Muslims and Modern Banking: A Rejoinder

#144 by SR

[Wanna wager?]

The answer is an unqualified `No`. I only know the US Lullar against the EU`s Zero and the YehN, while your beloved USD Index is all screwed up because its major component the YuhaN is not even free-floating and the index will be maningless if the chinks revalue even as Lullar goes up against the floating currencies.

So, you can recline on your slow but unstoppable mountain glacier, sipping on the crate and half of black label, and twiddle your thumbs till index hits 70. Then you can go out and try to encash it but you may find it`s not convertible into YuhaN !!!

P.S. No wager but keep this on record, just for posterity. I see the index going down no further than 85 and then turn around to make an attempt at 98 in 12 months time.

#142 by SR

[So my wager offer is applicable only to the USD index heading south over the next 12, 24, 36 and 48 months.]

Tell me SR .. just curious ... you can`t spend the dollar index OR gold `now`, I mean today even if it goes in your direction over the next 12, 24, 36 and 48 months. Wouldn`t that make playing the temporary ``technical`` glitches more practical?

Just wondering. As for me, currencies going up and down are mere numbers. For you, it`s your bread and butter. No?

SR

I’ve been trading currency futures at IMM for a decade and a half

I just saw this statement. Please desist immediately. Otherwise you`ll lose your shirt if you haven`t done already. These are 100 times leveraged and it`s IMPOSSIBLE to make money on IMM unless you have the instinct for the day-trade swing... able to get out ONLY if you can catch the rate. These are spot contracts disguised as futures but obviously you don`t know that. You`ve probably been locking your positions too. You see the currencies move 100 basis points ... pips if you call it .. everyday, and that`s the entire 1% of your margin wiped out when these go against you .. and they will .. believe me. When you lock, it`s going against the trend. You`ll eventually have to cut and get out at a much larger loss than the original. The only way to make money on spot day trade is to to go for 10 pips ... not 100 pips, and get out at the same 10 pips. I`m amazed you never mentioned ...

#139 by SR

Hmm .. looks like the problem is more serious than I thought. Apparently we are operating on different tangents with altogether different premises, so there really cannot be any debate. Myself being a currency trader based on technicals, anything over the horizon of 1 year is sheer sacrilege (six months is more like it), while your horizon is based on somewhat esoteric economic fundamentals which takes over a year just to kick-in .. and more likely the effects are seen in decades, if at all. When I say dollar is going up, I`m saying it has been going up in the last 12 months. When you say dollar has gone down, you mean it has been going down since 1985 ... aaah ... now I get it.

Well .. SR ... the first three paras in your response need no comment because of the reason above. Let`s continue from the 4th:

Let’s not insult the intelligence of the Chowk readers ... How in God’s name can you make money on something that you BUY for 107 and SELL for 101.90…? How in God’s name can you make money on something that you BUY for 107 and SELL for 101.90…?

SR ... I`m now having serious doubts ... since you`ve made the most basic of errors of comprehension here. When I sold Yen, I had to deliver 101.90 Yen in return for each of the dollar I got. When I bought back, I got 107 Yen in return for each of the dollar I delivered. Now, is that a profit or a loss?

There is a $29 million discrepancy in your statement.

The profit was Yen 5.10 per dollar. Multiplied by $300 mio that is Yen 1.53 billion. Divided by 107 i.e. the $/Yen rate at unwinding the position, that is $ 14,299,065 of profit ... booked and realized. You got it upside down. All major currencies except Euro and Aus$ are quoted in terms of US$1=CCY. You obviously got confused. Although this is a common error amongst laymen but you should really do better than that!

This was actually a swap transaction. I haven`t counted the `positive carry` profit in the above calculation but that too was considerable. Not a speculative transaction, it was liability management. There was a debt repayment denominated in JPY. Instead of buying and paying the required Yen outright, I substituted the immediate debt liability for a future liability and swapped my dollars for yen for three months, paid the creditor in spot Yen, enjoyed the interest differential for three months and took the ride adjusting my stop-loss/take profit levels higher according to price action, and bought Yen to settle when the rate was 107, met the swap liability in Yen, got back my dollars, and was ahead 1.53 billion Yen.

