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Nikkei 63,000,000 And Other Flashbacks: The Complete Dylan Grice Japan Series

Tyler Durden's picture


Confused by the day to day happenings in the land of the rising sun, and liquidity tsunami? Don't be, instead read the following series of papers (pdf) by former SocGen strategist Dylan Grice who predicted everything that is currently happening nearly three years ago. The titles of the enclsed five pieces are self-explanatory especially in light of recent events: "A global fiasco is brewing in Japan", "More on Japan’s brewing fiasco, and some musings on recent pushback", "Fooled by anecdotes: Japan’s coming inflation, JGB toxicity and what to do", "Nikkei 63,000,000? A cheap way to buy Japanese inflation risk" and finally "Buy Japan, and prepare to buy with both hands." Oh, and spoiler alert...

...Grice doesn't see a "Hollywood ending" to what is about to happen in Japan.


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Sun, 04/07/2013 - 20:51 | 3420253 prains
prains's picture

land of the rising sum

Sun, 04/07/2013 - 21:02 | 3420274 Banksters
Banksters's picture

Nikkei is up 3 percent in early trading.  To the moon, bitchez.  All you need to do is devalue your currency.  Finance, so easy a child could do it.


Shit, the Japanese are so smart they built 51 nuclear reactors at or near fault lines.   We gotta keep those giga watts up to power Toyko advertising.   



Sun, 04/07/2013 - 21:09 | 3420313 JPM Hater001
JPM Hater001's picture

3 percent is just today's inflation change...wait until it really gets going...

Sun, 04/07/2013 - 21:12 | 3420321 zorba THE GREEK
zorba THE GREEK's picture

Dow 36,000 same thing, hyper-inflation.

Sun, 04/07/2013 - 20:54 | 3420265 Possible Impact
Possible Impact's picture

"A global fiat-sco is brewing in Japan"

^^^ Pronunciation guide

Sun, 04/07/2013 - 20:55 | 3420268 holdbuysell
holdbuysell's picture

It's only a matter of time until the next Sunday night event.

Sun, 04/07/2013 - 20:59 | 3420275 Curt W
Curt W's picture

IMF Lagarde praises Japan for their bold move.

If it was that easy why don't they just print enough money for everybody, I don't really like my job that much anyway.

Sun, 04/07/2013 - 21:00 | 3420277 booboo
booboo's picture

Can some tech savy videoographer duplicate the tsunami shoving yachts and fishing boats inland on a tidal wave of yen?

Sun, 04/07/2013 - 21:42 | 3420411 Mine Is Bigger
Mine Is Bigger's picture

It seems a little cruel.  Thousands of people died just a little over two years ago.

Sun, 04/07/2013 - 21:01 | 3420280 lolmao500
lolmao500's picture

Don't worry, the bond interest rate is going back down! All is saved!

Sun, 04/07/2013 - 22:44 | 3420590 adr
adr's picture

The Bitcoin client works just like a Trojan. In fact it may be a Trojan itself. If I wanted to create a program to steal massive amounts of financial data, I would con people into downloading software I claim will make them money. 

You know, it has happened many times. A lot of people think they are getting something off Bittorrent for free. Little do they know they are getting the program for free because they will load a trojan that will hand over control.

Now we see that control of millions of computers is being handed over to mine Bitcoins. Perhaps the original purpose intended by its creator.

Pretty sweet to create something of no real value that has skyrocketed in percieved value. Seeing people hand over earned wealth for the chance at obtaining massive amounts of unearned wealth.

Still don't think Bitcoin is a scam?

Sun, 04/07/2013 - 22:57 | 3420635 Pseudo Anonym
Pseudo Anonym's picture

that didnt take long.  much faster than i thought.  simply amazing.  and the price of btc still going up.  even more amazing.

Sun, 04/07/2013 - 23:16 | 3420685 Freewheelin Franklin
Freewheelin Franklin's picture

Which is why I don't use Skype or Windows. Anyone still using Windows deserves to get a virus. I've had to remove too many of those fuckers to ever go back. Linux for me from now on. It may be buggy at times, but that's a lot easier to fix than removing a rootkit. 

