When in Hong Kong, Buy American

Buying coins in Hong Kong doesn’t have to be daunting. Apart from obviously staying away from the modern counterfeits, the free port actually offers a very good selection at quite good bargains – for American coins. The geographic mispricing that basically drives the theory of buying Asian numismatics in the states also works the other way around.

I just picked up this 1876 S trade dollar, improperly cleaned and slightly damaged (VF35 details?) for HKD500 the other day. Haven’t done too bad (hopefully) for my first purchase, since I haven’t really seen trades at this condition for under $100 for a few years.

So a few notes on noodling the HK market for American coins: (ALWAYS WATCH FOR FAKES)

1. Be prepared. That means Red Book, loupe, scale, and a couple of genuine coins to compare with. I can’t stress how important the scale is, as the prevalence of counterfeits is quite high here. If you need to buy a scale, go to one of the kitchen supply shops on Shanghai Street in Yau Ma Tei (near the intersection with Wing Sing Lane) and get one for HKD50. It’s a trouble to lug, but well worth it considering the downside risks.

2. Go to smaller private shops. They need to move coins, and given the dead volume for American coins in HK, you can talk down the price quite a lot. Best thing to do as an American is point at it, ask for the price, and then give your own price (on a calculator). But don’t go to street stalls. That’s just a bad move.

Where to buy coins in HK? A good place is the Mong Kok market on Soy Street (4 levels of numismatics!) They mostly deal with Asian numismatics, but there are a few stalls with American coins. I’ll add the exact address later with a picture, but if I don’t get around, feel free to leave a comment.

3. Look for the uncommon coins. It’s really not worth buying common Morgans or Peace dollars (I even saw a blue Ike in the mix) for more than spot (ie, what you can do in the states). We’re looking for high economic/collection efficiency here!

4. Never be afraid to walk away. I mean never. If you can’t get a very good deal, just leave. Unless you know, they happen to have a genuine stella or some other R3, 4 coin. Then remember to bargain hard (30-40% off US wholesale seems reasonable).

5. Always, always, always be vigilant and look for counterfeits. Same concept as in the states, but just two gears higher.

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I’ll add more as summer progresses. Though the HK market of US coins are mostly silvers, I would really want to find a misidentified colonial copper or historically significant coin that the dealer doesn’t realize.

To the best of good collecting, and remember to stay away from fakes!

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gemuchlichkeit soft focus

either there’s a flaw with my fd 50mm f1.8 lens, or a wonderful side effect to what’s supposed to be a portrait lens anyways. need to borrow someone’s ef 50mm to be sure…

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The Last Trading Post Until 8/19/2012

This will be my last trading post until the end of summer as I will start employment with a bank’s fixed income desk very soon. I really don’t want to get tied up in conflicts of interest, dissemination of company property and then angry letters from HR. Slowly winding this account with around 26% profit since January and keeping it as a JPY play only.

Sooo a few notes, I use soft stops, ie when there’s a daily close that invalidates channels, targets or lines I’ve previously drawn.

Timing should be that the AUDNZD trade closes first tomorrow evening, then AUDUSD should be stopped out (though this trade is a hedge against both a dovish RBNZ and fall in risk sentiment because nothing in Spain has been solved yet… and they’ve woken the Italians). CADJPY I can hold (after everything has been closed) for a couple of years.

Going to open an Hong Kong account in the next few days so I can trade NDFs and CFDs. GOLD AND SILVERRRRRRR!

USDSEK has reached its first target after a week. Good trade, eh? I wouldn’t look to buy again until it reaches 6.9000. But, volatility is high so a bad position won’t hurt that bad.

To the best of good buys.

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No new stimulus?

Well, Uncle Ben didn’t seem to mention any in his testimony to congress. The entire market has been waiting for something like this for the past ~3 days.  I think quite a few will be unhappy that the only new money is coming from China, rather than another blowout deal from the US. Seems like fedspeak does build up – other members preview what the Ben says.

The USDSEK positioning remains valid, though I now seem to doubt a daily close below the channel at around 7.1100/7.0900, which was the confirmation for a short entry. However, a commendable effort to those who captured the leg down.

