Excellent Commentary All ........................................................................................ The markets which are home to the stronger currencies and economies....will possibly begin to find cheaper bargains with respect to weaker currency based countries which currently house the paper of some of the worlds finest assets... It is very possible that foreign ownership of publicly traded corporate assets will cause large and meaningful control shifts with regards to the ownership of the worlds finest publicly traded corporate assets... After all...the government that houses the paper...is the government that wins by virtue of the right to tax and apply legal impositions... Furthermore ..an exchange is just a set of computer banks that could be housed in any country that has a strong internet backbone.. The right to tax...impose legal impositions...and ownership control of significant percentages of publicly traded assets...is indeed the worlds best game...and the game is on... One would be wise to utilize short term currency advantages to collect worthwhile asset bases... As there are two forms of valuation....one is constant within the confines of one currency...and the strong currency blankets over and encapsules the primary valuation means... This is a very patient process which is centered on efficiency and thoughtful long term economic strategy...
Great commentary everyone. Quite a coincidence that Paulson was in China this week.. QUITE a coincidence. FX markets should see some never-before-seen volatility. Profit from this or go join the rest of America in line at Wal-mart. I'm worried about the Yen carry trade as well.
what worries me is Paulson might utter some gibberish that the market fixes on to sell off more. Or his cronies in congress saying something similar on the likes of events preceding the '87 crash by baker.
The time to worry about the yen carry trade was 123-124. This isn't the time. Risk is already reduced on the books (more than it was at 123-124). Last Feb the carry trade moved in from 121.50 -> 115 or so, now it moved 124.5 -> 118. same point move. After seeing the move from 115 -> 124, I believe we're in a bear market for the yen, with this being a correction. Maybe we'll hit 130 next round.
Unless BOJ isn't on the boat of the rest of world major bankers; or Maybe it is its intension to sabotages others efforts to curb world wide inflation; which US hasn't experienced; then it will be more down side from here for yen; we maybe see it hits 150. How about 180! So what's point of Paul going to China; ask them to appreciate yuan and at same time; let yen runs lower?
fundamentally I see the japanese are in a bear cycle for their currency because they are making an obvious bet against continued inflationary pressure. They are willing to sacrifice their future buying power in expense for current economic performance. What they are being short sighted about is the fact that their future economic performance depends on their ability to afford input costs (commodities). How are they to do that if they continue to devalue their currency? At 140jpy to 1 USD, imagine continued escalating commodity costs pressuring their business and sending them into a spiral of weakening fundamentals. Anyone who is bearish on the USD because of long term debt fundamentals needs to study the amount of debt the Japanese carry for some perspective. The Japanese are making a dangerous bet against commodity cost rampup - and the only thing that will save them is a miraculous falloff of input costs (ie oil, metals, etc) with simultaneous economic strength (impossible, since any world recession to kill the commodity boom will likely hit the Japanese just as hard, if not harder). By the way, yen volatility is on historic LOWS even now... Look at charts the past 30 yrs to get an idea. Look for that collosus move from 98 -> 140 occuring over a 2 yr period in the late 90s for an example of real volatility. That said, if you see change in policy, and BOJ starts moving rates up 12 times a year then get on board and go long jpy.
SHANGHAI would not go down because too many overseas capitalS chasing Chinese stocks/ real estates here, betting on a steady RMB appreciation against USD
Although we are seeing a pretty sharp bounce in imported inflation it had no impact on overall inflation numbers. By contrary - in the last 5 month inflation has been subdued. Second round effects have been subdued, too. Stronger YEN is NOT in governments interest and interest of Japanese companies. Therefore, I expect carry trades to continue. Even when BOJ hikes in August a quarter point => so what ? Japanese money lasts to be cheap compared to all other major economies. As soon as this doom and gloom subprime mortgage, credit crunch gibberish is over - expect new highs in USD / YEN, IMAO !!