Why it’s nearly impossible to trade Currencies with success

(Elite E Services) — 9/1/2017 — As we have explained in our book Splitting Pennies – trading FX is nearly impossible; or at least, it may be possible for some time, but in the long run, it’s a near certainty that without the use of professional algorithmic trading systems you will blow up your account.  That’s because of the dynamics of how FX works vs. other markets.  In traditional markets, there is a bias towards positive movement; all CEOs of public companies want their stock to go higher.  Bull traders, 401k investors, pension funds – basically everyone wants the stock market to go up.  The short sellers aren’t ‘pessimists’ so much as ‘realists’ that over-inflated P/E ratios are a sign for a crash from unrealistic levels.  This is NOT the case in FX.  Currency markets have opposing forces like ‘gravity’ and ‘anti-gravity’ – every country wants both a strong currency and a weak currency.  This may seem illogical, welcome to the world of Currency!  The reason is simple – exporters want a cheap currency and importers want a strong currency.  Politicians usually favor a weak currency because it’s good domestically and big business favors a strong currency (at least in the USA) because USA is a net importer.  Let’s have a look at today’s USD action most noticed in EUR/USD:

On the surface this looks like a great trading opportunity – but is it?  EUR went up on poor US Payroll data; and then fell on dovish jawboning from the ECB.  Planned conspiracy to manipulate FX or just random brownian movement?  Believe what fits into your mind that helps you sleep at night, either way – would you have been able to buy EUR at 1.1924, sell near the high at 1.1980 and then reverse, covering near 1.19 handle?  All within 10 minutes?  Maybe someone did it, even if by accident, but the point is that any trading plan or investment strategy shouldn’t rely on the ability of such skills because even if as a trader you were able to achieve this great feat – would it be able to repeat it, day in and day out – for years?  Probably not.

Enter more paradox such as “Triffin Dilemma”:

The Triffin dilemma or Triffin paradox is the conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies. This dilemma was first identified in a 1929 book, Gold and Central Banks, by Polish economist Feliks Młynarski,[1] who identified a fundamental instability in a gold-based international monetary system, that the reserve currency countries would tend to accumulate foreign reserves, but as the volume of these grew relative to the country’s gold reserves, international investors would begin to fear suspension of convertibility; later in the 1960s, it was rediscovered in the context of the Bretton Woods system by Belgian–American economist Robert Triffin, who pointed out that the country whose currency, being the global reserve currency, foreign nations wish to hold, must be willing to supply the world with an extra supply of its currency to fulfill world demand for these foreign exchange reserves, thus leading to a trade deficit. Due to Młynarski’s precedence in articulating the problem, Barry Eichengreen has suggested renaming the problem to “the Młynarski dilemma“.[1]

This is not only true for a reserve currency – any currency has a conflict between short term and long term interests.  For example, if a currency is weaker it can help exporters in the short term to boost sales, but hurt the same exporters in the medium term when they need to go out into the world and buy raw materials for higher prices.  This push and pull is what defines modern Forex on a systemic level.  While average investors certainly don’t need to know this unless you’re planning on getting a job with a central bank, it can help any investor understand how and why Currency markets fluctuate the way they do.  It should also be noted that these forces maintain ‘bounds’ naturally, establishing a sort of ‘high’ and ‘low’ limit for any FX pair.  For example the EUR/USD now trading around 1.19, it can go in next days to 1.20 or 1.21 but not 1.90, for example.  Even in rare cases such as the “Brexit” the GBP/USD went down by less than 10% – which is a lot, for a major Currency.  So let it be known to all that these risks in FX are investable (with the help of algorithms) and hedgeable.  Looking from a risk management perspective, it is a lot more manageable than securities, commodities, or bonds – which have the finality of the ‘ulimate’ risk (default) – as Currency is ‘money’ the Euro can’t ‘default’.

A final note to all you Bitcoiners – Bitcoin is a Currency it’s only a matter of time before it’s integrated into the Forex system, because BTC/USD is an FX pair.  Good time to brush up on your FX and understand the broader market (not just the microcosm of Cryptocurrencies).

