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Five Things You Need to Know: Legal Injection, Housex2, Healthy 10%, Hugo Boss?, Invisibility


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


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

1. The BoJ Faces Legal Injection

Japan is continuing its move toward ending quantitative easing, but also more recently has been periodically injecting massive amounts of liquidity into the money market. Is this some kind of global liquidity conspiracy?

  • First, what exactly is was "Quantitative Easing"?
  • Quantitative easing is different from the U.S. Fed's monetary policy known as "qualitative easing."
  • In qualitative easing, the Fed simply lowers the price of money (overnight interest rates) until people borrow, invest and/or spend again. But what if people simply refuse to borrow and/or invest no matter how cheap money is? You know, you can lead a horse to water...
  • Well, Japan found out what would happen. It is called systemic deflation. In order to fight it, the BoJ adopted what is called "Quantitative Easing," a policy where the central bank not only lowers the price of money and prints yen, but also uses this freshly printed yen to buy government bonds.
  • Back in March, thanks to improving consumer demand following improved corporate profits, the BoJ announced it would move toward ending "Quantitative Easing." The move is a prerequisite to credit tightening.
  • The overnight call rate in Japan (the rate at which banks borrow money from one another) has been targeted at near 0%, but has recently risen to .1% (yes, that is a decimal point in front of the 1).
  • In order to stabilize the rate, the Bank of Japan on Monday injected a massive Y1,500bn ($13.3bn) into the money market on Monday. Last week the BoJ injected Y500bn as well.
  • So what is really going on? It seems the BoJ on the one hand would like to tighten credit, but at the same time would like to keep liquidity flowing.
  • Well, that's just it. As economic activity heats up the BoJ must balance the risks of rising inflation, which would require a faster pace of credit tightening, and the potential of further credit tightening choking off the supply of money.
  • Meanwhile, the BoJ has been trimming the reserve target for the balance of private financial institutions' current accounts deposited with the BoJ. The reserve was 30-35 trillion yen at one time, but has been reduced to a third of that as of last Wednesday.
  • The monetary injections are providing the BoJ some leeway in the current account above the legally required minimum of 6 trillion yen.

2. Home2

Over the weekend, a Barron's cover story put the kibosh on the investment value of our second homes.

  • Are you prepared for your vacation home to fall 20-25% in value over the next few years?
  • Barron's suggests that is not out of the question after surveying a number of hot vacation-home areas.
  • After a long string of double-digit annual price increases, a number of second-home regions across the country are suddenly suffering from plunging sales volume and increasing inventories of unsold homes.
  • Barron's notes that many second homes have been sold not to serious vacationers but to speculative investors.
  • The danger also is that a wave of selling, reduced prices, and increasing inventory could spill over into the traditional home market.


Why 10%? That's the magic "correction" level, according to Ned Davis Research, as quoted in Barron's over the weekend.

  • The S&P 500 has gone 810 trading days without a 10% correction.
  • According to Ned Davis, the average is 222 days between 10% corrections.
  • If we make it to 830 days, that will be the longest stretch of days without a 10% correction in more than 40 years.
  • The S&P 500 most recently notched a five-year high of 1325.76 on May 5.
  • 1193.18 here we come!

4. Hugo, Boss?

At this Thursday's OPEC meeting hosted by Venezuela President Hugo Chavez in Caracas, we'll find out if Hugo is indeed, boss.

  • Among items to be discussed are Mr. Chávez's call for a reduction in oil output, which has already been publicly dismissed by the United Arab Emirates oil minister as well as officials from Iran. Still, he's going to call for it. (MV Rating: Three Shaking Fists)*
  • Chávez is reportedly also seeking to expand OPEC's ranks to include Ecuador, which dropped out of the group in 1992 saying it could not afford the membership fees, and Sudan, which has become a politically important oil producing country as sanctions prevent U.S. companies from investing in Sudan and China emerging as a key Sudanese investor. (MV Rating: Two Shaking Fists)*
  • Venezuela was a founding member of OPEC, which was modeled in part on the Texas Railroad Commission. (MV Rating: Two Raised Eyebrows)*
  • Today the country produces just 2.2 million to 2.5 million barrels of oil a day, however. (MV Rating: Two Blank Faces)*
  • The country, with a per capita GDP of $6,500, is spending $5 million on hosting this Thursday's OPEC meeting, far surpassing the $3 million spent by Kuwait on the December meeting, and more than 20 times the Vienna-OPEC meeting. (MV Rating: Three Hand-to-Forehead Slaps)*
  • The meeting is the organization's first in Caracas since 2000. (MV Rating: Three Blank Faces)*

MV Rating Guide
One Shaking Fist = Miffed
Two Shaking Fists = Indignant
Three Shaking Fists = Furious
Four Shaking Fists = Weapons Are Hot

One Raised Eyebrow = Belushi-esque
Two Raised Eyebrows = Very Odd
Three Raised Eyebrows = Good Lord!
Four Raised Eyebrows = Cold Fear

One Hand-to-Forehead Slap = Dang
Two Hand-to-Forehead Slaps = I knew it!
Three Hand-to-Forehead Slaps = Sheer lunacy!
Four Hand-to-Forehead Slaps = Schizophrenia

One Blank Face = Incomprehension
Two Blank Faces = Boredom
Three Blank Faces = Banal
Four Blank Faces = Actuarial

5. The Metaphysics of Invisibility

If an invisible man punched you in the stomach, would you feel it? These are the kinds of things we think about at Minyanville. Obsessively. Meanwhile, two separate teams of researchers have come up with theories on ways to use experimental "metamaterials" to make objects invisible, China Daily reports.

  • The key to invisibility is "metamaterial;" also imagination, we imagine.
  • In electromagnetism a metamaterial is an object that obtains its (electromagnetic) material properties from its structure rather than from its material composition. (See "Lost" Series Finale).
  • In the case of invisibility research, material made using nanotechnology can possibly change the direction of electromagnetic radiation, also open an entirely new spectrum of intra-office practical jokes. "Hey, has anyone seen my desk?"
  • The new metamaterial technology would not simply block out light, or prevent its reflection, as in conventional "stealth" technology. That would be boring, like science-NON-fiction.
  • Instead, light waves would flow around an object hidden inside a metamaterial shell just as water flows undisturbed around a smooth rock, or so they would have us believe.

Below, a common shrubbery trimmed into the exact image of
Raquel Welch, encased in a metamaterial shell rendering it invisible.

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