Friday, October 3, 2008

2008 (+ 2009 + ?) financial crisis explained in plain english ... OR my observations from today's TRADING ORGY :-)

folks, it's unbelievable, i do know all the reasons why this crazy 2008 financial crisis (not just 'subprime') happened! it is not just because of the no#1 reason and a necessary precondition of this mess which is greenspan's and bernanke's printing press which had printed soooooo many dollars [money supply M3] out of thin air for sooooo long :o))

today was a holiday in germany and thus i could sit in front of moving price charts the whole day and trade. we could also say gamble ... well, the rational part of my soul told me not to trade as there is not enough capital on my account and a smallest price decrease in my current positions would mean a margin call and a deadly end of my account. but the small devil living inside my crazy, greedy, dishonest, corrupt, stupid, incompetent, addicted and forever lost soul told me: "trade jaro, trade! you will definitely win few bucks and move your account into a more stable area". so i did!

my capital in the early morning: 356 €uros
my today's low: 282 euros
my today's high: 440 euros
my object of lustfulness today: dow jones index (DJIA)
my number of trades: 12
my trading result: 2.17 euros ... thank goodness! it could also be a loss of few hundred €uros instead :-)
last but not least, amount of money (or just 'liquidity' ?) moved on the market: 12 x 10,600 = 127,200.00 usd ... folks, please do NOT think about the 'stability' of nowadays financial system! it is crazy! consider that i had just 300 €uros of 'securities' in place :o((. do NOT think about things they WILL happen if the greedy banks would act like me - i'm sure they already do!

damned hell! did you think about OVERLEVERAGE? or about all these lehmans, merills, bears, AIGs, freddies, fannies + their small dirty european buddies northern rock, ubs, fortis, ikb, hypo real, bayern lb? jaro, you must be kidding! how can we remember all these funny names? pls repeat them slowly again, thx! ok fellows, here we go: AIG, Bayern LB, Bear Stearns, Dexia, Dresdner Bank, Fannie Mae, Fortis, Freddie Mac, HBOS, HSH Nordbank, Hypo Real Estate, HypoVereinsbank, IKB, Indymac, KfW, LBBW, Lehman Brothers, Merrill Lynch, RBS, Morgan Stanley, Northern Rock, Sachsen LB, Société Génerale, Wachovia, Washington Mutual, WestLB (as of 10/05/2008. thx 2 http://gburek.eu/)! pls note that banks [citibank, deutsche bank, ubs (they've written off about 40 billion euros!), commerzbank, ...] which have had just some 'small' difficulties in the past are NOT listed above! well, they've got what they deserve! by taking soooo much risks and having so few securities! what about the remaining crazy, greedy, dishonest, corrupt, stupid, incompetent + LYING BANKS out there? pls don't ask me to comment on crazy, greedy, dishonest, corrupt, stupid, incompetent + LYING GOVERNMENTS, ok?


the question of the day: what is the difference between me and these crazy, greedy, dishonest, corrupt, stupid, incompetent, lying + guilty overleveraged banks? it's so easy! i do risk just my own money and i take the responsibility for my behaviour in good and in bad times. folks, there is not 1 taxpayer's penny being lost through my trades, no bailout by u.s. treasury happened, no fresh dollars from bernanke's helicopter arrived ('helicopter ben'), ....


folks, please, please, please, do NOT hope for a perfect world! protect yourself instead !!! pls note the use of 3 (=three) exclamation marks, it should show u that the issue is somehow important! [the audience:] thx, but how could we protect ourselves + our families? just ask and answer 1 simple question to yourself (and act accordingly to your personal situation after that): DO I HAVE ENOUGH GOLD + SILVER ALREADY?


btw, are HUGE bailouts solution for financial crises? or what is the solution to solve this particular crisis? it's also easy! let the greedy banks take the responsibility for their own behaviour, let them go bankrupt if they deserve it, but do not allow to pay all taxpayers for failure of few! do not allow to give the money of competent people (profitable businesses + individuals) into the hands of incompetent people (zombie banks) as it would invers the real benefits of our (competitive) capitalist system! do not produce inflation by printing additional dollars out of thin air as you would probably not add oil to a fire in order to extinguish it. wow, thx ... + what should be done concretely?

