السبت، 31 أكتوبر 2009
الخميس، 29 أكتوبر 2009
Golden Avalanche
Nick from www.sharelynx.com shared some quotes with me that I'd like to pass on. They are from a book written in 1939 by Graham & Whittlesey called Golden Avalanche:
“Before leaving the subject of gold supply it is interesting to relate present gold reserves to the monetary circulation of this country and the world. The gold reserves of the United States are almost two and a half times the total of all ordinary money now in circulation in this country. We could replace at its present value every piece of paper money with a gold coin and would still have enough left over to do the same for every country in Europe. There is enough gold in the monetary reserves of the world to replace all ordinary currency of the entire world 100 per cent with gold coins. Never until the present decade was such a situation as this even approached.” p.15
"It has been estimated by a number of writers, on the basis of conditions prior to 1914, that the production of gold would have to rise by about 3 per cent a year in order to preserve approximately stable price levels. The best known of these calculations are those of the Swedish economist, Professor Cassel. This estimate tends to exaggerate the rate of expansion in the demand for basic reserve money. It is based on a period when population and production, and, therefore, the money-work to be done, were increasing at an exceptional rate, and when the non-monetary demand for gold was at its highest. During these years, moreover, the need for gold rose as rapidly as it did partly because of the extension of the international gold standard system to embrace a growing list of countries.
Even if the gold standard system were again established as it was in 1913 the need for gold could not be expected to increase as it did in the half century before the World War, simply because there would not exist the same possibility of extending the use of gold over a steadily widening area.
“Before leaving the subject of gold supply it is interesting to relate present gold reserves to the monetary circulation of this country and the world. The gold reserves of the United States are almost two and a half times the total of all ordinary money now in circulation in this country. We could replace at its present value every piece of paper money with a gold coin and would still have enough left over to do the same for every country in Europe. There is enough gold in the monetary reserves of the world to replace all ordinary currency of the entire world 100 per cent with gold coins. Never until the present decade was such a situation as this even approached.” p.15
"It has been estimated by a number of writers, on the basis of conditions prior to 1914, that the production of gold would have to rise by about 3 per cent a year in order to preserve approximately stable price levels. The best known of these calculations are those of the Swedish economist, Professor Cassel. This estimate tends to exaggerate the rate of expansion in the demand for basic reserve money. It is based on a period when population and production, and, therefore, the money-work to be done, were increasing at an exceptional rate, and when the non-monetary demand for gold was at its highest. During these years, moreover, the need for gold rose as rapidly as it did partly because of the extension of the international gold standard system to embrace a growing list of countries.
Even if the gold standard system were again established as it was in 1913 the need for gold could not be expected to increase as it did in the half century before the World War, simply because there would not exist the same possibility of extending the use of gold over a steadily widening area.
As was noted earlier, the monetary reserves of the world are today nearly three times as great as in 1929. If commodity prices were to return to the 1929 level, if business activity were to increase at an annual rate equal to that maintained in the sixty fat years prior to 1914, and if all the countries then on the gold standard should return to it, we should still have enough gold to meet all monetary requirements for many years to come, even though not one single ounce was produced during that time. If the gold standard is not restored on such a scale, then the world is long on gold to a corresponding degree. It is absolutely fair to say that, ignoring entirely the possibility of increasing the efficiency of our monetary and banking systems and making the most liberal assumptions as to growth in the monetary and non-monetary demand for gold, there is not the remotest prospect of the world’s needing to have another ounce of gold mined for several decades." p. 18-19
الاثنين، 26 أكتوبر 2009
YOUR FOREX EDUCATION 8^)
As a forex trader, you have entered one of the most difficult and tricky playgrounds in the world; with price hiccups and retracements often causing you to second guess your previous decision. In a market with so much panic and loss going on. Allow me to ask you; how much time have you invested in your Forex education today??????
Many highly competent professionals who are at the top in other fields come into Forex and get wiped out. The most important thing you can do to insure your success in Forex is to keep learning. When you are in the market live, you need this stuff to be automatic, because lots of time when you see price moving randomly, you forget your objective.
Everyday, take some time and invest in educating yourself in this market, if you don't, you will lose here. Once you learn what is going on, you will find that Forex is not hard, but it is no stroll in the park either. You must stay alert, develop patience and be ready when the opportunity for profit presents itself.
Keep a practice account, because it helps build market confidence and helps you overcome many of the fears that have been created from your losses.
When you have taken a loss in the market, it is an education you paid for. Learn from it!
Continual education gives you the advantage. Never stop learning!
Lastly you can be successful at Forex! While experience is a great teacher, it is not necessarily the best; pick the brain of a good trader when you can. When you learn something important from your chart studies, a book, a video or another trader; WRITE IT DOWN!
Discard what doesn't work, and review what does OFTEN!!!!!
Get 10 Trading Lessons FREE Click Here
Happy Trading!
This blog is not in anyway an enticement or solicitation to trade in the Forex Market. These tips are for informational purposes only and are not to be substituted for legal advice or council. I have written this blog in hopes that it will help you to avoid some of the terrifying pitfalls I had in the Forex Market before I learned better.
Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you need for living expenses and cannot afford to lose.
الأربعاء، 21 أكتوبر 2009
الثلاثاء، 20 أكتوبر 2009
Guest post: My forex trading
HOW TO BEGIN LEARNING MY FOREX TRADING
- Forex isn't a place where you're gonna become rich over the night, it isn't made for this purpose.
1. I think that new traders shouldn't use leverage at all !!!(1:1)
2. They should a find pair that is fully up or down on a monthly basis.
3. If price is at an all time high, then they need to consider exactly where to sell!
If price is at an all time low, then they need to consider where to buy !
(Only with a proper candlestick reversal confirmation, on a smaller time frame like the weekly chart)
4. Learn the ABC's or 123's of trends to understand price behavior because price is the number one indicator !
Traders Whiteboard #4 Click Here Using Stop losses!
5. Learn to use moving averages (I use SMA 5,10,20,100)!
6. If you don't use leverage, you don't need money management!
7. When your position shows profit, put your stop loss order on break even!
8. When you are in profit, don't be greedy! Take little and repeat when you have a chance!
9. If you don't use leverage, you don't need to use STOPS
WHEN YOU BUY OR SELL CURRENCY, YOU NEED TO KNOW WHAT IS HAPPENING WITH THE ECONOMY IN THAT COUNTRY AND EVERY OTHER COUNTRY THAT IS RELATED TO IT.
Bloomberg or CNN are excellent choices to work with.
NOW YOU CAN START STUDYING THE FOREX MARKET!!!
