serve as a consultant.

Mr. Catania, who was executive vice president of business development, marketing and research before he left the CBOT in 2002, said he believes the exchange might entice more capital to the film-making industry at a time when investors have become jittery about investing in movies.

“I was very interested, because this is an area that has been really unserved with regard to risk management,” Mr. Catania said. “There’s certainly a need for the folks that place up all that money to try to protect their money.”

Mr. Swagger expects the exchange to attract movie studios, theater operators, major banks that invest in film production and other financing companies that specialize in the area.

The exchange will clear the contracts through the Minneapolis Grain Exchange, so would-be investors will have to work with that exchange’s futures commission merchants or become a merchant there to buy or sell the contracts, which will have a value pegged to box-office receipts. The investors will be able to hold small or long positions and bet on between 12 and 16 movies in the weeks before the movies are released.

The Trend Exchange won’t be without rivals. New York-based Cantor Fitzgerald LP is also in the process of seeking regulatory approval from the CFTC for a movie futures exchange. That exchange — the Cantor Exchange — expects investors will be able to buy or sell contracts on its www.cantorexchange.com website starting in April.

This tale first appeared in Crain’s Chicago Business, a sister publication of InvestmentNews.

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Choosing the Best Forex Online System Trading Software – Features You Should Watch Out For

Money maker — Wed, 17 Mar 2010 15:39:09 +0000

Before buying any Forex online system trading software available in the market, you first need to know what the features to look for in the software.

The Forex trading market has been growing gradually and easily 3 trillion worth of investments could be seen exchanging hands every day. With such a high volume of money going on, many people are seeing the potential in this trade. At the same time, companies who are in the programming industry take this as an opportunity to capitalize and come out with all sorts of software and investment tools that will be of use to Forex traders.

Forex online system trading software is certainly a must for all Forex traders. But, before buying any of the software available in the market, you need to know what the features that a excellent Forex software should have. Whether you are new to this Forex trade or an expert, a excellent software is vital for you to succeed in Forex trading. Below are some features that one have to look out for.

• The software must be capable to analyze the market in order to have a practical edge during trading. Some Forex online system trading software even provides analysis of the most prominent traders around the globe. News and latest updates of the Forex market should also be available online through the software.

• The Forex software must have some kind of mathematical modeling (like the Fibonacci formula) to enable them to monitor the market movements. Such modeling should be effective as a guide to make excellent and vital decisions in the Forex transactions in order to buy maximum profits or minimize loses.

• The solution provided by the software must offer an integrated management system that could really make the best investment decisions even when the market conditions are unfavorable.

• The solution must also be able to determine when to go in and when to get out of the investment during trading period. It should provide a proper guideline in order for maximum profit.

• The interface with the software should be as simple as possible so that there will be not much confusion in using the software. It does not matter whether you are an expert or beginner as every trader would prefer not to encounter confusion and stress when using the software.

• The Forex software must have a demo account, especially useful for beginners to practice with ‘fake’ money and get familiar with the Forex trade before trading with real money.

• The software should work with the well loved online trading platform known as Meta Trader 4. In addition, this platform is helpful in organizing the broker services.

• Finally, the Forex online system trading software should be able to facilitate online and real time transactions.

What Are the Benefits of Using Brokers When Buying Currency Options?

Money maker — Wed, 17 Mar 2010 14:26:33 +0000

FX Option structures are not off-the-shelf tools, so are not standardised. Banks in general will focus most of their attention on larger capitalisation clients from which they make more profit. If you are a small to mid capitalisation corporation having a turnover over between £1m and £20m in foreign currency, banks are likely to have less interest in you due to the lower profit margins. In turn, banks will standardise their offerings often pushing you into a structure which will have the largest profit margin for them rather than the most appropriate tool for your needs. In response it’s vital to know your specific needs and take advice from a number of sources, competing banks being ideal.

This is not to say a broker will not do the same so beware of both. The best process is often to get a variety of structure thoughts from both your bank/s and a broker and compare, making sure all involved are aware you have been contacted by a variety of suppliers. A possible advantage of using a broker over your banks is meeting your specific needs. Options are completely ad hoc and can be built to meet your individual requirements, for example, if you have a $900,000 contract to hedge if 15 payment streams a broker is likely to be more willing to break down and give you specific small-term hedges for each individual amount.