So now for the good news, the Currency Market provide a number of opportunities for algorithmic trading systems that continually profit, making FX a new budding asset class.

Today’s move is a blip on the radar, a non-event for hedgers – and a potential huge trading opportunity for algos.  Game on!

For a pocket guide to make you a Currency Genius checkout Splitting Pennies.

Splitting Pennies a great way to learn about money

Are you confused or curious about the markets, money, or finance?  Splitting Pennies is a great start, because it's not a technical 'how to trade' or 'how to invest' book.  Yes, it gets a little technical - but it's done so in a way that is fun and entertaining.  See what these happy readers have to say, from Amazon:

I recommend this book to anyone interested in how the world of money really works

This should be the first book anybody reads before beginning forex trading. Joe is not selling a "get rich quick" trading strategy or some such nonsense, but provides a thorough, non-biased explanation of how both forex and the financial system in general operate. Anybody thinking about beginning forex trading should read this book first before ever opening a MT4 terminal, a few bucks spent up front will save you a lot of money in the long run. 

See more reviews and buy the book directly from Amazon (Paperback, Hardcover, or Kindle) by clicking here.

For more info, visit www.splittingpennies.com 

How the big banks are banking off FX stupidity

We all know that the majority of people don’t know FX (Foreign Exchange) so this topic should come as no surprise.  However, it’s important for traders and investors to understand how the US banks are ripping off their clients, and the only reason they do it is because clients allow them, because they don’t understand how they’re being scammed.  What we are talking about is the retail deliverable foreign exchange market.  Deliverable currencies is FX that is ‘deliverable’ to a foreign recipient, for example if you want to pay up front for a hotel in France you’ve booked in advance for your summer vacation.  It’s not only retail but for the example here it is – someone walking into a branch and asking to make a foreign payment.  We’ll use Bank of America as the example, let’s look at their FX rates from their website, available here:  https://www.bankofamerica.com/foreign-exchange/exchange-rates.go

So here’s the first line of defense to this scam, which it can be fairly called (we will explain).  Only one side of the spread is displayed – this will depend when you are ‘buying’ or ‘selling’ but they will NEVER be displayed on the same time or on the same screen (then, normally intelligent people may be able to deduce they were being fleeced like a sheep).  Let’s calculate the total spread based on the above rates using simple FX math for the 2 currencies chosen for this example, Euro and Yen.

FX is quoted EUR/USD that means 1 EUR = 1.1820 USD – the spot FX spread is about 1.1820 / 1.1822 according to LCG Brokers from Fortress Capital; but the market is closed now (it’s Saturday, day of rest in FX).  Now if we want to calculate the inverse price, for EUR/USD using Bank of America’s tool, we need to use the 1/x (reciprocal) function seen on most common calculators.  So if EUR/USD is 1.12 the inverse (reciprocal) is .89.  If we use the same ‘spread’ to convert 1 USD = x Euro then we subtract 1.1820 – 1.12 = .062 or 620 pips.  .062 doesn’t sound like much of a spread, but if you look in % terms it’s 5.54% of the price.  If we add the same amount of pips (or percent, however you calculate) to the other side of the spread, it would be 1.244 – for a total spread of 1240 pips.  Common spot trading spreads can run as high as 2 or 3 pips for the real shady FX brokers from Asia or aggressive IBs.  1240 pip spread is laughable.  Now of course these customers are PAYING in foreign currency not TRADING foreign currency it would be impossible to trade over 1240 pip spreads – but this is the reality for these poor retail victims.  1240 pips is substantial if you’re sending more than $50 – so now let’s look at the shocking examples.  At these prices, if you sent 100,000 to Europe, that would be about $5,540 in spread.  Where does this $5k magically disappear to?  The markets?  No – it is booked as a profit on the bank’s balance sheet.  Recently we (Elite E Services, Inc.) sent a wire payment like this for $5,000 and the banker had the audacity to say that if Bank A (not Bank of America, we won’t reveal the name) did the FX conversion we’d save $10 on the wire payment fee!  We calculated that would have been $350 in payment to Bank A to save $10.

