Forex Market: Unlocking Opportunities for Investors


This post is by Sponsored Content from Visual Capitalist

The following content is sponsored by the Compare Forex Brokers.

The Forex Market

Forex Market: Unlocking Opportunities for Investors

In 2019, the global foreign exchange market (forex) was valued at a jaw-dropping $2.4 quadrillion.

In fact, this is equal to more than 50 times China, Japan, Germany, India and the U.S.’s economic output combined. Institutional investors, such as investment banks, pension funds, and large corporations have typically dominated this space, but there are avenues for individuals to enter the market as well.

This infographic from Compare Forex Brokers breaks down the world’s most interconnected financial market, and how individual investors can start trading.

The Forex Market: A Global Landscape

Across the forex market, 170 major, minor, and exotic currency pairs can be traded as contracts for difference (CFDs). A CFD enables you to speculate on whether the price of an asset will rise or fall.

Here, trades are conducted on over the counter (OTC) markets—non-centralized markets made up of a network of participants. This is different from traditional markets, such as the S&P 500 and the Nasdaq, which operate on formal, centralized exchanges.

While the forex market is by nature, decentralized, these core regions show where forex transactions are most concentrated by market participants including banks, commercial businesses, or individual investors.

Globally, the majority of forex trading takes place within the following hubs.

Forex Trading Centers (2019) Country Share of Global Over the Counter (OTC) Forex Turnover
1 UK 43.1%
2 U.S. 16.5%
3 Singapore 7.6%
4 Hong Kong 7.6%
5 Japan 4.5%
6 Switzerland 3.3%
7 France 2.0%
8 China 1.6%
9 Germany 1.5%
10 Australia 1.4%

Source: BIS

The UK accounts for over 43% of global forex trading, averaging $2.7 trillion daily according to the 2019 Triennial Central Bank Survey by the Bank for International Settlements. London’s geographic location between the U.S. and Asia makes it an optimal forex trading centre—a trend that has held strong over the last 50 years.

With forex trading in the U.S. jumping over 50% in the last decade, the U.S. is the next most active forex market. Meanwhile, averaging $633 billion in trading volumes in 2019, Singapore is Asia’s largest forex trading center, with Hong Kong following close behind.

The Top Seven Currency Pairs

What are the most highly-traded currency pairs?

Overall, 68% of global forex trading falls into seven major currency pairs.

  Top Seven Currency Pairs Percentage of Total
1 United States Dollar vs Euro 24.0%
2 United States Dollar vs Japanese Yen 17.8%
3 United States Dollar vs Great British Pound 9.3%
4 United States Dollar vs Australian Dollar 5.2%
5 United States Dollar vs Canadian Dollar 4.3%
6 United States Dollar vs Chinese Yuan 3.8%
7 United States Dollar vs Swiss Franc 3.6%

Source: BIS

Currency prices are impacted by factors including inflation, international trade, political stability, among other macroeconomic factors.

Breaking Down Institutional and Retail Trading

While commercial and central banks, hedge funds, and investment managers make up most of the forex market, only 5.5% are individual investors.

Importantly, they differ in a few key ways.

Institutional Forex Trading Retail Forex Trading
– Buy and sell the physical currency

Interdealer market: Large institutions trade on an interdealer market, which is a non-centralized network of dealers

Less formal: Often trades are conducted by phone, email or instant message.

Non-transparent: Execution prices and buy/sell orders are not visible to the market.

– Buy and sell contracts for difference (CFD)

Contracts for Difference (CFD): CFDs allow traders to speculate on the price of an underlying asset. Traders do not own the underlying asset.

Long and Short Trades: Traders can take a long or short position:

Long position: buying a CFD with the expectation the asset’s market price will increase.

Short position: selling a CFD with the expectation the asset’s market price will decrease.

For various reasons, retail forex trading increases in popularity year after year. However, before diving in, it is important to know the stakes involved in this speculative market.

Understanding the High Risk of Forex Trading

Retail forex trading is, at is core, very risky.

In 2019, 71% of all retail forex trades lost money. One explanation is the highly leveraged nature of the market—many investors trade using borrowed money. But while trading with leverage can magnify losses, it also applies to gains.

Key Benefits of the Forex Market

While there is risk inherent in the market, what are some of the advantages in forex trading?

