Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Covid, Debt and Precious Metals - 3rd Jun 20
Gold-Silver Ratio And Correlation - 3rd Jun 20
The Corona Riots Begin, US Covid-19 Catastrophe Trend Analysis - 3rd Jun 20 -
Stock Market Short-term Top? - 3rd Jun 20
Deflation: Why the "Japanification" of the U.S. Looms Large - 3rd Jun 20
US Stock Market Sets Up Technical Patterns – Pay Attention - 3rd Jun 20
UK Corona Catastrophe Trend Analysis - 2nd Jun 20
US Real Estate Stats Show Big Wave Of Refinancing Is Coming - 2nd Jun 20
Let’s Make Sure This Crisis Doesn’t Go to Waste - 2nd Jun 20
Silver and Gold: Balancing More Than 100 Years Of Debt Abuse - 2nd Jun 20
The importance of effective website design in a business marketing strategy - 2nd Jun 20
AI Mega-trend Tech Stocks Buying Levels Q2 2020 - 1st Jun 20
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? - 1st Jun 20
The Inflation–Deflation Conundrum - 1st Jun 20
AMD 3900XT, 3800XT, 3600XT Refresh Means Zen 3 4000 AMD CPU's Delayed for 5nm Until 2021? - 1st Jun 20
Why Multi-Asset Brokers Like TRADE.com are the Future of Trading - 1st Jun 20
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

The Next Currency to Crash

Currencies / Forex Trading Oct 22, 2009 - 05:11 PM GMT

By: DailyWealth

Currencies

Best Financial Markets Analysis ArticleDr. Steve Sjuggerud writes: "What's your slam-dunk currency trade right now?"

I asked my friend Jack that question earlier this week...


Jack's the best guy I know at currency analysis. I've known him for 16 years. Back in the mid-1990s, we worked 20 feet away from each other at a firm specializing in international investing. Jack taught me a lot about currencies and managing my trading (cutting your losses and such).
This week, I drove down to tiny Palm City, Florida, where Jack's Black Swan Trading group is based. We spent a few hours catching up.

Jack explained his favorite trade right now... and he explained an easy way for an individual investor to take advantage of it...

In short, Jack thinks the Japanese yen today is like a ticking time bomb. It's ready to explode... We just don't know when. As of this month, the time may be right.

You see, right now, the Japanese yen is extremely overpriced. It's just off a huge high versus the dollar. The only time it's been higher against the dollar was in early 1995.

Since that's the only similar high in the yen's history, let's take a closer look at what happened next...

In 1995, the Japanese yen was comically overvalued. Everyone knew it. But just like the last six months, the yen kept going higher. Then the bottom fell out.

Soon after the yen peaked in 1995, it crashed... The yen lost 20% of its value in three months and a total of over 40% of its value in three years. That's an astonishing fall in the value of a developed country's currency.

Back then, if you'd bet against the yen with just a little leverage, you could have made a whole lot of money – easily triple-digit gains... even more depending on how you traded it.

Jack told me we're seeing a similar setup today in the yen... and the potential is there for similar gains.

You see, the Japanese can't raise interest rates, since the economy is in the tank. And the Japanese government is issuing more debt to make up for its shortfall in tax revenues. So in essence, it's creating more money out of thin air.

Look, when a currency pays no interest, and its government is writing I.O.U.s, then the value of a currency should fall. Nobody wants something that pays no interest and is increasing in supply.

But for the last six months, the Japanese yen has done the opposite of what it "should" have done. It's gone up... until this month. Jack believes after its huge rise from April, the yen may finally be changing its trend.

In the past, it was tough for individual investors to bet against the yen, particularly in retirement accounts. You couldn't trade futures or options, and you couldn't go short. But now, there's a way to bet against the yen AND get a bit of leverage AND do it all in your retirement account. It's through the ProShares UltraShort Japanese Yen Fund (YCS).

Here's a chart of YCS over the last six months. You can see as the yen has strengthened, these shares have crashed... down from $25 to $20 in the last six months.


But the fund is already up from $20 to $21 this month as the yen has weakened. (It's a "double inverse" fund, meaning for every 1% move down in the yen, this fund should move up 2%.)

A move back to April's level of $25 would be a 25% gain from YCS' lows around $20 – and even then, the Japanese yen would still be near its all-time highs versus the dollar. My point is, even after that gain, there's still much more room to run.

If you know my writing, you know I look for three things in a trade: 1) cheap, 2) ignored or hated, and 3) an uptrend. In the yen's case, we have all three.

Time to follow my friend Jack's advice (the best currency analyst I know), and bet against the yen. The double-inverse Japanese yen fund (YCS) is the smartest way to play it. Thanks, Jack!

Good investing,

Steve

P.S. For more on Jack, or to sign up for his free daily letter on currencies, go to www.blackswantrading.com.

http://www.dailywealth.com

The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

Customer Service: 1-888-261-2693 – Copyright 2009 Stansberry & Associates Investment Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This e-letter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry & Associates Investment Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Daily Wealth Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Mike F.
23 Oct 09, 13:31
Yen

I thought this same over the summer...proceeded to drop 500 pips. Won't get fooled again?


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules