The Last Lecture

Before I end my last note for the week, I thought this video could be good for the soul. Let's pay a tribute to Dr Randy Pausch for his many years in education.

Have a great weekend.

Market Waits On

As the trading day ends for the week in a few hours, the world anticipates for news on Paulson and the members of the Treasury to disclose details on the bailout plan. The current market's  sentiment, judging from how equity indices are performing (volatile), indicate that market participants are running dry on patience, as they begin to doubt whether anything would be passed to restore liquidity in the markets, and save the sinking boat. 

In my opinion, restoring liquidity may not save all the firms from failing, but it is likely to calm the markets as well as those OTC derivatives creators who are still writing credit default derivatives.

Monday's market open would likely be another interesting one, as the markets will likely begin to discount the outcome, as it may no longer matter if the Bill is passed or not. Here is a short article of an enthusiastic party to this bailout plan:

UK banks hold 95 bln pounds of sour assets that could qualify for US bailout plan - Times of London

Times of London reports Britain's five leading high street banks have as much as 95.3 bln pounds ($175 bln) of distressed assets on their books that may qualify for the American bailout scheme. If the British banks tap the rescue fund being set up by the US Treasury and the Federal Reserve to the maximum, they could secure one quarter of the $700 billion being made available. Under the terms of an outline agreement that appeared to have been reached by US policymakers last night, Britain's lenders will be able to use the facility... According to analysts' estimates, and the banks' own recent filings, HSBC (HBC) has as much as 45 bln pounds in structured mortgage debt and other soured assets sitting on its balance sheet that it might look to exchange with the Fed under the plan. Next are Barclays (BCS), with 17.4 bln pounds; Royal Bank of Scotland (RBS), with 16.2 bln pounds; and HBOS, the UK's largest mortgage bank, with 13.3 bln pounds, analysts said yesterday. Lloyds TSB (LYG) follows some way behind in its exposure to the troubled mortgage securities, with assets of about 3.4 bln pounds.

Let's look forward to next week, where the Chinese exchanges will get an entire week's holiday for their national day. And I will be looking forward to this weekend's F1 in Singapore. Have a Great Weekend! 

What Will Happen If This Financial Uncertainty Persists?

Ever wonder what will happen to your stockbroker if the financial situation persists?

Trading Outlook

The world markets today will remain focused on further developments on the U.S. financial bailout program, that has just about worked its way through Congress. It now appears to be a done deal. The strongest reaction has been in equty markets, which have improved. The USD really does not know what to do with it, but its tone improved as the day wore on. It may indeed be a dramatic 

The major question now is whether interbank liquidity will start to improve once the bill officially has been passed as the interbank lending had dried up pretty drastically. As simply, banks who have cash do not want to let it go for credit/liquidity reasons. 

Next Monday will be an interesting day because on that date, markets will start trading the three month maturity over the turn of the year. Equity markets and the bond vigilantes will have the final word on the bailout program and have already rallied in anticipation of its passage.

The USD is trading steady to lower against EUR, CHF, JPY and GBP. Crude Oil starts lower at 106ish away from yesterday's high at $108 per barrel. Gold is also lower

Asian bourses traded lower with HSI 18771.02 -163.41, Nikkei 225 closed at 11893.16 -113.37,  STI currently trading at 2409.90 -34.26, and Shanghai 2293.784 -3.717. 10-yr JGBs were a touch weaker. European bourses rallied. E-Z bond prices have gained.

U.S. equity markets closed up stronger yesterday. Likely to follow with a weaker opening in the US markets today. Bond prices are also weaker.

EUR/USD and Crude Oil Relationship

Thank you for your kind support and encouragement. I am glad my info has been useful to some. 

Just last week, a reader asked, if there were any currencies that showed a correlation with specific commodities, so in order to answer this query, the above image may speak for itself. 

