Jim Rogers Buying the Yuan
 

Just read this article: Jim Rogers Shifts Assets Out of Dollar to Buy Yuan

and he says that
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Jim Rogers, chairman of Beeland Interests Inc., said he is shifting all his assets out of the dollar and buying Chinese yuan because the Federal Reserve has eroded the value of the U.S. currency.

"I'm in the process of -- I hope in the next few months -- getting all of my assets out of U.S. dollars," said Rogers, 65, who correctly predicted the commodities rally in 1999. "I'm that pessimistic about what's happening in the U.S."

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It goes on to say, [ QUOTE ]
he expects the Chinese currency to quadruple in the next decade and that he is holding on to commodities such as platinum, gold, silver and palladium.

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and he is so sure of the yuan that he says [ QUOTE ]
"I don't see how one can really lose on the [yuan] in the next decade or so. It's gotta go. It's gotta triple. It's gotta quadruple."

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He's also buying more yen due to the carry trades.

So besides practically quoting the most important parts of the article, does Jim Rogers know what he is talking about, what can we learn from him, and should we all be following his advice?

Any other discussion would be informative as well.

Re: Jim Rogers Buying the Yuan
 

Actually his trade all boils down to the rest of the G7 putting enough pressure on China to let their currency float freely. Once it comes off of an artificially depressed state, it has nowhere to go but up. Unfortunately China is going to fight the pressure of the G7 because once the currency floats and skyrockets in value, their export economy is dead.

Rogers knows the high up guys and he knows how much pressure can be put on China. He knows they will cave eventually. Good luck though being a small Forex trader and getting in on this yuan trade.

Re: Jim Rogers Buying the Yuan
 

these are both positions we've talked a ton about in BFI.

long yen, long yuan. he is exaggerating a lot since if the yuan flies up the chinese communist party will crap themselves lol.

but seriously, they have to slow the economy slightly and have acknowledged that by raising rates (in a small way). they are still accumulating huge reserves though so they need to raise rates even further.

the good news for china is that unit labor costs are STILL falling despite 15% increases in wages since productivity is increasing even faster.

they can keep the yuan where it is for a while, but evenutally they need to raise it (and it will raise itself if it is oversold by the chinese central bank for too long).

this is one fo those spots where the market is just not efficient b/c you have such a huge player out to peg a currency without regard for profit. long the yuan is definitely a great trade...but i don't know exactly how to execute it since you can't own chinese currency [img]/images/graemlins/frown.gif[/img]

i'll search around a bit though.
Barron

Re: Jim Rogers Buying the Yuan
 

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Good luck though being a small Forex trader and getting in on this yuan trade.

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i'm going to search around some spreadbetting sites, but igindex don't offer yuan but offer all sorts of other currencies.

ill post if i find anything useful.

Re: Jim Rogers Buying the Yuan
 

well, you can buy the yuan here:

CME renminbi futures

it is about 125k per contract and i forget what the margin requirements are, but if they are 50:1 as quoted for other futures contracts tthen it is only a 2.5k or so margin requirement...

it might be more though...like at 20:1 it is almost 6k margin.

Barron

Re: Jim Rogers Buying the Yuan
 

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but i don't know exactly how to execute it since you can't own chinese currency

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I don't know much about the Yuan, but what do you mean by this? You mean there are regulations against owning Yuan, or it's just not practical to byu? I used to have several small bank accounts: USD, GBP, EUR, KRW and CNY. There was only a few K in them, but they weren't too much trouble to open.

Re: Jim Rogers Buying the Yuan
 

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but i don't know exactly how to execute it since you can't own chinese currency

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I don't know much about the Yuan, but what do you mean by this? You mean there are regulations against owning Yuan, or it's just not practical to byu? I used to have several small bank accounts: USD, GBP, EUR, KRW and CNY. There was only a few K in them, but they weren't too much trouble to open.

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The yuan isn't a free floating currency, it is pegged. (I think) So that means there isn't a "market" for it like the other currency pairs.

