Good time to invest in a nikkei ETF? | TigerDroppings.com

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Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
120338 posts

Good time to invest in a nikkei ETF?


There are a couple of ETFs that track the nikkie that are hedged against currency fluctuations.

I'm considering investing in DXJ







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Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
120338 posts

re: Good time to invest in a nikkei ETF?


The money board hates Japanese people

A little more on the fund

quote:

New Prime Minister Abe won on a platform promising to devalue the yen and create Western-style inflation by copying the quantitative easing playbook of the U.S. Federal Reserve. This article will focus on my bullishness toward Wisdom Tree Japan Hedged Equity ETF (DXJ) and its prospects for further capital gains.


quote:

According to the fund company's description, DXJ "seeks investment results that closely correspond to the price and yield performance, before fees and expenses, of the Wisdom Tree Japan Hedged Equity Index. The Fund employs an investment approach designed to track the performance of the Wisdom Tree Japan Hedged Equity Index. The Index and the Fund are designed to provide exposure to equity securities in Japan, while at the same time hedging exposure to fluctuations between the value of the U.S. dollar and the Japanese yen.

quote:

It is my view that we are in the very early stages of the game and further gains are to follow. The table below details the top 10 holdings of the fund. They are all world class companies that derive a significant percentage of their profits overseas and would be direct beneficiaries of a further weakening yen.


LINK






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Doc Fenton
LSU Fan
Houston, TX
Member since Feb 2007
50726 posts

re: Good time to invest in a nikkei ETF?


quote:

The money board hates Japanese people


... and probably giving advice concerning FX markets as well (unless of course we're talking about Iraqi dinars).

If I'm not mistaken, the FX hedging in the DXJ ETF is going to come at a cost, and one that might be hard to estimate in advance, as it will probably be using quantity adjusting options (or " quantos") which are essentially embedded currency forwards with variable notional amounts. (See also LINK.)

Given the volatility jumps in the yen and the Nikkei, it looks plausible as a good speculative investment, as there might be changing political winds in Japan that would seek to depreciate the yen (against the normal wishes of an aging voting demographic), while focusing instead on corporate productivity growth and finding new sources of labor.

However, you have to keep your eye on FX markets, which are very political and artificial in the sense that they are at the whim of central bankers. Looking at DXJ, it appears to hedge against currency movements in either direction, which would seem to indicate that you will pay more for this hedging service as the expected volatility of the USD-JPY exchange rate rises, as it has done recently.

quote:

Investors use quantos when they believe that a security will do well in another country but fear that country's currency will not. Thus, investors buy an option in the foreign stock while keeping the payout in their home currency.


But what happens if the yen swings back in the other direction and appreciates versus the dollar, causing the Nikkei to slump as exports fall?

For decades many U.S. investors participated in the so-called "carry trade" where they would borrow at Japanese interest rates, sell the yen short, lend at higher U.S. interest rates, and then convert to repay in yen. It worked great so long as the yen didn't appreciate against the dollar too much, and the very presence of the carry trade was a factor in helping to keep the value of the yen down somewhat.

Since 2002, however, the yen has appreciated against the dollar a good bit. So it's just something you need to keep and eye on and know your costs of hedging, especially given a volatile environment like this:

quote:

As we can see from the above description, the key aspect of this fund is the hedged exposure to the fluctuation of the yen. The yen was trading at 78 per $US pre-election up to a current quote of 93 per dollar for a stunning 19% move. The DXJ has managed to move from $32 to $41 for a stellar advance of 28% in the same time frame. For the year, "Japan's Nikkei gained 23% in 2012, its best gain since 2005, but the popular EWJ is up just 6.3%, thanks to a declining yen (FXY -11.3%). The DXJ -- hedged against currency fluctuations -- is up 16.5% YTD." The stellar returns of the DXJ highlight the importance of the currency hedge.


In any case, I have no idea if it's a good time to invest or not, but it certainly is something interesting that you don't see too often on this board.







