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“Predicting the Stock Market Is Easier Than You Think”

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Stock Market

Even if you don’t trade stocks for a living, or have any financial background whatsoever, being able to predict the future economy can be a huge benefit to your financial situation. Real estate can be sold at its highs, money can be drawn from mutual funds that are expected to rise indefinitely, and when things start to go bad, moving capital into tangible assets such as gold is a boon.

This article aims to give market outsiders a no-nonsense four-step guide to successfully predicting the health of the economy consistently over time.


Step 1: Break the financial matrix

If you think trading is hard, you’re right. It turns out that up to 80–90 percent of non-institutional traders (those who don’t work at financial institutions) lose money when tradingThis high percentage has prompted regulators to force brokers to publish data about their clients’ losses on their own platforms. That’s why you’ll find the following language on the websites of countless investment companies: “Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider.”

These warnings don’t really solve the problem, and have been about as effective as GDPR cookie compliance (i.e. they have virtually no effect whatsoever). If anything, the broker is just fueling the potential client’s desire to beat the odds: “Are you one of the 21 percent?”

It is increasingly difficult for traders to beat the market due to the rise of “algo trading,” which virtually eliminates any chance for mere mortals to make money trading on a short-term basis.

It is also becoming increasingly difficult for traders to beat the market due to the rise of “algo trading” (the use of computer algorithms), a strategy that virtually eliminates any chance for mere mortals to make money trading on a short-term basis. If you have ever tried trading a company’s earnings the market will have moved before you had a chance to react (as the below graph demonstrates).

Source: MarketWatch 2018.

Day trading is now the least profitable way to trade, as only advanced supercomputers can now benefit from world news and company earnings. A trading floor no longer has 200+ sweaty middle-aged men throwing their hands up in the air like Hollywood wants you to believe; they have been replaced by machines implementing financial artificial intelligence, commonly known as FinTech.

So why do people still think day trading will make them rich? This can be explained by the fact that day trading is widely advertised as an effective strategy by the mainstream brokerage industry and financial media. Once it is shoved down retail traders’ throats, they cave in to the constant propaganda and lose money quickly by sticking to unprofitable strategies whilst utilizing the “education” offered by the brokers, which is code for “learn how to give me all your money in the fastest way possible.”

Day trading is now the least profitable way to trade, as only advanced supercomputers can now benefit from world news and company earnings.

The entire industry is based on suckering desperate individuals into a false narrative. They say it is easy to make money—all you have to do is trade on charts with no fundamentals and you’ll be sitting on a beach sipping a piña colada in no time. But let’s ask the obvious question here: If trading were that easy, why isn’t everybody doing it?

The truth is it’s almost impossible to make money if you are a retail trader; the small percentage of people who do succeed have had sufficient training and education. Realising you are stepping into a financial matrix where everything being thrown at you forces you to lose money instead of gain, is the first step required to making informed decisions.

Step 2: Learn how the “smart money” consistently predict the market

It’s important to understand that two herds exist in the financial markets: the dumb money and the smart money. “Dumb money” refers to nonprofessional investors, “smart money” to institutional investors who work at investment banks and hedge funds. These professional individuals use the same processes to create trade ideas and views on currencies, commodities, stocks, and bonds. Their strategies only differ from each other in terms of the assets they decide to trade.

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Since the smart money are analysing the same data and following the same indicators, a smart money herd mentality is created. The internet allows outsiders to get a glimpse of that mentality—to predict what the smart money are doing and what position they may take on a certain asset.

The CFTC (Commodity Futures Trading Commission), for instance, records smart money transactions in the financial markets using their weekly Commitments of Traders report. Below is a graph of eurodollar futures traded on the CFTC exchange. The white line on the graph below shows us that institutions are positioned net long the euro (that is, most people are buying) and net short the U.S. dollar (most people are selling). However, the number is decreasing, showing that money has been flowing from the euro into the dollar over the past year.

Source: CFTC exchange.

Now that we have identified that institutional investors have a herd mentality, we need to know how they come to the conclusion that the U.S. dollar is favored over the euro. The problem outsiders have when learning how markets really work is gaining the correct information about what drives the economy in the first place. The markets are forward-looking: the price you see is a reflection of what the market thinks the price will be six to 12 months in the future rather than in the present day. When it comes to the stock market, gross domestic product (GDP) is the benchmark for global growth and contraction. Therefore, being able to predict movements in GDP is the key to predicting stock market moves.

