Peter Schiff On Japan's "Sock Puppet Kabuki" Market

Tyler Durden's picture

Authored by Peter Schiff of Euro Pacific Capital,

Sock Puppet Kabuki: Nikkei Today Parallels Dot-Com Bust

The Japanese stereotype of excessive courtesy is being confirmed by the actions of prime minster Shinzo Abe who is giving the world a free and timely lesson on the dangers of overly accommodative monetary policy. Whether or not we benefit from the tutorial (Japan will surely not) depends on our ability to understand what is currently happening there.

For now most economists still believe that Abe has stumbled upon the magic elixir of economic revitalization. His commitment to pull his country out of the mud by doubling the amount of yen in circulation, and raising the nation's official inflation rate to 2%, had conferred rock star status on the formerly bland career politician. But just one year after his first critical raves arrived, the audience is heading for the exits. As it turns out, the Japanese miracle may be a simple tale of confidence easily gained, and just as rapidly lost.

In many ways the 75% nine month rally in the Nikkei 225 (that began when Abe was elected prime minister in September 2012), and the subsequent crash that began on May 22, is not all that different from the turbocharged rally, and spectacular crash, that occurred in technology heavy Nasdaq more than a dozen years ago here in the United States.

At the time that (the company behind the iconic Sock Puppet) made its IPO, other high flying tech stocks had racked up 1000% gains. While investors scratched their heads, pundits offered reasons why common sense no longer applied to the new economy. We were told that valuations, revenue and profits no longer mattered. And to an extent that now seems absurd, the investing establishment bought into the insanity. But then a funny thing happened, investors woke up and realized that they had nothing but a handful of magic beans that couldn't grow a beanstalk. When the fog lifted, stocks plummeted...Wile E. Coyote style.

This time around investors in the Japanese market were similarly deluded by fairy tales. Leading economists told them that Japan could cheapen its currency to improve trade, use inflation to create real growth, increase prices to encourage spending, and drastically increase inflation without raising interest rates. In short, monetary policy was seen as substitute for an actual economy.

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Boris Alatovkrap's picture

Jacob Schiff was agent for Rothschild and financier backing of Bolshevik Revolution. Who is Peter Schiff?

malikai's picture

I believe a more important question one might ask is who is Irwin Schiff.

beachdude's picture

Why am I seeing the crap harry dent ads here?

MeelionDollerBogus's picture


firefox + adblock + noscript

no ads anywhere any page any reason. Ever.

EmmittFitzhume's picture

Watanabe and Bernanke will pump until the handle breaks off

Boris Alatovkrap's picture

Why is Central Banker to play with Female Sexual Stimulation Aid? And why is so rough?

Boris Alatovkrap's picture

Or is pump male anatomical enhancement device?

Unknown Poster's picture

Three card kabuki. Spend a shitload of money you don't have, and fire up the printer when the bills come due.

They trynna catch me ridin dirty's picture

Schiff: 1

Keynesian confetti throwers: 0

disabledvet's picture

typically gold is "the place to be" when an economy is entering into a massive deflation. why the exact opposite has been the case this time around will be debated by historians for centuries to come. i guarantee the price of gold is going lower...possibly much lower...from here. (3-400 bucks in US Super Dollars sound about right to me) we'll see if the Fed will take this spike in yields "lying down" (having helped create it) as they say or if they really are/were ready to plunge 75% of the US economy into the over-leveraged and wrong side of the boat speculation abyss (as in inflation trading when in fact there hasn't been ANY inflation since Day ONE.) the fact of the matter is this recovery has suddenly "and out of nowhere" become one of 5 and dime store variety. this is a MASSIVE game changer as this country has 100 billion dollar budgets at the State level "that now have to financed by a citizenry on a shoe string budget." time to find out just how bad the over-promising and over delivering really is.

Spitzer's picture

So you would be the guy holding onto Thai Baht when they had their "deflation" in 1997

You would be the guy holding Russian Rubles when they had their "deflation" in 1998

I know I know, this time is diffrent.


US super dollars are magic.

NidStyles's picture

Why is that you are always wrong dude? Seriously. Deflation? When has the supply of paper bennies ever shrank in the US? When? What about Yennies?

Spitzer's picture

The US hasn't posted a trade surplus since the Ford admin,

malikai's picture

I don't believe that. The US has been running the biggest fiat export industry the world has ever seen. And growth in this industry is huge!

LetThemEatRand's picture

Oh, I thought this article was about Bukkake theater.  I guess I need to go back to the article about gay marriage and get my kicks.  I'm sure I'll find someone there who will debate its merits with me all night.

