China Starts To Make A Power Move Against The U.S. Dollar

 

Again another very common-sense, compelling read from our friends at: http://theeconomiccollapseblog.com/

Those that subscribe to EWT/EWFF will be familiar with the concepts discussed below.  I’m sharing the article, because these concerns/assumptions have been known and discussed by others for a lot of years, it’s satisfying when others join the lone wolves at the party  Again I think before it gets to the destructive phase some sort of deal/solution with materialise to ease the pain, however, make no doubt if the worst does happen it will be painful, very painful.  But as usual use common sense, people bought Gold and got sucked into the hype back in 2010/2011, if it happens you’ll know about it, it might not happen there are no guarantees.

China Starts To Make A Power Move Against The U.S. Dollar

Posted: 20 Feb 2014 05:37 PM PST

US Dollars - Photo by selbstfotografiertIn order for our current level of debt-fueled prosperity to continue, the rest of the world must continue to use our dollars to trade with one another and must continue to buy our debt at ridiculously low interest rates.  Of course the number one foreign nation that we depend on to participate in our system is China.  China accounts for more global trade than anyone else on the planet (including the United States), and most of that trade is conducted in U.S. dollars.  This keeps demand for our dollars very high, and it ensures that we can import massive quantities of goods from overseas at very low cost.  As a major exporting nation, China ends up with gigantic piles of our dollars.  They lend many of those dollars back to us at ridiculously low interest rates.  At this point, China owns more of our national debt than any other country does.  But if China was to decide to quit playing our game and started moving away from U.S. dollars and U.S. debt, our economic prosperity could disappear very rapidly.  Demand for the U.S. dollar would fall and prices would go up.  And interest rates on our debt and everything else in our financial system would go up to crippling levels.  So it is absolutely critical to our financial future that China continues to play our game.

Unfortunately, there are signs that China has now decided to start looking for a smooth exit from the game.  In November, I wrote about how the central bank of China has announced that it is “no longer in China’s favor to accumulate foreign-exchange reserves”.  That means that the pile of U.S. dollars that China is sitting on is not going to get any higher.

In addition, China has signed a whole host of international currency agreements with other nations during the past couple of years which are going to result in less U.S. dollars being used in international trade.  You can read about many of these agreements in this article.

This week, we learned that China started to dump U.S. debt during the month of December.  Many have imagined that China would try to dump a flood of our debt on to the market all of a sudden once they decided to exit, but that simply does not make sense.  Instead, it makes sense for China to dump a bit of debt at a time so that the market will not panic and so that they can get close to full value for the paper that they are holding.

As Bloomberg reported the other day, China dumped nearly 50 billion dollars of U.S. debt during the month of December…

China, the largest foreign U.S. creditor, reduced holdings of U.S. Treasury debt in December by the most in two years as the Federal Reserve announced plans to slow asset purchases.

The nation pared its position in U.S. government bonds by $47.8 billion, or 3.6 percent, to $1.27 trillion, the largest decline since December 2011, according to U.S. Treasury Department data released yesterday.

This is how I would do it if I was China.  I would try to dump 30, 40 or 50 billion dollars a month.  I would try to make a smooth exit and try to get as much for my U.S. debt paper as I could.

So if China is not going to stockpile U.S. dollars or U.S. debt any longer, what is it going to stockpile?

It is going to stockpile gold of course.  In fact, China has been voraciously stockpiling gold for quite some time, and their hunger for gold appears to be growing.

According to Bloomberg, more than 80 percent of the gold that was exported from Switzerland last month went to Asia…

Switzerland sent more than 80 percent of its gold and silver bullion and coin exports to Asia last month, the Swiss Federal Customs Administration said today in an e-mailed report. It imported most from the U.K.

Hong Kong was the top destination at 44 percent on a value basis, with India at 14 percent, the Bern-based customs agency said in its first breakdown of the gold trade data since 1980. Singapore accounted for 8.6 percent of exports, the United Arab Emirates 7.9 percent and China 6.3 percent.

When China imports gold, most of it goes through Hong Kong.  We know that imports of gold from Hong Kong into China are at an all-time record high, but we don’t know exactly how much gold China has accumulated at this point because they quit reporting that to the rest of the world a number of years ago.

When it comes to global finance, China is playing chess and the United States is playing checkers.  China knows that gold is a universal currency that will hold value over the long-term.  As the paper currencies of the world race toward collapse, China could end up holding most of the real money and that would be a huge game changer when they finally reveal that fact…

The announcement of China’s new gold hoard will send shockwaves through the financial markets, and make China and the Chinese yuan (their national currency) even bigger players at the international table.

