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Stating The Obvious and The Quest For Wisdom

  • #941
  • Edited 4:11am Mar 20, 2010 3:58am | Edited 4:11am
Quoting Scotty B
Greece is screwed up and their situatin has scared a lot of money away. A lot of that money will not come back into the currency just becase Greece resolves the issue. The consequence is permanatley compounded into price @ some mimimum level. That's why we are not expecting november highs when buying comes back in, albeit temporarily. The EU will simply be worth less because of this. However, because buyers will come back in if the Greece outcome is positive, the market has added in the discount of the problem itself PLUS the expected result,...
The point of view of the market (if such a thing is possible) is of necessity only one narrow point of view. There are many other points of view. Some of them may have a better take on reality, may be more useful for making predictions about future events (or future exchange rates).

Lots of intelligent people have been suggesting that the dramas playing out in the EU now are in natural course for it on its way to greater integration. Will the EU fall apart? Who knows? But if this is a case of "what doesn't kill you only makes you stronger" and the EU becomes more unified and works out some of the kinks in its monetary policies, then the euro may end up stronger than ever.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #942
  • Mar 20, 2010 4:16am Mar 20, 2010 4:16am
Quoting The Fool
The point of view of the market (if such a thing is possible) is of necessity only one narrow point of view. There are many other points of view. Some of them may have a better take on reality, may be more useful for making predictions about future events (or future exchange rates).

Lots of intelligent people have been suggesting that the dramas playing out in the EU now are in natural course for it on its way to greater integration. Will the EU fall apart? Who knows? But if this is a case of "what doesn't kill you only makes you stronger"...
OR

FRN/USD, GER/USD, USD/ITL..............

  • #943
  • Mar 20, 2010 4:19am Mar 20, 2010 4:19am
I guess my question would be wouldn't the EU be better off cutting loose the weaker countries? A chain is only as strong as its weakest link. In the short run it maybe chaos, but for the long haul the EU would be better off not having to deal with countries they will have to constantly bail out or can't pull their weight.

That seems to make sense to me, but anyone feel free to comment.
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #944
  • Mar 20, 2010 4:28am Mar 20, 2010 4:28am
http://en.wikipedia.org/wiki/Economy...European_Union

Take out Germany, France & Italy and you're left with a bunch of Vermonts & a few Alabamas.
"If The Fool persists in his Folly he will become wise." - William Blake
  • #945
  • Mar 20, 2010 5:21am Mar 20, 2010 5:21am
Quoting Darkstar
I know for a fact that later this year the US economy will be in far better shape then it is now. I also know that at some point later this year the Fed will start raising rates. Both will be dollar positive and are definitly tradeable.

You don't need a time machine to predict the news; a basic understanding of macroeconomics, game theory, and some patience is pleny sufficient to make money on it.
I would like to see the reasoning of your macroeconomic outlook. The markets will top soon(before q3)and in fact we're heading into stagflation.
  • #946
  • Mar 20, 2010 5:25am Mar 20, 2010 5:25am
Quoting LasVahGoose
Just let us know when the DarkStar Webinar is.

Any reading you recommend for Game Theory 101? Doesn't look like anyone has written a game theory for dummies book. Anyone that has a recommendation at an entry level would be fine.

Also try and get your hands on William Poundstone's "Prisoner's Dilemma" (if u haven't already), very interesting book on Von Neumann and Game theory in general.

Not that advanced, but a friendly intro to game theory, u can read on the side. Entertaining too.
  • #947
  • Mar 20, 2010 7:06am Mar 20, 2010 7:06am
Quoting LasVahGoose
Just let us know when the DarkStar Webinar is.

Any reading you recommend for Game Theory 101? Doesn't look like anyone has written a game theory for dummies book. Anyone that has a recommendation at an entry level would be fine.

Here is another.
All I ask for is a chance to prove that money cannot make me happy.
  • #948
  • Mar 20, 2010 9:36am Mar 20, 2010 9:36am
Interesting statement in this read.
If the euro is essentially gutting the European — and again to a greater extent the Club Med — economic base, then Germany is achieving by stealth what it failed to achieve in the past thousand years of intra-European struggles.


Quoting LasVahGoose
I guess my question would be wouldn't the EU be better off cutting loose the weaker countries? A chain is only as strong as its weakest link. In the short run it maybe chaos, but for the long haul the EU would be better off not having to deal with countries they will have to constantly bail out or can't pull their weight.

That seems to make sense to me, but anyone feel free to comment.
In trading, there is no bullshit. You either make money or you don't.
  • #949
  • Mar 20, 2010 9:42am Mar 20, 2010 9:42am
After reading this thread over the last several days, I had a discussion with a retired (early) wall street trader friend & he whole heartly backs up what DarkStar is sharing. Not that I ever though DarKStar needed any comfirmation on what he shares, but I just thought I'd run the contents by this trader. According to my friend the news (fundementals) & stops are very important to the big traders. His advise was to pay close attention to what DarkStar is sharing & KIS as there are not many traders willing to share this information if they really know how to trade this way.

