Sorry fellows,

the past weekend i had to visit 3 different birthday events and that meant i was at partys nonstop day and night since friday. But it was worth it absolutely. Made some great new friends.

That means I won`t do an weekly recap.This evening I will post my humble “forecasts” for this week.

headz up guys ’n gals !

“At the beginning of the eighteenth century, fifty years before the time of Quesnay, Bandini of Sienna had shown, both from reason and experience, that there never had been a scarcity of food, except in those countries where the government had itself interfered to supply the people.”

-Jean-Baptiste Say, Treatise on Political Economy

“Was shorting the Argentine peso your favorite trade of all time?”
“No. I don’t have a favorite trade of all time. My favorite trades are when I’m wrong and get out without losing too much money.”

Anonymous, Currency Fund Manager, London

Inside the House of Money: Top Hedge Fund Traders on Profiting in the Global Markets. (Wiley, 2006).

“There is nothing like losing all you have in the world for
teaching you what not to do. And when you know what not to do in
order not to lose money, you begin to learn what to do in order
to win. Did you get that? You begin to learn!”

Jesse Livermore , “Reminiscenes of a Stock Operator”

By Professor Antal E. Fekete
May 2, 2008

The most powerful of the latter-day pagan gods that have guided the destinies of humanity for the past two-score years is irredeemable debt. Before August 14, 1971, debts were obligations, and the word “bond” was to mean literally what it said: the opposite of freedom. The privilege of issuing debt had a countervailing responsibility: that of repayment.

On that fateful day all that was changed by a stroke of the pen. President Richard Nixon embraced the woolly theory of Milton Friedman and declared the irredeemable dollar a monad, that is, a thing that exists in and of itself.

According to this theory the government has the power to create irredeemable debt - debt that never needs to be repaid yet will not lose its value - subject only to a “quantity rule”, for example, it must not be increased by more than 3% annually. This idea is so preposterously silly that “only very learned men could have thought of it”.

If the thief is thieving modestly, then he will not be detected. It never occurred to the professors of economics and financial journalists that a modest thief is an oxymoron, a contradiction in terms. How did they get to believing in irredeemable debt? The explanation is most likely found in Schiller’s dictum: “Anyone taken as an individual is tolerably sensible and reasonable. But taken as a member of a crowd - he at once becomes a blockhead.” Economics professors and financial journalists are no exception.

For a time it appeared that Friedman was right. The world has become dedicated to the proposition that it is possible, even desirable, to expand irredeemable debt in order to make the economy prosper. Never mind the default of the US government on its bonded debt held by foreigners. Never mind people victimized by theft. Thanks to the quantity rule, they will never notice the difference.

For all its seductive attractiveness, Friedmanite economics is ignoring the effect of irredeemable debt on productivity. It watches debt per GDP and is happy as long as this ratio stays below 100% by a fair amount. However, what should be watched is the ratio of additional debt to additional GDP. By that indicator the patient’s condition could be diagnosed as that of pernicious anemia. It set in immediately after the US dollar debt in the world was converted into irredeemable debt.

The increase in GDP brought about by the addition of $1 of new debt to the economy is called the marginal productivity of debt. That ratio is the only one that matters in judging the quality of debt. After all, the purpose of contracting debt is to increase productivity. If debt volume rises faster than national income, there is big trouble is brewing, but only the marginal productivity of debt is capable of revealing it.

Precipitous decline
Before 1971, the introduction of $1 new debt used to increase the GDP by as much as $3 or more. Since 1971, this ratio started its precipitous decline that has continued to this day without interruption. It went negative in 2006, forecasting the financial crisis that broke a year later. The reason for the decline is that irredeemable debt causes capital destruction. It adds nothing to the per capita quota of capital invested in aid of production. Indeed, it may take away from it. As it displaces real capital, which represents the deployment of more and better tools, productivity declines. The laws of physics, unlike human beings, cannot be conned. Irredeemable debt may only create make-belief capital.

By confusing capital and credit, Friedmanite economics obliterates truth. It makes the cost of running the merry-go-round of debt-breeding disappear. It makes capital destruction invisible. The stock of accumulated capital supporting world production, large as it may be, is not inexhaustible. When it is exhausted, the music stops and the merry-go-round comes to a screechy halt. It does not happen everywhere all at the same time, but it will happen everywhere sooner or later. When it does, Swissair falls out of the sky, Enron goes belly-up, and Bear Stearns caves in.

