forex presents the end of the safe haven?
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FOREX.com presents The end of the safe haven? . Kathleen Brooks Research Director. Contents . De-constructing the myth of the safe haven Why did we believe in them, why we won’t in future “Safe havens” for the new paradigm . Traditional safe havens . Yen . Swiss franc . Treasuries. - PowerPoint PPT PresentationTRANSCRIPT
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FOREX.com presentsThe end of the safe
haven? Kathleen Brooks
Research Director
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Contents
• De-constructing the myth of the safe haven
• Why did we believe in them, why we won’t in future
• “Safe havens” for the new paradigm
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Traditional safe havens
Treasuries
Swiss franc
Gold
Yen
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What does it mean?
• Uncorrelated to risk • Trustworthy • Stable • Piece of mind • Liquid
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Safe havens: why do we need them?
• We like things that go up
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Making sense of a complex market
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Key characteristics –
Strong domestic finances Politically stable
Not controlled by capricious forces
History of paying debts
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Something is wrong here…
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The unreliable safe haven
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Gold – Sept- Nov 2008
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Gold – Jan – June 2010
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Swiss franc – relic of safe haven era
1/30/2
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2/11/2
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2/23/2
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3/6/20
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3/30/2
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5/29/2
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7/28/2
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8/9/20
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8/21/2
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9/2/20
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9/14/2
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9/26/2
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10/8/
2012
10/20
/2012
11/1/
2012
11/13
/2012
11/25
/2012
12/7/
2012
12/19
/2012
12/31
/2012
1/12/2
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1/24/2
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1.17
1.18
1.19
1.2
1.21
1.22
1.23
1.24
1.25
1.26
EURCHF
EURCHF
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Rot at the heart of the biggest safe haven of
them all…
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Dollar earns safe haven status
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Politically stable: are you serious?
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Stable monetary policy?
1/25/2
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7/3/20
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8/12/2
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9/1/20
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9/21/2
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10/11
/2012
10/31
/2012
11/20
/2012
12/10
/2012
12/30
/2012
1/19/2
013
2700000
2750000
2800000
2850000
2900000
2950000
3000000
3050000The 3 trillion dollar balance sheet
Fed balance sheet
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Stable finances? US debt-to-GDP
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Who destroyed the myth of the safe haven?
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Central banks – major threat…
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What made us open our eyes?
1, Financial crisis – we became aware of debt
2, Sluggish recovery – causes central banks to act beyond traditional mandate
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The new reality in trading
1, central banks and governments are not safe…
2, Be careful who you trust
3, Currency wars a potential for the future
4, public finances – takes years to repair
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Trading in the new paradigm
1, Accept the volatility of markets
2, Look for other assets without these risks
3, factor in political and CB risk in your trading
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What safe havens today need to offer
Free from meddling by capricious central banks No sovereign problems Strong fundamentals
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Safe havens of the future -
Commodities:
• Pros – demand expected to remain high
• Cons – at risk from growth cycles, apart from agriculture …
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Safe havens of the future -
Commodity bloc currencies : AUD, NOK, SEK, CAD, NZD
• Pros – no financial problems
• Cons – limited liquidity, still affected by global growth cycle
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Safe havens of the future -
EM government debt
• Pros – no financial problems
• Cons – shallow markets, limited liquidity, politically unstable, no proven track record
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Safe havens of the future -
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Argument for agri as safe haven
Positive: • Demand is recession proof • Growing global population • Highly liquid – often traded … • Not controlled by a central bank
Negative: • Can be volatile due to the weather and growth
conditions • Sensitive to supply issues (demand fairly solid).
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Access to agri – FOREX.com
Products: TRADE platform - Wheat - Cocoa- Cattle - Hogs - Corn- Oats - Rice - Soybean
- Tip – stick to the staples, and meat…
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Access to agri – FOREX.com
Ease of trading with TRADE platform
- Spreads are fixed for ALL markets
- Comprehensive tools and analysis – Market DNA – revolutionises technical trading
- Integrated news and research
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FOREX.com presentsThe end of the safe
haven? Kathleen Brooks
Research Director