Tuesday, September 30, 2008

Dow Jones Recovers....


Stocks recover and it looks like the Senate will be voting on the $700 Billion Dollar Bailout bill tomorrow night. Initial reports have 70 + yes votes. One new prevision is for FDIC insured deposits do be raised to $250,000. This is very nonpartisian ans should go over well on "Main Street"

Here is the ARTICLE

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The Dollar is KING !!!


The Dollar surged on the back of increased troubles in the overseas markets. No longer is the market thinking that this is a U.S. problem, now everyone seems aware that it is a global problem. Dexia is the latest victim of the credit crisis as a state backed rescue plan was enacted today. Dexia is the world’s biggest lender to local governments.

It seems that the market is realizing that the U.S., although still in a lot of trouble, is ahead of its European counterparts in dealing with this situation.

``This isn't just about Wall Street, there's very bad news in Europe that will need to be countered by new measures,'' said Stephen Jen, the global head of currency research at Morgan Stanley in London. ``What's notable is how well the dollar has held up against the euro and pound despite the bailout's rejection yesterday.''


It is expected that on Thursday, congress will meet again to discuss the $700 Billion dollar bailout plan. The market seems to be anticipating progress toward a solution.


Good Luck and Good Currency Trading.

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Problems in Europe


The ripple effect is starting to hit Europe. Yesterday the European governments stepped in to rescue Fortis, Bradford & Bingley Plc, and Hypo Real Estate Holding AG. This came just hours before the U.S. Congress failed to agree to the $700 Billion Bailout package. The tightening credit situation is hitting everyone and with it economies will also be hit. One thing I have posted about before is how I feel that the U.K. could get hit pretty hard since their mortgage markets is basically all set with variable rates. Also ther Real Estate market in the U.K. was crazier then it was here in the States. I was discussing this with a few co workers yesterday and was informed that in the U.K. if you walk away from your mortgage the government can come after you and take your car, savings etc etc. This limits the chances that someone will walk away. If this is true (I am trying to get confirmation) then it would certainly lesson the chances that someone would up and walk away, well at least just a little.

The ECB has said it will add more funds to the banking system through year end. They will do so with "Special Auctions". They just doubled the size of the currency swap to $240 billion dollars to make more dollars available to the market.

All in all not a pretty picture, and I think it is best to stay as much on the sidelines as is possible with your trading.


Good Luck and Good Currency Trading.

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Monday, September 29, 2008

$700 Billion dollar package, that faded away.



The failure of the $700 Billion dollar package has begun to annoy me. Not because it has failed, I have no problem with that. We elect officials who are supposed to speak for the people and they vote their conscious and I am OK with that. What annoys me is the reasons that I am hearing for the failure.

1. That there were enough votes to get the bill passed but when the Republicans heard Pelosi's speech (blaming Bush for this mess), they took and about face and voted no.

2. That some elected officials could not vote for the package because it bails out the rich on wall street and hurts the Americans on "Main Street".

The second point is one that I cannot understand. Take a look at what happened today with stocks. Do you think the guy on "Main Street" is happy with this? Their net worth dropped today, either by way of a 401k, pension plan or equity in a home. They are losers. How about the small business that cannot get a loan to stock inventory, stream line shipping etc. etc. This weekend I was getting a haircut and the owner of the shop was explaining to me that he was paying 29% on his credit cards (he was asking if I could get him a better rate at my bank). The balances were so high because he could not get a business loan to fix up his barber shop and it needed to be upgraded. Now he says it is impossible to get out from under and is considering filing bankruptcy. This is the type of guy on "Main Street" that could (notice I said could) benefit from the bailout package. The package once approved would help (considerable) free up cash and enable banks to lend to credit worthy individuals and small businesses. Rather the congressmen today, protecting the little guy actually (in my opinion) hurt him.

As for the first point, I believe those 12 congressmen (if what I heard was true) put politics in front of what is best for the American people. Today's showing makes me want to vote out ALL incumbents come November.

Did anyone see Hank Paulson gives his briefing? He seemed to be shaking, probable in disbelief, trying to figure out what he could possible do to help this situation.


All comments would be appreciated

Good Luck and Good Currency Trading.

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$700 billion Bailout Plan FAILS!

Unbelievable the plan was voted down, and now the finger pointing begins. Stocks have been crushed and U.S. dollar interest rate futures are through the roof. Believe me, interbank lending is frozen. I still think they will come together, especially after this reaction.


The U.S. House rejected a $700 billion financial-rescue plan intended to restore confidence in the nation's banking system, dealing a blow to government efforts to contain a lending crisis.

The House rejected by a vote of 228 to 205 the measure to authorize the biggest government intervention in the markets since the Great Depression.


CLICK HERE to read the article on Bloomberg.

It seems the Republican are blaming Pelosi's speech. It seems that 12 Republicans backed out of a yes vote as Pelosi blamed Bush's politics for this mess.


Good Luck and Good Currency Trading

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Latin America.....


This region has been under extreme pressure of late led by Colombia which has suffered from a slowing economy and its close relationship with the U.S. Credit situation. I expect this currency to remain under pressure as uncertainty about the outcome of the bailout begins to surface.

Argentina. Although the Argentinian economy expanded at a faster pace then was expected, adjusted for seasonal factors is was not quite as good. Looking forward a lower industrial production in August should weigh heavy on growth in future reports. I think you can see that in the currency which closed at its weakest level (3.1150) in months. Along the curve the market continues to look for offers suggesting that further weakening is in its future.

Brazil. Some interesting developments are surfacing in this country. The currency which has strengthened for years has reversed course over the last few months and has weakened at a fast pace. This should have been expected once viewed against the U.S. credit situation. I think however that the rapid fashion of this weakening caught a few locals by surprise. I know of many local corporate who had strengthening trades on their books and with these latest moves have severe mark to market issues and therefore margin calls. As I have written about before the local market has been scrambling for dollars. This scramble has resulted in local dollar rates topping 6%. If faced with further weakening in the Real, I could see these corporates being forced to close out their contracts. That means a higher Usd/Brl, and higher rates. The liquidity is quite thin and it could make for a tricky situation.

Mexico. This economy is slowing in a substantial way. I see no way they raise rates. Currently the market is building in a cut of 25bp at there next meeting (I think Oct 16). Although I do not see it happening in Oct, I see a further the market continuing to look for this move. A narrowing of differential between USD and Mexican rates lies ahead.

As for trades I am looking for:

Eur/Usd to move lower.
Gbp/Usd to move lower. I do not have this on but I think there is real opportunity here. The U.K. economy is highly exposed to mortgages and I cannot see them escaping this global meltdown.
Usd/Brl to move higher.
Usd/Ars to move slightly higher. I think that high interest rates in Argentina will prevent to big of a move higher.

Lets hope the 700 billion USD Bailout goes well.


Good Luck and Good Currency Trading.

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Sunday, September 28, 2008

The 700Billion dollar package has finally Arrived. I Think....

