Insider Crimes, Funny Money and Options Rackets

March 22nd, 2007

WARNING: The following is not a recommendation to buy, sell or hold any financial instrument. Trading stocks, currencies and options involves serious risks.

For years, I’ve kept this information to myself, waiting for a chance to look at it again more seriously and systematically. Unfortunately, I don’t really see myself being able to allocate the time to research this stuff further.

I know that several Cryptogon readers are traders and/or otherwise involved with the financial markets. Others of you are good at writing software. There are several neuroscientists out there and at least one rocket scientist-type guy or gal! HA. Seriously, it’s true. Three INTJs have written in, in response to the INTJ reference I made in a previous post. These are the types of people who can nail this stuff to the wall, to the extent that it can be nailed to the wall.

I thought that some of you might take a look at this information and have the skills and tenacity to take it further than I was able to. Maybe figure something out… and share it with the rest of us.

Anyway, here goes.

STOCKS: INSIDER CRIMES AND THE ACCUMULATION PHASE

From around 1998 to 2003, I looked for a way out of having a day job through trading, stocks mostly. I learned a lot of things the hard way, but at least I learned. My goal wasn’t to get rich. All I wanted to do was make small profits consistently. Fifty bucks a day was actually my goal. I managed to do this, and orders of magnitude better, on occasion, for a while, but it was hard, time consuming and incredibly stressful. Was trading (intraday) worth it? For me, not really, but it was better than showing up to some office.

Was it gambling? In a word, yes, but I didn’t know that at the time. I thought that the tools and systems I used were working. Actually, they weren’t working. How did I know they weren’t really working? Because I started to lose money! They had just appeared to be working. I stopped trading as soon as I lost confidence in the tools. (Maybe the tools actually worked for a while, but then stopped working? That’s possible, I suppose, but not likely.)

I had always assumed the entire business of the markets to be a massive criminal enterprise that allowed public participation simply because it made a few people extremely wealthy. But, I wondered, when do the fewest people make the most money in the shortest period of time?

During gaps.

A gap is a sudden, violent change in the price of a stock, future, bond, etc. Gaps are caused by some event that temporarily creates a state of disequilibrium in order flows. Gaps on stocks started to draw my attention because I just knew that insiders (and others) were pre-positioning themselves to profit from those moves.

I noticed that, quite regularly, unknown, crappy little companies would go up 25%, 50%, 100%, 200% or more in a single session. You see them almost every day on the top percent gainers board. For years, I looked at those and shrugged. “Yep. People hit the lotto too,” I’d say to myself.

I watched another one pop, then, finally, I thought: “This is the scene of a crime for sure.”

I’m not talking about legal insider trading by corporate officers that the financial press follows. I’m talking about the mistresses of executives and $2000 per hour prostitutes who heard something over pillow talk, friends at country clubs who get a tip during the golfcart ride to the 18th hole, industrial espionage operators (former spooks) who have these idiots under surveillance, low level IT staff who read the executives’ email, not for fun, but for profit, etc. etc.

The point is that LOTS of people who aren’t corporate insiders know the news before the market does. They buy before the news comes out. This happens every day.

Thousands of symbols. Every couple of days at least one of them goes up by 25% or more. How would I go about finding them?

Assume maximum criminal behavior and find stocks where the signal to noise ratio is very high.

I came up with a system where I doubled a few times; I made nearly 3x once. No losses. I could never bring myself to allocate large amounts of capital to hold overnight on these “Risk of ruin” bets because I didn’t believe this was really working, even when I was hitting. (All stock bets are, in my opinion, risk of ruin.) Was it luck each time? Possibly.

Whatever it was, here’s what I did:

I looked for cheap stocks that were flatlining or trading in a narrow range near their 52 week lows. Then I looked for increases in volume and churn. Churn is increasing volume with prices staying flat, or increasing slightly. Under churn, prices stay relatively flat because the buying is accompanied with selling to keep the price from running away. There is, however, a net inflow of capital.

This is the critical part: The activity had to be happening in the absence of any news.

I’d read about Dow theory, so the minute I started to notice these volume increases, without news, it made sense. What I was seeing was the accumulation phase on these stocks, where people with inside information were buying ahead of the good news.

