m22au's journal
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Just noting that following today's weak jobs report, EUR, GBP, AUD all outperformed the S&P 500.
1. Initial reaction to jobs report: S&P 500 down, EUR, GBP and AUD all stronger against USD.
2. Secondary reaction:
Then EUR, GBP and AUD undercut their 8.30am levels on a 'risk-off' trade.
3. Tertiary reaction:
But this didn't last long: EUR, GBP and AUD all made new highs against USD.
***
Previously it was only JPY, CHF and gold that did well against USD when there was weak economic data.
But today, the "risk-on" currencies joined the party. Yes, I do recognise that the ES recovered from 1294-ish to 1307-ish during the day, however, EUR, GBP, AUD didn't fall by much at all when ES crumbled to 1294.
1. Initial reaction to jobs report: S&P 500 down, EUR, GBP and AUD all stronger against USD.
2. Secondary reaction:
Then EUR, GBP and AUD undercut their 8.30am levels on a 'risk-off' trade.
3. Tertiary reaction:
But this didn't last long: EUR, GBP and AUD all made new highs against USD.
***
Previously it was only JPY, CHF and gold that did well against USD when there was weak economic data.
But today, the "risk-on" currencies joined the party. Yes, I do recognise that the ES recovered from 1294-ish to 1307-ish during the day, however, EUR, GBP, AUD didn't fall by much at all when ES crumbled to 1294.
A little short on recent posts, m22au... 
What are your thoughts on the current PIIGS situation? How will it resolve itself (or not)?
And as a long term bull on precious metals, have you bought the mini dip to $1500 in gold? Did you get caught on the Silver pullback or is it just a buying opportunity?
What are your thoughts on the current PIIGS situation? How will it resolve itself (or not)?
And as a long term bull on precious metals, have you bought the mini dip to $1500 in gold? Did you get caught on the Silver pullback or is it just a buying opportunity?
My apologies benwm, I didn't intend to disappoint my legion of fans out there
Regarding gold and silver:
I don't trade it. This is strictly a multi-year buy and hold, paired with a short position in equities. The thesis (as described in previous posts) is as follows:
1. Too much debt in many countries (not just US).
2a. IF hyperinflation THEN gold and equities go up, but gold goes up by more than equities, because it is a sound hyperinflation hedge. I also note that most of my equities shorts are in oil-sensitive sectors (airlines, carmakers) that would underperform due to hyperinflation causing oil price rises.
See these threads for more info:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=193390 (started March 2010) and
http://www.elitetrader.com/vb/showthread.php?s=&threadid=213873 (started January 2011)
2b. IF deflation THEN gold and equities go down, but gold goes down by less because it's perceived as a safe haven, particularly if faith in government bonds (not just US govt bonds) wanes.
This (2b) scenario is more and more unlikely, due to the existence of a Bernanke-put, and more widely, a central-bank-put in most countries.
Given the growing possibility of a bond market rout in the coming years in Spain, Italy, UK and Japan, this would also be good for gold. See next post for more info on that.
Regarding gold and silver:
I don't trade it. This is strictly a multi-year buy and hold, paired with a short position in equities. The thesis (as described in previous posts) is as follows:
1. Too much debt in many countries (not just US).
2a. IF hyperinflation THEN gold and equities go up, but gold goes up by more than equities, because it is a sound hyperinflation hedge. I also note that most of my equities shorts are in oil-sensitive sectors (airlines, carmakers) that would underperform due to hyperinflation causing oil price rises.
See these threads for more info:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=193390 (started March 2010) and
http://www.elitetrader.com/vb/showthread.php?s=&threadid=213873 (started January 2011)
2b. IF deflation THEN gold and equities go down, but gold goes down by less because it's perceived as a safe haven, particularly if faith in government bonds (not just US govt bonds) wanes.
This (2b) scenario is more and more unlikely, due to the existence of a Bernanke-put, and more widely, a central-bank-put in most countries.
Given the growing possibility of a bond market rout in the coming years in Spain, Italy, UK and Japan, this would also be good for gold. See next post for more info on that.
Regarding PIIGS:
The can will be kicked down the road again and again and again.
However, this will not solve the problem, and eventually at some point there will be some kind of default / restructuring for Greece, Ireland and Portugal.
As for what form that takes - it's anyone's guess.
I note that the EUR/USD rose from 1.18 in June 2010 to the high 1.40s recently. To me that is the market's message that the EUR won't be hurt too much if sovereign defaults are limited to the three countries listed above.
However the game will change completely if and when Spain and/or Italy need a bailout of some type - they are probably too big to save (especially Italy).
I rarely check the 10-year yield of Greece, Ireland and Portugal these days - as long as they are over 10%, to me that means it's a matter of when and not if they need a default / restructuring of some type.
However I am regularly checking the 10-year yields of Spain and Italy. I note that (ignoring last week's decline in yields) in June, Spain broke above 5.60% and Italy broke above 4.90%.
Also look at UK: GBP/USD has not rallied as much as other "risk currencies" this year. It has similar problems to the USA (slow economic growth, bloated banking sector), but without the massive benefit of foreign (Asian) investors willing to buy government debt.
And then there's the old favorite of Japan:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=181522
The can will be kicked down the road again and again and again.
However, this will not solve the problem, and eventually at some point there will be some kind of default / restructuring for Greece, Ireland and Portugal.
As for what form that takes - it's anyone's guess.
I note that the EUR/USD rose from 1.18 in June 2010 to the high 1.40s recently. To me that is the market's message that the EUR won't be hurt too much if sovereign defaults are limited to the three countries listed above.
However the game will change completely if and when Spain and/or Italy need a bailout of some type - they are probably too big to save (especially Italy).
I rarely check the 10-year yield of Greece, Ireland and Portugal these days - as long as they are over 10%, to me that means it's a matter of when and not if they need a default / restructuring of some type.
However I am regularly checking the 10-year yields of Spain and Italy. I note that (ignoring last week's decline in yields) in June, Spain broke above 5.60% and Italy broke above 4.90%.
Also look at UK: GBP/USD has not rallied as much as other "risk currencies" this year. It has similar problems to the USA (slow economic growth, bloated banking sector), but without the massive benefit of foreign (Asian) investors willing to buy government debt.
And then there's the old favorite of Japan:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=181522
regarding eu situation... there may be cute surprising baby pigs jumping out at any time. Read the other day commnets from german official that slovenia is just like greece and needs austerity measures.
and i am sure that there is more. anywhere property prices are irrationaly high for no reason, there is a banking problem. Rumunia, bulgaria, hungary.....
chinese 'help' but will ask for the cut of meat.
and i am sure that there is more. anywhere property prices are irrationaly high for no reason, there is a banking problem. Rumunia, bulgaria, hungary.....
chinese 'help' but will ask for the cut of meat.
I agree that there might be some "baby PIIGS" jumping out unexpectedly. However it seems to me that for EUR/USD traders, and also for (US) equity traders, Greece / Ireland / Portugal are only considered to be a small problem. For example, look at where the S&P 500 and EUR/USD are now, compared to late June 2010. Given this I doubt that Slovenia / Romania / Bulgaria / Hungary will be a problem for US stock traders.
However if and when the 10-year yields in Spain and Italy go beyond a certain point (6% ? 7% ?), then that's when it will be tough going for US stocks and for EURUSD.