Thursday, November 29, 2007

Look's Like Bernanke is set to ease....

Bernanke seems to be signaling an interest rate cut is in the works. This STORY just out on Bloomberg news outlines the reasons. I am still long dollars across the board but I am not sure if that is such a good thing in the face of this interest rate cut. My positions are as follows.

1. Long Usd/Krw
2. Long Usd/Brl
3. Long Usd/Ars
4. Long Usd/Twd
5. Short Eur/Usd

Good Luck and Good Forex Trading.

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Monday, November 26, 2007

Europe's Economy Slowing ???

The German finance minister just stated that......

He is more sceptical about growth outlook due to U.S. crisis, Oil prices,Strong Euro.

This may be the crack in the armour I was looking for in regards to lower rates in Europe, and therefore a lower Euro.

Time will tell but I think this may be the beginning.

Good Luck and Good Forex Trading


Sunday, November 25, 2007

Raising Rates to Worsen Sub-Prime Mess

This is the TITLE of a featured story in the weekend edition of the WSJ. The article states that due to resets on current sub prime mortgages, interest payments are set to rise by 362 billion dollars in 2008. This is not good news especially when coupled with a slowing economy both here in the the states and globally. What does this all mean? I think to assume that this situation will confine itself to just the U.S. is quite naive. I remember back in 1997. Thailand was under tremendous pressure to devalue it's currency in the wake of an extremely slowing economy. Hedge Funds were attacking the region (buying large quantities of dollars) attempting to get the governments to give up on currency pegs, and managed floats which the region had been using to mange its currencies for many years.

Thailand was the first to be attacked, it was seen as the weakest and easiest to break. It was eventually broken but not before inflicting its own punishment. One day in May 1997 the Central Bank raised rates to 1500% (Yes 1500%) on Thaibaut short balances. This was to hurt any speculators who would be so bold as to short their currency. It hurt, quite a lot to be honest. I lost more money on that day then I had ever lost before. Actually I lost more on that day then anyone at my institution had ever lost before. I remember sitting at my desk and being called by the head of Global Markets. He asked what I thought was going to happen next, I said it would get worse before it got better, and that Thailand was just the first to go, the rest of the region would go down one by one, like a stack of dominoes. I am not so sure he agreed with me, but he didn't fire me nor did he take away any trading responsibility for losing all that money. Rather he allowed me to trade my view. Over the next couple of days weeks thing got worse, alot worse, and I began shorting the other currencies of the region. As I predicted ever currency over the next few years went down, one by one. It also spilled over to other regions. Brazil and Argentina eventually broke it's pegs and Russia defaulted on it's debt. It was actually one of the best things to ever happen to me. I was a part of a devistating situation and turned it into a huge opportunity. Now I do not think that the current Sub Prime story is any where near the situation described above, but I do tink we will have some similarites. Spillover to other regions....Yes. Slowing of the Global Economy....Yes.

How far these situations go is up in the air and only time will tell.

Good Luck and Good Forex Trading.


Friday, November 23, 2007

30-year mortgage rate at 6.20%, lowest since May

This STORY (and Title) is from an article in today's USA Today. Rates me be at the lowest level in a while but it is getting someone to lend you money which is the big problem. Today lenders are raising their standards to ensure that they get their money back. Credit is very tight, I think that in the coming weeks we will see the headline shift to overseas problems. Clearly the U.S. was not the only country fueling their growth with less desirable loans. As previously written I think this can be the stimulus for a dollar recovery and will lead to lower rates in Europe and the U.K., if not now place on your radar screens for the weeks ahead.

I am currently:

Short Euro (1.4778)
Long Usd/Cad (.9889)
Long Usd/Ars (3.1327...from Wednesday's Fix)

I will look to get long Usd/Krw next week, as I am off today. I am also going to be looking for a low cost way to get short rates in the U.K. and Europe.

Good luck and Good Forex Trading.

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Thursday, November 22, 2007

Is the Dollar nearing a bottom?

This was a topic of conversation in our weekly trader's meeting on Tuesday. The Technicians in the group clearly felt that was the case. We then began to ask the group what would be the catalyst to give the dollar it's much needed boost. We came up with a couple of possibilities.

1. Asian Credit Crisis.
This was an ARTICLE in today's Telegraph.UK.Com. It is a good read and shows (if you didn't already believe) that this Sub-Prime mess is not limited to the U.S.
2. Middle East Summit.
In early December the Middle East countries are set to meet to discuss their currencies and how they will manage them in the future. Most of the currencies are pegged to the U.S. dollar. This has some problem's (Inflation is very high in the region now) and some benefits. Currently there is broad speculation that region might adopt a basket approach to managing it's currency (Kuwait recently went this way) or repeg at a lower level. As such this has put alot of pressure on the dollar. I for one think that the region will not move at all (politically the best move) and alot of Reval/basket trades will have to be unwound. Even if they do move could it be a case of, Buy the Rumour, Sell the Fact ?

