Cyprus-Forum.com

[Robin Hood]

Pyrpolizer:

a) You seem to ignore the fact that speculators as traders do 2 things buy and sell. The easiest thing in trading (ask Milti he knows) is to buy. The most difficult thing is to sell with profit. It's not as easy as you think with the speculators doing the job with computers. Trading with computers still carries with it the fundamental principle that the easiest thing is to buy and the most difficult thing is to sell with a profit.
Telling us that the speculators do as they please pushing the values down as they please (as if they gain from selling at lower prices) is fundamentally wrong, sorry.

Exactly ...... they sell with one hand and buy with the other ......... that is the way I understand it! Maybe I am wrong but it seems logical. They use client’s money ....... and the bank’s deposits, to buy and sell. You are trying to align the normal commercial trading process, with currency speculation ..... and I don’t think you can, they are fundamentally different. They don’t put up x billion £’s for sale and wait for a buyer ....... they ARE the buyer!

They don’t send e-mail’s asking their clients what they want to do ...... they have the money and act quickly, chasing one another. They speculate (sell) and create their own prediction (the product reduces in value) ..... the client/bank keeps their fingers crossed ............ that is why they get six figure salaries! When they buy the process is reversed.

Billions of £’s sold and billions of Euro’s used to buy, in fractions of a second ...... and the speculators are the ones that initiate the process. (The algorithms are the prize for any bank .....a microsecond shaved off the processing time can mean the difference between a profit and a loss. Even the length of the ‘cable’ (Fibre Optic) between the banks computers and the Market computer has significance.)

They are transferring part of the ‘value’ in one currency, to the other. As you say net sum zero BUT ................ if they can sell the £ and buy with the Euro in less than a blink of an eye.......... with the speed of these computers the difference is milliseconds or maybe even microseconds, and the profit small. But do that thousands of times a day with huge amounts of money and you can make a very handsome profit for both the bank, the Client and the ‘trader’. Does sod all for the real economy ...... it is a process that makes money out of money ..... they produce nothing.

Other computers see the transaction and they react to a selling/buying spike, but there are breaks on the system otherwise you would have an avalanche of selling one currency and it would crash ....... that would benefit nobody!

As I say, this is how I understand the system works. If you can show me it works another way with your explanation then I am quite content with accepting your explanation as just as valid as mine but, just like mine, .......... open to questions?

b) If Catalonia gets independence and then joins the EU automatically (it cannot do otherwise anyway) what's the problem (economically) for the EU?? zero minus zero=zero, no?
Now imagine Brexit, and then Scotland voting to remain in the EU. Woww! That would mean a totally separate country. Borders and millions Euros in building and controlling physical borders, restricting move of goods and services and people and all sorts of bad economics.
Moreover most probably Scotland would need to adopt the Euro, or just issue it's own currency.
Now give me one reason why such news (which was REAL news a few months ago and might be REAL news again after Brexit) would not push the value of the GBP down to it's limits.

I think your assumption is wrong. I seem to remember that when Sturgeon started with that proposal the Scot's were told by the EU Commission that they would NOT remain a member of the EU and would have to go through the membership process as an independent state. This could take up to ten years, I assume that the same would apply to an independent Catalonia?

Another point to consider is that the Scottish referendum was a referendum approved by the UK Parliament, the Catalonian referendum has been declared illegal by the Spanish Parliament. Just like Crimea’s referendum ......... it would not be as ‘they’ desired .......... therefore the self determination of the people will be ignored anyway!

Have you not got the reaction the wrong way round? Surely if the referendum in Catalonia was a vote to leave it would be a Catxit and the Euro would fall in value against the £? The reverse of what you say. It would be bad news for the EU as it would show cracks in the structure and impact the financial stability of Spain.

[Pyrpolizer]

Pyrpolizer:


Exactly ...... they sell with one hand and buy with the other ......... that is the way I understand it! Maybe I am wrong but it seems logical. They use client’s money ....... and the bank’s deposits, to buy and sell. You are trying to align the normal commercial trading process, with currency speculation ..... and I don’t think you can, they are fundamentally different. They don’t put up x billion £’s for sale and wait for a buyer ....... they ARE the buyer!