T. Forex
Market club info:
http://www.ino.com/info/447/CD4033/&dp=0&l=0&campaignid=6
This blog is not in anyway an enticement or solicitation to trade in the Forex Market. These tips are for informational purposes only and are not to be substituted for legal advice or council. I have written this blog in hopes that it will help you to avoid some of the terrifying pitfalls I had in the Forex Market before I learned better.
Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you need for living expenses and cannot afford to lose.
The King of Currencies
A reader has asked me to comment on these two recent GATA articles www.gata.org/node/7908 and www.gata.org/node/7911, which claim that London unallocated metal is a fractional reserve system.
Adrian Douglas’ assertion is that there is at a minimum four owners for each ounce of unallocated metal held in London. His support for this is to apply the ratio of average daily share trading in GLD (11.9m) to its shares outstanding (325m), rounding to a ratio of 1:30, to an estimate of the daily trading in gold in London to derive the amount of gold London should have. This is then compared to an estimate of what London does have, resulting in the 1:4 fractional ratio.
For his estimates of the London market, Douglas relies on a report by Paul Mylchreest. I haven't had time to review Mylchreest’s numbers in detail, but his report takes a very logical approach and is fact based to estimating of the amount of gold in London. His conclusion is that there is
"an aggregate pool of gold of just over 16,866 tonnes of gold to support an average of 2,134 tonnes of daily spot gold trade. On this basis, 12.7% of the pool of available gold is being turned over every day on average. … And the entire pool is turned over every 7.9 working days. In my opinion, this level of trade relative to the estimated pool of gold liquidity is excessive and doesn’t pass the smell test."
Firstly, he makes a series of assumptions to get to his figures. For example, his 16,866t figure relies on World Gold Council/industry estimates of above ground gold and the percentage that is investment. Being a trade organisation representing miners who want a high gold price one should expect that “stock” numbers will be estimated on the downside. When estimating what the real trading volume of gold is, then he steps into a more rubbery area because he is relying on only two guesses from some industry people - we need more than that.
As a result, one must consider his 12.7% turnover figure to have a fair margin of error considering all the assumptions and estimations used to derive it. This is not to say that it should be 1%, just that it is not a “hard” number.
Secondly, even if 12.7% is correct, I don’t think it logically follows that this “doesn’t pass the smell test", a conclusion he comes to by comparing gold to equity, other commodities and fiat currencies. The last one is probably the most relevant. In this he has to again make some assumptions about currency trading turnover to come to a figure of 2.6% for Sterling, conceding that when including forwards and swaps “daily Sterling turnover is only equivalent to 8.4% of UK broad money”.
Why stop at Sterling? If one does the same calculations for the Australian dollar, you get 4.1% for spot and 13.3% including forwards and swaps. Does gold’s 12.7% (which could be lower if some of Mylchreest’s assumptions are changed) now appear as an “excessive amount of gold trading relative to the likely pool of available gold”?
Mylchreest’s final conclusion is that either 1. there is “more than one ownership claim on each gold bar” or 2. “there is far more gold bullion held in private hands than is acknowledged by current industry estimates”.
I would suggest that there is another OR that Mylchreest has not considered: the very fact that gold is no one’s liability and cannot be printed means it attracts a disproportionate amount of trading and speculation. Why is it assumed that 12.7% is excessive and unreasonable? Could not the 12.7% figure be proof of the special monetary nature of gold, proof that it is the King of Currencies?
I have spent a bit of time on Mylchreest’s report because it is the key input into Adrian Douglas’ calculations. Before I move on to his numbers, I would like to say that I have a lot of respect for Mylchreest’s report and look forward to it being improved with more accurate data.
On that, I note Mylchreest’s statement on page 25 that “I haven’t a clue what COMEX inventories were in 1997, but let’s assume 200 tonnes …” That information is available at Sharelynx.com going back to 1975. A subscription is required but would be worthwhile as Sharelynx has a lot of other data that would be very useful for Mylchreest’s analysis.
Now on to Adrian Douglas’ calculations. He is basically applying GLD's turnover of 3.66% to Mylchreest’s turnover figure of 2,134t to come to an implied stock holding that London should have of 64,000t. This is then contrasted to Mylchreest’s estimate of 15,000t of non-leased physical to derive the 1:4 fractional ratio.
This analysis assumes that the behaviour of over-the-counter (OTC) players is/must be the same as those trading GLD. Let us consider each of Douglas’ statements in support of this.
“The purpose of buying investment gold is for it to store wealth. This necessarily implies that it is held for a long time.”
This is a very broad statement and one that I don’t think can be supported. Investors have all sorts of different time horizons. Remember we are talking about trading in unallocated and whether that is backed. The fact that it is unallocated rather than allocated bars would imply, if anything, that the investors have shorter time frames rather than long.
“If gold is bought and traded quickly it would destroy wealth, not store it, because there would be a large loss due to transactional fees.”
It is actually the other way around. The quicker you can trade something the less risk you have to changes in prices. Bullion banks have a spread between their bid and ask prices – they MAKE money from quickly trading gold. For those dealing with bullion banks in the OTC market, the tightness of those spreads combined with the volatility of gold mean it is entire reasonable for them to make money day trading gold.
“Considering these limitations [minimum trade limit of 1,000 ounces] it is likely that OTC participants would turn over a lot less than 1/30th of the inventory in a day.”
I do not see how the $1 million trade size must mean a lower turnover. That is not a big figure for wholesale market participants. With bullion bank spreads of $0.50 to $1.00, a 1000oz deal only means $500 to $1000 profit. This would mean that a spot gold trader would need to do a lot of trading to make a decent return on the capital employed, which means they would trade more frequently, rather than less.
As with Mylchreest’s comparisions to currency trading, I don’t think Douglas’ comparisions to GLD make any conclusive case that London gold turnover is suspicious.
For further support, Douglas notes that
“In the last 14 years the supply of dollars has increased from $4 trillion to $15 trillion (+275 percent) while the gold price has risen from $400 in 1995 to $1,000 in 2009 (+150 percent). How could this happen? … There has to be an alternative massive supply of gold to make the price rise slower than the influx of dollars.”
How it could happen is that those extra dollars were diverted into equities and house prices, rather than gold, pushing up their price more instead.
He also says that “If the OTC market traded only gold that was in the vaults on a 100 percent reserve ratio, there could never be a lack of liquidity.”
Lack of liquidity has nothing to do with stocks, backed or not. It has to do with a depth of buyers and sellers. If you have 100% backed unallocated, but few of the holders want to sell, then you have a lack of liquidity as well.
For some closing comments, I’ll quote Lawrence Williams from Mineweb:
“The big problem, though, with much of this kind of analysis is that the analysts and observers are working with a mixture of real and assumed figures. It thus tends to rely on statistics being manipulated, perhaps subconsciously, to support pre-conceived theories.”
