JPY Speculative Shorts Surge To Most Since October 2007, EUR Hatred Moderates

In the week ended April 6, the record number of net speculative Euro shorts seen last week of -85,326 declined by almost 20k contracts to -67,223. The weekly change of 18,103 was the second biggest increase in bullish EUR bias in 2010. This was also manifested in the price of the EUR over the prior week, in which the dollar opened very week on Greek fears then somehow ended stronger even though nothing had been resolved about the Greek situation. Much more importantly for carry traders, the number of Yen shorts surged, with the net number of speculative JPY shorts hitting a two and a half year high of -42,305. Yet the deterioration in sentiment was a fraction of last weeks, when net short positions increased by a massive 41k to -31k.

In the other major currencies, both the GBP and the CHF saw a minor improvement in sentiment, although while the CHF is close to the flatline, the GBP continue to be close to record net short levels.

Comments

[pitz]

With Japan having one of the most economically and financially sound economies in the developed world, Yen shorts are playing with fire.

When on earth will dumb-sh*t hedgies finally learn, "interest rate != return"?

Japan is at the bottom of a long-term bear market in the value of high-value engineered goods and services.  America and the rest of the world is at the top of a bull market in the value of financial services.  Hedgies are seeding their own demise by trying to short Japan.

[Real Wealth]

by pitz

"With Japan having one of the most economically and financially sound economies in the developed world, Yen shorts are playing with fire."

http://www.creditwritedowns.com/2010/03/japan-defying-gravity.html

"Firstly, Japan government finances in an extraordinarily bad shape and the future ability of Japan to ever hone up to its liabilities is very, very slim. Secondly, dis-saving is very likely to become a binding constraint in Japan at some point which would epitomized by how Japan would need to borrow from foreigners in order to finance an external deficit. In this case, and I agree with Grice here, it is game over."

To mantain population takes 2.1 births, yet Japan's is 1.2:

http://www.indexmundi.com/japan/total_fertility_rate.html

Compare 1950 Japan, 2006, and 2050 projection:

http://news.bbc.co.uk/2/shared/spl/hi/pop_ups/07/asia_pac_enl_1193399898/html/1.stm

Then consider how they have to import all their oil, plus 60% of their food. 

No food, no empire with indirect (Saudi Arabia, etc.) and direct (Iraq) control of oil. 

[Grand Supercycle]

DOW / SP500 daily chart gives bullish signals as of Friday 9 April.  Weekly chart still trends up but continues to warn of an overextended bear market rally.

http://www.zerohedge.com/forum/latest-market-outlook-0

http://i39.tinypic.com/34y4k6t.png

[GFORCE]

People keep peddling this demographics rubbish but what they fail to factor in is that Japan actually produces things of worth. When the ponzi paper, debtor, importer economies of the west finally take their deleveraging, Japan will be in a better position, regardless of work force age.

Look at EUR/JPY- eurozone in a race to the IMF as the more sound euro economies have bank liabilities of 1.5 tn to the PIIGS.

AUD/JPY- The aussie economy is more than half consumer and the rest is largely made of a one way bet on China's consumption and construction, which relies on the ez/usa consumer, who is about to die.

USD/JPY- 12tn debt and China reducing the ponzi treasury holdings.

JPY any day.

[Real Wealth]

by GFORCE

"People keep peddling this demographics rubbish but what they fail to factor in is that Japan actually produces things of worth."

Those things will be produced cheaper somewhere else.  Japan itself is just a expendable part of the American empire, that will be shed as soon as it becomes a liability instead of an asset.   

[pitz]

Exactly, and Japan has met the demographic challenge head-on, by moving to automate as much as they can, as well as outsource low-value stuff, while still maintaining control.  99% of the world would jump at the opportunity, tomorrow, to move to Japan if they opened their borders to foreigners (which they could, if the population starts to drop too low!).  Consumer credit is non-existent in Japan compared to the rest of the developed world.  Etc.

Japan, as a nation, decided to work hard, and create things of real value, instead of just pretending that things would be okay in the future, by creating a credit Ponzi scheme.  This will pay off spectacularly in the next decade or two.

The fact that Japan can keep its interest rates at 0% for an extended period of time (close to a decade now), and still experience deflation, is a testament to the absolute strength and resilience of the Japanese economy.  Not a sign of weakness, as foreigners who do not understand monetary theory, would believe.

[lawton]

Japan will just stay stagnant for the next decade like the last two.