Jan 14, 2005

Where I Stand

Near the end of last year I put on a tiny Short GBP long Yen trade and I am now looking to exit and look for a bounce to reshort. I also reentered a short AUD long Yen trade when it got back below my original stop. I plan to just keep rolling down my stop there. EUR/Yen has moved below the 135 level which I considered an important breakout and I will now be looking to short that on a bounce as well. Through the great dollar rally of 2005 the Yen has barely budged and I simply don't trust the dollar long term against the currencies that have been supporting it these last couple of years.

I have been outright wrong on interest rates in the U.S. for the last couple of months. I don't see how the market can continue shifting its estimates of short-term rates higher while the long-end stays down. If the market anticipates a slowdown why isn't it showing up in commodity prices or the equity markets? I continue to see it as an accident waiting to happen and would prefer to own foreign bonds for interest rate exposure. Either the Japanese short end or the European long-end with the currency hedged.

The markets are in a good position now both in price and by the market psychology to resume the rally from last year. I would own companies that make something whether it is a technology product or machinery, I just prefer something physical. I am generally nervous about the financials because they are most exposed to a credit event. They have still not really reacted to the changes at Fannie Mae (FNM) or the general deteriorating credit of consumers. I am short-term bullish only and if I wasn't comfortable trading actively I would just be investing in a foreign stock or bond index.


  1. It's amazing how FNM sticks around $70 despite the company being trashed week after week. I am taking the other side and betting that FNM has a sharp rally sometime this year as the shorts finally throw in the towel.


  2. Being long because shorts might throw in the towel is really not my type of strategy. Best of luck though.