Tag Archives: japan

The Fed’s Great Adventure in Inflation

In the current policy and media stoked market environment, anything is possible.  It’s  the wonderful, magical world of hands-on policy making.  5 years after the financial crisis, but still not enjoying a ramping economy like the good old (and long gone) days of the last great secular bull market (RIP 2000)?  Just sit back, relax and let the man in charge control the image.

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FOMC Minutes… Head for the Hills!!!

While the MSM instigates reasons why we should give a damn about what people who have little control over the T bond market were thinking at the last meeting, why don’t we just tune it all out and manage the markets instead?

tyx, etc

The top panel shows the 30 year yield marching toward the traditional limiter AKA the 100 month EMA.  The pattern measures to 4.5% or so, so there could be a spike above and a hell of a lot of hysteria at some point.  That’s the collective markets; 98% hype, hysterics and emotion and 2% rational management.  Either the 30 year yield is going to do something it has not done in decades (break and hold above the EMA 100) or it is not.  Simple.

The relationship between long term bonds (30) and short term bonds (2) in the middle panel is currently negatively diverging gold as the ratio has dropped this month.  Again, we wonder is gold (bottom panel) leading the curve this month or should gold bugs take caution?  I think gold is leading the curve, but it bears watching.  The relationship became distorted in second half, 2012.

As for gold, it probably bottomed at the end of June.  That is because the sold out condition of the sector (read: Paulson puking GLD, hedge fund net short positions, India’s antagonism toward its would-be gold buyer citizens, etc. etc. etc.) was simply historic.

Really, just dialing down all the noise of the last 2 years it was a grand and climactic panic IN to gold in 2011 by the global public in the face of the Euro’s supposed Armageddon.  Everyone had bought and then it was time for the bleeding out of this emotional money.

The bleeding went on longer than I originally thought it would, but that is why we do ongoing work to interpret things every step of the way.  Hey, no harm no foul.  A little patience and ongoing perspective and now we have what appears to be a purified asset class, free of unhealthy sponsorship.

Back to the chart’s top panel.  China is a net seller of T bonds.  Japan is a net seller of T bonds.

tics

As we have been noting every step of the way T bond yields are a function of supply and demand.  The global system endured a solid decade of net inflows of global funds into the T bond market.  Now it appears the tide may be going out.  Hence, interest rates all along the curve – save for the officially manipulated ZIRP on the Fed Funds – are going up.

It is all normal to free market participants; just another phase.  It is only abnormal if you buy in to the idea that the Fed is in control and can remotely operate the financial markets indefinitely; if you buy in to the idea that the Fed decides when the cycles are to change.

If you look at it a certain way, it’ll tickle your funny bone as you listen to Huey, Dooey and Louie jawbone ‘Taper’ in the media or as you review what a bunch of bureaucratic clerks had to ruminate about at the last FOMC meeting at 2 PM US Eastern today.

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Guest Market Analysis, News & Commentary

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(e) = external link

Deflation Isn’t an Export; Crazy Talk is  Michael Ashton  6.4.13
Out on a Limb  James Howard Kunstler  6.4.13
Sell the Dollar?  Case for Hard Currencies  Axel Merk  6.4.13
Explaining the Gold Bull Market  Steve Saville  6.4.13 (pdf)
Annual Report 2012  Federal Reserve Bank of St. Louis  6.4.13 (e)
Wounded Heart  Bill Gross  6.4.13 (e)
Gameplan for a Completely Corrupted Market  Cody Willard  6.4.13 (e)
Japan’s Easy Money Tsunami  David Howden  6.4.13 (e)
March Housing Numbers  B.I.G.  6.4.13 (e)

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Market Analysis, News & Commentary

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Let’s All Go Medieval  James Howard Kunstler  5.28.13
Crash Patterns  Steve Saville  5.28.13 (pdf)
Kuroda’s Gambit  Doug Noland  5.28.13
Gold Coins Can Bring a Message  Tom McClellan  5.28.13
Rock, Paper, Scissors  John Hussman, Ph.D.  5.28.13 (e)
40 Frighening Facts on the Fall of the US Economy  Zero Hedge  5.28.13 (e)
Financial Market Articles & News  Biiwii.com/EWI  5.28.13
US Corporate Tax Rates Vary Greatly  tBP  5.28.13 (e)

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Here Comes Johnny Yen Again

The Yen conveniently turned and burned the day after this post noting that it had declined to a big time support zone.  Specifically “The Yen is now at its first major support area.  If it finds support here and bounces I wonder if other asset trends would reverse as well.”

Here is the daily view:

yen

Yen daily

Much like a gold mining index we know and love hate manage risk against, the Yen has positive divergence but has proved nothing yet on this bounce because it resides below the EMAs 10 and 20 and is firmly in a downtrend.  Now, trends have to end somewhere; either at zero or at a reversal point.  But technically, Johnny Yen may only be doing a strip tease (song ref. folks).

In the balance hang all the other asset market trends as noted.