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CNBC Guest Post: Here’s What Could Trigger the Next Wave of Selling

Posted on August 26th, 2015 by Erica

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The market has to bounce? Those are famous last words for this generation of traders.

I can’t tell you how many times I have heard this in the past few years, and most times, the traders have been correct. But this has allowed them to have a false “Masters of the Universe” complex, where they think each selloff is just an opportunity to buy. And anything and everything they do is correct. In trading, no one is right all the time.

Financial Market trends

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The past two trading days (while great for day traders) were a wake-up call for this generation of position traders. And while the market did bounce off of an overextended dump on Monday morning, it doesn’t mean we are out of the woods.

A market recovering due to a rate slash by China is not the same as a market bounce on trading or corporate fundamentals. So, before everyone starts jumping for joy, I would consider that while this might have been another Band-Aid on the wound, it’s not a cure for the overall issues that led to this month’s selloff.

What will happen over the coming weeks is that the traders and investors who have been bottom picking will be trading scared and will be the first to bail out. That will cause the next leg down. Or, they, along with other investors will sell into rallies in fear of another selloff, which causes natural resistance.

The problem is that this economy is floating on many <asset_inline nid=”8″ target=”_self”>false assumptions. Instead of growth from producing and selling products, the economy’s growth comes from artificially low interest rates, layoffs and cost-cutting.

Even worse, no one from either side of the political aisle stands out as a leader who understands real fiscal policy. And we all must remember that the Federal Reserve is out of bullets.

One of the concepts investors have to understand is that the market does not always have to bounce and if it does, a trader can be right about a bounce and still get blown out in the process of waiting for it.

To anyone who says, “The market has to do ___,” I always say: “Don’t ever tell me what the market has to do! The market is bigger and smarter than us all. And once again, it showed everyone from the small investor to the ‘masters of the universe’ who’s boss.”

My advice for young traders is to take a step back and realize that experiencing market moves like this will, in time, make you a better trader. Most young traders think there are two main positions — long and short. Traders need to understand that being flat can be the most profitable position since it allows a trader to think clearly. I’ve never heard one of my clients tell me they thought the market was going to go down when they were long.

Traders tend to talk their positions so my advice to the trader who has been rattled the past few days is to step back, get flat and don’t worry about missing moves in the market. I have been going home flat since early last week which has allowed me to trade intraday and make the most of the markets movement. Being flat has allowed me to sleep very well the past few nights.

Do not worry about missing out. I remember in 1987 feeling like that would be the last time to take advantage of a market move. We have seen and will see many more in the years to come. The key to trading is to cut your losses and to be able to come back and trade another day.

For a CNBC profile of David Greenberg, visit the CNBC website here.

 

CNBC Guest Post: Get Ready, A Correction is Coming

Posted on August 21st, 2015 by Erica

People overreact when a selloff like the one happening today occurs. As a trader, I Iive for selloffs in the market. But my real concern is the economy.

Think of it in terms of a car: The gauges at the top show the car moving along at 55 miles per hour, fuel level on full, and the washer fluid topped off. But beneath that, where most drivers don’t look, it shows the wheel pressure is dangerously low, the oil pressure is at the top of the range and its leaking coolant.

This is our economy, built on artificially low interest rates and earnings growth derived from firing employees and cutting costs — not from producing and selling more products.

The political outlook makes it worse: There is no one (from either side) standing out as someone who understands real fiscal policy.

The market is vulnerable. I am not concerned about this short-term selloff, but I am deeply concerned that the market is setting itself up for a major and long overdue correction.

Over the past six years, every minor selloff has been followed by a major upside extension.

I think the market is tired and there are a lot of long positions that have gotten in too late. They will be the first to panic and add a new leg to this selloff.

As a trader, I would be careful of a looking for a bottom or aggressively buying into the next bounce. We are at a time where the risk-reward ratio in the short or near term in the market might have reached a tipping point for the long side.

