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Wednesday was a good day for Fawad Khan.

He got up shortly before 3 a.m. and headed to a bank of computers in his Mississauga basement. While his family slept, he started trading.

One screen charted the euro in real time. It looked like the seismic readout for an earthquake. Trading in this kind of market, with one’s own money, is not for the faint of heart.

At 3 a.m., Khan bought euros, expecting the currency’s value to rise. When it did, he sold. Then he bought low and sold high, again. Within an hour he was up $750 (US). For his third move, he went short, predicting the euro would fall. It did, and he made another $300. It was 4:30 a.m.

“Then I went back to sleep,” says Khan, 62, a civil engineer who made day trading his full-time job after emigrating from Pakistan in 1999.

At 1 p.m., Khan was back in the basement of his modest bungalow. He sold short again, both the euro and the S&P 500 stock index. He called it a day at 2:30 p.m. — $2,935 (US) richer after three hours of trading.

“If you go with the (market) trend, you make money. If the bull is in command, you follow the bull. If the bear is in command, you follow the bear,” Khan explains, referring to the beasts that signify a rising or falling market.

It sounds simple enough, but Khan is part of a relatively small group making money in today’s wildly volatile global markets. Most investors are watching their investments, including retirement savings, evaporate. Although marked by frenetic swings, the overall market tendency is down, some 20 per cent since spring.

“We’ve seen a lot of wealth shed away in the last few months. And the ones who lost it are the people who can’t afford to lose it,” says Eric Kirzner, professor of finance at the University of Toronto’s Rotman School of Management.

“Ninety per cent of the people lose money,” says Khan, “and the money they lose goes into the pockets of the 10 per cent making money.”

This lopsided formula rings true to many these days. It partly explains the anger of protesters “occupying” Wall Street for the past three weeks. It might also explain why recent statements on the BBC by an unknown trader — Goldman Sachs rules the world; traders dream of market turmoil and recession — went viral.

“He was honest and forthright in the most scary way,” Rotman’s dean, Roger Martin, says of Alessio Rastani. “This guy was absolutely correct. What he said is, ‘traders like us couldn’t care less whether the economy is doing well or badly. . . all that has to happen is for there to be volatility.’”

There’s nothing of the vulture in Khan. He’s the soft-spoken father of five children who warns against greed and never risks more than $900 in leveraged currency contracts. Yet he too gets a rush from the kind of volatility that has many fearing they’ll never afford retirement.

“I love it,” he says.

The small group of winners in today’s market is largely made up of professional traders selling financial products the uninitiated wouldn’t understand, like index futures, or buying bear market exchange-traded funds. They are people making short-term trades while riding the market’s ups and downs.

“High frequency trading is all the rage now,” says Dave Poxon, 45, a day trader in Whitby.

Poxon says “click traders” — buying and selling with a click of the mouse — can’t keep up with those, like himself, who use algorithms to ride the volatility. He said he and two colleagues made a total of about $5,000 to $6,000 (US) a day last week using an algorithm he designed.

There’s no clearer sign of the profitability of volatility than HBP S&P 500 VIX Short-Term Futures Bull Plus, an exchange-traded fund (ETF). It was the most profitable mutual fund on the Toronto Stock Exchange during the last three months, its value rising an eye-popping 178 per cent.

The leveraged fund doesn’t buy and sell stock. It simply tracks the performance of the VIX Index — known by insiders as the Fear Index — which measures the volatility of U.S. stocks. The more volatile the market, the more money it makes.

“Volatility has been a very lucrative asset class to be invested in,” says an official with Horizons BetaPro, which manages the ETF. The official, who didn’t want to be named, stressed the fund isn’t for typical, long-term investors: “If the market isn’t volatile, you would lose gads of money on that ETF.”

Martin argues that big players are increasingly counting on market volatility. He points especially to hedge funds, which in 2008 controlled $2 trillion of assets in the U.S.

In theory, hedge funds reduce risk by placing bets in opposite directions. They should therefore make money no matter which way the market goes. But the way most hedge fund managers get paid magnifies the theory to the extreme, Martin argues.