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Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
120338 posts

re: Good time to invest in a nikkei ETF?


I'm putting some money in and letting it ride for at least a month

:prayer request:






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Doc Fenton
LSU Fan
Houston, TX
Member since Feb 2007
50726 posts

re: Good time to invest in a nikkei ETF?


:prayers sent:





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Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
120338 posts

re: Good time to invest in a nikkei ETF?


I'll update this thread later and post my results



I don't expect anything sensational but I think it's fairly safe






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Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
120338 posts

re: Good time to invest in a nikkei ETF?


Up 5.83% since I started this thread on 2/15



Not a bad short term gain so far. Nothing spectacular. Just nice and steady.






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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
29466 posts

re: Good time to invest in a nikkei ETF?


quote:

There are thirty billion ETFs that track the nikkie that are hedged against currency fluctuations.




If you read fund prospectuses, most so-called "Asian" funds are really just Japan funds.

Personally I prefer the non dollar hedged variety, but unfortunately that has been hard for me to find.






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Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
120338 posts

re: Good time to invest in a nikkei ETF?


Update: Up 9.3% from February 15th when I started this thread






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Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
120338 posts

re: Good time to invest in a nikkei ETF?


quote:


Personally I prefer the non dollar hedged variety, but unfortunately that has been hard for me to find.


Personally I like being up about 26% since I started this thread.






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Vols&Shaft83
Tennessee Fan
Member since Dec 2012
11349 posts
 Online 

re: Good time to invest in a nikkei ETF?


quote:

Personally I like being up about 26% since I started this thread.










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eng08
LSU Fan
Member since Jan 2013
1469 posts

re: Good time to invest in a nikkei ETF?


Would probably be even better if only one currency was easing, instead of both.

Congrats though, been watching it too since you brought it up.






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Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
120338 posts

re: Good time to invest in a nikkei ETF?


Not really. The yen has been taking a nose dive compared to the dollar. Which has made this etf more lucrative than the similar non currency hedged funds that brain child CFA so yourned for.

Looks like a college drop out out smarted one of the money board "gurus" on this note







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Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
120338 posts

re: Good time to invest in a nikkei ETF?


nm I see what you're saying, but the yen has been easing at a much faster pace than the dollar which made this a smart play by any measure

And I'd gather that it's still a smart play over the next 2 months. Beyond that I tend to get skeptical.






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eng08
LSU Fan
Member since Jan 2013
1469 posts

re: Good time to invest in a nikkei ETF?


Yeah we'll they have a few years to make up for.





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Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
120338 posts

re: Good time to invest in a nikkei ETF?


quote:

Yeah we'll they have a few years to make up for.


So why not capture the easy money? I'm no investment guru and I did.






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eng08
LSU Fan
Member since Jan 2013
1469 posts

re: Good time to invest in a nikkei ETF?


I thought it was a good idea, but I was not willing to take the risks on something I do not fully understand.

Also Didnt have the cash laying around to throw at it.






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HNTIGER1980
LSU Fan
Member since Oct 2011
439 posts

re: Good time to invest in a nikkei ETF?


quote:

Good time to invest in a nikkei ETF?


Need to put your money somewhere?
Have you heard about bitcoin?






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ThaBigFella
LSU Fan
baton rouge
Member since Apr 2006
2043 posts

re: Good time to invest in a nikkei ETF?


go with your heart man. Last wednesday I read tesla was about to release its first quarterly profit ever and it had sold more tesla model s cars than mercedes sold S Class in the last quarter......I talked with my friend who works for morgan stanley and he laughed and said that's ridiculous and electric cars are silly.......I didn't buy at $55 LAST WEEK.....it hit $97 this morning......go with your heart, don't listen to others haha cost me $40k





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Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
120338 posts

re: Good time to invest in a nikkei ETF?


Up 27.14% since I started this thread

I'm not sure where you got the idea that this was a "risky" investment.






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