Sunday, August 24, 2008

Lookout Below! Falling Pound!--IFCN Wk 37 -Fri- Equity: $814.41

I was quite surprised at the action of the British pound on Friday. I wasn't surprised at the pound falling after having a small correction, but plummeting to new lows for the move – putting in 2 year lows – was amazing!

And the OneNightStand trade in the pound got triggered! After all the conflagration witnessed in the currency markets recently, this was an extreme move by anyone's measure.

As of 2005, Warren Buffett was widely proclaimed as one of the foremost traders who had been betting against the dollar since 2002. His view was that widening US deficits and diminishing trade would drop the value of the dollar. Apparently his view has changed.

Comments on Friday which stated that Mr. Buffett had no further bets against the dollar encouraged some to jump on the dollar's side. He also said U.S. stocks were much more attractive than they were a year ago.

Trader's coppering his bets better be ready for a rough ride. Even though the dollar will likely gain some more, there could be some dangerous volatility with that kind of news coming out.

I do believe that U.S. realestate, stocks, businesses, etc. are grossly undervalued relative to world values. Especially considering the future potential of technologies that reside here.

That doesn't mean anyone immediately cares about your inexpensive house in a great neighborhood when their own house is burning down, regardless of neighborhood.

The fire?

Some flames about the British economy appeared on Friday, and hence the value of the Sterling-- were tainted by the fact that Britain's GDP actually was unchanged in the second quarter when all the previous estimates were for increased growth.

Also, the general consensus is growing that the European Central bank could be lowering interest rates very soon.

Just a thought..., imagine how bad Britains and Europeans must feel about their economies when the well-publicized economic ills of the U.S. are taking a backseat to their own?

Next week will show us how negative the feelings are for the European currencies.


Here's the week's recap:

The data below is as of Friday's close, Aug. 22, 2008:

Start of week equity: $841.14

OneNightStand Exit(s) on 08/18/08 :

*Eur/Usd: Short @ 1.4753 – Exited at 1.4745 for 8 pips profit.
*Gbp/Usd: Short @ 1.8619 – Exited at 1.8689 for 70 pips loss.
*Usd/Chf: Long @ 1.0984 – Exited at 1.0936 for 48 pips loss.
*Usd/Jpy: Long @ 110.41 –Exited at 110.26 for 15 pips loss.
Total Losses: $ 10.12 (Change of -$15.63 from Friday's close)

Completed FirstStrike trades this week:

  • Eur/Usd: Short @1.4695, stopped out at 1.4755 for a 60 pip loss.
  • Gbp/Jpy: Short @205.32, exited at 203.64 for a 168 pip profit.
  • Gbp/Usd: Short @1.8639, stopped out at 1.8699 for a 60 pip loss.
  • Usd/Chf: Long @ 1.0985, stopped out at 1.0925 for a 60 pip loss.
  • Usd/Jpy: Short @ 109.77, exited at 110.02 for a 25 pip loss.
Total losses: 205 pips
Total profits: 168 pips
Net loss: 37 pips (-$11.26)

OneNightStand 08/22/08 entry(s):
*Gbp/Usd: Short @ 1.8511
The above to be exited Monday morning, 00:01 CST
Unrealized Profits: $ 0.16

End of week equity: $814.41(includes unrealized P&L)
Total Loss for Week: $26.73 (3.1% weekly decrease)

Looking forward to the new week.

Joel Rensink

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