• Tag Archives Japan
  • Now China’s Curve

    This is a syndicated repost courtesy of Alhambra Investments. To view original, click here. Reposted with permission.
    Suddenly central banks are mesmerized by yield curves. One of the jokes around this place is that economists just don’t get the bond market. If it was only a joke. Alan Greenspan’s ‘conundrum’ more than a decade ago wasn’t the end of the matter but merely the beginning. After spending almost the entire time in between then and now on monetary ‘stimulus’ of the traditional variety, only now are authorities paying close attention. Last September the Bank of Japan initiated QQE with YCC (yield curve control). The ECB in December altered its QE parameters to allow for what looks suspiciously like a yield curve steepening bias. And the Fed in its last policy statement declared its upcoming intent to think about balance sheet runoff that, as my colleague Joe Calhoun likes to point out, is almost surely going to be favored in the same way.
    Central bankers spent years saying low interest rates were stimulus. They have yet to explicitly correct their interpretation, preferring the more subtle approach of instead altering their operations as noted above. As I wrote back in December.

    This post was published at Wall Street Examiner by Jeffrey P. Snider ‘ June 20, 2017.


  • Global Equity Markets Firmer As Oil Stabilizes, Greece Gets Bailout Money

    (Kitco News) – World stock markets were mostly higher overnight. Crude oil prices are firmer today, which helped out the equities. Also, Greece’s creditors approved another release of bailout money for the indebted country, which assuaged European investors. U. S. stock indexes are pointed toward slightly higher openings when the New York day session begins.
    Gold prices are modestly up in pre-U. S. market trading, on a technical and short-covering bounce from solid selling pressure seen earlier this week.
    In overnight news, Russia’s central bank cut its key interest rate by 25 basis points. The Russian ruble rallied on the news.
    The Bank of Japan held its regular monetary policy meeting Friday and made no major changes in its policy.
    The Euro zone’s consumer price index for May was reported down 0.1% from April and up 1.4% from a year ago. The numbers were right in line with market expectations but down from the European Central Bank’s target rate of around 2.0% annual inflation.

    This post was published at Wall Street Examiner on June 16, 2017.


  • Global Liquidity Reaching a Tipping Point

    ICYMI! Global #liquidity is close to its tipping point! pic.twitter.com/jqrOoaexHo
    — jeroen blokland (@jsblokland) June 16, 2017

    This week the Fed announced that they are going to begin reducing their $4.2 trillion balance sheet starting this year. Here’s what Louis-Vincent Gave at Gavekal Research said about this yesterday (see Louis-Vincent Gave on Tech, Fed Balance Sheet, and More):
    ‘In our system today, there are four central banks that matter a lot and have a disproportionate impact on global markets: the Fed, the Bank of Japan, the ECB, and People’s Bank of China. Starting from really six months ago, we’ve gone from zero central banks tightening to now two, because (in addition to the Fed) the Chinese central bank is also tightening.’
    Here’s an updated chart from Moody’s illustrating where central banks across the globe are currently, showing, as Louis says, US and China tightening while Japan and the ECB maintaining a loose policy stance (h/t @SoberLook):

    This post was published at FinancialSense on 06/16/2017.


  • Gangsters, Grandmothers and Gold: Japan’s New Crime Wave

    Sometimes the perpetrators are gangsters. Sometimes they are rather less accustomed to the criminal life. In one case, the ringleader of a middle-aged, female crime ring was said to be a 66-year-old woman.
    An old-fashioned crime is experiencing a resurgence in Japan: gold smuggling. The authorities say they are contending with a startling rise in the amount of gold being brought illegally into the country. The smugglers – an array of professional criminals and enterprising amateurs – profit by dodging import duties and taxes, in some cases worth millions of dollars. Arrests have jumped 40-fold in just a few years.
    The smuggling has gained national attention because of a spate of high-profile episodes, including a brazen gold robbery by thieves dressed as police officers; the seizure of multi-million-dollar gold cargoes from fishing boats and private jets; and the foiling of the smuggling ring the police have said was organized by a 66-year-old housewife.
    Crime rates in Japan are among the world’s lowest and have been falling further as the population ages. But some nonviolent crimes, like shoplifting or embezzlement, have remained more common than other offenses – say, murder or armed robbery.

