Roundup……
A couple of quick thoughts on the week that just was. Colombia, yesterday they cut rates 100bp which was expected (I thought they would do slightly less). The current rate is 5% and the Central Bank signaled that they were ready to do more in the months to come. This is a record low for Colombia rates and signals that they know how bad the economy, both worldwide and locally is. I was looking for slightly less as I do not think that lower rates have the same direct effect to the economy that they do in the U.S. and U.K. Clearly I was wrong here. The CB did say however that they do not see rate cuts the size of this one in the coming months. The CB was concerned as growth has slowed (actually shrank) in the first quarter of 2009 greater then was previously expected. Inflation, always a concern, has come lower allowing the aggressive rate cuts. The CB expect this “clearly expansive” rate policy to lead to a pick up in growth in the second half of the year.
Mexico, which has been selling $100 mio per day in an effort to keep the peso strong has cut the amount in half. This is all brought about due to less volatility in the markets. Clearly there is a big effort to sell the Dollar everywhere you can. I continue to think this is the correct move. The U.S. has an enormous debt it is facing and would enjoy a weaker Dollar (no matter what they say publicly).
Argentina is a bit of a concern for me. They have congressional elections June 28 and many people that I talk to are worried that the currency could begin to weaken (considerable) after that. I have cut my position by 4/5 as I see this a a big wild card which cannot be safely assessed.
Good Luck and Good Forex Trading.
Oil on the move
Crude is on pace to set the largest monthly jump in prices since May 1999. This is starting to cause consumers, some of which are out of work, some concern. I am not sure why this move is occurring but my initial thoughts is speculation.
Speculation, that the stimulus package that President Obama has in the works will begin to produce jobs and put Americans back to work. With these jobs will come a need for more energy and as such the demand for oil will be greater. If the Chinese and Indian economies begin to turn around this move could be even greater. The biggest problem I see with this is that higher oil prices could stop the potential recovery. If a regular consumer needs to spend more money on gas for their car or oil to heat their home there is less left to buy discretionary goods. From a business perspective if more money is needed to pay for raw materials then there is less to employ people.
From a trading view, this should be good for commodity currency’s. Aud, Nzd, Brl should all strengthen and I look for the dollar to continue to get beaten up. There is really no reason to buy the dollar. The U.S. government would love to see a weaker currency as it will help with our recovery. The talk by BRIC countries yesterday that they will attempt to use less dollars in their transactions only under scores the situation that the world is slowly trying to make the dollar much less the dominate global currency. Time will tell whether they are successful but for now I like being short dollars.
Good Luck and Good Forex Trading
Is it me or are people calmer……
It certainly seems to me that the markets are becoming increasingly comfortable with the current state of affairs. Emerging market currencies are in a constant state of strengthening. Rates worldwide are coming off and people seem to be spending money. On the rates front it seems that the largest rate cuts are behind us and that stability is the course for the medium term. Colombia, which has had three consecutive 100bp rate cuts is scheduled for another one this Friday. The market is looking for another 100bp cut but I am not so sure. The rest of Latin America has been pulling back on its rate cut expectations and i think that this could be an opening for Colombia to low the trend down. I do understand that rates are high there (6%) and that growth is very poor, but I think that a slower and less drastic rate cuts are what Colombia and the region are looking for. From the people that I talk to the consensus is that the Mexico story is over. Rates have made their move and any further cuts will be much more tame. Chile, rates here have come off hard and the locals have been the ones pressuring the markets. I look for this to change in the near term. I currently have a paying position on and I am looking for a steepening curve at higher levels. This is not a position I will have for an extended term. I think this curve moved to fast and sharply and I think that a reversal is in the cards.
From a “man on the street” perspective, contractors that I talk to have said that their phones are ringing more. Also, when people call they are serious about doing the work. As one contractor told me, when a someone sees a neighbor doing some work on their home it gives them confidence to do some themselves. This of course if they have a job. The roads were relatively empty this weekend but the beaches, shops, and restaurants seems pretty full to me. It seems to me that a bottoming is occurring but it will be a long time before a full recovery is underway.
Good Luck and spend your money wisely
Recently Read……”Man on Wire”
I just finished Man on Wire
I highly recommend it!
Good Luck and Good Forex Trading
The Class of 2009
So what is a graduate to do. Coming out of school this year, young people will be facing the toughest labor market in many years. Those lucky enough to find a job will be probably be paid considerably less then a graduate just a few years ago. The class of 2009 are being faced with tough decisions, trade down to lesser jobs or continue on toward a more advanced degree in hopes that the economy turns around.
For an example of how lower initial pay can have a lingering effect on a person take a student graduating in December 1982. Unemployment was 10.8%. That student made on average 23% less the first year out of college and 6.6% less 18 years out of college then a student graduating in May 1981 when unemployment was 7.5%.
It actually a very challenging environment. According to research, it is probably better to take a lower paying job with in your field of interest rather then branch out to another field with the thought of getting back in later. That is because you will be learning the skills necessary to thrive in the market place when it turns around. This will give you an edge on your competition.
When I graduated from college in the mid 80’s I was surprised to find how difficult it was to land a job. Finally I got one working in the back office of a bank. The pay was $13,000 a year (which was less the I was making in my college job) and the job was no thing like I envisioned myself doing (did I really have any idea what I wanted to do?). I remember one day walking around during lunch and passing the subway station which took me to and from work and thinking that I should jump on the train and not come back. I didn’t, and things did get better, but I know what a lot of these graduates will be going through.
There are different paths for different people. I have a brother who straight out of college started a travel business. Much to my surprise 20 years later the business is thriving. At the time I didn’t think he had the discipline to work for himself (and I was probably right), but over the years he has found a way to make it work and has done very well for himself.
I have a friend that has recently lost his job in the financial sector. Well aware that there a less and less jobs in this field and that the one’s out there are paying considerable less he has deceided to take a new path. He was always known as the “Idea Man” but now he is putting those ideas in motion. Meeting with a patent attorney and focus groups to find which “ideas” have the most potential and putting them to work.
My point is that there are many paths to “success” and the road least traveled may be the one right for you.
Good Luck and Good Forex Trading
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