Archive - Jun 10, 2013 - Story

Yet another month in which the Ben Bernanke risk managed S&P500 Onshore Fund outperforms 93% of all other actively managed brand name hedge funds, and is on pace for the fifth year in a row in which the 2/20 world will underperform the S&P500. And the best news: PM Ben does not charge 2 and 20. Of course, there is no free lunch, and his dues will come when the world one day realizes just what the cost of reflating the biggest asset bubble in history is, but for now the music is playing and the dancing continues. As for the best funds out there? Those focusing on Japan, if only for a little longer.

The last time we encountered the name Stephane Richard, CEO of France Telecom Orange, he was deflecting poor iPhone sales on frugal customers. While we don't know if French customers have become less frugal in the past two months, we do know that Mr. Richard has bigger problems on his hands than declining top and bottom lines: such as suddenly being embroiled in the Bernard Tapie corruption scandal that previously focused on Christine Lagarde, and which this morning led to the CEO being held for questioning over his role in a 2008 arbitration process that resulted in a large pay-out to businessman Bernard Tapie, a judicial source said. "Richard was at the time head of cabinet to Christine Lagarde, who was finance minister to conservative former president Nicolas Sarkozy before she became head of the International Monetary Fund."

Currency markets are anticipating the conclusion of the BOJ meeting on Tuesday. No changes are expected to the current policy scheme and asset purchase targets, but it is likely that the committee will introduce measures to try to stem JGB volatility.  Based on their recent record, it is unlikely they will succeed. Later in the week, the focal point will shift to the US where the monthly Treasury statement on Wednesday and retail sales data on Thursday will shed more light on how automatic federal spending cuts are affecting the broader economy.

• In Hong Kong, ex-CIA man may not escape U.S. reach (Reuters)
• Backlash over US snooping intensifies (FT)
• Apple to Revamp IPhone Software, Ending Product Funk (BBG)
• Nothing like revising history: Japan revises up Q1 growth to annual 4.1% (FT), just don't look at the trade deficit
• Coffee Exports From Indonesia Seen Slumping to Two-Year Low (BBG)
• Euro bailout Troika nears end of road with patchy record (Reuters)
• Treasuries Little Changed Before Bullard Speaks Amid QE Debate (BBG)
• Schwab Topping Goldman Sachs Presages Return to Stocks (BBG)
• Hedge funds take over another city: London’s Forced Renters Fuel Apartment Investing Boom (BBG)

Japan goes to bed with another absolutely ridiculously volatile session in the books following a 5%, or 637 point move higher in the PenNIKKEIstock Market closing at over 13514, which if taking the futures action going heading to Sunday night into account was nearly 1000 points. With volatility like this who needs a central bank with price stability as its primary mandate. The driver, as usual, was the USDJPY, which moved several hundred pips on delayed reaction from Friday's NFP data as well as on a variety of upward historical revisions to Japanece economic data, but not the trade deficit, which came at the third highest and which continues to elude Abenomics. Fear not: one day soon consumers will just say no to Samsung TVs and buy Sony, or so the thinking goes. erhaps the most interesting news out of Asia was the spreading of FX vol tremors to a new participant India, which is the latest entrant into the currency wars, even if involuntarily, where the Rupee plunged to 58, the lowest ever against the dollar.

Think it's all a right-wing conspiracy... think again.

A miss for the trade balance (extending the slide into bigger and bigger deficits), positive 'revisions'  to rear-view mirror data on nominal GDP, a world of carry traders looking for a better exit point (or staring at margin calls), and more PR coverage of Abe's third arrow have created the perfect short-squeeze storm in Japanese stocks. While USDJPY managed to creep back above 98 (trading in a relatively modest 100 pip range), and JGBs rapidly recovered from early negative-correlated-to-equity-based losses to trade 1-2bps lower in yield, the broad Japanese equity market - TOPIX - is up almost 5%. This is it's best day since March 2011 and second-best day since Lehman. S&P futures are up a mere 2 points, Treasury futures are unchanged, and Gold is modestly higher. So simply put, Japanese stocks are on their own tonight in a land of Abe(g)nomics as every other asset (risk-on or risk-off) sits idly by.