Trading Street Magazine

Volumn 1 Issue 1

December 13, 2014

We Asked Our Experts See What They Are Predicting Page 31

Trading Street Magazine

December 13, 2014

Page 1

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Past performance is not necessarily indicative of future results.

Table of Contents Trading Street Magazine Is published FREE for its members

Letter From the Editor ......................................... 4

Publisher

Don’t Confuse the Raging Bull Market with Good Times ............................................................. 6

Trading Street, LLC

Most Market Prognosticators are Wrong! ..... 9

Business Development

The 7 Killer Trading Mistakes That Doom Traders From Ever Becoming Consistently Profitable ................................................................12

Marketing

Calendar of Economic Events for Remaining Period in December 2014 .................................14

Editor Timothy LuCarelli Bil Hoerter Ric Chappetto Contributing Writers Benjamin Lee Larry Hannula Stephen Vettorel Tony Wiedenheft

US Growth – How will it Impact the Global Economy? .............................................................. 24

For Subscription Information

2015 the Year of the Liquidity Trap ............... 27

www.tradingstreet.co

What Does Our Investing Future Hold? ...... 31

Contact Information

What Does Equilibrium for Crude Oil Look Like in 2015? ......................................................... 38

Editor’s Office ext. 100

Please visit the website

646-396-8108 info@tradingstreet.co

Advertisements in Trading Street Magazine are the sole responsibility of the advertiser.

Consumer questions should be directed to the individual advertiser.

ALL RIGHTS RESERVED ON ENTIRE CONTENT Trading Street Magazine is published monthly by Trading Street, LLC and is free of charge by viewing online. Reproduction of content, articles or advertisements, is strictly prohibited without the express written consent of the Publisher. All information is provided as is and has been checked for validity to the best the writers’ abilities. Any third party information has been reprinted with permission of the content owner and may not be reproduced from this publication without the owner’s consent.

Trading Street Magazine

December 13, 2014

Page 3

Letter From the Editor

Welcome to Trading Street’s first online magazine publication. These magazines will start out monthly and continue to build eventually becoming a weekly staple on Trading Street. Our desire is to bring readers information, opinions and a culmination of facts that can provide them with better decision making processes in their every day investing life. Trading Street’s vast resources will also provide readers with much information about platforms, systems, and all types of investing information useful to many styles of investing and time frames.

Just as with our experts that we are introducing through Trading Street our advertisers will also go through the same vetting process. Keeping true to our mission of bringing quality products and services to the investing public Trading Street’s magazine will only host advertisers that truly have a viable and useable product at a reasonable price.

Being that it is the end of the year this issue of Trading Street magazine will focus on past market related events and what the future holds for investing in 2015. While future market movements are always hard to predict it is none-the-less a sad fact that we all have to have some semblance of future market movements whether they be gut feelings or quantitatively derived technicals.

As the year end holidays’ fall upon us our attention will turn form the events that drive the markets to family, friends and the general euphoria that comes with the holiday season. As everyone’s holiday hangover turns to reality after January first we will all want to determine our investing direction. Within this edition of Trading Street Magazine we have several articles about markets’ direction but also articles that provide guidance for how to find market direction using your own personality.

The markets would not be markets if it was not for all the different personalities and opinions. While no one wants to admit they are seeking future price movements they all have one common goal and that is to make their investments grow. Without that human desire for investment gains markets would not exist and the free market economy would fail.

Please enjoy this edition of Trading Street magazine and feel free to contact us with your comments.

Thank you

Timothy LuCarelli

Page 4

Trading Street Magazine

December 13, 2014

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Trading Street Magazine

December 13, 2014

Page 5

Don’t Confuse the Raging Bull Market with Good Times

By Larry Hannula

Upon further and more detailed review, cyclically it appears the current cycle period is coming from our economic crash and March 2009 S&P 500 bottom at 666; a point at which I suggested to my clients going “All In” on S&P 500 futures. My oscillator studies, at that time, showed totally undervalued postures on all timeframes (Daily, Weekly and Monthly) which produced one of the biggest rallies in market history. I believe we are also in a market rally similar to the period after the 1987 Crash when the Federal Reserve also flooded the system with liquidity.

The new normal that makes things different this time is the historic higher levels of Quantitative Easing (QE) balance sheet expansion that drove multi- national companies to borrow at record low rates to fund and perform massive share buy backs as the manner in which to grow their earnings per share. This QE Fed policy is accompanied by the replacement of workers with robotics and other innovative technologies increasing productivity of the overall workforce. Also, multinationals using cheaper global workers combined with a lowering in the pay scale for US workers, declining from a high of 60k average salary to just above 40K, as often spoken of by the “Talking Heads” on CNBC , is destroying the buying power and balance sheets of the US middle class.

The combination of higher productivity and a lower wage base when combined with lower equity shares outstanding, typically has produced growing EPS. This smaller float of shares sent large cap multinationals to new all-time highs in what is called an Extend 5th wave as known to the Elliot wave aficionados using what is now politely referred to as financial engineering. The old days stock options awarded to CEO’s were issued at market lows every year to reward top executives; even the late great Steve Jobs was investigated for this practice but was given a pass.

The pump and dump tactics of corporations used by many CEO’s to enhance the company’s bottom line are reaping rewards for tactics that in any other situation could be called illegal; much like the old Mob Guys. The growing EPS of these companies should not to be mistaken with quality companies growing their business using sound investment tactics. The adage that it is different this time can never be more appropriately stated as “Don’t Fight the Fix.”

Trading in a buy side fixed game is not to fight market participants but use model based proprietary oscillators to join in on the party “If you can’t beat them…. Join them” is my mantra.

Page 6

Trading Street Magazine

December 13, 2014

Technically many traders see the current market as conditions similar to the period of that after the ‘87 Crash, really a buying opportunity that eventually ended with the 2001 top. The current top in the stock market will also take more time to form, possibly after more new all time highs in January 2015. With the change in Congress we may see a bigger protracted correction over the remaining lame duck period. In one of my favorite movies of all-time A Bronx Tale “C” told his dad, Lorenzo the Bus Driver (Robert DeNiro),that the working man is a sucker. Those on welfare in America can get almost 40K a year in benefits as stated many times by the talking heads on TV proving “C” was right

in today’s New Normal.

My call for 2015 is for a real market correction as higher rates will take the methadone away from a market seemingly “Hooked on QE”.

As the late great Milton Friedman would say regarding Welfare, education and the hot topic of the (un)Affordable (unaffordable by many people) Obama Care Act “Governments solution to the problem is often worse than the problem itself.”

About the Author

Larry Hannula is a multi-decade veteran of the financial services industry, specifically the Chicago Futures Market. Like many professional traders, Larry began his career in finance as a runner on the CME floor. Working for Donaldson, Lufkin, & Jenrette (DLJ – soon to be Lehman Bros.) one of many merchant banks with a floor presence, he was asked to cover an important client, Swiss Bank– and began a 10-year stint running their currency desk on the floor. This cash-to-futures arbitrage proved to be lucrative, and also gave Larry an opportunity to move into his coveted role as a CME exchange member self-trading filling broker while running Swiss Bank’s Merc floor FX (Foreign Exchange) Futures desk.

To learn more about Mr. Hannula and his trading strategies please click the link below to his company page, Tech Trade on Trading Street:

Trading Street Magazine

December 13, 2014

Page 7

Predictions from 1929

“Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months.”

- Irving Fisher, Ph.D. in economics, Oct. 17, 1929

“The Wall Street crash doesn’t mean that there will be any general or serious business depression... For six years American business has been diverting a substantial part of its attention, its energies and its resources on the speculative game... Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before.”

- Business Week, November 2, 1929

“...despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression such as would entail prolonged further liquidation...”

- Harvard Economic Society (HES), November 2, 1929

Page 8

Trading Street Magazine

December 13, 2014

Most Market Prognosticators are Wrong!

By Stephen Vettorel

With 15 shopping days left before Christmas and 14 trading sessions before the close of the year, I wanted to let you know that many “Guru Forecasters” were wrong in 2014!

First, though, a reminder of the difficulty involved with forecasting and why it isn’t a recommended approach to investing. In April 2014, the 10-year Treasury bond was yielding 2.73%. Bloomberg surveyed 67 prognosticators. Not one forecast that the 10year would decline by the end of 2014. Not one (it’s a lot lower today: 2.17%).

Ok, well, interest rates are famously difficult to predict, some say. What about oil prices? Bloomberg surveyed 28 experts on December 5, 2013 when oil (West Texas) was $97 barrel and asked them where oil prices would be in one year. Only one predicted a drop below $80/barrel. No one came even close to today’s level just 12 months later of $61. They were, every one of them, flat wrong.

