Carry Trade Investors Flee BRICs And Semiconductors As Bank Of Japan Cites Increasing Risks From Global Inflation
Wednesday, 18. June 2008, 19:56:15
Investors took flight from the BRICS today as ActionForex/CEP News/Kevin Franco reports that the Bank of Japan's monetary policy board is concerned about the rising risks to global inflation, according to minutes from the Bank of Japan's, BOJ, monetary policy meeting on May 19 and 20.
"Many members said that the recent rise in the prices of primary commodities was not only due to increased demand brought about by growth in emerging economies, but also to various other factors such as supply constraints, heightened geopolitical risks, accommodative financial conditions (Richard: Bank of Japan 0.5% lending, and US Bank lending used for investing in indexed commodity funds and futures contract speculation), and a 'flight to simplicity'," according to the minutes.
"Some members suggested that the Bank of Japan should pay attention to inflation expectations and price setting by some companies. Core CPI is expected to continue to trend higher and should be watched carefully.
Members also agreed that risks to economic growth both at home and abroad needed to be monitored as well."
"Although overseas economies taken as a whole continued to expand, downside risks remained elevated as the disruptions in global financial markets had continued and growth in the U.S. economy had been sluggish," the text read.
The bear market is restarting: disinvestment from stocks and bonds worldwide, is strongly underway today.
It was on May 19, 2008 that the TAF, TSLF, and PDCF rally ended; and on June 10, 2008, that for all practical purposes the yen carry trade rally ended. Trading in shares of the once hot basic material stocks, such Aluminum Corporation of China, ACH, show "the end of the age of prosperity", that has come via financialization and Federal Reserve liquidity, as well as credit margin that has come via 0.5% interest yen carry loans from Bank of Japan lending. The chart of ACH shows the May 19 end to the Fed Rally with a gravestone doji, and the June 10 sell off that came with an end to the yen carry trade rally with a crescendo fall lower of value from 40 to today's 35.50.
Definitely the bear market picked up steam today, as those with yen carry trade loans sold off traditionally favored yen carry investments: the BRICs, EEB, Semiconductors, XSD, and Nasdaq, QTEC fell significantly in early morning trading.
Trading in Brazil, EWZ, which popped higher yesterday, is selling off today.
Steel stocks, SLX, a long time yen carry trade favorite, shows very bearish with a lollipop hanging man candlestick, a gravestone doji, a dragonfly candlestick; lack of volume here says "it's a gona fall".
We are witnessing a topping off in the basic material stocks, IYM, shows three days of dojis, in a rounding top pattern.
Since late last year I've cautioned investors both on this blog and in two FinancialSense.com articles, about the dangers of investing in the HUI indexed precious metal mining shares, relating that they are disconnecting from the price of gold and can no longer can be relied upon to leverage the price of gold to the investors advantage. Today, the gold stock ETF, GDX, is barely showing positive, as it is not trading up with gold and the industrial metal commodiites; but, is being pulled down by the overall stock market, VTI.
Banks, KBE, and investment bankers, KCE, operated to lead the overall US market down.
The chart of the Banks, KBE, shows the May 2008 sell off by institutional investors in bank stocks, who exited to speculate in commodity futures, RJI, and in indexed commodity funds. It also shows three black crows as investors are fleeing these level two asset and level three level asset laden zombie corporations. The Fed Chief Bernanke, never, ever should have tried to save them, their assets "so called" consists of debt; and is subject to the Liquidation Thesis, which holds that Government services and payments, service sector jobs, public and private debt of all types, and unfunded retiree benefits, are going to be liquidate, that is done away with.
Energy Companies, XLE, and oil service companies, OIH, traded up on a higher oil, USO, price, as President Bush called for more oil production.
Natural gas, GAZ, jumped higher in its ascending wedge; but natural gas producer, Cabot Oil and Gas, COG, was pulled down by its participation in the Russell 2000 Growth, IWO, shares.
Testimony given recently before Congress documents that there is no supply shortage of either oil or gas, and that the current price of each is maintained solely by speculation.
The chart of energy production shares relative to banks, XLE:KBE, and energy service companies relative to banks, OIH:KBE, shows the overvalued state of the energy companies, and the desperate state of the banks. The chart of the overall market relative to banks, VTI:KBE, shows how dislocted the market is from the banks, and is just one of many evidences of the risk of a systemic financial and investment breakdown.
US Treasuries, TLT, are up, but at the point of a bear cross as 50 day moving average is overtaking 200 day average. For those who are of the short selling persuasion, one should add to the bear government bond ETF, TBT, today; or add to bear Treasury mutual fund RYJUX as a run on the US Treasury Bond, $USB, commenced on March 18, 2008 as the bond market place called interest rates, $TYX, higher when the Federal Reserve announced expanded TAF, TSLF, and PDCF facilities to aid the banks.
