New Economic Platform - More Than Analysis

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In the next 20 years, you may get bored seeing more and more books analyzing the effects of the current economic crisis and what brought it on.

But, at the very beginning of this financial crisis, I've found the first book to advocate a new financial platform and address the biggest problem: adding more jobs and restoring worldwide financial stability.

The book didn't just suddenly appear as an analysis of the world's economic crisis. It has been stored in the brain vault of Leonard S. Johnson for more than 5 years. He has been tossing around ideas, coming up with new approaches and creating new kinds of thought for that entire time. And this was long before this financial crisis put the world on its collective knees. It was now time to come to the aid of a crumbling financial world.

That's when Johnson decided it was time to give the world a needed answer to deal with these effects of the economic crisis with his innovative book "The Bank for International Ideas." Johnson has based his book entirely on taking intellectual capital to intellectual property. He shows how to use the book's premise to create a new financial order based on worldwide innovative ideas that become businesses, scientific projects or organizations.

"The Bank for International Ideas" isn't a book of how to merely get banks to support and fund new ideas. The fact is banks are not doing that to the degree we have known in the past. BII is a complete financial platform which allows anyone in the world to submit ideas to the bank.

The process starts with the review committee. The committee, a noteworthy group of peers, decides if the idea is worthy and valid. If so, the bank actually issues credits which are then redeemed in currency in three parts: 33%, 33% and 34% totally 100%.

This means BII allows the innovator to make money on the idea while searching for investors, investment money, funding and mentor involvement. There's nothing to pay back unlike a usual bank transaction. The individual is actually paid for the idea. That's new in the world of finance. And good news for the idea-maker.

Johnson believes the world is no longer going to be run by the current skilled jobs. He believes true financial stability will be led by innovators who create areas of new job categories, not simply the skilled ones that we have known.

Johnson has created "The Bank for International Ideas" book to become the financial handbook of the upcoming new era of finance. The result is: It isn't the end-all answer to analyzing the effects of the financial crisis. It is the end-all book to the beginning of the new phase of finance in the world.

Unlike the blow-hards that puff themselves up to tell the world how they would do or would've things, Johnson has a truly remarkable way to make the entire world a better place financially.

I have also found something else he's done. He's created a 5-part YouTube explanation of the financial platform and how it works. So, you can absorb the financial concept before you get the book and delve into the details.

It just gets better and better.

How to Trade - Book Review - John Murphy, Intermarket Analysis

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The majority of literature that discusses asset allocation linking multiple markets has a heavy dose of macro and microeconomics. Typically, macro-micro relationships require applying econometric models to comprehend the structural linkages between the two intertwined fields of economics.  John Murphy removes the hard statistical methods while retaining the economic logic with chart-based reasoning.

John Murphy was the technical analyst for CNBC-TV for seven years and a professional analyst for over 25 years. His career includes time at Merrill Lynch as a Director of Commodity Technical Analysis.  John has his own consulting firm, JJM Technical Advisors.  He is also president of MurphyMorris, Inc., which was created to produce educational software products and online services for investors.

There are adequate reader reviews on Amazon and Google Book Search, to help you decide if you will get the book. For those who have just started or are about to read the book, I've summarized the core concepts in the larger and essential chapters to help you get through them quicker.

The number on the right of the title of the chapter is the number of pages contained within that chapter. It is not the page number.  The percentages represent how much each chapter makes up of the 246 pages in total, excluding appendices.

1.  A Review of the 1980s.  16, 6.50%.

2.  1990 and the First Persian Gulf War.  16, 6.50%.

3.  The Stealth Bear Market of 1994.  18, 7.32%.

4.  The 1997 Asian Currency Crisis and Deflation.  14, 5.69%.

5.  1999 Intermarket Trends Leading to Market Top.  16, 6.50%.

6.  Review of Intermarket Principles.  16, 6.50%.

7.  The NASDAQ Bubble Bursts in 2000.  18, 7.32%.

8.  Intermarket Picture in Spring 2003.  16, 6.50%.

9.  Falling Dollar During 2002 Boosts Commodities.  14, 5.69%.

10.  Shifting from Paper to Hard Assets.  14, 5.69%.

11.  Futures Markets and Asset Allocation.  20, 8.13%.

12.  Intermarket Analysis and the Business Cycle.  20, 8.13%.

13.  The Impact of the Business Cycle on Market Sectors.  18, 7.32%.

14.  Diversifying with Real Estate.  18, 7.32%.

15.  Thinking Globally.  12, 4.88%.

Focus on chapters 3, 7 and 11-14, which makes up about 46% of the book. Especially chapters 11-14 are relevant for practical trading purposes.  Unlike my prior book reviews, where I've summarized the key points for each focus chapter, I will summarize the key points across chapters 3, 7 and 11-14. This is to recognize the connectivity of intermarket relationships across the 4 main asset classes of Stocks (Equities), Bonds, Currencies and Commodities.  The context of the summary is to be viewed from a retail option trader's perspective.

