financial mashup

[jonathankaplan]

Stock markets worldwide just had another bad October. Whatta ya know?

I just saw this article about the world's reliance on the dollar. China has an awful lot of those dollars, considering. Makes me think the Chinese holders of that USD are going to start putting it elsewhere than US government paper, perhaps even into the US stock market more

Comments

[dubaiwalla]

On China, I thought this was a really good counter-intuitive post.

[blueadept]

The BOJ may be heading back to a 0% rate.

[nokomisjeff]

Although the DJIA had a bad month, last week was the best since 1974 according to Bloomberg

[adb_jaeger]

and have a solid 30% gain.

Did you actually follow all the advice and sell, or is it a paper gain?

[nokomisjeff]

I sold enough to pay for my original investment and kept the remaining shares for speculation. Kind of like free shares, or playing with the house's money if you want to look at it that way.

Jeff

[adb_jaeger]

Kind of like free shares

I love doing that.

[madwriter]

>>Makes me think the Chinese holders of that USD are going to start putting it elsewhere than US government paper, perhaps even into the US stock market more significantly now.<<

The last I heard, China had already started divesting itself of U.S. dollars from its reserves. At one point it had close to a trillion dollars, whereas a few months ago it was closer to $700 billion. I doubt they'll do much more, though, since a big divestment could crash the dollar, and the U.S. is still their biggest customer. :/

>>I think they do...<<

I think they do too, but that they used up their bag of tricks some time ago. Hence the 700 or more point drops in the stock market. (And I think they may've run out more than two months ago--at least looking at Dow days that were down by hundreds of points at any given moment and then in the up range by closing.)

[infopractical]

What do you know specifically about the unwinding of the carry trade? I was expecting bigger fallout. Over the past year I have paid little attention to everything I used to track in finance because of a string of 400 hour work months building my business. Now I'm reading your journal wondering, "How the hell did I miss that?" I was expecting a noteworthy interest rate bump on such a spectacular unwind -- something that would precipitate the second serious wave of the current crisis.

Perhaps I was just wrong?

Thanks in advance for any light you can shed.

[jonathankaplan]

The unwind pretty much happened, the JY rallied significantly, although nowhere near as much as I thought it would. The USD rates have stayed ridiculously low to counter the economy's weakness, and that made the unwind less dramatic, I think. The new carry trade is borrow USD and buy other better currencies with the cash. That carry trade won't unwind until the FED has to raise rates, and looking at the overall weakness in the economy and the lack of devaluation even with such loosening, that might not be for a long time.
But overall, you got me. The situation has gotten so complex.

[infopractical]

Thanks for taking the time to update me on this.