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Conferences Current Daily Commentary (2005) (Public)
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Duncan	24-Sep-06, 06:13 AM (GMT)
"Bleeding"
DJIA - Bleeding May Be Stopped I had hesitated to predict the point at which Thursdays "Feast of the Cannibals" might bottom, because of the nature of the data, and the combination of the influence of the Fed meeting, and potential for a delayed reaction, a la the old Alan days, and the Jewish Holiday. Suffice to say, I'm comfortable that my gut was correct, and I'm a little sorry that I didn't publish it. But, the important thing is that today's results suggest that the bleeding may be stopped. It looks bad on the intraday chart, and probably on your portfolio totals. But, we didn't have an artery, or even a vein open. In the grander scheme of things, we had a teeny weeny pull back. I believe that it's onward and upward from here. Now, the market can do funny things on Mondays, so don't be complacent. V 428a. I'll show only one daily bar chart, primarily to illustrate the volume pattern, which couldn't be "more standard." The COMPX was about the same this week. The Dow continues up blue NL 4 as support. I have not shown a resistance line above it, but you can see that we're in a very narrow, upsloping channel. Whether you think of it as the floor of a channel, or merely as support, the old "Things continue until they quit" philosophy is working strongly here. We basically are at the 6th bounce up NL 4. That's fantastic confirmation of support. It also is a time to be very careful, since things seldom continue forever, whenever that is. So, here we are, IN THE Y INTERSECTION, and it would take little downside to make this a breakthrough to the down side. Notice that the %R is just about to puncture the minus 20 level, which is a sell signal. And, Monday is our next trading day. Hence, a technical combination of features that, as I said above, demand extra caution. But remember, I'm bullish here. V 434. The reason for optimism is that, when we look at the larger picture, we see that we still have plenty that we could fall before getting worried that Ben's words before Congress might be wrong. Just because the May-June plummet was expected (here), does not mean that a great many people were not in great pain over it. The recovery was not as steep, but it's been very respectable, and you'll notice that, as those in higher arithmetic would say, "it's concave upward." That is, we are just past the 5th of a series of minor accelerating highs. V 432. I recently read a long and intensive newsletter by Bob Bronson about the dismal prospects for the economy, based upon cyclic theory. In particular, long and very long cycles. Kitchin and Kondratieff cycles abound, and some charts go back well beyond the founding of the NYSE. We have, according to that author, just passed the peak of a "Supercycle." That's like saying "Watch out, San Francisco, here comes 'the big one.'" Is he right? Are we headed into an abyss? The net projection of that analysis suggests that the economy and/or markets will return to target levels which are about where they were in 1982, the beginning of the greatest bull market in history. One must step way back to try to view that entire picture. As a great believer in cyclic analysis, Fibonacci numbers, and Elliott Wave theory, and with a willingness to at least try to admit to, and to understand the small and huge negatives that we currently face, I am what I would call "TENTATIVELY bullish." My analysis suggests that we stand a very good chance of BREAKING the Supercycle pattern, in fact, right here, at this moment in time. Not because his rendering of history is wrong. I believe that Bronson did an outstanding job of analysis. I BELIEVE what he wrote! Up to the projection which, like my "trip to the moon, to hit the happy face," still is only a best guess, based upon available data. My use of the word "tentatively" implies that I'm not SURE that Bronson's analysis is suddenly going to fail. Markets and economies, and politics, are both the substance and the reflection of human endeavors. And humans are so consistently, well, human. We create the lessons of history from which we are supposed to learn, then we repeat them. Some of the best, and some of the worst. But, we have begun to inject a totally new feature into the patterns. That is the emergence of a concentration of power which truly can manipulate global markets at will. That, of course, is the Proactive Fed. And hard upon its heels has come an essentially satanic counterpart, what I term the Major Cyborgs. If you have listened to Alan and Ben carefully, little has happened that they have not willed, or are projecting, since I began dogging Alan in 1999. They have treated the Major Cyborgs as secondary characters whom they can control, as "useful idiots." To be used as tools. We are finally beginning to hear the TV Guri speak of the hedge fund industry beginning to "mature." That's code for what I've been ranting about for a couple of years. The evidence is the increasing frequency of implosions, Amaranth being the latest. I distinguish between the Cyborgs and the Hedgies, though both borrow tricks from each other. The Hedgies methodically build successive layers of risk on top of each other, like an inverted pyramid, to multiply gains. The Major Cyborgs rely upon computers to receive, and process data, then create massive trading positions, to be executed, all in milliseconds, in stealthy little lightning fast blizzards that are seemingly undetectable. The Fed was big enough, and beneficent enough, to control these entities back in 1998, when they had to bail out Long Term Capital Management (LTCM) to prevent global collapse. Hedgies typically take a lot of time to develop their positions, then find that they cannot unwind them quickly enough when things begin to go badly, leaving them holding a big bag. Only the Fed was able to engineer a semi-graceful crash for them. The recent meeting at Sea Island, GA, is tacit evidence that the next round may be less easily dealt with. Considering the massive speculative bubble in the complex web of energy, the failure of Amaranth could have much broader consequence than at first supposed. Both Alan and Ben have on several occasions voiced positive, if terse, comments about Hedgies. I think I hear hesitancy in their voices. The Major Cyborgs, as they mature, may become a different story. Long time readers will recall that I referred to their relationship with the Fed as "The clash of the Titans." The Major Cyborgs have had a considerable advantage during their gestation beneath the radar. Better quality and faster data, bigger and faster computers, bright people, particularly from engineering to write more sophisticated code, bright young people who knew how to ferret out the little pockets where money might hide, and essentially free rein to do what they pleased. As individuals 5 years ago, they were like kids turned loose in a candy store. Now they are in the phase where they are cannibalizing each other. The next phase, if we are not yet there (I believe that we are) will be for them to formally, or worse, loosely join forces, to drive the markets. To whipsaw the markets, because they CAUSE the pivot points, and know where and how long the moves will continue. Just watch my intraday charts, occasionally superposed, to see that almost daily. That's called rigging. The PPT is big enough, and smart enough, to use and control them at the current time. Who's to say how long that will last? So, a continuation of the upsweep in chart V 432 is contrary to the current Supercycle decline, targeted to bottom in about 2015. This is a tug of war that likely soon will be decided. - Charlie Miller 2006-09-22
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Duncan	24-Sep-06, 07:40 AM (GMT)
1. "YOU WILL NEVER MAKE IT WITHOUT A PLAN"
\ \ \ Tories aim to scrap inheritance tax on first homes Gaby Hinsliff, political editor Sunday September 24, 2006 The Observer Inheritance tax on people's main family home should be scrapped, according to a major Conservative review of taxation to be delivered shortly to David Cameron. That would help thousands who currently have to pay death duties on any property worth more than £285,000, which in many cases forces them to sell the home they have inherited to settle the bill. Critics of the levy have argued that rising house prices mean too many ordinary families are being dragged into the tax net. Two Blairite former ministers, Stephen Byers and Alan Milburn, have called for changes to ensure the middle classes are not unfairly penalised. The Tax Reform Commission set up by the shadow Chancellor, George Osborne, is due to report next month on measures to make the tax system fairer. It is not expected to recommend scrapping the tax completely, but the main family residence would be exempted - leaving only those with second homes to face the 40 per cent levy on property. A source close to the commission said: 'The tax is grossly unfair because it penalises people who save for their future. 'The people who will benefit the most will be young people who will not have to pay tax on their parents' estates. The very rich don't pay inheritance tax because there are plenty of ways for them to avoid it, so the people who are caught are those families whose main asset is the family home.' The commission, chaired by Tory peer Lord Forsyth, was set up before Cameron took over, and there has been some alarm in the leader's inner circle at reports it would call for up to £20bn of tax cuts at a time when Cameron is insisting a Tory administration would not put unaffordable tax cuts above spending on public services. It is also looking at the case for the 'flat tax' once championed by Osborne, from which Tories have begun gently to distance themselves. However of all the proposals, inheritance tax is among the most politically sensitive now that senior Labour figures are discussing its reform, and Cameron will be placed under considerable pressure to at least give it serious consideration. The Treasury has insisted inheritance tax still affects only a tiny proportion of the population and that it is a justifiable tax on the wealthy, even if their wealth is mainly in bricks and mortar. However, during the last election campaign Shaun Woodward, then a strategy adviser to Blair and now a minister, warned the issue had become a 'hand grenade' in the South-East, as even people who had bought their own council houses were now becoming liable for the tax. \ \ \ Offshore havens 'declare war' on honest taxpayers By Paul Lashmar Published: 24 September 2006 The US Senate has accused the Isle of Man, the Cayman Islands and other offshore havens of facilitating tax evasion that costs other countries billions of pounds every year. The accusations are made in a report by Carl Levin, chairman of the Senate Permanent Subcommittee on Investigations. He said: "I believe the findings are explosive: the report blows the lid off tax haven abuses that make use of sham trusts, shell corporations and fake economic transactions to help some people dodge taxes." Senator Levin added that tax havens have "in effect declared war" on honest taxpayers. The report, Tax Haven Abuses: The Enablers, The Tools and Secrecy - the result of a year-long investigation - criticises the Isle of Man and other offshore jurisdictions for their secrecy and lack of regulation. One of Britain's leading tax experts, Richard Murphy of the University of Nottingham, said Senator Levin's attack was the latest in a growing number of complaints over offshore territories and the British Government's attitude towards them. "Levin has highlighted what is really happening in the UK's tax havens and it's not pretty," he said. "They sell secrecy and sham that let people evade taxes that they would clearly owe but for the charade the haven provides. "It's obvious the US has had enough of this, and it's going to be a serious embarrassment to the UK if we do nothing about it." But a Treasury spokesman said: "The Government has effectively tackled both corporate and personal tax avoidance structures time and again. To suggest otherwise is misleading and inaccurate. On an international level the Government has consistently worked for greater openness and transparency in tax." The Levin report also makes a series of recommendations aimed at making it harder for US citizens to use offshore accounts. © 2006 Independent News and Media Limited \ \ \ \ \ http://www.safehaven.com/article-5946.htm the lesson since November 2005 is that if conditions are bullish enough manipulation efforts lose their effectiveness \ \ \ http://www.safehaven.com/article-5947.htm Conclusion Most short and intermediate term indicators have turned downward and seasonally next week has averaged a negative return. I expect the major indices to be lower on Friday September 29 than they were on Friday September 22. \ \ \ September 23, 2006 A Sudden Recognition of Risk? by Michael Panzner This past week, the commander of Thailand's army unexpectedly staged a coup d'état and ousted the government of Prime Minister Thaksin Shinawatra. The military declared itself in control and instituted martial law across the nation. In addition, there was violence and widespread rioting in Budapest following Hungarian Prime Minister Ferenc Gyurcsany's taped admission that he had misled voters about spending plans and had lied "day and night" to win power ahead of last April's elections. Reports also surfaced that one of the world's largest hedge funds had lost more than $5 billion -- over half of its assets -- in a matter of days because of a bad bet in natural gas futures, despite the firm's billing as a sophisticated multi-strategy advisor with adequate risk controls. Meanwhile, Yahoo's shares fell sharply after the technology bellwether lowered earnings guidance for the third quarter and warned that online advertising growth seemed to be slowing in some economically-sensitive categories, including autos and financial services. And finally, the Federal Reserve Bank of Philadelphia reported a surprising drop -- in fact, the steepest monthly decline since January 2001 -- in its general economic index, giving strong indications that the U.S. is heading for a slowdown. Taken together, these seemingly unrelated events suggest that there has been an abrupt change in the investment risk equation. Yet they come at a time when investors have been complacent, as evidenced by the fact that share prices are near multi-year highs, the VIX Index, or "fear gauge," is not far from its 2006 lows, credit spreads are at exuberant extremes, and the economy is widely seen as being in a Goldilocks-like state. Under the circumstances, an apparent disconnect between expectations and reality can sometimes trigger a dramatic reaction, where equity prices fall, government bonds rise, and funds flow from risky securities, sectors, markets and classes into safer ones -- often in a very disorderly fashion. One might call this a sudden recognition of risk, where investors learn the hard way about the perils of taking too much for granted. Talk Back Michael J. Panzner StockMarketJungle.com Michael Panzner is author of The New Laws of the Stock Market Jungle: An Insiders Guide to Successful Investing in a Changing World and a 20-year veteran of the stock, bond and currency markets. He is currently at work on a book about global financial risks. Copyright © 2005-2006 Michael J. Panzner \ \ \ \
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Duncan	24-Sep-06, 09:59 AM (GMT)
2. "If you can correctly determine the trend of a market, you will make money"
Deep Value Face-Off: Irwin Michael vs. Ross Healy (Part 1 of 3) Canada’s Report On Business Television recently held a series of live broadcasts from BCE place in downtown Toronto. On Monday, September 18th, 2006, they invited two venerable deep-value fund managers in a question and answer forum. You might think I’m hypocritical for advising people not to obssess over ROB-TV while highlighting this event. However, my interest was peaked because of Irwin Michael’s appearance. I hope you will see why I listen when Irwin speaks. It’s truly a no-spin zone (unlike Fox News, or Jim Cramer) and investors get to benefit from his wisdom! Irwin Michael is my favourite fund manager because of his no compromise, no spin, non-apologetic approach to openly discuss investing. He talks and writes candidly about his investment decisions; allowing me to soak up his perspective and learn from it. You won’t catch him doing any sweet-talking to appease investors and audiences. As of the end of August 2006, Irwin’s ABC Fundamental Value has averaged an annual 17.82% return for the last 15 years while it’s benchmark indes S&P/TSX Total Return has only managed a 10.79% in the same timeframe. Ross Healy is the chariman and CEO of Strategic Analysis Corporation, an investment advisory firm. Though I feel at times, that Ross’s comments are too politically correct, too on the fence, I still recognize that Ross is very much respected in the Canadian investment scene. Ross is best known for his bearish call on Nortel when it was trading over $100 in 2000. As of June 2006, Strategic Analysis Corporation’s model portfolio has outperformed the S&P/TSX Total Return index to a tune of 20.9% to 11.7% since its 1993 inception. Note: While Irwin Michael has been a frequent guest of Report On Business Television, this was his guest appearance on the show Market Call. In contrast, Ross Healy was at the very first Market Call and has been a popular frequent guest of the show. The following transcript has been edited for readibility and relevance purposes. (i.e. consolidating various responses on the same topic that were made throughout the show) On Current Market Conditions Michael: Fear . I think a lot of people are fearful. If it’s not gold crashing or oil and gas falling out of bed. It’s something else, wars, US federal reserve etc. I think there’s a real dose of negativity out there. Healy: I think the market is kind of sleep-walking through what I view as a market-top heading into a recession, probably in 2007, which I suspect will be fairly severe. I know that there’s a lot of fear out there. On the other hand, I see equal amounts of confidence and hope. Between the two of them, there’s a kind of stasis in the market Michael: I just see a slow down. Instead of growing at 3.5% rate of growth, we’ll maybe be at 1.75% to 2%. We’re stock pickers. In this environment of fear, we’re finding opportunities to purchase certain stocks. Healy: I’m selling. We’re selling pretty much across the board. We have been reducing our energy, mining exposure, and broadly across the board. I’m just happy to be pulling back and getting more and more cash. I think cash will be king in another year and I want to have lots of it! On Value In The Energy Sector? Healy: Yes there is, there’s a lot of value in the energy sector but the market doesn’t care right now and I think it’s going to continue not to care. And there’s some sectors of the market, which include the oils, where there are some concerns developing about costs. And as the price of oil sinks, it’s taking the stocks down with it. I think there’s gonna be a magnificent buying opportunity coming, but it’s not today. Michael: It’s cheaper to buy them at the stock market, than to drill for . In consequence, I think you’re going to see many more mergers, acquisitions, takeovers; particularly on the trusts side. On Income Trusts Michael: Healy: I wouldn’t touch trusts. I think it’s too early, there will be a terrific opportunity. The problem with “those wretched things” is that too many of the trusts are basically junior stocks. In recessions, junior stocks get ravaged. I don’t see any difference between junior income trusts and junior stock. I am keeping my money well aware from that group Michael: I like to see 35%, 45% upside (before I lay my money down) not including the income. I’m not saying you buy all the trusts. There are a select few. On Blue Chips As Safety Healy: I think it’s a frightening idea actually. When I look at the U.S. companies, a lot of them have a tremendous amount of downside. Starting off with the financial sector which I’m afraid of. On Celestica, And The Tech Sector Michael: We don’t own ANY high-tech company. Zero. They’re not fundamentally cheap! Our style is we want to buy you two dollars for one dollar. And if I can’t buy it, forget it right there! Healy: No tech. I’m a 100% with Irwin on that one. Celestica happens to be one of the few tech stocks where a little value seems to be coming back in again. But that doesn’t make any difference when the whole group is overvalued or expensive. I think we can be very patient. We’ll buy tech stocks when it’s a lot cheaper. On Canadian Oil Sands Reserves Michael: I have nothing in the oil sands, nothing. That’s probably a statement unto itself. We tend to be buying companies that actually, I won’t say they’re real, but they have cash flow, they’re earning. We own Nexxen and Talisman, which I can relate to. In terms of the feeding frenzy in the oil sands, I’m not there Healy: I don’t think it’s a feeding frenzy yet. I’ve been a little surprised that one hasn’t developed. It’s one of the last open-ended sources of oil reserves on that planet. But nothing has happened and that’s quite surprising. I think one of the reasons is that the costs have escalated tremendously. On A Possible U.S. Recession Healy: I also have concerns about the U.S. consumer. David Dodge, the head of the Bank of Canada, also has quite serious concerns about the U.S. consumer in 2007 and a strong possibility of a recession. Michael: I see a slow-down. The very fact that U.S. gasoline is no longer $3 a gallon helps the consumer. A lot of people weren’t going to Walmart because gasoline was too much, now they can drive there. I think the psychology is so bad, it’s like the chicken-little scenario right now: “We’re going into recession, we’re going into recession”. We are getting ourselves into a funk and not doing anything. On What’s The Next Hot Sector? Michael: We don’t go for hot sectors. We look at hot stocks - stocks that everyone hates. When I wake up in the morning, I tend to look at the new low-list, as opposed to the new high-list. Not to say that everyone is to be bought. But quite often, you’ll find one or two little gems, that have come apart because of tax-loss selling, which we’re starting to see right now. Or just the sheer paranoia of investors wanting out because they read something on the front page of the paper, or the front page of Business Week. Healy: There are sectors that I avoid. I’m out of the Financials both sides of the border because they’re very very expensive and offer no value at all. And if the financials don’t come through and if the energies can’t come through. That’s 60% of the Canadian market. You have to say to yourself, ok, if 60% of the Canadian markets wants to go down. Where are you going to make money? Michael: We have no banks and no real Canadian insurance companies in our portfolio. However, on the contrary, I look at the American life companies and they’re dirt cheap. We’re able to buy them well below book and break-up value because the American companies have not gone through the consolidation that Canadian companies have. Healy: Healthcare looks like they’re bouncing quite nicely. There looks like some good value in that sector. That’s it for an exciting part 1. If you’re on the edge of your seat from the wisdom that these two fund managers have displayed, make sure you stay tuned for Parts 2 and 3!! \ \ \ Mainstream US economic and financial columnists and analysts are talking about it. So is the IMF and the BIS and the OECD. Even at the Fed, there are Governors who have gone public saying the chances of it happening are in the 40 percent range. Long suffering US stock market investors are wondering how it has been postponed for so long, given the fact that the markets have been going sideways for seven years or more now. Even the hedge fund traders, one of whom just dropped a cool $US 5 Billion on natural gas futures that zigged when he bet they would zag, are beginning to express concern. What they are all "concerned" with it burgeoning mass of evidence all pointing to an inescapable conclusion. The conclusion being that the US is staring down the barrel of an economic recession. Of course, The Privateer has already pointed out that in REAL terms, the US economy i9s already IN recession. We did that in our Early September issue (Number 560) published on September 3. The reasoning is simplicity itself. In the second quarter of 2006, the official US annualised economic "growth" rate was 2.9 percent. The equally official annualised US rate of consumer price inflation was 4.1 percent. In REAL terms, that's a recession. And, of course, leaving aside any questions about "manipulation", many US markets are now reflecting this expectation of recession. The prime example is in the futures markets for commodities (including precious metals). These have plummeted so far this month. Then there are the yields on US Treasury debt, which have also been plummeting. On September 22, for example, the yield on the Treasury 10-year bond slumped to 4.59 percent. That's a whole 56 basis points (0.56 percent) below the Fed Funds rate of 5.25 percent. All this is, of course, a product of the orthodox methods which everyone now expects the financial powers that be to put into play to "deal" with the upcoming recession. As recently as last May, Wall Street was still convinced that the sequential 0.25 percent rate rises which had been inexorably advancing for the past two years were going to keep on going. Then the first evidence that the housing bubble might be leaking emerged, precious metals and commodity prices dived, and the clamor began to mount for the Fed to stop raising. The Fed duly complied on August 8 when, for the first time since May 2004, it DIDN'T raise rates by that 0.25 percent. Now, the attitude has completely reversed direction from where it was going back in May. Now, Wall Street is not expecting higher rates, it is expecting LOWER rates from the Fed. The only question still in contention is whether the Fed will start back down this year of wait until 2007. Clearly, plummeting Treasury yields so far this month are indicative of a HUGE bet that the Fed will move sooner rather than later. And that, it is almost universally anticipated, is all that will be required. It is the holy writ of modern "economics" as it is accepted in the US that any economic slowdown, no matter what the cause and how long it has been "delayed", can be overcome by lowering interest rates and/or by the injection of "judicial" amounts of new "capital" (read "money") into the system. This is, of course, how modern finance "works". According to "economics", any economy has the inherent tendency to go in up and down cycles (known impolitely in some circles as "boom and bust"). If left to its own devices, an economy would accentuate these "cycles" to the point where nobody could cope with them. It is, therefore, absolutely essential that a "governing" mechanism should be applied so as to smooth out these otherwise unavoidable ructions and thereby safeguard the future prosperity and well being of the people. That's what modern "economists" would have you believe. In reality, of course, the precise opposite is the case. These dreaded economic cycles are purely and wholly a RESULT of interfering with individual choice and above all, of tampering with what individuals use as the indispensible means of exchanging the fruits of their labour with each other. Boom and bust, economic "growth" and recession/depression, call it what you will - the underlying cause is official interference with money. That simple fact does not register at all with those who are sublimely confident that, having got the US economy into the mess it is in, the Fed now only needs to intensify its interference to get it out again. Nobody who holds this view admits into their thinking any inkling of a prospective weakening of the money itself CAUSED by this Fed tampering. Inside the US, and in a surprisingly large number of nations outside the US, the US Dollar is complacently viewed as being utterly invulnerable and invoilate. It is an article of faith that no matter what level of interference the Fed resorts to to achieve yet another "soft landing", it will have minimal effect on US MONEY. Oh sure, the Dollar might fall a bit in exchange value, but once the "soft landing" is put in place it will come roaring back again. After all, it always has. The US Dollar always has, at least since 1944, because it has been the world's RESERVE currency since then. Unlike any other currency, the world has a vested interest in the US Dollar. This is not merely because of all the US Dollars they hold as "reserves" behind their own systems. Fundamentally, it is because the interlocked global economy depends on the viability of those reserves to function at all. Without this status for the US Dollar, the US itself would have long since succumbed to its voracious appetite for debt and yet more debt. The problem today is that the reserve currency status has been abused to such a degree by those in charge of the US financial system that it is now a hollow shell disguising a bankrupt economy. Monetary manipulation is viable for only so long as there is something of substance to manipulate. The US Dollar and all other global paper currencies have no connection whatsoever to anything of substance. They once did, and that substance was Gold. The connection has been sundered for a long time now, so long that few still remember a time when it still held sway. Those who thing that the Fed can rescue the US economy from this latest approach to recession are utterly ignoring the fact that the means by which the Fed is expected to rescue them are the exact same means by which the problem was created in the first place. One does not douse a fire with imflammable liquid, nor "cure" a man with a broken leg by breaking the other one, and if that doesn't work by breaking his arms too. No currency is immune from the kind of manipulation the US Dollar has undergone for the past four decades. All currencies so manipulated eventually succumb, history provides no exception to this rule. The other historical constant is that, having failed, every monetary system returns, however reluctantly, to Gold. This time, it will be no different. The blind faith that the Fed can fix the problem that they caused by means of the same methods by which they caused it is bringing the day of reckoning - for the US Dollar - ever closer ever more quickly. \ \ \ a recession or real slowdown cannot be good for the stock market http://www.safehaven.com/article-5949.htm \ \ \ http://www.safehaven.com/article-5950.htm \ \ \ http://www.safehaven.com/article-5951.htm once this 4-year cycle tops, regardless of whether it occurs above or below the May high, it will confirm the personality of the longer-term trend and we will know if we are truly in a secular bull or bear market. We will know if we have a setup that has historically averaged 41% or 24%. We will know whether to expect to see the 2002 low violated or for it to hold. We will know whether or not to expect new market highs coming out of this 4-year cycle low, or if we should expect another failed 4-year cycle advance. Yes, a lot will be known as this setup unfolds. \ \ \ http://www.safehaven.com/article-5952.htm Summary: The SPX made a new bull market high last week. But it was only by a couple of points and then it immediately began to retrace. That is not a sign of strength, but perhaps more indicative of a last-gasp effort. This is supported by steadily deteriorating market breadth and, since intermediate cycle lows are due in Mid-October and the short-term structure appears to be complete, the index could be at, or within a few days and a few points of a top. \ \ \ http://www.safehaven.com/article-5953.htm Bottom Line. Enjoy our analysis and support/resistance numbers. The markets will, often, turn at those numbers, but it takes a short-term system perfection to take advantage of these turn-around/drill-troughs. Some of them will be short-lived and some will make a fortune if let run. We got it down close to perfection. \ \ \
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Duncan	24-Sep-06, 10:34 AM (GMT)
3. "its not worth guessing"
http://news.goldseek.com/InternationalForecaster/1159113600.php \ \ \ http://news.goldseek.com/PaulvanEeden/1159110180.php very high correlation between higher-end diamond prices and stock market indices. Diamonds are the ultimate luxury item and during times of prosperity (usually when stock prices are rising), demand for diamonds is strong. Conversely, when times are tough, less people buy expensive diamonds. \ \ \ http://news.goldseek.com/RickAckerman/1159110000.php Technical signs that a major top is in continue to accumulate \ \ \ Tax probe for soccer 'bungs' By Andrew Murray-Watson (Filed: 24/09/2006) HM Revenue & Customs is set to launch an investigation into suspected tax evasion among figures in the top echelons of English football. advertisement The probe follows new allegations of "bung taking" by managers and agents in the BBC's Panorama programme last week. A spokesman for the Revenue said: "The same tax rules apply to sports clubs as to any other form of organisation and our compliance approach remains the same. "Our inquiries cover all areas where non-compliance may occur. . . We use sophisticated intelligence gathering and risk assessment techniques to tackle non-compliance and deploy our resources in a manner to tackle evasion where the risk is the greatest." It is believed the Revenue contacted Peter Harrison, an agent featured on Panorama, in April. Harrison was reported to have said on Friday that he expected another visit from the taxman following last week's allegations. Harrison, Sam Allardyce, the manager of Bolton FC, and Craig Allardyce, his football agent son, who also featured in the programme, all deny allegations of wrongdoing and have threatened to sue the BBC. Lord Stevens, the former head of the Metropolitan Police, is expected to deliver a report into the "bung culture" to Premier League chairman on October 2. It is believed that executives at the Football Association fear that Stevens will not deliver conclusive proof of bung taking. \ \ \ Tory peer makes £200m from second-hand cars By Lianne Gutcher The coffers of Conservative Party deputy chairman Lord Ashcroft are set to swell by £200 million after the sale of BCA, the car auctions firm in which he has a “significant” stake, to buyout firm Montagu Private Equity. “We were presented with an offer that we had to take seriously,” BCA’s chairman David Hammond was reported as saying in the Financial Times. The figure for what Lord Ashcroft would gain is based on the business selling for around £450m. Rival private equity group CVC Capital, which owns AA roadside repair and previously owned Kwik-Fit car repair business, is also thought to have been interested in acquiring the company. Tim Naylor, from BCA’s press relations department, declined to confirm how much the company was sold for. Neither would he say whether there had been any interest from other parties. But in a statement, chief executive Jon Olsen said: “We are pleased that Montagu has acquired the business. The senior management team is fully committed to staying with the business, to build on the success we have already achieved.” The deal is expected to be completed by the end of October. About 40 investors have jointly owned BCA since it was sold at the end of 1995 by ADT, the cleaning and security group built up and headed by Ashcroft. BCA operates in 11 European countries and last year sold about three million used cars with a total value of £3.3 billion. The firm generates its income by charging a fixed fee on every car sold. In 2004, the last year for which accounts were filed at Companies House, BCA had a pre-tax profit of £24m. The firm’s largest market is the UK, where it also has substantial property interests. Spain and Germany are understood to be BCA’s fastest growing markets. Last year, Britons spent £33.5bn on second-hand cars, slightly more than the £33bn spent on new models, according to Robert Baker, chief economist at The Society of Motor Manufacturers and Traders. He said: “Total sales volumes are very robust.” But he added that prices in the used car market have fallen every year since 1997. Wiet Stokhuyzen, director at Montagu, said: “BCA is a first-rate company with a highly regarded management team which has delivered consistent and profitable growth for over a decade. We look forward to investing in further growth, particularly in Europe, where BCA has developed a strong position.” Ashcroft came to the rescue of ADT, then known as the Hawley Group, in 1977 when it was close to bankruptcy. By 1988, the group had been rebranded as ADT and had 100,000 employees on its payroll. In 1997, Ashcroft sold ADT to Tyco for £3.7bn. On his website, Ashcroft describes himself as an “innovative entrepreneur” who has worked in business for 40 years. In the 1980s, he began developing interests in Belize, where he had lived as a child. By 2005 his international business, BB Holdings, which also has a US presence, employed 37,000 people and had an annual turnover of $1.4bn (£765m). BB Holdings owns the Bank of Belize, the biggest commercial and retail banking operator in that country. In 2005, Ashcroft hived off the UK and Ireland division, which now trades separately on the Alternative Investment Market (Aim) as Carlisle Group. Ashcroft is also an investor in Mavinwood, which owns underground storage facilities and Wraith. According to The Sunday Times Rich List 2006, Ashcroft has a personal fortune of £820m and is the 66th wealthiest person in the UK. The same survey names him as Britain’s top political lender. In the year to March 29, he lent £3.6m to the Conservative Party. He has also been a long-time Tory donor and started giving financial support when Lady Thatcher was Prime Minister. He was party treasurer under William Hague from 1998 to 2001. Ashcroft is often described as a “controversial” figure. His critics point to the fact that he hardly pays any income tax in the UK because he is domiciled overseas. The tycoon has also been instrumental in securing funds from overseas donors, which some have thought inappropriate. The businessman also clashed with Conservative leader Michael Howard in the run-up to the 2005 general election. Ashcroft wanted his donations to go to specified candidates rather than Conservative Central Office funds. After the Tories’ defeat and Howard’s resignation, the newly elected Conservative leader David Cameron named Ashcroft deputy party chairman in December 2005, making him responsible for target seats and opinion research. In the year to March 29 2006, the multimillionaire gave about £2m to the party. The funds were used to back Tory MPs in marginal seats. Ashcroft’s interests also run to soccer and he holds a 42% stake in Watford Football Club after a rights issue in March. 24 September 2006 \ \ \
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Duncan	24-Sep-06, 01:48 PM (GMT)
4. "you can check in but you can’t check out"
