Friday April 30, 2010 - 14:55:47 GMT
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Black Swan Capital - www.blackswantrading.com
Key News & Comment Hodge PodgeKey News & Comment Hodge Podge
- Euro members facing â€śdramaticallyâ€ť rising debt burdens need to push through budget cuts on a similar scale to those imposed by Latvia, said the Baltic nationâ€™s Prime Minister, Valdis Dombrovskis, who oversaw the European Unionâ€™s toughest austerity measures last year.
â€śFor the euro zone, there is no debate for devaluation, so internal devaluation and fiscal adjustment seems to be the only available tool,â€ť Dombrovskis said at an event in Munich today. â€śWe seem to be proving that we were able to manage something many thought was impossible -- an internal devaluation
GDP Impact from an â€śinternal devaluationâ€ť was an 18.96% YOY decline for Latvia
: [Chart not available in text format.]
The straight jacket of the euro is what we call this. I wonder how many politicians within the fiscally broken states have the courage or the ability to force these kinds of internal adjustments. It may be a lot easier to just leave the euro and devalue accordingly. Can you say Drachma, Lira, Escudo, and Peseta?
- South African credit contracted for a sixth consecutive month in March as consumers curbed spending and banks tightened lending conditions. (Bloomberg)
When we look at the relative performance of South Africa we keep wondering why this currency continues to outperform the dollar and others by so much.
SA Rand-USD, AUD-USD, and CAD-USD Weekly: [Chart not available in text format.]
But the answer is a simple one: all things commodities, plus hot money still likes the yield in South Africa. But relative to the outsized economic growth numbers being produced by the likes of Australia, Canada, and Brazil, in comparison South Africa continues to lag.
South Africa GDP YOY % Change: [Chart not available in text format.]
It will be interesting to watch the South African rand and economy once that soccer money dries up. Stay tuned.
â€˘ The Bank of Japan said on Friday it needed to do more to foster economic growth and renewed its commitment to ultra-loose monetary policy even as it signaled deflation may end sooner than earlier thought. (Reuters)
Comment: Many commentators look at the latest missives from Japan and the BOJ as more of the same. We see it differently. We believe Japan when they say they want USDJPY to rise to 120. There will be the liquidity backdrop to make it happen. We do think intervention when needed will be part of the process. And we continue to think that ongoing normalization of rates elsewhere leaves the yen right where the BOJ wants itâ€”as the key carry trade currency again.
US Imports from Japan Absolute Value (black line) versus USDJPY (purple line): [Chart not available in text format.]Quotable
â€śHappiness? A good cigar, a good meal, a good cigar and a good woman - or a bad woman; it depends on how much happiness you can handle.â€ť â€”George Burns
Black Swan Capital
www.blackswantrading.com Currencies are another asset class â€¦ David Newman here ... on Investing versus Trading
How many times have you seen pictures of people sitting on the beach with their laptop in hand in those â€śTrade Forex Commission Freeâ€ť advertisements? Open a FX account, quit your real job, sit on the beach and get rich is the implicit 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€¦and you donâ€™t have to take that much risk in order to get involved in currencies. Trading can be profitable; but it requires extreme focus and discipline. There is another way if you want to â€śinvestâ€ť in currencies. Investing in currencies for the long haul means using currencies as another asset class in your portfolio. An asset class that will stand along stocks and bonds and hopefully provide some much needed diversification.
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). An ETF is a simple straightforward currency product that you can buy and sell in your standard equity brokerage account. Itâ€™s the same as buying any other fund traded on the exchange. 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.
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All the best,
Director of Sales and Marketing
Black Swan Capital
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