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Actually, CADUSD has been rallying quite hard because of the surprise Bank of Canada rate hike. For now, CADUSD is a mainly a USD weakness story. So be careful about shorting CAD.
It’s difficult to find decent publicly short plays on Canadian real estate, largely because most banks are lending with CMHC insurance. As CMHC is owned by the government, the banking system is partly insulated. Having said that, here are some suggestions:
1) Short HCG, but that’s a well-known story
2) Short Canadian MBS/long Canada bonds, but you need to read the MBS docs carefully to see what`s in the pool
3) Short CADUSDI understand now. Think about it this way:
1) If you sell your winning position immediately, you lock in the gain.
2) If you enter a stop loss, you are in effect buying a put option on your position. Regardless of how “cheap” the put option is because you tightened your stop, there is still a cost.Either way, it will affect your P&L profile. You have to decide what is most appropriate for you.
If you are talking about something like this, it could be just a blip in the data: https://research.stlouisfed.org/fred2/graph/?g=3dhS
The YoY % change is not anything remarkable: https://research.stlouisfed.org/fred2/graph/?g=3di2
I would watch it for another week or two to see if the spike is temporary.
See the chart in Gundlach presentation on EM and commodity prices:
http://www.businessinsider.com/jeff-gundlach-presentation-januray-2016-2016-1When the market sold off, readings got oversold. Given that I was already long, I decided to stay long as I believed the risk-reward ratio was in my favor. Unfortunately, oversold markets got more oversold.
Obviously, I would not act contrary to the Trend Model signal if I was starting with cash.
The model isn’t automated to the extent that it needs a computer program. I just look at a series of charts on a daily basis and I can easily see signal changes.
My degree was originally in Computer Science so I can automate these processes and I have automated many investment processes in my work as a PM. In this case, programming the process is overkill.
EM equities have been highly correlated with commodity prices, which are inversely correlated to the USD. In effect, a bet position on EM is a bet on USD weakness.
While I am constructive on commodity prices and therefore EM equities, you also need to be aware of the macro bets that you are taking if you buy EEM, etc.
As I understand it, the Riyal is pegged to the USD, much like the HKD peg. So speculators wanting to attack the Riyal may have to wait a long time.
As for how much KSA has, I refer you to the latest IMF comments that indicates that the Kingdom has five years given its current course (that was before they implemented their latest austerity package):
http://www.aljazeera.com/news/2015/10/imf-saudi-arabia-151022110536518.html
https://www.imf.org/external/pubs/ft/dp/2015/1501mcd.pdfIMHO, the Saudis would be unlikely to devalue and de-peg from the Dollar. Devaluation would create inflationary pressures and therefore political pressures and turmoil within KSA. Not something the House of Saud is willing to tolerate.
Better the devil you know.
Sorry, I generally don’t comment on company specific questions. If you want to look for companies with strong balance sheets, try looking at the debt to equity ratios or interest coverage ratios of the components of XLE or XOP on sites like Google Finance or Yahoo Finance.
Hi Neal,
I hate to sound wishy washy but there is no single best answer to that question. How you manage risk is a function of:
1) Your risk tolerance and pain threshold
2) The success rate and return profile of your trading strategyIn order to really optimize your trading, you really have to understand how (2) behaves under different market conditions. Until you do, it will be difficult to achieve optimum results.
