FX Trading Ideas.....and other Ramblings

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2009-01-12T06:47:00.002-05:00

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Good Luck and Good Currency Trading

Employment Numbers as expected....POOR

2009-01-10T07:29:00.004-05:00

The Employment report for December was poor once again. According to the Labor Department 524,000 people lost their jobs last month. That brings the total number of jobs lost in 2008 to 2,589,000. WOW. I consider myself among the lucky ones who still has a seat to go to on a daily basis.

“The labor market has deteriorated sharply, and it’s telling us the economy is exceptionally weak right now,’ said Jim O’Sullivan, senior economist at UBS Securities LLC in Stamford, Connecticut. “The first quarter will be pretty rough again, with big declines in payrolls and higher unemployment.”

Job losses were also widespread, manufacturing, service sector, builders, retailers etc etc all reported job losses.

President-Elect Obama has a number of inititives in the works that I sure hope get this economy moving. Time will tell.

Market Reaction

The Dollar strengthened arcoss the board led by the Euro which traded down to 1.3480(ish). In Latin America the dollar trader stronger most of the day against Mexico and Brazil but on the close reversed course and ended up at its weakest level of the day. I think this has more to do with Latin America then the Dollar. Latin America is setting up for a big lower interest rate move. Chile cut 100bp on Thursday and signaled they had more to come. Mexican Finance Minister said that they were "Very worried about growth". The market took this as a sign of interest rate cuts at the January 16 meeting. Brazilian rates also were off about 20bp as expectations for 75-100bp cut in rates at their Jan 20 meeting are now fully priced in.

I think that Latin American rates might be slightly over done at these levels but will certainly be lower in 3-6 months.

Good Luck and Good Currency Trading.

ADP Employment Index Collapses

2009-01-07T09:08:00.003-05:00

The ADP Employment number came out this morning and was much worse then expected. -693k after an expected -495k. The revision from last month was -476k after an initial report of -250k. This has led to an worse number expected when U.S. Non Farm Payrolls are reported on Friday. The previous estimate was for -500k but now I am hearing expectations of between 750-1000k. I think that horrible numbers will be built in and a rally may ensue after the reported number.

Good Luck and Good Currency Trading

Chilean Stimulus Package

2009-01-07T00:30:00.000-05:00

Emerging Markets currencies and rates continued to rally today as risk seems to be back in vogue. Chile is the latest country to announce a substantial stimulus package. The plan is to sell bonds and tap savings in an effort to spur a slowing economy. The currency rallied all day closing at 624 and blue chip stocks rallied 2.52% in response to the move.

“They built up their war chest and now they’re using it,” Joydeep Mukherji, Standard & Poor’s sovereign risk analyst for Chile, said by telephone from New York today. Chile has “the highest credit rating in Latin American precisely because of these kinds of policies.”
The Finance ministry believes this move will enable the country to create 100,000 new jobs and allow the economy to grow by 2-3 percent. With the size of this package the Chilean government is certainly not fooling around. It looks as if the good feeling is spilling over to other Latin American economies as Brazil, Mexico and Colombia have all responded positively as well.

Currently Latin American yield curves are all inverted as the market continues to look for rate cuts sooner then later. Chile has a rate announcement later this week and the market is now looking for 75-100bp up from 50bp earlier. I think lower rates in this region with a steepening curve in the States will force interest rate differentials to converge. Not that the Fed will raise rates but as people get fed up with earning 0% with Treasury Bills I can see them looking for alternative investments.

The Euro which opened considerable lower, reversed course and is closing at the highs of the day. I am looking for this currency to make a move higher.

Good Luck and Good Currency Trading

Madoff and the Markets

2009-01-06T00:30:00.000-05:00

Emerging Markets started out the year on a very positive note. The Bovespa was up 3.17% (now 10.57% for the year) while the currency rallied from 2.3500 to a close of 2.2425 (BMF). The Mexican Peso had a very similar move starting the day at 13.7100 and trading down to a close of 13.4750. Now the question is why? Is this a “head fake” or the beginning of a real move. For now I will not get to carried away and will see how the week plays out. We have the Employment number on Friday and I see no way that number looks good. Then again the entire market could be feeling the same way and that could negate the negative effect. Any Thoughts?

Reading a fee reports this morning highlights how decidedly bearish the overall market is. Most analysts’ think we are still in the beginning stages of this slowdown and expect further deterioration in the months to come. I think this is probably correct and as such think strongly that Interest Rates in the Latin American region are headed lower. Chile has a rate announcement later this week and I am looking for a 50bp cut. Look for Colombia to follow closely behind. Lower rates in the region, slower growth and continued risk aversion lead me to think that the currencies could be under significant pressure.

I am starting to look at a basket trade. Long Argentina, Chile and Colombia against short Mexico and Brazil. I am not going to put it on yet but will watch over the next few weeks to see how thing develop.

On to one of my recent most interesting stories Bernard Madoff. Amazingly regulators looked into Madoff’s operations at least 8 times over the last 16 years and no thing turned up to cause concern. He seems to have been able to convince regulators that he was not running an investment advisory business. He claimed that he received a commission rather then a percentage of the profits like typical Hedge Funds do. Still it is amazing that he was investigated so many times and no thing came out of it. Someone was not doing their job.

Good Luck and Good Currency Trading.

Predictions for 2009

2009-01-05T00:30:00.001-05:00

As a trader it has always annoyed me when reading an analyst declare "I told you so" when hitting an objective on a trade. It is only a real objective if the analyst employs real risk management in applying the trade. What I mean is this, I say the Euro will go to 2.00 against the dollar by Dec 2009. It first trades down to parity, trades at this level for 11 months then spikes on Dec 20 up to 2.00 and the analyst says "BINGO". Any trader would probably have been stopped out OR cut the position due to lack of movement (11 months trading at parity) and never held the position for the 11 ensuing months. Remember Traders are paid to make money and watching a losing trade do no thing for 11 months would make for a quick exit from most trading desks. With this being said I will make a few predictions for the coming year. They mean very little and I will probably have few of these trades on as I trade much shorter term and alot (I repeat ALOT) should happen between now and Dec 2009.

The Dollar.

The current environment is one, which, most countries will attempt to devalue their currencies. A weaker currency will help with trade and help companies who have income generated from off shore entities. The U.S. should be no different. The question is who will be able to devalue in a quicker more efficient manor. I think the Bush administration has pursued a policy of a weak dollar (although they say the want a strong dollar) for years now and I believe that President Obama will be the same. That being said I also feel that the U.S. will come out of this global recession quicker then anyone else, followed by recoveries worldwide. Therefore I see a stronger dollar near term (1-3 months) as the turmoil continues followed by a period of dollar weakness 3-9 months. I see this playing out against the other major economies, Europe the UK and Swiss. I do not see the Dollar making new lows but we should finish 2009 weaker then we started.

Against Emerging Market currencies I see a similar situation playing out. The Dollar trading stronger near term as market participants continue to exit risky currency plays and looking for a safe haven for their money with global turmoil (Israeli/Hamas) but reversing in the 3-9 month area as traders look to yield to make money. Remember U.S. rates are very low (.25%) and the Fed has said that they will keep them their for the foreseeable future. If markets go quiet like I think they will traders will run for yield as a way of producing profits.

U.S. Rates

As the Fed has said, rates will stay low probably throughout at least the first three quarters of 2009. I do however see the yield curve steepening out as markets quiet down and the world begins to have more confidence in the global banking system. I think alot of the reason 3mth treasury bills are near 0% is the fear of losing principle. Right now you can earn 3% in an HSBC Direct account which is guaranteed by the government (up to $250,000) so eventually people will begin to shift into a better yielding alternative.

Global Rates

Interest Rates globally have to come down and in a big way. It seems to me that everyone is moving to slow currently and this will catch up to them. How far everyone moves I am not sure but the general direction is certainly lower.

Stocks

U.S. stocks should end the year higher then they began. I am looking for a level of 11,500 by year end. Why, well it is basically a guess but I think that stocks should go bid before the rest of the economy shows signs of rebounding. The U.S. consumer is a funny bunch, they forget very easily. Once the turn is in they will invest, maybe not to the extent of previous years but they will certainly invest. I do however think we move lower first and I am also looking for a very up and down first 1-4 months.

Random Stuff

Baseball Attendance

I think that Baseball attendance will be poor this year. Huge salaries being paid to athletes while a large portion of America is unemployed and having a big problem paying their bills. I am certainly not against a player getting paid all he can, but I think personal finances will have Americans watching more games from home this year.

Bernard Madoff

I really don't care what happens to this guy as long as he is locked up. He destroyed many people and numerous charities. I have read all the stuff about greed (on the side of the investor) being the cause of this and I don't fully buy it. He lied about his fund (could he have done this alone!?) and took money up to the end. I am sure most of the victims of this fraud were unaware that they were in a Madoff fund. Blame the right people here, not the one looking for an honest return but the guy stealing their money.

Sarah Palin

I think she will fade away and rarely be heard from again (Sorry Tina Fey).

Remember these predictions mean little to anyone including me.

Good Luck and Good currecny Trading.

Real Estate and IndyMac

2009-01-04T08:04:00.004-05:00

There were a few good articles in yesterday's WSJ, none described why we are in this Credit Crisis more then Would you pay $103,000 for this Arizona Fixer-Upper? (this is the actual house)The answer in case you were wondering is a definite no!

