What might this chart indicate to you? Short term correction in a lasting degradation in the Yen, or the Yen showing doubt in the ability to get out of the death spiral?
And the Nikkei follows the leader:
Posted in Economics, Markets.
– June 12, 2013
Japan has become our petri dish for central bank efficacy. Much of the market action over the last few weeks has been driven from news coming from Japan. When the Yen strengthens, markets fall and vice versa. The question everyone is asking is whether central banks are heading down the right path or bound to lose control.
If you look at flows in the United States, the shift has been made towards floating rate or short duration debt and into cyclicals, small cap stocks, and even Japanese equities. It seems that the 50 bps backup in interest rates has many investors feeling that interest rates are finally on their upward move. You even have former chairman of Goldman Sach’s Jim O’Neill telling everyone to get ready for 4% 10 year treasury yields.
If the world is so filled with sunshine, why is the 10 year breakeven inflation rate in the United States falling:
And if the economy is counting on some support from a slowly recovering housing market, then how exactly will that housing market recovery react to a sharply rising mortgage rate:
To be honest I think we have just one elephant in the room and certain investors are reacting to short term technicals rather than the underlying over-arching issue:
Will Abenomics Work?
Look at the Yen, the Nikkei and 5 year Japanese breakeven rates. They are all the same thing. If Abe can’t ignite some inflationary pressure then the whole central banking foundation comes crumbling down:
Yen = Nikkei = Expected Inflation
Since the middle of May the Abe formula has been in doubt. If the Abe formula is in doubt for Japan, then it certainly should raise flags for central banks around the world. Japan is just much further down the path of deflationary destruction. Let’s just hope that Japan’s 3.5% reported Q1 GDP and later revised upward to 4.1% (because the 5/15 number didn’t seem to impress) is real. Otherwise it might just be a long summer and fall trading season.
Posted in Economics, Markets, Politics.
– June 11, 2013
I have read a few articles that defend the rising costs of college, specifically looking at the current differentials between the lifetime earnings of those with college degrees and those without. These types of comparisons only make me think of the “Old Economy Steve” meme floating around with the younger generations:
The focus on current graduates has excludes all comparisons to previous generations. Unfortunately, there are some realities that make Old Economy Steve pretty annoying. For one, student debt levels are on a trajectory that trumps credit cards and auto loans:
The cost of college tuition in the United States is 2nd only to Switzerland:
And most importantly the cost of education compared to disposable spending has reached a record gap:
As with all unsustainable growth paths, the student loan market will hit a wall. The only questions are 1) When and 2) What are the repercussions?
The immediate result is that current graduating students have a debt yolk around their necks. The future market results are currently unknown, but it is almost certain that college students in the future should find cheaper tuition after the student debt bubble deflation forces lower tuition costs.
Posted in Economics, Markets.
– June 5, 2013