Can Japan End its Easy-Money Addiction?

The shock landslide defeat of PM Shinzo Abe’s Liberal Democratic Party (LDP) in the recent Tokyo metropolitan elections – and the triumph there of Tokyo Governor Koike’s new party (Tomin First) – has lit a faint hope that the radical Japanese monetary expansion policy could be on its way out. The flickering light though is not strong enough to soothe the mania in Japan’s carry trades and so the yen continued to slide in the aftermath of the elections. Between mid-June and early July the Japanese currency depreciated by some 5% against the US dollar and 10% against the euro.
The perception in currency markets is that Japan will not be embarking on monetary normalization this year or next, in contrast to Europe where ECB Chief Draghi has hinted that the train (to monetary normalization) will start next year, even though the journey promises to be very slow. The US train to normalization continues at a glacially slow pace including some periods of reverse movement. Moreover the monetary climate prior to the journey commencing is even more extreme in the case of Japan than in Europe or the US.
It was possible to imagine that the shock election setback for the LDP could have caused Shinzo Abe to withdraw support from his money-printer in chief, Bank of Japan governor Haruhiko Kuroda (whose term ends in April 2008), thereby signaling an early end to negative interest rates and quantitative easing. But markets in their wisdom have concluded this is not to be. Many elderly Japanese are pleased with their stock market and real estate gains even though they complain about negative interest rates and the threat of inflation. In any case it was young voters, responding to the stink of alleged corruption scandals, who turned out en masse for Governor Koike’s new party.

This post was published at Ludwig von Mises Institute on July 17, 2017.

Brazil’s President Tells Supreme Court To Suspend Corruption Probe Of Brazil’s President

In a move that will surely light the proverbial lightbulb over Donald Trump’s head, Brazilian President Michel Temer, having been officially dragged into Brazil’s massive corruption scandal after a record emerged in which he urged the payment of “hush money”, said on Saturday he would ask the Supreme Court to suspend its investigation into allegations he was also involved in the carwash corruption scheme, vowing to remain in power.
Speaking during a televised address on Saturday afternoon, Brazil’s deeply unpopular president, who replaced a just as deeply unpopular president last year when Dilma Rouseff was impeached, claimed the recording that implicated him in the scandal was doctored and said he would file a petition with the Supreme Court to suspend the investigation until it could be verified, the WSJ reported.
In the recording cited by Temer, which unleashed a historic crash of the Brazilian stock market and currency on Thursday when news of Temer’s involvement broke, the president can be heard chatting with Joesley Batista, chairman and heir of the beef-and-chicken JBS empire, apparently him his approval to pay the jailed former speaker of the House Eduardo Cunha – the man responsible for Dilma Rouseff’s ouster last year – to buy his silence. Batista, who made the recording and gave it to prosecutors in hopes for prosecutorial leniency against JBS, said the recording wasn’t edited.

This post was published at Zero Hedge on May 20, 2017.

The US Dollar and Stock Market Could Spike Higher Under Trump’s Tax Plan

President Trump, as part of his ‘America First’ program, has proposed lowering the US corporate tax rate to 15 percent and to close a myriad of loopholes in an effort to simplify the tax code, and to also encourage the nation’s largest businesses to bring production back home.
The proposal represents a tangible shift in the relationship between Washington and big business. In 2014, President Obama’s Treasury Department introduced new measures to crack down on corporate tax inversions, a strategy companies utilized to exploit gaping tax differentials between the United States and other countries. Burger King’s acquisition of Canada’s Tim Hortons, a coffee and doughnut chain, for example, was motivated in large part by Canada’s more hospitable tax environment.

This post was published at FinancialSense on 04/27/2017.

