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Judith/Mark:
The central banks may appear to be in charge, but when the bottom drops
out, even they will not be able to stop it. They are running out of
bullets, Europe with a collective 2.5% interest rate, the US at 4.75. When
China devalues we should see the next iceberg rip into this paper vessel.
I give the market 2 years max before it crashes and the greater depression
ensues.
Do you remember last August seeing Rubin and Clinton's faces on TV trying
to soothe the citizens nerves as the market dropped 20% ? There was true
fear in their eyes, they know the system is in trouble. Rubin referred to
it as the almost 'total global financial collapse' that riuned his fishing
trip, at the SAIS speech last week.
http://www.geocities.com:80/WallStreet/District/4944/index.html
I base my opinions on a lot of daily economic reading, research of past
history, and general disgust at the level of incompetence at the controls
of the Federal Government today.
Here's some factoids to consider:
1) There's over an 18% unemployment rate in China, many of their largest
banks and financial institutions are now insolvent. Things are getting
worse there by the day, as state owned businesses privatize, they will
lay-off even more people. The once booming construction industry has
given China's major cities many newly vacant buildings, and the workers
are now among the roaming unemployed poor. Expect a devaluation of
their currency the Yuan by the beginning of the year 2000, and a
devaluation of the Hong Kong Dollar. Hong Kong just reported approx 7%
unemployment, a new record there.
2) Europe has a collective unemployment rate of over 12%, their economies
are weak and getting worse daily. The Yugoslavian war
is making matters worse as shipping channels have had to be re-routed, and
naturally costs are higher. Economists predict at least a half point cut
in growth for each European country due to Yugo. If you think demand will
come from Europe, think again.
3) Russia. Coming apart at the seams, with hyperinflation of 50% last
year, an equal amount expected this year. Banking system is insolvent, tax
system ineffective - favoring the rich, punishing the unable-to-pay poor.
Have defaulted on a long string of debts causing virtually all foreign bank
lending to cease. Russia says that it needs a minimum of $6 Billion from
IMF to stave off total collapse. Expect mass rioting there soon as the
civilian hardship intensifies as the ruble continues to weaken as the
government continues to run the printing presses to pay its workers.
Hard-liners are expected to retake the upcoming political seats.
4) The US with its massive stock and real estate market bubbles is
disguising a rather punk economy. Personal bankruptcies have set records 4
years in a row, the last being 1,400 in 1998. Personal, Corporate and
Government debt levels are staggering. The tech sector (NASDAQ) is
valued at a collective 100 times earnings, sales are plummeting, price
pressure, and intense competition will make it worse. When the market
crashes, reality will set in real quick just how excessive things have
gotten.
5) Brazil & Latin America. Brazil's currency the real is now trading for
alomst 2 per dollar, double its original peg. Interest rates are near 40%,
unemployment and poverty are high, with over 50% of the population in
poverty now. Argentina is next, as it depends heavily on sales of its
goods and services to Brazil. Argentinian farmers have begun
demonstrations due to the extremely low agricultural prices. Their farmers
are facing
the financial ruin American farmers are facing. This situation will get
much worse soon.
---------
To make matters worse, the US consumer is in debt up to his/her eyeballs:
FROM TODAY'S GDP REPORT:
Commerce said personal savings -- measured as the proportion of earnings
devoted to bank accounts and other savings -- shrank at a 0.5 percent rate
or by $30.9 billion in the first quarter after being flat in the fourth
quarter. It was the weakest performance for the quarterly savings rate
since the government began compiling the figure in 1946 and meant consumers
were borrowing heavily to keep shopping.
SKYROCKETING CONSUMER DEBT
-----------------------------
REVOLVING (CREDIT-CARD) DEBT
http://www.bog.frb.fed.us/releases/G19/hist/cc_hist_r.html
AUTO LOANS
http://www.bog.frb.fed.us/releases/G19/hist/cc_hist_a.html
OTHER
http://www.bog.frb.fed.us/releases/G19/hist/cc_hist_o.html
*THESE Figures DO NOT EVEN INCLUDE Mortgages!!!
NEGATIVE U.S. SAVINGS RATE
-----------------------------
http://www.stls.frb.org/fred/data/gdp/psavert
SKYHIGH CORPORATE DEBT
------------------------------
http://www.bog.frb.fed.us/releases/G19/hist/cc_hist_o.html
UNBELIEVABLE FEDERAL DEBT
-----------------------------
http://www.publicdebt.treas.gov/opd/opdpenny.htm
THE (IR)RESPONSIBLE PARTIES
-----------------------------
http://www.gslink.com/%7Earison/debt.html
INTEREST EXPENSE ON THE FEDERAL DEBT
--------------------------------------
http://www.publicdebt.treas.gov/opd/opdint.htm
THE SCAMMING OF AMERICA
------------------------
http://nationaldebt.com/clintons_deficit_reduction_plan_jan98.html
-----------------------
At 07:02 PM 5/1/99 +0200, you wrote:--
>hi james you might not know this but tiger fund and quantum aka mr soros had
>a terrible year from summer 98 to mar 99 they got royally skinned in usdyen
>collpase and the rise of aud and cad
>soros needed every cent on his real positions to regain his returns.... i am
>not jealous of him but as a trader who has sat in a bank for 11 years the
>hedge funds had 3 great years but banks have cut back there 20>1 leverage
>and now apart from clear examples as the real the g7 central banks are well
>in charge. on the real as a private investor you would need huge pile of
>cash to short real on margin as most banks wont even let the jockeys they
>pay 100k usd ayear plus the license to trade this
>-----Original Message-----
>From: James Taylor <jptaylor@xxxxxxxxxxxxxxx>
>To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
>Date: Saturday, May 01, 1999 3:46 AM
>Subject: Re: Fundamental Experience
>
>
>>>Mervin,
>>>
>>>Here's my humble observation, hope it can be of some help.
