David Taylor from Dismally forwarded a link to me from ABOB Capital that isolated some of the problems now facing Iceland. I received a similar email from another reader with a link to a post by Nouriel Roubini also questioning the krona and all the deficit currencies.
If you look at the fundamentals of the krona and the other deficit currencies it makes sense to think there could be more selling ahead. I don't have a lot of exposure for clients or personally but I have some.
I don't think my current exposure is enough to damage returns if things get ugly but with all of the negative press these countries are getting and all the awareness being created I wonder if there might not be a counter intuitive counter trend in these currencies.
History is full of instances where the stock market rallies for no reason at all at the exact time it should be going down. So, why not these small currencies?
For now I have no plans to increase exposure personally or for clients but it makes sense to think that with everyone on one side of a trade, everyone could be wrong.
Wikinvest Wire
3 comments:
Roger,
if the other side is the central bank or the government, then everyone still can be right. NZD is the only currency I'm exposed to, where this thinking seems to be correct. Everyone and his mom is short the NZD and the government still talks about the high NZD and that the trading community has its blessing to trade it lower.
Currencies are excellent assets for speculation. They may make an excellent counter strategy since they will not be aligned with other assets.
Currencies are however simply CASH. Cash is not an investible asset
Neil George from Personal Finance is recommending Bonds from Iceland. Ant comment?
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