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Were they referring to the "Yen carry" or "USD Carry" trade. It works either way but I'm curious to see if they got it right. You basically borrow cheap and reinvest in the interest deferential and then, if you choose, sterilize any currency risk, Regards, Dr. Zhivodka

You guys are trying to out think this bond move and in the process you're being too smart by half. Bonds and currencies don't trade like shares. Don't try to force them to. Let them do their thing. Give them a wide berth and then hang on and ride the wave. :) Dr. Zhivodka

Of course!! Forget deflation! It's a fable, a fairy tail. It was never happening in the first place. It was a rouse to get the knownothings in the media and financial community to begin to "parrot" the Fed party-line. It worked. The Fed is printing money and injecting liquidity...

Interestingly enough the global interest rate markets seems to be even more correlated now than they normally are, which is very highly indeed. In addition to the U.S. yield curve getting absolutely smoked in here, the JGB's (Japanese Govie Bonds) are getting crushed like there's no tomorrow...

You're defeating the purpose of trading the Bonds. When they finally decide to change directions they tend to stay decided. Plus, it always helps to hide your P/L blotter from yourself during the trading day. :) Regards, Dr. Zhivodka

ROTFL :p :p :p

Long term cap gains is 15% now not 20% But the overall rate is 23% I was mistaken on the 22% =(.6*.15)+(.4*.35) = 23% Still it's a hellava lot better than a 35% tax rate. Dr. Zhivodka

I'm curious, what's your (or his) definition of Capital Structure Arb? This is not a challenge. I'm sincerely interested to see if everyone is referring to the same thing. Thanks, Dr. Zhivodka

Why do I trade what I do? Because of the tax treatment of Futures over Shares and other Cash instruments. Futures = 60/40 long term/short term cap gains = approximate 22% tax rate before deductions Stocks = straight cap gains = 35% rate before deductions. No brainer...

I was referring to only one market. Not how two or more markets relate to each other. Yes, you misunderstood my first reply. Dr. Zhivodka

Negative. The concept is autocorrelation. It's basic undergraduate Univariate Probability. Autocorrelation detects the degree of randomness in a time series. Bonds and Currencies tend to exhibit a high degree of autocorrelation. The higher the autocorrelation found in a time series...

I've traded both since '88, they both have different characteristics. Why is this? This is due to a well known concept called "autocorrelation" Learn it, live it, profit! :cool: Dr. Zhivodka

What index? Stock indices?

You got it. They can still stimulate a bit with the short end of the curve. But if they lose control of the belly and the long end the mortgage market will dry up and they know it. Also, you should be able to find the curve from your quote provider or the Journal, IBD, FT ...

Careful Grigo, the "girls" at the Del Rey are very aggressive. Also, be sure to pack your rain gear. Suffice it to say this is NOT the tourist season there. This is their "winter" and it just pisses rain like you wouldn't believe. Pura Vida

Dude, where do you get your information? Just because the media knownothings incessantly flap their gums about deflation doesn't mean that we are actually experiencing it. Just look at any any aggregate price measure. They're all still running in 2-3% per annum basis. Hardly deflation...

Forget this deflation rap. At this point it's all a rouse. The Fed is trying to have a "Mexican Standoff," where they try to confuse and intimidate bondholders/bondtraders from dumping the long end of the curve. Don't fall for it. We've already backed up 35-40 basis points from last...

Profit or Prophet? Either way there's money to be made on the inflections of either. Pick your poisons mate. :) Dr. Zhivodka

Shouldn't there be some sort of minimum market knowledge test required to be moderator? :) Dr. Zhivodka BTW: short USU3 from last Tuesday @122.00

Actually they use Principal Only (PO) Treasury Strips. Treasuries themselves would cost too much (even on max margin) and leave too little left over to trade with. Or the prime broker takes the other side your created liability. Which again, has it's associated cost. But I agree that...