Hey, Enough About Baseball –

Let’s get back to something really important: the Japanese Economy! (I can hear your collective groans all the way up here…now ya’ll just cool it and listen)

Last night the Nikkei Dow dropped 1,423 points – a 7.3% drop in one day – the biggest in 13 years. Whoa! Why, you inquire? (you really do want to know – you know you do!)

Depends on who’s being quoted in the financial papers today. Was it Helicopter Ben’s comments yesterday before Congress saying QE-infinity isn’t infinite, and in fact the Fed will begin to ‘taper’ (his word) in the 4th quarter? Ouch! Maybe…

Or was it the publication of the manufacturing index for China indicating a significant slowdown in Chinese manufacturing production? Oh no! Maybe…

Or maybe it was just that the Nikkei Dow – up a whopping 70% in six months – just got a little bit ahead of itself, and when it surpassed the U.S. Dow, that gave investors – mostly foreign hedge funds – a desire to cool it for a bit?

Or maybe it’s a little of all those things –

There was even some discussion about the situation with Japanese banks and a bond rout. If you recall, on January 2nd, in the post titled The Phoenix Rises from the Ashes, I cited AEP and his observation that Japanese banks held a lot of government bond debt that would get to be more expensive to service when the yen was devalued. I believe the last line was something about chickens coming home to roost in the East – well: look out for some flying birds on their way to the henhouse.