Wood to BOJ : Normalize now!!

In a Bloomberg news report today, CLSA's iconoclastic forecaster extratrordinaire, Christopher Wood & Lombard Street's esteemed Brian Reading, are reported to have called upon the BOJ to normalize rates. Contrary to most neo-mercantilist apologists who worry about the possible entrenchment of pernicious deflation (vs. the logically and naturally occuring benign type witnessed in Japan over the past decade and a half), the duo suggest that normalizing rates will INCREASE consumption, buoy financial sector earnings and property prices, and set Japan on the road to retail recovery.

Having not seen my own copy of "Fear & Greed" yet, I am relying on Bloomberg's report that Wood doesn't expect this anytime over the next three months. Needless to say, I agree on all accounts, but have a more cynical and more Machiavellian view on BoJ intransigence which is that it is NOT the result of conservative policy error, but rather, the lynchpin in a well-honed trade & industrial policy that is intent on retaining all commercial advantage for its enterprises visa-vis both its customers and its primary east-Asian competitors.

I would so love to see the bar-room brawl between chief apologist Stanford's Prof MacKinnon, and the pragmatic and experienced prognosticator, Mr Wood, though, like BoJ policy, we are unlikely to witness this event any time in the next three months.

Where are all the Jewish Momentum Investors?

Many would find financial research a curious pursuit. And while most curious financial researchers have their own peculiar or arcane interests, one area of modern finance continues to intrigue and mystify me: "Why are there so few Jewish momentum investors?" Now before the ADL or JDL launches protest a to Blogger's management taking issue with this post before giving it a fair read, let me first clarify several points at the risk of spoiling my punchline. Firstly, by way of full disclosure, I have strong affiliations with the Tribe itself (of Abraham that is) - and little to no affiliation with the Church of Serial Correlation, the Cult of Momentum, or The Turtle Traders). Secondly, despite the fact that I am an unashamed peacenik, frequent critic of Likud, and an admirer of famous Israeli's such as Amos Oz, Y. Rabin, D. Barenboim and Y. Beilin, I AM an admirer of both the Jewish faith, and some of the things Israel has accomplished. This qualified and tepid opinion, however, does NOT - I repeat does NOT - in any way whatsoever make me anti-semitic. Thirdly, and contrary to your suspicions, the accompanying image, as any native from Calgary might tell you, strangely enough has nothing to do with the Star of David, or Momentum. It is in fact a sheriff's badge presumably labelled to express disaffection over the "mess" and chaos their annual rodeo-related Stampede creates. But it does a nice job of visually marrying my seemingly unrelated subjects.

Having dispensed with formalities and belied critics who might impugn my creditibility based upon THEIR politics, I will return to subject: the dearth of Jewish momentum traders. This puzzle initially gestated from meditations regarding the relative contribution of nature vs. nurture upon one's political beliefs. Proposing too much nature, it seems, is a contentious thought to some folk as I've discovered, for after espousing it, I've had people look upon me as puzzled and suspicious as if I were Kim Jong-Il doing a Liza Minelli impersonation, even though it's a quite innocuous observation. It goes like this. Based upon keen but anecdotal observation, populations seem to have roughly similar distributions of political archetypes between what one might broadly categorize as "progressive" or "conservative", irrespective of ethnicity, religion, or nationality of the entire population. Whether it's exemplied by Republican or Democrat, Labour or Conservative, Social Democrat or Christian Democrat there seems to be a rough equivalency in the percentages of these divisions in society. This seems to hold even if the specific ideological anchors have different coordinates in the political spectrum in different places. As other personality traits such as optimism and empathy have been shown to be strongly influenced by genetic predisposition, my probably unoriginal hypothesis by way of extension was quite simply: Why not politics? Perhaps everyone is born with a certain greater or lesser predispositon towards progressivity or conservatism, which themselves are possibly based a general affinity towards being receptive of, and embracing change (in the case of the progressive), or being cautious and suspicious of said change (as befits the conservative). The resulting conclusion: people underestimate the role of such genetic predisposition in political belief structures, in general, and in their own idelogical make-up in particular. While I am not an anthropologist nor a sociologist there are many examples of similar less-than-physical pre-disposed traits in relatively consistent proportions across varied populations (e.g. homosexuality). And while learned people who have studied this are not necessarily in agreement as to which competing theory best explains WHY the phenomena exists, there is little disgreement over the existence of the objective phenomena itself. This is NOT meant to disavow or diminish the influence of nurture, or to discount free will of the spirit which both have a role. But it is interesting, if not uncomfortable, to speculate that we may not be as free as we would like to believe.

Teleport now to the floor of the CBOT or the CBOE where mixed amongst the overly tall brokers are traders and speculators of many persuasions. Scalpers, market-makers, front-runners, discretionary liquidity providers, strategic traders, trend traders, and counter-trend traders, some disciplined, some emotional some visceral or instinctive. But here too there seems to be a similar archetypical personality divisions: that of the "trend-trader" or "counter-trend trader". One can also think of it as momentum-oriented or reversion oriented (or short-premium option traders vs long-premium option traders for our derivative friends). Might not genetic predisposition have a similar role in whether one felt more comfortable "riding a trend" or "or trying to anticipate a reversal"? Or in "buying a breakout" or "fading a pop"?? Or "Buying growth" or "buying value"? After all, these dichotomies are essentially attributable to the inherent optimism vs pessimism, or safety vs. adventuresomeness which we already have good reasons to believe are strongly influenced by nature.

Whether one agrees or not at this point, I hope you'll see a consistency and logic to this thread so far, that, if not probable, is at least plausible. Now comes the puzzle: if the general population consists of some relatively consistent distribution of, for simplicity's sake, "momentum-traders" and "reversion traders", why does there seem to be such an asymmetrical distribution specifically amongst the Jews? It's certainly not for lack of prowess at making money. Trading is in our blood and has been since our days refueling camels at the Judean cross-roads of civilisation. As a tribe, we account for some of the greatest value investors, but we seemingly can't ride a trend. Even Sol Waksal for example, whose company has the ultimate momentum theme - a cure for cancer, felt compelled to trade his position lest it's value be [temporarily] knocked by some petty little FDA concerns about experimental design. Few would argue that we are over-represented in the world of arbitrage, but under-represented amongst the great CTA's. Or that we have a keen eye for spotting and picking up the four-cent nickels, but have more difficulty sticking around to turn $1 dollar in $10. I could be way off base, but I think there is a pattern here. Is it something peculiar to "us" or is there something about momentum? Maybe it's just the "feel of it"? Or maybe it's the risk vs. reward proposition that is intuitively (or objectively) unappetizing? Or perhaps momentum requires something more of the mind or spirit, something that we simply cannot give?

It would be useful at this stage to better define "momentum". Though I am no expert on the subject, it may be helpful to separate it into different categories. One is "naive momentum" which is quite simply using past returns to predict the future direction of returns. "What's gone up will keep going up". What is outperforminmg will (hopefully) keep outperforming. For academics analyzing the stock market's cross-section of returns, this phenomena is typically viewed as relative in nature, or normalized performance ranks. Through this lens, persistence in relative return has been found to exist for as yet undiscovered and undiscernible reasons, confounding theorists - especially those espousing market efficiency. But the real Momentum-Men (and they ARE men as not a single famous woman springs to mind), are the practitioners that call themselves "trendfollowers" and would perceive themselves as more sophisticated and discriminating than the naive crowd. Here, simple moving averages give way to complex pattern matching techniques and endlessly catalogued contingency tables - all integrated systematically to find the holy financial grail which will allow them to distill the real trend that has the higher probability of persisting and thus being the motherlode that will take an ounce of gold that broke out from $454 to the stratospheric price of $5,000/oz (or beyhond!). This is a periodically prerequisite necessary to pay for for all the shakeouts, false starts, and ubiquitious reversals that are the by-product of the financial equivalent of chaos. That a number of practitioners have been reasonably (if not fabulously) successful employing these methods would seem to indicate that one dismisses them at their peril. Yet, others employing quite similar methods have crashed and burned spectacularly. But there is no shame in making (and losing) a fortune, for aside from being an adventure, it generates notoriety. And with such fame (infamy might be more accurate), one can always write a book, or post his musings on a website, or teach others to trade using trend-following techniques (but hopefully a more complete set than they used - one that incorporates counter-measures against periodically going nuclear). But perhaps the most amusing description of something with momentum was by Leif Ericson (on Peter Greenfinch's website) which he posited "was the battle between those with more money than intelligence against those with more intelligence than money.

Indeed, momentum has its uses, and has made some people (particularly brokers and exchanges, as well as some investors and traders) fabulous amounts of money. But it's not for the faint-hearted, and not without large and attendant risks. But that still doesn't answer why Jews are under- or unrepresented here. What's preventing them from joining the search for the leprechaun with real potfulls of gold at the end of the rainbow for the lucky few?

For a start, it seems that being long momentum requires faith. Similar in nature to the good old-fashioned bible-thumping fire-breathing kind. But faith in what? It's difficult to say just what that something is, and theoreticians remain perplexed. One might say it's essentially faith that the future bias of returns will continue to resemble the past. But is this wise or even acurate? It's not a bad bet with respect to things like whether the sun will tomorrow, whether the leaves will turn color this autumn, or whether the government will suddenly feel geneorous and abolish tax. And it's not unreasonable have some more-then-ambivalent confidence in a directonal movement when something is converging towards some probable equilibria. But the odds and thus confidence intuitively diminsh as one moves farther from equilibria (assuming one has a reasonably accurate estimate of probable equilibria). Consequently, risk increases. By contrast, it is "doubt" which comes easy to us Jews. Faith comes much harder. We desire proof. We NEED proof. A Covenant, for example, would work well. As would a burning bush, or some directives or commandments carved in stone. Recall, God had to crack the whip many times before people were convinced. And it took lots of smiting. And even then, there was backsliding. Moses was skeptical at first and took multiple minor demonstrations of transmutation to convince him. And I would guess that when he took his demands to the Pharoah, he probably had his doubts. At least until Pharoah's kingdom was over-run by toads. That was his nature - to doubt.

Maybe we eschew Momentum because we're just contrarians? While it's true that we are always up for a good debate, it is unfair to say that we are contrarians for the sake of it or just for kicks. Having said that, one must remember that we are wary of crowds as historically, when we Jews have seen the crowd coming, it was time to leave. And fast. Over the generations it's become burnished in our minds. But suspicion of the herd is not pathological. When there is sale on, we are the first to queue up and often lead the stampede. No obvious contrarianism there. And one must not forget that the God of the old testament is severe. He can (and often did) take away what he'd bestowed, not to mention the ever-present threat of smiting. Momentum needs time, and these things in combination have always made time an issue for us which, while it makes us good bankers, does put some behavioural boundaries upon our holding period. The old saw "One in the hand is worth more than two in the bush", would take on special meaning if one not might be around to collect.

Jews are studious, value education, and usually pretty rigorous. The faith required of a momentum investor resembles closing one's eyes when taking risk. We are used to and not shy of taking risks, but they are typially calculated risks. Like the risk of taking that "Home Office Deduction" against our income tax. We can do the math. But we disapprove of pure gambles. When was the last time you a saw one of our tribe win a large Pick-6 jackpot?!? Or when was the last time your Jewish friend invited you to go the racetrack, or wager on the greyhounds? We intuitively know lotteries are poor odds. That's why when we went to Vegas, we would rather "be the house" and "be paid" than "pay the house" and be played. When we do go to casinos as a customer its for the free drinks, and not for thrill of trying our luck against the odds. We prefer investment to speculation. At least with an investment, one can estimate probabilities and calculate expected returns. And hedge. Only then do we pray. And when we pray, we pray to God not for "good luck" but rather that the hedge holds.

Without being disparaging, momentum is useful as a discipline for people who have no other. And some form of discipline is better than none. We've an inherent intellectual flexibility which in investment terms is important in order to integrate new information and fight against hard-to-overcome cognitive biases. Maybe that's because we've always been moving and have had to learn the ways of new people and places. Unlike the way many conservative strict-constructionists in America prefer an ossified constituition, or the way fundamentalists of all religious persuasions strictly interpret their religious texts, Jews are constantly re-examing and re-interpreting the meaning of their scripture (amongst other things). Trend-following is a disciplined system that proxies for intelligence-derived flexibility. It dictates change in response to something, even if that something is facile, and often ill-logical, and frequently uneconomic. Our nature results in a demanding need to know "why" and to reach our conclusions by way of intellect, rather than faith. This creates decision flexibility (to react to, or incorporate change) which inhibits belief anchoring without sacrificing understanding.

