Keeping Track Of The News
If you want to consider yourself a serious investor it's very important to keep abreast of the global news and weather so that you can anticipate movement in the stock market.
Political Situation
One of the things that affects the stock market is the political situation in various countries. Expected events like the American Presidential Elections can leave the American, or even world markets, in suspended animation until the results are known. However, when there is political turmoil in a country, the markets can become very volatile, which can give investors a chance to make a killing. On the other hand, it can also be a situation where you can lose your shirt big-time.
Commodities stocks can be particularly vulnerable especially when there is political unrest in a country or even if there are unusual weather conditions. This is particularly true if the commodities represent the country's main export or it is a major world commodity like coffee or oil. By operating in the futures market and correctly anticipating how weather conditions and political events can affect these markets, you can make a lot of money. However, if you chose wrong you can be left with huge losses. Currency speculation in times of crisis can also lead to big profits, but it is not for the fledgling investor. To prevent speculating in times of political crisis, many governments close their stock markets to prevent liquid funds leaving the country.
Currency Speculation
For example in 1992, George Soros, the well-known investor, had a hunch that the British government would be forced to devalue the pound because of various political and economic factors. By speculating on the pound, and selling short, he was able (it is believed) to make over $1.1 billion. Of course, his speculation may have fueled the crisis in the first place, but he certainly benefited from Black Wednesday.
Emerging Markets
Emerging markets are also extremely vulnerable to volatile political situations. A useful strategy if you want to lessen your risk is to invest in equity funds geared to emerging markets, rather than directly investing in the markets themselves. In this way, you can be protected to some extent from the volatile nature of these markets. These types of funds are not for the short-term investor, as they are aimed at those investors who take a long view over at least five years.
Weather
By being aware of global weather you can anticipate crop failures, which will drive the prices up, or predict bumper crops, which will drive commodity prices down. The recent abnormal weather worldwide in 2010/11 will almost certainly affect commodity prices in those areas. Insurance companies will have to increase premiums to compensate for the rise in insurance claim payouts and this will affect their standing in the markets. Construction companies will also have more business due to the need for reconstruction and repair in areas affected by flood damage. The tourist industry can also be badly affected by the weather. The 2010 volcanic eruption in Iceland grounded planes in Europe and caused an estimated loss to the airlines of $210 million per day, affecting their share prices. Even countries like Kenya were affected to the tune of $3.8m a day, as they were unable to export goods to Europe.
So you can see why it is very important for even small-time investors to keep track of world news and global weather to help give you an edge.