Transcript 10-Year Mini JGB Futures (go short)

Making the
trade of the
century count
__
Keith Fitz-Gerald
Chief Investment
Strategist
__
Moneymorning.com
Source: Zazzle.com Jayce79
All investments have inherent risks.
Past performance does not guarantee future results.
All investments are undertaken at your own risk.
Recommendations are subject to change at any time.
No representation is being made that any account will, or
is likely to achieve profits or losses similar to those
discussed in this presentation.
The risk of loss in online trading of stocks, options, futures, forex, foreign equities, and bonds can be substantial. Options are not
suitable for all investors. For more information read the "Characteristics and Risks of Standardized Options". For a copy, call +1
203 618-5800 or click here. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN
LIGHT OF YOUR FINANCIAL CONDITION.
Japan has defied expectations of
failure for so long that betting
against it is called the
“Widowmaker”
And that was before the earthquake
But I think the timing may finally be right
Here’s why…
If 2008-2010 were the years of sub-prime debt
http://www.businessweek.com/magazine/content/10_22/b41800274195
67.htm
2012-2015 could be the years
entire nations go broke
When it comes to contrarian plays,
Japanese Debt
Is the biggest single opportunity on the planet
• 228% of GDP
• Makes Greece look organized
• Question is not whether Japan is
too big to fail…
• But is it too big to save?
• 95% of all bonds held
domestically helping prevent
capital flight
Image: AP
• But new liquidity will challenge that
It could hit a quadrillion Yen…
Let’s put that into perspective…
…a quadrillion pennies
Source: kokogiak.com
How long can Japan hold on?
50% higher debt than
any other country
And getting worse…
Source: Bank of International Settlements
The Japanese government
took in $4.6 trillion but
spent
$5.3 trillion
in 2010
Leaving a
$700 billion gap
That they can fill by borrowing or printing
After the quake…it’s $1 trillion problem
Here’s why this matters…
Japan has historically filled the gap with
internal financing drawn from its own citizens
$8 trillion in bank deposits helps
(equals the savings of Germany, France and England combined)
**Source: John Richards North American Head of Strategy, UBS
But…
they might not be able to do this much longer
More than 1/3rd of Japan’s population will be over
65 by 2024—one of the developed world's largest
proportions of elderly citizens.
Retired households will outnumber households in
their prime saving years by 2015 - so savings rates
will fall drastically.
Younger Japanese people are saving much less than
their elders did shrinking the base further –
happening now.
Data shows this very clearly
25
Figure 1, Japan's and US's Household Saving Rates,
1955-2010 (% DHI)
"Japan's and US's Household Saving Rates, 1955-2010," (March
2011). http://sites.google.com/a/dwcampbell100.com/www/home/Table%201-2.docx
20
US
15
adjusted 68SNA Japan
revision 93SNA Japan
10
5
0
55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99
1
3
Japanese gross national savings declined
from 35% of GDP in 1990 to around 23% last year.
Meanwhile household savings rate dropped
from around 10% in the 1990s to around 2% today.
5
7
9
For households, net wealth available to
support future living standards is dropping.
For the economy, less household savings
means less money available to support
world’s fast-growing retiree population.
Therefore, it will become more difficult to
support domestic investment and sustain
strong economic growth.
All of which leads us to the following…
Debt will Exceed
Household savings
by 2015 or sooner
When that happens:
1) Debt per Japanese worker will surpass
available savings
2) Japan’s current account balance as a % of
GDP may turn negative within 5 years if
exports don’t recover
3) Higher interest rates and inflation
Japan will have no choice but to finance its deficits
externally for the first time at globally competitive rates
that are 200%
or more higher than today
This will prompt Japanese investors to
withdraw their money from savings accounts
and sell Japanese bonds…
…in search of higher yields
When that happens
Putting
upward
pressure on
rates
Global
investors
sell their
bonds
And downward
pressure on
Japanese bond
prices
Which should sound hauntingly familiar
Then the cycle repeats itself
Loss of
confidence
Inflation
New debt
is more
expensive
Falling
bond
prices
Rates start
to rise
Now is the time to act…
…before everybody else figures this out
Indeed the sharks are already circling…
The cost of
insuring
Japanese debt
is the most
expensive of
the big four
and rising
Here’s how to play along
The risk of loss in online trading of stocks, options, futures, forex, foreign equities, and bonds can be substantial. Options are not
suitable for all investors. For more information read the "Characteristics and Risks of Standardized Options". For a copy, call +1
203 618-5800 or click here. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN
LIGHT OF YOUR FINANCIAL CONDITION.
1
Buy credit default swaps
Beyond the realm of reality for 99% of all investors…
But a real opportunity nonetheless…
The risk of loss in online trading of stocks, options, futures, forex, foreign equities, and bonds can be substantial. Options are not
suitable for all investors. For more information read the "Characteristics and Risks of Standardized Options". For a copy, call +1
203 618-5800 or click here. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN
LIGHT OF YOUR FINANCIAL CONDITION.
2
Trade Futures
10-Year JGB Futures (go short)
10-Year Mini JGB Futures (go short)
10-Year Mini JGB Options (buy puts)
Available on SIMEX or CME
Singapore International Monetary Exchange & Chicago Mercantile Exchange
The risk of loss in online trading of stocks, options, futures, forex, foreign equities, and bonds can be substantial. Options are not
suitable for all investors. For more information read the "Characteristics and Risks of Standardized Options". For a copy, call +1
203 618-5800 or click here. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN
LIGHT OF YOUR FINANCIAL CONDITION.
3
Or…
Sell - Vanguard Japanese Government Bond Index
Fund – USD (VJGVU) $100k min; Ireland
Buy - ProShares UltraShort Yen ETF – (YCS)
***Buy longest date call options on YCS
The risk of loss in online trading of stocks, options, futures, forex, foreign equities, and bonds can be substantial. Options are not
suitable for all investors. For more information read the "Characteristics and Risks of Standardized Options". For a copy, call +1
203 618-5800 or click here. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN
LIGHT OF YOUR FINANCIAL CONDITION.
Some final thoughts…
1. Patience
2. Will accelerate very quickly
3. Speculative
Thank you!
Friday
1100 Conquer the Greatest Money Migration
1615 Making the Currency Trade of the Decade Count
Saturday
1630 The best places to hide from the falling dollar
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