Thursday, July 31, 2008

Tucson Jewelry

Tucson Jewelry

By virtue of the fact that I give free internet marketing advice on another one of my blogs, I became acquainted with a new friend that had some questions regarding selling online (retail) in a local market. As you may have gathered from the title of this post, her husband and her are one of several retailers in the tucson jewelry market.

I remember marvelling (out loud) while driving around Arizona back in 2004 when things were still booming, "how do all these retail storefronts stay in business?" Now that things are slowing down a bit, how do higher end retailers do?

Jewelry Store in Tucson

It turns out that the founder of Rainbow Jewelers got his start in the jewelery markets of New York. During his time there, he developed a certain craftsmanship and expertise in custom jewelry and repairs. The custom stuff and repairs are keeping their business thriving while people get more price sensitive to the price of gold, diamonds and other precious gems.

Tucson Diamonds

Apparently, after talking to her, she told me that there are quite a few people who will buy a diamond loose and then "go local" and have their jewelry store in tucson to have it placed in a custom designed ring, etc.

That makes sense I guess. If you're trying to save a few bones but are in the situation where you want (or need -- more on this later) to spend some of your hard earned pesos on some diamond jewelry, there are quite a few online retailers that can provide competitive prices.

Online Jewelry Stores

I bought a present for Golden Lotus a couple of times from BlueNile. I know next to nothing about diamonds and other precious gems, (and frankly my tin foil leanings make me believe it's an artificial market being run by a cartel which limits the supply on the open market) but gosh darnit...try explaining that to most women out there -- including Golden Lotus.

So, rather than wait for man-made diamonds to further mature to deliver colorless stones at reasonable prices, I bought online.

Diamond Engagement Rings

As it so turns out, I happen to be in the market for one of these -- shhhhhhh -- don't tell Golden Lotus :)

Of course like many things in Uruguay, the prices relative to the size, and quality of, cut, clarity, color, etc left a little to be desired. At the jewelry store in punta carretas, they wanted over 20,000 for most anything decent -- not huge stones -- just a carat or so.

Now, I know the dollar is down and gold, platinum, diamonds, and (probably everything) is up, but good grief. These seemed to be overpriced by about 2x over what they "should" run.

At the same time, I'm a little freaked out about the process of getting a ring sent by one of the online retailers to UY, because I'm guessing if they could guess there was diamond jewelry in that package, I'd owe a duty on it.

An Idea!

So, now the wheels start turning in my head....

I can put myself into indentured servitude for Golden Lotus' engagement ring! brilliant, huh?

It would be like a 21st century version of the sharecropper settling up with the company store at the end of the month...

"well, at .50/hour, you worked 320 hours this month, and that totals out to 160 dollars, congratulations!"

"now, let's see....that's less $15 for the bottle of vodka, $22 for the large bag of rice, $18 dollars for the box of top ramen, $56 for the new keyboard, and $12,000 for the diamond engagement ring....that puts you at only 11,924 dollars in the hole.....see you next month!"

it could be the hole new model for displaced IT workers worldwide....gets companies out of those pesky social security and medicare contributions!

Uruguay Guy

p.s. all joking aside, i think for small retailers a skill that differentiates and can't easily be commoditized (like his jewelry repair skills and custom jewelry business) will do better than those who are forced to compete on price in commoditized businesses like the Diamond or Gold Business. I heard a similar thing from a friend of mine who used to deal in silver and gold coins and decided to go into the investment advisory business instead....even though prices are booming, margins aren't.

Saturday, July 26, 2008

Ron Paul on the Housing Bailout

Ron Paul on the Housing Bailout


Wednesday, July 23, 2008

Wednesday, July 16, 2008

Short Term Bounce

another short term bounce alert is in effect for US markets....

while not here yet, the setup that we are watching closely for is a big fast move downward -- a "wash out".

the idea is that this would create an opportunity to base and move higher for a couple of weeks, getting us into august at which point active traders would want to reinstate short positions.

the one caveat: tons of people are looking for the same thing right now. oft times, paradoxically, for the bounce to happen, people have to stop looking for it -- that's what will trigger the capitulation and subsquent "felinius mortus" bounce.


p.s. the move in the metals would be (likely) toward 1k/oz (or an assault on the all time high), then a retrace, into the mid to low 900's (at least), basing and marching back northward in late summer/early autumn.

p.p.s. skf would move counter to these trends, violently.

p.p.s. how do we know when a washout is a washout? look for the volatility index (VIX) to post a number solidly in the 30's (it spent time there today). the last two or three reversals posted big "red candles" on the VIX where it opened the day high and closed decidedly lower -- this gets triggered by an overnight scare and stick save bringing the markets higher during the trading day.

Dunning for President

So, a Senator from KY has not only figured things out but is in the position to speak his mind, and maybe even do something about it.

This video is pretty amazing....especially given the source - the banking committee's q&a session with the head of the federal reserve.


Friday, July 04, 2008

America - Fuck Yeah!

America - Fuck Yeah!

Apologies to any minors whose ears this song may burn (yeah, right).

Tuesday, July 01, 2008

The midnight Forex Trader

A short anecdote I thought I'd retell here.

During winter down here, my day job takes up all of the available US market hours. So, the other day, needing some extra cash to give to my knee doctors, I thought -- "Hey, what better way to get the money back than through trading forex with absolutely no positive expectancy in my trades, just hoping to get lucky."

Ok, admittedly, I was a little more confident going in....but I shouldn't have been.

