Monday, June 30, 2008

Central Banker's see sluggish Global Economy.

Central bankers expect the world economy to turn ``sluggish'' by the end of the year as soaring inflation and higher borrowing costs bite into disposable incomes, Argentine central bank President Martin Redrado said.

This is not a new thought and one which I (and many others ) have been talking about for quite a while.

``We see very difficult times for the world economy moving ahead,'' Redrado said today, reporting on a meeting of the world's central bankers at the Bank for International Settlements in Basel, Switzerland. ``By the end of the year, we're going to have a sluggish world economy.''

This signals to me that the world Financial leaders know the dual problem facing the world, high inflation and slowing growth, and will fight the inflation battle first and deal with the slower economy later on. I definitely agree with this move.

Colombia I talked about how the Central Bank chief stated last week that he would do anything he could to stop the Peso appreciation, well here is an article from BLOOMBERG which can certainly be a catalyst for it. Clearly exporters are feeling the pinch and have been voicing it to the Government. It seems now they are listening. The currency has been very volitile and trading on thin volume. The Peso weakened 270 big figures in a week, with it moving 100 figures down and then up on Friday. I am small short dollars here thinking that it is temporaryly overdone.

Good Luck and Good Currency Trading.


Friday, June 27, 2008

A Meltdown Developing

The markets today were quite interesting. Crude made all time new highs topping out above $140 dollars per barrel. COLOMBIAN PESO melted down on the back of the Finance minister call to do anything necessary to stop the currency appreciation. Chile was close behind as were a large assortment of of Emerging Market Currencies. We have seen this all before and I think I want to see some follow through before saying that it will continue. Clearly the markets are nervous. Stocks are suffering and High Yielding currencies are under pressure. For now I will stay the course (see previous posts) and see what the market gives me.

Good Luck and Good Currency Trading


Thursday, June 26, 2008

Fed holds Rates steady.

As expected the Fed left rates unchanged with a 9-1 vote. Fisher was the lone voting member looking for a hike in rates.

The opening line in the inflation paragraph read,

The Committee expects inflation to moderate later this year and next year.

Wishful thinking maybe but the statement was not hawkish enough for the market's to expect a rate rise in the immediate future. Fed Fund futures which before the announcement were looking for 75bp by year end moved that expectation to 50bp. It would not surprise me to see this drift lower in the weeks ahead.

The future policy outlook stated that the committee would continue to monitor the situation an act as needed promote its duel goals of growth and price stability. The FOMC noted both downside risks to growth and upside risks to inflation. This is nothing new as the Fed Govoners have been talking like this for a while. I think this implies a very slight bias toward tightening but not enough to expect anything near term. I think that the duel risks to the economy (slow growth and high inflation) will keep the Fed on hold into next year.

Good Luck and Good Currency Trading


Wednesday, June 25, 2008

Welcome to the Jungle....

This is a short inspirational piece given to my son and his teammates after the final cuts for the Football team last year. I think it is quite a good piece. The boys were broken down by long, exhausting practices and a few seemed discouraged. But this piece really summed up what was done and why.

Every Morning in Africa, a Gazelle wakes up. It knows that it must run faster then the fastest lion or it will be killed.
Every Morning, a lion wakes up and knows it must outrun the slowest Gazelle or it will starve to death.
It really doesn't matter if you are the Lion or the Gazelle....

When the sun comes up you better be ready to RUN !!!

During this year, we will sometimes be the lion and sometimes the gazelle. Everyday, we work you hard so that in any scenario, we WILL be successful. Sometimes we will be able to use our strength and skill to overpower our opponents like a lion. However, sometimes we will have to rely on our speed and elusiveness against a stronger opponent. WE MUST BE READY? So, when you are exhausted and your body is aching from hard practices, keep in mind why we are working you hard.


This is definitely how it is in the "Real World" and in Trading. Someday's you need to change your style to survive the markets. Remember the goal is to stay in the game. It is great to be correct, but if you have run out of capital and cannot trade on your idea what good does it do. I call this the ability to "Live to fight another Day". Hard work, preparation and discipline are the key to enabling that to happen. "The Plan", which we have talked about before, is the key to all this.

Good Luck and Good Currency Trading.


Trading Ideas....

I wanted to detail a few of the stories I have been profiling of late and discuss trades that I have on or that I am developing.


I feel there is some real potential here. Yes, it is a very dangerous currency to trade as liquidity is very poor, but yield if good and it seems to me that the Central Bank has a good hold on the market. For months now the story has been the Farmers Strike. It looks now as if it is about to end. BLOOMBERG is reporting that the

Argentine farmers increased their deliveries of grain to ports on the Parana River after farm group leaders met with President Cristina Fernandez de Kirchner yesterday to end a conflict over higher export taxes.

This is very good news for the fixed income market. Today the rates market did not react, but the spot has maintained its bid tone against the dollar. With inflation very high, it is in the governments best interest to keep the currency strong. I am looking for this curve to flatten in the coming weeks and for the spot to trade below 3.00.


