Call Me a Turkey!

Wow, finally finding some quiet time on a holiday weekend to get a post in. My life has been very busy and equally stressful as of late. My wife and I will be welcoming our 2nd daughter into the world on the 13th (via c-section), then closing on a house purchase the 22nd, possibly the 18th depending on how things go. Then there will be prepping, painting, carpet installation, and finally moving. We'll make it though!

In my last post I shared my view that Turkey looked like a good longer term investment. I was wrong. I was right in my analysis of tangible returns in interest rates and the potential for a carry trade, but I did not place enough focus on Turkey's central bank governor. The problem with the Lira carry is that foreign money is not welcome in Turkey. This is why even in an environment of accelerating inflation in Turkey, interest rates are being kept artificially low and bank reserve capital requirements remain high. Furthermore, the Turkish central bank is selling Lira daily to buy dollars. This government order flow has significantly devalued the Lira over the last month. The bottom line is that until leadership changes in Turkey, trading the Lira either direction is a bad bet. I'm out at break even and I've shifted my attention to other, more stable markets.

Whenever you are researching possible trades and developing trends, always be sure you know the political risks to your trade--they can be enormous even when everything else about the trade looks great.

As of the 15th, I won't be allowed to leverage up on my gold positions, dang it. Right when the gold market is about to blow up I'll have to settle for market returns. I'll be mixing in floating profits all the way down though. $500 is where gold is headed. Now that gold is falling sharply and US equities had one of their most bullish weeks in two years, the gold apocalypse is upon us.

I'm also bullish the Euro right now, I still think we'll see 1.5 here in the next couple of months. I don't put too much weight on technicals anymore, but the giant bull flag in EU looks to be breaking out and so I took a small bet on EU. Interest rates are on my side, the Greece situation is settling down, and I have no doubt that money will flow from gold into the EU. It's just a game of putting the pieces of the puzzle together.

Recently I've also been buying the Aussie. Yes, even though AUS is correlated with gold. I'm targeting 1.1. At that point in time I believe the falling gold prices will make 1.1 a longer term high in AUSUSD.

Take care everyone and trade well.

Oh Sweet Precious Liquidity, Where Art Thou?

Wow, looks like all the Gold bulls are really taking advantage of the record high prices-- George Soros did anyways. What we are seeing in Gold is either the beginning of a horrifically beautiful crash, or just a pre-crash appetizer. This is what we call market impact, or lots of Fox News viewers "taking profits." I believe there will be enough morons to net out one last group of sellers at decent prices. Someone out there with some cash to burn will believe he/she is getting a great deal and buy lots of gold at $1500/ounce. As the gold bulls watch their dreams begin to crumble as prices being reaching 1400, 1300, they will only then wonder if $2000 gold isn't all that reasonable and before you know it, gold will be at $800...Soon after, $500 or lower. Don't you just love irrational markets? Hyper-inflating gold prices turned out to be wonderful hedge against hyper inflation...I rest my case.

I'll nurse my gold trades carefully, but this monster won't be taken down without a fight. I'm looking to add more to the short after price breaks through $1500 but kicks back off of it from below. We must simply wait for the pain to increase.

I'm also watching the Turkish Lira very closely. It is an extremely good deal right now verses the dollar. Goldman Sachs must be in the business of philosophizing when they aren't trading. They are not happy with Turkey and their low rates therefore they are paying to prop up the dollar against it. I surely hope Goldman isn't that stupid, hopefully they are luring in the morons who BLINDLY follow their trade calls to gain some cheap liquidity. I see the Lira becoming a very nice trade over the next few years as Turkey reacts to their inflation troubles.

Thanks yet again for visiting the blog, folks! Be careful out there, whatever you do, don't buy gold!