FOREX.com presentsThe end of the safe
haven? Kathleen Brooks
Research Director
Contents
• De-constructing the myth of the safe haven
• Why did we believe in them, why we won’t in future
• “Safe havens” for the new paradigm
Traditional safe havens
Treasuries
Swiss franc
Gold
Yen
What does it mean?
• Uncorrelated to risk • Trustworthy • Stable • Piece of mind • Liquid
Safe havens: why do we need them?
• We like things that go up
Making sense of a complex market
Key characteristics –
Strong domestic finances Politically stable
Not controlled by capricious forces
History of paying debts
Something is wrong here…
The unreliable safe haven
Gold – Sept- Nov 2008
Gold – Jan – June 2010
Swiss franc – relic of safe haven era
1/30/2
012
2/11/2
012
2/23/2
012
3/6/20
12
3/18/2
012
3/30/2
012
4/11/2
012
4/23/2
012
5/5/20
12
5/17/2
012
5/29/2
012
6/10/2
012
6/22/2
012
7/4/20
12
7/16/2
012
7/28/2
012
8/9/20
12
8/21/2
012
9/2/20
12
9/14/2
012
9/26/2
012
10/8/
2012
10/20
/2012
11/1/
2012
11/13
/2012
11/25
/2012
12/7/
2012
12/19
/2012
12/31
/2012
1/12/2
013
1/24/2
013
1.17
1.18
1.19
1.2
1.21
1.22
1.23
1.24
1.25
1.26
EURCHF
EURCHF
Rot at the heart of the biggest safe haven of
them all…
Dollar earns safe haven status
Politically stable: are you serious?
Stable monetary policy?
1/25/2
012
2/14/2
012
3/5/20
12
3/25/2
012
4/14/2
012
5/4/20
12
5/24/2
012
6/13/2
012
7/3/20
12
7/23/2
012
8/12/2
012
9/1/20
12
9/21/2
012
10/11
/2012
10/31
/2012
11/20
/2012
12/10
/2012
12/30
/2012
1/19/2
013
2700000
2750000
2800000
2850000
2900000
2950000
3000000
3050000The 3 trillion dollar balance sheet
Fed balance sheet
Stable finances? US debt-to-GDP
Who destroyed the myth of the safe haven?
Central banks – major threat…
What made us open our eyes?
1, Financial crisis – we became aware of debt
2, Sluggish recovery – causes central banks to act beyond traditional mandate
The new reality in trading
1, central banks and governments are not safe…
2, Be careful who you trust
3, Currency wars a potential for the future
4, public finances – takes years to repair
Trading in the new paradigm
1, Accept the volatility of markets
2, Look for other assets without these risks
3, factor in political and CB risk in your trading
What safe havens today need to offer
Free from meddling by capricious central banks No sovereign problems Strong fundamentals
Safe havens of the future -
Commodities:
• Pros – demand expected to remain high
• Cons – at risk from growth cycles, apart from agriculture …
Safe havens of the future -
Commodity bloc currencies : AUD, NOK, SEK, CAD, NZD
• Pros – no financial problems
• Cons – limited liquidity, still affected by global growth cycle
Safe havens of the future -
EM government debt
• Pros – no financial problems
• Cons – shallow markets, limited liquidity, politically unstable, no proven track record
Safe havens of the future -
Argument for agri as safe haven
Positive: • Demand is recession proof • Growing global population • Highly liquid – often traded … • Not controlled by a central bank
Negative: • Can be volatile due to the weather and growth
conditions • Sensitive to supply issues (demand fairly solid).
Access to agri – FOREX.com
Products: TRADE platform - Wheat - Cocoa- Cattle - Hogs - Corn- Oats - Rice - Soybean
- Tip – stick to the staples, and meat…
Access to agri – FOREX.com
Ease of trading with TRADE platform
- Spreads are fixed for ALL markets
- Comprehensive tools and analysis – Market DNA – revolutionises technical trading
- Integrated news and research
FOREX.com presentsThe end of the safe
haven? Kathleen Brooks
Research Director