Archives: 2008 March

Can you really make thousands of dollars a month letting a killer forex trading robot do your trading for you? Does it sound just too good to be true?

At first you might think that it is just all Internet nonsense. Certainly I did. Then I began to think about it. It really isn’t that much different than what I was doing in the 1990’s when I would write trading programs to trade forex using Telerate equipment for the data feed and to generate trading signals.

Except that back in those old days when a trading signal was generated by the program I, or someone on the 24 hour a day trading desk, had to ask for a dealing quote over our Reuters Dealing System, then place the order using Reuters dealing, or at times pick up the phone, call our counterparty in New York, and verbally place the order. This was back in the pre-Internet forex days and our Reuters lines were not always stable from some of our office locations in Asia and South Asia.

The point , however, is that I used a computer program to generate the trading signals but had to manually enter the order. A forex trading robot can be programed into a Meta4 trading platform, an excellent platform by the way, and be turned loose to make the trades automatically.

There are some differences in favor of the robot. Computers today are many times more powerful than the ones in the 90’s that were running our Telerate and Reuters equipment. A new modern computer can make millions of calculations in less time than it takes to bat an eye. Then there is the Internet. Communication at near the speed of light is hard to beat. The Meta4 forex trading platform is blazing fast. And speed is important in the forex market.

The US Federal Reserve Bank has become the Yucca Mountain of Subprime Mortgages. I’ll explain below.

Last week’s buy out of Bear Stearns really highlights the severity of the possibility of a monetary system collapse of some sort. And not just by the investment banks, brokerage firms, and commercial banks but even of the US Federal Reserve.

In order to induce JP Morgan to “buy” the Bear the Federal Reserve offered 30 billion dollars of taxpayer money to protect Morgan from nasty Bear portfolio surprises. No doubt there will be some in there as at $2.00 a share the Bear subprime “assets” must be toxic waste of the worse sort.

The Federal Reserve then did something totally unprecedented. The Fed, under Ben Bernanke’s throw the money from helicopters direction made the same overnight lending facilities available to the brokerage firms that are available to the banks.

And the collateral for these loans? Why of course it is the impossible to evaluate toxic waste subprime paper that can’t be sold or even evaluated anyplace else. In effect the Fed has become the dumping ground for all of the contaminated near worthless paper that no one else will touch.

====== As Stated by the Taipan Publishing Group ====

As a result of all this, the Federal Reserve has picked up a new nickname — the “Yucca Mountain” of subprime.

For those unfamiliar, Yucca Mountain is a proposed dumping site for America’s nuclear waste. Most states are in favor except Nevada, where Yucca Mountain forlornly sits. Las Vegas is particularly less than thrilled at the prospect of a toxic tomb just 90 miles away.

We are very, very, uncomfortably close to the beginning of the great financial panic of 2008. You had better buckle your seat belt, put on your crash helmet, and get ready for a bumpy, and for many, very unpleasant ride.  

“We are going to see economic times the likes of which no living person has seen,” Trends Research Institute Director Gerald Celente said, forecasting a “Panic of 2008.”

“The bigger they are, the harder they’ll fall,” Celente said in an interview with New York’s Hudson Valley Business Journal.

Celente, who correctly forecast the subprime mortgage financial crisis and the dollar’s decline a year ago and gold’s current rise in May, told the newspaper that the subprime mortgage meltdown was just the first “small, high-risk segment of the market” to collapse.

Derivative dealers, hedge funds, buyout firms and other market players will also unravel, he said. The derivative market alone is a multi trillion dollar market that is so large no one, even the big banks up to their necks in it, knows just how big it is.

Then you have more mundane credit markets, like student loans, auto loans, and credit card debt that are showing signs of coming unhinged. It is highly likely that more than one big name bank and investment bank will not survive the panic of 2008.

Celente makes another chilling forecast. The US dollar will collapse and lose 90% of its value. Should that doomsday forecast turn out to be true we Americans are going to suffer as never before.

For those who have been long US dollars this year it must seem like US dollar panic selling is not only near but has already occurred.

The dollar’s quick move to below 100 Yen and to the north side of 156 against the Euro has been painful for dollar bulls and for many others, like oil exporters, who price their products in dollars.

However, the move has not quite gone hyperbolic into a full scale panic – yet. With the moves that the US Federal Reserve Bank has been making we are probably very close to a complete collapse of the dollar which will bring on the hyperbolic stage.

The Bear Sterns disaster has placed the fed into a real bind. Just a day after announcing the 200 billion emergency lending facility that was designed to inject liquidity into the world’s banking system the “run on the bank” at Bear shows just how dangerously far the credit crisis has progressed. 

Even with the liquidity injection into Bear Sterns counterparties on the Street in London and elsewhere are refusing to deal with Bear. Bear is probably fatally wounded. Their business model is broken and it is unlikely that they will be able to control the downward spiral leading to the failure and breakup of the firm.  

The Fed and JP Morgan announced an undisclosed amount of emergency funding for Bear. Futures markets are now pricing in a full one percent cut in interest rates at the March 18th FMOC meeting.

The US Federal Reserve Bank has made it clear to currency traders that the US dollar will be sacrificed in a desperate effort to prop up the US economy.

In testimony before congress last Tuesday and Wednesday, The Fed Chairman, Ben Bernanke, spoke primarily of further downside risks to the economy while stating that he thought that inflation, while obviously increasing, could be controlled.

Neither Ben Bernanke nor President Bush seem capable of speaking about a recession that is probably already underway. They both state that a recession will be avoided.

However, they seem joined at the hip in a misguided effort to flood the markets with liquidity and to further lower interest rates in an effort to prevent what can not likely be prevented. I fear that with present policies the dirty “R” word will perhaps be avoided only to be replaced by something worse, stagflation.

The Fed seems to completely ignore the fact that it was a policy of  low rates for far too long that caused the bubbles that are now collapsing. Thinking that you can correct economic conditions by reverting to the same policies that caused those conditions in the first place  seems to me to be more like wishing and dreaming than sound policy. 

In my opinion, the first quarter of 2008 will mark the beginning of a recession that will be made more dangerous to the health of the US economy by the desperate actions on the part of the Fed to lower interest rates. Lower interest rates will place further pressure on the dollar and lead to even higher inflation as the dollar falls.