Sunday, November 30, 2008

Trump Entertainment Resorts to skip payment.

Facing tough competition and sliding revenue amid the economic meltdown, Trump Entertainment Resorts will have to skip a $53.1 million interest payment scheduled for Monday on its 8.5% senior secured notes due 2015 in order to maintain sufficient liquidity.

This from the WSJ's Market Watch. This of course is a seperate company from Donald Trump himself, but "The Donald" is the single biggest holder of the stock of this company.

The comapny has 30 days to make the payment. If at that time a payment is not made then the holders of some of the notes are able to speed up the maturites. The article seems to think that the company will use the 30 days to restructure the debt and that makes sense to me.

I guess in these times everyone, even Mr Trump's companies can get themselves into trouble.

Good Luck and Good Currency Trading.


Black Friday Sales higher then Expected.

It seems the first counts coming out of Retail stores are for slightly better sales then was anticipated. $10.6 billion dollars spent as opposed to $10.3 billion last year. The question I guess is will it be sustained. Remember last year there were 32 shopping days between Thanksgiving and Christmas and this year on 27. Therefore there should be more spending per day just to equal same store sales from a year ago. I was in a few stores yesterday and although they were relatively empty, so were the shelves. Sales people informed me that the were "busier then expected yesterday" and that "what was on the shelves is what we have".

I am not sure what this will translate into, as I am sure we are in for very poor economic numbers again this week.

CLICK HERE to read the story about Black Friday Sales.

I will post on the markets a little later.

Good Luck and Good Currency Trading


Friday, November 28, 2008

Black Friday

Worker dies at Long Island Wal-Mart after being trampled in Black Friday stampede. This a headline from today's New York Daily news.

What a way to start the holiday's!

I know stores need a little "hype" but I think when it gets to this everyone will agree it is to much.

CLICK HERE to read the story.

Good Luck and Good Currency Trading.


The 99 Club....

I was clicking through a few Blogs this morning and came across MONEYNING. It is a personal finance blog which had an interesting story which is quite appropriate at this time of year, especially considering the poor state of the economy. Here it is.

"Once upon a time, there lived a King who, despite his luxurious lifestyle, was neither happy nor content.
One day, the King came upon a servant who was singing happily while he worked. This fascinated the King; why was he, the Supreme Ruler of the Land, unhappy and gloomy, while a lowly servant had so much joy. The King asked the servant, ‘Why are you so happy?’

The man replied, ‘Your Majesty, I am nothing but a servant, but my family and I don’t need too much - just a roof over our heads and warm food to fill our tummies.’

The king was not satisfied with that reply. Later in the day, he sought the advice of his most trusted advisor.

After hearing the King’s woes and the servant’s’ story, the advisor said, ‘Your Majesty, I believe that the servant Has not been made part of The 99 Club.’

‘The 99 Club? And what exactly is that?’ the King inquired.

The advisor replied, ‘Your Majesty, to truly know what The 99 Club is, place 99 Gold coins in a bag and leave it at this servant’s doorstep.’

When the servant saw the bag, he took it into his house. When he opened the bag, he let out a great shout of joy… So many gold coins!

He began to count them. After several counts, he was at last convinced that there were 99 coins. He wondered, ‘What could’ve happened to that last gold coin? Surely, no one would leave 99 coins!’ He looked everywhere he could, but that final coin was elusive. Finally, exhausted he decided that he was going to have to work harder than ever to earn that gold coin and complete his collection.

From that day, the servant’s life was changed. He was overworked, horribly grumpy, and castigated his family for not helping him make that 100th gold coin. He stopped singing while he worked.

Witnessing this drastic transformation, the King was puzzled. When he sought his advisor’s help, the advisor said, ‘Your Majesty, the servant has now officially joined The 99 Club.’

He continued, ‘The 99 Club is a name given to those people who have enough To be happy but are never contented, because they’re always yearning and Striving for that extra 1 saying to themselves: ‘Let me get that one final thing and then I will be happy for life.’

We can be happy, even with very little in our lives, but the minute we’re given something bigger and better, we want even more! We lose our sleep, our happiness, we hurt the people around us; all these as a price for our growing needs and desires.

That’s the 99 club.

Market Post to follow.....

Good Luck and Good Currency Trading.


Thursday, November 27, 2008

Paul Volcker to Head Economic Recovery Board

From CNN

“Paul has been by my side throughout this campaign, providing a deep understanding of financial markets, extensive experience managing economic crises, and keen insight into the global nature of this particular crisis,” Obama told reporters, calling Volcker “one of the one of the world’s foremost economic policy experts.”

Obama said a key purpose of the board would be to provide a perspective from outside the walls of the Washington “echo chamber,” which he said “can sometimes keep out fresh voices and new ways of thinking.”

In his Monday press conference of the week Obama stated that,"The economy's likely to get worse before it gets better. Full recovery will not happen immediately,".

