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Ex-Soros Advisor Sells "Almost All" Japan Holdings, Shorts Bonds; Sees Market Crash, Default And Hyperinflation
Previously, we have pointed out why Japan's attempt at reincarnating its economy, geared solely at generating a stock market-based "wealth effect", and far less focused on boosting the country's trade surplus or current account, is doomed to failure, namely due the drastically lower equity participation by the general population and financial institutions in the country's stock market. Sure, foreign investors will come and go renting each rally for a period of time, but unless the local population participates in the "reflation attempt" (which has already sent the price of luxury goods, energy and food through the rood), or in other words change the behavioral patterns of two generations of Japanese in under two years, the inflationary shock will simply leads to a loss of faith in the government and ultimately Abe's second untimely demise. Not surprisingly, 4 months after Japan set off on the most ludicrous economic experiment in history, and one week after the BOJ announced its plans to double its balance sheet, Abe's approval rating has already begun sliding with a poll by Asahi just reporting that popular support of Abe's cabinet is already down to 60%, down from 71% a month ago.
The reflationary reality has finally started to get official recognition with the very Goldman Sachs (who like in Europe and the US is behind this epic experiment in hidden taxation of consumers) asking how popular inflation would be in Japan, and answers:
How popular will inflation be in Japan? Assuming the BoJ is successful and inflation rates rise, one interesting dynamic will be the political support for 'super-easy' monetary policy. The majority of financial household assets sit in deposits, which until now have earned a positive real rate. While long-term inflation expectations move higher, the Yen and equities re-price rapidly but the negative impact on deposit returns from negative real rates will only be felt once inflation has actually started to materialise. This is clearly not an immediate concern as the government’s approval ratings remain high ahead of the Upper House elections this Summer. Still, PM Abe’s policy aim of beating deflation may become less popular at some stage because the implied distributional choices of higher inflation may become clearer for voters. For example, higher inflation would re-distribute real income from (older) savers to (younger) wage earners. But again it is worth thinking about the exact sequencing. By the time inflation in Japan becomes settled in positive territory the Fed may well be on the verge of hiking rates. In essence, any concerns about inflation in Japan and debate about a BoJ policy response will likely arrive at a stage when Fed tightening and JPY carry trades have already become the dominant theme.
In short, yes, Japanese inflation will destabilize the economy, and almost certainly lead to yet another political upheaval, but by then Japan will have served its purpose and injected some $1 trillion into the US stock market, thus supposedly allowing the US economy to become self sustaining. Or not. As to the consequences that the demographically-challenged Japanese population has to face as it suddenly finds itself holding worthless pieces of paper... who cares.
Which means that Abenomics will ultimately fail to fix Japan, but at least there is some hope it will last long enough to send the S&P to even more ridiculous highs - which, when one cuts out all the noise, it really what the whole experiment is all about.
For Japan, there is still some hope that the country will stop this ludicrous experiment merely serving to feed US risk assets before it is too late. Luckly, we are not the only ones seeing the writing on the wall. A month ago, it was "Mr. Yen", former finmin Eisuke Sakakibara, himself, saying "Abenomics" is going to fail.
"In terms of two percent inflation, it ['Abenomics'] will fail. Deflation is structural. Even at the time, when Japan was in the upward [growth] swing between 2002 and 2007, prices went down. It will be extremely difficult to get out of deflation," said Sakakibara, also known as "Mr. Yen" for his efforts to influence the currency's exchange rate through verbal and official intervention in the forex markets in the late 1990s.
According to Sakakibara structural deflation in the world's third largest economy is largely a result of the integration between the Japanese and Chinese economies and hence near impossible to move away from.
"Cheap Chinese goods come into Japan and push down the prices. And a lot of Japanese companies go to China to manufacture goods — so it's not going to change," said Sakakibara, who is currently a professor at Aoyama-Gakuin University in Tokyo.
According to Sakakibara, dollar-yen between 90 and 95 would be most favorable for the economy.
"I remember in 1998, 1999 — it [dollar-yen] did go to 150 — I was at that time in the government, I was terrified," he said.
Moments ago, it was none other than Takeshi Fujimaki, Soros' former advisor on all matters Japanese, who tripled down on the warnings, and told Bloomberg that the Bank of Japan’s “huge bet” by boosting quantitative easing won’t turn the economy around and is instead sending the nation toward default.
“By expanding the monetary base to 270 trillion yen, the BOJ is making a huge bet which I think it will ultimately lose,” Fujimaki said in an interview in Tokyo on April 11. “Kuroda’s QE announcement is declaring double suicide with the government. The BOJ will have to share the country’s fate and default together.”
