Retail Sales Numbers Counter Consumer Confidence
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Your Daily Profit


May 12, 2009


*****Second Half Recovery

*****Retail Sales

*****FOREX Trading


Fellow investor,


The first signs of the news cycle shifting to a bearish tone are evident this morning. Should we call them bearish “green shoots?” Or “brown shoots?”


Retail sales came in worse than expected this morning. And we’re seeing the market react badly to bad news. That’s as opposed to reacting positively, or putting a positive spin, on bad news like we’ve seen repeatedly over the past two months.


Bloomberg reports that “Fewer jobs, falling home values and the biggest loss of household wealth on record may limit consumers’ ability to spend for years…”


For the record, that’s not a positive spin. Neither is this quote from chief economist at John Hancock Financial Services Bill Cheney: “The second quarter is going to be tough…”


That’s not what you want to hear when you’re forecasting a second-half recovery like Bernanke and others in the Obama administration are. I was never convinced that their numbers were grounded in reality and now we’re starting to see evidence of this.


*****Rising Consumer Confidence was a major factor driving the stock market higher over since March 10. It’s often noted that confidence in the economy and the stability of employment are important contributing factors for retail spending. People don’t spend when they’re scared of losing their job, or as the case has become more frequently, their homes.


You’ll recall that much of the consumer spending during the middle part of this decade was fueled by homeowners using the equity in their homes like an ATM. With falling home values, existing equity lines being cut by lenders, and far fewer new ones being issued, consumers are finding they now have to live only off their income. What a novel concept. That’s good if you think people should be responsible about their finances, but bad if you’re are retailer dependent on Americans’ voracious appetite for bigger, better, newer.


But consumer confidence can do much to help banks.


So when we see that retail ETFs (tickers XRT and RTH) are down, but financial ETFs (ticker XLF) are down more, I can’t help but think that investors are aware that big problems still exist for banks (despite the whitewash stress tests) and that the economy is more dependent on banks for recovery than it is on retail. In other words, consumer confidence might fuel a rally, but it won’t carry a recovery. To get even more blunt, we’ve had a bear market rally and stock prices will resume the bear market trend in the near future.


*****How near? That’s always the question. As an answer, let me say that I think “sell in May” might prove to be a good idea. I will be looking for an exit point for Graham Corp. (AMEX:GHM) soon. It may come in a few days or some time in the coming weeks, but watch for it in Daily Profit.


***** Today is normally Newsletter Advisors Weekly, where I bring you insights from the country's best investment minds. However, I've received quite a few emails from Daily Profit readers who want to know more about foreign currency trading.


Also called Forex, foreign currency trading is one of fastest growing trading platforms in the world. Normally thought of as a market only for the "big players", Forex is quickly becoming popular with individual investors as they seek quick returns from fluctuating currency exchange rates.


I recently put together a report based on comprehensive research and analysis with leading Forex traders and I'd like to make it available to you today. Let's get started on just what Forex is and how you can benefit from it, then I'll share with you the link to the report (don't worry, it's free) detailing seven Forex strategies that are easy enough for beginners yet powerful enough to juice the returns of seasoned Forex veterans.


Forex Trading: The Biggest, Hottest Financial Market on the Planet


If you’re a reader of financial news or a viewer of business news channels, you’re undoubtedly familiar with the term “Forex” – an acronym for Foreign Exchange, or FX for short.


The Forex market is concerned with the buying and selling of the currencies of just about every country on earth. Needless to say, this market is HUGE! And, until just recently, only the Big Boys could play in the gargantuan Forex sandbox. Guys like huge corporations, hedge funds, large commodity trading advisors and other institutional investors.


However, with the advent and popularity of online trading, many firms have opened up the “cash” currency market to individual traders, providing leveraged trading as well as full-feature execution platforms, charts and real-time news.


The popularity of foreign exchange trading has truly exploded on the investing and trading scene. The reasons? Let’s take a quick look at these Fascinating Forex Facts to see why this type of trading has taken the world by storm …


Fascinating Forex Facts


  • The Forex market has an average daily volume of almost 2 TRILLION dollars per day! Let’s put that into perspective. The New York Stock Exchange has an average daily volume of approximately $25 billion. That means the Forex market is 200 times larger than the Big Board! In fact, the daily volume of the Forex market is triple the size of all other investment markets combined!
  • Despite its size, the Forex market does not have a physical location or a central exchange. It operates through an electronic network of people, banks and companies that specialize in trading one currency for another. So almost all Forex trades are executed on the Internet by someone sitting at a computer with a high-speed connection.
  • Because the Forex market does not have a physical location or a central exchange, it is able to operate on a 24-hour basis – leapfrogging from one time zone to another across the major financial centers of the world. The Forex market actually follows the sun around the globe, and as one region is closing down for the day, another one is opening. The market is ready for business 24 hours a day, six days a week, from 5:00 p.m. ET Sunday to 4:00 p.m. ET Friday.
  • This 24-hour access – combined with its HUGE trading volume – makes Forex the most liquid market on earth! Plus the Forex market has no gaps between prices – and your stop-loss orders are guaranteed. The stock and futures markets cannot offer you this guarantee because the limited trading hours create frequent gap opens. Nearly all Forex brokers make sure their hours of operation coincide with the hours of operation of the global Forex market.
  • No one can “corner the market.” The Forex market is so huge and has so many global players that no single individual or entity ... not even a central bank... can control the market for any significant period of time.
  • There is no “insider trading.” Because of the vast size of the global Forex market and its non-centralized nature, there is no chance whatsoever for disruptions caused by insider trading. There is less chance for fraud in the Forex market than in any other investment market.
  • There are no commissions. No exchange fees, no closing fees, no government fees, no brokerage fees. This all adds up to a very low retail transaction cost. If you select your broker properly, your round-trip transaction cost could be as low as 0.07%.
  • A very desirable byproduct of extremely high liquidity is almost instantaneous as transactions executed with blinding speed.
  • You can leverage your trades by a factor of 50 to 1, 100 to 1 and even 200 to 1.
  • You can trade with a very low margin with relative safety compared to the disastrous potential of margin trading found in other financial markets.
  • Finally, and this is the true bottom line for the Forex market’s popularity, if you get really good at currency trading, your potential financial reward is so big it can make your head swim! How big? Well, George Soros recently guessed right on the British pound tanking and made over one billion dollars in a single day!


Taking all these aspects of Forex trading into consideration, is there now any doubt as to why this has become the biggest, hottest, most popular trading game in town?


Discover more about Forex trading and the seven methods used by beginners and pros alike for outsized profits in my special report, "7 Powerful Strategies for Forex Profits". It's free for Daily Profit readers. You can find a copy in PDF format here.


That’s it for today, I’ll talk to you tomorrow.


Ian Wyatt


Daily Profit


P.S. If you’ve got questions about the market or stocks and ETFs I’ve been mentioning or if you have comments about Daily Profit (compliments and criticism equally encouraged) feel free to drop me a line at [email protected]. My mailbox is always open to you and I really do read you notes.

Posted 05-13-2009 12:44 PM by Ian Wyatt