I talked the other day about Boris Schlossberg's presentation at the FXCM Expo in Dallas. He discussed the fact that the EUR/JPY might be a vehicle for understanding the global appetite for risk: as the EUR/JPY falls, it shows a reduction in the global risk appetite. Here is what the global risk appetite looked like yesterday:
Then, yesterday, Google (GOOG) disappointed on its earnings. Here is a side-by-side chart of Google and the EUR/JPY from this morning. You can click on the chart to enlarge it:
So, is Google now a good proxy for understanding global aversion to risk? It seems to me that the price of Google's stock probably does a fine job representing the hopes, aspirations, and delusional get-rich-quick mentality of not only your average retail investor, but of hedge funds too.
I think it's fair to say that when the world's investors start running away from risk (whether it's the carry trade or Google, or Webvan and Pets.com, or Tulips, for that matter), they run away from <em>all the risk. They don't just sell their shares of Google. They start selling their shares of everything that has been bubbly, frothy, overpriced and overhyped.
Today might not be the day for the total collapse of the carry trade and Internet economy 2.0. But I'm gonna keep my eye on GOOG just in case.
