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Japan Spirals into Bankruptcy?
- Thread starter observer67
- Start date
Quote from m22au:
thanks for your insights deucy28
Thank YOU.
I appreciate your abundant contributions to this thread. I am just now starting to go through it page by page, but slowly with so many other pressing issues I am always addressing.
I am interested in your first post about short S&P and long gold. Other than what I see intuitively understanding your trade, have you addressed your rationale for the pair on this thread or another one ? If so, I would like to know more from your perspective. I am a pairs trader but exclusively a chartist (not t.a.) and not a fundamentalist. (My first post on ET with charts for examination for trades was Aug 1 on Main / Trading / Charts of Note. I must still be in the honeymoon stage for ET because I have been charmed not just with them all being gains, but strong ones.) However, I have nothing against a pair judged to be a good play on a high probability fundamentally. I am really interested in yours.
1. Mauldin travels the world and lectures and sits on panels, etc. He arguably has one of the very highest subscribed readership (on his free newsletter). He says his most frequently asked question anywhere he is in the world is about the U.S. and what will happen first: serious recession/depression or serious inflation ? His answer is, "Yes !" He says economists are split as to which one will come first. But the other one will closely follow, he says. I am curious if in your pair S&P / gold, if it matters to you which economic scenario comes first ?
2. Having gold long, I assume you are on it (news about it) like a tall dog. It probably is overwhelming the amount written about it, opinions and all. With the latest and very recent Bernanke announcement of extended QE, Gold strangely went down. Jimmy Rogers has an explanation if you have not heard this one; look half way down the article about India:
http://www.cnbc.com/id/100326475
Best of luck !
Quote from deucy28:
Thank YOU.
I appreciate your abundant contributions to this thread. I am just now starting to go through it page by page, but slowly with so many other pressing issues I am always addressing.
I am interested in your first post about short S&P and long gold. I am really interested in yours.
1. Mauldin .....
says his most frequently asked question anywhere he is in the world is about the U.S. and what will happen first: serious recession/depression or serious inflation ? His answer is, "Yes !"
I am curious if in your pair S&P / gold, if it matters to you which economic scenario comes first ?
2. Having gold long, I assume you are on it (news about it) like a tall dog. It probably is overwhelming the amount written about it, opinions and all. With the latest and very recent Bernanke announcement of extended QE, Gold strangely went down. Jimmy Rogers has an explanation if you have not heard this one; look half way down the article about India:
http://www.cnbc.com/id/100326475
Best of luck !
Thank you for your kind words.
Long gold and short S&P 500 is an expression of my view that the global debt problem has not been properly addressed. All that has happened in the US (and many other countries) is that bank debt has been moved to government balance sheets.
It doesn't matter too much how the debt problem is resolved (ie, deflation or inflation), because in either situation I believe gold will outperform the S&P 500. Although I am disappointed this pair has not gone in my favor in recent months, this is genuinely a multi-year idea.
You are correct that gold declined noticeably after the recent QE4 announcement, however, over time I believe that the Fed (and other central banks) will be increasingly aggressive with their monetary policy.
Also of interest (but not an issue just yet) is how loose monetary policy affects the price of oil and food commodities. It's all nice and well for QE to push stock prices higher, but if (Brent) oil goes above $130, then this will start to hurt the transport sector at the very least, if not the entire economy.
Two articles who give an opposing view to Kyle Bass:
"Almost Nobody Talking About The Yen Collapse And Japan's Prime Minister Understands What He's Really Trying To Do"
www.businessinsider.com/abe-might-not-be-aggressive-about-easing-2012-12
"The Yen â What Everybody Knows Probably Isnât Worth Knowing"
http://www.acting-man.com/?p=21108
"Almost Nobody Talking About The Yen Collapse And Japan's Prime Minister Understands What He's Really Trying To Do"
www.businessinsider.com/abe-might-not-be-aggressive-about-easing-2012-12
"The Yen â What Everybody Knows Probably Isnât Worth Knowing"
http://www.acting-man.com/?p=21108
I took a very small position long USD/JPY at about 84 in December 2012.
With the benefit of hindsight I should have made this a larger position, especially given that JPY was near record highs.
Having said that, USD/JPY looks like the market's favorite carry trade. One only needs to look at the massive move in USD/JPY on 25 February to see how quickly the JPY can appreciate when it's a "risk-off" day.
I will add to my long USD/JPY position under one of the following conditions:
(1) At USD/JPY of about 84
(2) Signs of JGB weakness, specifically in the 10 year and 30 year JGBs. In addition to the weakness being absolute (ie, a rise in yields), it would also be ideal to see weakness relative to US bond yields (ie, JGB yields rising faster than US treasury yields).
With the benefit of hindsight I should have made this a larger position, especially given that JPY was near record highs.
Having said that, USD/JPY looks like the market's favorite carry trade. One only needs to look at the massive move in USD/JPY on 25 February to see how quickly the JPY can appreciate when it's a "risk-off" day.
I will add to my long USD/JPY position under one of the following conditions:
(1) At USD/JPY of about 84
(2) Signs of JGB weakness, specifically in the 10 year and 30 year JGBs. In addition to the weakness being absolute (ie, a rise in yields), it would also be ideal to see weakness relative to US bond yields (ie, JGB yields rising faster than US treasury yields).