The story of this Foreclosure is that of Ms Marvene Halterman. This is a good woman from all indications who was given poor advise which led to a major problem. Ms Halterman has not worked in years and received income from the government in the form a disability pay, welfare and other forms of Government assistance. In 2006 a telemarketer called (Integrity)and the cash strapped women was provided with a credit line from another lender. This in addition to the $36,000 that was already owed on a home equity loan. Ms Halterman says she used the money to pay off her pickup, in addition to other things, but within months she was again in financial trouble. She went back to integrity and this time was provided with a 30 year adjustable rate mortgage for $105,000. The rates 9.25% for the first year with a lifetime cap of 15.25%. Of course this is not just a once off occurrence but rather something which occurred everyday across this country. In Avondale, where Ms Halterman lived from 2000-2005 the number of residence doubled in size to 70,000. Today one in nine Avondale homes are in foreclosure.

Now I do not know Ms Halterman, but I think that lending anyone size able money twice (on the same piece of property)within a year is crazy. Place on top of that the fact that Ms Halterman was on public assistance and it throws the entire equation out of balance.

Does Ms Halterman have some responsibility, of course, but a great responsibility has to rest with the appraiser and lender. A lender has the responsibility to determine the "willingness and ability to pay". People may have the "willingness" but not the ability due to the inability to manage their money effectively. Is this, or should I say was this taken into account, I do not think so. But moving forward I certainly hope it is. I guess this is a little like closing the barn door after the horse has left but there is little else that can be done.

Is the bottom near?

It seems a group of investors led by George Soros, John Paulson, Christopher Flowers and Micheal Dell have gotten together and purchased IndyMac bank (of course with Government assistance). Could this be a sign that the bottom is near? My 101 year old Grandmother has been advising me to "Buy Real Estate". She remembers many people who did just that during the Depression and again after World War 2 who became quite rich doing just that. I guess time will tell this time around, but right now I am not exactly flush with cash......maybe Intergity Mortgage will lend me some cash so I can invest?

Check back tomorrow for my 2009 Predictions.

Good Luck and Good Currency Trading.

GMAC and Chrysler

2009-01-02T10:05:00.003-05:00

GMAC will be delivering 5 million preferred shares to the government in return for the $5 billion capital injection that they received. GMAC, the financial arm of the automaker also disclosed that the government exercised a warrant to purchase 250,000 additional preferred shares. GMAC also said that if the Treasury doesn’t receive interest on its shares for six straight quarters or more then six nonconsecutive quarters, it will receive two seats on an expanded management board. These board members would only serve until all interest has been paid in full.

Chrysler on the other hand continues to wait for a rescue loan. It is still unclear as to why GM has received their money while Chrysler has not but the Treasury has said that they are “working expeditiously with Chrysler to finalize the transaction. We remain committed to closing it on a timeline that will meet near term funding needs”.

Well lets hope so.

Good Luck and Good Currency Trading.

Happy New Year

2009-01-01T08:55:00.002-05:00

Good Luck and Good Currency Trading

GMAC, putting their money where there mouth is.

2008-12-31T08:19:00.004-05:00

General Motors is in the process of putting their newly found money to use. Im a news conference yesterday they announced new financing to be offered by their dealers. GM said it would offer 0% financing on five 2008 models and 0.9% to 5.9% loans on dozens of other 2008 and 2009 models in a year-end sales push backed by GMAC. I think this is what the government want's to happen with the money being pumped into financial institutions. Get the funds to the people as soon as possible.

CLICK HERE

GMAC Receiving TARP Money

2008-12-30T09:50:00.005-05:00

GMAC is going to be receiving about $6 billion to help stabilize the company. The Treasury has kept the funds flowing and it does not look to be stopping anytime soon. They announced that "The new program didn't have a specific dollar limit". The money indirectly benifits Cerberus, who is a 51% owner of GMAC. This brings to a total of almost $350 billion that the Treasury has dispursed from the original $700 billion which was approved a few months ago.

CLICK HERE to read the story in the Wall Street Journal.

Good Luck and Good Currency Trading

Wall Street in Review....

2008-12-29T07:32:00.006-05:00

2008 will be remembered as the year that brought Investment banks to their knees. First Bear Stearns, then Lehman.....followed by Merrill, Morgan Stanley and Goldman. Each had to come to terms with the fact that Investment Banking as we know it is gone.

In today's WSJ is an excellent article on what went on over the Sept 20, 2008 weekend. It is a good and interesting read.

CLICK HERE to read the story.

Good Luck and Good Currency Trading.

Retail Sales Slump

2008-12-26T09:01:00.005-05:00

Even after record discounting, retailers are beginning to see that sales are going to be considerably below expectations. Sales of luxury items are especially effected falling 35% from a year ago.

My fear is that this is only the beginning. Come January with the credit card bills coming in I can see even more severe cutting back on spending. In today's WSJ there is an article on the effects the economy is having on small businesses. They are the hardest hit as lines of credit are cut back (even cancelled all together) and many of the customers are delinquent on payments.

CLICK HERE to read the story.

Good Luck and Good Currency Trading.

Toyota projects a loss in 2009

2008-12-23T16:08:00.005-05:00

U.S. car makers are not the only ones facing financial problems. Toyota announced today that they are looking at projected losses in 2009. This would make the first time a loss occurred since 1938. This again signals to me that the Automakers problems are not JUST poor quality and unwanted designs. The credit crisis is a huge factor and one that a loan will not help.

CLICK HERE to read the story from the WSJ.

Good Luck and Good Currency Trading.

Brazil Central Bank Lowers Inflation and Economic Forcasts

2008-12-22T19:18:00.002-05:00

The Brazilian Central Bank lowered its inflation forecasts as well as its economic outlook in a preclude to lowering interest rates in the near future. Although there has been extensive talk that Brazil was immune to the fall out from the credit crisis, in reality no one is. Rates in Brazil have been coming off as the currency has been getting beat up. This trend looks set to continue into the new year. I am looking for similar stories in Chile, Colombia and Argentina. Remember the Fed came out last week and said that they were going to keep interest rates at current levels (.25%) for an extended period of time. With the new year just weeks away Trader will be looking for a way to make money. Although I think that financial institutions will want only limited risk, some risk will need to be put on the table. Yield Monkey's get ready! I expect a gradual move into higher yielding currencies as economic activity grinds to a halt, volatility decreases and traders look for a way to make money. In these times yield is the way to go.

Good Luck and Good Currency Trading.

Auto Makers Bailout Approved

2008-12-20T07:23:00.004-05:00

President Bush announced a plan to pump $13.4 billion into the auto makers by mid January. This plan gives the car companies a few months to get their house in order but certainly does not correct all of their problems. The money is going to GM and Chrysler and it gives them until March 31 to produce a plan for long-term profitability, including concessions from unions, creditors, suppliers and dealers.
More money can be made available if Congress releases the other $350 billion of the treasury departments financial rescue plan.

This plan to bail out the automakers sets "target" rather then firm requirements about what needs to be done.

President Bush was afraid that letting the auto makers fail "could send our suffering economy into a deeper and longer recession." He also said he didn't want to "leave the next president to confront the demise of a major American industry in his first days of office." Both of these gestures are accurate and seem sincere.

President Elect Obama praised Bush for this action but warned, "The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely necessary to save this critical industry and the millions of American jobs that depend on it."

The other part of this puzzle I don't hear many talking about is the toll the economic crisis is having on the car companies. From things that I am reading people are going into the show rooms but a large percentage are unable to obtain financing to purchase a car. Couple this with an economy where a large percentage of people are out of work and a large group that potentially will be out of work in the near future and you can see why car companies are struggling. Time might help (I think it will). Combine this time, with making hard choices, as President Obama has said,

“I do want to emphasize to the Big Three automakers and their executives that the American people’s patience is running out, and that they should seize on this opportunity over the next several weeks and months to come up with a plan that is sustainable. And that means that they’re going to have to make some hard choices.”

These hard choices should lead to more efficient companies and hopefully coinside with an improved economy will allow these companies to prosper. Well lets hope so at least.

Good Luck and Good Currency Trading.

A Unique type of Bonus

2008-12-19T00:30:00.000-05:00

With all the uproar about compensation on wall street here is a unique way to pay bonuses to senior executives. Credit Suisse one of the hardest hit in the credit crisis has decieded to pay bonuses to about 2000 senior employees in the form of "illiquid shares" which "are linked to the performance of a pool of illiquid assets that were originated in the investment banking division," Credit Suisse said. The division was responsible for most of the bad subprime and other assets taken on by the bank in the leadup to the global financial crisis. Hey they made the mess now let them deal with it, or at least get paid based on value of those assets.

There has been alot of talk about how senior executives do not deserve bonuses this year due to the terrible performances of the industry. I certainly agree that if you do not perform, you should not get paid. This is a good way of compensating the people who helped create the problem. Basically no thing now but something down the road if things turn around. Great Idea.

CLICK HERE to read the entire story from AOL

Chrysler to shut manufacturing plants

2008-12-18T07:46:00.003-05:00

Lets hope that this is not a sign of things to come, but Chrysler announced yesterday that they would be shutting all of the North American manufacturing plants for 30 days as they await a Government bail out package. All three automakers have been taking steps to survive the current recession and it seems that Chrysler feels that by closing their plants they will lose less money then by opening them up. This is real sad news. Both Chrysler and GM are afraid that they will not have enough money to make it through the end of the year.

The closing of the plants is somewhat normal. Usually during the holiday season all plants are closed for two weeks but this year due to the economic situation they have extended it to four weeks. My question is will it help? From news reports the car companies are suffering from two problems the recession and credit. Many car dealers are reporting that they have people coming into the show rooms to buy but are unable to get credit approval. This could be a bigger problem. If banks do not lend, even after receiving all the government assistance, then the auto makers will be in bigger trouble.

