Tag

US Dollar

Jul 22

Why the Japanese Yen Carry Trade Matters

By Blog
One thread from the complex sweater that is global finance to keep an eye on is the reversal of the Japanese yen carry trade. As a refresher, for decades investors have been conditioned to borrow in cheap, low-interest yen, buy foreign assets (U.S. assets) that yield or earn more, then eventually sell them and pay off those yen loans at a profit. A declining yen gives the carry trade an additional boost to profits. Sell dollar assets at higher prices, convert those dollars into a cheaper yen (getting more yen), then pay off the loan with money left over from…
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Jul 17

Understanding Today’s Commodity Cycle

By Blog
A colleague asked some good questions about a dollar cycle/commodities chart I shared last week (first chart below). The chart showed commodities (gold line) rising over the last five years while the dollar (black and red line) has been rising and stocks (gray line) have also been rising. This is abnormal, as historically the broad commodity cycle tends to be inversely related to stocks and dollar strength. This aberration could be explained by the enormity of passive investing, indexation, and intense actions to keep stocks afloat by the powers that be in an effort to stave off a very messy…
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Jan 11

2022 Asset Class Returns: Year in Review

By Blog
Toward the end of last year’s “Year in Review” piece I wrote: “You may be in the camp of investors that sees a year like this year as an opportunity lost as opposed to a sign that we have entered dangerous stock market times.”  2021 was one of those years where the US stock market outperformed most other investment categories by enough that it may have been easy for investors to assume there was less risk in the market than there really was at the end of last year. Unfortunately, to many investors’ surprise, 2022 came along and proved that,…
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