They don’t send e-mail’s asking their clients what they want to do ...... they have the money and act quickly, chasing one another. They speculate (sell) and create their own prediction (the product reduces in value) ..... the client/bank keeps their fingers crossed ............ that is why they get six figure salaries! When they buy the process is reversed.

Billions of £’s sold and billions of Euro’s used to buy, in fractions of a second ...... and the speculators are the ones that initiate the process. (The algorithms are the prize for any bank .....a microsecond shaved off the processing time can mean the difference between a profit and a loss. Even the length of the ‘cable’ (Fibre Optic) between the banks computers and the Market computer has significance.)

They are transferring part of the ‘value’ in one currency, to the other. As you say net sum zero BUT ................ if they can sell the £ and buy with the Euro in less than a blink of an eye.......... with the speed of these computers the difference is milliseconds or maybe even microseconds, and the profit small. But do that thousands of times a day with huge amounts of money and you can make a very handsome profit for both the bank, the Client and the ‘trader’. Does sod all for the real economy ...... it is a process that makes money out of money ..... they produce nothing.

Other computers see the transaction and they react to a selling/buying spike, but there are breaks on the system otherwise you would have an avalanche of selling one currency and it would crash ....... that would benefit nobody!

As I say, this is how I understand the system works. If you can show me it works another way with your explanation then I am quite content with accepting your explanation as just as valid as mine but, just like mine, .......... open to questions?

b) If Catalonia gets independence and then joins the EU automatically (it cannot do otherwise anyway) what's the problem (economically) for the EU?? zero minus zero=zero, no?
Now imagine Brexit, and then Scotland voting to remain in the EU. Woww! That would mean a totally separate country. Borders and millions Euros in building and controlling physical borders, restricting move of goods and services and people and all sorts of bad economics.
Moreover most probably Scotland would need to adopt the Euro, or just issue it's own currency.
Now give me one reason why such news (which was REAL news a few months ago and might be REAL news again after Brexit) would not push the value of the GBP down to it's limits.

I think your assumption is wrong. I seem to remember that when Sturgeon started with that proposal the Scot's were told by the EU Commission that they would NOT remain a member of the EU and would have to go through the membership process as an independent state. This could take up to ten years, I assume that the same would apply to an independent Catalonia?

Another point to consider is that the Scottish referendum was a referendum approved by the UK Parliament, the Catalonian referendum has been declared illegal by the Spanish Parliament. Just like Crimea’s referendum ......... it would not be as ‘they’ desired .......... therefore the self determination of the people will be ignored anyway!

Have you not got the reaction the wrong way round? Surely if the referendum in Catalonia was a vote to leave it would be a Catxit and the Euro would fall in value against the £? The reverse of what you say. It would be bad news for the EU as it would show cracks in the structure and impact the financial stability of Spain.

No, I don't know how exactly they work, Paphitis had a friend who was doing currency trading, and perhaps would be the only one who could enlighten us.
I would be surprised if they could do what you are saying and at the same time achieve anything.:in short buy -sell to themselves. This is just a zero sum activity of one probably big trader in an effort to push prices down. Since Currency exchanges are in pairs, if one is trying to dump the GBP Vs the Euro he automatically raises the price of Euro. To make a profit he has to sell those Euros at a higher price than what he bought them from himself. How can he ever do that when there are thousands of other traders, even hobbyists selling at lower price?
He would eventually have to sell at the same price as others still losing nothing other than wasting his time.
It requires a huge conspiracy among traders to do an intentional dumping of the GBP considering there are thousands of traders all over the world, who do economic forecasts and adjust their algorithms accordingly.
Imitating each other is not the rule imo most of them are huge Banks who do their own studies and forecasts.

About the case of Catalonia I was simply trying to answer your question why the Euro didn't plunge because of their referendum.
Your question was this:

Only today I listened to BBC who were saying that Catalonia is going ahead with an illegal referendum on independence from Spain and I believe Catalonia is one of the richest parts of Spain ..... did the Euro plunge?

