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Seeking an "untouchable" Haven for Cash

  • #1
  • First Post: Feb 3, 2011 10:03am Feb 3, 2011 10:03am
Today I observed the incredible moovements in the FX Markets - probably due to the good US Datas - but 1 Pair USD:HKD is simply standing nearly stable

What makes this Pair so uncorrelated ?

I have a lot of Cash in Euro and seeking a "save Heaven", from where I can moove into other Pairs by Time

My Idea is to find a stable Place for my Money, from where I can start to think the whole Market over

I dont look for a Return - just a save Heaven

I have a trading Account with Interactivebrokers - so no Problem to moove in any Pair at once

I am a total Newbee - so excuse any stupid Questions, if it is one

Cheers
  • #2
  • Feb 3, 2011 10:42am Feb 3, 2011 10:42am
Quoting MaaTini
Today I observed the incredible moovements in the FX Markets - probably due to the good US Datas - but 1 Pair USD:HKD is simply standing nearly stable

What makes this Pair so uncorrelated ?

I have a lot of Cash in Euro and seeking a "save Heaven", from where I can moove into other Pairs by Time

My Idea is to find a stable Place for my Money, from where I can start to think the whole Market over

I dont look for a Return - just a save Heaven

I have a trading Account with Interactivebrokers - so no Problem to moove in any Pair at once

I am...
gold is a safe haven currency. If everything fails, gold will remain as a currency.
  • #3
  • Feb 3, 2011 11:03am Feb 3, 2011 11:03am
Quoting CindyXXXX
In a sense currency IS gold... Those little paper notes you buy things with are just rights to the gold supply of the bank in the end are they not
the paper you talk about is worthless by itself. Since we went away from the gold standard it is not backed by anything except by the "belief" of people. Guess what you have, once people stop believing in the currency you hold - you just have paper.
Best example: zimbabwe dollar. Has such an incredible amount of hyper inflation that it is not worth anything.
But what always had and will always have value is gold. And why, cause it is scarce. Any fiat currency can theoretically be printed indefinitely, so it is not necessarily scarce and thus the good old gold is the best save haven.

I just realized you were talking about gold supply in the bank. Please read up on the monetary development since I think the 60s, when the USA decided to go away from gold standard and the rest of the world then followed. No currency has to be backed up by gold anymore since then. It's just backed by belief, nothing else.
  • #4
  • Feb 3, 2011 12:14pm Feb 3, 2011 12:14pm
Quoting CindyXXXX
Oh ok sorry (getting my wires crossed) -...
Talk about irresponsible governments:
Inserted Video

The USA is at the forefront.
  • #5
  • Feb 3, 2011 12:41pm Feb 3, 2011 12:41pm
Quoting CindyXXXX
I see I may have made a slight understatement and I'm aware of these things but the question though is where is this money being spent?... Its only one side of the argument to say that the US is printing too much money.
hm, can you explain maybe further? I don't understand why the where matters. (I am not an economist)
  • #6
  • Feb 3, 2011 1:10pm Feb 3, 2011 1:10pm
Quoting CindyXXXX
Well a very simplified example... The government prints say 10 billion dollars and hen invests it into projects that create jobs, keep small and large business a float, the back bones of the entire economy etc and in 10 years the economic effect of that is a 50 billion dollar economic surplus through the value that initial investment brings back INTO the US then the initial printing of that 10 billion would be justified. The Government pays back the initial Treasury debt and everybody wins.,

After all when they print money its a loan from the FED,...
I understand your reasoning, but you have too much faith in the USA or governments, my friend: http://www.treasury.gov/connect/blog/Pages/letter.aspx
This is a letter from geithner to the congress that the USA will be bankrupt by march if the congress won't raise the debt limit. It's only a matter of time until the whole system goes bust. The USA is in deep shit as well as some countries in europe. Only a matter of time...

We can just hope for the Chinese that they will keep us afloat, the world's creditors. At least they know that borrowing is bad and rather lend. Don't know why the West forgot that.

By the way, it is so interesting that this letter got no coverage whatsoever in the US media. It was all over the news in germany at least. And now if you search the internet, there is also almost no mention of that. What a free media world we live in
  • #7
  • Feb 3, 2011 1:14pm Feb 3, 2011 1:14pm
Quoting MaaTini
Today I observed the incredible moovements in the FX Markets - probably due to the good US Datas - but 1 Pair USD:HKD is simply standing nearly stable

What makes this Pair so uncorrelated ?
It's not about lack of correlation. HKD is a managed floating currency, not a free floating one. The "managed" part refers to The Hong Kong Monetary Authority, de facto a central bank. Allowed fluctuation band against USD is between 7.75 and 7.85, since 2005... that would be the "floating" part. I guess drowning is not allowed.
  • #8
  • Feb 3, 2011 1:23pm Feb 3, 2011 1:23pm
Quoting Custos
By the way, it is so interesting that this letter got no coverage whatsoever in the US media. It was all over the news in germany at least. And now if you search the internet, there is also almost no mention of that. What a free media world we live in
Avg US person doesn't care about this kind of news.
"Meanwhile, CNN’s Wolf Blitzer said that as the crisis deepens in Egypt, “Stay tuned to CNN for up-to-the-minute reports about Charlie Sheen.”"