In a statement from Auto Dealers,

"The dealers have stated that they have lost an estimated 20 to 25 percent of their volume because of this credit situation," .

With this shut down, workers will receive normal holiday pay for the first two weeks they are out of work and then will get unemployment benefits and supplemental pay from the company for the remaining two weeks.

With the current economic situation, the Bernard Madoff fund investigation and totally uncertain times I don't expect people to be hitting the stores in a major way in the near future.

Good Luck and Good Currency Trading.

SEC to probe ties to Madoff

2008-12-17T08:04:00.002-05:00

As if Christopher Cox doesn't have enough problems there is a story in todays Wall Street Journal about the agency investigating its ties to Mr Madoff. One of the agency's former attorneys names Eric Swanson married Mr Madoff's niece Shana Madoff in 2007. Mr. Cox himself is reported to be saying, "I am gravely concerned" by the agency's regulation of the firm.

CLICK HERE to read the entire story.

Good Luck and Good Currency Trading.

The Fed surprises with a 75bp cut

2008-12-16T17:36:00.002-05:00

The Fed came out swinging today, cutting the Fed Funds rate 75bp to 0.25%. The FOMC established a target range for Fed Funds of 00 to .25%. This is not overly surprising as the Fed Effective on most days has been down in this range. The vote was unanimous and this rate is expected to be in place for quite some time. Effectively the Fed is saying, stop putting your money in treasuries and get out there and invest (Stocks, small business's) or better yet SPEND.

The Fed wanted to make it clear that they have other tools at their disposal and are not afraid to act if needed. The primary focus of the monetary policy moving forward will be the Quantitative Easing measures that the Fed is using. The measures will "sustain the size of the Federal Reserves balance sheet at a high level". They also repeated that they are going to purchase large quantities of agency debt and MBS to support the mortgage and housing markets and it stands ready to increase the amounts as warranted.

The Fed also said it would expand the use of its balance sheet to "facilitate the extension of credit to households and small business" while using the balance sheet in creative ways to "further support credit markets and economic activity". Basically the approach seems to be that the Fed will do anything and everything to get the Economy rolling again.

They also believe that decreased oil and other commodity prices in addition to increased slack in the economy will lead to lower inflation.

The reaction from the markets was positive. Treasuries and stocks rose but the dollar came under tremendous pressure. I think all of these trends will continue to the end of the year.

Good Luck and Good Currency Trading

Bernard Madoff and the SEC

2008-12-15T00:30:00.000-05:00

The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.

This is the first paragraph of the Mission Statement from the SEC website.

Is there anyway that Christopher Cox can keep his job after this. Lets remember that this is after the Financial crisis has crushed the average investor. I do not believe that you can blame one man for all of these failures but as the man in charge you need to take the hit.

It turn out that the SEC never inspected Bernard Madoff's investment advisory business even after he subjected it to just such an inspection over two years ago. This ability to avoid detection for years certainly raises my interest in whether the SEC is effective at all. You would think (and hope) that a fraud of this magnitude would be uncovered through an inspection, that is why regular visits to investment advisory funds is important. Madoff's brokerage firm was inspected in 2005 and a few violations were detected. The so-called best- execution rules, which require that customer trades be made at the most advantageous prices, were violated three times. I assume this is basically "front running", filling orders for the firm before filling them for a client. This inquiry itself was only opened after tipsters and media reports raised questions as to how Madoff's returns were so consistent when other funds were not.

Now the heat is (or at least should be) on Madoff's auditors Friehling and Horowitz.
Hedge Fund Advisor Aksia should be looking good after all this. They have been advising clients to stay away from Madoff's fund since there were "Red Flags", including that its books were audited by a three-person accounting firm.

According to a Bloomberg article

Friehling & Horowitz included one partner in his late 70s who lives in Florida, a secretary, and one active accountant, Aksia said.

This all goes to show, if it looks to good to be true, it probably is. Also you are better off doing the research yourself as the SEC doesn't seem to be watching out for us.

Good Luck and Good Currency Trading

Inside theCage

2008-12-14T08:21:00.004-05:00

I just finished the book Inside the Cage: A Season at West 4th Street's Legendary Tournament. This book is written by Wight Martindale Jr. It is about the legendary hard court basketball tournament held at West 4th street in Manhattan every summer. I have seen many pickup games at that park, and have come across a tournament game or two also, but I never knew what went on behind the scenes to get the games played. For anyone who has ever played basketball in a school yard take that action and multiply it 10-20 times and you get an idea of what playing at West 4th street must be like. The action is non stop and the play extremely physical. Many professional players have played here. Anthony Mason, Mario Elie, Smush Parker, Fly Williams just to name a few. The dedication and self sacrafice to keep this tournament going all these years is amazing and it shows what you can accomplish if you are doing something you love. Now this tournament mant not be as well know as the Rucker Park Tournament but is it just as contested on a nightly basis. I really recommend this book for any basketball junkie, and , if you are in lower Manhattan on a Summer night stop by and watch a game (get there early as it get 5-6 deep at the fence) it is well worth your time.

Good Luck and Good Currency Trading.

Bernard L. Madoff

2008-12-12T07:33:00.003-05:00

Well until a couple of hours ago I never heard of the man. But now, I, and many others are well aware of who he is. It seems Mr Madoff ran a Hedge Fund that has been returning 8% for the last 10-20 years. This year he is slightly up even when the rest of the market is down 35-40%. Well after years of pyramiding money to live an extravagant life style Mr Madoff came clean to his sons and admitting thePONZI SCHEME. According to a WSJ article he called his two sons to his Manhattan apartment and told them about it. It seems investors were trying to redeem up to 7 Billion dollars and there was just no money left and no new money coming in. Mr Madoff as a last gesture wanted to pay bonuses to his remain employees from the 200-300 mio dollars that he had left. His sons went to the police with this information.

Enjoy your remaining years in Prison Mr Madoff. I will never understand this type of behavior. It is just not worth it!

CLICK HERE to read the Wall Street Journal story.

Good Luck and Good Currency Trading.

Brazil, Peru holds rates steady

2008-12-11T02:54:00.004-05:00

As expected the Central Bank of Brazil held rates steady at 13.75%. They did however signal that they are prepared to act, possible as soon as the next meeting, to cut interest rates if it is deemed necessary. The "majority" of policy makers "discussed the possibility" of lowering rates but the vote was unanimous to keep them steady. As I have written about before, President Lula, has stepped up verbal pressure for lower rates. Some might view this "Discussion" as trying to appease the President, but I see it more as a good sign that the CB see a problem and are preparing to deal with it. According to BLOOMBERG NEWS Brazil has the highest real interest rates after inflation among 54 countries that they track. This clearly signals that inflation was and is a large concern, but between now and the next meeting on Jan 21 2009 I would expect alot more negative economic numbers to come out and with it pressure to cut rates. The problem for Brazil is that Inflation is running slightly high while their currency has weakened almost 32% since September. This being the second worst preforming currency of the year (behind only Iceland). To cut rates right now would only hurt this two situations, something the CB is not prepared to do. I still expect for rates to open lower tomorrow morning and the currency to be slightly stronger.

Peru also held rates steady at 6.5% which are seven year highs. The Government is hoping that these high interest rates will slow down inflation in the country. Like Brazil, the Peruvian CB openly talked of lower rates at their next meeting. The bank did however cut reserve requirements which frees up liquidity, something credit markets globally really need. It would not surprise me if Brazil took this step also. The problem seen in Peru, slowing growth, high inflation and a weak currency is a similar story throughout Latin America. These countries need to balance out all concerns. I think however it is important to see what has happened here in the States and the velocity at which it has happened. To lean toward lower rates and risk higher inflation seems the more prudent way to go right now.

Good Luck and Good Currency Trading.

Brazil Rate Meeting Tonight.

2008-12-10T08:28:00.003-05:00

The Central Bank of Brazil meets tonight for the final time of 2008. There has been considerable uncertainty over the direction the CB will take. President LuLa has been calling for the CB to cut rates. Slowing growth numbers (except for the other days GDP number) and lower Inflation numbers led many to expect just such a move. However the CB has not been as negative on growth as the market and they seem afraid that further cuts in rates can make the weak currency situation move out of control. The currency has moved from 1.5600 to 2.5000, this with the CB in aggressively everyday to attempt slow the move.

On the growth front a number of corporations have announced suspensions or resizing of expansion plans. Confidence surveys are running low and crude prices are in free fall. Car sales in Brazil (like everywhere else) have collapsed. This is a key sign to me that everyone is tightening their belts. Remember if car sales slow, then there is a spillover effect. Steelmakers already facing a slowdown in demand globally are now hit here once again. From an employment stand point things do not look quite so bad. Brazil posted their lowest unemployment rate in the new historical series by IBGE, this while the total wage bill grew by above 8% in the last 12 months. All this being said I do not think inflationary pressures are present in Brazil. Therefore the uncertain nature of the economy lends itself to a wait and see approach. I see no change in rates from the Central Bank.

Good Luck and Good Currency Trading

Stocks Rally Again, except for the Tribune Co.

2008-12-09T00:30:00.002-05:00

Stocks move higher once again, not only in the States but Globally. I am certainly not complaining, but I am finding it hard to come up with reasons why. President Obama has pledged to boost the economy by starting a public works program like no other. His goal is to put together a spending package bigger then anyone since the 1950's. This I think is good. If people are working they are spending money and paying taxes. The other reason being given is the Auto sector "Bail-out" or "Loan" depending on who you are talking to. I am of two minds here, one says we need a bail-out as letting the car companies fail could send the economy off the deep end (if we have not already done that). The other is let them file chapter 11 and sort their problems out from the ground up. This too, could send a crushing blow throught the economy, but which is worse?

My fear is where does this all end? The Tribune company today filed for bankruptcy protection. This because the companies cashflow will not allow it to cover the $512 million debt payment due in June. This all because ad revenues have come off very very hard. There is also no hope that these revenues will come back...EVER. The Tribune Co is also saddled with tremendous debt because Samuel Zellled an all debt backed deal to take the Tribune private. This to the tune of $12 billion.

Mr Zell sent a memo to the employees of Tribune, I found it on IDIOT INC.

CLICK HERE to read it (well worth the time).

So although I think that the Auto Bail-out is warrented, where does this all stop? Who is next in line for a handout?

As for the currency markets, I have been laying low. Liquidity is poor and I perfer not to trade during "whippy" markets if I can help it.

Good Luck and Good Currency Trading

Stocks Surge

2008-12-08T09:38:00.003-05:00

Global stock markets are on the rise this morning as plans continue to come out specifying how governments are going to stimulate the economy.

China is looking into steps to expand the $586 Billion stimulus package already announced and India announced new spending after the central bank cut rates by 100bp. Here in the States it looks like the automakers are going to get a "loan" and that seems to have the markets reacting positively (who is next?).

CLICK HERE for further information from AOL.COM

Currency's remain whippy but quiet overall. I expect increased illiquidity as the days progress. So keep your positions smaller as it will be hard to exit trades.

Good Luck and Good Currecny Trading

Gas Prices continue to Fall

2008-12-08T00:30:00.000-05:00

Are lower Gas prices enough to take the heat off the car companies, of course not. But lower crude prices translate into dollar's in the consumers pocket right away. Gas prices have hit the lowest levels in 5 years according to a national survey out today. The nationwide average for regular gas was $1.75 while $2.02 for premium. This is in comparison to the high in July of $4.11. This definitely translates into money in your pocket, but will the average consumer spend it or save it, that is the big question. Time will tell.

Good Luck and Good Currency Trading

General Shinseki named to Cabinet Post

2008-12-07T07:36:00.002-05:00

General Shinseki was named to President Obama's cabinet today as the next Veterans Affairs Secretary. General Shinseki was the first Four Star General of Japanese-American ancestry and a major "wet Blanket" on the theory of a quick victory in Iraq. Shinseki testified in front of Congress in 2003 that it might take several hundred thousand U.S. troops to control Iraq after the invasion. This was not taken well by the Bush administration and Defense Secretary Donald Rumsfeld and his deputy, Paul Wolfowitz belittled the estimate as "wildly off the mark". As we know now General Shinseki was correct and all these years later we have many more troops in Iraq trying to finish the job.

This choice seems to be viewed as quite good.

"General Shinseki has a record of courage and honesty, and is a bold choice to lead the VA into the future," said Paul Rieckhoff, executive director of the Iraq and Afghanistan Veterans of America. "He is a man that has always put patriotism ahead of politics, and is held in high regard by veterans of Iraq and Afghanistan."

Upon his retirement from the Military in June 2003,General Shinseki had some advise:

"You must love those you lead before you can be an effective leader," he said. "You can certainly command without that sense of commitment, but you cannot lead without it. And without leadership, command is a hollow experience, a vacuum often filled with mistrust and arrogance."

Shinseki also left with the warning: "Beware a 12-division strategy for a 10-division army."

Very observant considering the twists and turns this war has taken since then.

I got most of my information for this post from a story on AOL

Good Luck and Good Currency Trading.

Federal Bailout Application

2008-12-06T08:18:00.003-05:00

Click to enlarge.

Good Luck and Good Currency Reading

Employment, much worse then expected.

2008-12-05T09:06:00.006-05:00

The employment number came out at -533,000. Expectations were for -335,000. On top of that there were major negative revisions to the two previous months. Bad numbers were expected but I think these were definitly off the charts. More government intervention is in the cards. Is there anyway the Govenment can let the automakers go under? I do not think so.

Here is the story from BLOOMBERG NEWS

Good Luck and Good Currency Trading.

The Brazilian Real melts....

2008-12-04T00:30:00.001-05:00

The Brazilian Real fell to eight week lows on the back of speculation that interest rate cuts are near. Yesterday we saw Industrial Production fall 1.7% after expecting flat. This caused yields to tumble 60-70bp alone the curve. Despite the best efforts of the Central Bank the currency could not get a foothold. The CB sold dollars at two auctions and lent another 1.96 billion dollars to exporters in a separate offer in an attempt to slow down the free fall. It did little good. After the 150bp cut in rates by New Zealand today the market is preparing for a move by the Brazilian CB as early as next week. Certainly the DI curve expects this to happen. Commodity prices, which account for 2/3 of Brazil's exports are also off over 50% from July 2008 highs which is not helping the currency at all.

This is a trend I dare not stand in front of. For now as I wrote about earlier this week I am staying on the sidelines until a little more liquidity enters the markets.

Good Luck and Good Currency Trading.

GM Bailout Plan...and the others too.

2008-12-03T20:22:00.003-05:00

GM is out with their plan and critic's are already saying it will not work. In it GM vows to cut 31,000 jobs, close nine plants and rid themselves of 1,750 dealers.

GM hopes the plan will convince lawmakers to give it up to $18 billion from the government: $12 billion in loans, including $4 billion by the end of December, and a separate $6 billion line of credit in case market conditions worsen.

"Absent such assistance, the company will default in the near term, very likely precipitating a total collapse of the domestic industry," GM officials said, contending its collapse would have "a ripple effect that will have severe, long-term consequences to the U.S. economy."

Here is the rest of the story.

CLICK HERE

Good Luck and Good Currency Trading.

Australia cuts Rates

2008-12-03T00:30:00.000-05:00

Australia cut rates last night from 5.25% to 4.25%. Rates have now been cut 300bp since August and is in line with the continuing deteriorating situation in the markets. The size of this cut is slightly larger then expected but I think totally hustified. I think the Aud will continue to suffer as the market is looking for risk reduction at all costs (many people buy Aud as a high yielder..yes me too!). The statement from the CB left the door open for more cuts in the future but implied that in the future they would be less aggressive. They did state that "Global inflation will moderate significantly in 2009". The Bank did note however, that policy was now “at an expansionary setting” and that the cash rate is now at its “previous cyclical low point” which implies that further rate cuts will not be as aggressive.

Good Luck and Good Currency Trading.

Bernanke Speaks.....Stocks Crash

2008-12-02T00:30:00.001-05:00

OK so I was a little to early with my Yield Monkey speech. I walked in to weaker EM currency's and sold dollars right away. I was lucky as Usd/Mxn went from 13.8200 (where I sold) down to 13.5800 (where I took it back), Brazil made a similar move and I also profited small on that. But this was just luck. I was lucky that I took Wednesday and Friday off last week or I would have probably been short from worse levels. But it is better to be lucky then good and this time the Good Guy wins (that is me!).

As for the markets, stocks were having a difficult day and when Big Ben Bernanke began speaking all hell broke loose. He spoke frankly and I think this disturbed the markets abit. He said that there was:

“obviously limited” room to lower interest rates further and may use less conventional policies, such as buying Treasury securities, to revive the economy.

That the U.S. economy will probably “will probably remain weak for a time,” even if the credit crisis eases

“Although further reductions from the current federal funds rate target of 1 percent are certainly feasible, at this point the scope for using conventional interest-rate policies to support the economy is obviously limited,”

I think that everything he is saying makes perfect sense. Maybe the market has been drinking a little to much of the "koolaide" being served by the talking heads on TV. I think the worst of the Credit Crunch is behind us, but that doesn't mean things are going to get better all of a sudden. Clearly the Fed is not going to sit back and watch things get worse. They put out two new programs to try to free up credit last week. Those include a commitment to buy as much as $600 billion of debt issued or backed by government-chartered housing-finance companies and a $200 billion initiative to support consumer and small-business loans. Get used to the volatility, it is not going away in the near future.

I am going to hold off making currency picks today, I do not have anything of substance on so I will wait till I get a more conviction on a move.

Good Luck and Good Currency Trading.

Sales Better....and EM (and Yield Monkey's) should benifit

2008-12-01T00:30:00.001-05:00

Just a few quick thoughts to start the week. Initial reports seem to be pointing toward Black Friday sales being slightly better then last year and much better then expected. Does it continue? I do not know. I do know that I and most of the people I know are cutting back in one way or another.

Now on to some trading views. I still look for global interest rates to move lower. U.S. have done so and even if the Fed does not officially lower anymore the market is taking it lower themselves. Fed effective are consistently below 1.00% on a nightly close. This has flattened the yield curve at extremely low levels. What is a fund manager to do? Go for yield wherever they can. If I am correct and the market quiets down look for currency's such as Mexico,Chile, Brazil....or Heck the entire Latin American region to do better. I will be entering into small short dollar positions in this region today. There is an article on BLOOMBERG NEWS which talks about Funds in search of yield looking to enter riskier waters.

In the best year for Treasuries since 2002, fund managers who only buy government bonds are seeking permission to invest in corporate debt they considered toxic just a month ago.

Americans have short memories and as such this does not surprise me. With a new year approaching, traders are getting their 2009 budgets. You need to take risk to achieve a budget and I look for higher yielding assets to perform better.

My "big picture view" going into 2009 is, Global yields lower and a weaker dollar. I still think the Euro heads toward 1.4500 by the first quarter of 2009.

Good Luck and Good Currency Trading.

Trump Entertainment Resorts to skip payment.

2008-11-30T22:06:00.003-05:00

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.

