Is now the time to take a trading holiday?

Discussions about the psychology of the markets and the masses as it relates to trading.
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rhc
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Is now the time to take a trading holiday?

Post by rhc » Wed Dec 28, 2011 11:42 pm

Over at the MF Global thread on page 37, we have reference to this article;
http://www.zerohedge.com/news/guest-pos ... ose-are-we

This, to my mind, is essential reading for anyone with any money in any trading account.
It is a disturbing read. Definitely for Adults Only!

The gist of the article is that no-one’s money is safe. . . . as we all now know
Segregated account means nothing. . . . as we now all know
Regulators have basically told the ‘little man’ to shove it . . . .as we now all know
It’s every man for himself. . . . as we now all know

. . . and since it is every man for himself what do you think will happen when the next ‘MF-Global-type-Firm’ runs into trouble? There will be a lighting-speed mad scramble for the exit door with the majority being trampled underfoot.
I have said in other threads that I’m watching the share price of IB with a keen eye, but so are thousands of others.
I think it’s naïve of me to think I can get out in front of others if TSHTF at any stage. ( & then you have the infamous clawback provisions to deal with even if you do manage to get out)

So, having said that, I am seriously playing with the idea of closing my IB account and taking a one year trading holiday and simply watching the action from the sidelines.

Do any others feel this way as well?
Have others actually closed trading accounts due to these concerns?


***************************


Now, the question;
What to do with my money if I choose not to trade.?
Here in Oz I can get a nice boring ‘safe’ 1 year term deposit at my local friendly bank that pays interest in $AUD of around 5.5% p.a. . . . give half of that to the government in tax and the other half to inflation and I should end up even by year’s end.
Other than that, the only other thing I can think of doing is to buy some Gold and then a Glock.

It seems to me that this is one of those points in history where ‘Return of capital’ is fast becoming more important than ‘Return on capital’

Any thoughts?

stopsareforwimps
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Re: Is now the time to take a trading holiday?

Post by stopsareforwimps » Thu Dec 29, 2011 1:46 am

rhc wrote:trading holiday...Any thoughts?
Some people have voted with their feet: http://www.zerohedge.com/news/entire-sy ... l-casualty

However "Tyler Durden" is a full-on glass half empty man. He will be right sometimes and he digs up interesting stuff but he tells one side of the story only IMHO.

As for the question of what are the safe assets one could move to, good luck there. I hear Canberra real estate (Oz equivalent of Washington) is doing well but this may change if Tony Abbot wins the next election. US real estate may be close to its lows or at least to fair value. Gold's role as an inflation hedge does not seem to be working at the moment, nor its role as an asset not subject to credit risk.

"Cash" means lending money to hyper-leveraged banks backed by overcommitted governments with printing presses starting to roll and the taxman at the door ready to tax imaginary incomes.

Often in situations like this trend following can help.

You might consider taking your desire not to trade to Tribe.

[Edited to put quotes around the name Tyler Durden, having now watched "Fight Club"]
Last edited by stopsareforwimps on Wed Feb 22, 2012 3:59 am, edited 1 time in total.

rhc
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Re: Is now the time to take a trading holiday?

Post by rhc » Thu Dec 29, 2011 4:26 pm

stopsareforwimps wrote:You might consider taking your desire not to trade to Tribe.
You might consider reading Luke 4:23

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Re: Is now the time to take a trading holiday?

Post by Chuck B » Thu Dec 29, 2011 10:31 pm

rhc wrote:Now, the question;
What to do with my money if I choose not to trade.?
Here in Oz I can get a nice boring ‘safe’ 1 year term deposit at my local friendly bank that pays interest in $AUD of around 5.5% p.a. . . . give half of that to the government in tax and the other half to inflation and I should end up even by year’s end.
Other than that, the only other thing I can think of doing is to buy some Gold and then a Glock.
Buy a GT3RS and have a blast for the next few years...

rhc
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Post by rhc » Thu Dec 29, 2011 10:41 pm

Good advice!
. . . and to complete my midlife crisis I could grow a pony tail and find myself an 18 year old blonde busty girlfriend. 8)

Ahhh, La dolce vita

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Re: Is now the time to take a trading holiday?