In contrast a bank may not wish to waste time a will simply offer you a standardised structure which is less desirable and appropriate. Again, these are only factors to consider and your bank may in fact offer brilliant advice and structure thoughts. It depends on your needs, if you want your supplier to be pro-active and act on your needs immediately you are more likely to get this from a broker. For example, if you turnover £5m in foreign currency per annum and you request a quote from your bank they may take up to a week to price up a variety of thoughts for you. A broker is far more likely to provide you with structure thoughts on the day. It’s vital to push for the best service so if either supplier isn’t responding with structure thoughts on the same day as a request politely question for this to be improved. An additional consideration is to make sure you are speaking directly with the dealing desk rather than a relationship manager, this will influence the level of service and/or the pricing you receive.

What is the Difference Between the Term Hedging and Speculation in Relation to Currency Options?

Money maker — Wed, 17 Mar 2010 14:26:28 +0000

There are many preconceptions with “hedging” and “speculation”. The term Option brings up memories of Nick Leeson bringing down Barings Bank in Singapore speculating with Stock Index Options. It’s vital to know Options can validly be used as Risk-Management tools, without a need to have a view of the market. When you buy an FX Option, the total risk you take on is the premium paid for that Option, you cannot possibly lose anymore over the premium value. The use of FX Options in managing currency risk allows you to protect a rate while being flexible to benefit if the market rate improves in your favour. This is particularly relevant if you can achieve a protection rate (worse case rate) at or above your budget rate, while leaving you open to benefit from any upside over the period you hedge.

But, it is vital to know the parameters of each Currency Option structure. If you hedge a particular volume of currency using an FX Option, there is a possibility you will be obliged to take delivery of the currency at a specific rate. This certainly needs to be considered when chose the volumes you are going to hedge and your budgeted volumes for the year, if this fluctuates considerably you need to consider this accordingly. There are ways of cash managing an Option structure and rolling them into straight Forward Contracts with an Open Window (which means you can draw down or use the currency for an open/ unspecified period of time at a particular rate). Being aware of the potential obligations when using FX Options Structures is vital and it’s key to look at both the positives and negative implications.

Producer Prices Fall, Put Inflation Fears Further at Bay

Money maker — Wed, 17 Mar 2010 14:25:39 +0000

U.S. producer prices fell more steeply than expected in February, posting their largest drop in seven months as energy costs tumbled, according to a government report on Wednesday that pointed to scant inflation pressures.

The Labor Department said the seasonally adjusted index for prices paid at the farm and factory gate fell 0.6 percent, the largest decline since July, following a 1.4 percent rise in January.

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Analysts polled by Reuters had expected producer prices to fall 0.2 percent last month. Compared to February last year, producer prices increased 4.4 percent, but slowing from a 4.6 percent rise in January. It was below market expectations for a 4.9 percent increase.

The report came a day after the Federal Reserve renewed its promise to hold benchmark interest rates exceptionally low for an extended period, arguing that substantial resource slack would likely keep inflation subdued for some time. It left overnight interest rates in a range of zero to 0.25 percent.

The Labor Department attributed the February decline in wholesale prices to a 2.9 percent drop in energy costs, which was also the largest decline in seven months and represented a sharp reversal from January, when energy costs surged 5.1 percent.

Gasoline prices plummeted 7.4 percent after an 11.5 percent rise in January. Food prices rose 0.4 percent after rising by the same margin in January.

Stripping out volatile food and energy costs, core producer prices edged up 0.1 percent last month, slowing from January’s 0.3 percent increase. The core index had been forecast to rise 0.1 percent in February.

Core prices last month were lifted by a 0.5 percent rise in the index for passenger cars. It was the largest increase since June. The core producer price index rose 1.0 percent measured on a year-on-year basis, in line with market expectations and following a 1.0 percent rise in January.

Health-Care Bill Faces Delay as Democrats Struggle With CBO

Money maker — Wed, 17 Mar 2010 14:25:35 +0000

Congressional Democrats, racing to end work on an overhaul of the U.S. health system, are facing delays as they strive to meet deficit-cutting targets.

