FX Thoughts : The Slow Boil Death


Uncanny that I was sent this SouthPark video, The Importance Of Saving Money, by Retired Trader and chanced upon, almost instantaneously on a WSJ article No Trends, No Friends for FX Funds – life is tough for investors seeking to make money in currency funds.

It starts out with Trend following is dead because trends never really get going,” complained John Taylor, chairman of FX Concepts, one of the oldest and best-known currency-focused hedge funds.


“Ever since the Great Recession of 2008-2009, the foreign exchange markets have been buffeted by ever-increasing interference from government bodies, especially central banks, disrupting the day-to-day functioning of the market,” said Mr. Taylor.

So far, we have been hearing accusations of manipulation in every trading asset class except the one that Bernanke does not understand – Gold.

FX has always been considered the most transparent asset class and impossible to corner or control until last month when Bloomberg came out to report that Traders Sought To Rig Currency Rates To Profit Off Clients.


And there was that Reuters scandal of inadvertently releasing the US ISM data 15 milliseconds early to HFT clients.


Investors are badly shaken everywhere as now the fear is that it is not only the banks, but countries themselves that are cooking the numbers. This leads to a certain degree of xenophobia and all good money goes home.

What should we expect in the future ?

“The G-20 is mindful of the risks and unintended negative side
effects of extended periods of monetary easing. Future
changes to monetary policy settings must be carefully
calibrated and clearly communicated. The aim is to limit
volatility of financial flows and disorderly movements in
exchange rates, as they have adverse implications for
economic and financial stability.”

Total Control ?

It is a slow boil death like DialAStrategist said in her piece, Theory of Minimum Variance. And Bernanke and gang are boiling the frog to death 1 degree at a time so it does not know it is dying.