I think this is a good sign that first, he is getting out there and letting Americans know that he is "on the case" secondly, he is building a very credible team to lead us out of this crisis. A team that I think would have been very close to one that McCain might have picked. This reinforces my belief that one man cannot know everything. It is best to build a strong team around you and the make a decision based on their recommendations.

CLICK HERE to read the story.

Good luck and Good Currency Trading, oh and Happy Thanksgiving!


Happy Thanksgiving

Good Luck and Good Currency Trading.....


Wednesday, November 26, 2008

Terror attacks in Mumbia, India

Major pedestrian sites were the target of terrorist attacks today in Mumbai. A train station, major hotels and select tourist attractions were the locations. Intial reports have up to 80 people killed so far. The attacks seem to be targeted on British and Americans although many Indians were also attacked.

CLICK HERE for a report from FOX NEWS.

Good Luck and Good Currency Trading.


Word of the Year......"Bailout"...and a little on Taxes

The word of the year as per Merriam-Webster’s online dictionary is "Bailout", as they said it was easily the most looked up word of the year.....

Now I wanted to address a comment recently by The Lonely Trader.
He wrote, "Am I the only person in this country who thinks we need to *raise* taxes, then?"

I think it is a very good point and I wanted to give my thoughts on it. Let me begin by saying that I am not an economist and all my ideas and opinions are usually brought about by breaking things done to its simplest level. With Taxes I like to look at what is going on around me. I work in an environment where most of the people make "decent" money. Most of these people are in the 35-45 year old age group, have a wife and a couple of kids and a house in the suburbs. Most have a landscaper, a cleaning lady and possible a nanny. A landscaper (to cut your grass and trim your bushes) and a person to clean your house once a week might cost $125-175 per week depending on what you want them to do and how big your house is.

These are the people who are directly in the cross hairs of President Obama's tax increase. Now some (ok most) would argue that this is ok, they should be paying more taxes if they can afford all these things, and you might be correct but recently the discussion on the desk has been about cutting back on these things. Maybe the cleaning lady comes once every other week or the personnel trainer is no longer coming to the house. Now these may seem like extravagances to the average person but think of it from the perspective of the worker. They are no longer receiving an income (or at least not as much of one). As with most people when you are fearful of losing an income (due to lose of a job, bonus or increased taxes) you cut back on the "extras". By increasing taxes on people making about $250,000 I believe that this negative "trickle down effect" will occur. Waiting and increasing taxes when stocks have rebounded (they will eventually) and the job market has improved is a wise thing (people will feel the effects less), I think doing that now will only put the economy further in the hole.

Also on taxes, I think it is important to figure out the correct level at which to increase the tax rate. $250,000 seems to be the number the Obama camp is looking at. I personally think it is to low. I really believe that this is the income group that drives the economy. This bracket can have a nice home, a car that they turn over every few years. Hire the Gardener, housekeeper and a Au-pair. They can go out to dinner once or twice a week, basically put the money back to work.

I am not sure of the level that would make the most impact with least residual effect (Obviously Obama thinks 250,000) but I think that is the key to getting the Tax situation right in this country. These are real simplistic thought and would like to hear what others are thinking.

Good Luck and Good Currency Trading.

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Monday, November 24, 2008

Government Bails Out Citibank

The Government bailed out Citibank today bu investing $20 Billion and backing a bunch of their less then stellar assets.

"Under the deal, the government will have the right to slash the huge pay packages and bonuses that Citi's executives had long enjoyed, and cap stockholder dividends at only 1 cent per share."

Although this is important I do not think it will turn around the fortunes of the Bank.

CLICK HERE to read the story from the

Good Luck and Good Currency Trading.


Obama and Gun's and Roses surprising the country

Not that I think it is a bad thing but it looks like President Elect Obama is taking a second look at his proposed tax hikes.

President-elect Barack Obama may consider delaying an election promise - to roll back tax cuts on high-income Americans - as part of his economic recovery strategy, a senior aide and an adviser said on Sunday.

David Axelrod, one of Obama’s closest confidants chosen to be a senior White House adviser, was asked if the tax cut could be ended later than Obama called for during the campaign. “Considerations will be made,” he said on “Fox News Sunday.”

I think it is good to change your mind sometimes and this is one of them. Things have changed (although I never thought it was a good idea to increase taxes on anyone) and the economy needs more money in the hands of people willing to spend it. By letting the Bush tax cuts expire they will be doing just the opposite, I think Obama is smart enough to know when to lose a battle to win a war.

As for Gun's and Roses their much anticipated album (Its been 10 years in the making), CHINESE DEMOCRACY DEMOS 1999-2008 2 CD came out over the weekend and Dr Pepper said in March that if the album came out before year end everyone in America would get a free soda. Here is the LINK to the companies homepage to get your soda.

Good Luck and Good Currency Trading

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Sunday, November 23, 2008

Citibank looking for a Bailout?

It looks like there is serious talk of between U.S. regulators and Citibank to limit the banks potential losses on toxic assets. Isn't this what the TARP was supposed to do from the beginning? And why Citi and not BOA, JPMorgan, MS etc etc etc. To me it has been one bank after another going down. Once Citi is bailed out the markets will go after the next "Victim".

