Thursday, July 31, 2008

Emerging Markets

A rundown of Emerging Markets....

Brazil. Bovespa up over 3% and the currency just keeps on appreciating. The trend of the last 4 years just refuses to stop. part of the reason was the good U.S. numbers today. ADP employment was up 6,000 jobs against an expected loss of 60,000.

``Good news from U.S. markets makes investors more confident and willing to take on more risk,'' said Francisco Carvalho, currency trading manager at Sao Paulo-based brokerage Liquidez Corretora.

I do not currently have a position here but would play it from the short (dollar) side for short term plays.

Chile. The Peso weakened alot today closing up near 507.00. I didn't see any specific news for this but I think we are basically range bound with a slight bias toward a higher Usd/Clp.

Colombia. Similar to the Chile. The peso traded weaker most of the session and couple that with the Central Banks desire for a weaker Peso I see no reason to buck this move. I think the only reason we are not higher was the rate rise last Friday. Eventually the interest rate differential will kick in but for now I think the Dollar moves higher here.

Argentina. In a word UGH. The market is looking for dollars across the curve, but specifically against 1,2,3 months. Although spot has not moved up much, the rates have moved higher in these periods. Argentina is always a difficult currency for me to short and this time is no different. I squared up my position and am currently only running a small yield curve play. For this I am grateful as I have a bad feeling here that a meltdown may be quickly approaching.

. The short covering sqeeze of last Friday is all but forgotten and it looks like we are once again ready to take out the 10.00 level. Stay short dollars for now, the trend and interest rate differencial are in your favor.

And now a little Asia.

Korea. This currency is trading totally in line with crude. Today crude rally's 4 dollars and Usd/Krw moves higher. I think this crude move is short lived and we will be seeing sub $120 a barrel very shortly. Therefore and high oil consumers (India, China, Korea, and the good old USA) currency should do well.

Good Luck and Good Currency Trading


Wednesday, July 30, 2008

More Write Downs to come….

Although the Merrill news could be seen as good news to some extent, it should also signal the beginning of some real substantial write downs for other institutions. The good news is that with this write down it seems to me that Merrill has taken all its medicine. The remaining sub prime assets on their books are already hedged or written down substantially. The bad news is mostly for all other financial institutions. Since prior to this fire sale there was really no prices to mark to market the portfolios, individual financial institutions were allowed to mark their books where they thought the market was. I doubt (but do not know for a fact) that anyone had their books marked this low. As such I would expect another round of write downs or fire sales in the near term.

Shareholders can not be overly happy either. The share price is now greatly diluted, but at least they are moving forward. I look at this very similar when I trade. Sitting on bad positions, hoping and praying that things will change. I always feel tremendously relived when I finally cut the position and move on. Only then can I begin to make rational decisions again.

Hopefully this will move Wall Street in the same direction.


Good Luck and Good Currency Trading


Tuesday, July 29, 2008

Merrill writes down again

Although it seems this could be the last time (I know I have said that before..).

I think it is a good move, write it off and start again. Holding it certainly didn't work.

Here is the story from the WSJ

Good Luck and Good Currency Trading.


Some thoughts on the Euro

European stocks have been struggling this year as have stocks worldwide. The decline has been led by Financials and airlines. This is again a universal theme.

``If you're looking for good news from the banking sector I suggest you go on holiday because it is just not going to be there,'' Howard Wheeldon, senior strategist at BGC Partners LP in London, said in a Bloomberg Television interview.

Earnings estimates are being trimmed and I see little reason to think that things will get better in the near term future.

In the States the curbs installed for preventing short selling is being credited for the large bounce in Financial stocks last week. I think that the over sold nature of the sector also had a lot to do with it. But as in Europe I would not get overly long just yet. The capital structure of most financial institutions is poor and only time will get them out of it. If fundamentals are not good then preventing short selling will not help things, only delays the inevitable.

A recent survey of German consumer confidence showed a decline to five year lows, this is certainly not good sign.

``Three things are weighing on sentiment: inflation, inflation and inflation,'' GfK Chief Executive Officer Klaus Wuebbenhorst said in an interview on Bloomberg Television. ``And the European Central Bank raising rates also makes consumer loans more expensive.'

Besides inflations slower growth is weighing on the region and the ECB has made it clear that inflation is the biggest worry, therefore growth could really suffer.

``Along with fears of high inflation, many Germans are concerned that there will be a more marked cooling of the economy than previously anticipated,'' GfK said. ``News from the U.S. of the continuing gloom in the financial markets support these assumptions and not least, the continuing high value of the euro represents a hazard to exports.''

Overall I think that the Euro could suffer moving forward (I know I have said this many, many, many times before).
Technically we are in the middle of a range, a range we have been in since Feburary. No need to break out now but I think when it does break, it will break to the downside.

Good Luck and Good Currency Trading


Monday, July 28, 2008

Emerging Markets

Friday was once again an interesting day in Emerging Markets, lets go through each country.

