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Author: washcomp Big gold star, 5000 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 465275  
Subject: Important Currancy events Date: 3/17/2011 8:11 AM
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I know this topic is pretty boring to some, so I'll try to minimize the numbers and give my personal interpretation.

Today's moves are giving an indication of an upcoming potential disruption in the markets. That's not necessarily a bearish comment from the standpoint of the US market, but is an indication that things must be watched closely as the game has changed and we don't know the new rules.

Data point #1: THE JAPANESE YEN IS NOW AT THE HIGHEST IT HAS BEEN SINCE WWII!

Japan needs money, so their insurance companies, other firms, people and presumably their government are selling "stuff" and buying yen. This stuff has included gold, Australian dollars (where a lot of money was parked to pick up the high interest rates), global equities, and presumably US T bonds (though current pricing does not reflect this).

The leader board:

The US dollar index is at 75.97, essentially the low for the year (but still somewhat above the all time low of about 70 which it briefly hit in early 2008)

The Euro has risen (against the USD) to $1.40 which is relatively high based on their obvious problems (but still far off their pre-crisis high of $1.60)

The GB pound sterling has risen to $1.61, close to its year high of $1.63 (but of course still way off historical levels)

The Canadian loonie, after taking a wallop a few days ago, is still strong (and currently re-strengthening) at a bit over $1.02US (high for the year was $1.035US)

Big winner:

The Swiss franc is now at an all time high against the US dollar at $1.11. It is currently at 1.26 to the Euro, slightly above its all time high of 1.24 to the Euro

Current loser:

The Australian dollar (not part of the USD index) is about 3% lower against the USD than it was a week ago (this is even more pronounced when you realize that the USD has also dropped).


OK, so what does this mean to us? Jeff's theory (good, bad or ugly) is that when the USD index goes down, American equities tend to rise. While the absolute value (on a given day) is relatively unimportant, the direction and velocity are. Today's move would tend to be bullish for US equities. Assuming other currencies/equities respond similarly (never even thought about this before), this would be bullish for Australia and bearish for Japan, Switzerland (still a thought experiment at this point).

What's more important from a macro point of view is the disruption in the "world as we know it today" if the third largest economy in the world starts liquidating US debt to pay for its own problems. If this takes place at the "government level", this can be covered up by the Fed, but if at the commercial level (insurance companies et al), this could cause a drop in the price of US bonds (with an associated interest rate rise). At this stage of the game, an increase in the "long rate" will impact the mortgage market and other similar "long" debt, but more importantly, fear will ripple through the market. Higher interest rates are a headwind to equities (as the higher they get, the more likely people will gravitate with money in that direction to gain safe, predictable returns). If the move begins to move the needle on short rates, the Fed will be forced into a QEIII regardless of their wishes.

While the events in Japan are very different from what we suffered in late 2008, the symptom of a liquidity crisis is parallel. The exact way things play out over the next year is unknown, but the impact to the world economy will be felt. The "good news" (I feel uncomfortable using that word in the context of the recent tragedy) is that there are certain types of predictable companies who are likely to benefit and others which will be hit.

This is a time for careful reflection about what cards you want to hold, and which you want to discard and replace. The game is about to change, whether we like it or not, and the nature of that change, in the absence of a road map is important to consider earlier, rather than later.

On a personal note (and a general observation to those who tend to pick a single horse in the race), many are aware that my main currency bets are on the Swiss franc and the Australian dollar. I have explained that part of the rational (as I've pointed out before) for this was geographic diversity as it was unlikely for a single currency event to overtake Asia, Europe and the US simultaneously as the valuations were ratio based. The above currency movements indicate the Aussie was badly hit, but interestingly the Swiss franc was the best performer. On a total basis, from my USD centric standpoint, the needle on the sum of the two positions has barely moved. "Stuff" happens, whether to good companies or good currencies. It's frequently unpredictable. Regardless of your high opinion of a specific company, putting too many eggs in one basket is playing Russian roulette (the odds are highly in your favor, but...).

Your suggestions of either how to take advantage of this scenario or protect against the possibility of rising interest rates are important to us all.

Jeff
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Author: qazulight Big gold star, 5000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 354713 of 465275
Subject: Re: Important Currancy events Date: 3/17/2011 8:13 AM
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Jeff, the dollar has broken through a rising support line. 72 is the next support.

Cheers
Qazulight

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Author: washcomp Big gold star, 5000 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 354714 of 465275
Subject: Re: Important Currancy events Date: 3/17/2011 8:17 AM
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I didn’t realize how high the yen has risen in the past few days and I frankly don’t know how to take advantage or protect from the distortion in the global economic fabric that this is going to cause.

