On Fx (Krasting)

Monday, July 23rd, 2012

I’ve been running a short EURUSD for the past six weeks. I got in at 1.2650 on June 30, and doubled up on July 8 at 1.2260. I was delighted to see the Euro get cheap in Friday’s trading, but the market action forced a decision. I wrote some things down on a pad, thought about it a bit, and said, “Screw it”, and cut the whole position. Some of my thinking:

I hate trading FX at the end of July . The markets shut down with the approaching European August vacations. The last week of the month is about cleaning up positions, not putting new ones on. August is never a time to be involved, unless you have to.

There was something odd about the EURUSD trading Monday through Thursday. Tyler Durden, at Zero Hedge, made note of this.

The red arrows that Tyler drew bother me. This stinks of “official guidance”. It’s tough to make a buck at the FX casino, it’s tougher still when the tables are rigged.

In May and June the Swiss National Bank (SNB) bought CHF 110Bn worth of Euro’s. That’s a staggering amount. I’m convinced that the intervention was heavy in July as well. Reserves are headed up another CHF50Bn. I think these numbers still understate what is happening, as the SNB has been writing calls on the Franc.

In the course of just three months ¼ Trillion Euros have crossed into the Alps. This is unsustainable. At some point it will have to result in a messy blow up. But not necessarily in the month of August.

I don’t think the SNB is going to fold its cards just because they are under attack. If the SNB were to quit intervening, the EURCHF would be nearing par in a matter of days. The cost to the SNB would be CHF40Bn (15% of GDP).

Before taking a loss of this magnitude, the SNB, (with the blessings of the government), would implement a variety of exchange controls. I think this is a something that could come sooner than the market believes.

It is my understanding that there is significant macro hedge fund positioning in the EURCHF. I don’t believe that the SNB is going to simply write a monster check to some fat cats up in Greenwich. There will be (at least) one more chapter in this story.

Should there be something that makes people blink on the CHF, it could end up causing short positions in the EURUSD to get jumpy. I’d rather not be part of a jumpy crowd.

I’m worried about what Bernanke may do on August 1st. We could see something that brings the US negative short-term interest rates. (My thoughts on this). It’s very difficult for me to be a dollar bull. I’m much more comfortable playing the dollar from the short side.

The Euro weakness on Friday was related to a big selloff in Spanish bonds. The Spanish ten-year ended up at 7.27%. This means that a Spanish bailout is not far off and Italy is next in the crosshairs.

Really? I don’t think so. It’s not going to be that easy.

The Euro technocrats are not going to fold in August. They may be going down, but I fear more battles are in the offing first. SMP purchases of sovereign debt is likely next week.

Realized gains have been elusive for me this year.

Now that I don’t have a position to worry about, I’m worried about not having a position. I will be looking for an opportunity to re-load a short Euro exposure. Hopefully it will be at higher levels than Friday. Either way, I will act before September rolls in. The Euro is still toast.

Tags: Alps, Bank Snb, Blessings, Eurchf, Eurusd, Franc, GDP, Guidance, Hedge Fund, Magnitude, Monday Through Thursday, Month Of August, Red Arrows, S Trading, Six Weeks, Swiss National Bank, Three Months, Trillion, Tyler Durden, Vacations
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Video-Rama: Global Economy Banked Into Recession

Friday, January 30th, 2009

While financial markets remained mired in uncertainty, the who’s who of global economics descended on Davos in Switzerland for the annual meeting of the World Economic Forum. This week’s harvest of video clips therefore includes a number of interviews set against the backdrop of the snow-covered Alps.

The overall message of the video footage is aptly conveyed by titles such as “Mountains of doom” (Nouriel Roubini) and “Wall Street winter blues” (Robert Shiller). Also discussing aspects of President Obama’s stimulus plan, the mooted bad bank, and other crisis-related issues are Jamie Dimon, Edmund Phelps, Steve Forbes, Joseph Stiglitz, Barry Ritholtz, Chris Whalen, George Soros, Stephen Roach, Kenneth Rogoff, Jack Welch, Jan Hatzius, George Friedman and Michael Lewis.

But although gloom prevails, money-making opportunities do exist as highlighted by John Murphy (StockCharts.com), who expects gold bullion to be the best investment for 2009.

In lighter vein, this week’s compilation is rounded up by Bunny and Mimi (the Pinky Show) with a clip entitled “Banked into submission”.

CNBC: Dimon on economic recovery
“Jamie Dimon, JPMorgan chairman and CEO, tells CNBC’s Maria Bartiromo when he’s expecting an economic recovery.”

Source: CNBC, January 29, 2009.

CNBC: Orszag on Obama’s stimulus plan
“Peter Orszag, director of the Office of Management and Budget, discusses Obama’s stimulus package and what the final product will look like.”

Source: CNBC, January 28, 2009.

