Notification:
To those who read my blog, or who have subscribed to my feed, I have switched over to Wordpress.
This is my new URL: http://freethemarketman.wordpress.com/
Sunday, February 17, 2008
Blog Switchover
To those who read my blog, or who have subscribed to my feed, I have now switched over to Wordpress.
This is my new URL: http://freethemarketman.wordpress.com/
This is my new URL: http://freethemarketman.wordpress.com/
America: Freedom to Fascism
"A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known, and he carries his banners openly. But the traitor moves among those within the gates freely, his sly whispers rustling through all the alleys, heard in the very hall of government itself. For the traitor appears no traitor. He speaks in the accents familiar to his victims, and he wears their face and their garments, and he appeals to the baseness that lies deep in hearts of men. He rots the soul of a nation. He works secretly and unknown in the night to undermine the pillars of a city. He infects the body politic so that it can no longer resist. A Murderer Is Less To Be Feared." Cicero, 42 B.C.
The only difference between communism and socialism is its method of imposition.
Communism is forced upon the people against their will. Socialism on the other hand is entered into voluntarily by the majority of voters.
Even though the goals are the same, socialism is much more dangerous because it gradually enslaves the people without the use of visible force, while artfully disguising its evil motives with a variety of so-called noble causes.
The evils of socialism and humanism cannot survive exposure unless "good men and women do nothing".
'Truth is treason in the empire of lies.'
Money, Banking and the Federal Reserve
Thomas Jefferson and Andrew Jackson understood "The Monster". But to most Americans today, Federal Reserve is just a name on the dollar bill. They have no idea of what the central bank does to the economy, or to their own economic lives; of how and why it was founded and operates; or of the sound money and banking that could end the statism, inflation, and business cycles that the Fed generates.
Dedicated to Murray N. Rothbard, steeped in American history and Austrian economics, and featuring Ron Paul, Joseph Salerno, Hans Hoppe, and Lew Rockwell, this extraordinary new film is the clearest, most compelling explanation ever offered of the Fed, and why curbing it must be our first priority.
Alan Greenspan is not, we're told, happy about this 42-minute blockbuster. Watch it, and you'll understand why. This is economics and history as they are meant to be: fascinating, informative, and motivating. This movie could change America.
Dedicated to Murray N. Rothbard, steeped in American history and Austrian economics, and featuring Ron Paul, Joseph Salerno, Hans Hoppe, and Lew Rockwell, this extraordinary new film is the clearest, most compelling explanation ever offered of the Fed, and why curbing it must be our first priority.
Alan Greenspan is not, we're told, happy about this 42-minute blockbuster. Watch it, and you'll understand why. This is economics and history as they are meant to be: fascinating, informative, and motivating. This movie could change America.
Video: FIAT EMPIRE - Why the Federal Reserve Violates the U.S. Constitution
This is a new video I discovered, although it has been around for some time. I have only one problem with these documentaries and books. A Central Bank is a Central Bank, no matter what name it goes by. The practices by The Federal Reserve is no more different than that of the European Central Bank, Bank of England, Bank of Japan or the South-African Reserve Bank. Keep that in mind if you are not an American watching this video.
The problem is not exclusive to the U.S.A. Fortunately for us plebs, there are still Americans with a backbone and they are the only people exposing and addressing this issue, as far as I know.
This Award-winning documentary, which features presidential candidate Ron Paul, was inspired by the book, "The Creature From Jekyll Island" by author and FREEDOM FORCE founder, G. Edward Griffin.
To get the full documentary on DVD(with up to 120-minutes of additional uncut interviews of Ron Paul and the other experts) go to www.FiatEmpire.com/screener. To instantly download a DVD-quality version of FIAT EMPIRE, go to www.mecfilms.com/mid/orders/fiat4.htm.
Find out why some feel the Federal Reserve's practices are a violation of the U.S. Constitution and others feel it's simply "a bunch of organized crooks." Discover why experts agree the Fed is a banking cartel that benefits mainly bankers and their corporate clients as well as a Congress that would rather increase the National Debt to over $9 trillion than raise taxes. Find out how the corporate media facilitates the partnership between the Fed and Congress and why it fails to disclose what's going on. Lastly, find out how the Federal Reserve-member banks are owned and controlled by an elite group of insiders.
The problem is not exclusive to the U.S.A. Fortunately for us plebs, there are still Americans with a backbone and they are the only people exposing and addressing this issue, as far as I know.
This Award-winning documentary, which features presidential candidate Ron Paul, was inspired by the book, "The Creature From Jekyll Island" by author and FREEDOM FORCE founder, G. Edward Griffin.
To get the full documentary on DVD(with up to 120-minutes of additional uncut interviews of Ron Paul and the other experts) go to www.FiatEmpire.com/screener. To instantly download a DVD-quality version of FIAT EMPIRE, go to www.mecfilms.com/mid/orders/fiat4.htm.
Find out why some feel the Federal Reserve's practices are a violation of the U.S. Constitution and others feel it's simply "a bunch of organized crooks." Discover why experts agree the Fed is a banking cartel that benefits mainly bankers and their corporate clients as well as a Congress that would rather increase the National Debt to over $9 trillion than raise taxes. Find out how the corporate media facilitates the partnership between the Fed and Congress and why it fails to disclose what's going on. Lastly, find out how the Federal Reserve-member banks are owned and controlled by an elite group of insiders.
Saturday, February 16, 2008
Hayek's 'The Road to Serfdom' in Five Minutes
Here is a conundrum for you. Various titles are available for this video clip. Which one do you choose?
1) Clinton's "Road to Serfdom" in Five Minutes
2) McCain's "Road to Serfdom" in Five Minutes
3) Obama's "Road to Serfdom" in Five Minutes
Here's the catch. Doesn't matter which one you choose. The result will be the same.
In South-Africa's case there is no conundrum. The only drum beating is:
1) Zuma's "Road to Serfdom" in Five Minutes
Road to Serfdom, The Description
This spell-binding book is a classic in the history of liberal ideas. It was singularly responsible for launching an important debate on the relationship between political and economic freedom. It made the author a world-famous intellectual. It set a new standard for what it means to be a dissident intellectual. It warned of a new form of despotism enacted in the name of liberation. And though it appeared in 1944, it continues to have a remarkable impact. No one can consider himself well-schooled in modern political ideas without having absorbed its lessons.
What F.A. Hayek saw, and what most all his contemporaries missed, was that every step away from the free market and toward government planning represented a compromise of human freedom generally and a step toward a form of dictatorship--and this is true in all times and places. He demonstrated this against every claim that government control was really only a means of increasing social well-being. Hayek said that government planning would make society less liveable, more brutal, more despotic. Socialism in all its forms is contrary to freedom.
Nazism, he wrote, is not different in kind from Communism. Further, he showed that the very forms of government that England and America were supposedly fighting abroad were being enacted at home, if under a different guise. Further steps down this road, he said, can only end in the abolition of effective liberty for everyone.
Capitalism, he wrote, is the only system of economics compatible with human dignity, prosperity, and liberty. To the extent we move away from that system, we empower the worst people in society to manage what they do not understand.
The beauty of this book is not only in its analytics but in its style, which is unrelenting and passionate. Even today, the book remains a source of controversy. Socialists who imagine themselves to be against dictatorship cannot abide his argument, and they never stop attempting to refute it.
1) Clinton's "Road to Serfdom" in Five Minutes
2) McCain's "Road to Serfdom" in Five Minutes
3) Obama's "Road to Serfdom" in Five Minutes
Here's the catch. Doesn't matter which one you choose. The result will be the same.
In South-Africa's case there is no conundrum. The only drum beating is:
1) Zuma's "Road to Serfdom" in Five Minutes
Road to Serfdom, The Description
This spell-binding book is a classic in the history of liberal ideas. It was singularly responsible for launching an important debate on the relationship between political and economic freedom. It made the author a world-famous intellectual. It set a new standard for what it means to be a dissident intellectual. It warned of a new form of despotism enacted in the name of liberation. And though it appeared in 1944, it continues to have a remarkable impact. No one can consider himself well-schooled in modern political ideas without having absorbed its lessons.
What F.A. Hayek saw, and what most all his contemporaries missed, was that every step away from the free market and toward government planning represented a compromise of human freedom generally and a step toward a form of dictatorship--and this is true in all times and places. He demonstrated this against every claim that government control was really only a means of increasing social well-being. Hayek said that government planning would make society less liveable, more brutal, more despotic. Socialism in all its forms is contrary to freedom.
Nazism, he wrote, is not different in kind from Communism. Further, he showed that the very forms of government that England and America were supposedly fighting abroad were being enacted at home, if under a different guise. Further steps down this road, he said, can only end in the abolition of effective liberty for everyone.
Capitalism, he wrote, is the only system of economics compatible with human dignity, prosperity, and liberty. To the extent we move away from that system, we empower the worst people in society to manage what they do not understand.
The beauty of this book is not only in its analytics but in its style, which is unrelenting and passionate. Even today, the book remains a source of controversy. Socialists who imagine themselves to be against dictatorship cannot abide his argument, and they never stop attempting to refute it.
Ron Paul is a Kook
Well, that is the label Ron Paul's been awarded by the good people who oppose him and his ideas.
But what is a "kook". According to the Merriam-Webster Online Dictionary, a kook is:
"One whose ideas or actions are eccentric, fantastic, or insane"
OK. So from this definition I assume that the "sane" people are implying that Ron Paul and his ideas are "insane".
But, before I allow myself to be sucked into this belief like a sheep, I first need to validate if Ron Paul's ideas are "kooky". Then I will decide.
To do this, I will juxtapose Ron Paul's ideas (the kooky ones) against the dissenter's ideas (like day and night, hot and cold, etc.)
The Kooky Ideas vs. The Sane Ideas
Freedom vs Slavery
Peace vs War
Capitalism vs Socialism (communism)
Sound Money vs Fiat Money
Savings vs Cheap Credit/Debt
Non-Intervention vs Intervention
Free Economy vs Planned Economy
Surplus vs Deficit
Anti Income Tax vs Pro Income Tax
Independence vs Dependence
Solvency vs Bankruptcy
Deflation vs Inflation
Conservative vs Liberal
Deregulation vs Regulation
Proactive vs Reactive
Decentralized Government vs Centralized Government
Limited Government vs Big Government
Individualism vs Collectivism
Pro-Market vs Pro-Government
Private Property vs No Private Property
Money backed by Gold vs Money backed by Debt
Wow, interesting when you compare the ideas like this, huh?
Ron Paul is a kook...yeah, right! He is actually fantastic!
Friday, February 15, 2008
The Devilish Mixture of Stagflation
By Bill Bonner
"One part slump…one part inflation…and one part who-knows-what. Of course, the feds are eager to put more inflation into the brew. If they had their druthers, the concoction would have more of a kick - with more exciting price increases and less depressing slump."
Read the rest
"One part slump…one part inflation…and one part who-knows-what. Of course, the feds are eager to put more inflation into the brew. If they had their druthers, the concoction would have more of a kick - with more exciting price increases and less depressing slump."
Read the rest
Upping the Inflation Dosage
By Peter SchiffIn perhaps one of biggest ironies to ever to come out of Washington, this week Congress simultaneously pilloried major league baseball players for using artificial stimulants to pump up their performance while passing legislation to do just that to the national economy. Am I the only one laughing?
In reality, the current slump in the U.S. economy is simply the come down from years of financial doping in the form of skyrocketing home values and easy credit. Rather than reaching for yet another syringe, Congress should ask Americans to do what it demands of ballplayers: play within their natural means. Unfortunately in the case of the economy, the patient is already so juiced up that further doses may not only fail to stimulate but may result in a trip to the emergency room.
As the widely praised “economic stimulus” bill was signed into law, the only dissent heard was from those saying the plan did not go far enough. Speaking for those unheard voices who disagree with the strategy entirely, I believe the most significant aspect of the plan is that it creates a new and improved method for delivering inflation.
Previously, the government has largely relied on interest rate stimulus to keep the economy humming. In this method, money supply growth, also known as inflation, is channeled through the banking system. The Fed makes cheap credit available to banks, which then lend out the new funds or use them to acquire higher yielding assets. As a result, asset prices, such as stocks, bonds and real estate, have been bid up to bubble levels. However, the inflationary impact on consumer prices occurs with a considerable lag.
Now that rate cuts alone are proving insufficient, mainly because banks are now so over-loaded with questionable collateral and shaky loans that few can consider acquiring more assets or extending additional credit (no matter how cheap such activities can be funded), the Government is opting for a more direct approach. By printing money and mailing it directly to the citizenry, the “stimulus plan” cuts out all of the financial middle men and administers the inflation drug directly to consumers.
If simply printing money could solve financial problems, the Fed could send $10 million to every citizen and we could all retire en masse to Barbados. However, more money chasing a given supply of goods simply pushes up prices and does nothing to improve underlying economics. Since this new money will go directly into consumer spending, without first being filtered thought asset markets, the effects on consumer prices will be far more immediate.
This politically inspired placebo will do nothing to cure what ails our economy. The additional consumer spending will merely exacerbate our imbalances, allow the underlying problems to worsen, and put additional upward pressure on both consumer prices and eventually long-term interest rates as well. The failure of the stimulus plan to cure the economy will cause the Government, and the Wall Street brain trust, to conclude that it was simply too small. Their next solution will be to administer an even stronger dose.
My prediction is that over the course of the next few years, successive doses of even larger stimulus packages will fail to revive the economy. As the recession worsens and the dollar drops through the floor and consumer prices and long–term interest rates shoot thought the roof, politicians and economists will look for scapegoats. Few, if any, will properly attribute the problems to the toxic effects of the stimulus itself.
However, like all drugs, the biggest danger is an overdose. In monetary terms an overdose is hyperinflation, which will surely kill our economy. It is my sincere hope that before we reach that “point of no return,” a correct diagnosis is finally made. When that occurs, the stimulants will be cut off, and the free market will finally be allowed to administer the only cure that works: recession. If that means we lose some speed on our fastball, so be it. Maybe we could use a few months in the minor leagues to get back to basics. While we may not like the economic side effects of stopping cold turkey, it sure beats carrying our money around in wheelbarrows!
For a more in depth analysis of the tenuous position of the Americana economy and U.S. dollar denominated investments, read my new book “Crash Proof: How to Profit from the Coming Economic Collapse.”
******
Mr. Schiff began his investment career as a financial consultant with Shearson Lehman Brothers, after having earned a degree in finance and accounting from U.C. Berkeley in 1987. A financial professional for over twenty years he joined Euro Pacific in 1996 and has served as its President since January 2000. An expert on money, economic theory, and international investing, Peter is a highly recommended broker by many leading financial newsletters and investment advisory services. He is also a contributing commentator for Newsweek International and served as an economic advisor to the 2008 Ron Paul presidential campaign.******
FMM Comment:
The scapegoat referred to WILL be capitalism. Ron Paul addressed the question, "Has Capitalism Failed?" long ago in the U.S. House of Representatives, July 9, 2002.
"Corruption and fraud in the accounting practices of many companies are comingto light. There are those who would have us believe this is an integral part of free-market capitalism. If we did have free-market capitalism, there would be no guarantees that some fraud wouldn't occur. When it did, it would then be dealt with by local law-enforcement authority and not by the politicians in Congress, who had their chance to "prevent" such problems but chose instead to politicize the issue, while using the opportunity to promote more Keynesian useless regulations.
Capitalism should not be condemned, since we haven't had capitalism. A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank. It's not capitalism when the system is plagued with incomprehensible rules regarding mergers, acquisitions, and stock sales, along with wage controls, price controls, protectionism, corporate subsidies, international management of trade, complex and punishing corporate taxes, privileged government contracts to the military–industrial complex, and a foreign policy controlled by corporate interests and overseas investments. Add to this centralized federal mismanagement of farming, education, medicine, insurance, banking and welfare. This is not capitalism!
To condemn free-market capitalism because of anything going on today makes no sense. There is no evidence that capitalism exists today. We are deeply involved in an interventionist-planned economy that allows major benefits to accrue to the politically connected of both political spectrums. One may condemn the fraud and the current system, but it must be called by its proper names – Keynesian inflationism, interventionism, and corporatism.
What is not discussed is that the current crop of bankruptcies reveals that the blatant distortions and lies emanating from years of speculative orgy were predictable. "
Capitalism rests its case.
The Conspiracy Theory of History Revisited
Mises.org UpdatesMurray Rothbard writes: Anytime that a hard-nosed analysis is put forth of who our rulers are, of how their political and economic interests interlock, it is invariably denounced by Establishment liberals and conservatives (and even by many libertarians) as a "conspiracy theory of history," "paranoid," "economic determinist," and even "Marxist." These smear labels are applied across the board, even though such realistic analyses can be, and have been, made from any and all parts of the economic spectrum, from the John Birch Society to the Communist Party. The most common label is "conspiracy theorist," almost always leveled as a hostile epithet rather than adopted by the "conspiracy theorist" himself.
It is no wonder that usually these realistic analyses are spelled out by various "extremists" who are outside the Establishment consensus. For it is vital to the continued rule of the State apparatus that it have legitimacy and even sanctity in the eyes of the public, and it is vital to that sanctity that our politicians and bureaucrats be deemed to be disembodied spirits solely devoted to the "public good."
FULL ARTICLE
Let's Legalize Competing Currencies
By Ron PaulBefore the US House of Representatives, February 13, 2008
I rise to speak on the concept of competing currencies. Currency, or money, is what allows civilization to flourish. In the absence of money, barter is the name of the game; if the farmer needs shoes, he must trade his eggs and milk to the cobbler and hope that the cobbler needs eggs and milk. Money makes the transaction process far easier. Rather than having to search for someone with reciprocal wants, the farmer can exchange his milk and eggs for an agreed-upon medium of exchange with which he can then purchase shoes.
This medium of exchange should satisfy certain properties: it should be durable, that is to say, it does not wear out easily; it should be portable, that is, easily carried; it should be divisible into units usable for everyday transactions; it should be recognizable and uniform, so that one unit of money has the same properties as every other unit; it should be scarce, in the economic sense, so that the extant supply does not satisfy the wants of everyone demanding it; it should be stable, so that the value of its purchasing power does not fluctuate wildly; and it should be reproducible, so that enough units of money can be created to satisfy the needs of exchange.
Over millennia of human history, gold and silver have been the two metals that have most often satisfied these conditions, survived the market process, and gained the trust of billions of people. Gold and silver are difficult to counterfeit, a property which ensures they will always be accepted in commerce. It is precisely for this reason that gold and silver are anathema to governments. A supply of gold and silver that is limited in supply by nature cannot be inflated, and thus serves as a check on the growth of government. Without the ability to inflate the currency, governments find themselves constrained in their actions, unable to carry on wars of aggression or to appease their overtaxed citizens with bread and circuses.
Read the rest
The Frightful Face of Stimulus
Among businesspeople, bankers, and investors, there is a growing fear that the economy is headed towards recession or already in one. But that alone is not the source of worry. After all, an economy if left alone to function in freedom can recover. The real problem has to do with the political response. There is every indication that no matter who comes to be in charge in November, we face a future of massive spending, inflating, and regulating.
And here is the real danger. One only needs to look at such preposterous measures as the "stimulus package" that congress passed to much fanfare. Dumping money into consumers' hands, drawn from wherever they can get it, is the only means these guys can dream up to shore up prosperity. That only proves that they don't know what brings about prosperity in the first place, which is not congress but free enterprise.
Economist Robert Higgs compares a "stimulus package" to getting water out of the deep end of the swimming pool and dumping in the shallow end – all with the expectation that the water level will rise. As he emphasizes, economists should never tire of asking where the money for stimulus is going to come from. Mankind has yet to invent a machine to create it out of nothing: it's either taxing, inflating, or going into debt that has to be paid later (and crowds out capital creation now). There is no other way.
Read the rest
FX Insights Trade Team Update 14/02/2008
By FX Insights Moderator
A few days ago in our update (2/12) we covered some of the signs the market was showing us and how the signs were beginning to show the market wanted to take the euro back up after making a 400 pip correction...
Based on some things I observed in the market today, I believe we've been given very good confirmation that the euro found solid support in the 4500-4480 level and could possibly attempt to move back towards the 4750 level to test further upside...
The main driving force behind today's momentum to move up and test the 4650 level was Bernanke and Trichet... but, we'll talk more about those two in a moment, first, let's talk about some of the key fundamentals today...
Early this morning we got German, French, and Eurozone GDP which came in as expected and forecasted, and this certainly took away some market fears about slowing European growth -- but remember, that data is somewhat lagging, so we could see a different story...
U.S. Trade Balance came in way hotter than expected, and as we forecasted this USD+ number was the result of the dollar's continued weakness... Initial Claims, on the otherhand, came in below expectations showing further signs of a real recession happening... in addition, continuing claims were ugly again, and this certainly has put renewed pressure on the dollar...
Here's where the fundamentals come into play on a day like today -- Trade Balance was great economically and USD+, but the market couldn't react too strongly dollar positive because the sole reason we saw a hot number was due to the dollar weakness and not because demand for U.S. goods are increasing...
Then the Initial Claims data was just a great "reminder" to the market of how bad things are, taking away and desires to buy dollars and sell euros...
But the real story of the day is what Bernanke and Trichet had to say...
Bernanke -- I can sum up his speech in a few lines... Bernanke basically told the markets that the economy sucks, it's getting suckier, there's no hope it will get un-sucky in the near term, and I'm probably going to cut interest rates by at least 25bps in March to keep Wall St., banks, and Jim Cramer from crying like babies...
Trichet -- I can sum up his speech in a few lines as well... Trichet told the markets I'm hellbent on maintaining price stability, I'm worried about wage-induced inflation, I'm worried about consumer inflation, I'm not budging on interest rates, and I'm not worried about growth, so shut up and stop asking me...
Bernanke: over-the-top dovish
Trichet: over-the-top hawkish
Equals: EUR/USD going to 4650 today
For now, the central bankers have set the table... and now it's the market's turn to respond... Bernanke gave the market zero reasons to buy the dollar while Trichet gave the market every reason to keep buying the euro -- at least for now... he's going to give the market some reasons to sell euros, but that is still yet to come...
The other confirmation we need to consider is the fact we're now firmly entrenched above the key 4550 level... if you remember from the last half dozen or so updates we said in order to re-open the door to move back up, the euro would have to sustain a break above the 4550 level and I think this has finally been confirmed today, based on price action...
As you well know, the market has been trading in a rather confusing and odd range after we shorted the euro down to the 4400 level... we've since moved up 200 pips, but it's been a bit of a struggle to do so and quite "strang" how we've gotten back to the 4650 level...
We'll talk more about trading in a moment, but lets look at tomorrow's fundamentals:
There's quite a bit, but the biggest will be the Empire Index, Import Price Index, Net TIC Flows, and Michigan Sentiment... I really don't see too many USD positives coming from tomorrow's data... I don't expect any real upside surprises...
If my suspicions about what I saw in the market today, I suspect we should see the EUR/USD push for higher gains tomorrow... and as this relates to trading, I will likely have to buy the dips and not risk a short and not risk getting caught on the wrong side of the market...
The price action is still rather "methodic" and we're still trading in fairly tight ranges, so the longer we do this, the higher the probability grows we need to see a bigger move soon...
The euro's just been plodding along after forming support at 4480... the market will not trade within this slow, tight range for too much longer... pattern's are showing that it's getting close to move again...
And it's for those reasons that I will remain very tight and cautious with my trades, taking 20 to 30 pips per trade, then getting out and not keeping my accounts exposed to risk...
I do not like the way the market has been behaving, I don't like knowing the market is confused and unsure about what it wants to do... I don't like trading in a market that is hesitating to drive the euro long or is hesitating to push the euro short...
When the market is trading with this type of mentality and clearly displays these kinds of psychological traits, it greatly enhances how exposed to risk we as traders are, and for this reason, I'm playing it tight, depending on price patterns, not overleveraging my accounts, and I'm certainly not going to try and catch a big move, even though I'm certain one is coming...
Anyway...
We did have another successful live trade that was opened and closed this morning for some quick and easy pips:
Click on Image
Again, please practice very strict risk and money management as we head into tomorrow's trade day...
Also, for yen traders, don't forget the BOJ issues their interest rate policy and statement... you'll want to pay attention for this... with the yen's rapid appreciation the past few weeks, the BOJ could certainly say some things to manipulate prices... just an FYI...
See ya in the chat!
-FX Insights
Also, for yen traders, don't forget the BOJ issues their interest rate policy and statement... you'll want to pay attention for this... with the yen's rapid appreciation the past few weeks, the BOJ could certainly say some things to manipulate prices... just an FYI...
See ya in the chat!
