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Dairylea Dollar Spreads
Aug. 30th, 2007 11:05 amAnd just as it was predicted, so it came to pass. I took the bull by the horns, increased my long sterling position, only half an hour before Sydney-based Basis Yield Alpha Fund said that US home loan defaults had wrecked the value of its debt holdings, and filed for bankruptcy. This was enough to send the carry-traders scurrying for cover, strengthen the yen and bring back the popularity of US Treasuries. If there was an order of currencies that you don't want to be in when news of a hedge fund going bust in Australia comes out, my guess that it would be A$, NZ$, Sterling, C$, Euro. Currencies whose net index would go up would be the US dollar and then the star performer of the lot, the Yen, which promptly gained just under 1% against an averaged basket.
So, sterling got slaughtered and I had to close out my 'new' position. I kept my 'old' position open.
Unfortunately, Finspreads doesn't think that way. It operates on a "first in, first out' principle, for accounting purposes. So, just as I was closing out a position that I saw as a hundred quid loss (not bad for a couple of hours' work, eh?), Finspreads, because it treats my part closure on a different basis, told me that I had won £110. Where does the vanished money go? Into the 'open' position, which my figures think of as being about level, but which Finspreads tells me is substantially down.
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All of this kind of shows up a paradox in Doubleday's line of thought. If things are going to get a lot nastier (as he predicts) then the dollar is going to strengthen against everything but the Yen, rather than collapse to the $2.12 level or wrose (as he predicts). Even a reduction in interest rates in the US won't stop this if the herds are panicking. I'm still maintaining a short dollar position because I think that things will calm down in the markets, but the credit situation in the US will necessitate a 0.75% to 1% cut in rates over the next six months or so. Betting on currencies. Fuck me, that's a stressful game for you.
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Well, the plumber came round, showed me all the brochures and smples and stuff. And we're agreed on a late-September start, we hope. And my boiler chose to stop dripping a couple of days before he came round. Doubtless by the time I return home this afternoon, it will have started again.
++++++++++++++
So, sterling got slaughtered and I had to close out my 'new' position. I kept my 'old' position open.
Unfortunately, Finspreads doesn't think that way. It operates on a "first in, first out' principle, for accounting purposes. So, just as I was closing out a position that I saw as a hundred quid loss (not bad for a couple of hours' work, eh?), Finspreads, because it treats my part closure on a different basis, told me that I had won £110. Where does the vanished money go? Into the 'open' position, which my figures think of as being about level, but which Finspreads tells me is substantially down.
+++++++++++
All of this kind of shows up a paradox in Doubleday's line of thought. If things are going to get a lot nastier (as he predicts) then the dollar is going to strengthen against everything but the Yen, rather than collapse to the $2.12 level or wrose (as he predicts). Even a reduction in interest rates in the US won't stop this if the herds are panicking. I'm still maintaining a short dollar position because I think that things will calm down in the markets, but the credit situation in the US will necessitate a 0.75% to 1% cut in rates over the next six months or so. Betting on currencies. Fuck me, that's a stressful game for you.
+++++++++++
Well, the plumber came round, showed me all the brochures and smples and stuff. And we're agreed on a late-September start, we hope. And my boiler chose to stop dripping a couple of days before he came round. Doubtless by the time I return home this afternoon, it will have started again.
++++++++++++++
