Abe goes all-in

The market is evidently coming to grips with the latest Japanese GDP "shocker", as is the political establishment.  Japan has such a long and (in)glorious history of freakish data out-turns that it is difficult to be truly flabbergasted by yesterday's number, particularly as it was largely driven by inventories.   Nevertheless, the data was clearly very disappointing, and if you're keeping score at home, the economy has now shrunk by 1.8% in real terms since Shinzo Abe took office.  As an aside, in real terms the economy is now smaller than it was when Abe was unceremoniously booted from office the first time, in September 2007.



On the face of it, therefore, one can question how effective Abenomics has really been.   To be sure, the imposition of the consumption tax hike is a massive qualifier which dented the momentum that Japan's economy built up last year.   That having been said, following the previous VAT hike in 1997 the economy rebounded strongly in Q3, more than recouping the pullback in Q2.  While it's true that the global economy is on a weaker footing than 17 years ago, it's not like it was all pony rides and lemonade back then, either: Asian crisis, anyone?

That's not to say that Abenomics has been totally ineffective, of course.   USD/JPY's 50% higher than it was before Abe took office, and the Nikkei has more than doubled.  That's good news for most exporters, equity holders, and pajama-clad retail FX punters; in a familiar theme to those in the West, it's less clear that the beneficent impact of these asset price moves has filtered down to Main Street.

Abe's response?  Well, it's one that many members of the FOMC and non-Germanic ECB board members could appreciate: clearly we haven't done enough!

The BOJ knocked the market's socks off with its QQE decision at the end of last month.   Recent declines in prices, particularly for energy, evidently gave them ample cover - recall that there is a negative impulse from yen weakness as it pushes up energy costs, which Japan's legions of pensioners are rather sensitive to.   A nearly 25% decline in the yen price of Brent since earlier this year may have afforded Kuroda an opportunity to up the ante.

However, it's worth noting that even at the current price of Y9500 or so, oil is still very expensive by historical standards.   Pushing the yen weaker is not an obvious panacea in that regard.



The asset allocation shift of the GPIF will create plenty of demand for domestic equities and a supply of yen as the institution buys foreign assets.  As this happens, the music may well play on.   After the fact, however, the GPIF will be taking very much more investment risk than they are accustomed to.   Perhaps this will not be an issue; US pensions and endowments have certainly ridden a roller coaster over the past decade or so in terms of their investment returns, albeit generally on nothing like the scale that the GPIF operates in.  That having been said, it is probably worth asking the question about what would happen should 2008-type price action (or even 2002-type price action) occur; the GPIF would almost certainly be sitting on monumental losses.   Perhaps this attempt to kick-start the economy is worth this risk; then again, maybe it isn't.

Finally, Abe is now calling a snap election just two years after he was swept into office, presumably to freshen his mandate to throw even more lighter fluid on the searing rallies in USD/JPY and the Nikkei.  His decision to postpone the next VAT hike for a few years, while probably wise, will nevertheless not please either the mandarins in the MOF or Kuroda (the recent aggressive easing was presumably a quid pro quo for staying the course on VAT hikes.)

Should Abe's LDP win another sizable majority, one would have to presume that the asset allocation shift will continue apace, maintaining a tailwind for recent trends.  That having been said, on a structural basis Macro Man is a little wary.   Price action in the Nikkei, for example, is strikingly similar to that during the time of the last "revolution" in Japan, i.e. the Koizumi administration.


Needless to say, that didn't end well.   Macro Man can envisage USD/JPY trading back up to the low 120's but is sceptical that it can extend much further.  Political tolerance elsewhere in the world for much more yen depreciation has to be called into question, particularly in the context of a global growth deficit.   Moreover, thanks to years of Japanese deflation the PPP marches steadily lower, and 125 today is a much weaker yen than it was 10 or 15 years ago.

Still, in the near term it's hard to fight the trend, particularly when the policy levers on both sides of the trade appear supportive.   Nevertheless, it's worth remembering that one-way bets in the yen usually end not with a whimper but a bang.

Not that Abe will mind, of course.   If he gets chucked out of the PM's office again, there will no doubt be a warm welcome for him at the Eccles building.   After all, if Koizumi can impersonate Elvis, why can't Abe mimic Janet Yellen?




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Anonymous
admin
November 18, 2014 at 9:17 AM ×

Abe San, if he gets a fresh mandate, will go full throttle as only the Japanese can do when they put something in their head (and from living 3 years in Japan I have a first hand experience) .
Sure enough, it will fail and without going into convoluted macro analysis, suffice to say that if you could print your way to prosperity, someone would have found out already;
However, between now and then, I think the objective is to try to break the old high.
40 000 sounds attractive and since most market will hyperbolic within a few months, I wouldn't be surprised if we got there within a year.
Best

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amplitudeinthehouse
admin
November 18, 2014 at 12:13 PM ×

WHEN are these guys going to wake up and declare this a non-event.
I don't want anything to do with this wonky market.
NO!!!

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amplitudeinthehouse
admin
November 18, 2014 at 12:22 PM ×

Pal, if you don't take this trade off my books we are DONE!!
I don't trust this trade as far as I could throw it..

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amplitudeinthehouse
admin
November 18, 2014 at 12:25 PM ×

Anyway, who put this trade back in the playbook?..
Gone by end of week all there's nothing..test me.

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Polemic
admin
November 18, 2014 at 12:30 PM ×

Amps - What guys , what event. Which wonky market. who is Pal. Which trade on your books, who put it there, whats gone by end of week and what all os nothing and what are you meant to be tested on?

You see the sort of problem we have here in communication Amps? You ain't making it easier though you promised to.


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amplitudeinthehouse
admin
November 18, 2014 at 12:43 PM ×

Pol, Pal...this is the think tank, you need to expect some incoherence.
Anyway, hasn't this been a nice test drive for future NYC residents of said stock-market action looking into the future.
Thanks Pol, Pal and everyone that participates here..this test drive has been awesome to watch.

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Roman
admin
November 18, 2014 at 12:45 PM ×

I think stories about Japan's economic bs in mass media are written by the same people who proclaimed Europe is disintegrating in 2011 - with slightly different accents of course.

But nothing really matters except ES 95% correlated with (usd.jpy+aud.jpy)/2

As soon as jpy breaks - watch out below. But not even a minute before.

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Anonymous
admin
November 18, 2014 at 12:51 PM ×

No point in trying to make sense of random ramblings....
Either the guy is short and can't take the pain anymore, or he is long and is suffering from the Jonah complex ...
Who cares?

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amplitudeinthehouse
admin
November 18, 2014 at 1:12 PM ×

A very precise call that was , Anon.
The Jonah has hit four in a row.
You gotta love it this price action..
Have you blushed yet?
No jokes, lets' be serious..someone up there has to pull me out of this losing circle of dromedaries, otherwise you have to ask yourself are these pals or people for real?
There's no point trading the market from here , it's done ..there's no trust in the model program or it's regulators that are sponsoring it.
It's as if there having an eachway bet, heads if the data release is on schedule we win, tails it's doesn't matter if the data doesn't get released we've lost nothing. Surely this picture has become picture perfect clear by now. There's no trust anymore in this model program and the contagion has already set in within it's regulators. No trust No love..ain't that right Pal.

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Macro Man
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November 18, 2014 at 1:19 PM ×

If there's no point trading, then there's equally no point wasting everyone's time with these incoherent rants. Why don't you take a nice long break.

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amplitudeinthehouse
admin
November 18, 2014 at 1:28 PM ×

Done, MM..but before I leave I just want to correct a previous post.
There's NO TRUST LEFT with this model program regulators.
Let's hope that the regulators that that is aim at cops it on the chin like I have and we can go back to our own picture perfect lives and let them at it. Who cares? I don't!!

