Macroeconomic and Geopolitical context in Trading | Forex Factory

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Macroeconomic and Geopolitical context in Trading

  • #1
  • First Post: Oct 14, 2014 7:25pm Oct 14, 2014 7:25pm

UPDATE #1 - 10/14/14


In latest days, Russia has discovered a huge, in fact, we could say MASSIVE Oil field that, experts said, it could be larger than the Gulf of Mexico.
This reinforce its Oil Supply and therefore, their plans; they planned to sell Oil at $100 a barrel.

The US won't let that to happen.

Suddenly, Middle East producers said that they will be "comfortable selling Oil barrels at $80, or even lower". This is clearly an offensive against Russia's plans, and a precise punch to Russia's economy.

You can be sure that the US is behind this. They could even buy Oil at $100, officialy declaring $80 and paying the other $20 "behind the table".

How do you think Russia's counter-offensive will be?


Kind regards,
MarketFox.-
Trade, don't bet.
  • #2
  • Oct 15, 2014 7:19pm Oct 15, 2014 7:19pm
First I want to thank you for opening up this topic, there is a tremendous amount of information to digest but I would like to bring up a couple of points. First a minor point then I will post a major point. The USA does have a tremendous amount of oil imports and exports. As of this time your article does not mention the US as the biggest producer of oil. I think not mentioning this or making it part of your analysis is flawed.

http://www.bloomberg.com/news/2014-0...ing-saudi.html

The USA is also the world's largest gas producer.

http://www.worldoil.com/US-surpasses...-producer.html

China and Russia can try to gang up on us but the USA is energy self sufficient.

Also, the import/export figures used in oil imports dont show that the USA has the oil refineries. For example most of the Central and South American countries do not have oil refineries. They have the oil they purchase sent to the USA (registered as and import) and then sent back to their countries (an export). For example Venezuela may have plenty of oil for themselves but they have to send it to the USA to be refined and then sent back to their country to use. In reality we can squeeze Venezuela anytime we want. I read an article several years ago, sorry couldn't find it to post here, that in finished oil products (refined oil) the USA exports more than it imports. So the export/import balance is really not a negative but a positive to the USA economy.
  • #3
  • Oct 15, 2014 7:31pm Oct 15, 2014 7:31pm
I was happy you seemed to understand the flaws about the gold standard and you seem to understand how Fiat currencies are needed for economic growth. Then you went into this Russia/China union where they plan on having a gold backed currency of some type. I was surprised you went there after showing how Fiat based currencies are necessary for economies to grow. Without growth of money supply because of population growth and Economic growth you would be in a permanent recession. It is why the super-inflationists end up being wrong in their predictions. USA must continue printing money because despites its recent recession world-wide economic growth still continues. For it to continue the money supply must continue to increase (inflate). Without inflation you have economic collapse. I explain it this way.

Lets talk about the basics of money. There is a great deal of misinformation about it and how it works. One of the driving forces is the so called argument, "They are just printing money". It is presented as some kind of evil or bad thing along with inflation. Most of this information comes from the Gold crowd. If we just use gold all these problems would not exist. Except they ignore the problems of gold based currencies have had in history. It is why it is not used anymore. (sorry conspiracy theorists). Let me try to explain and this will cause a big whirlwind but so be it.

Gold/silver based currencies have a major problem. They always lead to a few having the gold and the rest being peasants. Let me explain and this is simplistic but it is how people get to understand the basics:
Lets pretend you have a country of 100 people and you have in circulation 100 ounces of gold. So if the gold was evenly spread everyone would have 1 ounce of gold. People buy, sell, work, produce, etc. and exchange the gold. After a while some will have more some will have less and some will have none. You also have babies and a growing population. If your country grows to 200 people and the gold was evenly spread then everyone has a 1/2 ounce or what we would call a depression. Populations have always grown faster than gold can be mined so you always guarantee that the majority of the population would live in poverty or be peasants, serfs, etc. Those that get hold of gold then hoard it because to spend it and not get it back would lead you to becoming part of the lower classes.

The second problem with gold currencies is the lack of economic growth. Since the amount in circulation is limited and those that have it tend to hoard it. Economic growth becomes limited because you cant sell and buy more than what funds are in circulation. Just like each human in our make believe country has less gold available to them as the population grows. So does each business have a smaller pie as it grows. If you have two bakers and now there is a third, without the growth of the money supply each one gets less. Gold and silver based economies have always had this problem. So off on ships they go to find new lands and new sources of gold and silver. Temporary prosperity happens as new land's gold and silver is brought back to the old countries. But once economic growth and/or population catches up to the new supply or gold, you have economic collapse, the haves group gets smaller and the have not group gets bigger. Peasants with pitchforks can be a nasty group.