Prognostication: Here It Comes

I claim no special power here, nor any inside information. This is simply arithmetic coupled with logic. I’ll give you a “decision tree” sort of format with the critical points outlined.
Note that if you’re going to mitigate any of what I see coming around the bend you need to do it right damn now, not wait. By the time you get to those critical points it’s too late. For many people it’s already too late, but if you’re not in that batch then you need to make your lifestyle changes today.
I am operating on the premise that the rank corruption that I outlined in the Ticker here will not be addressed. It will not be addressed for the same reason the 17th Amendment will be cited as the reason the American political experiment failed when the book on America is finally closed, as that Amendment permanently removed the ability of the States to call a hard-stop on any expansion of Federal Power they did not consent to. That was designed in to our government by the founders and it was removed intentionally by the 17th Amendment. That balance of power can never be restored absent a Revolution because to do so The Senate would have to literally vote themselves out of a job at a supermajority level which they will never do and there is no means to compel them to do so.
For the same reason the 30-year trend in Medicare and Medicaid spending will not be stopped. It may be tinkered with around the edges but it won’t be stopped because to stop it without literally throwing people into the street and letting them die you have to break the medical monopolies and in doing so you will inevitably (1) destroy the graft machine that drives a huge part of DC and at least half of the jobs inside the Beltway, along with the asset values they support, (2) create an immediate and deep (15% of GDP, but temporary) recession on purpose which neither Congress or Trump will ever voluntarily initiate as it would cause a guaranteed 70% stock market crash along with the immediate detonation of about 1/3rd of all in-debt corporations in the United States and (3) expose the outrageous theft of trillions of dollars from taxpayers over the last several decades to fund the medical scam machine at all levels.

This post was published at Market-Ticker on 2017-04-17.

Are Big Banks’ Dark Pools Behind the Run-Up in Bank Stock Prices?

The biggest banks on Wall Street, both foreign and domestic, have been repeatedly charged with rigging and colluding in markets from New York to London to Japan. Thus, it is natural to ask, have the big banks formed a cartel to rig the prices of their own stocks?
This time last year, Wall Street banks were in a slow, endless bleed. The Federal Reserve had raised interest rates for the first time since the 2008 financial crisis on December 16, 2015 with strong hints that more rate hikes would be coming in 2016. Bank stocks never do well in a rising interest rate environment because their dividend yield has to compete with rising yields on bonds. Money gravitates out of dividend paying stocks into bonds and/or into hard assets like real estate based on the view that it will appreciate from inflationary forces. This is classic market thinking 101.
Bizarrely, to explain the current run up in bank stock prices, market pundits are shoving their way onto business news shows to explain to the gullible public that bank stocks like rising interest rates because the banks will be able to charge more on loans. That rationale pales in comparison to the negative impact of outflows from stocks into bonds (if and when interest rates actually do materially rise) and the negative impact of banks taking higher reserves for loan losses because their already shaky loan clients can’t pay loans on time because of rising rates. That is also classic market thinking 101.
Big bank stocks also like calm and certainty – as does the stock market in general. At the risk of understatement, since Donald Trump took the Oath of Office on January 20, those qualities don’t readily come to mind in describing the state of the union.
Prior to the cravenly corrupt market rigging that led to the epic financial crash in 2008 (we’re talking about the rating agencies being paid by Wall Street to deliver triple-A ratings to junk mortgage securitizations and banks knowingly issuing mortgage pools in which they had inside knowledge that they would fail) the previous episode of that level of corruption occurred in the late 1920s and also led to an epic financial crash in 1929. The U. S. only avoided a Great Depression following 2008 because the Federal Reserve, on its own, secretly funneled $16 trillion in almost zero interest rate loans to Wall Street banks and their foreign cousins. (Because the Fed did this without the knowledge of Congress or the public, this was effectively another form of market rigging. Had the rest of us known this was happening, we also could have made easy bets on the direction of the stock market.)

This post was published at Wall Street On Parade By Pam Martens and Russ Marte.

