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Strategies & Market Trends : January Effect 2003 -- Ignore unavailable to you. Want to Upgrade?

To: RockyBalboa who wrote (601)	6/24/2003 7:49:30 AM
From: Londo	Read Replies (1) \| Respond to of 666

Well, there still is a rate differential - shorting Yen and buying US Bonds seems to be a way to make the spread, although it would seem natural to short the US Bond if Yen rates got too high - i.e. the traders that are short Yen would be forced to cover. In the event of a Japanese economic recovery, shorting the bond futures would probably make you a mint considering their huge fiscal deficits and inflationary time bomb that they have .. right now nobody's spending because of deflation, but what happens if we reversed this and everybody decides to spend their savings because of inflation? Their long term yields could rise from 1% to 10% in a couple years! The bank would have no choice but to pay for the debt through inflation - buying Japanese equity and selling Japanese Bonds would be the way to go - let's hope that IB gets their act together and gives access to their futures exchange before the action happens (I suspect it'll be within the next 18 months). My eyes have been focussed somewhat on Japan over the past 3 months, but I'm still studying. Difficult to get good macroeconomic information on the country and their banking system, and the general 'psychology' there. Interesting tidbit that I read: "In 1989 Japan’s GDP was 20.4 per cent of worldwide GDP, while the country’s market value accounted for 39.6 per cent of the global total. Now GDP is 16.9 per cent of global product but Japanese stocks account for a mere 8.9 per cent of total market value. . . Operating profit at Japan’s 1,000 largest companies is estimated by Toyo Keizai, the corporate data provider, to have grown by 24.3 per cent in the fiscal year to March 31 and is forecast to grow by 11.7 per cent in the current fiscal year." (“Look for Colour in a Monochrome World,” Barney Jopson, Financial Times, April 7, 2003.)