US Economy Updates

So this week was a very important week for the US economy. A lot of economic indicators came out - Trade Deficit, Beige Book, TIC, Unemployment Rate, PPI, and CPP. According to one of our head traders George, all numbers are pretty positive. Surprising huh - a week of good US economic data! Since mid-June, first bit of solid, good US economic data. Of course, elections are coming, all numbers will be revised, and the future is unknown. I personally think fears of a double-dip recession are too paranoid... HOWEVER, there is a risk of deflation...

The relationship between equities and bonds, (when equities are going up, yields are going down) is converse. So according to him, the USD/CAD should go down because CAD, a commodity currency, will benefit from a lower yield. It's currently trading between the .99 and 1.07 range, an 800 pip range.

Next week he's waiting for the US dollar to make a move. If the dollar index breaks below the 80, then the dollar should be expected to depreciate.

Quantitative Easing - this is a concept that many people have been talking about recently. I always thought QE is what the BOJ did a few days ago. Inflation is good for the currency, and so how will the US government respond to deflation fears? George thinks all monetary policy pretty much sucks.

So his big thing is the USD/CAD if it steps out of the range, it's going to be violent.

Now, the AUD/USD - since the middle of August, it's had a very good run from .8770 to .9450. He thinks it's a bit tired at .9350, it's showing exhaustion. There's this mystery gap, that hasn't been filled - happened in the beginning of last week. Why is George worried about this? He wants to see it be filled before he goes long on this currency. Of course, with the carry trade back, it is a very tempting offer.

According to Alvin, one of the better traders here, he thinks it will dip back towrads the .9200 line before heading back further.

For the Euro, George thinks, if we have a complete disintegration of the dollar, then the Euro will keep going up. Otherwise, he thinks it will only hit the 1.33 level, with little chance of going past it. On the longer term, from the 1.18 level, made its retracement to the 1.31 level it's at now. Only way it can continue its bullish is if the US Govt is forced to do QE on their currency due to deflation fears. However given the CPP recently up, it is unlikely to see this.

So it is definitely a yawn right now on the EUR/USD. But we'll keep watch on it.

Currently the market sentiment is definitely favoring the riskier assets. However, next month's figures will truly determine if our market can take on more risk appetite (and therefore breaking out of a feared double-dip) or retrace back down to mid-year levels.

George's recommendations is that Yen and Franc are both risky because intervention is very scary for all parties involved, and George does not want to be surprised. I happen to agree - when there's a 50-50% of something happening, it is too risky to trade (better to trade based on breakouts, where you put a stop buy or a stop sell rather than a market/limit order).

What is really interesting is how much monetary policy affects the FX markets. I always thought the economies of the individual countries are important - they are, of course - but the governments' decisions have much more of an immediate effect. Quantitative Easing - one of the CB's primary tools of increasing the money supply (i.e. printing money). This can be either sterilized - with the government choosing to put some money into treasury bonds and reserves, or unsterilized, where all the government does is print money. A lot of traders currently think that the BOJ will only print money unsterilized, to prove to the market that they are serious about depreciating their currency.

Why would this QE work for Japan, but not for the CHF a few months back, when the Swiss NB tried to depreciate their currency? This is probably because first, while both are unilateral moves by governments, Japan has very little inflation, which means they have a LOT of room if they want to depreciate their currency. Second, the Japanese Yen has been rising for a long period of time, and the market sentiment is that the Yen was already overbought. Therefore, by selling the Yen unilaterally in the market, the BOJ can show traders that they are serious.

According to Alvin, he would rather go with the BOJ, sell the Yen (meaning go long on the USD/JPY pair) for the short-term, because it is unlikely that we will see traders muster up a huge move in such a short period.

Moving to the cable (GBP/USD), all economic indicators for the GBP are down. However, movement on the pound was much more positive than the EUR/USD. For example, the GBP/USD retraced to the 38.2 Fibonacci level since their low, while the EUR/USD retraced to the 50 Fib. level since their low. This bullish sentiment is actually quite strange because the British Economy is having many problems.

But go Bullish on the pound? I would not recommend it. George does not say he would recommend it either. However, there is STILL risk appetite in the market, and it is supporting the EUR/USD and GBP/USD at their current levels. He predicts that they will both go up 300 points, form a double-top and then collapse. Sounds like a perfect situation?

While there are no true sell signals, the market sentiment is definitely in favor of these two currencies.

Money issues

I have a total of 5$ in my wallet right now. I have 90$ in the bank. I have 400$ in credit card debt.

I feel so poor. But what can I do? My two internships - one at this FX-trading hedge fund, and one at Wells Fargo, both don't pay anything. They are all performance based - meaning, if I trade well, and if I get my boss clients, then I'll get a commission. Unfortunately however, my performance has been... lackluster...

I'm tired of asking my parents to pay for my credit card. This is just as hard of a time for them as it is for me. They are saving on everything, and have been for the past 4 years. Sometimes I wish we never moved to our huge house, which we bought practically in the middle of the housing boom (now it's down about 10% in value). That way at least we'd have a lot more money to spend on food, clothing, electronics, etc.

Do I miss my old house? Yes I do. But no use crying over spilled milk.

Money is so hard to come by. After I finish this full-time recruiting season, I'm going to work hard to find a paying internship, regardless of whether I get a full-time offer or not. I need the money. In the mean time, I'll try to not to get any interest on my credit card.

Games... the horror!

As any male of the Y generation knows, computer gaming is the MOST interesting you can do by yourself. And with the inception of online gaming (since 1995), playing with other people on games such as World of Warcraft, Ultima Online, Everquest, Starcraft, etc, can be fun and eternally addicting.

When I was little I remember, being obsessed with a few different games. Pokemon, Age of Empires (1), these bubble-shooting games, this game called Oregon Trail (not the "you have died of dysentry" one, but the later version), as well as a few others I can't remember. Wow, those first early games weren't addicting, but they introduced me into the world of...

Starcraft. That's the first game that addicted me. At first, it was my cousin who played - and I loved watching him play. I thought it was so interesting, especially building the bases. When I was at my cousin's place I would frequently wake up very early in the morning just to watch him play. I didn't want to play myself, it seemed too hard.

Later though, I begin playing so much during the early 2000's. I played Counterstrike for a long time as well. Anything that was online, I played - Warcraft 3 (though not as extensively, since I wasn't very good at it). Oh, let's not forget the video games - I played Super Smash Brothers extensively, as well as a bunch of other games - Super Mario Sunshine, Final Fantasy X and XII, Magic The Gathering, and... other games I can't remember.

Then came Puzzle Pirates. Does anyone even know this game? It's a free online MMORPG that I tried in 2005... and wow, it took over my life for 2 years! I became captain of the largest crew in the "ocean," went frequently on "pillages" and was up all night. Sometimes my internet would break down and I would freak out because if I wasn't online, our ship would lose a TON of money. These were the days when I would go to sleep at around 5:00 in the morning, and wake up at 7 to go to school...

And then, came World of Warcraft. Wow. WOW. I was literally stuck in that world for another 2 years, although I did take a break in the middle from 2007 summer to 2008 summer. But for about a year I played WOW almost non-stop, first as a troll shaman, then as a gnome mage. Honestly I was never that good at it... but everyone knows that once you get addicted to something... you keep playing.

Heh. Now, I'm enraptured by another game. League of Legends. It's crazy fun. I was up until 4 last night playing it. Is it my fate to be playing these games for the rest of my life? Are these games the reason why I haven't achieved my dreams, and gotten good grades in school? If you asked my parents, they probably will say yes.

If you play games right now... no matter which one... just try and control yourself. Every morning I wake up, I get urges to just flip open the computer and game all day. It took a lot of self-control and discipline for me to come to work. But at least it's a step in the right direction.

Writing is fun. But what is more fun? Music.

I've already posted 3 posts today, and I'm going to keep posting. As I stated before, writing really works the mind. It forces me to focus my thoughts, develop them, and conceive them in a way that is clear and understandable.

For example, let's talk about my favorite subject - MUSIC. Usually, my mind is simply shooting off in a million different directions when I think about music. One really weird thing about me is that I don't listen to other people's music. While I do enjoy the occasional hip-hop song now and then, I find that the silence of my mind is much better company. Instead of listening to music, my mind will play back something that is both completely new, and sounds good enough for me to be satisfied. And sometimes my fingers will move along with that music... it is an eternal song, always playing, fading when I am focused on something else (such as writing, right now), but coming back full force when I am resting.

Music, in my opinion, should be meaningful. Meaningful - it's a vague definition - but it's the way I think music should be. It should also be understandable. And finally, beautiful. The combination of these three concepts means that the music can be enjoyed by the audience, no matter what style it is. Meaningful music can always find a place in this world - just look at the recent popularity in film score music. Understandable - the modern hip-hop, pop, rap, club music, they are all extremely understandable, and popular. Finally, beautiful - of course, it has to sound good.