Re: Jim Rogers Buying the Yuan
 

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but i don't know exactly how to execute it since you can't own chinese currency

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I don't know much about the Yuan, but what do you mean by this? You mean there are regulations against owning Yuan, or it's just not practical to byu? I used to have several small bank accounts: USD, GBP, EUR, KRW and CNY. There was only a few K in them, but they weren't too much trouble to open.

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The yuan isn't a free floating currency, it is pegged. (I think) So that means there isn't a "market" for it like the other currency pairs.

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While the yuan is pegged, it is not going to down in value. Everyone in the world, including China, knows that the yuan is undervalued. If it were allowed to trade freely like the rest of the currencies, it would dramatically increase in value. The only thing stopping it is China's political/economical clout.

Eventually, it will reach fair value. But there is no guarantee as to how soon that will happen. I also don't know of a good way of purchasing yuan, but I would love to buy some if I could find an easy way of doing so.

I have read in several places that investing in the Yen is a good way to invest in the Yuan, as for some reason, the Yen is somehow tied to the Yuan and/or will benefit from the yuan increasing in prices. I don't know the exact details behind this though so do your own research before buying any Yen.

But until China is willing to open up their economy, all we can do is ::yuan:: and wait.

Re: Jim Rogers Buying the Yuan
 

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but i don't know exactly how to execute it since you can't own chinese currency

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I don't know much about the Yuan, but what do you mean by this? You mean there are regulations against owning Yuan, or it's just not practical to byu? I used to have several small bank accounts: USD, GBP, EUR, KRW and CNY. There was only a few K in them, but they weren't too much trouble to open.

[/ QUOTE ]

The yuan isn't a free floating currency, it is pegged. (I think) So that means there isn't a "market" for it like the other currency pairs.

[/ QUOTE ]

While the yuan is pegged, it is not going to down in value. Everyone in the world, including China, knows that the yuan is undervalued. If it were allowed to trade freely like the rest of the currencies, it would dramatically increase in value. The only thing stopping it is China's political/economical clout.

Eventually, it will reach fair value. But there is no guarantee as to how soon that will happen. I also don't know of a good way of purchasing yuan, but I would love to buy some if I could find an easy way of doing so.

I have read in several places that investing in the Yen is a good way to invest in the Yuan, as for some reason, the Yen is somehow tied to the Yuan and/or will benefit from the yuan increasing in prices. I don't know the exact details behind this though so do your own research before buying any Yen.

But until China is willing to open up their economy, all we can do is ::yuan:: and wait.

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i'm not so sure you understand exactly how the yuan is kept undervalued. specifically, the chinese central bank (people's bank of china) borrows yuan from its citizens (via regulations about savings etc.) and sells it for dollars.

alternitavely, it could print yuan, sell them and purchase dollars....it isn't the chinese clout that keeps the yuan down. it is their market intervention.

what i meant by "you can't buy yuan" is that LITERALLY, you cannot own yuan. at least as far as i knew/know, the chinese govt makes it illegal for outsiders to purchase yuan from outside of china (i.e. you must go to china). this may be simplifying the issue (there could be a ton i'm missing here), but that was my understanding.

now i know that you can at least purchase renminbi (yuan) futures from the chicago mercantile exchange. i posted the link to get them. they cost about USD 125k but only require a maintenance margin of less than 10k (couldn't get an exact quote but 50:1 would be 2500 and 20:1 would be 6k).

i also think they are quoted in yen for some reason and you may have to do a currency cross to get it but if you get on the phone with either interactive brokers or the chicago merc, i'm sure you can get the exact methodology for purchasing the futures contract.

finally, the yen doesn't respond or correlate to the yuan enough to be anywhere close to ag ood enough proxy. it is decent, but just not tradable imo.

Barron

Re: Jim Rogers Buying the Yuan
 

If you buy them in China, can you take it outside of the country? I know a business owner with an office in China...

Re: Jim Rogers Buying the Yuan
 

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If you buy them in China, can you take it outside of the country? I know a business owner with an office in China...

