Blog Why Not?!

Take on Assets
Some guesses on what will appreciate
Economics, 100830

So it was long long time since I wrote anything about the economy and what assets I believed would appreciate. I spent last year learning about inflation, deflation and a bunch of other concepts. I have also spent a great deal of time learning about the technical side of trading. I have read books in western technical analysis and candlestick analysis. Since both my fundamental and my technical studies taught me that nothing can be certain, I understood that I had to learn about risk management, hedging and proper money management. So that is pretty much what I have been up to.

So, what happens next? Well my guess is that uncertainty will prevail. In times of great uncertainty, dividend paying companies could attract attention. Then we have the Megatons to Megawatts Program and that in combination with the need for energy, China take on nuclear and so on tells me that the price of uranium will appreciate. Same goes for rare earth. Then we have food prices that I believe will very expensive in the future. As the price of energy increases and the number of people in the world increases, then the price of food will increase as well.

That is about it.

- Aramis

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Trading Strategy v1
Going Long Instead of Being Long
Economics, 100720

So, I am constantly trying to improve on my trading strategies. What I do is money management, where risk-reward is established using candlestick price action analysis. I have just recently familiarized myself with these two concepts and now I will integrate them with my fundamental strategy.

So what I will do is to select an asset that I believe to be profitable if I go long. Then I trade it actively and constantly evaluate the risk-reward. This, I think, can protect me form an erroneous fundamental analysis. If the fundamental analysis is correct, it can help me when I am unsure of how to interpret the technical analysis.

Take energy as an example. As the world believes in deflation energy falls and it is probably not the perfect time to be long, but perhaps it is a great time to go long! Fundamentals tells me that I should go long sometime and candlesticks can tell me to hold-off for a little while longer, until the risk-reward has improved. With proper money management one could also make the trade run risk-free and catch intermediate trends.

Tracking one and the same asset will also make you learn more about the particular assets behavior, thus I believe perhaps one could even profit by shorting the asset when the price action indicate bearishness.

I also believe that good profit is made not on one good trade, but on many many small trades. I am a big believer in the power of cumulative effect. To achieve this, active swing trading is key. In swing trading odds are everything, so why not do technical swing trade on an asset, that your fundamental analysis tells you has a tendency to trend in a certain direction! When they do not indicate the same, this can be very good for you to know.

Many trades and exponential return is key but first rule is to protect your capital, so be conservative when taking a risk, then take a small profit and after that be aggressive bet on catching the trend. That way you never lose much, often win a little and every once in a while win a lot. And perhaps most importantly you stay liquid, which make it possible to take advantage of new and perhaps even better possibilities.

- Aramis

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Hedging Energy
My strategy
Economics, 100716

Debt contraction exerting a deflationary force on the global economy, an ageing population that could wake up the bonds vigilantes, peak oil and then the inevitable hyper-inflation which everyone (both deflationists and inflationists) that will for sure kill of all the assets used to considered safe. So, how do you make your purchasing power preserve through time?

So, this is what I do. I believe in peak oil and higher energy prices, due to the inelastic nature of our energy resources. Thus I believe in going long oil and natural gas. I also think that we right now are live under the kind of deflationary circumstances so I hedge my energy long positions by shorting OBX. I am managing my money, by mixing swing-trading and trend following techniques. Visit my money managment page and have a closer look.

- Aramis

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Natural Gas
Going long
Economics, 100614

So, I guess it could go a little something like this: the demand for energy will grow and then supply of energy will be less. Oil will, accordingly to some, get more expensive and it will take a while before there is enough renewable energy sources to provide meet the demand. A problem with renewable energy is that you will have to transform the energy to fuel. My take is that natural gas is now cheap.

- Aramis

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Why We Are Where We Are
Soros reads and reads
Economics, 100608

- Aramis

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Googles Algorithmic Trading
My god.
Economics, 100528

This post is about how powerful Google could be if they decide to engage in trading. Which they actually already have!

In 2008 I wrote about Googleface (basically Google as the user-interface to Internet). Well, Google TV and Android has pretty much proven me right so far. Now lets fuse this idea with this something called Algorithmic trading.

Algorithmic trading, simply put, it is about computers trading financial instruments. The computers perform technical analysis, probes the current market and applies a zillion of other techniques. Some computers even perform fundamental analysis where they parse news in search for buy and sell signals. To get an operation going you need a lot of money, because this stuff is expensive. The one rule is simple, act before everyone else does.

So, under optimal circumstances one get the latest information first and thus can be that first to react to the news.

Now news is not always as important as how people react to the news. So perhaps there could be a marriage between socionomics and data mining of social networks or something like that has been done with Twitter Take Facebook as an example, just imaging what kind of information they have!

Now, lets consider that Google is working on pubsubhubbub which is a mechanism for publishing news to, among others, Google. So take the information that this mechanism will provide Google with and merge it with the information from the search queries, emails, advertising information, Google Wave and the list goes on and on. Google has a great set of data! Now consider that Google is opening its own trading floor.

What do you get? You probably get one hell of a dataset ordered in a probably very well suited way for data mining, owned by a company that will have no problem utilizing this information because they can hire highly educated people who are already skilled traders, working with the the latest in trading technology plus they will be working with all the latest news in the world. What can beat that?

My god.

- Aramis

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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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Currency Market
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). That is like writing new word every sixth 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 in several programming paradigms. 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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z to s
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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