Here is the story from BLOOMBERG

Good Luck and Good Currency Trading.


Obama and his Job Creation (2.5M) Plan.

President Elect Obama came out on his weekly Democratic radio address and gave his plan to save the U.S. Economy. It is an infrastructure plan which includes rebuilding roads and bridges and modernizing schools. He stated that "These aren't just steps to pull ourselves out of this immediate crisis. These are the long-term investments in our economic future that have been ignored for far too long," . That is good as short term fixes (see the rebate checks given out a few mnths ago)only delay the inevitable. We need to get to the problem.

First stabilize Financial institutions. I think we are close on this count....
Second keep people in their homes. The big problem here is even if the mortgage companies stop on the foreclosures many people do not have jobs anymore and cannot pay anything. So that leads me to number three,
Third get people working. By delaying foreclosures and creating a jobs program (needs to be up and running quickly) hopefully we can get this economy moving in a positive direction quickly.

Now for reality. Unemployment is going higher, probably increasing 4.5% over the next 4-6 months. I am not an economist but a realist. I look at store front and empty stores in malls. I see more people sleeping on the streets when I go to work in the morning and I hear of more of my friends and neighbors losing their jobs and not finding new ones.

I am glad to hear Obama stepping up and presenting a plan(and a Treasury Secretary). It is very important for the American people to see that their leader is doing something. Stocks need to stabilize as when they do people feel more comfortable spending money. We will get out of this and I suspect sooner rather then later. American like to spend money and they have short memories. As soon as the Economy looks like it is turning the corner alot of people will pile in.

Good Luck and Good Currency Trading.


Time for a Change.....

It seems the Bull has run into a little trouble.....

Good Luck and Good Currency Trading....


Saturday, November 22, 2008

A New Treausury Secretary Timothy Geithner

It looks like President Elect Barack Obama is set to announce Timothy Geithner as his new Treasury Secretary. This is really no surprise as his name has been thrown about lately. Mr Geithner is currently the President of the Federal Reserve Bank of New York so as such has been deeply involved in dealing with the Financial Crisis. When word of this appointment leaked out on Friday Stocks rallied hard maybe not so much on Mr Geithner himself but rather on any announcement. I think part of the problem here is the lack of leadership during this "lame duck" session. As I have said in the past I understand why. Mr Paulson doesn't want to do anything that the incoming administration will undo come January 20 2009, which could and probably would cost tax payers lots of money. As such he is trying to do little and keep the seas as calm as possible. This is next to impossible in the currenct environment. With Mr Geithner appointed, a transition team can be put in place and we can begin to hear some of his ideas on the direction he plans to take in dealing with the crisis and the $700 billion bailout fund.

I wish him luck, it is certainly not going to be easy.

Good Luck and Good Currency Trading.


Friday, November 21, 2008

Dow Tumbles yet again.

Wow, just when you though it couldn't get any worse......

Today stocks once again came under late selling pressure after talks to save the auto industry went no where. This seems extremely similar to the Lehman situation.

Congress today refused to give away more cash until the car makers came up with a plan to get themselves out of this mess. Clearly this is a two headed problem, one is that the industry has refused to keep up with the times. Smaller more economical cars are needed and the industry have provided few options. Also labor has crippled them. The benefits that these workers receive are far and away better then and other labor union (I am all for getting all you can but this is getting to an all or no thing game here...and no thing is knocking on the door)and it has prevented the companies from getting out from under. But something else I read about today, which I have totally missed is how the credit crunch has effected these companies. These companies are unable to sell their debt on the open market to raise cash. Just as I wrote about small businesses being unable to fund themselves this is exactly what is happening to the auto makers. The Democrat's never even to a vote on the issue.

Democratic leaders scrapped votes on the auto rescue, postponing until next month a politically tricky decision on whether to approve yet another unpopular bailout at a time of economic peril, or risk being blamed for the implosion of an industry that employs millions and has broad reach into all aspects of the U.S. economy.
"Until they show us the plan, we cannot show them the money," Speaker Nancy Pelosi, D-Calif., said at a hastily called news conference in the Capitol.

I can only assume that this is because they knew they did not have enough votes to get it through. Now it will wait till December, but I fear that the public will be less sympathetic to a bailout then, as the economy deteriorates and more people are out of work struggling to provide a decent holiday for their families.

Talk about bad publicity, all three automaker CEO's took separate private flights to Washington at an estimated cost of $20,000 each. Whether they deserve to travel this way or not is up for debate, but it is a public relations nightmare. It was reported that Rahm Emanuel, the new chief of staff for President elect Obama, was seen flying coach recently. Again I certainly feel that he should be in First Class, but here is a guy who understands public perception and is doing his best to put a good face on the new administration.

Ford and GM said they would put a plan together and I expect it will be done quickly.

"Yes, we're kicking the can down the road, because that will give us the opportunity to do something positive," Reid said. "But that will only happen if they get their act together."

