Parenteau's 2006 Paper at Levy Institute and 2010 article on Financial Balances

In hindsight, this paper would have been good to read in 2006. His advice is pretty expensive (only $497 a year) these days at www.richebacher.com

Parenteau's 2006 Levy Institute Paper (short version)



Moving closer to present time, here is a March 2010 article by Mr. Parenteau wherein he discusses the three sector financial balances approach. I find this conceptual framework important, possibly essential to understanding international economics. I hope you enjoy reading it, too.



http://www.nakedcapitalism.com/2010/03/parenteau-on-fiscal-correctness-and-animal-sacrifices-leading-the-piigs-to-slaughter-part-1.html

Balance Sheet Recession Explained

This is also an introduction to Rob Parenteau.

Volatility Futures & Options

Essentially retweeting this from Only VIX blog. Interesting link.

Volatility Futures & Options

Read What Congress Should Be Reading This Weekend

What did Treas Sec Geithner say about China exchange rates, etc.

Report to Congress on International Economic and Exchange Rate Policies

On Fortune's cap we are not the very button. --Shakespeare

CAD: Another Blowout Employment Number | Kathy Lien | FX360.com

The good news on the Canadian job front supports the recent IMF forecast of the continuing global recovery. Which way is Fortune's wheel turning?

IMF Survey Magazine from July 8

Five Year Crude Chart and CRB Chart

Below is a link to the CRB Index chart for 5 years.

http://www.barchart.com/chart.php?sym=%24CRB&style=technical&p=WO&d=X&sd=&ed=&size=M&log=0&t=CANDLE&v=0&g=1&evnt=1&late=1&po=1&o1=%24WTIC&a1=on&o2=&o3=&x=35&y=12&indicators=&addindicator=&submitted=1&fpage=&txtDate=#jump


Here is a link to the Federal Reserve's statement regarding M3 issued March 9, 2006


http://www.federalreserve.gov/releases/h6/discm3.htm


What James Turk says appears in a blog

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/7/8_James_Turk_-_Threat_To_The_US_Dollar.html

His concern about M3 no longer being reported is that it makes it hard to compare the numbers to those of the early 1930s. He further complains that Eurodollars, a major M3 component, is particularly difficult to model. While this may be true, it is not relevant to the 1930s because at that time there were no Eurodollars. So how would this number be helpful?

His statistical evidence for inflation is misleading, if not false. Please compare his statements about oil prices and CRB Index with the historical information in the charts above. He fails to mention that oil prices are about 50% lower today than they were at their height, a few months before he started his comparison.

James Turk, founder of goldmoney.com, may be a good gold and silver salesman, but his statistical arguments are not cogent.

HARPEX Container Freight Index

HARPEX Container Freight Index

Despite a 30 day decline in the Baltic Dry Index, the container freight index is rising.

Collin Twiggs had this to say about the rising container index and steel prices today

"This leads me to believe that steel (?) (iron ore and coal?) stockpiled during the worst of the financial crisis is now being used for production, resulting in a down-turn in imports without a corresponding fall in manufactured exports — which remain in a healthy up-trend."

Gmail - Trading Diary: Commodity Exports Fall While Manufactured Exports Rise - jubjub59@gmail.com

Gmail - Trading Diary: Commodity Exports Fall While Manufactured Exports Rise - jubjub59@gmail.com

Search for meaning

I like these video clips of Viktor Frankl.

http://www.youtube.com/watch?v=fD1512_XJEw

http://www.youtube.com/watch?v=v0GWA7xzCa8&NR=1

Economics

A nameless razor fusses.

Today the minutes from the Federal Reserve’s last monetary policy meeting confirmed that central bank officials are in no rush to tighten monetary policy and raise interest rates. According to minutes, central bank officials believe that the economy is moving in the right direction with economic activity expanding at a moderate pace in early 2010.

President Obama Moves Early to Reappoint Bernanke

President Barack Obama on Tuesday announced plans to keep Federal Reserve Chairman Ben Bernanke in his job for another term.

I'm glad. Daniel K. Tarullo is not ready for prime time, in my humble opinion. Despite the opportunity the President had to appoint his own man to this hotseat of power, he chose a greater good. The cachet of credibility.

Introducing Daniel K. Tarullo

When Bernanke's term ends in January, will Obama replace him or keep him?

Although I think it would be better to keep him on, since he is a known quantity in these turbulent financial times, I think Obama will find it very difficult not to put his own stamp on a power position he has a chance to appoint. Since the federal reserve chairman has a term of 4 years, appointed by the president, and subject to Senate confirmation, Obama may not get another chance to make this change. (Although he is sure he will serve a second term at this point.)

If you recall, President Bush brought Bernanke in to serve as his chairman of his Council of Economic Advisors for awhile before deciding on him to replace Alan Greenspan. Bernanke was a governor of the Federal Reserve at the time. Obama's council has no FRB governors on it.
http://www.whitehouse.gov/administration/eop/cea/members/

The president must choose from sitting governors of the Fed. That limits his choice to the following list. Donald L. Kohn, the current vice chairman, Kevin M. Warsh, Elizabeth A Duke, and Daniel K. Tarullo. Although Bernanke would no longer be the Chairman, he would still have the rest of his 14-year term as a governor to serve. So he would still be there in the woodwork.



http://www.federalreserve.gov/aboutthefed/default.htm


Daniel K. Tarullo is the ringer on this board of governors. He took office on January 28, 2009. He is a law professor from Georgetown. He held several senior positions in the Clinton administration. Before that, he served on the staff of Senator Edward Kennedy and practiced law in Washington, DC. He also taught at Harvard Law School and was a visiting professor at Princeton. Not any experience as a central banker. He is Obama's man. But surely not, you say.

Time will tell.

Trading is Like Starting a Fire with Flint & Steel

Trading Forex or futures markets is like starting a fire with flint and steel. A lot depends on your kit and your skill, but a lot depends on the elements. What you have in mind is building a nice fire. That would be a healthy winning trade. Striking your flint and steel together would be taking a position in the market. The tinder would be the amount you are willing to risk on the trade. The kindling would be having your trade go in your favor by the amount of your risk capital (tinder). A log would be the trend. Getting the logs to burn comes about by catching the trend and riding it.

The day-trader is always concerned with striking his flint with the steel and not getting burnt. Sometimes it seems to be raining or windy or both. You don't get much started. The experienced fire starter looks for the best kindling and tinder. Patiently waits for his trade to set up. The impatient one keeps burning tinder and char cloth but all too often the fire dies. Fire starting is a survival skill that can be learned. A forex trader who approaches the market as a problem in fire starting could do worse. We trade our beliefs about the market.

