INTEREST RATES, RECESSION OR DEPRESSION?

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hjm

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Registered: 06-2006

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Tuesday, April 10, 2007 - 07:32 pm:

I was very interested to read the article by Aubie Baltin in todays update.
I have also read a book The Next Great Bubble Boom by HS Dent that adds weight to the discussion using demographic economics.
Thought of gold at $2000 or $5000 seems very hard to comprehend but crazy things can happen - Where did the price of Nickle go in the 70's. What about daffodils a long time ago.
Would some one like to point me in the best direction for further research on this. Colin, or anyone else, are you interested in commenting on the article. Thanks

colin_twiggs

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Registered: 09-2002

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Wednesday, April 11, 2007 - 10:08 am:

It appears that the Yen/USD carry trade is causing the Fed a headache. They raise short-term rates but the carry trade continues to suppress long-term rates -- until the BOJ raises rates to the level that the carry trade is no longer profitable. At which point the unwinding of positions may have a tsunami-like effect on the market: the dollar-yen exchange rate; long-term treasury yields; and a knock-on effect on equities.

Does anyone have information as to the magnitude of these trades?

Carry trades are very popular with hedge funds. They borrow at low rates in yen and invest in USD/AUD treasuries,
pocketing the yield spread. Four per cent may not sound like much, but positions may run into billions of dollars.

Regards,
Colin

(Message edited by colin_twiggs on April 11, 2007)

fibonacci

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Post Number: 188
Registered: 10-2003

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Wednesday, April 11, 2007 - 10:54 am:

Good morning hjm,

Re:GOLD PRICE PROJECTIONS

Perhaps the Aden sisters are finally going to be proven right, because it's different this time.

John

You've got to
know when to hold 'em
know when to fold 'em.

colin_twiggs

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Wednesday, April 11, 2007 - 11:38 am:

Nicholas Vardy estimates that as much as US$1 trillion may be staked on the yen carry trade: the net "short" position in yen futures on the Chicago Mercantile Exchange.

Regards,
Colin

maxboost

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Registered: 12-2005

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Wednesday, April 11, 2007 - 01:20 pm:

Hi Colin,
The futures broker I use has also suggested that there is up to $1 trillion in this trade. Mostly yen/aud, yen/nzd and yen/usd with profits going into US equities. During the most recent equities pull back, most of the time the yen broke a little the cash S&P would put on a little rally. If the yen gets up and rolling I think equities could get pummeled for a while at least.
Regards