I never looked at earnings. The company’s products or services didn’t matter. All I was looking for was that very specific pattern.

The trick was finding stocks with a high enough signal to noise ratio to spot the criminal insider buying. This nonsense happens on all stocks, I’m sure, but it’s too difficult to see most of the time. That’s why the flatliners and narrow rangers are nice. I picked stocks near their 52 week lows because, well, for some reason they stopped there before. Think of this as an up or out proposition. Oh yeah, it could go to zero and you could lose your money.

Don’t use stops on these bets. These are all or nothing gambles. Why? Because market makers will often drive down the price before the big move up. These stocks are very simple to manipulate. Just before a big move, they might run the stops, just under where you’ve drawn your support line, to scoop up a bunch of shares at a discount. (This just happened on one today, as a matter of fact.) Double and triple bottoms are built on the skulls of people who thought there were being smart by setting stops down near a 52 week low. If you’re reckless enough to buy a crap company near a 52 week low and are worried about it dropping more, forget this method. You’ll get stopped out, and minutes, hours or days later, the thing could suddenly double. Company bought out. Drug approved. Government contract awarded. Whatever.

Why not wait for the fake dip before the big move up? Sometimes there is no dip at all. Sometimes there is. Again, nobody said it was going to be easy.

Why not use a screen that only looks for double bottoms AND a follow-on positive slope OBV on no news?

* scratch whiskers *

Every time I think I’ve beaten this crap to death, there’s always another weird path to take. I’m no longer in a position to do 20 hour research binges on this stuff, but some of you young whipper snappers should try it.

The way to play this is with small bets on multiple setups with capital that you assume will be lost. As soon as you get a pop on any of them, sell immediately into the “dumb money” players who show up to chase the news, which might just be some kind of criminal press release. Don’t try to parse the news. Don’t even look at it. Get to battlestations. Lock and load.

How much you take off the table is up to you. I would typically dump it all in one shot. But you might consider selling 1/2 or 3/4 of what you started with and set a trailing stop on the rest. You might also draw a trend line connecting the bottoms of an on balance volume (OBV) study to better plan your exit. Upward slope? Let it ride. Cross down? Dump it. I liked watching this on one and three minute charts. You just need some way of seeing that more dumb money is flowing into the thing than insiders are pulling out.

There was no way to know what would happen an hour, a day or a week later. Sometimes they would go higher or much higher, sometimes they would crash back down. Once you get out, though, don’t even think about looking at the thing again. Spend your time looking for the next one, trading sideways, near its 52 week low, with anomalous volume on no news.

Can’t find any? Ask your significant other to duct tape your hands to the desk so you don’t make any stupid, undisciplined trades. Actually, if you have the time to dedicate to this type of work, you probably don’t have a significant other, or a company has provided you with a padded room and just slides food and coffee under the door.

If you have access to Trade Station or some other scriptable tool, a screen could be written to automate the search. [I have no reciprocal relationship with the TradeStation Group.] FYI: TradeStation is not a toy. It is the most sophisticated strategy testing and trading platform available to the public. Any strategy can be coded and tested using that software. When I was doing this, I was doing it manually, individually inspecting hundreds of charts.

A note on volume: Screen for stocks with an average daily volume of at least 25,000 shares. Many crap stocks barely trade at all, so any activity will skew your volume studies and could give you false positives. But if you see a dead one with volume picking up out of nowhere (no news), with the price holding steady (churn), keep an eye on it. Read about OBV. Then read about it again.

I was doing this on NASDAQ listed stocks in the $1 to $3 dollar range; stocks colloquially referred to as dog food. I don’t see why this technique couldn’t work on the serious pink sheet garbage penny stocks as well. I mean, what’s the difference between a $2.25 NASDAQ stock and a penny stock? About two bucks.

Another note on volume: Your volume studies are the key to this. If you can apply two moving averages to daily volume, that will spot the weirdness. Make your long MA something like 13 periods and your short (trigger) MA something like 5 or 3 periods. If you get a fast period MA cross on the volume, ON NO NEWS, that might be something. You’re looking for sustained, anomalous volume. One day spikes may or may not be something. There’s no way to know on those. But when that average daily volume starts breaking out, that’s interesting. Up sloping OBV on no news is interesting.

