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Perishabull

How (and why?) did we miss the great bull market in the Yen?

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Too busy watching Gold?

 

I remember when I suggested buying Swiss Frances at around $0.90 (on FBB) it was met with apathy

 

What next?

 

Food maybe?

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Not many were taking deflation seriously, and thinking about getting liquid in core currencies such as gold, Yen and dollar. Too many fiat money fantasies. :lol:

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Too busy watching Gold?

 

I remember when I suggested buying Swiss Frances at around $0.90 (on FBB) it was met with apathy

 

What next?

 

Food maybe?

The SNB has made it clear that the Swissie is just another fiat - a trading op, nothing more.

 

Uranium and potash look quite promising now, in addition to Au and Ag.

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I didn't miss it. B) I remember p'ing myself laughing watching the yen gain during the financial crisis, at one point on the 24th October 2008, it gained about 5 percent against the pound in less than 7 minutes. I have been thinking that the yen has been siginificantly overvalued for a while, and now finally the long-term technical charts are looking significantly negative for the yen, but only after going higher than I ever expected it would.

 

The next currency bull market? I quite like the look of the norwegian krone and indonesian rupiah as well as some east european currencies like the czech koruna and polish zloty.

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Too busy watching Gold?

Yes, sorry.

 

The SNB has made it clear that the Swissie is just another fiat - a trading op, nothing more.

Yes. Similalry the Yen, I can't trust something that is printed into existence in overdrive, while the fundamentals are erroding. Short term trading op, that's why I have to pass.

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It looks like the yen bull market is at an end. Here is a daily chart of the yen going back to June 2011, the two big BoJ devaluation attempts of the past year are clearly visible. What is interesting is that this move upwards has happened during the London markets, the BoJ likes to devalue at atbout 2.30am European time. The GBPJPY chart tells a similar story, a clear break upwards above the 25 day MA, my favoured MA for the pair, happening during the London hours.

I shall be adventurous and set a target of 85 for the USDJPY this year, although this pair has been absolutely tortuous for the last nine months or so, daily ranges of 12 and weekly ranges of 60 pips don't exactly make for a rollercoaster ride.

post-6456-0-06270600-1327411508_thumb.png

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"The yen weakened against all of its 16 major counterparts after Japan posted the first annual trade deficit in 31 years, stoking concern the country’s fiscal health may deteriorate."
Business Week

 

If the trade account remains in deficit, it could have worrying implications for the country’s current account balance – the sum of trade and investment balances, representing Japan’s overall surplus of cash.

 

Many fear that if the trade deficit continues to widen, the investment surplus could be insufficient to cancel it out, leading to an overall deficit on the current account.

 

Such a development would have huge implications for bond and foreign-exchange markets, as Japan would become a net capital importer. The fiscal deficit, on the margin, would be financed by foreigners. Warning signs may be there."

Ft.com

 

Japan is in deep serious trouble the moment it enters a sustainable period of negative or neutral current account balances. If Japan becomes dependent on foreigners to finance rollovers on its debt either the Yen sinks or interest rates rise. Interest rates at a mere 3% would currently consume all of Japan's tax revenue. [...]

 

This is a moment of truth for Japan, perhaps the first of many. The question at hand is critical: Is the trade deficit a new trend or simply the long-lasting spillover from the tsunami?

 

Today's answer may be different than tomorrow's.

Mish's comments

 

I reckon that the conditions are in place for a fundamental change / shift all things concerning Japan (bonds, Nikkei, Yen etc.) but I wouldn't hazard a guess to all possible consequences.

 

Surely the ongoing strength of the Yen must already have had quite a damaging effect on the competitiveness of the export-based Japanese economy, and a lot of companies appear to move or have moved productive capacities abroad or closed facilities. I wouldn't say this is a trend that can easily be reversed even if the Yen now started reversing its trend and moved into a period of relative weakness. Add to that the damaging effect of the tsunami and its effect on the ability of Japan to maintain its energy needs.

 

This is not looking good!

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Funny, isn't it.

By the time a move is widely recognised, it may be done.

 

Here's the Yen (FXY) versus Japanese stocks (EWJ)

 

Japanese Yen---- (FXY) ... update

fxy.png

Japanese stocks (EWJ) ... update

ewj.png

EWJ - more detail

ewj.png

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Have never seen that yen futures indicator before.

 

Latest weekly USDJPY chart here, we are already halfway towards my target of 85 and it is looking super-bullish to my eyes.

post-6456-0-06845300-1329996221_thumb.gif

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Funny, isn't it.

By the time a move is widely recognised, it may be done.

 

Yes, is there a Freudian slip implicit in the title? I had thought about that, after I started the topic, that the title implies that the bull market has been missed and is therefore over...

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OK, now we're rocking with the yen making new yearly lows against the dollar last night and even the pound approaching levels not seen against the yen since early August last year. Going by purchasing power parity I think a fair value would be around 140-145 yen to the pound, but I don't see that level in the near future, maybe 133 is a good target for this year.

