help

[Finster]

Re: request for help

the ability to borrow yen at near zero rates, and turn around to buy higher yielding instruments in other currencies, pulls down rates all around the world...

No it doesn't.

[Jim Nickerson]

Re: request for help

No it doesn't.

I think I can follow jk's reasoning better than I can, "No it doesn't."

Where do you see jk as being wrong?

[jk]

Re: request for help

No it doesn't.

the ability to borrow yen at near zero rates encourages carry trades. example: borrow yen, sell yen to buy dollars, invest dollars in tbills. gee, we've created more demand for tbills! yes, i know there have to be dollars created to be bought, but our system creates credit on demand and the yen trade increases that demand.

[Jim Nickerson]

Bullishness.

Here is some serious bullishness on the markets
http://www.marketwatch.com/News/Stor...o&dist=myyahoo

Don R Hays of the respected Hays Advisory institutional service was his superbullish self Wednesday, and that's before the Dow Jones Industrial Average made a third successive record high close as the Fed again declined to tighten.

Hays wrote: "NEVER, NEVER, NEVER in my 37-year career have the secular signs been more exciting than they are today. Let me say that again. This is not a flamboyant statement ... We believe the stock market's rally will prove in time to have known the Fed despite their Open Mouth Committee statements was opening the spigot. Over the last two months the growth rate of MZM and M2 (money supply measures) is 7.4% and 6.9% respectively, and that is very, very good news IF it continues. We believe it will..."
Hays even interprets that fact that the stock market is overbought according to some indicators as bullish: "In truth, this is bad news ... or good news. In strong bull markets an overbought condition that reaches very overbought levels is a very good sign of buying power ... if confirmed by psychology readings showing the buying power coming from the smart side of the aisle."
Hays argues this is now the case. This is his asset allocation: "We are 90% bullish and have 10% cash, just in case the market gives us that more acceptable and easier time to buy new stock positions on a pull-back."

Brimelow periodically mentions Hays, and for some while Hays to my perception has been truly a lonely bull, and at the moment he seems more correct than us bears, and if he is ultimately correct, then there is no telling how high the markets may go. But if there is a flood of money from the Fed that is moving the markets up, what is the longer term sequella?

[sixpack]

Re: help

late arriving comment (sorry!). Is it reasonable to conclude that Japanese interest rate policy / liquidity moves are the most significant factor in the world economy with the size of the carry trade ? Japanese liquidity removal certainly has been before. Put another way, once interest rates do move in Japan, will May '06 repeat itself ?

On the other hand, why would a measly quarter point rise in Japan scare the sweet Jesus out of the markets and create unwinding scenarios ? I still havent got my head around that.

I'm not sure why you suggest that 'others joining the carry trade party', eg Iceland, would result in an exodus ? Could you elaborate if you are so inclined ?
thx.

[jk]

Re: help

Is it reasonable to conclude that Japanese interest rate policy / liquidity moves are the most significant factor in the world economy with the size of the carry trade ? Japanese liquidity removal certainly has been before. Put another way, once interest rates do move in Japan, will May '06 repeat itself ?

On the other hand, why would a measly quarter point rise in Japan scare the sweet Jesus out of the markets and create unwinding scenarios ? I still havent got my head around that.

i share your questions. the only theory i've come up with as to why the boj's tiny moves matter, is that they trigger a panic like whispering "fire" in a crowded theater. if money managers think there might be an exodus from the carry trade, it is in their interest to get out first/early. thus, the most nervous among them might react to a random blip, reinforcing it, and triggering moves by others, operating rather like a short squeeze. [which is what it is -- short yen.] not all managers will react like this, but enough might to explain the moves.

[Finster]

Re: request for help

I think I can follow jk's reasoning better than I can, "No it doesn't."

Where do you see jk as being wrong?

What reasoning? See my point? There isn't any. I think it is first incumbent upon jk to provide at least some scintilla of basis for his claim that "the ability to borrow yen at near zero rates, and turn around to buy higher yielding instruments in other currencies, pulls down rates all around the world..." before there is any need to refute it.