Why? Same reason we have been pointing out every day for the past week, the same reason the Japanese bond market is now essentially broken with daily trading halts becoming an expected feature:
“The volatility in the JGB market as well as the fact that there is large selling represent fear among investors,” Fujimaki said. “They are early signs of a larger selloff and we should continue to monitor the moves in the long-term bonds.”
Fujimaki said he recently bought put options for Japanese government bonds of various maturities, without elaborating. He continues to hold real estate in Japan and options granting the right to sell the yen against the greenback expiring in less than five years. He also holds assets in U.S. dollars and currencies of other developed nations.
“Japan’s finance is sinking into the ocean,” Fujimaki said. “There’s no escape from a market crash in the future when you have such enormous debt.”
And the punchline:
“By expanding the monetary base to 270 trillion yen, the BOJ is making a huge bet which I think it will ultimately lose,” Fujimaki said in an interview in Tokyo on April 11. “Kuroda’s QE announcement is declaring double suicide with the government. The BOJ will have to share the country’s fate and default together.”
“Shirakawa did more than enough and he had good reasons to not do any more,” said Fujimaki. “There will be tremendous side effects from monetary stimulus. QE doesn’t work and has no exit.”
“Things may look rosy for now as stocks rise, but should we see hyper-inflation, JGBs will see a huge selloff, leading to a stock market crash,” said Fujimaki, adding that he sold “almost all” of his Japanese stock holdings some time ago.
Wow.
And people thought Kyle Bass was bearish.
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He is mind kind of....
Sounds like his vision is clear.
he looks good at math. im listening.
Next thing you know, Paul Krugman will call this guy a deranged libertarian doomer hiding in his bunker.
Who's the expert on the markets? Dude who's earned his keep in the markets or Paul Krugman, fascist shill of the Ivy League elite.
Ex soros adviser sees market crash. Hmmm. Funny... I'm detecting the same thing.
What’s the big deal?
It’s not like a quarter quadrillion yen is real money or anything..
OMG this is impossibro!
"Bonds are garanteed by the Japanese Government. Please don't worry."
Where is that fucker Krugman?
Dr Paul Krugman can't be reached, as he is masturbating in front of his new set of laserjets MFP M276 and M251.
default AND hyperinflation?
This guy just want you to sell yours before inflation takes Japanese stocks to sky rocket. Only when US and China stops Japans money printing will they settle back down.
Japan's fault is mimicking British Empire instead of doing it like China mimicking American Empire.
The paper crash is on, hold all your money in tangable physcials.
how can shortage and price drop exist at the same time?
it just doesn't make sense...
"Q. If Japan has a financial collapse, what will happen to its government bonds?
A. Please do not worry."
That is the exact quote.
Japanese cars (for foreigners) are gonna get cheaper...maybe.....
I'll grab two when each is 5 oz of the yellow metal.
Given that Japanese car factories are highly automated surely the costs in Yen will go up with the increase in energy and raw material prices, thus not getting cheaper in foreign currencies, unless you're suggesting that the massive increase in energy and raw material prices will bankrupt the car companies so their current stock of cars is sold off cheap in liquidation?
"good at math" droll, dry and hilarious
He forgot to mention the nearly $1 Trillion in UST held by Japan. No worries, the FED will buy them.
no, no no.
japan uses them to buy jgb. corrals all jgb debt as possible. then and only then takes the hit and forgives all their self owned debt. debt that people were rapidly and gleefully selling to the boj. for, um, dollars...japan debt now transfering to dollars.
yea to the reserve currency...onboarding euros next i guess....
bernanke has no choice but to slow qe but its gonna be a show. there are a lot of dollars out there floatin around. alot of dollars lookin to land...here.
sell, ben, sell !
no wait.
buy, ben, buy!
:)
With what, a Ctrl-P, or an Excel entry?
Except that their Excel is backed by more than MS: DOD. /s
Fear not, when Japan needs cash they'll dump them for whatever they can get. That'll be a fun day.
someone's vision is not....
Sakakibara saying abenomics will fail to inflate at and Soros' man saying the plan will because it will hyperinflate....wth?
That guy is so fucked. He's betting against the Fed. There isn't any hyperinflation. It's just the opposite. Real assets tanking hard tonight.
Excuse my asking, but since when is paper gold a Real Asset?
Deflationary head-fake.
Come on. That's not even a good attempt at English.
JGB is for Jerry Garcia Band?
No, but LSD is for Long Slow Deflation.