It seems to me that the most bang for your buck should Japan's fiscal conditions continue to deteriortate would be put options on JGBs, although I'm having a hard time finding anywhere where it would be possible (as a retail investor) to put on this trade. Has anyone come across brokers that offer options on JGBs?
Volatility premiums will certainly be an issue, although I would think that with years of little volatility in the price of the bonds that any premiums shouldn't be too onerous, and well worth the risk.
Volatility premiums will certainly be an issue, although I would think that with years of little volatility in the price of the bonds that any premiums shouldn't be too onerous, and well worth the risk.
if you should listen to one single guy then it is Martinghoul.
Read his post on the following page:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=181522&perpage=6&pagenumber=1
That was 2009 and you guys have been rambling on for 33 or so odd pages. I just read the last page and it looks some people are still hoping/praying for their counter momentum trades to turn around. Japan is going nowhere fast. How many times does it have to be repeated that the absolute critical difference is that the majority of JGBs is held domestically. That makes all the difference. There is no China that can sink Japan, no Russia, no Europe, no US. If anything then Japan is dying a slow death until there is no more way around structural reforms. Japan, in my opinion, is still way too far away from that realization. Until then Japan will further lose competitive edges and hand over parts of their slice of the pie. Nothing else is gonna happen. Japanese society has one property that lends itself perfectly well to ensure Japan WILL NEVER EVER GO BANKRUPT: It is that when times really get tough, all the Japanese government has to do is to plead with its citizens to buy government bonds. Nothing easier than that. Japan households have way enough to buy out the government.
Read his post on the following page:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=181522&perpage=6&pagenumber=1
That was 2009 and you guys have been rambling on for 33 or so odd pages. I just read the last page and it looks some people are still hoping/praying for their counter momentum trades to turn around. Japan is going nowhere fast. How many times does it have to be repeated that the absolute critical difference is that the majority of JGBs is held domestically. That makes all the difference. There is no China that can sink Japan, no Russia, no Europe, no US. If anything then Japan is dying a slow death until there is no more way around structural reforms. Japan, in my opinion, is still way too far away from that realization. Until then Japan will further lose competitive edges and hand over parts of their slice of the pie. Nothing else is gonna happen. Japanese society has one property that lends itself perfectly well to ensure Japan WILL NEVER EVER GO BANKRUPT: It is that when times really get tough, all the Japanese government has to do is to plead with its citizens to buy government bonds. Nothing easier than that. Japan households have way enough to buy out the government.
Quote from hftvol:
if you should listen to one single guy then it is Martinghoul.
Read his post on the following page:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=181522&perpage=6&pagenumber=1
That was 2009 and you guys have been rambling on for 33 or so odd pages. I just read the last page and it looks some people are still hoping/praying for their counter momentum trades to turn around. Japan is going nowhere fast. How many times does it have to be repeated that the absolute critical difference is that the majority of JGBs is held domestically. That makes all the difference. ...
Japanese society has one property that lends itself perfectly well to ensure Japan WILL NEVER EVER GO BANKRUPT: It is that when times really get tough, all the Japanese government has to do is to plead with its citizens to buy government bonds. Nothing easier than that. Japan households have way enough to buy out the government.
Martinghoul's post was on 4 November 2009. Since then various things have changed:
1. Japan posting monthly current account deficits
2. Shinzo Abe promising to do whatever it takes
3. USD/JPY surging from 76ish to 95ish, suggesting that the 76ish level is a long-term bottom.
Regarding the internal demand - that's nice for now. But as you are probably aware (1) the population is near a secular peak and (2) it is aging and (3) how much additional issuance can the declining and aging population buy?
As mentioned a few days ago, I took a small USD/JPY long position at about 84, so the comment that "some people are still hoping/praying for their counter momentum trades to turn around" is not applicable to my situation.
And as I said a few days ago, I'm not interested in adding to my USD/JPY long at these levels unless the Japanese bond market shows signs of declining.
Bookmarking this Kyle Bass post for future reference:
"Kyle Bass Warns "The 'AIG' Of The World Is Back"
http://www.zerohedge.com/news/2013-03-12/kyle-bass-warns-aig-world-back
One interesting quote:
""The AIG of the world is back - I have 27 year old kids selling me one-year jump risk on Japan for less than 1bp - $5bn at a time... and it is happening in size." As he explains, the regulatory capital hit for the bank is zero (hence as great a return on capital as one can imagine) and "if the bell tolls at the end of the year, the 27-year-old kid gets a bonus... and if he blows the bank to smithereens, ugh, he got a paycheck all year." Critically, the bank that he bought the 'cheap options' from recently called to ask if he would close the position - "that happened to me before," he warns, "in 2007 right before mortgages cracked."
"Kyle Bass Warns "The 'AIG' Of The World Is Back"
http://www.zerohedge.com/news/2013-03-12/kyle-bass-warns-aig-world-back
One interesting quote:
""The AIG of the world is back - I have 27 year old kids selling me one-year jump risk on Japan for less than 1bp - $5bn at a time... and it is happening in size." As he explains, the regulatory capital hit for the bank is zero (hence as great a return on capital as one can imagine) and "if the bell tolls at the end of the year, the 27-year-old kid gets a bonus... and if he blows the bank to smithereens, ugh, he got a paycheck all year." Critically, the bank that he bought the 'cheap options' from recently called to ask if he would close the position - "that happened to me before," he warns, "in 2007 right before mortgages cracked."