Claus Vistesen

The Global Debt Hangover

Hi Guys,

Thanks for the comments.

@Thomas;

Right, but then again this is not all about "Say's Law" I think since government bonds seem to be supported not only from QE but also from "mandated" deleveraging and de-risking of financials' balance sheets. At least, this is the "word on the street" and it will be an important factor. Also regulatory changes may mean that financials need to stoke up on government debt (of which there is plenty) in order to bolster their capital base with "non-risk".

Now, I still among the deflationists so I don't think yields will go up on an overall basis to reflect inflation expectations (or an even stronger expectation of a recovery). However, we may see some quite interesting discrimination between sovereigns and in fact; given the turmoil in Greece, Spain etc the next big jolt to the financial system may exactly be driven by a sharp rise in yields on some of the more risky sovereigns. I mean, a lot of people think that the Bund yield will come down to reflect the ongoing mess in the Eurozone. Fine with me, but what about intra-Eurozone divergence?

Claus

Dubai: The Great Unravelling

Now,

… on the rest of the comments, both to the quality of my degree and the convulution of my writing. Well, what I can say; SA commenters always come in different shape and sizes :)

@ Popey: This is a long standing critique by part of SA readers to my articles. Please note that I AM trying to make it as concise as possible. In the present case, it was written very quickly and contains some quite nasty typos and mis-spellings. Sorry. I have corrected some of the worst in the version on my own site.

On the rest … thanks for the backup from Dancer and User492911, but rest assured that I have been blogging/debating online long enough to disregard such pissing and snark with ease.

@FB5000

”We are supposed to take this stuff seriously?”

My question exactly …

Claus

Dubai: The Great Unravelling

Hi Guys,

Wow, the debate is certainly going here although of course some of the comments are more, uhm, value added than others :).

Anyway, let me respond in general by saying that I am certainly not sure about how to read this situation, but what I am fairly sure about is that it IS worthwhile to look closely since if there is one thing we should have learned by now, it is that things have a tendency to have repercussions beyond their immediate vicinity.

Whether this is the case in Dubai is of course exactly what we are talking about here and I am surely open to opinions from people "closer to the ground” than myself.

So, on this

“Dubai will be just fine. Dubai is the Arab worlds pride and joy.”

Well, I agree on the first part in the sense that Dubai won’t sink into the ground (although we will see how much real value there actually is) but what about the second. Will Dubai really be a source of pride and joy going forward? I am not sure.


On this;

”Greece and Hungary are amoungst those most severely impacted by a reassessment of Sovereign risk, whilst Japan has safe-haven inflows of money boosting it's currency.”

Right, this is exactly the point isn’t. Are we getting a ”reassessment of risk” and what will this mean elsewhere?

On this;

”Way too many young people with newly minted degrees in naysaying economics as if somehow they are privy to the biggest "thing" to happen since that other big thing of all things we refer to from the 1930's”

Granted Jimmy, my perspective may be short, but I am not saying that Dubai is the ”biggest thing”, but rather that it may hold the potential to reverse the rally in risky assets we have observed since March and if this does not do the trick, my guess is that CB’s exit strategies may do it.

On this;

”Undoubtedly banks and others knew very well the risk and problems in Dubai but decided to brush it off and hide it in the back corner with their derivatives. That is partially understandable maybe, since it was assumed Dubai World would always get backing by the government no matter how bad their practices were. This is much like the implicit guarantee issue to Fannie Mae and Freddie Mac.”

Right Moon, this sounds as a very reasonable take. My question to the rest of you then is … how much more of this ”brushing off” is there to be revealed in Dubai and elsewhere since there is a fair argument to suggest that the more sequential rattles we get of this, the higher the volatility will be and the longer we have to wait for the recovery in the real economy. I.e. this all goes on to Bylo’s and Dave’s comments.


Claus

The Performance of Japanese Companies: A Growing Connection with External Demand

Hi guys,

Thanks for the comments.

On this MadHedge ...

"During my career, I watched GDP growth rates fall from a white hot 10% in the sixties, to 4% in the seventies and eighties, to 1% in the nineties and the early 21st century. Are we flat lining at 0% in the teens? That leaves fertile ground only for stock pickers who are willing to do the local spade work to find one hit wonders like Toyota and Fast Retail."

