Tuesday, Jun 26, 2007
What have we been telling them
FT.com: Market Insight: Carry trade threatens a deflationary global collapse
Concerns that the credit cycle may be turning down are growing. But so far, the impact on stock markets has been fairly limited. Investors take comfort in three misguided beliefs. They believe that equities are not expensive and that there is no sign of any diminution in the flood of global ‘liquidity’. Furthermore, they believe that if the worst happens, the US Federal Reserve will come to the rescue.
Posted by chris @ 09:24 AM (150 views) Add Comment
9 Comments
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1. sold 2 rent 1 said...
Shame I am not an FT subscriber but I can guess the content.
deflationary global collapse = k-winter
Equities are in a secular bear with a decade or so to run.
The fed will fight inflation until we have a deflationary depression.
When a global liquidity crisis strikes - gold is the best asset to own
2. royston said...
Somebody please paste the article here. I am not a subscriber either and can't see it. .....Sounds like a good one though.
3. royston said...
Yen is dropping now - it's already below $123.
4. Mike said...
cant read it, now cant afford to subscribe, need to keep my little bit of money i have together with the ak47 in case of global meltdown
5. Stillthinking said...
Surely the yen would rise if the carry trade was abandoned. After all, yen is borrowed and converted to say NZ dollars, which are then invested for a high return. To unravel would need said NZ dollars to be changed back to yen. Sudden demand for yen.
6. royston said...
Stillthinking,
The Yen quote is inverted, i.e. number of yen(JPY) per 1 dollar(USD). USDJPY = 125 means the dollar is expensive (you have to pay a lot of yen to get one) and the yen is cheap. USDJPY = 105 means the dollar is cheap (doesn't cost a lot of yen) and the yen is expensive. If the carry trade unravels, then a lot of foreign money needs to be converted into yen fast in order to pay back loans to Japanese banks. This would increase the demand for yen, driving the value of the yen up, but the USDJPY (the most watched yen exchange rate) down - possibly even lower than USDJPY = 105.
7. talking rot said...
Oh Mike! AK47's are sooo old hat. The AKM is better constructed and uses the 5.45mm round which flies faster, thus transferring more energy to the target, and is lighter so you can carry more of them. Tracers rounds light up a pretty green colour instead of the NATO standard red. Same price as AK47 because most street-hoods are after H&Ks or Sigs.
8. george monsoon said...
Fantastic
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9. harold said...
george, excellent.