Thursday, August 9, 2007

FXY And The Yen Carry Trade

Watching Fast Money tonight... I mean, you have to right? and they started discussing ways to hedge against the down market.

Most everyone knows about the QID and the SDS, the inverse ETFs.

However, they also mentioned the FXY, a stock that "the Fly" mentioned today on his site. This is an interesting play, because, as they explained on Fast Money, if you believe that the contagion in subprime will lead to an unwinding of the Yen carry trade, the Yen will have to go up.

They also mentioned that a rate cut is now priced in BEFORE the Fed meets in September. That doesn't mean it will necessarily happen, but as Mackey stated, a surprise rate cut "will kill the USD." And if the USD goes down against the Yen, again, FXY benefits.

Meanwhile, I bash CNBC all the time. But Fast Money is a good show.

UPDATE: Commentor "Gappingandyapping" over at Fly's place hooked me up with this link by our friend Woodshedder. It explains the Yen carry trade very nicely. The charts are from February or March though...

Built To Spill, "Carry The Zero (live)"

Fuzzy math for the lenders...

Jim Cramer Calm, Stock Market Freaks...

I left the house at 4:40 to head out to the beach for some early morning surf. I didn't bother to look at CNBC to see where the futures were. Then, while surfing, I got creamed by this huge wave and I saw this hot girl on the beach laughing... I didn't give a shit, I'm married and hardly notice women anymore, but it was a sign.

When I got home, I turned on my screens and did a double take when I saw that the futures were down huge. I was long AMG and LAZ overnight. I figured with the GS rumor out of the way at the end of the day yesterday that we'd have a bullish open. And I wanted to fuck with "the Fly" by taking the opposite side of his LAZ short. Anyway, WRONG!

You could say, and you wouldn't be overstating anything, that today was not the best day to be long brokers overnight... It's never a good sign when you're calling your risk manager at 9:35 and asking them to ease your risk limit for the day, since you've already maxed it out. But this is what the first 4 hours of my day was like.

The good news is that I hit my low of the day, P&L-wise, at 9:40. The rest of the day things worked out for me.

Problem was that I churned a lot. I tend to get a little overexcited on days like today. I didn't have my P&L up, but I'm sure I had huge disgusting swings in my P&L. I'm 100% positive that I did not close at my highs. I know this because I bought 800 shares of AMG at 3:30 and lost a quick point on it. That's when I decided to call it a day. That's the way the market was today, easy come, easy go. And since I traded 125,000+ shares today, I did a lot of coming and going.

Anyway, my head is kind of spinning still. Excuse this post if it's unintelligible. However, read on.

One important thing I realize. This volatility has allowed me to pick up some of my bad habits again. So far, I've been bailed out by the volatility, but it will not last forever. I need to get my shit back together. Take Monday, Wednesday and today of this week. Traders who are on their game, as user Streetsmack over at Wallstreak is, are making huge amounts of money. That is exactly as it should be in this market. I've been saying it over and over for the last 3 weeks... the stock market is a big money machine right now if you have your trade on... huge opportunity.

Man, I'm tired.

Another thing I've been repeating over and over since the beginning of this meltdown is that it's not just going to end in a snap! February was freaky in that the market got hit so hard and bounced so strong and so fast. Methinks this time is different.

"Banks don't trust each other." That's one thing they said on CNBC today that stood out at me as being extremely scary. That means they're probably lying to each other. If they're lying to each other, then they're lying to their investors as well.

Another thing that stood out at me on CNBC today was when Maria said, "Dow industrials are down 295, (and then practically yelling as if a huge rally has begun) they were just down 300!" As if that 5 points were gigantic or something... apparently she was thrown off by the first digit of the number... Maria is a cheerleading idiot. Perhaps that's why she only has 4% of the vote on my poll... Okay, fess up... who voted for her?

So, the bad news is that I'm long the financials overnight again.


Here's the stats:

P&L, $1608
Best, RWT, $906
Worst, AMG, -$1278

shares traded, 126,600
43 stocks traded, 23 winners, 20 losers
trades, too many...

UPDATE: I'm happy to say that if you search Google for "2007 Bull Trap", my blog comes up 5th.

Virtual Office, $6789. Dow, -380.84, 13276.45.

Misstrade, $3120 on 2000 shares traded.
Me, $1608 on 126,600 shares traded.
HPT, $1500 on 51 contracts traded.
OBAT, $456 on 9600 shares traded.
Denarii, $105 on 1000 shares traded.
Evolution, vacation, happy birthday
Bubs, no trades.

The one thing I didn't say today was, "Man, it's too bad Bob Pisani is off this week. Only he could clear the smoke and tell me, the homegamer, what is up with this market.

Anyway, the market got smoked. I have to step away now. I'll have a daily post up in a bit with more color.

Me And The Market, Right At The Open

Luckily, some poor fool took 200 shares of my LAZ long at $40.50. So I only lost 30 cents there. Still have 100. And 300 AMG...

(h/t bloggerdotcom)

Eating It At The Open

I held AMG and LAZ long into the close...

Ah, the life of an idiot.