A.) first of all we would need sound financial + economical policies which would allow entrepreneurship, competition, bankruptcies, failure, start-up companies + free markets instead of government controls, prohibition (e.g. shortselling, price controls etc.), bailouts, printing press, inflation, market & industry manipulation, ....

B.) then we would need to build wealth based on work and savings (instead of borrowing and spending) like in the good old days + like the austrian school of economics (von mises, hayek, menger, ...) tells us: http://en.wikipedia.org/wiki/Austrian_Business_Cycle_Theory

C.) yes, i do believe that a gold standard would help a lot to achieve this kind of wealth and prosperity. in my opinion would a gold standard also avoid such stupid and senseless 'investments' like the u.s. wars on iraq, iran, afghanistan, kosovo, vietnam, venezuela, cuba, terror, democracy inside western democracies, free markets, u.s. + european taxpayer, freedom, ???, ... IMHO would even the world become a better place. why? there would simply be no money for this kind of wars & malinvestments. that does not mean that there would be no wars at all as there have been many wars + a lot of destruction also in ancient time under a gold standard, but a war was usually over when the kings had no gold/silver to pay their soldiers :-)


poll: is it already too late for all these measures? YES / NO ??? i'm not sure, i hope not, but i'm realy not sure, i'm so pesimistic about that :-((.
why? well, we see just bailouts + socialisation of losses + government interventions & regulations + an unbelievable increase in money supply all over the world instead of free markets. is there any hope for improvement? yes, in november will the new u.s. president [11/04/2008: barack hussein obama => who are the strong powers behind him? the kennedy-clan + george soros + zbigniew brzezinski + ??? is it good or bad for the world? the time will show it :o)] most likely correct few of bush's mistakes and maybe even end the wars on iraq, afghanistan, terror ... and reduce budget deficits ... and so on ... that could help a little! but he has to speed up a lot before the winter comes, the kondratieff winter :o((


(enhanced about a week later just for the case you've thought this crisis cannot become worse. it could and it also did: /2008/10/how-bad-is-current-financial-mess.html)

december, 1st ... the crisis is far from over! watch + listen to meridith whitney (oppenheimer & co.):


btw, what is the song of the crash(y) year 2008? hmmmm :o) ... and the winner is ... is ... is the dream team ... bush & bernanke!


yep, here are my trades:

item--------------: DJIA >> position closed, #1
units--------------: 1
order type--------: market (buy) / stop (sell)
trade type--------: long
entry date--------: 10/03/2008, 13:32
entry price-------: 10,550
initial stop-loss--: 10,530
new stop-loss----: 10,566
exit date---------: 10/03/2008, 13:41
exit price---------: 10,566
profit (loss) in %-: 0.15%
profit (loss)-------: $ 16
reason why + strategy: trying to trade the HUGE moves in DJIA which i've expected because of the planned voting of u.s. congress on the HUUUUGE bailout ($700 billion) of financial institutions
lessons learned: nice trade; clever and FAST placement of initial stop-loss-limit as the DJIA moved so fast in one direction; nice stop-loss-limit later on to secure the profit => OK


item--------------: DJIA >> position closed, #2
units--------------: 1
order type--------: market (buy) / stop (sell)
trade type--------: long
entry date--------: 10/03/2008, 13:34
entry price-------: 10,575
initial stop-loss--: 10.560
new stop-loss----: 10,571
exit date---------: 10/03/2008, 13:41
exit price---------: 10,571
profit (loss) in %-:
profit (loss)-------: ($ 4)
reason why + strategy: trying to trade the HUGE moves in DJIA which i've expected because of the planned voting of u.s. congress on the HUUUUGE bailout ($700 billion) of financial institutions
lessons learned: nice trade; clever and FAST placement of initial stop-loss-limit; the price move was not big enough to move my stop-loss-limit higher => OK


... to do ... document the next 10 trades ... oh, my god! i can't start my trading platform just now (=saturday, 10/04/2008) to look-up the trading data! there is no customer hotline @cmc-markets today! there is no one who could initialize my 'entry code' to start the log-in process with the server defaults! ... f*cking hell :o)) . well, i've installed the software again, so i can continue writing now :-)


item--------------: DJIA >> position closed, #3
units--------------: 1
order type--------: market (buy) / stop (sell)
trade type--------: long
entry date--------: 10/03/2008, 13:43
entry price-------: 10,581
initial stop-loss--:
new stop-loss----: 10,582
exit date---------: 10/03/2008, 13:55
exit price---------: 10,582
profit (loss) in %-:
profit (loss)-------: $ 1 (WHAT a GAIN! i'm so happy :o)
reason why + strategy: trying to trade some HUGE moves ...
lessons learned: nice trade; FAST placement of initial stop-loss-limit; nice stop-loss-limit later on to secure the profit; the DJIA didn't want to move muuuuch higher this time => OK


item--------------: DJIA >> position closed, #4
units--------------: 1
order type--------: market (buy) / stop (sell)
trade type--------: long
entry date--------: 10/03/2008, 13:53
entry price-------: 10,599
initial stop-loss--: 10,582
new stop-loss----:
exit date---------: 10/03/2008, 13:55
exit price---------: 10,582
profit (loss) in %-:
profit (loss)-------: ($ 17)
reason why + strategy: trying to trade some HUGE moves ...
lessons learned: a small mistake; i had already 1 long position; i thought that after break-out through the 10,600 level there will be a huuuuge move up; it was a false break this time; i was not FAST enough to place new stop levels for my two positions [remember: there is a minimum spread to current price needed (about 10 points?) and in a fast moving market is it not easy to place an appropriate stop limit ... => idea of the day: i will try not to put a stop-limit immediately in my trading platform but just watch the quotes and sell 'market' when my emotional / theoretical stop-loss-level (about 20 points?) will be reached ... i have to think about that 'strategy' a little bit longer and maybe try it in the market clutter. and i still can place a stop-order in my trading platform when the price moves to a comfortable area to secure my fictitious profits] => let's think about this emotional stop-loss-strategy @entry some time longer :-)


item--------------: DJIA >> position closed, #5
units--------------: 1
order type--------: market (buy) / stop (sell)
trade type--------: long
entry date--------: 10/03/2008, 13:58
entry price-------: 10,578
initial stop-loss--: 10,560
new stop-loss----:
exit date---------: 10/03/2008, 14:00
exit price---------: 10,560
profit (loss) in %-:
profit (loss)-------: ($ 18)
reason why + strategy: trying to trade some HUGE moves ...
lessons learned: nice trade; FAST placement of initial stop-loss-limit; the DJIA didn't want to move muuuuch higher this time => OK


item--------------: DJIA >> position closed, #6
units--------------: 1
order type--------: market (buy) / stop (sell)
trade type--------: long
entry date--------: 10/03/2008, 14:05
entry price-------: 10,567
initial stop-loss--: 10,550
new stop-loss----:
exit date---------: 10/03/2008, 14:08
exit price---------: 10,550
profit (loss) in %-:
profit (loss)-------: ($ 17)
reason why + strategy: trying to trade some HUGE moves ...
lessons learned: nice trade; FAST placement of initial stop-loss-limit; the DJIA didn't want to move muuuuch higher this time => OK


item--------------: DJIA >> position closed, #7
units--------------: 1
order type--------: market (buy) / stop (sell)
trade type--------: long
entry date--------: 10/03/2008, 14:13
entry price-------: 10,578
initial stop-loss--:
new stop-loss----: 10,606
exit date---------: 10/03/2008, 14:59
exit price---------: 10,606
profit (loss) in %-: 0.26%
profit (loss)-------: $ 28
reason why + strategy: trying to trade some HUGE moves ...
lessons learned: nice trade; FAST placement of initial stop-loss-limit; nice stop-loss-limit later on to secure the profit; this was a WAR BETWEEN BEARS AND BULLS which lasted about 1 hour; the DJIA moved few points higher and tried to break-out to a new (higher) level; but fell back just to stop out my position; than moved higher again (in short term trading plays luck also a important part :o) => OK