Bloomberg: Edmund Phelps says US needed “more coherent” stimulus
“Edmund Phelps, a professor at Columbia University and winner of the 2006 Nobel Prize in economics, talks with Bloomberg’s Francine Lacqua and Erik Schatzker about the US government’s plans to stimulate the economy and ease the credit crisis. Phelps, speaking at the World Economic Forum meeting in Davos, Switzerland, also discusses measures to remove toxic assets from banks’ balance sheets and the outlook for US housing.”

Source: Bloomberg, January 28, 2009.

Fox Business: Steve Forbes talks stimulus, economy & Geithner

Source: Fox Business, January 28, 2009.

CNBC: Stiglitz on the economy
“Opportunities for your money at the World Economic Forum, with Joseph Stiglitz, Columbia University professor and Nobel Prize winner, and CNBC’s Becky Quick.”

Source: CNBC, January 28, 2009.

CNBC: Barry Ritholtz – nationalize the banks

Source: CNBC, January 29, 2009.

Yahoo Finance: Chris Whalen – give money to healthy banks, let FDIC’s Bair handle the dying
“Why should taxpayers have to keep bailing out banks that aren’t lending and are black holes? Why can’t Congress just force these banks to write down their bad debt then recapitalize them? Why doesn’t the government create a bank that does not have toxic assets and will fill the void of much needed loans to businesses who need them?

“‘Lack of political courage [and] ignorance of finance’ in Congress are the answers to these and related questions, according to Chris Whalen, managing director and co-founder of Institutional Risk Analytics. ‘Our friends in Washington who’ve been receiving a lot of money from Wall Street don’t want to put these people out of work.’

Click here for the article.

Source: Aaron Task, Yahoo Finance, January 21, 2009.

BBC News: Soros on getting out of the global crisis
“Financier George Soros has outlined his recipe for stabilising the global economy to the BBC’s Business Editor, Robert Peston. Speaking against the backdrop of the World Economic Forum in Davos, he said the present problem was ‘bigger’ than in the 1930s.He was asked if he thought there were any signs of recovery in sight.”

Source: BBC News, January 28, 2009.

CNBC: Roubini – mountains of doom
“Discussing the stimulus and the disaster that is the world economy, with ‘Dr. Doom’, Nouriel Roubini, RGEMonitor.com chairman.”

Source: CNBC, January 28, 2009.

Bloomberg: Roach sees “longer and deeper” recession, weak recovery
“Stephen Roach, chairman of Morgan Stanley Asia, talks with Bloomberg’s Betty Liu about the outlook for the global economy. Roach, speaking from Zurich, also discusses the US recession and the state of the Chinese and Indian economies. Mario Gabelli, chief executive officer of Gamco Investors, also speaks.”

Source: Bloomberg, January 27, 2009.

Fox Business: Rogoff – 80’s crisis a “baby” compared to now

Source: Fox Business, January 28, 2009.

CNBC: Jack Welch on the economy
“Perspectives on the government’s stimulus plan, with Jack Welch, former GE chairman/CEO.”

Source: CNBC, January 29, 2009.

Bloomberg: Hatzius says Fed will likely buy treasuries eventually
“Jan Hatzius, chief US economist at Goldman Sachs, talks with Bloomberg’s Betty Liu about the likelihood the Federal Reserve will buy US Treasuries. Hatzius, speaking from New York, also discusses the outlook for monetary policy and need for a ‘large’ stimulus package.”

Source: Bloomberg, January 28, 2009.

John Authers (Financial Times): Housing and the Fed
“If there is a single key variable to determine when the crisis in the US banking system can be brought under control, it is house prices. The further they fall, the higher the likely default rate on the mortgage-backed securities that banks now hold on their balance sheets.”

Click here for the article.

Source: John Authers, Financial Times, January 27, 2009.

Barron’s: Santoli’s market outlook: 8,000 and 800
“Barron’s Mike Santoli explores whether the Dow hovering around 8,000 and the S&P around 800 carries a certain significance and what this could mean.”

Source: Barron’s, January 26, 2009.

CNBC: Robert Shiller – Wall Street winter blues

Source: CNBC, January 28, 2009.

CNBC: Steve Forbes discusses outlook for stocks

Source: CNBC, January 28, 2009.

Bloomberg: StockCharts’s Murphy sees gold at $1,000 by year end
“John Murphy, chief technical analyst at StockCharts.com, talks with Bloomberg’s Brennan Lothery about the outlook for the gold price in 2009. Murphy also discusses commodity prices, the US equity market and investment strategy.”

Source: Bloomberg, January 27, 2009.

BBC News: Trichet – system must be more resilient
“The president of the European Central Bank, Jean-Claude Trichet, has warned about imbalances in the global economy for some time. He told the BBC’s Tanya Beckett that it was a question of ensuring that by being extremely bold in the short term, long term confidence was not hampered.”

