Investors Shun Anti-Yen Bet Despite Soro’s Seal of Approval

Published in the Wall Street Journal, February 14, 2013
By Ira Iosebashvili and Matthew Walter

• –Investors look to go other way as Soros bet against yen revealed
• –Some see pause in yen’s decline
• –Soros up almost $1 billion

For some bearish yen investors, a report that George Soros is also betting heavily against the yen means one thing: get out of the position.
Fund manager Alejandro Silva is one of many investors who believe that if a whale like Mr. Soros–who in 1992 made a fortune by betting against the British pound–is revealed to be betting against the yen, it’s a good time to go the other way. The thinking is that once big name hedge fund strategies become known to the public, these firms are likely to pull out of the positions, traders say.

The Japanese currency has fallen by almost 20% against the dollar since September, with the dollar recently trading at Y93.01. The decline coincides with the rise of Shinzo Abe, who was elected prime minister in December after promising to kickstart the country’s moribund economy through looser monetary policy and government stimulus.

“It’s a sign that it’s time to take the other side once you guys are printing it,” said Mr. Silva, a founding partner at Silva Capital Management in Chicago, which oversees $800 million in currencies and fixed income.   On Thursday, The Wall Street Journal reported that Mr. Soros scored gains of almost $1 billion on the anti-yen trade since November, citing people with knowledge of the firm’s positions. Others reaping big trading profits by riding the yen down include David Einhorn’s Greenlight Capital, Daniel Loeb’s Third Point LLC and Kyle Bass’s Hayman Capital Management LP, investors say.   Mr. Silva said he began betting against the yen late last year and took profits on the trade in January, when the dollar rose above Y90.

“There’s a herd mentality in currencies, like in any asset,” said J.D. Perry, portfolio manager at JP Global Capital Management in Baton Rouge, La., another investor who was positioned against the yen as it fell throughout the end of last year and sold those positions in January. “When I see a story like that, it’s probably a sign that it’s going to retrace some,” he said.  Even so, many of these investors remain longer term bearish on the yen, regardless of Mr. Soros.

“We’ve made a ton on money betting against the yen ourselves, and it would take an enormous move in the yen to get us out,” said Christopher Stanton, a portfolio manager at $650 million Sunrise Capital Partners. Mr. Stanton’s fund uses computer programs to identify momentum trends in the currency markets. He began betting against the yen when the exchange rate was at Y79 in November.
“The Bank of Japan has a definite exchange rate in mind, and I bet it’s a lot higher than people think,” Mr. Stanton says. “Short-term guys may get shaken out on the Soros news, but we’re staying in.”

Published in: on February 15, 2013 at 7:57 pm  Leave a Comment  

Inflation since 1775 and Its move since the Fed


Declaration of Independence

Yesterday at the American Economic Association’s 2013 Annual Meeting, Carmen Reinhart and Ken Rogoff offered a paper titled Shifting Mandates: The Federal Reserve’s First Centennial.

The paper included a cool chart of inflation since 1775. The authors argue that inflation didn’t take off until the U.S. went off the gold standard in 1933.

From the paper:

It is probable that in 1913, while financial panics were not uncommon, high inflation was still largely seen by the founders of the Fed as a relatively rare phenomenon associated with wars and their immediate aftermath. Figure 1 plots the US price level from 1775 (set equal to one) until 2012. In 1913 prices were only about 20 percent higher than in 1775 and around 40 percent lower than in 1813, during the War of 1812. Whatever the mandates of the Federal Reserve, it is clear that the evolution of the price level in the United States is dominated by the abandonment of the gold standard in 1933 and the adoption of fiat money subsequently. One hundred years after its creation, consumer prices are about 30 times higher than what they were in 1913. This pattern, in varying orders of magnitudes, repeats itself across nearly all countries.

inflation 1775

Inflation chart

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Published in: on January 7, 2013 at 8:59 am  Leave a Comment  

America Has Sown the Seeds of Its Own Demise

By Dean Kalahar, published on Real Clear Markets

In the aftermath of the election of 2012, a new reality must be digested by all Americans. Working within the precepts of a democratic republic, The American public freely exercised their choice and voted for a New America.
The electorates’ decision once and for all confirms a definition of America that values hopes, feelings and equality of results over the realities of human nature, history, and the foundational principles that hold western civilization together. There is now no doubt that the tipping point of geometrically increasing cultural decline has been crossed. America has now firmly changed from a nation where the founding principles of the great enlightenment have been substituted for a utopia of widespread human suffering. There is no going back.

This change is not due to one person or event. For fifty years we have seen systemic institutional decay to the vital institutions across our cultural landscape that sustains America. And like a canary in a mine providing an early warning signal to dangers, we have been warned time and time again that we were losing our footing and chose to ignore the obvious.

