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"The Most Important Chart For Investors" Flashback, And Why USDJPY 120 Is Now Coming Fast
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. Here is the punchline of what he said:
We have long believed that investors ignore Japan at their peril. Time and time again, investors have missed major global market trends that have been catalysed by Japan. We have felt for some time that a fragile Chinese economy could be pushed over the edge by a further yen devaluation – in many ways a replay of the Asian crisis of 1997. And just as the Chinese real economy data has taken a turn for the worse in August, the yen has slipped below a key 15-year support level against the dollar. This is probably the most important chart investors should focus on. The next phase of global currency wars may have begun.
We have written previously that Japan?s QE and the associated yen weakness could trigger a re-run of the 1997 Asian crisis, only this time sucking in the Chinese renminbi. The yen has just broken below a key long-term support and after a brief technical pull-back, its decline is likely to accelerate. This will trigger a wave of profit-crushing deflation flowing from east to west. Andrew Lapthorne has just written a great note on Japanese equities. He says yen weakness, not corporate self-help, is the key to Nikkei outperformance, with Germany looking particularly vulnerable. It looks as if yen weakness is what we've now got!
Staring long and hard at the Yen/$ chart, I think that, in the current circumstances, the yen/$ will head to 120 pretty quickly - perhaps after a short reinvigorating retracement. And, if the dollar’s ascent is given extra impetus by the DXY also breaking out, a decline in the yen below Y120 will see an end to its 30-year uptrend – a trend that has relentlessly exported deflation from the west to Japan. Sound far-fetched? One of the few things I have learnt over 30 years in this industry is that when traders decide the yen/US$ starts to move it can jump by Y10 or Y20 very, very quickly indeed.
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.
Albert Edwards Presents "The Most Important Chart For Investors"
Which incidentally has nothing to do with stocks or bonds, and everything to do with all-important FX (which just happens to drive all correlation and risk pairs around the globe thanks to the far greater embedded leverage in FX, and is why all "modern" traders focus almost entirely on the USDJPY and EURUSD).
Specifically, as SocGen's Albert Edwards notes "we show on the front page chart what I believe to be the key chart investors should be focusing on at present. It shows the yen breaking down against the US dollar. This may be more than just a strong dollar story on the back of Fed tightening however, as it seems the yen has now also broken key support levels against the euro. This is a weak yen story. Though there are good fundamental explanations for recent dollar strength vis-à-vis both the yen and the euro, often commentators like to find a fundamental story to fit market events even when price movements have occurred without any clear fundamental explanation ? for we teenage scribblers (as ex-UK Chancellor Nigel Lawson dismissively called us) all have to fill those column inches of commentary."
Wait, Albert is now a chartist? So it would appear, with a few large caveats:
Sometimes it is very clear to me that instead of fundamentals driving prices, it is the charts or technicals that are important. Hence I have long been an advocate of keeping one eye on the charts to see if a major support or resistance has been broken. The very fact that the markets contain so many followers of technical analysis means that the soothsaying of chartists can actually be self-fulfilling. Nowhere is this more true than in the world of foreign exchange (FX) trading where fundamentals often play a peripheral role, even in the medium term. And in a world where momentum investing has become more ?fashionable?, FX is the one area where a clear market trend is especially seized upon with relish.
We couldn't agree more, since we ourselves enjoy point out, more often than not, when various algos activate momentum ignition strategies in the USDJPY to push the broader S&P 500 above (never below) key resistance levels. In fact, it was on Zero Hedge where we pointed out last night the extreme oversold level of the Yen. Edwards, however says to ignore this, and instead to focus on what may be historic weakness in the Yen, which in turn will clobber the global economy.
... if I am right and the yen runs sharply lower from here, then this will spell real trouble for the global economy. (Do not be fooled if there is now a pause in yen weakness or even a partial retracement from these levels, as the rapidity of recent moves means the yen is now extremely oversold against the dollar ? i.e. the daily RSI=88. This should be the pause that reinvigorates the new trend).
Why does a rapidly weakening yen spell trouble for the global economy?
First, because the Chinese economy will see a further rise in its already strong real exchange rate, especially if other Asian currencies are pulled down with the sliding yen. This will hurt the Chinese economy which, from August data, appears to be weakening again. The strengthening renminbi will also exacerbate deflationary pressures further.
Second, a weak yen spells trouble for the west as a wave of deflation washes in from the rapidly devaluing east. This reverses a decade long trend. I believe that profits growth is so anaemic in the west that this monetary tightening via strengthening exchange rates could in itself be sufficient to send US and European profits into outright decline and subsequently their economies into recession (via a contraction in the investment spending). That is why this FX technical break is so important
That's what could happen. Here is why Edwards believes, it will happen.
