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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: mishedlo who wrote (3240)12/11/2003 8:05:44 PM
From: russwinter  Read Replies (2) of 110194
 
You and everybody else interested in my currency defense linkage issue should read and think long and hard about what this latest Bill Gross article implies.
Message 19583818

For those that don't know who Gross is, and if I'm correct, he is the largest fixed income manager in the US, or one of the largest. Certainly he is a keen observer of the rate market. In this article he subtlely recommends a carry trade: the borrowing of US dollars at short term rates, and buying commodities (including precious metals), foreign equity and debt issues, etc (see the list). In a nutshell he says borrow all you can in USD, and buy everything you can overseas. It's the Great Short or Anti-USD trade. I have no doubt this trade is now strongly in force on a raft of foreign assets and commodities, and it will grow as long as speculators carry borrow cheap in the short term. I wonder if this might explain some of the money supply drops? In fact it's getting to be a free for all, and it will continue to put immense pressure on the dollar and create inflationary spikes in input items. And I don't think Japanese currency intervention is the cure for it. In fact, it's one of the causes of this affliction (by providing mispriced capital). And that's just one more reason why 1-2% fed funds rates can't stick for 2004, far too USD destabilizing just because of this trade alone, let alone the separate issue of being behind the curve on inflation.
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