[sdljfslkjfdsj]

All it took was quantitative easing since 2001 resulting in ownership of 40-50% of the entire japanese bond market (which isn't really a market any more because some days 0 transactions take place due to the complete hijacking of the BOJ & a guaranteed 0% yield) & 5-10% ownership of the entire japanese stock market.

The BOJ is a top holder of many largest Japanese corporations shares outstanding which is kind of weird because the BOJ doesn't really have any money they just "create" it. Color me bearish if that kind of monetary extremism can't even get the Nikkei 225 near prior all time highs or any meaningful inflation. I guess they could buy every bond in existence both public & private plus take the stock holdings up to 30% of the entire float.. maybe that's what is needed? It kind of seems weird to trust any of the statistics on inflation, rates, economic prospects for the country with such an active price insensitive manipulator in the market place every day.

[joefranklinsrs]

Well, you could say the same about China, where the Chinese government is a major stakeholder, directly or indirectly of all the state enterprises and some of the biggest individual companies. Alot of the purchases of foreign companies and technologies is done by the Chinese government. Also, China engaged in huge QE from 2008 to today, resulting in massive debt taking.

At least the financial numbers coming out of Japan is reliable and transparent. Also, alot of soverign funds around the world considers Japanese Yen and Bonds one of the safest investments.

[sdljfslkjfdsj]

We agree China is more toxic & japans central banking interventions are indeed transparent. Hell the economists in charge of the policy even seem proud of the strategy & convicted in its outcome even though they've been wrong since you were probably in junior high.

Even today they still claim the policy is driving inflation toward some goal seeked objective. It isn't but that doesn't hold them back from saying it & keeping a forever bid in the market place.

As for "safest" investments well.. ya. You get 0% & sometimes less than that & sometimes a few basis points more so if the yield to maturity is an indication of risk then sure its riskless. The trade is your capital is lent to a sovereign for ~0% for 10 years with guaranteed inflation decay (cost of carry) & it's possible a default could occur. The only way a default won't occur is by creating more bonds & currency to finance the old debt when a tiny yield is present. Pass, at least with my money. If I need a place to park other peoples money where I earn a maintenance fee (pensions, endowments, etc) doing so regardless of performance then OK I'll do that. That's a fine incentive structure as a fiduciary but structurally it's a guaranteed no upside & 100% downside no matter how unlikely the downside. I like my money too much for that.

I don't like the heavy handed interventions in any country but Japan is without a doubt the most reckless & crazy of them all. They've been doing it the longest & in the last 10 years went from bat shit crazy to mach 3 with hair on fire. It may feel quite common to you but I assure you central banks creating money to buy gov't debt to finance interest on previously issued debt hasn't always been so common. It's not a sign of strength.

[joefranklinsrs]

> since you were probably in junior high.

It's been a looooong time since I was in Junior High haha

> I don't like the heavy handed interventions in any country but Japan is without a doubt the most reckless & crazy of them all.

No doubt, Japan started the QE. Then US. Then EU. Then China. Dollar is the hegemony, so US is safe. China is in a very dangerous position and will likely fail. EU has similar economic size as US, and is aligned with US, so it should be safe. Jury is still out on Japan. We will be able to tell when deflation takes over the world economy.

[bilbo0s]

I think there is a large audience of people taking your prognostications with a grain of salt because we are in an environment where we've heard it all before.

Only difference is that lately we've been also hearing that the EU will fail. Their failure has been only 2 or 3 years away for the past 10 to 15 years or so. As for China, ever since I was at the University of Wisconsin watching Bush the Greater lose his election to Bill Clinton, China's failure has been "imminent". Five years away, a decade at most.

Every year.

For the past 30 years.

I realize that even broken watches are right twice a day, but even that would be just a matter of luck or happenstance at this point. It wouldn't be because the doomsayers like yourself were correct about the EU or China. Or even the bullish people like yourself being right about Japan or the US. Or even the people with the opposing opinions being right. I've lived long enough now to know that if you guys get something right it's likely all down to simple happenstance.

[joefranklinsrs]

I see my comment about China touched a nerve :) there's no need to downvote me, this is just based on my personal observation, which is too long to be typed up, so I merely summarized it here.

I'm not sure if anyone who knows what they're talking thought China was going to fail in 1990. I think most of the world at that time was concentrating on Japan, Russia, and US. China was too small of a player to be noticed by anyone prominent.

In any case, my observation is based on numbers and trends. Ebbs and flows for a country, government and culture. Debts and growth. Demographics, core strengths, and relationships. I stand by my observation: China will most likely fail.

[prewett]

Can you give more details on why you think China's debt is a problem? I've been hearing about it for several years, but as far as I can tell from the numbers, it is about the same level as Japan (Japan's debt is 253% of GDP, China's is 260% of GDP), and Japan doesn't even look like it is beginning to fail. And China appears to be actively taking steps to curtail the debt.

[sumedh]

Are you shorting the Chinese market, if not why should we take you seriously?

[bilbo0s]

I can't remember my voting, been pretty active today, and the last few actually, but did I downvote you?

I normally don't do that if a comment is worth responding to.

If you got a downvote, it wasn't from me.

EDIT: just checked. Downvote was mine. Sorry for this comment claiming I didn't.

Still, your prognostications are all just as much hogwash as everyone else'. Whether you guys are right, or wrong, is all a matter of luck. It truly is whether you want to believe that or not.

[sdljfslkjfdsj]

nice chat. if this is indeed the beginning of a global tightening regime (i doubt it) it will be a fun time as an active participant as long as one has an open mind.

i'm ultra excited for the opportunity in front of us & my view has been that the dollar is the most undesired asset class over the last few years & continues to be. no surprise its been outperforming for a while :)

take care.

[chrisjc]

I really wish I could hear you two guys continue the chat. It was incredibly interesting.

[joefranklinsrs]

Stay safe :)

[pembrook]

It's hard not to see Japanese bonds as safe when they yield pretty much 0%.

[RobertoG]

Reading your comment, comes to mind that the case of Japan demonstrate that bond markets are not so essential after all and that "creation" of money doesn't necessarily generate inflation.