Iran Seizes 15 British Sailors: London Demands Release
March 24th, 2007I would treat all corporate press on this a pure PSYOP product. I’m only posting this to let people know that an event has taken place.
Via: AP / Boston Herald:
Naval forces of Iran’s hardline Revolutionary Guards captured 15 British sailors and marines at gunpoint yesterday in the Persian Gulf, an audacious move coming during heightened tensions between the West and Iran.
…
U.S. and British officials said a boarding party from the frigate HMS Cornwall was seized about 10:30 a.m. yesterday during a routine inspection of a merchant ship inside Iraqi territorial waters near the disputed Shatt al-Arab waterway.
Iran’s Foreign Ministry insisted the Britons were operating in Iranian waters and would be held “for further investigation.â€
BullionVault
March 23rd, 2007WARNING: This is not a recommendation to buy sell or hold any financial instrument.
PLEASE NOTE: BullionVault is also mentioned heavily on Money: Going Tactical.
UPDATE 2: 28 April 2007: BullionVault Moving Vaulting Operations to Viamat
All BullionVault clients received this email today:
Dear BullionVault user,
There is an important change concerning your gold.
BullionVault is moving to a different professional bullion market
vault operator.
There is no cause for concern. Your gold is perfectly safe and
will remain so. This letter will explain the circumstances to
you.
BRINKS INC.
There have been growing stresses on our relationship with Brinks
Inc, the US-owned vault operator, and it has become clear that
they feel uncomfortable about continuing to vault BullionVault
gold.
Why this might be so I am genuinely unable to say. Their exact
reasoning has not been disclosed to us.
Fortunately, there is an excellent alternative available to us in
ViaMat International, the largest Swiss-owned vault operator, and
one which has a full quota of internationally located
professional bullion vaults.
Swiss ownership suggests an independence from some of the
pressures which Brinks may have found themselves operating under
recently. Also you – our users – have chosen to vault 26 times as
much gold in Switzerland as in the United States, so we believe
this change will be both natural and welcome.
You will continue to have the choice of London, New York or
Zurich storage, and there will be no increase in costs to you. We
will continue to provide storage at less than a third of the
costs of most gold ETFs.
We warmly thank Brinks for looking after your gold and ours so
professionally since we first launched our service.
THE TRANSFER TO VIAMAT
BullionVault has now signed a long-term storage agreement with
ViaMat. We will soon be transferring all BullionVault gold to
ViaMat’s professional vaulting facilities in each location –
London, Zurich and New York.
Your gold will be properly protected during this transfer.
Bullion shipments of this size are not at all unusual for the
companies involved, and they both accept responsibility and carry
appropriate insurance for the process.
For security reasons we are not disclosing exactly when the
transportation of bullion will take place, but it will NOT be in
the next two weeks. It is for this reason I am writing to you
today.
If you chose BullionVault because we vaulted at Brinks, then it
is only proper you should have the opportunity to exit
BullionVault before BullionVault exits Brinks.
If, on the other hand, you are satisfied with our switch to
ViaMat vaults, then you need do nothing.
Your gold will be transported between the vaults at no charge to
you. It will remain in the city of your current choice, be it
London, Zurich or New York.
Nor do you need to worry about buying or selling gold through
BullionVault during this transportation. The BullionVault service
will not be interrupted.
The strength of your legal ownership rights within ViaMat is just
as personal and permanent as it was in Brinks. In fact it is even
more clearly stated. You can read the relevant acknowledgements
of your property rights by ViaMat in our revised Terms and
Conditions (see below).
ABOUT VIAMAT INTERNATIONAL
Swiss-owned ViaMat has been operating for 62 years and is a
direct competitor of Brinks in several markets. It offers a
similar and thoroughly professional bullion-vaulting service in
the locations in which BullionVault previously employed Brinks.
ViaMat trucks perform the same cash-distribution service for the
Swiss banking industry that Brinks trucks perform in the United
States.
In the English-speaking world ViaMat is less well-known than
Brinks, but neither company self-promotes aggressively; vault
operators tend to like a low profile.
Do visit their website to learn more (www.viamat.com).
TERMS AND CONDITIONS
This change in vault operator has necessitated a re-draft of our
Terms and Conditions, previously unchanged since the BullionVault
service was launched.
