Another wild JGB ride last night.....
http://www.zerohedge.com/news/2013-04-10/usdjpy-plunges-bojs-kuroda-says-has-done-what-necessary-and-possible-now
USDJPY Plunges As BOJ's Kuroda Says Has "Done What Is Necessary And Possible For Now"
Moments ago BOJ's Kuroda hit the tape with remarks that did not make algos very happy:
- KURODA SAYS BOJ HAS DONE WHAT'S NECESSARY AND POSSIBLE FOR NOW
and yet:
- BOJ'S KURODA PLEDGES ALL NECESSARY STEPS FOR 2% INFLATION
- KURODA SAYS MONETARY POLICY NOT AIMED AT AFFECTING YEN RATE
Algos appear confused: will the BOJ do more to hit the 2% inflation target, or, as the first bullet suggests, is it tapped out? For now, they shoot first and ask questions later, sending the S&P500 carrying USDJPY lower by 60 pips in a matter of milliseconds.
In tried and true Eurocrat copycat fashion, we expect a refutation and clarification saying he did not say what he just said any moment now...
| Name | Yield | 1 Day | 1 Month | 1 Year | Time |
|---|---|---|---|---|---|
| JGB 2 Year Yield | 0.13% | +2 | +8 | +2 | 01:59:00 |
| JGB 5 Year Yield | 0.26% | +6 | +15 | -4 | 01:59:00 |
| JGB 10 Year Yield | 0.58% | +6 | -6 | -37 | 01:59:00 |
| JGB 30 Year Yield | 1.46% | +8 | -24 | -47 | 01:59:00 |
Change shown in basis points
from Bloomberg.......
http://bullmarketthinking.com/secretive-devaluations-government-bails-out-of-its-own-currency-ahead-of-the-citizenry/
( A look at what has happened in Venezuela with their currency is what we could see - not as grande of a scale naturally , in Japan as Japan actively seeks to not just devalue their currency but also force savers into spending due to distrust of the yen holding its value. Needless to say , a dangerous game. )
Secretive Devaluations: Government Bails Out Of Its Own Currency Ahead Of The Citizenry
April 3, 2013 | By Tekoa Da Silva
I came across an interesting story yesterday, translated from a Caracas-based news publication. It indicated that for the second time in only five weeks, the Venezuelan government has devalued its currency.
Unlike the first devaluation however, the second was done behind closed doors with local financial interests placing bids on dollar exchange transactions ahead of the country’s citizenry.
Caracas reporter VÃctor Salmerón states that, “Two devaluations have been implemented in the last five weeks so as to obtain more bolivars per petrodollars…the forex rate was cut [devalued] by 46.5% from VEB 4.30 to VEB 6.30 per US dollar.”
Salmerón adds that in the most recent devaluation,“Sicad did not reveal the price of the US dollars sold in the bid launched on March 26, [but] financial sources have said that companies paid VEB 11.00-14.00 per US dollar—that is twice the [previous] rate.” [ie. another 50% devaluation]
There are a few interesting things to note here. The first is that the Venezuelan government and a few financial interests are dumping their local currency behind closed doors ahead of the populace they’ve been elected to serve.
Secondly, the country is devaluing against a currency which is already “devaluing” when measured against gold.
After reading that piece yesterday I ran some numbers on the devaluation declines. Here’s what I found:
-The Venezuelan Bolivar has lost 82% of its value against the US dollar since 2005.
-The US Dollar has lost 75% of its value when measured against gold since 2005.
So how far has the Venezuelan currency actually declined in real terms when measured against gold? The chart will shock you.
With the help of Nick Laird over at Sharelynx.com, I was able to put together a chart of the Bolivar vs gold, which includes this week’s suspected, “behind closed doors” devaluation of their currency against the USD:
(click to enlarge)
The chart shows that when measured against gold, the Venezuelan Bolivar has “collapsed” from Bs. 860 in 2005, to what appears to be over Bs. 20,000 today. This represents an over 23-fold move (2300%) in gold over the last eight years.
