Thursday, February 21, 2008

Ben says- "It's Just Some Campers Grilling Some Steaks"-IFCN Wk 11 -Thu- Equity: $484.40

Have you ever tried fundamental trading in Forex? By this I mean trading on the news released and doing the whole "macro" thing-- trying to figure out how the different financial bodies of the the different major countries all interact.

I'm sure there is somebody out there who is successful at it, but it must be tiring. Especially when most of the moving lips out there are lying.

The Fed just reduced its projections for economic growth for 2008 because of the (extremely well-publicized) credit issues and soft housing market. They also indicated that they see larger future unemployment nmbers and higher inflation.

The Fed is now predicting the unemployment rate will be around 5.2% to 5.3% in 2008, up from the previous forecast of 4.9% and the 2007 average unemployment rate of 4.6%. They also think that the GDP will grow between 1.3% and 2.0% in this year, down from earlier forecasts of 1.8% to 2.5%.

Now is where I think it gets interesting:

The Fed now expects inflation to be somewhere between 2.1% and 2.4% this year, above the previous estimate of 1.8% to 2.1%.
  • Anyone check the price of gas today? Crude oil, as well as heating oil and unleaded gas (before taxes) are up exactly 5 times the price they were 6 years ago this month.
  • Anyone check the price of a bushel of wheat today? $18.50/bushel Minneapolis Wheat (5 times it's price just 2 years ago) and $10.50/Chicago Wheat (3.5 times it's price 2 years ago)
  • Gold and silver? (3 times their price 6 years ago)
  • Copper? (6 times it's price 6 years ago)
You could add 100's more items to the list. Even houses-- as troubled as the current market is-- are more than double what they were 6 years ago.

These are the costs of the main staples of life in this country. Anyone who doesn't live on the street or by the charity of others is paying a tremendous amount more each year than the TYPICAL projected "joke" inflation numbers the Fed releases.  (I can't believe that ANYONE can choke down the figures the government releases over and over..., but somebody obviously does.  They keep doing it!!!!)

If the Fed was responsible for reporting a forest fire burning 10,000 acres-- they would probably report that the smoke everyone's smelling is some campers grilling some steaks and there's really nothing to worry about.

How much more are you earning than you were 6 years ago?

Anyway, the reason I bring this up is simple....

You cannot expect to trade your hard earned capital based on news and data that governments choose to bestow on you. It isn't just the Fed. The other countries are interested in managing their currencies to their best advantage and will tell what ever it takes to get you into bed..., with them.

You need a method to trade that has risk controls and an edge that you can prove. Which doesn't care what Ben Bernanke has to say. The method needs only to care what the prices say.

On to the trading account:

I've been stopped out of the following 5 FirstStrike pairs:
  • Eur/Usd: short @ 1.4631 -stopped out for a loss of 60 pips
  • Usd/Chf: long @ 1.0995 -stopped out for a loss of 60 pips
  • Usd/Jpy: long @ 108.30 -stopped out for a loss of 60 pips
  • Gbp/Jpy: short @ 211.14 -stopped out for a loss of 60 pips
  • Gbp/Usd: short @ 1.9575 -stopped out for a loss of 60 pips
Current positions: None
Equity: $484.40
It will be very unlikely that we will see any OneNightStand trades on Friday. The necessary breakout points are excessively distant.

We will recap tomorrow.

Joel Rensink

No comments: