This particular writing will help you master one of the most popular trading themes in the Forex world: The carry trade.
Just in case you’re new to currency trading, the carry trade involves buying a high-yielding currency (like British pound, Aussie or New Zealand dollars), and then funding that purchase with a lower-yielding currency (like the Japanese yen or Swiss franc). Then you pocket the difference between the low and high interest rates.
For years, investors alike have taken advantage of this trading strategy. But there’s just one problem: The carry trade is notorious for its volatility, so you can really only use the carry trade during stable markets.
Eye on the Business Cycle
So how do you know when you'll see stable markets again? Well, you have to know how the economy flows in and out of recessionary and recovery periods (also known as the "boom" and "bust" cycles).
In other words you have to understand what's known as the "business cycle." Today, I'm going to tell you how the business cycle influences the carry trade so you can master this trade.
You see, savvy stock investors watch the business cycle for their trades. They know which sectors profit at certain points in the cycle. They also know the exact moment when an economy is about to turn up or down by watching this cycle. So let's talk more about this so that you can find out how it affects the carry trade (especially ones like EUR/JPY).
The business cycle looks like the waves in the ocean. Let's take a look at a visual below so we can see what it looks like.
The Waves of the Economy
Tuesday, January 13, 2009
Sunday, January 4, 2009
Profit in the new world economy
Also in This Issue:
Good Day Currency Traders!A new year is upon us. And with it come the promise of victory and the specter of defeat. We'll take the optimistic approach and say that the losses of 2008 won't continue in 2009. But the pessimistic approach demands we acknowledge certain trends that remain in place. Trends that virtually guarantee continued losses.
But the losses don't have to be yours.
As we've seen over the last few days, several strategies worked wonders in 2008, bringing in 100%+ gains in one of the worst years for investors since the 1930's. And we've heard about a few more that show that "promise of victory" for 2009. Today we're going to look back over all those strategies and figure out specifically what made them tick. And what will keep them in place over the coming year.
You see, while the chaos in the marketplace is indeed complicated, it's not beyond some degree of comprehension. And the market's reaction - specifically running away in terror - almost makes the situation easier to work with.
Almost. In reality, you still need the guidance of a few carefully hand-picked experts. Experts that showed their mettle by going against the grain and turning huge profits over the past twelve months. In Eric Roseman's case, this meant putting the brakes on key positions during the biggest bull market oil has ever seen. And for Jack Crooks, it meant calling a significant rally in the dollar when no one else was seeing it.
But let's get right to it. We're going to focus on how these experts applied their strategies in the real world to turn a real profit, so let's get started...
Be a Patriot; Buck the Trend
Especially in light of the mortgage fiasco at the heart of our economic woes, many investors are down on the dollar. Indeed, it seems to be an American pastime to snub the dollar at any possible occasion. And why not? We've watched our infrastructure wilt over the last few decades, we're the originator of this economic downturn, and our government carries an amount of national debt that could only be described as legendary. From a ‘fundamental' standpoint, the dollar rally overstated the currency's strength.
But what if those are 2006's ‘fundamentals' that everyone's talking about? That is to say; what if the banking crisis, global credit crunch and subsequent economic downturn have changed currency ‘fundamentals' for the time being?
"The price of a currency is determined by the supply and demand for that currency. It is that simple," Jack Crooks said earlier this week. "Now, think about the credit crunch. It was a ‘sea change' event in the global economy that completely altered the supply and demand dynamics for every single asset class - stocks, bonds, commodities and currencies."
He went on to explain how money flow is currently keeping the dollar tightly coupled with gold, oil and the stock market, and how everything became so tightly connected. And with several member countries against the wall, he sees hard times ahead for the euro...
"Euro member countries have no sovereignty on monetary policy...and the big member country - Germany - is railing against providing a major stimulus to support the rest of the union members. Why should Germany pay for other countries lack of discipline?
"This is the Achilles Heel of the European Monetary Union - Since member countries have no fiscal responsibility, they can spend all they want and the ECB has no say or power to stop them."
