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Saturday, June 29, 2013

End of Q2 & H1 2013

It is that time again and we have just closed the second-quarter as well as first-half of 2013. It has been a decent start with plenty of ups and downs and I am glad that we have our portfolio positioned to enjoy more ups than down entering the second-half of 2013. We had plenty of developments which rattled the markets and the global rally as well as fiscal health of the global financial systems began to show its cracks.

Bernanke suggested that there could be an end to QE which has dumb money investors begging for worse economic news and is one of the clearest sign that the global equity market rally we saw from 2009 was built on nothing but stimulus which artificially propped up prices based on hope that inflated equity markets would spill over and create sustainable economic growth; massive fail!

The housing recovery was credited with a substantial amount of praise and cited as key to the economic recovery in the U.S. Ben Bernanke just killed the housing recovery with his remarks of the end of QE which pushed interest rates higher and makes affordability of mortgages that much more difficult for an American dying middle-class who can’t afford to purchase home to start with.

Dumb money has credited with Ben Bernanke with saving the U.S. economy which displays one of the reasons why dumb money is called dumb money. Ben Bernanke successfully kicked the can down the road and passes the issues on to the next Fed Chief starting in January of 2014 which may be, unfortunately, Janet Yellen. Bernanke seems to ignore the fact that there is a public record of who initiated a moronic fiscal policy which will boomerang back and history will show that Bernanke’s monetary maneuvers created a temporary spike before bringing down the house.

That was exactly what smart money expected him to do and all those who think Bernanke did a great job place them in the dumb money camp and most likely are happy to do so. Obama-Bernanke is the worst combination for the U.S. economy as well as for the U.S. budget. It is a dream team of destruction which was supposed to be placed in office for one term only, unfortunately plans have changed and they were allowed by decision makers to remain at powerful positions in order to do what they were born and raised to do; fail!

Obama did a great job portraying his lack of intelligence and promoting his socialistic health agenda while ignoring the economy altogether which will start to extremely backfire starting in the second-half of 2013 and going into Senate election season in 2014 where Republicans as well as Tea Party activists will take away seats from the socialists and regain control of the U.S.

Obama is not the only failure in office around the world; he is joined by Merkel, Hollande as well as Abe in Germany, France and Japan. Investors as well as traders should fasten their seatbelts for a spike in volatility which will reduce the size of global portfolio over the next few years by over 50% while smart money should quintuple or more their accounts in the same time frame.

The amount as well as combination of pathetic stupidity in the global political as well as monetary arena is unmatched in history and they will do an outstanding job in catastrophic mistakes and harmful policy decisions which will sink the global financial world into the abyss.

On the forex front we expect the AUDUSD together with the GBPUSD to outperform counterparts in the second-half of 2013 and the AUDUSD is our Hot Forex Trade of the month for July.

Thursday, June 27, 2013

Mandela versus Obama

I am about to head out for a lunch meeting with two of our investors about an increase in investment activity and before I am leaving my office I take some time to reflect on the health situation of former South African President Nelson Mandela. Last reports have it that he is on life support and it appears that he may be nearing the end of his days walking among us.

Mandela is called the father of the South African nation as he was able to unite South Africa more than any other president and he was the first black South African President. Personally I admire what Mandela accomplished in South Africa and it is sad he had to endure all those struggles especially as a political prisoner. I do detest his socialistic ideas and his tremendous support of the UN as well as stark criticism of the Western world. Nevertheless I do respect him as a person despite our different views on so many topics and it is sad to see him in a condition of deteriorating health. I do keep him in my prayers.

Nelson Mandela united a racially divided country which makes me think about Mr. Obama, the first half white or half black individual depending on your point of view, who was allowed to move into the White House despite being constitutionally ineligible to do so. Mr. Obama has managed to divide the U.S. even more than it previously was.

Some moronic scholars make idiotic attempts to compare Mr. Obama to former President Mandela. Those who try to make a case do nothing more than display their utter lack of understanding and amuse us intellectuals with their pathetic descriptions which are at least good for a healthy laugh. Former President Mandela united a divided country, while Mr. Obama divided a semi-united country which is the first big difference.