It looks you answered it to yourself better than me.

[Robin Hood]

Pyrpolizer:

I would be surprised if they could do what you are saying and at the same time achieve anything.:in short buy -sell to themselves. This is just a zero sum activity of one probably big trader in an effort to push prices down. Since Currency exchanges are in pairs, if one is trying to dump the GBP Vs the Euro he automatically raises the price of Euro. To make a profit he has to sell those Euros at a higher price than what he bought them from himself. How can he ever do that when there are thousands of other traders, even hobbyists selling at lower price?

He would eventually have to sell at the same price as others still losing nothing other than wasting his time.

It requires a huge conspiracy among traders to do an intentional dumping of the GBP considering there are thousands of traders all over the world, who do economic forecasts and adjust their algorithms accordingly.

Imitating each other is not the rule imo most of them are huge Banks who do their own studies and forecasts.

I asked Google ........ How do speculators make a profit from currency speculation?

First up was:

Readers Question: Can you please explain how speculators can gain a profit from speculative attack on currencies?

A speculative attack on a currency occurs when ‘investors’ believe that the value of a currency is over-valued and therefore, they sell that currency in anticipation of it falling and buy another currency (e.g. sell their holdings of Pound Sterling and buy Euros). They make money by seeing the value of the currency they buy (e.g. Euros) increase.

Also, to maximise profits, investors can engage in ‘short selling’. This is when an investor sells assets (Currency) that he doesn’t own, and agrees to repurchase them at a future date. If the currency falls in value, then they make a profit, because they sold currency at a high price, but can repurchase at a lower price. George Soros is said to have made £1 billion profit through short selling the Pound Sterling, just before the devaluation of 1992.

Full article with many links to other related questions about currency trading:

http://www.economicshelp.org/blog/10546/currency/how-speculators-gain-profit-from-currency-speculation/

See what you think. I don’t think I was that far out!

They effectively do just what Soros did! The trader 'borrows' the Sterling from his bank and sells it. The pound drops, the Euro rises ...... they buy back the same number of pounds they 'borrowed' and put it back in the bank. But the Euro has gained value so they pay less for the same number of pounds. ..... the difference is their profit. It seems to me to be like stealing candy from a baby?

[miltiades]

Interpret as you wish
The undeniable fact is that since Brexit the pound has been steadily losing against all major currencies.
Traders or speculators as you call them, can drive the value of a given currency up or down. They are not impressed it seems that ....we have our country back.
Mate, Sterling is in for a rough time over the next year or so all thanks to the ....highly sophisticated geriatrics and loee working classes who were apparently convinced by the likes of Farage and Clown that the country would be sp much richer out than in, even our NHS would be better off by 350 million a week !!! They swallowed it !!!

[Pyrpolizer]

Pyrpolizer:

I would be surprised if they could do what you are saying and at the same time achieve anything.:in short buy -sell to themselves. This is just a zero sum activity of one probably big trader in an effort to push prices down. Since Currency exchanges are in pairs, if one is trying to dump the GBP Vs the Euro he automatically raises the price of Euro. To make a profit he has to sell those Euros at a higher price than what he bought them from himself. How can he ever do that when there are thousands of other traders, even hobbyists selling at lower price?

He would eventually have to sell at the same price as others still losing nothing other than wasting his time.

It requires a huge conspiracy among traders to do an intentional dumping of the GBP considering there are thousands of traders all over the world, who do economic forecasts and adjust their algorithms accordingly.

Imitating each other is not the rule imo most of them are huge Banks who do their own studies and forecasts.

I asked Google ........ How do speculators make a profit from currency speculation?

First up was:

Readers Question: Can you please explain how speculators can gain a profit from speculative attack on currencies?

A speculative attack on a currency occurs when ‘investors’ believe that the value of a currency is over-valued and therefore, they sell that currency in anticipation of it falling and buy another currency (e.g. sell their holdings of Pound Sterling and buy Euros). They make money by seeing the value of the currency they buy (e.g. Euros) increase.

