Start of the Second Week of 2018: Did You Catch What Happened in Japan Last Week?
Our last post noted that the stock and bond markets started the year in similar patterns from the last part of 2017 - a kind of business as usual start to the New Year. We also noted that gold might be the surprise of 2018 if its recent action indicates a resumption of a bull market that began in 2001. If so, it would be a kind of "stealth" bull market in the making.
But we just noticed that another "stealth" event may have occurred in Japan last week: the Nikkei shot up 700 points on one day, then another 200. Did you hear or read anything about it? We didn't. Having now become aware of it, could this be another "stealth" event? But, as opposed to gold, the "stealth" here isn't about a possibly bull market in Japanese stocks. They've been doing just fine and financial media has noted this. The possible "stealth" here has to do with inflation.
We're hearing more about it these days. Of course, ever since 2008, the subject keeps coming up and just as quickly goes away. When the Fed began buying trillions of dollars worth of mostly fixed income securities starting in 2008 as a means (according to them) of quelling the threat of collapse of financial markets, just about everyone expected a burst of inflation to ensue. It didn't. That expectation lasted for a number of years. Still no inflation. And so the pattern has continued. Frankly, we're not sure why we haven't had inflation, and neither are most of the reliable analysts we've consulted. The only thing certain is that inflation hasn't occurred.
But when a stock market springs upward as did Japan's, one possible interpretation could be that inflation lies at the base of that springing action. If true, it would be remarkable, given Japan's seemingly endless bout of deflation ever since its stock and real estate markets collapsed in 1989-1990. But, like anything in this changing world of ours, nothing lasts forever. Could this be not only the end of deflation in Japan, but the beginning of outright, possibly powerful, inflation?
It's just a thought, of course. All hints or threats of inflation have proved false signals for so long now; you can't blame us if we assume this latest event proves yet another head fake. But we don't know that. And so it's worth keeping our eyes on what's going on in Japan, as well as what unfolds in 2018 in other markets, including the possibility that U.S. Inflation may just be stretching its arms in the midst of its long winter's nap, only to go back to sleep yet again. Then again, it may have finally awakened. We'll have to wait and see.
But we just noticed that another "stealth" event may have occurred in Japan last week: the Nikkei shot up 700 points on one day, then another 200. Did you hear or read anything about it? We didn't. Having now become aware of it, could this be another "stealth" event? But, as opposed to gold, the "stealth" here isn't about a possibly bull market in Japanese stocks. They've been doing just fine and financial media has noted this. The possible "stealth" here has to do with inflation.
We're hearing more about it these days. Of course, ever since 2008, the subject keeps coming up and just as quickly goes away. When the Fed began buying trillions of dollars worth of mostly fixed income securities starting in 2008 as a means (according to them) of quelling the threat of collapse of financial markets, just about everyone expected a burst of inflation to ensue. It didn't. That expectation lasted for a number of years. Still no inflation. And so the pattern has continued. Frankly, we're not sure why we haven't had inflation, and neither are most of the reliable analysts we've consulted. The only thing certain is that inflation hasn't occurred.
But when a stock market springs upward as did Japan's, one possible interpretation could be that inflation lies at the base of that springing action. If true, it would be remarkable, given Japan's seemingly endless bout of deflation ever since its stock and real estate markets collapsed in 1989-1990. But, like anything in this changing world of ours, nothing lasts forever. Could this be not only the end of deflation in Japan, but the beginning of outright, possibly powerful, inflation?
It's just a thought, of course. All hints or threats of inflation have proved false signals for so long now; you can't blame us if we assume this latest event proves yet another head fake. But we don't know that. And so it's worth keeping our eyes on what's going on in Japan, as well as what unfolds in 2018 in other markets, including the possibility that U.S. Inflation may just be stretching its arms in the midst of its long winter's nap, only to go back to sleep yet again. Then again, it may have finally awakened. We'll have to wait and see.
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