While Mr. Obama shares some of the socialistic ideas former President Mandela idealized, Mandela will be or at least should be remembered for his positive contributions to South Africa and all the beneficial developments as a direct result of Mandela and his deputy F.W. de Klerk. They have paved the way for a united South Africa which is now among the Top 5 emerging markets and a member of BRICS. Regardless if one agrees with Mandela’s unfortunate socialistic views he deserves all the respect for his great accomplishments as well as contributions to the country he loved with all his heart despite or maybe due to the terrible treatment he received until the start of the 90’s.

Nelson Mandela did not give up following his dreams and realizing them and nobody can take that away from him. I do respect him very much for his spirit. There are not many individuals who have received the terrible treatment Mandela had to endure and still he did not allow it to derail him; if anything else he was inspired to work that much harder.

On the other side we have Mr. Obama who will and should be remembered for his daily abuse of the U.S. constitution as well negative impacts of his idiotic policies as well as ideas. Mr. Obama is the exact opposite of former South African President Nelson Mandela and any comparison which puts one great President who improved his country in so many ways and initiate drastic positive change on the same level as one individual who defrauded the American public and abuses the constitution while creating a bigger cultural divide and causing severe economic hardship is as pathetic and ridiculous as the claim that Mr. Obama is a legit 

President when even the Supreme Court of Justice acknowledged the fact that Mr. Obama does not possess the constitutional right to be in the White House, but was ordered to ignore the constitution on this.
I am headed to my meeting and keep thinking about the severe differences between President Mandela and Mr. Obama and how both are as different as black and white. Yes, both men are African but many tend to forget that Africa is a continent and not one country which further displays the stupidity among the general public. 

Tuesday, June 25, 2013

Mahi FX Review

Today we will take a look at a forex broker out of New Zealand, Mahi FX. We were a bit unsure if this forex broker is from New Zealand or Australia as they are regulated by the Australian regulator, but both countries collaborate in this area in the same manner they collaborate in other areas. The web address bar indicates it as New Zealand and we will go with that for now. The one odd thing is that Mahi FX does not have an ‘About’ page.

Well, we know that Australia has some of the finest women human mankind has to offer and that Australia/New Zealand seems to become more and more popular among forex brokers due to their business friendly economy. It is a very welcome development, so let’s see if their forex brokers compare to the dimes gracing the beaches.

Besides that fact that an ‘About’ page is missing, Mahi FX greeted us with the best designed website and their presentation was top notch. There is not much more you can ask for when it comes to this area. Mahi FX does a lot with videos which is a great way to communicate and right on the front page you have an interview with the CEO of Mahi FX.

Mahi FX has some of the best spreads in the retail industry which is a great start. Additionally they offer their own trading platform which seems top of its class as well and we are impressed by its functionality. Having said all of that, Mahi FX does not offer too much information or it is extremely hard to find. It appears as what others lack in transparency they offer, and easy to find information others offer they lack.

It would be really nice for Mahi FX to make basic information easy accessible. They are very transparent about their founders and management team which is great. They have a nice tool about spreads and how it can and does affect your portfolio. Given that they are regulated, there is little doubt that Mahi FX is hiding something which makes it even more disappointing that some basic information is essentially impossible to locate.

We have no idea if Mahi FX is a market maker, STP or ECN broker. We do not know how many currency pairs are offered or if other assets classes are available to trade. It appears you can find out all those answers after you open an account with them or if you ask them through support.

Conclusion

Two claws up when it comes to design, presentation, spreads as well as trading platform and transparency about management. Two claws down on everything else given the lack of information. Mahi FX is a better choice than most other retail forex brokers and we would rank them in the Top 25. Overall we have to give them one claw up and one claw down for now.

Thursday, June 20, 2013

Cyprus bets on Casinos

Cyprus moved to the back of the news cycle as far as importance is concerned. I am just receiving an update on a report from my personal assistant that covers Cyprus and their move to legalize casinos in order to boost economic activity in the tourism as well as gambling sector. We have advised our clients to move their funds out of Cyprus at the end of last year which left us with minor exposure to the Cyprus financial drama.

Dumb money regulators blame the Cypriot government for allowing Russian oligarchs to bank in Cyprus and due as they please. A rather idiotic point of view as expected. The EU is angered over Cyprus as they have seized business opportunities which were presented in a large part by the wealth of Russia which is perfectly fine. In retrospect other EU members secretly wish they could cater more to Russia and ride and take advantage of the economic tidal wave Russia creates.