Also, to maximise profits, investors can engage in ‘short selling’. This is when an investor sells assets (Currency) that he doesn’t own, and agrees to repurchase them at a future date. If the currency falls in value, then they make a profit, because they sold currency at a high price, but can repurchase at a lower price. George Soros is said to have made £1 billion profit through short selling the Pound Sterling, just before the devaluation of 1992.

Full article with many links to other related questions about currency trading:

http://www.economicshelp.org/blog/10546/currency/how-speculators-gain-profit-from-currency-speculation/

See what you think. I don’t think I was that far out!

They effectively do just what Soros did! The trader 'borrows' the Sterling from his bank and sells it. The pound drops, the Euro rises ...... they buy back the same number of pounds they 'borrowed' and put it back in the bank. But the Euro has gained value so they pay less for the same number of pounds. ..... the difference is their profit. It seems to me to be like stealing candy from a baby?

I thought I replied to this, but it looks the reply stayed in my head

Well, we have to read that article carefully:

Firstly it talks for a "speculative attack" which clearly is not an attack per se, but the fact that ALL currency traders believe the same thing and they are usually right.
If their belief proves right the currency (GBP) will fall and they would have saved their money before this happens. The profit the writer talks about is flawed. There is absolutely no profit in re-buying the GBP at a lower price because simply they would buy a currency that's worth less.
Sure they would buy back more GBPs but those GBPs will have lower purchasing power Vs say the Euro. So for the currency trader there is really no profit. If the currency trader however works for a client whose savings are in GBP he would have made a profit for that client since the GBP would still buy the same goods and services from UK at almost the same price like before the "attack". The reason is, that the local prices take a long time to adjust.

Secondly it's clear that a "speculative attack" cannot be done on purpose just to dump a certain currency even if the majority of currency speculators would somehow conspire to do it. There will still be the thousands of others who will not follow, and those speculators who tried to do it will end up losing money.

It's a known fact that short selling produces profits in this particular case. Soros might have had a lot of clients engaged in such a contract.
Question is how many currency traders/speculators eventually ended up burning themselves from such practices? Isn't it about 70%?

[Robin Hood]

Interpret as you wish
The undeniable fact is that since Brexit the pound has been steadily losing against all major currencies.
Traders or speculators as you call them, can drive the value of a given currency up or down. They are not impressed it seems that ....we have our country back.
Mate, Sterling is in for a rough time over the next year or so all thanks to the ....highly sophisticated geriatrics and loee working classes who were apparently convinced by the likes of Farage and Clown that the country would be sp much richer out than in, even our NHS would be better off by 350 million a week !!! They swallowed it !!!

Yes it is an undeniable fact, Sterling was all ready on the downward slope many months before the referendum ...... which remember, 'THEY thought was an odds-on certainty that the result would be remain. It wasn't and I would say that the City slickers would have been 'Remainers' to a man ... it was in their interests to remain. So like you they were all pissed off and saw nothing but doom and gloom!

I am however convinced that it now has nothing to do with the economics ......... it is now a political assault on the UK and for obvious reasons. If the UK quit and it is a success, then it is curtains for the idea of a Federal Europe, as many States would follow the UK and reform into a European Economic Community.

I think that it will turn out to be the right decision to leave this 'Club' ..... they are showing they are not very nice people!

[Robin Hood]

Pyrpolizer:

I thought I replied to this, but it looks the reply stayed in my head

It’s the weather ........ I keep forgetting what day of the week it is!

Firstly it talks for a "speculative attack" which clearly is not an attack per se, but the fact that ALL currency traders believe the same thing and they are usually right.

Can’t agree! They all ‘think’ but it only takes one to act and the ‘algorithms’ kick in and they chase one another. An attack is an attack .......this attack is coordinated and politically driven!