The Democrats, who had expected a final cost estimate from the Congressional Budget Office as early as last week, have to show that a bill amending legislation the Senate passed in December will reduce the federal budget deficit by $2 billion over the first five years and not add to the deficit afterward.

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House Speaker Nancy Pelosi said she also wants the two measures together to cut the deficit by $100 billion over the first decade and $1 trillion over the second decade.

“The numbers have to add up to drastic deficit reduction,” Pelosi, a California Democrat, told reporters yesterday. She later said the House would meet the budget targets, and party leaders including House Majority Leader Steny Hoyer reiterated that they expect a vote this week.

Still, Pelosi and Senate Majority Leader Harry Reid can’t go forward until they have the cost estimate from the nonpartisan budget office. They have been going back and forth with CBO officials for days, Reid said.

“It’s not as if CBO has been over there waiting to crank up their adding machines,” Reid told reporters. “They’ve been giving us numbers all along, trying to come up with a final product. And we expect that soon.”

Deadline Looms

Lawmakers are trying to complete their votes before they leave Washington for a two-week recess on March 26. President Barack Obama is pushing for action to cover tens of millions of uninsured Americans without adding to the deficit. The president is keeping the pressure on, lobbying undecided lawmakers and plotting a health-care speech in Fairfax, Virginia, on March 19, his fourth in two weeks.

The plot calls for the largest health-care changes in four decades. Americans would be required to get insurance, with subsidies and purchasing exchanges to help. Insurers such as Indianapolis-based WellPoint Inc. would get millions of new policyholders and be required to accept all customers.

Health insurance stocks rose yesterday after two days of declines. The Standard & Poor’s 500 Managed Health Care Index climbed 1.3 percent, led by a 3 percent gain for Bethesda, Maryland-based Coventry Health Care Inc.

Republican Opposition

Democrats are trying to pass the legislation over the unanimous opposition of Republicans and polls that show public opinion against them.

The House has to approve the $875 billion bill passed by the Senate and clear a set of changes to that measure through a budget process called reconciliation. The changes are needed because House Democrats object to parts of the Senate bill. The Senate would then pass the reconciliation bill.

Among the issues House leaders and the CBO are discussing are the size of subsidies for middle- and low-income families; changes to the Medicare payroll tax; the amount of funding states get for Medicaid programs for the poor and disabled, and payments to doctors who take Medicaid patients, said Ron Pollack, executive director of Families USA, a Washington-based group that advocates for health legislation.

Another key area is the provision affecting the so-called “doughnut hole,” a gap in coverage for seniors’ prescription- drug benefits under Medicare, Pollack said.

“If CBO has a cost score that is higher than is anticipated, you can dial down,” Pollack said. “If CBO delivers greater cost savings than expected, you can dial up.” He added, “none of this should be the source of a crisis.”

Skipping the Vote

At the same time, Pelosi is considering how to win votes. One option is trying to shield her members from a vote on the Senate bill by using a mechanism that would “deem” the legislation passed without a full vote, a possibility that has drawn fire from Republicans.

“There are a lot of people who don’t want to vote for it,” she said yesterday. “We will do what is necessary to pass a health-care bill.”

Senate Republican leader Mitch McConnell said Democrats had “concocted a way to pass it without really casting a vote.” He said Pelosi was trying “to pull the wool over the eyes of the public,” in a speech on the Senate floor.

Pelosi responded, “If you don’t want to talk about substance, talk about process.”

While she voiced optimism about the legislation’s prospects, she has a number of hurdles.

Tax on Benefits

House Democrats are especially focused on changing one aspect of the Senate bill, an excise tax on high-end insurance policies. They say the levy, opposed by labor unions, would affect too many workers and want to scale it back.

New Hampshire Senator Judd Gregg, the ranking Republican on the Senate Budget Committee, said Democrats may not be able to reduce the tax through a reconciliation bill because it might affect revenue flowing into Social Security.

“Anything that affects Social Security cannot be done,” Gregg said.

Senate Budget Committee Chairman Kent Conrad, a North Dakota Democrat, said Democrats could make it work.

“Many of these things depend on how it’s written,” Conrad said. “Could it be written in a way that would be stricken? Sure. I don’t reckon that will happen.”