    This post was published at NY Times


  • The Fate of Britain – Is This Why Cable Goes to Parity?

    We have prepared a very important special report on Britain in the wake of the British election. This special report covers the forecast for the British pound (otherwise known as cable or sterling) against the dollar, euro, and the Japanese yen. Additionally, this covers the long gilts and the share market. We have also addressed the rising tensions once again in Northern Ireland that may reignite violence.

    This post was published at Armstrong Economics on Jun 16, 2017.


  • Fractional-Reserve Banking and Money Creation

    According to traditional economics textbooks, the current monetary system amplifies initial monetary injections of money. The popular story goes as follows: if the central bank injects $1 billion into the economy, and banks have to hold 10% in reserve against their deposits, this will allow the first bank to lend 90% of this $1 billion. The $900 million in turn will end up with the second bank, which will lend 90% of the $900 million. The $810 million will end up with a third bank, which in turn will lend out 90% of $810 million, and so on.
    Consequently the initial injection of $1 billion will become $10 billion, i.e., money supply will expand by a multiple of 10. Note that in this example the central bank has actively initiated monetary pumping of $1 billion, which in turn banks have expanded to $10 billion.
    But in a world where central banks don’t target money supply but rather set targets for the overnight interest rate (e.g. the federal funds rate in the United States and the call rate in Japan) does this continue to make sense? Additionally, in some economies like Australia banks are not even compelled to hold reserves against their deposits. Surely then the entire multiplier model in the economics textbooks must be suspect.

    This post was published at Ludwig von Mises Institute on June 17, 2017.


  • The Next Economic Crisis Is Going To Leave The Majority Of People In Shock – Episode 1307a

    The following video was published by X22Report on Jun 15, 2017
    EU has decided to put Greece further into debt. It is becoming clear that Greece will never get out of this debt hole. 70% of the people support the BREXIT. Canada’s existing home sales has declined rapidly. Bitcoin dropped on worries about cyber attacks and regulations. Nike cutting 1500 people. The US manufacturing industry declines once again. Illinois is worse now than back in the great depression of the 30s. Bloomberg’s Mike Cudmore says the Fed has just pushed us into a recession, what he really means a collapse of the economy. Japan has decided that they will look into joining China’s belt and road trade system. The Fed is now pushing the collapse is not holding back, most of the people are going to be shocked when this hits.


  • SWOT Analysis: Gold’s Strength Is Justified Says UBS

    Strengths
    The best performing precious metal for the week was palladium, up 5.10 percent. Grant Sporre, an analyst at Deutsche Bank, noted there is a genuine physical tightness in the market, but the spike had all the hallmarks of someone being caught short and being squeezed. Bullionvault’s Gold Investor Index, which measures the balance of client buyers against sellers, rose the most in two years reaching a high of 55.3 in May versus 52.1 in April, reports Bloomberg. In India, gold imports jumped fourfold in May to 126 metric tons from 31.5 metric tons in the same month last year. In a report by the World Gold Council, consumption in India could climb dramatically this year as a ‘simple’ nationwide Goods Services Tax will boost the economy, making the gold industry more transparent to benefit buyers, reports Bloomberg. Amid unease over a congressional hearing on possible links between Russia and the Trump campaign, holdings in SPDR Gold Shares (the world’s largest gold-backed ETF) climbed to the highest this year on the back of safe-haven demand, reports Bloomberg. In the two weeks through the end of May, hedge funds and other large speculators boosted their bullish bets on the precious metal by 37 percent, notes another Bloomberg article, the most since 2007 according to government data. Japanese investors sold a record amount of U. S. debt in April, reports Bloomberg. ‘Political turmoil in Washington and uncertainty about French elections pushed down Treasury yields, diminishing their attractiveness,’ the article continues. Japanese investors cut holdings of U. S. debt by $33.2 billion in April, the most in data going back to 2005, according to a Ministry of Finance balance-of-payments report.

    This post was published at GoldSeek on 12 June 2017.


