The most important piece of the French President’s visit to Japan was to discuss a cooperative agreement with the Japanese Prime Minister on the development of new and improved nuclear powered electricity-generating facilities. The Japan Times and Bloomberg both reported that “Hollande and Abe discussed nuclear energy and agreed to promote joint development of a next-generation nuclear reactor as well as to support private-sector efforts to export nuclear power technologies to emerging countries.” Japan’s Mitsubishi Heavy Industries and France’s Areva Corp. are two of the main developers of nuclear technology for domestic purposes. As I have written previously, the issue of nuclear energy is a vital link in the ABE economic plan. Prior to the 2011 tsunami and Fukushima disaster, Japan produced most of its electricity through nuclear power generators. The tragic outcome from the tsunami forced Japan to curtail most of the nuclear generators and become more reliant on imported energy, especially liquified natural gas (LNG).
Posts Tagged ‘Christine Lagarde’
Today we got follow-through in the global equity markets as the EUR/YEN cross rallied to three-year highs since the YEN was, again, the chief recipient of the Bank of Japan’s (BOJ) enhanced efforts to bring forth inflation from a long time deflation-plagued economy. The Japanese investors were busy sending forth YEN in search of yield but also buying NIKKEI stocks in a return for domestic yield. A positive outcome from the sudden desire of Japanese investors into equities may mean an increase in corporate democracy as the demand for dividends is going to increase. The corporate culture in Japan has always been anti-shareholder as the predominant thought is that management owns corporations and the shareholders should be quiet and not make waves. The status quo has been challenged by some foreign activist investors and always rebuffed in a very anti-democratic show of defiance. As the desire for an income stream for investors, look for the ABE government to be supportive of increased democratization of corporate Japan. The flow of corporate money to investors would aid domestic demand, especially as bond returns go negative.
I make a distinct reference to the CASH HIGH S&Ps versus the S&P FUTURES has made an all-time high. According to the CQG charts, the all-time high in the S&P futures front month is 1586.75 and the high daily close is 1576.25. The CASH high is 1576.09 and the previous high CASH daily close was 1565.15, which was surpassed on Friday’s close. Here is a significant chart that shows the important difference between Friday’s close and the last record high close of October 9, 2007.
Yes, another day and the markets had to try to understand the significance of Cyprus. The newswires were filled with analysts claiming this was a “tempest in a teapot” and that the doomsayers were blowing the Cypriot problem into a pseudo crisis. Again, a world that is highly leveraged is subject to a “single spark starting a prairie fire” and the fear of contagion and an electronic bank run are very real if the major policy makers don’t invoke the trust of the electorate and investors. The perceived actions by IMF Director Lagarde (the joker) and the liquidationist mentality being thrust from Berlin and Chancellor Merkel (the thief) have created a situation where European bank depositors are nervous, especially so in the peripheral banks. THE MAIN COMPONENT OF THIS UNCERTAINTY WAS THE MOVE IN THE FRONT MONTH EURIBOR CONTRACTS,AS THE JUNE 2013 FELL 10 TICKS ON A DAY WHEN OTHER INTEREST RATES WERE LOWER. NOTHING SAYS BANK FEARS THEN A COUNTER MOVE IN THE EURIBOR AND LIBOR MARKETS. An increase in bank yields with equity markets falling is a sign about the fear in the bank deposits market. It seems that the policy makers that are leading the previously “revered” TROIKA (IMF,European Commission and ECB) have initiated fear for a mere pittance.
Notes From Underground: Raising The Specter of Secretary Robert Rubin (Turning Back the Hands of Time)March 18, 2013
It was a very muddled and confusing day in the markets as the news wires carried numerous rumors. The Cypriots were going to approve the lunacy and then they weren’t as the government couldn’t get the needed votes in parliament. Later in the day there was noise about a new compromise with the depositors with more than 100,000 euros bearing the brunt of the “TAX PLAN” and small depositors paying just 3 percent. The markets did not follow through with last night’s initial selloff and the U.S. equities tried to make a move higher late in the day but late selling pushed the markets down on the day by the close. The U.S. is fulfilling its role as a haven, but instead of bonds being the main recipient of global angst, it appears that frightened money is comfortable buying the asset base of U.S. corporations. Gold did perform as a haven but for all the turbulence in the market its rally was tepid. It seems that investors want an asset with some return rather than the mere store of value.
As the sun sets on the Greek drama, the most predicted outcome has indeed taken place as the IMF/EU and ECB/EFSF/ESM have come to an agreement about bringing the Greek debt load to a robust level of 124% debt-to-GDP ratio by 2020. There was no way the TROIKA was going to risk the entire EURO project on a mere 44 BILLION EURO payout to the Greek government. The game was played out to the 11th hour–oh those drama queens in Brussels–and although the OFFICIAL SECTOR did not take an official haircut, the core nations of the European financial system do stand to take a bath. IMF Director Lagarde was able to save face as the Greek debt levels will reach the previously promised levels of 120%. Madame Lagarde can now go to the IMF Board and report that all previously agreed to conditions have been ratified by the EU and await the signing of the memorandum of understanding with the Greek leadership. The IMF needed to get Greece out of the way so it can figure out the role it will play in the Spanish bailout and/or Italy.
First and foremost, a happy Thanksgiving to all the readers of NOTES FROM UNDERGROUND. The growth in readership and the high level of discourse is something I am very grateful and certainly thankful for in full measure. As much energy as I expend in formulating the blog, it is worth the effort because it helps anchor my thoughts about the impact of the global political economy. It is certainly the definition of a give-get. So again, thanks to all my readers.
First and foremost: To all of my readers, friends and their families in the path of the hurricane that has wreaked havoc on so many lives, my thoughts and prayers are with you as you strive to put your lives back together. For you I am “Waitin’ On A Sunny Day.” The markets will do their job of assessing the damage to property and the economic impact that follows such devastation. Hopefully lost lives were kept to a minimum. For those trying to measure the economic impact I warn to be careful with all the flotsam and jetsam that will be filling the airwaves about how the repairs of the storm battered region is certain to be a form of economic stimulus.
The IMF took center stage during the last four days as its meeting in Tokyo became the central focus of the global macro world. As usual, the IMF communique promised much via the usual platitudes but as investors and traders we are left in the lurch as much is promised but no real substance is revealed. Probably the most important element in the communique is the line, “WE NEED TO ACT DECISIVELY TO BREAK NEGATIVE FEEDBACK LOOPS AND RESTORE THE GLOBAL ECONOMY TO A PATH OF STRONG,SUSTAINABLE AND BALANCED GROWTH.” Why is this simple statement so critical? In last week’s IMF-produced “World Economic Outlook,” it revealed that the IMF‘s model is probably flawed when measuring the impact of fiscal policy on economic growth.
In his regular Monday Financial Times column, Wolfgang Munchau takes full aim at Bundesbank President Jens Weidmann for trying to make ECB President Draghi the devil incarnate. Because Weidmann invoked the Faustian character, Mephistopheles, from German hero Goethe’s play Dr. Faustus, Munchau accuses the Bundesbank President of undermining the policies of the ECB. Weidmann is going directly to the German public to plead his case that the ECB is taking the EU down the road of inflationary hell and monetary debasement. Munchau takes up the Draghi/Bernanke/Woodford argument that “the debate about nominal income targeting, where a central bank no longer stabilizes the inflation rate directly but focuses instead on stabilizing NOMINAL GDP (emphasis mine).” Munchau assumes that the central banks would be vigilante in controlling inflation but offers no view about what happens if NGDP rises with a significant rise in inflation but unemployment has not met the desired target.