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we are now way beyond my knowledge here. i just remember that in november 2006 i wanted to buy some yuan but couldn't. now there appear to be futures contracts to do so. that i think is the best way to do it.

Barron

Re: Jim Rogers Buying the Yuan
 

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If you buy them in China, can you take it outside of the country? I know a business owner with an office in China...

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I have a drawer stuffed with Yuan from my last visit that I can't be bothered to change as I'll be back again soon. I don't remember there being anything on the customs declaration form about not being able to take Yuan out of the country.

Many countries I've been to have limits of between $2000 and $10000 or currency equivalent that you have to declare. I've no idea whether or not you can take it after declaration.

Re: Jim Rogers Buying the Yuan
 

why not go to china with 100k USD, convert, open a savings account, and leave it for 5 years?

Re: Jim Rogers Buying the Yuan
 

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why not go to china with 100k USD, convert, open a savings account, and leave it for 5 years?

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uhh, b/c with that you could get 3 contracts for 375k worth of exposure to the Yuan and have maybe 70k left over to earn the higher US interest rate.

Barron

Re: Jim Rogers Buying the Yuan
 

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Good luck though being a small Forex trader and getting in on this yuan trade.

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i'm going to search around some spreadbetting sites, but igindex don't offer yuan but offer all sorts of other currencies.

ill post if i find anything useful.

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You can trade the yuan (USD/CNY) at Oanda.
http://www.oanda.com/site/pr/exotic_...03142007.shtml

Re: Jim Rogers Buying the Yuan
 

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why not go to china with 100k USD, convert, open a savings account, and leave it for 5 years?

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uhh, b/c with that you could get 3 contracts for 375k worth of exposure to the Yuan and have maybe 70k left over to earn the higher US interest rate.

Barron

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how does this margin business work?

Re: Jim Rogers Buying the Yuan
 

sorry as you all know i am a complete novice, so could i please check that:

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now i know that you can at least purchase renminbi (yuan) futures from the chicago mercantile exchange. i posted the link to get them. they cost about USD 125k but only require a maintenance margin of less than 10k (couldn't get an exact quote but 50:1 would be 2500 and 20:1 would be 6k).

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say i need a minimum margin of 20:1, so i put down $6k. i then have an effective position of $125k in yuan. if that position then goes down to $119k then i need to make a margin call (?) and put more down if i want to continue with the position?

sorry just i only spreadbet where i can have a guarenteed stop loss, whereas am i right in saying that if i had $6k margin deposited but then my position dropped to $100k, i would then have to deposit another $19k?

i will likely buy 1 contract i think, i doubt i want to risk any more than $10k. any thoughts of likelyhood of it dropping 8% and bustoing my $10k?

Re: Jim Rogers Buying the Yuan
 

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sorry as you all know i am a complete novice, so could i please check that:

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now i know that you can at least purchase renminbi (yuan) futures from the chicago mercantile exchange. i posted the link to get them. they cost about USD 125k but only require a maintenance margin of less than 10k (couldn't get an exact quote but 50:1 would be 2500 and 20:1 would be 6k).

[/ QUOTE ]

say i need a minimum margin of 20:1, so i put down $6k. i then have an effective position of $125k in yuan. if that position then goes down to $119k then i need to make a margin call (?) and put more down if i want to continue with the position?

sorry just i only spreadbet where i can have a guarenteed stop loss, whereas am i right in saying that if i had $6k margin deposited but then my position dropped to $100k, i would then have to deposit another $19k?

i will likely buy 1 contract i think, i doubt i want to risk any more than $10k. any thoughts of likelyhood of it dropping 8% and bustoing my $10k?

