Last week here in Australia there was a lecture by Niall Ferguson which was televised by ABC Australia over here, so I downloaded it and watched it and was quite taken by it, although posting the link here below, I was wondering if anybody else has seen this? Or if you download and watched it or what are your thoughts on this are?
And with regards to trading surely strategies you use today may not always work tomorrow or next year. And to what depth of any downturn (if any) brings what does one do or should do, if and when such potential on the edge collapse happen to come about?
If your question is can the USA recover from the Obama policies put in place over the past 18 months the answer is yes. If the question is can the USA recover from the entitlement mentally that put Obama in power the answer is NO!
There will be tremendous trading opportunities if the USA implodes such as shorting stocks and treasuries as well as US Dollar plays. The treasuries bubble is a monster that is waiting to blow. When will will this happen? When it is in the best interest of China to pop it. And they will. IMO any foreign company dependent on the USA for its success would be best served diversifying their dependency.
Just remember that any government chaos or geopolitical event creates volatility and volatility creates tremendous trading opportunities.
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Adding to the above, I note that the other week or so ago, we had a Hindenburg Omen appear which occurred on 13th of August.
However, not long after that, we also now have a 2nd Hindenburg also occur.
If this stands true to what history has shown I guess there could be some rocky times a head, or as a different variety of opportunity as some would say.
Not trying to sound like Mr. Doom here so to speak, but to me this stuff can be quite concerning as there are others out there whom seem to trade the long side with longer term positions that could be fragile to their situation.
For scalpers and future traders though, if you see this downward spiral start to play out, my question really was which instrument would be the high probability what to short, which currency, what % risk or do you load the bus on that contract on the short side etc etc.
Dont think I have ticked access to trading Bonds through IB trading privileges , but which bonds exactly, US 30 year or 10 year, or 2 year bonds?
Guess I am looking at trying to hear others thought to this so I can aid in formulating my own game plan.
Does one just go short on ES or CL and go long on gold and silver as in YG (miniGold) and YI (mniSiliver)?
Watching the USA from Europe the picture is quite different. The financial and economic misery of the USA has not been created by the Obama administration, but has slowly evolved over years.
(1) Oil imports and Chimerica: The US-Dollar is still the reserve currency of the world. This has enabled Americans to spend more than they produce. The savings rate has gone negative, there is a huge negative trade balance for years. American manufacturing has lost its competiveness, where innovation did not compensate for it.
(2) Financial Crisis: The dollars spend were recycled and relent to the US. Petrodollars and export proceeds were used to purchase US treasuries. The carry trade made the liquidity available to US citizen at low interest rates.
(3) The US is simply suffering from the Imperial Syndrom. However, neither fragmented Europe nor totalitarian China can take the political lead. This explains why the US dollar remains the reserve currency of the world. In case of political unrest or economic crisis, the money still flows back to the US dollar.
(4) Risk aversion is one of the most important parameters to consider in trading, because a high dose of risk aversion can break up the usual correlations between different instruments. Today risk aversion can be detected via a rising DX.
(5) When the relationship between risk aversion and DX changes, this will be the point where the empire will implode. I know investors who have signed up long term options (OTC) to protect themselves against a massive devaluation of the US dollar. I am more optimisitic. Unlike Argentine or Greece, the US has the privilege to finance the debt in their own currency. Although US treasuries may once be as worthless as triple A rated repackages of collateral debt obligations, bounded rationality drives investors to purchase them. This trend is not over yet.
(6) The second Hindenburg Omen just reflects the dissappointing news of the last weeks. The probability of a W-shaped recession has increased. This will not lead to an implosion of the USD yet, because who should take over?
(7) Again, nothing of this is linked to the Obama administration.
Last edited by Fat Tails; August 23rd, 2010 at 12:29 PM.
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Beg to differ. The employment situation will not improve in the USA until the current administration weens itself from the socialist/marxist spending spree. Every man, woman and child in the USA now owes the federal government $43,000 and growing. Look to Greece if you want to see the future of the USA if the current trend continues.
I own a small business and know many other small business owners. I can assure you that increasing the employment count is not even an option let alone any pay increases. We are all hoarding cash for a future that is completely unknown and an federal government environment that is extremely business unfriendly. What we as small business owners are doing is no different than what the major corporations are doing. Major companies have in excess of two trillion dollars sitting in cash because. in part, they can't plan for the future. So what part of that leads to an economic rebound?
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The Federal Government stepped in to bail out consumers and the private sector and is now in a losing position whatever it does.
Option A : Curb spending during the financial crisis is similar to getting out of a losing position and taking a horrendous loss at once. Does not help businesses either but will kill many of them, as shown in the 1930s.
Option B : Continue spending to maintain the economy running is similar to averaging down. We all now that this does not work in the long term.
Option B is the preferred option of all politicians. The old 2001 bubble was replaced with a new, but larger real estate bubble. The real estate bubble is going to be replaced with a new but larger government debt bubble. Of course, the system will implode sooner or later, Ponzi schemes always implode, and the US financial system looks very similar.
Just that this Ponzi scheme is already running for decades, so Obama did not invent it. Whatever he chooses, option A or option B, it will harm business, so there is no solution. If you are appointed CEO of a near bankrupt corporation everything you do is false.
The only clean solution would be a monetary reform. In that case I would not want to be the guy who owns all the cash, LOL.
Last edited by Fat Tails; August 23rd, 2010 at 12:30 PM.
Probably just more jaw flapping but if (IF) it catches on it will be one more dent in the dollars armor. Seems that everyday more and more people are catching on to the potential serious crisis in the US.