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| User Info | So It's Official: IMF / Carry Trades in forum [Ticker] | |||
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Genesis Posts: 71422 Incept: 2007-06-26 
KD^2 
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http://market-ticker.org/archives/1600-S....
---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2009-11-09 08:03:00
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Drumm23 Posts: 878 Incept: 2008-02-14 
Nurburgring
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Carrys seem to become self-reinforcing too, dragging volatility down with them ... until they suddenly implode. They also tend to turn down up, and up down: any news that fundamentally implies continued low US rates will feed the beast and rally (all, equity and commodity) markets - I think that's what we saw on Friday; a terrible jobs number not only weakens the dollar anyway but also drags rate-hike expectations out further, weakening it a bit more but (amdittedly, stupidly) pumping the risk markets higher. This is absolutely mental. ---------- you want inspiration? want to see a true hero? http://www.youtube.com/watch?v=rPLCaAu_H....
2009-11-09 08:12:45
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Genesis Posts: 71422 Incept: 2007-06-26
KD^2
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The problem Drumm is that it does structural and permanent damage to the economy of the host country. Japan got butt****ed by their carry trade and now there are very-well-noted people warning that they're facing a potential literal destruction of their internal funding mechanisms. History has shown that every time a nation allows this to happen capital flees faster than the depreciation profits the traders. EVERY TIME. This is the worst sort of desperation move - unfortunately. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2009-11-09 08:14:41
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Redfigures Posts: 705 Incept: 2008-02-24 
State of Flux Online
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I will not short this ramp! I will not short this ramp! 
2009-11-09 08:16:12
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Moonoverseattle Posts: 2775 Incept: 2008-02-02
MOTEL 6 Online
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You would think that with this kind of carnage the bond market might actually wake up. Bernake has no ability to control rates if the bond market says **** you and so far a giant zip. ---------- A democracy cannot exist as a permanent form of government It can only exist until the voters discover that they can vote themselves largesse from the public treasury.
2009-11-09 08:20:03
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Xanares Posts: 1288 Incept: 2008-11-10
London
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Amazing stupidity. So we buy bad news and sell good pretty much. Reg. Buffett, I've got the feeling he knows about at least two things; the carry unwind / oil and an upcoming subsidice for carbon credit cool mother****ing trains.
2009-11-09 08:20:43
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Uwe Posts: 1029 Incept: 2009-01-03
Philly Burbs
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TheTicker wrote..When the global economy truly recovers When and under what circumstances do you see that happening? -Uwe- ---------- “Political tags - such as royalist, communist, democrat, populist, fascist, liberal, conservative, and so forth - are never basic criteria. The human race divides politically into those who want people to be controlled and those who have no such desire.” - Heinlein
2009-11-09 08:21:28
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Leicestersq Posts: 44 Incept: 2009-10-12 UK
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I am not so sure I agree with all of this ticker. My thinking on the dollar, is that the US is trying to break China's fixed exchange rate with the dollar. This fix gives China a huge competitive advantage with the US, allowing it to export huge amounts of stuff to China. It buys relatively little from the US in return, and has ended up with a huge dollar cash mountain in its central bank as a result of this policy. It cant use this cash for anything, as that would end the dollar peg. This deal is bad for the US, in that it is almost impossible for many manufacturing companies to exist in the US, as they simply cannot compete with China. It is good for the US though, because the US can simply print money, and buy stuff from China, effectively for FREE!! As long as those dollars remain unused in the Chinese central bank, what the US buys from China, is "For Free". - (Quote from Bedtime Stories). Presumably China is willing to do this to enable it to build up its manufacturing industry. But it must now be scared to break the link with the dollar now that it has become an industrial power. Presumably the Chinese fear that if they broke the dollar peg, they would be unable to consume enough of their own production to keep their population off of the streets. The US wont put up trade barriers, after all, those sorts of trade wars dont help anyone. So instead, why not just print dollars and buy the stuff, "For Free"? So that is what they are doing. This will continue until the Chinese see the madness in their policy, which effectively enslaves millions of Chinese to produce things for the US. If the Chinese drop their peg, then the US can amend its print the dollar policy. The dollar will fall against the Renminbi, and it will be difficult for the Chinese to export to the US, except where they have a monopoly. Even then it will become a lot cheaper, relatively, to make things in the US, and so manufacturing will be transferred to the US from China. This should in theory, boost wages in the US. So that oil might be more expensive, but the chances are wages will be higher and make it more affordable than it otherwise would be. Sure, it is going to cost more in real terms, but that is pretty much down to supply and demand in the oil market. In dollar terms, the price of oil has been rising pretty rapidly as of late. The suburban model of life, may come under some stress, but it might not collapse. Things though, could get very interesting, as and when the Chinese dollar peg gets dropped. What will they do with all of that money?
