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G0ldfinger

The YEN's counterintuitive rise

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I mean, the BoJ is printing like crazy, and you would think people would send capital overseas, rather than the other way round.

 

So, what do we see here? Is someone cashing in U.S. treasuries and buying Yen? Why?

 

EDIT: I should add, the standard theory seems to be that speculators are anticipating the liquidation of foreign assets in order to provide domestic capital for reconstruction.

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I mean, the BoJ is printing like crazy, and you would think people would send capital overseas, rather than the other way round.

 

So, what do we see here? Is someone cashing in U.S. treasuries and buying Yen? Why?

 

EDIT: I should add, the standard theory seems to be that speculators are anticipating the liquidation of foreign assets in order to provide domestic capital for reconstruction.

 

Wild guess here.

 

Asians are saving nations because they anticipate times when they will need money. All the corporations of Japan and the Government have saved/invested overseas.

 

They need 200B to rebuild Japan. So they sell their savings and buy Yen.

 

So many things fall in price as Japanese sell but their desired object is Yen.

 

Meanwhile to confuse the picture, uncertain times caused by potential nuclear disaster cause many other rich country savers to seek the safety of their own currency which they know and understand while they ride out the storm where the highest interest rates available in their own currency are in bonds.

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Yes, looks like repatriation of funds (Bringing Yen back home to pay for the quake and other disasters).

 

Does appear counterintuitive though when current situation.

 

Talk of imminent intervention from the big 5 central banks.

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Bo Peng has a few things to say.

My last crystal ball reading of market aftershocks from the tragedy in Japan has been mostly correct, in retrospect, with one big mistake: the Yen keeps surging. Apparently I underestimated the extent of Japanese repatriation, which has probably been sustained by the worsening of the nuclear situation.

 

FT Alphaville just posted a table listing overseas holdings by Japanese investment trusts. It doesn't provide any direct trading guidelines. For example, Japanese investment trusts own 7% of the Vietnam stock market, which has barely budged since the earthquake. But at least it provides a partial picture of the potential extent of the ongoing Great Japanese Unwind. Nobody knows how big the carry trade unwind by Mrs. Watanabe is. But it's prudent to assume that, given the high savings rate in Japan, repatriation may continue for awhile if the nuclear situation keeps worsening. Too bad for Japan Inc., since a strong yen is exactly what they don't need.

 

This changes the short-term (days) trade. If the situation improves, stocks would rebound strongly while the yen may drop; otherwise more of the same -- tanking stocks and surging Yen. Whether this will impact U.S. Treasuries or not remains to be seen.

 

But it doesn't change the longer-term outlook. Japan will surely go into recession, possibly a severe and painful one. And, since central bankers all over the world are 100% confident they can eliminate business cycles that are the healthy, evolutionary mechanism, self-correcting the fundamental flaws of the free market system, much like a forest fire, BoJ will continue printing their way into disaster. Where JGB has been at the peripheral of the bond vigilantes' radar so far, it will be at the center soon (could be in months). On this side of the pond, the Fed will of course continue printing as the economic fallout trickles in.

 

A big question is whether this unwind will be contagious and trigger a global one comparable to the panic in 2008. My answer is no. It is very unlikely that a nuclear meltdown, as terrible as it may be for Japan, would cause much global direct damage. A Japanese recession would have global implications, but it would come later and slower. Precious metals and commodities will enjoy strong support by the suicidal central bankers. Granted, commodities inflation driven by excess money will kill all economies; but that's of no concern for central bankers since their goal in life is to create inflation, and their inflation detector is designed not to detect any until too late.

 

A commodities rebound may be delayed compared to precious metals, though, because the supply-demand argument may cause some hesitation. But people have no choice other than to continue on the moronic, suicidal path of commodities inflation, driven by moronic central bankers around the world. No doubt central bankers are very intelligent people. Problem with very intelligent people is that they can screw up much bigger and for much longer than others are capable of.

 

And a few things we can say are not:

The earthquake/tsunami/nuclear-meltdown triple whammy is not bullish for Japan nor the world at large. It's hard to imagine a more idiotic argument.

The commodities market is not driven by supply-demand at the time-scale longer than days at most.

The yen's surge is not because it's a safe haven.

 

Disclosure: I am long GLD, PHYS, SLV, DBA.

 

http://seekingalpha.com/article/258629-the-great-japanese-unwind-and-how-it-will-play-out-globally

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Yes, looks like repatriation of funds (Bringing Yen back home to pay for the quake and other disasters).

 

Does appear counterintuitive though when current situation.

 

Talk of imminent intervention from the big 5 central banks.

 

This sounds like something else to nut out to get agreement!

