Wednesday, March 16, 2011

What a Mess

As if every day since last Friday was not enough, more and more issues are surfacing every hour. I will do the best I can to hit what I think is important, but no one writer can cover all the moving parts.

Japan Nuclear Reactor News
I really cannot comment much here. The news items are all over the place and it is hard to know what to make of the news that does come out. I suggest checking in at major news sites and following the more headline centered financial blogs for the latest news.

What is troubling is how sketchy the real hard information is and why nobody seems to be able to really explain what the scenarios are. It is either "Total Meltdown Catastrophe" or "Troubling, but With Limited Large Scale Impact". Seems a wide divide.

Yen Carry Trade
Wonderful, yet another market that I do not have a firm grasp of!

I understand the Yen carry as a vehicle for cheap liquidity for speculation. The Wiki entry for this in regards to Carry:
By early year 2007, it was estimated that some US$1 trillion may have been staked on the yen carry trade. Since the mid-90's, the Bank of Japan has set Japanese interest rates at very low levels making it profitable to borrow Japanese yen to fund activities in other currencies. These activities include subprime lending in the USA, and funding of emerging markets, especially BRIC countries and resource rich countries. The trade largely collapsed in 2008 particularly in regards to the yen.
I have no idea how much it collapsed then or if it was reborn after.

Some items worth a look (via Zero Hedge):
The Day the Yen carry Trade Died
I would expect intervention on this, but how much can Japan do at this point?

Josh Brown, The Reformed Broker, has a great list that will get longer during the evening:
Yen Linkfest

Video Recap a Must See
iBankCoin write chessNwine does not post much free content anymore (and he should not, it's too good) but here is a great video recap not only of just today, but a long stretch where being cautious and on the sidelines would have been a very good thing to do:
Video Market Recap 3-16-2011
I of course was not listening too much but I did scale way down my position sizes while I played a few ideas the past few weeks. Thanks Chess!

Just How Important are Stock Indices to Policy Makers?
Grabbed a headline this morning off Yahoo because something about it just pissed me off royally for some reason. Here it is:

You can click for a larger view but it reads:
Stocks Hit by Japan Fears Despite Nikkei Rally

After a 20% drop, Japan's Nikkei rose 6% today. Somehow the stock market moving up failed to calm anyone. How much Japan blew buying stocks instead of saving to either rebuild the country or defend their currency is open for debate.

This kind of thing pisses me off because it is a waste. When markets are ready to rise, they will rise. They will not need help. All the money funneled here to the banks via POMO to raise the stock market was done to provide a "Look, SHINY Object" kind of distraction against serious issues. All that money and all that work gets erased pretty quick.

It should be totally clear by now that all things cannot be controlled at all times. Pretending otherwise is foolish and silly.

There are many big picture things to consider tonight, but I am out of time.

Have a good night.


watchtower said...

In the Great Depression we had the dustbowl.

With Katrina we had the dams breaking.

In Japan we had an earthquake/tsunami followed by the nuclear nightmare.

I don't know who coined the phrase "when it rains it pours" but they sure knew what they were talking about.
No doubt there are tons of other examples out there but that's all I could come up with off the top of my head.

intrinsic said...

The recent disaster’s financial impact would be on a far larger scale than the Kobe quake. The USD/JPY currently is almost at record high against the USD. It would continue to appreciate while funds are repatriated in the near term. However inevitable increase in government spending, with already high debt levels would ensure that it is confined to raise the necessary funds domestically.
Economic consequence of the Japanese earthquake