Managers are paid according to the “2 and 20 formula” — 2 per cent of the assets they manage plus 20 per cent of the increase they generate. Big paycheques are made when markets shoot up or down.

“The more back and forth the better,” Martin says.

As the market swings, the incentive is to “roll the dice” and make a killing. If the bet turns out wrong, the manger has lost other people’s money — including, perhaps, a pension fund’s — yet still walks away with the 2 per cent fee. If the trade works, the millions or billions of dollars the fund earns is at the expense of other investors or companies because the market is a zero sum game, Martin says.

Either way, Martin argues that hedge fund managers are getting filthy rich without adding value or jobs to the economy. He calls it “the very biggest problem with the economy now.”

Sometimes the action raises allegations of crime. Canadian insurer Fairfax Financial Holdings Ltd. is suing a group of hedge funds, accusing them of spreading false information to drive down its stock and then profit through short-selling. (In short selling, a trader borrows shares to sell, hoping to buy them back later at a lower price. If that happens, the trader settles the loan and pockets the difference.)

Short sellers make money when stocks go down, which explains their reputation as vultures. Kirzner argues they help create an efficient market by moving stocks where they belong, pointing to the recent decline in share price of Research in Motion — maker of the BlackBerry — as an example.

It’s a game many are playing now, but one with a history of dire warnings. The legendary short-seller Jesse Livermore made millions betting short when stock markets crashed in 1929. But he lost as many fortunes as he made. In 1940, after throwing back two drinks, he walked into the cloakroom of a swanky Manhattan hotel and blew out his brains.

Fawad Khan isn’t playing for high stakes. He’s happy making what he describes as a decent living.

He was introduced to the stock market while working as a contractor in Pakistan. He built a home for a businessman who was so grateful he gave Khan a quick course on trading.

In Canada, he realized that contracting work involved the same kind of “palm greasing” it did in Pakistan. So he gave it up, studied trading and for the past nine years has been focusing on buying and selling currencies.

“It’s beautiful work,” he says. “I can do it any time I want. No business will give you that freedom.”

He says most days a handful of people will join him in his basement and copy his trades. He doesn’t charge them, unless they get hooked and want to take a course he gives now and then. He urges them to trade with a “stop loss” of $50 or $100 — if you lose that much, stop trading.

“The people who know this business, they make money. The people who are greedy, the people who have fear, they lose money.”

So what should a cautious trader do these days?

“Keep selling the euro short,” he says. “Short selling is good advice.”

Unless you’re Jesse Livermore, of course.

Big winners

Canada’s top performing mutual funds and ETFs over the last three months:

HBP S&P 500 VIX Short-term Futures Bull Plus: up 178.7%

HBP S&P 500 VIX Short Term Future: up 87.0%

HBP COMEX® Gold Bullion Bull Plus ETF: up 39.6%

Friedberg Global Macro Hedge (US$): up 29.8%

HBP S&P/TSX Energy Bear Plus ETF: up 28.0%

Source

Sheila Mauricette was at work when a door-to-door seller came to her home. Now she

The Bank of England surprised markets Thursday by sanctioning another 75 billion pounds ($116 billion) injection into a British economy that’s suffering from the shockwaves of Europe’s debt crisis and the British government’s austerity program.

The Bank’s rate-setting Monetary Policy Committee said it was reviving a program of asset purchases which injected 200 billion pounds in between March 2009 and January 2010 to help lift Britain out of a deep recession. The hope is that by buying government bonds from banks, they will use their cash injection to lend to hard-pressed businesses and households.

The scale of the asset purchases, which will take four months to complete, was more than anticipated by those predicting Thursday’s move. Most economists thought the Bank would opt to wait until November before deciding on a more moderate 50 billion pound injection.

“It is clearly an indication of the extent to which the MPC is worried about the slowdown that it has chosen to act so soon and so decisively,” said Peter Dixon, economist at Commerzbank.

In a statement, the nine members of the MPC said the pace of global expansion has slackened, especially in Britain’s main export markets _ a reference to the eurozone, which is mired in a debt crisis that’s beginning to impact on banks’ day-to-day activities.

“Vulnerabilities associated with the indebtedness of some euro-area sovereigns and banks have resulted in severe strains in bank funding markets and financial markets more generally,” the panel said. “These tensions in the world economy threaten the U.K. recovery.”

Though the eurozone economy is also showing increasing signs of heading back into recession, the European Central Bank opted to keep its main interest rate unchanged at 1.5 percent. Many in the markets had been predicting a cut.

While launching another round of so-called quantitative easing, the Bank of England’s panel left the base lending rate at an all-time low of 0.5 percent and said that inflation would likely undershoot the 2 percent target in the medium term in light of the deteriorating outlook. It’s currently running at 4.5 percent and likely to go above 5 percent in the next month or two on the back of higher utility bills, the panel said.

“In the light of that shift in the balance of risks, and in order to keep inflation on track to meet the target over the medium term, the committee judged that it was necessary to inject further monetary stimulus into the economy,” the panel said.

The pound slumped soon after the announcement, trading 1.1 percent lower at $1.5293 as investors were caught unawares by the surprisingly big increase.

Chris Williamson, chief economist at Markit, said the decision was not without risk but would bolster the economy “until European policymakers can find a resolution to the region’s sovereign debt crisis and the U.K. government outlines a coherent strategy for growth.”

The Bank acted a day after revised data showed that the British economy grew by only 0.1 percent in the second quarter, half the previous estimate. It managed little or no growth in the previous six months.

American economist Adam Posen has been alone among the nine Monetary Policy Committee members to vote last month for another 50 billion pounds in asset purchases, but minutes of that meeting signaled a shift in sentiment with “most members” agreeing that the case for more stimulus had strengthened.

With the base rate at an all-time low of 0.5 percent and the government cutting spending, quantitative easing is the only remaining big lever to jolt the economy to life.

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Mayor Michael Bloomberg is set to take the stand in a grand larceny trial Monday, answering questions from prosecutors who say he was bilked out of more than $1 million and from defense lawyers who claim he is using the case to cover up unsavory campaign practices.

On trial is John Haggerty, a political operative who worked on the mayor’s re-election campaigns and is now accused of convincing the mayor and his staff to pay for a $1.1 million poll-monitoring operation that never materialized, then using most of the cash to buy himself a house.

But much of the questioning so far has revolved around Bloomberg, as Haggerty’s lawyers have sought to turn the jury’s focus to the billionaire mayor, painting a picture of a high-rolling candidate surrounded by privileged insiders who skirted ethics rules, threw money at problems and didn’t hesitate to bend the law.

Prosecutors do not accuse the mayor of any wrongdoing, and Bloomberg’s representatives have said his campaign broke no laws and followed standard practices.

The cross-examination of the mayor Monday promises to be tense. Defense lawyers used their opening statements to flatly accuse him of “campaign fraud.” Bloomberg’s spokesman says the tactics are a sign of desperation.

Prosecutors may try to limit what questions Bloomberg must answer. Before the trial, they asked Manhattan state Supreme Court Justice Ronald A. Zweibel to bar their adversaries from inquiring about the mayor’s campaign finances. The judge nixed that request but said he might revisit the issue if it arises during the trial.

Haggerty, 42, is a veteran of several prominent New York Republican campaigns. As a volunteer on the 2009 campaign of the Democrat-turned-Republican-turned-unaffiliated mayor, Haggerty was the point man on “ballot security,” a term used mainly by Republicans for poll watching with an eye to preventing voter fraud.

He presented Bloomberg campaign aides with a $1.1 million budget that included more than 1,300 paid poll watchers, an office, two-way radios and other expenses, according to prosecution filings and documents aired at the trial. Prosecutors say Haggerty did little of what he promised and used about $750,000 of the money to buy his brother’s share of their late father’s home.

Bloomberg financed the plan with a personal donation to the Independence Party that didn’t have to be reported until after the election. Haggerty’s lawyers argue that Bloomberg was trying to distance himself from a practice that has at times been subjected to court scrutiny as an alleged tool for voter suppression, something that Bloomberg’s aides deny.

