One of my biggest call in 2013 is for
This summer points to a turning point of certain investment trends which lasted for almost a decade. The continuous rise of yen versus global currency, the ever lowering of government bond yields etc. This week marked one of the most volatile weeks in 2013. I am not entirely surprise as investors and traders are moving back and forth from traditional easy trades to some which require a holistic view of the world in years to come. Is it tough psychologically to decide, hence the erratic price movements. The dip of USDJPY and UST 10yrs Yields this week was quickly reversed last night. Be prepare for more similar days this year but last night’s movement on the back of OK economic data out of the US reaffirmed my view that the trend has reversed but it is not without volatility. One advice; avoid the crowded trades and use less popular instruments to achieve your investment objectives. USDJPY at 104 was crowded but less so at 96.00 if you get what I mean…
You Must Be A Good Thinker” Joseph Yap 6 years and 11 months old
The fall in Japanese Yen for the past 3 months has caught many people by surprise and with its magnitude of fall (-15% against major global currencies) is it undoubtedly one of the best/worst performing investment assets for many people in the same period. Why is it falling the way it did? Is it because the world’s economy is picking up again? Is it because risk appetite is back again? Is it investors selling yen because they think its over-value? Is it the return of the carry trade? All these reasons might explain the fall in Japanese yen we have seen recently. But then again from 2003 to 2007 when the global economy was ragging and risk assets globally appreciated in value, the Japanese yen actually held its value against major currencies. So what could be different now? Despite the fall in the value of the Japanese yen in the past 3 months, the currency is still 25% stronger against USD, 10% stronger against EUR and almost 35% stronger against KRW in the past decade and that is the root of the cost. The carry trade is a result and not the cause if you like deeper. One would get similar cheap funding monies from EUR/USD/HKD/SGD/CHF etc
The strong yen in the past 10 years has caused a huge imbalance for Japanese corporations causing their competitiveness to fall against global peers. We have seen the rise of German automakers, Korean electronics and European consumer care companies in the expense of Japanese counterparts during this period. The strength of the yen has also discourage Japanese companies’ investments overseas in favor of a more domestic strategies during this period. With this strategy in mind, Japanese companies and financial institutions have in the pass decade favor a “long” yen position naturally.
With burst of the US subprime bubble and the European Sovereign Debt Crisis, the global imbalances have started to correct itself and with the natural force of nature and economics this would reverse the strength of yen we have seen in recent times. I would expect yen would at least need to fall by the magnitude it has risen against USD, EUR and KRW over the next few years for its products to be competitive against in the global landscape. At the same time it would encourage financial institutions in Japan to expand their business overseas and lend a higher proportion of their money outside Japan as well. Therefore, eventhough the yen has fallen 15% recently…it might have a long way to go if one is to take a longer term view..
The financials market got off to a great start in 2013 as expected. Please refer the articles i have written in the past 3 months calling for this
The financial markets are likely to see a very strong year as equity risk premium for major economies such as EU, Japan, China, Hong Kong, South Korea are all over 10%. The fall in risk free rate plus the major compression of credit spread in 2012 has made equity markets one of the cheapest asset class out there. The other 2 asset class which could also perform well would be convertible bonds and high yield bonds as global default rate continue to fall on the back of quantitative easing.
Furthermore, in 2013 we are likely to see a repeat of 2003 and 1993 of which in 2003 the money that came out of the Nasdaq bubble fueled global risk assets including US subprime and asset backed markets which burst in 2007 . In 1993, the money that came out of post Japan bubble also fueled the markets in Asia ex Japan which resulted in the 1997 Asian Financial Crisis later on. I believe we are seeing a repeat here as globally central banks has embarked on massive quantitative easing and this year onwards the money is going to flow out of government bonds and money market funds to fueled risk assets especially those markets trading above historical risk premiums.
Stay tune for Part 3 of this article – as I analyze sectoral performance globally.
The WordPress.com stats helper monkeys prepared a 2012 annual report for this blog.
Here’s an excerpt:
The new Boeing 787 Dreamliner can carry about 250 passengers. This blog was viewed about 1,200 times in 2012. If it were a Dreamliner, it would take about 5 trips to carry that many people.