Colombia, raised rates unexpectedly on Friday. The reason cited was inflation. Colombia will probably miss its inflation target for the third consecutive year and as such the CB reacted.

``Inflation has had a higher than expected increase,'' said Finance Minister Oscar Ivan Zuluaga at the central bank in Bogota after the announcement.

This could be a problem for the currency, as it will add to its strength (interest rate differential widening). The CB has been under tremendous pressure of late to stop the appreciation of the currency. That is one of the reasons they instituted the daily currency purchases earlier this year.

Mexico. The Central Bank announced the suspension of dollar sales, beginning Aug 1. This caused the currency to weaken the most in almost 6 weeks. This followed the announcement that the Government would purchase 8 billion dollars in reserves from Banco De Mexico. With the market looking to challenge the 10.00 level (I have been calling for the for a while) there were ample shorts to squeeze, which is exactly what happened. There was also talk of major "knock-outs" in the options market at the 10.00 level. Now what from here....

The announcement ``led to a sharp move in the peso,'' said Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York. ``We're not expecting a big drop in the coming days as the spread with U.S. rates keeps the peso firm.''

Interest Rate differential comes into play once again. I tend to agree as carry is king (in my book at least).

Argentina, posted the largest trade surplus since 2001. This on the back of the farmers strike. Rates have settled in at around the 15% level in the 12 mths, and the currency has strengthened slightly in recent days (3.0150/00). I still like my position which is long a few (not many) dollars in spot and short dollars along the curve. I benefit from positive carry while guarding against a meltdown of the currency.

Brazil. The calmest currency of all. The stock market has been struggling of late and the yield curve is recting strange. I think there are opportunites to be had in the differentials with dollars. Of late they have been narrowing, I do not agree with that. I think there is an opportnity to buy the curve looking for it to widen out. Rates will continue to go higher in Brazil, here in the States we will stay flat. As for the currency, I do not have a strong view. The currency has strengthed for the past 4 years, I guess ride the trend for now (sorry I do not have any conviction here).

Good Luck and Good Currency Trading.

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Sunday, July 27, 2008

Crude moving lower and so are Gas prices....

A welcome sign for all of us the drive, according to this article on AOL Finance Gas prices might break below $4.00 per gallon this week. I for one would be very pleased by that.


Check back later for a full Emerging Market Post....

Good Luck and Good Currency Trading.


Friday, July 25, 2008

Rates continue on a higher path in Latin America.

Mexico. Inflation was considerable higher then the markets were expecting. The Bi weekly CPI came in at .38% against an expected .25%. The core came in at .24% against and expected .18%. This will keep interest rates on an upward trend.


Brazil. As written in yesterday’s post, the Central Bank raised rates a surprising (at least to me) 75bp. The currency did not react as strongly as I would have expected, nor have rates moved aggressively higher.


Current positions.

Long Usd/Brl. I think we should be lower and we are not. Maybe there is something I am missing but since we are not moving lower, I prefer to stay small long dollars, or square.

Looking for widening interest rate differential in U.S. Dollars ag Brazil and U.S. Dollars ag Mexico. The U.S are not changing rates near term and Brazil and Mexico are in rate rise environments. I guess if it ain’t broke don’t fix it, so staying the course here.

Looking for narrowing differentials in U.S. Dollars ag Argentina. I have cut this position down quite a bit as I do not see much upside for this trade at these levels. The yield is still very attractive so I will ride it for the short term.

Good Luck and Good Currency Trading


Thursday, July 24, 2008

Brazil raises 75bp

Brazil raised rates last night 75bp, which was on the higher end of expectations. The market was looking for 50bp (as was I) with a few looking for 75bp.

The Policy Makers led by President Henrique Meirelles are signalling that there is more to come.

Policy makers led by President Henrique Meirelles raised the overnight rate by three quarters of a percentage point to 13 percent last night to bring inflation back to target in a ``timely fashion.'' Thirty-one of 45 economists surveyed by Bloomberg News predicted a half-point increase as in the two previous meetings.

Markets are subdued with spot opening and trading basically 1 figure lower then yesterdays close.

Good Luck and Good Currency Trading

To read more CLICK HERE


Mexico to continue to raise rates

Mexico was very bid all day today against the dollar. As I have written in previous post’s I am looking for a test sub 10.0000. Couple this with hawkish talk coming from the Mexican central bank governor, Guillermo Ortiz.

Mexico's central-bank governor, Guillermo Ortiz, said inflation pressures may be building even as some food and energy prices ease, and signaled the bank will seek to stop rising costs from spreading.

This signals to me a clear sign that Mexico will lean toward a tighter interest rate policy in the months to come.

Look for spot Usd/Mxn to head lower and interest rate differentials to continue to widen.


Good Luck and Good Currency Trading


Wednesday, July 23, 2008

Are we in a Recession.....

This is an article I came across on Yahoo Finance.
It was a good read, no thing I didn't already think, but certainly didn't give me that warm fuzzy feeling inside.

