Commodity Trading Companies are Increasing Their Bullish Bets on Commodities

This is all good news for China which is dependent on the status of the world economy and the U.S. If there is confidence in China there will be an increase in most commodity prices as they are now the largest consumer of coal, copper, and cotton. According to the commodity futures trading commission speculators increased their net long positions by 9.8 percent which is the biggest gain since August.

According to some money managers China is the most important factor because they are becoming the largest consumer of a number of commodities as they increase production to meet world demand for their inexpensive products. However, you cannot forget that China is dependent on other countries’ economic growth such as European nations and the U.S. In retrospect Europe and the U.S are the main drivers of increased commodity prices as they fuel the economic engine of China.

Why do hedge funds and other commodity trading companies believe we are going to have an increase in the prices of commodities? Could it be because of China or confidence in the Federal government to avert a disastrous fiscal cliff? I believe it is both. China is now under new leadership which is giving confidence to investors that they will improve their financial climate.

According to a survey by Bloomberg the world economy is in the best shape it has been for 18 months. A commodity strategy that could benefit a speculator would be following the prices of hard commodities such as copper which is used in manufacturing, along with cotton which is used to make clothing. They should also pay close attention to energy such as oil and coal, the largest sources in the U.S and China. This commodity strategy will be directly affected by the economic conditions in the U.S, China, and Europe.

Other markets to be traded based on economic growth but not specific to just growth are interest rates. A trader could also trade the stock indices but they are U.S stocks and may not be directly correlated to economic growth in China. A futures strategy that is bullish on these commodities would be going long by either buying futures contracts or options on futures contracts. Both have different risk and reward scenarios and should be chosen based on a traders risk tolerance. Another futures strategy would be trading spreads. A trader can enter a spread trade with either futures or options.

A futures spread can be done by buying and selling futures contracts on different commodities or different months. An option spread can be done by selling and buying options, calls or puts, at different strike prices. These types of trades are considered to be less risky but also tend to have a smaller amount of profit for the trader. Money managers and traders are expecting a rise in commodity prices in 2013 due to signs of economic growth in the U.S and China but do not expect enormous gains. There are other factors that drive commodity prices such as supply side factors. Traders need to examine both options.

What is an IRA?

IRA, or the individual retirement account, is, in essence, a personal account for people who are currently employed. This tex-deferred account is also for the spouses of people who are successfully employed. Setting up an IRA is not difficult and can be easily down through any bank, insurance firm or brokerage. There is a wide range of investment options that you can choose from. Your earnings will be completely untaxed as long as they are paid out of the individual retirement account.

Types of IRA

There are various types of individual retirement account:

1) Traditional – A traditional IRA contributions are usually tax-deductible. In other words, money is deposited into the account before tax. All the earnings as well as transactions within the account have no tax impact. Withdrawals at the time of retirement are taxed as per the income.

2) Roth – This type of account is funded with after-tax assets. All the transactions happen without any tax impact and withdrawals are often tax-free.

3) SEP – The SEP IRA is essentially a provision that lets an employer, usually the owner of a small business or someone who is self-employed, to make retirement plan contributions into a traditional individual retirement account. The account is established into the name of an employee and acts as an alternative to pension funds that are started in a firm’s name.

4) Self-Directed – This type of IRA works by letting an account holder make investments on the behalf of the whole retirement plan.

An IRA is a good option but not everyone can take advantage of it. There are some restrictions attached to each type of IRA based on a person’s individual income as well as employment status. There are also caps on how many contributions can be made in a year, or how much. An account holder might also have to suffer penalties if he/she tries to pull the funds out before the designated retirement age.

What are Bonds and How Do They Work?

We have all borrowed money at some point of time. Just like people, firms and governments also need money. Companies require funds when they want to expand their product range or maybe step into a new market. Governments, on the other hand, require money for lots of things. The problem with large firms is that they at times need such large amounts of money that bank loans are just not enough. Companies then issue binds in order to raise money.

A bond, in essence, is just a loan for which you are the lender and a company (issuer) issuing the bond is the borrower. The bond’s issuer gives the lender (you) interest payments. These are made at a rate and schedule that has been predetermined by the issuer. This interest rate is often called coupon and the date on which the company that has issued the bond has to repay the amount that has been borrowed is known as the maturity date.

Bonds are often referred to as ‘fixed income securities’. The reason for this is that you the exact amount of money that you’ll be getting back if you choose to hold the security till the bond has matured.

Bonds are a good investment and perfect for you if you don’t like to invest in stock, which can be quite unpredictable. For people who are looking for a very long term investment (like retirement) or a short term one, bonds are a good solution. These help you ensure that you will get a fixed amount at the end of the day and also make the most of the interest payments. In addition, high yielding bonds can help you enhance your current income. As long as you have invested in bonds, you can rest assured that you will get your money back, plus interest payments at regular intervals.

If you want to find out more about bonds, you can always read online or talk to someone you know who has invested in them.

The End of the Road – Why Bankruptcy Should Be Your Last Option

As each day passes people become more and more consumed with financial difficulties. Unfortunately, these difficulties can continue to increase to the point where a person is unable to repay any of their debts. As a result, bankruptcy has become an avenue for people to relieve themselves of the debt and financial obligations they have accrued. Despite the well documented setbacks of this process, people continue to fill the offices of bankruptcy specialist at an alarming rate.

The statute of bankruptcy was initially established under English law in the year of 1542 and centered on insolvency. However, bankruptcy as we know it today provides individuals two platforms for relief, chapter seven and chapter thirteen. While both procedures will successfully eliminate your debt, the function and usage is very differently. Chapter seven is typically referred to as liquidation bankruptcy and is intended for those looking for a fresh start.

Liquidation means you must be willing to loose any assets outside the jurisdiction of your bankruptcy exemptions. Chapter thirteen however, is referred to as the reorganization bankruptcy. This is because the goal of this aspect of bankruptcy is to save assets by combining them into a fixed monthly payment. It should be noted, that chapter seven bankruptcy stays on your credit report for ten years. Chapter thirteen however, stays on your report for only seven years.

The truth is many people who file for bankruptcy never really recover from this process. This is because they don’t learn better ways to manage their money. Typically, bankruptcy is a direct result of two things: inability to live within your means and under-saving.

The average person realistically, doesn’t make enough money to adequately support themselves and their family. In situations where this is the case, saving money is not a reality. However, juxtapose that to a person who does have sufficient income that exceeds the normal cost of living. How does this person end up in the bankruptcy line? Overspending is usually the main reason for this type of individual to file for bankruptcy.

If you spend more than you make or more than you can afford to, your gonna end up in debt. This is true in every case outside of extreme medical situations that occur suddenly. Without a doubt, bankruptcy will follow you around for years to come. Even after it clears off your report, you will still have to deal with the ramifications of this debt relief option. Remember, by curbing your spending and increasing your savings you begin the process of getting yourself out of debt. And this is the only way to truly do it.