The new Terms and Conditions are now available to you on our
website. Thanks to ViaMat’s co-operation with us in developing
new controls on bullion withdrawals from the vault, these new
terms further improve your security as a BullionVault user.
Please note that under both sets of Terms and Conditions, you are
free at any time to end our business relationship by selling your
gold and withdrawing your money.
The new Terms and Conditions will apply from 26 May 2007. Please
be sure to read them here:
http://www.bullionvault.com/help/terms_and_conditions.html
FEEDBACK
Please direct any questions about our new storage arrangement or
our Terms and Conditions to me here using this address:
viamat.question at BullionVault.com
FURTHER NEWS
That is the main business of this letter, but I’d also like to
take this opportunity to tell you of some further developments
here at BullionVault.
The last few months have seen major changes for us. In October,
we were joined by Adrian Ash as head of research. I know many of
you are already enjoying reading his analysis of the gold and
broader financial markets daily.
In November we expanded our equity shareholder base, and
benefited by a large cash injection from new investors. We have
been further strengthened by existing investors electing to
convert 99.5% of a convertible bond into new equity in March
2007. Together these have strengthened an already robust company
into one of the most secure financial foundations you are likely
to come across anywhere. The company now has net shareholders
funds – all held in gold and cash – sufficient to run all our
planned expanded operations for more than four years, and without
a single cent of revenue. Given current trends I believe we will
beat this cautious revenue projection!
By most measurements our business has increased by about 50% in
the last 6 months. We are still only 2 years old, but with
monthly sales around $7 million we are now comfortably the
largest in the world at what we do – enabling private buyers of
physical gold to own it directly in a professional vault in a
secure location of their choice.
In January we moved offices. Visitors are welcome by appointment.
We are in West London, at 2 King Street Cloisters, Clifton Walk,
London W6 0GY, UK. You can call us on our new number, +44 (0)208
600 0130.
In February we expanded the team with Italian, French and German-
speaking support staff. The expanded team is in training, prior
to our launch of multi-lingual sites. The BullionVault service is
now almost ready for launch in German and French, while Italian,
Spanish, Japanese, Chinese and Polish versions are all at various
stages of planning and development.
We have an ambitious development plan covering a whole range of
improvements. Of interest to many of you is that bigger gold
buyers will soon be able to allocate ownership of specific whole
bars within BullionVault in their name.
Watch for further news on this and other developments. These are
exciting times in the gold market. Thank you again for choosing
BullionVault, where your gold remains – and will remain – as
physically safe as it could possibly be, anywhere on Earth.
Yours sincerely,
Paul Tustain
Director
www.BullionVault.com
UPDATE 1: 25 April 2007: Correspondence with Paul Tustain, Director of BullionVault
I wrote the following email to Paul Tustain, Director of BullionVault:
Paul,
My readers (and I) are concerned with the possibility that the U.S.
regime could make gold ownership illegal again for Americans.
Since you require fiat money transfers in and out of Bullion Vault to
occur via bank accounts, what would happen to your clients’ holdings in
the event that the U.S. government banned or limited gold ownership again?
Feel free to respond on or off the record. Unless you tell me that it is
ok to publish your response, I will NOT publish it.
Thanks,
Kevin Flaherty
cryptogon.com
Whatever your opinion is on physical posession vs. vaulted metal, I found Paul’s response to be very interesting; especially the part about Bullion Vault clients holding 26X more gold in Zürich than in New York. Wow. I knew I was right about Switzerland (see original post below), but I didn’t know I was THAT right.
Here is Paul’s email:
‘Fiat’ money is a fact of life. Currently there are no currencies based
on gold circulating effectively as money. So bearing in mind that there
are several fiat currencies still living (just 🙂 ) their success rate
/as circulating money/ is actually better than gold.
But they seem to be consistently poor at storing value, which gold does
fairly well. So I’ll continue to use gold to store value and use
whatever other people seem to like when I go shopping.
I believe in a serious crisis smart money will sell the odd chunk of
high integity gold for a bit of the paper stuff – and get full value,
legally, in Switzerland, before redeeming it somewhere useful via bank
wire. My guess is – and history supports me here – that provided I
spend the paper stuff reasonably quickly the depreciation in legally
supported paper money at home has a less onerous price to pay than the
discount I would have to accept selling gold in a country where it’s
either widely unrecognized or illegal.