You have heard that Fannie and Freddie, their gentle names notwithstanding, may cripple the financial system without a large infusion of taxpayer money. You have gleaned that jobs are disappearing, housing prices are plummeting, and paychecks are effectively shrinking as food and energy prices soar. You have noted the disturbing talk of crisis hovering over Wall Street.

Something has clearly gone wrong with the economy. But how bad are things, really? And how bad might they get before better days return? Even to many economists who recently thought the gloom was overblown, the situation looks grim. The economy is in the midst of a very rough patch. The worst is probably still ahead

Job losses will probably accelerate through this year and into 2009, and the job market will probably stay weak even longer. Home prices will probably keep falling, shrinking household wealth and eroding spending power.

"The open question is whether we're in for a bad couple of years, or a bad decade," said Kenneth S. Rogoff, a former chief economist at the International Monetary Fund, now a professor at Harvard.


Good Luck and Good Currency Trading


The sea's are a changing....and the Dollar seems Cool again

Today we had another down day for Crude. The dollar benefited, as did Usd/Mxn. As i said in my previous post I am not sure what to make of this. I think Usd/Mxn is making a push for 10.00. First because we are so close to is and second because of the ever increasing interest rate differential. Mexico is in a rate rise environment and the U.S. is in a stable rate environment. Brazil was basically unchanged today. Posibbly because of the oil factor. As I said before when crude comes off, oil producing currencies could weaken. I know that is only one factor to an economy and probably not the most important one but it is certainly the one which has been driving the market most recently. Right, wrong or indifferent it is a big factor driving the market. Will it lead the way I am not sure, but currently i am on the sidelines in the spot but still looking for widening differentials in interest rates. Ultinatly there will be a level to get back into a short Usd/Brl position, but right now I am not comfortable with it.

The Dollar is very bid. I will not short it currently. It looks to me as if the market is looking for ANY opportunity to buy the dollar against other major currencies. This I think is adding to the weakness in crude. All in all a positive for the world economy.

Good Luck and Good Currency Trading.


Tuesday, July 22, 2008

Crude Lower...

I am getting the feeling that we have seen a top in crude. Down big today on the back of a storm missing the drilling rigs in the Gulf of Mexico. It seems to me we are now looking for any reason to sell Crude.


This is all good news for the Dollar. Usually I think if it is good for the U.S. it is good for Emerging Markets. But when it comes to Crude I am not sure since a great amount of the EM countries wealth (Latin American EM) comes form commodity profits, specifically Oil profits.

Any Thoughts ?

Good Luck and Good Currency Trading.


Markets, Calm

The markets were very quiet yesterday, as no new economic news came out (except for leading indicators -.1) and traders seemed to still be weekend break. Emerging Markets were also quiet.

Argentina has performed basically as expected. Spot has remained steady (3.0250-75) with interest rates coming off. I look for rates to stabilise and the dollar to grind higher.

Brazil, not much to say here. The dollar continued its slow grind lower during the trading session yesterday. Rates traded ever so slightly higher. I have very little risk on here, I feel the dollar will reverse (move higher) but I do not want to fight "yield" or trend.

Colombia and Chile. I am square in both of these currencies. No real inspiration in these currencies. Better to be on the sidelines during these times.

Reading the news this morning I see Wachovia had a record loss after writing down 8.9 billion dollars of bad loans and cutting the dividend by 87%. OUCH.

-- Wachovia Corp., the U.S. bank that hired Treasury Undersecretary Robert Steel as chief executive officer two weeks ago, reported a record quarterly loss of $8.9 billion and cut the dividend by 87 percent. The stock fell as much as 12 percent in early New York trading.

The second-quarter loss of $4.20 a share compared with net income of $2.3 billion, or $1.23, a year earlier, the Charlotte, North Carolina-based company said today in a statement. The loss included a $6.1 billion charge tied to declining asset values.

Good Luck Mr Steel ! Actually if you think about it is there a better time to take over as the top dog? There is really no where to go but up !

To read more, CLICK HERE


Monday, July 21, 2008

2.5B Usd loss, and it's good news

It is a sad day when a major U.S. bank can announce a 2.5B dollar loss and the market take it as good news, but that is what happened with Citibank.

Citigroup posted another loss in the second quarter as it struggled with surging loan defaults, but the $2.5 billion shortfall was smaller than Wall Street anticipated

Sad, yes but I think the last line in the ARTICLE says it all,

Not all financial services companies have been clearing the low bar that Wall Street set for them this quarter.

I still think that a stable (for more then just a day or two) financial system is the beginning to a turn around on Wall Street. For now I have not seen it.

My positions to start the week are.

Short Usd/Brl (small)
Long Usd/Ars
Short Usd/Clp (Small and not sure why)
Short Usd/Cop (I fix out of this close of buisness Monday)

Interest Rate plays

Looking for widening differentials in


Looking for narrowing Differentials in


Good Luck and Good Currency Trading.

Happy Birthday John (my oldest son)

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Sunday, July 20, 2008

Emerging Markets

Friday was a very interesting day in the Emerging Market world. I will take you through a few of the Countries of interest.

