new currency positions

My views on currencies

I think there will be a new paradigm: GBP and USD are the preferred funding currencies for carry trades instead of JPY. Bernanke is going to keep interest rates at 0 for a long time. However, because of the balance sheet recession and many companies trying to delever loans dominated in dollars which would push the dollar up. This would not happen for GBP, thus I am more bearish on it.

I am no longer bullish on the dollar anymore. I do not like longing it because of Bernanke's guillotine. The silver longs will protect us from any currency devalution.

Regarding Euro, 1 euro for 1.33 dollar doesn't price in the guillotine effect. It is not that expensive, and I do not want to short it.

My current hierarchy for ZIRP currencies:

JPY > USD > GBP

We are going to start small with these new positions:

- USD/JPY 10 (at 99.2 yen per dollar)
- GBP/JPY 10 (at 148.9 yen per pound)

Diversification is not part of the equities strategy. The equities strategy could be summed up as "short beta" and maintain a token long on PBR. Short an index or an ETF is the simplest way to express this view. Regarding sectors I am most bearish on XLY and XLF. Besides sector ETFs and SPY are largely diversified too.


Portfolio (12 positions/ 2.1:1 leverage) (approximate)

Equities (20%):
+ XLP 10
+ XLY 5
+ PBR 5
(XLP and XLY will be removed tommorrow: it is imperative that I build up large short positions before the real sell-off)


Currencies (60%):
- USD/SEK 10
- EUR/SEK 25
- EUR/AUD 5
- EUR/CAD 5
- USD/JPY 10
- GBP/JPY 10
(consider building larger currency positions [short GBP and NZD against yen especially pound] first)

Fixed income (110%):
+ German government bond 10 year 70
- Japanese government bond 10 year 40
(consider a small long position in 10 year Treasuries)

Commodities (20%)
+ Silver 20
(prepared to short oil and copper)