Japan’s Debt Crisis a Follow-up Review

March 14th, 2012 | Posted by octafinance in Bonds | Currencies | Europe | Japan | Options - (2 Comments)

This is a continuation of the article “Japan’s debt crisis comes after Europe buy some long term OTM yen puts”

Surprisingly honest, Japanese Ministry of Finance official admits that “Japan is fiscally worse than Greece“. Bloomberg is reporting that, at a conference in Tokyo, Yasushi Kinoshita said “Japan’s 2011 fiscal deficit was up to 10% of GDP and its debt-to-GDP has soared to over 230%”. It seems that Kinoshita is worried that there is a big risk of shocks even with large amount of JGBs that are held domestically. I completely agree with him as stated in my analysis.

And now a former top Japanese currency official:  “The Bank of Japan is locked into purchasing more government bonds and may contribute to a loosening of fiscal discipline in the world’s largest public debt market”. “Since they have come this far, if the BOJ stops purchasing bonds, there will be a fall in bond prices and huge valuation losses for banks.”  said Makoto Utsumi, former vice finance minister for international affairs and now president of Japan Credit Rating Agency Ltd.

BOJ last month increased bond purchases through its asset fund by 10 trillion yen ($123 billion) to $374 billion QE as part of measures to counter deflation and spur growth. That means that BOJ will monetize most of the deficit that Japan has. Don’t underestimate the significance of such program, the Japan’s economy is much smaller than the USA one.

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When to worry about Hyperinflation. Where it could happen?

March 7th, 2012 | Posted by octafinance in Bonds | Currencies | Europe | Japan | Uncategorized - (3 Comments)

While some people are worried whether QE3 will be initiated so they can reap some profits there are others who are worried that hyperinflation might suddenly happen and destroy their wealth.  Because I received a few emails from such nervous investors and businessman from Europe and USA, I have decided to dedicate this post to them and assure them that even though money printing is risky and causes hyperinflation, we have nothing to worry about in Europe and USA.

Hyperinflation is one of the worst systemic risks. People and investors usually avoid holding much cash because they believe that hyperinflation might destroy it and they are partly right in their assessment. The only problem with that assumption is that there are specific causes that result in hyperinflation and cash might be a good option for now, even for those that hold Euros.

There have been 28 episodes of hyperinflation in national economies in the 20th century, with 20 occurring after 1980. Peter Bernholz, (more…)

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Japan’s debt crisis comes after Europe. Buy some long-term OTM Yen Puts

November 28th, 2011 | Posted by octafinance in Bonds | Currencies | Japan | Options | Trades - (2 Comments)

The chess and investing are similar processes. In order to be successful investors, we must foresee the coming, many moves before it happens and we must position ourselves for it.  I’m sharing this analysis with you so you can position yourself for the coming. I know that most of you are interested more of what is happening in Europe and it’s obvious as you are Europeans. But still I think that the best trade and most profitable trade from a risk/reward perspective is related to Japan. When we talk about Japan, I’m talking you about what will happen within the next 5 years as I believe that I’m many moves before the markets which are focused on Europe’s debt crisis.

In this analysis I will answer the following important questions:

1. Why Japan’s crisis will shake the world in few years?

2. Why for many years hedge fund managers betting against Japan lost money and why they were wrong?

3. How can I profit from what is coming? Why position now?

4. Why Japan’s debt and economy are not safe? Most people think Japan is save because: 

-  Japan is net creditor and have huge reserves.

- Japan has trade surplus so it gets more money than spends from outside.

- Japanese government bonds are locally hold so it’s not a target for sudden yield spikes or attacks from foreign bond holders.

I will prove you are wrong! And of course my final prove will come when you see Japan all over the news within the next 5 years at maximum. (more…)

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