perhaps but thing is, each individual CB has its own 'credibility' type issues... BoJ will raise, no doubt, and v.probably in July, again for 'credibility' type reasons... now its all a question of, is it going to be 10 or 25bp, and what pace the hikes going fwd?... but in any case the yen carry trade has already started unwinding big time... take a look at yr USDJPY charts for instance, mid dec, mid feb etc... every time fukui has made the right sort of noises basically... re US housing, tanked? is that what you see? to me its just a healthy climbdown from sky-high speculative valuations...
BOJ lending at zero %, it's not like this thing would have a bloodless ending..... I'm really suprised that long paper has held up thru this, not knowing what junk paper is doing or CDO's, hard asset players got shoved over the side........... it's not housing per se but what people have borrowed against it....negative ams....etc...
I'll say it again: Good. Those people who are so stupid as to take on ridiculous mortgages they clearly should not be able to afford in the stupid hopes that money will remain cheap forever deserve as much pity as the ever-increasing army of noob investors who come here and post how they can double their money every two days until they turn $5000 into $5 million. Now back to the topic.
***thread hijack concluded**** gold correction not over until...asia blows out of remaining carry trade longs....or a financial lock up where Bernanke is forced to repeat that the Fed. "will be the lender of last resort"....
I don't understand the carry trade long theory on gold. To me, in Forex, a carry trade is that which you hold to accumulate interest whilst leaving your money in for a period of time. Ie, being long GBP/JPY. How is this done in gold? And I'm not being smarmy, I'm just trying to understand.
carry trade can go for anything where you borrow in say Japan at zero (near zero) and then dump the cash into metals, bonds, CDO's, emerging markets, US, anywhere where you think you can get a positive return (momentum markets) you pocket the performance spread, as long as your borrowing costs and currency risk can be managed.... so you do this on enormous scale based on what risk you can cover........... problem: your lender starts to jack up rates on your borrowed capital...then there is a race for you to unwind your trade...which seems to be what is happening....unfortunately, everyone is racing for the same door........ easy..............
Ah, I understood the process, I just didn't consider that a carry trade since there was no yield being maintained as the investment was being held.
there is another massive trade whereby Japan and China cental banks print their currency by the wagon load and swap it for US dollars to keep their currency weak relative...... then they take the Dollars and purchase titanic amounts of US treasuries to pocket the yield....thereby pushing Treasury prices artificially high (IMHO) and yield low ...keeping the US consumer on the debt wagon to finance all the plastic crap purchased in China and sold in wal*mart... not sure when that trade will be undone and not sure what would trigger it, but it will be a horror movie ....
then debt for Dollar swap by FCBs postpones the day of reckoning which is sure to come....... it will be a spectacle for all of history since the imbalances are enormous...but the cracks in the system are forming.....