2009-11-09 08:23:47
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Genesis Posts: 71422 Incept: 2007-06-26
KD^2
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I don't Uwe. But it doesn't matter really. The problem with the destruction that carry trades cause is that it is structural - and permanent. That this is being allowed to happen here after watching what it did to Japan is absolutely criminal. Our government and private funding system will not survive it. Theirs is unlikely to as well, and we don't have the buffers they did when they started the program. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2009-11-09 08:24:36
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Genesis Posts: 71422 Incept: 2007-06-26
KD^2
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Quote:My thinking on the dollar, is that the US is trying to break China's fixed exchange rate with the dollar. No they're not. The US could break that peg tomorrow if it wanted to. Label China a currency manipulator and under that pretext nail 'em with 50% tariffs on EVERYTHING. Bang - they'll drop it like a hot potato. This has nothing to do with that at all. It is all about creating the conditions for arbitrage that the "big banks" are using to run the markets and "profit." However, this is like eating your mating-age females of a species - as you eat them it doesn't look all that bad at the time, but there is a point beyond which genetic diversity is lost and you're absolutely ****ed, even though it doesn't appear so at the time. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2009-11-09 08:27:55
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Ldog Posts: 182 Incept: 2009-06-11
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So basicallly this all about getting GS et al back to all time highs and the rest of us be damned?
2009-11-09 08:31:01
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Leicestersq Posts: 44 Incept: 2009-10-12 UK
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Karl, If you trade with a major economy, and they fix the exchange rate like the Chinese have done, at a level which makes them ultra-competitive, money will flow out of your economy to the other major economy. After a while, that will leave the first economy drained of cash, and no market mechanism to allow a correction via changes in the exchange rate. If enough money flows out of the economy, it will eventually collapse, if nothing else is done. But the counter move is obvious. Just print money. Print it at the rate that the money is leaving the economy. That way you wont get any inflation, given that the actual amount of money in your economy is constant. You also get to buy a lot of production from the other economy, for free. The problem is, what happens when the other country decides to put its dollars back into the market, and drop the peg? You would get a huge amount of inflation in double quick time. The policy reaction to that should be raising interest rates, destroying rather than printing money, and the Government should run a fiscal surplus (unlikely as it may seem). I dont believe in conspiracies in the main, and I believe that China's policy of fixing the exchange rate is just one of those that seems like a good idea to the Chinese. However, the dangers it poses to both the US and China are very real. Dropping that peg is likely to cause major upheavals in both economies, but the longer that it is left as it is, the bigger problems it will cause when it is dropped.
2009-11-09 08:40:34
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Avianphlu Posts: 35 Incept: 2008-12-03 Hudson Valley New York
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looks like pm's are more secure every day
2009-11-09 08:47:17
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Genesis Posts: 71422 Incept: 2007-06-26
KD^2
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The devaluation and damage of such moves is STRUCTURAL. The "obvious" move is the wrong one, because the structural damage is not avoided, it is in fact enhanced.