As the group that has more collects more and that group becomes smaller. The group that has less end up with even less and gets bigger. This is exactly what has happened in history. The group that has more becomes the Kings, queens, nobles, barons, princes, and princess. Basically the history of Europe through out the Middle ages. In other areas of the world you have Emperors, Pharaohs, etc. etc. Doesnt matter what you call them you have a ruling class who has the gold, sometimes a middle class of merchants, and the large peasant class or serfs, slaves, peasant farmers, etc. This is the history of the gold standard and I do not want any part of it and neither would you if you understood that you and your posterity would become serfs, peasants, or slaves all over again.
  • #4
  • Oct 15, 2014 7:33pm Oct 15, 2014 7:33pm
So Russia and China, a union that long term will not work, can hoard all the gold they want. Remember history is about one king going to war against another king so they will distrust one another at some point and try to destroy each other. Once you realize they wish to becomes the king, queens, nobles and barons the majority of the world will not want to participate and that will be the end of that.
  • #5
  • Oct 15, 2014 8:47pm Oct 15, 2014 8:47pm
Quoting nanningbob
So Russia and China, a union that long term will not work, can hoard all the gold they want. Remember history is about one king going to war against another king so they will distrust one another at some point and try to destroy each other. Once you realize they wish to becomes the king, queens, nobles and barons the majority of the world will not want to participate and that will be the end of that.
I keep this last quote.

I agree with you; for me the "Gold Standard" doesn't make sense, but this is the information that I receive from, let's say, "my insiders".

At first I also didn't believe in that "Russia/China" alliance, it sounded like a random media article... but then came the contracts and agreements and I begin to dig a little bit more about it.

Certainly, the US is energetically sufficient; I didn't say the opposite.
What I tried to say is that "the other faction" is trying to be energetically sufficient; creating some kind of "parallel world".

And I don't know about how serious they took that thing a bout the Gold Standard. This new entity that will take place in Shangai trading Gold backed up in metal could, indeed, increase the gold price, but maybe they will keep the Fiat Currency with some "Old School Back up", like Gold. Or even to get profits like any investor will do once the price is up.

Everyday we see a different crazy economist either bringing calm or predicting the apocalypse. I tried to process all that data and this was the result based in MY PERSONAL OPPINION. That's why I wanted to hear something different, and I really appreciate your collaboration.

Feel free to post your thoughts!

Kind regards to you,
MarketFox.-
Trade, don't bet.
  • #6
  • Oct 15, 2014 10:31pm Oct 15, 2014 10:31pm
Quoting MarketFox
{quote} I keep this last quote. I agree with you; for me the "Gold Standard" doesn't make sense, but this is the information that I receive from, let's say, "my insiders". At first I also didn't believe in that "Russia/China" alliance, it sounded like a random media article... but then came the contracts and agreements and I begin to dig a little bit more about it. Certainly, the US is energetically sufficient; I didn't say the opposite. What I tried to say is that "the other faction" is trying to be energetically sufficient; creating some kind...
OK I understand better. The one other thing I want to point out about China, I have lived in China for 12 years doing business here, is they dont get along with their neighbors. They are at odds with every single nation around them and China and Russia do have some serious border disputes but they have not shown up in the news for awhile now. To have a world wide impact there has to be some kind of trust in the currency or trade or economic deals between nations. The USA maybe far from perfect and there is a lot to disagree with in some of their policies but there is a sense of trust in its institutions and govt. to allow world wide trade to happen. I do not see neither China nor Russia generating that same kind of trust. If anything I would tend to agree with a viewpoint of more regional type currency domination like the EURO in Europe but not maybe the same format. So China's RMB could share power with the YEN in Asia and may even be the dominant currency there. The Yen would be like the GBP or CHF in Asia. The Euro dominates the continent but the CHF and GBP are still big players on the market. Same in Asia, the RMB will become the dominate currency someday but the YEN will still be a big player in Asia.
  • #7
  • Oct 15, 2014 10:37pm Oct 15, 2014 10:37pm
Quoting nanningbob
{quote} OK I understand better. The one other thing I want to point out about China, I have lived in China for 12 years doing business here, is they dont get along with their neighbors. They are at odds with every single nation around them and China and Russia do have some serious border disputes but they have not shown up in the news for awhile now. To have a world wide impact there has to be some kind of trust in the currency or trade or economic deals between nations. The USA maybe far from perfect and there is a lot to disagree with in some...
Ok, now you became one of my Insiders! (just kidding).
What you're saying makes sense.
Thanks for clearing up my head.

Kind regards,
MarketFox.-
Trade, don't bet.
  • #8
  • Oct 16, 2014 7:24pm Oct 16, 2014 7:24pm
Quoting MarketFox
{quote} Ok, now you became one of my Insiders! (just kidding). What you're saying makes sense. Thanks for clearing up my head. Kind regards, MarketFox.-
This could be a good thread but doesnt see we have any takers.
  • #9
  • Oct 16, 2014 9:18pm Oct 16, 2014 9:18pm
Quoting nanningbob
{quote} This could be a good thread but doesnt see we have any takers.
I guess fundamentals are boring for most of the Traders. Let's give it some time.
Trade, don't bet.
  • #10
  • Oct 16, 2014 9:50pm Oct 16, 2014 9:50pm
Quoting MarketFox
{quote} I guess fundamentals are boring for most of the Traders. Let's give it some time.
I won't say its boring thou. Its just that I chose to be a lurker instead =)
  • #11
  • Oct 16, 2014 9:57pm Oct 16, 2014 9:57pm
Quoting Relativity
{quote} I won't say its boring thou. Its just that I chose to be a lurker instead =)
+2 on this one. I mean sure everyone can have own opinion. I think threads like this are the most interesting TBH
All posts are my personal opinion
  • #12
  • Oct 17, 2014 7:00am Oct 17, 2014 7:00am
Quoting MarketFox
UPDATE #1 - 10/14/14 In latest days, Russia has discovered a huge, in fact, we could say MASSIVE Oil field that, experts said, it could be larger than the Gulf of Mexico. This reinforce its Oil Supply and therefore, their plans; they planned to sell Oil at $100 a barrel. The US won't let that to happen. Suddenly, Middle East producers said that they will be "comfortable selling Oil barrels at $80, or even lower". This is clearly an offensive against Russia's plans, and a precise punch to Russia's economy. You can be sure that the US is behind this....


I don't really care. If you can say how you would use all that info to trade profitably then I will change my opinion.

Just to be clear, all the things you mention are very interesting and informative and good to know in terms of how things work.
However, if there is not a way to use all of the info to trade profitably then I wouldn't get too concerned/involved. But that's just me!
  • #13
  • Edited 4:24pm Oct 17, 2014 1:07pm | Edited 4:24pm
Quoting keabwan1
{quote} I don't really care. If you can say how you would use all that info to trade profitably then I will change my opinion. Just to be clear, all the things you mention are very interesting and informative and good to know in terms of how things work. However, if there is not a way to use all of the info to trade profitably then I wouldn't get too concerned/involved. But that's just me!
Yes, I know what you mean. You can consider it as a "report".
It certainly isn't a holy grail of profits and if you're most interested in price action, this won't suit your profile.

The only ones who want to know this, are the big movers.
And since they move most of the price percentage, we're kinda following them.

I'm working in a fundamental system that could suit you. It would be something like "The chartism of fundamentals".
Give me some time; I'm collecting the historical data of all countries... It's kinda hard.

Regards to you and everybody,
MarketFox.-
Trade, don't bet.
  • #14
  • Oct 18, 2014 4:50pm Oct 18, 2014 4:50pm

UPDATE #2 - 10/18/14


When I started to write the Update #1, I noticed some pattern.
Now the days have passed, I can show you a better picture.

Since October began, a massive sell-off took place in the world's most important indices (In fact, the December futures of them).

S&P 500
Attached Image (click to enlarge)
Click to Enlarge Name: US500-DEC14Daily.png Size: 25 KB


Dow 30
Attached Image (click to enlarge)
Click to Enlarge Name: US30-DEC14Daily.png Size: 37 KB


Nikkei
Attached Image (click to enlarge)
Click to Enlarge Name: NK-DEC14Daily.png Size: 41 KB


UK
Attached Image (click to enlarge)
Click to Enlarge Name: UK100-DEC14Daily.png Size: 34 KB


Now you can ask: Where that money went?

Gold
Attached Image (click to enlarge)
Click to Enlarge Name: GOLDmicroDaily.png Size: 39 KB


What do you guys think?
Trade, don't bet.
  • #15
  • Oct 18, 2014 5:17pm Oct 18, 2014 5:17pm
Quoting MarketFox
UPDATE #2 - 10/18/14 When I started to write the Update #1, I noticed some pattern. Now the days have passed, I can show you a better picture. Since October began, a massive sell-off took place in the world's most important indices (In fact, the December futures of them). S&P 500 {image} Dow 30 {image} Nikkei {image} UK {image} Now you can ask: Where that money went? Gold {image} What do you guys think?
Well, its obvious LOL.

Quoting MarketFox
{quote} Yes, I know what you mean. You can consider it as a "report". It certainly isn't a holy grail of profits and if you're most interested in price action, this won't suit your profile. The only ones who want to know this, are the big movers. And since they move most of the price percentage, we're kinda following them. I'm working in a fundamental system that could suit you. It would be something like "The chartism of fundamentals". Give me some time; I'm collecting the historical data of all countries... It's kinda hard. Regards to you and...
Yes it does takes time to create such a basic system and gather the data. Its not an easy system to create, but IMO its doable and takes a little creativity and common sense. I've followed MasterForex-V's work and he did talk about something similar that you did.

I've also attempted a similar approach for currencies and actually created something similar. Its a little broken thou, but now you have something here, I think I am encouraged to continue on my work.

I like it!

I am watching =)
  • #16
  • Oct 18, 2014 6:32pm Oct 18, 2014 6:32pm
Quoting Relativity
{quote} Well, its obvious LOL. {quote} Yes it does takes time to create such a basic system and gather the data. Its not an easy system to create, but IMO its doable and takes a little creativity and common sense. I've followed MasterForex-V's work and he did talk about something similar that you did. I've also attempted a similar approach for currencies and actually created something similar. Its a little broken thou, but now you have something here, I think I am encouraged to continue on my work. I like it! I am watching =)
It sounds like we're officially "The fundamental team", haha.
Keep it up! I'd love to see what you're working at!

And with Gold... if it breaks the $1,450 level I'm opening a "Long for Long" and "Short for Short" (Long position for long time and Short position for Short time -in retracements-).

Stay green!
MarketFox.-
Trade, don't bet.
  • #17
  • Oct 18, 2014 6:48pm Oct 18, 2014 6:48pm
Quoting MarketFox
{quote} It sounds like we're officially "The fundamental team", haha. Keep it up! I'd love to see what you're working at! And with Gold... if it breaks the $1,450 level I'm opening a "Long for Long" and "Short for Short" (Long position for long time and Short position for Short time -in retracements-). Stay green! MarketFox.-
Hey MarketFox, I have some strong believes in what you've said and I wouldn't at all be suprised about the coliation between the two nations mentioned and the impacts it has had on the stocks - to - forex markets. Nice read, very interesting, keep adding your insights as I find them a great read!
  • #18
  • Oct 18, 2014 6:57pm Oct 18, 2014 6:57pm
Quoting Nednones
{quote} Hey MarketFox, I have some strong believes in what you've said and I wouldn't at all be suprised about the coliation between the two nations mentioned and the impacts it has had on the stocks - to - forex markets. Nice read, very interesting, keep adding your insights as I find them a great read!
Thanks for your words and for joining us! I'll do my best at this.

MarketFox.-
Trade, don't bet.
  • #19
  • Oct 19, 2014 3:23am Oct 19, 2014 3:23am
Quoting MarketFox
{quote} It sounds like we're officially "The fundamental team", haha. Keep it up! I'd love to see what you're working at! And with Gold... if it breaks the $1,450 level I'm opening a "Long for Long" and "Short for Short" (Long position for long time and Short position for Short time -in retracements-). Stay green! MarketFox.-
Haha... well I don't know. All I know is that chart data does reflect certain fundamental truths of the market, so long one knows where and how to look at them. IMO looking at how currencies flow this way also seems to tell me where the real money is going to. This way we consciously trade, both fundamentally and technically, hence trading is almost no longer about luck, but (fuzzy) logic.
http://www.forexfactory.com/showthre...39#post7810139
http://masterforex-v.su/002_020.htm
http://masterforex-v.su/forex001002002.htm
  • #20
  • Oct 19, 2014 1:35pm Oct 19, 2014 1:35pm
Quoting MarketFox
Since the beginning of times, Commodity currencies has been the most used exchange system.

At some point we stopped exchanging “five chickens for a pig” and started looking for Gold
That's about as far from the truth as you can get. Barter as a means of economic transaction has never been proven to actually have taken place on a scale large enough to be considered important as far as the history of money is concerned. However, debt and debt-like-money has been in use for about 5000 years now. We have clay tablets from Mesopotamia to prove that. We also have other records. I don't mean to get off topic here so I'm not going to spray you with the details of it but for anyone who is more interested in this I would advise you check out David Graeber's Debt: The First 5,000 Years. The book itself is a brick, but you can probably do well by either checking out David Graeber's book presentation at Google Talks or by reading one of the many book reviews out there (don't limit yourself to just one, though).

As far as your gold chart is concerned.... have a look at 10 year US bonds or German Bunds. Now do you see where the money went?
If you don't risk, you don't ever have to lose.
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