Money Market

The money market is a market in which the cash requirements of market participants who are long cash are met along with the requirements of those that are short cash. This is identical to any financial market; the distinguishing factor of the money market is that it provides for only short-term cash requirements. The market will always, without fail, be required because the needs of long cash and short cash market participants are never completely synchronized. The participants in the market are many and varied, and large numbers of them are both borrowers and lenders at the same time. They include:

■ the sovereign authority, including the central government (“Treasury”), as well as government agencies and the central bank or reserve bank;

■ financial institutions such as the large integrated investment banks, commercial banks, mortgage institutions, insurance companies, and finance companies;

■ corporations of all types;

■ individual private investors, such as high net-worth individuals and small savers;

■ intermediaries such as money brokers, banking institutions, etc.;

■ infrastructure of the marketplace, such as derivatives exchanges.

A money market exists in virtually every country in the world, and all such markets exhibit the characteristics we describe in this book to some extent. For instance, they provide a means by which the conflicting needs of borrowers and lenders can achieve equilibrium, they act as a conduit for financing of all maturities between one day and one year, and they can be accessed by individuals, corporations, and governments alike.

In addition to national domestic markets, there is the international cross-border market illustrated by the trade in Eurocurrencies. Of course, there are distinctions between individual country markets, and financial market culture will differ. For instance, the prevailing financial culture in the United States and United Kingdom is based on a secondary market in tradable financial assets, so we have a developed and liquid bond and equity market in these economies. While such an arrangement also exists in virtually all other countries, the culture in certain economies such as Japan and (to a lesser extent) Germany is based more on banking relationships, with banks providing a large proportion of corporate finance. The differences across countries are not touched; rather, it is the similarities in the type of instruments used that is highlighted.

Business???

Determining the kind of business you want to have

After you decide you’re going to start your own home-based business, you have to answer two questions: Exactly what kind of home-based business do you want to start, and what’s the best way to market your products or services? You basically have two types of home-based businesses to choose from: businesses you start from scratch and businesses you buy. The latter category is further split into three types: franchises, direct-selling opportunities, and business opportunities. Whether you prefer to march to your own drummer and start your business from the ground up or get a business-in-a-box depends on your personal preferences.

The advantage of a business you start from scratch is that you can mold it to fit your preferences and the existing and emerging markets, which provides you with a boundless variety of possibilities. Businesses started from scratch account for the majority of viable, full-time businesses — in other words, they tend to be more successful over the long run than businesses you can buy. In their book Finding Your Perfect Work (Tarcher), Paul and Sarah provide characteristics of more than 1,500 self-employment careers, along with hundreds of examples of unique businesses that people have carved out for themselves.

If you have a business idea that doesn’t fit an existing category, you can get feedback on your business concept at www.conceptfeedback.com. Each type of home business that you can buy, on the other hand, has its own spin. The following illustrates how the three types are different from one another.

Franchise

A franchise is an agreement in which one business grants another business the right to distribute its products or services. Some common home-based franchises include the following:

·         Aussie Pet Mobile (mobile pet grooming)

·         Jani-King (commercial cleaning service)

·         Jazzercise (dance/exercise classes)

·         ServiceMaster Clean (cleaning service)

·         Snap-On Tools (professional tools and equipment)

Direct selling

Direct selling involves selling consumer products or services in a person-to-person manner, away from a fixed retail location. The two main types of direct-selling opportunities are:

1.   Single-level marketing: Making money by buying products from a parent company and then selling those products directly to customers

2.   Multi-level marketing: Making money through single-level marketing and by sponsoring new direct sellers

Some common home-based direct-selling opportunities include the following:

·         Shaklee (household cleaning products)

·         The Pampered Chef (kitchen tools)

·         Green Irene (green products and consulting)

·         Longaberger Company (baskets)

·         Mary Kay, Inc. (cosmetics)

·         Fuller Brush Company (household and personal-care products)

Business opportunity

A business opportunity is an idea, product, system, or service that someone develops and offers to sell to others to help them start their own, similar businesses. With a business opportunity, your customers and clients pay you directly when you deliver a product or service to them. (Another way to think of a business opportunity is that it’s any business concept you can buy from someone else that isn’t direct selling or franchising.) Here are several examples of business opportunities that you can easily run out of your home:

·         Astro Events of America (inflatable party rentals)

·         Debt Zero LLC (debt settlement)

·         ClosetMaid (storage and organizational products)

·         Vendstar (bulk-candy vending machines)

Interested in how to find more companies and how to get in touch with them? Entrepreneur Media - www.entrepreneur.com and www.gosmallbiz.com have extensive information on business opportunities you can buy. You can also do a search on Google, using the keywords business opportunity.