Now the critical thing for US readers to understand, this is a uniquely American practice which happens only inside the borders of USA.  If you are in virtually any other country, whether it be UK, New Zealand, Japan, Australia, Switzerland – you’re going to get rates on such transfers which are HIGH but probably something like 50 pips maybe 100 pips in extreme cases.  If you do transfers more than 100,000 that can go down to as low as 25 pips.  So how can the banks get away with it in USA?  They are simply taxing people’s stupidity, because there are alternatives.  Companies like Fortress Capital offer deliverable payment services by using payment processors like Commonwealth Foreign Exchange to get the same foreign rates and save customers up to 90% on transfers.  But they require an application and would not open an account for a single individual customer (it’s mostly for corporates who do regular transfers).  Then of course there’s Currencies Direct who has offices in USA, and a number of other companies.

But the fact is that the banks have people by the short and curlies, there are not really many or any choices when you need to do a single transfer – and banks are making a small fortune from this.  Could this be considered a Monopoly?  Anti-trust issues?

They settled huge claims and have since reduced the spread (whereas now it’s 5.5% it used to be 7% – 8% !!) and companies like American Express (AMEX) no longer charge a ‘foreign exchange fee’ – that’s right, on top of this horrendous spread many providers used to charge a 1% or 2% ‘fee’ on top of this!  Outrageous!

The sad thing is that most in the retail market, even small retail customers with little or no investment accounts understand stock trading.  Forex is not so complex as it is sometimes presented by the banks – I’m sure they do this intentionally, they aren’t stupid.. This profit center is good for them and costs them nothing, it’s a risk-less profit that no one can complain about because ‘hey, it’s Forex.’

This is not the ONLY way the big banks are banking off people’s FX stupidity, but it’s the most petty way, and the most widespread.  Millions and millions of dollars of such transactions take place on a daily basis and the banks are happy to keep things like this.

For a pocket guide to make you a Forex Genius! Checkout Splitting Pennies – Understanding Forex www.splittingpennies.com