The situation in Cyprus is less than stellar and after engaging into several unfavorable moves forced onto them by Germany in order to secure a financial bailout Cyprus is about to piss of the EU all over again. Cyprus struggles to raise money in order to free them from the German gridlock and now they turn to the gambling industry. Cyprus has requested a study and review in how a casino resort may boost their economy and expect the results in a matter of weeks.

Cyprus already established them as an offshore forex broker haven with a business friendly approach, tax friendly policy and a regulatory system which functions as part of the EU. Plenty of forex brokers are domiciled there and operate retail forex operations from within Cyprus which offered a great mix of being a member of the EU as well as Eurozone, but were able to distance them from the Franco-German anti-business as well as socialistic economic approach.

This explains why wealthy individuals favored Cyprus which build up its banking as well as financial industry as a direct result of it. Yes, they made some terrible mistakes which shows that dumb money advisers were at work and if Cyprus could do it all over again with a smart money approach they could create an offshore financial powerhouse. Since the trust has been broken, Malta has now a much better chance to achieve that if they decide to learn from the Cypriot mistakes.

They Cypriot economy is predicted to contract by 13% over the next 24 months as their financial industry collapsed as they imposed a tax on deposits above €100,000. Tourism makes up almost one-fifth of all economic activity which makes it a crucial part for improvement as well as investment. Russian investors are pulling out of Cyprus, but do flock there for vacations as it is very easy to reach and has plenty of sunny days which makes it a great location to take a break from money making and wealth building.

Russian visitors to Russia, yes that includes some of the most beautiful women mankind has created, rose 15% in April from year ago levels and now Cyprus is making a play for a casino resort in order to get Russian as well as all other tourists to gamble. This is particularly attractive for Russian tourists as Russia outlawed basically all casinos in 2009. On top of that the average Russian gambler wagers $170 per person which compares to $82 for the rest of the world.

This shows that despite the bailout, Cyprus top priority is its positive relationship with Russia which is the only sensible solution for Cyprus. I am very pleased with the developments out of Cyprus and we are set to have a conference call with officials there in order to offer our assistance for a casino resort and the creation of a regulated casino industry in Cyprus.

Wednesday, June 19, 2013

Bernanke to Spook Dumb Money

The Fed started their two day meeting yesterday and today at 1400 hours EST the FOMC will announce the results of their meeting which will be followed by a press conference at 1430 hours EST. Ben, the Septic Tank, Bernanke will have to face some tough questions as the socialist Dumbama who is currently on a little trip around Europe after attending the G-8 Summit in Belfast, North Ireland where he Russian President Putin played him like a well-trained puppy, basically stated that Bernanke is fired.

I am not even bothered to listen to his press conference as I expect equity markets as well as the USD to tank like usually. Every time the Septic Tank opens his mouth and attempts to communicate plenty of feces is spilled, dumb money is shocked and smart money collects. He has already rattled the bulls as he noted that the Fed may taper with QE which send the first shock waves across global equity markets. Dumb money was quick to adjust some of their bullish bets and the Nikkei 225 plunged into a bear market already.

While I do expect volatility to pick up right after the announcement and into the New York close, I position all our traders to take an early day today and simply enjoy the finer things Monte Carlo has to offer. All our funds and their trades are well positioned and the last thing I need is for someone to panic as Bernanke will initiate a sell-off in late afternoon trade.

Bernanke will most likely announce that the Fed will taper QE sooner rather than later as he clearly knows that he will no longer be allowed to abuse the Fed with his moronic approach and idiotic tactics which were designed to artificially prop up financial markets based on hope the rest of the economy would follow suit. It did not do so and the U.S. economy is a dead patient on life support. Bernanke will signal that the Fed is going to lower the medication until it pulls the plug completely.

Janet Yellen is rumored to become the first female Fed Chief and Bernanke may try to crush markets now to a certain degree until Yellen, should she indeed be hated enough on Capitol Hill to be offered the plague of exiting QE completely, takes over and batters financial markets into the ground. Most dumb money mismanagers believe that the Fed exit will signal economic strength which is the reason why dumb money always ends up holding the bag as smart money cashes out and eat their lunch.

