Come On, Yen!

I’ve been saying that the yen/dollar ratio would fall below 100 for more than a year now, and we’re finally getting close. It closed last week at 104.59 after hitting 103.4 earlier in the week. On massive intervention by the Bank of Japan, it spiked to 112 at the beginning of March, but quickly succumbed again to its downward trend.

The BOJ is no small player in this game. In March it sold some $45 billion worth of yen in an attempt to keep the yen weaker. That’s a lot. Such a pace, in the words of none other than Alan Greenspan, is “unsustainable”. The BOJ seems to agree and — I think — is giving up. The Euro has already strengthened considerably more against the dollar than the yen has. It’s Japan’s time to help shoulder America’s disintegrating national balance sheet. Let’s face it, if a $45 billion intervention in one month could not protect the 105 demarcation line for more than three weeks, maybe 105 is a false hope.

So, I’m back to reiterating my belief that soon a yen will be worth precisely a penny. In other words, the yen/dollar rate will hit 100 and probably fall below. I’m sitting here outside of Tokyo with a pile of yen just waiting for the bell to ring at 100. To me it will be a starting bell to start transferring back to the states.

What should you do? Well, you probably don’t have a bunch of yen saved up anywhere, which means you should do precisely nothing when it comes to thinking about the right time to change yen to dollars. On a bigger theme of a weakening dollar, you could buy real assets, i.e. gold, commodities, or stocks that deal in them. There are lots of ways to invest in that market, but I would suggest that one of the simplest will be available anytime now. An exchange-traded fund, or ETF, targeting the price of gold will be on the market soon. It will make buying gold as easy as buying any stock. Stay tuned for more on that.

Here’s a chart of the yen/dollar rate over the past year.

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