The White House on the other hand wants to let the automakers tap the fuel-efficiency loans for their short-term cash needs. Lets just hope this doesn't become a war between the political parties.

And now for the latest rumour.....Citi bank to be broken up and JPMorgan and Goldman taking a piece. WOW! This after Prince Alwaleed bin Talal boosted his stake in the bank. Unfortunatly it did little good.

Good Luck and Good Currency Trading.


Thursday, November 20, 2008

GM,Ford and Chrysler lead Dow lower

Automakers have been at congress the last few days asking for money. I have been someone who has said that the $700 billion bailout was necessary, but I do not like bailing out the automakers UNLESS they are willing to give some concessions. Number one is labour has to meet management somewhere along the line and new management, with some progressive ideas need to be installed. Let remember these problems didn't just come to light now. They have been lurking under the surface for some time, high gas prices and now a total collapse of the economy has put them front and center. New money will just delay the problem, what needs to be done is create more fuel efficient vehicles here IN THE U.S. Labour has to give some concessions on its benefits package and new management has to be installed as the old management has done nothing to change the situation. I know in my job we no longer receive a pension. There was no debate about it it was put on the company website saying...."As of Jan 1 2009 there will no longer be a pension plan in place for employee's". That was it, take it or leave it. I am not happy about it but given the current environment I would prefer to have a company able to function rather then one destined for bankruptcy. I also have a few Friends at brokerage shops who were asked to "donate some of their bonus back to the company to allow the company to grow in the future". They all did! My point is in bad times everyone needs to give up a little short term for longer term gains. I believe it and live it.

As for the economy it looks like it is getting worse....alot worse.

The Fed came out with it's Oct 29-30 minutes, here is a summary.

The worsening financial situation, the slowdown in growth abroad, and incoming economic data led the FOMC members to mark down significantly their outlook for growth.

Inflation was seen decelerating to "levels consistent with price stability" given the drop in energy prices and increased slack in labor and products.

The risks to growth remained weighted substantially to the downside, which explained the magnitude of the October rate cut and the view that "additional policy easing could well be appropriate at future meeting". Another 50bp cut in December maybe?

The FOMC downgraded its October economic projections, Real GDP Q4/Q4 growth is expected in the range of -.2/+1.1% in 2009 compared to 2.0/2.8% in the June FOMC projections.

The Fed is also looking for substantially higher unemployment (down 7 to 8% ) during 2009.

I am convinced that the Fed and Treasury will do everything in their power to get the economy on the upswing as soon as possible. One problem is their "lame duck" period waiting for Obama to take over and Bush to leave. Understandable Paulson doesn't want to do anything that the Obama government will undue in January, waiting is prudent....but just might be costly during this terrible economic time.

Good Luck and Good Currency Trading


Wednesday, November 19, 2008

Paulson, Congress and the Bailout

Paulson and Bernanke were on Capital Hill and were grilled pretty hard by the members of Congress. Henry Paulson fought back pretty well stressing that the governments financial rescue package was not a,

``panacea'' for economic difficulties, clashing with lawmakers who want the funds to help beleaguered homeowners.

``The rescue package was not intended to be an economic stimulus or an economic recovery package,'' Paulson said in testimony to the House Financial Services Committee in Washington. The Troubled Asset Relief Program was designed to stabilize financial markets and the flow of credit and ``is not a panacea for all our economic difficulties.''

Barney Frank was quite aggressive cutting off Mr Paulson and saying that ``the bill couldn't have been clearer'' in also being aimed at reducing foreclosures. I could only thinkthat Paulson cannot wait to see Washington from his rear view mirror!

Paulson countered by telling Congress that he has no intention of using the second half of the $700 Billion program but rather leave it for the Obama administration to deciede what to do with it.

Federal Reserve Chairman Ben S. Bernanke told lawmakers at the hearing that using the TARP for buying stakes in banks is ``critical for restoring confidence and promoting the return of credit markets to more normal functioning.'' He warned that lending in the U.S. is ``still far from normal.''

CLICK HERE to read an excellent write up from Bloomberg news.

Good Luck and Good Currency Trading


Tuesday, November 18, 2008

Citibank to cut 53,000 jobs

When I was young man coming out of college, I took a job with a European Bank. Over the years I have switched around a few times, but more out of necessity then trying to get a few extra dollars. For many of those years I always wanted to work for a large American bank. Bank of America always came to mind when these thoughts came to mind. My thought was always that when my trading career came to an end that it would be easier for me to transition into another part of the bank. The European banks that I have been exposed to have not had the "foot print" in the U.S. to provide such a transition. Well years later I am still at a European bank and luckily still a vital part of the team (famous last words). Looking at the fate of 53,000 workers at Citibank (onto of the 23,000 previously announced) it seems that if I had made it to my "dream job" that life might not have been quite so good. Now of course you never know what would have happened but I guess for now I am happy with the way I have played the cards life has dealt me.

