My View on Market and Economy : Debarghya Mukherjee

#1
Hello Traderji Friends,
I was searching some good threads on fundamental analysis in Traderji, but failed to get what I was really looking for. So Started this new thread on my view on market and impact of economy.

Here I want to discuss about various economical matters that helps us to understand what, why and how things are done.

Topics like money systems, Banking system, Reserve Bank, currency system etc.

So friends pls join with me here. I want your active participation and valuable comments here.

Thank you
Debarghya Mukherjee
 
#2
EVERY DOLLAR MAKES MORE DEBT?​

Dollar is the most powerful and widely used currency in the world and backbone of world economy (along with gold). But any idea how now a days dollar works! Every paper of dollar is just a contract note of "Debt". Yes you read me right. DEBT.

Any idea why? Here it is,
US Govt. printing money and giving it to FED reserve. Now this money is given to US Govt. But not as dollar itself. FED gives the money to the Govt as loan. That means, Govt needs to pay dollar + interest to the FED reserve. Ok.
Govt is pumping this money to the market. So everybody using this dollar actually bearing the loan paper in his pocket.

One Fine sunny day US Govt wanted to pay all his debt to to the FED reserve. They pumped all money from the market and went to FED. But they paid all the money that is all the dollars taken as loan. But how then can pay back the interest? There is no money left. They just had payed the principle amount. Ohh God then?

US Govt. is very smart they started printing more money, but that will increase more interest. This way an never ending process will only increase interest in economy.


Please make comment bellow.
Thank you,
Debarghya Mukherjee
 
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#4
Hello SG,
First of all thank you for making comment here. I read your thread. It is so interesting. Thanks for giving the link.


Hi DM,

If you have the time & inclination to know more... suggest you read or see it on youtube about 'Fractional Reserve Banking'

There is a youtube link which I had posted earlier.... that video should keep you riveted.... also check the thread Articles Of Interest.

Youtube link is the last post in the thread....Hope you find it interesting.

SG
 
#6
Learning curve of Traders: Debarghya Mukherjee

Learning curve of Traders​
Stages of Traders
Stage One: The Clueless Trader
1) Heard of a day trader making millions, or buying options is safe and can make you rich quickly
2) Got lucky in an earlier stock investment.
3) After all, how hard can it be? The money sounds appealing and the freedom to be independent sounds attractive
4) Every trader is optimistic
5) You open a direct access brokerage account and the sound of Level II, ask/bid, and market makers make trading sound like hi-tech video game
6) You will buy just to see the market reverse and you will short just as the market starts to rally.
7) Most of your trades are done emotionally. You buy just because the markets feel strong without any logical reason
8) You have no clue how the mechanics and psychology of trading works. What's worse? You are not aware that you don't know
9) Most traders will blow their entire account at this stage.
10) Mostly you start your trading in a bull market
11) You will spend more time finding a broker charging least brokerage, how to save tax, and like companies paying dividend and issuing splits and bonuses and less time in learning what trading actually is.
12) A big majority of people will leave trading and blame the randomness of markets, or say markets are always manipulated
13) Generally you start with fundamental analysis and put money in "good" companies and dont forget to watch CNBC
14) You dont know what is short selling or have never tried it, no idea of stop loss as well
15) You are in the unconscious incompetence stage, in this stage your capital is at maximum risk

Stage Two: The Rookie Trader
1) In this stage you have lost enough money to realize what you are doing is completely wrong. In other words, you start to realize that you don't know.
2) You will then devour every trading book available.
3) Your search for magic indicator and the holy grail starts here
4) You will memorize every technical pattern known to man. You will read about the ADX, moving averages, Fibonacci lines, pivot points, MACD, Bollinger Bands, channels, etc
5) You will go through the "help" tab on your data vendor to read about every single technical indicator available
6) You will plot them on your charts and spend hours looking for an indicator that works
7) You will be extra confident now, thinking you have found the magical technical indicator
8) Yet, you still continue to lose money everyday. You realize that your indicators are lagging and that every other new trader is probably looking at the same thing.
9) You realize that you are the sucker
10) You are in the conscious incompetence stage

Stage Three: The Developing Trader
1) You start to realize the amount of work required and the immense learning curve that you must overcome to understand the markets, maximum pessimism is experienced here
2) At this point, traders may find it overwhelming and quit. Stronger minded traders will push their motivation harder to start their second spurt for knowledge
3) Hunger and passion is needed to clear this stage
4) You will ask a thousand questions and bug every professional trader you meet. You will read a thousand day trading articles
5) You will start paper trading, develop strategies and setups, and define risk parameters for every trade
6) You will go on a hunt for self-understanding to master your psychological game
7) You will visualize every possibility on a trade before you take it.
8) This is the true learning phase. You are trying hard to develop your edge in trading.

Stage Four: The Determined Trader
1) This is the stage in which you learn to specialize in certain markets and trading methods
2) Without realizing it, you have finally found your style of trading after hours of hard work and research. You stick to your method and you improve it
3) You realize that you need an edge whether its tape reading or being a Fibonacci expert. The important thing is you are slowly transforming yourself into a specialized trader
4) You test your methods and they seem to work. You gain tremendous market knowledge.
5) You reflect back on yourself and you can't help but laugh at your foolishness.
6) Although you have not made enough money to call yourself successful you are proud of your journey and accomplishments
7) You realize that the Holy Grail is not about technical indicators or price patterns
8) You calculate risk before profits and place strict money management on all your trades.
9) You cut losses short and learn to scale out on your winners.
10) You start accept losing as a natural part of the game
11) You take high probability trades that you have tested and feel confident about your setups because you understand that trading is a game of probabilities
12) Your psychological makeup has changed from an amateur mindset to a professional one.

Stage Five: The Consistent Trader
1) You rely on your trading method and start taking trades systematically. You try to aim for consistency and are meeting your daily goals often.
2) You are fully aware of your strengths and weaknesses as a trader.
3) At times you feel euphoric and at times you feel pain. But you are able to understand your own psychological makeup to control your emotional swings.
4) You are now able to trade for a living
5) You have reached the conscious competence stage

Stage Six: The Expert Trader
1) In this final stage, you completely understand the markets you are trading. Being involved in it everyday you are aware of every key price level
2) You understand market concept and are able to predict the direction of the markets a fairly good amount of time.
3) You pat yourself on your back and take profits as soon as you feel euphoric. You do this because you understand euphoria is the same as emotional trading.
4) You talk to other traders and realize the development stage they are in
5) People start asking you for trading advice, you publish a book, and you have a specific trading methodology that represents you!
6) Taking trades come naturally and you are able to get in and out at the precise price levels based on tape
7) Instead of having the markets take your stop out, you exit when you know you are wrong.
8) You keep your head high but remain humble on the inside. You have now officially graduated the school of the hard knocks
9) You have reached the unconscious competence stage


As I read on : http://financeandtradingmadeeasy.blogspot.com/2010/04/reposting-holy-grail-post-in-text.html
 
#7
BY ANY CHANCE THE BANK WILL MAKE LOSS?

How our banking system works?
Person Mr.A opens and saving account and deposit 10$ in his account. With the assurance of interest.Then the bank keeping may be 1$ in deposit they can issue loan of size (10-1)*9= 81$.

Now Mr.B wants loan from the bank of os 814 bank can issue it to him. With the hope that Mr.B will give him return 81$ with interest. Now this lending interest is greater than savings accounts interest. So the banks makes profit from our money.

They never can make losses. Until Mr.B fails to pay the bank his 81$. :clap:

Any other way banks work? If anybody knows please share here.
 
#8
Sitting On Cash? Scared to invest? You are slowing down economy and market​

Crybabies. People who dont understand the difference between liquidity and safety. People who have been given bad advice by financial experts.

Its a shame. Cash in your sock drawer is bad for the economy and bad for you. It hurts the economy because its not being put to use in consumption or investment. It hurts you because cash has a yield of 0%, which means that its real yield (yield less inflation) is in the neighborhood of 2%.
The standard advice from the experts goes something like this: Put your long-term savings, such as for retirement, in stocks and bonds. Then have at least six months of household spending safely tucked away in money funds or bank accounts, in case you get laid off or need to replace the roof.

Thats bunk. I think you should live dangerously. Spend, or invest, to the hilt. Keep only enough in the bank to avoid overdraft charges.

How did cash get to be so popular? It provides two things that a household needssafety and liquidityand people got in the habit of acquiring the two in a single asset.

