Catching on just in Time?

Kat Von Rohr (March 1, 2010)

High-tailing it out of Arizona by way of the Barry Goldwater Airport on Thursday (you remember Daisy, don’t you?) means that I personally missed the kick-off to this year’s FX University conference.

And what a kick-off it was.

With over four hundred attendees congregating in the chilly Scottsdale desert, it’s the biggest currency-centric conference ever held by our sister publication, World Currency Watch.

We’re not necessarily surprised. These days, everyone from Chinese prime ministers to “Gloom, boom & doom” Faber seem to be reading from our book, ringing the bell on “reserve currency status” and a bubble in the Treasury market.

So what advice are they hearing?

Let’s take a peek…for all the details, we go to Kat von Rohr, Franchise manager of World Currency Watch, and Managing Editor of FX University daily…

“I Hope You Call Your Broker and Say
‘Sell Those Toxic Things!’”

When Chuck Butler speaks, everyone stops fidgeting and pays attention. Yesterday was no exception…

You may remember Chuck from this past Friday’s A-Letter. He runs one of the longest-standing, most accessible daily newsletters for the retail forex investor (you can see his daily contributions in FX University Daily), and he’s always a crowd favorite at these kinds of events.

Chuck stepped up to the mic to reveal one of the biggest government cover-ups of the last decade. It’s helping create the largest asset bubble in financial history…the Treasury Bubble.

Here’s the story…

Right now, our country is drowning in over $12 trillion in debt. (And Chuck says it will be $14 trillion by the end of this year!) There is no way that the tax receipts will dig us out of a $12 trillion hole, so the government must issue Treasuries to cover that debt.

The problem is not enough investors want to buy those Treasuries anymore. Just this month, both China and Japan severely scaled back their Treasury purchases. In fact, the Treasury auction nearly failed!

Of course, the Fed-Heads couldn’t allow that. So Bernanke and company bought up the unwanted Treasuries. But they didn’t just go to the auction and buy them. That would be too obvious. Instead, the Fed waited for the “primary dealers,” or the big institution brokers to buy them.

Then the Fed buys those Treasuries from the dealers. As Chuck said, “It’s a documented fact. You can see the Treasuries end up on the Fed’s balance sheet a few days later.”
Sadly, the Fed has been doing this a lot lately. Again, the problem is that the Fed creates more dollars to pay for those Treasuries. Chuck calls this a “Circle of Debt” – and it’s not likely to stop anytime soon.

Even worse, Chuck pointed out the government can’t even afford to pay the interest payments on all those Treasury bonds. When those bond investors come to collect around 2017, the U.S. will have to print more dollars to pay them back. As Chuck said, that “will be another major hickey for the U.S. dollar.”

Fortunately, Chuck gave a few ways you can protect yourself. First, he said, “If you own Treasuries, I hope you call your broker and tell him to sell those toxic things!”

Chuck also gave his top five currencies to buy now. These include his favorite commodity currency plays like the Australian dollar, Canadian dollar and Norwegian krone. He said all three were in the best position to rally as the dollar sank further.

“How Many Traders Are in the Room?”

Sean Hyman was on deck after Chuck. As long-term FX University Daily readers know, Sean’s specialty is trading currency crosses, or non-dollar currency pairs in the foreign-exchange market.

So naturally, Sean explained to all our newbie traders here in FX University how to pump up their trading with currency crosses. But for the savvy traders, he also gave away a couple of powerful Forex secrets…

The first secret was about chasing high yielders. As he said, “If you moved into a small town, and one bank offered interest rates of 0.1% and the other bank offered rates of 3%, which bank would get the most business?” (Of course, everyone answered “3%.”)

“Well traders all over the world want the same thing. They all want to make more money so they buy the high yielding currencies.” So the secret to FX trading is to watch who is about to raise rates next.

If know that, then you know where currency traders will send the next windfall, and which currencies are about to soar.
Secret #2: Not all currency pairs are created equal.

As Sean pointed out, “volatility = opportunity for a currency pair.”

The faster a pair moves, the faster you profit.

So if you’re looking to earn larger gains in the FX market, make sure to check out the volatility of each pair. You can easily measure it’s volatility by looking at how many pips it trades in a day. (This is listed as the “average true range” on each graph.)

It’s worth pointing out that currency cross pairs like the GBP/AUD (pound/Aussie) trade 220 pips in a single day, while the GBP/USD trades only 169 pips. That’s why traders love currency crosses – you don’t have to wait around for them to start moving in your favor.

Sean also gave his #1 currency cross play to trade in the coming weeks. I can’t reveal it here because it’s a small FX trade, so opening it up to a quarter-million readers could really kill the profits for those attendees that came all the way out to Scottsdale. But you can hear all about it in our FX University Audio and Video Series.

And by no means is FX University anywhere near done. It continues with a dozen more workshops from all our currency experts. All our speakers will be drilling down and covering the how-to’s of trading, and unveiling more practical currency plays to cash in on the euro crisis, the dollar decline, the coming interest rate hikes this year and more.

I’ll be back tomorrow with all the details.

Till then – Good Currency Investing!

Kat Von Rohr, Managing Editor FX University Daily

P.S. Couldn’t make the hike to Scottsdale? We’ve got you covered! Click here for details on the FX University Audio and Video Series, where you can catch up on all the specific trades, tips, PowerPoint presentations and macro-views covered at the event. Click here for more…