After you decide on a business, you have to find the money to get it started. Then you have to market your products or services and persuade people to buy them. You can choose conventional methods of promotion, such as advertising and public relations, or you can leverage new selling opportunities, such as the Internet, to your advantage. Or you can (and probably should) do both.

It’s your choice — you’re the boss!

Trading - Data

A determination of what works, and what does not, cannot be made in the realm of commodities trading without quality data for use in tests and simulations. Several types of data may be needed by the trader interested in developing a profitable commodities trading system. At the very least, the trader will require historical pricing data for the commodities of interest.

TYPES OF DATA

Commodities pricing data is available for individual or continuous contracts. Individual contract data consists of quotations for individual commodities contracts. At any given time, there may be several contracts actively trading. Most speculators trade the front-month contracts, those that are most liquid and closest to expiration, but are not yet past first notice date. As each contract nears expiration, or passes first notice date, the trader “rolls over” any open position into the next contract. Working with individual contracts, therefore, can add a great deal of complexity to simulations and tests. Not only must trades directly generated by the trading system be dealt with, but the system developer must also correctly handle rollovers and the selection of appropriate contracts.

To make system testing easier and more practical, the continuous contract was invented. A continuous contract consists of appropriate individual contracts strung together, end to end, to form a single, continuous data series. Some data massaging usually takes place when putting together a continuous contract; the purpose is to close the gaps that occur at rollover, when one contract ends and another begins, Simple back-adjustment appears to be the most reasonable and popular gap-closing method. Back-adjustment involves nothing more than the subtraction of constants, chosen to close the gaps, from all contracts in a series other than the most recent. Since the only operation performed on a contract’s prices is the subtraction of a constant, all linear price relationships (e.g., price changes over time, volatility levels, and ranges) are preserved. Account simulations performed using back-adjusted continuous contracts yield results that need correction only for rollover costs. Once corrected for rollover, simulated trades will produce profits and losses identical to those derived from simulations performed using individual contracts. However, if trading decisions depend upon information involving absolute levels, percentages, or ratios of prices, then additional data series (beyond backadjusted continuous contracts) will be required before tests can be conducted.

End-of-day pricing data, whether in the form of individual or continuous contracts, consists of a series of daily quotations. Each quotation, “bar,” or data point typically contains seven fields of information: date, open, high, low, close, volume, and open interest. Volume and open interest are normally unavailable until after the close of the following day; when testing trading methods, use only past values of these two variables or the outcome may be a fabulous, but essentially untradable, system! The open, high, low, and close (sometimes referred to as the settlement price) are available each day shortly after the market closes.

Intraday pricing data consists either of a series of fixed-interval bars or of individual ticks. The data fields for fixed-interval bars are date, time, open, high, low, close, and tick volume. Tick volume differs from the volume reported for end of-day data series: For intraday data, it is the number of ticks that occur in the period making up the bar, regardless of the number of contracts involved in the transactions reflected in those ticks. Only date, time, and price information are reported for individual ticks: volume is not. Intraday tick data is easily converted into data with fixed-interval bars using readily available software. Conversion software is frequently provided by the data vendor at no extra cost to the consumer.

In addition to commodities pricing data, other kinds of data may be of value. Temperature and rainfall data have a bearing on agricultural markets. Various economic time series that cover every aspect of the economy, from inflation to housing starts, may improve the odds of trading commodities successfully. Do not forget to examine reports and measures that reflect sentiment, such as the Commitment of Traders (COT) releases, bullish and bearish consensus surveys, and put-call ratios. Non-quantitative forms of sentiment data, such as news headlines,may also be acquired and quantified for use in systematic tests. Nothing should be ignored. Mining unusual data often uncovers interesting and profitable discoveries. It is often the case that the more esoteric or arcane the data, and the more difficult it is to obtain, the greater its value!

Managerial Economics

Making the Best Decision

To establish appropriate decision rules, managers must understand the economic environment in which they operate. For example, a grocery retailer may offer consumers a highly price-sensitive product, such as milk, at an extremely low markup over cost—say, 1 percent to 2 percent—while offering less price-sensitive products, such as nonprescription drugs, at markups of as high as 40 percent over cost. Managerial economics describes the logic of this pricing practice with respect to the goal of profit maximization. Similarly, managerial economics reveals that auto import quotas reduce the availability of substitutes for domestically produced cars, raise auto prices, and create the possibility of monopoly profits for domestic manufacturers. It does not explain whether imposing quotas is good public policy; that is a decision involving broader political considerations.

Managerial economics only describes the predictable economic consequences of such actions. Managerial economics offers a comprehensive application of economic theory and methodology to management decision making. It is as relevant to the management of government agencies, cooperatives, schools, hospitals, museums, and similar not-for-profit institutions as it is to the management of profit-oriented businesses.