Back in late September, we posted what Albert Edwards thought at the time was "The Most Important Chart For Investors" which was quite simply, a chart of the USDJPY. Considering the BOJ's overnight move, he was absolutely correct. So for all those who missed it, here it is again, because it explains not only where the Yen is headed next, but why, sadly, this could well be the end of Japan and the mirage of a recovery that has had everybody hypnotized for the past 6 years.
Second Spaceship Crash In One Week: Virgin Galactic's SpaceShipTwo Suffers "In-Flight Anomaly" - Live FeedSubmitted by Tyler Durden on 10/31/2014 - 14:25
The Next Time The BIS Wants To Warn About Monetary Kool-Aid, Bubbles, Lack Of Liquidity Or Complacency...Submitted by Tyler Durden on 10/31/2014 - 14:04
We have a modest proposal to the Bank of International Settlements, aka the "central banks' central bank": the next time you feel like warning the general public about: "low volatility everywhere" or that asset prices are at "elevated" level, that "it is hard to avoid the sense of a puzzling disconnect between the markets’ buoyancy and underlying economic developments globally", that "despite the euphoria in financial markets, investment remains weak" that "the temptation to go for shortcuts is simply too strong, even if these shortcuts lead nowhere" that "As each day goes by, it seems less and less likely central banks can now really do “whatever it takes”, maybe it should discuss its asset-bubble, volatility-crushing, impotent-central banking concerns with its Board of Directors first?
In August 2013, the Nasdaq SIP broke and trading in Nasdaq stocks was halted for 3 hours. Yesterday, at 1:07 PM ET, the NYSE SIP broke but trading was allowed to continue until the backup facility was put on line. ?Apparently, the NYSE didn’t think it was necessary to halt trading in their listed stocks... despite customers not receiving accurate pricing.
At what point does revolution take place? In our review of history, the probability is low but for the economic trend. In other words, turn the economy down and the percent of discontent rises exponentially. So beware – not ghosts and goblins, but politicians going forward. The problem is not that Americans are ignorant, they are being fed nonsense by the media to sell newspaper and TV advertising. We have fallen into a cycle of Yellow Journalism that was begun by Pulitzer. So perhaps Americans will wise up only when the economy turns down and the Internet provides a greater proportion of real news compared to mainstream media.
"We start our Q4 GDP tracking estimate at +2.2%, eight-tenths below our prior standing forecast. The lower tracking estimate mainly reflects the larger-than-expected +0.7 percentage point contribution from defense spending to Q3 growth (which introduces risks for payback in Q4), the weaker-than-expected trajectory for consumer spending heading into the quarter apparent in today’s personal income and outlays report for September, and a slightly weaker assumption on net exports in light of the large net trade contribution in Q3, our global teams’ recent downgrades to rest-of-world growth forecasts and the recent appreciation of the US dollar." - Goldman Sachs
Still confused what the BOJ's shocking move was about, aside from pushing the US stock market to a new record high of course? This should explains it all: as the chart below show, as a result of the BOJ's stated intention to buy 8 trillion to 12 trillion yen ($108 billion) of Japanese government bonds per month it means the BOJ will now soak up all of the 10 trillion yen in new bonds that the Ministry of Finance sells in the market each month. In other words. The Bank of Japan’s expansion of record stimulus today may see it buy every new bond the government issues. In other words: full monetization.
Not everyone's buying it...
"THE NIKKEI: BLAST OFF!: It shall be very, very hard to do, but the Nikkei is only now just breaking out to the upside and so we should buy it while selling the Yen at the same time. The “hard trade” is always the best trade and it is going to be very hard to buy this market but we have to with 24-25 thousand as a target."
Now that The Fed is (however briefly) out of the money-printing business, it appears to have turned its attention to the rest of the world's "despicable monetary policy" actions and fired what seems to be the first warning shot of 'currency wars 2.0', as MarketNews reports:
ECB SOURCE SAY EUR3 BILLION BALANCE SHEET TARGET NOT IN THE CARDS: MNI
ECB SOURCE FED HAS NOTICED EUR SLIDE AND ECB MUST NOT PUSH TOO FAR: MNI
One wonders how long before Jack Lew also proclaims Japan a 'currency manipulator' (and, gasp, the Eurozone) especially after Germany's Wolfgang Schaeuble reminded the world this morning that "growth can't be helped by printing money." You don't say...