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Five Things You Need to Know: BoJ Minutes, Carry On My Wayward Rising Sun, Platinum Hit, Class War Erupts Between "Haves" and "Have-Mores", Minyanville Guide to Retirement


What you need to know (and what it means)!


Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. BoJ Minutes

The minutes of the Bank of Japan's October 12-13 policy board meeting released today expressed optimism about the economy, but also suggested a willingness to delay any further interest-rate increases until next, year, pressuring the yen against other major currencies.

  • In the minutes of their Oct 12-13 meeting published today, the board members said recent indicators suggested that 'the economy continued to expand moderately,' according to XFN-Asia News.
  • Some members said that, given the 'extremely accommodative financial environment,' attention should be paid to boom-bust risks.
  • As well, Bank of Japan governor Toshihiko Fukui has recently warned of the risks of leaving interest rates at very low levels for too long.
  • However, the minutes gave no real leads on when the central bank might raise the overnight call rate again from 0.25 pct where it has been since July when the BoJ raised borrowing costs for the first time in almost six years.
  • Tomorrow's monthly report on the economy may downgrade the government's view of the economy, the new report from XFN-Asia suggested.
  • If that is the case, then it may prove difficult for the BoJ to raise rates anytime soon, which brings us to today's number two topic...

2. Carry On My Wayward Rising Sun

The news that the BoJ minutes provided no clear plan of action to further raise interest rates brought the yen carry trade back into the spotlight.

  • Following the BoJ minutes the euro hit a fresh all time high against the yen, with one euro worth 151.70 yen before settling under that level, AFX News reported.
  • The dollar and the pound were also bid against the yen following release of the BoJ minutes.
  • Why the currency movement on the meeting's minutes?
  • At issue is the likely continuation of the yen carry trade where a trader, say, borrows yen from a Japanese bank and converts it to euro or U.S. dollars (which creates a euro or dollar asset and yen liability) and buys, say, either U.S. or euro bonds with the proceeds.
  • If the trader can borrow yen at near the overnight call rate, which is .25%, then it can be profitable to buy, say, a bond that yields 4% and profit from the spread (4% - .25% = 3.75%).
  • Of course, bonds are just one "type" of carry trade. As we know from May's "liquidity event," yen financing has been used to fuel everything from Icelandic home investment, as Stephanie Pomboy recently noted, to the India Sensex Index to U.S. Treasuries and on and on and on...
  • What are the risks? The primary risk is the exchange rate.
  • If the dollar or euro (or whatever yen is being exchanged for) were to decline against the yen, the trader could lose money, especially since carry trades are typically conducted with large amounts of leverage so small movements in exchange rates can produce big losses.
  • In other words, it does not take a big move to wipe out the spread.

3. Platinum Hit

Platinum prices are making new record highs on speculation a new ETF for the metal will make it more accessible to investors, Bloomberg reported.

  • Platinum rose to a record in London this morning on speculation a new investment fund for the metal will make it more accessible to investors, putting a squeeze on supply, Bloomberg reported.
  • Platinum has risen for four straight years and the market is anticipated to run a supply deficit of 20,000 ounces this year, from 70,000 in 2005, Johnson Matthey Plc, the world's largest distributor of the group of metals that includes platinum and palladium, said Nov. 14, according to Bloomberg.
  • Meanwhile, speculation is growing that platinum, which is all but off-limits for small-time investors, may soon be accessible via an exchange traded fund.
  • The introduction of a platinum ETF may add between 5 and 15 percent to prices, Wolfgang Wrzesniok-Rossbach, head of marketing and sales at Heraeus Metallhandels GmbH in Hanau, Germany, told Bloomberg.
  • Platinum is a heavy, malleable grey-white metal that is corrosion-resistant and primarily used in the production of hit records.
  • In the United States, it takes 1,000,000 in sales for an album to go platinum.

Record platinum prices apparently forecasting
release of new Hootie and the Blowfish reunion album.

4. Class War Erupts Between "Haves" and "Have-Mores"

A second post dotcom wave of prosperity in Silicon Valley is apparently sparking class envy among the "Haves" and "Have Mores," the New York Times reported.

  • Now that the YouTube purchase by Google has amplified talk of a second dot-com boom, the Times says, many high-tech entrepreneurs are examining their lives as measured against upstarts who have made it bigger.
  • Seven or eight years ago, when it seemed that anyone with a business plan could get rich, financial rewards for tech startups proved generous and democratic, the newspaper notes.
  • "By the time it occurred to people to be envious, it seemed, they were rich, too - at least on paper," the Times says.
  • These days, however, it seems an undercurrent of envy is creeping into the valley thanks to a spate of recent deals with hefty financial rewards.
  • "It can seem like the only way to be respectable is to achieve as much as the founders of YouTube or Google," Alain de Botton, author of "Status Anxiety," told the Times.
  • "It's kind of embarrassing," Reid Hoffman, whose start-up, a business-oriented social-networking site called LinkedIn, is almost four years old, said.
  • "You started a year or two earlier, and they start after you and then this thing zips right past you and gets the golden results."

5. Minyanville Guide to Retirement

Planning for retirement is one of those goals that we never seem to find the time to but it is critical to develop a solid, well-formulated gameplan for reaching your retirement goals.

Below are some useful retirement-planning tips designed to help you retire on your own terms:

  • Diversification is the key to any sound retirement plan. Make sure you gamble away your retirement savings in both Las Vegas and Atlantic City.
  • When it comes to saving for retirement, some people say "Don't put all your eggs in one basket." But if all you are saving are eggs, well... then good luck with that.
  • Have you considered a Rothschild IRA? The 2000 Chateau Laffite Rothschild Pauillac is a safe bet with a maturity range of 2021 to 2050, rated 99 points by Wine Spectator.
  • A good rule of thumb is to allocate your retirement investments between stocks and bonds according to your age. Another good rule of thumb is to somehow get a whole lot of money just before you retire.
  • Estate planning can be tricky and involve many unexpected expenses. To save your heirs from unexpectedly high burial costs when you die, start building a giant pyramid now in which to store your jewel-encrusted sarcophagus. Fill the pyramid's chambers with gold and treasures.
  • Did you know that a single Styrofoam cup of coffee a day would in 40 years turn into the equivalent of $381,437 in the stock market? Clearly, this shows that the best retirement plan is to horde Styrofoam cups.
  • Some people are concerned that social security will run out by the time they retire. In order to increase the odds that you will receive social security payments, assume various identities with unique social security numbers.
  • Don't be like a lot of people and forget to write down where you buried the tin can that contains your retirement savings. Also, make sure your name is clearly written on the can in permanent ink in case another investor accidentally digs it up.
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