Friday, March 25, 2016

The Yen, Oh Man

If you have never heard of Horseman Global, you are in for a real treat.

It's a hedge fund that has been generating phenomenal returns since 2012:

2012: 16.27%
2013: 19.15%
2014: 12.63%
2015: 20.45%

Over 4 years, that's a disgusting 88% returns in a mere 4 years.

And guess what's more amazing? This hedge fund has been net SHORT since 2012. 

So when this guy speaks, I listen and I listen good. ZeroHedge breaks it down, but the idea isn't too complicated to understand.

I was just talking to my friend recently about the strange relationship that the Yen has on financial markets, so this is quite coincidental.

Although Japan is blowing up their economy on multiple fronts (bad policies, horrible demographics, weakening technological advantage) and that should eventually translate to the Yen being much less valuable, the carry trade with the Yen is also very significant. The Yen is pretty much the world's favourite pair for carry trade since forever. So although I do think that the Yen eventually becomes significantly weaker in the future, I still do think that in the short-term (less than 3 years) the Yen will strengthen along with the declines of the global equity markets.

In all honesty, I have little faith in the long term competitiveness and value of Japanese companies. Don't get me wrong, I love the place. But as an investor, I really don't see anything too awesome about Japan fundamentally at all. Japan has a lot of structural problems that isn't being addressed, especially by weird government policies.

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