Argentina. Many of my readers, will remember that I have had a position in this currency for some time. It has been a roller coaster ride that I am unable to get away from because of a its high yield. Since March 2008 there has been an on again off again (mostly on) strike being held by the farmers due to increased tariffs imposed by the Government. These strikes has caused interest rates to soar, and in response the Government has been intervening in the spot market to punish speculators. Rates have moved to almost 20% in the 12 mth sector. On Friday the tariff was revoked.

Argentina's President Cristina Fernandez de Kirchner revoked a decree that increased some agriculture export taxes after she failed to win support for the levy from the country's Congress.

The country will resume the level of taxes on farm exports that existed before the measure took place in March, Cabinet Chief Alberto Fernandez said today in a press conference in Buenos Aires.

This is good news for the country as it shows that the Government, long thought of as not listening to the people, has bent to the will of the people. The curve immediately reacted by moving lower, considerable lower. Since this all occurred late on Friday afternoon, the local spot market was closed so I am not sure of what the reaction will be, but I think it will be to move higher. Remember, the Government drove the spot lower in response to higher rates, with rates coming back off why not let market forces dictate where it should go? It would also more closely reflect where it should be to begin with. Inflation is exceptionally high (in part due to the strike)and a weaker currency is logical in that environment. This is just an opinion and reflects my current trading position (long Usd/Ars spot and Short Usd/Ars outrite ...over bought dollars in the spot)so please keep that in mind.

Mexico. On Friday the raised rates 25bp to 8%. Interestingly it was announced on the Banco de Mexico website 30 minutes before the published time. Speculation was the someone at the CB made a mistake and "pressed the button to early". Anyway, I was some what surprised by the move (although it was widely expected in the market). I though they would wait till next month as growth in Mexico is slowing. Inflation of course is moving higher and they choose one evil over another. This is the opposite tactic of the Fed. They have basically said no rate rises until the economy stabilizes, although the Fed Stern does not seem to agree.

The Federal Reserve shouldn't wait for housing and financial markets to stabilize before it begins raising interest rates, central bank policy maker Gary Stern said.

``We're pretty well-positioned for the downside risks we might encounter from here,'' Stern, president of the Federal Reserve Bank of Minneapolis, said in an interview yesterday. ``I worry a little bit more about the prospects for inflation.''

Interest rate differential should continue to widen here and look for Usd/Mxn to test the 10.000 level in the very near future.

Colombia and Chile
. Both of these currencies weakened against the dollar on Friday. I am not comfortable sitting short dollars against Colombia at these levels and am very glad that I will be fixing out of all my shorts on Monday. Usd/Clp seems range bound with a weakening bias as long as commodity prices continue to move lower (specifically Copper) as I think they will.

Brazil. This currency has been grinding lower but not as aggressively as I would like. I continue to sit small short but will not get "married" to the position.
Interest rate differentials should continue to widen as Brazil is clearly in a tightening environment.

As always I am staying away from the Euro, but if a gun was to my head I would sell it, as crude is coming off and I think alot of bad news is already built into the U.S. economy.

Good Luck and Good Currency Trading

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Saturday, July 19, 2008

Bear Rally or the beginning of a new Bull Run...

Interesting article in the weekend edition of the Wall Street Journal talking about whether this is a Bear rally or a Bull Run. I am not sure,(i think the former....but hope its the latter)but it is an interesting read.

Read Here

I will be posting on Emerging Market developments later this weekend.

Good Luck and Good Currency Trading


Friday, July 18, 2008

Good Economic numbers…well at least better….

As I wrote yesterday I expected Usd/Brl to open lower. It did and traded lower during the New York morning, more on the back of catch up then anything else. I cut my entire short as the Bovespa has struggled even as U.S. stocks have moved steadily higher. Again I do not want to be long Usd/Brl (I have already made that mistake in Argentina).

The Euro has also traded heavy all session. A lot of factors here:

1. Crude off again today. Trading at 130.40 currently down over 4 dollars.
2. Decent U.S. numbers. Here I think we may be getting ahead of ourselves as I need to see more before I get on that bandwagon, but the truth is we have been so negative for so long that it makes sense to have at least a “Relief Rally”.
3. Stocks. Up Up and away. Financials leading the way again. I again think this makes sense. Remember everything runs in cycles and these Banks have been writing down their mortgage portfolios. Pretty soon (if not already) they will be at “the bottom” and when things stabilize will start producing once again. Long(er) term these will be a great buy. It is just a case of how long you have to wait.

I continue to try to stay out of the Euro market as I have no luck at all.

JPMorgan also beat analyst estimates today. This coupled with yesterday’s profits from WAMU, is being seen as very positive for the markets. Jamie Dimon did caution the markets that

That while a weakening economy means financial markets will remain ``under stress,'' the New York-based company's capital position is strong. JPMorgan has posted more than $12 billion of write downs, losses and credit provisions on mortgage-tainted assets through the second quarter, a fraction of the $43 billion at Citigroup Inc., which reports earnings tomorrow.


