Wednesday March 3, 2010 - 16:49:38 GMT
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Black Swan Capital - www.blackswantrading.com
Greece stabilized? If so, what next for euro? ECB rate cut?
Banks and regulators from across Europe have been summoned by the European Commission to discuss regulation of the market for sovereign credit default swaps in the wake of the Greek debt crisis. (Bloomberg)
Chinaâ€™s hidden borrowing may push government debt to 96 percent of gross domestic product next year.
â€śAfter spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting.â€ť
FX Trading â€“ Greece stabilized? If so, what next for euro? ECB rate cut?
Some analysts have the view that if Greece is stabilized it will prove the euro has passed a major test, and lead to a fresh new rally against the US dollar. Of course we can never say never when it comes to trading/investing, but it seems an unlikely course precisely because of the key element needed by Greece and the other states in fiscal jeopardy- austerity.
Letâ€™s suspend our disbelief for a moment and assume the respective parliaments among the key countries do muster the political courage to pass and implement real reform. Given Europeans love for nanny-state socialism, that will not be easy.
Draconian austerity will most likely lead to much slower economic growth throughout the Eurozone. Interesting that Germany, the European paymaster, is calling for austerity that will likely impact its exports very negatively. Another sour spot for German taxpayers I am sure ... as exports to Eurozone 25 countries have been on the mend likely as a result of much government stimulus money that is due to vanish if real austerity is tried: [Chart not available in text format.]
And another country, that buys a decent amount of Eurozone bonds, China, wonâ€™t be too happy if its exports to the Eurozone take another hit ... [Chart not available in text format.]
It would seem that slower growth in the Eurozone, in the midst of deleveraging debt, increases the odds the next move by the European Central Bank will be down, instead of up, as unemployment across the zone is high and will likely grow on austerity moves ... [Chart not available in text format.]
And monetary velocity is likely to fall, multiplying the impact of slow money growth throughout the Eurozone: [Chart not available in text format.]
All those charts to make this point: If growth slows because of austerity and the ECB is forced to cut interest rates (or at least is forced to remain on hold for a very long time), the advantage shifts decisively to the US dollar relative to the euro.
No doubt, we could see a healthy euro bounce if it muddles through this period of major risk. But when the hard grind and economic impact of real reform starts to settle into the market, we think the euroâ€™s most likely path is lower against the dollar. And that eventuality would suit the European states the need major adjustment just fine.
You donâ€™t have to be a trader to make money in currencies â€¦
David Newman hereâ€¦Todayâ€™s Currency Currents lays out a longer term fundamental reason why the euro should continue to fade against the US dollar. It is the type of investment you can harness in the currency market without having to be a highly disciplined and focused trader.
Iâ€™m fortunate to get to speak to a lot of very nice people each day interested in Black Swanâ€™s currency services. Often I hear the same question: Donâ€™t I have to be a short- term trader, staring at my screen all day, and using dangerous amounts of leverage to profit in the currency market? The answer is no.
Unfortunately most of the marketing real people see is from the spot forex brokers who seem to encourage overtrading and too much leverage in an account. Itâ€™s not that this type of trading canâ€™t be profitable, but most people are just not cut out to be traders.
How many times have you seen pictures of people sitting on the beach with their laptop in hand in those FX ads? Open a FX account, quit your real job, sit on the beach and get rich is the message. Itâ€™s ridiculous! But unfortunately that is what sells.
It doesnâ€™t have to be that way. You donâ€™t have to buy into the hypeâ€¦
There are plenty of low leveraged long-term investment choices available to you so you can make real money in currencies. They are called Currency Exchange Traded Funds (ETFs). It is a simple straightforward currency product that you can buy and sell in your standard equity brokerage account. We offer recommendations on Currency ETFs in our month Currency Investor newsletter. We donâ€™t recommend trading them; we do recommend investing in them using a long-term buy and hold strategy.
To sum it up: Our monthly Currency Investor newsletter is geared toward newcomers and experienced investors who are looking for a conservative approach to the foreign exchange market, and learning more about how the global economy works.
In plain language we deliver global macroeconomic analysis and actionable ideas geared toward exchange rate fluctuations.
Our analysis is comprehensible and our recommendations consist of ETFs, as I said, so donâ€™t get turned off by buzz words like â€śexchange ratesâ€ť or â€śforeign exchangeâ€ť â€“ this investing strategy is as easy to implement as buying and selling stocks.
Plus, at $39 per year itâ€™s a deal youâ€™d be hard-pressed to find anywhere else.
Thorough global analysis plus complete investment guidance ... and all for only $39 per year? You canâ€™t beat that with a stick. Click here to sign up ...
All the best,
Director of Sales and Marketing
Black Swan Capital
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