Search
 
 
       
 
Luck vs. Skill in the Currency Markets Minimize
 
The            Sovereign Society Offshore A-Letter
 

Friday, January 19, 2007
Vol. 9 No. 17
In Today's Letter:
Comment: Luck vs. Skill in the Currency Markets
Sovereignty: Clock Is Ticking a Bit Faster
Wealth: How to Play this Surprise Dollar Rally
Privacy: Warrantless Wiretaps, Smoke & Mirrors
Luck vs. Skill in the Currency Markets

Today's comment is by Jack Crooks, our Currency Director and editor of the brand new investment-trading service, Crooks Currency Options.

Dear A-Letter Reader,

I once doubled the size of my investment account in a single day with a well timed trade on the Japanese yen. Most people would chalk it up to luck, and I wouldn't necessarily disagree, but in retrospect I realize that I was in the right place at the right time. This is what trading is all about. You must be willing to take a well-calculated risk. Seldom if ever will you find yourself with all the information necessary to make a well-informed investment decision. If the game where that easy, we'd all make oodles of money - all the time. 

In trading currencies, as in life, you must be willing to take a leap-of-faith. You will never have all the pieces of the puzzle laid out for you in jig-saw fashion. Instead, you piece them together one at a time based on your experience, and on the quality of your own homework - good old fashioned research and analysis. But still in the end it comes down to making decisions based on imperfect information and conjecture.

So at this point you are probably asking yourself: "why not just head out to Vegas for the weekend and take your chances there" - certainly more entertaining than getting up at four in the morning to watch the currency markets!

But the real key to the puzzle - besides your value-added analysis and experience - is you discipline at risk-management. At the time I made my killing in the Yen, I didn't realize how much risk I was taking - today I understand this factor only too well - and apply it to every trade I make.

Of course the rest of the story is that I gave back to Mr. Market every cent and more that I made in the Yen that glorious day. At that time, I was still paying the tuition for my own education, but it doesn't have to be that way for you when it comes to currency trading.
 
I've talked with a lot of people over the years that are really excited about the potential for pulling down big profits trading currencies. They are enticed by the advertisements showing a guy on the beach in some tropical paradise, with laptop in one hand and piña colada in the other, leisurely racking up profits in forex trading. The presumption of course is that "you too" can make so much money in the forex markets that you can quit your day job. There is a kernel of truth to that, and best of all, we make forex as easy as possible for you to profit from.

The sad fact is that many people who get involved in forex trading, don't get the benefit of guidance from someone who's actually been there and done that . That's a shame because currencies are a great market to trade, it's highly efficient, open for trading 24-hours a day, and you can do well - with the right guidance and investment discipline.  But you need to learn the ropes first - you can't run a hundred yard dash before you learn to walk. 

A novice can make big bucks initially in forex, but keeping it and staying in the game long-term requires risk-control - which is one of the most important factors in spot forex that's not easy to master. Essentially it comes down to occasionally admitting you were wrong - and quickly cutting loses.  A lesson I learned early in my own career. But I am incredibly excited about the opportunity to launch a currency options service: Crooks Currency Options, which can help you accelerate your education in FX trading, while helping you manage the often difficult task of controlling your risk in the process. In my view, currency options are the best single way for most people to speculate in the currency market-big profit potential, limited risk, and straightforward, disciplined trading instructions that anyone can follow. 

Big profit potential because currency options give you the advantage of trading with huge amounts of leverage, just like you can get in the spot forex market, yet when you buy a currency option, either a call (when a currency is poised to appreciate against the U.S. dollar) or a put (anticipating a currency to fall against the buck), your maximum risk is strictly limited to the cost of your option, plus brokerage commission. 

And the typical holding period for a profitable currency option trade ranges from two weeks to a few months. And all you have to do is sit back and tell your broker to place an occasional trade-based on detailed buy and sell instructions from me, typically on a weekly basis.

Let's recap the advantage of currency options:

1) High leverage to produce high profit
2) Risk strictly limited to your initial purchase price
3) Intermediate-term holding period (two-weeks to 2-months)
4) Just plain easy to do

And right now I think there are some potentially great opportunities in the market.  A couple of the major currencies look very, very cheap compared to the dollar-I refer to them as big-bang opportunities; these are perfect setups for nailing down quick profits in currency options. Stay tuned!

