Compare the recession with the past

How does the current economic and financial downturn match up to past contractions?

In an attempt to present matters in historical context, Paul Swartz of the Council on Foreign Relations recently published a chart book showing that the current economic environment has been more severe than a typical recession. He specifically highlights the following four conclusions:

  • Financial markets have dramatically improved, but from an extremely low base. Rather than pricing in disaster, they anticipate tough times ahead. For example, the charts on the spread for AAA and BAA bonds show the credit market moving from unprecedented panic to a level of fear that is merely in keeping with the worst experiences since 1945.
  • Real economy indicators show signs of stabilization. See in particular the charts on manufacturing sentiment, non-farm payrolls, oil prices, and car sales. Nonetheless, many of these indicators remain worse than anything hitherto experienced in the postwar period.
  • The collapse in the federal government’s finances is unprecedented, raising questions about how the government deficit will be brought under control.
  • By most measures, the current recession is far milder than the Great Depression. But the appendix shows that house prices have fallen much more sharply than in the 1930s.

The charts below plot current indicators (in red) against the average of all post-World War II recessions (blue). To facilitate comparison, the data are centered on the beginning of the recession (marked by “0?). The dotted lines represent the most severe and the mildest experiences in past cycles. The last few charts specifically compare the current downturn with the Great Depression.

The year-over-year fall in real gross domestic product (GDP) is now competing to be the worst in the postwar period.


The federal budget has deteriorated far more rapidly than in any past recession, in part due to the first economic stimulus and bank bailouts. The current stimulus implies an even larger and more prolonged deficit in the future.


Global trade collapsed in the fourth quarter of 2008 and first quarter of 2009 in a way never seen in the postwar era.


Unemployment initially increased at a rate consistent with past recessions. However, the latest data show the worst labor market in the postwar period.


The fall in nonfarm payroll shows rapid deterioration in the labor market. The deterioration has slowed, but will this improvement be enough to slow knock-on effects?


Industrial production (IP) held up well when the recession began but collapsed in the second half of 2008. The current collapse is creating a new postwar record.


A rise in oil prices is typical before the start of a recession, and a fall is typical as a recession proceeds. This time oil prices initially continued to rise after the onset of the recession. Conversely the recent fall has been larger than usual, even allowing for the rebound in the spring. The recent fall has dramatically changed the geopolitical position of oil exporters.


The ISM survey offers a forward-looking indicator of industrial production. A number above 50 in the ISM survey implies manufacturing growth whereas a number below 50 implies contraction.


Auto sales typically fall by 20% in a recession. This time around they have fallen by over 40%.


Consumer sentiment typically starts falling before the recession begins, but turns around soon after. However, pessimism seems particularly strong this time.


Most post-World War II recessions were preceded by a tightening of monetary policy. This one was not. Easing started sooner and happened faster than is typical. Although the Fed’s ammunition in nominal target rate cuts is gone, it has continued to ease in other ways.


The spread of investment-grade debt – a measure of the risk that high-quality corporate bonds will default – typically rises during a recession. The rise during the current cycle is unprecedented. The credit markets’ recent improvement still leaves spreads at historic highs.


The spread on BAA debt (the lowest investment grade rating) is an indicator of the risk that lower quality companies will default. The recent rise in the BAA spread is unprecedented. As the financial system has stabilized, the credit markets have improved, but the current implied default rates suggest a rough period for corporations.


Equity markets start to fall nearly eight months before a recession begins.
In this cycle, a fall in equity markets preceded the recession. However, the subsequent fall has been larger than normal, and the markets have not recovered on schedule.


The last few charts compare the current recession with the prewar average and the Great Depression.

The thick red line represents the current recession; the thin blue line, the postwar average; the thick green line, the Great Depression; the thin orange line, the prewar average.

Due to financial system deleveraging, the economy is enduring uncomfortably low inflation. The current recession looks more like a prewar recession than a postwar recession or the Great Depression.


Production in this cycle has collapsed relative to the postwar average, but is in line with the prewar average. The current collapse does not compare to that of the Great Depression.


Although the labor market has deteriorated more than at any time since World War II, it is much healthier than during the Great Depression.


US trade – the sum of exports and imports – has collapsed dramatically. But it will have to deteriorate further to compare to the Great Depression.


Government intervention is much less controversial than prior to World War II. Thus government stimulus occurred faster than was the case during the Great Depression. Government net financial investment (bank bailouts) has contributed a substantial portion of expenditures.


So far, equity market performance has lined up with the Great Depression.


One area in which this downturn has been far worse than the Great Depression has been in home prices.




Credit Card Interest

* Between 1989 and 2006, Americans’ overall credit card debt grew by 315 percent from $211 billion to $876 billion (2006 dollars).
* From 2001 to 2006, homeowners cashed out $1.2 trillion in home equity, often in an effort to cope with mounting credit card debt and to cover basic living expenses (2006 dollars).
* Nearly six out of 10 households with credit cards revolved their balances in
2004. The average amount of credit card debt among those households reached an all-time high of $5,219, an increase of 89 percent from $2,768 in 1989.
* From 1989 to 2004, the percentage of cardholders incurring fees due to late payments
of 60 days or more increased from 4.8 percent to 8.0 percent.
* In 2004, the average credit card-indebted family allocated 21 percent of its income to servicing monthly debt compared to the 13 percent dedicated to debt payments among all households.
* In 2004, 46 percent of very low-income (under $9,999 per year) credit card-indebted households spent more than 40 percent of their income to pay off debt.
* From 1989 to 2004, credit card debt among very low-income households quadrupled from an average of $622 in 1989 to $2,750 in 2004.
* While white households carry more credit card debt, African Americans and Latinos have a higher percentage of credit card-indebted households. In 2004, of those with credit cards, 84 percent of African-American households and 79 percent of Latino households carried credit card debt compared with 54 percent of white households.
* Over 90 percent of African-American families earning between $10,000 and $24,999 had credit card debt.
* Since 1989, Americans in the age group of 65 and over have experienced the greatest increase in the amount of credit card debt carried. The average balance for this age group increased 194 percent from $1,669 in 1989 to $4,906 in 2004.