"This is the first major test of the euro as a currency during a major down cycle...don't be surprised if it fails." Even I was a little skeptical after reading this part...but then again, so was everyone else that he told about a dollar rally this time last year...
Your first triple-digit winner is on its way... Guaranteed.
And your next 11 will be right behind it. That's twelve recommendations that will double in the next 12 months. Guaranteed.But only the most serious minded individuals need apply.
Read all the details here...
Buffet & the Mortgage Prophet
John Paulson is certainly more likable than that other Paulson.
You may recognize him as one of the lone fund managers to see a mortgage meltdown on the horizon and profit handsomely from betting against key sectors. And in 2008, his US$13 Billion Paulson Advantage Plus fund gained 38%, making it the top performer among multi-billion dollar funds.
So what do Warren Buffet and this mortgage prophet have in common?
Distressed debt. According to Bloomberg, Paulson is interested in buying distressed mortgages and distressed debt. They also say he's interested in debt restructurings, bankruptcies, strategic mergers, and financial recoveries.
Why shouldn't he? Unlike the banks - the backbone of the world's credit system - Paulson is sitting on US$36Billion in liquidity that he could share with some of the world's credit-starved companies. And with the market arguably at a point of maximum pessimism, the reward for taking on default risk is substantial to say the least.
That's why Sovereign Society Investment Director Eric Roseman is developing a new research service to focus on distressed debt opportunities. With the equity markets in such a fragile shape, and the immense profits to be found in debt opportunities, it's sure to be one of 2009's most promising frontiers.
In addition, he's working on a service...you might've heard of it as "spyglass"...that uses a combination of legal and market resources to track the insider trades of corporate executives. Again, with the markets in a state of unprecedented volatility and more ups and downs sure to be on the way, Eric sees it as a perfect time to stick close to the insiders and make huge gains.
What's more, the first 200 people who sign up for these services will receive them here.
Hedging Against the Apocalypse
As oil broke US$100 a barrel last year on the meteoric rise to US$150, few people were putting the brakes on their investments. Instead, most were too busy coming up with reasons why US$100 was perfectly justified and US$150 a feasible outcome. Investment Director Eric Roseman explains how he, too, bucked the trend and started hedging early in 2008...
"To protect our natural resource exposure in my service, Commodity Trend Alert, I immediately issued a series of reverse-index purchases betting against commodities. We were most successful betting against industrial metals or base metals, as copper and other metals collapsed. That position - still open - has gained 80% since just August of 2008."
"And since September, CTA has been riding a broad commodity index to the basement as part of our reverse-index strategy - up more than 60% at the moment."
On the importance of hedging at a time like this, Eric said "Volatility will remain rampant in an uncertain economic environment marked by growing consumer credit woes, weak earnings, and massive government bond issuance to support gargantuan fiscal spending plans. Investors must hold downside market protection."
And looking back at gold's performance in 2008, he mused "Gold has also been a strong performer compared to most other assets in 2008. Significantly, gold is the only asset that is outside the credit system and the only asset that has no liability. In 2008, spot prices gained a modest 1% - not much in absolute terms but certainly impressive compared to other plunging assets."
And his forecast for 2009 was abundantly clear, "This is not the time to be aggressively buying stocks. Odds are, prices will get cheaper again following any bear market rally. That's certainly been the case every time stocks have rallied off their lows since October 2007. Instead, make sure your portfolio includes gold, portfolio-hedging strategies and income from high quality investment-grade corporate bonds in 2009."
And that's it for today. We hope seeing the world through the eyes of these few successful experts helps you see the current situation for what it really is. Don't read it wrong; it's still a perilous economy for investors, any way you slice it. But it's also one that's bristling with opportunity for those who know how to find it.
There's no special comment today. Instead we only ask that you take a moment and think about where you want to be this time next year. Most investors will have stuck to the ‘tried-and-true' methods of going long in the stock market or short on the dollar. After all; it's hard to teach an old dog new tricks and bubble mentality dies hard. But for a lucky few investors, 2009 will probably be their best year ever.