Before we started BullionVault we received 1400 market research surveys
about a whole host of issues to do with gold. And the surveys said that
opinion on where to store gold was very polarised. People either
desperately wanted gold at home, or desperately wanted it offshore. The
majority of our respondents were US citizens, so the day we started we
actually opened with more gold in the US than in Switzerland, ready for
the flood of domestic storage demand.
But we now have 26 times more gold in Switzerland than in New York!
The data shows that our rich clients from everywhere store in
Switzerland, and only relatively poorer US clients store in USA
(actually a few rich clients store a small slug in USA as well as a big
slug in Switzerland – which looks like a hedge – and that makes sense to
me). The preference for Switzerland has nothing to do with price,
because there is no difference on BullionVault.
So what is the cause, and what is the effect? I think that the answer
is that a ‘gather it in’ or ‘hoarding’ mentality prevents you getting
rich. It so diminishes the investment opportunities you will say “yes”
to that you are doomed to long term under-performance.
I make the point only to suggest a new world view to those who want
physical gold in their pockets to the exclusion of all else. For
myself I think I will do best by storing in a place where I am most
likely to be able to sell legally. I’ll go with the flow and buy stuff
with giant wads of fiat if that’s what people want. There’s no point
getting too proud to buy in the way the seller prefers.
On your other issue many people will fear that the banks will *all*
fail, and they are too frightened of this scenario to use a safety net
apparently predicated on banking. They are betting against the odds.
What is far more likely is that many, not all, banks would fail, and the
few which are remaining will be cautious enough only to permit new
accounts from people who have something of meaningful value – like gold
– to offer them. The banking industry will not disappear (it never has)
it will merely shrink to the size which matches the demand of a reduced
rich class. This is not only rational economics but is the reality of
what happens in financial collapse. No banks is a fantasy (or a
nightmare) which will not happen.
So how do we at BullionVault protect our customers from the failure of
their own bank? We allow them to take possession of their gold in the
location of its storage (if it really gets that bad), *and* (if not) we
allow them to open a new bank account and return their money there. The
circumstances are tightly controlled.
Best
Paul
— End Update —
As all of you know, I used to be a gold bug. I’m not any longer because I don’t have confidence in an asset that is supposed to be a hedge against inflation when that asset is traded in leveraged fiat currencies.
Here are some Cryptogon posts that mention gold:
What Happened to Gold as Global Stock Markets Sold Off?
Gold Gapping Down Along with Global Stock Markets? Sure, Why Not?
The New Zealand Economy is Sinking While Financial Assets Soar
The New Zealand Economy is Sinking While Financial Assets Soar – Comment
So, after reading all of that, you still want to buy gold?
Ok.
If you’re going for physical possession, I would acquire the gold without leaving a paper trail. When I bought gold in the past, I paid cash for it at coin shop. I walked in. I handed over cash. I walked out with American Eagle gold coins. In my opinion, that is the only good way to acquire gold. It was a private, cash transaction between me and the coin dealer. Nobody else knew about it.
If you need to move a large asset pool into gold, or if physical security issues are a concern, consider BullionVault.
I know that many Cryptogon readers are heavily involved with gold, or are going to be soon. Even though I no longer view gold as a viable strategic asset, given the extremely dire circumstances we’re all facing, I wanted to look for a good mechanism for Cryptogon readers who have made the decision to move into gold.
While you legally own certified gold bullion with with BullionVault (secured by Brinks Viamat in your choice of vaults in New York, London or Zürich), you do not physically possess it. This has advantages, and disadvantages that will be apparent to each of you, depending on your beliefs about the future and your individual situation.
I signed up for BullionVault account to check out the service. It looks excellent. This is an efficient, inexpensive and secure way to own gold.
Use this link to BullionVault if you want BullionVault to pay me a commission if you sign up and use the service.
Use this link to BullionVault if you DO NOT want BullionVault to pay me a commission if you sign up and use the service.
The New Zealand Economy is Sinking While Financial Assets Soar
March 23rd, 2007Kiwis hate it when I talk about the New Zealand economy. Sorry, mate, a Ponzi scheme is a Ponzi scheme. Most national economies are really just subsidiaries of the U.S. Mega Debt Death Machine now.
If you want to wind a Kiwi up, ask him or her which country is New Zealand’s second largest trading partner? DOH! That one smarts really bad. It’s the U.S.
