Mark Cuban is probably best known for being a successful businessman, TV show co-host, and the owner of the Dallas Mavericks. However, he is also known to dabble in the investing world, with an apparent preference for currency investing.
In a recent interview, Cuban discussed his latest trade in which he went short on a major developed market currency. The move was rather bold, though it has probably worked out quite well for the NBA franchise owner (read The Key to International ETF Investing).
Mark Cuban went 'all in' on a short yen bet, assuming that it would plunge against the dollar, shifting his debts to the currency in order to play the trend. "In December, early December, I went and took every penny of debt that I had with the Mavericks and personal debt and everything and converted it to a yen loan when I think it was in the mid-80s, and I've been really happy with it," said Cuban on CNBC.
Obviously given the Japanese focus on easing and the punishing effect this has had on the yen against the dollar, this has been a great move by Cuban. In fact, it has probably reduced the dollar value of his debt by around 20% in four months time, as the yen is currently trading around the 100 mark against the greenback.
How You Can Play
Unfortunately, this move isn’t exactly practical for most investors out there. Getting a loan in a different currency is not an easy process, and if the trade moves against you it can have devastating consequences (see Japanese Yen ETF Investing 101).
There are however, a number of ETFs out there that can allow investors to make a bet on a weaker yen, without the high risks that are inherent in getting debt in a foreign currency. So, for those of you out there who aren’t billionaires, the following Japanese yen focused ETFs could make for interesting plays to invest like Mark Cuban and make a short play on the yen:
ProShares UltraShort Yen (YCS)
This is the only short-yen ETF currently on the market, offering -200% exposure to the currency’s performance against the dollar. The exposure resets on a daily basis though, so longer-term performance may deviate from what some might be expecting in this ETF.
The product is a bit expensive coming in at 95 basis points a year, though it is extremely well-traded as volume usually comes in around 550,000 shares a day. In terms of performance, the ETF has added about 27% YTD, making it a big winner so far in 2013.
Equity plays on a sluggish yen
Cuban has said in the past that he doesn’t usually invest in stocks, but the following ETFs could be an interesting exception. These two funds hedge out yen exposure and invest in Japanese securities, so they benefit from a weakened yen without hurting U.S. dollar-focused investors (see WisdomTree Files for 3 More Hedged ETFs).
And, generally speaking, when the yen is sluggish it helps the domestic Japanese stock market, so these could be interesting ways to play the currency weakness. So while these might not be the first funds you think of to make a bet against the yen, they can certainly help you make an investment like Mark Cuban in this regard:
WisdomTree Japan Hedged Equity Fund (DXJ)
This is by far the most popular hedged Japan ETF on the market, as it has over $7.5 billion in assets and sees roughly 2.7 million shares in volume a day. Expenses are also reasonable, considering that it goes beyond ‘regular’ Japan ETFs like EWJ with its hedging process, as they come in at 48 basis points a year.
The ETF also has a tilt towards exporting names, which could be good news in terms of performance as these can benefit from a weakened domestic currency when selling abroad. The proof is in the ETF’s performance though, as the fund has gained 26.7% YTD, and about 50% in the past six months (see Currency Hedged ETFs: Top International Picks?).
Db X-trackers MSCI Japan Hedged Equity ETF (DBJP)
Another option in the hedged Japan equity market is DBJP, an ETF that charges investors 50 basis points a year to strip out yen exposure while still buying Japanese securities. In addition to being a bit more expensive than its WisdomTree counterpart, the fund has less in volume and assets, coming in below 30,000 shares a day in volume, and below $60 million in assets.
The fund has a somewhat similar holdings structure as DXJ, though it has a few more names in its basket, and it is a bit more concentrated. The real promise of this fund though is in its performance as it has outperformed DXJ in recent time frames, gaining 29.3% YTD and over 57% in the trailing six months.
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- Mark Cuban