  1. Low transaction costs: No exchange or regulatory fees. Overall trading costs are low with both commission and no commission pricing structures available.
  2. High liquidity: Along with being the largest market globally, it is also the most liquid with $6.6 trillion in daily trading volume.
  3. 24-hour market: Trading is not confined to limited hours or time zones.
  4. Leverage: Forex brokers offer retail traders leverage which allows the to increase their exposure

Unlike equities, currency trading is all about relativity. A currency can depreciate overall, but can also appreciate relative to a currency that has depreciated even more.

Connect to New Markets

While big gains are possible, many trades lose money, but regulatory improvements have helped build trust in the market.

Meanwhile, multiple digital platforms provide a link to global currencies, allowing retail forex traders to enter the market and trade from any location. For those comfortable taking more risk, currency markets offer opportunities with outsized potential.

Subscribe to Visual Capitalist


Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

The post Forex Market: Unlocking Opportunities for Investors appeared first on Visual Capitalist.

Forex Market: Unlocking Opportunities for Investors


This post is by Sponsored Content from Visual Capitalist

The following content is sponsored by the Compare Forex Brokers.


The Forex Market

Forex Market: Unlocking Opportunities for Investors

In 2019, the global foreign exchange market (forex) was valued at a jaw-dropping $2.4 quadrillion.

In fact, this is equal to more than 50 times China, Japan, Germany, India and the U.S.’s economic output combined. Institutional investors, such as investment banks, pension funds, and large corporations have typically dominated this space, but there are avenues for individuals to enter the market as well.

This infographic from Compare Forex Brokers breaks down the world’s most interconnected financial market, and how individual investors can start trading.

The Forex Market: A Global Landscape

Across the forex market, 170 major, minor, and exotic currency pairs can be traded as contracts for difference (CFDs). A CFD enables you to speculate on whether the price of an asset will rise or fall.

Here, trades are conducted on over the counter (OTC) markets—non-centralized markets made up of a network of participants. This is different from traditional markets, such as the S&P 500 and the Nasdaq, which operate on formal, centralized exchanges.

While the forex market is by nature, decentralized, these core regions show where forex transactions are most concentrated by market participants including banks, commercial businesses, or individual investors.

Globally, the majority of forex trading takes place within the following hubs.

Forex Trading Centers (2019) Country Share of Global Over the Counter (OTC) Forex Turnover
1 UK 43.1%
2 U.S. 16.5%
3 Singapore 7.6%
4 Hong Kong 7.6%
5 Japan 4.5%
6 Switzerland 3.3%
7 France 2.0%
8 China 1.6%
9 Germany 1.5%
10 Australia 1.4%

Source: BIS

The UK accounts for over 43% of global forex trading, averaging $2.7 trillion daily according to the 2019 Triennial Central Bank Survey by the Bank for International Settlements. London’s geographic location between the U.S. and Asia makes it an optimal forex trading centre—a trend that has held strong over the last 50 years.

With forex trading in the U.S. jumping over 50% in the last decade, the U.S. is the next most active forex market. Meanwhile, averaging $633 billion in trading volumes in 2019, Singapore is Asia’s largest forex trading center, with Hong Kong following close behind.

The Top Seven Currency Pairs

What are the most highly-traded currency pairs?

Overall, 68% of global forex trading falls into seven major currency pairs.

  Top Seven Currency Pairs Percentage of Total
1 United States Dollar vs Euro 24.0%
2 United States Dollar vs Japanese Yen 17.8%
3 United States Dollar vs Great British Pound 9.3%
4 United States Dollar vs Australian Dollar 5.2%
5 United States Dollar vs Canadian Dollar 4.3%
6 United States Dollar vs Chinese Yuan 3.8%
7 United States Dollar vs Swiss Franc 3.6%

Source: BIS

Currency prices are impacted by factors including inflation, international trade, political stability, among other macroeconomic factors.

Breaking Down Institutional and Retail Trading

While commercial and central banks, hedge funds, and investment managers make up most of the forex market, only 5.5% are individual investors.

Importantly, they differ in a few key ways.

Institutional Forex Trading Retail Forex Trading
– Buy and sell the physical currency

Interdealer market: Large institutions trade on an interdealer market, which is a non-centralized network of dealers

Less formal: Often trades are conducted by phone, email or instant message.