Sun, 04/07/2013 - 21:03 | 3420281 fonzannoon
fonzannoon's picture

"Think about that for a moment. Japan is an advanced economy, a developed democracy and certainly no Zimbabwe. But Israel was all of those things too. It simply found itself politically committed to a level of expenditure

military and social which it co uldn’t fund. Instead of taking the politically unpalatable course of cutting that expenditure, it resorted to the tried-and- tested tactic of buying time with printed money. Between 1972 and 1987 Israel’s CPI rose by a factor of nearly 10,000. Inflation averaged around 84% and peaked at an annualised500% in early 1985.In real terms equity prices fell (chart above), failing to keep pace with the rise in the CPI. But innominal terms they exploded rising by a factor of around 6,500 over the period, in keeping with experiences of nominal share indices in Argentina, Brazil or Weimar Germany during their inflationary crises"     So, buy stawks? During that inflationary time in Israel, how did gold perform in comparison to stocks, which according to the article, exploded higher?
Sun, 04/07/2013 - 21:09 | 3420308 ekm
ekm's picture

Never forget: It's not money is, it's what money can buy if .........accepted.

Sun, 04/07/2013 - 21:12 | 3420318 fonzannoon
fonzannoon's picture

Talk to me ekm, if (and I know this sounds evil but....) if Japan is simply a domino that is falling and this is the move they are making....why don't I go massively long Japanese equities, massively short their currency....rake in the profits, cash it out, but precious metals, hard assets etc etc etc....and go sit on the beach?

Sun, 04/07/2013 - 21:19 | 3420327 ekm
ekm's picture

1) They can change their mind anytime

2) Massive money printing is done only and only to prevent swaps from blowing up, hence huge yen shadow banking collapse

3) The gov can seize your money

4) Nobody knows if that money is going to stocks, or not, only japanese primary dealers will decide where that money will go.

5) I bet, same as for QE, that money is going to swap winning counterparties who may or may not put that money into stocks


Rule of thumb: Follow the money, but there's no trace yet.

Sun, 04/07/2013 - 21:20 | 3420338 fonzannoon
fonzannoon's picture

Good points but Dylan Grice makes a pretty decent case to just go all in. Tough to reconcile.

He used Israel as an example, so I wonder, how did gold in Israeli currency stack up to stocks during that period.

Sun, 04/07/2013 - 21:22 | 3420351 ekm
ekm's picture

BOJ has 24 primary dealers, local and foreign.


Fed primary dealers are in a roach motel situation. Do you think they will fall into the same trap in japan?

Sun, 04/07/2013 - 21:25 | 3420356 kito
kito's picture

i would hold the japanese currency, THEY WILL NOT ESCAPE DEFLATION!!!!!! NO....MATTER......WHAT!!!!..........................all this printing is no different than throwing on a pair of beer goggles...if they arent attractive enough, you arent hammered enough!!!! reality.....the chic is keep drinking until she looks GREAT....but remember what happens the next morning when you wake up beside your perceived beauty queen...........

Sun, 04/07/2013 - 21:29 | 3420372 fonzannoon
fonzannoon's picture

If all this printing forces the rest of the market to puke up yen, and the BOJ has to monetize it, how the hell do they get deflation?

This is like being too hammered to even tag the fat chick, so you angrily leave the bar at 4am and drive 100mph into the first tree that ended up in the middle of the road.'

I just don't get it Kito. How do you seem their currency strengthening from here? It's a total mess....

Sun, 04/07/2013 - 21:38 | 3420395 kaiserhoff
kaiserhoff's picture

They get to deflation the same way we do Fonz.  Real estate is still insanely over-valued, after 24 years, the banks are still broke, and wages are going no where fast.  They can print to the moon, and no one will care.  Pushing on a string unless there is real economic activity somewhere.

Sun, 04/07/2013 - 21:46 | 3420425 fonzannoon
fonzannoon's picture

I get the argument, I truly do. Think about how many dollars are out there though. If they ever push the envelope to the point where dollars start getting dumped en masse (and I realize it's all digital kito) It will force an inflationary nightmare. It will end with a thud. But it will be one hell of a fireworks show before it goes.

Sun, 04/07/2013 - 22:23 | 3420543 kito
kito's picture

be the contrarian luke...use the force...............dont ask the contrarian luke.................

