TradeForGain.com

Archive for the ‘lessons’ Category

One of the blog readers (Peter) recommended these videos. They are a bit long (1h 43m and 1h 45m) but are a “must see”. I gained a lot of insights from them.

Summary - The Money Masters the documentary discuss the topics of money (as it relates to central banking and rational reserve banking), debt, taxes and their development throughout the modern world. [edit] Private central banking and fractional reserve banking The documentary criticizes the control aspects of modern centralized banking systems and regulation. The film uses as evidence the history of money and banking, showing the viewer how central banks came to be what they are today, and how they operate. It supports its assertions by references and quotations from past Presidents and major players in the banking industry. [edit] Media control The film contends that by the end of World War I private central banks owned and controlled much of America’s large media, paper and film outlets, and that they achieved this through the large consolidation of wealth generated by Fractional-reserve banking and later a fractional based finance system. The film contends this alleged near-monopoly of the financial system goes largely unnoticed or redacted from the human history because of the control of human information exchange through this mainstream media ownership. [edit] Tax The film touches briefly on the U.S. Federal income tax. See also Tax protester constitutional arguments. [edit] Monetary Reform Act By way of conclusion, the film presents an option for a different kind of monetary policy for the United States of America…

Money Masters – Part 1 of 2 – 120 minutes – on Google Video

Money Masters – Part 2 of 2 – 105 minutes – on Google Video

Thanks Peter!

1. The US have the biggest international trade deficit and domestic budget deficit in their history.

2. A record-breaking consumer debt, with near-zero savings rate.

3. New jobs are not being created as fast as they used to be. Unemployment is creeping up in some regions.

please see post for more on unemployment rates.

4. Declining Dollar that countries, such as China and Japan, may grow leery of buying in huge quantities.

US Dollars held by other nations (2005):

• Japan, $832 billion
• China, $818 billion
• Taiwan, $255 billion
• Korea, $205 billion
• Hong Kong, $125 billion

5. The value of US Stocks (blue chip) grew nearly 10 fold in the two decades from 1982 to 2000, while real earnings (adjusted for inflation) increased only three fold over this same period.

The most recent drop in the Dow Jones and other indices will not be forgotten and will likely continue.

6. The US economy is heavily dependent on unprecedented low interest rates that simply cannot last forever.

Note how the interest rates have been declining to support the other bubbles such as housing and stock market.

• The huge supply of foreign money helps keep interest rates low.
• The government uses this money to fund its deficits. This deficits spending is highly cumulative of the economy. It allows for lower taxes and more jobs created by government spending.
• Low interest rates encourage purchases of capital goods such as cars and houses
• Low interest rates help make credit cards cheaper and easier to obtain, creating growing pool of capital to buy more goods (and a credit card industry boom).
• Low interest allow business to expand more easily.
• Low interest help the stock market.
• A booming stock market encourages foreigners to put even more capital into the US by investing in the stock market.

And what about Gold?

Gold could be a spectacular investment after the bubbles pop and a very good investment before they pop.

1. The gold market is very, very small ($500 billion) compared to the stock and bond markets ($45 trillion). Even a small shift of capital out of these markets into gold will greatly boost the gold market.
2. Gold is easily sold for euros, giving investors a double benefit. That means, if you buy gold, you are indirectly buying euros at the same time.
3. Gold has significant potential for being an illegal tax avoidance technique.
4. The gold market is much more of a world market than U.S. stocks and bonds.
5. It’s very difficult to rapidly increase gold production. Gold mining will not be able to keep pace with demand for many years. When demand for gold goes up, so will the price.
6. Gold’s value increase with inflation. Inflation will be very high in the U.S. and also in major European and Asian nations.
7. If the banking system comes under severe stress, as it likely will, gold will have even further appeal.
8. Short term, the central banks of world, which have been selling about 500 tons of gold a year since the 1999 Central Bank Gold Agreement, will likely reduced their sales. In fact, some are already saying they will increase their gold reserves - instead of buying dollars.
9. Short term, South Africa’s production fell 15 percent in 2005.

As usual, here are some supporting charts - first, the Monthly chart for Gold:

How does it compare to the Dow Jones?

How does it run against interest rates? Do you see my point, it doesn’t go along with Interest Rates…

Finally,

• you can see my Gold-related trades here. They are for real.
• please feel free to comment, I would like to hear your opinion.

References:

• “America’s Bubble Economy” by David Wiedemer, Robert Wiedemer, Cindy Spitzer and Eric Janszen.

I normally view both OHLC and Candlesticks charts but sometimes candles gives nice insights on price action. The following is the daily chart for IBKR.

The green arrows are bullish (buyers) and the red are bearish bars (sellers) – Who do you think it’s winning?

Also, another useful technique is trying to visualize the Candles all together by combining them… look at the big green candle in the chart… it’s basically a combination of all the previous 7 candles – cool?

The following is the OHLC chart for the same symbol, you can still see the price action, is just a bit harder.

And lastly, the Weekly Candle chart. It’s almost what I’ve illustrated above.

Now, start combining those candles – it works!

I have received recently received an email from my friend Jr regarding my position on BNS (Bank of Nova Scotia). His question on the following chart for BNS.TO – Should one sell the stock now that it’s broken the support at 48 and make a 3 bars Lower Low? The area in question is highlighted.

Everyone has a different method and what I will explain here might not fit your style, I’m a “short term swing trader”, meaning I want to explore movements that last anywhere from 1-5 days (in most cases) – I will hold longer if I feel the trade has more potential and after I’m able to move my stop to break-even.

Now, back to BNS. When evaluating a stock I usually ask the following questions:

• What’s the long term trend?
• Is the stock historically oversold?
• How does it compares to it’s peers?

Let’s try answering some of these questions for BNS using charts.

What’s the long term trend for BNS? for long term analysis I usually use the Weekly chart. Given the recent market drop, BNS looks strong. Note how it bounced back from Dec-Apr and rapidly attacked the previous support breakdown at $50.00 – it looks like it’s consolidating at this point.

Is the stock historically oversold? I normally use bands for that purpose. The following charts shows BNS and how it reacted to band-stretches in the past… It looks very oversold at this point and it could snap-back – I’m not saying it will reverse the trend  and go up, I’m saying it could possibly bounce back, short-term… that’s what I do right? I explore short-term opportunities. Now, please visualize the chart below and next look at the previous chart… below it looks like a nightmare, support broken, etc… above, just a normal consolidation after a strong bounce back from support (or, what I normally call – Failure to Drop).

How does it compares to it’s Canadian and US peers?

Canadian Peers – BMO, RY, TD and NA

US Peers – C, JPM, BA – Ouch, that’s ugly…

In summary, BNS is amongst the strongest in Canada (chart-wise) followed by TD and NA and I think it’s worth keeping it for now. I feel the market could bounce short term anytime now.

Good luck to you.