My new issue of Money mag has a whole article on how Japan is coming back and is the new HOT investmant.
in a moment of sheer lunacy on my part I ordered that rag- now it goes straight to the hospital where my wife works without me even opening the cover
Friday morning Barrons outdoes them once again:
Bitcoin for Your Thoughts? Buy GoldVirtual currency's bubble bursts, as the precious metal looks undervalued.
http://online.barrons.com/article/SB50001424052748704235404578404671944242416.html?mod=BOL_twm_col#articleTabs%3Darticle
Wow, broken record 'stackers' have a buddy at Barrons now! Keep stacking!
OT but.... Gold around 1480, Silver at 25.35 and falling. gold/silver ratio at 58+ Interesting times.
This is like Christmas eve for me. What is going to suck is tomorrow when I find coal in my stocking because my dealer still wants $1575.
If GSR gets above 59.07 I may have to swap.
LCS says he will NOT take FRN below $25 spot.
This is getting more unreal by the moment.
Holy shit! My post got old fast.
EX Soros adviser? F**k me naked. I'm too busy trading . I'll catch ya 'all in London.
If he's talking up JGB vol, then that's what he must be selling.
If you can sell JGB vol you are probably killing it right now.
short (GBP) lol
lol is the new vol (?!)
Gold being down now makes perfect sense to me.
Thanks for clearing this up, Tyler.
silver is down .50 in asia now.
Cliff diving.... Gold and Silver down big. Watch out for falling knives.
.95 now
ummmm N(H)OPE, socialism is a complete sucess everywhere it's ever been tried!
I dare anyone to show me just one example of a socialist society that has failed......
yep. both parties are the same..........
That's why Bush did QE 1- Infinity too, just like the OBowel Movement is doing.
I truly wonder if a flood of Japanese money flooding into the U.S can give Bernanke the cover he needs to exit QE temporarily and back up the assertion that "see! we can stop qe anytime we want, and the market does not react". Even if he slows down the pace of buying for a bit. What a nice charity hop for him if it works.
I have a 75 pip stop on usd/jpy. I'm, looking to short the ponzi euro.
I wonder if silver will break into the $24's tonight? What happened to the imminent silver short squeeze? I guess that is over. This is like being on a rowboat with your half mentally retared cousin and he starts rocking the boat back and forth and you start trying to grab onto anything you can because this crazy asshole is going to rock the boat until you both fall off. The only thing you can do is take the oar and knock him unconscious because that is the last thing he expected.
It already has. And it is heading straight toward $23's.
Buy silver/ Buy usd/
We may go full retard here shortly and you never want to do that.
Shit, we've gone long past full retard already, and are now into anencephalic territory.
anaphylactic shock/
We've gone plaid.
we've gone BIDEN
Meanwhile, wtf is with gold? Ramped up $14 and now it's smashed, $18 down.
A furious amount of paper Gold being sold, and physical gold being bought.
"QE doesn't work and has no exit."
Tora! Tora! Tora!
Ben? Ben Bernanke?
If anyone's going to sit there and just take financial repression full in the face, it's the Japanese people. Everyone else has so far.
As for hyperinflation...... well, we'll see about that. I have faith that "official government statistics" in Japan will show little to no inflation, just as they do here in the US. For sure, they won't recogize it's even happening unless it gets so out of control that it's undeniable (too late).
I hate to be so down on the idea of collapse, but let's face facts here. It's BEEN going on across huge portions of the globe for a while now and nobody has pushed back. No bond "vigilantes" have taken anyone down yet.
The obvious flaw in my own argument (which I freely admit): Good God, that's a lot of debt they got! Perhaps at some point sheer size of that debt outweighs the usual arguments in countries that have "only" 100-150% Debt/GDP.
The price of rice will be key.
I suspect the price of oil will have more to do with it.
Yes, but food is ultimately the winner in that context.
Oil affects food prices, and other commodities, but people don't really change until they get hungry.
Japan produces food. But, they don't produce any oil.
Whale oil. Also, dolphin oil.
Yeah but each whale only produces 40 to 50 barrels of oil.... that will not go very far....
‘You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.’
Uhup you can do with out oil and driving your car, but you can't do without food. Ask the folks in Egypt.
It give new meaning to "Japanese Spring".
"Reaction against an unwise policy is not to be condemned. And progress towards chaos is not to be commended."-Mises
Injustice/unfairness brings chaos.
Why might chaos be wanted? Creating chaos brings an opportunity to grab control of what previously resisted being taken-over. Globally speaking, unfortunately.
Domination is a key driver of sociopaths.
Send lawyers, guns and money.
Mostly guns and ammo.
+ Rocket launcher
http://www.youtube.com/watch?v=NGhd53hV0Z0
"Lawyers, Guns, and Money" - Warren Zevon.
