Treasury Notes lost 6% this year (24% annualized)

[powayseller]

Ok, guys, what is this country coming to, when our Treasury notes are losing value at 24% annualized? So much for the most powerful economy…

Last year by this time Tnotes of 10 years or longer gained 4.25%, this year they lost 6.5%.

The dollar keeps losing value against the yen and euro. “Taking the currency’s drop into account, longer-maturity Treasuries produced losses of 14.4 percent for a euro-based investor and 12.5 percent for a yen-based investor this year.”

Why don’t we all just buy CDs in euros and yen?

[sdduuuude]

This is interesting

[powayseller]

sure is…the yen pays no interest,but at least you’re not losing 10% annually to inflation.

Has anyone here ever played the currency markets? I know it’s a high-risk game, but with the certainty of the dollar continuing to lose value, I see equal risk in holding dollars.

[Anonymous]

You had to know you would hear from me on this. I have traded currencies quite a bit, but not recently. When they combined them to the Euro it took away the Swiss Franc, which was my favorite one to trade.

I have been in the process of developing a trading system for the Yen, but it is a work in progress.

That COT report that everyone loves to hate is valuable in currencies as well.

[picpoule]

What if Bernanke continues to raise interest rates? Won’t that help the dollar?

[powayseller]

It should. The IMF is meeting in July to figure out how to save the dollar. UK’s Observer writes IMF acts to avoid markets meltdown. There is a global dollar sell-off. “We’re in a meltdown mode”, according to Bear Stearn chief European economist David Brown.

[lewman]

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.

[powayseller]

Where are you invested now? I like your philosophy, and it is similar to mine. The Inverse Funds are interesting. RYWBX is a way to bet against the dollar without having to buy foreign currencies. However, I thought of getting euros through an Everbank account.

[lewman]

I have exposure in most major foreign currencies except CAD but am looking to add that to my portfolio either by buying the currency or investing in canadian stocks.

Beware that these currencies seem to have gone up a bit too far too fast since 05Q4 and along with gold (if you think of it as a currency as well), they’re starting to soften a bit.

I’ve never used Everbank but currency buying/selling is such a commodity I don’t think there’s a huge difference which bank you go with.

[powayseller]

Do you have any charts for the COT currency report? I do like your blog, Chris. I check it every day.

[Anonymous]

Poway

Yes I do. The yen is showing the commercials net heavily short. That is why I had said I was looking for a short sale setup. I have not looked at the others yet.

It is still in a strong short-term uptrend, so it has to break that before I will consider entering. But, certainly no longs with this setup with the commercials.

[powayseller]

What about the euro? Or the renminbi – can that be purchased?

I see Gold is coming off its high, just as you said. Do you wait to buy until you see the Commercials long, or do you wait for a certain % decline? I would like to take a large position in gold, but am waiting for a pullback.

[Author]

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