Blog Why Not?!

Pension Pays Dept
Innocent, ignorant and will pay through the nose
Economics, 100314

I am not skilled in economics and this post is merely my humble attempt to understand what is happening.

From what I gather, it goes a little something like this. For the money to survive, an overvalued supply of money must gain purchasing power. The purchasing power may increase if there is stronger demand. If the supply contracts the demand is likely to rise. When there is debt default, the money supply contracts. Debt default thus increase the value of money. When a money issuer is indebted and the debt is payed of with money created by magic printing machines, a default on the debt would be to inflate the supply of money. This kind of default does not increase the purchasing power of the money supply. One could perhaps argue that in this version of debt default by inflation, everyone owning this kind of money help to pay of the debt. Since those who lent the money in the first place is getting paid back in the inflated money, they help to pay of the debt. They pay by not getting paid. The money supply which was overvalued in the first place, now has even less purchasing power.

Another type of dept default that the indebted money issuer could do, is to simply say that hey I can not pay. Not issuing more money, would not increase the money supply. An indebted issuer defaulting on its debt does not make the money attractive as a commodity, since the lender will not get the money back. If the demand for the money decreases, the purchasing power of the money dwindle. Everyone owning the money loose purchasing power and thus could be said to pay for this debt.

An indebted issuer anticipating such a development could perhaps confiscate part of the money supply by means of taxation and use this money to pay of the debt its lenders. This would decrease the supply of money for those being affected by taxation. Though the money supply neither increases or decreases in total, those not belonging to the selected few who get money back and do not have to pay tax, would have less money thus less purchasing power. Just as if there had been inflation they would find life getting more expensive, just as if there had been deflation they would find it harder to get the money they need feel that life is cheap. Those who lend money get the money back so perhaps they are happy, but those who both lend and pay tax, make no profit since they are, besides paying money to themselves, also paying to those lenders who does not have to pay tax. Why would anyone want to do that? Perhaps it is impossible to escape the taxation, but at least one could stop lending money to the money issuer and position the purchasing power in an asset the gives a better return on the money.

If this happens, this means an even less demand for the money and so the total purchasing power of the total supply of money decreases and to make the debt more attractive, the issuer will have to promise the potential lender a greater return on investment. If this can not be financed by more taxes, something will have to give. Either a blatant default or money supply inflation. Either way, the loosing part is the part owning the debt since they will get paid in useless money or not get paid at all.

Did I walk this through correctly or did I miss anything? Am I right or is it a very good idea to buy treasury bonds. Someone will have to make good and pay for the debt. My guess is that it is those who seek a safe-heaven and are risk adverse. Old people will suffer. :-(

UPDATE 100315: Today I came across this link.

- Aramis

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SWAZ
Swing Trading Avanza Zero
Economics, 100313

So, index funds are great since they spread your risk. If you do not have the means for stock picking, index funds are nice. If one asset does not perform that well it might be compensated by the other ones in the fund. A stock index fund is still worth something, even if one of the companies might go bankrupt. As companies come and go, the index fund remains and in the long run the index always rise.

So, when you invest in an index fund, the idea is probably to go long. However, there is this index fund Avanza Zero, which costs nothing to trade (sounds strange? well it is part of their marketing campaign). You buy it and sell it fairly quickly, in my experience no more then two days, which makes it pretty suitable for swing trading.

So, instead of going long and passively shuffling over money every month, what you could do is to put in money whenever the stocks have begun to rise a little and exit when they begin to dive a little. If you do not react quickly enough and do not sell in time and believe it will begin to rise again very soon, then simple do not sell. I mean, you were going long anyway so in the long run it did not matter that much did it? If you exit and you were wrong, then simply re-enter. You might have lost out on a rise, but you are swing trading and that is a cost of swing trading. However, if you do not fail utterly and sell every time it begin to rise and buy every time it begin to fall, you are making money on the difference.

The whole point with swing trading, is that you re-invest the money you make on the difference. Though you make only a little money on the difference, you will receive an exponential return on your initial investment. Exponential return is amazing. It is counter intuitive, but have a look at this video:

You might improve on your timing by observing when there is a turn downward or upward and cross-reference with VIX, you could also keep yourself up to date on what is happening in the near future in USA and for a look at the fundamentals in the long run have a look at ECRI news.

- Aramis

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VIX Trading
Trading OMX using VIX
Economics, 100309

Kind of amazing how OMX index map to VIX in this comparison graph. My guess is that it would be rewarding to study VIX support and resistance levels and trade OMX based on the findings.

- Aramis

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Gaming Currencies 8
Cerebral Celebration
Economics, 100308

About a year ago I begun developing a program that could game currencies. I started out from scratch, developing the program on my spare time.

Though number of lines say nothing about quality, it says something about how much time spent infront of the computer instead of with friends and so forth. I have written more then 30.000 lines (wc -l) of code and over 84.000 words (wc -w). Thus everyday I have written like 230 words a day to the repository and that is like writing new word every other minute for a year, night and day.

I work fulltime as a java-programmer, so I decided to go with java. I do have a girlfriend and I have been busy doing other things, like a trip to Brazil for a month, braking my arm, vacation in France etc. So what I managed to produce is: a graphics engine, rudamentary widget framework, re-usable technical analysis (TA) tools for trading, visualization tools, genetic algorithm (GA) framework, two client server modules for distributed computing and trading server communication and a lot of other libs and tools that I need. I have learned basics about TA, GA and DLL programming. I have learned MQL and I have had practise of client server protocoll system design. I have developed some TA indicators of my own and I have spent countless of hours pondering the why, what and hows of currency trading.