In response to the recent devaluations, Venezuelan citizens have stampeded their way to retail and electronic stores, buying any goods left in sight with their post-plundered-pieces-of-paper currency(PPPP’s if you will).
Among the swarming herd unfortunately, were many families and senior citizens, which due to economic & educational challenges are always the last to respond.
One thing we can be certain of however, is that holders of physical gold, silver, and producing real assets have not been fighting for places in line following these devaluations.
——
Final Point: Unless you like waiting hours (or days) in line for the distribution of low-quality, high-priced basic necessities (food, water, clothing, etc.), then consider adding to personal stocks of hard assets with absolute precision.
——
Final Point: Unless you like waiting hours (or days) in line for the distribution of low-quality, high-priced basic necessities (food, water, clothing, etc.), then consider adding to personal stocks of hard assets with absolute precision.
Enjoy the article? Please support the site by sharing this URL page link with friends, family, and your favorite chat forum.
Thanks,
Tekoa Da Silva
Bull Market Thinking
Tekoa Da Silva
Bull Market Thinking
and....
http://www.zerohedge.com/news/2013-04-09/kyle-bass-perplexed-golds-low-price
Kyle Bass Is "Perplexed" At Gold's Low Price
- Ben Bernanke
- Central Banks
- Greece
- Hayman Capital
- Housing Market
- Insurance Companies
- Investment Grade
- Ireland
- Japan
- Kyle Bass
- Kyle Bass
- Monetary Base
- Monetary Policy
- recovery
- Risk Management
"The stress is beginning to show," Kyle Bass warns during a wide-ranging interview with Bloomberg TV. "The beginning of the end," is here for Japanese government bonds as he notes that while quantitiavely it is clear they are insolvent, "the qualitative perception of participants is changing." But away from Japan specifically, there is a lot more on the Texan's mind. "Things go from perfectly stable to completely unstable," very quickly; even more so after 20 years of exponential debt build-up and Keynesian cover-ups; and it is this that he warns complacent investors that it is "really important to think about the capital at risk in your strategy." For this reason he prefers to hold gold rather than Treasuries, as, "when you think about the largest central banks in the world, they have all moved to unlimited printing ideology. Monetary policy happens to be the only game in town. I am perplexed as to why gold is as low as it is. I don't have a great answer for you other than you should maintain a position." His discussion varies from housing's recovery to structured credit liquidity "money is being misallocated by the printing press" and the future of the GSEs, concluding with the rather ominous, "at some point in time, I would much rather would own gold than paper. I just don't know when that time is."
Bass on Japan:
"I actually think it's the beginning of the end... When you have 20 years of pro-cyclicality of thought manifesting itself in the way that it has in Japan…I am not naive enough to think I can predict the end of a 70-year debt super cycle with any kind of precision, but looking at the changes in the qualitative perception of the participants is something that I think is key to the situation and we saw a big change on Friday.""When I started sharing our views more globally it was the middle of 2010 and I said I believe the stress would begin to show itself in the next three years. Pretty much three years in, we're close, and the stress is beginning to show. Maybe that was luck at the time, but now when you ask the timing--look everyone wants the crystal ball and it's really difficult to predict this, but what you can do is follow where I think the stresses are going to show in the marketplace, but more importantly, you have to get into the heads of the participants because they all have a collective sense of fatalism. When you do the quantitative analysis here, you know they are insolvent.Everyone who owns the bonds knows they are insolvent. It's a question of how long they can hang on. What changes their views are a multitude of variables, but it's really important to follow any change in those views. When you see things like Argentina, Greece, Cyprus, Ireland, Italy--you see how fast things go from perfectly stable to completely unstable. In this case I think it will happen more quickly because of the 20 year buildup."
On Hayman Capital having strong performance overall when it has a trade that, even if it's right, takes a while:
“When we think about the globe, I think about positioning. When you invest in a fiduciary like myself or someone else, you want someone that has the courage of their convictions. You want someone that is not particularly dogmatic. And if they are, you want to think about risk management. It is really important to size things properly. So far, knock on wood, I think you have to be as thoughtful as you can possibly be on the construct of the position and not set yourself up for many years of losses until something like this happens.”"It's really important to think about the capital at risk in your strategy and the construct of how you put these kinds of hedges into place. We have 90+% of our money is long--long U.S. structured credit, U.S. mortgages, U.S. stocks--the majority of our capital is long."