\ \ \ the trade that is most attractive in the intermediate outlook, among currencies, is to be long the Yen against the Canadian dollar - which for most traders would mean buying the Yen (long) and selling the CAD (short), each against the USd, and particularly if you are bearish on the energy trade over that time frame. http://www.safehaven.com/article-5954.htm \ \ \ http://www.safehaven.com/article-5955.htm \ \ \ Hot Ice! The Intercontinental Exchange Energizes The Energy Markets Feature Interview with Ice Chairman & CEO, Jeffrey Sprecher by: Russell Wasendorf, Sr. Anyone who reads the papers or watches the news knows how important energy trading has become. Besides being a political battlefield, it is also a huge moneymaker (for some) and a high-risk game whose biggest players are engaged in a kill-or-be-killed competition. As CEO of the Intercontinental Exchange (ICE), an over-the-counter electronic energy trading market, Jeffrey Sprecher revitalized the energy business by buying the London-based International Petroleum Exchange and putting energy futures and over-the-counter markets on one electronic platform. He also gave the New York Mercantile Exchange (NYMEX), the home of the liquidity for most of the crude oil and natural gas futures, some major competition. Sprecher is the epitome of an entrepreneur. He used his own money—along with his ingenuity and influence—to form ICE, and he turned it into a success by making the right moves at the right times. He knew when to get out of the alternative power plant industry in California—shortly before energy deregulation—and he knew how to profit in the deregulated market by filling a need. Sprecher also led ICE through a long and messy court battle with the NYMEX over ICE’s use of that exchange’s settlement prices, maintaining that his exchange had as much right to those prices as any other market participant. He took ICE public in 2005 with the largest IPO in Georgia’s history, $416 million at $26 per share. The share price jumped 67 percent in the first day of trading on the New York Stock Exchange and is currently about $66.00 per share. A self-proclaimed “business junkie,” Sprecher was ahead of the game in predicted several major trends. His insights into the current—and possible future—state of the energy markets make an interesting read and an invaluable one for anyone following the enormous technological and other changes the markets continue to undergo. RW: You have achieved tremendous success with ICE. What is your background? What brought you to this point? JS: For most of my career I worked in the electric power industry developing power plants. I was based in California. When California decided to deregulate the power industry, part of the plan was to create an exchange so buyers and sellers could discover the price of power. I got on a committee that was put together as a public/private partnership to try to figure out how the exchanges work. I was advocating that we should have a free-market exchange. What ultimately came out of that was a decision to create a government-backed exchange. I disagreed with that model and decided to set up ICE to become a power exchange for the other 49 states. As fate would have it, the California model did not succeed, and ultimately ICE’s model did—and today we are the largest venue for trading power in North America. RW: You mean primarily electricity? JS: Yes. ICE has become much more than I had anticipated. It’s much more global; it has energy products way beyond electric power, including gas and oil. We have a futures exchange. As luck would have it, what started as a relatively simple goal ended up as something much larger. RW: When did you buy the International Petroleum Exchange (IPE)? JS: We bought that in 2001. Stepping back, I bought a company called Continental Power in 1997, and that became the precursor to the Intercontinental Exchange. The name change stemmed from the fact that we were more than continental and we were going to do more than power. We actually formed ICE in 2000 and it was that year that we got the backing of 13 large market makers who agreed to support the platform. Then a year later in 2001 we bought the IPE which for the first time put over-the-counter (OTC) and futures markets together under one entity. Ultimately we put the IPE, which is now called ICE Futures, on the screen so we had OTC and futures trading electronically. RW: This was occurring at about the same time that Enron was collapsing, so you were ready to step in with an over-the-counter product as they crumbled? JS: Correct. We benefited in a way from the collapse of Enron in that the collapse showed the problems with a one-to-many trading system as opposed to our many-to-many neutral platform. Also Enron had gotten an exemption from oversight by the CFTC whereas we registered with the CFTC. So I think the combination of a many-to-many model that had a better regulatory regime in the face of a collapsing Enron was something the market was ready for. RW: Congratulations—you just got your seventh month in a row record in volume. What is your market share over the New York Mercantile Exchange, your primary competition? JS: It is in the futures arena. We have more than 50 percent of light, sweet crude oil futures trading. Light sweet crude includes both Brent and West Texas Intermediate crude, which are two similar grades of crude. We have about a 55 percent market share in the middle distillate futures market, which is heating oil, and we trade European gasoil. Similarly, NYMEX trades U.S. heating oil. We’re hoping to build liquidity in heating oil. And then in the area of natural gas, NYMEX has a natural gas future in North America; we have a natural gas over-the-counter market in North America. If you look at that as a whole, I would estimate we have about a 40 percent market share in cleared natural gas and NYMEX has the rest in their futures and OTC business. We also trade electric power, which the NYMEX does not trade, and we probably have 80 percent market share in cleared OTC power, versus the rest of the market, which is mostly block trades that are given to NYMEX for clearing on their platform. We pretty much split the energy markets, since we have different offerings for the market. RW: So let’s see…NYMEX is 135 years old and you are six? And you already have half of the total market volume. This is a story very similar to the International Securities Exchange. When they came out to compete with the very dominant Chicago Board Options Exchange, it was just a matter of months before ISE was eating into the CBOE’s volume; they soon exceeded CBOE’s volume. Are there other similarities between the way the ISE took volume away from the CBOE and the way you are taking volume away from NYMEX? JS: I actually think the stories are quite similar. Both “ices” — we call them “the other ice” — started around the year 2000. Both went into markets that were dominated by incumbents that had been through many generations of trading and technology changes. But we both came in and showed we could find a way to innovate in a market and use technology as a tool to lever our way into the markets. And I think it shows in both cases that an innovative solution can come into an already-served market and attract business. RW: You were quoted in the Atlanta Journal-Constitution saying that “our decision to go electronic was led by our customers.” Whenever I hear about exchanges going electronic, they invariably say, “by the demand of our customers” “to serve our customers better,” etc. The intention of floor trading is always to serve the members. It seems odd to me that even the regulators are trying to make things equal in the markets, that regulators are not more strongly backing electronic trading, because the only ones that have the advantage in pit trading are the people on the trading floor. Any information coming off the trading floor is a delayed quote, so you’re getting something after the fact. JS: I think the counterpoint to that is that these decades-old exchanges have come to create benchmark pricing that had billions of dollars of commerce tied to them, and as the transition is going on, the regulators and the major market participants seem very concerned that the transition be done in such a way that it doesn’t have a negative impact on people’s confidence in the market. I think you’ve seen almost all the exchanges in the world take a slightly different path, but at the end of the day it does seem that technology is ultimately the winner, regardless of the path. LIFFE derivatives exchange, ICE Futures and the Matif, we all closed our floors in a binary manner. In the case of the Chicago Mercantile Exchange and the Chicago Board of Trade and now NYMEX, they’re gravitating from floor to screen in an organic way. In the case of companies like Eurex and to a certain extent ICE’s OTC market, we created pure electronic markets without having the benefit of a floor. In that set of examples, almost all of those exchanges are highly successful…so it almost seems that if management can set the exchange on the right path then the natural forces will ultimately take over. RW: After you bought the IPE, were you already a public firm at that time or did you go public afterwards? JS: We went public afterwards. We bought it with the stock in a share-for-share transfer of private company stock. RW: So why didn’t you do the IPO on the London exchange? JS: We actually planned on going public shortly after the merger and we thought we might do the IPO in the U.S. and in London. Then it was the end of 2001 when Enron collapsed, and the whole market in energy started to go through a change, and we could see that coming. It showed up in a loss of volume in the OTC markets and a gain in volume in the futures markets as there was a flight to a lower number of more highly-regulated contracts. It just didn’t seem like the right time to go public. So we revisited the topic last year and went public then. At that time we were in a Sarbanes-Oxley world with a fully-electronic NASDAQ, a soon-to-be-hybridized NYSE and an electronic London Stock Exchange. In looking at the investor pool we were going to target for our shares, what we saw was that the CME, the CBOT, the ISE and NASDAQ were all public companies and there seemed to be a bias toward listing on the New York Stock Exchange, so we followed the trend there so we could stay close with the other exchanges. That was particularly important for us, because we didn’t have a strong brand identity outside the energy business. Listing with the other exchanges on the NYSE was a compelling way for us to extend our branding beyond the energy markets. RW: I find that interesting—you mentioned Sarbanes-Oxley. Did you feel that Sarbanes-Oxley could have swayed your decision? JS: You know, it’s interesting, because we have been implementing Sarbanes-Oxley controls internally for the last year or more, and they are definitely somewhat intrusive in running a business. It’s not clear to me that everything is to the benefit of shareholders. Because we decided not to go public in 2002 we had a three-year period of getting ready to be a public company, and ultimately that helped us. Had we not had that period, I don’t know that we would have been as ready to be a public company. So I can see the need for newly formed companies that don’t have the infrastructure to go public. It’s too bad. And I certainly understand John Thain’s interest in creating a global exchange that has multiple listings and is around the world under one platform. Right now there does seem to be a regulatory difference in the cash equities business that could make a global exchange more competitive. RW: Let’s talk about that, because there is a criticism that you have an advantage, since ICE futures is a London-based exchange and you’re actually regulated by the London regulators, the Financial Services Authority? (FSA) The NYMEX has backed off a bit on their criticism, but they claimed that you were unfairly regulated, since the London regulators are seen as less stringent than the CFTC. The way I look at it, the only difference really is that the London regulator doesn’t require large trader reports and there are no limits on positions. Are those such big differences? JS: They are not such big differences, and the allegation that we are somehow under lighter regulation is just flat out wrong. The FSA regulates futures very similarly to the CFTC, they just have a slightly different way of reaching the same goal. In the case of the CFTC, they have formal large trader reports; in the case of the FSA they have what’s called risk-based regulation. In that regard, we meet regularly with the FSA to go over the positions of large traders and discuss the relative risk. Similarly, the CFTC requires that self-regulatory organizations, i.e. futures exchanges, find ways so that there contracts can’t be manipulated and squeezed as they go to delivery. So in the face of our competitor, the exchange itself has chosen to establish trading limits for three days prior to physical delivery. In the case of cash-settled contracts, the regulators in both the U.S. and the U.K. require that the underlying index be representative of the market and that the underlying index, be it physical or cash, can’t be squeezed. We’re in a unique situation; we created a contract that settles on the NYMEX price, and the regulators make sure that the NYMEX contract, where the settlement price is established, is representative of the market price. Both ICE and NYMEX settle on the same marker. It’s a nuance, but it’s an important nuance, and it’s very unfair to the FSA to suggest that they aren’t monitoring the markets properly. Another related point is that the CFTC and the FSA have a long-established working relationship that has been further cemented by the creation of ICE and the globalization of the energy trading markets, and they have entered into a working relationship and an agreement on how to share information. That’s being used in connection with ICE. We decided to voluntarily create large trader reports in the form that the CFTC uses so that the European regulator can forward those on to the U.S. regulator in the form that the U.S. regulator is used to seeing. That has really bridged the difference between the two regulators. RW: So you are voluntarily complying with U.S. regulations, even though you’re regulated by London? JS: Correct. And we have been doing that since we launched our WTI contract, recognizing that there is a unique role for the regulators in a global market. We’ve seen in the oil markets that the oil companies and the major petroleum users like regulated markets. Discovering the world’s price of oil is subject to a lot of criticism for all of the supply-and-demand problems that oil creates. Discovering that price in a regulated market just takes one of those criticisms off the table and allows the market to function somewhat unabated. RW: Since you’ve existed as an exchange, how has the demographic of traders changed? JS: It’s been a big change, particularly lately. When we acquired the IPE in 2001 it only had 70 members and almost all of them were energy companies whose names most people would recognize. It was truly an industry organization. Today, we’ve dramatically expanded the number of people that are trading oil. We’ve brought in financial players, funds—there are, for example, over 300 energy-targeted funds that are now trading on ICE and on other venues. We have brought in algorithm traders, proprietary traders—so called “prop shops” — and retail traders. It has really expanded the audience for energy trading, which could only be done by having electronic distribution. RW: What new markets do you foresee bringing into the exchange? JS: We’re in a unique position, because we have more than 800 over-the-counter markets that trade on ICE right now. We started the process of taking bilateral markets that were dominated by the industry and adding clearing to them. We now have about 80 products that are cleared over-the-counter. Cleared markets allow funds and other qualified people to trade them alongside the industry. In the case of our WTI contract, we took the cleared OTC market and then made it a future. So we have a bit of a conveyer belt where we can start a bilateral contract traded by the trade, move it into a cleared OTC contract, and then ultimately make it a future. So, rather than have a lot of smart people sitting in the back office trying to invent new contracts, we are actually taking contracts that the trade itself has developed and just moving them along that conveyor belt to ultimately expose them to retail traders, funds and others that come into the futures business. RW: Do you trade ethanol? JS: We don’t. But it’s certainly an area we’re looking at. The whole gasoline market in North America is a bit of a mess as we’ve moved from MTBE additives and had multiple grades of gasoline in multiple states and a difficult distribution system for ethanol. There hasn’t been in the underlying physical markets yet an obvious benchmark on how to trade that gasoline-ethanol complex. A number of other exchanges have tried; corn-based ethanol and sugar-based ethanol are both trading, but at this point it’s not obvious to us that the structure of the market is ready for a futures contract. RW: It would be so much fun to promote: “Alcohol on ICE!” Any merger plans? JS: That’s certainly not something I can discuss, but I will say there is a lot of talk and speculation about M&A activity in the space. Right now it seems confined to the cash equity business with the New York Stock Exchange and the NASDAQ looking to expand globally. My impression is that the large derivatives exchanges are sitting on the sidelines waiting to see how those mergers unfold, since they have implications on what happens to LIFFE and Eurex derivatives exchanges. So a lot of speculation about M&A activity in the derivative space a year ago seems to have abated. For ICE, we simply look at M&A activity as a way of moving our business plan along. If we could buy, merger versus build…it’s something that we would consider. But all of it is in the context of trying to leverage our customer base and our technology base to create shareholder value. RW: To compare you with other exchange heads, most of them, up until recently, came off the trading floor. More recently you see the Harvard MBAs becoming leaders of exchanges. But your background is very entrepreneurial, and I can’t help thinking that must have given you a bit of an advantage in guiding your exchange in a customer-service-orientation. To survive, an entrepreneur must be very aware of what his customers want. JS: We are a unique company in that Chuck Vice, our president, and Edwin Marcial, our chief technology officer, and I were the forces behind Continental Power Exchange that ultimately became ICE. None of us had ever traded or worked at an exchange; the whole company was born by listening to customers and ferreting out their needs and trying to use that to innovate. I hope it’s in the DNA of the company, because ultimately I think it is innovation that will drive the growth in the derivatives business. You’re no longer safe from competition in the way you were in an open outcry environment where just location alone, and the complications of establishing an open outcry floor from scratch, were just too difficult, and where you had member-owned businesses that really weren’t there to develop shareholder value. In today’s environment of public company exchanges that are using technology to expand globally, and in the case of ICE, where we created a derivative on another exchange’s product similar to what the ISE has done with the S&P 500 contract, you’re seeing the new entrepreneurs finding ways to serve a market that appears to be underserved. The biggest challenge to me is to keep that kind of environment and appetite for calculated risk taking alongside of running the public company where we have to meet quarterly earnings projections and deal with a very short-term focused environment. You know, the exchange business is one of the only businesses where our shareholders and our users can see how we do every single day. One of the reasons I believe the exchanges enjoy high P/E ratios, aside from their growth rates, is that they are relatively easy to understand and monitor, and it is against that background that we have to create an entrepreneurial environment that’s willing to think outside the box. Finding that balance is really my challenge as a public company CEO. RW: As I was taking the tour of your exchange, I was struck by something that I’ve never seen in a futures exchange before, and I’ve been in almost all of the futures exchanges in the world: the customer service department. It’s a very active customer service department—you take a thousand calls a month with questions from customers. It’s certainly unique. JS: We have one here in the U.S. and one in Europe. They operate 24 hours a day and provide limited support on the weekend. When we first started the company and I created a board of directors of industry members, people from our liquidity providers, as their employees were trying to make the jump from analog (or floor) trading to electronic trading, they were encountering a lot of resistance. Management was getting on board with straight-through-processing and the ability to do risk management. But their individual traders were not as enthusiastic. And that group said to me that I had to find a way to deliver the ability to deal with the traders’ problems in