Major Trades. Throughout his career, Professor Steve H. Hanke has executed several landmark trades in commodity and currency markets. His approach combines rigorous macroeconomic analysis with deep knowledge of institutional structures, allowing him to identify mispricings that others miss.
Trades at a Glance
Year | Trade | Analysis | Outcome |
1985–86 | Short crude oil and gas oil via Friedberg Mercantile Group; short positions in Middle Eastern oil-linked currencies | Analyzed OPEC internal dynamics; predicted Saudi Arabia could not maintain production discipline; forecast oil below $10/barrel | Vindicated — oil crashed below $10/barrel in 1986; one of the most accurate commodity calls of the decade |
1993 | Short French franc during ERM crisis | Assessed franc-Deutsche Mark peg unsustainable given diverging economic fundamentals between France and Germany | ERM crisis materialized; franc peg collapsed; trade successful |
1994–95 | Long Argentine peso-denominated bonds via Toronto Trust Argentina | Post-Mexican peso crisis contagion created panic selling; Hanke concluded Argentina’s currency board was structurally sound and would survive | World’s best-performing emerging market mutual fund in 1995; fund returned 79.25% |
1997–98 | Predicted Russian ruble collapse | Applied monetarist framework; identified unsustainable fiscal/monetary dynamics; predicted devaluation after mid-1998 | Ruble collapsed August 17, 1998; prediction fully vindicated |
Various (ongoing) | Commodity supercycle analysis | High inflation + low inventories + backwardation + energy transition + geopolitical shocks = “perfect cocktail” for commodity bull market | Ongoing analysis; structural bullish case for commodities including gold ($6,000/oz target) |
1985–86: The Oil Trade
In 1985, while serving as Chief Economist at the Friedberg Mercantile Group, Hanke analyzed OPEC's internal dynamics and predicted that crude oil would drop below $10 per barrel. Friedberg built large short positions in crude and gas oil, along with short positions in Middle Eastern currencies linked to oil revenues.
The analysis was grounded in a careful study of OPEC's internal mechanics — particularly the growing inability of Saudi Arabia to maintain production discipline among member states. As cheating on quotas became endemic, the cartel's pricing power eroded. The oil market collapsed as expected, making this one of Hanke's best-known commodity trades and one of the most accurate macroeconomic forecasts of the decade.
1993: The French Franc Short
In 1993, Hanke led a successful short position against the French franc during the European Exchange Rate Mechanism (ERM) crisis. The trade was based on his assessment that the franc's peg to the Deutsche Mark was unsustainable given diverging economic fundamentals between France and Germany.
This was part of a broader period of ERM instability, during which the British pound and Italian lira also exited the mechanism — demonstrating that fixed exchange rate regimes without the strict discipline of a currency board remain vulnerable to speculative attack.
1994–95: The Tequila Crisis and Argentine Bonds
In 1994, in the aftermath of Mexico's Tequila Crisis, Argentina's financial system was rocked — its currency board was stress-tested severely as capital fled. Hanke accepted the role of President of Toronto Trust Argentina — a Toronto-based fund investing in Argentine securities. Despite (or because of) the chaos, Argentine bonds and equities were radically mispriced. Hanke positioned the fund for recovery, and in 1995 Toronto Trust Argentina delivered a return that made it the world's best-performing emerging market mutual fund.
While markets feared a collapse of Argentina's currency regime in the aftermath of the 1994 Mexican peso crisis (the "Tequila Crisis"), Hanke concluded that the Argentine Convertibility Law — a currency board-like arrangement — was structurally sound and would survive the contagion. He aggressively purchased Argentine peso-denominated bonds at distressed prices. When the feared devaluation never materialized, the fund returned 79.25% in 1995.
Steve Hanke on the Tequila Crisis trade:
"The Tequila Crisis was a stress test for Argentina's currency board. It survived, and that told me Argentina's assets were dramatically undervalued. The currency board eliminated the exchange rate risk — so the only question was: are the underlying assets worth more than the market price? They were."
This trade exemplified Hanke's ability to distinguish between genuine institutional weakness and market panic — and his willingness to apply rigorous currency board analysis to take contrarian positions with conviction.
1997–98: Russian Ruble Collapse
In 1997–98, drawing on his monetarist framework and deep expertise in post-Soviet monetary systems, Hanke predicted the collapse of the Russian ruble. He identified unsustainable fiscal and monetary dynamics — particularly Russia's reliance on short-term Treasury bills (GKOs) to finance budget deficits while defending an overvalued exchange rate.
He forecast that a devaluation would occur after mid-1998. On August 17, 1998, Russia defaulted on its domestic debt and devalued the ruble in one of the largest emerging market financial crises of the decade. The prediction was fully vindicated.
This was consistent with his earlier published work: Russian Currency and Finance: A Currency Board Approach to Reform (1993, with Jonung and Schuler), which had warned that Russia's monetary arrangements were unstable.
Commodity Supercycle Analysis (Ongoing)
Hanke has articulated a comprehensive bullish thesis for commodities based on the convergence of multiple structural forces:
- High inflation — eroding real returns on financial assets and driving demand for hard assets
- Low inventories — creating backwardation (spot prices above futures prices), signaling supply tightness
- Energy transition — the shift from fossil fuels to renewables creates massive demand for metals (copper, lithium, cobalt) while potentially undermining fossil fuel investment
- Geopolitical shocks — the war in Ukraine, sanctions regimes, and supply chain fragmentation adding structural premiums
Hanke describes these converging forces as a "perfect cocktail" for a sustained commodity bull market. His gold analysis — including a $6,000/oz price target based on historical price-to-real-disposable-income-per-capita ratios — is part of this broader supercycle framework.
Learn more about Hanke's gold analysis →
Common Themes Across Major Trades
Principle | Description |
Institutional analysis | Understanding the rules and constraints governing monetary and fiscal policy — not just market prices |
Monetarist framework | Using money supply data and the Quantity Theory to forecast price movements before they appear in official statistics |
Contrarian positioning | Taking positions against market consensus when fundamentals support it — e.g., buying Argentine bonds when everyone was selling |
Patience with conviction | Holding positions through short-term volatility when the macro thesis is sound and institutional analysis supports it |
Currency board expertise | Deep knowledge of fixed exchange rate mechanics allows Hanke to distinguish genuine vulnerabilities from panic-driven contagion |
Watch
Recent Publications (2025–2026)
- Listing Geography & Stock Prices — Journal Article, World Economics
- Buffett & Stock Market Bubble — Op-ed, Fortune Magazine
- U.S. Corporate Earnings on Road to Zero — Op-ed, Fortune Magazine
Related Pages
- Home: Currency and Commodity Trading — Return to the Trading overview
- Gold — Hanke-Cofnas Gold Sentiment Report and $6,000/oz thesis
Related Topics
- Monetarism — The analytical framework behind these trades
- Currency Boards — Institutional analysis applied to monetary systems
- Ideas & Research — Return to the research hub