A World With Higher Rates

WHAT'S GONNA BE? - I keep wondering how things will change when rates start to go up. One of the areas I think we will see some dramatic change is in the asset management business. Fund models have been so reliant on one dimensional strategies revolving around ultra accommodative monetary policy incentive that it will be shocking to see these models perform when this incentive comes off the table. When rates are sitting at zero, it's a heck of a lot easier to produce. But as rates start to rise, I think we will start to see a major shakeup in the business that sees many so called asset managers falling by the wayside, unable to adjust to a long overdue reality.

NOT FOR ME - Unfortunately, I haven't been smart enough to play into this strategy these past several years and have been plugging away as I always have, looking for the volatility and embracing the challenge of running straight into it and trying to ride it the right way. This is the trading that I know and love and I wouldn't have it any other way. My hope is that the shakeup in the business as rates begin to rise will invite even more volatility and opportunity. Whatever the case, the key takeaway for me is that if my strategies can perform in an environment that might not be as ideal given the one way direction on a centrally focused theme of monetary policy influence, hopefully they will perform as well if not better, when we return to higher rates and get off being so focused on the Fed every second of the day. Of course, I can't say for sure. I can only hope and in the interim will continue to keep my head down and plug away.

Still selling equities into rallies. Fresh short in play. Via @joelkruger

THE TRADING - Unfortunately, I had to exit my GBPNZD short for a loss after the market failed to show any downside follow through whatsoever and continues to ignore severely overbought technical readings. Otherwise, I will be looking for another pullback in USDJPY (as I am not convinced this correction is done just yet), and upside in EURCHF back towards the February peak at 1.0815. Away from FX, I continue to employ the sell equities on rallies strategy and have sold the SPX500 yet again, this time at 2109. The strategy has done quite well over the past several weeks and I will only look to exit on a break to fresh record highs.

Friday Position Review

Looking at the current exposure as we head into the weekend.


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Holding GBP Exposure that Pays

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