The Hedge Fund of the Last Resort
"She thought that maybe - just maybe - Western Civilization was in a decline because people did not take time to take tea at four o'clock."
E.L. Konigsburg 1996, "The View from Saturday"
December 25, 2008 and the Bank of Japan reportedly decided to take (even more) drastic measures to revive the ailing patient, the Japanese economy. With no monetary policy bullets left in terms of interest rates (with the lending rate at 0.1%), the BoJ has moved from buying JGBs and CP to taking on corporate debt. The backstop has moved from the banking sector, then indirectly to the broader economy in the credit markets to directly boosting the industrial base.
The BoJ is signalling in no uncertain terms that its economy is flatlining, and barring flying over Tokyo Bay and dropping yen on the country there is nothing to stop the inevitable hard landing. Stocks are poised for further downside pressure as expected earnings are revised down.
The BoJ must now be considered the biggest hedge fund in Asia playing across a number of diverse asset classes including currencies, stocks, interest rates and now corporate debt. The irony is that there are no other "natural buyers" other than other Sovereign Hedge Funds (central banks) with an appetite to invest in such close to distressed opportunities. This begs the question that Asian political leaders need to sit down the collective risks and opportunities together- or else- expect a growing threat of social and politicial unrest in the region; and not just from a few displaced farmers, but from unemployed white collar workers!
While central banks have correctly tackled the economic levers individually it is becoming very clear that a more co-ordinated political strategy is now the best option to avoid what looks like a growing risk of cascading national economic disasters leading to global depression. It is noones interest to see this happen.
Other Sovereign Hedge Funds (central banks) in the U.S., U.K., Europe and elsewhere (China) are likely working the phones in the next few weeks. The biggest Sovereign Hedge Funds need to sit down very soon. Mahalo.
"She thought that maybe - just maybe - Western Civilization was in a decline because people did not take time to take tea at four o'clock."
E.L. Konigsburg 1996, "The View from Saturday"
December 25, 2008 and the Bank of Japan reportedly decided to take (even more) drastic measures to revive the ailing patient, the Japanese economy. With no monetary policy bullets left in terms of interest rates (with the lending rate at 0.1%), the BoJ has moved from buying JGBs and CP to taking on corporate debt. The backstop has moved from the banking sector, then indirectly to the broader economy in the credit markets to directly boosting the industrial base.
The BoJ is signalling in no uncertain terms that its economy is flatlining, and barring flying over Tokyo Bay and dropping yen on the country there is nothing to stop the inevitable hard landing. Stocks are poised for further downside pressure as expected earnings are revised down.
The BoJ must now be considered the biggest hedge fund in Asia playing across a number of diverse asset classes including currencies, stocks, interest rates and now corporate debt. The irony is that there are no other "natural buyers" other than other Sovereign Hedge Funds (central banks) with an appetite to invest in such close to distressed opportunities. This begs the question that Asian political leaders need to sit down the collective risks and opportunities together- or else- expect a growing threat of social and politicial unrest in the region; and not just from a few displaced farmers, but from unemployed white collar workers!
While central banks have correctly tackled the economic levers individually it is becoming very clear that a more co-ordinated political strategy is now the best option to avoid what looks like a growing risk of cascading national economic disasters leading to global depression. It is noones interest to see this happen.
Other Sovereign Hedge Funds (central banks) in the U.S., U.K., Europe and elsewhere (China) are likely working the phones in the next few weeks. The biggest Sovereign Hedge Funds need to sit down very soon. Mahalo.
posted by Franklin Scruggins | 9:51 AM
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