EurAnalysis

Having read this, my conclusion is that it is another "gold will go up" article. As for the logic, it seems both convoluted and flawed.

For example:

In summary: There are people (and companies) who exchange their cash for units in money market funds. These funds use that
cash to buy –under repurchase agreements- US Treasury bills from players in the futures markets. And the players in the futures
markets use that cash to fund the margins, obtain leverage, and buy positions. What if these positions (financed with the cash
provided by the money market funds) are short positions in gold (or other commodities)? Now, we can see what USD money
markets have to do with gold!

And what if these positions are long gold? Then the exact opposite will happen. Thus without knowing the intent of the traders to go long or short the predictive value is exactly zero.

And back to 23288. I would like some nice H1 close below, so I can sleep for a few hours before London.

edit: Hi Aaron. Welcome back you arguing bastard .

Hey Tom. I see you are at 10+V. Who did you blackmail?

I agree with these targets.

Waiting for a break of today lows at 1.2329 to go back short

I dunno how I did that, perhaps some mistake. You know I dont know a sh!t.

You didn't. Others did

Price behaves. But I have already started second redbull and dont want to sleep now. Hmm. Anyway, Daily LTL (which I dont trust at all but those damn technicians keep using it) is about to get tested.

edit: zoomed chart

T

Hey Tom, What, if any, technical indicators do you trust?

http://sibileau.com/martin/2012/08/06/

Archive of August 6th, 2012

Leverage, floating rate notes and high frequency trading

Published on August 6th 2012






Click here to read this article in pdf format: August 6 2012
Today is a holiday in Canada and our letter is published later than usual. We will make a few comments on what we believe were the most relevant events impacting capital markets (do these still exist, by the way?) last week:

No news on monetary policy

During the past week, both the Fed and the European Central Bank had the opportunity to execute on new policies, be it price or volume driven. As we anticipated in our last letter, these banks decided to past on such an opportunity. There is really nothing else they can effectively do, except explicitly monetize sovereign debt. If they opt for unconventional policies, the medicine will have a worse effect than the sickness, although we want to make this clear: Monetizing sovereign debt is also not the solution. However, it buys time and is the less distorting of all available measures. Having said this, if we are right, the rally we saw in the Euro was only short-covering and soon, we will have to enter a new downward leg.

Relevering of corporate balance sheets: Rich shareholders, poor corporations

A few months ago, we warned that: “…in the past 10 years, you have seen the S&P500 index fluctuate, nominally, without making any “improvement”. This has huge ramifications and one of them is that businessmen who would want to monetize the fruit of their labour would not be able to do so, on average, because if they are lucky, they only break even when they sell their businesses. If you were one of them, what would you do in the face of the recent monetary expansion?

I for one would leverage my company with cheap credit lines and distribute (or increase the distribution of) dividends, to cash out. And this is precisely what we are seeing and will continue to see: Leverage seems to have bottomed and now is reverting in corporates. This is not positive for growth and hence, we don’t want to own shares. We don’t want to own mining companies. We understand that the recent rally was fully driven by the expansion of the Fed (via swaps) and the European Central Bank (via Long-Term Refinancing Operations). We are simple investors and are humble enough to know that we will not be able to call the exact day in which the reversal in stocks takes place…”

This trend is increasingly becoming more evident, as new multi-billion shares-buyback programs and dividend raises are announced every week. Who’s financing this? Banks mostly and they will be sorry for it by the time interest rates (i.e. real interest rates go up). In the meantime, let’s enjoy the party!