-FX Insights
Thursday, February 14, 2008
Whore of the World
No institution in modern times is as vile, insidious, corrupt, evil and disgusting as a Central Bank.
It is a whore that has stradled the globe, copulating and spreading its version of syphilis, namely inflation, in an orgy of debt and cheap credit.
The biggest whore of them all, is the Federal Reserve.
Reuter reports that a Depression risk might force U.S. to buy assets. Really? How will this work?
What is so bad about the Fed and U.S. govenment buying a broad range of assets, including stock? Effectively, if the Fed buys an asset, it means that the asset is monetized, or turned into cash for the seller. The money paid by the Fed doesn't exist.
During a normal transaction, a buyer and seller exchanges money for goods. The money used actually exists. It comes from the existing money supply (assuming the transaction doesn't involve credit).
The money offered by The Fed and/or government to conclude the transaction is money added to the current money supply, also known as inflation.
What is so bad about deflation. It corrects the wrong created by inflation. It washes out the excesses and brings the market back to equalibrium.
Wrong. The perception that a more "pro-active Central Bank and Government" will avert a repeatof is flawed.
Continued interferance by The Fed and government only postpones and further inflates the inevitable correction.
The Reuters article is based on a worst case scenario and might not even materialise. However, if you catch a wiff of The Fed resorting to these type of tactics, be prepared for a monetary meltdown.
It is a whore that has stradled the globe, copulating and spreading its version of syphilis, namely inflation, in an orgy of debt and cheap credit.
The biggest whore of them all, is the Federal Reserve.
Reuter reports that a Depression risk might force U.S. to buy assets. Really? How will this work?
"Fear that a hobbled banking sector may set off another Great Depression could force the U.S. government and Federal Reserve to take the unprecedented step of buying a broad range of assets, including stocks, according to one of the most bearish market analysts."
What is so bad about the Fed and U.S. govenment buying a broad range of assets, including stock? Effectively, if the Fed buys an asset, it means that the asset is monetized, or turned into cash for the seller. The money paid by the Fed doesn't exist.
During a normal transaction, a buyer and seller exchanges money for goods. The money used actually exists. It comes from the existing money supply (assuming the transaction doesn't involve credit).
The money offered by The Fed and/or government to conclude the transaction is money added to the current money supply, also known as inflation.
That extreme scenario, which would aim to stave off deflation and stabilize the economy, is evolving as the base case for Bernard Connolly, global strategist at Banque AIG in London.
In the late 1980s and early 1990's Connolly worked for the European Commission analyzing the European monetary system in the run up to the introduction of the euro currency.
"Avoiding a depression is, unfortunately, going to have to involve either a large, quasi-permanent increase in the budget deficit -- preferably tax cuts -- or restoring overvaluation of equity prices," Connolly said on Monday.
"If conventional monetary policy is not enough to produce that result, the government may have to buy equities, financed by the Fed," Connolly said.
What is so bad about deflation. It corrects the wrong created by inflation. It washes out the excesses and brings the market back to equalibrium.
"While Connolly already sees some parallels with the 1930s, he expects that a more pro-active central bank and government will probably help avert a repeat of that scenario today.
The build up of a credit bubble in recent years was similar to the late 1920s run-up to the Great Depression, he said."
Wrong. The perception that a more "pro-active Central Bank and Government" will avert a repeatof is flawed.
Continued interferance by The Fed and government only postpones and further inflates the inevitable correction.
The Reuters article is based on a worst case scenario and might not even materialise. However, if you catch a wiff of The Fed resorting to these type of tactics, be prepared for a monetary meltdown.
How to Socialise Risk
What does it mean when a government "socializes" something? The answer is quite simplistic.
When a government socialiszes something, it means that it is incurring a cost to do something, and that cost is transferred to the taxpayer. Northern Rock in the U.K. is an excellent example and illustrates The Economic Incompetence of Socialism.
The Wall Street Journal reports on the attempts by banks to get government to "socialize" some of the risk THEY took on:
Nice business to be in, this banking business. If going to school was anything like banking, nobody would fail, no matter how dumb you are.
When a government socialiszes something, it means that it is incurring a cost to do something, and that cost is transferred to the taxpayer. Northern Rock in the U.K. is an excellent example and illustrates The Economic Incompetence of Socialism.
The Wall Street Journal reports on the attempts by banks to get government to "socialize" some of the risk THEY took on:
"The banking industry, struggling to contain the fallout from the mortgage debacle, is urgently shopping proposals to Congress and the Bush administration that could shift some of the risk for troubled loans to the federal government."
Nice business to be in, this banking business. If going to school was anything like banking, nobody would fail, no matter how dumb you are.
The Fed's Open Checkbook Policy
By Bill Bonner
Read the rest
"Faced with what appeared to be a '70s style slump, Bernanke rushed off in the opposite direction - offering lower interest rates and more cash. He hopes to avoid a recession and - who knows - this morning's news suggests that he may have done the trick."
Read the rest
Dow Jones Musical Chairs - Part 2
I discussed the chopping and changes made on the Dow in Dow Jones Musical Chairs
Mark Hulbert at Marketwatch touches on the same issue: What happens to Stocks added and deleted form the Dow?
Therefore, to follow the Dow's moves is not a very good way to track the performance of the US stock market.
I suggest you rather monitor the Willshire 5000 index, which represents the broadest index for the U.S. equity market. This should give you a better indication of where the market is heading.
Mark Hulbert at Marketwatch touches on the same issue: What happens to Stocks added and deleted form the Dow?
According to Norman Fosback, editor of Fosback's Fund Forecaster, the Dow would today be more than twice its quoted level had IBM not been removed in 1939.
Are these examples typical of all changes made over the past 110 years? I don't know, since I have not gone back and calculated the returns of all stocks that were added or deleted to the Dow subsequent to its creation in 1896. But I wouldn't be surprised if the average deleted stock has outperformed the average addition.
That's because companies that are added often are coming off a period of dynamic growth. A company that is substantially out of favor typically does not get added. This skews the Dow towards the large-cap growth sector of the market, which historically has underperformed smaller stocks and issues that are closer to the value end of the value-growth spectrum.
Therefore, to follow the Dow's moves is not a very good way to track the performance of the US stock market.
I suggest you rather monitor the Willshire 5000 index, which represents the broadest index for the U.S. equity market. This should give you a better indication of where the market is heading.
January US Retail Sales are Down
In nominal terms, Retail Sales might be up 0.3%, if you can trust those figures.
However, the picture changes if you deduct CPI. If you use the US Government CPI of 4.1%, real sales are down to -3.8%.
If you use the CPI value of Shadow Stats, which estimates CPI at around 7.5%, then Retail Sales are down -7.2%! That makes more sense. I can not see how Retail Sales can grow when business is scaling back. Shedding more light on this, Mike Shedlock asks the question, Does The Shopping Center Economic Model Work?
The hype reflected on the stock markets over statistics like this, leaves me cold. Is this a sucker trap being used by big players to offload shares onto the next fool ?
I just can not see any valid reason for equities to go up in the current local and global economic environment.
However, the picture changes if you deduct CPI. If you use the US Government CPI of 4.1%, real sales are down to -3.8%.
If you use the CPI value of Shadow Stats, which estimates CPI at around 7.5%, then Retail Sales are down -7.2%! That makes more sense. I can not see how Retail Sales can grow when business is scaling back. Shedding more light on this, Mike Shedlock asks the question, Does The Shopping Center Economic Model Work?
The hype reflected on the stock markets over statistics like this, leaves me cold. Is this a sucker trap being used by big players to offload shares onto the next fool ?
I just can not see any valid reason for equities to go up in the current local and global economic environment.
FX Insights Trade Team Update 13/02/2008
By FX Insights Moderator,Yet again we have another tame day in the market... but, we have some things to discuss and consider...
First, lets talk about today's retail data -- to my surprise and the market's surprise, the data was a big upside surprise... we did see the euro back-off initially, but I think we saw limited downside as the market was probably thinking the same thing I was: downward revision coming next month...
I don't believe those numbers at all, but hey, I have to play the hand I'm dealt...
As far as Eurozone industrial data goes, as we forecasted, it disappointed to the downside, coming in at -0.2% vs. an expected 0.5%. Once again we have more proof and evidence that growth is slowing in the Eurozone and this will put pressure on the ECB to cut rates at least once this year... stay tuned as this story continues to play out in the weeks to come...
Fundamentally, we have a monster day tomorrow. We start with key German, French, and Eurozone GDP, and I do mean this is key as GDP is a tremendous measure of growth... I'm not convinced we'll see any mega downside disappointments as this data is somewhat lagging as it relates to the real-time growth situation, but I'm certainly not going to be surprised if the data comes in softer than expected as growth is certainly slowing in Europe...
Then we have U.S. Trade Balance, Initial Claims, Bernanke, followed by Trichet...
With the USD remaining terribly weak, I would suspect a decent Trade Balance, the key for the USD is for the Trade Balance to come in at or lower than expected... a softer number would keep additional pressure on the dollar vs. the euro...
As far as Bernanke and Trichet goes, I have no clue what they will say... either one could make things sound really good or really bad, so it's anyone's guess... lately, Bernanke has remained dovish on economic conditions and dovish on interest rates... Trichet has started growing more dovish on growth but remains hawkish on rates... so, prepare for anything!
EUR/USD:
As we spoke about yesterday, the euro is trading within a somewhat confusing range... it's still making higher lows, but again, we bounced hard off of 4600 and came down...
We flirted around the 4550 key level, eventually to move up and stay over during the duration of the NY session, but as I type this, the euro's moved back into the 4560's...
I have to assume the market is waiting for tomorrow's big data... but the longer we stay in this tight and weird range, the higher the probability grows that we need to make a bigger move soon... maybe the market will wait for tomorrow of Friday to do it...
I'm trading the range and playing things extremely tight... I only took two trades today, which is about the least I've taken in a single trade day all year, and I will certainly not keep my accounts exposed to any risk heading into tomorrow's big fundamental day, I suggest you do the same...
Price Action:
Staying on the recent topic of price action and using EUR/USD 30-minute price openings, I'd like to give you another perfect price pattern that played out right before our eyes this morning... we were discussing it in the chat and I know quite a few traders took a trade based on this price pattern and took some easy profits from the market...
Here's what we observed:
At the 10:00 a.m. price opening, we saw the euro make a bottom in the 4530's and then move up to the 4580's... leading us to the bottom of the range was a very consistent consecutive pattern of lower half hour price openings, and it played out beautifully to show us what the support was and where to get in on a good euro long that would pay at least 20 pips... this pattern, of course, paid out much more than 20 pips...
6:00 a.m. -- 4592 (high opening of range)
6:30 a.m. -- 4587 (1st lower opening)
7:30 a.m. -- 4584 (2nd lower opening)
8:00 a.m. -- 4582 (3rd lower opening)
8:30 a.m. -- 4581 (4th lower opening)
9:00 a.m. -- 4574 (5th lower opening)
9:30 a.m. -- 4544 (6th lower opening)
10:00 a.m. -- 4538 (7th lower opening/euro reaches bottom)
So, holding true to typical EUR/USD price action patterns, we have 7 straight lower price openings, we hit a bottom, and then we move up about 50 or so pips to the top of the day's range...
Honestly, it can't get much easier than this... I know a lot of traders tell me they still have no understanding or concept of using this price action pattern technique, but it's as simple as writing down the opening price and counting to 7... it's just that easy... if I could break it down and make it easier I would, but if you can write numbers and you can count to 7, you should be able to use this powerful indicator...
Does the the euro always follow this same exact pattern? Of course not, there is no such thing as always in the FX market... but we've seen this same exact pattern play out thousands and thousands of times, so the probabilities are there for sure...
Yesterday, Yeno called a live trade in the chat to short the euro at 4600 and today the trade was closed for a nice 50 pip profit:
Click on ImageFinally, I have two new posts about fulltime currency trading that you'll probably want to take a look at...
Being a fulltime trader PART I
Being a fulltime trader PART II
That's all for now, see ya in the chat
-FX Insights
Becoming a Full Time Forex Trader - Part 1
By FX Insights Moderator,
There’s a lot of things in this market that I’m not an expert on, but I do trade professionally fulltime, so based on what I know and based on my own personal experiences of trading this market 24/6, I’d like to offer a few thoughts for consideration.
