Shifting My Focus

I made a tough decision over the Turkey Holiday.

I have shut down the PAMM effective Monday, November 29, 2010. I think I can better serve the trading community with a new PAMM sometime in Q1 2011 focusing exclusively on the gold and silver market. Stay tuned to the blog as I role out the details in the future. It will be a better PAMM – lower fees, focused exclusively on the precious metals.

I didn’t do this because I had a couple of losing days; I actually did this because I believe going forward into 2011 [and beyond] the major fiat currency pairs [EURUSD, etc.] will be subject to the most massive manipulation and intervention schemes the world has ever seen. How it’s going to turn out I have no idea.

Gold and silver are classic manipulated markets; but once you know how the manipulation schemes work, you can take advantage of them. I have traded both for over 30 years. So, why didn’t I trade these markets much over the last 4 – 6 weeks? Well, it was a classic case of being underfunded in the PAMM account along with heightened volatility that raised the risk levels to an unacceptable level.

The algorithm will always work, but the sad reality is that when market volatility is extremely high, the losses get raised also. No big deal to me, but investors and small traders get spooked easily.

I’m going to continue the blog and give you my insights into trading. I hope you all stick around and continue to support the blog by reading my posts and telling others about them.

-vegas

Happy Thanksgiving Week

Everybody in the U.S. celebrates Thanksgiving this Thursday. As such, I'm traveling and will post my next comments on or about Monday, November 29. I'll still be trading, but I won't be posting anything here or on the fxfisherman forum until then.

Everybody have a good Holiday.

-vegas

Vegas Takes a Punch

Maybe I do look like the guy with his head in the sand [from a previous post]. After today’s trading, I sure feel like it. Not a good day.

It started with AUDUSD and worked its way to EURUSD.  I was bullish AUD [via gold] and bearish EUR. Pretty much all algorithm trades, but what really hurt was the ass-whooping I took on a EURUSD stop during the night.

What can I say? We are in a period of insane volatility and the algorithm has gotten chopped up as a result. In on a cross, and then - BOOM! - the other way to the stop. I just move forward and don’t take it personally.

I just wanted to post so that everyone can see I know how to take an approximate 7% punch. Risks in the business. Ouch! Time to get back to business.

-vegas

Let's Check the Scoreboard

The smartest guys in the room have gotten together and tallied the results for October 2010. From the folks at Hedged Fund Net [HFN]: October and YTD 2010 Benchmark Performance:  Ranked by Total Performance.

So, what do these figures mean and how should you interpret them?

These figures are the equal weighted performance averages of all hedge funds reporting for that group. So, a +5.00% for all of 2010 means that 50% of all hedge funds in that group are above this mark and 50% are below it.

If you have money invested anywhere and in anything, the following rankings will give you a good idea where you should be. For example, let’s say you have some stocks invested in companies in Brazil. Accordingly, you should have returned +2.51 % in October and for the year you should be up 10.64%. If your stocks are up more than this, then you have beaten your benchmark and are considered a superior money manager [or investor]. Conversely, if your performance consistently lags the appropriate Index Benchmark, maybe you aren’t as good a trader as you think you are.

Hedge funds [all sizes] all over the world use these benchmarks to judge performance. Investors [or more importantly, potential investors] seeking superior returns and good managers use these benchmarks as well.

I have bold faced the Forex Strategies section.

My PAMM [TrafficCap WealthBuilder], although not officially considered a “hedge fund”, operates basically the same way and should be judged accordingly [Foreign Exchange Stratagies].