Reconsidering our last comments on the repo market: Why we may be proven wrong

At the end of our letter on June 25th, we brought up what we thought was a sharp comment from Murray Rothbard, in his book “America’s Great Depression”. In its Chapter 12, under the section titled: “The attack on property rights: The final currency failure”, Rothbard told us that: “…despite the gigantic efforts of the Fed, during early 1933, to inflate the money supply, the people took matters into their own hands, and insisted upon a rigorous deflation (gauged by the increase of money in circulation)— and a rigorous testing of the country’s banking system in which they had placed their trust…”

We concluded therefore that this crisis has to end with a rigorous deflation or liquidation of liabilities, which must be expressed in terms of a new standard. In the ‘30s, the US dollar was still backed by gold and gold was the Fed’s asset. Today, the US dollar is backed by US Treasuries. Therefore, we concluded, “to insist upon a rigorous deflation” is to repudiate the US Treasury notes. On July 2nd, we made the case that such a repudiation was going to take the form of lower volumes in the repo market. By that, we meant illiquidity in the repo market. The same was going to make harder to short commodities naked, brining eventually one net short position in the futures markets to bankruptcy. In the process, counterparty risk would rise exponentially endangering the respective clearinghouse and forcing the Fed to intervene. The key conclusion here was that from that point on, spot prices of commodities were no longer going to be manipulated, given the broken futures markets, opening the door to high inflation.

As the title of this paragraph suggests, we may be wrong in this analysis. What makes us think so? New information: Namely, the potential massive use of floating rate notes (FRNs) by the US Treasury, starting 2013. We want clarify this: The introduction of FRNs will not suppress the process described above. It will only delay it and make the fall even more catastrophic.

The new information came to us upon reflection, based on a series of anonymous articles published on Zerohedge.com, regarding the upcoming change in the funding policy of the US Treasury. Please, find the links to these articles below. Give yourselves some time to read them carefully. They are worth it. We present them in chronological order:

1. www.zerohedge.com/print/446207
2. www.zerohedge.com/print/446655
3. www.zerohedge.com/print/447068
4. www.zerohedge.com/print/447126
5. www.zerohedge.com/print/452769

Floating Rate Notes are variable rate notes. If you hold them and rates increase, for instance, you don’t suffer a capital loss. Since the beginning of the crisis, the US Treasury has basically issued fixed rate debt. The long term portion of it, courtesy of Operation Twist, is being massively bought by the Fed. The short end, is accumulating in the balance sheets of the primary dealers. If interest rates were to rise, these dealers would suffer untold capital losses, and it would be politically difficult to bail them out. Therefore, the same dealers are pushing the US Treasury to slowly start refinancing this short-term fixed rate notes in their inventory with floating rate notes. That way, by the time interest rates rise, the problem will have already been transferred to the US taxpayer, who will be in a deeper hole.

What does all this have to do with our previous analysis of the repo market? Well, if floating rate notes are issued, they will have a strong bid from money market funds and liquidity will be enhanced in the repo market, which would continue funding the commodity futures markets.

However, with the US Treasury facing a higher fiscal cliff, the Fed would be forced to intervene buying not only the long-term, but the also short-term debt, to ensure that inflation transforms these higher nominal short-term rates into lower “real” rates. The Fed would not do this only to save the US Treasury, but also the private sector. Why? As short-term liquidity shifts from commercial paper to government-issued floating rate notes, levered companies (and we just said companies are pushing leverage) would have a hard time finding short-term working capital funding. Potentially, and only years ahead, this could well end in situations seen in Latin America, where banks offered weekly or weekend guaranteed investment certificates at high rates. Gold, again, would end up being “the” store of value. But this, this is years ahead and in the making.

The consequences of high frequency trading and the myth that it is needed to bring liquidity to markets

High frequency trading was brought back to light in the past week, after the tremendous losses suffered by the Knight Capital Group. We don’t have much time but want to simply say this: The whole idea that high frequency trading brings liquidity to markets is born out of a misconception of liquidity. And here, we go with the Austrian school: Liquidity is not and should never be intrinsic to an asset, but is the result of preference by acting men.

Secondly, High frequency trading does not even provide liquidity. It just plays the operational weaknesses of markets. In a casino, when the croupier says “rien ne va plus”, all the real bids are locked. In a stock exchange, it appears that this doesn’t happen, allowing high frequency traders to introduce false signals to trigger stop losses or profit taking. If that is liquidity, our markets are broken. It is another Ponzi scheme, with no real cash at the end, played within mili-seconds.