  • Apple Slides After Mizuho Downgrade, Price Target Cut

    Suddenly the penguins knives are out for the world’s biggest company, and exactly one week after Pacific Crest downgraded Apple to “Sector Weight” and a $145PT, perhaps a harbinger of what was to come later in the week, overnight another bank, Japan’s Mizuho, has also taken the machete to its own growth forecasts of Tim Cook’s juggernaut, and downgraded the iPhone maker to neutral from buy, cutting the price target from $160 to $150, claiming the best case scenario is now priced into the shares.
    Of course, the analyst is merely the first of many price and momentum chasers who has adjusted his sentiment based on what the market does, and after last Friday’s tech sector drubbing we expect many more such downgrades in the days to come.
    Here are the summary highlights from Lamba’s note:
    We are downgrading Apple to Neutral from Buy while adjusting our PT to $150 from $160. The stock has meaningfully outperformed on a YTD basis and we believe enthusiasm around the upcoming product cycle is fully captured at current levels, with limited upside to estimates from here on out. Our sensitivity work indicates bull case EPS of around $11 which, along with a cycle-peak multiple, indicates limited upside to the stock. Our LTVC work suggests more muted gains as well. As such, we move to the sidelines despite our expectations of a strong iPhone 8 cycle

    This post was published at Zero Hedge on Jun 12, 2017.


  • China’s ‘official’ gold reserves unchanged for 7th straight month — Lawrie Williams

    Latest reports from the People’s Bank of China for May indicate that the World’s No. 2 economic power has kept its official gold reserve unchanged – at 59.24 million ounces (1,842.6 tonnes) – for the seventh successive month. Indeed China’s officially reported gold reserves have remained unaltered since the Chinese renminbi (or yuan) was confirmed as an integral part of the IMF’s Special Drawing Right (SDR) back in October last year. Currently the Chinese currency accounts for 10.92% of the basket of currencies which make up the SDR – the others are the US dollar 41.73%, the Euro 30.93%, the Japanese yen 8.33% and the pound sterling at 8.09%.
    The IMF notes on its website that the SDR was created in 1969 as a supplementary international reserve asset, in the context of the Bretton Woods fixed exchange rate system. A country participating in this system needed official reserves – government or central bank holdings of gold and widely accepted foreign currencies – that could be used to purchase its domestic currency in foreign exchange markets, as required to maintain its exchange rate. But the international supply of two key reserve assets – gold and the US dollar – proved inadequate for supporting the expansion of world trade and financial flows that was taking place. Therefore it was decided to create a new international reserve asset under the auspices of the IMF.
    Although the idea was to create a new reserve currency as defined by the SDR basket, the composition of which is reviewed every five years, the inclusion of a currency in the basket does lend a degree of acceptance as a potential reserve currency in its own right, which is presumably why China was so keen for the renminbi to become part of the SDR basket. To help achieve this the Chinese central bank began to announce monthly additions to its gold reserves in the interests of transparency. Prior to that it had only announced its gold reserve increases at five or six year intervals saying that this additional gold, which it then moved into its official reserve, had been held in accounts which were outside the purview of its gold reserve reporting to the IMF.