I don’t think these currency traders are usually right? You say later 70% got their fingers burned. I think there are ‘traders’ and there are ‘TRADERS’ ! A bit like comparing Dell Boy and Rodney to Harrods. There are a handful of big boys and the rest watch what they do ..... or at least their computers do ...... and when they see action they respond but time is on the side of the big boys.

If their belief proves right the currency (GBP) will fall and they would have saved their money before this happens. The profit the writer talks about is flawed. There is absolutely no profit in re-buying the GBP at a lower price because simply they would buy a currency that's worth less

But it is them that create the drop in the value by making a decision to sell, that is predetermined ..... the larger the ‘sell’ the greater the impact.

Of course there is a profit. They buy the GBP at the lower price to put it back in the Sterling account. They spend the Euro’s from their own account to buy the Sterling and it goes straight back to the Euro account ...... Euro loss = zero ....... but the GBP drops say 50% on that action and the euro rises by 50%. They have increased the purchasing power of their Euros by 50%. That is their profit, they still have the same number of GBP’s and Euro’s but 50% of the value that was in the GBP is now transferred to the Euro.

Sure they would buy back more GBPs but those GBPs will have lower purchasing power Vs say the Euro. So for the currency trader there is really no profit. If the currency trader however works for a client whose savings are in GBP he would have made a profit for that client since the GBP would still buy the same goods and services from UK at almost the same price like before the "attack".

No matter what happens to Sterling it will still retain more or less the same purchasing power for British goods bought in the UK. If he wants to buy European goods he pays more. If your pension is in GBP and you live in the UK it makes little difference ...... but if you live in Cyprus your Euro income has suddenly dropped!

The reason is, that the local prices take a long time to adjust

This is why short term speculation causes short term and often devastating falls in rates. Long term it is a gradual decline, anything short term is down to speculators.

Secondly it's clear that a "speculative attack" cannot be done on purpose just to dump a certain currency even if the majority of currency speculators would somehow conspire to do it. There will still be the thousands of others who will not follow, and those speculators who tried to do it will end up losing money.

It is done on purpose ....... they have no loyalty or regard for a country only how much money they can gain for themselves. But The Speculators are the handful of very big traders who have trillions at their disposal and they do ‘dump’. The thousands of other speculators are FOREX players who have latched on to making money out of money ...... they have little effect on the rate. They just try to anticipate what the big boys are going to do ...... and as you point out, most of them get it wrong!

It's a known fact that short selling produces profits in this particular case. Soros might have had a lot of clients engaged in such a contract.

Absolutely ........ Soros plays big and is part of the speculator super league and dumped big time!

Question is how many currency traders/speculators eventually ended up burning themselves from such practices? Isn't it about 70%?

Yes ...... and how many of them thought that could use common sense to make a quick profit?

-----------------------------------------
Slightly off the thread, but this video of a discussion/interview with Richard Werner I found interesting. The financial guy sitting opposite him often appears on BBC World News as a financial/market expert ..... even he agreed:

https://www.youtube.com/watch?v=EC0G7pY4wRE

[Londonrake]

FWIW.

Quite a few business articles in the media today pointing out that recent events in North Korea have added to a drive towards the €, which is regarded as a "safe haven"

[Pyrpolizer]

Can’t agree! They all ‘think’ but it only takes one to act and the ‘algorithms’ kick in and they chase one another. An attack is an attack .......this attack is coordinated and politically driven!

I don’t think these currency traders are usually right? You say later 70% got their fingers burned. I think there are ‘traders’ and there are ‘TRADERS’ ! A bit like comparing Dell Boy and Rodney to Harrods. There are a handful of big boys and the rest watch what they do ..... or at least their computers do ...... and when they see action they respond but time is on the side of the big boys.

I don’t think you are right on this. Is assumes they imitate each other and don’t do their own studies.The algorithms are actually designed to take human input. They are not fixed, they are dynamic. Politically driven to initiate it? Yes maybe. Would currency traders in Japan follow what currency traders in Germany have done? Doubtful!