It’s tough for anybody to get ahead financially with that sort of baggage, don’t you think. This article will shed some light on credit card debt and the benefits of getting out of it.

What Is Interest?
Interest, typically expressed as an annual percentage rate, is the fee paid for the privilege of borrowing money. This fee is the price a person pays for the ability to spend money today that would otherwise take time to accumulate. Conversely, if you were lending the money, that fee/interest compensates you for giving up the ability to spend that money today.

Credit Card Debt
Most of us are familiar with credit cards. As mentioned earlier, U.S. statistics show the average family has long-term credit card debt in excess of $5,000. In fact, credit card debt accounts for a very sizeable chunk of total consumer debt, which hit $2.5 trillion in 2008. Clearly credit cards are an important part of our day-to-day lives, which is why it’s important for consumers to understand the effect of that interest on them.

An Example: Discovering the Benefit of Increasing Your Payments
Let’s say John and Jane both have $2,000 debt on their credit cards, which require a minimum payment of 3%, or $10, whichever is higher. Both are strapped for cash, but Jane manages to pay an extra $10 on top of her minimum monthly payments. John pays only the minimum.

Each month John and Jane are charged a 20% annual interest on their cards’ outstanding balances. So, when John and Jane make payments, part of those payments go to paying interest and part go to the principal.

Here is the breakdown of the numbers for the first month of John’s credit card debt:

  • Principal: $2,000
  • Interest: $33.33 ($2,000 x (1+20%/12))
  • Payment: $60 (3% of remaining balance)
  • Principal Repayment: $26.67
  • Remaining Balance: $1,973.33 ($2,000 – $26.67)

These calculations are done every month until the credit card debt is paid off.

In the end, John pays $4,240 in total over 15 years to absolve the $2,000 in credit card debt. The interest that John pays over the 15 years totals $2,240, higher than the original credit card debt.

credit-card1Because Jane paid an extra $10 a month, she pays a total $3,276 over seven years to absolve the $2,000 in credit card debt. Jane pays a total $1,276 in interest.

credit-card2The extra $10 a month saves Jane almost $1,000 and cuts her repayment period by more than seven years!

The lesson here is that every little bit counts. Paying twice your minimum or more can drastically cut down the time it takes to pay off the balance, which leads to lower interest charges.
However, as we will see below, it’s wise not to pay only your minimum or even just a little more than your minimum. It’s best simply not to carry a balance at all.

20% Return Guaranteed?

As an investor, you would be thrilled to get a yearly return of 17-20% on a stock portfolio, right? In fact, if you were able to sustain that kind of return over the long term, you would be rivaling investing legends such as Peter Lynch, Warren Buffett, George Soros and value-investing guru Jim Gipson.

But if someone came up to you on the street or you opened your email inbox and read a headline that screamed, “20% Return Guaranteed!” you’d likely be very, very skeptical. Anyone who guarantees anything is questionable. However, you do get one guarantee by paying off the balance on your credit card: if it charges 20% per year, you are guaranteed to save yourself from losing 20%, which, in a way, is just as good as making a 20% return!
Ensure Your Investments Aren’t a Guaranteed Drain
Often, however, investors are reluctant to pay down their credit cards and choose to put the money in investing or savings accounts. Now, there are many factors that drive individuals to do this, which behavioral finance tries to explain. One of these factors is people’s tendency to have mental accounts, which causes them to place different meaning on different accounts and on the money held in them. Mental accounting sometimes prevents investors from looking at their finances as a whole. Do remember, $1 is $1, regardless of whether it is invested or lost. Not thinking this way can be very costly.

Holding a credit card balance actually negates any investment gains - unless of course you’re a world-class investor. Investing instead of paying off your credit card is a guaranteed loss of money.

On the other hand, paying off your credit card debt guarantees you a return, a return of whatever your card charges you. So, if you have money in your investing or savings account, or you have $1,000 burning a hole in your jeans, take that money and pay off your credit card! Then, once you eliminate your high-interest debt, you’ll not only have more money (because you’re not making interests payments) but your investments will truly grow.

The moral of the story: carrying a balance on your card can be very costly. Our first recommendation is to pay off your balance entirely. Paying the astronomical interest rates that credit card companies charge simply does not make sense if you have savings elsewhere. If you can’t completely pay off your balance, increasing your monthly payment, even a little bit, will be very helpful in the long run.


Capitalism Nowadays


You have two cows. You sell one and buy a bull. Your herd multiplies, and the economy grows. You sell them and retire on the income.

You have two cows. You sell three of them to your publicly listed
company, using letters of credit opened by your brother-in-law at the bank,
then execute a debt/equity swap with an associated general offer so that
you get all four cows back, with a tax exemption for five cows. The
milk rights of the six cows are transferred via an intermediary to a Cayman
Island company secretly owned by the majority shareholder who sells
the rights to all seven cows back to your listed company.
The annual report says the company owns eight cows, with an option on
one more. The public buys your bull.

You have two cows. You sell one, and force the other to produce the
milk of four cows. You are surprised when the cow drops dead.


You have two cows. You go on strike because you want three cows.

You have two cows. You redesign them so they are one-tenth the size of
an ordinary cow and produce twenty times the milk. You then create clever
cow cartoon images called Cowkimon and market them World-Wide.

