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My October of 2008 Monthly Investment Pick

Discussion in 'Felix Long Term Investment Pick Archive' started by Felix Homogratus, Oct 22, 2008.

  1. Felix Homogratus

    Felix Homogratus Commander in Chief

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    Hi there :)

    This is Felix with the monthly investment pick for October.

    Well…it’s been a crazy month to say the least. Let me update you on my investment moves throughout end of September and October, and let me tell you on what my current investment position is.

    As you may already know, I have been actively day trading forex by using fundamental analysis since 2003. In 2007, in addition to my active forex trading, I became active in passive forex investing.

    After enjoying approximately 50% return on my forex investments in 2007, I transitioned out of active forex trading completely by 2008.

    What is my forex investment strategy? It’s quite simple. I focus on 8 major currencies, which are US Dollar, Canadian Dollar, Great British Pound, Euro, Swiss Frank, Japanese Yen, Australian Dollar, and New Zealand Dollar.

    On Tuesdays, I look over the major economic indicators that came out for each currency on Monday and the previous week, and I try to predict, given the current circumstances, which currency has the highest chance to appreciate, and which currency has the highest chance to depreciate, and then I match the two.

    On September 16th, I sent you my previous currency outlook, and at the time, it looked like NZD/JPY was a good buy at 70.20. You can find my reasoning for that at the time in September monthly investment pick, which can be accessed through this same website section.

    Then on September 23rd, while I was doing my usual longer term analysis, my perspective shifted, and I saw that Euro still had some room to go down, and I felt that Australian Dollar had the best outlook to start appreciating, so I went ahead and closed my NZD/JPY position for around 200 pips profit, and went short on EUR/AUD at around 1.7520.

    Then we had the major global problems happening in the beginning of October, and I ended up closing my EUR/AUD position in the middle of October for around 1.9640, just to realize a major loss of -12.50% on my account equity. (I don’t use leverage).

    So far if you didn’t shift out of the NZD/JPY long, you are experiencing a similar equity loss.

    This month, that EUR/AUD loss is actually my first currency investment loss ever. It’s good that I had some buffer from earlier profits this year. I hope that your investments went pretty smoothly through this “Red October” situation :), but if they didn’t, then perhaps the fact that Warren Buffett’s net worth is negative -16% so far this year is making you feel a little better.

    The big question is where is a good place to put the money right now? Here is what I think.

    If you are an active forex day trader, there are plenty of great opportunities to make money, but if you are a passive currency investor, then I feel the situation is much tougher.

    At this point, I am quite confused myself, in trying to pick the strongest and weakest currency out of the 8 majors. The 8 economies are so interrelated and what’s happening now is the first crisis of such nature on such global scale, and there is no precedent to go by.

    Here is what I am doing. I think that all of these global uncertainties will lead to global inflation, which will be recognized majorly against fixed commodity prices, especially gold.

    So far, gold hasn’t been going up as much as I think it should due to the global uncertainty. I think that one of the reasons is that many funds are selling their gold assets for cash, in order to cover their losing positions in equity markets. That’s also why I feel we’ve seen such strength in the US dollar, basically just a temporary demand for cash.

    In addition to this, it’s end of October, which is the beginning of the holiday season worldwide, so in general people are in good and cheerful moods. Plus with the US being the biggest player in the world, and the elections coming up, with lots of new hopes for Obama, we are also seeing “delayed panic” effect. In addition to this, we are seeing all of these government cash injections, so people are still standing by and watching what would happen…

    I think that if the crisis were to take effect, and if we were to see global economic shut down, and skyrocketed demand for safety instruments, such as gold, it would happen in the first 4 to 5 months of 2009. Holiday season is over, time to pay taxes, the new president is in the office, which most likely won’t improve things as much as people are hoping. No new hope, the financial crisis is still happening, people are afraid to spend, and such fear is exactly the thing that can translate into shut down of most service-based economies.

    So basically, at this point my strategy is as follows. Gold is at $760 per ounce right now, which I think is a BARGAIN considering all the global problems that are going on. I think that by April of 2009, there is a very high chance of gold going above $1,500 per ounce, and maybe even above $2,000 per ounce. Even if I am wrong, I simply don’t see gold being a losing investment into the first two quarters of 2009, assuming that it’s bought at around the price now.

    What I think is possible, is that gold might go even lower in the next month or two, maybe even as low as $680. But I don’t think that it’s a sign for panic. I think it’s a sign to add to gold positions, maybe even leveraging your money at 2:1 to buy more gold.

    So to make the long story short, I am shifting all of my assets into gold, and I am not going to even bother investing into currencies until beginning to middle of 2009, depending on the situation.