In the Banker War on Cash, New Zealand and Canada Are the Next Major Countries on the Banker Hit List

As we warned more than 4 years ago in this article here, the criminal banking cartel’s end game involves restricting freedom of speech and curbing any criticism of their criminal banking industry by banning cash and imposing an end game of 100% digital money upon all of us. Now with the benefit of 4 more years, there can be little doubt that indeed, that the banking industry has advanced their war against all of us by accelerating their war on cash, and attempting to disguise this war on cash as a war on corruption.
Any logical person would understand the vast irony in such a statement, especially since bankers are leading these false charges of a war on cash as a war on corruption, not only given the fact that the banking industry is the most corrupt industry on the planet, but also given the fact that bankers provide much of the dirty money that feeds global stock markets by laundering tons of dirty money for the world’s most violent drug cartels. Recall that in 2012, HSBC bankers had to pay a $1.9B fine for willingly laundering hundreds of millions, and more likely billions of dollars, of dirty money for the largest and most murderous Mexican drug cartels. Though HSBC CEO Stuart Gulliver unconvincingly denied approving of these transactions, any logical person would conclude that it is next to impossible for the CEO of a bank not to know that origin of the source of hundreds of millions of dollars of cash flowing into his bank.
In addition to profiting handsomely by conducting business with the largest, most violent drug cartels in the world, such as the Sinaloa drug cartel, HSBC bankers were also convicted of openly conducting business with terrorists linked to Al-Queda, Hezbollah, and Russian mobsters, and for openly moving money for rogue states like North Korea and the Sudan. In fact, Jack Blum, a former US Senate investigative attorney, stated, ‘[HSBC bankers] violated every goddamn law in the book. They took every imaginable form of illegal and illicit business.’ Of course HSBC bankers were not the only bankers convicted of laundering huge sums of illicit money and profiting from this illegal act. Wachovia bankers, Standard Chartered bankers, Citibank bankers, Wells Fargo bankers, and dozens of other bankers were also found guilty of these criminal activities as well, exposing the systemic criminal nature of the banking industry.

This post was published at GoldSeek on 29 January 2017.

Buy C-R-A-P

We live in a modern world of acronyms and buzzwords, and the financial industry is certainly no exception. In fact, it may be one of the worst culprits, what with FANG, ZIRP, TINA, BREXIT, QUITALY, BRIC, etc. all entering the lexicon over the last few years. Yet, creating some catchy collection of consonants remains one of the most surefire ways to attract attention in this business since it, admittedly, makes for a great headline and gives strategists like us something fun to write about (‘fun’ being a relative measure). Well, now the new eye-catching acronym to watch, according to Tom Lee of Fundstrat is C-R-A-P – Computers, Resources, American Banks, and Phone Carriers – which are all levered to the investment recovery, inflation, and deregulation expected over the next year. Before I comment further on those recommendations, though, I want to point out that I like to follow Tom Lee’s thoughts because, like us, he lets the data do most of his thinking, and, like us, he was one of the few pundits last year who actually saw potential for the US stock market. He backed that up, too, with one of the highest S&P 500 targets among strategists for 2016 (2325), but now, according to Bloomberg, he has the lowest price target for 2017 among the fifteen strategists they track (2275), further proof that he doesn’t just parrot consensus numbers.
Reading between the lines of his comments, Lee does not see a substantial upside for the stock market as a whole in 2017, at least not without a pullback first, but he does believe a potential exists among individual areas of the market. This line of thinking is consistent with our view that passive indexing may be more frustrating for this type of investing environment because you will be dragged down by the underperforming sectors and the increased volatility may make it more difficult to hold onto positions long enough to achieve the eventual performance. We generally agree, too, that the C-R-A-P stocks should do well in the political and economic landscape that many expect on the horizon. If inflation does pick up, driven by fiscal stimulus and more robust economic growth, Fundstrat argues that the contemporaneous increase in wages will not hit technology company margins as hard given their reliance on more high-skilled workers, and we, too, continue to advise an overweight of Tech to benefit from the Computers sub-sector. The big acronym of 2015 and 2016, the so-called FANG stocks, may already be coming back into favor, as well, with Facebook Inc. (FB/$123.41/Outperform), Amazon.com Inc. (AMZN/$795.99/Outperform), Netflix Inc. (NFLX/$131.07/Outperform), and Alphabet Inc. (GOOG/$806.15/Outperform) all breaking out to new reaction highs last week.

