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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