HiThis is quite an interesting artilce Mike Baghdady
What gives one man the winning edge over another of equal – even greater – talent? It’s all about winning the mind game and the same lessons apply whether you’re on a sports field or in the boardroom. Here’s how… What makes one man successful over another man? Particularly when the two men have equal levels of the relevant talent or skill? It comes down to the mind game, says Kris Morton of Gazing Arabia, a human performance management company. The winner on the sports field or in the board room is the man who does not lose his head under pressure and stress, says Morton, someone who can recognise and process his emotions. Easily said but how can someone master mind control? Even the world’s best athletes can succumb to the intense pressure-cooker stress of a championship final. Like Mike Tyson who, in the heat of the moment, ruined his life and career comeback in a ‘red mist rage’ moment that saw him bite Evander Holyfield’s ear. Or when Michael Schumacher almost killed himself and Damon Hill on the Formula 1 track as Hill went to overtake him and potentially take the championship. Then there was the ongoing All Blacks World Cup choking curse… finally broken in 2011 but not without a great deal of effort. Morton should know; the All Blacks team hired his company to train them in mental strength to overcome the ‘choke’ curse. It paid off. That final game against France was probably the worst show of rugby from the All Blacks throughout the whole tournament but still they won and this came down to their dogged, steely-focused, ‘never say die, just grind out the basics and keep a cool head’ mental attitude. Such mental strength under such extreme pressure doesn’t happen by chance, you need to train yourself in this, says Morton. THE QUIET MIND When it comes to success, what separates two people of equal talent, or two sportspeople of equal physical strength, is the mind game – knowing how to quiet the brain chatter that stops you performing, says Morton “When you’re executing a gold shot on the final green on the final day of the tournament, your mind is either going back and forth with negative and positive self talk or there is complete trust. The back and forth self talk is, ‘oh heck, I missed one of these the other day… no, come on you can do it, you know what you’re doing…’ but if you have complete trust in the process based on countless hours of practice, you’re in that space of intuition, trust and quiet mind that allows you to execute under pressure as opposed to the guy who’s trying to talk himself into it or talk himself out of it.” Morton says. “In a sportsperson, the effect of the mind on the body is much more obvious. For example, in putting it’s called the Yips when the golfer can’t control the putter head. You’ll either see the putter shaking or he’s got a stiff elbow so he can’t naturalise the movement, it becomes mechanical or jittery. The impact of stress is clear and immediate but it works in a similar way in business. “If you look at people like Tiger Woods, certainly for the majority of his career, what differentiates him from the rest of his field is not so much having more talent or a better swing, but his mental strength. His ability to perform under pressure, trust his intuition and shut out the distractions to focus on the execution. His ability to do that has meant that he can make more of his talent that most of his competitors.” ALPHA BRAINWAVE MALES It’s all about brainwave patterns, says Morton. As we’re going about our day, our brains are active and in beta wave state. This refers to the frequency range of human brain activity between 12 and 30 hertz per second, in other words 12 to 30 cycles per second. Compare this to delta brain wave, which the brain is in during deep sleep or coma where it’s cycling at zero to four hertz per second. “Beta is where most of us are, most of the time while we’re awake,” Morton says, “but if you’re a high performance sportsman on that final putt, you want to be in the alpha state, one level below beta at eight to 12 hertz per second. When your brain is in alpha, your mind is quiet. “It’s like when you first learn to drive a car and you’re concentrating hard and thinking, ‘ok, now I have to signal, now I have to look in the side mirror…’ but when you’ve driven for years, you don’t need to think about it, you rely on your intuition so you can free up your mind and think about other things on your drive, you can be in that intuitive alpha state and other perceptive doorways open up. “What’s misleading for a lot of people is the belief it’s all about trying really hard. Yes, you must put in the effort and the hard yards and the training but when it comes to executing in the moment, you can try too hard.” At the crucial moment, you need to be in the zone or flow, says Morton. However, in order to execute something automatically in a flowing way, you need to have it repeated it countless times to carve those neural pathways deep into the brain. STRESS AND PERFORMANCE The biggest killer of a man’s presence of mind, says Morton, is stress. Men’s brains are not genetically wired up to deal well with the long, ongoing levels of stress that modern life can bring. Their hunter-gatherer cavemen brains are more suited to short, sharp bursts of the ‘oh no, a dinosaur is chasing me’ variety aka the ‘fight or flight’ stress response. From an evolutionary perspective, there was a good reason for this, says Morton. “If you electromagnetically scan a man’s brain and a woman’s brain, the piece in the middle that joins the right and the left hemispheres is much larger and more lit up, more active on a female. In men, the left hemisphere tends to be more dominant and that’s where you’ve got analysis and pure language. The right brain is more to do with pattern, perception, perspective and language from an emotional perspective. That’s where your emotional centres are; your amygdalas. One of the reasons women appear better at communication and talking about their emotions is because the left brain deals with language and the right brain deals with emotions. A woman can link those two, tap into her emotions, process them and understand them in a logical way using language in her left brain. Men find that more difficult and we think it’s down to our evolutionary path. When a man’s going out hunting and his life is in danger, his emotions are going to be ones like fear and desperation. What he needs to be able to do is cut those off, focus on analysing the situation and be task orientated.” The modern man though needs to be able to process their emotions, says Morton. “It’s not about denying your feelings because that just builds up,” Morton says. “It’s about recognising them, acknowledging them then letting them go so you can get back to focusing on the task at hand. “I think most men, when they’re being honest and taking their CEO armour off, would admit they don’t process emotions well. With men you get more of a biological response, this aggressive, ape behaviour. Anger is a very easy emotion to understand and process, it doesn’t make us feel vulnerable. Although what’s behind anger is usually a very vulnerable emotion, someone’s said something that’s made me feel like I’m not good enough, or not worthy and all this goes back to childhood conditioning.” Part of the problem, says Morton, is that most men don’t even realise they’re not coping with stress. This is due to the ‘normalisation’ of ongoing, low grade stress that’s often part and parcel of modern life but the results eventually manifest as physical issues. “An ongoing stressful work situation will impact your physiology. Your energy, clarity and posture will suffer, your heartbeat will raise, your digestive system won’t function properly, you’ll suffer insomnia and so on. “If you look at the proliferation of chronic fatigue, of bowel and digestive illnesses, Crohn’s disease, Irritable Bowel Syndrome, high blood pressure… these things are often the result of a mentally stressful lifestyle.” MIND CONTROL So the million dollar question is, how can a man best deal with stress that is impacting his performance? The answer is loads of things but is there an all encompassing, integrated solution? No. One size does not fit all. While one man might be open to ‘touchy feely’ practices like meditation or psychoanalysis to talk through childhood traumas, other men shudder at the thought and prefer behavioural modification techniques. Others might find daily exercise helps. “Meditation is a great thing to do. For someone like me who can find it hard to switch off, I find meditation great for getting into those alpha and theta brainwave states. The question is, how do you integrate that into your daily life? Yeah, I can meditate every day and feel calmer but when I’m back in my office, or on the sports field, but how do I integrate that into my job?” It’s about focusing on the process and the bigger picture – not focusing on the outcome, says Morton. “By focusing more on the process and being better at what you’re trying to do, rather than being overly fixated on the outcome. Instead of ‘how much money did I make?’ the focus is ‘how can we serve our customers better, or make better products this year, or engage our employees better this year?” “That, I would suggest, is going to lead to higher performance than being overly focused on outcomes that we can’t always control. What we can control is the input, the things that we do to get there. Higher performers have much more focus on the things they can control, the processes, the skills, the behaviours, the mindsets, the feelings... Those people who have equal talent but are more stressed and very outcome focused are less successful than those who process their emotions and enjoy the journey, not just the destination. “A good question for a man to ask himself is, ‘am I enjoying the journey?’ if the answer is no, something needs to change.”
The Reserve Bank of Australia cut its benchmark interest rate to the lowest level since 2009 to revive demand outside of a mining boom it expects may crest at a lower level than previously forecast. Governor Glenn Stevens and his board lowered the overnight cash-rate target by a quarter percentage point to 3.25 percent, the central bank said in a statement in Sydney today. The decision to end a three-meeting pause was predicted by nine of 28 economists surveyed byBloomberg News, while the rest forecast no change. “The peak in resource investment is likely to occur next year, and may be at a lower level than earlier expected,” Stevens said. “As this peak approaches it will be important that the forecast strengthening in some other components of demand starts to occur.” The local currency dropped as the RBA signaled weaker growth at home and abroad. Prices of the nation’s key exports, iron ore and coal, have declined in recent months as Europe’s fiscal crisis weighs on global growth and Chinese demand. Stevens’s decision to add to rate reductions in May and June reflects signs of weakness in the labor market, subdued inflation and “modest” growth in theU.S. economy. “Growth in China has also slowed, and uncertainty about near-term prospects is greater than it was some months ago,” Stevens said. “Key commodity prices for Australia remain significantly lower than earlier in the year, even though some have regained some ground in recent weeks.”
