Money Flow Trading Method along with Risk Management

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SUNDAY, FEBRUARY 10, 2019
Tough Advice For Aspiring Traders
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Recently, I have received an unusually large number of emails and messages from new traders who have been encountering problems--and losses--in their trading. The majority have opened up their own accounts and are trying to learn on their own and eventually make a living from their trading.

Of course, they find out that it is not so easy to make a living from trading--just as it's not easy to make a living from any performance activity, from acting to sports. But to hope to learn completely on your own and somehow rise to elite levels of performance? How often does that occur in anyperformance domain? Show me a successful performer and I'll show you one who has undergone years of training, practice, and mentoring. No one goes from their backyard basketball court to the NBA. No one tries acting at home and makes the casting calls on Broadway.

No one.

But those selling services to traders won't say this. Educators will pretend that their books and classes can make traders successful. (Would anyone possibly believe that books and online courses on acting would take someone to Hollywood? To the NBA?). Coaches will pretend that, if you just use their techniques and gain mental mastery, you'll find profitability. (Really? Will emotional control and self awareness win you chess championships or help you find success as a baseball pitcher?)

I receive requests for coaching every week from individual, retail traders. In the 15 years I've been doing this full-time, how many of those requests have I taken on?

None.

Ever.

The only way I work with aspiring traders is if they are enrolled in full-time programs of mentoring, either on a hedge fund desk or a training program at an investment bank, graduate program of finance/financial engineering, or proprietary trading firm. Because anything else would not be practicing performance psychology. It would be selling hope.

If you're an aspiring trader, hope and passion and desire are not business plans. They do not substitute for talent, skill, and experience. If you think you have the talent and drive, my advice is to find yourself the best training possible and do what medical students, Olympic athletes, and performing artists do: learn from successful practitioners in a daily, structured curriculum.

It may not be what you want to hear, but that advice will save you a lot of money, time, and heartache. And, more importantly, it will free you up to do what you're truly meant to do in this world.
Further Reading:

Trading Coaches as Whores

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WHAT IS PROPRIETARY TRADING? THE COMPLETE PRIMER ON PROP FIRMS
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If you’re reading this, you’ve probably just done a search for “proprietary trading,” “prop trading,” “proprietary trading firms,” or some variation thereof, most likely trying to find out exactly what a proprietary trading firm does. It’s a reasonable question. You’re probably already trading and are looking to take your skill set and performance to the next level. You want to find the best proprietary trading firm out there that fits your needs and trading style.
Done right, researching proprietary trading firms and prop trading groups can be a formidable undertaking. You need to understand the types of firms out there, what they specialize in, and what you’re seeking to accomplish by trading at a proprietary trading firm. The issue is that it’s difficult to understand where the proprietary industry is without knowing where it began, where it has been, and where it’s going.
In the Beginning
In addition to providing trading access to their clients, Wall Street firms have always traded for their own accounts. That, in itself, is proprietary trading — trading for your own account. The difference is that these firms are trading through proprietary trading desks; they are not proprietary trading firms. Their primary focus is in acting as broker-dealers to the public, holding custody of their clients’ accounts, and investment banking.
While a proprietary trading firm may also be a broker-dealer, providing its own order routing for its traders, its purported raison d`etre is for the firm and its traders to turn a profit by trading the firm’s capital in the markets.
Proprietary trading, more colloquially referred to as prop trading, got its start in the 1980s, concurrent with the rise of hedge funds. Traders with professional experience who saw no further upward mobility or financial benefit in remaining with investment banks had two prime options in front of them. If they had the contacts to raise capital and wanted the responsibility of running accredited investors’ money, they opened hedge funds. If they didn’t want the responsibility of running other people’s money and just wanted to trade, they opened proprietary trading firms, attracting other experienced and up-and-coming traders they knew, and staked those traders with capital to trade.
It is important to bear in mind that even though this was only 30-odd years ago, this was prior to the telecommunications advances of the 1990s through the present. Not only did the internet not exist outside of DARPA, the first cell phones were just coming to the market. Prop firms still had to be wired into the exchanges or the major investment banks (or wire houses) to get their trades made. This meant that prop firms were concentrated in the major financial cities (New York, Chicago, San Francisco) and they required the brick and mortar of an office as well as specialized equipment, such as a Quotron or Bloomberg Terminal.
This was also prior to decimalization of the exchanges. Stocks traded in 1/8th dollar increments instead of one cent increments. Liquidity was also less prevalent during that time than is common today. If a trader got into a position, that position needed to move ¼ point in the direction of the trade for the trader break even, buying at the ask and selling at the bid. This impacted profit potential in a trade and forced traders to be laser focused in their pre-trade analysis.
Additionally, commissions were much higher during this period as well. While some of the larger prop firms could get better commissions because of the volume they traded, the average commission during the mid-1980s hovered around 0.6% of the market value of the trade. To enter AND exit a trade, a trader was sacrificing around 1.25% (round trip) right off the top. For a trade to be profitable, movement often had to be measured in dollars, not eighths. This meant that a trade often developed over a period of days or months (swing and position trading) rather than minutes or hours (day trading).
The difficulty in profitable trading coupled with the sunk and recurring costs required by a brick and mortar location naturally led to the founders and owners of prop firms being very discerning about who they hired to trade their capital. Prop trading was far from democratized, as it is today. Getting a job at a prop firm was either a matter of personal pedigree and connections or a storied track record of up-from-the-bottom hard work, diligence, competence and connections. Connections mattered; it was just as much of a club as the rest of Wall Street.
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Enter the ’90s
Commerce and trade is driven by the exchange of information followed by the acquisition or distribution of goods and services. This is as true for trading financial instruments as it is for discovering you’re out of milk and need to go to the store to buy some.
From the establishment of the Amsterdam Stock Exchange in 1602 through the first US stock exchange, the Philadelphia Board of Brokers in 1790, information moved at the speed of foot, horse, or sail, and later (1812) railroad.
The first transcendental leap in communications came in 1837 with the invention of the telegraph. Fast forward 155 years and we finally have the introduction of commercial dial-up internet access in 1992, just in time to take advantage of the invention of the World Wide Web in 1990.
This hockey-stick point in the computing and telecommunications industries began to democratize trading. The dotcom boom was soon to follow. The masses saw this exponential leap in communications as an opportunity and excuse to fully immerse themselves in the financial markets.
In a moment of clarity that ran in the face of tradition and an institutional desire to protect their positions and profits, brokers got on board the online commerce train rather than be run over by it and began offering online brokerage accounts in late 1994.
Beginning in 1995, an expanding economy, the digital revolution, the advent of online trading and the concomitant drop in trading commissions from the introduction of online trading all combined to create the perfect storm for stock trading. The S&P 500 index opened January 3, 1995 at 458.65 and closed December 31, 1999 at 1,469.25, an increase of 220% in five years. The worst month during that period was August 1998 where the S&P 500 had a loss of 14% but then the market rebounded and broke through to new highs over the next three months. If you were on the long side of the markets, it was nearly impossible not to make money.
Human psychology being human psychology, everyone who was in the markets thought they were geniuses. The natural extension of that thought process being, “If I can make more money trading the markets than working at my job, why don’t I?”
Stories abounded of friends of friends who quit their jobs to trade the markets. There was a retail demand for the ability to trade professionally that the financial industry was happy to fill.
During this period, many “boutique” (read as small) broker-dealers arose to cater to the new demand and branded themselves as proprietary trading firms. In addition to trading commissions that were competitive with online brokerage firms, these boutique broker-dealers enticed traders wanting to trade full-time with the prospect of being able to work among other professionals on a trading floor, which was essentially a bank of computers with a squawk box feed to the Chicago S&P trading pit. The advertised benefit of trading in a group environment was a supposed synergy among the traders and a master-apprentice environment where people who wanted to learn to trade could do so at the knee of the more experienced traders.
Broker-dealers live and die by commissions generated from their clients, so the focus of these boutique broker-dealers was to encourage their traders to trade low-priced stocks often and in volume. This practice was a driving force in the rise of the day trader. Traders would take positions in the morning and liquidate those positions immediately prior to market close, ending up in cash at the end of the day.
While traders were now trading in volume due to the seemingly never-ending rise of the market and due to the encouragement of the firms they were with, the question in the minds of every manager at every broker-dealer was how to get them to trade even more.
The problem was Regulation T.
Brokerage firms were (and still are) allowed to loan their customers money to trade stocks in a margin account, but they were limited in how much they could loan their customers by Federal Reserve Board Regulation T, referred to in the finance industry as Reg T. Since 1974, the Federal Reserve Board has set the maximum margin rate for Reg T margin to 50%. That meant that traders could only trade twice the cash value of their accounts.
The workaround was that Reg T only applies to customer accounts: it does not apply to the firm’s proprietary accounts. Up to that point, traders were simply a broker-dealer’s customers and could only be offered Reg T margin. If the broker-dealer hired a trader, even on a profit-only or commission-only basis, Reg T would not apply and brokers could offer their traders more even more leverage, leading to more trading, leading to more commissions for the broker-dealer. The only thing required of the trader was the ability to study for and pass a (then) National Association of Securities Dealers (NASD) Series 7 Exam and pass a background check.
Problem solved. The traders were still required to post their capital, but the firms could leverage them up 10, 20, even 40 times the value of their accounts. If the traders were profitable, then great. Even if they weren’t profitable, the firm had oversight on the positions and could liquidate the positions and commissions kept rolling in.
Not surprisingly, creating the group synergy and master-apprentice opportunity marketed by these new prop firms was difficult. The broker-dealers’ goal was to get their customers to trade more. The traders’ goal was to be profitable, which in practice, more often than not, meant trading less, being more focused, and concentrating on risk management. The two goals were often competing and diametrically opposed.
There is no established course of study, no college degree, that leads to a designation as a trader. Most of the jobs on Wall Street are either sales (asset collection) or back-office (administrative and compliance). This is true to this day.
Any “experienced” trader that was employed by the firm had a motivation, clearly communicated or otherwise, to get traders to trade more to generate more in commission income. Any experienced and successful trader that was not employed by the firm who was on the trading floor had the goal of generating profits for his (the demographic was overwhelmingly male) own account and any time he devoted to showing a new trader the ins and outs of the markets would take time away from his own efforts and, therefore, his profitability.
While there are a few notable exceptions of firms that took the view that it was better to have their traders be profitable and long-term customers, in the main, most of these firms treated their traders as temporary commission-generating machines, allowing them to churn their accounts and repeatedly take losses with no advice, supervision, or mentorship.
The bursting of the tech bubble in March 2000 spelled the death knell for the vast majority of these boutique broker-dealers masquerading as prop firms. The market had gone up so far for so long that people believed that it would continue to do so. When the market turned, many of those successful traders that had learned their craft in the preceding five years had no experience in a bear market and destroyed their accounts. Day trading fell out of favor among retail traders, the public at large soured on the stock market, and commission revenue dried up. Smallpox couldn’t have wiped out a population better than the tech wreck destroyed small broker-dealers in the early 2000s.