Yes 70% of those who do risky tricks with currency trading get burned. Doesn’t mean they have to be small to have this kind of "accident"

Of course there is a profit. They buy the GBP at the lower price to put it back in the Sterling account. They spend the Euro’s from their own account to buy the Sterling and it goes straight back to the Euro account ...... Euro loss = zero ....... but the GBP drops say 50% on that action and the euro rises by 50%. They have increased the purchasing power of their Euros by 50%. That is their profit, they still have the same number of GBP’s and Euro’s but 50% of the value that was in the GBP is now transferred to the Euro.

So where’s the profit in re-buying the GBP and putting it back in their Streling account? If their sterling account got totally empty after selling it they do get more GBPs in that, however that more has less purchasing power. If the STG account remained half after they sold the other half, then the remaining half have already lost it’s purchasing power leaving them with a loss.

No matter what happens to Sterling it will still retain more or less the same purchasing power for British goods bought in the UK. If he wants to buy European goods he pays more. If your pension is in GBP and you live in the UK it makes little difference ...... but if you live in Cyprus your Euro income has suddenly dropped!

I agree.

This is why short term speculation causes short term and often devastating falls in rates. Long term it is a gradual decline, anything short term is down to speculators.

I mostly agree with this as well. But devastating short term falls? Why? Surely you don’t mean as "short" as the months that passed by from the Brexit Ref to date.

It is done on purpose ....... they have no loyalty or regard for a country only how much money they can gain for themselves. But The Speculators are the handful of very big traders who have trillions at their disposal and they do ‘dump’. The thousands of other speculators are FOREX players who have latched on to making money out of money ...... they have little effect on the rate. They just try to anticipate what the big boys are going to do ...... and as you point out, most of them get it wrong!

I assume by the term handful you mean less than 10 internationally. Here’s a hint: Get 10 Cypriots to agree on anything and if you manage to do that I will pay you € 100. How different do you think the rest of the world is? No there will always be some who would stay back and trick the rest.

Slightly off the thread, but this video of a discussion/interview with Richard Werner I found interesting. The financial guy sitting opposite him often appears on BBC World News as a financial/market expert ..... even he agreed:

https://www.youtube.com/watch?v=EC0G7pY4wRE

As the old crow said: "Brilliantly explained"

[Robin Hood]

LR:

Quite a few business articles in the media today pointing out that recent events in North Korea have added to a drive towards the €, which is regarded as a "safe haven"

But of course The Euro is just another Fiat currency ......... that is backed by nothing of value and the perceived value is set by ..... you’ve guessed it ..... currency speculators (Banks). I can’t find the article but, some months ago I read that if gold was valued in dollars today as it was until Nixon scrapped the gold standard, one Troy ounce of gold would cost today $147,000!!!! That’s inflation for you!

Milti:

Mate, Sterling is in for a rough time over the next year or so all thanks to the .........

In my eyes .... currency speculators, although you never said a truer word! But it won’t be just Sterling ...... they could/will all collapse.

The USD has value because in a master stroke when the US offered to make the Saudi King rich beyond his wildest dreams if he sold oil ONLY in USD, they created the Petro-dollar. Everyone needed the USD to buy energy as the ME was at the time the main supplier. As other sources were developed, most often by US companies, the Petrodollar was the only way it could be purchased. Anything bought by the US was also purchased in USD as the recipient country needed USD to buy its energy. That condition was perpetuated by all other oil producers. This means the American Dream was based on buying resources and products with IOU’s backed by nothing other than a promise of ‘Trust me!’! Effectively they got it all for free!

Today that is changing. Russia, China, Iran and others, our now selling their oil/gas in currencies other than Petro-dollars. This is the reason why regime change was necessary in Iraq, Libya and they tried also in Syria ......... as they were going to sell in gold, Euro’s and other foreign currencies. Libya was also going to introduce the Golden Dinar ..... which the bankers feared as it also threatened the supremacy of the USD.

It is not as simple as the result of a vote by some toothless old fogies in the UK on Zimmer frames ...... it is a much, much bigger picture than you could ever possibly imagine!

But of course it is all a ‘conspiracy theory’.