Archive for the ‘Uncategorized’ Category

The dollar is strengthening and we’re just going along for the ride..

Thursday, December 17th, 2009

The trade I have going with the dollar against the Swissie is moving along nicely. On Tuesday, the price closed above my intial entry + 1xATR and so, I added another contract putting me long 2 contracts USD/CHF.

USD/CHF Daily

USD/CHF Daily

I could have gone short the EUR/USD but because a) the USD/CHF broke the 14-day high, first, and then b) the EURO and the Swiss are closely correlated, they are, for all intents and purposes, the same trade.

What is driving the dollar higher? Inflation. Or more appropriately the worry of inflation. Consumer Price Index and Producer Price Index, which were reported yesterday, showed a slight uptick in prices. (This should come as no surprise to anyone who is vaguely familiar with the way our government has been spending money lately. The real surprise is that it took so long!)

The way the thinking goes, if the Federal Reserve and “Time’s Man of the Year”, Ben Bernanke, start getting a wiff that prices may start rising, their job is to keep them from rising to quickly. So while for now the overnight interest rate (the rate the Fed charge banks for borrowing money to lend to you) is at 0.25%, the Fed not have any choice but to begin raising rates next year if prices continue to rise. This is good for the dollar. And, since forex is essentially the futures market, what’s happening now reflects what traders think will happen in the future – i.e. rates are going to go up. Looking at the Fed Funds Rate futures, it looks like traders expect the Fed to start raising in late spring, early summer – so the dollar will be a good trade through then.

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Obama is focused on paying down the U.S. debt but..

Thursday, December 10th, 2009

he’s going to try to do it using worthless U.S. Dollars!

I’ve been trying to figure out the logic behind the President’s recent moves with regard to the $200 billion, the Treasury Department reported, will be paid back early. According to the terms of the original allocation, any unused funds were to go to toward the national debt.

However, the “Illustrious Leader” now wants to do what all good politicians do when they think they have a little more cash in the till – they spend it.

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There seems to be no effort by the current administration or those in congress for that matter to do anything about the falling dollar. In fact they seem hell-bent on accelerating the free fall.

And that makes perfect sense if their plan is to continue to devalue the U.S. Dollar to a point where those who own the debt – us and the Chinese – are paid back with worthless currency.

Not a bad plan if it worked. However, it won’t.

With a depreciating currency comes higher inflation. No, we haven’t seen much of that – YET. But it will happen.

If you think it’s hard to pay the bills, now, just wait. You ain’t seen nothin’ yet.

FOREX UPDATE: In a touch of irony, I’m actually long the dollar against the Swiss Franc. But I expect this to be a short-lived trade. I’ll wait, though, before the signal to move out and reverse.

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German philosopher, Friedrich Nietzsche, was wrong about a lot of things..

Monday, December 7th, 2009

..but he was spot on when he wrote, “what doesn’t kill you, only makes you stronger.”

After participating in more than 30 marathons, two 50-mile trail races, and two Ironman distance triathlons , you’d think that I would be able to remember the pain and fatigue involved – especially in the later stages of those races. And I do.

However, the only pain I still “feel” is that of dropping out of the run portion of the my second Ironman.

I don’t still “feel” the pain of dropping out of my second 50-mile Ice Age Trail race. I was recovering from a bad cold and, at 50K, felt like I was going to pass out. Dropping out was the smart thing to do.

Likewise, I don’t “feel” bad about dropping out of the 2001 Grandma’s Marathon at mile 20. A sharp pain in my upper leg told me that something was seriously wrong and that going any further would risk more serious damage. I was right. A few weeks later, the doctor diagnosed a stress fracture in my upper femur and that, if it had been worse, he would have had to put in pins.

But I shouldn’t have quit with only 16 miles left in the 2005 Ironman Wisconsin. Yes, the heat index was in the low 100’s. Yes, many of my friends were dropping out and ending up in the medical tent. Yes, they had the highest drop out rate of any IM race at the time. And these were factors which played on my mind and told me that it was ok to quit at the time. But it wasn’t ok. Because it’s never ok to quit just because everyone else does.

It’s obvious that too many people don’t hold to this philosophy. I’m amazed at the number of people who quit whenever things “get uncomfortable” or if they don’t see immediate success. Whether it be a marriage, a business, a job, school or you name it, success is usually only found after experiencing the set-backs, disappointments, struggles and, sometimes, even pain – and then working through them.

Is it ok to take breaks? Yes. Is it ok to slow down? Yes. Doing either is not only acceptable but, in many cases, it’s the wise and prudent thing to do. But it’s not ok to quit.

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I’m really enjoying Sean Walsh’s blog posts…

Saturday, December 5th, 2009

at www.illusionsandrealities.com . In his recent post, he points out that every adult, at some point, will come down with what he calls “jobitis – a condition that strikes every adult at some point in his or her life.”

As Sean points out, this usually happens in your mid-thirties. No matter how much you lie to yourself and others that you love your job, you know it’s not true.

I’ve loved every job that I’ve ever held – for maybe a year or two. After that point, monotony sets in. I begin to realize that I’m not living my life. I’m living the life that the employer or job has defined for me.

It made sense to expect to spend your working life in one career and maybe with one employer. Now here’s the NEWS FLASH: Those days disappeared 30 years ago!

Americans have been slow to figure this out. Our public education system still hasn’t.

But only so much blame can be blamed on the education system. After all, most of us graduate high school at 18 and college before we’re 25. After that, we’re responsible for our own education.

