Time for cool heads to prevail
It looks like we are entering a time of extreme volatility where there will be plentiful trading opportunities but also lots of danger around every corner
- It’s going to be very risky to be long USD whilst the threat of a ratings downgrade hangs over the US. The impact on the Treasury market cannot be underestimated so USD bulls (or bottom pickers like myself) need to be very careful
- It’s also going to be very risky to be long EUR. The Italian debt situation is a very serious one indeed as their debt levels are quite astronomical for an economy which has grown at around 1.5% on average for the last 10 years. This could be the straw which knocks over the EU house of cards (if you’ll pardon the appalling mixed metaphors)
- Look at the NZD, look at the CHF, look at Gold; all screaming at us that the market is desperate for something ‘safe’ to buy
Conclusion: Be careful. I think we are going to see the unexpected and the Black Swan hasn’t even shown up yet!!