Non-transparent: Execution prices and buy/sell orders are not visible to the market.

– Buy and sell contracts for difference (CFD)

Contracts for Difference (CFD): CFDs allow traders to speculate on the price of an underlying asset. Traders do not own the underlying asset.

Long and Short Trades: Traders can take a long or short position:

Long position: buying a CFD with the expectation the asset’s market price will increase.

Short position: selling a CFD with the expectation the asset’s market price will decrease.

For various reasons, retail forex trading increases in popularity year after year. However, before diving in, it is important to know the stakes involved in this speculative market.

Understanding the High Risk of Forex Trading

Retail forex trading is, at is core, very risky.

In 2019, 71% of all retail forex trades lost money. One explanation is the highly leveraged nature of the market—many investors trade using borrowed money. But while trading with leverage can magnify losses, it also applies to gains.

Key Benefits of the Forex Market

While there is risk inherent in the market, what are some of the advantages in forex trading?

  1. Low transaction costs: No exchange or regulatory fees. Overall trading costs are low with both commission and no commission pricing structures available.
  2. High liquidity: Along with being the largest market globally, it is also the most liquid with $6.6 trillion in daily trading volume.
  3. 24-hour market: Trading is not confined to limited hours or time zones.
  4. Leverage: Forex brokers offer retail traders leverage which allows the to increase their exposure

Unlike equities, currency trading is all about relativity. A currency can depreciate overall, but can also appreciate relative to a currency that has depreciated even more.

Connect to New Markets

While big gains are possible, many trades lose money, but regulatory improvements have helped build trust in the market.

Meanwhile, multiple digital platforms provide a link to global currencies, allowing retail forex traders to enter the market and trade from any location. For those comfortable taking more risk, currency markets offer opportunities with outsized potential.

Subscribe to Visual Capitalist


Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

The post Forex Market: Unlocking Opportunities for Investors appeared first on Visual Capitalist.

Open Outcry Project


This post is by Jeff Carter from Points and Figures

John Lothian is trying to capture the essence and elan of the trading floors of Chicago. It’s really hard to do. But, he has a little oral history project that he is working on. I did an interview and here it is. There are a million stories from the trading floor. John has some other great interviews up on his site and YouTube. I’d encourage you to listen to them. I have introduced some traders to John and I hope they do some interviews. If you were a long time floor trader, I’d encourage you to reach out to them and schedule a time.

I really hope he gets some interviews with members like me that really advocated for change.  At the CME we called them the “Equity Owners Association”.  Yra, Joel, Howard, Donnie, Craig, Bill, and Aryeh, your time is waiting.  That would be great for posterity and for when the historians look back years and years from now to how the change happened, and why it happened. It was not as simple as people think.

People that I interface with today have no understanding, and because of their lack of understanding, they resort to using stereotypes.  I walk into an office of some Ivy League-educated fund of funds and the experience I had is so foreign to them they don’t even know how to process it.  Same with a lot of venture firms.  It certainly wasn’t corporate.  Venture firms are supremely strait-laced and white shoe compared to the trading floor.

I was always pretty good at getting along with people from different walks of life, but wow, What a conglomeration of people there were on the floor!  My friend Irv Rosen, who passed away last year, once asked, “Jeffrey, are you married?  You’d make a good son-in-law and I have a cute daughter.”  I loved Irv.  He was great. I could be a stand in for a minyan in a pinch.  South Siders, North Siders, West Siders and then the people who came from all over the world and all walks of life to trade and try and make money.  You had to learn tolerance and to get along otherwise you didn’t survive.  Not to mention ingnoring some awfully smell farts every day.  Pat Ward (badge PEW) I am looking at you.  I saw him clear out an entire pit once in the middle of heated trading.

John Lothian told me after my interview the floor was described to him as “4000 people that were unemployable by anyone.”  That’s sort of true in a way.  My old friend Orv Wilkin once told me, “I heard great news today.  I was diagnosed with dyslexia.  I am so happy.  All these years I thought I was dumb.”  Spend enough time around Orv and you needed to wear Depends because you laughed so hard you’d pee in your pants.

The floors weren’t just hookers and blow.  They were human.