Now, what does this have to do with all of these carry trade antics?
As the U.S. dollar collapses, that part about New Zealand’s second largest trading partner goes from being an embarrassing reality, that most Kiwis would rather not think about, to a national emergency.
Why?
Lots of dairy products wind up in the U.S., and meat, and kiwi fruit, and, and… If Americans go bust, A) who’s going to buy that stuff and B) what are they going to pay for it with?
Hmm?
What, then, happens to New Zealand’s ability to repay its debts, which are massive, relative to New Zealand’s size, without all those American Ponzi dollars?
Hmm?
This post is more for Kiwis than anyone else. I love New Zealand and I hope that the Kiwis who read Cryptogon are getting ready for what is going to happen. It’s going to be rough, but I wouldn’t want to be any other place in the world.
Note: The guy who wrote the story below is a gold salesman, by the way. I’m not endorsing gold as a solution to this situation for reasons that I’ve laid out repeatedly. Of course, I could be wrong, and might be very wrong on gold. It’s all a matter of how many people drink the KoolAid, whether it’s gold, silver, sea shells, shovels or chocolate bars. But I know leveraged swindling when I see it. I wouldn’t base a religion on an asset that trades in real time in leveraged fiat funny money, like gold. But that’s just me. Your results may vary. Batteries not included. (I love the hate mail I get from comments like this from the gold bugs. It’s some of the best entertainment available out here, thousands of miles from nowhere.)
Via: Daily Reckoning:
In plain English, financial assets have soared, but the real economy has sunk. In 2006, New Zealand racked up the 15th largest trade deficit in the world. Not bad for a nation of just four million people. (The US came top, followed by Spain and then Britain.)
New Zealand’s also got a max’ed-out housing market and a bubble in consumer-credit. Its currency looks over-valued on any kind of fundamental basis. And sitting atop this must-have collection of “haute finance†springwear – as worn by all of the most fashionable Anglo-Saxon economies this year – you’ll find an inverted yield curve.
Just as with Sterling, US and Australian Dollars, it’s now cheaper per annum to borrow New Zealand’s money for repayment five years from now than for repayment in 2008. The bond market doesn’t believe rates will stay high, in short. So why bother hiking?
“There’s increased skepticism that the combination of high rates and the high currency will be sustainable,†reckons John Body, head of financial markets at ANZ National Bank in Auckland. “It could lead to a slowing of the economy and so we could see the exchange rate go down.â€
“New Zealand’s growth is skewered to the downside and that has sucked fresh buyers from the kiwi,†says Body.
But most problematic of all, however, is what’s going to happen when all those Euro-Kiwi and Uridashi bonds reach maturity. Tokyo and Frankfurt investors alike will need to redeem the bonds with Euros and Yen. And to raise that cash they’ll need to sell New Zealand Dollars.
New issues of Uridashi and Euro-Kiwi bonds peaked at the end of 2005. A two-year play on the free profits between New Zealand rates and the low-yielding currencies proved most popular. So redemptions are set to peak at the end of this year.
Okay, the “free money†gap has since widened out to 700 points. That might help create fresh Uridashi and Euro-Kiwi bonds for a while. But when confidence in the New Zealand Dollar finally catches up with the hard facts of New Zealand’s own cash-hating economy, something’s going to give.
Velkomin to the United States of Foreclosure
March 22nd, 2007Excellent article; really gets at the palpable absurdity of the situation.
Via: Atlantic Free Press:
Sub prime loans are loans that are made to people with poor credit. The lender requires a higher rate of interest to cover his risk. For the last 5 years, the sub prime market has skyrocketed due to the loosening of lending practices. The traditional criterion for determining whether a loan applicant is credit-worthy has been abandoned. Now, it is not uncommon to have mortgage lenders provide 100% financing to shaky borrowers who are unable to provide documentation of their real earnings (“no doc†loans) and cannot even scrimp together 4 or $5 thousand for a down payment.(“piggyback†loans)
Why on earth would the banks and mortgage lenders take such a risk?
In a word; greed.