Emerging Market Benchmarks:
HFN India Index:                                   +1.46% in October, +17.54% in 2010
HFN Emerging Markets Index:               +2.72% in October, +12.94% in 2010
HFN Russia Index:                                 +2.43% in October, +11.28% in 2010
HFN MENA Index:                               +2.75% in October, +11.18% in 2010
Emerging Market Equity:                        +2.59% in October, +11.00% in 2010
HFN Brazil Index:                                  +2.51% in October, +10.64% in 2010
HFN Latin America Index:                     +2.47% in October, +10.16% in 2010
Emerging Market Debt:                          +0.68% in October, +7.83% in 2010
HFN China Index:                                  +3.45% in October, +5.59% in 2010


Broad and Developed Market Benchmarks:

HFN North America Index:                    +2.50% in October, +8.30% in 2010
HFN U.S. Index:                                    +2.42% in October, +7.98% in 2010
HFN Australia Index:                              +4.78% in October, +6.92% in 2010
HFN Asia Index:                                    +1.54% in October, +5.48% in 2010
HFN Europe Index:                              +1.81% in October, +5.06% in 2010
HFN Japan Index:                                -0.35% in October,  +0.14% in 2010 

Fixed Income (FI) Strategies

HFN Mortgages Index:                         +0.09% in October, +17.06% in 2010
Corporate Bond Strategies:                   +2.07% in October, +11.72% in 2010
HFN Distressed Index:                          +2.35% in October, +11.56% in 2010
All Fixed Income Strategies:                  +0.95% in October, +9.84% in 2010
HFN Fixed Income Arbitrage Index:     +0.39% in October, +9.31% in 2010
Government Bond Strategies:                +0.44% in October, +6.02% in 2010 

Equity (EQ) Strategies

HFN Technology Sector Index:             +4.37% in October, +21.97% in 2010
HFN Energy Sector Index:                    +3.22% in October, +10.28% in 2010
Natural Resource Equity Strategies:       +3.49% in October, +9.99% in 2010
All Equity Focused Strategies:               +2.27% in October, +6.63% in 2010
HFN Long/Short Equity Index:             +2.18% in October, +5.76% in 2010
HFN Healthcare Sector Index:             +0.66% in October, +5.06% in 2010
HFN Market Neutral EQ Index:           +1.13% in October,  +3.01% in 2010
Financials Equity Strategies:                  +0.87% in October, +1.53% in 2010
Real Estate Equity Strategies:                +0.55% in October, +0.88% in 2010
HFN Short Bias Index:                         -1.65% in October, -9.62% in 2010 

Commodity and Foreign Exchange (FX) Related Strategies

Commodity (Non-FX) Strategies:         +3.91% in October, +8.43% in 2010
HFN CTA/Managed Futures Index:     +3.17% in October, +6.10% in 2010
Foreign Exchange Strategies +0.34% in October, +4.93% in 2010
Financial Futures Strategies:                  +1.94% in October, -1.60% in 2010

So, take all the hedge funds that trade Forex; add up the total performance for all of them in 2010 and you get an average [50% above, 50% below] of 4.93%. Of course, hitting these Benchmarks isn’t as easy as it seems. Next time somebody tells you they make 100% a day, tell them to call big money and get a high-paying job.

So, why does it seem these returns are a bit low when compared to the monster returns available in the market if you are right?

It’s because you have to manage risk properly, and the vast majority of money managers [or investors] don’t do a very good job of this. Get stupid, and 20% or 30% losses can hit you before you know it. After that, you have to climb back and it is difficult and may take time. So while +4.93% for 10 months of trading seems paltry, it looks a hell of a lot better than being down -20% for the same period because you had a 35% hit back in March.

-vegas

Meet America’s Most Clueless

For those of you who live in the United States, but for some reason have never left the country, you really need to get out more often. There are, believe it or not, other countries where people actually have some brains, live quite well, and enjoy a standard of living much better than you.

No, I’m not referring to the Bamster or Weimar Ben, or any of the countless pols that make me want to puke on a daily basis. That would be too easy.

No, dear readers, I am talking about ordinary, first-rate, gullible Americans. And since I’m an American, I think I am uniquely qualified to show why the U.S. is in financial trouble.

Before you see the visual evidence, I start with the premise that Americans have been “dumbed down” the past 30 years [maybe more] with an educational system that cares nothing about learning and knowledge and everything about pushing a liberal socialist agenda. It matters nothing if little Timmy learns to think critically [read and write] and becomes proficient in math. No, what truly matters is that he becomes a metaphorically neutered male; tackling such weighty matters as gay/lesbian studies, revisionist American history, conflict resolution, etc., etc.

