- The perverted bond market (nearly $20 trillion in negative yielding debt) is signalling an epic coming crisis
- A painful global recession is increasingly guaranteed in the coming 12 months. But that’s not the largest risk…
- A massive global currency crisis is brewing. One that could very well topple a number of today’s nations.
- Why hard assets offer one of the best defenses against how all this will unfold
The larger part of this story concerns the effects that excessive financialization has had on the globalization of markets.
One very large part of this has involved the explosion of carry trades — i.e., borrowing in one place to invest in another.
An example would be borrowing US dollars to buy New Zealand government bonds. The “carry” part of that trade is that borrowing in US dollars might cost you 2% per year, but New Zealand bonds are paying out 5% — providing you with a 3% ‘carry.’ Lever that up, and do that trade all day long, with as much volume as your lenders will allow.
In the past, it made a lot of sense for a Japanese pension fund to sell its yen (where the local 10-yr government bond is sporting a negative yield) and buy euros to plow into Italian 10-year debt which has a positive yield. Easy money, right?
Well, it’s all fun and games until you get clocked by a currency reset that wipes out all your positive carry.
The trend up until now has been one of increasingly large bets denominated in US dollars spread out all over the globe.
But the hugely concerning warning sign of a massive reset is now flashing, and it’s… (Enroll now to continue reading)