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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (7646)	3/9/2007 1:06:32 AM
From: Hawkmoon	Respond to of 33421

John, Hawk I am going to try to post some thoughts on the carry trade!!!! Look forward to your comments. And don't get me wrong. I'm not an advocate of such a carry trade, but just commenting on the realities that exist and why it serves the interest of both the borrower and the Japanese lenders. They just have far too much depositor money and they have to lend it to someone. If not lent for internal consumption/investment, then it's lent to foreigners who reinvest it in higher return instruments. Japanese banks just have no choice but to be involved in that carry trade until internal demand for credit catches up with the money they have available from depositors. Again, this is something the Japanese people seem perfectly willing to support by not seeking higher returns. And I think the Japanese financial "wizards" have some of the best "plunge protection" teams out there, all focused on making sure that Japan's monetary base is not permitted to contract. But we all know that the carry trade has to eventually "turn", as Greenspan states. It's just making the Japanese government do what is necessary to make that happen, if it has that ability. Demographics are certainly not in the favor of the Japanese bankers. The aging population in Japan is extremely conservative and will be hesitant to remove their money from low interest rate bearing accounts. For them, their savings accounts in Japanese banks are their "mattresses" and they'll only pull out what they need to survive retirement. Hawk