We have long believed that investors ignore Japan at their peril. Time and time again, investors have missed major global market trends that have been catalysed by Japan. We have felt for some time that a fragile Chinese economy could be pushed over the edge by a further yen devaluation – in many ways a replay of the Asian crisis of 1997. And just as the Chinese real economy data has taken a turn for the worse in August, the yen has slipped below a key 15-year support level against the dollar. This is probably the most important chart investors should focus on. The next phase of global currency wars may have begun.
We have written previously that Japan?s QE and the associated yen weakness could trigger a re-run of the 1997 Asian crisis, only this time sucking in the Chinese renminbi. The yen has just broken below a key long-term support and after a brief technical pull-back, its decline is likely to accelerate. This will trigger a wave of profit-crushing deflation flowing from east to west. Andrew Lapthorne has just written a great note on Japanese equities. He says yen weakness, not corporate self-help, is the key to Nikkei outperformance, with Germany looking particularly vulnerable. It looks as if yen weakness is what we've now got!
Staring long and hard at the Yen/$ chart, I think that, in the current circumstances, the yen/$ will head to 120 pretty quickly ? perhaps after a short reinvigorating retracement. And, if the dollar’s ascent is given extra impetus by the DXY also breaking out, a decline in the yen below Y120 will see an end to its 30-year uptrend – a trend that has relentlessly exported deflation from the west to Japan. Sound far-fetched? One of the few things I have learnt over 30 years in this industry is that when traders decide the yen/US$ starts to move it can jump by Y10 or Y20 very, very quickly indeed.
Remember that "shocking" CPI print from last week? If the SocGen strategist is right, prepare for many more such "stunners" as Japan makes deflation-exporting its only business model, one which could well crush the economies of Europe, China, and the US... and Japan! Case in point: recall what just happened to Sony last week. But the all important offset, a rising global stock market, should make it all better at least until the entire economic base is so hollowed out, not even algos can dismisses the record divergence between stock market myth and economic reality.
Edwards' bottom line: "If a clear break in the yen downwards against both the dollar and euro is occurring, not only will this spell trouble for the beleaguered Chinese economy and exacerbate deflation in the west, but it will also break the spell of German economic dominance."
* * *
And here is what Albert told us moments ago:
The amazing thing is how little interest there is with western investors about Japan and how it effects US or European portfolios
Notwithstanding the fact that it is the 3rd biggest economy in the world by a long way (the same size as Germany and France added together if you look at it the right way ie current exchange rates rather than PPP)
Little understanding out there what yen devaluation means for Chinese renmimbi and how they will be forced to devalue too
ECB money printing will never be able to compete with Japn. The euro might be going down v the dollar but it will be going up against theyen
Little understanding how, not only will eurozone be going into recession and deflation but that Germany will be the weakest economy in zone. Once Germany’s budget deficit starts to rise sharply as a result of their recession the new mad balanced budget act will kick in and they will be cutting spending aggressively. Expect the eurozone to disappear down a black hole!
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Have you ever heard of options? Yes, you can trade FX options. Silver is so fucking cheap right now! I've been heavily stacking for over a year!
Who gives a flying FUCK how low it goes? It's cheap on any chart known to Man. Buy a fucking mattress if you want, and store large sums of cash in it.
Use your head. Buy some art, and a few exotic cars. Buy some arable land, and some animals.
Yen Cross offers good advice. Take it!
Diversification means holding CA$H too...
One day the only part of all these charts that will be visible will be the vertical and horizontal axes because one day everything except gold and silver will be flatlining.
You know I thought Americans were the worst sheep in existence...
That is of course until Fukushima took place and now "Abenomics going-all-in" on it's debt Tsunami to it's finish!
Ramming Speed!!!
Japan is America's little robot (as is Germany), America is Israel's Golem.
Any damage to Japan, Germany or America or any other Goim from any NWO experiments on the path to implementing the Protocols of the Elders of Zion is of no consequence.
Japan is America's little robot (as is Germany), America is Israel's Golem.
fd
I keep hoping that I've got it all wrong and that somehow someway these guys over the last 3 years will come to their senses and stop it before it gets worse. But with each passing day they break yet another milestone and embark on more unchartered water...
To the moon George Soros! "To the moon"!
Mr. Soros and the current President on that very large denominated bank note will wish they were deceased if that should become reality!
So what? If there's any further trouble, Japan just doubles down again....why can't that just go on for decades, it already has.
it will, fanatics here are just late on their medz
It continues to work as long as the Japan's aging Boomers and elders continue to invest to hold so much Japanese paper. Always been fascinated by that dynamic and never really gotten a great understanding of why it has persisted so long with people continuing to get raped on their returns. Seen Bass and few others talk about it in very broad terms but still doesn't get to the core of 'Why'
Anyone for a game of dominos
The only sure way to win is by not playing.
$14 silver will be tested
If that happens then one tonne of $1 dollar bills will be worth more than one tonne of silver.
Now how is that reflecting sanity, when paper is worth more than the real thing?
