by winston » Fri Oct 13, 2017 2:32 pm
not vested
Frightful ETFs to Flee: Guggenheim CurrencyShares Japanese Yen Trust ETF (FXY)
The Guggenheim CurrencyShares Japanese (NYSEARCA:FXY) ETF is structured to invest in derived securities that are structured to track the price movement of the Japanese yen against the U.S. dollar.
And that’s been a minor success so far this year seeing a little gain of some 3%. But that pales in comparison to how the ETF has performed for the trailing twelve months losing over 8% and a whopping loss of nearly 32% for the past five years.
Moreover, the yen has a litany of challenges that should result in not only wiping out that minuscule bounce but a continued downward march against the dollar.
At the top of the list is the near to negative short-term interest rates. This means that traders and investors from private equity to hedge funds continue to use the yen as a funding currency.
By borrowing or swapping yen investors can in effect borrow at a near zero or negative interest rate and use the proceeds in higher performing assets or higher-yielding currencies.
And with the economy while up in some sectors seen as fragile, particularly in the vital retail sector, the Bank of Japan has little to no room to direct interest rates higher.
Meanwhile, U.S. and many other markets are already posting somewhat higher yields even if modestly, but that’s all it takes to make shorting the yen a worthwhile and risk-controlled bet.
Good for those selling the yen, bad for those investing in this ETF. And even with many Japanese corporations faring better in their earning, much of that is credited with the cheaper petrol and natural gas prices reducing.
And even more to the fall in the yen over which has resulted in foreign revenues generating high net income in yen terms.
And households remain cautious as economic fear pervades throughout the economy, amplified with a lack of wage growth. Then there’s the mess on the Korean peninsula and missiles flying about and over the islands of Japan. Not the best case for Japanese economy and for the yen.
Source: Investor Place
It's all about "how much you made when you were right" & "how little you lost when you were wrong"