currency trading

Deflation Vs Inflation – The Great Debate

Forex Kong 25 Comments

It’s pretty rare that I get excited about something like this as I don’t really spend a lot of timing thinking about – but in this instance, I’m really looking forward to learning more.

We’ve had some discussion in the comments section over the weekend, with a couple of very  knowledgable participants really putting out some great info.

Deflation vs inflation…..the great debate.

I for one have thrown this around on occasion, only to find myself back where I started in the first place – time and time again. I hope I don’t create a “dead-end ” here (as I generally stick to spaceships, quiet time with ants, and the search for evidence of alien life on Earth ) and am certainly “not” an economist, but I hope we can wrangle these guys ( and whom ever else ) to shed a little light, on a an area of economics – often misunderstood.

The basics:

Deflation is a “decrease” in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Deflation increases the real value of money ie…..the currency of a nation or regional economy.

Deflation allows one to buy more goods with the same amount of money over time.

*Thank you Wikipedia!” ( what you think I rattled that off the top of my head?)

Inflation is a persistent “increase” in the general price level of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy.

So…..in a nut shell – looking at the value of a dollar in a given economy, and the reflection of “how much of what” that dollar is able to purchase at a given time  – no?

The questions:

Given the current monetary policy – Is the United States “currently” in an inflationary environment or a deflationary environment? And more importantly ( as we are all much more interested in the future )…..

Where do you see the United States headed next? And….(bumbuddabum bumbumbbumbbumb!!!)

Why?

Woohooo! I’ll do my best to chime in but in all honesty I’ve likely got little to add…other than my own “backward / flipped over / nutty way” of looking at it, which ultimately may not have to do much with economics as it does making money trading forex.

All opinions / views more than welcome!

Let’s get this thing licked! And thank you in advance to JSkogs in particular. A valued reader and contributor here at Kong, and from what I gather – a pretty all around great guy.

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Forex_Kong_Google

Forex Trades – Right Here – Right Now!

Forex Kong 7 Comments

Some general observations:

The overnight surge in GBP looks a tad “suspect” to me, so I’ll be watching for opportunity to “get short GBP” in any of several pairs including GBP/USD as well GBP/JPY and even GBP/NZD, pretty much “right here – right now”.

The Australian Dollar has also “seen its day” with a couple of days of retracement, but with absolutely nothing but “empty space” down below. I expect AUD to turn, and continue its way lower……much lower. Short AUD/JPY reload more or less….”right here – right now”.

The U.S Dollar has pulled back “a bit” providing for further “long opportunities” if you are still in that camp. Keep in mind that USD has changed it’s course creating higher highs since early January so….regardless of near term squiggles – I’ll be looking for a stronger USD moving forward.

Long oil idea from weeks ago has certainly been a performer (as much as I scrapped the trade a couple of days in ) and good ol gold “appears” to have caught a bid.

Another day ( ho hum ) with SP 500 / risk – trading flat as a pancake.

Wish I had more to share.

Safe Havens Misunderstood – Don't Be Fooled

Forex Kong 17 Comments

To refer to the U.S Dollar as a “safe haven” makes little sense, even to the  newbie trader/investor who I’m sure by now has at least read / heard something “somewhere” – with respect to USD’s continued depreciation/devaluation and “ever diminishing” buying power.

I don’t have the stat off the top of my head, but remember reading that the U.S Dollar has lost some 93% of its value / buying power over the past….75 – 100 years? As well that the number of “new dollars” created “every year” now surpasses the number of dollars “in existence” over the previous 800 years. That’s what I call devaluation no?

In the current investing environment any “perceived dollar strength” cannot be misunderstood as “actual strength” as…….USD rises when assets priced in USD are sold. Period. End of story.

As stocks (which are priced in U.S Dollars) are sold (by the simple mechanics of markets) a “cash” position is then raised. Investors “seeking safety” aren’t rushing out to “buy dollars”, they are simply selling stocks / assets “priced in dollars” with attempt to “get out-of-the-way” should further downside risk ensue. Do not mistake this ( as the U.S media would have you ) as “dollar strength” or even worse as a “good thing” in that……a move towards USD suggest investors are moving to “cash”.

The general spin in the media these days would have you thinking “hey the Fed is going to continue tapering, stocks haven’t fallen and hey! – Look at the U.S Dollar gaining strength too! Things must really be going well!

This couldn’t be further from the truth.

I had questioned in a previous post – which “safe haven would take the lions share” during the impending correction ( already underway ) and have now seen that indeed “all assets suggested” have begun the slow turn upward. USD as well the Japanese Yen, Gold and even U.S Bonds – all moving higher over the past couple of weeks.

Do you think it’s just by chance?

 

 

Spanish Speaking Traders – Bienvenidos!

Forex Kong 4 Comments

El idioma español es el segundo idioma más utilizado en los Estados States.

The Spanish language is the second most used language in the United States.There are more Spanish speakers in the United States than there are speakers of Chinese, French, German, Italian, Hawaiian, and the Native American languages combined.