Sun, 04/07/2013 - 22:31 | 3420564 fonzannoon
fonzannoon's picture

lol, I get to carry forward 3k a year. That makes me a winner!

Mon, 04/08/2013 - 02:38 | 3420950 Pareto
Pareto's picture

Kuroda's batshit crazy targets will eventually force Bernanke's hand.  $85B/month will rise to $120B/month (or something like that, and this will have the effect of hiking the $/Y cross.  This will ultimately become the end game for the $USD as a reserve currency.  And I would only add that one ought not to wait too long for that to happen.  I think you're playing with fire in any event.

Sun, 04/07/2013 - 21:53 | 3420451 bnbdnb
bnbdnb's picture

Bullshit. The Nikkei hits 63,000,000 and people will become commodities.

Sun, 04/07/2013 - 21:57 | 3420453 fonzannoon
fonzannoon's picture

People are commodities.

""You know what they want? Obedient workers ­ people who are just smart enough to run the machines and do the paperwork but just dumb enough to passively accept all these increasingly shittier jobs with the lower pay, the longer hours, reduced benefits, the end of overtime and the vanishing pension that disappears the minute you go to collect it."

Tell me that is not a commodity

Sun, 04/07/2013 - 21:58 | 3420473 bnbdnb
bnbdnb's picture

BIG difference. Every young man and woman will be lining up for purchase to the highest bidders.

People will be signing contracts to never sue, to never disagree/argue and to stay a slave for the rest of their lives.

Sun, 04/07/2013 - 22:06 | 3420491 fonzannoon
fonzannoon's picture

They already do and have for a long time.

Sun, 04/07/2013 - 22:09 | 3420496 bnbdnb
bnbdnb's picture

Multiply the count of people actually doing that today by 63,000,000.

Sun, 04/07/2013 - 22:10 | 3420498 fonzannoon
fonzannoon's picture


Sun, 04/07/2013 - 21:27 | 3420358 ekm
ekm's picture

Dylan is comparing a small guy with a big guy. Israel can be handled, it's got other geopolitical issues.

Israel's case happened when the world was doing ok.


Who is doing ok now? Bank of Israel buying aapl stock?

Sun, 04/07/2013 - 21:52 | 3420427 Mine Is Bigger
Mine Is Bigger's picture

I am wondering why everyone is thinking the BOJ will actually do all those crazy things they said they would.  It seems clear to me they are dead set on weakening the currency and achieving the seemingly arbitary target of 2% price inflation.  (I read somewhere they would be happy with 100 yen to the dollar.)  I think they will achieve these goals pretty quickly.  Then they probably won't have to go through with their plans completely.

Sun, 04/07/2013 - 21:27 | 3420363 SheepDog-One
SheepDog-One's picture

Sure go all-in...just as long as you really believe you can front run maniacal monetizers and can move faster than their computers.

Sun, 04/07/2013 - 21:03 | 3420291 Hedgetard55
Hedgetard55's picture

Brothers, get balls deep in Japanese stawks, NOW, and retire happy.

Sun, 04/07/2013 - 21:06 | 3420304 fonzannoon
fonzannoon's picture

It's that easy? I mean it seems that easy....I am not sitting on my hands this time. I hope you are right.

Sun, 04/07/2013 - 21:34 | 3420379 kito
kito's picture

BULLSHIT its that easy....LOGIC says you print oodles of goes into equities by all of those who are first in line to the money trough................the stock market loses all connection to reality....all connection to actual earnings.......LOGIC asks, what happens next fonz????? what happens when the great nikkei wall, built with yen, blows over????????? YOU CANNOT ESCAPE THE DEFLATION MONSTER...HE WILL HIDE UNDER YOUR BED....he is in your closet........dont look now, but you might want to check the toilet that you are sitting on....................everything that gets filled with yen, dollars, etc.... will eventually blow..........................its all just digital money....gone in the blink of an eye............

Sun, 04/07/2013 - 21:40 | 3420405 fonzannoon
fonzannoon's picture

Logic says you print oodles of yen, the yen sells off, the japanese exports kick ass, fonzannoon sells the yen and buys exports....then a short time later fonzannoon exits both trades....then what you said happens next....or not....either way...

