European banks agreed to suspend trading in the $2.8 trillion market for mortgage debt known as covered bonds to halt a slump that has closed the region's main source of financing for home lenders..... http://www.bloomberg.com/apps/news?pid=20601087&sid=aS4wGPNgwfHs&refer=home
Fed cool on long-term growth forecast
The Federal Reserve on Tuesday revealed it no longer believed the US economy can grow much more than 2.5 per cent a year without causing rising inflation, a lower rate than many investors thought was sustainable.
Freddie Mac seeks emergency funding after posting $2bn loss
Freddie Mac, the government-sponsored company tasked with propping up the US mortgage market, said it would be forced to seek emergency funding to shore up its balance sheet after plunging $2bn (£968m) into the red.
The company yesterday said that it had hired Goldman Sachs and Lehman Brothers to tout for new funds that seemed likely to dilute existing shareholders, adding that it was also considering halving the dividend. Its shares lost more than a quarter of their value.
U.S. Stocks Tumble to Three-Month Lows; Freddie, Limited Fall
U.S. stocks fell to three-month lows after growing concern that losses from mortgage defaults will spread through the economy pushed down shares of banks, brokerages and retailers.
While all the signs of a perfect economic storm are registering more and more clearly, Bush admin is waffling and barely waking up, while a single lone Republican senator is blocking even minimal intervention.
Auto Trading Term: Mean – Reversion
Mean Reversion is a mathematical methodology commonly used for stock investing, but it can be applied to other processes. In general terms the idea is that both a stock's high and low prices are temporary, and that a stock's price will tend to have an average price over time.
Mean reversion involves first identifying the trading range for a stock, and then computing the average price. (Persons using extensive financial analytical techniques establish the average price as it relates to assets, earnings, etc.)
When the current market price is less than the average price, the stock is considered attractive for purchase, with the expectation that the price will rise. When the current market price is above the average price, the market price is expected to fall. In other words, deviations from the average price are expected to revert to the average.
One Standard Deviation (the square root of the trading range) can be used as a buy or sell indicator measurement. For instance, if the normal trading range is betweent 51 and 100, the range is 50, giving a standard deviation of $7.07 (the sq. rt. of 50). If the average price is $75, an investor using Mean Reversion would buy the stock at $75-SD (buy at $68) and sell the stock at $82 ($75+$7). One standard deviation is thought to cover 78% of future price movements, based on past movements. One, two or more standard deviations can be used for more accuracy.
Stock reporting services (such as Yahoo, MS Investor, Morningstar, etc.), commonly offer moving averages for periods such as 50 and 100 days. While reporting services provide the averages, identifying the high and low prices for the study period is still necessary.
Mean reversion is a more scientific method of choosing stock buy and sell points than charting, because precise numerical values are derived from historical data to identify the buy/sell values, rather than trying to interpret price movements using charts (charting, also known as technical analysis).
Persons desiring to apply this methodology should become familiar with the math concept of standard deviation.
