kinellll Italian 10 year note @ 7.41

[Martinghoul]

Well, firstly, I think you're mightily confused, as I keep trying to tell you (and you're clearly not listening, which isn't exactly surprising). To call me an "inflationist" because of the points I have made about the advantages of having one's own currency is patently absurd.

Secondly, scose is being sarcastic. I haven't delivered on my trade thread promise, but why not use this thread, as it's as good as any other.

Some of the trades (all for PA) I have done recently are centered arnd the same fundamental theme. Specifically, I average into positions that fade the excessive ccy strength of the so-called "safe haven" ccies, like CHF and JPY. Specifically, I am short CHFNOK, CHFSEK and was long NOKJPY (took it off after the yen intervention, but will put it back on when/if it goes back). I like the trades for the following reasons:
1) I believe that the downside is bounded, since, even now, the strength of CHF & JPY is difficult for their respective economies to deal with. If we go much further, the BoJ/SNB hands might be forced further and they will be compelled to act in an increasingly meaningful way. If they don't, the impact of the ccy strength on the economy should eventually make itself known.

2) The levels are extreme here and I do believe that exchange and interest rates exhibit mean-reversion over long horizons. I don't expect a massive regime shift (see above).

3) Carry is nice and positive.

4) I like being long Scandi ccies, rather than the majors, etc, because I believe that they're unfairly perceived as high-beta and too highly correlated to the Euro-debacle. I especially prefer NOK, as I have some concerns about household debt in Sweden and Denmark.

I have had these trades on for a while now. I add/take off clips opportunistically, when/if there's a meaningful move. That's pretty much it, but if anyone's got any questions I'd be happy to answer to the best of my ability.

 

[Martinghoul]

Also, my post above leads me nicely into a question for you, n_t...

Consider Switzerland. Swiss Franc has appreciated, on a trade-weighted basis, by smth like 40% or more in the past several years. We all know the reason for such extreme movements. The SNB has responded by, effectively, printing large amounts of CHF. Furthermore, the SNB committed, with full support of the Swiss government, to printing *unlimited* amounts of CHF in the future, if necessary.

I imagine that you must be vehemently opposed to things like this, as a matter of principle, 'cause printing money is everywhere and always a bad thing. Moreover, printing money, according to you, is always hyper-inflationary (which is why, I guess, I am an "inflationist"). But then how do you explain that Swiss inflation is pretty much the lowest it's ever been (the last YoY print was actually negative).

So here's my question to you. Please explain to me what is specifically wrong with what the SNB is doing at the moment. Once I understand your logic (or lack thereof) in this particular case, we can hopefully proceed to a more general framework.

 

[cr6196]

From what I have seen, the CHF move was really causing chaos with some really competitive businesses (certainly far better than any in UK). Some exporters were reporting flat sales in foreign currency and down 15% or so in CHF. The latest inflation figures really were suprising tho considering how agressive the snb has been. Either way, I am long Swiss exporters.

what about HKD? doing the same thing as the Swiss but with 6% inflation. it is difficult to see how they can hold on until 2013 with US peg where it is. what about AUD?

 

[new_trader]

Well, firstly, I think you're mightily confused, as I keep trying to tell you (and you're clearly not listening, which isn't exactly surprising). To call me an "inflationist" because of the points I have made about the advantages of having one's own currency is patently absurd..

Actually that isn't correct. You said that a Central Bank having control of their money supply is a huge advantage and I disagree. I say that unrestrained control of the money supply is a disastrous thing. We will never, I repeat, never agree and go in endless circles, usually with with you calling any counter-argument you disagree with silly or absurd...etc...time will tell.

 

[new_trader]

Just to refresh your memory, this is where I said it:

Does anyone here think that the US founding fathers were naïve or clueless about “Modern Economics” (Whatever that is)?

History of Fiat Money

The founding fathers were concerned about the unrestrained control of the money supply. One thing they all agreed upon was the limitation on the issuance of money. Thomas Jefferson warned of the damage that would be caused if the people assigned control of the money supply to the banking sector. Many of the founding fathers experienced the damage caused by fiat currency. Most of the revolutionary war was financed by worthless currency called "Continentals".

 

[Martinghoul]

Actually that isn't correct. You said that a Central Bank having control of their money supply is a huge advantage and I disagree. I say that unrestrained control of the money supply is a disastrous thing. We will never, I repeat, never agree and go in endless circles, usually with with you calling any counter-argument you disagree with silly or absurd...etc...time will tell.