Adrian Douglas’ assertion is that there is at a minimum four owners for each ounce of unallocated metal held in London. His support for this is to apply the ratio of average daily share trading in GLD (11.9m) to its shares outstanding (325m), rounding to a ratio of 1:30, to an estimate of the daily trading in gold in London to derive the amount of gold London should have. This is then compared to an estimate of what London does have, resulting in the 1:4 fractional ratio.
For his estimates of the London market, Douglas relies on a report by Paul Mylchreest. I haven't had time to review Mylchreest’s numbers in detail, but his report takes a very logical approach and is fact based to estimating of the amount of gold in London. His conclusion is that there is
"an aggregate pool of gold of just over 16,866 tonnes of gold to support an average of 2,134 tonnes of daily spot gold trade. On this basis, 12.7% of the pool of available gold is being turned over every day on average. … And the entire pool is turned over every 7.9 working days. In my opinion, this level of trade relative to the estimated pool of gold liquidity is excessive and doesn’t pass the smell test."
Firstly, he makes a series of assumptions to get to his figures. For example, his 16,866t figure relies on World Gold Council/industry estimates of above ground gold and the percentage that is investment. Being a trade organisation representing miners who want a high gold price one should expect that “stock” numbers will be estimated on the downside. When estimating what the real trading volume of gold is, then he steps into a more rubbery area because he is relying on only two guesses from some industry people - we need more than that.
As a result, one must consider his 12.7% turnover figure to have a fair margin of error considering all the assumptions and estimations used to derive it. This is not to say that it should be 1%, just that it is not a “hard” number.
Secondly, even if 12.7% is correct, I don’t think it logically follows that this “doesn’t pass the smell test", a conclusion he comes to by comparing gold to equity, other commodities and fiat currencies. The last one is probably the most relevant. In this he has to again make some assumptions about currency trading turnover to come to a figure of 2.6% for Sterling, conceding that when including forwards and swaps “daily Sterling turnover is only equivalent to 8.4% of UK broad money”.
Why stop at Sterling? If one does the same calculations for the Australian dollar, you get 4.1% for spot and 13.3% including forwards and swaps. Does gold’s 12.7% (which could be lower if some of Mylchreest’s assumptions are changed) now appear as an “excessive amount of gold trading relative to the likely pool of available gold”?
Mylchreest’s final conclusion is that either 1. there is “more than one ownership claim on each gold bar” or 2. “there is far more gold bullion held in private hands than is acknowledged by current industry estimates”.
I would suggest that there is another OR that Mylchreest has not considered: the very fact that gold is no one’s liability and cannot be printed means it attracts a disproportionate amount of trading and speculation. Why is it assumed that 12.7% is excessive and unreasonable? Could not the 12.7% figure be proof of the special monetary nature of gold, proof that it is the King of Currencies?
I have spent a bit of time on Mylchreest’s report because it is the key input into Adrian Douglas’ calculations. Before I move on to his numbers, I would like to say that I have a lot of respect for Mylchreest’s report and look forward to it being improved with more accurate data.
On that, I note Mylchreest’s statement on page 25 that “I haven’t a clue what COMEX inventories were in 1997, but let’s assume 200 tonnes …” That information is available at Sharelynx.com going back to 1975. A subscription is required but would be worthwhile as Sharelynx has a lot of other data that would be very useful for Mylchreest’s analysis.
Now on to Adrian Douglas’ calculations. He is basically applying GLD's turnover of 3.66% to Mylchreest’s turnover figure of 2,134t to come to an implied stock holding that London should have of 64,000t. This is then contrasted to Mylchreest’s estimate of 15,000t of non-leased physical to derive the 1:4 fractional ratio.
This analysis assumes that the behaviour of over-the-counter (OTC) players is/must be the same as those trading GLD. Let us consider each of Douglas’ statements in support of this.
“The purpose of buying investment gold is for it to store wealth. This necessarily implies that it is held for a long time.”
This is a very broad statement and one that I don’t think can be supported. Investors have all sorts of different time horizons. Remember we are talking about trading in unallocated and whether that is backed. The fact that it is unallocated rather than allocated bars would imply, if anything, that the investors have shorter time frames rather than long.
“If gold is bought and traded quickly it would destroy wealth, not store it, because there would be a large loss due to transactional fees.”
It is actually the other way around. The quicker you can trade something the less risk you have to changes in prices. Bullion banks have a spread between their bid and ask prices – they MAKE money from quickly trading gold. For those dealing with bullion banks in the OTC market, the tightness of those spreads combined with the volatility of gold mean it is entire reasonable for them to make money day trading gold.
“Considering these limitations [minimum trade limit of 1,000 ounces] it is likely that OTC participants would turn over a lot less than 1/30th of the inventory in a day.”
I do not see how the $1 million trade size must mean a lower turnover. That is not a big figure for wholesale market participants. With bullion bank spreads of $0.50 to $1.00, a 1000oz deal only means $500 to $1000 profit. This would mean that a spot gold trader would need to do a lot of trading to make a decent return on the capital employed, which means they would trade more frequently, rather than less.
As with Mylchreest’s comparisions to currency trading, I don’t think Douglas’ comparisions to GLD make any conclusive case that London gold turnover is suspicious.
For further support, Douglas notes that
“In the last 14 years the supply of dollars has increased from $4 trillion to $15 trillion (+275 percent) while the gold price has risen from $400 in 1995 to $1,000 in 2009 (+150 percent). How could this happen? … There has to be an alternative massive supply of gold to make the price rise slower than the influx of dollars.”
How it could happen is that those extra dollars were diverted into equities and house prices, rather than gold, pushing up their price more instead.
He also says that “If the OTC market traded only gold that was in the vaults on a 100 percent reserve ratio, there could never be a lack of liquidity.”
Lack of liquidity has nothing to do with stocks, backed or not. It has to do with a depth of buyers and sellers. If you have 100% backed unallocated, but few of the holders want to sell, then you have a lack of liquidity as well.
For some closing comments, I’ll quote Lawrence Williams from Mineweb:
“The big problem, though, with much of this kind of analysis is that the analysts and observers are working with a mixture of real and assumed figures. It thus tends to rely on statistics being manipulated, perhaps subconsciously, to support pre-conceived theories.”