Currency RetreatsThe so-called Aussie traded at $1.0312 at 2:49 p.m. in Sydney, compared with $1.0365 before the announcement. Since the RBA’s Sept. 4 meeting, government data indicated a weaker economy: growth slowed in the second quarter to 0.6 percent from 1.4 percent in the first three months of the year; employers unexpectedly cut payrolls in August; the nation recorded a wider-than-expected trade deficit in July; and business confidence declined. “Credit growth has softened of late and the exchange rate has remained higher than might have been expected, given the observed decline in export prices and the weaker global outlook,” Stevens said. A quarter of Australia’s exports, making up about 5 percent of gross domestic product, goes to China, and 60 percent of those shipments are iron ore. China’s manufacturing contracted a second month for the first time since 2009, a government survey indicated yesterday.
China’s SlowdownThe data add to signs that China’s growth rate is at risk of reaching a 22-year low as the ruling Communist Party prepares to begin installing a new generation of leaders next month. China’s central bank has held off from adding to rate cuts in June and July, partly on concern housing prices will rebound, Chen Yulu, a People’s Bank of China academic adviser, said last week. Australia’s economy grew about 4 percent in the first half of 2012 from a year earlier on the strength of resource-industry investment and consumer spending. Still, weaker commodity prices and an elevated currency prompted mining companies including BHP Billiton Ltd. (BHP)and Fortescue Metals Group Ltd. (FMG) to put off projects and cut jobs in the past two months. “The board judged that, on the back of international developments, the growth outlook for next year looked a little weaker, while inflation was expected to be consistent with the target,” Stevens said in today’s statement. The RBA aims for inflation in a range of 2 percent to 3 percent on average. Australian commodity prices declined 4.3 percent in August from the prior month and 18.5 percent from a year earlier in Australian dollar terms, a central bank index showed last month. The gauge reached the lowest level since April 2010. The RBA lowered borrowing costs by 1.25 percentage points from November to June to help shield the economy from Europe’s debt crisis and slower growth in China. “China’s slowdown and its effect on mining are key concerns, as is the high value of the local currency,” said Katrina Ell, an economist at Moody’s Analytics in Sydney who predicted today’s reduction. To contact the reporter on this story: Michael Heath in Sydney at firstname.lastname@example.org To contact the editor responsible for this story: Stephanie Phang at email@example.com
01 October 2012 Written by Training Traders
Market sentiment got a boost today from the upside surprise in US ISM manufacturing, which showed an expansion in broad US manufacturing for the month of September. This number provided a reprieve from what has been months of evidence pointing to deterioration on the manufacturing front with firms loathe to load up on inventory and employees ahead of uncertainty on the tax, regulation, and spending, and demand framework in 2013. Construction spending in August fell 0.6% m/m as July's upwardly-revised to -0.4% m/m from a larger decline of -0.9% m/m. The mover of the downside surprise in construction spending was the sluggish activity in commercial projects, i.e. non-residential. Indeed, according to the report, non-residential projects, which account for almost 70% of construction spending, are being hit by government budget constraints and concern about the looming fiscal cliff. While for the month of September the US posted an expansion in manufacturing, Europe, China, the UK, and Brazil continued their respective declines with data pointing to the 14th month of contraction in the Eurozone (to 46.1 in Sep from 45.1 in Aug and as low as 44.0 in July); in the UK manufacturing contracted more than expected (to 48.4 from 49.6 in August); China showed its 11th straight month of manufacturing decline, dropping to 47.9 from 47.6 in August; and Brazil PMI manufacturing for the month of September contracted again, coming at 49.8 after the 49.3 registered in August. Of relevance to the market this week in the US, on Friday October 5th, non-farm payrolls are due to be released for the month of September. Consensus stands at 115,000 after August's 96,000. The number will inevitably provide fodder to pro and anti-Fed voices looking for evidence as to the effectiveness or lack thereof of the Federal Reserve's activist policies including three rounds of quantitative easing. On Wednesday, October 1st, is the first presidential debate. This year's presidential election is market-relevant and in our view, and an upset could move the market to the upside. The market is, by a wide array of accounts, pricing in an incumbent win.
Switzerland’s central bank has become a conduit for vast flows of capital into German Bunds and other safe-haven bonds, exacerbating the eurozone’s North-South divide.
