I have had the pleasure over the last couple of weeks to help plan the CFA Society of Alabama 2012 Dinner featuring Jim Rogers and Barron’s Senior Editor Jack Willoughby.  The event was fantastic, and I would like to publicly thank Jim Rogers and Jack Willoughby for investing so much time and effort into the State of Alabama.  Both are incredible men, and I was delighted to meet them.

Jack Willoughby challenged Jim Rogers’ statement “you must understand currencies” with the point that  leveraged forex trading that has grown popular is not suitable for investors.  Jim responded by saying currencies seem unsafe just like all investments seem unsafe before a bull run, and that with proper education and management, currencies represent outstanding opportunities.  I think both are right.

Over a year ago in Japan Intentional or Accidental Pursuit of Deflation, I contended that the persistently appreciating Yen was starting to pose an extreme competitive disadvantage to the Japanese exporters.  Korean electronic, auto, and appliance manufacturers (LG, Samsung, Hyundai, Kia, etc.) have exploded their market share in the US due to their huge pricing advantage over their Japanese neighbors discussed recently in Hyundai Motor Europe confident on 2012 goal. 

“…Japanese rival Toyota, which has been overshadowed by the success of South Koreans in Europe in recent years, said good products backed by a currency which is ‘extremely competitive’ make Hyundai and Kia outperform the market.

‘It is probably the mirror of the yen,’ Mr Alain Uyttenhoven, vice-president at Toyota Europe, told reporters, referring to the strong yen that hurt Japanese carmakers. “

Japan seems very slow to change, but the Yen seems to have finally found a limit as the Japanese now suffer a significant trade deficit with the world.  The Japanese no longer can pursue the harmful Yen policy of the past.  Instead of Yen to US$ and Euro, they should focus on the Yen versus their competing Asian currencies.

From TimelyPortfolio

The question then becomes does this represents an opportunity for investors, and if it does, how do you go from US stocks and bonds to a short Yen long emerging currency position?

R code from GIST: