Yen Yuan Fault

by | Mar 25, 2010 | Archives

The yen yuan fault may create a tsunami of profit.


See how this chart from and the chart below can help you earn a fortune.

There have been plenty of earthquakes around the ring of fire in recent months… but few have as much potential to shake human lives as much as the stress building between the the US dollar, the Chinese yuan and Japanese yen.

I have been writing about the Borrow Low-Deposit High concept for more than 20 years.  Some readers have made millions from following our advice.

The key message in all that writing has been to look for a currency that has risen and has a very low interest rate but has weak fundamentals.  The idea is to borrow this currency and invest in a currency that has fallen versus the borrowed currency but has a high interest rate and strong fundamentals.

This is why I have been warming to the idea of cashing in on the profit potential of borrowing Japanese yen and investing in Chinese yuan.

The chart above shows how the yuan is pegged to the US dollar.  Last July the Chinese government revalued the yuan to the greenback… but not enough.

Massive American debt, trade balance and current account deficits suggest that the US dollar will fall more versus the yuan.

Yet my idea is not to borrow dollars to invest in yuan… though this may be a good bet.

An excerpt from a recent  Bloomberg article “Yuan Poised to Become Reserve Currency, Goldman’s O’Neill Says” by Keith Jenkins enhances this thought and explains why the yuan is likely to rise against the dollar when it says:

China’s yuan is destined to become a global reserve currency rivaling the dollar and the euro, as the nation’s economic power increases the currency’s allure, said Jim O’Neill, chief economist at Goldman Sachs Group Inc.

The Chinese government will “eventually” allow the yuan, or renminbi, to trade freely on foreign-exchange markets, dropping the system under which it controls its value, O’Neill wrote in an essay that formed part of a report published today for Chatham House, a London-based foreign affairs research organization.

“As China moves in this direction, other large emerging economies will presumably gradually move in the same direction and the end result will be something approximating to today’s Western monetary system,” London-based O’Neill wrote. “Under such a system, the renminbi, dollar and euro would all form the linchpin of the world’s currency markets.”

China is likely to overtake Japan as the world’s second- largest economy this year, said O’Neill, who coined the term BRICs to describe Brazil, Russia, India and China in 2001. In the next decade, along with other large emerging economies, the size of China’s economy will approach that of the U.S., he wrote.

O’ Niell’s new book is “Beyond the Dollar: Rethinking the International Monetary System.”

On the other hand one should never throw caution to the wind… especially based on comments from employees of big banks.

While some readers have made millions from Borrow Low-Deposit High… others have lost their entire investment!

We are reminded of the comments of a Bear Sterns expert on mortgage backed securities.  Insiders believed that American house prices could never fall at the national level and when asked in 2006 about the Bear Sterns model portfolios he wrote:  “Our models are fine. We have been doing this for 20 years.”

Bear Sterns would not last more than 20 months after that statement.

This is why we never speculate and leverage investments more than we can afford to lose.

However an even better position from a fundamental point of view is a Yen Yuan Multi Currency Sandwich.  Borrow the Japanese yen and invest in Chinese yuan.


This chart which shows the Japanese yen’s rise versus the Chinese yuan also from shows why.

The US dollar remains fixed to the yuan… but the Japanese yen has risen… a lot… against the dollar and the yuan.

However there are many fundamentals that suggest the yen will fall versus the US dollar and hence the yuan.

This means I am liking the yen/yuan sandwich more.  There is just one glitch… finding safe high yielding Chinese investments.  We’ll review that search in an upcoming message.

Join us in North Carolina this June to learn more about the Multi Currency Sandwich. June 24-27 International Investing and Business North Carolina


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June 24-27 International Investing and Business North Carolina

June 28-29    Ecuador Travel & Andes

June 30-Jul 1 Imbabura Real Estate Tour

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July 3-4      Coastal Real Estate Tour
July 6-7      Quito Real Estate Tour
July 9-10     Cuenca Real Estate Tour

Sept.   3-6   Ecuador Export Tour
Sept.   8-9   Imbabura Real Estate Tour
Sept. 11-12   Coastal Real Estate Tour
Sept. 14-15   Cuenca Real Estate Tour
Sept. 17-18   Ecuador Shamanic Mingo

Oct.    7     Quantum Wealth North Carolina
Oct.   8-10   International Investing & Business North Carolina
Oct.   11-12  Travel to Quito and Andean Tour
Oct.  13-14   Imbabura Real Estate Tour
Oct.  16-17   Coastal Real Estate Tour
Oct.  19-20   Quito Real Estate Tour
Oct. 22-23    Cuenca Real Estate Tour

Nov.    4-7   Super Thinking + Spanish Course Florida
Nov.    8-9   Travel to Quito and Andean Tour
Nov. 10-11    Imbabura Real Estate Tour
Nov. 13-14    Coastal Real Estate Tour
Nov. 16-17    Quito Real Estate
Nov. 19-20    Cuenca Real Estate Tour

Dec.   3-5    Ecuador Shamanic Mingo
Dec.   7-8    Imbabura Real Estate Tour
Dec.  10-11   Coastal Real Estate Tour
Dec. 13-14    Quito Real Estate Tour
Dec. 16-17    Cuenca Real Estate Tour

Read the entire article Yuan Poised to Become Reserve Currency, Goldman’s O’Neill Says