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SKY NEWS: Mike Baghdady Discusses UBS Rogue Trades
SKY NEWS
Mike Baghdady Discusses
UBS Rogue Trades
SKY NEWS: Mike Baghdady Stock Trading Interview
SKY NEWS
Mike Baghdady Stock Trading
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SKY NEWS: The Apprentice - Stock Market Traders - Training Live
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The Apprentice - Stock Market Traders -
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CNN: Mike Baghdady Live Interview Turtle Trader Program
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Mike Baghdady Live Interview
Turtle Trader Program
CNBC:  New Turtle Traders Official Launch
CNBC
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WINNER OF The World of Trading Competition
WINNER OF
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http://www.bloomberg.com/news/2012-09-24/g-20-agree-more-government-action-needed-for-world-recovery-1-.html   Group of 20 officials meeting in Mexico City agreed that the latest monetary easing by developed nations will buy time for the global economic recovery and that governments must do more to boost growth, Mexican central bank Deputy Governor Manuel Ramos Francia said. Ramos Francia spoke at a news conference following the end of a two-day meeting of deputy finance ministers and central bank officials from G-20 nations in Mexico City. Mexico is presiding over the group this year. “Time can be bought through monetary easing, but the risks are still present,” Ramos Francia said. “For Europe to effectively heal, for example, other types of policies need to be implemented.” The meetings took place after European Central Bank President Mario Draghi said Sept. 6 that the bank was ready to buy unlimited quantities of short-dated government bonds of nations signed up for rescues. The U.S. Federal Reserve on Sept. 13 said that it would make additional purchases of debt in a third round of so-called quantitative easing, while the Bank of Japan unexpectedly increased its asset-purchase fund to 55 trillion yen ($707 billion) at its meeting last week.

Commodity Prices

The G-20 nations called for better transparency in commodities markets and for measures to boost production, transportation and trade of raw materials to reduce price volatilitiy, said Mexico’s deputy finance minister, Gerardo Rodriguez, who co-chaired the Sept. 23 and 24 meetings. Increasing raw material production “was the central part of our discussions today,” Rodriguez said. Rodriguez said the deputies discussed boosting emerging markets’ International Monetary Fund quotas, which determine access to financing, financial obligation and voting rights. A concrete decision will probably come by the end of the year or the start of 2013, he said. The nations agreed that emerging markets should “gradually” increase their presence in the IMF based on measurements including economic output, Rodriguez said. To contact the reporters on this story: Nacha Cattan in Mexico City at ncattan@bloomberg.net; Eric Martin in Mexico City at emartin21@bloomberg.net
http://www.telegraph.co.uk/finance/financialcrisis/9563849/Bundesbank-castigates-IMF-for-saving-Europe.html  

Germany's central bank has launched a blistering attack on the International Monetary Fund, accusing officials of spraying around money like confetti and overstepping their legal mandate.

In this photo illustration a Lego shark chomps down on a Lego figure holding a Greek flag as other figures holding an Italian (L), Portuguese (C) and Spanish flag look on over a sea of Euro coins on September 27, 2011 in Berlin, Germany
The Bundesbank said the IMF was right to help rescue Greece, Ireland and Portugal but said monitoring levels were slipping and there had been a 'watering down' of standards Photo: Getty Images
“The IMF is evolving from a liquidity mechanism into a bank. This is neither in keeping with the legal and institutional role of the IMF or with its ability to handle risks,” said the Bundesbank in its monthly report.
The bank said the Fund was right to help rescue Greece, Ireland and Portugal but said monitoring levels were slipping and there had been a “watering down” of standards. The scale of loans risks “overwhelming the IMF’s institutional structure”.
The unprecedented attack came as the IMF’s chief, Christine Lagarde, called for urgent measures across the world to head off a fresh global slump. While praising the latest emergency measures of central banks in the US, Europe and Japan, she said this was not enough to secure recovery.
The Europeans must activate their new machinery, while the US must prevent a “dramatic tightening” of fiscal policy later this year. Failure to act “would effectively plunge the country off a 'fiscal cliff'", cutting US growth by up to 2pc. She said this would pose a “serious threat for the global economy”.