The fundamental story here is very good. The Central Bank is acting in an independent fashion (Raising Rates) which investor's always like. Growth is good and the markets are opening up more and more everyday. I look for this curve to continue to steepen. The currency should also continue to strengthen. This currency trade has been in play for years, why stand in the way ? Get on board and Wait till the trend reverses. Remember, The Trend is your Friend.


I am putting these two together because I feel the stories are similar. Both Central Banks are intervening (buying dollars) on a daily basis (Chile 50mio and Colombia 20mio). This has certainly changed the direction of the currency and I do not see a compelling reason to fight the CB. Rates in both of these countries is trending higher. As such I prefer to be long dollars here. You could think of it as kind of a "Currency Basket". Long Usd/Clp and Usd/Cop and Short Usd/Ars and Usd/Brl. A currency basket yes, just not an easy one to get out of if things go poorly.


Terribly inflation numbers today coupled with stronger then expected growth equals one thing HIGHER RATES. Look rates to move higher and the currency to test the 10.00 level.


As a few might have noticed I have stayed clear of this currency of late. I trade this currency very poorly and think it is best left to others.


I am small long dollars against the Yen. I am hearing that 108.05 is a "key" level. I don't necessarily care about that , but rather I like being long dollars and I have not been able to successfully hold a short Euro position.

These are just my opinions, but would like to know what others are thinking.

Good Luck to all and Good Currency Trading.


Tuesday, June 24, 2008

American ingenuity is not dead.

With gasoline prices climbing higher and higher on a daily basis and families struggling to make ends meet with the economy struggling, it was encouraging to see this story about American ingenuity. A young entrepreneur, James Blue, has operated an auto shop in San Diego for years. One of his services is to install larger (much larger) gasoline tanks in trucks and SUV's. So far this year he has installed 12 of these tanks, which is about the same amount as he did all of last year. These tanks can hold up to 98 gallons of gas and cost about $1,700 to install. This enables people to drive into Mexico and fill up with much cheaper gasoline (about $2.50 per gallon as apposed to $5.00). The tank will pay for itself in no time.

It proves that in times of difficulty there is always a way out.

To Read more CLICK HERE


Colombia and Chile under pressure

The Colombian Central Bank announced today that it would begin buying 20 million dollars per day in an effort to ease the currency appreciation which has been going on. Initially it has worked. The currency has weakened from 1670.00 on Friday to a closing level of 1722.00. This is a similar move to what Chile did a few months back when they announced a plan to purchase 50 million dollars per day.

Banco de la Republica will buy the U.S. dollar through competitive auctions, the bank said in a statement late June 20. The purchases replace the $150 million in dollar put options the bank sold monthly. Policy makers also said they ``unanimously'' decided to leave the key lending rate unchanged at 9.75 percent, matching the forecast of 23 of 39 economists surveyed by Bloomberg.

Judging from the reaction of the market, I would approach and shorts carefully. The similar plan in Chile stopped the appreciation and has certainly put pressure on the currency in recent weeks. The market was definitely short dollars against Colombia and I think people will be looking for the exit (as many have today already) in the days to come.

As a follow-up to yesterday’s Argentinean post, Congress has decided to debate the Farm export taxes which was instituded back in March.

``The only solution I see is the repeal of the tax and the debate in Congress of the best tax system for the good of the nation and the sectors involved,'' said Oscar Aguad, a congressman from the opposition Radical Civic Union in a telephone interview. ``If there's no solution soon, the economy will start cooling off and unemployment will start to rise.''

This has been taken well although cautiously. The spot drifted lower from 3.0550 to 3.0150, but is now closing at 3.0200. The rest of the curve is quite well supported as we have heard these stories before and I think the market wants to see concrete evidence of a change before reacting. If spot stays here or trades lower I believe that the curve will trade lower as it is to expensive to stay long dollars. I would not be surprised to see spot break 3.00 in the days to comes as the market “tests” this level.

Good Luck and Good Currency Trading.


Monday, June 23, 2008

GM to RAISE prices on 2009 model cars...

As crazy as that sounds that was the announcement out of GM today.

General Motors Corp. told U.S. dealers Monday it plans to raise prices on 2009 models by an average of 3.5 percent despite a tough market that is forcing the automaker to cut production and discount its 2008 models.

This after they already have had to close four North American production plants and eliminating 8,350 jobs. I am not sure this is a way to raise market share but maybe the car maker is so desperate they don't know what else to do.

LaNeve said zero-percent deals are usually successful, but it's unclear if they'll have any effect in such a weak market. U.S. auto sales were down 8 percent through May due to the economy, low consumer confidence and high gas prices, and LaNeve said sales were soft in June.

Sales down and you RAISE prices.....I just don't get it.

CLICK HERE for the rest of the story from AOL Finance.


Argentine's Striking Farmers.