If the whole thing goes against me I just get to add to my carry forward losses on all my other awesome ideas that could not fail.

I don't see too many deflationary monsters in history by the way. Please show me a country that lived above it's means and overloaded itself with debt and was then rewarded with falling prices?

Mon, 04/08/2013 - 02:30 | 3420943 Pareto
Pareto's picture

Take Yen.  Buy US dollars, buy US Treasuries or short term paper of some kind (I say this because I think US equities are in their own little shit storm of fighting its own demons of diminishing aggregate demand).  Then later sell the US paper and reload back to YEN, OR, buy PMs as Bernanke will be forced to inflate and debase domestic currency commensurate with Japan.  Then rinse and repeat.  Or you could just sit out the entire ponzi that is FUBAR and just buy PMs and go to the bar.

Sun, 04/07/2013 - 21:36 | 3420390 nmewn
nmewn's picture

I'm sorry, I can' practical streak is much shorter than my integrity streak.

But I understand.

All I would suggest is liquidating at the first burp of yen trillion to one ;-)

Sun, 04/07/2013 - 22:55 | 3420627 slightlyskeptical
slightlyskeptical's picture

Japanese stocks may soar, but the Yen will likely fall through the floor. So if you buy Japanese stocks in US dollars you will likely see the Nikkei rise but it won't translate into profits in your portfolio. The trade is USDYEN long and Nikkei short.

Sun, 04/07/2013 - 21:04 | 3420293 IridiumRebel
IridiumRebel's picture

63,000,000 dead sounds about right. Fukusushi!

Sun, 04/07/2013 - 21:12 | 3420320 ebworthen
ebworthen's picture

If this is a miracle solution it must mean every family in Japan should run their budget the way the government does; spend more money than they make and max out the credit cards, right?

Sun, 04/07/2013 - 21:13 | 3420323 fonzannoon
fonzannoon's picture

I don;t see this being the solution for anyone in japan. They should be scrambling to get every dollar out of that currency. What I wonder is, should the rest of us jump in?

I watched those banks tank in 2008. I did not short them. But a lot of people did, and rode off into the sunset. Is this any different?

Sun, 04/07/2013 - 21:20 | 3420341 Ralph Spoilsport
Ralph Spoilsport's picture

Timing is everything, tough call here. You aren't the only one trying to decide. Problem as always is going up against the ones with insider info.

Sun, 04/07/2013 - 21:18 | 3420333 Freaking Heck
Freaking Heck's picture

Yep changes at the margin are happening. Well stated here as well. More and more people waking up to the coming Tsunami


Sun, 04/07/2013 - 21:22 | 3420340 kito
kito's picture

isnt it going to suck for japan when growth goes nowhere the remainder of the year?????? putting running shoes on a turtle doesnt make it fast!!!!!!

Sun, 04/07/2013 - 21:33 | 3420376 fonzannoon
fonzannoon's picture

This is no longer about growth. In the U.S we can still somehow bullshit ourselves about growth. Japan hit the wall. They have no tricks left in the bag. Their currency is getting chucked out the window. They can default or inflate, but it makes no difference to the currency.

Did I sound confident there? Cause I have no idea if that is right.

Sun, 04/07/2013 - 21:35 | 3420387 kito
kito's picture

no, everything being INFLATED with those digital yen get chucked out the window...big difference............the yen is just the dont inflate air.................

Sun, 04/07/2013 - 21:52 | 3420428 fonzannoon
fonzannoon's picture

Kito please show me one country anywhere in history that accumulated massive debts to live above their means and were eventually rewarded with falling prices for their citizens?

To be clear, not falling equity prices, I agree with you that's where this goes, I mean falling prices in things people need/use.

Sun, 04/07/2013 - 22:16 | 3420522 bnbdnb
bnbdnb's picture

At some point, equity profits will eat into the economy.

"I now have 100 times more money than I used to...hmm I think I'll buy that group of girls over there. Might as well get their cars and homes too."

Sun, 04/07/2013 - 22:23 | 3420536 kito
kito's picture

question is...where is all this printed money going??? it seems to me its grabbed by those favored sons who are first in line at the trough...who then use it to boost the prices of all this yen gets corralled, not into maintstream society where the velocity of money goes NOWHERE, but rather into monetary assets, which get obliterated..................wipeout........................

