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Take a Second Visit to the Trough for the Australian Dollar.
Many readers made a killing last February when I recommended that they buy Australian dollars and short the euro and the yen against it (click here for the call at http://www.madhedgefundtrader.com/February_4__2010.html ). The outright Ausie/US Dollar (FXA) jumped from $AUS.85 to $AUS.92, while the cross soared from AUS$.63 to AUS$.72, which, if you used the 5:1 leveraged on the futures I suggested, brought in a 71% return.
Since then, the lucky country has become accident prone, shooting itself in the foot with both barrels of a side by side shotgun, and I hope you all kept your trailing stops in place. A lot of the hottest hedge fund money poured into The Land Down Under, and when the global risk reversal came (click here for that call at http://www.madhedgefundtrader.com/May_7__2010.html ), the baby got through out with the bathwater.
Then the Australian government announced a 40% special tax on the profits of mining companies to fund anticipated social service costs down the road. The blow was serious enough to torpedo Peabody Energy’s (BTU) $3.5 billion takeover of McArthur Coal (MCC.AX), and several other major foreign investments have been put on hold.
I still think Australia is blessed, with that perfect combination of huge resource and energy exports, a strong economy, rising interest rates, and a small population to support. So you should start scaling back into the Ausie dollar around AUS$.80, the Ausie/euro cross at AUS$.65. And when you want to go back into equities, Australian stocks (EWA), which have lost a mind blowing 25% in the past month, should be at the top of your list too.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on the “Today’s Radio Show” menu tab on the left on my home page.
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madhedgefundtrader, how bout you take a break from posts and focus on your portfolio. If you're taking your own advice, you must be in a deep asshole.
I enjoyed his posts in the past... But recommending the aussie on fundamentals? Gimmie a break, if the aussie rallies it's because of risk taking. Nothing else matters right now, nothing else has mattered in the last three years.
the baby "got through out" with the bathwater?
WOW!!!
http://www.kitco.com/ind/charnock/may262010.html
I know not a favorite here, but echo's MHFT article.....time is fast approaching to get IN.
It's called a double barrel.
Your calls suck and yet you are most blissful. Every broken clock is right twice within a 24 hour span of time.
FYI JD - A double barrel shotgun can either be a side by side or an over / under.
That's true, thanks.
Yeah and a lot of traders got their butts fucked when you recommended DBA but I don't hear you bringing that back up again. Asshole.
Always do the opposite of what this guy recommends, I guarantee it will make you money....
It's funny. I was looking for a grain ETF and thought DBA would be the answer. In looking at the prospectus, I found the the majority of their holdings were in coffee, chocolate, and sugar. No thanks. Sounds like luxury food to me.
RJA has a bit better allocation than that. Wheat, corn, soybeans, cotton are the most heavily weighted. http://www.elementsetn.com/pdfs/ELEMENTS-RJA.pdf
If you are interested in DBA, buy it for an IRA, not your taxable brokerage account. The tax hoops you have to jump through for DBA are irritating.
http://www.theaustralian.com.au/politics/kevin-rudd-to-backflip-on-minin...
How much of the Aussie economy are energy and resources?
30% are energy and resources.
42% financial services
Huge housing bubble, 4 main banks which 2 (Commonwealth and Westpac) have 50% of their assets in Aussie mortgages.
Housing finance approvals falling, listings rising. When the 10times median house price against annual income bursts, its going to be ugly.
Last quarter housing investment loans (speculators rental yield is less than 3%) came in at 26% of GDP.
If you want to read about Australia try bubblepedia.net.au or debtdeflationblog.com.au
The aussie won't be spared in the coming months. Recommend short AUD/USD cross when it bounces to 0.86...
I'm onboard with this. Just picked up some FXA on the tail a tad under 82 last week. At 86, that baby's out the door!