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A Guide to Profiting from the Coming Japanese Financial Tsunami

A Guide to Profiting from the Coming Japanese Financial Tsunami

In a world now drowning in government debt obligations, Japan stands out as the most indebted government on the planet. Japan is the worlds third largest economy having only recently been eclipsed by China, and home to the second largest bond market in the world. It is our contention that a social mood change reminiscent of that which has gripped European countries will be the tipping point that fundamentally and irrevocably causes a panic out of Japanese Government Bonds (JGBs). The ramications of this taking place are difcult to imagine. We at Capitalist Exploits have no crystal ball, and we offer only our opinion on the matter. In this report we will examine the rationale of our thinking, as well as that of two industry professionals whose opinions we value. Well also provide some ideas on how the small investor can participate in what we believe will be a wildly protable trade.

A Guide to Profiting from the Coming Japanese Financial Tsunami

The widow maker

Betting against Japans debt market has been labeled the widow maker trade, and with good reason. Many a hedge fund manager has been handing checks to the Bank of Japan for the last two decades.

As you can see from the graph above the Japanese debt markets have seemingly deed gravity for over 20 years. As John Maynard Keynes stated, The market can remain irrational longer than you can remain solvent.

A Guide to Profiting from the Coming Japanese Financial Tsunami

Above is a chart of the USD/JPY relationship since 2001. Borrowing dollars and investing it in Yen has been very protable. Hedge fund managers who have been long the Yen itself have been enjoying a wonderful decade, while those that have been shorting the Yen have suffered horrendous losses.

How has Japan managed what to many seemed to be the impossible?

We believe there are 3 main reasons: 1)  Unlike most other major economies Japan nances its decits internally. Fully 96% of JGBs are domestically held. A deationary environment where all asset classes excepting JGBs have fallen for over 2 decades has lured Japanese citizens and institutions into the safety of government bonds. A false sense of security exists in this market; one not backed up by the data. Additionally, the European debt crisis has aided in sending Japanese investors scurrying home to the safety of their own sovereign debt markets. In many eyes JGBs are a safe haven. Lemmings would be excused from such behavior, humans should not. 2)  Equally importantly, Japan is a nation of savers. The immense savings of both citizens and corporations has been funneled back into the Japanese Government bond market. In short the Japanese savings pool has been funding the growth of this beast. 3)  Japan is arguably the most homogeneous society on this ball of dirt, and considered by many, the most xenophobic. Staying home is something that comes naturally to the Japanese, even if staying home with ones capital no longer makes fundamental sense.

A Guide to Profiting from the Coming Japanese Financial Tsunami

Why now? 1) S  avings rates are plummeting Standard life cycle theory (something I just made up) suggest that a rapidly aging
society coincides with equally rapid dis-saving.

The chart above clearly shows that Japanese households are saving less and less. 2) Front-loaded debt structure - Fully 60% of current JGB inventory will need

to be rolled over in the next 5 years.

Paying off this debt is not an option. Rolling ever increasing amounts of debt which will be nanced by ever more debt, which is itself needed to pay the interest bill on previous debt issuance, is the essence of every Ponzi scheme ever created. It is also a game the Japanese Government has been playing for a long, long time. Beginning in April of this year the BOJ is set to begin marketing 149.7 trillion Yen (USD$1.9 trillion) in new bonds. These are funds required to meet budgetary spending for 2012 which cant be funded by tax revenues. Any tiny increase in yields on either the new debt issuance, or that which is required to be rolled over, could easily be the straw that breaks the camels back and puts Japan into a situation that is likely to spiral out of control. 5