Word out this morning is that the package has been finalized. No huge surprise here, most people would agree that it was necessary. Really Congress had no choice. You may not agree with it, but it is a necessary evil.


Congressional leaders and the Bush administration reached a tentative deal early Sunday on a landmark bailout of imperiled financial markets whose collapse could plunge the nation into a deep recession.
House Speaker Nancy Pelosi announced the $700 billion accord just after midnight but said it still has to be put on paper.


We've still got more to do to finalize it, but I think we're there," said Treasury Secretary Henry Paulson, who also participated in the negotiations in the Capitol.
"We worked out everything," said Sen. Judd Gregg, R-N.H., the chief Senate Republican in the talks.


CLICK HERE to read more.

Good Luck and Good Currency Trading

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Cost of Carry


The Lonely Trader commented on my post about a short Euro position. He runs an excellent blog on trading and wanted to point out that cost of carry is a very important element of any trade. It can eat away at profits is negative or provide a profit is positive and the market does not move. My friends continually get on me about my desire to find positive carry in all my trades. They refer to me as a “yield monkey” and have termed one of my rules of trading (I have a few of them)“The Triad Theory”. Let me explain….

Triad Theory. Market can do three things, Go up, Go down or stay the same. If you can put a trade on where two of those three scenarios generate profits you have just increased your chances of making money. When looking at trades I am always looking for positive carry. That is what attracts me to trading Emerging Market currencies, YIELD. I am well aware that there is a reason for the yield (the risky nature of the currency) but over time and with the right mixture of risk it pays off. I am about to date myself, but two of my favorite books are "Den of Thieves" and Highly Confident". Both books were about Drexel Burnham Lambert, the 1980's Investment house, and its number one trader Michael Milken. Michael Milken came up with a theory on junk bonds (and I am going to simplify it here), If you put together a diversified portfolio, some will fail, some will do well and others will just plod along (earning yield) and the overall return should be superior then a regular portfolio. Looking at Emerging Market currencies I believe it is very similar. Take a large sampling of currencies into a basket, some will do well, others will suffer but over all you should do OK. During times of low volatility this strategy works much better. I also like to group currencies into regions, maybe be long yield in Latin America, but short yield in Asia. This would depend on my view of the Economic conditions of the regions.

Please remember that I trade for a large financial institution and not on a retail level. As Lonely Trader points out the carry on being short euro is negative. In my world over the last two weeks it has actually been positive due to the world wide scramble for dollars. Has this been passed along to the retail portals, I really do not know. The thing to remember is that carry is an important part of any trade. Time can be a benefit or a hindrance depending on how your trades are structured. In times such as this yield should be looked at as a “kicker” and not the reason to enter a trade. Volatility is way to high, but when markets calm down I am one trader who will be looking at it once again.

Comments would be appreciated.

Good Luck and Good Currency Trading.

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Saturday, September 27, 2008

700 Billion dollar bailout plan approved...well almost

It seems I was a little premature with my post the other day. Once again politics enters the equation and the deal gets delayed. A new story on Bloomberg news is reporting that a deal is close. At any hand I would assume one gets done by Asian opening tomorrow night.

U.S. Senate leaders said they expect to hammer out a $700 billion bank-rescue package before financial markets start to open tomorrow evening, as House Republicans said they won't try to meet an ``artificial timeline.''


CLICK HERE to read the story.

Good Luck and Good Currency Trading.

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Friday, September 26, 2008

Bovespa under pressure


The Bovespa is under pressure today and the spot market initially reflected this, with the currency trading considerable weaker against the dollar. The current level is 1.8520 after touching 1.8730 earlier in the session. The reason for the reversal was that the Central Bank announced a 500 mio usd repo auction for today. This pumped dollars into the system. These are dollars the CB has been collecting for years now and are letting back into the market at a time that is needed the most.

I still like the dollar moving higher here, but there could be a pull back near term.

Good Luck and Good Currency Trading

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The Big Dollar


I am becoming increasingly bearish on the Euro. Some of this is a “gut feel” and some is from some observations and research I have done.

1. Speculative positioning continues to follow the broader market trend lower. The reduction of market longs began well ahead of the market peak (double top at 1.6000) and has now shifted to a net short position. The peak net long position was 119k contracts; currently the reading is short 40k contracts.
2. Technical indicators are quite bearish. Although I do not follow technicals that closely I have many friends in the market that swear by them. The Double top at 1.6000 was followed by two “spike reversals”. This, from what I am told is a very bearish formation.
3. A major sea change seems to be under way. The U.S. seems to be willing to do anything to keep the Global Economy moving, Sure the bailout package should be inflationary, increase the budget deficit and be bad for the dollar, but there is a saying in the market “Buy the Rumor … Sell the fact”. The dollar has been hit for a few weeks now and now that the package is out of the way I can see it bouncing.

For now I am small short and will add on the way up.

Key support is at 1.3865 and I will add on a clear break (and close below for two days) of this level.

Good Luck and Good Currency Trading

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Thursday, September 25, 2008

700 billion Dollar Bailout Approved

No surprise here, but the bailout has been approved.

Now should we take Bill Gross (Pimco) up on his offer to work for no fee to manage the bailout fund?


CLICK HERE for the Story

Good Luck and Good Currency Trading.

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Emerging Market Currencies under Pressure

The markets continue to come under pressure as risk aversion and a real need for dollars is the dominante theme.

I maintain my biais toward weaker Emerging Market currencies as well as Interest Rate differentials narrowing as dollar rates remain well bid.

The big question is when will the "Big Dollar" turn and begin to go bid. Yes we have problems, but I think the real need for dollars globally will benifite the dollar. I am just not sure when.


Good Luck and Good Currency Trading.

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Wednesday, September 24, 2008

German IFO Weaker


German IFO number was lower in September prompting officials to expect a cut in rates by the ECB. French and Italian business confidence also set multi year lowers earlier in the day.

Comments from the IFO suggest that the German economy will escape a recession, but again that is a technical term. Economies are slowing and people are hurting. Companies are less confident and as such hiring will be non existent.

The Euro drifted lower this morning, marginally but the over riding factor to this economy still is the U.S. credit situation.

Good Luck and Good Currency Trading.

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Concerns about the Paulson Plan.


There seems to be a growing amount of anxiety about the fate of the Paulson plan in the U.S.Congress. I can understand why. Quite a few things are left up in the air. It is basically a, trust me and I will do a good job. As I have sad before I think he will but I can understand why people would be cautious about this approach.

To me we have little choice (see what happened to the stock market at the sign of discord?) and I think members of Congress know this. They may question, or demand some concessions, but in the end they will sign off on it as they really have no choice. I am not saying that there will not be some concession, there will be but no thing that will derail the process. But lets remember this will not solve the problem. Do you really think that once the bad loans are off the table Banks are going to begin lending again. Not a chance. They will sit back and reassess and go back to their core businesses (remember I currently work for a bank).