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Anonymous
admin
November 18, 2014 at 1:45 PM ×

WSJ:
Freight Rates from Asia To Europe Plunge By All Time Record Amount

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Anonymous
admin
November 18, 2014 at 1:46 PM ×

Energy -3.0%. "These [PPI numbers] were worse than expected, but we suspect simply related to new PPI Calculus." MNI

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Anonymous
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November 18, 2014 at 1:48 PM ×

"US QE took 7 years. Abenomics only at work for 2 years. My word to Abe: Don't lose your nerve, just carry on pumping money in" -Motley Fool

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Anonymous
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November 18, 2014 at 1:54 PM ×

Financial Times: Sweden's central bank hints at QE as inflation <0 and balance sheet 38% below 2009 level.

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Anonymous
admin
November 18, 2014 at 2:00 PM ×

Japan’s 1-year bill goes negative at auction, a new all-time low
Japan’s GDP Deflator slid to 92.4 (or -0.3%) in Q3 from 92.7 in Q2. Household spending is back to Q3 2013 levels (¥71,276 billion)
I still don't understand what they're trying to accomplish. Structural reform should have been the first thing you tackle, not deflation.
Unless the majority of Japan is invested in equities, Abenomics makes little sense. You essentially squeeze the middle class.

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Anonymous
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November 18, 2014 at 2:08 PM ×

@ anon 2:00 PM
If politicians knew anything about economics, we wouldn't be there in the first place;
Abe San probably doesn't embarass himself with the complicated notions surrounding causality.
Thus, a rising stock market and a 2% inflation rate must definitely, in his views, mean economic properity.
He has decided to achive that.

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Macro Man
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November 18, 2014 at 2:17 PM ×

In fairness to Abe, it's probably important to remember where Japan was before Abenomics....USD/JPY 77 and going nowhere, Nikkei 8500 and going nowhere, CPI negative and going nowhere, economic growth lumpy but going nowhere, national pride dented by the tsunami and the consequent Fukushima disaster.

He at least tried to give things a jolt, to change the mentality of stagnation. For that I think he is to be applauded. However, once the defibrillators have been applied and roused the patient, it does not necessarily follow that their continued application is useful. I suspect that the same principle applies here, and the 'third arrow', while boring, is the most badly needed....and most poorly-executed.

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Anonymous
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November 18, 2014 at 2:50 PM ×


All this is true, however, lessons from Argentina to Zimbabwe, going through Venezuela and Weimar Germany tell us one thing: it all starts like that and never stops.

To paraphrase the most printed book on the planet:

Abe saw all that he had made, and it was very good
And there was evening, and there was morning.
Thus, it was still the land of the rising sun and he decided to do more of the good things.

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Mr. T
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November 18, 2014 at 3:35 PM ×

Pre-Abe they might have had a lower Nikkei, lumpier economy etc but at least they had their pride. Now, at least in economic terms, Japan is the laughingstock of the world economy. The endless windmill fighting for a goal that I think most people see as silly has real costs. They might be able to dodge some of those costs with desperate moves by GPIF etc, but it seems unlikely that they will get out unscathed. A better solution, and one that plenty of Japanese have wanted for a long time, starts with the structural reforms necessary to deal with their situation and says no to the free-growth model of Abe (and his predecessors).

In more practical terms Abe is also going all-in on low energy prices, low input prices, higher trading partner fx rates, purely-domestic funded treasury, spoos etc. He might be able to pull levers and make Nikkei go higher but oil? Coal? Rice (CA drought).

Maybe NK gets to 40k, maybe yen gets to 150 - then what? All that equity is going to trickle down into the middle class? Even at 150 its going to be really hard for Japan to compete on price for exports.

I just don't get the goals and motivations.

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Leftback
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November 18, 2014 at 3:41 PM ×

Third arrow may end up impaling him in the butt, trying to change Japan's underlying culture is like.... expecting a Fed rate hike. Not sure Abe-san will get through the election. Aging electorate not happy with rising prices. I am with MM on this one, most of the negative news already priced into JPY and wouldn't be surprised to see it turn upwards.

After the morning surge and homebuilder confidence survey, market participants in the US are clearly on a rocket-powered sleigh pulled along by the FOMC reindeer. We may have reached Peak Santa a little early, or we could be on the way to the North Pole.