I would lighten up on positions and watch from the sidelines, looking for sold growth opportunities.

But remember: Selloffs (like another word that begins with s) happen. And no market goes in one direction forever.

Commentary by David Greenberg, the president of Schaeffer Greenberg Advisors and a former board member of the New York Mercantile Exchange. He has lectured on the transition to electronic markets and personal money management at the Museum of American Finance, West Point Military Academy, Columbia University, Syracuse University and elsewhere. Follow him on Twitter @greenbergcap.

To read this article on CNBC, click here.

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CNBC Guest Post: The Risks of Killing the CME Pits

Posted on February 8th, 2015 by Erica

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If you ask anyone who ever set foot on the floor of the New York Mercantile Exchange, they’ll tell you it was a place unlike any other. The screaming and yelling, the energy, the epic fights and the epic friendships. While we all competed against each other on a daily basis, we also had each other’s backs. Fortunes were made one day and lost the next, then made again. When the opening bell rang, it was like being in the Super Bowl every day.

I began as a runner on the CME Group floor in 1986. I was fresh out of Syracuse University and making $3.75 an hour. The education and experience was life-changing. When I moved back to New York, I traded gold and then crude oil in NYMEX’s crude oil pit. It was just after the Gulf War and oil was going crazy. So was the floor. Arms were swinging, bodies were flying and adrenaline was raging. I’d never seen anything like it and probably never will.

While the CME Group announcement that they will be closing the pits July is hard for all of us to take, it’s only the final of many nails in the coffin that began in 2006. That was when the NYMEX board voted to allow electronically-traded physically-settled energy contracts to be traded side by side with the open-cry pit markets. Previously, NYMEX ACCESS offered electronic trading but it was only available after-hours. Before this, the only time the electronic market was open during the day was a few days after the Sept. 11 attacks – NYMEX needed to settle the markets before the weekend.

I voted against electronic trading for a variety of reasons, including my concern that the market conditions were moving faster than the learning curve of the Commodity Futures Trading Commission and the regulators, who didn’t understand the new markets they were trying to enforce.

I remember when someone on the board said it would help the floor by making the WTI floor and WTI electronic contracts fungible, I laughed and replied that this would kill the floor within six months. Sadly, I was correct. It happened in the first 18 months.

After NYMEX placed their contracts online, seat leases dropped rapidly from $25,000 to $1,000 a month. Everyone knew their time on the floor was now finite. CME’s news about closing the floor isn’t surprising to anyone and will only affect a handful of people. The decision to launch electronic trading in 2006 and 2007 had life-changing consequences for thousands of people, but many have since moved on.

So who has taken the place of the floor market makers?

High Frequency Trading (HFT) trading stepped in. While there has been extremely bad press about the HFT traders (I was one of the biggest haters of the people who took my place), even I have to acknowledge that without them, there wouldn’t be a market or liquidity to trade off of.

If you slow down HFT to a snail’s pace, you’d find they do exactly what the floor traders did. The floor traders fought for location, the best traders were often the fastest and we all took advantage of the markets in efficiency. It’s pretty much the same for HFT.

Most people aren’t aware how traders got their spots in the pit and just how valuable their position was. There were crucial advantages in standing on the top steps, standing next to certain brokers, having phones lines closer to the pit and seeing the TV’s on the floor. It was all about having information and order flow, which is what allows today’s top HFT to succeed.

The closing of the gold and crude oil pits could worsen the issue of painting the tape (manipulating prices by both buying and selling) by large trading houses to help their positions or hurt traders that can’t bully the market. This has happened and will be a major issue for the settlement of back months. The front month is a weighted average and shouldn’t be affected.

The open access that has been given to funds that never traded energy or only traded as financial instruments has caused harm to the public on a supply and demand basis.