International banking expert James Rickards compared it to a game of Texas Hold ‘Em poker:

“You want a big pile of chips. The U.S. has a big pile of chips, Europe has a big pile of chips. The U.S. has 8,000 tonnes [metric tons] of gold, 17 members of the euro system have 10,000 tonnes. China at 1,000 tonnes is not a player, but at 5,000 tonnes, they are a player.”

There are some really good points made in the quote above, but I do take exception with a couple of things.  First of all, I believe that China now has far more than 5,000 tons of gold.  Secondly, I seriously doubt that the U.S. still actually has 8,000 tons of gold or that Europe still actually has 10,000 tons of gold.

As China (and eventually the rest of the world) moves away from a U.S.-based financial system, the consequences are going to be dramatic.

For instance, right now the average rate of interest that the U.S. government pays on debt is just 2.477 percent.  That is ridiculously low and it is way below the real rate of inflation.  It is simply not rational for anyone to lend the U.S. government money so cheaply, and at some point we are going to see a dramatic shift.

When that day arrives, interest rates are going to rise dramatically.  And if the average rate of interest on U.S. government debt rises to just 6 percent (and it has been much higher than that in the past), we will be paying out more than a trillion dollars a year just in interest on the national debt.

Even more frightening is what a rapidly changing interest rate environment would mean for our banking system.  There are four large U.S. banks that each have exposure to derivatives in excess of 40 trillion dollars.  You can find the identity of those banks right here.  Interest rate derivatives make up the biggest chunk of those derivatives contracts.  As John Embry told King World News just the other day, when that bubble bursts the carnage is going to be unprecedented…

“Stockman brought up a brilliant point, the fact that we have hundreds of trillions of dollars of interest rate swaps, which are polluting the world’s banking system. If we see growing volatility in interest rates, and I think that’s inevitable with what’s going on, that would cause spasms in the financial system. And if something goes wrong in the derivatives market, Heaven help us because the leverage that is imparted to the banking system through these derivatives is unholy.”

Unfortunately, very few of the “experts” will ever see this crash coming.

Very few of them saw it coming in 2000.

Very few of them saw it coming in 2008.

And very few of them will see it coming this time.

I really like what Paul B. Farrell had to say about this…

Early warnings of a crash are dismissed over and over (“just a temporary correction”). They gradually numb us about the inevitable. Time after time we forget history’s lessons. Until finally a big surprise catches us totally off-guard. Financial historian Niall Ferguson put it this way: Before the crash, our world seems almost stationary, deceptively so, balanced, at a set point. So that when the crash finally hits — as inevitably it will — everyone seems surprised. And our brains keep telling us it’s not time for a crash.

Till then, life just goes along quietly, hypnotizing us, making us vulnerable, till a shocker like Lehman Brothers upsets the balance. Then, says Ferguson, the crash is “accelerating suddenly, like a sports car … like a thief in the night.” It hits. Shocks us wide awake.

Don’t let the upcoming crash take you by surprise.

The warning signs are very clear.

Get ready while you still can.

Money - Photo by Pen Waggener

Learn to apply Moving Averages to your trading with this Free eBook

I seem to be posting and posting this year!  I will stop soon and have a decent break, too much info to digest with too many posts.

For those of you who subscribe to the EWT how good was Feb 2014 Issue!  That is why I like their analysis completely different to anything else out there, Interesting but hugely relevant to life itself.

Greetings  Trader,

Robert  Prechter’s Elliott Wave International (EWI) has just released a free 10-page  trading eBook: How You Can Find High-Confidence Trading Opportunities Using  Moving Averages, by Senior Analyst Jeffrey Kennedy.

Moving  averages are one of the most widely-used methods of technical analysis because  they are simple to use, and they work. Now you can learn how to apply  them to your trading and investing in this free eBook. Let EWI’s Jeffrey  Kennedy teach you step-by-step how moving averages can help you find  high-confidence trading opportunities. Jeffrey’s trading eBooks have been  downloaded thousands of times because he knows how to take complex trading  methods and teach them in a way you can immediately understand and apply.  You’ll be amazed at how quickly you can benefit from Moving Averages with just  this quick, 10-page lesson.

Improve your  trading and investing with Moving Averages!

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This link will work if the one above fails – click here

Regards,

THT

Gold – Weekly Time & Price analysis

The S&P500 is still working out as per last weeks post, here’s Gold for this weeks analysis – nice and simple – it too is in the zones for both price and time.

