In my Friday letter, "Thoughts from the Frontline," I touched briefly on the Yen Carry Trade and its effects on asset prices. Just what should investors be concerned with and profit from in a market bent on volatility and anchored by a new seat at the Fed? My good friends at GaveKal have written an excellent and timely article on global liquidity and its implications for the markets.
Charles and Louis-Vincent Gave, along with Anatole Kaletsky, are each co-founders of GaveKal, a global investment research and management firm. Their expertise on monetary policy and global trends is often very insightful and highly sought after. In one of their more recent commentaries, The Leverage in the System and the Weak U.S. $$, they take an in-depth look at the Bank of Japan, Oil, the U.S. Dollar and the Euro. This is a very interesting take on the strength of the dollar and very much Outside the Box.
I trust that you will pay less attention to the manic noise of the markets and find this piece to be an enlightening perspective on the global economy.
John Mauldin, Editor
Outside the Box
The Leverage in the System and the Weak US Dollar
We always like to quote Bastiat and highlight that economics is all about what we see, but more importantly, what we do not see. Take consumer leverage as an example. For years, the perma-bores have warned us that the amount of leverage the US consumer was taking on invited an economic disaster. Instead, and despite numerous crisis (9/11, Iraq War, Enron,…