FOREX.com presents The end of the safe haven? Kathleen Brooks Research Director
Contents De-constructing the myth of the safe haven Why did we believe in them, why we won’t in future “Safe havens” for the new paradigm
Treasuries Swiss franc Gold Yen
What does it mean? Uncorrelated to risk Trustworthy Stable Piece of mind Liquid
Safe havens: why do we need them? We like things that go up
Making sense of a complex market
Key characteristics – Strong domestic finances Politically stable Not controlled by capricious forces History of paying debts
Something is wrong here…
Gold – Sept- Nov 2008
Gold – Jan – June 2010
Swiss franc – relic of safe haven era
Rot at the heart of the biggest safe haven of them all…
Dollar earns safe haven status
Politically stable: are you serious?
Stable monetary policy?
Stable finances? US debt-to-GDP
Who destroyed the myth of the safe haven?
Central banks – major threat…
What made us open our eyes? 1, Financial crisis – we became aware of debt 2, Sluggish recovery – causes central banks to act beyond traditional mandate
The new reality in trading 1, central banks and governments are not safe… 2, Be careful who you trust 3, Currency wars a potential for the future 4, public finances – takes years to repair
Trading in the new paradigm 1, Accept the volatility of markets 2, Look for other assets without these risks 3, factor in political and CB risk in your trading
What safe havens today need to offer Free from meddling by capricious central banks No sovereign problems Strong fundamentals
Safe havens of the future - Commodities: Pros – demand expected to remain high Cons – at risk from growth cycles, apart from agriculture …
Safe havens of the future - Commodity bloc currencies : AUD, NOK, SEK, CAD, NZD Pros – no financial problems Cons – limited liquidity, still affected by global growth cycle
Safe havens of the future - EM government debt Pros – no financial problems Cons – shallow markets, limited liquidity, politically unstable, no proven track record
Safe havens of the future -
Argument for agri as safe haven Positive: Demand is recession proof Growing global population Highly liquid – often traded … Not controlled by a central bank Negative: Can be volatile due to the weather and growth conditions Sensitive to supply issues (demand fairly solid).
Access to agri – FOREX.com Products: TRADE platform -Wheat -Cocoa -Cattle -Hogs -Corn -Oats -Rice -Soybean -Tip – stick to the staples, and meat…
Access to agri – FOREX.com Ease of trading with TRADE platform -Spreads are fixed for ALL markets -Comprehensive tools and analysis – Market DNA – revolutionises technical trading -Integrated news and research
FOREX.com presents The end of the safe haven? Kathleen Brooks Research Director