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Thanks for the additional insight.
I am still learning and developing and my style seems to be
chrystalising around chart watching, rather than market watching but
I find that knowing the broad strokes of the story behind the charts
helps to estimate the potential and probability of what I am looking
at.
In the past I haven't taken an interest in the economics behind
market events but this time it is such a fascinating story and the
opportunity of my trading lifetime to learn things that you don't
find in the books.
> The continued unwnding of the carry trade which is currently at
>least
> partially responsible for USD strength, is likely to continue with
> 25-30% of global hedge funds predicted to close in the coming
>months.
Unwinding of leveraging is where my investigations ended up.
I also came to the conclusion that there is no single factor at play
here ... it is a domino effect.
Yes, I noticed that US Treasuries went into negative returns so that
is a real barometer of fear.... I am not sure if they are still there.
On the other hand I thought the US market showed some real guts on
Friday, to hold the line when we were looking over the edge of
another cliff..... Nikkei down 10, Europe down 6 on the US open,
trading in the indices futures holted premarket ...CNN announcing
anticipated market halts, prior to market opening, just in case ...
and it didn't happen .... a steady reaction to a string of bad news
like that is usually a good sign.
Considering Dunkirk etc I expected more from the Brits, but they
capitulated without a fight.
As you say, unwinding carries is only partially responsible ...one
wonders what else, is pushing the dollar.... if we know the causes we
will know what to expect when the causes are no longer in place and
possibly anticipate when that might be ... sooner or later?
Someone out there must have access to the data that shows where US
currency exchanges are coming from and going to so it isn't entirely
unknown.
The other point of interest to me is that I doubt very much that
anyone can get a hold on the amount of leveraging that was/is in
place.
I don't think all CreditDefaultSwaps were/are registered ... I expect
a lot of it is done off market because it would be to the advantage
of some to do it there ... as well as that AFAIK Hedge Funds are
obliged to report etc.
Even if reporting rules were in place I still doubt any govt has the
resources to record/classify/monitor/regulate all leveraged investing.
So IMO leveraging is the key to the puzzle and we don't know and
can't know how much is out there, how much has been mopped up
already, how much has been swept under the carpet and how much is
still to hit the fan.
Thanks for helping me out with my enquiries.
I am attracted to anomalies.
brian_z
--- In amibroker@xxxxxxxxxxxxxxx, "sidhartha70" <sidhartha70@xxx>
wrote:
>
> The continued unwnding of the carry trade which is currently at
least
> partially responsible for USD strength, is likely to continue with
> 25-30% of global hedge funds predicted to close in the coming
months.
> We are looking at a wall of redemptions.
> Of course, where there is fear, they is a flight to USSD tresuries
> too, so that's another factor.
>
> But Brian I agree... you are not the first market watcher I have
> spoken to who is somewhat perplexed about the dollars strength given
> the likely damage that will done to the US balance sheet as a result
> of this crisis.
>
> Once the fear factor abates, I can see a lot of further weakness in
> the USD.
>
> --- In amibroker@xxxxxxxxxxxxxxx, "Tomasz Janeczko" <groups@> wrote:
> >
> > Brian,
> >
> > Actually it is known phenomenon that USD is getting strength
> > when economy collapses.
> > See "dollar is smiling in a recession"
> >
> http://www.morganstanley.com/views/gef/archive/2007/20071210-
Mon.html
> (Dec 2007)
> > and
> >
> http://www.morganstanley.com/views/gef/archive/2008/20080407-
Mon.html
> (Apr, 2008)
> >
> > Best regards,
> > Tomasz Janeczko
> > amibroker.com
> > ----- Original Message -----
> > From: "brian_z111" <brian_z111@>
> > To: <amibroker@xxxxxxxxxxxxxxx>
> > Sent: Sunday, October 26, 2008 4:17 AM
> > Subject: [amibroker] Re: OT: Fed to cut rates below 1% soon ?
> >
> >
> >
> > Does anyone have any idea why the USD is so strong at the moment.
> >
> > I am puzzled by this as I can't see any basis for it.
> >
> > The only explanation that I can come up with is that there has
been a
> > silent emulation of the Japanese 'carry trade' based on low
interest
> > USD loans (the US has low interest rates, a desire to protect
> > exports, sluggish growth and a sophisticated investment culture in
> > common with Japan).
> >
> > quote from:
> >
> > http://goldnews.bullionvault.com/yen_carry_trade_101620084
> >
> > Japan sits at the epicenter of "bubble-mania" in foreign exchange,
> > because its yield starved domestic investors plowed $6 trillion of
> > their savings into overseas assets.
> >
> > Japanese investors increased their exposure to foreign assets by
¥59
> > trillion ($566 billion) in 2007 alone, setting a record top of
¥610
> > trillion ($5.9 trillion) and making Japan the world's largest
> > creditor nation for the 17th straight year.
> >
> > In addition, global speculators borrowed $1.2 trillion worth of
low-
> > cost Japanese Yen (Tokyo interest rates haven't got above 1.0% per
> > year since the start of this decade), in order to buy higher
yielding
> > currencies, commodities, and stocks held abroad.
> >
> >
> >
> >
> > "History never repeats, I tell myself before I go to sleep at
night"
> > (Split Enz)
> >
> > http://en.wikipedia.org/wiki/Asian_Financial_Crisis
> >
> >
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "Tomasz Janeczko" <groups@>
> > wrote:
> > >
> > > Hello,
> > >
> > > Did you see this daily effective FED rate chart:
> > > http://www.newyorkfed.org/charts/ff/
> > >
> > > Usually effective rate follows closely target rate (currently at
> > 1.5%)
> > >
> > > In recent days effective FED rate dropped below 1%.
> > >
> > > It looks to me that FED is going to be walking in footsteps of
> > Japan central bank in '90s.
> > >
> > > Now EBC funds still at 3.75% ? They are going to cut fast, much
> > faster than FED, IMHO.
> > > If situation evolves in that direction we are going to see
EURUSD =
> > 1.0 soon
> > > and probably Japanese Yen remaining the strongest currency for
> > months to come.
> > >
> > > Any thoughts?
> > >
> > > Best regards,
> > > Tomasz Janeczko
> > > amibroker.com
> > >
> >
> >
> >
> > ------------------------------------
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