Month: February 2014

Reading on the Unwinding Carry Trade

I.C. Angles Investment Post…

After testing its 125-day moving average the stock market has gone on to eek out a new high in February. My own views remain unchanged and I continue to be concerned about several issues, including monetary policy and associated malinvestments, particularly in China, which pose significant risks to the global economy. On that note Zero Hedge recently ran an article well worth a read that contained a lengthy excerpt from Bank of America Merrill Lynch Global Research, focusing on these very topics that I have been blogging about for some time, with data I have not presented before. For those inclined on learning more about implications of the global carry trade that links Fed money creation with Chinese bad debt here is a quick link to “The Pig in the Python is about to be Expelled.” Although a good read my own opinion does differ somewhat in that I don’t believe tapering or continuing to push money into Chinese credit markets is a matter of choice, as postulated. Per my October post on China “The Clock is Ticking” arguing that Chinese return on capital is deteriorating to the point where it no longer generates growth, as well as my earlier commentary on the Fed, including “The Party is Over“, where I have commented that monetary policy is similarly realizing diminishing or even negative returns, I believe a reversal in economic fortune is now a matter of time, regardless of the monetary choices made.

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