Intro
I’ve diversified my holdings into mostly stocks & metals (gold & silver ETFs). I’ve dumped any $US Bonds and while I’d initially moved some into a couple of Foreign Exchange Funds, I moved it on fairly quickly to other things. Though it was a short term, I’d expected to see some movement, but it was mostly flat, and some were a tiny bit down. Well, I’d figured that by now some decent trends might have shown up, and maybe it was time to revisit the FX (Foreign Exchange) choices and what might make sense as an alternative to the $US.
FX Foreign Exchange
Things are significantly different from what I’d experienced a decade or two back trading FX ETF (Exchange Traded Fund) instruments. What has changed?
First off, several “old friends” are now gone. FXM was Mexican Pesos. Now it is some other stock. The Swedish Krona fund is gone. Several minor currency funds are no more. What survived? Mostly a limited number of major currencies. FXE -Euro. FXB – British Pound. FXF – Swiss Franc. FXA – Australian Dollar. FXY – Japanese Yen. FXC – Canadian Dollar. The Yen is dropping a lot relative to the rest, so something not going well in Japan. The other big change is that a LOAD of BitCoin and other “digital currency” funds now exist.
My first thought on the Bitcoin ETFs was “why”? Just to avoid dealing with a Bitcoin exchange? To put ANOTHER intermediary between you and the digital quatloos? FWIW, as the epitome of “no intrinsic value” mixed with “backed by nobody’s full faith and credit”, I do not see Bitcoin as any kind of “investment”. It MAY be useful as a trade vehicle, but there are a lot of trade vehicles like that with no intrinsic value (like, all the ones based on portfolios of options & futures…) But, OK, you can make a lot of money with short term trades so I can see when Bitcoin became trendy that the trader guys would want to trade it.
That said, look at this list of “Currency” ETFs and ask yourself if Bitcoin & related have become a fad:
https://etfdb.com/etfdb-category/currency/
Symbol ETF Name IBIT IShares Bitcoin Trust Registered GBTC Grayscale Bitcoin Trust FBTC Fidelity Wise Origin Bitcoin Fun ARKB ARK 21Shares Bitcoin ETF BITB Bitwise Bitcoin ETF Trust BITO ProShares Bitcoin Strategy ETF HODL VanEck Bitcoin Trust BRRR Valkyrie Bitcoin Fund BTCO Invesco Galaxy Bitcoin ETF UUP Invesco DB US Dollar Index Bullish Fund EZBC Franklin Bitcoin ETF FXY Invesco Currencyshares Japanese Yen Trust USDU WisdomTree Bloomberg U.S. Dollar Bullish Fund FXE Invesco CurrencyShares Euro Trust FXF Invesco CurrencyShares Swiss Franc Trust EETH ProShares Ether Strategy ETF BTCW WisdomTree Bitcoin Fund BITI ProShares Short Bitcoin Strategy ETF FXA Invesco CurrencyShares Australian Dollar Trust BTF Valkyrie Bitcoin and Ether Strategy ETF UDN Invesco DB US Dollar Index Bearish Fund FXC Invesco CurrencyShares Canadian Dollar Trust FXB Invesco CurrencyShares British Pound Sterling Trust ARKA ARK 21Shares Active Bitcoin Futures Strategy AETH Bitwise Ethereum Strategy ETF DEFI Hashdex Bitcoin ETF BTOP Bitwise Bitcoin and Ether Equal Weight Strategy ETF BETH ProShares Bitcoin & Ether Market Cap Weight Strategy ETF CEW WisdomTree Emerging Currency Strategy Fund SETH ProShares Short Ether Strategy ETF BETE ProShares Bitcoin & Ether Equal Weight Strategy ETF BITC Bitwise Bitcoin Strategy Optimum Roll ETF
So it goes…
Do realize that ETFs are a product and that they can some and go as fast as some Broker finds a trend to ride or finds one has lost profitability for them as seller of the ETF. So short term trade vehicles, not long term investments.
FX vs oil
I’ll just mention one other thing in passing: Drawing a chart of several of the national currencies vs the $US trend vs Oil ETF: I think I noticed the impact of trading oil in $US vs North American seasonality. The $US and USO (oil) would both have demand (so price) rise when northern hemisphere countries were swapping their local currencies for $US to buy oil. Winter (heating) and some “summer vacation time” in Europe (cars, busses, planes, ships). It wasn’t a huge trend, and it looked like it had about a 1 month lag vs Oil prices, so some care in timing needed. But over the last year, it was visible. (Oil itself had more seasonal movement than the currencies, so I’d trade USO for that trend trade rather than currencies).
Would I trade that? Likely not. Better trades elsewhere, IMHO. But maybe useful for some futures spreads & hedges. Also the move of BRICS+ into non-$US (and especially Saudi Arabia taking Yuan and others in trade for oil) might well completely disrupt this one year observed trend “going forward”.
US Oil vs Currencies Baskets – 1 year daily Jun2024
So, looking at this, the top line is US Oil (oil is very volatile in price). The main ticker is FXE the Euro and near / at the bottom (with SMA (Simple moving Average) lines and other indicators (PSAR). The blue line just above the bottom clutter is the Swiss Franc – FXF. Notice that it peaks at Christmas just after oil bottoms the start of the month. Similarly about the end of September oil prices peak and the Franc bottoms a week or so later in the start of October.