According to the 2012 American Community Survey conducted by the U.S. Census Bureau, Spanish is the primary language spoken at home by 38.3 million people aged five or older, a figure more than double that of 1990.

Español es “el segundo idioma más popular” aprendida por hablantes nativos de Inglés Americano.

Spanish is “the most popular second language” learned by native speakers of American English.

I am very pleased to “kick off ” further promotion in several Latin American countries, and wish to extend a very warm welcome to those spanish speaking traders!

Estoy muy contento de “poner en marcha” una mayor promoción en varios países de América Latina, y el deseo de extender una cálida bienvenida a los comerciantes de habla Español!

Thursday Forex Trade Update – Re Load

Forex Kong 4 Comments

Once I get my signal for entry, and then begin to “actively trade” a given currency pair on the smaller time frames – things really start moving.

I’ve already taken profits on the entire group of trades entered Monday, then “re loaded” several pairs with smaller orders through yesterday and last night, with a couple of really big moves being seen – in particular the Australian Dollar ( didn’t I tell you that days ago?? ).

A quick update on activity here on Thursday as quite simply – I am sticking with the same pairs (more or less) and after a couple of days “chopping around” look to scale into re entries “across the board”.

Often what I’ll do in cases like this, when we’ve nailed the original entry so well – is take a “portion of profits” already taken – and treat the “re entries” as “bonuses”. Taking 6% in a matter of 48 hours, with next to no market exposure allows me to “mentally” approach the next trades a little differently.

I knock the Kongdicator down to the smaller time frames, and more or less just do the same thing over again as…..I’ve already got the confidence that we’ve nailed a change in trend / direction – now it’s really about “getting back in there” at the very best points that I can.

I hope you’ve been following along, and from what I understand from some of my regular readers…it sounds like several of you are making some money too!

USD has taken a little break, and several pairs present “decent shots” at re-entry here this morning. AUD has been punished hard, but I’m confident it still has further to fall as NZD also looks to be fading. JPY has certainly been stubborn but my feelings about it have not changed.

We are literally….soooooo close to a larger scale correction  – you can practically smell it.

Trading Greed – Take Profits Faster

Forex Kong 14 Comments

It’s very difficult trying to “teach” people not to be greedy.

Human nature ( or at least the human nature you “had” before becoming a trader ) pretty much has “greed” wound tightly ’round your genes, and for the most part – that makes sense. Man finds something that he wants / needs, then he wants more, he needs more, and if only driven by the human instinct to “survive” – he looks to “get more”.

What happens when you wake up the morning after your “discovery” and the “more” you where planning to go back for – has disappeared? Overnight – the watering hole has dried up.

Thankfully you took what you could the day before right? Running home to get that “bigger bucket” (to put all that water in) didn’t work out to well for you did it?

You have to learn to take profits when you see them…as in this crazy environment there is absolutely no guarantee they’ll still be there in the morning.

Kong on the scoreboard with 4% returns on trades initiated Monday – now looking at re entry . As well on the CNBC front I’ve actually been pleasantly surprised this week as…..the floating heads have shown considerable restraint ( as I would have expected them to just say  buy, buy , buy ).

China Gets The Gold – U.S Stays Afloat

Forex Kong 28 Comments

Not to shabby really. Two full weeks without a trade alert posted, and Monday the Nikkei closes down some -450 points. I hope you got the tweet. Of the 13 pairs suggested I think maybe “one” didn’t move directly into profit within the first few hours of trading.

A wonderful entry sure, but in this day and age you can’t just rely on that. Would it shock me to see the entire move 100% completely retraced  by tomorrow afternoon? Not in the slightest.

Interesting to see, that of the “safe havens” outlined in a post a few days ago – ALL managed yo move higher as risk aversion took center stage. The U.S Dollar, Bonds, Yen and Gold all moving higher as suggested ( I hope you’ve taken something away here –  a nice lil nugget found laying in the dirt.)

There’s been some talk that the “age-old correlation” between the price of gold and the value of the Australian Dollar has once again “found its way” as the Aussie continues to exhibit “some degree of strength” in a “risk off ” environment. Personally I’m not holding my breath as ( call me crazy but…) I’ve formulated some idea as “what the hell has been going on with Gold” and it doesn’t involve Australia.

Has anyone else considered that the Fed / U.S has actually been “allowing” China to buy gold on the cheap as a backroom / side deal  / means to convert / smooth out the waters as opposed to seeing China dump USD as well as future bond purchases?

Makes perfect sense to me. China says “moving away from USD as well no need for more US denominated debt”, U.S has a heart attack and swings a deal to actually “give” China whatever remaining gold is available for the lowest price possible?

The more I think about – the more sense it makes.

You won’t tolerate our “money printing any longer” so…..please don’t drop the hammer on us just yet – “here’s all our gold reserves as well”.

Manipulation ( short selling in the paper market ) essentially giving China the means to buy gold on the cheap as opposed to more U.S denominated debt no?

I’m positive this has absolutely nothing to do with the Australian Dollar and caution that people are at least “open to the idea”. Call me a wack job……fair enough.