Thomas Jordan, the SNB's president, said Switzerland would continue to amass foreign holdings of bonds as long as necessary Photo: AP
A report by Standard & Poor’s claimed the Swiss National Bank (SNB) had bought €80bn (£64bn) of German, Dutch, French, Finnish and Austrian bonds this year to counter a flood of money entering the country and hold the franc at 1.20 to the euro.
The scale is vast. The SNB has effectively financed almost 90pc of the combined budget deficits of five core countries over the same period. The bank’s total reserves have soared to 79pc of GDP.
Some inflows into Switzerland are funds repatriated by Swiss citizens seeking shelter from the global storm. But a large part is either capital flight from Italy, Spain and Greece, or money withdrawn by Swiss banks from the Club Med bloc as they cut exposure.
The effect has caused the North-South yield spread to widen further, fuelling the eurozone’s vicious cycle. “We think this 'euro-recycling’ is exacerbating the trend of diverging market conditions for sovereign bonds in the eurozone,” said the agency.
Simon Derrick from BNY Mellon said the Swiss central bank was more or less forced to only buy top-notch bonds as it struggles to defend its euro peg. “The golden rule for reserve managers across the world is that you don’t lose taxpayers’ money. But the truth is that this has become a conduit for capital flight from South to North,” he said.
The European Central Bank’s plan for unlimited purchases of Italian and Spanish bonds – if and when the two countries request rescues – may have changed the landscape. David Owen, from Jefferies Fixed Income, said Asian investors and wealth funds were once again nibbling at Club Med debt. “A year ago they said 'we don’t understand Europe’ and didn’t want to touch it. Now they no longer think EMU is breaking apart and they like the yields on offer in Italy and Spain,” he said. Thomas Jordan, the SNB’s president, said Switzerland would continue to amass foreign holdings of bonds as long as necessary, warning that it was “still too early” to conclude that the eurozone crisis was over. “In the current situation, a further appreciation of the Swiss franc would constitute a very substantial threat to the Swiss economy, and would carry with it the risk of deflationary developments. We will continue to enforce the minimum exchange rate with the utmost determination,” he said. The bank said 60pc of its holdings were in euros as of June. It is trying to diversify into dollars, yen, Canadian “loonies” and Sweden’s krona. Bond buying to hold down a currency can lead to inflationary “blow-back” into the home economy, as China learnt in the boom. In Switzerland’s case it is feeding a property bubble. The SNB said in its Financial Stability Report that mortgage debt had surged to 140pc of GDP, far higher than in the US, Britain, Spain or Greece. The SNB is concerned that “an adverse shock - such as rising interest rates - would lead to a vicious feedback loop of falling prices and impaired balance-sheets throughout the banking sector”. The bank is developing “counter-cyclical capital buffers” to curb excess lending, along lines pioneered in Hong Kong and Singapore. Germany’s Bundesbank is preparing similar “loan-to-value” caps on mortgages to counter a surge in the German money supply. Hans Redeker, currency chief at Morgan Stanley, said Switzerland’s currency peg was working well for now, helping manufacturing exporters and the tourist industry survive lean times. The problem will come as deflation recedes. Any reserve accumulation to hold down the franc will then have loose money effects. “We are watching the Swiss data very carefully,” he said.
