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Posted by on May 12, 2015 in Market Insight, Treesdale

Is the Short EURO Trade Over?

Is the Short EURO Trade Over?

Treesdale Partners, portfolio manager of the AdvisorShares Gartman Gold/Euro ETF (GEUR) and AdvisorShares Gartman Gold/Yen ETF (GYEN), share their thoughts about the gold space.   The Euro has rebounded more than 8% to 1.135 off the current lows of 1.05. What has caused this? Bill Gross and Jeff Gundlach have both recently recommended shorting the frothy European bond markets. The five-year BOBL which is a German government bond has increased in yield from -0.15% to 0.086%.   The yield on the ten-year German Bund has increased in the same period from .07% to 0.59%! These are enormous moves in the interest rate markets and have been the impetus behind the Euro FX move.   Higher rates portend a stronger currency. Along with these capital flows, there are rumors of hedge funds exiting this somewhat “crowded” trade of shorting the Euro currency. So is this trade over? The fundamentals remain the same. The European bloc still remains weaker than the U.S. economy. ECB quantitative easing has just begun and will continue into...

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Posted by on Apr 23, 2015 in Treesdale

To Hedge or Not To Hedge

To Hedge or Not To Hedge

Treesdale Partners, portfolio manager of the AdvisorShares Gartman Gold/Euro ETF (GEUR) and AdvisorShares Gartman Gold/Yen ETF (GYEN), share their thoughts about the gold space.   There have been several blogposts on the merits of buying currency hedged ETFs for foreign equity exposure versus unhedged exposure.   The arguments for unhedged ETFs are weak and often false, like “the companies hedge their currency exposure already”. European companies are perhaps hedging their business exposure but they are not certainly hedging your personal investment in their stock.   Bond market participants have long figured this out. Ask any bond trader how they think about FX risk in foreign bonds.   They will tell you that they fund their foreign bond purchases in the repo or other financing markets in that respective currency. Another illustration, let’s say an American wanted to buy a house in Holland because he thought it was a good investment.   That house cost 100,000 Euro.   After 2 years he realized he made a great investment and the house appreciated 25% to 125,000...

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Posted by on Mar 19, 2015 in Treesdale

Has China Joined the Currency Wars?

Has China Joined the Currency Wars?

Treesdale Partners, portfolio manager of the AdvisorShares Gartman Gold/Euro ETF (GEUR) and AdvisorShares Gartman Gold/Yen ETF (GYEN), share their thoughts about the gold space. China has been quietly joining the rest of the world in reducing interest rates and depreciating their currency. For the past couple of years, growth in China has been slowing and their stock markets have suffered as a result. This year, the markets have been strong because of the orchestrated currency weakness and lower rates. This sounds eerily similar to Japan and Europe. But isn’t the Chinese yuan regulated by the government in a currency band relative to the dollar? Yes it is, however, the band can be widened and moved to where the government deems to be optimal. The yuan depreciated 2.4% in 2014 and another 0.5% so far this year. The yuan is something to monitor closely since Asian countries will not want to be at a disadvantage to China with respects to their exports. With all of Japan’s ills, a depreciating Chinese yuan would...

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Posted by on Mar 3, 2015 in Treesdale

Is The Whole Equal To The Sum of Its Parts?

Is The Whole Equal To The Sum of Its Parts?

Treesdale Partners, portfolio manager of the AdvisorShares Gartman Gold/Euro ETF (GEUR) and AdvisorShares Gartman Gold/Yen ETF (GYEN), share their thoughts about the gold space.   I recently noticed that Ireland and Portugal issued bonds at record low yields. Wait, weren’t Ireland and Portugal the next troubled economies after Greece? Aren’t they the “I” and “P” in PIGS? Don’t Spain and Italy still have plenty of problems also? So now it dawned on me why the Euro is doomed. When a country gets over its skis, the capital markets have a self-correcting mechanism to push that country through its economic cycles. In general, that country’s currency gets devalued and interest rates rise to entice foreign investment. The Euro bloc is full of countries where this should happen. Countries over time naturally need to go through periods of feast and famine. The question remains, where would the individual currencies trade if the Euro didn’t exist? Is the Euro equal to the sum of its parts? It’s hard to exactly quantify this...

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Posted by on Dec 23, 2014 in Treesdale

Canary in a Coal Mine?

Canary in a Coal Mine?

Treesdale Partners, portfolio manager of the AdvisorShares Gartman Gold/Euro ETF (GEUR), AdvisorShares Gartman Gold/British Pound ETF (GGBP), AdvisorShares Gartman Gold/Yen ETF (GYEN) and AdvisorShares International Gold ETF (GLDE), share their thoughts about the gold space. With the collapse of oil, market participants are logically discussing which assets are vulnerable to more selling and which are value buys.  As everyone knows, the currencies of oil producers like Norway, Mexico and Nigeria have been crushed but none to the extent of the Russian Ruble. The Russian situation was fairly unstable even before the oil debacle. It’s unclear to most market participants how the Russian situation plays out. The interest rate increase to 17% has stemmed the ruble down trade for now.   Commodities have been sold off in sympathy hence the currencies of commodity producers especially those of Emerging markets have been very weak.   But the asset class everyone is talking about is high yield bonds or junk bonds as they are affectionately referred to. Since energy companies comprise the second highest...

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Posted by on Dec 17, 2014 in Treesdale

Does Victory For Abe Mean Defeat For The Yen?

Does Victory For Abe Mean Defeat For The Yen?

Treesdale Partners, portfolio manager of the AdvisorShares Gartman Gold/Euro ETF (GEUR), AdvisorShares Gartman Gold/British Pound ETF (GGBP), AdvisorShares Gartman Gold/Yen ETF (GYEN) and AdvisorShares International Gold ETF (GLDE), share their thoughts about the gold space.   Prime Minister Shinzo Abe prevailed on Sundays snap election, which will give him a fresh mandate to implement his policies to revive Japan from its prolonged well-chronicled economic malaise. There was no way Abenomics wasn’t going to continue since Abe’s LDP party had 352 candidates to the opposition Democratic Party of Japan fielding only 198 candidates for the 475 seats up for grabs. Abe’s strategy of depreciating the Japanese Yen through aggressive monetary policy was commended by most; however, increasing the VAT or consumption tax to 8% has put the brakes on the economy. In fact some data released in November has shown the economy surprisingly quickly slipped into recession after the April 2014 hike from 5-8%. Abe has announced a delay to the proposed further increase to 10% consumption tax slated for...

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