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Is The Bank Of Japan 'Managing' US Stocks Today?
Two months ago we showed, and explained in great detail, how in the new normal the role of gold is nothing more than a funding "currency" to allow the BOJ to sell Yen against it (on a borrowed basis, which is also why the LBMA halted reporting its GOFO data as of the end of February, as it would not be pleasant for the central bank cartel to demonstrate just how much institutional gold shortfall there developed following major BOJ interventions). So for all those who are curious what it looks like when the BOJ "enters the house", here it is...
Gold and USDJPY... peculiarly linked once again...
And where USDJPY goes, US equity markets are ignited...
As we detailed previously, it’s a clever trade from a cynical perspective...
A number of unpleasant ironies are immediately apparent:
- It is helping to drive up equity prices in the country with the most rapidly expanding credit bubble and credit bubbles don’t tend to have happy endings;
- It is simultaneously driving down the price of the ultimate safe-haven asset and thereby silencing price signals relating to market and financial system risk;
- It appears to be a leveraged trade, obtaining the leverage via ultra-low rates in the repo market. The latter is a source of systemic risk which is known to regulators but remains unaddressed; and
- The logical conclusion is that risk across the world’s financial system is even more under-priced than market participants realise and many believe it is woefully under-priced.
We are in a global credit bubble in which the multi-trillion dollar expansion of central bank balance sheets, their imposition of near zero (or even negative) interest rates and control of entire yield curves (directly or indirectly) are at the cutting edge.
This has encouraged more and more speculation in risk assets which, in many cases, is being enhanced by leverage and without a commensurate sense of heightened risk.
Japan is the “cutting edge of the cutting edge” of this expanding global credit bubble.
* * *
The coincidence of course is that there appeared a miracle bid in the JGB auction last night after the previous two auctions were dismal failures. It seems that confidence-inspiring 'management' has spilled over into today's US equity markets... how else do you explain the ramp this morning on absolutely no news whatsoever and Grexit ever closer?
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look at the 10 years JAPAN
oh my god !!
The really smart central bankers are printing money and surreptitiously purchasing gold. This drives down their currency and gives them real assets to have after the inevitable collapse. The smart CBs are also dumping more and more naked gold shorts on the market knowing that they will never have to cough up the real metal when the SHTF.
He who has the gold, makes the rules. Trade accordingly.
Imagine all the fiat it took and the DJ is only at 18k. In real terms (minus the devaluation of fiat in inflation terms) the Dow is at like 8k. In fact it hasn't really moved from the bottom in real terms, nothing has. Gold, oil, the lot, they just increased asset prices while flatilining the average wage.
This will end well.
> Japan is the “cutting edge of the cutting edge” of this expanding global credit bubble.
Sounds like an impeding 'financial' nuclear explosion
SEPIKU
dow 500K or bust!!!
Off topic but after watching "kill the messenger" the other day I thought this was interesting and worth sharing.....
http://www.paulcraigroberts.org/2015/02/04/editor-major-german-newspaper...
Come on Tyler, why are you showing us the manipulation without spoon feeding us the way to trade it. How am I to re-fund my account after thinking that Oct and Dec were going to be the big drops if I don't get the sure-fire trades? You're going to make me think on my own? Sheesh!
This will break hard in a bad way for the Japanese. They must hate gold as much as the Chinese.
They... will... lose...
What really gets me is how people talk of "independent" Central Banks. As I have put forth before the "US FED" ends QE and 2 days later the "BOJ" comes in with an insane level in % terms with more. Almost all "Independent" CB follow with negative interest rates, and yet somehow they are all "Independent." If I'm wrong it sure doesn't look like it, and if I'm wrong it would appear that the Japanese can print unlimited amounts of YEN to buy US, and European stock. Are you kidding me this is what the investment world has come to? Sounds like a ridiculous way to keep the "stock market" up. Just trying to figure out what happens when, through fiat printing Japans "independent" CB owns a majority of US based corporations.
Central Banks are independent of their nominal countries.
You must include AAPL in this equation. After all the iCar and well,,,, whatever.
"how else do you explain the ramp".... By now do they really need any splaining Lucy?
A few months ago the markets sold off ( for an hour or two) on news the markets may be rigged! Now they go up every day because everybody knows they are rigged... ...The times they are a changing.
So, the BOJ is bidding up the price of stocks in addition to the Fed? Seems like a win/win for me. If you study the Zimbabwe financial collapse you will conclude that the people who owned land, hard assets and stocks were the ones who preserved the value of their holdings.
At the top of the market bubble would be the time to buy hard assets and land with the stock gains to lock in our profit. So Tyler the thing we need most from you is when the top occurs. Any help there?
We've reached a few tops!