Does it not betray a wee bit of vanity and arrogance? Remember, “… no sage is always right…” those are your words of wisdom.

In the currency markets we say if you`re right 70% of the time, that`s good enough. I reiterate noone is `always` right. Above example was only one of that 70%. I`ve been completely wrong 30% of times. Where`s the arrogance brother?

Let’s play this game. Let’s mark the calendar today and come back in 12 months.

You got a deal. You say dollar index down 10%+ by end of year. Let`s make that specific and use Euro instead, the other major currency. That means Euro at 1.32 (It`s 1.20 something now).

Ok. I`ll make that even more specific in my case so I hand you a handicap. I say US$ will strengthen till second quarter and make a failed attempt at 1.1760, and weaken thereafter till end of the year to max 1.2650 by the end of year .. i.e. dollar down 5% against Euro. Japanese Yen will not correlate and will weaken on the Euro/Yen cross. Now, my wager is US$ will weaken after the second quarter ... but remain within the overall cyclical trend heading to 1.2650, hold against an attempt above that, and start it`s journey back to Euro 1.15 during early next year and if it breaks that level, strengthen towards 1.07 during 2007 ... i.e. up 11% from now.

In a nutshell, my wager is $ will remain in it`s long term uptrend and between Euro 1.1760 and 1.2650 by end 2006. Dollar will either rise to 1.1760 i.e. 2% up or not fall below Euro 1.2650 i.e. 5% down something during this year. But, it will rise by 11% by mid- 2007. Deal? And don`t be a cheapskate ... make it a crate of `Blue Label`.

Of-course there`s a 30% chance I`ll be wrong and I`ll have to recommend you .... sob ... boo hoo ... to the board.

Do copy/paste this where you can find it in December 2006 ... because I most certainly will.

Rgds.

Re: # 140 zeemax {``...we are operating on different tangents with altogether different premises, so there really cannot be any debate.

Myself... six months..., while your horizon is based on ... fundamentals ... takes over a year just to kick-in .. and ... effects are seen in decades... When I say dollar is going up ... it has been ... in the last 12 months. When you say dollar has gone down, you mean it has been going down since 1985 ... aaah ... now I get it. ...``}

Yes, this is the crux of our different outlooks. So we`ve been debating from completely different perspectives. I always had faith in you that given time you`ll figuer it out.

{``...This was actually a swap transaction. I haven`t counted the `positive carry` profit in the above calculation but that too was considerable. Not a speculative transaction, it was liability management. There was a debt repayment denominated in JPY...``}

Again, it turns out that we speak from opposite shores of the ocean. I did leave open the possibility of differences in technical nomenclature and that is what I am hearing you describe it.

In the parlance of Chicago currency futures pits it is quite the opposite.

IMM currency futures and 1% margins etc...

Thank you for your concerns, but margin is only a danger if one uses it to the hilt. Only fools do that. I never over leverage. That is a sure shot way to the bancruptcy courts. But thanks for your patronizing warning. I`ve been heeding it for well over a decade. The broker`s margin is typically 5% for most commodities futures contract trading and often closer to 1-2% for currency futures. Whenever I`ve traded those instruments I have always maintained sizable cushions, stop-loss orders and/or protective long options collars. Crude oil contracts on the NYMEX, for example, are for a 1,000 bbl so a single contract controls approximately $60,000 worth of commodity. Yet a trader can trade it with a minimum margin deposit of around $5,000... That is plain suicide. I`d never trade a crude oil contract without a minimum cushion of $25,000... It is always greed that kills people.

{``...You got a deal. You say dollar index down 10%+ by end of year. Let`s make that specific and use Euro instead, the other major currency. That means Euro at 1.32 (It`s 1.20 something now).