What sane person, grounded in economic reality and a firm grasp on the issues of the day, can come up with any other conclusion than the U.S. if filled to the brim with ROY G. BIV trash!

America [collectively] gets the crooks leaders it eventually deserves. It’s easy to explain Obama; more and more Americans want free stuff they don’t have to work for and feel guilty about. “Shazaam!! I’m gettin’ a chek frum da guberment!”

OK, no more teasing; here’s video proof. But first let me set up what you are about to see. Canadian Mark Dice comes down from Canada and tries to give away a free 1 oz., .9999 pure gold Canadian Maple Leaf coin to random people on the street. Filmed in November 2009, gold is at approximately $1,150 per oz., and he can’t give it away! Here is the link:

http://www.prisonplanet.com/mark-dice-tries-to-give-away-one-ounce-gold-coin-to-random-people.html 

If I were King, I’d just put them in one place and do this:

I’m speaking metaphorically of course.

-vegas

QE2 Blues

This ain’t me.

I have been professionally trading the financials [gold, silver, currencies, bonds, S&P] for just a little over 30 years. I have never seen volatility across the board like we have seen in the last 2, maybe 3 weeks. Today was just over-the-top crazy.

Gold has a $25 range before Europe even opens. In the last few days, silver has ranges of $2. EURUSD is all over the place with ranges of 200 + pips the norm.

Today, AUDUSD [in my algorithm] violated the lower aqua line twice [RM=3], rallied to the upper aqua line, and then went down to the lower aqua line again. Prices are moving so fast, that entering a trade with an acceptable risk/reward ratio is almost impossible. What I mean by this is that the algorithm triggers a buy/sell signal and the market is anywhere from 20 to 40 pips away from the signal. By the time I enter a stop, I’m looking at 60 pip risk on a single trade. This is simply not acceptable.

As I have stated before on the fxfisherman forums, precious metals present their own problems when you have free-falling prices. No markets are worse for stops than silver and gold. What you think is an acceptable risk becomes moot after potential stop slippage.

As a result, I stepped away from trading today as I have done other days this month. If you have read any of my posts, blogs, and algorithm documents you know I take risk seriously. Now you know why. There is a reason why I’m a 30 year veteran of these markets; there is a reason why I have been rated #1 in the world in managed funds [download “Vegas #1” above]; it’s not because I’m the smartest guy in the room or because I get lucky trading, but because I treat potential risk very, very seriously and I am very disciplined.

Don’t get me wrong, I love volatility. But not volatility induced by panic reactions from government bureaucrats who are trying to manipulate the world’s financial system. This whole G-20, PIIGS, Weimar-Fed-QE2 thing is the biggest Ponzi scheme in the history of the world. It is a CERTAINTY that it will fail and fail miserably. Because we have never seen anything as brazen as this scam, markets are reacting accordingly. I certainly will adjust my trading.

I can easily recover losses of a percent or two within a day; recovering from 30% or greater hits from very chaotic trading is very difficult. It has nothing to do with being a hero or being a big shot. I have a moral responsibility as author of the algorithm and being a money manager, to give to you my honest, up-front expertise. I hope you would expect nothing less.

I have been there. On a Friday afternoon in October 1980, I lost 70% of my account in 45 minutes trading gold. Things got away from me in a highly volatile market! I put the circumstances of this situation in the “1 Hour Tunnel Method” I released a few years ago.

I have absolutely no intention of ever getting anywhere close to that again. Whether I manage your funds, you trade the algorithm on your own or it simply is my own account, I know the feeling of large losses and I simply refuse to participate.

I know that by publishing my trading methods, and now managing a PAMM, I open myself to all kinds of criticisms. “A wild day and you sit on the sidelines? Are you some kind of pansy? Where are your balls? C’mon, do somethin’!!”  I’ve heard it all before and worse. If you read the PDF file “Vegas in the Pit” [download above], you will know that there was a time when I refused to participate in a rally that lasted 23 days in a row before disaster struck. Who was smiling and said “I told you so” at the end?

The money comes at its own pace; I simply don't want it to go away from circumstances beyond my control.

