Yen

26 years ago, today was envisioned as day when cars flew, holographic movies were box office hits, hoverboards roamed, and people were fired by fax. None of the happened. Instead the only "back to the future" moment this morning is a deja vu one we have seen every day for the past 7 years: bad economic news leading to surging stocks.

The uncertainties are awkward, but we’re all trapped in a gigantic mess not of our own making. As Voltaire is believed to have said, doubt may be uncomfortable, but certainty is absurd. Almost as absurd as believing that a tiny group of unelected bankers can read the runes of the global economy and manage the price of money accordingly.

For the biggest, and most criminal, cover up by a Japanese government in recent history, the irradiated chickens are coming home to roost and earlier today Japan finally acknowledged the first "possible casualty" from radiation at the wrecked Fukushima nuclear power plant, a worker who was diagnosed with cancer after the crisis broke out in 2011.

In the early 2000’s, I began to advise friends and associates that much of the world would likely be entering a depression before the decade was out.

"Not everyone went down with The Titanic..."

In the absence of any key economic developments in the Asian trading session, Asian stocks traded mostly under the influence of the late, pre-opex US ramp momentum courtesy of another day of ugly economic data in the US (bad econ news is good news for liquidity addicts), closing solidly in the green across the board, led by China (+1.6%) and Japan (+1.1%) thanks in no small part to the latest tumble in the Yen carry trade, which mirrored a bout of USD overnight weakness. And since a major part of the risk on move yesterday was due to Ewald Nowotny's comments welcoming more QE, news from Eurostat that Eurozone CPI in September dropped -0.1% confirming Europe's deflation continues, should only be greeted with even more buying as it suggests further easing by the ECB is inevitable.

First The Bank of Japan destroyed the Japanese bond market, and then, back in May we warned that The Bank of Japan had 'broken' the stock market. Now, it appears the all too obvious consequences of being the sole provider of buying power in an antirely false market are coming home to roost as Nomura reports the "temporary suspension" of new orders for 3 leveraged ETFs - the largest in the world - citing "liquidity of the underlying Nikkei 225 futures market."

The US is in decline. The US government is overloaded with debt. The US financial system is losing is dominance. And even the banking institutions themselves are losing relevance. This isn’t bad news. It’s tremendously exciting.

Do not believe in official statistics, Japanese retailers seem to be saying, as they cut earnings forecasts and warn of lackluster consumer spending, a key growth engine for Japan at a time when exports and factory output are stalling. Despite government statistics claining a 2.9% rise in household spending, Reuters reports Japanese retailers exclaimed "Consumer spending has ground to a halt," as Japan heads for a quintuple dip recession. Amid falling wages and higher costs, on apparel maker warned "shoppers are tightening their purse strings." The government's initial growth strategy did not really expand the pie, "now the government is simply left trying to redistribute wealth."

Correction continues, but it is only a correction.

Gains in the foreign currencies appears to be mostly short-covering rather than bottom-picking per se.  In bigger picture the dollar is consolidating its earlier gains.

The global risk on mood (which is really anything but, and is merely an unprecedented short covering squeeze as we will report momentarily) launched by an abysmal jobs report one week ago and "validated" yesterday by the surprisingly dovish FOMC minutes, which said nothing new but merely confirmed what most knew, namely that a rate hike is almost certain to not occur until mid-2016 if ever, and accelerated by a Fed-driven collapse in the dollar which overnight has led to a historic 3.4% move in the Indonesian Rupiah the most since 2008, has pushed global stocks even higher in their biggest weekly rally since 2012, despite the start of an earnings season where virtually every single company reporting so far has stumbled on earnings reports that were far worse than even gloomy consensus had expected.

"The collapse in inflation expectations tells us that the market believes the central banks, despite their monetary profligacy, are failing to prevent the western economies from turning Japanese, and thus at risk of repeating their devastating slide into outright deflation in the 1990s."

News That Matters

Having government control over the levers of the economy can have advantages. For example, by taking prompt action, the Chinese government was able to pull the economy out of the recession remarkably fast, basically by fire-housing the stimulus package that was equivalent to 12% GDP. That’s the advantage. The only problem is that these kinds of short-term advantages come with long-term, painful consequences.