Ok. I`ll make that even more specific in my case so I hand you a handicap. I say US$ will strengthen till second quarter and make a failed attempt at 1.1760, and weaken thereafter till end of the year to max 1.2650 by the end of year .. i.e. dollar down 5% against Euro. Japanese Yen will not correlate and will weaken on the Euro/Yen cross. Now, my wager is US$ will weaken after the second quarter ... but remain within the overall cyclical trend heading to 1.2650, hold against an attempt above that, and start it`s journey back to Euro 1.15 during early next year and if it breaks that level, strengthen towards 1.07 during 2007 ... i.e. up 11% from now.

In a nutshell, my wager is $ will remain in it`s long term uptrend and between Euro 1.1760 and 1.2650 by end 2006. Dollar will either rise to 1.1760 i.e. 2% up or not fall below Euro 1.2650 i.e. 5% down something during this year. But, it will rise by 11% by mid- 2007. Deal? And don`t be a cheapskate ... make it a crate of `Blue Label`. ...``}

The gods may be sharing their knowledge of the future with you... I don`t know. But they haven`t been so forth coming with me.

I DO NOT get into all these complications. I am just a poor layman, unlike you sophisticated super-professionals. All I want to wager is that the US Dollar Index as opposed to cross-rates with the euro or yen... My specific focus is the USD Index. Today it stands at about 90... in 2002 it was at 122... In 2004 it went as far down as the lower 80`s... it is this USD index that I place my wager on. I don`t want to play the trumpet of any of the other worthless paper currencies like the euro or the yen either. They are all creations of bureaucrates and politicians. I trust neither. The only currency I have faith in (that it will maintain value even two decades from now) is precious metal, particularly gold. So my wager offer is applicable only to the USD index heading south over the next 12, 24, 36 and 48 months. Gold, by contrast, will continue to head north. Temporary ``technical`` glitches notwithstanding.

As for blue label, forget about it. Black label is as far as I go. But I`ll do a crate and a half. You are right: I am a cheap skate. :)

...SR

Re: # 142 zeemax {``...Tell me SR .. just curious ... you can`t spend the dollar index OR gold `now`, I mean today even if it goes in your direction over the next 12, 24, 36 and 48 months. Wouldn`t that make playing the temporary ``technical`` glitches more practical?...``}

Are you saying you don`t want to take my wager? Because I clearly said that I was unwilling to speculate on the so-called technicals.

If I was trading institutional funds and was mandated to be in the market then I would employ technical trading tactics. But then that would be a totally different game. And make no mistakes, a game is what it becomes. In the end its about money management and loss control.

What I was debating here was in the spirit of uncovering fundamental macroeconomic trends. For that the USD index is a (relatively) superior tool. It gauges the value of the US Dollar relative to a basket of currencies of its major trading partners, weighted roughly in proportion to the respective trade share of each issuing country. By that metric the (lousy) Euro had appreciated against the (equally lousy) US dollar disproportionately... and thus the recent (last 12 months) re-alignment in their cross-rates.

So the question remains, do you or do you not take my wager? I say that over the next 12 months (and 24, 36, 48) the USD index goes down from here, even if on an individual basis the US Lullar beats the EU`s Zero or the YehN and YuhaN...

There is no stopping this slide in the USD index before 70... Similarly, after a few retractions, gold goes up, up and up. There is no stopping it below four digits. In other words, in the 48 to 60 month time frame the rock sold price floor for gold is $1000... It is a powerful trend, like the slow but unstoppable movement of a mountain glacier.

Wanna wager?

...SR

Re: # 121 zeemax {“…Noone is denying the USD index went down and Gold went up. …”}

Ah, at last we have acknowledgement of fact. Plain facts that every reader of financial pages knew but somehow you, my dear brother, always insisted on ignoring and preferred not to talk about.

{“…I`m only saying If the USD index went down it was because it was driven down…”}

The Lord giveth and the Lord taketh away. First you acknowledge a market reality and then you preface it with a disclaimer. Are you implying there is some “unnatural” market manipulation going on?