One thing that isn’t apparent by photos or videos is different pits had different personalities. Even within pits if they were big enough, certain sections had their own personalities. I traded in two or three pits, but really two. They were very different because of the people in them, the product, and the pace of trading.

I loved all my days on the floor.  It was a place I was totally cut out for.

This is a small snippet of what it was like to work on the floor. I traded from the mid-’80s to 2012. I wish we could go back and talk to traders from every generation because I am sure it was different. There are a million stories and everyone that traded down there for a period of time has theirs.  They all are important and different.  However, certain things were constant and I think you can pick that up if you listen to some interviews. I know some of the other folks that were interviewed. I love listening to them. They bring back a lot of memories. I hope I never forget them.

Disgusting


This post is by Jeff Carter from Points and Figures

Republican Senator Richard Burr of North Carolina disgusts me.  He should step down, and be off the ballot for the November election.  Run a real conservative instead.  One with morals and scruples.

He sold $1.5MM of stock after getting private information as head of the Senate Intelligence Committee.  He should step away from that committee.  He can’t be trusted.  He should be censured, but before Senators vote they ought to check their own accounts and their staffer’s accounts too.

The problem is, he’s not alone.  This is something that has gone on in Congress for eons.

This is the kind of crap that undermines confidence in elected officials.  It undermines capitalism too.  Action like that undermines our faith in institutions and increases the cynicism.  It makes the political market ripe for socialism.

Here are some stories, one you no doubt have heard.

Democrat Hillary Clinton made $150k trading cattle by reading the Wall Street Journal.  Then never traded again.  Uh-huh.  Traders know how that works.  The real story is someone took the losing side of a cattle spread and in those days there was no real good audit trail so no one could figure it out.  It was a pure bribe.  Supposedly, some chicken guy needed regulations on manure or something like that relaxed, and that was a good way to persuade Governor Bill Clinton.

Democratic Senator Chris Dodd, Chair of the Senate Finance Committee had a wife, Jackie Clegg, on the board of CME.  Right before the 2008 crash, she dumped all of her CME stock and other financial institution stock. Wonder why?  Just decided to diversify?  She’s not on the board anymore either.  Decided to hang it up.

Former Republican Speaker of the House Dennis Hastert was a pretty sharp real estate investor in Illinois.  Can’t imagine why or how he got so good at buying farmland real estate?

Back in the day, CME would have a massive party in May and lobby Congress. It was well attended.  After one of those parties, I wound up in the backroom of the Capital Grill.  Republican Senator Alphonse D’Amato was holding court.  He was talking and a lot of guys were smoking cigars and harrumphing.  D’Amato asked me and the two other gentlemen I was with directly about Hillary and her cattle trading.  Then he said, “Who was that guy we had at the NASDAQ?”  Someone said, “Ziffy”.  D’Amato said, “Yeah, Ziffy.”  I said, “Surely Senator, you are making the buy and sell decisions independently correct?”  He said, “Fuck that, Ziffy just sends us checks.”

In my home state of Illinois, corruption is deeper than an Amazon swamp.  Many many politicians and their cronies make a lot of money gaming things and taking advantage.  Turn out is so shitty that it is virtually impossible to get rid of them because voters feel hopeless.  They know they can’t get change.  New candidates aren’t “reformers”.  They are just new pawns on the chessboard.  As they rise in power, they get access to more “opportunities” and more patronage.  Check out Senator Dick Durbin’s wealth and how it’s grown just pulling down a “public” salary.  Check out the wealth of the former Mayor.

There is a cottage industry on the hill that trades a lot of stock and futures.  It’s got to end.

Senator Burr ought to resign immediately.  He is a disgrace to the Senate, his state, his party and himself.

 

This Isn’t A Typical Market Meltdown


This post is by Jeff Carter from Points and Figures

Markets break and rally all the time.  I have been sort of active in the market since 1986.  In 1980 I was in college. After I dropped out of USAFA, I took out the max student loan I could and bought money market securities at 21%.  Every three months I’d roll them over at a lower interest rate.  When they got to 17% or so, I was upset at the return, so I bought some stock.  I doubled my money in the stock market and was hooked.

