Rhody Trader

Vincent Fernando at The Business Insider did a post comparing the current economic situation to that of the early 1980s. The upshot of the post is that when one looks at inflation, unemployment, and interest rates as they are now and as they were then things don’t look quite so bad right now.

Actually, from my perspective things now remind me more of the early 90s. That was the time of the RTC after all those thrifts were shut down across the country. In Rhode Island the governor shut down all the credit unions on New Years day 1990, which really did a number on the state economy for a couple of years. I was only a kid in the early 1980s, but I do remember it wasn’t a great time. The cities were in rough shape. I think anyone who was in NYC at the time would agree.

Seperate, former colleague Jamie Coleman at ForexLive posted  a fun look at the yen situation. The Japanese have always stood ready and willing to intervene in the currency markets, either directly or verbally. That, at times, creates some very interesting press and market action – as it did last night.

For a while during the height of the risk aversion action EUR/JPY and the stock market were very closely linked. This was reflective of the carry trade and how investors had a hair trigger getting out of it when they became worried. That relationship has been fairly choppy of late, however, as Zero Hedge observed today.

Here’s a chart of the 1mo rolling correlation between EUR/JPY and the S&P 500. Notice how at several points in the last year it’s been well short of strongly positive and has even gone well negative.

Last week it was reported that Dan Brown’s latest novel, Lost Symbol, had sold more than 1 million copies in its first day. Of course that will have included pre-order sales. CNBC just reported that in the first week the book sold a record 2 million copies. I am not included in that group myself. I’ve read both of Brown’s prior two books. Not sure yet whether I’ll read this one as well. I’m generally not the sort who feels the need to go out and get hold of a copy right away and Brown didn’t blow me away with the other novels in any case – not that they were bad, mind you.

But that’s beside the point. Let me just say that my eyes lit up at the number since I’m developing my own novel. It’s one which will share a genre and some other broad elements with Brown’s work, which means it will likely appeal to a similar market – a big one from the looks of it.

I just had a call from a woman at SFO Magazine asking if I’d be willing to be interviewed for a story on part-time trading, specifically trading for those who already have full-time jobs. I agreed. We’re going to chat tomorrow afternoon. I’m don’t know at this point when the article would go to print.

It’s interesting to be asked for an interview like this. I’m not talking about part-time trading. Personally, I’ve always considered myself a part-time trader. Yes, I work in the markets as a professional market analyst, but that’s not trading. In fact, most days I have to make a point of remembering to open my trading platform if I think I might do a trade. Besides, I’ve long found that my somewhat longer-term positions have been the most productive for me.

No, the thing I find interesting is how I’ve been asked for and interview rather than maybe asked to write an article on the subject. I’ve published three articles in SFO – Trading Coaches Needed!, Juggling Too Much? Trend Trading Simplifies Analysis, and What’s the Bandwidth?. Granted, it’s been a while since I wrote anything for magazine publication. Maybe this is their way of trying to draw me back in.

By the way, SFO published a review of The Essentials of Trading when it first came out.

There’s been talk in the markets about the increasing use of the dollar in carry trade strategies (even the pound is being thrown into that discussion as well). It’s interesting that we’re not just talking about banks and money managers and that sort involved here. Germany and Austria have taken advantage of the lower US rates by issuing dollar-denominated debt. As this Bloomberg article indicates, the swap rates are such that issuing in dollars is about 25bps cheaper than doing so in euros.

If you’re wondering what the big carry trade is right now, look no further than AUD/USD.

Here’s something to ponder. Back in 2007 when all of this global economic mess started unfolding 10 yr Treasury yields peaked in June. Stocks did not peak until October. Yields put in an initial bottom in January 2008, while stocks made their first minor low in March 2008. The major low in yields was reached in December 2008, while stocks hit their low in March of this year. That’s a pretty good case for stocks lagging bonds by a 2-4 months.

Now, bond yields made their most recent peak in June (again). Could we be in for another stock peak this month or next? If bonds don’t make a quick u-turn there’s going to be a strong case for it.

I wrote a while back in Surfing the Cash for Clunkers Market Distortion Wave about how I thought the Cash for Clunkers program could potentially mess things up in the auto demand situation by creating an artificial surge that sucked in future demand. It sounds like that indeed may have happened. Reports are indicating that the post-clunkers sales run rates are actually well below where they were before the program started.