 

Edit: Surely this is a thread about the bull market being over, as the thread title implies?

 

Edit 2: "Former MOF Official Says Yen Still Too Strong"

 

http://www.bloomberg.com/news/2012-02-24/former-mof-official-says-yen-still-too-strong.html

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Article (in German)

 

Interesting charts in the linked article. Japan still has a positive real interest rate (10y bonds).

 

There is also some correlation between the Nikkei and Dollar/Yen, meaning if the yen weakens there should be a positive impact on Japanese stocks. That's something quite a few people have been saying for a while. However, when inflation picks up and real interest rates become negative this relationship tends to break down, as it did, for example, in June 2008.

 

Japanese stocks are undervalued, and have been so for years. At the moment I think this may be a sweet spot for investing but perhaps one that may not last long!

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Chris Martenson on FSO

 

Suffice to say he's not particularly optimistic on Japan.

 

For those who are in a hurry today, the bottom line is that Japan is in serious trouble right now and is a top candidate to be the next black swan. Here are the elements of difficulty that concern me the most, each one serving to reduce Japan's economic and financial stability:

 


  •  
  • The total shutdown of all 54 nuclear plants, leading to an energy insufficiency
  • Japan's trade deficit in negative territory for the first time in decades, driven largely by energy imports
  • A budget deficit that is now 56% larger than revenues (!!)
  • Total debt standing at a whopping 235% of GDP
  • A recession shrinking Japan's economy at an annual rate of 2.3%
  • Renewed efforts underway to debase the yen

As I wrote a shortly after the earthquake in March 2011, Japan is facing an economic meltdown. If it is not careful, it may well face a currency meltdown, too. These things take time to play out, but now almost exactly a year after the devastating earthquake of 2011, the difficulties for Japan are mounting -- as expected.

 

Conclusion

 

It is a very big deal that Japan is slipping into negative trade territory for the first time in three decades. Last spring I was writing about how the global flow of funds -- the massive tide of liquidity sloshing back and forth -- involved Japan to a large degree. Japan was the hub of a massive carry trade, was buying huge amounts of US Treasurys and, in general, was a vast emitter of liquidity flows to the world.

 

With its reconstruction costs and now with its trade deficit, Japan becomes a net consumer of funds. In other words, the flow of funds reverses. This represents, at the very least, a change to the global liquidity tide charts.

 

In Part II: Implications of a Collapsing Japan, we lay out the case for how close to the brink of economic crisis Japan truly is, and why the country is likely to stumble faster and further in 2012 than the shaky situation in Europe that is currently grabbing the world's attention.

 

Make no mistake. A material retrenchment of the Japanese economy will have profound impact across the globe. One notable example: If Japan has to stop buying US Treasuries to direct capital to its domestic needs or -- even worse -- begins selling Treasuries for the same reason, the Federal Reserve will have to put its printing presses into overdrive to make up the gap.

 

Got gold?

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"Make no mistake. A material retrenchment of the Japanese economy will have profound impact across the globe. One notable example: If Japan has to stop buying US Treasuries to direct capital to its domestic needs or -- even worse -- begins selling Treasuries for the same reason, the Federal Reserve will have to put its printing presses into overdrive to make up the gap.

 

Got gold?"

 

In the short run: Don't feed the Rampant monsters

Got Dollars?, preferably HK$ or C$ ?

 

Gold outperformed inflation, now maybe some other assets will do that.

Keep an eye on those Gold shares: http://www.greenenergyinvestors.com/index.php?showtopic=16074

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Cough cough :)

 

I remember when I was suggesting gold and Yen. GBPJPY was 248.

I expected a huge reversal of the carry trade that had built up.

 

Now it's just gold and silver :)

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Cough cough :)

 

I remember when I was suggesting gold and Yen. GBPJPY was 248.

I expected a huge reversal of the carry trade that had built up.

 

Now it's just gold and silver :)

Did you grab some yourself, Steve?

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Did you grab some yourself, Steve?

 

Hi Michael :)

Of course, I remember racing around like a fly being chased by an electric fly swat, trying to convert from GBP to Yen as fast as I could arrange it, a couple of weeks before the 248 GBPJPY top, and I remember suffering from vertigo as the chart then DROPPED like a pallet of gold falling off a cliff :)

I missed the very bottom though, but as they say, it's the main move that matters, not the 10% at either end :)

 

Obviously (well to my way of thinking) the Yen exchange rates have a limit on how far they can go (unless something very drastic happens), as with all the main crosses, so it became time to get out of Yen and just sit on the safer long-term gold and silver.

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THEN

 

TheYen.png

 

and now...

 

JY_zpsa5da76d3.png

 

 

 

Funny, isn't it.

By the time a move is widely recognised, it may be done.

 

 

Yes, is there a Freudian slip implicit in the title? I had thought about that, after I started the topic, that the title implies that the bull market has been missed and is therefore over...

 

 

Exacto...

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