Or perhaps we're just not optimistic enough to "close our eyes and buy"? It seems that most momentum traders are optimists by nature. Optimistic in their belief market solutions are always better. In conservative republicanism. In low taxes. I would not deny the suggestion that as a people we are not renown for our positivism. Not in art, literature, nor psychiatry. But in finance, optimism is independant of, and should not be confused with, monentum. Sometimes there is good reason to be optimistic about the direction of price movement, and sometimes not. And while I would agree that optimism serves many useful functions in the human struggle for survival, it's been shown by researchers that pessimists perception of objective reality is in fact closer to objective reality. Optimism is an important tool in sports, healing the mind and spirit or achieving personal goals, but it cannot and will not move market prices. Full stop. Objective reality (or at least reasonably accurate perception of reality), on the other hand, is extremely useful and of paramount importance when assessing probabilties, making expected return calculations, or discerning the sign and location of the fat tail..

What is the final take-away? Though untested, and unproven, the asymmetry seems to result from an unusually strong combination of natural predisposition towards progressivity inherent in our genes coupled with a multitude of social nurture factors eminating from our idiosyncratic history, religion and culture, all which reinforce our predilection for value and the counter-trend. This is not to discount the potential contributions momentum can make. But that doesn't mean we have to like it, or for that matter, pursue it, which in aggregate, we apparently don't. After all, no one really "likes" insurance, but we still buy it....

Quote of the Day

Steven Rattner, former Lazard co-hort of Felix Rohatyn, general all-around straight-shooting good-guy, and in his spare time working for the home team (or at least the lesser of the evils, politically) now Chief Buyout Honcho at his own shop, Quadrangle, spoke to Bloomberg News in an interview today, and said:

"there may be a change, that this gushing well of liquidity that we've all enjoyed for the past several years now is coming to an end.

He continued that it's hard to tell precisely if its now for certain, and that for the moment, it seems to be contained. Then, in a moment of clarity and forthright honesty for which I most admire him, he went on (and it's verbatim):

Our view for some time has been that we are in a credit bubble and that there is money being lent and that we're happily borrowers of it on the private equity side at rates and on terms that really frankly don't make a great deal of sense from the standpoint of the lenders...but we're the borrowers, and we're happy to take advantage of that, and so as long as we can continue to finance our deals with that money, we will continue to do it."

What can one say, but, "a fool and his money [lent fixed, for too long, too cheap, and on shitty terms] are soon parted"...

The Sordid Business of Predicting A Crash

First let me state that I am patently NOT in the business of prognosticating stock crashes. That said, please allow me to forecast one that, against all good, common sense, I believe, may be coming to a bourse near to you rather soon, in perhaps the next 30 to 40 trading days. And I say "good, common sense" because statistically predicting crashes is, for those who pursue it, a truly rotten profession. Far more difficult than trying to predict, say a "0" or "00" on the spin of roulette wheel (at a mere 1-in-37). It is more akin to 1-in-120 call, AT BEST, and perhaps a 1-in-500 or even 1-in-1000 longshot-of-a-call at worst, assuming of course that I do not need to accurately flag the precise day, but or days, but only the general vicinity in time.

Surely you will ask "why" I have embarked upon so ludicrous and statistically unrequited and unrewarding a path. The first reason in all honesty is that since I am not paid for this forecast, I cannot be fired for being wrong. Second, because I am master of my own fate, and because I am rather reasonably hedged and crash-neutral insofar as market exposure is concerned in my professional portfolios, I needn't worry about firing myself, for being wrong. Third, IF as a result of this rather bold and outlandish prediction, I turn out to be correct, then I shall have no problem (with all of my readers' testaments in hand), in pursuing a new (and leisurely!!) career as an ‘Investment Letter Writer’, one that I can pursue from a suitably comfortable location, be it surf-side or slope-side (for which the prices of said bricks & mortar will - no doubt - be dramatically reduced in the event).

The more skeptical amongst you will no doubt endeavor to ask, what manner of evidence I might possess to back up this apparently farcical and visceral hunch. And here, I will reveal to you, that which is of true value. It is not a secret of dark magic or of statistical smoke & mirrors, though it is somewhat obscure, and off the beaten path of ordinary observers. For "it" is buried deep in the cross-section of the distribution of stock-market returns, in particular, within the higher moments, which, I would hold out to my readers, have a remarkable tendency to (historically speaking) whisper things that are terribly important, be it "danger" or "opportunity".

To be more specific, I am referring to the cross-sectional skewness of daily returns in the investable portion of the US equity market, and, even more precisely, a three-month moving average of such a measure, systematically removing of course, the most extreme daily observations. Typically, this measure tends to have a negative sign, which if my feeble knowledge of statistics serves me right, implies that the associated tail risk of the distribution sports a negative sign, in relation to the average daily return (which has incidentally over the past 25 years typically been (small) positive. The kurtosis then, a sensitive cubed measure, relates to us just how far from the mean that [usually] negative tail lies. Periodically, in the US, this measure of cross-sectional skewness of returns climbs to positive territory, and, on a few even rarer occasions, the departure into the positive is rather greater and more elongated than at others. These, historically speaking, have coincided with, or presaged significant market events.

On some occasions (as one might expect), such a flip-flop into a state of highly elevated positive skewness has FOLLOWED extreme corrections such as those seen in the Aug through October period in 1987, the May through early October period in 1998, or the June 2002-> March 03 capitulation of the NASDAQ. On such occasions, it has been a benign signpost of recovery, signaling what momentum traders term: a breakout, or trend-continuation, of sorts. This is intuitive since, following a grand capitulation, with the veil of fear and uncertainty is lifted, gaps to the upside, recovering earlier losses, are unsurprising and tend towards continuation. Such moves are typically consistent with, and converge towards, some future sustainable intermediate-term equilibrium rather than away from it.

On other occasions however, such positive skewness periodically follows elongated positive return runs that resembles something like a melt-up. At such times, positive returns perhaps have induced panic buying, or panic short-covering that causes the tail-risk to have - at these instances – an uncommonly positive sign. Such was the case in April to August run-up in 1987, the second quarter of 1998, the fourth quarter of 1999 into the beginning of the year, and, yes, mid-February 2007. In fact, mid-February 2007 saw the most elevated measures seen I’ve seen in the US market since my data for this commences 25 years ago. Now I’ll admit that these may not be apples-to-apples comparisons since the nature and number of listings in the “investable” cross-section has changed over time, but nonetheless, the elevation recently witnessed is, in a single word, unprecedented.