2008-11-30T09:14:00.004-05:00

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

Black Friday

2008-11-28T15:29:00.002-05:00

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....

2008-11-28T07:51:00.003-05:00

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.

Paul Volcker to Head Economic Recovery Board

2008-11-27T10:05:00.004-05:00

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

2008-11-27T00:30:00.000-05:00

Good Luck and Good Currency Trading.....

Terror attacks in Mumbia, India

2008-11-26T18:05:00.003-05:00

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

2008-11-26T08:25:00.005-05:00

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.

Government Bails Out Citibank

2008-11-24T14:23:00.002-05:00

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 Gothamist.com.

Good Luck and Good Currency Trading.

Obama and Gun's and Roses surprising the country

2008-11-24T00:30:00.000-05:00

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

Citibank looking for a Bailout?

2008-11-23T20:41:00.002-05:00

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.

2008-11-23T07:39:00.003-05:00

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.....

2008-11-23T00:30:00.000-05:00

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

Good Luck and Good Currency Trading....

A New Treausury Secretary Timothy Geithner

2008-11-22T08:52:00.004-05:00

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.

Dow Tumbles yet again.

2008-11-21T00:30:00.000-05:00

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.

GM,Ford and Chrysler lead Dow lower

2008-11-20T00:30:00.000-05:00

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

Paulson, Congress and the Bailout

2008-11-19T00:30:00.000-05:00

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

Citibank to cut 53,000 jobs

2008-11-18T00:30:00.001-05:00

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.

The Dollar

2008-11-17T00:30:00.000-05:00

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.

G20

2008-11-16T07:29:00.004-05:00

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.

G20 meeting this weekend

2008-11-15T07:01:00.003-05:00

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,

China Rumours

2008-11-14T08:40:00.002-05:00

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.

Markets take a tumble.

2008-11-13T00:30:00.000-05:00

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.

A Few Random Thoughts

2008-11-12T00:30:00.000-05:00

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.

China to the Rescue

2008-11-11T00:30:00.001-05:00

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.

AIG

2008-11-10T08:02:00.003-05:00

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.

Brazil demands reform

2008-11-09T10:10:00.002-05:00

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 AOL.com

CLICK HERE

Risk reduction continues

2008-11-08T06:33:00.005-05:00

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

Stocks lower AGAIN...

2008-11-07T00:30:00.000-05:00

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.

Now What?

2008-11-06T00:30:00.000-05:00

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.

Barack Obama

2008-11-05T06:55:00.003-05:00

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

I will followup with a market post later.

Election Day....

2008-11-04T05:29:00.001-05:00

Don't forget to vote !

Good Luck and Good Currency Trading

Emerging Markets

2008-11-04T00:30:00.000-05:00

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.

Some News to Start your Week.

2008-11-03T00:30:00.000-05:00

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.

Efforts to Save Mortgages

2008-11-01T07:13:00.007-04:00

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.

Is the worst behind us?

2008-10-31T00:30:00.000-04:00

Today was another rather calm day for the markets. Libor rates continued to come down, stock markets rallied, Emerging Market currencies strengthened and interest rates continued to fall. Sitting back one might think that everything is good and it is "Safe to enter the water again".

Mexico. I like recieving positons in rates, specifically Mexico and Brazil. Today Mexican rates came off hard, primarily in the back end of the curve. This caused the curve to flatten as the shorter end was unchanged. I have been seeing alot of customers buying Mexican CD's as the implied rates offshore are considerably higher then the onshore rates. I will be watching short dates for more direction on the curve, if they stay around these levels then the curve will steepen out again, but I am leaning toward short end rates coming lower (as the currency strengthens) and a further flattening of the curve ensues.

Brazil. Interest Rates went higher today in a move that I can only clarify as strange. I think these were weak shorts getting squeezed out and I think that they will begin to move lower in the days to come. The currency is being effected by numerous flows. It seems the Central Bank is doing all it can to keep it from running away. There have been many newspaper articles written about the trouble of local corporates who speculated on a stronger Real only to have severe mark to market issues of late. The CB are well aware of this and doing everything in their power to provide ample liquidity to the market. Tommorrow is the fixing of the Nov BMF contract. The roll has gone exceptionally bid and I think it could be paid up by banks trying to accumulate dollars in an effort to "close out" these corporates. This is pure speculation. As such I think there is a good chance we see sub 2.00 in the next two days, after that I have no idea.

Euro. I think that the Euro reached a temporary top (1.3100 ish) and will begin to move lower testing 1.2500 by the end of next week. The market still needs dollars and I think this will be the catalist to move the Euro lower.

Good Luck and Good Currency Trading.

Fed Cuts Rates

2008-10-30T00:30:00.001-04:00

The Fed came in today and cut rates 50bp as expected. Market pricing was split between 50 and 75bp. Today's move is in line with what the rest of the world has been doing, that is cutting rates in an attempt to shorten the economic slowdown we have been experiencing.

Their statement was quite clear. We will "monitor economic and financial developments
carefully and will act as needed to promote sustainable economic
growth and price stability."

The Fed clearly believes that the multiple policy initiatives that have been put in place will help to alleviate the slowdown which we are currently experiencing.

The Fed also said that it stands ready to ease further if economic and financial markets warrent as "downside risks to growth remain". I think that economic activity will remain soft and there is a good possibilty of further rate cuts in December.

I look for Emerging Markets currencies to improve going into the weekend but clearly we are not out of the woods yet.

Good Luck and Good Currency Trading.

The Fed to the Rescue

2008-10-29T16:03:00.003-04:00

The Fed has just set up dollar swaps with Brazil, S Korea, Singapore, and Mexico. This took the dollar lower against all of these currencies.

Overall another step toward calming the waters and getting everyone lending again.

Well at least lets hope so.

CLICK HERE to read more.

Good Luck and Good Currency Trading

Laugh or Cry

2008-10-29T08:07:00.000-04:00

Young Chuck moved to Texas and bought a Donkey from a farmer for $100.
The farmer agreed to deliver the Donkey the next day.
The next day the farmer drove up and said, 'Sorry son, but I have some bad news, the donkey died.'
Chuck replied, 'Well, then just give me my money back.'
The farmer said, 'Can't do that. I went and spent it already.'
Chuck said, 'Ok, then, just bring me the dead donkey.'
The farmer asked, 'What ya gonna do with him?
Chuck said, 'I'm going to raffle him off.'
The farmer said, 'You can't raffle off a dead donkey!'
Chuck said, 'Sure I can Watch me. I just won't tell anybody he's dead.'
A month later, the farmer met up with Chuck and asked, 'What happened with that dead donkey?'
Chuck said, 'I raffled him off. I sold 500 tickets at two dollars a piece and made $998.'
The farmer said, 'Didn't anyone complain?'
Chuck said, 'Just the guy who won. So I gave him his two dollars back.'
Chuck now leads the US bank bailout team.

Good Luck and Good Currency Trading.

Stocks move Higher

2008-10-29T00:30:00.001-04:00

Stocks had a great day yesterday closing up almost 900 points. Alot of people were calling this the bottom and saying that we were now going to turn up....well I hope so (and think so) but don't be so quick to that conclusion. This to me was a relief rally. It happened across a few different assets classes. The Dollar moved lower. Emerging Markets strengthened and interest rates (in EM) came off. This is a good first step but I think we need a little follow through in the days ahead. I like that this all occurred after the terrible confidence number we saw today (38 expected 58 , I think were the numbers). To me those were to be expected. Equities were off considerable and that is how people judge there wealth. Sure you house price can fall, but as long as you can pay the mortgage (I know that is a big IF these days)it really doesn't matter, but when your 401k is falling in value people stop spending...fearing for their future.

I am looking for the Dollar to continue under pressure and for the U.S. yield curve to steepen out a bit. The Fed will cut tomorrow, probably 50bp which I do not see doing alot now, but would cripple stocks if they didn't and the Fed knows this.

Good Luck and Good Currency Trading.

Emerging Markets

2008-10-28T00:30:00.000-04:00

Mexico. The Mexican CB announced they were going to pare back the sales of longer term bonds (in excess of 10 years) and increase the supply of shorter end bill auctions in an effort to increase liquidity. Interest rates fell aggressively.

The government also plans to borrow as much as an additional $5 billion from multilateral lenders by 2009 because the financing terms are ``particularly attractive in current market conditions,'' the ministry and central bank said.

Brazil. The Bovespa dropped below 30,000 for the first time in 3 years. This is occurring because of a weakening economy and talk that many local corporations have large derivatives losses sitting on their books. With less credit around and commodity prices falling Latin America is a prime area to sustain considerable losses. The CB has been in providing liquidity to both the spot and short date market. This has clearly helped, but when they stop this aggressive intervention I think the upside for this currency pair is substantial.

Argentina. Argentine lawmakers are set to begin debate on President Kirchner's proposal to nationalize the pension plans of the country. This was done in an effort to bridge the gap in financing the Government needs to continue paying their debt. Without this it is feared that Argentina will suffer a second debt default in the last 7 years. The market doesn't like this move and has driven their debt market to default levels. The currency has been weakening steadily the last few days and implied interest rates are over 100%. All in all this is a currency to stay away from.

Trades.

Long Usd/Brl and Usd/Mxn. If it not for intervention from the Central Banks these currency pairs would be higher. I think eventually we will in that direction.

Euro. I am totally square here but something is telling me to get long. I will not though, as I tend to trade this currency pair very poorly. I will however try and "scape" a few points during the day by attacking it from the long side.

Good Luck and Good Currency Trading.

Market awaits Fed Rate Cut

2008-10-27T18:44:00.003-04:00

The Fed is expected to cut rates at their meeting this week as the markets are looking for help anywhere they can find it. I for one do not think it will have a big impact near term, but possible (I repeat possible) in a few months. This of course all depends on if the Banks and Financial Institutions begin to lend and we get some stability in the equity markets. Everyone I talk to is very concerned by the equity "crash" and are being more selective on where they will spend their money.

Here is a story from AOL.COM. It is a good read.

CLICK HERE

Good Luck and Good Currency Trading.

Another Week begins

2008-10-27T00:30:00.001-04:00

Well here goes another week. I see no reason to expect anything different from what has occurred the last few. Stocks should remain unstable and currencies erratic with thin liquidity. I plan on trading this week as I have the past few, with a short term time frame and a small tolerance for losses. Here are a few thoughts before the open.

I look for the Euro to do better during the course of the week. For no other reason then it has been beaten up a bit lately. This is going against the trend so I will not be taking a large position and I will not run it long if it starts to go my way.

Latam America. I expect further weakening in this region as the week progresses. I think that Argentina has the biggest amount of upside in the region as it has not weakened of late as the Central Bank has kept it under control (with the interest rates taking the hit). Over the last two trading sessions the spot market has weakened by five big figures, telling me there could be more to come this week.

Overall get ready as I think this wild ride is not close to being over.

Good Luck and Good Currency Trading.

Brazil

2008-10-26T08:18:00.003-04:00

Here is an interesting commentary by an Economist Tony Volpon who is located in Brazil. The situation there is not good. The Central Bank is doing all it can to hold things together, but it isn't easy. Here is the perspective of someone on the ground.

The incomprehensibly bad timing of the decision to publish a government decree
allowing for the purchase of private sector banks by public sector institutions
annouced this morning has led to serious doubts about the quality of Brazil's
banking sector even as both Fin Min Mantega and Central Bank Pres Meirelles
assured the market that this is just a "preventive" measure.
The decision to do this can only be attributeed to a very bad error in judgement
given the hyper sensitive market environment or the fact that, ministerial
claims notwithstanding, there are in fact problems in the Brazilian banking
system.
Given the massive moves seen today, especially in interest rate markets (which,
unlike the much more commented stock market, really matters for the economy) the
morbid joke making the rounds is that if there were no banks broke yesterday,
there are today.
Of course none of this is a joking matter. While we cannot say with any
certainty that there are no problems in the banking system, the truth is that
Brazil's banking system is very concentrated in very large, well capitalized
banks. The recent market volatility, the likely hit as bad FX derivative trades
are unwound, and the credit losses that we will see as the economy slows will
certaily take their hits on our banks, but it is not conceivable that there is
now any type of systemic issue here, at least not even for the more pessimistic
likely scenarios.
The government has unfortunately not been very forthright about the real risks
that the Brazilian economy faces. Let us remember that there are key second
round elections to take place this Sunday. We can only hope they will be more
realistic afterwards. To still talk about 4-4.5% growth in 2009, as the Min Fin
still insists, does nothing but damage HIS credibility in a period where
credebility is a key necessity for fiscal and monetary authorities.
We see the panic and are running for cover. A lot of damage is being done, and a
lot of this is like a glass cup: easy to shatter, very difficult to put back
together again. The small glimmer of hope is the still on track normalization of
external credit markets. It is sad and unfortunate that we now have to deal with
this type of local bad judgement.

Good Luck and Good Currency Trading

Financial Armageddon

2008-10-25T16:51:00.003-04:00

I just read a very good post on Financial Armageddon.com. It discusses Volvo, the worlds second largest truck maker, and how they "won just 115 European orders in the third quarter down from 41,970 a year earlier". WOW !

If that doesn't tell you that we are in a very bad situation no thing does.

CLICK HERE to read the post. It is well worth the time.

Good Luck and Good Currency Trading.

Latest Read

2008-10-25T07:46:00.008-04:00

A few weeks ago I finished the book Sole Survivors of the Sea (Blue Jacket Books). It is by James E. Wise Jr.. The book is a series of short stories about sole survivors of sunken ships, mostly from WWII. The book appealed to me initially as it is usually what I read, a series of non fiction survival tales. In reality it was a bit slow with alot more technical jargon then I like. Clearly these were very brave men, doing some incredible things to survive, the book just never really grabbed my attention. If you are a history buff, especially about WWII this book might appeal to you.

Good Luck and Good Currency Trading.

Market comment to follow.

Latin America

2008-10-24T00:30:00.001-04:00

Well today started like yesterday ended.....in a meltdown. But some serious intervention prevented a disaster from occurring.

Brazil opened at 2.5000 after ended the previous day at 2.2640. The market quickly traded to limit up 2.5305 before a serious intervention occurred in the market. Usd/Brl actually touched limit down at 2.2450 which in itself it quite amazing. Rates also came off very high levels as the central bank intervened in the forwards as well as the spot.

Mexico went through very similar movements before ending the day at the lows. Short dates have become quite managablewhich has enabled the curve to steepen with the short end doing all the work.

The "Big Dollar". I am becomeing convinced that the Euro is in for a relief rally heading into the weekend. I have cut my short and remain square. I will get small long tomorrow morning BUT will go home square for the weekemd.

Good Luck and Good Currency Trading.

Another Day, another Meltdown.

2008-10-23T00:30:00.000-04:00

The market wasted no time in buying dollars yesterday. There was almost no currency spared when paired against the greenback. The Euro was trading sub 1.2900 when I walked in and continued to sell off throughout the session. Clearly the trend has been established and the Euro should be traded going forward from the short side. I have been short for a while but cut back on my position some what today. As I have said before markets do not move in on direction only and this market is no exception. Actually this market is exetremely prone to sharp retracements. As such I like to cut positions as they move into the money. This one is no exception. I have a 30% allocation and will add if it moves against me.

The Latam markets are a real mess. Liquidity is terrible and spreads are very wide. Brazil opened at 2.3700 (BMF) after a close yesterday at 2.2620. By days end we were limit up (2.3900) with the offshore market closing at 2.4200/4400. Interest rates were up 150bp in the back end with the front end "lagging" with only a 45bp move. Here as in Mexico the curves steepened out quite abit. Short end liquidity seems to be drifting back into the market. Today o/n traded at 20 points and t/n traded at 30 points. This is a good sign and a symptom of the squeeze from last week into this week. With the curve severely inverted market participants grabbed liquidity along the curve. This steepened out the curve and has now left Financial Institutions long cash day to day. I suspect that the market will continue flush and the front end of the curve will come off hard. Therfore a further steepening with the short end doing all the work.

As I have said previously, these are the craziest markets I have ever seen. Today there was a discussion on the desk that this is "Way over done". I was quick to point out, Why? Rational thought has no place in this discussion. Corporations are having big mark to market issues based on taking bets on the currency rather then doing what they were meant to do. This is only the beginning. There is more to come.

But what happens when all this is over. I think that rates in the Emerging Markets world have to come down in a big way. The global economy is fractured and will not heal overnight. It will also not heal with high interest rates. I for one to not expect Mexico or Brazil to hike rates at their next meeting as some have argued. A 25 or 50bp hike will not stop the run on the currency (see Huf who raised rates 300bp today). No one is enticed to buy the currency for an extra few bp's of yield, why, when the currency is moving 3-4% in a few hours!

Stay nimble and you will be in a better position to take advantage of these markets.

Good Luck and Good Currency Trading.

Latin America

2008-10-22T00:30:00.001-04:00

It ain't pretty out there.

These markets are under continued and very steady pressure. Brazil and Mexico are leading the weakening trend but only because they are the most developed and had the most invested in them to start. I think the big reasons for this are

1. Commodity prices. They have been consistently trending lower for the last few months and as such currencies dependent on them have come off. Brazil, Mexico, Chile, Australia, New Zealand to name a few.

2. Over speculation by local corporates. Just reading articles on Bloomberg and the WSJ is enough to tell you that alot of local currencies leveraged themselves thinking that their local currencies would continue to appreciate. Alot of these trades had no thing to do with hedging exposures but rather it was outright speculation on the movement of currency. Now that the currency has changed direction the corporates for lack of a better word are F*cked! This becomes a self fulfilling prophecy, the banks that sold the currency products to the corporates know that they have a problem and begin to worry about margin calls (are we going to receive our money?) and such. Word starts to spread, hedge funds try to front run the market and this triggers margin calls which then force the corporates to close out their position (if they have the money to pay back the losses). All the while everyone is buying dollars.

Today the Brazil flirted with limit up for a good deal of the day and closed within spitting distance of the level. It the market was open another 30 minutes or so it certainly would have closed there. Mexico closed near the highs of the day also and I see little that will prevent the market from opening considerably higher tomorrow morning.

TRADES.

Remain short Euro. I am still looking for us to trade sub 1.3000 (we closed at 1.3070 ish yesterday) and think it will happen today.

Long dollars against all Latin American currencies. I think you start with Usd/Mxn, follow with Usd/Brl....do a little Usd/Clp and Usd/Cop for good measure. There is no reason to be short dollars in this region. Please remember that I am keeping my positions on the smaller side and will take profits quicker then usual as the market dynamics are changing quite quickly. No need to be a hero.

Good Luck and Good Currency Trading.

Paul Volker

2008-10-21T18:47:00.003-04:00

In today's Wall Sreet Journal there was a very interesting article about the effect Paul Volker is having on Barack Obama's fiscal policies. Paul Volker the man credited with crushing inflation in the 1980's has been out of the spot light for many years but his reemergence in this election has many Republicans rethinking their vote.

