Friday, August 29, 2008

Japan unveils $18Billion stimulus package

The other day I mentioned that a friend was looking for Usd/Jpy to move lower first but then reverse course and head considerably higher. He mentioned to me at the time that he was unsure of what the catalyst would be, but he would look to buy dips.

Maybe this is the stimulus.

Japan unveiled a 2 trillion yen, or $18 billion, stimulus package Friday, including assistance to small businesses and other pump-priming measures to shore up its flagging economy hit by soaring energy and material prices.

The new measures include discounts on expressway tolls, assistance to farms and help for part-time workers to find better jobs, according to the Cabinet Office. Funds were also earmarked for better medical care, ecological technology, housing loans and education, it said.


Good Luck and Good Currency Trading.


Thursday, August 28, 2008

Ortiz speaks and Mexican Rates Follows.

Mexican Central Bank chief Ortiz reported seeing an "End of Inflation Episode". This dashed all market hopes of further tightening in the region. Yields came off hard and the Currency is at the weakest point of the day 10.2300. Couple those comments with lower crude and we may be in for a pretty big move going into the long weekend.

Good Luck and Good Currency Trading


Another Quiet Day....But Stocks Move Higher

Today was once again a pretty quiet day. Latin American Emerging Market currencies held steady or strengthened (slightly) against the dollar and for now I still like sitting short dollars against the region. I fixed long some Usd/Ars and I see no reason to rush out of that position. The Argy curve continues to flatten and I think that will come to an end pretty soon.

Fannie Mae stop was halted and a management reshuffle was announced. The market liked this news and the stock rallied on the back of it.

I sold some dollars against Asia (Mostly Usd/Krw). The Korean Central Bank was in O/N selling dollars and there is always the chance they get aggressive and really give it a push.

I am starting to really like being short Jpy/Krw. I have a small position on now and will add along the way.

Good Luck and Good Currency Trading.


Wednesday, August 27, 2008

It's a Marathon not a Sprint

Really not much to write about today. I think it is important not to force markets like this and remember to live to trade another day.

The dollars climbed against the Latam currencies and I took the opportunity enter a few positions.

I sold Usd/Brl at 1.6440 (BMF). This added to an already small position that I had.

I bought 6 mth Usd/Ars. This took me out of some, but not all, of my interest rate risk as well as added to an already long Dollar position. I also buy more dollars on Tomorrows fix.

I sold some forward Mexico today (looking for the interest rate differential to narrow against dollars). As I said yesterday I think that the Mexican central bank does not want to raise rates again. The curve is very flat and I think there is a very good possibility that we will go inverted.

Speaking with a friend at a large investment house, he is looking for an entry point to buy Usd/Jpy. He mentioned 102.00 but that was just off the top of his head before a big move higher. On a retracement I will buy a few as I do like the carry, possibly against another currency, but I will not wait to 102.00. More likely 105.50 I will start to buy and layer in down to 102.00 then hold my breath and hope for the best.

Good Luck and Good Currency Trading.

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Tuesday, August 26, 2008

Random Thoughts...and a Few Trade Ideas.

Coming back to work I see markets that are very similar to the ones I left two weeks ago. With a U.K. holiday yesterday (from what I here this week is the biggest holiday week in the UK) and a long weekend in the U.S. coming up this weekend I am not looking for any breakouts but rather more range trading. As such I would like to put on some yield. What I mean is that if Usd/Brl continues to grind higher I will look for a level to sell some (1.6480 BMF?) and then add if we take that level out (1.6700-1.6800 lvl).

Usd/Ars yields came off hard during my vacation with 12 month yields moving from 21% down to 17%. I do not see much downside here but I could see little movement during this slow week. I have a position looking for lower yields but I am long dollars spot as I do not think we can move to much lower. Last time Argentine yields were this low I sold looking for a big move lower and watched as the position went against me hard. I held it and added on the way up so I have done OK out of the situation but it would not surprise me if it happened again. Therefore I have cut some of the position just in case.

Usd/Clp and Usd/Cop are definitely "perky". I am not sure what to make of these currencies right now. An article in today's WSJ talking about weaker commodity prices (Copper) I think helped weigh on the currency, but the country continues to grow as evidenced by its GDP number up 4.3% ag 3.9% expected (READ HERE)means to me that higher rates are in the cards.