How do you predict GDP, you ask? The answer is leading economic indicators. You may have heard that term before, but you might not have been introduced to the most powerful indicators that are used by smart money who consistently predict market moves before the dumb money herd. If we can identify the leading indicators of GDP, then we can accurately predict future moves in GDP and therefore the stock market.

Step 3: Use indicators to create a worldview

We will now use the strongest and most accurate leading indicators to create a view on the economy and thereby predict future stock market movements. Two of the three indexes discussed below pertain specifically to the United States, but bear in mind that the U.S. economy drives the global economy and many stock markets mirror these indexes. (This actually hasn’t been the case recently if you look at Europe and China, but that’s something for you to do some further reading on.)

The most powerful predictor: ISM

The ISM Manufacturing Report On Business® publishes a monthly index scorewhich is calculated by interviewing more than 300 purchasing managers from around the U.S. A score above 50 indicates that there is a positive growth in the economy and vice versa. However, this is not how a professional uses the ISM to predict GDP. It is all about the current trend and whether there is an upwards or downwards momentum in the readings. Remember that the difference between this indicator and a stock chart is that the score is based on real-life purchasing managers reporting current market conditions: it isn’t just a line on a chart!

The ISM has over 90 percent correlation with real U.S. GDP growth.

Using the last 70 years’ worth of data we can create a key that allows us to predict GDP based on the ISM’s trend line:

ISM above 50 and increasing: positive outlook
ISM peaks above 50: neutral/negative outlook
ISM above 50 and decreasing: negative outlook
ISM below 50 and decreasing: negative outlook
ISM troughs below 50: neutral/positive outlook
ISM below 50 and increasing: positive outlook

With a six to 12 month time lag on GDP the correlation is staggering. And the fact that the lag exists is what allows professionals to accurately predict the stock market consistently over time. The financial media are aware of the ISM but barely dedicate any time in covering the true power of this leading indicator. It doesn’t matter what stock you are trading: the ISM will have some influence over that stock price.

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The ISM’s amazing accuracy can partly be explained by the professional trader herd theory: institutions such as investment banks and hedge funds implement the same overall strategy but employ their own unique variations. You can almost guarantee that the ISM is an important part of a professional’s process when generating ideas and forming a global view on the world economy.

Here are examples of the ISM mirroring the stock price and therefore predicting the financial health and performance of well-known companies.

Advanced Micro Devices (AMD)
Apple (AAPL)

JPMorgan global manufacturing PMI

JPMorgan publishes a global PMI (purchasing managers’ index): it’s not limited to the U.S. markets like the ISM reports. We won’t really go into this indicator further, but the theory is exactly the same as the ISM.

JPM, just like other leading indicators, predicting the last two recessions

Building permits

The second-most powerful and widely misunderstood indicator is the U.S. building permits index. Why would that be? It turns out that building permits aren’t just a planning application: they involve a payment made to the government. They aren’t free! If builders aren’t willing to pay for the application in the first place, this indicates that there is a decrease in demand for housing and that businesses are holding back on spending.

U.S. building permits predicts GDP and housing crashes

Plus, to build a house you need a large amount of capital. The vast majority of homebuilders use debt to finance the building of a house in the form of a mortgage. If banks and other lenders aren’t willing to lend, then the total number of permits will decrease—hence they act as a barometer of financial health. The wellbeing of the housing sector relies on the availability of credit in the system. The ability or inability of banks to issue a consistent supply of loans gives us a great insight into the health of the overall economy.

Step 4: Use your newfound knowledge to predict the economy

We are now in August of 2018. The Chinese and European markets are contracting, and the financial media are saying the stock market in the U.S. has reached new all-time highs. But does that mean we should enter the market and buy stocks? Let’s check the status of our indicators.

ISM above 50 and decreasing: negative outlook
JPMorgan global manufacturing outlook decreasing: negative outlook
Building permits decreasing: negative outlook

Using the data we have obtained we can come to the conclusion that the U.S. economy is still growing but at a much slower rate than in previous months. As a result, smart money will eventually react as institutions will use this hypothesis to anticipate a global economic slowdown and short the U.S. market. (Hint: it’s already happening, check below!)

Smart money that are reducing their long positions are almost net short!

We are already seeing this in China and Europe as their stock markets start to tank and move towards negative GDP growth. But will the U.S. follow suit? It’s looking that way. In a year or two we could be on the verge of a recessionary period in the economy. However, it’s always good to wait for a few readings before changing your bias: future readings may reverse and hey, presto, an even longer bull market in the U.S.!