This post was published at FinancialSense on 01/10/2017.

Most Overvalued Stock Market In U.S. History – Here’s Why

I find it to be mind-blowing when financial advisors and stock market gurus get in bubblevision or write Seeking Alpha articles and assert that the stock market is good ‘relative’ value right now. They are either dishonest, unethical or just stupid. Likely a combination of all three in varying degrees.
Here’s a chart with which everyone is familiar:

This post was published at Investment Research Dynamics on January 10, 2017.

Trump Interviewed: I Sold All Stocks In June Because “I Felt That I Was Very Much Going To Be Winning”

As the mainstream media continues to blast Trump with allegations of conflicts of interest related to his many real estate holdings around the world, at least one conflict they won’t have to worry about anymore is his holdings of public stocks. Per the Washington Post, a Trump spokesman told the press yesterday that Trump unloaded all of his public shares back in June.
Then, in what was supposed to be an interview congratulating Trump for his Time Person of the Year award, Matt Lauer of the Today Show decided to grill the president-elect on his public stock holdings and why he decided to sell.
“Well I’ve never been a big person for the stock market, frankly. But, over the years I bought stocks. And, I bought them when they were low and I saw what was going on with interest rates were so low that it almost seemed like it was easy to predict what was going to happen with the stock market.”
When pressed on why he chose June to dump all his shares, Trump responded simply that he felt “like I was very much going to be winning.”

This post was published at Zero Hedge on Dec 7, 2016.

Brazil’s New President Temer Threatened With Impeachment After New Corruption Scandal Emerges

Six months after Brazil’s former president Dilma Rouseff was removed from power as a result of a carefully orchestrated process by her former Vice President, Michel Temer, who as many suggested at the time, was merely trying to shift attention away from himself and to his former boss due to his “checkered past”, swirling with allegations of corruption on par with those of the deposed president, Temer himself may be in danger of impeachment when overnight, Brazil’s public prosecutor announced it was studying a possible investigation into whether President Michel Temer put pressure on a former minister to favor a Cabinet colleague’s property investment.
Marcelo Calero, who resigned last week as culture minister, told federal police that the president pressured him to resolve a dispute with another Cabinet member, Geddel Lima, president Temer’s top government congressional liaison, who was seeking a permit for an apartment building in a historic preservation area of his hometown, a federal police source said.
Calero’s accusations have set off new crisis for Temer for allegedly using his public office to obtain a permit for the luxury oceanfront building in the city of Salvador.
Following the news, the Brazilian real slumped as much as 2.2% to 3.4679 reais to the dollar, the biggest intraday drop since Trump’s unexpected victory. Traders cited concern that the controversy could derail an overhaul of government finances favored by investors. Simiarly, Brazil’s main stock market index, the Bovespa, fell 1.3 percent on concerns of continued political uncertainty delaying recovery from the country’s worst recession since the 1930s.
As Reuters adds, adding fuel to the crisis, the Estado de S. Paulo newspaper reported on Friday that Calero secretly recorded his conversations with Temer and Vieira Lima to back his case. If the chief prosecutor’s office finds grounds to investigate the allegations it would have to ask the Supreme Court for authorization to allow the probe involving the president, the spokeswoman said, effectively starting a new impeachment process. Confirming this, the leader of the Workers Party in lower house Afonso Florence said that former Culture Minister Calero’s allegation that President Michel Temer pressured him on Lima’s case is ‘very serious’ and may lead to an impeachment request.

This post was published at Zero Hedge on Nov 25, 2016.

