New Programs :

looking at a group at ACM, track record from 2007. In the process of our due diligence with them

Added Fibo Fx to our database, very short term high frequency model. This program is being offered at Marex Financial and possibly Rab0

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FCI – our clients are up this month. Doing well very happy with them so far

IAB -  yet another positive month, looking to begin trading at London Capital Group and Marex as well this month

MS1 – starting to pick back up, up at pfg,flat at lcg. Did our best at marex this month

FC Stone he had 2 accounts, one up 7%  and the other down 2. Fc Stone has now allowed us to combine

platforms so we expect to see better results as the markets become more active

Nex Gen – got caught last night with GBP news in the Asia session creating unexpected volatility. Overall not

concerned as the drawdown was minimal and the consistency is stable

NSK – Has done well for us, thus far. Very professional in their outlook for risk. We expect their assets to pick up at PFG

as we transition clients from other trading venues

Precise CP – Very excited about their performance. Activity will begin to pick back up mid august as the trader”s wife

is having a baby. Also have a futures version  to  be released near the end of the year

QTFX -  The past 2 months have been  bad for them. After such a great start the past 8 months.They have had there

Equity stop levels hit in each month,(Ouch). They are retuning their risk profile and hopefully August , we will

see them return back to form.

QVFX -  Had their first losing month since inception( less than 2%). Lowered their max daily loss to 3%.

In my 2010 outlook piece, I predicted that risk would become a factor again as several countries would be unable to roll their debt as they have become overwhelmed from absorbing the losses of their respective banks. As we’ve noted in the past, simply moving bad debts from one balance sheet to another doesn’t mean the debts disappear. We knew a day of reckoning was coming and it looks like Greece is first in line.

Greece is currently in a major fiscal hole and the yield on two-year Greek notes, which started at 5.21% this year, has blown out to 14.5%. While this may look insignificant to some, this is a colossal change in terms of sovereign debt. Greece will not be able to roll its debt without European Union or International Monetary Fund aid. I would be willing to bet, however, that many Main Street investors are just becoming aware that Greece is on the brink of default and they are have no idea what this means to them. Investors are relying on their professional advisors to steer their assets through the Greece fire. The question becomes whether or not that reliance is the right decision. Therefore, I offer our analysis.

The first thing we do when a problem emerges is try to determine the effect of the worst case scenario. From our perspective, Greece is currently a relatively isolated issue. It is a miniscule portion of the total sovereign debt of the world, and European banks most likely would absorb the default. (This is probably why there is no actual policy in place to aid Greece of yet as rhetoric has been the only tool implemented). Nevertheless, we have no Greek debt and we’ve avoided Portugal and Spain as well, who are next in the default line as contagion spreads. Up until the last few days the debt yield of all of these countries hasn’t come close to reflecting the potential default risk we believed possible. In addition, we can only speculate about a short-term remedy as too many players are involved. Some of our sources indicate that Greece will be dropped from the EU, revalue its own currency versus the euro and re-enter sometime down the road. But this, of course, does absolutely nothing to fix the real problem in Greece. Which brings me to my second point: How can we use this incident to our investment advantage?

When we strategize about specific events affecting investment policy, we look to use those events to make a large gain with reduced risk or to protect principal from unforeseen consequences. The Greek incident offers opportunity for both.

The short term causes of Greece’s problems are all too common. Greece borrowed too much money, manipulated the manner in which it disclosed those borrowings and collateralized its borrowings with its most prime assets. This type of irresponsibility leads to default. But it’s important to remember that investors don’t buy sovereign debt to take on risk. Most sovereign debt purchasers are willing to accept smaller interest payments in return for assurance. So, the possibility of Greek default requires us to examine the safety of even the most assured investments.

In normal times, sovereign debt would be considered the safest asset. But global recessions constrain economies. With enough pressure, long-term fundamental issues bubble up and their bursting is accelerated. This is precisely what’s occurring in Greece.