Although I’ve only been trading since October of 2006, I put in about 80 hours a week watching the market, tracking the global markets, researching the market fundamentals, and trading the EUR/USD…
I have to be honest and say this – I would never recommend or push someone to trade fulltime, especially if you have a young family or you’re a homebody… this life of fulltime trading is not conducive to family life… for me, I love to go out and socialize, but I’ve had to let that go to a great degree in order to pursue my goals as a currency trader in addition to the demands of maintaining this FX community…
That being said, I would never discourage anyone from trading fulltime… if you have your heart and passions set on trading fulltime, fantastic, I support you 100% and I can promise that the FXI community will do everything in our power to help you succeed.
First, I think there’s a few questions you need to ask yourself and have solid answers for:
There are probably a few more questions you should ask yourself, but I think those are the important issues to work out in your heart and mind… if you’re at peace with the decision to go fulltime, your next job is to put together a game plan for how you’re going to get started…
Do you have to quit a job? Do you have to reduce your living expenses? Do you have to payoff debt to get that off your back? You get the idea… you have to mentally and physically prepare your body for the new life you’re about to lead…
If you’re loaded down with debt, or you’re having trouble making ends meet, or you have to take a home equity loan to fund an account large enough to trade fulltime, you better think twice!
OK, now that we have all the touchy-feely stuff out of the way, lets get practical…
Risk and money management:
You might be getting tired of hearing us talk about the importance of risk and money management, but that is the #1 key to surviving and profiting in Forex. Risk management is the foundation of trading and it’s the pinnacle of trading – and everything in between!
Honestly, you could make the stupidest trades ever, you could short range bottoms and long at range tops, and as long as you’re using proper risk management techniques, you’ll likely survive the market until it turns around and goes the other way and your negative entries turn into positive ones…
Establish strict risk management rules for your trading… some of my risk management rules are:
Those are some of my personal risk and money management rules. You have to establish your own. Write them down and commit to following them in all market conditions no matter what – you must stay consistent and organized in all that you do!
There are several posts in our forums about risk and money management, so I won’t beat this horse to death, because I know you’re smart enough to grasp the concepts and importance of risk management – the key is applying this to your trading and being consistent.
Establishing your personal trading style:
Trading is not an exact science… I cannot tell you the “right” or “wrong” way to trade. But you have to establish a style and system of trading that fits your needs. The only way you’re going to establish your own personal system for trading is by experience.
Trading styles largely can be established and defined by your personality… for example, my personality is more on the adventure, explorer, risk-taker, act first and think later type level… and that’s put me in trouble before as I would over leverage and over trade my accounts… so, I can’t let that aspect of my personality interfere with my trading style and my management of risk.
But, the other sides to my personality of attention to detail, hard work, open to knew ideas and knowledge, etc. have worked to benefiting my trading style.
The other part of establishing your trading style has to do with what “indicators” you use to decide when to enter and when to exit a trade. I use the term indicator simply for lack of a better word, but the point is there has to be something you see in the market to cause you to get into a trade and then to get out of trade, whether it is for profit or loss…
Most of you know this already, but for my personal trading style, I rely on these indicators:
Those are most of the biggies. I must say that I wasn’t able to fully develop my own trading style until I completely understood how this market works and why the market moves the way it does. And that is one main area that 95% or more of all retail traders never grasp.
Sadly, most retail traders go the way of using tech indicators and nobody ever teaches them what really causes market movements and nobody teaches them the patterns of the market. That’s why we spend so much time trying to educate traders on the reality of this market and not the fallacy of using techs.
As far as my trading style goes, I’d have to say the most important thing is price action and tracking the EUR/USD 30-minute price openings. It took me 6 months to learn it, but when the light bulb finally went on, it’s changed my trading for the better and I know this technique will never fail me.
I believe price action is the best indicator for trading the EUR/USD – it’s what works for me, and it’s what makes me the most money and gives me the most success in the market. The key for you is to establish what works best for you. My benchmark for successful trading is something that gives me 9 wins out of 10.
If using techs is your key to success, wonderful, more power to you. I can’t trust something that’s lagging, but again, if you win the most using them, beautiful. I prefer predictive indicators which is why I’m also very fundamental and why I try to think like a bank trader and not a retail trader trading off of Fib lines or MACD’s or EMA’s, which have nothing to do with anything in this market.
Moving on…
Reaching expert status:
98% of my trades, if not more are EUR/USD. I have put all of my energy, my heart, and my soul into learning every single thing I can about the EUR/USD, about its fundamentals, about its patterns, about its price action, etc. I have learned all of the key fundamental reports and how they could affect the market. I’ve learned to read the body language of Ben Bernanke and Jean-Claude Trichet… I’ve learned how the banks trade the EUR/USD, I’ve spent thousands of hours starring at the EUR/USD prices flash on my trade station…
This is just my opinion, but I believe if you want to trade fulltime, you have to focus on one pair and become an expert on it. The EUR/USD offers me enough trading opportunities to make a living from. The more I’ve focused my attention on just trading that pair, the more success I’ve had in the market. I can tell you just about everything about the EUR/USD’s fundamentals, about how and why it moves, etc.
I could write a novel on it if somebody put a gun to my head and made me. I don’t want to sound arrogant, but I want to drive the point that I feel the key is becoming an expert on just one pair and sticking to it.
I probably know enough about the cable, yen, and Swiss to make money on them, and I used to trade them in addition to the euro, but I don’t do that anymore and I’m a much more profitable trader for it. I save my margin for trading the euro.
Even though I feel like I’m an expert on the EUR/USD doesn’t mean I should try to be an expert on another pair, I don’t even want to, in fact, because I think it would take away from my success trading the euro. Reason being, the market is constantly evolving and changing… market conditions are constantly changing, fundamentals are constantly changing, and market sentiment is constantly changing… so, it’s my job to stay one step ahead of the market and one step ahead of the evolution constantly happening with the EUR/USD and with the market… I haven’t learned it all, and my mind is constantly open to learning new things!
--END OF PART I--
There’s a lot of things in this market that I’m not an expert on, but I do trade professionally fulltime, so based on what I know and based on my own personal experiences of trading this market 24/6, I’d like to offer a few thoughts for consideration.
Although I’ve only been trading since October of 2006, I put in about 80 hours a week watching the market, tracking the global markets, researching the market fundamentals, and trading the EUR/USD…
I have to be honest and say this – I would never recommend or push someone to trade fulltime, especially if you have a young family or you’re a homebody… this life of fulltime trading is not conducive to family life… for me, I love to go out and socialize, but I’ve had to let that go to a great degree in order to pursue my goals as a currency trader in addition to the demands of maintaining this FX community…
That being said, I would never discourage anyone from trading fulltime… if you have your heart and passions set on trading fulltime, fantastic, I support you 100% and I can promise that the FXI community will do everything in our power to help you succeed.
First, I think there’s a few questions you need to ask yourself and have solid answers for:
1. Why do I want to trade fulltime?
2. Can I emotionally handle trading in the most volatile market known to mankind?
3. Am I prepared for this pursuit to drastically change my life for better and for worse?
4. Are my family and loved ones supporting me in my endeavors?
There are probably a few more questions you should ask yourself, but I think those are the important issues to work out in your heart and mind… if you’re at peace with the decision to go fulltime, your next job is to put together a game plan for how you’re going to get started…
Do you have to quit a job? Do you have to reduce your living expenses? Do you have to payoff debt to get that off your back? You get the idea… you have to mentally and physically prepare your body for the new life you’re about to lead…
If you’re loaded down with debt, or you’re having trouble making ends meet, or you have to take a home equity loan to fund an account large enough to trade fulltime, you better think twice!
OK, now that we have all the touchy-feely stuff out of the way, lets get practical…
Risk and money management:
You might be getting tired of hearing us talk about the importance of risk and money management, but that is the #1 key to surviving and profiting in Forex. Risk management is the foundation of trading and it’s the pinnacle of trading – and everything in between!
Honestly, you could make the stupidest trades ever, you could short range bottoms and long at range tops, and as long as you’re using proper risk management techniques, you’ll likely survive the market until it turns around and goes the other way and your negative entries turn into positive ones…
Establish strict risk management rules for your trading… some of my risk management rules are:
1. Only making between 1% and 2% entries per trade
2. Keeping my usable margin above 90% at all times and in all market conditions
3. Typically not stacking my entries closer than 20 pips apart (unless market conditions dictate otherwise)
4. Not taking new entries when the market opens on Sunday
5. Not adding new entries in the afternoon on Fridays
Those are some of my personal risk and money management rules. You have to establish your own. Write them down and commit to following them in all market conditions no matter what – you must stay consistent and organized in all that you do!
There are several posts in our forums about risk and money management, so I won’t beat this horse to death, because I know you’re smart enough to grasp the concepts and importance of risk management – the key is applying this to your trading and being consistent.
Establishing your personal trading style:
Trading is not an exact science… I cannot tell you the “right” or “wrong” way to trade. But you have to establish a style and system of trading that fits your needs. The only way you’re going to establish your own personal system for trading is by experience.
Trading styles largely can be established and defined by your personality… for example, my personality is more on the adventure, explorer, risk-taker, act first and think later type level… and that’s put me in trouble before as I would over leverage and over trade my accounts… so, I can’t let that aspect of my personality interfere with my trading style and my management of risk.
But, the other sides to my personality of attention to detail, hard work, open to knew ideas and knowledge, etc. have worked to benefiting my trading style.
The other part of establishing your trading style has to do with what “indicators” you use to decide when to enter and when to exit a trade. I use the term indicator simply for lack of a better word, but the point is there has to be something you see in the market to cause you to get into a trade and then to get out of trade, whether it is for profit or loss…
Most of you know this already, but for my personal trading style, I rely on these indicators:
1. Overall market fundamentals/economics
2. Price action and price action patterns
3. Following market correlated variables such as gold, oil, equities, securities, and commodities
4. Watching real-time price action
5. Closely watching and following moves by central banks and central bankers
Those are most of the biggies. I must say that I wasn’t able to fully develop my own trading style until I completely understood how this market works and why the market moves the way it does. And that is one main area that 95% or more of all retail traders never grasp.
Sadly, most retail traders go the way of using tech indicators and nobody ever teaches them what really causes market movements and nobody teaches them the patterns of the market. That’s why we spend so much time trying to educate traders on the reality of this market and not the fallacy of using techs.
As far as my trading style goes, I’d have to say the most important thing is price action and tracking the EUR/USD 30-minute price openings. It took me 6 months to learn it, but when the light bulb finally went on, it’s changed my trading for the better and I know this technique will never fail me.
I believe price action is the best indicator for trading the EUR/USD – it’s what works for me, and it’s what makes me the most money and gives me the most success in the market. The key for you is to establish what works best for you. My benchmark for successful trading is something that gives me 9 wins out of 10.
If using techs is your key to success, wonderful, more power to you. I can’t trust something that’s lagging, but again, if you win the most using them, beautiful. I prefer predictive indicators which is why I’m also very fundamental and why I try to think like a bank trader and not a retail trader trading off of Fib lines or MACD’s or EMA’s, which have nothing to do with anything in this market.
Moving on…
Reaching expert status:
98% of my trades, if not more are EUR/USD. I have put all of my energy, my heart, and my soul into learning every single thing I can about the EUR/USD, about its fundamentals, about its patterns, about its price action, etc. I have learned all of the key fundamental reports and how they could affect the market. I’ve learned to read the body language of Ben Bernanke and Jean-Claude Trichet… I’ve learned how the banks trade the EUR/USD, I’ve spent thousands of hours starring at the EUR/USD prices flash on my trade station…
This is just my opinion, but I believe if you want to trade fulltime, you have to focus on one pair and become an expert on it. The EUR/USD offers me enough trading opportunities to make a living from. The more I’ve focused my attention on just trading that pair, the more success I’ve had in the market. I can tell you just about everything about the EUR/USD’s fundamentals, about how and why it moves, etc.
I could write a novel on it if somebody put a gun to my head and made me. I don’t want to sound arrogant, but I want to drive the point that I feel the key is becoming an expert on just one pair and sticking to it.
I probably know enough about the cable, yen, and Swiss to make money on them, and I used to trade them in addition to the euro, but I don’t do that anymore and I’m a much more profitable trader for it. I save my margin for trading the euro.
Even though I feel like I’m an expert on the EUR/USD doesn’t mean I should try to be an expert on another pair, I don’t even want to, in fact, because I think it would take away from my success trading the euro. Reason being, the market is constantly evolving and changing… market conditions are constantly changing, fundamentals are constantly changing, and market sentiment is constantly changing… so, it’s my job to stay one step ahead of the market and one step ahead of the evolution constantly happening with the EUR/USD and with the market… I haven’t learned it all, and my mind is constantly open to learning new things!