The Farmers on Friday lifted the road blocks and in response the Argentine President Cristina Fernandez de Kirchner has agreed to meet with them. This seems positive on the surface and is probably the reason for the small break in the upward pressure on out rites. Lets see what today brings.

To read the rest of the story CLICK HERE


Sunday, June 22, 2008

Baseball, Trading and Life

On Friday night my son played in the championship game of the local Babe Ruth baseball league. The League consisted of 8 teams form two neighboring communities. Of the teams two were form my town and the other six from the neighboring community. Although we finished in sixth place we played well in the playoffs and made it to the final game against the number one seed, the other team from my town. This made for alot of good natured trash talking at school all week. All of these kids have played on the same team at one time or another over the years, and to have a championship game played against each other should be enjoyable.

Unfortunately the game was never really close. We jumped out early and the other team never mounted a significant attack. After four innings we were up 10-0 and eventually won the game 10-3. During the game I realized that the other coach had little interest in winning the game. He didn't pitch anyone of significance, played kids totally out of position and showed a general lack of interest in the game.

Now this did not take away from the effort of the kids. Both teams played hard and I doubt that anyone saw it the way I did (I know my son didn't). I think this is an important lesson for life. You need to put yourself in a position to be successful. Whether that is in a baseball game, in business or in Trading. Everyone is not good at everything. Knowing your strengths and weaknesses is essential to being successful. The things you are not good at, find someone who is and partner up to accomplish your goals.

When Trading I think it is very important to be prepared. Sit up in your chair, and have a plan in place. What are you going to do if the market goes up ? What about if it goes down ? Are you going to cut your position ? Add to it ? How about flipping it ? All possibilities, and without a credible plan in place your trading career will be short in duration. Now of course this is easier said then done and over the years I have had my ups and downs when it comes to implementing plans. But I think that the only way to be really successful is to put a plan in place and let the chips fall where they may. If it is not working, adjust (again part of the plan), but always working toward your goal.

Back to the game Friday night, although the game might not have meant a lot to the other coach, it surely did to the kids (this just judging from the amount of their spectator classmates at the game). It is the coaches responsibility to put the kids in a position to be successful. If it works out great, if not that is OK too, but the most important thing is that you gave them a chance to win. On Friday night I felt the other coach let his team down.

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Saturday, June 21, 2008

American Airlines

Just reading through the USA Today and I see that starting today American Airlines will begin charging a $20 fee when frequent flyer miles are redeemed. This marks the first time that AA will not be offering "Completely" free tickets in exchange for airline miles. This is a continuing theme in the airlines as they find ways other then price increases to pass along increased fuel costs to their customers. This new charge is in addition to new Baggage Regulations which went into effect in May 2008.

Although these fee's as an individual charge are not crushing, it is when you add them up with other day to day expenses that the effects start making there way to the consumer. Will this stop someone from taking a quick flight for a few days away....probably not, but cumulative effects may prevent the consumer from turning over his car, purchasing new appliances or redecorating the family room.

So far the U.S. consumer has once again proven to be exceptionally resilient. Does it continue only time will tell.

Good Luck and Good Currency Trading.


Friday, June 20, 2008

It just Ain't worth it

In my continuing series of greed from the Finance world comes the story of the two ex-managers of the now defunct Bear Stearns Hedge Funds. The Fed's have e-mail and phone conversations which look at least initially pretty bad. Time will tell.


Also it looks like our old friend Sam Israel didn't commit suicide as he tried to make us all believe. His long time girlfriend was arrested yesterday for aiding and abetting Mr Israel.


As I have said before I just do not think it is worth it.

Good Luck and Good Currency Trading


Thursday, June 19, 2008

Latan American Rates ready to go higher.

There seems to be alot going on in the Latin American markets the last few days....Here is a recap.

Argentina. Last week there were no bids in sight. This week just the opposite. Although the spot does not move higher (Manipulation anyone?) the rate differential has increased tremendously. Argentinian rates have moved from 10.5% to 15.5% (implied through NDF's) in the last three days. The key to watch is the spot. If it begins to move up and the Central Bank doesn't step in to keep it lower, this could be a blood bath (with yours truely right in the middle).

Mexico: Rate announcement is due out on Friday. The market expects no change but look for the Central Bank to switch its statement from one of caoutioning about slow growth to fighting inflation. This will begin to prepare the market for rate increases which will be coming down the road.

Brazil: The CB came out today and stressed that inflation problem and the need to do something about it. The Article on BLOOMBERG really lays it out for everyone.

``The central bank is alert and ready to act,'' Meirelles, 62, said today in a Bloomberg Television interview in Sao Paulo.

Meirelles said he sees the need to cool consumer spending in Brazil after the annual inflation rate climbed to 5.58 percent in May, the fastest since January 2006, fueled by rising food costs. Policy makers raised the so-called Selic rate twice this year to 12.25 percent, saying an expanding economy may stoke inflation

No one should be surprised by the increase in rates that is sure to come.