Most economists assert that Greece overextended itself this last decade and the spending on which Greece embarked to combat the recession pushed it to the brink of default. While we agree that Greece is overextended, this bland assertion does nothing to identify how Greece got here. To find out why, we compared economies that are performing well against those that are constrained or contracting.

In 1980, the total population of Greece was about 9.7 million. Today it stands at approximately 10.7 million. That’s an 11% growth in population over 30 years. When compared to India, Brazil and Indonesia, whose populations have all grown nearly 60% or more over the same time, the fundamental reason why Greece is faltering becomes obvious: its population is not growing as vivaciously.

In terms of growth, there are no major economies other than China that can compete with the growth of India, Brazil and Indonesia over the last few decades. Given the table below, it doesn’t take much to recognize the correlation between population growth and economic growth.

(Note that the United States also enters into the growth arena as its percent of population growth has slightly eclipsed China.) Accepting this fact, if we can determine the similarities between countries growing in population, we can simultaneously identify areas of the world where the odds of investment return are increased and avoid areas where a government guarantee has limits.

After some serious inspection of a world map, the first two things I noticed were that all the aforementioned growth nations have massive amounts of land at their disposal and they all have direct access to the ocean. Therefore, they have room for population expansion and they can directly access the seas for shipping routes. The next similarity was a little less obvious at first but just as vital.

In India, the domestic currency is the rupee. Brazil has the real. Indonesia has the rupiah. China has the yuan, and we all know about the dollar. What’s important is that each of these countries has a central bank tasked to maintain the “value and stability” of their respective currency. Defining exactly what that task means in terms of respective policy for these central banks is beyond my ability. But one thing I do know is that each of these central banks has the capability to print their own currency in times of strife and all of them did during this last crisis. Greece, on the other hand, is part of the EU and, therefore, does not have the ability to print its way out of this corner. The EU can print Euro’s and they probably will. However, that’s way beyond Greece’s influence. So, the Greek government has little control over its own fate. In the long run, austerity and restraint are the real solutions to a national budget problem. But that doesn’t comfort anyone holding Greek debt right now. The only way we can prosper in the long term is to make sure our money is around in the short term. To my knowledge, no one has mentioned any of these root issues that are pressuring Greece. But these basic points are way too stark to be coincidental.

In recent weeks many scathing headlines have come out about the manner in which investment companies manage their clients’ money and where their moral responsibilities lie. I completely understand this scrutiny as we are in a high profile business, and the ethics and performance track records of many of our competitors are less than stellar. But let this piece stand as proof that not all of us in the industry are highly overpaid regurgitators of modern investment theory who simply spout the “buy and hold” mantra until a portfolio is decimated. Some of us actually enjoy applying thought and discipline to investment strategy. Land mass, direct access to the seas and central bank independence are factors that, I believe, increase our odds of success as we determine where in the world to deploy capital. I also realize that these observations might counter the opinion of the average investment professional. But that’s the point and why we will continue to produce original thought and results that better the average in this constant battle.

As always, I appreciate your continued trust and confidence.

This commentary has been prepared using sources of information generally believed to be reliable. No representation can be made as to its accuracy. Information in this report does not pertain to any Warren Capital Group product and is not a solicitation for any product. Investing in securities involves risk, including potential loss. Foreign investment involves specific risks including greater economic, political, and currency fluctuation risks, which may be even greater in emerging markets. Indexes can not be invested in directly, are unmanaged and do not incur management fees, costs or expenses.

Let’s first recognize the complete problem.  At the end of 2007 there were collectively $100 trillion worth of debts worldwide on the books.  Those debts were secured by $50 trillion of assets at a ratio of 50%.  The trouble is that the asset base has shrunk because of declining stock markets, housing prices and real estate corrections.  If asset bases are reduced and the debt burden is not, you’ve got a real problem.