A Guide to Profiting from the Coming Japanese Financial Tsunami

3) Demographics The oldest population in the world outside of tortoises, or maybe bowhead whales, combined with a highly restrictive immigration policy ensures pressures will continue. A declining tax base and a nation of citizens who are now increasingly dipping into their savings to nance their retirement years is a double whammy. Pension funds are now selling ever increasing amounts of JGBs in order to pay for increasing numbers of pensioners. In short, pension funds are as heavily invested as they are ever going to be in this market and will likely be sellers from here on out, not buyers. The combination of these factors is likely to force the BOJ to sell more short-term debt rather than long-term debt. This will put the Japanese government into an increasingly perilous nancing situation. 4)  Trade surplus shrinking and now negative. Japan has just reported their largest trade decit on record. Continuing to run a trade decit means Japan must turn to foreign investors to nance their government debt or look to monetize debt issuance, which itself will pressure the Yen and cause ination. There is no way out. 5) I  nation Rising energy imports due to the Fukushima disaster, and a declining population and workforce are manifesting in the trade decit mentioned in point 4 above. The BOJs recent asset purchase program will have the effect of stoking ination, which erodes the advantage of holding JGBs at current yields. 6)  Declining tax revenues The Japanese government spends twice what they take in, and is borrowing the difference. Government tax revenues peaked in 1991 and have been declining consistently ever since. In contrast, debt-servicing has been rising consistently for 20+ years. The combination of these two factors has led to a situation where today over half of Japanese government tax revenues are swallowed by debt servicing alone, and the trend is only accelerating. 7)  Debt servicing Debt servicing costs under 1% are a complete anomaly when taking into account the fundamental situation of the government debt market in Japan. It is theoretically possible to push debt servicing costs lower, but the pendulum cannot swing much further in this regard. Current signs are that it has begun swinging in the opposite direction. 8) C  rowded trade The structure of the market is such that Japanese citizens and corporations are more heavily invested in this asset class than they have ever been. The question therefore remains - where is the marginal buyer going to come from to support not only the status quo, but the increasing debt issuance that is now baked in the cake?

A Guide to Profiting from the Coming Japanese Financial Tsunami

Conversations with Traders

There are some pretty sharp guys talking up this trade. Among them is our friend Tres Knippa. Tres is a oor trader and broker in Chicago. He has been trading futures and currencies for over 17 years and is a registered commodity trading advisor to Kenai Capital Management He holds a BBA from Baylor University, a Ranch Management certicate from Texas Christian University and is a graduate from the Entrepreneurial masters program at MIT in Boston, Massachusetts. I sat down with Tres to discuss the perilous situation of Japans nances, their bond market (which he agrees sits on the edge of a very steep cliff) and most importantly we discussed how to participate in what we believe will be an historical trade. We both acknowledge we may be wrong, but are collectively putting our money where our mouths are and as is always the case, the market will be the ultimate arbiter. Chris: Rising yields on JGBs, capital ight, soaring borrowing costs, and a collapsing Yen. These are all issues you and I have discussed before and something weve both been very vocal about. The facts are the facts, and I cannot see any mathematical means for the Japanese Government to continue increasing their debt level and interest payments as a proportion of government revenues for much longer. The problem of course for us as traders and investors, who dont have a $100 million balance sheet to put to work, is the ability to participate on the short side with the sort of leverage that we would ideally like to have. I know youve had the same dilemma for some time. Tres: As a fund manager, one of the biggest headwinds I can face is negative carry. Negative carry is something that this trade has going against it. It is my opinion that the best way to participate is with options.Options decay (theta) produces negative carry.When I rst started looking at this trade and trying to participate, I sold futures. I quickly realized this was not how I wanted to make this trade. I am not willing to make the assertion that JGBs cannot actually RALLY from here. As the BOJ monetizes the debt, it is certainly possible that JGBs can go up some more. I want to be positioned is such a way that I am short IF JGBs break... thus, the option market.I think the options give me far more convexity, which is what I am looking for. Chris: Right. You want the sort of upside available to guys with huge balance sheets, like a Kyle Bass, where he can get involved in the OTC market buying Credit Default Swaps. There doesnt exist any ETFs in this space either, which might normally seem attractive to smaller traders. Tres: If I buy the Short JGB or the short 3X JGB, then if the market goes up, I lose money.No thanks.I am in the option market because I want to be short IF we break, but not until then. It is true that the ETF would avoid the negative carry aspect of this trade, but as I will discuss later, I think I have come up with a very reasonable strategy to battle this negative carry.

