I’m moderately literate in stocks, but I had to look up carry trade.
“A carry trade is a trading strategy where an investor borrows at a low-interest rate and reinvests in an asset or currency with a higher rate of return1. Essentially, it involves profiting from the interest rate differential between two currencies or financial products. For example, someone might borrow in a low-interest rate currency and invest in assets denominated in a higher-interest rate currency. However, carry trades come with risks, including currency fluctuations and potential losses1. It’s a strategy best suited for sophisticated investors with a high risk tolerance1. 🌟”
And when you borrowed Japanese yen to buy US dollars, and you get a margin call on your loan, you are forced to sell the US stocks you bought with the money.
...and with an implicit government bailout.
“It’s a strategy best suited for sophisticated investors with a high risk tolerance1. 🌟”
Translation: Someone with the ability to move markets and that has insider information.
Me too. The story was written in Investing, not in English.
Thank you. I was thinking transportation/shipping/haulage.
It also ties in with “counter party” risk.
If I make a deal with a 99% prospect of making $100, but a 1% chance of losing $10,000, then I’m a fool because the return is not worth the potential risk.
If someone makes a deal with me where I have 99% chance of making $1 million, but a 1% chance of losing $1 billion, then he’s a fool. I’m almost certain of making $1M, and if I lose I say “I don’t have a $billion, talk to my bankruptcy lawyer”