Saturday, January 26, 2008

Currency Harvest finally paying off?

I pointed out in a previous post that the Currency Harvest Index (which uses the "carry trade" strategy) performs very well during bear markets, but that otherwise its results are unimpressive. The Currency Harvest Fund (DBV) tracks this index, and it's been following the S&P 500 pretty closely for the past year:

However, just recently the fund has veered off significantly from the stock market's trajectory. In the past month, DBV is down only 3% compared to the S&P's 11% loss.

If you already believe that we are in a bear market, then this recent behavior supports the notion that DBV may be a stellar investment for the next several months. On the other hand, if you're not yet convinced that we are in a bear market, then this brand new disconnect between DBV and stocks may be one more piece of evidence that the bear has arrived.

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