Since the mayor’s donation to the party could not legally be earmarked for a specific purpose, it is not evidence that any money was stolen from Bloomberg, the defense argues.

The trial has offered an unusual peek behind the scenes of the mayor’s self-financed campaigns and inside City Hall, as some of his closest aides have answered questions about their relationship with the mayor and how they spend his money. Former Deputy Mayor Kevin Sheekey said on the stand that he didn’t enjoy his first two years in office.

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Some 55 million women across North America read other women

The tropical depression named Ophelia has regenerated in the Atlantic east of the Leeward Islands and is expected to strengthen.

The U.S. National Hurricane Center in Miami said Tuesday the depression with top sustained winds of 30 miles per hour (45 kph) was about 175 miles (285 km) east-southeast of the Leewards. It could become a tropical storm Wednesday on a forecast track that could steer it toward the north Atlantic.

Far out in the Atlantic, Tropical Storm Philippe was heading northwest and continued to weaken.

Philippe had maximum sustained winds of about 40 mph (65 kph) and should become a tropical depression Wednesday as it heads west-northwest.

In the Pacific, Hurricane Hilary is also weakening and doesn’t pose any immediate threat to Mexico’s coast.

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Hundreds of jailed members of the militant Basque separatist group ETA have called for an end to violence as a tool for achieving Basque independence, boosting pressure for ETA to disband and prompting the government on Saturday to call the appeal significant but insufficient.

A group representing the 700 ETA prisoners in Spain and France made the appeal in a statement Friday night, adding that they themselves should be granted amnesty.

The call endorsed a groundbreaking agreement reached late last year by pro-independence Basque political parties _ chiefly the remnants of ETA’s banned political wing, Batasuna _ and civic groups that said Basque independence should be achieved through peaceful means, not by shooting people or setting off car bombs.

But the prisoners stopped short of calling on ETA to dissolve, as demanded by Spain, and reiterated traditional demands that the government also rejects, such as letting the Basque people decide whether to break away or remain part of Spain.

ETA declared a cease-fire in September 2010 and went further in January by calling the truce permanent and saying it was prepared to let international observers verify it.

ETA has killed 829 people since the late 1960s in a campaign of bombings and shootings aimed at forcing the government to allow creation of an independent Basque homeland straddling the Basque provinces of northern Spain and southwest France. But the group has been decimated in recent years by arrests of its leaders and members, and has not killed anyone in Spain in more than two years.

Government spokesman Jose Blanco said Saturday the prisoners’ appeal was unprecedented.

“It is an important step, a significant one. But it is not the one that society in general and the government wanted because it is not definitive, nor is it the one that announces the end of ETA,” Blanco said.

Debate among ETA prisoners _ seen as holding much sway in the organization _ on whether to renounce violence has been under way for months.

The appeal comes now with a general election due in Spain in November. The governing Socialists, who negotiated with ETA in 2006, are expected to lose badly to the opposition conservatives, in large part because of the dismal state of Spain’s economy.

While many in Spain see Europe’s last major armed militancy as being on its last legs, one big question mark is whether ETA will make some kind of big announcement before the voting on Nov. 20.

Some in Spain say ETA’s demise _ the golden ring that successive Spanish governments have sought in vain for decades _ might conceivably be enough to save the Socialists by letting them claim credit for what would be a historic event.

Meanwhile, Basque police said some 10,000 protesters marched through the region’s main city, Bilbao, Saturday evening to protest a 10-year jail term given Sept. 16 to activists who include Arnaldo Otegi, the former Batasuna leader who has been credited with leading the pro-independence community to reject violence as the way to achieve a Basque state.

A court in Madrid convicted Otegi and four others of forming an organization to replace Batasuna and serve as a political tool for ETA. Many Basques reacted angrily, saying the conviction dashed hopes for peace just as momentum toward it seemed to be building.

At the march, protest leaders hailed the decision by the ETA prisoners as setting the stage for a settlement. Many demonstrators waved the red, white and green Basque flag and chanted slogans calling on the government to transfer ETA prisoners scattered around the country to prisons in the Basque region _ a long-standing ETA demand.