When the floor was open, access was limited, and used for hedging more then speculative trading. This latest massive selloff in energy proves the point that speculation is alive and well, and controlling the market. The world’s supply and demand didn’t change that drastically for a contract in crude when the front month came off over 40% in six weeks. This massive speculation is enabled by the ease of access to funds into the electronic market.

The days of trying to get across the floor and through the phone wires by doing limbo poses, of being so tight in the pit that I had to throw my trading sheets over my head behind me for my clerk to figure out my position and have him try to stick his arm back in the pit to give it to me, feeling the rush and power of being a floor trader – these days are long gone.

Long gone but not forgotten. Even when all we hear now are the clicks of the keyboard and funky sounds announcing a trade has gone off, we can always look back and remembers how great is was. And if you ask any of us if we missed it, we’d reply “EVERY DAY!!”

Trading Tip #3 – When You Hear the Word “Hope”

Posted on November 5th, 2014 by Erica

Trading Tip #3 – When You Hear the Word “Hope”

UntitledTake if from me – THERE IS NO HOPE IN TRADING. I tell this to every one of my executive coaching clients. If you keep thinking, “I hope it goes up” or “I hope it goes down,” then get out NOW. It’s not working. Do yourself a favor. Get flat and take another look at the market. Hope is on a date with an old friend of mine and trust me, it is not going well.

Read more on “Trading Tip #3 – When You Hear the Word “Hope”” »

Trading Tip #7 – Never Trade in Pain

Posted on October 27th, 2014 by David Greenberg

Trading Tip #7 Never Trade in Pain

This trading tip is meant more for the day traders and people who Untitled trade their own money.  I understand the traders  that trade for banks or funds are probably not going to be able to walk in their boss’ office and say “I’m not in the mood to trade today” or “I’m in pain today, and I think it’s better for me to stay flat for the day.”

Read more on “Trading Tip #7 – Never Trade in Pain” »

Trading Tip #4 – Being Able to Admit When You’re Wrong

Posted on October 15th, 2014 by David Greenberg

Trading Tip #4 – Being Able to Admit When You’re  Wrong

Untitled I remember the last conversation with my ex-wife just before we started the divorce. I sat her down, looked into her eyes and I said, “I’ve spoken to all the mathematicians, and it is theoretically impossible for me to be wrong every time.”

As a trader, one thing I know I am good at and have no issues with is admitting when I’m wrong and then changing direction quickly. It is an essential quality for being successful. Read more on “Trading Tip #4 – Being Able to Admit When You’re Wrong” »

Trading Tip #8 – Recovering After Getting Your Butt Kicked.

Posted on October 14th, 2014 by David Greenberg

Trading Tip #8 – Recovering After Getting Your Butt Kicked.

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The day after getting your butt kicked can be one of the most important trading days of your career. I am not talking about the normal, or slightly above normal, butt kicking. I am talking about one of those days that you just got hammered for whatever reason. Maybe you were stubborn, thinking “the market has to come back.” Maybe you added to a bad position and it just kept going against you. Maybe you said, “I Hope” and she wasn’t around to hear you scream her name. Or maybe, like me, you got caught on the wrong side of a world news event driven market, and the market gapped against you. Read more on “Trading Tip #8 – Recovering After Getting Your Butt Kicked.” »

David Greenberg Joins 9/11 Tribute Center Board of Directors

Posted on October 6th, 2014 by Erica

9/11 Tribute Center Press Release:

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(New York, NY – October 3, 2014)  David Greenberg joins the Board of Directors of the 9/11 Tribute Center and September 11th Families Association. After Mr. Greenberg lost a number of friends and colleagues on 9/11, he was back to work on 9/13 at the New York Mercantile Exchange. As a member of the NYMEX Board, he was able to help the exchange get back into operation in one week. It was the only building in the WTC area to be open during the first few months. NYMEX brought over 1,000 people in by ferry to operate and keep the market open. Mr. Greenberg volunteers at the 9/11 Tribute Center to remember his lost friends. In his spare time, he gives motivational talks to young people at major universities on leadership and personal money management.