You have two cows. You re-engineer them so they live for 100 years,
eat once a month, and milk themselves.

You have two cows. Both are mad.

You have two cows, but you don’t know where they are. You break for

You have two cows. You count them and learn you have five cows.
You count them again and learn you have 42 cows. You count them again
and learn you have 12 cows. You stop counting cows and open another bottle
of vodka.

You have 5000 cows, none of which belong to you. You charge others for
storing them.

You have two cows. You worship them.

You have two cows. You have 300 people milking them. You claim full
employment, high bovine productivity, and arrest the newsman who
reported the numbers.

You have two cows. That one on the left is kinda cute…


The mystery of options pricing

Most options traders – from beginner to expert – are familiar with the Black-Scholes model (A model of price variation over time of financial instruments such as stocks that can, among other things, be used to determine the price of a European call option. The model assumes that the price of heavily traded assets follow a geometric Brownian motion with constant drift and volatility. When applied to a stock option, the model incorporates the constant price variation of the stock, the time value of money, the option’s strike price and the time to the option’s expiry.) of option pricing developed by Fisher Black and Myron Scholes in 1973. To calculate what is deemed a fair market value for any option, the model incorporates a number of variables, which include time to expiration, historical volatility and strike price. Many option traders, however, rarely assess the market value of an option before establishing a position.

This has always been a curious phenomenon, because these same traders would hardly approach buying a home or a car without looking at the fair market price of these assets. This behavior seems to result from the trader’s perception that an option can explode in value if the underlying makes the intended move. Unfortunately, this kind of perception overlooks the need for value analysis.

Too often, greed and haste prevent traders from making a more careful assessment. Unfortunately for many option buyers, the expected move of the underlying may already be priced into the option’s value. Indeed, many traders sorely discover that when the underlying makes the anticipated move, the option’s price might decline rather than increase. This mystery of options pricing can often be explained by a look at implied volatility (IV). Let’s take a look at the role that IV plays in option pricing and how traders can best take advantage of it.

What Is Volatility?
An essential element determining the level of option prices, volatility is a measure of the rate and magnitude of the change of prices (up or down) of the underlying. If volatility is high, the premium on the option will be relatively high, and vice versa. Once you have a measure of statistical volatility (SV) for any underlying, you can plug the value into a standard options pricing model and calculate the fair market value of an option.

A model’s fair market value, however, is often out of line with the actual market value for that same option. This is known as option mispricing. What does this all mean? To answer this question, we need to look closer at the role IV plays in the equation.

What good is a model of option pricing when an option’s price often deviates from the model’s price (that is, its theoretical value)? The answer can be found in the amount of expected volatility (implied volatility) the market is pricing into the option. Option models calculate IV using SV and current market prices. For instance, if the price of an option should be three points in premium price and the option price today is at four, the additional premium is attributed to IV pricing. IV is determined after plugging in current market prices of options, usually an average of the two nearest just out-of-the-money option strike prices. Let’s take a look at an example using cotton call options to explain how this works.

Sell Overvalued Options, Buy Undervalued Options
Let’s take a look at these concepts in action to see how they can be put to use. Fortunately, today’s options software can do most all the work for us, so you don’t need to be a math wizard or an Excel spreadsheet guru writing algorithms to calculate IV and SV. Using the scanning tool in OptionsVue 5 Options Analysis Software, we can set search criteria for options that are showing both high historical volatility (recent price changes that have been relatively fast and big) and high implied volatility (imarket price of options that has been greater than theoretical price).

Let’s scan commodity options, which tend to have very good volatility, (this, however, can also be done with stock options) to see what we can find. This example shows the close of trading on March 8, 2002, but the principal applies to all options markets: when volatility is high, options buyers should be wary of straight options buying, and should probably be looking to sell. Low volatility, on the other hand, which generally occurs in quiet markets, will offer better prices for buyers. Figure 1 contains the results of our scan, which is based on the criteria just outlined.

Options Scan for High Current Implied and Statistical Volatility

Looking at our scan results, we can see that cotton tops the list. IV is 34.7% at the 97th percentile of IV (which is very high), with the past six years as a reference range. In addition, SV is 31.3%, which is at the 90th percentile of its six-year high-low range. These are overvalued options (IV > SV) and are high priced due to the extreme levels of both SV and IV (i.e. SV and IV are at or above their 90th percentile rankings). Clearly, these are not options you would want to be buying – at least not without taking into account their expensive nature.

As you can see from Figure 2, below, both IV and SV tend to revert to their normally lower levels, and can do so quite quickly. You can, therefore, have a sudden collapse of IV (and SV) and a quick fall in premiums, even without a move of cotton prices. In such a scenario, the option buyers often get fleeced.

Cotton Futures – Implied and Statistical Volatility

There are, however, excellent option writing strategies that can take advantage of these high volatility levels. We will cover these strategies in future articles. In the meantime, it is a good idea to get in the habit of checking the levels of volatility (both SV and IV) before establishing any option position. It is worth investing in some good software to make the job timesaving and accurate.

In Figure 2, above, July cotton IV and SV have somewhat come off their extremes, yet they remain well above the 22% levels, around which IV and SV oscillated in 1999 and 2000. What has caused this jump in volatility? Exhibit 3 below contains a daily bar chart for cotton futures, which tells us something about the changing volatility levels shown above.

The sharp bearish declines of 2001 and sudden v-shaped bottom in late October caused a spike in volatility levels, which can be seen in the breakout higher in the volatility levels of Figure 2. Remember that the rate of change and the size of changes in price will directly affect SV, and this can increase the expected volatility (IV), especially because the demand for options relative to supply increases sharply when there is an expectation of a large move.

