Thursday, August 16, 2007

Carry Trade & Economist Summary

The Economist has a good sample of what happened during the last weeks. As an example i have taken the report on the carry trade. I hope the links work without subscription. O top off this you can click at the labels to get more on last weeks topics. Please leave a comment if a certain Link doesn´t work.

Der Economist hat eine ziemlich gute Übersicht was in den letzten Wochen abgegangen ist. Beispielhaft habe ich mir mal den Report zum Carry Trade herausgepickt. Ich hoffe das die Links auch ohne Abo funktionieren. Hinterlaßt bitte einen Kommentar wenn ein bestimmter Link nicht abzurufen ist.
Banks in trouble
A liquidity squeeze "Bankers' mistrust"
Funding difficulties "A conduit to nowhere"
Hedge funds "Behind the veil"
Financial contagion "Mortgage flu"
Should central banks act as buyers of last resort?

Not-yet-desperate housewives
Is Mrs Watanabe doing her bit for global stability?

IN MOST of the world in the past week, attention has been on highly leveraged hedge funds that have been forced to dump assets bought on margin. In Japan, however, a different species of margin trader has—until now, at least—stood firm: the housewife. On her shoulders may lie responsibility for some of the stability of the global financial system.

On August 15th the Japanese currency climbed to a 4½-month high against the dollar and continued to surge against the New Zealand dollar, raising concerns about the sustainability of the carry trade, through which investors borrow in cheap yen to buy higher-yielding assets elsewhere. This had made fortunes for international investors but, lately, Japanese retail investors had become the carry trade's greatest enthusiasts.

> The latest strenght of the Greenback is worth mentioning and if the $ will sustain these trend it will be unusual. I doubt that that this will last. Brad Setzer is also wondering The dollar, still a currency that you run to?

> Die Stärke des US $ in den letzten Wochen des Chaos ist zumindest wenn dieser Trend anhält recht ungewöhlich. Ich glaube das dies nicht von Dauer sein wird. Brad Setzer stellt sich die gleiche Frage The dollar, still a currency that you run to?

The metaphorical Mr and Mrs Watanabe account for around 30% of the foreign-exchange market in Tokyo by value and volume of transactions, according to currency traders, double the share of a year ago. Meanwhile, the size of the retail market has more than doubled to about $15 billion a day.

One reason for the surge is margin trading. Brokers are offering leverage of as much as 200 times the down-payment (though the average is more like 20 to 40 times).

In July Japanese retail investors' short positions on the yen (a bet that it would fall) exceeded the amount taken by traders on the Chicago Mercantile Exchange, a foreign-exchange trading hub. “The gnomes of Zurich were accused in their day of destabilising markets. The housewives of Tokyo are apparently acting to stabilise them,” boasted Kiyohiko Nishimura, a Bank of Japan board member, in July.

Strikingly, as the yen appreciated, retail traders, rather than dump their positions, saw a buying opportunity and sold yen for other currencies, softening its rise. “The Japanese government has not intervened—they've not had to, because the Watanabe-sans have been selling yen for them,” says James Gow of FXOnline Japan, a retail broker.

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Blogger jmf said...

Australian Central Bank Props Up Currency Amid Rout

Australia's central bank bought its currency for the first time in six years to stem the steepest one-day drop since it was allowed to trade freely in 1983.....

10:12 PM  
Blogger jmf said...

Yen Set for Best Week Versus Dollar Since 1998; Carry Trade Cut

The yen has strengthened at least 4 percent against all 16 most-active currencies this week as a global rout in equities and emerging-market assets spurred investors to exit so-called carry trades. New Zealand's dollar declined the most, set for the largest weekly loss since December 1985, after a measure of yen volatility jumped to the highest in almost eight years

10:13 PM  
Blogger FFDIC said...

Janis Joplin
Ball And Chain
Live in Germany 1969

10:43 PM  
Blogger jmf said...

Moin ffdic,

great clip!

Asian Stocks Drop, Led by Toyota, on Yen Strength;

Japan's Nikkei 225 index tumbles 5.3% to 15,290.25

Japan's Topix index plunges 5.5% to 1,481.42

It´s another picture when you add the the Yen gains over the past week

11:03 PM  
Blogger jmf said...

New Zealand dollar plummets 3.2% versus U.S. dollar

11:14 PM  
Blogger jmf said...

Excellent story from the WSJ (free) that could be taken as a "blueprint" for way too many families....

One Family's Journey
Into a Subprime Trap

4:41 AM  
Anonymous Anonymous said...


We cab see I think how the Economist's research and writing standards are contributing to the opacity of financial markets t its reading public.

Mrs Watanabe show a very regular trading pattern:

5:07 AM  
Anonymous Anonymous said...

Just plain stupid or dumb like a fox?
"But I blame that on that I don't understand the lingo they were talking," she says. "It's a scary experience.... All I could see was all these numbers flash before me... I said, 'Mario, I hope you don't get into something that is going to hurt us.'"

"the family had little or no equity in the home"

"Mr. Montes says the family may try to sell the house,"

"Bottom line, it's our little home," Mrs. Montes told a visitor one evening in April as tears welled in her eyes. "We're going to keep it. Hopefully, we won't go down and if we do, we're going to go down with a fight."

You decide!

Negative equity... been there done that!!

6:18 AM  

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