The Obama-Volcker relationship continues to evolve, campaign advisers say. At the start, Sen. Obama sought advice from Mr. Volcker and other outside voices through his economic adviser, Austan Goolsbee, a 39-year-old University of Chicago professor. But starting with the demise of Bear Stearns Cos. in March and continuing today, Sen. Obama speaks directly and often with Mr. Volcker about the intricacies of the financial crisis and possible solutions. They've become "collaborators," as one aide puts it.

His discussions with Mr Volker are credited with his vision that the housing downturn would escalate into a financial crisis.

In a September 2007 speech at Nasdaq, Sen. Obama predicted that because of oversight lapses and abusive practices that cause the public to doubt financial results, "the markets will be ravaged by a crisis in confidence."

This was a direct result of conversations with Mr Volker.

I think it is very important to know who the candidates are listening to. One man does not run the country, rather it is a man who is capable of making informed decisions.

All in all a very interesting read.

CLICK HERE to read the article.

Brazil...A crisis brewing....

2008-10-21T00:30:00.000-04:00

Local newspapers are talking more and more about the highly leveraged operations of the Brazilian Corporates. This is causing serious difficulties for the local economy and is weighing heavy on market liquidity and credit quality. Basically local corporates put on a series of trades that go poorly if the dollar strengthens against the Real. Market talk puts the amount at between 20-40 billion usd. Many corporates are being forced to close these transactions at large losses and most do not have the capital to pay these losses off. This is causing the dollar to move even higher. The biggest problem as with here in the United States is that the corporate credit worthiness is hard to quantify. As such are banks going to lend to these corporates to allow them to stay in buisness?

I think this all points to a weaker Real and lower rates in Brazil. I cannot see how they can raise rates in such an environment. I think the currency will take the hit here so my trading view is to buy Usd/Brl and to recieve rates in the two year sector.

I have a similar view in Mexico as corporates in this country put on similar trades and as such should have a similar effect on the economy...to slow it down. The Mexican Central Bank has already begun to intervene in the market selling dollars (unlike Brazil where they have not had to do that yet). The Mexican CB has sold around 9 billion of its 90 billion dollars reserves. I think this points to a much weaker Peso in the coming weeks and a steeper yield curve out to two years.

Also the dollar looks strong against the major currencies. Look for the Euro to break 1.3000 in the next week or so.

Good Luck and Good Currency Trading.

The Final Nail in the Coffin

2008-10-20T00:30:00.000-04:00

I think that Colin Powell has delivered the final nail into John McCains coffin. This election is done. Having a man like Colin Powell come out and endorse you in such a positive manner should and will carry considerable weight. With just three weeks left before election day Mr. Powell has come out and taken away any doubt that Barack Obama can handle the office of the President. This, in my opinion, is further bad news for the markets. One of my favorite expressions is "Perception is reality" as such big business traditionally looks at Democrats as being bad for them. Barack Obama has come out and used the term "Income redistribution" and has made it clear that he intends to raise taxes on more wealthy Americans. Couple this with the high probability that the Democrats will also capture the Senate (they already control the house) and you are looking at a clean sweep for control of all three branches of the government. I believe that the Democrats will not only win this election....but win convincingly. As I said before this will be viewed negatively by the market now, BUT another favorite expression of mine is, "Sell the Rumour....Buy the Fact" ans I expect the markets to rebound (at least temporally) after the election.

I remember this happening after Lula was elected President of Brazil a few years back. The markets were in terrible turmoil. The currency was weakening, stocks were under pressure and the bond market had no bid at all. After he came into office, people realized that he wasn't as bad as expected and the markets turned around for an extended period of time. I hope that happens here, for now I will continue to trade very short term until a more stable market develops.

Good Luck and Good Currency Trading.

Colin Powell....on Meet The Press

2008-10-18T08:30:00.003-04:00

Colin Powell, former Secretary of State for George W Bush, and advisor to the last three Republican Presidents is scheduled to appear on Meet the Press tomorrow morning. He has been "courted" by both candidates for months, looking for an endorsement. Talk on the street is that he may come out in favour of Senator Obama tomorrow on the show.

“It’s going to make a lot of news, and certainly be personally embarrassing for McCain," a McCain official said. "It comes at a time when we need momentum, and it would create momentum against us.”

This would be a huge boost to the Obama (like he really needs it) as it could sway any voters unsure of his foreign policy and national security credentials.

If Mr Powell does come out in favour of Barack Obama, it would be yet another nail in McCain's coffin. The markets, which many are saying are suffering PARTLY because of the expected win by Obama (and a whole lot of other Democrats in the House and Senate) could do worse in the coming weeks.

Senator Obama's plans for the economy are seen by Wall Street as being anti business and as such could stale the economy even more and for a longer period of time.

I suspect that Colin Powell will not come out with an all out endorsement of Obama. Also I think that the markets will continue to suffer in anticipation of an Obama win, but will rebound once he is elected in a classic "sell the rumour, buy the fact" scenario.

Keep your positions small and your time frame short.

Good Luck and Good Currency Trading.

Cooler Heads Prevail

2008-10-17T00:30:00.000-04:00

Well the markets although not calm traded in a more reasonable manner today. Mexico was still the center piece of my world as short date rates remained extremely tight. The Central Bank came in numerous times to add liquidity and try to correct the situation. It helped a bit and from what my contacts at the CB said "We know the situation and are working on it". Hhhhmmm, I sure hope so.

Check back later for an update.....

Good Luck and Good Currecny Trading.

PANIC

2008-10-16T00:30:00.003-04:00

Wow....what a day. One of utter panic and it is leaving me to think...What Next?

The meltdown was universal. Usd/Mxn started at 12.4000 and ended the day at 13.20.
Usd/Zar opened at 9.05 closed at 10.7800 ! This is an all time new high. Short date Mexico traded as high as 90% today. Hearing that the Mexican finance minsiter is looking to inject 40billion peso into the local market this morning (lets hope so). This will hopefully allow short dates to trade lower but how low I am not sure. From my conversations it sounds like a few Mexican corps may have defaulted and as such the market needed to cover those short dollar positions, both spot and forward. This of course is all speculation but from the market movements seems logical.

I think from a trading perspective you need to keep positions small and look to take profits and cut losses quickly. This is no time to be a hero.

Good Luck and Good Currency Trading.

U.S. Banks

2008-10-15T07:12:00.002-04:00

At a meeting on Monday afternoon the Fed "suggested" that the Major U.S. Banks take a cash injection. The cash came in the form of the U.S. Government taking a stack in the Banks by purchasing preferred shares.

Here is and interesting article from the Wall Street Journal. Some seem to be not to happy, but eventually all went along for the benefit of the Economy.

It is a good and interesting read.

READ MORE

Good Luck and Good Currency Trading

DJIA Rebounds

2008-10-14T00:30:00.000-04:00

Stocks had an excellent day today up over 11% on the day. This moved followed a similar move by Asian and European stock markets and coupled with Latin American markets all up similar amounts. So now we need to see some follow through and I think the only way we see that is to see some action coming out of the Central Banks.

Once again all the major market moving news began over the weekend. The news thou had little to no concrete details.

The CB's will use "All available tools to support systemically important financial institutions and prevent their failure" while also stating that

Financial institutions will "Have broad access to liquidity and funding".

This signals to me that another Lehman situation is not in the cards. I think the Fed learned from allowing Lehman to fail that the consquenses are worse then bailing them out. This is what really caused the confidence problem.

In Europe the ECB agreed to guarentee until the end of 2009 bank debt inssuance with maturites up to 5 years, allowed governments to buy stakes in banks and committed to recapitalise critiscal banks in distress.

Australia and New Zealand offered guarantees on all bank deposits

These are all very good steps and I hope enough to stabilize the markets. It looks to me as the risk is that markets get disappointed once specific details are released. Lets hope not.

Good Luck and Good Currency Trading.

Brazil lowers Reserve Requirements

2008-10-13T18:26:00.003-04:00

The BACEN announced the third round of measures to address the tightening of cred conditions in Brazil. The BACEN announced the suspension of reserve requirements on time deposits and leasing companies.

This is a very positive reaction to the market situation and as such should be viewed as positive. Today the Bovespa was up 14% and the currency closed at limit down (2.1835 BM&F). Remember three days last week it closed limit up!

There are many that are calling for a 50bp rate rise on Oct 29. I am not sure that will happen but, if done, add to a positive reaction for the Real. Therefore I am currently short Usd/Brl at 2.2100(BMF). I have no level for T/P but will stop myself out above 2.2800(BMF). I think it is still to early to think we are out of the woods and as such would think the Central Bank would hold off on and rate rise.

Good Luck and Good Currency Trading

All is Well....

2008-10-13T07:37:00.002-04:00

Markets are looking positive this morning as a combination of European and U.S. plans to restore confidence hit the news wires.

U.S. equity futures gained after the worst week for stocks in 75 years, boosted by the government's plan to buy stakes in banks and a Federal Reserve officials pledge to ``consider every option'' for restoring confidence.

This is the key restoring confidence. Nothing is more important at this time !

Financials, led by Morgan Stanley (up 34%) and Merrill Lynch (up 10%) are all up in pre market trading.

``The measures that they've said they're going to take are important,'' said Quincy Krosby, who helps manage about $380 billion as chief investment strategist at the Hartford in Hartford, Connecticut. ``When we say stabilize the financial system, we're talking about money flowing, banks lending. That's what the market is waiting for.''

It is very important to have a positive day today in stocks.

Emerging Market currencies should trade stronger today also. There is a call from locals in Brazil that we will trade back down to 1.9000 in the next few weeks. If a credible plan is announced, I think we could be there sooner then later.

