Reasonably Thinking

Hungary received a downgrade to junk status today, which placed further downward pressure on the euro.  As the euro fell, my broker covered my short position since FXE shares were unable to be found for further shorting.

When I initiated this position a year ago, I shorted the euro knowing that I was long gold.  Essentially, my effective paired trade was long GLD and short FXE.  This has proven well over the year.

Image from Google Finance

I’m okay without my FXE short.  Gold is still likely to be good long-term, and the euro could rally on any perceived good news.  While I still have over a 23% gain in gold, the euro hedge cost me a mild $53.

Top Five is updated to reflect this transaction.

Oil Field Bet!

Last month when I purchased DBA, I was looking for someplace liquid to park assets while participating in any upside inflation.  Unfortunately, I have been underestimating ETF futures roll expenses for DBA, JJG, and DBC.  Thus, I was willing to exit my DBA position today (at a manageable $50 loss) to fund a new position.

 The new position is a field bet on oil producers and servicers.  Oil markets seem to have a structural tightness to them that are unlikely to ease in the near future.  Furthermore, energy serves as a real asset by correlating to inflation.  Today I purchased producers XOM & CVX and servicers SLB, BHI, & HAL, all of which have at least a four star rating from both S&P and Morningstar.  To hedge my equity correlation exposure, I took a negative equity position by shorting SSO (this trade accumulates to my existing SSO short position).

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Top Five is updated to reflect for the changes in SSO and DBA.