To finish our discussion, let’s take a closer look at IV by examining what is known as a volatility skew. Figure 4, below, contains a classic July cotton call options skew. The IV for calls increases as the option strikes get farther away from the money (as seen in the northeasterly, upward sloping shape of the skew, which forms a smile, or smirk shape).

This tells us that the farther away from the money the call option strike is, the greater the IV is in that particular option strike. The levels of volatility are plotted along the vertical axis.

As you can see, the deep out-of-the-money calls are extremely inflated (IV > 42%).

July Cotton Calls – Implied Volatility Skew


The data for each of the call strikes displayed in Figure 4 is included in Figure 5, below. When we move farther away from the at-the-money call strikes for the July calls, IV increases from 31.8% (just out of the money) at the 38 strike to 42.3% for the July 60 strike (deep out of the money). In other words, the July call strikes that are farther away from the money have more IV than those nearer to the money. By selling the higher implied volatility options and buying lower implied volatility options, a trader can profit if the IV skew eventually flattens out. This can happen even with no directional moves of the underlying futures.

July Cotton Calls – IV Skew

What Conclusions can we take?
To summarize, volatility is a measure of how rapid price changes have been (SV) and what the market expects the price to do (IV). When volatility is high, buyers of options should be wary of straight options buying, and they should be looking instead to sell options. Low volatility, on the other hand, which generally occurs in quiet markets, will offer better prices for buyers; however, there’s no guarantee the market will make a violent move anytime soon. By incorporating into trading an awareness of IV and SV, which are important dimensions of pricing, you can gain a decisive edge as an options trader.


50 common interview questions and answers

Review these typical interview questions and think about how you would answer them. Read the questions listed; you will also find some strategy suggestions with it.

job interview1. Tell me about yourself:
The most often asked question in interviews. You need to have a short statement prepared in your mind. Be careful that it does not sound rehearsed. Limit it to work-related items unless instructed otherwise.
Talk about things you have done and jobs you have held that relate to
the position you are interviewing for. Start with the item farthest
back and work up to the present.

2. Why did you leave your last job?
Stay positive regardless of the circumstances. Never refer to a major problem with management and never speak ill of supervisors, co-workers or the organization. If you do, you will be the one looking bad. Keep smiling and talk about leaving for a positive reason such as an opportunity, a chance to do something special or other forward-looking reasons.

3. What experience do you have in this field?
Speak about specifics that relate to the position you are applying for. If you do not have specific experience, get as close as you can.

4. Do you consider yourself successful?
You should always answer yes and briefly explain why. A good explanation is that you have set goals, and you have met some and are on track to achieve the others.

5. What do co-workers say about you?
Be prepared with a quote or two from co-workers. Either a specific statement or a paraphrase will work. Jill Clark, a co-worker at Smith Company, always said I was the hardest workers she had ever known. It is as powerful as Jill having said it at the interview herself.

6. What do you know about this organization?
This question is one reason to do some research on the organization before the interview. Find out where they have been and where they are going. What are the current issues and who are the major players?

7. What have you done to improve your knowledge in the last year?
Try to include improvement activities that relate to the job. A wide variety of activities can be mentioned as positive self-improvement. Have some good ones handy to mention.

8. Are you applying for other jobs?
Be honest but do not spend a lot of time in this area. Keep the focus on this job and what you can do for this organization. Anything else is a distraction.

9. Why do you want to work for this organization?
This may take some thought and certainly, should be based on the research you have done on the organization. Sincerity is extremely important here and will easily be sensed. Relate it to your long-term career goals.

10. Do you know anyone who works for us?
Be aware of the policy on relatives working for the organization. This can affect your answer even though they asked about friends not relatives. Be careful to mention a friend only if they are well thought of.

forex money salary11. What kind of salary do you need?
A loaded question. A nasty little game that you will probably lose if
you answer first. So, do not answer it. Instead, say something like,
That’s a tough question. Can you tell me the range for this position?
In most cases, the interviewer, taken off guard, will tell you. If not,
say that it can depend on the details of the job. Then give a wide

12. Are you a team player?
You are, of course, a team player. Be sure to have examples ready.
Specifics that show you often perform for the good of the team rather than for yourself are good evidence of your team attitude. Do not brag, just say it in a matter-of-fact tone. This is a key point.

13. How long would you expect to work for us if hired?
Specifics here are not good. Something like this should work: I’d like it to be a long time. Or As long as we both feel I’m doing a good job.

14. Have you ever had to fire anyone? How did you feel about that?
This is serious. Do not make light of it or in any way seem like you like to fire people. At the same time, you will do it when it is the right thing to do. When it comes to the organization versus the individual who has created a harmful situation, you will protect the organization. Remember firing is not the same as layoff or reduction in force.

15. What is your philosophy towards work?
The interviewer is not looking for a long or flowery dissertation here. Do you have strong feelings that the job gets done? Yes. That’s the type of answer that works best here. Short and positive, showing a benefit to the organization.

16. If you had enough money to retire right now, would you?
Answer yes if you would. But since you need to work, this is the type of work you prefer. Do not say yes if you do not mean it.

17. Have you ever been asked to leave a position?
If you have not, say no. If you have, be honest, brief and avoid saying negative things about the people or organization involved.

18. Explain how you would be an asset to this organization
You should be anxious for this question. It gives you a chance to highlight your best points as they relate to the position being discussed. Give a little advance thought to this relationship.

19. Why should we hire you?
Point out how your assets meet what the organization needs. Do not mention any other candidates to make a comparison.

20. Tell me about a suggestion you have made
Have a good one ready. Be sure and use a suggestion that was accepted and was then considered successful. One related to the type of work applied for is a real plus.

21. What irritates you about co-workers?
This is a trap question. Think real hard but fail to come up with anything that irritates you. A short statement that you seem to get along with folks is great.