Good Luck and Good Currency Trading.

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Thursday, July 17, 2008

Just when you think you have it figured out....

OK, today was the feel good reversal day. The kind of feeling I get when sitting at the beach at 6pm. A total opposite of yesterday and one more reason I am glad I am keeping positions small and timing short(er) term. Stocks reversed themselves hard led by financials which were tremendously over sold.

U.S. stocks rallied after higher- than-estimated profit at Wells Fargo & Co. sparked the biggest- ever gain in financial shares and a two-day tumble in oil prices brightened the outlook for transportation companies

Is this a bottom or just a temporary lull before another storm, i really do not know.
The economy will dictate this and currently I do not see any reason for the economy to stop its slide. There is still high unemployment, high inflation and a general lack of confidence running through the markets. I certainly hope I am wrong but I think we have more downside in our future.

In spite of all the trouble Emerging Markets have held up tremendously well. I was spooked out of my Short Usd/Ars position earlier this week by a fellow trader talking about a Devaluation in the future. I have talked to a few economist Friends in the market and they do not see a reason for this to happen. But I have decided to take a more Conservative approach to this position and cut it down to see how the spot reacts short term.

Brazil. I went home short dollars today. This is not unusual in that I have been set up this way for years now (no kidding). The thing that is different this time is the size of my position, approximately 5 times my normal amount. This position is short term as I think we will open lower tomorrow and make a push lower. Usd/Brl really lagged the "feel good" move today and I think it will play a little catch up tomorrow. Either way I will be out (or have a substantially reduced position) tomorrow.

Colombia, was basically unchanged today. I remain small short dollars in this currency pair. This currency has seen greatly reduced liquidity of late. FDI money is still there, therefore I think we have a downside move in the next few days.

Chile, was on holiday today. In spite of that the dollar traded lower. This trend will probably continue. Rates are on the rise and copper is expected to make new highs. Yield is adequate so I think staying short here will not hurt you.

Mexico. A big mover today, and why not. Decent yield and an economy not slowing as much as people feared. Sure inflation is a problem, but where isn't it? I think Mexico will run a similar course to the U.S. in terms of rates ( but not quite for as long)and that is to stay steady for a few months.

Euro. Good question. We tested the old high and came off pretty quick (kind of what I was expecting, but I didn't have any position in it). From here I am not sure. I hope it continues lower as that would help with the price of crude and therefore inflation, but as I said earlier I see no reason for things to change near term on the economy and by default the dollar should remain weak.

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Wednesday, July 16, 2008

Markets feel the strain....

I wish there were some words of wisdom I could place here to tell you what is going on in the market......But I can't. All I can say is that the markets are extremely nervous, more so then I have ever seen in my career. Stocks are weak, interest rates in the States are going no where soon and the dollar just can't get sold enough. Usually at times like this I would attempt to fade the move, in small amounts (improving my average) as i would think we are due for a correction, but not now. I see little upside in the near term and I think that the pain to "warehouse" the position is to great.

Some possible trades I am looking at (or have small positions on already).

Short Dollars. Against the Euro,Gbp,Aud and Nzd. Also surprisingly against Latam Emerging Markets. I would think these currencies would come under pressure at some point but not right now.

Lower Dollar Rates? The market certainly thinks so but here I think there is a real opportunity as I think a sell off in U.S. Dollar futures could be just around the corner. Not long term but a bit of profit taking.

I guess the best advise I can give is not to get married to anything. Be nimble, take profits quickly and losses even quicker.

Good Luck and Good Currency Trading.

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Tuesday, July 15, 2008

Markets are nervous

The markets today have me a little scared. I cannot put a finger on it , but rather it is a “gut instinct”. I have cut down a as much risk as possible as when I get like this I try to take the more conservative approach.

Currently I have on:

Long Usd/Ars. Yes this is quite strange for me but the reason I have gone long is that I sell dollars over the next two weeks from fixings. There was an offer today and I took advantage of it. I feel better having covered this short.

Short Usd/Cop. I fix out of this next week and see no reason to change.

Long Forward Mexico and Brazil, looking for interest rate differentials to widen out in these currency pairs.

The dollar should continue to show weakness, why buy it? Is there really any reason ??

Good Luck and Good Currency Trading


Monday, July 14, 2008

The Week Ahead....

I don't expect this week to be easy. Friday's trading session was extreme to say the least. Presently I think that a large majority of small investor's are shorting the market. I have recently been receiving calls from friends telling me how much money the are making in these markets. Their current strategy is to buy puts on individual stocks as a daily trade. Great idea and one which is working, but it is very similar to the calls I was getting in 1999-2000, but then it was being long Technology stocks. Back then "Everyone" (except Buffet) was buying Technology stocks and making a fortune (at least on paper). I was one of those people also, but it all ended badly. Shorting stocks has proven to be a poor investment over the medium to long term, will this time around be any different, time will tell.

