Move over George — its Charlie’s Chart

I was all set to write on the “velocity of money” in an informatative and interesting manner (yawn, yawn) when an article on Bloomberg caught my eye.

In brief, a former Bank of Japan executive director, Hideo Hayakawa, is calling on Japanese policy makers to abandon their monetary base target by pointing to what traders call a Soros chart, named after billionaire investor George Soros, who long ago said that, “a burgeoning money supply would weaken the yen.”

2 Sept 2016

Mr Hayakawa goes on to observe that the correlation between the $US/¥ rate and the monetary base has ended and they are now moving in opposite directions.

So what do we deduce from that?

Observation one, often repeated throughout these posts is that correlations work, until they don’t! Observation two is that maybe, just maybe, it is a temporary break-down due to the unprecedented intervention and verbiage from the world’s Central Bankers’ of late, which actually was to be mentioned within the planned velocity of money overview (now you are getting excited.)

Either way, it piqued my interest to add a couple of addition’s to George’s observation, by way of Japan’s Nikkei Dow 225 stock-index and that of America’s finest, the S&P 500 stock-index, seen within a second chart below. Interestingly, the correlation between the S&P 500 and the other three variables also appears to have ended:

2 Sept 2016 2

Whether its temporally or otherwise, the near future will surely show, but there is an uncanny S&P target as set out within last week’s comment, “Reality Check – Historic Divergence.”

So move over George, this could be far more interesting.










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