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the margin adjusts daily. i don't think it will busto 10k by a long shot if it is 50:1 margin, and even at 20:1 it is a greater change, but still not likely since i think the margin rule is you have to lose some big chunk to get a margin call (not sure exactly what it is for the contract at hand).

also, that onida thing i'm gunna go check out to see what the rules are there.

also, the value of the futures i'm sure are determined in some huge way by the probability of the yuan being more freely floated. so good economic news from china or higher inflation from china (or vice versa in the US) would either a) increase the likelihood of more interest rate hikes in china and thus more "inching up" of the yuan, or b) lower rates in the US which makes it harder for the PBoC to keep the yuan at the peg (i.e. they have to sell more yuan).

i don't think they''ll be any shortage of those 2 news bits coming. hope this helps,

Barron

Re: Jim Rogers Buying the Yuan
 

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Good luck though being a small Forex trader and getting in on this yuan trade.

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i'm going to search around some spreadbetting sites, but igindex don't offer yuan but offer all sorts of other currencies.

ill post if i find anything useful.

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You can trade the yuan (USD/CNY) at Oanda.
http://www.oanda.com/site/pr/exotic_...03142007.shtml

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i can't tell if this is a futures contract or an outright purchase. thoughts?

thanks,
Barron

Re: Jim Rogers Buying the Yuan
 

Seems like an outright purchase. The spread is 40 pips thoough.

Re: Jim Rogers Buying the Yuan
 

I have a small account at Oanda. All these are outright purchase.

For a large position, it might be safer to buy a futures contract from CME.

Re: Jim Rogers Buying the Yuan
 

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I have a small account at Oanda. All these are outright purchase.

For a large position, it might be safer to buy a futures contract from CME.

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so then the question becomes:

"is it better to purchase 10k of yuan outright or gain exposure to 125k of yuan for a similar tie up of capital"

i'd venture to guess that unless you actually need CNY for usage purposes, the futures contract would be better suited given the outlook and costs of execution.

Barron

Re: Jim Rogers Buying the Yuan
 

Maintenance margin reqs are usually 75% of the initial margin for futures contracts. So if you put 10k into a 125k contract with 20:1 margin (initial margin req 6,250), it needs to drop 5,312.50 (so you have 4,687.50 equity)... 4.25%

I think I'm correct, but the first time doing this type of calc

Re: Jim Rogers Buying the Yuan
 

I was under the impression that futures contracts where limited to maximum 12 months (at least the ones I see in my forex account). So if my opinion is the yuan will appreciate in the next 5 years but I dont know when, futures dont really allow me to make the bet..

Re: Jim Rogers Buying the Yuan
 

My problem with Oanda and all these 'FX' shops popping up everywhere is broker risk. Frankly, I just don't trust them with 100k of cash. I might very well be wrong about the risk but I would feel a lot more comfortable with a big shop like Morgan Stanley or something.

Re: Jim Rogers Buying the Yuan
 

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I was under the impression that futures contracts where limited to maximum 12 months (at least the ones I see in my forex account). So if my opinion is the yuan will appreciate in the next 5 years but I dont know when, futures dont really allow me to make the bet..

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you can roll futures pretty easily and seamlessly. for a roll to really hurt you, the price would have to jump HUGELY during the time you sold to the time you bought the next contract. that kind of break doesn't happen and you have a choice of when to put in your order to roll the contract (or you can simply take delivery ... but that requires $$$$). i think the roll order can be placed anytime between the last trading day of the previous contract and the last trading day of the maturity of your contract.

Barron

Re: Jim Rogers Buying the Yuan
 

DcifrThs:

What are the tax implication of rolling futures together? Is there a way to avoid paying cap gains every year? Also, not to sidetrack this thread, but what is your opinion on oil futures? In a scenerio where Supply will eventually diminish and Demand will have accelerating upward pressure (china/india)... it seems highly probable that oil will appreciate (at least until alternatives become viable)...

Also how do you find out the maximum margin ratios?

Re: Jim Rogers Buying the Yuan
 

So throughout all of this discussion, is the general consensus that we should buy and hold some yuan any way that we can?

It seems like this discussion went very quickly from an economic analysis to "how can we buy yuan?"

Also, at OANDA it says USD/CNY. That means we should SHORT that currency pair, correct?

Re: Jim Rogers Buying the Yuan
 

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So throughout all of this discussion, is the general consensus that we should buy and hold some yuan any way that we can?