real time, because traders are real-time people; they are working in a high pressure environment and don’t have a lot of time to train or problem-solve issues with the platform outside of their own trading needs. We went from being highly criticized in the area of customer support to, I think, being an industry leader in that area. It has become an incredibly important tool for ICE to manage its business. We recruit out of our customer service department for a full range of positions that open up at ICE. What we find is that if you take young people and put them in there and train them about our business, by solving problems it cuts across all lines of our business from trading issues to technology issues to just dealing with the way our customers think. We’ve been heavily promoting people out of there and putting them into all of the parts of the organization. That DNA coming from the customers and then moving it into the ranks of the organization—which is still quite a small company—I think is one of the things that makes us great. It’s a unique asset and something we’re very proud of. RW: Customer-driven revenue and innovation. JS: Member-owned exchanges were largely driven by members who were customers, but having a completely independent board of directors and a management team that is simply there to manage a neutral playing field and maintain the perception in the market that you truly are a neutral playing field—that allows us to attract all kinds of customers without favoring a particular group. When we ran our open outcry exchange after acquiring it in 2001, we used to talk about the loudest common denominator. That’s what tended to get the attention in an open outcry environment. Now in an electronic environment, it’s much more about dealing with all types of customers and issues, from helping algorithmic traders who have a lot of intricate technology needs to retail customers who simply don’t know how to reset their user ID and password—that makes an exchange. We’ve found that the algorithmic traders really do want to interact with the commercial customers, and commercial customers want to go to a place where they can get their business done quickly. Highly technological traders are providing that intraday liquidity. And that makes the market. RW: You are the very first online platform to connect with the internet. You really pushed to provide retail trading to electronic traders and a retail customer base. The makeup of your exchange is fairly similar to the makeup of my FCM. My largest department is the customer service department; the second largest is my technology department—my code writers. JS: Yes. It’s a very small management team with a large customer service and technology bent. The only other area getting a lot of attention is the financial controls area in the Sarbanes-Oxley world, which is just the cost of doing business in North America. RW: Even though I don’t have a public firm, we have to comply with most of Sarbanes-Oxley, because we are a government-regulated FCM. So when I saw you were going to do an IPO through the New York Stock Exchange, I thought, it’s really not going to be so hard because you’re already regulated in ways that other industries are not. JS: Being a private company, we were able to take calculated risks to grow the company without quarter to quarter earnings scrutiny. So with regard to Sarbanes-Oxley, the trick is coming up with a control structure that doesn’t dampen the commercial opportunities and still allows someone to take a calculated risk and move quickly. Some of that is healthy—it’s always good to test the theories. We had the luxury when we were a small private company of making code changes in the platform whenever we thought it was appropriate. As the platform has gotten bigger and more widely distributed and we get more quote vendors and more third party screen vendors, and with controls that we have, both internal and external, there’s a lot more discussion that goes into a code change and implementation. Some of that is good and some is frustrating, but I think we’ve found a good balance and you’re seeing us move quickly as we implement new technology. RW: You are about half the trading volume against NYMEX. Is there room for both of you? Do you think the neck-and-neck situation can continue or do you see a winner-take-all scenario? JS: I certainly don’t see a winner-take-all scenario. I’ve never seen any asset class or any business where there is only one. It goes against most principles our customers have, and we tend to be very close to our customers. As much as our customers rely on us, they may not want the company to be the only execution venue for energy. I think they like competition, they’ve seen how innovation has dramatically changed the energy business, and I think that the major dealers in the space recognize the benefits of competition and are going to make sure it is protected. I also think in the wake of ICE demonstrating how derivatives can be created around other exchanges’ products, that you’re going to see much more of that type of innovation all through the commodities and derivatives business, and that increased competition among all exchanges could result. It wasn’t until ICE won a lawsuit NYMEX brought against us that we paved the way through a law that allows people to continue to use exchanges’ settlement prices for the creation of derivatives products. That was a bit of a watershed event that I think ultimately is going to bring a lot more competition into the space. So I tend to think it’s going to go the other way, that there will be multiple exchanges competing, looking for new opportunities, and I think market participants would welcome that. RW: On an entirely different topic: Do you have any unattained personal goals? JS: I actually don’t. I have a great personal life that took me a very long time to achieve, and I have a very fulfilling business life, which I actually had since leaving business school. I have always been doing entrepreneurial things, which has been very rewarding and challenging at the same time. So I am a relatively happy person. RW: What was your midlife crisis? JS: I didn’t start out with a goal to run an exchange. I had a goal to create a market for the trading of electric power in North America so that I could continue building power plants. I had no desire to live in Atlanta, Georgia; I was living in California. But it became such an interesting space for me that I left my other job and really started a new life around ICE. At a point when in my 40s, that was my midlife crisis. RW: I call the futures industry the “roach hotel” because you can check in but you can’t check out. I started in this business 36 years ago and I stuck at it. There is so much changing all the time that it satisfies that entrepreneurial spirit. JS: I caught a number of trends in ICE; for example, the emergence of the use of the internet. B-to-B e-commerce. The failure of Enron and the complete restructuring of the energy business. And this move towards exchanges becoming public companies. This all fell in a short space of time that we never could have predicted when we started out, but it made things really interesting and challenging. It can keep you up at night worrying how to position your company and how to take advantage of opportunities and still protect what you’ve earned. RW: Are you an athlete? Do you work out? JS: No. I’m a business junkie. I’ve always been. RW: And I think it shows. Thank you so much for speaking with SFO. \ \ \ \
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Duncan	24-Sep-06, 03:21 PM (GMT)
5. "the elite are always ahead of the curve"
m The Sunday Times - Business The Sunday Times September 24, 2006 Bank likely to ignore ailing US and raise rates David Smith, Economics Editor THE Bank of England is set to raise interest rates further, possibly as early as next month, despite increasing signs that the American economy is slowing sharply. Some analysts think the risk of a US recession next year is as high as one in three. In spite of the prospect of a US-led global slowdown, the City remains convinced that further rate rises are on the cards. Analysts surveyed this weekend by Ideaglobal.com, the financial-research company, see a 30% probability of a hike next month from the current 4.75% level, and a 75% probability of a rise in November. “It is hard to see the Bank not hiking further before the end of the year, though next year could be a different story,” said Nick Stamenkovic, an economist with RIA Capital Markets. Fears are mounting over the US economy amid a sharp downturn in the housing market and weakness elsewhere. A downbeat survey from the Philadelphia Federal Reserve last week added to the gloom. BNP Paribas said: “With housing starts collapsing at a close to 40% annualised rate in the last six months, that the residential investment sector is melting down can no longer be questioned. “Sceptics of our view of an imminent hard landing for the economy have demanded to see infection from the housing market into the broader economy. “This extremely weak Philly Fed survey suggests widespread economic weakness may be arriving a month or two earlier than even we anticipated.” The weakness of the US economy hit global equity markets and contributed to a sharp drop in oil prices, which closed just above $60 a barrel on Friday. Some economists think the Federal Reserve may have to reverse some of this year’s hikes if the weakness persists. The Federal Funds rate stands at 5.25%. James Knightley, an economist with ING, said: “We see significant risks that could threaten recession, but believe the Federal Reserve will be able to counter the danger. “A combination of weaker growth and lower energy prices mean inflation is likely to drop sharply in the next six months, offering the Fed scope to act promptly and aggressively to offset potential for a more severe downturn.” \ \ \ m The Sunday Times - Business The Sunday Times September 24, 2006 When standing still is the best way to progress IRWIN STELZER American Account BEN BERNANKE, the chairman of the Federal Reserve Board, and his monetary-policy colleagues must have had the words of former US President Ronald Reagan ringing in their ears when they met last week — “Don’t just do something, stand there.” Which is about all they could have done, given the fact that the slowing economy calls for an interest-rate cut to prevent the housing-market slide from turning into an avalanche, and the inflation indicators have been calling for a boost in rates, at least until very recently. So best to do nothing, and continue the current “pause” while promising to remain alert to inflation should the Fed’s guess that it will soon abate prove incorrect. The Fed is to be forgiven for its decision not to choose between the doves (who see a recession around the corner) and the hawks (who see rising labour costs generating inflationary pressures). The numbers are on the side of the hawks. There are lots of ways to measure inflation, all of them flawed, but all pointing to an annual rate of around 3%, well above the Fed’s “comfort range” of 1%-2%. That means that when we correct the Fed’s current short-term rate of 5.25% to subtract out inflation, the real rate of interest is a mere 2.25%. That isn’t high enough to qualify as an inflation-fighting rate. The Fed is counting on two things. First is the slow-down in the housing market, which it has stopped describing as “gradual”. Slowing sales and rising inventories are reducing the upward pressure on prices and, in some markets, driving prices down. Steadier prices and higher interest rates make it less attractive for consumers to cash in the equity in their houses, which should slow consumer spending. The slowing market is already causing some lay-offs in the construction industry and in the offices of property agents, mortgage writers and other companies that are dependent on a high rate of house sales. The Fed is also counting on a continued drop in petrol and natural-gas prices, which are headed down, easing cost pressures on airlines, truckers, chemical companies and other energy-intensive industries. That’s where the forecasters’ problem begins. Yes, cheaper petrol lowers cost pressures on many industries. But it also frees up consumer purchasing power, and makes it cheaper to visit the mall, where the frequency of customer visits to such retailers as Wal-Mart has dropped as the cost of driving to the shops has gone up. That should give the economy a fillip that will in part offset the downward drag of a slowing housing market. The balancing of pluses and minuses is made more difficult by the fact that in a globalised economy developments in the US tell only part of the story. Economists at Merrill Lynch are predicting a sharp slowdown in growth in America, from 3.4% this year to 1.9% in 2007. But “the good news is that there are strong sources of growth outside the US that should prove resilient to a US cyclical slowdown”. That should keep the worldwide growth rate at above 5%, the firm predicts, as the Japanese, Chinese, Indian and European economies move ahead. John Connor, of the Third Millennium Russia fund, would add the Russian economy, which he says is driven not only by international demand for commodities, but by a booming consumer sector. All of which buoy markets for US exports. The implication of the disparity in growth rates of the slowing US — if it is indeed slowing — and the growing economies of Asia and other areas is clear: the dollar will fall as those growing countries raise interest rates to cool things down, and the Fed lowers rates to stimulate growth. That will make dollar assets less attractive relative to those of other countries, and reduce the inflow of dollars that the US needs to sustain its rising trade deficit. Indeed, that is already happening, which has made the international lending agencies sufficiently nervous to convene a meeting of leading trading nations to “manage” the dollar down, rather than watch it collapse. All of this esoteric detail is of little interest to most Americans. They see Ford and General Motors laying off tens of thousands of workers, read that nutters in Venezuela and Iran are plotting to cut off supplies of oil, get depressed about the situation in Iraq as the nightly television news casts a pall over dinner tables, and see American foreign policy impotent in the face of a drive by America’s old adversary, France’s Jacques Chirac, to thwart President George Bush’ s efforts to prevent Iran from acquiring nuclear weapons. According to the latest poll, 50% of Americans expect the economy to get worse, and only 14% expect it to get better (the balance see things remaining about the same). If by “worse” the majority means “to grow more slowly”, the majority is right. And that seems to be what they do mean, because 57% of Americans tell ABC News/Washington Post pollsters that their own finances are excellent or good. That may be why the National Retail Federation — not normally a hotbed of optimism — says that Christmas sales will exceed last year’s by a healthy 5%. If some analysts of the housing market are right, the retailers might indeed smile as they down their Christmas puddings. Consumers did not spend all the money they extracted from their houses. A good portion went to pay down credit-card debt, or to buy stocks, bonds and real estate, or to finance home improvements, all of which strengthen consumers’ balance sheets. Meanwhile, continued strength in the job market, and rising real incomes should cushion the effects of the housing-market problem. In the end, it would be a big surprise if the economy failed to grow by at least 2% next year, with an emphasis on the “at least” — hardly the end of the world. Irwin Stelzer is a business adviser and director of economic policy studies at the Hudson Institute \ \ \ m According to the latest poll, 50% of Americans expect the economy to get worse, and only 14% expect it to get better (the balance see things remaining about the same). If by “worse” the majority means “to grow more slowly”, the majority is right. And that seems to be what they do mean, because 57% of Americans tell ABC News/Washington Post pollsters that their own finances are excellent or good. That may be why the National Retail Federation — not normally a hotbed of optimism — says that Christmas sales will exceed last year’s by a healthy 5%. \ \ \ d what is happening or has happened is everyone and there dog has been loaded to the gunnels with debt this suits banks and the elite it bulls property then when everyone is loaded with debt a recession kicks in servicing loans starts to strangle people and property prices get hit the elite are always ahead of the curve they buy property when prices get crumpled On 24 Sep 2006, at 16:06, m wrote: Economists at Merrill Lynch are predicting a sharp slowdown in growth in America, from 3.4% this year to 1.9% in 2007. But “the good news is that there are strong sources of growth outside the US that should prove resilient to a US cyclical slowdown”. That should keep the worldwide growth rate at above 5%, the firm predicts, as the Japanese, Chinese, Indian and European economies move ahead \ \ \
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Duncan	24-Sep-06, 03:37 PM (GMT)
6. "acquire trading skills"