That is exactly when to drop the ton of dollar bills on a ton of silver and go create your own "silver mine" in some remote cave network.
If it hits 14... I am going all in again some more!
Back in the day, watching this site and doing homework let me ride the last wave in AU from 11 to 45 to back in at 17~.
I'd love to catch another big wave like that.
You guys have been good to me.
Thanks.
You must be really old to be buying gold when in teens
Thanks for the proof read.
"$14 silver will be tested"
Will it even matter in 3 months?.. I'd say your best investment with that silver at this point is storable dry goods that include "gun powder"!
You'll be needing it when the grocerry store shelves are all go empty!
$0 silver will be tested.
$0 silver will be tested.
I don't doubt your prediction nor the stupidity of the gamblers that play in this "Casino"!
No one can argue that we will remember this day with great trepidation and sorrow for the gift it will keep giving us expotentially into the future much like the row of "0s" that continue growing without end -never to repaid !!!
Yes, 0 in Federal Reserve Notes, yes it will be. No one will take dollars for it, unless they need it to wipe excrement from their body.
I remember the days when AUD hit .54 or was it a dream....
hmm... japan and us are working together again to combat russia and china.
US forces the oil cheap. Japan is devalue it's currency. The whole thing is to undermine russia energy base economy, while japan try to take jobs from China and the other Brics countries.
With the oil price and commodity prices so low now, Japan can afford to lower it's currency and make less impact on the import costs.
This is really going nasty now.
Good points.
Yes. Called currency war for a reason.
But why would the Chinese sit idly while we choke them? It's not as if they lack a way to retaliate financially.
Because they were made by the system and depend on the system in the current paradigm and will not risk revolting against it until the decision is made for them.
And the Japan & US are not against Russia & China becuase they are enemies, but because they are opponents, competitors for a pie that is shrinking (with respect to their growing needs).
competitors for a pie that is shrinking (with respect to their growing needs).
hmmm, shouldn't that be (with respect to growing population and want of the good life at others peril).
in addition...
China has a lot of problems right now and does not want to play in the monetary war games.
Their bubble could collapse if it gets too ugly and everyone starts to peak under the rocks.
Monetary war games? Maybe. Or the central banksters playing musical stimulus. A.k.a., a circle jerk...
Merika with $18 Trillion and multi trillions in derivatives, merika has no problems?
Contagion effect?
Interms of numbers the JCB 750bUSD program is amust read for the ECB.
The agita this currency movement must be causing other asian componnets must be heavy.
Alliances may be changin on this.
Boo! Happy Holloween!
Oughta be good for a double top. We'll see, we're right now at the high again on the S&P. If we tank from here, I will LOL...
Gold is being trashed for one reason or another, likewise silver.
With this, the flow on effect to China means AUD will be heading down.........the question is if to buy more gold....very tempted to add some now while the AUD at 88...
but I already have 10% of wealth in bullion....and loathed to break that percentage....
I am going to have to pay very close attention over the next few weeks.
Wonder if this portends a later rate rise in Aust.
Dollar up, gold down is normal.
Basically gold behaves like a currency, even though technically it's a commodity. Normally it trades inverse to the dollar. I haven't checked the historicals, but my guess is, whenever it trades in tandem, there's a war of some consequence going on somewhere.
You don't buy gold over silver at this GSR, unless you are paying some ungold VAT for silver while paying no tax on gold.
Nice seeing you in these parts again, tmos.
Actually I am not sure of the GSR of 10 - 20 really applies any more. My hunch is that gold will rocket more than silver, but (of course) I could be wrong.
So buy both! Add some platinum if you are an optimist (lots of rather high-end industrial uses).
From a chart I posted earlier...the velocity of money is slower now that at anytime going back before 1959...
http://research.stlouisfed.org/fred2/series/M2V/
Pretty well proves the US has been in recession/depression for 6 years running.
US dollar up 1% so far and the day isn't finished. Huge flight to safety going on.
That safety never seems to include Dollar paper gold though...
Yen is dying. The US Federal Reserve's plan of infinite printing will die as well. First Japan (US Fed engineered) then the US.
All the central bankers can burn in fucking hell
What about that spike in the Saudi peg last week?
Does what is happening in the clouds or places I do not go make a difference?
What makes a difference to me and most people is what is happening around them, in their neighborhoods. If people are living in a stable place, have work and provide for necessities, all the charts and what the DOW and S& P do is nonsense to them and forcasting six months into the future is about as accurate as forecasting next week's weather.
When you have your neighbor knocking on the door asking for food or money and cars are parked due to unemployment and theft is rampant, then you know you have a real problem.
People are mostly about neighborhoods, not nations or NWO. Nations and NWO is about power, corruption and intellectual experimentation. A lawyer, politician or economist does not put bread on my table, work does. Conversely a lawyer, politician or economist tends to rob me of my hard earned $.
