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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: John McCarthy who wrote (104463)11/17/2009 6:17:21 PM
From: Skeeter Bug1 Recommendation  Read Replies (2) of 116555
 
John, no worries. the carry trade is the engine that is driving the bubble. the big banks borrow for nothing and buy assets. wash, rinse repeat. they all know the game, so they short the dollar to goose their return. this drives down the dollar on a relative basis.

for example, a bank that borrowed $100 million and stuck it a brazil bond denominated in brazil currency and made whatever the bond paid probably 3% or so and then made 30% on the relative devaluation of the dollar compared to the brazilian currency.

the beauty for the big bankster is they keep the money when this works out and will offload the losses on the tax payer if they lose - so they will play this game for a few minutes *after* the music stops. they know they can leave the room and the tax payer has to find the seat.

it will blow up. they always do. ask japan about their yen carry trade.

i think the market goes up for the rest of this year - or at least up and down within its current range. this is a high risk proposition, though. if i'm wrong, i could lose big. i think i will buy gold and silver bullion and hedge it with an IYR or similar short position. i fully expect a large sell off, possibly even credit crisis collapse part II, in Q1, 2010 and gold could easily drop 10-40% if i'm right. that's where the IYR hedge comes in. i think IYR would drop between 20% and 80% in the same time frame. that means i make more money in a falling market and i can then go long gold and silver (at cheaper prices) for the longer term.

that's the plan, anyway.

ps - i'm also buying some bags of old US silver coins as i might need them to buy groceries at some point. a 1 oz gold bar wouldn't work to well to buy weekly groceries - at least not for the typical person.

in argentina, some would only pay 14k gold prices for pure gold - depending on how hungry you were.
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