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

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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?

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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