Sun, 04/07/2013 - 22:32 | 3420567 bnbdnb
bnbdnb's picture

Equity wipeout would be admitting defeat. Never.

Mon, 04/08/2013 - 02:22 | 3420931 Pareto
Pareto's picture

Yen is going anywhere that isn't Japan.

Sun, 04/07/2013 - 21:30 | 3420370 q99x2
q99x2's picture

Everything is fixed. Whewh I was worried for a while that GREECE was going to F'kn default. Those Neo Nazi's sure are a bunch of pussies. At least the Japanese aren't afraid to walk with the ChairSatan into Hell.

Sun, 04/07/2013 - 21:29 | 3420371 SheepDog-One
SheepDog-One's picture

In Cyprus many actually borrowed money to buy bank shares since it was considered such a no-brainer that it was safe and nothing could go wrong.

Mon, 04/08/2013 - 00:53 | 3420839 ReactionToClose...
ReactionToClosedMinds's picture

yep .... and flipping RE was a no brainer in 2005 ... until it slowed ... then stopped  ... then started to reverse .. then ..... no one expected the follow-on to the correct decision to let Lehman go after they tried to overnegoatiate a shit hand when some muppet got lined up to maybe buy lehman ..... excepting alot of Goldie was in panic mode to make sure AIG got fixed and Goldie got a Buffett backstop .... then, and only then,  you could have an 'orderly' equity sell-off.

Hey Goldie saved a lot of dumbass' money all over the place, USA & globally ... they now owe us .... I swear I can actually understand some of that arrogant thinking ....

And if I were Mr Washington-Post Protects-Me Warren Buffett, in my old age I would feel very uncomfortable having a material stake owning a shark tank.  Yo, Warren, you just challenged their manhood ..... they have no choice now but for their DNA to eventually shove it deep up yours ... enjoy the equity stake ride .... but then you've got another arrogant guy Charlie Munger to cover for you right?  Ha, just double the fun & challenge have someone laugh over a drink someday about your carcasses.

Sun, 04/07/2013 - 21:49 | 3420434 eigenvalue
eigenvalue's picture

If the JGB market collapsed and inflation exploded, this could cause serious contagion among all the OECD countries. Up till now, people are fine with holding treasury bonds, gilts, etc despite all the money printing simply because Japan is still fine. Japan has been used by Keynesians as an example to claim that money printing is OK. If Japan was gone, this would cause doubt over the debt sustainability of countries like the US, the UK, etc. We may see the endgame much earlier than we thought.

Sun, 04/07/2013 - 21:53 | 3420444 fonzannoon
fonzannoon's picture

If Japan did an about face right now and retracted this whole bazooka of a stimulus, I still think the yen would spiral off into space. Right now everyone is realizing they have no way out.

Sun, 04/07/2013 - 21:58 | 3420472 eigenvalue
eigenvalue's picture

Retracting the stimulus? It's impossible. Any policy has vested interest in it, espeically a bazooka one. 

Sun, 04/07/2013 - 22:12 | 3420504 andrewp111
andrewp111's picture

Yes, if. There are many possible outcomes, and most have very disturbing implications.

-- Inflation takes off in Japan and goes out of control

-- The QE is totally ineffective, and after an inflationary hiccup or two, Japan returns to deflation. This could happen if the carry-trade demand for the Yen overwhelms the forces making the currency depreciate.

-- The Nikkei soars and then returns back to earth in line with the 20+ year trend

-- The Nikkei soars and soars, and never goes down again

-- The BOJ is successful in getting the mild inflation it wants

-- A full-on currency war is started

-- The experiment fails, and the Government of Japan becomes maximally desperate  and starts minting trillion Yen coins.

