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.
“Kuroda loves a surprise - Kuroda doesn’t care about common sense, all he cares about is meeting the price target,” Folks, look-out below. As George W. Bush said in another context... this sucker is going down!
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 -0400
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."
Central banks are printing rules almost as fast as they’re printing money. The consequences of these fast-multiplying directives — complicated, long-winded, and sometimes self-contradictory — is one topic at hand. Manipulated interest rates is a second. Distortion and mispricing of stocks, bonds, and currencies is a third. Skipping to the conclusion of this essay, Jim Grant is worried: "The more they tried, the less they succeeded. The less they succeeded, the more they tried. There is no 'exit.'"
Brandenburg CPI -0.3%, Previous 0.0%
Hesse CPI -0.2%, Previous 0.1%
Saxony CPI -0.2%, Previous 0.1%
Bavaria CPI -0.3%, Previous 0.1%
To summarize (even though with liquidity as non-existant as it is, this may be completely stale by the time we go to print in a minute or so), European shares erase gains, fall close to intraday lows following the Fed’s decision to end QE. Banks, basic resources sectors underperform, while health care, tech outperform. Companies including Shell, Barclays, Aviva, Volkswagen, Alcatel-Lucent, ASMI, Bayer released earnings. German unemployment unexpectedly declines. The Italian and U.K. markets are the worst-performing larger bourses, the Swiss the best. The euro is weaker against the dollar. Greek 10yr bond yields rise; German yields decline. Commodities decline, with nickel, silver underperforming and wheat outperforming. U.S. jobless claims, GDP, personal consumption, core PCE due later.
QE has finally come to an end, but public comprehension of the immense fraud it embodied has not even started. In stopping QE after a massive spree of monetization, the Fed is actually taking a tiny step toward liberating the interest rate and re-establishing honest finance. But don’t bother to inform our monetary politburo. As soon as the current massive financial bubble begins to burst, it will doubtless invent some new excuse to resume central bank balance sheet expansion and therefore fraudulent finance. But this time may be different. Perhaps even the central banks have reached the limits of credibility - that is, their own equivalent of peak debt.
ECB Stress Test Fails To Inspire Confidence Again As Euro Stocks Slide After Early Rally; Monte Paschi CrashesSubmitted by Tyler Durden on 10/27/2014 07:09 -0400
It started off so well: the day after the ECB said that despite a gargantuan €879 billion in bad loans, of which €136 billion were previously undisclosed, only 25 European banks had failed its stress test and had to raised capital, 17 of which had already remedied their capital deficiency confirming that absolutely nothing would change, Europe started off with a bang as stocks across the Atlantic jumped, which in turn pushed US equity futures to fresh multi-week highs putting the early October market drubbing well into the rear view mirror. Then things turned sour. Whether as a result of the re-election of incumbent Brazilian president Dilma Russeff, which is expected to lead to a greater than 10% plunge in the Bovespa when it opens later, or the latest disappointment out of Germany, when the October IFO confidence declined again from 104.5 to 103.2, or because "failing" Italian bank Monte Paschi was not only repeatedly halted after crashing 20% but which saw yet another "transitory" short-selling ban by the Italian regulator, and the mood in Europe suddenly turned quite sour, which in turn dragged both the EURUSD and the USDJPY lower, and with it US equity futures which at last check were red.
The week ahead, as if it mattered.
Albert Edwards is angry, and understandably so: almost exactly two weeks after warning readers to "sell everything and run for your lives" and the market was on the verge of its first correction in years, several powerful verbal interventions by central banks from the Fed, to the BOJ to the ECB have staged yet another massive rebound which has nearly wiped out all the October losses. Central-planning aside (and ask how much the USSR would have wished for central planning to indeed have been "aside") we share his frustrations, almost to the point where we would reiterate word for word Edwards' furious outburst, as follows: "Simply put, the central banks for all their huffing and puffing cannot eliminate the business cycle. And they should have realised after the 2008 Great Recession that the longer they suppress volatility, both economic and market, the greater the subsequent crash. Will these morons ever learn?"
Futures Bounce On Stronger Europe Headline PMIs Despite Markit's Warning Of "Darker Picture" In "Anaemic" InternalsSubmitted by Tyler Durden on 10/23/2014 06:59 -0400
Perhaps the most interesting question from late yesterday is just how did the Chinese PMI rebound from 50.4 to 50.2, when the bulk of its most important forward-looking components, New Orders, Output, New Export Orders, posted a material deterioration? When asked, not even Markit could provide an explanation that seemed remotely reasonable so we can only assume the headline was goalseeked purely for the kneejerk reaction benefit of various algos that only focus on the headline and nothing else. Luckily, we didn't have much time to ponder this quandary as a few hours later we got the latest batch of Eurozone PMI numbers.
Alongside the CPI data released earlier which showed the smallest possible broad price increase, when considering that previously the BLS reported flat nominal hourly wages in September, it implied that real wages declined once again. Sure enough, in a separate report today, the BLS announced that real average hourly earnings (in constant 1982-1984 dollars) declined once again, this time from $10.34 to $10.32, a -0.2% drop from past month. This also means that since March, there has been just one month in which real hourly wages have increased, and that was mostly due to the outright deflationary print the BLS reported last month.
After last month's shocking 0.2% drop in CPI, driven almost entirely by plunging gasoline prices, September CPI once again posted a modest rebound, rising 1.7% from a year ago, or 0.1% month over month, just above the 0.0% expectation, with core prices excluding food and energy rising precisely in line with the 0.1% expected. Broad prices were pushed lower by another month of declining energy prices (Gasoline -1.0%, Fuel Oil -2.1%), however offset by rising food prices which increased by food up 0.3% and Utility bills, rising 1.6% in September - the highest price increase in Utility bills since the 7.5% surge in March. Then again, one wonders how food inflation is so subdued when the report itself notes that "the index for beef and veal rose 2.0 percent in September and has now risen 16.7 percent since January. The index for dairy and related products increased 0.5 percent, its tenth increase in the last 11 months." But hey: there is always artificial food in a box which is plunging.
Equity Levitation Stumbles After Second ECB Denial Of Corporate Bond Buying, Report Of 11 Stress Test FailuresSubmitted by Tyler Durden on 10/22/2014 06:57 -0400
If the ultimate goal of yesterday's leak was to push the EUR lower (and stocks higher of course), then the reason why today's second rejection did little to rebound the Euro is because once again, just after Europe's open, Spanish Efe newswire reported that 11 banks from 6 European countries had failed the ECB stress test. Specifically, Efe said Erste, along with banks from Italy, Belgium, Cyprus, Portugal and Greece, had failed the ECB review based on preliminary data, but gave no details of the size of the capital holes at the banks.
What’s the true risk for the global economy? Its pronounced: /d??fl?SH(?)n/