Kyle Bass: BOJ Will Need to Make QE Bigger to Control Rates

May 24, 2013 By 3 Comments

hLegendary fund manager Kyle Bass was on CNBC Thursday, discussing Japan’s plan to for ¥120 T in QE over the next 2 years, and the crisis Japan finds itself in when purchasing ¥120 in bonds is not enough to contain rates.  Bass states that the outstanding supply of JGB’s are so massive that when rational investors respond to the BOJ’s massive QE program by selling even a marginal amount of bonds, the central bank’s bond purchases will be overwhelmed by selling, and QE will have to drastically increase to contain rates:
There are ¥1 Quadrillion in bonds out there.  If 5% of them are sold, that’s ¥50 Trillion! ¥60 Trillion a year in QE won’t be big enough!
Weak yen doesn’t equal higher stocks ad infinitum.  Many businesses will move south, and you will continue to see things bifurcate.

Bass’ MUST WATCH interview is below: [Read more...]

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Stewart Thomson: Buy Gold On QE Exit News

May 22, 2013 By 1 Comment

The timeless market adage, “Buy the rumour, and sell the news!” may be something to carefully ponder, at this point in time.
Here’s why: A lot of the anticipation for a reduction in QE may already be factored into the current gold price.
The question you may need to ask yourself is, have the bears dropped the ball, by overplaying their QE reduction card?
There is also a classic double bottom forming in gold, and I’m sure that many technical analysts at the major banks may soon begin talking about it, in their daily commentary to investors.  For this double bottom pattern to “activate”, gold must trade at $1490, but if it does, the technical target is…. $1680!
There are probably very few gold investors who believe such a move is even possible, let alone likely, but markets have an odd habit of doing what is least expected. [Read more...]

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Abenomics Brings Currency Wars to G7 Talks

May 10, 2013 By 5 Comments

Shinzo Abe unleashed his plan with the blessing of the Bank of Japan to begin aggressive government bond purchases. This has led to a massive growth of 60% on the Nikkei and is deflating the yen and boosting their exports.   Kyle Bass of Hayman Capital, a strong gold bullion supporter, previously described the country’s combination of; the highest Debt-to-GDP ratio, its large trade deficit, low FDI and a declining population as a “vicious cocktail”.
Abenomics in simple terms allows the nation’s Prime Minister to push its supportive Central Bank to increase the money supply by ramping up government printing presses, resulting in the yen dollar to break the ¥100 barrier.
Not un-expectantly, this aggressive and potentially calamitous policy has caused other countries like South Korea & New Zealand to cut interest rates, noting the damaging effects the deflated yen has on its exporters. [Read more...]

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The Incredible Weight of Quantitative Easing

May 7, 2013 By 13 Comments

quantitative easingSkip the supposed theory and purpose of Quantitative Easing, and ask yourself what is its equivalent weight? Suppose we use the $85,000,000,000 per month that is officially acknowledged and round it to $1,000,000,000,000 per year and relate that $1 Trillion per year to items more easily understood:

  • What is $1 Trillion expressed in truckloads of one ounce Silver Eagles?
  • What is $1 Trillion expressed in truckloads of one ounce Gold Eagles? [Read more...]
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Fed to Replace QE With Outright Money Printing?

May 4, 2013 By 24 Comments

BernankeThe US economy would have to undergo a major readjustment if QE ceased. Quantitative easing could even be replaced with outright money printing.  One prominent hedge fund manager is already calling for it!
Regardless of day to day moves in the dollar, the US currency has to decline in the long term.
The long term dollar chart looks terrible! [Read more...]