السبت، 17 أكتوبر 2009
الجمعة، 16 أكتوبر 2009
Trading Strategy
This is my contribution to an easy trading strategy for new traders. It is an effective strategy, that is easily traded. Please keep in mind that price can go as far as the previous day's high or low depending on the direction of your steps. Also be mindful that this is a short term strategy. Have a killer trading week, and make money!!!!!!!!!!Here is a link to some more free lessons. Some of them are actually good!
http://www.ino.com/info/447/CD4033/&dp=0&l=0&campaignid=6
This blog is not in anyway an enticement or solicitation to trade in the Forex Market. These tips are for informational purposes only and are not to be substituted for legal advice or council. I have written this blog in hopes that it will help you to avoid some of the terrifying pitfalls I had in the Forex Market before I learned better.
Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you need for living expenses and cannot afford to lose.
الخميس، 15 أكتوبر 2009
FOREX PAWN SHOP
Forex is like a pawn shop where the big wigs want to buy from you below wholesale and resale to you at retail.
Many times at market tops, the news is good and the masses are buying, at the going retail rate while the big wigs are unloading what they bought at the bottom for below wholesale to make a nice profit. (You will usually notice smaller price movement during these periods)
Many times at market bottoms, (which are much harder to predict by the way) the news is usually grim. The public is usually selling cheaply out of panic, trying to save their hides and cover their butts. Then the big wigs who were smart enough not to be in that panic, come in and pick up the valuables at below wholesale prices. It is bargain basement shopping at it's best. Supply and demand, accumulation and distribution. That is the cycle of the market my Friend!
Unfortunate most investors get this wrong. They buy at market tops and sell at market bottoms. You don't want to buy when price has gone too far upward, because you too are looking for a bargain, which can often be found on a nice pullback. Of course only with proper confirmation to the upside. You only want to sell when you have a nice fat profit in your pocket; so you want to sell at the top as well. Again with a proper confirmation to the downside.
Never ever hold on to losing positions thinking you can out wait the big wigs, instead cut your losses when they are small, (not on market hiccups or retracements, you will learn the difference). Then wait for a valid market set-up to enter the market when it is in the best interest of your money . You too can be like the pawn brokers and buy cheaply and sell expensively! There are always opportunities to make money in the market as long as you have capital. Preserve your capital, so that you too can get in on these sweet deals.
Happy Trading My Friends
How to get rich slowly in forex. Click Here
This blog is not in anyway an enticement or solicitation to trade in the Forex Market. These tips are for informational purposes only and are not to be substituted for legal advice or council. I have written this blog in hopes that it will help you to avoid some of the terrifying pitfalls I had in the Forex Market before I learned better.
Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you need for living expenses and cannot afford to lose.
الأربعاء، 14 أكتوبر 2009
الثلاثاء، 13 أكتوبر 2009
Guest post #1 Money Management
Since I only know what I know, I have invited some other seasoned traders to share some of what they have learned over the years as well. I hope that you will find these posting helpful. As always take it slow, be patient and exercise discipline.Subject: Money management
Hi Traders Friend,
I'll focus this post on money management which is one of the most important parts of trading. The first rule of money management is to preserve your capital. Simply stated, be patient and wait for a good setup according to your own strategy.
Professional traders only risk between 1% to 3% per trade. I personally risk 2% per trade. So how can you determine your risk and keep it between 1% to 3%? I personally use a website calculator at:
http://www.facebook.com/l/a4c62;www.forexhit.com/calculators/aec/allocation-efficiency-calculator.htm
You can pay for a calculator that you can download but the good ones cost about $ 100. Or you can use a free one on a web page. The choice is yours.
You need to know how many PIPs you may have to loose in order for the trade to be invalidated. This depends on your level of tolerance, your trading style, and your trading system. That is another lesson in itself so let's just stick to the task on hand. :)
So let's say you have $ 2,500 in your account and your risk for the trade is 50 PIPs. If you risk 2% of your account for the trade you can only trade one mini lot for that trade. If your risk for the trade is 25 PIPs with the same amount of capital than you would be able to trade 2 mini lots.
If you only made 25 PIPs per week profit, in less than a year you will double your account. Just 25 PIPs per week. You don't have to hit "home runs" every time to grow your account in a substantial way. Nor do you need to risk a large amount for every trade to grow it substantially either.
By keeping your risk low, when you get on a loosing streak (also called a draw down) you can take quite a few hits in a row and not do severe damage to your account and to your trading psychology. Every person and every trading system has draw downs. George Soros and Warren Buffett have had plenty of draw downs, but they keep their risks low and are still Billionaires.
I hope this quick post helps you to start understanding the basic principles of money management.
Alexander.
Get 10 Trading Lessons FREE Click Here
This blog is not in anyway an enticement or solicitation to trade in the Forex Market. These tips are for informational purposes only and are not to be substituted for legal advice or council. I have written this blog in hopes that it will help you to avoid some of the terrifying pitfalls I had in the Forex Market before I learned better.
Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you need for living expenses and cannot afford to lose.
الأحد، 11 أكتوبر 2009
TOOLS OF THE TRADE
My Friends, as most of you know, I am not the biggest champion of indicators; however I do know how to use them. I am creating this post for my Friends who want more information about different technical tools. I hope you find this very useful. If you have any questions about anything you have seen here you know where to find me. Also you may check out my youtube page that has videos that I think are helpful for both newer and seasoned traders. http://www.youtube.com/user/TRADERSFRIEND.
Education will help you to do what you need to do with Forex. NEVER STOP LEARNING!!!!!
17 Moneymaking Candlestick Formations You Can Use Today Click Here
Fibonacci... it's a technical tool that can make you rich. Click Here
Double Tops and Pivot Points explained! Click Here
Traders Whiteboard #4 Click Here
For all of my Friends who were seeking to broaden your understanding, I hope this helps. Thank you for all of your kindness and support always.
Happy Trading My Friends!
If you have any questions, you may reach me
at TradersFriend@yahoo.com
This blog is not in anyway an enticement or solicitation to trade in the Forex Market. These tips are for informational purposes only and are not to be substituted for legal advice or council. I have written this blog in hopes that it will help you to avoid some of the terrifying pitfalls I had in the Forex Market before I learned better.
Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you need for living expenses and cannot afford to lose.
السبت، 10 أكتوبر 2009
Futures COT
Adam Hamilton of Zeal LLC is one commentator I have been following for many years. His latest one on the Commitments of Traders Report is essential reading:
"The bottom line is gold futures activity as chronicled in the CFTC’s Commitments of Traders Report is often misunderstood. A minority of analysts choose to interpret facts about week-to-week developments out of the illuminating context of bull-to-date behavior in similar situations. Thus their interpretations of this complex report are often misleading. And sadly many newer traders are swayed by this shoddy analysis.
It is critical to remember gold futures are a zero-sum game. For every short, there is an offsetting long. So if the feared commercial hedgers’ net-short position is surging and hitting records, then so too are speculators’ net-long positions."