The point I’m trying to drive home to you all is to take risk seriously. Consider risk before profit blinds you. One, two, or even 23 days mean nothing; large percentage losses destroy your financial future. How many times have I told you that before you pick the color of your new Mercedes, first do no harm, and then make the money.

***

I make no bones about the fact that I am bullish on gold and silver. However, as I have told you many times, do NOT fade the algorithm. At the start of the Asian session I was waiting for gold to turn to get long: errrrrrrrrr, it didn’t happen. Instead, we got a $20 drop in about 3 hours. Now, the probability of coming back from this drubbing and then making new highs is not good. If it happens, then fine, I’m long; but it is a serious warning flag going forward that moving higher today will be very difficult. This drop convinced me not to be long, but the 4 Hour is still bullish, so I don’t want to get short either.

AUDUSD turned bearish on the 4 Hour chart Thursday, and after watching it get pummeled to the lower aqua line twice, my gold proxy for buying and selling didn’t look good either.

Then comes news that Italy had a good [so the apparatchiks say] government bond auction and everything goes nuts in a wild short covering rally. Whoops – sorry to screw you – time to head lower to the aqua line again [maybe it wasn’t so good after all]. This isn’t the kind of trading action I want to participate.

In the late 1970’s, Clint Eastwood immortalized the character “Dirty Harry” in a series of cop movies designed to show how corrupt and inefficient American cities had become regarding law enforcement. From a list of my favorite Dirty Harry quotes is “a man has got to know his limitations”.

Well, I know mine and I know when to step away. It’s ALL about the money.

-vegas

Gold & Silver Update: Hide the Children

Things are gonna get reallllllllllll interesting the next week or so. Don’t believe what you might see and hear from the talking heads on CNBC and Bloomberg, which by the way will look and feel something like this:

From King World News, I am including a link for your perusal. In a nutshell, the silver shorts are all Fed supported large banks [hello JP Morgan & HSBC], and more significantly demand out of Asia is “insatiable”. Read the entire post here:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/11/10_KWN_Source_-_Asian_Buyers_Have_Silver_Shorts_Checkmated.html

While I generally discount stories of large “mystery” buyers, the recent lawsuits against JP Morgan & HSBC finally shed light on what has been an open secret in the trading community for a very long time; viz., these two along with Goldman et al are government supported market manipulators that do not want precious metals prices going higher. They exist to prey on retail traders in the “paper” futures markets and give cover to spendthrift governments.

However, with the gig all but totally up, the U.S. government simply cannot hide the fact that they have embarked on total monetization of the U.S. currency. [See my remarks in earlier blogs for Weimar Ben’s actions if you haven’t already.] It makes perfect sense that the Chinese are stockpiling silver [and just about everything else] for future needs. Put yourself in their shoes: going forward at 9% - 10% internal growth, with total debasement of the dollar thrown in as well, where do you think prices are going to be in 3 – 5 years since mine production has slowed and costs are rising? Yeah, that’s what I thought!!

Take the tens of thousands of futures contracts these banks are short in the gold and silver December 2010 maturity, coupled with insatiable demand, and you end up with a total melt-up clusterfark. Say hello to the next big bank bailout!!

Exit question part I: If you were short numbers like these, would you not engineer a “run-the-stops-on-the-downside” like we saw yesterday and today in gold and silver, in a last ditch effort to save your firms ass, hoping to send prices low enough into the stops so you could get out or at least get lower prices for your losses?

But wait, it only gets better.

Today, the Weimar Fed announced the buy back for notes and bonds over the next month. Starting Friday, the Fed buys $105 BILLION in 18 almost daily operations over the next month.  Let the asset price rise orgy begin!!

I caught up with my head mathematician this morning,

and doing some serious cipherin’ I figure this means another 10% - 15% rise in just about every asset class from stocks, precious metals to Barbie dolls by the December futures expiration!

The way I see it, the shorts had yesterday and today to ride the back of the large banks to force the gold and silver markets lower. I’m talkin’ about quick, very vicious spikes down that get your stops filled no where near where you might think. Yesterday and today were not the days to get long; too much risk. By the end of tomorrow though, I will be long, expecting the front-running of the Feds printing money monetization to start in earnest by days end or sometime Friday.