Bernanke stressed the fact that the Fed will be data dependent and will not taper or reduce QE until the U.S. unemployment rate drops to 6.5%. Well, it is obvious that his plan was flushed down the toilet just as everything else the Septic Tank has attempted. The only thing he has accomplished is to kick the can down the road, display his idiocy and now he will be forced to pass the torch to another unqualified individual and see if that person will fumble the ball or can keep it kicking down the road until the next person will have to pick it up.

Prepare your portfolio for a rout on global equity markets. I am sure to enjoy this evening as I host a small private party down at the yacht club. Dumb money will get butchered during the last two hours of New York trading and as Dumbama is finishing his speech in Germany where moronic Germans approve more of him than the country he defrauded with his presidency I am applying the finishing touches to our trades and ensure we are not going to violate our risk management protocol as Bernanke will screw it up once again.

Monday, June 17, 2013

Enfinium International Review

Today we will take a look at Enfinium International, a broker out of Australia. They are not a forex broker only and offer traders Equities, CFD’s, Futures, Forex, and Commodities. Visitors are greeted by professional design and their website is easy to navigate.

They offer the popular MT4 platform with a minimum deposit of $1,000 and claims to offer NDD trading as well as STP and state on their website that they never trade against their clients. They are regulated in Australia and for the time being there is no reason for The Last Bear to think that this online broker has deceived potential clients. They seem quite open and honest which is the right approach for a broker.

It appears that forex trading is not their primary business unit, but that does not mean that traders should not take them into consideration. They offer maximum leverage of 1:500 and they offer what they call the Enfinium Trader Workstation without further information provided. They claim to work with 14 liquidity providers for best pricing and spreads appear to start above 2 pips on popular pairs.

We tried hard to find out more from what they present on their website, without success. This was rather unfortunate as we would have loved to bring you more about this online broker. Apparently tailored to retail forex traders without any tools to introduce new traders to forex which is slightly confusing as it appears they have not quite grown up and decided who to target.

Conclusion

We have nothing bad to report about them, but on the other hand aside from their claim to not trade against clients and being a NDD/STP broker we have nothing good to report either. In general there are brokers out there who present themselves better, and there are brokers out there who represent themselves worse. We are sitting on the fence with this forex broker and therefore have to give them two claws down.

The sole reason being we would have loved much more information without having to open an account or contacting them directly. Our gut feeling makes us believe that they are trying to sound bigger and better than they really are and just because they are regulated does not mean that there are no areas of concern, The Last Bear has roared!

Saturday, June 15, 2013

Al-Qaeda in Possession of SA-7’s in Mali

I have received confirmation of what we have feared since last year. I have called a conference with all our senior executives and commanders. When Western nations decided to assist criminals and rebels to overthrow Colonel Gaddafi with their airstrikes on a sovereign nation we were among a small group who opposed intervention as well as assistance to rebels.

They begged for help and knew that they would receive it as the late Colonel Gaddafi was not liked by the West as he did not dance to their music and decided to play his own tunes. He was open for business and every capitalist appreciates that. Plenty of people decided to point their fingers and accuse everyone who opposed intervention in Libya that we were driven by greed.

This just shows the lack of intelligence among the general public. For starters we oppose interventions in sovereign nations. What happens within the borders of a country is the business of the citizens as well as government of that country alone and no outside nations has the right to intervene simply because they are able to do so. Colonel Gaddafi stated multiple times that his country is under attack and he did so rightfully.

Now that his regime has been overthrown, chaos in Libya is the daily routine and nothing functions. I am not suggesting Libya was a fully functioning society or fully operational nation. Libya had plenty of problems on all fronts, but thanks to the invasion by NATO forces and their assistance of rebels Libya has deteriorated further and now we left them to deal with their problems again after causing much more hardship.

Our primary concern was that Colonel Gaddafi’s stockpiles of weapons would be raided by al-Qaeda fighters and other criminals. We were particularly concerned with his arsenal of SA-7’s. The SA-7 Grail as it is known in NATO circles started production in 1970 and is a former Soviet weapon. It is still in use today and was sued in every major regional conflict. The SA-7 is also known as 9K32 – Strela 2. It is a first-generation Soviet man portable and shoulder fired surface-to-air missile which operates in low altitude with an extremely high explosive warhead as well as a passive infrared homing device.