    This post was published at Sharps Pixley


  • How gold can rescue pensions

    The World Economic Forum, in conjunction with Mercers (the actuaries) recently estimated that the combined pension deficit currently stands at $66.9tr for eight countries, rising to $427.8tr in 2050. The eight countries are Australia, Canada, China, India, Japan, Netherlands, UK and US. Of the 2016 figure, $50.5tr is unfunded government and public employee pension promises.
    Yes, we are now talking in hundreds of trillions. Other welfare-providing states missing from the list have deficits that are additional to these estimates.i
    $66.9tr is roughly 1.5 times the GDP of the eight countries combined, and $427.8tr is nearly ten times. Furthermore, if we take out the non-productive government element, the figures relative to the private sector tax-paying base are closer to twice productive GDP today, and thirteen times greater in 2050. That 2050 deficit assumes a 5% compound annual growth rate. This is a linear projection, but the deterioration in finances for unfunded government pensions may turn out to be exponential, in line with the accelerated increase in the broad money quantity since the great financial crisis.
    The problem is mainly in the welfare states, so we know that the welfare states are in big trouble. Governments routinely offer inflation-protected pensions to state employees, funded out of current taxation. The planners in government treasury departments are coming alive to the scale of the problem, though the politicians would rather ignore it. Government finances are already being subverted by both unfunded pension obligations, and by additional rising healthcare costs for aging populations.
    Furthermore, people are living longer. Someone born in Japan ten years ago who retires at 60 can expect to live to 107, leaving the state picking up a forty-seven-year welfare and pensions bill. And it’s not much less expensive in other countries, with 50% of North American and European babies born in 2007 expected to live to 103.
    The global dependency ratio, those in work relative to those in retirement, is expected to deteriorate from 8:1 to 4:1 by 2050. When most people retire, they stop paying income tax and become a burden on the state welfare system. Therefore, retirement ages must rise. Not only must they rise, but they must rise by enough to pay for those who are otherwise fit but mentally incapacitated by dementia, Alzheimer’s and Parkinson’s, set to spend the last decades of their lives expensively kept.
    That is the background to a global problem. But we shall just say ‘poor taxpayers’, and move on. Instead, this article focuses not on the problems of funding state pensions (which is admittedly 75% of the problem), but is an overview on why the current low growth, low interest rate environment is so detrimental to private sector pensions.

    This post was published at GoldMoney on JUNE 08, 2017.


  • Central Banks Now Own Stocks And Bonds Worth Trillions – And They Could Crash The Markets By Selling Them

    Have you ever wondered why stocks just seem to keep going up no matter what happens? For years, financial markets have been behaving in ways that seem to defy any rational explanation, but once you understand the role that central banks have been playing everything begins to make sense. In the aftermath of the great financial crisis of 2008, global central banks began to buy stocks, bonds and other financial assets in very large quantities and they haven’t stopped since. In fact, as you will see below, global central banks are on pace to buy 3.6 trillion dollars worth of stocks and bonds this year alone. At this point, the Swiss National Bank owns more publicly-traded shares of Facebook than Mark Zuckerberg does, and the Bank of Japan is now a top-five owner in 81 different large Japanese firms. These global central banks are shamelessly pumping up global stock markets, but because they now have such vast holdings they could also cause a devastating global stock market crash simply by starting to sell off their portfolios.
    Over the years I have often been asked about the ‘plunge protection team’, but the truth is that global central banks are the real ‘plunge protection team’. If stocks start surging higher on any particular day for seemingly no reason, it is probably the work of a central bank. Because they can inject billions of dollars into the markets whenever they want, that essentially allows them to ‘play god’ and move the markets in any direction that they please.
    But of course what they have done is essentially destroy the marketplace. A ‘free market’ for stocks basically no longer exists because of all this central bank manipulation. I really like how Bruce Wilds made this point…

    This post was published at The Economic Collapse Blog on June 7th, 2017.


  • “Investors Should Be Petrified” Of The Coming Ice Age: Here Are Albert Edwards’ Scariest Charts

    Congratulations to Albert Edwards who this morning announced that he has once again placed first in the 2017 Extel Survey of analysts in the Global Strategy category, for the record 14th year in a row. As he adds “it is particularly gratifying that clients still seem to highly value our thoughts, especially during these cyclical intermissions in the Ice Age, when equities outperform government bonds.” This year’s victory appears to have been especially hard won because as he adds “you have to have a thick skin in this business, especially when our press office forwards our online press cuttings. Some of the reader abuse can get very, very personal. How do they know this stuff about me? The comments surely can’t all be from my former partner!”
    Of course, this being Albert, not even his record victory can brighten up the mood much, and the SocGen strategist then adds that “the current QE-inflated, cyclical equity bull market may have gone on way longer than we expected, but equities have only just managed to catch back up with global 10y+ government bonds (see chart below). The secular equity bear market will inevitably reassert itself and that performance chasm will open up again.”
    So, inspired by the record victory, Edwards is briefly reprising some of his favourite “Ice Age” charts, traditionally a source of rationality in an otherwise insane market, and lately, world.
    * * *
    The macro underpinning for our Ice Age thesis is the West’s slow replication of Japan’s 1990s descent into outright deflation. Each cyclical recovery sees lower highs in both inflation and nominal GDP growth rates and the inevitable recession, when it comes, wreaks increasing levels of havoc in financial markets.

