March 31, 2007

Got Yen?


You can move some of your dollar holdings easily into the waaaaaaaaaaaaaaaaaaaaay underpriced yen via the yen etf FXY. Buy low sell high. The Fed will be lowering rates soon, the BoJ will be raising rates, and we all know how the yen carry trade bubble will end - just like all bubbles. The only question is when.

Why Americans put all their savings into dollars I'll never understand. Well, when you pay $15 for a glass of so-so wine at a pub (as I did last night), then it really comes to life. The dollar will continue to shrink and shrink and shrink. We're insolvent folks. And all that funny money Bush and Congress keep spending? The only way we'll ever pay it back is through the printing press.

Neil Mellor, currency strategist at Bank of New York, warned that with a large amount of uncertainty still surrounding the health of the US economy and with continued geopolitical tensions, there was a good chance that carry trades could face further pressure.

"The fact is the trigger is cocked," he said. "Given the recent rise in volatility, the risks investors are taking to get yield smack of the end of a bubble.There is little rationale that this bubble will not meet its end."

32 comments:

Anonymous said...

Yeah well any day now w is going to focus on fighting the Germans, because the US is undefeated against them. You'll see.

chris g said...

Keith, I'm glad you came around to the "lowering rates" camp.

Peahippo said...

Yes, I've been hoping that the Fed does lower rates, since that will give the housing bubble the last burst of reflationary pressure and result in even cheaper homes for us "bEtter renters" when we snap them up for pennies on the dollar. My goal now is to submit as few pennies as possible in this enterprise.

After all, we're already going to have queues of unemployed people, waiting for their ration of soup, bread, water and a chance at wifi Internet surfing. We may as well just go all the way and completely bankrupt out the system.

Anonymous said...

"Well, when you pay $15 for a glass of so-so wine at a pub (as I did last night), then it really comes to life."

Don't blame the dollar for London's rip-off prices. That kind of outrageous price is due to the real estate bubble over there.

keith said...

I think we'll now see deflation - led by asset deflation, then salary deflation, and goods deflation. services may be the only thing that continues to see inflation

the deflation will be curbed in some way by the devaluing of the dollar as interest rates tumble along with the economy

if you want to see deflation, just look at housing prices, or what circuit city did last week (fired thousands making "too much" and letting them reapply for their same jobs at lower wages).

You'll also have millions of REIC unemployed (not shown by the government numbers though) who'll drive wages down further.

thoughts?

Anonymous said...

With the japanese national debt at over 7 trillion US $, and a GDP of one third ours; I don't believe I will be buying any yen anytime soon.

It will always remain a mystery to me how the japs can keep their debt machine running with such absurdly low interest rates, but then again perhaps the carrytrade is what keeps the whole enchalada going...

Anonymous said...

NEW YORK, March 30 (newratings.com) – General Motors (GM.NYS) and Ford Motor Co are taking on Treasury Secretary Henry Paulson to discuss the weak yen, the Financial Times said on Friday.

The US carmakers feel that the low priced yen is giving the Japanese carmakers an unfair edge, and would like the administration to put pressure on the Asian nation’s government to strengthen its currency, the newspaper said. The move comes ahead of lawmakers preparing to outline legislation next week which, if passed into law, will require the Treasury to take action against countries that manipulate their currencies, the Financial Times added.

Anonymous said...


You'll also have millions of REIC unemployed (not shown by the government numbers though) who'll drive wages down further.


Yeah but they weren't shown in government employment numbers either while they were making $250K a year in 2003,4 and 5 either.

So in the end it's a wash.

Anonymous said...

I was under the impression that they were printing even more Yen than dollars, and the Japanese government debt is a bigger portion of GDP than the USA. Doesn't sound like much of a refuge from inflation.

The USA is already experiencing wage deflation. Circuit City is laying off thousands of their $8 and $9 an hour employees, and replacing them with people who will work minimum wage.

Events are moving fast.

Anonymous said...

There are too many dollars chasing too few resources.

The stock market is over-valued. Why do I say that? Because every investor will sell when the slightest bad news comes along. And it's all en masse. The entire market collapses at once. Don't these stocks have an innate value? Yes they do, and it's WAY WAY below what they are selling for now, otherwise, you wouldn't sell the stock for inflated dollars.

So if the stock market is overvalued, real estate is overvalued, when these things collapse, what will the next bubble be?

That's the big question. The only answer I have right now is "gold and silver" and maybe natural resources in general. That's for the little guy. The big money is now bubbling up corporations in these "private equity" purchases of companies.

