Ouch

Well that Dollar / Yen trade was an almighty screw up and I am suitably poorer for my efforts.

I still think in the long-term (3 to 4 months) the trade is the right one but having been stopped out twice in the last few weeks I've had my fill of this particular currency play.

That doesn't mean I've moved my attention away from the currency market and I've used some of these new Standard Bank Currency Reference Warrants to go long the US Dollar against the South African Rand.

One of the fallouts I would expect to see courtesy of Dubai is some money being pulled out of emerging markets and parked off in in things like the US Dollar - particularly as Christmas rolls around.

If one looks at the US dollar call (USDSCA) there seem to be quite a lot of people taking bets that the rand is going to weaken from these levels. Of the last 7 trading days 4 have had trade in excess of 2.3m which is not bad for an instrument which is only 2 weeks old.

I also bailed on my Sasol call after my stop-loss was breached - the warrant was decaying too fast and my sense is that investors are not going to rush to bid up emerging market shares over the next 30 days.

Yeah!

These are the kind of analysts I'm talking about:
























Danielle Chiesi - the analyst who sunk Galleon!

Comments on ABL

African Bank Investments Limited (Abil) for me has long been a popular choice in my investment portfolio. They're a good dividend payer (both the ords and the prefs) and they are one of the few financial services stocks who have really good growth prospects over the next two to four years.

I have read quite a lot of commentary today about how Ellerines is an albatross around the neck of Abil and how it is likely to continue to hurt them.

Don't get me wrong - in hindsight they have overpaid for the asset but just look at this for a moment and let's try and work this out.

As things stand revenue breaks down like this

• African Bank - R7.4bn
• Ellerines - R6.9bn

That revenue line in these results is the key. A business that can generate R15bn in revenue - primarily cash can do whatever the hell it likes.

Have a look at the capital raisings that the bank has undertaken this year. I think it raised about R800m over the last 12-months.

In credit markets which have been squeezed that is not a bad going. In a business of this nature, if you can generate cash the funding (and cost of funding) will ultimately play ball.

Another key aspect for me is that the Ellerines they bought and the Ellerines they are trying to build are two very different animals. The group has admitted they have made mistakes and they've done things about it.

Instead of standing around and letting it fail they've attacked the problem and they are trying to address some of the challenges they are facing. If you have seen some of the plans around simplying the whole retail offering you will know that there is a strategy they are trying to execute.

The other point I would like to try and get across is that I don't believe Abil are trying to be furniture salesmen competing with the mainstream retailers. My sense is they would like a functional and workmanlike retail offering but stick to the business of lending - and managing the risk of lending

Conclusion
Maybe the ordinary shares are a little expensive at current levels (if you have a short-term investment outlook) but I don't think you can go too far wrong adding a few of the Abil preference shares to your portfolio.

Long dollar, short yen

Anybody who has been following my Twitter feed over the last week will know that I have been yapping on and on about the US dollar being the only place to be for December.

More specifically - long dollar short yen.

Now given what has and still is happening to the US dollar over the last 12 months, most of you are probably looking at me a little cross-eyed and wondering if I have taken my medication this morning... but hear me out.

I like the dollar going into December for a couple of reasons:

1. Say what you like about it, it will ultimately a defensive hard asset over the long run

2. Asia is stressing about their exports, at some point they are going to start putting pressure on their govts. to weaken many of their currencies to try and resucitate their export market

3. Singapore and Korea are now talking about trying to limit capital flows into their markets. Taiwan last week banned foreign investors from placing funds in time deposits on concern about currency speculation. Plenty of asset managers have been talking up the Asian currencies for a while now. Do they have the capacity to keep taking these inflows in the short-term? I don't think so.

4. Its a volume game - the two currencies who can genuinely absorb major inflows - the dollar and the yen (I'll touch on the yen now now).

5. Equity markets have run hard and there is a general sense that maybe its time to take something off the table and re-evaluate into the new year. Where are you going to park that cash?

Just for shits and giggles I am reading an article at this very moment about them evacuating people in "flood-hit Britain" - Mud Island is sinking into the sea ----> FACT

Which brings me to the Yen. The yen at 88.80 to the dollar is BAD news for Japan. A look at the Nikkei vs. Dow and S&P shows you that it the currency is doing Japanese companies no favours. In my opinion it won't move much lower and people will be looking for an excuse to buy the dollar over the yen in the short-term.

So long dollar, short yen and long Sasol are my only open positions at the moment.

A whole lot of nothing

A week which opened up a little nervous but ultimately ended green.

The JSE Top40 (J200) opened at 23730 and finished at 24075 helped by a bit of a bounce in banks and industrials (SAB and RCH). For the rest it was a case of going nowhere fast.

Portfolio changes:

• Sold out of my long IMP call on Wednesday (IMPSBC) for a marginal profit - time decay was starting to bite into the warrant despite being in the money
• Switched into a long on SOL (again SOLSBG)
  

While I still maintain that IMP in the long run is a good call (especially with platinum gaining traction at the top end of the the $1300 range), the time decay on the asset is hurting.

Sasol seems to have built a nice base around the R290 mark (Friday close as well as warrant strike). IMP on the other hand has broken below R170 (the warrant strike) and coupled with the safety issues and the drop off in production - it maybe needs to do a few things right to tempt me back.

Having said that trade in both warrants was brisk over the week and for investors with a bit of risk appetite, they both seem to be an option.

Classics!

I just got mailed these two and thought they were brilliant for a laugh:

THE LLOYD`s Prayer

Our Chairman,
Who Art At Goldman,
Blankfein Be Thy Name.
The Rally`s Come. God`s Work Be Done
On Earth As There`s No Fear Of Correction.

Give Us This Day Our Daily Gains,
And Bankrupt Our Competitors
As You Taught Lehman and Bear Their Lessons.
And Bring Us Not Under Indictment.
For Thine Is The Treasury,
The House And The Senate
Forever and Ever.

Goldman.

and then a truly beautiful poem:

Loves the sensation
caused by temptation
A guy sticks his location
in a girls destination
to increase the population
of the next generation
Do you understand my explanation
or do u need a demonstration

Snigger...

I don't know where this comes from but I see it posted on the Page88 site and I had to laugh at it:

• The Economy, How Bad Is It....
• The economy is so bad... that I got a pre-declined credit card in the mail.
• The economy is so bad.... I ordered a burger at McDonalds and the kid behind the counter asked, "Can you afford fries with that?"
• The economy is so bad... that CEO`s are now playing miniature golf.
• The economy is so bad... if the bank returns your check marked "Insufficient Funds," you call them and ask if they meant you or them.
• The economy is so bad.... Hot Wheels and Matchbox stocks are trading higher than GM.
• The economy is so bad... parents in Beverly Hills fired their nannies and learned their children`s names.
• The economy is so bad... a truckload of Americans was caught sneaking into Mexico .
• The economy is so bad... Dick Cheney took his stockbroker hunting.
• The economy is so bad... Motel Six won`t leave the light on anymore.
• The economy is so bad... the Mafia is laying off judges.
• The economy is so bad... Blue Cross laid off 20 Congressmen and Morgan Stanley laid off 10 more.