The ultimate carry trade

Quote from nzbryant:

Cutten

I know you are not my stock analyst, but how do you find out info about Jap REITs? I read the FT and WSJ daily, and never see anything on this. Is it all in Japanese?

I am not Cutten, but you seem to assume that FT and WSJ are better than people here such as Cutten.

I commend Cutten for this thread, and I want to say that I wrote a note on this on one of my blogs and some people send me a note similar to Bryant's note and to the notes of other people here who write as if they are entitled to things.

I am sorry that you (Bryant and others) should consider that there are people better than any newspaper or wall street house out there. If they are humble to share here, do not assume that they are lower when they are in fact better.

Those houses/newspapers charge you to the nose, that is probably why you respect them. But people who show up here and give valuable information are not respected. You did not even thank the man for sharing.

Cutten: I think you should cut this thread. I have been posting market calls that nailed tops and bottom for a large number od days here and most of what I got (with the exception of some small great number of people) were insults or ungrateful comments.

Some people understand only this: make them pay, and then they will consider what yougive them as great value, even if that value is negative!
 
Cutten:

1. Thanks for starting this excellent thread.

2. My timing methods tell me that the bottom on the J-REIT is in the 1000. It is now in the 1200 area. But one can start getting in as one is already paid income while waiting.
 
Quote from pbj:

Has anyone trading on the Tokyo Stock Exchange using IB noticed that IB has set the minimum price variation for these J-REIT's at 1000 yen while that actual minimum price variation on the TSE is 100 yen? See this web page from the TSE

http://www.tse.or.jp/english/rules/equities/dstocks/index.html

I put in a ticket at IB for them to correct this, but so far there is no correction.

pbj:

Do you pls. know if there are options traded on the J-REIT index?
And if yes, any information on this.
 
Quote from sjfan:

How is it difficult to see that you have a very large FX exposure?

Say you want to buy $100 worth of a japanese asset. Today the exchange rate is about 107.21 JPY:USD and you exchange your dollars into Yen. So you bought yourself 10,721Yen worth of assets. A year later, let's say the value of your asset doesn't change and you sell it for exactly 10,721Yen, but the exchange rate is now 110 JPY:USD, you get only $97.46 back! That's a loss of a > 3% due to FX risk.

If you are borrowing using USD collaterals, the same logic applies; You will be responsible for the FX PnL (in the exact same way as if you are long a spot JPY:USD FX pair with a forex broker without any leverage).

What you've described is a classic uncovered currency arbitrage with a slight twist of using a risky asset instead of a riskless asset on the JPY leg. So now you get both FX risk + market risk.... probably shouldn't really call it an arb...

Do you make the difference between buying with your cash, and buying on credit?
 
Quote from nzbryant:

Cutten

I know you are not my stock analyst, but how do you find out info about Jap REITs? I read the FT and WSJ daily, and never see anything on this. Is it all in Japanese?

Go to ft.com, look up the stocks of Japanese REITs (there are links posted on this thread where you can find a list of their names & stock codes). Ft.com and reuters.com both have balance sheet info and financials on the companies.

For news/ideas, just type "J-REITs" or "Japan REITs" into google. For more info, google each stock name/symbol - Reuters also has a headlines summary for each stock.

You can get more detailed info from the company websites, many of them have an English version.
 
Some news on this sector - as predicted, corporate activity and takeover offers are now beginning:

"Tuesday, August 12, 2008

U.S. Fund Oaktree To Launch Tender Offer For Japanese REIT

TOKYO (Nikkei)--U.S. investment fund Oaktree Capital Management LP said Tuesday it will launch a tender offer for Re-plus Residential Investment Inc. (8986), the first such bid for a Japanese real estate investment trust."

http://www.nni.nikkei.co.jp/CF/FR/GATEWAY/rss_news.cfm?URL=/AC/TNKS/Nni20080812D12JFN04.htm&Check=1

If this tender offer is successful, then further takeovers in the sector can be expected in the coming months. They have chosen one of the most undervalued REITs, trading at 63.6% discount to NAV. I would recommend watching the prices on the Japan open and trading session tonight to see how the whole sector reacts.
 
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