Today the foundational pillars of civilization that have sustained America have been voted insignificant and will be allowed to collapse. The result is a New America for sure, but it is not a greater America. It is an America that has sown the seeds of its own demise, blinded by self inflicted wounds, disguised by false compassion, and based on trust in a human condition that is not in our nature.

A callous society focused on self has been defining deviancy downward, as the late Senator Daniel Patrick Moynihan warned us, for a long time. Sometimes covertly and other times overtly, a cultural war was being raged in America by a progressive “tolerance” movement that is intolerant of institutional traditions, principles, and laws that were created and tested over thousands of years of trial and error. Those who have lectured us have shown a condescending hypocrisy of moral relativism towards any concept that might interfere with their self-anointed sensibilities of creating a utopia so as to avoid self awareness. The walls of the republic have been crumbling for some time. Now the collapse is all but inevitable because, and let’s be clear, they have won.

America’s religious institution has been eroded by the secularization of society, the welfare state, the misguided belief in the separation of church and state, and attacks toward any outward expression of religious passion. The church has lost the culture war.
Our public education institution has been decimated by bureaucracies and unions that have failed to teach children how to read, write, or add, while choice, accountability, rigor, and our nation’s history have been forsaken for self esteem and multiculturalism. The schools have lost the culture war.

Our family institution has been redefined into a bizarre amalgam of gender, sexual, and parental proclivities. 40% of children are born out of wedlock and 25% of teenagers have a sexually transmitted disease. The overt-sexualization of our society has created confusion and despair among our children, while infanticide has become an all too easy choice. Biological and psychological realities for sanctioning marriage between a man and woman for the sake of our posterity have been ruthlessly attacked by those seeking to re-define the universal order. Our families have lost the culture war.

Free market entrepreneurial principles no longer guide our economic system. Efficiencies, life saving economic growth and opportunity based on the laws of human nature and scarcity have been forsaken by an ever encroaching government institution that believes a command and control approach of central planning can better answer the questions of what, how, and for whom. Our economic system has lost the culture war.

The winners of this battle have handed over America’s keys to the government. A government that no longer sees its role as providing for the steady rule of constitutional law and unwavering protection of the basis of morality found in the steadfast protection of personal property. The New America government will direct the collapses of what they deem are antiquated institutions of society like life, liberty, and property. They will smugly orchestrate the demise of the bedrock principles that sustained our family, education, religious, and economic institutions that have held us together and allowed us to thrive as a country; naively believing a nation can sustain itself after its foundations are removed.

Progressive ideology has destroyed the social fabric of the nation from within. Ignorance has sown the seeds of our own destruction. As the Romans did long ago, our fate will be written in the epilogue of history. Gone, a nation whose torch was smothered when a complacent arrogance forgot who they were, what made them great, and the humility to stand vigilant in defending liberty was lost.

There is no upside for America or its people; and it is going to get ugly out there. But for those who have been fighting the good fight for so long, honoring those who have died fighting for the same providential cause, my suggestion is to pull in, relax, live, and love your families.

Patriots, the New America is the reality; just have peace of mind knowing the winners of the war, and the choices they made, will be held personally responsible for the severe costs that are to follow. To those who asked for a New America, I leave you with the words of Col. Jessup in A Few Good men: “You have no idea how to defend a nation. All you did was weaken a country today … That’s all you did. You put people in danger. Sweet dreams, son.”


Dean Kalahar teaches economics and psychology, and has authored three books, including Practical Economics.

Published in: on November 8, 2012 at 4:27 pm  Leave a Comment  

Illuminating the World of Hedge Funds…

Illuminating the World of Hedge Funds Infographic

Published in: on September 25, 2012 at 7:28 am  Leave a Comment  

Quantitative Easing: The Ultimate Faustian Bargin

This is a great article talking about the ills of the global solution of quatitative easing.  Bottom line: you can’t spend what you don’t have…at least not for long.  If you do, basically bad things happen.

Published in: on August 22, 2012 at 10:34 pm  Leave a Comment  

Stimulus Hokie Pokie

The Fed is discussing QEIII as a new round of stimulus to the economy.  This is truly a perplexing discussion.  Why?  Well, let’s be real we have seen a two direct stimulus, QEI, QEII and operation twist.  So if it hasn’t worked yet do we really believe a new round will do something different?  Of course not!  I said it would not work, it has not worked and new stimulus will not work.  Deregulate, lower taxes specifically suspend payroll taxes and tell the unions to take a hike.  Then we will see hiring!

Published in: on August 18, 2012 at 7:40 pm  Leave a Comment