Watch the Markets

I don't know of any substitute for watching the market. When you take your eye off, you might as well be unconscious. But with 24 hour markets, this is not easy. Picking your hours of alert watching is an important choice. You have to decide what you can live with. Some people only look once a week, trading from the weekly charts. Some try to watch every tick for 10 hours in 15 markets simultaneously.

Being committed to certain markets is an important key. My current thinking is that I need to watch 4 to 6 markets intensely from about 6AM EST to around 3PM, with glances at a bunch of others. I give my most intense attention to oil, namely the July Crude Oil Futures contract and the USD/CAD forex pair. My next favorite are the Treasury Bond and 10-year Treasury Note markets. Then comes S&P500 e-mini and a few others.

The commitment is to a continuous monitoring of the market. For me there are emotional reasons why I find this difficult. When I trade, I am emotionally involved. When I close a position there is a kind of emotional disconnect that occurs. Especially if I have a losing trade. I stop watching. But the battle still rages.

Watching the market has to be your number one commitment. Without that, you miss the moves. Orienting yourself to the trend must be a second important duty.

April leading indicators rise; recession to ease - MarketWatch

April leading indicators rise; recession to ease - MarketWatch

Posted using ShareThis

The Euro as Substitute for S and P Futures

As long as we are exploring the concept of trading the USD/CAD pair in lieu of the more expensive crude oil futures, why not test the idea of EUR/USD as a way of trading the S&P futures? This could be interesting. Today it would have worked pretty well.
The charts, compliments of INO, are 5 minute candlestick charts from today.

Basics of Diplomacy

. . . diplomacy is about trying to understand other people. Finding out what will encourage them to agree with you and what will prevent them. Having a well reasoned argument rarely works on its own.

--John Duncan, UK's Ambassador for Multilateral Arms Control and Disarmament

Somehow the forces that move the currency markets might yield lessons to the basics of diplomacy. Agreement could be when the market price is not moving--equilibrium. Or it could be when the market is moving--trend. The markets are composed of people. What will encourage them to agree with you? Support and resistance? Trading ranges. What will prevent them agreeing? Loss of equilibrium. Thus the currency trader studies diplomacy in order to succeed. The market is like negotiating a treaty. Could be a chapter in Elephant Theories.

What Action Are You Creating Today?

"Here I am planting the millionth tree. What action are you creating today?"
This picture of Governor Schwarzenegger comes from twitter http://twitpic.com/3slai

When Trading the USD/CAD as a Substitute for Crude

The 85% correlation between the USD/CAD and the price of crude oil makes trading the Loonie a convenient substitute for the relatively expensive crude oil futures contract. Each might go about this in his own way, but I am thinking it would be a good idea to keep on eye on the crude futures chart and the Loonie both, when attempting this strategy.

That way, when your position in the USD/CAD starts going wrong, you can check to see if the crude prices are moving a different way than you wanted and take corrective measures. For example, this morning, oil prices were up, Canadian trade balance was up. Loonie was stronger. It tested $1.1550 and bounced. I expected it to do a normal bounce and continue settling lower, but it bounced over 100 pips, thus stopping me out. Crude prices had fallen from the time of the bounce. I wasn't watching. So now I will watch. Just a tip.

I seem to be the kind of trader that would benefit from the discipline of a no-loss stop once the trade has gone in my favor say 30 or 40 pips. While this is not entirely satisfactory, it has the advantage of not losing money on the trade.

Shoulda Woulda Coulda

According to this video by Oliver North, one of the five principles for a successful life is never play Shoulda Woulda Coulda. I didn't know he was a forex trader. Do you think he was reading my mind?

http://www.youtube.com/watch?v=_yFUB-fIg04&eurl=http%3A%2F%2Fwww.5principlesoflife.com%2FpIndex.html&feature=player_embedded

Three Little Rules

Three little rules

Jamie’s rules for forex traders:

1. Understand the basics of technical analysis. You don’t need to be a quant-geek to be successful, but understanding the first ten chapters or so of the classic Technical Analysis of the Futures Markets: A Comprehensive Guide to Trading Methods and Applications by John J. Murphy would be a great start.
2. When the fundamental and technical outlooks for a currency differ, always side with the techs.
3. When the fundamental and technical outlooks for a currency converge, go for it! Take a more aggressive position than normal.

Jamie Coleman of ForexLive.com offers these pearls. I ordered John J. Murphy's book, as suggested in Rule 1, and was pleased to learn that Chapter One, Philosophy of Technical Analysis, reveals the source of Jamie's Rule 2.

The problem is that the charts and fundamentals are often in conflict with each other. Usually at the beginning of important market moves, the fundamentals do not explain or support what the market seems to be doing. It is at these critical times in the trend that these two approaches seem to differ the most. Usually they come back into sync at some point, but often too late for the trader to act.

One explanation for these seeming discrepancies is that market price tends to lead the known fundamentals. Stated another way, market price acts as a leading indicator of the fundamentals or the conventional wisdom of the moment. --p. 5

My own recent experience with the current bear market rally in stocks had me taking quick profits and moving back to the sidelines, waiting for the inevitable correction. It still hasn't come. I stayed out, based on the fundamentals not improving much. Yet the trend took off and left me there waiting for the correction. In this case, the wisdom of rule number two becomes apparent. Market price did indeed lead the known fundamentals. AIG went from 36 cents to $2, etc.

Jamie Coleman's 'little rules' are expressed so simply, they embody the quality of the Italian word, sprezzatura, a term that originates from Castiglione’s The Book of the Courtier. It is defined as “a certain nonchalance, so as to conceal all art and make whatever one does or says appear to be without effort and almost without any thought about it.

These nonchalant rules helped me to sort out the relative importances of fundamental and technical analysis when they are in conflict. Thanks, Jamie.

http://en.wikipedia.org/wiki/Sprezzatura

I picked up a nice used copy of John J. Murphy's classic at my favorite shopping place. http://www.abebooks.com/

High Traffic Business and Econ Websites

Here is some good information. What do all these people know
that I don't?

http://www.gongol.com/lists/bizeconsites/

The Quotable Gerry Davies

Gerry Davies of ForexLive provides very colorful commentary from the UK. He lives in East Anglia. Gerry Davies has over twenty three years experience in global financial markets. He has worked as a market analyst for twelve years, the majority of that time employed by Thomson Financial. Gerry spent three years working in the company’s London office, before relocating to the U.S. where he worked out of the Boston office holding the position of Regional Director Foreign Exchange.

Prior to his work as a market analyst, Gerry spent eleven years trading foreign exchange and money markets at a number of international banks, including Canadian Imperial Bank of Commerce, United Overseas Bank, Credit Commercial de France and Manufacturers Hanover Trust Co.

His perspective on the markets is invaluable. I liked this quote from today. "Anyways, I’m a borne again optimist, and I’m increasingly convinced the worst is over regarding the global economic crisis (remember Gerry, think HAPPY thoughts.)"