Source: BBC News, January 29, 2008.

CNBC: China – the next world superpower?
“China is unlikely to replace the US as the world’s dominant superpower, says George Friedman, CEO of Stratfor. He tells Kirby Daley from the Newedge Group & CNBC’s Amanda Drury why. He also reveals the other key challenges we may face in the next 100 years.”

Source: CNBC, January 30, 2009.

YouTube: Michael Lewis on how to avoid bankruptcy

Source: YouTube, January 28, 2009.

Pinky Show: Banked into submission
“Part III of the globalization comic series. In this mini-episode, Bunny tells Mimi about the World Bank and IMF and how wonderful they are.”

Source: Pinky Show (via YouTube), March 21, 2007.

Tags: 2006 Nobel Prize In Economics, Alps, Amanda Drury, bank, Barry Ritholtz, Bbc, Becky Quick, Betty Liu, Bloomberg, Brennan Lothery, Business Editor, Ceo, chairman, chairman and CEO, chairman/CEO, Chief Executive Officer, chief technical analyst, chief US economist, China, Chris Whalen, Columbia University, Congress, Credit Crisis, Davos, Davos Switzerland, director, Director Of The Office Of Management And Budget, Doom, Edmund Phelps, Emerging Markets, Erik Schatzker, European Central Bank, Fdic, final product, Finance, Financial Times, Financier, Francine Lacqua, Gamco Investors, GE, George Friedman, George Soros, Gold, Gold Bullion, Goldman Sachs, India, Institutional Risk Analytics, International Monetary Fund, Jack Welch, Jamie Dimon, Jan Hatzius, Jean Claude Trichet, John Authers, John Murphy, Joseph Stiglitz, Jpmorgan, Kenneth Rogoff, Kirby Daley, managing director and co-founder, Maria Bartiromo, Mario Gabelli, Michael Lewis, Mike Santoli, mooted bad bank, Morgan Stanley Asia, New York, Newedge Group, Nobel Prize In Economics, Nouriel Roubini, Obama, office of management and budget, Peter Orszag, Pinky Show, president, professor, RGEMonitor.com, Robert Peston, Robert Shiller, Stephen Roach, Steve Forbes, Stimulus Package, Stockcharts, StockCharts.com, Stratfor, Switzerland, Tanya Beckett, United States, Us Federal Reserve, Us Government, Us Treasuries, usd, Washington, World Bank, World Economic Forum, Yahoo, Youtube, Zurich
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Bill Gross: Hmmmm? (Investment Outlook June 2008)

Monday, May 26th, 2008

May 26, 2008 – Pimco’s Bill Gross makes a most humorous analyses, drawing parallels that the hordes are marching on the new Rome (America), and that its time to act. Make sure you read this must read, the June 2008 Investment Outlook, by Bill Gross. At the end, Gross puts forth his recommendations.

What this country needs is either a good 5 cent cigar or the reincarnation of an Illinois “rail-splitter” willing to tell the American people “what up” -”what really up.” We have for so long now been willing to be entertained rather than informed, that we more or less accept majority opinion, perpetually shaped by ratings obsessed media, at face value. After 12 months of an endless primary campaign barrage, for instance, most of us believe that a candidate’s preacher – Democrat or Republican – should be a significant factor in how we vote. We care more about who’s going to be eliminated from this week’s American Idol than the deteriorating quality of our healthcare system. Alternative energy discussion takes a bleacher’s seat to the latest foibles of Lindsay Lohan or Britney Spears and then we wonder why gas is four bucks a gallon. We care as much as we always have – we just care about the wrong things: entertainment, as opposed to informed choices; trivia vs. hardcore ideological debate.)

It’s Sunday afternoon at the Coliseum folks, and all good fun, but the hordes are crossing the Alps and headed for modern day Rome – better educated, harder working, and willing to sacrifice today for a better tomorrow. Can it be any wonder that an estimated 1% of America’s wealth migrates into foreign hands hands every year? We, as a people, are overweight, poorly educated, overindulged, and imbued with such a sense or self importance on a geopolitical scale, that our allies are dropping like flies. “Yes we can?” Well, if so, then the “we” is the critical element, not the leader that will be chosen in November. Let’s get off the couch and shape up-physically, intellectually, and institutionally-and begin to make some informed choices about our future. Lincoln didn’t say it, but might have agreed, that the worst part about being fooled is fooling yourself, and as a nation, we’ve been doing a pretty good job of that for a long time now.

Bill Gross – Investment Outlook – June 2008 – “Hmmmmm”

Tags: Alps, America, Bill Gross, BRICs, Britney Spears, cent, Emerging Markets, energy, energy discussion, EUM, Fixed Income, Healthcare System, Hordes, Illinois, inflation, Investment Wisdom, Lincoln, Lindsay Lohan, Markets, philosophy, PIMCO, preacher, risk, Rome, Value
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