We’ll take it day by day but as it stands, all “short AUD” entries look fine here as of this morning

Gold will be gold, and I’m quite certain the Aussie will continue to find itself on its own “downward trajectory”.

Reflections On China – Where To Next?

Forex Kong 1 Comment

If you’re not following China’s economic story  in a “day-to-day sense” – I completely understand.

It’s not like you don’t have enough on your plate, with what’s going on in your own lives. Tough enough these days keeping up with the troubles in Europe, or the world’s largest nuclear disaster in Japan, not to mention your kids, employment, your health and likely a million other things far more pressing than “what the hell is really going on” in China.

Well…..I try keep things pretty straight forward here for that reason alone. Gimme the info , no need for a bunch of meaningless numbers and charts etc – just tell me what it amounts to, and how it may affect my investment decisions / trading moving forward. Thank you Kong, have a good day – talk to you later. Fine.

You may recall that China’s leaders had their “Third Plenum” meeting some months ago outlining a list of reforms to be taken on by the country through the coming years. The general gist of this as it may affect you is simple – China needs to move away from the policies centered on “massive and somewhat inefficient growth” to a more sustainable model where support is now given to the “tiny shoots” that may have blossomed as a result.

Simple enough, and simply put – China’s reform policies moving forward will contribute to “a generally slowing economy” as “growth” takes a temporary back seat to “sustainability”.

You also have to appreciate that China “IS” the global growth engine. China is now the largest trading nation in the world in terms of imports and exports, after overtaking the US last year.

The proposed reforms in China make absolute and perfect sense as,  much like a well-tended lawn – you’ve done the work to get that grass growing, it’s up , it’s starting to grow – but you’re certainly not going to “flood it” with a pile more fertilizer now are you?

The implementation of reforms in China will undoubtedly contribute to the slowing of global growth moving forward, but as we’ve all come to recognize / understand – this will only be a small “zig or a zag” in the long-term chart of China’s continued move higher.

Kongdicator Tweaks – More Time At The Beach

Forex Kong 16 Comments

You know I’d have to say that I’m pretty proud of myself.

A full ten days here in January and I’ve placed a couple of little “feeler traders” here and there, but for the most part haven’t made a single “move” of any real size / conviction. The investment environment has been volatile yet “directionless” as even today ( with the “even worse than expected data” out of the U.S – surprise , surprise there Kong ) we still find ourselves “hovering” around the same levels, with currencies taking people for big rides in both directions, and plenty of questions still hanging in the air.

I think you know where I stand.

The idea of “recovery” in the United States is ridiculous, the stock market is a complete and total fabrication, the idea of “tapering” sounds more ridiculous by the day, and I expect to see global growth “slowing” moving forward.

It’s “the timing” that will be key in order to keep pulling profits.

We’ve still not been given a clear signal as to “what’s gonna happen” when we see risk come off, or even if the Fed will “allow” risk appetite to wane as…….you wonder…at what level would the Fed immediately step back in to prop up markets? ( Gees….I’m already looking “that far ahead”.)

With continued concern as to “which way will USD go”? I remain focused on the “known/obvious” correlation between Japan’s Nikkei and the Yen ( trading inversely as expected ) as opposed to getting caught up in the confusion surrounding USD, and the next turn in markets.

I don’t want to get long USD – but I will if I have to.

I’ve over road signals produced by the Kongdicator these past few days as yes….signal fired “long JPY” on several other pairs other than just AUD/JPY, but I’ve approached this with caution, made a couple tweaks and have now “extended” the entry time “x factor” further away from the time signal is initally issued. So far that has kept me out of markets longer, but also out of “chop” a full 2 or 3 days longer so……an improvement in my eyes.

Bernanke Was Drunk – I Understood Everything

Forex Kong 2 Comments

Well I’m pleased.

Still sounding like a someone scared half to death ( that little “quiver” in his voice ) Bernanke (clearly “buzzed”) fielded questions from some pretty sharp people this afternoon and frankly – I’m not sure if he answered a single one.

All the same I am pleased in that, it’s the first time I believe I’ve ever seen the man smile, or even show the tiniest bit of human emotion.

Can you even imagine how happy he must be? Carrying such a burden for so long, I seriously can’t imagine a comparative situation in my own life, where perhaps such “relief” may have been felt.

Here’s to you Ben! You gave us one hell of a ride! With enough twists n turns to give everyone “well their money’s worth”! Good luck to you Ben! All the best!

You won’t be missed.

A very interesting day out on the field today with the U.S Dollar pushing “about” as far as I’d be willing to see it before turning back for “just one more” fall. Have you seen the price of oil last 3 days as well? Wow….so who’s thinking that oil just tanks and the U.S Dollar shoots for the moon from here?

Not me……but I’ll tell you – we ARE getting very, very, very close to considerations of USD making a move higher, watching bond yields of course, then there’s that JPY and Nikkie oh….and don’t forget Gold! 

The following weeks promise to be very exciting. Have a good weekend everyone.