The Best Idea Yet: Robots.

This week I take a quick look at a previously under-examined solution to the financial crisis that grips the globe. But first, let’s look at the chart of the week:

Citigroup, which I talked about a couple of weeks ago, fell nearly 40% this week.

On fears that the U.S. government would nationalize major banks, the banking sector had another bad week. Citigroup's stock has lost more than 92% of its value in the last 12 months.. How much longer can this last?

Yesterday, I asked a group of newsletter subscribers to suggest topics for this week’s newsletter. Tim wrote:

Rob,

Love the newsletter. Keep it coming!

How about an occasional or permanent section on robots?
Do any of them work? If so which?
How do you write your own? Etc.

Tim

Tim was referring to “trading robots,” which make buy and sell decisions about the market independent of human intervention. However, when I first read his suggestion, I believed he was talking about actual robots. You know, machines of the future that help humans with ordinary tasks.

And it got me thinking: maybe that is the best topic for the weekly newsletter. So here you have it:

Five Ways that Robots Can Help Save the World

1. Robots can run the real estate lending system. First, some humans reasonably good at math – such as children from the 5th grade primary school system – will set lending standards. These lending standards will, say, make home loans only to borrowers with good credit. And only permit loans to be made for 90% or less than the value of the property. Property values will be calculated by a survey system of multiple appraisals, including comparable prices paid in the same area.
   
   Then, these simple standards will be programmed into robots. These robots will then work at banks (which will be owned by the federal government anyway in the next few months), and will give out loans based on objective criteria. Similar robots will operate the inter-bank lending system, and these robots won’t try to broker crazy deals whereby loans are chopped up, repackaged and hyped and sold. These robots will be able to use the miraculous invention called “math” to simply and honestly value the underlying loans.
   
   
2. Robots will write legislation in the United States Congress. We’ll program the machines to not allow pork barrel spending, whereby which worthless pet projects are snuck into normal legislation about important matters. For instance, the robots won’t even consider attaching a grant to study why people try to escape from prison to a bill to deal with health care problems.
   
   
3. Robots will run the U.S. income tax system. Each January 1, robots will send each United States voting-aged citizen and business a stamped envelope and a postcard-sized letter. This postcard will contain one question:

   How much did you make last year in your job and your investments? Include all income from all sources.

   Then the citizen will be given the option to pay 15% immediately, or pay 1.5% per month over twelve months in an installment plan. And then robots will audit the returns.
   

4. Robots [I deleted this]. I wrote this section in a moment of insanity, and it was not family-friendly. The language and the content were just too far over the top. Instead of subject you to the vulgar (but totally hilarious) section that appeared here, I'll just show you a photo of a gentle stream.
   
   
   
5. Robots will run the agencies that regulate the financial markets. For instance, if a robot asks to see Bernie Madoff’s trade records, and does not get a full and complete answer, including the ability to independently verify the trades, the robot will keep asking. If it does not receive a full answer after three requests, the robot will simply shut down the entire firm, and transfer the firm’s assets to the firm’s customers.

The robots that work at the regulatory agency will not engage in pointless efforts to penalize investors, like what FINRA is working hard to do. By the way, a Google News search for “FINRA forex leverage” produces this insightful result below:

You can click the image above to see a larger version.

Now, enough of the insanity. Let's look at a chart of the U.S. Dollar.

Here's what I am looking at right now. You can click on it to make it bigger.

Now I'm looking at a shorter term trendline on the U.S. Dollar Index (chart above). If the blue shorter-term trendline is broken this week, we could see a longer-term move all the way down to the 82.00 area. That's a potentially very long slide.

However, if we see a bounce back upward in the next week or two -- a bounce off this blue trendline -- that's a sign that the dollar could continue and exceed its nearly year-long upward trend.

Update on the EUR/USD

Last week I mentioned a possible breakout on Europe's single currency. I also said that I was bearish on the currency. Here's what happened (you can click the chart to enlarge it):

And now, we're almost done with this week's update. Thanks for making it this far.

I'll be in Orange County, California, and England (or Scotland) for seminars in the next two months. I'd love to meet you in person. You can get information about Orange County by clicking here. It's almost sold out. And if you're interested in coming to a UK-based seminar, send me an email (rob@robbooker.com) and we'll write back to you with some information in the next day or two.

Happy Trading!