Chile and Colombia: Their currencies have been strengthening quite a bit of late all on the promis of higher rates. Chile raised rates unexpectedly a week ago and Colombia went last week also. There is no reason to believe that those will be the last.

Good Luck and Good Currency Trading.


Wednesday, June 18, 2008


Crude was little changed even after the President came out and endorsed drilling/exploration off the coast's of the United States. Any movement on this would take time (60 years?) and would require approval from Congress (little chance of that happening). It is pretty simple to me we either get more production or consume less. Consumption on a worldwide perspective will not happen as to many Emerging Markets will require much greater amounts as the years go on. Remember these are countries (India, China) which have huge infrastructure needs. Large countries in need of Roads, hospital, manufacturing plants. Their needs will only increase as time goes on.

As for greater production,

``No one is expecting to see announcements of increased production,'' said White House spokesman Tony Fratto. The meeting to discuss ways to stabilize prices will be held June 22 in the Red Sea port of Jeddah and involve producers, major industrial nations and banks.

``There were some hopes that there would be some substantive moves from Saudi Arabia from the meeting, but it looks like it's going to be something more akin to group therapy than moves to quell the market's fears about sufficiency of supplies,'' said John Kilduff, vice president of risk management at MF Global Ltd. in New York

So we either find more or else get ready for $6.00 per gallon gas in the very near future.


Good Luck and Good Currency Trading


Latin American currencies take off…..

The Latin American currencies took center stage today as Colombia a recent lagger in the currency strength camp took off strengthening over 35 big figures against the dollar. Chile and Brazil also traded much stronger against the dollar today. It seems talk from the Central Banks worldwide that interest rates are not imminently going higher is the main driver. Also economic number in the region have been stronger then expected led by Brazilian retail sales up 8.7% in April. Also rates are not expected to jump higher, a gradual rising of rates is still expected (with U.S. rates lagging and therefore interest rate differentials widening) in both Brazil and Colombia.

Here are the stories from Bloomberg News, Enjoy.





Tuesday, June 17, 2008

The Dollar gives back some gains.

The dollar gave back some of its gains yesterday as the G8 didn't come out with any type of coordinated effort to shore up the struggling currency. Combine this with crude which remains stubbornly high and the dollar will have difficulty moving considerably higher in the near term. It looks like we could be range bound for a few weeks (with this being close to the top of the range). I will be curious to see how the dollar reacts if we approach the low against the Euro. Remember in a previous post I heard that the Treasury did not want to see a further weakening of the dollar. I think if we get close the market will test the Treasury's ability to hold the dollar.

CLICK HERE to enjoy the rest of the article.

Good Luck and Good Currency Trading


Monday, June 16, 2008

The Fed, Bernanke and Interest rates...

Great article in today's Washington Post about the potential for interest rates to rise here in the States.

CLICK HERE to read more.

Well Worth it

Good Luck and Good Currency Trading.


Crude....The Plan.

Here is a very good article from The Times Online. It discusses a plan to deal with the Crude situation. As for here in the states I believe that gas prices, if they are ar 4.25 per gallon will be THE crutial issue in this year's upcoming election. The candidate who has the clearest plan for dealing with the crisis will win. I really believe that.

To read the Times Online article READ HERE


Sunday, June 15, 2008

Happy Fathers Day......

This morning I opened up my Wall Street Journal, flipped to the weekend section and under the "Family" section saw a story entitled "A Father's tough Love". The story reminded me a little of my childhood growing up. The pictures of five boys, a mom and a dad dressed in 70's "loud" clothing and the long parted in the middle hair is very similar to pictures from my family from that time. The writer in the story portrays his day as a tough guy both in and out of the house. He sites a story of going to a wrestling match and a few "thugs" stepping in front of them on a concession line, only to be told (and they listened) to go to the back of the line.

I remember a similar story from my Dad. Once walking home on a Saturday afternoon I was confronted by a older kid from the neighborhood asking me for money. When I told him I didn't have any he said "So anything I find I keep". I didn't say anything and he proceeded to "pat me down" found nothing and walked away. I mistakenly continued home and told my father this story. He looked at me and grabbed my chin and said "Where are the marks"? I said "What marks". He said "The marks from the fight". I said "Dad there wasn't a fight he just checked my pockets and walked away". Still holding my chin he said, "You never let anyone go through your pockets without a fight". Then disgusted he walked away. I never forgot it, and months later he proved he was not all talk but action also. My father new the kid who went through my pockets. A kid named Ozzie. He was 4(ish) years older then me and "hung out" at the local park. One day my dad was painting a window in our apartment when he saw Ozzie walking down the street. He saw him walk up to another kid and after a brief conversation started patting his pockets. My Dad started screaming from the window "Don't move! Stay right there" and ran down a flight of stairs across the street straight up to Ozzie. "Give him back his money" my Dad said. No you have it all wrong, we are friends, right ? looking over at the stunned victim. No my Dad said "give him back his money now". Silence followed then my Dad said, "So anything I find I can keep". With that Ozzie reached into his pocket and handed over a few coins to the still frightened victim. My Dad then sent the kid on his way and went back to his painting.

