http://finance.yahoo.com...llions?mod=bb-budgeting --> Eliminate $1 paper bills and replace with $1 coins to reduce debt...

Japan’s Earthquake: Mother Nature’s Precision Timing

We will have to go back into history, 308 years to the 1703 Genroku Earthquake to find one of the magnitude that struck the island nation today. Once again, we witness nature’s hidden order as today, 11th of March, 2011 is 3.08 months (308/100) to the bottom of the Economic Confidence Model 2011.45 (June 12th, 2011).

Source:
http://en.wikipedia.org/...of_earthquakes_in_Japan


Kind regards,

Kinuthia Karanja
karanjakinuthia@hotmail.com
Skype: kinuthia.karanja

IN THE ALTAR OF THE MARKET…….
WHERE BONDS AND CURRENCY VOWS..UNTIL DEATH DO THEM APART.

heheheheh……am always amazed over how bond investors really are…currency traders ..but little do they know themselves as such…to be precise what is a bond literary… …?

What is featured in a bond is actually a currency …not apples, bananas…or oranges…

So when you buy a bond..You are actually buying a currency because a bond is a certificate indicating the asset (currency) you have purchased, over what period, and for what returns …

However as many of you know, I’ve been trading currencies in the Forex market for years now. I’ve made a career out of pairing the euro with the dollar, the Japanese yen with the euro, and the Swiss franc with the euro…among other currency pairs.

But even though I’m a traditional Forex trader and I’m constantly checking the bid and ask prices for my favorite currency pairs, I’m still always looking for other currency opportunities around the globe…even the more obscure, “unsung” currency plays.

Take foreign bonds for instance. Investors, even American investors have been able to buy foreign bonds for decades. Yet, few foreign bond investors really think of themselves as “currency investors.” The reason? They don’t realize a foreign bond is also a “currency play” too.

The irony of all this? Foreign bonds are actually one of the most intriguing currency plays in the market today.no wonder when bonds of a country falls the currency also do.

If you choose the right one, you can actually profit in three different ways…from capital gains (assuming you buy a bond below par), yield, and currency appreciation if the dollar drops against the currency your bond is denominated in.

In that way, this “unsung” currency play is actually a profit trifecta…if you can choose the right one.

Let me explain…Why the Currency Matters…

When you are investing in a foreign bond, you not only need to have an opinion about what that bond will do but also an opinion about how that country’s currency will fare against your own.

This is where the currency play kicks in.

For instance, if a foreign bond earned you 8% interest…that sounds great, right? However, what if I tell you, while you had invested in that bond……, your currency strengthened 10% against that foreign bond’s currency?

Then its not such a good idea……right…?

Because as much as you got 8% total return on the bond yield …….your currency strengthened against that currency whom you were holding it bond ….meaning your 8% returns from bond…having been dominated in foreign currency of that bond …. will have to be divided by 10% more by your mother currency during conversion ……Gain 8% but lose 10% when you go to convert the money back into your home currency.

Let me give a clear cut illustration here…….

Lets say we decide to take on Ugandan bonds for instance which are giving 10% total return per year….right…..?

During the time of our move to invest there …lets assume the exchange rate was……………. Ksh 1= 20 Ughs………

So we move in with Ksh 10,000 which when converted..We get Ugsh 200,000….okay…

One year down the line…….things changes….and our currency (Ksh) appreciated by 50% to …..
Ksh 1 = 30Ugsh……..

During that time is when we are getting back what we invested…..as in our Ughs 200,000 + 10% bond yield return is now Ugsh 220,000….right….?

Then …as the exchange rate is now Ksh 1 = 30 Ugsh…then it will be 200,000 Ugandan shilling divided by the current exchange rate…….ie

Ugsh 200,000 (capital invested) divided by 30(current exchange rate)

= Ksh 6,666

See…..! ! ! !

Total loss instead…..…hmmmm, terrible…….

However, what if I told you that a foreign bond earned 10% but your home currency weakened against the foreign bond’s currency by 50%?

As in…..we decide to take on Egyptian bonds…….and during our move to invest ….
1egyptian pound was Ksh 20.

Thus our KSH 10,000 is equivalent to 500 Egyptian pounds…….

Then one year later …the Kenya shilling weakens by 50% against the Egyptian pound… bringing the exchange rate to ……1Egyptian pound is now 30 kenya shillings.

