Investment Chart Kondratiev Wave

Investment Chart Kondratiev Wave

Sunday, 13 March 2011

Mr market and yield curve/ Japan

Yield curve out of sync with economic momentum
Gold/ silver rate, ISM and IFO are pointing to much flatter yield curves than we see at the moment. Quantitative easing is still pegging the short dated yields at lower levels than otherwise should have been the case, triggering very steep yield curves because of pricing in that central banks are behind the curve.

The earthquake will bring money back to Japan, but strength of the yen is uncertain because the Bank of Japan will have to step up quantitative easing. The problem for Japan to find profitable infrastructure investments is solved for the time being. Toyota will have to build more new cars (but import them from abroad). One should not overestimate the growth stimulus from the earthquake. Damage repair will take money away from investments that should have be done otherwise. But the damage repair could help to improve the confidence of Japan that it can do some things really good, as for the time being seems the case (the help from government is many times better than after the Kobe earthquake, the nuclear meltdown problems are way better treated than Harrisburg/ Chernobyl, the damage to buildings is incredibly low because of uge advances in earthquake proof building). The reaction of Wall Street Friday on the earthquake was as if it were a non event.

Maybe the influence is not that big on markets. It should cause a touch higher bond yields, lower prices for some Japanese stocks but also higher growth expectations for Japan that could translate into higher share prices.

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