Exit question, Part Deux: What does $108 Billion dollars go into within 30 days that won’t lose its value but keep appreciating?

One more tidbit: yesterday the Intercontinental Commodity Exchange [ICE] announced that accounts can use gold for margin purposes.

Over the next month, this is going to be one hell of a ride up. Hide the children.

-vegas

US DOPES [U.S. Department of People’s Equity & Savings]

Yup, even Mr. Ed thinks the acronym is worth a laugh.

But you won’t be laughing when the U.S. Government takes over your IRA or 401k, if you are a U.S. Citizen. For the last 3 years, liberals in the U.S. Congress have been scheming and laying plans to do just that. Headed by super lib George Miller [Marxist, CA.], the plan is essentially this: they steal take your retirement money and give you Treasury paper and guarantee you make 2% per year. You have no choice in the matter; it is essentially a government takeover of your money. When you retire, you don’t get the lump sum, only the income stream.

This plan was hatched and was supposed to be implemented upon Obama winning in 2012, with a Pelosi controlled House and a Reid controlled Senate. Too bad the people of the Untied States sent Pelosi packing.

With the Republican teanami that happened last Tuesday, here are the current odds of this scheme happening anytime soon:

Only place your hard earned capital where it is protected from harm, in an environment that is friendly. In the current political environment, the United States is the very last place I would want to keep and invest money.

-vegas

Greatest Data Week Ever: Some Observations

The celebrations have begun in the U.S. The parties have started and people are giddy with joy. You couldn’t find this much happiness unless you were at a Wayne Newton shindig in Las Vegas. With the U.S. mired in recession, TOTAL unemployment at 17%, what possibly could make people this giddy?

After getting his backside severely slapped by voters, Obama’s taking 3,000 people to India for 10 days. If you wanted to, you couldn’t get much farther away from the U.S. by going to India. By my reckoning, this means the average TV viewer with no cable doesn’t have to look, or hear, from the Bamster for at least a couple of weeks.

Look at it this way: your wife announces she is going to visit her mother 15,000 miles away for 10 days; the kids are safely ensconced at Camp Itchygumma for the month, and you live in a luxury apartment above the best strip club in town. Oh Joy, Hallelujah!!! [Have a nice trip honey, and tell your Mom I said Hi!!]

Make no mistake dear readers; this is a dangerous trip for BHO. Why, yesterday I read with horror that since he’s going to be wandering around the sub-continent, there are many dangerous coconut trees ready to drop real, live coconuts on his saintly dome. Natch, the Indians are scurrying around the Taj stripping every coconut tree within 100 miles so this doesn’t happen.

But I don’t think this goes nearly far enough to protect all the liberals in the entourage. Therefore, I am calling, NO DEMANDING, that the Indians put the following sign up everywhere “The One” might visit:

After all, it doesn’t get much more dangerous for tone deaf, out-of-touch, not-a-clue liberals than falling coconuts.

***

By now, everybody knows what the Weimar Fed did. 

Using some “back of the envelope” math, it means everything you earn and everything you save is gonna be DEVALUED by at least 10% going forward. ETA is about 6 – 9 months. Think your 401k or IRA is doing well because the stock market is inflated up a little? Chew on this: since the start of 2010, the S&P valued in silver is down 29%.

Here is how you can save yourself and your family: I’m inserting a link here for “e-dinar”, a company providing a 100% gold- and silver-backed online payment system and related exchange services. For more information, follow this link:

http://www.e-dinar.com/html/

I highly recommend them for accumulating gold, silver, and platinum. Their reputation is impeccable and their service is very good. The fee structure, copied from their website is as follows:

As you can see, there is only a 1% annual fee to hold and store gold, silver, and platinum. You simply won’t find a better deal anywhere in the world. Located outside the U.S., Euroland, and the other high-tax snoop countries, your holdings are safe, secure, and most importantly private.

