MacroPass: David Hay On The Wild Action (And Opportunity) In the Japanese Yen
MacroPass: David Hay On The Wild Action (And Opportunity) In the Japanese Yen
A powerful rally in the bruised & beaten yen may be in store
This week’s installment (our fourth) of our new MacroPass service for premium members of this Substack comes from David Hay, Chief Investment Officer & Principal at Evergreen Gavekal and publisher of The Haymaker Substack.
It’s a recent report David just sent to his private subscriber list explaining why the Japanese yen has been weakening so much of late, and despite its current woes, may be setting up for powerful rally at some point— thus creating opportunity for the courageous investor.
David also kindly provides a (long) list of the current assets — including the yen — he calculates offer strong potential to surprise to the upside in the coming year.
If you somehow missed our previous announcements, MacroPass is a weekly rotating selection of premium analysis from many of the big thinkers interviewed on Thoughtful Money.
To-date that list of contributors includes experts like Tom McClellan, Michael Howell (Capital Wars), Darius Dale (42 Macro), Doomberg, Kevin Muir (The Macro Tourist), Alf Peccatiello (The Macro Compass), Lance Lambert (ResiClub), Ed Yardini (Yardini Research), David Hay (Haymaker), Melody Wright (M3_Melody), David Stockman (Contra Corner), David Brady (FIPEST Report), John Rubino and Adam Kobeissi (The Kobeissi Letter). And more are joining each week…
The reports issued so far in this MacroPass series include
If you’re already a premium subscriber to this Substack, just continue below to read this week’s report from David.
And if you’re not (yet), read the start of it below. If you like what you see, just upgrade to premium and access the full report, as well as all past and future MacroPass content.
High-level macro-market insights, actionable economic forecasts, and plenty of friendly candor to give you a fighting chance in the day's financial fray.
Charts of the Week
It’s ironic, based on the U.S. dollar’s current strength versus most other currencies in recent years, that it has been so severely debased since Richard Nixon took America off what was left of the gold standard in 1971. This debasement has also led to much higher and more volatile oil prices. Both trends are unlikely to reverse over the balance of this decade and might well intensify. If so, that should be beneficial to the stock prices of energy producers and gold miners.
While the U.S. federal government continues to big itself into a deeper and deeper debt hole, Corporate America is in the opposite state. In fact, net interest payments for American companies are running at the lowest percentage of after-tax profits since 1956. However, this is likely skewed by mega-cap, cash rich entities like Microsoft and Apple. For many smaller enterprises, their balance sheets are far weaker and they are paying much higher interest rates than they were two years ago, thanks to the Fed’s aggressive rate-hiking campaign.
“The Yen is causing problems that are showing up in the (economic) data. How Janet Yellen and the other members of the G10 choose to deal with it is still up in the air, but we can no longer deny that it’s not affecting the global financial system. (Thursday’s) big GDP miss is just the first of many coming strains resulting from Japan’s massive devaluation.” -Kevin Muir, in his 4/26/2024 edition of The MacroTourist
The Way-Too-Carried-Away Carry Trade
Champions
Maybe I’m just experiencing a much deserved attack of humility but, in the wake of last week’s Making Hay Monday on my bullish natural gas whiff, I’m right back on the apologia kick. In my latest act of contrition, I’m going to focus on my ill-timed positive stance on the Japanese yen. My suspicion is that only a handful of Haymaker readers have been paying attention to its relentless value vaporization. However, that’s getting harder to do with articles like this one from last Friday’s front page of the Journal’s Business & Finance section.
Besides that, you might want to take your next international vacation to Japan — where prices are stunningly affordable — there are at least two big reasons you should care about the yen’s precipitous decline. The first is that
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