LOL -
In trading, there is no bullshit. You either make money or you don't.
  • #9
  • Feb 3, 2011 1:29pm Feb 3, 2011 1:29pm
Quoting nhct
It's not about lack of correlation. HKD is a managed floating currency, not a free floating one. The "managed" part refers to The Hong Kong Monetary Authority, de facto a central bank. Allowed fluctuation band against USD is between 7.75 and 7.85, since 2005... that would be the "floating" part. I guess drowning is not allowed.
Yep, till this day HK has one of the very few successful currency boards in the world. History has shown that this rigid type of currency regime often fails, predominantly due to differences in fiscal austerity and business cycles that are out of sync from the country/countries these nations peg their exchange rate to (e.g. Argentina in the 1990s).
It's not about how much you make, it's about how much you don't lose.
  • #10
  • Feb 3, 2011 1:29pm Feb 3, 2011 1:29pm
Quoting mrgreen
Avg US person doesn't care about this kind of news.
"Meanwhile, CNN’s Wolf Blitzer said that as the crisis deepens in Egypt, “Stay tuned to CNN for up-to-the-minute reports about Charlie Sheen.”"

LOL -
haha, yeah, CNN is a joke as a news channel.
  • #11
  • Feb 3, 2011 1:39pm Feb 3, 2011 1:39pm
Gold standard? screw that. I want a cotton standard. I would prefer my money backed by cotton. You seen that commodity lately? Cotton has been outperforming gold by leaps and bounds. No sense having a gold standard, when cotton is appreciating more. It is more valuable after all right?

You guys didn't hear about those Chinese farmers hoarding cotton? They must know something...

At current prices:

Cotton Standard > Gold Standard
Private message me for a link to my order flow website.
  • #12
  • Feb 3, 2011 2:09pm Feb 3, 2011 2:09pm
Quoting CindyXXXX
I see I may have made a slight understatement and I'm aware of these things but the question though is where is this money being spent?... Its only one side of the argument to say that the US is printing too much money.
Increase in M2 leads to inflation, inflation leads to expected currency depreciation. Expected currency depreciation leads to lower expected rate of return on US investments, resulting in less capital inflows.

US has a massive trade deficit, which is being compensated for by equally massive capital inflows. As soon as these capital inflows drop, the USD will depreciate, and bubble that US citizens have been living in will burst.

Meanwhile US government debt is the worst ranked AAA paper, and will probably be downgraded soon. When that happens, the reserve currency status will be under pressure, and the USD won't be the "safe haven currency" anymore.

At the same time China is building a bubble for itself. They already own enormous dollar reserves that will be worthless when the USD depreciates. If they keep purchasing, they get pulled in further, but the dollar will remain strong. If they bail out, they will lose a lot but at least won't get pulled in further. China has been increasingly announcing its intent to purchase euros, and in the mean time is hoarding massive amounts of gold.

http://en.wikipedia.org/wiki/List_of...ccount_balance is interesting: I was surprised to see how large the current account deficits of the PIGS were.

Oh an the relation between money supply and inflation isn't necessarily stable. During the late 90s the Bank of Japan increased money supply to fight deflation, but firms nor consumers started investing/spending. The US consumer prices haven't been very responsive to the increase in money supply either, but once it picks up, inflation may rise drastically.
The nail that sticks out gets hammered back in
  • #13
  • Feb 3, 2011 3:35pm Feb 3, 2011 3:35pm
Quoting MaaTini
Today I observed the incredible moovements in the FX Markets - probably due to the good US Datas - but 1 Pair USD:HKD is simply standing nearly stable

What makes this Pair so uncorrelated ?

I have a lot of Cash in Euro and seeking a "save Heaven", from where I can moove into other Pairs by Time

My Idea is to find a stable Place for my Money, from where I can start to think the whole Market over

I dont look for a Return - just a save Heaven

I have a trading Account with Interactivebrokers - so no Problem to moove in any Pair at once

I...
Since you're with IB, you can probably move the money into CDs within your account. Not sure, but that's my impression. No interest but pretty stable.
  • #14
  • Feb 3, 2011 8:13pm Feb 3, 2011 8:13pm
Quoting Custos
gold is a safe haven currency. If everything fails, gold will remain as a currency.
thank you for your answer - and you might be right:

if everything fails, gold will remain

but: do you see the Volatility of the Goldprize?