This is a very interesting article Mike Baghdady Reuters) - On a warm summer day on the eve of the Olympic Games, European Central Bank President Mario Draghi stood up at a business conference in London and dropped a bombshell. "Within our mandate, the ECB is ready to do whatever it takes to preserve the euro," Draghi told the audience in Lancaster House, a grand building in central London, then paused for effect. "And believe me, it will be enough."Global markets, full of talk of a euro zone break-up, rallied sharply on Draghi's unexpected message. Just as shocked were the ECB boss's aides and his colleagues on the bank's policymaking Governing Council, none of whom knew Draghi would make such a sweeping promise. "Nobody knew this was going to happen. Nobody," one senior ECB official said of the speech. The truth was, the speech was just the beginning. Draghi was in no position to guarantee "whatever it takes." His words were a gamble that set off weeks of frenzied backroom diplomacy and public sparring that would severely test the relationships of the main protagonists in the euro zone crisis. Through conversations with senior ECB officials and leading political actors in the euro drama, most of them on condition of anonymity, Reuters has pieced together a detailed picture of the negotiations that led from Draghi's late-July speech to his September 6 announcement that the ECB stood ready to buy "unlimited" amounts of bonds issued by the most stricken euro members. Key to Draghi's gambit was peeling off enough members of the ECB's Governing Council. One of them, Jens Weidmann, head of the powerful Bundesbank, has become a vocal critic of Draghi's plan. He and his hawkish German colleagues believe it will compromise the ECB's sacred independence and stoke inflation, a taboo in Germany since hyper-inflation in the 1920s gave rise to the Nazis. Yet getting Germany on board was essential. Europe's biggest economy, it has served as the bloc's paymaster during the crisis. If Draghi's policies ran up against a German wall, they would surely fail. In the end, Draghi won over everyone on the council but Weidmann, and crucially secured the backing of Europe's dominant leader, German Chancellor Angela Merkel. "Mario is someone who, when he is convinced he's right, is not worried about going ahead and saying he's right," said Francesco Giavazzi, an Italian economics professor who has often worked with Draghi since they studied together at the Massachusetts Institute of Technology (MIT) in the 1970s. This is the story of how Draghi got his way. PRUSSIAN HELMET Within hours of the London speech, the ECB president's surprised colleagues had recognised its significance and leapt into action. Joerg Asmussen, a 45-year-old former deputy finance minister who had joined the ECB in January, alerted Merkel. Asmussen would emerge as a key player in the hectic weeks to come. A pragmatic German with strong European leanings, he had close ties to all the main players - Draghi, Merkel and Weidmann - giving him leverage and putting him in a unique position to help forge consensus. While Asmussen informed his Berlin contacts, his French colleague on the ECB board Benoit Coeure sent word to Paris. Within 24 hours of Draghi's speech, Merkel and French President Francois Hollande had spoken by phone and issued a statement echoing Draghi's promise. It was a first sign that the Italian's risky, and still murky, plan might fly. But the manoeuvring had only just begun. On the other side of Frankfurt, in the 70s-era cement colossus that houses the Bundesbank, officials were seething at Draghi's London speech and demanding he come clean about his intentions. Early last year, the head of the German central bank Axel Weber had resigned abruptly in protest at the crisis-fighting policies of Draghi's predecessor, Jean-Claude Trichet. The Frenchman had embarked on the ECB'S first-ever round of sovereign bond buying to drive down the borrowing costs of heavily indebted countries like Greece, Portugal, Spain and Italy. Weber, who had been in line to replace Trichet at the top of the ECB, denounced this as dangerous money printing to finance profligate states. When Weber bolted, it opened the door to both Draghi and Weidmann, a former student of Weber's who had served as Merkel's top economic adviser in Berlin. The youngest Bundesbank president ever, Weidmann was now in the same difficult position as his mentor had been. The ECB was on the verge of what looked like a new and ambitious bond-purchase programme. Draghi needed to ensure Weidmann did not flee as Weber had. If he did, it might set off a backlash in Germany that would kill his plan even before it got off the ground. The two met for coffee in Draghi's office on the 35th floor of the Eurotower on July 30, four days after the speech. Displayed on a shelf behind Draghi's conference table was a black-and-gold spiked Prussian helmet from 1871, a gift from Germany's Bild newspaper to symbolise its confidence that the Italian ECB boss would adhere to German-style discipline. The conversation was civil and professional, sources familiar with the meeting told Reuters. But Weidmann made clear he would oppose any revival of bond-buying. The two most powerful central bankers in Europe were at odds. Within days, Draghi was due to chair the first meeting of the ECB's policy-setting council since his speech. Markets were expecting him to unveil concrete steps. But he had yet to flesh out his plan, and was still unsure how many of his colleagues shared Weidmann's doubts. A dinner in the Eurotower on the eve of the council meeting went well for Draghi. Sitting around a large table in a conference room down the hall from