Ms Lagarde also said emerging economies need to bolster their defences against “potential spill-overs”, if necessary by injecting “additional stimulus”.
In today’s market, a trader’s problems change as quickly as he or she can solve them, which is why having a rule-based strategy is more important than ever, says Mike Baghdady. In addition to trying to make correct trading decisions, new issues have arisen that we must attend to such as anonymity to protect our orders from negative selection and executing our orders with the least possible market impact. We also have to seek liquidity and have an algorithm to help us find that liquidity; and when we do find it, we must then have a quality execution. We should have a complete understanding of the rules behind our trading systems; we must understand why they are giving us specific signals at all times, and the reasoning behind them. After all, what good is pulling an exceptional profit from a trade if you don’t understand the series of events that occurred to make it happen, or the ability to repeat the action consistently? While quantitative analysts and programmers begin with certain assumptions that they believe should work, when they are tested in real life they are quickly felled by variables that the analysts couldn’t have accounted for or anticipated. A good trader must be able to adjust their strategy to account for these variations and not only believe that the changes they have made to their strategy will stand up against a sudden change in volatility, they must also have the confidence to execute each trade with a high degree of certainty that they are more likely to win than lose. Practically everyone makes poor assessments of risk and event probabilities under the duress, but fortunately in trading, human emotion represents a tremendous source of opportunity for us to profit from. The best trading systems can show you a map of such human behaviour by identifying price points on their charts, flagging where traders have realised they have made errors in their judgment and are desperately seeking to act on those realisations and correct them, to limit their losses. Within all of these price points are opportunities that winning traders know how to profit from because they understand how the errors other traders have made manifest themselves in price action. They are making money by exploiting the consistently irrational behaviour patterns of other traders acting on their base senses of hope, fear and greed. That is why understanding price behaviour really works and continues to work because it is based on the market movements that result from this systematic and repeated irrationality that is embedded in every trader in the market. Strategies based on price behaviour allow a trader to identify points where other traders need to enter or exit trades and to have a good mechanical system that automates the entire process of trading. Such a system should provide answers to each of the decisions a trader has to make, and because there is a set of rules that specifically defines what should be done in any circumstance, decisions are not left to the judgment of the traders themselves, but to their systems – eliminating to some extent the risk of emotion interfering in an execution. A profitable trading system that adheres to the rules and principles of price behaviour contains five basics elements:
  1.  Portfolio selection
  2.  Risk Control
  3.  Optimum Entry
  4. Optimum Exit
  5. Automatic execution
It becomes much easier for a trader to be consistent in his trading if he sticks to a system he can rely on. If a trader understands the rules behind his system, he can identify whether the market conditions are optimal under his strategy or whether they have changed sufficiently to keep him out of it. When new variables come into the market such as volatility due a news event, or the unwinding of large positions to indentify money-making opportunities, his system should tell him that the risks are too high under these conditions, and that he either shouldn't trade or should dramatically cut his size. When the dust settles, he should similarly be able to identify the short-term market directions based on reference points in the charts which, if executed with precision, can lead to far bigger winning trades; or in other instances, tell him to be patient and allow his trades sufficient time to develop. Knowing the rules behind automated systems and strategies and having the knowledge and confidence that they work most of the time makes it easier for the trader to recognise all the signals and trade according to the system even during times of trading losses. It will allow the trader to be consistent despite the inner emotional struggles they must overcome after a series of losses, or large profits. Successful trading, whether by an individual at home or within a large scale hedge fund, is like flying a plane: you can largely travel on auto pilot but in the unforeseen event of turbulence, you can immediately take manual control and bring your position back to safety.