I am hearing stories that China over the last month has been a very large buyer of Mexican debt. This was a driving force in the flattening of the curve, which is still very flat today. I think that Mexico is on hold going forward in rates although the market wants one more hike. There could be some potential here.

On the news programs today I heard alot of talk of Financials losing another 30% before it is all over. Investment houses not surviving as stand alone units and housing prices falling another 10-15% in the coming months. This may all be true but I think it is getting close to the time to start averaging into these sectors again. I was lucky enough to cut some of my stock holdings at 13,400 and 14,000 in the Dow. This not so much because I was smart but rather because I was scared. I watched a lot of my paper wealth evaporate in 1999-2002 NASDAQ "crash". It hurt, and I will attempt to not let that happen again. I think it is now time to start reinvesting these funds on a systematic basis over the next 12-18 months.

Good Luck and Good Currency Trading

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Monday, August 25, 2008

So you think you have In Law problems

Talk about supporting you in-laws. This story in todays WSJ says it all.

Trouble with the in-laws doesn't often involve law enforcement, but that's what happened to London-based private-equity star David Blitzer, whose 71-year-old father-in-law is charged in the U.S. with trying to shake him down for $11 million.

Continue Reading


First Impressions

I usually try to look at the markets when I get back from vacation and put on a trade that looks obvious. What I mean by that is, I look at the market and let a trade jump out at me.

Regular readers know that I am a big believer in yield. after reading up on the markets of the past two weeks I see little chance of the Fed raising rates anytime soon. Inflation is a problem but an unstable economy is a bigger problem so the Fed will keep the liquidity ample and as such rates will stay where they are. Looking for a trade I resort back to my usual suspects. I think a basket of trades, Dollar neutral with positive carry is the way to go. I need a little more time to come up with the correct balance but I think that yield is the way to go. While I was away I had one small trade on, riding the curve in Argentina which paid off nicely. It is a clear example to me that positive carry can make up for alot of mistakes.

This ARTICLE from AOL money and Finance basically spells it out. The Fed is concerned about Inflation but they think it will come off and are more concerned about the effects higher rates will have on the economy. Also I saw on the CNBC news scroll on Friday that the Fed would not be raising rates anytime soon. I am assuming it is the news editors interpretation of Bernanake's speech on Friday. Perception is Reality and Stocks certainly took the speech the same way.

Check back later for the trades I put on.

Good Luck and Good Currency Trading.


Sunday, August 24, 2008

Back from Vacation

I just got back from vacation yesterday. I haven't had time to look and see what the market has done but I do have a couple of quick observations.

First I need to describe my vacation. Myself, my three brother, my mother and all of our kids (13) rented a house on the beach. The vacation is easily driven to (about 4 hours away for any family) and is in a popular resort community.

On one of the evening's while walking the entire crowd back after an ice cream run, a small crowd gathered at the corner gas station. A worker was at the price board, adjusting the sign. Good natured banter between the crowd and the employee about whether the price is "going up or down" ensued. What was really interesting was that two kids, about 11-13 years old rolled up on their skate boards. One yelled "is the price going up or down". The employee yelled "Down" and a big cheer came from the kids and one yelled "More gas for my skateboard". I found it quite interesting that first a crowd (OK a small crowd) gathered to discuss the price with the employee and that the kids were so involved with what was going on with gas prices. I know that the conversation in my car quite frequently revolved around the price of gas at this station as apposed to the one we just passed. I can only assume that crude prices are lower based on what gas prices have done during the past two weeks, but more needs to be done and quickly. Even at $3.65 a gallon (at my local station) we are over $1.00 a gallon higher then last year, and heating season is approaching. People can and will live without Air Conditioning, but they need heat. Also landlords provide heat whether you want it or not (unlike AC's which you can keep turned off) so the cost is there and will be passed along.

The U.S. consumer will spend money, hopefully it is not on heating their homes alone.

I sure hope things are getting better. There was traffic on the roads. Amusement parks were crowded and restaurants/bars seemed full. I am still concerned about the cost of crude and continue to feel that getting this one commodity lower is the key to getting the U.S. economy back on track.

Good Luck and Good Currency Trading.


