The Yen continued to plunge downward today, after last week becoming the 24th down week out of the last 32 since October of last year. That’s right – the Yen has been down three out of four weeks for more than 7 months now:

Chart courtesy Finviz.com. Disclaimer: past performance is not necessarily indicative of future results.

We’re hearing more and more about the Yen Carry Trade being back (although we have our doubts on that – with US 10-years yielding 1.92% and Japanese 10-years yielding 0.74% – there isn’t much of a carry there). Mark Dow has a nice explanation of how it works on his blog.

But what we start thinking about more than anything when hearing about the Carry Trade is the infamous Mr. John Devaney, who had to sell his 142-foot yacht named (wait for it…) “Positive Carry” during the financial crisis because of losses in his hedge fund due to the unwinding of, you guessed it – the carry trade.

The problem with the carry trade isn’t that it doesn’t work… it’s that it can be difficult to let go when the market winds take an unfavorable turn. We’d rather just short the Yen and exit the trade when the trend comes to an end. And at this point, even if the Yen reverses and heads higher now, the decline will still have been one of the best long-term trends we’ve seen in years.