Market Comment Discord in Europe and indications of a slowing global recovery punctuated market sentiment to kick off an economic data filled week. Disagreement continues in Europe, today's reports highlighting differences between France and Germany about how to deal with bailed-out nations as the French prime minister publicly supported a re-evaluation of Greek aid restructuring efforts and a German governing coalition official called out Spain for its "prevarication" on a full EU bailout. France and Germany also disagreed on the timeframe for execution of the ramped-up role for the ECB in the regional joint banking sector supervision efforts. Further depressing investor sentiment was Germany's business confidence index, which showed IFO business confidence dropped to 101.4, coming worse than market forecasts. This was the fifth consecutive monthly decline, taking the index to the lowest level since February 2010. This indicator is a good test of market sentiment - the index is a closely-followed benchmark for German economic health. Current assessment and expectations sub-indexes also fell and also came below expectations. This week the market will digest a good amount of important economic data out of Germany, will receive some important releases from Spain, as well as from the US. In Germany: Wednesday Sep. 26th inflation data will be released. This is contentious for German politics given that requisite to saving the Euro is Germans enduring higher rates of inflation. On Thursday, Sep. 27th, unemployment will be released, a big test of what has been a up to this point a very resilient German labor market (SA 6.8% steady all of 2012, multi-year low). On Friday, Sep. 28th, retail sales for month of August will be released after July showed negative growth on both a monthly and yearly basis on this front. Meanwhile, on Monday Oct. 1st we get German manufacturing PMI, an indicator which has consistently came less than 50 since March of this year but has been trending higher since July, re-affirmation for which would be well-received by the market. On Friday Sep. 28th, Spain is due to release its much-awaited bank stress test results as well as its new proposals for economic reform and next year's budget. On the US front, on Thursday, Sep. 27th the market will get the final release of second quarter GDP, a figure which will be keenly watched and evaluated particularly in this political environment ahead of Nov. 6th elections and given the launch of the Fed's QE3. On Tuesday Sep. 25th consumer confidence survey will come out as per the Conference Board and that of the University of Michigan will come on Friday. Both are likely to show an upturn in sentiment in our view primarily driven by a quickening recovery in housing and an upturn in equity markets. Housing market data also comes this week with Case-Shiller home prices on Tuesday, new home sales Wednesday and pending home sales Thursday. Prices have been trend rising for the past five months and we expect this trend to continue through July's data.
Jacob Bunge at The Wall Street Journal reports that a trading blunder has cost BofA/Merrill nearly $10 million yesterday.   Chicago Board of Trade Futures market       The details are a bit technical and murky, but the gist is this: Yesterday was the day that the SPY ETF went ex-dividend, meaning it paid out a 78 cent dividend to owners, and thus would be expected to drop by 78 cents at the same time. There's an options strategy that involves selling a bunch of borrowed call options right before this drop, and then buying them back afterwords... it's essentially shorting a whole bunch of calls on this 78 cent drop. It's evidently a controversial tactic to trade around dividends. Apparently not all of the eligible options were properly exercised, thus causing a significant loss. Trade Alert, which was the original source on the blunder thought the loss could even be as high as $20 million. Here's part of the email that was sent around: SPY calls were candidates for early exercise ahead of today's 78cent ex-dividend event for the widely held SP500 ETF. Total dividend proceeds available to the long-call holders was nearly $170million. As expected, call volume in SPY on Thursday was several times the normal level as nearly 6million contracts traded in the 'dividend stripping' strategy employed by a small number of traders. The trade involves buying and selling massive blocks of calls among counterparties, with each exercising the newedge long positions to effectively divert the un-exercised portion of open interest to their accounts. Normally we see about 8% of the eligible calls go unassigned in SPY, which would have yielded about $13million in profits to the traders involved. But this morning's SPY open interest data shows an unusually large share, 24%, of the calls were not exercised , which works out to more than $35million for the traders who successfully implemented the trade. Sources on the floor are telling us that the unusually low exercise percentage in SPY yesterday was the result of a mistake or clearing error on the part of one of the pros involved in the dividend trade, suggesting this seemingly 'riskless' operational arbitrage was anything but safe, and one trader may be looking at a 20-something million dollar loss today. The details differ. WSJ is saying $10 million. Trade Alert thought it was more like $20 million associated with a single trader. Either way, something happened so that a "riskless" approach to arbitraging dividend day went awry. Read more: http://www.businessinsider.com/options-ex-dividend-trading-glitch-2012-9#ixzz27KIVuh21
