Thinking about betting against Japan

[stuntman stoll]

I think it may be time to start betting against Japan. From what I've read, some big hedge funds have been doing this for years, and have been losing money; but maybe not because they're wrong, but too early.
What is the best way to go about this? I was thinking of something like buying an inverse Japanese bond fund like this https://www.google.com/finance?q=NYSEARCA:JGBD&sq=japan+bond&sp=1&ei=NauXWOncN8fDjAG8-6-QAQ , along with shorting their forex currency pairs.

 

[opal]

I don't have a clue about investments for Japan but evidently, because of their ZPG policies.. it's been predicted that by 2060 - there won't be any Japanese left.

 

[presence]

I just created this for you... should be useful

Monthly USDJPY to 1971

http://pastebin.com/e09TnVPY

via spreadsheet chart





data from here

https://www.investing.com/currencies/usd-jpy-historical-data

would seem USDJPY is approaching a long moving average crossover toward bull





USDJPY 1971 to current w/ 200 month and 50 month average

import csv
import numpy as np
import matplotlib.pyplot as plt

def moving_average(a, n) :
    ret = np.cumsum(a, dtype=float)
    ret[n:] = ret[n:] - ret[:-n]
    return ret[n - 1:] / n

close=[]
date=[]

with open('usdjpy.csv', 'rb') as f:
    reader = csv.reader(f)
    for row in reader:
        close.append(float(row[1]))
        date.append(float(row[0]))

close = np.array(close)
date = np.array(date)
        
ma_long = moving_average(close,200)
ma_short = moving_average(close,50)        

for i in range(len(close)):    
    plt.plot(date[i],close[i],'r-' ,marker = '.')
for i in range(len(ma_short)):
    plt.plot(date[i],ma_short[i],'g-' ,marker = '.')
for i in range(len(ma_long)):
    plt.plot(date[i],ma_long[i],'b-' ,marker = '.')
        
plt.show()
plt.pause(0.1)

 

[stuntman stoll]

Sooo, I didn't look too closely at the 3x inverse bond ETF that I linked to in the first post... but apparently it kind of disappeared/was delisted last fall (I can't really find info about what happened to it). Also, it was/is run by Deutsche Bank which will probably either go the way of Bear Sterns or Lehman.

So am I limited to simply shorting the Yen, or is possible for a novice to directly short bonds as well?

 

[Zippyjuan]

Shorting can be a risky way to invest. Trying it with foreign currency bonds adds to the risk since there is the risk of the currency values changing besides the value of the underlying asset changing. A multiple inverse (like the 3x mentioned) magnifies those risks. https://www.thebalance.com/inverse-bond-funds-the-risks-and-benefits-416950

Risks of Inverse Bond Funds
Inverse ETPs provide investors with a greater number of options, but also a greater number of potential dangers. First, betting against a particular market segment is, by its nature, a sophisticated strategy that may not be appropriate for all investors. Before buying such a product – and in particular one of the leveraged funds – be sure to assess your risk tolerance and make sure you understand that inverse ETFs are designed to be short-term trading vehicles.

Also, don’t forget that although they are bond funds, the leveraged versions are highly volatile in nature. For example, in the interval from July 25 to September 22, 2011, the yield on the 10-year Treasury note fell from 3.00% to 1.72% as its price rose. During that same interval, the price of Daily 7-10 Year Treasury Bear 3x Shares (ticker: TYO), a triple-inverse ETN, fell from $38.23 to $28.02 – a loss of 26.7%. Make sure you can tolerate this type of volatility before you invest.

Risks of Double and Triple Inverse Bond Funds

Investors also should be aware that the two- and three-times inverse funds only provide the expected inverse performance on single days. Over time, the effect of compounding means that investors won’t see performance that is exactly two or three times the opposite of the index. In fact, the longer the time period, the greater the divergence between actual and expected returns.

A quick example: in a single day, an inverse Treasury ETF might lose 2% if the market rises 1%. It lost one third of its value during its just over five years in existence and rarely went up.

Over a month, the return might be -6% (not -4%) on a 2% loss for the market. In a year, an investor may see a -26% (not -20%) loss on a 10% downturn in the market. This is only a hypothetical, but it illustrates the divergence that can occur over time. This is the most important reason why the leveraged inverse funds shouldn’t be considered long-term investments.

As to what happened to the fund in the OP:

http://www.businesswire.com/news/home/20160909005895/en/Deutsche-Bank-Redeem-Exchange-Traded-Notes

Over its final five years, its value fell from $20 to $13.

If you are unsure about how an investment works, it is good to stay away from it.

 

[Krugminator2]

Sooo, I didn't look too closely at the 3x inverse bond ETF that I linked to in the first post... but apparently it kind of disappeared/was delisted last fall (I can't really find info about what happened to it). Also, it was/is run by Deutsche Bank which will probably either go the way of Bear Sterns or Lehman.

So am I limited to simply shorting the Yen, or is possible for a novice to directly short bonds as well?

Are a country's bonds and the country's currency directly correlated and the same bet? (Hint: No. Not usually)

Leveraged etfs are trading vehicles meaning hold time should be less than 5 days. Buying a triple leveraged inverse etf and holding is a good way for a guaranteed loss because of the way they rebalance. Here is a chart of the triple leveraged gold miner etf http://bigcharts.marketwatch.com/ad...rsToggle=false&chartStyleToggle=false&state=9 Here is a chart of the triple leveraged inverse gold miner etf. Notice they both end up at zero. http://bigcharts.marketwatch.com/ad...rsToggle=false&chartStyleToggle=false&state=9 Shorting leveraged ETFs on large spikes might be worth considering. A better strategy might be to not trade and do something you will be more productive at.

 

[P3ter_Griffin]

I'd suggest finding some Japanese manufacturers that make a lot of their money through exports to take a long position on. They would benefit from a weaker Yen and have productive value between now and when/if what you're betting on transpires. IIRC they are well recognized for manufacturing and exporting machines/robotics for manufacturing businesses in other countries. Overall less of a lottery ticket potential probably but it would also reduce the risk of your endeavor.