ikkyu

Rising Interest in Currency Funds

Greetings,

As always, a great overview by Mr. Shaw

To throw my 2 yen into the discussion, I think the carry trade makes sense as a default position for engaging in currency markets. I don't think that is highly disputed among currency experts. Of the three major techniques for trading currencies, valuation (PPP), momentum, and carry, carry has by far the best risk-adjusted returns. Don't take my word for it though. Compare various indices:
https://index.db.com/d...

Also, carry trading really compliments a bond heavy portfolio, as there is a fairly constant negative correlation.

Cheers from Osaka,
john

Currency ETFs: Consider the Commissions

Greeting Ray,

Fair enough my friend.... different strokes and all. Funds like DBV and JEM may be useful, if expensive.

If there is a bundle to be made, carry trading is likely the best way to do it IMHO.

Best wishes and thanks for your opinion.

john

Currency ETFs: Consider the Commissions

Greetings,

I agree with the original poster on these costs being absurd. Any medium to long term forex strategy is going to be better accomplished with a forex broker. ETF's are a primitive way to get such exposure.

I am not sure where Ray is getting his quotes from. I show a spread of around .007% for EUR/USD and .039% for USD/MXN. That is more like 5.6x than 100x, my friend.

For a one year holding period costs are 57x cheaper using the broker OANDA for EUR/USD than the ETF FXE. That is not counting the bid/ask spread on the ETF or commissions, which could jack this up considerably. You have no further costs after that (outside of interest on a negative carry) no matter if you hold for years. So there is virtually no comparison cost wise.

See spreads and carry interest for Oanda here:
www.xrof.com/index.htm...

These ETFs are a scam. This is the cheapest market to trade in the world! Hell, SPY has what like .17% expense ratio?

Also you didn't mention the tax advantages. If you document yourself as a professional trader, you get 60/40 (LT/ST capital gains) like for futures trading.

Here is another article similar to yours:

www.thefinancialwhiz.c.../

I like Ray, he seems cool and quite thoughtful, but ETFs are blunt, expensive ways to trade currencies not matter how long your holding period.

Best wishes,

john

ETF Update: Pharma ETFs, Commodity ETFs, Carry Trade

Greetings,

You have repeated Hougan's error. DBV is leveraged 2:1. The prospectus probably should be read by "professionals."

Cheers from Osaka,
John

DBV: Unlevered Carry Trade ETF for the Masses

My friend, you might read the prospectus. It is levered 2:1, but I agree its a nice fund.

Cheers,
john

Currencies: Dead Cats and Yapping Dogs

Greeting Ray,

Thanks for the ongoing articles about FX carry. It is amazing to see how little info there is out there for such an awesome strategy. You are about the only mainstream writer that details it.

Also, thanks for alerting us to JEM, not sure how i missed that.

I think that you will find JEM and DBV have strong correlation in a rising to high volatility market, so i am afraid that i don't share your diversity views with respect to regions and countries. Just compare USD/TRY and NZD/JPY over the last couple years to see what i mean. Many people look at fx carry as a trade with a risk premium because the reversals are so violent. I see FX carry collectively as being either ON or OFF.

I also do not believe the principle moneymaking of FX carry lies in collecting interest, but then i only employ pairs with a spread >3%.

Nonetheless, i share your enthusiasm. And look forward to more thoughts.

Cheers from Osaka,
john

Foreign Currency Trading: Can Investors Profit From Trends?

Mr. Swedroe,

Thanks for your response. If markets have a risk premium then they have an inherent uptrend. And that is what buy-and-holders are exploiting. Interestingly, risk premium is generally the explanation for why carry trading is persistent.

Cheers from osaka,
john

Strategies for Currency Investors

nice post. I would recommend carry trading as the default strategy and maybe go from there if you are ambitious. Also OANDA is the best retail broker in my opinion. The have no minimum size trading lot, which has huge ramifications for P/L. You can make a one dollar trade if you wish. Oanda is a favorite for carry traders.

For instance, you could mirror the DBV strategy with no fund-fees just the spread. (also DBV is 2X fund).
cheers from osaka,
john

World Interest Rate Overview: Abandoning the US Dollar

It's true. The USD is now with the yen and CHF in the bottom 3 yielding currencies of the G10 and DBV will reset to show this on Mar 17 when they roll the futures. Now whether you or i have the huevos to carry trade currently is another issue altogether! I want to see volatility hit an intermediate extreme and then i am there.

Cheers from osaka,
john

Foreign Currency Trading: Can Investors Profit From Trends?

My mistake it is published in fall 2007 Journal of Portfolio Management.

Foreign Currency Trading: Can Investors Profit From Trends?

P.S. perhaps a non-published, non-peer reviewed paper is not necessarily "evidence."

Foreign Currency Trading: Can Investors Profit From Trends?

If markets don't trend, why would you invest in anything?

Yen Carry Trade Unwinding? Not So Fast...

My friend,

There was a major inflextion point in the yen around june 21. If counter-trend trading is your bag, so be it. No trend trader would be near this right now. I agree that waiting on japan to do anything has a "lifetime risk" (i.e. you could die before the government changes course).Ultimately, neither you nor i knows how much yen has been borrowed and where it has been put to use. My wealth increased significantly through holding yen in my paltry .8-1% savings account (vs. $).

How much upside are you talking about? You just don't see Soros blogging about macroeconomic situations....

best wishes from osaka,
john