I go away for 2 weeks |

I go away for 2 weeks

In the span of two weeks, there has been a lot of noise, but not a lot of movement. The S&P is roughly where we left it, 10 year yields are where we left them, and most currencies haven’t moved – except one.

The yen is at 15 year highs and any attempt to short it has been met with continued strength. There are a lot of theories out there, but one thing is for sure – the deflationary pressure continues for now as stocks and bonds no longer offer investors any haven.

I usually like taking the other side of government traders. They tend to be driven by institutional considerations more than any market or profit signals, so they have a good record as contra-indicators. That being said, we are facing the one time I do not want to be on the other side of a CB. CB’s are incredibly effective at devaluing a currency. While deflation might be the order of the day for the yen, eventually, the BoJ will win and inflation will hit as even local investors and citizens begin to fear the government campaign. I think we might be in the last throws of deflationary pressure in Japan. I’ve been wrong on the timing for the past year, so there’s a chance I’m still wrong. However, once the tides change, I believe the downdraft in the yen will be swift and painful for anyone caught long the currency.

Last 5 posts by Yaron Sadan

Calling all themes - February 10th, 2012
Portugal, and Yields, and Iran . . . - January 30th, 2012
The Hunt for Yield - January 26th, 2012
All eyes should be on Iran - January 23rd, 2012
Quick note - January 19th, 2012