Inside The IMF – U.S Pulls Strings

The U.S. government has by far the largest share of votes in both the IMF and World Bank and, along with its closest allies, effectively controls their operations with 18% of the votes in the IMF and 15% in the World Bank.

Together, the United States, Germany, Japan, the U.K. and France control about 40% of the shares in both institutions.The rest of the shares spread among 175 other member governments, some holding just a tiny number of votes, so in a general sense – the United States is effectively in charge.

Currently Timothy F. Geithner is listed as the U.S Governor to the IMF – with our good friend Ben Bernanke listed as “alternate”.

The IMF makes sure that U.S. allies get the financial support they need to stay in power, abuses of human rights, labor, and the environment notwithstanding; that big banks get paid back, no matter how irresponsible their loans may have been; and that other governments continually reduce barriers to the operations of U.S. business in their countries, whether or not this conflicts with the economic needs of their own people.

The IMF lends money to governments. Because many governments, especially governments of poor countries, are often in dire need of loans and cannot readily obtain funds through financial markets, they turn to The IMF . And if the IMF will not loan to a country, international banks certainly won’t. As a result, the IMF wields great power, and is able to insist that governments adopt certain policies as a condition for receiving funds. As seen through the economic and environmental fall out after IMF intervention in Ecuador in 2001 – 2003 (more on this later).

In some way this could be perceived as “a loan of last resort/loan sharking” – considering that the country accepting the loan is now in scenario where the IMF can dictate repayment terms (at unrealistic interest rates) in order to impose even greater influence – ( In Argentina for example –  The Buenos Aires water system was sold for pennies to Enron, as was a pipeline going from Argentina to Chile) as corporate America swoops in and buys prime assets on the cheap.

Inside The IMF – The Darker Side

I’m sure that most  of you have heard of the organization The IMF – but likely not in this light. I have been researching this for some time now, and over the next couple posts hope to share with you what I’ve learned.

The International Monetary Fund (IMF) is an international organization that was initiated in 1944 at the Bretton Woods Conference and formally created in 1945 by 29 member countries. The IMF’s stated goal was to stabilize exchange rates and assist the reconstruction of the world’s international payment system post-World War II.

Countries contribute money to a pool through a quota system from which countries with payment imbalances can borrow funds temporarily. Through this activity and others such as surveillance of its members’ economies and policies, the IMF works to improve the economies of its member countries.

The IMF describes itself as “an organization of 188 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.” The organization’s stated objectives are to promote international economic cooperation, international trade, employment, and exchange rate stability, including by making financial resources available to member countries to meet balance of payments needs. Its headquarters are in Washington, D.C., United States.

Voting power in the IMF is based on a quota system. Each member has a number of “basic votes” (each member’s number of basic votes equals 5.502% of the total votes), plus one additional vote for each Special Drawing Right (SDR) of 100,000 of a member country’s quota. The Special Drawing Right is the unit of account of the IMF and represents a claim to currency. It is based on a basket of key international currencies.

Ok so we get it – an international financial group all pitching in to a communal “fund” where the more that your country contributes the greater the number of votes (and influence) is given.

I wonder if you’ve already got some idea as to where I’m going with this.

Any idea of which country is the largest contributor and in turn receives the most votes/influence?

Next in the series: Inside The IMF – U.S Pulls Strings

Trading JPY – When Short Turns Long

If you’ve been trading the Japanese Yen (JPY) alongside me these past few months,  I’m sure that you agree….the currency has been a real friend. The steep and steady slide of JPY over the past few months has made for some excellent trade opportunities – for that I am thankful.

Once you’ve tracked and traded a currency this tight, for an extended period of time – you really start to get a feel for its movements. What time of the day holds action, when to sit out, when to step on the gas, or when to sit back and enjoy the ride. By now you’ve got 8 million horizontal lines of support and resistance drawn at levels you’ve now come to know in your sleep. You are now….one with Yen!

As we know nothing moves in a straight line, and no currency exists in a vacuum so….at some point the tides change and your “easy ride down” morphs into some “bumpy days sideways” until finally a correction “upward” is due.

Taking into consideration that JPY is still very much so considered a safe haven currency (as we’ve been over  – with Japan holding the majority of its debt domestically), coupled with current fundamentals shifting  “towards” risk off behavior I feel the time is coming very soon to flip this one upside down – and start looking LONG JPY.

