Comments on: Carry Trade? What Carry Trade

By: Jamie

Jamie — Wed, 25 Nov 2009 14:28:56 +0000

First, MetalMiner is terrific! Second, I really enjoyed the fresh perspective on the so-called USD carry trade and tend to be a contrarian as well (i.e. leverage made available by low rates, pales in comparison to the structured leverage manufactured by Wall Street over the last 8 years – just look at the number of hedge funds who aren’t around anymore). I would also argue that the reason why we will continue seeing lower volatility is due to the dismantling of market structures that were entirely focused on exacerbating volatility (e.g. naked options writing, off balance sheet CDS, over zealous securitization & general financial engineering). I tend to disagree with the “all commodities are in a bubble” statements, but do think there are areas of commodities that have gotten way too far ahead of themselves (namely collectibles like gold and maybe silver). China is clearly in a bubble but of a very different kind and I think the surprise may be how overly dependent China is on the export model. China’s bubble is in fact its failure to spend its reserves and my conclusion is China’s demand for industrial materials, especially copper, oil and iron ore, will persist for sometime because spending those reserves is the best way to cool growth.

By: Stuart

Stuart — Wed, 25 Nov 2009 13:38:38 +0000

Marcus, thank you for your comments on the property markets. I state my stat sources in the article, and indeed those same sources do say parts of HK are forthy and the authorities are getting concerned. The more general point of the article is that the low dollar rates are not creating inflation in the west, in parts of China it could be a different matter but then we come back to the RMB peg, if China set interest rates at a level appropriate for their own country and allowed the currency to float they would not be at the mercy of the dollar’s slide.

By: marcus

marcus — Wed, 25 Nov 2009 09:15:26 +0000

Well, clearly if they MTM to USD then they would be making a gain on the bonds, but they’d be lying themselves ’cause vs. a basket of currency, their mtm is probably down 20%-30%.

I live in Hong Kong and goes up to China quite often. I can tell you the propertyh market is definitely in a bubble. everybody is leveraged up to buy new apartments since borrow cost is so low.

I don’t know where your get your stats from Stuart..

By: a

Tue, 24 Nov 2009 02:23:53 +0000

“China is probably ticked off with the US because the yield on 10yr Treasuries is only 3.35%, whereas as last year it was 5%”

why would they be ticked off? that means they have mtm gains on those treasuries they bought at 5% — and it’s not like the fed isn’t trying to move heaven and earth in order to create inflation