>>>It seems that you are trying to trade based on what you think might happen
>>based on some stimulus (rates, etc..). In today's extreme and complex
>>market environment, things do not always unfold as one might logically
>>think they should. I personally let the charts tell me when to enter a
>>trade, and I use fundamentals to back it up. Sort of the opposite order
>>that you had mentioned.
>>>I use technical indicators and chart patterns.
>>>
>>>As a few examples:
>>>Even thought the US equity markets have been going higher, I have refused
>>to go long any index futures due to the fact that economic fundamentals
>>make no logical case for stocks to keep rising. The risk/reward is way off.
>> Any day, one of the hundreds of sharp pins can break this massive bubble
>>and it could be limit down for two weeks, bankrupting any account.
>>>
>>>The bond market has been in chop mode for the last few weeks, and even
>>though the short term trend is still down, it is risky due to the extreme
>>equity prices. If the stock market crashes, the bond will likely skyrocket
>>(with the help of the stupid-ass folks at the Federal Reserve via open
>>market operations). But here the fundamentals of a strong bond (lower bond
>>rates) makes no fundamental sense given the extreme level of the US debt
>>that the bonds represent, and the precarious position the US economy will
>>find itself in when the long-overdue crash does finally occur. What will
>>it take for foreignors to repatriate their treasuries en masse ? I think a
>>big market crash, some good ol' fashioned panic in the streets, and the
>>confidence will be gone. The bond market can go either way. My money is
>>that it will go DOWN long-term (i.e. T-Bond rates to rise as inflation
>>increases). Also, it is certain that the Fed will continue to flood the
>>economy with dollars contributing to an already staggering M2 and M3 money
>>supply, and the Fed will lower the Prime and Discount rates in the
>>foot-steps of the Japanese, to practically zero.
>>>
>>>Currencies are the toughest to trade since governments are big players in
>>these markets and practically daily there is new rhetoric floated by some
>>government official when a trend starts to develop. This hot-air does
>>indeed move the prices of these currencies significantly. The
>>roller-coaster ride is not worth it. The only folks I know that are making
>>any money at it is large hedge funds like George Soros, who will short-sell
>>en large masse countries currencies. Classic example: Brazilian Real.
>>Soros made a nice bundle shorting it, as well as, a nice bundle shorting
>>the Thailand Baht, and his famous $2 billion profit short selling the UK
>>Pound Sterling.
>>>
>>>The safest money in the futures market has been to short sell commodities
>>on rallies. Wheat, SoyBeans, Cotton, Coffee, Cocoa.
>>>
>>>You mentioned that it was amazing how fast your balances fell. Money
>>management is a lesson I learned the hard way. It is easy to be too
>>aggressive by adding to many contracts. My rule of thumb is to have
>>4-to-1 balance to position ratio at a minimum. e.g. for every $3,000 tied
>>up in contracts, have at least another $9,000 in cash in the account. You
>>need to give the trade room to develop, and not have to exit a trade
>>prematurely due to monetary constraints.
>>>
>>>One last idea, in my opinion, mechanized trading systems do not work. The
>>break out system is the best performer, but blindly following any system is
>>a recipe for losses due to the fact that most systems are either trend
>>following or non-trend based (and what works for a while suddenly stops
>>working.) I use systems as filters to help select stocks based on extreme
>>indicator values. I then review the charts, looking for indicator
>>agreement and price action (trendline breaks, breakouts). I use:
>>Stochastics, RSI, ROC, Momentum, Divergence from Moving averages (50, 200
>>period), ROC of Volume, and ADXR. I scan the weekly charts first. I use
>>key support/resistance as guides for potential profit targets, I watch
>>daily price patterns (candlestick patterns) as indications of reversals,
>>and reaction highs and lows as stop loss targets.
>>>Buy the book called Martin Pring on Market Momentum. Excellent
>>explanation of each of the above indicators and their uses.
>>>
>>>Hope some of these comments help and give you some things to explore and
>>think about.