Currently watching EURJPY again. As of right now (1.5hrs in) risk appears to be peeling off. If this candle closes red hammer down, I will be adding more to the position. EURUSD has failed to pass the former low of 1.26000 (also a fib from 1.18754 to 1.49485 – retest of 91.0% at 1.21520?…)

But nothing wrong with selling Euros – though selling it against USD, CAD or NZD seems to make more sense… will see how EURJPY does… Will probably throw it away if it’s not positive by today’s US close.

To the best of good buys.

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Don’t touch these just yet

USDJPY and USDSEK, both looking for a potential short on stimulus bets/US dollar correction. However, I’d only pick one of these and given the overall broad sentiment looking at S&P500 futures, either or.

That sentence did not make sense, but it’s better to be right and lose a few pips.

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USDJPY – Need tomorrow’s candle downwards and crossing the channel for further downward pressures. Otherwise target remains at the 79.800/80.000 former light congestion.

USDSEK – same story, looking that break although this pair seems more likely. My dear, Draghi didn’t offer us anything important except that these temporary loans/refinancing/recapitalization are still on the table.

Want to sell something? Why not USDCAD or AUDNZD?

To the best of good buys.

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Yen Channel Top

Wow in 3 days… let’s see if there’s going to be spike before the Bernanke opens his mouth. I have closed out my ZARJPY from Friday and switched over for USDCAD at 1.0340 for the traditional Bernanke play.

Recent Fedspeak in the past 2 days have once left markets in confusion. Dallas Fed President Bullard, who is one of the more bullish presidents, call the recent softness in the labor market as transitory, and does not distract from the current fed policy of slowly unwinding. Taking at the status quo, this means no more new stimulus. Yet, words from the Ben himself remain ambivalent, refusing to signal any steps unless there’s some crisis of some kind.

But here is the channel in focus.

Other yen crosses show a hit of a very steep channel, like CADJPY here. EURJPY has broken out, and I wouldn’t have a problem buying it until 103.000, but USDCAD (crude tracking ~82% correlation 20D) and NZDUSD, AUDUSD, USDSEK give better choices for a bullish reversal.

And of course, if we do get more stimulus as a kind of brain surgery to fix a scratched elbow, that USDJPY channel will still have plenty of room downwards.

tsk re-evaluating AUDNZD… there’s still Aussie labor data tomorrow. However, we are at the longer term .500 fib of 1.29320. The congestion between 1.27880 and that fib has been noted…

But, looking forward to what Draghi has to say tomorrow. Wonder if there’s going to be any mention of fiscal easing to help with the sovereign/commercial bank/debt/credit crisis.

To the best of good buys.

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Another Chart to Reconsider ECB Dovishness

Of course, assuming that the ECB is dovish. A marathon is still made of small steps.

But in light of that, and contrary to the post a few hours ago, EURSEK may not be optimal considering that it has stopped at the resistance and the top of a former channel. Indicating a bullish ECB? Possibly, but at least there are 2 positions to see out what the ECB does.

Here seems to be a better one: EURNZD, though only for a short term hold such as this one. (This is also considering where EURCAD is at the end of the day – anywhere in the 1.2970+ zone and that’ll be a better position). Entry at 1.6500-1.6550 seems safe, with the next resistance on this rising channel at 1.6610 and change. Placing an order at 2 days’ high of 1.6530 and watching.

Mind you that the RBNZ rate decision is out June 14, so depending on how bearish, there could be a test of mid-channel.

Of course, considering that it is a dovish ECB. Wonder what Draghi’s thinking right now…

To the best of good buys.

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China, Europe, all rolled into one RBA statement

The RBA has cut once again, to 3.50% with further downside of 50bps and upside of 25bps for this year, if the world economy recovers. Governor Stevens’s statement can be found here.

Although the first and second paragraphs point towards uncertainty in world markets, there seems to be a lot of descriptions about “peaking” and signals of corrections, in both terms of trade and the Australian dollar. Credit has also been described as weak, though business credit has been picking up. The bank could ease, but perhaps not as soon as the housing market is re-adjusting to normal prices.

On the plus side, Australian sovereign yields are getting cheaper as there shouldn’t be some kind of outrageous credit event happening in Australia in the near term. On the same token, why buy Australian dollars again as the yield differentials decline? But still on the safe side, sell it against something with still positive rate expectations (look at CSST 10yr RBNZ) and which yields mirror those of Aussie sovs.

Anyways, here’s a good reason why you should keep good margin and not touch anything during major event risk – 110 pips in around 10 minutes. mmm and it’s still volatile around 20 minutes after the statement.

