Japanese Yen

Japanese Yen

Well, as you can tell I’ve been away for a few.  Somehow the markets didn’t care.  I know it’s unbelievable.  They chugged along without worrying about my stops or my entries.  In the process I found out that I do have the ability to turn it off.  I had not done that for several years.  I did on purpose.  The ideas was to see if I could get a fresh look at the market on my return.  It seems to have worked.  Maybe someday I will share a little more about the unconventional way I look at the market.  For now I just want to thank everyone that has taken an interest in reading what I say.  I really appreciate you stopping by or following me on twitter.  Sincere thanks.

JPY Repatriation

I have been thinking about the long term implications of Japan’s earthquakes.  What comes to mind is the current set up in the currency markets where anyone that can has borrowed Yen to invest elsewhere.  Though this is an empirical exercise, I think it has merit.  Because Yen is so cheap that they almost pay you to take it, there are a lot of folks out there that have borrowed Yen to invest around the world.  But let’s focus on the Japanese at this point.  What is going to happen is that much like they do every year, the Japanese will have to repatriate their Yen.  This time however, they will need to do it to rebuild their country.  This will not be a move that will be done and undone quickly.  This move will be relatively more permanent than previous.  But here’s the thing that I would like for you to think about.  If you are a Japanese investor or firm that is going to repatriate your Yen for a lengthy maybe even permanent period of time, which investments would you cash in to bring the Yen back home?  Would cash out of high interest currencies like the Aussie?  Would you rather cash out of low interest currencies like the USD?  If you were going to cash out of low yielding currencies like the USD, would you go ahead and pull out of the US stock market?  You would obviously be thinking that if you start selling dollars the value of your US stock holdings would decrease right?  I’m not saying any of this is going to happen.  I’m just trying to ask the questions that I think are valid questions given the current conditions.

How about that US Dollar?

Somehow I think that Uncle Ben is under the impression that a devalued Dollar will actually keep inflation at bay.  This is pure speculation, but I think they believe that since the USD is the currency against which all others are either pegged or floating, that if they devalue, it will somehow have special privileges and counteract inflation.  But what they must not be seeing is that Gold and Silver by default will become the standard and then the USD will be worthless.  I think precious metals will (if they haven’t already) put a major kink in their plan and introduce the typical issues that devaluations have brought to countless third world countries in the past that were measured against the USD.  So in short, I think the USD is capable of becoming worthless, even more so than Bernanke is believing.  But guess what?  I’m just a guy with a keyboard and an Internet connection.  What could I possible know about what goes on in the head of Bernanke?  That is the absolute truth.  But it sure is fun to think and go through the exercise.  Right?

Thanks for playing with me today.  I wish everyone a great weekend.  May the pip gods smile on everyone next week.