What’s your point, Steve? It’s that economic fortune-telling is a poor basis for investment decision-making. A far better strategy is to invest in a

Trading Street Magazine

December 13, 2014

range of asset classes: stocks - domestic, international and emerging markets as well as bonds to cushion against volatility while achieving return. The difficulty in advocating for diversification this particular year, though, is that the S&P 500 is an obvious benchmark and it is sitting near the top of the performance tables.

As a result, a lot of people feel that owning anything but large US stocks is not worth it. China is slowing down, small stocks stink and Europe will never reclaim its former glories. Forget all of it, they say.

Wait! Check out the “jump” table below (I call it a jump table because results jump around from year

Page 9

to year). This year looks a lot like 2011 when the S&P 500 sat near the top of the asset class performance tables, ahead of small stocks, emerging market ones, or international stocks. True, but does that mean diversification is dead? Look at 2004, 2005, 2006, 2007, 2009, 2010 and 2012. The S&P 500 was the bottom 2 or 3 in stock performance. Owning just an S&P 500 ETF may have been a good idea if you did it this year, but that’s not been the case in most years.

not hit a home run, but you will likely never strike out either. I welcome your comments, questions and rebuttals.

Diversification is still valid. It means you probably may

About Stephen Vettorel Mr. Vettorel has nearly two decades of experience in capital raising, trading and institutional investment for companies such as Fidelity Investments and Fisher Investents. He is a graduate of Xavier University holding a degree in finance. In 2006 he founded Aumenti Capital Management, where he managed a $15 million long/short strategy hedge fund with a trading focusing on equities, futures and currencies.

To learn more about Mr. Vettorel please click on the FX ES Trader ad below

Page 10

Trading Street Magazine

December 13, 2014

Trading Street is Proud to Have the Following Industry Partners Please Help Support Them

Trading Street Magazine

December 13, 2014

Page 11

The 7 Killer Trading Mistakes That Doom Traders From Ever Becoming Consistently Profitable

By Benjamin Lee

This is part one of a seven part series:

Trading is one of the most difficult professions that anyone will ever undertake. Your strengths and your weaknesses are magnified because the market is filtered through your beliefs, experiences, and your own emotional makeup. If you have trouble with discipline or risk management, it will show up in your trading.

If you are scared of loss, you will ultimately manifest losses in your P&L. If you get emotional very easily, the market will bring out those emotions consistently.

Trading is already difficult enough because our competition has unlimited resources, better research, more capital, and lower commissions compared to us.

The odds are stacked in their favor. Over 90% of traders fail to make money and blow out their account. Yet most traders don’t spend the time or energy to attempt to stack the odds back in their favor.

In Outliers, Malcolm Gladwell observed that it takes approximately 10,000 hours of work in a particular field to become a maven or an expert. If I told you it would take 10,000 hours to master trading, would you invest the time and do whatever it took to become consistently profitable? If you said no, I would recommend just hanging up your trading shoes and finding a new, safer profession. If you said yes, prepare for one of the most fulfilling, exciting, and profitable professions you will ever encounter.

Every trader has a goal in mind when they start trading. They want to become consistently profitable so they can leave their job, support or improve their lifestyle, provide for their family, and/or to fulfill other emotional reasons. Whatever your particular goal(s), there is a path of success that you can follow to accelerate your learning curve and timeframe. After years of working on my own trading methodology and psychology and working with hundreds of other traders, I have found seven killer mistakes that will destroy any chance of a trader becoming consistently profitable.

As we go through them, remember how many apply to you. We will provide a test at the end of this article for Page 12

you to judge what you’ll have to do to reach your goals.

In addition, we will give you some suggestions on what to do to correct any mistakes that you’ve been making.

Killer Mistake #1: Their trading system doesn’t evolve with the markets.

When most traders first start out, they are typically enamored by the promise of riches from a particular trading system that works extremely well. The creators of the system brag about the profits that they’re raking in as you listen to their sales pitch and eventually you decide to purchase the system. You can’t wait for the system to show up in your mailbox. Once it arrives, you start reading voraciously through the material to absorb all the information. You start trading the system immediately and that’s where the excitement stops. You begin to realize that the system works but not as well as the creators said. You win for several days in a row and, all of a sudden, lose it all in one day.

I know this first hand because that’s how I first started and have heard the same story from numerous other traders.

What most trading system developers fail to mention is the importance of context. In real estate, the three most important factors in gauging a property are location, location, and location. The same holds for trading except its context, context, and context. If you Trading Street Magazine

December 13, 2014

don’t understand what the market is trying to do and five years. It has lost 39% in this year alone. If you how well it is doing in achieving that goal, entering a have been using a reversion-to-the-mean trading systrade is basically trying to shoot a basketball through a tem, you probably aren’t doing too well in this trending hoop with your eyes closed. For some professionals, market. The two major types of markets are trending they can sink a majority of their basmarkets and balancing/rotational markets because they have muscle memokets. A trading system that is great in ry and experience. For newer traders, Most trading sys- trending markets will get you in trouble your success rate is going to be very price doesn’t trend and just rotems tell you to en- when low. This theory applies to trading as tates. A trading system that is great in well. When an experienced trader uti- ter the market after rotational markets will get you killed lizes a trading system, they are filtering price has touched a in trending markets. The market only that system through the entire database trends approximately 18% of the time certain moving averof price action and experience in their and is in balance the remainder of the head. Most trading systems tell you to age... time. So how do you take advantage enter the market after price has touched of this? You either have to have two a certain moving average, has formed separate trading systems that work well some type of candlestick, or after price bounces off a in each market and learn to determine whether you’re Fibonacci retracement. But unless you’re looking at in a rotational or trending market. Or find a trading the context of the most recent price action, your odds system that teaches you the fundamentals of the market of becoming consistently profitable are significantly and auction process and focuses on taking trades that decreased. have higher probability based on the current context of the market. If you haven’t found a trading system that

Most trading systems are really good in certain you’re completely comfortable with, I would suggest markets and not very effective in others. US Crude you find one that matches your personality and you can Oil just broke below $60 per barrel for the first time in internalize easily.

About the Author: The the next “Master Market Psychologist” Benjamin Lee of ThinkTradeThink.com understands the institutional trading mindset enlightening the “average trader” to the pathways trod by true working professional traders.

• 8-Years Professional trading Experience • Trades 2 Hedge Funds • Has Traded Positions in Excess of 1 Million Shares • Bachelor’s in Finance • MBA in Entrepreneurship Click below to learn more about Mr. Lee

Trading Street Magazine

December 13, 2014

Page 13

Calendar of Economic Events for Remaining Period in December 2014

Page 14

Trading Street Magazine

December 13, 2014

Saturday December 13 2014 16:00 Sunday December 14 2014 15:50

Reporting Period

Previous

Survey

Forecast

Country

Reporting Period

Previous

Survey

Forecast 13.59

Country Parliamentary Elections

JP

Tankan Large Manufacturing Index

JP

Q4

13

13

15:50

Tankan Non-Manufacturing Index

JP

Q4

13

12

15:50

Tankan Non-Manufacturing Outlook

JP

Q4

14

14

15:50

Tankan Large Manufacturing Outlook

JP

Q4

13

14

18:00 21:00 21:00

Unemployment Rate Final Retail Sales MoM Retail Sales YoY

SG SG SG

Q3 OCT OCT

2.00% -0.40% 5.50%

1.90%

1.90% -0.65% 3.33%

22:30

WPI Inflation YoY

IN

NOV

1.77%

1.41%

1.50%

23:00

Current Account

FI

OCT

€ 591M

€ 111.7M

23:00

Inflation Rate YoY

FI

NOV

1.00%

1.30%

23:00

Inflation Rate MoM

FI

NOV

-0.20%

-0.11%

Country

Reporting Period

Previous

Monday December 15 2014 0:00

Balance of Trade

IN

NOV

$ -13.35B

$ -13.3B

0:00

Unemployment Rate

TR

SEP

10.10%

10.30%

0:15 0:15 0:30 1:00 2:30

PPI MoM PPI YoY Retail Sales YoY Balance of Trade IBC-BR Economic Activity

CH CH NL NO BR

NOV NOV OCT NOV DEC

-0.10% -1.10% -0.40% NOK 31.6B 0.48%

-1.37% 0.22% NOK 21.7B

3:00

CBI Industrial Trends Orders

GB

DEC

3

5:00

Consumer Confidence

BR

DEC

111.1

110.42

5:00 5:00 5:00 5:00 5:00 5:00 5:00 5:30 6:15 6:15 6:15 6:15 7:00 7:00 8:30 8:30 8:30 11:00

Balance of Trade Current Account Inflation Rate YoY Inflation Rate MoM Industrial Production YoY PPI MoM PPI YoY Ny Empire State Manufacturing Index Capacity Utilization Industrial Production YoY Industrial Production MoM Manufacturing Production YoY Balance of Trade NAHB Housing Market Index Inflation Rate YoY 3-Month Bill Auction 6-Month Bill Auction Inflation Rate MoM