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yes

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It seems like this discussion went very quickly from an economic analysis to "how can we buy yuan?"

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the economic analysis behind "should we buy the yuan" has been hashed out a ton, search for posts with yuan or renminbi back when i started posting on this forum in april/may/june.

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Also, at OANDA it says USD/CNY. That means we should SHORT that currency pair, correct?

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yes. in MOST (i would hope all but i can't speak to that) cases, the first currency in the currency pair determines the direction you want to take. if the think then yen will rise relative to the dollar you short USD/JPY or long JPY/USD.

Barron

Re: Jim Rogers Buying the Yuan
 

Thanks DcifrThs, someday I hope to have just a little bit of the knowledge that you have.

I used to trade FX, hence the FX in my screenname. I traded EURUSD, USDCAD, and USDJPY, but never really got anywhere with it. I worked basically with technical analysis and the charts, but never seemed to "get it." That was around the 2005 time frame.

I was told by an employee of Merrill Lynch (I think) that I shouldn't trade Forex because we are at a severe disadvantage.

The only problem I ever really had with it was that it moved incredibly slow. Maybe if I took a more fundamental approach to it, I could do better.

Thoughts/Advice?

Re: Jim Rogers Buying the Yuan
 

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I have a small account at Oanda. All these are outright purchase.

For a large position, it might be safer to buy a futures contract from CME.

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Considering opening an account with Oanda, please share your experience. How long have you had an account there? Have you had any bad experiences with them?

Re: Jim Rogers Buying the Yuan
 

No bad experiences with them.

Note that I'm not a winning FX trader so I've never cashed out but I did manage to keep playing with my original stake even after 2 yrs.

But ever since IB introduced spot fx, I don't use Oanda much anymore.

Re: Jim Rogers Buying the Yuan
 

ItalianFX, what was your Merrill friends basis for suggesting we are at a disadvantage in Forex?

I've found that technical analysis just doesn't cut it in trading Forex. The only way to succeed is to supplement that TA with a good base in the fundamental workings of the Forex market. The actual currency pair you are trading is simply the final piece of a sequence of events (if that makes any sense). You can TA the Eur/Usd pair to death, but if you don't know the rest of the picture leading up to the final TA, it is all useless.

Any trader in Forex should have a working knowledge in ALL major market areas and understand the intermarket relationships between those areas. Trading currency without using the associated markets is just impossible in my opinion.

1. commodity markets (gold, base metals, CRB index, GSCI index, JOC-ECRI index, oil)

2. bonds/rates (spreads, yield curve, inflation rates, Fed thinking, Fed Funds, bond prices/yields, foreign bond prices/yields, ECB thinking, other foreign central bank policy, foreign economy economic indicators)

3. equities (sector rotation, rate sensitive sectors, inflation sensitive sectors, gold mining shares, oil shares, banking shares, futures instruments, foreign equity markets)

4. other currencies (carry trades, correlative relationships)

5. domestic economic indicators (too many to list)

6. Geopolitical events (wars, weather, natural disasters, terrorism, etc.)

These are just the major areas. Each of these markets affect other markets. No matter how good your TA of the Eur/usd looks, if these other markets don't lead up to that last piece of the puzzle and confirm it, then the TA is useless.

TA is pretty much just a tool to fine tune your entry point based on a whole host of other fundamental factors.

Re: Jim Rogers Buying the Yuan
 

tippy,

Do you simply read, read, read? What do you look at and how do you interpret everything?

Re: Jim Rogers Buying the Yuan
 

mainly I look at Gold, Oil, Copper, 2yr/10yr/30yr bond prices/yields/spreads, CAC/FTSE/DAX/Nikkei/SP500, XAU, XOI. These are my major intraday indicators. Minor things I look at intraday are the BKX, SOX, CMR, DJB, DJU,GSC. Daily I look at all the domestic economic indicators, foreign rates, foreign economic indicators, some news. I've got it pretty organized, so it doesn't take much time.