22. What is your greatest strength?
Numerous answers are good, just stay positive. A few good examples: Your ability to prioritize, Your problem-solving skills, Your ability to work under pressure, Your ability to focus on projects, Your professional expertise, Your leadership skills, Your positive attitude.

23. Tell me about your dream job.
Stay away from a specific job. You cannot win. If you say the job you are contending for is it, you strain credibility. If you say another job is it, you plant the suspicion that you will be dissatisfied with this position if hired. The best is to stay genetic and say something like: A job where I love the work, like the people, can contribute and can’t wait to get to work.

24. Why do you think you would do well at this job?
Give several reasons and include skills, experience and interest.

interview questions

25. What are you looking for in a job?
See answer # 23

26. What kind of person would you refuse to work with?
Do not be trivial. It would take disloyalty to the organization, violence or lawbreaking to get you to object. Minor objections will label you as a whiner.

27. What is more important to you: the money or the work?
Money is always important, but the work is the most important. There is no better answer.

28. What would your previous supervisor say your strongest point is?
There are numerous good possibilities: Loyalty, Energy, Positive attitude, Leadership, Team player, Expertise, Initiative, Patience, Hard work, Creativity, Problem solver.

29. Tell me about a problem you had with a supervisor
Biggest trap of all. This is a test to see if you will speak ill of your boss. If you fall for it and tell about a problem with a former boss, you may well below the interview right there. Stay positive and develop a poor memory about any trouble with a supervisor.

30. What has disappointed you about a job?
Don’t get trivial or negative. Safe areas are few but can include: Not enough of a challenge. You were laid off in a reduction Company did not win a contract, which would have given you more responsibility.

31. Tell me about your ability to work under pressure.
You may say that you thrive under certain types of pressure. Give an example that relates to the type of position applied for.

32. Do your skills match this job or another job more closely?
Probably this one. Do not give fuel to the suspicion that you may want another job more than this one.

33. What motivates you to do your best on the job?
This is a personal trait that only you can say, but good examples are: Challenge, Achievement, Recognition

34. Are you willing to work overtime? Nights? Weekends?
This is up to you. Be totally honest.

35. How would you know you were successful on this job?
Several ways are good measures: You set high standards for yourself and meet them. Your outcomes are a success.Your boss tell you that you are successful.

36. Would you be willing to relocate if required?
You should be clear on this with your family prior to the interview if you think there is a chance it may come up. Do not say yes just to get the job if the real answer is no. This can create a lot of problems later on in your career. Be honest at this point and save yourself future grief.

37. Are you willing to put the interests of the organization ahead of your own?
This is a straight loyalty and dedication question. Do not worry about the deep ethical and philosophical implications. Just say yes.

38. Describe your management style.
Try to avoid labels. Some of the more common labels, like progressive, salesman or consensus, can have several meanings or descriptions depending on which management expert you listen to. The situational style is safe, because it says you will manage according to the situation, instead of one size fits all.

39. What have you learned from mistakes on the job?
Here you have to come up with something or you strain credibility. Make it small, well intentioned mistake with a positive lesson learned. An example would be working too far ahead of colleagues on a project and thus throwing coordination off.

40. Do you have any blind spots?
Trick question. If you know about blind spots, they are no longer blind spots. Do not reveal any personal areas of concern here. Let them do their own discovery on your bad points. Do not hand it to them.

41. If you were hiring a person for this job, what would you look for?
Be careful to mention traits that are needed and that you have.

42. Do you think you are overqualified for this position?
Regardless of your qualifications, state that you are very well qualified for the position.

43. How do you propose to compensate for your lack of experience?
First, if you have experience that the interviewer does not know about, bring that up: Then, point out (if true) that you are a hard working quick learner.


44. What qualities do you look for in a boss?
Be generic and positive. Safe qualities are knowledgeable, a sense of
humor, fair, loyal to subordinates and holder of high standards. All
bosses think they have these traits.

45. Tell me about a time when you helped resolve a dispute between others.
Pick a specific incident. Concentrate on your problem solving technique and not the dispute you settled.

46. What position do you prefer on a team working on a project?
Be honest. If you are comfortable in different roles, point that out.

47. Describe your work ethic.
Emphasize benefits to the organization. Things like, determination to get the job done and work hard but enjoy your work are good.

48. What has been your biggest professional disappointment?
Be sure that you refer to something that was beyond your control.  Show acceptance and no negative feelings.

49. Tell me about the most fun you have had on the job.
Talk about having fun by accomplishing something for the organization.

50. Do you have any questions for me?
Always have some questions prepared. Questions prepared where you will be an asset to the organization are good. How soon will I be able to be productive? and What type of projects will I be able to assist on? are examples.


World Bank Reports Slower Growth in Asia

A World Bank report predicts that this year will end in slower growth with international capital flows projected to fall further to US$363 billion.

According to the Global Development Finance 2009, developing countries will expand by only 1.2 percent by the end of the year compared to 2008’s 5.9 percent.

China and India will be responsible for most of the growth in the region and the reports says that when both are excluded, the GDP of the rest of the developing countries is estimated to drop by 1.6 percent.

The report also predicts that overall world growth will be negative with a 2.9 percent contraction of global GDP this year. It will be next year that global GDP is expected to recover by 2 percent then by 3.2 percent in 2011 with developing countries showing the most vibrant growth.

“The need to restructure the banking system, combined with emerging limits to expansionary policies in high-income countries, will prevent a global rebound from gaining traction,” said Justin Lin, World Bank Chief Economist and Senior Vice President, Development Economics said in a statement. “Developing countries can become a key driving force in the recovery, assuming their domestic investments rebound with international support, including a resumption in the flow of international credit.”