On structured credit and the importance of being very liquid in the long side:
“Believe it or not it's really liquid right now. With Bernanke pinning rates at zero and the entire world continues to chase yield. Our indices are being led by utilities and things that don't particularly lead us into new highs, it's because of their dividend yield. So the whole world continues to chase yield. Structured credit and even mortgage credit are one of the most liquid areas in the marketplace today. People can't get enough of them. Even in subprime credit, 97% of the 20,000 line items are still rated below investment grade. They're still junk. The ratings-based buyers aren't even there yet. The money is being misallocated by the printing press."
On gold:
“We have always had a position in gold. When you think about the largest central banks in the world, they have all moved to unlimited printing ideology. Monetary policy happens to be the only game in town. I am perplexed as to why gold is as low as it is. I don't have a great answer for you other then you should maintain a position.”
On George Soros' recent statements that he’s losing interest in gold:
“George has been a much better investor than I over the years. When you think about the global monetary base, it is north of $70 trillion. All the gold in existence is around $7-8 trillion. There might be $1.2-1.3 trillion of investable gold. At some point in time, I would much rather would own gold than paper. I just don't know when that time is.”
On whether he'd rather own gold than U.S. treasuries:
“I do. If something happens in Japan like we think it is going to happen, I think U.S. Treasury nominal yields will go negative in a flight to quality. maybe gold moves up and Treasuries actually get much stronger for all the wrong reasons, not as an endorsement of U.S. fiscal policy because it is the only place money has to go... If monetary policy is the only game in town, we are all in for a world of trouble. That is the way we see it.”
On residential mortgage-backed securities:
“That investment is working...The various concentric circles surrounding housing not getting worse, which is how we think about it. We are not expecting it to get materially better, just not to get worse. The services sectors, the new mortgage insurance companies, the things that are actually asymmetric investments you can make around the housing market not worsening are where the majority of our long side of our portfolio is.”
On the future of Fannie and Freddie:
“I have no clue... We decided to just exit, thinking about them when you meet with both sides of the aisle, they both want a bullet in their head. Typically when that happens you get a bullet in your head. The second thing we were thinking about, if you remember there was a proposal to start raising the g-fees. There is a way for the U.S. Treasury to get paid back all of the money they've pumped into Fannie and Freddie if they start raising g-fees."
http://www.zerohedge.com/news/2013-04-09/guest-post-japan-vs-newton-and-certain-lose
Guest Post: Japan Vs. Newton (And Certain To Lose)
- Bank of Japan
- Bond
- Borrowing Costs
- Chris Martenson
- Guest Post
- Japan
- Monetary Base
- Nikkei
- Volatility
- Yen
Submitted by Chris Martenson of Peak Prosperity,
Conventional thinking and reporting has it that Japan is conducting a larger version of the same monetary experiment they’ve been running for about 15 years. The implication here is that we can safely analyze what Japan is up to through the same monetary lens, as always, but with a slightly wider aperture.
By now, we are all familiar with the details. Japan has initiated a program of monetary expansion that goes by the shorthand of 2-2-2. In two years, the Bank of Japan (BoJ) will fully double the monetary base as it seeks a minimum of 2% inflation.
In the aftermath of this announcement, the yen weakened by a whopping 8% against the dollar, the Nikkei stock average vaulted up by roughly 10%, and the $10 trillion Japanese government bond market had to be frozen twice because of intense volatility.
In truth, what Japan is running is as much a massive social experiment as it is a monetary experiment. It has such enormous implications to everyone, but especially the Japanese people, that we should all be paying very close attention.
Creating Inflation
The basic formula for creating inflation involves more money and credit chasing too few goods. Whether this is more goods (just not enough to match the growth in money and credit), the same amount of goods, or even fewer goods is not important. What matters is that there is more money and credit than goods.