PL PL PL PL RU RU RU US US US US US BE US IL US US AR

OCT OCT NOV NOV NOV NOV NOV DEC NOV NOV NOV NOV OCT DEC NOV

€614M €-235M -0.60% 0.00% 2.90% 0.30% 5.10% 10.16 78.90% 4.00% -0.10% 3.40% € 1398.9M 58 -0.30% 0.03% 0.09% 1.20%

€ 103.7M € -390.1M -0.50% -0.04% 1%

Trading Street Magazine

December 13, 2014

NOV

Survey

Forecast

3

€ -378M -0.40% 0.00% 1.10% 0.80%

58 -0.40%

6.94% 11.99 79.06% 3.78% 0.56% 4.07% € 800.2M 55.41 -0.20%

1.40%

1.39%

12 79.30% 0.60%

Page 15

13:00 13:00 14:00 14:00 16:30 17:35 17:45 23:00 Tuesday December 16 2014 0:00 0:00 0:00 0:30 0:30 0:30 0:30 1:00 1:00 1:00 1:00 1:30 1:30 1:30 1:30 1:30 1:30 1:30 1:30 1:30 2:00 2:00 2:00 2:30 2:30 4:45 4:45 5:30 5:30 5:30 5:30 5:30 5:30 5:30 5:55 5:55 6:00 Page 16

Overall Net Capital Flows Net Long-term Tic Flows Industrial Production YoY Retail Sales YoY RBA Meeting's Minutes Markit/JMMA Manufacturing PMI Flash HSBC Manufacturing PMI Flash Bank Stress Tests

US US CO CO AU JP CN GB Country

Markit Comp PMI - Flash Markit Manufacturing PMI - Flash Markit Services PMI - Flash Markit Comp PMI - Flash Markit/BME Manufacturing PMI Flash Markit Services PMI - Flash Riksbank Rate Decision Markit Comp PMI - Flash Markit Manufacturing PMI - Flash Markit Services PMI - Flash Balance of Trade Core Inflation Rate YoY Retail Price Index MoM Retail Price Index YoY PPI Input MoM PPI Input YoY PPI Output YoY PPI Output MoM Inflation Rate YoY Inflation Rate MoM Balance of Trade Zew Economic Sentiment Index Zew Economic Sentiment Index BOE's Governor Carney speech Financial Stability Report Chain Store Sales WoW Chain Store Sales YoY Foreign Securities Purchases Foreign Securities Purchases by Canadians Manufacturing Sales MoM Building Permits Housing Starts Building Permits MoM Housing Starts MoM Redbook MoM Redbook YoY Inflation Rate YoY

FR FR FR DE DE DE SE EA EA EA IT GB GB GB GB GB GB GB GB GB EA EA DE GB GB US US CA CA CA US US US US US US NG

OCT OCT OCT OCT

$ -55.6B $ 164.3B 1.30% 8.70%

DEC DEC

52 50

50.3

Reporting Period

Previous

Survey

DEC DEC DEC DEC DEC DEC DEC DEC DEC OCT NOV NOV NOV NOV NOV NOV NOV NOV NOV OCT DEC DEC

47.9 48.4 47.9 51.7 49.5 52.1 0.00% 51.1 50.1 51.1 € 2.014B 1.50% 0.00% 2.30% -1.50% -8.40% -0.50% -0.30% 1.30% 0.10% € 18.5B 11 11.5

Dec Dec OCT OCT OCT NOV NOV NOV NOV Dec Dec NOV

-1.50% 2.90% CAD 4.37B CAD 8.64B 2.10% 1092K (R) 1009K 5.9% (R) -2.80% -1.30% 3.90% 8.10%

0.60% 6.60%

$ 11.4B 52861.48 0.20% 5.83% 51.4

48.6 48.4 50.5 0% 51.5 50.5 51.5

0.00% 2.30% -1.60% -9.30% -0.30% -0.30% 1.20% 0.00%

19.7

Forecast 47.92 47.71 46.87 53.3 48.68 54.97 0% 51.9 49.69 52.51 € 3.7B 1.39%

1.18% -0.05% € 17B 13.95 19.32

CAD 9B -0.60% 1060K 1040K

1050.68 1051.5K

8.10%

3.02% 8.17%

Trading Street Magazine

December 13, 2014

6:45 8:30 13:00 13:00 15:30 15:50 15:50 15:50

Markit Manufacturing PMI Flash 4-Week Bill Auction PPI MoM PPI YoY Westpac Leading Index MoM Balance of Trade Exports YoY Imports YoY

US US KR KR AU JP JP JP

DEC

54.8 0.04% -0.60% -0.70% 0.00% ¥ -710B 9.60% 2.70% SGD 4240M 2.00%

56.4

22:00

Balance of Trade

SG

NOV

23:30 Wednesday December 17 2014 0:00 0:00 1:00 1:00 1:30 1:30 1:30 1:30 1:30 2:00 2:00 2:00

Interest Rate Decision

TH Reporting Period

Previous

Survey

Inflation Rate YoY Inflation Rate MoM Inflation Rate YoY Retail Sales YoY Claimant Count Change Average Earnings Excl. Bonus Average Earnings Incl. Bonus MPC Meeting Minutes Unemployment Rate Core Inflation Rate YoY - Final Inflation Rate YoY - Final Inflation Rate MoM

AT AT MY PL GB GB GB GB GB EA EA EA

NOV NOV NOV NOV NOV OCT OCT

1.60% -0.10% 2.80% 2.30% -20.4K 1.30% 1%

OCT NOV NOV NOV

Current Account

NL

Q3

MBA Mortgage Applications MBA 30-Year Mortgage Rate Industrial Production YoY PPI YoY Unemployment Rate Wholesale Sales MoM Core Inflation Rate YoY Current Account Core Inflation Rate MoM Inflation Rate YoY Inflation Rate MoM EIA Crude Oil Stocks Change Fed Interest Rate Decision Foreign Bond Investment Foreign Stock Investment RBA Bulletin House Price Index YoY Balance of Trade

US US PL PL RU CA US US US US US US US JP JP AU CN CH

Dec Dec NOV NOV NOV OCT NOV Q3 NOV NOV NOV Dec Dec Dec

6.00% 0.70% 0.40% 0.00% EUR 16975M 7.30% 4.11% 1.60% -1.20% 5.10% 1.80% 1.80% $ -98.5B 0.20% 1.70% 0.00% 1.454M 0.25% ¥ -852.2B ¥ 481.9B

2:00 4:00 4:00 5:00 5:00 5:00 5:30 5:30 5:30 5:30 5:30 5:30 7:30 11:00 15:50 15:50 16:30 17:30 23:00 Thursday December 18 2014

NOV NOV

-2.60% CFH 3.25B

Reporting Period

Previous

Country

Trading Street Magazine

Country

December 13, 2014

NOV NOV NOV NOV NOV NOV

55.35

0.15% ¥ -1000B ¥ -991.8B 6.30% 1.10% SGD 5452.1M 2%

2.05% -20K 1.50% 1.20% 5.90% 0.70% 0.30% -0.20%

Forecast 1.89% -0.17% 4.20% 2.72% -25.8K

5.80% 0.70% 0.30% 0.02% EUR 17407.6M

1.10% -1.10% 5.10% 1.80% $-97.2B 0.10% 1.40% -0.10% 2.240M

21.44% 4.15% 0.61% -1.74%

1.87% $ -97.1B 1.87% 0.18% 5.9M 0.25% ¥ -1740.1B ¥ 994.5B

CFH 3B Survey

Forecast Page 17

0:00 0:00 0:30 0:30 0:30 1:00 1:00 1:00 1:00 1:30 1:30 1:30 1:30 1:30 1:30 2:00 2:00 5:30 5:30 5:45 5:45 6:00 6:00 6:00 7:00 7:00 7:30 9:00 9:00 16:05 20:00 20:30 21:00 21:00 23:00 23:00 23:00 23:45 Friday December 19 2014

Business Confidence Consumer Confidence Unemployment Rate Consumer Confidence Unemployment Rate IFO Business Climate IFO Expectations IFO Current Conditions Interest Rate Decision PPI MoM PPI YoY Retail Sales ex Fuel MoM Retail Sales ex Fuel YoY Retail Sales MoM Retail Sales YoY Construction Output YoY Current Account Continuing Jobless Claims Initial Jobless Claims Markit Composite PMI - Flash Markit Services PMI - Flash Consumer Confidence Retail Sales MoM Retail Sales YoY CB Leading Index MoM Philadelphia Fed Manufacturing Index EIA Natural Gas Stocks Change GDP Growth Rate QoQ GDP Growth Rate YoY Gfk Consumer Confidence BoJ Interest Rate Decision All Industry Activity Index MoM Coincident Index - Final Leading Economic Index - Final GFK Consumer Confidence PPI MoM PPI YoY Business Confidence

