Bubbles, Bubbles Everywhere:
http://www.cnbc.com/id/15840232?video=326813795&play=1
Bubbles in Asset prices, Bubbles in Liquidity, Bubbles in Stock Markets, Carry Trades, Housing, Credit, M&A Activity-the list goes on and on. No one knows how far the bubbles can stretch or when they could burst.
World equity markets to a large degree are being driven higher by the vast amount of liquidity (i.e. cheap credit) driving the M&A bubble. Private equity buys a distressed asset like Chrysler because they think they can turn it around and sell it for a profit with borrowed money. Thomson buys Reuter's because they want to expand market share with borrowed money. Money is cheap and available and as long as it is-the deals will go on. It's creating a frenzy of trading activity because it's helping to drive the indicies up to record levels.
So how does this help you trade currency?
Look at Friday for guidance. The Chinese raised borrowing costs and markets got nervous. The carry trade currencies started free-falling until they calmed down. What's that tell you?
It's a fragile existence that's built on a house of cards-and it doesn't take much "wind" to blow those cards over.
As soon as some of the loans go bad, as soon you hear about liquidity drying up, as soon as Central Bankers and/or people like Henry Paulson start talking about anything that sounds like they think markets are extended to a dangerous point and that risk is being ignored-things could come down rapidly, or as fast as electronic markets will allow before the servers go "poof" (as happened in February).
Currency pairs like GBP/JPY, EUR/JPY will drop like bombs. A frenzy will ensue in the effort to exchange Pounds, Euros etc into Dollars and Dollars into Yen, because that's what happens when carry trades collectively and rapidly unwind.
There's no better time to trade then when the market is thinking collectively because that's when it acts collectively. That's the time to trade your larger positions, so here's my plan:
I'm gonna put a really nice chunk of change into my currency account, but not because I want to take a position right now. I just want to have both barrels loaded for when that turkey walks by. I don't know exactly when he's comin', but I know he is so I want to be ready. For now i'm gonna wait patiently and trade my normal positions, but when I see tom's fat head in my sites-he's gettin' both barrels.
http://www.cnbc.com/id/15840232?video=326813795&play=1
Bubbles in Asset prices, Bubbles in Liquidity, Bubbles in Stock Markets, Carry Trades, Housing, Credit, M&A Activity-the list goes on and on. No one knows how far the bubbles can stretch or when they could burst.
World equity markets to a large degree are being driven higher by the vast amount of liquidity (i.e. cheap credit) driving the M&A bubble. Private equity buys a distressed asset like Chrysler because they think they can turn it around and sell it for a profit with borrowed money. Thomson buys Reuter's because they want to expand market share with borrowed money. Money is cheap and available and as long as it is-the deals will go on. It's creating a frenzy of trading activity because it's helping to drive the indicies up to record levels.
So how does this help you trade currency?
Look at Friday for guidance. The Chinese raised borrowing costs and markets got nervous. The carry trade currencies started free-falling until they calmed down. What's that tell you?
It's a fragile existence that's built on a house of cards-and it doesn't take much "wind" to blow those cards over.
As soon as some of the loans go bad, as soon you hear about liquidity drying up, as soon as Central Bankers and/or people like Henry Paulson start talking about anything that sounds like they think markets are extended to a dangerous point and that risk is being ignored-things could come down rapidly, or as fast as electronic markets will allow before the servers go "poof" (as happened in February).
Currency pairs like GBP/JPY, EUR/JPY will drop like bombs. A frenzy will ensue in the effort to exchange Pounds, Euros etc into Dollars and Dollars into Yen, because that's what happens when carry trades collectively and rapidly unwind.
There's no better time to trade then when the market is thinking collectively because that's when it acts collectively. That's the time to trade your larger positions, so here's my plan:
I'm gonna put a really nice chunk of change into my currency account, but not because I want to take a position right now. I just want to have both barrels loaded for when that turkey walks by. I don't know exactly when he's comin', but I know he is so I want to be ready. For now i'm gonna wait patiently and trade my normal positions, but when I see tom's fat head in my sites-he's gettin' both barrels.