http://globalintelhub.com/big-banks-banking-fx-stupidity/

Alpha Z Advisors Offers An Alternative To Options Investing

(GLOBALINTELHUB.COM) -- Dover, DE 8/8/2017 -- Global Intel Hub exclusive interview -- Elite E Services sat down with Mike Connor, Principal and Senior AP of Alpha Z Advisors, LLC – a trading advisor offering alternative investments based on strategies incorporating research on price anomalies, behavioral biases and institutional practices. In November of last year, Alpha Z Advisors LLC was ranked #1 Options Strategies Category by Barclay Hedge, a service that tracks funds’ strategies. So we wanted to learn more about on the Alpha Z Advisors strategy, as we have always supported options as a great way to not only hedge investments but also provide additional alpha to any portfolio. Also, futures options are generally traded on regulated exchanges – unlike FX which are mostly traded over the counter (OTC).
Who is Mike Connor?
Professional risk manager and former member of the Chicago Mercantile Exchange, who has more than 40 years’ experience in the futures and options industry.
What is the story behind Alpha Z Advisors?
Professor William Ziemba started Alpha Z Advisors, LLC with trading capital from friends and family. The initial investors were individuals he knew from the academic world in addition to a few referrals from the initial investors. The fund has grown in size from trading profits from the initial capital without attracting new investors.
How has the performance been?
2015 had great performance, more than 100% return, but it probably will never happen again due to a management decision to reduce initial margin to equity risk.
Why has it been so consistent?
The fund primarily trades options based on CME’s S&P 500 E-mini contract. Trading centers around the extreme prices of puts on the E-mini contract. The big money in trading options is made from being long, but returns are inconsistent (but the risk is usually very well controlled). The consistent money is made by being short options, but it comes with risk, and to stay in the game the risk has to be controlled.
How do you control the risk?
By properly hedging the positions either with other options or a futures position, and by margin to equity control. Short (selling) options positions are no different than an insurance company policies – you are selling price insurance. Like any insurance company, we’re going to have occasional disasters, like Katrina – but they should be manageable. Over a long time horizon, well managed market disasters should not prevent us from continuing to perform. We have had our share of ups and downs, and fortunately we have been able to survive all drawdowns. Good risk control and position sizing are the most important factors in any trading campaign.
What factors may impact the strategies’ performance?
Implied Volatility. Volatility is opportunity, but left unchecked it can be a horrible threat.
Considering the results, why do you think there’s not larger AUM?
Until recently we have not solicited publicly. This is our first concentrated effort at soliciting investors. In addition, we put together a minimum account size so high ($250K for the managed account, $100K for the fund). Our account size should eliminate many potential investors. We are looking for sophisticated investors that can take a part of their portfolio and take greater risk for a higher return.
How can investors ‘prove’ that the performance is ‘real’ – is there an institutional My FX Book ? There’s been a lot of CTA frauds that were real CTAs but used fake performance to lure investors – what assurances can we offer them about Alpha Z?
All the accounts – all the funds’ assets – all the performance results are compiled every month by an independent CPA firm. The statements themselves can be verified by the FCM.
Positions are manually stress-tested intra-day.
What makes Alpha Z Advisors LLC different than other CTAs?
I’m not sure if that’s the case, we have a very professional trading plan. You can go to Amazon and buy books published by our founder Dr. William Ziemba, actually he’s published more than 50 books on statistical abnormalities and opportunities in the stock market. It certainly does not mean we cannot lose, or have losing open positions – we are going to have losing positions there is no way around it. But overall, if we can control the risk and keep margin to equity at a reasonable level we should be able to survive during the bad times. We have, I think, enough excess margin to sit through a significant rise in implied volatility and still survive, if the positions and margin to equity can be properly controlled. Like any market position whether it is options or futures an unexpected giant gap opening is always a threat to open market position’s stability.
What makes the strategy different?
Trades are well positioned and I believe are market entry timing is very good. Our exposure is laid out over a broad time horizon (we don’t trade in nearby month, for example). If futures were a bullseye, you’d have to hit the target almost dead center to make a profit, with options, you can just hit the wall and still make a profit – of course, only with properly controlled risk and other parameters. I do not know how other CTA’s manage their positions and stress test their market risk, but I am confident our process is robust. What we do is not magic, it’s simply neutralizing the risk as much as possible, and there is a number of ways we accomplish that. It is all about understanding what the options can do if they move against you, and how you can respond adverse market activity.
The execution is done by a professional service. One way we keep our costs down other than accounting, is to try and soft dollar expenses through a soft dollar basis.
Customers are free to choose any brokerage house they want that clears at the CME. If customers do not have any preference, we are happy to set them up with our preferred FCM.
For more information contact:
Mike Connor
312-470-6260
Or visit www.alphazadvisors.com
This article/interview is for information/educational purposes only and is privileged, confidential and proprietary. This article/interview is NOT an offer to sell or a solicitation of any investment products or other financial product or services, is NOT an official confirmation of any transaction, or an official statement. Past performance is not indicative of future results. There is a substantial high and unlimited level of risk of loss in trading commodity futures, options, options writing, equities and off-exchange foreign currency products; such trading is not suitable for all investors.  Investors should only invest money they can afford to lose.

http://globalintelhub.com/alpha-advisors-offers-alternative-options-investing/

Mysterious Trader With "Nearly Unlimited Bankroll" Said To Manipulate, Dominate Price Of Bitcoin

It was over three years ago, back in May 2014, when we wrote "How Bots Manipulated The Price Of Bitcoin Through "Massive Fraudulent Trading Activity" At MtGox" in which we first demonstrated one of the more striking observed "bot-driven" bitcoin manipulation schemes, in this case related to the infamous collapse of the now defunct Mt.Gox bitcoin exchnage.

As we wrote at the time, a number of traders began noticing suspicious behavior on Mt. Gox. Basically, a random number between 10 and 20 bitcoin would be bought every 5-10 minutes, non-stop, for at least a month on end until the end of January, by what appeared to be two algos, named later as "Willy" and "Markis." Each time, (1) an account was created, (2) the account spent some very exact amount of USD to market-buy coins ($2.5mm was most common), (3) a new account was created very shortly after. Repeat. In total, a staggering ~$112 million was spent to buy close to 270,000 BTC – the bulk of which was bought in November.