I want it to work but I think that we are in for range bound trading (large, violent ranges) for the foreseeable future.

Good Luck and Good Currency Trading.

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Tuesday, September 23, 2008

Goldman Raising Capital


Goldman announced after the close today that they were going to be raising 7.5bio dollars from Warren Buffet's Berkshire Hathaway Inc.

Berkshire is buying $5 billion of perpetual preferred shares, New York-based Goldman said today in a statement. Goldman, which this week transformed itself from the biggest U.S. securities firm to the fourth-largest bank by assets, also plans to raise at least $2.5 billion by selling common stock in a public offering.

This was viewed positive by the market as Goldman was up quite a bit just before the close (it carried over afterwards also).

I heard on CNBC the other day an announcer saying, When will Buffett help out with some of his cash, well it seems he has finally found an investment that he likes. It seems to me that both Morgan Stanley and Goldman Sach have found partners and raised enough cash to fend off the market, at least for now.

Even if Goldman was ok before this move, they are clearly better off now. With a well respected name like Warren Buffet in your corner ( a very good friend of Bill Gates anther pretty wealthy guy) the market should look at this "merger" in a very good light.

``The investment will further bolster our strong capitalization and liquidity position,'' Blankfein, 54, said in today's statement. Berkshire's investment ``is a strong validation of our client franchise and future prospects.

I tend to agree with Mr Blankfein.

Good Luck and Good Currency Trading.

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South Africa



South African Finance Minister Manuel resigned today. This was a bit of a surprise. In addition it seems that most of the Cabinet also resigned. The market initially took this very negative taking Usd/Zar up to 8.2000. Now it seems like a "Technicality" to allow the new President the ability to put his people into the posts. The market is currently trading at 8.0750.

Good Luck and Good Currency Trading

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Goldman and Morgan Stanley.....



Over the weekend Morgan Stanley and Goldman Sachs were granted permission to transform into a bank holding company. I was surprised by this mainly because I didn't know it was possible.

As a followup to last night's random trading ideas is this article about the Dollar.

The combination of spending $700 billion on soured mortgage-related assets and providing $400 billion to guarantee money-market mutual funds will boost U.S. borrowing as much as $1 trillion, according to Barclays Capital interest-rate strategist Michael Pond in New York. While the rescue may restore investor confidence to battered financial markets, traders will again focus on the twin budget and current-account deficits and negative real U.S. interest rates.

``As we get to the other side of this, the dollar will get crushed,'' said John Taylor, chairman of New York-based International Foreign Exchange Concepts Inc., the world's biggest currency hedge-fund firm, which manages about $15 billion.


It has already begun and I think we have a bit more to go.
CLICK HERE to read the entire article. Well worth your time.

Good Luck and Good Currency Trading.

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Monday, September 22, 2008

Another tiring Session.


A few random thoughts from today's session.

Mexico. On Friday the Central Bank left rates unchanged at 8.25%. This was a widely expected result. The key points to the statement on Friday was that they were very concerned with the development in the U.S. The 700bn package should help, but I am afraid on near term. I think this currency pair is headed toward 11.0000 over the coming months.

Brazil. Fundamentally things are ok, but since August foreign investors have been reducing their bias on currency appreciation. Currently foreign institutional investors have switched to a long dollar view. This is consistent with my view also.
The central bank certainly wants any moves to be orderly and as such should intervene if a weakening currency gets out of hand. The CB entered the market on Friday to ease the dollar FRA market. It was effective, but once again for how long?
I am looking for Usd/Brl to move toward 2.0000 in the coming weeks.

Colombia.The Central Bank has been in buying 20 mio usd per day for the last few months. This may seem small when compared to the daily volume in Colombia but it has definitely had an effect. I think this is a major reason for the turn around in the currency and I look for it to continue in coming sessions. With the weaker peso the administration was able to lift capital controls on equity portfolios. The lifting of restrictions has had little effect on the currency (another negative). Granted the currency is 35% weaker then four months ago, but for now is comfortably below 2,200. I think we are heading higher and will be taking this level(2,200) out. As such it would not surprise me to see the CB in selling dollars to smoth the ride.

The "Big Dollar". The Dollar has reversed course and weakened tremendously over recent sessions. This makes some sense to me. This rescue plan should be terrible for the Dollar and inflation. Also continued risk aversion makes the Dollar vulnerable. I do not see us see us making new lows (but then again anything is possible), but rather a steady grind (swift grind)lower.

Crude was up at 130 per barrel at one point today, short date liquidity is very thin. All in all very nervous markets.

Good Luck and Good Currency Trading.

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$700 Billion Bailout


Today Henry Paulson made the rounds of the morning talk shows. His message was pretty clear, pass the rescue plan quickly or more carnage lie ahead for Wall Street.

The cost of doing nothing would have been far more severe because the clogged credit markets would make it harder for businesses to get the loans they need to keep operating, he said. Doing nothing also would make it harder for consumers to get the credit they need for car loans and other purchases, the Treasury secretary said. Consumer spending accounts for two-thirds of total economic activity.

"We need to look at what is going on in the credit markets and they are still very fragile right now and frozen," Paulson said on NBC's "Meet the Press."


President Bush seemed to echo Paulson's concern when he said that he was,

worried the financial troubles "could ripple throughout" the economy and affect average citizens. "The risk of doing nothing far outweighs the risk of the package. ... Over time, we're going to get a lot of the money back."

He added, "People are beginning to doubt our system, people were losing confidence and I understand it's important to have confidence in our financial system."


Predictably neither presidential candidate took a position on the proposal.

GOP nominee John McCain said he was awaiting specifics and any changes by Congress.

"This financial crisis requires leadership and action in order to restore a sound foundation to financial markets, get our economy on its feet, and eliminate this burden on hardworking middle-class Americans," McCain said in a statement.

Democratic nominee Barack Obama called for help for Main Street as well as Wall Street.

"We need to help people cope with rising gas and food prices, spark job creation by repairing our schools and our roads, help states avoid painful budget cuts and tax increases, and help homeowners stay in their homes," Obama said. "And we must also ensure that the solution we design doesn't reward particular companies, or irresponsible borrowers or lenders, or CEOs, some of whom helped cause this mess."

Wonderful, but we need action and we need it now. Forget politics (OK that was a stupid request), if we do not act now our entire financial system will freeze up for a long long time. Think Japan during the 1990's.

I am not saying that I am happy about creating this "fund". I am also not sure it will solve the problems. I think it will allow the banks and financial institutions to get back on track in a shorter period of time.

This plan makes me nervous from the perspective that Paulson is looking for tremendous power. I think he wants and needs this power because of the unknown nature of what lies ahead. I do not think this is his nor Bernanke's mess but I am glad they are there picking up the pieces. It seems that we are in the best hands available at this time.

Lets remember right now banks are not lending. Average Americans are nervous about their bank deposits. I am sure that quite a few have begun to pull money out and have it sitting in their top draws at home. If banks do not lend, everyday businesses will begin to go out of business. It has to happen.

