James Bibbings'  Instablog

Forex Registration Almost Here

For years traders, brokers, and money managers have been able to operate within the over-the-counter retail foreign currency markets (“forex”) with very little regulation.  As a result, trillions of dollars and millions of clients have traded within the industry with little standardization or legal oversight; that is until now.  As of the date of this article the industry is mere inches away from being entirely revamped and standardized through regulation.  The passage of the Farm Bill in May of 2008 eventually will mean mandatory registration with the Commodity Futures Trading Commission (“CFTC”) and membership with the National Futures Association (“NFA”) for nearly all forex professionals.  Have you and your firm considered what are you going to do about this?  Determining what steps you should take today may in fact determine whether or not you will still have a business tomorrow.

To Register or Not to Register

It has taken much longer than I would have liked to get this article out and it’s been a few weeks since we last talked about GDP.  I again want to thank each and every one of you for following me, analyzing what I have to say, and being patient.  To get everyone up to speed a few weeks ago I wrote an article titled "The 11^th Hour, Moments before A US collapse."  That article summarized some thoughts that I had regarding government intervention and its effects on GDP.  I followed that feature up with a supporting article the next week titled "GDP Fallacy, Do Governments Willfully Mislead People" in which I supported the first two points of my original thesis.  After this I wrote “How to Trade When the Government Controls Investment” and explored the details of my third point in the original article; how the government has worked to control gross investment.

Within each of these articles I have also tried to investigate potential investment opportunities.  My thought has been that if we can gain an understanding of the government's intentions within the markets, we may be able to make higher probability trades.  Since I’ve taken so long to put this together, I want to discuss points four through nine of my original theory. 

So if you've been following me the whole time let's get started; and if not take some time to read my previous work before moving on.  When you read remember to remain mindful of the GDP equation and the fact that GDP is intended to measure economic well being:

Let me start by thanking each and every one of you for following me and analyzing what I have to say.  Last week I wrote an article titled “The 11^th Hour, Moments before A US collapse.”  That article summarized some thoughts that I had regarding government intervention.  I followed up with a supporting article earlier this week titled “GDP Fallacy, Do Governments Willfully Mislead People” in which I supported the first two points of my original thesis.  In the second article I also began to investigate potential investment opportunities that might make sense if we can gain an understanding of the government’s intentions within our increasingly unexplainable market.  Today I want to discuss point three in my original theory, so if you aren’t up to speed get reading.  If you’ve been following me the whole time let’s get started; remember to remain mindful of the GDP equation and the fact that GDP measures economic well being:

GDP = (A) Private Consumption + (B) Gross Investment + (C) Government Spending + ((D) Exports - Imports))

Point Number Three

During the great recession there have been ups and downs, ins and outs, tons of tears and very little rejoicing.  At some point we've all been on the wrong side of a trade, seen the damage of broad company layoffs, had our 401k's destroyed, or have harbored deep ill feelings towards at least one (or more) government announcements.  At times such as these the emotions connected with our dire and depressing circumstances can become overwhelming.  So rather than being held down by circumstances that we cannot possibly control, what can we do about it?  Rather than sit and complain let's find a way to get away from government intervention and unjust market influences.  Clearly getting more active in politics, writing our representatives, and voting is one place to start.  That however takes too much effort for many people; we need something easy.  So let me be the first to lift up an idea, let's explore agricultural food investments.  I'll explain.

At least two times a month, Ned Schmidt, publishes his thoughts on agricultural food products as an investment option.  In his most recent publication on July 27^th he wrote:

"A multitude of irrelevant questions still are before investors, in general. Will housing prices recover? What will GDP growth be? Will GOOG beat the estimates? Will bank stocks continue to recover? Those are all questions of yesterday, rather than being questions of tomorrow...

Last week I published an article titled:  “The 11^th Hour, Moments Before A US Economic Meltdown”.  In my writing I laid out a theory to explain how the government makes choices in its attempt is to solve the economic problems ailing the United States.  I considered and wrote out my theory as a way to rationalize what had been happening within the financial markets over the last several weeks.  As everyone knows, recently the markets have been on a tear upward.  Much to my bewilderment, this run up has not been driven by powerful fundamental changes, key technical levels, or been followed by significant changes in trade volume.  So what happened?  How can we explain the irrational reasons for a market climbing when it should be falling apart?  To get up to speed in this discussion, or to find out for the first time the reasons why I think we’re going forward even though we shouldn’t be revisit my original story via the link above. 

Now that the framework is in place, I want to touch in detail on each of the points in my original thesis.  Today’s discussion will focus on points one and two of the ten step plan included in the original article. These points were:

1.   GDP = (A) Private Consumption + (B) Gross Investment + (C) Government Spending + ((D) Exports - Imports))

Rather than write one or two lengthy posts this week I'm going to lay out a summary.  From there I'm going to support each of my points and explain how I think the US financial markets have gotten to where they are today.  Through this summary I hope to reveal some new insights into the recent market rally and possibly find a way for bears to enjoy trading it.  Rest assured I have not defected from my bearish sentiment, and the days ahead will explain my feelings.  So stay tuned, have an open mind, and you just might realize a thing or two along the way.    

Just Like Helium, Up-Up and Away

Over the past couple of weeks more and more people are beginning to believe the great recession has ended.  I have been considering this and trying to decide whether or not the current market run up is just a strong bear market rally or something more.  Like all bears, over the last couple of weeks I have been squeezed in my trading (as well as in my thinking) and it has been growing increasingly uncomfortable.   When faced with this type of pressure almost everyone steps back, and takes a second to re-evaluate things.  For me, while trying to regroup, I came up with some new ideas and deeper thoughts into what may be really happening in our markets.   So perhaps by reading this I'll be able to shed some newfound insight into how to trade the market over the coming weeks.