Good Luck and Good Currency Trading.

G7, Lots of Statements.....No Details.

2008-10-12T07:38:00.004-04:00

``We'll have some volatility for a while'' Paulson said. ``We need to restore confidence.

Truer words were never spoken. This Crisis is now all about confidence. Right now there is none. So far this G7 meeting is setting up to be a big disappointment. The markets needs and wants a concrete plan to get us out of this. So far we have heard

``The current situation calls for urgent and exceptional action,''

They pledged to ``take all necessary steps to unfreeze credit and money markets'' without detailing how that would be accomplished.

Great....Agreed.....but we need to hear what all the necessary steps will be!

I truly believe that everyone is aware of the severity of the situation. Stocks have lost over 40% of their value. That is people who are about to retire needing to put it off (if they can find a job). That is also people who have retired in big trouble. That is on top of the millions of Americans who have mortgages and car payments that they cannot afford. Where does it end !

We need to hear some concrete steps, starting with,

The Fed buying equity stakes in financial institutions.

``We're going to do it as soon as we can do it and do it properly and do it effectively and right,'' Paulson said.

Expect this to happen soon, it will also not involve the Fed being en voled in the management of the institution. They would be buying senior preferred shares of non-voting stock from the financial companies. This would be the quickest way to get money to the firms as well as the best way to protect tax payers. I truly believe that once the Fed puts tax payers money into these firms they will not allow them to fail.

Here's hoping the the G7 come out with a great confidence booster later today, I doubt it and as such expect to be in the office tomorrow to begin another long week.

Good Luck and Good Currency Trading.

G7....Stock Market.....and the Finacial Crisis.

2008-10-11T07:20:00.003-04:00

Wow what a week. I have never seen volatility, driven by such fear and uncertainty as I have over the last couple of weeks. From my perspective the "market" is blaming the majority of the uncertainty on the Lehman failure. Any way you look at it the shareholder loses, but the fallout from Lehman bankruptcy is that financial institutions do not want to lend money to anyone who can fall into the same situation. Morgan Stanley, Merril Lynch, Wachovia etc etc etc. Why take the chance of lending money which you will never get back. Better to let it sit on your balance sheet and lend it back to the Fed overnight (at 0% in alot of cases)just in case the market begins to make a run on you.

As all the talking heads are saying, this crisis will stabilize once banks begin lending to each other in a meaningful and consistent way.

Yesterday a meeting of the G7 convened in Washington, the first statement came out as follows.

``The current situation calls for urgent and exceptional action,'' the finance ministers and central bankers said in a statement after talks in Washington yesterday. They pledged to ``take all necessary steps to unfreeze credit and money markets'' without detailing how that would be accomplished.

Notice the last line WITHOUT DETAILING HOW THAT WOULD BE ACCOMPLISHED. The market wants tangible solutions.

As Jeff Pantages, chief investment officer at Alaska Permanent Capital Management said

``They've seen what Lehman did and the repercussions, if you're a bondholder, you've got to feel better. If you're a shareholder, you're not so sure.''

This is what I said above, the government probably will not let another large institution file bankruptcy (see AIG, GM, Chrysler,Ford....)but will allow a takeover/merger at extremely low valuations causing great pain for the shareholder.

``We have taken a lot of actions,'' European Central Bank President Jean-Claude Trichet said. ``My experience of markets is that it always takes a little time to capture the elements,'' of the decisions taken, he said.

Paulson signaled his top priority is getting his plan to buy financial stocks running as soon as he can. ``This is a plan that I'm quite confident will work,'' he said. The Treasury chief also said ``we have more to do in the liquidity area.''

The American plan follows U.K. Prime Minister Gordon Brown's 50 billion pound ($87 billion) program that will partly nationalize at least eight lenders.

As for these statements I tend to agree with Trichet, there is no way the $700 billion Bailout program could be working already. The Treasury hasn't started an auction or bought one financial stock yet. But do you really want to be short Morgan Stanley at $3.00 a share when the Federal Government has a vested interest in is surviving? Not me.

Stocks recovered at the close yesterday to post moderate losses for the 8th straight day. Can we go lower, yes. Will we go lower, probably. But overall valuations for these companies are at all time lows. In any other situation these stocks are screaming buys (I am not suggesting anyone go out and buy)so eventually as market volatility lessens and banks begin lending stocks will move higher again.

Check back later as I am working on a post about my thoughts on a clearing house approach toward bank lending and updates from the G7 meeting.

Good Luck and Good Currency Trading.

Dow Jones continues to sink....

2008-10-09T00:30:00.001-04:00

Today the Fed cut interest rates 50bp in a coordinated effort with other central banks from around the world. Also participating were the U.K.,ECB,BOC,SNB and Sveriges Riksbank all cutting rates 50bp also. This follows the 100bp cut by Australia's CB the other day. The Bank of Japan expressed strong support for these policy actions.

This was encouraged by the IMF to make a coordinated response to the situation. This is very similar to the approach that the world had after September 11. A coordinated global interest rate cut happened on the following Monday. That day too stocks fell but ultimately things turned around. Although this situation is totally different, lets hope the same results play out.

The move by the Fed was widely expected as Bernanke said in his comments on Tuesday that the Fed would have to lower rates do to the negative impact ot the credit crunch and the financial market turmoil on growth prospects.

The market definitely wanted this and it was well received initially. At the close the Dow Jones fell 2% closing down for the sixth day in a row. This says to me that although lower rates will help it is fear and a lack of trust that is ultimately preventing the banks from lending to each other. I think it will be weeks before any positive effects are felt from the TARP program and until then we will be seeing weak economic numbers.

THE MARKETS-LATAM

Mexico. Total panic and position squaring took place today. We closed on Tuesday at 12.3000 and opened on Wednesday at 11.7500. Trading very quickly up to 12.9000. The coordinated rate cuts were announced and the market traded down to 12.5000. After that a short squeeze ensued. We traded up to 14.3000, followed by the CB of Mexico announcing dollar sales which began to drive the market lower. We traded as low as 11.9000 before settling at 12.3000. Sorry to bore everyone with the price action but I wanted to demonstrate the crazy nature of these markets. The CB also stated that they would sell 400 usd everyday the currency moved more then 2%.

Brazil. For the third day in a row the currency opened limit up. This caused the Central Bank to come into the market three times to intervene each time with positive effects. The currency closed off limit up at 2.3300 but the market remains ver choppy with thin volume.

Colombia. The Central Bank stopped it's dollar buying program. For the last few months they have been buying 20 mio usd per day to stem the currency appreciation. In the current environment they have wisely chosen to stop this program.

Argentina. The bond market is in a total tailspin. No bids for this market at all. They are basically at default levels and the implied interest rates through the forwards are at 100% in the near end moving gradually lower to 40% in the 12months. EVERYONE is looking to buy dollars, and there are very few to be had. This is a market to stay away from at all costs.

I tend to be a bit to optimistic. I never saw this type of a meltdown coming and have been surprised by its continuation. This reminds me very much of the 1997 Asian crisis. Many times I would hear people say "It cant go any higher" only to see the market paid and bid at that level. Panic takes over and rational thinking goes away. That is where I think we are now. No one is thinking rationally, therefore I think things will get worse before they get better. Anyone who thought that after the Bailout Package was passed the economy would take off and stocks would rise, didn't and doesn't understand what is going on. It will help but it needs time.

Euro. We have seen it bounce in recent sessions and I think it will continue to rise in the days/weeks to come. Again I think it will be on the back of a slowing global economy and the market realizing that we have to issue alot of debt to pay for this Bailout Package. I do not have a position in this currency as I do not have that strong of an opinion.

Good Luck and Good Currency Trading

The Presidential Debate

2008-10-08T19:01:00.005-04:00

Is it me or is anyone else getting sick of the Presidential Election. Last night I watched the Debate and was disappointed by the candidates, both of them. Stop blaming everyone else for the economic crisis. why don't we blame the people who are at fault.

Lets start with the Investment Houses themselves. The firms over levereged themselves to generate over sized profits on a small capital base. To keep this formula you need to produce profits and have the public confidence. Who allowed this to happen? Washington ? Congress?? The House???.....How about the board of directors of these firms who signed off on the business plan and allowed it to happen. How about the stock holders who if they read the prospectus would know how these firms went about generating profits and how they funded them. At anytime the Board if Directors could have stood up and said, no more of this. Or said we need to cut back of the leverage we are using? Stock holders who were uncomfortable with the risk didn't have to own the stock. I do hold Stockholders much less to blame. Many of these shares were owned through pension plans and mutual funds and to research every corporation owned would be next to impossible, so the blame in this case should fall to the pension fund manager.

OK, maybe Washington should have had more regulation, but in my opinion the blame rest's squarely on the shoulders of the management and board of directors of each firm. They knew (or should have know) how money was being made and what risks were on the table. It seems to me they were just greatly underestimated.

Good Luck and Good Currency Trading

Another Day Another Meltdown

2008-10-08T00:30:00.000-04:00

ECB’s Kranjec says Financial Crisis will be long
ECB doesn’t talk about negative growth at the moment but that growth is close to zero.

ECB’s Ordonez sees problems spreading to multinational companies.
ECB’s Quaden says had not anticipated how bad the financial crisis would be.

A few headlines from the ECB yesterday morning.

I am becoming convinced that rates globally will have to come lower ! The global economy is slowing drastically. Crude and commodities in general are coming off, therefore inflation will follow. Bernanke said that the Fed is ready to lower rates when needed. I expect at the next meeting (Oct29) the Fed will cut.....But time will tell

Not much else to add.

Good Luck and Good Currency Trading.