You could do that, but then you'd be exposed to currency risk. Any attempt to hedge this risk would wipe out your expected gains because currency futures take into account country interest rates.
we in america "essentialy" have negative rates, at least as of a few months ago b/c cost to borrow money, at least by banks at the fed funds rate, is less than inflation: borrow at 1.25 and the money inflates at 2 or so... defaltion is root cause in japan; sucks when you cant even PAY someone to borrow money. ther have been practices in US where banks literally DID pay you to borrow money in severly depressed areas, to spur economic activity....
my last post was actually addresssed to this, they arent trying to make money now but "investing" to make money later, otherwise tehy know they will NEVER make money should things remain depressed, last time US did it in large scale i think was dust bowl depression era, although technically US, at least banks, have a negative rate now
so long as currency values maintain the same value youd be great, but this is akin to buying a weak stock and shorting the strong one, you know what happens here. this is almost liek a modified currency pairs trading. LOL
P "A few large players like Robertson ((I believe, not sure) have really lost their ass on this exact trade b/c they didn't hedge the currency risk correctly." Correct. Julian Robertson was heavily short Yen when the FED (!) intervened for the Yen and brought it back from around 145 to midThirties in a day. The deal Euro-Yen is a currency deal IMO, not an interest rate game. There is no arbitrage in that. Any Swap will reflect that. To hedge out the currency is to hedge out the return. It is purely being Yen short. In Europe there is loans in Yen are sold to the average guy, heavily marketed in the papers. This has been going on for years now and it will blow private people off the road - just a question of time, since these loans run for decades. peace
Hey Prae I am looking for some form of written narrative on that exact situation (a trader or manager blowing up via Yen based trades) any ideas if you have seen an article or such that you remember and can link me to? Thanks.
Same to you Man if you know of any discussions, articles, etc that describe this please let me know. I will search on this Julian guy. Thanks.