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Beyond 2000 — Survival of the fittest
The early 2000s saw some changes to the prop trading industry. In response to what was viewed as the irresponsible encouragement of day trading, in early 2001, the Securities and Exchange Commission (SEC) approved amendments to NASD Rule 2520, creating the “pattern day trader” rule which took effect in September 2001, six months after the bursting of the tech bubble. As a result, day traders had to have a minimum account equity (value of cash and marked-to-market positions) of at least $25,000. For those traders meeting this requirement, brokerage firms could offer buying power four times the value of the account but solely for intra-day trades.
The next change was that the SEC looked at the profit split structure among prop firms. The rationale was that if a firm is presenting itself as a proprietary trading firm, then a measurable amount of the profits generated from that activity should go to the firm. In the late 1990s, some firms were offering 99:1 profit splits, where the trader kept 99% of the profits generated. They were able to do this because, in actuality, the profitability of the traders wasn’t a consideration — commission generation was the sole focus of this practice.
This practice was unethical at best and morally repugnant on the other end of the spectrum. During the 1990s and into the early 2000s, it was not uncommon for traders at some prop firms to have a 97% failure rate. Their management teams knew that of 100 traders they brought in, only three would make it long-term. The aim was to get as many people in as possible and get them to generate as much in commissions as possible before they drew their accounts down to zero.
Those prop firms that were still around at the time sat up and took notice to the new legislation — quickly. The industry recognized that it was best to change their model quickly and quietly and firms reduced profit splits with their traders to show that the purpose of their prop trading activities was, in fact, to make a profit rather than to solely generate commissions. Currently, the industry has established that allowing its traders to keep 70% to 90% of profits with the firm keeping 10% to 30% provides incentive and compensation for its traders and shows that the firm is vested in its traders being profitable.
With the shift away from a commission-generation model and a need to show that the firm was generating a profit from its proprietary trading activities, prop firms had to justify the lower commission split to their traders and demonstrate that their activities focused on profitability.
Many firms could not make the shift and the industry was (rightfully) whittled down even further. The answer to both the above issues was comprehensive training for traders. The synergies and master-apprentice opportunities that prop firms had used to market their services to traders now actually had to be produced, codified, and delivered. The firms that had paid lip service to training their traders suddenly found themselves scrambling to develop training programs, only to find that quality training programs take thousands of hours to build, test, and refine.
The same issue occurred with respect to coaching and mentoring programs. The same firms that did not invest in training their traders previously found that most of those “coaches” whose previous job was to get traders to trade more and in larger sizes were not, in point of fact, very good traders themselves. Caught flat-footed, firms either opened their coffers and actually hired traders with excellent records and teaching skills or, more commonly, faked it until they could develop rising traders into a cadre of coaches.
By the mid- to late-2000s, the prop trading industry was becoming noticeably stratified. Barebones, undercapitalized firms with a patina of training and support were at the left side of the spectrum, mediocre firms in the midst of transforming their business models to become more supportive of traders muddled through as best they could, and on the right side of the spectrum, best-of-breed firms that were well-capitalized and had invested the time, energy, and capital into comprehensive training programs and coaching/mentoring programs at their inception began to clearly distinguish themselves.
Pulling Ahead of the Pack
Concurrent with the Global Financial Crisis of 2008, barebones firms on the left side of the prop trading spectrum began to fail with regularity.
Since these firms had never invested in training or supporting their traders, they had to rely heavily on their risk management systems to protect their trading operations. Unsurprisingly, given their focus on commission generation instead of trader profitability and longevity, their risk management systems were often not up to the task of multiple, heavy trader drawdowns in a fast market. The traders these firms failed to train and support were actually the seeds of the destruction of these firms.
The mid-tier firms realized they were caught between the proverbial rock and hard spot. They knew that to survive they had to make massive intellectual property investments to get their traders profitable, but they were also facing necessary investment in their risk management systems. This was all occurring as the economy as a whole was imploding due to the housing crisis. For those firms who could get their traders on the right side of the market (short) and get sturdier risk controls in place, they weathered this period battered and bruised but alive. Those that couldn’t, failed.
Among the survivors in this tier, many were so damaged that they didn’t have the capital to continue to improve their operations and were very receptive to buyout offers when the dust settled. The choice was to be acquired or face what they viewed as a lingering death as their traders moved on to better capitalized firms.
The best-of-breed portion of the spectrum began to pull noticeably ahead of the pack during this period. They had recognized far in advance that not only was the ethical choice to properly train and support their traders, but it was a far better model for longevity.
For most of these best-of-breed firms, the 2008 financial crisis represented one of the most lucrative trading environments since the late 1990s. Their traders had the knowledge to trade multi-directionally, identify and short poor performers in weak sectors, hedge portfolios against the occasional bear rally by being long on those few issues that were holding up, and size their positions correctly so that the risk taken at both the position and portfolio level were not undue. These strategies decreased reactionary risk management activity at the firm level and freed up resources to concentrate on coaching and mentoring traders.
Because of their success during this period, these best-of-breed firms were in a position to either poach top-performing traders from the less successful firms or outright dispatch and acquire the wounded mid-tier firms.
If ever there was an object lesson in businesses being rewarded for doing right by their customers, it was this time in the prop industry. Those firms that entered the industry with an eye toward fostering the profitability and longevity of their traders were rewarded, not only with increased trading profits but also with growth. Those firms that clung to the commission generation model at all costs weren’t even afforded a respectful burial.
To this day, one of the best indicators of the quality of a prop trading firm is its longevity.
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Finding and Evaluating a Prop Firm
The institutional prop firms of the 1980s still exist, but the barriers to entry there are in full effect, with a pedigreed education, industry connections, and a long apprenticeship period requirements for entrance.
Prop Firm Business Models
Among the (relatively) few remaining retail prop firms, there exists two business models: broker-dealer or non-broker-dealer. The driving force in this business decision is whether the firm chooses to view commissions as a source of revenue.
If the firm chooses to accept trading commissions as a source of revenue, it is required to be a broker-dealer, subject to associated regulatory oversight, and its traders will need FINRA licensure. Depending on the firm, the licensing requirements are a Securities Industries Essentials (SIE) exam and Series 57 top off, or the Series 7 and Series 55 exams. The Series 56 was replaced by the Series 57 in 2016 and would also be acceptable.
Some traders are best suited to find a firm with the broker-dealer model. As broker-dealers, these firms can offer their traders lower commissions than non-broker-dealer prop firms. If a trader trades in volume and is day-trading centric, the cost of obtaining FINRA licensure and the additional regulatory burden on the trader may be more cost effective in the long run.
The best-in-breed example of this type of firm is T3 Trading. T3 Trading offers excellent training and support for its traders, has recognized expert traders who are compensated by the firm to increase trader profitability, offers respectable-but-responsible leverage for its traders, and provides multiple choices between commission level and profit split.
The non-broker-dealer model does not incur the regulatory and licensure burden of a broker-dealer model. In this model, the firm foregoes the revenue stream from commissions. Contrary to some uninformed musings on chat boards and social media, this model is completely legal and acceptable to the SEC, provided the firm is not attempting to act as a broker-dealer.
Regulatory compliance is streamlined for this model and its traders are not required to obtain FINRA licensure.
While commissions are slightly higher for the non-broker-dealer model, since these prop firms are trading through institutional-grade platforms, the difference is minimal and is still far less expensive than trading at a retail brokerage firm.
The non-broker-dealer model is an excellent choice for the trader who wants to trade part-time at a professional level and for traders whose personalities are better suited to position and swing trading.
The best example of this type of model is Maverick Trading.
Know Your Goals and Trading Style
To determine if trading at a prop firm is the best path for you, you need to know what you want to get out of trading with a firm. Before you start looking at different prop firms, list out what you want to achieve, what training and support you want to see, whether you want to trade part-time, full-time, or start out part-time and transition to full-time once your trading capital can support it.
You also need to have an idea of within what time horizon you want to trade.
Done right, day trading is time intensive and often involves not only technical analysis but learning the ebb and flow of how a particular stock or group of stocks trades. This can limit your opportunities if those issues are dead money (moving nowhere) when you’re looking to trade them. If you like fast action but also want the comfort of being in cash at the end of the day, you’re probably suited for day trading.
Swing and position trading are generally grouped together because swing trading can roll right into position trading. Swing trading is anything from an overnight hold to holding for several weeks and position trading picks up at the several weeks mark and can go out to several months.
Swing and position trading are the most popular time horizons for active trading, especially for people seeking to trade part-time with a full-time day job. Gains are meaningful and movement in this timeframe relies more on technical trading than long-term fundamental analysis.
While the IRS sets long-term capital gains rates for investments held at least a year, from a trading standpoint, positions held for six months or more are investments, governed more by fundamental analysis and macro events than by technical price movements.
If your personality is most suited to in-depth fundamental analysis and you prefer to know more about the company than the people that work there, you’re probably best suited to be an investor, in which case I would recommend not trying to trade at a prop firm.
What Instruments to Trade