A Guide to Profiting from the Coming Japanese Financial Tsunami

Chris: Right, one aspect of course of the ETFs is that of tracking error. This is exacerbated in the double and triple leveraged ETFs. Volatility destroys your capital even where the market is moving in the direction you anticipate. In my humble opinion theyre best suited to day traders. Ive been short the Yen directly in the spot market for a little while now as I believe that the BOJ will look to monetize debt before looking to seek buyers for their debt offshore. The latter is an immediate check mate, while the former might buy a little more time. What is your opinion on this? Tres: The BOJ monetizing the debt has the appearances of being motivated by an effort to weaken the yen.I disagree.I think the purchasing of JGBs by the BOJ is politically motivated. Think about it, what do politicians do? They spend money and make promises to spend more money in order to get reelected.How does Japan spend money? By borrowing it.How do governments borrow money? By issuing bonds. Who remains to buy this stuff? Answer: the BOJ. One common misunderstanding is that central banks are independent.Far from it I am afraid. Chris: Explain how you worked out your present strategy of using a combination of futures and options contracts to allow for the massive upside while curtailing the risk side of the trade. Tres: The biggest risk of this trade in my opinion is TIME.How much option decay am I willing to stomach while I wait for something to happen? This is the dilemma that kept me awake at night for over a year.My strategy uses a combination of selling an option spread in order to pay for larger amounts of further out of the money options.This gives me more exposure to a large downside event but takes away some of the negative carry issues inherent in a long options strategy. The other aspect of my strategy is the utilization of the variety of instruments available to me.The TSE (Tokyo Stock Exchange) trades a JGB futures and options contract and the SGX (Singapore Futures Exchange) has a mini-contract that is 1/10 the size of the TSE contract.The 1/10 size gives me an instrument I can use to hedge my option strategies I trade at the TSE.Without getting too technical here, it lets me lay off my positive deltas in tenths. Chris: Fighting decay while keeping the enormous upside that exists with your strategy is the key to this really isnt it? Tres: You bet it is. Its the core strategy. Chris: If you can keep your capital intact, or even lose a small fraction on a monthly basis, which is what one would expect when purchasing LEAPS, then youre doing exceptionally well, certainly when one considers this trade from a risk/reward standpoint. Ive mentioned to some friends that this could well turn out to be a 50-100x move when it takes place. My friends believe me, but others give one of those looks which are kept exclusively for insane people. What are your thoughts on the reward side of the spectrum? Tres: Regulatory restrictions prevent me from putting a number on the upside. Other well known fund managers have on many occasions referred to this trade as having 100x potential. Positioned properly and with the right series of events, 100x return could be being too conservative.

A Guide to Profiting from the Coming Japanese Financial Tsunami

Chris: Ok, I think its always smart to review what the market is telling us as traders since the market is the ultimate decider. With that in mind what are you seeing in the markets right now? Tres: February 14 was more than just Valentines Day this year, it was the day that I think the world changed for Japan. Once the BOJ announced that they would step up purchases of JGBs, then we should have seen a big jump up in JGB prices right?If our government were to announce a program to buy large amounts of a particular asset, I would expect the value of that asset to rise.JGBs are roughly the same price now as they were on February 13 after that announcement was made. A government buying its own debt is not sustainable.The market will realize this in time. Chris: Yes, its insane. The BOJ announced their intention to push consumer price ination to 1% using their own version of QE. Given that its presently sub 2%, this would destroy the real yield advantage that Japanese bond holders currently enjoy. Are these guys simply trying to play a word game, or do they not realize the repercussions of a positive ination environment and how it would impact their debt nancing situation?

