Notes From Underground: The House of the Rising Sun

This has been a very slow news day. Jobless claims and durable goods were relative non-events and that about sums up the data releases. The news continued to flow out about Glencore and its coming IPO but the details are far from complete.

The Greek debt crisis has receded to the back pages but we classify that under the same concept that the media does not care about process, only sensationalism. So the Greek story calms because of lack of pictures, but we continue to believe it is far from over. The story that caught our eye was the Bloomberg piece about the emergency Bank of Japan meeting on Dec. 1, after the YEN had strengthened to 84.83 following the Dubai news. The BOJ unveiled a $10 trillion yen lending facility to to ensure liquidity in abundant amounts. The importance of this is that it solidifies the point that the Japanese government is very concerned about YEN strength in a deflationary environment. As BOJ Governor Shirakawa stated, “The bank does not tolerate a year-on-year rate of change in the CPI equal to or below zero percent.” This is now front and center in our trading strategy and would like to see how the YEN performs if we have some equity weakness in the New Year to test the resolve of YEN weakness.


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