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The "Panic Premium": Beyond This Level In The USDJPY, Japan Collapses
If all it took to push stocks to ever recorder(est) highs, granted on no volume, but recorder(est) highs nonetheless, was for correlation algos to pick a carry FX pair trade du jour which to push the Nikkei, or the Dax, or - most frequently - the S&P higher, then all equity indices would already been in scientific digit territory. And since they aren't, it is only logical that prosperity through currency debasement can only "work" for so long.
But how long?
Well, when it comes to the primary carry pair du jour, the Dollar-Yen, the answer may be just a few hundred pips more, before it all comes unglued for Japan's Prime Minister whose first stint in the role ended in a prophetic bout of epic diarrhea, Shinzo Abe.
According to a SocGen report authored by Alain Bokobza, released earlier today, all hell will break loose when the USDJPY, currently trading at 7 year highs north of 119, leaves 123 in the rearview mirror.To wit:
To leverage Abenomics in an investment strategy has clearly become more difficult as the balance between the fiscal and monetary policies remains unclear, making it a source of instability and pushing the yen into a very high volatility regime that prevents foreign investors from hedging at a reasonable price.
As long as the domestic bond market remains protected by central bank buying, and up to dollar/yen levels of around 123 (SGe end 2015), the equity market should continue to react positively (corresponding level for the Topix: 1,575).
Beyond that threshold, there is a risk that current correlations could break and change to those prior to 2006. A collapse of the yen (not SG’s central scenario) could then create a "panic premium" on Japanese assets, in which case the yen would fall much further still, putting JGBs at risk and sending the equity market sharply down.
And yet paradoxically, none other than that "other" SocGen strategist, Albert Edwards, correctly predicted back in September not only USDJPY 120 as the next key level for the Yen (months before Paul Krugman became Japan's de facto central bank head, a move the soon to be annihilated nation will forever regret), but a few weeks ago forecast 145 in the Dollar Yen as soon as Q1 2015.
In other words, the French bank not only just planted the bogey beyond which Abenomics loses control (because central planning really is, is a self-fulfilling prophecy), but is explicitly predicting precisely that.
Then again, a complete collapse in the world's third largest economy, in lieu of a global war, may be just what the Keynesian doctor ordered - just imagine the excuses the Fed would have to resume printing then: "we don't want to do push CTRL-P, but Japan's economic depression simply left us no choice..."
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Even the Japanese do not have a Yen for the Yen,.
An Asian guy walks into the New York City currency exchange with 2000 yen and walks out with $72. Next week he walks in with 2000 yen and gets $66. He asks the lady why he gets less money this week than last week. The lady says "Fluctuations". The Asian guy storms out, and just before slamming the
source: http://www.jokebuddha.com/Yen#ixzz3Km5Gr3tBdoor, turns around and says: "Fluc you Amelicans too!"
Ba-duum boom
What a down arrow? Where's your slense of hlumor?
BTW, to my asian brothers, I love your women. I only wish they loved me back, even for a short time.
Ai wantu a Japanesu waifu !
I love that joke. I tell it as being a broker and his Asian client and the "fluctuations" are stock market fluctuations.
He got a deal on both transactions. 2000 Y is only worth about $17.00.
And all you guys think the Japanese are stupid. Sheeesh.
Having challenges with the accent of a second (or maybe even third ) language is no measure of intelligence (positive or negative). Some people just have a natural skill for it but most people do not.
Also, misunderstanding is an essential part of a lot of humor.
I thought the joke was funny. I upvoted it. I guess my comment was seen as criticism to some people who seem to think they understand humor better than others but do not see the humor in my comment (Sheeesh wasn't a dead giveaway?).
That said, as regards your comment about learning a different language, the joke falls short for Japanese (maybe not for other Asians) as there is no "L" sound in the Japanese language, thus the broader joke about Japanese "Engrish." They say "herro" and "erectric." So the Japanese guy in the joke would not have heard "fluctuation" as "Fuck you Asians." But even if he did his response would have been "Fruc you Americans, too."
Still, thanks for the lesson in language and humor.
Good point, the Japanese are smart.
Not THAT smart. They still believe their government, and buy its bonds...
