Abenomics Crash and Burn

On December 29, 2012, I wrote that Abenomics would fail (please refer to: Here's Why A Weak Yen Will Destroy Japan). One year later the Nikkei 225 was sitting pretty at about ¥15,600 + (actually went up to over ¥16,200!) and the cracks were beginning to show on Abenomics. Immediately after the Nikkei tanked for a ¥518 drop in one day, on June 5, 2013, I added another missive... Abenomics Has Failed showing that the twisted reasoning of Abenomics needed a very weak yen to ever have the chance of succeeding (which it doesn't) and that the market doesn't like instability (as if ¥500 daily increases and drops in price don't point to market instability!)

The word on the street back then (and today) was was that "they" needed a yen that was much weaker than ¥100 to the USD (I understood that to mean ¥120 to USD) to ever have the chance of succeeding and that the yen sitting around ¥100 to the USD was the death knell of Abenomics. 

From those posts I received 3 emails in total from "financial advisors" in Japan (and on Linkedin message) telling me something along the lines of "It's too early to judge whether or not Abenomics is a failure." Two guys challenged me by adding something like, "Do you think I should give up my positions just because you say Abenomics is a failure?"

Keep in mind that these people were expecting, like a lot of people, that Abenomics would have had the Nikkei 225 at or over ¥20,000 by April, 2014. Well, folks, it's March 29, 2014. A 60% sales tax increase is about to be implemented (3 percentage points) and the Nikkei is about ¥1600 below its Dec. 30, 2013 high of ¥16,291.31. Today, March 29, 2014, the Nikkei sits at ¥14,696.

For you "financial advisors," I don't think you should "give up your positions." Do what you want with your money.

But I do think you use your heads and stop advising people to funnel their retirement money into the stock market and churning accounts so that you can earn a commission on selling this crap and a business plan built on jawboning and hope. How about doing some real research (you know investigation and basic simple math?) and getting people into something that will benefit them, rather than your company bottom line or your commissions? (I know the term, "needs selling," but that doesn't mean YOU need to sell; it means you are supposed to sell people what they need.)

By the way, you can earn the same commissions by recommending stable investments over investments built on "Hopium."

One of these investors made a bet with me for dinner and drinks claiming that Abenomics and the Nikkei were good investments. Since he's down ¥1695 on the Nikkei (about a %10 loss) since the highs, think I should call him up and ask when he's buying my dinner? 

Nah. Poor guy. For one, he's lost a bunch of money - as well as the money of his clients (of which come from a pool that I hope is quickly shrinking) - and, two, I don't eat hamburgers nor do I drink anymore.

Well, today, comes more and more damning evidence that even Mr. & Mrs. Watanabe have figured it out; while everyone and his economist were expecting an increase in household spending before the sales tax increase, household spending has dropped! From Zerohedge: Japanese Prepare For "Abenomics Failure", Scramble To Buy Physical Gold 

"(Household spending) dropped 2.5% on expectations of a 0.1% increase in the month ahead of Japan's infamous sales tax hike."

Hmmm? That is surprising to say the least! So the Japanese aren't buying stuff?... But wait a minute! What are they buying if they aren't buying junk they don't need?

Well, lookie here, even though gold is in a bear market, they are buying precious metals!

From the very same Zerohedge article:

"Tanaka Kikinzoku Jewelry, a precious metals specialist, reported that sales of gold ingots across seven of its shops are up more than 500% this month. At the company’s flagship store in Ginza on Thursday, people queued for up to three hours to buy 500g bars worth about Y2.3m ($22,500). March has been the busiest month in Tanaka’s 120-year history." 

And just to add to the good news all around, Bloomberg reports: 

Japan’s trade deficit widened to a record in January as surging import costs weigh on Prime Minister Shinzo Abe’s campaign to drive a sustained recovery. The 2.79 trillion yen ($27.3 billion) shortfall reported by the Ministry of Finance in Tokyo today exceeded the 2.49 trillion yen median estimate in a Bloomberg News survey of 28 economists. Imports rose 25 percent from a year earlier and outbound shipments gained 9.5 percent. 

Yes, indeed.

This Nikkei 225 at ¥14,696 is an illusion and I am expecting the Nikkei to slide far under ¥14,000 as soon as the figures come out for household consumption for April to July... I wonder if it can hold at ¥10,000?

You "financial advisors" think sales of gold can help to ease the drop in household spending? I don't. There aren't too many people in the middle and lower income brackets (the vast majority of the population) who are running around with ¥2.5 million yen to buy 500 gram gold bars... They are just trying to make ends meet on a daily basis.

But, hey, you financial advisors, I advise that you "hold your positions"!

Abenomics Has Failed

Well folks, Elvis has left the building. Abe had a big announcement today and failed to jawbone the market back into line. As of 3:25 pm on June 5, 2013, the Nikkei Stock Market and the US dollar/yen rate have announced the market's verdict: Abenomics have failed.

The yen has cracked to under ¥100 to the US dollar. Look out below! See the spike? That's when Abe began to speak... Gee, what happened within an hour? Your guess is as good as mine.

Bloomberg reports:

The yen gained against most of its major counterparts after Japanese Prime Minister Shinzo Abe’s growth strategy failed to boost domestic stocks. 