This is not the first time I’ve written about this issue.  As I noted early last year, to stop the economic bleeding governments around the world did the only short term things they could.  They aided the ailing institutions by assuming the sketchy debt the institutions created and couldn’t dump on their clients and turned on the spending spigot.  While arguably necessary at the time, neither addressed the underlying asset gap and both contributed to the widening.

Leave it to the masters of finance to pull off this coup, but the fact of the matter is that the failing and insolvent banks used their influence, political connections and fear mongering tactics to pressure governments worldwide to grant them a clean slate.  People can moan about this all they want but it doesn’t change the reality that those inadequately financed loans have now been transferred onto the balance sheets of their respective governments.  If that wasn’t a big enough challenge, those further leveraged governments simultaneously implemented spending programs to promote economic growth.  Given the performance of many markets so far this year, maybe the day of reckoning is upon us.

In my January, I predicted that risk would be a factor this year as several countries fail to roll their debt.  This happened sooner than I expected as Greece, Portugal and Spain are the headliners right now.  Government spending and balance sheet issues are now the factors that lenders of the world (bond purchasers) are considering as numerous nations come to the market to finance their inadequacies.   But given low government interest rates, balking by bond buyers should come as little surprise.

Even with all the market fear, interest rates in these three countries remain very low.  (Ten-year bonds yield just 6.25%, 4.41% and 4.03% respectively in Greece, Portugal and Spain).   It’s a wonder why anyone would take on such default risk for so little return.  But when further examined, it becomes apparent that this is a global issue and the reason why their rates remain so low is that there are very few better alternatives.

One way to examine sovereign debt risk is to look at the spread over treasuries.  Remarkably, the largest spread over 10-year Treasuries that any of these countries face is 2.25%, born by Greece.  To me this is the market saying that these spending and indebtedness issues are worldwide and that the U.S. is not immune to this virus.

It doesn’t take much work to find out how whacked our budget is here in the U.S.  There is simply way more government spending than there is tax revenue and it’s been that way for a long time. The maddening solution to date has simply been to pile debt upon debt.  It’s politically easy to simply raise the debt ceiling.  But a few facts and a couple of recent events lead me to believe this game is close to over.

First off, the numbers published by many U.S. government agencies are as manipulative as they are vast. They have implemented accounting tricks that would make Lehman Brothers blush.  The truth is that our total debt is currently 85% of GDP and will be 100% of GDP by 2012.  These types of numbers are making those Euro countries I mentioned teeter.  Moreover, about 50% of our debt is owned by foreigners.  If you want an example of how big a problem that is than look no further than Fannie and Freddie.  The majority of their quasi government debt at the time they went into conservatorship was owned by Japan and China.   There was no way those two countries would have accepted default.  And what happened?  They forced Fannie and Freddie into taxpayer hands and they have now amassed $1 trillion of losses that Americans will be paying for years.  Also of note is the fact that the first few treasury auctions of the year are failing miserably.  They have been less than 25% subscribed as no one is willing to buy our debt at these paltry rates.  To make matters worse, China was a net seller of treasuries in December as it unloaded $34 billion of its holdings.  It’s time to wake up and accept the fact that the forces pressuring Greece are now surrounding our borders. So, here’s what can be done.

To fill the asset and revenue gaps we can raise taxes, reduce spending or create more currency.  You can make your own assumptions as to the likelihood of the first two occurring.  But I think the third option is either being overlooked or undeservedly dismissed.

Most economists I’ve consulted say that you can’t print your way out of debt or to a balanced budget because it will destroy the value of the underlying currency and create inflation.  But recent history contradicts as the Fed has increased the money supply (USM1) by 22% in the last two years and the dollar’s index value is the same as it was in the middle of 2007.

I will, however, confess that printing more money should cause inflation.  And that’s the beauty of this plan.  If we turn on the presses we can buy our own debt while we simultaneously increase asset prices.  Genius!

I realize that some of my ideas sound farfetched. But given the state of economic confusion, we are in dire need of some off the wall ideas.  I also take solace in the fact that several of my past suggestions have now been implemented in some form or fashion.  However odd it sounds, printing our way to solvency is an option that plugs holes.  And part of my duty as a citizen, money manager and author is to find a way to fill the gaps.