For me this would manifest in taking “short positions” in AUD/JPY, NZD/JPY,CAD/JPY and possibly several others as markets continue across the top before making their move lower.

Bernanke is on deck for Wednesday with the FOMC minutes being released so…I imagine he’ll want to talk it up that QE is right on track and set to continue. This along with the current fluster of information out of the EU Zone makes for a pretty tricky couple days. I will be monitoring and watching all my previously drawn lines of S/R as they will all just get hit again on the upside.

In this case I am considering that buying JPY will align with “risk off coming into markets” for those of you looking to line up the fundamentals. JPY is a safe haven and is likely “bought” in times of risk aversion.

Kong Hits 100% Cash Target

I’ve done it.

Overnight I took a number of smaller trades looking to fill gaps in many of the JPY’s charts. A number of those paid off and I’ve also sold my remaining  “short USD”  trades for a small profit this morning as well. The point being – I have moved to 100% cash as per my trade plan, and am exactly where I want to be for the coming days.

To an active trader the feeling of being 100% cash is truly , TRULY remarkable….as you’ve “officially” extracted “x number of dollars” from that devil of a market, and are able to put your feet up a day or two and relax. I’m really not much for that  – but in this case, will certainly take a day to re-evaluate and not worry about open positions.

From a completely psychological perspective, the opportunity to step away from the market is a welcome gift. I would encourage anyone who is struggling or confused, or perhaps those who are  underwater in a position or two – to take the time to get away from it all…if only for a day or two.

In my case – a time for celebration, as to have survived yet another  – trading adventure.


Black Swan – Cyprus Blows Up

What happened in Europe yesterday is yet further proof that nothing has been done to repair the underlying fundamental issues surrounding the EU Zone financial crisis .

For those who don’t believe the government is prepared to take extreme measures that may include the seizing of retirement accounts, cash savings or even gold, look no further than Cyprus, the latest recipient of bank bailouts.

As of this moment, citizens of Cyprus are scrambling to withdraw funds from their bank accounts after the EU, with agreement from the Cypriot government, announced they will decimate funds held in personal bank accounts to the tune of up to 10% of existing deposits.

The European Union has made the determination that the people of Cyprus are now responsible for the hundreds of billions of dollars in bad bets made by their government and bank financiers, and they are moving to confiscate money directly from the bank accounts of every citizen in the country.

Could this be the black swan event I have been looking for in prior posts?

EU Zone Catalyst – USD Saves Face

I expect things to get pretty interesting here this evening as  markets get moving – and look to interpret the news. We will keep a very close eye here later this evening and into the early morning on Monday, as this “news” does line up pretty nicely with my previous posts  – and suggestions of getting to cash and exiting markets mid March.

This “could” certainly be a catalyst in my view.

Trade wise  (if indeed we get a strong move on this news)  I would be looking to dump USD shorts immediately and reverse these trades – as well get long JPY, dumping the commodity currencies…….pronto.

Xi Jinping – The President Of China

Xi Jinping ( born 15 June 1953) is the General Secretary of the Communist Party of China and the Chairman of the Party Central Military Commission. He is also the President of the People’s Republic of China and the Chairman of the State Central Military Commission, and is the first-ranked member of the Politburo Standing Committee (PSC), China’s de facto top power organization. Xi is now the leader of the Communist Party of China’s fifth generation of leadership.

Xi is considered to be one of the most successful members of the Crown Prince Party, a quasi-clique of politicians who are descendants of early Chinese revolutionaries. Senior leaders consider Xi to be an emerging figure that is open to serious dialogue about deep-seated market economic reforms and even political reform, although Xi’s personal political views are relatively murky. He is generally popular with foreign dignitaries, who are intrigued by his openness and pragmatism.

He will rule over one fifth of the world’s population for the next ten years, if all goes to the Communist Party’s plan. 

His challenges are numerous: a strong but slowing economy with growing resentment over corruption, an urban-rural wealth gap, continued calls for wholesale political reform and countrywide worries stemming from countless environmental scandals.

I thought it might be worth getting to know this fellow a bit – considering he’ll be the man for the next 10 years. I was hoping to find some indication of his  plans moving forward and ironically – found “tackling corruption” sits at the top his……………”to do list”.