But who knows, right? Coming off a year where almost everyone's expectations and records were shattered, who can guarantee success in the coming year? Well, The Sovereign Society can. That's why we're promising 12 triple-digit-winners in 2009, or your money back and US$35,000 in free investment resources. It's truly an offer that's too good to pass up.
Consider it before you make up your mind on 2009.
All The Best,KAT VON ROHR, Managing EditorWorld Currency Watch
P.S. This letter is your last chance to take advantage of our special triple-digit-winners offer, and you need to at least consider it before it's too late.
A test link.
Buck the Trend; Be a Patriot
Buffet & The Mortgage Prophet
Hedging against the Apocalypse
Good Day Currency Traders!A new year is upon us. And with it come the promise of victory and the specter of defeat. We'll take the optimistic approach and say that the losses of 2008 won't continue in 2009. But the pessimistic approach demands we acknowledge certain trends that remain in place. Trends that virtually guarantee continued losses.
But the losses don't have to be yours.
As we've seen over the last few days, several strategies worked wonders in 2008, bringing in 100%+ gains in one of the worst years for investors since the 1930's. And we've heard about a few more that show that "promise of victory" for 2009. Today we're going to look back over all those strategies and figure out specifically what made them tick. And what will keep them in place over the coming year.
You see, while the chaos in the marketplace is indeed complicated, it's not beyond some degree of comprehension. And the market's reaction - specifically running away in terror - almost makes the situation easier to work with.
Almost. In reality, you still need the guidance of a few carefully hand-picked experts. Experts that showed their mettle by going against the grain and turning huge profits over the past twelve months. In Eric Roseman's case, this meant putting the brakes on key positions during the biggest bull market oil has ever seen. And for Jack Crooks, it meant calling a significant rally in the dollar when no one else was seeing it.
But let's get right to it. We're going to focus on how these experts applied their strategies in the real world to turn a real profit, so let's get started...
Be a Patriot; Buck the Trend
Especially in light of the mortgage fiasco at the heart of our economic woes, many investors are down on the dollar. Indeed, it seems to be an American pastime to snub the dollar at any possible occasion. And why not? We've watched our infrastructure wilt over the last few decades, we're the originator of this economic downturn, and our government carries an amount of national debt that could only be described as legendary. From a ‘fundamental' standpoint, the dollar rally overstated the currency's strength.
But what if those are 2006's ‘fundamentals' that everyone's talking about? That is to say; what if the banking crisis, global credit crunch and subsequent economic downturn have changed currency ‘fundamentals' for the time being?
"The price of a currency is determined by the supply and demand for that currency. It is that simple," Jack Crooks said earlier this week. "Now, think about the credit crunch. It was a ‘sea change' event in the global economy that completely altered the supply and demand dynamics for every single asset class - stocks, bonds, commodities and currencies."
He went on to explain how money flow is currently keeping the dollar tightly coupled with gold, oil and the stock market, and how everything became so tightly connected. And with several member countries against the wall, he sees hard times ahead for the euro...
"Euro member countries have no sovereignty on monetary policy...and the big member country - Germany - is railing against providing a major stimulus to support the rest of the union members. Why should Germany pay for other countries lack of discipline?
"This is the Achilles Heel of the European Monetary Union - Since member countries have no fiscal responsibility, they can spend all they want and the ECB has no say or power to stop them."
"This is the first major test of the euro as a currency during a major down cycle...don't be surprised if it fails." Even I was a little skeptical after reading this part...but then again, so was everyone else that he told about a dollar rally this time last year...
Your first triple-digit winner is on its way... Guaranteed.
And your next 11 will be right behind it. That's twelve recommendations that will double in the next 12 months. Guaranteed.But only the most serious minded individuals need apply.
Read all the details here...
Buffet & the Mortgage Prophet
John Paulson is certainly more likable than that other Paulson.