Now of course Citibank is not alone (my bank has been consistently letting people go weekly for the past few months),

Banks and brokerages worldwide have announced more than 200,000 job cuts since the subprime mortgage market's collapse last year sparked a credit crisis. Goldman Sachs Group Inc., which converted last month from the biggest U.S. securities firm into a commercial bank, began earlier this month telling about 3,200 employees, or 10 percent of its workforce, they were out of a job, according to a person familiar with the decision.

Citibank's job cuts are bigger than any other financial institution, according to data compiled by Bloomberg. UBS, Merrill and Wachovia Corp. are among companies that have disclosed more than 5,000 job reductions.

this after Jamie Dimon said last week that the U.S. recession could be worse then the credit crisis that brought markets to a standstill earlier this year.....Wonderful!

I guess the moral of the story is to be grateful for what you have as things could be worse......just ask MARK CUBAN, as prison time could be in his future.

Good Luck and Good Currency Trading.

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Monday, November 17, 2008

The Dollar

There has been alot of discussion in my office of late as to which way the Dollar is headed. I can see why there is such confusion, as it was in a big tail spin for years as the Bush administration silently encouraged the weak dollar. Now with the world in financial turmoil it seems that everyone is running to a "Safe Haven", even if the safe haven is being blamed for the problem. My thoughts are that the dollar is going to benefit over the medium term(3-6mths). Right now there is little conviction as to when the bottom will be in and a leveling out process will begin. I am looking for the 1.2700 level to get short Euro's. I think the near term trend is lower and a recession has officially hit Europe. I see them as being much more bureaucratic then the U.S. and as such it will take longer to get their house in order. Europe traditionally has had high rates to deflect inflation and I think that this fear of inflation will prevent rates from coming down quick enough and stay down long enough to get them out of this mess quickly. Remember over the summer as the crisis was getting its legs under it the ECB hiked rates and increased both capital and margin requirements. The 2 year bund remains 100 bp below the ECB target rate which suggests to me that alot more cutting should be done. This cutting I think happens later then sooner.

In the longer term 6-18months I think that the Dollar will suffer. A weak dollar makes our goods more competitive on the open market. Although it is also more inflationary, I think it is a "small" price to pay to help get our economy going. I also think that we have a huge amount of new debt to be issued. A weaker dollar helps as we get to repay that debt with less dollars. I think the incoming administration will talk "Strong Dollar" as most have in the past, but will be quite happy to see it weaken in the coming years.

I am looking for the Euro to test sub 1.2000 and then rebound sometime in the middle of next year to all time new highs. Then again I am sure I will change my mind about 200 times before the end of the first quarter!

Do look for Latin American interest rates to move lower in a big way. Led by Mexico and Chile. Brazil will lag for off-shore market participants as the on/off shore market will remain bid until the first quarter of next year.

Good Luck and Good Currency Trading.

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Sunday, November 16, 2008


The G20 got together this weekend to decide that they will "collaborate on plans to revive their economies and fend off future financial meltdowns."

Wonderful not I can sleep well at night. Another good use of taxpeyer money hosting this meeting !

CLICK HERE to read a Bloomberg story on the meeting.

Good Luck and Good currency Trading.

A post on the dollar to follow.


Saturday, November 15, 2008

G20 meeting this weekend

World leaders are gathering in Washington this weekend to try to come to an agreement on a more open global financial market. Don't hold your breath that this "plan" will have any "teeth" to it.

In the largest gathering of its kind here in nearly a decade, President George W. Bush and some two dozen foreign leaders were to meet Saturday behind closed doors as they prepared to adopt an action plan for more openness in financial markets and an early warning system for problems like the speculation frenzy that fed the U.S. housing bubble.

The action plan would include measures aimed at making the global financial system more accountable to investors and more transparent to regulators, diplomatic officials said.

After a financial collapse, the magnitude that we are currently in, over reaching for more regulations are normal and in some cases prudent. Lets hope that the new administration will not "over regulate" as I feel it will destroy the entrepreneurial nature of the young. Clearly someone should have been watching out for us, and no one was. It starts with the President, but Barney Frank and Chris Dodd are not getting a free pass.

Lets hope that President-elect Obama can put a team in place that provides just enough regulation to prevent a repeat of this ever again.

A bigger problem facing the current and future administration is the "bread line" forming outside of the Treasury.

It is reported that 110 banks have filed for $170 billion dollars from the Bailout plan. In addition the Auto makers are looking for $25-50billion. There was a rumour running around the markets yesterday that Hartford Financial applied to become a Saving and Loan so that they could qualify for some of the Bailout package. This rumour sent stocks from up 50 to down 350. Who can blame them, where does it stop?

I know we are in very very very difficult time, but any aid should have to be met with change. The auto industry has been a mess for many years. If they want aid INSIST that management be changed. Clearly the plan drawn up by thee leaders has not worked for the past 20-30 years, a new direction is needed. That Labor gives concessions on benifit packages. These packages have been killing the industry for years and labor refuses to renegoitate. Without this no money should go to the automakers. NONE!

I will have a post on the dollar tomorrow.

Good Luck and Good Curreny Trading,


Friday, November 14, 2008

China Rumours

I am hearing RUMOURS that China is thinking about diversifying their reserves and as such is looking into gold.

Again it is a RUMOUR only.

Good Luck and Good Currency Trading.


Thursday, November 13, 2008

Markets take a tumble.

Global markets once again took a tumble as stock market's around the world retreated on fears of a slowing economy.

I am not sure what they are fearing as clearly global economies are slowing, and no thing is going to change that near term.

Henry Paulson gave quite a detailed speech concerning the $700 mio usd bailout and the market didn't seem to like it very much.

Offshore Usd/Brl is bid way above the implied market as fears of further meltdowns are being built into the market.

To read the entire story CLICK HERE

Good Luck and Good Currency Trading.


Wednesday, November 12, 2008

A Few Random Thoughts

The more I think about what is going on the more I think we will come out of this sooner rather then later. Remember timing is all relative but I think that we will see a stabilized stock market by the first quarter of next year and that will be the beginning of a turn around.

The economy is clearly weak and that is what is driving stocks on an erratic pace downwards. No longer is the market concerned about credit. There is a bit of lending going on in the interbank market. Libor rates have more normalized and Governments worldwide are all ensuring that everyone knows that they are aware of the problem and taking steps to correct it. Just today the U.S. government announced an effort to directly help home owners. The new efforts involve the speeding up the process by which homeowners can renegotiate there loans. This is a big step and one which is long over due.

With this slow economy will come lower rates. We have seen the beginning of this and believe me it is only the beginning. Worldwide rates are coming lower and as such I think being long high yielding currencies could be profitable. I am cautiously shorting dollars against Argentina (very cautiously here) Brazil, Mexico and Chile. I think rates will eventually come lower in all of these countries.

Good Luck and Good Currency Trading.

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Tuesday, November 11, 2008

China to the Rescue

China anoounced yesterday a $586 billion stimulus boost to their economy. This plan to sustain its economy spurred gains in stocks, metals and oil.

The Chinese government pledged ``fast and heavy-handed investment'' in housing and infrastructure through 2010 and a ``relatively loose'' monetary policy, according to a State Council statement yesterday.

``This plan is, by all measures, too large to be ignored,'' said Kevin Lai, an economist at Daiwa Institute of Research in Hong Kong. China may ``help the rest of the world by creating more demand for foreign goods and services.''

The markets have totally agreed and have not ignored at all. The biggest benificiary of the plan so far has been Latin American currencies, led by Brazil and Chile. The Chilean Peso rose 1.3% to 629.05 as a great majority of the Chinese plan was to spend on infastructure. As China accounted for 27% of the worlds growth last year this is spending that can have far reaching benifits.

``Since a good part of the stimulus plan from China points to infrastructure projects, we'll likely see boosted demand for copper,'' said Juan Pablo Castro, an economist at Banco Santander SA in Santiago. ``That's great news for Chile.''

In Brazil it is a similar story as Bill Rudman, who helps run a $3 billion emerging equity fund at WestLB Mellon Asset in London said.

``What's good for China is good for Brazil,'' .

The Chinese package is equivilent to 1/5 of the countries GDP last year and is expected to be used up by the end of 2010.

In reading this and seeing how other governments are responding to this crisis it strikes me that all of this aggressive action should shorted the period of recession that we sustain. Or at least I hope so.

Good Luck and Good Currency Trading.


Monday, November 10, 2008


They Federal Government has announced a new infusion of cash into AIG. Previously they had placed 80+ billion dollars in the form of loans, this time around they have injected $40 billion directly into the company by purchasing equity. This equity was purchased as part of to $700 billion Bailout which was passed earlier this year. This move highlights that the we are not out of trouble. The markets are certainly more stable but AIG is a crucial part of the puzzle which needs to be stable before we are out of the woods. At first it was deemed necessary to provide a "bridge loan" to AIG to give them time to sell off parts of the company to raise capital. Months later nothing is sold off and the government is becoming a partial owner.

As part of the new arrangement, the Federal Reserve is reducing a $85 billion loan it had made available to AIG to $60 billion. The Fed also is replacing a separate $37.8 billion loan to the insurance company with a $52 billion aid package.
The actions were needed to "keep the company strong and facilitate its ability to complete its restructuring process successfully," the government said.
It marked the first time money from the $700 billion bailout package Congress enacted last month has gone to any company other than a bank.

Emerging Markets are opening stronger this morning and I look for this to continue as we have a holiday here in the U.S. today. The Euro is slightly better bid and I am also looking for a move back to 1.3100-3200 by the end of the week.

Good Luck and Good Currency Trading.

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Sunday, November 09, 2008

Brazil demands reform

Brazil is on the tapes demanding "sweeping global financial overhaul" as the financial meltdown has taken its toll on Emerging countries. Although I agree with this I think it is always important to get your own house in order before you begin throwing stones. As I have written here there are many Brazilian corportes that took outrite risk, speculating on a stronger currency. This risk did not pay off and there has been a big spillover effect to the market. "Sweeping" changes should start at home and move on from there.

To read the story on



Saturday, November 08, 2008

Risk reduction continues

In yesterday's WSJ was an article about Royal Bank of Scotland and how they are looking to reduce risk. As the article says there are no "scared cows" any business is a potential victim as the banks looks for ways to reduce its risk and balance sheet "as part of a turnaround strategy".

RBS has hired a consultant to advise on each business in the group.

"Even if you have an average return on equity, if it is low risk and good prospects, we might keep it" said Stephen Hester the banks new CEO. Conversely high return, high risk products might not be kept.

This follows a story I heard earlier this week that CSFB had eliminated Latin American Trading from its strategy also.

It seems to me that Banks are looking at core businesses and how to return to low risk and steady returns. In the case of CSFB, do they have a strategic advantage in the Latin American region? If the rumour that I heard is correct I would assume not, and rather then put capital at risk there it is better(safer) to put the money at risk in a business where they would have a strategic advantage. Lets remember all (almost all at least) major banks are now partially government owned, as such risk was bound to be down. If you do not have a strategic advantage in a business line you need to invest more capital and leverage to get over sized returns. If you have legitimate business in the region then it makes sense to put resources in that area. "Prop Trading" then becomes a small part of the business and handling customer flows (legit corps not hedge funds)is the main focus. In this case fee driven income is the main driver of the business.

This goes back to my post from NOV 3 where I said that I didn't think now that banks were partially government owned that they would be allowed to take "uncalculated risks". Banks are in retrenchment mode, plain vanilla is back in vogue and the days of high leverage are at least temporarily behind us. That is one reason I think Goldman Sach's stock has been hit hard this week. Yes, I read the story about being caught in the stock sell off, but I think that the market is assessing there ability to take leveraged bets in the future. Right now the prospects for that are lower then in the past and as such returns should fall. This is my opinion here but I think I am on the right track.

Good Luck and Good Currency Trading


Friday, November 07, 2008

Stocks lower AGAIN...

Today was a day where I could not have been more wrong. On our daily morning meeting I "predicted" that Emerging Markets would "remain calm" and I saw a move toward a stronger currency as the day progressed. WOW was I wrong. Stocks traded heavy all day, ending down about 440 pts. Brazil, traded to just below limit up. It was saved only by the market closing. Mexico also was under pressure the entire day. The guys in my office were blaming Obama (I am not sure what he has done wrong just yet)but I think it has alot more to do with the mass interest rate cuts that occurred yesterday morning. The ECB and the Swiss National Bank cut 50bp. Czk cut 75bp, but the big surprise was the U.K. cutting a shocking 150bp. This may have been warranted, but I think it sent a bit of panic through the market as it highlights just how bad things are out there. I think this sends a signal to the market that Inflation is on the back burner and that getting growth started again is the main objective. I still here other EM traders i my room talk about inflation and how the Latin American countries need to raise rates (Mexico and Brazil). I think they are all smoking crack. Rates may not go down but there is no way they are going up (famous last words). I am staying with my receiving position and will look for a new opportunity to sell dollars.

Good Luck and Good Currency Trading.


Thursday, November 06, 2008

Now What?

So we elected a new President yesterday......Now What ?

First, I think this is a GREAT country to live in. Forget about Barack Obama being the first black President of the United States, that is a real step forward for our country. To me the biggest and greatest thing about America is that after an election we move forward. I think it is great and the number one reason that we are leaders of the free world.

OK, now on to the markets.

Barack Obama is going to have a big advantage going into his first term as President,

1. The country is in such terrible shape economically and "emotionally" that I find it hard to believe that he cannot get a big boost in consumer confidence in the first few months of his administration.

2.Also he should be able to get through a few important initiatives in the first 100 days as he will have full (almost) support of the House and Senate.

His job will not be easy as this economy is in terrible shape. The ADP employment report was -147k today pointing toward a another very poor employment number on Friday. The economy will not change overnight but I think that confidence numbers should move higher in the coming months. Obama won decisively. The American people got the guy they wanted and as such at least initially should be happy. I can see Stocks doing better in the months to come (yes I did see the -500 points yesterday) and I maintain that stock prices are a huge factor in how much money people spend. If your 401k is growing you are happier spending money then if it is shrinking.

Longer term I think there are still some real problems ahead. The budget deficit should grow. Tax revenues will be down, even with increased taxes on the wealthy (I happen to feel that taxes would have been raised no matter who was elected...remember George H.W.Bush) as with less people working and spending money, less taxes will be collected. Remember we still have the $700 billion bailout package to pay for and the Iraq war is still going on. This large fiscal deficit should add to the structural negatives for the dollar which will require further capital inflows from overseas investors. As such although I think near term the dollar might continue to see support, over the medium to longer term I think we are in for another round of dollar bashing.

