And all I got was this lousy birth certificate....

The world has woken to the news that public enemy number 1 (well at least the US enemy number 1) - Osama Bin Laden - has been killed in a mansion in Pakistan in a joint special forces attack. It has been almost 10 years since that fateful day since September 11th and you can understand the relief in the US that this fight has been "won".

The cynic in me suggests that this news probably puts paid to Donald Trumps presidential ambitions.... All he could produce was a birth certificate of sorts for Barack Obama....

... no wonder Obama thought he probably was justified in taking a dig at the property billionaire in the press conference yesterday.

So what does this mean for markets and trading?

- I gotta fess up. Friday's spike in Gold burnt me and I was stopped out there.
- Still in with my short oil from $125 and long US$ / short Japanese Yen trade

In my head I had suspected a bit more of a "patriot rally" in terms of the US dollar but lets wait it out. The yen is weakening and as the rest of global markets digest the news, there might be a bit more enthusiasm for the trade.

Oil at $125 is in my humble opinion overbought and being driven by this commodity bubble and being held up unnaturally high with social tensions in places like Libya, Syria, Egypt etc. But there is nothing new in these areas to suggest that this kind of price is justified, especially with economic data suggesting the economy is staggering.

I do agree with the early analysis from STRATFOR that this probably means that the US can hasten its departure from Afghanistan. While the US has made a lot of noise about its humanitarian support / obligations to the region, the fight has been going on for 9 and a half years and Americans are tired of this battle. Since the initial "shock and awe" they've been left fighting for a country which is politically and economically worthless.

With the US elections around the corner, it will do a lot for popularity ratings to show US soldiers packing their bags and heading home to their loved ones. US soldiers departing the Middle East will invariably be good publicity in the near-term.

So for now I'll stay short oil and long the dollar... counter-intuitive maybe but its probably about time the world started to settle down for a bit and put this chapter behind us.

Sasol, the Nasdaq and the Dollar

So we are slowly sliding out of an interesting 2010 and treading with some trepidation into 2011. Markets are interesting at the moment... I wouldn't say tough because I'm still happy being long for the simple reason that there is a sea of liquidity out there desperately seeking places to be parked. I think it is pretty obvious that people are not going to make (or even protect) money by leaving it in the bank.

I have three active trades on the go at the moment:

Sasol
I like this share. Good dividend payer, growth prospects, trades at a discount to its peers and hell its been largely unloved in 2010 despite oil now heading for $100 a barrel. The company started the year at R290 a share and up until September it didn't go anywhere but in the last couple of weeks its been slowly

gaining some momentum and looks like it wants to push aboe R340 a share.

Call me a cynic but the company is widely held by domestic asset managers and I wouldn't be surprised if this stock starts getting some serious media attention in the early half of 2011 as they try and ramp up their portfolios. Sasol also recently announced a $1bn investment in a Canadian project and a lot of its other Gas to Liquids (GTL) plants are coming on line and pushing up production volumes.

All signs are there that Sasol is kicking up a gear so I am comfortable being long Sasol at R335.

The Nasdaq
Technology stocks have been out of favour in the US for a while now but there is lot going for them. The last couple of quarters have been good for telecomms and tech stocks with many indicating share buybacks and dividends were on the cards. I stand under correction but I think Intel has lifted its dividend in each of the last five years.

US companies have sat with alot of cash on their balance sheets over the last two years and at some point they are going to look to deploy that capital. That means investing in new technology, PCs, semi-conductors etc. A Nasdaq at 2600 doesn't seem to be too risky in my books.

The Dollar
Considering how I got smacked around by US currency over the last six months I probably need my head read but here's my logic:

- The US is coming out of recession
- AIG, Bank of America and Citigroup are repaying their debts
- The emerging market story is interesting but it has meant that many of the US companies are offering some seriously good value. I wouldn't be surprised if demand for US assets starts to rise as institutional investors start realising that they get better value for their money in the US rather than directly ploughing money into emerging markets?

I thought about it a bit and decided to go long dollar, short yen. There is some uncertainty in Asia with the Korean spat so I wonder if the basket of Asian currencies might come under some selling pressure?

Let's see how those play out over the next few weeks.... Happy Xmas and New Year folks

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.

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.