In addition to the time horizon that your personality is best suited to trade, you must have an idea of what instruments you want to trade or learn to trade and find a firm that specializes in those instruments.
While day trading is best known for trading the stocks themselves, prop firms long ago expanded what they were willing to let their traders trade.
Options are a popular instrument for swing and position trading. Done correctly, the potential downside risk is defined and planned for while the upside can be a considerable multiple of the risk. Options trading is a two-step process. First you need to learn how to trade stocks on a technical basis, then you need to marry that to the characteristics of the options themselves. There is far more to options trading than what is covered in The Characteristics and Risks of Standardized Options.
Currency trading, foreign exchange, forex, or FX, are all the same thing known under similar names. Forex trading is pairs trading, where you are long one currency and short another currency at the same time through a single currency pair or cross. FX trading is best suited for people with a day trading or swing trading time horizon, who like technical analysis, but are also interested in the effects geo-economic events play on interwoven economies. In the US, as a result of one of the Dodd-Frank reforms, leverage in FX trading is limited to 50:1, whereas in other countries, traders may be permitted 100:1 or greater leverage. Trading FX is an odd animal where to be successful, a trader must have a high risk tolerance but be simultaneously brutal and immediate in risk management skills.
With respect to futures and commodities trading, due to the risk, there are very few prop firms that specialize solely in futures and commodities. Those that do specialize in these instruments have higher up-front risk deposits. What is becoming more common is that existing prop firms specializing in some other instrument are offering futures and commodities trading to existing traders with successful track records and well-honed risk management skills.
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Trading Floor vs. Remote Prop Trading Firms
When you’ve answered the above questions, you must consider whether you would benefit from physically being on a trading floor provided by the firm or if you can accomplish your goals with remote support.
Once broadband internet access became widely available, Maverick Trading abandoned the trading floor model and went completely remote. This has allowed the firm to source talent without geographic constraint.
While many firms are switching to a remote model, some firms choose to continue with brick and mortar trading floors. The costs associated with these trading floors are substantial, so any monthly desk fees the firm charges its traders will likely be higher than with a remote firm, but some people find true value in the ability to trade physically next to other traders.
Training and Support
Training and support for traders was once largely viewed as an unnecessary cost center for a retail prop firm, which, as we discussed previously, led to a Hunger Games-type reaping within the industry. Today, at least among the best-of-breed firms, training and support is now viewed as a prerequisite to trader profitability and a vital tool to augment the firm’s risk management program.
For newer traders looking for prop firms for beginners, the training program should be the primary consideration.
Each firm has its own culture, time-horizon focus, trading instruments permitted, and associated risk profile.
Even at Wall Street prop firms with institutional level assets (over $100m), once someone has gotten in the door, it’s still a matter of a years-long apprenticeship program, with a new trader starting out with an internship, moving on to an Assistant Trader, then an Execution Trader, and finally a portfolio manager with his own profit and loss responsibility. This is a years-long endeavor to achieve. Even traders making lateral moves between institutional prop firms need to show audited track records to their prospective new employers.
While retail prop firms have democratized professional trading, they are taking a risk on a completely unknown quantity — the incoming trader with little to no professional experience.
The best way for a retail prop firm to mitigate this risk is for them to proactively train and support traders new to the firm — to teach them how, and why, the firm wants them to trade in a certain way with certain risk-management parameters.
Bear in mind that a comprehensive training program is a massive, but necessary, cost center to a firm. For example, at Maverick Trading, the firm’s options training program is over 250 hours of dedicated instruction and its FX training program is over 100 hours. Those programs exclude the ongoing, near-daily seminars that Maverick offers its traders for each division.
Content does not create itself, either. For each hour of video presentation Maverick Trading produces, an additional four hours in preparation, editing, and logistics is required.
Likewise, for each hour of coaching that we provide a single trader, an additional hour of preparation and documentation is required.
All this is designed to prepare a trader for successful live trading with the firm’s capital and to increase profitability once the trader is live.
Supervision and Risk Management
“If you’re the smartest person in the room, you’re in the wrong room.” – Henry Ford
Supervision and risk management are two of the most important benefits of trading with a prop firm. A lone-wolf retail trader is, by definition, the smartest person in the room.
Traders who are on their own tend to become inwardly focused. They develop affinities for positions. They become emotionally attached to positions. They invest so much time in research that they convince themselves they must be right, even when the market tells them otherwise.
It’s a common trait in people. As human beings, we have a need to be right about things. It feeds our egos. We concentrate on being right about a position rather than concentrating on being profitable in a complete portfolio.
This need to be right is the kiss of death for a trader’s portfolio.
At some point in time, every trader needs a dispassionate look at his portfolio. Someone needs to tell him, “This position is killing you. It’s affecting your decision making. Close the trade, book the loss, clear your mind, and move on. Ask yourself if this is the hill you want to die on.”
A good prop firm will supervise its traders and provide an additional level of risk management. This can take many forms, from recommending a reduced position size, recommending a shift in portfolio allocation, or forcibly liquidating positions when a trader is frozen with indecision.
The aim of a comprehensive supervision and risk management program should not solely be to protect the firm. It’s primary focus should be to protect the firm’s traders.
Risk Capital
Within retail prop firms, there are no longer any firms that do no require a Risk Capital deposit. They have all gone out of business and the last one with this model shut its doors in 2009.
Ask any manager at any prop firm and they will tell you that their traders trade more responsibly, and more profitably, when they have capital at risk as well, when they have skin in the game.
As you research prop firms, you will find that Risk Capital is first-loss capital. On the opposite side, any losses in excess of a Risk Capital deposit is non-recourse to a trader.
For example, a trader comes to a prop firm, deposits $10,000 in Risk Capital, and gets a $50,000 account. The trader puts on $40,000 in positions, which is not hard to do. One of those positions is ill-advised, such as shorting naked call options. Overnight, the company he effectively shorted announces it is being acquired at a 100% premium. The next morning the price of the underlying stock has doubled, leaving the trader with a $20,000 loss.
The trader can walk away from the trade. He won’t get any of his risk deposit back, but he can walk away. The firm will balance the $20,000 loss against the trader’s risk deposit, but the firm will eat a $10,000 loss.
All trading contains risk. Each prop firm knows this, accepts this, and profits from it, but even with focused training, ongoing support, comprehensive risk management program, and requirements for Risk Capital, in the end, it is the firm’s capital that is at risk and losses do occur.
Profit Splits and Payouts
As we discussed previously, in exchange for the use of their capital, prop firms will take a split of the profits their traders generate, typically between 10% and 30%, depending on the firm, the size of the trader’s account, and the trader’s profitability.
The ability to trade additional capital is one of the driving reasons that people come to prop firms. With proper position-sizing and risk management, a trader has the ability to make more in gross dollars with less risk than the typical lone wolf retail trader.
While each trader is different in what they expect to receive in profit splits, one thing to look for is whether the firm keeps a high-water mark on its traders accounts. If the firm does keep a high-water mark on its traders accounts, it shows that the firm has an alignment of interests with its traders, only taking a profit split if the trader is truly profitable.
Trading losses will happen to every trader: it’s the nature of the game. You want to make sure that when you do take a loss that you get to keep all the profits until you are back above your high-water mark. This allows you to get back to even much more quickly and concentrate on follow-up profitability with a clear head.
Without a high-water mark, when you do take a loss, there is a tendency for traders to trade more aggressively to get back to their break even point, which can exacerbate the situation and actually cause more losses.
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Taking the Next Step
For a beginner or even an experienced trader, the ability to receive focused training, ongoing support, and access to meaningful amounts of trading capital are all attractive benefits of trading with a prop firm.
You need to pick one whose focus fits with your individual trading time horizon and trading style, and offers instruments you want to trade or learn to trade. Training needs to be comprehensive and more in-depth than what you can get in a 15-minute online video. The aim of that training should be to make you an expert in what you want to trade.
Support should start early and be ongoing, not only during training but also during live trading. Support should be included in the services the firm provides as a matter of course and not a bolt-on accessory.
Even if the firm is a broker-dealer and receives a revenue stream from trader commissions, the focus of the firm’s operations should be, first and foremost, fostering an environment that focuses on trader profitability rather than trade volume.
Capital provided by the firm should be meaningful but responsible. It should be enough so that your profitable trades provide a genuine return on your time investment and the risk but not so massive that it promotes irresponsible position sizing.
Supervision and risk management should be constant and ongoing. While it should reward responsible risk-taking, traders should feel like they are being monitored if they take a position size that is outside the norm of their personal trading plan. Risk management programs should be designed not just to keep the trader at the firm to generate commissions, but to assist the trader to attain and maintain profitability. The focus should further be not on short-term events, but with an eye toward ensuring the longevity of a trader profitability.
In the end, finding a reputable prop firm can not only mean the difference between a trader’s success or failure, it can also help a trader achieve profitability in all market conditions and avoid the black swan events that can destroy a trader’s portfolio.
Darren Fischer is the Chief Executive Officer of Maverick Trading and co-author of Maverick Trading: Professional Techniques to Create Generational Wealth. Maverick Trading is a private proprietary trading firm with trading divisions in stocks/options and FX.