Book Review by: Elizabeth Cranston Winning the Day Trading Game: Lessons and Techniques from a Lifetime of Trading New to trading? Not technically skilled yet? This is the book for you. It’s not overloaded with charts and won’t confuse you with technical jargon. Instead author Thomas L. Busby has stripped trading techniques down to the bare essentials. Limiting the amount of technical analysis and fundamental analysis, Busby simply outlines several key skills you need to day trade, often using personal stories to illustrate his points. (That’s not to say that this author does not recognize the importance of analysis — there are charts — but he doesn’t bombard readers with facing pages of multiple charts.) For example, in order to emphasize the necessity of having a plan, he tells a childhood story about hopping a train to impress his older and, of course, cooler cousins. In his adolescent effort to impress, he clammed up on the train, riding it a few hundred miles from home and having to, by his father’s order, take the Greyhound bus back home. The lesson? To have a plan when you enter a trade, otherwise you may end up far off course. Along with his personal stories, Busby has filled his book with basic trading information, including advice on timing, tape reading, controlling risk and the like, all easy-to-understand, essential information for new traders. He also offers a few tips and techniques unique to his own trading. Before he delves into this, however, he discusses major losses he suffered after the crash of October 1987. Generally, trading books may discuss the author’s mistakes here and there, but rarely do they devote entire chapters to it. Needless to say, Busby certainly wants to impress upon traders the lessons he learned from this mistake and how to avoid making such huge mistakes. He reviews the importance of persistence in spite of loss, and management of risk over the quest for profits. With references to the crash of ’87 experience peppered throughout the book, he goes on to describe the skills required for successful day trading. Some of the advice may already be obvious to most readers. For example, he says, “To make money when trading, it is essential to have liquidity and volatility.” Even long-term investors, who merely stand on the sidelines of the electronic “pits” and watch the action on TV or read it on the web, know this. But, since he is covering the basics, Busby would certainly be remiss if he did not include this information. Not all the trading advice he offers is as general, however. More specifically, he identifies three trading time zones — prime times for day traders: 9:00 a.m.-10:15 a.m.; 12:30 p.m.-1:15 p.m.; 2:15 p.m.-2:45 p.m. In addition, for certain markets, he singles out key numbers — points at which a market tends to exert some amount of support or resistance. Although he offers a few numbers, some of which are historically based and some of which change based on the time of day (such as the 12:30 p.m. price for S&P futures), ultimately he recommends that a trader simply study a market he wants to trade and identify the “rhythm” of that market. In addition, Busby offers readers his own brand of advice as well. For example, he relays his own strategy for day trading futures and equities: the three Ts. The three Ts are the tick, the trade and the trend. In the tick part, a trader liquidates a portion of his position with the goal of making a small profit such as three-quarters of a point or a point, making a few ticks of profit. In the trade part, he sets his profit target two to three points above entry and exits at a key point number of resistance, liquidating another portion of his position. For the trend part, if the trend continues in favor of his trade, he can ride out the last portion of his position, making a little extra dough. All in all, Busby has crafted a book that seamlessly blends lessons of life with trading advice and tips, creating a text unique to him yet relatable to all. \ \ \ How My Worst Trade Ever Turned Me Into...A Better Trader by: John F. Carter Our author shares some intimate insight into the trials and tribulations he experienced as a beginning trader…and what he has learned to avoid disaster. Dear Diary: Why is it that individual traders routinely get the shaft? This is a question I wrote in my trading journal nearly 15 years ago. Although a diary is typically associated with a teenage girl who has just discovered her true love in third period French, it is actually a very important tool of self-discovery for the trader. This is especially important for individual traders. Like hungry cats turned loose on a rat farm, individual traders, unlike fund managers, are unsupervised and have the freedom to act unchecked in any way that they choose. Unfortunately, this kind of freedom reinforces bad habits. The biggest mistake these traders make is a common yet fatal affliction that plagues nearly all traders—they are trading to make money. Trading to make money? Isn’t that what we as traders are supposed to be doing? You would think so. However, look at it this way; traders certainly place their orders with the idea of making money. But what are most traders doing? They are losing some serious cash. So if trading to make money doesn’t work, what perspective should we be trading from? What mental shift is required to stop us from nibbling like sparrows and defecating like elephants? My Worst Trade Ever It is with these thoughts in mind that I recall my worst trade ever—the trade that beat me upside the head with a 2 x 4, snapping me awake to the realities of trading. It was this trade that made me realize that I had to adjust my mental perspective so that I could do this for a living. In the early 90s my wife and I were recent transplants to Roseville, Minnesota. We moved there from Austin, Texas in September. To say that we were unprepared for the coming brutal winter is like saying China seems to have a slight appetite for copper and cement. Of course we should have known we were in trouble when we saw a sign at Target advertising a sale on fleece underwear. Ah, hindsight. We started that winter in an apartment where we had to park our cars outside. By the time February rolled around it took us about 30 minutes to get psyched up enough to venture outside in weather sporting wind chills of 70 degrees below zero. And that was just to find out whether our cars would start—most of the time they did not. About the time we had exhausted the rental supply at Blockbuster, we decided it was time to take action. We needed a house with a garage—a heated garage—and we needed it now. We found one quickly and put in an offer at full price. It was accepted just as quickly and our dream of thawing out began to unfold before us. A Stroke of Genius? At the time I had been trading for a few years part-time and had built up a trading account to just over $150,000 trading options. My plan was to take $30,000 out of the account to use as a down payment on the house. As the closing date approached, I was struck with a brilliant idea. Why not just make a few extra trades and create the $30,000 needed for the down payment out of trading profits? That way I could keep my $150,000 trading account intact! Truly a stroke of genius. I put on the coffee and reviewed my charts for hours that night. I looked at multiple time frames and countless indicators. The hours of study drew me to the same conclusion time and time again—the major stock market averages were approaching solid resistance levels. I therefore made the one deduction that was abundantly clear to me: To buy OEX puts aggressively the next trading day. The next morning, primed and ready to go, I placed my order and then went to my day job. I was able to get quotes at the office, so I would periodically check to see where the markets were trading and whether or not I had been filled. Around lunch, the markets had drifted up to resistance and I was filled for 100 OEX puts at $8.00, or $80,000. The markets consolidated for a while and edged up just a little higher, driving down the price of the puts to $7.00. Unable to resist this bargain, I went ahead and bought another 100 puts, putting my entire account into this one trade. I calculated that a move of just two points in the option price would get me my house money. Needless to say Einstein would be impressed. The next day the markets did an odd thing. They opened higher. Even more unusual, they continue to move higher through mid-morning and into lunch. And strangest of all, the markets closed at their dead highs on the day. I was a bit perplexed, but at the same time I had confidence that the trade would work out. After all, I just needed to make the $30,000 and I would be done. If the market went against me a little, then it just meant that it would take a few more days than I expected for the trade to work out. The Pain of Loss At this point, we all know that this story will not have a Hollywood ending, so let’s cut to the epilogue. The markets screamed higher for the next four trading days in a row. Unable to take the pain any longer, I finally called my broker and begged him to close me out. I got an unimposing 75 cents for my puts, leaving me with $15,000. In just four days I had caused $135,000 to vanish into thin air. It took a few moments for this to sink in. I had just blown out my trading account. Worse, I wasn’t going to have enough money to meet the down payment on the house. I tried to console myself with thoughts like “At least I’m not part of the first landing wave on Omaha Beach.” Or, “At least I’m only 22 and have the rest of my life ahead of me.” It didn’t work. Omaha Beach actually sounded more appealing. Of course, I did what any rational person would do in this situation—I got cash advances on my credit cards so I could buy the house, and I sure as hell never said a word to my darling wife. (I’m obviously playing the odds here that she won’t read this article.) I didn’t trade again for six months. Let’s fast forward to today. A Different Time Today is August 8th, 2006. I’m looking at the markets this morning to see how everything is setting up. It’s one of those “interesting trading days” as the Federal Reserve’s FOMC announcement is at 1:15 p.m. CST, just three hours away. I know most of the markets will be quiet up until that time. The night before I viewed my daily charts in various markets. I generally look at about 30 charts each evening—the stock index futures, metals, energies, grains and currencies. There were a few things that stood out to me the night before. First, the currency pair New Zealand/U.S. dollar (NZD/USD) is trading just under its 100-period exponential moving average (EMA). It’s tested this level four times now and this time I’m looking for a break out up and through that 100-EMA. The main reason for this has to do with a bullish divergence in the 14-period RSI. See Figure 1. click image for larger view Before I went to bed I placed a bid just above the 8-period EMA (about 15 pips) at 0.6238. I placed a stop at 0.6196, which is mostly a money management related stop. My target is the 1.272 percent extension of this move higher, which is 0.6380. I always like to get “in front of” my targets, so I place an order to sell at 10 pips below at 0.6370. Going Through The Ropes I wake up to find that I’m filled, and it’s currently trading at 0.6254, up about 16 pips from my entry. I’m aware that the FOMC meeting is today so the markets could get very volatile. I move up my stop to 0.6222 and leave my target. Although I don’t trade heavily during FOMC day, I don’t mind having a few smaller positions on as long as the chart setup is clear. I find that many times prices will move up to and pause at a logical technical level on a chart just before a major economic announcement—and then the announcement will cause the chart to continue along its technical course. The next chart that caught my attention in my nightly review was a daily chart of the CBOT’s mini-sized Dow contract (YM). In looking at the chart, (see Figure 2), I can see a very clear triple test of the 11,330 area. Last Friday, August 4th, the employment numbers came out softer than expected, and the markets exploded higher on the anticipation of a pause in the interest rate cycle. However, that strength was short lived and the markets sold off hard later in the day. Now we are hovering right under that key 11,330 level. The slow stochastic is rolling over and its looking like a sell-off is setting up. click image for larger view For the YM trade I don’t place an overnight order as I did with NZD/USD. I want to wait until the next morning to see where the market opens and use the pivot levels to get into a short trade. For this I will wait until after the cash market opens at 9:30 a.m. CST. Once the market opens, I go short on an early rally to the daily resistance one (R1) pivot level at 11,295. I place a stop at 11,315, which is my standard 20-point stop when using pivots. However, in this case I actually want to hold through the FOMC announcement so I don’t place a target. Because of the chart set-up I viewed the night before, I like the prospects of a downside move after the rate hike. I might be right. I might be wrong. Like pulling the handle on a slot machine, I acknowledge that I don’t know what the market is going to do next. My stops are in and there is nothing to do but wait. The Waiting Game It’s now 1:11 p.m. CST and the announcement is coming in four minutes. Both positions are currently moving against me. The YM is rallying into the number release—it’s up about 20 points here in the last few minutes, up to 11,275. NZD/USD is falling and is down nearly 20 pips in the last 10 minutes. On a side note, I have been on a water kick, drinking 100 ounces of water each day with no caffeine. No coffee, tea, sodas, etc. I’ve been doing this for about three weeks now. It was tough to do initially and I felt tired frequently, but for the last week I have felt a lot more consistently energetic and I sleep better. I say this because I’m getting up from my desk just before the number is released because I have to pee. Ok, I’m back. The rates were left unchanged. After 17 consecutive rate hikes the Fed has finally decided to step back and see what exactly it is they have done to the economy. In looking at the charts, NZD/USD is rallying hard as the dollar collapses and I’m now up over 50 pips on the position. The YM, however, is also rallying. Before the announcement I was up about 20 points and now we are at 11,305 and I’m down 10 points. My stop is still in place at 11,315. There is nothing to do here but wait. A few minutes have gone by and the markets are now reversing. The dollar was collapsing and now it is firming and back to its highs of the day. NZD/USD is off now, trading at .6270, still decently higher from my entry. The YM is collapsing and is now down over 80 points. Ticks (a technical indicator reading) are reaching -1,000 levels now which is an extreme reading, so its time to cover. I get out at 11,204 for +101 points. (This is something I always do on my day trades. If I’m long and I get a +1,000 tick reading, then I use that as an exit signal, and vice versa.) The dollar continues to strengthen; however NZD/USD is holding up pretty good. Neither my target nor my stop has been hit so there isn’t much to do now with this trade except sit on it. If it can close higher by the end of the New York session, I will raise my stop to breakeven on the trade. Unlike the stock indexes, there aren’t any “internal” readings I can use in the forex markets such as ticks to let me know of any good spots to exit a trade. For the YM, it’s consolidating near its lows but there isn’t anything I want to do with it here. Once the FOMC announcement hits, it generally takes about 30 minutes for the markets to calm down as traders in various states of panic wind down the trades that they made “instinct.” I’m calling it a day. A little later in the day NZD/USD sells off and come down to exactly my stop. I get stopped out for -16 pips. It of course then goes on to rally over 100 pips. But since I’m trading from the perspective that I have no clue what is going to happen next, I simply move on to the next trade. Keeping the Cash Ok, back to the question—if we aren’t doing this to make money, what are we supposed to being doing this for? After my blow-up trade I didn’t do any trades for six months. I spent time with other traders, and read books like Mark Douglas’s The Disciplined Trader (Prentice Hall Press, 1990) to figure out what screw was loose in my head that would allow me to get myself into the situation that I did. I knew I could make money in the markets, but keeping it seemed to be a problem—and “keeping it” is certainly a key issue for anyone hoping to do this for a living. The net result was that I realized I had to change my perspective on what it meant to be a trader. I had already found that “trading to make money” was just courting disaster, as it automatically jump-started in me all of the bad habits losing traders have. Even if my OEX put option trade had worked out, it would have only been a matter of time before I had a blow up. What finally sank in was that when I focused on the setups and not the money, I actually made money. But when I focused on the money and not the setups, money screamed running from my account. So my change in perspective was this: Instead of trading to make money, I was now trading to acquire trading skills. This perspective shift automatically kicked in the habits that most winning traders share. Letting profits run. Looking at trading as a “series of trades” instead of placing too much emphasis on each individual trade. Cutting losers off at the knees. Realizing you never know what the market is going to do next, so to position size and use stops accordingly. We’ve all heard these rules before. We know about them. But if we are trading from the wrong perspective, we will automatically override them and will only realize it after the trade is over. So in closing, dear diary, I thank you for being there so that I could record my state of mind during my disaster trade. Had it not been for you, I would have undoubtedly been plagued with additional disasters, and my relief sought not in a book on trading psychology but a bottle of Jack Daniels. Without you, I would never have learned to shift my perspective so that I could do this for a living. \ \ \
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Duncan	24-Sep-06, 05:41 PM (GMT)
7. " they benefit from chance’s tendency to favor prepared minds"
m The Sunday Times - Money The Sunday Times September 24, 2006 Hedge fund crash snares rich investors The financial meltdown of an aggressive American scheme has cast a shadow over private investors’ enthusiasm for so-called alternative investments, reports David Budworth THOUSANDS of British investors were last week caught in a $6 billion (£3.2 billion) meltdown at Amaranth, an American-based hedge fund, raising doubts over the recent rush into so-called alternative investments. Investors in the Schroder S&P Cautious Managed Distribution Portfolio and one of Clerical Medical’s pension funds were indirectly affected by the scandal, as were wealthy British clients in funds run by Credit Suisse, the investment bank, Man Group, the hedge-fund manager and Collins Stewart Tullett, the stockbroker. Investors have been pouring money into alternatives such as hedge funds and private equity in recent months to beat the stock market. Private banks have doubled the amount they suggest their wealthy clients should have in the sector over the past three years, according to Hotbed, a private-equity syndicate. Big private-sector pension schemes have also been getting in on the act, so hundreds of thousands of workers have some exposure. A survey by Mercer, a consultant, found that the average company pension fund has increased its exposure to hedge funds and private equity from 9% to 13% over the past year. Britain’s biggest pension fund, the BT company scheme, said last week that it was selling about £3 billion of traditional British shares in favour of alternative assets. But the dramatic loss at Amaranth, after a large bet on natural gas prices went badly wrong, has been a sobering reminder of the risks that some investors are taking. Among the investors sharing the losses are those in so-called funds of hedge funds run by Credit Suisse, Man Group and Collins Stewart Tullett. This type of scheme is specifically targeted at wealthy investors as well as institutions. But it is not only sophisticated investors who have been put at risk. The Schroder S&P Cautious Managed Distribution Portfolio and one of Clerical Medical’s pension funds have lost out indirectly through investments in the Goldman Sachs Dynamic Opportunities fund, though both say their exposure was small. The Goldman scheme could lose up to $15m from its investment in Amaranth. Odi Lahav of Allenbridge Hedgeinfo, a research and ratings firm, believes many professionals had been blinded to the hedge fund’s risks by the lure of big profits. He said: “Amaranth appeared in a lot of fund-of-fund portfolios. It was open about its large exposure to energy so the managers who have lost money only have themselves to blame.” Advisers are also raising question marks over the march into private equity. Private-equity funds provide finance for firms that are not quoted on the stock market or are being taken private. The aim is to restructure them and relist them on the stock market, or sell them to a trade buyer, a few years later for a healthy profit. Performance has certainly been spectacular. According to the latest figures from the British Venture Capital Association, the sector has returned an impressive 21% a year since 2003, while UK shares have risen 18.5% and bonds 6.9%. Over the past 10 years, private-equity investment trusts, the easiest route into the sector, have soared 255%. But while private equity has been a good long-term bet, some commentators caution against piling in now because much of the easy money has already been made. Jonathan Bell of Stanhope Capital, a wealth manager, said: “We are big fans of private equity in the long term. But, given the scale of money committed to the sector in the past two years and the prices being paid, investors should be concerned that future returns will not match past performance.” Richard Buxton, head of UK equities at Schroders, described the trend by pension funds to sell traditional shares to invest in private equity as “absolute madness”. He believes shares look cheap compared with private-equity investments and that canny investors should be moving in the opposite direction. “It’s absolute madness to say you ought to sell equities at these valuations to put money into private equity,” he said. But supporters of alternative investments believe the commentators knocking the sector are over-reacting. Amanda McCrystal, head of wealth management at Bramdean Asset Management, run by City high-flyer Nicola Horlick, said investors should not read too much into Amaranth’s troubles. She said: “In any sector of investment you get instances where things go wrong, but that doesn’t mean that other opportunities in the sector aren’t attractive.” While some hedge funds, like Amaranth, take big risks and are not for the faint-hearted, others aim to reduce risk as much as possible. These schemes can be attractive, particularly as they aim to produce positive returns regardless of the prevailling market conditions. Patrick Connolly at JS&P, an independent adviser, said: “We have done a lot of research into hedge funds and we believe they can add value to a portfolio — so we use them for our clients.” However, Connolly recommends having no more than 10% of a portfolio in the funds. Because of the high minimum investments — typically £100,000 — advisers do not recommend investing directly in the schemes. Instead they suggest funds of hedge funds. These are managed funds like unit trusts but rather than investing in stocks the manager invests in hedge funds. Connolly recommends Ermitage European Absolute. Because they invest in a spread of funds, even if one of their holdings implodes the impact on the overall portfolio may not be too significant. Amaranth said its losses might be 35% once it has finished unwinding positions. But the funds that are exposed to it expect to be knocked back by no more than 5%. The easiest way to get into private equity is through an investment trust that buys into a range of private businesses. Tim Cockerill at Rowan Asset Management said: “Some of the trusts are looking expensive because their share price has risen faster than their net asset values. “However, Dunedin Enterprise is at a discount of 16%, so that would be my first choice. I also like HG Capital, which has a good record but trades at net asset value.” Alternatively, syndicates such as Hotbed and Pi Capital enable you to invest in private companies directly. To become a member, you must normally earn £100,000 or more, have assets of £250,000 after tax excluding your main home or pension, have experience of investing in unquoted firms, or be a company director. SPREADING THE RISK DAVID WOOD, 58, invests in private firms through the Candover investment trust, which has more than doubled in value since he first put money into the scheme in 1999. Wood, who lives with his wife, Ann, 58, in Tonbridge, Kent, was attracted to a fund investing in private equity because he worked for one — RIT Capital Partners — before he retired. He knows that some commentators are warning that the private-equity sector is heading for trouble, but views his investment as a long-term holding. Wood also takes comfort from the international spread of private firms in Candover’s underlying portfolio. He said: ‘Buying this investment trust means my investment is well diversified in a multitude of different companies.’ \ \ \ \ m The Sunday Times - In Gear The Sunday Times September 24, 2006 Mercedes-Benz CL By Richard Bremner Massage my temples, Jeeves – and don't spare the horses Short of moving into a five-star hotel complete with personal butler, it’s hard to think of an environment that caters to your most trivial needs more effectively than the interior of a luxury car. Aching back? Then take a massage on the move, at 155mph. Too tired to press the pedals in an urban jam? Leave it to the radar — it tracks the position of the traffic in front, gently braking and accelerating your car to maintain station in the crawl. Hate parking? Drive slowly past an empty street-side space and the Mercedes CL will assess its length and, if it’s big enough, provide you with manoeuvring instructions to slot you home. Mercedes reckons on selling about 500 of these über-coupés every year, most being the £79,550 5.5 litre V8 CL 500, but a few the £106,995 twin turbo V12 CL 600. Despite such rarity the CL has significance for those of us with lesser cars because it trailblazes technology that will become more widely available. This latest model pioneers a new safety system. Unmemorably labelled Pre-Safe Brake, it incorporates the previously available Pre-Safe system (the passenger seat is moved into the optimum position should an accident be considered imminent, the air cushions in the seats are inflated for additional protection and the windows and sunroof are closed), warns the driver of said collision and calculates the stopping effort required. If the driver fails to hit the big pedal then the system brakes automatically, using 40% of the car’s stopping power to reduce the severity of the impact, if not avoid it altogether. It’s like having someone to watch over you. If these safety nets make you feel more secure, the CL itself will surely make you feel good about life. It’s big and has a svelte, muscular authority that falls on the right side of brutish. It is mildly, subtly ostentatious. The same applies to the richly furnished wood-and-leather cabin. With its 388bhp V8 and seven-speed automatic gearbox, the CL 500 will hit 62mph in 5.4sec and reaches an electronically limited 155mph. The 517bhp twin turbo V12 CL 600 (it makes do with five speeds) knocks off the sprint in 4.6sec. Both engines are really good at serving fat streams of civilised power on demand, the V12’s advantage only becoming truly useful somewhere north of 100mph. It’s built for annihilating unrestricted autobahns, and if your journeying rarely takes you there then the CL 500 will more than suffice. It is much better value, too, costing £27,445 less than the £106,995 CL 600. You’ll need to pay extra for the ventilated, massaging front seats, but the CL 500 is a lavishly kitted car. Like its pricier brother it comes with second-generation Active Body Control suspension. All you need know about this ingenious system is that both Porsche and VW want to buy it but Mercedes isn’t selling. What they’re after is its near-magical ability to stop the body of a big, heavy car like this from lurching and heaving during cornering, braking and accelerating, enabling it to move with a dexterity that would challenge cars half its size. Model Mercedes-Benz CL 500 Engine type 5461cc, eight cylinders Power/Torque 388bhp @ 6000rpm / 391 lb ft @ 2800rpm Transmission Seven-speed automatic Fuel/CO² 23.3mpg (combined cycle) / 288g/km Performance 0-62mph: 5.4sec Top speed: 155mph Price £79,550 Verdict Svelte, soothing and potent techno marvel Rating Release date March 2007 SEARCH FOR THIS CAR ONLINE But the CL is not a sports car — you’re too detached from the proceedings for that. Instead it encourages cruising, an experience all the more enjoyable if you drop all four electric windows. Like its predecessors, the CL has no central roof pillars, presenting an unimpeded view through the sides of the car and a luxuriantly breezy experience provided you don’t charge too hard. Among high-end coupés it’s almost unique in providing four adult-sized seats and a boot that will swallow a sizeable trawl of luggage. However, only the CL 500 makes sense in this speed-limited country. Few will need the near-absurd potency of the V12, its price taking it perilously close to the Bentley Continental GT whose more beautiful looks and blue blood eclipse the Benz, albeit with rear seats resembling leather-lined torture cells. But if £80,000 is your budget, then the CL 500 is your car. It comes with an engaging battery of intelligent features, it’s addictively potent, handsome, library-quiet and as comforting as a scatter of velvet cushions. THE OPPOSITION Model Jaguar XKR coupé £67,495 For Agility, looks, economy and value Against Useless rear seats Model Bentley Continental GT coupé £117,500 For Handsome, powewerful, blue blood Against Ride not the best, cramped rear seats, thirsty \ \ \ \ m i always go back to an interview with warren buffet. what he said after sept/11 was, give me a trillion dollars and i,ill so you a good time. what he was referring to, was bush giving back taxes to the american public, then he told them to spend spend spend. and they duely did. house prices then duely surged and surged and surged. citizens spent spent spent. interest rates fell fell fell. now all that is happening is the reverse, exactly as we see in nature. a flower grows, blossoms then and only then withers and finally dies. ----- Original Message ----- From: duncan robertson what is happening or has happened is everyone and there dog has been loaded to the gunnels with debt this suits banks and the elite it bulls property then when everyone is loaded with debt a recession kicks in servicing loans starts to strangle people and property prices get hit the elite are always ahead of the curve they buy property when prices get crumpled \ \ \ d regular dude is spending money on designer clothes and consumerist drivel but sooner or later they are shopped out the elite have got out of debt and they dont need an income to service there lifestyle average joe is relying on some things his job his house value staying up interest rates not going much higher and stocks and pension values not going much lower a much smarter approach would be not relying on 0 stocks due way south no ifs 10600 looks and always looked like the level, however its a question of when \ \ \ yip Commodities bottom now or soon. \ \ \ Here's to 10 Years! A Day Trader Looks Back on the Day Trading Revolution by: David Silverman Ten years after electronic trading turned the boisterous noise of the pit into the quiet click of computer keys, day trading can still generate as much adrenaline as life in the pits. I don’t remember exactly when I first heard the term day trading, but I do recall when it entered my consciousness. I was traveling to New York in April of 1998 to spend Passover with my in-laws (my mother-in-law makes an amazing brisket), and I picked up a copy of Forbes for the plane ride. On the cover was a young man named Serge Millman sitting in a trading room, looking more like a roadie for a heavy metal band than any trader I’d ever seen. The article featuring Millman was about “free enterprise” coming to Wall Street; more specifically, that with the advent of electronic communication networks (ECNs), and the implementation of more egalitarian order handling rules in January, 1997, it was now possible for electronic traders—they called themselves day traders—to compete with professional trading firms on a level playing field. The part that really intrigued me was that these day traders were making what we refer to in the industry, prosaically, as a “s**tload of money.” The 25-year-old Millman, the article reported, had earned $800,000 through day trading in the previous year, and as a 38-year-old floor trader who hadn’t been to a heavy metal concert in…well, ever, I couldn’t help being impressed. Déjà Vu All Over Again Later that week, a brisket and matzah sandwich in my briefcase, I visited the Broadway Trading Company, from which Millman conducted his business. I was amazed to discover that one block away from the New York Stock Exchange in a decrepit building with a slow elevator and rank smell in the hallways, Broadway offered its 150 traders state-of-the-art technology to connect to the exchanges and ECNs. They called their facility a trading arcade. I was also amazed to find out that Millman was only one of many similarly young, similarly unwashed, similarly successful traders. Fueled by Red Bull and Snickers bars, often arriving at the office only a few hours removed from their previous night’s entertainment, each was free to trade whatever stocks he liked in whatever manner he chose. And Lord how they traded; a typical day at Broadway during this period yielded close to 10 million shares. At two cents per share, the brokerage business produced its own s**tload of money. In 1998, the hottest stocks were the dot.coms, and with the irrational exuberance of the day stoking the flames, it was a wonder that the Broadway day traders didn’t burn down the building. As I toured the facility, met Millman and some of the other young men—there were virtually no women in the room—and listened to their tales of trading bravado, I was struck by an overwhelming sense of déjà vu. How similar this seemed to the Chicago Mercantile Exchange (CME) trading floor I had walked onto 15 years earlier as a new member. At the CME we fancied ourselves as the ultimate risk-takers, oozing testosterone from every pore. Nothing intimidated us. We took on multi-national corporations, pension funds, insurance companies, energy producers, food processors, proprietary trading houses, investment banks, and even the mighty central banks—we particularly enjoyed outsmarting them—and day after day tallied up the winnings. We felt invincible, untouchable, and wanted everyone to know it. A fellow trader who grew up on a farm and would know such things once said to me that the pits were so fertile that if you threw down a dollar bill, a tree with hundreds would grow. On most days that seemed to be an accurate assessment. Masters of their Universe We were arrogant, but it was an arrogance born of accomplishment, for we were among the elite in an industry that humbles all but the most talented. In the same way that Ted Williams said he could see the seams of a speeding baseball just before he hit it out of the park, the traders in the pit were always ready to swing for the fences. Clearly, the desire to make a great deal of money was the ultimate driver, but beyond the euphoria of cashing in, we found other sources of inspiration. Some viewed the market as a giant casino, a game of odds in which the thrill is in beating the house. Others perceived it as a challenging math problem, requiring the objective application of quantitative principles. Some saw a Darwinian struggle, with only the fittest surviving. Others craved the competition and adrenaline rush that comes with facing off against a formidable opponent. The more philosophical among us argued that the market was a political tool, a means for the ruling class to enforce a social structure that was advantageous to it. On the other hand, the free market enthusiasts—and they were surely the majority—scoffed and countered that the market was devoid of bias, that anybody in society could use it to reap the benefits of economic freedom. These were the tenets of faith that shaped our market views as well as the way we looked at the world. For some of us, there were other personal rewards that could not necessarily be quantified on a profit and loss statement. In the pit, each time a buyer and seller made a trade, they were required to call out the price of the transaction to the crowd. An exchange employee then entered that information into the CME’s pricing system, from which it was immediately transmitted to the world. Until a subsequent trade was reported, the original trade constituted the global price for that instrument. This meant, effectively, at any given instant a trader could “set” the value for a country’s currency, short-term interest rates, or an index of hundreds of stocks, simply by buying or selling from one of his colleagues. While this phenomenon—really more of a technicality—was of almost no practical importance, more than a few traders I know perceived an existential meaning in it that affected them deeply. Most traders hate the phrase “Master of the Universe,” popularized by Tom Wolfe in Bonfire of the Vanities (Farras, Straus and Groux, 1987), because it has turned into such a negative stereotype. But setting the world’s price, even if only for an instant, yielded the kind of control and power that Wolfe’s famous phrase hinted at, but did not adequately describe. For these traders it validated their existence: Any of them might have said, “I trade, therefore I am.” All of this came rushing back to me as I walked through the closely packed rows of trading desks in the Broadway arcade. With the advent of technology, the means to achieve success differed, but the methods were essentially the same: Buy on the bid and sell at the offer, follow the momentum, take small profits and even smaller losses. The room was eerily quiet compared to the boisterous noise of the pit, but the shouted out bids and offers had merely been translated into a different form: bits of data sent screaming through cyberspace with precision and speed unimaginable just a few years earlier. It was extremely appealing. Perhaps I had gotten stale on the trading floor, or perhaps it was my dormant Alpha maleness emerging from hibernation, but I had forgotten how exciting it was to be in such an environment and I could not wait to start trading like these guys. The End of the Arcade The halcyon years of the day trading revolution came to an ignominious halt with the bursting of the dot.com bubble. Traders who were used to seeing the market go perpetually up could not believe it when almost $8 trillion of stock market equity disappeared in a fraction of the time it had taken to create. Global Crossing, Pets.com, eToys.com, Webvan, XO, Worldcom, Qwest, Go.com, Kozmo.com — the list of failed companies went on and on, and the day traders did not know how to react when virtually every stock in the marketplace fell apart at once. Never having seen a bear market, they were buyers on the way down, using all the margin money their firms would lend them, and salivating over the “bargains” they were getting. The best analogy I can think of is the final scene in Raiders of the Lost Ark, when the bad guys open up the ark of the covenant and, at first, see a beautiful, sexy enchantress swirling around them. And then their faces melt off. In the end, some day traders busted out, others simply closed their positions, happy to be walking away from their workstations with a couple bucks in their pockets and their faces red, but otherwise intact. A few managed to hold on to their bull market winnings and even added to them by getting short when the market collapsed, but these were the exceptions. The trading arcades emptied, and day trading became a term of derision, synonymous with gambling, irresponsibility, and the irrational excesses of a time best forgotten. Day Trading Gets A Bad Rap The Securities and Exchange Commission (SEC) was forced to deal with the fallout from the burst of the dot.com bubble, and one of the consequences was the many lawsuits filed by day traders against brokerage firms that had lent them money to trade and encouraged them to trade actively. It is fair to question whether the ultimate responsibility for trading losses should reside with the actor or the enabler, although when the risks are fully disclosed (albeit in very, very small print), it is hard to feel sympathy for traders who made bad trading decisions and then cried that they deserved their money back. To paraphrase a classic line, “Crying!? There’s no crying in day trading!” Nevertheless, in an effort to protect future crybabies, the SEC has done its best to discredit day trading, as can be seen on a page on its website entitled “Day Trading: Your Dollars At Risk” (http://ww- w.sec.gov/investor/pubs/daytips.htm). There, you will find the following warning: “While day trading is neither illegal nor is it unethical, it can be highly risky. Most individual investors do not have the wealth, time, or the temperament to make money and to sustain the devastating losses that day trading can bring.” The web page goes on to describe some of the “facts” that every investor should know about day trading. • Day traders should be prepared to suffer severe financial losses. • Day traders do not “invest.” • Day trading is an extremely stressful and expensive full-time job. • Day traders depend heavily on borrowing money or buying stocks on margin. • Day traders should not believe claims of easy profits. • Day traders should watch out for “hot tips” and “expert advice” from newsletters and websites catering to day traders, and “educational” seminars, classes and books about day trading may not be objective. • Day traders worship Satan (especially during the quarterly triple witching hour). Okay, I made the last one up, but clearly the SEC wants people to stay as far away as possible from day trading. While one of the SEC’s roles is to try to protect the hopelessly stupid from getting involved in risky financial schemes, some of their warnings are a bit hysterical. It is true that there are no easy profits in day trading, that there are charlatans who sell worthless services, and that day trading should not be confused with investing. But anyone who has successfully day traded knows that there are two sides to every coin, dollar or bearer bond. Yes, day trading can be stressful, but what job isn’t? As for it being expensive, certainly one has to be willing to spend some money in order to