To the best of good buys

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Central Bank Lookout for June

Because just to make low rates and Spanish fire more interesting, there is a June docket full of central bank events. While the focus is on the Fed on the 20th, it starts with the RBA in 6 hours. There’s also the ECB on the 6th, BoE on the 7th and then the RBNZ on the 14th.

As an aside, there’s an excellent piece on the RBNZ site about the Kiwi over the past 30 years of free market exchange. It also has excellent insights to what else drives the Kiwi, even against the Aussie! Quite interesting!

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What can the Fed do right now? There’s increasing expectations for more LSAPs after May’s NFPs and today’s New York ISMs and factory orders, with services ISMs treading at 53.5, which will be updated later tomorrow. Mind you that while “QE” seems to be the blanket publically-aware term, the biggest of them and one still in everyone’s minds, QE2, was to buy more LT weighted treasuries, resulting in open-market low rates. (QE1 was buying distressed assets including MBS and other primarily real estate backed assets, so arguers will have a point)

Anyone still at a terminal can look up FARBAST right now, and see the effects of Fed purchases on a 3 year scale. On a shorter 1Y/6M chart, Fed holdings of these assets (mostly treasuries) are actually declining. More room to buy? Possibly.

Additional fed purchases of US government debt seems unlikely at this point, with the market already doing the dual job, keeping rates low and supporting treasury issuance and interest payments. However, remember that this current central bank administration has been exceptionally dovish with good reason, trying to jump start growth at every opportunity and labeling almost all inflation as “transitory.”

If Bernanke’s disapproval of the BoJ’s inaction is anything to go on, the next step may be once again one to outdo the Japanese. The facilities of QE1 and QE2 mirror what the Bank of Japan has tried to do, first with property purchases (however late it was) and then JGB purchases for the last good decade and a bit. The Bank of Japan has also done direct securities purchases before (not sure if they are still doing it after Sendai) while moving away from JGBs, with Governor Shirakawa citing the need for more central bank independence.

And so this results in the possibilities that the Federal Reserve may very well start propping up securities prices. Although this immediate flies in the face of government, moral hazard and the new set of risk clauses after the financial crisis, I would certainly not mark it off if I was an independent central bank. Plus, with treasury prices so high, doesn’t it seem tempting to sell some treasuries and go for some high yielders?

Of course, that’s the same thought that builds up every bubble. Still, very interesting to see what the Fed will do on the 20th. If it’s anything like moving towards Fed purchases of (hopefully) low-risk securities, I’m going to buy a few lottery tickets with the trading money.

Now how to trade this? The dollar is due for a correction lower before moving higher again, as the channel set since January of this year has been dollar positive for many high-yielding pairs. This pattern isn’t that evident in low yielders like the Euro and sterling, since the differentials are so low that the effects of a rising US yield doesn’t fully replicate its effects in the pairs.

However, these next few suggestions are based on a technical recovery and the tradition of selling every time Uncle Ben opens his mouth.

USDSEK is a lot safer than other risk pairs at this point, with China taking out the Oceanics, US taking out Canada and Norway having its own real estate bubble. On a longer term, the target may very well be 6.7000, but I’m taking very short one-sided only trades on this because of the current congestion from 7.1000 to 7.2500. Until the lower support breaks, I’ll only be shorting once the pair gets to around 7.2500/7.3000. Plus, Riksbank isn’t for another month and that’s a bank that focuses on price stability.

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USDJPY – the pair I will be focusing on for work this summer. Very very nice channel has been established since the recent top. Anyone with a terminal should see whether this is correlating more with 2, 5 or 10 year yields spreads, just to see what has been driving this pair. Also do a few gold/silver correlations to filter out dollar expectations pulling this pair around. But, that channel does offer very good entries. Eyeballing the chart, there seems to be a good short entry again at 79.000 or so.

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With the Fed out of the way, the RBA and ECB are now on tap. I haven’t been watching data from those two countries that much over the past weeks, so I can’t really make a fundamental judgement. However, these two charts are setting up for a sell. EURSEK needs to break that top support before a good entry

For tonight,the focus is on AUDNZD. I have a substantial lot here, so I will wait for the dust to settle. Manual stops are placed at 1.28750, while new entries will be at 1.2910. Let’s see if the RBA messes up everyone again with a decision to hold. Unless you’re Glenn Stevens, everyone’s guesses are as good as everyone else’s. Like playing on dealer’s side on roulette on this one.

