Loading ...Interest rate derivatives
“Naturally, betting on gains in the greenback has acquired a huge following,” he says, “even among retail investors, gaining a cult-like status almost equal to the self-described ‘apes’ that cheerlead for meme stock AMC Entertainment Holdings Inc.” Will it suddenly fall out of favor, as is often the case with the latest hot investment? “That,” he adds, “is what inevitably happens when sentiment gets extremely hot,” he says, “and it may be happening now.” With that in mind, it might be wise to consider the extraordinary leverage at work in the currency markets – a prospect that suggests the risk of a meltdown. The Office of Comptroller of the Currency reports notional derivative exposure in FX trading at $43.6 trillion – second only to interest rate derivatives. In other words, though it might seem far-fetched at this juncture, there is potential for a downside just as fearsome as the upside.”
I have asked this in the past too … what happened to the interest rate derivatives in the light of 10-year rates going from under 1% to 3.48%
Someone had to fail on those bets, right?
GL
Thanks for this post. The material from the link is excellent. Here is one example: ““Historically speaking, if you buy gold when the yield curve inverts and hold that gold for 36 months (three years), you’ll make a solid return. At some point during this period, there will be a wild swing in gold prices, and those who are patient could reap rewards. This has worked like clockwork.…If we take the average of the last three times this happened, the price of gold jumped by about 30%. Assuming something like this happens again, we could be looking at gold that’s well above $2,200 per ounce.” – Moe Zulfiqar, Lombardi Letter
Thanks Sir CM!