"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat


Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

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Wednesday, June 22, 2011

Impact from Dodd-Frank

I have fielded quite a bit of emails from people scared out of their minds because of a rash post over at a widely read website which tends to post first and think later. That is the problem with this Wild West of the Internet - too many are interested in "first scoops" and not in arriving at solid conclusions based on analysis.

The regulations which have Forex.com issuing a statement to its clients to close out their gold and silver positions affect US based Retail customers on non-regulated over the counter markets. It will not have any impact on the COMEX market or any other regulated futures markets.

If anything, this will serve to drive more business towards the Comex which is a regulated futures exchange market. The regulations are attempting to stem US-based retail investor activity in non-transparent, non-regulated over-the-counter markets.

Keep in mind that in this day and age, the more "clicks" a website gets, the higher it rises in the "ratings" and the more advertising revenue its owner gets from paid ads. This sort of thoughtless sensationalism is a perfect example of that.
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3 comments:

  1. Angus HawkinsJune 22, 2011 at 11:10 AM

    Thanks Dan once again for your voice of experience to temper rash conclusions

    ReplyDelete
  2. AGJune 24, 2011 at 8:36 AM

    Hi Dan,

    I totally agree with your logic. It seems SaxoBank has also issued the same warning. Having been their customer and used their platform, I totally agree with the Dodd-Frank bill in prohibiting such OTC contracts. This platform amounts other things offers CFD on commodities (where Gold and Silver is also included). A CFD stands for Contract For Differences and is a derivative. The bank promotes CFD's on Silver and Gold as being much cheaper to trade than a futures contract, doesn't expire, and much more leveraged (20x or more). The caveats are the bid ask spread for such CFD is quite large for any serious investor, it is back absolutely by NOTHING, no matter how much you buy of this product you will never influence the price of the subjacent commodity. High leverage usually means that clients implode themselves and averages a healthy return for banks that offer these products. Imagine an overnight revaluation on Gold, customers going long would make hefty profits but the bank would probably go broke taking the other side of the trade since it isn't hedging itself.

    cheers,
    Alex.

    ReplyDelete
  3. cfdMarch 14, 2012 at 2:59 AM

    The amount of information in here is stunning, like you practically wrote the book on the subject.

    Learn to Trade

    ReplyDelete

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