Dear Friends,
Reading the comments from the various hedge fund managers complaining how “stupid” the markets are as well as complaining about the lack of a clear trend is particularly amusing since these are the VERY PEOPLE who have created this idiotic volatility with their cursed computer algorithms. None of these people do the least bit of fundamental analysis but rely completely on system trading. Of course that means their computers are doing their thinking and their trading for them while they check their brains at the doors leading to their offices since those are certainly not needed once you have a little black box dishing out orders for you.
Further down in the article it mentions those who are trying to take advantage of the “micro-trend” and who trade hundreds of times a day. These are those whom I have often written about and referred to as “one minute bar chart geeks”. This is the crowd that would not know a grain of wheat from a kernel of corn but will trade both markets without even a glance at a weather map or an export usage chart.
Welcome to the new age of casinos in which the price that you see quoted on the screen is COMPLETELY MEANINGLESS and totally disconnected from any fundamental reality. It is all the result of day traders flipping orders and shoving prices around without the least bit of care whether or not that price is based on anything meaningful.
That is the reason that I am concerned about the long term health of the futures markets in particular. These markets were created for the PRODUCER AND END USERS who need to offload risk by the means of legitimate hedges. With what these damn fool one minute bar chart geeks have brought about in our markets, the very purpose of the futures’ market existence is becoming irrelevant. These same producers and end users cannot use them to hedge on account of the “stupid” volatility that is wrecking havoc on their trading accounts and resulting in increasing numbers of margin calls and are exploring different kinds of contracts to protect themselves and bypassing the futures markets altogether.
My advice is for the officials who run these exchanges to stop being so short sighted in the pursuit of profits and look to the long term stability and health of their industry. One place where they can begin is to severely revamp the trading position sizes that they are allowing hedge funds to put on in both futures and in options. That is the least that they can do. I am watching markets make daily moves the size of which used to be the norm for an average week. That is where the insanity is.
Trader Dan
Jim Sinclair’s Commentary
Even algorithms can go to hell when funds attempt to kill funds in the predatory mindset of today’s world of hate, thieves and murderers in finance.
Currency Funds Crushed as Lack of Market Trend Hits FX Concepts
By Ye Xie and Liz Capo McCormick
July 6 (Bloomberg) — FX Concepts Inc., the world’s largest currency hedge fund, says it lost 5.4 percent in this year’s first five months. John W. Henry & Co.’s foreign exchange fund told investors it lost 2 percent, after 2008′s 76 percent gain, the best since its 1986 launching.
Both use computer models to spot currency trends and, along with other momentum chasers, are getting hammered by this year’s lack of clear direction as the markets are pulled in opposing directions. Deflationary pressure from the first global recession since World War II is being countered by the inflationary forces of record stimulus spending and currency printing across the globe.
The ICE’s Dollar Index shows the U.S. currency is down 1.4 percent against a basket of six major currencies in this year’s first half, the smallest two-quarter change since 2006. Of four currency trading styles simulated by Royal Bank of Scotland Group Plc indexes, trend-following is the year’s only loser, down 4.8 percent after also underperforming in June. In 2008, the tactic gained 9.9 percent, its best in five years.
"I am not trying to make any excuse, but certainly it has been difficult," said John Taylor, chairman of New York-based FX Concepts, which manages about $12 billion. "Unfortunately, there’s lack of consistence of what’s happening. I am wondering how stupid the market can be for how long."
Deutsche Bank AG, which Euromoney Institutional Investor Plc ranks as last year’s biggest foreign-exchange trader, predicted in April that "extremely weak trends" among Group of 10 currencies in the previous six months "augers strong trends in the coming six months."