The question is, have the financial markets and the real economy decoupled? It looks like they have, with the former booming and the latter stagnant since '08. If so, then theoretically the stock market could also crash without much real effect.
yeah, except for 401k, IRA, and pension management who would notice? we don't need no water let the motherfucker burn
That's an astute observation. Only ones it would matter to are the wall street crooks and the cnbs propaganda types.
The stock market today is one HUGE diversionary tactic. Years ago, it was where money met ideas. Today, well to call it a cesspool is being kind.
Japan now ugliest whore in the room....well done.
I'd hit it......with a stick.
Yeh PayPal is a political whore.....I stopped using them when the blocked Wikileaks payments.
Gold down has to do with the Swiss referendum? Seems like a play by the 1% to convince the Swiss people to vote down the referendum. See, you can lose money by buying gold.
Currency... not money... money is backed by something other than "faith"
Yeah. A "wave of deflation" from things exported from Japan. Not really a problem. If you're in Japan, take this opportunity to fund your carry trade and buy US corporate bonds. You're welcome.
Whoever has the gold, wins... (Hint: not the West) Everything else is bullshit...
Fuck gold! Save your fiat for the coming super depression. Put it in your mattress.
Short the paper buy the physical.
Whoa! I can make the dollar dive against the Yen right back to 106.
Not with mirrors, not with inside information, not with a magic wand.
All I have to do is BUY it at 112 in hopes it will rise to 120 and V I O L A !!! it will begin its descent to 106 a minute after.
Here, I'll show you.
I have some play money I use to torture myself, when I want to be absolutely right about something in the FX markets, that will make me lose money.
I'm going to buy the dollar 112, one contract, and you watch how fast I lose.
Here goes, at noon eastern time. Done.
check out my loss at the close.
So the markets are celebrating QE from a country that has over 1 QUADRILLION IN DEBT? WTF Japan's debt is over 200% of its GDP and with its population aging and its exports shrinking they are pretty much fricken done..fini..toast bitchez...And lets not forget the FED has quadrupled their debt since 08 and our government has doubled theirs as well..
Carry trade myths and low gas prices to attract Democrat voters. Hope and chains at the final hours.
In and around the year of 1970, the yen was trading at about 354 yen for a dollar.
Suffering Bastard:
Ingredients- 2 Parts Light Rum
- 2 Parts Gin
- 2 Parts Ginger Ale
- 1 Part Lime Juice
- 2 Dashes Bitters
How to mixFill a chilled highball glass with ice cubes. Add all ingredients.
If you're reading this, you need one.
Me thinks IMF SDR is revamping new currency valuations. Could be wrong. Gut feeling.
We have truly entered the twilight zone and are in complete and total uncharted water on the monetary front. QE to infinity in Japan, buying 100% of current government bond issuances and now the largest Japanese pension fund is buying more equities. Absolutely incredible. As for the ECB, the use of negative interest rates is really beyond comprehension but let's face it, in one fashion or another, the ECB too will join in the frenzy to buy up assets with or without Germany's blessing. As for the US, how quickly everyone has forgot the Fed just expanded its balance sheet from $1 trillion to $4 trillion along with using ZIRP. Meanwhile, China (pegging to the USD doesn't look all that great now) has a monster debt problem to deal with that could become far worse with further pressure on their economy (importanting deflation with the dual problem of reducing demand for their products due to pricing pressures and having to repay debt with more expensive currency). As for the emerging markets, this war between the four largest economies in the world (US, Europe, Japan, and China) is going to be an absolute killer as their currencies and economies are raped and pillaged.
As for the Japanese, well I hope they've been buying PMs as their purchasing power is getting killed and we are now possibly seeng the first hyper-inflationary currency collapse with the Yen. Japan is now without question "all in" on the monetary front and desperately trying to salvage what's left of not just their economy but more importantly, their society. If one looked at Japan from a classic financial analysis perspective (i.e., balance sheet, income statement, cash flow, etc.), it is a complete dissaster. We're at the final table now and the short stacks don't have enough to cover the blinds so they're left to make their move with whatever cards they've been dealt. An Japan's cards look very bad - demographics, environmental, lack of natural resources, and dying innovation at the corporate level (think Sony). The only question that remains for Japan is who they go begging to when their grand monetary experiment finally fails (let's say by 2020). My guess is China, right next door, very large, and plenty of reserves to use for the world's greatest M&A transaction ever. China buys Japan with $1+ trillion of worthless US debt.