So how do you sound good? First, you want the best instruments. Whether it's a voice, or a classical piano, or an electric guitar, it has to be tuned to perfection. The sound recording systems have to all be top notched. In fact, if you get the preparation to be top-notch, no matter what you record, it will sound good, I guarantee you.

Next, is the technique. I have a problem that is common among many piano amateurs - I bang too much. "Banging"- an unfortunately named term for when piano players do not relax their arms, and instead of playing firmly with their fingers, start using arm strength to max out the magnitude of the sound.

This unfortunately produces a rather unpleasant, sharp sound that is distasteful to the ear. Instead, use firm fingers, relax your arms, and let your music guide your body, not the other way around.

Mad Men

I've been thinking about this show for a while - Mad Men. It's a show about the 1960's, where a couple of advertising executives go through their daily lives. The character that strikes me most is Don Draper.

I love his character, and I think as an adult man, I should change my character to be more closer to his. Meaning, don't talk so much. Listen. Be serious. Respect others. Respect yourself.

Frequently when I meet people, or am hanging out with friends, I'll get very excited and begin talking a lot. It's not like I say anything stupid, but it's that I don't really have anything smart to say either - so a lot of what comes out of my mouth is trash. That kind of loses respect for me, and I know that other people respect me less after they realize that I don't have much good things to say.

Here's what I'm going to do. Talk much less and listen. I tried this the other day, and wow, the respect people paid me was much more than I had in the past! People listened to every word I said WHEN I spoke, and other times I would just nod and listen. Not talking is probably one of the best ways to earn respect from people.

I think it's also different for men than women. Women can talk all they want and they'll still be likable, funny, whimsical... interesting. If a guy talks too much... you lose respect for him, and he becomes boring. A man needs to be quiet. Strong. Internally confident.

Don't ever give your opinion if it's not asked for. Even if you are asked for it, it is better to give a neutral opinion.

Can this work? I will let you guys know the results of my personality "experiment" after a few weeks.

Have faith in your thesis

I'm sitting at this Hedge Fund that I work at - Forex Signs, Inc, and one of our head traders - Noah Muchai, is standing around talking to another trader about the importance of having faith in your thesis.

Based on books I've read, this is the most important rule in trading. People do not lose money based on following a system - people lose money because they stop following their system and start making erratic, hope and fear-based decisions. According to Noah, if the technical indicators in your system do not confirm, then you DO NOT enter the trade. Just don't do the live account, study it more, and make sure your own system... is secure, and that you BELIEVE in it.

Don't always be looking for a new system. Sometimes the older systems work the best. According to Curtis Faith (The Way of the Turtle) very basic breakout systems can work just as well as the newest "quant" and... what's that word... obscure? systems.

Can I have faith in a system? I think I should have faith... in the trending system that Ivy (this trader who worked with us interns during the first few weeks) taught us. It is very simple. Draw trendlines, have it match to at least 3 points. Bet into the trade only when it hits the 15% level of the trading range. Only trade in the direction of the trend.

Let's do it. Let's follow that. Don't try the breakouts or whatever. Just do that. And use Fibonaccis to confirm/restrain your trades (meaning, if it's going to hit an important fibonacci level, it's better to wait to see what happens)

Hello hello!

I'm back. I'm going to begin posting just my daily thoughts.

Jesus, recruiting is HARD. I haven't gotten a single interview yet after submitting my resume to companies such as Morgan Stanley, Barclays Capital, RBS (Royal Bank of Scotland), Bank of America- Merrill Lynch (BaML) and some other investment banks. But with a quite below average GPA (3.35) I'm scared that I won't even be able to get to the interview section!

What makes the GPA so important anyway? It's interesting. GPA shows the world how smart you are, how well your ability to synthesize concepts. With a low GPA like mine, it practically says, this guy isn't smart enough to analyze the global markets today. And I agree - I don't think I'm smart enough.

Which is why I'm working extremely hard to bring up my brain's intelligence level. How can I do that? There are so many brain exercises out there, but I think working on this blog is one way of doing it. Because your mind - your thoughts - they're always swimming around, thinking wildly, without focus, and only when you write, can you bring those ideas into focus.

So... wish me luck!! Next blog post will be up in a few minutes.