Dr. Engali's picture

Don't waste your time. Gay marriage is old news. It's time to move on to our next distraction. Those NASCAR drivers have something against making right turns. I demand legislation. Ovals should be outlawed!

LetThemEatRand's picture

I'm pretty sure there is an election somewhere that will turn on this issue while our financial system does the 9/11 controlled pancake.

knukles's picture

Damn Doc!
I never thought of NASCAR as liberal!?!?!?!

Fucking rabbit holes....

Yen Cross's picture

     That looks like a finger puppet to me Tyler. ;-)

Cognitive Dissonance's picture

"Hey Mrs me pull a rabbit out of my hat." - Shinzo Abe

"Again?" - Mrs Watanabe

"Nothing up my sleeve. (Rip) PRESTO!" - Shinzo Abe

[Pulls a roaring tiger out of the hat.]

"Whoops. I've got to get me another hat." - Shinzo Abe

"I'm outa here." - Mrs Watanabe

Dr. Engali's picture

Hey stranger. I see I'm not alone in my love for Rocky and Bullwinkle. You ought to see my kids look at me when I sing the theme song for Tennessee Tuxedo.

Cognitive Dissonance's picture

For the last two weeks Mrs Cog and I have been transitioning to our Plan B residence......which is now our one and only Plan A. The list of things that need to be done is long and getting longer by the day. Out here where the cows out number people 10 to 1 and it's a mile trip just to get to the nearest macadam there is no popping down to the local hardware store for that needed screw or thingamajig. The pace is slow and the locals even slower. We are now officially on "Mountain Time"......which is just slightly faster than island time.

I'm OK. Really.......I'm OK. I'm hoping the healthy lifestyle keeps me alive long enough for the culture shock to wear off. :)

<Up here, if you ain't from around here then you're city people.>

Dr. Engali's picture

It's pretty nice once you get used to it. Just stay away from secluded places where you here banjos playing.

Cognitive Dissonance's picture

The locals seem friendly enough. But I can't seem to shake the feeling that I've been invited to supper and I'm the main course. ;))

Money Squid's picture

be sure to look up and wonder and the night sky. It has faded to sodium vapor yellow in the big city.

dunce's picture

I was a Rocky and Bullwinkle fan as well, but i lived alone and it was a guilty pleasure. I would never try to explain to anyone why it entertained me. I don't know if i would have changed channels had someone come to visit while they were on. Why should a grown man watch a silly cartoon?

DanDaley's picture

It was actually pretty sophisticated political and philosophical humor.  Great voices. I really loved it, but yeah, some people just don't get the whole package.

Xibalba's picture

Ever since dropping 2 nuclear bombs on them, Japan has just been another US state.  

JamesBond's picture

it's the rainy season here in japan and my futons need cleaning; there must be some irony in there somewhere....



Unknown Poster's picture

I'm confused. You have money in your mattress and it needs laundering?

Fish Gone Bad's picture

The irony is that in Japan, the fresh air is now INSIDE.

fonzannoon's picture

the CNBC interview with Schiff today was classic. the other guest had a moment of clarity that stunned everyone except Schiff because he was too busy talking to hear it.

fonzannoon's picture

I can't link it. it's linked twice in the other thread that summarized the bullshit market today. 4 mins in or something.

fonzannoon's picture

I am going to call him up on his radio show tomorrow and rip him a new asshole. That guest put it on a tee for him. Someone across from him finally yelled manipulation, and he was too busy trying to yell about inflation to get what just happened.

Temporalist's picture

I like how their position is that gold only went up after 2008.  That seems to be the MSM theme.  Oh and that the SGR is "historically" 30 to 1 (apparently in their limited 20 year time frame) but now that it's over 60 to 1 that's perfectly fine.

edb5s's picture

I wasn't lucky enough to hear any of the BS that was being spewed, but I did see a headline on CNBC today saying something to the effect of "former save havens: AAPL vs. gold."  I had a really good laugh about that one.

Dr. Engali's picture

It's good to see Peter Schiff get some live on the Hedge. He doesn't grace these pages that often.

Spitzer's picture

He has been lately

He has the sense of humor and the Austrian backround which is basically the pillars of ZH



donpaulo's picture

don't know how many of you actually live in Japan or have ever been there but getting your news from Schiff about Nihon is very amusing.


the LDP just won the Tokyo elections on very low voter turnout.


What does it mean ? ask Schiff