Fun days ahead…

To the best of good buys.

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It’s June…

That means time for EURO2012, Q3, work and another fun month to trade these volatile summer months. As of right now, I am down around 20% from my previous post and around breakeven for the year, which indicates that I just wasted the last 6 months and should have done better with school.

But here is where markets currently stand.

1. 10 year yields are now at 60+ lows at around 1.570. I think the spread between 10 years and the benchmark discount/lending rate also happens to be near the lowest during a recession but still higher than some premiums during booms, though I don’t have data. The separation between the two states is that in recessions, it is assumed that the safe-asset drive for treasuries push yields lower, while in booms the chase for higher yielding assets leave t-notes behind and the Fed looks at other (mostly growth) data to ratchet up the FOMC rate. Whoever still has access to a Bloomy should look this up and confirm or deny this. Makes for a good yen trade!

2. The Spanish banking system with its cajas are coming under solvency pressures and that sort of fun. Last summer, I was watching Greece implode with its government change, only to have the US downgrade provide the most volatility. This year Spain, but also with the US as the fat lady?

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But with NFPs tomorrow, the record low yields and recent Fedspeak, there is an even more important turn of events with June. For the past 2 months or so, Bernanke, Yellen, Dudley and co. have all commented that further easing will be reserved for only a fall-off in the labor market. During this week’s series however, Dudley’s comments were less focused on highlighting the labor market, but instead on growth, and then saying further stimulus is unlikely unless some low-probability, high risk event happens.

That low-probability, high risk event as of right now is Greece leaving the Eurozone, but the more likely event is something to do with Spain. However taking a look at the calendar, there won’t be any major auctions until the end of summer (look on the Bloomberg ECO for ES 10, 15, 30s). But still, keep an eye on CDSs of major Spanish banks, including the healthy ones (STD comes to mind).

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What to do with today’s NFPs? Estimates have actually been revised up during these past few days, and a lower ADP report always contrarily suggests, there may be a pickup in the private sector. Also be reminded that this report is for May, expected 150k, previous 115k, so make your seasonal judgements wisely.

Keeping that in mind with the recent fedspeak turn where the markets are already doing the bank’s mission, it may very well be another day for the dollar. Remember that the QEx operation’s main goal was to crush rates so that there would be more lending, liquidity, and then hopefully growth. This fed’s primary goals was not to devalue (Romer’s GSIs, take note here) though there is of course the correlation between dollar and rates. Now that rates are low, there’s no real need to drive up bond prices even higher. Marginal utility does not outweigh additional liquidity in transitory inflation.

In the next few days, a correction in rates should be the most natural, hinting towards higher USDJPY. But with the Spanish situation yet unfinished, a clear direction on any risk sensitive pair is once again difficult.

Though corrective bounces on all dollar and yen based pairs do look attractive, I’d only put 1 day trades on them, taking profit as I go with very tight stops. Like this one.

More attractive ones I would think are these two: AUDNZD and EURCAD for the continued short Euro position without dollar risks.

AUDNZD has an attractive entry anywhere in the 1.2870+ area, but the direction should be more definite with today’s close and crossing of 2 fibs. This double top may very well end in another double bottom at 1.25480, though 1.26810 would be the first resistance at the cloud bottom and short term fib.

And for EURCAD, although my currently entry is premature, has crossed below the pennant channel. Downside remains at 1.2480s, pending today’s close below the line, while upside is around a retest of 1.3000. Doing some sums shows that EURCAD 1.3000 with an assumed USDCAD of 1.0200 means EURUSD 1.27450, while an assumed USDCAD 1.0300 means EURUSD 1.2620, both of which seem likely.

I just may very well close out this current 10 pip loss and switch it over the AUDNZD, which has a better indication without so much risk. The RBA is expected to cut to 3.25% this year, while transitory/nontransitory/headline inflation in NZ still remains elevated. After that, I will be looking for the start of the dollar correction, if we get any… as rates provide a major headwind.

Feels good to write one of these again. For now, I still have 12 more days in the states so I will try to get the breakout code polished and the Fabozzi fixed income tome read.

 

Going to be an exciting day out there tomorrow. To the best of good buys.

 

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