Another quick story, one day my Dad was driving home from work, waiting at a light for oncoming traffic to stop so that he could make a left hand turn. When the traffic stopped my Dad proceeded to turn left. A driver on the oncoming side swerved around stopped traffic and hit my Dad's car. It was a minor accident and no one was hurt. The young driver jumped out of the car and apologised. He said it was all his fault, but said he was in a big rush, and wanted to not go through insurance. He asked my Dad to call him to take care of the details. My Dad said "Not a problem" took the driver's telephone number and went on his way. A day or so later my Dad called the driver, the young man basically told my Dad to go away. There was no police report nor any proof that it was actually his fault (remember my Dad was making a left hand turn). I know my Dad was furious but there was little he could do at that time. But remember all things come to those who wait. Years later my Dad was interviewing people for a position at the company he worked at and guess who came walking thought the door?!?! My Dad started by asking him "Have you ever been involved in an accident with a white station wagon"? "No" said the young man "I never owned a white station wagon". My Dad rephrased his question "Have you ever hit a white station wagon"? The young man now a bit flustered replied "Yes". "That was me", my dad responded. For the next 20 minutes or so the young man was peppered with questions and really had no chance to recover. He didn't get the job, but my Dad got a little closure on the incident.

These two situation's (as well as countless others) had a big impact on my life. Always stand up for yourself, and what goes around comes around. They are true. These were not lessons my Dad set out to teach but rather lessons learned from the way he lived his life. I try to remember that when I am around my own kids. It is not only what you say, but what you do. My Dad has been gone almost 24 years now and I still remember his last words to me "Take your time". I have interpreted them different ways over the years, but I think the way I want to interpet them now is to enjoy the things around you now and not worry so much about the things from yesterday and tomorrow.

Happy Father's Day.

To read the WSJ Article CLICK HERE


Friday, June 13, 2008

South Africa melts

The South African central bank Governor Tito Mboweni made a few comments following his decision to raise rates 50bp. His speech was decidedly hawkish and the market was expecting a minimum of 100bp. As a result the currency sold off and sold off HARD.



Where there is smoke there is fire ????

I know of a few people in my office who predict Lehman's doom by Monday morning. They feel that maybe a little shady accounting was going on. I have no idea but here is a story to get you interested.



Thursday, June 12, 2008

An Oil IPO in Brazil

Eike Batista, A Brazilian Billionaire has taken a new direction in building his personel fortune. He has created an oil compay to which has bid on tracks of land off the coast of Brazil to drill for new sources of oil. It is risky but seems there is alot of excitement in the new venture. Why not, with crude prices at record highs and demand on the rise the upside looks limitless.



The International Energy Agency...IEA

If you are like me you were unaware that there actually is an International Energy Agency, but there is. The IEA acts as a energy policy advisor to the 27 member countries in an effort to ensure reliable, affordable and clean energy for their citizens. It was founded in the 70's during the last oil crisis. I have been really keying in on crude lately as I feel that this is the big driver of the markets today. High crude prices is a major factor in the weak dollar and one of the many worries on the Fed's mind, but more on that later.

The members of this agency are required, when a crisis hits, to take steps to deal with the situation withing 90 days. During the disruption caused by hurricane Katrina the member countries all member countries released 60 million barrels of oil onto the market within 30 days to help stabilize the situation. The member countries are required to keep a 90 day supply of crude on hand to deal with these situations.

The world faces an ``oil crisis,'' and the International Energy Agency stands ready to release emergency stockpiles even as the biggest consumers discuss measures to contain spiraling demand, the agency's chief said.

``We can call it an `oil crisis' given the current price, and that it continues to climb even after global efforts to cut consumption,'' Tanaka said. ``We see a critical, structural issue in the global oil market, where supply growth isn't catching up with demand.''

Unlike the crisis in the 70's which was a supply side situation, this is a demand side crisis. This is what has me concerned. Sure we can cut demand due to a slowing economy, or taking away subsidies (in Asia these are quite common) but will the demand go away or just go to sleep for a while ? During the 70's the government installed a 55 mph speed limit. Talk of that happening again was running through the market today. This would help as it would definitely reduce demand in a permanent way. But I think the key is increased production and alternative energy sources. Without these two methods I think we see $160 per barrel by the end of the summer.
Also today margin requirements were raised on crude contract on the exchange. I think this helped spike the market as all the under water shorts had to cut their position or post more margin. I think this is a good move by the exchange as it could help get some of the speculators out of the market.

Weekly Desk Meeting.