On the PM front, I posted a couple of weeks ago that I felt the pain in gold and silver is going to continue as a direct result of the USD increasing in value. This is a relative statement of course as the USD is increasing in value against currencies that have significantly larger problems so where else to turn in the short-run other than the USD. The Yen is close to dying with a country that has no real strenght supporting it. The Euro is always under the risk of breaking-up. No EM currencies can even compete at this stage of the game. So the pressure on PMs is more of a technical matter (i.e., on paper) as a response to the increasing value of the USD which of course is going to create all kinds of indigestion problems for the Fed over the next couple of years. But for the near-term (next 12 to 24 monnts), it looks like PMs will be on sale and most likely going lower as the USD continues to strenghten so this, as I see it, will be the time to accumulate PMs and buy-in using cost averaging as they continue to decrease in value (at least against the USD). Could gold test $1,000, yes I believe which might lead it to the $800 range but once this route takes place in coordination with failing fiat currencies, it will be the last moment to acquire any gold at all. It might be hard to stomach some of the pounding PMs will take but this has always been the case when investing in PMs as if you can't deal with all of the challenges associated with PMs (ranging from manipulation to high volitility) then it's probably not the right place to be.
I will continue to look to buy PMs but might hold for a bit as this current CB cycle (moving from the USD back to Japan and most likely to ECB) plays out. Eventually, the Fed will be forced to play the game again as the USD strenghtens too much and businesses/Washington start to complain. But let's face it, this is all smoke and mirrors as the big event will eventually be realized when the world's economies re-balance and the realization that too much debt is present, that can never be repaid, comes home to roost. Until then, its just one big game being played by children.
How's that old children's song go again. Ring around the posey (USD), pocket full of posey, ashes (the Yen), ashes (the Euro), we all fall down! Yep, we're going to all fall down and its going to be an extremely hard fall at that.
mis-delivered #1: y'all need to wake up and smell the chrysanthemums then ask the manufacturers and robotics in Detroit, Peoria, Milwaukee and Rochester about Japan. They'll straighten you about your comment; "a country that has no real strenght".
mis-delivered #2: you guess Japan goes begging to China. Is the basis of your guess the wide-open naval arms race and mid-ocean territorial conflicts going on between Japan and China? China vs. the rest of its neighbors over sea control shows the lack of scope and scale in your analysis where you are dragging in "bar-talk" to talk up a PM point of view.
FYI: After 50 years of secrecy, the USA opened World War II records regarding the atomic bomb strikes on Japan. Japan was months from testing its own nuke when they were bombed in August 1945. When Russia declared war on Japan on August 9, another bad day for Japan, their first move was to seize Japan's nuke testing grounds in what is now North Korea. That was a measure of Japanese capabilities then; now the 18 year-olds graduating from Japan's high schools have the equivalent of a USA 4 year college education as the Japanese have never taken every summer off from school the way Americans do.
So I would never short Japan's strength, it's just really well concealed in things like chyrsanthemums.
and world polluting plutonium.
My comment on Japan going to China was a joke. Sorry if you didn't get it.
As for Japan's strenght, sure, call out a few industries where they have a competitive advantage and no doubts Robotics is one of them. But Robotics alone is not going to solve their massive problems which starts with very poor demographics, little natural resources, a PR/environmental dissater with the nuclear facility accidents, and industries that were once leaders (e.g., CE space with Sony and Panasonic) and now are laggards. But honestly, these problems are modest compared to the most pressing issue which is really a combination of two. First, the country's financial condition is beyond reason when evaluating and truly understanding its debt load. Japan is completely in uncharted water right now and has basically turned its bonds into currency. Really, what's the difference. Both can be printed endlessly. Both offer no collateral/security. Both yield basically nothing. The only real difference is that the Yen is used for retail transactions and bonds for wholesale transactions. Once the market finally realizes that the true size of the money supply in Japan is the combination of the Yen and the Bonds, me, you, or nobody else knows what the hell is going to happen.
Second is credibility, as in it is completely gone now with Japan's leaders and economy. A last ditch effort, never tried with an economy of this size, to spark some type of real economic growth. So brilliant, Japan elects to enter a pricing war with China, Asia, Europe, etc. Nobody is going to stand for lost marketshare without one hell of a fight. And the ultimate irony with all of this is based in that this type of monetary action may actually spark deflation (not inflation, one of the goals). If everyone is defending marketshare, look for aggressive pricing to take hold as to match the devaluing Yen. So everyone cuts, stimulates, and cuts again, at the same type ultra low interest rates and costs of capital as flooded into investments, resulting in over capacity. And so what is a business to do, cut prices to protect marketshare, make-up the lost earnings from price decreases from attempting to increase volume. Just ask the energy/oil industry how this working out.
Remember and when a price war breaks out, over the short-term, covering fixed/sunk costs become irrelevant as the only focus is covering direct variable costs and base operating expenses. So this cycle begins to spiral down, deeper and deeper until the weakest players are forced out, capacity adjusts to balance with supply and demand, and a floor is set. Doesn't matter if its a company, industry, of country, at some point and however painful it may be, this process will come full circle.
What Japan is doing is simply adding fuel to a raging fire, hellbent on achieving its goals, come hell or high water, and without regard for anyone else.