We just signed our own death warrant by tarriffing China. Oh boy. Now they'll have to start letting their own people consume the goods and stop being our slaves.

"You! Produce me goods of various types and I'll give you just enough to keep you alive".

Anonymous said...

We dropped two bombs on those sandal wearing goldfish tenders...

and look at them tody!

So if we really want to Help Iran, let's Nuke'em, so in 30 to 40 years they'll be much better off!

Anonymous said...

The Marshall Plan!

Anonymous said...

Be careful.

"Yen Slides After Unexpected Decline in Japanese Retail Sales
By Ron Harui

March 29 (Bloomberg) -- The yen fell after a government report showed Japan's retail sales unexpectedly fell for a fourth month in February.

The Japanese yen dropped against the world's 16 most- actively traded currencies today on prospects the Bank of Japan will keep the lowest benchmark interest rate among major economies in coming months, retaining the yield disadvantage of yen-denominated assets.

``The data show consumer spending is still weak, undermining the BOJ's case for raising interest rates,'' said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. ``The yen is being sold'' to 117.50 against the dollar and 156.00 per euro today, he said.

The yen declined to 117.08 against the dollar at 9:30 a.m. in Tokyo from 116.86 late in New York yesterday. It also slipped to 155.87 per euro from 155.55.

Sales at retail outlets dropped 0.2 percent from a year earlier, the trade ministry said today in Tokyo. The median estimate of 24 economists surveyed by Bloomberg News was for a 0.1 percent increase. Sales of fuel, including heating oil, fell 5.5 percent. Private consumption accounts for more than half of Japan's economy.

The Bank of Japan's key overnight lending rate is 0.50 percent. The Federal Reserve's target overnight lending rate is 5.25 percent, the European Central Bank's rate is 3.75 percent and Australia's rate is 6.25 percent.

A finance ministry report today showed Japanese investors bought 17.7 billion yen ($151.3 million) more overseas bonds and notes than they sold during the week ended March 24, snapping seven straight weeks of net sales."

It is something to keep your eye on though. Betting on the Japanese economy is risky. They have real crappy demographics. BUT they have had deflation for 16 years now. They are also along with everybody else very dependent on the US economy. I think it is an interesting play and would be short lived.

keith said...

I'm not recommending yen as a day trade. I'm recommending holding yen in your portfolio until you need it - 10 years? 20 years? The dollar will decline and the yen will rise. And one day - tomorrow, next month, next year, whenever... the yen carry trade bubble will collapse

Anonymous said...

I'd rather invest in the FXA. It is the Australian $ and they paid off their national debt. They are far away from the hordes of uneducated illegal immigrants. They have a sensible immigration policy that favors educated workers. It also pays 5.75% interest.

I don't think we will see products deflation because with a weaker dollar, it will cost more to buy goods from Asia and oil from Canada and the ME. Housing will crash because very few people can afford them without toxic loans.

Anonymous said...

The USA is already experiencing wage deflation. Circuit City is laying off thousands of their $8 and $9 an hour employees, and replacing them with people who will work minimum wage.

Yet walmart is hiring thousands of people at $10 an hour. And still WM is the bad guy. More wonderful logic form the minds of today's idiot liberals.

Anonymous said...

Peahippo said...
Yes, I've been hoping that the Fed does lower rates, since that will give the housing bubble the last burst of reflationary pressure and result in even cheaper homes for us "bEtter renters"
---

In the current market, IF rates were lowered, the Greedy Sellers would UP their asking prices.

That is not what this country needs. Housing needs SUSTAINED growth, not a quick shot of sugar.

Sustained growth can only occur with first a drop back down to the normal levels of home prices (pre-bubble), then keeping shoddy quick buck looking investors out of it.

Anonymous said...

thoughts?

March 31, 2007 2:05 PM


what about gold and silver?

borkafatty said...

The CPI uses something called "owner's equivalent rent" to account for the rise or fall in the price of housing. The PCE now uses imputed space rent. The methodology is somewhat different and arcane, but the point is that it is not the actual prices of homes but their rental value that is measured in the inflation indexes.

What this means is that during the recent housing price boom, as the prices of housing soared, it did not show up in the inflation indexes because the indexes were tracking rent, which was not rising nearly as fast. One of the reasons rents were staying low is that home ownership was rising, so there were fewer people looking to rent an apartment or home.

