May 16, 2010 at 09:28 AM EDT
The Hot New “Carry Trade” and Gold’s Record Run – One Chart Explains it All
Every few months institutional investors get hooked on a new trade. The trades start off with solid fundamental ideas, then the Big Money piles in, it goes parabolic, good “stories” bring in the retail investor, and the trade eventually blows itself up. Right now, all signs point to that is what is exactly happening with gold. The Carry Trade Du Jour The ongoing growth of edge fund assets and low borrowing costs for proprietary trading desks are making carry trades, when a trader sells short one asset and buys another, bigger and bigger. The key thing with all carry trades is they start out with excellent fundamental justification. The asset that is sold short (bet against) has terrible fundamentals and the asset that’s…
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