Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
YouGov's MRP Poll Final Tory Seats Forecast Revised Down From 359 to 338, Possibly Lower? - 10th Dec 19
What UK Economy (Average Earnings) Predicts for General Election Results 2019 - 10th Dec 19
Labour vs Tory Manifesto's UK General Election Parliamentary Seats Forecast 2019 - 10th Dec 19
Lumber is about to rally and how to play it with this ETF - 10th Dec 19
Social Mood and Leaders Impact on General Election Forecast 2019 - 9th Dec 19
Long-term Potential for Gold Remains Strong! - 9th Dec 19
Stock and Financial Markets Review - 9th Dec 19
Labour / Tory Manifesto's Impact on UK General Election Seats Forecast 2019 - 9th Dec 19
Tory Seats Forecast 2019 General Election Based on UK House Prices Momentum Analysis - 9th Dec 19
Top Tory Marginal Seats at Risk of Loss to Labour and Lib Dems - Election 2019 - 9th Dec 19
UK House Prices Momentum Tory Seats Forecast General Election 2019 - 8th Dec 19
Why Labour is Set to Lose Sheffield Seats at General Election 2019 - 8th Dec 19
Gold and Silver Opportunity Here Is As Good As It Gets - 8th Dec 19
High Yield Bond and Transports Signal Gold Buy Signal - 8th Dec 19
Gold & Silver Stocks Belie CoT Caution - 8th Dec 19
Will Labour Government Spending Bankrupt Britain? UK Debt and Deficits - 7th Dec 19
Lib Dem Fake Tory Election Leaflets - Sheffield Hallam General Election 2019 - 7th Dec 19
You Should Be Buying Gold Stocks Now - 6th Dec 19
The End of Apple Has Begun - 6th Dec 19
How Much Crude Oil Do You Unknowingly Eat? - 6th Dec 19
Labour vs Tory Manifesto Voter Bribes Impact on UK General Election Forecast - 6th Dec 19
Gold Price Forecast – Has the Recovery Finished? - 6th Dec 19
Precious Metals Ratio Charts - 6th Dec 19
Climate Emergency vs Labour Tree Felling Councils Reality - Sheffield General Election 2019 - 6th Dec 19
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19
Will Labour Government Plant More Tree's than Council's Like Sheffield Fell? - 4th Dec 19
What the UK Economy GDP Growth Rate Predicts for General Election 2019 - 4th Dec 19
Gold, Silver and Stock Market Big Picture: Seat Belts Tightened - 4th Dec 19
Online Presence: What You Need to Know About What Others Know About You - 4th Dec 19
New Company Tip: How To Turn Prospects into Customers with CRM Tech - 4th Dec 19
About To Relive The 2007 US Housing Market Real Estate Crash Again? - 3rd Dec 19
How Far Will Gold Reach Before the Upcoming Reversal? - 3rd Dec 19
Is The Current Stock Market Rally A True Valuation Rally or Euphoria? - 3rd Dec 19
Why Shale Oil Not Viable at $45WTI Anymore, OPEC Can Dictate Price Again - 3rd Dec 19
Lib Dem Election Dodgy Leaflets - Sheffield Hallam Battle General Election 2019 - 3rd Dec 19
Land Rover Discovery Sport Brake Pads Uneven Wear Dash Warning Message at 2mm Mark - 3rd Dec 19
The Rise and Evolution of Bitcoin - 3rd Dec 19
Virtual games and sport, which has one related to the other - 3rd Dec 19

Market Oracle FREE Newsletter

UK House prices predicting general election result

Yen Carry Trade Alert - Gold And Financial Markets

Stock-Markets / Yen Carry Trade Jun 26, 2007 - 02:03 PM GMT

By: Christopher_Laird

Stock-Markets For the past several weeks, I have been telling subscribers of my concern about the Yen again being at a low level. This present level has led to upsurges in the Yen, as traders unwind Yen carry trades. World stock markets and gold have sold off when this happens, as in late February of this year. The Yen hit a 5 year low days ago.


Japanese Finance Minister Omi stated Monday that people should not be making ‘one way bets on the Yen' – the same terminology that the ECB used just before the Yen strengthened a great deal in late February, and led to world stock crashes. The BIS also stated this week that the present low level of the Yen is ‘anomalous'.

"Over the weekend, the Bank for International Settlements warned in its annual report about the risks of carry trades and said there was "clearly something anomalous" about the yen's weakness...A drop in Japanese shares also kept the market on edge for any potential rush out of risky positions such as carry trades." Reuters

Take a look at this chart of the Yen, gold, and Dow Jones world stock index.

US markets

Gold is languishing. There are concerns about the US banking situation after huge losses in two Bear Stearns hedge funds that made billion dollar bets on US subprime mortgages. The Dow has reacted quite negatively to revelations on the Bear Stearns hedge fund mess Friday, and now Monday. I believe gold has been anticipating this kind of trouble for weeks, due to rising interest rates. Gold has also been concerned about the prospect of another Yen carry trade stock market sell off.

Chinese markets

With the Chinese stock markets looking shaky, the last thing world stocks need is pressure on the Yen carry trade to unwind again, as it did late February, and the Yen strengthened 6% in roughly a week, causing waves of world stock sell offs. The US Dow had one horrible 500 point drop during that episode, but appeared to shake off the weeks long Asian selling then. That helped to quiet the situation.

It is always possible the Asians markets will rally again, but the prospect of new Yen carry unwinding is quite high right now.

Gold in this situation

I have been concerned that Gold does not like rising world interest rates, which puts a lot of pressure on the housing market, stock markets, and subprime derivatives which are extremely sensitive to small changes in interest rates. See the present Bear Stearns hedge fund disaster. I believe that gold had been telegraphing these concerns before last week. Gold has not reacted in a bullish way to the USD falling again to the low 82 range, nor has gold reacted bullishly to rises in oil recently – indicators of negative gold sentiment. My subscribers have been informed of these concerns for two weeks.

Leverage concerns

Gold is presently reacting to financial deleveraging concerns overall. If I was to choose one concern over all others, it is the amount of leverage in all markets. Rising interest rates threaten this leverage, and will lead to serious deleveraging at some point this year.

Changing interest rates are very dangerous to carry trades, first the Yen carry, but also involving the Swiss Franc. Carry trades are again poised to unwind.

Also, gold does not like the competition of rising world interest rates, as conservative investors are attracted by higher bond yields.

All things considered, the world is again poised for some serious stock sell offs, and in many respects the same ingredients are present that led to the last wave of Asian sell offs in late February – again, see the chart above.

The Prudent Squirrel newsletter is Chris Laird's macro economic gold newsletter. It is 44 issues a year, published Sundays. Subscribers get mid week email market alerts. Subscribers are already aware of the concerns in this article.

Stop by and have a look.

By Christopher Laird
PrudentSquirrel.com

Chris Laird has been an Oracle systems engineer, database administrator, and math teacher. He has a BS in mathematics from UCLA and is a certified Oracle database administrator. He has been an avid follower of financial news since childhood. His father is Jere Laird, former business editor of KNX news AM 1070, Los Angeles (ret). He has grown up immersed in financial news. His Grandmother was Alice Widener, publisher of USA magazine in the 60's to 80's, a newsletter that covered many of the topics you find today at the preeminent gold sites. Chris is the publisher of the Prudent Squirrel newsletter, an economic and gold commentary.

Christopher Laird Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules