Currency Wars – Japan Turns Up Heat

This is getting really interesting.

Getting this right could provide some of the absolute best trade opportunities of 2013. I plan to take full advantage. Considering that I expect the coming year to be extremely difficult to trade (and a real minefield for those with little experience) focusing on “what works” will be essential for survival.

As I’d mentioned in a previous article, the dynamics surrounding the U.S Fed’s plans to “print their way out of debt” and the dynamics of Japan’s recent foray into the “monetary easing business” are very different – and well worth pointing out.

Bottomline – Japan’s public debt is predominantly domestically owned (95% is owned by Japan’s own citizens) while the U.S owes more than 50% of its debt to foreigners. Japan’s printing will have little ramifications (globally speaking) and essentially they can print forever – managing  this domestically, with almost no risk of default.

Sooner or later holders of  U.S debt are going to get extremely “choked” as the dollar denominated paper they own is driven into the ground…and worth less and less and less…….

http://potstockwatch.com/2012/12/14/japanese-economic-story-trading-the-yen/

A quick look at a long term weekly chart of the AUD/JPY.

Forex_Kong_Currency_Trading

Forex_Kong_Currency_Trading

The recent monetary policy shifts/ implications out of Japan are a game changer if you ask me – and will likely be cornerstone to my trading plans moving forward. Eventually (as well with consideration of “eventual” rising interest rates in America) the U.S game will come to an end. It’s gonna be messy, and it’s gonna be tricky to trade.

The Yen (at least for now) appears to have a much clearer path on its road to “devaluation” than the USD – as the currency wars are now really starting to heat up. Opportunity will be found shorting both, but the fundamentals suggest that the Yen may provide an easier path to profit.

11 Responses

  1. AlexB December 27, 2012 / 8:55 am

    Let foreign government have 100% of our debt. Its only on paper. Remember : when you owe $1000 banks owns you , when you owe 1 bil , you own the bank .

    • Pot Stock Watch December 27, 2012 / 9:40 am

      Not sure I understand where you are coming from Alex – I assume you are American?

      That being the case then well…..China already owns you no? Who do you think the bank is in this case? ie…..U.S has borrowed and borrowed and borrowed…as I see it clearly being the client. As well….if Ben stopped buying the debt himself, rates would fly as no one else is touching U.S debt with a 10 foot pole.

  2. pimacanyon December 27, 2012 / 10:49 am

    interesting site, I like your commentaries. Looks like you’ve been at this currency trading thing for a while, eh?

    can I ask you’re currently positioned? How long are you typically in a trade?

    • Pot Stock Watch December 27, 2012 / 11:11 am

      Hey Pimacanyon!

      Im in 13 individual pairs at the moment – all risk on, and in general short JPY and USD. I can’t keep up posting each and every trade as I it would be too much work for now. Thanks for dropping by the site, and (it sounds like) reading over my posts of the last several weeks. These last few months have been incredible.

      I hope to answer any other questions you have!

  3. pimacanyon December 27, 2012 / 10:51 am

    just entered a comment, but it didn’t appear, so this is a test. maybe you have to approve comments before they show up?

  4. pimacanyon December 27, 2012 / 10:53 am

    weird… well, it lost my last comment. what I said was:

    Nice site, I’ve appreciated reading your commentary over the past couple or three weeks. Seems like you’ve been at this currency trading thing for a while, eh?

    Can I ask how you’re positioned? When you open a trade, what’s your typical holding time before you close it?

    Thanks, and good luck to you!

  5. pimacanyon December 27, 2012 / 11:26 am

    Kong, thanks for the reply. You seem to have a lot of confidence in the risk on position. good luck with it. I’m also risk on, longer term SSO and QLD positions I’ve had for a while. Not liking the SPX action today though. The fiscal cliff has the markets all plugged up. However, the cliff is such bad news and yet the markets keep holding up (relatively speaking) that it looks to me like once it’s resolved–even if it’s only a can kick–risk assets should move quickly higher. Full moon tomorrow morning, maybe it will mark the turn.

    • Pot Stock Watch December 27, 2012 / 11:40 am

      This market is grinding everyone in equities. As it stands…the currency market has been playing out exactly as planned – short of the USD taking a much slower “dive” than I’d expected.The fiscal cliff is a complete embarassement for Americans – it’s really too bad.

      Your positions are taking a bit of a hit here today yes – but I imagine (as you’ve suggested) things will quickly turn upward and be off to the races here any day now. Good luck as well man – please keep me posted!

  6. Ikti December 27, 2012 / 11:43 am

    Looks like I have my volatility jump and at the same time you have your weaker yen. Interesting market…

    • Pot Stock Watch December 27, 2012 / 11:51 am

      Totally.

      It’s really tough for anyone out there that may only be looking at a single asset class or individual equity/currency/whatever! As everything is thrown into the pot at once – to ultimately confuse and counfound as many as possible.

      So many normal “co relations” out the window.

      Nice work volatility wise – wow. Nice.

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