Comment by phil

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phil
May 20th, 2015 at 6:36 am

YHOO/Albo – Thanks but just following Rule #1 and ALWAYS selling into the initial excitement.  

X/Batman – Plenty of headwinds to be sure.  



Did we add X?  If we did, I forgot to put it in the LTP and "X" is a very hard thing to search comments for! 

Japan/Craigs – Well, I wanted to see what the reaction to GDP was and we topped out at 20,310 and now back to 20,210, where I added one short back on /NKD.  It's hard to say if the "good" news is bad news or if, as you note, they are paying attention to inventories or maybe realizing that this kind of growth at this cost (spending 10% of their GDP on stimulus) is not enough and unsustainable.  



However, it is worth pointing out the weak GDP Private Consumption. In comparison with the huge easing policy, we wonder how sustainable will be this slight recovery. Indeed inventories suggest that more products remain in warehouses and unsold to consumers which set to be problematic in the mid-term. On the other side, as a result of a weaker yen which increased the cost of raw materials, big local companies like Panasonic decided to repatriate production back home.

Inventories added 0.5% to GDP growth and I'm not on the team that thinks piling up goods in warehouses is an economic positive.  Private consumption only grew 0.4%, Capital Spending was also 0.4% – everything else was just stimulus spending.  Employee Compensation fell 0.6%.  Exports were up on the weak Yen – mostly cars as China and the US both had good car-buying quarters.



“My wages haven’t gone up,” said Azusa Nemoto, 37, a contract worker in the publishing industry. She said her bosses often tell her to leave early to save on overtime costs. “The way I see it, the economy is still bad,” she added.

A shrinking labor force and a rock-bottom unemployment rate of 3.4 percent make finding a job easy in Japan — but finding one that pays well is increasingly hard. Nearly 40 percent of Japanese workers are now part time or on temporary contracts, earning about a third less than their permanent, salaried counterparts.

Naohiko Baba, the chief Japan economist at Goldman Sachs, estimates that the growth of Japan’s irregular work force is depressing average wages by as much as 0.5 percent a year. “Pay rises do not necessarily increase Japan’s average wage,” he said.



Really there's no GDP growth at all – just a constantly falling Yen repricing the GDP higher (more Yen) through the stealth inflation via deflation of the currency.  Amazingly, this is something that is completely ignored by the MSM:



The Yen had it's weakest qtr so far, with XJY (like /DX) averaging 83.5 vs 87.5 in Oct, Nov, Dec and down from 98 in Q114.  That's 5% lower Q/Q and 14.8% lower than last year so they damned well better have generated more Yen in the GDP since the Yen itself is worth less than it was.  

So yes, still short EWJ and /NKD.