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Here's where things stand.

On the year,
Safe assets outperformed risky assets.

Safe assets gained almost 2.5% post Brexit
While risky assets gained 3.9% since their Brexit lows

One of those is lying.
Agreed. But why is JPY a "safe asset"?
+1 Reply
Thank you.

To answer your question:
1- In Terms of GDP... Japan ranks #4 in the world (After the US, The EU, and China)
2- In terms of Forex reserves, Japan comes in at #2 which makes it second only to China (estimated reserves: 1.2 trillion dollars)
3- in terms of Market capitalization The Tokyo Exchange is the second largest in the world (Second only to NYSE)
4- in terms of investment, Japan is one of the highest net creditor nations. What this means is that Japan makes more investments in foreign countries than foreign countries make investments in Japan (Read: NIIP)
+1 Reply
eskgroup Silver-Silver
Can they sustain a couple of quadrillion of derivative crash? See creditworthiness...
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eskgroup eskgroup
Considering JPY at current levels, will it produce the inflation they "need"? Hmmm...I wonder why Gold is going up...see correlation: UJ & Gold.
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Thank you Silver! I want to ask you a question: what if both are not lying at all? If they not, who's gonna compensate?
+2 Reply
Silver-Silver Victor.Y.F
You're welcome!

The demand for safe assets comes from some kind of fear that deters investors away from risky assets.

What we're seeing here is an interesting situation where the "safe" asset market is pricing in quite a bit of downside in risky assets.

"what if both are not lying at all?" Well that's a good question. For that purpose I looked at a wide range of assets in the same category in order to spot the lie.

Here's the breakdown:
* Gold / Silver - going up - Risk off
* Yen - going up - Risk off
* 2y, 5y, 10y and 30y yield - going down - Risk off
* DAX, SPX, NKY, FTSE - going up - Risk on

Also....don't forget that SKEW....which is a good indicator for institutional bearishness made a brand new record high - which it came down from - on June 28

Is it Bear Season Again?

+1 Reply
Victor.Y.F PRO Silver-Silver
Thank you for your sharing silver! Is there any possibility that spx500 and gold both rise? Like 2009- 2011 market?
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Silver-Silver Victor.Y.F
Good point.

That usually happens on the back of dollar weakness -or hopes of it - I would look for confirmation in things like

EURUSD
GBPUSD
JPYUSD
AUDUSD
NZDUSD
Other commodities priced in dollars - Oil / Gas / Cotton / etc

After the fall in asset prices due to fear being rampant in the system, commodities are the first to recover on any sight of weaker USD.

So yes, the SPX and Gold can both go up at the same time, but only if the dollar is heading lower.
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Silver, what's that histogram at the bottom of your chart?
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So the histogram is the correlation between the two.

Regardless of whether they go up or down,

when they move in the same direction, you get a positive correlation coefficient - "CC" for short
when they move in opposite directions, you get a negative CC


Since the start of the year there has been a negative CC between the two asset classes 83.5% of the time.
Reply
Thankyou for this interesting chart. I agree with your thesis.

I would have liked it even better if you showed what you have plotted to represent each of the asset classes. Good chart otherwise.
Reply
You're welcome.

As far as the tickers I used for Safe assets;

* Bonds - $VGIT, $VGLT, $VGSH
* Gold / Silver - $BPM
* JPY - $JPYUSD

For risky assets I used CFD's for major indices
* S&P - $SPX500
* DAX - $GER30
* Nikki - $JPN225
* FTSE - $UK100
Reply
DanV MOD Silver-Silver
I see. Thankyou for reply. Are combining these in some form of formula, to derive representing lines for safe and risk assets?
Reply
Correct.
The math is simple for the most part because I mostly aiming for direction of movement. The only thing worth noting is I had to multiply JPYUSD by 10000 to get it to be in the same range of decimals as the other tickers

- (10000*JPYUSD)+VGLT+VGIT+VGSH+BPM

For indices, I simply added them up with no adjustments, again...I'm looking for direction only.

- SPX500+GER30+JPN225+UK100

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DanV MOD Silver-Silver
Right got that. Just wondering if it would make sense if you simply add percentage change rather than monetary change.
Reply
Good point. Here are the numbers individually (From the low of June 23 till where the ticker closed on July 1)

Risky assets:
SPX500 - 5.77%
GER30- 6.53%
JPN225 - 5.00%
UK100- 14.94%

Average for risky = 8.06% from low to close

Safe assets:
VGIT - 1.36%
VGLT - 5.97%
VGSH - 0.29%
BPM - 8.16%
JPYUSD - 4.28%

Average for safe assets = 4.01% from low to close

I summery, based on individual daily candle charts (where as the original chart is a line chart)
Risky assets gained 2% for every 1% safe assets gained since Brexit lows
Reply
DanV MOD Silver-Silver
Excellent, makes sense.
Reply
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