I try to be nonpartisan but I think this comment from House Republican Leader John Boehner sums it up,

"This would be the most serious financial crisis that the world has ever dealt with. It is not a time to be playing games,"

Sure we need to get to what caused the problem but that is latter after we stabilize the economy. The nation's outdated regulatory system for financial markets must be overhauled but the first job is to get the rescue package through Congress and then deal with a comprehensive regulatory overhaul next year (A quote from Paulson).

Good Luck and Good Currency Trading.

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Sunday, September 21, 2008

The rich "suffer" also


Postponed nose job's for 16 years old's, botox instead of a face lift and trying to find a discount nanny are just some of the worries facing some of the wealthiest in society. With the economy in disarray it seems everyone is putting off or cancelling all together some of the finer things in life.

Kathleen Mullen of Northrop & Johnson (a luxury boat builder) told of a New York investor who called to delay the purchase of a 25 mio dollar yacht. Ms Mullen said that he was thinking about cancelling the purchase all together (although he was still going to lose the 10% deposit) due to the economy.

At Roundabout New and Resale Couture, a consignment shop on the Upper East Side, manager Kristjansen Villanueva says a woman came into the store for the first time on Wednesday saying the "resale" sign in the window caught her eye.

Mr. Villanueva says the customer told him she's watching her spending because her husband works at Lehman Brothers and their finances were "a little bit shaky." He says she bought an Armani pinstripe suit for $499 -- when buying it at a boutique would have cost her $2,500.


To Read More CLICK HERE

I guess everything is relative....

Good Luck and Good Currency Trading.

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Facebook, for College Applicants.


Now that my sons are in their teenage years, I have frequently talked to them about the use of Facebook and the unexpected consequences that it can have. There was an article in Thursday's Wall Street Journal about the effect some students Facebook accounts can have on them and their college admissions process.

According to the article, a survey of 500 top colleges found that 10%of admissions officers acknowledged looking at social networking sites to evaluate applicants. Of those colleges making use of this information, 38% said that what they saw affected them negatively.

Nicholas Santangelo, a senior at Seton Hall Prep, a private school in West Orange, N.J., says he expects colleges might look at his Facebook site but hopes admissions officers realize the postings reflect only a partial view of any student. "There are some things I might think about getting rid of," says Nicholas, 17, who is considering such competitive schools as Amherst College and Wesleyan University.

Now this student raises a very good point, "Admissions officers realize the postings reflect only a partial view of any student". I totally agree, but WHY, give a school an excuse to not select you. Remember college admission is very difficult and potentially years of hard work can be ruined do to a misunderstood posting or picture. Either on your profile of someone else's.

Here are two perspectives from the article.

Greg Roberts, senior associate dean of admission at the University of Virginia, says his staff is free to check out anonymous tips about social-networking sites or make use of the information if the admissions committee is evaluating a "tight" decision.

Sandra Starke, vice provost for enrollment management at the State University of New York at Binghamton, says she instructs her staff to ignore Facebook and other sites because she considers postings to be casual conversations, the online equivalent of street-corner banter. "At this age, the students are still experimenting," she says. "It's a time for them to learn. It's important for them to grow. We need to be careful how we might use Facebook."


It seems to me it is not worth the risk. Facebook and Myspace are still relatively new technology. As the years go by I can only assume that it will be used more and more to find out about individuals, both for school and potential jobs.

To read the entire article,


CLICK HERE

Check back later to get me take on the 700 billion dollar bailout.


Good Luck and Good Currency Trading

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Saturday, September 20, 2008

Our new currency

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Friday, September 19, 2008

A probe into Short Selling


An article on AOL.COM states that

New York state is launching an investigation into whether some traders used illegal tactics to drive down the stock price of several Wall Street firms.

Short-selling is not illegal. But Cuomo said he will focus on whether short sellers engaged in conspiracy or spread rumors and bad information to influence the stock prices of Lehman Brothers Holdings Inc., American International Group Inc., Goldman Sachs Group Inc., Morgan Stanley and other firms that have been hammered in the ongoing financial crisis.

Kind of like shutting the door after the horse is out of the barn.

I will update later if I am not hiding under my desk !!

Good Luck and Good Currency Trading.

Thursday, September 18, 2008

Paulson to the Rescue...



Today the Treasury came up with a "Permanent" plan to shore up the markets. Stocks soared and Emerging Market currencies strengthen on the back of it. But will it last?

READ MORE

In Brazil the Central Bank announced a plan to sell dollars in the currency market for the first time since 2003. This is a move to inject liquidity into a market that is desperately in need of some.

``This move aims to correct liquidity distortions in the interbank foreign-exchange market,'' Meirelles told reporters in New York after meeting with Federal Reserve officials to discuss the global financial-market meltdown.

Liquidity Issue

``The problem was a liquidity issue, a lack of short-term credit lines for local companies,'' said Francisco Carvalho, currency-trading manager at Sao Paulo-based brokerage Liquidez Corretora, Brazil's biggest currency derivatives brokerage. ``Investors were all asking and waiting for the central bank to move.''

Meirelles said the dollar auctions don't aim to influence currency prices and that the central bank doesn't target an exchange rate.

``We realized there was a deterioration in liquidity,'' Meirelles said.


Speaking to some locals in Brazil, the lack of liquidity is partially because of the collapse of the stock market. Margins are being called and there are no dollars to post. Therefore stocks get liqidated. It is a real mess. As I wrote yesterday Locals need dollars, at all costs.


Good Luck and Good Currency Trading.

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Where from here ?


The FED opted to not changed rates at their regularly scheduled meeting on Tuesday. This was not a surprise to me as no matter how low rates are the liquidity "crisis" has more to do with counterparty risk then with not having access to the money.

Today we saw the last (of the big five) remaining Investment houses come under pressure. Goldman Sach's ended the day down 13.91% at $114.5 per share. This after falling to a low of $97.78 at one point. Morgan Stanley ended at $21.75 per share down 24.21% after hitting a low of $16.08.

``They're fish in the barrel, the short sellers have them targeted,'' said William Smith, whose firm Smith Asset Management Inc. in New York manages $80 billion, including Goldman stock. ``Morgan Stanley's probably going to wind up doing a deal, it's really a matter of survival.''

I agree with this statement. It very much reminds me of the Asian crisis when one by one each Asian currency took their turn being the brunt of short sellers. They all went, or had to establish currency regulations to prevent a run on the currency. It took a few years for it to play out and a few more for the economies to recover and I see the same thing here. I think it is only a matter of time before Goldman and Morgan Stanley team up with someone. The days of the stand alone investment house are over.

Think how John Thain is feeling right about now. If not for his moves over the weekend it would be Merrill squarely in the cross hairs of the market. Instead Merrill has a strong and respected partner and was taken over 70% above the previous close. I bet Goldman and Morgan Stanley would not mind that. I tend to believe what the top dogs at these firms are saying, everything is fine, and we are well capitalized etc etc. But the important thing is that the market smells blood and they want it and it seems to me will get it.

