Abenomics: medicine or poison for Japan?

[Puppycow]

edited to say you can actually clearly see the statistically "unusual" state of the Nikkei easily here..

..because, on any timescale you choose, from 5 minutes through to monthly like this, it is quite unusual to see more than 5 (ie six) bars of the same colour follow each other without a break, exponentially more unusual for 7, and the same again for 8.

we are actually showing 8 upbars going vertical at this point, these are far from normal markets

Although I rarely agree with you, I think that this time you may be right. There may be some of what Alan Greenspan called irrational exuberance going on here. It's up over 67% in the last 6 months although change in the real economy is barely noticeable yet.

 

[The Don]

For those that do not know him, Peter Schiff is a gold enthusiast:

On October 25, 2012 Peter Schiff said that the price of gold, which was then around $1700 per ounce, would rise to $5,000 per ounce within the following two years

In the linked video he claims that Japan will have inflation. That'll he a welcome change from deflation.

Schiff makes no specific predictions about the Nikkei in the linked video however just some vague notion of some kind of crash.

 

[kevsta]

For those that do not know him, Peter Schiff is a gold enthusiast:

for those that dont know him, he is amongst other things a gold enthusiast. since the early 2000s he was calling an impending stocks housing bubble, and more vociferously in 2005/6/7 on TV, which later on (after he was right) ended up with somebody else, ie not him, compiling a "Peter Schiff was right" video.

disclosure: it is largely because of Mr Schiff that I am sitting on such large gains from PMs. I have followed him since early 2008, indeed in 2008 I went through every single back episode of "Wall Street Unspun" his radio show back as far as 2005 I think, and watched pretty much every video out there.

my favourite was his 2006 "Mortgage Banker's speech" laying out to a large audience of Mortgage bankers exactly what was going to happen to them in Nov 06, as you can imagine, they probably werent very amused.

but he has lectured all over, including at Google and Harvard Uni, the best of his stuff is all here http://buygoldsilver.org/invest/peter-schiff/

On housing and stocks, he was exactly right, and way in advance. He also at the time maintained that the Dollar would collapse and of course the opposite happened.

He maintains that this is still to come, the 2008/9 problems were the pre-tremors of the real crash and makes the case strongly in his latest book

http://www.amazon.com/Real-Crash-Americas-Bankruptcy-How-Yourself/dp/1250004470

I'll be honest, he may not get everything exactly right all the time, but I personally have way more faith in his grasp on the facts than Bernanke & the Fed, I only wish I knew who he was in 2002 and could have gotten the whole 600% metals run like he and his clients did.

 

[kevsta]

Although I rarely agree with you, I think that this time you may be right.

most of what I espouse in here is my bearish opinion, and I expect most to disagree. however when it comes to trading statistics my posts are factual and you would be hard pressed to disprove.

in this case its very easy to try, just look back at charts, any charts, and see how often you get 7 or 8 of the same colour bars in a row.

what the reason for that (now with the Nikkei) is, is speculation and opinion, but the fact is, it is extremely unusual, for whatever reason is the cause.

Im not even saying the amount its moved, so much as the way its doing it, no pullbacks, straight up (like the S&P in fact atm) I've been watching markets for 5 years now, and very closely via a traders eye view daily for 18+ months now, and when I said a few weeks back "the markets are broken" this was more an observation from watching, rather than a political statement about the Bernank.

There may be some of what Alan Greenspan called irrational exuberance going on here. It's up over 67% in the last 6 months although change in the real economy is barely noticeable yet.

Im personally not so sure the Yen carry algos have been programmed to do exuberance yet (opinion & speculation, obviously)

 

[The Don]

Peter Schiff got a couple of calls right and many, many more wrong. This makes him an above-average pundit

IMO he is like Turk, a one trick pony. He (Schiff) is consistently pessimistic and so when things go bad he's right, and when it's going well he's wrong.

 

[kevsta]

Peter Schiff got a couple of calls right and many, many more wrong. This makes him an above-average pundit

IMO he is like Turk, a one trick pony. He (Schiff) is consistently pessimistic and so when things go bad he's right, and when it's going well he's wrong.

opinion based on not having watched any of his real lectures prior to the event, yes? at least find time to watch the mortgage bankers speech if nothing else?

"many, many" is inaccurate, IMO. however on the bright side, at least we can stop arguing about the past now and have a whole new set of predictions to see if he is ultimately right about or not.