Here’s What Happens If Hillary Wins…

At an event in Davos, Switzerland on Friday, Larry Summers gave you a glimpse of how regressive a Hillary Clinton presidency will be…
Regular readers are familiar with Summers…
He’s the former Treasury Secretary and Clinton crony who’s first in line to return to his former post at Treasury if Hillary is anointed on Tuesday.
The last time we caught up with Summers he was mindlessly proposing that the government should buy stocks to artificially boost the stock market and economy.
Not content with the government taking ownership over large swaths of the stock market, Summers is now taking his ‘government as the supreme father’ fantasies one step further…

This post was published at Wall Street Examiner by Michael Covel ‘ November 7, 2016.

China’s Big Ball of Money Isn’t Going Anywhere Near Stocks

This year is seen going down as the worst since 2011 for China’s stock investors as the memory of last summer’s rout lingers and speculative buying switches to the housing market.
The Shanghai Composite Index will end the year at 3,075, according to the median forecast in a Bloomberg poll of 10 strategists and fund managers. That implies a 13 percent drop over the 12-month period, the steepest in five years, and a gain of 2.9 percent from Wednesday’s close. Fading prospects for monetary easing, a slowing economy and the risk of higher U. S. borrowing costs spurring yuan weakness were among factors weighing on the nation’s shares, the survey showed.
Turnover on the world’s second-largest stock market has collapsed to a two-year low as China’s army of investors, unnerved by 2015′s plunge in equity values, charged into other assets. After a frenzied bet on commodities futures soured, they have set their sights on a bigger target – property. With new home prices now jumping the most in six years, analysts are scaling back projections for interest-rate cuts.
‘The property market and the stock market are like a seesaw,’ said Li Lifeng, a strategist at Sinolink Securities Co. in Shanghai. ‘If the ‘fever’ in the property market doesn’t cool down, funds will flow from equities into real estate.’
Small-cap technology stocks are the least preferred by analysts in the survey because of stretched valuations, while building companies are favored thanks to government efforts to boost infrastructure investment.

This post was published at David Stockmans Contra Corner on September 29, 2016.

The Donald Nailed It: ‘We Are In A Big Fat Ugly Bubble’

Most of the 90 minutes last night was a waste – with both candidates lobbing well-worn clichs, slogans and sound bites at the audience and each other.
But there was one brief moment that made it all worthwhile. That was when Donald Trump peeled the bark off the Fed’s phony recovery narrative and warned that the stupendous stock market bubble it has created will come crashing down the minute it stops pegging rates to the zero bound.
‘…… Typical politician. All talk, no action. Sounds good, doesn’t work. Never going to happen. Our country is suffering because people like Secretary Clinton have made such bad decisions in terms of our jobs and in terms of what’s going on.
Now, look, we have the worst revival of an economy since the Great Depression. And believe me: We’re in a bubble right now. And the only thing that looks good is the stock market, but if you raise interest rates even a little bit, that’s going to come crashing down.
We are in a big, fat, ugly bubble. And we better be awfully careful. And we have a Fed that’s doing political things. This Janet Yellen of the Fed. The Fed is doing political – by keeping the interest rates at this level. And believe me: The day Obama goes off, and he leaves, and goes out to the golf course for the rest of his life to play golf, when they raise interest rates, you’re going to see some very bad things happen, because the Fed is not doing their job. The Fed is being more political than Secretary Clinton.

This post was published at David Stockmans Contra Corner by David Stockman ‘ September 27, 2016.

