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Strategies & Market Trends : The Art of Investing

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Dec 11 4:00 PM EST

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To: Daniel Chisholm who wrote (113)	9/17/1998 8:51:00 PM
From: Sun Tzu	Read Replies (1) of 10695

Daniel, contrary indicators work the very majority of time. You just have to make sure they are extreme enough. There is no great magic to it, just the market dynamics; when everyone who could be buying has already bought, there is no place for the position to go but down. This was my position about 3 years ago when dollar/yen was in 80s. It wasn't that I understood much of the related economics (hell I'm not even a currency guy); it was that in meeting with some of my friends in Citibank, I got to see the bank's info on the pro-yen pro-dollar positions. It was 9:1 and for me that was good enough to park some money with my friends to short yen for me. Unfortunately they got me out of it way too soon (around 108 and yen fell all the way to 132 if I recall correctly). Given that this was not really my game and I made it out with profits, I decided not to push my luck. One of the biggest lessons I've learned is to set expectations for how the story should unfold. If that does not happen (or like you said you don't understand the story anymore) get out of the position as fast as you can. You can always jump back in if your original point is confirmed. I have two questions for you. Do you know the Yen, Dollar, and DM long and short position right now (and how they may have changed in the past 3 months)? And what do you think of going long DM and short yen as a pair trade? Actually I'm thinking about going long D.Bundes and short Yen (not JGB). Sun Tzu P.S So many people were short JGB. As absurd as the JGB pricing was, I was almost certain that joining the masses would have spelled disaster. I doubt many of them got out with their skins in tact when the rates fell. This may be another reason for the strange yen behavior.

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