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Reality Check: The Nonsense Of Helicopter Money Speculation

Takeaway: Its been a rocky few weeks for Japan as helicopter money speculation stoked volatility. Central planners can't arrest economic reality.

Reality Check: The Nonsense Of Helicopter Money Speculation - helicopter money cartoon 07.19.2016

 

"There is considerable uncertainty over the outlook for prices," Kuroda told a press conference on Friday, following the Bank of Japan's July meeting. "In order to prevent these uncertainties from leading to a deterioration in confidence in households and businesses, we have decided to implement new measures."

 

The BOJ decided to double its annual purchases of ETFs to ¥6 trillion and will conduct an assessment of the effects of negative interest rates and its asset-buying program, which Reuters says suggests "that a major overhaul of its stimulus program may be forthcoming."

 

It's been a wild week leading up to the BOJ decision. "Helicopter money" speculation created a massive amount of volatility. Take a look at the last four days of trading in the USDJPY, with short-term intraday moves bouncing between -1.79% to +2.32%. Meanwhile, the peak-to-trough decline over the past four days is -3.55%:

 

Reality Check: The Nonsense Of Helicopter Money Speculation - usdjpy 7 29

 

In the past, BOJ Governor Haruhiko Kuroda has thrown cold water on helicopter money speculation. Here are a collection of recent statements from Kuroda addressing helicopter money:

 

  • "WSJ: There’s been a lot of discussion recently, especially among academics, about employing helicopter money, fiscal expansion financed with monetary quantitative easing. Is that something that should be considered in Japan?

    Mr. Kuroda: No.

    WSJ: Why not?

    Mr. Kuroda: No, we have no intention to employ helicopter money, anything like that, because, as you know, in any—almost all developed countries, fiscal policy is formulated by the government and approved by the parliament. Fiscal policy is the responsibility of the government and the parliament and prerogative of the government and the parliament." 4/18/16 (Wall Street Journal)
  • "Helicopter money is a policy where monetary and fiscal measures become one. But developed countries have learned through history to keep monetary policy and fiscal policy separate, with the central bank taking charge of the former and the government the latter... I don't think [helicopter money] can be adopted under the current legal system." 4/28/16 (Nikkei Asian Review)
  • "No need and no possibility for helicopter money." mid-June, (BBC Radio 4)
  • "There is an institutionally established system in which the government and the Diet are responsible for carrying out fiscal policy, while monetary policy is conducted by an independent central bank. Under the current legal system, I don’t think we can carry out (helicopter money)." 6/17/16 (Japan News)

 

Why does this matter?

 

Reality Check: The Nonsense Of Helicopter Money Speculation - bank of japan reuters

 

You'll note that the Reuters headline above is exactly one week before the BOJ announced it would pursue negative interest rates. You may be wondering... Will Kuroda shock markets again?

 

However, the more relevant question investors should be asking themselves is: Will the BOJ's "major [policy] overhaul," helicopter money or not, ultimately matter?

 

Since announcing the BOJ's negative interest rate policy in January:

 

  • Nikkei: -5.4%
  • USDJPY: -15.3%
  • 10yr JGB: -29bps

 

Clearly, markets continue to price in Japanese #GrowthSlowing regardless of what BOJ bureaucrats say. We continue to believe that central planners cannot rain money down from the heavens and expect their flagging economies to grow.

 

The central planning #BeliefSystem is breaking down.

 

Reality Check: The Nonsense Of Helicopter Money Speculation - central bankers cartoon 06.29.2016


This Overlooked Housing Investigation Has Huge Investing Implications

In this excerpt from The Macro Show, Hedgeye Housing analyst Josh Steiner explains the findings of a recent Treasury Department investigation that has significant implications for housing investors.

 

 

Subscribe to The Macro Show today for access to this and all other episodes. 

 

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CHART OF THE DAY: Can Trump Win?

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye Director of Research Daryl Jones. Click here to learn more.

 

"... Despite the punditry and career politicians missing the rise of Trump, the vast majority of voters are unhappy, so it shouldn’t have been terribly surprising. According to a recent poll from Rasmussen, 70% of likely voters believe the country is on the wrong track and a mere 24% believe the country is going in the right direction. The spread is near the highest level of the last 8 years.

 

So, despite his flaws, errant tweets, and narcissistic moments, it’s not difficult to see why a candidate that has never held political office is doing so well. The people are frustrated. Very frustrated. But can Trump win?"

 

CHART OF THE DAY: Can Trump Win?  - 7 29 16 chart of day


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

Daily Market Data Dump: Friday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, rates and bond spreads, key currency crosses, and commodities. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products

 

CLICK TO ENLARGE

 

Daily Market Data Dump: Friday - equity markets 7 29

 

Daily Market Data Dump: Friday - sector performance 7 29

 

Daily Market Data Dump: Friday - volume 7 29

 

Daily Market Data Dump: Friday - rates and spreads 7 29

 

Daily Market Data Dump: Friday - currencies 7 29

 

Daily Market Data Dump: Friday - commodities 7 29


Oil Bulls Are Getting Pummeled as Long-Term Bears Get Paid

Takeaway: Oil bulls are getting pummeled while the long-term bears continue to get paid.

Double #Ouchy here - don’t look now but this morning’s drop towards the $40-handle for WTI puts it down -15% in the last month alone; was it the Dollar? Supply? Demand? A bird or a plane? With Durable Goods and Capex careening to the downside, the bullish narrative on “Global Cyclical Demand has bottomed” is very hard to follow. 

 

Oil Bulls Are Getting Pummeled as Long-Term Bears Get Paid - Oil cartoon 04.07.2016 

 

Editor's Note: The snippet above is from a note Hedgeye CEO Keith McCullough wrote for subscribers this morning. Click here to learn more.


[From The Vault] Cartoon of the Day: Fallen...

[From The Vault] Cartoon of the Day: Fallen... - Oil cartoon 12.09.2014 large

 

Our inimitable, in-house cartoonist Bob Rich is on a much-deserved summer vacation. While he kicks back and relaxes, we're going into the Hedgeye Vault and highlighting some of his best work. With oil tumbling -25% off the recent high, we bring you another audience favorite


the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.

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