The EUR/JPY, which is the yen carry trade barometer, FXE:FXY, showed a minute downturn at 1.68.
The CRB commodities ETF, RJI, manifested a kind of shooting star, spinning top doji at 13.60 as base metals, JJM, rose 2% on John Simpson's BBC News that Peru's 'Copper Mountain' is now in Chinese hands.
The news of the copper mountain deal was not well received at Peru Copper, PCU: shares fell sharply, and then recovered some.
The gold ETF, GLD, was pulled up by the base metals action to 87.8, but on falling volume, suggesting that a fall lower to 85.4 or 84.5 is very possible.
John Simpson reports that 'Copper Mountain', Mount Toromocho, stands high at 15,000 feet, 4,600 meters, 86 miles, 138km, from Lima and is comparable to any mountain in Europe.
It gets its name from its shape - The Bull With No Horns. And it is composed almost entirely of copper ore: two billion tonnes of it.
It could become the most productive copper mine anywhere on earth. Now it belongs, in effect, to China.
When open-cast mining begins, in three or four years, a Chinese mining company, Chinalco, will send the copper back home to be turned into electrical wire.
The plan is to use it to carry out the electrification of the whole of China.
The Peruvian government is happy with the $3bn, £1.53bn, that Chinalco will invest in the Toromocho mines.
The Chinese will be even happier. They have got themselves a bargain.
The copper Chinalco extracts from Toromocho will cost something like US$410 (£210) per ton. Today, the price for copper on the London Metal Exchange was $8,255 (£4,220) - 20 times more.
Chinalco stands to make a 2,000% profit on its investment.
There is only one problem. In order to dig out the copper ore, the company will have to shift the inhabitants of an entire town, and move them across the valley.
Morococha is a poor and depressing place. Many of the inhabitants lead the most basic of lives. But that makes them all the more willing to accept the compensation which Chinalco is offering.
In a referendum last year, more than half of the inhabitants voted to accept.
But there is no serious alternative. China is buying up raw materials all around the world, paying for its shopping spree with its vast reserves of foreign currency.
But there is no serious alternative. China is buying up raw materials all around the world, paying for its shopping spree with its vast reserves of foreign currency.
During his disastrous term in office from 1985 to 1990, President Alan Garcia set out to challenge the world's richest countries and the power of the big multinational corporations.
It was a disaster. As a result Peru went through a period of economic near-chaos.
Two years ago, surprisingly, he managed to get elected again - only this time he cuts a very different figure. He has become the friend of international business.
China offers Peru cash, and it is prepared to give Mr Garcia its political support. You can see why he would be interested.
Some Peruvians, just like the critics of Chinalco's offer to the town of Morococha, think President Garcia ought to get a better deal from the Chinese.
But Peru is not a rich country. He is perfectly pleased with the bargain the Chinese are offering. So are the Chinese.
Related Reports
BOE and BOJ Minutes Reflect Inflation Fears
Midwest Floods Destroy 5 Million Acres Of Farmland
The weekly chart of agricultural commodities, RJA, shows agricultural commodities are trading in the same speculative way as oil; the dragonfly doji suggests a topping out process.
Concluding Comments
Today I weep for the poor people in Peru, I see a no win situation for them ase seen in the kind of widespread environmental destruction that has occurred in China, and the paltry relocation fee the peasants are being.
In times past when companies like Exxon Mobil, XOM, acquired reserves, there was no public revelation of the amount made, yet today's expropriation by a foreign country probably rivals the natural resources acquired by the global oil companies.
Foreign direct investment by China is covered only a few authors. I am sure that sovereign wealth funds control larger banks, and could easily instigate a commercial lending or other crisis, by their shareholder interest. Foreign direct investment in Dow Chemical, DOW, and other industrial companies creates a monopolistic cartel that challenges the economic security of America, but there is nothing that Congress is doing to challenge this development. In fact the Security and Prosprerity Partnership of North America, the SPP, through the North America Competitiveness Council, the NACC, assures that state corporate rule is coming over the natural resources, corporate resources, and peoples of the North American Continent. And the June 10, 2008 Declaration of the EU US Summit assures a tight combine and integration of European and US Corporate interet as well.
Why, just why, do I write, this blog? One of the reasons is to provide Cliff Notes, so no one will be a 'gullible investor'; for I sure don't want any led off 'the precipice of disaster' that we have arrived at today.
The above referenced, Bank of Japan report, relates that inflation is on the way, and Richard, your blog host, the Resourceful Bear, reminds: "Inflation, it's a stock and bond killer, and a gold thriller".