 

[The Don]

opinion based on not having watched any of his real lectures prior to the event, yes? at least find time to watch the mortgage bankers speech if nothing else?

Which "good news" predictions did he get right ?

"many, many" is inaccurate, IMO. however on the bright side, at least we can stop arguing about the past now and have a whole new set of predictions to see if he is ultimately right about or not.

Well he was wrong about the dollar and hyperinflation, two very big misses and it looks like he's going to be wrong about gold.

From the video all I got were some vague mentions about Japan collapsing.

 

[kevsta]

Which "good news" predictions did he get right ?

us "bad news bears" struggle with that. but whether its good news or not depends if you're long or short, doesn't it?

Well he was wrong about the dollar and hyperinflation, two very big misses and it looks like he's going to be wrong about gold.

Phase II - remember back to the roadmap, USA last after Japan.

From the video all I got were some vague mentions about Japan collapsing.

*everything* collapsing eventually would be reasonably accurate

 

[The Don]

us "bad news bears" struggle with that. but whether its good news or not depends if you're long or short, doesn't it? :

If someone predicts the market consistently on one direction, say gold up (or down) or housing bubble burst (or market continuing to rise) then eventually they're going to be right. If their message happens to run counter to prevailing wisdom at the time then they'll look even more sagacious. It doesn't mean that they're going to be right regularly.

Someone who didn't want to get into the housing market in 2000 because they thought it was a hopelessly overvalued bubble (that'd be me BTW - I had £200k to invest and didn't choose property) was still wrong even if the market dropped significantly in 2008/9.

IMO Schiff has been right because it aligned with his bearish view. It doesn't necessarily add any credulity to any future predictions.

 

[The Don]

*everything* collapsing eventually would be
reasonably accurate

Well he can never be proved wrong because even if *everything* hasn't collapsed in 1, 2, 5, 10, 20 ,50 years time, it's just around the corner

Helpful testable predictions (from Schiff)

- 200 yen to the dollar by the end of 2013
- Gold at $5,000 per ounce before 25 October 2014

We can at least tell whether he was right or wrong.



edited to add.....

Here are some past Schiff predictions.

http://www.economicpredictions.org/peter-schiff-predictions/

 

[kevsta]

edited to add.....

Here are some past Schiff predictions.

http://www.economicpredictions.org/peter-schiff-predictions/

good site, its about time there was something like that out there, for next time as much as anything.

Im not even saying the amount its moved, so much as the way its doing it, no pullbacks, straight up (like the S&P in fact atm) I've been watching markets for 5 years now, and very closely via a traders eye view daily for 18+ months now, and when I said a few weeks back "the markets are broken" this was more an observation from watching, rather than a political statement about the Bernank.

wrt to abnormal markets, this is about when the Nikkei bottomed and headed upwards wasnt it, Nov 2012?

 

[Puppycow]

Here are some past Schiff predictions.

http://www.economicpredictions.org/peter-schiff-predictions/

I count 5 trues, 10 falses and 2 which are labeled "To be determined" but which are clearly false but don't seem to have been updated to reflect the obvious misses. Further, the misses are wildly wrong in some cases.

 

[The Don]

And some of the trues are now false:

Stopped clock right twice a day IMO

 

[kevsta]

And some of the trues are now false:

Stopped clock right twice a day IMO

and some of the falses will yet be true

 

[The Don]

and some of the falses will yet be true

Which ones ? The ones which were marked false were those with a specific date range.

I don't consider a prediction like "Manchester City will win the 2012/13 Premier League Title true if they win it in 2016/17". I also don't think that "One day Manchester City will win the Premier League Title" a prediction because unless they disband the Premier League, it's unfalsifiable.

As the old adage says Economists have predicted eleven of the last three recessions (and eleven of the last three bull markets no doubt).

 

[Puppycow]

Now we are starting to see effects in the real economy.

Japan’s Economy Grew More Than Forecast 3.5% in First Quarter

Japan’s economy expanded more than analysts estimated in the first quarter as consumer spending and exports climbed.

Gross domestic product rose an annualized 3.5 percent in the three months through March, the most in a year, the Cabinet Office said today in Tokyo. The median of 36 economist forecasts in a Bloomberg News survey was 2.7 percent. In the fourth quarter, growth was a revised 1.0 percent, the data showed.