Get Ready For The Mother Of All Stock Market Corrections Once Central Banks Cease Their Money Printing

Undue tightening by the US Federal Reserve could set off a perfect storm of recessionary effects
Global stock and bond markets have been all over the place of late. Rarely have investors been so lacking in conviction. Confusion as to future direction reigns, and with good reason after the spectacular returns of recent years.
For how much longer can stock markets keep delivering? Is there another recession on the way, or to the contrary, is growth likely to surprise positively, underpinning current valuations? Economic turning points are never easy to spot, but right now it’s proving harder than ever.
The immediate cause of all this uncertainty is, however, fairly obvious. It’s the US Federal Reserve again, and quite how far it is prepared to go with the present tightening cycle. Few expect policy makers to act at this week’s meeting of the Federal Open Market Committee.
Even so, a number of its members have once again been making hawkish noises, and another rise in rates by the end of the year is widely anticipated.
Indeed, it is on the face of it quite hard to see how the Fed can avoid such action. Already at 2.3pc, core inflation in the US is trending higher. The US labour market continues to tighten, and money growth, for some a key lead indicator, is strong.

This post was published at David Stockmans Contra Corner By JEREMY WARNER, The Telegraph ‘ September 22, 2016.

Just Plain Pathetic

We are speaking, of course, of the Fed’s decision to punt yet again, and for a reason that is not mysterious at all. To wit, our financial rulers are petrified of a stock market hissy fit, and will go to any length of dissimulation and double-talk to avoid triggering a crash of the very bubbles their policies have inflated.
So now the money market rate will be pinned to the zero bound for 96 months running – – through at least December. Indeed, hell itself could freeze over before these cowardly fools would raise rates at their next meeting a week before the elections – – and most especially not when the Donald is remonstrating loudly and correctly that the whole thing is rigged.
Not that any more evidence was needed, but today’s decision surely proves that our financial rulers have wandered so deep into their monetary puzzle palace that they have now lost touch with every vestige of the real world. That’s because there is not a shred of evidence that more free money for the Wall Street gamblers will do anything except further inflate financial asset values that are already tottering in the nosebleed section of history.

This post was published at David Stockmans Contra Corner on September 21, 2016.

Tulip Fever In China’s Housing Markets

Housing in major cities in China has seen price hikes over the last year that resemble the famous Dutch ‘Tulip Fever’ bubble of 1637, according to new research by economic consultancy firm Longview Economics.
‘I think what’s going on in China is troubling … some of the valuations there are really quite extraordinary,’ Chris Watling, the CEO of Longview Economics, told CNBC Thursday. ‘We’ve double checked these numbers about seven times, because I found them quite hard to believe.’ The firm’s research found that only San Jose in the Silicon Valley is more expensive than Shenzhen. The Chinese city has seen prices rise 76 percent since the start of 2015, with the acceleration beginning in April 2015 as the country’s stock market was nearing its peak. The situation in Beijing and Shanghai is similar, albeit less extreme, the company states.

This post was published at David Stockmans Contra Corner By Matt Clinch, CNBC ‘ September 19, 2016.

A Homerun For The Donald – -Attack The Fed’s War On Savers, Workers And The Unborn (Taxpayers)

The central banks have gone so far off the deep-end with financial price manipulation that it is only a matter of time before some astute politician comes after them with all barrels blasting. As a matter of fact, that appears to be exactly what Donald Trump unloaded on bubble vision this morning:
By keeping interest rates low, the Fed has created a ‘false stock market,’ Donald Trump argued in a wide-ranging CNBC interview, exclaiming that Fed Chair Janet Yellen and central bank policymakers are very political, and should be ‘ashamed’of what they’re doing to the country…
He’s completely correct. After all, they are crushing real wages with their 2% inflation targeting; destroying savers with NIRP and sub-zero rates; and burying unborn taxpayers in monumental debts that today’s politicians are pleased to issue with reckless abandon because the short-run carry cost is nil.
Interest on the Uncle Sam’s $19.4 trillion of debt, for example, is easily $500 billion lower than its true economic cost based on a normal yield after inflation and taxes and elimination of the phony $100 billion per year in so-called Fed ‘profits’ that are booked by the treasury as negative interest expense.
Alas, when interest rates eventually normalize, the Treasury’s debt service costs will soar by hundreds of billions. At the same time, the entirety of the Fed’s ‘profits’, which are conjured from thin air because it buys interest-yielding government and GSE debt with printing press liabilities which cost virtually nothing, will disappear. That’s because it will be forced to take reserve charges for giant principal losses on the falling prices of its $4.5 billion portfolio of government and GSE bonds.

