Happy New Year

The year known as 2008 is over.

I should have something profound to say.

I could point you towards the best whatever list of 2008, the worst whatever list of 2008, or I could make some fantastic new years resolution.

I won't.

What will 2009 bring us?

Thursday.

As I get older the years start to blend a little.

I do think 2009 will be very interesting, hopefully not as "interesting" as 2008. We are supposed to look back over a just completed year and think of all we learned, what we would do different, and what we would do the same. We do that for a while and then I think we forget it all rather quickly.

One way to help remember is to write it down. I do a year end balance sheet (net worth statement) for our family. I maintain this throughout the year but then again I'm weird. I would suggest you take some time in the first week of January and complete your balance sheet. It is the only way I know of to determine if you are making financial progress or not.

From a financial standpoint you don't know where your going and how your going to get there if you don't know where you were.

Or something like that.

The EIT told me only an old banker would do something as strange as a family balance sheet so to him I say a hearty BAH HUMBUG!.

And a HAPPY NEW YEAR!!

Ok ok, if I have to pick something I'll take a pass on the worst and choose the best.

THE BEST
The best picture of 2008 and the best story. The picture says it all, but read the story anyway.

It is simply wonderful.

My Old Friend

Crude oil.

Remember him, or is it her, probably him, it's crude.

Using the same trade criteria for crude, programmed in sierra, as the YM. Difference being crude oil actually moved. I will wait and see what the first week of January brings but may be moving back to crude oil if the YM doesn't start getting some intra day range.

Started looking for trades on the renko and 1 minute charts after price broke through (arrow) on the 5 minute chart with blue bars in place.

5 Minute Crude Oil Chart

1 Minute Crude Oil Chart

Gazprom, once mighty, is reeling

As my American friends are rushing into their new socialized business empire maybe they should stop and have a look at their old Russian enemy to see how well it's working for them.

"A year ago, Gazprom, the Russian natural gas monopoly, aspired to be the largest corporation in the world. Buoyed by high oil prices and political backing from the Kremlin, it had already achieved third place judging by market capitalization, behind Exxon Mobil and General Electric." Andrew E. Kramer, International Herald Tribune.

(Click on the read more icon for the full story)

As far as trading goes there were no signals and no trades.

read more | digg story

The Power of Yes?

After reading the NY Times story on WaMu do you get the feeling that they were running the business, a business funded by shareholders, with the capital is scarce motto I subscribe to?

Scarcity requires choice, choice means there are two options, yes and no. At WaMu no was removed from the equation.

To treat shareholder's and bondholder's capital the way they did is disgusting. The consequence to the shareholders is clear, the consequences to management and the board of directors are also clear.

There are none. At least not yet.

In Canada we have had the Minister of Finance and the Bank of Canada Governor telling the Canadian banks to lend more money. My response to those two gentlemen, as a shareholder of two of those banks, would not be fit to print.

I find it odd that with all the trouble in the financial system we still have not seen any reforms put in place. Other than the U.S. investment banks converting to commercial banks and lowering their leverage ratios there has been no change to the regulatory system that I know of.

There could be many changes I'm sure but two I would implement immediately are removing off balance sheet accounting and changing CEO compensation to include a claw back feature.

The off balance sheet accounting issues were at the heart of Enron's collapse and there is no reason for it to be allowed. All assets and all liabilities must be on the balance sheet with the rational used to arrive at their values fully explained in the notes.

CEO compensation must include recourse by the company to take back compensation paid over, say the previous 5 years, net of taxes paid. This recourse would be triggered based on the company's losses incurred in the current year.

We must stop CEOs from raping the company for their own compensation and then leaving the burnt out hulk behind, with shareholders and employees destroyed, while they sit back and enjoy the millions they took in the previous years.

Mr Kerry K. Killinger past CEO of WaMu would be a prime example.

"Flexible lending rules", LOL.



9/26/2008 post

Duel Bag

Merry Christmas

And it came to pass in those days, that there went out a decree from Caesar Augustus, that all the world should be taxed. (And this taxing was first made when Cyrenius was governor of Syria.) And all went to be taxed, every one into his own city.

And Joseph also went up from Galilee, out of the city of Nazareth, into Judaea, unto the city of David, which is called Bethlehem; (because he was of the house and lineage of David) To be taxed with Mary his espoused wife, being great with Child. And so it was, that, while they were there, the days were accomplished that she should be delivered.

And she brought forth her firstborn Son, and wrapped Him in swaddling clothes, and laid Him in a manger; because there was no room for them in the inn.

And there were in the same country shepherds abiding in the field, keeping watch over their flock by night. And, lo, the angel of the LORD came upon them, and the glory of the LORD shone round about them: and they were sore afraid. And the angel said unto them, Fear not: for, behold, I bring you good tidings of great joy, which shall be to all people. For unto you is born this day in the city of David a Saviour, which is Christ the LORD.

And this shall be a sign unto you; Ye shall find the Babe wrapped in swaddling clothes, lying in a manger.

And suddenly there was with the angel a multitude of the heavenly host praising God, and saying, Glory to God in the highest, and on earth peace, good will toward men.

Daily DOW Futures

Hmmmm.
In the spirit of Christmas I feel I should have something positive to say, yes positive, hmmm, ah, er, it didn't break yesterday's low?

THAT'S IT!!

So I'm sure we're fine, no worries.

Didn't stare at charts all day, but when I did there were no signals and no trades. When I didn't there were no signals and no trades.

Something positive to say again..... twice in one post.... hmmmm, I earned IB interest?

THAT'S IT!!

There has been a sighting

And there was much rejoicing.

A blue bar! A blue bar!

Actually 3 on the 5 minute chart, that last one is after 4:00 EST. The 2 short trend bars did not line up with anything on the renko or 1 minute chart. The big blue long 5 minute bar set up nicely with the renko and a new swing high.

So we have 390 minutes of trading to watch each day, we spent 386 minutes doing nothing, 1 minute of trading, and 3 minutes of joyous celebration.

Another exciting day in the life of a day trader.

5 Minute YM Chart

8 Tic Renko YM Chart

Voice of Reason

Saw this on Denarii trader, has Fred been reading my blog?

Trading Boredom

You know the problem with these stupid blue bars is, THEY NEVER TURN BLUE. Ever since that stupid EIT (exceptional Irish trader) showed me how to program sierra my MUT (made up trade) trading has gone way down. Down all the way to zero actually.

Oh sure profit is up, but what am I to do all day. This was the best I could come up with.



Yes, those Brits are mean.

On another note the Hugo Chavez, I mean Danny Williams AbitibiBowater saga continues.

Wonderful World

I saw this on Trader X's blog who saw it on Pradeep's blog. After watching it take a moment and think about how you just watched this.



I sit on my tush in Stubblejump Alberta trading DOW futures in Chicago, or crude oil futures in New York, chatting with traders from Ireland, America, Jordan, etc, while listening to blues radio UK. Think about all that is occurring at the speed of light to make that happen, and yes, I get mad if something doesn't quite work right for a few seconds. Actually I get mad if it even slows down for a while.

Amazing.

The first house I owned, me not my parents, had a party line for the telephone.

No, not a 1-800 party.

See how I saved you kiddies the trouble of googling that.

Google now there's another, ah never mind, you get the picture.

Running Money

Being a day trader is an exciting job. You are plugged into the market, feeding off the ebb and flow of billions, no, trillions of dollars.

Right.

Or, you wake up at 6:30 MST time, scrape material from eyes that really shouldn't be coming out of human eyes, look outside to see a fresh blanket of snow, turn on outside lights as it's still pitch black out, go out and shovel driveway, come back in, blow nose, make coffee, wipe more stuff out of eyes, turn on charts, read news, log in to the EIT's chat room, annoy them with what you think are really witty comments, watch charts, watch charts, watch charts, watch charts, watch charts, read someone else made a profitable trade, wonder why I didn't, question wisdom of trading plan, watch charts, watch charts, watch charts, respond to man who loves rain questioning my lack of blue bars, watch charts, continue to banter in chat room, banter becomes increasingly bizarre cumulating in solfest asking the EIT to just shoot the market, shoot it dead, EIT responds with "bang" posting, man who loves rain leaves room in disgust, watch charts, watch charts, BLUE BARS on 5 minute chart, watch charts, watch charts, renko chart confirms short trend, blue bar on 1 minute chart, second bar fails, third bar fails, fourth bar turns down, turns blue, take it, full stop, market closes, read LT's rambling comment on last post, wonder if I'm up to the task of answering, whatever, still snowing, go shovel snow again.

