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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (7775)	6/10/2004 11:07:53 AM
From: Chispas	Read Replies (3) \| Respond to of 116555

George Ure : "Fed in a Box", 06-10-04 I've started to do the research for this weekend's Inside Report - tentatively titled a Midsummer's Nightmare. It's a pretty awful stew of a presidential indictment by a grand jury, a Fed that can't raise rates because it will collapse the Freddie Mac and Fannie Mae housing portfolios - and of course the interruption in oil supplies lingering as a possible terrorist threat. To a degree, such works are a matter of intelligent speculation. Except for the fact that globally, interest rates are rising with the latest case being the Bank of England which just hit 4.5% this morning: ap.tbo.com This puts more pressure on the U.S. Fed, but it also creates a wonderful opportunity for traders. Consider this Ponzi-like scheme for carry trades: If you have the right connections and are big enough, you can borrow money from the Fed for about 1% and then go invest in foreign denominated instruments paying, in the case of England, 4.5%. It's an almost risk-free 3% spread - which means it can be leveraged. If you want to see where the so-called "growth" in the economy has been, look no further than the financial sector where tens of thousands make their living spotting inconsistencies like this and trying to make money with them. Borrow at the low rate, invest in the high, write some derivatives, and pray to God that the U.S. dollar strengthens, not weakens, so you'll have some real return at the end of the trade. Ah, such is the high roller's life. --------------------------------------------------------------------------------- Complete morning report -- urbansurvival.com