Little Tribute From George Soros

Paulson cannot be allowed a blank cheque
By George Soros 

Published: September 24 2008 20:28 - Last updated: September 24 2008 20:28

Hank Paulson’s $700bn rescue package has run into difficulty on Capitol Hill. Rightly so: it was ill-conceived. Congress would be abdicating its responsibility if it gave the Treasury secretary a blank cheque. The bill submitted to Congress even had language in it that would exempt the secretary’s decisions from review by any court or administrative agency – the ultimate fulfillment of the Bush administration’s dream of a unitary executive.

Mr Paulson’s record does not inspire the confidence necessary to give him discretion over $700bn. His actions last week brought on the crisis that makes rescue necessary. On Monday he allowed Lehman Brothers to fail and refused to make government funds available to save AIG. By Tuesday he had to reverse himself and provide an $85bn loan to AIG on punitive terms. The demise of Lehman disrupted the commercial paper market. A large money market fund “broke the buck” and investment banks that relied on the commercial paper market had difficulty financing their operations. By Thursday a run on money market funds was in full swing and we came as close to a meltdown as at any time since the 1930s. Mr Paulson reversed again and proposed a systemic rescue.

Mr Paulson had got a blank cheque from Congress once before. That was to deal with Fannie Mae and Freddie Mac. His solution landed the housing market in the worst of all worlds: their managements knew that if the blank cheques were filled out they would lose their jobs, so they retrenched and made mortgages more expensive and less available. Within a few weeks the market forced Mr Paulson’s hand and he had to take them over. 

Covered With Losses

Hi all,

As I write this, I have been stopped out of my short position in GBP/USD, with total damage of USD $105. My total damage is 1.05%, where I have already reached my daily limit to risk my capital on. The image above is a snapshot of the statement in the account.

Let's look forward to a better trading day tomorrow.

Cheers. 

Market Call

After much thoughts as to how my market calls should be made in order to create the best effect and authencity, here are some details that I would like you to know:

1. All trades made on this trading account no. 77104 will be 'real' live trades.
   
2. A report in the format (shown on the right) will be reported on a weekly and monthly basis.
3. Trades and market calls made by me, are only for the purpose of reference, and is no indication for you to trade and follow. 
4. Entry and exit of trades may be in a matter of minutes, therefore, I would urge readers to follow them closely or to backtrack the results with the use of their charts for authentication of results.

See ya soon on market call.

Financial Crisis Management

Back in the 80s, when the US government had to deal with a crisis where the Resolution Trust Corporation, which is a holding company formed and housed within the Treasury, to deal with distressed real estate that was funded by loans and savings, the strategy was deemed a sucess where it was later reused by the HK and Indonesian government during the asian financial crisis. This indeed managed to give immediate liquidity and confidence to the markets during such turbulent times. In addition, this came as a win-win situation for the governments, because as these distressed assets were bought in a 'fire-sale' price, which was significantly cheaper than its face value, the governments made profits from such transactions, where in today's case, the similar situation applies.

The target of this plan for the purpose of restoring order in the banking system, so banks will remain confident to lend, as well as to free up funds for further lending and use when the economy grows. 

After reading the above information on the bailout plan, I question if laissez faire can really be made real in capitalism, but as history repeats itself over and over again, I am convinced that by adopting a neo-keynesian approach to the management of monetary systems may seem like a better approach.  

US Trading Outlook

The markets are still waiting for details on the US financial markets bailout program, as later today 13:30 GMT, Paulson, Bernanke and and Cox will address in a testimony on this issue, which the highlight may pose to be an event risk for the evening. By observation on the FX markets, the market seems to be anticipating a bearish trend underlying for the US Dollar, due to the loosening of monetary and fiscal policies of the US, which is usually seen as a problem for a currency. Currently, the USD is trading weaker against the majors.

Be reminded that central banks have injected massive amounts of money over the weeks, if the bailout scheme does not turn out to be as welcoming as expected, then we may have to keep a close watch on the USD and US equities markets for a roller coaster ride. The hope is that this bailout program could work to improve liquidity and provide banks the opportunity to liquify their balance sheets, but hope may not always come true.