The marginal productivity of debt is an unimaginative taskmaster. It insists that new debt be justified by a minimum increase in the GDP. Otherwise capital destruction follows, a most vicious process. At first, there are no signs of trouble. If anything the picture looks rosier than ever. But the seeds of destruction inevitably, if invisibly, have sprouted and will at one point paralyze further growth and production. To deny this is tantamount to denying the most fundamental law of the universe: the Law of Conservation of Energy and Matter.

The captains of the banking system in effect deny and defy that basic law. They are leading a blind crowd of mesmerized people to the brink where momentum may sweep most of them into the abyss to their financial destruction. Yet not one university in the world has issued a warning, and not one court of justice allowed indictments to be heard from individuals and institutions charging that the issuance of irredeemable debt is a crude form of fraud, calling for the punishment of the swindlers issuing it, whether they are in the Treasury or in the central bank. The behavior of universities and courts in this regard could not be more reprehensible. Rather than acting to protect the weak, they act to cover up plundering by the mighty.

The inconspicuous beginnings of irredeemable debt have blossomed into a colossal edifice, a fantastic debt tower that is bound to topple upon the prevailing complacency and apathy. Actually “tower” is a misnomer. Rather, what we have is an inverted pyramid, a vast and expanding superstructure precariously balanced on a tiny and ever-shrinking gold foundation - the only asset in existence with power to reduce gross debt.

The construction has no precedent in history, and no place in theory, whether Ricardian, Walrasian, Marxian, Keynesian or Austrian. As a matter of fact, no one is analyzing the process. Research has been placed under taboo by the powers that be, lest diagnosis reveal the presence of cancer caused by irredeemability. There is no known pattern or model that would apply to its mechanism in terms of equilibrium analysis.

Two negative conclusions emerge. One is that the edifice of irredeemable debt must grow at an accelerating pace as markets for derivatives providing “insurance” to holders of debt proliferate. The insurer of debt must also be insured, as must the insurer of the insurers, and so on, ad infinitum. This is due to the fact that the risk of collapsing bond values has been created by man. In contrast, the risk of price changes of agricultural commodities are created by nature, and the futures market provides insurance, with no need to re-insure. The other conclusion is that the unwieldy size of the debt structure excludes the possibility of a normal correction: a major liquidation would dwarf the calamities of the Great Depression.

The debt delusion
It is a delusion to think that the government can splatter debt all over the economic landscape to cover up its warts, and reap everlasting prosperity as a result. The stimulation and leverage of debt has always caused stock markets to boom, so that the impact of debt was aided and magnified by the added paper wealth which, in turn, increased the propensity to spend and borrow still more.

 Businessmen are supposed to be more realistic in contracting debt. Yet the pattern of increase in corporate debt has also changed tremendously. Whereas traditionally corporations used to finance their capital needs in a ratio of $3 in debt for every $1 in stock, in the years leading up to 1971 they issued $20 in debt for every $1 in stock, with the ratio sky-rocketing thereafter.

We hear arguments that economists have by now learned how to control the economy with the so-called built-in stabilizers. Debt has largely lost its sting as a consequence, we are told. For example, bank deposits can now be insured. They couldn’t in the 1930s. But when the government itself is loaded with debt, and runs boom-time deficits, the built-in stabilizers may backfire and destabilize the economy further.

The government has commitments so great that its endeavor to offset a depression in our vast economy can only result in a loss of confidence. Anxious withholding of purchasing power in the private sector could far outweigh anything the government can add. To make matters worse, government income is highly dependent on a prosperous economy. The magnitude of the problem of offsetting a depression is grossly disproportionate to resources available.

One of the marks of great delusions is that nearly everyone tends to share them. It is a sorry tale - any delusion gives rise to a rude awakening in due course. Public attitudes to debt have changed so radically since 1971 that today indebtedness is practically a status symbol, instead of the shameful condition it used to be in a bygone era. The most striking reversal in traditional American attitudes towards debt is the widespread acceptance of perpetual national indebtedness, copied by perpetual personal indebtedness - a never-ending lien on future income.

Perhaps the worst aspect of the regime of irredeemable debt is the lowest level of morals followed by governments in modern history. It is epitomized by an elaborate check-kiting (using a bad check to get money) conspiracy between the US Treasury and the Federal Reserve.

Treasury bonds, contrary to appearances, are no more redeemable than Federal Reserve notes. It’s all very neat: the notes are backed by the bonds, and the bonds are redeemable by the notes. Therefore each is valued in terms of itself, rather than by an independent outside asset. Each is an irredeemable liability of the US government. The whole scheme boils down to a farce. It is check-kiting at the highest level.