Positioned properly and with the right series of events, 100x ROI could be being too conservative

Tres: Ination is the LAST thing the BOJ wants or needs at the moment.Deation is what is feeding demand for JGBs. If you have deation of 2% and a bond yield of 1%, then you have a real yield of 3%.Not too bad. You know Chris we spoke about this together just after the Bank of Japan (BOJ) announced a plan to increase monetary easing by boosting purchases of long term government bonds. As if taking its cues from the US Federal Reserve, the BOJ made a very public policy of ghting deation and attempting to boost consumer ination to 1%. As long as consumer prices and costs of living continue their downward deationary spiral, a 1% yield on the 10-year may not seem so bad. What if the BOJ gets what it wants? Will Japanese investors be quite so keen on a 1% yield in a positive inationary environment? If they reach ination targets, I would imagine that demand for a 10-year bond with a 1% yield would drop signicantly. Checkmate! Chris: I can see a lot of monetization coming, real ination rising, all countered by a barrage of hedonistic adjustments causing nominal deation. It might work for a bit. Central bankers are whores to the politicians when push comes to shove. Show me an independent central bank - its akin to searching for the egg yolks in scrambled eggs. Tres: For a moment lets ignore how horribly irresponsible and unsustainable it is for one agency of a government to assist in nancing the bad policy of another. Perhaps we should dig a little deeper here. Perhaps we should take this announcement forexactlywhat it is. This is the BOJ trying to tell the bond market that everything will be just ne. By all means, please keep lending your government money it cannot ever pay back. Please keep supporting a policy whereby the Japanese government spends more than twice what it generates from tax revenue. The BOJ, the Japanese government, the citizens of Japan, the PM of Japan are all abundantly aware of the important fact that a

A Guide to Profiting from the Coming Japanese Financial Tsunami

small increase in bond yields is just not possible. A small increase in borrowing costs sends Japan into an immediate debt crisis. The BOJ made the announcement in an attempt to weaken the Yen and let the market know they intend on supporting the bond market till the bitter end. They cant afford for rates to rise, so of course they are going to buy bonds. Is this anything that we did not already know? The bond market rallied on this news, right? Chris: Its perverse. Tres: As a oor trader in Chicago, some of my best trading days have come from going with market action that appears to be 100% contrary to recent announcements. We should identify recent price action in the Japanese Government Bond (JGB) market as potentially one of those moments. Should we have expected a large jump in JGB prices? Perhaps. Did the JGB market actually have a big jump? Well, not exactly. March JGB futures rallied on the news in Tuesdays trade, but the price did not take out the highs we saw earlier in February, or even prices seen in mid-January. I am not condent enough to say that the market is about to reverse a 20+ year trend, but I am condent in saying that the price action does not match the news. Chris: Id like to come back to your trading strategy for a second. Lets say, hypothetically speaking, we get Japanese CPI moving into positive territory and bonds become less attractive. What is your sense of timing, with regards to the impact felt in the bond market, and how do you see things moving once the realization hits that the Japanese government is actually bankrupt? Tres: I am not willing to pick a top in a market that has not been willing to break for over 20 years.I think it will happen, but clearly I have no idea when.My job as a trader and duciary is to minimize losses for as long as I can, until the trade starts working. Tres manages the mechanics of this trade for clients. We love the strategy and think Tres is one of the best guys to be managing our money too. If you wish to become a client and participate in this trade with Tres then contact him at