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FOMC Minutes Released Early Due to Data Leak, Hints QE to End By 2014

April 10, 2013 By 22 Comments

The FOMC has just released their minutes early (scheduled release was 2pm EST) due to a leak of the minutes.
The MOPE continues, with the FOMC members reportedly stating that the pace of QE will slow mid-year, with QE ending altogether by the end of the year:

In light of the current review of benefits and costs, one member judged that the pace of purchases should ideally be slowed immediately. A few members felt that the risks and costs of purchases, along with the improved outlook since last fall, would likely make a reduction in the pace of purchases appropriate around midyear, with purchases ending later this year. Several others thought that if the outlook for labor market conditions improved as anticipated, it would probably be appropriate to slow purchases later in the year and to stop them by year-end. Two members indicated that purchases might well continue at the current pace at least through the end of the year. [Read more...]

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If the Japanese QE Hail Mary Fails…

April 6, 2013 By 8 Comments

qe hail marySubmitted by Bill Holter:

The yield on 10 yr Japanese bonds DOUBLED in just one day’s trading (from .32 basis points to .65)…causing their bond market to CLOSE.  Now, only 2 days after the announcement, JGB (government bond prices) have not only given up all of their gains of yesterday but yields are actually higher now than before the announcement.  Call it “bond vigilante ism” or whatever you’d like, it looks like investors did some mental math and figured out that less than 1/2% interest is not compensation for anything, especially when the government basically announced that the Yen will be “halved” with-in 2 years. [Read more...]

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Deepcaster: Riding the Big Profits Kahuna – How Much Longer?

April 6, 2013 By 6 Comments

metalsSubmitted by Deepcaster:

The Equities and Bond Markets have been riding The Big Kahuna of Fed, ECB, Bank of England (and now the Bank of Japan’s) Q.E. et al. for several Years Now.
But for how much longer can Investors expect to ride these Market Boosting Central Bank Injections and other Interventions before Disaster strikes and the use of QE reveals itself to be clearly Counter Productive?
Increasingly, these Interventions are seen to be Disasters: [Read more...]

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SD Weekly Metals & Markets 4/5: BANK OF JAPAN GOES KAMIKAZE

April 6, 2013 By 30 Comments

SD WEEKLY METALS & MARKETS 4/5/13:

  • Trading recap:  Support holds.  Make that FIVE times silver has tested $26.  Gold closes strongly up off $1550, silver over $27

  • Physical silver shortage widens as wholesalers suspend sales of ASE’s, 90%, lengthening delays on all physical silver products seen in wholesale market!

  • Bank of Japan goes Kamikaze, announces ¥50 Trillion annual QE, will buy REITS, bonds of all maturities, and EFTs!

  • QE to infinity:  Jim Sinclair now has mainstream company:  Columbia Professor Michael Woodford and helicopter money

 The Doc and Eric Dubin give their perspective on the biggest stories of the week in the SD Weekly Metals & Markets  [Read more...]

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Kyle Bass On ¥1 Quadrillion in Debt: The Japanese Zone of Insolvency-They’re Finished!

April 4, 2013 By 4 Comments

Kyle Bass JapanFor those unable to attend the Initiative on Global Markets conference in March, legendary fund manager Kyle Bass gave a shocking and eye-opening 48 minute presentation on Japanese debt, and how the ¥ will be the first currency to crash and burn in the rapidly escalating global currency war:  

The Japanese interest expenditure is nearly ¥11 Trillion.  To put that in perspective, their tax revenues are ¥43 Trillion.  Japan is spending 1/4 of their tax revenue on interest alone today, with interest rates at zero (5 year bonds are at 17 basis points). 
This is the zone of insolvency!  There is no looking back!  If Abe and Kuroda really achieve some sort of inflationary outcome, and the swaps move, they’re finished.  Every 100 basis point move in cost of capital costs Japan ¥11 Trillion.  A 200 basis point move has their debt service exceeding central government tax revenue! Those wishing for inflation do not know what they wish for!

Bass’ full MUST, MUST WATCH presentation on Japanese & global debt markets is below: [Read more...]

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BOJ Announces ‘Shock-And-Awe’ QE, Will Purchase ¥50T Annually in ETFs, REITs, Bonds

April 4, 2013 By 10 Comments

shock and aweThe Bank of Japan satisfied stock markets with a host of new monetary easing that sent the yen tumbling and helped stocks recover from losses. The fact that it is risks an outbreak of significant inflation and possibly a currency crisis is being ignored by market participants for now.

