Macro Man

Well we had better mention the Aud before we kick off. Macro great, bounce none. So we reinstated the shorts through 0.9950. But anyway, onwards..

Much has been made recently of the disinflationary trends globally together with the apparent end of the commodities super cycle which is now evident in global price indices. Please note we are using the term "disinflation" (a decrease in the rate of inflation) which should not be confused with "deflation". Now, this has been reasonably well noted by market participants, but TMM thinks that the effects are not yet well explored. Specifically, TMM thinks the decline in inflation volatility has subtle but strongly positive effects on financial asset prices and a negative effect on commodities. To that end, history may serve as a guide. The last time the US went through a period of stable inflation, whereby both headline and core (i.e. headline ex energy & food) inflation were closely coupled, was in the 1990’s:




TMM recognizes that given the backdrop today, the 90’s may seem quite different. But it’s worth noting that for this exercise, we are not comparing absolute levels. Instead, we are concerned with relative changes. In other words we are more concerned with the direction rather than the size of the move.

The Effect on Bonds is a bit tricky to measure, since Fed policy is such a big driver. But in this respect, we can use the yield curve as a very rough proxy for the yield premium on long term treasuries. And the story there seems to be one of a declining yield premium. From 1995 to 1999, the 5s30s yield curve actually flattened, even though the Fed cut rates by over 100bps. It’s quite possible that the improving budget deficit at the time may have had an effect , but the budget deficit is also improving now. All in all, this makes sense – with decreasing inflation volatility, (and by extension central bank activity) investors are likely to demand a lower premium for long dated bonds.





The Effect on Stocks is also quite positive, as they are also a long dated financial instruments. With declining inflation volatility, nominal earnings volatility can also be expected to decline, which should reduce the risk premium. There is an old 20-CPI estimate for the S&P PE ratio which has had some reasonable success over the long run. This is now suggesting that PE should be in the very high teens:




The disinflation impact on gold, however, appears to be quite bearish. The chart below shows gold in white, Fed Funds rate in Orange, CPI in Yellow, and the price of WTI crude oil in purple. Note that from the mid 90’s, the price of gold fell ~60%, even though during this period the Fed cut rates, we got a series of systemic events (LTCM, Asia crisis) AND oil prices rose. Again, the improving federal budget deficit may have also contributed back then – but that is also happening now.




In addition, there are some unique instances that are worth mentioning. Obviously disinflation gives DM central banks more room to pursue QE. But ironically, the disinflationary impact probably also makes QE less effective at generating inflation. Case in point: Headline Inflation in Japan has averaged 40bps above core inflation over the past decade. This suggests that once the inflationary impacts of the weak Yen runs its course, it will be even harder for the BoJ to achieve its 2% inflation target. The small caveat here is that the Nipponese CPI basket can actually be changed or rebased to give the appearance of higher inflation, at least temporarily. TMM expects such a change within 2 years and remember the basket being manipulated in 2006 to, believe it or not, print inflation lower (smoke and mirrors and government payments).




For Europe, current austerity targets look even more difficult to achieve, given that EMU inflation has averaged 56bps over core inflation the past decade:




So where does this leave us? Last to the party with yet another reason as to why equities will keep on going to the moon and gold through the floor? We would actually like to think we were one of the first to arrive at this current party but popped out at the end of January to get some cigarettes only to find that everyone is high by the time we return. But this is a longer term trend and as we are calling for the party to go on into the night we might as well wade in.

But how? We actually think that the chances of a melt up are still pretty high. Some of us were there in 1997-2000 and can smell exhuberance and fear. That darkest of fears, the one of missing a profit. As we have said many a time, it ain't over til 25yr olds are driving around in 3 series BMWs bragging about their portfolios. We are adding to low delta SPX calls. Gold? Well we are already short and happy to ride that into a golden sunset.

Continued good jobless data has reset USD and US mood in general and there has been a proliferation of US Jobs analysis resulting in line-drawing that extends to 6% unemployment levels after further +200k NFPs. The USD/JPY break was perhaps the sound of the market cracking as this weight was added to that of Abe and EU policy moves and clues.  Whilst everything US is indeed looking better than a lot of everything else, it may be getting a bit short term extended. 

AUD appears to be on the receiving end of Soros / CB de-diversification / pick your bogeyman. Either way we are pleased, but note the sensitivity of Aussie inflation to imported goods prices. You can only make money on bills and AUD up to a point. We will add that the USD/JPY break has pulled many USD crosses through short term targets and though we expect AUD to underperform we are lightening our AUD/USD shorts at this level looking for a bounce to resell on.

Schauble's talk of loosening his garrotte of austerity around the throats of periphery pre-G7 (why are they holding at a public hotel rather than at "Chequers"?) may just be pre-talk camaraderie, but there is a theme.  Despite weak Italian data we see the Eur/Usd down move abating as growth prospects balance the -ve rate fears and instant USD effect.  It's still actually in a range.  

Equities in general - Towel chucking from perma-bears, yield calcs on zero cost funding and much much more continue to fuel the boom. We have a piece prepared on background "why buy equities long-term" but its such a common call we are caught behind the curve. We are dip buyers like the rest of the planet. Meanwhile, make us a price on how long it will be before regular daytime TV features stock trading programs again. 

TMM note the mad rush into "safe" assets like XLP, XLU, and the like. TMM have more to say on this at a later point but suffice to say all low volatility dividend payers are not created equal - we will revisit this soon. 

Tesla has proven that there's bad investment advice, then there's the advice you get from Sarah Palin. TMM think ultimately better battery technology is a great leveller in EVs much like cheap polysilicon was for solar. TMM think the Suntech chart from 2007 may be instructive here. Some of us were long but are no longer. Tesla worth more than Fiat? Short term that price action has got "dotcom" written all over it. 

On general asset price rises - QE is fuelling asset price rises but doing little  for income. In fact income ratios are falling as asset prices rise. Great for holders of capital but until they withdraw it to spend, the gap of wealth between poor and rich continues. QE has to reach income before it works. TMM have been wondering if just bypassing all the links and handing £5000 to every head of population would be quicker and benefit the poor over the rich.

Commodities:- TMM note that while equities are now trading on concerns of QE, zero financing etc much as commodities did in 2009, commodities are now trading on FUNDAMENTALS. Fancy that. Note crosses like Palladium / Silver - the former will stop being produced at these prices as every South African mine goes under, the latter falling due to structurally declining demand trends ex hoarding which also happens to be going backwards. Its a pity all those commodity funds are getting redeemed just at the time having any expertise has value but that's life with hedge fund allocators we suppose.

TMM are also wondering if speculation can hold inflation lower than it where it naturally should be. As the speculative drive into commodities, especially oil, seven years ago drove up actual inflation, perhaps the expectation of no/low inflation drives speculative positions into short commodity trades that feed through into real low inflation. If so, they are winding up a coil for a sharper snap back in inflation when the time comes.

Finally for all those long Nikkei / yen hedged - Been a good ride hasn't it? But crowing demands beer buying for the house

It's been a week or so since our last post and May is lining up to be another case of capitulation. Capitulation on the inflation trade, capitulation on the growth trade and capitulation of the "world is normal" trade. And throughout this equities march onwards. Buy buy buy buy.

There's plenty being said at the moment about what other people think, to the point that TMM are getting quotosensitive (much like "photosensitive", but this brings us out in hives when we hear other people's opinions repeated as religious portents). If we want opinions from people who have just as little clue as everyone else then we will talk to ourselves thank you. We don't care what Bill or Warren or Paul or Roggoff or Rienhart or any pundit thinks. We should stop reading what other people think and start thinking for ourselves.

 Is this part of the Twitter problem? Recycling of thoughts diminishes the ratio of originality to quote to such a point it's not worth thinking for yourself? Or is it something to do with education? One of TMM's offspring was writing an essay last week and had an original thought to add but felt they couldn't because they had to reference all thoughts and ideas. "Reference yourself" we suggested. But no, a rare original thought bit the dust because someone else HADN'T said it first.

 The Roggoff Rienhart witch hunt appears to us to be more of a blame game in a world of desperation rather than anything important. Are people really not thinking things through enough for themselves, that a spreadsheet error can cause global policy error (this isn't rocket science). Oh actually scrub that, we've just remembered how the Buba work.

But, wow, imagine this ...

WEIDMANN: " Hey Wolfie, you won't guess what, I've just found a +/- error in cell A3, you know all zat shit about ze periphery and all zat austerity stuff, guess what?  We should be giving them MORE not less HAHAHAHA",
SCHAUBLE:- "No shit! That's hilarious! Do we tell Cyprus?"
WEIDMANN:- "Nah, fuck 'em. Let's tell zem we want a special haircut on ze depos, you know a "cyprus special", its like a normal haircut but twice the price and rubbish "
BOTH:- "MWUAHAHAHAHA"

Policy is not swung on spreadsheet corrections and if it is then it's time to change the policy makers.

TMM have been doing lots of pondering recently, mulling their own thoughts around and it's pretty hard not to just come out with a rehash of many themes we have posted here already over the past couple of years. So excuse the a number of back links. But one over-riding trend is the growing push against austerity. Populations get impatient and the data is still looking dire. Money multipliers are not working and the machine is grinding to a halt. Well that's the concern. Desperation is kicking in and any money that is being printed doesn't appear to be ending up where the printers would like it to. So today was another of those days when the world looks to the central bank wizards for results, but at this rate the great book of Central Bank Policy will one day be filed in libraries under "alchemy".

Dr Aghi, Abe and Bendrick hard at work -



So what did Dr Aghi come up with? On the face of it not a lot. A predicted 25bp cut and no special methods other than the special method of saying thalt he is prepared to use special methods. One of which is the much talked about possibility of negative rates -

"On the deposit facility rate, we said it in the past: we are technically ready. There are several unintended consequences that may stem from this measure. We will address and cope with these consequences if we decide to act. We will look at this with an open mind and we stand ready to act if needed"

Looking at negative deposit rates “with an open mind”? This has prompted TMM to go back to thinking about the if/how/why/whether they will be implemented. In this respect, a speech by Benoît Cœuré in February 2012 seems especially applicable and we wonder if Dr Aghi is paying direct reference to it - here is the link, along with some select sentences:


• From a technical point of view, there is in fact nothing that prevents central banks from paying negative rates for the security they offer to depositors, at least temporarily
• Given the costs associated with holding large amounts of banknotes, it is likely that significantly negative interest rates would be required to trigger a switch from money holding to investment in banknotes.
• And there is a degree of hysteresis: a temporary situation of zero or negative interest rates can have long-lasting implications for banks and their trading incentives… The Japanese experience is of course relevant here. [9] Within three months of the introduction of the zero interest rate policy, the volume of transactions declined by around one-half and low turnover persisted until end-2006 when the zero interest rate policy was discontinued.
• Important market intermediaries, such as money market funds, could be driven out of business, as their business model loses profitability, for both domestic and foreign investors with excess liquidity may shift their investments to alternative, more profitable market segments.
• zero or negative interest rates may produce adverse effects on the profitability of commercial banks and financial intermediaries more broadly. In a financial crisis this can result in a credit contraction. All in all, the impact of zero rates on the profitability of banks remains uncertain and highly dependent, among other determinants, on parallel regulatory response.
• Overall, a switch to zero or negative interest rates bears some risks – mainly of a microeconomic nature – which would have to be weighed against potential benefits in terms of additional macroeconomic stimuli. It also has to be noted that such steps would be warranted only in the face of clear downward risks to price stability, which today are not present in the euro area. In particular, the discussion about deflation risks remains largely speculative.

For comparison, here are the ECB staff forecasts then and now:






Now, TMM recognizes that Euro area HICP inflation has been especially subdued recently. But even with these considerations, the ECB would have to sharply change the definition of ‘downward risks to price stability’ for negative rates to be justified given current forecasts, assuming it is still using the above prerequisites. Of course, it is possible that the ECB council has internally relaxed its criteria for negative rates – but that does not yet appear evident based on ECB member speeches.

But all this has led us back to looking at the effects of negative interest rates and some of the possible consequences, however we have discussed most of those HERE (Was that nearly a year ago already? Don't crises drag on?). But we were particularly reminded of this post by Cœuré's line "Given the costs associated with holding large amounts of banknotes, it is likely that significantly negative interest rates would be required to trigger a switch from money holding to investment in banknotes" which prompted us to think of ways of making holding cash even less attractive.

 Other than those listed in the previous post we suddenly had a Eureka moment that unifies an old anthropological conundrum of the small Micronesian Island of Yap with todays ECB policy dilemma. If you really want to make cash unattractive as a handy medium of exchange then you can't do much better than the Rai Stones of Yap . It is therefore obvious that the origin of these stones was a case of runaway deflation caused by a tribesman incentivised by large bonuses, leveraging his balance sheet by using complex derivatives to the point of creating a credit bubble resulting in a deflationary economic collapse and the implementation of negative rates on cash deposits by the Yapese central bank followed by the logical introduction of the most useless form of cash on the planet.

So TMM would like to introduce you to the new 1 Euro coin.

And how it will be used:-




The ECB committee popping out for a box of matches.