In a post from yesterday on the relationship between global financial markets and central bank activity, we wrote something upon which we'd like to expand:   On the surface, the Fed's QE, and the ECB version of bond buying (OMT) look the same, because they're both bond buying. But whereas the Fed isn't in the market to facilitate US fiscal policy, the ECB (whether it will admit it or not) is playing a quasi-fiscal role, facilitating borrowing and spending by weak countries (assuming the program ever gets off the ground). After the last couple weeks of CentralBankapalooza, this is a point that seems to be lost on people, as they discuss the latest round of monetary easing from the Fed, ECB, and the Bank of Japan. But to say that the ECB "eased" policy at its last meeting is actually a gigantic understatement. What Mario Draghi did is almost nothing like what Bernanke did. Sure, both are using the central banks' unlimited balance sheet to buy bonds, but whereas the Fed is buying up bonds in order to (in part) push money into riskier areas of the market, the ECB is hoping to buy up bonds to bring a bid back into the peripheral sovereign bond market. More broadly, as stated above, the Fed is trying to influence the market and the economy through fairly technical channels (reduce yields, hope money then goes into riskier areas), whereas the ECB is offering to backstop weak European governments, so that they can keep spending without fear of completely busto. Under the guise of ensuring the transmission of monetary policy, Mario Draghi is slowly upending the old system of government financing in Europe. Furthermore, it's precisely because the bond buying scheme is so revolutionary, that it's made even some mainstream ECB defenders blush. CNBC's ace ECB reporter Silvia Wadhwa thought it was beyond the pale that Draghi's plan requires sovereign governments to undergo certain actions in order to get help. She identified this as a threat to democracy. If Draghi's new plan (dubbed the OMT) gets off the ground, it's a very big deal in a way that QE can't compare. Europe's not out of the woods yet (heck, Spain hasn't even asked for a bailout yet... a necessary step in order to partake in the plan) but thinking about what happened just in terms of world central banks printed money is missing the point a little, at least on the European front. Read more: http://www.businessinsider.com/the-ecbs-breakthrough-2012-9#ixzz27KI6juLC
  Global risk appetite strengthened today driven by US economic data, which provided further evidence of a strengthened recovery in the housing market. US housing starts 2.3% monthly gain to 750,000 pace in August driven by single family home construction, taking the year-over-year increase in starts to +29.1%. Building permits, an important leading indicator for housing's future performance, fell 1% month-over-month but rose 24.5% year-over-year, albeit a slowdown from July's +29.3% year-over-year rate of expansion. For both metrics it was construction of apartments that weighed down the numbers while building of single family homes that drove the numbers. Construction of single-family houses rose 5.5% in August to a 535,000 rate, best since April 2010. Permits for single-family homes rose 0.2% to a 512,000 annual pace, highest since March 2010. Meanwhile, existing home sales in August rose 7.8% month-over-month, +9.3% year-over-year, to a 4.82 million annual rate. Existing home sales is a crucial indicator in evaluating the health and future trajectory of the housing market as rising demand for existing homes and an evaporation of existing inventory is what will lead to a broader recovery. The median price leaped 9.5% year-over-year, the strongest year-over-year gain in six years to $187,400 from $171,200 in August 2011. It currently takes 6.4 months to sell current inventory; the National Association of Realtors considers six months "normal". Existing home sales troughed in July of 2010 at a sales rate of 3.39 million that month and peaked at 7.25 million in September of 2005. Today's housing data, in our view, provides more clear evidence of the ongoing and strengthening recovery in housing, which will be only expedited with Fed action and record low mortgage rates combined with still high (although off the record highs reached January of this year) affordability.
