Thursday, December 10, 2009

where is the risk in carry trade

There are many chats about carry trade risk (borrow U$ and invest in riskier assets). Commodities are at risk if the carry trade reversed. However, the biggest risk is the one people are not focused on. Corporate debt from Russia. Many Russia companies are highly leveraged and they borrowed U$ to finance their operation. If crude oil stay below 65 U$, a huge credit problem for Russia companies.

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