Forex Investment

This column was originally published on RealMoney on March 1 at 2:49 p.m. EST. It’s being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

As the markets take a breather around the unchanged line, it’s a good time to do a system check.

There’s been a lot of talk about the technical glitch at the New York Stock Exchange, which I still think was basically a delayed quote and meant little in real terms; trading was much more orderly than if it were all being done by live humans. However, I haven’t heard any complaints that any brokerage firms had overloads, glitches or failures.

Before I tout this as a testament to the capability and efficiency of the electronic platforms now widely in place, especially given that extra bandwidth needed now that many options are trading in penny increments, I should ask: Has anyone had any problems out there?

In case people are answering yes, I will jump ahead on an article I’m working on (call it a sneak preview) and suggest that it always makes sense to have a backup system in the form of a second account. This is true even for non-professional or less-than-active traders.

With that in mind, there are two relatively new and private firms that cater to more sophisticated traders. One is TradeKing, which is about a year old. It has some of the lowest rates and great tools, but minimal auxiliary services.

The newest player in the house is OptionsHouse, which was launched early this year and is run by option market-making and proprietary trading firm Peak6. OptionsHouse has some advanced risk-management tools, which might have come in handy the past few days, and offers an innovative flat-fee commission structure of $10 per transaction, regardless of the number of contracts. So for people who trade “size,” this can be a great deal.

Also, some of the better-known names that specialize in options trading are also among the best ranked in terms of all-around online brokerage firms. These include OptionsXpress (OXPS) , the ThinkorSwim division of Investools (SWIM) , which just last week changed its ticker to the more memorable SWIM from IEDU, and the CyberTrader platform from Schwab (SCHW) , which has one of the most well-rounded offerings among the mainstream names.

Regardless of your investment style or even the size of your pocketbook, it’s wise to have two trading accounts, even if the second is with a $2,000 minimum, just to have a backup system in place. You never know when one might have a “glitch.” But if and when one does occur, you can bet it will be at very inopportune time.

Oil Prices Waver Around $51 a Barrel Oil Prices Seesaw Around $51 a Barrel After Falling to Fresh 19-Month Lows The Associated Press

NEW YORK - Oil prices wavered Wednesday sliding to new 19-month lows then recovering slightly as the market weighed comments by Saudi Arabia’s oil minister that further OPEC production cuts were not needed due to growing worldwide demand.

“I think the market is just trying to take a breath today,” said Andrew Lebow, senior vice president of Man Financial Inc.

Light sweet crude futures for February delivery rose 13 cents to $51.34 in midday trading on the New York Mercantile Exchange. The contract slid as low as $50.28 in earlier trading, a new 19-month low, before recovering.

Forecasts of ample stocks contributed to the earlier decline, with U.S. inventory figures, to be released Thursday, expected to show increases across the board crude, gasoline and distillates, such as diesel and heating oil.

March Brent crude on London’s ICE futures exchange rose 26 cents to $51.88 a barrel.

Saudi Oil Minister Ali Naimi said Wednesday that despite the recent drop in prices, OPEC members would push ahead with plans to invest billions of dollars to boost production capacity so they could meet growing demand, especially from Asian economic powerhouses India and China.

“Producers in general are not moved by a price movement today, tomorrow or next month. We look at the long future,” he told reporters in New Delhi, where he was attending an international energy conference. Saudi Arabia is OPEC’s biggest producer.

On Tuesday, Dow Jones Newswires reported that Naimi said he believed there was no need for further cuts by the 12-member Organization of Petroleum Exporting Countries. His comments helped accelerate oil’s trek lower.

OPEC has committed to a total cut in output of 1.7 million barrels per day, including a 500,000 barrel-a-day reduction set to begin Feb. 1. A survey by Dow Jones Newswires estimates OPEC has cut output by little more than half of its pledged levels. Production remains near 27 million barrels a day or about 700,000 barrels a day above OPEC’s target.

Antoine Halff, head of Fimat energy research, suggested the market “might see a bit of a rebound.” He noted that although Naimi’s comments were largely taken by the market as bearish, Naimi’s expectations for growing worldwide oil demand were bullish.

Still, Vienna’s PVM Oil Associates suggested the value of crude could drop further, at least over the short term.

“As it is very unlikely now that another (OPEC) output cut will be announced before mid-March, prices near $50 a barrel or lower would be no surprise,” according to a PVM report.

With the start of a cold snap in the Northeast, heating oil rose 1 cent to $1.50 per gallon on the Nymex. Natural gas futures dropped by 30 cents to $6.333 per 1,000 cubic feet, while gasoline futures lost less than a cent to $1.3615 per gallon.

The price of crude has plunged 16 percent since the year began on a mix of unusually warm weather in the Northeast and an influx of short positions in the market, or bets that prices would fall. A barrel of crude hasn’t settled below $50 since May 24, 2005.

Oil has historically cost much less, however. A barrel of crude fetched $41 on average in 2004 and $30 in 2003, according to estimates by Oppenheimer & Co. analyst Fadel Gheit.

Gasoline prices, which surged to record levels above $3 per gallon last summer, have come down along with the price of crude. The average price of unleaded gasoline nationwide is about $2.22, according to AAA.

Despite claims by some mutual fund salespeople that high expenses somehow equate with superior performance, data from TheStreet.com Ratings indicate that those who penny-pinch can do quite well in risk-adjusted returns.

TheStreet.com Ratings’ database of open-end stock funds was screened to filter out new and unstable funds with less than $1 million in total net assets. We also included retail funds with initial investment requirements of no more than $50,000.

The 10,555 remaining funds were then reviewed to see how expense ratios and asset size affect our ratings grades, which are based on risk-adjusted returns. (All portfolio classes were counted as individual funds in the study.)

In most cases, the difference between a relatively high and low expense ratio amounts to a fraction of one percentage point. However, this could translate into a material difference over years of compounding.

TheStreet.com Ratings’ grades consider only returns and volatility for the past three years, with extra weight given to the most recent performance periods. Even without allowing the fractionally lower expense burdens much time to build, the low-expense-ratio funds earned impressive grades compared with their pricier counterparts.

The bar chart below is based on funds with high vs. low expense ratios. It shows that in the C range of grades, which equate to hold recommendations, fund expenses didn’t make a material difference among the grades.

But in the buy-recommended A and B grade ranges, there was a higher percentage of funds with low expense ratios — except for the top grade of A-plus, in which there is actually a slightly higher percentage of high-fee funds. Similarly, there was a smaller percentage of low-expense funds languishing in the sell-recommended D and E grade ranges.

Of the 10% of funds with the lowest expense ratios, only 26.4% fell into the sell-recommended category, while 25.6% of the top 10% of funds found themselves similarly classified. But 31.3% of the decile with the highest expense ratio were tagged with sell recommendations by TheStreet.com Ratings, where they were kept company by 32.3% of the smallest TNA (total net assets) decile.

TheStreet.com Ratings’ Grades for Highest and Lowest Expense Ratio Stock Funds

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Source:

We also found that the larger funds, in terms of asset size, did not saddle their holders with the higher expense percentages imposed by small funds, reflecting the smaller asset bases over which they have to spread their costs. The average expense ratio of the top 10% of funds, as ranked by total net assets, was 1% vs. 1.61% for the lowest 10%. That translated into a significant advantage in our ratings grades earned by the big boys.

TheStreet.com Ratings’ Grades for Stock Funds by Asset Size

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Source:

LONDON (AFX) - Here are the top stories on AFX News

US jobless rate drops but job growth slows

WASHINGTON (AP) - The nation’s unemployment rate dipped to 4.5 percent in February even as big losses of construction and factory jobs restrained overall payroll growth. Wages grew briskly.

The latest snapshot, released by the Labor Department on Friday, offered a mixed picture of the employment climate.

EADS reports $1.01 billion loss in 4Q

MUNICH, Germany (AP) - Airbus parent EADS NV said Friday that a weaker dollar and major delays at its Airbus unit dragged its 2006 profit down, caused a multimillion dollar quarterly loss and warned that Airbus would “display another substantial loss in 2007.”

The Amsterdam-based company lost 768 million euros ($1.01 billion) in the fourth quarter compared with a profit of 405 million euros a year earlier. Sales, however, were up 11 percent to 11.96 billion euros ($15.73 billion) compared with 10.76 billion euros in 2005.

Brevan Howard Macro raises 770 mln eur in IPO

LONDON (AFX) - Brevan Howard Macro Ltd said it has raised 770 mln eur by placing 82.8 mln shares in its initial public offering.

The company said the offer comprised of 27.2 mln eur shares at 10 eur each, 45.1 mln usd shares at 10 usd each and 10.5 mln stg shares at 10 stg each.

Japan’s Aeon, Daiei form alliance to create country’s largest retail group

TOKYO (XFN-ASIA) - Aeon Co Ltd and Daiei Inc are forming a broad capital and business alliance to create Japan’s largest retail group, the two companies said.

By combining forces, Aeon, Daiei and Daiei’s largest shareholder, Marubeni Corp, aim to help turn around the struggling Aeon and to grow its business in a difficult market, the three said in a joint statement.

Procter & Gamble affirms 3Q guidance

CINCINNATI (AP) - Diversified consumer-products maker Procter & Gamble Co. on Friday affirmed its guidance for the fiscal third quarter.

For the quarter ending in March, P&G continues to expect earnings between 72 cents and 74 cents per share.

AGF board backs Allianz buyout offer

PARIS (AFX) - Assurances Generales de France said its management board has decided unanimously to back the buyout offer made by the group’s largest shareholder, Allianz SE.

It said after consultations with external consultants the board decided that the financial terms were “fair” and that the strategic basis for the merger was “in the interest of the company, its shareholders and its employees.”

DaimlerChrysler has no plans to spin off commercial vehicles

FRANKFURT (AFX) - DaimlerChrysler AG has no plans to spin off its commercial vehicles division, reported Sueddeutsche Zeitung in an interview with the unit’s chief Andreas Renschler.

“That is not on our agenda. Why would we separate from such a highly profitable business?” said Renschler.

Breeden rejects Applebees’ seat offer

OVERLAND PARK, Kan. (AP) - Restaurant operator Applebee’s International Inc. said Friday its negotiations with activist shareholder Breeden Capital Management LLC have failed, after Breeden rejected an offer for two seats on its board.

Breeden, which owns about 5 percent of Applebee’s stock, wanted four members elected to the board and has pushed for a number of changes, including selling most of the company-owned restaurants to franchisees.

Telefonica requests Merrill Lynch provide financing for eventual Endemol buyer

AMSTERDAM (AFX) - Telefonica SA said it has asked Merrill Lynch to offer stapled financing to the eventual buyer of Endemol NV as the Spanish group is exploring strategic options for the sale of all or part of its 75 pct stake in the Dutch television company.

If Telefonica were to decide to divest its 75 pct stake in Endemol, it said it would solicit from the potential purchaser a public offer for the other 25 pct of the shares outstanding in Endemol.

Converium is open to a bidder other than Scor - chairman

LONDON (AFX) - Swiss reinsurer Converium Holding AG, fending off a 2.4 bln usd hostile takeover from French rival Scor SA, is increasingly open to — and looking for — another bidder, but one hasn’t surfaced yet, the Wall Street Journal said, citing Converium

s chairman in an interview.

EU SUMMIT Leaders reach deal on fighting climate change

BRUSSELS (AFX) - EU leaders agreed to adopt binding targets on future use of renewable energy, overcoming the main obstacle to an ambitious plan to fight global warming.

The overall accord became possible once leaders agreed to a binding target of a 20 pct share of renewable energies in overall EU energy consumption by 2020, which had been the main stumbling block.

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PROSECUTORS for the International Criminal Court yesterday promised that their investigation into atrocities in Darfur was only just beginning after naming the first two suspects accused of war crimes.

Ahmed Haroun, the state interior minister during the height of the Darfur conflict, and a Janjaweed commander, Ali Muhammad Ali Abd-al-Rahman, also known as Ali Kushayb, were accused on 51 counts, including commissioning rape, torture and murder in Sudan’s western region.

Haroun is believed to have been the government liaison with Janjaweed commanders, helping to recruit and arm fighters, while Ali Kushayb was directly responsible for controlling troops on the ground.

Human rights campaigners welcomed the move but said it was only the first step to reaching senior government figures responsible for a policy that has resulted in thousands of deaths.

However, the Sudanese government said it had no intention of handing over the men.

Ali al-Mardi, the justice minister, said: “We are not concerned with, nor do we accept, what the International Criminal Court prosecutor has opted for.”

He insisted that Sudanese courts were capable of dealing with war crimes suspects.

It is four years since rebels took up arms against what they saw as an Arab-dominated government with little regard for the farming tribes of Darfur. Since then more than 200,000 people have died and a further two and a half million have been forced from their homes.

The government denies mobilising Arab militias in a scorched earth policy designed to starve the rebels of support.

Yesterday, Luis Moreno-Ocampo promised his investigation would not end with Haroun and Kushayb.

“The office is continuing to gather information about current crimes committed by all parties in Darfur and is monitoring the spillover of violence into Chad … and the Central African Republic,” he told a news conference at the court’s headquarters in The Hague.

“Haroun knowingly contributed to the commission of crimes against humanity and war crimes, including murder, rape, torture, inhumane acts, pillaging and the forcible transfer of civilian populations,” prosecutors said in their 94-page report.

Ali Kushayb - known as the “Aqid al Oqada” or colonel of colonels, controlling thousands of militiamen in the Wadi Saleh region of west Darfur - is accused of similar crimes.

Leslie Lefkow, of Human Rights Watch, said: “They were both involved in some horrendous summary executions of people in the Wadi Saleh area in 2004, and this is among some of the worst crimes that we’ve documented in Darfur. It’s significant that the ICC is going after the people who were part of the picture of those responsible for some very, very serious abuses.”

After Mr Moreno-Ocampo has filed the evidence of alleged war crimes with the court, its judges will have to decide whether to open an inquiry against the suspects with the aim of issuing international arrest warrants.

Haroun, a member of president Omar al-Bashir’s inner circle, is currently a junior minister for humanitarian affairs while Ali Kushayb is believed to be in government custody.

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