On this front, so far, so good. Japan is going to fully double (!) the monetary base in just two years. In any tidy, mathematical world where economics is governed by linear, rational processes, this doubling of the monetary base would result in inflation.
Unfortunately, the real world is not very tidy.
The monetary base is really an abstraction that refers to the amount of money that the banking system has available to pyramid into a greater number of loans. As I am sure you have figured out by now, simply having more money in the system will not automatically result in more money chasing goods.
In fact, without a good reason to borrow and then spend that money, those new funds may well just sit in the banking system chasing nothing related to real goods and services in the real economy. Instead, that money will simply chase financial assets such as stocks and bonds.
The BoJ knows this, and yet their plan revolves around the idea that they can create inflation by simply doubling the monetary base. Does this mean they are confident that there is pent-up consumer demand that was stymied by a lack of cheap funds from the banking system?
The very short answer is ‘no.’ The BoJ knows perfectly well that more base money will do nothing to stimulate additional inflation via consumer demand, and they know this because Japan has had rock-bottom borrowing costs for a very long time.
The Real Target – Trust
So if the BoJ already knows that more base money will not lead to the buying of more goods and services, then what is their plan for stoking inflation?
The answer is both simple and somewhat upsetting: They are targeting people’s trust in the yen. The idea is simple to understand, as inflation requires that people prefer to hold ‘things’ instead of money. That is, the preference for money is diminished and the preference for real things, perhaps anything other than money, is elevated.
If enough people decide that holding money is a losing proposition, they will favor consumption instead. The way to get people to favor things instead of money is to debase their confidence in money. So people’s trust in money has to be targeted, and this is, indeed, the BoJ’s target.
The sad part of this story is that the BoJ is seeking a 2% (minimum) inflation target under the theory that higher inflation will be good for the economy and therefore Japanese businesses and therefore Japan.
The problem is that there are multiple reasons that prices might rise. Some of them are beneficial to these inflationary aims, and some of them are destructive. For example, if prices rise because people lose confidence in the yen, and prices rise because imports cost more, then this simply hurts consumers at the benefit of exporters.
In short, there is no net societal gain. The accounting identity in play here is that one entity’s loss is another entity’s gain. If consumers and importers have to pay more for imported goods simply because the yen has fallen in value, then all we have to work out is who gains. Exporters gain, by and large, as do other sectors.
That’s just the way these things work – it is not possible to engineer a gain where everybody benefits because one sector’s deficit automatically becomes another sector’s gain. It is simply Newtonian physics. For every force, there is an equal and opposing force – only the forces are economic and involve gains and losses.
The form of inflation that Japan hopes to stoke involves the kind where money currently stored in Japanese bank accounts comes roaring out into the Japanese economy. The BoJ is willing to harness the import/export losses as a useful means of convincing the local businesses and populace that the yen is just not a safe store of value.
So the basic plan that the BoJ has put into motion is to ruin local faith in the yen. It is actively targeting trust, a necessary component of any fiat-based currency, under the twin theories that it knows what it is doing and will know when to stop.
The problems are that I am pretty sure they will succeed beyond their wildest hopes and that nobody at the BoJ has any experience in massive social engineering experiments.
Conclusion
The BoJ is not just running the largest monetary experiment in their history, but also the largest social engineering experiment.
Trust is an essential component in every economy and for every currency. The BoJ has just upped the ante by explicitly and specifically targeting trust in the yen. Perhaps they know what they are doing, and we certainly hope so, but I happen to think it is playing with fire.
There really aren’t any guidebooks for it to follow, and even if there were, it is doubtful that the economists in charge would have been required to study them during their academic training and political careers.
If the notion of your pilots flying blind bothers you, then you are probably not very happy or confident with the BoJ’s actions here. Were I a Japanese citizen, I would immediately convert my yen holdings to something, anything, else. Swiss francs, gold, dollars – anything (!) would be preferable to me here.
Once your central bank declares war on its own currency, this is just the prudent thing to do.
