|
The world carry trade for US Dollars is over $9 trillion.
In today’s world of monetary insanity, investors seem to forget that $1
trillion is a staggering amount of money. So to put that $9 trillion carry
trade into perspective, if it were a country instead of a carry trade, it
would be roughly equal in size to the economy of China, the second largest
economy in the world.
Suffice to say, we’re talking about a truly staggering amount of
borrowed US Dollars that have been invested into other assets/ investments.
Carry trades only work if the currency you are borrowing in doesn’t rally.
As soon as it does, your trade very quickly goes into the red.
This is particularly true if you’re talking about a corporation that has
borrowed in US Dollars to fund projects in countries where sales are
denominated in other currencies (Europe, Asia, etc.)
The reason for this is that many multi-nationals do not hedge their
currency risk. So if, for instance, they are borrowing in US Dollars
without a hedge to invest in Europe and the US Dollar rallies, their projects
very quickly begin to lose their appeal… and a LOT of money.
Ka-Boom:
To put that move into perspective, it’s nearly on par with the
US Dollar rally that occurred during the 2008 CRASH!
This tells us point blank that something MAJOR is happening in the
financial system right now. You DO NOT get
20+% moves in the US Dollar during normal, healthy environments.
As usual, stocks are the last to “get it.” But this won’t last for long.
The S&P 500 is sitting on the ledge of a massive cliff. And when it
finally tumbles, the move will be both fast and violent.
If you’ve yet to take action to prepare for the second round of the
financial crisis, we offer a FREE investment report Financial Crisis
"Round Two" Survival Guide that outlines easy, simple to
follow strategies you can use to not only protect your portfolio from a
market downturn, but actually produce profits.
You can pick up a FREE copy at:
http://www.phoenixcapitalmarketing.com/roundtwo.html
|