What period? Screen using daily closes. There’s no need to gear up for an intraday-style gun battle during the screening process. (TR and I tried to do it in real time using TradeStation’s incredible Radar, but we failed. We couldn’t filter the cranks from the real moves. Our tools were finding real moves and cranks. Sadly, for us, they looked the same in fog of war. We progressed to the Magic Mystery Dot, which was very interesting and weird, but didn’t quite work. It kinda worked, but I nearly pissed myself trading based on its signals.) You can quietly sit back, look at the daily data and pick these out very carefully. The criminals need to take their time on accumulation. They can’t do it too fast or the price will go up, or smarty pants people with their volume studies on their radar screens might spot it. The setups are usually slow and steady, they happen over days or weeks.

Once you’re in, just set price alarms using some tool and don’t think about them again. Initially, set your alarms somewhere above the top of recent ranges that the stocks have been oscillating in, or just above the flatline if it’s really just trading sideways. If the price breaks out on no news, continue to hold; this could just be a temporary crank that will fade fast. If the breakout occurs on the news, dump it, even if you’re only making cigarette butts and bottle caps. A weak pop on news just means that there aren’t enough suckers willing to take the bait. How do you know it’s a weak pop? What’s the slope like on your one and three minute OBV charts after the news? Flat to down? Buddy, you’re juggling hand grenades with the pins pulled at that stage.

Also, because these moves may involve very serious criminal activity you want to get clear of the pig before the exchange halts trading and the SEC gets in on the act. By the time the authorities are parsing the news and taking note of the order flow, you want to be outside in your hammock, sipping a cold beer.

Again, nobody said it was going to be easy.

Note: The above strategy should work on the short side too, in theory, but I have only ever worked the long angle. Why? To play this short, there will be more noise, you’ll have to play with more expensive stocks and to not use stops when short could result in unthinkable disaster. You could potentially lose more than your initial bet.

CURRENCIES: FOREX FUNNY MONEY

FOREX is the best pure gamble now, for intraday action, but you have to sit there for hours and just be able to react to momentum/panic moves on news. FOREX is for people who have the temperament of a sniper. Most of it is boring to the point of being unbearable. Finally, unexpectedly, you’ll get window of opportunity, lasting seconds, to take one shot.

That’s FOREX. I’ve only used a realtime simulator for FOREX and never traded with real money. I tried all of my old daytrading tricks (multi period stochastics, MAs, Ichimoku, trend following, etc.) and none of it seemed to work for me. What looked good, though, was a straddle of USD/CHF and EUR/USD just before news.

USD/CHF and EUR/USD move in opposite directions almost all of the time. Get in long (or short- I don’t think it matters) on both sets of pairs, just before news. Once scheduled economic news hits the market, there could be a violent reaction one way of the other. Immediately dump the position that’s losing and let the winning pair ride for some number of PIPs. Were talking seconds to minutes. Get out. Turn off your computer. You’re done for the day.

FOREX is probably the best venue for news driven action. You will make or lose the most money on FOREX. It’s easily the noisiest, whip sawing fake out thing I’ve ever seen, but sometimes, those pairs just run and keep on running one way. Outside of news, though, that thing is a crap shoot.

You can experiment with a decent real time trading platform at fxcm.com. [I have no reciprocal relationship with fxcm.] You just run the thing with a practice account that is loaded with 50,000 pretend dollars. It’s totally free.

OPTIONS RACKETS: EXPIRATION ANTICS

I actually wrote this as part of a comment. I’ll just reproduce it here. I initially named the market maker, but I’m removing it now. It doesn’t matter who it was. Why? Well, that firm frightens me. There’s no way to know what they’re capable of doing. I’ll just call them Big Firm.

One day, things were looking good long on Amazon. We got a bit of a pullback during a multilane uptrend, lots of support. I got in heavy, 1000 shares. It wobbled around a bit, then the futures took off. Up and away.

I thought, “Wooo hoooo!” this is going to be a good one.

Buyers pouring in!

Wait.

What’s this?

Big Firm is on the ask.