 

[The Don]

Now we are starting to see effects in the real economy.

Japan’s Economy Grew More Than Forecast 3.5% in First Quarter

The way it was reported on BBC Radio 5's wake up to money, these figures are for Jan-Mar 2013 before Abenomics has had a chance to take effect. The guest for that segment (a UK-based Japanese Professor of Economics IIRC) said that this was encouraging but not an indication that the lost (two) decade (s) wre over.

Then again if Peter Schiff is right this is an indication of impending collapse in the Japanese economy and the next 6 months will have hyperinflation, collapsing Yen and a stock market crash (oh my !).

 

[Puppycow]

The way it was reported on BBC Radio 5's wake up to money, these figures are for Jan-Mar 2013 before Abenomics has had a chance to take effect. The guest for that segment (a UK-based Japanese Professor of Economics IIRC) said that this was encouraging but not an indication that the lost (two) decade (s) wre over.

Well Abe was elected in December IIRC so he was Prime Minister during the entire period. His choice for Bank of Japan governor Haruhiko Kuroda didn't assume office until March 20th, 10 days before the end of the quarter. I understand the argument that his policies wouldn't have had time to take effect, but as I recall the current wave of enthusiasm in the stock market began even before Abe's election when polls showed him leading and likely to win. His loose money policy was known and some people began to make bets against the yen even before the election in anticipation.

So maybe we are seeing some kind of economic placebo effect where expectations of future policy changes spur positive economic activity in advance of the actual policy. The yen was already weaker in January than in December and had weakened considerably several weeks and months before Kuroda assumed office in anticipation of a policy change. So if the positive effect is attributable to the weak yen, then actually Abenomics had already effectively been in effect during Q1.

Here is the Financial Times' take:
Japanese Q1 growth hits 3.5% as Abe impact begins to show

(They don't want me to cut and paste the article so I won't quote, but they make similar points in the article.)

 

[kevsta]

big slump last night, Nikkei down 7%? whats going on?

edit, here's the " Overly Alarmist" view

http://www.zerohedge.com/news/2013-...plunge-over-800-points-biggest-drop-22-months

Japanese Stocks Halted; Plunge 1500 Points To Close Down 7.3% - Biggest Drop In 26 Months

UPDATE 1: They are panicking... BOJ injected 2 trillion yen ($19.4 billion) into the financial system to stem volatility following a circuit breaker in JGB futures trading.

UPDATE 2: Nikkei 225 is now down 1500 points from its highs and down 1150 (over 7%) from yesterday's close

All the time it is just the quadrillion JPY second-largest bond market in the world that is experiencing volatility on an unprecedented scale, the BoJ and her partners in crime are more than willing to 'officially' say "please do not worry."

But when the equity market - that barometer of everything good and holy about Abenomics starts to crater, you can bet the excuses will come fast and furious. Today's drop of over 1500 points (over 9%) from the earlier highs is the largest drop for the Nikkei 225 since March 2011. The Nikkei 225 just lost the all-powerful 15,000 level and is suffering another VaR shock with a 6-sigma move today.

In fact given the price levels this drop is on par with the post-Lehman moves in 2008. The question now (with US equity futures also fading fast -20 points and JPY crosses getting hammered) is how will the Japanese risk appetite for peripheral European crap hold up with this crimping in their plan as Japanese bonds and stocks dump?

The Nikkei 225 is down 7% (1000 points) from its earlier highs...

 

[Puppycow]

big slump last night, Nikkei down 7%? whats going on?

Correction? I thought it was maybe getting overheated and overbought. Here's what I said up-thread:

Although I rarely agree with you, I think that this time you may be right. There may be some of what Alan Greenspan called irrational exuberance going on here. It's up over 67% in the last 6 months although change in the real economy is barely noticeable yet.

In other news:
Japan’s Bond Yields Touch 1% as BOJ Injects Funds to Stem Swings

Japanese government bonds fell, with 10-year rates touching 1 percent for the first time in a year, on speculation the Federal Reserve will curb stimulus and the Bank of Japan will tolerate an increase in yields.

Japan’s five-year note rate matched the highest in two years after Fed Chairman Ben S. Bernanke said yesterday the central bank may trim bond purchases if policy makers see indications of sustained economic growth. The BOJ injected 2 trillion yen ($19.4 billion) into the financial system to stem volatility following a circuit breaker in JGB futures trading.