Glenn Schorr, an analyst at UBS AG, said today in a note to investors that the market reaction was ``insanity.'' Goldman and Morgan Stanley aren't at risk of running out of money because they keep plenty of cash on hand and can borrow from the Federal Reserve and a consortium of banks set up over the weekend, he said, noting that both have enough capital to absorb any losses.

Once again PERCEPTION IS REALITY and right now the reality is that the market is risk adverse.

The market has been extremely illiquid. In my core currencies I am having difficulties cutting and covering positions. The biggest problem is funding existing positions. Short date dollars are trading at a huge premium over Fed Funds. Foreign markets are desperate for dollars. To get those dollars they are moving to the forward FX market to obtain them. They S+B the foreign currency against Dollars (therefore B+S dollars). They are willing to do that at way below market rates because of their need for the dollars. Today for example short date Mexico was trading at a discount to dollars.

Back to the original question, where from here? Well I saw this morning that there was a hostile takeover offer from a Korean company Samsung Electronic to buyout a U.S. company SanDisk for 5.85 billion dollars. This was at a 73% premium over the closing price on Tuesday. Could this mean that U.S. companies are beginning to be viewed as under valued ? Possible, but once again time will tell.

As for the "Big Dollar" it got hit hard today. This I found kind of strange. Yes we have problems (lots and lots of problems) but with dollars at such a premium and everyone seeming to need them (and funding being in excess of 6%) I think it is only a matter of time before it regains some momentum to the upside.

Good Luck and Good Currency Trading.

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Wednesday, September 17, 2008

Morgan Stanley




Story just out that Morgan Stanley is considering merging with Wachovia Bank. Also another report that they are having discussions with CITIC the China controlled conglomerate that owns CITIC securities. This takes us back to what we have been talking about, Investment houses cannot survive alone.


CONTINUE READING

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AIG rescued by the FED

So the Fed comes in an bails out AIG. Well really they bailed out the entire financial market. Libor's are still very high as banks are just not lending to each other. Fear of counter party failures is rampant. Last night I went to dinner with a few of my brokers who said many "large" banks tell them, "No Investment names". None !

It seems to me it is only a matter of time before Morgan Stanley and Goldman need to find partners.

I also can't seem to think that the UK is in for at least the same situation as the States. Most of their mortgages are tied to variable rates, with liquidity very very tight it would seem to me that resets will be very high. This cannot be good. Possible sterling could weaken (even more then it has already done so) in the coming months.

Good Luck and Good Currency Trading.

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Tuesday, September 16, 2008

Fed leaves rates unchanged


The Fed left rates unchanged at 2.00%. The decision was based on the opinion that financial markets had "increased significantly" and that recent economic growth had slowed. Also the inflation outlook remained "highly uncertain".

The Fed also noted that the down side risk to growth and the upside risk to inflation were of "significant concern".

I think they left the door open to decrease rates should market condition warrent such a move.

It also seems the a "bailout" of AIG is back on the table.

"AIG may get a loan package from Federal Reserve" Person said.

The markets have taken this news very good. Emerging Markets have rallied (a bit)and US dollar interest rate futures came off.

The Fed has also injected large sums of cash into the system the last two days and made it pretty clear, that if needed they would do more.

Good Luck and Good Currency Trading.

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The Bell Tolls for Lehman


Doom and Gloom is the best way to describe the mood in the room today. Trading was very limited, it was more a day to try to asses risk from the Lehman fall out and try to survive the moves of the market.

The big story of the day was the Fed asking JP Morgan and Goldman to take the lead in arranging for the bridge loan for AIG. The Fed clearly has had enough of buyouts and is now going to let Wall Street clean up after itself.

This is just me asking, but if I were Goldman or JP Morgan, I wouldn't be shy about asking the Fed for a little interest rate cut in exchange for the bridge loan. Not that I am saying that it happened, or that I think a rate cut will happen, but it was certainly worth the question. The markets clearly think a rate cut is in the cards, Eurodollar interest rate futures were up 45-55 bp today. That is huge! I am looking for rates to stay unchanged but for the Fed to definitely move to a easing bias. Would a 25bp cut do any good ? I think this is more a question of counterparty risk and a 25bp cut will do nothing to help.

I do think that Paulson and Bernanke are doing a god job (or as good as they can do). Trying to calm these markets is very difficult. There are going to be enormous layoffs on wall street. The people who keep their jobs will get little to no bonus with no chance to job ship to "greener" pastures. I think that the days of the bright young men and women flocking to wall street may slow down a bit as bigger and more interesting ways to make money lie elsewhere.

I think Inflation will begin to take a back seat as no one will have much money to spend on anything other then food and the energy bill.

I sure hope one of my presidential candidates has a solution for all this !

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Monday, September 15, 2008

And the Hits just keep on coming.


AIG gets down graded by Moodys and Stand and Poors.

This was the single biggest fear I heard talked about during the day. AIG was trying to raise the 40B in an effort to prevent this from happening.

Oh, tomorrow will be fun!

Good Luck and Good Currency Trading.

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A deal for Merrill....


It has been reported that a deal has been stuck between Bank of America to buy Merrill for $29 per share. This after Merril closed on Friday at $17(ish). A couple of questions....

1. Why did Bank of America pay so much for Merrill ? I could only assume that it was not necessary to pay so high.
2. If Merrill was worth $12 above Friday's closing price why did they have to sell?

I do think it is wise. First they were able to command a sizable premium and second it was only a matter of time before they would have faced a similar fate. I think there is a new world order. As I have written about before, Investment houses can not survive alone. It is better to "merge" from a position of (relative) strength rather then total weakness(Bear Stearns).

"I think John Thain at Merrill is the ultimate realist," Ms. Bush said, the analyst, who expected federal regulators to bless the deal by relaxing deposit limits for bank-holding companies. "He knows if Lehman goes under he is not far behind. He wants to cut the best deal he can."

In the past 15 months, Merrill and Lehman have both had tens of billions of dollars worth of risky, illiquid assets carried on balance sheets that were leveraged at a debt-to-equity ratio of more than 20 to one. When the credit crunch hit in mid-2007, the assets kept deteriorating in value and couldn't easily be sold, eating into both firms' capital cushion. Recently, Lehman's balance sheet topped $600 billion and Merrill's $900 billion


Also it is being reported that the Fed is now going to accept a wider variety of assests at the discount window, stocks included. Isn't this kind of like intervening in the stock market?

AIG is also scrambling to raise cash, this on the back of an expected downgrade from S&P. They are looking to raise another 40B dollars. From what I am reading it is not that they necessarily need the money but rather they are tryiny to raise it in anticipation for margin calls that will come from the lower rating, and therefore lower share price.