Unwound some of the dollar stuff

I have unwound some of the long dollar short yen positions I was in. Felt I was a little over-geared in the short term and there was some profit on the table so it was easier to walk away and try again another day.

Bet on the dollar

If you've been following me on Twitter you'll see I've been plugging my long Dollar | Yen position which has so far yielded some rewards.

The thinking behind this is four-fold.

1. There is the political instability around North Korea which is likely to lead to some volatility in the Asian markets (including presumably the currency markets)

2. As the economy (or more specifically the stock-market) has rebounded, there has been some flight from low yielding but perceived "safe" currencies such as the Yen into the Euro for its higher yield. I argue that the dollar sale has been overdone and in fact offers better value than the Euro.

3. While I still expect another market down-leg, the more the rally takes hold (particularly in the US) the more appetite there will be for the dollar - I don't see the currency alternative at the moment nor do I see something else that carries enough "size".

4. China, Japan and the rest of Asia all want the dollar to be strong relative to their currencies and logically they are not going to try and put some pressure on their own currencies to keep them weak relative to the dollar.

It is not a long term trading position - simply because I think there is too much volatility and earnings uncertainty everywhere but I think while everyone is keeping their eye on the Euro, I think the US dollar offers something a little different.

Dollar fizzling out?

We touched on the declining dollar recently.

There is an interesting article on Bloomberg this morning discussing the dollar rally fizzling out. The link is here:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aKpyxDjnfiJ4&refer=home

It's interesting to note two things:

1. They've accepted that all the money the US Federal Reserve is pumping into the markets to try and stimulate economic growth is finally starting to have an impact on the the value of the US dollar.

2. Currencies like the dollar, yen and Swiss franc are going to be the losers while higher yielding currencies such as the Brazilian real, Indonesian rupiah and Polish zloty as well as emerging marketing currencies are going to be the winners.

I thought that was interesting considering that many of the "strategists" within the SA investment scene are talking up Asian markets and currencies at the moment.

The day the dollar died?

I arrived back in JHB on Monday last week to discover that the US dollar had slipped below the R10 to the US Dollar mark. I have to admit that I had mixed reactions to seeing this.

Will I look back on 22 December 2008 and see it as the Day the dollar died?

The dollar has only managed to gain 3.3% of value against the euro since the start of the year and has been under significant selling pressure in the last few months. Against the Yen the US dollar has seen the biggest annual decline for the last two decades, this year.

From my perspective I make some handy money from things like Google so a weaker Rand vs. the dollar is useful.
HOWEVER times are a changing and I guess its going to be interesting to see what happens in the global currency market over the next decade or so.

Can't remember if I blogged about it, but a few weeks back I sat through a presentation by one of these strategist types for one of SA's big banks and he was predicting a major shift away from not only US equities into Asian equities but also a move

away from the dollar as the world standard currency.

I can buy the theory that positioning yourself for movement in the Asian equity market makes sense and have been trying to angle a part of my portfolio this way

While the euro has been the early short term this strategist is expecting currencies like the Singapore dollar to become increasingly important in the bigger picture.

So lets take a look at this currency.

As of this morning, the Singapore dollar (SGD) is trading at 1.43870 SGD to US$1.

Not being a trader in the currency market I'm going to make a note of this figure and track it on a weekly basis and see whether the money is shifting into Asia.

I'm going to do the same for the Yen, Chinese Yuan Remimbi, the Hong Kong dollar, the Thailand Baht and the Vietnam Dong. For good measure I've thrown in the Indian Rupee because of India's growing importance in the bigger picture.

US$1 vs. Japanese Yen = 90.3261
US$1 vs. Chinese Yuan Remimbi = 6.82252
US$1 vs. Hong Kong Dollar = 7.75005
US$1 vs. Thailand Baht = 35.0630 (international rate)
US$1 vs. Vietnam Dong = 24,704.36
US$1 vs. Indian Rupee = 48.4366

I'm not totally convinced the dollar is "dead" - purely because many Asian economies remain heavily export dependant and it suits them to have weaker currencies.

Throw in the fact that in the short term there is political uncertainty in places like Thailand and war tension in India and Pakistan, I suspect that while these currencies make some ground vs the US dollar in the longer term there will be some issues counting against this basket of currencies.