--END OF PART I--
Becoming a Full Time Forex Trader - Part 2
ROI:
I don’t care what anybody says, ROI (return on investment) is king in the FX market. It’s not about how many pips you can make in a day or in a month, it’s all about ROI, and how you trade your account to achieve that ROI…
In the world of investing, if you can beat the S&P/500, which is making about 15% ROI annually, you are pretty much a trading god. The key is how you arrive at your ROI, which goes back to risk management and not over leveraging your account.
Every once in awhile a retail broker will have a trading contest to see who can gain the most ROI in a month. Those contests are a joke and are a terrible way to teach risk management, because it causes traders to over leverage…
When it comes to ROI, I suggest setting a monthly goal for yourself… if you want to do 20% ROI per trade month, you need a game plan to safely get you there… you can even break this down to daily ROI goals. For me, I try do 1% ROI per day… some days I do more, some I don’t meet the goal, but I’m not going to go crazy on my accounts to hit that goal…
If you are going to trade fulltime to support your lifestyle you absolutely must know how much ROI you’re going to need to make on a weekly or monthly basis and then you have to trade your account in such a way to not only meet your ROI goal, but so you can safely withdraw funds from your account without putting any open trades in jeopardy of a margin call – not very easy to do!
You could have a balance of $50,000 but have 10 open entries that have sucked your usable margin down to $5,000, and a situation like that keeps you held hostage to the market… you’d not be able to remove funds because your usable margin will not allow… this is a critical factor when it comes to trading fulltime and trying to live off of your trades!
Not trading with your wallet:
There’s two ways to trade this market – either with your wallet or with risk capital. Trading with your wallet causes you to be emotional, take make dumb, emotional decisions, to over leverage your account, to over trade your account, and to take unnecessary risks. Trading with your wallet basically means trading with money you really can’t afford to lose – trading with rent money, trading with mortgage money, trading with food money, trading with your kid’s college money, etc.
Trading with your wallet is going to put so much stress on you that you’ll end up trading like an idiot and you’ll make idiotic decisions… it prevents you from seeing the market clearly and from making smart trade decisions.
In a way, trading fulltime for a living is like trading with your wallet, however, your account should be funded with risk capital… using risk capital keeps you in a much better psychological state of mind and it keeps your emotions from getting the best of you…
How much money should a fulltime trader have in their account? My opinion is a minimum of $50,000 to $75,000 to get started. It really depends on what kind of returns you need your account to give you to support your lifestyle. But I think any less than that will keep you held hostage to the market…
And please don’t get tripped up on account size… percentages are always the same… a 1% used margin entry is the same on a 5K account and a 50K account… percentages never change! 1% is 1%, no matter what…
If you have to take out a second mortgage on your home, or you have to get a title loan, or if you have to borrow cash from a credit card to fund a fulltime trading account, I can pretty much guarantee you’ll crap it out within 6 months and then you’ll be really screwed.
Continuing this point… I suggest you have set aside at least 6 to 9 months of living expenses before you go fulltime. In the event you can’t pull living expenses from your trading account, at least you have your bills covered for 6to 9 months while you get your account in shape to make withdraws. Don’t leave anything to chance!
Pick a broker:
Bottom-line – most retail brokers suck… they stop hunt, they manipulate prices, they play games, they take the opposite side of your trade, they don’t educate traders, etc. So you have two choices, go with a typical retail broker like FXCM, IBFX, Oanda, DBFX or go with an ECN like Hotspot or MB Trading or whatever…
There are advantages and disadvantages to a retail shop or an ECN, but you have to decide what works best for your needs and for your trading style. If you use stops and keep your trades exposed to stop hunting, you might do better with an ECN… if a feature like a user-friendly platform is more important, you might do better with a retail broker as opposed to an ECN.
Once you decide what type of brokerage you want to run your trades through, then you need to pick your broker. Trust me, some are worse than others… FXCM has the most user-friendly platform on God’s green earth, but of course they play typical retail broker games… an ECN like Hotspot is not known for stop hunting and they have lower pip spreads, but the platform is atrocious…
Talk to the brokerage, talk to their customer support, to their tech support and get a feel for how friendly and helpful they are… talk to other traders who use their services to see what kind of issues they might experience. Our community is a great place to do this…
Do you want to go with a U.S. broker or a Swiss broker? There are advantages and disadvantages to both… again, you have to weigh the pros and the cons, but I recommend you really take the time to figure out who will work best for your fulltime trading needs.
Suffering pain:
No trader wants to lose money, no trader wants to get margin called, but I honestly think every trader needs to feel the pain and wrath of this market… we trade in a beast of a market and no trader will ever respect this market until it beats them unmercifully… it’s pretty easy to suffer at the hands of this market, so if you’ve already been down that road, don’t make those same mistakes when you go live to fulltime trading…
Trading the spot FX market is like guerilla warfare… at any second you could be attacked… the whole market is against you… in order for another trader to win, you must be the one that looses, that’s how it works in this game… the market will use any and every opportunity to take your money, it shows no mercy, no remorse, and it’s unforgiving…
When I hear about these companies like 4xmadeeasy, it makes my blood boil because there’s nothing easy about Forex and there’s nothing you can do to make it easy… how dare those people even call it that? It blows my mind that they manage to sucker so many people, but it happens… I don’t know how they sleep at night knowing they’ve duped so many people, but I guess they don’t have souls…
Trading FX fulltime is one of the hardest ways to make money and requires the most time, energy, and focus… if you’re not willing to put in the work and the efforts it takes to trade fulltime, don’t do it… stick with your day job and do this as a hobby…
Resources:
Yes I might be biased, but I truly believe the FXI community provides everything a trader would ever need to be successful in this market… I think the principles we teach are solid and proven and tested to work… our community is helpful and kind and giving and serious about seeing traders succeed…
We are 100% committed to only providing accurate and helpful information and not filling your head with crap that doesn’t work and that would lead you down the wrong path…
Point being – fill your trading arsenal with good resources that will help you be the best trader you can be… trading FX fulltime can be so lonely, which is one reason we started FXI in the first place… take advantages of the good resources out there to help traders…
I always get asked what books a trader should read – I don’t have much to recommend… I’ve never read a book on Forex except for Forex Revolution and I never finished the whole thing, to be honest… I’ve never read a book on how to trade, I’ve never read a book on economics, and I’ve never read a book on using indicators… I can’t help you there… there are probably some good resources, though, so ask around…
If I did have to offer a recommendation, I’d probably say to read Jesse Livermore’s stuff… he’s an old school price action trader who made millions in the equities markets in the early 1900's, but lost his millions because he broke his risk management rules… Livermore’s principles are timeless, however…
Consistency:
One thing Cisco has always drilled into our heads is staying 100% consistent in all that we do… consistency is one of the keys to being a successful fulltime trader…
Once you develop your risk management rules, your trading style, your rules for trading, etc., you must stay consistent and stay consistent with your game plan…
I could go on and on about consistency, but this point is pretty cut and dry and I’m sure you understand…
Conclusion:
Those are my thoughts on trading fulltime… that’s who I see it… I’m sure there’s more that could said, but I think this covers the basics… there’s a lot here so read it a few times if you must… after reading this feel free to find me in the chat if you want to discuss any of these points further…
I hope this helps, and like I said, we’re here to support you 100% in your pursuits of being a successful FX trader…
--END OF PART II--
I don’t care what anybody says, ROI (return on investment) is king in the FX market. It’s not about how many pips you can make in a day or in a month, it’s all about ROI, and how you trade your account to achieve that ROI…
In the world of investing, if you can beat the S&P/500, which is making about 15% ROI annually, you are pretty much a trading god. The key is how you arrive at your ROI, which goes back to risk management and not over leveraging your account.
Every once in awhile a retail broker will have a trading contest to see who can gain the most ROI in a month. Those contests are a joke and are a terrible way to teach risk management, because it causes traders to over leverage…
When it comes to ROI, I suggest setting a monthly goal for yourself… if you want to do 20% ROI per trade month, you need a game plan to safely get you there… you can even break this down to daily ROI goals. For me, I try do 1% ROI per day… some days I do more, some I don’t meet the goal, but I’m not going to go crazy on my accounts to hit that goal…
If you are going to trade fulltime to support your lifestyle you absolutely must know how much ROI you’re going to need to make on a weekly or monthly basis and then you have to trade your account in such a way to not only meet your ROI goal, but so you can safely withdraw funds from your account without putting any open trades in jeopardy of a margin call – not very easy to do!
You could have a balance of $50,000 but have 10 open entries that have sucked your usable margin down to $5,000, and a situation like that keeps you held hostage to the market… you’d not be able to remove funds because your usable margin will not allow… this is a critical factor when it comes to trading fulltime and trying to live off of your trades!
Not trading with your wallet:
There’s two ways to trade this market – either with your wallet or with risk capital. Trading with your wallet causes you to be emotional, take make dumb, emotional decisions, to over leverage your account, to over trade your account, and to take unnecessary risks. Trading with your wallet basically means trading with money you really can’t afford to lose – trading with rent money, trading with mortgage money, trading with food money, trading with your kid’s college money, etc.
Trading with your wallet is going to put so much stress on you that you’ll end up trading like an idiot and you’ll make idiotic decisions… it prevents you from seeing the market clearly and from making smart trade decisions.
In a way, trading fulltime for a living is like trading with your wallet, however, your account should be funded with risk capital… using risk capital keeps you in a much better psychological state of mind and it keeps your emotions from getting the best of you…
How much money should a fulltime trader have in their account? My opinion is a minimum of $50,000 to $75,000 to get started. It really depends on what kind of returns you need your account to give you to support your lifestyle. But I think any less than that will keep you held hostage to the market…
And please don’t get tripped up on account size… percentages are always the same… a 1% used margin entry is the same on a 5K account and a 50K account… percentages never change! 1% is 1%, no matter what…
If you have to take out a second mortgage on your home, or you have to get a title loan, or if you have to borrow cash from a credit card to fund a fulltime trading account, I can pretty much guarantee you’ll crap it out within 6 months and then you’ll be really screwed.
Continuing this point… I suggest you have set aside at least 6 to 9 months of living expenses before you go fulltime. In the event you can’t pull living expenses from your trading account, at least you have your bills covered for 6to 9 months while you get your account in shape to make withdraws. Don’t leave anything to chance!
Pick a broker:
Bottom-line – most retail brokers suck… they stop hunt, they manipulate prices, they play games, they take the opposite side of your trade, they don’t educate traders, etc. So you have two choices, go with a typical retail broker like FXCM, IBFX, Oanda, DBFX or go with an ECN like Hotspot or MB Trading or whatever…
There are advantages and disadvantages to a retail shop or an ECN, but you have to decide what works best for your needs and for your trading style. If you use stops and keep your trades exposed to stop hunting, you might do better with an ECN… if a feature like a user-friendly platform is more important, you might do better with a retail broker as opposed to an ECN.
Once you decide what type of brokerage you want to run your trades through, then you need to pick your broker. Trust me, some are worse than others… FXCM has the most user-friendly platform on God’s green earth, but of course they play typical retail broker games… an ECN like Hotspot is not known for stop hunting and they have lower pip spreads, but the platform is atrocious…
Talk to the brokerage, talk to their customer support, to their tech support and get a feel for how friendly and helpful they are… talk to other traders who use their services to see what kind of issues they might experience. Our community is a great place to do this…
Do you want to go with a U.S. broker or a Swiss broker? There are advantages and disadvantages to both… again, you have to weigh the pros and the cons, but I recommend you really take the time to figure out who will work best for your fulltime trading needs.