Growth in developing countries is forecast to be better for next year at 4.4  percent and 5.7 percent in 2011. East Asia and Pacific region growth should report a 5 percent growth this year and signs of recovery will come in by the second half of the year and the well into 2010 backed by China’s massive stimulus plan.

The report acknowledges that concerted global action against the crisis is still underway. “To prevent a second wave of instability, policies have to focus rapidly on financial sector reform and support for the poorest countries,” Hans Timmer, Director of the Bank’s Prospects Group said in a statement.

For a more detailed look at the World Bank report click here.

market trends

Backstage actions are shaping market trends

Trends are what allow traders and investors to capture profits. Whether on a short- or long-term time frame, in an overall trending market or a ranging environment, the flow from one price to another is what creates profits and losses. There are four major factors that cause both long-term trends and short-term fluctuations. These factors are governments, international transactions, speculation and expectation, and supply and demand.

Major Market Forces
Learning how these major factors shape trends over the long term can provide insight into why certain trends are developing, why a trend is in place and how future trends may occur. Here are the four major factors:

  1. Governments
    Governments hold much sway over the free markets. Fiscal and monetary policy have a profound effect on the financial marketplace. By increasing and decreasing interest rates the government and Federal Reserve can effectively slow or attempt to speed up growth within the country. This is called monetary policy.If government spending increases or contracts, this is known as fiscal policy, and  can be used to help ease unemployment and/or stabilize prices. By altering interest rates and the amount of dollars available on the open market, governments can change how much investment flows into and out of the country. 
  2. International Transactions
    The flow of funds between countries impacts the strength of a country’s economy and its currency. The more money that is leaving a country, the weaker the country’s economy and currency. Countries that predominantly export, whether physical goods or services, are continually bringing money into their countries. This money can then be reinvested and can stimulate the financial markets within those countries. 
  3. Speculation and Expectation
    Speculation and expectation are integral parts of the financial system. Where consumers, investors and politicians believe the economy will go in the future impacts how we act today. Expectation of future action is dependent on current acts and shapes both current and future trends. Sentiment indicators are commonly used to gauge how certain groups are feeling about the current economy. Analysis of these indicators as well as other forms of fundamental and technical analysis can create a bias or expectation of future price rates and trend direction. 
  4. Supply and Demand
    Supply and demand for products, currencies and other investments creates a push-pull dynamic in prices. Prices and rates change as supply or demand changes. If something is in demand and supply begins to shrink, prices will rise. If supply increases beyond current demand, prices will fall. If supply is relatively stable, prices can fluctuate higher and lower as demand increases or decreases.

Effect on Short- and Long-Term Trends
With these factors causing both short- and long-term fluctuations in the market, it is important to understand how all these elements come together to create trends. While these major factors are categorically different, they are closely linked to one another. Government mandates impact international transactions, which play a role in speculation, and supply and demand plays a role in each of these other factors.

Government news releases, such as proposed changes in spending or tax policy, as well as Federal Reserve decisions to change or maintain interest rates can have a dramatic effect on long term trends. Lower interest rates and taxes encourage spending and economic growth. This has a tendency to push market prices higher, but the market does not always respond in this way because other factors are also at play. Higher interest rates and taxes, for example, deter spending and result in contraction or a long-term fall in market prices.

In the short term, these news releases can cause large price swings as traders and investors buy and sell in response to the information. Increased action around these announcements can create short-term trends, while longer term trends develop as investors fully grasp and absorb what the impact of the information means for the markets.

The International Effect
International transactions, balance of payments between countries and economic strength are harder to gauge on a daily basis, but they play a major role in longer-term trends in many markets. The currency markets are a gauge of how well one country’s currency and economy is doing relative to others. A high demand for a currency means that currency will rise relative to other currencies.

The value of a country’s currency also plays a role in how other markets will do within that country. If a country’s currency is weak, this will deter investment into that country, as potential profits will be eroded by the weak currency. (Unique features of the forex market may allow larger players to get a jump on smaller ones)

The Participant Effect
The analysis and resultant positions taken by traders and investors based on the information they receive about government policy and international transactions create speculation as to where prices will move. When enough people agree on direction, the market enters into a trend that could sustain itself for many years.

Trends are also perpetuated by market participants who were wrong in their analysis; being forced to exit their losing trades pushes prices further in the current direction. As more investors climb aboard to profit from a trend, the market becomes saturated and the trend reverses, at least temporarily.

The S & D Effect
This is where supply and demand enters the picture. Supply and demand affects individuals, companies and the financial markets as a whole. In some markets, such as the commodity markets, supply is determined by a physical product. Supply and demand for oil is constantly changing, adjusting the price a market participant is willing to pay for oil today and in the future.

As supply dwindles or demand increases, a long-term rise in oil prices can occur as market participants outbid one another to attain a seemingly finite supply of the commodity. Suppliers want a higher price for what they have, and a higher demand pushes the price that buyers are willing to pay higher.

All markets have a similar dynamic. Stocks fluctuate on a short and long-term scale, creating trends. The threat of supply drying up at current prices forces buyers to buy at higher and higher prices, creating large price increases. If a large group of sellers were to enter the market, this would increase the supply of stock available and would likely push prices lower. This occurs on all time frames.

The Bottom Line
Trends are generally created by four major factors: governments, international transactions, speculation/expectation, and supply and demand. These areas are all linked as expected future conditions shape current decisions and those current decisions shape current trends. Government affects trends mainly through monetary and fiscal policy. These policies affect international transactions which in turn affect economic strength. Speculation and expectation drive prices based on what future prices might be. Finally, changes in supply and demand create trends as market participants fight for the best price.


Is forex trading software fills the gaps?