Weekly Gold Price & Time

I’ve only included the time analysis for the WEEKLY chart – As you can see from a WEEKLY perspective it is in the zone, but it still could rally much further higher in both time and price – this particular upswing could last all the way until 30th May 2014! If the Gold market is respecting previous swings.

Daily Gold - Time & Price

As for Gold on a DAILY chart – we might see the uptrend continue into early March, then expect some sort of pullback or an end to this uptrend and resuming of the downtrend.

What is key in this market now is how the next Weekly cycle low prints on the chart, if we get a higher low then expect higher prices of some description.

 

What to look for going forward – part 2

OK – I’ll keep this short and brief as I have a huge amount of things to sort through, once you start something on these blogs you have to see it through.

You should recognise the chart below from the beginning of the month, the only thing that has changed is price action has been added – HOW did I know the bottom was in? Students will instantly see it’s a THT Cyclist set-up! That MADE money, anyway,

that is NOW topping out – if you are still long you really need to tighten your stops on the trade.

What is going to happen next? The patterns on the chart are still applicable and valid and it is STILL not clear at this stage.

I’m quite open for price to make new highs, so the pattern to watch there is for a pull back towards the swing low marked a

from which it finds support and then bounces to new recent highs.  ALWAYS, ALWAYS remember the MARCH 2014 Time Cycles – they are relevant, the market has worked these cycles out in the past, there is no reason why they won’t do it again!

Don’t get hung up on retracement levels – they don’t really matter!

Now, what if a double top has just been printed? Then this is it and you need to concentrate on the short side – I don’t think I’ve talked out loud about my expectation to the public for the short side exactly – my preference is for a fast decline – not like 2008, more like the drops of 2011 – fast, to support and over.  It will probably have been and gone by the time I get to document it properly.

At this precise time (could be invalidated by price action next week) we have a LOWER high swing point formed, we need 2 to confirm a potential change in trend – that is a few weeks off from forming

The swing low at a now has the potential to provide a false break (price exceeds the low @ point a and then bounces back upwards) It depends on what is unfolding in the market – The main point is if the swing low at point a is broken it then provides us with another reference point and we’ll be able to assess at that point.

So currently it’s not 100% clear what will happen – still the same as last time – there is a perfectly viable Elliott Wave ABC correction type event still viable (If it’s forming the B swing with this recent rally up)

My advice is sit tight and watch

Feb 2014 Blog

Do not ignore those Time Cycles – the most recent publication on them shows in January 2014 one of them arrived, that cycle is present at all major turning points of relevance – something fairly major will happen in the months that follow it.

Remember that George Soros has double up his short position on the S&P500 to 10% of his fund!  These people don’t do that out of hope.

All the best

THT

Does The Trail Of Dead Bankers Lead Somewhere?

Again thanks to http://theeconomiccollapseblog.com/ for another though provoking post.

There’s def something not quite right here, too much of a coincidence of which I’ve previously mentioned.

Also notice the George Soros short position, this happened in Q3 last year and reported on 31st Jan 2013 – again these types of players do not position themselves to that extent unless they know something! This game is rigged, although it is impossible to work out who’s doing what in the rigging, but when key players position themselves contrary to the norm you have to sit up and listen, I’m not suggesting you act, just listen and be prepared should anything untoward start happening.  In the end Soros’s Put position might just be a rather large hedge and nothing more, time will tell.

Enjoy

Does The Trail Of Dead Bankers Lead Somewhere?

Posted: 18 Feb 2014 01:19 PM PST

Trail - Photo by Ws47What are we to make of this sudden rash of banker suicides?  Does this trail of dead bankers lead somewhere?  Or could it be just a coincidence that so many bankers have died in such close proximity?  I will be perfectly honest and admit that I do not know what is going on.  But there are some common themes that seem to link at least some of these deaths together.  First of all, most of these men were in good health and in their prime working years.  Secondly, most of these “suicides” seem to have come out of nowhere and were a total surprise to their families.  Thirdly, three of the dead bankers worked for JP Morgan.  Fourthly, several of these individuals were either involved in foreign exchange trading or the trading of derivatives in some way.  So when “a foreign exchange trader” jumped to his death from the top of JP Morgan’s Hong Kong headquarters this morning, that definitely raised my eyebrows.  These dead bankers are starting to pile up, and something definitely stinks about this whole thing.

What would cause a young man that is making really good money to jump off of a 30 story building?  The following is how the South China Morning Post described the dramatic suicide of 33-year-old Li Jie…

An investment banker at JP Morgan jumped to his death from the roof of the bank’s headquarters in Central yesterday.

