Beware that even for USD based invetors returns of T-notes & bonds are not guaranteed unless you hold til maturity. 4plex posted a link to Ron Paul’s speech about the USD and gold, an excellent piece that’ll help you understand the “big” trend. As you can guess I’m sold. If you’re interested, there’s now a way for ordinary investors to short T-bonds without having to dabble in the scary world of futures. Check out the mutual fund RYJAX. It moves inversely to T-bonds.
Re: CDs. I would be cautious about the yen as the Japanese central bank is notorious for suppressing the yen to aid exporters and besides as you said the interest rate differential is just too huge (you’d be betting the yen will rise at least 4~5% before you breakeven). They haven’t done that for over a year but I won’t be surprised if they do that again if the yen continues to strengthen. The other currencies like euro, aud, gbp are better deals from an interest rate differential perspective. If you have a difficult time deciding which currency to buy, check out the fund RYWBX, which tracks the inverse of the US Dollar index. The USD index already includes a basket of foreign currencies.
And even if Ben continues to raise rates I’m not so sure it will help the USD by much. Short term maybe but my money is on the continued weakening of the USD. Remember the other countries have either started to raise rates (aussie, europe) and japan’s expected to do so by end of 2007. And the higher the interest rates, the more money will be required to service the enormous debt and that means running the printing press even harder and increase in money supply will cause its value to drop.