Now, as much as I compared the Clunkers program with the Y2K tech cycle, I don’t think the scope is anywhere near the same. Two things were part of the technology upgrading that went into Y2K preparation. One was necessity. The other was ample money from a strong economy. We have neither of those in this case. The figures suggest the annualized sales rate during the Clunkers run reached about 13.7 million. That’s a big bump, but short-lived and from a low base.

So the bottom line is that while I do think the automakers will see a sales lag for some time to come, it’s probably not going to drag on and on, especially if the economy picks up. They will feel the pain into next year, most likely, but my guess is not beyond mid-year if things continue improving as they have done.

This morning a visitor to my trading education blog posted the 1000th comment. That’s approved comments. There have been over 35,000 spam ones to-date. That’s against about 550 posts, so that means the averages is a bit below 2 comments per entry. Admittedly, a huge chunk of the comments came from one post – No More “Hedging” for Forex Traders. That discussion of the NFA rules against carrying offsetting positions accounts for about a quarter of all comments on the blog. Needless to say, there was a very active and intense discussion.

Admittedly, I’d love to see more commenting on the blog. It’s a form of feedback to let me know what interests people and what they are looking for, and I like interacting with folks. Hopefully the next 1000 will happen more quickly than the first 1000.

One of the many things I have on my plate (probably too many things, to be honest) is  the development of a new book project aimed at answering all the most common questions new traders ask. I answer a lot of questions on my trading education blog, on the forum sites I hang out at, via email, and in seminars and other discussions. While some of them are specific, many are variations on the same basic set of questions that most folks have at one point or another during their development. A while back I decided to put them all into one place as a handy reference source, with answers of course.

I’m most of the way through collecting the questions and providing answers to them. My hope is to have the book completed early this fall.

This is not a solo project, though. While I can answer all of the questions I intend to include, I’m not necessarily the best source for many of them. Also, I only have my own perspective based on my own experience in the markets. It might not be quite the right one to best answer the question on the mind of a specific individual. With all this in mind I’m bringing together a group of additional contributors to provide additional depth and expertise to the question answers. I’ve got several commitments to take part already, but will continue to look for others who can add value to the project. The more the better, as far as I’m concerned. If you are someone with a goodly amount of experience in the markets, and would maybe like to take part, let me know.

Here are the questions I have put together so far. If you have suggestions for any additional ones, definitely leave your suggestions via comment below.

Staring Points

How is trading different from investing?

Why should I trade rather than just invest?

——————————————————————————–

The Biggies 

How much money can I make trading?

When do I know I’m ready to start live trading?

What books should a new trader read?

Should I quit my job and trade full-time?

Only professional traders make money, right?

Do I have to accept some big losses in the beginning?

How long does it take to make a stable income from trading?

How do I start trading?

How difficult is it to trade?

What is the percentage of people who succeed in trading?

——————————————————————————–
Trading Education

Is it worth spending money on educational resources when there’s so much free stuff available?

If you know so much, why don’t you just trade?

How do I avoid scammers?

——————————————————————————–
Markets & Instruments

What is the best market to trade?

What’s the safest market?

What should I trade?

Is forex trading a scam?

Is it better to trade spot forex or currency futures?

Should I avoid trading over the holidays?

——————————————————————————–
Mechanics

What is leverage and margin in trading?

How much money do I need to start trading?

Is live trading different than demo trading?

What’s the difference between a stop and a limit order?

Where does the money I make in the market come from?

Do I have to pay taxes on my trading gains?

——————————————————————————–
Analysis

What’s the best indicator?

Which type of market analysis is better?

What is technical and fundamental analysis?

Why didn’t the market rise on the positive news?

What is Support and Resistance?

What are the differences between discretionary and system traders?

What timeframe charts should I look at?

What charting package and/or data feed should I use?

——————————————————————————–
Trading Systems

How can I create a good trading plan?

How do you backtest a system?

Where should I put my stop?

Should I buy this system?

——————————————————————————–
Trader Psychology

How important is psychology in trading success?

How can I overcome my fear when trying to pull the trigger on a trade?

Why can’t I follow my trading system?

——————————————————————————–
Brokers

What’s the best broker?

How should I select a good broker?

Is my broker trading against me?

Is my broker running my stops?

——————————————————————————–
Jobs

How do I get a job trading?

What types of trading jobs are there?

What’s better, an MBA or a CFA?

What kind of program should I do at school to get a trading job?