I am to debunk an argument that hasn't even been presented?

[Jim Nickerson]

Re: request for help

What reasoning? See my point? There isn't any. I think it is first incumbent upon jk to provide at least some scintilla of basis for his claim that "the ability to borrow yen at near zero rates, and turn around to buy higher yielding instruments in other currencies, pulls down rates all around the world..." before there is any need to refute it.

I am to debunk an argument that hasn't even been presented?

I hope your shoulder is mending, and as it does your seeming disposition improves.

I can tell you what I know for a fact regarding world economic behavior, and it would be nothing or near nothing except what I read somewhere, which may be boils down to "conventional wisdom."

Being no expert in anything, it seems the essence of what has gone on for years is "people" or "institutions" (and I do not have the foggiest notion to whom that refers--certainly not me) have borrowed at near zero interest rates in Japan and bought higher yielding bonds, I guess, in other countries, perhaps a lot in the US, thus gaining the spread between the rates at which they borrowed and they rates at which they then loaned the borrowed money coming from Japan. How jk knows that or on what basis he believes it is true, he will have to answer, but I bet if one did a poll on this board, most would agree with his perception. I would, but in fact I only "know" what I read.

It seems clearl, Finster, you do not buy the "conventional wisdom." So what is the truth, and how do you know it is the truth?

[Finster]

Re: request for help

I hope your shoulder is mending, and as it does your seeming disposition improves.

This is my ‘good mood’ disposition.



What would you expect from somebody called ‘Finster’?


;-)

Being no expert in anything, it seems the essence of what has gone on for years is "people" or "institutions" (and I do not have the foggiest notion to whom that refers--certainly not me) have borrowed at near zero interest rates in Japan and bought higher yielding bonds, I guess, in other countries, perhaps a lot in the US, thus gaining the spread between the rates at which they borrowed and they rates at which they then loaned the borrowed money coming from Japan. How jk knows that or on what basis he believes it is true, he will have to answer, but I bet if one did a poll on this board, most would agree with his perception. I would, but in fact I only "know" what I read.

That seems fairly uncontrovertible. The questionable part pertains to whether that necessarily "pulls down rates all around the world...". Does it really? Or is it being used as an excuse for central banks all around the world to pull down rates and inflate?

I can tell you what I know for a fact regarding world economic behavior, and it would be nothing or near nothing except what I read somewhere, which may be boils down to "conventional wisdom."

…

It seems clearl, Finster, you do not buy the "conventional wisdom." So what is the truth, and how do you know it is the truth?

A quickie lesson in finsterish. "No it doesn’t." translates as: "Please think this through. Are you sure? Why do you think so? Is this conventional thinking really justified? Or is it something people just accept because it is so often repeated?" A twist on the Socratic method, if you will.

As for the merits of conventional economic thinking, do we not have every reason to be skeptical? After all, conventional economic thinking has given us bubbles, inflation, the greatest indebtedness of any nation in all of history, and appears highly likely to lead to a decline in our overall living standards, at least on a relative basis with the rest of the world. Our ears ought to prick when we hear just about any statement that represents the conventional economic thinking. There is definitely something badly broken in there, and if we fail to ask for a critical examination of each step before proceeding with our analysis we risk becoming just another part of the problem ourselves.

We do call ourselves "contrarian" here, right?

[bart]

Re: request for help

This is my ‘good mood’ disposition.



What would you expect from somebody called ‘Finster’?


;-)

Jim, just for possible edification's sake, the following are some of the images that come to mind when I think about Finster and the Manor. ;)

[Jim Nickerson]

Re: request for help

This is my ‘good mood’ disposition.
What would you expect from somebody called ‘Finster’?

Good, got me to laugh out loud. Just what does Finster mean, or from where does it come? Everytime I see Finster, I think "der Fenster."

That seems fairly uncontrovertible.

Not uncommonly do I have to look up words, and that one is not in my Merriam-Webster's 2003.

The questionable part pertains to whether that necessarily "pulls down rates all around the world...". Does it really? Or is it being used as an excuse for central banks all around the world to pull down rates and inflate?