Tuesday, August 12, 2008

Latest Read

I just finished Senior Year by Dan Shaughnessy. It was a quick read and very enjoyable. It is about a father's journey through his son's senior year of high school. The son a very good baseball player and is finalizing plans for collage. I really enjoyed the book and really got the message (enjoy it while you can). My youngest son is not even in High School yet, and only with alot of hard work will be able to play on the High School team, but I felt connected to the story. I encourage all parents and teens to read the book it is worth the time.

Good Luck and good currency trading.


Monday, August 11, 2008

On Vacation...

I am on Vacation for the next two weeks. When away I like to try to forget about the markets so not sure how much I will be updating......

Good Luck and Good Currency Trading.


Sunday, August 10, 2008

Being a Met Fan....

As many readers know I am a Big Baseball fan and an even bigger New York Met Fan. Being a Met fan in New York is not always easy. We are surrounded by Yankee Fans who over the years have had far greater success then we have.

Discussing this with a long time friend recently he relayed the following story. It always amazes me what people remember. I bring this back to Trading. I can remember the PPI number on March 17 1989 (+1.0% the second consecutive unexpected rise of 1.0%)because of what it did to the markets, and my P/L (it was good believe me!). Today I always look for higher PPI numbers hoping and praying for the same magic. I cannot tell you what I had for dinner on Sunday, but I can tell you about the time I shorted the Euro and Trichet announced that Inflation was a big issue in Europe (Ugh). Here is the Story......

This morning I read a blurb in one of those “newspapers” that they give out for free as your getting on the subway here in New York. It was about the closing of Shea Stadium, and what it was like to be a Mets fan as opposed to a Yankee fan. In New York you are either one or the other. The article described how real life reflected more on the life of a Mets fan as opposed to a Yankee fan, here’s how. The Mets seem to have steady success or rather levels of success. The high notes are far and few between, but when they come we celebrate them. Whether it be a ground ball through the legs of Buckner or the birth of your first son, They take your breathe away and you never forget them. It is the mediocrity of normal lives that make success all the more sweet. Who cares about winning if you’ve never lost? Anyway, I reflected on my experience growing up in Brooklyn and Queens and the fact that the Mets were always on the television on Saturday afternoons in my house. I can still see the picture covered with snow and the rabbit ear antenna covered with enough aluminum foil to make some nice shut in a new helmet. It was Saturday, it was summer and the window fans were on full tilt blowing that 88 degree heat in on us and we were happy.

I must have been 8 or 9 when the summer camp we went to offered us a Yankee game or the zoo. Summer camp was at St. Brigids Catholic school in Brooklyn in the parking lot. Anyway, myself and two of my older brothers went to the game. It was my first major league baseball game. I cant remember who they were playing or who was there with me, but what happened to me while I was there stays with me to this day. I think my mother gave us a 20 dollar bill to buy lunch and peanuts with. There were 3 of us. Where a 20 came from I have no idea, my father must have won big at the track! No, he didn’t pony up the money for us to have a good time at the game. My mother robbed his double secret hiding spot, then probably helped him search the house for the missing money. We took the subway out to Yankee Stadium, it was so big I couldn’t see the corners of the building. We had seats somewhere between right field and the sun, who cares where. This was the place that they show on television, and I was there. I heard the call of the hot dog vendors and I was ready. I did the ass dance down the row of spectators to the aisle where the hot dog guy was standing. I bought my first hot dog at a major league game. I can remember that I was excited. I took the hot dog in my small hands trying to get a grip on the mustard pack covered with vendor sweat when I reached up to take my change. He handed me something equivalent to a buck and a half. I said “No, this is wrong. I gave you a 20” he said “No Kid, you gave me a 5, here look” he pulled a 5 from his filthy mustard and grease covered apron for viewing. I panicked almost breathless and speechless and ran for my brother Mickey, I’ve seen him in fist fights, he will know what to do, He’s 12. By the time I reached him and told him of the theft, the hot dog man was gone in a sea of sun glared fanatics. I vaguely remember a small beating by my two brothers since their lunch money was probably now being spent on watered down Reingold beer. To most people reading this its really not a big deal. Its really not that big of a deal to me either, I have had more beatings by the brothers than you can shake a stick at. I still cant grow hair on the outsides of my lower calves due to all the electrical tape draggings (my father worked at the phone company). But I was TAKEN by a hot dog vendor!