Suffering pain:
No trader wants to lose money, no trader wants to get margin called, but I honestly think every trader needs to feel the pain and wrath of this market… we trade in a beast of a market and no trader will ever respect this market until it beats them unmercifully… it’s pretty easy to suffer at the hands of this market, so if you’ve already been down that road, don’t make those same mistakes when you go live to fulltime trading…
Trading the spot FX market is like guerilla warfare… at any second you could be attacked… the whole market is against you… in order for another trader to win, you must be the one that looses, that’s how it works in this game… the market will use any and every opportunity to take your money, it shows no mercy, no remorse, and it’s unforgiving…
When I hear about these companies like 4xmadeeasy, it makes my blood boil because there’s nothing easy about Forex and there’s nothing you can do to make it easy… how dare those people even call it that? It blows my mind that they manage to sucker so many people, but it happens… I don’t know how they sleep at night knowing they’ve duped so many people, but I guess they don’t have souls…
Trading FX fulltime is one of the hardest ways to make money and requires the most time, energy, and focus… if you’re not willing to put in the work and the efforts it takes to trade fulltime, don’t do it… stick with your day job and do this as a hobby…
Resources:
Yes I might be biased, but I truly believe the FXI community provides everything a trader would ever need to be successful in this market… I think the principles we teach are solid and proven and tested to work… our community is helpful and kind and giving and serious about seeing traders succeed…
We are 100% committed to only providing accurate and helpful information and not filling your head with crap that doesn’t work and that would lead you down the wrong path…
Point being – fill your trading arsenal with good resources that will help you be the best trader you can be… trading FX fulltime can be so lonely, which is one reason we started FXI in the first place… take advantages of the good resources out there to help traders…
I always get asked what books a trader should read – I don’t have much to recommend… I’ve never read a book on Forex except for Forex Revolution and I never finished the whole thing, to be honest… I’ve never read a book on how to trade, I’ve never read a book on economics, and I’ve never read a book on using indicators… I can’t help you there… there are probably some good resources, though, so ask around…
If I did have to offer a recommendation, I’d probably say to read Jesse Livermore’s stuff… he’s an old school price action trader who made millions in the equities markets in the early 1900's, but lost his millions because he broke his risk management rules… Livermore’s principles are timeless, however…
Consistency:
One thing Cisco has always drilled into our heads is staying 100% consistent in all that we do… consistency is one of the keys to being a successful fulltime trader…
Once you develop your risk management rules, your trading style, your rules for trading, etc., you must stay consistent and stay consistent with your game plan…
I could go on and on about consistency, but this point is pretty cut and dry and I’m sure you understand…
Conclusion:
Those are my thoughts on trading fulltime… that’s who I see it… I’m sure there’s more that could said, but I think this covers the basics… there’s a lot here so read it a few times if you must… after reading this feel free to find me in the chat if you want to discuss any of these points further…
I hope this helps, and like I said, we’re here to support you 100% in your pursuits of being a successful FX trader…
--END OF PART II--
Wednesday, February 13, 2008
For Interest Sake !
Chuck Jaffer at Marketwatch reckons that Certificates of deposit don't have much horsepower for today's savers. He is right. Chuck goes on to say the following:
Before I go any further, I think it is appropriate to first establish what inflation is. The popular belief these days is that inflation is the "Rise in Prices". But, something has to cause prices to rise. In his book "What You Should Know About Inflation", Henry Hazlitt sums up Inflation as follows:
No subject is so much discussed today—or so little understood—as inflation. The politicians in Washington talk of it as if it were some horrible visitation from without, over which they had no control—like a flood, a foreign invasion,or a plague. It is something they are always promising to "fight"—if Congress or the people will only give them the "weapons" or "a strong law" to do the job.
Yet the plain truth is that our political leaders have brought on inflation by their own money and fiscal policies. They are promising to fight with their right hand the conditions brought on with their left.
Inflation, always and everywhere, is primarily caused by an increase in the supply of money and credit. In fact, inflation is the increase in the supply of money and credit.
If you turn to the American College Dictionary, for example, you will find the first definition of inflation given as follows:
In recent years, however, the term has come to be used in a radically different sense. This is recognized in the second definition given by the American College Dictionary:
Now obviously a rise of prices caused by an expansion of the money supply is not the same thing as the expansion of the money supply itself. A cause or condition is clearly not identical with one of its consequences. The use of the word "inflation" with these two quite different meanings leads to endless confusion.
The word "inflation" originally applied solely to the quantity of money. It meant that the volume of money was inflated, blown up, overextended. It is not mere pedantry to insist that the word should be used only in its original meaning. To use it to mean "a rise in prices" is to deflect attention away from the real cause of inflation and the real cure for it.
Let us see what happens under inflation, and why it happens.
When the supply of money is increased, people have more money to offer for goods. If the supply of goods does not increase—or does not increase as much as the supply of money—then the prices of goods will go up. Each individual dollar becomes less valuable because there are more dollars.
Therefore more of them will be offered against, say, a pair of shoes or a hundred bushels of wheat than before. A "price" is an exchange ratio between a dollar and a unit of goods. When people have more dollars, they value each dollar less. Goods then rise in price, not because goods are scarcer than before, but because dollars are more abundant.
In the old days, governments inflated by clipping and debasing the coinage. Then they found they could inflate cheaper and faster simply by grinding out paper money on a printing press. This is what happened with the French assignats in 1789, and with our own currency during the Revolutionary War. Today the method is a little more indirect.
Our government sells its bonds or other IOU's to the banks. In payment, the banks create "deposits" on their books against which the government can draw. A bank in turn may sell its government IOU's to the Federal Reserve Bank, which pays for them either by creating a deposit credit or having more Federal Reserve notes printed and paying them out. This is how money is manufactured.
The greater part of the "money supply" of this country is represented not by hand-to-hand currency but by bank deposits which are drawn against by checks. Hence when most economists measure our money supply they add demand deposits (and now frequently, also, time deposits) to currency outside of banks to get the total.
The total of money and credit so measured was $63.3 billion at the end of December 1939, and $308.8 billion at the end of December 1963. This increase of 388 per cent in the supply of money is overwhelmingly the reason why wholesale prices rose 138 per cent in the same period.
This is the issue Ron Paul refers to in his speaches. If you didn't understand what he was talking about, you should understand now. This phenomenon is not exclusive to the U.S.A. Any country with a Central Bank will be exposed to this type of monetary inflation.
Furthermore, credit created by banks is another underestimated contributor to inflation. People believe that the money they borrow from a bank is the money of another depositor. That is only 10% true. The fact is that banks are ALLOWED to create money out of thin air. For every $1 deposited with a bank, they can create another $9 to lend to other people. This "legally fraudulant" practice is better known as "fractional reserve banking". It is also the reason why banks are tinkering on the brink of collapse. If you want more information, read The Economic Incompetence of Socialism.
Getting back to ol' Chuck's article, he continues to say that:
I don't know. Chuck leaves me with the impression that he is marketing CDs on behalf of the banks in order to help them build up reserves. :-)
My personal investment/savings strategy: Meet or beat the annual growth of M3
Investing with the expectation of losing money is stupid. Locking your money into an investment that can't keep pace with inflation is the same thing. With the cost of living on the rise and interest rates on the decline, that makes bank certificates of deposit that are more than a 1.5 percentage points behind inflation a dumb idea.
For certificates of deposit, savers who locked their money in before the Fed's recent cuts, are much more likely to be ahead of inflation, and clearly should ride out the length of their term deposit. For investors with new CDs, penalties for early withdrawal could make a pull-out even more costly than simply lagging the rate of inflation.
Before I go any further, I think it is appropriate to first establish what inflation is. The popular belief these days is that inflation is the "Rise in Prices". But, something has to cause prices to rise. In his book "What You Should Know About Inflation", Henry Hazlitt sums up Inflation as follows:
No subject is so much discussed today—or so little understood—as inflation. The politicians in Washington talk of it as if it were some horrible visitation from without, over which they had no control—like a flood, a foreign invasion,or a plague. It is something they are always promising to "fight"—if Congress or the people will only give them the "weapons" or "a strong law" to do the job.
Yet the plain truth is that our political leaders have brought on inflation by their own money and fiscal policies. They are promising to fight with their right hand the conditions brought on with their left.
Inflation, always and everywhere, is primarily caused by an increase in the supply of money and credit. In fact, inflation is the increase in the supply of money and credit.
If you turn to the American College Dictionary, for example, you will find the first definition of inflation given as follows:
"Undue expansion or increase of the currency of a country, esp. by the issuing of paper money not redeemable in specie."
In recent years, however, the term has come to be used in a radically different sense. This is recognized in the second definition given by the American College Dictionary:
"A substantial rise of prices caused by an undue expansion in paper money or bank credit."
Now obviously a rise of prices caused by an expansion of the money supply is not the same thing as the expansion of the money supply itself. A cause or condition is clearly not identical with one of its consequences. The use of the word "inflation" with these two quite different meanings leads to endless confusion.
The word "inflation" originally applied solely to the quantity of money. It meant that the volume of money was inflated, blown up, overextended. It is not mere pedantry to insist that the word should be used only in its original meaning. To use it to mean "a rise in prices" is to deflect attention away from the real cause of inflation and the real cure for it.
Let us see what happens under inflation, and why it happens.
When the supply of money is increased, people have more money to offer for goods. If the supply of goods does not increase—or does not increase as much as the supply of money—then the prices of goods will go up. Each individual dollar becomes less valuable because there are more dollars.
Therefore more of them will be offered against, say, a pair of shoes or a hundred bushels of wheat than before. A "price" is an exchange ratio between a dollar and a unit of goods. When people have more dollars, they value each dollar less. Goods then rise in price, not because goods are scarcer than before, but because dollars are more abundant.
In the old days, governments inflated by clipping and debasing the coinage. Then they found they could inflate cheaper and faster simply by grinding out paper money on a printing press. This is what happened with the French assignats in 1789, and with our own currency during the Revolutionary War. Today the method is a little more indirect.
Our government sells its bonds or other IOU's to the banks. In payment, the banks create "deposits" on their books against which the government can draw. A bank in turn may sell its government IOU's to the Federal Reserve Bank, which pays for them either by creating a deposit credit or having more Federal Reserve notes printed and paying them out. This is how money is manufactured.
The greater part of the "money supply" of this country is represented not by hand-to-hand currency but by bank deposits which are drawn against by checks. Hence when most economists measure our money supply they add demand deposits (and now frequently, also, time deposits) to currency outside of banks to get the total.
The total of money and credit so measured was $63.3 billion at the end of December 1939, and $308.8 billion at the end of December 1963. This increase of 388 per cent in the supply of money is overwhelmingly the reason why wholesale prices rose 138 per cent in the same period.
This is the issue Ron Paul refers to in his speaches. If you didn't understand what he was talking about, you should understand now. This phenomenon is not exclusive to the U.S.A. Any country with a Central Bank will be exposed to this type of monetary inflation.
Furthermore, credit created by banks is another underestimated contributor to inflation. People believe that the money they borrow from a bank is the money of another depositor. That is only 10% true. The fact is that banks are ALLOWED to create money out of thin air. For every $1 deposited with a bank, they can create another $9 to lend to other people. This "legally fraudulant" practice is better known as "fractional reserve banking". It is also the reason why banks are tinkering on the brink of collapse. If you want more information, read The Economic Incompetence of Socialism.
Getting back to ol' Chuck's article, he continues to say that:
Clearly, certificates of deposit are not money losers. No matter how low the payout, they are better than stuffing money in a mattress, and they provide a safe haven -- with coverage from the Federal Deposit Insurance Corp. -- for investors who are skittish about the market.
But anyone turning away from market risk could be giving a big wet kiss to purchasing-power risk -- the chance that their money grows more slowly than the rate of inflation -- and there is little doubt that the majority of people investing in CDs now fall into that category. For proof, look no further than the numbers.
I have a problem with this statement. If you deduct the 2007 CPI value of 4.1% from whatever yield you are receiving now on your CD, you have a problem. Your answer is hovering close to zero. Your problem becomes even bigger if you believe CPI to be 4.1% as the government claims it to be. Shadow Stats estimates annual M3 (broad money supply growth) at around the 15% level. That is why you can't figure how CPI can be at 4.1% when you see the price of goods around you rising at a higher rate. I say CDs are money losers.
I also believe The Fed is well aware of this. Dropping rates will eventually discourage people to save. The Fed wants you out there spending, stimulating the economy with those worthless Dollars. It is not interested in you parking your savings in some CD account.
Still don't understand the consequence of inflation? Henry Hazlitt further says:
Inflation, to sum up, is the increase in the volume of money and bank credit in relation to the volume of goods. It is harmful because:
- It depreciates the value of the monetary unit,
- Raises everybody's cost of living,
- Imposes what is in effect a tax on the poorest (without exemptions) at as high a rate as the tax on the richest,
- Wipes out the value of past savings,
- Discourages future savings,
- Redistributes wealth and income wantonly,
- Encourages and rewards speculation and gambling at the expense of thrift and work,
- Undermines confidence in the justice of a free enterprise system,
- Corrupts public and private morals and
- Encourages malinvestment by entrepreneurs.
