Author Topic: Converting US dollar debt into Yen dollar debt  (Read 2197 times)

scorpioncapital

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1656
    • scorpion capital
Converting US dollar debt into Yen dollar debt
« on: April 04, 2013, 04:49:57 PM »
Let's assume this scenario. You have US dollar investments financed by US dollar debt.
You think that the Yen is going to be devalued over time more than the US dollar, the thesis being that their total government debt is several multiples more than their tax revenues.

So you convert the US dollar debt you own into Yen-based debt.

Winning case - the yen falls considerbally faster and you later convert your debt back to US dollars for less than you sold it, thus wiping out some of your debt that finances your investments.

Losing case - the yen falls less than the US dollar and your debt increases.

What are the odds that the US dollar will devalue more than the Yen given the dynamics? I'm referring to what Kyle Bass believes that the Yen will drop much faster than the US dollar over time.

Actuall this is a general strategy question. Should you convert some of your debt into a basket of currences that may devalue faster than the US dollar and thus reduce the holding cost of investments? If not the Yen, what other major currency is likely to devalue faster than the US dollar in the immediate future?