Wall Street mobilizes to declaw Dodd bill

Money maker — Wed, 17 Mar 2010 14:00:15 +0000

Dodd: Under the gun(photo: AP)

Wall Street mobilizes to declaw Dodd bill

Bankers look to weaken the latest version of the financial reform bill; Volcker rule in their sights

By Associated Press

March 17, 2010 8:30 am ET

Financial institutions and their allies mobilized lobbyists and fueled their media campaigns Tuesday in a swift response to a Democratic plot to rein in Wall Street and protect consumers in their banking and borrowing transactions.

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The U.S. Chamber of Commerce prepared a $3 million blitz aimed at members of the Senate Banking Committee, and banking lobbyists prepared amendments and looked for friendly senators to advance them.

Senate Banking Committee Chairman Christopher Dodd unveiled a 1,336-page bill Monday that would give the government unprecedented powers to split up firms that threaten the economy, force the industry to pay for its most spectacular failures and make an independent consumer watchdog.

The financial industry’s immediate objections place pressure on senators to weaken the bill and made a series of obstacles for Dodd as he attempts to navigate between the Senate’s institutional need for bipartisanship and the pull of liberals and consumer advocates who want to crack down on Wall Street.

The Obama administration ramped up its own countercampaign Tuesday, sending Treasury Secretary Timothy Geithner on a round of television appearances to signal that the White House is not in a compromising mood.

“We are going to look for ways to make it stronger,” Geithner said on Fox Business Network. “And we are going to resist efforts to weaken it.”

Dodd hopes to get the bill through his committee next week, preparing it for action on the Senate floor sometime after Congress’s two-week Easter recess.

The consumer bureau, which would be located within the Federal Reserve but have honestly autonomous powers, promptly emerged as the main industry target. Bank officials said Dodd unnecessarily separated the functions of the Fed and other regulators from the consumer agency. The chamber argued that the watchdog’s reach would extend to small businesses.

“Our basic argument is that effective consumer protection can be achieved without making a giant new bureaucracy with unlimited powers, unlimited scope to regulate businesses that had nothing to do with the crisis,” said David Hirschmann, president of the Chamber’s Center for Capital Markets Competitiveness.

The chamber is focusing its message in six states, five of them home to members of the Senate Banking Committee — Democrats Mark Warner of Virginia, Tim Johnson of South Dakota, Evan Bayh of Indiana and Jon Tester of Montana, and Republican Bob Corker of Tennessee, who attempted to negotiate a bipartisan deal with Dodd.

Also in the chamber’s sights is Democrat Blanche Lincoln of Arkansas, who is facing a hard re-election and who chairs the Senate Agriculture committee. The agriculture committee is helping write legislation governing derivatives, highly complex transactions blamed in part for the financial crisis. The chamber is working with a coalition of corporations that want to be exempt from some restrictions because they use derivatives as hedges against market fluctuations, not as investment opportunities.

The chamber mounted an earlier campaign against a House version of the legislation. The bill, which contained a freestanding consumer protection agency, ultimately passed on a strict party-line vote.

Hirschmann said the bureau proposed in Dodd’s bill would have too many powers to write and enforce regulations, even on the smallest institutions on the basis of the bill’s unspecified “abusive practices.”

Dodd spokeswoman Kirstin Brost shrugged off the chamber concerns.

“Since when in the history of the United States have we seen consumer financial protections gone wild?” she said.

But Warner indicated that the provision could undergo revisions.

“In consumer protections there may be some changes that could be made,” he said in an interview. “Chairman Dodd tried to strike a balance on this. I reckon it’s a excellent starting point.”

Besides their consumer protections concerns, the largest financial institutions also started raising alarms over Dodd’s desire to prohibit bank holding-companies that have commercial bank operations from engaging in risky trades. The banking industry has interpreted Dodd’s bill as ordering regulators to ban such proprietary trading.

But Dodd’s bil,l while saying that regulators “shall” prohibit such trades, also states that such regulations will be subject to the “recommendations and modifications” of a Financial Stability Oversight Council chaired by the treasury secretary and composed of the heads of financial regulatory agencies.

“These areas of proprietary trading, private equity and hedge funds need extra scrutiny,” Warner said. “I would be reluctant to prescribe what that action ought to be.”

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Was LA earthquake a precursor to the ‘Big One’?