If that is what you are implying, then you are fundamentally contradicting your later two statement:

{“ ... My only sage is price action ... nothing else. …”

“…Market prices in everything Markets are never wrong .. sages often are…”}

I have absolutely no qualms about these two statements of yours. And what I have been saying to you is only what the market have also been trying to tell the great sage zeemax, but only if he’d care to listen.

{“…I, was somehow bullish dollar throughout last year beginning January 2005 when I shorted almost $300 mio worth of Yen at 101.90 and covered three months later at around 107, and made $ fourteen mio in the process. …”}

Now, now my friend. Let’s not insult the intelligence of the Chowk readers here. You of all people should surely know better. I’d never expect such a declaration from the great zeemax in a public forum. Admittedly, we small timers do not have hundreds of millions of other people’s money to play crap shoot with, but surely some of us do know a thing or two about how the markets work. Although I’ve never dealt in currency spot markets, I’ve been trading currency futures at IMM for a decade and a half. Please READ your above statement carefully… you write “ I shorted (meaning sold) yen at 101.90 and covered (meaning bought back later) at 107…” How in God’s name can you make money on something that you BUY for 107 and SELL for 101.90…? To my non-professional dull-witted mind that looks like a LOSS of 5.10 or about 5%... Multiplied over $300 million it would be an approximately fifteen million in LOSS. How does one claim to have “made $ fourteen mio in the process…??”

There is a $29 million discrepancy in your statement. Unless, of course, you got the nomenclature wrong and actually meant to quote pices in their reciprocal fractions, which instead of 107 and 101.90, would be equalent to 0.009346 and 0.009814, respectively. But then you`d have used their customary abbreviations 93.46 and 98.14 respectively. Do you mind clearifying my simpleton`s confused mind?

(For the benefit of Chowk readers unfamiliar with “shorting” it should be clarified that financial instrument can be bought and sold at market price in any order. One can sell something that is presently expensive and later buy it back for less. Profit and loss however are always the difference between buy price and sell price. Thus a buy (called “cover”) at 107 balanced against a sell (called “short”) at 101.90, regardless of the chronological order of the transaction is a loss of 5.10)

{“…Everyone said Yen was heading to 75 but I knew the downside risk was less than the upside potential. I have actually TRADED Yen at 75 and I know it couldn`t stay below 100 for long let alone 75. …”}

Dear brother… just read it and tell me how it sounds? Does it not betray a wee bit of vanity and arrogance? Remember, “… no sage is always right…” those are your words of wisdom.

{“…This year I was bearish dollar so far but now being forced to change that view. Do you know why dollar is still going up? Because the rest of the world just doesn`t allow it to go down, despite John Snow`s best efforts. …}”

Your first instinct may turn out to be right after all. In my humble opinion the surge of the dollar has very little steam left in it. I would be looking to go short on the USD index.

Let’s play this game. Let’s mark the calendar today and come back in 12 months. If the dollar index is higher more than 10% I owe you a crate of Johnny Walker Black. If it is lower by more than 10% you will recommend me to your board and recommend hiring my services. A change between 5% and 10% will only result in public acknowledgement and humility. A change less than 5% will be meaningless.

Re: # 124 by hamidm

Do not be swayed too far by our high powered investment banker friend here. It really was a crap shoot and this time your younger brother came out ahead.

Now, unlike my dear friend zeemax, I never claimed to be any kind of an expert in banking or finance, but I did do well in my high school math class. And in my limited knowledge I cannot figure out how to interpret his following statement:

{“…he can spend his Euros in Europe in which case he`ll lose a full 13% in terms of purchasing power. You, on the other hand my friend, have taken nil risk, earned 2% plus more, and are ahead 13% spending your $ in USA…”}

The reason his statement confuses me is because although a Big Mac costs 13% more at the time Economist published that silly index (it was the result, largely, of currency fluctuation), four years earlier the same Big Mac selling for the same price in euros was cheaper on the Big Mac index than it was in America. But be that as it may, let us take this 13% so-called advantage at face value. How does this 13% gain make up for the fact that in the last four years the dollar has lost over 35% against (that other worthless piece of ECB issued paper called) the Euro...???