Joseph Warren is founder and CEO of Warren Capital Group.  Warren Capital Group is a SEC Registered Investment Advisor providing investment management and advisory services.  WCG has expertise in the areas of stocks, bonds, real estate, money markets and other alternative assets.  Learn more about Joseph Warren and Warren Capital Group at http://warcap.com or email at jrw@warcap.com.

Foreign Exchange (forex or fx) is an over the counter (OTC) financial market where buyers and sellers carry out a large volume of foreign exchange transactions daily. The forex market is practical because it helps enable trade and transactions between countries, and it also allows an investment opportunity for risk seeking investors who don’t mind engaging in speculation.  Those that trade in the forex market typically look carefully at a country’s financial, economic and political situations, as these factors tend to influence the direction of its currency.  But why are we as investors now being inundated with information about the forex markets and currency trading? Why is it now so important to get involved and begin evaluating speculative investment opportunities in this market?

Technology
In decades past, the forex market was dominated largely by banks, central banks, multinational corporations, governments, hedge funds, and other financial markets and institutions.  These entities had the ability, knowledge and resources, to build and maintain strategies that could them capture alpha or market-beating returns on forex investments.  Some have heard the stories about George Soros and his Black Wednesday trade that earned him over $1 billion, when he broke the Bank of England and forced England to withdraw from the European Monetary Union.  Of course, this was back in 1992, long before retail investors could take part in the forex market.

With the advent of the internet and the advances in technology, forex trading has now moved from being primarily traded manually over a trade desk by these larger entities, to being executed electronically over an online electronic trading platform.  These advances have fueled the speed with which banks can now provide equal price offers to retail investors as they do to larger entities.  We now see retail brokers providing every day investors access to trade the forex markets via their own online trading platforms with investors needing only to deposit sums as low as $200.

As we move into the next decade, we expect to see opportunities increase in the forex market as more and more banks improve their technology and provide this global asset class more transparency, speed and liquidity.

Regulation
As is mentioned above, jurisdictions around the globe have had to move quickly to keep up with the growing demand in the forex markets globally.  Here in the US, the National Futures Association (NFA), a self-regulating entity under the U.S. Commodity Futures Trading Commission (CFTC), have made drastic strides to develop a plan for regulating forex trading in the US.  Entities wanting to trade or promote forex trading must follow strict regulatory guidelines and seek the appropriate licensing and approvals from these governing bodies.

Over the past 3 years, many of the bad retail forex brokers that initially offered accessibility to trading forex have vanished.  This is the favorable outcome of the government’s initiatives to weed through the firms that were practicing high pressure tactics, and taking advantage of investors and traders.  Brokers in the USA, classified as Forex Dealer Members (FDMs) or Futures Commission Merchants (FCMs), are now required to provide daily and monthly reports of their compliance and financial requirements being met and upheld.  The new alternative net capital requirement is $20 million plus 5% of the amount of customer liabilities over $10 million.  This increased responsibility and accountability has provided investors and traders more peace of mind with regard to the institutions with whom they deposit their funds (margin) for trading.

Investors seeking Alternative Avenues
Investors today are seeking other avenues to diversify their assets.  The recent market recession of 2008/09 have taught many that a dependence on the stock and bond markets only, might not be a wise choice.   Investors are now increasing their knowledge of the forex market, mainly because it’s one of the most liquid markets in the world, trading in excess of $3.2 trillion a day in volume.  Also, the forex market is active 24 hours a day, except on weekends, leaving access for investors the ability to trade when it’s most convenient for them.

Risks in Forex
There are many advantages to trading in the forex market, however, investors and traders must also know what to be weary of when looking for opportunity.  Forex investments are often afforded access to a considerably high degree of leverage (in some cases up to 100:1).  This can result in large losses as well as large gains.  Investors must know and understand their investments and understand that it is possible that they could lose their principal in any investment made in this market, just as with any other investment / market.