0:30 1:00 1:00 1:00 1:00 1:30 Page 18

SE SE HK NL NL DE DE DE TW ZA ZA GB GB GB GB EA IT US US US US BE MX MX US US US CO CO GB JP JP JP JP DE DE DE FR

DEC DEC NOV DEC NOV DEC DEC DEC

104.3 96.8 3.30% -8 8.00% 104.7 99.7 110 1.88% 0.30% 6.70% 0.80% 4.60% 0.80% 4.30% -1.70% € 636M 2514K 294K 56.1 56.2 -14 -0.70% 4.50% 0.90% 40.8 -51Bcf -0.10% 4.30% -2 0.00% 1.00% 1109.8 105.6 8.7 -0.20% -1.00% 99

NOV NOV NOV NOV NOV NOV OCT OCT Dec Dec DEC Jan DEC OCT OCT NOV DEC Dec Q3 Q3 DEC OCT OCT OCT Jan NOV NOV DEC

Country

Reporting Period

Current Account

HK

Q3

Current Account Industrial Orders YoY Industrial Sales MoM Industrial Orders MoM

EA IT IT IT

OCT OCT OCT OCT

Public Sector Net Borrowing

GB

NOV

Previous

97.9

105.4 100.7 110.4

1.88% 0.10% 6.50% 0.30% 4.50% 0.30%

299K

6.79%

1.10% 3.20% 1.61% € 2577.9M 2642K 289K 55.5

56.6

3.70% 0.50% 27 -45Bcf 0.90% 4.30% -1

-13.4 0.55% 4.33% 32.22 -379.3Bcf 1.82% 4.12% -2.36 0%

110.2 104 8.6 -0.20% -0.90% 99

110.2 104 8.38

Survey

Forecast

HKD -8.94B € 31.0B -0.40% -0.40% -1.50% £ -7.05B

103.55 97.03 3.20% -7.87 8% 104.51

-0.96% 99.73

HKD -7.9B € 13.8B

-0.73% £ -15.05B

Trading Street Magazine

£ -13.2B December 13, 2014

3:00 3:00 3:00 3:30 4:30 4:30 5:00 5:30 5:30 5:30 5:30 5:30 5:30 6:00 9:00 11:00 Sunday December 21 2014 3:00 3:00 16:30 20:00 21:00 23:00 Monday December 22 2014 0:00 0:00 0:00 0:30 1:00 3:00 3:00 5:00 5:30 7:00 7:00 7:00 14:00 17:00 21:00 21:00 23:00 23:00 23:45 23:45 23:45

IPCA mid-month CPI YoY IPCA mid-month CPI MoM Unemployment Rate Foreign Reserves Current Account Foreign Direct Investment Retail Sales YoY Core Inflation Rate YoY Inflation Rate YoY Inflation Rate MoM Retail Sales MoM Retail Sales YoY Retail Sales Ex Autos MoM Unemployment Rate Interest Rate Decision Balance of Trade

Industrial Production YoY Industrial Production MoM Unemployment Rate BOJ Monthly Report Unemployment Rate Import Prices MoM

BR BR BR IN BR BR RU CA CA CA CA CA CA MX CO AR

IL IL TW JP MY DE

DEC DEC NOV Dec NOV NOV NOV NOV NOV NOV OCT OCT OCT NOV NOV

6.42% 0.38% 4.70% $ 314.66B $ -8.13B $ 4.98B 1.70% 2.30% 2.40% 0.10% 0.80% 4.50% 0.00% 4.78% 4.50% $ 361M

6.54% 0.73% 4.40%

Previous

Trading Street Magazine

December 13, 2014

DK DK DK SE GR IL PT RU US EA US US CO PH SG SG FI FI FR FR FR

$ -8.65B

$ -4.6B 5368.62

2.50% 2.30% -0.10% 0.10%

4.91% 4.50% $ 631M

2.18% 2.31% 0.16% 0.80% 5.66% 0.32% 4.90% 4.50% $ 620.9M

Survey

Forecast

OCT OCT NOV

19.41% 1.96% 3.87%

3.23% -0.90% 3.90%

OCT NOV

2.70%

2.60%

Previous Consumer Confidence Retail Sales MoM Retail Sales YoY Retail Sales YoY Current Account Unemployment Rate Current Account GDP YoY Chicago Fed National Activity Index Consumer Confidence Existing Home Sales Existing Home Sales Change MoM Balance of Trade Balance of Trade Inflation Rate YoY Inflation Rate MoM PPI YoY Unemployment Rate GDP Growth Rate QoQ - Final GDP Growth Rate YoY - Final PPI MoM

4.30%

DEC NOV NOV NOV OCT NOV OCT NOV NOV DEC NOV NOV OCT OCT NOV NOV NOV NOV Q3 Q3 NOV

6.3 0.70% 3.10% 4.50% € 1.622B 5.70% € 563M 0.00% 0.14 -11.6 5.26M 1.50% $ - 0.70B $ 281M 0.10% -0.40% -0.30% 8.30% -0.10% 0.00% -0.20%

Survey

Forecast 6.41 0.23% 0.86% € 0.2B 6% € 291.6M 0.44% 0.28 -11.53 5.1M $ -0.3B $ 503.6M -0.46% -0.50% 8.20%

0.30% 0.40% Page 19

Tuesday December 23 2014 0:00 0:00 0:00 0:00 0:30 0:30 0:30 0:30 1:00 1:00 1:00 1:00 1:30 1:30 1:30 1:30 1:30 2:00 2:00 4:45 4:45 5:30 5:30 5:30 5:30 5:30 5:30 5:30 5:30 5:55 5:55 6:00 6:00 6:00 6:55 7:00 7:00 7:00 13:00 Wednesday December 24 2014 0:00 0:30 0:30 0:30 Page 20

Previous Industrial Production YoY GDP Growth Rate QoQ - Final GDP Growth Rate YoY - Final PPI YoY Inflation Rate YoY PPI MoM PPI YoY Balance of Trade Retail Sales MoM Retail Sales YoY Unemployment Rate Tourist Arrivals YoY Inflation Rate YoY Inflation Rate MoM Current Account GDP Growth Rate QoQ Final GDP Growth Rate YoY Final Industrial Production YoY Industrial Production Mom Chain Store Sales YoY Chain Store Sales WoW GDP MoM Core PCE Prices QoQ Final PCE Prices QoQ Final Durable Goods Orders Ex Transportation GDP Price Index Final GDP Growth Rate QoQ Final Personal Income MoM Personal Spending MoM Redbook MoM Redbook YoY Business Confidence Economic Activity YoY House Price Index MoM Reuters Michigan Consumer Sentiment Final New Home Sales MoM New Home Sales Richmond Fed Manufacturing Index Consumer Confidence

KOF Leading Indicators Business confidence GDP Growth Rate QoQ - Final GDP Growth Rate YoY - Final

AT DK DK ES HK SE SE TH IT IT NO TR BE BE GB GB GB BE BE US US CA US US US US US US US US US BE MX US US US US US KR

OCT Q3 Q3 NOV NOV NOV NOV NOV OCT OCT OCT NOV DEC DEC Q3 Q3 Q3 OCT OCT Dec Dec OCT Q3 Q3 NOV Q3 Q3 NOV NOV Dec Dec DEC OCT OCT DEC NOV NOV DEC DEC

-2.20% 0.10% 0.30% -0.20% 5.20% 0.20% 2.10%

Country

Reporting Period

Previous

CH NL NL NL

DEC DEC Q3 Q3

-1.3 2.4 0.60% 1.10%

Survey

0.50% 0.90%

-2.02% 0.50% 0.90% 0.40% 4.41% 3.02% 303.98 0.10% -0.56% 3.50%

-0.10% -0.50% 3.70% 1.09% -0.11% -0.13% £ -23.1B 0.90% 3.20% 5.64% 0.10%

0.40% 2.00% 2.30% -0.90% 2.10% 4.60% 0.20% 0.20%

Forecast

0.38% -0.28% £ -25.3B

0.80% -0.54%

1.40% 1.20% 1.40% 3.90%

1.40% 1.20% 0.96% 1.40% 3.90% 0.30% 0.12% 2.16% -5.85

-6.1 2.93% 0.00% 88.8 0.70% 458K 4 103

93.8 454.1K 12.29 101.91 Survey

Forecast

0.20% 1.10%

-1.27 2.9 0.20% 1.10%

Trading Street Magazine

December 13, 2014

4:00 4:00 4:00 5:30 5:30 7:30 15:50 21:00 21:00 Thursday December 25 2014 15:30 15:30 15:30 15:30 15:30 15:30 15:30 15:30 15:50 15:50 15:50 15:50 15:50 20:00 21:00 21:00 Friday December 26 2014 0:00 0:00 3:30 3:30 3:30 4:30 4:30 6:00 Sunday December 28 2014 13:00 16:00 23:00 Monday December 29 2014