https://www.barclayhedge.com/ranking...c0223e68310bb1

https://portal.barclayhedge.com/cgi-...TA&is_yearly=1

https://portal.barclayhedge.com/cgi-...10&is_yearly=1

https://portal.barclayhedge.com/cgi-..._cta_curr_GE10https://portal.barclayhedge.com/cgi-...10&is_yearly=1

2018 Yearly Performance Awards - CTAs
Currency Traders Managing Less Than $10M — Managing At Least $1 Million but Under Million as of Month-end December 2018

 

1. Year
   201020112012201320142015201620172018
2. Sector Name
   Agricultural TradersCTAs Managing Less Than $10MCTAs Managing More Than $10MCurrency Traders Managing Less Than $10MCurrency Traders Managing More Than $10MDiscretionary Traders Managing Less Than $10MDiscretionary Traders Managing More Than $10MDiversified Traders Managing Less Than $10MDiversified Traders Managing More Than $10MFinancial/Metals Traders Managing Less Than $10MFinancial/Metals Traders Managing More Than $10MManaged Futures Energy TradersMulti-AdvisorOptions StrategiesShort TermStock IndexSystematic Traders
3. Search

CTA Program2018
CARAUM
Lecka Alpha Trading GP Limited Lecka Alpha Trading LP 24.52%6.50M
Capricorn Strategies Ltd. Trend I (FX-only) 14.99%1.80M
GAM International Management Ltd GAM Star Discretionary FX USD 4.46%2.48M
PAK Capital, LLC Currency Program -1.17%3.98M
Whitmore Capital Management Whitmore Capital, LP -2.91%5.93M
Typhon Capital Management Chiron Currency Program -3.42%2.00M
Aleph One Fund Management Ltd. Isotropic Fund -3.97%4.74M
Vortex Currency Program -7.63%2.31M
Wake Trade Technologies, Ltd. Eagle Fund USD class I1 -7.77%1.31M
Savernake Capital FX Program -8.78%2.00M

THE RANK ABOVE WAS CREATED BASED UPON THE ESTIMATED PERFORMANCE AS REPORTED BY THE FUND MANAGERS. CONSEQUENTLY, WHEN THE FINAL PERFORMANCE IS REPORTED BY THE MANAGERS IT MIGHT NOT MATCH THE POSITION AWARDED AND THE MANAGER COULD HAVE MOVED UP OR DOWN IN THE RANK.

https://www.backstopsolutions.com/pr...e-barclayhedge


BACKSTOP SOLUTIONS GROUP TO ACQUIRE BARCLAYHEDGE

Leading cloud-based technology provider deepens its productivity portfolio for institutional investors by adding capabilities in alternative investment data and indices

CHICAGO, IL, December 17, 2018 – Backstop Solutions Group, the leading cloud-based productivity suite provider for institutional and alternative investors, today announced the execution of a definitive agreement to acquire BarclayHedge, a leading provider of alternative investment data and indices.

By adding BarclayHedge to its portfolio of acquired companies, Backstop takes another significant step towards achieving its long-term vision of a productivity suite for institutional and alternative investors. With proprietary access to the 2,200 alternative investment managers and 6,900 funds tracked by BarclayHedge, Backstop will be able to offer institutional clients a unique combination of technology, tools, services, and data to help optimize their research management and due diligence workflows. Alternative asset managers who currently report to BarclayHedge will also benefit by having their exposure to asset owners potentially triple when the client communities of both Backstop and BarclayHedge are combined.
Clint Coghill, Backstop’s Chairman and CEO, said: “Backstop’s vision is to optimize every step of the investment process for institutional and alternative investment firms, from capital raising to investor relations to research and portfolio management. This acquisition supports our vision by removing friction for asset owners conducting research on alternative managers and for alternative asset managers hoping to get their data in front of those asset owners.”
He added, “With BarclayHedge’s premium reputation and meticulous collection of fund, performance, and investment data, we’ll be able to maximize our clients’ research capabilities. Our recent round of financing was undertaken to fuel growth and execute faster against our strategy, and this acquisition helps us do exactly that.”
Backstop remains committed to empowering clients to gain greater visibility into their data, no matter the source. Recent enhancements to the Backstop platform include building a user-centric integration with Preqin’s extensive Private Equity and Real Estate offerings and surfacing the data points throughout views, reports, and tools across the suite. In addition, Backstop continues to partner with other industry-leading data providers such as HFR, Morningstar, EurekaHedge, HFI, and MSCI.
Sol Waksman, Founder and President of BarclayHedge, will become President of the Backstop BarclayHedge Division. In this role, Waksman will continue to make the BarclayHedge database the premier source for research and indices on hedge funds and commodity trading advisors by expanding data coverage and providing thought leadership on alternative investment industry trends to institutional asset owners.

“I’m personally very excited to be joining forces with Backstop and its client base of both asset owners and asset managers. There are many synergies to be unlocked in our respective lines of business, and I look forward to unlocking them,” said Sol Waksman, “We collect over 300 data points per fund manager, providing institutional asset owners with a rich set of information they can rely upon to select the right managers for their portfolios. We can now make those data points available to a new universe of asset owners, as well as provide our fund managers with a more seamless reporting process through better integrated tools. It’s the classic ‘win-win’ for both companies.”
Financial Technology Partners (“FT Partners”) served as exclusive strategic and financial advisor to Backstop Solutions on this transaction.
About Backstop Solutions Group, LLC Because every minute matters, Backstop’s mission is to help the institutional investment industry use time to its fullest potential. We develop technology to simplify and streamline otherwise time- consuming tasks and processes, enabling our clients to quickly and easily access, share, and manage the knowledge that’s critical to their day-to-day business success. Backstop provides its industry-leading cloud-based productivity suite to investment consultants, pensions, funds of funds, family offices, endowments, foundations, private equity, hedge funds, and real estate investment firms.
MEDIA INQUIRIES:
Maryling Yu
VP of Marketing
(312) 277 1189
[email protected]