 

It will not be Yen being brought back home. It will be overseas assets denominated in local currency that are sold to get local currency which is used to bid up the price of Yen. This means assets will fall in price overseas which should then encourage the currency traders who now hold dollars to reinvest the dollars in other currencies and assets.

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Bo Peng has a few things to say.

My last crystal ball reading of market aftershocks from the tragedy in Japan has been mostly correct, in retrospect, with one big mistake: the Yen keeps surging. Apparently I underestimated the extent of Japanese repatriation, which has probably been sustained by the worsening of the nuclear situation.

 

FT Alphaville just posted a table listing overseas holdings by Japanese investment trusts. It doesn't provide any direct trading guidelines. For example, Japanese investment trusts own 7% of the Vietnam stock market, which has barely budged since the earthquake. But at least it provides a partial picture of the potential extent of the ongoing Great Japanese Unwind. Nobody knows how big the carry trade unwind by Mrs. Watanabe is. But it's prudent to assume that, given the high savings rate in Japan, repatriation may continue for awhile if the nuclear situation keeps worsening. Too bad for Japan Inc., since a strong yen is exactly what they don't need.

 

This changes the short-term (days) trade. If the situation improves, stocks would rebound strongly while the yen may drop; otherwise more of the same -- tanking stocks and surging Yen. Whether this will impact U.S. Treasuries or not remains to be seen.

 

But it doesn't change the longer-term outlook. Japan will surely go into recession, possibly a severe and painful one. And, since central bankers all over the world are 100% confident they can eliminate business cycles that are the healthy, evolutionary mechanism, self-correcting the fundamental flaws of the free market system, much like a forest fire, BoJ will continue printing their way into disaster. Where JGB has been at the peripheral of the bond vigilantes' radar so far, it will be at the center soon (could be in months). On this side of the pond, the Fed will of course continue printing as the economic fallout trickles in.

 

A big question is whether this unwind will be contagious and trigger a global one comparable to the panic in 2008. My answer is no. It is very unlikely that a nuclear meltdown, as terrible as it may be for Japan, would cause much global direct damage. A Japanese recession would have global implications, but it would come later and slower. Precious metals and commodities will enjoy strong support by the suicidal central bankers. Granted, commodities inflation driven by excess money will kill all economies; but that's of no concern for central bankers since their goal in life is to create inflation, and their inflation detector is designed not to detect any until too late.

 

A commodities rebound may be delayed compared to precious metals, though, because the supply-demand argument may cause some hesitation. But people have no choice other than to continue on the moronic, suicidal path of commodities inflation, driven by moronic central bankers around the world. No doubt central bankers are very intelligent people. Problem with very intelligent people is that they can screw up much bigger and for much longer than others are capable of.

 

And a few things we can say are not:

The earthquake/tsunami/nuclear-meltdown triple whammy is not bullish for Japan nor the world at large. It's hard to imagine a more idiotic argument.

The commodities market is not driven by supply-demand at the time-scale longer than days at most.

The yen's surge is not because it's a safe haven.

 

Disclosure: I am long GLD, PHYS, SLV, DBA.

 

http://seekingalpha.com/article/258629-the-great-japanese-unwind-and-how-it-will-play-out-globally

great post LB :)

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So, is this the start of the Great Yen Carry Trade unwinding then?

 

I doubt it as we have already had a dose of that and the respons each time is massive printing by the BoJ. (And swaps with the Fed)

 

I think it may be:

1 a rush of foreign bargain hunters looking to pick up cheap stock.

2. burnt longs from overseas needing to fulfil their margin obligations..

 

I don't see this as long term trend.

 

I wonder what SteveNetwriter has to say?

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Goodness !

I suppose some here havent yet read my other threads?

(Perhaps some here are too bust ramping Gold to each other??)

 

It is obvious isn't it?

 

The Yen is rising now BECAUSE:

 

+ Japanese insurance co's and banks and individuals realise that they will need to have some Yen on hand to cover emergency and rebuilding expenses.

 

+ They are SELLING various assets around the world (since many of their financial holdings were outside Japan)

 

+ They are selling the currencies they received from those assets, and repatriating the money to Japanese yen

 

This selloff (and yen rise) will persist until they get enough yen to be comfortable. And the markets were so madly bullish, it has trigger some knock-on selling.

 

A longer term rise in the yen may happen if people think that Japan's need for capital will drive rates higher, and so some may be unwinding the yen carry trade in anticipation.

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OK, that sounds reasonable. So, indeed, it is money needed for reconstruction.

 

It is obvious isn't it?

EDIT: Who would be ramping gold? We're all "100% in", no need to ramp us up. :P

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OK, that sounds reasonable. So, indeed, it is money needed for reconstruction.

EDIT: Who would be ramping gold? We're all "100% in", no need to ramp us up. :P

LOL

Sorry. I over-reacted.