Witnesses said the man went to the roof of the 30-storey Chater House in the heart of Hong Kong’s central business district and, despite attempts to talk him down, jumped to his death.

If this was just an isolated incident, nobody would really take notice.

But this is now the 7th suspicious banker death that we have witnessed in just the past few weeks

– On January 26, former Deutsche Bank executive Broeksmit was found dead at his South Kensington home after police responded to reports of a man found hanging at a house. According to reports, Broeksmit had “close ties to co-chief executive Anshu Jain.”

– Gabriel Magee, a 39-year-old senior manager at JP Morgan’s European headquarters, jumped 500ft from the top of the bank’s headquarters in central London on January 27, landing on an adjacent 9 story roof.

– Mike Dueker, the chief economist at Russell Investments, fell down a 50 foot embankment in what police are describing as a suicide. He was reported missing on January 29 by friends, who said he had been “having problems at work.”

– Richard Talley, 57, founder of American Title Services in Centennial, Colorado, was also found dead earlier this month after apparently shooting himself with a nail gun.

– 37-year-old JP Morgan executive director Ryan Henry Crane died last week.

– Tim Dickenson, a U.K.-based communications director at Swiss Re AG, also died last month, although the circumstances surrounding his death are still unknown.

So did all of those men actually kill themselves?

Well, there is reason to believe that at least some of those deaths may not have been suicides after all.

For example, before throwing himself off of JP Morgan’s headquarters in London, Gabriel Magee had actually made plans for later that evening

There was no indication Magee was going to kill himself at all. In fact, Magee’s girlfriend had received an email from him the night before saying he was finishing up work and would be home soon.

And 57-year-old Richard Talley was found “with eight nail gun wounds to his torso and head” in his own garage.

How in the world was he able to accomplish that?

Like I said, something really stinks about all of this.

Meanwhile, things continue to deteriorate financially around the globe.  Just consider some of the things that have happened in the last 48 hours…

-According to the Bangkok Post, people are “stampeding to yank their deposits out of banks” in Thailand right now.

-Venezuela is coming apart at the seams.  Just check out the photos in this article.

-The unemployment rate in South Africa is above 24 percent.

-Ukraine is on the verge of total collapse

Three weeks of uneasy truce between the Ukrainian government and Western-oriented protesters ended Tuesday with an outburst of violence in which at least three people were killed, prompting a warning from authorities of a crackdown to restore order. Protesters outside the Ukrainian parliament hurled broken bricks and Molotov cocktails at police, who responded with stun grenades and rubber bullets.

-This week we learned that the level of bad loans in Spain has risen to a new all-time high of 13.6 percent.

-China is starting to quietly sell off U.S. debt.  Already, Chinese U.S. Treasury holdings are down to their lowest level in almost a year.

-During the 4th quarter of 2013, U.S. consumer debt rose at the fastest pace since 2007.

-U.S. homebuilder confidence just experienced the largest one month decline ever recorded.

-George Soros has doubled his bet that the S&P 500 is going to crash.  His total bet is now up to about $1,300,000,000.

For many more signs of financial trouble all over the planet, please see my previous article entitled “20 Signs That The Global Economic Crisis Is Starting To Catch Fire“.

Could some of these deaths have something to do with this emerging financial crisis?

That is a very good question.

Once again, I will be the first one to admit that I simply do not know why so many bankers are dying.

But one thing is for certain – dead bankers don’t talk.

Everyone knows that there is a massive amount of corruption in our banking system.  If the truth about all of this corruption was to ever actually come out and justice was actually served, we would see a huge wave of very important people go to prison.

In addition, it is an open secret that Wall Street has been transformed into the largest casino in the history of the world over the past several decades.  Our big banks have become more reckless than ever, and trillions of dollars are riding on the decisions that are being made every day.  In such an environment, it is expected that you will be loyal to the firm that you work for and that you will keep your mouth shut about the secrets that you know.

In the final analysis, there is really not that much difference between how mobsters operate and how Wall Street operates.

If you cross the line, you may end up paying a very great price.

Now is the Time to beware

Permission is granted to share this post as long as you acknowledge me as the source.

I’m not into scare mongering, when a major buying opportunity appears I will advise accordingly, but first, along with the other Time Cycle posts I’ve made you need to be aware of this one.  If you were climbing stairs towards a fire I’m sure you’d want people who could see the smoke to at least let you know the possible/potential dangers ahead – It’s then up to you as to what you decide to do.

