Tuesday, May 29, 2007
Featured In Globe & Mail
It is my first time in the Globe & Mail, which is Canada's NYT, and first time in print (no online version). I'm thankful to God, GM and everybody else who takes time to come here. I'll sure miss you in the next few months due to my hiatus. Feel free to e-mail me to chat about the market, in the mean time will try to get permission for "Monday Edition" posts. Thanks!
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10 comments:
Your ideas on the carry trade is incorrect. Simply borrowing using Swiss doesn't actually provide you an edge from someone borrowing using the Yen. Most profits for carry trading strategies are derived from price movements rather than from the actual rate differential itself. Carry trades are also extremely correlated in their net movements. Global liquidity conditions affect all pairs with substantial rate differentials. Thus, the basis of your trading thesis was incorrect.
Anon-
Point noted. You're right, that most profits are derived from fluctuations. Like, when I was long USD/JPY, and JPY rose, I lost about 1-2% of profits made from months of carry trading. Similarly, made more $$ when EUR/USD rose at the end of Nov-Dec, than holding for months.
When I use carry trades, as you know, the broker (Oanda) credits the account each day, very tiny increment, but each day depending on how much your holding overnight.
I like to go long USD/JPY on Fridays, as you get credited over the weekend, quite common actually.
However, putting all this explanation in a short article like that is not possible.
Tx for your great comment though, much appreciated. Y
Also, the reason I like to hold GBP/CHF is I'm bullish on raising rates in UK, and even though Yen has been on a downward path, I'm afraid it might make a violent move to the upside, if US markets correct for a bit.
You've probably read about Bill Lipshultz, Salomon Brothers' legendary FX guy- he said the key to his profits also comes from "net positive carry", especially when your positions are huge.
Good stuff Yaser,
Congrats on the summer intership.
That would be my dream job, just to get the experience would be awesome.
Ahh ok.
Yes I am familiar with Oanda.
As for Lipshultz comments, I would venture to say that it should be taken in context of the present theme. Long the carry generally does provide excess returns. This is actually exploited by this ETF by Deutshe Bank (ticker: DBV). However, in any liquidity crunch, it tends to get hammered and you end up losing months of +carry in the breakdown. Thus, it resembles the payout from a short call/put position.
I am actually of opposite view regarding GBP. I believe they are, for the most part, done raising their rates. The numbers released seem to show that. On the other hand, it has been a good time to take long USD positions. Income has increased significantly and its just a matter of time before it starts hitting consumer spending.
You are correct in your insight that there is a linkage between equity markets and the carry trade. But I believe its actually the other way around. The carry trade ends up affecting the equity market (although it is a weakly reflexive process). My thinking is that the carry trade is being used to finance investments in other countries which trickles down and raises the values of the global equity markets. If you chart the S&P 500 and DBV (the carry trade ETF proxy) you will notice a strong correlation between the two.
Good trading to you.
Anon-
I agree that currency influences market moves. Like today- The Chinese downfall didn't have an effect because in Japanese trading their IP was weak, hence BOJ will not raise rates = more carry trading. Add to that the Fed notes, Hoo-wah! Last time, when China corrected, Yen was on the rise and BOJ was expected to raise rates and US Fed was a lot more uncertain about raise or not to raise. Now they seem content that raising rates is not the way.
Also, I somewhat agree with the GBP view. Right now, too many bets have been bearish on US$, so a short-term squeeze will occur. If weak JPY news continues, look for further gains.
Thanks for your insightful comments, wish you well too!
HPT-
Tx for your comment, I'm sure you can get something w/ your trading skills. You should call up all trading desks and just network w/ few industry people.
Hello yaser
its very nice, i inspired with you and ur exprience.
well today only i come to know abt you through your brother qaiser.
veryy god keep it up
well i want also join investment field but waiting for good adviser and good platfarm
can you advise me
Abdulwasim
abdulwasim111@gmail.com
Hey Yaser,
Congrats on the Globe and Mail mention and the internship !! The increased notoriety from the Globe and Mail mention should help to get you an even better internship position the next time around. Good Luck..
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