Wednesday, October 8, 2008

The TRUTH: We're the 10th Man!! - IFCN Wk 44 – Wed- Equity: $1,366.54

The following was sent to me thanks to George B. --

Bar Stool Economics

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100.

If they paid their bill the way we pay our taxes, it would go something like this:

  • The first four men (the poorest) would pay nothing.
  • The fifth would pay $1.
  • The sixth would pay $3.
  • The seventh would pay $7.
  • The eighth would pay $12.
  • The ninth would pay $18..
  • The tenth man (the richest) would pay $59.

So, that's what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.

'Since you are all such good customers, he said, 'I'm going to reduce the cost of your daily beer by $20.'

Drinks for the ten now cost just $ 80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free.

But what about the other six men - the paying customers?

How could they divide the $20 windfall so that everyone would get his 'fair share?'

They realized that $20 divided by six is $3.33.

But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer.

So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:

The fifth man, like the first four, paid nothing (100% savings). The sixth now paid $2 instead of $3 (33%savings). The seventh now paid $5 instead of $7 (28%savings). The eighth now paid $9 instead of $12 (25% savings). The ninth now paid $14 instead of $18 (22% savings) The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before.

And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

'I only got a dollar out of the $20,' declared the sixth man.

He pointed to the tenth man, 'but he got $10!'

'Yeah, that's right,' exclaimed the fifth man.

'I only saved a dollar, too. It's unfair that he got ten times more than I!'

'That's true!!' shouted the seventh man.

'Why should he get $10 back when I got only two? The wealthy get all the breaks!'

'Wait a minute,' yelled the first four men in unison.

'We didn't get anything at all. The system exploits the poor.'

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him.

But when it came time to pay the bill, they discovered something important.

They didn't have enough money between all of them for even half of the bill!

And that, boys and girls, journalists, and college professors, is how our tax system works.

The people who pay the highest taxes get the most benefit from a tax reduction.

Tax them too much, attack them for being wealthy, and they just may not show up anymore. (Note: Think: Atlas Shrugged! - jr)

In fact, they might start drinking overseas where the atmosphere is somewhat friendlier...


David R. Kamerschen, Ph.D.
Professor of Economics, University of Georgia

For those who understand, no explanation is needed.

For those who do not understand, no explanation is possible
__________________

Here is the status of this week's FirstStrike trades:
  • Eur/Usd: Short @ 1.3518, stopped out at 1.3638 for a 120 pip loss.
  • Gbp/Jpy: Short @ 180.00, exited at 177.03 for 297 pip profit.
  • Gbp/Usd: Short @ 1.7488, stopped out at 1.7608 for a 120 pip loss.
  • Usd/Chf: Long @ 1.1460, stopped out at 1.1340 for a 120 pip loss.
  • Usd/Jpy: Short @ 102.18, stop 103.38. Trade in progress.
FirstStrike trades not stopped out before Friday-- exit on Friday just before 15:00 CST.

I'm beginning to believe the worst of the avalanche is over. There are very few shoes left to fall.

Have a good evening.


Current trade equity is: $1,226.54.
Silver position equity: $140.00.
(Current XAG price: $11.57 – 200 unit position average: 10.87)
TOTAL Equity: $1,366.54

Joel Rensink
www.infiniteyield.com

PS: To receive the FREE! trading rules for the Infiniteyield Forex Challenge ($499 value) and the semi-monthly newsletter about this challenge, send an email to: newsletter@infiniteyield.com and tell me to which address you would like it sent. Please do not use AOL, Hotmail or Yahoo addresses. They've been known to filter out more good mail than actual spam. Try a Gmail address. It's free, simple and perfect for traders!

3 comments:

Jimbo said...

Why was the gbp/jpy trade closed out? I thought we were supposed to wait till Friday.

MikeZhang said...

that trade was close out at a 50% trailing stop.

But here is question to master joel, what's the criteria of setting trailing stop, setting break-even, lefting the initial stop order unchanged? Like this week's FS, GJ was set a 50%, while UJ's stop order stay the same. (on Wednesday, the UJ's max profit was about 350 pips)

Thanks
Mike

Anonymous said...

Thanks very much Mr. Rensink for this wonderful wonderful word of wisdom ... yeah. Like JPY is now in remorse having its rivals fall to pieces ..... alone JPY is nothing .... its buyers are out of cash and out of worth. Though I hope what you speculate is gonna come true .... and markets are gonna revive soon. They better be ....