Outside the Box

The New Carry Trade

John Mauldin

July 11, 2005

This week we will turn once again to a group headquartered in Hong Kong with offices in Stockholm and New York called GaveKal Research Limited. We pull together three one page commentaries from last week that focused on the carry trade.

They make the point is that over the last ten years the carry trade has moved from the Yen to the US Dollar and is now moving to the Euro. This is a short concise piece that gets right to the point and brings a lot of ideas. Most economists are still forecasting a weak dollar, but GaveKal presents a scenario that could lead short-term to a strong dollar and even weaker Euro. This is an outside of consensus view, which is why this was picked for Outside the Box.

John Mauldin, Editor
Outside the Box

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Playing With Fire?

From GaveKal

As we never get bored of pointing out, structural bear markets and deflationary busts only happen when policy makers commit one, or several, of what we call the "five cardinal sins". The five sins are: 1. Protectionism, 2. Tax Increases, 3. Increases in Regulation, 4. Monetary Policy Mistake, 5. A War. The common thread behind these five policy mistakes is that, when committed, they reduce the returns on invested…

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