TCMB Interest Rate Decision MBA Mortgage Applications MBA 30-Year Mortgage Rate Continuing Jobless Claims Initial Jobless Claims EIA Crude Oil Stocks Change BOJ Monetary Policy Minutes Construction Orders YoY Housing Starts YoY

0:30

Balance of Trade

Core Inflation Rate YoY Household Spending YoY Tokyo Core CPI YoY Tokyo CPI YoY Inflation Rate Ex-Food and Energy YoY Inflation Rate YoY Inflation Rate MoM Unemployment Rate Foreign Bond Investment Foreign Stock Investment Industrial Production YoY - Prel Industrial Production MoM - Prel Retail Sales YoY Industrial Production YoY Industrial Production YoY Industrial Production MoM

Inflation Rate YoY Inflation Rate MoM Deposit Growth YoY Foreign Reserves Bank Loan Growth Business confidence Capacity Utilization Balance of Trade

Business Confidence HIA New Home Sales MoM Consumer Confidence

Trading Street Magazine

December 13, 2014

TR US US US US US JP JP JP

8.25%

8.25% 32.97% 4.20% 2755K 280K 8.8M

NOV NOV

15.70% -12.30%

-2.60% -5%

Country

Reporting Period

Previous

JP JP JP JP JP JP JP JP JP JP JP JP JP TH SG SG

NOV NOV DEC DEC NOV NOV NOV NOV Dec Dec NOV NOV NOV NOV NOV NOV

Country

Reporting Period

TR TR IN IN IN TR TR MX

DEC DEC Dec Dec Dec DEC DEC NOV

Country

Reporting Period

Previous

KR AU FI

DEC NOV DEC

75 3% 2.6

Country

Reporting Period

Previous

HK

NOV

HKD -49.8B

Dec Dec Dec Dec Dec

Survey

Forecast

2.90% -4% 2.40% 2.10% 2.20% 2.90% -0.30% 3.50%

2.88% -6.46%

-0.80% 0.40% 1.40% -2.90% 0.20% 2.60%

-0.44% 0.22% 0.35% -4.94%

Previous

3% 0.04% 3.40%

Survey

9.15% 0.18% 11.70%

Forecast 8.91% -0.11%

11.30% 102.7 74.50% $0.143B

100.65 73.83% -151.15 Survey

Forecast 76.59 3.53

Survey

Forecast HKD -38.5B Page 21

2:00

Consumer Confidence

IT

DEC

5:30

Nominal Budget Balance

BR

NOV

6:00 6:30 11:00 12:00 12:00 12:00 15:00 15:00 15:00 15:00 15:00 15:00 23:30 Tuesday December 30 2014 0:00 0:00 0:00 0:00 0:00 0:00 0:30 0:30 1:00 1:00 1:00 1:00 2:00 3:00 3:00 3:00 4:00 4:00 4:00

Interest Rate Decision Dallas Fed Manufacturing Index Industrial Production YoY Current Account GDP Growth Rate QoQ GDP Growth Rate YoY Current Account Industrial Production YoY Industrial Production Mom Manufacturing Production YoY Retail Sales MoM Retail Sales YoY Current Account

IL US AR AR AR AR KR KR KR KR KR KR TH

DEC NOV Q3 Q3 Q3 NOV NOV NOV NOV NOV NOV NOV

100.2 BRl -17.780B 0.25% 10.5 -1.80% $ 0.61B 0.90% 0.00% $ 9.01 B -3.20% -1.60% -3.40% -0.40% -0.30% $ 2628M

Country

Reporting Period

PPI YoY Inflation Rate YoY Inflation Rate MoM Retail Sales MoM Retail Sales YoY Consumer Confidence Retail Sales YoY Balance of Trade Private Loans YoY Business Confidence PPI MoM PPI YoY PPI YoY Industrial Production YoY Retail Sales YoY Current Account Retail Sales MoM Retail Sales YoY Unemployment Rate

AT ES ES ES ES TR HK SE EA IT IT IT GR PT PT ES CL CL CL

NOV DEC DEC NOV NOV DEC NOV NOV NOV DEC NOV NOV NOV NOV NOV OCT NOV NOV NOV

4:00

Balance of Trade

ZA

NOV

4:45 4:45 5:00 5:55 5:55 6:00 6:00 8:00

Chain Store Sales WoW Chain Store Sales YoY Industrial Production YoY Redbook MoM Redbook YoY S&P/Case-Shiller Home Price MoM S&P/Case-Shiller Home Price YoY Unemployment Rate

US US CL US US US US CO

Dec Dec NOV Dec Dec OCT OCT NOV

Page 22

Previous

100.51 BRl -41.3B 0.25% 12.43 -2.12% $ -1.2B 0.07% 0.18% $ 8.5B -1.35% 0.55% -0.21% 0.64% 1.14% $ 1321.1M Survey

-1.00%

-0.80% 1.00% 68.7 4.30% SEK -0.2B -1.10% 96.3

Forecast -0.90% 0.18% 0.18% -0.08% 0.95% 69.42 1.69% SEK 1.1B 10430510% 96.68

-1.20% -0.90% 0.20% 0.80% € 0.439B 5.40% -0.20% 6.40% ZAR -21.33B

-1.47% -0.06% -2.24% 1.11% € 0.8B 3.80% 0.56% 6.20%

-0.10%

1.49%

ZAR -8.7B

2.18% 0.00% 4.90% 7.90% Trading Street Magazine

9.80% December 13, 2014

Wednesday December 31 2014 0:00 1:00 2:00 4:00 4:00 6:45 7:00 7:00 14:30 16:00 17:00

Balance of Trade Current Account Retail Sales YoY MBA Mortgage Applications MBA 30-Year Mortgage Rate Chicago PMI Pending Home Sales MoM Pending Home Sales YoY Private Sector Credit MoM Balance of Trade NBS Manufacturing Pmi

Trading Street Magazine

December 13, 2014

Country

Reporting Period

TR AT GR US US US US US AU KR CN

NOV Q3 OCT Dec Dec DEC NOV NOV NOV DEC DEC

Previous $ -6.25B € -463M

66.2 -1.10% 2.20% 0.60%

Survey

Forecast $ -7B € -816.2M -5.28% 33.09% 4.20% 62.71 -2.69% 0.54% 4726.82 50.67

Page 23

US Growth – How will it Impact the Global Economy?

By Tim LuCarelli

The US economy is enjoying a resurgence of growth with two of the strongest back to back Gross Domestic Product (GDP) quarters in several years and a potential for a very strong fourth quarter. China’s growth, though still very robust compared to other nations, is waning and Europe looks as though it is headed for another recession while Japan officially entered a recession last quarter.

For many years politicians and economists touted that when the US sneezed the rest of the world caught cold. As much as no one really wants to admit that is still true, we only have to look back to 2008/2009 when the US banking sector imploded taking down the US economy and for all practical purposes the rest of world.

The US has officially been out of recession since June 2009 but for many people within the US borders the recession continues in the form of no work, less pay and overall higher prices. The US Government bailouts helped all the people in the top percentage of income earners with the expectation that there would be a “trickle down” effect. After five years many people are still waiting for some of that wealth to trickle down.

The US is now at its largest disparity between rich and poor in recorded history.

Employment numbers

Unemployment in the US has dropped from 7.0% a year ago to 5.8% in the latest employment report. However, the marginally employed is 2.1 million, about where it was a year ago, meaning the long term employed are not finding jobs. Additionally another statistic that is worrisome is the wage rate for US workers, while there are more people working they are making less money than they did eight years ago; hence, the growth in wage disparity.

While the employment numbers are nothing to get overly excited about they are considerably better than they were just five years ago, which means people as a whole have more money to spend and feel more Page 24

confident about their future. From an economic standpoint this may be some of the reason we are now seeing very good growth numbers in GDP. An argument for continued growth may also lie in the consumer sentiment numbers which are at values not seen since 2006; again, quite possibly a function of the employment situation.

Food and energy

Inflation has always been a contributing factor to stagnant growth and when food and fuel increase at disproportionate amounts to wages it has an even greater affect. Throughout the whole great recession fuel prices were at record highs which most certainly contributed to prolonging the depressed state of the economy. Additionally food prices have climbed an average of 2.5% since the official end of the recession.

While this might seem like no big deal because it did keep pace with overall wage increases, the number of unemployed, underemployed and lower paid workers that did not have their income increase are now struggling to buy food.