***

On the first Friday of every month we go through the same NFP shenanigans. As most traders know, Non-Farm Payrolls data is a complete guess. One thing you can always count on from highly paid and useless analysts is the word “unexpectedly” prefaced before any data analysis.

In order to get to the bottom of this mess, I sent my own highly paid and useless staff to Washington, D.C. After 2 weeks in the Honeymoon Suite at Motel 6; far, far too many nights out ‘til 4 A.M., they reported back that, yes indeed, they had infiltrated the Bureau of Labor Statistics and attended a very high-level staff meeting. While I couldn’t quite make out their report, written on a cocktail napkin with purple lipstick, the super-secret photo they smuggled out pretty much said it all:

And you sometimes wonder why I don’t like trading on NFP Friday?

-vegas

Beggar America – How I learned to Love Debt

Having survived the last 48 hours of election results and the Weimar Fed announcement this afternoon, I decided to clean the place up and get ready for the hyper-inflation party to follow. All the 2-dimensional food group wrappers [sliced cheese, candy bars, pop-tarts, etc.] have been collected and thrown away.

I got some brand spankin’ new vacuum tubes [natch, before the price rise], got my suit pressed, and after 2 days of reflection from the insanity of looking up at my trading screen, I’m ready to trade anything and everything higher. For posterity, let the world know what a true high-tech trading operation looks like:

 Now, I’m sure some of you decided to trade during the Fed announcement  Being the kind of gambling man that I am, I would lay 5 – 1 that most of you are pretty much in the following mindset:

Don’t make me say “See, I told you to stay away from this” again.

Over the last couple of days, the “whisper number” for QE2 on the street had been going down from $1 Trillion to $500 Billion, and over 6 months instead of 1 year. Almost seems deflationary in comparison.

The open little secret here amongst those of us with a brain is that “Weimar Ben” can never let interest rates go up again, or the gig is up. They will waste the country, and by default print as much as needed to keep rates artificially low. In their collective hubris, they are fighting a battle they cannot win, always determined to win the last war; in the end, they will be unsuccessful in keeping rates low. Everything they don’t buy, nobody else will. That day is approaching faster than anybody in power will admit.

Today’s Weimar announcement is an open invitation for everyone to aggressively sell the U.S. Dollar and bet heavily on commodity prices going higher. Weimar Ben has given it his blessing.

-vegas

We Know That You Know We Know

All the academic pinheads who couldn’t get a job in the real world, and by default ended up at The Federal Reserve, will gather up all their PhD policy papers and meet tomorrow and Wednesday somewhere deep in an underground bunker.

Anybody with a brain knows that what they are planning on doing is insane. We know that printing money is inflationary and destructive. Hell, they know it too!! But what most people don’t realize is that they don’t care if we know.

Reminiscent of “Are you smarter than a fifth grader?” comes the brilliantly timed question of the century “How are you going to pay this back?” I, for one, don’t particularly look forward to learning Chinese.

So, we know that you know we know it ain’t ever going to be paid back and probably a lot sooner than anybody realizes inflated out of existence.

Is this our future?

 And when this doesn’t work, then what?

I have long made the case that physically holding gold doesn’t make any sense either. You gotta pay to store it, it earns nothing by sitting there, and most importantly you gotta protect it. You can’t eat it, and for all practical purposes, in your life it is totally useless [I didn’t say worthless; big difference].

And if the proverbial crap sandwich is served up to the world and it takes $10,000 to buy a loaf of bread, what makes you think those gold coins are going to save your bumpkin? After all, when you go to the store and give the clerk a bright shiny 1 oz. gold coin for that bread do you think nobody will notice? If it comes to pass, you’re gonna be the most popular guy on the block – and it won’t be a good thing.

In the final analysis, we know that Fed Chairman Bernanke knows that we know he doesn’t have a clue what to do. When you go around to the primary dealers in government debt about a week before the most important policy meeting in a long time, and ask them what they think you ought to do, you look and act like the chump at a poker table.

Captain Bernanke at the helm and taking charge of the jumbo jet U.S. Economy, flight #2010:

 This isn’t going to end pretty.

-vegas