One day my 10 year old son asked me what I was doing as he watched me stare at charts for a while.

"I get paid to wait" I responded cleverly.

"How much?" he asked.

Sigh.

I Want to Move

Where do I go? Are there any capitalist countries left?

Save us John Galt.

ST. JOHN'S — — Newsprint giant AbitibiBowater Inc. [ABH-N] is warning of possible legal action against the Newfoundland and Labrador government after the province hastily passed legislation Tuesday to expropriate the company's hydroelectric assets, water and timber rights in Grand Falls-Windsor. Click on the read more icon for the full story.


read more | digg story

FED

The Fed made money free and the market went up.

Imagine that.

The now "magic" blue bars kept me flat until after the announcement, and then laid out 4 trades after the rate cut.

5 Minute YM Chart

1 Minute YM Charts

If it seems to good to be true.......

I know a guy, he has never had a losing year, you should give him a call.

Ever had this conversation with someone? Remember this little story next time someone offers you a deal that is too good to be true.

Unfortunately this is just one more in a long list of scams.

YM Trading

The DOW futures came back to life Friday after a slow week of trading. Today had some intra day range and was a nice trading market.

I was watching the 5 and 1 minute charts again and trading mainly off the 8 tic renko chart. This 5 minute chart shows a couple of the strong long moves we saw today.

With the blue in place on the 5 minute we looked for long entries on the renko chart.

I Make Fire!

Ever see the Tom Hanks movie Castaway? Remember the scene, after days of trying, when he finally makes fire. He starts screaming and dancing around his fire.

Picture one Norwegian, Danish, Swedish, English Canadian dancing around his computer screaming I make bars change colour.

I am a programming master!

Maybe not.

Actually the exceptional Irish trader walked me through some basic programming in Sierra Charts. Sierra uses an XL spreadsheet to allow you to program some parameters of your plan.

The 5 and 1 minute price bars now turn colour when certain conditions are met. The spreadsheet is looking at the ATR, ADX, and CCI and turns the price bar blue for long and white for short. It's not a black box but does give me a visual of when I need to start paying attention.

I have not tried to program anything on the renko charts as they are all ready colour coded for direction, and I am looking at swing highs and lows on it. In other words I wouldn't have a clue on how to program that.

Today's trade action was horrible for me and evidenced by the severe lack of colour on my minute charts.

Here are a couple of 1 minute charts from yesterday and today.

The Oil Kingdom

Interesting story from 60 Minutes on Saudi Arabia's oil business.

The energy industry is unsure of what Saudi Arabia's actual proven oil reserves are, as they produce millions of barrels a year and their stated proven reserves never go down.

Part 1

Watch CBS Videos Online
Part 2

Watch CBS Videos Online

Business

In my former lifetime as a business banker I saw many businesses in different phases of their economic life. With that in mind two recent stories jumped out at me proving a theory my Father, a business reporter, told me many years ago.

The worst thing you can give a new business is money.

Huh?

Ok, here are the two stories, a former boxer and convicted felon starts his own machining company, and why can't Microsoft make money online.

In our first story we have a former homeless boy, turned boxer, turned felon, turned machinist, turned business owner with 53 employees and 6 million dollars in 2008 revenue.

Nice.

In our second story we have Microsoft with 2008 revenue of 60 billion dollars, net income of 18 billion dollars, cash on hand at 24 billion dollars, and they can't make money in their "new" online business.

According to the Fortune article Microsoft's online revenue grew to 770 million and they lost 480 million dollars.

What?

They spent 1.25 billion to make 770 million in revenue.

Why?

Because they can.

How did Microsoft start? A couple of college drops outs with little money and a big idea. How do most internet start ups happen? A couple of kids working out of their parents basement.

That is the key, you can't waste money if you don't have any. As a wise commodity trader :) once said "capital should always be treated as scarce, as scarcity requires choice". Capital is no longer scarce at Microsoft, so they no longer have to make hard choices when it comes to spending money.