his office, four members of the ECB's board - Asmussen was on vacation in France - and national central bank governors from the 17 euro member states exchanged ideas over baked goat's cheese, roast beef and caramel mousse. Draghi and Coeure presented the outlines of a bond-buying proposal put together by the board. Some, including Dutch central banker Klaas Knot and Finn Erkki Liikanen, had reservations. Only Weidmann was dead-set against it. The council agreed that ECB experts would be given several weeks to hone the plan. On August 2, as the council put the finishing touches on the statement Draghi would deliver at an afternoon news conference, Weidmann made a special request. He wanted the ECB president to make clear to reporters that support for bond-buying had not been unanimous. Draghi agreed. A few hours later, Draghi told reporters in Frankfurt and investors watching screens around the globe that the ECB could soon begin buying bonds to reduce borrowing costs in countries like Spain and Italy. But his lack of specifics disappointed markets. And he made one crucial mistake. Instead of sticking to past practice and remaining vague about who had dissented, he named Weidmann as the lone rebel, infuriating officials at the Bundesbank and on the ECB council who sympathised with the German, according to several sources. "It wasn't right for him to single out Weidmann," the senior ECB official said. In the following weeks, a stung Bundesbank would work overtime to undermine Draghi and his plans through a combination of public statements and aggressive leaks. Calling Draghi "soft," Bild threatened to reclaim its Prussian helmet. The debate reverberated in Berlin, unsettling Europe's most powerful leader. TIGHTROPE Angela Merkel has been walking a tightrope since the euro crisis erupted in late 2009, using tough rhetoric to appease an electorate deeply sceptical about supporting crisis-hit euro members like Greece, while nudging bailout deals through parliament to keep the single currency intact. Draghi's plan presented the cautious 58-year-old chancellor with a dilemma. Her former adviser Weidmann and many in the conservative German establishment opposed it. Yet for Merkel it was a godsend. With European leaders at odds over plans to integrate their fiscal policies and banking systems, the ECB was the only body capable of calming markets and keeping the euro zone stable. Merkel, facing a re-election battle in 2013, was loath to see the euro zone explode on her watch. "Super Mario" had offered her a lifeline. In private, sources say, the German leader complained to aides that Draghi was being unfairly attacked in Germany because he was Italian. In public she kept studiously quiet for weeks. Then, in mid-August on a trip to Canada, Merkel backed the ECB chief unequivocally for the first time, describing his policies as "completely in line" with hers and other European leaders. Back home in Germany, though, a backlash was building. On August 26, influential weekly Der Spiegel published an interview with Weidmann in which he likened Draghi's bond plan to a dangerously addictive drug. Days later, Alexander Dobrindt, a top politician from Merkel's Bavarian sister party, slammed Draghi as a "Falschmuenzer," or forger. Even Draghi's allies seemed to be abandoning him. Asmussen had pulled overnighters with Weidmann in Berlin during the height of the global financial crisis and had studied with him at Bonn University. The two were very different. Weidmann, reserved and serious, had refused to move his family from staid Frankfurt when he came to the German capital to advise Merkel. Asmussen, his partner and two daughters, couldn't imagine uprooting from trendy Prenzlauer Berg in Berlin when he joined the ECB. Born a year and a half apart, they are not close friends but call each other on birthdays and sometimes give each other a heads-up on the content of their newspaper interviews. Both were outraged when Bild, without talking to either of them, ran a story on August 27 saying they had turned against each other. Asmussen was bothered by Weidmann's isolation and began pushing back against Draghi, giving interviews and speeches in which he attached tough conditions - such as IMF involvement - to his boss's bond-buying programme. The Italian's wiggle-room was shrinking by the day. Then on August 30, Bild reported that Weidmann had considered resigning, just as Weber had. It wasn't true - the youthful Bundesbank chief never seriously thought about stepping down, according to sources at the German central bank. But the report heaped new pressure on Draghi. As August drew to a close, the ECB president cancelled plans to attend a central bankers' conference in Jackson Hole, Wyoming. He had a week to forge consensus on his bond-buying plan, yet virtually all the details still needed to be hammered out. A PLAN COMES TOGETHER Draghi scrambled over the weekend of September 1-2, and on his 65th birthday a day later, to stitch together his plan. A reserved man, he had a breadth of experience most central bankers would envy. After earning an economics doctorate from MIT, he worked at the World Bank in Washington, headed the Italian Treasury, did a stint at Goldman Sachs, ran the Italian central bank and the Financial Stability Board (FSB), a global regulation body. In contrast to his micro-managing predecessor Trichet, Draghi likes to delegate so that he can focus on the big strategic issues. He has earned a reputation for taking his time and listening carefully before making decisions. Once he does commit, people close to him say, he doesn't look back. Top secret papers had been circulating at the ECB since June exploring new alternatives for