Trading lesson

This is a great post for anyone wanting to be a trader. Find it here, at Bespoke:
Yesterday’s Headline of the Day

I am going to steal the whole thing, apologies to Bespoke, but the post is just far too valuable for one website!

Here is the headline, followed by the whole post:

As investors and traders, there are always moves in the market that make us scratch our head. The above headline regarding the rally in the Japanese Yen is one of them. Now, we realize there a multiple reasons why the Japanese Yen is rallying (repatriation of assets and an unwind of the carry trade), but at face value the move seems counterintuitive. Would you want to buy the currency of a country facing a nuclear meltdown? Events of the last few days remind us of how interconnected today’s global market is. The result is that short-term moves can often seemingly defy all logic.

Great post.

While I am here, let me expand a little on the Yen moves.

Apparently, there has been no repatriation of capital back into Japan (not yet, anyway). This from IB:

Everyone is warning that Japanese banks, insurers and corporations will turn importers of capital causing a flood of yen repatriation. But we’re short of evidence to substantiate this while speculators are living out that dream.

Other sources have also not seen evidence of repatriation (again, yet).
So the Yen appreciation is occurring on expectations of repatriation (I am ignoring the effects of the unwinding carry trade for the time being, but that effect is in there too).

Trading on expectations, and good money to be made while doing so. Trading is not investing.

A bit more detail on the repatriation case, also on the rising Yen, and why its not…
The case for co-ordinated yen intervention

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