It is this story that seems to come to mind whenever I think of taking in a Yankee game. It is some sort of Classic Conditioning Pavlovian Dog bull, but it happened, it happened to me. For this reason I have never been a Yankee fan, never donned a Yankee hat or jersey, never called “YANKEES” when we were picking team names for stickball. Thirty some odd years later, I still wouldn’t.

Wanna hear about Shea?

The Northern Yankee


Friday, August 08, 2008


COMMITMENT is what transforms a promise into reality. It is the words that speak boldly of your intentions. And the actions which speak louder then the words.

It is making the time when there is none. Coming through time after time after time, year after year. Commitment is the stuff character is made of; the power to change the face of things. It is the daily triumph of integrity over skepticism.

Abraham Lincoln.

The world of renouned pianist, van Cliburn, after one of his magnificent concerts was approached by an admirer who had been in the audience.

The emotional fan grasped Cliburn's hand and said,

"I would give my life to be able to play the piano like that"

The pianist smiled and replied..."I DID"

There are no shortcut in life or in trading and when things get difficult an added commitment may be needed. When things seem impossible, hang in there you can never tell what the next moment brings.

Don't Give up.....Never Give up !!!

Good Luck and Good Currency Trading


Thursday, August 07, 2008

Emerging Market Currencies under Pressure

Latin American currencies are feeling the pressure as the “Big Dollar” continues to gain ground. The dollar has been gaining steadily against Ars, Brl and Mexico over recent sessions. The markets generally feel nervous as yield players seem are getting squeezed. Liquidity is also extremely thin as it seems traders are away on vacation.

Mexico Consumer Prices has come out at .56 (expected .52) with the core number coming in at .4% exactly as expected. These numbers should allow for another rate rise on Aug 15 as Inflation is the main driver for rates in the country currently.

Continue to look for interest rate differesntials to widen.

God Luck and Good Currency Trading.


Car Companies teaming up...

The other day I read about GM and Ford collaborating on some new technology and in todays Wall Street Journel I see where Chrysler and Nisson to team up on "Key Cars".

Take a look HERE


Wednesday, August 06, 2008

Crude moving Lower

From today's FT on oil...

"Traders said a single market participant, believed to be a
Latin American national oil company, had in the past 10 days
taken a large position in put options to protect itself against a drop below $70 by December 2009."

Look out BELOW !!!!!


Fed Announcement

The Fed held rates steady today, as expected, at 2.00%. The statement was less hawkish then I expected sending U.S. Rates lower after the announcement. Clearly Inflation is a big concern but they also mentioned the the economy was very fargile. Look for rates to remain steady into 2009, possibly well into 2009.

Good Luck and Good Currency Trading.


Tuesday, August 05, 2008

The Dollar........

The more I have been reading of late the more I get the feeling that the Dollar is in the beginning stages of a big move higher. For a while now I have been pointing out that the dollar did not make new lows, even with Crude making new highs. Clearly that was the case earlier in the year and now that Crude seems to have “turned over” it will be an even greater incentive for Dollar buying. But let’s look at a more critical factor, demand for Dollars. When countries do capital raising it is usually done in the cheapest and most liquid currency available. This is and has been the Dollar. The reason is the real or perceived notion that the Dollar is overvalued. Because of this the Dollar’s should be cheaper to fund because when it is time to repay them they should be “depreciated”.

Capital investments therefore in major developing markets have been made in Dollars. Look at the foreign direct investments in Brazil, China and Mexico. Extremely large amounts of Dollars have been flowing in for years. Most of them borrowed, how you get these Dollars, buy buying them. It is an interesting thought.

Also think about credit spreads. I know a few months ago when spreads were “blowing out” the market was looking to raise dollars any way they could. FX Forwards were being hit across the all currencies (the market wanted to B+S Dollars). Again it refers back to the above observation, the market (countries) borrowed Dollars and need to re borrow or buy them back when they are maturing. It has to (famous last words) occur. If you are like me and think that European Rates are not going any higher and that Credit spreads will widen out, then the Dollar should go higher. Time will tell.

A lot of my thought above came from an article written by John R. Taylor Jr., the Chief Investment Officer for FX Concepts.