None of this will escape practitioners, who can see it and smell it in the trenches, perhaps using other technical descriptive terminology or endogenous market indicators, but it is, nonetheless an additional systematic tell-tale, less commonly observed by most. Now add to this a kurtosis measure of the same cross-sectional returns. Somewhat expectedly, during selective panics, (for example the 2002 tech-wreck), skewness is highly negative, and kurtosis is highly elevated signaling a negative tail well-departed from the mean. During 1987, by contrast, or September 11th, the crashes were rather more democratic, and while skewness was negative, kurtosis was not nearly as elevated as at other times of less-universal panic. For during a crash the average return tends to be rather negative, with the tail not too far off the mean, as correlations tend to converge. Importantly, at both “significant tops” AND recovery rallies, kurtosis is typically diminished, or at a local minima. This may reflect investor behavioural preferences to take profits on large the positive tail, but it nonetheless has a subduing effect in keeping the tail closer to the mean on those occasions when the skewness does turn positive. Yet again, in mid-February, somewhat unprecedentedly, we have witnessed very elevated positive skewness AND reasonably elevated kurtosis. In my experience, this is twilight-zone stuff. All we need now is Rod Serling to tell us what it means.

My take is as follows: we are at a monumental turning point in America’s twenty-five year experiment in leverage, and systemic speed bump in Bretton Woods II. We are seeing the telltales of a liquidity-induced blow-off that’s been fueled by ever-easier credit and nearly free-money that - up until now - has fed nominal earnings growth, but that is on the cusp of rolling over, on many and diverse fronts due to systemic contradictions, inconsistencies and imbalances. Yet some high-rollers awash with investable funds and brass cojones seem to be betting that even more liquidity (the Fed "put", Bernanke's helicopter, whatever) will be thrown at it by authorities, that will assuage any drop in nominal prices. AND they must also believe that this liquidity, like that which has been thrown at markets since 2002, will continue NOT to spike rates, and NOT to puke the USD, and NOT cause the ire of Pelosi and her labour constituents, and so not fan inflation but further fuel yet another bout of asset price spirals such as those seen in commodities, stocks, Art, REITs, Credit Spreads, beachfront property, wine, Chelsea homes, and the famous Honus Wagner T205 baseball card. The era of risk anaesthitization is ending.

Understand, I am not a bear looking for an excuse to be bearish. Rather, I am looking at an indicator of an unusually rare market occurance, searching for an explanation, whose more plausible answer is pointing towards something eventful, with returns that are likely to be more volatile, and with a greater frequency of negative signs than those witnessed in the preceding four years. As an immediate forecaster of things bad, I must admit to being unnerved by the post-hiccup jack-in-the-box company of Mssrs. Faber, Edwards, and Tice, irrespective of their esteemed and cogent analyses. But IF the whispers of "the higher moments" again prove prescient, it is highly likely that the brief turbulence witnessed last week is but a proverbial “shot across the bow” presaging an episodic fit that will - in hindsight - be measured in months, and nominal losses into measured into double-digits.

Sub-Prime Poetry v1.0

So Farewell
then
New Century
Financial.
You're implied yield
was 452.38%
before
it was ZERO.

You lent
to those who
might not be able
to pay.
And they
Didn't.

The Laws
of prudent
lending, were,
one presumes,
apparently
were not so
NEW.

(with apologies to EJ Thribb)

ClineSpeak

Bloomberg's Tom Keene stewarded a nice interview with the eminent Dr. William Cline, now Senior Fellow of the Peterson Institute for International Economics, and whose textbook on International Monetary Policy, incidentally, was cornerstone of my course work on the subject in the early 1980s.

His main points (though nothing new), were nice to hear as they were realyed in the most sober and un-hysterical of terms:

* The current path of US deficits is clearly unsustainable. If left uchecked. modelling US ratio of debt to GDP will tend towards 140% in the following decade. It needs to stabilize at nearer to 50% to have any chance of intermediate term sustainability.

* This will necessarily require a cut in the CA deficit, to at least 3% of GDP from current 7% levels.

* In the modelling the policy outcomes required to get there, the US will also need flatten the fiscal gap to zero, perhaps even running a mild fiscal surplus, from currently yawning levels.

How does th US achieve these goals?

* Reversing Bush tax cuts will only get the US fiscal gaps to the -2 to -3% level, though mounting intergenerational liabilities will require further fiscal action and measures on reveues, spending, or both.

* USD must continue to depreciate on the order of another 15 - 20%. Asian nations, in general, must allow their currencies to rise. Japanese YEN should be in the vicinity of 90; and the RmB too, should be substantially higher. I could detect (like my own opinion) a rather scathing tone towards Japanese intransigence YEN appreciation.

* To avoid a meaningfully hard and rapid crisis-induced adjustment, participants probably should enact and abide by a new Plaza-like Accord whereby participants agree NOT to intervene in FX markets; NOT to accumulate reserves for mercantile advantage; and let the markets tend towards natural adjustment. Failure to due so will inevitably spawn more a meaningful adjustment crisis.

* He was rather disturbed by the fact that current adjustment requirements (even today) are more demanding than historical ones, YET policy-makers remain sanguine, and wholly unmotivated to seek multilateral solutions.

I would add, almost needless to say, that all plausible solutions are contractionary, whether undertaken sooner or later. The earlier they are implemented, the more likely that recovery benefits from a lower currency and lower rates will feed through to cushion the overdue adjustment.

Aesop Revisited

(the following joke that I'd like to share was e-mailed to me by a perceptive Swedish friend, its ultimate attribution which cannot be established, so apologies in advance to its pithy author for any copyright transgressions.

A Japanese company (Toyota) and an American company (General Motors) decided to have a canoe race on the Missouri River. Both teams practiced long and hard to reach their peak performance before the race. On the big day, the Japanese team won by a mile.

The Americans, very discouraged and depressed, decided to investigate the reason for the crushing defeat. A management team made up of senior executives was formed to investigate and recommend appropriate action. Their conclusion was the Japanese team had 8 people rowing and 1 person steering, while the American team had 8 people steering and 1 person rowing.

So American management hired a consulting company and paid them a large amount of money for a second opinion. They advised that too many people were steering the boat, while not enough people were rowing. To prevent another loss to the Japanese, the American's rowing team's management structure was totally reorganized to 4 steering supervisors, 3 area steering superintendents and 1 assistant superintendent steering manager. They also implemented a new performance system that would give the 1 person rowing the boat greater incentive to work harder. It was called the "Rowing Team Quality First Program," with meetings, dinners and free pens for the rower. There was discussion of getting new paddles, canoes and other equipment, extra vacation days for practices, and bonuses.