A Way To Trade Oil

Kathy Lien, that incisive and energetic currency analyst, said something today I found especially interesting. "Over the past year, the positive correlation between oil prices and the Canadian dollar / U.S. dollar currency pair is more than 95 percent."
Seems like someone whose account wouldn't accommodate an oil future's contract, may be able to trade the Canadian Dollar instead. The trick is in finding a time frame and stop that keeps you following the trend without whipsawing you all the time. I find the Loony to be very choppy.

For a look at her chart, click on the link.

cadoil050509.jpg (JPEG Image, 647x354 pixels)

Jame Coleman says Tell My Friends

I followed Jamie Coleman's commentary closely a few years ago when he was with Thompson Financial. I lost touch with him for awhile, but found him again at www.ForexLive.com. This is good news. I think you will like his insightful observations. Sometimes he seems to know the future. But of course, no one does.


Jamie Coleman

Prior to launching ForexLive, Jamie Coleman spent nearly twelve years at Thomson Financial as managing analyst of the institutional forex product IFR Forex Watch. In 2007, he left the Forex Watch team to launch a retail forex-oriented site which became the popular Reuters FX Hub. FX Hub fell victim to cost cutting after the sub-prime mortgage crisis swamped the financial markets in 2008.

Prior to his work as a market analyst, Jamie spent 12 years trading spot and forward foreign exchange at a number of major banks including, ABN Amro, ING and NatWest USA. His biggest career break as a trader, being hired as chief dealer at Baring Securities in New York in February 1995, was derailed by Nick Leeson, one of the great rogue traders of market lore.

Jamie is a native New Yorker and graduate of Georgetown University.

All Atwitter

My blog is now upgraded and I hope to have a Twitter feature soon. I hope you enjoy the new look and functionality.

Halsey's Poetry

A friend of mine has been writing poetry for years, but didn't show much of it until very recently. Poetry writing is so personal that it takes courage to 'show off' (believe me, I heard dat.)

If he consents, I will publish a link to his blog so my many readers can experience these thoughtfully crafted verses.

Peter Drucker Article

Dr. Peter Drucker, the dean of management consultants, met this past winter with members of the US Congress. His remarks are relevant and instructive as we ponder the potential of government in this particularly unpromising election year. We've excerpted them from What's Next: A Newsletter of Emerging Issues and Trends, which is published by the Congressional Clearinghouse on the Future. You can reach the Clearinghouse at 555 House Annex 2, Washington, DC, 20515 Tel. 202/226-3434.

Every 200 or 300 years, there is a very short period when the world suddenly changes - the way it does in a kaleidoscope. This is one of those periods when the old solutions no longer work. One can clearly see new priorities.

Since the French Revolution, we have believed in what I call "salvation by society," the belief that government and society could basically mold the human being. Communism was the extreme manifestation of this secular religion. In this country, that belief peaked in the Kennedy years, and by now, it is pretty much gone. It is gone in the rest of the world, too. And so we have a world that has no ideologies. We can expect that within 20 or 30 years, we will have major new political alignments. In this country, our parties have never been ideological. [...]

For 200 years, all the debates have been over what should be done. Since 1792, nobody has asked, what can government do? Now, for the first time, we are asking the question. Government, like any other institution, has core competencies. We have learned from other institutions what happens when institutions try to do things that don't fit their competence - they usually end up flat on their belly. Of all government [social] programs of the last 40 years, not one has worked. Head Start is the only exception. This is not an American phenomenon; it is worldwide. Japan is an exception, [but] it is beginning to hit Japan. [...]

We started the Core Management Foundation one and one-half years ago with the avowed aim of tripling the effectiveness of nonprofit institutions and doubling their share of the GNP. Those are realistic, but not easy, goals.

One of the great movements in my lifetime among educated people is the need to commit themselves to action. Most people are not satisfied with giving money; we also feel we need to work. That is why there is an enormous surge in the number of unpaid staff, volunteers. The needs are not going to go away. Business is not going to take up the slack, and government cannot.

I think we will depend on the nonprofits. The nonprofit sector is the largest employer in the American economy.

Productivity [in manufacturing and agriculture] has increased 50-fold in the last century ... and is growing as fast as ever. [Now] both sectors together employ fewer than one-sixth of the labor force. [...]

Knowledge has become the central resource. [But] the productivity of knowledge workers is incredibly low. Does anybody here believe that the teacher of 1991 is more productive than the teacher of 1900? The productivity of service workers is even lower.... Over three-fourths of our workforce are service and knowledge workers. By the end of the century, 90 per cent of total workers will be knowledge and service workers. Productivity of knowledge work and dignity of service work are the two great priorities.

Please support this web site ... and thanks if you already are!

All contents copyright (c)1992, 1996 by Context Institute

FRB: Speech, Bernanke--Monetary Aggregates and Monetary Policy at the Federal Reserve: A Historical Perspective--November 10, 2006

FRB: Speech, Bernanke--Monetary Aggregates and Monetary Policy at the Federal Reserve: A Historical Perspective--November 10, 2006

Ideas & Screening | Reuters.com

Ideas & Screening | Reuters.com

FRB: Monetary Policy Report to the Congress - February 15, 2006

FRB: Monetary Policy Report to the Congress - February 15, 2006

Follow the link to see the text of the new Fed Chairman's first report to the Congress. I can tell you that the currency markets are very interested.

U.S. Treasury - Treasury International Capital System - Home Page

U.S. Treasury - Treasury International Capital System - Home Page

The current account deficit is still being comfortably funded despite news media hysteria. US securities of $185 billion were bought with international capital inflows last year above and beyond the current account deficit. --tb

FRB: Speech, Greenspan--Acceptance of honorary degree from New York University--December 14, 2005

FRB: Speech, Greenspan--Acceptance of honorary degree from New York University--December 14, 2005

"Open and free markets are the antithesis of violence." I like that quote.

Tai Chi Currency Trading

Stay out of the market and don't get hit. Stick and follow the charging elephant.

FRB:Speech, Bies--Productivity and economic outlook--January 18, 2006

FRB:Speech, Bies--Productivity and economic outlook--January 18, 2006

New Zealand Banker Predicts Euro's fall to $1.19 in a week

Bloomberg.com: Currencies: "The euro will probably decline because it has been unable to extend its 2 percent advance this year through a key level on charts traders watch to predict price movements, said Sue Trinh, a currency strategist at Bank of New Zealand Ltd.

``The continued failure to breach topside resistance at $1.22 will see some investors turn bearish on the single currency,'' said Trinh, who is based in Wellington. A resistance level is a price where sell orders may be clustered.