TMM thought it would be time to review their old friend, the Aussie. A couple of interesting research pieces have come out from the sellside at the same time as one member of TMM has been travelling downunder so we thought we would try to find some sense between the 10,000 ft world of the big picture and capital flows and slightly more granular information on capital expenditures from corporates.


Lets start with the big picture of Aussie capital flows and what is holding up the currency. Shorting AUD has been about as much fun as being in the octogon with George St Pierre - just when you think you've got the terms of trade flow right you get slugged with flight to quality flows and just when you think they are receding with normalization of the volatility regime you find mining majors rushing into the market to build mines and gas plants as fast as they can. Its about as much fun as being hit in the face, then kicked, then thrown on the ground and strangled until you tap stop out. Ie not fun at all. So, where are we now with respect to these key drivers of flows and where are we going?

First, it appears that portfolio flows have slowed down somewhat. There are some tentative signs of a slowing of reserve accumulation ex Japan and Australia has not seen material net inflows for a couple of quarters.

TMM are big believers in normalization of current account balances as being a sign of the world getting better and this does appear to be happening. So, if reserve assets are generally going down and the eurogroup does not do anything insane for a while, perhaps having had their false idol of Reinhardt and Rogoff smashed by a bit of basic spreadsheet math then there should be less net flows and much less flows to Australia. TMM won't bet the farm on this one but having been blindsided by these flows despite having got the commodities picture largely correct we have stopped whimpering and gotten out of the fetal position on this one.

Second, what about European bank deleveraging? This provided a substantial tailwind to shorts in 2011 but has also tapered off as of late. BIS data seems to indicate that Eurobank exposures to Australia are now low enough that it is unlikely to be a key driver and anecdotal evidence from our trip down here indicates that most eurobanks that are leaving the market are down to their last couple of hundred million dollars of loans. The loan auction-palooza of 2011 appears to be a long way away now.

Third - what about all that mining investment? This is a bit more contentious and frankly much more important of a driver of flows in the last year and going forward. Investment continues to be torrid and while the coal sector is desperately looking to cut capacity after an apparent step function change in Chinese thermal power growth and iron ore projects get cancelled the gas sector rolls on. Or does it? Here is ANZ's pipeline of future projects as of Jan 2013:
investment flows do not do it then rate cuts cannot be that far behind.

Putting that lot together TMM feel that Aus$ is vulnerable to an old fashioned sharp move lower in a "thatshouldnthavehappened" style that is pure "Gold".

- Nikkei did not fall despite Usd/Jpy pull back and the US falls.

- Asian Markets did not really fall despite US and European actions. 

- So this is not a global relinked "risk off" move and still sits within "positional" explanations.

- Gold has bounced though the bounce is still ex-feline. 

- Some of TMM have been doing some company visits downunder and keep hearing that "winter is coming" from mining guys. We aren't sure if this something to do with "Game of Thrones" or just a southern hemisphere reverse seasons thing or whether this is just a reflection of mining contractors' order books.

- Aud is looking as sick as a dawwg (our cross hairs are back on it). 

- Not much real news, with Price is News starting to dominate. 

- Boston - really terrible and hopefully an isolated event. 

- China is slowing but not crashing. 

- Jim Reid has devoted 50 odd pages to showing that historical returns to high yield at these spreads are really bad. Thanks Jim, we know. Now what is the catalyst?

- Soft ZEW result is already in the price. 

- John Sweeney's BBC Panorama program about North Korea didn't tell us anything new or actionable and in TMM's eyes was a journalistic self-indulgence that, having used LSE students as cover,  puts future acedemic research in dangerous lands at risk. TMM wonder if, like they do with dodgy banks, it's time to split the BBC into a "Good BBC " and a "Bad BBC".   

- A recent dreadful dining experience has spawned a new entry for the TMM glossary:- 

Aqua Nueva - A distillation of pure arrogance and appalling service containing no spirit whatsoever served in a glitzy shallow vessel to the detriment of the recipient.  As in  "The Eurogroup served Aqua Nueva to Cyprus". Like the London restaurant with the same name and dreadful attributes, to be avoided at all costs. 

- John Sweeney = Aqua Nueva

TMM are finally emerging from their Gold bear bunker, having decided two years ago that there was never ever any point in discussing the value of gold as it verged on religious resulting in a torrent of abuse from the spamchuckers that made it just not worth the bother. But this morning we have got to the point where it can't be ignored any longer as some are blaming it for moves in other assets.

Gold is back to 2011 levels and Silver has just broken through a support at 26.00 that, if you like horizontal support lines, has been the road over a sinkhole.