https://www.armstrongeconomics.com/i...uropean-union/

1825
Blog/European Union
Posted Feb 11, 2019 by Martin Armstrong
https://d33wjekvz3zs1a.cloudfront.ne...k-of-Italy.jpg
The entire project of creating the Euro was a means to allow Northern Europe to effectively takeover Southern Europe and impose its philosophy in a totally one-sided arrangement. I have stated plenty of times that all the debts of member states should have been consolidated into the central Euro debt and thereafter each state would be on its own as is the case in the United States. But from the outset, this was like pretending to be one family, but you do not really want to associate with your drunken brother-in-law who is always asking for money. Oh yes, you have to pretend to be nice at funerals and weddings. But that is where family ends. The European Union is no different.
https://d33wjekvz3zs1a.cloudfront.ne...2018-Rally.jpg
https://d33wjekvz3zs1a.cloudfront.ne...uro-Gamble.jpgThe crisis brewing here is monumental and it will tear the European Union apart at the seams. There is this crisis that because the Euro was NEVERdesigned properly to begin with, Brussels is trying to enforce its demands upon every member state to maintain austerity regardless of the consequences domestically in each member state. When Southern European states joined the Euro, they had to convert all past debts from their local currency to the Euro. What happened was not only their national debts DOUBLED in real terms, but ALL PRIVATE debts also DOUBLED. Suddenly, banks that had lent Italian lira were now demanding to be paid in Euro which doubled in real value. Nonperforming loans skyrocketed and every politicians blamed the bankers for their own misguided creation of the Euro.
Noe the crisis in philosophy is rising to the surface. The new Italian government wants to provide €1.5 billion to compensate savers for bank failures. Brussels is insisting that violates their bail-in rules and cannot be done. In the mean time, the new government intends to clean house in the Central Bank and remove all former officials stating that they has FAILED to properly supervise the entire banking crisis.
Both Vice President Matteo Salvini and Vice Regent Luigi DiMaio have made it clear that they will not comply with those EU rules and leave the people bankrupt because of the failed banks. The EU has lost all direction and no longer sees itself as a body for the people, but to merely rule the people. They have lost sight of the purpose of government in this desperate attempt to save the Euro. At the EU Commission, there has to come a day when reality crashes down upon them. This is not the way democratic governments are supposed to function.
The majority of the terms of the central bankers in Italy expire in May. We will be holding the World Economic Conference in Rome May 3rd & 4th so we will have a front row seat for the May Crisis engulfing Europe. We will be issuing a special report on the Europe Crisis and how to survive it for attendees.

Categories: European Union, Italy
« Italy Falls into Recession

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FLASH CRASH SEE CHART

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https://www.zerohedge.com/news/2019-...-flash-crashes

One month after various Yen, Lira and Pound cross flash-crashed in the aftermath of Apple's shocking guidance cut, moments ago the Swiss franc was the latest currency to flash crash when the haven currency sold off sharply against dollar and yen and euro just after 5pm EDT, as dealers took advantage of the non-existent holiday liquidity (japan is closed) to execute a stop-loss run, according to Asia-based FX traders quoted by Bloomberg.
As a result, the USD/CHF soared as much as 0.9% to 1.0096 before paring move to be up 0.4% at 1.0045; the CHFJPY slumped 0.4% to 109.22 while the EURCHF surged as much as 1.14081 before paring gains.
However, as so often happens, moments after the initial crash, BTFDers emerged and all of the pairs are now stronger on the day, as the pile up extends this time to the opposite direction.
https://zh-prod-1cc738ca-7d3b-4a72-b...%20crosses.jpg

https://moneymaven.io/mishtalk/econo...UOa2pIzhEPitg/

IMF Cuts 2019 Global Growth Forecasts Again: "We Have No Idea," Says Lagarde

https://www.gold-eagle.com/article/i...it-has-started

Egon von Greyerz

January 21, 2017


There is only one asset class on the horizon for most investors. Whether it is the professional or private investor, when they consider investing, stocks will always be first on their list. And if we exclude all debt instruments, the stock market is by far the biggest market in the world. Global stock markets are capitalised at around $80 trillion currently.


Stocks – A Stairway To Heaven?
Since the creation of the Fed in 1913, investing has been “a stairway to heaven” (Led Zeppelin). But there have been quite a few stumbling blocks on the way. In 1929 the Dow peaked at almost 400 before the crash. The low of the Dow was in July 1932 at 40 – a 90% fall. It then took 25 years until 1954 for the Dow to get back to 400. This gives an average return of 5% over a 103-year period excluding dividends. This is an excellent return and including dividends the total return approaches 10% annually.


As I have shown in previous articles, the rise of the stock market is very much linked to the increase in debt. Since Reagan came to power in 1981 for example, US debt is up 22X and the Dow up 20X.
https://www.gold-eagle.com/sites/def...on012117-1.jpg

We are now getting to the point when increasing amounts of debt and money printing is required to fuel the stock market. With the Shiller P/E currently at 28.5, the stock market is in bubble territory and approaching the 1929 overvaluation level. But we are not yet in the super-bubble area of 2000. So in theory there is room for this bubble to grow yet bigger.


Caveat Emptor
But even if stock markets can become even more overvalued than currently, they are now at levels which represent unacceptable risk especially when we look at a mean of 16.7of the Schiller inde. This makes the overvaluation 70%. This necessitates a very stern “Caveat Emptor” (buyer beware) to any stock market investor.
https://www.gold-eagle.com/sites/def...on012117-2.png


The Investment Secret Of The Century
Although stocks, bonds and property all represent very high risk, few investors look for opportunities outside these markets. And it is for this reason that most investors have totally missed the best performing asset class in this century which is of course precious metals. Most investors don’t look at gold as an investment. Gold is regarded as a volatile commodity and does not appear in the average investment portfolio. Less than 0.5% of world financial assets are invested in gold today. This extremely low level of gold investment shows that very few people understand gold and even fewer look at the performance of gold. Most investors don’t have a clue how gold has performed in the 2000s. If they did know, they would realise that they have missed the best investment in the last 16 years by a very big margin.

The table below shows how gold has done in dollars and pounds compared to the S&P and the FTSE-100.
https://www.gold-eagle.com/sites/def...on012117-3.png


This little blue and white table above is the secret of this century. Investors in the US would have made $262,000 more by investing in gold than in the S&P. In the UK, an investor would have made £448,000 more by investing in gold instead of the stock market. Very few Brits realise that by buying gold in 2,000 and never trading it they would have made 5.5X their money. The sad thing is that neither the Brits nor the Americans realise that they would make even more money in the next five years by holding gold and silver.


But the average person sadly never buys an unloved and undervalued investment. He waits until the price has gone up substantially and it becomes headline news.
I have shown above what has happened to two major stock markets in relation to gold in this century. But that is just an example. The pattern and gold’s outperformance is consistent in virtually all stock markets in the world.


Stocks To Lose 95% Against Gold
These incremental returns by investing in gold are the secrets of this century. Only a very infinitesimal percentage of investors are aware of this. But even fewer investors are aware of what will happen in the next few years. Gold will continue to outperform stock markets worldwide by an even bigger percentage. As the chart below shows, the Dow has lost hugely against gold in this century. But that is just the beginning. The current correction up of the Gold/Dow Jones ratio has probably finished. This correction is very similar to the one in the mid-1970s. Next target should be sub 1 where it was in 1980. A 1 for 1 Dow Index vs Gold could be at 10,000 Dow and $10,000 gold or with hyperinflation they could both be at 100,000. At whatever level they meet, it means that the Dow will have fallen by at least 95% against gold. Very few people can envisage such a fall today but it would not be the first time in history.
https://www.gold-eagle.com/sites/def...on012117-4.png


Insatiable Silk Road Demand For Gold
As stock markets fall and gold rises, the increased demand for physical gold cannot be satisfied at current prices. Currently the silk-road countries of China, India, Russia and Turkey absorb virtually all annual gold mine production. The chart below shows the insatiable demand for gold in these countries. Since 1995 they have bought a total of 31,000 tons.


Gold Demand In China, Russia, Turkey And India
https://www.gold-eagle.com/sites/def...on012117-5.gif

The acceleration in the Silk Road gold demand started in 2008 during the Great Financial Crisis. Since that time, these four countries have bought a total of 21,000 tons. That equals an average of 2,600 tons annually which is slightly less than annual global mine production. Some estimates consider the Chinese demand to be grossly understated in these figures. The demand from the Silk Road countries is likely to continue to be very strong in spite of current political problems in India.
As the gold price starts to rise, demand in the West will increase substantially. The dilemma is that this increased demand will take place during a period of falling goldmine production. Currently 3,000 tons are produced annually but this is expected to fall to 2,000 tons by 2025.


Institutional Demand For Gold To Treble
Official inflation figures have for an extended period been between 0% and 2% in most countries. Real inflation is of course considerably higher and even more so if asset inflation is included. But in spite of major increases in credit and money printing, inflation has been low due to low velocity of money. In 2017, we are likely to see an increase in the velocity of money leading to higher inflation and eventually hyperinflation in many countries. As inflation rises, institutional demand for gold will increase for inflation hedging purposes. Currently gold available for investment is around 0.4% of world financial assets. An increase to say 1.4% of global financial assets would involve gold purchases of $5 trillion. With annual gold production including scrap averaging around 3,500 tons in the next 8 years, the total gold production during this 8 year period would be $1 trillion at current prices. Thus there would be a total deficit of $4 trillion (at current prices) between demand and supply.

