Retail Investors Pig Pile Into the Yen: It's Been Hard Not
to notice how many investors piled into the JPY this week, after, of course, it had already made it's move higher against the USD. More broadly, it's certainly interesting to contemplate that in a world clearly bereft of non-correllated opportunities, that it's still the JPY and CHF that caught the bid, during the Storm.
The last 10 days really put a stake into the heart, for example, of the Dollar Bull During Deflation Theory, which I first heard from Richard Russell a few years ago, and has even been embraced as recently by smart managers like Peter Theil of Clarium Capital in SF.
I just don't see it.
Despite the fact that the JPY has been printed into oblivion, it appears that any rising deflationary pressure in the USA is not going to help the USD, at all. Hey, I don't like the JPY that much either. But the moves in forex the past few weeks are telling on mutliple levels. One level is the carry trade. The other level is a tad more fundamental. In a big global slowdown, it looks like JPY will be favored, not only b/c of the persistent savings levels in Japan, but also, because its a pan-Asian currency proxy. The JPY is catching part of the Bid that frankly would be going into the Yuan.
Despite all this I go back to my original point which is that piling into the JPY at 114.50 on Monday morning was a very moronic move, and I saw all sorts of retail investors doing that Sunday night. Furthermore, the number of forces lined up to keep the JPY weaker far outwiegh forces to make its stronger--again, ex a big global dislocation. imo, the BOJ's rate hike pace is at best one hike every 6 months, and frankly I wonder if they won't hike again until 2008.
It's certainly distressing to see the dearth of non-correllation globally right now. Accumulating some JPY makes sense, I would venture, but only on extreme weakness.
Gregor |