Although gold could easily fall lower, I suggest that one dollar cost average a buy of gold at Bullion Vault.com, GoldIsMoney, and in the gold ETF, held in a trust account, not a brokerage account, all before July 4, 2008; yes most definitely before the 4th of July, 2008.
"Many members said that the recent rise in the prices of primary commodities was not only due to increased demand brought about by growth in emerging economies, but also to various other factors such as supply constraints, heightened geopolitical risks, accommodative financial conditions (Richard: Bank of Japan 0.5% lending, and US Bank lending used for investing in indexed commodity funds and futures contract speculation), and a 'flight to simplicity'," according to the minutes.
"Some members suggested that the Bank of Japan should pay attention to inflation expectations and price setting by some companies. Core CPI is expected to continue to trend higher and should be watched carefully.
Members also agreed that risks to economic growth both at home and abroad needed to be monitored as well."
"Although overseas economies taken as a whole continued to expand, downside risks remained elevated as the disruptions in global financial markets had continued and growth in the U.S. economy had been sluggish," the text read.
The bear market is restarting: disinvestment from stocks and bonds worldwide, is strongly underway today.
It was on May 19, 2008 that the TAF, TSLF, and PDCF rally ended; and on June 10, 2008, that for all practical purposes the yen carry trade rally ended. Trading in shares of the once hot basic material stocks, such Aluminum Corporation of China, ACH, show "the end of the age of prosperity", that has come via financialization and Federal Reserve liquidity, as well as credit margin that has come via 0.5% interest yen carry loans from Bank of Japan lending. The chart of ACH shows the May 19 end to the Fed Rally with a gravestone doji, and the June 10 sell off that came with an end to the yen carry trade rally with a crescendo fall lower of value from 40 to today's 35.50.
Definitely the bear market picked up steam today, as those with yen carry trade loans sold off traditionally favored yen carry investments: the BRICs, EEB, Semiconductors, XSD, and Nasdaq, QTEC fell significantly in early morning trading.
Trading in Brazil, EWZ, which popped higher yesterday, is selling off today.
Steel stocks, SLX, a long time yen carry trade favorite, shows very bearish with a lollipop hanging man candlestick, a gravestone doji, a dragonfly candlestick; lack of volume here says "it's a gona fall".
We are witnessing a topping off in the basic material stocks, IYM, shows three days of dojis, in a rounding top pattern.
Since late last year I've cautioned investors both on this blog and in two FinancialSense.com articles, about the dangers of investing in the HUI indexed precious metal mining shares, relating that they are disconnecting from the price of gold and can no longer can be relied upon to leverage the price of gold to the investors advantage. Today, the gold stock ETF, GDX, is barely showing positive, as it is not trading up with gold and the industrial metal commodiites; but, is being pulled down by the overall stock market, VTI.
Banks, KBE, and investment bankers, KCE, operated to lead the overall US market down.
The chart of the Banks, KBE, shows the May 2008 sell off by institutional investors in bank stocks, who exited to speculate in commodity futures, RJI, and in indexed commodity funds. It also shows three black crows as investors are fleeing these level two asset and level three level asset laden zombie corporations. The Fed Chief Bernanke, never, ever should have tried to save them, their assets "so called" consists of debt; and is subject to the Liquidation Thesis, which holds that Government services and payments, service sector jobs, public and private debt of all types, and unfunded retiree benefits, are going to be liquidate, that is done away with.
Energy Companies, XLE, and oil service companies, OIH, traded up on a higher oil, USO, price, as President Bush called for more oil production.
Natural gas, GAZ, jumped higher in its ascending wedge; but natural gas producer, Cabot Oil and Gas, COG, was pulled down by its participation in the Russell 2000 Growth, IWO, shares.
Testimony given recently before Congress documents that there is no supply shortage of either oil or gas, and that the current price of each is maintained solely by speculation.
The chart of energy production shares relative to banks, XLE:KBE, and energy service companies relative to banks, OIH:KBE, shows the overvalued state of the energy companies, and the desperate state of the banks. The chart of the overall market relative to banks, VTI:KBE, shows how dislocted the market is from the banks, and is just one of many evidences of the risk of a systemic financial and investment breakdown.
US Treasuries, TLT, are up, but at the point of a bear cross as 50 day moving average is overtaking 200 day average. For those who are of the short selling persuasion, one should add to the bear government bond ETF, TBT, today; or add to bear Treasury mutual fund RYJUX as a run on the US Treasury Bond, $USB, commenced on March 18, 2008 as the bond market place called interest rates, $TYX, higher when the Federal Reserve announced expanded TAF, TSLF, and PDCF facilities to aid the banks.
The EUR/JPY, which is the yen carry trade barometer, FXE:FXY, showed a minute downturn at 1.68.
