All Aboard
We are fast approaching a moment in Forex trading that can
only be described with history.
As we enter my hot tub time machine, I’m setting the dial
for October 1992. Let’s review the facts shall we? The British Pound [GBPUSD]
is north of 2.00; George Soros is long D-Marks and short the Pound in such large
quantities that the Bank of England makes a request to him to stop shorting
their currency.
When the Brits decide they don’t want to be a part of the
EU, the Pound plunges; 3 days later it’s trading at 1.40. Up until now, this is
the moment in history that can best be described as a “nuclear moment” for
major currency pairs; a 60 handle drop worth $60,000 on a 1 lot.
Of course, we now know that George had inside information
from the Chancellor of the Exchequer that Britain had absolutely no intention
of joining the EU currency, but in Forex trading the only rule is there
are no rules. A cool $6 billion in profits; but I digress…
We all know politicians lie; yesterday I read over at Zero
Hedge how the police in Greece
are urging people to leave their money in Greek banks and not to participate in
a classic run on said banks. After all, it’s a safety issue don’t-cha-know?
[Excuse me I have to puke … OK, better now.]
Everybody should know what this means; collapse is imminent.
Sometime, over the next 10 weekends, Greece will get kicked out leave
the EURUSD; it will happen over a weekend. You wake up Monday morning and there
is a new reality from Sunday night. So, which weekend and what exit scenario?
Our pals over at MS are telling muppets clients that it
could get as ugly as 0.80 on the Euro under 1 of 4
scenarios they envision for the Greek exit [Grexit]. That, my dear readers,
would be an approximate 45 handle haircut, and eclipse that long forgotten Pound
episode from ’92 [forgotten except by those who lived it]. Fortunes made,
fortunes lost.
So where does this leave gold?
I have a very hard time, after seeing the Euro slaughtered along
with equity markets, seeing gold rally into this. I don’t know how the
smartest-guys-in-the-room stop a deflationary collapse like this. Sure, the
policy response will be to print untold trillions, thus setting the stage for
the eventual hyper-inflation collapse, but the initial knee-jerk reaction is
likely to be many dollars / oz. to the downside.
And every Sunday afternoon, when Forex reopens in New Zealand
from the weekend, do we get any relief rally when we come to find out this wasn’t
the weekend for Grexit? How many weekends do you go home short, only to find
out you got sandbagged again, and get to buy it higher on the open? Nothing
is a slam dunk here.
But what if everybody is wrong here on the catastrophe? If
they happen to get it right, and kick Greece out the right way, wouldn’t
that be uber-bullish for the Euro? How about a 10 handle higher open with the
Gypsy’s out of the way? What would a $100 / oz higher open in gold do to your
juices? Let me repeat: nothing is a slam dunk here; nothing.
But whatever weekend it occurs, and the inevitable rioting
and chaos that follow, and you’re sitting comfortably in your easy chair, just
remember this: you are looking at the future of Amerika.
“Thank you
politicians.”
Meanwhile …. It’s the weekend and we need a chuckle. Without
further ado …
Have a good weekend everyone.
-vegas
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