bond market intervention and the conditions that might be attached to it. Draghi needed to narrow down the options and clinch agreement - fast. By insisting that any ECB bond buying be tied to an aid programme involving the notoriously tough IMF, Asmussen had staked out a position that could discourage countries from asking for help in the first place. His hard bargaining aimed to ensure ECB action did not lead countries to soft-pedal reforms. This was a concern borne of experience. In 2011, the ECB had bought Italian bonds only for Italy's then-prime minister, Silvio Berlusconi, to drop reform promises days later. The half-dozen or so members of the policy council who sympathised with Weidmann were particularly worried about being taken in again. Riled by some of the public debate about the ECB's plans, Draghi argued that the risks facing the euro zone meant the ECB had to act. After a period of intense negotiations, he won out. At the September 6 policy meeting, all members of the Governing Council bar Weidmann backed the plan to buy sovereign bonds on secondary markets. But Weidmann's stance and the manoeuvring of others sympathetic to his cause ensured any ECB intervention would come with a strong dose of "conditionality". Countries who wanted the ECB to intervene must first sign up to a formal aid programme. IMF involvement would be sought and bond purchases restricted to maturities of up to 3 years. The ECB could choose to sell as well as buy bonds - a veiled warning to countries that it might pull the plug if they failed to deliver on their promises. The new initiative just needed a name. Initially dubbed "Outright Open Market Operations" or (OOMO), the ECB board ditched that for "Monetary Outright Transactions" (MOT), before settling on the more grammatical "Outright Monetary Transactions" (OMT) shortly before the programme was unveiled. Beginning his news conference with a wry smile, Draghi announced: "Under appropriate conditions, we will have a fully effective backstop to prevent potentially destructive scenarios." He then made clear the volume of bond purchases would be unlimited. Euro zone blue chip stocks soared to levels not seen since March and the euro extended its upward march. A week later, Germany's Constitutional Court gave a green light for Europe's new bailout fund and Dutch voters handed pro-European parties a sweeping election victory. After three years of seemingly constant crisis, Europe could breathe again. PROOF IN THE PUDDING It is far too early to hail Draghi's plan as a solution to the crisis. The central bank has bought no bonds yet and its members are already sending conflicting signals over how the plan will be implemented. Many questions remain. Will countries need to sign up to tough new reforms on top of those already being implemented before the ECB jumps to their aid? If they do, will it dissuade governments in Rome and Madrid from seeking aid at all? And are Draghi and his colleagues really prepared to put their money where their mouth is and buy an unlimited amount of bonds? A hesitant approach, inhibited by German doubts, doomed Trichet's Securities Markets Programme (SMP) to failure. "It will work if the expectation of unlimited support is not altered or compromised in some way," said Domenico Lombardi, a senior fellow at the Brookings Institution and former IMF executive board member, who knows Draghi. "The key word is unlimited," he added. "It has been said in words, but the actions that follow will have to be consistent." Perhaps a bigger question is the longer-term impact of Draghi's plan on sentiment in Germany. At the single currency's birth, the ECB was sold to sceptical Germans as a euro-wide carbon-copy of the Bundesbank. Combating inflation was to be its sole objective and its independence sacred. Now many Germans feel betrayed, some convinced the ECB has been taken over by a cabal of dovish southerners. A poll released the day Draghi announced his plan showed nearly one in two Germans had little or no confidence in him. Still, Draghi has bought Europe time, and given politicians more space to sort out the mess. The currency's fate hinges on whether those politicians grab the opportunity Draghi promised them on that warm summer day in London. (Paul Carrel reported from Frankfurt, and Noah Barkin and Annika Breidthardt from Berlin; Edited by Simon Robinson and Sara Ledwith)
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http://www.bloomberg.com/news/2012-09-24/g-20-agree-more-government-action-needed-for-world-recovery-1-.html Group of 20 officials meeting in Mexico City agreed that the latest monetary easing by developed nations will buy time for the global economic recovery and that governments must do more to boost growth, Mexican central bank Deputy Governor Manuel Ramos Francia said. Ramos Francia spoke at a news conference following the end of a two-day meeting of deputy finance ministers and central bank officials from G-20 nations in Mexico City. Mexico is presiding over the group this year. “Time can be bought through monetary easing, but the risks are still present,” Ramos Francia said. “For Europe to effectively heal, for example, other types of policies need to be implemented.” The meetings took place after European Central Bank President Mario Draghi said Sept. 6 that the bank was ready to buy unlimited quantities of short-dated government bonds of nations signed up for rescues. The U.S. Federal Reserve on Sept. 13 said that it would make additional purchases of debt in a third round of so-called quantitative easing, while the Bank of Japan unexpectedly increased its asset-purchase fund to 55 trillion yen ($707 billion) at its meeting last week.
