Friday, April 10, 2015

Watch Japan

In recent years there has been much angst in markets over debt. Politics in this country, (USA) has been keen on debt worries, particularly as a populist message to unseat a Democrat president. I think the politicians miss the main point most of the time.

Japan has huge amounts of debt and for years the warnings have been sounded about what could or will happen if interest rates and therefore borrowing costs rise in Japan, or there is a loss of confidence in the Yen around the world.

Shinzo Abe took unprecedented action in the last couple years as he, the prime minister of Japan, as well as the governing body in Japan went on a concerted effort to devalue the Japanese Yen. So far it is working. The Yen is weak, and presumably Japanese exports are competing with the rest of Asia.

I watch charts. If something significant is happening to prices, or the correlations between markets change, I don't expect to hear about it on the news. Eventually it will become news, but the time to take note is as the changes are happening, and I never know for sure what the cause of the changes may be until later.
For years there has been a correlation between strength in the Japanese Yen and strength in the gold market. It is marked in the intraday charts. This morning, again, the Yen opened up strong and gold opened up strong. It is almost like there is a fear for a strong Yen that prompts the gold buying. There may be other reasons of a macro financial reason that I am unaware, and to my way of thinking they don't really matter. I make my decisions on what the price is doing.
I do listen to chatter of professionals. Some are right, most are right eventually. The timing is the key, as always.
John Mauldin, who is a fine writer and student of macro-events has been warning for years that Japan is living on borrowed time.
Mauldin here

I am making no predictions regarding timing here, this post is a reminder to myself and any reader to keep an eye on the Yen and how it acts and how it affects the price of gold. There does seem to be some worry in the markets about Japan. And the big events are usually not in the news until they are the news. A catastrophe in Japan would be hugely disruptive to the world of finance.

Control risk,

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