I’m tempted to say this is uncharted territory, but I’m sure after things settle down, someone will find a chart to match what they see in the rear view mirror :-)

Jeff

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Author: tim443 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 354719 of 465275
Subject: Re: Important Currancy events Date: 3/17/2011 9:52 AM
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Your suggestions of either how to take advantage of this scenario or protect against the possibility of rising interest rates are important to us all.

Jeff


Currency is not my playpen (need to much of it to make a dent) so my question is what happens if the Japanese government annouces that the nuc plants are under control?

This would have to be confirmed by a massive number of experts from all over the world of course as I heard multiple USian news guys assuring me last night that the Japanese government could not be trusted. }};-(

The news guys could go back to ranting about survivors freezing, starving and dying of thirst and the rest of us could get back to figuring out where the markets and the companies that they are made up of are going from here.

I just bought back my favourite little pure lead play, batteries are really big when you have rolling blackouts.


Tim <thinks this could happen very soon> 443

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Author: WendyBG Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 354722 of 465275
Subject: Re: Important Currancy events Date: 3/17/2011 10:27 AM
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<I just bought back my favourite little pure lead play, batteries are really big when you have rolling blackouts. >

Interesting idea. How did you do this?
Wendy

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Author: tim443 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 354729 of 465275
Subject: Re: Important Currancy events Date: 3/17/2011 10:45 AM
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<I just bought back my favourite little pure lead play, batteries are really big when you have rolling blackouts. >

Interesting idea. How did you do this?
Wendy



Well I went to stock entry, entered the symbol, put in my bid price, clicked on buy and plotzlich there it was.

Sorry couldn't resist. }};-D

This fellow has a rather interesting "Geological anomaly"*** in that they surface mine high grade lead in western Australia and ship the concentrate to Malaysia for purification and ongoing shipment to China.

*** - normally lead is a by product of mining for other stuff but whatever else was there got leached into the Indian ocean millions of years ago.

http://www.google.ca/finance?q=TSE:IVW

I assume they have a US pink but have no idea (or reason to know) what it is?

Tim <dirt, grease and a couple of interesting techies> 443

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Author: ArseLonga Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 354736 of 465275
Subject: Re: Important Currancy events Date: 3/17/2011 11:19 AM
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Tim, an old buddy of mine, Ken Belson, lived in Japan for about 15 years, writing principally for the Times but also others. He and his (Japanese) wife have been back in NY for a few years, and he covers sports business now, but this past week he has written and co-written several articles, including this one today http://www.nytimes.com/2011/03/17/world/asia/17tokyo.html?hp....

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Author: tim443 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 354739 of 465275
Subject: Re: Important Currancy events Date: 3/17/2011 11:37 AM
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Foreign nuclear experts, the Japanese press and an increasingly angry and rattled Japanese public are frustrated by government and power company officials’ failure to communicate clearly and promptly about the nuclear crisis.


Arse,

When you are up to our A$$ in alligators it is sometimes difficult to explain to the reporter in the simple words he might understand that the original purpose was to drain the swamp.


Tim <had a couple of problems with arrogant reporters who felt they had the right to do whatever unsafe, stupid and destructive things they wanted in order to get the story***> 443


*** Would you believe one opened the back door of the helo without asking and leaned out to get the picture? Another destroy a very expensive survival suit (irreplaceable in the high Arctic) by running across a bunch of sharp rocks without bothering to take it off first.

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Author: warrl Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 354741 of 465275
Subject: Re: Important Currancy events Date: 3/17/2011 12:07 PM
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so my question is what happens if the Japanese government annouces that the nuc plants are under control?

Well, there will certainly be no American major-media reporters present to hear that announcement.

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Author: steve203 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 354742 of 465275
Subject: Re: Important Currancy events Date: 3/17/2011 12:14 PM
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Well, there will certainly be no American major-media reporters present to hear that announcement.

Of course not. They'll all be back to the previously scheduled program: getting the mob in a panic about gas prices. After all, they are well paid to promote unrestricted drilling.

Steve...saw API propaganda 3 times during the network news last night, and twice more on the late local news.

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Author: ArseLonga Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 354744 of 465275
Subject: Re: Important Currancy events Date: 3/17/2011 12:22 PM
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warrl, those were just the words to which I was responding.

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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 354745 of 465275
Subject: Re: Important Currancy events Date: 3/17/2011 12:24 PM
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....Your suggestions of either how to take advantage of this scenario or protect against the possibility of rising interest rates are important to us all....

I mainly just use diversification to protect against the unpredictable but there is one thing that I have been thinking about. That is the affect this will have on China.

The business between China and Japan is huge and with the Japanese economy being severely constrained due to damage, power outages, and supply chain disruptions the flow of goods from Japan will likely be sharply reduced for at least the near future. As things progress it is also likely that the flow of goods for things like food and building materials will be increasing into Japan in the near future.

One of the basic definitions of inflation is "too much money chasing too few good". These problems could reduce the inflow of consumer goods, manufacturing tools and components to china. China has been at risk of having inflation and any supply reductions could trigger inflation in China.

