Dollar Falls on Global Recovery; Copper Climbs to 13-Month High →
bloomberg.com/apps/news?pid= … 6nyXsCmxho
Oct. 26 (Bloomberg) – The dollar fell and metals rose, driving copper to a 13-month high, as South Korea’s fastest economic growth in seven years and profits that almost doubled at Electrolux AB signaled the global recovery is accelerating.
The dollar declined against 12 of the 16 most-traded currencies tracked by Bloomberg as of 8:36 a.m. in New York. Copper climbed as much as 1.2 percent to $6,728 a metric ton in London, while zinc rallied for a ninth day. South Korea’s Kospi Index advanced 1 percent and futures on the Standard & Poor’s 500 Index added less than 0.1 percent.
there is more
Stagflation it is folks, like the yen from the mid nineties to about 2007, the dollar is backed by ZIRP (zero interest rate program) and is falling like a stone which means, the carry trade is now in dollars as commodities traders exchange dollars for yen or euros. Both Japan and the Eurozone are on the back foot from this shift which means we can’t export easily to the US. The Asian countries benefit as they use US carry trade dollars to buy up all commodity systems. The bailed out bankers are also in on the act and bid up the price of commodities so that we now have the worst of all possible worlds: stagflation.
Approaching the First Trillion in Global ETF Assets →
seekingalpha.com/article/165628- … _lb_author
But what’s next for the market?** In Europe, at least, the focus amongst ETF providers seems to have shifted away from expanding asset class coverage and towards working out where additional efficiencies can be created in the ETF “manufacturing” process – hence the talk about developing ETF platforms – and of course to broadening the investor base to include more retail clients.**
The latter effort seems vital (in Europe, at least) to keeping the ETF market on its amazing growth path. Tomorrow we’ll be running a thought-provoking interview with Julian Hince, who recently joined iShares to help boost its distribution of ETFs to individual investors in the UK, as an example of how issuers are approaching this challenge.
In the meantime (and I hope I’m not jinxing things and risking another market crash by saying this slightly prematurely), here’s to the next trillion!
there is more
The New Carry Trade →
elliottwave.com/freeupdates/ … Trade.aspx
Given the choice between loans with identical terms, one would always pick the lower interest rate. Institutional investors also generally pick the currency with the lowest rate when they choose which one to denominate their loans in. For example, when a trader is long AUD/USD, he receives the difference between the two country’s interest rates – in this case the trader is credited 2.75% (3% AUD minus .25% USD). This is called a “carry trade.”
Markets can move fast when they head down, and when a carry trade unwinds, few things move faster. Let’s take a look at the benefits and risks of the U.S. becoming the low-interest-rate capital of the world.
As the recession has taken hold, short-term U.S. interest rates have been pushed down to .25% or lower. (The current rate on the 13-week Treasury bill is .09%.) These low rates encourage those who want to borrow to do so in U.S. dollars, which is exactly how the low Japanese interest rates of the past boom cycle encouraged borrowing in yen.
During the inflationary boom of 2002-2007, the yen carry trade fueled many loans at the low cost of .25%. The yen-denominated loans allowed for strength in other assets in an apparent self-reinforcing cycle. That led to substantial yen weakness, especially versus the euro and Australian dollar where EUR/JPY gained 38% and AUD/JPY gained 40% over the five-year period.
there is more
There’s one simple solution; a return to the gold standard. Transactions are done in gold rather than currencies. No wonder gold is so expensive.