It can reach a maximum strike altitude of 2,300 meters and is operated by proportional navigation logic. Its maximum range is 4,300 meters and carries a 1.15 kilogram direct –energy blast fragmentation warhead with 370 grams of HE content. Its detonation mechanism is a non-delay impact mechanism with grazing fuses and a 14s – 17s self-destruct mode while it flies at a speed of 500 meters per second.

The fact that the SA-7 is still in use today as a much feared weapon speaks chapters about its operational use with deadly outcome. Colonel Gaddafi had a huge arsenal of SA-7s and now our fears have been confirmed that al-Qaeda in Mali has an unknown number of those deadly MANPADS. The U.S. hoped to be able to secure the stockpiles and flew in specialists who arrived too late as arms depots were raided and SA-7’s specifically sought.

Since 1975 at least 40 civilian aircraft have been hit which caused 28 crashes and 800 deaths. The biggest threat is to civilian aircraft as most modern military aircraft have counter-measures in place. It also forces attack helicopters to fly above the SA-7’s reach which makes it harder to engage militants.

This could de-stabilize the entire North-African airspace which is why we opposed intervention. Once again idiotic leaders made a decision and now the world is less safe than before. Each time they try to tackle one problem, they create two more. The confirmed reports that al-Qaeda in Mali has the SA-7’s worries us and our business interests in the region which need to be addressed and resolved. 

Thursday, June 13, 2013

$2.4 Trillion Later

I am enjoying my lunch break together with my assistant as we had quite a nice turnaround since the Septic Tank rattled the bulls after he suggested that the Fed may taper their pathetic QE program which was the only reason global equity markets have rallied to new all-time or multi-year highs. I never bought into the rally which was painful at times. After my stunt at the office to revitalize all the depressed faces we really spearheaded forward. We saw our account skyrocket on the back of the USDJPY reversal as well as collapse of the Nikkei 225.

After Japan closed for business we saw the Nikkei 225 in official bear market territory as dropped over 20% while the USDJPY corrected almost 1,000 pips. We took a huge short position in the Nikkei 225 at 15,750 back on May 23rd and before the close we set our SL at 12,750 which means we either get more downside tomorrow and increase our profits or book a guaranteed profit of 3,000 per contract. I can’t disclose how many contract we shorted, but the number is five digits. You do the math.

One day before we took our huge Nikkei 225 short position we did the same with the USDJPY at 103.50. Our TP is set at 93.50 with an SL at 95.00. At least 850 pips highly leveraged, yes we deserve to celebrate. We did similar maneuvers in the S&P 500, FTSE 100 and EURAUD. Three weeks have changed the entire outlook for the rest of the year.

Since the Septic Tank mentioned that his 12 Plumbers and he may taper with the QE program, global equity markets have shed roughly $2.4 Trillion. As plenty of dumb money managers scramble for the exits as they saw the 2013 profits melt away in less than 15 trading days, we are sitting in the heart of Monte Carlo enjoying the scenery and breathing a sigh of relieve. Dumb money once again saw their gain evaporate due to their idiotic approach to financial markets.

When Abe was re-elected Prime Minister of Japan he tried to talk the talk that this time would be different. He reintroduced Abenomics to Japan. He has not learned anything from his previous mistakes. There is a reason he lost the elections and the Japanese voters thought to now give him another chance to do more of the same and so he does.

At first dumb money had an orgasmic experience and bought into Abenomics. Just another example of how pathetic the majority really is. They make the same mistakes and expect a different outcome; insane. Now they get punished as they deserve. The planet displayed a sever vote of disapproval to Abenomics and the USDJPY is the best indicator of that. Nikkei 225 down, USDJPY down and the Japanese economy will soon follow suit.

The sell-off has not caught up with Europe as well as the U.S. yet, at least not in such a drastic manner. Give it some time and we may report a total of $5 Trillion in losses before the month is over. Our food arrives, so I am going to enjoy it as much as I have enjoyed the correction in the Nikkei 225 as well as the reversal trade in the USDJPY.

Wednesday, June 12, 2013

HotForex Review

Today we will examine a much talked about forex broker; HotForex. They have invested heavily in ad campaigns in order to get their name out and apparently they have had some success in doing so. It appears as they are closing the gap to InstaForex when it comes to top forex brokers in Asia who cater to retail clients as a market maker. InstaForex still enjoys the number one spot and is well established, but HotForex is worth to take a look at so here we go.