HAHA Big Firm is up to his old tricks, that guy! Not going to fool me! * hands quivering at that point *

Futures rising. The Nasdaq 100 is climbing. It’s ok. It’s ok. Stand fast. Stand fast. (I was viewing the battlespace on three displays.)

Big Firm is selling AMZN. He’s keeping the lid on Amazon right now. Is he just trying to front load shares for himself before the pop??? What the???

Actually, the price is dropping. The support on the bid side, outside the spread, started to disappear on Level 2.

“F*ck this shit, man.” I sent a sell limit order outside the spread. (This is a way to jump the line that forms at the exits when the theater is on fire.) I was lucky, someone took it at the market for a loss of only ten cents or $100 on that 1000 shares.

Seconds later, the long red candles started dripping down my multiperiod charts. Time sales cascaded red with large block sales. * my hair is standing on end even now remembering this, I nearly got decapitated on this one * The idiots in the chat room spat out things like:

AMZN REVERSE IT SHORT!!!

WHAT THE HELL??

HOLY CRAP

OMG

Etc.

Big Firm single handedly moved Amazon down nearly $2 in a couple of minutes, through hourly and daily supports. Well, not single handedly. They just used their deep pockets to frighten lots of traders into dumping. And the move took on a life of its own. I just sat back and watched it happen, in awe.

Why did They do it?

Someone told the chatroom I was in that it was about options expiration, and that Big Firm had obviously bought a bunch of out of the money puts that were about to expire worthless.

But guess what? Instead of expiring worthless, Big Firm just drove the price of the stock down until those options were in the money! I watched this happen. Amazon did that move on its own, without follow through from the futures or other tier 1 stocks.

As usual, don’t take my word for it:

Stock Price Clustering on Option Expiration Dates

This paper presents striking evidence that option trading changes the prices of underlying stocks. In particular, we show that on expiration dates the closing prices of stocks with listed options cluster at option strike prices. On each expiration date, the returns of optionable stocks are altered by an average of at least 16.5 basis points, which translates into aggregate market capitalization shifts on the order of $9 billion. We provide evidence that hedge re-balancing by option market-makers and stock price manipulation by firm proprietary traders contribute to the clustering.

That was it for me. I could think of better things to do than dog paddling in a shark tank.

But….

Maybe this could be visualized in a way (heat chart) that would show where the largest clusters of out of the money options were sitting. This would have to be a real time screen of the NASDAQ 100. (Forget it on smaller stocks.) You’re looking for stocks that have large pools of options that are out of the money and for stocks that begin to move toward those option clusters IN OPPOSITION TO THE FUTURES.

How do you play?

If a large cluster of options is below the market price, the futures are rising, and the tier one stock is wobbling or starting to fall, buy puts somewhere down there. If the large cluster of options is above the market price, the futures are dropping, and the stock price is wobbling or starting to rise, buy calls.

The fact that the stock starts moving toward those options in opposition to the futures shows you that a powerful market maker or two might be refusing to let their options expire worthless.

If you knew where the options cluster was, and, therefore, the motivation behind the bullshit crank of a move, I suppose you could play the stock directly.

Of the three dangerous trading schemes above, this last one would be the most difficult to program. It might also be the most profitable.

Well, guys, that’s it. I need to go build a bean frame and collect some cow manure.

23 Responses to “Insider Crimes, Funny Money and Options Rackets”

  1. Joan Says:

    This reads like some kind of spy novel! It’s frightening that things like this are happening all the time.

    I would never try to do anything like you describe (way too scary for me), but thanks for sharing this information.

  2. fallout11 Says:

    I considered intraday trading about the time you got in (1997-98).
    Despite being an INTJ and former electronic warfare programmer, I am not a fan of gambling, even ‘educated gambling’. The risks of ruin are simply too great. Casinos offers better odds, on the whole, and less organized crime.

    Great piece, however, and quite educational.

