Yen Carry Trade: How Much is Too Much? [View article]
Dear John;
According to the IMF's attempt to measure the yen carry trade, the bulk of this carry trade is not "speculation" but individual Japanese investors buying offshore investments denominated in high yielding currencies. In Asia, for example, a Japanese investor can earn 6.8% on demand deposits while also enjoying an appreciating Auzzie dollar against the yen. Japanese fund management companies are creating mutual funds with monthly payouts that have various bells and whistles to be able to make the monthly payouts, which is also contributing.
I found this attempt to get a balanced view of the carry trade a bit refreshing. tmcgee.wordpress.com/2.../
Japan Investors Opposing Global Sentiment: Avoid Tech, Buy Material [View article]
Dear William;
"Materials" means basic materials stocks. As in the S&P "Materials" SPDR (ticker XLB), basic materials includes such industries as chemicals, construction materials, containers and packaging, metals and mining, and paper and forest products. Apologies for the mis-spelling of Tokyo Electron, which has no ADR (American Depository Receipt), and thus no ticker was given.
S. China Morning Post: Japanese Companies To Tap the IPO Market By 2009 [View article]
Dear Dr. von Pfeil;
I would like to know more about your deeply-rooted skepticism concerning investing in Japan's stock market vis-a-vis the Economic Time™ and the conjecture therein that Japanese stocks are not market-(ergo investor) friendly. Granted, Japan has always been somewhat of an outlier in terms of fitting into global macro models. Yet foreign investors who have taken the time to get below top-down allocation decisions seem to be making money. If not, Japan would have been abandoned long ago as a destination for global portfolio investment flows.
Foreign investment flows continue to be a major driver of Japanese stock prices. Is this merely a function of simple top-down investment allocation decisions? Is Japan merely an afterthought/risk hedge against what is happening in global equity markets? We think not. There has to be something behind the massive portfolio investment inflows into Japan equities beyond mere excess savings/liquidity sloshing around in global markets.
For example, after the sell-off in mid-year 2006, why did European investors become the major net purchasers of Japanese equities after US investors took profits?, and in 2007, why have Asian investors become the major net buyers of Japanese equities? Might not this have something to do with the massive excess savings of Asian and GCC (Gulf Cooperative Gouncil) states' expressed wish to reduce their currently heavy overweighting in the US dollar?
Or could this be because the Japanese market as expressed by the US$ "EWJ" ETF has outperformed the S&P 500 since 2003, despite the Yen carry trade-induced structural weakness in the Yen?
The Subprime Solution: Containing Global Contagion [View article]
Dear Ken;
Remember Y2K and all of the "smart guys" telling us how this would bring down the civilized world? The Fed and other central banks reacted by providing massive amounts of liquidity to ensure the "doomsday" scenario would not come to pass...what a great stimulous for global stock markets!
The Japanese political scene makes for greate media coverage and speculaton among foreign investors, but has precious little to do with what goes on in the realy economy--and therefore only has a passing impact on the stock market. This is because politics in Japan is largely irrelavent to what is actually going on in the real economy! For a reality check, all you have to do is track what Japanese politicians actually do versus what they say. At the end of the day, political action in Japan inevitably gravitates toward what is considered the best solution for Japanese business and the financial markets, i.e., a very investor -friendly compromise...
Relationship Investing Pays in Japan [View article]
Steve;
Our data shows Steel investments in 37 Japanese companies, and there is no shortage of potential financiers who would like to ride of Steel's coattails. In addition, considering that hedge funds investing in Japan using traditional (eg, long/short strategies) lost money in 2006, more than a few of such hedge funds are considering becoming "activist" investors, given the obvious success of such strategies so far.
Japanese Value Stocks: Excess Liquidity and Extreme Volatility [View article]
Dear Lance;
Yes, after the stock tanked from JPY2,870 to JPY2,310 (19.5%), and the ADR is down some 4% since (from your March 9 call), so your Nomura trade is now up only 6%. From where do you want to start measuring whether yours is longer than mine?
Nikko Cordial Bouncing Around; I'm Not Selling [View article]
Regardless of what foreign investors think, I hear that the TSE was outraged by initial pressure tactics from Nikko Cordial to have the stock removed from the supervisory post, and TSE chief Taizo Nishimuro was on TV in Japan last night indicating that the TSE is not yet ready to let Nikko off the hook.
The point is not whether Japan is on the verge of a "consumer spending binge", but whether consumer is actually stronger (and potential GDP growth) is actually stronger than was indicated in the weak Q3 GDP number, and whether the apparent strength in Q4 GDP was real or a statistical fluke. In other words, Japan's sustainable GDP growth looks better than the weak Q3, but not as strong as indicated by the Q4 number (i.e., real GDP growth is more like 2.5%).
There is ample evidence that Japan's labor market is tight, and that this is more than a shift from retiring baby boomers with full benefits to "burger flipping" younger workers. Moreover, the government's household survey is notorious for distorting underlying consumption trends, while further distortion is being added by the wave of retiring baby boomers, i.e., the 60-ish part of the labor force.
Thirdly, a GDP surprise for Japan does not require a so-called "consumer spending binge". All is required for a "growth scare" is firmer consumption that currently overly-bearish assumptions assume, which is implied in the comments about domestic demand in a mature (i.e., ex-growth) economy. After all, if currency traders could believe that the end of quantitative easing and a modest tightening of short-term rates by the BOJ (i.e., the end of ZIRP) could destroy the current climate of global excess liquidity (and the fundamentals behind the yen carry trade) with the stroke of a pen, they are just as gullible about an ostensible re-appraisal of Japan's potential growth rate and the implications this may have on BOJ policy.
Yen Carry Trade: How Much is Too Much? [View article]
According to the IMF's attempt to measure the yen carry trade, the bulk of this carry trade is not "speculation" but individual Japanese investors buying offshore investments denominated in high yielding currencies. In Asia, for example, a Japanese investor can earn 6.8% on demand deposits while also enjoying an appreciating Auzzie dollar against the yen. Japanese fund management companies are creating mutual funds with monthly payouts that have various bells and whistles to be able to make the monthly payouts, which is also contributing.
I found this attempt to get a balanced view of the carry trade a bit refreshing.
tmcgee.wordpress.com/2.../
Japan Investors Opposing Global Sentiment: Avoid Tech, Buy Material [View article]
"Materials" means basic materials stocks. As in the S&P "Materials" SPDR (ticker XLB), basic materials includes such industries as chemicals, construction materials, containers and packaging, metals and mining, and paper and forest products. Apologies for the mis-spelling of Tokyo Electron, which has no ADR (American Depository Receipt), and thus no ticker was given.
S. China Morning Post: Japanese Companies To Tap the IPO Market By 2009 [View article]
I would like to know more about your deeply-rooted skepticism concerning investing in Japan's stock market vis-a-vis the Economic Time™ and the conjecture therein that Japanese stocks are not market-(ergo investor) friendly. Granted, Japan has always been somewhat of an outlier in terms of fitting into global macro models. Yet foreign investors who have taken the time to get below top-down allocation decisions seem to be making money. If not, Japan would have been abandoned long ago as a destination for global portfolio investment flows.
Foreign investment flows continue to be a major driver of Japanese stock prices. Is this merely a function of simple top-down investment allocation decisions? Is Japan merely an afterthought/risk hedge against what is happening in global equity markets? We think not. There has to be something behind the massive portfolio investment inflows into Japan equities beyond mere excess savings/liquidity sloshing around in global markets.
For example, after the sell-off in mid-year 2006, why did European investors become the major net purchasers of Japanese equities after US investors took profits?, and in 2007, why have Asian investors become the major net buyers of Japanese equities? Might not this have something to do with the massive excess savings of Asian and GCC (Gulf Cooperative Gouncil) states' expressed wish to reduce their currently heavy overweighting in the US dollar?
Or could this be because the Japanese market as expressed by the US$ "EWJ" ETF has outperformed the S&P 500 since 2003, despite the Yen carry trade-induced structural weakness in the Yen?
The Subprime Solution: Containing Global Contagion [View article]
Remember Y2K and all of the "smart guys" telling us how this would bring down the civilized world? The Fed and other central banks reacted by providing massive amounts of liquidity to ensure the "doomsday" scenario would not come to pass...what a great stimulous for global stock markets!
The Japanese political scene makes for greate media coverage and speculaton among foreign investors, but has precious little to do with what goes on in the realy economy--and therefore only has a passing impact on the stock market. This is because politics in Japan is largely irrelavent to
what is actually going on in the real economy! For a reality check, all you have to do is track what Japanese politicians actually do versus what they say. At the end of the day, political action in Japan inevitably gravitates toward what is considered the best solution for Japanese business and the financial markets, i.e., a very investor -friendly compromise...
Relationship Investing Pays in Japan [View article]
Our data shows Steel investments in 37 Japanese companies, and there is no shortage of potential financiers who would like to ride of Steel's coattails. In addition, considering that hedge funds investing in Japan using traditional (eg, long/short strategies) lost money in 2006, more than a few of such hedge funds are considering becoming "activist" investors, given the obvious success of such strategies so far.
Japanese Value Stocks: Excess Liquidity and Extreme Volatility [View article]
Yes, after the stock tanked from JPY2,870 to JPY2,310 (19.5%), and the ADR is down some 4% since (from your March 9 call), so your Nomura trade is now up only 6%. From where do you want to start measuring whether yours is longer than mine?
Nikko Cordial Bouncing Around; I'm Not Selling [View article]
Will the Yen Bears Be Surprised? [View article]
There is ample evidence that Japan's labor market is tight, and that this is more than a shift from retiring baby boomers with full benefits to "burger flipping" younger workers. Moreover, the government's household survey is notorious for distorting underlying consumption trends, while further distortion is being added by the wave of retiring baby boomers, i.e., the 60-ish part of the labor force.
Thirdly, a GDP surprise for Japan does not require a so-called "consumer spending binge". All is required for a "growth scare" is firmer consumption that currently overly-bearish assumptions assume, which is implied in the comments about domestic demand in a mature (i.e., ex-growth) economy. After all, if currency traders could believe that the end of quantitative easing and a modest tightening of short-term rates by the BOJ (i.e., the end of ZIRP) could destroy the current climate of global excess liquidity (and the fundamentals behind the yen carry trade) with the stroke of a pen, they are just as gullible about an ostensible re-appraisal of Japan's potential growth rate and the implications this may have on BOJ policy.