So is this just marking the end of Summer Vacation Season AND the seasonal buy of heating oil toward the end of Summer (before the winter cold sets in)? Then a second ramp up and drop as the winter doldrums end and Spring Driving Season begins? Maybe a big of late topping up of heating oil if one guessed too low on first filling? Then perhaps the May / June drop relates to fields having been plowed and planted, but no harvest demand yet, along with folks preparing for the end of School and the holding off for an August Vacation? It would likely help to look at other years to confirm the trends in this year. Note that there are other currencies in the pile at the bottom with similar “wobbles”, but not as extreme. Not on this chart, USDU or $US Up fund moves somewhat with USO (though more weakly) and counter to the other currencies.
Enough to be useful in trading? Maybe, but would require some work…
Semiconductors & Broad Index funds
SemiConductors vs Broad Indexs Jun2024
Semiconductors are way outpacing everything else. A huge chunk of that being the A.I / NVIDIA fad. NASDAQ (QQQ) is being pulled up by them and riding above the other large indexes. Small Cap Companies (RUT Russel 2000) are doing the worst (orange line on the bottom) with Large Caps (DIA Dow Industrials) barely doing better. (So restaurants AND big banks both with issues…). The S&P 500 Largest US Companies doing better than Very Large or very small, but not as good as Tech that is mostly being hauled up by Semiconductors.
A LOT of money seems to be pumping up Taiwan Semi Manufacturing (TSM) at about the same rate as the SMH index (which makes me wonder why… not afraid of a China war taking them out?). While NVDA NVIDIA is on a rocket ride well above the SMH. So doing a LOT of the lifting… THE big question being who will make an effective competitor chip.
Sector Stock Movements 1 week 10June2024
On this FinFiz chart, the size of the square is market cap size, the color is movement (green up / red down) in price.
We can quickly see who’s moving the markets. AVGO is Broadcom,, a semiconductor maker and network company. With TSM, NVDA, Arm Holdings (ARM), Micron (MU) all making major moves and a big part of the market. Microsoft did OK as did ASML in Europe (a maker of chip making gear). Not in Semis, we have Amazon (crushing all other sellers of stuff) and META (Google). Then some scattered drug companies. Most of the rest is either very small, red, or both…
So I guess the question is “Ride this bubble, or time when to get off before it pops?”.
There’s a whole lot riding on Tech, Semiconductors, and a couple of Internet Companies. Not so much expecting to make money in “brick and mortar” stores, cars, manufacture of goods, agriculture, mining, etc. IMHO, not a good thing.
For now, I’m going to continue mostly using SPY as my major investment / trade vehicle, but will likely add an entry buy of QQQ and consider trading one lot of NVDA. Maybe easing into it with SMH first ;-)
So there you have it. My view today.
Musings from the Chiefio 
Supplemental.
https://www.moneymetals.com/news/2024/06/06/is-there-a-financial-crisis-bubbling-under-the-surface-003240
@Ossqss:
I saw no mention of “Mark To Market” in that article. That requirement was a large part of what caused the banking crash in 2008 (and I’ve not heard it was removed).
Basically,, “unrealized losses” had to be marked as losses when the bank was examined. rather like, if you bought your home for $400,000 but just today you could only sell it for $350,000, you had to report a $50,000 “loss” “on the books”. EVEN IF you had no desire or intent to sell the assets.
For a LOT of banks, insurance companies, etc. this meant that buying a 30 year Treasury with a guarantee of having the $1000 face value repaid at maturity, had the “risk” that it might only fetch far less than that “today” in the market, but you had to put on your list of assets “The price today” (marking the value as market today) that might be $800, not $1000. Even though you would be paid the full $1000 at maturity.
This was the major cause for why so many financial institutions had “sudden losses” and were under stress. They were not “real” losses, just an artifact of the change of the accounting rule to force “Mark to Market”. (Prior years, you could just say your $1000 US Treasury was worth $1000 and you were going to hold it to maturity).
IF that rule was withdrawn, then banks can ignore their “unrealized losses”; but if that accounting rule is still in force, they will be forced to state their “unrealized losses” as actual losses and likely fail.
Some background: https://www.westga.edu/assets/economics/docs/research/Mark-to-Markets-Effect-on-Community-Banking.pdf
Unfortunately, I don’t know what the current rule is…
This article implies that when The Fed “stress tests” a bank, it looks at Mark To Market values…
https://fedsoc.org/commentary/fedsoc-blog/the-fed-s-mark-to-market-loss-approaches-1-trillion-matching-the-potential-loss-on-student-loans
There’s a couple of other bits in that article which are of note:
So with The Fed insolvent, the US Government insolvent and massively in debt AND overspending their income by about 1/3 AND with massive unfunded future payment obligations: Clearly they (Fed & US Politicians) think we really ought to be worried about GlowBull Warming, what “gender” pronouns a purple hair nut job demands I used today vs yesterday; and picking a fight with China and Russia at the same time as we are out off ammunition AND money to buy any AND factories in which to make it…
But, it seems, we have no effective way to fire these horribly bad managers and get in a set of management who knows how to handle money.
A pivotal moment, and BRICS++ gets a boost.
U.S.-Saudi Petrodollar Pact Ends after 50 Years
https://www.msn.com/en-us/money/markets/u-s-saudi-petrodollar-pact-ends-after-50-years/ar-BB1o29sn
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