Weekly Importer / Exporter Analysis 5-20-13

This one covers two weeks. US importers sweep the board.  Yen may be stabilizing after revelation that consumers are suffering from fuel and energy cost increases.

Currency Protection Gage:  Our plot is purely based on the data from demonstration transactions, meaning that this is likely meaningless at this point.  However, as we move to real transactions, people might be interested in how others think of their currency risk.  We think this will occur later this month or into October.  This purely is based on the number of customers looking to protect their transactions.  If the result is skewed to “Importers” it might be interpreted that importers are worried about currencies moving against them.  Transaction size is not a factor in this graph.  Also note that this chart is through an American business point of view: if you are a foreign exporter you are treated as an American importer in this graph.

The next is a simple chart of who won the battle last week, between the USD and five currencies.  The perspective is strictly from America, so if against the Aussie Dollar, United States importers won, that also means Australian exporters won as well.

Currency	Week Ending 5-17-13	Weeks in a Row
Australian Dollar (AUD)	Importers Win!	2
Canadian Dollar (CAD)	Importers Win!	3
British Pound Sterling (GBP)	Importers Win!	2
Euro (EUR)	Importers Win!	2
Japanese Yen (JPY)	Importers Win!	2

Thanks,

Damon

Weekly Importer / Exporter Analysis 5-6-13

European Central Bank lowers interest rates in a move to help beleaguered countries.  Stronger than expected jobs report in the US not enough to counteract the effect, exporters mostly win.

Currency Protection Gage:  Our plot is purely based on the data from demonstration transactions, meaning that this is likely meaningless at this point.  However, as we move to real transactions, people might be interested in how others think of their currency risk.  We think this will occur later this month or into October.  This purely is based on the number of customers looking to protect their transactions.  If the result is skewed to “Importers” it might be interpreted that importers are worried about currencies moving against them.  Transaction size is not a factor in this graph.  Also note that this chart is through an American business point of view: if you are a foreign exporter you are treated as an American importer in this graph.

The next is a simple chart of who won the battle last week, between the USD and five currencies.  The perspective is strictly from America, so if against the Aussie Dollar, United States importers won, that also means Australian exporters won as well.

Currency	Week Ending 5-3-13	Weeks in a Row
Australian Dollar (AUD)	No Change	0
Canadian Dollar (CAD)	Exporters Win!	1
British Pound Sterling (GBP)	Exporters Win!	1
Euro (EUR)	Exporters Win!	0
Japanese Yen (JPY)	Importers Win!	0

Thanks,

Damon

Weekly Importer / Exporter Analysis 4-29-13

New Italian government passes first of two confidence votes.  Could this be the turnaround needed or just a delay for elections?  Time will tell.

Currency Protection Gage:  Our plot is purely based on the data from demonstration transactions, meaning that this is likely meaningless at this point.  However, as we move to real transactions, people might be interested in how others think of their currency risk.  We think this will occur later this month or into October.  This purely is based on the number of customers looking to protect their transactions.  If the result is skewed to “Importers” it might be interpreted that importers are worried about currencies moving against them.  Transaction size is not a factor in this graph.  Also note that this chart is through an American business point of view: if you are a foreign exporter you are treated as an American importer in this graph.

The next is a simple chart of who won the battle last week, between the USD and five currencies.  The perspective is strictly from America, so if against the Aussie Dollar, United States importers won, that also means Australian exporters won as well.

Currency	Week Ending 4-26-13	Weeks in a Row
Australian Dollar (AUD)	Importers Win!	1
Canadian Dollar (CAD)	Exporters Win!	0
British Pound Sterling (GBP)	Exporters Win!	0
Euro (EUR)	Importers Win!	1
Japanese Yen (JPY)	Exporters Win!	0

Thanks,

Damon

Italian Impasse at President Bad for World Economy

It looks like new Italian elections will be called for in late June or early July based on the re-election of Giorgio Napolitano for President.  His inability to form a government in the past months leaves little hope that a reform centered coalition will be created.

The effects of this new election will loom large.  It appears that, despite being indicted under multiple counts, Berlusconi has a chance of winning a majority.  It is easy to predict the international response if Berlusconi’s party comes to power: chaos.  He oversaw the worst excesses of Italian politics and his minions have openly pandered to voters looking to leave the Eurozone.

Also in the mix is Beppe Grillo of the 5-star Movement.  A newcomer to the political scene, most feel that he is a joke.  If fresh elections make him kingmaker, we can be assured of political dysfunction for the near term.  This uncertainty will be immediately reflected in bond yields, which have been quite forgiving given the 50 days without a functional government.