The euro may fall to $1.19 within a week, she said"

Currencies: Dollar lifted late in day after Guynn speech - Financial - Financial Services - Currencies

Currencies: Dollar lifted late in day after Guynn speech - Financial - Financial Services - Currencies: "'Any time you have credible evidence of terrorism in the U.S. or abroad, it works against the dollar,' said Michael Woolfolk, senior currency analyst at Bank of New York."

Bloomberg.com: Market Insight

Bloomberg.com: Market Insight

Click on the red text to go to the link. It's kind of a report of who won the superbowl of currency forecasting. Merrill Lynch, which won in 2004, fell to 38th this year. Merrill Lynch is the sixth-biggest currency trader on the planet.

Buffett and major traders still see a dip in dollar - Marketplace by Bloomberg - International Herald Tribune

Buffett and major traders still see a dip in dollar - Marketplace by Bloomberg - International Herald Tribune

Buffett reduced his bets on the dollar's decline to $16.5 billion from $21.5 billion in June, according to a statement from Berkshire Hathaway on Nov. 4. The company, which had $926 million of pretax currency losses in the first half, used forward contracts, or agreements to purchase or sell a currency in the future at a preset price.

. . . "The story of the current account deficit allowed traders and analysts to justify any currency prices," said Steve Pearson, chief currency strategist in London at HBOS, a large lender. "Sentiment got overly bearish on the dollar."

Pearson was the most accurate forecaster of exchange rates in the year that ended on Sept. 30.

For 2006, he expects the euro to fall to $1.08.

Candlesticks, Bamboo Sticks

.
Originally uploaded by iiiink.

Currency trading using candlestick charts is similar to observing a bamboo thicket.
But without the serenity. A 30-minute candlestick chart sometimes gives a pattern like the picture. When it does, the market is consolidating quietly. But when the momentum shifts, one must act accordingly. King Kong may have entered your quiet grove.

Fine Line

Icy Bridge
Originally uploaded by WisDoc.

Sometimes trading currency reminds me of this icy bridge. You can see your way ahead for a few feet and it is treacherous, but beyond that it gets mysterious. As Paul McCartney says in his recent song, Fine Line: There is a fine line/ Between recklessness and courage/ It's about time/ You understood which road to take/ It's a fine line/ And your decision makes a difference/ Get it wrong and you'll be making a big mistake//

Meat Slicer

Meat Slicer
Originally uploaded by enuwy.

My year in England spanned fall 1975 to fall 1976. I enjoyed the local traditions, and one especially was the costume of the butcher. I'm glad to see that some things never change. This photo was uploaded to the web today. Trading currency markets is a lot like being a butcher. You take the raw meat and put it in little packages for your customers. It is a traditional occupation with no end in sight. Some people find it exciting?

PIMCO Manages over $463 billion in Assets

Bill Gross, managing director of PIMCO, widely regarded as the country's leading fixed income authority, may be worth a listen when he publishes his outlook.

FRB: Speech, Greenspan--Budget policy--December 2, 2005

Well worth reading and studying. Alan Greenspan is having a farewell party in London this weekend at the G-7 meeting. The text is at www.federalreserve.gov

Economy growing but at uneven pace: Beige Book - Banks - Financial - Industrial, Diversified - Retail - Financial Services - Industrial Products & Ser

Just in case you thought the Beige Book was something to ignore. Perhaps beige is not your favorite color? The Fed does not wave red flags. That would alarm the high-strung financial community too much. Most of what they say is very neutral. The beige flag is about all you will get--thank goodness.

PIMCO Bonds - IO December 2005

I learned today that William H. Gross, Managing Director of PIMCO (Pacific Investment Management Company) is known as a Bond Guru.

He has just published at www.picmo.com his investment outlook for the next year. One could do worse as far as prophesies go. It is only 4 pages. Well worth a look.

Raghee Horner's Book, ForeX Trading for Maximum Profit

EC_ProductDetail

Bush Names Bernanke to Replace Greenspan

U.S. stocks logged their biggest one-day gain in six months as Bernanke's nomination laid to rest market uncertainty over who would by Greenspan's replacement. Bond prices ended lower on worries a Bernanke Fed could take an easier line on inflation, despite his assurances on Monday that he would steer the central bank along Greenspan's course.

As if these yahoos know why the market went up or down today. So much pretended knowingness.

Great New Picture of the Author

Larry Williams calls The Zurich Axioms "The best book I have had the joy to read on speculation."

The Zurich Axioms Article at Michael Covel Blog

Larry Williams in his book, Trade Stocks & Commodities with the Insiders--Secrets of the COT Report, mentions that Max Gunther's 1985 book The Zurich Axioms is "The best book I have had the joy to read on speculation." A fingernail version is available on this blog. Check it out.

But he paid it all back with interest on Monday!

On Monday, October 10, Phillip Bennett, CEO of Refco the futures broker, was placed on leave of absence at the Board's request. It was announced that an internal review found that he had failed to disclose owing the company around $430 million. Refco stock had closed around $28 on Friday. It closed on Monday less than $16. Refco said it must restate earnings back to 2002 and delay filing its next quarterly report, originally scheduled for next week.
Bennett was said to have repaid the $430 million with interest Monday.

On Tuesday, October 11, a story about Mr. Bennett and Refco appeared in the Financial Times and many other places. On the same day,

Federman & Sherwood Announces That a Securities Class Action Lawsuit Was Filed Against Refco, Inc.
On October 11, 2005, the class action lawsuit was filed in the United States District Court for the Southern District of New York against Refco, Inc. (NYSE : RFX) . The complaint alleges violations of federal securities laws, Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5, including allegations of issuing a series of material misrepresentations to the market which had the effect of artificially inflating the market price. The class period is from August 11, 2005 through October 7, 2005.

Plaintiff seeks to recover damages on behalf of the Class. If you are a member of the Class as described above, you may move the Court no later than Monday, December 12, 2005, to serve as a lead plaintiff for the Class. However, in order to do so, you must meet certain legal requirements pursuant to the Private Securities Litigation Reform Act of 1995.

If you wish to discuss this action, participate in this suit, or have any questions or concerns regarding this notice, or preservation of your rights, please contact: William B. Federman FEDERMAN & SHERWOOD 120 N. Robinson, Suite 2720 Oklahoma City, OK 73102 (405) 235-1560/FAX: (405) 239-2112 Email to: wfederman@aol.com - http://www.federmanlaw.com

SOURCE Federman & Sherwood William B. Federman of Federman & Sherwood, +1-405-235-1560, or fax, +1-405-239-2112, or wfederman@aol.com http://www.prnewswire.com

That's pretty quick, William Federman of Oklahoma City! The stock closed Tuesday at less than $14.



Warning Issued to Past and Current Shareholders of Refco, Inc. by the Law Firm of Lerach Coughlin Stoia Geller Rudman & Robbins LLP
On October 11, 2005, the law firm of Lerach Coughlin Stoia Geller Rudman & Robbins LLP ("Lerach Coughlin") (http :) (http :) filed a complaint on behalf of all those who purchased the common stock of Refco, Inc. ("Refco" or the "Company") (NYSE :) (NYSE : RFX) . The complaint alleges a series of false and misleading statements associated with the company's accounting practices and follows a lengthy investigation by Lerach Coughlin. Since Lerach Coughlin filed a complaint, The Law of Firm of Schatz & Nobel has issued a press release claiming to offer "information" about joining the suit. Be advised that this firm has not even filed a complaint. Rather, the press release appears to be an advertisement designed to solicit clients so that the firm can participate in this case.

You too are very quick on the draw, Lerach!

On Tuesday, the New York-based Refco said it had voluntarily contacted the Securities and Exchange Commission, the U.S. Commodity Futures Trading Commission, the New York Stock Exchange and other regulators, and was co-operating with their inquiries.

On Wednesday, October 12, Phillip Bennett was arrested by federal prosecutors and charged with securities fraud in U.S. District Court in Manhattan a day after Refco announced that a $430-million-US debt to the company owed by a firm controlled by the ousted chairman and chief executive was hidden through secret transfers to an unnamed customer account.

Securities Fraud Class Action Against Refco, Inc. is Filed by Scott+Scott, LLC
Scott+Scott, LLC (http :) represents investors in a securities class action filed today in the United States District Court for the Southern District of New York against Refco, Inc. ("Refco") (NYSE :) (NYSE : RFX) and certain of its officers and directors. Refco securities purchasers between August 11, 2005 and October 10, 2005, inclusive (the "Class Period") are putative class members. Refco provides execution and clearing services for exchange-traded derivatives, and brokerage services in the fixed income and foreign exchange markets in the United States, Bermuda and the United Kingdom. Refco went public via an initial public offering in August 2005.



Wechsler Harwood LLP Files Securities Class Action Suit Against Refco, Inc. -- RFX
Wechsler Harwood LLP today announced that it has filed a Federal Securities fraud class action suit on behalf of all other persons or entities who purchased or otherwise acquired Refco, Inc. ("Refco" or the "Company") (NYSE :) (NYSE :RFX) common stock pursuant or traceable to the Company's Initial Public Offering ("IPO") on August 11, 2005, and on behalf of all other persons or entities who purchased or otherwise acquired Refco common stock between August 11, 2005 and October 10, 2005, both dates inclusive (the "Class Period").

The action entitled, FrontPoint Financial Services Fund, LP. v. Refco, Inc., et al., Case No. 05-Civ-8663 (DC)(RHM), is pending in the United States District Court for the Southern District of New York seeks to pursue remedies under both the Securities Act of 1933 (the "Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act") and names as defendants, the Company, certain of its senior officers and directors, as well as its commercial/investment bankers/underwriters involved with the Company's IPO. A copy of the complaint can be obtained from the Court or can be viewed on Wechsler Harwood web site at: www.whesq.com.



Pomerantz Haudek Block Grossman & Gross LLP Commences Securities Class Action Against Refco, Inc. -- RFX
The Pomerantz Firm (www.pomerantzlaw.com) has filed a class action complaint in the United States District Court, Southern District of New York, against Refco, Inc. ("Refco" or the "Company") (NYSE :) has filed a class action complaint in the United States District Court, Southern District of New York, against Refco, Inc. ("Refco" or the "Company") (NYSE :) (NYSE :RFX) , two of its officers, certain underwriters and the Company's outside auditor. The class action was filed on behalf of public investors who purchased the common stock of Refco during the period of August 11, 2005 and October 7, 2005, inclusive (the "Class Period"). It includes those investors who purchased the common stock of Refco pursuant and/or traceable to the Company's initial public offering on August 11, 2005 ("IPO").



Milberg Weiss Announces the Filing of a Class Action Suit against Refco Inc. and Certain of Its Officers and Directors on Behalf of Investors
The law firm of Milberg Weiss Bershad & Schulman LLP announces that a class action lawsuit was filed today on behalf of purchasers of the securities of Refco Inc. ("Refco" or the "Company") (NYSE :) (NYSE : RFX) between August 11, 2005 and October 7, 2005, inclusive (the "Class Period"), including purchasers of the Company's shares pursuant or traceable to the Company's initial public offering (the "Offering") on August 11, 2005. The action seeks to pursue remedies under the Securities Act of 1933 ("Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act").

Shares dropped 28% on Thursday morning before trading was halted by the New York Stock Exchange.

According to a Bloomberg story today, to remain out of jail, Bennett was forced to pledge his Park Avenue apartment in Manhattan and his country horse farm in New Jersey, along with $55 million in a bond and cash.

FRB: Speech, Greenspan--Closing remarks--August 27, 2005

FRB: Speech, Greenspan--Closing remarks--August 27, 2005

FRB: Speech, Greenspan--Reflections on central banking--August 26, 2005

http://www.federalreserve.gov/BoardDocs/speeches/2005/20050826/default.htm

Thinking With Mergers and Acquisitions in terms of Foreign Exchange

FX Power Student center: "Mergers and Acquisitions

What are they?

� M&A Deals -> Average 1% Appreciation in Target's Currency

� Every $1 Billion Dollars -> 0.5% Positive Impact on Target's Currency

Mergers and acquisitions (M&A) involve the combining of two corporations or the acquisition of a part of a corporation by another corporation. Large cross border M&A activity of greater than US$500 million often has an impact on the Foreign Exchange market. A study done by the Bank for International Settlements (BIS) disclosed that large M&A deals cause the target corporation's domestic currency to appreciate 1%, on average, relative to that of the acquiring corporation. In fact, the report finds that in the period immediately after the deal is announced, there is generally a strong upward movement in the target corporation's domestic currency (relative to the acquirer's currency). Fifty days after the announcement, the target currency is then on average 1% stronger. Based upon this sample, every $1 billion deal has an approximately 0.5% positive impact on the target currency. The study also showed this impact to peak at around 5%.

How are they used in Foreign Exchange?

� All Cash Deal -> Most Significant Impact � All Stock Deal -> Minimal Impact

� Stock & Cash -> Impact Based Upon % of Cash

It is very important for traders to consider the specifics of the deal itself. For instance, deals comprised entirely of stock swaps rarely have an impact on the FX market because there is no foreign exchange transaction taking place. On the other hand, deals involving large cash transfers strongly affect the FX market. Deals involving a mixture of both elements require a more in depth assessment of the relative value of the cash portion of the transaction and whether or not it is significant enough to move the markets.

The following charts are examples of two deals done in 2003 and another in 2000. In each of the three examples, the target corporation's currency appreciated significantly against the acquirer's currency in the months following the announcement, which illustrates how M&A transactions move markets."