Firstly, I don't recall you specifying any qualifications such as "unrestrained". What does "unrestrained" even mean? Furthermore, what counter-arguments have you given? I haven't seen anything said by you personally. All I see is a bunch of articles and links.

I have now given you a very specific example, i.e. the Swiss and the SNB. Pls be kind enough to tell me whether you believe that the "unrestrained" control of the supply of Swiss Franc by the SNB is disastrous and, if so, why.

 

[Martinghoul]

Just to refresh your memory, this is where I said it:

I remember... If I am not mistaken, I think I had a question about that which you never responded to. If the premise is that the Founding Fathers are infallible and if they were, in fact, so concerned about the whole "fiat money" issue, why is there nothing in the US Constitution or the Bill of Rights or any of these documents that specifically forbids "fiat money"?

 

[Martinghoul]

From what I have seen, the CHF move was really causing chaos with some really competitive businesses (certainly far better than any in UK). Some exporters were reporting flat sales in foreign currency and down 15% or so in CHF. The latest inflation figures really were suprising tho considering how agressive the snb has been. Either way, I am long Swiss exporters.

what about HKD? doing the same thing as the Swiss but with 6% inflation. it is difficult to see how they can hold on until 2013 with US peg where it is. what about AUD?

Yes, indeed... The Swiss economy is very very well-organized and extremely competitive. However, there's no way that even the super-efficient Swiss exporters can deal with a 40% appreciation of the domestic currency. Moreover, the Franc is causing all sorts of damage to the traditional industries like tourism and retail.

I have observed a lot of noise recently around HKD and, to be honest, I am not sure what to do about it. I was short AUDNZD earlier this year, made some decent money on it and took it all off. I will reload if it pops again. My problem with all these ccies is that I don't have a good understanding of what's going on in China (does anyone?), so I try to be a lot more cautious.

 

[cristiano]

Some of the trades (all for PA) I have done recently are centered arnd the same fundamental theme. Specifically, I average into positions that fade the excessive ccy strength of the so-called "safe haven" ccies, like CHF and JPY.

Hi MG, hope you don't mind me prying a little - the basis for the trades you describe is fundamental, what do you look for when you're decided on the fundamentals? Significant s/r, price action patterns?

Not asking for a lesson in trading, but am curious as to how the pros do it. Or do you wait for a lovely pin bar like everyone else??

 

[Martinghoul]

Hi MG, hope you don't mind me prying a little - the basis for the trades you describe is fundamental, what do you look for when you're decided on the fundamentals? Significant s/r, price action patterns?

Not asking for a lesson in trading, but am curious as to how the pros do it. Or do you wait for a lovely pin bar like everyone else??

No, no patterns whatsoever... I generally have an entry level that makes sense to me, which is defined purely subjectively, based on expected risk/reward (there are ways to be scientific about it, if you're into that). If the mkt isn't quite at my tgt level but is reasonably close, I do a small clip to have smth on. If the mkt isn't close enough or if I have a little on, I will just work an order and let the mkt come to me. I will add as the mkt moves against me, as long as I believe the original premise for the trade is still valid.

 

[enragedcow]

Also, my post above leads me nicely into a question for you, n_t...

Consider Switzerland. Swiss Franc has appreciated, on a trade-weighted basis, by smth like 40% or more in the past several years. We all know the reason for such extreme movements. The SNB has responded by, effectively, printing large amounts of CHF. Furthermore, the SNB committed, with full support of the Swiss government, to printing *unlimited* amounts of CHF in the future, if necessary.

I imagine that you must be vehemently opposed to things like this, as a matter of principle, 'cause printing money is everywhere and always a bad thing. Moreover, printing money, according to you, is always hyper-inflationary (which is why, I guess, I am an "inflationist"). But then how do you explain that Swiss inflation is pretty much the lowest it's ever been (the last YoY print was actually negative).

So here's my question to you. Please explain to me what is specifically wrong with what the SNB is doing at the moment. Once I understand your logic (or lack thereof) in this particular case, we can hopefully proceed to a more general framework.

It's wrong because they print money to feed their corporate greed and don't share it equally (trolololol)

Switzerland's reserve bank has its head screwed on right, from what i've seen so too does NZ's.

There is no logical answer to why it's wrong martinghoul, for it to be wrong 100 years of economic thought must be ignored in favour of shear nonsense.

