Daily Archives: August 5, 2012

Of Elephants and Butterflies, of Cabbages and Kings

It’s Sunday morning and we’re feeling – reflective? But it’s time …

“The time has come,” the Walrus said,
“To talk of many things:
Of shoes—and ships—and sealing-wax—
Of cabbages—and kings—
And why the sea is boiling hot—
And whether pigs have wings.”

Through the Looking-Glass, and What Alice Found There by Lewis Carroll

Things That Make You Go Hmmm…: 20120729

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In this issue, Grant takes an in-depth look at Japanese demographics. These trends combined with Japan’s record high sovereign debt spells trouble and sooner rather than later.

Whilst the heavy domestic funding and negligible foreign holdings of Japan’s government debt have been its saviour over the last twenty years (see chart, below), it was always going to be the case that when Japan’s pension funds began to need to sell their holdings, the problems would multiply in their complexity very quickly. We appear to have reached that tipping point—albeit very, very quietly.

Related problems are problems a stagnating tax revenue, a rapidly diminishing savings rate, a declining current account balance and the appearance of trade deficits. Dylan Grice whom he quotes extensively in this discussion when asked what will happen in Japan in his view has the picture of either a depression or that it will end in a hideous bout of hyperinflation that will take the Nikkei from its current level of 9,662 to 40,000. And gives the time-frame as Within the next five to ten years.

He finishes with a brief comment on Mario Draghi’s recent comments and the role of the ESM in saving Europe (chortle).

Things That Make You Go Hmmm…: 20120805

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In this issue, Grant deconstructs Mario Draghi’s address of June 26th to the Investment Conference in London in which he promised the moon:

Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.

The market response was ballistic up until he was essentially forced to retract his promise. His full letter as entertaining and beautifully crafted as ever, follows.

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