The mortgage industry is driven by fees. Lenders (and agents) are able to fatten their bottom line through loan origination fees and then they tack on additional fees for shipping the loans off to Wall Street where they are bundled into Mortgage Backed Security (MBS). Collateralized debt has become a Wall Street favorite and these otherwise shaky loans have become staples in the hedge funds industry. In fact, last year Wall Street purchased nearly 60% of all mortgages–ignoring the risks associated with sub prime “debt instrumentsâ€. Also, through the magic of derivatives, many of these Mortgage Backed Securities have been leveraged to the extreme; sometimes at a ratio of 35 to 1.
In other words, a home loan of $300,000–that may have been secured by a young man with bad credit who makes $12.50 per hour picking up mill-ends and bits of insulation on a construction job site–has been leveraged into a $10,500,000 securities investment. This may explain why Treasury Secretary Hank Paulson is trying to sooth jittery investors with words of encouragement while he dispatches the Plunge Protection Team (PPT) to shore up the trembling stock market behind the scenes. Every effort is being made to keep this monstrous equity bubble from pirouetting to earth.
Currently, derivatives and mortgage-backed bonds total more than all US Treasuries, Notes and US Bonds combined!?! The stock market is one gigantic pyramid of debt and it’s ready to blow.
…
Imagine an electrical circuit with thousands of connections. No one designed it. No one tested it. No one has a diagram for it. It just grew. Now, because of its size and power and pervasiveness, everything depends upon it. So what happens when one of those thousands of connections burns out? No one really knows.â€
About: Insider Crimes, Funny Money and Options Rackets
March 22nd, 2007UPDATE: The Post Is Now Public
Of the three people who have written in to ask for access to the post so far, two of them asked if their Amazon purchases counted.
Well, they obviously should! Since I have no way of telling who bought what (except for a couple of examples where you guys have told me), I have to open the post up to everyone.
– – – – –
The post below is a look at three interesting and risky trading strategies that I’ve kept to myself over the past several years. I made decent money using one of them, another one came to me after looking at a real time FOREX simulator for about 200 hours, and almost getting decapitated by a big Wall Street firm gave me the idea for the last one.
I’m not saying that this information IS valuable, but it might be to some people, or not. I wanted to give Cryptogon contributors a crack at using this information before I release it to the general public (if I ever decide to). While more people are contributing to Cryptogon lately, there are a shocking number of freeloaders out there. I generally don’t care, with most of the stuff I post, except as it affects my ability to meet basic financial requirements for survival. But I’m not going to give away strategies that MIGHT be valuable to the wealthy freeloaders, knowledge about trading that I learned over years, and at incredible cost in terms of time.
This information is technical and describes strategies that are very risky. This information is not intended for “investors.” I was desperate when I devised these strategies, and even though the stock play I used worked several times, I couldn’t tolerate the risk. All of this stuff, though, would be interesting in terms of automated strategy design and backtesting, if you have the head for that kind of thing, the right tools and the time.
If you’re interested in reading the post, send me an email with the subject “TRADING STRATEGIES” along with your name and the date of your last PayPal contribution. If you have signed up for hosting with BlueHost via Cryptogon, send me an email from the domain you registered when you signed up.
Insider Crimes, Funny Money and Options Rackets
March 22nd, 2007WARNING: 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.
Incarceration Rates for Selected Countries
March 21st, 2007They hate us for our freedom.
Via: Crooked Timber:
Canary Island to be Powered Solely by Renewables
March 21st, 2007It’s not rocket science, folks, as I’ve been saying for years…
The “water battery” is a great way to go. If I could build any system I wanted for my own property, that’s what I would do. Some of the time, my “battery” would be charged for free, when it rains. The rest of the time, excess power that was generated from the wind and the sun would pump water up the hill, charging the “battery.” Ducks would swim in the “battery.” There might even be a tire (or ‘tyre’ in New Zealandese) island in the middle of the “battery” full of weird and wonderful plants. The “battery” would look like a beautiful pond to most people. There’s no need to frighten people by calling it an aquatic microclimate that can store intermittent surges of clean energy!
Anyway, hats off to Spain.
They would be able to avoid some of the intermittent generation aspects of their current plan with linear induction wave buoys, but that simple technology, for some reason, isn’t available yet. In this case, even with the losses associated with pumping that water up hill, it seems like wind alone is enough. Spain could always add the wave component in the future.
Via: Yahoo / AFP:
El Hierro, one of the smallest of Spain’s Canary Islands, is to receive 100 percent of its electricity supply from renewable energy sources, the Madrid government said Tuesday.
