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Five Things You Need to Know: Japanese Hawk, Antimatter, Feynman, Daily Affirmation, Time

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

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

1. The Japanese Hawk Flies at Sunrise (on July 14)

A relatively light day on the U.S. economic front has our eyes trained East, far to the East.

  • Bank of Japan board member Kiyohiko Nishimura said today that the BoJ would keep very low interest rates for the time being, but noted that with inflation now positive, keeping interest rates at such extremely low levels for a prolonged period could cause long-term problems.
  • Meanwhile, as the Wall Street Journal reported this morning, Japan's Minister for Economic and Fiscal Policy, Kaoru Yosano, said the BoJ would likely abolish its policy of keeping benchmark interest rates near zero before the end of the summer.
  • Nine of 15 economists surveyed by Bloomberg earlier this month said they expect the BoJ to increase the key overnight rate as early as July.
  • The next meeting of the Bank of Japan is July 14, which leads us to today's Japanese economic data...


2. Japan Exports Antimatter

Japan's trade surplus in May rose year-on-year for the first time in 17 months.

  • The Ministry of Finance today reported that Japan's trade surplus widened 35.2 percent from a year earlier to Y384.9 bln in May.
  • Exports were boosted by, among other things, strong US demand for Japanese cars.
  • The surplus with the US rose 23% to Y627.5 bln.
  • The trade surplus with the rest of Asia rose 25.5% to Y439.6 bln.
  • Exports are a key driver of the Japanese economy, so the report could hasten BoJ's move away from quantitative easing and potentially cause officials to raise benchmark interest rates from zero as soon as next month.
  • While the figures suggest economic recovery (remember, this is the first surplus in 17 months) keep in mind that every cloud with a silver lining also has a spinning vortex of antimatter comprised of antiparticles.
  • If these antiparticles come into contact with the normal particles, the result is certain annihilation.
  • Normal particles = Japanese economic growth through demand for exports.
  • Antiparticles = Worldwide slowdown as monetary policy in US, China and Europe continues tightening, exacerbating risk aversion.
  • Normal particles + Antiparticles = Annihilation (See Number 3, below).


3. Picturing Annihilation

Who says economists make the best central bankers? Hedge funds hire non-finance people all the time. Some even prefer it.

  • We would suggest that the fact that American physicist Richard Feynman never was at least considered for chairman of the Federal Reserve in his lifetime might have been one the gravest policy errors ever committed.
  • You probably thought we were being tongue in cheek above when we were momentarily distracted by quantum mechanics, but markets demand cross-disciplinary thought... at least they do if we wish to think outside the herd.
  • We can't pretend to even partially comprehend Richard Feynman's work, but interactions and collisions between "particles" (economic data, price, time, macro concepts) in financial markets often result in bizarre transformations.
  • These interactions and "collisions" between, say, crude oil, Japanese stocks, gold and US Treasuries can be difficult to conceptualize and even talk about, just as in physics, calculating interactions between (matter) electrons and (antimatter) positrons) can be difficult and unapproachable.
  • One of Feynman's many, many contributions to physics were Feynman diagrams, pictures that allowed physicists to work with challenging concepts.
  • Below is a Feynman diagram from the American Scientist Online.
  • It looks difficult to me. But it can also be expressed in story format and even related to finance: Two particles (say, crude and 10-year Treasury) are traveling along in time at a relative speed. Before long they meet up, perhaps have a few drinks together, then depart. Upon leaving, they discover that not only has their speed changed (too many pomegranate margaritas), but that they are not really even the same anymore at all (you know how booze changes some personalities).
  • The story and diagrams may not be wholly analogous to finance, but the conceptualization is useful we think in imagining new ways of thinking about financial markets.


4. Daily Affirmation with President Bush

President Bush, seeking to repair America's image abroad, promised to close Guantánamo Bay and discuss trade concessions with Europe, according to the Financial Times. "Doggonit, people like us!"

  • Speaking at a summit with the European Union in Vienna's Hofburg castle, President Bush said "I'd like to end Guantánamo; I'd like it to be over with," the FT reported.
  • But he also reportedly angrily rejected as "absurd" a recent FT/Harris poll that shows Europeans feel the US poses the greatest threat to global peace.
  • The FT/Harris poll conducted last week said 36 percent of people in five European countries considered the US the biggest threat to world stability, ahead of Iran and China.
  • Basically, we think this absurd polling nonsense all boils down to a simple misunderstanding.
  • If we could address the people of Europe, we would tell them that our image as a warlike people is misguided.
  • Failing that, we would reach out, deftly wrestling them into a half-nelson, quickly spinning them around so that their elbow is behind their back and force them to acknowledge our generous and peaceful nature.


5. Tick Tock, Tick Tock

According to a study by the Oxford English dictionary, "Time" is the most popular English noun.

  • The dictionary used the Oxford English Corpus - a research project about English in the 21st century - to come up with the list of the 25 most popular nouns, according to Associated Press.
  • The word "Person" was ranked number 2, followed by "Year" at number 3.
  • Rounding out the top 10 were "Way" in fourth, followed by Day, Thing, Man, World, Life, and Hand.
  • Perhaps surprisingly, the word "Money" is ranked 65th.
  • We think it's about Time a Person this Year found a Way, especially in this Day and age - no small Thing - to look at the language Man relies on in this modern World and how Life is expressed in language. This deserves a Hand of applause.
No positions in stocks mentioned.

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