I know Merrill Lynch made a market in this stuff a few years back for even smallish BDSs such as myself. I nearly pulled the trigger on a 5 or 10 year put swaption on the 10-year yield in winter 2008 when it briefly yielded below 2% (stupid, the damn thing doubled within months). Vols were so low at that point, the trade would have probably been profitable even if rates hadn't gone up. It was about as risk-free as you could get.
The problem with shorting the Euro IMO is that while currency destruction appears inevitable, you don't know whether it will occur in the Euro bloc as a whole or only in a few specific countries (Greece, Spain etc.) as they're forced out of the euro area. I think the exit of one or more of the miscreants would make the Euro a screaming buy. If they just print the money then the Euro will of course continue to be debased - but simply buying gold, possibly with borrowed euros, seems a better play on this than e.g. shorting EURUSD.
The problem with a 'miscreant exit' is the violent domino effect. Think what would happen to Italian borrowing rates if Spain left -- or what would happen to the borrowing rates of all the periphery countries on the whole if any one of them left. Fiscal armageddon pricing would be imputed forward. Meanwhile the fiscally responsible eurozone countries in this scenario -- Germany, the Netherlands et al -- see instant depressionary conditions as investors treat the 'core euro' as a proxy d-mark. There would be potential massive trade shocks as the currency went vertical -- which in turn would seal the doom of the remaining periphery countries, reinforcing the feedback loop. My .02 is that Merkel, Schauble etc know damn well that Germany will have to cave at some point -- not out of principle or commitment to their fellow eurozone members, but because the blowback from a violent exit would tear them apart too. They are holding off on admitting this realization until the last possible moment, though, because standing down would be political suicide at home. This of course doesn't say much about whether the EURUSD is a short or not. But if general increasing attitudes of U.S. bullishness take hold (a lot of it centered around shale gas), then at some point the relative strengths between the two could kick into play and make EURUSD the short all the hedgies were waiting for. And gold is still a black box (in my humble opinion...)
What I found interesting is his contention that the USA is reaching a 'turning point.' I have to say it doesn't look that way to me - he confuses sheer political and institutional dysfunction with 'acceptance of debt and labor price restructuring.' Although I think major inflation is the means by which the accumulated losses from the 1980-2007 credit boom will be realized and 'written off,' the US might well follow Japan's path for much longer than many think. Maybe not twenty years but zero-bound rates through 2017-2020 doesn't seem at all unreasonable. I'm actually surprised at how 'rational' the Treasury market has been in this regard, ie that TLT didn't get anywhere near its early 2011 levels - contrary to the stock market.
It seems to suggest exactly what I said above, that the Euro is a screaming buy under the 'violent breakup' scenario. What happens after this is pretty obscure and it seems a bit far-fetched to start looking for trades based on so many conditionals and hypotheticals. Looking at the big picture though Germany's economy might well find itself in big trouble in a few years: all that production capacity installed to meet demand from credit-bingers in China and peripheral Europe constitutes a lot of malinvestment, not to mention all the foreign loans up to and including the BuBa's target-2 balances. But again, the problem for me is that most places are in pretty much the same boat. They're all being confronted with the choice to print or suffer one pain or another; either the pain of a deflationary depression or that of becoming a hot-money mecca as the Fed works to debase global reserve balances. When the time comes there ought to be plenty of better trades around than shorting Euros.
Right, except I'm arguing the odds of the "violent breakup" actually occurring are close to zero, because 1) the periphery countries aren't suicidal, and 2) Germany isn't that stupid. It's enough to know that a violent breakup would be catastrophic for all involved, and that such an outcome is forecastable enough, with high enough probability, to check its occurrence. The counterpoint to this is Lehman... that the authorities saw Lehman coming and stood by anyway. But evidence suggests Hank Paulson and others wrongly believed a Lehman bankruptcy would be manageable. Does anyone really believe that, re, a Spain / Italy exit? I agree EURUSD short looks like a crappy trade under present circumstances; what could change that, though, would be a glaring differential in economic strength, with the U.S. appearing strong enough to weather a trajectory of incrementally tightening monetary policy, even as deep recessionary conditions and growing political unrest force Germany to accept revision of the fiscal pact (as the ECB writes big checks). The funny thing is, the euro and gold are in the same boat to me... there are scenarios where either could be a great short, depending on what happens, or either could be a (temporary) great long, depending on what happens -- specific branches of the scenario tree and all that... the only viewpoint I'm instinctively dismissive of is the one that says "xyz wins no matter what." There are very few no matter what's out there now.
You'd be surprised. Big fortunes are lost and watered down all the time, often due to over-concentration in a high-beta investment. Good article here: http://online.wsj.com/article/SB10001424052970204336104577096410776256928.html
EURCHF floor is over, it's now a peg ... http://georgedorgan.livejournal.com/4447.html Bank actually sold euros in Q1. Unless Switzerland falls into a depression, floor isn't getting raised. The only good thing is the EURCHF longs from 1,2090, 1.2070, 1.2050, 1,2030 have all gotten completely fried, so at least there is some air above 1.2010.
Well, this is a rather superficial analysis that this guy has done. Indeed, EUR investments excluding FX derivatives have fallen by 6.5%. However, curiously enough, EUR investments including FX derivatives have fallen only by 0.7%. So, really, I can imagine that they just had some PNL swings, that's all.
Wow. RWE divvie just hit my account. I forgot they pay the dividend just once a year. Gotta love the German utilities! I would advise all currently pumping out pixels on earning a couple of basis points of positive expectation here or there to take advantage of the recent pullback and buy lots.