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#11 selecto

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Posted 04 March 2007 - 10:29 PM

Yen Climbs to Three-Month High; Investors Reduce Riskier Trades Bloomberg. March 5: The yen climbed to the strongest in almost three months against the dollar as Asian stocks extended a global slump, prompting investors to unwind riskier investments funded by borrowing in Japan. LOL, the operative word hwere is "prompting." Ain't that a nice way to put it.

Edited by selecto, 04 March 2007 - 10:32 PM.


#12 selecto

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Posted 04 March 2007 - 10:52 PM

Echo, although important, its not so much the currency risk; the killer is the 20 to one stuff turning sour.

#13 arbman

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Posted 05 March 2007 - 01:55 AM

OK, now someone help me out. The dollar yen relationship took a similar dive in Dec 05 while the SPX consolidated. It also took a similar magnitude drop between Oct-Dec 2006 and the SPX rose.


Exactly Echo, instead of correcting, the market only marched higher, I believe I had a remark about this back then, this market used up every dime to only go higher from the cheaper oil to the neutral interest rate position by the Fed. There was no risk discounted and now, if it crashes, it should come also as no surprise because the markets are not really efficient, only trend following as long as the money keeps coming in. The last rise in Oct-Nov was also largely supported by the Fed and now they are also stuck with a weak USD...

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#14 OEXCHAOS

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Posted 05 March 2007 - 07:46 AM

As we speak the spx and the dollar-yen are headed down. If you are using carried money, you have to be a tad scared sh*tless.

In that case, you just do what you gotta do. For those hedgehogs who borrowed in yen to buy the subprime crap their prime brokers have been securitizing, the choice is simple. Since there is no bid for subprime paper right now (and I mean no bid at all -- as in zippo, nada), and since every time the yen ticks up the loan you leveraged 6 or 8 or 20 to 1 gets more expensive to repay, you sell what you can sell. And guess what that is? :D


That makes perfect sense.

I've been saying (here and in the letters) that this decline isn't your normal "we're afraid of earnings so let's sell" type of decline. I positited that this was primarily related to some sort of hedge fund and/or derivative sort of issue.

This is basically both and the most plausible scenario.

Bears, watch out when this becomes widely circulated in the financial press---by then it'll be about over.

M

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