item--------------: DJIA >> position closed, #8
units--------------: 1
order type--------: market (buy) / stop (sell)
trade type--------: long
entry date--------: 10/03/2008, 14:59
entry price-------: 10,623
initial stop-loss--: 10,610
new stop-loss----:
exit date---------: 10/03/2008, 15:01
exit price---------: 10,610
profit (loss) in %-:
profit (loss)-------: ($ 13)
reason why + strategy: trying to trade some HUGE moves ...
lessons learned: nice trade; FAST placement of initial stop-loss-limit; the DJIA didn't want to move muuuuch higher this time => OK


item--------------: DJIA >> position closed, #9
units--------------: 1
order type--------: market (buy) / stop (sell)
trade type--------: long
entry date--------: 10/03/2008, 15:02
entry price-------: 10,624
initial stop-loss--: 10,591
new stop-loss----:
exit date---------: 10/03/2008, 15:06
exit price---------: 10,591
profit (loss) in %-: (0.31%)
profit (loss)-------: ($ 33)
reason why + strategy: trying to trade some HUGE moves ...
lessons learned: a small mistake; i couldn't place an initial stop-loss-limit FAST enough as the DJIA moved so fast; loss too high ...


item--------------: DJIA >> position closed, #10
units--------------: 1
order type--------: market (sell) / stop (buy)
trade type--------: short
entry date--------: 10/03/2008, 15:12
entry price-------: 10,573
initial stop-loss--: 10,591
new stop-loss----:
exit date---------: 10/03/2008, 15:13
exit price---------: 10,591
profit (loss) in %-:
profit (loss)-------: ($ 14)
reason why + strategy: trying to trade some HUGE moves ...
lessons learned: nice trade; FAST placement of initial stop-loss-limit; the DJIA didn't want to move muuuuch LOWER this time => OK


item--------------: DJIA >> position closed, #11
units--------------: 1
order type--------: market (buy) / stop (sell)
trade type--------: long
entry date--------: 10/03/2008, 15:14
entry price-------: 10,615
initial stop-loss--: 10,591
new stop-loss----: 10,616 => 10,682 => 10,707
exit date---------: 10/03/2008, 16:19
exit price---------: 10,707
profit (loss) in %-: 0.87%
profit (loss)-------: $ 92
reason why + strategy: trying to trade some HUGE moves ...
lessons learned: this was a dream! this was this kind of trades i'm looking for! clever and FAST placement of initial stop-loss-limit; nice stop-loss-limit later on to secure the fictitious profit - note that the limit was far enough from the 'psychological' barrier 10,600; a nice coffee + dinner break during the trade (my stop order was in the market); and last but not least: the LUCK to pinch a really big move in price => yabbadabbadooo!


item--------------: DJIA >> position closed, #12
units--------------: 1
order type--------: market (buy) / stop (sell)
trade type--------: long
entry date--------: 10/03/2008, 16:36
entry price-------: 10,721
initial stop-loss--: 10,707
new stop-loss----:
exit date---------: 10/03/2008, 16:41
exit price---------: 10,707
profit (loss) in %-: 0.15%
profit (loss)-------: $ 16
reason why + strategy: trying to trade some HUGE moves ...
lessons learned: nice trade; FAST placement of initial stop-loss-limit; the DJIA didn't want to move muuuuch higher this time. after so many trades i was really tired (it was already late afternoon in germany) and then i decided not to trade any longer and went to gym. furthermore i didn't expect any big (= tradable) price move anymore. (the price reached 10,801 later on :). folks, i couldn't believe my eyes when i came back from gym! DJIA @10,325 points? => long live the stop-loss-limit-strategy ;-))

resume:
few bucks for me; some more for my broker (12 x 4 usd spread = 48 usd); some liquidity for the markets; and a great experience ...
-----
folks, a small bonus for my german-language readers => a funny explanation-video about the financial mess out there through beer bar analogy ;o)

leute, bankwesen für anfänger + topmanager zugleich! ein echt lustiges aufklärungsvideo :o)
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