Posts Tagged ‘dollar carry trade’

Steve Meyers: Global Debt Crisis, Dollar Carry Trade, and 2010 Forecast Update

Steve Meyers: Global Debt Crisis, Dollar Carry Trade, and 2010 Forecast Update

Courtesy of Jesse’s Café Américain

"This is just a dress rehearsal for what’s in store for us."

 


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IMF: Rising Asset Correlations Prove Roubini’s Dollar Carry Trade Warning

IMF: Rising Asset Correlations Prove Roubini’s Dollar Carry Trade Warning

Courtesy of Joe Weisenthal at Clusterstock

It’s hard to think of a more controversial — and crucial — subject right now than the dollar carry trade. If indeed, Ben Bernanke’s cheap money is becoming the world’s lead funding currency for all manner of risky bets, then we may be in the greatest bubble the world has ever seen.

If cheap money is only a modest force in the rise of global asset values, and if much of the rise is due to improved fundamentals (which is indisputable, when compared to March), then the recovery may be sustainable.

The connection between Fed liquidity and rising markets has been discussed for awhile, but Nouriel Roubini has been the flag bearer for this idea, ever since he wrote an FT piece on the subject last month.

Over at Roubini.com (formerly RGE Monitor; it’s been rebranded) Heiko Hesse sites IMF research showing that rising correlations between various assets and the dollar are what tell the whole story.

carry trade

The results indicate that an index for the U.S. dollar has seen an increased negative co-movement with major asset price classes in recent months (here the MSCI Emerging Market index, the EMBI+ bond spread, S&P 500 as well as oil prices). For example, the negative co-movement between the U.S. dollar and oil prices is almost at its highest since the beginning of 2006 with -0.5. Jen (2009) recently provided a number of reasons why the correlation between the dollar and crude oil prices has been so negative.[3]

While the increased co-movement of the U.S. dollar with a range of risky assets does not provide any evidence for the dollar carry trade per se, the fact that the correlations have almost reached the highest magnitude since the beginning of the sample period in 2006 for all the asset classes in figure 2 does suggest that a dollar depreciation has gone hand in hand with a sharp appreciation of higher-yielding emerging market asset classes. This is consistent with a story whereby the unwinding of safe-haven flows has significantly led to the rebound of risky asset classes, and the U.S. dollar, bolstered by U.S. quantitative easing and low interest rates, could have increasingly served as a funding currency. In practice,


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Where the Wild Things Are

This week, John Mauldin discusses our trash currency and the dollar carry trade. Could the dollar go bump in the night and jump up and bite you…? – Ilene

Where the Wild Things Are

where the wild things are Courtesy of John Mauldin, Thoughts from the Frontline

Where the Wild Things Are
It Is Not Just Japan
The Euro-Yen Cross and the Dollar Carry Trade
New York, London, and Switzerland

From ghoulies and ghosties
And long-leggedy beasties
And things that go bump in the night,
Good Lord, deliver us!

--Old Scottish Prayer

Where the Wild Things Are is a beloved children’s book and now a beautiful movie. But in the investment world there are really scary wild things lurking about in the hidden recesses of the economic landscape. Today we look at one of the unintended consequences of the Federal Reserve’s low interest rate policy.

For quite some time, I have been arguing that we are faced with no good choices, not just in the US but in the entire "developed" world. I see a low-growth, Muddle Through world over the next years (with a double-dip recession just to liven things up). However, that does not mean that we will lack for volatility. Things could get volatile rather quickly. Let’s quickly set the background.

It Is Not Just Japan

Let’s look at today’s interest rate picture. Yesterday, we had the bizarre occurrence of banks actually paying the government to hold their cash. Three-month treasuries yield a miniscule 0.01% in interest. If you opt to buy a one-year bill you get all of 0.26%. You can see the entire spectrum below.

jm112009image001

Look at the graph of the yield curve below. It is as steep as we have seen it in a long time. But that is almost the point. Banks are essentially getting free money. If you are a banker and can’t make money in this environment, you need to quit and find meaningful employment.

jm112009image002 

And that is part of the rationale that the Fed espouses with its low interest rate regime. Not only does it allow banks to repair their balance sheets, it also encourages investors to put money into riskier assets in order to get some return on their investments. Over $260 billion has gone into bond funds this year, and just $2.6 billion into…
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YOU SHOULD BE VERY CONCERNED ABOUT THE PARALLELS WITH JAPAN

YOU SHOULD BE VERY CONCERNED ABOUT THE PARALLELS WITH JAPAN

Courtesy of The Pragmatic Capitalist

Busy City Street, Japan

We here at TPC aren’t the only ones concerned about the parallels with Japan.  There appears to be an increasingly loud drumbeat over the shocking similarities between Japan in the 90’s and the U.S.   This morning, Hong Kong’s leader Donald Tsang had some rather alarming comments:

I’m scared and leaders should look out.  America is doing exactly what Japan did last time.”

As opposed to dealing with our issues here at home, Tsang believes the Fed has created a dollar carry trade that is simply reflating bubbles all over the world:

“We have a U.S. dollar carry trade at the moment.  Where is the money going — it’s where the problem’s going to be: Asia.  You can see asset prices going up, not only in Korea, in Taiwan, in Singapore and in Hong Kong, going up to levels that are incompatible or inconsistent with the economic fundamentals.”