JACK CROOKS, Currency Director,
On behalf of The Sovereign Society

EDITOR'S NOTE: Today is the official start of Jack Crooks' new "Crooks Currency Options" service. This is your chance to jump into currency options, while limiting your risk. Basically how much you invest is all you can ever lose... period. And you can get started with relatively little capital. If you'd like to learn more, click here

Advertisement

 Turn Today’s Wall Street Journal Headlines
Into Tomorrow’s Triple-Digit Gains...

With nothing more than a cup of coffee in one hand, and a morning newspaper in the other, you could be making some serious money.

Every day, dozens of small and large events around the world open the doors to profit for savvy investors who know how to turn them into cash - literally.

Find out how this master trader applies a high-return, low-risk options strategy to the currency market and turns the day’s current events into massive gains of 488%...347%...75%...in just a few weeks or even days!

LINK: http://www.isecureonline.com/reports/CCO/ECCOH104/ 
Sovereignty

The Clock Is Ticking... a Bit Faster

As you've probably heard, the directors of the Bulletin of the Atomic Scientists, moved the minute hand of its famed "Doomsday Clock" forward by two minutes.

A group of scientists from the University of Chicago conceived the clock in 1948, three years after the U.S. introduced the world to nuclear weapons by using them on Japan. It was the scientists' warning to the world about the destructive power of the atomic bombs they had created. Eugene Rabinowitch, one of the cofounders of the Bulletin, wrote, "The Bulletin's Clock is not a gauge to register the ups and downs of the international power struggle; it is intended to reflect basic changes in the level of continuous danger in which mankind lives in the nuclear age, and will continue living, until society adjusts its basic attitudes and institutions."

The clock hands are now positioned at five minutes to midnight. This is the closest it has come since the end of the Cold War. The statement released yesterday by the Board of Advisors of the Bulletin began:

"We stand at the brink of a second nuclear age. Not since the first atomic bombs were dropped on Hiroshima and Nagasaki has the world faced such perilous choices."

Although the world's stockpile of nuclear bombs is lower than it was at its peak of 65,000 in 1986, there are still an estimated 27,000 in the world. And 26,000 of these are in the hands of the United States and Russia, and another 1,000 or so are held by Britain, China, France, India, Israel, Pakistan, and North Korea.

As noted in the announcement by the Bulletin, each of the 27,000 warheads now in existence has 8 to 40 times the destructive force that of the atomic bomb dropped on Hiroshima in 1945. In that relatively small explosion, 100,000 people were killed. Just fifty of today's nuclear weapons could kill 200 million people. Man clearly has the power to destroy all life on the planet.

Society has Armageddon in its power, but is it possible for it to "adjust its basic attitudes and institutions?" Possible, yes. Anything is possible that does not violate a law of nature. There is no law of nature yet discovered that says intelligent life in the universe must commit suicide.

Therefore, if mankind is in danger of destroying itself, there must be deeply-ingrained attitudes and institutions in society that are wrong. If not, society would not still be in danger of self-extinction more than half a century after the danger of nuclear weapons was so gruesomely demonstrated.

I believe the erroneous belief that has kept the Doomsday Clock set so close to midnight all these years is a belief that the state is an absolute necessity for the functioning of society, and that all individuals must submit to its authority. Yet, the state itself was the mechanism that both developed the weapons of mass destruction, and keeps the world in continuous danger of Armageddon. The state.

Will the clock advance to midnight? Will mankind destroy itself? Very possibly. But if, by chance or by luck, it does not, it will be because enough individuals recognized the terminal danger of empowering governments with sovereignty. In a world in which sovereign individuals controlled their own lives and fortunes, there would be no nuclear weapons, and no need for a Doomsday Clock.

JOHN PUGSLEY, Chairman 

Wealth/Investments

 How to Play this Surprise Dollar Rally

The U.S. dollar is on a roll this month...

Every currency pundit in the world predicted the U.S. dollar would decline again in 2007. Although the year is just three weeks old, the buck's performance thus far has surprised global investors with a 2.3% gain versus the euro and similar gains across the board against other currencies, including the yen. The only major unit to rally against the strong dollar is the pound following a surprise rate hike by The Bank of England last week.

