Tag Archives: Quantitative easing

Commodity markets, Market outlook

When to buy gold in 2015/2016: Gold is a way to avoid the market crash in the near future

In early 2015, the gold price remained approximately $1150-1250, but as the Chinese economy slowed down, the price finally fell below $1100 in July.

As the Fed was going to rise the interest rate, the bear market itself was predicted by some investors. When the rate rises, the higher yield makes the dollar more attractive, and as a consequence, the gold price, traded in USD, decreases.

However, now we have another influential factor: the slowdown of the Chinese economy, which became more serious than before. So in this article, we contemplate on the two factors that affect the gold price and explain why gold is still a way to avoid the upcoming market crash in a few years.

Continue reading When to buy gold in 2015/2016: Gold is a way to avoid the market crash in the near future →

Market outlook, US stock market

Fed rate hikes will reverse portfolio rebalancing and end QE bubbles

The investors are trying to be prepared for the Fed’s raising the interest rate in late 2015 and 2016, worried about how much it could affect the markets, but they seem to have forgotten what has been supported the markets for several years.

Have we already overcome the termination of the Feds’ QE? The answer is no. Although the interest rates are kept relatively low, and the US stocks remain near the all-time high, the markets are just supported by QEs by Bank of Japan and European Central Bank.

The portfolios of the investors of all kinds have been distorted by the QEs. According to the paper by the Fed, due to the QE the owners of Treasury securities and MBS shifted their funds into riskier assets. For example, the households sold Treasury bonds and MBS to the Fed and bought riskier assets such as corporate bonds, commercial paper and municipal debt and bonds.

Continue reading Fed rate hikes will reverse portfolio rebalancing and end QE bubbles →

Currencies, USD/JPY

Is USD/JPY reasonable at 120?: The comparison of the manetary bases

After the Bank of Japan (BoJ) decided the additional monetary easing on 31st of November, USD/JPY reached 122 once and is now traded around 120. We review if the rate is appropriate from a long-term viewpoint, after the radical depreciation from about 110.

Screen Shot 2014-12-09 at 14.41.58 Continue reading Is USD/JPY reasonable at 120?: The comparison of the manetary bases →

Market outlook

The consumption tax rise can’t be compensated by monetary easing or public investment

The government of Japan published the 3Q GDP on 17th, confirming that Japan had got into a recession. The Japanese media reported as if it was struggle of Abenomics against the deflation, but the real cause of the recession is the consumption tax rise in Apr. What is worse is that the bad effect of the tax rise can neither be wiped away by the monetary policy nor by the public investment that Abenomics has been engaged in, and thus another strategy is required. We firstly review the contents of the GDP:

Screen Shot 2014-11-24 at 06.39.03 Continue reading The consumption tax rise can’t be compensated by monetary easing or public investment →

Chinese stocks, French stocks, Japanese stocks, Stocks

Reviews: Wacom, Heiwa Real Estate, Gecina, CNNC International

Here are the reviews of the stocks introduced before:

The stock rose by 5.46% on Friday and the price is now ¥579. The volume has increased significantly. Goldman Sachs increased their short position by 4th, selling 4.51% of all the issued shares in total. Deutsche Bank also added their position, meaning they’re now being short squeezed. Continue reading Reviews: Wacom, Heiwa Real Estate, Gecina, CNNC International →

European bond market, European stock market, Foreign exchange market, Market outlook

Reviewing the euro, the German government bond and property companies

The ECB (European Central Bank) is expected to have a Governing Council meeting at 1:45pm CET, which has been keenly watched by investors since Mario Draghi, the governor of the ECB, mentioned the possibility of financial easing in this meeting. Continue reading Reviewing the euro, the German government bond and property companies →

Foreign exchange market, Market outlook

How much can the euro fall down if ECB starts the QE?

After Mario Draghi, the governor of European Central Bank (ECB), mentioned the possibility of financial easing started in the next meeting of the central bank, the speculation occurred also in the currency market following the European real estate stocks that had been already boosted for months. (See the article on Gecina.) EUR/USD is now traded at 1.37, falling down by more than 1%.

The news currently mostly tells about the negative interest rate, not the quantitative easing, but if the other methods couldn’t hinder the inflation rate from diminishing, the ECB would have no option but the QE. Therefore, in this article we estimate the due rate of EUR/USD after the QE. Continue reading How much can the euro fall down if ECB starts the QE? →

News

BOJ’s Kuroda mentions the inflation rate after QE

According to Reuters (the source in Japanese), BOJ’s Kuroda said the inflation rate would remain fairly strong after the central bank achieves the inflation target of 2%. This statement is significant in the sense that he implied the moderate increasing of the inflation would be acceptable even after it becomes 2%.

As the increasing of the inflation usually follows the financial easing, considering the fact that the BOJ is willing to continue the QE until the inflation rate becomes 2%, the inflation rate is likely to increase after the QE up to around 2.5%. Consequently, the long-term interest rate, which is currently around 0.6%, couldn’t avoid to be hiked after the BOJ finishes the QE. The time to be short the bond futures is approaching.