Oil is taking what looks like the start of another leg lower. More emerging market and energy sector weakness ahead, not that I need it... Brazil is such a complete mess, one wonders if there is anything more that can go wrong.

Btw, did anyone read Kissinger's comments on Ukraine, Russia and sanctions? A good read on what a huge policy mistake this was by EU and US.

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Leftback
admin
November 18, 2014 at 3:43 PM ×

Btw, we shorted the XHB at 10am. Markets peak on good news. Added to that, there is real data out in the morning on housing starts....

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Leftback
admin
November 18, 2014 at 3:47 PM ×

A fairly simple and accurate article on the shopping season, in the Northeast it is very empty out there. It's about wages, stupid.

Empty Malls

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Anonymous
admin
November 18, 2014 at 3:47 PM ×

To be honest, at least SAbe's policy is good for tourism. Last I heard, tourists from China and other countries flocked into Japan and snapped everything, especially when Japan refunds all sales taxes on items bought by foreigners.

A sige question, why GBP suddenly dropped about two hours ago? NZD dropped due to milk price and maybe some concerns over AU/China trade deal. Any news on GBP this morning?

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Mr. T
admin
November 18, 2014 at 5:04 PM ×

SPX 2050, +230 in a month. Crazy crazy rally. It seems a bit glutenous to be calling for a Santa rally on top of this. I must have some sort of mental illness - I nibbled a little outright short on spoos and q's. I guess I'm the fodder that will take us to 2250.

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Polemic
admin
November 18, 2014 at 5:23 PM ×


Mr T, perhaps if you change your time reference point to miss out the crazy crazy drop of similar proportions then 'SPX up 40 points over the last 2 months' doesn't sound so crazy.

This doesn't detract from your observation, it's just me expressing a bugbear of mine with time referencing where it is most commonly seen with 'the rally since 2009' with everyone slicing off the preceding drop.

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Anonymous
admin
November 18, 2014 at 5:24 PM ×

JAPAN’S ABE TO START CORP TAX CUTS NEXT YEAR, NIKKEI SAYS

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Anonymous
admin
November 18, 2014 at 5:26 PM ×

Truly remarkable spread now between $SPY & $HYG

http://imgur.com/UMunypt

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Anonymous
admin
November 18, 2014 at 5:33 PM ×

PBOC outdoing everyone:

http://imgur.com/xEJ7ShA

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Mr. T
admin
November 18, 2014 at 5:56 PM ×

Very true Pol. Some interesting math on the AAPL buyback - at current prices and roughly their buyback rate, they are spending approx $40bil/yr to generate EPS growth of ~5%. At current price target consensus it drops down to about 4%. I think its likely that some time from now this will look like a colossal misallocation of capital. Is there really nothing out there that at that scale could beat the 4/5% hurdle rate? Considering they are gigantic business running with net margins north of 20%, it seems unlikely.

There are others out there too - UNP at current rates is about 3%. KO ~3%.

Put another way, where the heck is the M&A boom?

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Leftback
admin
November 18, 2014 at 5:57 PM ×

Credit is definitely sending a message, as is the mild flattening of the yield curve this week. It is very rare for these clear bond market signals not to precede a pullback in equities. IWM failed again at its resistance level of 118 last week, and now 117 looks like it is the new resistance level today. Until this technical backdrop changes I am bearish small caps. If it clears 118 then we hop on Santa's sleigh, I guess.

IWM is 26% small banks, 19% small industrials and 6% small oil and gas. That's about 50% of the index that doesn't like lower energy prices, strong dollar and flatter yield curve, all of which we have had in spades during Q4.

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Robert
admin
November 18, 2014 at 6:00 PM ×

I really doubt about success of 'Abeconomics' - all-in and full tilt!

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Leftback
admin
November 18, 2014 at 6:03 PM ×

We have discussed this point quite a bit. I was interested to see this collection of data on the issue. Not much of a correlation, in fact:

Do Lower Gas Prices Boost Consumption?