Anyone who has ever studied supply and demand Econ 1.0.1 will now be scratching their heads and looking for a conspiracy theory to explain away something that "shouldn't have happened" (just go and have a look at the Hero Zedger comments in any gold piece they have posted recently). At this rate the tin-foil beanie wearers will be able to afford silver ones  But isn't it the biggest no brainer that if you print money then the value an asset of limited supply against that money has to rally?

Let's pose a question to our Econ 1.0.1 class in the style of "A Question of Sport's" "what happens next" round.

Presenter - "Japan, running out of options and seeing the success of US actions, opens the taps and announces it will print an incredible amount of money, vowing never to stop until it encounters inflation. So what happens next?"

Ex sports star - "Well Jpy takes in on the chin and hits the deck and gold goes to the moon and his shorts fall off"

Presenter -  "Anyone else?"

Other ex Sports star - "Gold catches fire and runs up the pitch screaming whilst the yen crashes into the posts"

Presenter "No. Run the film and lets see what happens to gold in yen terms.."



So what's all that about then?  TMM sees it as a lovely example of how theory disconnects from price via reality, in other words - TMM's price equation of Price = Theory + Reality (P = T + R) where reality is everything that isn't in the theory.  Theory is all well and good as long as you have enough people believing in the theory, or more rightly willing to back the theory with their own money. Its all very "Bitcoin". It will go up whilst everyone believes it will go up, whether that is based in economic theory, technical analysis, or just straight forward herd mentality. But TMM like to think that the world is more complicated that Econ 1.0.1 and just as Econ 192.168.0.1 is doing for Bitcoin so Econ 79.197.1 is doing for gold. No matter how much of a fixed asset it may be it is reliant on a) everyone agreeing that it is a store of value  and b) being better to hold than any other store of value, whether that is stocks, bonds, fiat cash or lumps or gallons of any other commodity.

But isn't gold an alternative currency? One of the requirements for a useable currency or money is that its value is predictable and has a low volatility. Pricing eggs in a currency that is wanging around in 10s of percents per day, whilst exciting for traders,  is not conducive to reducing risk for shopkeepers or customers. The argument that a complete transition to the newer money would eliminate the volatility relies on 2 assumptions. First that things would settle down after transmission as currency supply steadies and second that a transition would be possible whilst high volatility exists. The European transition to the Euro was accompanied with a volatility that tailed to zero in the run up. Jumping straight to a Bitcoin or gold function with the current levels of volatility would be impossible. So obtusely,  the very reason that Bitcoin (or Gold during its run up and collapse) could not replace existing currency is because of the very volatility that is responsible for its heightened visibility.

Isn't it a hedge against inflation? Well let's look at the chart below which is the US price of gold inflation adjusted.



We would imagine that a perfect hedge against inflation would see a flat line with the  odd wobble as expectations get ahead of price. The chart above shows that they are hardly small wobbles and at current levels we would need to see 100% inflation or the price drop from these levels by a half to get back to the sort of eyeballed averages of $350 inflation adjusted. If the above chart implies expectations for inflation are already to be 100% over current price then there is an awful lot of room for inflation expectations to take off before the price has to budge.
+
Which leads us on to think about inflation expectations again and to wonder if we are seeing something that should worry the BoJ. Just when they have unveiled their nuclear bazooka, designed to spark the living fear of inflation into its populace, are we instead seeing a general market capitulation in the inflation trade? Commodities are off everywhere. Oil is down another 2.5% on the day and linkers are doing the same. Even the ultimate measure of usd/jpy is off 2.5% from its highs. Or is it the growth trade being unwound? The growth and inflation trades are to TMM (and obviously the BoJ) much as the interaction of magnetism and electricity are to each other. They are probably bound by a single Maxwellian equation combining the two, resulting in some Fleming hand gestures. In this case, the resultant force on gold is represented by an extended middle digit.

Where is this leading us?  Corrective moves or a new phase? We have to say that our short term trading antennae are concerned that Asian time saw the biggest wash down in gold prices and Asian time zone rarely sets new direction and often sees blow off peaks or troughs. which causes us to pause before jumping in, but with Econ 1.0.1 having been taught a lesson in P=T+R we think it less likely for such trades to be as reloaded. In a way if this is either the US growth trade being lightened or the global inflation trade being lifted it is still very interesting as it is indicative of some sizable perception changes.

