Library of Mistakes
EP 26: The Rise Of Carry (with Tim Lee & Kevin Coldiron)
Jun 18, 2024
Tim Lee and Kevin Coldiron discuss the impact of carry trades on emerging markets, implementation of transaction taxes in Latin America, and the repercussions of central bank interventions on carry trading and future monetary policy.
43:13
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Quick takeaways
- Carry trades rely on low volatility for success, posing systemic risks if central banks intervene inadequately.
- Speculative capital from carry trades hinders emerging markets' stability, suggesting transaction taxes and capital controls as preventative measures.
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Overview of the Library of Mistakes Podcast
The podcast episode introduces the Library of Mistakes, a collection housing over 4,000 books on repeated errors in finance and business. The discussion revolves around a book titled 'The Rise of Cary' that delves into the consequences of volatility suppression in financial markets. The book highlights that carry trades are reliant on volatility remaining low, showcasing examples like currency trading and selling put options. Moreover, it points out that leveraged positions amplify the risks associated with carry trades.
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