But the underlying point here is that we should not force liquidity into all stocks. If some are not liquid, it is for a reason and providing fake demand via high-frequency trading is an expensive mistake. If the world allows high frequency trading to continue, it will end, paradoxically, in illiquid markets. The real money will leave markets and flow to real assets, because if liquidity means being exposed to the manipulation of high frequency trading….why pay a premium to be liquid?

Martin Sibileau

http://www.hangthebankers.com/econom...ble-heres-why/

America is quickly approaching a catastrophic economic collapse.

Before you dismiss this as hype or paranoia, take a few minutes to review the facts outlined on this page. The numbers don’t lie. At this point, the dollar crash is unavoidable… far from an exaggeration this is a mathematical certainty. As repelling as that sounds, it’s in your own best interest to learn just how bad the situation is.

According to the talking heads of mainstream press the economy is slowly recovering and the financial crisis is all but behind us, but we need a reality check. It’s time to stop being naive and start being more discerning. Instead of more false hope, we need the truth as bitter as it might sound… and the truth is, from our local municipalities, to our states to our federal government, we are broke… the truth is we can’t payback our debt without getting into even more debt… the truth is the housing crash of 2008 was just a small preview of what’s to come.


America is drowning in debt. The government’s liabilities are now growing at an exponential rate. Our national debt is on a vicious downward spiral.
To our detriment our government continues to pretend that we can borrow our way out of debt and only handful of our politicians are willing to admit that our nation is now bankrupt.

Snippet:

It’s interesting to note that when we hit this debt ceiling this year, our government will once again move the ceiling up to allow for the debt to grow. Now ask yourself, what is the point of a movable ceiling? A movable ceiling is an oxymoron. If you can move your debt limit on demand, why bother pretending that you have a debt limit in the first place?

http://www.crisishq.com/wp-content/u...ln-150x150.jpg“I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. Corporations have been enthroned, an era of corruption will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people, until the wealth is aggregated in a few hands, and the republic destroyed.”
– Abraham Lincoln, 16th President of the United States

Statistics the government would rather you didn’t know

Now that you have somewhat of an idea of how big a trillion is, consider the chart on the right (U.S. national debt from 1940 to 2011 in trillions of dollars) and look at the mind-boggling statistics below:

http://www.crisishq.com/wp-content/u..._1940-2011.gif

1. The U.S. government spent over 454 billion dollars just on interest on the national debt during fiscal 2011.
2. In 2011, the government borrowed $41,000 every second.
3. Currently, the government’s burden is growing by $10 million per each passing minute
4. Just during the Obama administration, the U.S. government has accumulated more debt than it did from the time that George Washington took office to the time that Bill Clinton took office.
5. Currently the U.S. monetary base is sitting somewhere around 2.7 trillion dollars. So if you went out and gathered all of that paper money up it would only make a small dent in our national debt. But afterwards there would be no currency for anyone to use.
6. The United States government is responsible for more than a third of all the government debt on the entire planet.
7. Mandatory federal spending surpassed total federal revenue for the first time ever in fiscal 2011. That was not supposed to happen until 50 years from now.
8. If the U.S. government was forced to use GAAP accounting principles (like all publicly-traded corporations must), the U.S. government budget deficit would be somewhere in the neighborhood of $4 trillion to $5 trillion each and every year.
9. The U.S. national debt is now more than 5000 times larger than it was when the Federal Reserve was created back in 1913.

Hopefully at this point you’re starting to realize how big our debt is and how fast it’s growing. Shockingly, our government’s biggest liabilities are not even shown here, so this is just the tip of the iceberg.


First, it’s based on a foolish assumption that the rest of the world is willing to to lend us money that they know we can’t pay back. Second, it ignores a mathematical consequence: exponential growth due to interest alone.
http://www.crisishq.com/wp-content/u...2/07/ponzi.jpg
We’ve been able to get away with borrowing so much up until now because the dollar is the world reserve currency, but this privilege has its limits. It’s also a privilege we’re going to lose because we have been shamelessly abusing it.
The Federal Reserve has been keeping the interest artificially low, to help the government keep borrowing. Of course this is no favor on Fed’s part, because the end result is debt enslavement. Since whatever the government owes is inherited by the people, it’s the people who get screwed at the end. If the interest was allowed to return to market rates, it would help prevent the government from borrowing beyond its means.

