12,000

I have never understood the fixation of some people to champion one side of the market. It's like living life with one eye closed when you have a perfectly good pair.

The long side has been good for the past 8 months or so, but now the short side looks like a good direction to play. Moving WITH the markets is the way to play.

RoughTrader

 

You're the best contrarian indicator I've ever seen. You're BlueStreek's reverse incarnation.

 

may be a joke now but not when the market gaps up 1% and your left with a losing short position and have to ask "Do I cut my losses" cause in the back of your head you know that the markets may make a full recovery and you will be left with a very big loss if you don't act.

 

you still own those 150 shares of google.


IF so sell because GOOG is going to 400.

 

not true, many were short last week when the dow rallied to 12300, I was long some QID at the time, didnt care that I was down because I knew that the markets would be pulling back even more, I said it days ago when the market gapped higher.

Tomorrow is PPI and Friday CPI anything too hot and expect a market sell off as bad as yesterday.

 

nikkei futures are selling off hard right now.

 

Yen is rising, too.

And I don't think it's temporary.

Add that to the pile of shit that will continue to crush the markets.

Bye-bye yen carry trade.

 

The next key support stands at 116.40—61.8% retracement of the 115.14-118.48 move. A breach below 116.30 calls up risk of 116.

 

I do own them. I am down about 9 pps, but no big deal since my average cost is 420's and I know it will rebound.

 

Before examining the latest Japanese MoF and US Treasury intervention tactics, it’s important to understand how the “yen carry” trade works. It’s simple to understand, and it’s not just hedge funds and international bankers who engage in the trade. Many brokerage firms offer margin loans at near 1% in Japanese yen, which are re-invested by their clients to buy stocks around the world.

The “yen carry” trade is primarily a simple game of interest rate arbitrage. Step 1: Borrow yen at 0.5% and convert the yen into $9,000 US dollars. Step 2: With $9,000 from Japan and $1,000 of your own money, invest $10,000 in US Treasury notes at 5.00%. Step 3: Collect $500 in interest from the US Treasury, and pay $45 to the Japanese lender. Step 4: Pocket the $455 difference as a profit, for a rate of return of 45.5% on your original $1,000. Step 5: Sell the US Treasury note, and convert the US dollars back into Japanese yen to pay off your loan.

Step 5 is the tricky part, because if the yen were to suddenly surge by 5% against the US dollar, the principal amount of the yen loan would also climb 5% from $9,000 to $9,450, which would wipe out the $455 profit from the interest rate spread. It would be nice to buy yen futures as a hedge against a climbing currency. The problem is that yen futures trade at a hefty premium to the cash market price.

Locking into a yen futures contract at say a 4.5% premium to the cash price would wipe out the profit from the interest rate differential between the two currencies. So carry traders must take on currency risk to play the game, which can go very wrong, if the yen suddenly shoots higher. And that’s what happened earlier this month, when the Japanese yen suddenly surged by 5% against the Euro and US dollar, until US Treasury chief Paulson huddled with Tokyo financial warlords on March 6th.

On February 10th, G-7 central bankers had warned traders against the practice of borrowing vast amounts in low-yield currencies such as the yen and Swiss franc to reinvest for a profit elsewhere. “We want the markets to be aware of the risks of one-way bets, in particular on the foreign exchange market. One-way bets in the present circumstances would not be appropriate. We want the markets to be aware of the risks they contain,” said European Central Bank chief Jean “Tricky” Trichet.
Japanese Finance Minister Koji Omi was singing from the same song book. “This means that G-7 countries think that markets, particularly foreign exchange markets, should recognize the risk of moving in one direction too heavily. I think we have come to the appropriate conclusion,” he said. And when the chief of the powerful Japanese ministry of finance speaks, currency traders listen but don’t always obey.