Tuesday, January 13, 2009
World Currency Plays
Lets start by looking at some charts.
Look how GBP has cratered against US$:
EUR weakening against US$ after some technical strength last few weeks – should go below low point from a couple of months back:
The AUD’s cratered against US$ too, but should go lower a bit more:
And finally I expect the CAD to continue to weaken against US$ for about 2yrs – technically that’s what is indicated – US$ becoming stronger in the Americas:
Although I have a feeling at least the EUR (if not all of them) will go lower against the $, before starting to recover (I’m thinking $1.10/1EUR is a great place to get in – its @ 1.33 now). Basically folks want the safety of $ now (short to mid-term until another currency gains decent foothold in the commodities/world market as de-facto currency), since Obama is promising to pour money (literally) into the economy, and EU & UK are still getting worse just like the US . I believe EU & UK manufacture more than the US today (especially Germany for e.g.), and will eventually bounce back faster than US, but the amount of money expected to be poured into the US economy will be far greater than they can/want to spend.
Long-term this kind of spending will put massive pressure on the US $, which is what I’m hedging on happening. But for now, let these currencies get cheaper for us to afford more of them, and then pounce & ride them up.
The yen is a different matter – its become very strong against the $ (strongest ever in at least 10 years) - still don’t understand why – latest report is apparently because they’re pouring more money into their economy than us (but I still don’t get it). Bottom-line, can’t afford to buy now – I wanted to buy when rate was 100yen to $1, but wasn’t sure of myself & couldn’t get myself to commit; now its @ 89 – both damn (for not pulling the trigger) & wow (since I was right & didn’t think I could be that right)!
I’d put more money into the EUR than AUD or GBP, but I want to hedge against the EUR using the GBP. Long-term I think the English will switch over to the EUR, but that’s probably a generation (~decade) away.
Both AUD & CAD should get stronger as the world starts expanding again and starts buying up commodities – both countries are commodity rich, but that will take at least 2 years or so to happen – India is in for a real bad time with economy, elections probably in May and now huge corporate scandals (first Satyam, & now Wipro), and China needs to digest its decade long growth (from a cities standpoint, while Gov focuses on rural growth) & exports recover (Olympics over – so no reason for massive boost to cities and make the local honchos more powerful).
Will stay out of South American currencies, since their governments are corrupt at best and will usurp our money at the drop of a hat (see what Argentina did by deciding to default on debt – brazenly). Brazil (oil & natural resources) & Mexico (oil & cheap import points for the US) may turn out to be long-term winners – just don’t want to take the risk when richer feeding grounds available that are better able to withstand currency/economic crises – EU, Australia, Canada & UK.
Look how GBP has cratered against US$:
EUR weakening against US$ after some technical strength last few weeks – should go below low point from a couple of months back:
The AUD’s cratered against US$ too, but should go lower a bit more:
And finally I expect the CAD to continue to weaken against US$ for about 2yrs – technically that’s what is indicated – US$ becoming stronger in the Americas:
Although I have a feeling at least the EUR (if not all of them) will go lower against the $, before starting to recover (I’m thinking $1.10/1EUR is a great place to get in – its @ 1.33 now). Basically folks want the safety of $ now (short to mid-term until another currency gains decent foothold in the commodities/world market as de-facto currency), since Obama is promising to pour money (literally) into the economy, and EU & UK are still getting worse just like the US . I believe EU & UK manufacture more than the US today (especially Germany for e.g.), and will eventually bounce back faster than US, but the amount of money expected to be poured into the US economy will be far greater than they can/want to spend.
Long-term this kind of spending will put massive pressure on the US $, which is what I’m hedging on happening. But for now, let these currencies get cheaper for us to afford more of them, and then pounce & ride them up.
The yen is a different matter – its become very strong against the $ (strongest ever in at least 10 years) - still don’t understand why – latest report is apparently because they’re pouring more money into their economy than us (but I still don’t get it). Bottom-line, can’t afford to buy now – I wanted to buy when rate was 100yen to $1, but wasn’t sure of myself & couldn’t get myself to commit; now its @ 89 – both damn (for not pulling the trigger) & wow (since I was right & didn’t think I could be that right)!
I’d put more money into the EUR than AUD or GBP, but I want to hedge against the EUR using the GBP. Long-term I think the English will switch over to the EUR, but that’s probably a generation (~decade) away.
Both AUD & CAD should get stronger as the world starts expanding again and starts buying up commodities – both countries are commodity rich, but that will take at least 2 years or so to happen – India is in for a real bad time with economy, elections probably in May and now huge corporate scandals (first Satyam, & now Wipro), and China needs to digest its decade long growth (from a cities standpoint, while Gov focuses on rural growth) & exports recover (Olympics over – so no reason for massive boost to cities and make the local honchos more powerful).
Will stay out of South American currencies, since their governments are corrupt at best and will usurp our money at the drop of a hat (see what Argentina did by deciding to default on debt – brazenly). Brazil (oil & natural resources) & Mexico (oil & cheap import points for the US) may turn out to be long-term winners – just don’t want to take the risk when richer feeding grounds available that are better able to withstand currency/economic crises – EU, Australia, Canada & UK.