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Rantly McTirade
admin
November 18, 2014 at 6:04 PM ×

This move by Abe/Kuroda is desperate, corrupt and stupid. The crash back into Depression shows how utterly useless-and dangerous-central banking has become; if this crap had any real economic benefit, it would have been apparent years ago. The Japanese people(and others) need to deal very harshly with these vermin. And offering 'the Nikkei was 8500' as some sort of justification for the stupidity is pathetic.

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amplitudeinthehouse
admin
November 18, 2014 at 6:30 PM ×

Just what I thought, McTirade..The Japanese market(and OTHERS) have hidden this bazooka of QE well behind the curtain till now. But now in an environment of cheap liquidity and eager takers of such the curtain has lost it's rubber band.
I hope the housing market stands up to the very cheap liquidity sloshing around at the moment..we wouldn't want to see household buyers do their there ass would we( cough cough )

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amplitudeinthehouse
admin
November 18, 2014 at 6:36 PM ×

That's what I forgot to chuck in yesterday..the liquidity well of wealth of the FOMC and BoJ has finally lost it's rubber band.

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Macro Man
admin
November 18, 2014 at 7:06 PM ×

@ Rantly, "pathetic", huh? What would you have done in their place, tough guy? While I concur that asset manipulation carried to the levels it's been done to is counterproductive, I don't think it was a bad idea to change the narrative that existed in japan pre-Abenomics. If you think that view merits an ad hominem, feel free to piss off to Zero Hedge.

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Anonymous
admin
November 18, 2014 at 7:13 PM ×

Oil, industrial base metals and agriculture stuff taking it up the chin again despite USD pull back.

I recall the comment/opinion on the previous post on stocking up commodities waiting for the (inevitable?) monetary velocity picking up. What do you guys think on these basic commodities?

I mean surely we have to see all this accrued liquidity breaking of the leash some time...

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Anonymous
admin
November 18, 2014 at 7:22 PM ×

30yr trend of trade growing 2times global GDP may have ended

http://imgur.com/A91WOPV

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Polemic
admin
November 18, 2014 at 7:23 PM ×


The problem with Commodities is that they don't have the same sort of self correcting feedback loops re oversold/bought as things like FX as they are true supply and demand. What is more hey do tend to be high responsive to gravity. So it really depends on which commodity. Coal and iron I wouldn't try and pick a base on until mines start closing. On Iron there is debate as to where that is. Sub $70/tonne and some say that 300m tons of production becomes unprofitable against a current oversupply for 2015 of about 56m tonnes. But, these guys aren't going to close the day that they run into the red.

Oil is down to Saudi but i am pretty sure spec land is no longer long but don't listen to me, I had my kevlar gloves sliced asunder through 80.

But it is energy that I d be first to buy. I still feel that going into winter with Putin's hand on the gas tap and him in belligerent mood is conducive to some sort of shock. At least for Europe.

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Anonymous
admin
November 18, 2014 at 7:25 PM ×

C Says,
Point one conjecturing about the future is really little more than 'brain spam'. We all need a reason to back what we do and 'brain spam' is as good as anything.

Personally, I would take a 20 year chart of USD/JYen and think what if ? If being a structural change between the two underpinned by a combination of demographics and one country being much richer than the other in resources (energy). I've called this my 3 to 4 year JBTFD. If that works out with 120 being eventually a diminishing dot in the rear view mirror then it's the multi-bagger.

Now there's many an argument why that might not happen ,but 'brain spam' can sound pluasible which ever side you are on.

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Polemic
admin
November 18, 2014 at 7:30 PM ×

C,
Remember talking about this back in april 2013? I remember your comment picking up on our suggestion that a good dose of immigration would do them good. I went back to that post

http://macro-man.blogspot.co.uk/2013/04/the-japanese-grand-national.html

last night and by coincidence whilst MM was penning this I was going back through that post to see what had changed / or not.

