foreign currency

Japan’s Failure To Cure Deflation: Should You Buy Yen?

The Yen is now about 100 to the dollar. Yesterday the central bank of Japan announced new policies and the market’s reaction was to make the Yen go up. Usually when a central bank is trying to stimulate the economy that creates cheap and easy money conditions. These actions should cause foreigners to flee because they would then fear devaluation and inflation. This should have made the Yen go down. It rose from a May, 2015 price of 125 to the dollar despite Japan’s central bank trying massive Quantitative Easing and negative rates to devalue the currency. Many other nations worried the attempted devaluation would be in violation of agreements to avoid big devaluations. Thus it is quite a surprise

2017-01-10T23:32:52-08:00 September 22nd, 2016|mayflowercapital blog|Comments Off on Japan’s Failure To Cure Deflation: Should You Buy Yen?

Interest Rates To Return To Normal If Foreign Flight Capital Stops Flowing?

The old paradigm that the rate for the ten year Treasury should be roughly the same as nominal GDP was based on the assumption that there would not be huge inflows of foreign flight capital into the U.S. If this paradigm was active now then the ten year Treasury would yield about 4%. (This comes from adding the real GDP of 2.3% to inflation, which is about 1.7%). The foreign inflows in recent years have helped to push the ten year Note to 1.59%. Is it possible that the pressure of the flow of funds is what forces rates down and once the flow of funds becomes neutral then the lack of flow will cause the economy to move back

2016-07-18T10:14:26-07:00 July 18th, 2016|mayflowercapital blog|Comments Off on Interest Rates To Return To Normal If Foreign Flight Capital Stops Flowing?

If Britain Leaves The EU: Will A Crash Occur?

On June 23rd Britain will vote on deciding whether or not to leave the European Union (EU). This is called Brexit. Opinion polls indicate exiting is likely, but the vote will be close. The risk is if the UK leaves the EU it may greatly weaken the already unsustainable EU economic system resulting in a breakup of the Eurozone. The EU is slightly bigger economic region than the U.S. If it breaks up and falls into a recession that will further increase the chances of global recession affecting the U.S. A massive capital flight out of the UK and EU may not have any major region to go to except the U.S. resulting in lower U.S. interest rates and a

2017-01-10T23:33:00-08:00 June 13th, 2016|mayflowercapital blog|Comments Off on If Britain Leaves The EU: Will A Crash Occur?

Why Did The Yen Go Up When The Nikkei Declined?

The Yen went up against the dollar in the past 12 months from 125 to 108. Meanwhile the Nikkei stock index went down from 20,800 in June, 2015 to 14,900 in February, 2016 and is now 15,928. Based on the Purchasing Power Parity theory (that consumer goods should cost the same everywhere when adjusted for foreign exchange) the Yen was too cheap, possibly as much as 33% too cheap, so it needed to go up to about where it is now. A massive new amount of Quantitative Easing since Abe became Prime Minister in late 2012 caused it to be indirectly devalued. It is tempting for investors to leap to the conclusion that because Japan’s stock market has been low

2016-04-12T14:10:39-07:00 April 12th, 2016|mayflowercapital blog|Comments Off on Why Did The Yen Go Up When The Nikkei Declined?

Difference Between U.S. Economy And Other Regions Leads To Crash

  As the U.S. economy improves then the pressure will grow on the Federal Reserve to raise interest rates. This in turn will make the dollar go up which will trigger a recession in EM countries thus leading to a global recession. The problem is the dichotomy between the U.S. and other developed countries has created an uneven rate of recovery where the U.S. is way ahead of other countries in terms of recovery. This means a tectonic plate shift sudden dissipation of energy (an earthquake) in the financial world.     Before the Reagan era the U.S. was a lot closer to Europe in terms of having a lesser amount of economic freedom and higher tax rates. In the past 30

2017-01-10T23:33:19-08:00 June 15th, 2015|mayflowercapital blog|Comments Off on Difference Between U.S. Economy And Other Regions Leads To Crash