Category Archives: Currencies

The Black Thursday you likely never heard about…

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black swan 1Dear Mr. Market:

In all of our “letters” to you a recent market event perhaps best sums up how nasty and volatile you can be. This time you really pulled one-off and caught the entire financial world flat-footed. If such a world were painted as a lake we have been enjoying a fairly pleasant view with relatively calm and peaceful waters. Now, without any warning, you have sent not one, but rather two black swans to land on the lake and alter the serene setting…

First off, what is a “black swan”? InvestorWords defines it as:

Definition

“Colloquial term for any extremely rare event. The term was popularized by a book by Nassim Nicholas Taleb, entitled “The Black Swan”, and was based on a previous belief (now a misconception) that all swans were white and that black swans did not exist. The term is frequently used in the finance and investing sectors to denote an event that is unexpected, and impossible to accurately predict.”

INVESTOPEDIA EXPLAINS ‘BLACK SWAN’

“Black swan events are typically random and unexpected. For example, the previously successful hedge fund Long Term Capital Management (LTCM) was driven into the ground as a result of the ripple effect caused by the Russian government’s debt default. The Russian government’s default represents a black swan event because none of LTCM’s computer models could have predicted this event and its subsequent effects.” Continue reading →

Currency Markets: Not the Roller-coaster you think it is!

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dollar3Dear Mr. Market:

You’ve taken equity investors on a roller coaster ride this year with the Dow Jones now delivering negative returns year to date. Investors have been scrambling to find where to invest their money as they move out of equities. The fixed income markets remain an area of doubt as interest rates are near rock bottom levels and fear of rate hikes from the Fed continue to run rampant. With all these variables and negativity in the market where should investors consider looking to invest their cash?

We’ve discussed ‘Alternatives’ before and how they warrant a place in a diversified portfolio. Often investors become a bit skeptical when they hear the term Alternative Investment as thoughts of hedge funds and ‘ponzi schemes’ come to mind.   With new regulations and monitoring in place investors can feel confident when they consider adding these types of investments to their portfolios. The investments that typically come to mind when looking at this asset class are: real estate, commodities, futures and hedge funds. Today will take a look at one component of alternative investments that is often overlooked but investors interact with everyday– the dollar or currency markets in general.

If you turn on the nightly news or read any articles about the economy it is hard not to see headlines discussing the strength and/or weakness of the dollar. What does this really mean and how can an investor take advantage of these moves? Analysts and economists tend to use terms to make themselves sound like an authority while at the same time losing 90% of their audience. Below we will discuss some of the basics:  Continue reading →