Even thought I have always been a big fan of DarkStar & the info he has shared, I will always do my on due diligence just to satisfy my on mind.

I may not ever trade using this information, but it is certainly thought provoking & worth the time to follow along on this thread as there are not many threads that are really worth reading.

Scotty B, Nice thread you started & a most appropriate title.

LasVahGoose, your post #934 is a great idea.

I will try & keep my post to a minimum as I really have little to offer on the topic being shared & I trade a method that works for me & want to stay focused on that method. I just thought I would share what my friend had to say about this topic.

_______________________
  • #950
  • Mar 20, 2010 9:43am Mar 20, 2010 9:43am
Jesse Livermore is the greatest Trader there has ever been in the history of financial markets in my opinion!!!

Quoting The Fool
Oh by the way - thanks to DS and the other traders who recommended "Reminisences of a Stock Operator" here - it is proving to be a good read.

Free link:

http://www.stock-market-seminars.com...-livermore.pdf
  • #951
  • Mar 20, 2010 10:46am Mar 20, 2010 10:46am
Quoting Scotty B
I really like this example. It brings a few questions to mind though. One being: are these smaller news items (like we've seen this past week) already discounted into price according to the expected or forecast numbers? I only ask because as I've observed, #'s that come close to expectations don't ussually move the market much, thus one could deduce that the EXPECTED info was already factored into price at the time of the announcment. When numbers are way off then, well....

Also, do most of the big guys arrive at roughly the same expected numbers...
I'm splitting your post because there is a big difference between the two subjects.

On the short term econ number announcements, people are betting on a possible range of numbers. The numbers listed on the FF calendar and talked about on CNBC are AGGREGATE predictions. In other words if one economist predicts a number will be 10 and another predicts 20, cnbc and FF are going to say the expected print will be 15.

All things being equal, if the print turns out to be 15, the market probably won't move much. There will be buyers and sellings squaring their postion at various levels of profit and loss, but the net result will wind up around the aggregate expectation of the 15 print.
  • #952
  • Mar 20, 2010 11:02am Mar 20, 2010 11:02am
Quoting Scotty B
Greece is screwed up and their situatin has scared a lot of money away. A lot of that money will not come back into the currency just becase Greece resolves the issue. The consequence is permanatley compounded into price @ some mimimum level. That's why we are not expecting november highs when buying comes back in, albeit temporarily. The EU will simply be worth less because of this. However, because buyers will come back in if the Greece outcome is positive, the market has added in the discount of the problem itself PLUS the expected result, or...
Were talking about greece in a vaccume. The reality is that there are still other factors at play in the euro and lead to a conclusion that a return to november levels isn't in the cards. The euro area economies just aren't as attractive as the USD, AUS, CAD, and others on a purely marco basis. It's useful to eliminate all these things for our analysis here, but that doesn't make them any less relevant for our real world trading.

Now back to the point I was making about these 2 scenarios being different....

The greece play is one with a finite number (2) of outcomes. I think this would be easier to understand in a different context:

It's like an Intrade bet on the outcome of sundays health care vote. Either HC will pass or it won't. Currently intrade has ~70% odds of it passing. That doesn't mean that only 70% of healthcare will be passed, it means there is a risk premium priced into the contract of 30%. Either it will pass and you can capture that 30% or it will fail and you will lose the 70%. In a sense, the HC contract price is efficient because it accurately reflects the inherent risk, but it is also inefficient in that it has not fully realized the inevitable outcome. That ineffciency represents a profit opportunity if you can analyze the situation and come to the proper conclusion and the inevitable outcome.

Now go back and look at the greece situation in that context and let me know what you think.
  • #953
  • Mar 20, 2010 1:16pm Mar 20, 2010 1:16pm
Quoting Darkstar
Were talking about greece in a vaccume. The reality is that there are still other factors at play in the euro and lead to a conclusion that a return to november levels isn't in the cards. The euro area economies just aren't as attractive as the USD, AUS, CAD, and others on a purely marco basis. It's useful to eliminate all these things for our analysis here, but that doesn't make them any less relevant for our real world trading.

Now back to the point I was making about these 2 scenarios being different....

The greece play is one with a finite...
I do see the difference between a situation with a range of outcomes and one with only two. The jump that's hard for me to make is finding that 0/100 range in odds, extrapolated onto what are seemingly arbitrary prices. How would you infer what the market was thinking by looking at current prices? Or am I totally off the mark? I'm going out on a limb here, but if you meassured the current pre Greece decision price range and used that as your scale, I'd say the market is about 75% decided towards the down side with the risk premium being 25%. I admit though, I don't really know what I'm talking about.