A Guide to Profiting from the Coming Japanese Financial Tsunami

Views from successful trading guru Brad McFadden

Brad is another trader we respect a lot. Hes been trading, stock broking and managing portfolios for close to two decades. In his proprietary trading days, working for Rand Merchant Bank, Brads returns were consistent with a return on capital of about 10% compounded per annum. The book was leveraged three times, thereby providing a return on equity of about 30% per annum. Brad now trades his own account from his ofces in Sydney, Australia. He shares a similar view of the Japanese debt markets to our own and I asked him to share his ideas with us. The markets I am focused on and the rationale for trading these markets The main market that I am focused on trading is Japan, specically the broad equity market, the Yen and JGB. The reason for focusing on these markets is twofold: a)  My long term fundamental view, and; b) The asymmetric payoff prole I can achieve in applying my bullish view on the Nikkei and bearish view on the JPY and JGBs. Let me explain my view and then I will detail the way in which I am applying this view... As far as I am concerned it all begins with the JGB market. Yes, the fundamentals look shocking for JGBs given the debt to GDP ratio of some 230%, the budget decit, the aging population, etc. However, this isnt the primary reason as to why I am very bearish on JGBs. The primary reason relates to market structure. This is the most invested/overweight that Japanese nationals have been in the JGB market since the Nikkei peaked in the late 1980s. Given this fact, it is difcult to imagine where the marginal buyer of JGBs is going to come from, outside of the BOJ printing money to buy bonds. It would appear that being long the JGB market is the most crowded trade/investment on the planet. Signicant downside always occurs when markets are crowded on the long side. Now, the worst enemy of a nations treasury/bond market is ination. You dont want to be long bonds if ination spikes higher. Yet this is precisely what appears to be happening in Japan. For almost a generation Japan has been locked in a deationary condition. However, things are changing. Inationary pressures appear to be building rapidly. The BOJ is convinced that it needs to create ination to pull the Japanese economy out of its seemingly never ending downward spiral.

Signicant downside always occurs when markets are crowded on the long side

Furthermore, inationary pressures are being helped along by an overreaction to the Fukushima disaster. Most of Japans nuclear reactors have been taken off-line and the shortfall in electricity generation is being made by oil red power stations. The result is that electricity prices are rising in Japan for the rst time in over 20 years, and where electricity prices go so follow a whole lot of other prices.


A Guide to Profiting from the Coming Japanese Financial Tsunami

Valuations of Japanese stocks are extremely low. They are not materially different from levels reached at the height of the GFC in 2008 and the lows of 2002. However, this isnt the most appealing aspect to wanting to be long Japanese equities. This is the most under-weighted Japanese nationals have been in the Japanese equity market since the bear market started in the late 1980s. So if one looks at just how cheap Japanese equities are from a fundamental perspective and how under owned they are it is very difcult to make a case that we will see material downside in Japanese equities. Rather, the next big move is likely to be to the upside. What is the catalyst likely to be to push stocks materially higher? The same thing that is likely to push yields on JGBs higher - ination. Deation has dogged the Japanese economy for about 20 years. This deation has coincided with a bear market in Japanese equities and bull market in JGBs. When this underlying condition reverses to ination the bull market in JGBs and bear market in equities will reverse. It appears that they are in the process of doing so. The application of the view What makes being bullish on Japanese equities and bearish on JGBs so attractive are the extreme low levels of implied volatility on options trading on the Nikkei and particularly JGBs. This is the lowest implied volatility on JGBs at least since 2000 (that is as far back as records go), and implied volatility on Nikkei options hasnt been much lower over the last 8 years. What this means is that you can get dramatic asymmetric payoffs on call options on the Nikkei and puts on JGBs. I am a macro trader. I trade currencies, bonds, equities and commodities. To me the most important decision to make is whether or not to be long or short an asset class, rather than what securities to trade within each asset class. It is much easier to trade broad asset classes because it isnt too difcult to understand the underlying structure of the market (just where weak and strong hands are positioned) and the ow of capital between asset classes. In terms of the global sovereign debt issue, as traders we have to be careful here. Much of what is bantered about in the press of popular opinion is mere dramatization. My feeling is that there will be an ultimate price to pay for all the money printing, bail-outs, and stimulus measures that many developed nations have engaged in over the last 3 years, particularly the last 12 months. That ultimate price will likely be ination. I think it is politically unacceptable to have deation (everyone is well aware of the deationary nightmare that Japan went through over the last 20 years). So developed nations will continue to head down the road of ination until they can no longer do so (until ination gets out of hand and makes the 1970s look like a walk in the park). Change rarely happens unless it is forced upon governments.

