A TRADING STRATEGY FOR INDIVIDUAL INVESTORS

It is my opinion that long term there is a significant likelihood Japan will experience a sovereign debt crisis and a notably weaker currency.  As a result, I believe there is opportunity in being net short the Japanese Government Bond market and the Yen.  Although no one can guarantee the future and there is risk in making such a trade, this site is devoted to providing you with a variety of information and analysis that I believe support my opinion, as well as an avenue to participate in the opportunity yourself.*

Welcome to Short Japan Debt.

MEET THE STRATEGIST

Tres is responsible for identifying, researching, and continuing to refine the Short Japan Debt trading strategy.  When you open an account through Short Japan Debt, Tres will serve as your Commodity Trading Advisor (CTA), managing your account with expertise and unbridled enthusiasm for the financial markets.

Tres has been a trader on the Chicago Mercantile Exchange since 1996.  Having started in agricultural futures and options, Tres has since expanded to energy, equities, and sovereign debt.

A regular contributor on CNBC, Bloomberg, Fox Business, Al Jazeera, NHK, BNN and many other financial news networks, Tres has also hosted and been guest at numerous investment conferences, webinars, and other speaking engagements.

STATUS QUO

THE JAPANESE WILL CONTINUE TO FINANCE THEIR OWN DEBT

We’ve heard “the Japanese can finance their own debt”, because for some time now, they have – approximately 90% of Japanese Government Bonds are currently owned by the citizens of Japan.  This might continue if the population dynamic of Japan remained constant, but it’s not.  Indeed, due to the unbelievably low likelihood of having both the lowest birthrate in the modern world and the highest life expectancy, Japan’s workforce is shrinking while their population is aging.  

A smaller workforce produces less tax revenue (barely 40% of their budget, currently), while an aging population draws more on social security (over 31% of their budget and growing).  Combined, the two trends require even more borrowing long-term (already 48% of Japan’s budget is funded by new debt).  To further the fiscal challenges faced by Japan, as owners of debt divest from their portfolios to fund retirement, net buyers (the aging population of Japan) may eventually become net sellers.  Will the foreign markets lend to Japan at today’s extremely low rates? Not when they get better yields elsewhere. 

“Japan’s huge government debt, which exceeds 200% of GDP, persistent deflation, reliance on exports to drive growth, and an aging and shrinking population are major complications for the economy.”

— Central Intelligence Agency, United States of America

“I hope this serves as a warning for the government, they have absolutely no sense of crisis. Once bond yields spike and the fire is lit, the amount needed to finance Japan’s borrowing needs is going to jump and it’s going to be too late.”

— Azusa Kato, Economist at BNP Paribas Tokyo

“At a time at which the bond, I think, is the most risky asset or one of them in the world, the pricing of that asset, using the Black-Scholes Model, is the best it has ever been… You can put enormous positions on in Japanese interest rates, very cheaply.”

— Kyle Bass, Founding Partner, Managing Member and Principal at Hayman