Patience

Long time readers will know I follow New Zealand as an investment destination, I just wrote about a couple of stocks there recently.

Lately I have been thinking about buying some NZ sovereign debt. The yields are high as you probably know. Two years yields 6.93%, five years yield 6.59% and ten years yields 6.40% (all yields as of June 9).

New Zealand has all sorts of issues that make it a tricky destination. Housing numbers are bad, it is hard to get a job, there are deficits galore and the central bank's recent announcement of holding rates steady was taken as dovish which threatens the currency. In the last couple of months the kiwi has come down from above $0.81 to below $0.76.

None of the factors cited above (plus any others you would care to throw in) are new, save for the announcement from the RBNZ which though taken as being meaningful could not have been a black swan. Therefore these risk factors pose less danger at $0.76 than they do at $0.81, a fairly obvious conclusion. They will pose even less danger if the kiwi were to drop to $0.71.

The kiwi has had several short term spikes down over the last few years, this will either be one of them or not. I don't have exact target in mind but for now I'll just wait. This is the sort of thing where waiting for the market to come toward some sort of target can be done and that is the plan for now.

The current news about the kiwi, the trend in the kiwi and some of the news around greenback intervention (Paulson brought this up) create some visibility for more kiwi weakness. If it happens I'll act on it but if the kiwi does not come down some from here, thus providing better compensation for the risk, then no trade.

The case for New Zealand is they do have things the world (more specifically, China) wants and some of the global themes that have been starting to play out recently should, IMO, make New Zealand more attractive--even if being more attractive doesn't solve their problems.

The point of this post is not that you should do anything with New Zealand but that you probably have themes you have studied and come to a conclusion on and for some of them you can wait for them to come to you. This cannot apply to everything but it does some things.