Every time I have gone to compose an overview recently on this crazy meltdown I’ve ended up throwing it in the bin as the plethora of headline news and data and subsequent volatility of the markets rules it irrelevant within minutes of its completion ! See I’m even writing this without any form of punctuation just so I can get to the end quicker !
Well, now that the toxic asset poop really has well and truly hit the financial fan you will all be bored by the extensive coverage you’re receiving from all angles. You certainly don’t need any more sent down your broadband and, in any case, you surely haven’t needed me to guide you.
Hopefully I did that many many months ago when I first started to take my bearish stance and you will all recall my piece along the way last year entitled “Looking Under the Rock” when I warned there was plenty more turmoil to come despite many rouge-tinted views to the contrary.
So much has gone on in the past 2 weeks, and indeed as I type, that I’m not going to even try to give an evaluation in this piece and anyway I’ve been a tad busy trading successfully for myself and my clients ! Selfish I know but hey…...
Ok so the cynics out there will shout loudly that I’m evading giving an opinion at this time and you know what? They’re dead right but discretion now must be the better part of valour. Even I recognize that at times like these..
In a fortnight that has seen bailouts of US mortgage giants Fannie and Freddie ( yep, aren’t ya sick of hearing about them now ? !) as well as insurance goliath AIG, not to mention the bankruptcy of America’s 4th largest investment bank, (oh, and the takeover of the 3rd largest )- to mention just a fraction of the casualties around the globe - we have seen more volatility in both directions on the Dollar than I can recall in my many years of trading. Oh, and I forgot to mention the concerted intervention this week from G10 central banks to shore up the liquidity crisis………..
I’m hoping you will get the frantic speed of the current markets by the frantic style of my writing! Take today for example ( and it’s nowhere near finished yet ) we have seen GBP/USD move from 1.7915 to 1.8348 and EUR/USD surge from 1.4150 to 1.4454 and that reverses the whole move down from yesterday ! It may not mean much to you but trust me that’s some rollercoaster ride even by my previous predictions.Want me to talk you through the rest of the week? No, I thought not and we havent even touched on the stock market chaos have we ?
Traders and investors have been driven by fear and perhaps a hint of loathing, first dumping risk related carry-trades then re-positioning then dumping, then...well you get the gist. This has resulted in a total shakeup of relative currency values as shown in the table below. The Pound has enjoyed mixed fortunes across he board having dipped just below my target level of 1.7500 USD but risen against many others and will continue to perform erratically while this chaos remains.
The US Treasury and Federal Reserve Bank are meeting this week-end to introduce plans to save the planet eeeee US financial system ( er, maybe I was right first time ) by helping to eliminate the so called “toxic” ( worthless) assets on banks’ books. The plan could involve setting up a fund to buy these assets from banks, something like the Resolution Trust Corporation (RTC), which was used to clean up bad debts from the savings and loan crisis in the late 1980s.
With all that going on it’s pointless to pre-empt the market reaction come Sunday night. I promise I will try and make some sense of it and send you all another missive.
Meanwhile I’m heading out for a well-earned drink or dozen………yes it really has been that kind of week…….
Have a good week-end.
Mike
MSP Foreign Exchange Services
Office: + 44 ( 0 ) 1732 700383
Mob: + 44 ( 0 ) 7887 581696
Email: mspfx@tiscali.co.uk