By way of background, I am the worlds WORST currency trader I believe. I'm the only person I know who lost money shorting the dollar in the last 5 years. If you go back and look at a long term chart of the Euro/USD I was long the EUR during the one "blip" there it actually went down...I gave up the ghost at 100-1 leverage at 1.19 if I remember right. It's now 1.58 --- grrr... :)

Anyhow, I thought, it'll be different this time....I have a new trading platform (interactive brokers -- I've actually had it forever, but my previous experience with currencies kept me away from actually playing the forex market).

Well, I kicked myself the last time that I saw the Yen go under 100/dollar...I had been making the call for quite sometime that it was ripe. But, when it moved, it move FAST...over 10 percent in a week.....guys who were 100/1 leverage 10x'ed their money.

So now that it was back around 108 again, and the dollar had shown some inexpicable strength, i thought it might be a time to play some more dollar weakness....

So, how it works is that you can buy the JPY/USD cross or the USD/JPY cross. In my "old" forex account I only bought or sold the usd/jpy. If I wanted to short the dollar, I would just sell this cross, at the time about 108, and then buy it back later for (hopefully) a lower price.

Leverage in Forex

So, one of the things that got me into trouble last time was the insane amounts of leverage available to you. A lot of the bucket shops and fly by night forex platforms will give you just enough leverage to hang yourself. at 200x leverage a small move can wash you out pretty good.

So, I was thinking that if I didn't lever in too heavy I would have a better chance of learning the ropes before I inadvertantly tied a hang man's noose.

Now, part of my confusion is that Interactive Brokers shows me two forex clearing houses to trade in, IDEAL and IDEALPRO (?) Pro, has much better spreads, like maybe a pip or two, but IDEAL (i'm guessing) has wider spreads but the ability to trade with a lower amount than the gross domestic product of chile at risk.

So, I tried to buy in with what I though was 10x leverage on my risk capital...that way if i caught a 1% move in the underlying I'd be up 10% (or vica versa).

I got the trade on (at 107.79) and the spread was between 3 or 4 it was bidding 107.79 - asking 107.83

I needed for the ask to fall BELOW 107.79 to make any kind of profit...where i could buy it back and take off my short.

immediately the currency pair started bouncing around and IB's interactive profit/loss indicator was kind enough to show my what was happening to my account. GOOD GRIEF....I must've messed something up....Within minutes I was $1250 down....and the bid/ask had barely moved against me.....

Now, forex and the currency markets run 24 hours a day as they chase around the globe. Here it was 2:30 in the morning and I was sweating to death. Did I understand the platform well enough to set a stop and have it be triggered successfully? I didn't want to bail on this trade because I thought it was right. But I didn't want to get washed out either...good grief....this may have been a time to try some "paper trading" before going live :)

I wanted to go to sleep but i didn't dare.

I optmistically placed a buy order (to go back flat) at 107.76 (if i remember right). After 20 or 30 agonizing minutes, it cleared!!!

There I was, breaking the cardinal rule of trading....letting your losses run, and cutting your winners short. But, good grief. I didn't want to be that leveraged. And I needed some sleep before trying to get confident with the stop loss orders for the IB's currency trader.

I was freaked out...I was still heart rate was elevated....I'd just made 450 bucks in 30 nice as that sounds, i'd chopped 4 years off my life and taken unwise risk with my portfolio....stupid stupid stupid...

"Well, at least that will pay for the MRI I need to get on my knee, " I thought., when I go in to check my account the next day, there is really no difference. Where'd the 450 go?

Puzzled I went back and studied the chain of events a couple of times. After another 1/2 hour of looking at everything it finally dawned on me.

I'd "banked" 450 YEN on that trade. Not dollars. I'd been down 1400 YEN at one point in the trade....about 14 bucks :)

Ee gads....what a lesson. There is something that paper trading can't do, and that is mimic the real world emotions that your body goes through when you have a trade on. To stay emotionally detached -- especially if you're stupid enough to be betting with money you can't afford to lose -- that's going to be pretty challenging (read: impossible). You're going to do stupid things like cutting your winners short.

The yen is now 2.5 percent lower (a couple of days later). If I would have placed that trade right and had the guts to stay in it, I would be up about 25%. But I didn't. And, I didn't.

All in all, I think the lesson into my own tolerance/threshold for pain and my bad trading habits (at least in forex) was worth a lot more than the 25% i would have gotten.

....Ok, lunch is over....back to the salt mines....
Uruguay Guy

Another SKF Lunchtime Follow up

I checked in on our friend, SKF, again at lunchtime.

OK. It has done pretty well for itself in the last week. And, this is where it gets challenging. Lots of traders will give you contradictory advice regarding what's an appropriate level of hoggishness to compensate you for the risk (and your wrong plays), while not being so hoggish as to lose your gains.

Since I can't really daytrade other than to check in during my lunch hours, I decided to take about 1/3 of my skf position down (the 1/3 that was living in my retirement accounts which makes it difficult to get into and get out of). I put in the order around 164, but it was an "odd lot" which cleared out at 163 and change (the price action was jumping around quite a bit).

Does this mean that I think the run is over? No, not really.

In the very short run, there maybe more risk of a small snap back than a total washout....However, what I didn't see...even as the market was going parabolic (down) was a MONSTER spike in the index which measures "volatility". the VIX.

The VIX was at 25 and is usually over 30 when people are getting really panicky and dumping things left and right....which is the precursor for a total crash...and importantly, a washout that can lead to a whipsaw rebound.

So the long and short of it?

If you got into SKF as financials were breaking down (again) you got a nice 20 point run in a couple/few days. Is it over? Probably not. Should you take profits? Depends on your goals for this trade. In my retirement account, I'd been in since much lower and it had met my short term goals, so I took it down.

The rest, although it is probably a little "overbought" (meaning financials could be oversold) i want to see some fundamental change in their plight before I get too anxious to walk away from the trade.

happy trading,
Uruguay Guy