Another problem is that the leaking radiation is had generally be blown out to sea. In addition to risking damage to the fishing industry, a potential problem is that the radiation could blow into the shipping lanes and restrict that ability for ships to get to and from China without making costly and lengthy detours. If a ship does travel through an area with radiation then the cargo and the ship itself may be too contaminated to be saved. This is in addition to the health hazards to its crew.

Greg

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Author: tim443 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 354748 of 465275
Subject: Re: Important Currancy events Date: 3/17/2011 12:40 PM
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Another problem is that the leaking radiation is had generally be blown out to sea. In addition to risking damage to the fishing industry, a potential problem is that the radiation could blow into the shipping lanes and restrict that ability for ships to get to and from China without making costly and lengthy detours. If a ship does travel through an area with radiation then the cargo and the ship itself may be too contaminated to be saved. This is in addition to the health hazards to its crew.

Greg



Scheesch,

When I see such &_)&^^##$$ written I can't help but get the urge to reach for a honk bag.

Get that from a newsletter by any chance?

Bad news guys, the casualties among the workers at the reactor so far are a broken arm and a broken leg. A hundred meters from the reactors the readings are higher than background but not immediately dangerous. While nobody wants to get a lot of radiation over long periods please avoid the ignorant hyperbole of the news announcers.


Tim

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Author: washcomp Big gold star, 5000 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 354751 of 465275
Subject: Re: Important Currancy events Date: 3/17/2011 12:57 PM
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In the vein of Tim's allagator comment, we did a lot of fiber optics and assorted Cisco hardware installation at the NY WTC after the bomb went off in their garage to "harden" their network. We ran a riser up each corner of the building from the third subbasement to the Port Authority's (the landlord) floors which were in the 80-85 floor range. Each floor then got a ging from closet to closet and then an "X" connecting diagonal closets. On 9/11/2001, before it was clear that the buildings were coming down, I called the facilities manager to offer my assistance if he needed me in the emergency (said message on their voicemail system went down with the ship).

Afterwards, for a couple of months, I was certain that he and all the others I had worked with had perished as well as their offices were on the 83rd (IIRC) floor. Months later I was talking to a mutual aquaintence who told me they had all survived (though one had lost a ring off his finger from the shock caused by the impact). When I called the guy up (now working in New Jersey for the PA), he told me that, reardless of what the police recommended (stay calm and at your desks), he had ordered the immediate evacuation of his people. While they were leaving, the phones started ringing with reporters who wanted to get inside scoops of what was going on (which they ignored on their way out the door).

They survives because they didn't speak to the reporters and were amung the last to leave the buildings (and became the men and women covered in white dust that were seen trudging across the Brooklyn Bridge).

Jeff

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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 354757 of 465275
Subject: Re: Important Currancy events Date: 3/17/2011 1:20 PM
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...When I see such &_)&^^##$$ written I can't help but get the urge to reach for a honk bag. ...


Reread the post,it said "a potential problem" not an actual problem now.


It isn't a given, but it is hard to see how the situation at the reactors will be better instead of worse in the near future.


Greg

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Author: tim443 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 354769 of 465275
Subject: Re: Important Currancy events Date: 3/17/2011 2:42 PM
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Reread the post,it said "a potential problem" not an actual problem now.


It isn't a given, but it is hard to see how the situation at the reactors will be better instead of worse in the near future.


Greg



I just watched a report on BNN where a Chinese scrap dealer is refusing a steel scrap shipment from Japan because it "may" be contaminated with radiation. Do you think there is any chance someone has had time to crush and ship a bunch of cars, load them on a ship and have them already at a port in China?

Would you scream "There is a potential Fire" in a movie theatre?

One of the problems of our modern world is that anyone can go out and buy a piece of technology that can find contamination in Billions of parts per whatever but he doesn't really need to understand how to use it.

If you think it all makes sense I own two uranium miners that mine in the same area of the world. One is down 5% today the other is up 14%. Clearly one set of investors is wrong, the question is which one.


Tim

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Author: AdvocatusDiaboli Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 354777 of 465275
Subject: Re: Important Currancy events Date: 3/17/2011 3:43 PM
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I just bought back my favourite little pure lead play,

Which is that?

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Author: tim443 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 354778 of 465275
Subject: Re: Important Currancy events Date: 3/17/2011 4:26 PM
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AD

I should perhaps mention the company has in the past (including very recent past) had issues with Australian birds eating some of their product and being found dead of lead poisoning. }};-O

Clearly Australian birds are not all that clever but some people (bird watchers I suspect) took a dim view and had the company shut down for months over it.

Tim

http://boards.fool.com/lti-just-bought-back-my-favourite-lit...

http://www.google.ca/finance?q=TSE:IVW

http://www.ivernia.com/

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