8 June 2006

Up. Not down

Kitco - Contributed Commentaries - Richard Daughty: "What will happen? Well, Chris Laird of PrudentSquirrel.com asks, provocatively, 'World Markets about to Crash Together?' He first defines the problem as 'The US is considering a pause in its interest rate hikes of late. The interest rate differential the US holds over Japan and Europe is as much as 3%. If that differential is not maintained, trillions of dollars of US denominated financial investments are going to be unloaded on the world markets.'
So what is the upshot of this unloading? 'A combination of unwinding the Yen carry trade and a serious drop in the value of the USD will just simply pull the rug out from under every major financial market that has benefited from the cheap USD and Yen.' I'm going to go out on a small limb and say we are looking right now at a gigantic world stock collapse.'
Almost as an afterthought, he says 'Oh, did I mention that we are seeing the highest insider selling of stocks since about 2000?' And you remember what happened in 2000.
So it is the sudden, huge collapse of the Current Account that, alongside the fall in Japan's monetary base, is the Big Freaking News That Screams Danger! Danger! Danger! To The Mogambo (TBFNTMD!D!D!TTM)."

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