    This post was published at Zero Hedge on Jun 7, 2017.


  • OECD: World Is Still Locked in a ‘Low-Growth Trap’ with Rising Inequality

    The Organization for Economic Cooperation and Development (OECD) just released its latest economic outlook which it sums up as ‘better but not good enough,’ noting that, since the financial crisis of 2008, global growth remains ‘below past norms and below the pace needed to escape fully from the low-growth trap.’ Projecting a modest pickup in global growth to 3.5 percent this year, the authors write:
    ‘After many years of weak recovery, with global growth in 2016 at the lowest rate since 2009, some signs of improvement have begun to appear. Trade and manufacturing output growth have picked up from a very low level, helped by firmer domestic demand growth in Asia and Europe, and private sector confidence has strengthened. But policy uncertainty remains high, trust in government has diminished, wage growth is still weak, inequality persists, and imbalances and vulnerabilities remain in financial markets. Against this background, a modest pick-up in global GDP growth is projected this year to 3 per cent, with an upturn in trade and investment intensity and improving outcomes in several major commodity producers.’
    The OECD’s outlook for the United States is GDP of 2.1 percent in 2017 with an uptick to 2.4 percent in 2018. That compares with OECD projected growth in the Euro area of 1.8 percent in both 2017 and 2018 while Japan is expected to grow at 1.4 and 1.0 percent, respectively, in 2017 and 2018.

    This post was published at Wall Street On Parade By Pam Martens and Russ Marte.


  • What Can We Learn from Japanese Gangsters?

    If government regulations are squeezing your business, and you want to avoid the risk inherent in the mainstream financial system, what do you do?
    Buy gold!
    This is true even if your business is – shall we say – not completely above board.
    In fact, Japanese organized crime is reportedly turning to gold as its traditional revenue streams are squeezed by stepped-up law enforcement. Deutsche Welle reports gold smuggling and theft have risen sharply, particularly in southern Japan.
    Obviously, we don’t want to get involved in organized crime, but can we learn something from these Japanese gangsters?
    Jake Adelstein is an expert on Japan’s underworld. He said the country’s organized crime groups, known as ‘yakuza’ have found gold to be a lucrative income stream in recent years. The sudden surge in gold smuggling provides evidence of this trend. Japanese customs detected only eight attempts to smuggle gold into the country in in 2014. That number increased to 294 last year.
    Gangs across the country are desperate for new sources of income after the police began a crackdown on their more traditional sources of income around five years ago. In years gone by, the ‘yakuza’ earned their living largely from extortion and protection rackets, but the new legislation has effectively eliminated those revenue streams. So they have been casting around for a new way of making a living, and the gangs that are dominant in southern Japan have clearly recognized the opportunities that lie in gold.’

    This post was published at Schiffgold on JUNE 6, 2017.


  • SocGen Angered By “Stupidly Strong” Correlation Between Yen And Treasury Yields

    In a world where stat arbs do most of the trading, and where central banks set the prices, everything is a correlation of a correlation of a correlation, and as we have not tired of pointing out since 2010, virtually every correlation starts with the USDJPY, the preferred funding vehicles for BOJ intervention in capital markets, as well as an indicator of Japanese pension fund, in most cases the GPIF, activity in the US risk assets.
    It is this USDJPY’s anchor that overnight angered SocGen FX strategist Kit Jucker who writes that “the correlation between USD/JPY and US Treasury yields remains stupidly strong.” As expected, the flow-thru starts with the BOJ:
    “The causation seems clear enough – the BOJ is anchoring Japanese yields and the relative appeal of the yen is a function of yields overseas, encapsulated by the global bellwether. The last year can be divided into two ranges. Pre-Trump, USD/JPY traded in a 98-108 range and 10s in a 1.3-1.8% range. Since mid-November, USD/JPY has traded in a 108-119 range, 10s in a 2.15-2.70 range. We are at the bottom of that range, in both FX and bond markets.”

    This post was published at Zero Hedge on Jun 6, 2017.


