Japan's ZIRP in '98-'00 linked to US market crash in '00 & its happening again
By Yaser Anwar CSC of Equity Investment Ideas
An interesting thing I found today was, when the Bank of Japan has a ZIRP (zero interest rate policy) it leads to alot of hedge funds/private equities etc to commit alot of capital to the markets through "carry trade".
During '98-2000 when the BoJ said that it will be ending its ZIRP the markets crashed due to lack of liquidity & higher interest rates.
We are witnessing a similar situation now. The BoJ meets in July, they are expected to raise rates some economists believe, thus ending their ZIRP which could be a negative for the markets.
As much as I hate interest rate hikes, I think Bernanke needs to raise rates 'cause of the US deficits, he needs to make the US$ attractive to our debt buyers.
On June 10, Russia announced that it will be converting its 715 billion$ reserves, mostly from oil royalties, to 45% US$ and 45% Euro from a previous 25% Euro. This is one of the characteristics that will lead to the US$ demise. Maybe not in a couple of months but a year or two from now, especially since Middle Eastern countries are thinking to do the same.
And when it happens Bernanke will have no choice but to raise rates, as much people hate him for doing it, US deficits will leave him with no choice, thus sending the markets and the economy into recession.
Thats why its even more important now than ever to have at least 20-25% exposure to international stocks.
http://www.equityinvestmentideas.blogspot.com/
An interesting thing I found today was, when the Bank of Japan has a ZIRP (zero interest rate policy) it leads to alot of hedge funds/private equities etc to commit alot of capital to the markets through "carry trade".
During '98-2000 when the BoJ said that it will be ending its ZIRP the markets crashed due to lack of liquidity & higher interest rates.
We are witnessing a similar situation now. The BoJ meets in July, they are expected to raise rates some economists believe, thus ending their ZIRP which could be a negative for the markets.
As much as I hate interest rate hikes, I think Bernanke needs to raise rates 'cause of the US deficits, he needs to make the US$ attractive to our debt buyers.
On June 10, Russia announced that it will be converting its 715 billion$ reserves, mostly from oil royalties, to 45% US$ and 45% Euro from a previous 25% Euro. This is one of the characteristics that will lead to the US$ demise. Maybe not in a couple of months but a year or two from now, especially since Middle Eastern countries are thinking to do the same.
And when it happens Bernanke will have no choice but to raise rates, as much people hate him for doing it, US deficits will leave him with no choice, thus sending the markets and the economy into recession.
Thats why its even more important now than ever to have at least 20-25% exposure to international stocks.
http://www.equityinvestmentideas.blogspot.com/
posted by douglas mcintyre at 5:44 AM
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