Yes, expansionary monetary policy (assuming it doesn't affect infrastructure or technology etc) is neutral in the medium term and only causes inflation (thanks Olivier Blanchard) but in the face of more recessionary pressure on an economy it is sound policy. And who says inflation is the be all and end all...

 

[scose-no-doubt]

Some of the trades (all for PA) I have done recently are centered arnd the same fundamental theme. Specifically, I average into positions that fade the excessive ccy strength of the so-called "safe haven" ccies, like CHF and JPY. Specifically, I am short CHFNOK, CHFSEK and was long NOKJPY (took it off after the yen intervention, but will put it back on when/if it goes back). I like the trades for the following reasons:
1) I believe that the downside is bounded, since, even now, the strength of CHF & JPY is difficult for their respective economies to deal with. If we go much further, the BoJ/SNB hands might be forced further and they will be compelled to act in an increasingly meaningful way. If they don't, the impact of the ccy strength on the economy should eventually make itself known.

2) The levels are extreme here and I do believe that exchange and interest rates exhibit mean-reversion over long horizons. I don't expect a massive regime shift (see above).

3) Carry is nice and positive.

4) I like being long Scandi ccies, rather than the majors, etc, because I believe that they're unfairly perceived as high-beta and too highly correlated to the Euro-debacle. I especially prefer NOK, as I have some concerns about household debt in Sweden and Denmark.

I have had these trades on for a while now. I add/take off clips opportunistically, when/if there's a meaningful move. That's pretty much it, but if anyone's got any questions I'd be happy to answer to the best of my ability.

Sh*t trades them kid you playing this through straight fx?

Anyway I wanna hear about the sciencey ways you mitigate or take on risk in the context of your work account. And professional trade rationale. Is it all quanty?

 

[Martinghoul]

Sh*t trades them kid you playing this through straight fx?

Anyway I wanna hear about the sciencey ways you mitigate or take on risk in the context of your work account. And professional trade rationale. Is it all quanty?

Yeah, although not sure what you mean by "straight FX". These are my PA trades and I am spreadbetting.

My philosophy for my work trades is very similar in terms of the criteria I use (so mean-reversion trades, mostly; carry matters; mostly fundamental rationale; not really very quanty at all). The key difference is that, because I have a much larger set of different mkts to play with, I can build a portfolio where I can reduce the macro biases. Normally, I don't do FX, but, if I did, and had a portfolio of CHFSEK, CHFNOK etc, I would be well aware that the really meaningful risk for me would be some sort of a Eurogeddon, where the SNB wouldn't be capable of maintaining the EURCHF floor and CHF goes completely nuts, while SEK & NOK get spanked. So I would try to find a trade, possibly in fixed income or smth else, that should perform in a Eurogeddon. Obviously, none of this is a science (you can try to make it more scientific, but doesn't really help) and the key to everything is still size/leverage. Still, that's the principle.

 

[scose-no-doubt]

Yeah, although not sure what you mean by "straight FX". These are my PA trades and I am spreadbetting.

Oh didn't know you were spreadbetting. I wasn't sure if you're using bloody money market type stuff or swaps or whatever other weird and wonderful things are out there to play with.

Who do you spread bet with if you don't mind me asking? I'm surprised you're allowed to trade your own account at all.

 

[Martinghoul]

Oh didn't know you were spreadbetting. I wasn't sure if you're using bloody money market type stuff or swaps or whatever other weird and wonderful things are out there to play with.

Who do you spread bet with if you don't mind me asking? I'm surprised you're allowed to trade your own account at all.

How the hell can I do money mkt stuff and swaps for my PA? If you have a way, don't hold back and let me know. But, on the flip side, PA has its distinct advantages.

I do it with GFT at the mom, which is pretty good in some ways (better than IG, which I used previously). However, I had a big beef with GFT when they did something that just wasn't right. So nobody's perfect... And yes, I can do stuff PA but w/ all sorts of limitations.

 

[scose-no-doubt]

Noooo, no, no, I meant I thought you had access to the same stuff as for work when you trade your PA. So is this a matter of tax advantage > spreads or ease of access? I'd have thought you'd be with IB or at least trading DMA.

 

[Martinghoul]

Noooo, no, no, I meant I thought you had access to the same stuff as for work when you trade your PA. So is this a matter of tax advantage > spreads or ease of access? I'd have thought you'd be with IB or at least trading DMA.

Ah, I see what you mean...

IB and/or DMA doesn't really give me that much more flexibility in terms of the mkts I can play with. So I am happy to spreadbet and take advantage of the tax break.