re: ["Forgive my ignorance, but how can the BOJ kneecap the carry trade now?"]
Good question.
Better question:
Under what circumstance do carry-traders knee-cap themselves,
or get knee-capped by others - where the BOJ need not fire a
shot?
First, give credit where credit is due...
Central bankers have pulled an amazing array of
rabbits out of their hat lately. And central banks are now
coordinating intervention to a degree never before seen. They
are not going to just stand idly bye as speculators drive
commodities parabolic, and to the headlines of the front page.
Especially, given how public pundits like Larry Kudlow have
now done a "180" and are finally screaming at the top
of their lungs about inflation and the weak dollar.
Central bankers may be stupid, but they are not deaf.
Did buggers not learn anything from May 2006?
Croesus, the carry trade is affected by both exchange rates
and interest rates.
The BOJ has more tools than just rates.
Let's turn back the hands of time to May, 2006:
Remember, the BOJ utilized a massive withdrawl of liquidity
as their tool in May 2006, orchestrating the most dramatic
collapse of a major monetary base in history.
The BOJ vaporized 20 trillion yen (approx $175 billion
US) and we all know what happend to oil and gold.
And as far as Yen-carry traders knee-capping themselves,
or the BOJ having their work done by others...
Prime Brokers have been demanding more collateral from their
hedge fund clients, calling in lines of credit, and drum roll
please....
Actually, trading against their own clients!
-- whodathunkit?
The bastards.
Can you say - Mother Rock & Amaranth deja vu all over again?
Hedge funds being liquidated, and being hit with new collateral
requirements has been widely reported in the news
for over a month.
Did you heed it?
The big, fast and the easy money is always made
by leveraging bottoms... August 2007, December 2007,
not being the last bull standing at the top.
Pigs get fat...but, hogs get slaughtered.
Be a pig at the bottoms.... never a hog at the tops.
So that leads us to the question of -- okay, wiseass - how
the hell do we know a top?
Well... tops like bottoms are comprised of three major
elements. A combination of the underlying fundamentals,
technical price and volume action, and sentiment.
Wall street is loaded to the gills with traders who are
masters of the first two -- the fundies, and the technicals.
It's number three... mastering sentiment - that separates
the pretenders - from the contenders.
Many here think that when I quote great poker players like
Doyle Brunson saying: "play the players - not the cards" that
I'm being a smartass. I'm not. Studying human nature, and
behavior will make you more money, more often, than studying
the market. Why?
"Because markets always change, but people never do."
Write that out... print it out... put it on a sticky, and
put it on the upper right hand corner of your trading
screen, leave it there, and never take it off
As simplistic, and as flip as it sounds - it's pure gold.
If it sinks in, and if you really get it - at its
deepest level... it will make you rich.
And the reason why people never change is because
- they can't.
Human nature and behavior is hard wired. It's DNA.
-- Accept it.
-- Deal with it.
-- Study it.
-- Learn it.
-- Master it.
Spend 2/3rds of your time reading and studying human
behavior and psychology...and only 1/3rd of your time
studying the markets.
Many people have continually asked me why I am here on SI?
A lot of my friends and peers ask me the same thing.
And my answer is simple. It comes from one of the best
books on the study of human nature and behavior, and
most importantly - it's the bible for those who study
and manipulate human nature and behavior... a book called
"Breakthrough Advertising" by Eugene Schwartz.
Schwartz had a million dollar quote for traders...relative
to being a guy who lived in a fabulous NY City penthouse
apartment, with one of the great collections of American
Art, and who lived a very, very sophisticated life.
Schwartz immersed himself in the common culture on a daily,
and a weekly basis. He actually scheduled and blocked out
time to read all the common magazines, all the pulp fiction
rags on the best seller list, he read People, Cosmo, read
the National Enquirer and the Weekly World News, he went
to see all the top movies, and made a point to keep his
pulse on the common man. He always wanted to know what the
masses capacity of belief on a given subject or trend was,
what their limits of belief were... and he mastered it.
While living a sophisticated lifestyle in NYC, he knew
how valuable it was to "never lose the Butte, Montana
in me" ... and to keep a pulse on main street USA, and
the common man.
That same principle translates to trading.
Buffett has said the same thing in response to why he
has remained in Omaha, instead of moving to New York.
It's not about Wall Street... it's about Main Street.
Buffett got it, and so did Eugene Schwartz.
I'll warn you right now. Breakthrough Advertising is a
difficult read. Very difficult. It's deep and it's dense.
You will need to read it 3,4 even 5 times for the pearls
it contains about human nature and behavior to sink it.
And it's real value lies in a higher plane than being
just another study of the madness of crowds... it's a
study, and a blueprint - on how those who make a living
manipulating (maybe that's the wrong word, but we'll stick
with it)... of manipulating human nature and behavior.
It's a masterpiece on understanding your enemy.
And in trading -- make no mistake about it...
This is war.
It's you against them.
And they most definitely want to kill you, to strip
your body clean, and leave you dead and naked in the
woods.
So either get serious about this shit... and master it,
or keep getting victimized by it.
And vis a vis "tops"...
Ask yourself a question.
At both major market peaks and valleys... are
you creating written strategies and trading
plans? Yes, written.
And yes... markets are dynamic, not static - so your
trading plans must also be. But remember this...
"A fool with a plan will always outperform a genius without one."
If you got caught flat footed, and were blind sided in
May 2006, in August 2007, in December 2007, or here...
did you have a plan?
Again, a written one.
The two main reasons I am here on SI are this.
1. This is my "Butte, Montana." This is the pulse
of Main Street - not Wall Street. This is where you learn
to trade the traders. It's like having an open phone line
behind enemy lines.
2. Because writing out your thoughts, and trading strategies
(whether publicly, or privately in a trading notebook) forces
you to crystalize your thoughts and strategies.
If you do not keep a daily, or weekly written trading journal
with your thoughts on your trades (both winners, and losers)
and on the markets... and treat it like the bible -- you
are missing out on one of the great secrets of master traders.
Some traders take it to the extreme. I've seen traders who
have bookcases lined with 3-ring binders of their trading
notes... and file cabinets filled with clippings from the
FT, from the WSJ, and from Barrons... filled with hand
written notes in the margin.
...an observation:
The better the trader -- the more extreme the process.
Take it, or leave it for what its worth.
This shit ain't easy. Not if you want to be better than
good, and especially if you want to be great.
And it's no different in anything else in life.
If you're a big slow white guy from a small town in Indiana,
then you'd better take a clue from Larry Bird and spend
hour, upon hour... thousands upon thousands of hours...
mastering your shot and honing your ball handling skills.
Trading is no different.
If you just want to hop online and check the quotes, scan
a few boards, read a couple of blogs, check the headlines
from the WSJ, read every other issue of Barrons and chase
the hot trends... nolo problemo.
Passion must come from within... it can not be beaten
into anyone. And you're deluding yourself if you think
mastery comes without hard work.
So stop deluding yourself that you're going to find
some magic bullet in Elliot Wave, Candlesticks, or Point
and Figure charts... because you're not.
There are no magic bullets.
It's all about basic blocking and tackling.
There's a reason that Vince Lombardi started off every
training camp with the same five words...
"Gentlemen, this is a football."
Mastery comes from the fundamentals. From the basics.
From simple blocking and tackling. Lombardi didn't
win all those Super Bowls by running triple reverses
and trick plays... he won by knowing his opponent
and his opponents tendancies better than his opponent
knew himself... and by mastering the fundamentals.
Why do NFL coaches spend so much time watching game
film of their opponents?
Eugene Schwartz knew.
And so do master traders.
Know and study your opponent to the point that you know
his next move, before he knows it himself.
And as far as having a written plan and profit taking
price targets - did you have one here?
I did... way back from the August Yen-carry shakeout, and
again off the December test of technical support - which
confirmed the validity of those targets.
Message 24050631
Message 24127703
Message 23923456
Message 24195637
Message 24009107
How about $100 Oil, $1,000 Gold, HUI 520 and USD 72 as price targets?
The HUI topped at 519.68.
Gold using the GLD ETF topped intraday @ $1004, and a $991 close.
Oil...at what? $109.42
And intervention on the USD came in at 71.
...not bad for not being able to "pick the eyes out of longterm trends" 'eh?
So what triggered the exodus here?
What were those who just took their chips off the table,
watching that you weren't?
What did they see that caused them to hit the sell button?
How about dollar/yen...
I think I've talked about keeping this chart at the top of your screens...
Those that did... got the timing right:
Now I know that some people think it's impossible to keep
"picking the eyes out of these historical trends"...
and then presenting them as "brilliant trades"...but, it's
not brilliance... it's all "blocking and tackling."
HUI 520, $1000 Gold, $100 Oil and USD 72 were my targets
in my "written plan" -- did you have one?
... price targets and a written plan?
I can guarantee you that you won't be able to "pick the
eyes out of historical trends" if you don't.
To bring this to a close... some final thoughs:
-- Keep and use a daily trading trading journal, and
write out your trading strategy, including price targets,
and the major indicators you are going to watch.
-- There are no magic TA systems or bullets - quit looking
for one. Real "TA" - the kind that you can actually use, and
the kind that will make you money, is 97% about price, volume
and trendlines. Simple blocking, tackling and "this is a
football" kind of stuff.
-- Spend 2/3rds of your reading, study, and research time -
studying the players -not the cards. Master human behavior,
psychology...the madness of crowds. Become a master at
interpreting and predicting sentiment, because markets change,
but people never do... simple words that bring massive results.
Mo later,
S.O.T.B.
PS: ask better questions.
-- where did the big money players come in ?
-- why did they come in?
-- why did they leave here?
-- why will they come back?
-- what's really changed as far as the fundamentals?
My fingers are tired... that's a shitload of typing.
I hope you get something out of it.
And remember... it only takes one good idea.
So get busy... and find one
And remember what Napoleon said. |
