I love Bloomberg.
"The worst is yet to come for the yen."
“We are going to see considerable strength in the equity market for quite some time.”
“The yen will obviously weaken further.”
“The impact of the BOJ’s additional easing was big, so it couldn't be priced in during just one day.”
“There is a risk in not holding Japanese shares."
“I would call it a Halloween treat.”
The world has gone crazy because the GPIF, Japan’s public pension management fund, is set to pump $187 billion into global stock markets.
About half of that could be invested in stock markets outside Japan, like the US and Europe.
But one caveat.
“The market suggestion is a few billion dollars a month.” By comparison, the FX market trades over $4 trillion per day.
Also, in order for the GPIF to invest up to current projections would require it to sell 23.4 trillion yen of domestic bonds per its new mandate.
Who would be the buyer? The BOJ.
Sounds like robbing Peter to pay Paul.
Oh, and according to BNP Paribas, all those recycled emerging market petro dollars that amounted to over $500 billion per year back in 2006 are gone as of this year. This year the EM oil producers will effectively import capital amounting to $7.6 billion, causing the "recycling" to go negative. Suddenly the GPIF figures sound a lot less rosy.
There's another interesting wrinkle.
The BOJ also said it will triple its purchases of real estate investment trusts (REITS) to 90 billion yen ($794 million), while the GPIF will invest as much as 5 percent of its $1.1 trillion portfolio into alternatives (private equity, infrastructure, and real estate).
Yet Bloomberg notes that GPIF is a "latecomer" to alternative assets, especially real estate.
The last time Japan was a latecomer to real estate was at the peak of the Nikkei bubble in 1989 when it infamously paid top dollar for Rockefeller Center in NYC, only to lose its shirt and scrap the deal in 1995.
So the following words might need some emphasis, you know, for perspective:
“One risk is that investors may regard the announcement of additional quantitative easing as the peak of positive news for the housing and real estate sector,” Nomura analyst Daisuke Fukushima said.
There's one last bit, but I can't confirm the source of it from Zero Hedge:
GPIF PANEL MEMBER SAYS GOVERNANCE LAW REFORM MAY TAKE A YEAR
Judging by the reversal in Nikkei futures last night from plunge lower to lunge higher, it appears there may not be much to the above statement. But if true, it may be a much needed dose of reality to a speculative environment that has become overly enamored of central bank easing.
Indeed, a dose of reality could also mean "the worst is yet to come for the yen" -- it could strengthen in a bout of sudden risk aversion. Something no one seems prepared for.
No one seems prepared for anything but another joyous seasonal pattern in the stock market which would continue to a Santa Claus rally.
It would be great if markets always did what we thought they would. But with the amount of seasonal bulls calling for an automatic rally, I can't help but look at the current internals and see the possibility for an upset.
Anything below 1987.23 could raise the odds of such an upset. And with five unfilled gaps since 1820.66 and very muted volume, the 1900 area is still possible.
Personally, I'd rather see a better topping pattern develop at current levels. I have gotten my wish for new highs. It would be fine with me if it took its time.
The full moon is Thursday at 5:23 pm which is also Draghi Day at the ECB. Maybe the market flops around 'til then.
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