June 28, 2010 – Australian Dollar Owners Make a Killing

Featured Trades: (FXA), (EWA)
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2) Australian Dollar Owners Make a Killing. Those who took my advice to buy the Australian dollar at the $.80 handle (click here for the call) are no doubt now shopping for the next vintage Ferrari to add to their collection, a contender for next year's triple crown, or a new mansion at the Hamptons. Sure, they know the house will drop in value by half, but who cares?  Those who loaded up on the Aussie made 11%, and 55% in a month if they used 5:1 leverage that some currency traders favor. The Australian dollar tanked in May because of a global flight from risk and a proposed 40% windfall profits tax on mining companies that triggered the most ferocious negative advertising campaign in TV history. Since then, hedge funds poured into the currency down under, making it one of the world's best performing assets this month. They have been drawn by widening interest rate differential between the Ausie and the buck, the Euro, and the yen, as well as fabulous long term fundamentals. Then the stunning news emerged yesterday, that the man who proposed mining tax, Chinese speaking prime minister Kevin Rudd, was tossed out on his ear by his own left-of-center Labour Party, to be replaced by Julia Gillard, a Welsh borne former trial lawyer. I'll date myself hear, but when I first lived in Sydney 40 years ago, women were not allowed to go into pubs. They were restricted to the more civilized and vomit free 'lounges.' To see a woman now running the country is irrefutable evidence of how far the country has come. I still love the Lucky Country's currency (FXA) and the stock market (EWA) long term, seeing it eventually reaching parity against the US dollar. But you might want to take the easy money that has been made off the table during otherwise diabolical market conditions.

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