But were in a different century now, when technology allows you to get your safety and liquidity from *separate sources. By getting them separately, you can avoid that 2% return.

The first place to look for liquidity is in a brokerage account. If you have any investment sense, you have all or almost all of your savings invested in extremely liquid things like Treasury bonds, listed stocks, no-load mutual funds and exchange-traded funds with tiny bid/ask spreads. That is, you never buy convoluted, high-fee products like hedge funds and variable annuities.

If you need cash, go online and click on the sell button. Your commission is $9 and your cash is available in three days. Need cash sooner than that? A margin loan will do the trick. If you have $200,000 invested, you can pull out $100,000 immediately this way while your sell order is in process. Youll owe margin interest, but only for three days.

Depending on how its held, a mutual fund position can turn into cash in as little as 24 hours. An electronic link between your fund company and your commercial bank might be helpful.

If you have a lot of equity in your home, you have another source of emergency cash. Arrange a home-equity line of credit well before you might need it, *advises Timothy Wyman, a *financial planner in Southfield, Mich. Get a line that costs you money only if and when you draw on it.

Dont leave a large pile of cash sitting in a bank account just to avoid monthly account charges. Look for a bank that counts both brokerage *assets and deposits toward the minimum that qualifies you for fee-free banking. Let the bank hold $100,000 of your stocks and ETFs and you will get royal treatment, even if you never trade the account.

Those antediluvian advisors also tell you to set aside cash now for big outlays you expect to make soon, like a $25,000 tuition bill due in December 2012. Otherwise you run the risk of being forced to sell at the bottom.

Yes, this $25,000 chunk of your stock portfolio might be worth only $20,000 a year from now. But its equally likely to be worth $31,000. Stocks tend to go up.

You can withstand the uncertainty. If you cant, then this particular $5,000 loss is not the problem. Its what the same market correction is going to do to your 401(k), which probably has a lot more than $25,000 of market exposure.

If you find yourself going to cash with your tuition money so that you can sleep better, its time to rethink the risk level in your entire asset pileretirement, college savings, brokerage account, vacation home, everything.

Lower the risk, if you have to. But lower it in a way that does not have you putting any money in an asset that returns 2%.

Here are three cash-free ways to *reduce risk:
Switch some of your retirement assets from stocks to bonds.
Shorten the maturities of your bond funds.
Buy some ten-year inflation-protected Treasurys. They have a rotten 0% real return, but thats still two points better than cash.

Your 2012 tuition money and your emergency roof fund should go into risky growth stocks. Put safer assets like bonds and dividend-rich blue chips in your retirement account, where their high yields will be protected from the tax collector.


As read on: http://www.forbes.com/
 

shinchan

Well-Known Member
#9
How can a bank give loan of 81Rs. when the deposit amount is 10 only??? From where it got the balance 71 Rs.???:confused:


Further, CRR and SLR take out nearly 30% of the deposits, which leaves only 70% with banks to lend.


BY ANY CHANCE THE BANK WILL MAKE LOSS?

How our banking system works?
Person Mr.A opens and saving account and deposit 10$ in his account. With the assurance of interest.Then the bank keeping may be 1$ in deposit they can issue loan of size (10-1)*9= 81$.

Now Mr.B wants loan from the bank of os 814 bank can issue it to him. With the hope that Mr.B will give him return 81$ with interest. Now this lending interest is greater than savings accounts interest. So the banks makes profit from our money.

They never can make losses. Until Mr.B fails to pay the bank his 81$. :clap:

Any other way banks work? If anybody knows please share here.
 

SavantGarde

Well-Known Member
#10
Hi Shinchan,

Seeing you after ages...How are you?

It is not just 81 Bucks banks can lend upto 90 bucks of the 10 buck deposit....
It is called 'Fractional Reserve Banking'... which in simple words means they lend money created from thin air and it is only a book entry......suggest you see the 'The Money Masters' video on youtube..... though it runs into 3hrs29 minutes....you will be riveted and better than watching any Bollywood film....if at the end you don't think it is as good as what I said...you can comeback & clobber me......:)


SG

How can a bank give loan of 81Rs. when the deposit amount is 10 only??? From where it got the balance 71 Rs.???:confused:


Further, CRR and SLR take out nearly 30% of the deposits, which leaves only 70% with banks to lend.
 

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