Sure, the robotics industry is a plus for Japan but from a business perspective, just one product line being offered to the market. What you need to do is focus more on Japan's real financial condition and understand basic financing to understand that it has no balance sheet left, no ability to produce cash flow to repay its massive debt load, and is simply tapping its last credit card before it is cutoff as well (i.e., the Yen and its perceived value in the market). The ulitimate crash of Japan may not happen next month, next year, or even over the next five years but eventually, its debt monster will eat it alive. Just like the US, Europe, and China will experience eventually.
My macro level point is very simple and applies to not just Japan but the western economies also. Debt, as in there's too much, income, as in there's not enough, leads to these type of CB actions. The only real question to solving this problem will be whether the CBs win and can inflate their way out of this mess through unprecidented levels of money printing or deflation takes hold and the debt bomb implodes on everyone. Inflate or default, its that simple. Four years ago, I thought inflation would win the battle but today, my position has changed. Defaults will occur (actually they've already started in South America) that finally rebalance the global economy once and for all.
Nobody reads yer long diatribes. Boring as hell.
Nobody reads yer long diatribes. Boring as hell.
Welcome to the New World Order - a global economy based entirely upon accounting fraud.
Why stop at 120? The way the country is going to hell in a handbasket, it should be at 220.
www.traderzoo.mobi
145 is realistic
This one sure did bring out the foil hats & bongs.
Welcome to the end of the comments!!
Once you eliminate the impossible, whatever remains, no matter how improbable, must be...
-- Arthur Conan Doyle
If Japan is going to print money to buy foreign stocks (including US), why shouldn't the Fed print money and buy Japanese stocks. May as well print and buy the whole country while the currency has any value at all.
So let’s take a look at this from a distance. A country, in this case Japan decides it wants to stimulate their economy further.
1.
Let’s print a lot of YEN
a.
Eurozone says wait, we’re poor and not doing so well, we’ll raise your print
2.
Let’s take our new-found printed wealth and buy assets (foreign and domestic)
a.
Other countries are going to stand idly by and let money created out of thin air buy our assets
i.
We’ve seen a 4 handle move in the YEN to over 112; but wait think Argentina; the YEN could go to 150 or 200 in the blink of an eye if the rest of the world does not believe in the exchange rate
3.
Let’s devalue our currency to become more competitive
a.
Being more competitive means exporting deflation on all other countries; beggar thy neighbor
In the old days the Bond Vigilantes would never have let this occur, but in the New Normal the levers are pulled by the Central Banks, until they’re NOT
Remember the unintended poorly though out plans of the past
1.
1987—portfolio insurance
2.
2000—dot.com = new normal = new revenue streams = great value
3.
2008 – 2009 houses as ATMs, real-estate never goes down, just figure out how to package and leverage the asset
4.
2014 We can just print our way out of any problem and suppress the risk profiles of interest rates and volatility – who cares in the only beneficiary is the banks and top 1%
This may not end with the elevator down, but a fall into the abyss.
China has been buying up real assets with their incredibly cheap looking fake Mao paper for years now. Our elite let's it happen as long as they get their share.
Dancing, woo! Woo! Made. So. Much. Money. Yesterday. Woo! And banked it. Actually, my robot did all the work. Thanks Bender. And Gain Capital. A round of sake for all! Once you understand Forex all the pessimism optimizes, Poopsie.
so much for interest rate hikes ... NEVER GONNA HAPPEN!
Once Germany’s budget deficit starts to rise sharply as a result of their recession the new mad balanced budget act will kick in
How dare they do the right thing. They need to be punished!
If the eurozone is expected to disappear into a black hole, and rightfully so I think, this chart isn't merely 'The Most Important Chart For Investors' but 'The Most Important Chart Of The Universe' to keep it in equal terms. (No pun intended)
For being the ultimate chicken-little-the-sky-is-falling website for so long, the deafening silence on the diarhhea-inducing-for-so-many-of-the-mutton-heads who-infest-this-website freefall happening in gold right now is a curious thing.
C'mon, there must be some way you can blame it on Obama.
Every FED-fed party celebrates with a golden crunch, so not mentioning it just "goes without saying".
Geruda,
You are looking at a glass half empty. I'm looking at a glass half full. I look at the freefall as probably the last opportunity to load up some PMs on the cheap. Why would anyone blame Obama for this opportunity?
Well I hope yer right cuz I got a sh&tload I bought when it was cheaper than this but about half what it was at peak. Didn't I see a warning on Kitco about not catching a falling knife. Better wear some kevlar gloves...
Geruda is a little pissant Chinaman that's been chased of Z/H many times over the last year.
Duh, so I should borrow money to buy assests since the value of the currency I borrow will be worth the price of a cup of flour in 6 months and will be an easy repay? What could possibly go wrong....Wong?
Why doesn't Obama bring back the Greenback.
Real currency has earned a few presidents a bullet.
According to Natixis FICC Research:
http://personal.crocodoc.com/SU8Hy8u
In reality, central banks control only the prices of the assets they buy directly
When a central bank buys an asset directly (often government bonds), it drives up the price of this asset, the demand for which increases.
But the prices of the other asset classes increase only if the economic agents that have sold the first assets to the central bank use the money received to buy these other asset classes.
This transmission of increases in asset prices to all asset classes is therefore unstable, since it depends on the behaviour of investors and savers. Since 2012, we have seen that central banks’ purchases first led asset sellers to buy risky assets (equities, corporate bonds), whose prices rose. But in the recent period, the rise in risk aversion has turned them away from risky assets, whose prices have fallen, and they have invested the money received from the central bank in risk-free assets.
There is therefore no stable monetary policy "risk channel"; the only asset prices that are controlled by central banks in the longer run are those of the assets that central banks buy directly. This could in the future push central banks to buy riskier assets if they want to change their prices in a stable manner.
Central banks’ asset purchases have a direct impact on the prices of these assets
When a central bank buys financial assets, it increases demand for these assets, which directly drives up their prices.
This occurred with purchases of Treasuries and ABS in the United States (Charts 1A and B) and with government bonds in the United Kingdom and Japan (Charts 2A and B), and with the announcement of covered bond purchases in the euro zone (Chart 3).
But the impact of the central bank’s asset purchases on other asset classes is uncertain
- The central bank buys assets (especially government bonds, Charts 1A, 2A and B above).
- It pays by creating money (Chart 4).
- The economic agents that sell assets to the central bank use this money to buy other assets. But they have a free choice: a quantitative easing policy will drive up the prices of the assets that economic agents choose to buy, not the prices of the others.
- We also saw from 2011-2012 until the spring of 2014:
• A tightening of credit spreads (Charts 5A and B, 6A and B);
• A rise in the stock market (Charts 7A and B, 8A and B).
- But investors’ risk aversion has risen since the spring of 2014, (Charts 9A and B): they no longer buy risky assets and the prices of these assets have corrected downwards, whereas long-term interest rates on risk-free government bonds have fallen sharply (Chart 3 above, Charts 10A and B).
Conclusion: The risk channel is not robust
The transmission of the rise in the prices of the assets the central bank buys directly to a rise in the prices of other assets is therefore unstable, since it depends on investors’ attitude and their risk aversion.
The "risk channel" is the mechanism through which the central bank’s monetary creation drives down risk premia.
We have seen that this mechanism is unstable: it functions only if economic agents use the money created by the central bank, in exchange for purchases of risk-free assets, to buy risky assets.
If their risk aversion rises, this mechanism disappears - and so does the risk channel. In that case, the only remaining possibility for the central bank is to buy risky assets directly if it wants to drive down their prices.
Sorry, OT...
ZH is absolutely dog gone amazing and predicts the future like no other. I remember about two years ago Tyler or someone else predicted the first Virgin Spaceship crash would cause unbelievable crash in civilian craving for space flight, and concomittant crash in ticket prices for civilian space flight travel.
Behold your first Virgin Civilian Space Flight Wreck: Read it and weap Virgin stock holders!
http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&u...
Maybe everyone else already knows this and has seen it for some time, but I have been thinking about all the talk of fiat, hyperinflation, reserve currencies, and the death thereof, etc. We all realize that the game for a long time has been debt-inflate......debt-inlflate......over and over. The danger of course, is when we deflate the currency and inflate prices to a level that is unsustainable and things get out of hand so that hyperinflation occurs.
I think there is something different this time. Maybe not totally differnet, but rather perfected or more efficient. This time we have the Fed, the ECB, and the BOJ all working together. They are three different currencies from three different countries, but are they working towards one goal?
When a currency is "valued" it is valued against another currency. So if the Yen is devalued the dollar and euro go up. Then the euro gets devalued through printing and the dollar goes up again. That gives the dollar room to print and devalue itself to the yen and euro. When it is all said and done, there are way more dollars, euros, and yen out there, but the perceived value is the same because the value is measured by ratios rather than volume. Now, it is impossible for this not to have an affect on prices.....around the world........in every "asset" class (except gold and silver for reasons we all know and understand). But by having three currencies working together instead of one, they can drag this inflation out for quite some time before it goes hyper. We have already witnessed this as the number of dollars has doubled in the last 6 years and we do not have hyper inflation.....yet. The number of yen and euro has increased dramatically as well, but the ratio of dollars to euro to yen is somewhat the same as it was back in 2000......would be my guess as I do not have the hard numbers.