trade successfully, but it is hard to think of another business that requires such a relatively small amount of start-up capital compared to the virtually unlimited potential for earnings. Day traders often use borrowed funds, but so does Donald Trump, and he seems to be doing fine. Finally, the SEC is right that day traders sometimes suffer severe financial losses, but that is what makes day trading a worthwhile pursuit; without the possibility of severe loss there can be no opposite possibility of phenomenal gain. If the SEC were really trying to give the full picture, they’d add a bullet point that says, “Day traders can make a s**tload of money.” A New Game in Town? Because of this intrinsic quality day trading continues to proliferate, and notwithstanding the fallout from the dot.com debacle, the practice can even be said to be experiencing a revival. The arcades are not as ubiquitous as before, but those who trade in today’s arcades tend to be more sophisticated and better prepared than the neophytes of the ‘90s. Today’s day traders use automated trading systems, and test their trading ideas with incredibly advanced software. They have faster connectivity and more powerful hardware, and they can buy more equipment for far less money than before. Moreover, today’s day traders trade every kind of market from stocks to derivatives, on exchanges and in the cash markets, and they have even learned how to make money on the short side. This is not to say that the percentage of successful day traders is necessarily higher than before or that there aren’t still cases where some lose more than they can afford. But, for the most part, today’s day trader is new and improved and ready to take on the world. I remember one thing I heard someone say during my long-ago visit to the Broadway arcade: that the best day traders are the ones who sit in front of their screens all day and “eat the glass.” This struck me as a perfect description of what one needs to be willing to do in order to achieve success in the markets. It isn’t easy. It can be bloody and painful, and those tiny shards get caught between your teeth, but if you really want to make it, you need to eat the glass with every trade. I don’t know what Serge Millman is doing these days or how many of the Broadway day traders who so impressed me are still trading. It doesn’t really matter. The names and faces are always changing, but if you listen carefully you can hear the sound of crunching glass. As for me, I prefer the taste of my mother-in-law’s brisket, but a fella has to make a living. \ \ \ Around the Clock Trading: Day Trading the Currency Market by: Kathy Lien How to navigate one of the only 24-hour markets, without spending your entire day glued to a trading screen. In recent years, day traders have been drawn to the foreign exchange market, as that venue has become more accessible to individual investors. Unlike the stock and futures markets where you can only be a true day trader if you trade for a living or have a gracious enough boss who doesn’t mind if you check market quotes every ten minutes, the currency market offers solid day trading opportunities, before, after and if you must insist, during work as well. The currency market is the only true 24-hour market in the world. With the largest daily trading volume and three major trading centers, there is plenty of liquidity and news flow around the clock. Day traders rely on intraday volatility to produce quick and large market movements, which is the main reason why it is difficult for most people who hold a full time job to day trade the stock or futures markets. For traders on the East Coast, with the European markets open before work and the Japanese and Australian markets open after work, there are plenty of opportunities to make a quick 20 or 30 pips (the term for points in FX), which can mean as much as $200 or $300 in the currency market. Traders on the West Coast have it even better since they can trade the U.S. and London overlap (8 a.m.-12 a.m. EST, 5 a.m.-9 a.m. PST) before work, which is where the biggest action in the currency market happens. How It Works Day traders can also zip in and out of trades without having to pay commissions at most brokerages. In many other markets, traders have to pay a commission on top of the spread, but currency traders only need to pay the bid/ask spread. With tough competition among brokerages or market makers, the spread has fallen to as little as three pips. On a percentage basis, the daily movement of a currency is small. A typical 100-pip move in the euro/dollar (EUR/USD) only represents a move of 0.4 percent. For most traders, this fluctuation is probably too small to bat an eyelash. However, the FX market is a highly leveraged market, with some brokerages offering as much as 200:1 leverage, which means that small movements can be compounded significantly. Be careful though, as excessive use of leverage can be risky since losses will be compounded just as easily as gains. Now that it is a bit clearer why the FX markets are so well suited for day trading, it is time to explore the intricacies of day trading currencies specifically. Pick The Right Currencies Not all currencies are suited for day trading. As we have mentioned earlier, day traders need volatility to be able to open and close a position on the same day with meaningful profits. For currency pairs that have a daily trading range of 30 to 40 pips, opportunities are scarce and day traders would probably have to suffice with ten pip profits at a clip. On the flip side, currency pairs with average daily ranges of 125 to 145 pips offer plenty of opportunities for quick 30-, 40- and, in many instances, 50-point profits. In the currency market, there is something for everyone. For conservative day traders, the Australia/U.S. dollar (AUD/USD), New Zealand/U.S. dollar (NZD/USD), dollar/Canada (USD/CAD) or Australia/Japanese yen (AUD/JPY) may be good currencies to trade because, for the most part, they have controlled orderly movements with ranges between 65 to 95 pips. Currency pairs such as British pound/Japanese yen (GBP/JPY) and euro/Canada (EUR/CAD) are what we call the “Google” stocks of the FX market because they frequently experience wide swings during the course of a day. These currencies are perfect for active high-risk day traders. Table 1 lists the average daily range of various currency pairs over the past year (between August 2005 and August 2006). Interestingly enough, the daily range of the British pound/U.S. dollar (GBP/USD) has increased significantly over that time as the gap between U.K. and U.S. interest rates moves from a premium in the pound’s favor to a discount. Which currency pairs you select to day trade should depend upon how aggressive a trader you are. click image for larger view Focus On The Most Active Time frames The most productive way to day trade is to focus on the most active time frames. This typically involves trading when the largest amount of market participants are actually in the market. According to the Bank for International Settlements’ 2004 Triennial Central Bank Survey, the breakdown of foreign exchange trading activity is as follows: If we combine the U.K. and the U.S., the total trading volume represents 50 percent of total market activity. Tack on Germany and Switzerland, which are open around the same time as the U.K., and you have 58 percent of total market activity. Therefore it is no surprise that when the European and U.S. markets overlap, trading is the most active. The second most active trading period is when the European markets overlap the Asian markets. In the late Asian, early European market hours, we see anywhere between 30 to 50 percent of total market activity. So for day traders, these overlaps are the best times to trade because they tend to be the most active. See the accompanying market hours list of the time of day that the overlaps generally occur as well as each market’s open and close: Keep An Eye on the Reports Economic data also work as great catalysts for market movements. In the U.S., economic data is generally released between 8:30 a.m. and 10 a.m. EST. In Europe, because there are so many countries involved, data is released anywhere between 1:45 a.m. and 6 a.m., with the biggest concentration in the 4 a.m. to 5 a.m. block, although central bank announcements from the U.K. occur at 7 a.m. EST, while the announcement from the Euro zone occurs at 7:45 a.m. EST. As for the Asian markets which include Japan, Australia and New Zealand, economic data is released between 7:30 p.m. and 2 a.m. EST. In the FX market, there is something for the night owl, early bird and insomniac. Therefore regardless of what time of day you can trade, there will always be a market and news releases for you to key off of. Keying Off Shorter Time Charts Although the premise behind day trading is not to hold positions overnight, the actual style of day traders can vary significantly. Some day traders will use five-minute charts exclusively while others prefer hourly charts. Either way, smart traders should always look for confirmation. If you trade five-minute charts, you can use 30- or 60-minute charts for confirmation. If you trade hourly charts, you can use daily charts for confirmation. The point is to make sure that the slightly longer-term trend is not conflicting with the shorter and usually more volatile market signals. A sample day trading strategy that uses a longer time frame for confirmation would take oversold and overbought signals from the slow stochastic indicator on five-minute charts, but only if the stochastic on the 60-minute chart confirms the currency’s bias. click image for larger view Let’s take a look at an example of this strategy in U.S. dollar/yen (USD/JPY). Since USD/JPY has an average daily range of 99 pips, let us assume that our strategy seeks profits of 20 points with a ten-point stop. Figure 1 reveals a five-minute USD/JPY chart with a slow stochastic. If we did not look for confirmation, we would sell each time the stochastic moved from above 80 and then back below it and buy whenever the stochastic rose from below 20. This strategy would have generated four trades according to Figure 1. Two out of the four trades would have been unprofitable, which is not bad, but if we used the 60-minute stochastic to screen the trade, we would have avoided the two unprofitable trades. Figure 2 indicates that up until 10 a.m. EST, the stochastic indicator was moving upward, indicating that the uptrend is stronger, which suggested that any moves down or retracements would probably be shallow. click image for larger view Keep Stops Tight When it comes to day trading, the most important rule is to keep stops tight. When you are going for only 20 or 30 pips with a stop of ten or 15 pips, you need to make sure that your strategy is right more than it is wrong. So make sure that the percentage of profitable trades far exceeds that of unprofitable trades. The same is true if you are going for 50 or 60 pips with a stop of 20 or 30 pips. However if you are trading a wider range pair and aim for 50 or 60 pips with a 15-point stop, you could probably suffice with focusing on a few big winners. Either way, discipline and sticking to tight stops is a cardinal rule when it comes to day trading. Having a filter helps prevent traders from falling victim to overtrading. SIDEBAR ------------------------------------------ CHOOSING AN ONLINE FOREX BROKER Is the firm regulated, with solid financials? First step – visit the NFA’s website www.nfa.futures.org to confirm that the firm is a registered FCM. Among the registered firms, look for those with clean regulatory records and solid financials. Who runs the firm? Management expertise is a key factor that should not be overlooked. Standards for a firm’s dealing practices and execution quality will be reflected in the management’s level of forex trading experience. Be sure to review staff bios to evaluate the actual level of management and trading experience at the firm. How much leverage does the firm offer? Too much of a good thing? In the case of leverage, yes. Firms offering excessively high leverage are not looking out for the best interest of their customers. A good rule of thumb is to not employ more than 100:1 leverage for standard (100k) accounts and 200:1 for mini (10k) accounts. What resources are available? Evaluate all of the free and paid tools and resources offered by the firm including, charting, news, research, wireless trading, etc. Training and education are also critical supports that are valuable for traders new to the forex market. Your forex broker should have educational services to help you both learn the market for novice traders, and to continue to learn more sophisticated trading strategies for experienced FX traders. Is 24-hour customer support available? Forex is a 24-hour market, so 24-hour support is a must. Can you contact the firm by phone, e-mail, chat, etc.? Are the reps knowledgeable? The quality of support can vary drastically from firm to firm, so be sure to experience it firsthand — before opening an account. How robust is the platform? Open a practice/demo account and test out the firm’s trading platform. A sophisticated platform will be intuitive, with real-time profit and loss (P&L) and position management. Advanced order capabilities are a must for a 24-hour market; not just stops and limit order but also complex orders such as if/then and trailing stops. The demo account should provide you with all the services and support of the live system. Experiencing the full scope of the platform’s functionality will be a key factor in your final decision. Once you’ve completed your due diligence and are comfortable with the firm’s trading platform and customer service, then you’re ready to open an account. ------------------------------------------ Putting it All Together The currency market offers a wealth of opportunities for day traders. Like your local 7-Eleven, it is almost always open. This makes it an extremely easy market for traders who also have a full-time job. However, no one wants to spend every minute of their free time staring at their trading screens and looking for the perfect opportunity. In fact this is probably the worst thing to do because it can foster overtrading. To be truly successful with day trading currencies, it is important for traders to focus on picking the right currencies to trade and the right time to trade them. In addition, when it comes to day trading, your trade either works or it doesn’t, so keep your stops tight and make sure that you look for confirmation on other time frame charts before taking the trade. \ \ \ \ Surfing the Blogosphere for Day Trading Resources by: Brett N. Steenbarger, Ph.D. Blogs written by traders for traders fill an important niche. Here’s how to navigate the new world of blogs and find the ones that can help you with your trading. My work as a psychologist has brought me in contact with a variety of traders working in proprietary firms, hedge funds and investment banks. It is fascinating to see how many styles of trading are out there and the variety of ways that traders search for a performance edge in the marketplace. As a rule, I find that there is a correlation between the amount of time and effort traders spend in preparation and the longevity of their success in the marketplace. Too often, traders with a good “feel” for the markets find their intuitions lacking when patterns of trend and volatility shift. Traders who spend quality time outside of trading to prepare their ideas, on the other hand, expose themselves to a wide array of market patterns each day. To paraphrase Pasteur, they benefit from chance’s tendency to favor prepared minds. Indeed, as I researched principles of performance expertise for my forthcoming book, Enhancing Trader Performance, I was struck by a universal relationship: Highly accomplished performers in any field spend more time rehearsing and improving their performances than actually in formal performance. Wrestlers spend more time practicing their moves and escapes than in matches; chess players review and replay many more practice games than they play in tournaments; Broadway actors and actresses will rehearse their lines many times before the curtain opens; Olympic track stars typically prepare for years for performances that may last only seconds. Finding a Needle in a Web An investor—one who holds positions months or years—has the luxury of spending considerable time reviewing market patterns, formulating trade ideas, backtesting them and tweaking the results. The day trader, however, initiates and closes positions between the market open and close, often holding positions for minutes at a time. Faced with the need to closely monitor market conditions during trading hours, the day trader has only the time in the evening and early morning to prepare for the coming day. It is imperative to use these limited hours as productively as possible. The web is both a boon and bane to the day trader in need of good market information. There is no lack of market data: just about every major portal—MSN, Yahoo! and Google—maintains financial sites that include charts and news. These sites typically include columns from well-known writers and bulletin boards with discussions among traders. In addition, trading communities such as Trading Markets (www.tradingmarkets.com), Minyanville (www.minyanville.com), and TheStreet.com (www.thestreet.com) feature data, articles and interaction among community members. Amidst this haystack of material, however, it is difficult to find the needles of valuable information that are truly relevant to a particular trader and trading style. This problem occurs in part because many people writing about markets are not necessarily day traders themselves. It is difficult for them to produce actionable material for day traders if they are not actively engaged in the markets themselves. With limited time and a bewildering array of data and websites, day traders are understandably frustrated in the search for information that can provide them with useable ideas. Blogs to the Rescue This is where weblogs (or blogs, as they’re known) have filled an important niche. Typically (though not necessarily) written by traders for traders, blogs are online journals that record thoughts and ideas as they occur. Thanks to sites such as Blogger (www.blogger.com) and Typepad (www.typepad.com), blogs can be constructed in a matter of minutes, providing an attractive layout and push-button publishing. The ability to update a blog in seconds and on the go (no resident software on the user’s machine is necessary, other than a browser) is a major factor in their timeliness. Given the ease with which all of us can now become authors, it is little wonder that the blogosphere is expanding exponentially. Technorati (www.technorati.com), the leading search service for blog content, tracks more than 47 million sites and 2.7 billion links among them. It is estimated that 11 percent of all web users regularly visit blogs and that 75,000 new blogs are added to the web every day. One reason for this expansion is that blogs can be easily syndicated through formats known as RSS (really simple syndication) and Atom. With a program known as a feed reader (or aggregator), users can subscribe to syndicated blogs. (I find the FeedDemon reader—www.newsgator.com—to be particularly user-friendly). This allows updated blogs to appear automatically in the feed reader, so that users don’t have to type in URLs and search the web for new content. (Many browsers, such as Microsoft Internet Explorer 7 and Mozilla Firefox, also support feeds.) Quite simply, you can wake up in the morning, open your reader and peruse the updated blogs you have subscribed to. No pop-up ads, no spam, no wasted time clicking around the web. Linking to a Community Another valuable aspect of blogging is the community emphasis. Bloggers consider themselves part of an online community and thus commonly link to one another, creating ongoing dialogues. Readers typically have the option to comment on blog entries, expanding the interaction. Not infrequently, ideas for my own blog entries have come from suggestions from readers or posts from other bloggers. The Technorati search engine is excellent for tracking all links to blog sites, allowing