Tuesday, 18 December 2012

Targets . . .

As we continue the post Japanese election rally in celebration of the final debasing of the JPY I thought I'd start today on a somewhat lighter note. This is the toughest road cycling challenge I've ever seen and as such I think it's well worth your time to sit back and admire the route in all it's glory. I'd suggest a good glass of Rose de Provence.

The Haute Route de Alps takes in 600km of riding, 20,000m of climbing and takes 7 days. It's truly remarkable that people and do this and as one person said: "This is as close to what the pro's do that an amateur can ever attempt." The first leg for 2012 went from my last home town Geneva of Geneva to Megeve. I've driven this road many times and I can tell you a fully loaded car coming out of the valley up to Megeve can struggle getting up the Col. I can only imagine what it's like on a bike in the middle of summer. At the end I defy you not to want to do it . . . you first cycling target for 2013.

At this time of year you start to get so many new targets that it's hard to keep up. I believe that 2013 will be harder than 2012 in financial markets as I can see an inflexion point in the bond market. As I've discussed previously, if the US flips from full-on money printing to slow money supply contraction you'll not want to hold bonds. This brings me to Japan.

There is an idea going around that Japan should debase it's own currency by buying US treasury bonds.  It must seem attractive to those in Japan unwilling to live with the idea that living standards there will have to go into decline with the ageing population. In my world you tend to pay down your obligations rather than borrow more, especially when you're borrowing to buy bonds yields 0.25%. It's just crazy, but I don't rule it out. From the American point of view it at least holds out the possibility that they'll be a buyer in the bond market when everyone hits the sell button. In the meantime maybe the Chinese can get in front of the train and sell to the Japanese while they can and not when they have to? What a world.

If I was in rates at UBS I'd be targeting not to be arrested in the Libor investigation that the FT says may net three dozen of the troubled banks staff. I can't believe that it will be only UBS. Barclays were smart settling first. The question then moves on to who's next.

Another target I have for 2013 is a stronger copper market now that JPM has been given the OK to launch it's Copper ETF. This is not good if you're an end users. Any strategic resource like this that has funds scooping up the stuff is likely to lead to problems. Copper as a market already suffers some of the worse delivery problems amongst metals traded on exchanges. If you want copper you've always been better off buying directly from the physical market. I find it hard to believe that JPM will have the ability to ever deliver the metal itself and therefore I think you take risks buying the product as a long term investment. What you're really buying is JPM credit risk.


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