After all the doom and gloom news about the Eurozone crisis and its devastating effects on the global economy, it was somewhat refreshing to have an in-depth chat with one Middle East investor who stated “ in general the eurozone crisis hasn’t really affected our investment strategy” The Investment Director from the Bahamdan Group (one of the largest and most established family offices in Saudi Arabia) told me that as smart investors they have already made practical changes within their investment portfolio’s and strategies and that they are optimistic the crisis will recover within the next few years. They have to look long-term and so at the moment capital preservation is what is on most Middle East investors minds. When asked what his top 3 challenges were for investing in 2012, he replied;
  1. · We are global investors and have seen a lot of challenges in Turkey – particularly in terms of the Turkish Lira
  2. · Concerns over Europe – we are just waiting to see if the Euro will collapse or not?
  3. · Political instability in the Middle East that is still ongoing
Other than the top challenges, the call was a positive one and ended with the investor stating his opinions on investment opportunities for 2013. He believes that, banking, telecoms and aviation hold some of the best opportunities for next year, whilst in terms of countries, Saudi and Turkey are both appealing places to invest in. What are your thoughts on the Eurozone crisis and what opportunities do you see on the horizon for investors in 2013?
The headline news last week was the US Federal Reserve’s announcement of a new round of quantitative easing in which the central bank plans to purchase $40 billion of mortgage-backed securities on a monthly basis (without a predetermined end date). The Fed also pushed back the timeframe on how long it will maintain its current zero-interest-rate policy, indicating that the current level of rates should be in effect through the middle of 2015.   While the fact that the Fed announced new easing plans was not unexpected, the aggressiveness of the plan and its open-ended commitment came as a positive surprise to observers. Equity markets jumped on the news, with the Dow Jones Industrial Average climbing 2.2% to 13,593, the S&P 500 Index rising 1.9% to 1,465 and the Nasdaq Composite advancing 1.5% to 3,183 for the week. In contrast to market action following previous Fed easing announcements, last week also saw a significant selloff in bonds and an increase in inflationary expectations. Political (and other) risks bear watching The pending US “fiscal cliff” has been much in the news lately and its ultimate resolution is far from certain. We still hold out hope that there is a better-than-average chance that Congress can come to some sort of agreement during a last-minute lame duck session post the November elections to soften or delay some of the scheduled provisions. For this to happen, the Democrats would have to accept some sort of extension of the scheduled tax cuts and the Republicans would need to agree to delay some spending cuts. Should the parties not be able to come together on some sort of deal, the political environment could become more difficult in 2013. In addition to politics, investors are also retaining focus on US economic fundamentals. Data continues to be mixed, with housing and retail sales trending down a bit last week and industrial production looking a bit better. We are still maintaining our view that US growth should trend around the 2% level for the time being. Outside of the United States, we would note that concerns over the European debt crisis continue to percolate. The European Central Bank has committed to using its balance sheet to support the euro, but downside risks for the region remain. Growth is slow, the banking system is troubled and policymakers still need to chart a path forward for greater fiscal policy integration. Additionally, turmoil in the Middle East and elsewhere has been heating up. In addition to the violent protests occurring at US embassies, concerns are growing over Iran’s uranium enrichment programs. The possibility of a unilateral Israeli strike on Iran is a worrisome one and would have unforeseen effects on the global economy and financial markets. Signposts for a continuation of the bull market Although volatility has not gone away and downside risks have remained in the forefront over the past several months, stocks have continued to perform extremely well. On a year-to-date basis, stocks are up around 18% in the United States and even higher in other markets. With 20/20 hindsight, it appears that valuations were overly depressed at the beginning of the year and that confidence in policymakers to address Europe’s problems was too low. Additionally, it seems that many investors were positioned too defensively and had some catching up to do. Looking ahead, there are some signposts investors should be looking for to determine whether or not the current up-leg in risk assets can continue. First, we will need to see some indications that aggressive monetary policy is working. That is, we’ll need to see some improvements in economic growth statistics. We also would need to see the European Central Bank continue its policy support. There is still a great deal of room for policy error and the work of Europe’s politicians and policymakers is far from over. Additionally, we would look for clearer signs of a soft economic landing in China. These developments are all certainly possible and given that valuations are not extended, markets do have room to make further gains.