Now, the opposite is happening. The rent portion of the inflation measures are rising as fewer people are buying and there are more people looking to rent, either because they have lost their homes due to foreclosure or no longer qualify for the newer, more restrictive mortgages. And even though we are seeing a lot of new apartment construction, the supply of places to rent is still not rising as fast as the demand.



"Gotta Love it"...a buddy can you spare a $100..

Anonymous said...

If you think the FED is going to lower rates any time soon you just aren't paying attention.

They will keep the rates where they are now unless inflation increases accelerate. In that case they will raise them.

The recession will officially start later this year.

FlyingMonkeyWarrior said...

The Fed will lower rates, imo.

W.C. Varones said...

I agree with you, but I prefer the EWJ. It's got equity upside as well as currency appreciation.

Anonymous said...

"Got Yen?" Damn, made me LOL at work, what are you trying to do get me fired.

Anonymous said...

The fed has to lower rates it's the only option.

- Dr of Economics

Anonymous said...

i think the fed is between a rock and a hard place. either they can raise rates and save the dollar, thereby encouraging foreign investment by them purchasing our debt instruments. this act will cause the economy to go in the tank. so if they lower the rates, the economy will respond accordingly. the asset bubble will continue, perhaps. who knows. so the question is, do they save the dollar or do they save the economy. there is no where to go now. they have painted themselves in a corner. sooner or later the laws of money present in the economies of this world will balance out, no matter what they do or the tricks that they play. this asset bubble was just another false game, they have played to extend this false ecomomy a few more precious years. then there are the wild cards, china and iran.......the big money boys are losing control now. sooner or later it will be every man for himself in this world and the honor among thieves will dissapate, as the economies of this world, attempt to save their own asses as this whole decrepid scam unravels and unravel it will. it would be interesting to note just how much derivatives are in the markets now. no one really knows since they are not regulated. i know it is in the multiple trillions of dollars now. buy gold and silver and lots of it and bury it. someday you will need it and i think that someday is near.

Anonymous said...

it would be interesting to note just how many small cities and towns have money that they have taken from their taxpayers and invested in stock market vehicles, many of which include subprime and alt a debt tranches. what happens when they lose their whole wad on this gambit? what happens to the taxpayers in these small towns when this happens? will the small cities decrease the size of government to make up for the loss? as this thing unravels, strange things will be happening. we will witness things that no american has ever seen.

FlyingMonkeyWarrior said...

For the Big Picture, Open your mind and think! The North American Alliance will result in the Feds Lower rates and the devaluation of the Dollar. Then we will have a United Massive Power here (Canada, US, Mex.)as compared to the Russia/China and the EU alliances, IMO. This is the plan. See
"Today is Iran Hostage Crisis Day #9" thread for the "connection of the dots" of lower interest rates, merging of the North American Alliance and the end of the USA and the USD (The Amero replaces the USD, I foretell). I have gone out on a limb here, time will tell.
Not an April Fools Post.

FlyingMonkeyWarrior said...

http://www.321gold.com/editorials/willie/willie030907.html

Anonymous said...

i think i read somewhere that the amero is already printed and distributed and waiting in plastic wrapped pallet loads in the vaults of federal reserve banks. if this is true, then they already know that it will soon be exchanged by the fed for dollars. what will be the exchange rate on the dollars for amero swaps, that would be something to know....

Anonymous said...

Wow. I am amazed at all the people who think the Federal Reserve will lower interest rates to save the economy. Why in the world would they do that? They are a private club of large banks. And there is nothing "Federal" about them other than their name.

I can see these boys sitting around a plush board room and asking themselves, "well shall we lower our rates and save the economy, or do we keep the rates high and protect the value of our assets?"

Its a no brainer if you ask me. They will protect the value of their assets (vaults full of government bonds) by jacking the rates as high as they need. The government bond market is more important to them than your McMansion somewhere with a 100% mortgage.

Everyone sings the praises of Paul Voelker. But he jacked the interest rate to 21% to save the market for government bonds, not to fight inflation.

Anonymous said...

"They will protect the value of their assets (vaults full of government bonds) by jacking the rates as high as they need"........


i agree. this is what i think they will do. they will say that they have to raise rates because of some other lame excuse, but raise them they will do. all this talk about them cutting rates is utter nonsense put out by the talking heads on cnbc..........

Anonymous said...

If the straits for Hormuz are shut down and oil goes to $100 (which is where it will be once Peak Oil kick in) then Japan (read yen) is fucked - they are 90% dependent on imported oil!