And some of us do recognize that we always need to be learning and getting re-educated. The problem here, though, is what most of us choose to get re-educated in. Most of us choose to get re-educated to get another, albeit different, JOB!

What’s the definition of insanity? Doing the same thing over and over, again, but expecting different results.

There are tons of books, blogs, websites, etc. that discuss how to develop incomes outside of being an “employee” that don’t involve much in the way of risk. Push away your skepticism and start looking at a few. (A good place to start is Sean’s book “Financial Illusions and the Realities of Money.”)

I’m always looking for ways to prevent my and wife’s future from being dependent on the whims of an employer. You should be too.

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A strong jobs report, yesterday, put some backbone into the dollar

Saturday, December 5th, 2009

…kicked me out of both the Yen and the Swiss Franc. That’s just how it goes, though. Short term, there may be some life to the dollar but long term, I believe it’s still going down.

But what I believe doesn’t matter when it comes to taking a trade. The only thing that matters is what the market actually DOES.

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Asian-Americans show us how to succeed.

Wednesday, December 2nd, 2009

Several years ago, I was sitting in the airport in Chicago waiting for my connecting flight to Miami. I was on my way to attend Market America’s “Leadership School” – as it was called then. Near me, in the boarding area, were a group of Chinese Americans who were also on their way to Miami, for the same reason.

For the past several years, the Chinese American contingent in attendance at these conferences had been growing noticeably. Now, at least half the attendance is composed of Chinese-Americans. They are the fastest rising group of distributors, in terms of income, as a whole.

So, while we were waiting, I asked one of them what it was that made them so successful. Her answer was eye opening. First, she said, they are supportive of each other. If someone is going to be going to college or is going to open a business, an eighth cousin, who they’ve never met, will send them money even if they aren’t asked to. It’s just done that way in their culture.

The other factor, she said, is the fact that they come from a culture in which they do exactly what their told – without question.

They succeed or fail as a group. But no one is left alone.

Compare this to Caucasian or Black groups as a whole, and it becomes clear why so many in those groups are falling behind financially.

A recent USA Today article, Cultural Factors Help Limit Recession’s Impact puts this same phenomenon in terms of the recessiaon.

“The recession has been brutal for just about every segment of the population, but though the unemployment rate for Asian Americanshas been inching upward, it has been far lower than the rates for whites, blacks, Hispanics or the nation as a whole. “

“Asians in the United States, both native born Asians and Asian immigrants, have higher educational levels than other groups,” says Alan Berube, senior fellow and research director of the Brookings Institution’s Metropolitan Policy Program.

Asians also are “tied in by a social network, a family network,” says Paul Ong, a professor of Asian American Studies at UCLA. “Rather than lay people off, you will find them spread the work out and there is lots of use of family labor.”

“Despite their upward mobility, Asians are still a minority group and thus more closely connected to one another than a native-born Caucasian American,” he says. “You’re much more on your own if you’re a middle-income, native-born white American, especially in a big city.”

So, what lessons can be drawn from this for Caucasian and Black Americans? Be more supportive of each other.

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In addition to being long the Yen, I went long the Swissie, also…

Tuesday, December 1st, 2009

Last Thursday, Thanksgiving day, several of the major currencies broke resistance against the dollar. One was the Swiss Franc.

In the situation where I signals on several currency pairs, I take the trade with the lowest ATR (average true range) if there is strong correlation between several of them – such as is the case with the Swiss Franc and the EURO. If my money management rules allow, I will take both/all trades.

But, for now, it’s the Yen and the Swissie.

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This time it’s the yen!

Wednesday, November 25th, 2009

Earlier in the week, I thought it would probably be a quiet one with no trades to be made. But checking on the charts at the end of the day is a habit. So, yesterday, after the market close, I checked my charts and saw the signal to go long the yen as the three week low of 88.63 was taken out just before the close.

I got in at 88.53 and placed the stop loss at that price plus 1.5 x ATR – which is a nice low .75. So, the stop is at 89.65.

If we get a close below yesterday’s close minus 1 x ATR at 87.88, I’ll add another contract.

This is the no-hastle way to trade. Just follow the rules.

US Dollar vs. Japanese Yen Daily Chart - 25 Nov 2009

US Dollar vs. Japanese Yen Daily Chart - 25 Nov 2009

(I’ll have to remember to tell Mom to have the computer on so that I can check when we get up there, tonight!)

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Waiting again for the next trend to develop…

Saturday, November 21st, 2009

The stop-loss on my pound trade was triggered, yesterday. So, now we wait,again:)

There is much speculation that stocks will continue to weaken and the dollar start to gain strength.

Maybe – maybe not. We don’t know.

Many traders trade what they THINK will happen. That’s gambling.

There is much debate between traders which is better: to trade reversion to mean or to trade trends. The performance data shows that trend traders as a whole do much better with less fret.

Yes, the number of wins / losses can be higher in trading reversals but the gains are typically smaller. And there’s much more work involved.

Trend trading looks to capture big moves when they occur. Yes, this involves more losses – but good money management and position sizing will keep these losses small.

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Went to lunch with some friends, yesterday..

Wednesday, November 18th, 2009

who I hadn’t seen in a couple years (has it been that long?) because I’ve been out of town so much, primarily.

These folks are all aspiring entrepreneurs. They call themselves CEO Nashville and meet every Tuesday at a little BBQ place in Brentwood to discuss their various business projects.

My buddy Ron Herbert – an insurance man and serial entrepreneur who seems to have his hands in every deal going down in Nashville – caught up with me last week and informed me of the new Tuesday lunch group.

It’s a great group of folks – dreamers all – and a nice break from the robots that most of us have become.

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