Wednesday, June 11, 2008

Asian central banks intervene to defend currencies

Things seem to get more complicated. In the past, foreign investors will look for signs of inflation pick up in Asian economies to bet on reflation theme but now they are fearful and start to sell emerging currencies. This will make central banks job more complicated because more expensive imports will fan higher inflation . (Click link)

June 10, 2008, 2.33 pm (Singapore time) - Central banks in Thailand, India and South Korea stepped into markets once again on Tuesday to defend their falling currencies from a rallying dollar and foreign capital outflows spurred by worries over inflation.

Two traders in Bangkok said the Bank of Thailand had intervened again to help the baht recover from Monday's 5-month low of 33.41 per dollar. The central bank also sold dollars on Monday.

'Intervention persists,' said a trader in Bangkok. 'I think they want to repel speculators.' The baht rebounded to 32.93 per dollar, up about 0.9 per cent from late Asian trade on Monday. It has fallen more than 3.5 per cent in the past three weeks.

I think Ringgit was not spared also. See chart, 1 USD = 3.27 Ringgit as of 10 June.

This perhaps due to US intentions to artificially boost up their currency which backed by nothing. Geez, how the hell a country that preaches free market decided to go for intervention?(Click link)

By MARTIN CRUTSINGER, AP Economics Writer Mon Jun 9, 6:10 PM ET

WASHINGTON - President Bush's forceful call on Monday for a stronger U.S. dollar in the world economy may be coming a little late for Americans fed up with gas prices topping $4 a gallon and steadily rising costs of other imported goods.

Speculating business is getting more complicated with all kind of variables dancing around. No wonder our good friend W. Buffett bet hedge funds will not beat S & P 500. (Click link)

(Fortune Magazine) -- Will a collection of hedge funds, carefully selected by experts, return more to investors over the next 10 years than the S&P 500?

That question is now the subject of a bet between Warren Buffett, the CEO of Berkshire Hathaway, and Protégé Partners LLC, a New York City money management firm that runs funds of hedge funds - in other words, a firm whose existence rests on its ability to put its clients' money into the best hedge funds and keep it out of the underperformers.

You can guess which party is taking which side.

Protégé has placed its bet on five funds of hedge funds - specifically, the averaged returns that those vehicles deliver net of all fees, costs, and expenses.

On the other side, Buffett, who has long argued that the fees that such "helpers" as hedge funds and funds of funds command are onerous and to be avoided has bet that the returns from a low-cost S&P 500 index fund sold by Vanguard will beat the results delivered by the five funds that Protégé has selected.

We're way past theory here. This bet, being reported for the first time in this article (whose author is both a longtime friend of Buffett's and editor of his chairman's letter in the Berkshire annual report), has been in existence since Jan. 1 of this year.

I like the challenge of playing all kind of variables in speculation game but I don't like to lose money when I get it wrong, so I will not put down real money. I am making no secret to put the third stock in my portfolio which require no stock picking skills at all: FBM30etf.

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