Earnings Estimate Revisions are the most powerful force impacting stock prices.

Go to the link and read this free report. The Zack's Rank--Harnessing the Power of Earnings Estimate Revisions.

Food for thought.

Katrina and the Price of Oil--The Dollar

Katrina may wreak considerable damage to the oil drilling rigs in the gulf. She may possibly damage the refining capacity in the area as well. This could temporarily jimmy the supply and demand for oil, causing an increase in the price of oil. This may be bearish for the dollar near term.

Or not. It's still a crapshoot.

Tom Buchanan's Trading Room

Looking into the future, which is always a crapshoot, but big and small business always have to do it, Goldman Sachs has raised its estimate of average oil prices for the next five years from $45 (its previous estimate set earlier this year) to $60 a barrel for West Texas Intermediate Crude. Compare this to Barclay's Capital which forecasts that WTI will remain above $50, Merrill Lynch forecasts $45 and Deutsche Bank estimates $38-40. Thus saith Friday's Financial Times.

It also says that while cash reserves have been accumulating in the oil industry, the rate of reinvestment has not yet picked up. The cost of development projects has doubled and is now in the tens of billions. With that much money on the line, the future forecasts have to be fairly accurate. Where is Nicky Engel when you need him?

What do it mean?

Bernanke Confirmed by Senate

Latest Business News and Financial Information | Reuters.com

FRB: Testimony, Greenspan--The economic outlook--June 9, 2005

FRB: Testimony, Greenspan--The economic outlook--June 9, 2005


We are all ears, O wise one. Your words move markets as usual. You calm our anxious hearts with the voice of reason. The dollar resumes its rise.

Gann's Advice

"You should learn to trade on knowledge and eliminate fear and hope. When you are no longer influenced by hope or fear, and are guided by knowledge you will have the nerve to trade and make profits.

". . . If you study price movements correctly, they will tell you more about what the market is going to do than any broker, newspaper, or so-called inside information. The time period is the most essential, because time tells what prices are going to do.

"LEARN To Be Independent: The greatest help that I can give you is to show you how to help yourself. If a man or woman depends upon others for advice, or for inside information and follows what others think about Commodities, he will never make a success in speculation--or anything else. You must learn to be independent. Learn to do by doing, and to know by study and application. When you are following something that you KNOW, you will have the confidence and courage to be successful.

"The most important thing outside your health for you to protect is your money. Therefore, take time to study. Prepare yourself to handle your money yourself and do not depend forever and entirely upon others.

"Knowledge is not enough. You must put into use what you learn in order to benefit. You will learn by doing. Action and execution at the proper time bring profits.

"NERVE. A man can have the finest gun in the world, but if he hasn't the nerve to pull the trigger he will never kill any game. You can have all the knowledge in the world, but if you haven't the nerve to buy and sell you cannot make profit. Knowledge gives a man nerve, makes him bold and enables him to act at the right time. When a man fails to buy or sell at the right time, the result is that he becomes afraid. Fear is a detrimental influence. When he has too much nerve and buys on hope at the top, he is guessing. When influenced by hope alone, he cannot expect profits.

"GOOD Health. . . . I have tried to trade when I was in bad health, always resulting in failure, but when I am in good physical condition, I act at the right time, making a success. If your health gives away, the most important thing is to work to get your health back in perfect shape, for HEALTH is WEALTH.


"To stand in a brokerage office or sit in a brokerage office and try to beat the market by reading the ticker and watching every quotation that comes out, is the most foolish thing a man could do, and the greatest waste of time, and the man who thinks that is the way to make money trading in commodities is making the mistake of his life. Those of us who have tried it, know. Expert tape readers are few and far between. It is the study of a lifetime, and while the tape does show the trend of the market, there are so many minor changes and quick reversals that the average man cannot tell whether the main trend has turned or whether it is only a minor change that will last a few hours, a few days, or a few weeks before the main trend is resumed again.

"You make a greater success when you sit at home or in your office, quietly follow your charts and trade on definite indications.

"I am not guessing or giving you a wild theory. I have gone through the mills. I have had every ticker in my office for years. I have thought I could not get along without them, and lost plenty of money by having them in the office and getting in wrong because the ticker showed some minor trend and threw me off the main trend which I had figured. I made a greater success when I took all the tickers out of my office and have not had a ticker in my office for the past ten years.

". . . A man cannot watch the tape and not be influenced by hope or fear.

--W.D. Gann, 1942, How To Make Profits Trading In Commodities


I think he's trying to tell me something. When I read him in 1985 I thought he had some good stuff to say, but after 20 more years, he seems wiser.

--

US Dollar--What Are The Most Market-Moving Economic Indicators?

DollarMarketMovers.pdf (application/pdf Object)


Thanks to Kathy Lien, Refco's Chief Strategist, for confirming in spades my own market observations of the past few months. Namely, that the market adjusts to economic news releases very quickly, usually within 10-20 minutes of the data release. For the small-time currency trader like myself, this suggests a strategy I call 'fishing'.

You have to be at the fishing hole ready to go, just before the news event, but not yet fishing. Then, with the release of the news, quickly throw your line in the water depending in which way the data indicates the market will go. Or which way the market is going as revealed in the first five minutes. You should have enough excitement during the succeeding 15 minutes to equal any fishing. Pull your line out. Maybe throw it in again later.

FRB: Speech, Greenspan--Derivatives markets--May 5, 2005

FRB: Speech, Greenspan--Derivatives markets--May 5, 2005

Read Chairman Greenspan's speech on derivatives here. Click on link.

FT.com / Currencies - Asian currencies withstand Chinese talk

FT.com / Currencies - Asian currencies withstand Chinese talk


Mr. Johnson puts forth the common wisdom regarding the Chinese renminbi revaluation and its effect on the currencies. See link.

"The yen drew support from continuing speculation of a renminbi revaluation by China, a move seen as heralding a period of broad Asian currency strength. . . .

"However, with the yen having already rallied from Y108.80 against the dollar in the past four weeks, Chris Towner, consultant at risk manager HIFX, argued it could be a case of 'buy the rumor, sell the fact.' The yen may have already staged its Chinese revaluation rally and could weaken when Beijing finally moves."

Time will tell, meanwhile last Friday's Commitment of Traders report from the CFTC shows the commercials are long the yen by about 31,000 contracts on the Merc. Moi? I'm sitting on the sidelines until after tomorrow's non-farm payroll report.

Philly Fed Surprise Bullish for Dollar

http://quote.bloomberg.com/apps/news?pid=10000103&sid=anEJaU2BEfvk&refer=news_index

The consensus was for a rise to 14.5. Instead, the number was 25.3, indicating stronger than expected business climate. The dollar strengthened immediately. A surprise will do that. Others attribute the dollar's sudden strengthening to a resurfacing of the rumor that Osama Bin Laden has been captured. Take your pick. In the past hour the dollar has improved against the Euro by nearly 100 pips.