I have seen the whites of the eyes of markets in 1987, 1989, 1998, 2000, 2001, 2007-09.  They are all different.  This one is different too.

This one is different because of politics.  The left has an agenda.  The media is acting as a Democratic operative and helping them carry out that agenda.  Here is a quote from an article I read this morning.

Swine flu, also known as H1N1, happened on Obama’s watch. With over 60 million cases in the U.S., and over 12,000 deaths, where was the vitriol hurled at Obama, compared to what we are seeing directed toward Trump?

Taking a step back and taking objective stock of the situation might cause people to calm down.  Is this serious?  Sure.  Is it Spanish Flu of 1918?  Not even close.  It’s not smallpox, the plague, polio, ebola or anything like that.  Only . Continue reading “This Isn’t A Typical Market Meltdown”

Envy, Jealousy and the Relentless Attack on Wealth and Capital


This post is by Jeff Carter from Points and Figures

I’d like you to participate with me in an effort I am leading. I am raising money to dedicate a hotel suite to the Unknown Soldier at the new National World War Two Museum hotel. Any proceeds over and above dedicating that space will go to Museum STEM projects dedicated to helping grade school children across the United States learn STEM.

The attack on the rich and risk-takers continue.  Except, there are carve-outs for real estate since a lot of Americans understand real estate investment or engage in it.  Venture, Private Equity, and Hedge Funds are significantly harder and much riskier.  John Cochrane recently wrote up this on Wealth Inequality and Taxes.  Everyone ought to take the time to read and understand it.

Our tax code is riddled with carve outs and loopholes.  The only way to fix it is a flat tax with no write offs.  Everyone will pay their fair share.  We have one man, one vote; why not one man, same tax?

This proposed carried interest tax illustrated below echoes the transaction tax that Michael Bloomberg proposed.  He isn’t the only Democrat proposing it.  That tax is a useless tax on liquidity and hurts smaller investors.

In this case, it’s a tax that totally misunderstands risk and reward.  If enacted across the country, it will curb investment into innovation and efficiency.  It’s just a grab money tax because people are jealous.  I disagree vehemently with Continue reading “Envy, Jealousy and the Relentless Attack on Wealth and Capital”

Death Valley


This post is by Jeff Carter from Points and Figures

Yesterday, I went to Death Valley with my wife, brother in law and sister in law. They had a Jeep so they drove. We did a 33-mile loop. The scenery was pretty incredible. I had heard of Death Valley but had never been there. The climate is challenging to say the least. Years ago, there was some mining there. You can find old mine shafts with tailings around them.

Here was a mine shaft we climbed up to.  Jokingly, I made my caption about Bitcoin.

 

View this post on Instagram

 

Looking for Bitcoin

A post shared by Jeff Carter (@pointsnfigures) on

The scenery was incredibly beautiful. My iPhone camera doesn’t do it justice.

 

View this post on Instagram

 

A post shared by Jeff Carter (@pointsnfigures) on

There was a “town” in Death Valley called Leadfield.  The whole thing was set up as a swindle.  It proves that when you prey on people’s greed, there are always suckers around that will part with their money.

 

View this post on Instagram

 

Like Bitcoin? Or not??

A post shared by Jeff Carter (@pointsnfigures) on

Get Ready For More Candy Coated Unicorns

Remember the Wicked Witch of the West in the Wizard of Oz.  Spoiler alert if you haven’t seen the movie.  She gets doused with water and melts in the end.

I was reminded of that yesterday.  Aileen Lee first coined the term “unicorn” to mean a start-up company that hit $1B in valuation.  Here is a quote from Axios Pro Rata

Since venture capitalist Aileen Lee coined the term “unicorn” in 2013 for tech companies valued at more than $1 billion — she counted 39 at the time — hundreds more have sprung up.

  • By the numbers: Today, there are 187 private tech unicorns in the U.S., with an aggregate valuation of just over $600 billion, according to a new PitchBook report.
  • And the pace of minting new ones is accelerating — 71 current U.S. unicorns reached that status less than a year
    UBER Chart

    Continue reading “Get Ready For More Candy Coated Unicorns”

J.C. Parets of All Star Charts on Limit Up Podcast by TopStepTrader.com

This was a fun podcast to do. Pull up a comfortable chair and give it a listen. My friend JC Parets agreed to chat and we did for about 47 minutes. You’ll get his take on technical analysis, trading and markets. You’ll also learn how he got into the financial services business and how he is using the acumen he picked up in financial services to start a new business making wine. JC recently got married so we chat briefly about that too.  Thanks to Griffin Caprio of Dante 32 and TopStep Trader for making this possible.

Hope you like it and please give us feedback in the comments below.

 

View this post on Instagram

 

First one done with @cabotstain Jarrah color

A post shared by Jeff Carter (@pointsnfigures) on

Trump’s Tweets and the Market

Years ago, I invested in Ycharts.  They are the best research tool on the web. They give you the power of an institutional platform.  They have more than 50,000 stocks, ETFs, and mutual funds plus 4,000+ financial metrics with up to 30 years of history. It works in your web browser. No terminals. No installation. No crazy formulas and clunky interfaces.   You can thank Sean Brown the CEO of Ycharts for compiling this data.

This data isn’t biased.  It isn’t political.  There is no hidden agenda.

When Trump moves the market he moves it more to the downside than the upside.  That’s not a Trump phenomenon, markets always break more than they rally.  Old traders enjoyed a bear market a lot more than the bull because there is more fear in a bear market to trade off of.

By the way, tariffs aren’t

Continue reading “Trump’s Tweets and the Market”

Sign This Petition Please

Former Senator and Governor of New Jersey Jon Corzine stole over $1B of client money to cover his own personal trades. He bankrupted MF Global. He treated segregated customer funds like a personal piggy bank.  He put a stain on an entire futures industry. He caused billions in enterprise value to leak out of companies like CME and ICE for no reason.

Now he wants to be a registered SEC investment advisor.

My friend John Lothian has started a petition for anyone to sign to stop Corzine from getting any sort of certification from the SEC.  He is banned for life from trading CFTC products.  Here is the link to sign.  Or, simply email your name to corzinepetition@gmail.com  Here is a link to some articles from John’s newsletter on the checkered history of Corzine.

Here is some background on how we got here.

My Continue reading “Sign This Petition Please”

Limit Up Podcast Interview with Fin Tech Founder Michael Patak of TopStep Trader

Michael Patak sat down for a podcast interview.  He is the founder of TopStep Trader based here in Chicago.  It was a fun interview because Michael was a pit trader before he became a founder.  Pit trading was very entrepreneurial.  I think you’ll get a sense of it, and how entrepreneurial Michael has been his whole life from our interview.  Michael took a big risk starting TopStep.

Today, he’s known as the Founder and Chief Vision Officer of TopstepTrader and the Co-Founder of mobile trading platform BLUECHXP.  In 2015 has was semi-finalist and in 2016 a finalist for the Ernst & Young Entrepreneur of the Year Award. In 2017, Inc. Magazine ranked TopstepTrader No. 1,261 on its 36th annual Inc. 5000. You can find Michael on his own Instagram and makes frequent appearances on the TopstepTrader Instagram account

An Officer and a Gentlemen (Continuing Conversation with Major Gen Karl Horst)

General Horst and I ran overtime. We had a really good time chatting. TopStep Trader broke the podcast up into a couple of segments. Hope you enjoy it and if you do share it.

I am driving up to Minnesota today. Hope the folks in Los Angeles are okay. If you are building an earthquake emergency kit, check out Luminaid lights. They are solar powered and can also charge your phone.

Go Cubs, crush the Sox.

The Bonds

The WSJ had an article about bonds, and Main Street versus Wall Street.    It’s a debate I have seen before.  The debate centers around trade reporting.  This is one of the nuances of operating an exchange.  We get a peek at a lot of different exchange startups and they always want to talk about how they match trades.  The real guts and glue of an exchange is not the matching of trades but everything that happens after the trade is made.  Reporting, clearing, settlement, pays and collects, arbitration, and enforcement.