The next year the Japanese won by two miles. Humiliated, the American management laid off the rower for poor performance, halted development of a new canoe, sold the paddles, and canceled all capital investments for new equipment. The money saved was distributed to the Senior Executives as bonuses and the next year's racing team was outsourced to India.

Avarus animus nullo satiatur lucro

There is the wonderful scene in the "Life of Brian" where our hero is caught by a Roman sentry (played by John Cleese) writing anti-Imperial slogans on the wall, and, rather than being hauled away is professorily corrected, and made to write it ad infinitum, all over the walls of the plaza.

Thinking of our recently-humbled carry traders, perhaps a similar exercise is in order. Now repeat after me:

Avarus animus nullo satiatur lucro.
Avarus animus nullo satiatur lucro.
Avarus animus nullo satiatur lucro.
Avarus animus nullo satiatur lucro.
Avarus animus nullo satiatur lucro.
Avarus animus nullo satiatur lucro.
Avarus animus nullo satiatur lucro.
Avarus animus nullo satiatur lucro.
Avarus animus nullo satiatur lucro.
Avarus animus nullo satiatur lucro.
Avarus animus nullo satiatur lucro.
Avarus animus nullo satiatur lucro.

(and so on....)

Literal translation: A greedy mind is satisfied with no (amount of) gain

Factor Failure

Hello Houston....We've got a problem!

And so it is with "growth factor" measures in Japan. Not that this has much historical return attribution in any event, but even so, February 07 has been horrid to growth! In big round "top v. bottom decile" numbers, irrespective of the inanity or robustness of the measure, they are down ~5% in the MTD. This is even more interesting because this is not on the heels of some extended outperformance in prior intervals. It is, for whatever reason, monumental factor failure in the grossest sense. Yet despite this failure, somple naive price-momentum continues to motor away, with long-window portfolios accounting for much of this. But growth often correlates with "quality", and here we see similar potholes for "quality" concious, be it Margin, ROE, CFROI, EVA, volatility of earnings, forecast dispersion, etc.

So what is responsible? Non-price earnings revision, somewhat idiosyncratic longer-dated momentum, sector-effects and the global liquidity-sensitive names, all skewed towards larger-cap resulting in a rather strange and narrow mixture that does not explain well systematically-speaking, nor bode-well for all but the most trend-hugging reactionaries. It is very Darwinian, as the survivors continue to see more money ploughed into them, while those that pause or miss - irrespective of attributes,get mercilessly torpedoed.

Explaining what's worked (the brokers' term) is always more useful with other practitioners' input, so anything that any other observers might wish to add would be interesting to ruminate upon.

BoJ's Pennies in a Fountain

Everyone will offer you something today regarding the BoJs latest rate decision. Some will be dripping with sycophancy about BoJ independence, while others puerilely describe why zeropointtwo-fivepercent is a bold and decisive action by the obviously concerned public servants at one of the world's most important central bank. I will simply express to you my opinion that it is a most pathetic gesture...an insult to both right-minded central bankers and those concerned about the health of the international monetary system.

The analogy that immediately came to me was the carefree tossing of a penny into a fountain, after making a decidedly pleasant but juvenile wish. Call me unsentimental, but if one REALLY wants something badly and desperately, one should NOT rely upon a wish imbued upon a penny tossed into a fountain, or for that matter, the first star one saw last night. Rather, one should go and proactively try to make it happen. For a central banker in general, this means NOT sucking-up to the politicos, or whinging ninnies, irrespective of which side of the fence they are calling from. For the Bank of Japan more specifically, it means: if you really need near-zero rates of interest because the civilized world will disappear tomorrow and take the global financial system with it, then leave the bloody rate unchanged. IF, on the other hand, nearzeropercent rates of interest in a large somewhat open and important economy near the center of the international monetary system, are in fact long-run destabilizing and fostering asset-price bubbles and global imbalances that will be even more painful to wean-off of in the future (which this writer believes they are), then do not be zeropointtwofivebasispoint pansy, but be a man, and raise the rate.

Mr BoJ, you have done quite enough damage, thankyouverymuch, to the integrity of things monetary for the sake of your own parochial advantage. Now it is incumbent upon you to more seriously clean up the mess, and normalize your official lending rates, NOT over the course of the next four years, but soon.

Earnings Hooliganism

If you'd asked me, I 'd have thought that "hooligan" was certainly Dutch in its lexigraphical derivation. In actual fact, the OED tells me that it is derived from "Hooley's Gang", an apparently tough Irish group of thugs wreaking havoc at the turn of the century. It comes to mind because the latest interim earnings earnings season has yielded to a singular mob-like behaviour in dealing the short-term fortunes of stocks in Japan. Some academics have previously termed it the "MBE" phenomena where there is a decided post-announcement drift divergence effect in the performance of securities that "meet of beat" expectations, while the guillotine awaits those that don't. Mind you, if it were just the Japanese domestic investors, they might be forgiven for quarterly earnings announcements and all the pathetically panicked and outsized portfolio readjustment that results is new to the island, a bone to the foreign institutional demanders of transparency, despite the stupidly myopic short-termism it has has brought to American markets, poignanly discussed by Rappaport in his damning paper on the subject.

Of course we've seen this before. Certainly, in the US, where systematic earnings yob-ism is the norm, and to an increasing extent in Europe, and at least since 2004 when the Gaijin returned to Japan, without guns and uniforms. Historically, the effect was confined to the smaller cap names, at least according the numerous academics. But the perrformance-incentivized hooligans now so prevalent in Japan have driven a post announcement wedge between the perceived good & seemingly bad (at least as determined by the most recent 9mo interims) unlike anything we've seen to date. But interestingly, in Tokyo, the hooligans are unconcerned by size, or other attributes, perhaps ass a reuslt of the inferior expectational data and more limited liquidity. But it IS better if its got positive ex-ante momo and it MBE's. This may be the result of short covering, or mischievous elves trying to force them to cover, or mechanical bots trying to capture some post-revision drift. However, is history is gauge, except for the cheaper secs., they will likely be paying too much.

