Update

Just a quick update on my long USD short ZAR trade. Things have moved in the right direction and I am marginally in the money.

Quite pleased that the Rand is starting to get comfortable below the R7.50 to the US dollar level and it is good to see decent volumes continuing to go through on that USDSCA warrant.

Something that should give a bit of momentum to the weakening of the ZAR will be the hints being offered by the bond market. Foreigners were net sellers of R596m worth of SA bonds on Thursday following up on the R645m sold on Wednesday.

These are the kind of flows likely to indicate that people are starting to pull in their horns and take money back to the developed markets for a while.

According to the guys over at RMB: "RMB analysts said in their daily report that risks of an immediate break
of 7.62 have faded as mixed US data has taken the strength out of the US recovery and global risk-taking is resuming, if slowly."

.... they're bankers and probably wrong.... Personally I wouldn't be surprised to have a decent sell-off going into December - particularly with concerns around structural problems in places like Greece, Spain, Ireland etc.

A great number of out of China with November Industrial Output up 19.2% - well above economist expectations. The recovery seems to be taking hold at all levels of the economy which is very encouraging for longer term investment stability

Anyways - I have a good feeling about today. Let's see what the day holds.

And we're off!

I'm still trying to get my head around that US jobs number but I guess I'll take what comes - it looks like the jobs are finally starting to come through in the US economy.

The dollar started to bounce back and that burnt the gold and platinum prices on Friday - it will be interesting to see what impact that has on SA shares during the next week. If foreigners decide to lighten some of their SA holdings we might see the Rand come under a bit of pressure.

Rand slipped to R7.46 vs the US $ on Friday and a move through the R7.50 mark could be quite telling. I see it has subsequently strengthened a bit at the end of the trading day to R7.41.

Like I said in my previous - I still the dollar offers some of the best opportunities for traders over the December / January period.

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.

Call update

Just a quick note - on Tuesday Impala Platinum rose by 1.85% to R166 after earlier in the day after hitting a high of R168.49 earlier in the day.

A quick look at trade in the US ADR has IMP trading at around R168.50 if the present Rand / Dollar exchange rate is used (R7.40).

There was a bit of a pickup in trade in my prefered call warrant IMPSBC with 469235 warrants trading hands and the warrant rising 3c to 27c - admittedly it didn't trade particularly much in the latter part of the day when IMP gave up some of its gains.

Last week I said I thought the dollar would bounce back against the Rand and it seems to have done so - albeit slowly and this is proving a positive boost for the rand hedge stocks listed on the JSE.

Long AUD
Speaking of currency related developments I picked up a currency trade via my Global Trader account which seemed to make sense to me.

This week we take a look at the Australian Dollar (AUD) a currency that has come up three times in our past reports and has continued to strengthen on the back of firmer Gold prices and the carry trade. The Reserve Bank of Australia (RBA) became the first central bank to increase interest rates this year, by increasing their cash target rate from 3.00% to 3.25% on 6 October. This increase took the market by surprise, as most analysts had expected the RBA to keep interest rates unchanged.

The question in most investor’s minds at the moment is will the AUD continue to strengthen against the greenback, or is the greenback oversold at these levels. We, however, continue to be bullish on the AUD as the currency continues to be backed by relatively stronger fundamentals than its peers. Year on year unemployment levels in Australia declined from 5.8% to 5.7% in September 2009, as the Australian economy continues to strengthen on the back of anticipated increase in demand from the Asian markets. Australia’s trade balance however continues to show a different picture as the trade deficit continues to remain relatively high, as it was recorded at $AUD1.5 billion in August. Australia continues to provide investors with higher yields for their investments.

The AUD is currently trading at its 52 week high at 0.9265 to the Dollar. We anticipate the AUD to continue its strong run against the Dollar with our eyes firmly fixed on the 0.95 resistance level. The AUD should continue trading firmer with 0.935 as the first resistance level and followed by 0.95 as the next level. On the down side we expect the currency to find support at 0.90 and then 0.88.

Their recommendation was long AUD vs USD at 0.92 with a stop at 0.90 and a take profit level at 0.935 which I will follow and see what result it produces.

Friday mumbles

After making a small profit on my short on the Top40 I closed out my position and the only open trade I now have open is a long on Sasol. At least the Rand is providing a bit of a handbrake at the moment and the oil price at $68.60 is "robust"

There is no question that the rising unemployment issues in places like the US remains a threat - you cannot have a jobless recovery - finished and klaar. Personally I think a lot of stocks will still come off over the next few months - particularly those with exposure to the consumer end of the market.

A couple of people commented that being long Sasol while shorting the TOp40 was surely counter-productive and in general that makes sense. But Sasol is cheap in comparison to its international peers.

At the moment Sasol is trading on a price to earnings (PE) multiple of say 10.5 (allowing for some currency).

In comparison the historical PE's of:

• Exxon Mobil - 17 times
• Chevron - 15 times
• Royal Dutch Shell - 13 times
• BP - 13.9
• ConocoPhillips - 13
• Total - 9

For sure Sasol is not Exxon or Chevron but when one considers the multiplier effect that a weaker rand could have on earnings and the great technology the company possesses, it would make sense to see Sasol pushing on from here.

But that's just my view so who knows.

It is not a very scientific method of analysing investor sentiment but I thought what was quite interesting was to take a look at the top headlines on CNN....

# Chicago, Rio lead race to host Olympics
# Key piece of human evolution revealed
# 1,100 dead in Indonesia quakes, U.N. says
# Ex-prosecutor says he lied about Polanski case
# Martin: Hollywood is clueless on Polanski
# CNNMoney: Dow plunges on economic reports
# Fortune: BofA CEO scores $53M retirement
# KSL: Elizabeth Smart says she was raped daily
# Vote now for 2009 CNN Hero of the Year
# Time: What Berlusconi's Obama jokes say
# Ticker: Republican sounds off on Polanski
# Boy, 11, wages fight against the N-word Video
# Stranger carries boy from burning building Video
# H1N1 vaccine on schedule, official says
# What if you ditched your car for a day?
# Kanye West's 'Fame Kills' tour meets swift end
# Sister upset about Mackenzie Phillips' book Video
# Poo power saves farmer $200,000 Video T-shirt
# CNN Wire: Jon Gosselin’s epiphany...

...... Yip sounds like people are REALLY worried about panic in the global economy this Friday.

Go Gold go!

Absolutely loving this gold price action and pretty sure we've got clear air up to $970 before the end of the week. At this moment in time we're floating around the $953 mark and the only thing that hasn't played the game in terms of my AngloGold call has been the strong Rand. (or is that more specifically a weak dollar)

Still pretty confident that long ANG is a good place to be going into tomorrow.

Sasol was looking fine but dipped off today as the exchange rate strengthened and US markets sold down but still pretty happy with where we're at.

Looking forward to tomorrow, I reckon there is going to be plenty of short covering around gold as people pile in and technically I don't see the Rand / Dollar getting through the R8.20 mark to the dollar.... in fact I think there might be some hot money being pulled from emerging market currencies tomorrow...

Let's see ...

Wow!

Wow! The Dow Jones Industrial Average sank 770.59 points (6.92%) yesterday as the US congress failed to approve the terms for the proposed US$700bn bailout that was supposed to save sinking financial markets.

The tech heavy Nasdaq went down 199.61 points (9.14%). Unless a miracle happens today, we're likely to get trashed.

Interestingly though - the Rand is slipping quite drastically and is now trading at around R8.33 to the US dollar.

I'll be he honest - I don't think we have even begun to see the real moves in the Rand / Dollar rate.

The question though is going to be twofold:

- What are our resources going to do with the weaker Rand? (Will the Rand buffer boost them or will they just keep being sold down)

- When the hell are these commodities supposed to bounce?!

Commodities such as base and precious metals were supposed to bounce on the back of increased demand from China following the Olympics. But this doesn't seem to be the case OR the

There is a palpable excitement building around Gold shares / the gold price at the moment and this failed bailout may just be the tonic that is needed to light some serious fires in the precious metals markets.

Gold is now above the psychological barrier of US$900 an ounce. A sliding Rand and a rising gold price is fuel for a run on these shares which creates some great opportunities for traders.

I maintain my exposure to the precious metals / Rand Hedge market through a small call position on Impala Platinum. For the rest of the market it still looks pretty grim.

Rand to be hit?

Does anyone else get the schnarkies that the Rand is about to take an almighty klap??

I've been watching the action in the US and locally and suddenly in the last few minutes Gold has rocketed some 50 odd dollars and the gold shares are on a mission.

Harmony, Gold Fields and AngloGold Ashanti are up in excess of 10% and gold doesn't look like its planning to stop.

In between this the Rand has slipped to R8.22 to the US dollar...

This is great for my Impala shares and for my dollar earnings but will play absolute havoc with the local South African economy (Inflation and debt issues will continue to rise).

I just get the horrible feeling we're about to see a huge selloff of emerging market currencies as people pull their money back into their home balance sheets.

I think I will just keep patting my IMP on the head for the moment... Time for these things to fly....