I suspect the Fed uses BOJ and ECB as their proxies for buying stocks. It would look bad to be buying actual stocks as opposed to 'supporting price stability' in currencies and futures. It doesn't mean that the Kevin isn't making the orders, just that the account that the shares of SPY are going into has someone else name on it and will never show up in any Fed paperwork. I like to follow some of the least liquid S&P components to see when there is outside support coming into the market. Those supposedly low beta stocks can leap up one or two percent in minutes when SPDR starts buying to cover the new shares being sold to the mysterious bidder. Fading the ramps can be profitable.
..except that they will announce emergency taxation on all cap gains.. we don't care what you buy with your proceeds, pay us our one time %60 tax on profits... bitches.
Oh and don't forget the new and improved 60% death tax waiting for you with all your documented paper profits.
Got gold?
So let me get this straight.
The BOJ borrows gold. They use the gold as collateral to back newly printed yen. They then take the newly printed yen and buy stocks, ergo the market goes up. The value of the yen goes down because of the flood of newly printed yen in the market. OK.
Two questions. Why does the BOJ borrow gold to print yen? Why don't they just print it?
Second question. Why does the price of gold go down if the BOJ is a big borrower? Are they the big short? Are they shorting paper gold to ensure a profit on the borrowed gold when they return it?
Inquiring minds want to know.
Icarus
“Why don’t they just print [new currency]?”
This addresses a fact of money “printing” that few seem to realize: all currencies and all bank reserves are issued into economic existence IN EXCHANGE FOR government debt (directly or indirectly).
Why is it done this way? I suspect that buyers of such government debt require some form of collateral before they will surrender $10,000 or $10,000,000 for a piece of paper. If they don’t perform this due diligence, they and their money will be quickly separated.
In the case of the dollar, that collateral, as indicated, consists of US Treasury debt (directly or indirectly), which are mere pieces of paper. If that’s all they are, they are worthless. So, what is important is, ‘What do such pieces of paper represent… what do they promise?’ They promise to collect confiscatory taxes from future generations of Americans to the point of extinction.
The dollar (currency and bank reserves), in other words, is the measure and means by which we, and our children and grandchildren, will be cannibalized – unless we take actions to protect ourselves (above links will lead you to such actions).
“It is… driving down the price of the ultimate safe-haven asset and thereby silencing price signals relating to market and financial system risk”.
I would say that is a very modest assessment.
What we are witnessing is a mass disregard of a major lesson of common sense, or verdict of history: ‘Failure to correct a problem only delays redress and multiplies penalties.’
In this case, “failure to correct” is the issuance of baseless currency and bank reserves; and redress will come incrementally as individual-by-individual realizes there are no counterparties on the other side of the contract evidenced by such currency and bank reserves.
What is the problem men refuse to correct… or even see?
It is the wide-ranging set of un-anticipated consequences spawned by governments’ attempts to guarantee checking accounts.
By these attempts, the government would seize a failed bank and guarantee all deposits up to, for example, $250,000; amounts over that limit would be lost.
This immediately created major problems for individuals and companies with larger deposits. A company with a “cash” (checking account) balance of $5,000,000 (add as many zeroes as you like), was suddenly at risk to lose very large amounts of money.
A relative stampede ensued as large depositors sought means to avoid these losses. A result was so-called zero-balance checking accounts (aka many names). By this operation, balances would be swept into US Treasuries at the close of business every day. Then, if the bank failed (was seized) after closing, the company would lose nothing.
Soon, there weren’t enough Treasuries to meet demand. This led to the huge demand for Mortgage Backed Securities (MBS) as alternatives to US Treasuries.
As a result of these operations, huge amounts of “money” disappeared from the so-called “monetary base”; which, formerly, consisted of paper currency and bank reserves. Pre-crisis of 2007, this “monetary base” stood at $0.9 trillion, as evidenced by the Federal Reserve balance sheet. The resulting invention of “cash equivalents” has ballooned to somewhere between $12 and $18 trillion.
So, in the time of some 7-8 years, the “money supply” has ballooned from $0.9 trillion to $15 trillion (approx.). What Price Gold… will give you more dots to connect.
What do you think lies ahead? That’s right: a hyper-inflation of the dollar to extinction; and it will take everything with it – on a planet-wide scale.
It's been going on since Abe was elected. The whole Japanese heirarchy has staked their future on the stock market going up as a way to divert from the real economy. What sense does it make that USD/JPY should drive the stock market? Yet, the correlation is incredible. But in broader terms:
(1) It is the implicit or explicit goal of every major central bank in the world to boost their individual stock markets to supposedly provide a wealth effect
(2) The central banks have unlimited fiat currency
(3) Stock markets are measured in fiat currency
= Stock markets go up regardless of any other external factors, metrics, or common sense. It's been the same since 2009 when the Fed made it perfectly clear that the stock market was now a policy tool. Just sit back, enjoy the ride and use your profits to buy things that are really valuable. It's not ending next week, next month or next year and will likely only end when there is rioting in the streets over inflation in some distant future. The market is going to hit numbers none of us could have believed even a year ago