As a trader you would have been searching everywhere for a software that would fit your needs. These trading software are complex but they really help in making your trading decisions. In this article we will try and help you on how best you are able to evaluate and chose the right software.

We will look briefly into four trading software which are Wave59 trading software, Metastock software, Omnitrader software, and The IQchart software so at to see what they offer. The four softwares are amongst one of the best trading software online.

Basically we will look at what they have got to offer to all its users.

1. Free trial facility
You should try to evaluate their refund policy and free trial facility. This is very vital so that you may be able to depict if the software is good for you or its claims are not certain. Therefore you should be able to receive your fund back so as to try out another one. The cost of having trading software is very high but the refund policy or free trial should be of paramount importance.

2. The Various Technical indicators available
When searching for trading software you should also make sure that the software has got technical indicators. Most of this software will provide you the common technical indicators but the main point you should consider is that the software should be able to show you how to use them. Not all technical indicators are good in all markets therefore you should not rely on one indicator you at one time because it may turn to be negative in another market condition. So, basically you should be able to evaluate if it is good so as to help you make up your trade decisions.

3. Generating trading signals on automation
The software you select should be able to see if it can generate automatic sell and buy signals in your system.

Creating a defined trading system
Good software should be able to allow users to create their own trading systems. Of cause, creating your own trading system is not an easy task but this should be achieved by all traders so as to master each market trade effectively. First and foremost you should master several technical indicators then proceed to learn the pseudo language for your trading rules. Lastly you would need to test your system for a long period of time like based on a 2 year period. This will definitely show you the weakness and strength of your trading system.

Pattern recognition
You should be able to evaluate if the software is able to generate signals with automation and this process is known as ‘Pattern recognition’. There is several pattern recognition that you would need to know before you are able to evaluate on any one of these. Some software will also make use of secondary tools to draw points on graphics or to draw trend lines. Therefore make it a point you evaluate the software on what type of pattern recognition it is using.

Data feeds availability
Evaluate the type of data feed that each software supports. This is a vital feature that can even cost you extra to your trading decisions. The price ranges from daily to monthly depending if you need future data or intraday and option data.

Day trading support
Check if the software supports day trading facility and this means that you should be able to receive data live during the day. The data should be sent direct to your system so as to make it analyzed. Make it a point that you pay more for intraday data feed.

Special characteristics
Some of the special characters for each trading software should include the following:

Ease of use:
the software should not look very complex and difficult to use. It should also provide a help guide to all its users and it should not take most of your valuable time and period for you to learn to generate sell and buy signals. It should also offer a success rate of at least 70% in any given market.

Pricing Structure: Some of these software are very expensive. Some offer to rent their product on a monthly base and some sell their products. Make sure you do not spend too much.

Picking the right software for your trading style is not a complex task at all. You should make sure that you follow.

Student debt

Student debt vs College in America vs Education Online

If you are serious about an education online, your next step is to start thinking about how to cover the costs of such an endeavor. Some of these colleges can be a bit pricey. However, if you have chosen to attend an accredited school, you should be eligible for financial assistance. Let’s talk about what’s available and how you can start acquiring the funding you need for your online education.

Types of Assistance

The two best types of financial aid are grant and scholarships. These are the best because they never have to be repaid. The most common financial assistance grant is the Federal Pell grant which provides students with a few thousand dollars (the amount varies based on your need, your tuition costs, and your year in school) towards their education. Pell grants are awarded through the United States government.

The government also offers a few other types of grants. If you have done well in high school and are choosing education online right after graduating, you may qualify for an Academic Competitiveness Grant. On the other hand, if you are planning on majoring in a science or math field then you could qualify for the National Science & Mathematics Access to Retain Talent Grant. Students who plan on becoming teachers of certain subjects may also be eligible for the Teacher Education Assistance for College and Higher Education Grant. While none of these grants are likely to cover your entire tuition, they will help lighten the load considerably if you qualify. They can also be stacked on top of one another and on top of additional aid. Keep in mind that most government grants can only be used to obtain a first degree.

Scholarships are the second type of good financial aid you want. Unlike grants that most often come from the government, scholarships can come from a variety of sources. Many colleges and universities provide scholarships to students who meet certain academic, social, athletic, or cultural requirements. As an online student, you may not be eligible for all of the available scholarships through the college you wish to attend, but you should be able to find some, especially if you shop around at different schools.

You can also find a lot of scholarships through other sources. Employers often offer scholarships to their workers or to members of their workers’ families. Organizations associated with your field of study may also offer scholarships. For example, if you are going into nursing, some of the local hospitals or medical facilities may offer scholarships, too.

In addition to grants and scholarships, you may also be able to take out education loans. Two types of these loans exist: federal and private. Federal student loans do not require that you pass a credit check, plus they have set interest rates which are usually lower than what you’ll find through private lenders. However, they do have borrowing limits based on your year in school.

Private lenders usually have no set limits on how much you can borrow, although you are usually allowed only so much over the price of attendance for your university. However, you do need to pass a credit check and you may be required to pay higher interest rates. You’ll also have fewer options when it comes times to pay back the loan; the Federal government offers a number of payment choices, such as paying on a graduated or income based scale.

Getting Started with Financial Aid

The first rule of thumb is don’t rush off to a bank and take out a loan for your education online. Private lenders should really be your last resort. First, you should go online and complete the FAFSA (Free Application for Student Aid). This is the application for all federal and state financial aid, including grants and loans. You can complete it online in less than 30 minutes usually.

You can complete the FAFSA any time after January 1st through the middle of June to qualify for federal aid, but you may need to submit it earlier if you want to qualify for state financial assistance. Many states also provide grants to students. Make sure you know when your state deadline is so you can complete the form on time.