Gold Trade – For The Last Time

I suggested some months ago to buy gold and gold related stocks. Since then the price of gold, and performance of the related miners has gone nowhere but down…and down….and then down even more.

I lost $1500.00 bucks in options that expire today – likely the largest “losing trade” I’ve made in many months.

Putting this in perspective – I see $1500.00 (+/-)  flash on my screens  a few times a week (if not daily) as it represents “peanuts” in the grand scheme of things. I spent about a week watching the trade go against me before I put it aside in the “whatever” category and got on with my work – banking some of the best returns of my life over the same period of time via the currency trading.

The plain fact of the matter is… regardless of price – in the current “print til you can’t print anymore” environment – there is absolutely no reason to own gold. There is no fear. There is no “need to store value” while stocks are blasting to the moon! People (including myself) are making money hand over fist in a number of areas as gold bugs continue to debate/rationalize/haggle the reasons as to why their “all in bets” on the shiny metal haven’t made them rich – but more so bust their accounts.

Its foolish investing. It’s gambling. It’s naive and its completely irresponsible.

Bottom line – gold will make it’s move when stocks and “risk” tanks. And from what I gather – the FED is gonna work pretty damn hard to make sure that doesn’t happen……. anytime soon.

I do plan to “re enter” and take another shot at gold and related names – but as seen a week ago when gold popped some 30 bucks on the big DOW DOWN DAY – it looks pretty obvious to me that we won’t see a move in gold – until we see some serious fear enter the market – regardless of where the USD is at.


GBP Buying – Good For A Trade

The Great British Pound has really taken a beating over the past few months. I’m seeing relative strength in the currency  across the board meaning – the GBP is making solid headway against a majority of other currencies. Looking for possible reversals against USD, CAD as well CHF could result in some decent trades.

I do caution however – the GBP is a wopper. It moves extremely fast and furious at times and demands tremendous respect. My suggestion would be to consider these trades with a very small position size – and allow for considerable volatility.

GBP Counter Trend Rally

GBP Counter Trend Rally

All short USD trades are performing nicely here as of this morning, and I will look for further in USD/CHF as the day progresses. Otherwise I am nearly 100% out of JPY trades with a few small ones still hanging in profit.

I rarely trade GBP but do see it as an opportunity and will approach it purely as “a trade”.


Market Direction Uncertain – USD No Help

I’d have to say this is the first time in my entire trading career  where I’ve seen both the US Dollar and US equities rise together –  for such an extended period of time. The USD has been up up up some 25 days and running now – while stocks continue to grind higher as well. Something is obviously up.

The USD as well as the JPY are (under most conditions) recognized as “safe haven” currencies (as absolutely bizarre as that sounds) and as risk presses on and stocks move higher – these are normally sold. When risk comes off – flows head back for the ol USD as it is still the world’s reserve currency.

So are the big boys already building positions in USD in preparation for a larger correction/world event/news flash?

Looking at the calendar – I had planned to be in 100% cash as of the middle of March with expectations of such an event, and here we are….. only two days away. Obviously I can’t say for sure – but it would make a lot more sense to me that stocks would correct here as opposed to the Dollar. After this many days moving higher – we’ve got to see a little “zig” in that “zag” at some point.

So….with several open positions (small positions thankfully) I will likely plan to watch closely over coming days and even throw on a couple stops (which I normally / rarely use) in order to keep my self insulated from any “global disaster”.

Short of that…..perhaps things keep chugging along a while longer , and indeed the USD does finally make a turn down – and stocks continue there “blow off top”.

Trade safe here people. Market direction IS uncertain.

When Trading Gets Boring

Some time ago I read that “you’ll know you’ve become a successful trader when…” – you are bored stiff with it. I’m not sure I’d go quite that far, but can say with honesty that days like yesterday (and now today) do put one to the test. With extremely light volume and the USD STILL HANGING THERE – markets appear to be stalled and trading with little conviction.

During these slow times I try my best to go and find something else to do in that – staring at a screen full of candles and lines going absolutely nowhere is not exactly my idea of a good time. One still needs to remain disciplined and vigilant but sitting there watching “paint dry” can wear on you psychologically – and you don’t want that.

With most trades in the green / flat and markets flat as a pancake – Im out of here for today and will likely go find something more interesting to do…hmmm….maybe go get a tooth filled.