Yield Monkey's look on in Horror

OK,So riding the wave of Emerging Market Joy has finally got me. And got me good! The rick aversion theme was on in full force. I at first fought it, then tried to square up, now I am in survivor mood. As a friend said to me yesterday, "This week has been a long month"! Ditto from me. But what is happening and more importantly what will happen?

What is happening is that the market has begun to believe how bad this Sub-Prime issue is. How it has effected the housing issue in a major way and how it could eventually put the U.S. economy in a real recesses ion. No one want to say it but the possibility is real. Think about your own situation, 401k which looked so nice just a week ago looks quite venerable right now. In times like this do you go out and buy that new plasma screen TV or do you put off that purchase on til a later time. On a larger issue if no one is buying homes then an economy really slows. New home buyers, renovate (you need to hire workers), buy new appliances(Durable goods) and need to furnish the new spaces. I believe this is one of the biggest drivers of an economy. Not to mention if the war in Iraq ever starts to deescalate, then there will be alot of young men and women coming home looking for work.

What will happen in my opinion we have more to come. Remember I have been quite wrong in my prediction's over the past few weeks (look at my P/L for more confirmation). Every rally in Emerging currencies is faced with new sales as established shorts are looking to exit. Also any new shorts, have very tight stop losses attached, propelling the market higher. Before I left the office yesterday, there were a few Hedge Funds sniffing around for offers (dollar offers) in any EM currency. The official close in Brazil was 1.8990 but was trading at 1.9150/00 when I walked out. Bad News. I have tried my best to square up, but Argentina, one of my number one plays all year, continues to remind me why I hated trading this currency back in 2000-01. Interest rates have gone to 25% and liquidity to next to no thing. This combination has resulted in great P/L pain for me.

This week I will definitely square up everything possible. EVERYTHING. After that I start again, and if all else fails I can begin to ask the age old question.....

Would you like fries with that Sir?

Good Luck and Good Forex Trading.