Currently the price of food remains high but fuel costs have dropped significantly and the potential for prices to remain low or lower would be a big boost to people’s wallets. With more disposable income, especially for people with lower incomes, spending will increase causing GDP to ratchet up even more. This wealth effect would be more than any stimulus the government could provide. The disparity between rich and Trading Street Magazine

December 13, 2014

poor would actually start to close, albeit not much but enough to cause more enthusiasm amongst the population increasing confidence to spend more; creating an almost self-feeding growth frenzy.

made everyone else economically sick, the pump in growth by the US will most certainly have a profound effect on growth around the world. China’s current sick feeling will go away as the US steps up purchases of pre-made goods. Japan, still in a 25 year slump and Who wins? self-stimulating their economy with exces The US Federal Reserve has sigsive quantitative easing will most certainly naled they will raise rates when growth is feel the added benefits of a stronger US other economy. Many other nations will also feel sustainable. Since the early eighties and the Many rule of Paul Volker, action by the Fed to curb nations will the effects especially Canada and Mexico. too much growth or not enough growth has Some that will not feel all they should will always been late. They, the Fed, has waited also feel the be Europe and Russia. Europe has too many until economic data shows a very clear slow effects... internal growth issues and Russia, well Rusdown or pick up and there is no reason to sia just has issues. think this Federal Reserve administration will be any different, which means the US

On balance the impact will be positive will need to see at least two more quarters of 3+ percent the longer the Fed waits to raise rates and the more growth before the Fed will even hint at raising rates. economic momentum all the global economies will gain. The road has been long and hard for many peo One good factor for the US and for the global ple in the US and around the world. The remaining economy is that when the Fed does raise rates it will be question is will the growth sustain or slump back into perceived as a vote of confidence for continued growth. stagnation? Economic momentum, if allowed to continue long enough, will put everyone in the world back

Just as when the US got sick in 2008/2009 and into the black.

About Tim LuCarelli He began his investment career trading Swiss Franc and Deutschemark futures on one of the early electronic platforms in the late 1980’s. His career progressed naturally to interest rates, energies, equities, and derivatives – which, in addition to his FX background -- all helped build the broad base on which he launched his financial modeling and quantitative analysis companies.

Click below to learn more about Mr. LuCarelli

Trading Street Magazine

December 13, 2014

Page 25

Economic Outlook

2015 the Year of the Liquidity Trap

by Shayne Heffernan

Shayne Heffernan warns on a bloated World economy in 2015, the excess of money printed and the artificially created economy will unravel.

A liquidity trap is a situation described in Keynesian economics in which injections of cash into the private banking system by a central bank fail to lower interest rates and hence fail to stimulate economic growth. A liquidity trap is caused when people hoard cash because they expect an adverse event such as deflation, insufficient aggregate demand, or war.

Signature characteristics of a liquidity trap are shortterm interest rates that are near zero and fluctuations in the monetary base that fail to translate into fluctuations in general price levels.

In its original conception, a liquidity trap refers to the phenomenon when increased money supply fails to lower interest rates. Usually central banks try to lower interest rates by buying bonds with newly created cash. In a liquidity trap, bonds pay little to no interest, which makes them nearly equivalent to cash. Under the narrow version of Keynesian theory in which this arises, it is specified that monetary policy affects the economy only through its effect on interest rates. Thus, if an economy enters a liquidity trap, further increases in the money stock will fail to further lower interest rates and, therefore, fail to stimulate.

In the wake of the Keynesian revolution in the 1930s and 1940s, various neoclassical economists sought to minimize the concept of a liquidity trap by

specifying conditions in which expansive monetary policy would affect the economy even if interest rates failed to decline. Don Patinkin and Lloyd Metzler specified the existence of a “Pigou effect,” named after English economist Arthur Cecil Pigou, in which the stock of real money balances is an element of the aggregate demand function for goods, so that the money stock would directly affect the “investment saving” curve in an IS/LM analysis, and monetary policy would thus be able to stimulate the economy even during the existence of a liquidity trap. While many economists had serious doubts about the existence or significance of this Pigou Effect, by the 1960s academic economists gave little credence to the concept of a liquidity trap.

The neoclassical economists asserted that, even in a liquidity trap, expansive monetary policy could still stimulate the economy via the direct effects of increased money stocks on aggregate demand. This was essentially the hope of the Bank of Japan in 2001, when it embarked upon quantitative easing. Similarly it was the hope of the central banks of the United States and Europe in 2008–2009, with their foray into quantitative easing. These policy initiatives tried to stimulate the economy through methods other than the reduction of short-term interest rates.

Trading Street Magazine

December 13, 2014

When the Japanese economy fell into a period Page 27

of prolonged stagnation despite near-zero interest rates, the concept of a liquidity trap returned to prominence.

However, while Keynes’s formulation of a liquidity trap refers to the existence of a horizontal demand curve for money at some positive level of interest rates, the liquidity trap invoked in the 1990s referred merely to the presence of zero interest rates (ZIRP), the assertion being that since interest rates could not fall below zero because no one will lend 100 dollars unless she gets at least 100 dollars back, monetary policy would prove impotent in those conditions, just as it was asserted to be in a proper exposition of a liquidity trap. Given that there is no evidence of the existence of a liquidity trap for an interest rate greater than zero, in modern macroeconomics liquidity trap refers to a situation in which the nominal interest rate is zero. As a consequence of this, a liquidity trap is also known as the Zero Lower Bound Problem.

While this later conception differed from that asserted by Keynes, both views have in common, firstly, the assertion that monetary policy affects the economy only via interest rates, secondly, the conclusion that monetary policy cannot stimulate an economy in a liquidity trap, and thirdly, the inference that interest rates cannot fall below some value. Declines in monetary velocity offset injections of short-term liquidity.

Similar controversy emerged in the United States and Europe in 2008–2010, as short-term policy rates for the various central banks moved close to zero. Paul Krugman argued repeatedly in 2008–11 that much of the developed world, including the United States, Europe, and Japan, was in a liquidity trap. He noted that tripling of the U.S. monetary base between 2008 and 2011 failed to produce any significant effect on U.S. domestic price indices or dollar-denominated commodity prices.

About Shayne Heffernan

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reached a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financials. Shayne Heffernan founded the Heffernan Group of Companies and you can interact with him in his own Live Trading Lab here on Trading Street. Click the picture to the right to find out more.

Page 28

Trading Street Magazine

December 13, 2014

Trading Street Magazine

December 13, 2014

Page 29

Predictions from 2008

“There’s growing evidence that parts of the debt markets… are coming back to life.”

Peter Coy and Mara Der Hovanesian, BusinessWeek, Oct. 1, 2007

“I expect there will be some failures. … I don’t anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system.”

Ben Bernanke, Federal Reserve chairman, Feb. 28, 2008

“Anyone who says we’re in a recession, or heading into one—especially the worst one since the Great Depression— is making up his own private definition of ‘recession’.”

Donald Luskin (US investment guru), September 14, 2008

Page 30

Trading Street Magazine

December 13, 2014

What Does Our Investing Future Hold?

T hat

is a question on everyone’s mind. The truth is that investment cash has been difficult to come by for years, which means you must search far and wide, diligently seeking good advice. Soothsayers make outlandish predictions that never have any possibility of coming true but they do draw a great deal of media attention, which helps sell their books or other products. Such is the nature of our competitive world today. Watch any of the self-proclaimed gurus on the air these days. Their practical value is likely more to pad their own egos than for anything that might benefit the average investor or trader.

We thought it would be interesting for our panel of experts here at Trading Street to provide their predictions. Every one of Trading Street’s experts have no need to boost their ego as they have all been trading for a living for many years. Many of them are published authors, but they also teach and mentor; they have a genuine interest in sharing their knowledge, not boasting about it. Many of Trading Street’s experts didn’t really want to give predictions for 2015 but as persuasive a management team that we are, we’ve convinced most of them that it would be fun to look back in a year to see who was right, wrong and who couldn’t even come close. This is for braggin’ rights here, and we do it in the spirit of fun and camaraderie on Trading Street.

So as you’re reading some of these predictions keep in mind that they come from those of us that believe in methodologies, and real analysis. We are not prognosticators in any sense of the word, but we have seen much that has worked over the decades, and more that has failed. With that in mind, let’s see what our pros have to suggest. And for sure, have some fun reading the predictions. It is our hope that you learn a bit and find our experts inspiring for your own trading Page 31 Trading Street Magazine December 13, 2014 future.

Predictions for 2015

Trading Street’s Participating Experts: Heffx - Shayne Heffernan The Lions Den 4X - Tony Wiedenheft TradeFoxx - Tony Lopez Fx Addicts - Tim LuCarelli

Disclosure The views and opinions expressed are for informational and educational purposes only as of the date of writing and may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The information provided does not take into account the specific objectives, financial situation, or particular needs of any specific person. All investments carry a certain degree of risk and there is no assurance that an investment will provide positive performance over any period of time. Dividends are not guaranteed. Prices of equity securities may decline significantly over short or extended periods of time. Debt or fixed income securities are subject to market risk, credit risk, and interest rate risk, call risk, tax risk, political and economic risk and income risk. Investors should contact their tax advisor regarding the suitability of investments in their portfolio.