>>>
>>>Cheers,
>>>James
>>>
>>>http://www.advsoftware.com
>>>(soon to be moved to http://www.techtrading.com
>>>
>>>----------------
>>>At 10:03 AM 4/29/99 -0700, you wrote:
>>>>Hi RTs,
>>>>
>>>>Last year, I traded fundamentally for a few months and then traded
>>>>technically for the next few months. The result: my fundamental
>>>>performance was good and my technical performance was disastrous. My
>>>>technical method was a modified breakout rule and it caught all those
>>>>false breakouts and it burned my capital away slowly but surely.
>>>>
>>>>My fundamental analysis is limited to economic theory. The following is
>>>>my experience from actual trading.
>>>>
>>>>My first serious attempt to develop an economic model came in late
>>>>1997. In 1997, Asian currencies collapsed. And their economic
>>>>situation changed very suddenly. We have seen in the past how these
>>>>sudden economic shocks could occur (USA 1929, Brazil & Latin America
>>>>early 1980's, Japan 1990, Mexico 1994, etc.), but this time I have
>>>>enough time and materials to do a study. So, after a few months'
>>>>intense study, I developed my "Far-from-equilibrium Macro Economics
>>>>Theory" (FFEE) in May 1998. Certainly, I would use it in trading.
>>>>
>>>>I opened a futures account in July 1998. The first fundamental trade
>>>>from FFEE was shorting Canadian Dollar. It worked. Then, I went long
>>>>Eurodollar, US T-Bond and Japanese Yen. I also went short Dow Jones
>>>>Futures on Sept. 29, 1998. Amazingly, they all worked, just as my FFEE
>>>>predicted. I made money in Canadian Dollar, Eurodollar, Japanese Yen
>>>>and Dow Jones. Unfortunately, I stayed in US T-Bond for too long and
>>>>there was a reversal on Oct. 8 and Oct. 9, 1998. I have protective
>>>>stops, but I was filled 32 ticks below my stops. Fortunately, I took my
>>>>profit in Dow Jones Futures on Oct. 9, 1998 and it was a good decision.
>>>>
>>>>The speed that market took my profit away was remarkable, especially in
>>>>US T-Bond. That left a deep impression. The collapse in US T-Bond on
>>>>Oct. 8 & Oct. 9 was a resonance (gamma trend). And it was AGAINST me.
>>>>The feeling of being caught in this type of situation was very negative,
>>>>although this should be no surprise.
>>>>
>>>>Since US stock market held up very well on Oct. 7 & Oct. 8, I suspected
>>>>that an interest rate cut from the Fed was on the way. I decided that
>>>>the next big move was going to be in Swiss Franc and D.Mark futures
>>>>market. The only question, of course, is whether this expected big move
>>>>would be up OR down. I had to make a decision.
>>>>
>>>>My FFEE suggested that Swiss Franc and D.Mark would depreciate against
>>>>US Dollar. An interest rate cut will boost US stock market and capital
>>>>would flow from Europe to USA, hence US Dollar should go up. However,
>>>>my 4 year study in University and my Economics Degree suggest another
>>>>scenario. Since I expected that the US would cut interest rate soon and
>>>>Europe was going to keep its rates unchanged, academic economics theory
>>>>points to an appreciation of Swiss Franc & D.Mark against US Dollar due
>>>>to interest rate differencial. At that time (Oct. 9, 1998), US Dollar
>>>>was very weak. I thought about it. My FFEE was right 5 times in a
>>>>row. But I was not confident. Academic economics theory must be
>>>>correct millions of time. If not, it would not be published in the
>>>>textbook, I thought. Then, my intuition came in and I believed that
>>>>after a series of violent swings in the over-valued US stock market, the
>>>>expected capital inflow might not occur. I decided to go long Swiss
>>>>Franc & D.Mark futures.
>>>>
>>>>I lost money in both trades. When the Fed cut interest rate, Swiss
>>>>Franc and D.Mark futures went up and I bought more. That was the only
>>>>"up" day and then Swiss Franc & D.Mark futures were sinking fast. My
>>>>economic knowledge from academic economics was wrong and my FFEE was
>>>>right.
>>>>
>>>>After that, I still had substantial profit from my Jap.Yen trade. I
>>>>caught the whole move in early Oct. 1998. I decided to use the money to
>>>>trade technically. I had a modified breakout system that was designed
>>>>to avoid intra-day breakouts. I used it because the system went short
>>>>sugar in Aug. & Sept. 1998 and it also made several other profitable
>>>>trades. However, later on, there were so many false breakouts which
>>>>were not intra-day in nature. So, I lost consistantly by catching false
>>>>breakouts.
>>>>
>>>>I have suspended trading for a while due to my faulty technical system.
>>>>In early March, my fundamental economic theory FFEE again gave me a
>>>>scenario. After G7 meeting, I was convinced that the US had given a lot
>>>>of pressure on Europe (cut interest rates) and Japan (increase money
>>>>supply). According to FFEE, these actions would drive capital out of
>>>>Europe and Japan. A capital flow into USA would occur and there would
>>>>be further boom in US stock market. So far, this scenario is correct.
>>>>
>>>>
>>>>All the best!
>>>>
>>>>Mervin
>>>>
>>>>
>>
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