The only way that the increased investment demand can be satisfied is with higher prices since production cannot be increased. An institution who wants so spend $1 billion on gold would get 25 tons at current prices. But since there will not be enough gold available at the current price of $1,200, prices will need to increase at least fivefold to $6,000 within the next 8 years in order to satisfy the increase in demand. So for the $ 1 billion investment, the institution would get 5 tons of gold rather than 25 tons.

In addition to increased investment demand, there will be an even greater demand from the holders of paper gold. As the gold price rises, there will be a panic in the paper gold market as the paper holders of gold demand delivery. This is likely to push the gold price well above $10,000 in today’s money.
Fundamental And Technical Factors Point To Higher Gold In 2017


There are many fundamental and technical factors that point to an increase in the gold price in 2017. One of these is my good friend Ray Merriman, the foremost financial forecaster using cycles and astrology, who sees the gold price rising strongly staring in 2017 and continuing to at least 2020.

So for investors who hold physical gold and silver, 2017 should be a very interesting year. And for the ones who don’t $1,200 gold and $17 is an absolute bargain compared to what we will see in the next few years. But the most important reason for holding physical gold and silver is not the potential capital appreciation but as a hedge against a bankrupt financial system. Gold and silver is the best insurance anyone can buy as long as it is held outside the banking system.


Egon von Greyerz
Founder and Managing Partner
Matterhorn Asset Management AG

matterhorn.gold
goldswitzerland.com

https://goldswitzerland.com/the-valu...ee-whatsoever/

Is FOREX trading a Gambling??



What is SPACULATION??

Most of the time I would say uneducated Forex traders are gambling away their money since they take the easy wrong route and only use technicals and do not trade with much funds and do not have proper training and mentorshop.

Speculation is less of gambling as long as you have a reason to trade and use proper Risk Management.


BWM

I would wait for your call after 7.00pm tonight. take care.

ear Friends (Traders)

We are a company in California. We are looking for some good traders who could manage our fund. If you are seriously to want to be our traders. Plz send email to me

[email protected]

Full name, contact, your history trading, tracking records form 3 -6 months

We are welcome you working with us

Best regards

IAA Team

I was waiting for your call.

https://www.zerohedge.com/news/2019-...ops+to+zero%29

Authored by Patrick Buchanan via Buchanan.org,
After reading an especially radical platform agreed upon by the British Labor Party, one Tory wag described it as “the longest suicide note in history.”
https://zh-prod-1cc738ca-7d3b-4a72-b...dems-pb232.jpg


The phrase comes to mind on reading of the resolution calling for a Green New Deal, advanced by Alexandria Ocasio-Cortez, and endorsed by at least five of the major Democratic candidates for president.

The Green New Deal is designed to recall the halcyon days of the 1930s, when, so the story goes, FDR came to Washington to enact the historic reforms that rescued America from the Great Depression.

Only that story is more than a small myth.
The unemployment rate when FDR took the oath in 1933 was 25 percent. It never fell below 14 percent through the 1930s. In June 1938, despite huge Democratic majorities in Congress, FDR was presiding over a nation where unemployment was back up to 19 percent.

World War II and the conscription of 16 million young men gave us “full employment.” And the war’s end and demobilization saw the return of real prosperity in 1946, after FDR was dead.

Yet this Green New Deal is nothing if not ambitious.

To cope with climate change, the GND calls for a 10-year plan to meet “100 percent of the power demand of the United States through clean, renewable, and zero-emission energy sources.”

This appears to require a phase-out by 2030 of all carbon-emitting power plants fueled by coal and oil and their replacement by power plants fueled by wind and solar.

Will natural gas be permitted? Will nuclear power? There are 60 commercially operating nuclear power plants with 98 nuclear reactors in 30 states. Will they be shut down? Will the Greens agree to dam up more U.S. rivers to produce renewable hydroelectric power?

Air travel consumes huge quantities of carbon-producing jet fuel. What will replace it? Perhaps progressive Democratic candidates will set an example by not flying, and then by voting to end production of private aircraft and to ground all corporate jets. Let the elites sail to Davos.

The GND calls for an overhaul of the “transportation systems in the United States to eliminate pollution and greenhouse gas emissions from the transport sector … through … clean, affordable and accessible public transportation; and high-speed rail.”

Gas-powered cars are out. How long will that train trip from DC to LA take? And if China continues its relentless rise in carbon emissions until 2030, as permitted by the Paris climate accord, while the U.S. spends itself into bankruptcy going green, where would that leave America and China at midcentury?

“By the end of the Green New Deal resolution (and accompanying fact sheet) I was laughing so hard I nearly cried,” tweeted the Wall Street Journal’s Kimberley Strassel:
“If a bunch of GOPers plotted to forge a fake Democratic bill showing how bonkers the party is, they could not have done a better job. It is beautiful.”

The Green New Deal, say its authors, has as a goal “stopping current, preventing future, and repairing historic oppression of indigenous peoples, communities of color, migrant communities, deindustrialized communities, depopulated rural communities, the poor, low-income workers, the elderly, the unhoused, peoples with disabilities, and youth.”

Fifty years after the Great Society, apparently half the country consists of victims of oppression.
Who are their oppressors? Guess.

Among the endorsers of this Green New Deal is Sen. Cory Booker, who compares the battle to stop climate change to fighting the Nazis in World War II. Sens. Kirsten Gillibrand, Kamala Harris and Elizabeth Warren have all endorsed it. Sen. Bernie Sanders, who calls climate change “an existential threat,” was an original co-sponsor.

Nancy Pelosi has more sense. Interviewed last week, the speaker batted the Green New Deal aside: “It will be one of several or maybe many suggestions that we receive. The green dream, or whatever they call it, nobody knows what it is, but they’re for it, right?”

With her own agenda and priorities, Pelosi does not want to be dragged into having to defend a document that reads like it was written by the college socialists club.

The question, though, is why Democrats, who, if nominated, are likely to face Donald Trump in 2020, are signing on to so radical a scheme.

In a presidential election, the “out” party candidate usually has an advantage. No record to defend. He or she can choose the terrain on which to attack the incumbent, who has a four-year record.

Rarely does an out party present a fixed and stationary target as exposed as this, as out-of the-mainstream as this, as vulnerable as this.
The only explanation for the endorsement of the Green New Deal by candidates with a prospect of winning the Democratic nomination is that they are so fearful of Ocasio-Cortez and the left for whom she speaks that they must endorse her plan.

That British Tory got it right. This thing reads like a Democratic Party suicide pact.

Sorry, I was not home last night. We will try for tonight...


BWM

Thanks for posting here.


Benjamin

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https://www.zerohedge.com/news/2019-...ops+to+zero%29

Authored by David Weisberger via HackerNoon.com,
The story of QuadrigaCX has been told and retold over the past week, but all of the stories miss the most important point. Lost among the tales of lost keys, a suspicious death, & questions of the coins existence is the fact that QuadrigaCX routinely violated principles of best execution.


Wait??? Did he just say that a failure of best execution is more important than $190 million in lost Bitcoin???

Yes I did. You see, dear reader, anyone who bought Bitcoin on QuadrigaCX was either woefully ignorant of Bitcoin’s price or perhaps they were laundering their money. At CoinRoutes, we track the best bids and offers from a large number of exchanges, and, over the past year have seen the bid on QuadrigaCX consistently multiple percentage points higher than the best offers elsewhere. Price charts, such as this one from the end of September were commonplace:
https://zh-prod-1cc738ca-7d3b-4a72-b...6NaThszgBv.png

(In this chart, one can see that the best bid was from QuadrigaCX 100% of the time for the period and averaged over $150 dollars per coin more than the best offer from among the other exchanges.)

This price discrepancy existed for no rational reason. As Canada has no currency controls, why would anyone want to pay more than necessary for Bitcoin on a fringe exchange there??? It certainly was not for their top notch custodial services…

This, of course, calls into question whether the exchange actually had the Bitcoin they claimed, and, even if they did, if the coins were stolen or bought/sold from places that the authorities would be “interested” in. (OFAC countries, Drug Cartels, etc). That said, I am sure that QuadrigaCX managed to convince some poor retail investors to part with their money, as many of these investors are easily taken advantage of. While this was an extreme case, it should sound a warning note for the entire industry to start caring about best execution.

