The pundits are going crazy with this new Iran deal and they're talking about much lower oil prices going forward.
Iran ranks seventh in the world in terms of production capacity with about a 3.4 million barrel per day of output capability and it ranks fourth in the world in proven reserves with 158 billion barrels.
Some analysts are calling for a $10 $20 price range, eventually, in light of this deal. Maybe that's too low, I'm not sure, however, it's hard to argue against the longer term bearish outlook.
So what does that mean for the yen? There is a pretty good inverse correlation between the yen and oil prices so I think this could be a seminal event. It may very well mark the bottom in the yen's three year decline.
I think you have to be long the yen as a macro trade right now. The risk/reward on this seems very attractive.
2 comments:
Maybe try to watch what they do with their tire prices Mike?
Earlier this year, when oil took the second leg down (in USD terms) they increased their rebates (almost doubled them...)
Here:
http://mikenormaneconomics.blogspot.com/2015/04/japanese-still-lowering-tire-prices.html
Maybe sign up for Bridgestone's twitter.... see if they keep up the discounting should oil price go in the toilet...
They have shown a propensity to pass on lower oil prices to US consumers to this point, but if oil really collapses they are going to have to keep updating the rebates maybe they will fall behind and then you get the Yen rally...
rsp,
Okay, will keep an eye on that. Thanks.
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