10,000,000,000,000 – That’s a lot of Yen!
Even in dollars (dividing by 87 this morning) that’s $115,000,000,0000 – enough to make 115,000 people millionaires. It looks like most of those millionaires will be yesterday’s bulls (not us), who must have known something as they bought and bought as we double tested the 10,250 mark on the Dow both yesterday and Friday. Perhaps they are right, perhaps the entire global economy has been deemed "too big to fail" and our leadership is willing to do whatever it takes to boost it at every turn.
Sure you can argue there is bound to be hell to pay at the other side of this transaction but whether the bill comes next week, next month or next year, it certainly doesn’t seem to be worrying any of the people who are gorging on the feast that is the great rally of 2009. Despite the fact that the Nikkei was up 2.5% on Monday, the BOJ had "an emergency board meeting" last night and decided to offer 3-month loans to our friends the commercial bankers at 0.1% driving bonds to the lowest level in 13 months, now just 0.455% for a 5-year bond.
Making bonds worthless is a great way to force more money into the stock market, which is also fueled by low-cost margin loans and, don’t forget, those commercial banks can leverage up that $115Bn ten to one – so we’re talking about 100 Trillion Yen put into play last night and that’s over $1Tn US Dollars, which is quite a lot – even if they don’t buy what they used to…
“The BOJ was facing a lot of pressure from the markets and the government, so it wanted to show that it was being proactive,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo. “The BOJ’s understanding is that deflation risks have increased.”
So what the G20 is telling us is that, no matter what price commodities are and, whether people can afford them or not, they are NOT going to let those prices fall. Better some starving poor people than some upset rich people seems to be the working theory. In just 2 days the Nikkei has been able to erase half of November’s constant selling. Sure the 2-day volume was lower than the average volume of the selling and sure 2 days represents less than 1/10th of the month’s volume but who cares? Up is up and whether we build our house of bricks or straw – the G20 has promised to keep the big, bad wolf at bay (for as long as they can).
Similarly, the Hang Seng also had a fantastic 2 days, racking up 5% in 2 sessions on less volume than Friday’s drop but who cares – up is up and we’re not going to ruin things by examining them. Europe is up about 1.5% ahead of the US open, also giving them 4% gains in 2 days so the US markets have a lot of catching up to do as yesterday was kind of a dud. We’re still watching those pesky levels but it looks like 1,100 on the S&P is being taken out pre-market – just so those pesky volume sellers can’t ruin a good show before it gets started.
Gold similarly ran up $25 between midnight and 4am to touch $1,200.40 in the futures, just to make sure that print was in and copper hit $3.21 while silver touched $19. Our long gold plays pay 4x if gold goes to $1,250 so rah, rah gold but what a lot of nonsense it all is – especially when you look at a commodity that real people actually use like natural gas, which is DOWN 2.5% this morning and oil, back to $78.50 this morning still has a way to go before hitting $82, where it was on October 20th when the dollar was 2.5% higher.
Speaking of the dollar – it’s not dead yet at 74.5 and if they form a base here and break up, all of these good times will come crashing down like a house of straw. The threat of a strong(er) dollar is probably the biggest, baddest wolf in the economic woods but it certainly isn’t the only one. We’ll see Construction Spending and ISM at 10 along with Pending Home Sales and we’ll be getting Auto Sales Reports during the day. I assume the numbers aren’t good or there wouldn’t be this emergency need for stimulus but we’ll see and we’ll also see if they can finally hold our levels…