Another item that peaked my interest was that IMM speculative positions went long Dollars for the first time since June. I also think that in the States we are expecting bad news. John Thain of Merrill Lynch was on CNBC today talking about how things will be bad in the States into 2009. Now I tend to agree with him, but if the market is expecting bad numbers, getting them will not spoke them. I think it is this realization which will help us to turn the corner (for the dollar). Bad news here expected, bad news elsewhere a cause for concern. Lower rates abroad, narrowing differentials create another incentive to buy Dollars.

BUT, currently I still do not have a meaningful position in the Dollar.

Good Luck and Good Currency Trading


Monday, August 04, 2008

Looking at the "Bad" side....

The Employment number was out on Friday and although at first it looked good I see that most economist are saying that it is not quite as good as first thought.

``Companies have already cut the fat and some muscle, and are now trimming hours,'' said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. The drop in hours ``is going to have a huge impact'' on growth.

I know that after the number was announced I began yelling out my usual positive U.S. comment's in my office....

"God Bless America"

"What Recession?"

"You can't slow this Economy Down!"

Now I am not a fool (well at least I hope not), I am well aware that we are in a recession (whether official or not it is a recession). Store Fronts in midtown Manhattan are more and more empty with each passing month. I do it as a way of deflecting the overly negative statements coming out of most members of the sales staff in my office. I think it is very unhealthy to always be looking for the bad in everything. It makes for very long days.

I, like Mr Greenspan, am very impressed by the resilience of the U.S. economy. I thought for sure we would be much further along to a "real recession" by now. And the Global picture just blows me away. For any regular readers of this blog you are aware I have been talking about a slowdown on the Global front which has never (really) occurred (at least to the degree I had been expecting).

Now the employment number Friday was a surprise in that it wasn't as negative as the market expected. This after the TERRIBLE claims number from the previous day. But as the economist have pointed out it is still another loss in jobs in the States and as such shows a declining employment situation. From my reading it seems that employment has been cut back so far that in the future, workweeks will be hit next. More part time employee's are being hired as such if a company doesn't need the help they can take a part time employee and give them 30 hours in a week instead of 40. No one losses a job but real wages are decreased and as such spending power. Now once again I have over simplified this, but the theory seems accurate (at least to me). Is this what is happening now?

Overall I think the U.S. still has a ways to go to pull itself out of this mess. It will happen, but it will take time. Until then I will continue to look for any positive news in the reported numbers and yell out "God Bless America". It makes me feel good and my co-workers chuckle.

Good Luck and Good Currency Trading

The report on the dollar should be out by tonight.


Sunday, August 03, 2008

Latest Read.

I just finished the book Lone Survivor, The eyewitness account of operation Redwing and the lost heros of Seal Team 10. This book was the true story of Marcus Luttrell a Navy Seal who was the only survivor of his Seal Team deployed in Afghanistan in June 2005. Their mission was to capture or kill an al Qaeda leader, and the resulting story is quite compelling. Now the book was a bit "Rah Rah" for me BUT it is truely the story of some Heroic men. It does not matter if you are for the war or against it, the point is the men and women who fight the battles do so in a very Brave fashion. I am sure there are quite a few soldiers who don't agree with this war but still "show up" to work everyday, because this is their chosen profession. The book is a good read, and Marcus Luttrell and his team true heros.

Good Luck and Good Currency Trading


Saturday, August 02, 2008

The Dollar

I am working on a post about the Dollar which should be done later this weekend, please check back.

Good Luck and Good Currency Trading.....


Friday, August 01, 2008

Brokers Gone Wild...

As part of my continuing series titled "What were you thinking" comes this story from yesterday Wall Street Journal.

It seems two former Credit Suisse brokers were misleading a few clients on what they were really buying for them.

In one example, Mr. Tzolov sent a report to the client regarding a multimillion-dollar purchase of "South Coast Funding St. Loan." The actual name of the security is "South Coast Funding IV Ltd.," which is largely backed by real-estate- or mortgage-related securities. It may also include a small portion of student-loan securities, according to the security's offering document.

This because the client only purchased securities backed by Student Loans.

Well for now one of he brokers has aparently left the country and the other waits for a trial.

As I have said before it just doesn't seem worth it.

CLICK HERE to read the entire story. It is well worth it.