Morgan Stanley, but what else?

Ok. So it seems that shorting MS was a good decision. Now the price is 37,01, so I made almost 5% on this company so far. However my target is at least 20%, so it seems there is some way to go...

Today's news are pretty gloomy... Economic revival will not come too quickly. As you remember I was thinking about shorting car makers last week. Today some more news appeared that convinced me to such a move.

The question is what would be the car maker that could suffer most? I think that would be German Volkswagen. They had really very good years, but they will also suffer from high oil prices and economics slowdown. Below you can see the graph of the recent price movements of Volkswagen (daily interval from the beginning of march).

I decided to short 100 shares of Volkswagen. :) I hope they will not let me down! ;)

Second day of trading

Cool. It seems the banking industry is weaker than I thought. That should be good for my short position in 513 Morgan Stanley stocks (at this stage I am losing -1,36% on this position, but that is basically the spread I had to pay).

Today, the breaking news was that China is going to increase the price of oil domestically. Unfortunately, this led only to a very minor fall in the global price of the oil. It seems that the demand pressure is so strong that that we are far away from the demand/supply equilibrium in the financial markets. I am not a specialist in the Oil industry, so I am far from placing bets on this, but number of entities predict the rise of the oil price to the level of 200 USD per barrel. That's a lot! However in real terms it would not be such an unimaginable level. The inflation, which is about to take off soon, will decrease the relative pain.

The only tradable information today, was about very poor performance of Chrystler and Auto industry in general. I think about this on the weekend. Maybe I short some auto companies on Monday.

First step - analysis of macroeconomics

So here I am with my 100.000 EUR to start trading. Now this money is on bank account and is waiting for me to start trading.

In order not to go straight into red (loosing) I need to better understand current macroeconomic climat. In order to do that I bought the Financial Times (I think it is much better then WSJ) and I will be buying it everyday to get insight into economics.

Today's headline is "King and Darling issue bleak forecast". It seems that inflation is a major concern right now. It seems that guys want to react to the rising price pressure and want to kill rising inflation expectations. Ok - That would be good for long term for the economy to have stable inflation, but in the short term this means:

1. Negative pressure on the equity markets - at this stage noone should expect any happy rally in the equity markets. It seems all we can hope for is to avoid major fall in the prices of equities.
2. Positive pressure on GBP exchange rate. The depreciation of GBP (against EUR for example) should at least slow down in the near feature.
3. Higher pressure on MBS market. Ok. Maybe the mortgage market already showed all it's dark sides any nothing more will be exposed.
4. General slowdown in Economics => bad for retailers.
5. Some additional pressure on investment banks.

As you see at this stage it is hard to put any trades. We need some more details.

And here come first. On the first side of Financial Times we have: "MStanley in rogue trade probe" - it seems that this particular investment bank has real internal problems. (I applied there for an internship, but they didn't want me - another argument). So that would be my first trade!

I am selling short MStanley! I start with small amount of 20000 USD - I have to think it over again tommorow. But I think that would be a good trade.

Weak stock market = time for currency trading

As you see, the world stock markets are not robust at all. Even Fed and ECB (European Central Bank) have to act in order to fight with the poor mood on the world equity markets. It seems that it is now a good time for currency trading. Traders, who trade on their own account should move now to more liquid and less turbulent FX markets.
Strategy seems to be extremely easy now. You should have "safe" currencies long (CHF, USD, EUR) and emerging market currencies short (PLN, ZAR etc). Global flight to liquidity should lead to the appreciation of safe currencies in the short to medium term.
Of course, you may argue, that fundamentals of some of these "safe" currencies are quite weak (look at US twin deficit). Yes, that is true, but in fact fears of investors (global equity panic) should lead to the so called flight to liquidity and G7 currencies will become stronger in spite of their structural weaknesses.
Currency trading will give good opportunities especially now, as for example USD has positive carry trade against some of these "riskier" currencies, so not only we will win on the appreciation but also on the greater interest rates in US than in Poland for example.
So my advice for know is to focus on currencies. This is safe heaven when we compare it to the stock markets.