The CRB commodities ETF, RJI, manifested a kind of shooting star, spinning top doji at 13.60 as base metals, JJM, rose 2% on John Simpson's BBC News that Peru's 'Copper Mountain' is now in Chinese hands.
The news of the copper mountain deal was not well received at Peru Copper, PCU: shares fell sharply, and then recovered some.
The gold ETF, GLD, was pulled up by the base metals action to 87.8, but on falling volume, suggesting that a fall lower to 85.4 or 84.5 is very possible.
John Simpson reports that 'Copper Mountain', Mount Toromocho, stands high at 15,000 feet, 4,600 meters, 86 miles, 138km, from Lima and is comparable to any mountain in Europe.
It gets its name from its shape - The Bull With No Horns. And it is composed almost entirely of copper ore: two billion tonnes of it.
It could become the most productive copper mine anywhere on earth. Now it belongs, in effect, to China.
When open-cast mining begins, in three or four years, a Chinese mining company, Chinalco, will send the copper back home to be turned into electrical wire.
The plan is to use it to carry out the electrification of the whole of China.
The Peruvian government is happy with the $3bn, £1.53bn, that Chinalco will invest in the Toromocho mines.
The Chinese will be even happier. They have got themselves a bargain.
The copper Chinalco extracts from Toromocho will cost something like US$410 (£210) per ton. Today, the price for copper on the London Metal Exchange was $8,255 (£4,220) - 20 times more.
Chinalco stands to make a 2,000% profit on its investment.
There is only one problem. In order to dig out the copper ore, the company will have to shift the inhabitants of an entire town, and move them across the valley.
Morococha is a poor and depressing place. Many of the inhabitants lead the most basic of lives. But that makes them all the more willing to accept the compensation which Chinalco is offering.
In a referendum last year, more than half of the inhabitants voted to accept.
But there is no serious alternative. China is buying up raw materials all around the world, paying for its shopping spree with its vast reserves of foreign currency.
But there is no serious alternative. China is buying up raw materials all around the world, paying for its shopping spree with its vast reserves of foreign currency.
During his disastrous term in office from 1985 to 1990, President Alan Garcia set out to challenge the world's richest countries and the power of the big multinational corporations.
It was a disaster. As a result Peru went through a period of economic near-chaos.
Two years ago, surprisingly, he managed to get elected again - only this time he cuts a very different figure. He has become the friend of international business.
China offers Peru cash, and it is prepared to give Mr Garcia its political support. You can see why he would be interested.
Some Peruvians, just like the critics of Chinalco's offer to the town of Morococha, think President Garcia ought to get a better deal from the Chinese.
But Peru is not a rich country. He is perfectly pleased with the bargain the Chinese are offering. So are the Chinese.
Related Reports
BOE and BOJ Minutes Reflect Inflation Fears
Midwest Floods Destroy 5 Million Acres Of Farmland
The weekly chart of agricultural commodities, RJA, shows agricultural commodities are trading in the same speculative way as oil; the dragonfly doji suggests a topping out process.
Concluding Comments
Today I weep for the poor people in Peru, I see a no win situation for them ase seen in the kind of widespread environmental destruction that has occurred in China, and the paltry relocation fee the peasants are being.
In times past when companies like Exxon Mobil, XOM, acquired reserves, there was no public revelation of the amount made, yet today's expropriation by a foreign country probably rivals the natural resources acquired by the global oil companies.
Foreign direct investment by China is covered only a few authors. I am sure that sovereign wealth funds control larger banks, and could easily instigate a commercial lending or other crisis, by their shareholder interest. Foreign direct investment in Dow Chemical, DOW, and other industrial companies creates a monopolistic cartel that challenges the economic security of America, but there is nothing that Congress is doing to challenge this development. In fact the Security and Prosprerity Partnership of North America, the SPP, through the North America Competitiveness Council, the NACC, assures that state corporate rule is coming over the natural resources, corporate resources, and peoples of the North American Continent. And the June 10, 2008 Declaration of the EU US Summit assures a tight combine and integration of European and US Corporate interet as well.
Why, just why, do I write, this blog? One of the reasons is to provide Cliff Notes, so no one will be a 'gullible investor'; for I sure don't want any led off 'the precipice of disaster' that we have arrived at today.
The above referenced, Bank of Japan report, relates that inflation is on the way, and Richard, your blog host, the Resourceful Bear, reminds: "Inflation, it's a stock and bond killer, and a gold thriller".
Although gold could easily fall lower, I suggest that one dollar cost average a buy of gold at Bullion Vault.com, GoldIsMoney, and in the gold ETF, held in a trust account, not a brokerage account, all before July 4, 2008; yes most definitely before the 4th of July, 2008.
WIDGETIZE