Yen Carry Squeeze and Stagflation?
Continuing our theme, from Saint James Goldsmith? with more reasons for that market dip or free fall? As Nattered January 26th, 2018 at 12:39 pm
P - ...Draghi and Abe continue to prevaricate. That's what currency values are all about – your currency relative to someone elses.
Get your moment of Zen on... Prevaricate indeed, and Abe shall not tighten, the underpinning for low global rates and dollar carry trades [the YEN] cannot appreciate too much, if it does all hell will break loose.
Interesting codicil...
Above, since the Feb 2nd jobs report an almost -4.5% decline in USD vs JPY, and since Nov 6 - Feb 11 a decline of 8%.
A falling dollar and rising yen is a double whammy on anyone in that carry trade, think HKD and RMB as well. The day comes when rolling is not so good, and when margins get called, they must liquidate to pay the piper.
Stagflation?
Since the majority of global transactions and financial instruments are denominated in dollars, when the dollar declines, so does the value [and attractiveness] of those instruments and ASSETS tied to the dollar.
Why is oil going up when demand is declining with supply and production burgeoning? For commodities transacted in dollars, this leads to a price escalation which has nothing to do with supply or demand of the underlying asset.
Since the dollars being exchanged for the asset are worth less, we want and need more dollars for our asset. For all assets, including equities, the above partially applies subject to price elasticity, substitution and fungibility of the asset class.
But here's the rub... this is not an exhibition of strength or a good type of growth, quite the contrary. The resulting escalation of prices is not based in organic economic growth. No new business, methods or technology, no increase in production, usage of raw materials, labor or real increases in revenues or profits.
China and all parties will claim a rebound based on an increase in imports and exports, GDP, consumer spending, credit, debt, etc. Sure prices go up, there is an increase in dollar volume, wages remain stagnant or decline, with less buying power, viz. wage and savings erosion.
The little mice squeak louder and churn the treadmill faster, as the vice squeezes their nuts. There is a name for this deleterious effect, stagflation.
Now let's all chant, M-I-C-K-E-Y things are getting better all the time M-O-U-S-E. Annette Spoonajello and this seem apropos...
With regard to reasons for a market dip or free fall? More to come in Wages: Less is More? stay tuned, no flippin.
P - ...Draghi and Abe continue to prevaricate. That's what currency values are all about – your currency relative to someone elses.
Get your moment of Zen on... Prevaricate indeed, and Abe shall not tighten, the underpinning for low global rates and dollar carry trades [the YEN] cannot appreciate too much, if it does all hell will break loose.
Interesting codicil...
Above, since the Feb 2nd jobs report an almost -4.5% decline in USD vs JPY, and since Nov 6 - Feb 11 a decline of 8%.
A falling dollar and rising yen is a double whammy on anyone in that carry trade, think HKD and RMB as well. The day comes when rolling is not so good, and when margins get called, they must liquidate to pay the piper.
Stagflation?
Since the majority of global transactions and financial instruments are denominated in dollars, when the dollar declines, so does the value [and attractiveness] of those instruments and ASSETS tied to the dollar.
Why is oil going up when demand is declining with supply and production burgeoning? For commodities transacted in dollars, this leads to a price escalation which has nothing to do with supply or demand of the underlying asset.
Since the dollars being exchanged for the asset are worth less, we want and need more dollars for our asset. For all assets, including equities, the above partially applies subject to price elasticity, substitution and fungibility of the asset class.
But here's the rub... this is not an exhibition of strength or a good type of growth, quite the contrary. The resulting escalation of prices is not based in organic economic growth. No new business, methods or technology, no increase in production, usage of raw materials, labor or real increases in revenues or profits.
China and all parties will claim a rebound based on an increase in imports and exports, GDP, consumer spending, credit, debt, etc. Sure prices go up, there is an increase in dollar volume, wages remain stagnant or decline, with less buying power, viz. wage and savings erosion.
The little mice squeak louder and churn the treadmill faster, as the vice squeezes their nuts. There is a name for this deleterious effect, stagflation.
Now let's all chant, M-I-C-K-E-Y things are getting better all the time M-O-U-S-E. Annette Spoonajello and this seem apropos...
With regard to reasons for a market dip or free fall? More to come in Wages: Less is More? stay tuned, no flippin.
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