Thursday, April 4, 2013

Still a BTFD Market

As long as we've been going up, it is still a BTFD market.  The S&P is the best game in town, if you don't count the Nikkei, which is more of a gunslinger's market, with 500 point daily moves being common now.  I have tried to resist the temptation to trade the smaller moves in this market, but I fell to the temptation and took some losses here and there.  Best thing to do here is just buy dips, it ALWAYS comes back to make new highs.  I don't see enough excitement out there for this to be a top.  At the same time, there just aren't the huge inflows that are required to make us blast higher.  So I expect a slow grind higher market, with temporary dips, nothing more than 2%. 

The BOJ has jumped the shark.  50% monetary base growth target is unprecedented, and completely insane.  I don't expect this USDJPY to be able to stay under 100 for long.  It continues to be an alpha market.  Nikkei should get to 14000 if USDJPY gets to 100.  One of those uncommon situations where the retail investors will be hitting it big. 


ilya said...

More like completely hosed. The bond market the supposed smart money is betting on a complete collapse of Japan, otherwise why would you buy bonds at these rates with predicted 2% inflation??

Market Owl said...

JGB market is kind of a joke, it is a monopolized market, with the BOJ buying up most of the issuance now. It is a more overt version of the Fed's manipulation of the Treasury market.

The 10 year yield on JGB's is 0.4%. It doesn't matter what inflation is, the final arbiter of the price of JGB's is the BOJ, they are the market. And obviously they have a vested interest in buying as much as it takes to keep yields near zero to help out the Japanese government.

I guess by smart money, you mean Kyle Bass. There is no point shorting JGBs or Treasuries, they are being manipulated and will remain manipulated for the rest of their natural existence. Shorters will only lose money. There is no other way to protect the governments from insolvency. Japan is not the only government that is insolvent, so is the U.S.