Chasing Two Rabbits – Thoughts On A Gold-Yen Crossover
I have been espousing a theory that QE-steriods in Japan has led to a decline in liquidity conditions for Japanese banks. That, in turn, may have been partially responsible for the most recent downturn in the price of gold. It may or may not have been a factor in the gold smash of April, but .. read more
Ghosts of Modeled Financial Math
The volatility in yen markets, both stocks and credit, continued again with wild swings seemingly everywhere. The Bank of Japan also continued to promise measures aimed restoring calm, including outright purchases of ¥600 billion ($6 billion) JGB’s in the 5-10 year maturity range and an additional ¥300 billion ($3 billion) of maturities beyond 10-years. The .. read more
Cry Yen and Let Slip the Dogs of Negative Convexity
Despite repeated assurances that the Bank of Japan would do whatever monetarisms it could to calm the Japanese bond markets, the persistent stain of selling pressure has not abated, rather it has increased. While to this point it had been relatively benign in the most obvious correlations, the Nikkei has risen steadily throughout, for example, .. read more
We Have Seen Gold Prices Act Like This Before
Gold has not behaved like money in decades, rather gold is, for the most of the world, an investment class. We may not like such a development (it is one of the most insidious actions intentionally undertaken by central banks, including Basel rules) but gold is a liability on a bank’s balance sheet complete with .. read more
Pot Meets Kettle
Late Friday the Treasury Department released its semi-annual report on global exchange rates or as I like to call it, the semi-annual report on why all other countries on planet earth should let their currencies rise against the UD Dollar. Or maybe the semi-annual report on how easy monetary policy by other countries’ central banks .. read more
We’re All Monetarists Now
Japan last week announced a radical plan to finally slay the deflation dragon that has stalked their economy for the last 25 years. The sheer magnitude of the BOJ’s program should put to rest once and for all whether monetary policy can truly work as the growth tonic that policy wonks such as Ben Bernanke .. read more
Tactical Update/Macro Themes
The investment committee at Alhambra has been very busy these past 2 weeks analyzing the current world economic situation. Europe sits idle; they are mired in a financial crisis and engrossed in a political chess match. The rest of the world watches the drama and prays for it to end. For, resolution could ignite global .. read more
Tactical Update
This week, one particular article sparked an intense internal dialogue about some of the global economic realities that have us concerned. The article is from Peking University’s Professor Michael Pettis. Prof. Pettis opines that Chinese citizens would rather save than spend and that Japan, who has recently run a current account deficit, would prefer to .. read more