But since they are aggressively shorting the ones that do NOT MBE, this is where the opportunity lay for the patient. Make no mistake, I have nothing against a punter making a calculated short-term bet. In fact I thrive on it because they are creating opportunity. History may tell them it's a good one, in the short term. They should just hope they are asking the correct question. And that they do not oversize their position. For, in Japan, when they begin drilling reasonably hig-quality names to the tail of the dsitribution, despite contextual fundamentals, for a few bp's of hopeful short-term performance, potential buyers should take note, and use the mechanical myopia to wisely and patiently acquire positions, for they will be returning shortly to reverse their positions.

Japanese Stock Market Poetry v2.1

So farewell
then
Sunstar Osaka,
TSE Number four
nine one
three.

Maker of things
dental, health
cosmetic and
errr
umm
cycle brakes??!?

We hardly knew
thee for you
were but
a guppy
amidst coi.

Though "cheap"
as you might
have been,
cheap,
you always
were.

Fortunately,
now for you,
management
has flossed ye
away from
public view.

(with apologies to EJ THribb and all real poets)

Market Internals Update: Big Remains Beautiful

It is bad enough for overseas Japanese equity investors that for eight months Japanese equity funds have done nothing in dollar terms, while the US market has seen dollar returns of 20% and the European market approaching 30% in dollar terms. But in Japan, even with its indices up 15% since its mid-year lows, the currency is, sadly, down nearly a like amount, such that the resulting chart looks like my EKG while watching the evening news.

But the even bigger insult to active managers in Japan is that most Japanese stocks have continued to underperform the major indices. So much and so thin their ranks, that merely 26% of the approximately 2300 investable stocks have - on a 12-month rolling basis - beaten the Larger-cap dominated TOPIX or Nikkei. Market Cap, it must be said, has been a nice contributor to performance, and for the Gaijin fund manager, this as much saved him for foreign portfolios are heavily skewed towards the both the megacap, and the merely large.

But what does it mean??!? To some extent it is reversing the large-cap underperformance that was the result of Daiko Henjo, and the opportunity that Cassandra highlighted in the waning hours of 2005. To another, it is that the wall of GCC money is ploughing into cap-weighted indices, and prime market leader assets. But it also reflects that domestic no-growth assets have few buyers, and it is these, by number predominate the Topix, and the equally-weighted ranks of "the average stock" universe. This leads to a fascinating potential struggle. The "good-stock/bad-stock quants will love to hate these stocks as they have little immediate appeal outside of under-catalysed under-valuation. But in a world where leverage is most plentiful, and trade buyers increasingly emboldened, and private equity on the prowl all over Kabuto-cho (and Roponggi), it will continue to be dangerous to be short of increasingly under-valued assets, however pathetic their cash-generating ability, and irrespective of how opposed entrenched management & their extended constituencies are to any change in the status quo. Steel Partners was the first ungainly shoots across the bow leading to a second round of more determined struggled BY JAPANESE inconoclasts for undervalued Japanese assets. 'Twill be entertaining to watch the ensuing scrum for the Japanese are not known for their Rugby prowess...

The Secret Bank of Japan Lexicon

Verbal accuracy is a virtue in analysing and ultimately understanding international economic phenomena. The following lexicon should be of great value to earnest investors worldwide, especially those who take Media-speak, and bureaucratic Ministry-speak at face value.

ZIRP (c) - The policy of giving away free money in unlimited quantities to any and all comers, for the stated purpose of avoiding deflation, but actually for the purpose of insuring that the YEN remains weak for selfish, mercantilist purpose.

nearZIRP(sm)(c) - same as the above only a few basis points higher; ostenisbly meant to relieve pressure on the BoJ for the world's most FUBAR policy by creating the anticipation for a policy change that will always be "just around the corner".

ZIRPtastic - The feeling of joy and bliss that overcomes the borrower of "free money" upon swapping YEN paper for something with yield.

ZIRPflation - The internationally uncivic-minded side-effect of rising asset prices everywhere in the world caused - in reasonable part - by the unecessarily cynical & low discount rate in Japan and the unmitigated ability of foreigners to borrow as much as they want, in order to buy whatever higher-yielding, or greater capitally-appreciating assets they want. (See Private Equity, Hedge Funds).

disZIRPflation - The brave new world of very mild falling wage and goods prices in Japan (& Switz!) coincidental to ZIRP, nearZIRP, strongly rising asset prices, and massive demand for the currency to fund leveraged specualtive trades into higher-yielding currencies.

ZIRPulation - Leveraged specu-trage predicated upon borrowing YEN at nearZIRP for investment in anything and everything nonZIRP. Presumes continued weakness of the YEN and the dangerous belief that unwinding is possible somewhere near present levels as and when a paradigm short occuers (See "tail risk", and "lognormal")

ZIRP-sixed - Losing one's hedge fund by maintaining leveraged long YEN bets.

ZIRPcurve Risk - The aggregate embedded yield curve risk in a ZIRPified financial system where the paucity of short-end yield induces investors to "reach for yield" by going farther out on the curve, thereby squashing long-term rates towards ungodly low levels that circularly make it near-impossible to shift policy or paradigms without inducing massive mark-to-market capital losses throught the financial system.

ZIRPerrific - Peculiarly un-Japanese celebration of "High-fives all around" in the MoF & BoJ offices every time the YEN ticks new lows versus the dollar and especially the Euro.

ZIRPBento - The FreeLunch(c) Box served in the BoJ cafetaria, but available to any and alll comers.

ZIRPquake - Colassal dislocation in financial markets due to simultaneous attempted unwinding of ZIRP-related carry trades

neoZIRPantilism - Using all manner of monetary policy tools and jawboning about the same to insure that no one gets a competitive "leg-up" over TeamJapan. (See "Beggar-Thy-Neighbor";)

ZIRPing-on-a-String" - Economic state describing the ineffective outcome of employing ZIRP monetary strategies but to no avail, because the causes of Japan's disinflation has next-to-nothing to do with the price of money.

ZIRP-o-tility - The phenomena describing the compression of volatilty resulting from ZIRP and the flood of liquidity it spawns that have virtually eliminated risk premiums in global markets.

ZIRPocracy -Describes the paradoxical policy in capitallism where the market price is believed essential to the optimal, (or reeasonable approximation thereof) allocation of a scarce resource supporting privatisations, and market-pricing of utility services, but conveniently ignored when it comes to optimally allocating the quantity of YEN (or SFRs) in existence.

ZIRPlosion - - Eventual market explosion caused by any many manner of unwinding of speculative leveraged carry trades.