Post by AFJ Garner » Fri Dec 30, 2011 4:59 am

rhc wrote: You might consider reading Luke 4:23
Can you clarify for me your understanding of Luke 4:23 in this context?

stopsareforwimps
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Re: Is now the time to take a trading holiday?

Post by stopsareforwimps » Fri Dec 30, 2011 6:43 am

AFJ Garner wrote:
rhc wrote: You might consider reading Luke 4:23
Can you clarify for me your understanding of Luke 4:23 in this context?
He is rightly suggesting that I should consider my own long-standing reluctance to trade futures before throwing stones at others for with the same problem.

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Post by Chelonia » Tue Jan 03, 2012 2:33 pm

You missed your holiday year (2011). I think it´s time to get back in...

rhc
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Post by rhc » Tue Jan 03, 2012 9:20 pm

There seems to be some confusion associated with this post.
This post has absolutely nothing to do with whether markets will or will not trend in 2012,
or whether 2011 was a bad year for trend followers,
or whether “Trend following can helpâ€

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Post by marriot » Wed Jan 04, 2012 2:02 am

Diversification is the way.
The best would be to have a farm, grow natural products, have tourists come to you for sleep, eat, leisure.
Go on with trading with more then one broker, have your cash in two different countries and banks.
But it is a lot of work, i cannot do it.

Not to much years ago people was able to exchange cheese with shoes.
Have something real to exchange would let you sleep like a bebe'.

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Post by Moto moto » Wed Jan 04, 2012 2:35 am

rhc - without throwing the towel in i think all you can do is open multiple accounts, move cash around and cross your fingers.

The harsh reality is that unless you have enough money what else are you going to do. I did get caught by MFG, but at least I had learnt and only had a much smaller amount that I normally would as I had previously spread it. (still too much with hindsight)

But just for fun - go to your bank and try and withdraw $50,000 cash.....watch them panic :) These days I think you just need to set up quick transfers, minimise cash in multiple accounts, multiple brokers, sweep spare cash out, ideally anything that can be held in your own/trust/company name is likely safer....have you drawn up a check list for how to get money out quickly, the process for determining if something might show signs of trouble, part of a trading plan for such events???

the alternative is to go and borrow a truckload and go with the old saying...."borrow a million you cant repay - you are in trouble, borrow a billion you cant repay - the bank is in trouble"
If its a zero sum game it must end up somewhere ???

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Post by Chelonia » Wed Jan 04, 2012 2:56 am

Every time I see a Ron Paul supporter, I think what trouble we're really in.
RON PAUL SUCKS, IN 20-YUCK!

rhc
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Post by rhc » Thu Jan 05, 2012 8:55 am

Very sensible commentary re: Brokerage Risk from speculative-investor.com
Brokerage risk in the wake of MF Global

After MF Global (MFG), a US-based futures broker, went bankrupt late last year, it was discovered that a sizeable chunk of its customers' assets were missing. Although it has been widely reported that the loss of these assets is related to "re-hypothecating" (the practice via which a bank or brokerage uses the collateral deposited by its customers to back its own trades), we don't know that this is actually the case. There could be other reasons for the loss, such as 'borrowing' customer funds in a desperate effort to meet margin calls on leveraged trades that had gone wrong. Anyhow, the fact that MFG's own financial problems resulted in losses to its customers reveals a risk. After all, many people had assumed that customer funds/assets were segregated in a way that would prevent such a thing from happening. The question before us now is: does the MFG fiasco point to the need for a strategy change?

The answer is that it shouldn't require a strategy change. For a long time we've recommended that people spread their financial assets across multiple institutions and countries. The goal has always been to avoid being in the position where your finances would be severely damaged by the failure of a single financial institution or the stupid/destructive behaviour of a single government. This was the case prior to the MFG failure and is the case today.

The risk of loss has probably been lowered by MFG's collapse and the resultant disappearance of some of its customers' property, the reason being that the risk is now well known. Once a risk becomes well known there will generally be less chance of it materialising and wreaking havoc in the future. However, the fact that the risk is now out in the open doesn't mean that it has been reduced to the point where it is no longer a concern. In our opinion, if you were lucky enough not to be a customer of MFG and you haven't yet diversified your institution and country exposure then you should view the MFG episode as a warning shot. You might not get another warning shot.
(Bold emphasis mine)

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