Today we had out desk meeting, and talk was of the Fed/Treasury and their unhappiness of the weak dollar (also alot of time spent on crude as discussed above). One person said that in discussions with people at the Fed there was a "line drawn in the sand" for the dollar. They clearly did not want it making new lows and would even consider raising rates to defend it. Please take this with a grain of salt, as this person said that intervention was not on the table. I find it very hard to believe that the Fed would raise rates to defend the dollar with all that is going on in the market. What good would 25-50bp do?? If anything this says to me that the dollar will go and test the low and if we get within spiting distance the market will take it out. In my opinion intervention would be a much more viable tool to stop the dollar fall then raising rates. Then again a strong economy with low inflation would be alot better.

On the rates front the view was for higher rates globally (Chile raised rates last night 50bp) and this should keep the Latam currencies on the strong side.

Good Luck and Good Currency Trading


Wednesday, June 11, 2008

Looking for Rogue traders

It really amazes me how people in this day and age think they can get away with defrauding investors. Eventually it catches up to you. Maybe in a year or two.... or maybe in ten, but when it does is it worth it ?

Here is a story from the WSJ, these guys will be spending many, many years in prison, in my mind not even close to being worth it.



The Dollar looking real Perky

Can it be said anymore clearly.....

Bernanke Says Fed to Resist Price Expectations Surge

this from and article on Bloomberg. A Strong inflation stance coupled with increased talk of unwanted dollar weakness both from the States and Europe and I see no reason for the dollar not to make a big move up (OK I have been saying this for a while with little luck).

Now lets take a look at a couple of trades that I think have some potential.

A strong Canadian dollar. Today the BOC did not cut rates as was expected. I was pleased and surprised to see that they did not make the anticipated rate move. I think this will lead to a period of a stronger Canadian dollar but I do not think it should be bought against the dollar. Look at Eur/Cad or Gbp/Cad as I think they offer more opportunities.

Latan America. Latam currencies look ready to weaken a bit. This is not a trade that I am in love with but rather one which can be entered with a tight stop. If I am correct and the dollar does better, crude should come off (on a combination, slowing economy and stronger dollar) which should hurt latam currencies stronger do to oil revenues. I think the currencies pairs with the most upside are:


The problem here is yield, at 13%(for Brazil) any sideways trading gets very expensive, very quickly. But I think there is some potential here so it is on my radar screen.

Scandinavia. Again this call depends on crude. If I am correct and we top out soon then I see this region struggling to remain strong. I am looking at putting on a basket trade here and will update more once I have time to look at it more closely.

Just a few ideas and thoughts please let me know what you are thinking.

Here is the LINK to the article sited above.

Good Luck and Good Currency Trading.

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Tuesday, June 10, 2008

When Credit Card bills take over

Here is a quick story from todays Wall Street Journel. It seems there are support groups for everyone and anyone. It seems that there are quite a few support groups which cater to people having trouble controlling their credit card spending. One young lady joined a group called "Girls just want to have fun" a group out of Washington DC to try to get control of her spending. It turns out that part of her problem was a hungry boyfriend.

The Girls kicked into action, encouraging Ms. Greene to track her spending. While some of her income was going to pay down debt, including $14,500 in student loans, Ms. Greene realized she was also spending too much on extras, like her $400 Cole Haan boots and her hungry boyfriend, who she says would consume much of her food when he came over. "Things were particularly bad when it came to produce," she says. "He'd eat like four tangerines at once....Sometimes I'd cut up some watermelon, pineapple and strawberries. He'd eat a good 75% of that."

Can you guess what happened to the fruit loving boyfriend.....



Dollar on the rise.

The dollar has been given a boost in recent days by remarks from Henry Paulson, saying he wouldn't rule out the possibility of intervention in the foreign exchange market. This coupled with Ben Bernanke's comments of last week stating that they are watching the dollar very closly has left the dollar with a very real bid to it.



Rates up worldwide

Walking into work this morning I was greeted by alot of red numbers on my screens. These numbers were not my P/L (for a change) but rather the prints off interest rate futures screens that I watch daily. All interest rate futures that I watch were down on the day. Short Sterling (England) were down over 40bp as were Euribors (Europe). In the U.S., by the end of the day similar prints were taking place. As many readers know this is something I have been looking for. The markets finally started moving my way. I think alot had to do with Trichet's comments last week about actions speaking louder then words (He did retrace those comments a little by saying that no rate rises are guaranteed). But I think one thing is clear, rates are no longer going lower. Inflation is the worlds biggest concern Barack Obama has Paul Volker as his economic advisor. For those to young to remember, Mr Volker was the Fed Chairman during the early 80's when inflation (and high gas prices)were a huge problem. He moved rates considerable higher and is credited with getting inflation from 13.5% in 1981 to 3.2% in 1983. Quite an achievement. On a side note I think this add's tremendous creditability to Obama's campaign.

On the rumour mill was a report that Bernanke was going to make it quite clear that the next move in rates was up and in very short order. The trade everyone was looking at was the 2-5 year note's that were looked at as quite expensive if this turns out to be true.


