Tuesday, August 16, 2016

If I'm Japan The Yen Has Me Totally Stuck

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*If I'm Japan, what do I want the Fed to do.
*If they raise rates they take all my bond investors with higher rates.
*If they don't raise rates the yen goes up as the dollar goes down and kills my exports.
*Not only is the Fed totally stuck, so is Japan.
If I'm Japan I'm as stuck as the Fed. Yen falling below 100 is going to kill me. If the Fed raises they take all my assets because of their higher rates. If the Fed remains on hold my yen goes up which kills my stimulus expectations. I don't know what I'm going to do.
As the yen crosses over 100 we have a confirmation of a call we had August 2nd that there doesn't appear to be much in the way to hold back a strong yen.
(For this entire report I am now Japan, ok? I want to put myself in their shoes. I don't know this has ever been done, but let's try. You can't fully understand someone's position unless you stood in their shoes.)
Let's Review Scenarios
Totally Pretend Scenario 1: The Fed Raises Interest Rates:
If the Fed raises interest rates I'm totally stuck. Why, they have much higher rates than I (Japan) do. All my investments will go over there.
In fact, I was surprised to see that even though they didn't raise rates there was a renewed flight of capital to the US.
Here're the numbers. The following grid shows Japan foreign investment in the US. (Treasury.gov)
Foreign holdings
Billions20152016
SeptOctNovDecJanFebMarAprMayJun
Japan1177.11149.21144.91122.41123.51133.11137.11142.81133.21147.7
M-to-M-1.7%-2.4%-0.4%-2.0%0.1%0.9%0.4%0.5%-0.8%1.3%
Total-1.9%1.0%1.2%0.9%-0.3%0.4%

The above grid shows that investors took money out of Japan and sent it to the US. That is a pickup. Investment outside of me (Japan) into the United States reached levels not seen since October.





Chaim Siegel has been working with hedge funds and mutual funds as an analyst and PM his entire career. Chaim specializes in earnings and predicts, analyzes and reacts to earnings and earnings events as well as developing current company stories with a hedge fund perspective. If you want his analysis real time sign up to the right for real time email alerts. #in, $spy, $qqq, $iwm, $vxx, $ycs, $fxe, $EUO, $YCS, ^GSPC, INDEXSP:.INX, #elazaradvisorsllc, CME Globex: ES Disclosure: These trades can lose you money and principal especially when using leverage BY USING THIS SITE YOU AGREE TO TAKE ALL RESPONSIBILITY FOR YOUR OUTCOMES AND LOSSES AND HOLD BESTIDEAS, ITS CONTRIBUTORS AND ELAZAR ADVISORS, LLC HARMLESS