Everything has a cause and effect and each sector feeds off the others. Commodities are affected by the dollar. If Gold is up, the dollar is down. If the dollar goes down too much, commodities rise (look at gold and the CRB index). If commodities rise too much (inflation), interest rates go up. If interest rates go up, the dollar strengthens. If interest rates go up, bonds go down and stocks go down. If the Fed raises the rates the dollar goes up, gold goes down, commodities go down. And the cycle never ends. You can develop many relationships to observe whatever you want. Everything is related although sometimes there are lags. If one of these markets isn't behaving the way normal relationships say it should be, then watch out, the market is about to throw you a curve.

Gold and gold mining shares should move together, divergences are signals. Same with oil stocks.

Probably the best book to start with is John Murphy's "Intermarket Technical Analysis". It is an awesome read and points out all the major intermarket relationships. Once you get these down, reading the market (no matter which market you trade) gets alot easier. Even if you trade equities, having a working knowledge of the other areas can make trading alot easier. After that, move on to his next book, "intermarket analysis".

I know it sounds like alot of information, but it isn't really. Once you know what to look for in the intermarket relationships, things become clear. You filter out alot of what isn't important.

Re: Jim Rogers Buying the Yuan
 

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Probably the best book to start with is John Murphy's "Intermarket Technical Analysis". It is an awesome read and points out all the major intermarket relationships. Once you get these down, reading the market (no matter which market you trade) gets alot easier. Even if you trade equities, having a working knowledge of the other areas can make trading alot easier. After that, move on to his next book, "intermarket analysis".


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I checked out both books. Are they basically the same thing, only the second is a revision?

Either way, they look to be amazing books; however, they are expensive! [img]/images/graemlins/frown.gif[/img]

Re: Jim Rogers Buying the Yuan
 

Yes, the second is a revision of the first. The first was written in 1991, the second in 2004. The second book simply took all the relationships and showed how they held up after 1991. Some of the relationships changed for periods and the author describes why. A really good section on Deflation in the second edition.

If you just want to get one, go for the first one. You can usually pick up a good used copy for about a third of the new price. Nerds reading this stuff aren't usually too destructive, so the books are usually in pretty good shape, lol (if they have even been read at all).

Have a good weekend.

Re: Jim Rogers Buying the Yuan
 

tippy, that books looks great, ive looked on amazon but the only copy is £208 ($420). are there more mainstream books around which would be more available?

i really want a book which explains how currency, bonds, commodities etc inter-relate.

also, i went on to the cme.com website, i may be really stupid but can you actually sign up on this website to trade? i tried going on to the membership section but membership was some huge amount of money.

Re: Jim Rogers Buying the Yuan
 

regarding people buying the CNY...yes, techincally outsiders are not allowed to own the currency...same thing goes for brazil, argentina, south korea, phillipines (and some others)...but that doesnt mean it cant be traded. FX dealers devised a way around it by creating something called a NDF (non-deliverable forward)...basically its just a regular forward contract that automatically unwinds itself a day or two prior to maturity (so you dont take actual delivery of the foreign ccy) and thus settling any gains/losses in USD.
since NDF's are not as liquid as the majors, an alterative way to gain exposure to china (or most exotic asian currencies) is by buying/selling JPY.

and currencies DO have less longterm volatility than say, equities. but the reason youre at such a disadvatage is because of the volume you must trade in order to make any money and the use of leverage. hedge funds doing billion dollar trades are not that uncommon. in order for a retail investor to make decent money they must use ridiculous amounts of leverage...100 times leverage at retail brokers is the norm (compare that to 1.5 times leverage in the stock market)...so any small swing against you will usually wipe you out.

Re: Jim Rogers Buying the Yuan
 

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tippy, that books looks great, ive looked on amazon but the only copy is £208 ($420). are there more mainstream books around which would be more available?

i really want a book which explains how currency, bonds, commodities etc inter-relate.


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Intermarket Technical Analysis is $16 as the cheapest for me. Where did you see 420?