Swiss Quit on Their Own Currency

Today, Switzerland signaled to the world that it will attempt to flush the Swiss Franc down the bowl faster than the other fiat currencies of the world.

Not only did the Swiss National Bank cut it's target rate to 0.25 percent (from 0.5 percent), but the central bank also began selling the currency, marking it's first intervention in the Forex markets since 1992 (source: Bloomberg).

The fact that no country in the history of the world has ever devalued its way to prosperity does not seem to discourage central banks.

It's a sad, sad day when the Swiss - of all people - give up on their own currency.

Weekly Positions Update - 6/08/08

Alright back in the saddle here. Was attending my 5-year college reunion past 4 days - man did I miss some crazy action on Thu/Fri.

Back this week and we'll try to figure out where these crazy markets are heading!

Open Positions Date Position Qty Month/Yr Contract Strike Call/Put Entry Price Last Price Profit/Loss 05/21/08 Long 1 JAN 09 Feeder Cattle 113.950 112.500 ($725.00) 05/21/08 Long 1 JAN 09 Feeder Cattle 114.000 112.500 ($750.00) 05/27/08 Long 1 JAN 09 Feeder Cattle 115.200 112.500 ($1,350.00) 05/08/08 Long 1 OCT 08 Live Cattle 105.350 107.575 $890.00 05/09/08 Long 1 OCT 08 Live Cattle 106.700 107.575 $350.00 05/21/08 Long 1 JUN 08 Swiss Franc 0.974100 0.9796 $687.50 Net Profit/Loss On Open Positions: ($897.50)

Account Balances
Current Cash Balance	$94,414.89
Open Trade Equity	($897.50)
Total Equity	$93,517.39
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$93,517.39

Cashed out: $15,000.00
Total value: $108,517.39

Weekly return: -2.1%
YTD return: 39.0%

***BTW, I usually "cash out" money just to pay for taxes, rent, and cheap beer. So total value is all pre-tax.

Weekly Positions Update - 6/01/08

You know, I wish I had something interesting or insightful to say. Last week sucked, and I'm just glad to be out of my losing positions (silver - ouch, pork bellies - rallied since, of course).

Did a bit of thinking, and it's probably time I start following my own advice. Keep position sizes manageable, and just play the long term trends. Large position sizing has me jumping in and out of things too often - and I'm just getting chopped to hell by the volatility of it. I love the prospects of meat over the next year, and need to just keep things manageable so that I can stay in this trade.

In the meantime I'll continue to keep an eye on the softs (sugar, coffee, cotton in particular) to see when things look closer to a breakout.

Open Positions

Date Position Qty Month/Yr Contract Strike Call/Put Entry Price Last Price Profit/Loss 05/21/08 Long 1 JAN 09 Feeder Cattle 113.950 115.250 $650.00 05/21/08 Long 1 JAN 09 Feeder Cattle 114.000 115.250 $625.00 05/27/08 Long 1 JAN 09 Feeder Cattle 115.200 115.250 $25.00 05/08/08 Long 1 OCT 08 Live Cattle 105.350 108.300 $1,180.00 05/09/08 Long 1 OCT 08 Live Cattle 106.700 108.300 $640.00 05/21/08 Long 1 JUN 08 Swiss Franc 0.974100 0.9577 ($2,050.00) Net Profit/Loss On Open Positions: $1,070.00

Account Balances
Current Cash Balance	$94,414.89
Open Trade Equity	$1,070.00
Total Equity	$95,484.89
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$95,484.89

Cashed out: $15,000.00
Total value: $110,484.89

Weekly return: -9.4% <------- This is not good. C'mon man, get your head outta yer ass!
YTD return: 41.6%

***BTW, I usually "cash out" money just to pay for taxes, rent, and cheap beer. So total value is all pre-tax.

Video: Jim Rogers on the current economic situation

Jim Rogers on CNBC yesterday, with everyone's favorite Money Honey, Maria Bartiromo.

Thanks Toby for the find on this one.

Kevin Kerr: The Food Crisis, A First-Hand Report

Same story we've been following here. A nice rally in the grains today, and a little bit of life in the softs as well.