However, at this point our lenders are realizing that our debt has long passed a sustainable level. If you have ever applied for a loan, you should be familiar with this universal rule: when the borrower is in too much debt, the loan becomes high-risk and so the lender demands a higher interest to make the reward worthy of the risk. With every passing day U.S. plunges into a deeper debt pit and this makes lending to U.S. (by buying treasury securities) a more and more riskier investment.

To make things worse, the Fed is devaluing the dollar at an increasing pace by issuing bailouts, stimulus packages, quantitative easing, etc… and our lenders are realizing this too. This means that the dollars that our creditors are loaning to us now, are worth less when they get them back.

For these two reasons, the U.S. treasury securities (government IOU’s) are now high-risk, low-return investments. What was once considered the safest investment is now a Ponzi scheme at the point of collapse.

took a long just for a few pips i think, tight stop. and no redbull i go to sleep, the market will do what he wants, i dont care good night

E/U H1

Thanks Aaron.

I am only working on a fare calculation which permits trading to a low profile intraday trader.

Further I am considering two more facts so that the individual can have a risk free trading carrier.

A. The individual is below 40 yrs of age, the first 5 yrs (atleast) of his trading carrier he is employed (salaried, self-employed, business / profession - he has a fixed source of income).

B. I am only considering this prescription for a person who is new to Forex and not having Risk Capital of 100K USD. (If a person have that much of money to invest I do not consider him low profile intraday trader ) *

Trader less than 1K$ absolutely good to go if he follows the simple money management rules, follow baby steps.

I have seen traders in FF window showcasing their trade explorer with deposit 1K and in next week doubled the money but in next week back to the same or zero and closing the trade explorer.

5 years is a minimum time I believe people need to stick and get synchronised with all good ideas, technique, knowledge and other people to build a great carrier in Forex.

Please also consider I am from a 3rd world country and if I am earning only 2% daily from my 1K$ account that is quite handsome money since my living cost is nothing compare to the living cost of first world countries.

So idea varies respect to place we are living but still few basics does not.

Best Regards.

I use only momentum. And moving averages in smaller timeframes, so I dont get lost when zoomed in. Then it depends on definition of technical indicator. Otherwise, I use only price. And do my own math .No need indicators, I just need volatility, relative and absolute strenght of trend and thats it.

T

Hey Rekon, All good points. There is no "right" sum to do forex with, and the reality is that you should never risk more than you can comfortably lose.

u should read chris martensons ebook the debt issue is old but u can learn how toget prepared.

Absolutely, 100% agreed

All in all markets will decide. I default(no pun intended) to my long held precept of global reset of all debts. There is no solution unless sacrifice comes from the top as well as the bottom.

I believe the global reset will force countries to rebuild economy in a way that may be sustainable and depend on a currency that has intrinsic value and not one propped up on the belief that because your currency has held highest esteem in world markets that it should/will always be that way.

One example would be for the oil producers to decide that they no longer will take US dollars for payment, but will accept hard currency they deem needed by their economy( not necessarily gold.....could be wheat, steel,wood, or even fresh water).

This paradigm will place us in that unending circle of portability of value through hard vs. fiat currency.

Seems to me that the only thing we all tend to agree upon is that gold has value and paper currencies only hold the value that we assign them until such time we view them as not valuable, and either one can be used to purchase what we need at the time we need it, as long as seller accepts as payment.

So after my essay of bullshit for econ 101 class, I go back to.....market will decide all this, and do everyday. That's what we trade!

I am awarded no points, and may God have mercy on my soul!

I could go into this deeper, but my boots are only hip waders!

Best read.

BTW... added pending sell limit @1.2380, another small position. But hey, they add up for the good or the bad!

nice point, mine is running @ 1.2350 possible trailing stop hit.