Thursday, March 25, 2010

Update 3/25

Copper and the UK Pound are beginning to come down; I'm thinking by week's end I'll get filled on the sterling. My orders were to sell the GBP @ $1.485 and to sell Copper at $3.18. I must say copper has held up surprisingly well, especially yesterday when the brutal new housing numbers came in and the USD soared. Upon advice of one of the best, I'm going to buy the ETF YCS, which is the short yen fund; I'm going to buy at $20.75, and I'm going to buy two hundred of them. An ETF is rather like commodities trading only on the stock markets, though a tad less dangerous. As the Yen goes down, the YCS goes up. This will be a long term trade, with a short term goal of $24.00 and a long term goal of $30.00. The reason is that the Japanese Gov't will do pretty much anything to avoid deflation and watching their exports become uncompetetive.

Yesterday Portugal's sovereign debt was downgraded by Moodys and the Euro tanked, sinking to $1.335/dollar. Ben Bernanke hates watching the USD soar; his main fear is deflation, and he's right to fear it. John Mauldin sees deflation making a menacing comeback and the stock markets tanking some 40%. Given that the EUrocrats are notoriously stuck in neutral when it comes to Greece and other countries in trouble, I still see an IMF bailout for Greece.. with an assist from Ben Bernanke. Portugal will very shortly join the ciesta of shame. In addition, look for Bernanke to do something, perhaps US Bond,MBS and/or states bond purchases, to help defeat deflation. Mauldin sees deflation overwhelming the stock market; I believe Bernanke will do whatever's necessary, including negative interest rates, to tame the deflation lion. Step by step, we're having a race to the bottom, and so far the US, China & Japan are in the lead. Beggar thy Neighbor has arrived:

Update 4:30pm:

The sterling closed today at $1.4815, so I'm now "short" one sterling contract. My ETF YCS today closed at 21.06, a nifty gain for me today on day one of this trade.

In other news, the EU and IMF have agreed to an aid package for Greece, something I did'nt expect after Angela Merkel essentially told her country "nein" on Greek aid. Interestingly enough, the Euro went down instead of up after this.

The USD is on a tear of late. Worse, there was a bond auction today on the 7 year US Bond, and it went terrible. If the USD continues to soar and US Bond rates continue rising, Helicopter Ben Bernanke will, without the slightest notice or doubt, act forcefully to stop these trends. What Helicopter fears most is deflation and higher bond rates (In my 2010 outlook this was my opening statement). If Helicopter acts suddenly, my Yen and Sterling trades are going to end very ugly. A few more days like this and Helicopter will act.

Therefore, at the close tomorrow, I'm going to exit both the Yen ETF and GBP trades regardless of where they are. In addition, I'm going to place an order to "buy" a mini-Silver contract at $17.20/oz (today's close was at $16.73).

No comments:

Post a Comment