global market slipidy slide

 

God! I hate to be the one to bore you with the economy. Forgive me but it makes great stories. I am broke. Yep. Broke and it feels good. I don’t know have so the temptation to spend is dead. I looked at my 401k today and saw that it fell by 31.5%. Holy Mackerel! 31.5% – I hope you understand the seriousness of this. My good friend Chhoyster tried to cheer me up; he said that if I benchmark by 401k to the S&P index, I’m not doing so badly…as the S&P went down 40% or so.

 

Anyhow, I was reading an article on TIME.com about how emerging economies are slowly feeling the burden of current market situation. This is bad news. The hope was that in case the States doesn’t recover quickly from this debacle emerging nations will “emerge” and try to sustain the world economy. This isn’t the case as even BRIC nations (Brazil, Russia, India and China) appear to be struggling…some to the extent that they are seeking bail out from the IMF. But this is understandable of course considering the market complexities that intertwine these economies.

 

I wish I had known earlier about the yen carry trade. What does this mean? The yen has always loaned money at really low interest rates, 0.5% as a matter of fact. Now, compared to the 6% or higher of other countries, its not rocket science that the yen’s rate was practically a steal. Some people into FX trading would borrow the yen at this low rate and invest in countries with much higher rates…and of course pocket the spread (the difference). Genius! On Monday the yen was at a 13 year high against the dollar. Why? Because people were able to pay back yen loans unlike in the US where people can’t afford to pay back dollar loans.  This is return has made the yen the “cool kid on the block”. Finance is pretty amazing sha…you got to love it. (Sola do quick and open Sola Investments Inc.)

 

There is a lot to learn from the current market trends.  My prayer is that the naija geniuses all over the world, will some day return home to make our country a much better place and of course revamp the Nigerian Stock Exchange.

 

Pax

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