Money maker — Wed, 17 Mar 2010 13:24:34 +0000

The magnitude 4.4 earthquake centered about 10 miles southeast of downtown Los Angeles early Tuesday morning was typical for Southern California, very much in the range of those occurring every couple of months on average, say earthquake experts.

Senate poised to clear jobs bill for Obama

Money maker — Wed, 17 Mar 2010 13:24:33 +0000

Companies that hire unemployed workers get a temporary payroll tax holiday under a bill headed for likely Senate passage Wednesday.

A positive vote would send the legislation to the White House for President Barack Obama’s signature.

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It would be the first of several election-year jobs bills promised by Democrats to be enacted into law, though there’s plenty of skepticism that the measure will do much to boost hiring.

The bill contains about $18 billion in tax breaks and a $20 billion infusion of cash into highway and transit programs. It would exempt businesses that hire the unemployed from paying the 6.2 percent Social Security payroll tax through December and give employers an additional $1,000 credit if new workers stay on the job a full year. Taxpayers would reimburse Social Security for the lost revenue.

It would also extend highway and mass transit programs through the end of the year and pump in $20 billion in time for the spring construction season. That money would make up for lower-than-expected gasoline tax revenues.

The measure is modest compared with last year’s $862 billion economic stimulus bill, and the bulk of the hiring tax breaks would probably go to companies that were likely to hire new workers anyway.

Obama has promised to sign the measure into law.

In addition to the hiring tax incentives and highway funding, the bill would extend a tax break for small businesses buying new equipment and modestly expand an initiative that helps state and local governments finance infrastructure projects.

A far larger measure that would extend health insurance subsidies and jobless checks for the unemployed is in the works but has hit slow going. That measure has passed both House and Senate but is hung up as the rival chambers wrangle over how to partially finance the legislation, which also would extend a variety of tax breaks for individuals and businesses.

As a result, it may require a third temporary extension of unemployment benefits, which would otherwise expire at the end of this month.

The Senate vote also comes as a House panel is to vote on a new bill designed to help small businesses. That bill would exempt long-term investments in certain small businesses from capital gains taxes and would expand a program that subsidizes interest costs paid by local governments when they borrow for construction projects.

A man, a plan, Bank of Japan: Nikkei hits eight-week high on stimulus program

Money maker — Wed, 17 Mar 2010 12:47:28 +0000

(photo: AP)

A man, a plot, Bank of Japan: Nikkei hits eight-week high on stimulus program

Central bank governor holds Interest rates held at record lows

By Associated Press

March 17, 2010 7:55 am ET

Japan’s Nikkei stock index rebounded to an eight-week high Wednesday as investors took heart from further monetary easing steps by the nation’s central bank.

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The benchmark Nikkei 225 stock index rose 125.27 points, or 1.2 percent, to 10,846.98, the highest end since Jan. 21. The broader Topix index gained 1 percent to 947.43.

“While the bank’s go was widely expected, it heartened investors as it shows the Bank of Japan’s action and resolve to tackle deflation and support the economy,” said Yutaka Miura, senior strategist at Mizuho Securities Co. Ltd.

In a split choice, the BOJ policy board chose Wednesday to double the amount available under its small-term lending program to 20 trillion yen ($221 billion) from 10 trillion yen.

Introduced in December, the three-month loans at a fixed rate of 0.1 percent are intended to nourish credit flows and reduce longer-term interest rates.

The seven-member board voted unanimously to keep its key interest rate at a super lean 0.1 percent. In a statement, it pledged to maintain an “extremely accommodative financial environment” for the time being. The central bank has not changed the overnight call rate target since December 2008, when the policy board lowered it from 0.3 percent.

The central bank’s expected go came amid growing political pressure to take stronger action to combat falling prices, which threaten to undermine Japan’s patchy economic recovery.

“The Bank recognizes that it is a critical challenge for Japan’s economy to overcome deflation and return to a sustainable growth path with price stability,” Bank of Japan Governor Masaaki Shirakawa. “To this end, the Bank will continue to consistently make contributions as a central bank.”

The world’s second largest economy grew at an annualized pace of 3.8 percent in the fourth quarter thanks to robust exports, but that has done small to bolster demand or wages at home. Japan’s key consumer price index, which fell for the 11th straight month in January, is expected to keep declining for the next two years.