How to evaluate an opportunity
Valhalla Capital Group is a registered, regulated and licensed Commodity Trading Advisor and Independent Introducing Broker, under the NFA and CFTC.   We assist investors and traders in the forex market, by helping investors decide whether an investment in forex is a right move and whether they suitable for the risks involved.

As technology, regulation and professional trading systems improves, we will most likely continue to see a rise in the investments in the forex market.  With 24 hour trading, opportunities in bull or bear markets, greater control, liquidity and transparency, it’s no wonder we see forex trading as the buzz of the investment world.

Q. Before we go into the 3 reasons a separately managed forex account is the solution of choice in 2010 and beyond, let’s explore the true meaning of ‘What is a Separately Managed Forex Account?’

A separately managed forex account is an investment account, opened by an investor in their own name with a regulated forex dealer member or brokerage firm, and is managed by a professional money manager or Commodity Trading Advisor (CTA), pursuant to a limited power of attorney giving the money manager or CTA authorization to trade forex transactions on the behalf of the investor.

So, without further delay, here are the 3 reasons a separately managed forex account is the solution of choice in 2010 and beyond:

1. Control
   When an investor places funds in a separately managed forex account, that individual or firm owns that account. The investor has the freedom and control to decide what CTAs and money managers are given limited power of attorney to manage assets within that brokerage account or portfolio on their behalf. The investor can then tailor their own separately managed accounts to address their own personal preferences and financial goals. Although the chosen CTA or money manager may be trading for hundreds of other separately managed forex accounts at the same time, your account is ‘separate’ and distinct from all others. You maintain the control over when funds are deposited and only the investor maintains the authority to request and direct any withdrawals made from your account.
2. Flexibility and Liquidity
   Unlike most pooled investments, mutual funds, hedge funds and even CDs or money market accounts that have restrictive guidelines as to when funds may be withdrawn and the lengthy notice windows that must be given prior to a withdrawal being processed, a separately managed forex account typically carries much greater flexibility and liquidity. An investor usually has the freedom to deposit or redeem funds daily or weekly without any penalty. The determining factor with regard to the restrictions on redemptions will usually be decided based on the style or strategy of the model being traded and whether there are extended holding times on trades. However, most short term models will allow for clients to redeem their funds in an emergency situation in as little as 72 hours. Compared to other alternative investments that can require up to 60 days notice before processing a withdrawal, this measure of liquidity is often an attractive benefit to investors seeking that level of flexibility and liquidity.
3. Transparency
   In the Bernie Madoff era, where we’ve seen ponzi scheme after ponzi scheme in so many different countries around the world, many investors both large and small, have begun to demand far greater measures be put in place to ensure their brokerages and custodians provide a better level of transparency, allowing them to see their investment dollars at work. With the advances in technology, many brokers and forex dealer members who offer access to a separately managed forex account, can now provide their investors direct online login access to see their accounts in relative real time, 24 hours a day 7 days a week. In most cases, investors can see their account summary, the current value of their account, the allocation of the assets in their portfolio, and most importantly how the portfolio is performing in comparison to a benchmark. This level of convenience gives investors access to seeing their account activity whenever it’s most suitable for them, night or day.

There are so many other great benefits to making a forex investment through a separately managed forex account, including the ability to customize a portfolio, and include or exclude strategies or trading styles that you like or dislike. An investor also has the ability to open a separately managed account through a self-directed IRA, allowing their investments to grow on a tax-deferred basis in a traditional IRA or on a tax-free basis if the investor qualifies for a Roth IRA. Lastly, knowledge and experience are two very important qualities that any investor will benefit from when they’ve chosen a professional money manager or CTA to manage their assets on their behalf. Most professional money managers have spent a great deal of time and money invested in research and development of analytical systems that are often completely automated and can help to provide sound risk management and discipline to help attain the specific goals of a particular trading strategy.