  3. Kevin Says:

    It’s all gambling, that’s the really frightening thing. Even keeping cash in your mattress is gambling, if you know how money creation works. Holding cash is gambling on the fact that musical chairs game with Chinese will continue and that the sub prime mortgage apocalypse will somehow not spread to other sectors of the economy. (That’s Tooth Fairy and Santa Claus talk, by the way.) Maybe the Chinese will foot the bill for the subprime bailout?! HA

  4. bookman Says:

    I (unknowingly) did (something like) the gaps move on Viropharma (vphm) back in high school around 1997. It was the first trade I ever made. There was a lot of talk of a ‘cure’ for the common cold. I bought at 21$ & over a week it ran to ~$110… sure enough with my inexperience I stayed in & the stock crashed to 18 in two days. I got out a couple weeks later at 23.

    I certainly learned a lesson.

  5. bookman Says:

    the company had no product on the market and little or no revenue (i’m pretty sure they still don’t have either). there was just a lot of bullshit talk/marketing on the internets & cnbc. with the stock at 100$, the word being sold to the little guy was it could hit 200$. sure enough, the drug didn’t pass phase II fda trials a couple days later leading to the crash. good thing i only had 600 or so in it (though at 15 thats a lot of money).

    just my adolescent version of the ‘big fish that got away’

  6. George Kenney Says:

    Money as Debt:
    If you think the stock market is criminal, just imagine how you will feel when you figure out that the money system it is built upon is criminal too.

    http://video.google.com/videop.....2583451279

    >

  7. Ozzy "The Man" Diaz Says:

    Here, let me go one step further. Life is gambling. You have no choice but to play. When you stop playing you die. Humanity is life gambling with higher consciousness. Other species may survive for millions of years, before either evolving or becoming extinct. For the individual human consciousness, there is nothing really to fear because it will “die” “disappear” or become assimilated into some other reality when the body dies. The body is of life. It wants to live, to pass on its essence to the next generation. Thus it communicates its needs and desires to the consciousness through a complex system of neuro-chemicals that manifest as various urges including fear. Fears come from instinct and experience. Go to a skyscraper, and do like in Ferris Bueller’s Day Off. Lean against the glass and feel the fear come bubbling off. You are tricking your body into thinking it is in danger. In one sense, it is in danger because a small chance exists that the glass will crack and you will fall to your death. See? You can’t escape gambling. Even if you say, “Well, then I’ll kill myself and escape the gambling of life,” you are still gambling that you won’t be reincarnated into life again; perhaps as a life-form with a less pleasant existence, such as a worker in one of Wal-Mart’s Chinese slave mills, or that you won’t wind up in some form of Hell for the sin of suicide, or that you will enjoy the Heaven or the nonexistence more. All you can do is make educated bets and hope for the best. Society and its various priests of power try to control your education to control your choice-making and your perception of what is safe and unsafe. They do this as part of THEIR survival strategy. Politicians initially become slaves to powerful interests in part because their survival depends on it, but mostly, they become really enslaved because their perceptions are so controlled that they cannot imagine serving powerful interests in any other way than by blinding following orders. This is how powerful interests destroy themselves. They forget the old values that made them powerful in the first place; they succumb to greed, lust, etc. This usually happens when one generation transfers power to the next.

    But I digress.

    Kevin gambled by going to New Zealand. He’s gambling that some sort of ultra-criminal regime won’t exert unwarranted interest there. He’s gambling that the New Zealanders will be more vigilant of their liberty and less prone to corruption than in other countries. He’s gambling that it won’t become overrun with zombies like in Dead Alive. He’s also gambling by starting a farmlet. He’s gambling with the weather, the bugs, the tools, the drudgery, the animals, etc. All of the problems that made and make farming a risky enterprise, like any other.

    You’ll also notice that part of Kevin’s strategy involves running Cryptogon. He offers information and in exchange receives information. [By the way Kevin, you should count comments as “wealth” because they require “time” and “energy” to create, and because the wisdom and insight they offer, or the foolishness and obtuseness which allows for the sharpening of one’s own wisdom and insight, are the most highly liquidized forms of wealth in that they can be converted into liquidity-generating schemes.]

    Kevin also has designed Cryptogon to provide a revenue stream. For all the griping about the evils of money, he knows that having a stake in an income stream is still a wise gamble while money is accepted in stores in exchange for goods. Perhaps Kevin will set up other income streams as a hedge against extinction. Perhaps he will continues this process and evolve into a billionaire who enslaves us all.

