As Tempting as TRYJPY is, I'll Pass
My preferred trading style is to buy on dips and sell on spikes. The Turkish Lira has fallen off a cliff over the last couple of months and it's starting to look like a tempting buy. To sweeten the deal, there's also the positive carry, which comes up to about a dollar a day for every $10,000 position.
A bit too risky
Even though the currency has lost more than half its value in the last five years, it is still a little too risky for my liking. Here's a sampling of the major risks:
Too much USD debt (as % of GDP). As the Fed raises interest rates, it becomes harder to pay these debts back. Misery is further compounded by the weakening Lira.
Monetary policy lunacy. Inflation is running at around 10% and Erodgan wants to cut interest rates instead of raising them. Goodbye price stability.
Ultimately, Turkey is caught between a rock and a hard place. If they raise the interest rates, then that cools the economy, lowers GDP and they might have trouble paying back all their external debts. Let interest rates remain as they are, the lira falls in value and they again have trouble paying their debts.
Argentina :(
If anyone ever needs a reminder about not to catch a falling knife, then Argentina would make a good case study.
In 2008, the Argentine Peso was hovering around 2 to the USD. In 10 years, that has fallen to 28 to the USD. That 14x drop is also a reminder of how cryptocurrencies are a safeguard to reckless Central Bank policies.
All in all, the lira might be in for some more pain and as tempting as the interest is, the risk is too much to bear.
Very interesting graphs. I hadn't realised the lira was fledgling that badly. I imagine Venezuela is even more dramatic than what Argentina have been through.
Cryptos now may be a better store of value that some currencies but to be fair in some cryptos such as vertcoin, if people accumulated some before Christmas, their unrealized (if still HODLing strong) loss on some of their purchases as of now could be 80-90%, for example on vertcoin. still vertcoin has the potential for a long term hold whereas argentinian peso probably isn't going to regain much vs the USD. top 10 cryptos obviously are better stores of value than vertcoin but short term cryptos could have another 50% to go before turning around.
Yeah, Venezuela is a full-blown crisis and the currency is all but worthless now. It's tricky buying on dips because the bottom could be very far away.
I recall reading that bitcoin was the preferred mean of transacting in Argentina as the currency plummeted. Good thing about some crypto is the limited supply.
Great analysis! I learned more and more from you. ;)
Thank you @tangmo. Hope things will be clearer in good time. :)
You're welcome! ;)