In this case, one group wants to delay the reporting of large trades to the market.  The other wants the trade reported. I assume you can guess who is whom.  The WSJ reports,

If enacted, the plan could delay by two days reporting of 56% of investment-grade corporate bonds traded and Continue reading “The Bonds”

The Warrior

“It’s about being a warrior. It doesn’t matter the about cause necessarily. This is your path and you will pursue it with excellence. You face your fear because your goal demands it. That is the warrior spirit.”-Alex Honnold

Watched the movie, Free Solo, twice.  On the surface, it turns your stomach.  Death-defying, of course.  The camera angles and musical score heighten the drama.  The most enjoyable part of the movie for me was watching him enjoy the battle, the journey.  He smiled at the top but it looked more like a sense of relief rather than the elation he felt after a finishing a couple of tough parts of the climb. When you look deeper into the mentality and soul of the climber, Alex Honnold, you see something else.  Zen.

They showed a scene where he was doing a pretty intense

Continue reading “The Warrior”

January 2019 Data Update 9: The Pricing Game

In my last eight posts, I looked at aspects of corporate behavior from investments to financing to dividend policy, using the data that I collected at the start of 2019, to examine what companies share in common, and what makes them different. In summary, I found that the rise in risk premiums in both equity and bond markets in 2018 have pushed up costs of equity and capital, that companies across the globe are finding it difficult to generate returns on their investments that exceed their costs of funding, and that many of them, especially in mature businesses, are returning more cash, much of it in the form of buybacks. Since all of the companies in my data set are publicly traded, there is one final number that I have not addressed directly in my posts so far, and that is the market pricing of these companies. In this post,

Continue reading “January 2019 Data Update 9: The Pricing Game”

Volatility

Woke up this morning and saw the futures were a lot lower.  Of course, yesterday they had a record rally.  The day before, a record drop.  It’s called volatility.

I have a couple of observations as an old time trader. I just wish I was on the top step to take advantage of it.

The other day I said to “Buy Em” on Twitter.  Logically I think fears of a government shutdown and totally overblown.  The press hates Trump and you have to figure that any news they report goes through that filter.  Any news.  Heck, they gave his wife Melania grief for wearing Timberland boots on their recent trip to visit the troops in Iraq.

The other reason I said “Buy Em” is that corporate America is in good shape. Markets don’t drop when that is the case.

The other reason I said “Buy Em” is that there Continue reading “Volatility”

Buy Em

I don’t trade the market anymore.  I can’t make any sort of consistent money doing it.  I watch it though.  Of course, watching it over this past month hasn’t been pretty.  Yesterday was really ugly.

But, it can’t go to zero.

I don’t think we are headed to a recession.  I think corporate America is in pretty good shape with good balance sheets.  I don’t see layoffs.  Unemployment is still low, and below what we used to think “frictional unemployment” was.

There are a lot of wild cards but I think the consternation over a government shutdown is way overdone.  The government shuts down a lot.  Heck, if they get a few inches of snow in DC it will shut down.  The noise is way above the signal.

Mattis resigning is another matter and to me it’s a bit worrisome.  I would like to hear two people on opposite sides Continue reading “Buy Em”

A Big Difference Between Trading For Yourself And Startups

Startups entail assuming a lot of risk.  The outcome is highly variable.  Volatility reigns. At the outset, you don’t know if that startup is going to be a rocket ship or a failure.  All you know is a lot of them fail for a large variety of reasons.  Most people overestimate the failure rate of startups.   At a conference I was at a family office said they had been investing in startups for around 30 years and their failure rate was about 50%.  Those are good odds from where I come from. 50/50 with the upside that a startup can bring.  I’ll take that trade all day long especially if I can figure out ways to improve my odds.

There are a ton of resources today for startup entrepreneurs that didn’t exist before.  You can improve your odds if you want to and work at it.

Back in the

Continue reading “A Big Difference Between Trading For Yourself And Startups”

Different Strokes For Different Exchanges

One of the thing that really bugs me about exchanges is that there is no real standardization.  Unless you hear from a friend or actually open an account, it’s hard to know how it really works.

Coming from the CFTC side of the business, there was a certain amount of standardization.  No payment for order flow.  No wash trading.  When you saw volume and open interest in a contract you could be relatively sure what the liquidity pool would look like. When you are trading, you have to be able to get in, and get out of a position.  Less liquidity and the price to play goes up.  The SEC side of the business is a lot murkier.

Stablecoins are the rage, but the way to hedge risk in crypto is via traditional means.  If you used futures, options and OTC bilateral derivatives, Continue reading “Different Strokes For Different Exchanges”