Can you see another carry trade blowing up? I can...and I am quite sure there will be many more. The issue is compounded by the fact that, despite PIMCO's best efforts, the fed and the government need interest rates on treasuries to remain low...at this point that is likely a far greater priority over keeping stock markets afloat. The fed can not itself control the interest rate on the 10 and 30 year...they need the market to do that...their best option is to pull their support for inflation assets and to support the dollar...which would happen regardless - with or without their efforts. If this case were to play out, as I believe it will, mist money managers, including Bill Gross, will be left at the station and on the wrong die of the trade which will only serve to accentuate the pain.