"So if you were wondering how Bitcoin suddenly appreciated in value by a factor of 10 within the span of one month, well, this is why. Not Chinese investors, not the Silkroad bust – these events may have contributed, but they certainly were not the main reason. But who did it? and why?"

Of course, in the end this alleged manipulation did not help Mt.Gox which eventually collapsed in what has been the biggest case of cryptocoin fraud in history.

We bring up this particular blast from the past, because in the latest case of bitcoin market abuse - with Bitcoin trading at all time highs above $3,000 - Cointelegraph reports of rumors swirling about a trader "with nearly unlimited funds who is manipulating the Bitcoin markets." This trader, nicknamed "Spoofy," received his "nom de guerre" because of his efforts to “spoof” the market, primarily on Bitfinex.

Of course, spoofing is what Navinder Sarao pled guilty of last year, when regulators inexplicably changed their story, and instead of blaming a Waddell and Reed sell order for the May 2010 flash crash, decided to scapegoat the young trader who allegedly crashed the market due to his relentless spoofing of E-mini futures (and also making $40 million in the process of spoofing stock futures for over five years).

It now appears that a spoofer has once again emerged, only this time in Bitcoin.

For those unfamiliar, spoofing is simple: it is the illegal practice of placing a large buy order just below other buy orders, or a large sell order just above other sell orders, then cancelling if it appears that the order is about to be hit or lifted. The idea is to make traders think that somebody with deep pockets is getting ready to buy or sell, in hopes of moving the market. If traders see a sell order of 2000 Bitcoin they may rush to panic sell before the whale crashes the price. And vice versa on the bid-side.

As an example of Spoofy's trading pattern, here is a breakdown of a typical "trade" by the mysterious entity as noted by BitCrypto'ed who first spotted the irregular activity: Spoofy is a regular trader (or a group of traders) who engages in the following practices:

• Places large bids ($2 million and up) for Bitcoin, usually just under a smaller bid order, only to remove them once someone starts to sell. These orders usually have a lifetime of minutes, or sometimes as short as 5–10 seconds to manipulate the price up (more common)
• Places large asks ($2 million and up), for Bitcoin when he wants the price to go down, or stop going up (less common)
• Occasionally ‘Spoofy’ will allow orders deep in the orderbooks to remain for a few hours, usually $50–$100 below the current price. For example, during the recovery above $2,000, he had roughly 4,000 BTC of false orders in the $1,900 range that were unlikely to execute, and ultimately were never executed.

As noted above, spoofing is actually illegal - as ultimately the trader has no intention of ever executing the publicized trade - but as Bitcoin markets are largely unregulated, it’s a very common practice.

What is unusual in this case is the nearly unlimited bankroll that Spoofy has at his disposal: He regularly places orders approaching $60 million.

Even more unusual is that, as cointelegraph reports, most of Spoofy’s activity occurs on a single exchange: Bitfinex. This exchange came under fire earlier this spring when Wells Fargo cut off their banking ties. As a result, it’s virtually impossible to deposit fiat on Bitfinex without going through intermediaries.

Yet unlike most Bitfinex traders, Spoofy appears to have special privileges, and has massive sums of both fiat and Bitcoin at his disposal on that exchange, likely one of the only traders who does.

* * *

In addition to spoofing, "Spoofy" also engages in wash trading, or effectively trading with himself. As BitCrypto’ed points out in a recent blog post:

“Spoofy makes the price go up when he wants it to go up, and Spoofy makes the price go down when he wants it to go down, and he’s got the coin… both USD, and Bitcoin, of course, to pull it off, and with impunity on Bitfinex.”

The BitCrypto’ed blog also describes Spoofy’s wash trades, when he trades with himself by either selling into his own buy orders or vice versa. Wash trading at high volumes can induce a frenzy of buying or selling, as other traders respond to the high trading volume. Spoofy can execute wash trades at very low cost, about $1,000 per million dollars of volume.

A single entity (entity could be a trader, or a group of traders), single handedly wash traded 24,000 Bitcoins in shorts. In order to do this, you would need to have at least 24,000 BTC on Bitfinex and the USD to buy them with.

