Notes From Underground: All Quiet On the Western Front (From a News Perspective)

There were no real market-moving news stories this past week, but that didn’t stop the precious metals from coming under severe pressure on the Asian opening as prices in gold and, especially silver, fell prey to liquidation and downside stops were elected in a relatively illiquid market environment. The DOLLAR/YEN was also under initial pressure as Japanese Economics Minister Akira Amari was on the Sunday morning Japanese news show saying, “the correction of the strong yen is largely completed.” Mr. Amari was voicing concerns about further rapid yen depreciation could negatively impact Japanese consumers. The selloff in DOLLAR/YEN seems to be rather tepid based on the massive LONG DOLLAR/YEN POSITIONS, but this bares watching when Europe and the U.S. markets open. More importantly, the initial price action in the Nikkei equity market doesn’t seem to be very concerned about the comments of Mr. Amari.

Another issue with Japan is to make note of the news about the effort by hedge fund trader Daniel Loeb of Third Point to try to force Sony Corporation to be more accountable to its shareholders. Mr. Loeb desires the Sony board to unlock the value of some of its key entities by creating different classes of stock. This is an interesting move by Loeb for it means that  stock activists are going to try to seek changes to Japan’s lack of corporate responsibility to shareholders. As the Japanese BOND MARKET stops providing comfort to JGB investors and bond returns go negative, the Japanese corporations are going to have to provide shareholders with cash to offset the negative bond returns.

Japanese corporate leadership has previously viewed shareholders with contempt and treated them as third class citizens. With the pressure coming from global based investors and even possibly the Japanese government, corporate Japan is at a major inflexion point. I believe that Daniel Loeb senses this and is willing to be in the VANGUARD of forcing this change. If Loeb is successful this will be LONG-TERM positive for Japanese stocks and ultimately Japanese domestic investors.

1. Headlines in tomorrow’s Financial Times are about the European Commission seeking to put tariffs on Chinese solar panels. The threat of tariffs is always a problem, but the headline reads: “Berlin Warns EU Over Solar Tariffs.” This is a perfect example of the dissension taking place in Europe. The Germans are large exporters to China and they don’t want tariffs causing friction with the Chinese, especially since Premier Li Keqiang is coming to Germany to meet with Chancellor Merkel next Sunday. It is the German solar energy industry that is most at risk from the Chinese solar exports, but as German Economic Minister Philipp Rosler said “… punitive duties are the wrong instrument.” If the Chinese are dumping solar panels into Europe, the Germans would prefer to confront the Chinese in a more diplomatic fashion. Many Europeans would rather embarrass the Germans and use the threat of tariffs as a bargaining lever to force the German leadership to ease off on the austerity push.
2. On Thursday Bernard Connolly, the author of the “Rotten Heart of Europe,” was on the Santelli Exchange and whether or not you agree with Bernard’s dismal outlook for Europe and the global fallout from the European situation, I believe the short segment is worth watching. It is an even money bet (ha) that CNBC will never rerun the excerpt as it does with the bullish sentiments of someone like David Tepper. Open the link and pour a stiff drink  and then, of course, BUY THE BOOK and gain some insight from a true global macro master.

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2 Responses to “Notes From Underground: All Quiet On the Western Front (From a News Perspective)”

  1. hershel h herrendorf Says:

    I love  Bernie  Connolly I still owe for one book I always pay my debts,  Ira.   Hershel H Herrendorf

    1 (262 248 7551)  Lake Geneva



  2. yra harris Says:

    Herschel–thanks and I knew you would enjoy it–thanks

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