FXY And The Yen Carry Trade

Watching Fast Money tonight... I mean, you have to right? and they started discussing ways to hedge against the down market.

Most everyone knows about the QID and the SDS, the inverse ETFs.

However, they also mentioned the FXY, a stock that "the Fly" mentioned today on his site. This is an interesting play, because, as they explained on Fast Money, if you believe that the contagion in subprime will lead to an unwinding of the Yen carry trade, the Yen will have to go up.

They also mentioned that a rate cut is now priced in BEFORE the Fed meets in September. That doesn't mean it will necessarily happen, but as Mackey stated, a surprise rate cut "will kill the USD." And if the USD goes down against the Yen, again, FXY benefits.

Meanwhile, I bash CNBC all the time. But Fast Money is a good show.

UPDATE: Commentor "Gappingandyapping" over at Fly's place hooked me up with this link by our friend Woodshedder. It explains the Yen carry trade very nicely. The charts are from February or March though...