|
PureBytes Links
Trading Reference Links
|
Cliff:
Good ideas. I don't think the Euro will overtake the US dollar any time soon. I
think we'll have to watch and see just how the Euro is received by the
investment/transaction/investor community. And we will also have to watch to see
if all of the new member countries will be able to keep their economies within
the guidelines. If you look at the old EMS band in the early 1980's, it was
hailed as the Euro or ECU of its day. But by trying to force their
currencies[and therefore their economic conditions] to stay in step with the
stable currency of the EMS band, many countries were forced to devalue, devalue,
devalue. Besides the obvious French Franc and the British pound, look at the
Belgian Franc: It had two currencies, one for financial transactions and the
regular franc. It came to an ugly end after it had devaled for the umpteenth
time...
Which leads us back to your original point: Currency effects are tremendously
important in a world view.
Best,
Tim Morge
Cliff Scheller wrote:
>
> Mark and all,
>
> A bit more to add to the good mix so far --
>
> Good macro forecasting and trend start/end observations can be
> had using credit instrument spreads.
>
> They are useful not only from a yield-curve standpoint to track the
> underlying currency, and indirectly the country's equities, but
> expressed inter-currency, much as the crosses are. Comparison of
> the bond rate between canada and USA for the recent past is a
> good example, and then look at the currency cross as an overlay
> to see some interesting relationships that are tradeable.
> This is indeed for macro use and long-term strategies only, and is
> quite useless for short-term, unless you can play some of those
> fancy swap trades.
>
> Since you are building this for the future, don't forget the impact of
> the Euro itself, which may indeed vault itself into a premier if not
> the top world reserve currency, the way things seem to be going.
>
> Some other thoughts...
>
> is the world entering a period of such instability that these macro
> trend behaviors will be less useful?
>
> currency devaluations have large and far-reaching effects on macro
> business and trade. I would think that, for the next 3-5 years, these
> dislocations, and the resulting depressionary effects, will be the
> overriding factors in the "big picture". All asset prices are
> maintained with a relevancy to each other, in proportion to their
> ability to generate return. Here in the USA, we are enjoying the
> penthouse view, but every time a foreign currency devaluates, our
> assets become more expensive, and generate less potential return.
> A good macro model will have to take this comparative asset
> pricing into consideration, IMHO.
>
> Cliff
|