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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: gregor_us who wrote (24760)	1/16/2005 2:07:21 PM
From: Crimson Ghost	Read Replies (2) \| Respond to of 110194

I do indeed follow the yen very closely since i have a long pisition in EWJ -- the Japan ETF. I agree that this latest surge in the yen (especially since it did not tank the Nikkei) is of utmost significance. A strong case can be made that a surge in the Nikkei and yen will mark the final phase of the global stock bull. A surging Nikkei and yen imply considerably higher global bond yields before long -- the kiss of death for this liquidity driven bull market.

To: gregor_us who wrote (24760)	1/16/2005 2:46:04 PM
From: regli	Read Replies (1) \| Respond to of 110194

> While I expect forex to be jumpy initially on any official commentary, the fact that the Yen put on a show as the week progressed makes me wonder if there's a theme developing here.< From my perspective we are entering a different period. The fact that even significant dollar devaluation did not dent the current account deficit is starting to show its effects. The world-wide unease with U.S. foreign policy combined with a weakening dollar is starting to affect the mood of investors as well as CBs worldwide. When the reserve currency becomes undermined, common assumptions and views (political as well as economic) go through transformations. Alliances, be they monetary or strategic, get reevaluated. Could you have imagined 10 years ago that the Russians, Indians and Chinese would have joint military exercises? This is simply an incredible development. Who do we think could be their perceived antagonist? We are at the dawn of a new world order and nobody knows what that order will look like but everybody knows that it will take time to evolve. It’s easy to observe the discomfort with the dollar as there is mounting criticism of CBs when they loose money due to their dollar investments. I believe that this is one of the reasons why the Yen is showing strength. Short term it is likely that the Japanese will let it fall close to par and then declare a near emergency for their exporters therefore justifying them to intervene one more time. However, the underlying unease on the financial and political fronts and with no apparent clear global winner will benefit gold in no small way once the cracks in the system become much more obvious. Timing it is extremely difficult but I don’t think that predicting it is tough. With regard to gold, we are looking at it with much too narrow a focus. Gold has recently been primarily a U.S. dollar defense investment. However, all of us are worried about the world economy. As soon as the U.S. consumer stops being the consumer of last resort where will money flow that seeks safety from the ensuing turmoil? Clearly once this debt bubble bursts it will affect most economies and result in bank failures not just here but all around the globe. As this will coincide with additional liquidity pumped by CBs in all major currencies, I would be extremely surprised if gold would show surprising strength. Even if we muddle through, muddling through is not comforting as bull market driving euphoria is squashed resulting in increasing unease and uncertainty. In such environments the PMs generally show their best side.