As recently as Thursday, AIG said it was sticking to a schedule to unveil its strategic plan on Sept. 25. But its shares fell 31% on Friday. Late that day, Standard & Poor's warned that it could cut AIG's credit rating by one to three notches, citing concerns that AIG would have difficulty raising capital. Such a step would make it more expensive for AIG to borrow and further undermine investor confidence in the company

This is a panic market and I am sure opportunites are abound, but you have to be pretty brave to be sticking your hand out in these markets.

The Dollars is following Friday's session opening considerable weaker. U.S. Dollar interest rate futures are also rallying, with the yield curve steepening out tremendously.

Good Luck and Good Currrency Trading

Sunday, September 14, 2008

The clock is ticking on Lehman



All news reports are pointing to Lehman filing for bankruptcy tonight. I was talking to a broker friend who was at work this afternoon closing trades to offset Lehman risk in the market. The trader at Lehman told my friend that many top level managers were in their offices clearing out their desks. True, I do not know but it is clearly just a matter of time.

Merrill Lynch is reported to be doing the smart thing and is being bought by Bank of America, again unconfirmed. It makes sense to me, I do not see anyway that an investment house can remain independent in this environment. Most of their really profitable businesses are gone, and they will never be able to leverage themselves as they once did to gain over sized profits.

My boss called me about 30 minutes ago and was heading into the off to assess the mark to market of all Lehman deals on our books. I thought the worst was behind us but I guess I was wrong.

Good Luck and Good Currency Trading.

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Saturday, September 13, 2008

White Collar Crime


It seems greedy, corrupt people are not just in the U.S. Here are a few more white collar criminals who are being hunted by authorities. This was on AOL yesterday.

It just doesn't seem worth it to me.

CLICK HERE

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Friday, September 12, 2008

Lehman and the other Financials

By now you have all read or heard something about the potential bailout of Lehman. So another investment bank has a problem and has to find a buyer. But where does this all stop? WAMU is struggling, as are just about every major Bank, Investment Bank and financial institution. Do I think finding a buyer for Lehman is the Governments responsibility, NO. Do I think it is necessary, Yes. Without one we would be in a much bigger mess. Once again time is the only thing going to get us out of this mess. Alot of time.

READ MORE ABOUT WAMU

READ MORE ABOUT LEHMAN

READ MORE ABOUT BANK OF AMERICA-TO HELP

All articles from todays Wall Street Journal

Good Luck and Good Currency Trading

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Central Bank Watch


Let's take a look at what a few of the Central Banks have been up to.....

Argentina

Inflation is a big problem in Argentina. Although the official statistic's say it is running at 9% (within the 9-11% band the CB wants) in reality it is much higher. Independent economist's gauge inflation at about 20% and rising steadily over the next 12 months. An independent central bank would be in a rate rise environment but although stated as such in reality they are not. The currency policy is one of a weak currency (although based on the last 6 months it would be hard to see that)to boost exports and as such the CB intervenes regularly. We the current strong dollar environment I think there is real potential for a weaker Peso. 20% weaker (current implied interest rates through the NDF) I am not so sure.

Brazil

I would have said they were on the hawkish side, but after the rate announcement yesterday I am not so sure. The vote yesterday had three members looking for only a 50bp rise in rates. I think this comes from the most recent CPI data which showed a slowing of the index thanks in part to lower food and energy prices. The minutes from the last CB meeting (not yesterdays) were quite hawkish, but the market is now looking at the strong possibility that rates might now go another 50bp by year end as was previously expected. Rates along the curve today came off, could this be a sign of things to come?

Chile

Definitely hawkish. They last raised rates 50bp on Sept 4 as expected. This marked the fourth time in a row they moved 50bp. The statement coming out after the meeting, suggested that they were looking for continued strong growth to go along with the higher rates.

Colombia


Neutral, at the last meeting the Central Bank held rates steady at 10% (Aug 15). This decision was unanimous. They seem to be in a similar situation to us, a slowing economy and rising inflation. The next move in rates is probably down but that might not be for a few months. The CB's inflation target is 4%.

Mexico


Neutral. At its last meeting on Aug 15 the CB raised rates 25bp to 8.25%. This time around however the post meeting statements were pretty dovish. The market took that to mean that they would be on hold. Banxico feel that medium term inflation expectations are anchored (despite recent higher then expected inflation numbers), and as such are willing to wait and see what happens with the strength of the economy. Mexico is quite concerned of the spillover effect that the U.S. slowdown will have on them (look at Europe and Asia...). Bottom line is that Mexico feels they are nearing the end of this inflation cycle and as such rates should be on hold.

Peru

The Central Bank has been in a rate rise environment since July 2007, in which they have raised rates 175bp. The last hike was on August 7. Rates currently are at the highest level in five years. In the statement following the last meeting the committee said it would pay attention to inflation expectations and demand side drivers of inflation. Hawkish yes, but remember crude is coming off hard and with it SHOULD come inflation.

Good Luck and Good Curreny Trading.

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Thursday, September 11, 2008

More of the Same......


The dollar once again rallied across the board as fears of a slowdown overseas out weigh the problems we are facing here in the States.

Lehman Brothers reported earning, well actually losses, earlier then scheduled in an effort to calm the markets. I guess they were concerned that the market was building in a doomsday scenario and they wanted to put out the news to “calm” the markets.

Lehman Bros Holding Inc reported the biggest loss in its 158-year history, said it will sell a majority stake in its asset-management unit, spin off real-estate holdings and cut the dividend in an effort to shore up capital and regain investor confidence.

Lehman fell almost 7 percent in New York trading after posting a $3.9 billion third-quarter loss on $5.6 billion of writedowns, worse than the $2.2 billion loss analysts had predicted. The company said it's auctioning off about 55 percent of the asset-management group, including fund-manager Neuberger Berman, and didn't name potential bidders. The real-estate spinoff is expected to be completed in the first fiscal quarter of 2009, according to a statement today.

Still the markets suffered. Equities were up small and US Dollar interest rate futures were basically flat on the day, but Emerging Markets continued to suffer and with nervous markets come thin liquidity.

Brazil is expected to raise interest rates tonight, 75bp to 13.75. This move is expected and built into the market. I expect another 50bp before year end. The bond market rallied in anticipation of this.

Over all I am confused mostly because I am trying to fade this market. When will I learn !!!

Good Luck and good Currency Trading.

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Wednesday, September 10, 2008

It's DeJa Vu all over again


Looking at the headline of yesterdays post I realized that the market is one way. The "bailout" of Freddie and Fannie are not being taken by the market very well and this is adding to the overall feeling of exiting carry trades while there is still time.

Lets look at the plan for a minute. The plan essentially wipes out existing common stockholders in both companies and further dilutes preferred shares in the government entities. Remember it is not only the like of you and me who own these financial but other financials and Hedge Funds. This should cause these financial institutions (JPMorgan, Lehman, Merrill) to have to write down even more and create a bigger liquidity situation. I think it is clear that Freddie and Fannie will not be allowed to fail. But at share prices at less then a dollar for share holders they all but have.