    You see, this is all about survival. Kevin recognized that other people were preying on him to survive and that his survival was derived from forms of predation that he found to be repulsive He also realized that he know longer fully understood the system of predation, and that the more he understood the less he liked. That’s why he uses Manichean labels like “evil” and “criminal.”

    But I still think, that ultimately it’s a matter of perspective. Life feeds on life. Sometimes it feeds on human life. If you label this evil, then existence is evil. This is the beginning of religious hegemony, from which all other hegemonies spring.

    I’ll post more later. I know where I want to go with this.

  8. stu mann Says:

    ha ha, very funny, but not much to do with reality.

    what is identified as “criminal insider trading” is more likely programmed trading strategies interacting with one another to create trends – momentum without reason. its the uncertainty principle in practice. seems to result in greater volitility in the ‘dog food’ while smoothing the volitility in the big names, since they are more for the ‘buy n hold’ crowd.

    would like to point out that stops don’t work so swell during big price moves. a collapsing price can crash right thru your stop, especially in basement trading.

  9. Kevin Says:

    bookman,

    Those startup pharma companies are, in general, very good candidates for this. They’re usually one drug wonders. Universally shunned… Until the hideous FDA blesses whatever poison they’re cooking up, or moves it along in clinical trials (phase 2). But yeah, the axiom about pigs getting slaughtered applies to any gap move. Buy and hold… until the pop.

    I used to think of it like the old Sanford and Son TV show: Buy junk sell junk.

    Or…

    Someone else pumped it, I dumped it.

  10. Kristofer Says:

    “You see, this is all about survival. Kevin recognized that other people were preying on him to survive and that his survival was derived from forms of predation that he found to be repulsive He also realized that he know longer fully understood the system of predation, and that the more he understood the less he liked. That’s why he uses Manichean labels like “evil” and “criminal.””

    you had me up until this paragraph… he is not engaging in predation.

    a)his revune is derived from cherity or donations, which are not forced upon anyone.
    b) he gives back in a huge way in terms of, as you said, providing us with knowledge. not only that but a forum in which to discuss and exchange ideas.

    sorry that just confused me a bit.. i had to disagree….

  11. Kristofer Says:

    uh… revenue…. haha sorry

  12. Kevin Says:

    >>>what is identified as “criminal insider trading” is more likely programmed trading strategies interacting with one another to create trends – momentum without reason.

    Naa. Not so much. Not as likely on this garbage. It’s below the radar most of the time. If a market maker does a BS crank on these stocks it won’t attract much follow through because hardly anyone is watching it. That’s why the dog food stocks are useful.

    I never said to buy a price breakout! HA Some of the time, you’ll catch one that takes off. The rest of the time, you’ll get in right at a short term high and the thing will collapse down. Never chase a sudden price break out. Oh god no never. That’s the opposite of what I did.

    Volume. Volume. Volume.

    You might want to read what I said about volume again:

    You’re looking for sustained, anomalous volume. One day spikes may or may not be something. There’s no way to know on those. But when that average daily volume starts breaking out, that’s interesting. Up sloping OBV on no news is interesting.

    sustained-anomalous-volume

    Not some BS market maker crank that lasts for a minute or two. If you’re using your tools properly, those events are noise level.

    Re: stops. It’s up to the individual trader, and the viability of stops depends on liquidity. I always had my finger on the trigger, so I didn’t bother with stops much.

  13. Hans Gruber Says:

    Analysed, systematised, and scrutinised like an INTJ. I should know–I’m one too. We’re one of the least understood types and true outlyers; able to observe the world from this perspective to gain systemic insights rarely seen by others.

  14. Joan Says:

    Watch. Someone is going to make Kevin a job offer and he’ll decide that he’s had enough blogging-for-pennies.

  15. Kevin Says:

    HA. More likely, an offer I couldn’t refuse. (Godfather film reference, in case my sarcasm isn’t clear enough.)

  16. Bernie Says:

    I say start a hedge fund and get your colleague from the Magic Mystery Dot involved. In the prospectus, make sure you include these pictures:

    http://cryptogon.com/images/kevcompfarm.jpg

    http://cryptogon.com/images/tr.jpg

    If those don’t instill confidence, I don’t know what would!