"The bottom line is gold futures activity as chronicled in the CFTC’s Commitments of Traders Report is often misunderstood. A minority of analysts choose to interpret facts about week-to-week developments out of the illuminating context of bull-to-date behavior in similar situations. Thus their interpretations of this complex report are often misleading. And sadly many newer traders are swayed by this shoddy analysis.
It is critical to remember gold futures are a zero-sum game. For every short, there is an offsetting long. So if the feared commercial hedgers’ net-short position is surging and hitting records, then so too are speculators’ net-long positions."
الجمعة، 9 أكتوبر 2009
الخميس، 8 أكتوبر 2009
الثلاثاء، 6 أكتوبر 2009
Divergence in Apple????????
Is a divergence building in Apple?
See the latest video post on Apple and what apple is up to:
This is for those of my friend who have other interest than Forex. This is in no way a solicitation to buy any product, it is posted for your information only!
الاثنين، 5 أكتوبر 2009
Discipline
What makes forex trading so hard????????? Is it Fibonacci, MACD, Elliott Wave, EMAs, Stochastic, or a host of other indicators???????
No, if it is not that, what is it? As traders we watch every webinar, read every available trading book, go to every seminar and attend expensive classes. We know all of the rules, so why is it that so many of us fail as traders?
I think the number one reason we fail as traders is lack of discipline.
If you are like me; you want price to hurry up and get there, so you can put in your trade.....Sound familiar?????
The market is always slower or faster than you want. Sometimes you wait for hours for the right set-up, get a phone call or go make a sandwich and by the time you get back to your screen your big move is all over. Then you know you will have to wait for a while before the next good set-up comes along.
I remember one day, I'd waited about two hours for price to hit the morning's resistance and I got distracted somehow. When I got back to the computer, I had missed my much anticipated scalping opportunity. You may as well have put me in a straight jacket. I was so angry I could have chewed nails. I was to upset to trade the rest of the day, so I was out.
As a person who was born Type A, I still struggle with waiting, so I had to make some changes in my overall approach to my trading and I want to share somethings that I hope will help you.
#1. Write it down. Always come to your platform with a written plan. You are a business professional in a very competitive market, so it behooves you to have a game plan. Your completion is ready. This is not flag football; it is full frontal tackle. Suit up and be ready to play!
#2. Follow your game plan!!!!!!! It helps to tame some of those nail biting emotions that you are likely to encounter when the market begin to fluctuate.
#3. Stay out of the market, unless you have identified a clear trend. SOMETIMES THERE IS NO TRADE!!!!!!!!!!!!!!!
This one is connected to the same thought as in #2, but it is important enough for a line of it's own: RETRACEMENTS WILL GIVE YOU THE ILLUSION THAT YOU HAVE MISSED OUT, OR THAT YOU ARE ON THE WRONG SIDE OF THE TRADE. Having a clear game plan will help you not to panic so when you see price hiccups and retraces. Every price hiccup is not a loss. Remember that price never moves straight up or down. It bounces all day long, that is why you have to identify the major trend. You can read more about that at my blog:
http://tradersbud.blogspot.com/2009/09/trend-lines.html.
#4. Don't try to trade distracted! Come to your platform with a clear head, if you do not, you will leave with your butt thoroughly handed to you.
Here a a few tidbits that I hope will help even further.
Identify the longer term trend, and then use a shorter time frame for a good entry in the direction of the trend. This may take some time, but in order to enjoy success as a trader, it is essential that you learn to wait. You don't have to sit in front of your screen all day, but you do have to wait for a good set up. If you trade longer term charts four hours or more, this is easier, because you can come and go checking the chart at intervals.
Find your support and resistance levels. Many times I just used my high and low from the previous day, or week or month depending on my trading and profit objective. You may want to use pivot points, and you should be able to get those from your broker on your trading platform.
You want to buy around your previous support level, with a proper confirmation, and sell around your previous resistance level with a proper confirmation. If you don't get a confirmation, DO NOT BUY/SELL!!!! You want to trade when the odds are mostly in your favor!!!!!!!!!!
You want to buy around your previous support level, with a proper confirmation, and sell around your previous resistance level with a proper confirmation. If you don't get a confirmation, DO NOT BUY/SELL!!!! You want to trade when the odds are mostly in your favor!!!!!!!!!!
Know your reversal signals!!!! Know your reversal signals!!! Know your reversal signals!!!!
If you use an MA it often time will confirm a change of a trend. This tool confirms best in a trending market
After a loss take a break. Revenge trading often kills new traders. If you take a loss, especially a big one, your confidence has been shaken. Step away, CLEAR YOUR HEAD, review your game plan, refine it if you need to. After you have worked through your emotions, come back fresh and ready to trade. The emotional train-wreck of a big loss, compromises you and you can not see things as clearly or objectively.
Stay out of consolidation/deliberation (when price is in a tight trading range) on a short term time frame. There is a time for the market to rest, you need to rest with it. You are not a fortune teller, you are a trader, allow the market to show you which direction it is going to move in.
Oh this is a biggie. LETTING YOUR WINNING TRADES RUN AND CUTTING YOUR LOSSES SHORT. If you have had trades that started out as winners and ended up as losers , it can chips away at your confidence, often causing you to close your winning trades as soon as they come into profit. On the other hand you will allow your losing trades to run wild, hoping, waiting and praying for a reversal, instead of cutting the legs off of that diseased monster.
Staying in losing trades for extended periods of time cost you not only potential capital, but it also keeps you from entering other profitable trades.
After a loss take a break. Revenge trading often kills new traders. If you take a loss, especially a big one, your confidence has been shaken. Step away, CLEAR YOUR HEAD, review your game plan, refine it if you need to. After you have worked through your emotions, come back fresh and ready to trade. The emotional train-wreck of a big loss, compromises you and you can not see things as clearly or objectively.
Stay out of consolidation/deliberation (when price is in a tight trading range) on a short term time frame. There is a time for the market to rest, you need to rest with it. You are not a fortune teller, you are a trader, allow the market to show you which direction it is going to move in.
Oh this is a biggie. LETTING YOUR WINNING TRADES RUN AND CUTTING YOUR LOSSES SHORT. If you have had trades that started out as winners and ended up as losers , it can chips away at your confidence, often causing you to close your winning trades as soon as they come into profit. On the other hand you will allow your losing trades to run wild, hoping, waiting and praying for a reversal, instead of cutting the legs off of that diseased monster.
Staying in losing trades for extended periods of time cost you not only potential capital, but it also keeps you from entering other profitable trades.
A properly placed SL (stop loss) is your Friend and will help you save your capital. There are traders who trade without SLs. I would advise you to use SLs on your practice accounts often so that you get comfortable with them. There will be times that you will miss it, there is no need to punish yourself by going broke. You missed it, suck it up and move on.