In a statement today, Mr. Greenberg said, “My service on the board is to honor my friends, members and staff from the New York Mercantile Exchange and the New York Board of Trade who were lost and for all who helped in the recovery and rebuilding effort.”

Mr. Greenberg, founder of Greenberg Capital and former President of Sterling Commodities LLC, has over 25 years of experience in private investments, finance and global markets. He offers leadership, financial, and corporate and personal money management services to companies, academic institutions, private clients and professional sports organizations. Throughout his career, Mr. Greenberg has appeared on numerous media outlets including CNN, Fox Business News, Bloomberg and CNBC. He is frequently interviewed on world market events.

Mr. Greenberg has been a guest lecturer for the finance program at West Point Military Academy, Columbia Business School, the Jack Welch Experience at Sacred Heart University, the Whitman School of Management at Syracuse University and Hofstra University. In addition, he has taught a course on the transition to electronic trading at the Museum of American Finance. Mr. Greenberg is currently lecturing on personal money management, focusing on topics such as “Living Below Your Personal Financial Radar” and “The Art of Saving to Ensure a Sound Financial Future for You and Your Family.”

 

About the 9/11Tribute Center

The 9/11 Tribute Center is a visitor center opened in 2006 by the September 11th Families Association, a not-for-profit corporation. 9/11 Tribute Center offers visitors to the World Trade Center a place where they can connect with people from the 9/11 community: family members of lost loved ones, survivors, first responders and people who live and work in Lower Manhattan. Through walking tours, exhibits and programs, the 9/11 Tribute Center offers “Person to Person History,” linking visitors who want to understand and appreciate the historic events with those who experienced them. Visitors learn factual information about the events, the identity of 2,973 people killed in the attacks, the unprecedented rescue and recovery operations and the tremendous spirit of support and generosity that arose after the attacks. Personal gallery and walking tour experiences are available for student and group visits. Learn more about 9/11 Tribute Center programs, visit www.tributewtc.org.

9/11 – A Time to Remember, A Time to Help

Posted on September 10th, 2014 by admin

911_rememberAs the news coverage fades out please remember and please help those affected by September 11. I was in 9/11 and lost so many friends and co-workers, and as an uncle of a retired Army Ranger who is in chronic pain from injuries obtained in action, I am asking you to support a great cause.

The 3rd Annual Pike Hike to Ground Zero will take place on Saturday, September 14. The 17-mile hike will begin in Fort Lee, New Jersey and end at the Ground Zero Memorial.

This group of people was too young to feel the full impact of that tragic day as well as the pain felt from the troops coming back, but they’ve stepped out over the past few years to create a fundraising event to remember the victims of 9/11 and help wounded solders.

Please take a moment and look at this video and hit the link to the website. This is a great cause and close to the heart of all Americans.  No matter how small, please take the time to donate and show your support.

To donate please click here: https://support.woundedwarriorproject.org/group-fundraising/PikeHike2013

CFTC Leaders Jump Ship: Time for Some Real Change

Posted on November 15th, 2013 by David Greenberg

DSC_2006Once again there are a handful of open positions at the Commodities Futures Trading Commission (CFTC). First Jill Sommers, then Gary Gensler and now Bart Chilton are leaving. This agency’s mandate is to regulate commodity futures and options markets in the United States. Unfortunately, it is being run by people who have never traded commodities, run a clearinghouse for commodities or sat on an exchange board.

There is something inherently wrong with this thought process. It would be like me sitting on the medical practices board. Although I am sure that all the people on the CFTC have IRAs and other brokerage accounts, that doesn’t make them experts, just like having health issues doesn’t put me in a position to regulate doctors.

What does this mean when people with so little trading experience run an agency? Simply a replay of the past. Clearinghouses and financial services firms such as Refco, MGF and PFG have collapsed as a result of faulty oversight by the very agency pledged to oversee them. It will happen again.

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