Good Debt - Yen Carry Trade - Part II August 7, 2007
Posted by nbeyond in : investment, issues , add a commentFollowing the first post of Good Debt, I have collected some data about Yen value against US dollar. Check out this long-term fluctuation over past 37 years.
Overall, Japanese Yen has gotten stronger starting 1971
If you look at the recent data over last three years, the value of Yen kept dropping. One thing additionally important is that the value of the US dollar has also been plunging against Euro but not as much as Yen.
US Dollar is now even at a humiliating level against Euro. In other words, mighty Euro. This is just an observation for what happened in the past. Nobody wants to keep Yen. Instead, many want to borrow Yens and exchange them to other better valued currency. Just by doing this, they can earn as much of the interest difference and the value of the exchanged currency.
- What if this lower valued Yen against US dollar stops on a sudden?
- What if Yen is getting strong back as used be?
- Who are now paying this price because of the low valued Yen?
- Who are getting benefits thanks to the zero percent interest rate?
Answers for these questions are easily found from daily newspapers. These answers are thinkable and subject to personal belief. Do you see any chance to make a use of this phenomenon?
Sphere: Related Content
Good Debt - Yen Carry Trade - Part I August 2, 2007
Posted by nbeyond in : Out there?, investment, issues , add a commentI did make a comment about debt very beginning in the first post, A simple math and beyond - Does it really work?. In the post, I quoted as
I have reached to the conclusion that there is no good or bad debt. Some define the debt that is tax-deductible to be good and the debt that is non-tax-deductible to be bad. Unless the debt is given to you for example from your parent at a truly zero interest rate, every debt is bad.
According to the quote that assumes conversely that if debt is at zero percent interest rate, the money you borrow is GOOD debt by definition of the quote. Then, the following question is
Who is going to lend you money with no gain (No interest rate)?
nbeyond said to the question in the post: Maybe your family
This means virtually nobody will lend you money for no gain. This is wrong. In Japan, there is no interest rate if you put your money in your saving account. The banks will just hold your money and not return any gain for your deposit. This means if you put your money, in this case Japanese Yen, in the bank, you automatically lose your money as time goes on. This makes Japanese financial policy very weird. But, this is what has been happening last a couple of years, what’s happening now, and what will happen for some time coming. How long? I’d like to say that nobody knows it.
If you have credit or means to borrow this Japanese Yen, you don’t have to pay any interest at all
In summary, there exists Good Debt by definition for the time that this article is written. On the second thought, you must be stupid if you keep Yen. Is this right?
Sphere: Related Content
A simple math and beyond - Does it really work? June 17, 2007
Posted by nbeyond in : investment , add a commentBecause of my job, math is not something really far away from me. Recently, I felt like trying some calculation out using spreadsheet for the first time in my life to see the power of interests by numbers. Yeah, I am more about the number believer but mostly not in a money way. Before calculating, surely I needed some assumptions that necessitate my calculation. So I set those up like…
- Annual saving - 10,000 euros.
- 10 % averaged earning rate out of the investment by whatever means….
- Time of investment 30 years.
- No inflation effect considered.
- No effect caused by fluctuation of the earning rate (deviation).
- No tax applied on your capital gains.
If you are familiar with making these assumptions first and developing from them, you can already notice this article is only for those who can at least save some money meaning mostly those who have jobs. To those who have a debt, just clear your debt ASAP. This article is not for you. I have thought about the debt some times. I have reached to the conclusion that there is no good or bad debt. Some define the debt that is tax-deductible to be good and the debt that is non-tax-deductible to be bad. Unless the debt is given to you for example from your parent at a truly zero interest rate, every debt is bad. A legitimate way to constrain your life bit by bit. Sounds so much capitalism. But I think that’s right.
Living under capitalism, it would be much better using capitalism than just complaining about capitalism. It does not matter if you are rich or poor. To my understanding, it only matter if you invest to make a use of the power of interests or to be driven by it. This makes a clear difference between masters and slaves. I have to confess I am so much extreme on this. More or less, I think that this is true.
Back to the simple math with assumptions that you save 10k every year, invest all your extra money into stocks or funds or real estates, and earn 10 decent percents of your investment, the total of your money with no inflation considered will become 185K euros in 10 years, 640K euros in 20 years, and 1.8 million euros in 30 years.
Considering life span easily expended thanks to the medical technology, those who are at least under 50 will work until 67 with no problem. In fact, this is the retirement age that German government will establish sooner or later. For your info I will put the result of this simple math taken from the spreadsheet. To visualize the power of your investment, I made a simple figure.
The curve clearly shows that your money increases higher rate near the end of your investment period.
Things that may shake this scenario up not to work….
- You should find out a very decent way to earn 10 % annually. This 10 % averaged earning rate does not seem easy although John Chow sees it differently. This is the trickiest part I believe.
What we learned from this simple math….
- Clear your debt ASAP. Then, join the wagan that makes a USE of the POWER.
- What about my own castle (My own HOUSE)? - I have to think about it. I’m more cling to putting an effort to make more investment because in this way future is more under my decision makings than the bank or the big guy’s decision on your mortgage rate. Still, owning your own castle is hard to just get it off.
Sphere: Related Content