Their website offers a nice design and adds to a professional feel as you brows what they have to offer. They offer the standard MetaTrader 4 platform and have a Micro, Premium as well as VIP account. The Premium accounts are basically standard account with a few added features such as the MyFX plugin for deposits above $2,000 which is rather high as other brokerages offer them for half that. The annual subscription is $249.

Their VIP account carries a minimum deposit of $40,000 and charges a commission of $3 per $100,000 traded. They do not specify it as an ECN account and it makes no sense to deposit $40,000 into a market maker account. In addition they also offer the Currenex platform and advertise it to scalpers with a commission of $5 per $100,000 traded. The minimum deposit is $500.

Those who do not care about forex trading, but prefer to follow others will get access to Zulutrade through HotForex. The minimum deposit for a Zulutrader account is $50. Please never confuse forex trading with forex following as they are not the same. Professional traders do not social trade and you need to be aware that you follow someone else and depend on what they do which has nothing to do with trading. As long as you are happy with that keep forex following.

They offer leverage of 1:1000 on their micro account and 1:400 on their Premium account. The also offer two forex bonuses, a 100% credit bonus and a 15% rescue bonus. You can find the explanation as well as terms and conditions on their website. They offer PAMM accounts as well as Islamic accounts and have added a Fix account where spreads are fixed in order to complete their overall account offerings.

A few nice perks they offer are a debit card as well as various promotions plus what they claim is the best affiliate program in the forex industry which may just be the case with 60% revenue share, 25% refer-a-partner commission and up to $15 per lot. The Last Bear has not come across a better affiliate program to date.

HotForex is regulated by the FSC in Mauritius and does not accept U.S. clients. The do offer a VPS service and several educational tools and seem to have everything for the retail markets they need.

Conclusion

HotForex offers an affiliate program which may be unbeatable and earned its spot on our list as Best Affiliate Forex Broker. They are an overall great stop for retail traders and ranks second only to InstaForex when it comes to established forex brokers with PaxForex still holding the Top Spot Best New Forex Broker. The Last Bear gives HotForex two claws up!

Saturday, June 8, 2013

NFP rise 175K in May

As with every first Friday of the month, everyone is looking forward to the release of non-farm payrolls out of the U.S. as dumb money managers make trading adjustments based by this lagging indicator. Since 90% of financial markets are comprised of dumb money investors such as mutual funds this economic data point always moves financial markets.

I am sitting in my office monitoring our trades across all hedge funds as I wait for the release of the NFP. Japan spooked global markets as it collapsed two weeks ago and continued correct being down over 18% and coming close to official bear market territory according to dumb money standards. Smart money comprehends that the Nikkei 225 already collapsed into a bear market given the strength of the violent sell-off in the short period of time. Those who wanted to go long after a small correction were stopped hours or days after they tried to go long. Abe failed as expected, Nikkei 225 down, Japanese Yen up and Abe should be out.

The Fed picked up the torched scarring dumb money with their new bad word of choice, tapering. The only reason U.S. equity markets and to a smaller extend global equity markets managed to rally was due to the Fed’s stimulus. Currently the Fed decides to waste $85 Billion of taxpayer’s money per month for no good reason. Once the taper or even extend financial markets will come crashing down back to reality.

A healthy equity market wants strong employment figures; that is when you know that the rally is valid. The fear prior to the release was that NFP data would give the Fed a reason to taper stimulus and eventually exit it. Dumb money hoped for figures which were lukewarm and do not point to stable economic growth so that the Fed may continue to artificially pump up equity markets.

Flashback dumb money; the Fed should not even be in equity markets. All the gains dumb money witnessed in their portfolios will evaporate rather soon. This reverse and perverse approach is pathetic. NFP clocked in at 175,000, but negative revisions shaved off 12,000 jobs in March and April while the unemployment rate rose to 7.6%. Dumb money cheered and ignored the first crack in unemployment data which points to an even weaker economic picture than anticipated.

Most economic reports showed that the economy is in worse shape than dumb money hoped for and that there is an extreme disconnect between equity markets and the real economy. Such a drastic gap is not unheard of and the last major gap which formed was between 2007 and 2008. Eventually the gap will close and equity markets return closer to fair value which in the case of the 2008 meltdown saw equity markets shed roughly 50%.