I wholeheartedly agree and really what we need to think about is the macroeconomic dynamics that will emerge if we get to situation in which trend growth is negative. As you note, buying the market is NOT the right thing to do which makes you wonder. How much to standard run of the mill models suggest to invest in Japan if you want to buy global beta? And what will happen once we tweak this model to allot a share to Japan of 0%?

@dw57:

Your intuition on China is right in my opinion which is also why everybody who hails the coming of China and an appreciating RMB should think long and hard about the demographic projections of China. I have seen a lot of both sell/buy side analysts make the connection between Japan and China lately ... so the discourse IS emerging.

Claus

Daniel Gross on Mellowing Japan

Hi Guys,

"They put a lot of effort into creating human like robots. I think they want to solve their problems with robots, not immigrants."

Yes Tom, this is very interesting. I mean, this narrative started a couple of years ago as a joke but has now emerged as a real alternative. In principle I can see it work, but only in a very strange world. I mean, it is all well and good to have robots caring for the elderly, but in terms of social cohesion it is difficult to imagine I think. That of course will depend on the nature of the robots.

@Mad Hedge Fund

I completely agree with your analysis on the US and even though I am still undecided on the course I believe the US will take I am quite confident that she will rebound faster than Japan did (or didn't). However, I still believe deleveraging to be a fact for the future and specifally that the US will become less of a provider of excess demand to the global system than before.

Jeez, imagine the US running and aggregate surplus on the external books. THAT would constitute a serious drainage of global demand.

Claus

Head Start on Japanese Elections: What About the Economy?

Basically, it is all likely to be rearranging deck chairs on the Titanic. However I do think that a change in discourse on the fertility issue would be a most welcome change ... yet, this is very unlikely in the current situation.

Thanks for the visualization of the problem through Toyota and this, mind you, is supposed to be one of the best companies they have.

Nobody wants to be a perpetual prophet of doom, but Japan is in a bind and unless people and her politicians wake up to why this is; well ... then it is going to be a lot of the same.

Claus

Head Start on Japanese Elections: What About the Economy?

Hi,

Thanks for your comment on my articles.

"Whoever wins, there's not much they can do about it."

Well, if this isn't comment of the week I don't know. I completely agree; it is all very depressing this.

Reviewing the Latest Data from Japan

@ User 399644 ...

Cheers, I appreciate it. Try this one by my friend Edward;

seekingalpha.com/artic...

Claus

Reviewing the Latest Data from Japan

Just a small note to readers ...

I use Bulgaria as an example of a place where growth has been abysmal, or almost as abysmal as Japan. This is nonsense, at the moment, of course as one commenter points out to me. To add injury to insult, I meant to write Hungary and one can only speculate why Bulgaria came out on the screen.

With the this little correction out of the way. Fire away.

Claus

Japanese Housewives: Back in the Game?

Hi Dybydx,

Definitely ... this gambling not investing, but I still think there is an undercurrent here since in an environment where investors expect volatility to be low and risky assets to fly, the carry trade is almost a no brainer. Of course, at this particular point in time, Miss Watanabe may have stepped up just as the green shoots are ebbing out.

Claus

Perspectives on Carry Trading

Hi Dave,

Thanks for the comment.

Interesting point, but I am not sure I agree. At least, I would think that whatever relative return the US would be able to offer investment (be it financed from domestic savings or foreign) it would be competitive to the one we can offer e.g. in Europe not to mention Japan for that matter. Wouldn't you agree?

"Even much of the stimulus money is going to end up in other economies"

Yes, well I think this is the dirty secret here and oh boy will there be debate, mud throwing etc on this altar we move forward, not to mention of course protectionism.

Claus

Japan: Recession All but Certain

oops ...

copy/edit; "will not BE punished (...)"

Japan: Recession All but Certain

I sure hope so Kunst ... of course, if my readers are not willing to reciprocate I can only hope that my crime will not punished too severly.

Claus

Yen Cross Basics

Nice bout of currency wonkery here, Joseph. I will need more than a few minutes to digest what the points might mean for my funny money p/l :).

Just a minor copy/edit note ... the ECB is running 4.25% and not 5.25%. I know; we are in the region of pedantry here but I still thought that I would point it out. I guess it would also affect the 4.75 yield advantage the Euro has over the Yen (i.e. it is 3.75% no?).

In any case ... a neat piece about the inner workings of the FX trading universe.

Can one of the nice SA editors please edit these small numbers?

Claus