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Global Tactical Asset Allocation Q3 Update: Currencies
The always insightful market observers at Global Tactical Asset Allocation have released their third Q3 update compendium following equities and credit, this time focusing on FX, which is a must read for everyone trading currencies. Not surprisingly, the US Dollar is the fulcrum currency of choice: "The USD is becoming increasingly undervalued against most currencies and ridiculously so against some. It is at a 40 year low on a real broad trade-weighted basis. Its economy is much more dynamic and has started to rebalance earlier than other developed economies. Companies have been cutting costs aggressively and are much more competitive in the international markets. They are many challenges ahead but currencies are not an absolute bet on a country but a relative one...The 2 main problems remain are that: 1. the Fed is suppressing real government bond yields through quantitative easing. Ceteris paribus, the USD will have to be more undervalued on a PPP basis to be in equilibrium. Indeed, the deficit of interests payment foreigners are receiving has to be compensated by a lower price I.e. lower USD (this is another reason, beside the Balassa-Samuelson effect, why emerging markets with negative real yields have very undervalued currencies on a PPP basis). At current levels we think the compensation is large enough. 2. Uncertainties regarding future fiscal initiatives and long-term deficit reduction plans are high and foreign investors do not like incertitude." Naturally the result leads to Fx warfare, and other undesirable yet very exciting developments in FX trading. For everything one needs to develop an opinion on a given currency, including valuations, sentiment, liquidity, trade, seasonality, and more technical analysis that is healthy, this is the presentation for you.
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The Bearing thinks all currencies are risky.
Diversify into gold if you have none or not enough.
Sleep soundly... ZZZzzzz...
Tyler - thanks. Novice fx traders like myself appreciate this.
DoChen - teach your children well, buddy. The good guys ain't winning this go-round but can in the future. As messed up as it sounds, the world needs your offspring!
Is \/\/eed a currency?
Anything can be currencie.
curry n' sea.
Then let's just agree that Family Ties dvd's should be the new world reserve currency. Steven Keaton was the best TV dad ever and this show had the best theme song ever. Plus, unlike gold, it's something Rothschild doesn't have more of than you or me!
http://www.youtube.com/watch?v=4WHIRFqWx8I
The content is great and perfect for what you're trying to say. Awesome web site. Waiting for more posts on this article to read more. Keep up your excellency and efficiency in this same levels.
buy facebook likes
This morning the U.S. Federal Reserve released a statement from the Federal Open Market Committee (these are the muppets who set U.S. interest rates).
Here’s a selection from the statement:
“Information received since the… Committee met in April indicates that the economic recovery is continuing at a moderate pace, though somewhat more slowly than the Committee had expected. Also, recent labor market indicators have been weaker than anticipated.”
We know what the interventionists are thinking, “Dang, we should’a done more…”
Meanwhile, across the pond from Washington D.C., the Financial Times reports on the latest minutes from the Bank of England Monetary Policy Committee (these are the pommy muppets who set U.K. interest rates).
The FT says:
“Bank of England’s interest rate setting committee voted 7 to 2 in favour of holding down interest rates at record low levels but raised fears the recovery could be longer than expected.”
We know what the interventionists are thinking, “Blast it dear boy, we didn’t do enough…”
From, The Daily Reckoning email Newsletter...Highly recommended you join up to receieve their brilliant bits of information.
Does the slope of the yield curve have any meaning anymore since the Fed is buying most of the bonds and manipulating the curve at this point. Used to be the 10yr Note spread to the 3mo. bill was predictive for some folks:
http://www.uta.edu/faculty/crowder/papers/rdg06.pdf
Anyone still beleive this?
SHow your love for Ben here :-)
http://www.cnbc.com/id/43484679/
Now that was funny ... 96% with no confidence in Bernanke!
Do you have confidence in the way Ben Bernanke is handling the economy?
Yes = 4%
N0 = 96%
Total Votes: 20,177
(I hope i didn't bias the result ... LOL)
So the EU sack of shit is overvalued against the US sack of shit? Guess I'll hafta take their word for it, cuz no matter how hard I try to figure all this out, I still don't know shit.
No this is bullshit.
The EU is a net CREDITOR FOR FUCK SAKES, not the biggest debtor nation in the world with the biggest trade deficit in history with forex reserves of what ?.... 50 billion ?
GHOSTRADER Is \/\/eed a currency?
On the surface at first blush this seems to be a smart ass post.
Ron Paul & Barney Frank, both Congressional powerhouses have TODAY sponsored legislation to legalize pot. THIS could be the monetary stimulus that Bernanke , Geithner , Summers, Rubin , Volker , Blankfein , Immelt, Obama etc., etc never thought of. Tens of millions of dope dealers out on the streets creating VELOCITY of money in an otherwise dead economy.
BTW , I'm clean & sober for over 20 years
LOL, that was the article I read right before posting the post you quoted.
The question was rethorical.
Of cause it is!!!
Let me get this straight, according to GTAA, against the USD, the pound is slightly overvalued but
could go to parity. the Euro is 12-15% overvalued but could go to parity. NZD 20% overvalued,
AUD 50% overvalued, CHF 50% overvalued, CAD 15% overvalued, and the Yen is 25%
overvalued. Does this mean I should cash in my PM for dollars?
Don't cash your PM Dummy.
Wait. How long? Wait some more.
Unless they find a new comstock load, pm is going to be tough to debase. With the supermassive black hole of debt swallowing currencies (usd) faster than they can be printed, most all "savings" probably should (and eventually will) be in pm.
So many charts. Zorba so confused. Maybe Zorba listen to HungrySeagull and wait some more.
Why does the author assume that
The USD is becoming increasingly undervalued against most currencies and ridiculously so against some.
just because
It is at a 40 year low on a real broad trade-weighted basis.
How about its at a 40 year low because it aint worth a blue bag full of doggie doo.
Since all currency is relative to the group, Dollar doesn't have to be the "fastest runner" to escape a bear attack, it just has to avoid being the "helplessly defenceless fatso". I always speak in metaphors :)
How do you know if something that doesn't exist is undervalued against other things that don't exist?
Screw the Chinese! They are playing energy shortages as ( inflation excuses) The PBoC likes an excuse for reserve requirement hikes to be hid from the west. More over, the PBoC loves revaluing the YUAN on the backs of the Chinese, as opposed to {HIGHER INTEREST} RATES!
YEN(dot)
Some issues are really left to be undone. Although, I don't quite understand what's going around with the post, I just red it. And nothing came into my mind. Sorry. But anyway, since everybody is saying it's a nice post, I would also say great post mate. Thermage