Published Mon, 19 Aug 2019 10:31:48 -0400 on Seeking Alpha
In this article, I'd like to share an interesting idea that readers might consider for their portfolio. If you read my articles, you probably know that 10-year Treasury yields have dropped from over 3 percent when I began writing about them in November to under 1.6 percent today. That's great for my friends who entered the trade back then, but as such, Treasuries are now no longer likely to be a strong source of future return and only have good value as a hedge against equity volatility. The question that investors should ask now is whether there are better hedges out there given that 10-year Treasuries may be overextended.
How the Japanese yen carry trade works
To understand the yen, first, you have to understand the carry trade. The carry trade, in a nutshell, is when investors in countries with low interest rates swap their local currency for a currency with a high interest rate. The idea is that you can pocket the difference in interest and swap the currency back at a later date so you can spend your profits. Alternately, investors in other countries can borrow money in low-yielding currencies and invest the difference in higher-yielding currencies.
Although the proper implementation can be a bit complicated, the strategy really does work, as investors historically can make risk-adjusted returns similar to the stock market from so-called carry trades.
Portfolio value of a basket of carry trades 2008-2019
Historically, Japanese... Read more
|Stock name||Last trade||P/E||Earnings/Share||Dividend/Share||Dividend yield|
|PROSHARES ULTRAPRO SHORT S&P 500||25.26||0.0||0.00||0.00||2.32|
|SPDR DOW JONES INDUSTRIAL AVERAGE ETF TRUST||272.32||0.0||0.00||5.67||2.10|
|PROSHARES ULTRASHORT S&P 500||28.97||0.0||0.00||0.00||1.97|
|SPDR S&P 500 ETF||301.29||0.0||0.00||5.42||1.82|
|POWERSHARES QQQ TRUST SERIES 1||193.23||0.0||0.00||1.49||0.78|
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Yield Curve Steepening: An Ominous Sign
Dividend Watch: Divi-Do Land
Treasury Yields: A Long-Term Perspective
Dividend Watch: A Bar Bet You Will Win
S&P 500 Dividend Aristocrats Lag In This Down Market
The Negative EPS And Dividend Revision Cycle Has Only Just Begun
S&P 500 Dividend Yield Vs. 10-Year Yield Blowout