Looks hear…when we offload our investment we shall have back our 500 Egyptian pound plus 10% yield return.
Ie 500 Egyptian pound + 10% which is 550 Egyptian pound.

Then as we enjoy the depreciation of our local currency…..then it shall be multiplied by 30 …..Which is 50% more than when we got in …….ie

Egyptian pound 550 x 30 current rate of exchange = Ksh 16500

Now, by the time you take your 10% gains and convert them back into your home currency, you end up with 65% more money than you had before! Now, we’re talking!
Heheheh …I know this is what you waited to hear most…

During the hardest times of the market..this is how we do it at corporate fx……we don’t just keep on looking at the candle sticks and baby sitting the market…ooohhh…. no…no…no.

We move into those countries central banks….purchase their bond as we know their bonds and their currency will appreciate against ours over the time…..we purchase the bonds and forget the market for some months…..then we go swimming, we go hiking…we go camping….we go fishing…or we go to sleep lazily by the sea side writing love poems…

And it is as such high sea levels of forex that technical traders are left out completely...during such times they are not divers rather they are swimmers...and they have to stay in the shallow sea waiting for us.

For instance when you guys were breaking your ribs and necks buying safaricom I P O’s….we went for Ugandan shillings……..two months later were 36% richer……heheheh….
Therefore…. turbo Charge Your Returns by Picking the Strongest Country FIRST!

So when you’re looking to buy a foreign bond, the yield or potential capital gains your bond can earn are just part of the equation.
Therefore…. turbo Charge Your Returns by Picking the Strongest Country FIRST!

The other vital part is what happens to the dollar and your bond’s foreign currency from the time you buy your foreign bond and its maturity date. Depending on the currency, it can either hurt your overall returns, or it can turbo-charge your returns.

Therefore, the way I’d play currency move using foreign bonds is to FIRST get an opinion on the foreign currency and how you think it will perform vs. your home currency.

Then if you believe the foreign currency will trounce your home currency for the period of the investment……..,, then look into their bonds.

That way, if you’re right about the foreign currency’s direction vs. your home currency, you stand a much better chance of making a really nice return on your money (over and above the actual interest earned on the bond itself).

Your Bond Checklist: Things Your Bonds Need

So ……., “How do you know what country could be good to invest in?”
When looking at a bond, you want the highest yield for the least amount of risk.
Some of this you can gauge by S&P and Moody’s outlook in how they rate a specific country’s bonds.

I’d suggest investing in “investment grade” bonds for your first bond investments.
Government bonds can be a great place to invest…..”lakini sio kama hizi za hapa kwetu kenya”, for instance, if you can ascertain whether the country is in good shape to make good on its bond payments, then you can ascertain the risk that you’re taking on.

Personally, I look for countries that have some of the highest GDP growth out there and have the least amount of debt proportionately. Here’s my checklist. I look for bonds from countries with…

1. High growth possibilities

2. Doesn’t have a mountain of debt

3. Has a favorable rating from S&P or Moodys…etc

Just to recap, get an opinion on the overall state of your own country’s economy vs. the economy of the foreign currency. See which currency has the best sentiment and fundamentals going for it.

Find a country that is hitting on all cylinders and looks to outperform your country and your native currency. Then find that country’s investment grade bonds (preferably their government backed treasuries at first).

Then if you’re right on the direction of the currency, you’ll get a great “bonus” in addition to the interest. In doing the proper analysis, it can really help your money to beat inflation, unlike our bonds here which cannot fight inflation with their returns.
This can be a great way to stretch your retirement scheme or to simply “outpace” the inflation coming from your home country!
And that how sometimes we move to the most obscure…unsung currency play

Q. Why does JPY rise when bad things happen in Japan?


A. Because Japan is a net-exporter of capital. Money that would otherwise be slated for overseas investment in search of higher yields is suddenly diverted to domestic use. In Addition, Japanese insurers invest large amounts overseas on higher-yielding instruments and are forced to bring those funds home to pay claims. Foreign insurers also have to buy JPY to pay claims.

The all-time low in USD/JPY came after the Kobe earthquake in 1995 on just such a reaction.

@qw25041985. Once capital repatriates and re-builds Japan, perhaps we shall see a low in the Nikkei alongside a high in the Yen in 2011.

The 1995 high was 79.20, spitting distance of yesterday's close.