The central bank said it would introduce “quantitative and qualitative monetary easing” with steps including hiking purchases of Japanese government bonds to an annual pace of “about 50 trillion yen” ($530 billion), buying bonds of all maturities rather than the previous three-year-from-maturity limit.

Incredibly, the BOJ is increasing purchases of exchange-traded funds (ETFs) and real-estate investment trusts (REITs) – a sign of monetary imprudence if ever there was one. [Read more...]

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Bank of Japan Set to Unlease Massive Cost-Push Inflation, Propel Gold Well North of $2,000

April 3, 2013 By 8 Comments
Image: Jonny O'Callaghan

Image: Jonny O’Callaghan

Submitted by Stewart Thomson:

All financial eyes should be focused on the BOJ (Bank of Japan) right now.  Money managers are calling this week’s BOJ meeting, the most important one in many years.  Key market players expect Governor Kuroda to imitate Ben Bernanke’s actions, and begin buying longer maturity bonds, and more of them, with electronically printed yen.

Kuroda has said he will do “whatever it takes” to get the Japanese inflation rate up to 2%.  Cost push inflation (CPI) will likely be the horrific consequence of doing “whatever it takes”.   Japan is the 3rd largest economy in the world, far larger than Germany, which is number 4.  CPI could devastate Japanese savers.  Worse, because Japan is such a large economy, CPI could spread around the world, and I think it will.
The only good news about CPI is that it could push the gold price well above $2000, and push your gold stocks to new highs. [Read more...]

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Alasdair Macleod: Money Supply Accelerating

March 25, 2013 By 14 Comments

The monthly figures for the US dollar components of Austrian, or True Money Supply, for February are now in.

The path of least resistance is simply to continue to issue more and more money (so long as it has any purchasing power). The alternative, permitting the collapse of the banking system, businesses and even government itself, is unpalatable. Meanwhile, the dollar has a brief window of zero interest rates before the effect of excessive increases in money quantities on prices graduates from inflating asset values to inflating prices for food, energy and other consumables.

[Read more...]

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Ominous Stock Market Technicals

March 24, 2013 By 39 Comments

stock market collapseSubmitted by Morris Hubbartt:

At this point, quantitative easing is pumping about 85 billion electronically printed dollars a month, into bonds and other “quality assets”. Without the artificially low interest rates that QE creates, the economy would probably implode.  I view the current market as a dangerous place to allocate investment capital. I targeted 13,500 initially, for the Dow.  Now I’ve added a 2nd target, which is 12,200.

Down-day volume is beginning to overwhelm up-day volume, which is extremely bearish. The Dow could soon form a huge double top pattern, just as the infamous “Sell in May, and go away!” period of time arrives!
Overall, the stock market continues to be a huge beneficiary of QE policy. How long can this stock market rally continue? To help answer that key question in more detail, I am focused on two leading indicators. [Read more...]

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“Gold Is The Ultimate Money” says Ron Paul

March 21, 2013 By 11 Comments

Ron-Paul-with-Silver-Circle-Round[1]Dr. Ron Paul was interviewed by Fox after the U.S. Federal Reserve confirmed it will continue its QE program highlights the importance of gold as money.

On July 13, 2011, when Dr. Paul was a U.S. Congressman he asked U.S. Fed Chairman, Ben Bernanke, “Do you think gold is money?” and Bernanke replied, “No, it’s a precious metal.”   Dr. Paul countered, “Even though it’s been used for 6,000 years?” But Bernanke denied gold was money and said, “No, it’s an asset. Just like T-Bill’s are not money.”

The Fox News interviewer then commented, “Cyprus has taught us that governments can confiscate money that you’ve earned or even paid taxes on. Rampant quantitative easing and price fixing by governments may prop up the stock markets but it doesn’t keep unemployment down. The U.S. Fed is going to continue its QE program which is good for gold.” [Read more...]

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