Thanks for getting back to me....
Don't worry about hijacking the thread since it really doesn't get much traffic here in the Journal section anyway. I never bothered to create a thread on the main boards because one of the advantages of my method is that I only spend about 3 hours a week maintaining it, and I like to keep it that way.
...why being short USD to your broker reduces the margin call risk to zero.
The reason that being short the USD is less risky is simply that I can cover that short with actual dollars that I have. My checking account is in dollars, as is my 401K, stock holdings, and paycheck.
The "infinite risk" that comes with being short any security or commodity comes from the fact that there is no limit to how high its price can rise, and thus no limit to how expensive it would be to go into the market and have to buy back that thing to repay your short. Americans who use the JPY as their funding currency for example take the risk that the Yen shoots way up in price, and then they have to buy back this very expensive Yen to cover their Yen shorts.
But I never have to "go into the market to buy back my dollars," since I already have a bunch of dollars lying around, just not in my Oanda account. This may be also why you often hear about Japanese housewives making money from the Yen carry trade. They're using their own currency, so they're covered if the Yen appreciates.
...why did you include $150 deposits every year for every month?
Haha! Because Systems Analysts don't get paid a lot where I am, so that's what I can afford.
...what will you do when the USD does turn around?
I don't know that it will, but if it does then I'll dance a jig (badly probably) because the US economy will be improving. Then maybe I'll ask for a raise, thus offsetting any losses from open positions. Plus, I'll still continue to collect interest, and that interest will be in new and improved stronger dollars.
In all honestly I was very surprised to see how closely your actual results have compared to your projected results. How the hell did you do that?
Well, the projections are completely based on the deposits and the interest payments, which are predictable. My interest income is actually less than projected because I'm only getting about a 5% spread instead of 6%, and I also haven't built the position sizes as fast as I projected. However, the decline in the dollar so far has more than made up the difference.
The reason I asked your opinion on a hedged carry system is because I believe the results would be much easier to accurately project and rely on.
If I can't rely on the inability of our politicians to balance the US budget, what CAN I rely on?
Seriously though, there are two other reasons I haven't looked into hedging aside from my funny-mental view on the dollar. The first is wanting to be short my local currency, as explained above. The second is that the method hasn't needed much fixing yet, and I like the very low maintenance aspect of it. So once it was in place and working, I moved on to other things and only spend a couple of hours a week maintaining it.
However, if you can figure out a way to use hedging, I'd be interested to see what you come up with. Right now, I'm hedging by the fact that all my other assets are in dollars, so my short dollar position is covered by that.
The controls are in place now, and I maintain the total account position to a value between 4 and 8 times equity. Too late to prevent a 63% loss on equity though. Time to start clawing my way back up....