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

To: Hawkmoon who wrote (7995)	6/26/2007 9:24:29 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 33421

There's been a lot of talk about currency carry trades as of late, but not much about equity carry trades. Because isn't a currency carry trade essentially a "short" against a particular currency, with the proceeds reinvested in higher yielding instruments? However, the recent record high short interest indicates that quite a few shorts are betting the market has topped and have likely used the proceeds from those short sales to position themselves to profit from it (ultra bear funds.. etc). Message 23654841 So what happens if the market goes up in a buying panic? All of those carry trades (actual and naked short) will have to be unwound. And if the level of naked shorting is higher than the SEC and NASD are willing to admit, it could cause tremendous turmoil throughout the hedge fund industry. And btw, all of this short interest is ocurring during a period, supposedly, when companies are buying back tremendous quantities of their stock. That suggests that being short during a period when the quantity of stock is being reduced is even more risky. yahoo.reuters.com Hawk