The Yen snap back

Not long ago, check my blog on "The Grey Rhinos" which has mentioned already that the Yen isn't going to keep on losing value, it might just snap back one day.

It surely did yesterday when BoJ decided to move the trade range yield of 10yr Japanese government bonds to 0.5% mid range instead of 0.25% as its mid range guidance.

What would then happen from now on?

It has already fallen from the top of 150 to 131 yesterday, the decline of which is quite sizable.  It might climb back up to form a head and shoulder pattern ie forming the right shoulder so that the fall could be even more significant in the months ahead.

The carry trade is going to turn into losses if covering the yen short isn't swift and hard.

Take note of the YEN movements and long the YEN on any shoot up of the USDJPY.

An anomaly USD/HKD HIBOR

We are seeing USDHKD rates swinging from a low of 7.85 to a recent high of 7.77/7.78 indicating foreign money inflow, but this isn't helping HIBOR which usually should not be the case.

There probably are underlying factors affecting HIBOR which we aren't aware of or are banks afraid to lend to one another causing a strained HIBOR.

The coming months or quarters are likely to give an answer to this anomaly.

Is CS another factor that hasn't been fully taken care of by the market thus causing such strain？

We'll see.

HK Economy Next Year

HK is not only undergoing a recession, next year, we are seeing price rises coming in at all angles.

Price rises coupled with recession, what do you call it - STAGFLATION, right？

WRONG, currently we have inflation below nominal interest rates and that's known as DEFLATION, it will

dampen consumption and capital investment like property investment.

When you have DEFLATION and STAGFLATION together, consumption will fall off the cliff and lead to serious unemployment and fiscal deficits.

If not for the outflow of labor, unemployment likely is much higher and more noises against the government covid stand.

Brace yourself for a real rough ride next year in HK.

FAAG

Check out the FAAG charts above.

Almost all of them have fallen 50% except Apple and FB now Meta has seen drastic drop in prices.

If you think HSI has dropped a lot, take a look at these key stocks in the US.

We might not have reached a bottom yet if there's no major global incident happening before inflation comes back down below 2%.

Brace yourself for a major correction of the securities market or another global incident like Lehman whichever may come first.

Pension funds in trouble

Back in 2000 when the dot-com bubble bursted, Fed quickly lowered interest rates thus creating another bubble waiting to be bursted in just a few years time ie 2007, stock market peaking out, 2008, the Lehman crisis.

During these times, pension funds (esp defined benefits type) become underfunded because of stock market performance and low rates of return from the bond market, many have resorted to leverage to make returns better so pensioners can receive full amounts as promised.

This round of rate hikes by the Fed is fast and furious.

Such pension funds do not yet have time to adjust their portfolio as well as their leverage, many are now suffering heavy losses and likely cannot commit to paying their promised benefits if interest rate environment remains elevated.  Some might even be forced to liquidate certain positions to reduce leverage which means severe fund shortage in the years ahead.

Many such happenings are below the radar and rarely reported in the media.

HSI Yearly Range

HSI yearly range usually 7/8000 points.

It's heading towards 9000 or more.

Would it breach 10000 as its new yearly range？

An Island Top in the making Today

Check out this daily chart of HSI, if today's closing is as the chart shows, a gap existed between yesterday's low and today's high, an island would have been formed pushing HSI way lower than what's achieved only last week.

A Banking Crisis

Look at Credit Suisse prices.

What would happen to HSBC？

A banking crisis coupled with likely a EURO & EU crisis is likely to happen and very soon.

The Global Economy in the future

We haven't seen any special observations leading to the following guesstimate, but my hunch is it is likely to happen.

Will the US do further QE in the future, likely and not likely.  

Why likely, only in extreme circumstances like Covid, a depression or a war involving US directly which cannot be ruled out of such happenings in the future.  

Why not likely, the Fed would like to keep the government spendings in check and also to re-establish the credibility which it has lost since leaving QE on for too long creating serious inflation.  Another reason is labor gets even tighter going forward since Covid pushes more people [who can afford] to retire early or has since retired because of life uncertainties.  This huge group of retirees will need big labor to serve their retirement which wouldn't be easy to cover entirely by government and labor costs will keep rising as people retire.

If interest rates remain high in the range 3-5% for medium to long term, investments are more difficult to come by and with a smaller young population, it won't be easy to make enough returns to justify them.  US government will pay more interest leaving it unable to serve its citizens for the good life they enjoyed back in the years between 1990-2020.

Economies around the world will then teeter on the brink of recovery and recessions more often as interest rates are unlikely to drop as much as before to feed speculations and investments thereby reducing returns from stock and bond markets.

HSI rebound might falter

Federal Reserve officials back moving interest rates higher in order to slow the economy, minutes show: https://on.mktw.net/3QS7GSI

The news above add pressure to stocks moving up except a quick short squeeze.