My assumption is that since 2000 we’ve been in a BEARISH Deflationary Depression – the charts back this up and confirm it as well as other key Time Cycles confirming these assumptions.  The Bearish cycle is not over, so I’m afraid until that happens caution has to be adhered to and I’m afraid that comes in the form of highlighting potential major tops that could trigger a hefty fall – during the BULLISH phase of the cycles these falls are small compared to the falls during the bearish phase – hence the warnings.

These assumptions are not some whim, they’re based on researching over 200 years of market history and pulling out the common factors – who else do you know that’s done that?  I bet most people don’t look back further than a few years and I’m probably being generous with that assumption.

I’m on record as stating that if you still have money invested in the 2030’s, you will have to be prepared for very rough waters in the mid to late 2030’s – very similar to price action you’ve witnessed during the past 14 years (since 2000)

Why the Warning?

This Time cycle has been present at major TOPS and turning points in the markets – It arrived 18th January 2014 – take a peek at the daily charts to see its effect – just like the May 2013 Time Cycle virtually to the day!  this particular Time Cycle is not known for it’s accuracy to the day so the January 2014 plunge might be a coincidence or it might have been caused by this cycle – we’ll never know for certain, anyway this cycle is present in the months surrounding a major high – this is an official warning, I can only guess at the fall/correction that will follow, but a decent correction should occur.

This cycle is not spot on accurate, we need to watch the next few months before calling this cycle over – this cycle is ALWAYS present at major turning points and it’s hit a cycle date in January 2014, of which the recent fall has NOT been sufficient enough for this cycle.

This cycle will be NEW to you ALL, but students – there is another cycle due this year that represents a very good buying opportunity, my expectation is that this cycle and the March cycle will drag down prices into that buying opportunity cycle – of course I don’t know for sure that will happen, it’s my best guess, the FACTS are

  • This cycle is always present at key turning points in the market
  • The chart below shows it’s hit 100% of the time over 5 occurrences covering 20 years
  • If I go back further in time I can find the same hit rate!

This is from my recommended Gann course provider – part of it is my own work, but the concept came from the course provider.

Take 2 mins to think about this:  Here’s a Time cycle that is about 6-8 years in length and it signals key turning points in the markets with an 100% hit rate, albeit it could be off by a few months!  This time cycle is best used as a pre-cursor of a major correction, not an accurate timing Time Cycle as with other Time Cycles, also,

If you review the chart below, you will notice 1 thing for definite, this Time Cycle PREDICTS major stock market falls in advance, those stock market falls also FORCE governments to declare an official RECESSION, therefore this Time Cycle also predicts economic recessions – EVERYTHING is LINKED – I don’t care what you’ve been told by economists and governments, I’m showing you it is all linked – in free random markets that can’t happen, but it does, therefore if you are in BUSINESS you can forecast recessions, the smart people will act to protect themselves during those times.

We also have a massive TRIPLE TOP chart formation formed on the FTSE100 Monthly chart – REGARDLESS of the Bullish bias over the past few years, nice economic data and the like – that chart pattern shouts WARNING, just on the pattern alone, throw in the Time Cycles and you have a fairly potent warning signal to be very cautious/wary over the months ahead.

Now for the positive – there WILL be one or two, maybe three absolutely fantastic BUYING opportunities in the months and years to come – I will advise accordingly as and when they crop up so make sure you’re subscribed for free via the email subscription to this blog. – I can see 2 potential chances on that chart below, but we need much more price action (years) for this to become valid – each one of those buying opportunities at present has 50% profit appreciation gains written on it for a buy and hold investment which is not too bad for buying at the right time and doing nothing. – obviously this is dependent upon future price action and until that unfolds I might just be getting exciting for no reason at all.

I’m sure you can see the value in knowing when these cycles are due:

Time cycle

Like gold? World Gold Council Report

Quick link to the World Gold Councils latest report on Global Gold.

If you study the stats one thing that jumps out are the ETF sales – These are Investments the public make, they’ve been ditching gold as it’s fallen, probably pumping those funds into the stock market!

It is a well known fact that when the mass public collectively do something the game is often nearly up.

http://www.gold.org/investment/research/regular_reports/gold_demand_trends/?utm_source=Newsweaver&utm_medium=email&utm_term=GDT&utm_campaign=Released+today%3A+Gold+Demand+Trends+2013

Quick update to those following on social media – I don’t really do social media, I generate the blog posts and have it link in to social media, hence why I never tweet or facebook in general.

20 Signs That The Global Economic Crisis Is Starting To Catch Fire

Another great article from http://theeconomiccollapseblog.com – subscribe to his site and get the updates as they are released.