What this means is that you can get dramatic asymmetric payoffs on call options on the Nikkei and puts on JGBs


A Guide to Profiting from the Coming Japanese Financial Tsunami

In my experience governments operate on a if it aint broke dont x it philosophy. So this is the framework with which I work within, and I am riding an inationary wave. I have no idea as to how far it will take me and for how long. One has to be a little careful of preconceived ideas of what the nal outcome will be. The market will take us there; we just need to follow the signs. One of the primary reasons I have such a big position in Japan, is that Japan is addicted to deation and an ultra-low cost of capital (interest rates). Getting straight to the point - Japan is the least prepared country in the world to deal with ination. This is why we are likely to see a dramatic rise in yields on JGBs and equities as ination hits the Japanese economy. Why am I choosing to trade Japan now, why not 6 months or 12 months ago? I was waiting for the Japanese to adopt ination targeting. To me the decision of the BOJa month or so ago to actively try to create ination was the tipping point. How do I trade markets? Whenever I am trying to capitalize on just a couple of big trades I will generally look at buying puts. Usually implied volatility is at or near all time lows because no one in their right mind will think that this outcome will occur. I will use futures occasionally when there isnt a liquid option market or when options are alittle too expensive. The platforms I use are the Saxo Bank platform (primarily for currency trading and FX options), and the Interactive Brokers platform (for physical positions, options and futures). In terms of the relationship between Japanese equities, JGBs and the JPY - they are all highly inter-correlated. The thing that ties them all together is ination/deation. Japan has suffered from deationary monetary conditions for years, which has coincided with a bull market in the JPY and JGBs and a bear market in Japanese equities. If Japan moves into an inationary monetary condition, these long term trends will reverse, of that I am very sure. What I dont know is just which asset class will move the most. So I have positions in all three asset classes, Im long Japanese equities (via calls and CFDs on the Nikkei) and short JGBs via SGX Mini Futures and put options on TSE JGB futures. I am also long calls on the USD/JPY and EUR/JPY. I have been buying3 month to expiry calls on the USD/JPY because the volatility was signicantly lower than 12 month to expiry calls. I generally concentrate on LEAPS but only where the implied volatility is very low, and where the big offer spreads are tight enough (i.e. there is enough liquidity). The TSE JGB futures options have good liquidity but they only go out to about 2 months to expiry at best. So what one must do is put aside enough capital to ensure that you are able to buy puts on a monthly basis for the next 18 months. If the JGB market does not collapse within the next 18 months (to be conservative) then I will have to conclude that I am completely wrong in my bearish JGB view. Readers can get a hold of Brad at


A Guide to Profiting from the Coming Japanese Financial Tsunami

What about Equities?

Brad has a good point regarding Japanese equities. The nancial crisis that swept the world in late 2008 and 2009 led Japanese banks and institutions alike to seek safety in Japanese Government bonds. Japan Post, which is the worlds largest nancial institution, with assets totaling $2.1 trillion, holds fully 75% of their funds in Japanese Government bonds. The retirement fund has begun selling roughly $80 billion annually in JGBs as benets are paid out to its retirees. According to an IMF working paper authored by Waikei Raphael & Kiichi Tokuoka available here.

