40 Years Of Dueling Devaluers

Tyler Durden's picture

Japan's Nikkei 225 equity index is now within one day's new normal range of nominally crossing above the US Dow Jones Industrial Average for the first time since April 2010. The convergence of the two indices coincides with the rapid convergence of the two countries' trade-weighted  currencies that dislocated last in March 2009 (suggesting that indeed Abe has achieved his initial goal of devaluing back to the USD). The move off the November lows in the Japanese equity market is stupendous - as the chart below shows, it is a perfect exponential arc (linear on a log scale chart); leaving only the question (as we noted here) - which index hits 40,000 first as they continue to devalue themselves to economic nirvana (or valhalla).

Equity indices converging...


Trade-Weighted FX converging...


as the Nikkei 225 move off the November lows is a perfect linear trend (98% R^2) on a log-scale chart...


Sustainable? If you were wondering, at this rate of 'growth' the Nikkei will be at 40,000 in May 2014 (just one moar year)...


All this was discussed in great detail by Dylan Grice here

Meanwhile, JGB implied vol has collapsed overnight - another mission accomplished...


Charts: Bloomberg

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SillySalesmanQuestion's picture

Who knew Abe built rocketships for equities?

Say What Again's picture

The Nikkei 225 has made a 62% run in just under 6 months.  So we have an annualized rate of over 120%.  This is an approximation, "but good enough for hand grenades," as my sergeant used to say.  Based on the current game of chicken being played by the central bankers, this should be sustainable for at least a few more years, right?  OK, I've convinced myself -- I'm gonna mortgage the house and go all-in with a diversified portfolio of SP500, Nikkei 225, Tohoku Electric Power Co., Chinese Pork Farms, First Solar, & Herbalife.  What could possibly go wrong?


Mentaliusanything's picture

What could possibly go wrong. Your "Mort" gage. debt till death

Urban Redneck's picture

Setup a corporation to shield personal liability (like GS), get yourself a banking license and access to direct 0% funding from Uncle Ben (like GS), and pay yourself huge salary and bonuses while the gettings are good (like GS).

Somewhere in there is a successful (racket) business plan.

Groundhog Day's picture

The land of the rising sun is going to inflate zimzabwae style

thismarketisrigged's picture

looking at u,s futures overnight so far, dow is up 36 and s&p 5 pts.


god forbid we had 2 red days in a row, gotta have a 500 pt gain tomm to make up for  a whooping 22 pts on the dow lost today and 6 on the s&p.


as for what reaches 40,000 first, nikkei or dow, im going to have to say nikkei. as big of a scam the u.s markets are, as are all markets across the globe, japan it seems is not only green daily now, its up fucking 2-3 percent daily.


in the u.s , we are green daily, but not up that many pct points daily. nikkei will beat dow to 40,000.


japan is so fucked

Dr. Engali's picture

The rate the Nikkei is going they'll hit 40,000 by year end.

Seize Mars's picture

This Abe thing is misunderstood. The FED is just laying off a bunch of exported inflation into their economy. Yes it will have disastrous results. But it is acting like a safety valve for the USD hyperinflation.

SelfGov's picture

Oh weird! Starts right when the US peaked in oil production! 

CrashisOptimistic's picture

This yen erosion means they can buy fewer US Ts for the same amount of yen.  Unexpected consequence.

Wait til Toyota's are priced at $4000 for a 2013 Camry.  We'll see how GM competes.

Element's picture

Ha! Japanese algo-mouse auto-prints up a currency war! ... TORA TORA TORA!!!



Let's have no tasteless jokes about slopes either.

random shots's picture

NIkkei 225 is now some 40% over the 200 day MA.  It is worse now than in the 80's before it crashed.  Who is buying?  Seriously. 

Floodmaster's picture

Banks without regulation will never fail.

q99x2's picture

It is all very interesting. But boring.

RealEstateWannabe's picture

Anyone see the 10 yr JGB....yield spiked to 0.69% (15% move). I'm no math whiz, but shouldn't that have a positive effect on implied volatility?

M2Market's picture

rates on the 10 yr JGB is moving.... The beginning of the end for the land the setting sun

M2Market's picture

rates on the 10 yr JGB is moving.... The beginning of the end for the land the setting sun

mayjune1's picture

I have one question for anyone who wants to answer. Why haven't I heard Osama I mean Obama ever mention bernakes name?
Doesn't anyone seem just a little suspicious how this monkey who was put in by the Anglo Saxon elites for propoganda reasons( namely america is bigger than racism) bullshit, never mention bernakes name. The man responsible for trillions upon trillions of toxic debts for people who haven't paid a mortgage in 5 years. Maybe they don't have to since no house is under water anymore because bernake magically fixed that too. Boy is this country a Ponzi scheme or what. Axis of evil is right here baby. Forget about North Korea, this country is toast.

M2Market's picture

10 yr JGB rates are spiking of as of this note... When the Watanabes realize they need to get their assets the hell out of dodge all hell will break loose on yen and yen rates....  We're getting there

Jim in MN's picture

This shit is nerve gas for markets, investment incentives, and prosperity.


NoDebt's picture

We haven't cared about that stuff for years, in case you haven't noticed.

sitenine's picture

"Before money, there could be no inflation. After money, there could not for long be no inflation." ~ Jens O. Parsson

GreatUncle's picture

All the charts will converge "money moves for the best return" especially with free trade and no borders. If you ain't caught the new growth (illusion) yet you soon will.

polo007's picture


Since the financial crash of 2008 the western economies (US, Euro zone and Japan) have been using quantitative easing (QE). QE is not new. It was also used extensively in the 1930's. Japan has been using forms of QE for over a decade. But when one looks at the velocity of money and the money multiplier the money is not getting into the broader economy. But it is getting into the stock markets largely through the large money center banks that are the major beneficiaries of QE. Rising stock market valuations help the money center banks balance sheets. It is believed for the US at least that QE is primarily to help prop up the banking systems in the US, the Euro zone and Japan. The banking system remains saddled with huge amounts of debt that is either toxic or uncollectable.