THE MUPPET CLASS

                                          Which One Is You?

For the longest time, clients of Vampire Squid [AKA Goldman Sachs] have been known as “muppets”; the people who get the best trading information from the wizards-of-smart analysts making 6 and 7 digit salaries and bonuses. The fact that “your buying” is met by “their selling” shouldn’t concern you; “are you gonna believe us or your lyin’ eyes?”

To the best of my knowledge, the top FX strategist over there [the infamous T. Stolper] hasn’t made a profitable FX trade in over 3 years. Yet, people keep shoveling their hard earned money to firms like this year after year; why?

You can’t begin to explain chaotic systems through logic and intuition. You need the people who live behind the curtain in Oz. Of course, all that comes at a heavy price as you are never going to achieve the results you expect.

Does Vampire Squid allow you to profit from their HFT [high frequency trading] operations? Their proprietary trading algorithms [along with JPM] make billions and the number of trading days they lose money in a year are in single digits. Do you get to piggyback this if you are a “muppet”? Where do you go to sign up for this?

                             Following Algorithms ARE HARD

Two points here worth making; 1) you are the one who is supposed to supply the money, not take it, and by default 2) they are the elite financial class destined by divine right to take your money.

What they know they can’t share with you, because you are too stupid to understand advanced math and chaotic systems. Once given their HFT's, how long would it take the average sheeple to come to the understanding of, “err hey, whadda we need these guys for anyway?”

There is a reason for every rule in my long term algorithm; to keep you out of trouble. Aside from the abject stupidity on my part that cost us about $10-$15 per OZ. on Tuesday, so far this week the algo has done a fantastic job of preventing you from making ill-conceived trades both long and short.

[Like the Yellen up-its-bullish no wait a minute its-bearish price action that got people whipsawed like a seesaw in the last 24 hours. Welcome to news trading.]

We will see if the market is able to break its range tomorrow [Friday] and give us any trading opportunities [I’m not optimistic, but we’ll see]. I know it is hard to sit and be patient; if it was easy and intuitive, everybody would be able to do this and make a fortune. They can’t, and that should tell you everything you need to know about trading.

Have a great day everyone.

-vegas

THE NEW INTERNATIONAL CURRENCY: TUNGSTEN

                                   Guess What? It Ain’t Gold

Time to hand out “The Louie Renault Award” for being shocked.

[ http://www.youtube.com/watch?v=T1DEG6BWgp0 ]

The gold dealer community is abuzz over some Russians [ROFLMAO] selling 10 OZ. gold bars filled with tungsten. I just got one question: is JPM, or Vampire Squid, long tungsten futures?

If tungsten catches on with muppets clients, maybe some day we can have tungsten bars filled with gold. Until then, give me gold coins and leave the bars for the snooty Swiss.

Maybe it’s just my cynical gold dealer mistrust, but there is a part of me that says this whole thing is a scam to discourage people from buying and holding physical gold. The lengths that government, at any level, will go to confiscate your wealth is unbounded by any natural constraint.

Of course, given the propensity of the Amerikan public to swallow any and all swill Wall Street throws at them, expect nobody to learn the lessons of MF Global or PFG Best. Keep buying paper Amerika, it’s done such a bang-up job for you this last decade hasn’t it?

Have a good day everyone.

-vegas

OCTOBER 1992

                                                All Aboard

We are fast approaching a moment in Forex trading that can only be described with history.

As we enter my hot tub time machine, I’m setting the dial for October 1992. Let’s review the facts shall we? The British Pound [GBPUSD] is north of 2.00; George Soros is long D-Marks and short the Pound in such large quantities that the Bank of England makes a request to him to stop shorting their currency.

When the Brits decide they don’t want to be a part of the EU, the Pound plunges; 3 days later it’s trading at 1.40. Up until now, this is the moment in history that can best be described as a “nuclear moment” for major currency pairs; a 60 handle drop worth $60,000 on a 1 lot.

Of course, we now know that George had inside information from the Chancellor of the Exchequer that Britain had absolutely no intention of joining the EU currency, but in Forex trading the only rule is there are no rules. A cool $6 billion in profits; but I digress…

We all know politicians lie; yesterday I read over at Zero Hedge how the police in Greece are urging people to leave their money in Greek banks and not to participate in a classic run on said banks. After all, it’s a safety issue don’t-cha-know? [Excuse me I have to puke … OK, better now.]

Everybody should know what this means; collapse is imminent. Sometime, over the next 10 weekends, Greece will get kicked out leave the EURUSD; it will happen over a weekend. You wake up Monday morning and there is a new reality from Sunday night. So, which weekend and what exit scenario?

Our pals over at MS are telling muppets clients that it could get as ugly as 0.80 on the Euro under 1 of 4 scenarios they envision for the Greek exit [Grexit]. That, my dear readers, would be an approximate 45 handle haircut, and eclipse that long forgotten Pound episode from ’92 [forgotten except by those who lived it]. Fortunes made, fortunes lost.

So where does this leave gold?

I have a very hard time, after seeing the Euro slaughtered along with equity markets, seeing gold rally into this. I don’t know how the smartest-guys-in-the-room stop a deflationary collapse like this. Sure, the policy response will be to print untold trillions, thus setting the stage for the eventual hyper-inflation collapse, but the initial knee-jerk reaction is likely to be many dollars / oz. to the downside.

And every Sunday afternoon, when Forex reopens in New Zealand from the weekend, do we get any relief rally when we come to find out this wasn’t the weekend for Grexit? How many weekends do you go home short, only to find out you got sandbagged again, and get to buy it higher on the open? Nothing is a slam dunk here.

But what if everybody is wrong here on the catastrophe? If they happen to get it right, and kick Greece out the right way, wouldn’t that be uber-bullish for the Euro? How about a 10 handle higher open with the Gypsy’s out of the way? What would a $100 / oz higher open in gold do to your juices? Let me repeat: nothing is a slam dunk here; nothing.

But whatever weekend it occurs, and the inevitable rioting and chaos that follow, and you’re sitting comfortably in your easy chair, just remember this: you are looking at the future of Amerika.

“Thank you politicians.”

Meanwhile …. It’s the weekend and we need a chuckle. Without further ado …

 Have a good weekend everyone.

-vegas

A LINE IN THE SAND

                              I Bet He Loves To Trade Gold Too

It takes a brave soul to be long gold these days; you got the “Lemmings in Asia” throwing in the proverbial towel, a disintegrating Europe that sells everything, and of course the ever present Central Planners along with the JPM prop desk.

However, Vampire Squid [GS] is telling their Muppets that this is the time to buy gold.

[ http://www.zerohedge.com/news/goldman-sees-%E2%80%9Ccurrency-last-resort%E2%80%9D-15-1840oz-6-months]

Here’s my question: Is the recommendation for real, in order to really enrich clients, or is it a ploy to be on the sell side when the Muppets take their advice? Based on past history you would be better off running quickly from The Squid.

But has anything really changed to warrant a lower price in gold sub $1600? Me thinks not. As hard as it might be to get gold back over $1800, it might be even more difficult to get it lower than the $1550 area. Governments all over the world have the printing presses going full tilt, debasing currency on a monthly basis that 5 years ago you would have thought literally impossible.

I think you have to give gold the benefit of the doubt [buy breaks and be long sub $1600], up until the time it breaks [if it ever does] the $1550 area. It may be a tough hold, but fiat creation is everywhere and not going away. Anybody that thinks Europe or the U.S. will opt for “austerity” is nuts: they will print money until the revolution forces a change.

A definitive break of this area [by more than $10 or $20] and I think gold has some real problems going forward; not the least of which would be it would be lower on the year. What would real panic selling look like? You’ll find out if it goes lower on the year.

Have a good day everyone.

-vegas

WHEN WILL THE MUPPETS LEARN?

                            We’re Vampire Squid & Here to Help

All the exuberance of Tuesday’s advance just got a whole lot of cold water thrown on it. Even a Vampire Squid [Goldman Sachs] buy recommendation to their customer clients muppets couldn’t save gold today.

“Hey, it’s only money – and yours at that!”

Until late morning stops were set off, it was looking like a pretty dull affair. Stock market weakness, along with declining crude prices, and a rising dollar proved too much too handle for gold.

I’m wondering how many muppets bought gold while the prop desk at Vampire Squid was selling?

Below is an example of what I was talking about yesterday. The black dot is where the bid started climbing from about 1674.09. Over the next few seconds gold climbed all the way up to about 1675.09, a gain of about a dollar. If you long, from let’s say 1674.00, things for a second look promising; and if you’re trying to get out you have to push the liquidate button on the way up.

But let’s say you hesitate – wait a second – wait for it to roll over. Sorry, you lose. In the next second [red dot] the bid is 1673.83. What was a gain is now a loss Welcome to nibble, nibble, nibble, BOOM!

If you are not early, either getting in or getting out, you will pay the price with the dealer.

This is the major reason I have cut my leverage the last couple of months from where it was most of 2011. What looks great one second looks like death the next, and if you have a very highly leveraged trade you’re gonna hit the panic button and end up feeding the dealer.

I’m no muppet, and I don’t trade to feed the dealer or the house; I trade to make money. In these types of conditions it will be near impossible to get the price you want when you want it; you have to be early and be willing to take the money and run.

If you choose to wait, most likely price will get away from you and whatever risk management priorities you once had are now out the window. How do you recover from this?

Have a good day everyone.

-vegas