I gotta confess, I'm long the yen. I know I'm crazy, but I'm long the yen.
You may have seen this: Jeffrey Gundlach is killing it being short yen.
So why am I going against this guy who's one of the world's best known money managers and who's currently, "killing it" being short the yen?
I'll start by saying that besides Gundlach, there are several other "well known" people who are short yen or who have been advising people to short the yen. They are people like Peter Schiff, Axel Merk and Kyle Bass. I'm sorry, but when those three stooges get together on a theme, wild horses can't keep me from betting against them. All I need now is for John Paulson to say he's going short the yen and I will mortgage everything I have to add to this position. By the way, they're all short because of...you guessed it...fears of BoJ "money printing" and insolvency.
And the three stooges have a lot of company. Open interest and short positions by speculators (including small specs, who are considered the dumb money) is just off record levels. Commericals are long.
Since the election the yen has sold off something like 500 basis points against the dollar, or about 6%. That's all been due to aggressive yen shorting.
The new government believes it is "out of money," so an outright fiscal expansion underpinned by printing yen, is out of the question.
Prime minister Abe has been pressuring the BoJ and the BoJ has responded by saying it will "buy more assets." Great...more QE, that is just an asset swap and does nothing to weaken the yen.
The new government is also very close to the corporate sector and it is believed that it will soon give the ok to restart the nuclear reactors, which have been shut down since the quake. If so, this will go far to reverse Japan's current trade deficit, which came about solely as a result of massive oil imports to meet energy needs.
The markets believe this to be true and imminent, as shares in Japanese power companies have been surging.
So...Japan and the BoJ are doing nothing to create net new yen financial assets. The nukes will be restarted soon and the dumb money is shorting the yen like crazy.
If that's not a prescription for a yen rally, a big, big, BIG, one, I don't know what is.