This market is a mess and time and only time is going to get us out of it. There are more layoffs to come, more write downs and more bank failures. I will give you a little story about me. In 1991 I got married, bought a house in Westchester County New York. I paid 181,000 dollars for a split level house. Over the years I put very little work into the house, but kept it properly maintained. In 1998 I decided that the house was to far from work and I prepared to sell it to move closer to my job. During the seven years that I owned the house I never looked at what it was worth (Really!). When I went to sell it the Realtor told me to list it at 179,000 dollars. She showed me the competition and it seemed like the proper value. So if you take my situation as a sample for the real estate market as a whole then housing prices didn't move for seven years. Now that is really simplifying the market during that time period. I am sure many market went up, some down and there was a few hills and valleys in between, but essentially the market was unchanged for 7 years. From 1998-2006 the market exploded and made many people rich. Could we be in for a 7 year flat cycle ? Could there be a few hills and valleys over the next 7 years but essentially be back to 2006 levels by 2013 ? Well I don't know. We could replicate what has happened in the NASDAQ.The market was in excess of 5000 in 1999-2000 and then collapsing never to see, even close to those levels again (at least so far).

When you see Bill Gross (Pimco) telling you to put your money in cash that's one thing but turn on FAST MONEY on CNBC and they are suggesting that themselves, then you know this make take a little longer then previously thought.

As for the markets, being long dollars is the only way to be right now. The dollar is CRAZY BID against emerging markets as risk aversion is the name of the game. Looking for a widening interest rate differential is also the trade in play.

It hasn't been easy !!

Good Luck and Good Currency Trading....

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Tuesday, September 09, 2008

Emerging Markets continue to melt....


Markets initially opened on a positive note on the back of the Freddie and Fannie bailout. But all good things come to an end and so did the Emerging Markets rally.

Latin America: After opening stronger in all currencies the market reversed course and moved toward new lows. This signals to me that there is more to come. I think being long dollars is the way to be especially against Emerging Markets.


Brazil could not rally in spite of talk that the Central Bank is on the verge of raising rates yet again.

Brazil's central bank may raise the benchmark interest rate this week to the highest in two years, seeking to cool domestic demand and rein in inflation.

Policy makers led by President Henrique Meirelles will lift the overnight rate to 13.75 percent from 13 percent, the fourth increase since April, according to 28 of 29 economists surveyed by Bloomberg. One forecast the bank will raise the so-called Selic rate to 13.50 percent.


``Policy makers will only end the tightening cycle in January, when we get clearer signs economic activity is slowing,'' Mauricio Oreng, senior economist at Itau Corretora in Sao Paulo, said in a telephone interview. ``The central bank needs to make sure slower inflation isn't due to just a temporary ease of commodity prices.''

This as CPI and GDP both showed a rise again today.

There was talk today that,

Thirteen Wall Street dealers agreed ``unanimously'' that the government takeover qualifies as a so-called credit event that allows parties to credit-default swap trades to demand face value on the amount of debt covered by the contracts, according to a memo obtained by Bloomberg News today. Investors use the contracts to hedge against losses on their Fannie and Freddie debt holdings or speculate on the companies' creditworthiness.

``The market is not experienced at settling a credit event for a name of this size, so it is a bit of an unknown,'' said Sarah Percy-Dove, the head of credit research at Colonial First State Global Asset Management in Sydney


Not a pretty picture is being painted.

The best advise I can give is to trade very short term. Take smaller profits and have well defined Stop Losses before you enter into trades. Not the usual way that I trade but one must adapt to market conditions.

Good Luck and Good Currency Trading.......

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Monday, September 08, 2008

The Big Dollar


I wanted to put a few thoughts forward on the "Big Dollar". These ideas are for the medium term 3-6 months, but with the way the market is trading could occur alot fast, assuming of course that I am correct.

Euro. The Euro has been in free fall for the past few weeks. We closed on Friday at 1.4260. Looking at the market I have determined a few key levels which I will be watching.

1.4300, if we need to get above this level then I am looking for the market to trade to 1.4600. From there we could head higher up to 1.4900. I think this would be a healthy retrace of the down move and from here the Euro would turn negative again. A close above 1.4915 would signal to me that we could make a run at new highs, but this scenario I find highly unlikely.

Sterling. If the Euro is in free fall then Sterling is in free fall times 10. There has been really no retrace in the GBP since it began its descent. We closed on Friday at 1.7658. I am looking for the market to fill a gap on the daily charts from Aug 28. To accomplish this we need to trade to 1.8179. I think we will do this as we have had no significant retrace in the market and all markets need some sort of retracement.

Yen. The have written about the Yen recently and I think my scenario still has potential. We closed on Friday at 107.70, I think there is potential to trade lower to the 103-104 level. From there i think we will reverse and head higher eventually getting to 110.66.

When achieving breakout levels (I.E. Euro 1.4300) I like to see a close 2 days in a row to establish it as a real breakout.

Lets see how this plays out, as readers of this blog know my last few currency trades have been pretty poor (Clp/Cop and Jpy/Krw). Luckily I take much more risk in interest rates then currencies.

Good Luck and Good Currency Trading

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Sunday, September 07, 2008

Latest Read

I just finish the book JUICED, by Jose Canseco. I picked it up as a easy Summer read and that was basically what is was. What surprised me the most was the people he named. He really didn't pull any punches in describing who, what and where.

The book was nothing special, somewhat enjoyable to a baseball fan, but not something I would read again.

Good Luck and Good Currency Trading.

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Saturday, September 06, 2008

One of my Favorite Posts....


This is one of my Favorite Posts revisited.

The Battle at Kruger. I first came across it in May 2007. Later one of the Cable networks made an entire special out of the video.

I think it teaches one of me favorite theories......NEVER GIVE UP.

Click Here to view BATTLE AT KRUGER


Good Luck and Good Currency Trading....

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So you think you are a Trader....


Being a full time trader may mean different things to different people, but when it comes to taxes it is what the IRS thinks a Trader is that really matter.

Even if you make hundreds of stock-market trades a year, that doesn't automatically make you a trader -- at least in the eyes of tax collectors. And that means you wouldn't be eligible for certain breaks that traders can take.

This point is underscored by a recent Tax Court decision involving a Florida couple who formed a trading company and made more than 660 trades over two years. The court decided the couple were investors, not traders, and thus were subject to tough limits on deducting net losses and trading-related expenses.


While the Tax Court decision doesn't break new legal ground, tax analysts say it shows how difficult it can be to qualify as a trader and emphasizes the line between individual investor and professional trader. Calling yourself a trader on your tax return isn't enough, as the Tax Court decision points out. In addition to doing "substantial" trading with "continuity and regularity," the Internal Revenue Service says you must also be trying to profit from daily market price moves.

"The decision shows it's very, very difficult" to be considered a trader, says Bob Trinz, senior tax analyst at the tax and accounting business of Thomson Reuters.


Continue Reading

Good Luck and Good Currency Trading

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Friday, September 05, 2008

HELP !