In yesterday's WSJ there was an article titled Stop worrying and learn to Love the Bear. In it it describes how after a Bear market stocks become so cheap that in the ensuing Bull run you more then make up for it, or so that is how it has worked in the past. I am an optimist and believe that over time (I sure hope I have enough time!) things will come back, but I think this market highlights the need for diversity. Real Estate, Great. Some stocks, bonds...very important. Just don't forget to have some cash around to provide the all important Sleep Factor.

This week will be trying, IndyMac failing, North Korea pulling out of talks with South Korea, tensions in the Middle East (Israel,Iran...not to mention U.S./Iraq)all will be weighing on the market. Inflation numbers are also out this week and look for them to be bad, VERY BAD. I am not happy about any of this but think this is another case of excesses in the market working their way out, think Tech stocks in 2000.

Good Luck and Good Currency Trading


Sunday, July 13, 2008

The Perfect Storm

I certainly do not like reading about other peoples misfortunes. In today's Mortgage mess, many celebrities find themselves in a bed situation. Ed McMahon, Vin Baker, Latrell Sprewell to name a few have all had their home or boats foreclosed on when they failed to make payments.

"If you spend more money than you make, you know what happens. And it can happen. You know, a couple of divorces thrown in, a few things like that. And, you know, things happen," McMahon said on "Larry King Live" recently. "You want everything to be perfect, but that combination of the economy, I have a little injury, I have a situation. And it all came together."

I think that sums it up for celebrities, spending more money then they make. It probably sums it up for most Americans too and when times get bad their world collapse around them. I think the big difference is the celebrities have the means to hire qualified professionals to help and advise them. The vast majority of low income Americans do not have that luxury and have just the opposite, ruthless mortgage brokers looking to make a fast buck by selling a product to a client that is not right for them.

We are all suffering because of this now,some more then others.

To read the full article from AOL CLICK HERE

Good Luck and Good Currency Trading


Saturday, July 12, 2008

IndyMac Bank fails

I think the answer to yesterdays questions....

Is it safe to come out yet ? The answer unfortunately is no.

Today I see that the Fed has taken over IndyMac Bank, the troubled bank has been taking steps to address their issue's, firing more then half its staff and closing most of their lending operations. This obviously was not enough as more then 1.3 billion dollars has been taken out of the bank in recent weeks my depositors fearful that the bank would not survive.

Some, such as John Reich director of the office of Trift Supervision blame Sen Charles Schumer for the failure:

The director of the Office of Thrift Supervision, John Reich, blamed IndyMac's failure on comments made in late June by Sen. Charles Schumer (D., N.Y.), who sent a letter to the regulator raising concerns about the bank's solvency. In the following 11 days, spooked depositors withdrew a total of $1.3 billion. Mr. Reich said Sen. Schumer gave the bank a "heart attack."

Maybe, maybe not...its seems the problems were there to begin with. for now banking regulators are bracing for more failures over the coming months as the housing market still has not stabilized.



Friday, July 11, 2008

Another Day of Confusion

Is it safe to come out yet ?

Confusion, that is my take on the markets. Crude jumps $5 a barrel in minutes, the dollar reverses course and stocks are up and down like a roller coaster.

Crude. I heard everything from "technicals" to "Buying Programs", but I think the real reason was Iran continuing its "War Games". Firing off long range missiles in defiance of U.N. objection.

OPEC Secretary-General Abdalla El-Badri said at a press conference in Vienna yesterday that he hoped there would be no military conflict between Israel and Iran, adding that ``if something were to happen, it is impossible to replace the production of Iran.''

With statements like this any "saber rattling" will cause nervous markets and a
rally in crude.

Stocks. Wow what a day. Financials are clearly leading the show. But a few thoughts here. I think stocks will test 10,000. Why not, it is a big psychological level and the U.S. economy is in bad shape. I do not think we will stay below that level for long but we should test it. Freddie Mac (down 22%) and Lehman (down 12%) certainly didn't help things, but does anyone really think the government is going to let them fail? Not me. Yes they can go down in value, but as long as the Fed window is open to all who need it, failures should not occur.

Dollar. It has no choice but to suffer in this environment. I still think there is a good chance we make new highs in the Euro, but again I think those highs will be short lived.

My predictions have not been great, but I have been fairing OK as Emerging Market currency's are strengthening and there are curves (positive carry) to ride.

I am trying to stay nimble (and out of Euro) as these markets are not easy.

Good Luck and Good Currency Trading.


Thursday, July 10, 2008

More of the Same

Korea collapsed as the Central Bank was once again in, TWICE, with a rumored amount of between 3.5-6 billion dollars worth of selling. This forced the currency pair to fall below 1000. They mean business and if crude can continue to move lower look for further gains in this currency pair. I am looking for similar moves in Usd/Sgd and Usd Inr. These two currencies (specifically India) react quickly to changes in crude prices as they are big consumers of the commodity.

China could be an interesting play here also. It has been on a slow and steady appreciation path, recently almost 6 big figures a month (but the curve only building in 3.50-4.00). In the past week there has been little to no appreciation at all. So something has to give. Which one I am not sure, my head says sell dollars, my heart buy them (remember I am the ultimate yield monkey). For now I am on the sidelines looking for an opportunity.

Latin America. Argentina and Brazil were on holiday’s today. I continue to look for the dollar to weaken against all of the Latin American currencies, with Argentina and Chile benefiting the most Mexico the least. Inflation numbers out of Mexico were in line with expectation (bad numbers) and there is a call for an increase in 25bp in Mexican rates at the next meeting on July 18.

Good Luck and Good Currency Trading


Wednesday, July 09, 2008

Oil demand in Asia easing

Crude is currently hovering at $136 per barrel (near yesterdays close). Inventories the morning showed signs that the U.S. is cutting back on consumption (ok only slightly) and here is an article from which expresses the opinion that Asain demand is slowing as subsidies in these currencies get removed.

Good Luck and Good Currency Trading


Oil seeping through the ground in Kurdistan

As a followup to the post from earlier, is this article in todays Wall Street Journel. Wildcatters Plunge Into North Iraq

The Canadians are squeezing oil from sand. The Brazilians want to nurse it up through miles of seawater, sandstone and salt. But here in the far north of Iraq, oil is literally bubbling to the surface.

No matter the risks, some how, some way, some entrepenuer will find a way to get at this new source of oil.

Good Luck and Good Currency Trading.


Yield Monkee poking out its head.

Today was an interesting day to me. I have felt we have been range bound (and I still do), but I think some interesting things are occurring.

1. Crude came off hard today. Sure we have seen this before and it is still north of $135 per barrel but this occurred on a day where the dollar strengthened and I think that is key. I think we can continue to see some weakness in Crude.
2. The Dollar. It has been strengthening over the last few session's even in the face of a rate rise in Europe and poor employment numbers in the States. I look for continued strength, especially against the Yen in the sessions to come.
3. Dollar rates. Currently been trading lower across the board. As part of my range bound senario I look for them to begin to move higher. Not a breakout move but moving higher within the currecnt range.
4. Emerging Markets. Get the Yield Monkee back out. Argentine rates have moved higher, I guess on the back of the Tax situation in Congress, but the Spot continues to hover above 3.00. I think we will test below the 3.00 level in the next few days. The market wants it and it seems so does the Government. Brazil, closed on the weakest level of the day. Tomorrow (July 9) is a local holiday and I tihnk that is a good reason for the weak close. With stocks closing strong I think this move will reverse itself. I also think Usd/Clp and Usd/Cop will trade lower in the coming sessions.
5. Asia. Usd/Korea have been trading heavy for a week now. The Central Bank has been in selling dollars everyday, in sizable amounts. Why fight it. Look for this to continue and look for Usd/Sgd to move in a similar fashion.

Just a few ideas......

Good Luck and Good Currency Trading


Tuesday, July 08, 2008

Iraq eyeing a timetable for the U.S. Troop withdrawal

I was reading this story on AOL today.

Iraq's prime minister said Monday his country wants some type of timetable for a withdrawal of American troops included in the deal the two countries are negotiating.

I was wondering a loud today how such a decision, if reached, would affect the election and in turn the U.S. economy. Would such a decision help or hurt Barrack Obama? He has said if elected U.S. troops would be withdrawn starting in 6 months, many Americans feel strongly that this is the right move so if it is going to happen anyway would it make Obama's "platform" less appealing ?

How about the Dollar, would this strengthen or weaken it? Initially I think it would benefit from such an announcement, but then what? The money being spent on the war (Billions and Billions of it) would not be pumped back into the U.S. Economy (at least not most of it) rather I would think and hope we would begin to pay down the massive debt we have started to accumulate.

Stocks had another rocky day. I think alot of what is going on is that the financial markets are looking toward a Democrat in office and the fiscal fallout of such a move. Income Taxes will move higher. Capital Gains will move higher.Incentives for big business will be decreased. All in all not a very good picture for business.

As written before the dollar does not have a lot of upside room. I expect range bound trading over the weeks ahead with a weakening bias. U.S. Rates are on hold. I think they do not move till early next year. ECB rates, if you believe Trichet are also going no where fast. I like yield in times like this. When markets trade sideways the cost of running short a 12-17% currency (Brazil,Argentina...) is very painful. I think this is occurring.

Good Luck and Good Currency Trading.


Monday, July 07, 2008

G8 meeting begins in Japan

The G8 meeting is slated to begin today, Monday July 7. The topics up for discussion include, Climate control, Energy prices and a weakening U.S. economy. These are all very good and important topics. The problem as I see it is the countries who attend, or more importantly who do not attend.

The G8 include the United States, Canada, U.K., France, Germany, Italy, Japan and most recently (1991) Russia. The largest growing economies China,India, Brazil, South Africa and Mexico are only includes in "sideline Dialogue". This makes little sense to me. These countries are growing very rapidly and are a main driver of the issues being discussed. As Antonio Patriota, Brazil's ambassador to the United States said last week,

"The current format is not really sustainable for much longer."

and I tend to agree. How do you solve the problems of the world without its major players being included in the conversation. The European community has three member's yet a single currency/economy, why not give them one representatve? Things need to change and hopefully the current G8 will realize this and expand the currenct format.