Commodity futures, Forex and forward contract prices are highly volatile. Investments in commodities, futures and Forex may be affected by overall market movements, changes in interest rates, and other factors such as weather, disease, embargoes, and international economic and political developments.

Page 32

Trading Street Magazine

December 13, 2014

Heffx Dow Jones Our target for year-end 2015 on the Dow is 15000 with a potential bottom of 12500.

In general we do not feel there is any value in buying at the current levels, markets are without doubt bloated.

We expect to see the margin levels reduce in 2015.

Momentum Stocks Tesla $150 Twitter $25 FB $60 APPL $150 high to $95

Gold Here is a look at our weekly charts that are signaling a countertrend Bullish divergence that would indicate a target on $1500 in 2015. However there is a chance that as The Fed unwinds Gold could rally to $3000.

Last week Gold closed up 30.570 at 1,222.210. Volume was -0% below average (neutral) and Bollinger Bands were 18% narrower than normal.

Open 1,192.690

High 1,238.200

Low 1,186.910

Technical Outlook Short Term: Intermediate Term: Long Term:

Neutral Bearish Bearish

Moving Averages: Close: Volatility: Volume:

10-period 1,201.16 44 0

Close 1,222.210 0

50-period 1,270.33 36 0

Volume

200-period 1,486.88 46 0

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Trading Street Magazine

December 13, 2014

Page 33

Gold Summary Gold is currently 17.8% below its 200-period moving average and is in andownward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect very strong flows of volume into Gold (bullish). Our trend forecasting oscillators are currently bearish on Gold and have had this outlook for the last 14 periods. Our momentum oscillator has set a new 14-period high while the security price has not. This is a bullish divergence.

Oil

Oil Price on Track to Hit HEFFX $43 to $48 Range

Brent has fallen more than 40 percent, or $50, from its 2014 high reached in June and others in the market say the losing streak could have further to run.

OPEC said demand for its crude in 2015 would fall to its lowest in more than a decade, indicating a large supply surplus in 2015 without OPEC output cuts or a slowdown in the U.S. shale boom.

EURUSD

Our EURUSD target is $1.15

Europe remains in Crisis and there is no fast exit. Europe’s economy is in turmoil the structure of the ECB and the fiscal management of the trade bloc is questionable.

USD/JPY

USDJPY Target 100

The Bank of Japan will reject Abenomics in 2015 and the Yen will see a dramatic reversal. HEFFX are targeting 100 USDJPY as the Japanese Economy begins to reset. For decades Japan has run on printed money however there is an end to that free run.

Page 34

Trading Street Magazine

December 13, 2014

The Lions Den 4X

USD/JPY Where to Now?

As with most 4X traders the Cubs in The Lion’s Den have been trading the Japanese Yen. We just had our Trilogy FIB on the GBP/JPY take profit for over 500 single pips at 189.22.

The USD/JPY at this time is close to 120.00. Back in February 2007 it was here and fell about 600 pips. Then it went quickly back up to the 124 area. We are looking to play the USD/JPY down from the 122 – 124 channel with a Trilogy retracement alert. Ultimately we think the USD/JPY will head to the 130 area by summer 2015.

Good luck to all!

The Lions Den 4X was started by Tony Wiedenheft in 2003 when a family health crisis demanded he raise some additional funds over and above what he was taking home as a Florida construction supervisor. A friend suggested he look at Forex as a means to an end, and after going to a live FX seminar in West Palm Beach, realized a new passion for trading. After 2 years of saving cash, he was $4K lighter, but in possession of a new system, one that he mastered in 2 months, to the extent that he could quit his construction job to trade full-time.

Read more about The Lions Den 4X and Tony Weidenheft on Trading Street:

Trading Street Magazine

December 13, 2014

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TradeFoxx Black Gold Rush 2015 - Market Must Rise in 2015 Prediction

Sweet Crude Oil will start going up last week of December 2014 and will continue to rise to peak in July. Expect bounce to occur around 50 to 60 a barrel.

The best futures right now is Sweet Crude Oil; it has taken an unusual massive drop in the month of December 2014. If ever the phrase “Buy Low and Sell High� fit, it is now with Crude Oil.

Even if the market would hit rock bottom of say $50 a barrel you are now positioned to take this Black Gold straight to the bank if you hold your position for at least 3 months starting now in December. There are two points of resistance one with High Probability of occurring 50 to 60 a barrel and one for low probability 40 to 50 a barrel.

Take the last melt down of Black Gold it was in 2009 when Crude oil went down to 35 a barrel, with the first retracement of down swing at around $55 to $58 a barrel. We are getting close to that first point of bounce probability, currently we are at 58 barrel, 1st resistance if very very close, so expect Oil to bounce back soon.

The low probability of bounce back would be for oil to create again a new low at $35 barrel like it did in 2009, this should not happen for Russia economy is taking heavy hits which benefits higher OPEC prices in the foreseeable near future.

Tony Lopez CIO / President TradeFoxx.com

TradeFoxx will soon be joining Trading Street and will be offering their full line of products and services for the investing community. In the mean time please visit their website at www.tradefoxx.com

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Trading Street Magazine

December 13, 2014

Fx Addicts Follow the US Dollar Higher

Tim LuCarelli

Currencies The US Dollar will reign supreme in 2015 as the US will be the only place to put money. Additionally interest rates will begin to climb at the end of the first quarter and should continue throughout the rest of the year; this will also add momentum to the US Dollar.

Prices by the end of the year: EUR/USD A technical case can be made for the pair to trade below 1.0700 if there is a monthly close below 1.21 USD/CHF Above 1.2000 – if the EUR/USD closes below 1.21 USD/JPY Will spend most of the year between 125.00 and 130.00

EUR/USD Monthly

Oil By the end of 2015 WTI Crude will have settled into a range between $35 per barrel to $47 per barrel. The price of crude was supported by excessive speculation that made prices unstable; a bubble. Extrapolating future prices based on a multiple regression analysis of crude prices, wages and other product inflation dating back to 1947, crude should be trading in that $35 to $47 per barrel range in 2015 – any pricing above or below that range is unsustainable.

WTI Crude Oil

Gold By and large a bubble created by fear of war, economic demise and political riff. As the global economy improves fear will subside and the price will eventually stabilize in the $500 to $650 range – it will close out 2015 below $1,000 per oz.

Gold in Cash US Dollars

S&P 500 The US economy will continue to pick up into the beginning of 2015 and will bolster company profits driving the S&P 500 to hit just above 2,400.

Dow Jones Industrial Average Like the S&P 500 the Dow Jones will advance for most of the year topping out above 18,500.

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December 13, 2014

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What Does Equilibrium for Crude Oil Look Like in 2015?

To fully answer this question we must first review crude oil’s volatile history and the OPEC paradigm

By Bill Hoerter

W

e all know that high oil prices are problematic. Our global awakening to this problem began most likely in 1973 with the weaponization of a relatively finite resource by a fairly new group of Arab and other likeminded and equally situated states known as OPEC. This group was originally formed as an economic cartel, actually founded in 1960 as a counterbalance to the half dozen or so “Big Oil” multinational firms who were attempting to keep a lid on the price of their product. The 1973 oil embargo marked the first time this trade group, OPEC, took their majority share of a natural resource and used it specifically to bring heavy oil users to their economic knees simply by creating an embargo and quadrupling the price of oil.

Once the price shock of 1990 ended, and fears of supply interruptions disappeared by the end of the gulf war in 1991, prices once again began to slide dramatically back again to near $15/bbl for their ninth price swing of +/- 40%.

These kinds of action/reaction spikes higher, and subsequent market driven price drops led to a series of regular meetings to discuss the particulars of how their membership should address price stability, beginning with Venezuelan President Hugo Chavez hosting their first summit in 25 years in 2000. With the 9/11 attacks a year later and the following series of invasions and occupations, prices increased sharply beyond even the wildest projections from the OPEC meetings.

The dawn of the 1980s saw OPEC gain some le- Prices steadily rose from 2003 on with few real pullgitimacy as their warring nature gave ground to an un- backs as the “old OPEC” mentality kicked in and prices derstanding that their sole resource must be marshaled were allowed to spike higher via their rhetorical talking for the greater good of poorer nations in their region. points. In 2007 the global financial crisis forced them As a result they became more of a market-driven pow- to introduce price stability and sustainable oil producerhouse who had an effect on socio-economic growth tion themes. worldwide; as opposed to simply being an oppositional force to the US and other large oil users in response to their relative levels of support for Israel.

The 1980s also saw logical market forces trigger an inevitable fall in demand and therefore OPEC’s artificially steep pricing began to fall, so their nations, whose budgets are dependent on revenue from oil sales, experienced severe economic hardships – arguably by their own hand. The low point in prices came in 1986, after a 6 year decline that saw prices fall by nearly 50% through a combination of increased non-OPEC production and utility companies switching to coal, nuclear power and natural gas.

