We return

MCFX is back. Back in London and back in business. It's time to start repairing our horrendous balance sheet. And we're starting the recovery by buying GBP. Over the last 24 hours, we've bought a lot of GBP against CHF, JPY, USD and EUR. We actually think that GBP could become a safe-haven currency farther down the line. I know. Bizarre. But GBP is way ahead of the game in taking the pain and definitely in pricing in the pain. It's had an awful smack again this week amidst the backdrop the details of the Lloyds deal and the distressing terrorist killings in Northern Ireland. The latter has depressed us as we see the situation escalating again as recession dampens the economic incentives for peace.

However, in currency terms, GBP has had a healthy cleanout. It cleaned us out of our last remaining chunky position in GBPCHF - we stopped out of the June IMM date at 1.6480 but have recently bought back at a 1.6050 average and are happy that we'll fill that gap soon enough.

We've also sold EURAUD. The world is too bearish EUR and it's probably set for a very decent rally at some point - sure it's already had one over last few days. But that will probably continue. We are part of that bearish EUR brigade but stand aside as positioning dominates. That said, we've dipped our toes into short EURGBP but that's mainly a GBP view. And we've sold EURAUD - this is partly to ensure that we have some short EUR on just in case but also because we believe that the EURUSD bounce will coincide with an equity and risk bounce and so AUD might well outperform. Longer-term we love short EURAUD.

Our mention of equities brings us back to something we mentioned in our last post. We said we think the cult of equities is dead. That may be true. But we went too far - we said we don't believe equities will necessarily be higher in 5 years time in real terms. That was probably a bit crazy. Equities are now looking cheap. We may go a lot lower but over longer-term, there are buying opportunities at these levels.

Something else we mentioned in our last post was an imminent collapse in gold (as prompted by MCFX's brother), which duly happened. It's down a tasty 7% or so since our last post. And may have more to run. But we have not played it due to lack of faith in the timing.

But basically, load up on GBP - we'll probably manage it reasonably actively. As said above, we've bought a lot. 1.3760 (spot) just seemed too tempting a level to buy cable - especially with the expected EURUSD rally. EURGBP we've dipped our toes in a few times over last couple of weeks but most recently around 0.9265 for the June IMM date. GBPJPY after missing buying way lower due to some charting idiocy (was very very very frustrating), we've bought at around 133.50ish levels for the June IMM - that was probably a bit hasty considering how much lower it subsequently went. But we'll hopefully be above 140.00 within a few trading days. And the EURAUD we sold at 1.9920 also for June IMM date. The cable position is the main one we'll be jobbing as we hold that spot.

Good luck!