Unfortunately 'out of stock' on ammo
Unfortunately no 'out of stock' on lawyers
"I hate to be so down on the idea of collapse".
lol. That's how fucked up things are,
No shit, right? I'm as shocked as anyone else here that people have been so willing to accept artificial repression of returns on bonds, but I guess it beats the alternative (haricuts, defaults, etc.). That's all I can come up with as an answer.
So, yeah, it's fucked up. But in a zombie-rational sort of way.
I know there's a lot of people on ZH who are waiting, nay, HOPING for collapse, but you gotta understand that most people in most parts of the world would really rather not have a collapse. It would fuck up their whole day/week/month/year/life.
I think this only ends when we see a worldwide recession no matter how much QE is being pumped into the system. Then it's over. Not saying we're there yet, but I can see it from here.
Only a fucking idiot would hope for a collapse. Or someone who enjoys eating dog food - for breakfast, lunch and dinner.
Or someone who is just such a total fucking loser who sits in his basement with his ball cap on and wife beater shirt, admiring his Guns N Ammo collection while paying to chat with an 18 yr old online who is in a net cafe in Manila - would hope for a collapse.
I bet you feel quiet invincible with that army of strawmen behind you.
PS: Is that a red herring in your pocket, or are you just glad to see gold plummeting?
Wow gold $1456 silver $24.82
If a stock market shitstorm is not on the horizon I will be amazed.
PT 1452 Ag 24.41 ratio ~59.5, wow.
Au/Ag above 60 and I start thinking about switching from Au to Ag.
"They need to stop the run before it forces the Comex and others into default"
The quote of the year...
Everybody take delivery their Gold and lets watch em burn...
1450 did not hold.
Let's just get this over with.
After all, there is no hedge.
I didn't think I would see Silver Maple below $30 again.
Asian mkts down 1%
Shit storm rising from the east
WHAT? They didn't like how we did the usual heroic afternoon pump up to a flat close on Friday? Those ungrateful bastards! Can't they see how hard Kevin worked to make that happen on Friday?
Calling Bernanke and the Fed, what happened to those missing trillions?
Bernanke, Evans, Dudley and Yellen must be good book-cookers.
The same way they will make $17 trillion dissappear.
9 Trillion Dollars Missing from Federal Reserve.
http://investmentwatchblog.com/9-trillion-dollars-missing-from-federal-reserve-fed-inspector-general-cant-explain/
Look for the US to follow Japan. The US has been advising Japan over the years.
Why does the US have to wait to be the last one to default. I want it now.
Reserve currencies have their privileges.
Indeed., as privileges are a poster-child for injustice/unfairness; and beget chaos which can be deliberate to enable putting in control of what had been resisting being taken-over.
That is, for example, how global control can be accomplished.
Just got a call from Larry Silverstein, he asked me to pass on a tip to everyone that works at the Chicago Mercantile Exchange, yeah, you might want to call in sick tomorrow.
Just say'n.
$1400 would be most helpful for me and mine. Sorry for your troubles. Your troubles, not mine. Munchkins.
Traders live and die by their sort.
Pricing Implications of a Comex Default
Of course, a Comex default of this type means that you will not be able to buy silver from the usual markets until the dust settles. Also, when said dust has finally found a resting place, silver will undoubtedly be priced much higher.
That is because the price of silver will be based on the actual amount of silver metal in circulation, rather than on the inflated amount of silver paper that has suddenly been turned into paper money instead.
Thaaaaat's what they want to avoid.....
Food prices keep going up, though.
didn't we already talk about this?
:)
So, either Japan will sink back into structural deflation, or they will hyperinflate. Which is it? Maybe China and Japan will go to war which will totally change the game.
101 years ago the Titanic just sank. Rather fitting.......
And that Kim Il Sung thingy too,
Do they have icebergs in NK?
Spooky
Anyone seen Kyle Bass? Oh, there he is, here, you'll need these binoculars. See that tiny speck way out there on the ocean? Yea, that's him, on a giant fucking yacht.
http://www.youtube.com/watch?v=ZS2Z19yTuPI
NO MORE HARLEM SHAKE VIDEOS!!!!!!!!!!!! groan, were is my base ball bat!!! (the battery hook up was interesting) lol
shorting bonds is a risky business - BOJ can print unlimited and buy all the bonds
Excellent read
Isn't Shirakawa the indian chief from F Troop??
He forgot about deflation before hyperinflation AND THEN A NEW CURRENCY.
I'm not sure why hyper-inflationists like Fujimaki believe in a huge stock market correction. QE has already created inflation in investment assets and if M0 (currency) ever did go parabolic creating hyperinflation in consumer goods stocks (in actual companies not derivitives) would go up. This is what happened in Germany and Argentina.