On the maturing Oct crude oil contract, we witnessed a short squeeze on the maturing contract as prices spiked higher for some unusual reasons, as by logic, traders tend not want to get caught on the final day of trade for a commodity.

Nikkei is closed for holiday. Shanghai and Shenzhen managed to revive earlier losses, but it still closed negative. The death of toll of young children has increased, for the melamine mixture in one of China's dairy products producer, remain to creep in the news on most asian newswires.

Straits Times Index remained lower as investors remain careful to the Paulson, Bernanke and Cox's testimony.  

US equity markets will be opened mixed later. Bonds prices are also higher.

Trading Rules In A Nutshell

Hi all,

I'm finally done with the setup on my new Forexyard Demo account. 

As on our previous posts, trading calls will officially commence from today, and we will review the result of trading on a week to week, month by month, and year by year basis (hope I'm that determined). Let us move in small strides to make this work on a long term.

Summarizing some facts before we start on making market calls, here are some rules that I will be following:

1. Stops are pre-determined before any entry of trades
2. Size of trade is determined by the total size of the account, total risk should not be more 1% of the total value of the trading account at any time.
3. My target return per week is to achieve 0.5% gains weekly. Compound it by 56 weeks, you should get our annual target. (Gains are tabulated on a weekly basis only)
4. Term of trades may vary between minutes and even up to weeks.
5. Weekly P&L on the Demo Account no. 77104 will be published at both http://systematic-trading.blogspot.com and http://momentum-trading.blogspot.com
6. Not necessary to trade every day.
7. Active momentum trading hours will likely commence from early asia hours at (GMT00:00) to 11pm (GMT15:00). This will be subject to the availability of time to post. I will be making my live calls with a few other friends' at www.marketasiahub.com, as it may be the most suitable platform for real-time trading communications. 

I hope this is sufficient for now. Would welcome more as we move along. The key motive for having this introduction is to maintain a set of rules to decision making which is as systematic as possible. The implementation of more planning tools will be made and discussed in time to come. 

Will be looking forward to your support.

Cheers

Trading Outlook

Markets await details on the Fed's proposed bailout program, as the significance of this event is likely to pose bearish sentiments on the US dollar, as a combination of a loose monetary and fiscal policy, is usually seen as a problem for a country's domestic currency, similary over time, this countercyclical moves may be presumed to improve liquidity in the economic pipeline, and to provide firms the opportunity to realign their balance sheets. The bond markets may very well have to witness an increase in the outstanding U.S. government debt.

Currently, US Dollar trades weaker against the EUR, CHF, JPY and GBP.

Asian bourses closed higher with the Nikkei gaining. Shanghai and Shenzhen gained modestly making an approximate 20% over 2 days, following steps taken by the China government to boost stock prices. The U.S. equity markets will be opening lower later.

10-yr JGBs were also weaker. Commodity currencies are broadly mixed. Gold advanced only modestly. Oil is firm as it looks now like it wants to hold above the $100 line.

Stay tuned for my next post as I will describe further on the mechanics and rules of my trading system.

Cheers.

Weekend highlights

Hi all,

Hope you guys have enjoyed the 2 videos.

Dropping by for some update and information on the markets. Below is a link to where you can find a list of US financial companies whose shares that cannot be shorted as imposed by the SEC on Friday. Find it here: No Shorting

Another small bank, Ameribank, just joined the bank closure list, I wonder if the list will continue to get longer, click here to access for details:  Failed Banks

UK PM Gordon hinted that the FSA will be given more power if needed to regulate the financial system, and the UK is prepared to borrow more and use public expenditure.

Paulson said foreign banks will be able to unload bad financial assets under a $700B proposal to restore order. Details are still being negotiated.

So let's look forward to tomorrow.