For everyone else, Japan is now the largest economic Petri dish on the planet and is well worth studying for what happens next.
The early results, with a manic pulse in the Nikkei coincident with arrhythmic gyrations in the Japanese government bond market, suggest that something has been shaken loose in Japan.
Trust, perhaps?
http://www.zerohedge.com/news/2013-04-08/yen-surges-japans-deputy-pm-says-excessive-yen-gain-corrected
Yen Surges As Japan's Deputy PM Says Excessive Yen Gain "Corrected"
The circus continues. For this evening's entertainment, the country Deputy PM Taro Aso explains the "excessive JPY gain has been corrected," upon which USDJPY instantly strengthens 40 pips reversing all the post-US0-close JPY weakness. Of course, the market reaction was evidently enough for him to swallow his words and 'retract' his comments mere moments later. At the same time, the BOJ declares:
- *BOJ MEMBERS AGREED JAPAN'S ECONOMY STOPPED WEAKENING
While their optimism is welcome, facts (as they often do) stand tall in the face of their rhetoric as Japan's Macro index and manufacturing new orders (to name just two recent data points) do not even show second-derivative green shoots. And for the third and final act of this evening's early debacle, 30Y JGB yields have slammed 9bps higher (as JGB Futures prices look set for another halt).
The Bottom is in?
The Bottom is in?
What happens when Aso opens his mouth...
ruining the 100 target the world had for 2am... (maybe push it back to 3 or 4am)...
and it looks like we are set for another JGB Futures halt as long-dated Japanese bond yields are blowing higher once again...
and 20Y even more volatile...
and just to add to the fun - SGX entire futures exchange down.... Mini JGB's and Nikkei 225 yet to open on
SGX...
SGX...
Of course " ASO " has been known to put foot in mouth......
http://www.guardian.co.uk/world/shortcuts/2013/jan/22/taro-aso-japanese-politician-hurry-die
Taro Aso: the Japanese politician who wants older people to 'hurry up and die'
The finance minister is known for his straight-talking, otherwise known as unpleasantness
Email
Japanese finance minister Taro Aso: 'A real tells-it-like-it-is merchant.' Photograph: Yoshikazu Tsuno/AFP/Getty Images
Age: 72.
Appearance: Look at the picture, peasant!
Excuse me? Deaf as well as stupid, are you? Try getting your ears syringed. My taxes will be paying, after all.
I won't talk to you if you're going to be so rude. Oh relax. People often find me abrasive to begin with, but you'll soon be won over by my rogueishly forthright manner. Think of Silvio Berlusconi in Italy, Boris Johnson in London, or Taro Aso, finance minister – and former prime minister – of Japan.
I get it. Aso is a straight talker, is he? A real tells-it-like-it-is merchant? You could say that. He comes from a rich family, holds strong conservative views, and rather enjoys airing them.
What fun. His latest caper was on Monday, when he told a meeting of the national council on social security reforms that the problem of expensive geriatric care "won't be solved unless you let them hurry up and die".
The wag! But perhaps he was quoted out of context? Nope. The context is him calling anyone too ill to feed themselves "tube people", and saying: "Heaven forbid if you are forced to live on when you want to die. I would wake up feeling increasingly bad knowing that [treatment] was all being paid for by the government."
I expect most people who want to die have bigger worries than the state's medical bills. So do I.
And this is just Aso's latest wheeze, is it? That's right. A sprinkling of highlights would include: his aspiration, as economics minister in 2001, to make Japan a place where "the richest Jews would want to live"; his comment that Japanese colonial rule of Taiwan was the explanation for its "significant improvement in educational standards and literacy"; his decision to emphasise a point on comparative rice prices by saying:"Even someone with Alzheimer's can see which of 16,000 and 78,000 is the more expensive."
And that's just a sprinkling? I'm afraid so. "It's part of his character and there may be more to come," a party spokesman explained sadly,after another Aso outburst in 2008. "It is my job to try and make everyone understand what he really meant."
Do say: "How many Japanese voters are over 60?"
Don't say: "Only about 30 million."
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