March 31, 2007
You can move some of your dollar holdings easily into the waaaaaaaaaaaaaaaaaaaaay underpriced yen via the yen etf FXY. Buy low sell high. The Fed will be lowering rates soon, the BoJ will be raising rates, and we all know how the yen carry trade bubble will end - just like all bubbles. The only question is when.
Why Americans put all their savings into dollars I'll never understand. Well, when you pay $15 for a glass of so-so wine at a pub (as I did last night), then it really comes to life. The dollar will continue to shrink and shrink and shrink. We're insolvent folks. And all that funny money Bush and Congress keep spending? The only way we'll ever pay it back is through the printing press.
Neil Mellor, currency strategist at Bank of New York, warned that with a large amount of uncertainty still surrounding the health of the US economy and with continued geopolitical tensions, there was a good chance that carry trades could face further pressure.
"The fact is the trigger is cocked," he said. "Given the recent rise in volatility, the risks investors are taking to get yield smack of the end of a bubble.There is little rationale that this bubble will not meet its end."