  17. Kevin Says:

    Yeah! And the fees associated with this fund?

    Fees: 1% of account total annually, or the cost of all the burritos, booze and coffee consumed by Kevin and TR over the same period, whichever is greater.

    Man, the antics…

    TR is now residing in a RV—in an undisclosed location—working as a senior software engineer and Chief Linux Lunatic for an international biotech company. He nearly has enough money saved to get his land.

  18. Mark Says:

    Kevin – totally agree on the Forex play you mentioned.. indeed, EUR/USD seems to have an almost perfect negative correlation with the USD/CHF, so dumping the losing one quickly and pocketing the other one can indeed make you profits.

    Although – you mentioned you can short them instead of buying them – actually it does make a difference, although small. You’ll make money with the interest if you go long on the two whereas if you short them you’ll lose interest every day. This is only assuming you’re holding them overnight though. Since the carry trade is positive with the USD/CHF (net interest paid to you = 3%) more than the carry trade is negative with the EUR/USD (net interest you pay = 1.5%) – it necessarily means that if you short the two instead of buying them, you’ll be paying more interest than you’re making (paying 3%, earning 1.5%)

    Though, this is irrelevant in your case since I assume you were talking about buying them quickly on the news and dumping them minutes later. In that case no interest paid of course 🙂

    To anyone who is considering FOREX – listen to Kevin. It ain’t for the faint at heart. FOREX tarding is the purest form of gambling in the markets, and sometimes I question my own sanity for continuing to trade. I once lost 8 grand in a split second. I nearly had to go vomit. FX is hardcore. I’m planning on moving to ‘safer’ money-creating vehicles out there, but I need the bigger bucks in order to do that. Catch-22

  19. bookman Says:

    I think I was much more accurate about the gap play occurring with viropharma than I thought. I emailed you a jpg of the chart & the OBV. If I understood the post correctly, I was completely played by the crooks. Also, I clearly remember CNBC selling the stock HARD for about 3 days straight (hence my naive-ass buying it).

  20. Ozzy "The Man" Diaz Says:

    Kristofer-

    Part of the genius of Them and Their system is that They disguise Their predation, and in so doing, set the example for us all.

    It’s like in Scarface, when Pacino’s gangster says to the hoi-polloi: “You need people like me so you can point your finger and say ‘That’s the bad guy.'”

    I’m reading a book now, by an author named Mircea Eliade, a Romanian Joseph Campbell type; it’s called “A History of Religious Ideas.” I highly recommend it because it puts a lot of things in perspective.

    Before “civilization” [suppresses a smirk] there was hunting and gathering. Men hunted. Women gathered. Men hunted not necessarily because they were so tough, but because they were expendable. One man and a relative handful of women can sire a nation. However, if you flip it, what do you think happens? The men kill each other to compete over who will get to sire the nation, perhaps killing the woman in the process. So men hunted because proto-society could afford for them to take the risk.

    Hunting is obviously a form of predation. You must kill an animal to eat it. Gathering is predatory if you kill a plant to eat it. Now, you may argue, like Adam and Eve, that only eating the fruits is non-predation, because you are not killing the tree to eat the fruits, but the fruit contains the seeds which are a form of nascent life which the tree intends to use to propagate itself. It can only look on in horror as it watches its children be devoured by selfish predators. This is where the various pundits come out and take a spectrum of positions:

    A. Every Seed is sacred!
    B. As soon as seed goes into the earth, it is wrong to kill it.
    C. As soon as the seed has germinated for 3 months it is wrong to kill it.
    D. ” ” for 6 months.
    E. ” ” for 9 months.
    F. ” ” while young.
    G. ” ” while middle-aged.
    H. ” ” while old.
    I. ” ” while old and sick.
    J. All trees must be allowed to die of natural causes, which takes you back to A.

    Also consider this. Your body is not one creature, it is a complex ecosystem. You have microbes and bacteria all over you and inside you, existing in symbiosis, performing various functions. They are living and dying and you’re hardly aware of it most of the time, being so self-centered. Thus, you hardly think twice about all the genocides you commit every time you take antibiotics or even just wash your hands. You know when you think about it? Here’s an instance. You get sick, you take antibiotics. You get well, but now you have horrible diarrhea because you forgot to replenish your digestive bacteria with yogurt. Your body is protesting your murderous campaign with by giving you the shits.