Read the article below, get a cup of tea or coffee, read the article again and think of the deep impact of the statements.

I’m intrigued by #19 – I noticed the coincidence a few weeks back and have been trying to link them, something eventually will surface and you can bet that something is going on that we are not yet aware of.

On the grander scheme of things, these types of events are the common aspects associated with Deflationary Depressions, if you have read up on socionomics then you’ll understand how it fits.

I have to state, in case new readers to the blog read this post – I don’t agree with the US market outlook, yes things are very very bad, I just don’t think the stock market will act as everyone is thinking – I have posted my thoughts on the likely stock market movements in other blog posts – search through them to see.

Any it’s another great article, enjoy reading it.

20 Signs That The Global Economic Crisis Is Starting To Catch Fire

Posted: 13 Feb 2014 02:59 PM PST

Lighting A Match - Photo by Sebastian RitterIf you have been waiting for the “global economic crisis” to begin, just open up your eyes and look around.  I know that most Americans tend to ignore what happens in the rest of the world because they consider it to be “irrelevant” to their daily lives, but the truth is that the massive economic problems that are currently sweeping across Europe, Asia and South America are going to be affecting all of us here in the U.S. very soon.  Sadly, most of the big news organizations in this country seem to be more concerned about the fate of Justin Bieber’s wax statue in Times Square than about the horrible financial nightmare that is gripping emerging markets all over the planet.  After a brief period of relative calm, we are beginning to see signs of global financial instability that are unlike anything that we have witnessed since the financial crisis of 2008.  As you will see below, the problems are not just isolated to a few countries.  This is truly a global phenomenon.

Over the past few years, the Federal Reserve and other global central banks have inflated an unprecedented financial bubble with their reckless money printing.  Much of this “hot money” poured into emerging markets all over the world.  But now that the Federal Reserve has begun “tapering” quantitative easing, investors are taking this as a sign that the party is ending.  Money is being pulled out of emerging markets all over the globe at a staggering pace and this is creating a tremendous amount of financial instability.  In addition, the economic problems that have been steadily growing over the past few years in established economies throughout Europe and Asia just continue to escalate.  The following are 20 signs that the global economic crisis is starting to catch fire…

#1 The unemployment rate in Greece has hit a brand new record high of 28 percent.

#2 The youth unemployment rate in Greece has hit a brand new record high of 64.1 percent.

#3 The percentage of bad loans in Italy is at an all-time record high.

#4 Italian industrial output declined again in December, and the Italian government is on the verge of collapse.

#5 The number of jobseekers in France has risen for 30 of the last 32 months, and at this point it has climbed to a new all-time record high.

#6 The total number of business failures in France in 2013 was even higher than in any year during the last financial crisis.

#7 It is being projected that housing prices in Spain will fall another 10 to 15 percent as their economic depression deepens.

#8 The economic and political turmoil in Turkey is spinning out of control.  The government has resorted to blasting protesters with pepper spray and water cannons in a desperate attempt to restore order.

#9 It is being estimated that the inflation rate in Argentina is now over 40 percent, and the peso is absolutely collapsing.

#10 Gangs of armed bandits are roaming the streets in Venezuela as the economic chaos in that troubled nation continues to escalate.

#11 China appears to be very serious about deleveraging.  The deflationary effects of this are going to be felt all over the planet. The following is an excerpt from Ambrose Evans-Pritchard’s recent article entitled “World asleep as China tightens deflationary vice“…

China’s Xi Jinping has cast the die. After weighing up the unappetising choice before him for a year, he has picked the lesser of two poisons.

The balance of evidence is that most powerful Chinese leader since Mao Zedong aims to prick China’s $24 trillion credit bubble early in his 10-year term, rather than putting off the day of reckoning for yet another cycle.

This may be well-advised for China, but the rest of the world seems remarkably nonchalant over the implications.

#12 There was a significant debt default by a coal company in China last Friday

A high-yield investment product backed by a loan to a debt-ridden coal company failed to repay investors when it matured last Friday, state media reported on Wednesday, in the latest sign of financial stress in China’s shadow bank sector.

#13 Japan’s Nikkei stock index has already fallen by 14 percent so far in 2014.  That is a massive decline in just a month and a half.

#14 Ukraine continues to fall apart financially

The worsening political and economic circumstances in Ukraine has prompted the Fitch Ratings agency to downgrade Ukrainian debt from B to a pre–default level CCC. This is lower than Greece, and Fitch warns of future financial instability.

#15 The unemployment rate in Australia has risen to the highest level in more than 10 years.

