Japanese equities crash again, US bonds lost 1.8% in May, gold tops $1,400, what next?

Posted on 30 May 2013 with 1 comment from readers

Japanese equites tumbled by approaching five per cent today, somewhat less than last Thursday’s nine per cent intra-day loss, but this still threw a long shadow of uncertainty and volatility over global financial markets. Gold and silver advanced and US bond yields climbed again.

A strengthening yen is hitting Japanese export stocks but the real cause of the Japanese stock market’s instability is the 70 per cent gain in the past six months due to the rocket fuel of money printing. What has gone up like a rocket also tends to fall back to earth in the same fashion. But US treasuries are another deflating bubble.

US bond bubble

US bonds are heading for their steepest monthly loss in three years, down 1.8 per cent to yesterday, the biggest fall since December 2009. The US is selling $29 billion of seven-year bonds today into this weakening market.

The immediate market moves are all down to fears that the Fed may start to wind up its money printing program QE after a few ambiguous remarks from Fed chairman Ben Bernanke last week. The upward pressure on the yen is partly down to a selling of US bonds by Japanese institutions and the repatriation of funds. Also as Japanese equities sell off that boosts the yen as they are turned into cash.

Still that result is still the exact opposite of what the Bank of Japan intends to achieve with its own huge money printing program, and that policy failure is hardly good for stock market confidence. There is a downward spiral developing in Japanese financial markets that could yet get out of control. Money printing is inherently risky.

The general question now pops up. How can the common man invest? We have very high fluctuating market trends. We must look at these guys who have made good money out of cryptocurrencies through auto trading robots in a big way. Bitcoin Loophole is one among the best having got immense positive reviews.

Gold and silver

Precious metals are the winners by default. However, confidence was deliberately badly shattered in gold and silver by a bear raid orchestrated by central banks led by the Fed and Bank of Japan last month, so even in the gold and silver markets the response is muted, for now.

That will likely change dramatically if the Japanese equity correction morphs into something of a more worldwide financial crisis as the contagion to the US bond market already suggests is happening. Gold stocks are also strong against this trend.

This is all highly confusing for the average investor, and that is exactly how the central banks want to keep it so that they can rob them blind. That after all is the only real way to square their books.