...said some eCONomist in 1955...
garbage.
Modern economics is a game of "mark to fantasy" and pushing paper amongst ourselves...
Look we are pushing more bullshit paper than you, hence, we have a larger eCONomy!!!
LMFAO!!!
Want to be in the G7, the G4, the G2? easy peasy, print and push more bullshit paper...
"winning"
+1 who could possibly junk what is so obviously true?
Someone who does not like Latinas?
NSA trolls or people that don't understand sarcasm.
Exactly.
“But I don’t want to go among mad people," Alice remarked.
"Oh, you can’t help that," said the Cat: "we’re all mad here. I’m mad. You’re mad."
"How do you know I’m mad?" said Alice.
"You must be," said the Cat, "or you wouldn’t have come here.”
– Lewis Carroll, Alice in Wonderland
$/yen should stabilize around infinity.
Along with every other fiat currency.
Wasn't there some hedge fund guy a few years ago who bragged about having a yen-denominated mortgage? Seems I remember people giving him a bunch of shit at the time.
Fuck Business Insider. Fuck Henry Blodgett. Fuck Joe Weisenthal. Bunch of cunts.
http://www.businessinsider.com/kyle-bass-yen-mortgage-2010-10
I guess I picked the wrong month to short the USDJPY.
Japanese used to save 50% of their income and keep it in the post offices. Wall Street advised them to put that money in stock market and they get robed.
It's okay. Japan Post Bank has been buying up JGBs with all of those deposits. They've been getting robbed for decades.
"robed" as in they are wearing The Emperor's New Clothes?
so if the yen goes down moar it will go down moar? brilliant!
That's why they get paid the big fiat. Thank goodness they were all bailed out so these big packages could still be afforded to retain this kind of talent.
Holy Shito!
No..
Fuckashit round-eye!
This time the Big Other is indifferent.
Looks like Japan needs an IMF stick save.
A collapse of the yen (not SG’s central scenario) could then create a "panic premium" on Japanese assets, in which case the yen would fall much further still, putting JGBs at risk and sending the equity market sharply down.
The problem with this scenrio is that people will realise this and front run it, i.e get out of the Nikkei or at least reduce their holdings just in case they get caught holding the bag, so I would expect to see the Yen down/ Nikkei up correlation slowdown if not reverse far sooner than the prediction, obviously both would feed on each other as well.....today for instance USJPY new high but the Nikkei has actually come off 70 points albeit from the corresponding new high
Exactly, so what we have here is even worse for the central planned markets, a hard cap on the USD/Yen carry trade.
japan's dead baby, japan's dead
Is there any deep wisdom here to justify four +5's and a +4? It looks like numerology to me, but then I only studied economics and physics, and never studied chaos theory.
I get it that the Yen's in trouble, the market is starting to fluctuate more wildly, it's going to go out of control soon and plunge into some kind of new regime, and youre graphs and lines are part of a conversation and technology for how to pick the moment. To my untrained eye this kind of analysis looks like Bacharat players trying to spot the trend in a randomly shuffled super-deck. But some of you actually make a living off this kind of bet, right? Is it just hunches, gussied up with graphics, or is there more to it? Has anyone explained why it works?
And if everyone understood how to do this, would it lose its value?
My question is: what's going on with the decreasing bang for the Yen? What's the dynamic squeezing down on the stimulus obtained from each Yen injected? And when does that go zero or negative? *That* would put a date on the utimate limit for this game, the event horizon. It must be soon. How do we know when it's been crossed?
145 yen? Watch it hit the 250 area.
Gundlach predicts 200 but without a date.
The unpredictible part of the timing is when the collapse goes parabolic.
When do the people who have actually stashed away cash to avoid banks decide to hold something physical?
And there goes the retirement.
About Japan, it seems that Fuckushima is totally forgotten.
We don't how the situation evolved, MSM doesn't speak about it anymore. WTF hapenned ?
Shit! I have like 8,000 yen that I brought home in 1970. Came back to the ship drunk and stuffed the 1000yen notes under my mattress.
USDJPY was about 330 then. I knew I should have sold them at 80 :)
J/k
the kyle bass trade: long usdjpy
CDS/Put opitons on global market indices