The troubling outlook separates Japan from growing economies elsewhere in Asia, where central banks are winding down stimulus measures and tightening monetary policy. Interests rates are rising in Australia and Malaysia, while central banks in China and India are reducing liquidity to control inflation.

Meanwhile, Japan struggles with a familiar foe. The country has battled periods of deflation since the “Lost Decade” in the 1990s. Lower prices may seem like a excellent thing, but it hamstrings economic growth by shrinking company profits, sparking wage cuts and causing consumers to postpone buys. It also magnifies debt burdens.

The government’s ability to counter deflation with increased spending is constrained because of Japan’s ballooning debt, the highest among industrialized countries and rising. Prime Minister Yukio Hatoyama has proposed a record $1 trillion budget for the next fiscal year starting April, which will require the government to issue some 44.3 trillion yen ($492 billion) in bonds.

With limited room to maneuver on the fiscal policy front, Finance Minister Naoto Kan has repeatedly called on the central bank to do more. He wants deflation gone by the end of the year and has suggested establishing an inflation target.

The latest go by the central bank’s Shirakawa may appease the government for now. But it falls small of a meaningful fight against deflation, economists say.

Richard Jerram, chief economist at Macquarie Securities in Japan, described a temporary increase in liquidity or even a modest interest rate cut as “irrelevant.” Japan needs aggressive, government-led changes to shock prices higher, he writes in a recent report.

“Japan is in such a deep deflationary hole that marginal policy changes are likely to be ineffective,” he said.

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New Bank Specializes in Health Savings Accounts

Money maker — Wed, 17 Mar 2010 12:18:23 +0000

Record numbers of people have been opening tax-advantaged Health Savings Accounts to get tax deductions for a wide range of health-related expenses. So, it’s not surprising that there’s a bank solely dedicated to health-related accounts. Blue Cross and Blue Shield Association members established the Blue Healthcare Bank, and it can provide a Health Savings Account (HSA) in all 50 states. A Blue Cross Blue Shield HSA, like any other HSA, offers a tax-free way to save money for health-related expenses.

The Blue Cross and Blue Shield Association is a national group of 39 independent insurers, such as Blue Cross of Idaho that was among the first members to work with the Blue Healthcare Bank. The new bank can administer Health Savings Accounts for the 98 million people who have Blue Cross Blue Shield plans, but no one has to open a HSA just because they have Blue Cross Blue Shield insurance.

Health Savings Accounts Work with Lower-cost Insurance

To start a HSA, you must buy one of the high-deductible health insurance plans that can be combined with a HSA. As insurance premium increases spike by up to 39 percent, more people are switching to High-Deductible Health Insurance because these plans have lower monthly premiums than traditional plans.

Since high-deductible health insurance plans cost less, you can contribute what you save on premiums to a HSA. If you’re relatively healthy and don’t have regular medical expenses, you’ll save on premiums without having to spend much for medical-related fees.

Health Savings Accounts Earn Tax-free Interest

Like an IRA, a HSA earns tax-free interest, and all funds left in your account at the end of the year are carried over to the next year. When you retire, you can withdraw your HSA balance like an IRA.

If you’re under age 65, you can open a free HSA when you buy a qualified high-deductible health insurance plot, and you can keep your HSA even when you’re covered by other policies. You can’t have medical expenses paid by both insurance and a HSA, though.

Compare HSA Plans to Find the Best Rates

Not all high-deductible health insurance plans work with Health Savings Accounts. To open a HSA, you’ll need a compatible high-deductible health insurance plot, and you’ll need to compare plot benefits and rates.

Check the policies’ annual deductible, which is the amount you’ll have to spend before coverage starts. After the deductible is met, what percentage will you have to pay for specific services, such as doctor office visits? That percentage is called coinsurance. Look for the annual out-of-pocket maximum, and the lifetime limit on coverage. Be sure you know how the limits and maximums can interact. Working with in-network doctors and hospitals may be significantly less expensive so be sure you know which are considered in-network.

Contributions to a HSA Are Tax-deductible

In 2010, you can contribute up to $3,050 as an individual, and families can contribute up to $6,150 to a HSA. Contributions are not required, but your HSA contributions are tax-deductible, and withdrawals from a HSA to pay for qualified medical expenses are tax-free.

