Sean Hyman's blog

Recently, there has been a huge bubble forming in what people “feel” is always a “safe” financial instrument….treasuries!

And much of the time they are right. However, any financial instrument can get ahead of itself and form a bubble as “everyone gets the same idea at the same time”. Well, that is what has happened in bonds as money got scared and ran for the hills.

The 30 Year Treasury Bond Goes Parabolic! 

Those hills ended up being U.S. Treasuries, the U.S. dollar and the Japanese yen. In the past, I’ve covered the inflows into these and where some of the outflows will go.

During 2008, one of the few financial instruments in the world that went up was the U.S. dollar. It became a great defensive play as investors ran back to the “world’s reserve currency”. Also, investors began to flee the emerging markets and repatriated their funds back into the U.S. which caused them to sell out of the foreign currencies and repurchase dollars.

Also, as stocks and commodities plummeted throughout the latter part of 2008, investors looked for any “beaten down” safe havens out there that they could run to. The dollar had been sold off for years back to back. So there were very few financial instruments beaten down like this one. (However, the Japanese yen was in the same shape also).

So for a combination of all of these reasons, the dollar was “propped up” during 2008.

Well, 2008 has been a period of deflation. The U.S. and global economy has slowed dramatically and thus corporate expansion has come to a halt as consumer spending dried up.

So the Fed didn’t sit idly by. No, they do what they feel they do best which is print money. It’s a great tactic short term to get things going…normally (but usually a bad mistake longer term for the economy).

I say, normally, because when the Fed pumps money into the economy and gives banks access to more money and lower interest rates…they normally pass along the money and the low rates to the public and to corporations which need the money to expand and grow.

For years and year, whatever direction the euro went, the pound tagged along and vice versa. This produced a wide trading range for the last 30 years. However, we live in a new day today as we break through those historic highs this month!

Check out the chart below.

30 Year Highs are Taken Out! Will we reach parity?!? 

There’s been a power struggle since the advent of the euro!

2008 was a wild and hairy year for sure. Volatility was the highest I’ve ever seen it and also the highest I can ever find on record.

The Dow dropped from over 14,000 down into the 7000s. Oil dropped from $147 down to just under $40. These were some of the fastest drops I’ve ever seen in my life.

 So what’s in store for 2009 for stocks, bonds, commodities and currencies?

 Stocks finally stabilize and a few “select” sectors will lead the way out!

In stocks, you are going to see stabilization for 2009. In fact, it will likely “base” in a very wide sideways range for much of 2009 as it catches its breath to head higher into the next bull market in late 209 or 2010.

 The Fed just released its interest rate decision ....cut interest rates to a range between 0% and 1/4%. The first time I've ever heard of a "range" but that's the word.  

The Dow popped 50 points upon the Fed lowering rates by "at least" 75 basis points from the former 1% level.

Sean Hyman

Head Instructor

www.mywealth.com

shyman@mywealth.com

In the years that I’ve spent being an instructor to currency students all around the world, I’ve realized that the names and faces change but the same mistakes tend to happen.

 I think it’s because its human nature to be drawn to the same errors. So let’s talk about a few of the biggest ones so we can “put out a few of these fires” and get you on the road to success in your trading.

 The biggest mistake I see is that traders always say, “How little (dollar wise) can I get started with?” rather than saying how much SHOULD I start with?

 Being undercapitalized is one of the biggest mistakes in any market but particularly in a higher leveraged market like currencies. In my opinion, a trader ought to have at least $2,000 to $3,000 in their account per mini lot traded minimally.