At maturity the bonds are replaced by another with a more distant maturity date, or they are ostensibly paid in the form of irredeemable currency. The issuer of either type of debt is usurping a privilege without accepting the countervailing duty. They issue obligations without taking any further responsibility for their fate or for the effect they have on the economy. Moreover, a double standard of justice is involved. Check-kiting is a crime under the Criminal Code. That is, provided that it is perpetrated by private individuals. Practiced at the highest level, check-kiting is the corner-stone of the monetary system.

But our world is still one of crime and punishment, tolerating no double standard. The twilight of irredeemable debt is upon us. The sign is that banks are reluctant to take the promissory notes of one another. Significantly, this also includes overnight drafts. The banks know there is bad debt at large, and they don’t want to be victimized by taking in some inadvertently. What the banks don’t yet know, but will soon learn, is that all irredeemable debt is bad debt, and there is no way to rid the system of poison through administering more.

Redeemability of debt is not a superfluous embellishment. It has a function of fundamental importance: the proper allocation of resources to the different channels of their utilization.

The obligation to redeem debt hangs as the sword of Damocles over the government, just as it does over the head of every economic participant. It compels economy and foresight. It forces balancing of income and expenditures. It adjusts claims and commitments. It limits expansion by shifting resources away from the incompetent, and away from unhealthy projects.

The regime of irredeemable debt creates an escape route from commitments by the promise of eliminating the pressure of solvency. Whether it promises eternal prosperity, or it promises eternal subsidies, it does not matter. The results are the same. They consist in misleading people, enticing them to skate on thin ice, and luring them into financial adventures, private or public, which are not warranted by the ability to pay. The logical consequence is wholesale bankruptcy of individuals as well as that of the political setup. Losses breed more losses, until they become an avalanche. The present crisis is just the first sign of that denouement. More is on the way.

It is still possible to escape the catastrophe which this process would entail. The way out is to open the US Mint to gold and silver, as advocated by presidential candidate Ron Paul. The logic of this remedy is that it would mobilize potentially unlimited resources, presently tied up in idled gold, and re-introduce the indispensable means of debt-retirement into the economy.

Failing to bring gold back, where are we heading? The short answer is: we are marching into the death-valley of collectivism. The alternative to re-introducing redeemable currency is that the debt behemoth will force the imposition of a capital-levy type of taxation - along the lines of Solon, back in the Athens of 594 BC.

—-
Antal E Fekete has since 2001 been consulting professor at Sapientia University, Cluj-Napoca, Romania. He also runs the Gold Standard University, whose next session is to take place in Szombathely, Hungary from July 3-6 on “The Bond Market and the Market Process Determining the Rate of Interest”. For more information see www.professorfekete.com/gsul.asp or contact GSUL@t-online.hu.

(Copyright © 2008 A E Fekete)

Okay so far so good.

I am in week 3 of Trading this Account and week 4 of writing this blog.

First of all trading in “public” is something different then to trade in private, because I feel much more accountable for my trades and hopefully this will hold me back from over trading,trigger happiness and not thinking through my strategies and not planing my trades.

This blog is being written to get myself working on what has to be accomplished to succeed in this business.I know this is maybe the hardest and most challenging business one can choose as profession.

I really have many plans for this place of mine and hope one day i will not only aggregate News from my favorite sources , but instead  write my own articles and analysis of what’s going on in this world of Markets,Humans and Governments.

Also i plan to go live as soon as I traded 4 Profitable months in a row and feel ready for the challenge.Until then I can save my money and let it grow to a decent size.

 ——————————————————————————————————————-

Now for the changes i think i must do ,to get this piece of the web managed for myself to better keep it updated,cleaned and informative. Also for the convenience of my audience i will apply a few things.

I will only Post 4H Trades and higher from now on.Sometimes i might use 1H Charts to show my entrys with more detail.

Daytrading will be done from time to time but will not be documented here besides in the Real-time statement.

I will only note the weekly percentage change from now on.

Counting pips is not that useful as I change my position size with every new trade depening on stoploss and equity. But i will add my pipscount for the day to most end-of-day comments. 

Every Week there is a Weekly Review of the past week and a Weekly Wrapup of the coming week which includes my Big Picture View.

This includes my personal estimation and sentiment about currency pairs & commodities which are on my watch list.

Of course ,those people following this project since start have surely seen that I am not the most disciplined blogger & trader around . But I know there is a way to get there ;)  Time,sweat and blood as always in climbing the stairs to achievement.