FRB: Speech, Ferguson—-U.S. Current Account Deficit: Causes and Consequences—-April 20, 2005

FRB: Speech, Ferguson—-U.S. Current Account Deficit: Causes and Consequences—-April 20, 2005


This is very worthwhile reading. It includes footnotes, charts, and comes from a good source. See his bio at the link

What are the Bretton Woods Institutions?

Background to the issues

This link defines the term and gives background to the issues.

UofT G8 Information Centre: G7 Finance Ministers

UofT G8 Information Centre: G7 Finance Ministers

I find this website at University of Toronto gives you the statements from G7 meetings. You can read for yourself and see what they say without the spins from the helpful news media.

FRB: FOMC Minutes--March 22, 2005

FRB: FOMC Minutes--March 22, 2005

The minutes are now available to the public. That means me and you. Read them at the link. Find out if interest rates are going up faster or not. These minutes can cause the currency markets to twitter or untwitter.

Commitments of Traders

http://www.cftc.gov/cftc/cftccotreports.htm

Commitments of Traders may not sound at first like a technical term. It may sound like a term describing a relationship of questionable monogamy. Nevertheless, the Commitments of Traders, or COT, as it is sometimes called, is a weekly report published by the Commodities Futures Trading Commission (a government agency). It contains a plethora of information both for the most recent reporting period and historical data back to 1986. It is available on line at the link.

Most valuable is probably the information concerning the Commercial holdings. If I were considering taking a position in a currency, I would want to know if the commercials are net long or short that currency. In the Yen, for example, the commercials would be major financial institutions. They are usually on the right side of the market. So if you are interested in seeing what the big money is doing, look there. You could do as the commercials and be considered to have some financial wisdom. As of April 5 the commercials were net long the Yen by a wide margin. Last month they were net short through March 15.

FRB: Testimony, Greenspan -- Regulatory reform of the government-sponsored enterprises -- April 6, 2005

FRB: Testimony, Greenspan -- Regulatory reform of the government-sponsored enterprises -- April 6, 2005

These remarks did not cause the dollar to strengthen. But, as always, they are an education. For example, here we learn that the combined portfolios of Ginnie Mae and Fannie Mae were $1.38 trillion, or 23 percent of the home mortgage market as of 2003. Doing the math, the 2003 home mortgage market was $6 trillion!

FRB: Speech, Greenspan--Energy--April 5, 2005

FRB: Speech, Greenspan--Energy--April 5, 2005

Greenspan Appears in San Antonio (via satellite). His remarks did not push the dollar higher today. But he wasn't talking about raising interest rates.

William Poole's Saturday Remarks at Princeton University

Latest News and Financial Information | Reuters.com

William Poole, president of the Federal Reserve Bank of St. Louis, is known as an inflation hawk. He is also one of the 20 most influential people in Foreign Exchange markets. So when he speaks, sometimes the market moves. When the non-farm payroll number was less than expected, the market was wondering if the Fed would be able to raise interest rates more quickly than the quarter point "measured pace" of the past few months. Poole's remarks seem to indicate a yes, to the hyper imagination of the currency market.

Lately, remarks from the Fed have been bullish for the dollar. With several appearances from Alan Greenspan this week, I predict a good week for the greenback.

Institute for Supply Management figures can move the market

ROB042005.pdf (application/pdf Object)

The dollar is stronger today. After the non-farm payroll report last week came out weaker than expected--a number which creates the most volatility in the market of anything that happens monthly--the continued strength in the dollar is something of a puzzle.

Enter the ISM number--a measure of the condition of the economy. The higher than expected ISM number shows the American economy is expanding. For those who try to explain the market's movements in terms of the flow of economic indicators through the news, the ISM number is something to watch more closely than the screaming headlines. Check out the link.

Origin of Cable as synonym for British Pound?

What was the Exchange Rate Then?

A little economic history for you. My take on it is that the pound is called 'cable' because the foreign exchange market was mostly cable transfers of British pounds up until 1913 or so.

The Sharpe Ratio

The Sharpe Ratio

From the horse's mouth, the skinny on the Sharpe Ratio. The higher the better.

HedgeIndex - Home Page

HedgeIndex - Home Page

The Credit Suisse First Boston/Tremont Hedgefund Index is the largest asset-weighted hedge fund index. It is broadly diversified, encompassing around 400 funds across ten style-based sectors, and representative of the entire hedge fund industry. This industry has grown to about a trillion dollars from more modest beginnings in 1949 with the fund of Alfred Winslow Jones. In short, this page gives you a snapshot of that whole hedgfund thang you keep hearin bout.

Swiss National Bank websit

SNB BNS Schweizerische Nationalbank. Banque nationale suisse. Swiss National Bank. Banca nazionale swizzera.

The place to find the speeches of Jean-Pierre Roth is at this website.

The link shows his latest. http://www.snb.ch/e/aktuelles/index.html?file=referate/text_referate1.html

Philipp Hildebrand, the 41-year-old Harvard trained, member of the Governing Board,
has representative speeches here also. His February 4, 2005, speech on Hedge Funds is there.

Welcome to the Bank of England website

Welcome to the Bank of England

This website is the convenient place to find the remarks of Mervyn King, Governor Bank of England. You might say this website is the virtual Old Lady of Threadneedle Street.

Statement by the Hon. SADAKAZU TANIGAKI,Governor of the Fund and the Bank for Japan,at the Joint Annual Discussion

Statement by the Hon. SADAKAZU TANIGAKI,Governor of the Fund and the Bank for Japan,at the Joint Annual Discussion

Here is an example of Japanese Finance Minister Tanigaki's thoughts.

Bank of Japan Speeches and Statements

Speeches and Statements

Governor Toshihiko Fukui's speeches can be found at this site.

ECB: Monthly Bulletin

ECB: Monthly Bulletin

The European Central Bank Monthly Bulletin is available online at the link above. Maybe not as riveting as Stephen King, but good background for the person interested in the world of foreign exchange. A 200-page treasure trove of information each month.

The 20 Most Influential People in FX

20MostInfluentialPeopleinFXRefco.pdf (application/pdf Object)

This article by Boris Schlossberg of Refco is well worth reading. Among the many things he says is the following quote about Gordon Brown, UK Chancellor of the Exchecquer. "Mr. Brown is considered to be the most talented and effective public servant in the G-7 world. Under his stewardship UK has continued its streak of 46 consecutive quarters of economic growth, remaining the only G-7 country to avoid recession since the year 2000."