If you were a trader who once lost money to the market, you can change to become an informed profitable trader. You are no longer that scared trader who was always losing and it is time to develop and approach the market with a whole new confidence!
If your confidence has been shaken, use your practice account a lot. Look for trade set-ups on the short and long side of the trade and rebuild your confidence. When you start trading your live account again, then start off small with smaller margins.
Lastly, LEARN TO WAIT FOR PROPER SET-UPS AND NEVER STOP LEARNING!!!!!!! Patience and knowledge will be your best friends in the market!!!!
Happy trading My Friends!!
Get 10 Trading Lessons FREE Click Here
Forex Aussie Analysis See Video NOW
This blog is not in anyway an enticement or solicitation to trade in the Forex Market. These tips are for informational purposes only and are not to be substituted for legal advice or council. I have written this blog in hopes that it will help you to avoid some of the terrifying pitfalls I had in the Forex Market before I learned better.
Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you need for living expenses and cannot afford to lose.
الأحد، 4 أكتوبر 2009
SLV and Jeff Nielson
On Sep 17 Jeff Nielson posted an article on SLV. I took issue with his belief that ETFs' management fees were unrealistically cheap and thus another indicator they were a scam. Below is the exchange between Jeff and I on the matter.
Bron: You say "custodians of the vast majority of all the world's bullion-ETFs – a service which they are providing free of charge" but SLV has an expense ratio of 0.50%, some of which if I remember the prospectus correctly, is paid to the custodian. If SLV holders pay 0.50% how can it be considered "free". By what do you mean free?
Jeff: Hi Bron. Just look at all that is SUPPOSEDLY covered by this 1/2% fee:
1) Transaction costs. Purchases must be made CONSTANTLY, all day long - in order to buy the actual silver for unit-holders at the same price they bought their units at. Given the huge volatility with silver, it's not even feasible to restrict buying to once a day - since silver has had MANY daily moves of 5% or more.
2) Insurance/delivery costs
3) Storage/security costs.
Obviously BILLIONS of dollars of silver require significant security to guard such a hoard. The U.S. government has an entire military battalion guarding Fort Knox - so no one can find out how much gold is NOT there.If you think these costs are minimal, then answer this question: why do the small number of companies who hold their own bullion need to charge MANY times that premium for their own security/storage costs?
Bron: Before I comment, just want to state upfront that I work for the Perth Mint, but I am speaking here in a personal capacity. While I’m speaking personally, obviously the ETFs are competitors to my employer’s business, both in respect of physical coins and bars as well as our own storage facility, so I’m not any apologist for the ETFs. Taking each of your points in turn.
1) Transaction costs. I note that SLV’s average Bid Ask Ratio is 0.08%. This is very tight but is not necessarily unprofitable for a market maker. You are right that the market maker must be purchasing (or selling) gold constantly as it sells (or buys) SLV shares. My experience with the Perth Mint’s ASX listed product (code: ZAUWBA) is that the market maker will simply set their stock exchange price for an ETF higher than their cost on the wholesale over-the-counter market and adjust this constantly during the trading day. This way they always make a profit on transactions, it is not a cost to them. If individuals bid prices under this than the market maker misses out on a trade. It is only where there are excessive buyers or sellers that the market maker’s prices will get hit.
2) Insurance/delivery costs. Delivery costs are effectively zero, as the metal is most likely already in the vaults as sellers of physical need to bring their metal to London to trade it. Insurance is a real cost, but are easily covered by 0.50%. Important to note that the metal is not fully insured, just the first couple of billion (I don’t think the prospectus says anything about the first loss limit of the insurance). Once you get to a certain size therefore, the insurance cost is a fixed cost, not variable.
3) Storage/security costs. These are fixed costs, once you have a vault and have secured it, every additional ounce does not result in any change in costs. Once you get to the point that you have covered these fixed costs, every ounce above that is pure profit and this is where custodianship can be highly profitable. At 280 million ounces, SLV is definitely there in my opinion. Storage business is a classic case of economies of scale, which is why smaller companies have to have higher storage charges (eg Perth Mint allocated silver is 2.5% pa).
I have been a bit brief on explaining the above, but my view is that they are making money with a 0.5% expense ratio. That is why I think the “free of charge” line of attack is not supported and you are better off focusing on your other criticisms.
Jeff: Bron, at the time that SLV was created, there was only 200 million oz's of silver in GLOBAL inventories. Now SLV and others hold close to 450 million oz's. Obviously there MUST be both delivery AND insurance charges for AT LEAST 250 million oz's of silver - which could NOT have "already been in vaults".
As for security/storage costs, I'll happily concede (for purposes of argument) that no new storage space was created. This brings me back to my point about the ludicrous idea of a BANKER (holding a massive short position) SUBSIDIZING "longs" by providing free storage/security.
Even if you subscribe to that ludicrous fantasy, there is still the issue of the "opportunity cost" to banks. Precious metals are not the ONLY items in the world for which there is a demand for high-security storage. Will ANYONE suggest that banks will provide a FREE service for precious metals longs - rather than charge someone a fee for storing other valuable assets? Try asking JP Morgan to store YOUR OWN precious metals for free - and listen to how hard they laugh at you.
Bron: "Obviously there MUST be both delivery AND insurance charges for AT LEAST 250 million oz's of silver - which could NOT have already been in vaults"
You've missed my point. Lets assume the additional 250moz is real and was bought by bullion banks to back SLV & others. In that case, the bullion banks would incur no delivery charges as the seller delivers metal to London at their cost to be able to sell it on the spot market in London. Secondly, the additional 250moz has no insurance charges - as I said, they only insure the first $1b of holdings, not the entire holdings.
"the ludicrous idea of a BANKER (holding a massive short position) SUBSIDIZING longs by providing free storage/security" & "Will ANYONE suggest that banks will provide a FREE service for precious metals longs - rather than charge someone a fee for storing other valuable assets?"
Jeff, you keep on saying they are doing it for free when SLV charges 0.5%. Some of that 0.5% goes to the custodian, they are being paid. That is not "for free" - I don't understand why you keep on saying they are providing free storage.
The question is whether the 0.5% charge is realistic, profitable assuming the volumes of metal SLV and others hold is physical. As explained in my previous reply it is. Saying this does not mean that they have physical, but nor does it mean they do not.
Jeff: Bron, your assumptions about delivery cost are only valid if you're implying that silver (and gold) goes straight from refineries into bankster vaults - rather than having to be PURCHASED by the banksters (first) on the open market, and then transferred to their vaults.
