Have you ever seen the movie “Jerry Maguire”? If you didn’t, you should! That’s a damn good movie. My favourite scene is when he is yelling in his office: “SHOW ME THE MONEY”!!!
This is something that I do too when I do not understand what the heck is happening in the market and I don’t see where the money are going. For example, since the beginning of this year I saw many investment banks and big investors saying that the 2014 will be the year of the USD. The rationality behind this argument is valid as FED continues to taper, reducing, after every FOMC meeting the QE with 10 bln $. The US economy is recovering and when is not, is because of the weather:) The unemployment dropped from 7% to 6.6% - very close to the FED’s target of 6.5%, while in Europe is above 12%. But….the USD is not strong. I’d say Goldman Sachs, Meryl Lynch, BNP Paribas or Societe Generale are not putting the money where their mouth is.
Last year, Ben Bernanke, that time FED’s president, spooked the emerging markets and created a tsunami with the investors selling even their pets and running away from countries like India, Turkey, South Africa or Brazil. So, the money are not going into USD, are not going in gold or silver and they definitely are not going into equities because this chart http://screencast.com/t/9Wv9AhpB shows that the S&P500 - world benchmark for the equity market – is rallying on low volumes.
I am standing in the front of my trading platforms and yelling: “SHOW ME THE MONEY!”:) Believe it or not it works :) Here it is a chart that show where the money are going lately: http://screencast.com/t/atFU7r7MquB That ETF (if you don’t know what an ETF is, email me) tells me that the money are getting back in the emerging markets. If you don’t believe it, call the pet shops in India, Turkey or South Africa and they will tell you that in the last two months the request for pets strangely increased.J I do not blame the investors: why the heck should we buy the USD and get 0.25% on our money, hoping that next year, maybe, we will get 0.50% while India pays now 8% or Turkey 12%. You don’t like India or Turkey? South Africa pays 5.5%, Russia pays 5.5% also, Brazil 10.5% - there is a wide choice.
I already told you that I’m in love with India this year and buying INR is proving it. I am considering to add ZAR and TRY to my portfolio.
USD/TRY daily chart: http://screencast.com/t/GQ0SrXuIfM
USD/ZAR daily chart: http://screencast.com/t/2UleyPLVgs
Look at the other currencies that offer good interest rates: NZD, AUD, RUB and many others – they all show that investors look for yields. They don’t care anymore about risks, FED or the weather in America. They want yields….higher the better :)