Even Dennis Gartman is Shorting the Yen…
As CNBC reports, even Dennis Gartman is now shorting the Japanese yen. Along with every Tom, Dick, Harry, their aunt Elsie and her dog Freddie as it were. If ever there was a consensus trade, this must be it. Let us look at Gartman's arguments. They actually make superficial sense as you will see:
“The Japanese government has given a "sell" signal for the yen, Dennis Gartman, editor of The Gartman Letter, said Wednesday on CNBC.
"I've been short of yen for quite some time," he said. "I'm short of yen against dollars, generally."
On "Fast Money," Gartman said he was short of yen in U.S. Dollar, Canadian dollar, Australian dollar and New Zealand dollar terms. Over the past six or seven months, Gartman added, the trade is working out.
"I think it's abundantly clear that this new administration has made it very clear it intends to force the Bank of Japan to supply Japanese yen in unlimited terms," he said. ""I can't remember ever having heard that before.
"You have to remember, a government has a hard time strengthening its currency. But governments can very easily weaken their currencies simply by printing them. And when the Japanese said they're going to print them in an unlimited fashion, you have to believe them."
"What do I care whether they can or cannot create inflation as long as they are going to create more yen? This is the first time we've seen an authority in Japan use the term 'unlimited,'" he said.”
Well, duh. We all know what Shinzo Abe has said. However, since when do we “have to believe” a government? One should perhaps not consider the obvious, but rather the less obvious elements in play. Such as:
The analyst consensus unerringly expects a weakening yen year after year. It has been wrong for several years in a row, but undaunted by this series of failures expects the same once again (one of these days we will be right and then we'll be heroes!)
Commitments of traders in yen futures. A record high small speculator net short position was recently recorded. The move in speculative positioning overall is completely out of proportion with the actual move in the currency. Far bigger corrections in the past have produced far less speculative enthusiasm (chart via sentimentrader). Can it really be that this big mass of speculators has discovered the turning point in such a timely fashion? It would be a first.
We would also add here as a small correction that the trade hasn't been “working out for the past six or seven months”, but only since early October. If our ability to count to three hasn't been impaired, that's three months, not six.
What Could Go Wrong?
Now what could go wrong? After all, Shinzo Abe has promised “unlimited printing”, right? How about: Bernanke has promised the very same thing and has a head start. Or how about: it is actually not up to Abe to make such a “promise”. He is Japan's prime minister, not its central bank chief. We'll say it again: it does not matter whether he uses terms like “unlimited”, or whatever. What he is saying is not relevant – what actually happens in the future is, or rather, is going to be. So far the entire sell-off in the yen is based on nothing but perceptions – the idea that this time, they really mean it!
We may well all find out that they actually don't. We already pointed out yesterday that the Japanese bond market does not believe one word of what Abe says. So what does the bond market thinks it “knows” that the currency market doesn't? Consider who the traders in JGBs are: most of them are actually Japanese domestic investors. Guess who trades the yen and the Nikkei? The gaijin. Who is likely to be better informed?
Mind, it is always possible that the bond market gets it wrong in this case. If so, then its upcoming decline should suffice to change Abe's mind in a real hurry. Japan simply cannot afford rising interest rates on its existing debt, least of all at a time when this debt is set to continue to grow even further. And if we're not mistaken, they do have an abacus somewhere at the 'ministry of dreadful dreams' as well. And they actually only have to be able to count to three as well as it were. In a pinch, they can always take a look at how the Holy Hand Grenade of Antioch works.
It is that time of the year again – our semi-annual funding drive begins today. Give us a little hand in offsetting the costs of running this blog, as advertising revenue alone is insufficient. You can help us reach our modest funding goal by donating either via paypal or bitcoin. Those of you who have made a ton of money based on some of the things we have said in these pages (we actually made a few good calls lately!), please feel free to up your donations accordingly (we are sorry if you have followed one of our bad calls. This is of course your own fault). Other than that, we can only repeat that donations to this site are apt to secure many benefits. These range from sound sleep, to children including you in their songs, to the potential of obtaining privileges in the afterlife (the latter cannot be guaranteed, but it seems highly likely). As always, we are greatly honored by your readership and hope that our special mixture of entertainment and education is adding a little value to your life!
Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke
7 Responses to “The Yen – What Everybody Knows Probably Isn’t Worth Knowing”
Most read in the last 20 days:
- Ganging Up on Gold
So Far a Normal Correction In last week's update on the gold sector, we mentioned that there was a lot of negative sentiment detectable on an anecdotal basis. From a positioning perspective only the commitments of traders still appeared a bit stretched though, while from a technical perspective we felt that a pullback to the 200-day moving average in both gold and gold stocks shouldn't be regarded as anything but a normal - and in this case actually long overdue -...