I think the other thing that is "differnt" this time is the fact that we have never lived in a world economy facing fiat devaluation on steroids where 70-80% of the economy was made up of non-essentials. For hundreds of years the economy was built around essentials. Now the last thing on people's minds in this country is food, clothing, shelter, warmth, etc. Unless they are concerned about fads, taste, preference, or something of that nature. The economy of non-essentials is making it harder for all the hot money out there to drive prices up on consumers who are tapped out and are now paying rent on storage buildings to house all the crap they have and don't need. You have to increase wages/income if you intend to force people to keep buying what they don't need at higher prices in larger quantities. No way we get the inflation the Fed, BOJ, or ECB are trying to create to keep this ponzi scheme going unless they release that money to the public and out from behind the glass ceiling of the investment banking world.
Thing is, they realize it is easier to print the money and just be richer rather than filtering it through the economy and letting some of the little people retain any of it. Why hand out 100's and get back 60% when you can print 100's and keep 100%. This will continue to squeeze the middle class until there is none of us left. All that will be left is government dependency. Those too poor to live without gov assistance, and those too rich and maintain their riches through gov assistance. All will bow to Big Brother.
Of course none of this would have happened had the low-life, self-serving, bastards that we elected to Congress had not given the power to print and coin money to a private bank. That one thing explains everything about where we are today from a financial perspective. If you had a printing press in your basement and you could print all the money you needed, why would you give that printing press to your neighbor and start borrowing the money from him at interest? I'll tell you why......because you are the dumbest person the world has ever seen...........or...............you and your neighbor concocted a scheme whereby you could use that printing press to enslave your entire neighborhood and take everything your neighbors own. I'll let you decide what was the real reason.
How does this prognosis fit in with the BOJ play sending stocks to the moon :
http://www.businessinsider.com/raoul-pal-dollar-chart-2014-10
it has been a long time since i have said it, but deflation is NOT bad!!!!!!!!!!!!!!!!!!! it is the antidote to the politburo's idiotic voodoo economics. if we killed all the banksters then we would have neither deflation nor inflation.
Japan has no resources... a collapsed yen makes them very expensive as well as energy. China Russia BRICS have resources.. input costs much cheaper.
A too low yen ...kills the local population and also increased input costs doesnt make their exports as cheap and competitive with China as one would assume
Recently released minutes from the last Federal Reserve meeting confirmed growing concern about the pressure a stronger dollar is putting on other currencies around the world. Bottom-line is other currencies are under assault because both economies are weak and countries are buried in debt they can never repay at real market interest rates. When investors become unwilling to buy the bonds of heavily indebted nations causing the bond bubble to burst the values of currencies in those countries will tumble.
While there are not many Bond Vigilantes there are a slew of Currency Vigilantes and they are ready to make their presence known. Recent weakness in the value of the Yen, Pound, and Euro must not go unnoticed. The Currency Vigilantes are acutely aware of when a currency is overvalued or ready to be re-pegged and pounce on the weak currency to tear it apart. The article below questions just how stable the currency markets really are and may be a signal that currency trading is about to get very wild. Please note, this may also be sending a signal that the whole system is unstable and the stock market is about to drop like a stone.
Many people are looking for a "dis-inflationary crash" and it is possible or we may see money shift from bubble to bubble. I have pondered the possibility that what we are and have been going through is the "major deflationary period" before the storm. When we stand on the abyss central bankers will be forced to print so much worthless paper the money will act as a cushion to our fall but not change the reality. Before you discount this possibility that we will move directly into the final stage of hyperinflation consider that hyperinflation paves an easier transition to a replacement currency and a reset of the system.
http://brucewilds.blogspot.com/2014/10/fed-concerned-that-stong-dollar.h...
The deflationary force will continue to be fanned by the currency wars. Indebted economies shall bear the brunt. Deflation is bad for debts.
The real economies of Asia shall bear the brunt from China's inevitable response to Japan in the goods and services space. If you hold papers to the underlying goods and services, you are further exposed to bail outs, frauds in rigged markets atop of rickety legal regimes and brewing protectionism.
Markets are in space walks that are disconnected with the real economies. They are propped by the running taps of Central Banks under captive by the Predators who are Insiders.
Not bad for trading if you participate in the volatility and watch the liquidity and shut off the noises of market economists and analysts. Short term carry trades with Yen in $ Try are still pennies on the floor to be picked for the week ahead.
Chinese slowdown. If I had a penny for every failed Chinese slowdown prediction.....
Check some facts for yourself rather than parroting these dimwits. China ain't slowing down any time soon.
http://www.tradingeconomics.com/charts/china-gdp.png?s=wgdpchin&d1=20060...
http://www.tradingeconomics.com/charts/china-gdp-per-capita.png?s=chnnyg...
http://www.tradingeconomics.com/charts/china-wages.png?s=chinawag
Did The Ministry of Human Resources and Social Security specify any particular unit of currency? My suspision is that the growth in wages, is not of a homogenous nature.
Gross Domestic Product numbers notwithstanding.