Index futures and gold are trading fractionally away from Friday’s closing prices late Sunday night, but my hunch is that things won’t remain so subdued this week. We’ll continue to hold a short position — and at this point, a riskless one — in the Diamonds, notwithstanding an extravagant forecast that calls for a 1500-point Dow rally over the summer.
Interesting Week Ahead?
- May 28, 2013, 1:19 pm
Interesting might just be an understatement. If the Nikkei is any indication of what may be in store for the rest of us then it could get a little rocky indeed. Not that it would be the first time declines in stock markets were felt first in Asia and then fed through to US markets later. Maybe that is the new formula. We are about to see the worlds second largest bond market roll over first-hand if early indicators can be trusted. With rates sharply higher in Japan and a flight out to safer havens (Europe and UST) we are looking at a situation where the BOJ could be forced to buy up nearly 100% of its own issues. But can they hold the rate curve down? That is going to be the big question in the months ahead. I still contend Japan is the sacrificial lamb and Mr Abe is merely paying off a long overdue favour on behalf of his country to support the Treasury markets and by virtue of them USD dominance and the reserve currency. For the US to succeed in the face of its mammoth interventionist policies and persistently poor employment numbers, another country must fail. It is going to be Japan and this symbolic financial Sepuku is the answer to keeping the rest of the system from imploding first.