    Like I said before, this has nothing to do with active forex trading. If you are involved with active forex trading, I think the time now is as good as always. It’s just I feel that longer term currency trends are quite hard to predict in this market.

    Thanks for reading :)
    -Felix
     
  2. peter_z

    peter_z Recruit

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    Bullion or certs?

    Hey Felix!

    Thanks for sharing! I was thinking about gold for a while now, as it is indeed at bargain prices right now.

    Maybe someone can answer, if you go for bullion or certificates?


    Thanks,

    Piotr Zaniewicz
     
  3. duck

    duck Private, 1st Class

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    The problem is that the current official precious metal spot price is NOT the same price as the physical metal. There is a great chasm growing between the two. Just go into any coin shop and try to buy eagles. Reports all over say dealers want far more and are willing to pay far more than the spot price for any transactions.

    The paper gold market ascribes an artificially low price to the metal, below what current demand would naturally mandate. Given that.... if you're not buying physical, buyer beware.
     
  4. fx kayak

    fx kayak Recruit

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    Gold up in a recession?

    How do you figure inflation when the CRB index has dropped from over 600 to 400, the index has not been that low since October 2007. That is a 34% drop. There has not been a correlating drop in the price of Gold. A 34% drop in gold would put it at about $666 which would be its October 2007 price. Gold seemed to follow inflation up but not down.

    This is probably due to fear and flight to safety factor. If the banking system stabilizes but we still go into a recession, Gold will probably follow the inflation down. We should have falling prices with a recession not increasing prices.

    I agree that gold should fall to about $650 first.

    But if the recession continues, the price may have to fall further and commodity prices fall.
     
  5. ABDULAZEEZ I.T.AFOLABI

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    RE:Felix monthly investment pick

    Thanks Felix for your scholastic information of which is embellished with a lot of wisdom, keep the flag flying while I keep on waiting for your November investment pick but should be made available on time.

    AbdulAzeez I.T.Afolabi.
     
  6. superrooster1

    superrooster1 Recruit

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    If buying gold, wouldnt US Gold coins be a good investment. They seem to appreciate more than just the price of gold itself???

    Nice read and thanx!
     
  7. sound fx

    sound fx Recruit

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    Hi Felix

    I always read your monthly investment ideas, but have one comment. Did you let us know that you were closing your NZD/JPY trade early?
     
  8. hastings38

    hastings38 Recruit

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    "All that glisters is not gold" - Says who?

    Hello Felix

    It's a real pleasure to read opinions backed by solid reasoning. It warmed my heart to read what you think about gold as, three years ago I invested 12% of my portfolio in gold bullion with the aim of hedging against inflation and deteriorating interest rates. It's interesting you also think inflation may rise. Here in the UK, the word from the herd is inflation is going down and deflation is the real problem. As I make a point of ignoring the herd, I wonder what the inflationary effect will be of our stupid government bailout of our stupid banks? You can't drop half a trillion pounds into the economy and not expect some waves. I'm with you on inflation and I hope you are right about the prospects for gold because I love making money.
     
  9. deanz

    deanz Private

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    Does anyone else notice that when the USD [or any other currency] goes against fundamentals that people always find a reason as to why a currency that should be down the toilet... isn't !!

    Here's one for those people....... the markets are manipulated, always have been, always will be, the wolves feed off the herd......... which one are you, I'll give you a clue....... look at your account........ ha ha........ just kidding......... maybe !

    So before everyone rushes off to buy leveraged gold I'll point you to a few ideas to open your brain cells........ or not !

    a video of Jim Cramer telling how he used to manipulate the market:
    thestreet.com/video/index.html?bcpid=1459183594&bctid=1163950434

    James Conrad writes an article on - Precious Metals Manipulation: Lawyers Prepare for Battle:
    seekingalpha.com/article/93744-precious-metals-manipulation-lawyers-prepare-for-battle

    If you want to further your education here are a few things to google to get you started:

    Richard D Wyckoff
    Tom Williama - VSA - Volume Spread Analysis

    You don't aways have to be part of the herd led to the slaughter.

    Best of luck,

    Dean.
     
    #9 deanz, Oct 22, 2008
    Last edited: Oct 22, 2008
  10. Elisabeth

    Elisabeth Recruit

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    Newbie's thought

    OK, I'm a newbie so admittedly I lack experience. But my (small) knowledge still tought me GOLD was a poor investment. Kind of thing my Grandpa would do... I feel it's too good to be true. I hear about gold from everyone around and I have the feeling that this may not work. What's so good about it? What if it fell?




    :mad:
     

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