I don't know. Chuck leaves me with the impression that he is marketing CDs on behalf of the banks in order to help them build up reserves. :-)
My personal investment/savings strategy: Meet or beat the annual growth of M3
Tuesday, February 12, 2008
IMF Gold Sales Don't Change Anything
Boris Sobolev writes the following:
Read the full article
"Many pundits have been calling for gold to correct since October. But the rally in gold has been strong, steady and without any sizable corrections. Much money is still sitting on the sidelines, waiting for a cheaper entry point. It is quite possible that this entry point is coming soon as the G7 has just agreed to allow the International Monetary Fund (IMF) to start selling a portion of its 3,200 tonne gold holdings to cover its running deficits. The details of the sale will not be known until April, but the most mentioned figure for the total tonnes up for sale is 400 or about one eighth of total IMF holdings.
It is difficult to guess gold’s reaction to the news, but it is clear that the metal’s fundamentals remain sound. Paper money is in oversupply, gold is in demand by investors and especially countries looking to diversify away from the US dollar. Undoubtedly, buyers for extra gold offered by the IMF will be easily found. IMF sales don’t change anything."
Read the full article
The War that Never Thawed
'A new phase in the arms race is unfolding' says Putin
Vladimir Putin has used one of the last major speeches of his presidency to deliver a defiant message to the West, accusing it of unleashing a new arms race that left Moscow no choice but to retaliate in kind. Less than a month before presidential elections that his hand-picked successor is almost certain to win, the speech removed any lingering doubts that Russian foreign policy might become less aggressive after Mr Putin steps down.
"It's clear that a new arms race is unfolding in the world," said Mr Putin, one that Russia did not start. And he vowed that Russia would respond to the threats by developing newer and more modern weapons that were as good as if not better than those possessed by Western countries. "We are being forced into retaliating ... Russia has and always will have the answers to these challenges," he said.
Vladimir Putin has used one of the last major speeches of his presidency to deliver a defiant message to the West, accusing it of unleashing a new arms race that left Moscow no choice but to retaliate in kind. Less than a month before presidential elections that his hand-picked successor is almost certain to win, the speech removed any lingering doubts that Russian foreign policy might become less aggressive after Mr Putin steps down.
"It's clear that a new arms race is unfolding in the world," said Mr Putin, one that Russia did not start. And he vowed that Russia would respond to the threats by developing newer and more modern weapons that were as good as if not better than those possessed by Western countries. "We are being forced into retaliating ... Russia has and always will have the answers to these challenges," he said.
Casey's Daily Resource Plus - 12/02/2008
Precious Metals
Gold seems to have found a new level around which to gather itself, as it meandered either side of $920 during the New York session on Monday, before settling at $922.55/oz., up $4.35. Overnight, gold has been flat.
Unstoppable platinum had another monster day, propelled to a record close above $1900 barely two weeks after first breaching $1700, as it ended at $1934/oz., up $52. Overnight, platinum has pushed higher.
Silver spiked sharply from mid-morning through until noon, after which it backed off about 15 cents, but still closed at $17.40, up 29 cents. Overnight, silver is trending higher.
Read the rest
Gold seems to have found a new level around which to gather itself, as it meandered either side of $920 during the New York session on Monday, before settling at $922.55/oz., up $4.35. Overnight, gold has been flat.
Unstoppable platinum had another monster day, propelled to a record close above $1900 barely two weeks after first breaching $1700, as it ended at $1934/oz., up $52. Overnight, platinum has pushed higher.
Silver spiked sharply from mid-morning through until noon, after which it backed off about 15 cents, but still closed at $17.40, up 29 cents. Overnight, silver is trending higher.
Read the rest
Economics Teaches Us Not To Fret
In a world of scarcity, every choice requires that something else of value must be given up, and the highest-valued alternative given up is the opportunity cost.That opportunity-cost emphasis focuses on the question of what is actually being given up when a choice is made. Its purpose is to ensure that we don't mislead ourselves with basic errors, because if we misunderstand the relevant costs, our understanding can well be incorrect even if our theory from that point on is correct (following the maxim that logic only means making no more mistakes than you are already committed to).
Equally important, it helps ensure that others can't mislead us with their confused understanding, as so often happens when people try to sell government "solutions" to perceived problems (e.g., ignoring the cost to society of the taxation required to fund some spending program).
FMM Comment: On the other hand, you SHOULD fret when people vote for warmongers, socialists, fascists, welfarists, big spenders, inflationists, thiefs and liers.
How to Stimulate Yourself - Part 2
The Stimulus' Short-Term Purpose
Christopher Westley
Christopher Westley
The Wall Street Journal's Mark Gongloff quotes Lehman economist Ethan Harris in this morning's "Ahead of the Tape" column:
In the rush to enact a timely package, politicians may have stopped a 2008 recession, but they have ignored a risky letdown -- after the election. [The U.S. faces ] another brush with recession in 2009" [for this reason].
Gongloff adds that once the "stimulus cocktail wears off,"
...home prices seem likely to keep falling, weighing on consumer balance sheets, confidence and spending. The expansion after the the 2001 recession ... was partly fueled by more than $1 trillion in borrowing against home equity. It is hard to see the economy getting that lift this time.
Even if the stimulus package serves to help the political class survive the November elections, it remains that (as Hazlitt pointed out) the longer and indirect consequences of policies or actions are those that the good economists will focus on. Unfortunately, democratic capitalism produces politicians and the economists who focus purely on short-term results.
Until the rank-and-file realize that it is the expanding nation-state itself, with its monetary inflation and government spending, that has created this mess, and that more of the same can only prolong the inevitable (and make it worse), then the next few years will look like the 1970s all over again. This time, could we at least be spared the disco?
FMM Comment: My recommendations still stands on How to Stimulate Yourself
Ron Paul: Presidential Campaign Update 11/02/2008
Going the Distance: Dr. Paul gives another update on the campaign
Here's the article Dr. Paul is referring to: The Mouse that roared: Why Ron Paul won the election
I like the way how Dr.Paul is using YouTube of late to distribute important information regarding "The People's Campaign". ;-)
SCREW YOU MSM !!!
If you are a Ron Paul supporter, spread this message A.S.A.P. !
Here's the article Dr. Paul is referring to: The Mouse that roared: Why Ron Paul won the election
I like the way how Dr.Paul is using YouTube of late to distribute important information regarding "The People's Campaign". ;-)
SCREW YOU MSM !!!
If you are a Ron Paul supporter, spread this message A.S.A.P. !
FX Insights Trade Team Update 11/02/2008
By FX Insights Moderator,Well, not a whole lot of excitement in the market today, but we do have some issues to cover, starting with some Eurozone fundamentals...
This morning's economic data out of France and Italy's industrial sectors was weak, as we forecasted which certainly kept some downside pressure on the euro today...
We can identify three variables that kept the euro above the 4500 level -- commodities, equities, and the 10-year yield...
Both oil and gold were well supported today, especially oil, which is very euro supportive. The Dow and S&P/500 managed to stay in the green and close in the green, in addition, the 10-year yield cooled off from its recent highs... so, we had all of those factors which kept the EUR/USD above the 4500 level and helped today's signal to pay out, as it always does...
Fundamentally we get ZEW data tomorrow morning, which I firmly believe should disappoint to the downside and keep continued pressure on the euro... my research is not showing a high level of investor confidence in the Eurozone under present market conditions...
In addition to those market correlated variables giving us decent trade direction, it seems some of the old familiar EUR/USD price actions are finally starting to return to the market with more frequency and more reliability...
I'd like to give you a really good example of how we used price action and tracking the EUR/USD 30-minute opening prices to take a short at the top of today's range and rode it down for an easy 70 pips...
At 2:54 a.m. EST this morning we took a EUR/USD short at the price of 1.4570. The best indicator we used to determine to take the short was price action and using the 30-minute EUR/USD price openings... in addition, the time of the day what another key factor in determining to take this trade...
Lets look at the 30-minute price openings that led us to the point of taking this short:
(All times listed are EST)
11:00 p.m. -- 4527
11:30 p.m. -- 4543
12:00 a.m. -- 4538
12:30 a.m. -- 4550
1:00 a.m -- 4556
1:30 a.m. -- 4542
2:00 a.m. -- 4557
2:30 a.m. -- 4548
Now, if you were to briefly glance at that price opening pattern it wouldn't look like much, but allow me to explain how we used it to take the trade...
In addition to using the 30-minute price openings we were watching the real-time price action and observed the EUR/USD struggling to stay above the 4550 level, which was a key level...
Between 11:00 p.m. and 2:30 a.m. it didn't make an exactly perfect string of 7 higher openings, however, it never opened lower than the 11:00 p.m. price of 1.4527 but it couldn't open higher than 1.4557, so that right there was a great indicator it was likely to open lower the next several timeframes...
The other indicator was time of day... the EUR/USD was making those price action patterns and we were getting close to the European opening at the same time it was struggling to move higher, so we basically put all the pieces of the puzzle together, knowing with a fair degree of confidence that the euro would likely come down during the early European session...
Time of day indicated the euro needed to be shorted... price action indicated it needed to be shorted... it's failure to sustain a break of the 4550 level was an indicator... forecasted weak fundamental data was yet another indicator...
So really, it was a no-brainer trade... we decided to close this short at 10:44 a.m. EST at the price of 1.4499 after the euro displayed price action patterns of likely finding a bottom for the day somewhere between 4502 and 4478.
A short time after this short was closed our system triggered a signal, then we bought the euro back and closed our euro longs at 1.4525 this afternoon, again, based on the price action patterns...
Hopefully the example above sheds some more light on using price action and will help you in your quest to use it as a trade indicator...
EUR/USD Trading:
I'm still cautiously biased towards the downside for the euro until the market shows me otherwise... as we mentioned the euro has been unable to sustain a break of the key 4550 level which I believe keeps the doors open to more downside testing...
I think there's a fair probability to see downside testing in tomorrow's trading... the market appears to be setting up that way... we'll certainly be watching closely as we approach the 3:00 a.m. EST timeframe...
This morning we had another great live audio Q and A session in the chat room, so thank you for the questions and the participation.
There's a very important post about our SMS system and some solutions to make sure you receive the buy signal alerts on your email... please click here to read this important message.
That's all for now... see ya in the chat!
-FX Insights
Monday, February 11, 2008
Rage Against the Tube
The Plug-in Drug
All parents, or soon to be parents, need to read The Plug-In Drug by Marie Winn. It is a book that explains how television is destroying our children and our families.
I have been a professional in the television and radio industry for over 30 years. I work for a company that makes nationally broadcasted programming here in Japan and we often work with the TV Tokyo network, NHK, and nationally broadcasted radio. I also have the experience of being one of the few people who has ever gone to drug rehabilitation and successfully recovered (96% of all drug addicts who enter rehab will return to drug rehab – I have never returned, nor have I needed to – thanks to my wife.)
The Plug-In Drug is a wonderfully insightful book with excellent ideas. The only problem I had with it was a small bit of a seeming compromise by the author on the issue of controlling TV watching time. I think the writer does this because she knows that a "No TV life" is a concept that is too alien in our society today and that the parents would be too adverse to the idea of throwing out the box. Unfortunately, it is the parents who need the TV more than the children. The parents use TV as a babysitter and that, in turn, gets the children hooked. I can tell you from experience that there is no practical solution to trying to control TV watching. The only practical and successful method for controlling TV is to throw the set out. Even though I work in TV, we do not have a TV set in our house.
Imagine a drug addict only doing heroin "just for a few hours a day." It won't work. They will backslide. The only realistic and practical solution is total abstinence and the only way to do this is by eliminating the device.
The TV is actually a drug. But its dangers are even worse than anyone suspects. Married couples think, "Without a TV, my husband and I would have nothing to talk about" (I've heard this many times) but these people have it backwards. Because they have a TV, the couples don't talk about important things and make the effort at spiritual growth (no I'm not talking about religion). The Plug-In Drug should be an advocate for "The TV-Free Family."
People always say that they love their children and that they will do anything for them. But, for the most part, and from what I've seen, it's not true. There is one thing that they will not do for their children: They haven't the courage to throw the TV out.
Read the rest
FMM Comment: I agree wholehartedly with this article. Trash that $%^& Tube !!!
Dow Jones Musical Chairs
NEW YORK (MarketWatch) -- With Altria Group Inc. and Honeywell International Inc. booted out, the Dow Jones Industrial Average is now getting a little less industrial and a little more oriented financial and oil, with Bank of America Corp. and Chevron Corp. joining the world-famous blue-chip index.