readers to see which sites are interrelated. Traders can thus quickly identify blogs that are of specific interest to them and add those to their readers. These features of blogs have made them favorites among traders. Several websites aggregate blogs and organize them by content. StockBlogs (www.stockblogs.com) breaks blogs down by their type of content (technical analysis, fundamental analysis, etc.); Seeking Alpha (www.seekingalpha.com) categorizes blog entries by the markets/sectors that they cover. Several community sites have begun their own blogs, including the Trading Markets (www.moneyblogs.com) and Trading Education (www.traderblog.com) sites. Many blogs maintain blogrolls (directories of blogs they like) on their sites, making it easy to surf the blogosphere. Trader Mike’s blog (www.tradermike.net), for example, identifies when blogs on the blogroll have been updated, making it easy for readers to keep up to date if they don’t maintain a reader. What to Look For in a Blog The ease with which blogs can be published has also meant that there are many poor-quality blogs out there. Here are some of the features that distinguish the valuable blogs from the filler: • Frequent updating – A blog is both a journal entry and a participation in a community. The most valuable blogs, on average, will be those that stay on top of the markets and post actively. As a result, such blogs build up large archives of timely and useful market information. • Unique content – The best blogs offer perspectives on the market that cannot be found elsewhere. This can be achieved in many ways. The Big Picture blog, offered by Barry Ritholtz (http://bigpicture.typepad.com), draws upon his distinctive perspectives as a money manager. John Mauldin’s popular blog, Thoughts From the Frontline(www.frontlinethoughts.com), offers in-depth analyses of trends in the economy and the markets. Adam Warner’s Daily Options Report blog (http://adamsoptions.blogspot.com) covers markets and indicators not often on traders’ radar. The excellent CXO Advisory blog (http://www.cxoadvisory.com/blog), my own TraderFeed blog(www.traderfeed.blogspot.com) and the Ticker Sense site (http://tickersense.typepad.com) offer original market research. • Actionable content – The content of the best blogs is practical, useable information that day traders can apply immediately. There are several excellent stock-picking blogs, including Trader Mike’s watchlists (www.tradermike.net), Declan Fallond’s Stock Picks (http://blog.fallondpicks.com), and Jon Tait’s Fickle Trader (www.fickletrader.blogspot.com). The Alpha Trends blog (http://themoneyblogs.tradingmarkets.com/alphatrends) utilizes video to capture the technical condition of the market; Jim Wyckoff’s blog (http://www.traderblog.com) summarizes developments across markets and their implications. My trading psychology weblog (www.brettsteenbarger.com/weblog.htm) covers unique market indicators each day to give day traders a sense for whether markets are strengthening or weakening. • Useful links – Few blog writers are as creative in finding interesting and useful market material across the web as Charles Kirk (www.thekirkreport.com). I find the links posted by the Abnormal Returns site (http://abnormalreturns.wordpress.com) to be of particularly high quality. The Big Picture (http://bigpicture.typepad.com) not only links to interesting features, but typically comments on them at length. I find these links to be important stimuli for brainstorming market perspectives. • Modeling – Because trading blogs are typically written by traders for traders, they are often quite powerful in modeling how experienced traders think about the markets. Charles Kirk (www.thekirkreport.com) keeps his trading journal online; Jon Tait (www.fickletrader. blogspot.com) puts his market homework on his blog. Trader Mike (www.tradermike.net) posts annotated charts that capture his thinking about stocks. This aspect of blogs is particularly useful for new day traders who are just beginning to develop their own trading styles. In general, the best blogs come up with fresh, relevant material on a regular basis. The worst blogs are thin veneers for advertising and self-promotion or forums for the author’s rants. As a rule, the best blogs tend to link to other good blogs, which helps traders quickly identify promising resources. If you trace the links to your favorite blog in Technorati, you’re almost certain to find other useful sites. Beyond Blogs Blogging is an inherently social activity, and some sites are taking the social dimension beyond blogging. We’re beginning to see social sites for traders such as Stock Tickr (http://www.stocktickr.com), which allow users to post their watchlists and trade ideas for all in a community to share. Creating tags for blogs on sites such as Del.icio.us (http://del.icio.us) allows for an integration of blog content based upon users’ interests. Increasingly, we’re seeing vendors of trading software utilize blogs to communicate with users and obtain feedback for product upgrades. The Trade Ideas market scanning program (www.trade-ideas.com), for example, has created real-time market scans out of patterns that were first identified in blogs. I predict it won’t be long before we see wiki-style blogs that are written and edited by communities of authors, reflecting the collective wisdom of experienced trader-writers. Blogs do not substitute for study and hard screen time to master market patterns. They can, however, provide an important source of information and ideas for traders in an engaging format. For time-starved day traders, a core set of blogs that appear each morning for a reader is an excellent addition to the pretrading routine. {Note: I do not maintain a commercial relationship with any of the sites or services mentioned in this article.} \ \ \ \ Home Base: Is Yours a Good Fit for Trading? by: Rachel Koning Beals Heed the advice of experts and proceed slowly when considering a full-time career in home-based trading. Memories of high failure rates among home-based trading greenhorns during the last equity market boom and bust have slowed what was once a stampede of professionals leaving corporate America to take on the markets in their own familiar surroundings and by their own set of rules. Still, long after the tech-bust dust has settled, dedicated day traders and thousands more stay-at-home professionals with longer-term investing horizons are still trying to make a living playing the markets and being their own boss. High-speed online access to dozens of trading platforms for stocks, options, futures and foreign exchange, laptop computers, investment boot camps and countless chat rooms have changed this profession forever. However, day trading is often the riskiest venture for most amateurs-turned-professionals, though possibly the most alluring. Be Realistic “Day trading is not a get-rich-quick scheme, even though some seminars convincingly sell it as such. It’s a full-time, dead-serious business. It takes lots of cash, tools and discipline,” says J. Steven Niznik, a writer and consultant on technology industry jobs. Investors must brace for – and save up for — a steep learning curve and the likelihood for more setbacks than gains at the outset. And that’s just talking about the professional side of this career change. Working from the isolation of home, particularly when exposed in one way or another to around-the-clock financial markets that sway and bend to geopolitical news and central banker buzz, isn’t a good fit for everyone, especially those wanting to preserve a life away from the constant monitoring of positions. That said, a time-tested routine and discipline might in fact give traders a more flexible lifestyle than 9-to-5 offered them. Don’t underestimate the amount of study and practice. “You can’t read three books and go for it. Yes, you have to be passionate about it, but in reality, a successful trader should be a little bit boring,”says trader and author Dr. Alexander Elder. Elder highlights some the personal and professional challenges facing the 16 home-based traders, both men and women, that he studies in his latest book Entries and Exits. {Editor’s note: See last month’s book review.} One, former business owner Michael Brenke, concedes that trading isn’t all adrenaline rush and profits at your fingertips. “There is a non-glamorous side to trading – isolation, no co-workers, being cut off from people. People who go to work, pay for dry cleaning their business clothes, and sit in traffic may envy you, but you have to make a much bigger effort to get out and about,” he says in the book. “The way you look at money really changes. You think of spending $25,000 to buy a car, but then ask, ‘How much income will I lose? Is that car worth the loss of income?’” Is It Right For You? So how is any reasonable person to know when to take this plunge, if at all? One place to start might be trying to define whether or not an investor’s financial health, inherent skill set, risk tolerance and investing philosophy are in fact suited for day trading — the short-term and often risky transactions aimed at capitalizing on intraday price fluctuations in higher-volume markets. A day trader will hold a stock anywhere from a few seconds to a few hours but will always get out of a position before the close of each day. Day traders usually buy on borrowed money, hoping that they will reap higher profits through leverage but running the risk of higher losses too. Within this category exists scalping — quickly buying and selling a large volume of stocks or other contracts within seconds or minutes and hoping to earn a small per-transaction profit while minimizing risk. And then there’s momentum trading, for which the trader attempts to recognize a moving pattern during the day, buying at bottoms and selling at tops. “If you’re a nail biter, day trading may not be for you. Working a regular job and investing long term for retirement may save you from bloody fingertips,” Niznik said. Some of Elder’s case studies who day trade talk of their daily dilemma of making a sandwich and missing a golden opportunity on their screen. Some home-based investors opt for so-called swing trading, in which they hold onto a stock or futures position for anywhere from a few hours to a few days. They, too, are attempting to predict the short-term fluctuations in prices but are willing to allow for some time passage for prices to move or to capture additional momentum in the stock’s price. Position traders, meanwhile, typically hold stocks for a period anywhere from one day to several weeks or months. Traders tend to be using chart-based, or technical techniques, to help make these decisions, which may not fully play out for several weeks or months. Can You Handle Being Wrong? Regardless of trading style, individuals from all walks of life may consider a screen-based career; it is often the likes of lawyers and doctors that have the smarts and the income to line a beginning trading account. In Entries and Exits, the 16 home-based traders who are offering a glimpse into their trading lives had former professions that ranged from a fundraiser to tour operator to psychoanalyst and more. It’s often not the obvious professions that turn in the best performances over time, according to Robert Deel, long-time trader, strategist and director of www.TradingSchool.com, where he’s tutored some 30,000 individuals and professional traders in market psychology, technical analysis and tactical trading. Deel’s student database turns up perhaps surprising conclusions; some of the poorest trading results based on previous vocation are engineers, doctors, dentists, attorneys, economists, accountants and computer programmers. Of course, that’s not to say there are no trading success stories from these professions. “The theme here is intelligence and success, but these groups have certain psychological characteristics,” he says. “They don’t want to be wrong; to suggest they might be mistaken is often taken as an insult,” he says, adding, “In the case of engineers, in particular, they seem not to deal with chaos well.” He’s also found that younger traders often show a better track record than even seasoned MBAs, who, he says, tend to want to back test and quantify every move, second guessing their budding trader’s instinct just as it’s taking shape. “You see an opportunity and strike. You can be wrong. Accept it and get out with a small loss.” In fact, some of the most successful traders are commercial airline pilots, according to Deel. “Everything in their job points to success: flying by instruments, following directions from the tower, getting a feel the market at both the subconscious and conscious level, and trained to deal with stressful situations,” he says. Other probable candidates for profitable trading, according to Deel, are technicians trained to read EKG machines, and in some cases, cardiologists themselves, all of whom are “used to looking at charts… the beating heart of the market.” Finally, among Deel’s students, commercial artists have fared well in the trading arena. “This group is mainly visual-oriented and perhaps not terribly mathematically inclined, but they’re problem solvers. They follow rules.” Virtual Support One of the best ways to test interest and competence in home-based trading may be through visits to chat rooms and e-mail groups that share trading ideas, which Elder highlights in his book and during the phone interview for this article. These groups can also offer social support for the now home-based trader. Collaboration certainly has its strong points and may be just the lifeline needed when striking out alone to trade. But be careful about relying too heavily on the advice and support of others for a vocation that ultimately falls on the individual trader’s shoulders. Perhaps key to the decision to trade for a living is the willingness to hold the sole responsibility for one’s fortunes. “Don’t blame others for your failures. This is an easy trap to fall into. No matter what happens, you put yourself into the situation. Therefore, you are responsible for the ultimate result,” wrote the late futures market trader and author Bruce Babcock in an introductory article for Reality Based Trading’s website. “Until you accept responsibility for everything, you will not be able to change your incorrect behaviors.” It Takes Time Deel says that even with joining a mentor program like the one he offers at www.TradingSchool.com, count on at least four years of practice or part-time trading before taking the jump into a full-time trading career. Ultimately, he says, would-be traders must think about their own personality and their ability to trade with as little emotion as possible. “We are an easy-gratification society. But traders are jumping into a gladiatorial arena dominated by professional killers. I am one of those killers. You’re not trading against your next door neighbor,” he says. “The formula for success is self-discipline plus knowledge plus skill equals experience. And those things equal profits.” SIDEBAR ------------------------------------------ Is Home-Based Trading for You? The following quiz was compiled with the expert help of career and organizational consultant Liz Bywater, PhD, president of Bywater Consulting Group located in Yardley, Pa. Consider the findings, while not necessarily scientific, an initial step in determining trading-for-a-living compatibility. Answer the following on a scale of 1 to 5. 1. I can tolerate uncertainty. ____ 2. I am confident and self-assured. ____ 3. I am flexible and can adapt to change. ____ 4. I prefer working from home to working in a corporate setting. ___ 5. I can create and stick to an efficient work schedule. ____ 6. I have strategies to avoid feeling bored or lonely while working from home. ____ 7. I have never had an addiction of any kind. ____ 8. I make educated, decisive choices. ____ 9. I am patient. ____ 10. I have a financial back-up plan. ____ 1 = I’m nothing like this. 2 = Well, I’m only a bit like this. 3 = I guess this describes me most of the time. 4 = Sure sounds like me. 5 = Wow, I couldn’t have said it better myself. What Does it Mean? 10 – 19 Don’t leave your day job. Home-based trading just isn’t a good fit for you, at least not at this point in your career. 20 – 29 There could be a future for you in home-based trading, but you may be happier and more successful doing something else. 30 – 39 You appear well suited to try a career in home-based trading. 40 and above What are you waiting for? You’ve got the right stuff. (No guarantee of financial success is meant to be implied by this ranking.) \ \ \ \ d cars still the biggest hit on the persons balance sheet over time m cars are getting cheaper all the time. \ \ \ m one has to understand emerson on wealth. = its not what one earns but what ones outlys each month. d many years just keeping up with payments most people do this you dont build wealth \ \ \
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Duncan	24-Sep-06, 06:19 PM (GMT)
8. "Most people can't think without being influenced by hindsight"
http://www.safehaven.com/article-5956.htm Summary & Outlook We remain in Sell Mode, expecting the market to move lower into 10/11. More importantly, we see the potential for an even larger move setting up after the 10/11 date running up into November. \ \ \ GOLD & COPPER (Leading vs. Lagging Indicator) by Gary Tanashian biiwii.com September 24, 2006 The mainstream financial media fails to address a critical point regarding inflation. Specifically, when inflation is referred to as "showing up in oil prices" or as a result of rising real estate or other assets, a fundamental reality is being lost. That reality being that inflation is the creation of too much money and credit that finds itself chasing various asset classes. Inflation is always the increase of "money" aggregates in relation to assets. Here at Biiwii.com, our thesis has from the beginning been that the global economy is built on boom/bust dynamics and that these dynamics are predicated on monetary events. This is why we watch the dollar and competing currencies closely and it is why we discriminate when looking at "the metals". Specifically, in so far as gold is considered a monetary metal, we discriminate it from the entire spectrum of commodities which of course gain the eventual benefits of loose money policy or liquidity-producing market dynamics. Why? Because although inflation is likely to find its way into most commodities eventually, gold has proven to be the up-front watch dog. Here is a chart that shows gold's lead in sensing the amazing round of inflation that eventually created a new commodity bull market. The chart shows a comparison of how the star industrial metal, copper, faired during the process. It lagged by nearly 2 years! If one tracks the more general CRB instead of copper, a lag of approximately 6 months is seen there as well when compared to gold. So why are goldbugs so attentive to the gold price and leading gold mining stocks at this critical juncture where Fed policy appears to be at a turning point? The chart explains a lot. Keep an eye on highly visible gold stocks like Goldcorp (GG) and Newmont (NEM) as well as the bullion ETF's (GLD, IAU) along with Central Fund of Canada (CEF) and Central Gold Trust (GTU) for indications on the next round of liquidity. © 2006 Gary Tanashian Editorial Archive CONTACT INFORMATION Gary Tanashian www.biiwii.com l Email \ \ \ http://www.financialsense.com/editorials/odonnell/2006/0924.html \ \ \ \
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Duncan	24-Sep-06, 07:19 PM (GMT)
9. "rfyl"
rfyl Will this be another failed rally attempt? or will this week be another opportunity to exit just before the November 2006 elections low in October 2006. Gold http://stockcharts.com/gallery/?$Gold CRB Index http://stockcharts.com/gallery/?$CRB __._,_.___ \ \ \
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Duncan	24-Sep-06, 07:45 PM (GMT)
10. "over the top, of the test for supply flange"
d yellow box ceiling, is the ice level yellow box, marks test for supply result brown level, is top of 1st wave up pink down slope flag, is 2nd wave the 3rd wave, is from the yellow box floor up; we are over extended; but can overextend more still
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