Berney:" carry trade.. "
...like Gersh sez, it goes like dis...
watcha doo is borrow money from the Bank o' Japan, lotsa ways to do this, selling short is one example, the BigDudes sittin' at da banks who do this are just takin' out loans at some ridiculous interest rate like, oh mebbe one and one-half percent APR or somesuch.
then watcha do is wire dem Yen on back to the good ole US of A, and buy good ole US of A's TYX at 6%, like some kinda license to print free money. Lotsa people doin' this, most of the time this "carry trade" be de rigueur for banks, fundz, you-name-it.
well now this works pretty good so long as da Yen behaves and either goes down relative to da good ole USDollar or, stays flat, so's you can pay back yer loan to Tokyo.
when da good ole USDollar tanks, well you suddenly got a yearnin' for Yen, if'n you know what I mean, 'cuz you gotta cover yer arse, but quick!
so... ya dump yer bondz if'n you're a bank or an insurance company or sump'n, or ya dump yer stox, "winners" first usually, if'n you're a fundie, and rush on down to the currency room and start puttin' in STOP LIMIT buy orders to get those Yen back, baby.
That's why da YEN : USD is important, 'specially if'n you're holding bondz, also too if'n you're watchin' growth stox in the S&P index: the ebb and flow of investment liquidity.
Carry Trade. Important to know about. merci, monsieur Gersh (^_^)
-Steve |