I just note:

the Currency Pair USD:HKD is a kind of "stable" - the Prize of Gold not

So lets go back to my initial Question

Cheers
  • #15
  • Feb 3, 2011 8:30pm Feb 3, 2011 8:30pm
This may or may not help.

"The fact that currencies are money –the money of different countries – causes a problem with most newcomers to currency markets. A UK resident, for example, will say: “I thought I should protect myself against a fall in the pound, so I switched a £100,000 deposit into D-Marks. Should I be holding Yen?” The truth is that if you are a UK resident with all your expenditure and liabilities in sterling, there is no reason why you should hold any other currency. Or rather the only reason why you should switch sterling into another currency – say D-Marks – is that you think the best probability in the financial universe is that the D-Mark will rise against the pound.
There are two points here. The first is that you cannot decrease your risk by selling your own currency and buying another one (unless you have a liability in that currency): that increases your risk. The second is that the markets offer a number of bets, but it’s relatively rare that the best of them is that X currency will rise against the pound –or any other specific nondollar currency. The way it is in real life is that the dollar is the currency against which all others are quoted; and there is a firmament of currencies that bounce around the dollar in their own ways. That’s why this book is called “The Way of the Dollar”. .Thus the relationship between the nondollar currencies is a residual of the basic dollar relationship. And the residual is not easy to analyze or forecast."
The Way of the Dollar, John Percival
In trading, there is no bullshit. You either make money or you don't.
  • #16
  • Feb 3, 2011 8:37pm Feb 3, 2011 8:37pm
I am not so sure about gold in the long, long term. What people seem to forget is that gold is quite common in the universe. Now I am not saying that this will happen soon, but eventually, when we achieve the possibility to travel space, gold will be over mined and the value will depreciate quickly. Now, I am not saying this will happen anytime soon, maybe not even in a hundread years, but if you want to leave something for your family way down the line, gold might not be the best option. In my opinion, real estate is where the moneys at long term.
  • #17
  • Feb 3, 2011 10:24pm Feb 3, 2011 10:24pm
Quoting nhct
It's not about lack of correlation. HKD is a managed floating currency, not a free floating one. The "managed" part refers to The Hong Kong Monetary Authority, de facto a central bank. Allowed fluctuation band against USD is between 7.75 and 7.85, since 2005... that would be the "floating" part. I guess drowning is not allowed.
Thanks for your Answer and this Information

I can see in the Chart of 1 Year, this Currency Pair ranges in between

7.750 and 7.805

So it seem to me a very good Currency Pair for "parking" my EUR

Has anyone a better Idea?
  • #18
  • Feb 3, 2011 10:52pm Feb 3, 2011 10:52pm
A Friend told me following about the Currency Pair USD:HKD

2 Times a Day, the HKMA has to adjust the Value between this Pair

This very expensiv intervining could be stopped any Day sooner or later

This would lead to an explosiv Uptrend in the HKD

What you Guys are thinking about this Information?

Cheers

PS: love this Community - real bright People inside sharing Knowledge and Wisdom
  • #19
  • Last Post: Feb 4, 2011 2:31am Feb 4, 2011 2:31am
Quoting mrgreen
This may or may not help.
Good post. I was thinking the same thing: just hold assets in the currency you spend. However, this "safe haven" may also be a guard against inflation (e.g. gold). Thus it may be a useful discussion anyway.

Quoting MaaTini
but: do you see the Volatility of the Goldprize?
If you think about the market mechanisms and market efficiency, a low volatility "safe haven" doesn't really exist. A safe haven is a place people go when there is high uncertainty or risk aversion. When people start buying the safe haven currency (or commodity), this drives up its price. Likewise, the price drops again when people become risk loving again, or uncertainty reduces. This means that the so called safe haven can exhibit rather high volatility!

All in all, when you expect high inflation of your domestic currency, consume excessive savings and purchase a basket of AAA bonds denominated in many different currencies. Gold has also proven to be a good hedge against inflation historically, but the price reflects no fundamental value (as opposed to assets, that generate expected future cash flows). Instead the price of gold only reflects supply and demand, and demand is only based on how gold prices behaved in the past, in relation to inflation etc.
If you don't expect high inflation or a depreciation of your home currency, there is no reason to be looking for a safe haven over holding assets denominated in the domestic currency.
The nail that sticks out gets hammered back in
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