To accurately complete the FAFSA, you’ll want to complete your federal taxes beforehand. You will need this information on your application. If you live with your parents and are not a parent yourself or married, you will have to include your parents’ income as well.

After you submit the FAFSA electronically, you’ll receive a notification – known as the Student Aid Report SAR) – which you will need to review for errors. This form will also include your family’s estimated contribution to your tuition. This number is generated from the income information you provide and is used to determine whether or not you qualify for Pell grants.

The official information about how much financial aid you will receive will come from your college. They will tell you how much money you’ll be getting from the government and from their institution if you qualify for scholarships. If more money is owed, you may be able to finish any necessary paperwork for the federal student loan program.

If you get all of the money possible from governmental sources, including the loans, and scholarships but still owe money towards your tuition, you should then consider taking out a private loan to cover the difference.

A Final Word on Loans

Having financial aid available to help cover the costs of an education online is important. But when you’re taking out the loans, you don’t want to forget they this is money you will need to pay back with interest. Racking up more student loan debt than you need is a good way to make things harder instead of better on yourself after you graduate. Those payments can be very high and that extra debt burden can shrink your credit score.

Check this great charts about Student loans by state and Colleges in America again by state.


Fill up your own stress test

The nation’s 19 biggest banks recently underwent “stress tests” ordered by the government to see how they would hold up if the economy deteriorated further.

Consumers should put themselves through a similar stress test to determine if their personal finances could withstand a job loss, a serious illness or any other unexpected event that would challenge their finances.

To determine your financial stress test score, do the math for each factor and then find out how you score.

1. Enter yearly gross income. _____________

2. Enter monthly net income. _____________

3. Enter total monthly expenses (if needed, see CCCS budget sheet). _____________

4. Enter total unsecured debt (credit cards, student loans, etc.) _____________

5. Enter total amount of emergency savings. _____________

6. Enter the dollar amount of any equity in your home. _____________

7. Enter total retirement savings from company plans such as a 401(k) or any personal plans such as an IRA. Do not include any unvested dollars. _____________

Factor One: Disposable income ratio This factor shows your ability to absorb a drop in income or an increase in expenses. To calculate: Subtract monthly expenses from monthly income to determine disposable income or shortfall. Then divide your disposable income by monthly net income to determine your disposable income ratio.

Factor Two: Surviving on savings This factor shows the amount of time you can survive on emergency savings without a job. To calculate: Divide your total emergency savings by monthly expenses to determine how many months you can get by without income.

Factor Three: Total spend-down This factor shows how many months you could live before becoming completely broke. To calculate: Add your emergency savings to the amount of home equity and your total retirement savings to determine your total assets, then divide by your monthly expenses.

Factor Four: Debt-to-income ratio This factor shows the ratio between your level of debt and your level of income. To calculate: Divide your total unsecured debt by yearly gross income.


Factor One: Disposable income ratio

25 percent or more = 25 points

15 to 24 percent = 20 points

10 to 14 percent = 15 points

5 to 9 percent = 5 points

4 percent or less = 0 points

Factor Two: Surviving on savings

Six or more months = 25 points

Three to five months = 20 points

Two months = 15 points

One month = 5 points

Zero months = 0 points

Factor Three: Total spend-down

More than 48 months = 25 points

36 to 48 months = 20 points

24 to 36 months = 15 points

12 to 24 months = 10 points

12 months or less = 0 points

Factor Four: Debt-to-income ratio

Less than 10 percent = 25 points

10 to 19 percent = 20 points

20 to 35 percent = 10 points

36 to 50 percent or more = 5 points

More than 50 percent = 0 points

Final test score

Total the four categories to receive your financial stress test score.

0-25 points: Poor health – You are living dangerously and may already be in crisis.

25-50 points: Fair health – Any change or unplanned event could lead to financial crisis.

50-75 points: Good health – You have options to cope with change.

75-100 points: Excellent health – You are well prepared to handle adversity.


Unsecured debt

Experts advise having savings equal to three to six months of expenses, but that’s only a guideline. With today’s economic uncertainty, it’s wise to have more.

•If you carry a balance on credit cards and your credit card company raised your annual percentage rate or your mortgage reset to a higher rate, would you have enough to absorb those higher expenses?

If your credit card issuer cut your credit limit, would you have enough cash to pay for things that you would have bought on credit?

Would your credit score put you at risk for higher interest rates on your credit card and a lower credit limit?

•What is your debt-to-income ratio? It shows the ratio between your level of debt and your level of income.

To calculate, divide your total unsecured debt, such as credit cards, by your yearly gross income.

Mark advises having as little unsecured debt as possible. Mark said although your mortgage is part of your total debt load, he didn’t use that as a factor in the formula because it’s “healthy debt,” which will lead to homeownership and home equity, vs. credit card debt, which is unhealthy because it doesn’t help consumers achieve a financial goal.

Your total debt payments, including your mortgage, shouldn’t exceed 36 percent of your annual gross income, said Gerri Detweiler, credit adviser for, a credit education Web site.

Bank of Me

Consumers with a high debt-to-income ratio and no emergency savings should make only the minimum payments on their credit cards and save the rest of the money, Mark said.

“They need to bill themselves every month, and that bill needs to be to the Bank of Me,” he said.

“It’s more critical to have that fallback position,” Mark said, because there’s no guarantee the credit line you have today is going be there tomorrow.

“I would much rather my cushion be cash in the bank rather than a credit line that I don’t know whether it will be there a month later,” Mark said.

Consumers who score low on the stress test, should not be discouraged.

“A low score on the test doesn’t mean that they’re destined for failure,” Mark said. “It just means that their capacity to handle adversity is diminished. Their focus needs to be bolstering their financial strength so they can weather a storm.”