Sun, 04/07/2013 - 22:12 | 3420503 SDRII
SDRII's picture

It might be worthwhile to look beyond the "yen will implode" arguments seductive as they are to the role the Yen (carry) has played in western asset reflation and its centrality to dollar (US pivot). Consider:  the timing of the territorial disputes and the revolving door Japanese elections (nationalism stoked by national defense concerns), the rise of nationalistic Abe commensurate with the flaring of the island dispute,  the Cheonon incident (Okinawa protests), the Okinawa protests and basing issues (US), the Japan island buy, the death of the Japan ambassador appointee to China, Jpan finmin killing himself, the bilateral FX swap to avoid the dollar, the quake, the coordinated fx intervention post quake, the Ozawa (I want a more independent foreign policy Ozawa) investigation, the US defense think tank report on Japan drift, the US pushing TPP (Ag markets and LNG QPQ) vs. the Japan-Korea-China FTA, the US deploying xban radars (owing to the NK threat), the election of a SK president who compares herself to Margaret Thatcher, US basing rumors on JeJu, the US return to the Philippines (and the commensurate ratings upgrade whoring)...etc et etc.

Probably worth while looking into the previous chain of events in Japan and how they correlate with the announced US pivot in conjunction with the same Yen demographic time bomb analysis that has been rehashed for a decade.

" Troops from the Japan Ground Self Defense Force’s Central Readiness Force marched Tuesday through Camp Zama to their new headquarters inside the U.S. Army’s main base in Tokyo."

Bass may be right but he needs to dig a lot deeper as this game is bigger than demographics and the Mrs. Wataever


Mon, 04/08/2013 - 01:02 | 3420850 ReactionToClose...
ReactionToClosedMinds's picture

I say this in all respect ... more please.  Truth is stranger than fiction ..... but good fiction can be very entertaining.

I will say this ..... it is an absolute fact:  NKorea does nothing without either the ok of PRChina (most believable to me) or Russia (who knows with Putin tho')

So the ? is, whose catspaw is NKorea right now?  Forget all that 'in-fighting distraction stuff ..... after some thought (5 minutes) what chess piece is NKora - for what ultimate point or purpose?

Sun, 04/07/2013 - 22:28 | 3420554 adr
adr's picture

So the Nikkei soars 20%, and the Yen is devalued 20% or more. Throwing dollars at the Nikkei is as good as throwing it away.

I'm sure some thought chasing marks for yield in Weimar was good business.

The Japanese elders are all in bonds. The Japanese youth are mostly gone, searching for better prospects. The rest are broke.

A soaring stock market can't create demand for goods if there is nobody left who wants them.

Sun, 04/07/2013 - 22:40 | 3420588 HowardBeale
HowardBeale's picture

Something just broke. Welcome to your worst nightmare.

Sun, 04/07/2013 - 23:23 | 3420701 HowardBeale
HowardBeale's picture


Looks like distribution--and in a country that actually makes things. Imagine the pounding the Dow is going to take when things go viral...

Sun, 04/07/2013 - 23:51 | 3420756 lieto
lieto's picture

Bitcoin reminds me of Time Warner and AOL.

But that's just me.

Mon, 04/08/2013 - 03:30 | 3420988 lemarche
lemarche's picture


Mon, 04/08/2013 - 04:44 | 3421048 shinobi-7
shinobi-7's picture

Help!, the sorcerer's apprentice has lost control of the printing machines. Kabukicho is smoldering, about to explode. If it does, we won't even notice a war in Korea.

It is getting clearer by the day that the system may break in Japan but expect most of the sparks to fly to Europe where the financial system is ready to ignite spontaneously.


Mon, 04/08/2013 - 05:22 | 3421078 tom
tom's picture

Interesting. I agreed with him most of the way. He surely deserves a lot of credit for calling back then that the BoJ would eventually become almost the sole buyer of JGBs.

But I can't follow him on his prediction of Israel-like inflation in Japan. I just don't see it. The market doesn't see it either. They're excited about the fiscal stimulus coming, the devaluation relative to FX, and the prospects for increased corporate profits those bring. But domestic inflation expectations have hardly budged. 

I even suspect the yen shorts are a bit overplaying their hands, assuming more outward-bound Japanese money than will actually materialize, and we'll see the yen finish the year in the 80s. But I wouldn't touch it just yet.

Mon, 04/08/2013 - 05:51 | 3421091 Accidental Genius
Accidental Genius's picture

New here, testing to see if it works, probably won't - nothing ever does :(

Do NOT follow this link or you will be banned from the site!