  • Silver and NASDAQ Strength Will Reverse

    Bubbles come and go.
    Silver and gold – 1980
    Japanese Nikkei – 1990
    NASDAQ – 2000
    Mortgages and Real Estate – 2006
    Bonds, Debt, Stocks, Real Estate – 2017
    Examine the following graph of monthly data for 32 years of the NASDAQ 100 Index and Silver.
    We saw the NASDAQ bubble in 1999-2000, a rapid rise for silver in 2010 – 2011 and a large rise in the NASDAQ 100 during 2009 – 2017.
    Prices for both markets have often risen too far and too fast, and then corrected or crashed. The NASDAQ dropped more than 80% from 2000 to 2002. Silver dropped about 70% from 2011 to late 2015.

    This post was published at Deviant Investor on June 2, 2017.


  • Here Are The Seven “Black Swans” SocGen Believes Could Shock Global Markets

    As part of its periodic Global Economic Outlook, SocGen traditionally includes a discussion of what it views are the biggest “black swans” both to the upside and the downside, and the latest just released edition titled “On a Plateau”, which took a rather grim outlook to the world economy predicting that a US recession will likely hit in the not too distant future while “China, South Korea, Australia, US, Germany, UK and Japan are in the more mature phase of the cycle”, and that current global growth is “essentially as good as it gets”…
    ***
    … was no different.
    Which particular black swan is at the top this time?
    As author Michala Marcussen writes, “to our minds, policy is the main potential source of both upside and downside risk, be it with respect to fiscal expansion, trade policies, wage outcomes, euro area reform or monetary policy. As China tightens policy, what happens next in the US has become critical, we look for modest US tax cuts but believe that, Trumpflation insufficient to offset fading Xiflation. Without tax cuts, the US economy could well slow more substantially as early as 2H18.”

    This post was published at Zero Hedge on May 31, 2017.


  • Greek, Italian Risks Weigh On European, Global Markets; Oil, Gold Slide

    Tuesday’s session started off on the back foot, with the Euro first sliding on Draghi’s dovish comments before Europarliament on Monday where he signaled no imminent change to ECB’s forward guidance coupled with a Bild report late on Monday according to which Greece was prepared to forego its next debt payment if not relief is offered by creditors, pushing European stocks lower as much as -0.6%. However the initial weakness reversed after Greece’s Tzanakopoulos denied the Bild report, sending the Euro and European bank stocks higher from session lows. S&P futures are fractionally lower, down 3 points to 2,410.
    Elsewhere, the Japanese yen rallied after strong retail sales data while US Treasuries ground higher after returning from a long weekend largely unchanged; Australian government bonds extend recent gains as 10-year yield falls as much as four basis points to 2.37%. Asian stock markets and were modestly lower; Nikkei closed unchanged despite a stronger yen. China and Hong Kong remained closed for holidays while WTI crude was little changed.
    Despite the rebound, the Stoxx Europe 600 Index declined a fourth day as data showed that contrary to expectations of a record print, euro-area economic confidence fell for the first time this year, and as Draghi’s dovish comments to the European Parliament weighed on banking shares. As discussed yesterday, Italian bonds edged lower as traders digest the prospect of an earlier-than-expected election.

    This post was published at Zero Hedge on May 30, 2017.


  • “How Does This Ever End?” An Interview With Lacy Hunt

    The US economy is struggling with too much debt at every level. A debt jubilee isn’t going to solve it; and shifting demographics will likely make it worse. So, is America headed for two decades of lost growth like Japan? Dr. Lacy Hunt, who was interviewed by Erik Townsend on the latter’s MacroVoices podcast, considers the endgame for the US economy… Well, we could get lucky, Hunt says.
    “The US economy could experience a modern equivalent of the California gold rush. In the 1820’s and 1830’s, we took on a lot of debt to finance the early canals, steamship lines railroads – it was over-investment, over consumption. The panic year was 1838. Martin Van Buren was president, he didn’t know what was going on. By this, the country languished very badly for 11 years, and then gold was discovered it California, led to a huge surge in national income, people were very careful how they spent their income.

    This post was published at Zero Hedge on May 29, 2017.