The disconnect after that has been far greater and it should not come as a shock to see a correction of 75% or which will unfold during the rest of the decade. I am running some numbers and basically confirm our prediction of a major market crash. Next decade we may see the S&P 500 trade at actual fair value which is below 500. The only fair value is book value of companies and not expectations of what may happen. Next decade will see a complete shift in evaluations of companies and this decade long hyped up boom and bust will have a much need bust for good which will force market participants to rethink how to evaluate public traded companies and that it makes no sense to pay 20 times what a company is worth based on hope.

Thursday, June 6, 2013

More Trouble for JPM; Alabama to Cost $1.6 Billion


I am always thankful that my intellect directed me to work for a private company and has stopped me to seek out a career at the best-known financial institutions. Sure, there are benefits to work for a company like JPMorgan Chase & Company, but over the past decade firms like JPM and Goldman Sachs or Morgan Stanley have failed to attract top talent. They do attract interest from those who did not quite cut it for the true elite, but are still much better than the average.

During the financial crisis Jamie Dimon, CEO and Chairman of JPM, made it through to be hailed as the top CEO in the financial world. The golden boy who did not disregard risk management and navigated his firm to record profits enjoyed a nice run until the London Whale disaster shook his magic cage. Almost $7 Billion were wiped off the books by a trading loss caused by the London Whale.

Jamie Dimon did survive a vote of confidence and was allowed to keep both titles as some shareholders wanted to separate the two roles which would have essential caused Dimon to resign. A resignation by Dimon may have caused the share price to collapse and that would cause bigger losses than to allow Dimon to be happy keeping both roles.

Just as the London Whale disaster is receding from the news and JPM tries to rebuild it name it is being hit with another $1.6 Billion loss, this time much closer to home. Jamie Dimon decided to flush $1.6 Billion down the toiled in Jefferson County, Alabama as the bank forgave $842 Million in debt owed by Jefferson County to JPM in 2011 as it took the lead to arrange some risky security deals which may have been designed to safe Jefferson County, but related into the U.S. biggest municipal bankruptcy filing in history.

In 2009 JPM settled an SEC investigation into financing for Jefferson County for $722 Million. In total the costs are close to $1.6 Billion, but at least they are only one-quarter of the losses caused by the London Whale. At least Dimon helps to write history and his name can appear in the books, some CEO’s think it is better to make negative history than no history at all.

Let’s be fair, Jamie Dimon did not run JPM at that time and was employed by One Corporation which was purchased by JPM. So, it is not Dimon’s fault here. The exotic financing deal resulted in a prison sentence for County Commission and Birmingham Mayor Larry Langford on bribery charges.  The total debt tied to the sewer system is $3.1 Billion and Jefferson County announced that it made a deal with companies holding $2.4 Billion of the debt.

JPM will take a 70% while hedge funds will take roughly 20% of a hit. This shows that hedge funds came out on top, if that is what you would like to call it. Deals with municipalities under water are always popular as you are dealing with entities in distress and seeking to stay afloat by any means possible. Sure, the JPM case shows how it can backfire and it is nice for the media to gag over.

Trust me, for every one JPM like case there are a few dozen success stories nobody writes about as all parties involved try to keep it a secret and for good reasons. 

Sunday, June 2, 2013

Tallinex Review

Today we will look at a very new broker out of Estonia. Before you go ahead and dismiss this former Soviet republic it is worth pointing out that Estonia is part of the European Union and therefore obliges by the same rules as all other EU member countries. Estonia is actually one of the few bright spots in the EU which makes this an even more interesting forex broker.

Let’s take a quick look at Tallinex which surprisingly only offers ECN accounts according to their website. What raises concern is that they only offer the MT4 trading platform which is not an ECN capable platform without a bridge. MT4 is primarily used by market makers, but two bridges have been designed in order to enable ECN and STP trading directly from the MT4.

Tallinex does not mention the usage of an ECN bridge which makes their claim of being an ECN broker highly questionable. They offer an ECN-micro account with a minimum deposit of $100, leverage up to 1:400, minimum trading size of 0.01 lots and starting spread of 2.0 pips on popular pairs. Their margin call as well as stop-out levels are rather high in comparison to other brokers and stand at 150% and 100% respectively.