As part of a plan through to 2009, El Hierro will soon be able to rely on a combination of hydroelectricity and wind power to generate its electricity, the industry ministry said.
“El Hierro will be the first island in the world totally supplied by renewable energy,” the ministry said, without specifying when the scheme would actually be up and running.
The island will rely on a system involving two reservoirs to power hydroelectic stations, a wind farm and a pumping system.
“The bulk of the energy injected into the distribution network will emanate from the hydroelectric plant” with capacity of 10 megawatts, the ministry said.
The wind farm will generate electricity for the pumping station that will pump water to the two reservoirs that feed the hydroelectric stations, the ministry explained.
Excess wind energy will be used to power two desalination plants.
An existing diesel-powered plant on the island, population 10,500, will be maintained for emergencies if water and wind supplies run short.
“Using this system, we can transform a intermittent energy source into a controlled and constant supply of electricity,” the ministry said of the 54.3 million euro (65 million dollar) scheme which is designed to cut the island’s annual carbon dioxide emissions by 18,700 tonnes.
Houses Cheaper than Cars in Detroit
March 20th, 2007Detroit collapsed. Then what? Gardens. Lots of gardens. And livestock.
Via: Yahoo / Reuters:
With bidding stalled on some of the least desirable residences in Detroit’s collapsing housing market, even the fast-talking auctioneer was feeling the stress.
“Folks, the ground underneath the house goes with it. You do know that, right?” he offered.
After selling house after house in the Motor City for less than the $29,000 it costs to buy the average new car, the auctioneer tried a new line: “The lumber in the house is worth more than that!”
His Energy Bill Is $0.00
March 19th, 2007Let’s look at another bitter Red Pill lesson on the opportunity cost of the war in Iraq.
While this solar hydrogen system doesn’t seem like a good idea for mainstream deployment, Mike Strizki, the man behind the project accurately notes, “No one has said what I’m doing doesn’t work.”
So, why isn’t this a good idea?
Well, the cost! It’s too expensive. Right?
Yeah. All beancounters are great at explaining to newspaper reporters how expensive clean energy technologies are, but I don’t see anyone comparing the cost of these technologies to the stupid and illegal war in Iraq. Except me.
So, how many $500,000 solar hydrogen systems (like the one described below) could be built with the funds currently being allocated to the sinkhole war in Iraq?
Remember, the Iraq war is costing $208,333 per minute.
So, for every 2.4 minutes that the U.S. spends in Iraq, one of these emission free solar hydrogen systems could be built. That’s 25 per hour. That’s 600 per day. That’s 4200 per week. That’s 16,800 per month.
Of course, this is retail pricing. What would the cost be if the the buildouts were done on a massive scale? An order of magnitude less probably isn’t out of the question.
I’m not advocating the system described in this article. (Watch, someone will accuse me of falling for the hydrogen scam in comments.) The point is that we don’t have a clean-energy-technology-is-expensive problem. We have a diabolical-misappropriation-of-public-funds problem.
Some combination of large scale wave, solar and wind (in that order) power generation, plus simple conservation technologies, plus individuals feeding the grid with their excess wind and solar power would be the way to go. How close to that goal could we get if $208,333 per minute was spent trying to reach it?
We’ll never know because, “They hate us for our freedom.”
Via: Christian Science Monitor:
Mike Strizki lives in the nation’s first solar-hydrogen house. The technology this civil engineer has been able to string together – solar panels, a hydrogen fuel cell, storage tanks, and a piece of equipment called an electrolyzer – provides electricity to his home year-round, even on the cloudiest of winter days.
Mr. Strizki’s monthly utility bill is zero – he’s off the power grid – and his system creates no carbon-dioxide emissions. Neither does the fuel-cell car parked in his garage, which runs off the hydrogen his system creates.
It sounds promising, even utopian: homemade, storable energy that doesn’t contribute to global warming. But does Strizki’s method – converting electricity generated from renewable sources into hydrogen – make sense for widespread adoption?
According to some renewable-energy experts, the answer is “no,” at least not anytime soon. The system is too expensive, they say, and the process of creating hydrogen from clean sources is itself laced with inefficiency – the numbers just don’t add up.
Strizki’s response: “Nothing is as wildly expensive as destroying the whole planet.”