...SR

soysauce

[..sympathetic to the jihadi pov ...But supporting them? That says you agree with them..]

I both support and agree with them as long as their Jehad is in purely Qura`anic terms of armed struggle for liberation of their own lands ... not someone else`s.

[..on this hamburger index, wouldn`t the numbers tilt one way or another ...Brazil, being a huge beef producer ... no?]

The basic premise of a Purchasing Power Parity (PPP) index is the absolutely `Identical` nature of the article or basket of articles being compared. BigMac has been in use for some time and now a `Lette` index is also in use based on the Starbucks product. This identical nature must be the quality, quantity, packaging and so forth. If the Brazilian beef patties are identical to, say US patties, and are cheaper, that would certainly tilt the index. But in most instances this is not the case since then the Brazilians producers would rather sell in the US than in Brazil and domestic prices would adjust. PPP is however only an estimation and susceptible to things like transportation costs differentials etc. PPP is nevertheless widely accepted and used by all international bodies like World bank/IMF etc for comparative GDP and other economic figures rather than the nominal exchange rates.

Rgds

Mr. Masadi, hamidmji is both a genius and a clown. You should really ignore him if you wish to ignore him.

Mr. Masadi, hamidmji is both a genius and a clown. You should really ignore him if you wish to ignore him.

Here is another ``masterpiece`` from hamidm,

<<< #20 by hamidm2 on March 3, 2006 9:21am PT
Re: # 19

kulharee,

``Why is it always Zionists’ fault? `` ...... because it says so in the ``protocols of zion`` - the only other book that asadi has read in addition to the koran .... >>>

And you want me to explain things to him?

Mr soysause, here is hamidm2`s post on the Karachi bombing thread, his new ``masterpiece``

<<<<(Quote) #17 by hamidm2 on March 3, 2006 9:11am PT
Re: # 16

masadi,

..... as al-lah says in post #14, he wants you to renounce violence, period ........ stop making excuses and angling for virgins ............. (end quote) >>>>

Now, please explain to me what possibility I have of reasoning with this sob?

#132 thank you for enlightening me on the possibilities, however hamidm2 is not interested in even considering what the other person is saying. We have had enough interactions here for me to conclude thus. His methodology is ``heads I win, tails you lose``. Agreeing on even the most unobjectionable thing is ``objectionable`` to him. Look at his posts to me in various threads, it`s the same BS. After a while enough is enough. He needs to be cursed and ignored.

Mr. Asadi,
Here are a few possibilities - hamidmji did not read the article or gave it only a cursory look; he did read it but misunderstood it for any number of reasons; or may be you didn`t explain your position well enough, etc.
As an uninterested observer (uninterested in koran`s take on anything, that is), you come across as someone who looks to the koran for guidance on even secular matters. Surely you can understand someone like hamidmji who presumably grew up with pious people transposing his prejudice on to someone like you, unless you make an effort to educate him in a positive manner?

#130 writes <<< If indeed you have ``won``, let your arguments speak for themselves. >>>

Hamidm2 isn`t interested in arguments. He read the whole article and then claims I say interest is bad because the Quran says so. I`m running out of words to call him, he deserves every insult in the book, maybe someone can fill me in, my curse vocabulary fails me where it concerns that sob.

#124 hamidm2
it says so in ``the book`` - end of discussion :)

Mr. Asadi, namecalling doesn`t suit you. If indeed you have ``won``, let your arguments speak for themselves.

Zeemax, I can understand you being sympathetic to the jihadi pov, given their assumptions. But supporting them? That says you agree with them - their premises & their actions.
Anyway, on this hamburger index, wouldn`t the numbers tilt one way or another, if you chose, say, baguettes or tacos? Brazil, being a huge beef producer would be favored by thr hamburger index than by others, no?