When Bitfinex announced its plan to distribute Bitcoin Cash, it initially planned to distribute Bitcoin Cash to holders of short positions. Immediately following that announcement, a single trader short sold tens of thousands of Bitcoin all at once. It’s likely this trader was Spoofy himself, hoping to acquire as much Bitcoin Cash as possible.

The large number of shorts on Bitfinex also led many to believe that an epic short squeeze was coming, and many Bitcoin traders purchase coins in expectation of this. Suddenly, he “claimed” all of his own shorts, closing them using his own Bitcoin. The number of shorts dropped drastically, yet without affecting the price at all.

Bifinex itself admitted the manipulation on August 2, one day after the fork:

“After the methodology announcement on July 27th, several accounts began large-scale manipulation tactics in an attempt to obtain BCH tokens at the expense of exchange longs and lenders on the platform, causing the distribution coefficient to artificially plummet.

We have determined that this kind of manipulation?—?including wash trading and self-funding shorts?—?is in violation of Bitfinex’s terms of service. Those who intended to take unfair advantage of the circumstances surrounding the BCH distribution at the expense of other users have been sanctioned accordingly.”

Interestingly, BitCrypto'ed claims that Spoofy isn’t limited to just Bitcoin, and that shortly after this ‘trader’ was ‘sanctioned’ by Bitfinex, another interesting thing happened: ETCBTC shorts immediately disappeared on August 1.

Here we can see how the ETCBTC shorts simply vanished, from 60,000 ETC short, to a low of 93 ETC. But let’s not just look at ETCBTC, what about ETCUSD?

 

A giant middle finger. Notice the dramatic increase and decrease in longs with no effect on price.

I'm not sure what to make of these, but it calls into question the legitimacy of this data. The point I’m trying to make by showing the ETCBTC/ETCUSD margin pairs also engaging in very funny business at the same exact time, how are we supposed to know that the BTCUSD longs on Bitfinex are not also subject to this manipulation?

ETCBTC Shorts = Clear evidence of manipulation
ETCUSD Longs =Clear evidence of manipulation
BTCUSD Shorts = Clear evidence of manipulation (and admitted by Bitfinex)
BTCUSD Longs = BTCUSD Longs in terms of USD, has never been higher in Bitfinex’s history. See the green line.

It's not just Bitfinex: Spoofy’s activity also drives crypto prices on other exchanges, as arbitrage takes place. Because BItcoin is so thinly traded, a single large “whale” can potentially move the entire market.

Just like in US stock markets where HFTs find instant price arbitrage opportunities, with the help of extensive spoofing, the same takes place in bitcoin exchange.

People underestimate how much exchanges follow each other. Manipulation on one exchange will affect prices on other exchanges. You have traders that watch all of the exchanges and if one exchange starts to pull ahead, they too buy on cheaper exchanges.

You don’t just have people, but you also have bots that will do the same thing, so price reactions can be immediate.

Just like equities. And while Spoofy is certainly exercising outsized control over the Bitcoin price, it is uncertain how much of an affect this is having across all the markets. The price is currently rising, having finally surmounted the $3,000 barrier. The only problem? Nobody knows how much of this increase is organic and sustainable, and how much is due to the market manipulation of Spoofy and others.

Finally, nobody knows who he is:  The identity of Spoofy remains a mystery. He may be i) a single trader, ii) a large OTC trading firm or group of colluding traders, iii) or even the Bitfinex management themselves. He sometimes seeks to drop Bitcoin price, and sometimes acts to increase it. One thing is certain: one single trader seems to have a "central bank"-like impact on the entire crypto market.