You may recognize him as one of the lone fund managers to see a mortgage meltdown on the horizon and profit handsomely from betting against key sectors. And in 2008, his US$13 Billion Paulson Advantage Plus fund gained 38%, making it the top performer among multi-billion dollar funds.
So what do Warren Buffet and this mortgage prophet have in common?
Distressed debt. According to Bloomberg, Paulson is interested in buying distressed mortgages and distressed debt. They also say he's interested in debt restructurings, bankruptcies, strategic mergers, and financial recoveries.
Why shouldn't he? Unlike the banks - the backbone of the world's credit system - Paulson is sitting on US$36Billion in liquidity that he could share with some of the world's credit-starved companies. And with the market arguably at a point of maximum pessimism, the reward for taking on default risk is substantial to say the least.
That's why Sovereign Society Investment Director Eric Roseman is developing a new research service to focus on distressed debt opportunities. With the equity markets in such a fragile shape, and the immense profits to be found in debt opportunities, it's sure to be one of 2009's most promising frontiers.
In addition, he's working on a service...you might've heard of it as "spyglass"...that uses a combination of legal and market resources to track the insider trades of corporate executives. Again, with the markets in a state of unprecedented volatility and more ups and downs sure to be on the way, Eric sees it as a perfect time to stick close to the insiders and make huge gains.
What's more, the first 200 people who sign up for these services will receive them here.
Hedging Against the Apocalypse
As oil broke US$100 a barrel last year on the meteoric rise to US$150, few people were putting the brakes on their investments. Instead, most were too busy coming up with reasons why US$100 was perfectly justified and US$150 a feasible outcome. Investment Director Eric Roseman explains how he, too, bucked the trend and started hedging early in 2008...
"To protect our natural resource exposure in my service, Commodity Trend Alert, I immediately issued a series of reverse-index purchases betting against commodities. We were most successful betting against industrial metals or base metals, as copper and other metals collapsed. That position - still open - has gained 80% since just August of 2008."
"And since September, CTA has been riding a broad commodity index to the basement as part of our reverse-index strategy - up more than 60% at the moment."
On the importance of hedging at a time like this, Eric said "Volatility will remain rampant in an uncertain economic environment marked by growing consumer credit woes, weak earnings, and massive government bond issuance to support gargantuan fiscal spending plans. Investors must hold downside market protection."
And looking back at gold's performance in 2008, he mused "Gold has also been a strong performer compared to most other assets in 2008. Significantly, gold is the only asset that is outside the credit system and the only asset that has no liability. In 2008, spot prices gained a modest 1% - not much in absolute terms but certainly impressive compared to other plunging assets."
And his forecast for 2009 was abundantly clear, "This is not the time to be aggressively buying stocks. Odds are, prices will get cheaper again following any bear market rally. That's certainly been the case every time stocks have rallied off their lows since October 2007. Instead, make sure your portfolio includes gold, portfolio-hedging strategies and income from high quality investment-grade corporate bonds in 2009."
And that's it for today. We hope seeing the world through the eyes of these few successful experts helps you see the current situation for what it really is. Don't read it wrong; it's still a perilous economy for investors, any way you slice it. But it's also one that's bristling with opportunity for those who know how to find it.
There's no special comment today. Instead we only ask that you take a moment and think about where you want to be this time next year. Most investors will have stuck to the ‘tried-and-true' methods of going long in the stock market or short on the dollar. After all; it's hard to teach an old dog new tricks and bubble mentality dies hard. But for a lucky few investors, 2009 will probably be their best year ever.
But who knows, right? Coming off a year where almost everyone's expectations and records were shattered, who can guarantee success in the coming year? Well, The Sovereign Society can. That's why we're promising 12 triple-digit-winners in 2009, or your money back and US$35,000 in free investment resources. It's truly an offer that's too good to pass up.
Consider it before you make up your mind on 2009.
All The Best,KAT VON ROHR, Managing EditorWorld Currency Watch
P.S. This letter is your last chance to take advantage of our special triple-digit-winners offer, and you need to at least consider it before it's too late.
A test link.
Subscribe to:
Posts (Atom)