The third quarter is in the books, S&P +5.8%, Nasdaq +6.3%, Crude +8.2%, Gold +10.9%. Ben Bernanke has fueled up his helicopters, now about to dump additional $40 Billion a month into mortgage bonds, promising to keep interest rates at virtually ZERO till 2015 and likely way beyond.
So what does the public do in the third quarter? The public continues to be motivated by fear, moving more money from stocks into zero interest paying bonds. As of September 19th, monthly reading investors moved $32.4 billion into bond funds and $6.8 billion into money market funds. U.S. Diversified Equity Funds macro-group experienced its sixteenth consecutive month of net redemptions.
Of course the public could be smart here, maybe we are about to fall off the face of the earths, Israel will attack Iran and Europe wlll fall into massive civil arrest, but the point is, that the motivation behind the public actions in most cases is FEAR, and not economic rational of earning zero interest rate in bonds.
FEAR will hurt you, it will keep you from moving forward in life, whether your goal is to be a better trader, basketball player or entrepreneur. As a trader, speculator or investor we must follow a plan, successful speculators are able to follow the plan despite their emotional baggage, or emotional fears.
If your plan directs you into money market funds, great, but if you are there due to fear, attempt to control your fears by defining the worst case scenario, either with a stop loss, or structured long gamma (long option) trade.Continue Reading...
On Wall Street, it’s Who you know AND What you know. So why not capitalize on what you know of the culture and inner workings of Wall Street? Trader Trivia let’s you pit your knowledge of authors, ticker symbols, exchanges, personnel, media professionals, and the rich history of Wall Street against the machine or against another player through Apple’s Game Center.Continue Reading...
I saw the below tweet by Market Analyst Arlan Suderman. Given our recent posts like What’s That In Your Wheat? and upcoming What’s In Your Rice? and since I had no idea what on earth aflatoxin is and why it is blended with corn, I thought it warranted looking into.
In case you didn’t know either let me give you the ‘skinny’ on alfatoxin:
So why are Indiana, Illinois, Iowa, and Nebraska getting approval for a carcinogenic mycotoxin to be allowed in the blend?
Researching a little I found that alfatoxin is the byproduct of a mold that tends to spread during times of drought – of which the Corn Belt has suffered this summer.
The FDA normally forbids the mix of grain high in alfatoxin with ‘clean’ grain but has in the past relaxed this when state officials request – which they are now doing.
According to the standard FDA guidelines milk can only have 0.5 parts per billion (ppb), human food lower than 20 ppb and animal feed up to 300 ppb.
I found out that it is hard for humans to consume large amounts of alfotoxin but that the effects aren’t pleasant, think liver disease.
So I asked the man in the know on twitter, Arlan Suderman, I “understand it’s hard 4 us 2 consume large amounts but can feeding animals followed by meat consumption end up in blood stream?” …. and from this, the power of twitter for learning became evident, thanks to tweets from:
=> The levels allowed are considered to be able to be broken down by the animal and not end in the product.
=> This was followed up with the reality that it can get into milk pretty easily. I found out that four dairies in Illinois have been caught with alatoxin in their milk and now have no where that will take its milk. As a result, unsurprisingly those in the biz won’t purchase blended corn.
=> Back in ’88 under a similar situation corn had to be buried as it was unusable.
=> Some States require all milk to be checked, so by definition I presume some don’t.
=> Out in dairy country Illinois, if any positive milk alfatoxin samples are found in the milk, it will send the local barley (an alternative feed) market to the moon.
=> The basis for high quality corn could get out of control.
=> Alfatoxin can get through to the meat we consume: with milk, chickens and immature animals as the least tolerant to breaking it down.
Understandably this is an interesting question of supply and demand, a real issue for those who are in the business of growing both corn and also utilizing it for production, a health concern and I hope an interesting insight for those that just look at little bars on a screen.
The real fundamentals move markets.Continue Reading...
“One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity.” – Bruce lee
So what do Bruce Lee and Leonardo Da Vinci have in common? They both understood, as any good trader should, the essentials of making an impact…the power of subtracting noise.
As a trader you should do the same:
1) Subtract your emotional baggage
In close to twenty years of trading, I have yet to meet ONE successful trader that is emotionally unbalanced. Bring your emotional baggage, your demons, your insecurities to your trading terminal, and you likely to make wrong decisions.
2) Subtract financial entertainment
CNBC and other financial media are a great source of info-tainment and you can surely learn a lot. But if you sit in front of the TV all day without having a solid plan thinking that’s what professional traders suppose to do, you virtually guarantee to trade yourself out of capital very shortly. Understand that the delivery of TV news is designed to hit the emotional part of your brain. You might benefit from shutting it off in the short run.
3) Subtract noise
Good trading is not about having 8 screens, 1500 indicators, live steaming news, Twitter feeds, and a phone line with direct connection to god. Clean up your charts to the essence, price, volume and maybe one or two indicators. Clean up your screens and eliminate as much noise as possible, go over your trading diary and identify which inputs produced the most output, then go back and close the applications that add nothing but flicking lights and funny sounds, subtract until you are left with the essence of your system.
Make no mistake, the above three points are extremely difficult to accomplish. We assume we need “everything,” as in “the more tools the better.” But in fact, when we spread our brain too thin, we severely impact our ability to clearly process the essence of what requires to achieve our goal.Continue Reading...
We have written a string of posts recently on the dark side of trading with the UBS rogue trader and the SEC case against another ponzi-like scheme out of Atlanta.
Well it doesn’t stop! In a recently revealed trading incident, a London Broker for PVM Oil Futures, traded company funds while drunk, moving the oil price more than $1.50 and when all was said and done losing $9,763,252.
What’s more as a broker he was only authorized to enter trades on behalf of his clients. Yet he was able it seems, with ease, to trade PVM’s risk capital.
The broker, Steve Perkins had one savage hangover phone call from his boss the morning after asking what he’d done with $520 MM of the firm’s money.
Initially he lied saying he had been trading alongside a client. The story fell apart when he couldn’t put the client on the phone to corroborate his story.
The rub of it all is that he had been drinking all weekend at a company golf weekend which he was rounding out with a day off. He traded $520 MM in orders through the night being responsible for 69% of the total traded volume.
Early the following morning he sent a text to the Managing Director trying to pull a sick day when presumably it all began to soak in.
Despite the losses he will receive a fine from the FSA (the UK equivalent to the SEC) of only £75,000 (just over $121,000) likely reduced from £150,000 due to financial hardship.
Here we have yet another case of both trading without emotional or moral reflection and another company whose risk management procedures are ridiculously lax.
Although in the same industry it’s staggering the difference all too often seen between independent traders and those trading OPM.
Since Intentions = Results; both the broker and firm are long overdue some introspective work.Continue Reading...