Japanese banks hold more than 15% of total assets in JGBs. According to the BOJ (Bank of Japan) a 100 basis point
increase in interest rates across all maturities rose the value of interest rate risk (including from loans) by around 500 billion at the major banks and about 400 billion at the regional banks in FY2010. The total value of interest rate risk (including from loans) corresponds to 10 percent of major banks tier 1 capital and more than 30 percent of regional banks tier 1 capital, respectively. Bonds decline as interest rates rise, so we can see that a small 100 basis point rise in interest rates would wreak havoc in the banking sector. In fact, its not hard to imagine every major bank in Japan requiring a bailout. Pray tell who has the wherewithal for such a bailout? Since most debt is held by Japanese citizens, default on those obligations would be political suicide. As such, we believe inating the debt away is a more likely course of action. This leads us to looking into what asset classes are likely to benet from monetization of these enormous debts. Japanese equities collapsed in 1990 with losses being incurred by investors for 20+ years. Almost no one, sans the contrarian players, even want to talk about Japanese equities. Japanese equities today are trading at the same price as they were 30 years ago, pre-bubble. Looking at them from a priceto-book ratio they trade at roughly 0.8. Contrast this to US equities, which trade at a price-to-book ratio of 2.05. If we use Benjamin Grahams model we wouldnt buy anything for more than a price to book value of 1.2, and as such would be selling US equities and buying Japanese equities. Contrasting the 10-year JGB against Japanese equities, we nd that at the moment the dividend yield on Japanese equities more than doubles the return on the 10-year JGB. The real rate of return on equities from dividends alone is now such that competition has arisen. This is both due to equities being very cheap as well as JGBs being very expensive. Some easy means for retail investors to take advantage of rising Japanese equity prices are going long iShares MSCI Japan Index Fund (EWJ), which trades on the NYSE. One thing to consider with this fund is that it is not currency hedged, so it benets from a strong yen and suffers from a weakening yen. This is not optimal if you are expecting a weakening yen. One benet of this fund however, is that it is liquid with an option chain out to 2014.


A Guide to Profiting from the Coming Japanese Financial Tsunami

A better option if you are not seeking the leverage of options would be the Wisdom Tree Japan Hedged Equity Fund (DXJ), which tracks a dividend weighted index of value stocks. NYSE: JOF and NYSE: JEQ are both closed end funds focused on Japanese equities which appear to be well-managed and worthy of further investigation.

Currency What about the Yen?

As mentioned earlier in this report, it is our contention that the BOJ will increase the monetization of the countrys debts. This will have the effect of pressuring the Yen. Short selling the Yen in the forex spot market with appropriate risk control is one means of proting from a declining Yen. While not conclusive by any means, below are some popular currency pairs. USD/JPY EUR/JPY XAU/JPY XAG/JPY While it is possible to use leverage in the spot FX market, there are risks to being wrong. If appropriate risk controls are not implemented, complete wipe-outs are possible. Another, controlled-risk alternative is the options market. Either buying calls or puts on the currency pairs mentioned above, or buying puts on the Currency Shares Japanese Yen ETF (NYSE: FXY).


A Guide to Profiting from the Coming Japanese Financial Tsunami

We believe the risk/reward setup of the trades and positions discussed in this report to be sufciently favourable to take positions with our own capital. In full disclosure, we have multiple positions targeting the Yen and may add or reduce positions as we see t at any time. Further reading material on this topic is available at

Betting on an Inevitable and Overlooked Crisis Japan, Life Insurance Companies and Bedroom Talk Japan A Budget to be Proud Of! Crescendo of Debt 1,086,000,000,000,000
Sincerely, Mark and Chris Feel free to forward this report. If you havent already done so you can sign-up for our free blog here. If youre already a subscriber then please invite your friends here.

Disclaimer This report is intended for informational purposes only and is not intended to provide personal nancial advice. The information contained herein does not constitute a solicitation for the purchase or sale of securities. Mark and Chris and Capex Ltd., the parent company of (CE), are not licensed as nancial professionals, brokers, bankers or even candlestick makers in any jurisdiction, anywhere on this big ball of dirt.We do not know your individual situation, and you should always consult with your attorneys, accountants, nancial planners, and those that are sanctioned to provide you with advice. CE does not purport to tell or suggest which investment securities members or readers should buy or sell for themselves. CE does, and seeks to do business with, companies covered in its reports. Investors should be aware that as such CE may have a conict of interest that could affect the objectivity of the report. Readers are encouraged to conduct their own research and due diligence and obtain professional advice before making any investment decision.Like us, you our readers are solely responsible for your own investment decisions. Our opinions and analyses are based on sources believed to be reliable and are written in good faith, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. All information contained herein should be independently veried. The editor and publisher are not responsible for errors or omissions.