Can corn continue to break out from here? It's been rangebound for the past couple of months - I keep thinking that fundamentals will eventually prevail and push corn past the $7 mark.

In a "close your eyes and buy" trade, I picked up a mini Nat Gas contract this morning. I've been itching to buy it since it crossed the $8 mark, but lacked the testicular fortitude. I hate the volatility of Nat Gas, but no doubt which way the trend is going.

Also keeping a close eye on the Yen and Swiss Franc here. Both appear cheap, but could head lower as long as the "good times" remain on Wall St. When the next leg of the bear market hits, I expect these two to shoot up.

JP Morgan exec: No near end to financial crisis

This beauty sure slipped under the radar. Maybe all is not right with the world again, just yet?

Dollar, Carry Trade Thoughts from Chuck Butler

A couple of good ones from Chuck in today's Daily Pfennig:

Well... How about that U.S. dollar? That's some currency Rudy! Why, look at it rallying against the euro and other currencies as if it's on a mission from God! It looks as if the U.S. has turned things around... The Deficit no longer needs to be financed with over $2 Billion a day in foreign investment... Interest rates are where they need to be to fight this soaring inflation... The Government has stopped spending wildly, and the Budget is balanced... The mortgage lenders have recovered all of their losses... There is no longer a credit crunch... And finally, the war is the Middle East is over...

But Wait! Unless I pulled a Rip Van Winkle and slept through all of that... These things haven't happened, nor do they look as though they might begin to happen any time soon! So, what the heck has the dollar bulls dancing in the streets swinging a mighty hammer?

And on the carry trades:

The U.S. stock market has been on a feeding frenzy since the rate cut on Wednesday... All this euphoria in stocks has the Carry Trade going great guns once again... This is being reflected in the price of yen and Swiss francs... I just don't see how this can continue to go on and on and on... The Carry Trade has longer lasting power than the Energizer Bunny! But one day, it will all come crashing down like a house of cards... At least that's my opinion...

Daily Pfennig: Blue Light Specials on Yen, Swiss Franc

Currency guru Chuck Butler at the Daily Pfennig has been waiving the flag for the Swissie and Yen for some time, long before their recent moves up.

He loves them at today's prices:

Swiss francs are back to parity with the dollar, and even beyond! Japanese yen is flirting with a sub-100 figure too! I believe the term, "blue light specials" was used by someone (me!) a couple of weeks ago describing the cheaper levels to buy these currencies... I love it when a plan comes together!

Chuck Butler on the Swiss Franc

Chuck Butler on the Swiss Franc and potential end of the carry trade, from his must-read currency newsletter, the Daily Pfennig:

Swiss inflation is really putting the pressure on the Swiss National Bank (SNB) to raise interest rates... Inflation in Switzerland accelerated faster than expected in March. In fact, it was the fastest monthly pace in 14 years! OK, get ready for this... Because from that introduction, you would think inflation was out of control here, right? Well... Inflation rose to 2.6%... Nonetheless, this is higher than the SNB's target of 2%... So... Hopefully the SNB will not rely strictly on the stronger franc to combat this rise in inflation... A rate hike in Switzerland could all but end the short selling in francs...

Why you ask? Ahhh grasshopper, sit... You, see... When a low yielding currency is used as the funding currency of the Carry Trade, it is sold "short", and the proceeds are used to purchase a higher yielding currency... Since the "short" currency's yields are low, the borrowing costs are low too... (when you sell short, someone has to lend it to you to sell, thus you are borrowing the currency)... But if the borrowing costs begin rise, that causes the trade to lose... And who wants a "losing" trade?

So... Grasshopper... If Switzerland's interest rates would go higher, their borrowing costs would go higher. This would cause the Carry Trades using Swiss francs as a funding currency to unwind, which means the "short" would get covered, and to cover a short... You BUY the currency! Thus driving the price of Swiss francs higher! YAHOO! That's it... That's all there is!

Times Online: Dollar tumble spells trouble for yen trade

Full article

Summary:

• We all know the yen carry trade - folks borrow "cheap" yen (paying unnaturally low interest rates), invest in higher yielding terrain (ie. Australian dollar) and leverage the shit out of it.
• This doesn't work when the yen rises - as it is now. I had assumed that most of the carry trade was "unwound" - but this article suggests the real fireworks could be ahead of us.
  

