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Tuesday, February 27, 2024

Thirty-Five Trillion Yen Tuesday

Go go BOJ!!! 

Acting under pressure from the Government to DO SOMETHING, the Bank of Japan announce a 35,000,000,000,000 Yen ($418Bn) monetary easing program this morning, finally taking that last step and cutting rates to ZERO.  That’s right, the BOJ will literally give you money for nothing (no word yet on whether the chicks will also be free). Ironically enough, though, the logic of giving out free money now is the same as it was in the early 80’s – the BOJ is well aware that:

"We got to install microwave ovens
Custom kitchen deliveries
We got to move these refrigerators
We got to move these colour T.V.’s
"  

Of course, even with an economy one quarter the size of the US ($4.1Tn), $418Bn doesn’t buy what it used to so the BOJ is coming up with ANOTHER 5 TRILLION YEN in a program to buy private and public assets – let the shopping spree begin!  You might think such incredibly reckless spending by the BOJ would devalue their currency somewhat BUT Noooooooooooo – the Yen ROSE back to 83.2 to the dollar (and we caught that move last night in Member Chat!) as currency traders realized that $500Bn of QE from the BOJ was only a drop in the bucket of the ocean of irresponsibility that is our own Federal Reserve.  

As I had said to Members last Wednesday (and we had lots of cool currency charts): "I am seeing A LOT of money lining up on the short side of the Dollar trade. I’m very concerned that BOJ will do something to squeeze the bears and THEN I think it’s a better entry."  Of course, currency manipulation was the theme of the week last week and you can get a quick review by downloading a FREE SAMPLE of our new Weekly Newsletter HERE.  

"The surprise invited some yen selling, but I don’t think the BOJ’s move will be enough to produce any sustained yen weakening," said Masanobu Ishikawa, general manager of spot foreign exchange trading at Tokyo Forex & Ueda Harlow.  Hirokata Kusaba, senior economist at Mizuho Research Institute echoed this view, saying "there will be no substantive effect from going from the already ultra-low 0.1% to this range.  The only effect on markets will be from the surprise of the announcement, but that will fade," he said. "There’s no doubt the BOJ tried its best today, but it’s hard to see how the measures as a whole will help the economy that much."

Japan’s currency largess gave the Nikkei a 1.5% boost this morning, rescuing them from a weak open, where they threatened to fail the 9,350 line that has been a point of contention all year.  The Hang Seng went nowhere but did recover from a 100-point drop and the Shanghai went up and up and up today, gaining 1.7% to finish at 2,655, exactly testing the declining 200 dma so tomorrow will be a very interesting test for the junior Chinese index.  The BSE just keeps getting rejected at that 20,500 line and fell 60 points today so a real "Which Way Wednesday?" in store for us tomorrow.  

Europe is the happy beneficiary of this recent Yentervention as the Euro jumped to $1.38 to the dollar for the first time since January, when oil was $83.95.  So strong Yen and strong Euro means too bad USA, who still have to buy oil with our weak-assed Dollars – not to mention gold ($1,332) and copper ($3.71) and even pokey old natural gas ($3.71) so we should have a nice rally day today with the energy and mining sector leading us back up as our currency debases another notch.  

Europe is up, led by the CAC, who we learned last night was a global laggard with the EWQ down 7% for the year.  They are making up 20% of that this morning (1.4%) but they have a bit of work ahead of them if they are going to catch up to Germany (EWG is down 1%) or the UK (EWU is up 1.5%) so we’ll be watching them to see if the bullish trend is real or whether this is just a quick stop on the way down, like the 2.5% pop the global markets got off the last Yentervention, on September 15th.  

We were already sick of the nonsense yesterday and I called for cash in our "Turning $10K to $50K in 6 Months" Virtual Portfolio (which is now the "Turning $26K to $50K in 3 Months" Virtual Portfolio!) along with any other unhedged longs and today is another good opportunity both to sell into the excitement and to get a little short with our "October’s Overbought Eight" list – maybe even another opportunity to short NFLX!  Of course we love our weeklies and I’ll be looking for the SPY $114 puts to come down to about .60 as a fun way to play a pullback for the rest of the week.  

We’ll get a nice look at how the market behaves on "good" news.  Obama said he would be “very interested” in finding ways to lower the corporate tax rate so U.S. companies operating overseas aren’t disadvantaged so MORE FREE MONEY for our Mutinational Masters and Bernanke said he refuses to be out-eased by Japan and he’s got a whole fleet of helicopters lined up to dump money on our Multinational Masters as well.  

If you like to keep track of the BS – the WSJ did a very nice job of highlighting the latest Fedspeak and makes a nice read.  ICSC Retail Sales were weak (down 0.8%) and Redbook Sales were not much better and the ADP report was weak so we are certainly not out of the woods just because our money is worthless.  We get the ISM report at 10 and Consumer Confidence at 5 but jobs will be the big driver of the week with earning from YUM tonight, COST, MON, STZ and MAR tomorrow with PEP, AA and MU on Thursday so today is a nice day for a pop before the reality of the data becomes overwhelming.

Who knows, maybe the data and earnings this week will surprise us to the upside but, for now, we’ll play the percentages as we feel we’re a lot closer to the top of our range than the bottom.

 

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