Good luck and Good Currency Trading.


Sunday, July 06, 2008

The shifting of Currencies

The U.S. employment number was basically as expected and caused little reaction in the markets. The "Big" mover of markets was the ECB rate rise, which was expected, but not the dovish comments coming from Trichet afterwards. The Dovish comments caused the dollar to strengthen quite a bit and for Euribors to move from 10(ish) down to up more the 25bp. I cannot believe that Trichet thinks a "one and done" approach is the correct way to go, but rather maybe some pressure from Washington and the rest of the world to talk Dovish in an attempt to strengthen the dollar. Right now I see no reason for the dollar to strengthen. The U.S. economy is struggling at best and inflation by any reasonable measure is way to high. I think that the Central Bankers understand that a strong dollar helps everyone out (well almost everyone) and that they do not want to see it make new lows.


It seems that on Friday that the Argentine Lower House Passed the Grain Export-Tax Plan that President Cristina Fernandez de Kirchner put forth on March 11. There are a few adjustment to attempt to calm the Farmers but I am not sure it will be enough. I think this could lead to real trouble moving forward in Argentina. Look for the spot to weaken and interest rate differentials to move out (neither of which suit my positions). To read more CLICK HERE.


I do not comment on Korea very often but the currency has been hit by large volitity of late. The Central Bank has been intervening both in Asia time and New York in an effort to prevent the further weakening Won. It has done little except to give speculator's better levels to short the currency. As long as the U.s. economy is weak and Crude hover at new highs the Won will suffer as will most of Asia.

Good Luck and Good Currency Trading


Thursday, July 03, 2008

U.S. Employment and the ECB

These are the two big stories of today, will the ECB raise rates (yes) and how bad will the U.S. employment numbers be. After todays numbers everyone is looking for a terrible number (as am I). This may or may not come true but the big thing is the economy is in big trouble, liquidity is very thin and everyone seems to be trading scared. I have taken alot of risk off the table. I do not like to take to much risk into a number as it is really a "crap shoot". Ahead of a long weekend I expect a quick, violent move and then Traders head for the beach.

I will try to update after the number to give you my take.

Good Luck and Good Currency Trading.


Wednesday, July 02, 2008

Sam Israel Update.

Our Hedge Fund Hero Sam Israel is alive and well. He turned himself in this morning to Federal Authorites in Southwick Massachuetts.

Samuel Israel III disappeared early June -- hours before he was supposed to start a 20-year federal prison sentence for bilking investors in his Bayou hedge funds out of $450 million. His sentence, handed down two months ago, also included paying back $300 million.



Yield making a comeback.......well maybe

Today was another very interesting day. In previous session we have seen Colombia and Chile move aggresivly weaker only to close the day recovering from its weakest level's. Today Mexico and Brazil took their turn. We ended up closing with the currency slightly off its weakest levels, and i think with a long holiday weekend coming up that yield is going to come into play and we will see stable to stronger levels for Latin American Currencies.

A few other thoughts....

Very quietly we have seen sterling move back up to 2.00. The Euro is up near 1.5800 (in front of a widely expected rate increase on Thursday) and Aud and Nzd are once again flirting with stronger levels. What does this all mean......Yield ! In quiet markets yield rules and although these have not been quiet, I sense a few quiet sessions are in the offering and I look for these high yielding currencies to strengthen further.

It looks like the Farmers strike in Argentina, although not settled, can be move toward a more permenant closure if the taxes on Farmers can at the very least be altered. The currency has strengthened over recent sessions as trying to fund a short position is very expensive. Here is an article from BLOOMBERG which details what all sides are looking for.

Not much else except to let you know that my Son's baseball team lost tonight 3-1. Their record now is 2-1. My son played very well, went 1-2 with a great diving catch in left.

Good Luck to all and Good Currency Trading.


Tuesday, July 01, 2008

Quiet Day in the Markets.

There was little to report today in the FX markets. As I stated in my last post, I am waiting on confirmation before jumping on the Latin Market meltdown scenario. I have seen these little moves reverse themselves a bit to often for me to get involved just yet. What I did find interesting today was that The Brazilian Real weakened today, even though Stocks were slightly up on the day and Crude was basically unchanged. This cost me a few dollars as I was quite long the Real looking for a gradual move lower. Oh well there is always tomorrow.

Chile had almost an identical move to the one witnessed in Colombia on Friday. An early weakening of the currency followed by a late day rally. Today Colombia was on holiday, so it will be interesting to see what happens when these two markets reopen tomorrow.

Argentina was very quiet, and with a high yielding currency when quiet, the currency strengthened (which brought a smile to my face).

Not much of substance to add, and I expect the week to be quiet up to the employment number on Thursday. After the number I expect a quick exit as most Americans head to the beaches for the long holiday weekend.

Good Luck and Good Currency Trading.