This post was published at David Stockmans Contra Corner on September 12, 2016.

Here’s The Great Big Lie The Bulls Tell About The Stock Market

Bearish P/E ratio calculation carries the most weight

The U. S. stock market’s P/E ratio is telling us in no uncertain terms that stocks are hugely overvalued. Given that, I would have thought the bulls would simply ignore it.
I was wrong.
In fact, many of the bulls have figured out how to torture the data in order to make it appear as though the stock market’s current valuation is in line with historical averages. It’s crucial that you understand what they’re doing so you don’t get seduced by their sweet-talking rationales.
The reason the P/E can seem to tell more than one story is that there is more than one way of calculating it. Though the ‘P’ in the ratio – the price – is fixed, the ‘E’ can vary by a lot. Some analysts focus on trailing 12-month earnings, for example, while others focus on estimated earnings over the coming year. Some calculate the P/E based on earnings as they are actually reported by the companies, while others rely on so-called ‘operating earnings’ (which reflect a firm’s profits after excluding non-operating expenses such as taxes and interest).

This post was published at David Stockmans Contra Corner By Mark Hulbert, Marketwatch ‘ September 6, 2016.

RIP: Oil ‘Supply Glut’

The most remarkable aspect of the WTI crude oil futures curve this month has been its amazing ability to maintain its shape no matter which direction or by how much. Previously, as ‘dollar’ pressures either built or ebbed, the futures curve would either steepen at the front (liquidation pressure) or flatten toward more normal backwardation (easing of the ‘dollar’ difficulties). That was the case since June 8 when the WTI curve was at its flattest in well over a year; but as funding pressures built primarily, I believe, via Japan (increasingly negative and record negative cross currency basis swaps) the curve morphed from nearly flat to once more highly angular contango in the tell-tale sign of the ‘dollar.’
In short, the Japanese end of the Asian ‘dollar’ had become distressingly disruptive through June and July, but much less so once BoJ singled out the ‘dollar’ in its actual policy changes. Thus, from around June 8 until about August 2, the Japanese-connected ‘dollar’ pressure was increasingly acute and globally disruptive (stock markets obviously notwithstanding because of their own liquidity supply and buying interests, largely myths about what central banks can’t do). Since August 2, much less so; leaving oil once again as a function of ‘dollars’ this time in relatively better shape. [emphasis in original]

This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ September 1, 2016.

Monetary policy has Nationalized the Japan Stock Market

Even a resurgent yen hasn’t dampened Japan’s stock rally over the past couple months, but that’s not necessarily because investors like the market.
The Nikkei 225 index has surged around 10 percent since late June, even as the yen has climbed against the dollar, with the pair testing levels under 100. Normally this would be bad news for stocks as a stronger yen is a negative for exporters as it reduces their overseas profits when converted to local currency. So what explains the buoyant stock market?
Analysts attributed the gains to the Bank of Japan (BOJ), not fundamentals.
In a report titled, ‘BOJ nationalizing the stock market,’ Nicholas Smith, an analyst at CLSA, said that the central bank’s exchange-traded fund (ETF) buying program was distorting the market.
At its late July meeting, the BOJ said it would increase its ETF purchases so that their amount outstanding will rise at an annual pace of 6 trillion yen ($56.7 billion), from 3.3 trillion yen previously.
Those purchases were particularly distorting to the market because they focused largely on funds tracking the Nikkei 225 index, Smith said in a note dated Sunday, estimating that more than half of the BOJ’s ETF buying was likely in Nikkei-tied funds.

This post was published at David Stockmans Contra Corner By Leslie Shaffer, CNBC ‘ August 23, 2016.