Last Word

I hope you can see now that having a view on the global economy is easy once you know what drives markets and can anticipate what is to come in the future. Once you realize how the system works and can operate within it, it starts to make complete sense. I encourage you to do some further reading on the material covered in this article, and to explore further how this information can be useful in your future financial decision-making.

Good luck! If you have any questions feel free to leave them in the comments.

By Concoda

Culled from Medium

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Kwara Scholarship Board Rocked By N150m Alleged Bursary Fraud***EFCC Interrogate Chairperson

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Fraud

 

The Economic and Financial Crimes Commission (EFCC), has opened an investigation into an alleged fraud running into N 150m.

The alleged fraud was orchestrated by the management of Kwara State Scholarship Board.

Operatives of the EFCC have already interrogated officials of the board, including the Chairperson, Hajia Fatimoh Yusuf, Executive Secretary, Mr. Fatai Lamidi and the Board’s Accountant, Mr. Stephen Ajewole, among others.

A source within the board who spoke with www.theoctopusnews.com, in confidence revealed that the fraud was actually perpetrated between 2017 and 2018 when the Kwara State government released the said sum as bursary allowance for 10, 000 indigenes who were students in various tertiary institutions of the state.

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However, only 6, 000 students were paid bursary while 4, 000 students allegedly failed to benefit from the bursary.

The source revealed that the 4, 000 students who were not paid subsequently alleged that their money had been converted to personal use.

Our source revealed that the fraud was carefully orchestrated such that names of the recipient were provided, but they never got their allocation.

In the course of investigations, the students who sighted their names, matriculation numbers and signature became very angry, insisting that their signatures were forged.

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They claimed not to have been the original beneficiaries of the controversial bursary allowance despite their particulars on the scholarship board documents.

During interrogation, it was revealed only a handful of the students actually got paid, as opposed to the 10, 000 students reported to have been paid.

With the investigation ongoing, heads are expected to roll in the scholarship board, with management staffs expected to be persecuted if found guilty.

 

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FIRSTBANK AGRIC EXPO SET TO PROMOTE NEW AGRIBUSINESS OPPORTUNITIES

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tunThe 2019 edition – the third in the series –  is themed Agricultural Value Chain – Spotlighting Opportunities and Managing Risks” would have Professor Benedict Oramah, President of AFREXIM Bank as the Keynote Speaker.

 

The annual FirstBank Agric Expo, launched in 2017 provides the lead in national discourse on sustainable agriculture value-chain as a substantial source of Nigeria’s economic development, improved contribution to her balance of trade as well as foreign exchange. The 2019 edition would host over 600 delegates and over 60 exhibitors to display the latest technology in farm equipment, tools and machineries as well as packaged finished agricultural produce, logistics and supply, thereby keeping the participants and sundry agribusiness practitioners abreast with new opportunities in the Agricultural industry.

Besides the plenary session, the expo will feature three (3) Masterclasses with in-depth analysis on specific areas of Agribusiness, facilitated by enterprising Subject Matter Experts (SMEs). The Masterclass facilitators include Mr. Leonard Anyanwu, Group Executive Director, Saro International Limited; Mr Segun Ogunwale, Team Lead, Kominity Digital and Mr Bamidele Ayemibo Managing Director, 3T Impex Trade Centrewho will provide insight as well as share success stories and experiences.

 

Expressing his delight on FirstBank’s leading role at not just promoting Agriculture but diversifying the Nigerian economy, the CEO, First Bank of Nigeria Limited, Dr. Adesola Adeduntan said ”in the last 125 years, more than any other financial institution, we have played a key role in financing different sectors of not just the Nigerian economy but other economies in sub-Saharan Africa. As Nigeria expands opportunities in its non-oil sector – especially Agriculture – we remain committed to the growth of the agricultural sector and its contribution to the nation’s Gross Domestic Product.”

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“Our consistency in convening the FirstBank Agric Expo, which is in its third consecutive edition, is a demonstration of our commitment to building the agribusiness economy which is capable of delivering sustained prosperity by meeting domestic food security goals, generating exports, supporting sustainable income and creating employment opportunities”, he concluded.