Before you dismiss this commentary as only applying to fringe exchanges, that is sadly not the case. To my knowledge none of the exchanges that dominate the market for retail investors, incorporate data from their competitors. In extreme cases, this can lead to huge potential losses for their customers, as happened late last summer on a “regulated” exchange based in NY:
https://zh-prod-1cc738ca-7d3b-4a72-b...Dqm0rTDKfZ.png

In this example, clients entered multiple orders over a 10 minute period and traded Bitcoin up to over $7550 when all the other exchanges were offering Bitcoin around $6720

While exchanges could incorporate consolidated data feeds (such as CoinRoutes provides) to avoid these problems easily enough, there is no way for individual exchanges to provide best execution as long as they stay isolated. At any point in time during the day, even reasonably sized orders executed on one exchange alone will cost much more than smart routed or algorithmic orders. We have real-time tools at CoinRoutes to evaluate these excess costs, which are, quite often, significant. For example here is a table showing the excess costs for buying or selling several currencies on individual exchanges for orders of ranging from $55,000 to $200,000 in value (To avoid picking on specific exchanges, this table does not identify them, but uses the three largest exchanges that accept accounts from US investors)
https://zh-prod-1cc738ca-7d3b-4a72-b...vyYXo-iu0w.png

So, considering all of this, what lessons should we take away from this? I would suggest the following:

1. Exchanges should stop ignoring best execution and implement consolidated data, routing technologies or both.
2. Savvy investors should “vote with their feet” and stop trading on single exchange interfaces. Use systems such as CoinRoutes or trading desks that access multiple exchange accounts and, more important, use algorithms that incorporate market data from all relevant exchanges.
3. Regulators tired of arm waving at the problems of the crypto market should get serious about best execution. That would facilitate forward movement of the industry including the approval of a Bitcoin ETF. After all, if best execution and manipulation surveillance was standard on a critical mass of exchanges, the SEC would have no reason to object to a well constructed proposal.

In conclusion, while the QuadrigaCX fiasco makes for interesting stories, it highlights more important deficiencies within the crypto markets than poor estate management. When markets institute the necessary technology, policies and procedures to deliver best execution, those adopters will flourish, while those which refuse to learn this lesson will ultimately fail.

http://www.marketoracle.co.uk/Article15904.html

Social Credit and Meta-Feudalism
Politics / Social Issues Dec 18, 2009 - 03:48 AM GMT
By: Christopher_Quigley


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“Douglas said that we are trying to pass from one type of civilization into another in which the possibilities are such that we cannot imagine.”

“The King is dead long live the King” so goes the feudal aristocratic mantra establishing power continuity. Death and birth are a part of reality and amidst the pain of death the love of life must prevail. Currently many say that American society is dying but in fact it is experiencing a transformation.

Perhaps it is actually more correct to say that America is going through a paradigm shift. This shift is tantamount to a revolution and the revolution is based on increased awareness, growing consciousness, societal dysfunction and expanding poverty. The other force driving this trend is the emergence of learning networks and the diminished effectiveness of mass broadcasting. Thus average Americans are finally starting to think as sovereigns again. Their thinking had stopped following the disaster of the civil war. This national cessation of practical awareness allowed the then Federal micro-system to usurp the Union macro-system through credit power. As a result today the Federal Government is now macro, and the Union of States micro, but this should change over the next 50 years.

Ideally the elites want the American economy to contract. They desire a constrained and hobbled society which is more demanding, more complex, more controlled, more diverse, more fractured, more local and less efficient. In a word: meta-feudal. To understand a world that is meta-feudal you should watch movies such as “Brazil”, “Roller-Ball” and “Blade Runner”. These worlds are technological but disintegrated and astonishingly unequal. The powers work through fabricated “crises”. The elite set up the current “crisis” through the “originate to distribute” Basel banking agreement of 1998. From this model evolved: the hyper property bubble, the market-fixing credit derivative system, asset laundering off-balance-sheet accounting and the eventual “credit” collapse. This led to the new “improved” banking oligarchy. This club now involves far fewer players than existed heretofore.

The cull and consolidation continues but the center remains. However, these elites underestimated the power of the internet to educate and allow their manipulation to be seen for what it is. Should these powers be allowed to succeed again, as they did in 1930, we will all share the blame because we now know the score. The easiest way to negate this developing usurpation of power is to help others see through the lies and the obfuscation that passes for truth. Ideally the one way to stop the meta-feudal trend in its tracks is to educate yourself about social credit and apply its maxims. To understand Social Credit you need to have some idea about how the economy and money works.


Getting a general overview of the economy is simple. It has five main elements:
a. food & water
b. shelter
c. transport
d. life-care (health & sanitation)
e. security (internal & external)


Economic “science”, which is in effect an engineered human mind-set, states that the demand and supply of these elements is equated through the pricing system. The pricing system in a developed society uses a medium of exchange called money. The purpose of this money is to facilitate exchange thus supporting the effective functioning of the economy. Money is not supposed to be an end in itself. It is the responsibility of enlightened moral leadership within a society to ensure that the proper use of money is accomplished. In the West this moral leadership is gone for it has accepted criminality as a standard mode of operation. Criminality is unethical action with lethal consequences with no concern for the greater society.


Accordingly, money has ceased to function correctly. As a result people think the economy and its concomitant systems are collapsing, like in the “former USSR.” This is not the case. If we solve the money problem the answer to the economic problem will fall into place. But through ignorance and misguidance this central issue has been hidden from the populace. The solution is wrong because the problem is misdiagnosed. It cannot be admitted to because such a disclosure will mean a demand to the cessation of monopoly ownership of money and credit. There will be no “former USA”, not if the American public finally wakes up, that is. The land, the seas, the food, the water, the houses, the offices, the schools, the factories, the roads, the railways the ports, the hospitals, the police, the prisons, the fire officers and the army are all still there.


So what is the problem? Why is the economy failing? Why is there growing poverty? The problem is that the medium of exchange is corrupted and mal-functioning.
Simply put: there is not enough purchasing power in the hands of society in general to allow the proper interaction of supply and demand. The pricing mechanism is broken and mal-adapted to a modern technological society. It is time for economics to grow up. The current conceptualizing of “price” will not allow the further development of our civilization because the growth in the use of capital and machines has destroyed the availability of good “money jobs”. Without the “money jobs” there is no “effective purchasing power” available on the demand side of the economic equation to allow the supply side to consummate its potential. This conundrum can be easily solved if sufficient purchasing power is made available to the populace.


This is the essence of Social Credit theory. This theory acknowledges that society must face the question at to whether people matter more than capital and machines. There are many possible methods on offer to effectively achieve purchasing power distribution within a private banking system. However, there is no point in fighting over the finer points of this issue until the philosophy and the policy of the theory is accepted and understood. So what is the philosophy of this new economic model?


As expounded by Major Douglas in his treatise “Social Credit” the purpose of his policy is to slow and eventually stop the implosion of western civilization caused by credit monopoly and mal-pricing. He felt that monopoly debt was corrupting all relationships; private, public, national, international and institutional. He believed that usury was bringing effective slavery to all western democracies. He sought to offer citizens freedom and sovereignty through the adoption of a new economic model and trust me his theory works. Google it. Research it. Discuss it. Blog it. Read it. Dream it. Believe me it has the power to transform our society. For it is simple: if a society does not own its money and credit it will lose control of that society and this is exactly what has happened to western civilization. It is time to take back this ownership, for the underlying value behind all money is: credere=credit= faith. Faith is free. It belongs to no individual monopolistic group.


In the 1930’s Major Clifford Douglas claimed that society was hypnotized and that only a drastic de-hypnotization could save it. Like the famous psychologist with his theory X and theory Y on human nature, Douglas believed in grace. He believed in people. He felt that individuals had far more goodness and potential than society was allowing for. He reckoned that if common folk were given enough freedom and leadership they could move society and civilization into a new golden age.


An age of extended liberty, discovery, art and culture. The alternative would be booms, busts, over-consumption, under-consumption, excesses, depressions and wars. Eighty years later this is exactly what the world has experienced and is continuing to experience. However, the period between each stage is narrowing and the level of debt is exploding beyond comprehension. To followers of Douglas this situation is understandable because his analysis has been seen to be true, simply based on the observation of the history of the last 100 years. If it looks true, smells true, feels true and thinks true, then it is true.


Armed with this knowledge for how long do we allow the folly of present economic “orthodoxy” to continue? To me this situation is akin to an adult perceiving the behaviour of a wild and immature teenager, wondering when wisdom will prevail. To the elites, who must know the truth, this monopoly credit based, boom-bust phenomenon, is obviously allowed to continue because they have control. Their ownership motivates them to disregard consequences provided they are protected through privilege.


However, I believe that the truth is too obvious to ignore anymore. The situation can and will be changed. The optimum way to achieve this is through the personal action of understanding and living the new paradigm. Through example the solution will grow from the bottom up. It will not come from the top down. I can see the change of consciousness mentioned in my opening statement within my own environment. Folk are waking up. The philosophy of Major Douglas is showing a synergy with other social thinkers such as Buckminster Fuller, Douglas McGregor, Abraham Maslow, Joseph Schumpeter, Carl Gustav Jung, Prof. Carroll Quigley and E.C. Riegel. The end result is the on-going development of a new modality for “post-silicone” living. The money solution is so obvious it is beginning to be seen as “madness” not to sort it out. The de-hypnotizing is starting.