Japan’s currency rallied against the dollar and euro after the Topix index of shares extended losses to more than 3 percent. The dollar erased earlier gains driven by speculation the Federal Reserve will scale back stimulus measures. A volatility measure of Group-of-Seven currencies was near the highest in more than three months...  

“The yen is swayed by the movement in equity prices,” said Akira Moroga, manager of foreign-exchange products at Aozora Bank Ltd. (8304) in Tokyo. “Stocks which rose in anticipation of Abe’s growth strategy were sold off after the announcement lacked any concise measures.”

At the same time, while all this is going on, the JGB market is going berserk.

Zerohedge has a great article about the next chapter in this farce entitled "The Problems With Japan's "Plan (jg)B": The Government Pension Investment Fund's 'House Of Bonds'", the raiding of the $1.1 trillion dollars that are sitting ducks in the Government Pension Investment Fund (GPIF) which is now in the sights of the Japanese government... But! That is the final gamble and it is a wild one!

Nobuyuki Hirano, chief executive of Bank of Tokyo-Mitsubishi, admitted that the bank’s Y40tn ($485bn) holdings of Japanese government bonds were a major risk but said he was powerless to do much about it....The risk facing Japanese banks from their vast holdings of government bonds has been underlined by the chief executive of the country’s largest bank who said it would struggle to reduce its exposure. 

Well that's not good: if the largest Japanese bank can't handle what may soon be concerted selling by one of the largest single holders of JGBs, who can? And what can be done then? Oh, that's right: this is where Kuroda's plea to please not sell bonds, just to buy stocks comes into play. The problem is only the BOJ can come up with money out of thin air, for everyone else buying something, means selling something else first. So unfortunately unless the BOJ wishes to further increase its QE, which will be needed to absorb all the selling without a surge in yields (something Kyle Bass warned about last week), a move which however would further break the connection between bonds and inflation expectations, and further destabilize the equity, FX and bond markets. 

So in short: Japan's Plan B is not only not a panacea, but it is a House of Bonds Cards that would not survive an even modest gust of wind, and an even more modest contemplation into its true internal dynamics. We would urge Messrs Abe and Kuroda to come up with a fall back plan to the fall back plan before it, once again, becomes too late.

I think it is already too late.

Facebook Advertising and "Promote" Scam is a Total Failure! Judge For Yourself!

I love Karl Denninger. I don't always agree with him but I like his "Take no prisoners" attitude. Today he points out something that I've been complaining about for a long time: Facebook's scams and failure in advertising.

Please refer to: Market Ticker's Facebook's "Promote" Blows Up In Their Own Face?


There's a meme that has been flying around for a while since Facebook introduced the "promote" feature (where you can pay to cause your postings to show up on people's consolidated timelines -- and if you don't, most of the time they won't) that I'd like to address:

Many of us managing Facebook fan pages have noticed something strange over the last year: how our reach has gotten increasingly ineffective. How the messages we post seem to get fewer clicks, how each message is seen by only a fraction of our total “fans.”
It’s no conspiracy. Facebook acknowledged it as recently as last week: messages now reach, on average, just 15 percent of an account’s fans. In a wonderful coincidence, Facebook has rolled out a solution for this problem: Pay them for better access.
As their advertising head, Gokul Rajaram, explained, if you want to speak to the other 80 to 85 percent of people who signed up to hear from you, “sponsoring posts is important.”

What, did you think that you were going to get something for free forever?
Well, no.

But here's the problem -- Facebook apparently can't make any money (so their results show) without trying to ding you on both sides.  In other words not only do they insist that a person with a page pay to reach most of the people who "like" them, they also then spam the users who like the page with their own advertising.

This is tantamount to an admission that their advertising model is a failure.

Yep. FAILURE! There's nothing much that I can add to this. I've written many times about how much I dislike Facebook's business model and how I think mobile advertising is a failure... Recently I've been grousing - on Facebook no less - about how my older posts would get 70, 80, 100, 150 likes... Now? They only get 5 or 6? How did that happen? 

Well, it's obvious isn't it? They see that I was getting many hits and shares so they decided to cut my access in the hopes that I'd buy in to their "promote" scam. 

Well, I don't.

I've also noticed that people coming to my site from seeing a link from Facebook has dropped off a cliff while Twitter is still there. Facebook launched their "promote" scam in May. The results six months later are a disaster. Evidence? See for yourself:

The traffic to my blog over these last six months from May ~ Dec. 2012. Facebook that used to rank with Twitter has dropped off a cliff. It's obvious why.

You know what they say? The proof is is in pudding.

Facebook is a marketing, advertising and strategic planning failure.

Read more at the Market Ticker: Facebook's "Promote" Blows Up In Their Own Face?

"A massive 40% devaluation of the Japanese yen is imminent and inevitable..."

Are you sitting down? I hope you're not drinking coffee right now....

From Zerohedge:

"Caixin's Andy Xie, who is now confident that a massive 40% devaluation of the Yen is imminent and inevitable (with dire consequences for regional trading partners) ... now that the Japanese economy is no longer competitive in the New Normal world (read trade surplus) of delaying what every other central banks has been doing so well.... "

(Caixin is News and Analysis on China's Markets)

I hope you have at least 3 months of food and water stored up and you hold some gold besides being ready for earthquakes and other natural disasters, you should be ready for the man-made one that is coming.

Read more: Four Years of Japanese Central Planning Failure Chart