Going off of open interest for example, the market is still net short. There are pretty much twice as many noncommercial unsettled short contracts right now. If I was using someting like that as a gauge it would tell me that the market was obviously leaning more on the short side (obviously) and that risk premium was way lower than 30%. I don't think I can get away with using COT though in this example because like you said, EU is long term bearish anyways. I might need a little more help with this one... Anybody else wanna take a shot?
  • #954
  • Mar 20, 2010 1:28pm Mar 20, 2010 1:28pm
Quoting mrgreen
Interesting statement in this read.
If the euro is essentially gutting the European — and again to a greater extent the Club Med — economic base, then Germany is achieving by stealth what it failed to achieve in the past thousand years of intra-European struggles.
A case of the Pen is mightier than the sword. If we accept the premise in the article that, in a nutshell, this is another form of Germany conquering the area then all the nations would HAVE to be kept in the EU so Germany keeps them under its thumb and dominate. Interesting... STARTFOR looks like it is the economic version of JANES.

Thank you to everyone for all the reading and audio references on the topic of game theory. It will be put to use.
.
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #955
  • Mar 20, 2010 8:19pm Mar 20, 2010 8:19pm
Quoting Darkstar
Now go back and look at the greece situation in that context and let me know what you think.
All I can offer is a simplistic view. Greece seems to have a few options for refinancing, and the question that seems to underline the reports on bloomberg are emphasizing not IF but WHEN the support will come. Outlets such as EU or IMF are being heavily mentioned, but a full on default seems a less likely option.

Here is an example.
Quoting Bloomberg
Merkel said she’s made no decision on whether to back EU aid or to seek International Monetary Fund assistance to help Greece contain Europe’s biggest budget deficit.
The March 25-26 deadline Papandreou set might help answer the WHEN question. The bottom line is this is a mess, and the market is responding negatively to it, but it seems like the end result will be a resolution.



If my conviction of this were strong enough I would be looking for a long entry. The question is, would waiting for the positive news be too late for that entry? My thinking is yes it would be. I would want to be positioned in the market BEFORE the orders come in, and therein lies the risk of making the wrong, but necessary, decision.

It will be interesting to watch this play out.
All I ask for is a chance to prove that money cannot make me happy.
  • #956
  • Mar 20, 2010 9:33pm Mar 20, 2010 9:33pm


And to play the guessing game some more.

What if ...... a plan is put in place and it is a new day but the selloff continues anyway?

It can happen and I've see it many times before. What should be good so called "news", isn't.
  • #957
  • Mar 20, 2010 10:57pm Mar 20, 2010 10:57pm
Quoting SunTrader


And to play the guessing game some more.

What if ...... a plan is put in place and it is a new day but the selloff continues anyway?

It can happen and I've see it many times before. What should be good so called "news", isn't.
Would depend on the plan and time horizon. If the plan is on a weekly / monthly time frame then a one day move may not necessarily be significant.
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #958
  • Mar 21, 2010 12:53am Mar 21, 2010 12:53am
Quoting LasVahGoose
Would depend on the plan and time horizon. If the plan is on a weekly / monthly time frame then a one day move may not necessarily be significant.
Well I think I made the point that what should and what does happen are many times two different things, but I wasn't limiting it to a one day event.

Who knows, I sure don't. I'll wait and see.

That way I don't get caught saying but it was good news why did it go down and vice versa. The easy way to look smart when you don't try to outsmart the market.

But others have their own way of doing things. I understand. Not for me though.
  • #959
  • Mar 21, 2010 1:33am Mar 21, 2010 1:33am
Quoting Marsh
If my conviction of this were strong enough I would be looking for a long entry. The question is, would waiting for the positive news be too late for that entry? My thinking is yes it would be. I would want to be positioned in the market BEFORE the orders come in, and therein lies the risk of making the wrong, but necessary, decision.
You pretty much nailed the concept here Marsh. Once the outcome is certain, it would be priced into the market within seconds. People like fool would make certain of that. You have to get in before the orders hit the market (orderflow 101) and in this case that means accepting a certain level of risk.
  • #960
  • Mar 21, 2010 1:45am Mar 21, 2010 1:45am
Quoting SunTrader


And to play the guessing game some more.

What if ...... a plan is put in place and it is a new day but the selloff continues anyway?

It can happen and I've see it many times before. What should be good so called "news", isn't.
There is a big difference between what "should" make the market move and what "will" make the market move. A good employment number out of germany "should" be euro positive. However, if the main focus of market participants is greek soverign default risk, it probably won't be.

There are dominant themes in markets all the time. When news related to the dominant theme is positive or negative, that news will move the market logically. News that isn't related to the dominant theme often impacts price in an illogical manner because nobody really cares about it. If you are experiencing illogical price movement after a news announcement, it's a good bet that your looking at irrelivant data.
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