    But I digress.

    Gathering evolved into agriculture, as controlled by the women, the priestesses. But they understood the sacrifice and codified into religious myths. Agriculture comes from killing the Goddess and burning and/or burying her corpse. The Goddess is Earth/Nature. In order to plant rows of crops, you must clear the forest, you must murder Mother Nature. They understood the implications of what they were doing. They understood that you cannot get something for nothing. There must be a sacrifice. Sacrifice Mother Nature as the jungle, get the benefits [and drawbacks] of Agriculture. To hammer this point home, they engaged in human sacrifices to commemorate the sacrifice of the goddess. That’s how important it was to remember the sacrifice, they killed one of their own.

    The hunters on the other hand, still existed, but they began to diversify. Some became warriors, some stayed hunters. Hunting was part of a warrior’s training. Thus arose the cult of the bear and the wolf; two arch-predators. The hunter venerated the predator because he envied its abilities. Killing one of those predators was a demonstration of your mastery over them. The hunter became the hunted. Warriors took this hunting ethos and applied it to outside enemies. You see, once you have agriculture, you have territory. Territory that you have to protect. Agriculture allows the population to expand. Thus you need more territory, and you have to defend your own territory. Thus some warriors fortify and defend the territory, others form expeditionary forces to seek out more territory. If necessary, they kill to get this territory. They do this because if they don’t, it will be done to them, which they learn from the hard experiences of fending off raiding parties. Thus, they view foreign agriculturists as PREY, and they treat them as such. They kill the men who resist, co-opt the men who are willing to make a deal, or have something to offer, and enslave the weak men. The women and children, they rape and enslave. They become chattel.

    And, after a period of evolution, you get things like the Roman Empire, and eventually, a Global Empire.

    Now, there is a lot of simplification, and people like Kevin and Derrick Jensen argue that the Empire will collapse and we’ll be back to a new Dark Ages. Who knows. Maybe we will, maybe we won’t. With so much deception and duplicity it’s hard to tell what will happen. The U.S. may not collapse or it may. I’m sure They have contingency plans for every scenario.

    One thing I would like to point out, people always talk about how it’s the U.S. system. I’m not sure that it’s about countries anymore, or that it ever was. I mean, the U.S. has allies which people like Zbigniew Brzezinski view as vassals. However, if I were him, I would never allow myself to become so naive as to believe that countries with ancient and venerable political traditions like China, Japan, India, Great Britain, France, Germany, Russia, et al are going to view themselves as vassals. The influx of “foreign” money into the U.S. lobbying corridors means that the U.S. no longer truly acts in its own interest. Rather, it has become the tool of a variety of countries and interests. This is why I have nothing but contempt of Europeans who bitch and complain about the U.S. while they elect leaders and endure governments that are nothing more than accomplices and collaborators in an Imperial system from which they benefit as much if not more than the U.S. All that money we “waste” on defense goes towards defending foreign interests as much as it does our own. The U.S. military is essentially the Trilateral military.

    Anywho, I’m digressing as always. The message is simple. Kevin, like all living creatures, is a predator because has to kill, then eat to live. Those cute little goats on farmlet? If times are good, Kevin and Becky can subsist only on fruits, and the goats can receive a proper Christian burial. If times are bad, then maybe the goats get eaten. If times are really bad, a rampaging mob will eat everything in sight and then cannibalize itself, and then starve to death.

    Pleasant dreams.

  21. cryptogon.com » Archives » The Ghost in Wall Street’s Shell Says:

    […] Insider Crimes, Funny Money and Options Rackets […]

  22. triantus Says:

    ozzy you’re the Man indeed! couldn’t have said it better. and now back to hunting for some easy FX numbskull prey 😉

  23. cryptogon.com » Archives » Buy Companies with High Customer Satisfaction Scores? Says:

    […] presented in this article, it seems interesting, even to me. (It may or may not be better than anything I ever came up with on my own.) If you read what follows, along with the advice given to roomfuls of Google millionaires, and […]

Leave a Reply

You must be logged in to post a comment.