A historical similarity exists with the 1906 San Francisco Earthquake that caused capital to migrate westwards to pay for re-building and insurance claims to the tune of $250 million. Twenty insurance companies in the U.S. went bankrupt in the process.

Capital markets felt the aftershocks in the Panic of 1907.

Remember, 1906 was also the year that Moazaferedin Shah of Iran yielded to the freedom fighters to decree for a new constitution and an elected parliament. According to Wikipedia, "Article 1 and 2 of the laws, established Islam as the official religion of Persia/Iran, and specified that all laws of the nation must be approved by a committee of Shi'a clerics."

"The Islamic revolution in Iran came on the target in 1978, 72 years following the 1906 forced constitution. One Pi cycle of 31.4 years brought us to 2009. We are now turning down for a 8.6 year leg completing a 112 year turning point in 2018. This is the season for global revolutionary contagions." - The Counter Revolution of Iran by Martin Armstrong.

History loves reruns.

HOW TO KNOW WHEN AND WHERE TO GO FOR FOREIGN BONDS AS A CURRENCY PLAY Too…..

As I was requested by one of you …to take on one country as an example to show how to go about using foreign bond as a currency play….am going to use Brazil as it’s the one am working on for my next move
Why China’s New Pet Economy Looks to Grow in Coming Months and why you should go for their bonds….

In case you have kids, you can’t really appreciate what it’s like caring for a kid through sick days, cheering for them at football games, and happily sending them off to college with a good chunk of what could have been your retirement plan.

But that’s not all what being a parent is. It’s investing in your child’s long-term future so they can walk out of college with a job and an adult life…no matter what sacrifices you have to make in the short term.
And hopefully, given the right amount of love and financial assistance, the investment you make in your kids now in your 30s,or 40s, will pay off when you need your kid’s support in your 70s or 80s.Again, it’s a long-term investment…but a rewarding one.

And right now, that’s exactly what China is doing with its new pet economy, Brazil. Indeed, I’ve started to think of Brazil as China’s son because every positive piece of Brazilian news can be traced back to China.
We’ve talked about China here at corporate fx nakuru before, so you already know that the Chinese strategically plan every single move they make. They also tend to make long, calculated moves that are designed to pay off 10 or 20 years in the future.
Right now, their plans revolve around Brazil and the strategic resources located in South America’s largest and most exciting economy…

Listen the following……

China to use 2trillion$ currency reserve to buy commodities…sources CNBC NEWS
We all know that China has deep pockets and US$2 Trillion in reserves to spend. But just in the past month, key Chinese officials are starting to reveal how they will spend those funds.

China is already making investments in resources around the world. Why energy reserves? China knows full well that whoever has the oil reserves will run the world over the next 25 years. So they’re making friends and strategic relationships with the few resource-rich nations making oil discoveries.

Brazil just happens to be one of the few countries on earth with any real oil discoveries so far in this century. Remember that really huge oil discovery in 2007? It was in Brazil. It boosted Brazil’s potential oil output by 62%. It also happens to be the world’s largest oil reserve since the Discovery of Kashagan in Kazakhstan in 2000.

But here’s where it gets really interesting: China has been busy subsidizing Brazil’s oil efforts.
Over the last year, Chinese firms have started making huge investments in Brazilian resources and infrastructure for the first time ever.

In fact, they just promised to lend Petrobras, the largest state-run oil company, US$10 billion to help search for oil. In return, Brazil has promised to pay them a 10-year supply of oil (150,000 barrels a day the first year, 200,000 barrels a day the remaining nine). Talk about a Return on your investment.

It’s not just Petrobras either. There are at least 15 other Brazilian companies that show promise, based on China’s influence and demand for various commodities.

This is all huge, folks. And it’s a BIG reason I have my eyes trained on Brazil this year. But in truth, this is only the beginning…

More Money from Father China please…..

Brazil and china signs multi billions trade agreement….sources FINANCIAL TIMES
China just overtook the U.S. as Brazil’s biggest trading partner. There’s a good reason for that. China can’t get enough of Brazil’s raw commodities. According to a recent report by Goldman Sachs, China eats up 23% of the world’s soybeans and 9% of the world’s sugar. They also use a whopping 41% of the world’s cotton. And guess what? Brazil just happens to be a major exporter of all three.