Monday, June 09, 2008

A followup to yesterday's post.

I came across this article in the Financial post.

For superstitious investors, however, Big Brown prancing in the winner's circle in New York would mean nothing but trouble for the rest of the trading year, according to Deutsche Bank Private Wealth Management chief investment strategist Larry Adams.

"nothing but trouble"....and what have we had so far this year. High(er) crude, inflation and unemployment.

So now that Big Brown has lost all will be OK.....Maybe Big Brown was just long DOW Futures......

Here is the Story



Sunday, June 08, 2008

The Belmont Stakes, Big Brown and a sure thing

All week at work I have been hearing from the other traders how Big Brown was a sure thing to win the Belmont Stakes and as such the Triple Crown. Of course as we all know now it didn't happen. Not only that but it didn't happen in amazing fashion with Big Brown having to pull up and trot easily across the finish line in last place.
This to me is very similar to trading from time to time. You put all the work into your trading plan, come up with scenarios and then something happens that you are just not able to explain. At times like this you can decide to "ride out the position" to the end or cut your loses (pull up like Kent Desormeaux did with Big Brown).
I think the most important thing to remember is to "Stay in the game". By cutting your loses during times of confusion you preserve your capital and allow yourself another chance to succeed. In the case of Big Brown, maybe something is wrong with him and by pushing him harder the horse would have broken down and had to be "put down". By playing it a bit cautious the owners still have an asset (a very valuable asset) that will now, probably, be put out to stud.

In both senerios by knowing your circumstances it allows you the ability to fight another day.

Oh and remember in Trading , as in life, there is never a sure thing.

Good Luck and Good Currency Trading

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Saturday, June 07, 2008

Unemployment rate up...Stocks DOWN

The Unemployment rate rose yesterday to 5.5% from 5.0% sending shock waves through the financial community. I for one was surprised by the reaction (judging from the market the only one!). I have never put to much weight behind the rate itself as it can be thrown off by a lot of factors. Were there more people looking for work ? Summer Employment by students ? Maybe more people are looking now because they view the markets as picking up and there is more opportunity. Time will tell, but remember non farm payrolls were slightly better then expected and that to me is the big number.

The dollar got hit hard and in turn crude prices sky rocketed (up 10 dollars). This of course is terrible news for the economy and in the long run will be crushing.

``What held up the consumer in the face of increasing oil prices the last few years has been a strong job market, and that's clearly no longer the case,'' said Matthew DiFilippo, senior portfolio manager at Stewart Capital Advisors in Indiana, Pennsylvania, which manages $1 billion.

Hillary Clinton bows out of the election and the Democratic party looks to be unifying. This is very good for Barack Obama but how good will it be for markets as/if he gets closer to being elected......

Good Luck and Good Currency Trading


Friday, June 06, 2008

Payrolls fall as the Jobless rate moves higher.

This morning's employment number was to be basically as expected. The market is taking it deciededly more negative. It seems that the market is focusing on the Employment rate which rose to 5.5%. I usually look at this as a technicality as it possibly less people are looking for jobs.

Anyway here is the story from BLOOMBERG


Crude on the move once again....

Crude prices jumped over 5 dollars a barrel today on the back of hawkish comments from ECB President Jean-Claude Trichet.

``A year ago there would have had to be a disruption or political event to trigger a $5 move, but that's no longer the case,'' said Chip Hodge, a managing director at MFC Global Investment Management in Boston, who oversees a $4.5 billion energy-company bond portfolio. ``The only rational reason is the falling dollar.''

A lower dollar equals higher Crude. Not good for an economy....



Thursday, June 05, 2008

Can you be more Hawkish.....

Trichet talking this morning...very hawkish to me.



Brazil raises rates....

The Brazilian Central Bank raised rates last night as expected 50 bp to 12.25%.

``The central bank's rate decision today reinforces policy makers' commitment to its inflation target,'' said Roberto Padovani, senior strategist for Banco WestLB AG in Sao Paulo.

This move came as no surprise as inflation in this region has been on the rise. Just this past weekend the magazine VEJA ran a feature article talking about the dormant inflation "Dragon" under the headline ``He just opened his eyes.''

I look for more rate increases going forward topping out at about 13.5-14.0%. This of course depends on my other predictions of a slowing global economy coupled with lower crude prices.



The Story of a Bank takeover.

In Today's Wall Street Journal, is a story of a small bank in Minnesota which was taken over by the Fed's as the bank had come across some hard times. It was quite interesting to see how the entire process plays out. The Fed's anticipate that 150 banks will "fail" in the next 3 years (all small banks) against 3 in the past three years.

It is a quick read and an interesting one.



Wednesday, June 04, 2008

Weak Dollar no more ????

A follow to my last post. Today on the front page of the Wall Street Journal is an article detailing Ben Bernanke and his efforts to "Bolster the Weak Dollar".

As a side note Crude this morning is at 123.40, down almost 1 dollar already.



