Tuesday, February 4, 2014

Black Swan Capital - is the EURO the new YEN?



"Everything that seems to us imperishable tends towards decay; a position in society, like anything else, is not created once and for all, but, just as much as the power of an empire, is continually rebuilding itself by a sort of perpetual process of creation, which explains the apparent anomalies in social or political history in the course of half a century. The creation of the world did not occur at the beginning of time, it occurs every day."

Marcel Proust

Is the euro the new yen?

Greetings!

I floated the idea in Currency Currents a year or so ago, suggesting maybe the euro was becoming the new yen given its economic backdrop relative to the price action. I.E. no matter the seeming malaise across Europe, its currency continued to remain supported, relatively. The yen of did something similar if you look back: it rallied for years even though Japan's debt kept rising and its GDP kept falling and its interest rates went to zero (threw a monkey wrench into the whole yield spread argument). Two questions here: Will Europe become mired in the same deflationary trap as Japan's economy once was? And if so, will its currency react the same way-rally?

Currency Currents 4 February 2014





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