Somehow I have also had time to write a little on my book. Now I know why that work has not progressed as fast as I would have liked.

I work as a programmer, so basically I go to work and program for eight hours a day and then somehow I have managed to write the additional thirty thousand lines. A lot of keyboarding, this past year I guess.

- Aramis

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Drive-By Distributed Computing
Mega Super Computer
Programming and Design, 100218

I just put up a page that demonstrates my contribution about how to solve extraordinarily hard computational problems. I am at the moment working with genetic algorthim that uses distributed computing at home and I do JavaScript at work. So I just had to put them together: Drive-By Distributed Computing

- Aramis

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Teach every child about food
Jamie Oliver talks about parents killing their children
Personal, 100212

Will the free market or the government fixing this problem, or is all up to Oliver?

- Aramis

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Gaming Currencies 7
Methodic work on parametrization
Economics, 100204

So, I am still scratching my head over this hobby of mine that has developed into a far more interesting journey then what I had hoped for. I feel that I am now getting a grip of the fundamentals and I am able to play around with concepts and ideas.

How do I work? I cram my head with information from wikipedia, I wrap my head around the information and wrestle down the math I have to learn and the notions that are new to me. That part is pretty simple. Then I retract my sensory input device from the net and simply digest the information that I have consumed. The end-product is an understanding that helps me formulate a governing principle that I believe in, a widened perspective or something like that. Informed intuition is my travel companion and thinking damn hard for endless of hours is the machine through which I see. I am methodic and I am breaking it down bit by bit.

I have been focusing on the atomic scale of things and now I am zooming up, because I feel that it is time to get a feel for the big picture. My instruments will only work if they are configured corretly, so right now I am working with parametrization and period selecting.

I know how to find the ideal period, by knowing what my instrument need to project a true forecast. I know what my instruments need, by knowing what their vulnerabilities. I know the vulnerabilities by looking at what kind of situations, in which they are performing sadly and without joy.

I will now begin to crunch this data and I have selected a tragetory of thoughts that takes me into the land of volatility.

- Aramis

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Gaming Currencies 6
Breakthrough
Economics, 100114

Today went over my instrument and had a look at it again. I am sure I have to be wrong. The reason I am so sure that I have to be wrong, is because I find it so unbelievable utterly easy to predict the future. But if it is this easy, then why bother with several hundreds of esoteric technical analysis indicators? Next up, creating an indicator. If it turns out that it works, as though as highly unlikely that is, then I will plug it into metatrader, do some simulated trades and see how it turns out.

China it tightening their money policy, which means tighter access to credit. VIX is really really low right now which in crazy since this is by all means a jobless recovery. I am waiting for a (the) correction.

My broken arm seems to have healed very well and tomorrow it is back to work. That is good!

- Aramis

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Gaming Currencies 5
Esoteric ravings
Economics, 100112

As wrong it might be, this is my understanding. The curve is not a mathematical entity, thus it is unlikely that it will conform to a fractal theory. It is is however an entity created by interaction and reaction to action, so it will rhyme. Since the curve is created progressively in discrete frames of time by reaction to past action certain principles are formed. That people and machines have time to react to past events, is such a principle. While not necessarily a governing principle, a most likely play of event deemed to repeat itself. This principle takes the visual Z shaped from in a graph and the lesson learned is that everything that goes up, must come down and everything that comes down must go up. The principle also implies that the curve has to take a S shaped form in the macroscopic perspective. Just picture for your self the atomic shape of the curve, if the macroscopic perspective expresses a Z shaped curve. I have not seen it, but it I understand it requires total agreement between those interacting with the curve.

My interpretation is the following. The atomic curve is ragged and hard, thus the curve which can be divided is not. And a curve that rhymes, will not be understood by static predictions. Only predictions that changes all the time, reflects the true nature. Overbought or oversold is a situation that is created not by past events alone, but by all events up until that point when it happens. This is why I spend less time on Eliot Wave Theory and other such static ways of creating resistance and support levels and why I favor dynamically created averages that rhymes with Z and with S.

I do not know for certain where it will go from now, but I can find out why it is as it is, thus I can take a plunge in a direction that rhymes with the overall picture.

Though as perfectly wrong I might be, this is the foundation for my current work. So far it has turned out to be very, very interesting. Some successfully executed predictions on the atomic scale, are formed several minutes ahead of the event horizon (EH). Next is implementing a macro-atomic interference instrument, washing the output and put the genetic algorithm to work on the details.

I follow the rabbit.

- Aramis

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2010 Crisis
A misery year
Economics, 100109

So, from what I gather 2010 in USA the house bubble is not over yet. The number of bad loans resetting, will escalate in the coming months. There is talk about water shortage crisis in USA as well. There will also be a food crisis in 2010 and food prices will soar. Now if oil prices continue to rise, that will be really bad for the economy as well. There is a whole lot of toxic derivatives that no-one is talking about and that are tagged to the interest rates and dependent on them being kept low. There is moral hazard related to the to big to fail companies in USA.

- Aramis

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Star Wars Review
The Phantom Menace Review
Per, 091219

1

- Aramis

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