Heading into 2007, I was also predicting a lower dollar, but not a repeat of last year's 11.5% decline. I still think the dollar will soften this year, probably about 5% or less. But with every hedge fund on the planet betting against the dollar, the odds of a dive are unlikely, barring a real estate crash, a terrorist attack or an economic recession.

Here's another reason why I don't think the U.S. dollar will crack this year. One of the best contrarian indicators I follow to measure market sentiment, especially in currencies, is what mainstream investors are doing with their dollars. I remember, back in late 2004, as the dollar was tanking, many of my newer clients were compelling me to dump dollars for euro. I warned against dumping dollars in late 2004 because the currency had already plunged with everyone heavily shorting the dollar. One-sided bets in the market always eventually reverse -- and badly. In 2005, the dollar gained 12.8% versus the euro and started a cyclical rally in January of that year, just like it's doing right now.

At the moment, many investors are dumping dollars again for euro and other currencies. Though I implore investors to diversify their portfolios away from the dollar (its performance long-term is pathetic), short-term swings can be violent and can result in big losses for investors. I'm hearing the same sentiment today as I did exactly two years ago ahead of a short-term dollar bounce.

My advice: Use any intermittent dollar strength to reduce your exposure and buy better-managed foreign currencies like the euro, Swiss franc, Canadian dollars, Chinese yuan and Singapore dollars. I also like the Japanese yen, the cheapest of all currencies in 2007. Most of all, I expect gold and silver to outpace all currencies, which has been the case since 2005.   

ERIC ROSEMAN, Investment Director 

Privacy&Rights

 Warrantless Wiretaps, Smoke and Mirrors

In 2005, The New York Times revealed that President Bush had signed a secret executive order in 2002 giving the super-secret National Security Administration authority to monitor international phone calls and e-mails to or from the United States involving people suspected of having terrorist links. This "Terrorist Surveillance Program" bypassed the legal requirement of obtaining a national security wiretap order, as a law called the Foreign Intelligence Surveillance Act requires.

The Terrorist Surveillance Program is plainly illegal under the FISA statute. Violations of this statute are punishable by a five-year prison sentence. Bush claimed FISA doesn't apply in national emergency type situations, and that he has the "inherent presidential authority" to override any statute if the U.S. national interest requires that he do so.

But Wednesday, the Bush administration announced that it would suspend this "Terrorist Surveillance Program" and once again process all national security wiretapping requests through the legal mechanism FISA requires. While there's no doubt this is movement in the right direction-after all, the administration is no longer blatantly ignoring the law-will it have any real effect on the eavesdropping program?

That appears unlikely. The court established by FISA to issue warrants for national security related wiretaps, the Foreign Intelligence Surveillance Court, rarely turns down a government request. For instance, in 2005, of the 2,072 wiretap requests made by the Bush administration, the court approved 2,070-and the other two were withdrawn. Essentially, the court is a rubber stamp for surveillance.

And just who might be a terrorist target? Genuine terror suspects, of course, but also many other people who have little or no connection to terrorism. For instance, information released pursuant to Freedom of Information requests indicates the FBI considers peace activists, investigative journalists and even "militant vegetarians" to be potential terrorists. It's hardly a stretch to postulate that the international communications of such individuals might be wiretapped, particularly since amendments to FISA no longer require that national security be the "primary purpose" of a wiretap, as in existing law from 1978 to 2001, but only a "significant purpose" of it.

Most Americans, though, will no doubt be reassured by the appearance of due process in the national security wiretapping apparatus. But in my view, it's mostly smoke and mirrors, form over substance, and the Bush administration will go on wiretapping whoever it pleases, albeit with the connivance of the FISA court.

MARK NESTMANN, Privacy Expert & President of
The Nestmann Group
www.nestmann.com

Advertisement

How to Legally Obtain a Second Passport and Live the Life of Your Dreams

Own a 16th century farmhouse in the French countryside...a villa along the Spanish or Italian Riviera...an oak beamed cottage on a secluded mountain range in the center of Europe...

Countries all over the world are filled with extraordinary possibilities - most of which are never even explored, considered or carried out by the average individual.

Find out more about what a second passport can do for you, click below.

LINK: http://www.isecureonline.com/reports/190SGOPS/E190H129/

 

 
 
 Print