Some people have a faith in government “help” that I just don’t understand.

A great example of a regulator not understanding what he’s regulating is the CFTC expanding their empire into retail FX. They recently doubled the margin requirement to “help” keep traders “safe”. But look at an example of the effect (in round numbers).

A typical FX dealer wants 5000 to open a regular account. It took about 1000 to margin 1 lot before the regulation change. Now it takes 2000 per lot. This means that the customer with 5000 can only do 2 lots instead of 5. The CFTC regarded this as keeping traders “safe” because it would limit them to smaller positions and keep their trading more conservative. But, that assumes that the trader is only trading 1 currency pair and is trying to leverage the biggest position possible. It also prevent the trader from taking 5 positions in 5 different pairs. This is called “diversification” and is regarded by many as a conservative strategy. So, we have regulators who don’t understand diversification and don’t understand that margin is not inherently dangerous; it is a tool which can be used in a more or less dangerous manner, but it’s just a tool.

@ Trader Ken

Thanks for the link, but I’ll stand by my reference to “Pure Capitalism” in China, India, and the rest of Asia. Capitalism accounts for dishonesty. You mean to tell me that John Paulson, the “billion dollar man,” and Fidelity can’t do proper due diligence in China to find out if they’re being taken for a ride?

If they’re THAT stupid, they deserve every loss coming their way. i.e. no bailout.. That’s capitalism.

I have done over $100 million worth of business with China and never lost a nickel (yes, they tried to dupe me), whereas a lot of larger companies, like Royal Bank of Canada, for example, have lost loads of money ($25 million on one deal alone) because of fraudulent paper work. Why is that?

It’s because “corporate people” rely on image, not substance. That’s why they’re in corporations…they can hide the fact that they’re incompetent with a nice suit, a good Powerpoint presentation, and an ego. That’s also why they suck as traders…nothing separates the losers and winners faster than putting your money down on a bet and keeping score with a bankroll. The markets don’t care how nicely you comb your hair. And America is FULL of corporate people!! They run the coporations and represent the majority of politicians.

THEY are the MAN behind the curtain. Pull the curtain away and you see a giant steaming pile of nothing.

Maybe I should hire myself out to these bozo investors to show them how to get in good with the Chinese so they don’t take you to the cleaners? The first thing the Chinese do when they meet you is start complimenting you and wining and dining you like you’re an Arab shiek…obviously the people at Paulson and Fidelity ate it up. Losers!

A country with a fixed exchange rate, where the largest companies are all state controlled, with GDP quotas for area managers, with fake banks, with the mother of all Feds, run by communists, is pure capitalism? You’re making money because the (red) man behind the curtain wants you to make money…for now.

How China Could Yet Fail Like Japan
http://www.cnbc.com/id/43403189

Im not saying money can’t be made, of course it can. My big point is that what they are doing is unsustainable and because of that Im not buying into the “China (or any other low cost labor provider) is going to take over” rhetoric. They’ve come a long way in a short time and that’s great. Im just saying they are going to have to change some things if they really want to move forward in the long run.

You’re posting alot of government rhetoric. How do you know they planted all that green space? John Paulson thought Sino had a whole lot more forest than apparently they did. He believed the rhetoric and its cost him about 1/2 billion dollars so far.

I’d much rather live in a country with a $40k per capita gdp with rules on tv commercial volumes than one with $3k per capita gdp and no volume rules. Pay me $37k extra to not be yelled at by an advertiser? I’ll take it! If we want to improve things in this country let’s look at countries with higher per capita gdp’s, not lower.

Also lets add fake patents and bogus education systems to our list of “pure capitalism”, lol:

China’s Shortcuts to Economic Growth
http://finance.yahoo.com/news/Chinas-Shortcuts-to-Economic-tsmf-3523674625.html

Why do I believe the government? First of all…I’ve seen it. There was a 20-mile wasteland between Beijing and Tianjin in October of 2007…sand, weeds, bricks, garbage, etc. I went back in January (just over 2 months later) and it was ALL forest and gardens. There had to have been 10 million trees planted. They had 80 large track hoes…yes 80!…finishing it off when I was there.

That same project would’ve taken 30 years anywhere in North America and the Chinese did it in a couple months. As I’ve said before…you have to see China to believe it. It sort of reminds me of Silicon Valley where things just GET DONE…no yacking and posturing, just do it!

Second, the government realized it had a problem with corruption in business and government. But in China, unlike America, a politician convicted of taking bribes is usually executed. Let’s just say that, as a result of this practical approach, the problem isn’t what it used to be.

Similarly, after China got control of Hong Kong in 1997, they employed similar crackdowns on crime. That’s why the triads that were so powerful in southern China now operate out of the US and Canada. Barely a day goes by where a Chinese newspaper doesn’t show a picture of a criminal, usually sitting on a chair, with a bullet hole in his head. The paper says, “This is so and so…he and his friends tried to extort money from businesses. We are now looking for his friends. Have a nice day.”

That’s why I can walk back to my hotel at 3:00 AM in dowtown Beijing or Tianjin or Zhongshan without fear. Try THAT in Chicago!…or LA…or New York. You wouldn’t make it 20 feet!

…and one last thing about China…their savings rate among their citizens is just over 35%. The North American average varies from -2.4% to 2%.

The Chinese don’t do debt.

A Chinese friend of mine owns three large international companies that he started from scratch in 1983 selling one unit at a time. He’s never had a bank loan. When the financial crisis hit in 2008, he picked up three more international companies (2 Europe-based and one US) for pennies on the dollar because they were leveraged to the nuts.

You don’t find that kind of patience in North America or Europe. Hell, the average American will sell his soul for a new plasma and a Nintendo Wii.

An anti-debt attitude also is not pure capitalism. If people want to blow themselves up with debt or enhance their profits with debt, let em. That’s pure capitalism.

The bottom line is that a system supported by govt stimulus and a govt that has their hand in virtually every successful enterprise is not pure capitalism.

At the end of the day I’m following the data. If I want to build a good trading system Im going to look at the guy that’s making 40%/yr, not the guy that’s only making 3%/yr. If I want to build a good economy Im going to look at the country that has $40k/per capita income, not the country that only has $3k/per capita income.