Our debate extends to where this leaves equities. On one hand we should have sectoral suffering as commodity producers fall but on the other hand the feedback loop of lower input prices is great for everyone elses' margins, which once again leads us back to preferring equities to much else. Having been left behind by the equity train since the start of Feb we are still hoping for a drop to buy on, hopefully that will be on a continued growth/inflation trade unwind. We do believe that ultimately policy WILL stimulate to the tipping point that will provide inflation. How do we know? Well they've told us haven't they? But that could be a long time off.

In the meantime there are a lot of 5 minute macro managers trying to reconcile  money management issues with long term theory.

Sorry to stick to a Japanese theme but the 2013 Japanese money tsunami is engulfing everything financial to the extent that many new questions are now being asked. Here are some of them.   

If you are a Japanese central banker do you -

a) Retire to the mountains having done your job.
b) Read the story of "Pandora's Box" that someone has just handed you.  
c) Wonder if leaving out the "capital controls" part of the Japanese 1932 Great Depression rescue plan policy you are trying to reuse, might be causing all your fresh money to fund other people's recoveries rather than your own.
d) Resume normal policy -  Do nothing and say nothing.   

If you are the FED do you -

a) Give praise that BoJ policy provides you with an exit route to QE via Japanese UST purchases. 
b) Suggest the BoJ also looks at buying US Munis. 
c) Wonder how long it will be before someone realises that Abe is a CIA asset orchestrating (a) and hopefully (b)
d) Write your CV and try and get out on a high to the private sector before you have to fire-hose real inflation and get engulfed in the flames.  

If you are US Congress do you -

a) Vigorously support Japanese actions by signing new trade and defence agreements (but ask not to be paid in Jpy).
b) Kick up a rumpus over Japanese currency manipulation and introduce trade sanctions.
c) Blame the other side and praise yourself ( business as usual).
d) Ask where Japan is and ask why they ain't speaking English.     

If you are a French politician do you -

a) Point to the rally in OATs and say it reflects confidence in French policy.
b) Point to the rally in OATs and say it reflects confidence in French policy and so raise taxes. 
c) Blame Gerard Depardieu for eur/usd's rally which is solely responsible for the demise of your oh so competitive export industries. 
d) Go back to lunch as it's the Germans running Europe not you so why bother. 

If you are a Swiss central banker do you -

a) Welcome continued large inflows of private money which you can use to fund local industry.
b) Worry like hell about why anyone in their right mind still wants to buy the Chf. 
c) Get ready to cut rates and protect the eur/chf floor
d) Wonder if you intervened by selling chf/jpy there would be some sort of financial logic loop explosion. 
e) Make all foreign deposits in Swiss institutions junior to locals.

If you are a Eurogroup member do you - 

a) Send a large hamper of Italian luxury goods to Abe with a bouquet and thank-you note.
b) Slap yourself on the back and issue press statements linking periphery rallies to confidence in your policies. 
c) Say the rally is a template to recovery, but Japan is not a template, neither is Cyprus (but bank reforms are) HOWEVER - you may use any of these as templates as mercilessly as hip hop artists use 70s funk bass lines.
d) Ask the Troika for a report on Japan and eye their haircuttable deposit base with envy.
e) Ask Germany. 

If you are the Bundeathstar do you -

a) Follow the master plan ignoring all other external influences. 
b) There is no plan b. 

If you are a European Utility with structural demand decline but with a sudden source of cheap Japanese funding do you -

a) Delever, take it like a mensch and show some regard for shareholder returns.
b) Go bananas building wind farms and other renewables on the cheap.
c) Help the Saudis build nuclear facilities. I mean, what possibly could go wrong?

If you are a Japanese REIT now valued at a 3.5% cap rate do you -

a) Build more condos and sell them to..err..... your declining population. 
b) Build more condos and lobby for immigration in order to have customers. 
c) Screw it, buy a bunch of assets in Brazil, Australia and anywhere else with vaguely positive carry.

If you are an Australian miner staring at what Japan has done to AUD/USD do you - 

a) Cry to the RBA and make a fuss. 
b) Lie on your back while your creditors have their way with you and think of England which long ago gave up inflation targeting.
c) Try not think about the topical debate about Thatcher and the history of the UK mining industry. 
d). Mortgage your jet skis and V8s.

If you were a struggling Greek Region facing all the grim reality of uber-austerity do you -

a) Knuckle down and get the olive presses going again, Japan and its effects are just too far away from the daily struggle.
b) Pray for a miracle involving finding a huge deposit of Gold under your feet which will transform your lives. 
c) Have all your prayers answered and find a huge deposit of Gold under your feet but then argue with your neighbours to the extent that no one ever digs it up and you lose all your friends. (for clue click here)