See, by Jove, if we can get you to cooperate, you can shed worthwhile light on things.

A quickie lesson in finsterish. "No it doesn’t." translates as: "Please think this through. Are you sure? Why do you think so? Is this conventional thinking really justified? Or is it something people just accept because it is so often repeated?" A twist on the Socratic method, if you will.

I am not holding out myself as any example, but in fact I pay little regard to the media. I do regard what you and some others put up on this specific board, but given that, none do I take as necessarily correct. You know Finster, most people do not even know as much as I do, and they sure do not know as much as some who write here. I might have been an "expert" one time in a field of endeavor, and my experience was that even "experts" more often than not agree on most big issues, but could argue undendingly on the finer points--to me that is what knowledge and pursuit of it is all about--none of it is fully resolved on most things.

As for the merits of conventional economic thinking, do we not have every reason to be skeptical? After all, conventional economic thinking has given us bubbles, inflation, the greatest indebtedness of any nation in all of history, and appears highly likely to lead to a decline in our overall living standards, at least on a relative basis with the rest of the world. Our ears ought to prick when we hear just about any statement that represents the conventional economic thinking. There is definitely something badly broken in there, and if we fail to ask for a critical examination of each step before proceeding with our analysis we risk becoming just another part of the problem ourselves.

We do call ourselves "contrarian" here, right?

Excellent point.

And all this is so much better than, "No it doesn't" and your time spent in expounding allowed all those little fibers, cells, and tissues to continue recuperating in your shoulder without your thinking about it happening.

Thanks.

[Finster]

Re: request for help

Good, got me to laugh out loud. Just what does Finster mean, or from where does it come? Everytime I see Finster, I think "der Fenster."

Not exactly sure, Jim, but it kind of sounded like a good name for a cranky curmudgeon like the character I was going for. It may have come out of the deep recesses of my early childhood memories of a particular Loony Tunes character …





http://www.minorlooneytunes.com/finsterpics.html

Not uncommonly do I have to look up words, and that one is not in my Merriam-Webster's 2003.

Oops.

Perhaps it should have been incontrovertible…?

See, by Jove, if we can get you to cooperate, you can shed worthwhile light on things.

Let’s not be too hasty here ;) … I’m not exactly saying that’s what I think it is, just posing an example of a possible alternative explanation to illustrate the point that jk’s conclusion is not the only reasonable possibility.

I am not holding out myself as any example, but in fact I pay little regard to the media. I do regard what you and some others put up on this specific board, but given that, none do I take as necessarily correct. You know Finster, most people do not even know as much as I do, and they sure do not know as much as some who write here. I might have been an "expert" one time in a field of endeavor, and my experience was that even "experts" more often than not agree on most big issues, but could argue undendingly on the finer points--to me that is what knowledge and pursuit of it is all about--none of it is fully resolved on most things.

A good starting assumption is that none of us knows anything, myself conspicuously included. When people just take the pronouncements of presumed experts is when you run the risk of group-think and of perpetuating fallacy. I have certain biases myself, especially when it comes to certain kinds of things that I hear over and over again in the media as just some kind of "received wisdom" but that virtually never are critically examined. They just kind of set of alarm bells every time I hear them. You always have to try to distinguish between things that are simple and basic enough to merit the status of "fact" from things which are really kind of fuzzy and nothing more than conventional wisdom. As for example, the common claim that Asian demand is the prime factor behind rising oil prices.

And all this is so much better than, "No it doesn't" and your time spent in expounding allowed all those little fibers, cells, and tissues to continue recuperating in your shoulder without your thinking about it happening.

[Jim Nickerson]

Re: request for help

Jim, just for possible edification's sake, the following are some of the images that come to mind when I think about Finster and the Manor. ;)

Now if the right guy had used his digitus medius to straighten his helment, that would be a good picture, whether of Finster or not I do not know, but perhaps of him.

[bart]

Re: request for help

Now if the right guy had used his digitus medius to straighten his helment, that would be a good picture, whether of Finster or not I do not know, but perhaps of him.

You mean you or he don't have shining armor? :eek: :eek: :rolleyes: ;)