Archives of “six years” tag

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Is this the world’s most bearish man?

  
  Education
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He is this man:

His name is Robert Prechter and he thinks the Dow will fall well below 1,000 over within the next six years. What’s more, he even speaks in Nostradamic verse:

Mr. Prechter is convinced that we have entered a market decline of staggering proportions — perhaps the biggest of the last 300 years.

In a series of phone conversations and e-mail exchanges last week, he said that no other forecaster was likely to accept his reasoning, which is based on his version of the Elliott Wave theory — a technical approach to market analysis that he embraces with evangelical fervor.

Originating in the writings of Ralph Nelson Elliott, an obscure accountant who found repetitive patterns, or “fractals,” in the stock market of the 1930s and ’40s, the theory suggests that an epic downswing is under way, Mr. Prechter said. But he argued that even skeptical investors should take his advice seriously.

Have A Plan

  
  Education
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It’s interesting to see that at a time like this, a time of economic concern, a time of confusion, that many people (including traders) get caught up in information that doesn’t serve them in any way helpful.  What do I mean by this?  Well, if you look at most financial news networks or most financial news services out there, how often of the time are they serving us information that is helpful in any way to our trading?  I listen and talk to traders on a daily basis and it amazes me how much overwhelming economic information they know.  However, when I ask them how it’s serving their trading, I never seem to get a clear answer.

I’ve been lucky enough to talk to some of the most successful legendary traders out there and really pick their brains to see how they think.  If you’ve ever had the chance to read Market Wizards and New Market Wizards, there is some real wisdom in those books that most people don’t seem to pick up on.  In New Market Wizards, Jack Shwager interviews a very successful trader.  During the interview he asks him:

“Can you tell who will be a successful trader and who will not?”

The traders response is very interesting.  He goes on to say:

“Yes, on a less technical level, I can say that after years of studying traders, the best predictor of success is simply whether the person is improving with time and experience.  Many traders unconsciously acknowledge their lack of progress by continually jumping from one system or methodology to another, never gaining true proficiency in any.
As a result, these people end up with one year of experience, six times, instead of six years of experience.  In contrast, the superior traders gravitate to a single approach-the specific approach is actually not important-and become extremely adapt to it.”

Now, most traders would read that and think nothing of it.  But look at how he talks about how most traders jump from system to system, never really gaining true proficiency in any.  This is something I have come to observe as well within most traders.  When I try to understand why this is happening it seems that it’s the same reason each time.

As traders learn more and more about different indicators and patterns  in the market, they become more and more desperate to find this “holy grail” system that will produce some astronomical winning results.  Not only that, but they continuously jump from doing one thing to another.  One day they’re trading moving averages, the next day they’re trading a bear wedge pattern, the next day a double top; they’re just all over the place.  Why is this?  It goes back to the quote up top.  Instead of focusing on ONE methodology and mastering it, what happens is as soon as a losing streak comes along or a trade doesn’t work out the way they would have liked, they begin to think that something is wrong with the system, when in fact the real problem is the trader himself. (more…)

China Announces Huge Trade Deficit

  
  Education
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China announced on Saturday the first trade deficit within the last six years. Although a deficit was expected, nobody anticipated the numbers would reach $7.24 billion.

The last trade deficit in the country came in April of 2004 and was $2.26 billion.

For the month of March, the country’s imports totaled $119.35 billion and exports reached $112.11 billion. Both of these numbers are up drastically in comparison to March of 2009.

The deficit will more than likely turn around within the near future, but the numbers are enough to spark concern in the eyes of the Chinese.

The deficit in March mainly came from China’s trade with Taiwan, Japan and South Korea, Customs said, while it continued to run surpluses with the U.S. and the European Union. Those big trading partners have been among those arguing that China’s practice of keeping the yuan effectively pegged to the U.S. dollar gives its exporters an unfair advantage and contribute to the large trade surpluses.

All of this comes at a time when the United States and leaders throughout Europe are pushing China to increase the value of the yuan, which economist suspect is nearly 40% undervalued.

5 Rogue Traders -They had Broke Banks

  
  Education
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So, who are the rogue traders that have experienced all of this? Here’s a small sample (the ones we know of!). They are not in chronological order but in order of how much money they actually lost their banks (from the lowest to the highest):

1. John Rusnak

Rogue Trader: John Rusnak

The guy that brought down the Allfirst Bank and incurred losses of $69.2 million.

He was sentenced to 7.5 years in prison on January 17th 2003 for hiding the losses that he incurred as a currency trader. He hid the losses for a year. He is now under confinement at his home (since January 2009, meaning that he served almost six years for his rogue trading).

He was ordered to pay back $1, 000 per month after his release from prison and despite the fact that he remains in debt to the full sum of $691.2 million he will probably never be able to pay it back. How did it all happen?

  • Allfirst Bank wished to make its forex operations go from just hedging to bringing in a yield of profits and thus increase the total profits of the bank.
  • John Rusnak was hired to do this.
  • Rusnak was bullish on the Yen. He believed that the Yen would not fall any more after the bursting of the Japanese bubble. He believed that the Yen would rise against the Dollar.
  • He neglected to hedge his forward contracts believing that the Yen could not fail to rise.
  • With the onset of the Asian crisis, the Yen fell.
  • He thus entered false options into the systems to make it seem as if the positions were hedged. He also asked for more money from high brokerage accounts in order to try to win back the money that he had already lost.
  • The management granted this to him and he invested even more money.
  • Rusnak made a personal gain of $550, 000 in bonuses plus his salary.
  • The losses only came to light when the bank asked for capital to be released and they realized that Rusnak had been working in the red all the time.
  • Rusnak was fired from his position and along with him he brought down 6 senior executives for failing to detect the scam.

One thing is for sure: Rusnak has kept his nose clean since getting out of prison and has managed to fall into relative anonymity. Nobody knows what he’s doing today for work. (more…)

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