When you mention the 0.5% fee charged by SLV, my understanding is that this also (supposedly) covers their OWN administrative costs AS WELL AS all the shipping costs, transaction costs, insurance costs, and storage/security costs.
You would be hard-pressed to find any ONE bankster service (in ANY of their business activities) which they are willing to provide for a 0.5% fee. Suggesting that they are willing to REDUCE their fees (to close to ZERO) to SUBSIDIZE the entry of longs into the market is simply nonsense.
Bron: "your assumptions about delivery cost are only valid if you're implying that silver (and gold) goes straight from refineries into bankster vaults - rather than having to be PURCHASED by the banksters (first) on the open market, and then transferred to their vaults."
No it doesn't. There is no difference between purchasing from refineries or on the open market - refineries are all in different countries just like existing stocks. If market makers cannot acquire metal from investors or sellers already holding it in London, they will actually be able to acquire it at a discount to London spot (which is the usual state of the market), the discount equalling the shipment cost into London. Even if they have to pay a premium (or pay shipment costs into London), then they just factor this into their bid and ask prices quoted for SLV. This is why delivery is not a cost that comes out of the 0.5% fee.
"When you mention the 0.5% fee charged by SLV, my understanding is that this also (supposedly) covers their OWN administrative costs AS WELL AS all the shipping costs, transaction costs, insurance costs, and storage/security costs."
The 0.5% does cover their administrative and compliance costs, but as I have discussed above and in my previous replies, any shipping and transaction costs are recovered via market making activities, so these do not come out of the 0.5%. As I have also replied, insurance and storage/security are FIXED costs, not variable, whereas the revenue of 0.5% is variable. This means that once you cover you fixed costs, the 0.5% on any additional metal is pure profit.
"You would be hard-pressed to find any ONE bankster service (in ANY of their business activities) which they are willing to provide for a 0.5% fee. Suggesting that they are willing to REDUCE their fees (to close to ZERO) to SUBSIDIZE the entry of longs into the market is simply nonsense."
0.5% is not "close to zero". On 280moz, 0.5% = $24 million, that is not anywhere near zero. The fact is that in the wholesale market storage is offered for much less than 0.5%. Do you remember David Einhorn's Greenlight Capital exiting his GLD in favor of physical bullion? He did this because it was CHEAPER, in other words he could get storage for less than GLD’s 0.4%. In fact, quoting http://www.hardassetsinvestor/:
“By contrast, a $400 million player in the bullion market has substantial room to negotiate. You can be sure his [Einhorn] bullion holdings are being custodied for less than 12 basis points.”
If you believe that 0.5% is an unrealistic fee, a subsidised fee and therefore proof that SLV is a scam, then logically you must also believe that Bullion Vault, with a 0.12% storage fee, is also a scam. This puts you in a bit of a spot, because Bullion Vault is one of the most transparent operations in the market, and favoured by many goldbugs and commentators. Your stepping out on a limb here.
The post above was on Sep 21, Jeff replied to another post on Sep 22 but ignored mine. I posted the comment below on Sep 27. No response by Jeff as at Oct 4.
Bron: You have replied to someone else's comment which appear after mine, but ignored mine. Does this mean you conceed on the issue of the reasonableness of the storage fee?
Bron: You say "custodians of the vast majority of all the world's bullion-ETFs – a service which they are providing free of charge" but SLV has an expense ratio of 0.50%, some of which if I remember the prospectus correctly, is paid to the custodian. If SLV holders pay 0.50% how can it be considered "free". By what do you mean free?
Jeff: Hi Bron. Just look at all that is SUPPOSEDLY covered by this 1/2% fee:
1) Transaction costs. Purchases must be made CONSTANTLY, all day long - in order to buy the actual silver for unit-holders at the same price they bought their units at. Given the huge volatility with silver, it's not even feasible to restrict buying to once a day - since silver has had MANY daily moves of 5% or more.
2) Insurance/delivery costs
3) Storage/security costs.
Obviously BILLIONS of dollars of silver require significant security to guard such a hoard. The U.S. government has an entire military battalion guarding Fort Knox - so no one can find out how much gold is NOT there.If you think these costs are minimal, then answer this question: why do the small number of companies who hold their own bullion need to charge MANY times that premium for their own security/storage costs?
Bron: Before I comment, just want to state upfront that I work for the Perth Mint, but I am speaking here in a personal capacity. While I’m speaking personally, obviously the ETFs are competitors to my employer’s business, both in respect of physical coins and bars as well as our own storage facility, so I’m not any apologist for the ETFs. Taking each of your points in turn.
1) Transaction costs. I note that SLV’s average Bid Ask Ratio is 0.08%. This is very tight but is not necessarily unprofitable for a market maker. You are right that the market maker must be purchasing (or selling) gold constantly as it sells (or buys) SLV shares. My experience with the Perth Mint’s ASX listed product (code: ZAUWBA) is that the market maker will simply set their stock exchange price for an ETF higher than their cost on the wholesale over-the-counter market and adjust this constantly during the trading day. This way they always make a profit on transactions, it is not a cost to them. If individuals bid prices under this than the market maker misses out on a trade. It is only where there are excessive buyers or sellers that the market maker’s prices will get hit.
2) Insurance/delivery costs. Delivery costs are effectively zero, as the metal is most likely already in the vaults as sellers of physical need to bring their metal to London to trade it. Insurance is a real cost, but are easily covered by 0.50%. Important to note that the metal is not fully insured, just the first couple of billion (I don’t think the prospectus says anything about the first loss limit of the insurance). Once you get to a certain size therefore, the insurance cost is a fixed cost, not variable.
3) Storage/security costs. These are fixed costs, once you have a vault and have secured it, every additional ounce does not result in any change in costs. Once you get to the point that you have covered these fixed costs, every ounce above that is pure profit and this is where custodianship can be highly profitable. At 280 million ounces, SLV is definitely there in my opinion. Storage business is a classic case of economies of scale, which is why smaller companies have to have higher storage charges (eg Perth Mint allocated silver is 2.5% pa).
I have been a bit brief on explaining the above, but my view is that they are making money with a 0.5% expense ratio. That is why I think the “free of charge” line of attack is not supported and you are better off focusing on your other criticisms.
Jeff: Bron, at the time that SLV was created, there was only 200 million oz's of silver in GLOBAL inventories. Now SLV and others hold close to 450 million oz's. Obviously there MUST be both delivery AND insurance charges for AT LEAST 250 million oz's of silver - which could NOT have "already been in vaults".
As for security/storage costs, I'll happily concede (for purposes of argument) that no new storage space was created. This brings me back to my point about the ludicrous idea of a BANKER (holding a massive short position) SUBSIDIZING "longs" by providing free storage/security.