The Canadian dollar seems to have already put in a bottom and has been rebounding for a few weeks. The same is the case for Korea (I think this region has alot of potential for USD longs). All you need is a stimulus in this type of market to get a new direction going. I think that in the near future your will see a reversal of fortunes for the U.S. Dollar. Sit up in your chairs and be ready when it comes.

Happy Thanksgiving to All.

Good Luck and Good Forex Trading.


Monday, November 19, 2007

Market's looking for a Rate cut....

So the WSJ says no to a rate cut but it seems the market has other ideas. Today as has been the case for the last week or so:

1. Stocks were under pressure
2. U.S. dollar interest rate futures rallied
3. Short term dollar rates were very bid.

Today though something was a bit different.....EM currencies were under pressure. Led by Turkey,South Africa and Brazil EM currencies gave up considerable ground. With holiday's in the States later this week I see no way the trader will be adding risk to their portfolio's. I think there is real opportunity to be long dollars against just about any EM currency. I have gone long dollars against:


I will add others to the fold tomorrow (I was long dollar's against Mexico and Brazil all day but covered those positions on the close). I am also short Euro's.

I went home short Euro's over the weekend and got stopped out on the move to 1.4685 O/N. I resold today, a smaller position , and will only cover on a move to new highs. Be nimble and do not fall "in love" with any positions right now. These markets are to volatile and momentum changes very quickly.

Good Luck ans Good Forex Trading.

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Saturday, November 17, 2007

Rate Cuts not likely to Continue..........

This is the title of an article in todays Wall Street Journel. This is also something I have been thinking for a while. The Fed, although concerned about slow growth, is just as concerned about inflation and I think they are happy to let the year play out and see what the Holiday season brings. In the past week or so Fed officials have been preparing the market for a pause. Kroszner said on Friday that "The economey will probably go through a rough patch during which a number of economic data releases may be downbeat". He also stated that "The current stance of monetary policy should help the economy get through the rough patch during the next year, with growth then likely to return to its longer run sustainable rate". A few mintues later the Fed released Industrial production numbers which signaled a significant slowdown. This speech, in my opinion, was designed to prepare the market for this and other indications of slowing markets. As I said in the past I think that the Fed sees the economy from a very broad perspective. As such they see things that other's (even the talking heads on TV) do not see. Maybe they see these numbers reversing quicker then the rest of us. Clearly with oil prices nearing 100 usd per barrel, inflation as well as spending power will be an issue. Alot depends on the weather this winter. A harsh winter and the lay person will have a lot less cash to spend. All this being said the market's are still pricing in a 25bp cut in December. Stocks are off their high's (although not quite as much as I would have thought), and short term funding is definitly tight. Many company's (Starbuck's Kohl's and J.C. Penney to name a few) are warning of lower profits. It is a wait and see game with the economy on the edge.

The dollar has been very weak for a few years now. I am looking for a slight correction as overseas market's slow down and prepare to cut rates (U.K. and Europe).
Currently I am short the Euro with a stop above the highs of the overall move.

Good Luck and Good Forex Trading.


Thursday, November 15, 2007

Sub-Prime wow's revisited...

Take a look at this Link. It shows the extent of this problem. The market certainly is not reacting to Barclays adding 2.8 billion loss to it Sub Prime division. All in All not a good day for the Banker.

Good Luck and Good Forex Trading.


Saturday, November 10, 2007

Video Games.............

Video Games, in my house they are a constant. I try my best to limit the amount of time that my children play them as I feel that there is more to be done in a day then just video games. Recently my youngest son asked to be taken to a store to purchase a new game. I reluctantly took him after both my sons agreed to split the cost of the new game. The game they went to purchase was Brain Age 2 by Nintendo. Yesterday I sat down and watched as they took turns "Taking their lessons". It seems this game is a learning tool. It gives participants daily lessons (can only do one lesson a day)and scores them. There is a lesson which gives you your mental age (from 20-80 lower being better)based on how well you do on your exercises. Wow, I was pretty impressed.

You see last year my youngest son had a bit of difficulty on a standardized test. This was not the first time that it happened and therefore I became slightly concerned. I took him to one of those "learning centers" and he began a program to improve his skills. 3 months (at 800 dollars per month) later and he seemed to be doing better. He seemed more confident and his listening skills improved. Now back to Brain Age 2. You see the lessons that the learning center gave him (at 800 dollars per month)were basically Identical to the Brain Age 2 video game. Incredible huh?

Both of my son's are diligent about "completing their lesson's" and I for one do not mind them on the video game. So next time a Brother, say one who has a few houses in two states, a jet ski, and a really cool minivan. Yes, that Brother who, when things go wrong knows just the right telephone number of the local repair man to make everything well again. Yes, you know that Brother who has way to much money and not enough places to spend it, ask's what to buy your kid's suggest Brain Age 2. Not mine of course as they already have a copy. Seriously, this is a great learning tool for children (and adults?) so with the holiday's approaching this might be a good and useful gift.

Good Luck and Good Forex Trading.