- Gold Sector Correction – Where Do Things Stand?
Sentiment and Positioning When we last discussed the gold sector correction (which had only just begun at the time), we mentioned we would update sentiment and positioning data on occasion. For a while, not much changed in these indicators, but as one would expect, last week's sharp sell-off did in fact move the needle a bit. Gold - just as nice to look at as it always is, but slightly cheaper since last week. Photo via The Times Of India The commitments of...
- Australian property bubble on a scale like no other
Australian property bubble on a scale like no other Yesterday Citi produced a new index which pinned the Australian property bubble at 16 year highs: Bubble trouble. Whether we label them bubbles, the Australian economy has experienced a series of developments that potentially could have the economy lurching from boom to bust and back. In recent years these have included: the record run up in commodity prices and subsequent correction; the associated...
- Pope Francis: Traitor to Western Civilization
Disqualified There has been no greater advocate of mass Muslim migration into Europe than the purported head of the Catholic Church, Pope Francis. At a recent conference, he urged that “asylum seekers” be accepted, “through the acts of mercy that promote their integration into the European context and beyond.”* Before we let Antonius continue with his refreshingly politically incorrect disquisition, we want to remind readers of two previous articles that have...
- Bubble Dissection
The Long Term Outlook for the Asset Bubble Due to strong internals, John Hussman has given the stock market rally since the February low the benefit of the doubt for a while. Lately he has returned to issuing warnings about the market's potential to deliver a big negative surprise once it runs out of greater fools. In his weekly market missive published on Monday (entitled “Sizing Up the Bubble” - we highly recommend reading it), he presents inter alia the following eye-popping...
- A Looming Banking Crisis – Is a Perfect Storm About to Hit?
Andy Duncan Interviews Claudio Grass Andy Duncan of FinLingo.com has interviewed our friend Claudio Grass, managing director of Global Gold in Switzerland. Below is a transcript excerpting the main parts of the first section of the interview on the problems in the European banking system and what measures might be taken if push were to come to shove. Andy Duncan of FinLingo.com (left) and Claudio Grass of Global Gold (right) Andy Duncan: How do you see the...
- US Stock Market - a Spanking May be on its Way
Iffy Looking Charts The stock market has held up quite well this year in the face of numerous developments that are usually regarded as negative (from declining earnings, to the Brexit, to a US presidential election that leaves a lot to be desired, to put it mildly). Of course, the market is never driven by the news – it is exactly the other way around. It is the market that actually writes the news. It may finally be time for a spanking though. Time for some old-fashioned...
- Doomed to Failure
Larded Up and Larded Over We’ve been waiting for the U.S. economy to reach escape velocity for the last six years. What we mean is we’ve been waiting for the economy to finally become self-stimulating and no longer require monetary or fiscal stimulus to keep it from stalling out. Unfortunately, this may not be possible the way things are going. As Milton Jones once revealed: “A month before he died, my grandfather covered his back in lard. After that, he went...
- Are the Deep State’s Drones Coming for You?
What’s Aleppo? Look out kid Don’t matter what you did Walk on your tip toes Don’t try "No Doz" Better stay away from those That carry around a fire hose Keep a clean nose Watch the plain clothes You don’t need a weather man To know which way the wind blows – “Subterranean Homesick Blues,” Bob Dylan The entrance to Baghdad's “Green Zone”. Photo credit: Karim Kadim / AP DELRAY BEACH, Florida – Biggest foreign policy blunder...
- Meet Your New Stimulus Allocation Czar
March Towards Midnight The march towards midnight is both stirring and foreboding. Like a death row inmate sitting down to savor his last meal, a grim excitement greets the reality of impending doom. Thoughts of imminent mortality haunt each bite. Tic-toc, tic-toc... As far as the economy’s concerned, there’s no stopping its march towards midnight. The witching hour’s rapidly approaching. We intend to savor each moment and make the best of...
- Interview with Doug Casey
Natalie Vein of BFI speaks with Doug Casey Our friend Natalie Vein recently had the opportunity to conduct an extensive interview with Doug Casey for BFI, the parent company of Global Gold. Based on his decades-long experience in investing and his many travels, he shares his views on the state of the world economy, his outlook on critical political developments in the US and in Europe, as well as his investment insights and his approach to gold, as part of a viable strategy for...
- Evacuate or Die...
Escaping the Hurricane BALTIMORE – Last week, we got a peek at the End of the World. As Hurricane Matthew approached the coast of Florida, a panic set in. Gas stations ran out of fuel. Stores ran out of food. Banks ran out of cash. A satellite image of hurricane Matthew taken on October 4. He didn't look very friendly. Image via twitter.com “Evacuate or die,” we were told. Not wanting to do either, we rented a car and drove to Maryland. “We’ll just...