Ugh… Is there really anything else to say? The markets melted in a big way with the DOW down 3% (-344 pts). We in the States were not alone as stock markets around the globe were also in a similar situation. Talking Heads (Bill Gross, Jeff Macke) were on the airways suggesting that having cash is not such a bad thing (I wish they would have told me that last Oct !!).

Emerging Markets were under tremendous pressure throughout the session. Everyone is exiting carry trades and from what I can see just trying to get square.

Now for a few of the markets.

Korea. The Central Bank was in last night once again selling between 1-2 billion dollars. They were also rumored to be in during today’s session selling dollars.

Chile was the boring currency today. Traded between 514-518 all day with little to no real trading.

Brazil. UGH. Stocks off 4% and the currency a one way street with the dollar moving 5 big figures today. Rates also moved higher 12-17 bp out along the curve.

Colombia. OK,OK I am wrong ! Higher dollar once again with the spot closing at 2036, but all things being equal this currency pair should open higher as the overall market melted further after the official off.

"Where from here" has been the over riding question of the day. This says to me that all is not fine and that there is more pain to come. Remember we have the Employment number at 8.30 EST and I cannot see that being a good number (although I hope I am wrong).

Good Luck and Good Currency Trading

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Thursday, September 04, 2008

Bank of England Leaves Rates unchanged


The Bank of England left rates unchanged today....as expected at 5%. This result was well built into the market and was one of the reasons that the "pound" has been under such pressure of late.

They did not release a statement yet, so there is no way of knowing what the vote was.

I think the over riding reason for that no change is the ever increasing slowdown in the UK economy. As in the States I think rates are on hold for the near term future.

Here is the BLOOMBERG story

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Pressure.....


Latin American currencies continued under pressure today, making my long Cop/Clp position look a bit sick. It is a combination of risk aversion and a strong interest in the market to buy dollars.

Colombia. The spot traded and settled above 2000 for the first time January 2008. In Brazil stocks traded lower for the third consecutive month in sympathy with commodity prices.

Foreign investors pulled money out of Brazil's stock market for a third straight month in August, spurred by the steepest plunge in commodities in at least five decades.

The Bovespa stock exchange recorded a net loss of 2.25 billion reais ($1.36 billion) last month as investors from abroad sold 36.157 billion reais of stocks in August and bought 33.906 billion, the exchange said on its Web Site.

Also JBS SA, the worlds largest Beef producer fell to a 6mth low, on the back of a possible down grade by Moody’s.


Asia

Dollar Korea moved higher once again overnight in spite of the BOK reportedly in selling 4-5 billion dollars. The BI (Indonesia’s CB) was also in last night reportedly selling 200 million dollars (it is a much smaller market.
So I am wrong with my Cop/Clp and my Jpy/Krw, but I have not cut either position yet. If I was trading my own money from home I would most certainly be out. But with the strength of a large bank behind me and other positions that help offset these positions I get the ability to run them a little longer (I promise if these positions come back into the money not to say “I told you so”).

Good Luck and Good Currency Trading.

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Wednesday, September 03, 2008

Argentina.....


A follow up to yesterdays post,


Latin American currencies were under pressure throughout the session yesterday with Colombia leading the charge trading up to 1990 against the dollar.

I took this opportunity to establish the position that I talked about, Selling Usd/Cop (1979) against buying Usd/Clp (517.75), both for value 1month forward.

In other news Argentine president Cristina Fernandez de Kirchner came out and announced that Argentina would repay $6.7 billion in debt to the Paris club.

Argentina will repay its $6.7 billion of defaulted debt with the Paris Club group of creditors, seeking to ease companies' access to financing as growth in South America's second-biggest economy slows.

President Cristina Fernandez de Kirchner said she had signed a decree allowing the use of the central bank's $47.1 billion in international reserves to pay the Paris Club.

``This is an important step of state policy, which is to cut our debt,'' Fernandez said at the presidential palace in Buenos Aires. ``This payment puts companies in a pole position, which they haven't had before this decision, and reaffirms Argentina's willingness to pay its international commitments.''


This announcement was meant to ease the markets concern but little trading occurred with the more aggressive side being buyers of dollars.
Otherwise I think the U.S. markets are in a wait and see approach until Friday when the Employment numbers are announced.

Good Luck and Good Currency Trading.

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Tuesday, September 02, 2008

Gustav causing less damage then anticipated


Hurricane Gustav is not as strong as previously expected and as such should cause considerable less damage. As such Crude prices have tumbled, off $4.00 a barrel, as crude suppliers should be up and running again sooner rather then later. This has been good news for the dollar as it is almost 1 big figure higher against the Euro (1.4600) and almost 2 big figures against Sterling (1.8020). The dollar is clearly in a bull market, not so much on the strength of the U.S. economy, but rather on the weakness of the other countries.

A few thoughts on Latin America.

Usd/Clp. This currency pair has been heading lower of late as inflation expectation have increased and it looks like the Central Bank will be raising rates in the near future. The overall trand thought remains up in my opinion so I think you should be looking for opportunites to but Usd/Clp

Usd/Cop. This currecny pair has been heading higher. Considerable higher over the last week or so. Yesterday stocks were up big as the Central Bank lifted restrictions on foreign investment in the local equity market.

The Finance Ministry said today it would lift requirements that foreign investors must deposit 50 percent of their stock investments in the central bank for six months or pay a fine. Colombia imposed requirements on investments entering the country in May 2007 and toughened the rules a year later in an attempt to halt a surge in its currency.

I think this is an opportunity to short Usd/Cop once again.

Usd/Ars. The currency refuses to move but yields are considerable lower. I will not short dollars at these levels and currently stand long a few (although still looking for a flattening curve to try to offset the yield loss). I will look to sell dollars if yields approach 18-19% or buy them (heavily) if the shorter end approaches parity with Dollars.

Usd/Brl. Rates in this country have been coming off (no idea why) but I think it is wrong and remain slightly B+S currency against Dollars. No strong feelings here but I perfer to be cautiously long dollars, spot, but only for short periods of time due to yield.

Usd/Mxn. The currency is struggling based on no further rate rises plus crude coming off hard. I do not have much of a position here but my gut tells me to be ready to fade this move in the coming days/weeks.

Asia

Who was I wrong on the Short Jpy/Krw trade mentioned last week. Korea has suffered alot as the local economy is really struggling.

South Korea's won weakened below 1,100 a dollar for the first time in almost four years and stocks slumped, prompting the finance ministry to say it will take steps to support the year's worst performing currency.

Even these statements were not enought to support the currency....YET....but I have accepted that I am wrong (at least near term) and will now reasses.

Good Luck and Good Currency Trading.

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Monday, September 01, 2008

Kids and Money....


I came across a website for parents trying to teach their children about money management. WWW.KIDNEXIONS.COM is basically an online piggy bank plus a whole lot more. It is certainly worth a look if you are trying to teach your children about money.


Good Luck and Good Currency Trading.

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