Bernanke, Rates and the Economy

Federal Reserve chairman Ben Bernanke came out and laid it on the line for all to see. My take on his speech was that:

Rates are low enough, In addition, interest rates are ``well positioned'' to promote growth and stable prices, he said.

The Dollar is definitely on his mind, The Fed is working with the Treasury to ``carefully monitor developments in foreign exchange markets'' and is aware of the effect of the dollar's decline on inflation and price expectations

This is a very telling statement and it is something I have been saying for a while. A weak dollar is inflationary. If the value of the dollar rose it will bring the price of crude down. Crude is the single biggest driver of inflation today. Higher crude prices get filtered through the system and get translated into higher food and material costs. Driving the dollar higher will do alot of good. I think that we have seen a bottom in the dollar against the major currencies. Even when crude made new highs the Euro could not. Now with the potential fear of intervention,``We are attentive to the implications of changes in the value of the dollar for inflation and inflation expectations,'' Bernanke said. The Fed's commitment to price stability and maximum employment ``will be key factors ensuring that the dollar remains a strong and stable currency.'' , I see very little chance that it will mount a new attack on 1.6000.

Commodity currencies should suffer a bit. Canada, Aud, Nzd and Nok to name a few. Latin American currencies I am still on the fence with for now. Although the higher crude is certainly beneficial, the high yields in Brazil and Colombia make their currencies very attractive.

A few trades that I like are

Short Euro (I have had little luck in this currency pair all year but have established a small core short position)
Short Usd/Ars and Ars rates. This trade has worked out well and I continue to have it on for the positive carry effect.
Short Brazil Rates. I think these rates will peak lower then previously anticipated. As such I have begun to exit my long rates position and will be looking to receive.

A few carry fully placed bets and payoff well in these markets.

To read the story from Bloomberg CLICK HERE

Good Luck and Good Currency Trading.


Tuesday, June 03, 2008

Follow up on Lehman Brothers.

There is a story on the front page of the Wall Street Journal today about Lehman raising capital. In the story the number floated is 3-4 billion dollars. It certainly makes sense to re capitalize when you can, as things happen quickly and you want to be prepared for opportunities in the future. Raise cash when you can not when you have to (although there is a strong argument that they really need to raise capital just to stay afloat).

To read the story CLICK HERE


Morgan Stanley, Merrill, Lehman not feeling the Love from the Ratings Agencies

Yesterday S&P came out and lowered the ratings of Merril Lynch, Lehman and Morgan Stanley in a move that sent interest rate futures higher and stocks lower. There was a small recovery in both market at the close but not much to speak of. I think that this might be a slight over reaction. Do you think that with the lower rating the Fed will stop leanding to them ? Was this not expected ? Although I felt and still do that the worst is behind us, a lowered rating does not change this view. S setback yes, but only a small one. Here is the story from Bloomberg, a very good read.



Monday, June 02, 2008

Dollar set for more gains

There is an article in today's Wall Street Journel calls for continued gains in the dollar this week. Crude looks softer this morning and considering that the Euro could not make new highs on the back of record highs in Crude and very hawkish statements out of the ECB, maybe ...just maybe we will see a rebound. I am cautiously and tiny short Euro.


Interesting perspective on the Economy.

For those of you who missed it over the weekend, there was a interview/article in the Wall Street Journal about Barton Biggs, the chief investment strategist at Morgan Stanley, stating that the worst is over for the Economy and Stocks. With all the Doom and Gloom out there (see my post from May 29) it is encouraging to see this positive perspective. I tend to believe that perception is reality and if that is the case a few economist who see the scales tipping more favorable would be good. He does raise a cautionary signal on crude, one which I have been pointing out for a while. I think the Fed is also well aware of this and will do all it can to prevent it from happening.



Sunday, June 01, 2008

Many consumers spend early rebates on soaring cost of living

This is the headline of a story in Weekend USA TODAY. This "news", if you want to call it that will certainly put a little damper on the folks in Washington who expected everyone to go out and buy a new flat screen TV or a new I-pod. The cost of living is rising and rising fast. Food, gasoline, clothing are all on upward spirals. Looking at the monthly inflation numbers put out by the government you would never know this was occurring, but as everyday consumers, going to the mall, supermarket, and gas station you know the direct effect. This is the single most crippling item on the economy. When I read articles like this it really gets me concerned. What happens to people on fixed income? Let's say you just turned 65, retired and are looking to live out your years quietly. Now lets say this happened back in 1998. 10 years later you are 75, and your disposable income has greatly decreased. you still might have another 10-15 years ahead of you and the amount of money to live off of is worth alot less. This should be a real concern for the government and society in general. Inflation is a huge problem which should be dealt with strongly. I think the Fed knows this and is one of the reasons I think we will see substantially higher rates going forward. Not only here but globally. This is a drum I have been beating for a while and one I continue to beat.

Good Luck and Good Currency Trading.