EES: Fighting inflation with FX, a real traders market

(GLOBALINTELHUB.COM) Dover, DE — 7/18/2017 — Hidden in plain site, as the Trump administration finally released something of substance regarding the so called promised “Trade Negotiation” we see FX take center stage in the global drama unfolding.  As noted on a Zero Hedge article:

The much anticipated document (press release and link to full document) released by U.S. Trade Representative Robert Lighthizer said the Trump administration aimed to reduce the U.S. trade deficit by improving access for U.S. goods exported to Canada and Mexico and contained the list of negotiating objectives for talks that are expected to begin in one month. Topping Trump’s list is a “simple” objective: “improve the U.S. trade balance and reduce the trade deficit with Nafta countries.” Among other things the document makes the unexpected assertion that no country should manipulate currency exchange to gain an unfair competitive advantage,which according to Citi’s economists was the only notable surprise in the entire document: That line of focus centers on FX: “Through an appropriate mechanism, ensure that the Nafta countries avoid manipulating exchange rates in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage.”  ..While Canada and Mexico are not formally considered currency manipulators by the US Treasury, the reference in the list of objectives will likely set a template for future trade deals such as the pending negotiation to modify a 5 year old free trade deal with South Korea, a country in far greater risk of being branded a currency manipulator as it sits on the Treasury’s monitoring list for possible signs of currency manipulation.

As we have explained in previous articles and in our book Splitting Pennies – Trade is FX.  Tariffs can discourage trade, but so can a high price – effectively they are the same thing.  Conversely, a cheap price encourages trade.  This is why Japan has logically and rationally destroyed the value of its own currency in order to boost trade, in their case – exports – because Japan is not only a net exporter, they are a near 100% OEM manufacturer.

But it’s not clear that whoever wrote this document understands FX – every currency is currently a ‘manipulator’ – including Japan, and the US Federal Reserve Bank.  In fact, the global FX market has become a race to the bottom, with each currency competing with each other who can go down more, faster.  It’s a race into oblivion.  Contrary to what you may read in the current doom journalism popular online, the global financial collapse is happening right before our eyes – over a long time horizon.  The big mistake that many economists, analysts, and investors have made in the ‘doom and gloom’ crowd is that they all expected a ‘date’ or a ‘time’ when everything would ‘collapse’ – they didn’t think that it can happen over a period of 50 years.  We are in the demise, it’s happening right before our eyes.

Today someone asked me if Bitcoin can really be 500,000 – and why not?  My answer was that, it isn’t that Bitcoin is going UP it’s that the value of the US Dollar is going DOWN.  So if Bitcoin is 500,000 – that property in the hamptons that’s listed for $150 Million, it will be listed for $15 Billion, or why not $1 Trillion.  There is no limit to the amount of money the Federal Reserve can create – but there is a limited amount of Bitcoin.  Those who have lived in exSSR countries or Russia for example, understand how quickly money can be worthless.  Quantitative Easing is itself a global ‘reset’ if you understand how it works, and it happens over a long timeframe.

So where is one to invest, to protect from the deteriorating value of FX?  Bitcoin is by itself not a solution and by no means even something that should be part of any portfolio, it’s a test of the new world order’s global currency payments and monetary control system, whatever you want to call it – and it’s very volatile – just as it goes up 100% it can go down 90%.  The answer is that even with Bitcoin – the point is to TRADE it not INVEST in it.  Let’s dissect FX to understand this.  Take a look at this Daily EUR/USD chart going back 3 years:

The EUR/USD goes up, it goes down.  There’s an election in France, an election in the US.  It’s practically one currency.  But the ECB has a similar QE program that’s destroying the value of the Euro as well.  So the way to protect yourself here is to ‘trade’ this.  For example, take a look at a snapshot from 2016 of Magic FX Strategy, that has returned on average 1.5% per month for the last 4 years:

This is not a solicitation of this particular strategy, simply it provides a good example of how to ‘trade’ FX for a consistent profit, to combat inflation.  Investing in CDs and other interest rate products are not going to give you the 15%+ per year needed to stay ahead of the Fed.  This is the game of hot potato that Elite bankers have designed that’s built into the modern electronic financial system.  The stock market is great unless there’s a down year, but still just barely keeps you ahead of the game (if you stick to the traditional blue chips, industrials, utilities, etc) and certainly is not going to give you the 15% – 30% per year returns needed to really grow your portfolio.  30% + is the magic number Elite portfolios target (ironically, it’s about a 2x allocation to Magic FX strategy, in line with the natural fluctuations of the FX market, using reasonable, modest leverage).