My notes here

http://polemics-pains.blogspot.co.uk/2014/11/japan-well-thats-what-happens-when-you.html

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Leftback
admin
November 18, 2014 at 7:35 PM ×

Well, yes. If there's one thing we've learned it is that deflation scares always deliver outstanding prices for real assets. As for those punters who bought RIG at $80 in 2011 when we were buying the long bond, well Charlie, it's not necessarily a bad asset but you paid a bad price. But it is possible that the whole metals, mining, materials and energy sector treads water for a long time until markets see the Dollar's New Suit of Clothes for what it is.

Speaking of Emperors, with Abe-san having called a vote, we wonder whether Japan will enter a period of what might be called Electoral Dysfunction, during which time even the BoJ might feel unable to dispense additional Viagra. Most markets hate uncertainty, and there is a greater than zero possibility that Abe will not be re-elected. That would be curtains for Kuroda-sensei, the end for QE on steroids and the Nikkei.

With everyone including Hugh Hendry reportedly now long EWJ and short JPY "because, like, momentum" "I kno, right?", the likelihood of a very naughty little counter-trend move is growing.

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Anonymous
admin
November 18, 2014 at 8:01 PM ×

I've enjoyed reading your posts here guys.

But this is the day that I get up off the table. From irrational exuberance to the dotcom bubble, from measured pace and ninja loans to the financial crisis, and now standing ready to provide support to who knows what.

I give up. I fold. I will celebrate the inevitable Nobel prize that Mr. Bernanke will receive in a few years.

There is no use challenging the worlds biggest hedge funds when they are armed with printing presses.

If they would kindly publish a list of preferred assets, I would be happy to comply.

Anyone have any boot that need polishing?

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washedup
admin
November 18, 2014 at 8:07 PM ×

anon 8:01 - here is a list of all preferred assets:

**ANY - ALL!!**

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amplitudeinthehouse
admin
November 18, 2014 at 8:16 PM ×

There's no need to wait to see what the Dollar does, Abe has proven my point and proven how unreliable and elastic free the wads of liquidity can change the mental state of supply and demand in a market.
It's a write off or write your own ticket scenario it kinda depends from where you stand.
I can't even stand the sight of it anymore looking at that parabolic chart. Whats that telling ya. Piss off Abe.

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amplitudeinthehouse
admin
November 18, 2014 at 8:38 PM ×

Abe , your the best!

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Mr. T
admin
November 18, 2014 at 8:48 PM ×

Lots of eyes on HYG/JNK but under the hood (FICM etc) it looks primarily driven by weakness in energy issues. This should not be all that surprising, and does not really seem nearly as ominous as it could be. Like CPI, we need an "ex-food-and-energy" HY index.

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amplitudeinthehouse
admin
November 18, 2014 at 9:32 PM ×

We've found with Abe-economics there's no elastic band around the liquidity taps to stop the gushing of eager and younger market players that haven't been around to trade a collapse in confidence from ma and pa traders. Now with Abe-economics it's off with the elastic and off to the races.Enjoy.

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Anony
admin
November 18, 2014 at 10:45 PM ×

Greedy Gas Stations, eh:

http://www.marketwatch.com/story/gas-stations-were-slow-to-pass-on-oil-price-slide-data-show-2014-11-18?dist=afterbell

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Polemic
admin
November 18, 2014 at 10:49 PM ×

Gas stations? price manipulation? Someone should go through all their watsapp, Skype and 888-Girls late night chat lines and point out all their grammar errors and mock them for being chavvy and not fit for their jobs and say that gas station attendant's haven't changed since the 80s and that all people in the oil trade, including the receptionist at BP HQ in canary wharf, were misogynistic bullying male stereotyped Neanderthals.

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amplitudeinthehouse
admin
November 18, 2014 at 11:03 PM ×

We don't mock here, Pol..son we give you the reality, that reality sometimes comes in the form a tattoo , loss trade or just a little victory here and there.
But you son, you get a tattoo today along with the keys to a house and a car with your choice of color. I hope you enjoy it as much as we did here.