As we’ve previously mentioned, the parallels between the current deleveraging cycle here in the U.S. and Japan’s deleveraging cycle of the 90’s, are numerous. Credit Writedowns recently posted this excellent video from Fox Business which succinctly touches on many of these similarities.   I highly recommend readers take a look (attached below).

Wild grasses and Mount Fuji, Fuji-Hakone-Izu National Park, Honshu, Japan

One of the most interesting takeaways from the video is the current tax situation in the U.S. In Japan, the credit crisis was prolonged mainly because Japan attempted to bail their way out of their sinking ship.  Rather than deal with the problems directly (IT’S THE DEBT STUPID!) they attempted to circumvent the problem by creating an environment where the government spent hordes of money to prop up failing institutions.  Here in the U.S., we have not only bailed out failing institutions to the tune of several trillion dollars, but we have also continued to promote fiscal irresponsibility via government programs such as cash for clunkers and the first time homebuyers tax credit. Making matters worse, we have a Federal Reserve and Treasury which have agreed to double team the ailing dollar as they print money to no end and effectively punish the prudent while rewarding the speculators (the same bastards that helped create this mess to begin with).  Our tax issues have…
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The Dollar Carry Trade

The Dollar Carry Trade

Courtesy of Jesse’s Café Américain

A video from Warren Pollock regarding carry trades

 


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Zero Hedge

Has E.T. Gone Home?

Courtesy of ZeroHedge. View original post here.

UFO sightings have been making headlines again lately, notably with The New York Times running an interesting article about several U.S. Navy fighter pilots encountering mysterious objects near the southeastern coast of the United States.

That high-profile story remains unexplained and so do plenty of other UFO sightings reported by members of the public every year like strange lights crossing the night sky or orange disks hovering in the distance.

However, as Sta...



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Phil's Favorites

Food waste: using sustainable innovation to cut down what we throw away

 

Food waste: using sustainable innovation to cut down what we throw away

shutterstock.

Courtesy of Mehrnaz Tajmir, University of Bath and Baris Yalabik, University of Bath

Our appetite for food is a serious problem. The huge amount of energy, land and water used to fill our supermarket shelves mean that modern overproduction and excessive consumerism are rapidly depleting resources and damaging the planet.

Yet still, more than one-third of the world’s food...



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Kimble Charting Solutions

Doc Copper Is Pushing Higher Off 18-Year Rising Support, Says Joe Friday

Courtesy of Chris Kimble.

Gold & Silver have been hot of late! Is Doc Copper about to do the same? Possible says Joe Friday.

This chart looks at Copper Futures over the past 27-years. Copper has spent the majority of that time inside of rising channel (1).

The decline over the past year has Doc Copper testing 18-year rising support and lows of the past 8-months at (2).

Joe Friday Just The Facts Ma’am- Copper is attempting to rally off of long-term support at (3). As Copper is testing the bottom of this support channel, smart money hedgers are making a bi...



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Insider Scoop

Benzinga's Top Upgrades, Downgrades For July 19, 2019

Courtesy of Benzinga.

Upgrades
  • For American International Group Inc (NYSE: AIG), William Blair upgraded the previous rating of Market Perform to the current rating Outperform. American International Gr earned $1.58 in the first quarter, compared to $1.04 in the year-ago quarter. American International Gr's market-cap stands at $48,358,299,270. At the moment, the stock has a 52-week-high of $56.49 and a 52-week-low of $36.16. American International Gr c...


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Chart School

RTT Plus Chart Book (Sneak Peak)

Courtesy of Read the Ticker.

The magic of support and resistance channel lines and how they direct price. Here are some chart disclosed to members via the RTT Plus service. All charts are a few weeks old. 


XAU bound by parallel channel lines.


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Newmont Mining support from Gann Angles.



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US Dollar index (DXY) dominate cycle ...

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Digital Currencies

Cryptos Suddenly Panic-Bid, Bitcoin Back Above $10k

Courtesy of ZeroHedge. View original post here.

Following further selling pressure overnight, someone (or more than one) has decided to buy-the-dip in cryptos this morning, sending Bitcoin (and most of the altcoins) soaring...

A sea of green...

Source: Coin360

Bitcoin surged back above $10,000...

Ethereum bounced off suppo...



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Biotech

DNA testing companies offer telomere testing - but what does it tell you about aging and disease risk?

Reminder: We're is available to chat with Members, comments are found below each post.

 

DNA testing companies offer telomere testing – but what does it tell you about aging and disease risk?

A telomere age test kit from Telomere Diagnostics Inc. and saliva. collection kit from 23andMe. Anna Hoychuk/Shutterstock.com

Courtesy of Patricia Opresko, University of Pittsburgh and Elise Fouquerel, ...



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ValueWalk

Professor Shubha Ghosh On The Current State Of Gene Editing

 

Professor Shubha Ghosh On The Current State Of Gene Editing

Courtesy of Jacob Wolinsky, ValueWalk

ValueWalk’s Q&A session with Professor Shubha Ghosh, a professor of law and the director of the Syracuse Intellectual Property Law Institute. In this interview, Professor Ghosh discusses his background, the Human Genome Project, the current state of gene editing, 3D printing for organ operations, and gene editing regulation.

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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