#16 The central bank of India is in a panic over the way that Federal Reserve tapering is effecting their financial system.

#17 The effects of Federal Reserve tapering are also being felt in Thailand

In the wake of the US Federal Reserve tapering, emerging economies with deteriorating macroeconomic figures or visible political instability are being punished by skittish markets. Thailand is drifting towards both these tendencies.

#18 One of Ghana’s most prominent economists says that the economy of Ghana will crash by June if something dramatic is not done.

#19 Yet another banker has mysteriously died during the prime years of his life.  That makes five “suspicious banker deaths” in just the past two weeks alone.

#20 The behavior of the U.S. stock market continues to parallel the behavior of the U.S. stock market in 1929.

Yes, things don’t look good right now, but it is important to keep in mind that this is just the beginning.

This is just the leading edge of the next great financial storm.

The next two years (2014 and 2015) are going to represent a major “turning point” for the global economy.  By the end of 2015, things are going to look far different than they do today.

None of the problems that caused the last financial crisis have been fixed.  Global debt levels have grown by 30 percent since the last financial crisis, and the too big to fail banks in the United States are 37 percent larger than they were back then and their behavior has become even more reckless than before.

As a result, we are going to get to go through another “2008-style crisis”, but I believe that this next wave is going to be even worse than the previous one.

So hold on tight and get ready.  We are going to be in for quite a bumpy ride.

Lighting A Match - Photo by Sebastian Ritter

The FTSE100 Index from 1984

Here is a long-term chart of the FTSE100 Index since inception:

FTSE100 Mthly

Tell me how you would of INVESTED had you known the following:

  • A bull market was due from 1982 to 2000
  • from 2000 a 18 year bear market was due

The answer is obvious, yet millions got caught out – because they do not know or understand market cycles.

I keep banging on and on about market cycles – that chart highlights how important they are – one market cycle = 581% growth, the other market cycle (not yet fully completed) shows so far a 4% loss after 3/4 of the cycle has elapsed!  WHAT?  No wonder people can’t work out what it going on – they’re not looking back FAR enough to compare like for like.

Just think about someone who is due to retire soon – 14 years of virtual waste in terms of investment growth – this is why it is vital in understanding market cycles and your Investment life

Markets expand and then contract – this is simply what is happening here, albeit on a horrendous scale – stop and think what the next expansion and contraction will be like!  and yes there will be another 1987 style plunge, which in the Dow is likely to be thousands of points not 500 or so.

Economists and fundamentalists will tell you this and that, my pension isn’t paid in this and that’s, its paid from the growth it makes over the years, that is why it is important to understand the markets and where you are in them, because they’ve been wrong for 14 years and counting!

I’ve also made a prediction for Gold too, at some point I’d expect it to reach that level.

The biggest Secret of Trading and Investing

I’m afraid it’s a complete ploy – There are no secrets to trading or Investing.

There’s no method that works perfectly, it just does not and never has existed, if you’ve bought a system you’ve more than likely been duped, if you think that there’s some way to know what the market will definitely do you’re misguided and probably inexperienced, as long as you wake up to reality it’s not a bad thing.

Most professional traders have a success rate between 30-50%, this very fact means you’re into the world of probabilities, if the professionals have those stats what makes you so special that you’re head and shoulders better than the pro’s?  Exactly you’re not and yet most people base a trading system on odds that are better than what the pros are getting!!!!!!! Wake up please.

People like to think they can read the market, but at the end of the day it’s mostly best guess.  Price and Time are completely DYNAMIC, you cannot predict with accuracy using static analysis – there’s currently NO way to analyse data dynamically either – hence the problem of being able to do so.

The best method of labelling the markets moves is by Elliott Wave, but it only works approx. 40-50% of the time, the reason for this is because you are applying a static analysis of the market and price + time move dynamically, every now and again price and time will move in sync with the market and you’ll obtain picture perfect counts, timings and ratios, then as price and time move dynamically your static counts suddenly go pear-shaped.

W.D. Gann was aware of this, he even mentioned that price moves in 3 sections, he was not so bold to try to label them precisely though as he knew you can’t – well you can with hindsight, but not in real-time with huge accuracy.

Most people go on about  having a risk to reward ratio of 1:3 – which is sound advice, but again it fails people, because it is not detailed enough – I could have a 1:3 R:R but if my 1 x risk is too large (based on price) then I’m not going to get many 3R returns – just because I want a 3R return does not mean the market will provide it – you have to design your method to fit the market, there is a massive difference.