Monday, November 05, 2007

Sub-Prime fears resurface......But for how long

Chuck Prince, former top honcho at Citibank Resigned after larger then expected write-offs were necessary in the Sub-Prime mess. This follows a similar fate of Stan O'Neil at Merril last week. Is there more losses on the horizen? Who is next, Bear, Lehman, or the rumour of the day Goldman? Well I am starting to think that the worst is behind us on the Sub-Prime situation. Today there was hardly a reaction to the Citibank announcement. U.S. dollar interest rate futures were actually down on the day, with the Dollar little changed. It seems the market has built in the bad news and is now looking at the positive (Friday's employment number's?). So as long as no new and drastic news comes out I think that we may have seen the bottom of U.S. rates for a while. I am not attacking this market aggressivly but layering into flatteners in Mexico and Argentina.

Good Luck and Good Forex Trading.


Sunday, November 04, 2007

Marathon's as an analogy for trading

Today is the running of the New York City Marathon. Although I have never attempted the event I can only imagine the amount of training and determination it takes to accomplish the task. I am sure for many of the runners there is a point during the race when they would love to "throw in the towel", but for most they do not.

I think the same can be said for trading. I know from my own experiences that there have been many times over the years that I have said "Enough", only to wake up the next morning and head to the office to "Give it one more try". It has proven to be a very good career for me. I enjoy the challenge,(alot more when I am making money)the ever changing environment, and the camaraderie of my co-workers. For years I felt the Dealing room was like a boy's High School locker room, although this has definitely changed the same type of teamwork is necessary to be truly successful.

Perseverance is a key to success in anything you do. As Oscar Wilde said " Experience is simply the name we give our mistakes".

This is important to remember. Sure in trading you can lose your capital which forces you to quit, and there is no shame in that. Also you may just not enjoy it, but the ability to push ahead and learn from your mistakes, and better yet from the mistakes of others is key. I make sure that I speak to other dealers/brokers/sales people everyday. Not just in my markets but others as well. For those who know me, this is a big task, as I am a pretty quiet guy. But I realize that it is harder to succeed in life if you try to go it alone. I am sure today there are many individuals running in the marathon with friends, family members and co-workers. Most of these individuals what to finish faster then their running partners but I would say that almost non of them want their running partners to do poorly rather they want to do better. I have similar thoughts about Trading. I work on a desk of 10 people, in a room of 200 people. I want to be the number one producer, BUT I want to be that producer at a high level not by being the best of a bad lot. I do not like it when my co-workers struggle (even less when I do), but rather enjoy when they do well as it pushes me to work harder, and see where their successes are, so I can try to emulate them. I hope and encourage them to do the say with me.

This is very similar to all aspects of life. My youngest son is finishing up his football (American football for my overseas readers)season. The team required a commitment of 5 days of practice each week from 3-6 PM straight after school. As a 7th grader on a 7th and 8th grade team he received little playing time in any close game. There was one particular day that really strikes me in his commitment to completing a task. On a random day a few weeks ago I picked him up after an exceptionally hard practice. The bigger kids (and they are all bigger as my son is on the smaller side) tended to line up against him in drills (not on purpose but just the way it worked out)and he was repeatedly "man handled". When he saw me after practice he became emotional (but held it together until he made it to the car)and began explaining to me about the difficult practice. He mentioned how he was scared to go back (he said this on two occasions) and how he didn't think he would ever be good at the sport. I told him that Football was supposed to be fun and if it wasn't there was no shame in leaving the team as he gave it a good shot. He immediately said no, that he could not quit and was going to stay with the team till the end of the season no matter what practices were like. I reminded him of the "fun" aspect and left it at that. In hindsight I think the coaches were having a series of difficult practices to weed out a few of the less dedicated kids. Isn't this what happens in life. Interning at a large Investment house you frequently get the less desirable tasks. The long hours for little pay (and recognition) looking for that seat on a real trading desk so that you can show what you are made of. OK, back to my Son....

At yesterday's game after my son's team took a commanding lead he was inserted to play both ways for the entire second half. Very few 7th graders got this "honor". I think it had alot to do with my son missing no practices all year and working hard all the time. Respecting his coaches and the "veterans" on the team. He is not the best kid out there. Probably never will be, but working hard seems to at least gotten him a chance to perform on the stage, and what happens from there will depend on ability.

Work hard, learn from others and try to have a little fun.

Good Luck and Good Forex Trading


Friday, November 02, 2007

Employment Day......

At 8.30 Eastern Time today we will have the latest installment of U.S. Employment data. The Canadians put their numbers out earlier and it was stronger then expected. Couple this with Fed comments after their meeting earlier this week (they must have an idea of what the number will look like) and I am expecting a number on the stronger side. But what do you do with this? I think stocks will trade on the heavy side, as the market takes this as a clue that the Fed will not ease again this year. EM has held up remarkably well and baring a complete meltdown in the U.S. economy I expect them to continue trading firm.

Good Luck and Good Forex trading.