Commodity PricesThe G-20 nations called for better transparency in commodities markets and for measures to boost production, transportation and trade of raw materials to reduce price volatilitiy, said Mexico’s deputy finance minister, Gerardo Rodriguez, who co-chaired the Sept. 23 and 24 meetings. Increasing raw material production “was the central part of our discussions today,” Rodriguez said. Rodriguez said the deputies discussed boosting emerging markets’ International Monetary Fund quotas, which determine access to financing, financial obligation and voting rights. A concrete decision will probably come by the end of the year or the start of 2013, he said. The nations agreed that emerging markets should “gradually” increase their presence in the IMF based on measurements including economic output, Rodriguez said. To contact the reporters on this story: Nacha Cattan in Mexico City at firstname.lastname@example.org; Eric Martin in Mexico City at email@example.com
Germany's central bank has launched a blistering attack on the International Monetary Fund, accusing officials of spraying around money like confetti and overstepping their legal mandate.
The Bundesbank said the IMF was right to help rescue Greece, Ireland and Portugal but said monitoring levels were slipping and there had been a 'watering down' of standards Photo: Getty Images
“The IMF is evolving from a liquidity mechanism into a bank. This is neither in keeping with the legal and institutional role of the IMF or with its ability to handle risks,” said the Bundesbank in its monthly report.
The bank said the Fund was right to help rescue Greece, Ireland and Portugal but said monitoring levels were slipping and there had been a “watering down” of standards. The scale of loans risks “overwhelming the IMF’s institutional structure”.
The unprecedented attack came as the IMF’s chief, Christine Lagarde, called for urgent measures across the world to head off a fresh global slump. While praising the latest emergency measures of central banks in the US, Europe and Japan, she said this was not enough to secure recovery.
The Europeans must activate their new machinery, while the US must prevent a “dramatic tightening” of fiscal policy later this year. Failure to act “would effectively plunge the country off a 'fiscal cliff'", cutting US growth by up to 2pc. She said this would pose a “serious threat for the global economy”.
Ms Lagarde also said emerging economies need to bolster their defences against “potential spill-overs”, if necessary by injecting “additional stimulus”.
24 September 2012 Written by Training Traders
In today’s market, a trader’s problems change as quickly as he or she can solve them, which is why having a rule-based strategy is more important than ever, says Mike Baghdady. In addition to trying to make correct trading decisions, new issues have arisen that we must attend to such as anonymity to protect our orders from negative selection and executing our orders with the least possible market impact. We also have to seek liquidity and have an algorithm to help us find that liquidity; and when we do find it, we must then have a quality execution. We should have a complete understanding of the rules behind our trading systems; we must understand why they are giving us specific signals at all times, and the reasoning behind them. After all, what good is pulling an exceptional profit from a trade if you don’t understand the series of events that occurred to make it happen, or the ability to repeat the action consistently? While quantitative analysts and programmers begin with certain assumptions that they believe should work, when they are tested in real life they are quickly felled by variables that the analysts couldn’t have accounted for or anticipated. A good trader must be able to adjust their strategy to account for these variations and not only believe that the changes they have made to their strategy will stand up against a sudden change in volatility, they must also have the confidence to execute each trade with a high degree of certainty that they are more likely to win than lose. Practically everyone makes poor assessments of risk and event probabilities under the duress, but fortunately in trading, human emotion represents a tremendous source of opportunity for us to profit from. The best trading systems can show you a map of such human behaviour by identifying price points on their charts, flagging where traders have realised they have made errors in their judgment and are desperately seeking to act on those realisations and correct them, to limit their losses. Within all of these price points are opportunities that winning traders know how to profit from because they understand how the errors other traders have made manifest themselves in price action. They are making money by exploiting the consistently irrational behaviour patterns of other traders acting on their base senses of hope, fear and greed. That is why understanding price behaviour really works and continues to work because it is based on the market movements that result from this systematic and repeated irrationality that is embedded in every trader in the market. Strategies based on price behaviour allow a trader to identify points where other traders need to enter or exit trades and to have a good mechanical system that automates the entire process of trading. Such a system should provide answers to each of the decisions a trader has to make, and because there is a set of rules that specifically defines what should be done in any circumstance, decisions are not left to the judgment of the traders themselves, but to their systems – eliminating to some extent the risk of emotion interfering in an execution. A profitable trading system that adheres to the rules and principles of price behaviour contains five basics elements:
- Portfolio selection
- Risk Control
- Optimum Entry
- Optimum Exit
- Automatic execution