Read the rest
FMM Comment: Nadeem Walayat made the following point in his article:
"Don't Bet Against the Dow!".
Beware the smoke and mirrors!
Read the rest
FMM Comment: Nadeem Walayat made the following point in his article:
"Don't Bet Against the Dow!".
"Investors should realise one important factor about the Dow 30 stock market index and other similar general multi-sector indices that are made up of a limited number of stocks. The Indices are designed to exhibit the long-term inflationary growth spirals. In that in the long-run the indices will always move to a new high! "
Beware the smoke and mirrors!
FX Insights EUR/USD Calendar 2/10 thru 2/15 (with commentary)
By FX Insights Moderator,
For this trade week we have a four-headed beast to do battle with:
1. U.S. & European Growth Fundamentals
2. Equities
3. Securities
4. Central Bankers
Lets start with number one and work our way down as we try to devise our battle plan for the week ahead...
Fundamental Data:
Last week we saw the market take the EUR/USD down 200 pips twice... this is not a common occurance and something to take note of as we prepare for this week...
On Friday some dude from OPEC talked about denominating oil out of dollars and into euros, which caused that spike in the late afternoon... where did we bounce? At 4550. And if you remember last week we told you several times that the 4550 level is a key level to either keep us pushing lower lows or to allow the euro to make a recovery... we'll talk more about key levels later, though...
As far as this week's fundamentals go, the reason why it's such a critical week is because the market is so intensely focused on Europe's growth situation... the market is looking for any and all signs that growth is destabilizing, that it's weakening, and whether or not this weakness will be enough for the ECB to cut rates soon...
Monday -- key Eurozone growth data by way of French and Italian industrial production data. Forecasts show some recovery there from the previous data release... I'm not quite of this opinion...
Tuesday -- ZEW... I think in the ZEW data we'll see further deterioration of Europe's investor sentiment because of weakening economic conditions... the signs of this weakening sentiment have been there for several months and I believe it's not playing out right before our eyes...
If European investors continue growing wary of economic and financial conditions in the Eurozone this could likely lead to safe-haven buying of bonds, which would negatively impact the value of the euro against the dollar... just something to keep in mind.
Wednesday -- things pick-up on Wednesday... the two biggest pieces of data is the Eurozone Industrial Production number and the U.S. Core Retail Sales... I expect both pieces of data to disappoint to the downside, which will only further confuse the markets... there's really been no sign of much recovery in the U.S. retail sector... my research shows consumers are continuing to tighten their purse strings.
U.S. consumer credit is way down! Consumers are not borrowing either because they can't get a loan, they are loaded with debt and have nothing else to borrow with, they are out of a job, they are about to get their home foreclosed on, they are scared to take on new debt, or a combination of any or all of the above... it's a very tough situation and these factors are certainly weighing heavy on U.S. retailers.
Thursday -- this is where we really get a look at the growth situation in Europe as we get German, French, and Eurozone GDP data... I believe we'll see growth contracting from the previous month in this GDP data, which will not be EUR supportive at all...
Later in the morning we get the U.S. Trade Balance which seriously needs some help... the USD's continued weakness and worthlesness should help the Trade Balance and I'm expecting the data to be USD supportive...
Initial Claims has been quite weak all year long and I see no reason why we're going to get an upside surprise on Thursday... layoffs are continuing and there's no signs of this slowing...
The other keys for Thursday are speeches by Bernanke and Trichet... Bernanke is testifying before the Senate Banking Committee and he's scheduled to speak on the economic outlook and monetary policy... the market will be listening intently to both Bernanke and Trichet for any clues and signs on interest rate policy and growth outlook...
Friday -- tons of data on Friday... most of Friday's data is USD-related... growth, inflation, foreign investments, industrial output, and consumer sentiment... is that enough for you for one day?
I'm going to reserve any commentary on Friday's data for later on this week in the Trade Team updates as I've got much more research to do on what Friday holds...
Lets move on to equities now...
Equities:
Equities is the second head of our four-headed beast we're going to do battle with this week...
I believe the correlation between the Dow, S&P/500 and the EUR/USD will stay in play this week... equities are in a precarious spot right now... have they hit a bottom? Is there more room down to go? Investors will be trying to figure this out...
The way I see it, it's pretty simple... should the equities markets make a recovery this week and see some upward momentum and upward gains, I think this will be highly supportive of the EUR against the USD...
If money flows out of equities again this week, this will likely keep the USD pressure on the EUR... I'm not an equities expert nor do I trade them, so I can't predict what those markets will do this week, but I do know how those moves can effect the EUR/USD, so I'll certainly be watching very closely...
Securities:
Have you been watching U.S. bond yields lately? If not, you might want to this week... the 10-year yield in particular has made a roaring comeback from its lows in the 3.30's... on Friday the 10-year yield closed at 3.65%... if the bond yields keep rising, this should keep the USD supported against the EUR...
Central Bankers:
For most of the week, the Fed's henchmen will be on the speaker's circuit... the market will be listening for any clues on further Fed cuts or to see if the Fed is going to start getting hawkish on inflation and scale back the talk of keeping more cuts on the table...
Same goes with the ECB and Trichet... is Trichet going to stay dovish the next few months? Is he going to signal rate cuts? The markets will be watching and listening all week...
Over the weekend the ECB's Almunia talked about concerns over the euro's strength...
Of course we had the G7 meeting with the central bankers... I've already posted the key points from this meeting, so please take a look at that info... I expect we'll see some fallout in the market from this G7 meeting...
EUR/USD Trading:
As far as trading goes, I'm not heavy short nor am I heavy long... we're close to that key 4550 level... I believe in order for the euro to make a recovery, it's going to need to sustain a break above 4550...
If the euro stays below the 4550 level, it keeps the doors open for more downside testing and correcting... other key downside levels are the 4440 are and the 4380-4360 area...
I remain overal biased to more downside testing, but as I said, I'm not loading the boat with shorts and I'm playing the shortside extremely tight and cautiously because I know this week's fundamentals and those other variables we talked about could easily send the EUR/USD back up toward the 4750 level...
Best advice is to look for those relatively safe intraday trade opportunities, using 1% or 2% entries, taking a few pips per trade, and mitigating your risk during these times of uncertainty and no clear directions...
As we did last week, we'll look for some high probability live trade calls to put in the chat, but only if the opportunity for a lower-risk trade presents itself to the Trade Team...
There's a few posts you'll want to take a moment to read:
The Yen -- the market's untamed beast
Our 1-year anniversary message
FXI's Fundamental Test Part II
That should take care of things for now... again, practice strict risk and money management as we have a potentially volatile and crazy week ahead... each and every day this week holds heightened potential for volatility and price swings...
-FX Insights
1. U.S. & European Growth Fundamentals
2. Equities
3. Securities
4. Central Bankers
Lets start with number one and work our way down as we try to devise our battle plan for the week ahead...
Fundamental Data:
Last week we saw the market take the EUR/USD down 200 pips twice... this is not a common occurance and something to take note of as we prepare for this week...
On Friday some dude from OPEC talked about denominating oil out of dollars and into euros, which caused that spike in the late afternoon... where did we bounce? At 4550. And if you remember last week we told you several times that the 4550 level is a key level to either keep us pushing lower lows or to allow the euro to make a recovery... we'll talk more about key levels later, though...
As far as this week's fundamentals go, the reason why it's such a critical week is because the market is so intensely focused on Europe's growth situation... the market is looking for any and all signs that growth is destabilizing, that it's weakening, and whether or not this weakness will be enough for the ECB to cut rates soon...
Monday -- key Eurozone growth data by way of French and Italian industrial production data. Forecasts show some recovery there from the previous data release... I'm not quite of this opinion...
Tuesday -- ZEW... I think in the ZEW data we'll see further deterioration of Europe's investor sentiment because of weakening economic conditions... the signs of this weakening sentiment have been there for several months and I believe it's not playing out right before our eyes...
If European investors continue growing wary of economic and financial conditions in the Eurozone this could likely lead to safe-haven buying of bonds, which would negatively impact the value of the euro against the dollar... just something to keep in mind.
Wednesday -- things pick-up on Wednesday... the two biggest pieces of data is the Eurozone Industrial Production number and the U.S. Core Retail Sales... I expect both pieces of data to disappoint to the downside, which will only further confuse the markets... there's really been no sign of much recovery in the U.S. retail sector... my research shows consumers are continuing to tighten their purse strings.
U.S. consumer credit is way down! Consumers are not borrowing either because they can't get a loan, they are loaded with debt and have nothing else to borrow with, they are out of a job, they are about to get their home foreclosed on, they are scared to take on new debt, or a combination of any or all of the above... it's a very tough situation and these factors are certainly weighing heavy on U.S. retailers.
Thursday -- this is where we really get a look at the growth situation in Europe as we get German, French, and Eurozone GDP data... I believe we'll see growth contracting from the previous month in this GDP data, which will not be EUR supportive at all...
Later in the morning we get the U.S. Trade Balance which seriously needs some help... the USD's continued weakness and worthlesness should help the Trade Balance and I'm expecting the data to be USD supportive...
Initial Claims has been quite weak all year long and I see no reason why we're going to get an upside surprise on Thursday... layoffs are continuing and there's no signs of this slowing...
The other keys for Thursday are speeches by Bernanke and Trichet... Bernanke is testifying before the Senate Banking Committee and he's scheduled to speak on the economic outlook and monetary policy... the market will be listening intently to both Bernanke and Trichet for any clues and signs on interest rate policy and growth outlook...
Friday -- tons of data on Friday... most of Friday's data is USD-related... growth, inflation, foreign investments, industrial output, and consumer sentiment... is that enough for you for one day?
I'm going to reserve any commentary on Friday's data for later on this week in the Trade Team updates as I've got much more research to do on what Friday holds...
Lets move on to equities now...
Equities:
Equities is the second head of our four-headed beast we're going to do battle with this week...
I believe the correlation between the Dow, S&P/500 and the EUR/USD will stay in play this week... equities are in a precarious spot right now... have they hit a bottom? Is there more room down to go? Investors will be trying to figure this out...
The way I see it, it's pretty simple... should the equities markets make a recovery this week and see some upward momentum and upward gains, I think this will be highly supportive of the EUR against the USD...
If money flows out of equities again this week, this will likely keep the USD pressure on the EUR... I'm not an equities expert nor do I trade them, so I can't predict what those markets will do this week, but I do know how those moves can effect the EUR/USD, so I'll certainly be watching very closely...
Securities:
Have you been watching U.S. bond yields lately? If not, you might want to this week... the 10-year yield in particular has made a roaring comeback from its lows in the 3.30's... on Friday the 10-year yield closed at 3.65%... if the bond yields keep rising, this should keep the USD supported against the EUR...
Central Bankers:
For most of the week, the Fed's henchmen will be on the speaker's circuit... the market will be listening for any clues on further Fed cuts or to see if the Fed is going to start getting hawkish on inflation and scale back the talk of keeping more cuts on the table...
Same goes with the ECB and Trichet... is Trichet going to stay dovish the next few months? Is he going to signal rate cuts? The markets will be watching and listening all week...
Over the weekend the ECB's Almunia talked about concerns over the euro's strength...
Of course we had the G7 meeting with the central bankers... I've already posted the key points from this meeting, so please take a look at that info... I expect we'll see some fallout in the market from this G7 meeting...
EUR/USD Trading:
As far as trading goes, I'm not heavy short nor am I heavy long... we're close to that key 4550 level... I believe in order for the euro to make a recovery, it's going to need to sustain a break above 4550...
If the euro stays below the 4550 level, it keeps the doors open for more downside testing and correcting... other key downside levels are the 4440 are and the 4380-4360 area...
I remain overal biased to more downside testing, but as I said, I'm not loading the boat with shorts and I'm playing the shortside extremely tight and cautiously because I know this week's fundamentals and those other variables we talked about could easily send the EUR/USD back up toward the 4750 level...
Best advice is to look for those relatively safe intraday trade opportunities, using 1% or 2% entries, taking a few pips per trade, and mitigating your risk during these times of uncertainty and no clear directions...
As we did last week, we'll look for some high probability live trade calls to put in the chat, but only if the opportunity for a lower-risk trade presents itself to the Trade Team...
There's a few posts you'll want to take a moment to read:
The Yen -- the market's untamed beast
Our 1-year anniversary message
FXI's Fundamental Test Part II
That should take care of things for now... again, practice strict risk and money management as we have a potentially volatile and crazy week ahead... each and every day this week holds heightened potential for volatility and price swings...
-FX Insights
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