Speculation has run rampant in recent years in real estate, commodities, private equity, farmland, the carry trade (borrowing a low-yield currency, lending a high-yield currency), emerging market equities and debt, junk bonds and leveraged loans.
This anomaly seems to justify fears that speculative carry trades, where funds from low-interest countries such as Japan are used to buy high-yield currencies, have pushed the yen too low.
There is no assurance that owning foreign stocks will yield a currency benefit.
They will borrow money in low-yielding currencies to invest at higher yields elsewhere (the carry trade).
To boost yield, many funds do not hedge exchange-rate risk but exploit it by buying high-yielding currencies like the real.
Forecasting interest yields and currency movements also plays a role in determining future costs, especially on the life side.
DAVID Woo of Bank of America Merrill Lynch has just released a fascinating note on quantitative easing (QE), bond yields and currencies, entitled "The precise meaning of diminishing returns".
Carry trades borrowing in low-yield foreign currencies and investing in higher-yield ones also became popular.
Resolving our economic troubles will depend much more on reinvesting in education, transportation and other government services, basic science and applied research than on forcing China to yield on its currency.
This could have been due to the anticipation of higher interest rates giving the currency yield support in 2010, or it may have been due to the inverse relationship between the dollar and risky assets this year.
Mr. Cook claimed to be generating those profits by performing a so-called carry trade that allowed him to game the differences on currency yields in various countries.
