Is the short bet on the Yen over? Well, maybe not when it comes to trade vs. the Dollar. But as far as other weaker currencies, that's a different story. As it relates to the Euro, then indeed, the long bet on the EUR/JPY might be over. And here's the reason why.
Inflation might be coming back
That's a rather straightforward statement, but the Bank of Japan believes that inflation is inching higher. And while it's not as clear-cut a case a, let's say in the US, still there is a basis for it. When calculating Japan's inflation, excluding volatile prices such as food and energy, inflation gained 0.6%. Now, while that's still low, it's a move in the positive direction.
Moreover, a quick look at the inflation figures per segments and you can see most segments have experienced price increases. That is a mildly hawkish sign. It must be pointed out that the BOJ is about to change the way it measures core inflation. Going forward, the BOJ will publish core inflation figures, calculated both with and without energy prices. However, the BOJ will focus on core inflation excluding energy prices. Previously, by including them, it distorted the inflation figures into the downside. Continue reading "Are All Yen Bets Off?"→
Over the past few weeks, the Yen has been softer against its European peers, e.g. the Euro and the Pound Sterling, as risk appetite gradually made a comeback. Yet against its American peer, the US Dollar, trade has been rather subdued. The Dollar and Yen, the world's most sought after safe haven currencies, move generally in tandem. Because investors have had some difficulty choosing the front runner between the two, it has resulted in a sideways moving USD/JPY pair. The combination of a soft patch in the US economy and uncertainty over Japan's economic future has also made it difficult for some market movers to assess the next trajectory for the Yen. Yet, in either case, that is still a mere projection with no tangible evidence (yet) to tilt sentiment either way, in favour of the Yen or in favour of the Dollar. However, that might soon change; moreover, the reaction in the USD/JPY could be abrupt, swift and for some, devastating. Continue reading "JPY Set For An Abrupt Move"→
Alan Greenspan gave them the playbook (Credit & Debt Manipulation 101) and now Ben Bernanke and global inflators everywhere have taken the ball and run with it in new, innovative and levered up ways. Actually it’s a game of Whack-a-Mole and they play it well, these inflating moles. The minute you think you’re going to drop the hammer on one of their heads, he’s gone and another one pops up elsewhere.
So how can we follow all the data points that hands-on, manipulative policy has introduced and forecast conclusions with accuracy? The answer is that it is difficult in the short-term, but in the long-term we are all dead anyway, so we might as well use some inflationary bubbles of the past as a road map to what may be ahead.
There are currently several bubbles (and one anti-bubble*) in play over varying time frames. These bubbles are the direct result of policy actions. Last weekend we reviewed the bubble in Japan’s Nikkei in relation to its policy-induced crashing of the Yen and then last week wouldn’t you know that the Yen caught a bid and the Nikkei suffered an incredibly bearish day? Continue reading "Whack-a-Mole (Japanese Nikkei is the Latest Bubble)"→
Despite the recent market correction threatening the four-year bull market, investors should be partying like it's 2006.
Easy-money programs from the world's central banks and a recovering global economy could push stocks and other assets higher. So why is the comparison to 2006 relevant?
September 2006 was two years before the collapse of Lehman Brothers and a 28% drop in the markets in the span of less than a month. And two years is about the amount of time we may have until the next great market crash.