5 minutes ago | January 25th, 2015 12:06:04 GMT.

The best way to make $200K trading? Start with $100 million

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CNBC has the story of Owen Li, the founder of Canarsie Capital in New York. On Tuesday, he said the hedge fund had lost all but $200,000 of the firm’s capital—down from the roughly $100 million it ran as of late March.

A 99.8% loss in 9 months.

“I take responsibility for this terrible outcome,” Li wrote in a letter to investors, which was obtained by CNBC.com.

“My only hope is that you understand that I acted in an attempt—however misguided—to generate higher returns for the fund and its investors. But even so, I acted overzealously, causing you devastating losses for which there is no excuse,” he added.

Li is a former trader at Raj Rajaratnam’s Galleon Group, which collapsed amid insider trading charges.

Looks like he couldn’t do so well without Raj’s inside info. If you get the chance on the weekend watch the Frontline report on insider trading at Galleon. It’s on Netflix.

Meanwhile, it wasn’t such a great year for the hedge fund titans, despite the 10% rally in the S&P 500. David Tepper who was the best-paid fund manager in the world in 2013, earning a whopping $3.5 billion, revealed his fund was up just 2.2% in 2014.

Another thing that’s interesting to note is that Tepper said if the ECB starts to do QE it will be the beginning of the end of the bond bull market.

2015-01-25T12:06:04+0000

10 hours ago | January 25th, 2015 01:25:16 GMT.

Bundesbank President Weidmann doubts European Central Bank quantitative easing (QE) is going to work

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Bundesbank President Jens Weidmann in an interview with a German newspaper on Sunday said he had doubts the European Central Bank quantitative easing would be effective:

  • He said he voted against the ECB’s QE plan
  • Said he didn’t see a need for the program

Said the impact of the ECB’s QE  will likely be smaller than in the U.S.

  • Interest rates were initially higher when the Federal Reserve started a similar program
  • U.S. companies use capital markets for their funding to a larger extent than companies in Europe

“It’s hard to predict what the effects will be, but in Europe they will probably be less than they were in the United States”

Weidmann interviewed in Welt am Sonntag newspaper

Reuters and the Wall Street Journal (gated) have more

Weidmann- Remains upbeat about the German and Eurozone outlook

2015-01-25T01:25:16+0000

11 hours ago | January 25th, 2015 01:08:21 GMT.

Parliament approves Swiss franc exchange rate to be capped for a year

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I’m not sure whether to laugh or cry …

  • Croatia’s parliament has approved a government plan to fix the kuna-Swiss franc exchange rate at 6.39 kuna for the next 12 months
  • Around 60,000 households have foreign currency loans denominated in Swiss francs, amounting to around 27 billion kuna ($3.9 billion), or a little under eight percent of gross domestic product (GDP) (Reuters)
  • The fix is meant to help these borrowers who now face much higher repayments after the surge in the value of the CHF
  • Croatia’s prime minister, Zoran Milanović, said the exchange rate would be fixed for 12 months to allow the government to find a longer-term solution, possibly including a mass conversion  into kuna …  the Croatian National Bank (the central bank of Croatia) opposes such a conversion, saying it would deplete currency reserves by 30%
  • More at Reuters (link above) and FastFT (gated)

Ryan had the early heads-up on this plan quite a few days ago

CHF/HRK over the past year … reasonably stable until it wasn’t:

CHF HRK rate 25 January 2015

Chart via XE.com

2015-01-25T01:08:21+0000

12 hours ago | January 24th, 2015 23:16:54 GMT.

Fighting in Ukraine spreads to the strategic port city of Mariupol … deadliest attack yet

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  • Local officials reports that at least 30 civilians died and 93 were wounded in rocket attacks Saturday in Mariupol
  • The projectiles were launched from rebel-held territories, according to the U.S., NATO, the Organization for Security and Cooperation in Europe and the Ukrainian government
  • The separatists denied shelling the city, calling the accusations “provocations”

More at Bloomberg

2015-01-24T23:16:54+0000

12 hours ago | January 24th, 2015 23:12:50 GMT.

ECB executive board member Coeure: “Nothing we can do as the ECB to lift growth in a lasting way”

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More comments from ECB’s Executive Board member Benoît Cœuré in Davos, this time lobbing the ball back firmly to governments ….

  • “The political foundation of the European project is being weakened”
  • “We can’t do everything for Europe, we did our part on Thursday, others have to do their part. There is nothing we can do as the ECB to lift growth in a lasting way”

That’s a Reuters piece here

Bloomberg, too, report:

  • Coeure helped formulate the initial quantitative-easing proposal, which he said was created to win as much support as possible in the 25-member Governing Council
  • “We’ve been able to design it in a way that brings as many people as possible on board … We’re happy.”
  • Five members took issue with the plan, with Bundesbank President Jens Weidmann and the German member of the Executive Board, Sabine Lautenschlaeger, voicing the strongest disagreements, according to euro-area central bank officials. Weidmann criticized the plan in a German newspaper on Friday.

While the moaning and wailing will continue, the eyes of the market will be focused on Greece today (January 25) and in the early hours of the market opening tomorrow. Ryan put his souvlaki aside for just a moment to write this excellent guide to the election: Preview of the Greek general election Sunday 25th January 2015

2015-01-24T23:12:50+0000

17 hours ago | January 24th, 2015 18:11:28 GMT.

