Friday, May 17, 2013

Why Japan (And Easy Money) Could Blow Up America’s Stock Rally...

Japanese money printing has helped weaken the yen and boost Japanese stocks.

In an interview with Talking Numbers however Bill Fleckenstein of Fleckenstein Capital said he thinks Japanese easy money and Abenomics in general is "dangerous" for the domestic economy and global markets.
"What is going on in Japan is potentially very, very dangerous not just for Japan but for world markets. And, I’m not speaking about the Nikkei. What has taken place in the Japanese JGB [Japanese government bond] is extraordinary. In the last three days, the yield has gone from 60 basis points to 86. Can you imagine what would happen in America if yields on 10-year Treasuries went from 6% to 8.6%?
"There are huge derivative books in Japan where there’s been tremendous amount of derivatives written assuming that rates would stay low forever. I think this could be on the verge of blowing up. This may be the start of it, this may get quiet, or it may get ugly right now. That will impact the American bond market and it will affect equities everywhere. So, it’s potentially dangerous."

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