Today's ECB Rate Announcment in Full

(Summary of Statement of Mssr Trichet)

Everything macroeconomic is bon bon bon so we will do nothing today. But we are worried about everything and we are afraid that anything and everything can come apart at the seams, at a moments notice. So, as a result we will watch anything and everything carefully - especially those things that our colleagues across the Atlantic go to great lengths to ignore. We suggest that you take two aspirin and call us in the morning.

P.S. - We are especially watching you carry-traders!!
P.S.S. - We are watching asset prices & liquidity too!!
P.S.S.S - We should make fiscal hay while it is still economic day....

Merci very much!

(End of statement)


Bried Q&A followed....


Q: Will you be raising rates?

TRICHET: I am not telling you.

Q: Do all comittee members agree with your Vigilance?

TRICHET: Qwerty sporkwork wiglkcxx ixmagntryee op noim te te qsxtry. Qaaafff?? Kloop re voop dut dut! (Mr Trichet apparently answered in Esperanto, but no translator was immediately available)

Q: Do you agree with American officials that rising asset prices are an indicator a nations sexual prowess?

TRICHET: Mais Non! Non! non! Ce n'est pas possible!

Q: Do you think Carry Trades are a problem?

TRICHET: Does a poulet have lips? If it walks like a duck, if it talks like a duck, it is probably a duck (but not a canard. Claro?

Q: What do you think of the YEN ?

TRICHET: That's for me to know, and you to find out, nah nah-nah nah-nah nah! But...I will tell you this much: certain loans to certain people are certainly growing at what in no uncertain terms is certainly a rate several times higher that it should.

Tokyo Stock Exchange NYSE TIE-Up - Interview with CEOs Thain & Nishimura

But a few days ago, TSE Chairman Taizo Nishimura & NYSE CEO John Thain granted an interview regarding their proposed capital tie-up and cooperation talks which had splashed the headlines of financial pages. Below are some highlights from that interview...

BOOMBERG: So what are some of the reasons for the tie-up?

JOHN THAIN (Rubbing hands together doing imitation of Simpson's Mr Burns): Well, at the NYSE, we like to keep our friends close, and our enemies closer...

BOOMBERG: Errr yes, I see. You mean like Dick Grasso, Goldman Sachs, and the Specialists?

JOHN THAIN: No, they were all just our friends. In fact we send runners with snacks and gifts to go visit Joey, Sal, and Louie in the clink just so they know we're thinking about them. Dick did a lot of good things for his friends and for himself, so no, I wouldn't include him in that. And as for Goldman Sachs, well you know an anagram for Goldman Sachs is "Land Scam Hogs", which I think speaks volumes. And anyway, everyone who settled neither admitted nor denied guilt. And even those who found guilty denied guilt, or pleaded "extenuating circumstances", like the cost of living in Oyster Cove.

BOOMBERG: Are there others?

NISHIMURA: Technor-o-gy. You know, in Tokyo, we' have had probrems with our technorogy. You know, "Fat Fingers"??!

BOOMBERG: But given the insanely absurd "specialist system", the scandals surrounding front-running by virtually all the specialists (including Goldman's SpearLeeds sub), the high fees, restricted access to data, and well to be honest the virtually-non-existent market-supervision, isn't the NYSE the LAST place one would look for world class market structure and trading technology in a potential partner?

JOHN THAIN: Hey, that's not fair! We've made a lot of money for our members, and allowed them to make a lot of money! (errr should I be saying that??!?)

NISHIMURA: Understand, that at moment, we have agreed to agree to study ways in which we can agree to together study the different ways that might lead to joint ventures and new products. Nothing is concrete. We have, in stylized Japanese fashion, only agreed, (if you forgive my bluntness for the sake of the American audience), to agree on nothing, to evaluate ways that might lead to something in the future, to take some photos, and have lunch. Thank you very much....

BOOMBERG: Are you guys going to merge ?


JOHN THAIN(reverting to diplomatic tone): Nothing has been agreed and we are pleased with our little joint Indian pecadillo.


NISHIMURA: Perhaps we can discuss at a time that Japanese sovereignty is returned to the Kuriles....(translation note for American readers: "Perhaps when hell freezes over!!)

BOOMBERG: Thank you very much....

How obvious is it? (The Tongue-in-Cheek Version)

That "investors" undertaking leveraged cross-border speculation, employing borrowed funds in a near-ZIRP country to purchase higher yielding assets somewhere else, willingly assume the tail risk of large fluctuations and the potential result of being rather literally "carried-out" under certain circumstances in exchange for the positively skewed coupon-clipping-like returns of purchasing anything with higher yield or harboring sure-thing capital gains appeal is, well, obvious to those who can spell l-o-g-n-o-r-m-a-l. For sometimes, unpredictably, "shit" just "happens". Like the Kobe earthquake. Or the tsunami. Or LTCM. Or the end of QE. Or the assasination of an Archduke. Or the the realization that, upon closer inspection, one of the nations most revered enterprises was, in fact, a fraud.

Obvious as that may, something even more obvious has, until recently eluded the macro investors renowned for carefull;y structured bets that presumably can be unwound at a hair-triggers' notice with nary a market impact (except in 1987, 1994, 1998, and errrr 2007?), which is that the thing that investors funding at ZIRP or nearZIRP most desire (yield spread) and the thing they are most afraid of and want to hedge (currency exchange wrong-way directional movement risk) hasb been right under their noses in good old Japan. For Zaitech nirvana is, and has been, here all along in the form of listed real estate companies thhat were trading south of book, and forward-looking earnings yields (net of tax) of 800bps over nearly free money, J-REITS that were easily 500bp of unlevered free-money spread, utilities at near-book yielding 200bps unlevered spreads, and a whole host of high-earnings yields, near-bookval enterprises with 2% yields also nicely leverable, and given their liquidity, a mark-to-market that is manipulable and protectable from the horrors of margin calls. Rather simply, borrow Japanese yen, and buy Japanese stocks! Why do the Japanese people and specs go to all the bother of swaps, forwards, foireign funds, currency & tail risk, dishonest & smelly gaijin, etc. when one can borrow YEN for nearZIRP and buy good Japanese assets for attractive unlevered spreads? No need to be too-clever-by-half! For as currency realignment risk grows with each down-pip on YEN, and as credit spreads have narrowed forcing thrill-seekers to assume more credit risk to goose returns overseas, some, over recent months have finally realized that Japanese equity yield spreads can be levered too!! Over course, given the drubbing that Mrs. Sato took during the last bubble, she remains suspicious of investing in stocks (the Golden Buddhist Toad of Mrs Inoue still missing). Her son of course, has eschewed work, but sports an on-line account jockeying in out-and-out of stocks faster than one say "Investors Business Daily Sucks", but that hardly qualifies as investment.