This is another classic example of how Brazil’s success can be traced back to China. Not to mention, China now buys the lion’s share of Brazil’s commodities anyway. In fact, Brazil’s exports to China just jumped 65% year over year. The Chinese government’s massive stimulus package could lead to more rapid increase in Chinese demand for Brazil’s commodities.

If food-based commodities weren’t enough, China also is after Brazil’s iron ore. Iron ore is Considered one of Brazil’s top exports (right after soybeans), and right now the Chinese continue to demand more to create more steel.

Why do they need steel? Besides the fact that China is the biggest alloy producer in the world, China also has massive infrastructure projects under way. In fact, Morgan Stanley just released a note to their clients predicting iron ore will increase prices by 27% in Brazil.

Brazil unemployment slumps more than forecast …SOURCES WALL STREET JOURNAL
Not surprisingly, all this China influence is boosting Brazil’s economy. On a seasonally adjusted basis, Brazil’s unemployment rate fell to 7.9% from 8.4% in May. That’s the lowest level since November 2008. The reason for all these jobs? You guessed it…more demand from China.

Brazil May Recover Faster than developed Nations….BLOOMBERG

All that said, let’s keep in mind that it’s not all seashells and balloons for Brazil. Even with
China’s influence, Brazil still has its own recession to deal with.

Given all this great news flowing out of Brazil, the IMF has recently issued a “pro-Brazil” communiqué. The IMF says they believe Brazil might lead Latin America to a recovery before
the world’s more developed countries.
It bodes well for Brazil to be the “leader of the pack” of countries coming out of recession.
Brazil is showing growing signs of a rebound since China started pumping funds into Brazil this past winter. They’re showing resilient consumers, a healthy banking sector and higher
global commodity prices.

Additional signs of recovery have been springing up in recent weeks. It doesn’t come as a surprise to me that Brazil is rebounding, but it is shocking some of the world’s economists
who expected Brazil’s slump to be longer and deeper.

Brazil’s economy saw a decline of 0.8% in the 1st quarter of 2010. That officially put
Brazil in a recession. I think this small decline surprised not only economists, but the Brazilian
Central Bank.

Do you think China might be stupid to do all that commitment….or they do not know what they are doing……..?They have one of the finest brains in the world….and that’s how we piggy ride on their brain…….as this truly shows how Brazilian economy is bound to grow …and as it grows..so does it currency appreciate…..

Now with that one in mind tell me what else you need..to get convinced to go for BRAZILLIAN BONDS.
Currently Brazils interest rate is trending at closely to 12% …, two times greater than our interest rate here in Kenya which has been reviewed down ward up to somewhere around 6%.

So if you purchase Brazilian bonds today …you will be given a certificate which indicate your amount invested …, expected yield return plus over what period…..its very easy by the way.
After that …as your bond will be featured in Brazilian Real….two things will happen here.
1) Your capital must first of all be converted from Kenyan shilling into the dollar first as the Brazilian Real is not popular her in Kenya…..

2) Then from US dollar to Brazilian real and consequently you purchase the Brazilian bond.
During the maturing period…out of such well laid down fundamentals is automatic that the Brazilian Real will outperform the US dollar …and the dollar itself will out shine the Kenyan shilling ……

So with that one in mind …you will have 3 main returns all coupled under one investment….ie…bond return (12%)….,Brazilian Real appreciation against the dollar and the dollar appreciating against our own currency here….heeee…imagine all that.
And that’s how we carry out our home work right here at corporate fx before choosing a particular bond of any country.

So this is how you can take on bond portfolio as a currency play too…easy yet simple…

Forex trading is not only candlesticks…no…no……

Next I will tell why Kenyan shilling is losing as such against the US dollar

http://www.guardian.co.u...eactor-threat-fukushima

Now a nuclear accident after such a major quake would lead to global risk aversion. The yen is about to get very expensive in the short term. Short selling nikkei is also profitable in the short term, but my conscience does not permit me to do so with this sad aftermath.

Chart courtesy of Wealth Daily inc.



This will be significant in Q3.

Nuclear radiation from the damaged power plant (Tepco) in Japan is now approaching danger levels

Nikkei is 12%+ down today while trading at Topix TSE is halted. BoJ liquidity injection at 23Trillion yen since yesterday!? Seems like they'll have to inject a trillion US dollars (100 trillion yen) to freeze the market panic. But will the overloaded national debt take such an abrupt round of huge debt load...

http://www.bbc.co.uk/news/world-12740843