Contributions can be made with pre-tax dollars through employers, or you can take a tax deduction when you pay for medical expenses with post-tax dollars.

Health Savings Accounts Can Be Used for Diverse Health-related Costs

In addition to common health-related fees, the qualified expenses you’re allowed to use your HSA to pay for include expenses that may not be covered by health insurance. That includes dental fees and dentures, as well as the fees of psychiatrists, psychoanalysts, psychologists, and psychotherapists. Physical therapy fees are also qualified, including chiropractor services, hydrotherapy, and medical massage.

You can also use your HSA for acupuncture, aromatherapy, Ayurvedic medicine, healings by Christian Science practitioners or other healers, homeopathy, nutritional consultants, and traditional Chinese medicine. Vitamins prescribed by a doctor, nonprescription medications (such as aspirin and cough syrup), and birth control pills are also qualified.

Vision correction, including contact lenses and replacement insurance, eye glasses and exams, and laser eye surgery can be paid for from a HSA. A closed-caption decoder for TV, hearing aides and batteries, lip-reading expenses, modified phones, and special education are also qualified.

If you need adult disposable diapers due to neurological disease, an autoette or wheelchair, braces, crutches, handicapped car controls or modifications to accommodate a wheelchair, home modifications for medical care (including elevator systems and reclining chairs for cardiac patients), mattresses prescribed for arthritis, orthopedic shoes, or a prosthesis, you can use your HSA.

In addition, your HSA can be used to pay for childbirth classes, programs to stop smoking or lose weight, and treatment-related lodging (up to $50 per person with restrictions) and transportation. Dyslexia and remedial reading training are also qualified. You can even pay long-term care premiums from a HSA, and you can pay for these expenses for your spouse or any dependent family member even if that person is not covered by your insurance. All of these payments can be deducted from your income to reduce your taxes.

Investment upset: College kids dunk on the pros

Money maker — Wed, 17 Mar 2010 10:28:34 +0000

Investment upset: College kids dunk on the pros

Student stock pickers often outperform standard benchmarks — as well as their university endowments

By Mukund Multani

March 16, 2010 3:40 pm ET

The hype and glory that is the NCAA men’s basketball tournament officially starts tonight. But fans are already engaged in their annual tinderbox of a debate topic: Who gives a better showing — the college kids or the pros?

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Surprisingly, that same question can be questioned about investing. Student-managed investment funds, once the domain of graduate schools of business, have become extremely well loved with underclassmen. And while such funds are designed as teaching tools, they often outperform bellwether indexes such as the S&P 500. In some cases, student fund managers have outdone the professional investors who manage their university endowments.

The numbers tell the tale. In 2008, the S&P 500 fell 37%. University endowments fared somewhat better, losing 18.7% of their value. Student-managed assets, on the other hand, shrank by a mere 16.2%, according to InvestmentNews research. In fact, since 2007, the undergraduate-managed funds have outperformed their respective benchmarks by an average of 265 basis points.

More than half of the top 50 undergraduate schools in BusinessWeek’s 2009 college rankings now offer student investment programs, which are tied to for-credit courses. At these top schools, assets under student management average about $2 million per fund. Typically, the cash for the portfolios comes from alumni donations or corporate gifts, along with carve-outs of university foundations. Some student-managed investment portfolios — such as the one at the University of Texas — manage funds for private clients.

Instructors noted that student-run funds tend to have small volatility, due in large part to restrictions placed on investments. Generally, the fund managers may not engage in small selling. They’re also not permitted to buy derivatives, structured products or foreign securities.

In fact, the funds are mostly limited to plain-vanilla stocks and bonds. Of course, since student managers don’t live and die with the performance of their investments, they don’t do a lot of panic selling of these stocks. “Student-managed funds tend to have more of a long-term focus, and don’t feel the need for rapid trade executions,” David Sauer, director of the Davis Center for Portfolio Management at the University of Dayton, said.

Faculty advisers provide guidance but rarely make overt investment suggestions. That makes the students’ performance all the more impressive. At a recent gathering of some 300 schools with student fund programs, 40 teams participated in a competition to see who netted the highest return.

“What the students lack in experience,” Mr. Sauer said, “they often make up in the enthusiasm and energy that they bring to the stock-picking process.”

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