I personally think a R:R of 4R should be aimed for and ideally find a method that provides 10R – this gives you plenty of chances of being totally wrong on your calls and still making some money from the markets – having a 2R target leaves you open to failure, because you start to rely on accuracy to win trades.

Let’s take a gander at an example, pure maths, no set-up – it does not matter:

Every trade we take we risk 1R – 1R is the £ or $ amount you are happy to lose, I personally set this 1R amount on the 31st December every year based on 0.5% of my trading account value and to be honest I often trade a lot less £ risk than the 0.5% – the end result is my survival in the game and an amount that I am happy to lose without consideration.  If the 0.5% is above what I’m comfortable with, I scale back the £ risked so that I am comfortable.

Lets says I take 300 trades in the year, all risking 1R, with costs and slippage you will not keep losses at strictly 1R but as far as your able to you set out to lose typically 1R at most per trade/position.

We are risking 1R to try to make 4R, 300 trades per year, assume we are only correct 40% of the time = 120 winning trades @ 4R = 480R won during the year

That means we’ll have 180 losing trades costing us approx. 180R.   480R – 180R = 300R net profit

So with a trading set-up that wins 40% of the time we’ve generated a net profit of 300R, YOU then decide how much you are happy and comfortable risking per 1R

That was and is Secret #1 .

Secret #2 is the hard part, you have to find a trading method (it could be anything) that produces 4R profit on 40% of positions – this requires you to do a lot of back-testing and what I call Proper back-testing, by hand using your eyes and a real chart to make sure the method WORKS, if the method does not work and generate the R value then you will not make money and that is what all this is about making a profit, not a loss.

I’ve just developed a moving average system that makes 10R – this is obviously a very very highly profitable, allows you to risk a tiny £/$ amount to make really good returns – ALL by skewing the risk:reward in my favour.  It’s a really simple system, I’m sure it could be improved on to increase the R value, the crucial thing is it WORKS, it generates 10R+ which means you don’t have to risk large % £/$ amounts per trade.

Here’s the stats if we were betting £150 to make £1,500 on say 100 trades per year.

Assuming 30% winners = 30 winning trades per year @ £1,500 = £45,000 or 300R

= 70 losing trades = £10,500 (70R) = 45,000-10,500 = £34,500 net profit = 230R profit

Take a minute and think, this system loses more than it wins, but it only risked £150 per trade – you could start this method with an account of £3-5k – risking 3-5% per trade, BUT you’d of turned the £3-5k into nearly £40,000!

That’s a 690% profit in one year! – Who cares whether you can read the markets, whether you’re right or wrong, all you need is a method that makes 10R and is correct 30% of the time, everything else is fluff, the only thing that matters is taking enough trades when they appear – could you have a bad year? Of course, but if you follow the method at some point it will prevail for you – It is IMPOSSIBLE to know at what point it will prevail for you – this is often what kills traders because it means having a series of losing trades, which cause doubt, confusion and extreme stress at which point people give up.

This is turning small accounts into large accounts, because the following year you could increase the £ amount risked and so on.  On the example above you could even drop down to a 20% win rate and still make decent money.

There are no secret methods in this game, no hidden ways to exactly know what the markets will do – so you have to take the game to the markets and the only way you can do that effectively is by skewing the risk:reward in your favour – I’ve seen people selling trading methods that work 50% of the time or less and only produce 2R profit – yes these methods work and I’ve used them myself, but you need to take a lot of trades and risk a lot of £/$ per 1R, which results in a far riskier method than one that wins 30% of the time but produces 10R winners.

I also keep hearing things such as the market trends and consolidates, yes it does, but it’s impossible to know before the fact whether it’s just about to trend or consolidate!  Impossible.  On the back of this it is also impossible to know how long it’s going to trend or consolidate for too!

Once you realise this, it is the moment of clarity – you then realise that really all you have to worry about is taking EVERY signal, Risking an acceptable £/$ amount you are comfortable with and knowing that 70% of the time you should be WRONG, but overall the 30% winners will win big for you! Who do you know making over 50% per annum?  Not many people I can tell you.

Also if you are risking 1R and it turns into a 1R profit, your position on the amount risked is UP 100%, so if you are comparing options and %’s then a standard 10R return is the equivalent of an option increasing in price by 1000% – you have to compare like for like when looking at strategies, because some of them can sound amazing until you start to look underneath the hood!

I’ve not looked into options or strategies – at present they are not for me, I understand that they are brilliant for having a fixed £/$ stop

So we have seen that you don’t have to be super accurate to win big in the markets, all you have to be is on top of the risk:reward and you should do fairly well