The final Irrational of 2018 will be revealed on Monday when the Person of the Year is unveiled, but the penultimate award is always a favourite – mainly because it offers an opportunity to poke (well meaning) fun at people who just didn’t quite get the markets right this year, as well as highlight those calls that did go well.
A late entry for this award was the Bitcoin enthusiast Thomas Lee who is both long the cryptocurrency and proud of it. He wrote for Bloomberg News that the fair value for Bitcoin was around $14,000 (he also cited a Visa comparison that would have fair value at $150,000 so he’s either away with the fairies or desperate). Now had Mr Lee written this in January of course he would have been a small bear probably, for there were countless predictions that the cryptocurrency was heading back to the heights and beyond, but no, he wrote this last week when Bitcoin was trading around $3,800. As wishful thinkers go, Thomas Lee is right up there and one is moved to cite the well-worn saw that markets can stay irrational for longer than you can stay solvent.
Of course, Lee may still be wearing Bitcoin he bought early last year when it was trading around the…$3,500 mark – what is the carry cost for Bitcoin?
In FX terms the majority consensus at the start of the year was that the dollar would not have as bad a year as 2017, when it dropped more than 10% (the majority that view at the start of that year was that the dollar would rise substantially). Not the hardest call in the world, obviously, but interestingly most analysts thought, according to the various polls, that the dollar would end the year lower. Obviously it hasn’t, the Dollar Index is up almost 6% or five points from January 3.
I will be spending a little more time in the next issue of Profit & Loss on my colleague Galen Stops’ prediction of the euro to spring a surprise in 2018, however suffice to say that not only did he hide behind someone else’s prediction in our 2018 Crystal Ball, but he also managed to roll out two predictions for EUR/USD, one that it would end higher at 1.30, the other that it would end lower, at 1.14. At the time of making the prediction EUR/USD was trading at 1.21 – in other words, it was going to move, but we’re not sure in which direction (and if this does not signal every prediction I make next month going horribly wrong, I don’t know what does!)
Ultimately, however, there is only one winner of this award – and that’s me. Yes readers, you did read that right, my hubris extends to giving myself one of my own made up awards! Let’s face it, I don’t get too many right, so when I do I am going to drill it home!
With a pause while the builders widen the doorway of the office here to enable me to extract my rather enlarged head I need to stress that it is not for my Bitcoin prediction in the aforementioned Crystal Ball – even I have to accept (grudgingly) that calling Bitcoin to end the year in the “single digit thousands” left me quite a bit of room!
No, dear readers, the winning call was one borne – as all the best ones are – out of sarcasm – others grind through reams of data and public statement to build their view, I look for something that will raise a giggle.
In this column on April 23 I repeated something I had put on Twitter the previous day, suggesting that EUR/CHF, which was approaching the now-notorious 1.2000 level, “may have an issue working through an offer at 1.20005 for 20 yards” and as such it was a raging “sell”.
Obviously it was a suggestion more about taking the opportunity, which should never been turned down, to make an easy joke at the Swiss National Bank’s expense.
EUR/CHF at the time of writing is trading at 1.1324. The high of the year? 1.2005 in late April. Some things you just cannot make up, and so, with that cheeky 10.3% return I give you a truly irrational Irrational winner – me!