As I have said before I think that the office of the President forces the person in that position to move to the center. The enormous pressure being the most powerful man in the world requires it to happen. I certainly feel that Barack Obama's policy's so far have been very left leaning, but I think that once you are representing the entire United States of America it becomes a different story. He cannot lead from that far left. I think one of his biggest challanges will be "controlling" (for lack of a better word) Nancy Pelosi and Harry Reid(not to mention Howard Dean). They are way to the left and will try to pass legislation to promote that agenda.

Just my thoughts.....would like to hear yours.

Good Luck and Good Currency Trading.

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Wednesday, November 05, 2008

Barack Obama

We have a new President and the choice of Barack Obama is really no surprise.

I will followup with a market post later.


Tuesday, November 04, 2008

Election Day....

Don't forget to vote !

Good Luck and Good Currency Trading


Emerging Markets

I think there is an opportunity to enter some receiving positions in Latin America.

Mexico. Rates lower led by the short end. I sold the forwards out to 12mths today as I am looking for the curve to flatten at lower levels. I also sold a few dollars as I think the currency has room to appreciate to 12.5000

Brazil. Rates should move lower across the curve and the currency should move lower. I am looking for a sub 2.0000 print by the end of the week. Alot of negative flows in this currency pair is out of the way and I think contra move is in the works. Remember the CB last week did not raise rates as many had expected, as such I think the curve is way to steep at current levels.

Euro. I think the Euro will probably move lower in the next week or so although I have little conviction and will not take a sizable position here.

Good Luck and Good Currecny Trading.


Monday, November 03, 2008

Some News to Start your Week.

Robert J Aumann the Israeli economist who won the 2005 Nobel Prize in economics has come out saying that the Bailout package designed by Paulson and Bernanke "Weren't Smart" and that ultimately more banks and financial institutions will fail because of it.

``The intervention by the regulators to save the U.S. economy will lead to further bankruptcies of banks and insurance companies,'' Aumann said at a rabbinical conference in Jerusalem yesterday. ``They are only encouraging institutions to take more uncalculated risks.''

I am not sure I agree with this line of thinking, first, with most major banks now being partially owned by the government there is little chance that any board will be allowed to take "uncalculated risks". Quite the opposite I see financial institutions pulling in the reigns big time. Right now corporate sales people and not Hedge Fund sales people are in heavy demand in on the street. On the trading side there are few people in demand currently, but I expect the "plain vanilla" trader to be at least more in vogue in the month to come. The days of the MIT graduate coming in and writing a few spreadsheets and then being allocated capital without everyone having a complete understanding of what is going on is at least temporarily behind us.

CLICK HERE to read the story. Please let me know what you think.

Good Luck and Good Currency Trading.


Saturday, November 01, 2008

Efforts to Save Mortgages

Yesterday it was announced that JP Morgan Chase were putting together a program to modify $70 billion in mortgages for borrowers who are behind on their payments. The plan would cover approximately 400,000 mortgages most that were aquired when Chase and WaMu mergered. It seems some of the mortgages written by WaMu had a structure that had the principal growing month after month. This program is on the back of a similar program that Bank of America is doing. Also the FDIC is working with home owners who had loans with IndyMac. These programs all make sense to me. Most of these people want to pay their mortgage, they just can't. They probably borrowed to much and the bank lent them to much and now are in a situation where they cannot afford the payment. Option 1 the bank forecloses on the owner, kicks him out and takes over the home. The bank then tries to sell the house on the open market. Option 2 the bank calls up the owner and comes up with a number the owner can afford to pay and allows them to stay in their home. A win win situation. The bank has a paying assest and the owner stays in their home and continues on the path of the "American Dream".

I know some people would say that people who can still afford to pay their current mortgage are not getting a break, that in this case it paid to borrow a little more (alot more in some cases) then you can afford as the banks are now renegotiating their loans. OK, true, but what is the alternative? More people having their homes taken away, an economy slowed to a halt for a longer period of time. Stocks getting hit again and again. That is the reality.

Michelle Cabrera was on The Big Idea last night. Donny Deutsche was questioning her on this plan saying that it doesn't hold people accountable for their actions (I paraphrasing here). You took out the loan and now you owe the money, pay up, if you can't you suffer the consequences. Ms Cabrera countered that this was a "victimless crime" similar to prostitution. If two consenting parties are will to renegotiate the terms of their agreement for the betterment of all go do it. In this case I agree. Sure I would like to renegotiate the terms of my loan too, but I can't (I tried....the bank said no thanks). But I encourage all Americans to call up their mortgage holder and sit down and discuss their situation. It cannot hurt, all the bank can do is say "no thanks".

Ms Cabrera also talked about small businesses and how they to should go to their landlords, suppliers and shippers and have similar discussions. Remember it doesn't cost anything to ask and these are mutually beneficial relationships, if you cannot afford to stay in business then your landlord, supplier and shipper all suffer too.

This is essentially what "Wall Street" did, they went to the Government and said "We need help" some got it (Bear Stearns), others didn't (Lehman) but it certainly didn't hurt to ask.

Good Luck and Good Currency Trading.