 

 

About FirstBank

 

First Bank of Nigeria Limited (FirstBank) is the premier Bank in West Africa and the leading banking services solutions provider in Nigeria for 125 years. With some 15 million customer accounts, FirstBank provides a comprehensive range of retail and corporate financial services with over 750 business locations. The Bank has international presence through its subsidiaries, FBN Bank (UK) Limited in London and Paris, FBNBank in the Republic of Congo, Ghana, The Gambia, Guinea, Sierra-Leone and Senegal, as well as a Representative Office in Beijing.

Since its establishment in 1894, FirstBank has consistently built relationships with customers focusing on the fundamentals of good corporate governance, strong liquidity, optimised risk management and leadership. Over the years, the Bank has led the financing of private investment in infrastructure development in the Nigerian economy by playing key roles in the Federal Government’s privatisation and commercialisation schemes. With its global reach, FirstBank provides prospective investors wishing to explore the vast business opportunities that are available in Nigeria, an internationally competitive world-class brand and a credible financial partner.

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FirstBank has been named “Most Valuable Bank Brand in Nigeria” six times in a row (2011 – 2016) by the globally renowned “The Banker Magazine” of the Financial Times Group; “Best Retail Bank in Nigeria” for seven consecutive years (2011 – 2017) by the Asian Banker International Excellence in Retail Financial Services Awards and “Best Bank in Nigeria” by Global Finance for 15 years. Our brand purpose is to always put customers, partners and stakeholders at the heart of our business, even as we standardise customer experience and excellence in financial solutions across sub-Saharan Africa, in consonance with our brand vision “To be the partner of first choice in building your future”. Our brand promise is to always deliver the ultimate “gold standard” of value and excellence. This commitment is anchored on our inherent values of passion, partnership and people, to position You First in every respect.

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ZENITH BANK APPOINTS HENRY OROH EXECUTIVE DIRECTOR AND DR. AL-MUJTABA ABUBAKAR INDEPENDENT NON-EXECUTIVE DIRECTOR

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HENRY OROH

The Board of Directors of Zenith Bank Plc has approved the appointment of Mr. Henry Oroh as Executive Director of the bank. The appointment is consistent with the bank’s tradition and succession strategy of grooming leaders from within.

Also, the Board has approved the appointment of Dr. Al-Mujtaba Abubakar, FCA, as an Independent Non-Executive Director.

Both appointments are effective September 1, 2019, and have been approved by the Central Bank of Nigeria.

Henry Oroh holds a Bachelor’s Degree in Accounting from the University of Benin, Edo State and an MBA from the Lagos State University as well as an LLB Degree from the University of Lagos. He is a Fellow of the Institute of Chartered Accountants of Nigeria (ICAN) and an honorary member of the Chartered Institute of Bankers (CIBN), Nigeria.

He has over two decades of banking experience. He began his banking career in 1992 at Citibank where he served for seven (7) years in Operations, Treasury and Marketing.

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He joined Zenith Bank in February 1999 and has worked in various Groups and Departments within the Zenith Group Office. His expertise spans Operations, Information Technology, Treasury, Marketing, including the Manufacturing, Food and Beverages, Pharmaceuticals, Oil and Gas, Public Sector, Consumer, as well as Corporate Banking and Business Development.

In April 2012, he was seconded to Zenith Bank Ghana Limited as an Executive Director and became the Managing Director/ Chief Executive in February 2016, where he successfully spearheaded the phenomenal growth of the Zenith Brand both within the Ghana market and the West African sub-region.

Henry has attended several Leadership Programmes and Executive Management Courses at the Harvard Business School, Columbia Business School, New York, University of Chicago, University of Pennsylvania, HEC Paris, JP Morgan Chase, UK, and the Lagos Business School.

He comes to the Board of Zenith Bank Plc with strong competencies in Credit & Marketing, Operations, Information Technology, Treasury and impressive Leadership skills.

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Dr. Al-Mujtaba Abubakar is currently the Managing Director of Apt Pensions Funds Managers Limited.

He is a graduate of the Leeds Polytechnic, UK. He is a renowned Chartered Accountant and a Fellow of the Institute of Chartered Accountants of Nigeria.

Dr. Abubakar has extensive and tremendous experience in the financial services industry, audit and consulting. He worked with the firm of Akintola Williams Deloitte between January 2000 and November 2008 and rose to become the Partner and Board Member of West Africa sub-region. Prior to this, he had served on the Board of several financial institutions in Nigeria.

He has attended several management and leadership training programmes and conferences both within and outside the country.

He brings to the Board of the bank tremendous track record in Risk Management, Credit & Marketing, Auditing, and very outstanding leadership skills.

 

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