If you have a hundred dollars to your name treating capital as scarce is easy, when you have 24 billion it becomes rather difficult.

At this stage in Microsoft's life it's doubtful they will ever be able to create something really special ever again. Too many vice presidents, meetings, bureaucracy, and yes, too much money.

I could fix Microsoft's online division rather quickly. I would fire all but 50 people or so and eliminate 865 million dollars in expenses. I would be willing to bet that those cuts, which would be considered insane by the micro executives, would not drop gross revenue by any significant amount.

At some point in most business's lifetime they require an injection of equity or debt to move to the next level, but that injection should never happen at the idea stage. With cash in hand our fearless entrepreneurs stop thinking about how to make money and start thinking about how to spend money.

That is where things go horribly wrong.

Oh yes, Bill or Steve, I am available to consult if you need me.

For a small fee of course.

James Grant

Jim Grant of Grant's Interest Rate Observer is always a good interview. This one is over a month old, but still interesting. Also you got to love a guy that uses words like capricious and fallacious.



The book.

Mr. Market Miscalculates: The Bubble Years and Beyond

Triple Screen Trading

Here are the 3 main charts I watch during the day. I also keep the 15 minute around, but these are the 3 constant charts up during the day.

I have marked a trade I took and the bar it was taken on each chart. You could have entered on any the charts for this one and made money.

I wish they had all been like this today. They weren't, losing day today.

5 Minute DOW Futures Chart
8 Tic Renko DOW Futures Chart
1 Minute DOW Futures Chart

Fine, Be That Way

I take it from the "enormous" interest in the blog these past couple of days my Canadian political ramblings are not that interesting to you.

Ok.

Trading, yes trading, that's why you're here. You may have noticed I haven't been posting trades, at least I hope you noticed. I was changing the charts over and over and it was bad for you to watch, and bad for me to trade. I seem to have settled down again.

My exceptional Irish trader friend was aghast to discover today that I am using the CCI again. And if you've ever seen an aghast Irishman, well, it's not a pretty sight. He wanted to see one of my ugly CCI charts, so here they are.

I'm not going to go into details of my trade execution but will provide the general framework.

I watch 3 charts, a five minute, 8 tic renko bar, and a 1 minute. I want to see trend on the 5 minute chart in place first, then I look for the same on the renko bar and 1 minute chart. I use the 1 minute to help find the entry but would still consider the 8 tic renko chart the main entry chart.

The rest of the details are best left unsaid, as I have said many times you can't trade someone else's plan. You can learn from others, at least I can, but you cannot trade it.

Here's a couple renko charts from today. They are winners, there were many losers, in fact more losers than winners today. The day was net positive due to the money management, which most of you know is really the only factor between wining and losing.

8 Tic DOW Renko Charts

Good Bye Canada?

Charles Adler of Corus Radio says it best.

Every Trader Must Read

A fascinating article, why talent is overrated, from Fortune editor Geoff Colvin that adds to the nature vs. nurture trader debate.

The answer again is nurture.

The problem is, according to the research he quotes, it takes about 10 years to become an expert in your field. So the issue with trading is, most run out of money before they get there. The education is very, very expensive.

Here is the article, a radio interview with Geoff, and his book.
Talent Is Overrated: What Really Separates World-Class Performers from Everybody Else

On another note here's a couple of video gems from todays BNN's Squeezeplay.

That Little White Line

Remember those heady crude oil days. Ah the memories. Have a look at this old daily crude oil chart. See that little white line. See all the bounces off it on the way up.

Now look at this daily DOW chart. See that little white line. See the two bounces off it.

Apparently it works both ways.

Oh yes, the little white line, it's a 34 EMA.

Bring Home the Troops

The Canadian military is actively engaged in the war in Afghanistan. We may need their services here.

The Liberal Party of Canada once ran a campaign ad claiming if the Conservatives were ever elected there would be troops patrolling the streets.

Ok.

Let's do it.

Start with the opposition leader's official residence. If the opposition parties are not going to respect the will of the Canadian people then the government should take control of the country through whatever means necessary.

Pierre Trudeau enacted the War Measures Act once. Let's do it again.

I'm kidding.

I think.

I wonder what the penalty for treason is in Canada?