Gold will be fine, until it's not.

I do think there will be another sharp selloff at some stage, when the Dollar gets bid for a few weeks

 

That could be soon, if the dollar manages to avoid "falling off the cliff" near DXY-74-76

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... as posted on the Martensen ALERT thread...

 

Alert: Nuclear (and Economic) Meltdown In Progress

. . .

The substance of this alert centers on the unknown aftershocks that may result from the world's third largest economy, Japan, rapidly shifting from an exporter of funding to a consumer of it.

THIS SHIFT shows up as:

 

+ Japanese (companies, institutions, individuals) SELLING VARIOUS ASSET CLASSES:

xx

 

+ A Strong Yen (FXY): ... update

FXY.gif.jpg

 

(I circled the FXY upmove that happened in 2008.)

 

One important thing to keep in mind: In "emergency" times like this people shift assets in a hurry. What they are thinking about is: "What can I do to FEEL SAFER?" They are paying little attention to historic price relationships and fair valuations. They want to shift assets and do it in a hurry.

 

For those with cash and cooler heads, there are OPPORTUNITIES in times like these.

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This sounds like something else to nut out to get agreement!

 

It will not be Yen being brought back home. It will be overseas assets denominated in local currency that are sold to get local currency which is used to bid up the price of Yen. This means assets will fall in price overseas which should then encourage the currency traders who now hold dollars to reinvest the dollars in other currencies and assets.

OK :D

 

I think they are selling assets and using the currency they get paid to convert to Yen. So lots of people trying to buy Yen and up goes the price.

 

(Also some speculation going on).

 

Where does your opinion differ?

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OK :D

 

I think they are selling assets and using the currency they get paid to convert to Yen. So lots of people trying to buy Yen and up goes the price.

 

(Also some speculation going on).

 

Where does your opinion differ?

 

Your earlier wording suggested people held Yen overseas rather than foreign currency denominated assets.

 

So we agree.

 

There is still an issue with the control rods however. For example neutron flux can be limited to areas outside the positioning of the moderators and a pile of uranium only needs to have less than 50kg? to go critical versus the 152 tons in the reactor. By the way it appears these reactors did have convection cooling via the suppression pools which are in a doughnut around the base of the reactor pressure vessel and inside the containment vessel. Supposedly the large volume of the suppression pool was a safety feature - i suppose for a few hours only. I also found the manufacturers power flow map.

 

http://info.publicintelligence.net/Hitachi-ABWR.pdf

 

Page 17

 

If you want to continue please do so on the reactor thread

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Bubb has started quoting himself without explanation. I'm worried. Is he unravelling too? :(

 

..............................................................

great post LB

 

I'm always thorough with my C&P work.

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Goodness !

I suppose some here havent yet read my other threads?

(Perhaps some here are too bust ramping Gold to each other??)

 

It is obvious isn't it?

 

The Yen is rising now BECAUSE:

 

+ Japanese insurance co's and banks and individuals realise that they will need to have some Yen on hand to cover emergency and rebuilding expenses.

 

+ They are SELLING various assets around the world (since many of their financial holdings were outside Japan)

 

+ They are selling the currencies they received from those assets, and repatriating the money to Japanese yen

 

This selloff (and yen rise) will persist until they get enough yen to be comfortable. And the markets were so madly bullish, it has trigger some knock-on selling.

 

A longer term rise in the yen may happen if people think that Japan's need for capital will drive rates higher, and so some may be unwinding the yen carry trade in anticipation.

 

The same thing happened after Kobe in 1995. The $/yen fell from around 1 to around 0.8 and took 6 months or so to recover.

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The same thing happened after Kobe in 1995. The $/yen fell from around 1 to around 0.8 and took 6 months or so to recover.

Yes.

 

But how quickly did it strengthen so much (as the $ fell from 1.00 to 0.80)

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Bubb has started quoting himself without explanation. I'm worried. Is he unravelling too? :(

..............................................................

I'm always thorough with my C&P work.

Probably.

Late night last night, awaiting a chance to sell down my puts before Options expiry.

Tonight, I will catch up on lost sleep

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Yes.

 

But how quickly did it strengthen so much (as the $ fell from 1.00 to 0.80)

 

It took about two months. So if that precedent is any guide the current move is not over.

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So we agree.

 

Really? Cool :)

 

As for the critical mass, I guess they are talking about highly enriched (weapons grade) with such a small amount. 50kg was about the amount they had during Los Alamos IIRC. Apparently, Richard Feynman (my hero) carried it on a small private plane (separate hemispheres obviously).

 

PM me if you like as I don't want to derail either thread now (although I don't know how to do this now? Old dog, new tricks etc :rolleyes: ).

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