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amplitudeinthehouse
admin
November 18, 2014 at 11:16 PM ×

Son,sorry, you don't get the "Newtown Special" tat..why? b/c I've bet the house that'll you'll have another much bigger calamity install for us spectators , I'll be there to personally engrave it..what color?

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CV
admin
November 18, 2014 at 11:39 PM ×

Santa Rally courtesey of TWINE in Europe? Stranger things have happened ... Cyclical v Def in the eurozone is at panic levels, ... Rotate them sectors chaps ��

But yes, agree with sentiment in the main, looking for another 50-100 points going into Xmas is rich!

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Anonymous
admin
November 19, 2014 at 12:03 AM ×

Amos, for the love of God, put down the pipe,

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amplitudeinthehouse
admin
November 19, 2014 at 12:27 AM ×

Piss off!, Anon 12.02..I've just spent two weeks off from blogging waiting in anticipation for this clown of a market to walk right into a liquidity trap delivered by our man Abe-economics and this week he delivered in spades and your telling me I'm the one smoking?
Your not invited the Macro EOY Ball, Pal..where you will find us all still bowing to Abe-economics liquidity slush fund.

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Anonymous
admin
November 19, 2014 at 12:33 AM ×

Who's the clown?

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Nico G
admin
November 19, 2014 at 5:48 AM ×

Hunter Thompson is back and haunting traders' forum

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amplitudeinthehouse
admin
November 19, 2014 at 8:20 AM ×

Piss off Pal, I'm not having anything to do with that trade..laugh at you face.

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Anonymous
admin
November 19, 2014 at 9:08 AM ×

Anyone noticed what USD/JPY has done to the rest of Asia these last few weeks ?

Seems like China, Korea , Australia are feeling the full force of it whilst everyone is fixated on Europe

Abe not a popular guy in his own backyard.

O/T but Chinese house prices down 69/70 cities again with new starts +39% y-o-y.... where have we seen this movie before ?

devaluation dilemma writ large in China

Ausssie miners getting smoked, Aussie long end a one way bet

Korean Won vol ?

Macro punters would do well to divert their attention from S&P IMO, plenty going on elsewhere

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Anonymous
admin
November 19, 2014 at 10:58 AM ×

A look under the hood of the S & P while the US economy keeps chugging along:

http://www.financialsense.com/contributors/chris-puplava/credit-markets-signaling-near-term-caution

Rossmorguy

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Anonymous
admin
November 19, 2014 at 11:24 AM ×

@ anon 9:08 : good point

For all the talks out of China about rebalancing growth and investing in infrastructures, they are going to feel some serious pain pretty soon; in fact, my guess is they are already and the stats are next to useless;
Pissing contest between the BOJ and PBOC next year?
That should light the fire under risk assets a little more; after all, the liquidity champion so far are the chinese....
The question is: is it relevant to DMs?
Remember 1997 and 1998: Asia and EMs in general in pain and US equities (as well as Europe) skyrocketting eventually after 10/1998 and into early 2000;
I think the hot money flows again according to the same script. It explains nicely PE expansion for DMs.
Yes, it will alll end in tears but inbetween, there is a tidy bit to be made.

Best

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Anonymous
admin
November 19, 2014 at 4:43 PM ×

Leftback - yes I saw the Kissinger comments. However he also says (in his new book, if you happened to have read that) that Putin's bullying behavior in Georgia and Ukraine is counterproductive to world order. But I guess unilateralism is ok when it's just the EU's energy interests at stake. In my mind, sanctions are fully justified, particularly when Obama tried to work with Putin in the 1st term and basically got shat on by the kleptocrats in Moscow. If Obama had any balls he would call up Putin and tell him to play ball or the Keystone pipeline gets approved next week.

Re: USD/JPY, I hope you haven't been short because you've been talking how overdone it's been for 10 big figures.

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Nico G
admin
November 19, 2014 at 6:47 PM ×

Obama and balls in the same sentence?

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Leftback
admin
November 19, 2014 at 7:16 PM ×

Re: USDJPY. Indeed. Every time it seems overdone they have pulled out another bazooka. This is why one always begins with very very small positions....

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