European Central Bank and the Stability Pact

Bloomberg.com: Bloomberg Columnists

French and German budget deficits have breached the 3 percent level agreed upon in the so called stability pact. Now what?

Consumer Price Index Summary

Consumer Price Index Summary

This morning's CPI was up .6 percent before seasonal adjustment. After seasonal adjustment it met the expectation of .4 percent. This was mildly bullish for the dollar for about 15 minutes. Afterwards, the trading range returned to what it was before the announcement. For more information on the Consumer Price Index, investigate at the Bureau of Labor Statistics website, www.bls.gov

FRB: Press Release--FOMC statement and Board discount rate action--March 22, 2005

FRB: Press Release--FOMC statement and Board discount rate action--March 22, 2005

The release of this statement caused the dollar to strengthen immediately by close to a penny against the British Pound and about a penny against the Euro. Thus spaketh Chairman Greenspan.

What Did Wolfowitz Say Yesterday?

Examine his statement here word for word, without any spins from the media.

js2321_attachment.pdf (application/pdf Object)

Treasury International Capital Data for January $91.5 billion

js2314_attachment.pdf (application/pdf Object)

This number ($91.5 billion) compared with the $58 billion current account deficit shows that financing of the deficit continues stably and is not a problem at the moment.

The Bottom Line According to Greenspan

FRB: Testimony, Greenspan --Future of the Social Security program and economics of retirement -- March 15, 2005: "The necessary adjustments will become ever more difficult and larger the longer we delay. No changes will be easy. All programs in our budget exist because a majority of the Congress and the President considered them of value to our society. Adjustments will thus involve making tradeoffs among valued alternatives. The Congress must choose which alternatives are the most valued in the context of limited resources. In doing so, you will need to consider not only the distributional effects of policy changes but also the broader economic effects on labor supply, retirement behavior, and national saving. The benefits to taking sound, timely action could extend many decades into the future."

Social Security Taxes may need to increase from the present 12.4 percent to 18 percent by mid-century. Individual savings must also rise. Truly sobering projections.

FRB: Testimony, Greenspan --Future of the Social Security program and economics of retirement -- March 15, 2005

FRB: Testimony, Greenspan --Future of the Social Security program and economics of retirement -- March 15, 2005

Chairman Greenspan expresses his own views and not necessarily those of the Federal Reserve Board. Before the Senate Special Committee on Aging.

Anything Worth Doing Is Worth Overdoing.

shreve.pdf (application/pdf Object)

Here is a 350 page study on the connection between Stochastic Calculus and Finance. Not for the faint of heart. A quant needs to know this kind of stuff, though. I wonder if Alan Greenspan knows this subject. I wouldn't be surprised. I'm sure some of his staff do.

Carnegie-Mellon offers a Masters for Financial Quants. Master of Science in Computational Finance (MSCF)

MSCF : Statistical Arbitrage 46-936

The following course comes from that program. MSCF : Statistical Arbitrage 46-936. Could be interesting in light of the recent enlightenment on the subject of Statistical Arbitrage received by yours truly from a practitioner of this black art.

Uranium Data from the Department of Energy 1949-2003

sec9_7.pdf (application/pdf Object)

The price of uranium has about doubled in the past two years.
Good chance to test the supply elasticity of Uranium. In other words, we can see how much more uranium is produced at this higher price and how quickly that drives the price back down. Unless there is a uranium cartel I haven't heard of.

Graph of Uranium Price per Pound

UxC: Historical Price Graphs

Warren Buffet's Latest Letter to the Shareholders of Berkshire Hathaway

2004ltr.pdf (application/pdf Object)

See especially page 18 under Foreign Currencies

Valuation Models :: Balance of Payments

Daily FX :: Fundamental Research :: Valuation Models :: Balance of Payments

Carry Trades Defined and their relationship to the Interest Rate Parity valuation model

A Hole in the Interest Rate Parity Theorem -- Carry Trades

However, this theory has not held true since 1990, because despite higher interest rates in the U.S. versus Japan, the USD has appreciated against the JPY. One of the reasons for this shift is the popularity of carry trades. A carry trade involves buying or lending a currency with a high interest rate and selling or borrowing a currency with a low interest rate. Investors have been moving their funds into higher yielding currencies, therefore causing the higher yielding currencies to appreciate. These trades are popular in times of risk seeking and least successful in times of risk aversion. That is in risk seeking environments, investors tend to reshuffle their portfolios and sell low risk, but high value assets and buy higher risk and low value assets. Riskier currencies - those with large current account deficits - are forced to offer a higher interest rate to compensate investors for the risk of a sharper depreciation than that predicted by uncovered interest rate parity. The profit from a carry trade is an investor's payment for taking this risk. Carry trades are more likely to go wrong in times of risk aversion, such as global economic instability and geopolitical uncertainty. In such times, the riskier currencies - upon which carry trades rely for their returns - tend to depreciate. Typically, riskier currencies have current account deficits and, as risk appetite wanes, investors retreat to the safety of their home markets, making these deficits harder to fund.

Daily FX :: Fundamental Research :: Valuation Models :: Interest Rate Parity

FRB: Testimony, Greenspan --Economic outlook and current fiscal issues-- March 2, 2005

FRB: Testimony, Greenspan --Economic outlook and current fiscal issues-- March 2, 2005

Purchasing Power Parity Numbers from OECD for December 2004

The Purchasing Power Parity Theorem states that the foreign exchange rate of the currency tends towards the number that brings about the same purchasing power in the different countries.

18598721.pdf (application/pdf Object)

Another Look at Ichimoku Charts

A terse description of the Ichimoku charts and signals it generates can be seen at the link below.

This article and more available at Investopedia.com

Learning to Read Ichimoku Charts

The Japanese word "Ichimoku" can be translated as "one look" or "one glance." A Japanese newspaper man whose real name was Goichi Hosada, but who used the pen name "Ichimoku Sanjin," invented a charting technique before WWII.

Ichimoku's guidebook on the charts finally appeared in 1968, many years later. An article by Ken Muranaka which introduces these charts can be found at the following link.


ichimoku.pdf (application/pdf Object)

Although Mr. Muranaka translates many Japanese words to English, I think he goes a bit too far when he talks about "the standard line" and "the turning line." It is just as easy to go with the Japanese words for these, which are Kijun-Sen and Tenkan-Sen. The reason I say this is that the Ichimoku charts I look at most frequently come from the London office of the Mizuho Bank, and they show the lines simply as Kijun Sen and Tenkan Sen, rather than translating them into English. They are just wiggly lines on a chart, so it doesn't matter much what you call them. I just think it is less confusing if we use the names that appear on the charts you can look at every day.

http://www.mizuho-cb.co.uk/TresInternet/PDF'S/eur.pdf

For example, today's chart of the Euro/US$ showing the Ichimoku chart. More later.