The main problem is that both Berlusconi and Grillo surged in the poles prior to the election results, leaving the others a small grip on power.  Both have clearly decided that new elections will be better for their own parties.  That may not be in the interest of Italy, the Eurozone, or the worldwide economy.

Damon

Weekly Importer / Exporter Analysis 4-22-13

Election of Napolitano for a second presidential term in Italy is a bad sign for things to come.  If he could not put together a government during his first term, how can he do it a second?  Parliamentary elections loom, playing into Berlusconi’s hand.

Dollars purchase more against every currency while importers sweep the board.

Currency Protection Gage:  Our plot is purely based on the data from demonstration transactions, meaning that this is likely meaningless at this point.  However, as we move to real transactions, people might be interested in how others think of their currency risk.  We think this will occur later this month or into October.  This purely is based on the number of customers looking to protect their transactions.  If the result is skewed to “Importers” it might be interpreted that importers are worried about currencies moving against them.  Transaction size is not a factor in this graph.  Also note that this chart is through an American business point of view: if you are a foreign exporter you are treated as an American importer in this graph.

The next is a simple chart of who won the battle last week, between the USD and five currencies.  The perspective is strictly from America, so if against the Aussie Dollar, United States importers won, that also means Australian exporters won as well.

Currency	Week Ending 4-19-13	Weeks in a Row
Australian Dollar (AUD)	Importers Win!	0
Canadian Dollar (CAD)	Importers Win!	0
British Pound Sterling (GBP)	Importers Win!	0
Euro (EUR)	Importers Win!	0
Japanese Yen (JPY)	Importers Win!	0

Thanks,

Damon

Weekly Importer / Exporter Analysis 4-15-13

Trouble with Cyprus’ bailout may lead to currency volatility.

Currency Protection Gage:  Our plot is purely based on the data from demonstration transactions, meaning that this is likely meaningless at this point.  However, as we move to real transactions, people might be interested in how others think of their currency risk.  We think this will occur later this month or into October.  This purely is based on the number of customers looking to protect their transactions.  If the result is skewed to “Importers” it might be interpreted that importers are worried about currencies moving against them.  Transaction size is not a factor in this graph.  Also note that this chart is through an American business point of view: if you are a foreign exporter you are treated as an American importer in this graph.

The next is a simple chart of who won the battle last week, between the USD and five currencies.  The perspective is strictly from America, so if against the Aussie Dollar, United States importers won, that also means Australian exporters won as well.

Currency	Week Ending 4-12-13	Weeks in a Row
Australian Dollar (AUD)	Exporters Win!	0
Canadian Dollar (CAD)	Exporters Win!	0
British Pound Sterling (GBP)	Exporters Win!	1
Euro (EUR)	Exporters Win!	1
Japanese Yen (JPY)	Exporters Win!	0

Thanks,

Damon

Bitcoin is Really a Commodity

While Bitcoin has garnered a lot of press lately with its volatile movements and “safe haven” status after the Cyprus debacle, I think there needs to be a discussion on what a Bitcoin actually is and if it should be considered a currency or a commodity.  Anecdotal evidence points to both.  The word “coin” in the name suggests currency while the fact that they are “mined” suggests a commodity.  Does it really make a difference?  I think it does.  This chart outlines some qualities of currencies vs commodities:

	Currency	Commodity
Value	Relative to perception of national economic strength vs other economies amongst other factors	Set by supply and demand in markets
Interest rate set by governments	Yes	No direct interest rate
Can be used for speculative gain	Yes	Yes
Can be exchanged for goods and services	Yes	Yes
Supply determined by government	Yes	No
Taxed by government	Generally, yes	Sometimes
Subject to foreign exchange rules	Yes	No

I would argue that Bitcoins are more like gold, or shipping vessels, or grains, than Euros, Dollars, or Yen.  Since there is no defined interest rate, and the supply is fixed, it should behave more like oil than a Canadian dollar.

For those that argue it is a currency since you can use it to pay for goods and services, I would counter-argue that you can use gold, silver, and even oil to pay for things, albeit it is unwieldy. The online nature of Bitcoins make them an easy medium for exchange, but a commodity nonetheless.

This is important since there are very different rules, especially in the United States, when it comes to trading commodities versus currencies.  From banking and foreign exchange regulations to anti-money laundering rules, it would behoove the Bitcoin community to lobby for it to be considered a commodity.  The Treasury Department is already beginning to treat it as a currency.  This is why some of the bigger players are staying out of the game: the regulatory uncertainty is not worth the risk.

It is in my opinion that until more robust trading structures are implemented, and laws clarified, there is a regulatory risk involved in dealing with large amounts of Bitcoins.  They should be treated as a commodity rather than a currency since that simplifies the rules as well as the fact that Bitcoins do not share some features of a currency.

Happy trading!

Damon