They also offer an ECN-pro account with a minimum deposit of $2,000, leverage up to 1:200, minimum trading size of 0.10 lots and starting spread of 0.5 pips on popular pairs. Again, their margin call as well as stop-out levels are 150% and 100% respectively which is another area of concern. Their commission of $6 per 100,000 currency units, also known as one standard lot, is quite acceptable.

It appears that everything is a bit odd when it comes to this Estonian forex broker. There is something about Tallinex which just strikes us as wrong. They do not charge a commission in their ECN-micro account which is somewhat unusual. True, they make it up with a much higher spread which means it is more of a market maker account than an ECN account. Having said that, it appears that Tallinex is making a wrong ECN statement about their ECN-micro account.

When it comes to their ECN-pro account they still only provide the MT4 platform and no bridge is mentioned, spreads are much lower and they charge a commission but ask for a much higher minimum deposit than true ECN brokers. Since they do not explain how they offer ECN trading on a market maker platform it raises concerns that they are ECN at all. True ECN brokers are transparent and do not keep traders guessing.

They do offer a Pro-Managed account which at first sight appears as a novel approach and something refreshing. The minimum deposit is $1,000 and they claim the accounts are managed by professionals. After giving it a closer look it is a simple PAMM account, but the managers could be handpicked by Tallinex or be employed directly by them. The lack of transparency keeps us guessing.

Conclusion

After initially approaching this forex broker with higher expectation than normal and after reading several mentions online The Last Bear has to admit that our high expectations were not met and we left the review being disappointed. Something struck us really odd about Tallinex and questions remain about their claim to be an ECN broker. There are better outlets available and when in doubt, stay away. We have to give this one two claws down, the Last Bear has roared.

UPDATE:

As you guys can follow in the comments below, the Last Bear made a mistake when it comes the bridge Tallinex offers on their MT4 for their ECN accounts. Thanks 'anonymous' for pointing it out and this shows that we all make mistakes and rather than just deleting the initial review the Last Bear opted for an update so everyone can see that nobody is perfect and why a community is essential to point out mistakes.

This also changes our conclusion to one claw up and one claw down with a positive outlook, the Last Bear roared for the second time and in favor of Tallinex which jumped in our ranking to above average.

Saturday, June 1, 2013

Brokers Wiki Review

Everyone was on the search for a good forex broker at one point in their trading career, usually at the very beginning. The approach is usually very similar and the first stop tends to be the search engine of choice. Forex forums are also very high on the list and then there are broker review sites. In general common sense dictates that one should ignore what unknown individuals have to say about a specific broker.

The most popular broker review site must be Forex Peace Army. Plenty of new traders advice other new traders to check out FPA and find out more about their forex broker; FPA is full of review by traders or at least those who claim to be traders. This is comparable to one blind person giving directions to another blind person. You can imagine the results of that endeavor.

Furthermore, FPA is sponsored by forex brokers which creates a certain bias from the start. Imagine an alcoholic going to an AA meeting which is sponsored by brewers and spirit makers. It makes no sense and it is no secret that FPA has fumbled the task several times as it labeled legit forex brokers as scam because their ego was hurt since legit forex brokers did not bother to go into a lengthy online discussion in order to solve the issue. FPA is not the only terrible outlet online, your search engine will cough up plenty.

So are all broker review sites utter rubbish and completely useless?

No, of course not.  There are a few hidden gems which truly provide a good service to forex traders and one of them is Brokers Wiki.

Brokers Wiki does not take into consideration what traders claim, but have a more professional approach and uses experts to review and check out forex brokers. They have compiled an extensive database of different brokers across the financial industry.

The web-design is clean and navigating Brokers Wiki is very simple. The reviews are more in-depth than other broker review sites and Brokers Wiki has a search function which allows visitors to search for brokers based on the following aspects:
  • Type of Broker
  • Country
  • Broker’s Rating
  • Recommended For

In addition to broker reviews, Brokers Wiki also features a section with analysis of popular stocks which was an unexpected surprise as you can find much more information than simply broker reviews. In order to roundup their website they also offer a section called Stock Market Content Articles which offers more quality content for visitors.

Conclusion

The Last Bear believes that every trader needs to do their own due diligence first and take your time with this crucial step. There are no short-cuts and those who try to take them will end up on the wrong path which will cost them heavily. Having said that; Brokers Wiki is a nice resource to have in your arsenal as you evaluate potential brokers which you plan to enter a business relationship with.