One such talking point was a Nov 2009 statement that led to a violent price spike (over $100/bbl for the first time) when members publically threatened to

A cut in production as a group, in order to boost convert their petrodollars into Euros. Price increases prices at large, was their first in a series of manipula- were strong, spiking to $145 when suddenly a huge tions of their supply in order to stabilize this wild mar- change happened in June of 2008 as Saudi Arabia, ket that they had single-handedly created. However OPEC’s big dog, walked out of a negotiating session their troubles were far from over, as Iraq’s Saddam and declared their intention to maintain overall world Hussein pushed world oil prices up, via his invasion of oil supplies and NOT reduce production as the other Kuwait in 1990. This action caused huge rifts among members wished to do. Prices broke sharply over the other OPEC member-states as some defied their ar- next six months to under $50, a nearly $100 break. bitrary and self-limiting production quotas to protect That last gasp of reactionary pricing began a somewhat their own interests, thus keeping supplies flowing in tame, by comparison, rise in prices to what was to bespite of Iraqi requests for further limits/higher prices. come the “new-normal” of relatively high oil prices, Trading Street Magazine

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leading us to our current energy situation, and what OPEC is today – or right up until this November’s Vienna OPEC meeting in which Saudi Arabia validated the current sub-$70 levels.

A New Player – New Oil

How does the rest of the world play into the oil game? OPEC used to have the price-killing power of greater than half of the world’s oil production. In the 80’s their share of the world’s production began to fall to today’s levels, just under 40%. The US oil market produced nearly nine million barrels per day at its peak in 1985, falling to under four million barrels per day in 2005.

OPEC seized this opportunity to control prices, seeming to lock in prices over $90/ bbl for the foreseeable future.

We would argue that if the world were a simpler place, then a market-driven increase in supply would keep a lid on the price of this finite commodity, and it follows logically that non-OPEC development of permanent oil supply sources would have a huge stabilization effect. With OPEC setting a lower price target at the OPEC meeting in Vienna last month, Saudi Arabia was substantiating US Oil as a potential leader in the production of gas, oil and biofuels by 2020, an accepted notion which has assisted prices at current levels under $60.00/bbl.

However, the world is nothing if not on edge nearly all the time, with the potential for war at any given moment in the Middle East. As long as there are conflicts breaking out everywhere, oil seems free to float higher, which begs the question: does the price of oil correlate to the world’s propensity for either war … or peace? Look at Thomas Friedman 2009 “First Law of Petropolitics” – a rabid thesis that postulated the price of oil moved inversely to the relative pace of freedom around the world, and was related to the overall authoritarian nature of those net producers of the product. He assumed that there would only and always be a net advantage to consuming nations due to the majority of oil production in the hands of these relatively few producers.

non-OPEC development of permanent oil supply sources would have a huge stabilization effect

Relatively steady price rises since the ’08 peak oil surge/break was exactly the kind of structure that many US refining industries needed for a resurgence of development, yielding current projections of lower energy costs for the foreseeable future via a normal market force model. Free market economies, dependent on reasonable transportation costs will mean an overall decrease in commodity prices – a boon to the entire global economy. Is this a sea-change in the thinking about oil pricing moving forward for years? Have a look at what some people are arguing is the most important chart and event in decades, the re-development of US production:

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Net producers of oil – be they capitalists like the US, Mexico or Canada, and marginally free states such as Libya, Nigeria, Algeria and yes, Saudi Arabia and friends, continue to develop as markets dictate. They must be concerned for their future place in the global energy pecking order, or fall to the market forces that are taking over these economies.

Imagine a solar-powered Saudi Arabia if you can, or Qatar, the UAE, maybe Kuwait … we certainly can envision them moving along while still keeping potential dollars in fuel comfortably underfoot.

The million dollar question here remains whether or not this price break of late 2014, marks a permanent re-calibration of big oil – a sea-change, or Trading Street Magazine

December 13, 2014

merely another production blip on history’s big radar screen. The thinking here is that one must consider The Bear into this theoretical model: Putin’s New Russia.

its energy industry, which means that other sectors are relatively undeveloped and many items – including essential foodstuffs – are imported.”

How Does The Bear React?

Russia, the big dog in this global hunt for higher oil pricing, led by Vladimir Putin, either hopes to grab a hold over global prices to justify his administrative budget or will somehow creatively re-figure their economy to reflect productive capital creation. We would argue that the likelihood of that kind of modernization, as long as Putin’s ex-KGB stranglehold on their great natural resources is maintained, is emphatically NO. Let us explain:

Inflation is now rising fast and the CBR may be forced to raise interest rates again soon, inflicting further damage on an already fragile economy. This has ramifications throughout the Russian economy, as the Business Insider claims: “Russian businesses have $35B of FX debt payments falling due in December” … our best guess is that ALL Russian debt, at large, is going to be widely failing on the service side.

Where is Oil Heading in 2015?

First facts first; Russian data is difficult to trust, The falling price of oil, this time around, we and more difficult to extract except on an ad-hoc basis. believe has been promoted by the Saudi Kingdom to be Most of the expert data is at best excellent guesswork – the new normal. Tired of the wild swings and having with a strong basis in reading between government con- to react constantly to the push and pull of their personal trolled data lines; always designed to reflect the “party” political realities, they are joining the modern age of in a favorable light. Undeniably, though, Russian oil true market-driven forces. This essentially marks the revenue accounts for as much as 40% of their GDP. end of OPEC as a geopolitical power. Considerable Understand now that while the Central Bank of Russia sums of capital have been stashed by the Gulf States, (CBR) might be attempting to support their currency to lending considerable comfort at current prices. Other maintain their national buying power, a fight that may producers will keep oil flowing - stabilizing price highs have worked until the fall of 2014, the CBR is now and lows at lower levels on the charts; which the techtrapped to market forces as both the oil price and the nicians out there know to be a classic bear formation. ruble are falling off the table. The Russian economy This traps the oil dependent economies such as Ruswill suffer greatly, according to Frances Coppola in her sia – whose 2015/16 budget is thought to be based on December 1, 2014 Forbe’s article titled Oil, Sanctions $100+ per barrel oil, and desperately needs the price to And Russian Politics, where she noted that today’s re- increase regularly – rather than collapse. While half ality is extremely damaging to the Russian economy: of the Russian government’s operating budget is taken “Although the falling ruble offsets the damage to a net from oil revenue, and the lower buying power of the oil exporter that falling oil prices inflicts, Russia suffers ruble will crush their ability to feed their people, hence badly from Dutch disease because of the dominance of recession, at minimum, is certain in Russia.

What does this leave for Putin – the ex-KGB officer who’s appointed heads of state dance to his tune alone in an attempt to re-create the once mighty Russian Empire?

Coining a phrase from the political pundit George Will: Putin’s Russia is essentially a “primitive hunter-gatherer society that creates exactly three exportable products: Caviar, Vodka and OIL”. Ignoring natural gas for another day, everything else on their population’s shelves is imported at the expense of the basic comfort of the average citizen of the State. Putin’s heavy-handed control over his appointed heads of states, as well Trading Street Magazine

December 13, 2014

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as his failing dominance as THE supplier of European resources is diminishing as cheaper crude, and liquid natural gas is supplied in much greater quantity by entities friendly to those regional clients. With these developments, his act must switch to that of a cornered rat.

He either bites, or dies.

Analysis: Continued production gains in US extracted liquid fuels and delivery mechanisms, have a tempering effect on crude prices. China will afford Russia a limited marketplace for their fuel, keeping a limited cash flow alive: but as alternative fuels take root, such as biofuels and liquid natural gas, their motivation for continuing support is more political than practical; thus This forms the basis for our prediction of oil prices short-lived. Major bumps in natural gas production and in 2015: a bear market with the potential for extreme extraction methods plus new delivery mechanisms and price volatility. loading ports mature and relieve Europe of its Russian dependency. Brent crude will flow freely as producers

Crude 2015 range: $42-47 bottom, $92-97 scramble to cash in on excess inventory. Once the lows high. Spike to $117-122 possible but short-lived. Huge are in place, and lacking any Russian/Iranian/Syrian/ gains in volume and options activity. Natural gas re- Israeli misbehavior, the market will contract as marmains under pressure throughout after a seasonal rally. ginal players are weeded out in every regional sector and prices will naturally recover through Q2 of 2015.

About Bill Hoerter Beginning on the Mid-American trading floor back in the late 70’s when prices were still recorded on chalkboards, Mr. Hoerter found himself on the trading floor of the CME in the 1980’s in roles varying from B-arbitrage currency pit clerk/trader, to Broker-Member of the exchange.

Click HERE to learn more about Mr. Hoerter

Trading Street Magazine

December 13, 2014

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