---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2009-11-09 08:48:01
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Glasshammer Posts: 124 Incept: 2009-09-02
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Good Ticker, I don't know much about carry trades so it took a little extra reading to fully grasp the article. I also had to look into margin calls in order to get the entire picture.
2009-11-09 08:48:23
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Karlmarxghost Posts: 2638 Incept: 2009-01-26
Stealing Your Property Online
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Quote:
The fly in the ointment, China. Either tariff the hell out of them and use that money to put towards the debt or bring all the jobs home and use the tax revenues from those newly created jobs to pay down the debt. We will do neither though, instead we will continue to transfer our wealth to China as they use it to build up their military (especially their navy) Ironically we built up Hitler in the same fashion as we now are China. Quote:
It's quite simple actually Karl. When oil skyrockets the government will blame it on the evil oil companies. It worked last time so why not again? ---------- My views are my view and mine alone. Karl or ticker forum does not endorse or necessarily agree with my views. DO not trade on my views or take them personally.
2009-11-09 08:52:15
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Arrack979 Posts: 1271 Incept: 2008-07-15
Blue State Hell
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Wouldn't this situation make Nat Gas almost a no brainer right now? AS far as an investment (UNG)
---------- Cash IS a position, just like fetal and reverse cowgirl Last modified:
2009-11-09 08:55:52 by arrack979
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Genesis Posts: 71422 Incept: 2007-06-26
KD^2
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Arrack, not necessarily - we have lots of natural gas on our own soil and as such it won't respond much if at all to the dollar move.
---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2009-11-09 08:56:41
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Hehateme Posts: 12 Incept: 2009-09-09
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Great Ticker Karl But do you really think Sneaker Palosi and the Obamessiah get this ****? Some days, they just seem like a couple of kids playing with matches in a fireworks factory... ---------- "Never attribute to malice, that which can be adequately explained by stupidity." - Hanlon's Razor
2009-11-09 09:00:53
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Emdeplam Posts: 1418 Incept: 2008-01-10
USA/Germany
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"However, this is like eating your mating-age females of a species - as you eat them it doesn't look all that bad at the time" I hope for the sake of the eligible women of Florida that you are referring to the spread their legs and go down kind of eating... ---------- http://www.alizee-forum.com/gallery/ Last modified:
2009-11-09 09:03:49 by emdeplam
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Laura Posts: 3153 Incept: 2008-05-05
Florida Space Coast
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Pelosi and Obama fail to understand human nature. True ideology without application of common sense or logic with respect to how humans respond in a market environment.
---------- Karl's just a shill for Big Math. 1LumpSum Honey, where's the AK ? Tyler Durden My Ford focus can get me from point A to point B just as good Tigger's Cadillac. And my back door window is not broken. Mliu
2009-11-09 09:03:28
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Drumm23 Posts: 878 Incept: 2008-02-14
Nurburgring
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One quick question re the rails, why will they outperform the trucks in a high fuel-cost world?
---------- you want inspiration? want to see a true hero? http://www.youtube.com/watch?v=rPLCaAu_H....
2009-11-09 09:03:43
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T2 Posts: 364 Incept: 2008-11-17
Los Angeles
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Because it costs practically nothing to ship by rail comparatively speaking.
---------- ------------------------------------------ In California, no one can hear you scream.
2009-11-09 09:08:25
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Knobcreek Posts: 940 Incept: 2009-02-06
Near TN & VA, but not SC
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Yeah, I recall reading (looking for it) that disel locomotives use 1 gallon of fuel for every 400miles traveled. Essentially, they use the diesel fuel to drive the electrical motors.
2009-11-09 09:12:09
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Maxi Posts: 83 Incept: 2009-10-13 Lander, WY
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Freight Trains: A good rule of thumb when determining the fuel efficiency of the newer diesel locomotives is approximately 450 miles per ton per gallon of fuel. No commercial long-haul truck can even come close, considering all the additional overhead.
2009-11-09 09:13:59
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