Dollar Ready to Rally vs. Euro?

Interesting take in Daily Wealth on why the dollar is about to rally vs. the Euro (scroll to bottom - though the top article is good too).

My opinion - even if the dollar does not rally vs. the Euro, I don't think it has much farther to fall vs. the Euro either. However the dollar does have a ways to drop vs. the Asian currencies in order to restore some sort of balance to the trade balances - those currencies have been artificially depressed for some time.

And don't forget the carry trade currencies - favorite of Jim Rogers right now - the Swiss franc and Japanese yen.

Weekly Positions Update - 11/11/07

Story of last week for me was the carry trades unwinding. With the stock markets getting slammed, traders and investors are running away from risk. When that happens, the carry trade unwinds fast and furious.

The Swiss Franc and the Yen, the two currencies that are borrowed for the carry trade, both rallied strong on the unwinding.

Unfortunately for me, the Aussie dollar got slammed from mid-week on. The Aussie has been a beneficiary of the carry trade, so it takes a hit (usually temporary) when this unwinds.

I have to admit I got pretty carried away as the Aussie dropped, and kept buying...and buying...and buying. Thus I head into tomorrow morning with a dangerous 7 positions in the Aussie dollar. Leverage and huge positions like this are very irresponsible, but at least it's entertaining for you. I'll be the one at my computer screen watching every tick, wanting to vomit on any down draft.

Here's hoping for a quick swing up so that I can unload some positions. In case you're on the sidelines right now, I think 0.91 is a steal for the Aussie - it could rally to 0.93 or 0.94 easily within the next couple of weeks.

Date	Position	Qty	Month/Yr	Contract	Strike	Call/Put	Entry Price	Last Price	Profit/Loss	Market Value	Action
11/01/07	Long	2	DEC 07	Australian Dlr			0.9135	0.9117	($360.00)
11/09/07	Long	1	DEC 07	Australian Dlr			0.9138	0.9117	($210.00)
11/09/07	Long	1	DEC 07	Australian Dlr			0.9138	0.9117	($210.00)
10/29/07	Long	1	DEC 07	Australian Dlr			0.9188	0.9117	($710.00)
11/08/07	Long	1	DEC 07	Australian Dlr			0.9262	0.9117	($1,450.00)
10/31/07	Long	1	DEC 07	Australian Dlr			0.9285	0.9117	($1,680.00)
11/09/07	Long	1	MAR 08	Cotton			68.97	69.31	$170.00
01/22/07	Long	1	DEC 08	Cotton			63.00	75.03	$6,015.00
04/16/07	Long	1	DEC 08	Cotton			64.50	75.03	$5,265.00
11/09/07	Long	3	MAR 08	Coffee 'C'			126.05	126.10	$56.25
03/29/07	Long	1	NOV 09	Soybeans			828	945	$5,850.00
09/26/07	Long	1	MAR 08	Sugar #11			10.02	10.04	$22.40
08/11/06	Long	1	MAR 08	Sugar #11			14.50	10.04	($4,995.20)
06/04/07	Long	2	JUL 08	Sugar #11			10.05	10.31	$582.40
08/01/07	Long	1	JUL 08	Sugar #11			10.48	10.31	($190.40)
10/18/06	Long	1	JUL 08	Sugar #11			12.08	10.31	($1,982.40)
10/31/07	Long	1	DEC 07	Swiss Franc			0.864500	0.8927	$3,525.00
10/31/07	Long	1	DEC 07	Mini Gold			789.2	834.6	$1,507.28
10/31/07	Long	1	DEC 07	Mini Gold			797.2	834.6	$1,241.68
10/31/07	Long	1	DEC 07	Mini Gold			797.3	834.6	$1,238.36
Net Profit/Loss On Open Positions:									$13,685.37

Current Cash Balance	$74,107.28
Open Trade Equity	$13,685.37
Total Equity	$87,792.65
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$87,792.65

Cashed out: $5,000.00
Total value: $92,792.65