Thank you very much for asking. My posts would be incomplete without an answer to your question. I haven't change my criteria since I wrote six days ago (http://www.elitetrader.com/vb/showthread.php?s=&postid=1130010#post1130010) that the signals indicating that I am wrong would be a continuation of falling stock prices translating into pessimism about the economy and cheaper commodity/oil prices without a collapse of the US dollar.
I've had my eyes on that for the past several weeks -- a significant bias in favor of lower bond prices.
Remember that credit spreads have not widened out very much. If the US were about to see a significant slow-down (but, according to Ben, not a recession) wouldn't credit conditions be worsening? Credit is ridiculously easy to get and the LBO funds are going berserk! Portfolio managers can either buy lower rated paper or synthetically juice up using derivatives (e.g. default swaps or PIMCO's synthetic callable treasuries). In the case of PIMCO this involves longer duration assets where you can get some higher vol levels. I think that this is why the long-end continues to outperform the short-end. Managers are favoring barbells over bullets to get some capital gains and not get too far above a neutral portfolio duration. The bubble in credit is probably only in the 7th inning, so shorts have to be patient. And given the current global propensity for higher rates, a credit contraction will probably be associated with inflation rather than deflation. Steepeners should outperform flatteners.
this is the new era of credit.....past Volker style recessions were tied to sky high rates to flush out poor credits and start anew..... that's old thinking...now shakey credit is allowed a new life by a transfusion of the printing press and the new book escapes the punitive eye of old style bankers.... we are in a no pain era...where no managed economy can afford a teeth cleening since the effects cannot be anticipated and the fear rests with the bankers rather than the debtors......... the Fed. is there to protect the bankers rather than the depositors......a sleeping dog that may become restless and there will be hell to pay someday....
By the way, during all of this discussion of Japanese credit being so cheap, i.e. essentially 0%, I've wondered how does the average Joe investor take advantage of this? Is the credit really only for institutional players or does the average Japanese consumer also benefit from incredibly low mortgage and credit card rates? How would an individual investor outside of Japan participate in the Yen carry trade directly? I'm assuming in advance that the answers to the above questions are that the low interest is for institutional clients and that the average individual Japanese investor pays normal interest, i.e. 7 - 20 % as experienced by most of the world.
Ya sound like the guest host on squawk box today, all doom ya, anybody who says inflation is non existent is lying, and anybody who's saying it hasn't floated into wages is LYING, in my case I was EASY able to negotiate a fat raise and could do so again if the circumstances warrant. The labour market is still a little too tight, and if prices start filtering into wages look out...
Consumers in Japan have definitely benefited from lower rates, the problem isn't the rates themselves, but the societal differences inherently ingrained. They are savers, have learned that hard work and sacrifice will bring FUTURE reward. It's not all about instant gratification there (although there are now hints of it, consumerism and all)... They of course are also still spooked as a whole from past failures to get out of recession... Success breeds success, and it works the other way around too, if there was no real end in sight and every previous attempt has failed, why even show up... I've been to Japan twice, absolutely beautiful country, but the weirdest thing I saw was people being employed to do "busy work" to make wages so they can spend it. Unfortunately it doesn't quite work that way, their mentality is, "I'm lucky as it is to have a job, better save for a rainy day"
yea, believe me, they Japs are strange and nationalistic... there was an auction of short term paper last year where the coupon was NEGATIVE, and it was oversubscribed.... I mean they would take negative principal on a 3 month....I was astonished to see this ....and it got absolutely no notice in the western press......... we're taking negative on principal w/ the coupon.....I just sat there in front of my screen wondering if I was still on planet earth...................
OK, thanks for the answers so far. I lived in Japan for 3 months and can confirm that it is indeed a beautiful country. The main question is can an average investor borrow at 0%? So far it seems the answer is no. I'm curious to know if the following has happened: Average Japanese investor borrows 100,000 USD at 0% and invests in the US in mutual funds, stocks etc. If so, can a foreigner to Japan do this?