If you’re not making 15% + per year inflation is eating you away.  So where can you invest and get 15% with reasonable risk?  The answer is practically no where in the markets, maybe in the private equity world, complex real estate, and other special situations but clearly there is no vanilla answer like “Buy Gold” or “Buy Bitcoin” as there may have been post 9/11.  This will be more and more true as QE matures, because QE is distorting asset prices in complex ways.  This is the ‘trap’ which has been set.  Not only does it cull the herd, as the Elite like to do every 20 years or so, it forces investors into a situation where they have to take more risk – if they don’t, their assets will ultimately be eaten away by inflation.  They have to play the game because if they sit on the sidelines they will lose out.  Of course it’s not fair – but that is the nature of the global capitalist financial system, at the moment, and it’s not going to change in our lifetime, so one can understand it and master it, or be the victim of it, SIMPLE!

And in the case of FX it’s not so complex to understand.  Let’s look quickly at the last currency of investment, the Swiss Franc.

Here’s a historical chart of CHF/USD (usually it’s quoted USD/CHF which is the inverse – opposite)

Investors in Swiss Francs over this period – which includes Americans just sending their money to Switzerland, enjoyed a 400%+ return over the 40 year period, non-compounded, without considering interest (just FX).  The small blip in the 80s when this investment declined was due to the US Dollars aggressive double digit interest rates, but that ended in 1986 when Swissie just took off and never looked back.  That was until the post 2008 world, where Switzerland became the target of a number of investigations by hungry US agencies looking for someone to blame and money to pay for damage done by the credit crisis, including the IRS, FBI, and DOJ in general, but there were a number of other US interests interested in financially ‘toppling’ the Gnomes of Zurich – namely, by closing the only way out of QE.  The Swiss Franc (CHF) was really the only currency that had any value, it was 40% backed by Gold, and upheld by a 1,000 + year banking tradition, a stable economy, and banking privacy laws.

In order to solidify the US Dollar as the primary world’s reserve currency, that had to be smashed.  So they did it in a number of ways, including but not limited to activating assets there such as corrupt central bankers (which really was a non-issue) and squeezing the Gnomes back into submission.  So the conclusion to this drama is now the CHF previously being the only real currency to invest in for the long term and forget about it, is now a central bank manipulated currency that is subject to SNB interventions, caps, trading ranges, and other direct central bank manipulation (like all other currencies).

So the reason for that story is simply that there is no where to just ‘invest’ your money and forget about it anymore (there was, such as the example of the Swiss Franc).  The good news though, FX is a traders market.  If investors are not too greedy, there’s a number of strategies in FX that can return the 15% + needed to beat inflation and possibly even grow.  Magic FX is certainly not the only strategy in the world with such low-volatility and consistent returns.  But due to the recent Dodd-Frank regulations such strategies are only available to ECP investors, which is a step above being accredited – basically you need to be liquid for $10 Million.  Oh, and to make fighting inflation really fun for the retail US investor, you aren’t allowed to hedge (no buying and selling of the same currency) and you must exit your positions in the same order in which you entered them (FIFO) and you have reduced leverage.  Basically, the Fed is creating pressure forcing the hand of investors to trade to stay ahead of the game, and the regulators are making it difficult (and in fact, more risky) to trade.  With US rules it’s a miracle any US retail investor can be profitable.  The rules have really turned FX into the casino that people are afraid of, because they are literally telling you when to exit your trades (FIFO).

In conclusion – FX is a real traders market.  It’s better than stocks, bonds, options, futures, etc.  Now with the influx of Cryptocurrencies FX is about to get even more interesting.  By trading FX successfully, or finding a manager who can do it for you – it’s the only way to fight inflation, to at least maintain the value of your hard earned dollars.  As we mentioned earlier in the article, there are of course other methods such as private equity and niche businesses (such as lawyers selling rights to settlements) that can generate the 30% + needed to grow a portfolio – but it’s not available publicly, in the markets.  But FX is there – it’s there for the taking – and it’s not going away anytime soon.

Open a Forex Account or Learn Forex with Fortress Capital Trading Academy.

Article written by Elite E Services for Global Intel Hub.