Here are the Key Directional Intermarket Relationships in brief.

The U.S. Dollar (USD)
USD turns up as Bonds rise under normal conditions but Bonds fall during deflationary periods. USD turns down as Bonds fall but Bonds rise during deflationary periods.USD turns up as Commodities fall.  USD turns down as Commodities rise.USD turns up as Stocks rise but Stocks fall during deflationary periods. USD turns down as Stocks fall but Stocks rise during deflationary periods.

The USD remains the most liquid of all major traded currencies and maintains its position as the primary global reserve currency, despite growing sentiment for an alternative basket of currencies to replace it.

Bonds
Bonds turn up as the USD falls but the USD rises during deflationary periods. Bonds turn down as the USD rises but the USD falls during deflationary periods.Bonds turn up as Commodities fall.  Bonds turn down as Commodities rise.Bonds turn up as Stocks rise. Bonds lead Stocks and Stocks lag behind Bonds. Bonds turn down as Stocks fall. Again, Bonds lead Stocks and Stocks lag behind Bonds.
Commodities
Commodities turn up as the USD falls.  Commodities turn down as the USD rises.Commodities turn up as Bonds fall. Commodities turn down as Bonds rise.Commodities turn up as Stocks fall. Commodities turn down as Stocks rise.
Stocks
Stocks turn up as the USD rises.  Stocks turn down as the USD falls.Stocks turn up as Bonds rise.  Stocks turn down as Bonds fall. Again, Bonds lead Stocks and Stocks lag behind Bonds.Stocks turn up as Commodities fall.  Stocks turn down as Commodities rise.

Specific to Equities, as you trade the options on Sector Indexes of the S&P 500, please be aware of the correlation versus non-correlation with other equity and non-equity traded products. I am stating in brief, the more commonly known relationships that are repeatedly elaborated on in the book:
Changes in Energy (XLE) especially Oil (OIH, OSX) impacts Semiconductors (SMH, SOX).Utilities (XLU, UTH, UTY) are negatively correlated with Semiconductors (SMH, SOX).With broad-based Equity Indexes, the highest correlation is between Dow Jones and S&P 500.Canada benefits from rallies in oil being the ninth largest producer of crude oil globally.  While Japan, a major net oil importer suffers. The tickers for this inter-play would be FXC/XDC (Canadian Dollar), FXY/XDN (Japanese Yen) and OIH/OSX (Oil).Gold (XAU, GLD) behaves like the Australian Dollar (FXA, XDA). Australia is the third largest producer of gold globally.Top three currencies that have the tightest correlations with commodities are the Australian Dollar, the Canadian Dollar and the New Zealand Dollar.Gold/Silver (XAU, GLD) has very little correlation with other Indices.A deeper understanding of these inter-plays can help you construct effective pairs trading methods.

In conclusion, from a retail option trader's viewpoint, always remember that it is volatility that you are trading.  To trade the volatilities across multiple asset classes, use an optionable Index representing that particular asset class.  Remember, Implied Volatility can be added to or reduced from your portfolio, as not all Asset Classes or Sectors or Individual Companies or Countries move up/down in value ALL at the same time; and/or, ALL at the same rate.

This is not a criticism of the book but a personal observation.  It does not address the use of Relative Strength as a mechanism to cycle in or cycle out of an asset class, as one asset class weakens or strengthens against another asset class.  I have written about Relative Strength in another article, entitled "Stock Option Trading - Fundamental Flaw in Fundamental Analysis and Stock Picking". Please read it as a supplement to this article.

Thanks for reading my article,
Clinton Lee.
Founder, Home Options Trading: a uniquely retail-focused option-centric trading firm.

Please see Consistent Results (http://www.homeoptionstrading.com/consistent_results/), displaying the Model Portfolio's Performance YTD, updated each month-end. The portfolio models a typical self-directed retail option trader's account up to USD $50,000. Here's the stats in summary:
Return: Profit/Start of Year Cash Balance = up +75.62%.
Win/Loss Probability = 90.48%. 9 Wins per 1 Loss. Average Win/Average Loss = $3.09 Won per $1 Loss. Performance Ratio = (Win/Loss Probability) x (Average Win/Average Loss) = 90.48% x $3.09 = 2.80. Positive Expectancy = $1,051 per trade.

Preview an original 55 hour video-based course for online options trading from home, at http://www.homeoptionstrading.com/original_curriculum.html
Purchase the curriculum and receive a $800 options basic course as a Bonus!

Clinton's career spans 16 years of treasury, finance and banking across Hewlett Packard, JP Morgan Chase, Citibank; and, is currently a Corporate Director for Regional Business Development with ABN Amro (acquired by RBS) in Asia. Despite the years in the finance/banking industry, it did not help him directly grasp online options trading from home.