Portfolio Update — Closed Euro Shorts

Before Christmas, I posted about the Euro and wondered whether it was time to close the shorts and expect a bounce. I decided in the end to hold onto my shorts and wait for the end of the year break, in case anything serious happened during the public holidays. I was lucky on this one as the Euro kept on dropping.

Sentiment has been very negative on the Euro — for good reasons! — and the drop quite dramatic, from 1.50 to 1.26 USD. I am happy to take my profits here (closed my options at 1.2660).

Where to from here? Here's what I think about doing:

  • If the Euro keeps on dropping, well, I won't short it at these levels, and I will actually consider going long the Euro.
  • If the Euro stabilises at these levels, I will also consider shortly to go long, with tight stops and short term views.
  • In any case, I will now consider deploying the capital freed against a short the AUD vs the USD. If anything serious and major happens, the risk-off trade should make a major blow the bubble currency of the bubble economy that is Australia.


Tiho said...

How did you go with the Aussie Dollar crash?

I sort of missed it? Did it happen?

Let me bring back the post from those early September days on your blog...

3. The real estate bubble has popped in Australia, and speculators, commentators, strategists have been in complete denial about this. When the Central Bank is forced to cut interest rates to close to zero to try to save the banks — try to, not manage to — the AUD will collapse (aim at least 30% drop before the bottom, and that's the optimistic forecast. The pessimistic one will be a 50% drop).

Full disclosure: I have been short the AUD/USD since 1.08. I just opened new short positions on the AUD/USD at 1.07 — so as you can see, I put my money where my mouth is.

My comment to that was:

Australian Dollar investors aren't as easily shaken out of the commodity bull market this time around, as they were before. We are going to need more worrying stuff than "EU break up" or "Greece is bust" which is the main story week after week.

So where is the pop of the Aussie Dollar bubble? Here we are 4 to 5 months later so where is it mate?

It turns out you shorted the Euro at the right time, but even that was closed only days after you opened it. Here is what you said:

Unfortunately, I had to roll some positions and I just closed some of my EUR options at the US close on Friday as they were set to expire in a few days.

If only you held it til now, you could have actually caught the whole move. Oh man...

pej said...

Dude, it's not finished yet. Give it some time, to suck in as many losers and hyperinflationists as possible, and then the markets will prove that 99% majority wrong in a big way.

Tiho said...

Oh ok... "some time".

Funny, enough "some time" ago, back than you were sure that was it.

Now you need more time? And than as we watch the Aussie go above $1.10 in coming months... what than? If the Euro is bottoming due to huge net shorts, and starts to rally vs USD, imagine how high the AUD will go.

You want more time when that happens too?

Broke clock comment x2!

pej said...

I'm happy to wait. What if the AUD goes to 1.10 USD? Nothing, it's a small move compared to the drop to 0.50 USD than I'm aiming for :-)

I'll let you pick up pennies in front of the steam roller. I'll aim for the big buck, even if it takes a few more months to happen.