Even if you subscribe to that ludicrous fantasy, there is still the issue of the "opportunity cost" to banks. Precious metals are not the ONLY items in the world for which there is a demand for high-security storage. Will ANYONE suggest that banks will provide a FREE service for precious metals longs - rather than charge someone a fee for storing other valuable assets? Try asking JP Morgan to store YOUR OWN precious metals for free - and listen to how hard they laugh at you.
Bron: "Obviously there MUST be both delivery AND insurance charges for AT LEAST 250 million oz's of silver - which could NOT have already been in vaults"
You've missed my point. Lets assume the additional 250moz is real and was bought by bullion banks to back SLV & others. In that case, the bullion banks would incur no delivery charges as the seller delivers metal to London at their cost to be able to sell it on the spot market in London. Secondly, the additional 250moz has no insurance charges - as I said, they only insure the first $1b of holdings, not the entire holdings.
"the ludicrous idea of a BANKER (holding a massive short position) SUBSIDIZING longs by providing free storage/security" & "Will ANYONE suggest that banks will provide a FREE service for precious metals longs - rather than charge someone a fee for storing other valuable assets?"
Jeff, you keep on saying they are doing it for free when SLV charges 0.5%. Some of that 0.5% goes to the custodian, they are being paid. That is not "for free" - I don't understand why you keep on saying they are providing free storage.
The question is whether the 0.5% charge is realistic, profitable assuming the volumes of metal SLV and others hold is physical. As explained in my previous reply it is. Saying this does not mean that they have physical, but nor does it mean they do not.
Jeff: Bron, your assumptions about delivery cost are only valid if you're implying that silver (and gold) goes straight from refineries into bankster vaults - rather than having to be PURCHASED by the banksters (first) on the open market, and then transferred to their vaults.
When you mention the 0.5% fee charged by SLV, my understanding is that this also (supposedly) covers their OWN administrative costs AS WELL AS all the shipping costs, transaction costs, insurance costs, and storage/security costs.
You would be hard-pressed to find any ONE bankster service (in ANY of their business activities) which they are willing to provide for a 0.5% fee. Suggesting that they are willing to REDUCE their fees (to close to ZERO) to SUBSIDIZE the entry of longs into the market is simply nonsense.
Bron: "your assumptions about delivery cost are only valid if you're implying that silver (and gold) goes straight from refineries into bankster vaults - rather than having to be PURCHASED by the banksters (first) on the open market, and then transferred to their vaults."
No it doesn't. There is no difference between purchasing from refineries or on the open market - refineries are all in different countries just like existing stocks. If market makers cannot acquire metal from investors or sellers already holding it in London, they will actually be able to acquire it at a discount to London spot (which is the usual state of the market), the discount equalling the shipment cost into London. Even if they have to pay a premium (or pay shipment costs into London), then they just factor this into their bid and ask prices quoted for SLV. This is why delivery is not a cost that comes out of the 0.5% fee.
"When you mention the 0.5% fee charged by SLV, my understanding is that this also (supposedly) covers their OWN administrative costs AS WELL AS all the shipping costs, transaction costs, insurance costs, and storage/security costs."
The 0.5% does cover their administrative and compliance costs, but as I have discussed above and in my previous replies, any shipping and transaction costs are recovered via market making activities, so these do not come out of the 0.5%. As I have also replied, insurance and storage/security are FIXED costs, not variable, whereas the revenue of 0.5% is variable. This means that once you cover you fixed costs, the 0.5% on any additional metal is pure profit.
"You would be hard-pressed to find any ONE bankster service (in ANY of their business activities) which they are willing to provide for a 0.5% fee. Suggesting that they are willing to REDUCE their fees (to close to ZERO) to SUBSIDIZE the entry of longs into the market is simply nonsense."
0.5% is not "close to zero". On 280moz, 0.5% = $24 million, that is not anywhere near zero. The fact is that in the wholesale market storage is offered for much less than 0.5%. Do you remember David Einhorn's Greenlight Capital exiting his GLD in favor of physical bullion? He did this because it was CHEAPER, in other words he could get storage for less than GLD’s 0.4%. In fact, quoting http://www.hardassetsinvestor/:
“By contrast, a $400 million player in the bullion market has substantial room to negotiate. You can be sure his [Einhorn] bullion holdings are being custodied for less than 12 basis points.”
If you believe that 0.5% is an unrealistic fee, a subsidised fee and therefore proof that SLV is a scam, then logically you must also believe that Bullion Vault, with a 0.12% storage fee, is also a scam. This puts you in a bit of a spot, because Bullion Vault is one of the most transparent operations in the market, and favoured by many goldbugs and commentators. Your stepping out on a limb here.
The post above was on Sep 21, Jeff replied to another post on Sep 22 but ignored mine. I posted the comment below on Sep 27. No response by Jeff as at Oct 4.
Bron: You have replied to someone else's comment which appear after mine, but ignored mine. Does this mean you conceed on the issue of the reasonableness of the storage fee?
الخميس، 1 أكتوبر 2009
Canberra Trip
I have been busy preparing for two presentations I'll be doing at the Gold Standard Institute's seminar in Canberra. As a result my blogging will be infrequent.
On Sunday 1 Nov there is a free gold investor day and I will be explaining how London metal accounts are used to facilitate the flow of gold from mine to you. There is a great range of other speakers from Daily Reckoning, BullionMark, Global Speculator. If you are within driving distance of Canberra you would be crazy to miss it as it is a great opportunity to catch up with fellow precious metal investors.
2 Nov to 5 Nov is the formal seminar with Professor Fekete the key speaker. I'll have an hour session on COMEX stocks. Daily Reckoning will also be speaking and has a good explanation of what you can expect. Cost is $790 and a 4 day committment but if you have the time will be well worth it.
I have also forgottent to mention a new precious metals forum for Australians called Silver Stackers (they let gold investors in :). If you are tired of US centric discussions on forums like Kitco, it is worth a look.
On Sunday 1 Nov there is a free gold investor day and I will be explaining how London metal accounts are used to facilitate the flow of gold from mine to you. There is a great range of other speakers from Daily Reckoning, BullionMark, Global Speculator. If you are within driving distance of Canberra you would be crazy to miss it as it is a great opportunity to catch up with fellow precious metal investors.
2 Nov to 5 Nov is the formal seminar with Professor Fekete the key speaker. I'll have an hour session on COMEX stocks. Daily Reckoning will also be speaking and has a good explanation of what you can expect. Cost is $790 and a 4 day committment but if you have the time will be well worth it.
I have also forgottent to mention a new precious metals forum for Australians called Silver Stackers (they let gold investors in :). If you are tired of US centric discussions on forums like Kitco, it is worth a look.
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