At long last people are rediscovering sovereign thought and moral grace. Thus Social Credit is appealing to those who believe in freedom; to those who hate debt slavery; to those who realise the political system is media theatre; to those who seek to empower their family, their business, their community, their city and their state; to those who wish to rediscover scholarship, education and learning; and to those who wish to rebuild rather than collapse the American western tradition.

“The Union is dead long live the Union.”

“The organism has a right in natural law to draw sustenance from its environment. We cannot with impunity abstract humanity from the natural world. ….
Unfortunately, the present financial system creates an ever greater deficiency of effective and unattached purchasing power giving the illusion, through a distorted financial lens, of actual or physical scarcity in the midst of actual and potential abundance…..


Douglas said that we are trying to pass from one type of civilization into another in which the possibilities are such that we cannot begin to imagine. That transition, he believed, would best be facilitated in an environment which provides maximum freedom (immanent sovereignty) for the individual in the context of absolute economic security. The policy of Social Credit is to make possible the emergence of such an environment.” - Wallace Klinck


Reading Thread:
Quotes From: Mr. Wallace (Wally) KlincK
Social Credit: Long Term Student, Archivist, Researcher and Writer.
“Social Credit” - Major Clifford Douglas
“Critical Path” - Buckminster Fuller
“On Management” - Abraham Maslow
“Theory X & Theory Y” - Douglas McGregor
“Small Is Beautiful” - Joseph Schumpeter
“Man and His Symbols” - Cark Gustav Jung
“The Oscar Iden Lectures” - Prof. Carroll Quigley
“Flight from Inflation” -
&
“A New Approach to Freedom” - E. C. Riegel
By Christopher M. Quigley
B.Sc., M.M.I.I. Grad., M.A.
http://www.wealthbuilder.ie


Mr. Quigley is 46 years of age and holds a Batchelor Degree in Management from Trinity College/College of Commerce, Dublin and is a graduate of the Marketing Institute of Ireland. He commenced investing in the Stock Market in San Francisco, California where he lived for 6 years. Now based in Dublin, Mr. Quigley actively trades utilising the principles set out in the modules above. This Wealthbuilder course has been developed over the last 9 years as a result of research, study, experience and successful application.


Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.
Christopher M. Quigley Archive

2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

https://www.zerohedge.com/news/2019-...ops+to+zero%29

Fed Warns Dollar "Might Not Retain Its Dominance Forever"
https://zh-prod-1cc738ca-7d3b-4a72-b...?itok=LY4e264-
by Tyler Durden


Tue, 02/12/2019 - 17:05


When the TBAC published the minutes to its quarterly refunding decision two weeks ago, the most interesting part of the discussion was the "unique challenges" faced by the Treasury over the medium term, especially the possibility of significant financing gap over next 10 years amounting to over $12 trillion and the potential need for more domestic investor participation if foreign reserve growth slows.


Here, among other things (which potentially include the Green New Deal, with its $6+ trillion cost) the TBAC cautioned that the Treasury’s financing needs are expected to increase significantly even without factoring in recession possibilities over the next decade. The TBAC warned that deficits to the tune of $1-$1.5trn a year, and cumulatively over $12trn, over the next decade, are coming and will have to be funded in the bond market. Meanwhile, the CBO stubbornly refuses to forecast a recession during the next decade, instead projecting a steady 1.5-2% real GDP growth over the next 10y. While the TBAC did not take a position on this laughable assumption, it warned that deficits typically rise 2-5% of GDP in recessions, which would translate to additional deficits of $0.5-1trn at current GDP levels, and warns that "these borrowing needs have to financed in the context of already high global dollar debt exposure."
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But the bigger problem is that in the context of soaring deficit funding needs, the TBAC is also increasingly worried that "foreign investors already hold significant dollar debt" which is why the US will have to increasingly rely on domestic savings to fund its future budget deficits.

And here the TBAC made a surprising, tongue-in-cheek observation, namely that reserve managers have been very gradually increasing allocation to other currencies, and that the USD share of FX reserves has steadily come down from 72% in 2000 to 62% now even though the "USD is still the dominant reserve currency."
Still. As in for the foreseeable future, but not that much longer.
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Needless to say commenting (or joking) even sarcastically about the reserve status of the dollar, is generally frowned upon in very polite company because if enough people start "joking" about it, it just might become a self-fulfilling prophecy. It won't be the first time, just ask any of the countries below which all enjoyed reserve currency status for decades... and could print their way out of all trouble until one day, poof: "it's gone."
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We bring up all of this again, because yesterday in a blog post on the NY Fed "Liberty Street Economics" website, the researchers of the US central bank doubled-down on the snyde observations made by the TBAC when they "addressed the potential implications for the United States if the dollar’s global role changed" and we quote, noted that "the currency might not retain its dominance forever."


But why now? Because just like Mnuchin's calls to banks to comfort the public that they have sufficient liquidity sparked questions why is Mnuchin suddenly concerned about bank liquidity, so the recent focus on the viability of the dollar's reserve status, first by the Treasury Department's smartest Wall Street advisors, and now - by the Federal Reserve itself - is... a little troubling.

In any case, this is how the authors set the stage:
This post checks the status of the dollar, considering whether any erosion in the dollar’s international standing has occurred. The evidence to date is that the dollar remains the world’s dominant currency by broad margins. Alternatives have not gained extensive traction, albeit this does not rule out potential future pressures.

So nothing to worry about? Well, not really.

First, the good news: as the blog writes, since the global financial crisis, "central banks have accumulated official reserves more extensively to self-insure against dollar-funding market disruptions."

Indeed, many foreign investors and central banks are major holders of U.S. Treasuries, as these represent deep and liquid dollar investments. (See the next chart.) The dollar is the principal anchor currency for about 65 percent of countries with fixed or managed exchange rate arrangements. These countries account for approximately 75 percent of world output.
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Some more good news: the dominant role of the dollar as a unit of exchange and as a transactions and settlement currency is illustrated by its continued broad use in 88 percent of foreign exchange transaction volumes and at least 40 percent of the invoicing of imports of countries other than the United States. Sixty-two percent of international debt securities issuance, 49 percent of all debt securities issuance, and 48 percent of all cross-border bank claims are dollar-based. Roughly half of the $1.6 trillion of dollar banknotes in circulation are held overseas, fluctuating with economic and political uncertainty in foreign countries. In payments systems, roughly half of the $5 trillion of transactions settled daily through the CLS system are denominated in dollars, according to 2018:H1 data.

So far so good: and yet some clouds are forming on the horizon, as the following observation details:
The dollar share in official global reserves has gradually declined, falling from as high as 70 percent in 1999 to about 63 percent at the end of 2017, with early gains for the euro and later gains for a broader group of currencies. The accumulation of dollar reserves accelerated and then stabilized at higher levels after the global financial crisis as countries sought to amass cushions against U.S. dollar liquidity shocks. Some accumulation of other currencies in portfolios occurred in recent years as countries looked to improve portfolio returns in the low interest rate environment.


This brings us back to an observations made by the TBAC at the end of January, according to which global FX reserves growth has stalled and global trade, as a share of world GDP, appears to have peaked, while China is now running a flat current account with the rest of the world, something we discussed extensively in "A Tectonic Shift In China's Economy Has Largely Gone Unnoticed By Investors."


As a result of these transformations, there has been an even lower official foreign demand for USTs, which has been evident in lower foreign bids at 2-5y Treasury auctions compared to longer tenor auctions. Furthermore, foreign holdings of marketable Treasuries, as % of outstanding, have declined meaningfully from the pre-crisis peak (from 55% in March 2009 to 41% currently)


And while the TBAC admits that Treasuries look far less attractive on a FX hedged basis, something we also discussed recently, which is likely contributing to this decline in foreign demand, the TBAC believes "the decline might be more secular in nature."
https://zh-prod-1cc738ca-7d3b-4a72-b...202019%203.jpg


In its conclusion, the NY Fed econ team tries to take the TBAC's somewhat alarmist conclusion and nuance it, noting that "while the dollar’s international status may have declined in some pockets, overall it remains dominant." Nevertheless, it concedes that "recent trends bear watching" warning that "as history suggests a currency’s dominant status is not immutable" and just in case repeating its warning that "the [US Dollar] might not retain its dominance forever."


Sadly the Fed did not specify just what actions taken by, well, It would be necessary and sufficient to finally end the dollar's exorbitant privilege, after which any and all discussions about Magic Money Tree theories or who would fund various Green New Deals would promptly end as the "Venezuela alternative" would be all too clear.

BWM