Ray Hendon

The Burden of the Carry Trade

Hi, Mark

I don't know your situation, but as a general idea I like the ETFs of Rydex and Wisdom Tree. The specific ones to buy will depend on the strategy you wish to follow. The carry trade options are limited to about five, and a value strategy is even more limited. I have had good success with both the FXM and BZF funds, but I also like Australia (FXA) as a value play and as a carry trade prospect. China (CYB)) is probably the best value play, in my view, but CYB doesn't hold the yuan, it buys forward contracts, and the interest earnings are unattractive.

For strategy funds, I prefer DBV over ICI simply because I prefer the Deutsche Bank Index over the Morgan Stanley Index--but I have no way of knowing which would be better over the years. Right now, DBV has outperformed ICI by a small margin, but both are young funds.

I have also read of strong recommendations on the Swiss Franc (FXF), but I would encourage you to do some research on this currency--it has a long record of good stability and a haven in the storm type of play, but I don't know what to expect of it as a growth prospect.

I am a long term investor, so I don't look for fast turnover. You may be of a different temperment, so I can't give you advice or opinion of much value.

Good luck.

Ray