In future i will only pick out the 4–5 best of my daily readings and comment on them.But i will try to do this every trading day.

Regarding my trading strategy. I am not ready to explain my reasoning for taking trades in depth yet. There are a few reasons for this, especially that I am myself still learning and I learned the most in a special group on which I will elaborate in future. Also i don`t plan to sell any stuff here like a system or the “holy grail” because there is no holy grail in trading besides the face in the mirror. 

I simply want to show my struggle to become a pro and log my trading ;) Let`s see if I can get there within a few short years lol 

Okay enough bragging for tonight! Have a good one wherever you are!

A thought provoking analysis of the most dire situation in this generation.

OTC Hockey Stick Problems Of The Derivatives Beast

I let the comments speak for themselves->

“You are by far the most knowledgeable, enjoyable, and informative writer. I love your blog. I work in the derivatives beast, trading ETF’s of no vlaue all day in massive quantity. It truly is amazing how wall st. is “funny money world”. Its a complete disgrace, totally fraudulent, completely surreal, and no one in power ever questions the stupidity of it all. Every “derivative beast” trader I know cannot beleive how the stock market goes up,up,up in the face of massive insolvency,housing crisis,no jobs etc. I try to send them to your blog or lemetropolecafe.com for some doseage of reality. May God bless you and your fantastic blog. Without you we are doomed, with your knowledge, we can at least try and do something to protect ourselves and try and learn to produce “real” wealth instead of destroying it by shuffling paper around day in and day out.”

“Elaine,
I read today that consumer credit expanded sharpley in April (mostly credit cards and auto loans, since home equity loans are a thing of the past). I also read that the average work week dropped by 1.8 hours (that’s 4.5%!!). At first I was stunned: wages are stuck; oil, food, and everything else is inflating drastically; banks are going under; houses are becoming worthless as assets; consumer confidence is in the basement; etc, etc. What the Heck is going on? Why would people (already spending more than they earn) go on a credit-based buying binge at a time like this? I don’t buy the argument that they have to borrow to buy the basic necessities - I know they’ve already got too much crap, plan to take their vacations to Disney World, smoke, drink, gamble and indulge in all their usual vices, and already have at least one TV, auto, etc. A real recession (in terms of unemployment) hasn’t even happened yet, so they haven’t been hammered like 1982. And then I got it. The upsurge in April credit is because the tax rebate checks will be coming out in May (this was announced in April). These idiots are spending their rebate checks before they get them. How are you going to save the people from the credit-insane “financial system” when the people are just as credit-insane as the oligarchs and pirates?”

I Closed all my Positions.

I will add the Pipcount later here as i am in hurry now.

I opened a Long GPB/JPY,GPB/CHF,USD/CHF,USD/JPY.

For Exakt entry points please check the Statement on the Performance Page.

I will deliver screenshots later.

EDIT: GPB/JPY and GPB/CHF got stopepd out.

         USD/JPY and usd/CHF are both around +80pips.

I am waitig for possible reentrys into GPB/CHF and GPB/JPY.

I will deliver pics later for sure! :D

GPB/JPY is around +154 Pips

But i watch the current 4 H bar close to decide if i take the profit.

Stoploss already secured +40pips.

1H Chart _>

GPB/CHF is around +200

Also watching the current 4H bar.

Stoploss still @ Breakeven.

1H Chart->

EUR/GPB is around +53

I doubled the position size here but let the initial StopLoss intact.

SL for addition is Entry of initial Position.

1H Chart->

My trades so far went good. Only my EUR/USD Buy Stop was triggered before i could close it..a loss of -25pips.(“Only” lack of discipline to stay awake another hour as i knew already Friday market close that i would close it as soon as the market opens Sunday evening GMT+1)

GPB/CHF 1H +115

GPB/JPY 1H +40

EUR/GPB 4H +32

“Thievery and covetousness will persist and grow, and the basic morals of ourselves, our children, and our children’s children will continue to deteriorate unless we destroy the virus of immorality that is embedded in the concept of the Welfare State; unless we come to understand how the moral code of individual conduct must apply also to collective conduct, because the collective is composed solely of individuals.”

-F.A.Harper

EUR/USD was stopped out on the NFP Report.

At the moment there are 3 open Positions->

Short GPB/JPY @ 207.47  SL@ 209.06

Short GPB/CHF @ 2.0845  SL@ 2.0963

Long EUR/GPB @ 0.7825  SL@ 0.7765

and one pending order to buy EUR/USD @ 1.5484 but i do not think this one will get triggered that soon.