So is this Cassandra recommending this trade? Let no one forget Cassandra's imploring readers to buy Japanese stocks this past November. And Cassandra has maintained such a trade, for the better part of four years, via skewed portfolio toward precisely such undervalued domestic assets, and this has paid handsomely with low volatility, and low net equity exposure. The low asset values, reasonable yield spreads sans currency risk remain in some pockets for those willing to go down the cap scree a bit. But there also remains a host of quality large caps WITH not ignboble growth prospects, which possess after-tax earnings yields of 500 to 750bp over nearZIRP. And with Carlyle et. al. taking private anything and everything private with an ev/ebitda <10x while borrowing at junk rates (albeit diminished ones), these enterprises in Japan with ev/ebitda's in the 5 to 7x and money virtually free, are by comparison, extraordinarily anomalous. Thus my message to carry traders is: why make your life more difficult than it be? Why assume more risk for less, when you can assume less risk for more?

Five Things Hoarding USD Reserves Is NOT Responsible For (And Twelve Things For Which It Is)

One trillion USD of YEN-financed carry trades of one sort or another, says PI Econs Tim Lee!! One might then take a bold at guess at all the manner of leveraged speculative trades financed by Swiss Franc carry. Add a trillion USDs on the books of the PBoC, the same for TeamJapan, and another one-half to one-trillion USDs across , Russia, GCC and the ROW. Then, close your eyes and take a deep breath when contemplating what that Ivy education will cost in 2014 for your MoonUnit or Dweezil when she/he reaches the age of consent.

The more sanguine say "Worry not!" for they are but the benign products of globalization. But I cannot help but feel that these rough pencil-on-the-back-of-envelope numbers represent many-a-distortion-in-the-making here on Planet Earth. Of course, not all absurdities of modernity in this brave new millennia result from the cavalierly selfish to the wantonly stupid policies and actions of both leveraged implementers and official enablers. For example:

FIVE THINGS THAT DOLLAR RESERVE ACCUMULATION ARE NOT RESPONSIBLE FOR:

(1) Scooter Libby's aboutface & newfound desire to take down Karl Rove.
(2) John Bolton's Stalin-wannabee moustache
(3) The fog and appalling food at Heathrow Airport
(4) Marc Faber's ponytail
(5) Absurd rules concerning "liquids & gels" in carry-on luggage

TWELVE THINGS OF DUBIOUS HONOR THAT DOLLAR RESERVE ACCUMULATION HAS CAUSED OR ENABLED:

(1) Absurdly low USD interest rates relative to experienced inflation and asset price inflation leading to negative savings rates
(2) Unustainable US fiscal, trade and current account deficits
(3) The death of offical CB ability to modulate liquidity growth with free-flow of capital & hugely varying interest rates
(4) Rapid & persistent liquidity growth relative to GDP Growth;
(5) Greatly exaggerated and excessive USA PCE in relation to USA GDP
(6) Low to negative real interest rates & resultant US gross over-investment in oversized, shitbox housing
(7) Environmental destruction and/or global extinction of numerous fish & wildlife species
(8) De facto concession by USA of manufacturing & its web of dependancies to nations with policy horizons longer than a nano-second.
(9) Worse-Than-Non-Existant Energy Policy in the USA
(10) Continued mindless suburban sprawl in the USA
(11) Persistent and pervasive global asset-price inflation & destruction of risk premia encouraging all manner of leveraged overinvestment.
(12) Donald Trump

Carry Carry Quite Contrary

In a research piece dated today, Richard Koo, Nomura's Macro observer commented on recent market concern over BoJs pussy-whipping by the MoF. To sum up his observations, he said the BoJ, while between a rock and a hard place" should have just done the deed whether the market was expecting or not. He also observed that the carry trade is errr out of hand, saying that it is sooo over the top that even Croation home buyers are funding at nearZIRP in YEN, and that people, important people, and very important people (e.g. Angela Merkel) are rather concerned by the fact that while the RmB is appreciating albeit slowly, the YEN, Germany's main competitor has been, and continues to move, in the opposite direction. Finally, he notes that the BoJ should purely and simply intervene in the FX and buy Japanese Yen for US Dollars, thankyouverymuch.

I say, "Bravo!", Mr Koo. A BGO (blinding glimpse of the obvious) as former RJR Chairman F. Ross Johnson was renown for saying. But nonetheless someone had to say it. OK so they won't be able to move a vast amount of trillion dollar baby, but they could effect a reasonable correction by nudging the soggy unit towards the general direction of fair value vs. the USD, and even perhaps the Euro. This would allow the BoJ to "resonate" with the pathetic domestic whinging and whining regarding blah blah deflation weakness not yet deflation blah blah, while satisfying the rest of the OECD that Japan really is not intent on fostering a parasitic set of international monetary policies. Mr Omi, you're next....

It's Official: Women are mere "Birth-Giving Machines"

In a rather remarkable gaffe, Shinzo Abe's Health Minister, Hakuo Yanagisawa, spoke his mind with brutal honesty in describing Japanese women as birth-giving machines, according to the BBC. Of course with a fertility rate in Japan of 1.26, the lowest in the world, such an assertion is met with some skepticism at best, and with derision by the more pedantic. Yanagisawa is no newbie to the trenches having served numerous governments internationally and within the sennior ranks of the finance ministry. His remarks come at a rather uncomfortable time for PM Abe whose approval ratings are flagging rather dramtically for someone who has done ummm errrr nothing at all. Did I hear someone suggest Tourette's Syndrome???

And in an another remarkable gaffe revealing yet more stunning high-level honesty behind the facade of tatamae by another old warhorse in the Abe Cabinet, Finance Minister Koji Omi was reported to have been overheard comparing the the BoJ and it's MOF-induced persistent policy of ZIRP & nearZIRP as the world's most munificent "Liquidity Giving Machine" and that continuation of this policy will work to serve TeamJapan's parochial interests by insuring that the YEN remains [paraphrasing again] "even more pathetic and disagreeable to investors than the US Dollar....". His spokesman officially denied the remarks, wink wink nod nod....