NFA lowers leverage for JPY, AUD (and other currencies). Is it because the JPY and AUD are pegged and out of balance?

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The NFA has lowered leverage on the JPY, AUD  to 33:1 (3% margin vs 2% margin) as well as the Russian ruble, Brazilian real and Mexican peso as they more actively regulate brokers.

Interestingly, the EURUSD which just had a 570 pip trading week was left unchanged, while the USDJPY had a 194 pip trading range and the AUDUSD had a range of 363 pips.

HMMMM.

I wonder if the NFA is willy nilly reacting after the horse has left the barn,  or are the changes a reflection of risk to customers/to brokers?

I personally do not put a lot of faith in the commitment of traders report (it is old, it is not static, and other reservations), but the JPY net short position was reduced in the current week (see numbers below and from Adam’s post from Friday). The AUD position remained steady and net short which is good for clients as the AUDUSD fell this week.

The CHF thing – which this is all about – was about everyone being one way, with a floor in jeopardy and limited upside.   Is that what the NFA sees for JPY, AUD now?  Probably not.   Is the NFA reacting because they have an “aha moment” that leverage is too high (margin too low)?  That may be what they are saying now.  It seems they might think that they had their “eye off the ball” with regard to the CHF.  One can argue, if the NFA made the judgment (before the fact) that CHF risk was too great/too one way, and therefore margin  needed to be raised to 10% or 20%, then perhaps the damage could have been reduced.  However, the CHF story is different than the AUD and JPY (regarding ruble, real and peso I can appreciate that perspective).

  • EUR net short 181K vs short 168K prior
  • JPY net short 78K vs 94K short prior
  • GBP net short 46K vs short 37K prior
  • AUD net short 47K vs short 45K prior
  • CAD net short 29K vs short 21K prior
  • CHF net short 10K vs short 26K prior
  • NZD net short 2k vs short 2k prior
  • Gold net long 162K vs 130K prior

Below is the release: (see: https://www.nfa.futures.org/news/newsNotice.asp?ArticleID=4534)

—————————————————-

Notice I-15-07

January 23, 2015

Immediate attention required – Financial Requirements Section 12 – Additional increases in required minimum security deposit for forex transactions

As you know, on Jan. 21, 2015, NFA’s Executive Committee exercised its authority under NFA Financial Requirements Section 12 and increased, until further notice, the minimum security deposits required to be collected and maintained by FDMs under Section 12 for transactions involving the Swiss franc (5%), Swedish krona (3%) and Norwegian krone (3%). At the time of those increases, NFA alerted FDMs that NFA was continuing to monitor market conditions and that the Executive Committee could decide to make additional increases to these or other currencies if market conditions warranted. Given the continued volatility in the foreign currency markets, the Executive Committee has determined to increase the minimum security deposits required to be collected and maintained by FDMs under Section 12 as follows:

Japanese Yen – 3% (33:1)
Australian Dollar – 3% (33:1)

Other currencies:

Russian ruble – 20% (5:1)
Brazilian real – 9% (11;1)
Mexican peso – 6% (16.6:1)

These increases become effective at 5 p.m. (EST) on Monday, Jan. 26, 2015 and will remain in effect until further notice.

If you have any questions on these requirements, please contact Valerie O’Malley, Director, Compliance (vomalley@nfa.futures.orgor 312-781-1290) or Rachel Brandenburg, Senior Manager, Compliance (rbrandenburg@nfa.futures.org or 312-781-1472).

2015-01-24T18:11:28+0000

18 hours ago | January 24th, 2015 18:04:05 GMT.

Ray Dalio says money under a mattress appealing

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Lower rates aren’t sparking demand for low-grade bonds and billionaire investor Ray Dalio knows why.

With yields so low, “the transmission of the monetary policy mechanism will be less effective,” said Ray Dalio, the U.S. hedge fund manager who runs the $160 billion Bridgewater Associates. “We have a deflationary set of circumstances,” which makes it appealing to just stuff your money under a mattress, he said at a panel discussion in Davos, Switzerland, this week.

2015-01-24T18:04:05+0000

20 hours ago | January 24th, 2015 15:41:17 GMT.

It’s the EURUSD’s turn to take center stage…and it sure did

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The ECB decision this week to do QE to the tune of 60 billion per month, ignited a huge sell off in the EURUSD.  The pair had the highest trading range since 2011.

What next?

Greg Michalowski, Director of technical trading and client education for ForexLive outlines the levels he will be following in the new week which will be influenced once again by a market moving event – the Greek election.  Good fortune with your trading.

2015-01-24T15:41:17+0000
2015-01-24T14:37:29+0000

21 hours ago | January 24th, 2015 14:32:13 GMT.

BOJ’s Kuroda says economy likely to grow 2% in FY2015

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In Davos, Kuroda says Japan is likely to grow 2% in the fiscal year. He also spoke about other major economies, saying he is “extremely optimistic” about the US economy and that China is making huge structural changes.

On the domestic economy, he said the government needs to make reforms as quickly as possible. He noted that Japan has had a big increase in female labor participation and that the government is likely to relax visa restrictions for workers.

On Friday, Kuroda endorsed the ECB moves.

2015-01-24T14:32:13+0000
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