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.
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.
The lone dissenting dove at this week's 'end-of-QE' FOMC meeting has taken digital pen to pixelated paper to explain why moar is better and the Fed should not stop printing..."Of course, there are costs and benefits to every monetary policy action and inaction, and assessing those costs and benefits is by no means straightforward. On this occasion, my assessment differed from that of my colleagues," as he believes the inflation outlook has worsened. As a reminder, Kocherlakota was the 'gentleman' who fired dissenting economists at the Minneapolis Fed for disgreeing with his Neo-Keynesian philosophy.
The final UMich consumer confidence print (after preliminary 86.4) is higher again at 86.9 - the highest since July 2007. Ofcourse hope rose - future expectations up from 75.4 to 79.6) while current situation dropped (98.9 to 98.3)... as we all know escape velocity and wage gains (despite tumbling spending and slowing income in reality).
Despite plunging consumer spending, Chicago PMI surged to 66.2 (against expectations of 60.0), its highest in 12 months. This is above even the highest economist estimate and is a 4-sigma beat... having been at one-year lows just 3 months ago.
Bwuahahahaha... Nikkei futures halted limit up - over 1100 points post-BoJ (+1400 post-FOMC) as USDJPY tops 112 (up 4 handles post-FOMC) to its highest since Jan 2008.
If yesterday's Citi debacle was a buying opportunity (which it is according to the pre-market), then news that Ally Financial (formerly GMAC) is under regulatory and DoJ investigation must be great news:
*ALLY CITES REQUEST FROM SEC ON SUBPRIME AUTO FINANCE PROBE & MORTGAGE-BACKED SECURITIES; REQUESTS INCLUDE SUBPOENAS FROM DOJ
Of course, do not forget that GM itself recently admitted to the DoJ probing its subprime auto loan underwriting practices. But, but, but - isn't this exactly what FHFA's Mel Watt wants?
Yesterday's record-breaking surge in the Ruble appears, as we warned, to have been front-running today's rate-hike announcement... and despite its surprise size, it is disappointing the market. The 5%-plus swing higher in the Ruble yesterday has been notably retraced as the Russian currency plunges after the central bank hiked rates 150bps (expectations were broadly of a 50bps hike) but it appears the 'whisper' number was a 200bps hike and a shift in FX policy to more active intervention. The inituial rip rally instantly faded and despite low liquidity due to Russian holidays, USDRUB is back over 43 - which would be a new record low close if it holds.
Where Is The "Low Gas Price Spending Spree": Consumer Spending Tumbles At Fastest Rate Since October 2009Submitted by Tyler Durden on 10/31/2014 - 08:36
Goodbye GDP hopes: Consumer Spending tumbled 0.2% against expectations of growing 0.1%, dropping at the fastest pace since October 2009. This is the biggest miss since Jan 2014 - in the middle of the PolarVortex. Did it snow in September, and whatever happened to that spending spree that lower gas prices were supposed to lead to? The spending decline was driven by a tumble in spending on both non-durable ($8.1 billion) and mostly durable goods ($26.4 billion). Also, what happened to that surge in consumer confidence - guess broke Americans can't monetize being "confident" about their rising wages just yet.
You know the world's financial markets have become farce when the broad Nikkei 225 stock market of Japan rises 1000 points in 7 hours... The meme that stock 'markets' move on fundamentals not central bank liquidity is officially dead. Let that sink in for a moment...
Goldman On BOJ's Banzainomics: "We Highlight The Potential For Harsh Criticism Of Further Cost-Push Inflation"Submitted by Tyler Durden on 10/31/2014 - 08:12
It was about several months ago when Goldman, which initially was an enthusiastic supporter of BOJ's QE, turned sour on both Abenomics and the J-Curve (perhaps after relentless mocking on these pages), changed its tune, saying an unhappy ending for Abenomics is almost certainly in the cards. Not surprisingly then, in its post-mortem of the BOJ's overnight action, already being affectionately called Banzainomics, is hardly glowing, and is summarized as follows: "We maintain our view that unless the yen continues to depreciate significantly, as a result of the latest QQE action, the BOJ is unlikely to meet its scenario for inflation to stably reach 2% during FY2015. From a political perspective, with nationwide local elections looming in April 2015, we also highlight the potential for harsh criticism of further cost-push inflation driven by the weaker yen among nonmanufacturers, SMEs, and households. Irrespective of the latest easing moves, we believe the BOJ is treading a very narrow path."
- Futures rally after BOJ ramps up stimulus (Reuters), Japan's central bank shocks markets with more easing as inflation slows (Reuters)
- Kuroda Jolts Markets With Assault on Deflation Mindset (BBG)
- Japan Mega-Pension Shifts to Stocks (WSJ)
- Russia Raises Interest Rates (WSJ)
- Oil-Price Drop Has Saudi Officials Divided (WSJ)
- Not anymore, the BOJ is here: Fed Exit Could Spark Slump in All Markets, ATP CEO Says (BBG)
- Wal-Mart Weighs Matching Online Prices from Amazon (WSJ)
- Euro-Area Inflation Picks Up From Five-Year Low on Stimulus (BBG)
- Big Banks Brace for Penalties in Probes (WSJ)
- Ex-UBS Trader Defense Could Be Threat to U.S. Forex Cases (BBG)
Two days ago, when QE ended and knowing that the market is vastly overstimating the likelihood of a full-blown ECB public debt QE, we tweeted the following: "It's all up to the BOJ now." Little did we know how right we would be just 48 hours later. Because as previously reported, the reason why this morning futures are about to surpass record highs is because while the rest of the world was sleeping, the BOJ shocked the world with a decision to boost QE, announcing it would monetize JPY80 trillion in JGBs, up from the JPY60-70 trillion currently and expand the universe of eligible for monetization securities. A decision which will forever be known in FX folklore as the great Halloween Yen-long massacre.
UPDATE: Nikkei 225 +1100 points, USDJPY +3 handles to 111.00 post-FOMC,
In a surprise move given all the recent congratulatory bullshit from Abe and Kuroda on breaking the back of Japan's deflation and bring about recovery (forgetting to mention record high misery index, surging bankruptcies and a crushed consumer), the Bank of Japan (by a 5-4 vote) raised its bond-buying program from JPY 70 trillion to 80 trillion... and triple its ETF buying to JPY 3 trillion. This move, on the heels of more confirmation of broader foreign asset purchases in Japan's GPIF sent USDJPY instantly gapping 1 big figure higher to 110.30 and Nikkei futures instantly rose 400 points. S&P futures are also surging. Gold and silver are tanking and TSY bonds are selling off.