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Forecasters say Hurricane Hilary has strengthened into a small, but powerful Category 4 storm in the Pacific.

Hilary’s maximum sustained winds were near 135 mph (217 kph) Thursday. The hurricane is not forecast to make landfall, though officials say it is expected to rake Mexico’s coast with wind, rain and heavy surf.

The U.S. National Hurricane Center says a tropical storm warning is in effect for Mexico’s coast from Lagunas de Chacahua to Punta San Telmo. A tropical storm watch is in effect for west of Punta San Telmo to Manzanillo.

Hilary is centered about 85 miles (137 kilometers) southwest of Acapulco, Mexico, and is moving west-northwest.

In the Atlantic, Tropical Storm Ophelia is weakening.

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President Barack Obama said Monday the U.S. Postal Service should be allowed to reduce mail delivery to five-days-a-week to help cut its massive losses.

The Postal Service lost $8.5 billion last year and is facing even more red ink this year as the Internet siphons off large amounts of first-class mail and the weak economy reduces advertising mail.

While the post office has cut more than 100,000 workers in the last few years it needs to cut more, close offices and find other ways to reduce costs to keep operating.

In his economic growth and debt reduction plan unveiled Monday, Obama endorsed the idea of dropping one day of mail delivery _ it is expected to be Saturday _ and urged other changes in postal operations

He agreed that nearly $7 billion the post office has overpaid into the federal retirement system should be refunded to the agency, urged that its payments for advance funding of retiree medical benefits be restructured, and said the post office should be allowed to sell non-postal products and raise postage rates.

Currently the post office cannot raise rates more than the amount of inflation.

Postmaster General Patrick Donahoe said the president “has offered helpful recommendations to stabilize the Postal Service’s financial crisis.”

Sen. Tom Carper, D-Del personal loan for poor credit., who has proposed a bill including many of the same suggestions, welcomed the president’s statement.

“I have been saying for some time now that Congress and the administration need to come together on a plan that can save the Postal Service and protect the more than seven million jobs that rely on it,” he said in a statement.

Rep. Darrell Issa, R-Calif., who has his own postal reform bill in the House, responded that “the president’s proposal is not what taxpayers or the Postal Service needs.”

He asserted that Obama’s plan “will certainly cost taxpayers money.” Currently the post office does not receive tax funds for its operations.

Meanwhile, 75 members of Congress led by Reps. Gerry Connolly, D-Va., and Don Young, R-Alaska, called on the independent Postal Regulatory Commission to block the post office’s plans to close as many as 3,700 local offices across the country.

The proposed closures, most in rural locations that do little business, are currently under review.

The letter called for establishment of a new business model for the post office without closing offices and cutting its work force.

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Man Dip has a six-month lease on life.

That’s about how long local grocery stores will give the spicy sausage and cheese dip, a new product from an unknown local entrepreneur, before they decide whether to keep it or dump it. But that’s a lot farther than most other food startups make it in the highly competitive race for grocery shelf space.

If it were up to Dr. Ted Mimlitz, the man behind Man Dip, the concoction he’s been whipping up for 15 years might have remained just a party favorite and inside joke among his circle of friends.

But about four years ago, Andy Wolf, a serial entrepreneur who has brought to market a number of items including a deer sled for hunters, took a bite of Mimlitz’s dip at a school-related event for their children.

“I said right there, ‘Have you ever thought about bringing this out commercially?’” Wolf said. “I pestered him for three months. Then he called me one December night and said, ‘Do you really think we can do this?’ I said, ‘Absolutely.’

That confidence belies the difficulty in bringing a product to market from scratch. Lots of folks flirt with the idea of branding and selling their homemade creations. But few people pursue it beyond their daydreams.

Local products face stiff competition from large food manufacturers with established brands, bulk negotiating power and money for extensive product and marketing research. Most local food products that have found success at area grocery stores are affiliated with local restaurants or well-known landmarks such as the Hill. Think Imo’s salad dressing, Zia’s pasta sauce and Fitz’s root beer.

“When people see that on your shelves, there’s that connection right away,” said Rich Wallace, Dierbergs’ director of procurement.

Another local example