Red Queen Investing

by CantillonCH

It is rare these days to come across an investment manager or a strategist who will not proudly volunteer that he is either ‘Long the Nikkei, short the Yen,’ or is telling his clients to position themselves that way.

With all due caveats about crowded trades and the like, we cannot find the second part of this at all objectionable, having long been promoting the view that the USD would do what it has repeatedly done (in real effective rate terms) ever since the break up of the Gold Pool in 1968 signalled the imminent end of the Bretton Woods system – namely, decline then base out over the course of a decade to a point within +/- 2 1/2% of the same base level (95.5 on the BIS index), then reverse and rally for the next 6 1/2 years. Continue reading …

Abenomics gives Sato the ‘pip’

by CantillonCH

In a widely reported speech given in Kochi, BOJ board member Takehiro Sato gave voice to some of the dissent which has riven policy makers – and, we suspect, much of Japanese society – over the issue of whether the government’s latest resort to the Patent Inflationary Panacea (henceforth, the ‘PIP’) is likely to have the desired effect.

Expressing doubts over whether a hard ‘target’ for the attainment of a steady rate of price escalation of 2% a year – that latter-day shibboleth of collectivist Macromancy – Sato made the very reasonable, if little shared, individualist observation that ‘prices reflect the temperature of the economy, not a variable [sic] that can be directly controlled by a central bank.’

Continue reading …